Document:

exv10w42

 

EXHIBIT 10.42

EMPLOYMENT AGREEMENT BY AND BETWEEN VIEWCAST.COM, INC. AND GARY

KLEMBARA EFFECTIVE AS OF SEPTEMBER 1, 2007

     This Employment Agreement (this “Agreement”) is made and entered into as of the 1st day of
September 2007 between ViewCast.com, Inc. (the “Employer”), a corporation, and Gary Klembara (the
“Executive”), residing at 2910 Oak Point Drive, Garland, TX 75044. Where not otherwise defined
herein, capitalized terms used herein have the meanings set forth in Section 9.1 of this Agreement.

     WHEREAS, the Employer wishes to employ the Executive in an executive capacity, as its Sr. Vice
President of Sales, and Executive wishes to accept such employment, on the terms and conditions set
forth herein;

     NOW, THEREFORE, in consideration of the mutual promises, benefits and covenants herein
contained, the Employer and Executive hereby agree as follows:

     1. Effective Date: Term.

     1.1 This Agreement shall be effective as of September 1, 2007 (the “Effective
Date”).

     1.2 The Employer employs the Executive, and the Executive accepts such employment, for an
eighteen (18) month period commencing on the Effective Date (the “Initial Term”).

     1.3 The Term of the Executive’s employment under this Agreement shall be automatically renewed
for additional one-year terms (each a Renewal Term”) upon the expiration of the Initial Term or any
Renewal Term unless the Employer or the Executive delivers to the other, at least sixty (60) days
prior to the expiration of the Initial Term or the then current Renewal Term, as the case may be, a
written notice specifying that the Term of the Executive’s employment will not be renewed at the
end of the Initial Term or such Renewal Term, as the case may be.

     1.4 This Agreement may be terminated prior to the expiration of the Initial Term or any
Renewal Term as provided in Section 4 of this Agreement.

     2. Position and Duties.

     2.1 During the Initial or Renewal Term of this Agreement, the Employer shall employ the
Executive to serve as its Sr. Vice President of Sales. The Executive shall perform such executive,
administrative and operational duties customary for executives in such capacity or as may be
assigned to the Executive from time to time by the President and COO.

 

 

     2.2 Executive agrees to serve the Employer faithfully and to the best of the Executive’s
ability and to devote substantially all of the Executive’s business time, attention and efforts to
the interests and business of the Employer and its Subsidiaries.

     2.3 The Executive agrees at all times to perform all his duties in accordance with applicable
laws, rules and regulations and the policies and procedures of the Employer applicable to senior
executives in effect from time to time.

     3. Compensation, Benefits and Expenses.

     3.1 Salary. During the period from the Effective Date through the Term of this
Agreement and except as otherwise provided in this Agreement, the Employer shall pay to Executive
an annual base salary of $165,000.00 (the “Base Salary Amount”), in equal installments pursuant to
the Employer’s standard payroll policies and subject to such withholding or deductions as may be
mutually agreed between the Employer and the Executive or required by law.

     3.2 Incentive Compensation. In addition to the salary set forth in Section 3.1,
Executive, at Employer’s discretion, may earn incentive compensation as deemed appropriate for the
position each calendar year (see 2007 Incentive Compensation Plan as an example). Payment of any
bonus or incentive compensation shall be made in accordance with the Employer’s standard or
established payroll policies and shall be subject to such withholding or deductions as may be
mutually agreed between the Employer and the Executive or required by law.

     3.3 Fringe Benefits. During the period of his employment, Executive shall be entitled
to participate in Employer’s plans for the welfare and benefit of its employees available to senior
executive officers generally to the extent Executive satisfies the requirements provided in such
plans with respect to the position, tenure, salary, health and other qualifications for
participation. Executive will be entitled to 4 weeks annual vacation; no more than 2 consecutive
weeks may be taken at any given time in each fiscal year. A maximum of 40 hours accrued vacation
may be carried over from one year to the next.

     3.4 Expenses. During the term of this Agreement, the Employer authorizes Executive to
incur reasonable and necessary out-of-pocket business expenses in the course of performing his
duties and rendering services hereunder in accordance with Employer’s policies with respect
thereto, and the Employer shall reimburse Executive for all such expenses, provided (i) such
expenses and the purpose for which they were incurred are in accordance with Employer’s policies,
and (ii) the Executive timely submits to the Employer expense reports and substantiation of the
expenses in accordance with Employer’s policies.

 

 

     4. Termination.

     4.1 Termination. The Executive’s employment by Employer shall terminate on the
earliest Date of Termination upon the occurrence of one of the following events:

     4.1.1 the Executive’s death;

     4.1.2 the Executive is determined to be “permanently disabled” as defined under the disability
insurance policy covering the Executive;

     4.1.3 termination of Executive by Employer for “Cause”;

     4.1.4 termination of employment by Executive upon written notice to Employer;

     4.1.5 termination of Executive by Employer without cause upon written notice to Executive or
termination by Executive for Good Reason;

     4.1.6 the expiration of this Agreement; or

     4.1.7 a Change of Control of the Employer, if the Executive’s employment hereunder is
terminated by the Employer or its successor (other than pursuant to Section 4.1.3 above) after such
Change of Control.

