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Brocade Communications Systems Inc – ‘DEF 14A’ for 4/11/17

On:  Thursday, 2/23/17, at 4:27pm ET   ·   Effective:  2/23/17   ·   For:  4/11/17   ·   Accession #:  1193125-17-54050   ·   File #:  0-25601

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  As Of                Filer                Filing    For·On·As Docs:Size              Issuer               Agent

 2/23/17  Brocade Comms Systems Inc         DEF 14A     4/11/17    1:3.2M                                   Donnelley … Solutions/FA

Document/Exhibit                   Description                      Pages   Size 

 1: DEF 14A     Definitive Proxy Solicitation Material              HTML    759K 

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE

SECURITIES EXCHANGE ACT OF 1934

Filed by the Registrant ☒                            Filed by a Party other than the Registrant ☐

Check the appropriate box:

Brocade Communications Systems, Inc.

(Name of Registrant as Specified in Its Charter)

Payment of Filing Fee (Check the appropriate box):

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Brocade Communications Systems, Inc. 130 Holger Way, San Jose, CA 95134 www.brocade.com

To the Shareholders of Brocade Communications Systems, Inc.:

You are cordially invited to attend the 2017 Annual Meeting of Shareholders (the “Annual Meeting”) of Brocade Communications Systems, Inc. (“Brocade” or the “Company”) to be held on April 11, 2017, at 2:00 pm Pacific Time, at the Hyatt Regency Santa Clara, located at 5101 Great America Parkway, Santa Clara, California 95054. The attached Notice of Annual Meeting of Shareholders and Proxy Statement contain details of the business to be conducted at the Annual Meeting.

Whether or not you attend the Annual Meeting, it is important that your shares be represented and voted at the meeting. We urge you to promptly vote and submit your proxy via the Internet, by phone, or by signing, dating and returning the enclosed proxy card in the enclosed envelope. If you attend the Annual Meeting, you can vote in person even if you previously submitted your proxy. Please vote as soon as possible.

At a special meeting of shareholders held on January 26, 2017, our shareholders voted to adopt the previously announced merger agreement we entered into with Broadcom Limited (“Broadcom”) on November 2, 2016 under which Broadcom agreed to acquire us. No further action by our shareholders is required with respect to the merger agreement with Broadcom. Accordingly, no action will be taken at the Annual Meeting with respect to, and no proxy is being solicited by this proxy statement in connection with, such merger agreement or any matters related thereto. While we anticipate that the proposed merger with Broadcom will be completed in the third quarter of our fiscal year 2017 (which begins on April 30, 2017 and ends on July 29, 2017), if the closing of the merger occurs prior to the commencement of the Annual Meeting on April 11, 2017, then the Annual Meeting will not be held.

Sincerely,

David L. House Chairman of the Board		Lloyd A. Carney Chief Executive Officer

Use the Internet to vote your proxy until 11:59 p.m. (Eastern Time) on April 10, 2017.		Use a touch-tone telephone to vote your proxy until 11:59 p.m. (Eastern Time) on April 10, 2017.		Mark, sign and date your proxy card and return it in the postage-paid envelope provided.

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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

TO BE HELD ON APRIL 11, 2017

On April 11, 2017, Brocade Communications Systems, Inc. will hold its 2017 Annual Meeting of Shareholders at 2:00 pm Pacific Time. The meeting will be held at the Hyatt Regency Santa Clara, located at 5101 Great America Parkway, Santa Clara, California 95054 for the following purposes:

More information about these business items is described in the proxy statement accompanying this notice. Any of the above matters may be considered at the meeting at the date and time specified above or at any adjournment or postponement of such meeting.

Your vote is important. Whether or not you plan to attend the meeting in person, it is important that your shares be represented. To ensure that your vote is counted at the meeting, please vote as soon as possible.

San Jose, California

February 23, 2017

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BROCADE COMMUNICATIONS SYSTEMS, INC.

PROXY STATEMENT FOR 2017 ANNUAL MEETING OF SHAREHOLDERS

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PROXY STATEMENT SUMMARY

This summary highlights information contained elsewhere in this proxy statement. This summary does not contain all of the information you should consider. Please read the entire proxy statement carefully before voting.

Items to be Voted on at the Annual Meeting

Overview of Brocade

Brocade Communications Systems, Inc. | 2017 Proxy Statement    1

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Fiscal 2016 Performance Highlights

Our Board of Directors

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Corporate Governance Highlights

We maintain corporate governance policies and practices designed to promote the long-term interests of our shareholders. The following are some of our key corporate governance policies and practices:

Majority of independent directors

Majority voting

No supermajority voting provisions

Separate CEO and independent Chairman

Shareholder special meeting right

Annual Board self-assessments

Annually elected directors

Proxy access bylaw

Shareholder engagement

Executive Compensation Highlights

Our executive compensation program continues to be based on a pay-for-performance philosophy. Our executive officers are compensated in a manner consistent with our business strategy, market practice, corporate governance principles we believe to be sound, and shareholder interests and concerns. We believe our executive compensation program is strongly aligned with the long-term interests of our shareholders.

The following are some of our key executive compensation policies and practices:

Pending Acquisition by Broadcom Limited

On November 2, 2016, we entered into a merger agreement with Broadcom Limited (“Broadcom”) under which Broadcom agreed to acquire us. Upon the closing of the merger, our shareholders will receive $12.75 in cash, without interest, less any required tax withholding, for each share of our common stock. Our shareholders approved the proposed merger and related matters at our special meeting of shareholders held on January 26, 2017, with approximately 72.6% of our outstanding shares of common stock as of the record date for the special meeting voting in favor of the adoption of the merger agreement. No further action by our shareholders is required with respect to the merger agreement with Broadcom. Accordingly, no action will be taken at the Annual Meeting with respect to, and no proxy is being solicited by this proxy statement in connection with, such merger agreement or any matters related thereto.

Consummation of the merger remains subject to certain customary closing conditions, including the receipt of certain governmental approvals in various jurisdictions. Assuming timely satisfaction of the necessary closing conditions, we anticipate that the merger will be completed in the third quarter of our fiscal year 2017 (which begins on April 30, 2017 and ends on July 29, 2017). If the closing of the merger occurs prior to the commencement of the Annual Meeting on April 11, 2017, then the Annual Meeting will not be held.

Brocade Communications Systems, Inc. | 2017 Proxy Statement    3

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CORPORATE GOVERNANCE

Governance Practices

Our Board of Directors (“Board”) is actively engaged in promoting the long-term interests of our shareholders, maintaining internal checks and balances, strengthening management accountability and fostering responsible decision making by management. We highlight in the chart below certain key corporate governance practices, most of which have been in place for at least several years.

Key Corporate Governance Policies and Practices

Shareholder Engagement

Since the beginning of fiscal 2015, we have significantly enhanced our outreach to shareholders by contacting broader groups and classes of shareholders, by including members of our Board directly in such engagements, by asking shareholders about their general corporate governance concerns in addition to discussing the specific governance topics at issue for the Company, and by speaking directly with the proponents of shareholder proposals. We have historically engaged with our shareholders on specific topics and remain committed to maintaining active dialogues with our shareholders to ensure that a diversity of perspectives are thoughtfully considered by our Board in its deliberations on specific governance issues and in the overall maintenance of our strong corporate governance profile.

4     2017 Proxy Statement | Brocade Communications Systems, Inc.

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BOARD OF DIRECTORS

Information About Our Directors and Nominees

Our Board currently consists of the ten directors identified below. David L. House serves as Chairman of the Board. All of the directors have served as members of the Board since our 2016 Annual Meeting of Shareholders.

⁽¹⁾Skill sets are described under “Board Composition—Skill Set” below.

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8     2017 Proxy Statement | Brocade Communications Systems, Inc.

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Board Composition

The Nominating and Corporate Governance Committee of our Board (the “NCGC”) is responsible for identifying and reviewing qualified individuals for membership on the Board and recommending individuals for membership on the Board. The NCGC utilizes a variety of methods for identifying and evaluating nominees for director. The NCGC regularly assesses the appropriate size of the Board and whether any vacancies on the Board are expected due to retirement or otherwise. In the event that vacancies are anticipated, or otherwise arise, the NCGC considers various potential candidates for directors. Candidates may come to the attention of the NCGC through current members of the Board, professional search firms, shareholders or other persons. These candidates are evaluated at regular or special meetings of the NCGC, and may be considered at any point during the year.

