Document:

exv10w4

 

Exhibit 10.4

BROCADE SENIOR LEADERSHIP PLAN

Revised: July 30, 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%
	Section 16 Officers
	 	60%
	Other 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 and Annual Incentive Target as of the last day of the
Plan Period, except as set forth above or otherwise indicated in writing by Brocade.

 

 

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 BonusTarget3
	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  Target3

 

			
	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.
	 
	3	 	The Cash Bonus Premium for 2007 pursuant to this Addendum shall be
calculated based on (i) the officer’s base salary as of the last day of the Plan Period and
(ii) the Annual Incentive Target deemed to be in effect as of the beginning of the 2007 Plan
Period (without any subsequent adjustments during the period, unless otherwise indicated in
writing by Brocade).exv10w5

 

Exhibit
10.5

Sales Team Resource SOW

This Statement of Work (“SOW”) #6 adopts and incorporates by reference the terms and conditions of
Goods Agreement #ROC-P-68 (“Base Agreement”) between IBM (“Buyer”) and Brocade Information Systems
with offices located at 1745 Technology Drive, San Jose, California 95110 and Brocade
Communications Switzerland, SarL, with an office located at 29 Route de l’Aeroport, Case Postale
105, CH-1215, Geneva 15, Switzerland (individually and collectively “Supplier”). This SOW is
effective beginning on April 2, 2007. Transactions performed under this SOW will be conducted in
accordance with and be subject to the terms and conditions of this SOW, the Base Agreement, and
any applicable Work Authorizations (“WAs”). This SOW is not a WA.

1.0 Scope Of Work

In an effort to provide IBM with more direct technical and sales support resources dedicated to the
effort of selling IBM branded Brocade storage networking technology products, this Agreement is
being put in force to allow Brocade resources to be placed within IBM to assist in such sales. The
Brocade employee resources will be integrated within the existing IBM storage and SAN sales
structures and geographic organizations and such resources will drive incremental IBM revenue
opportunities utilizing IBM branded Brocade products (the Services, as defined in the Base
Agreement). This initial effort will be directed specifically at the placement of SAN Director
products, but is also intended to address the complete IBM Brocade product portfolio.

At the discretion and agreement of IBM and Brocade management, these identified resources may be
used to support unique transactions or to assist in an IBM direct or business partner sales
opportunity. These resources will have access to the full scope of both IBM and Brocade support in
order to ensure the success of their actions, and will take direction from agreed to management
from both companies.

2.0 Description Of Deliverables And Services

In the initial trial phase of this agreement, Brocade will identify and provide a maximum of twelve
(12) Storage Area Network (SAN) sales professionals to assist in driving incremental IBM sales
revenue. The ‘skill-split target’ of this resource will be
approximately [**] percent
([**]%) sales and [**] percent ([**]%) technical, with geographic placement mapped as ably as
possible and practical to the areas of most anticipated need and demand. Further, approximately
[**] ([**]) of these resources will be placed within the IBM Americas Group (‘AG’) Sales Geography,
with a definitive focus on the United States; and the remaining approximately [**] ([**]) resources
will be placed in IBM’s Europe, Middle East and Africa (‘EMEA’) Sales Geography. Brocade will make
the resources’ names and assigned locations available to IBM in advance of placement of said
resource.

Brocade resources identified and placed as a result of this Agreement in IBM’s AG region will take
direction from [**] of Brocade, [**] of IBM, and other IBM storage sales management as defined by
assigned territory. Similarly, Brocade resources placed in IBM’s EMEA region will take direction
from [**] of Brocade, [**] of NE-EMEA and [**] of SE-EMEA, along with other IBM storage sales
management as defined by assigned territory.

 

			
	[**]	 	Certain information on this page has been
omitted and filed separately with the Securities and Exchange Commission.
Confidential treatment has been requested with respect to the omitted portions.