     4.2 Time of Termination. Executive’s employment with Employer (including all
positions held with Employer or its Subsidiaries or affiliates) shall terminate immediately upon
the Date of Termination without further action by Employer.

     4.3 Effect of Termination of Employment.

     (a) Termination Due to Death. In the event the Executive’s employment is terminated due to
his death, his estate or designated beneficiaries shall be entitled to the following:

	 	(i)	 	any amounts payable on death pursuant to any plans or policies
of Employer;
	 
	 	(ii)	 	any other amounts due but not yet paid from Employer to
Executive; and

     (b) Termination Due to Disability. In the event the Executive’s employment is terminated due
to his permanent or total disability, Executive or his legal representative shall be entitled to
the following:

	 	(i)	 	any amounts payable on disability pursuant to any plans or policies of Employer;
and
	 
	 	(ii)	 	any other amounts due but not yet paid from Employer to
Executive.

     (c) Termination for Cause. In the event Executive’s employment is terminated by Employer for
Cause, Executive shall receive:

	 	(i)	 	The equivalent of two (2) weeks Base Salary Amount in effect on the Date of
Termination, payable in accordance with Employer’s standard payroll policies;

 

 

	 	(ii)	 	any other amounts due but not yet paid from Employer to
Executive; and
	 
	 	(iii)	 	reimbursement for three (3) months of COBRA premiums paid by Executive.

     (d) Termination Without Cause or for Good Reason. In the event the Executive’s employment is
terminated by Employer without cause (other than by death or disability) or by Executive for Good
Reason, Executive shall be entitled to the following:

	 	(i)	 	an amount equal to the Base Salary Amount in effect on the Date of Termination
for a period of twelve (12) months, payable in accordance with Employer’s standard
payroll periods and policies;
	 
	 	(ii)	 	any other amounts due but not yet paid from Employer to
Executive; and
	 
	 	(iii)	 	reimbursement for six (6) months of COBRA premiums paid by Executive (Note:
the executive has the right to continue COBRA coverage for up to 18 months).

     (e) Termination upon Change of Control. If Executive’s employment hereunder is terminated by
the Employer or its successor (other than pursuant to Section 4.1.3 above) after such Change of
Control, Executive shall be entitled to an amount equal to the Base Salary Amount in effect on the
Date of Termination for a period of twelve (12) months, payable in accordance with Employer’s
standard payroll periods and policies.

     5. Confidentiality.

     5.1 Confidential Information in General. The Executive has and will have access to
and participate in the development of or be acquainted with confidential or proprietary information
and trade secrets related to the business of Employer, its Subsidiaries and affiliates (the
“Companies”), including but not limited to (i) business plans, operating plans, marketing plans,
bid strategies, bid proposals, financial reports, operating data, budgets, wage and salary rates,
pricing strategies and information, terms of agreements with suppliers or customers and others,
customer lists, formulas, patents, devices, software programs, reports, correspondence, tapes,
discs, tangible property and specifications owned by or used in Employer’s business, operating
strengths and weaknesses of the Companies’ officers, directors, employees, agents, suppliers and
customers, (ii) information pertaining to future developments such as, but not limited to research
and development, future marketing, distribution, delivery or merchandising plans or ideas and
potential new distribution for business locations, and (iii) other tangible and intangible
property, which are used in the business and operation of the Companies but not made publicly
available (the “Confidential Information”).

 

 

     5.2 Assignment. The Executive hereby assigns to Employer, in consideration of his
employment, all Confidential Information in the possession of Executive at any time during the term
of this Agreement, whether or not made or conceived during working hours, alone or with others,
which relates, directly or indirectly, to businesses or proposed businesses of the Companies, and
Executive agrees that all such Confidential Information shall be the exclusive property of the
Companies. The Executive shall establish and maintain written records of all such Confidential
Information with respect to the inventions or similar intellectual property for the benefits of the
Companies and shall execute and deliver to the Companies any specific assignments or other
documents appropriate to vest title in such Confidential Information in the Companies or to obtain
for the Companies legal protection for such Confidential Information.

     5.3 Non-Disclosure. The Executive shall not disclose, use or make known for his or
another’s benefit any Confidential Information of the Companies or use such Confidential
Information in any way except in the best interests of the Companies in the performance of
Executive’s duties under this Agreement.

     5.4 Continuing Obligations. The obligations of Executive under this Section 5 shall
survive the termination of Executive’s employment and the expiration or termination of this
Agreement for a period of twelve (12) months.