The NCGC considers properly submitted shareholder recommendations for potential director candidates. In evaluating such recommendations, the NCGC seeks to address the membership criteria discussed below. Any shareholder recommendations submitted for consideration by the NCGC should be in writing and should include the candidate’s name and qualifications for membership on the Board and should be addressed to the attention of our Corporate Secretary. In addition, procedures for shareholder direct nomination of directors are discussed in the section entitled “Questions and Answers about the Proxy Materials and our Annual Meeting,” and are discussed in detail in our Bylaws, a copy of which is available on the SEC’s EDGAR website and on our Investor Relations website at www.brcd.com.

The NCGC has not formally established any specific minimum qualifications that must be met by a NCGC-recommended nominee. The NCGC strives to maintain an engaged, independent Board comprised of members who have broad and diverse experience and perspective, who have insight and practical wisdom, who have the highest professional and personal ethics, integrity and values, and who are committed to representing the interests of our shareholders. It therefore considers a wide range of criteria when selecting and recruiting director candidates, including those discussed below.

Brocade Communications Systems, Inc. | 2017 Proxy Statement    9

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Skill Set

The NCGC seeks directors who have held significant leadership positions and who have broad experience at the policy-making level in business, government, education, technology or public interest. The NCGC also seeks directors with specific skills and experience that is tied to service as a director of a mid-cap technology company generally and our business, industry and corporate strategy specifically. Skills and experience that the NCGC has considered and considers important and valuable are summarized in the following table.

The directors with skills and experience in each of these areas are identified in their individual biographies above.

10     2017 Proxy Statement | Brocade Communications Systems, Inc.

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Independence

The Board believes in the value of an independent board of directors, which is reflected in the fact that nine of our ten directors are independent, including all of the members of our Board’s Audit, Compensation and Nominating and Corporate Governance Committees.

Tenure

The NCGC strives to maintain a balance of long-tenured directors with deep institutional knowledge and others who bring a fresh perspective.

Diversity

The NCGC considers diversity in its evaluation of candidates for Board membership and in its annual review of the composition of the Board as a whole. The Board believes that diversity with respect to background and experience is an important consideration in board composition. The NCGC believes that, as a group, our director nominees bring a diverse range of backgrounds, experiences, service tenure and perspectives to the Board.

Commitment and Availability

A director should be committed to enhancing shareholder value and should have sufficient time to carry out his or her duties. A director’s service on other boards of public companies should be limited to a number that permits him or her, given his or her individual circumstances, to perform responsibly his or her director duties, but no director should serve on more than four additional public company boards.

Board Governance

Board Leadership

Brocade’s Chairman of the Board is independent and maintains a separate role from the Chief Executive Officer. The Board believes this structure benefits the Board and the Company by enabling the Chief Executive Officer to focus on operational and strategic matters while enabling the Chairman to focus on Board process, oversight and governance matters.

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Board Independence

Our Corporate Governance Guidelines provide that the Board shall have a majority of directors who satisfy the criteria for independence set forth in the listing rules of the NASDAQ Stock Market (the “NASDAQ listing rules”). Our Corporate Governance Guidelines also provide that all of the members of the Audit Committee, the Compensation Committee and the NCGC must satisfy such criteria. The Board has determined that each of the directors, other than our CEO, Mr. Carney, is independent within the meaning set forth in the NASDAQ listing rules. This includes all members of the Audit Committee, the Compensation Committee and the NCGC. The Board has also determined that each member of the Audit Committee meets the heightened independence standards required for audit committee members under the NASDAQ listing rules and SEC rules and each member of the Compensation Committee meets the heightened independence standards required for compensation committee members under the NASDAQ listing rules and SEC rules. There are no family relationships between any director and any executive officer. The independent members of the Board meet at the end of every regularly scheduled Board meeting without management present.

Annual Board Self-Assessment

Our Board and committees conduct annual self-assessments with the assistance of outside counsel to assess their effectiveness and to identify opportunities to improve Board and committee performance. Approximately every other year, the self-assessment process includes interviews with certain members of senior management to obtain his or her assessment of the effectiveness of the Board and committees. As the initial step in the self-assessment process, outside counsel conducts in-depth interviews with each director and then summarizes the feedback gathered from these individual interviews for discussions with the Board and committees and individual directors. Following those discussions, action items are developed, if needed, for addressing actionable feedback. The self-assessment interviews are generally conducted in the fall with the subsequent discussion being held at the December Board and committee meetings.

Board Succession Planning

As part of the self-assessment process, our Board, through its NCGC, annually reviews the composition of the Board, the skill sets of the current Board members in consideration of the changing needs of the business, the tenure of our Board members and Board succession planning. For example, following the review conducted in the first half of 2015, the Board, upon the recommendation of the NCGC, concluded that the Company and its shareholders would benefit from the addition of one or more new directors, at least one of which who would bring additional software, computer networking and customer service experience to the Board. This conclusion was based on several factors, including, among others, the increasing importance of software defined networking to the Company’s overall business strategy, the Company’s focus on customer experience, and the NCGC’s desire to enhance the collective diversity of the backgrounds and experiences of the Board members. The NCGC subsequently commenced a director search, which resulted in the election of Kim C. Goodman to the Board in February 2016.

Service on Other Boards

Our Corporate Governance Guidelines provide that no member of the Board should serve on more than four additional public company boards. In addition, our Corporate Governance Guidelines provide that neither our CEO nor any of our other executive officers should serve on more than two additional public company boards.

12     2017 Proxy Statement | Brocade Communications Systems, Inc.

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Director Stock Ownership Guidelines

We maintain stock ownership guidelines for our non-employee directors to align their interests with the interests of our shareholders. These guidelines provide that our non-employee directors must own the lesser of the number of shares of our common stock equal to three times the annual board retainer or 20,000 shares. Our non-employee directors are expected to reach their target ownership level within five years of the later of the date on which the guidelines were adopted or the date on which they became subject to the guidelines and to hold at least such minimum value in shares of our common stock for so long as applicable. As of October 29, 2016, each of our non-employee directors serving at that time satisfied our stock ownership guidelines.

Board Meeting Attendance

The Board held thirteen meetings during fiscal year 2016. The Board also acted once by unanimous written consent during fiscal year 2016. Each director serving during fiscal year 2016 attended at least 75% of the aggregate number of meetings of our Board and the committees on which such director served during fiscal year 2016.

Shareholder Meeting Attendance

We do not have a formal policy regarding attendance by members of the Board at our annual meetings of shareholders although directors are encouraged to attend such meetings. Nine of the ten members of the Board serving at that time attended the 2016 Annual Meeting of Shareholders, either in person or via teleconference.

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Committees of the Board of Directors

The Board has the following standing committees: Audit, Compensation, Nominating and Corporate Governance and Corporate Development. The Board has adopted a written charter for each of these committees, copies of which can be found on our Investor Relations website at www.brcd.com in the Corporate Governance section. Information about the functions of each committee, the membership of each committee and the number of meetings of each committee held in fiscal year 2016 is set forth below.

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In addition to the standing committees discussed above, during fiscal year 2016, our Board formed the Transaction Committee as a subcommittee of the Corporate Development Committee. Our Board authorized the Transaction Committee to oversee and direct Company management and engage with the Company’ advisors with respect to the exploration, evaluation and negotiation of strategic transactions. Our Board appointed Messrs. Roberson and House to serve on the Transaction Committee, and the Transaction Committee met eight times during fiscal year 2016.

Compensation Committee Interlocks and Insider Participation

During all or a portion of fiscal year 2016, Messrs. House, Krause, Roberson and Vaswani and Ms. Goodman served as members of the Compensation Committee. No member of the Compensation Committee during fiscal year 2016 was an officer or employee of Brocade. In addition, no member of the Compensation Committee or executive officer of Brocade served as a member of the board or compensation committee of any entity that has an executive officer serving as a member of our Board or Compensation Committee.

Code of Ethics

The Board has adopted a Code of Ethics for Principal Executive and Senior Financial Officers (the “Code of Ethics”), which applies to our Chief Executive Officer, Chief Financial Officer and any other principal financial officer, any other principal accounting officer, Controller and any other person performing similar functions (the “Principal Executive and Financial Officers”). The Code of Ethics is posted on our Investor Relations website at www.brcd.com in the Corporate Governance section. Brocade will disclose any amendment to the Code of Ethics or waiver of a provision of the Code of Ethics that applies to the Principal Executive and Financial Officers, including the name of the officer to whom the waiver was granted, on our Investor Relations website at www.brcd.com.