 

 

3.0 Term/Termination:

a.       Term:     IBM and Brocade agree to enter into this agreement for a minimum term of six
months, to begin on the date of first resource being provided to IBM. Each company agrees to
a mutual review of the success of the program, with the rights to jointly negotiate proposal
alternatives acceptable to each party by written amendment to this Agreement. Both parties
must agree to renew this Agreement for ongoing six-month extensions by providing the other
party thirty (30) day notice of its intent to renew and acceptance of such extension period
by the other party.

	 	b.	 	Termination:

i.     This Agreement will terminate at the end of the initial six (6) month period
unless the parties agree to renew the agreement for additional six (6) month periods.

ii.     This Agreement shall automatically terminate if (i) either party applies to court
for its winding-up or a liquidator, receiver, administrative receiver, administrator,
examiner or similar officer is appointed over all or a substantial part of its
assets; or (ii) either party commits a material breach of this Agreement, which if
capable of being remedied, shall not have been remedied within 30 days of notice
being served on it by the other party.

	 	c.	 	Brocade Personnel: Brocade shall have the right, in its sole discretion, to
terminate the services of any of its personnel contemplated hereunder for any reason at
any time, in which event Brocade shall identify a replacement resource in its sole
discretion. IBM shall not be entitled to terminate the employment of any Brocade
personnel contemplated hereunder.

4.0 Costs and Payments

	 	a.	 	In consideration for Brocade subservices, IBM and Brocade agree to the following:

	 	•	 	The annual full burden compensation (includes all individual compensation
inclusive of salary, bonus, commissions, benefits, 401(k) match, company car (if
available), business expenses, education/seminars, per diems (if available), etc.)
for each individual will be calculated at $[**] USD per sales
professional, and $[**] USD per technical professional. For the initial six (6)
month trial period only, Brocade and IBM agree to a blended flat rate of $[**] per
Brocade resource. If this Agreement is renewed, the individual rates above for a
sales professional and technical professional shall apply as stated above.
	 
	 	•	 	The blended flat rate of $[**] cost for these initial test phase individuals will
be split evenly between IBM and Brocade.

 

			
	[**]	 	Certain information on this
page has been omitted and filed separately with the Securities and Exchange
Commission. Confidential treatment has been requested with respect to the
omitted portions.

 

 

	 	•	 	A maximum of [**] ([**]) full-time Brocade sales employees, with the
agreed to set of both technical and sales skills, will be placed as Brocade
resources supporting the IBM storage sales organization beginning April 2. This
number may be amended downward by either company due to reasons such as, but not
limited to, the availability of resources.
	 
	 	•	 	Brocade will at all times remain the responsible payroll provider for such
resources. IBM will reimburse Brocade [**]% of the compensation paid for each
employee in accordance with this Agreement. And for the avoidance of doubt, such
resources will remain Brocade employees.

	 	b.	 	IBM Payment for Brocade Resources:  IBM and Brocade will establish part
numbers whereby IBM will purchase such part numbers from Brocade for each Brocade Director
sold during the term of this Agreement. Brocade will attribute all IBM payments for such
part number to IBM’s costs of such Brocade Resources. The parties will reconcile such
payments against the amounts owed to Brocade for such resources on a quarterly basis, as
defined below.

	 	c.	 	Reconciliation:

	 	•	 	A quarterly reconciliation will take place to determine the actual number of IBM
badged Brocade director products sold, against an agreed to target number of
placements beforehand. Additionally, this reconciliation will include an analysis of
the overall anticipated positive impact on gross revenues derived from their
efforts.
	 
	 	•	 	Prior to the six-month trial period, IBM and Brocade agree to a formal checkpoint
of overall progress by June 30, 2007.
	 
	 	•	 	Program adjustments to accelerate growth and success, as deemed appropriate and
acceptable by IBM and Brocade, may be made at the checkpoint, or other jointly
agreed to times.
	 