     6. Return of Employer’s Property.

     Immediately upon termination of the Executive’s employment with the Employer, the Executive
shall deliver to the Employer all Confidential Information, documents, correspondence, notebooks,
reports, computer programs, names of full-time and part time employees and consultants, and all
other materials and copies thereof (including computer discs and other electronic media) relating
in any way to the business of the Employer in any way obtained by the Executive during the periods
of this employment with the Employer. Immediately upon termination of the Executive’s employment
with the Employer, the Executive shall deliver to the Employer all tangible property of Employer in
the possession of Executive, including without limitation, telephones, facsimile machines,
computers, leased automobiles and credit cards. The obligations of Executive under this Section 6
shall survive the termination of Executive’s employment and the expiration for termination of this
Agreement.

     7. Non-Competition and Non-Solicitation.

     7.1 Non-Compete. For a period of eighteen (18) months following the termination of
Executive’s employment by Employer (the “Non-competition Period”), the Executive will not, directly
or indirectly, without the written consent of the Board of Directors, own, manage, operate,
control, be employed by, consult with or participate in or be connected with any entity

 

 

owning or having financial interest in, whether direct or indirect, a business entity which is
in the same line or lines of business as the Employer or its Subsidiaries. For purposes of this
Section 7.1, each of the following activities, without limitation, shall be deemed to constitute
proscribed activities during the Non-competition Period: to engage in, work with, have an interest
in (other than interests of less than 1% in companies with securities traded on a nationally
recognized stock exchange or interdealer quotation system), advise, consult, manage, operate, lend
money to (other than interests of less than 1% in companies traded on a nationally recognized stock
exchange or interdealer quotation system), guarantee the debts or obligations of, or permit one’s
name or any part thereof to be used in connection with an enterprise or endeavor, either
individually, in partnership or in conjunction with any person or persons, firm, association,
company or corporation, whether as principal, director, agent, shareholder, partner, employee,
consultant or in any other manner whatsoever. For purposes of this Agreement, an “indirect”
interest is presumed to exist if an interest is held by a spouse, parent or child, in addition to
any other forms of indirect or beneficial interest.

     7.2 Non-Solicitation. During the Non-competition Period, the Executive will not,
directly or indirectly, solicit for employment, or advise or recommend any person to employ or
solicit for employment, any person Executive knows to be an employee of the Employer or any of its
Subsidiaries.

     7.3 Continuing Obligations. The obligations of Executive under this Section 7 shall
survive the termination of Executive’s employment and the expiration or termination of this
Agreement throughout the Non-competition Period.

     8. Remedies.

     8.1 In the event of any breach or threatened breach, the parties to this Agreement may seek to
compel specific performance of the terms of this Agreement through arbitration in accordance with
the provisions of paragraph 9.2 of this Agreement.

     9 Miscellaneous.

     9.1 Certain Definitions.

“Cause” shall mean: (i) the Executive is charged with fraud, embezzlement, theft or other
criminal conduct, (ii) dishonesty, disloyalty, insubordination or gross negligence in the
performance of duties, (iii) failure of the Executive to obey the reasonable and lawful
orders of the President and COO, which orders were consistent with the duties of the
Executive under this Agreement, after the Executive had been given written notice of such
failure and not less than thirty (30) days to correct the misconduct; (iv) failure to
provide requested information, or (v) any act of fraud or serious moral turpitude.

 

 

     “Change of Control” shall mean the occurrence of any one of the following events:

	 	(i)	 	the Board of Directors of Employer approves a plan to sell or dispose of by
merger, consolidation or other transaction all or substantially all of Employer’s
operating assets (on a consolidated basis) or approves a plan of liquidation; or
	 
	 	(ii)	 	the Employer combines with another company and is the surviving corporation but
immediately after the combination, the persons who were the shareholders of the
Employer immediately prior to the combination own 50% or less of all outstanding
securities including vested options granted under the Plan of the combined entity.

“Good Reason” shall mean a significant change in the nature and scope of the authority,
powers, functions, benefits or duties attached to the position of Senior Vice President,
Sales of the Employer as held by Executive as of the Effective Date.

“Date of Termination” shall mean:

	 	 	 	(i)        if employment terminates because of Executive’s death, the date
of death;
	 
	 	 	 	(ii)       if employment terminates for “Cause”, the latest date specified in Section
4.1.3 of this Agreement;
	 
	 	 	 	(iii)      if employment terminates because of permanent or total disability, the date of
determination that Executive is so disabled as described in Section 4.1.2 of this
Agreement;
	 
	 	 	 	(iv)      if employment terminates due to expiration of term, the date of
expiration.

“Subsidiary” shall mean any entity in which Employer, directly or indirectly, owns 50% or
more of the voting securities or otherwise controls the ability to elect a majority of the
governing board.

     9.2 Dispute Resolution. Any disputes arising under or in connection with this
Agreement shall be subject to arbitration in accordance with rules and procedures of the American
Arbitration Association (“AAA”) with such changes as the parties may agree. If within 10 days of a
request for arbitration, the parties have not agreed on the selection of an arbitrator willing to
serve, either party may request the AAA to appoint an arbitrator who shall arbitrate the dispute
and such appointment and determination shall be binding on the parties. Neither party may commence
any legal action or proceeding under this Agreement, other than to enforce this provision, except
that Employer may seek judicial intervention for the purpose of obtaining injunctive relief to
enforce Executive’s obligations under paragraphs 5, 6, and 7, which shall specifically survive the
termination of this Agreement. Costs of arbitration, including,

 

 

without limitation, costs of investigations, fees and expenses of the arbitrator and attorneys
shall be borne by the party incurring same.