The Company also has a Code of Business Conduct and Ethics (the “Code of Business Conduct and Ethics”) that is applicable to all directors, officers and employees of the Company and its direct and indirect subsidiaries, which

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outlines the Company’s guiding principles that all directors, officers and employees should strive to uphold. The Code of Business Conduct and Ethics is posted on the Corporate Governance section of our Investor Relations website at www.brcd.com. Any waiver of any provision of the Code of Business Conduct and Ethics for a director or an executive officer must be approved by the Audit Committee and, where required by law and any applicable listing agreement with a stock market or exchange, promptly disclosed to the public.

Board’s Role in Risk Oversight

We believe that risk is inherent in innovation and the pursuit of long-term growth opportunities. Our management is responsible for the day-to-day management of risks possibly facing the Company. The Board, acting directly and through its committees, is responsible for the oversight of our risk management efforts. With the oversight of the Board, we have implemented practices and programs designed to help manage the risks to which we are exposed in our business and to align risk-taking appropriately with our efforts to increase shareholder value. As an example of one such program, we have implemented an enterprise risk management (“ERM”) program to identify, assess, govern and manage risks and our response to those risks. The structure of the ERM program includes regular reviews by members of senior management. The Audit Committee receives regular reports on ERM. In addition, as part of the overall risk oversight framework, other committees of the Board also may review certain categories of risk associated with their respective areas of responsibility, as needed.

Communications with the Board of Directors

Although we do not have a formal policy regarding communications with the Board, shareholders may communicate with the Board by submitting an email to investor-relations@brocade.com or by writing to us at Brocade Communications Systems, Inc., Attention: Investor Relations, 130 Holger Way, San Jose, California 95134. Shareholders who would like their submission directed to a particular member of the Board may so specify. All communications will be reviewed by the General Counsel or Chief Financial Officer. All appropriate business-related communications as reasonably determined by the General Counsel or Chief Financial Officer will be forwarded to the Board or, if applicable, to the individual director.

Director Compensation

The following table provides information about the compensation earned by non-employee directors who served during fiscal year 2016. Non-employee director cash and equity compensation is determined by the Board upon recommendation of the Compensation Committee with the assistance of its independent compensation advisor, who periodically provides recommendations as to the form and amounts of compensation for non-employee directors including market data regarding director compensation. Directors who are our employees do not receive compensation for their service as directors.

Fiscal 2016 Director Compensation Table

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Below is a summary of the elements of non-employee director compensation included in the table above.

Cash Compensation

In fiscal year 2016, each non-employee member of the Board received the fees as set forth below for his or her service on the Board and each committee of the Board.

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Non-employee directors also are entitled to receive additional meeting fees of $1,000 per Board and Committee meeting attended in person or by telephone in excess of nine Board meetings, ten Audit Committee meetings, seven Compensation Committee meetings, four Nominating and Corporate Governance Committee meetings, and four Corporate Development Committee meetings per year, as applicable. In addition, during fiscal year 2016, the members of the Transaction Committee, a subcommittee of the Corporate Development Committee, received meeting fees of $1,000 for each Transaction Committee meeting attended in person or by telephone.

We are also authorized to reimburse directors for expenses in connection with attendance at Board and committee meetings and Board-related activities.

Equity Compensation

Non-employee directors participate in the Company’s 2009 Director Plan (the “2009 Director Plan”), which provides for awards of RSUs to non-employee directors for their service to the Company. Only non-employee directors may participate in the 2009 Director Plan.

Under the 2009 Director Plan, each non-employee director, including any non-employee director first elected to our Board at such annual meeting, is entitled to receive on the date of each annual meeting of shareholders an automatic, non-discretionary award of RSUs having a value of $200,000 based on the closing market price of our common stock on that annual meeting date. Each such grant of RSUs will vest in full and become payable on the earlier of the first anniversary of the date of grant or the next annual meeting of shareholders, but only if such person continues to serve as a director on the vesting date. All unvested RSUs will be forfeited upon the termination of a non-employee director’s service as a director of the Company. If a non-employee director is first appointed to the Board other than at an annual meeting of shareholders, then he or she is entitled to receive a pro-rata portion of the annual RSU award. This pro-rata grant will vest at the next annual meeting of shareholders, but only if such person continues to serve as a director on the vesting date.

In addition to the grants above, in fiscal 2016, the Chairman of the Board was entitled to receive an automatic grant at the annual meeting of shareholders of 5,000 RSUs under the 2009 Stock Plan. The RSUs will vest in their entirety at the following annual meeting of shareholders, subject to continued service on the vesting date.

The vesting terms of the equity awards described above are subject to acceleration upon the earlier consummation of the proposed merger with Broadcom. For further details, refer to the section of this proxy statement entitled “Compensation Discussion and Analysis—Individual Compensation Elements—Long-Term Incentive Compensation—Treatment of Equity Awards Upon Consummation of the Proposed Merger with Broadcom“.

18     2017 Proxy Statement | Brocade Communications Systems, Inc.

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PROPOSAL ONE:

ELECTION OF DIRECTORS

Our Board of Directors currently consists of ten directors. At the Annual Meeting, ten directors will be elected for a one year term expiring at the 2018 Annual Meeting of Shareholders and until a successor is qualified and elected or until his or her earlier resignation or removal.

Nominees

The Nominating and Corporate Governance Committee of the Board recommended, and the Board approved, Judy Bruner, Lloyd A. Carney, Renato A. DiPentima, Alan L. Earhart, John W. Gerdelman, Kim C. Goodman, David L. House, L. William Krause, David E. Roberson and Sanjay Vaswani as nominees for election at the Annual Meeting to the Board. Each of the nominees is currently a director of the Company. See “Board of Directors—Information About Our Directors and Nominees” for information concerning our incumbent directors standing for re-election.

Unless otherwise instructed, the proxy holders will vote the proxies received by them FOR each of Judy Bruner, Lloyd A. Carney, Renato A. DiPentima, Alan L. Earhart, John W. Gerdelman, Kim C. Goodman, David L. House, L. William Krause, David E. Roberson and Sanjay Vaswani. If the nominees are unable or decline to serve as a director at the time of the Annual Meeting, the proxies will be voted for another nominee designated by the Board. We are not aware of any reason that a nominee would be unable or unwilling to serve as a director.

Voting Thresholds

Provided a quorum is present, directors are elected by a majority of the votes cast with respect to the nominee at the Annual Meeting (i.e., the number of shares voted “for” a director nominee must exceed the number of votes cast “against” that nominee), except in the case of a contested election. The election of directors at the Annual Meeting is not contested. If a nominee who is currently serving as a director is not elected at the Annual Meeting, then under Delaware law the director will continue to serve on the Board as a “holdover director.” However, as a condition to re-nomination, each incumbent director is required to submit a resignation from the Board in writing to the Chairman of the Nominating and Corporate Governance Committee of the Board. The resignation will become effective only if the director fails to receive a majority of votes cast for re-election and the Board accepts the resignation.

Abstentions and broker non-votes will have no effect on the election of directors.

Recommendation of the Board of Directors

The Board unanimously recommends that shareholders vote “FOR” the election of each of Judy Bruner, Lloyd A. Carney, Renato A. DiPentima, Alan L. Earhart, John W. Gerdelman, Kim C. Goodman, David L. House, L. William Krause, David E. Roberson and Sanjay Vaswani.

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PROPOSAL TWO:

ADVISORY VOTE TO APPROVE NAMED EXECUTIVE OFFICER COMPENSATION

Executive compensation is an important matter for Brocade and our shareholders. This proposal provides Brocade’s shareholders with the opportunity to cast an advisory vote on the compensation of our named executive officers as disclosed in this proxy statement.

We urge you to carefully read the Compensation Discussion and Analysis (“CD&A”) section of this proxy statement for details on our executive compensation program, including our compensation philosophy and objectives and the fiscal 2016 compensation of the named executive officers identified in CD&A.

The following highlights important aspects of executive compensation with respect to our named executive officers in fiscal 2016:

Based on the above, and pursuant to Section 14A of the Exchange Act, we request that shareholders approve the compensation of our named executive officers as disclosed in the CD&A, the compensation tables and the related narrative discussion of this proxy statement.

Voting Thresholds

Approval of this proposal requires the approval of a majority of the shares represented in person or by proxy and entitled to vote at the Annual Meeting. Abstentions are treated as shares represented in person or by proxy and entitled to vote at the Annual Meeting and, therefore, will have the same effect as a vote “against” the proposal. Broker non-votes will have no effect on the outcome of the vote.