	 	•	 	Upon subsequent reviews of the success of the proposal, a decision will be made
whether to extend, alter, or cancel this Agreement.

	 	d.	 	Reporting:
	 
	 	 	 	IBM will provide Brocade with a monthly written report listing the number of Directors
sold during the trial period. Such report will include the current month sales and sales
for the program to date. If a discrepancy exists between Brocade and IBM’s reported
sales, IBM and Brocade will meet to reconcile any reports for the full number and scope
of IBM branded Brocade directors sold in any given month. The parties agree that such
reconciliation will occur within 15 days after the end of each such reporting period.

5.0 Communications

All communications between the parties will be carried out through the following designated
coordinators. All notices required in writing under this Agreement will be made to the appropriate

 

			
	[**]	 	Certain information on this
page has been omitted and filed separately with the Securities and Exchange
Commission. Confidential treatment has been requested with respect to the
omitted portions.

 

 

contact listed below at the following addresses and will be effective upon actual receipt. Notices
may be transmitted electronically, by registered or certified mail, or courier. All notices, with
the exception of legal notices, may also be provided by facsimile.

 

 

	 	 	 	 	 	 	 	 	 	 	 	 
	 	Business Coordinators	 
	 	FOR SUPPLIER

	 	 	 	 	 	FOR BUYER
	 	 	 	 
	 	Name

	 	 	Mike Harrison
	 	 	Name Robert Mahoney	 	 	 	 
	 	Title

	 	 	Business Line Executive, IBM
	 	 	Title Business Line Executive	 	 	 	 
	 	Address

	 	 	1745 Technology Drive

San Jose, CA 95110
	 	 	Address 80 State Street,

Albany, NY 12207	 	 	 	 
	 	Phone

	 	 	303-746-0780
	 	 	Phone 1-518-487-6208	 	 	 	 
	 	Fax

	 	 	 	 	 	Fax	 	 	 	 
	 	E-mail

	 	 	mike.harrison@brocade.com
	 	 	E-mail

rmahoney@us.ibm.com	 	 	 	 
	 

Copy to: Brocade General Counsel

	 	 	 	 	 	 	 
	ACCEPTED AND AGREED TO:	 	ACCEPTED AND AGREED TO:
	IBM	 	Brocade Communications
	By: /s/ Malcolm McDonald

	 	5/6/07
	 	By: /s/ Jill Cameron
	 	4-27-07
	 	 	 
	Buyer Signature

	 	Date
	 	Supplier Signature
	 	Date
	Malcolm McDonald

	 	 	 	  Jill Cameron	 	 
	 	 	 
	Printed Name

	 	 	 	Printed Name	 	 
	Team Lead — WW Procurement

	 	 	 	Dir. WW Sales Operations	 	 
	 	 	 
	Title & Organization

	 	 	 	Title & Organization	 	 
	 
	 	 	 	 	 	 
	 	 	 
	Buyer Address:

	 	 	 	Supplier Address:	 	 
	  IBM

	 	 	 	  Brocade Communication Systems, Inc.	 	 
	  30309 Cornwallis Road

	 	 	 	  1745 Technology Drive	 	 
	  RTP, NC 27709

	 	 	 	  San Jose, CA 95110 USA	 	 
	  USA
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	 	 	ACCEPTED AND AGREED TO:
	 	 	 	 	Brocade Communications Switzerland, SarL
	 

	 	 	 	By: /s/ Ulrich Plechschhmidt
	 	27 April 2007
	 	 	 
	 

	 	 	 	Supplier Signature
	 	Date
	 

	 	 	 	Ulrich Plechschmidt	 	 
	 	 	 
	 

	 	 	 	Printed Name	 	 
	 

	 	 	 	Vice President EMEA	 	 
	 	 	 
	 

	 	 	 	Title & Organization	 	 
	 
	 	 	 	 	 	 
	 	 	 
	 

	 	 	 	29 Route de’Aeroport	 	 
	 

	 	 	 	Casa Postale 105	 	 
	 

	 	 	 	CH-1215 Geneva 15	 	 
	 

	 	 	 	Switzerland

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