     9.3 Notices. Any notices under this Agreement shall be in writing and shall be given
by personal delivery, by local courier service, by certified or registered letter, return receipt
requested, or by a nationally recognized overnight delivery service; and shall be deemed given when
delivered in person or by local courier or upon actual receipt of the facsimile or certified or
registered letter, or on the business day next following delivery to a nationally recognized
overnight delivery service at the addresses set forth below of this Agreement or to such other
address or addresses as either party shall have specified in writing to the other party hereto.

	 	 	 
	If to the Employer:
	 	ViewCast.com, Inc.

	 	 	3701 West Plano Parkway, Suite 300

	 	 	Plano, TX 75075

	 	 	 

	If to Executive:
	 	Gary Klembara

	 	 	2910 Oak Point Drive

	 	 	Garland, TX 75044

     9.4 GOVERNING LAW. ALL QUESTIONS PERTAINING TO THE VALIDITY, CONSTRUCTION, EXECUTION
AND PERFORMANCE OF THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH, AND BE GOVERNED BY, THE
LAWS OF THE STATE OF TEXAS.

     9.5 Entire Agreement; Amendment or Modification. This Agreement constitutes the
entire agreement of the parties hereto with respect to the matters contained herein. No
modification or amendment of any of the provisions of such agreements shall be effective unless in
writing and signed by the Executive and Employer. No failure to exercise any right or remedy
hereunder shall operate as a waiver thereof. No term or condition of this Agreement shall be
deemed to have been waived, nor shall a party be estopped from enforcing any provision of this
Agreement, except by a statement in writing signed by the Executive or Employer, whichever party
against whom such waiver or estoppel is sought. If any provision of this Agreement is found to be
unreasonably broad, it shall nevertheless be enforceable to the extent reasonably necessary to
protect the Employer and to the greatest extent permitted by law. If any provision of this
Agreement is determined to be invalid or unenforceable, such provision shall be reformed to the
extent necessary to make it valid or enforceable and to carry out the interest of the parties, or
if such information is not possible, the remaining provisions of this Agreement shall continue in
full force and effect.

 

 

     9.6 Binding Nature. This Agreement shall be binding upon and insure to the benefit of
the parties and their respective successors, heirs (in the case of the Executive) and permitted
assigns.

     9.7 Survival. The Executive’s obligations under Sections 5, 6, 7 and 8 will survive
the termination of Executive’s employment and the termination or expiration of this Agreement. The
Employer’s obligations under this Agreement will survive the termination of Executive’s employment
and the termination or expiration of this Agreement until paid in full.

     9.8 Headings. The paragraph and subparagraph headings contained in this Agreement are
for reference purposes only and shall not affect the construction or interpretation of this
Agreement.

     9.9 Counterparts. This Agreement may be executed in several counterparts, and all
counterparts so executed shall constitute one agreement, binding on the parties hereto,
notwithstanding that both parties are not signatory to the original or the same counterpart.

     10. Successors and Assigns. The rights and obligations of the parties hereto shall
inure to the benefit of and shall be binding upon successors and assigns of Employer.

     11. Further Assurances. Executive shall cooperate and take such action as may be
reasonably requested by Employer in order to carry out the provisions and purposes of this
Agreement. Specifically, Executive certifies that he is in compliance with the Immigration Reform
and Control Act of 1986 (the “Act”) and that he is legally entitled to work in the United States.
Executive also agrees to execute the Employment Verification Form I-9 as required by the Act and
also agrees to execute the Employee Proprietary Information Agreement in the form attached hereto
as Exhibit “A”.

     IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the date first above
written, but to be effective for all purposes as of the Effective Date.

	 	 	 	 
	     VIEWCAST.COM, INC.
 	 
	     	By:  /s/ George Platt 	 
	 	 	 	 
	 	 	 
	     	By:  /s/ John W. Slocum, Jr. 	 
	 	 	 	 
	 	 	 
	     EXECUTIVE

 	 
	     	By:  /s/ Gary J. Klembaraexv10w1

 

Exhibit 10.1

BROCADE COMMUNICATIONS SYSTEMS, INC.

AMENDED AND RESTATED

CHANGE OF CONTROL RETENTION AGREEMENT

     This Amended and Restated Change of Control Retention Agreement (the “Agreement”) is entered
into as of May 11, 2007 (the “Effective Date”) by and between Brocade Communications Systems, Inc.
(the “Company”) and Michael Klayko (“Executive”).

RECITALS

     A. It is expected that the Company from time to time will consider the possibility of a Change
of Control. The Board of Directors of the Company (the “Board”) recognizes that such consideration
can be a distraction to the Executive and can cause the Executive to consider alternative
employment opportunities.