As an advisory vote, this proposal is nonbinding. Although the vote is nonbinding, the Board and the Compensation Committee value the opinions of our shareholders and will consider the outcome of the vote when making future compensation decisions for our named executive officers. We have held such advisory votes on executive compensation each year since 2011.

Recommendation of the Board of Directors

The Board unanimously recommends that shareholders vote “FOR” the advisory proposal to approve the compensation of our named executive officers.

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PROPOSAL THREE:

ADVISORY VOTE ON FREQUENCY OF FUTURE ADVISORY VOTES ON NAMED EXECUTIVE OFFICER COMPENSATION

As described in Proposal Two above, our shareholders are being provided the opportunity to cast an advisory vote on the fiscal 2016 compensation of our named executive officers (commonly known as a “Say-on-Pay” vote).

Every six years, we are required to conduct a nonbinding shareholder advisory vote on the frequency of future Say-on-Pay votes. At our 2011 Annual Meeting of Shareholders, our shareholders cast the highest number of votes for annual Say-on-Pay votes. In light of this result and other factors considered by our Board, we have since held such Say-on-Pay votes on an annual basis. As six years have passed, this Proposal Three provides our shareholders with a second opportunity at the Annual Meeting to cast a nonbinding advisory vote on how often we should conduct a Say-on-Pay vote at future annual meetings of shareholders. Under this Proposal Three, shareholders may vote to have the Say-on-Pay vote every year, every two years or every three years.

The Board believes that continuing to conduct Say-on-Pay votes every year (as opposed to every two years or three years) is appropriate for us, and in the best interests of our shareholders, in order to continue providing shareholders with a frequent opportunity to give immediate and direct feedback on our executive compensation programs.

Voting Thresholds

The option of one year, two years or three years that receives the highest number of votes cast by shareholders will be the frequency of future advisory votes on executive compensation that has been selected by our shareholders. Abstentions and broker non-votes will have no effect on the outcome of the vote.

As an advisory vote, this proposal is nonbinding. Although the vote is nonbinding, the Board and the Compensation Committee value the opinions of our shareholders and will consider the outcome of the vote when setting the frequency of future advisory votes on named executive officer compensation.

Recommendation of the Board of Directors

The Board unanimously recommends that shareholders select “ONE YEAR” on the proposal determining the frequency of future advisory votes on named executive officer compensation.

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PROPOSAL FOUR:

AMENDMENT AND RESTATEMENT OF THE 2009 STOCK PLAN

We are asking shareholders to approve an amendment and restatement (the “Stock Plan Amendment”) of the 2009 Stock Plan (the “Stock Plan”) to increase the Stock Plan’s share reserve by 16,000,000 shares of our common stock (“Common Stock”). The Board has adopted the Stock Plan Amendment, subject to approval from the shareholders at the Annual Meeting.

As of December 31, 2016, there were 4,761,366 shares of Common Stock available for issuance under the existing version of our Stock Plan prior to the Stock Plan Amendment (the “Existing Stock Plan”).

If the shareholders approve the Stock Plan Amendment, it will be effective as of the Annual Meeting. If the Stock Plan Amendment is not approved, the Stock Plan Amendment will not take effect, and the Existing Stock Plan will continue to be administered in its current form until the share reserve expires and all outstanding awards have been exercised, vested or terminated.

Shareholders last approved amending the Stock Plan to increase the share reserve at the 2015 Annual Meeting of Shareholders. The Stock Plan’s share reserve has not been increased since that time. Except for increasing the Stock Plan’s share reserve as described above, the Existing Stock Plan is not being amended in any way.

Key Considerations

In making its recommendation to the Board regarding the number of shares to propose adding to the Stock Plan, the Compensation Committee considered proxy advisory firm policies, as well as key equity metrics such as gross burn rate, share repurchases, and the fungible plan design that applies to equity awards issued without an exercise price (“full-value awards”) other than options and stock appreciation rights. The Compensation Committee also sought and received feedback from the Compensation Committee’s independent compensation consultant. The table below summarizes our equity compensation plan practices over the past three fiscal years for all of our equity compensation plans.

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Rationale for the Stock Plan Amendment

The rationale for, and the reasons why the Board recommends approval of, the Stock Plan Amendment is set forth below:

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For the reasons discussed above, we request that shareholders approve the Stock Plan Amendment and the reservation of 16,000,000 additional shares for issuance. If the Stock Plan Amendment is not approved, we do not expect to be able to offer competitive equity packages to retain our current employees and hire new employees. The Existing Stock Plan, however, will continue to govern awards previously granted under it, and we will be able to make new grants of awards under the Existing Stock Plan while shares remain in that plan.

Effect of Pending Broadcom Acquisition

As previously announced, at a special meeting of our shareholders held on January 26, 2017, our shareholders voted to adopt the merger agreement we entered into with Broadcom on November 2, 2016 under which Broadcom will acquire us. Consummation of the proposed merger remains subject to certain customary closing conditions, including the receipt of certain governmental approvals in various jurisdictions. If the closing of the proposed merger occurs prior to the commencement of the Annual Meeting to which this proxy statement relates, we will not hold the Annual Meeting and Broadcom will determine any further action with respect to the Stock Plan.

Key Data

The following table includes information regarding outstanding equity awards and shares available for future awards under our active equity plans as of December 31, 2016:

Description of the 2009 Stock Plan

The following is a summary of the principal features of the Stock Plan and its operation. The summary is qualified in its entirety by reference to the Stock Plan itself set forth in Appendix A.

General

The Stock Plan provides for the grant of the following types of incentive awards: (i) stock options, (ii) restricted stock, (iii) restricted stock units, (iv) stock appreciation rights, (v) performance units and performance shares, and (vi) and other stock or cash awards. Each of these is referred to individually as an “Award.” Those who will be eligible

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for Awards under the Stock Plan include employees, directors and consultants who provide services to the Company and any parent or subsidiary. As of December 31, 2016, approximately 5,200 employees, consultants and directors would be eligible to be selected to participate in the Stock Plan. The Stock Plan will remain in effect for a term of 10 years from the date of its initial adoption in 2009.

Number of Shares of Common Stock Available Under the Stock Plan

Initially, the Board reserved 48 million shares of Common Stock for issuance under the Stock Plan, plus any shares subject to stock options or similar awards granted under the Company’s 1999 Plan, the Company’s 1999 Nonstatutory Stock Option Plan and the 2001 McDATA Equity Incentive Plan that expire or otherwise terminate without having been exercised in full and shares issued pursuant to awards granted under the Company’s 1999 Stock Plan, the Company’s 1999 Nonstatutory Stock Option Plan and the 2001 McDATA Equity Incentive Plan that are forfeited to or repurchased by the Company, with the maximum number of Shares to be added to the Stock Plan pursuant to this clause equal to 40,335,624 shares. The shares may be authorized, but unissued, or reacquired Common Stock. In 2012, shareholders approved an increase of 35,000,000 in the number of shares reserved for issuance under the Stock Plan for an aggregate reserve of 83,000,000 shares. In 2015, shareholders approved an increase of 29,500,000 in the number of shares reserved for issuance under the Stock Plan for an aggregate reserve of 112,500,000 shares. We are asking shareholders to approve an increase of 16,000,000 in the number of shares reserved for issuance under the Stock Plan (resulting in an aggregate reserve of 128,500,000 shares).

Shares subject to full-value awards count against the share reserve as 2.03 shares for every share subject to a full-value award. To the extent that a share that was subject to a full-value award is returned to the Stock Plan, the Stock Plan reserve will be credited with 2.03 shares that will thereafter be available for issuance under the Stock Plan.

If an Award expires or becomes unexercisable without having been exercised in full, or, with respect to full-value awards, is forfeited to or repurchased by the Company, the unpurchased shares (or for full-value awards, the forfeited or repurchased shares) will become available for future grant or sale under the Stock Plan (unless the Stock Plan has terminated). With respect to stock appreciation rights, all shares subject to a stock appreciation right will cease to be available under the Stock Plan, other than shares forfeited due to failure to vest which will become available for future grant or sale under the Stock Plan (unless the Stock Plan has terminated). Shares that have actually been issued under the Stock Plan under any Award will not be returned to the Stock Plan and will not become available for future distribution under the Stock Plan, except that if shares issued pursuant to full-value awards are repurchased by the Company or forfeited to the Company, such shares will become available for future grant under the Stock Plan.

Shares used to pay the exercise price of an Award or satisfy the tax withholding obligations related to an Award will not become available for future grant or sale under the Stock Plan. To the extent an Award is paid out in cash rather than shares, such cash payment will not reduce the number of shares available for issuance under the Stock Plan.

