exv4w2



 





Exhibit 4.2




FIRST SUPPLEMENTAL INDENTURE




     THIS FIRST SUPPLEMENTAL INDENTURE dated as of January 29, 2007 (this “Supplemental Indenture”)
is entered into by and among McDATA Corporation, a Delaware corporation (“Company”), Brocade
Communication Systems, Inc., a Delaware Corporation (“Brocade”), and Wells Fargo Bank, National
Association, as successor in interest to Wells Fargo Bank Minnesota, National Association, as
trustee (the “Trustee”). Capitalized terms used herein and not otherwise defined have the meanings
set forth in the Indenture (as defined below).



RECITALS




     A. The Company has heretofore executed and delivered to the Trustee an indenture dated as of
February 7, 2003 (the “Indenture”) providing for the issuance of 21/4 % Convertible Subordinated
Notes due 2010 of the Company (the “Securities”).



     B. The Company has entered into an Agreement and Plan of Reorganization dated as of August 7,
2006 by and among Brocade Communication Systems, Inc., a Delaware corporation (“Brocade”), Worldcup
Merger Corporation, a Delaware corporation and a wholly-owned subsidiary of Brocade (“Merger Sub”),
and the Company (the “Merger Agreement”) providing for the merger of Merger Sub with and into the
Company with the Company as the surviving corporation and a wholly-owned subsidiary of Brocade (the
“Merger”).



     C. Pursuant to Section 1.6(a) of the Merger Agreement, at the effective time of the Merger
each outstanding share of the Company’s Class A and Class B common stock, $0.01 par value per share
(“Company Stock”), shall be converted into the right to receive 0.75 shares of Brocade’s common
stock, $0.001 par value per share (“Brocade Stock”), together with cash in lieu of fractional
shares.



     D. Pursuant to Section 4.11 of the Indenture, as a condition precedent to any merger effecting
a change in the kind and amount of shares and other property issuable upon the conversion of the
Securities, the Company and Brocade shall execute and deliver to the Trustee a supplemental
indenture providing that the Holder of each Security then outstanding shall have the right to
convert such Security into such other securities and property receivable in the Merger by a holder
of Company Stock.



     E. In accordance with Section 11.1(a) of the Indenture, the Company and the Trustee may amend
or supplement the Indenture or the Securities to comply with Section 4.11 without notice to or
consent of any Securityholder.



     F. The Company and Brocade desire and have requested the Trustee to enter into this
Supplemental Indenture for the purpose of amending the Indenture to provide that, upon conversion
of the Securities under the Indenture, a Holder of Securities will receive Brocade Stock in lieu of
Company Stock which such Holder would have been entitled to receive pursuant to the Merger
Agreement had such Holder converted the Securities immediately prior to the Merger.



 









 





     G. Brocade has agreed to become a guarantor with respect to the Securities as set forth in
Article Three of this Supplemental Indenture.



     H. Each of the Company and Brocade has duly authorized the execution and delivery of this
Supplemental Indenture.



     NOW, THEREFORE, in consideration of the foregoing and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto
hereby covenant and agree for the equal and ratable benefit of the Holders of the Securities as
follows:



ARTICLE ONE

RELATION TO INDENTURE; DEFINITIONS




     Section 1.01 Relation to Indenture. This Supplemental Indenture constitutes an
integral part of the Indenture. In the event of inconsistencies between the Indenture and this
Supplemental Indenture, the terms of this Supplemental Indenture shall govern.



     Section 1.02. Definitions. The definitions of “Board of Directors”, “Common Stock”,
“Officer” and “Officers’ Certificate” in Section 1.1 of the Indenture are hereby amended and
restated in their entirety to read as follows:




     “Board of Directors” means either the board of directors of the Company (or where so
specified, of Brocade) or any committee of the Board of Directors authorized to act for it
with respect to this Indenture.




     “Common Stock” means the common stock of Brocade, par value $0.001 per share, as it
exists on the date of the First Supplemental Indenture and any shares of any class or
classes of capital stock of Brocade resulting from any reclassification or reclassifications
thereof and which have no preference in respect of dividends or of amounts payable in the
event of any voluntary or involuntary liquidation, dissolution or winding-up of Brocade and
which are not subject to redemption by Brocade; provided, however, that if
at any time there shall be more than one such resulting class, the shares of each such class
then so issuable on conversion of Securities shall be substantially in the proportion which
the total number of shares of such class resulting from all such reclassifications bears to
the total number of shares of all such classes resulting from all such reclassifications.




     “Officer” means the Chairman or any Co-Chairman of the Board, any Vice Chairman of the
Board, the Chief Executive Officer, the President, any Vice President, the Chief Financial
Officer, the Controller, the Secretary or any Assistant Controller or any Assistant
Secretary of the Company (or where so specified, of Brocade).




     “Officers’ Certificate” means a certificate signed by two Officers; provided,
however, that for purposes of Sections 4.11 and 6.3, “Officers’ Certificate” means a
certificate signed by the principal executive officer, principal financial officer or
principal



 









 







accounting officer of the Company (or where so specified, of Brocade) and by one other
Officer.



ARTICLE TWO

AMENDMENTS




     Section 2.01 Name. The first paragraph of the Indenture is amended and restated to
read as follows:




     “THIS INDENTURE dated as of February 7, 2003 is between McDATA Corporation, a
corporation duly organized under the laws of the State of Delaware (the “Company”), and
Wells Fargo Bank, National Association, a national banking association organized and
existing under the laws of the United States, as Trustee (the Trustee”).”



     Section 2.02 Conversion. Article 4 of the Indenture is hereby amended and restated
in its entirety to read as set forth on Annex A hereto.



     Section 2.03 Consolidation, Etc., on Certain Terms. Section 7.1 of the Indenture is
hereby amended and restated to read as follows:




     “Section 7.1 Company and Brocade May Consolidate, Etc., Only on Certain Terms




     None of the Company or Brocade shall consolidate with or merge into any other Person or
convey, transfer or lease its properties and assets substantially as an entirety to any
Person, unless:




     (1) in the case of the Company, (A) the Company is the surviving corporation or (B) the
Company shall consolidate with or merge into another Person (in a transaction in which the
Company is not the surviving corporation) or convey, transfer or lease its properties and
assets substantially as an entirety to any Person, the Person formed by such consolidation
or into which the Company is merged or the Person which acquires by conveyance or transfer,
or which leases, the properties and assets of the Company substantially as an entirety shall
be a corporation organized and validly existing under the laws of the United States of
America, any State thereof or the District of Columbia and shall expressly assume, by an
indenture supplemental hereto, executed and delivered to the Trustee, in form satisfactory
to the Trustee, all of the obligations of the Company under the Securities and this
Indenture, and the conversion rights shall be provided for in accordance with Article 4 by
such Person under such supplemental indenture;




     (2) in the case of Brocade, (B) Brocade is the surviving corporation or (B) Brocade
shall consolidate with or merge into another Person (in a transaction in which Brocade is
not the surviving corporation) or convey, transfer or lease its properties and assets
substantially as an entirety to any Person, the Person formed by such consolidation or into
which Brocade is merged or the Person which acquires by conveyance or transfer, or which
leases, the properties and assets of Brocade substantially as an entirety shall be a



 









 







corporation organized and validly existing under the laws of the United States of
America, any State thereof or the District of Columbia and shall expressly assume, by an
indenture supplemental hereto, executed and delivered to the Trustee, in form satisfactory
to the Trustee, the obligations of Brocade under the guaranty set forth in Article Three of
the First Supplemental Indenture dated as of January 29, 2007, and all of the obligations of
Brocade under the Securities and this Indenture, and the conversion rights shall be provided
for in accordance with Article 4 by such Person under such supplemental indenture;




     (3) immediately after giving effect to such transaction in clause (1) or (2) of this
Section 7.1, no Event of Default, and no event which, after notice or lapse of time or both,
would become an Event of Default, shall have happened and be continuing; and




     (4) the Company or Brocade, as the case may be, has delivered to the Trustee an
Officers’ Certificate of the Company or Brocade, as the case may be, and an Opinion of
Counsel on behalf of the Company or Brocade, as the case may be, stating that such
consolidation, merger, conveyance, transfer or lease and, if a supplemental indenture is
required in connection with such transaction, such supplemental indenture comply with this
Article and that all conditions precedent herein provided for relating to such transaction
have been complied with.”



