exv10w4



 





Exhibit 10.4




BROCADE SENIOR LEADERSHIP PLAN




Revised: May 11, 2007




PURPOSE



The Brocade Senior Leadership Plan is designed to link incentive compensation with Company
performance.




PERFORMANCE PERIOD AND PAYOUT PERIOD



Performance against Company and individual objectives is measured annually (according to the
Company’s fiscal year) (Plan Period), but will be reviewed semi-annually. Payout of earned cash
bonuses, if any, occurs on an annual basis.




ELIGIBILITY



Regular full-time and part-time Vice President (VP) level employees are eligible to participate in
the Senior Leadership Plan Program. To the extent a VP is eligible to and participates in the
Company’s Sales Incentive Plan, then that VP shall not be eligible to participate in this Senior
Leadership Plan.



Participants must be regular (full-time or part-time) employees at the end of the fiscal year to be
eligible to receive a Senior Leadership Plan Payout.



PARTICIPANT PERFORMANCE



As each Plan Period begins, participants must complete a CEO or VP Performance Contract.
Performance contracts should be tied to company and departmental goals as outlined by the board of
directors (i.e., company priorities and initiatives). All goals must be tied to overall company
objectives and have defined measurements.



Before Performance Contracts for Executive VPs are final, they are to be reviewed and approved by
Finance, Human Resources, and the Chief Executive Officer (CEO). Performance Contracts for
Functional VPs are reviewed and approved by the applicable Executive VP. The CEO’s Performance
Contract shall be reviewed by the Chair of the Board of Directors and the Chair of the Compensation
Committee.



At the end of each Plan Period, actual performance against the plan’s financial metric goals is
determined by Finance and provided to the plan participants. Performance against goals is then
assessed by the Participant and then reviewed and assessed by the VP’s manager, in order to
determine each participant’s bonus payout for the period. The Compensation Committee reviews and
approves all Section 16 Officers’ performance and bonus payouts annually. The CEO reviews and
approves all other VP cash bonus payouts. The Compensation Committee shall review and approve the
CEO’s bonus payouts.




 









 





COMPANY PERFORMANCE & SENIOR LEADERSHIP PLAN FUNDING



Each Plan Period, Brocade will set an Operating Margin target for the Company to achieve during the
Plan Period (Target OM).



At the end of each Plan Period, Brocade will fund the Senior Leadership Plan based on the actual
performance achieved by Brocade during the Plan Period (Actual OM) relative to the Target OM
(Actual Funding).



The Actual OM will be communicated following the end of each Plan Period.




PARTICIPANT INCENTIVE TARGET



A Participant’s Incentive Target is determined by the Participant’s pay grade at the end of the
12-month Plan Period, unless otherwise indicated in writing by Brocade.




	 	 	 
	Participant Pay Grade	 	Annual Incentive Target
	CEO
	 	100%
	CEO Direct Reports and Select VPs
	 	50%
	Other VPs
	 	40%






SENIOR LEADERSHIP PLAN PAYOUTS



On an annual basis, the Compensation Committee reviews and approves Section 16 Officers’
performance and cash bonus payouts. The CEO reviews and approves all other VP cash bonuses. Program
payouts are made within eight (8) weeks following the conclusion of the 12-month Plan Period.
Payouts will be pro-rated for Participants who are hired or transferred into the Senior Leadership
Plan during any Plan Period.



Except as otherwise agreed upon by the Company and the Participant, for each Participant, the cash
bonus payout is calculated based on the following formula (less applicable taxes and deductions):





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



	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Non-GAAP	 	 	 	 
	Participant	 	Revenue	 	Operating Income	 	Individual Goals	 	Total
	CEO
	 	 	37.5	%	 	 	37.5	%	 	 	25	%	 	 	100	%
	VPs
	 	 	50	%	 	 	40	%	 	 	10	%	 	 	100	%





Bonuses will be calculated using the salary as of the last day of the Plan Period.



Departmental budgets are communicated at the beginning of each fiscal year and may be updated
quarterly throughout the year by the CEO and CFO. Adherence to the individual’s departmental


 









 






budget is a gate for the individual to qualify for the Senior Leadership Plan bonus. Failure to
adhere to the agreed upon budget disqualifies the individual from a bonus payout.




ADMINISTRATIVE PROCEDURES



Compensation Committee Approval



The Compensation Committee reserves the right to decrease or eliminate bonus otherwise indicated.



New Hires and Promotions



Participants new to the company or who are promoted into the Senior Leadership Plan must complete a
VP Performance Contract within 60 days of beginning in the new position.



Grade/Salary Factor



Payout will be based on the Participant’s salary and pay grade on the last day of the Plan Period.
Bonuses will be pro-rated if Participant received a cash bonus on another bonus program.



Terminations: Anyone who is not on the payroll as of the end of the fiscal year is not eligible to
receive a cash bonus payout.



Leaves of Absences, Disability or Death: In the event of the Participant death, disability time
off, or leave of absence, Payouts will be made on a pro-rated basis, based on the number of days
the Participant was actively working at Brocade. If the Participant is on a legally protected leave
of absence (e.g. Family Medical Leave or Military Leave), the Participant’s eligibility for
participation in Plan may be extended beyond the time above, in accordance with the laws governing
the legally protected leave. In the event of death, any cash bonus payments will be paid to the
Participant’s primary beneficiary as designated in the Participant’s Brocade life insurance plan
documentation, if any.



Performance Improvement Plan/Disciplinary Situations (Development Needed): If a Participant, at
anytime prior to the cash bonus payout 12-month Plan Period, is subject to a performance
improvement plan, discipline or demotion, Brocade may, in its sole discretion, reduce or eliminate
the Cash Payment that the Participant would otherwise have been eligible to receive. If, at the
time prior to the Payout for a 12-month Plan Period, it is determined that a Participant may be
subject to corrective action, discipline or demotion, then Brocade may withhold the entire Cash
Bonus Payout, or a portion thereof, until after a final decision on such corrective action has been
made. If a Participant is given a performance rating of Development Needed, the Participant will
not be eligible to receive a Payout. Only the VP of Human Resources or CEO may approve exceptions
to this policy.



Other Provisions: Participation in the Senior Leadership Plan does not constitute an agreement
(express or implied) between the Participant and Brocade that the Participant will be employed by
Brocade for any specific period of time, nor is there any agreement for continuing or long-
term employment. Terms and conditions regarding the Senior Leadership Plan and any participation
therein, including but not limited to Senior Leadership Plan eligibility, Senior Leadership Plan
funding, and performance and payout criteria and determinations, are subject to change by Brocade
at any time in its sole discretion. Brocade and its Board of Directors retain the absolute right to
interpret, revise, modify or terminate the Senior Leadership Plan at any time in its sole
discretion.




 









 





ADDENDUM TO BROCADE SENIOR LEADERSHIP PLAN

(DATED OCTOBER 21, 2005)



Notwithstanding any terms to the contrary in the Brocade Senior Leadership Plan, the following
terms shall apply to the Bonus Payout under the Senior Leadership Plan for fiscal 2006 and 2007:




	 	 	 	 	 
	 	 	2006	 	2007
	Executive Officers and
Certain Other Officers
	 	 	 	 
	Cash Bonus Premium1

	 	Up to 1.0x of 2006
Bonus Target
	 	Up to 0.5x of 2007
Bonus Target
	Restricted Stock2

	 	1.5x of 2005 Base Salary
	 	N/A
	 
	 	 	 	 
	Other Officers
	 	 	 	 
	 
	 	 	 	 
	Cash Bonus Premium1

	 	Up to 0.35x of 2006
Bonus Target
	 	Up to 0.35x of 2007
Bonus Target








 




			
	1	 	In addition to normal bonus and subject to achievement of revenue and operating
margin/profit targets determined by the Board of Directors and other Company and departmental
financial, strategic and operational metrics.
	 
	2	 	The number of shares of restricted stock to be issued is multiplied by such employee’s
2005 base salary, divided by then fair market value on the date of grant. The grants will be
subject to 2-year cliff vesting. These grants will be in lieu of any 2006 focal option grants
for such employees.