If we increase or decrease the number of issued shares of Common Stock by means of a stock split, reverse stock split, stock dividend, reorganization, merger, consolidation, split-up, spin-off, combination or reclassification of the Common Stock, repurchase, or exchange of shares or other securities of the Company, or, in the Board’s sole discretion, other change in our corporate structure affecting our Common Stock, subject to any required action by shareholders, the Administrator will proportionately adjust the number of shares covered by each outstanding Award, the number of shares available for issuance under the Stock Plan and the price per share covered by each outstanding Award.

Administration of the Stock Plan

The Board, or a committee of directors or of other individuals intended to satisfy applicable laws and appointed by the Board (referred to herein as the “Administrator”), will administer the Stock Plan. To make grants to certain officers and key employees, the members of the committee are intended to qualify as “non-employee directors” under Rule 16b-3 of the Securities Exchange Act of 1934, and as “outside directors” under Code Section 162(m) so that the Company can receive a federal tax deduction for certain compensation paid under the Stock Plan. Subject to the terms of the Stock Plan, the Administrator has the sole discretion to select the employees, consultants, and directors who will receive Awards, determine the terms and conditions of Awards, to interpret the provisions of the Stock Plan and outstanding Awards, and to take other appropriate actions as provided under the Stock Plan. In addition, the Administrator may not amend any Award to reduce the exercise price of that Award or cancel any outstanding Award in exchange for cash or other Awards with a lower exercise price than the original Award, unless such action is approved by shareholders.

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Options

The Administrator is able to grant nonstatutory stock options and incentive stock options under the Stock Plan. The Administrator determines the number of shares subject to each option, although the Stock Plan provides that a participant may not receive options for more than 3,000,000 shares in any fiscal year, except in connection with his or her initial service with the Company, in which case he or she may be granted an option to purchase up to an additional 3,000,000 shares.

The Administrator determines the exercise price of options granted under the Stock Plan, provided the exercise price must be at least equal to the fair market value of our Common Stock on the date of grant (except for options granted in replacement of options held by employees of companies that are acquired by the Company). In addition, the exercise price of an incentive stock option granted to any participant who owns more than 10% of the total voting power of all classes of our outstanding stock must be at least 110% of the fair market value of the Common Stock on the grant date.

The term of an option may not exceed seven years, except that, with respect to any participant who owns 10% of the voting power of all classes of the Company’s outstanding capital stock, the term of an incentive stock option may not exceed five years.

After a termination of service with us, a participant will be able to exercise the vested portion of his or her option for the period of time stated in the Award agreement (except as otherwise expressly provided for). If no such period of time is stated in the participant’s Award agreement, the participant will generally be able to exercise his or her option for three months (or 12 months in the case of death or disability) following his or her termination of service. In no event may an option be exercised later than the expiration of its seven year (or shorter) term.

Restricted Stock

Awards of restricted stock are rights to acquire or purchase shares of our Common Stock, which vest in accordance with the terms and conditions established by the Administrator in its sole discretion. The Award agreement will generally grant us a right to repurchase or reacquire the unvested shares upon the termination of the participant’s service with the Company for any reason (including death or disability). The Administrator will determine the number of shares granted pursuant to an Award of restricted stock, but no participant will be granted a right to purchase or acquire more than 3,000,000 shares of restricted stock during any fiscal year, except that a participant may be granted up to an additional 3,000,000 shares of restricted stock in connection with his or her initial service with us.

Restricted Stock Units

Awards of restricted stock units result in a payment to a participant only if the vesting criteria the Administrator establishes are satisfied. Upon satisfying the applicable vesting criteria, the participant will be entitled to the payout specified in the Award agreement. The Administrator, in its sole discretion, may pay earned restricted stock units in cash, shares, or a combination thereof. On the date set forth in the Award agreement, all unearned restricted stock units will be forfeited to us. The Administrator determines the number of restricted stock units granted to any participant, but no participant may be granted more than 3,000,000 restricted stock units during any fiscal year, except that the participant may be granted up to an additional 3,000,000 restricted stock units in connection with his or her initial service with us.

Stock Appreciation Rights

The Administrator will be able to grant stock appreciation rights, which are the rights to receive the appreciation in fair market value of Common Stock between the exercise date and the date of grant. We can pay the appreciation in cash, Common Stock of equivalent value, or a combination thereof. Stock appreciation rights will become exercisable at the times and on the terms established by the Administrator, subject to the terms of the Stock Plan. The Administrator, subject to the terms of the Stock Plan, will have complete discretion to determine the terms and conditions of stock appreciation rights granted under the Stock Plan; provided, however, that the exercise price may not be less than 100% of the fair market value of a share on the date of grant. The term of a stock appreciation right may not exceed seven years. No participant will be granted stock appreciation rights covering more than 3,000,000 shares during any fiscal year, except that a participant may be granted stock appreciation rights covering up to an additional 3,000,000 shares in connection with his or her initial service with us.

After termination of service with us, a participant will be able to exercise the vested portion of his or her stock appreciation right for the period of time stated in the Award agreement (except as otherwise expressly provided for). If

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no such period of time is stated in a participant’s Award agreement, a participant will generally be able to exercise his or her stock appreciation right for three months (or 12 months in the case of death or disability) following his or her termination of service. In no event will a stock appreciation right be exercised later than the expiration of its term.

Performance Units and Performance Shares

The Administrator will be able to grant performance units and performance shares, which are Awards that will result in a payment to a participant only if the performance goals or other vesting criteria the Administrator may establish are achieved or the Awards otherwise vest. The Administrator will establish performance or other vesting criteria in its sole discretion, which, depending on the extent to which they are met, will determine the number and/or the value of performance units and performance shares to be paid out to participants.

Notwithstanding the foregoing, after the grant of performance units or shares, the Administrator, in its sole discretion, may reduce or waive any performance objectives or other vesting provisions for such performance units or shares. During any fiscal year, no participant will receive more than 3,000,000 performance shares and no participant will receive performance units having an initial value greater than $15,000,000, except that a participant may be granted performance shares covering up to an additional 3,000,000 performance shares in connection with his or her initial service with us. Performance units will have an initial dollar value established by the Administrator on or before the date of grant. Performance shares will have an initial value equal to the fair market value of a share of the Company’s Common Stock on the grant date.

Performance Goals

The granting and/or vesting of full-value awards and other incentives under the Stock Plan may be made subject to the attainment of performance goals relating to one or more business criteria and may provide for a targeted level or levels of achievement including: cash position, company free cash flow, earnings per share, earnings before interest, taxes, depreciation and amortization, gross margin, internal rate of return, net cash provided by operations, net income, operating cash flow, operating expenses, operating income, profit before tax, return on assets, return on equity, return on gross fixed assets, return on investment, return on sales, revenue, revenue growth, and total shareholder return. The performance goals may differ from participant to participant and from Award to Award. Any criteria used may be measured in absolute terms, measured in terms of growth, compared to another company or companies, measured against the market and/or applicable market indices, measured against the performance of the Company as a whole or a segment of the Company, and/or measured on a pre-tax or post-tax basis, if applicable.

Transferability of Awards

Awards granted under the Stock Plan are generally not transferable, and all rights with respect to an Award granted to a participant generally will be available during a participant’s lifetime only to the participant. Additionally, the Administrator may not determine and implement the terms and conditions of any program that would permit participants the opportunity to transfer for value any outstanding Awards to a financial institution or other person without shareholder approval.

Merger or Change in Control

In the event of a merger or change in control of the Company, each outstanding Award will be assumed or an equivalent option or right substituted by the successor corporation or a parent or subsidiary of the successor corporation. In the event that the successor corporation refuses to assume or substitute for the Award, the participant will fully vest in and have the right to exercise all of his or her outstanding options or stock appreciation rights, including shares as to which such Awards that would not otherwise be vested or exercisable, all restrictions on restricted stock will lapse, all restricted stock units will fully vest, and, with respect to Awards with performance-based vesting, all performance goals or other vesting criteria will be deemed achieved at 100% of target levels and all other terms and conditions met unless otherwise expressly provided for in the Award agreement. In addition, if an Award becomes fully vested and exercisable in lieu of assumption or substitution in the event of a change of control, the Administrator will notify the participant in writing or electronically that the Award will be fully vested and exercisable for a period of time determined by the Administrator in its sole discretion, and the Award will terminate upon the expiration of such period.