     Section 2.04 Successor Substituted. Section 7.2 of the Indenture is hereby amended
and restated in its entirety to read as follows:




     “Upon any consolidation of the Company or Brocade with, or merger of the Company or
Brocade into, any other Person or any conveyance, transfer or lease of the properties and
assets of the Company or Brocade substantially as an entirety in accordance with Section
7.1, the successor Person formed by such consolidation or into which the Company or Brocade
is merged or to which such conveyance, transfer or lease is made shall succeed to, and be
substituted for, and may exercise every right and power of, the Company or Brocade, as the
case may be, under this Indenture with the same effect as if such successor Person had been
named as the Company or Brocade herein, and thereafter, except in the case of a lease, the
predecessor Person shall be relieved of all obligations and covenants under this Indenture
and the Securities. Such successor Person, such predecessor Person and the Trustee shall
enter into a supplemental indenture to evidence the succession and substitution of such
successor Person and the release and discharge of such predecessor Person.”



     Section 2.05 Events of Default. Section 8.1 of the Indenture is hereby amended to
add new clauses (9) and (10) to read as follows:



     “(9) Brocade pursuant to or within the meaning of any Bankruptcy Law:



     (A) commences a voluntary case or proceeding;


 









 












	 	(B)	 	consents to the entry of an order for relief against it in an
involuntary case or proceeding;
	 
	 	(C)	 	consents to the appointment of a Custodian of it or for all or
substantially all of its property; or
	 
	 	(D)	 	makes a general assignment for the benefit of its creditors; or





     (10) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law
that:




	 	(A)	 	is for relief against Brocade in an involuntary case or
proceeding;
	 
	 	(B)	 	appoints a Custodian of Brocade or for all or substantially all
of the property of Brocade; or
	 
	 	(C)	 	orders the liquidation of Brocade;”





     Section 2.06 Supplemental Indenture. Section 11.6 of the Indenture is hereby amended
and restated in its entirety to read as follows:




     “The Trustee shall sign any amendment or supplemental indenture authorized pursuant to
this Article 11 if the amendment or supplemental indenture does not adversely affect the
rights, duties, liabilities or immunities of the Trustee. If it does, the Trustee may, in
its sole discretion, but need not sign it. In signing or refusing to sign such amendment or
supplemental indenture, the Trustee shall be entitled to receive and, subject to Section
9.1, shall be fully protected in relying upon, an Opinion of Counsel of the Company or
Brocade, as the case may be, stating that such amendment or supplemental indenture is
authorized or permitted by this Indenture. Neither the Company nor Brocade may not sign an
amendment or supplemental indenture until the Board of Directors of each the Company and
Brocade, respectively, approves it.”



     Section 2.07 No Recourse Against Others. Section 12.10 of the Indenture is hereby
amended and restated in its entirety to read as follows:



     “All liability described in paragraph 15 of the Securities of any director, officer, employee
or shareholder, as such, of the Company or Brocade is waived and released.”



     Section 2.08 Form of Security. Certain provisions of Exhibit B to the Indenture are
amended, restated and supplemented as set forth in Annex B attached hereto. Pursuant to Section
11.5 of the Indenture and upon the execution of this Supplemental Indenture, the Trustee shall
amend, restate and supplement in the form set forth in Annex B attached hereto the terms of the
then outstanding Securities, and all Securities presented or delivered to the Trustee on and after
the date hereof shall be amended, restated and supplemented in the form of Annex B attached hereto
to give effect to this Supplemental Indenture.



 









 





     The Trustee shall not at any time be under any responsibility to acquire or cause any Security
now or hereafter outstanding to be presented or delivered to it for any purposes provided for in
this Section 2.08.



ARTICLE THREE

BROCADE GUARANTY




     Section 3.01 Brocade Guaranty.



     (a) Subject to the provisions of this Article Three, Brocade fully and unconditionally
guarantees to each Holder of Securities hereunder and to the Trustee on behalf of the Holders: (1)
the due and punctual payment of the principal of, premium, if any, and interest on each Security,
when and as the same shall become due and payable, whether at maturity, by acceleration or
otherwise, all in accordance with the terms of the Security and the Indenture and (2) in the case
of any extension of time of payment or renewal of any Securities or any of such other obligations,
that the same will be promptly paid in full when due in accordance with the terms of the extension
or renewal, at the stated maturity, by acceleration or otherwise, subject, however, in the case of
clauses (1) and (2) above, to the limitations set forth in the next succeeding paragraph (the
“Brocade Guaranty”).



     (b) Brocade hereby waives diligence, presentment, demand of payment, filing of claims with a
court in the event of merger or bankruptcy of the Company, any right to require a Holder to pursue
any right or take any action (including, without limitation, a presentment, protest, demand for
payment, notice of dishonor or any other notice) against the Company, the benefit of discussion,
protest or notice with respect to any such Security or the debt evidenced thereby and all demands
whatsoever (except as specified above), and covenants that the Brocade Guaranty will not be
discharged as to any such Security except by payment in full of the principal thereof, premium, if
any, and interest thereon or as provided in Section 10.1 of the Indenture. In the event of any
declaration of acceleration of such obligations as provided in Article 8 of the Indenture, such
obligations (whether or not due and payable) shall forthwith become due and payable by Brocade for
the purposes of this Article Three. In addition, without limiting the foregoing provisions, upon
the effectiveness of an acceleration under Article 8 of the Indenture, the Trustee shall promptly
make a demand for payment on the Securities under the Brocade Guaranty provided for in this Article
Three.



     (c) If the Trustee or any Holder is required by any court or otherwise to return to the
Company or Brocade, or any custodian, receiver, liquidator, trustee, sequestrator or other similar
official acting in relation to the Company or Brocade, any amount paid to the Trustee or such
Holder in respect of a Security, the Brocade Guaranty, to the extent theretofore discharged, shall
be reinstated in full force and effect. Brocade further agrees, to the fullest extent that it may
lawfully do so, that, as between it, on the one hand, and the Holders and the Trustee, on the other
hand, the maturity of the obligations guarantied hereby may be accelerated as provided in Article 8
of the Indenture for the purposes of the Brocade Guaranty, notwithstanding any stay, injunction or
other prohibition extant under any applicable bankruptcy law preventing such acceleration in
respect of the obligations guarantied hereby.



 









 





     (d) Brocade shall be subrogated to the rights of the Holders of any Security against the
Company but only to the extent and in the amount that a joint and several obligor with the Company
would be entitled to contribution from the Company, in respect of any amount paid by Brocade to any
Holder pursuant to the provisions of the Brocade Guaranty; provided, that Brocade shall not be
entitled to enforce, or to receive any payments arising out of or based upon, such right of
subrogation until the principal of, premium, if any, and interest on all the Securities shall have
been paid in full.



     (e) The Company shall have a right of contribution against Brocade in respect of any amounts
paid by the Company to any Holder pursuant to the Securities and this Supplemental Indenture but
only to the extent and in the amount that a joint and several obligor with Brocade would be
entitled to contribution from Brocade.



     Section 3.02 Notice to Trustee; Events of Default. Brocade shall give prompt written
notice to the Trustee of any fact known to Brocade that would prohibit the making of any payment to
or by the Trustee in respect of the Brocade Guaranty pursuant to the provisions of this Article
Three. The failure to make a payment on account of principal of, premium, if any, or interest on
the Securities by reason of any provision of Sections 3.01 and 3.02 of this Supplemental Indenture
will not be construed as preventing the occurrence of an Event of Default.



ARTICLE FOUR

MISCELLANEOUS




     Section 4.01 Notices. Any notice, request or communication shall be given in writing
and delivered in person or mailed by first-class mail, postage prepaid, addressed as follows:


If to the Company:



McDATA Corporation

11802 Ridge Parkway

Broomfield, Colorado 80021

Attention: General Counsel



If to Brocade:



Brocade Communication Systems, Inc.

1745 Technology Drive

San Jose, California 95110

Attention: General Counsel




 









 




If to the Trustee:



Wells Fargo Bank, National Association

213 Court Street, Suite 703

Middletown, CT 06457

Attn: CORPORATE TRUST SERVICES

Facsimile No.: (860) 704-6219




     Such notices or communications shall be effective when received.



     The Company, Brocade or the Trustee by notice to the others may designate additional or
different addresses for subsequent notices or communications.



     Any notice or communication mailed to a Securityholder shall be mailed by first-class mail or
delivered by an overnight delivery service to it at its address shown on the register kept by the
Primary Registrar.



     Failure to mail a notice or communication to a Securityholder or any defect in it shall not
affect its sufficiency with respect to other Securityholders. If a notice or communication to a
Securityholder is mailed in the manner provided above, it is duly given, whether or not the
addressee receives it.



     4.02 Confirmation of Original Indenture. Except as amended and supplemented hereby,
the Indenture is hereby ratified, confirmed and reaffirmed in all respects. The Indenture and this
Supplemental Indenture shall be read, taken and construed as one and the same instrument.



     4.03 GOVERNING LAW. THIS SUPPLEMENTAL INDENTURE SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF
LAWS.



     4.04 Counterparts. The parties may sign any number of copies of this Supplemental
Indenture. Each signed copy shall be an original, but all of them together represent the same
agreement.



     4.05 Effect of Headings. The Section headings herein are for convenience only and
shall not affect the construction hereof.



     4.06 Separability Clause. In case any provision in this Supplemental Indenture shall
be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.



     4.07 The Trustee. The Trustee shall not be responsible in any manner whatsoever for
or in respect of the validity or sufficiency of this Supplemental Indenture or for or in respect of
the recitals contained herein, all of which recitals are made solely by the Company and Brocade.



     4.08 Successors. All agreements of Brocade in this Supplemental Indenture shall bind
its successor.



 









 





[Remainder of Page Intentionally Left Blank]




 









 








     IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture to be duly
executed as of the date first above written.



Dated: January 29, 2007




	 	 	 	 	 
	 	McDATA CORPORATION

 	 
	 	By:  	/s/ Scott A. Berman
 	 
	 	 	Name:  	Scott A. Berman 	 
	 	 	Title:  	Chief Financial Officer 	 
	 
	 	BROCADE COMMUNICATION SYSTEMS, INC.

 	 
	 	By:  	/s/ Richard Deranleau
 	 
	 	 	Name:  	Richard Deranleau 	 
	 	 	Title:  	Chief Financial Officer 	 
	 
	 	WELLS FARGO BANK, NATIONAL

ASSOCIATION, as Trustee

 	 
	 	By:  	/s/ Joseph P. O’Donnell
 	 
	 	 	Name:  	Joseph P. O’Donnell 	 
	 	 	Title:  	Vice President 	 
	 



Signature Page to the First Supplemental Indenture

(21/4% Convertible Subordinated Notes)




 









 








ANNEX A




ARTICLE IV



CONVERSION





     SECTION 4.1 CONVERSION PRIVILEGE



     (a) Subject to the further provisions of this Article 4 and paragraph 6 of the Securities, a
Holder of a Security may convert the principal amount of such Security (or any portion thereof
equal to $1,000 or any integral multiple of $1,000 in excess thereof) into Common Stock at any time
prior to the close of business on the Final Maturity Date, at the Conversion Price then in effect;
provided, however, that, if such Security is submitted or presented for purchase pursuant
to Article 3, such conversion right shall terminate upon the delivery of a Change in Control
Purchase Notice unless such notice has been validly withdrawn in accordance with Section 3.2, as
the case may be, for such Security or such earlier date as the Holder presents such Security for
purchase (unless the Company shall default in making the Change in Control Purchase Price payment
when due, in which case the conversion right shall terminate at the close of business on the date
such default is cured and such Security is purchased). The number of shares of Common Stock
issuable upon conversion of a Security shall be determined by dividing the principal amount of the
Security or portion thereof surrendered for conversion by the Conversion Price in effect on the
Conversion Date. The initial Conversion Price is set forth in paragraph 6 of the Securities and is
subject to adjustment as provided in this Article 4.



     A Holder may convert a portion of a Security equal to any integral multiple of $1,000.
Provisions of this Indenture that apply to conversion of all of a Security also apply to conversion
of a portion of a Security.



     A Holder of a Security is not entitled to receive any accrued and unpaid interest in respect
of the Security upon, or from and after, the conversion of such Security.



     A Holder of Securities is not entitled to any rights of a holder of Common Stock until such
Holder has converted its Securities to Common Stock, and only to the extent such Securities are
deemed to have been converted into Common Stock pursuant to this Article 4.



     SECTION 4.2 CONVERSION PROCEDURE



     To convert a Security, a Holder must (a) complete and manually sign the conversion notice on
the back of the Security and deliver such notice to a Conversion Agent, (b) surrender the Security
to a Conversion Agent, (c) furnish appropriate endorsements and transfer documents if required by a
Registrar or a Conversion Agent, (d) pay any transfer or similar tax, if required, and (e) satisfy
any additional requirement under paragraph 6 of the Security, if any. The date on which the Holder
satisfies all of those requirements is the “Conversion Date.” Upon conversion of the Security,
Brocade may choose to deliver shares of Common Stock, cash or a combination of shares of Common
Stock and cash as set forth in Section 4.14. Anything herein to the contrary notwithstanding, in
the case of Global Securities, conversion notices may be delivered



A-1









 







and such Securities may be surrendered for conversion in accordance with the Applicable
Procedures as in effect from time to time.



     Each conversion shall be deemed to have been effected as to any Security (or portion thereof)
as of the close of business on the later of (i) the Conversion Date, (ii) the expiration of the
Cash Settlement Notice Period, or (iii) if the Company elects to pay cash in lieu of Common Stock
pursuant to Section 4.14, the expiration of the Cash Settlement Averaging Period, and the person in
whose name any certificate or certificates for shares of Common Stock shall be issuable upon such
conversion shall be deemed to have become on said date the Holder of record of the shares
represented thereby; provided, however, that in case of any such surrender of a Security on any
date when the stock transfer books of Brocade shall be closed, the person or persons in whose name
the certificate or certificates for such shares are to be issued shall be deemed to have become the
record Holder thereof for all purposes on the next day on which such stock transfer books are open,
but such conversion shall be at the Conversion Price in effect on the date upon which such
Securities shall be surrendered.



     No payment or adjustment will be made for dividends or distributions on Common Stock issued
upon conversion of a Security.



     Except as otherwise provided in this paragraph, no payment or adjustment will be made for
accrued interest on a converted Security. Securities surrendered for conversion (in whole or in
part) during the period from the close of business on any record date to the opening of business on
the next succeeding interest payment date (excluding Securities or portions thereof presented for
purchase upon a Change in Control on a Change in Control Purchase Date during the period beginning
at the close of business on a record date and ending at the opening of business on the first
Business Day after the next succeeding interest payment date, or if such interest payment date is
not a Business Day, the second such Business Day) shall also be accompanied by payment in funds
acceptable to the Company of an amount equal to the interest payable on such interest payment date
on the principal amount of such Security then being converted, and such interest shall be payable
to such registered Holder notwithstanding the conversion of such Security, subject to the
provisions of this Indenture relating to the payment of defaulted interest by the Company. If the
Company defaults in the payment of interest payable on such interest payment date, the Company
shall promptly repay such funds to such Holder.



     Nothing in this Section shall affect the right of a Holder in whose name any Security is
registered at the close of business on a record date to receive the interest payable on such
Security on the related interest payment date in accordance with the terms of this Indenture and
the Securities. If a Holder converts more than one Security at the same time, the number of shares
of Common Stock issuable upon the conversion shall be based on the aggregate principal amount of
Securities converted.



     Upon surrender of a Security that is converted in part, the Company shall execute, and the
Trustee shall authenticate and deliver to the Holder, a new Security equal in principal amount to
the unconverted portion of the Security surrendered.



     For the avoidance of doubt, settlement for any conversion of a Security shall be on the first
Business Day following the Cash Settlement Averaging Period.



A-2









 





     SECTION 4.3 FRACTIONAL SHARES



     Brocade will not issue fractional shares of Common Stock upon conversion of Securities. In
lieu thereof, the Company will pay an amount in cash for the current market value of the fractional
shares. The current market value of a fractional share shall be determined (calculated to the
nearest 1/1000th of a share) by multiplying the Closing Price (determined as set forth
in Section 4.6(e)) of the Common Stock on the Trading Day immediately prior to the Conversion Date
by such fractional share and rounding the product to the nearest whole cent.



     SECTION 4.4 TAXES ON CONVERSION



     If a Holder converts a Security, the Company shall pay any documentary, stamp or similar issue
or transfer tax due on the issue of shares of Common Stock upon such conversion. However, the
Holder shall pay any such tax which is due because the Holder requests the shares to be issued in a
name other than the Holder’s name. The Conversion Agent may refuse to deliver the certificate
representing the Common Stock being issued in a name other than the Holder’s name until the
Conversion Agent receives a sum sufficient to pay any tax which will be due because the shares are
to be issued in a name other than the Holder’s name. Nothing herein shall preclude any tax
withholding required by law or regulation.



     SECTION 4.5 BROCADE TO RESERVE STOCK



     Brocade shall, prior to issuance of any Securities hereunder, and from time to time as may be
necessary, reserve, out of its authorized but unissued Common Stock, a sufficient number of shares
of Common Stock to permit the conversion of all outstanding Securities into shares of Common Stock.



     All shares of Common Stock delivered upon conversion of the Securities shall be duly
authorized, validly issued, fully paid and nonassessable and shall be free from preemptive rights
and free of any lien or adverse claim.



     Brocade will endeavor promptly to comply with all federal and state securities laws regulating
the offer and delivery of shares of Common Stock upon conversion of Securities, if any, and will
list or cause to have quoted such shares of Common Stock on each national securities exchange or on
the Nasdaq National Market or other over-the-counter market or such other market on which the
Common Stock is then listed or quoted; provided, however, that if rules of such automated
quotation system or exchange permit Brocade to defer the listing of such Common Stock until the
first conversion of the Securities into Common Stock in accordance with the provisions of this
Indenture, Brocade covenants to list such Common Stock issuable upon conversion of the Securities
in accordance with the requirements of such automated quotation system or exchange at such time.
Any Common Stock issued upon conversion of a Security hereunder which at the time of conversion was
a Restricted Security will also be a Restricted Security.



     SECTION 4.6 ADJUSTMENT OF CONVERSION PRICE



     The conversion price as stated in paragraph 6 of the Securities (the “Conversion Price”) shall
be adjusted from time to time by the Company as follows:



A-3









 





     (a) In case Brocade shall (i) pay a dividend on its Common Stock in shares of Common Stock,
(ii) make a distribution on its Common Stock in shares of Common Stock, (iii) subdivide its
outstanding Common Stock into a greater number of shares, or (iv) combine its outstanding Common
Stock into a smaller number of shares, the Conversion Price in effect immediately prior thereto
shall be adjusted so that the Holder of any Security thereafter surrendered for conversion shall be
entitled to receive that number of shares of Common Stock which it would have owned had such
Security been converted immediately prior to the record date of such event or the happening of such
event, as appropriate. An adjustment made pursuant to this subsection (a) shall become effective
immediately after the record date for the determination of stockholders entitled to receive such
dividend or distribution in the case of a dividend or distribution and shall become effective
immediately after the effective date in the case of subdivision or combination.



     (b) In case Brocade shall issue rights or warrants to all or substantially all holders of its
Common Stock entitling them (for a period commencing no earlier than the record date described
below and expiring not more than 60 days after such record date) to subscribe for or purchase
shares of Common Stock (or securities convertible into Common Stock) at a price per share (or
having a conversion price per share) less than the Current Market Price per share of Common Stock
(as determined in accordance with subsection (e) of this Section 4.6) on the record date for the
determination of stockholders entitled to receive such rights or warrants, the Conversion Price in
effect immediately prior to the date of issuance shall be adjusted so that the same shall equal the
price determined by multiplying the Conversion Price in effect immediately prior to such record
date by a fraction of which the numerator shall be the number of shares of Common Stock outstanding
on such record date plus the number of shares which the aggregate offering price of the total
number of shares of Common Stock so offered (or the aggregate conversion price of the convertible
securities so offered, which shall be determined by multiplying the number of shares of Common
Stock issuable upon conversion of such convertible securities by the conversion price per share of
Common Stock pursuant to the terms of such convertible securities) would purchase at the Current
Market Price per share (as defined in subsection (e) of this Section 4.6) of Common Stock on such
record date, and of which the denominator shall be the number of shares of Common Stock outstanding
on such record date plus the number of additional shares of Common Stock offered (or into which the
convertible securities so offered are convertible). Such adjustment shall be made successively
whenever any such rights or warrants are issued, and shall become effective immediately after such
record date. If at the end of the period during which such rights or warrants are exercisable not
all such rights or warrants shall have been exercised, the adjusted Conversion Price shall be
immediately readjusted to what it would have been based upon the number of additional shares of
Common Stock actually issued (or the number of shares of Common Stock issuable upon conversion of
convertible securities actually issued).



     (c) In case Brocade shall distribute to all or substantially all of the holders of its Common
Stock any shares of capital stock of Brocade (other than Common Stock), evidences of indebtedness
or other non-cash assets (including securities of any person other than Brocade but excluding (1)
dividends or distributions paid exclusively in cash or (2) dividends or distributions referred to
in subsection (a) of this Section 4.6), or shall distribute to all or substantially all of the
holders of its Common Stock rights or warrants to subscribe for or purchase any of its securities
(excluding those rights and warrants referred to in subsection (b) of this Section 4.6 and also



A-4









 







excluding the distribution of rights to all holders of Common Stock pursuant to a Rights Plan
(as defined below)), then in each such case the Conversion Price shall be adjusted so that the same
shall equal the price determined by multiplying the current Conversion Price by a fraction of which
the numerator shall be the Current Market Price per share (as defined in subsection (e) of this
Section 4.6) of the Common Stock on the record date mentioned below less the fair market value on
such record date (as determined by the Board of Directors of Brocade, whose determination shall be
conclusive evidence of such fair market value and which shall be evidenced by an Officers’
Certificate of Brocade delivered to the Trustee) of the portion of the capital stock, evidences of
indebtedness or other non-cash assets so distributed or of such rights or warrants applicable to
one share of Common Stock (determined on the basis of the number of shares of Common Stock
outstanding on the record date), and of which the denominator shall be the Current Market Price per
share (as defined in subsection (e) of this Section 4.6) of the Common Stock on such record date.
Such adjustment shall be made successively whenever any such distribution is made and shall become
effective immediately after the record date for the determination of shareholders entitled to
receive such distribution. In the event that a record date for any dividend or distribution
referred to in this subsection (c) occurs, but such dividend or distribution is not then paid or
made, the Conversion Price shall again be adjusted to be the Conversion Price which would have been
in effect if such dividend or distribution had not been declared.



     In the event the then fair market value (as so determined) of the portion of the capital
stock, evidences of indebtedness or other non-cash assets so distributed or of such rights or
warrants applicable to one share of Common Stock is equal to or greater than the Current Market
Price per share of the Common Stock on such record date, in lieu of the foregoing adjustment,
adequate provision shall be made so that each holder of a Security shall have the right to receive
upon conversion the amount of capital stock, evidences of indebtedness or other non-cash assets so
distributed or of such rights or warrants such holder would have received had such holder converted
each Security on such record date. If the Board of Directors of Brocade determines the fair market
value of any distribution for purposes of this Section 4.6(c) by reference to the actual or when
issued trading market for any securities, it must in doing so consider the prices in such market
over the same period used in computing the Current Market Price of the Common Stock.



     With respect to rights to purchase preferred shares that may be issued or distributed pursuant
to any rights plan that Brocade implements after the date of this Indenture (any rights that may be
issued pursuant to any such future rights plan being referred to as a “Rights Plan”), upon
conversion of the Securities into Common Stock, to the extent that such Rights Plan is in effect
upon such conversion, each holder of Securities will receive, in addition to the Common Stock, the
rights described therein (whether or not the rights have separated from the Common Stock at the
time of conversion), unless such holder is an acquiring person specifically excluded from securing
such rights by any Rights Plan. Any distribution of rights or warrants pursuant to a Rights Plan in
accordance with the requirements set forth in the immediately preceding sentence of this paragraph
shall not constitute a distribution of rights or warrants pursuant to this Section 4.6(c).



     Rights or warrants, other than rights issued pursuant to a Rights Plan, distributed by Brocade
to all holders of Common Stock entitling the holders thereof to subscribe for or purchase shares of
the Brocade’s Capital Stock (either initially or under certain circumstances),



A-5









 







which rights or warrants, until the occurrence of a specified event or events (“Trigger
Event”): (i) are deemed to be transferred with such shares of Common Stock; (ii) are not
exercisable; and (iii) are also issued in respect of future issuances of Common Stock, shall be
deemed not to have been distributed for purposes of this Section 4.6 (and no adjustment to the
Conversion Price under this Section 4.6 will be required) until the occurrence of the earliest
Trigger Event, whereupon such rights and warrants shall be deemed to have been distributed and an
appropriate adjustment (if any is required) to the Conversion Price shall be made in accordance
with this Section 4.6(c). If any such right or warrant is subject to events, upon the occurrence of
which such rights or warrants become exercisable to purchase different securities, evidences of
indebtedness or other assets, then the date of the occurrence of any and each such event shall be
deemed to be the date of distribution and record date with respect to new rights or warrants (and a
termination or expiration of the existing rights or warrants without exercise by any of the holders
thereof). In addition, in the event of any distribution or deemed distribution of rights or
warrants, or any Trigger Event or other event (of the type described in the preceding sentence)
with respect thereto that was counted for purposes of calculating a distribution amount for which
an adjustment to the Conversion Price under this Section 4.6 was made, (1) in the case of any such
rights or warrants which shall all have been redeemed or repurchased without exercise by any
holders thereof, the Conversion Price shall be readjusted upon such final redemption or repurchase
to give effect to such distribution or Trigger Event, as the case may be, as though it were a cash
distribution, equal to the per share redemption or repurchase price received by a holder or holders
of Common Stock with respect to such rights or warrants (assuming such holder had retained such
rights or warrants), made to all holders of Common Stock as of the date of such redemption or
repurchase, and (2) in the case of such rights or warrants which shall have expired or been
terminated without exercise by any holders thereof, the Conversion Price shall be readjusted as if
such rights and warrants had not been issued.



          (i) In case Brocade shall, by dividend or otherwise, at any time distribute (a “Triggering
Distribution”) to all or substantially all holders of its Common Stock cash in an aggregate amount
that, together with the aggregate amount of (A) any cash and the fair market value (as determined
by the Board of Directors of Brocade, whose determination shall be conclusive evidence thereof and
which shall be evidenced by an Officers’ Certificate of Brocade delivered to the Trustee) of any
other consideration payable in respect of any tender offer by Brocade or a Subsidiary of Brocade
for Common Stock consummated within the 12 months preceding the date of payment of the Triggering
Distribution and in respect of which no Conversion Price adjustment pursuant to this Section 4.6
has been made and (B) all other cash distributions to all or substantially all of the holders of
its Common Stock made within the 12 months preceding the date of payment of the Triggering
Distribution and in respect of which no Conversion Price adjustment pursuant to this Section 4.6
has been made, exceeds an amount equal to 10.0% of the product of the Current Market Price per
share of Common Stock (as determined in accordance with subsection (e) of this Section 4.6) on the
Business Day (the “Determination Date”) immediately preceding the day on which such Triggering
Distribution is declared by Brocade multiplied by the number of shares of Common Stock outstanding
on the Determination Date (excluding shares held in the treasury of Brocade), the Conversion Price
shall be reduced so that the same shall equal the price determined by multiplying such Conversion
Price in effect immediately prior to the Determination Date by a fraction of which the numerator
shall be the Current Market Price per share of the Common Stock (as determined in accordance with
subsection (e) of this Section 4.6) on the Determination Date less the quotient



A-6









 







of (y) the sum of the aggregate amount of cash and the aggregate fair market value (determined
as aforesaid in this Section 4.6(c)(i)) of any such other consideration so distributed, paid or
payable within such 12 months and described in clauses (A) and (B) above and the Triggering
Distribution divided by (z) the number of shares of Common Stock outstanding on the Determination
Date and the denominator shall be such Current Market Price per share of the Common Stock (as
determined in accordance with subsection (e) of this Section 4.6) on the Determination Date, such
reduction to become effective immediately prior to the opening of business on the day following the
date on which the Triggering Distribution is paid.



          (ii) In case any tender offer made by Brocade or any of its Subsidiaries for Common Stock
shall expire and Brocade shall pay for Purchased Shares (as defined below) an aggregate
consideration in an amount (determined as the sum of the aggregate amount of cash consideration and
the aggregate fair market value (as determined by the Board of Directors of Brocade, whose
determination shall be conclusive evidence thereof and which shall be evidenced by an Officers’
Certificate of Brocade delivered to the Trustee thereof) of any other consideration) that, together
with the aggregate amount of (A) any cash and the fair market value (as determined by the Board of
Directors of Brocade, whose determination shall be conclusive evidence thereof and which shall be
evidenced by an Officers’ Certificate of Brocade delivered to the Trustee) of any other
consideration payable in respect of any other tender offers by Brocade or any Subsidiary of Brocade
for Common Stock consummated within the 12 months preceding the date of the Expiration Date (as
defined below) and in respect of which no Conversion Price adjustment pursuant to this Section 4.6
has been made and (B) all cash distributions to all or substantially all of the holders of its
Common Stock made within the 12 months preceding the Expiration Date and in respect of which no
Conversion Price adjustment pursuant to this Section 4.6 has been made, exceeds an amount equal to
10.0% of the product of the Current Market Price per share of Common Stock (as determined in
accordance with subsection (e) of this Section 4.6) as of the last date (the “Expiration Date”)
tenders could have been made pursuant to such tender offer (as it may be amended) (the last time at
which such tenders could have been made on the Expiration Date is hereinafter sometimes called the
“Expiration Time”) multiplied by the number of shares of Common Stock outstanding (including
Purchased Shares but excluding any shares held in the treasury of Brocade) at the Expiration Time,
then, immediately prior to the opening of business on the day after the Expiration Date, the
Conversion Price shall be reduced so that the same shall equal the price determined by multiplying
the Conversion Price in effect immediately prior to the close of business on the Expiration Date by
a fraction of which the numerator shall be the product of the number of shares of Common Stock
outstanding (including Purchased Shares but excluding any shares held in the treasury of Brocade)
at the Expiration Time multiplied by the Current Market Price per share of the Common Stock (as
determined in accordance with subsection (e) of this Section 4.6) on the Trading Day next
succeeding the Expiration Date and the denominator shall be the sum of (x) the aggregate
consideration (determined as aforesaid) payable to stockholders based on the acceptance (up to any
maximum specified in the terms of the tender offer) of all shares validly tendered and not
withdrawn as of the Expiration Time (the shares deemed so accepted, up to any such maximum, being
referred to as the “Purchased Shares”) and (y) the product of the number of shares of Common Stock
outstanding (less any Purchased Shares and excluding any shares held in the treasury of Brocade) at
the Expiration Time and the Current Market Price per share of Common Stock (as determined in
accordance with subsection (e) of this Section 4.6) on the Trading Day next succeeding the
Expiration Date, such reduction to become effective



A-7









 







immediately prior to the opening of business on the day following the Expiration Date. In the
event that Brocade is obligated to purchase shares pursuant to any such tender offer, but Brocade
is permanently prevented by applicable law from effecting any or all such purchases or any or all
such purchases are rescinded, the Conversion Price shall again be adjusted to be the Conversion
Price which would have been in effect based upon the number of shares actually purchased. If the
application of this Section 4.6(c)(ii) to any tender offer would result in an increase in the
Conversion Price, no adjustment shall be made for such tender offer under this Section 4.6(c)(ii).



          (iii) For purposes of this Section 4.6(c), the term “tender offer” shall mean and include
both tender offers and exchange offers, all references to “purchases” of shares in tender offers
(and all similar references) shall mean and include both the purchase of shares in tender offers
and the acquisition of shares pursuant to exchange offers, and all references to “tendered shares”
(and all similar references) shall mean and include shares tendered in both tender offers and
exchange offers.



     (d) After any adjustment to the Conversion Price is made in accordance with Section 4.6(c)(i)
or (ii), no distribution or consideration (including the Triggering Distribution) that is taken
into account in making such adjustment shall again be taken into account for any future or other
adjustments made in accordance with Section 4.6.



     (e) For the purpose of any computation under subsections (b) and (c) of this Section 4.6, the
current market price (the “Current Market Price”) per share of Common Stock on any date shall be
deemed to be the average of the daily closing prices for the 30 consecutive Trading Days commencing
10 Trading Days before (i) the Determination Date or the Expiration Date, as the case may be, with
respect to distributions or tender offers under subsection (c) of this Section 4.6 or (ii) the
record date with respect to distributions, issuances or other events requiring such computation
under subsection (b) or (c) of this Section 4.6. The closing price (the “Closing Price”) for each
day shall be the last reported sales price or, in case no such reported sale takes place on such
date, the average of the reported closing bid and asked prices in either case on The Nasdaq
National Market (the “NNM”) or, if the Common Stock is not listed or admitted to trading on the
NNM, on the principal national securities exchange on which the Common Stock is listed or admitted
to trading or, if not listed or admitted to trading on the NNM or any national securities exchange,
the last reported sales price of the Common Stock as quoted on NASDAQ or, in case no reported sales
takes place, the average of the closing bid and asked prices as quoted on NASDAQ or any comparable
system or, if the Common Stock is not quoted on NASDAQ or any comparable system, the closing sales
price or, in case no reported sale takes place, the average of the closing bid and asked prices, as
furnished by any two members of the National Association of Securities Dealers, Inc. selected from
time to time by Brocade for that purpose. If no such prices are available, the Current Market Price
per share shall be the fair value of a share of Common Stock as determined by the Board of
Directors of Brocade (which shall be evidenced by an Officers’ Certificate of Brocade delivered to
the Trustee).



     (f) In any case in which this Section 4.6 shall require that an adjustment be made following a
record date or a Determination Date or Expiration Date, as the case may be, established for
purposes of this Section 4.6, Brocade may elect to defer (but only until five Business Days
following the filing by Brocade with the Trustee of the certificate described in Section 4.9)
issuing to the Holder of any Security converted after such record date or



A-8









 







Determination Date or Expiration Date the shares of Common Stock and other capital stock of
Brocade issuable upon such conversion over and above the shares of Common Stock and other capital
stock of Brocade issuable upon such conversion only on the basis of the Conversion Price prior to
adjustment; and, in lieu of the shares the issuance of which is so deferred, Brocade shall issue or
cause its transfer agents to issue due bills or other appropriate evidence prepared by Brocade of
the right to receive such shares. If any distribution in respect of which an adjustment to the
Conversion Price is required to be made as of the record date or Determination Date or Expiration
Date therefor is not thereafter made or paid by Brocade for any reason, the Conversion Price shall
be readjusted to the Conversion Price which would then be in effect if such record date had not
been fixed or such effective date or Determination Date or Expiration Date had not occurred.



     SECTION 4.7 NO ADJUSTMENT



     No adjustment in the Conversion Price shall be required unless the adjustment would require an
increase or decrease of at least 1% in the Conversion Price as last adjusted; provided,
however, that any adjustments which by reason of this Section 4.7 are not required to be made
shall be carried forward and taken into account in any subsequent adjustment. All calculations
under this Article 4 shall be made to the nearest cent or to the nearest one-thousandth of a share,
as the case may be.



     No adjustment need be made for issuances of Common Stock pursuant to a Brocade plan for
reinvestment of dividends or interest or for a change in the par value or a change to no par value
of the Common Stock.



     To the extent that the Securities become convertible into the right to receive cash, no
adjustment need be made thereafter as to the cash. Interest will not accrue on the cash.



     SECTION 4.8 ADJUSTMENT FOR TAX PURPOSES



     Brocade shall be entitled to make such reductions in the Conversion Price, in addition to
those required by Section 4.6, as it in its discretion shall determine to be advisable in order
that any stock dividends, subdivisions of shares, distributions of rights to purchase stock or
securities or distributions of securities convertible into or exchangeable for stock hereafter made
by Brocade to its stockholders shall not be taxable.



     SECTION 4.9 NOTICE OF ADJUSTMENT



     Whenever the Conversion Price or conversion privilege is adjusted, the Company shall promptly
mail to Securityholders a notice of the adjustment and file with the Trustee an Officers’
Certificate of Brocade briefly stating the facts requiring the adjustment and the manner of
computing it. Unless and until the Trustee shall receive an Officers’ Certificate of Brocade
setting forth an adjustment of the Conversion Price, the Trustee may assume without inquiry that
the Conversion Price has not been adjusted and that the last Conversion Price of which it has
knowledge remains in effect.



A-9









 





     SECTION 4.10 NOTICE OF CERTAIN TRANSACTIONS



     In the event that:




     (1) Brocade takes any action which would require an adjustment in the Conversion Price;




     (2) Brocade consolidates or merges with, or transfers all or substantially all of its
property and assets to, another corporation and stockholders of Brocade must approve the
transaction; or




     (3) there is a dissolution or liquidation of the Company or Brocade,


the Company shall mail to Holders and file with the Trustee a notice stating the proposed record or
effective date, as the case may be, of such event. The Company shall mail the notice at least ten
days before such date. Failure to mail such notice or any defect therein shall not affect the
validity of any transaction referred to in clause (1), (2) or (3) of this Section 4.10.




     SECTION 4.11 EFFECT OF RECLASSIFICATION, CONSOLIDATION, MERGER OR SALE ON CONVERSION PRIVILEGE



     If any of the following shall occur, namely: (a) any reclassification or change of shares of
Common Stock issuable upon conversion of the Securities (other than a change in par value, or from
par value to no par value, or from no par value to par value, or as a result of a subdivision or
combination, or any other change for which an adjustment is provided in Section 4.6); (b) any
consolidation or merger or combination to which Brocade is a party other than a merger in which
Brocade is the continuing corporation and which does not result in any reclassification of, or
change (other than in par value, or from par value to no par value, or from no par value to par
value, or as a result of a subdivision or combination) in, outstanding shares of Common Stock; or
(c) any sale or conveyance as an entirety or substantially as an entirety of the property and
assets of Brocade, directly or indirectly, to any person, then Brocade, or such successor,
purchasing or transferee corporation, as the case may be, shall, as a condition precedent to such
reclassification, change, combination, consolidation, merger, sale or conveyance, execute and
deliver to the Trustee a supplemental indenture providing that the Holder of each Security then
outstanding shall have the right to convert such Security into the kind and amount of shares of
stock and other securities and property (including cash) receivable upon such reclassification,
change, combination, consolidation, merger, sale or conveyance by a holder of the number of shares
of Common Stock deliverable upon conversion of such Security immediately prior to such
reclassification, change, combination, consolidation, merger, sale or conveyance, and
that each such Holder will also receive the rights described in a Rights Plan with respect to such
number of shares of Common Stock. Such supplemental indenture shall provide for adjustments of the
Conversion Price which shall be as nearly equivalent, as the Board of Directors of Brocade shall
reasonably consider to be practicable, to the adjustments of the Conversion Price provided for in
this Article 4. If, in the case of any such consolidation, merger, combination, sale or conveyance,
the stock or other securities and property (including cash) receivable thereupon by a holder of
Common Stock include shares of stock or other securities and property of a person other than the
successor, purchasing or transferee corporation, as the case may be, in such consolidation,



A-10









 







merger, combination, sale or conveyance, then such supplemental indenture shall also be
executed by such other person and shall contain such additional provisions to protect the interests
of the Holders of the Securities as the Board of Directors of Brocade shall reasonably consider
necessary by reason of the foregoing. The provisions of this Section 4.11 shall similarly apply to
successive reclassifications, changes, combinations, consolidations, mergers, sales or conveyances.



     In the event Brocade shall execute a supplemental indenture pursuant to this Section 4.11,
Brocade shall promptly file with the Trustee (x) an Officers’ Certificate of Brocade briefly
stating the reasons therefor, the kind or amount of shares of stock or other securities or property
(including cash) receivable by Holders of the Securities upon the conversion of their Securities
after any such reclassification, change, combination, consolidation, merger, sale or conveyance,
any adjustment to be made with respect thereto and that all conditions precedent have been complied
with and (y) an Opinion of Counsel of Brocade that all conditions precedent have been complied
with, and shall promptly mail notice thereof to all Holders.



     SECTION 4.12 TRUSTEE’S DISCLAIMER



     The Trustee shall have no duty to determine when an adjustment under this Article 4 should be
made, how it should be made or what such adjustment should be, but may accept as conclusive
evidence of that fact or the correctness of any such adjustment, and shall be protected in relying
upon, an Officers’ Certificate including the Officers’ Certificate with respect thereto which
Brocade is obligated to file with the Trustee pursuant to Section 4.9. The Trustee makes no
representation as to the validity or value of any securities or assets issued upon conversion of
Securities, and the Trustee shall not be responsible for Brocade’s failure to comply with any
provisions of this Article 4.



     The Trustee shall not be under any responsibility to determine the correctness of any
provisions contained in any supplemental indenture executed pursuant to Section 4.11, but may
accept as conclusive evidence of the correctness thereof, and shall be fully protected in relying
upon, the Officers’ Certificate with respect thereto which Brocade is obligated to file with the
Trustee pursuant to Section 4.11.



     SECTION 4.13 VOLUNTARY REDUCTION



     Brocade from time to time may reduce the Conversion Price by any amount for any period of time
if the period is at least 20 days and if the reduction is irrevocable during the period if the
Brocade’s Board of Directors determines that such reduction would be in the best interest of the
Company and Brocade or to avoid or diminish income tax to holders of shares of Common Stock in
connection with a dividend or distribution of stock or similar event, and Brocade provides 15 days
prior notice of any reduction in the Conversion Price; provided, however, that in no event
may Brocade reduce the Conversion Price to be less than the par value of a share of Common Stock.



A-11









 





     SECTION 4.14 PAYMENT OF CASH IN LIEU OF COMMON STOCK



     If a Holder elects to convert all or any portion of a Security into shares of Common Stock as
set forth in this Section 4 and Brocade receives such Holder’s conversion notice on or prior to the
day that is 20 days prior to the Final Maturity Date (the “Final Notice Date”), Brocade may choose
to satisfy all or any portion of its conversion obligation (the “Conversion Obligation”) in cash.
Upon such election, Brocade will notify such Holder through the Trustee of the dollar amount to be
satisfied in cash (which must be expressed either as 100% of the Conversion Obligation or as a
fixed dollar amount) at any time on or before the date that is two Business Days following receipt
of written notice of conversion as specified in Section 4.2 (such period, the “Cash Settlement
Notice Period”). If Brocade elects to pay cash for any portion of the shares otherwise issuable to
the Holder, the Holder may retract the conversion notice at any time during the two Business Day
period beginning on the day after the final day of the Cash Settlement Notice Period (a “Conversion
Retraction Period”); no such retraction can be made (and a conversion notice shall be irrevocable)
if Brocade does not elect to deliver cash in lieu of shares (other than cash in lieu of fractional
shares). If the conversion notice has not been retracted, then settlement (in cash and/or shares)
will occur on the Business Day following the final day of the 20 Trading Day period beginning on
the day after the final day of the Conversion Retraction Period (the “Cash Settlement Averaging
Period”). Settlement amounts will be computed as follows:




     (i) if Brocade elects to satisfy the entire Conversion Obligation in shares of
Common Stock, Brocade will deliver to such Holder a number of shares equal to (a) the
aggregate original principal amount at maturity of the Securities to be converted divided by
1,000, multiplied by (b) the Conversion Rate;




     (ii) if Brocade elects to satisfy the entire Conversion Obligation in cash, Brocade
will deliver to such Holder cash in an amount equal to the product of:




     (B) a number equal to (x) the aggregate original principal amount at maturity
of Securities to be converted divided by 1,000, multiplied by (y) the Conversion
Rate, and




     (C) the average Closing Price of the Common Stock during the Cash Settlement
Averaging Period; and




     (iii) if Brocade elects to satisfy a fixed portion (other than 100%) of the Conversion
Obligation in cash (the “Cash Amount”), Brocade will deliver to such Holder the Cash Amount
and a number of shares equal to the greater of (1) zero and (2) the excess, if any, of the
number of shares calculated as set forth in clause (i) above over the number of shares equal
to the sum, for each day of the Cash Settlement Averaging Period, of (x) 5% of the Cash
Amount, divided by (y) the closing price of the Common Stock on such day.



     Notwithstanding the foregoing, a Security in respect of which a Holder has delivered a Change
in Control Purchase Notice exercising such Holder’s option to require the Company to repurchase
such Security may be converted as described in this Section 4.14 only if such notice of exercise is
withdrawn as required in Section 4.1 hereof.



A-12









 





     If a Holder elects to convert all or any portion of a Security into shares of Common Stock as
set forth in Section 4.1 and Brocade receives such Holder’s Conversion Notice after the Final
Notice Date, if Brocade chooses to satisfy all or any portion of the Conversion Obligation in cash,
Brocade will have previously notified the Holders through the Trustee of the dollar amount to be
satisfied in cash at any time on or before the Final Notice Date. Upon such election, Brocade will
have notified the Holders through the Trustee of the dollar amount to be satisfied in cash (which
must be expressed either as 100% or as a fixed dollar amount) at any time on or before the Final
Notice Date. Settlement amounts and settlement dates will be computed in the same manner as set
forth above except that the “Cash Settlement Averaging Period” shall be the 20 Trading Day period
beginning on the day after receipt of the Conversion Notice (or in the event Brocade receives the
Conversion Notice on the Business Day prior to the Final Maturity Date, the 20 Trading Day period
beginning on the day after the Final Maturity Date). Settlement (in cash and/or shares) will occur
on the Business Day following the final day of such Cash Settlement Averaging Period.




A-13









 








ANNEX B




AMENDMENT, RESTATEMENT AND SUPPLEMENT TO SECURITY



1. All references in Exhibit A to the Indenture to Wells Fargo Bank Minnesota, National
Association, as trustee, shall mean Wells Fargo Bank, National Association, as successor in
interest to Wells Fargo Bank Minnesota, National Association, as trustee.



2. The legends on the form of the face of the Security are amend and restated in their entirety as
follows:





     “[UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER,
EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE &
CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY (AND ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH
OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST
COMPANY), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO
ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN
INTEREST HEREIN. THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE
INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITARY OR A
NOMINEE THEREOF. THIS SECURITY IS EXCHANGEABLE FOR SECURITIES REGISTERED IN THE NAME
OF A PERSON OTHER THAN THE DEPOSITARY OR ITS NOMINEE ONLY IN THE LIMITED
CIRCUMSTANCES DESCRIBED IN THE INDENTURE AND, UNLESS AND UNTIL IT IS EXCHANGED IN
WHOLE OR IN PART FOR SECURITIES IN DEFINITIVE FORM, THIS SECURITY MAY NOT BE
TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY
A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY
OR BY THE DEPOSITARY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF
SUCH SUCCESSOR DEPOSITARY.]1




     [THIS SECURITY (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A TRANSACTION
EXEMPT FROM REGISTRATION UNDER THE UNITED STATES SECURITIES ACT OF 1933 (THE
“SECURITIES ACT”), AND THIS SECURITY AND THE COMMON STOCK ISSUABLE UPON CONVERSION
THEREOF MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF
SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH





 




			
	1	 	This paragraph should be included only if the
Security is a Global Security.





1









 




PURCHASER OF THIS SECURITY IS HEREBY NOTIFIED THAT THE SELLER OF THIS SECURITY
MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES
ACT PROVIDED BY RULE 144A THEREUNDER.]2





     THE HOLDER OF THIS SECURITY AGREES FOR THE BENEFIT OF THE COMPANY THAT (A) THIS
SECURITY AND THE COMMON STOCK ISSUABLE UPON CONVERSION THEREOF MAY BE OFFERED,
RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (I) IN THE UNITED STATES TO A PERSON
WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED
IN RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF
RULE 144A, (II) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN ACCORDANCE
WITH RULE 904 UNDER THE SECURITIES ACT, (III) PURSUANT TO AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 (IF AVAILABLE), OR (IV)
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN EACH OF
CASES (I) THROUGH (IV) IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY
STATE OF THE UNITED STATES, AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS
REQUIRED TO, NOTIFY ANY PURCHASER OF THIS SECURITY FROM IT OF THE RESALE
RESTRICTIONS REFERRED TO IN (A) ABOVE.]2




     [THE HOLDER OF THIS SECURITY IS ENTITLED TO THE BENEFITS OF A REGISTRATION
RIGHTS AGREEMENT (AS SUCH TERM IS DEFINED IN THE INDENTURE REFERRED TO ON THE
REVERSE HEREOF) AND, BY ITS ACCEPTANCE HEREOF, AGREES TO BE BOUND BY AND TO COMPLY
WITH THE PROVISIONS OF SUCH REGISTRATION RIGHTS AGREEMENT.] 2”


3. Paragraph 6 of the form of the reverse side of the Security is amended and restated in its
entirety as follows:




     “6. CONVERSION




     A Holder of a Note may convert the principal amount of such Note (or any
portion thereof equal to $1,000 or any integral multiple of $1,000 in excess
thereof) into shares of Common Stock at any time prior to the close of business on
February 15, 2010; provided, however, that the conversion right will
terminate at the close of business on the Business Day immediately preceding the
date the





 




			
	2	 	These paragraphs to be included only if the
Security is a Transfer Restricted Security.




2









 











Change in Control Purchase Notice has been delivered, for so long as it has not
been validly withdrawn, for such Note or such earlier date as the Holder presents
such Note for purchase (unless the Company shall default in making the Change in
Control Purchase Price payment when due, in which case the conversion right shall
terminate at the close of business on the date such default is cured and such Note
is purchased).




     The initial Conversion Price is $14.28 per share, subject to adjustment under
certain circumstances as provided in the Indenture. The number of shares of Common
Stock issuable upon conversion of a Note is determined by dividing the principal
amount of the Note or portion thereof converted by the Conversion Price in effect on
the Conversion Date. No fractional shares will be issued upon conversion; in lieu
thereof, an amount will be paid in cash based upon the Closing Price (as defined in
the Indenture) of Common Stock on the Trading Day immediately prior to the
Conversion Date.




     To convert a Note, a Holder must (a) complete and manually sign the conversion
notice set forth below and deliver such notice to a Conversion Agent, (b) surrender
the Note to a Conversion Agent, (c) furnish appropriate endorsements and transfer
documents if required by a Registrar or a Conversion Agent, and (d) pay any transfer
or similar tax, if required.




     A Holder may convert a portion of a Note equal to $1,000 or any integral
multiple thereof.




     A Note in respect of which a Holder had delivered a Change in Control Purchase
Notice exercising the option of such Holder to require the Company to purchase such
Note may be converted only if the Change in Control Purchase Notice is withdrawn in
accordance with the terms of the Indenture.




     Upon conversion, the Company may choose to deliver, in lieu of Common Stock,
cash or a combination of cash and Common Stock in accordance with the terms of the
Indenture.”


4. Paragraph 13 of the form of the reverse side of the Security is amended and restated in its
entirety as follows:




     “13. DEFAULTS AND REMEDIES




     Under the Indenture, an Event of Default includes: (i) default for 30 days in
payment of any interest or Additional Interest on any Notes; (ii) default in payment
of any principal on the Notes when due; (iii) failure by the Company for 60 days
after notice to it to comply with any of its other agreements contained in the
Indenture or the Notes; (iv) default in the payment of certain indebtedness of the
Company or a Significant Subsidiary (all or substantially all of the voting
securities of which are owned, directly or indirectly, by the Company) and (v)
certain events of bankruptcy, insolvency or reorganization of the Company, or any
Significant Subsidiary or Brocade. If an Event of Default (other than as a result of
certain events of bankruptcy, insolvency or reorganization of the



3









 







Company) occurs and is continuing, the Trustee or the Holders of at least 25%
in aggregate principal amount of the Notes then outstanding may declare all unpaid
principal on the Notes then outstanding to be due and payable immediately, all as
and to the extent provided in the Indenture. If an Event of Default occurs as a
result of certain events of bankruptcy, insolvency or reorganization of the Company
or Brocade, unpaid principal of the Notes then outstanding shall become due and
payable immediately without any declaration or other act on the part of the Trustee
or any Holder, all as and to the extent provided in the Indenture. Holders may not
enforce the Indenture or the Notes except as provided in the Indenture. The Trustee
may require indemnity satisfactory to it before it enforces the Indenture or the
Notes. Subject to certain limitations, Holders of a majority in aggregate principal
amount of the Notes then outstanding may direct the Trustee in its exercise of any
trust or power. The Trustee may withhold from Holders notice of any continuing
default (except a default in payment of principal or interest) if it determines that
withholding notice is in their interests. The Company is required to file periodic
reports with the Trustee as to the absence of default.”


5. Paragraph 15 of the form of the reverse side of the Security is amended and restated in its
entirety as follows:




     “15. NO RECOURSE AGAINST OTHERS




     A director, officer, employee or shareholder, as such, of the Company or
Brocade shall not have any liability for any obligations of the Company or Brocade
under the Notes or the Indenture nor for any claim based on, in respect of or by
reason of such obligations or their creation. The Holder of this Note by accepting
this Note waives and releases all such liability. The waiver and release are part of
the consideration for the issuance of this Note.”


6. Paragraph 19 of the form of the reverse side of the Security is amended and restated in its
entirety as follows:




     “19. INDENTURE TO CONTROL; GOVERNING LAW




     In the case of any conflict between the provisions of this Note and the
Indenture, the provisions of the Indenture shall control. This Note shall be
governed by, and construed in accordance with, the laws of the State of New York,
without regard to principals of conflicts of law.




     The Company will furnish to any Holder, upon written request and without
charge, a copy of the Indenture. Requests may be made to: McDATA Corporation, 11802
Ridge Parkway, Broomfield, Colorado 80021, (720) 558-4348, Attention: Chief
Financial Officer.”


7. The form of the reverse side of the Security is amended and supplemented by adding a Paragraph
20 thereto as follows:




4









 








     “20. BROCADE GUARANTY




     This Note is entitled to the benefits of the Brocade Guaranty made for the
benefit of the Holders. Reference is hereby made to the Indenture for a statement of
the respective rights, limitations of rights, duties and obligations of Brocade
thereunder.”


8. The form of Conversion Notice attached to the form of the Security is amended and restated in
its entirety as follows:




5









 








“CONVERSION NOTICE




     To convert this Note into Common Stock of Brocade, check the box: o



     To convert only part of this Note, state the principal amount to be converted
(must be $1,000 or a multiple of $1,000): $                    .



     If you want the stock certificate made out in another person’s name, fill in
the form below:



 





(Insert assignee’s soc. sec. or tax I.D. no.)




 





 





 





(Print or type assignee’s name, address and zip code)




	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Your Signature:	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	Date:
	 	 	 	 	 	 	 	 	 	 
	 

	 	 

	 	 	 	 

	 	(Sign exactly as your name appears on the other side of this
Security)
	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	*Signature guaranteed by:	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	By:

	 	 	 	”	 	 	 	 	 	 
	 

	 	 

	 	 	 	 	 	 	 	 








 




			
	*	 	The signature must be guaranteed by an
institution which is a member of one of the following recognized signature
guaranty programs: (i) the Securities Transfer Agent Medallion Program (STAMP);
(ii) the New York Stock Exchange Medallion Program (MSP); (iii) the Stock
Exchange Medallion Program (SEMP); or (iv) such other guaranty program
acceptable to the Trustee.




6









 









9. The form of the Security is amended and supplemented by adding the following Guaranty thereto:




“GUARANTY





     The undersigned, Brocade Communications Systems, Inc., a Delaware corporation
(“Brocade”), hereby unconditionally guaranties to the extent set forth in the
Indenture, dated February 7, 2003 between McDATA Corporation, as issuer (the
“Issuer”), and Wells Fargo Bank, National Association, as successor in interest to
Wells Fargo Bank Minnesota, National Association, as Trustee (the “Trustee”), as
supplemented by First Supplemental Indenture dated as of January 29, 2007 by and
among the Issuer, the Trustee, and Brocade (as amended, restated or supplemented
from time to time, the “Indenture”), and subject to the provisions of the Indenture,
as supplemented, (a) the due and punctual payment of the principal of, premium, if
any, and interest on the Securities, when and as the same shall become due and
payable, whether at maturity, by acceleration or otherwise, the due and punctual
payment of interest on overdue principal of, premium, if any, and, to the extent
permitted by law, interest, all in accordance with the terms set forth in Article
Three of the First Supplemental Indenture, and (b) in case of any extension of time
of payment or renewal of any Securities or any of such other obligations, that the
same will be promptly paid in full when due or performed in accordance with the
terms of the extension or renewal, whether at stated maturity, by acceleration or
otherwise.




     The obligations of Brocade to the Holders pursuant to this Guaranty and the
Indenture, as supplemented, are expressly set forth in Article Three of the First
Supplemental Indenture and reference is hereby made to the Indenture, as
supplemented, for the precise terms and limitations of this Guaranty.




     Capitalized terms used but not defined herein shall have the meanings ascribed
to such terms in the Indenture, as supplemented.




     IN WITNESS WHEREOF, Brocade has caused this Guaranty to be duly executed as of
the date set forth below.



     Dated: January 29, 2007



	 	 	 	 	 
	 	Brocade:



BROCADE COMMUNICATION SYSTEMS, INC.

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title: ”	 	 
	 




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