     B. The Board believes that it is in the best interests of the Company and its shareholders to
provide the Executive with an incentive to continue his or her employment and to maximize the value
of the Company upon a Change of Control for the benefit of its shareholders.

     C. In order to provide the Executive with enhanced financial security and sufficient
encouragement to remain with the Company notwithstanding the possibility of a Change of Control,
the Board believes that it is imperative to provide the Executive with certain severance benefits
upon the Executive’s termination of employment.

     D. The Company and Executive wish to amend and restate that certain Change of Control
Retention Agreement dated as of March 9, 2007.

AGREEMENT

     In consideration of the mutual covenants herein contained and the continued employment of
Executive by the Company, the parties agree as follows:

     1. At-Will Employment. Executive and the Company agree that Executive’s employment
with the Company is and shall continue to be “at-will” employment. Executive and the Company
acknowledge that this employment relationship may be terminated at any time, upon written notice to
the other party, with or without good cause or for any or no cause, at the option either of the
Company or Executive. However, as described in this Agreement, Executive may be entitled to
severance benefits depending upon the circumstances of Executive’s termination of employment.

     2. Severance Benefits.

          (a) Termination of Employment. In the event Executive’s employment with the Company
terminates for any reason during the Term or any duly authorized extension thereof (as set forth in
Section 9 below), Executive will be entitled to any (i) unpaid Base Salary accrued up to the
effective date of termination, (ii) unpaid, but earned and accrued annual incentive for any
completed

 

 

fiscal year as of his termination of employment, (iii) benefits or compensation as provided
under the terms of any employee benefit and compensation agreements or plans applicable to
Executive, and (iv) unreimbursed business expenses required to be reimbursed to Executive.

          (b) Termination Without Cause not in Connection with a Change of Control. If
Executive’s employment is terminated by the Company without Cause during the Term or any duly
authorized extension thereof (as set forth in Section 9 below), and such termination does not occur
in Connection with a Change of Control, then, subject to Sections 3, 5 and 6, Executive will
receive: (i) twelve (12) months of Executive’s base salary, as in effect immediately prior to the
date of termination, payable in a lump sum payment within thirty (30) days of the Release Effective
Date, (ii) 100% of Executive’s target cash bonus under the Company’s Senior Leadership Plan for
the fiscal year in which Executive’s termination occurs, payable in a lump sum payment within
thirty (30) days of the Release Effective Date, and (iii) reimbursement for premiums paid for
medical, dental and vision benefits (the “COBRA Benefits”) for Executive and Executive’s eligible
dependents under the Company’s benefit plans for twelve (12) months following Executive’s
termination of employment, payable when such premiums are due, or, at the Company’s sole
discretion, in a one-time lump sum payment when such premiums are first due (provided Executive and
Executive’s eligible dependents validly elect to continue coverage under applicable law).

          (c) Termination Without Cause or Resignation for Good Reason in Connection with a Change
of Control. If Executive’s employment is terminated by the Company without Cause or by
Executive for Good Reason, in either case during the Term or any duly authorized extension thereof
(as set forth in Section 9 below), and the termination is in Connection with a Change of Control,
then, subject to Sections 3, 5 and 6, Executive will receive: (i) twenty-four (24) months of
Executive’s base salary, as in effect immediately prior to the date of termination, payable in a
lump sum payment within thirty (30) days of the Release Effective Date, (ii) 200% of Executive’s
target cash bonus under the Company’s Senior Leadership Plan for the fiscal year in which
Executive’s termination occurs, payable in a lump sum payment within thirty (30) days of the
Release Effective Date, (iii) reimbursement for premiums paid for COBRA Benefits for Executive and
Executive’s eligible dependents under the Company’s benefit plans for eighteen (18) months
following Executive’s termination of employment, payable when such premiums are due, or, at the
Company’s sole discretion, in a one-time lump sum payment when such premiums are first due
(provided Executive and Executive’s eligible dependents validly elect to continue coverage under
applicable law), and (iv) full accelerated vesting with respect to Executive’s then outstanding,
unvested equity awards that were granted to Executive on or prior to the date hereof or during the
Term (or any duly authorized extension thereof). For purposes of clarification, any subsequent
determination by the Board or Compensation Committee of the Board to reduce the amount of
acceleration following the term of this Agreement shall not affect any grants of equity awards made
prior to the expiration of such term unless otherwise agreed to in writing by the Executive.

          (d) Voluntary Termination without Good Reason; Termination for Cause. If Executive’s
employment with the Company terminates voluntarily by Executive without Good Reason or is
terminated for Cause by the Company, then (i) all further vesting of Executive’s outstanding equity
awards will terminate immediately, (ii) all payments of compensation by the Company to Executive
hereunder will terminate immediately, and (iii) Executive will be eligible for severance benefits
only in accordance with the Company’s then established plans, programs, and practices.

-2-

 

          (e) Termination due to Death or Disability. Notwithstanding anything to the contrary
in this Agreement, if Executive’s employment terminates by reason of death or Disability, then (i)
Executive’s outstanding equity awards will terminate in accordance with the terms and conditions of
the applicable award agreement(s); (ii) all payments of compensation by the Company to Executive
hereunder will terminate immediately, and (iii) Executive will be entitled to receive benefits only
in accordance with the Company’s then established plans, programs, and practices.

          (f) Sole Right to Severance. This Agreement is intended to represent Executive’s sole
entitlement to severance payments and benefits in connection with the termination of Executive’s
employment. To the extent Executive is entitled to receive severance or similar payments and/or
benefits under any other Company plan, program, agreement, policy, practice, or the like, severance
payments and benefits due to Executive under this Agreement will be so reduced, except where the
Company (as authorized by the Compensation Committee or Board) and Executive expressly agree in
writing that such additional benefits are intended to be in addition to (and not in lieu of) the
severance benefits under this Agreement.

     3. Conditions to Receipt of Severance; No Duty to Mitigate.

          (a) Separation Agreement and Release of Claims. The receipt of any severance pursuant
to Section 2 will be subject to Executive signing and not revoking a separation agreement and
release of claims in the form provided to Executive by the Company. No severance will be paid or
provided until the separation agreement and release agreement becomes effective (the “Release
Effective Date”).

          (b) Nondisparagement. During the term of Executive’s employment and for 12 months
thereafter, Executive will not knowingly disparage, criticize, or otherwise make any derogatory
statements regarding the Company, its directors, or its officers. The foregoing restrictions will
not apply to any statements that are made truthfully in response to a subpoena or other compulsory
legal process.

          (c) Other Requirements. Executive agrees to continue to comply with the terms of the
Company’s Employment, Confidential Information, Invention Assignment and Arbitration Agreement
entered into by Executive (the “Confidential Information Agreement”).

          (d) No Duty to Mitigate. Executive will not be required to mitigate the amount of any
payment contemplated by this Agreement, nor will any earnings that Executive may receive from any
other source reduce any such payment.

     4. Definitions.

          (a) Cause. For purposes of this Agreement, “Cause” means (i) Executive’s willful and
continued failure to perform the duties and responsibilities of his position that is not corrected
within a thirty (30) day correction period that begins upon delivery to Executive of a written
demand for performance from the Board that describes the basis for the Board’s belief that
Executive has not substantially performed his duties; (ii) any act of personal dishonesty taken by
Executive in connection with his responsibilities as an employee of the Company with the intention
or reasonable expectation that such may result in substantial personal enrichment of Executive;
(iii) Executive’s conviction of, or plea of nolo contendre to, a felony that the Board reasonably

-3-

 

believes has had or will have a material detrimental effect on the Company’s reputation or
business, or (iv) Executive materially breaching Executive’s Confidential Information Agreement,
which breach is (if capable of cure) not cured within thirty (30) days after the Company delivers
written notice to Executive of the breach.

          (b) Change of Control. “Change of Control” shall mean the occurrence of any of the
following events:

               (i) the consummation by the Company of a merger or consolidation of the Company with any other
corporation, other than a merger or consolidation which would result in the voting securities of
the Company outstanding immediately prior thereto continuing to represent (either by remaining
outstanding or by being converted into voting securities of the surviving entity) more than fifty
percent (50%) of the total voting power represented by the voting securities of the Company or such
surviving entity outstanding immediately after such merger or consolidation;

               (ii) the consummation of the sale or disposition by the Company of all or substantially all of
the Company’s assets;

               (iii) any “person” (as such term is used in Sections 13(d) and 14(d) of the Securities
Exchange Act of 1934, as amended) becoming the “beneficial owner” (as defined in Rule 13d-3 under
said Act), directly or indirectly, of securities of the Company representing 50% or more of the
total voting power represented by the Company’s then outstanding voting securities; or

               (iv) a change in the composition of the Board, as a result of which fewer than a majority of
the directors are Incumbent Directors. “Incumbent Directors” shall mean directors who either (A)
are directors of the Company as of the date hereof, or (B) are elected, or nominated for election,
to the Board with the affirmative votes of at least a majority of those directors whose election or
nomination was not in connection with any transactions described in subsections (i), (ii), or (iii)
or in connection with an actual or threatened proxy contest relating to the election of directors
of the Company.

          (c) Disability. For purposes of this Agreement, Disability will have the same defined
meaning as in the Company’s long-term disability plan.

          (d) Good Reason. For purposes of this Agreement, “Good Reason” means the occurrence
of any of the following, without Executive’s consent: (i) a material reduction of Executive’s
duties, title, authority or responsibilities in effect immediately prior to a Change of Control;
(ii) a reduction in Executive’s base salary or target annual cash incentive compensation; (iii) the
failure of the Company to obtain the assumption of the Agreement by the successor, or (iv) the
Company requiring Executive to relocate his or her principal place of business or the Company
relocating its headquarters, in either case to a facility or location outside of a thirty-five (35)
mile radius from Executive’s current principal place of employment; provided, however, that
Executive only will have Good Reason if the Executive gives written notice to the Board of the
event or circumstance constituting Good Reason specified in any of the preceding clauses within
ninety (90) days of its initial occurrence and such event or circumstance is not cured within
thirty (30) days after Executive gives such written notice to the Board. Executive’s actions
approving any

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of the foregoing changes (that otherwise may be considered Good Reason) will be considered
consent for the purposes of this Good Reason definition.

          (e) In Connection with a Change of Control. For purposes of this Agreement, a
termination of Executive’s employment with the Company is “in Connection with a Change of Control”
if Executive’s employment is terminated within thirty (30) days prior to, or twelve (12) months
following, a Change of Control.

     5. Excise Taxes. In the event that the benefits provided for in this Agreement
constitute “parachute payments” within the meaning of Section 280G of the Code and will be subject
to the excise tax imposed by Section 4999 of the Code (the “Excise Tax”), then Executive’s
severance benefits payable under the terms of this Agreement will be either

          (a) delivered in full, or

          (b) delivered as to such lesser extent which would result in no portion of such severance
benefits being subject to the Excise Tax, whichever of the foregoing amounts, taking into account
the applicable federal, state and local income taxes and the Excise Tax, results in the receipt by
Executive on an after-tax basis, of the greatest amount of severance benefits, notwithstanding that
all or some portion of such severance benefits may be taxable under Section 4999 of the Code.

     Unless the Company and Executive otherwise agree in writing, any determination required under
this Section 5 will be made in writing by the Company’s independent public accountants or another
nationally-recognized public accounting firm chosen by the Company (the “Accountants”), whose
determination will be conclusive and binding upon Executive and the Company for all purposes. For
purposes of making the calculations required by this Section 5, the Accountants may make reasonable
assumptions and approximations concerning applicable taxes and may rely on reasonable, good faith
interpretations concerning the application of Section 280G and 4999 of the Code. The Company and
Executive will furnish to the Accountants such information and documents as the Accountants may
reasonably request in order to make a determination under this Section 5. The Company will bear
all costs the Accountants may reasonably incur in connection with any calculations contemplated by
this Section 5.

     6. Section 409A.

          (a) Notwithstanding Sections 2 and 3 hereof, if Executive is a “specified employee” within the
meaning of Section 409A of the Code and the final regulations and any other guidance promulgated
thereunder (“Section 409A”) at the time of his termination, and the severance payable to Executive,
if any, pursuant to this Agreement, when considered together with any other severance payments or
separation benefits which are considered deferred compensation under Section 409A (together, the
“deferred compensation separation benefits”) will not and could under no circumstances, regardless
of when such termination occurs, be paid in full by March 15 of the year following Executive’s
termination, then only that portion of the severance payments (and any other deferred compensation
separation benefits) which does not exceed the Section 409A Limit (as defined above) may be made
within the first six (6) months following Executive’s termination of employment in accordance with
the payment schedule set forth in Sections 2 and 3 (or, with respect

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to other deferred compensation separation benefits, the payment schedule applicable to each
such payment or benefit).

          (b) Section 409A Limit. “Section 409A Limit” shall mean the lesser of two (2) times:
(i) Executive’s annualized compensation based upon the annual rate of pay paid to Executive during
the Company’s taxable year preceding the Company’s taxable year of Executive’s termination of
employment; or (ii) the maximum amount that may be taken into account under a qualified plan
pursuant to Section 401(a)(17) of the Internal Revenue Code of 1986, as amended (the “Code”) for
the year in which Executive’s employment is terminated.

          (c) Any portion of the severance payments or other deferred compensation separation benefits
in excess of the Section 409A Limit shall accrue and, to the extent such portion of the severance
payments or other deferred compensation separation benefits would otherwise have been payable
within the first six (6) months following Executive’s termination of employment, they will become
payable on the date that is six (6) months and one (1) day following the date of Executive’s
termination of employment.

          (d) All subsequent severance payments or other deferred compensation separation benefits, if
any, will be payable in accordance with the payment schedule applicable to each payment or benefit.

          (e) For these purposes, each severance payment is hereby designated as a separate payment and
will not collectively be treated as a single payment.

          (f) This provision is intended to comply with the requirements of Section 409A so that none of
the severance payments and benefits to be provided hereunder will be subject to the additional tax
imposed under Section 409A, and any ambiguities herein will be interpreted to so comply. The
Company and Executive agree to work together in good faith to consider amendments to this Agreement
and to take such reasonable actions which are necessary, appropriate or desirable to avoid
imposition of any additional tax or income recognition prior to actual payment to Executive under
Section 409A.

     7. Assignment. This Agreement will be binding upon and inure to the benefit of (a)
the heirs, executors, and legal representatives of Executive upon Executive’s death, and (b) any
successor of the Company. Any such successor of the Company will be deemed substituted for the
Company under the terms of this Agreement for all purposes. For this purpose, “successor” means
any person, firm, corporation, or other business entity which at any time, whether by purchase,
merger, or otherwise, directly or indirectly acquires all or substantially all of the assets or
business of the Company. None of the rights of Executive to receive any form of compensation
payable pursuant to this Agreement may be assigned or transferred except by will or the laws of
descent and distribution. Any other attempted assignment, transfer, conveyance, or other
disposition of Executive’s right to compensation or other benefits will be null and void.

     8. Notices. All notices, requests, demands, and other communications called for
hereunder will be in writing and will be deemed given (a) on the date of delivery if delivered
personally, (b) one day after being sent overnight by a well established commercial overnight
service, or (c) four days after being mailed by registered or certified mail, return receipt
requested,

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prepaid and addressed to the parties or their successors at the following addresses, or at
such other addresses as the parties may later designate in writing:

If to the Company:

Attn: General Counsel

Brocade Communications Systems, Inc.

1745 Technology Drive

San Jose, CA 95110

If to Executive:

at the last residential address known by the Company.

     9. Term. The term of this Agreement (the “Term”) shall be five (5) years from the
date hereof and may be extended upon mutual written consent of the Executive and the Company (as
authorized by the Compensation Committee or Board); provided, however, the Term shall be
automatically extended without any further action if the Company has entered into a definitive
agreement regarding a Change of Control (a “Pending Transaction”) until (i) twelve (12) months
following the consummation of such Pending Transaction or (ii) such definitive agreement has
terminated pursuant to its terms without a Change of Control occurring. Notwithstanding the
foregoing, the acceleration provision set forth in Section 2(c)(iv) hereof with respect to equity
awards granted prior to the expiration of the Term (or any extension thereof) shall survive
expiration of the Term (and any duly authorized extension thereof).

     10. Severability. If any provision hereof becomes or is declared by a court of
competent jurisdiction to be illegal, unenforceable, or void, this Agreement will continue in full
force and effect without said provision.

     11. Arbitration. The Parties agree that any and all disputes arising out of the terms
of this Agreement, their interpretation, and any of the matters herein released, will be subject to
binding arbitration in Santa Clara County, California before the American Arbitration Association
under its National Rules for the Resolution of Employment Disputes, supplemented by the California
Rules of Civil Procedure. The Parties agree that the prevailing party in any arbitration will be
entitled to injunctive relief in any court of competent jurisdiction to enforce the arbitration
award. The Parties hereby agree to waive their right to have any dispute between them resolved in
a court of law by a judge or jury. This paragraph will not prevent either party from seeking
injunctive relief (or any other provisional remedy) from any court having jurisdiction over the
Parties and the subject matter of their dispute relating to Executive’s obligations under this
Agreement.

     12. Integration. This Agreement represents the entire agreement and understanding
between the parties as to the subject matter herein and supersedes all prior or contemporaneous
agreements whether written or oral, including any agreements that provide for severance benefits
and any agreements that provide for vesting acceleration of Executive’s outstanding equity awards
(except for any terms that provide for the accelerated vesting of Executive’s equity awards if they
are not assumed or substituted by a successor corporation and any terms that provide for more
favorable acceleration of vesting pursuant to outstanding equity awards under agreements entered

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into prior to the date hereof). No waiver, alteration, or modification of any of the
provisions of this Agreement will be binding unless in a writing that specifically references this
Section and is signed by duly authorized representatives of the parties hereto.

     13. Waiver of Breach. The waiver of a breach of any term or provision of this
Agreement, which must be in writing, will not operate as or be construed to be a waiver of any
other previous or subsequent breach of this Agreement.

     14. Headings. All captions and Section headings used in this Agreement are for
convenient reference only and do not form a part of this Agreement.

     15. Tax Withholding. All payments made pursuant to this Agreement will be subject to
withholding of applicable taxes.

     16. Governing Law. This Agreement will be governed by the laws of the State of
California (with the exception of its conflict of laws provisions).

     17. Acknowledgment. Executive acknowledges that he has had the opportunity to discuss
this matter with and obtain advice from his private attorney, has had sufficient time to, and has
carefully read and fully understands all the provisions of this Agreement, and is knowingly and
voluntarily entering into this Agreement.

     18. Counterparts. This Agreement may be executed in counterparts, and each
counterpart will have the same force and effect as an original and will constitute an effective,
binding agreement on the part of each of the undersigned.

-8-

 

     IN WITNESS WHEREOF, each of the parties has executed this Agreement, in the case of the
Company by a duly authorized officer, as of the day and year written below.

COMPANY:

BROCADE COMMUNICATIONS SYSTEMS, INC.

	 	 	 	 	 	 	 
	Signature:

	 	/s/ Tyler Wall
	 	 	 	Date: June 25, 2007
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	Print Name: Tyler Wall	 	 	 	 
	 
	 	 	 	 	 	 
	Title: VP, General Counsel	 	 	 	 
	 
	 	 	 	 	 	 
	EXECUTIVE:	 	 	 	 
	 
	 	 	 	 	 	 
	/s/ Michael Klayko	 	 	 	Date: June 25, 2007
	 	 	 	 	 
	Michael Klayko
	 	 	 	 

[SIGNATURE PAGE TO CHANGE OF CONTROL RETENTION AGREEMENT]

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