For a discussion of the treatment of Awards granted under the Stock Plan under the terms of the merger agreement with Broadcom, refer to the section of this proxy statement entitled “Compensation Discussion and Analysis—Individual Compensation Elements—Long-Term Incentive Compensation—Treatment of Equity Awards Upon Consummation of the Proposed Merger with Broadcom”.

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Amendment and Termination of the Stock Plan

The Board will have the authority to amend, alter, suspend or terminate the Stock Plan, except that shareholder approval will be required for any amendment to the Stock Plan to the extent required by any applicable laws. No amendment, alteration, suspension or termination of the Stock Plan will impair the rights of any participant, unless mutually agreed otherwise between the participant and the Administrator and which agreement must be in writing and signed by the participant and the Company. The Stock Plan will terminate in 2019, unless the Board terminates it earlier.

Incentive Compensation Recoupment

In the event that material accounting errors occur that require correction of the Company’s issued financial statements, whether or not such errors result from fraud or intentional misconduct by executives, the Compensation Committee of the Board shall have the discretion to seek repayment of cash or equity incentive compensation erroneously paid or granted to the CEO or any of the executives of the Company who report directly to the CEO if the amount of such compensation would have been lower had it been calculated based upon financial statements free of such accounting errors. In determining whether to pursue such repayment, the Compensation Committee will take into account certain considerations, including without limitation the feasibility and expense of recoupment, any pending legal action and the amount of time since the occurrence of the accounting error requiring correction. In addition, the Company is required to disclose the results of the Compensation Committee’s determination to pursue recovery, as well as the reasons for any determination not to pursue recovery, in the first proxy statement filed following the determination.

Granted to Employees, Consultants and Directors

The number of Awards that an employee, director or consultant may receive under the Stock Plan is at the discretion of the Administrator and therefore cannot be determined in advance. The following table sets forth (i) the aggregate number of restricted stock units and/or performance stock units granted under the Existing Stock Plan during fiscal 2016, and (ii) the dollar value of such restricted stock units and/or performance stock units. There were no grants of stock options, restricted stock, stock appreciation rights, or performance shares under the Existing Stock Plan during fiscal 2016.

Certain Federal Income Tax Information

The following paragraphs are a summary of the general federal income tax consequences to U.S. taxpayers and the Company of Awards granted under the Stock Plan. Tax consequences for any particular individual may be different.

Nonstatutory Stock Options

No taxable income is reportable when a nonstatutory stock option with an exercise price equal to the fair market value of the underlying stock on the date of grant is granted to a participant. Upon exercise, the participant will

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recognize ordinary income in an amount equal to the excess of the fair market value (on the exercise date) of the shares purchased over the exercise price of the option. Any taxable income recognized in connection with an option exercise by an employee of the Company is subject to tax withholding by the Company. Any additional gain or loss recognized upon any later disposition of the shares would be capital gain or loss.

Incentive Stock Options

No taxable income is reportable when an incentive stock option is granted or exercised (except for purposes of the alternative minimum tax, in which case taxation is the same as for nonstatutory stock options). If the participant exercises the option and then later sells or otherwise disposes of the shares more than two years after the grant date and more than one year after the exercise date, the difference between the sale price and the exercise price will be taxed as capital gain or loss. If the participant exercises the option and then later sells or otherwise disposes of the shares before the end of the two or one year holding periods described above, he or she generally will have ordinary income at the time of the sale equal to the fair market value of the shares on the exercise date (or the sale price, if less) minus the exercise price of the option.

Stock Appreciation Rights

No taxable income is reportable when a stock appreciation right with an exercise price equal to the fair market value of the underlying stock on the date of grant is granted to a participant. Upon exercise, the participant will recognize ordinary income in an amount equal to the amount of cash received and the fair market value of any shares received. Any additional gain or loss recognized upon any later disposition of the shares would be capital gain or loss.

Restricted Stock, Restricted Stock Units, Performance Units and Performance Shares

A participant generally will not have taxable income at the time an Award of restricted stock, restricted stock units, performance shares or performance units are granted. Instead, he or she will typically recognize ordinary income in the first taxable year in which his or her interest in the shares underlying the Award becomes either (i) freely transferable, or (ii) no longer subject to substantial risk of forfeiture. However, the recipient of a restricted stock Award may elect to recognize income at the time he or she receives the Award in an amount equal to the fair market value of the shares underlying the Award (less any cash paid for the shares) on the date the Award is granted.

Tax Effect for the Company

The Company generally will be entitled to a tax deduction in connection with an Award under the Stock Plan in an amount equal to the ordinary income realized by a participant and at the time the participant recognizes such income (for example, the exercise of a nonstatutory stock option). Special rules limit the deductibility of compensation paid to the Company’s Chief Executive Officer and to each of its three most highly compensated executive officers (other than the Chief Financial Officer). Under Section 162(m) of the Code, the annual compensation paid to any of these specified executives will be deductible only to the extent that it does not exceed $1,000,000. However, the Company can preserve the deductibility of certain compensation in excess of $1,000,000 if the conditions of Section 162(m) are met. These conditions include shareholder approval of the Stock Plan, setting limits on the number of Awards that any individual may receive and for Awards other than certain stock options, establishing performance criteria that must be met before the Award actually will vest or be paid. The Stock Plan has been designed to permit (but not require) the Administrator to grant Awards that qualify as performance-based for purposes of satisfying the conditions of Section 162(m), thereby potentially permitting the Company to continue to receive a federal income tax deduction in connection with such Awards.

Section 409A

Section 409A of the Code, which was added by the American Jobs Creation Act of 2004, provides certain new requirements on non-qualified deferred compensation arrangements. These include new requirements with respect to an individual’s election to defer compensation and the individual’s selection of the timing and form of distribution of the deferred compensation. Section 409A also generally provides that distributions must be made on or following the occurrence of certain events (e.g., the individual’s separation from service, a predetermined date, or the individual’s death). Section 409A imposes restrictions on an individual’s ability to change his or her distribution timing or form after the compensation has been deferred. For certain individuals who are officers, subject to certain exceptions, Section 409A requires that such individual’s distribution on account of termination of employment commence no earlier than six months after such officer’s separation from service.

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Awards granted under the Stock Plan with a deferral feature will be subject to the requirements of Section 409A. If an Award is subject to and fails to satisfy the requirements of Section 409A, the recipient of that award may recognize ordinary income on the amounts deferred under the Award, to the extent vested, which may be prior to when the compensation is actually or constructively received. Also, if an Award that is subject to Section 409A fails to comply with Section 409A’s provisions, Section 409A imposes an additional 20% federal income tax on compensation recognized as ordinary income, as well as interest on such deferred compensation. In addition, certain states such as California have adopted similar provisions.

THE FOREGOING IS ONLY A SUMMARY OF THE EFFECT OF FEDERAL INCOME TAXATION UPON PARTICIPANTS AND THE COMPANY WITH RESPECT TO THE GRANT AND EXERCISE OF AWARDS UNDER THE STOCK PLAN. IT DOES NOT PURPORT TO BE COMPLETE, AND DOES NOT DISCUSS THE TAX CONSEQUENCES OF A PARTICIPANT’S DEATH OR THE PROVISIONS OF THE INCOME TAX LAWS OF ANY MUNICIPALITY, STATE OR FOREIGN COUNTRY IN WHICH THE PARTICIPANT MAY RESIDE.

Voting Thresholds

Approval of the amendment and restatement of the Stock Plan requires the approval of a majority of the votes cast on the proposal at the Annual Meeting. Abstentions will have the same effect as a vote “against” the approval of the amendment and restatement of the Stock Plan. Broker non-votes will have no effect on the outcome of the vote.

Recommendation of the Board of Directors

The Board unanimously recommends that shareholders vote “FOR” the approval of the amendment and restatement of the Stock Plan.

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PROPOSAL FIVE:

RATIFICATION OF SELECTION OF INDEPENDENT REGISTERED PUBLIC

ACCOUNTANTS

The Audit Committee has selected KPMG LLP as our independent registered public accountants for the fiscal year ending October 28, 2017, and recommends that shareholders vote for ratification of such selection. Although ratification by shareholders is not required by law, the Company has determined that it is desirable to request ratification of this selection by the shareholders. If the shareholders do not ratify the selection of KPMG LLP, the Audit Committee may reconsider its selection. Notwithstanding its selection or voting results, the Audit Committee, in its discretion, may appoint new independent registered public accountants at any time during the year if the Audit Committee believes that such a change would be in the best interests of Brocade and its shareholders.

KPMG LLP has audited our consolidated financial statements annually since it was first appointed in fiscal year 2002. We expect that representatives of KPMG LLP will be present at the Annual Meeting to respond to appropriate questions and to make a statement if they so desire.

Fees Billed by KPMG LLP During Fiscal Years 2016 and 2015

“Audit Fees” consisted of fees for the audit of our annual financial statements, including audited financial statements presented in our annual report on Form 10-K, review of the financial statements presented in our quarterly reports on Form 10-Q, and services that are normally provided by the independent registered public accountants in connection with statutory and regulatory filings or engagements for those fiscal years. This category also includes advice on audit and accounting matters that arose during, or as a result of, the audit or the review of interim financial statements, statutory audits required by non-U.S. jurisdictions and assurance services provided in connection with the assessment and testing of internal controls with respect to Section 404 of the Sarbanes-Oxley Act of 2002.

“Audit-Related Fees” consisted of assurance and related services by KPMG LLP that are reasonably related to the performance of the audit or review of our financial statements and are not reported above under “Audit Fees.”

“Tax Fees” consisted of professional services rendered by KPMG LLP for tax compliance and tax planning. The services for the fees disclosed under this category include tax return preparation and technical tax advice.

Pre-Approval Policy

The Audit Committee has established a policy governing our use of the services of our independent registered public accountants. Under the policy, the Audit Committee is required to pre-approve all audit and non-audit services performed by the Company’s independent registered public accountants in order to ensure that the provision of such services does not impair the public accountants’ independence. In fiscal years 2016 and 2015, all fees identified above under the captions “Audit Fees,” “Audit-Related Fees,” and “Tax Fees” that were billed or to be billed by KPMG LLP were approved by the Audit Committee in accordance with SEC requirements and the Audit Committee’s pre-approval policy.

Voting Thresholds

Ratification of the selection of KPMG LLP as our independent registered public accountants for fiscal year 2017 will be accomplished by the affirmative vote of the holders of a majority of the shares represented in person or by

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proxy and entitled to vote at the Annual Meeting. Abstentions are treated as shares represented in person or by proxy and entitled to vote at the Annual Meeting and, therefore, will have the same effect as a vote “against” the ratification of KPMG LLP as our independent registered public accountants. Broker non-votes will have no effect on the outcome of the vote.

Recommendation of the Board of Directors

The Board, on behalf of the Audit Committee, unanimously recommends that shareholders vote “FOR” the ratification of the selection of KPMG LLP as Brocade’s independent registered public accountants for the fiscal year ending October 28, 2017.

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EXECUTIVE OFFICERS

Set forth below is information regarding our executive officers.

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COMPENSATION DISCUSSION AND ANALYSIS

This Compensation Discussion and Analysis describes the material elements of our compensation program for our Principal Executive Officer, our Principal Financial Officer, and the next three most highly-compensated Executive Officers of the Company during fiscal 2016 (collectively, the “Named Executive Officers” or “NEOs”). For fiscal 2016, these individuals were:

This Compensation Discussion and Analysis also provides an overview of our executive compensation philosophy and objectives. In addition, it analyzes how and why the Compensation Committee of our Board of Directors (the “Committee”) arrived at the specific compensation decisions for our NEOs for fiscal 2016, including the key factors that the Committee considered in making those decisions.

This Compensation Discussion and Analysis is divided into the following sections:

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Fiscal 2016 Business Highlights

We are a leading supplier of networking hardware, software and services for businesses and organizations of various types and sizes. Our end customers include global enterprises and other organizations that use our products and services as part of their communications infrastructure and service providers that use our products and services as part of their commercial operations. Our business model is focused on two key markets:

In addition, we provide product-related customer support and services across all of our businesses.

In fiscal 2016, we achieved the following:

Quantitatively, our key financial and operating highlights for fiscal 2016 were as follows:⁽¹⁾

Fiscal 2016 Executive Compensation Highlights

The following key compensation actions were taken with respect to our NEOs for fiscal 2016:

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A detailed discussion of the terms of the PSUs, including a description of the reasons for the selection of the NASDAQ Telecommunications Index as the comparative benchmark for determining total shareholder return, is included under “Individual Compensation Elements—Long-Term Incentive Compensation—PSU Awards” below.

Effective for fiscal 2016, based on a review of our compensation philosophy and objectives as well as market practice, the Committee determined to not grant stock options to our NEOs.

Compensation Philosophy

Our executive compensation program is guided by our overarching philosophy of paying for demonstrable performance. Consistent with this philosophy, we have designed our executive compensation program to achieve the following primary objectives:

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“Pay for Performance” Program Design

The annual compensation of our NEOs is comprised of three principal elements: base salary, annual cash bonus opportunities, and long-term incentive compensation opportunities in the form of equity awards. While the pay mix may vary from year to year, our ultimate goal is to achieve our compensation objectives as described above. A discussion and analysis of each element follows under “Individual Compensation Elements” below.

To align our NEOs’ interests with those of our shareholders, and to motivate and reward individual initiative and effort, a substantial portion of our NEOs’ target annual total direct compensation opportunity is “at-risk.” We emphasize performance-based compensation that appropriately rewards our NEOs for delivering financial, operational, and strategic results that meet or exceed pre-established goals through our annual cash bonus plan. In addition, the PSUs, which make up a significant portion of our long-term incentive compensation arrangements, reward our NEOs for driving total shareholder return relative to an established stock price index that most closely resembles the performance of a collection of our peers, customers and competitors. We further align our NEOs’ interests with those of our shareholders and advance our retention goals through our stock ownership guidelines and grants of RSUs with time-based vesting.

The pay mix for our CEO and the other NEOs during fiscal 2016 reflected this pay-for-performance design:

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In addition, the following chart comparing our CEO’s total direct compensation with total shareholder return (“TSR”) over the past five fiscal years demonstrates our strong pay-for-performance alignment:

Notes:

Shareholder Input on Executive Compensation Program

“Say-on-Pay” Vote

At our 2016 Annual Meeting of Shareholders, we conducted a nonbinding shareholder advisory vote on the fiscal 2015 compensation of the NEOs (commonly known as a “Say-on-Pay” vote). Our shareholders approved the fiscal 2015 compensation of the NEOs with approximately 97% of the votes cast in favor of the proposal, a result that we believe indicates that our shareholders broadly support our executive compensation program.

As the Committee has reviewed our executive compensation policies and practices since that vote, it has been mindful of the strong support our shareholders have expressed for our approach to executive compensation. In addition, the Committee has taken into consideration the feedback that it has received from some of our larger shareholders that the Company should maintain relatively consistent compensation programs for its NEOs from year to year. As a result, following its annual review of our executive compensation philosophy, the Committee did not make any changes based on the result of our Say-on-Pay vote, but continues to actively monitor our compensation programs and implements changes, as appropriate, to ensure alignment with our current compensation objectives and business strategy.

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Frequency of “Say-on-Pay” Vote

Every six years, we are required to conduct a nonbinding shareholder advisory vote on the frequency of future “Say-on-Pay” votes. At our 2011 Annual Meeting of Shareholders, our shareholders cast the highest number of votes for voting on an annual basis, compared to voting every two or three years. In light of this result and other factors considered by our Board, we have since held such Say-on-Pay votes on an annual basis. As six years have passed, this year we are providing our shareholders with a second opportunity at the Annual Meeting to cast a nonbinding advisory vote on the frequency of future Say-on-Pay votes. The Board’s recommendation in support of continuing to hold such Say-on-Pay votes on an annual basis appears above under “Proposal Three: Advisory Vote on Frequency of Future Advisory Votes on Named Executive Officer Compensation.”

Shareholder Engagement and Feedback

We carefully consider feedback from our shareholders regarding our executive compensation program through our annual Say-On-Pay vote, as well as through our communications with shareholders throughout the year. Our shareholders are invited to express their views to the Committee as described under “Board of Directors—Communications with the Board of Directors” in this proxy statement. We also engage in outreach to our major shareholders throughout the year about various topics, including executive compensation. See “Corporate Governance—Shareholder Engagement.”

We value the insights gained from our discussion with our shareholders and find them to be helpful even when points of view vary. The Committee considers shareholder feedback when adopting policies affecting our executive compensation program. We will continue to seek opportunities for dialogue with our shareholders on executive compensation and other matters on an ongoing basis.

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Executive Compensation-Related Policies and Practices

We endeavor to maintain sound executive compensation policies and practices, including compensation-related corporate governance standards, consistent with our executive compensation philosophy. The following summarizes our executive compensation and related governance policies and practices during fiscal 2016:

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Role of the Compensation Committee

The Committee discharges the responsibilities of our Board relating to the compensation of our executive officers and members of our Board. The Committee has overall responsibility for:

The Committee’s practice of developing and maintaining compensation arrangements that are competitive includes a balance between hiring and retaining the best possible talent and maintaining a reasonable and responsible cost structure. We compete for talent in the highly-competitive entrepreneurial Silicon Valley and other technology hubs, and our future success and our ability to remain competitive are dependent on our continuing efforts to attract, retain and motivate highly qualified executives and employees in these intensively competitive environments.

The Committee has the authority under its charter, to the extent permitted by applicable law or regulation, to delegate its authority to subcommittees of the Committee when it deems appropriate and in our best interests. During fiscal 2016, the only such delegation of authority that occurred was a standing delegation of authority to a subcommittee of the Committee to approve certain grants of equity awards under our 2009 Stock Plan in accordance with the terms of our Equity Awards Granting Policy described below under “Other Compensation Policies and Practices—Equity Awards Granting Policy.”

Management Interaction with Compensation Committee

In discharging its responsibilities, the Committee works with members of our management team, including our CEO. The management team assists the Committee by providing information on Company and individual performance as well as management’s perspective and recommendations on compensation matters. The Committee solicits our CEO’s recommendations and proposals with respect to adjustments to target annual cash compensation, long-term incentive compensation opportunities, program structures and other compensation-related matters for our CEO Direct Reports. The Committee reviews and discusses these recommendations and proposals with our CEO and uses them as one factor in approving the compensation for our CEO Direct Reports. Our CEO is not present for any Committee discussions, and does not make any recommendations, regarding his own compensation.

Compensation Review Cycle

The Committee conducts a review of the base salary levels, annual cash bonus opportunities and long-term incentive compensation opportunities of our CEO and our CEO Direct Reports during a minimum of four meetings conducted each year between September and December with additional telephone calls, briefings and other communications made or conducted as necessary. Adjustments are generally effective retroactive to the beginning of the fiscal year. Each fiscal quarter, the Committee tracks our financial and operational performance and the corresponding projected payments under our annual cash bonus plan and the then-current value of the equity awards previously granted to our CEO and our CEO Direct Reports.

Compensation-Setting Process

The Committee sets the target total direct compensation opportunities for our CEO and approves them for the other executives who report to the CEO, including the NEOs. The executives who report to the CEO are collectively referred to as the “CEO Executive Direct Reports.” The CEO and the CEO Executive Direct Reports are together

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referred to as the “Covered Executives.” The Committee does not use a single method or measure in setting or approving the target total direct compensation opportunities, nor is the impact of any one factor on the determination of pay levels quantifiable. The factors below, which the Committee considers when selecting and setting the amount of each compensation element for our CEO, and when reviewing and approving the amount of each compensation element for our CEO Executive Direct Reports, provide a framework for compensation decision-making regarding the compensation opportunity of each Covered Executive:

Role of Compensation Consultant

The Committee engages an external compensation consultant to assist it by providing information, analysis and other advice relating to our executive compensation program and the decisions resulting from its annual executive compensation review.

Since fiscal 2006, the Committee has retained Compensia, a national compensation consulting firm, to serve as its compensation advisor. Compensia serves at the discretion of the Committee, which reviews Compensia’s engagement annually.

During fiscal 2016, Compensia regularly attended the meetings of the Committee (both with and without management present) and performed the following services:

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In fiscal 2016, Compensia provided no services to us other than the consulting services to the Committee. The Committee regularly reviews the objectivity and independence of the advice provided by Compensia to the Committee on executive and non-employee director compensation. In fiscal 2016, the Committee considered the six specific independence factors adopted by the SEC and The NASDAQ Stock Market and determined that Compensia is independent and that its work did not raise any conflicts of interest.

Competitive Positioning

For purposes of comparing our executive compensation against the competitive market, the Committee reviews and considers the compensation levels and practices of a group of comparable technology companies. The companies in this compensation peer group for fiscal 2016 were selected in June 2015 on the basis of their similarity to us, as determined using the following criteria:

Although we sought to include data storage companies in our compensation peer group, we were unable to identify any independent publicly traded storage companies that met the criteria outlined above.

After consultation with Compensia, the Committee determined to prioritize revenue over market capitalization for purposes of approving the compensation peer group for fiscal 2016 because revenue tends to be a less volatile metric than market capitalization.

Our compensation peer group for fiscal 2016 was as follows:

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The following chart shows our percentile position relative to our compensation peer group based on revenue, market capitalization, operating income, net income and headcount at the time the Committee approved the peer group:

Brocade Peer Group Comparison

To analyze the compensation practices of the companies in our compensation peer group, Compensia gathered data from public filings (primarily proxy statements) and from the Radford High-Technology Executive Survey database. This market data was then used as a reference point for the Committee to assess our current compensation levels in the course of its deliberations on compensation forms and amounts.

The Committee reviews our compensation peer group at least annually and makes adjustments to its composition, taking into account changes in both our business and the businesses of the companies in the peer group. As part of that process, the Committee made the following changes to the fiscal 2015 peer group in determining the fiscal 2016 peer group:

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This section describes the specific elements of our fiscal 2016 executive compensation program for our NEOs, who are identified under “Compensation Discussion and Analysis” above. Although the focus of this section is on NEO compensation, our fiscal 2016 executive compensation program for all of our CEO Executive Direct Reports, including those who are not NEOs, is comprised of these same elements, and the compensation-setting practices and approach described in this section apply similarly with respect to the compensation of all such CEO Executive Direct Reports. The Committee applies the factors described under “Governance of Executive Compensation Program—Compensation-Setting Process” above to determine these elements of compensation similarly for the CEO and all of our CEO Executive Direct Reports, inclusive of the NEOs.

The following table classifies these individual compensation elements, including each element’s principal objective and link to our business strategy and any associated performance measures. The table also categorizes each element based on the extent to which, if at all, the element is “at risk” based on performance.

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Base Salary

Base salary represents the fixed portion of our NEOs’ compensation and is intended to attract and retain highly talented individuals.

Generally, the initial base salaries of our NEOs are determined in consultation with Compensia at the time we hire the individual executive officer, taking into account his or her position, qualifications, experience, prior salary level, market data and the base salaries of our other executive officers. Thereafter, the Committee, in consultation with Compensia, reviews the base salaries of our NEOs annually taking into account these factors as well as those described under “Governance of Executive Compensation Program—Compensation-Setting Process” above. Following that review, the Committee makes adjustments, with respect to our CEO, and approves adjustments, with respect to our other NEOs, to base salaries as it determines to be necessary or appropriate.

In November 2015, the Committee reviewed the base salaries of our NEOs, taking into consideration a competitive market analysis prepared by Compensia, the recommendations of our CEO (except with respect to his own base salary), and the other factors described in the paragraph above. Following this review, the Committee determined that increases were necessary for certain of our NEOs to maintain the competitiveness of their base salaries. The base salaries of the NEOs for fiscal 2016 were as follows:

Annual Cash Bonuses

For fiscal 2016, we had a single cash bonus plan, the Brocade Senior Leadership Plan (the “Fiscal 2016 SLP”), for our NEOs. The Committee designed the Fiscal 2016 SLP to motivate the NEOs to achieve the following objectives:

The Committee established for our CEO, and reviewed and approved for each of our other NEOs, a target annual cash bonus opportunity at the beginning of fiscal 2016. The Committee also approved the formula for bonus payments at that time.

Target Annual Cash Bonus Opportunities

Each NEO was assigned a target annual cash bonus opportunity, the amount of which was calculated as a percentage of their base salary. In November 2015, the Committee reviewed the target annual cash bonus opportunities of our NEOs, taking into consideration a competitive market analysis prepared by Compensia, the recommendations of our CEO (except with respect to his own target annual cash bonus opportunity), and the other factors described in “Governance of Executive Compensation Program—Compensation-Setting Process” above. Following this review, the Committee determined that adjustments were necessary for certain NEOs to maintain competitive target total cash compensation and in those cases increased their target annual cash bonus opportunities compared to fiscal 2015 levels. For example, Mr. Fairfax received a market-based adjustment to his target annual cash bonus opportunity to better align his target annual cash incentive with those of the chief financial officers of the companies in our compensation peer group. Mr. Cheng’s target annual cash bonus opportunity was also increased to maintain competitiveness of his target total cash compensation compared to individuals holding equivalent roles at companies in our compensation peer group.

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The target annual cash bonus opportunities of the NEOs for fiscal 2016 were as follows: