Sample Business Contracts


1998 Equity Incentive Plan - Brocade Communications Systems Inc.



                      BROCADE COMMUNICATIONS SYSTEMS, INC.

                           1998 EQUITY INCENTIVE PLAN

                          AS ADOPTED FEBRUARY 26, 1998
                         AND AS AMENDED OCTOBER 9, 1998



        1. PURPOSE. The purpose of this Plan is to provide incentives to
attract, retain and motivate eligible persons whose present and potential
contributions are important to the success of the Company, its Parent and
Subsidiaries, by offering them an opportunity to participate in the Company's
future performance through awards of Options and Restricted Stock. Capitalized
terms not defined in the text are defined in Section 22 hereof. This Plan is
intended to be a written compensatory benefit plan within the meaning of Rule
701 promulgated under the Securities Act.

        2. SHARES SUBJECT TO THE PLAN.

               2.1 Number of Shares Available. Subject to Sections 2.2 and 17
hereof, the total number of Shares reserved and available for grant and issuance
pursuant to this Plan will be 2,400,000 Shares or such lesser number of Shares
as permitted under Section 260.140.45 of Title 10 of the California Code of
Regulations. Subject to Sections 2.2 and 17 hereof, Shares will again be
available for grant and issuance in connection with future Awards under this
Plan that: (a) are subject to issuance upon exercise of an Option but cease to
be subject to such Option for any reason other than exercise of such Option or
(b) are subject to a Restricted Stock Award that otherwise terminates without
Shares being issued. At all times the Company will reserve and keep available a
sufficient number of Shares as will be required to satisfy the requirements of
all Awards granted under this Plan.

               2.2 Adjustment of Shares. In the event that the number of
outstanding shares of the Company's Common Stock is changed by a stock dividend,
recapitalization, stock split, reverse stock split, subdivision, combination,
reclassification or similar change in the capital structure of the Company
without consideration, then (a) the number of Shares reserved for issuance under
this Plan, (b) the Exercise Prices of and number of Shares subject to
outstanding Options and (c) the Purchase Prices of and number of Shares subject
to other outstanding Awards will be proportionately adjusted, subject to any
required action by the Board or the shareholders of the Company and compliance
with applicable securities laws; provided, however, that fractions of a Share
will not be issued but will either be paid in cash at Fair Market Value of such
fraction of a Share or will be rounded down to the nearest whole Share, as
determined by the Committee.

        3. ELIGIBILITY. ISOs (as defined in Section 5 hereof) may be granted
only to employees (including officers and directors who are also employees) of
the Company or of a Parent or Subsidiary of the Company. NQSOs (as defined in
Section 5 hereto) and Restricted Stock Awards may be granted to employees,
officers, directors and consultants of the Company or any Parent or Subsidiary
of the Company; provided such consultants render bona fide services not in
connection with the offer and sale of securities in a capital-raising
transaction. A person may be granted more than one Award under this Plan.

        4. ADMINISTRATION.

               4.1 Committee Authority. This Plan will be administered by the
Committee or the Board acting as the Committee. Subject to the general purposes,
terms and conditions of this Plan, and to the direction of the Board, the
Committee will have full power to implement and carry out this Plan. Without
limitation, the Committee will have the authority to:

                (a)     construe and interpret this Plan, any Award Agreement
                        and any other agreement or document executed pursuant to
                        this Plan;

                (b)     prescribe, amend and rescind rules and regulations
                        relating to this Plan;


<PAGE>   2

                (c)     select persons to receive Awards;

                (d)     determine the form and terms of Awards;

                (e)     determine the number of Shares or other consideration
                        subject to Awards;

                (f)     determine whether Awards will be granted singly, in
                        combination with, in tandem with, in replacement of, or
                        as alternatives to, other Awards under this Plan or
                        awards under any other incentive or compensation plan of
                        the Company or any Parent or Subsidiary of the Company;

                (g)     grant waivers of Plan or Award conditions;

                (h)     determine the vesting, exercisability and payment of
                        Awards;

                (i)     correct any defect, supply any omission, or reconcile
                        any inconsistency in this Plan, any Award, any Award
                        Agreement, any Exercise Agreement or any Restricted
                        Stock Purchase Agreement;

                (j)     determine whether an Award has been earned; and

                (k)     make all other determinations necessary or advisable for
                        the administration of this Plan.

               4.2 Committee Discretion. Any determination made by the Committee
with respect to any Award will be made in its sole discretion at the time of
grant of the Award or, unless in contravention of any express term of this Plan
or Award, and subject to Section 5.9 hereof, at any later time, and such
determination will be final and binding on the Company and on all persons having
an interest in any Award under this Plan. The Committee may delegate to one or
more officers of the Company the authority to grant an Award under this Plan.

        5. OPTIONS. The Committee may grant Options to eligible persons and will
determine whether such Options will be Incentive Stock Options within the
meaning of the Code ("ISOs") or Nonqualified Stock Options ("NQSOs"), the number
of Shares subject to the Option, the Exercise Price of the Option, the period
during which the Option may be exercised, and all other terms and conditions of
the Option, subject to the following:

               5.1 Form of Option Grant. Each Option granted under this Plan
will be evidenced by an Award Agreement which will expressly identify the Option
as an ISO or an NQSO ("STOCK OPTION AGREEMENT"), and will be in such form and
contain such provisions (which need not be the same for each Participant) as the
Committee may from time to time approve, and which will comply with and be
subject to the terms and conditions of this Plan.

               5.2 Date of Grant. The date of grant of an Option will be the
date on which the Committee makes the determination to grant such Option, unless
otherwise specified by the Committee. The Stock Option Agreement and a copy of
this Plan will be delivered to the Participant within a reasonable time after
the granting of the Option.

               5.3 Exercise Period. Options may be exercisable immediately
(subject to repurchase pursuant to Section 11 hereof) or may be exercisable
within the times or upon the events determined by the Committee as set forth in
the Stock Option Agreement governing such Option; provided, however, that no
Option will be exercisable after the expiration of ten (10) years from the date
the Option is granted; and provided further that no ISO granted to a person who
directly or by attribution owns more than ten percent (10%) of the total
combined voting power of all classes of stock of the Company or of any Parent or
Subsidiary of the Company ("TEN PERCENT SHAREHOLDER") will be exercisable after
the expiration of five (5) years from the date the ISO is granted. The Committee
also may provide for Options to become exercisable at one time or from time to
time, periodically or otherwise, in such number of Shares or percentage of
Shares as the Committee determines. Subject to earlier termination of the Option
as provided herein, each Participant who is not an officer, director or
consultant of the 


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<PAGE>   3

Company or of a Parent or Subsidiary of the Company shall have the right to
exercise an Option granted hereunder at the rate of at least twenty percent
(20%) per year over five (5) years from the date such Option is granted.

               5.4 Exercise Price. The Exercise Price of an Option will be
determined by the Committee when the Option is granted and may not be less than
eighty-five percent (85%) of the Fair Market Value of the Shares on the date of
grant; provided that (a) the Exercise Price of an ISO will not be less than one
hundred percent (100%) of the Fair Market Value of the Shares on the date of
grant and (b) the Exercise Price of any Option granted to a Ten Percent
Shareholder will not be less than one hundred ten percent (110%) of the Fair
Market Value of the Shares on the date of grant. Payment for the Shares
purchased must be made in accordance with Section 7 hereof.

               5.5 Method of Exercise. Options may be exercised only by delivery
to the Company of a written stock option exercise agreement (the "EXERCISE
AGREEMENT") in a form approved by the Committee (which need not be the same for
each Participant), stating the number of Shares being purchased, the
restrictions imposed on the Shares purchased under such Exercise Agreement, if
any, and such representations and agreements regarding Participant's investment
intent and access to information and other matters, if any, as may be required
or desirable by the Company to comply with applicable securities laws, together
with payment in full of the Exercise Price, and any applicable taxes, for the
number of Shares being purchased.

               5.6 Termination. Subject to earlier termination pursuant to
Sections 17 and 18 hereof and notwithstanding the exercise periods set forth in
the Stock Option Agreement, exercise of an Option will always be subject to the
following:

                (a)     If the Participant is Terminated for any reason except
                        death, Disability or for Cause, then the Participant may
                        exercise such Participant's Options only to the extent
                        that such Options are exercisable upon the Termination
                        Date and such Options must be exercised by the
                        Participant, if at all, as to all or some of the Vested
                        Shares calculated as of the Termination Date, within
                        three (3) months after the Termination Date (or within
                        such shorter time period, not less than thirty (30)
                        days, or within such longer time period, not exceeding
                        five (5) years, after the Termination Date as may be
                        determined by the Committee, with any exercise beyond
                        three (3) months after the Termination Date deemed to be
                        an NQSO) but in any event, non later than the expiration
                        date of the Options.

                (b)     If the Participant is Terminated because of
                        Participant's death or Disability (or the Participant
                        dies within three (3) months after a Termination other
                        than for Cause), then Participant's Options may be
                        exercised only to the extent that such Options are
                        exercisable by Participant on the Termination Date and
                        must be exercised by Participant (or Participant's legal
                        representative or authorized assignee), if at all, as to
                        all or some of the Vested Shares calculated as of the
                        Termination Date, within twelve (12) months after the
                        Termination Date (or within such shorter time period,
                        not less than six (6) months, or within such longer time
                        period, not exceeding five (5) years, after the
                        Termination Date as may be determined by the Committee,
                        with any exercise beyond (i) three (3) months after the
                        Termination Date when the Termination is for any reason
                        other than the Participant's death or disability, within
                        the meaning of Section 22(e)(3) of the Code, or (ii)
                        twelve (12) months after the Termination Date when the
                        Termination is for Participant's disability, within the
                        meaning of Section 22(e)(3) of the Code, deemed to be an
                        NQSO) but in any event no later than the expiration date
                        of the Options.

                (c)     If the Participant is terminated for Cause, then
                        Participant's Options shall expire on such Participant's
                        Termination Date, or at such later time and on such
                        conditions as are determined by the Committee.

               5.7 Limitations on Exercise. The Committee may specify a
reasonable minimum number of Shares that may be purchased on any exercise of an
Option, provided that such minimum number will not prevent Participant from
exercising the Option for the full number of Shares for which it is then
exercisable.



                                      -3-
<PAGE>   4

               5.8 Limitations on ISOs. The aggregate Fair Market Value
(determined as of the date of grant) of Shares with respect to which ISOs are
exercisable for the first time by a Participant during any calendar year (under
this Plan or under any other incentive stock option plan of the Company or any
Parent or Subsidiary of the Company) will not exceed $100,000. If the Fair
Market Value of Shares on the date of grant with respect to which ISOs are
exercisable for the first time by a Participant during any calendar year exceeds
$100,000, then the Options for the first $100,000 worth of Shares to become
exercisable in such calendar year will be ISOs and the Options for the amount in
excess of $100,000 that become exercisable in that calendar year will be NQSOs.
In the event that the Code or the regulations promulgated thereunder are amended
after the Effective Date (as defined in Section 18 hereof) to provide for a
different limit on the Fair Market Value of Shares permitted to be subject to
ISOs, then such different limit will be automatically incorporated herein and
will apply to any Options granted after the effective date of such amendment.

               5.9 Modification, Extension or Removal. The Committee may modify,
extend or renew outstanding Options and authorize the grant of new Options in
substitution therefor, provided that any such action may not, without the
written consent of a Participant, impair any of such Participant's rights under
any Option previously granted. Any outstanding ISO that is modified, extended,
renewed or otherwise altered will be treated in accordance with Section 424(h)
of the Code. Subject to Section 5.10 hereof, the Committee may reduce the
Exercise Price of outstanding Options without the consent of Participants
affected by a written notice to them; provided, however, that the Exercise Price
may not be reduced below the minimum Exercise Price that would be permitted
under Section 5.4 hereof for Options granted on the date the action is taken to
reduce the Exercise Price.

               5.10 No Disqualification. Notwithstanding any other provision in
this Plan, no term of this Plan relating to ISOs will be interpreted, amended or
altered, nor will any discretion or authority granted under this Plan be
exercised, so as to disqualify this Plan under Section 422 of the Code or,
without the consent of the Participant affected, to disqualify any ISO under
Section 422 of the Code.

        6. RESTRICTED STOCK. A Restricted Stock Award is an offer by the Company
to sell to an eligible person Shares that are subject to restrictions. The
Committee will determine to whom an offer will be made, the number of Shares the
person may purchase, the Purchase Price, the restrictions to which the Shares
will be subject, and all other terms and conditions of the Restricted Stock
Award, subject to the following:

               6.1 Form of Restricted Stock Award. All purchases under a
Restricted Stock Award made pursuant to this Plan will be evidenced by an Award
Agreement ("RESTRICTED STOCK PURCHASE AGREEMENT") that will be in such form
(which need not be the same for each Participant) as the Committee will from
time to time approve, and will comply with and be subject to the terms and
conditions of this Plan. The Restricted Stock Award will be accepted by the
Participant's execution and delivery of the Restricted Stock Purchase Agreement
and full payment for the Shares to the Company within thirty (30) days from the
date the Restricted Stock Purchase Agreement is delivered to the person. If such
person does not execute and deliver the Restricted Stock Purchase Agreement
along with full payment for the Shares to the Company within such thirty (30)
days , then the offer will terminate, unless otherwise determined by the
Committee.

               6.2 Purchase Price. The Purchase Price of Shares sold pursuant to
a Restricted Stock Award will be determined by the Committee and will be at
least eighty-five percent (85%) of the Fair Market Value of the Shares on the
date the Restricted Stock Award is granted or at the time the purchase is
consummated, except in the case of a sale to a Ten Percent Shareholder, in which
case the Purchase Price will be one hundred percent (100%) of the Fair Market
Value on the date the Restricted Stock Award is granted or at the time the
purchase is consummated. Payment of the Purchase Price must be made in
accordance with Section 7 hereof.

               6.3 Restrictions. Restricted Stock Awards may be subject to the
restrictions set forth in Section 11 hereof or such other restrictions not
inconsistent with Section 25102(o) of the California Corporations Code.



                                      -4-
<PAGE>   5

        7.     PAYMENT FOR SHARE PURCHASES.

               7.1 Payment. Payment for Shares purchased pursuant to this Plan
may be made in cash (by check) or, where expressly approved for the Participant
by the Committee and where permitted by law:

                (a)     by cancellation of indebtedness of the Company to the
                        Participant;

                (b)     by surrender of shares that: (i) either (A) have been
                        owned by Participant for more than six (6) months and
                        have been paid for within the meaning of SEC Rule 144
                        (and, if such shares were purchased from the Company by
                        use of a promissory note, such note has been fully paid
                        with respect to such shares) or (B) were obtained by
                        Participant in the public market and (ii) are clear of
                        all liens, claims, encumbrances or security interests.

                (c)     by tender of a full recourse promissory note having such
                        terms as may be approved by the Committee and bearing
                        interest at a rate sufficient to avoid imputation of
                        income under Sections 483 and 1274 of the Code;
                        provided, however, that Participants who are not
                        employees or directors of the Company will not be
                        entitled to purchase Shares with a promissory note
                        unless the note is adequately secured by collateral
                        other than the Shares.

                (d)     by waiver of compensation due or accrued to the
                        Participant for services rendered;

                (e)     with respect only to purchases upon exercise of an
                        Option, and provided that a public market for the
                        Company's stock exists:

                        (1)     through a "same day sale" commitment from the
                                Participant and a broker-dealer that is a member
                                of the National Association of Securities
                                Dealers (an "NASD DEALER") whereby the
                                Participant irrevocably elects to exercise the
                                Option and to sell a portion of the Shares so
                                purchased to pay for the Exercise Price, and
                                whereby the NASD Dealer irrevocably commits upon
                                receipt of such Shares to forward the Exercise
                                Price directly to the Company; or

                        (2)     through a "margin" commitment from the
                                Participant and an NASD Dealer whereby the
                                Participant irrevocably elects to exercise the
                                Option and to pledge the Shares so purchased to
                                the NASD Dealer in a margin account as security
                                for a loan from the NASD Dealer in the amount of
                                the Exercise Price, and whereby the NASD Dealer
                                irrevocably commits upon receipt of such Shares
                                to forward the Exercise Price directly to the
                                Company; or

                (f)     by any combination of the foregoing.

               7.2 Loan Guarantees. The Committee may help the Participant pay
for Shares purchased under this Plan by authorizing a guarantee by the Company
of a third-party loan to the Participant.

        8. WITHHOLDING TAXES.

               8.1 Withholding Generally. Whenever Shares are to be issued in
satisfaction of Awards granted under this Plan, the Company may require the
Participant to remit to the Company an amount sufficient to satisfy federal,
state and local withholding tax requirements prior to the delivery of any
certificate or certificates for such Shares. Whenever, under this Plan, payments
in satisfaction of Awards are to be made in cash, such payment will be net of an
amount sufficient to satisfy federal, state, and local withholding tax
requirements.

               8.2 Stock Withholding. When, under applicable tax laws, a
Participant incurs tax liability in connection with the exercise or vesting of
any Award that is subject to tax withholding and the Participant is obligated to
pay the Company the amount required to be withheld, the Committee may in its
sole discretion allow the Participant to satisfy the minimum withholding tax
obligation by electing to have the Company withhold from the Shares to be issued
that number of Shares having a Fair Market Value equal to the minimum amount
required to



                                      -5-
<PAGE>   6

be withheld, determined on the date that the amount of tax to be withheld is to
be determined. All elections by a Participant to have Shares withheld for this
purpose will be made in accordance with the requirements established by the
Committee for such elections and be in writing in a form acceptable to the
Committee.

        9. PRIVILEGES OF STOCK OWNERSHIP.

               9.1 Voting and Dividends. No Participant will have any of the
rights of a shareholder with respect to any Shares until the Shares are issued
to the Participant. After Shares are issued to the Participant, the Participant
will be a shareholder and have all the rights of a shareholder with respect to
such Shares, including the right to vote and receive all dividends or other
distributions made or paid with respect to such Shares; provided, that if such
Shares are Restricted Stock, then any new, additional or different securities
the Participant may become entitled to receive with respect to such Shares by
virtue of a stock dividend, stock split or any other change in the corporate or
capital structure of the Company will be subject to the same restrictions as the
Restricted Stock; provided, further, that the Participant will have no right to
retain such stock dividends or stock distributions with respect to Unvested
Shares that are repurchased pursuant to Section 11 hereof. The Company will
comply with Section 260.140.1 of Title 10 of the California Code of Regulations
with respect to the voting rights of Common Stock.

               9.2 Financial Statements. The company will provide financial
statements to each Participant prior to such Participant's purchase of Shares
under this Plan, and to each Participant annually during the period such
Participant has Awards outstanding, or as otherwise required under Section
260.140.46 of Title 10 of the California Code of Regulations. Notwithstanding
the foregoing, the Company will not be required to provide such financial
statements to Participants when issuance is limited to key employees whose
services in connection with the Company assure them access to equivalent
information.

        10. TRANSFERABILITY. Awards granted under this Plan, and any interest
therein, will not be transferable or assignable by Participant, and may not be
made subject to execution, attachment or similar process, otherwise than by will
or by the laws of descent and distribution. During the lifetime of the
Participant an Award will be exercisable only by the Participant or
Participant's legal representative and any elections with respect to an Award,
may be made only by the Participant or Participant's legal representative.

        11. RESTRICTIONS OF SHARES.

               11.1 Right of First Refusal. At the discretion of the Committee,
the Company may reserve to itself and/or its assignee(s) in the Award Agreement
a right of first refusal to purchase all Shares that a Participant (or a
subsequent transferee) may propose to transfer to a third party, unless
otherwise not permitted by Section 25102(o) of the California Corporations Code,
provided, that such right of first refusal terminates upon the Company's initial
public offering of Common Stock pursuant to an effective registration statement
filed under the Securities Act.

               11.2 Right of Repurchase. At the discretion of the Committee, the
Company may reserve to itself and/or its assignee(s) in the Award Agreement a
right to repurchase Unvested Shares held by a Participant for cash and/or
cancellation of purchase money indebtedness following such Participant's
Termination at any time within the later of ninety (90) days after the
Participant's Termination Date and the date the Participant purchases Shares
under the Plan at the Participant's Exercise Price or Purchase Price, as the
case may be, provided, that unless the Participant is an officer, director or
consultant of the Company or of a Parent or Subsidiary of the Company, such
right of repurchase lapses at the rate of at least twenty percent (20%) per year
over five (5) years from: (a) the date of grant of the Option or (b) in the case
of Restricted Stock, the date the Participant purchases the Shares.

        12. CERTIFICATES. All certificates for Shares or other securities
delivered under this Plan will be subject to such stock transfer orders, legends
and other restrictions as the Committee may deem necessary or advisable,
including restrictions under any applicable federal, state or foreign securities
law, or any rules,, regulations and other requirements of the SEC or any stock
exchange or automated quotation system upon which the Shares may be listed or
quoted.



                                      -6-
<PAGE>   7

        13. ESCROW; PLEDGE OF SHARES. To enforce any restrictions on a
Participant's Shares, the Committee may require the Participant to deposit all
certificates representing Shares, together with stock powers or other
instruments of transfer approved by the Committee, appropriately endorsed in
blank, with the Company or an agent designated by the Company to hold in escrow
until such restrictions have lapsed or terminated, and the Committee may cause a
legend or legends referencing such restrictions to be placed on the
certificates. Any Participant who is permitted to execute a promissory note as
partial or full consideration for the purchase of Shares under this Plan will be
required to pledge and deposit with the Company all or part of the Shares so
purchased as collateral to secure the payment of Participant's obligation to the
Company under the promissory note; provided, however, that the Committee may
require or accept other or additional forms of collateral to secure the payment
of such obligation and, in any event, the Company will have full recourse
against the Participant under the promissory note notwithstanding any pledge of
the Participant's Shares or other collateral. In connection with any pledge of
the Shares, Participant will be required to execute and deliver a written pledge
agreement in such form as the Committee will from time to time approve. The
Shares purchased with the promissory note may be released from the pledge on a
pro rata basis as the promissory note is paid.

        14. EXCHANGE AND BUYOUT OF AWARDS. The Committee may, at any time or
from time to time, authorize the Company, with the consent of the respective
Participants, to issue new Awards in exchange for the surrender and cancellation
of any or all outstanding Awards. The Committee may at any time buy from a
Participant an Award previously granted with payment in cash, shares of Common
Stock of the Company (including Restricted Stock) or other consideration, based
on such terms and conditions as the Committee and the Participant may agree.

        15. SECURITIES LAW AND OTHER REGULATORY COMPLIANCE. This Plan is
intended to comply with Section 25102(o) of the California Corporations Code.
Any provision of this Plan which is inconsistent with Section 25102(o) shall,
without further act or amendment by the Company or the Board, be reformed to
comply with the requirements of Section 25102(o). An Award will not be effective
unless such Award is in compliance with all applicable federal and state
securities laws, rules and regulations of any governmental body, and the
requirements of any stock exchange or automated quotation system upon which the
Shares may then be listed or quoted, as they are in effect on the date of grant
of the Award and also on the date of exercise or other issuance. Notwithstanding
any other provision in this Plan, the Company will have no obligation to issue
or deliver certificates for Shares under this Plan prior to (a) obtaining any
approvals from governmental agencies that the Company determines are necessary
or advisable, and/or (b) compliance with any exemption, completion of any
registration or other qualification of such Shares under any state or federal
law or ruling of any governmental body that the Company determines to be
necessary or advisable. The Company will be under no obligation to register the
Shares with the SEC or to effect compliance with the exemption, registration,
qualification or listing requirements of any state securities laws, stock
exchange or automated quotation system, and the Company will have no liability
for any inability or failure to do so.

        16. NO OBLIGATION TO EMPLOY. Nothing in this Plan or any Award granted
under this Plan will confer or be deemed to confer on any Participant any right
to continue in the employ of, or to continue any other relationship with, the
Company or any Parent or Subsidiary of the Company or limit in any way the right
of the Company or any Parent or Subsidiary of the Company to terminate
Participant's employment or other relationship at any time, with or without
Cause.

        17. CORPORATE TRANSACTIONS.

               17.1 Assumption or Replacement of Awards by Successor or
Acquiring Corporation. In the event of (a) a dissolution or liquidation of the
Company, (b) a merger or consolidation in which the Company is not the surviving
corporation (other than a merger or consolidation with a wholly-owned
subsidiary, a reincorporation of the Company in a different jurisdiction, or
other transaction in which there is no substantial change in the shareholders of
the Company or their relative stock holdings and the Awards granted under this
Plan are assumed, converted or replaced by the successor or acquiring
corporation, which assumption, conversion or replacement will be binding on all
Participants), (c) a merger in which the Company is the surviving corporation
but after which the shareholders of the Company immediately prior to such merger
(other than any shareholder which merges with the 



                                      -7-
<PAGE>   8

Company in such merger, or which owns or controls another corporation which
merges, with the Company in such merger) cease to own their shares or other
equity interests in the Company, or (d) the sale of all or substantially all of
the assets of the Company, any or all outstanding Awards may be assumed,
converted or replaced by the successor or acquiring corporation (if any), which
assumption, conversion or replacement will be binding on all Participants. In
the alternative, the successor or acquiring corporation may substitute
equivalent Awards or provide substantially similar consideration to Participants
as was provided to shareholders (after taking into account the existing
provisions of the Awards). The successor or acquiring corporation may also
issue, in place of outstanding Shares of the Company held by the Participant,
substantially similar shares or other property subject to repurchase
restrictions and other provisions no less favorable to the Participant than
those which applied to such outstanding Shares immediately prior to such
transaction described in this Section 17.1. In the event such successor or
acquiring corporation (if any) refuses to assume or substitute Awards, as
provided above, pursuant to a transaction described in this Section 17.1, then
notwithstanding any other provision in this Plan to the contrary, such Awards
will expire on such transaction at such time and on such conditions as the Board
will determine.

               17.2 Other Treatment of Awards. Subject to any greater rights
granted to Participants under the foregoing provisions of this Section 17, in
the event of the occurrence of any transaction described in Section 17.1 hereof,
any outstanding Awards will be treated as provided in the applicable agreement
or plan of merger, consolidation, dissolution, liquidation or sale of assets.

               17.3 Assumption of Awards by the Company. The Company, from time
to time, also may substitute or assume outstanding awards granted by another
company, whether in connection with an acquisition of such other company or
otherwise, by either (a) granting an Award under this Plan in substitution of
such other company's award or (b) assuming such award as if it had been granted
under this Plan if the terms of such assumed award could be applied to an Award
granted under this Plan. Such substitution or assumption will be permissible if
the holder of the substituted or assumed award would have been eligible to be
granted an Award under this Plan if the other company had applied the rules of
this Plan to such grant. In the event the Company assumes an award granted by
another company, the terms and conditions of such award will remain unchanged
(except that the exercise price and the number and nature of shares issuable
upon exercise of any such option will be adjusted appropriately pursuant to
Section 424(a) of the Code). In the event the Company elects to grant a new
Option rather than assuming an existing option, such new Option may be granted
with a similarly adjusted Exercise Price.

        18. ADOPTION AND SHAREHOLDER APPROVAL. This Plan will become effective
on the date that it is adopted by the Board (the "EFFECTIVE DATE"). This Plan
will be approved by the shareholders of the Company (excluding Shares issued
pursuant to this Plan), consistent with applicable laws, within twelve (12)
months before or after the Effective Date. Upon the Effective Date, the Board
may grant Awards pursuant to this Plan; provided, however, that: (a) no Option
may be exercised prior to initial shareholder approval of this Plan; (b) no
Option granted pursuant to an increase in the number of Shares approved by the
Board shall be exercised prior to the time such increase has been approved by
the shareholders of the Company; (c) in the event that initial shareholder
approval is not obtained within the time period provided herein, all Awards
granted hereunder shall be canceled, any Shares issued pursuant to any Award
shall be canceled and any purchase of Shares issued hereunder shall be
rescinded; and (d) Awards granted pursuant to an increase in the number of
Shares approved by the Board which increase is not timely approved by
shareholders shall be canceled, any Shares issued pursuant to any such Awards
shall be canceled, and any purchase of Shares subject to any such Award shall be
rescinded. In the event that initial shareholder approval is not obtained within
twelve (12) months before or after the date this Plan is adopted by the Board,
all Awards granted hereunder will be canceled, any Shares issued pursuant to any
Award will be canceled and any purchase of Shares hereunder will be rescinded.

        19. TERM OF PLAN/GOVERNING LAW. Unless earlier terminated as provided
herein, this Plan will terminate ten (10) years from the Effective Date or, if
earlier, the date of shareholder approval. This Plan and all agreements
hereunder shall be governed by and construed in accordance with the laws of the
State of California excluding that body of law pertaining to conflict of laws.

        20. AMENDMENT OR TERMINATION OF PLAN. Subject to Section 5.9 hereof, the
Board may at any time terminate or amend this Plan in any respect, including
without limitation amendment of any form of 



                                      -8-
<PAGE>   9

Award Agreement or instrument to be executed pursuant to this Plan; provided,
however, that the Board will not, without the approval of the shareholders of
the Company, amend this Plan in any manner that requires such shareholder
approval pursuant to Section 25102(o) of the California Corporations Code or the
Code or the regulations promulgated thereunder as such provisions apply to ISO
plans.

        21. NONEXCLUSIVITY OF THE PLAN. Neither the adoption of this Plan by the
Board, the submission of this Plan to the shareholders of the Company for
approval, nor any provision of this Plan will be construed as creating any
limitations on the power of the Board to adopt such additional compensation
arrangements as it may deem desirable, including, without limitation, the
granting of stock options and other equity awards otherwise than under this
Plan, and such arrangements may be either generally applicable or applicable
only in specific cases.

        22. DEFINITIONS. As used in this Plan, the following terms will have the
following meanings:

               "AWARD" means any award under this Plan, including any Option or
Restricted Stock Award.

               "AWARD AGREEMENT" means, with respect to each Award, the signed
written agreement between the Company and the Participant setting forth the
terms and conditions of the Award.

               "BOARD" means the Board of Directors of the Company.

               "CAUSE" means Termination because of (i) any willful material
violation by the Participant of any law or regulation applicable to the business
of the Company or a Parent or Subsidiary of the Company, the Participant's
conviction for, or guilty plea to, a felony or a crime involving moral
turpitude, any willful perpetration by the Participant of a common law fraud,
(ii) the Participant's commission of an act of personal dishonesty which
involves personal profit in connection with the Company or any other entity
having a business relationship with the Company, (iii) any material breach by
the Participant of any provision of any agreement or understanding between the
Company or any Parent or Subsidiary of the Company and the Participant regarding
the terms of the Participant's service as an employee, director or consultant to
the Company or a Parent or Subsidiary of the Company, including without
limitation, the willful and continued failure or refusal of the Participant to
perform the material duties required of such Participant as an employee,
director or consultant of the Company or a Parent or Subsidiary of the Company,
other than as a result of having a Disability, or a breach of any applicable
invention assignment and confidentiality agreement or similar agreement between
the Company and the Participant, (iv) Participant's disregard of the policies of
the Company or any Parent or Subsidiary of the Company so as to cause loss,
damage or injury to the property, reputation or employees of the Company or a
Parent or Subsidiary of the Company, or (v) any other misconduct by the
Participant which is materially injurious to the financial condition or business
reputation of, or is otherwise materially injurious to, the Company or a Parent
or Subsidiary of the Company.

               "CODE" means the Internal Revenue Code of 1986, as amended.

               "COMMITTEE" means the committee appointed by the Board to
administer this Plan, or if no committee is appointed, the Board.

               "COMPANY"  means Brocade Communications Systems, Inc.,  or any  
successor corporation.

               "DISABILITY" means a disability, whether temporary or permanent,
partial or total, as determined by the Committee.

               "EXERCISE PRICE" means the price at which a holder of an Option
may purchase the Shares issuable upon exercise of the Option.

               "FAIR MARKET VALUE" means, as of any date, the value of a share
of the Company's Common Stock determined as follows:



                                      -9-
<PAGE>   10

                (a)     if such Common Stock is then quoted on the Nasdaq
                        National Market, its closing price on the Nasdaq
                        National Market on the date of determination as reported
                        in The Wall Street Journal;

                (b)     if such Common Stock is publicly traded and is then
                        listed on a national securities exchange, its closing
                        price on the date of determination on the principal
                        national securities exchange on which the Common Stock
                        is listed or admitted to trading as reported in The Wall
                        Street Journal;

                (c)     if such Common Stock is publicly traded but is not
                        quoted on the Nasdaq National Market nor listed or
                        admitted to trading on a national securities exchange,
                        the average of the closing bid and asked prices on the
                        date of determination as reported by The Wall Street
                        Journal (or, if not so reported, as otherwise reported
                        by any newspaper or other source as the Board may
                        determine); or

                (d)     if none of the foregoing is applicable, by the Committee
                        in good faith.

               "OPTION" means an award of an option to purchase Shares pursuant
to Section 5 hereof.

               "PARENT" means any corporation (other than the Company) in an
unbroken chain of corporations ending with the Company if each of such
corporations other than the Company owns stock possessing fifty percent (50%) or
more of the total combined voting power of all classes of stock in one of the
other corporations in such chain

               "PARTICIPANT" means a person who receives an Award under this
Plan

               "PLAN" means this Brocade Communications Systems, Inc. 1998
Equity Incentive Plan, as amended from time to time.

               "PURCHASE PRICE" means the price at which a Participant may
purchase Restricted Stock

               "RESTRICTED STOCK" means Shares purchased pursuant to a
Restricted Stock Award.

               "RESTRICTED STOCK AWARD" means an award of Shares pursuant to
Section 6 hereof.

               "SEC" means the Securities and Exchange Commission.

               "SECURITIES ACT" means the Securities Act of 1933, as amended.

               "SHARES" means shares of the Company's Common Stock reserved for
issuance under this Plan, as adjusted pursuant to Sections 2 and 17 hereof, and
any successor security.

               "SUBSIDIARY" means any corporation (other than the Company) in an
unbroken chain of corporations beginning with the Company if each of the
corporations other than the last corporation in the unbroken chain owns stock
possessing fifty percent (50%) or more of the total combined voting power of all
classes of stock in one of the other corporations in such chain.

               "TERMINATION" or "TERMINATED" means, for purposes of this Plan
with respect to a Participant, that the Participant has for any reason ceased to
provide services as an employee, officer, director or consultant to the Company
or a Parent or Subsidiary of the Company. A Participant will not be deemed to
have ceased to provide services in the case of (i) sick leave, (ii) military
leave, or (iii) any other leave of absence approved by the Committee, provided
that such leave is for a period of not more than ninety (90) days unless
reinstatement (or, in the case of an employee with an ISO, reemployment) upon
the expiration of such leave is guaranteed by contract or statute, or unless
provided otherwise pursuant to formal policy adopted from time to time by the
Company and issued and promulgated in writing. In the case of any Participant on
(i) sick leave, (ii) military leave or (iii) an approved leave of absence, the
Committee may make such provisions respecting suspension of vesting of the Award



                                      -10-
<PAGE>   11

while on leave from the Company or a Parent or Subsidiary of the Company as it
may deem appropriate, except that in no event may an Option be exercised after
the expiration of the term set forth in the Stock Option Agreement. The
Committee will have sole discretion to determine whether a Participant has
ceased to provide services and the effective date on which the Participant
ceased to provide services (the "TERMINATION DATE").

               "UNVESTED SHARES" means "Unvested Shares" as defined in the Award
Agreement.

               "VESTED SHARES" means "Vested Shares" as defined in the Award
Agreement.

                                      -11-
<PAGE>   12
                      BROCADE COMMUNICATIONS SYSTEMS, INC.

                           1998 EQUITY INCENTIVE PLAN

                             STOCK OPTION AGREEMENT


               This Stock Option Agreement ("AGREEMENT") is made and entered
into as of the date of grant set forth below (the "DATE OF GRANT") by and
between Brocade Communications Systems, Inc., a California corporation (the
"COMPANY"), and the participant named below ("PARTICIPANT"). Capitalized terms
not defined herein shall have the meaning ascribed to them in the Company's 1998
Equity Incentive Plan (the "PLAN").

PARTICIPANT:                                                                 
                               -------------------------------------------------
SOCIAL SECURITY NUMBER:                                                      
                               -------------------------------------------------
ADDRESS:                                                                     
                               -------------------------------------------------

                               -------------------------------------------------
TOTAL OPTION SHARES:                                                         
                               -------------------------------------------------
EXERCISE PRICE PER SHARE:                                                    
                               -------------------------------------------------
DATE OF GRANT:                                                               
                               -------------------------------------------------
FIRST VESTING DATE:                                                          
                               -------------------------------------------------
EXPIRATION DATE:                                                             
                               -------------------------------------------------
                               (unless earlier terminated under Section 3 below)
TYPE OF STOCK OPTION
(CHECK ONE):                   [ ] INCENTIVE STOCK OPTION
                               [ ] NONQUALIFIED STOCK OPTION


             1. GRANT OF OPTION. The Company hereby grants to Participant an
option (this "OPTION") to purchase the total number of shares of Common Stock of
the Company set forth above as Total Option Shares (the "SHARES") at the
Exercise Price Per Share set forth above (the "EXERCISE PRICE"), subject to all
of the terms and conditions of this Agreement and the Plan. If designated as an
Incentive Stock Option above, the Option is intended to qualify as an "incentive
stock option" ("ISO") within the meaning of Section 422 of the Internal Revenue
Code of 1986, as amended (the "CODE").

             2. EXERCISE PERIOD.

                     2.1 Exercise Period of Option.  Provided Participant 
continues to provide services to the Company or any Subsidiary or Parent of the
Company, the Option will become vested and exercisable as to portions of the
Shares as follows: (a) This Option shall not vest nor be exercisable with
respect to any of the Shares until December 7, 1999 (the "FIRST VESTING DATE");
(b) on the First Vesting Date the Option will become vested and exercisable as
to twenty-five percent (25%) of the Shares; and (c) thereafter at the end of
each full succeeding month the Option will become vested and exercisable as to
two and eight thousand three hundred thirty-three one hundred thousandths
percent (2.08333%) of the Shares. If application of the vesting percentage
causes a fractional share, such share shall be rounded down to the nearest whole
share.

<PAGE>   13

                     2.2 Vesting of Options. Shares that are vested pursuant to
the schedule set forth in Section 2.1 are "VESTED SHARES." Shares that are not
vested pursuant to the schedule set forth in Section 2.1 are "UNVESTED SHARES."

                     2.3 Expiration. The Option shall expire on the Expiration
Date set forth above or earlier as provided in Section 3 below.

             3.      TERMINATION.

                     3.1 Termination for Any Reason Except Death, Disability or
Cause. If Participant is Terminated for any reason, except death, Disability or
for Cause, the Option, to the extent (and only to the extent) that it would have
been exercisable by Participant on the Termination Date, may be exercised by
Participant no later than three (3) months after the Termination Date, but in
any event no later than the Expiration Date.

                     3.2 Termination Because of Death or Disability. If
Participant is Terminated because of death or Disability of Participant (or
Participant dies within three (3) months of Termination other than because of
Participant's Disability or for Cause), the Option, to the extent that it is
exercisable by Participant on the Termination Date, may be exercised by
Participant (or Participant's legal representative) no later than twelve (12)
months after the Termination Date, but in any event no later than the Expiration
Date. Any exercise beyond (a) three (3) months after the Termination Date when
the Termination is for any reason other than the Participant's death or
disability, within the meaning of Section 22(e)(3) of the Code; or (b) twelve
(12) months after the Termination Date when the termination is for Participant's
disability, within the meaning of Section 22(e)(3) of the Code, is deemed to be
an NQSO.

                     3.3 Termination for Cause. If Participant is Terminated for
Cause, then the Option will expire on Participant's Termination Date, or at such
later time and on such conditions as are determined by the Committee.

                     3.4 No Obligation to Employ. Nothing in the Plan or this
Agreement shall confer on Participant any right to continue in the employ of, or
other relationship with, the Company or any Parent or Subsidiary of the Company,
or limit in any way the right of the Company or any Parent or Subsidiary of the
Company to terminate Participant's employment or other relationship at any time,
with or without Cause.

             4.      MANNER OF EXERCISE.

                     4.1 Stock Option Exercise Agreement. To exercise this
Option, Participant (or in the case of exercise after Participant's death or
incapacity, Participant's executor, administrator, heir or legatee, as the case
may be) must deliver to the Company an executed stock option exercise agreement
in the form attached hereto as Exhibit A, or in such other form as may be
approved by the Company from time to time (the "EXERCISE AGREEMENT"), which
shall set forth, inter alia, Participant's election to exercise the Option, the
number of Shares being purchased, any restrictions imposed on the Shares and any
representations, warranties and agreements regarding Participant's investment
intent and access to information as may be required by the Company to comply
with applicable securities laws. If someone other than Participant exercises the
Option, then such person must submit documentation reasonably acceptable to the
Company that such person has the right to exercise the Option.

                     4.2 Limitations on Exercise. The Option may not be
exercised unless such exercise is in compliance with all applicable federal and
state securities laws, as they are in effect on the date of exercise. The Option
may not be exercised as to fewer than one hundred (100) Shares unless it is
exercised as to all Shares as to which the Option is then exercisable.

                     4.3 Payment. The Exercise Agreement shall be accompanied by
full payment of the Exercise Price for the shares being purchased in cash (by
check), or where permitted by law:

                (a)     by cancellation of indebtedness of the Company to the
                        Participant;



                                       2
<PAGE>   14

                (b)     at the discretion of the Committee, by surrender of
                        shares of the Company's Common Stock that (1) either (A)
                        have been owned by Participant for more than six (6)
                        months and have been paid for within the meaning of SEC
                        Rule 144 (and, if such shares were purchased from the
                        Company by use of a promissory note, such note has been
                        fully paid with respect to such shares); or (B) were
                        obtained by Participant in the open public market; and
                        (2) are clear of all liens, claims, encumbrances or
                        security interests;

                (c)     by waiver of compensation due or accrued to Participant
                        for services rendered;

                (d)     provided that a public market for the Company's stock
                        exists, (1) through a "same day sale" commitment from
                        Participant and a broker-dealer that is a member of the
                        National Association of Securities Dealers (an "NASD
                        DEALER") whereby Participant irrevocably elects to
                        exercise the Option and to sell a portion of the Shares
                        so purchased to pay for the Exercise Price and whereby
                        the NASD Dealer irrevocably commits upon receipt of such
                        Shares to forward the Exercise Price directly to the
                        Company, or (2) through a "margin" commitment -- from
                        Participant and an NASD Dealer whereby Participant
                        irrevocably elects to exercise the Option and to pledge
                        the Shares so purchased to the NASD Dealer in a margin
                        account as security for a loan from the NASD Dealer in
                        the amount of the Exercise Price, and whereby the NASD
                        Dealer irrevocably commits upon receipt of such Shares
                        to forward the Exercise Price directly to the Company;
                        or

                (e)     by any combination of the foregoing.

                     4.4 Tax Withholding. Prior to the issuance of the Shares
upon exercise of the Option, Participant must pay or provide for any applicable
federal, state and local withholding obligations of the Company. If the
Committee permits, Participant may provide for payment of withholding taxes upon
exercise of the Option by requesting that the Company retain Shares with a Fair
Market Value equal to the minimum amount of taxes required to be withheld. In
such case, the Company shall issue the net number of Shares to the Participant
by deducting the Shares retained from the Shares issuable upon exercise.

                     4.5 Issuance of Shares. Provided that the Exercise
Agreement and payment are in form and substance satisfactory to counsel for the
Company, the Company shall issue the Shares registered in the name of
Participant, Participant's authorized assignee, or Participant's legal
representative, and shall deliver certificates representing the Shares with the
appropriate legends affixed thereto.

             5. NOTICE OF DISQUALIFYING DISPOSITION OF ISO SHARES. If the Option
is an ISO, and if Participant sells or otherwise disposes of any of the Shares
acquired pursuant to the ISO on or before the later of (a) the date two (2)
years after the Date of Grant, and (b) the date one (1) year after transfer of
such Shares to Participant upon exercise of the Option, Participant shall
immediately notify the Company in writing of such disposition. Participant
agrees that Participant may be subject to income tax withholding by the Company
on the compensation income recognized by Participant from the early disposition
by payment in cash or out of the current wages or other compensation payable to
Participant.

             6. COMPLIANCE WITH LAWS AND REGULATIONS. The Plan and this
Agreement are intended to comply with Section 25102(o) of the California
Corporations Code. Any provision of this Agreement which is inconsistent with
Section 25102(o) shall, without further act or amendment by the Company or the
Board, be reformed to comply with the requirements of Section 25102(o). The
exercise of the Option and the issuance and transfer of Shares shall be subject
to compliance by the Company and Participant with all applicable requirements of
federal and state securities laws and with all applicable requirements of any
stock exchange on which the Company's Common Stock may be listed at the time of
such issuance or transfer. Participant understands that the Company is under no
obligation to register or qualify the Shares with the SEC, any state securities
commission or any stock exchange to effect such compliance.



                                       3
<PAGE>   15

             7. NONTRANSFERABILITY OF OPTION. The Option may not be transferred
in any manner other than by will or by the laws of descent and distribution and
may be exercised during the lifetime of Participant only by Participant or in
the event of Participant's incapacity, by Participant's legal representative.
The terms of the Option shall be binding upon the executors, administrators,
successors and assigns of Participant.

               8. COMPANY'S RIGHT OF FIRST REFUSAL. Before any Vested Shares
held by Participant or any transferee of such Vested Shares may be sold or
otherwise transferred (including without limitation a transfer by gift or
operation of law), the Company and/or its assignee(s) shall have an assignable
right of first refusal to purchase the Vested Shares to be sold or transferred
on the terms and conditions set forth in the Exercise Agreement (the "Right of
First Refusal"). The Company's Right of First Refusal will terminate when the
Company's securities become publicly traded.

             9. TAX CONSEQUENCES. Set forth below is a brief summary as of the
Effective Date of the Plan of some of the federal and California tax
consequences of exercise of the Option and disposition of the Shares. THIS
SUMMARY IS NECESSARILY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT
TO CHANGE. PARTICIPANT SHOULD CONSULT A TAX ADVISER BEFORE EXERCISING THE OPTION
OR DISPOSING OF THE SHARES.

                     9.1 Exercise of ISO. If the Option qualifies as an ISO,
there will be no regular federal or California income tax liability upon the
exercise of the Option, although the excess, if any, of the Fair Market Value of
the Shares on the date of exercise over the Exercise Price will be treated as a
tax preference item for federal alternative minimum tax purposes and may subject
the Participant to the alternative minimum tax in the year of exercise.

                     9.2 Exercise of Nonqualified Stock Option. If the Option
does not qualify as an ISO, there may be a regular federal and California income
tax liability upon the exercise of the Option. Participant will be treated as
having received compensation income (taxable at ordinary income tax rates) equal
to the excess, if any, of the Fair Market Value of the Shares on the date of
exercise over the Exercise Price. If Participant is a current or former employee
of the Company, the Company may be required to withhold from Participant's
compensation or collect from Participant and pay to the applicable taxing
authorities an amount equal to a percentage of this compensation income at the
time of exercise.

                     9.3 Disposition of Shares. The following tax consequences
may apply upon disposition of the Shares.

                            (a) Incentive Stock Options.  If the Shares are held
for more than twelve (12) months after the date of the transfer of the Shares
pursuant to the exercise of an ISO and are disposed of more than two (2) years
after the Date of Grant, any gain realized on disposition of the Shares will be
treated as long term capital gain for federal and California income tax
purposes. If Shares purchased under an ISO are disposed of within the applicable
one (1) year or two (2) year period, any gain realized on such disposition will
be treated as compensation income (taxable at ordinary income rates) to the
extent of the excess, if any, of the Fair Market Value of the Shares on the date
of exercise over the Exercise Price.

                            (b) Nonqualified Stock Options.  If the Shares are
held for more than twelve (12) months after the date of the transfer of the
Shares pursuant to the exercise of an NQSO, any gain realized on disposition of
the Shares will be treated as long term capital gain.

                            (c) Withholding. The Company may be required to
withhold from the Participant's compensation or collect from the Participant and
pay to the applicable taxing authorities an amount equal to a percentage of this
compensation income.

            10. PRIVILEGES OF STOCK OWNERSHIP. Participant shall not have any of
the rights of a shareholder with respect to any Shares until the Shares are
issued to Participant.



                                       4
<PAGE>   16

            11. INTERPRETATION. Any dispute regarding the interpretation of this
Agreement shall be submitted by Participant or the Company to the Committee for
review. The resolution of such a dispute by the Committee shall be final and
binding on the Company and Participant.

            12. ENTIRE AGREEMENT. The Plan is incorporated herein by reference.
This Agreement and the Plan constitute the entire agreement of the parties and
supersede all prior undertakings and agreements with respect to the subject
matter hereof.

            13. NOTICES. Any notice required to be given or delivered to the
Company under the terms of this Agreement shall be in writing and addressed to
the Corporate Secretary of the Company at its principal corporate offices. Any
notice required to be given or delivered to Participant shall be in writing and
addressed to Participant at the address indicated above or to such other address
as such party may designate in writing from time to time to the Company. All
notices shall be deemed to have been given or delivered upon: personal delivery;
three (3) days after deposit in the United States mail by certified or
registered mail (return receipt requested); one (1) business day after deposit
with any return receipt express courier (prepaid); or one (1) business day after
transmission by facsimile, rapifax or telecopier.

            14. SUCCESSORS AND ASSIGNS. The Company may assign any of its rights
under this Agreement, including its rights to repurchase Shares under the Right
of First Refusal. This Agreement shall be binding upon and inure to the benefit
of the successors and assigns of the Company. Subject to the restrictions on
transfer set forth herein, this Agreement shall be binding upon Participant and
Participant's heirs, executors, administrators, legal representatives,
successors and assigns.

            15. GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of California as such laws are applied
to agreements between California residents entered into and to be performed
entirely within California. If any provision of this Agreement is determined by
a court of law to be illegal or unenforceable, then such provision will be
enforced to the maximum extent possible and the other provisions will remain
fully effective and enforceable.

            16. ACCEPTANCE. Participant hereby acknowledges receipt of a copy of
the Plan and this Agreement. Participant has read and understands the terms and
provisions thereof, and accepts the Option subject to all the terms and
conditions of the Plan and this Agreement. Participant acknowledges that there
may be adverse tax consequences upon exercise of the Option or disposition of
the Shares and that Participant should consult a tax adviser prior to such
exercise or disposition.

            IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed in triplicate by its duly authorized representative and Participant has
executed this Agreement in triplicate as of the Date of Grant.


BROCADE COMMUNICATIONS SYSTEMS, INC.    PARTICIPANT



By:
   ---------------------------------------     ---------------------------------
                                               (Signature)

               
------------------------------------------     ---------------------------------
(Please print name)                            (Please print name)

                                            
------------------------------------------
(Please print title)




                                       5
<PAGE>   17

                                    EXHIBIT A

                         STOCK OPTION EXERCISE AGREEMENT











<PAGE>   18


                      BROCADE COMMUNICATIONS SYSTEMS, INC.

                           1998 EQUITY INCENTIVE PLAN

                         STOCK OPTION EXERCISE AGREEMENT


        This Exercise Agreement is made and entered into as of __________, 19___
(the "EFFECTIVE DATE") by and between Brocade Communications Systems, Inc., a
California corporation (the "COMPANY"), and the purchaser named below (the
"PURCHASER"). Capitalized terms not defined herein shall have the meaning
ascribed to them in the Company's 1998 Equity Incentive Plan (the "Plan").


PURCHASER:
                           -----------------------------------------------------

                           -----------------------------------------------------
SOCIAL SECURITY NUMBER:
                           -----------------------------------------------------
ADDRESS:
                           -----------------------------------------------------

                           -----------------------------------------------------

                           -----------------------------------------------------
TOTAL OPTION SHARES:
                           -----------------------------------------------------
EXERCISE PRICE PER SHARE:
                           -----------------------------------------------------
DATE OF GRANT:
                           -----------------------------------------------------
FIRST VESTING DATE: 
                           -----------------------------------------------------
EXPIRATION DATE:
                           -----------------------------------------------------
                           (unless earlier terminated under Section 3 of Option
                           Agreement)
TYPE OF STOCK OPTION
(CHECK ONE):              [ ] INCENTIVE STOCK OPTION
                          [ ] NONQUALIFIED STOCK OPTION


        1.     EXERCISE OF OPTION.

               1.1 Exercise. Pursuant to exercise of that certain option
("OPTION") granted to Purchaser under the Plan and subject to the terms and
conditions of this Exercise Agreement, Purchaser hereby purchases from the
Company, and the Company hereby sells to Purchaser, the Total Number of Shares
set forth above ("SHARES") of the Company's Common Stock at the Exercise Price
Per Share set forth above ("EXERCISE PRICE"). As used in this Exercise
Agreement, the term "SHARES" refers to the Shares purchased under this Exercise
Agreement and includes all securities received (a) in replacement of the Shares,
(b) as a result of stock dividends or stock splits with respect to the Shares,
and (c) all securities received in replacement of the Shares in a merger,
recapitalization, reorganization or similar corporate transaction.



<PAGE>   19



               1.2 Title to Shares. The exact spelling of the name(s) under
which Purchaser will take title to the Shares is:

                           -----------------------------------------------------

                           -----------------------------------------------------

Purchaser desires to take title to the Shares as follows:

                      [ ] Individual, as separate property

                      [ ] Husband and wife, as community property

                      [ ] Joint Tenants

                      [ ] Alone or with spouse as trustee(s) of the  following 
                          trust (including date):

                           -----------------------------------------------------

                           -----------------------------------------------------

                      [ ]  Other; please specify:
                                                 -------------------------------


               1.3 Payment. Purchaser hereby delivers payment of the Exercise
Price in the manner permitted in the Stock Option Agreement as follows (check
and complete as appropriate):


                      [ ] in cash (by check) in the amount of $____________, 
                          receipt of which is acknowledged by the Company;


                      [ ] by cancellation of indebtedness of the Company to 
                          Purchaser in the amount of $_______________;


                      [ ] at the discretion of the Committee, by delivery of
                          _________ fully-paid, nonassessable and vested shares
                          of the Common Stock of the Company owned by Purchaser
                          for at least six (6) months prior to the date hereof
                          which have been paid for within the meaning of SEC
                          Rule 144, (if purchased by use of a promissory note,
                          such note has been fully paid with respect to such
                          vested shares), or obtained by Purchaser in the open
                          public market, and owned free and clear of all liens,
                          claims, encumbrances or security interests, valued at
                          the current Fair Market Value of $___________ per
                          share;


                      [ ] at the discretion of the Committee, by tender of a
                          Full Recourse Promissory Note in the principal amount
                          of $__________, having such terms as may be approved
                          by the Committee and bearing interest at a rate
                          sufficient to avoid imputation of income under
                          Sections 483 and 1274 of the Code and secured by a
                          Pledge Agreement herewith; provided, however, that
                          Participants who are not employees or directors of the
                          Company shall not be entitled to purchase Shares with
                          a promissory note unless the note is adequately
                          secured by collateral other than the Shares; or


                      [ ] by the waiver hereby of compensation due or accrued
                          for services rendered in the amount of $_________.


                                      -2-

<PAGE>   20




        2.     DELIVERY.

               2.1 Deliveries by Purchaser. Purchaser hereby delivers to the
Company (i) this Exercise Agreement, (ii) two (2) copies of a blank Stock Power
and Assignment Separate from Stock Certificate in the form of Exhibit 1 attached
hereto (the "STOCK POWERS"), both executed by Purchaser (and Purchaser's spouse,
if any), (iii) if Purchaser is married, a Consent of Spouse in the form of
Exhibit 2 attached hereto (the "SPOUSE CONSENT") executed by Purchaser's spouse,
(iv) the Exercise Price and payment or other provision for any applicable tax
obligations and if the Exercise Price is paid for with a full recourse
promissory note, by delivery of a Secured Full Recourse Promissory Note in the
form of Exhibit 3, and (v) a Stock Pledge Agreement in the form of Exhibit 4
executed by Purchaser (the "PLEDGE AGREEMENT").

               2.2 Deliveries by the Company. Upon its receipt of the Exercise
Price, payment or other provision for any applicable tax obligations and all the
documents to be executed and delivered by Purchaser to the Company under Section
2.1, the Company will issue a duly executed stock certificate evidencing the
Shares in the name of Purchaser, to be placed in escrow as provided in Section
11 until expiration or termination of the Company's Repurchase Option and Right
of First Refusal described in Sections 8 and 9.

        3. REPRESENTATIONS AND WARRANTIES OF PURCHASER. Purchaser represents and
warrants to the Company that:

               3.1 Agrees to Terms of the Plan. Purchaser has received a copy of
the Plan and the Stock Option Agreement, has read and understands the terms of
the Plan, the Stock Option Agreement and this Exercise Agreement, and agrees to
be bound by their terms and conditions. Purchaser acknowledges that there may be
adverse tax consequences upon exercise of the Option or disposition of the
Shares, and that Purchaser should consult a tax adviser prior to such exercise
or disposition.

               3.2 Purchase for Own Account for Investment. Purchaser is
purchasing the Shares for Purchaser's own account for investment purposes only
and not with a view to, or for sale in connection with, a distribution of the
Shares within the meaning of the Securities Act. Purchaser has no present
intention of selling or otherwise disposing of all or any portion of the Shares
and no one other than Purchaser has any beneficial ownership of any of the
Shares.

               3.3 Access to Information. Purchaser has had access to all
information regarding the Company and its present and prospective business,
assets, liabilities and financial condition that Purchaser reasonably considers
important in making the decision to purchase the Shares, and Purchaser has had
ample opportunity to ask questions of the Company's representatives concerning
such matters and this investment.

               3.4 Understanding of Risks. Purchaser is fully aware of: (i) the
highly speculative nature of the investment in the Shares; (ii) the financial
hazards involved; (iii) the lack of liquidity of the Shares and the restrictions
on transferability of the Shares (e.g., that Purchaser may not be able to sell
or dispose of the Shares or use them as collateral for loans); (iv) the
qualifications and backgrounds of the management of the Company; and (v) the tax
consequences of investment in the Shares. Purchaser is capable of evaluating the
merits and risks of this investment, has the ability to protect Purchaser's own
interests in this transaction and is financially capable of bearing a total loss
of this investment.

               3.5 No General Solicitation. At no time was Purchaser presented
with or solicited by any publicly issued or circulated newspaper, mail, radio,
television or other form of general advertising or solicitation in connection
with the offer, sale and purchase of the Shares.

        4.     COMPLIANCE WITH SECURITIES LAWS.

               4.1 Compliance with U.S. Federal Securities Laws. Purchaser
understands and acknowledges that the Shares have not been registered with the
SEC under the Securities Act and that, notwithstanding any other provision of
the Stock Option Agreement to the contrary, the exercise of any rights to

                                       -3-
<PAGE>   21

purchase any Shares is expressly conditioned upon compliance with the Securities
Act and all applicable state securities laws. Purchaser agrees to cooperate with
the Company to ensure compliance with such laws. The Shares are being issued
under the Securities Act pursuant to the exemption provided by SEC Rule 701.

               4.2 Compliance with California Securities Laws. The Plan, The
stock option agreement, and this Exercise Agreement are intended to comply with
Section 25102(o) of the California Corporations Code. Any provision of this
Exercise Agreement which is inconsistent with Section 25102(o) shall, without
further act or amendment by the Company or the Board, be reformed to comply with
the requirements of Section 25102(o). THE SALE OF THE SECURITIES THAT ARE THE
SUBJECT OF THIS EXERCISE AGREEMENT, IF NOT YET QUALIFIED WITH THE CALIFORNIA
COMMISSIONER OF CORPORATIONS AND NOT EXEMPT FROM SUCH QUALIFICATION, IS SUBJECT
TO SUCH QUALIFICATION, AND THE ISSUANCE OF SUCH SECURITIES, AND THE RECEIPT OF
ANY PART OF THE CONSIDERATION THEREFOR PRIOR TO SUCH QUALIFICATION IS UNLAWFUL
UNLESS THE SALE IS EXEMPT. THE RIGHTS OF THE PARTIES TO THIS EXERCISE AGREEMENT
ARE EXPRESSLY CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED OR AN EXEMPTION
BEING AVAILABLE.

        5.     RESTRICTED SECURITIES.

               5.1 No Transfer Unless Registered or Exempt. Purchaser
understands that Purchaser may not transfer any Shares unless such Shares are
registered under the Securities Act or qualified under applicable state
securities laws or unless, in the opinion of counsel to the Company, exemptions
from such registration and qualification requirements are available. Purchaser
understands that only the Company may file a registration statement with the SEC
and that the Company is under no obligation to do so with respect to the Shares.
Purchaser has also been advised that exemptions from registration and
qualification may not be available or may not permit Purchaser to transfer all
or any of the Shares in the amounts or at the times proposed by Purchaser.

               5.2 SEC Rule 144. In addition, Purchaser has been advised that
SEC Rule 144 promulgated under the Securities Act, which permits certain limited
sales of unregistered securities, is not presently available with respect to the
Shares and, in any event, requires that the Shares be held for a minimum of one
(1) year, and in certain cases two (2) years, after they have been purchased and
paid for (within the meaning of Rule 144). Purchaser understands that Shares
paid for with a Note may not be deemed to be fully "paid for" within the meaning
of Rule 144 unless certain conditions are met and that, accordingly, the Rule
144 holding period of such Shares may not begin to run until such Shares are
fully paid for within the meaning of Rule 144. Purchaser understands that Rule
144 may indefinitely restrict transfer of the Shares so long as Purchaser
remains an "affiliate" of the Company or if "current public information" about
the Company (as defined in Rule 144) is not publicly available.

               5.3 SEC Rule 701. The Shares are issued pursuant to SEC Rule 701
promulgated under the Securities Act and may become freely tradeable by
non-affiliates (under limited conditions regarding the method of sale) ninety
(90) days after the first sale of Common Stock of the Company to the general
public pursuant to a registration statement filed with and declared effective by
the SEC, subject to the lengthier market standoff agreement contained in Section
7 of this Exercise Agreement or any other agreement entered into by Purchaser.
Affiliates must comply with the provisions (other than the holding period
requirements) of Rule 144.

        6.     RESTRICTIONS ON TRANSFERS.

               6.1 Disposition of Shares. Purchaser hereby agrees that Purchaser
shall make no disposition of the Shares (other than as permitted by this
Exercise Agreement) unless and until:

                     (a) Purchaser shall have notified the Company of the
proposed disposition and provided a written summary of the terms and conditions
of the proposed disposition;



                                       -4-
<PAGE>   22

                     (b) Purchaser shall have complied with all requirements of
this Exercise Agreement applicable to the disposition of the Shares;

                     (c) Purchaser shall have provided the Company with written
assurances, in form and substance satisfactory to counsel for the Company, that
(i) the proposed disposition does not require registration of the Shares under
the Securities Act or (ii) all appropriate action necessary for compliance with
the registration requirements of the Securities Act or of any exemption from
registration available under the Securities Act (including Rule 144) has been
taken; and

                     (d) Purchaser shall have provided the Company with written
assurances, in form and substance satisfactory to the Company, that the proposed
disposition will not result in the contravention of any transfer restrictions
applicable to the Shares pursuant to the provisions of the Commissioner Rules
identified in Section 4.2.

               6.2 Restriction on Transfer. Purchaser shall not transfer,
assign, grant a lien or security interest in, pledge, hypothecate, encumber or
otherwise dispose of any of the Shares which are subject to the Company's
Repurchase Option or the Company's Right of First Refusal, except as permitted
by this Exercise Agreement.

               6.3 Transferee Obligations. Each person (other than the Company)
to whom the Shares are transferred by means of one of the permitted transfers
specified in this Exercise Agreement must, as a condition precedent to the
validity of such transfer, acknowledge in writing to the Company that such
person is bound by the provisions of this Exercise Agreement and that the
transferred Shares are subject to (i) both the Company's Repurchase Option and
the Company's Right of First Refusal granted hereunder and (ii) the market
stand-off provisions of Section 7, to the same extent such Shares would be so
subject if retained by the Purchaser.

        7. MARKET STANDOFF AGREEMENT. Purchaser agrees in connection with any
registration of the Company's securities that, upon the request of the Company
or the underwriters managing any public offering of the Company's securities,
Purchaser will not sell or otherwise dispose of any Shares without the prior
written consent of the Company or such underwriters, as the case may be, for
such period of time (not to exceed 180 days) after the effective date of such
registration requested by such managing underwriters and subject to all
restrictions as the Company or the underwriters may specify.

        8. COMPANY'S REPURCHASE OPTION FOR UNVESTED SHARES. The Company, or its
assignee, shall have the option to repurchase Purchaser's Unvested Shares (as
defined in Section 2.2 of the Stock Option Agreement) on the terms and
conditions set forth in this Section (the "REPURCHASE OPTION FOR UNVESTED
SHARES") if Purchaser is Terminated (as defined in the Plan) for any reason, or
no reason, including without limitation Purchaser's death, Disability (as
defined in the Plan), voluntary resignation or termination by the Company with
or without Cause. Notwithstanding the foregoing, the Company shall retain the
Repurchase Option for Unvested Shares only as to that number of Unvested Shares
(whether or not exercised) that exceeds the number of shares which remain
exercisable.

               8.1 Termination and Termination Date. In case of any dispute as
to whether Purchaser is Terminated, the Committee shall have discretion to
determine whether Purchaser has been Terminated and the effective date of such
Termination (the "TERMINATION DATE").

               8.2 Exercise of Repurchase Option for Unvested Shares. At any
time within ninety (90) days after the Purchaser's Termination Date, the
Company, or its assignee, may elect to repurchase the Purchaser's Unvested
Shares by giving Purchaser written notice of exercise of the Repurchase Option
for Unvested Shares.

               8.3 Calculation of Repurchase Price for Unvested Shares. The
Company or its assignee shall have the option to repurchase from Purchaser (or
from Purchaser's personal representative as the case may be) the Unvested Shares
at the Purchaser's Exercise Price, proportionately adjusted for any stock split
or similar change in the capital structure of the Company as set forth in
Section 2.2 of the Plan.


                                      -5-

<PAGE>   23

               8.4 Payment of Repurchase Price. The repurchase price shall be
payable, at the option of the Company or its assignee, by check or by
cancellation of all or a portion of any outstanding indebtedness of Purchaser to
the Company or such assignee, or by any combination thereof. The repurchase
price shall be paid without interest within sixty (60) days after exercise of
the Repurchase Option for Unvested Shares.

               8.5 Right of Termination Unaffected. Nothing in this Exercise
Agreement shall be construed to limit or otherwise affect in any manner
whatsoever the right or power of the Company (or any Parent or Subsidiary of the
Company) to terminate Purchaser's employment or other relationship with Company
(or the Parent or Subsidiary of the Company) at any time, for any reason or no
reason, with our without Cause.

        9. COMPANY'S RIGHT OF FIRST REFUSAL. Unvested Shares may not be sold or
otherwise transferred by Purchaser without the Company's prior written consent.
Before any Vested Shares held by Purchaser or any transferee of such Vested
Shares (either being sometimes referred to herein as the "Holder") may be sold
or otherwise transferred (including without limitation a transfer by gift or
operation of law), the Company and/or its assignee(s) shall have an assignable
right of first refusal to purchase the Vested Shares to be sold or transferred
(the "OFFERED SHARES") on the terms and conditions set forth in this Section
(the "RIGHT OF FIRST REFUSAL").

               9.1 Notice of Proposed Transfer. The Holder of the Offered Shares
shall deliver to the Company a written notice (the "Notice") stating: (i) the
Holder's bona fide intention to sell or otherwise transfer the Offered Shares;
(ii) the name of each proposed bona fide purchaser or other transferee
("PROPOSED TRANSFEREE"); (iii) the number of Offered Shares to be transferred to
each Proposed Transferee; (iv) the bona fide cash price or other consideration
for which the Holder proposes to transfer the Offered Shares (the "OFFERED
PRICE"); and (v) that the Holder will offer to sell the Offered Shares to the
Company and/or its assignee(s) at the Offered Price as provided in this Section.

               9.2 Exercise of Right of First Refusal. At any time within thirty
(30) days after the date of the Notice, the Company and/or its assignee(s) may,
by giving written notice to the Holder, elect to purchase all (or, with the
consent of the Holder, less than all) the Offered Shares proposed to be
transferred to any one or more of the Proposed Transferees named in the Notice,
at the purchase price determined as specified below.

               9.3 Purchase Price. The purchase price for the Offered Shares
purchased under this Section will be the Offered Price. If the Offered Price
includes consideration other than cash, then the cash equivalent value of the
non-cash consideration shall conclusively be deemed to be the value of such
non-cash consideration as determined in good faith by the Board.

               9.4 Payment. Payment of the Offered Price will be payable, at the
option of the Company and/or its assignee(s) (as applicable), by check or by
cancellation of all or a portion of any outstanding indebtedness of the Holder
to the Company (or to such assignee, in the case of a purchase of Offered Shares
by such assignee) or by any combination thereof. The Offered Price will be paid
without interest within sixty (60) days after the Company's receipt of the
Notice, or, at the option of the Company and/or its assignee(s), in the manner
and at the time(s) set forth in the Notice.

               9.5 Holder's Right to Transfer. If all of the Offered Shares
proposed in the Notice to be transferred to a given Proposed Transferee are not
purchased by the Company and/or its assignee(s) as provided in this Section,
then the Holder may sell or otherwise transfer such Offered Shares to that
Proposed Transferee at the Offered Price or at a higher price, provided that
such sale or other transfer is consummated within 120 days after the date of the
Notice, and provided further, that (i) any such sale or other transfer is
effected in compliance with all applicable securities laws and (ii) the Proposed
Transferee agrees in writing that the provisions of this Section will continue
to apply to the Offered Shares in the hands of such Proposed Transferee. If the
Offered Shares described in the Notice are not transferred to the Proposed
Transferee within such 120 day period, then a new Notice must be given to the
Company, and the Company will again be offered the Right of First Refusal before
any Shares held by the Holder may be sold or otherwise transferred.


                                      -6-

<PAGE>   24

               9.6 Exempt Transfers. Notwithstanding anything to the contrary in
this Section, the following transfers of Vested Shares will be exempt from the
Right of First Refusal: (i) the transfer of any or all of the Vested Shares
during Purchaser's lifetime by gift or on Purchaser's death by will or intestacy
to Purchaser's "immediate family" (as defined below) or to a trust for the
benefit of Purchaser or Purchaser's immediate family, provided that each
transferee or other recipient agrees in a writing satisfactory to the Company
that the provisions of this Section will continue to apply to the transferred
Vested Shares in the hands of such transferee or other recipient; (ii) any
transfer of Vested Shares made pursuant to a statutory merger or statutory
consolidation of the Company with or into another corporation or corporations
(except that the Right of First Refusal and Repurchase Option will continue to
apply thereafter to such Vested Shares, in which case the surviving corporation
of such merger or consolidation shall succeed to the rights of the Company under
this Section unless the Agreement of merger or consolidation expressly otherwise
provides); or (iii) any transfer of Vested Shares pursuant to the winding up and
dissolution of the Company. As used herein, the term "IMMEDIATE FAMILY" will
mean Purchaser's spouse, the lineal descendant or antecedent, father, mother,
brother or sister, child, adopted child, grandchild or adopted grandchild of the
Purchaser or the Purchaser's spouse, or the spouse of any child, adopted child,
grandchild or adopted grandchild of Purchaser or the Purchaser's spouse.

               9.7 Termination of Right of First Refusal. The Company's Right of
First Refusal will terminate when the Company's securities become publicly
traded.

      10. RIGHTS AS SHAREHOLDER. Subject to the terms and conditions of this
Exercise Agreement, Purchaser will have all of the rights of a shareholder of
the Company with respect to the Shares from and after the date that Shares are
issued to Purchaser until such time as Purchaser disposes of the Shares or the
Company and/or its assignee(s) exercise(s) the Right of First Refusal. Upon an
exercise of the Right of First Refusal, Purchaser will have no further rights as
a holder of the Shares so purchased upon such exercise, except the right to
receive payment for the Shares so purchased in accordance with the provisions of
this Exercise Agreement, and Purchaser will promptly surrender the stock
certificate(s) evidencing the Shares so purchased to the Company for transfer or
cancellation.

      11. ESCROW. As security for Purchaser's faithful performance of this
Exercise Agreement, Purchaser agrees, immediately upon receipt of the stock
certificate(s) evidencing the Shares, to deliver such certificate(s), together
with the Stock Powers executed by Purchaser and by Purchaser's spouse, if any
(with the date and number of Shares left blank), to the Secretary of the Company
or other designee of the Company ("ESCROW HOLDER"), who is hereby appointed to
hold such certificate(s) and Stock Powers in escrow and to take all such actions
and to effectuate all such transfers and/or releases of such Shares as are in
accordance with the terms of this Exercise Agreement. Purchaser and the Company
agree that Escrow Holder will not be liable to any party to this Exercise
Agreement (or to any other party) for any actions or omissions unless Escrow
Holder is grossly negligent or intentionally fraudulent in carrying out the
duties of Escrow Holder under this Exercise Agreement. Escrow Holder may rely
upon any letter, notice or other document executed by any signature purported to
be genuine and may rely on the advice of counsel and obey any order of any court
with respect to the transactions contemplated by this Exercise Agreement. The
Shares will be released from escrow upon termination of the Right of First
Refusal; provided, however, in case any Shares are pledged, the Shares will be
retained in escrow so long as they are subject to the Pledge Agreement.

      12.      RESTRICTIVE LEGENDS AND STOP-TRANSFER ORDERS.

               12.1 Legends. Purchaser understands and agrees that the Company
will place the legends set forth below or similar legends on any stock
certificate(s) evidencing the Shares, together with any other legends that may
be required by state or U.S. Federal securities laws, the Company's Articles of
Incorporation or Bylaws, any other agreement between Purchaser and the Company
or any agreement between Purchaser and any third party:

                        THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN
                        REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
                        (THE "SECURITIES ACT"), OR UNDER THE SECURITIES LAWS OF
                        CERTAIN STATES. THESE SECURITIES ARE SUBJECT TO


                                      -7-

<PAGE>   25

                        RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT
                        BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE
                        SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS,
                        PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM.
                        INVESTORS SHOULD BE AWARE THAT THEY MAY BE REQUIRED TO
                        BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN
                        INDEFINITE PERIOD OF TIME. THE ISSUER OF THESE
                        SECURITIES MAY REQUIRE AN OPINION OF COUNSEL IN FORM AND
                        SUBSTANCE SATISFACTORY TO THE ISSUER TO THE EFFECT THAT
                        ANY PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE WITH
                        THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES
                        LAWS.

                        THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT
                        TO CERTAIN RESTRICTIONS ON PUBLIC RESALE AND TRANSFER,
                        AND RIGHT OF FIRST REFUSAL OPTIONS HELD BY THE ISSUER
                        AND/OR ITS ASSIGNEE(S) AS SET FORTH IN A STOCK OPTION
                        EXERCISE AGREEMENT BETWEEN THE ISSUER AND THE ORIGINAL
                        HOLDER OF THESE SHARES, A COPY OF WHICH MAY BE OBTAINED
                        AT THE PRINCIPAL OFFICE OF THE ISSUER. SUCH PUBLIC SALE
                        AND TRANSFER RESTRICTIONS AND THE RIGHT OF FIRST REFUSAL
                        ARE BINDING ON TRANSFEREES OF THESE SHARES.

        The California Commissioner of Corporations may require that the
following legend also be placed upon the share certificate(s) evidencing
ownership of the Shares:

                        IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS
                        SECURITY, OR ANY INTEREST THEREIN, OR TO RECEIVE ANY
                        CONSIDERATION THEREFOR, WITHOUT THE PRIOR WRITTEN
                        CONSENT OF THE COMMISSIONER OF CORPORATIONS OF THE STATE
                        OF CALIFORNIA, EXCEPT AS PERMITTED IN THE COMMISSIONER'S
                        RULES.

               12.2 Stop-Transfer Instructions. Purchaser agrees that, to ensure
compliance with the restrictions imposed by this Exercise Agreement, the Company
may issue appropriate "stop-transfer" instructions to its transfer agent, if
any, and if the Company transfers its own securities, it may make appropriate
notations to the same effect in its own records.

               12.3 Refusal to Transfer. The Company will not be required (i) to
transfer on its books any Shares that have been sold or otherwise transferred in
violation of any of the provisions of this Exercise Agreement or (ii) to treat
as owner of such Shares, or to accord the right to vote or pay dividends to any
purchaser or other transferee to whom such Shares have been so transferred.

      13. TAX CONSEQUENCES. PURCHASER UNDERSTANDS THAT PURCHASER MAY SUFFER
ADVERSE TAX CONSEQUENCES AS A RESULT OF PURCHASER'S PURCHASE OR DISPOSITION OF
THE SHARES. PURCHASER REPRESENTS THAT PURCHASER HAS CONSULTED WITH ANY TAX
ADVISER PURCHASER DEEMS ADVISABLE IN CONNECTION WITH THE PURCHASE OR DISPOSITION
OF THE SHARES AND THAT PURCHASER IS NOT RELYING ON THE COMPANY FOR ANY TAX
ADVICE. Set forth below is a brief summary as of the date the Plan was adopted
by the Board of some of the U.S. Federal and California tax consequences of
exercise of the Option and disposition of the Shares. THIS SUMMARY IS
NECESSARILY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE.
PURCHASER SHOULD CONSULT A TAX ADVISER BEFORE EXERCISING THIS OPTION OR
DISPOSING OF THE SHARES.

                                      -8-

<PAGE>   26




               13.1 Exercise of Incentive Stock Option. If the Option qualifies
as an ISO, there will be no regular U.S. Federal income tax liability or
California income tax liability upon the exercise of the Option, although the
excess, if any, of the Fair Market Value of the Shares on the date of exercise
over the Exercise Price will be treated as a tax preference item for U.S.
Federal alternative minimum tax purposes and may subject Purchaser to the
alternative minimum tax in the year of exercise.

               13.2 Exercise of Nonqualified Stock Option. If the Option does
not qualify as an ISO, there may be a regular U.S. Federal income tax liability
and a California income tax liability upon the exercise of the Option. Purchaser
will be treated as having received compensation income (taxable at ordinary
income tax rates) equal to the excess, if any, of the Fair Market Value of the
Shares on the date of exercise over the Exercise Price. If Purchaser is or was
an employee of the Company, the Company may be required to withhold from
Purchaser's compensation or collect from Purchaser and pay to the applicable
taxing authorities an amount equal to a percentage of this compensation income
at the time of exercise.

               13.3 Disposition of Shares. The following tax consequences may
apply upon disposition of the Shares:

                     a. Incentive Stock Options. If the Shares are held for more
than twelve (12) months after the date of the transfer of the Shares pursuant to
the exercise of an ISO and are disposed of more than two (2) years after the
Date of Grant, any gain realized on disposition of the Shares will be treated as
long term capital gain for federal and California income tax purposes. If Shares
purchased under an ISO are disposed of within the applicable one (1) year or two
(2) year period, any gain realized on such disposition will be treated as
compensation income (taxable at ordinary income rates) to the extent of the
excess, if any, of the Fair Market Value of the Shares on the date of exercise
over the Exercise Price.

                     b. Nonqualified Stock Options. If the Shares are held for
more than twelve (12) months after the date of the transfer of the Shares
pursuant to the exercise of an NQSO, any gain realized on disposition of the
Shares will be treated as long term capital gain.

                     c. Withholding. The Company may be required to withhold
from the Participant and pay to the applicable taxing authorities an amount
equal to a percentage of this compensation income.

               13.4 SECTION 83(b) ELECTION FOR UNVESTED SHARES. With respect to
Unvested Shares, which are subject to the Repurchase Option, Purchaser hereby
acknowledges that Purchaser has been informed that, unless an election is filed
by the Purchaser with the Internal Revenue Service (and, if necessary, the
proper state taxing authorities), within 30 days of the purchase of the Unvested
Shares, electing pursuant to Section 83(b) of the Internal Revenue Code (and
similar state tax provisions, if applicable) to be taxed currently on any
difference between the Purchase Price of the Unvested Shares and their Fair
Market Value on the date of purchase, there may be a recognition of taxable
income (including, where applicable, alternative minimum tax) to the Purchaser,
measured by the excess, if any, of the Fair Market Value of the Unvested Shares,
at the time they cease to be Unvested Shares, over the Purchase Price of such
Shares. Purchaser represents that Purchaser has consulted any tax advisers
Purchaser deems advisable in connection with Purchaser's purchase of the
Unvested Shares and the filing of the election under Section 83(b) and similar
tax provisions. A form of Election under Section 83(b) is attached hereto as
Exhibit 5 for reference. PURCHASER HEREBY ASSUMES ALL RESPONSIBILITY FOR FILING
SUCH ELECTION AND PAYING ANY TAXES RESULTING FROM SUCH ELECTION OR FROM FAILURE
TO FILE THE ELECTION AND PAYING TAXES RESULTING FROM THE LAPSE OF THE REPURCHASE
RESTRICTIONS ON THE UNVESTED SHARES.

      14. COMPLIANCE WITH LAWS AND REGULATIONS. The issuance and transfer of the
Shares will be subject to and conditioned upon compliance by the Company and
Purchaser with all applicable state and U.S. Federal laws and regulations and
with all applicable requirements of any stock exchange or automated quotation
system on which the Company's Common Stock may be listed or quoted at the time
of such issuance or transfer.


                                      -9-

<PAGE>   27

      15. SUCCESSORS AND ASSIGNS. The Company may assign any of its rights under
this Exercise Agreement, including its rights to repurchase Shares under the
Right of First Refusal. This Exercise Agreement shall be binding upon and inure
to the benefit of the successors and assigns of the Company. Subject to the
restrictions on transfer herein set forth, this Exercise Agreement will be
binding upon Purchaser and Purchaser's heirs, executors, administrators, legal
representatives, successors and assigns.

      16. GOVERNING LAW; SEVERABILITY. This Exercise Agreement shall be governed
by and construed in accordance with the internal laws of the State of California
as such laws are applied to agreements between California residents entered into
and to be performed entirely within California. If any provision of this
Exercise Agreement is determined by a court of law to be illegal or
unenforceable, then such provision will be enforced to the maximum extent
possible and the other provisions will remain fully effective and enforceable.

      17. NOTICES. Any notice required to be given or delivered to the Company
shall be in writing and addressed to the Corporate Secretary of the Company at
its principal corporate offices. Any notice required to be given or delivered to
Purchaser shall be in writing and addressed to Purchaser at the address
indicated above or to such other address as Purchaser may designate in writing
from time to time to the Company. All notices shall be deemed effectively given
upon personal delivery, three (3) days after deposit in the United States mail
by certified or registered mail (return receipt requested), one (1) business day
after its deposit with any return receipt express courier (prepaid), or one (1)
business day after transmission by rapifax or telecopier.

      18. FURTHER INSTRUMENTS. The parties agree to execute such further
instruments and to take such further action as may be reasonably necessary to
carry out the purposes and intent of this Exercise Agreement.

      19. HEADINGS. The captions and headings of this Exercise Agreement are
included for ease of reference only and will be disregarded in interpreting or
construing this Exercise Agreement. All references herein to Sections will refer
to Sections of this Exercise Agreement.

      20. ENTIRE AGREEMENT. The Plan, the Stock Option Agreement and this
Exercise Agreement, together with all its Exhibits, constitute the entire
agreement and understanding of the parties with respect to the subject matter of
this Exercise Agreement, and supersede all prior understandings and agreements,
whether oral or written, between the parties hereto with respect to the specific
subject matter hereof.

      IN WITNESS WHEREOF, the Company has caused this Exercise Agreement to be
executed in triplicate by its duly authorized representative and Purchaser has
executed this Exercise Agreement in triplicate as of the Effective Date.

BROCADE COMMUNICATIONS SYSTEMS, INC.         PURCHASER


By:
   ---------------------------------         -----------------------------------
                                             (Signature)


------------------------------------         -----------------------------------
(Please print name)                          (Please print name)

------------------------------------
(Please print title)




      [SIGNATURE PAGE TO BROCADE COMMUNICATIONS SYSTEMS, INC. STOCK OPTION
                              EXERCISE AGREEMENT]



                                      -10-
<PAGE>   28


                                LIST OF EXHIBITS



Exhibit 1:     Stock Power and Assignment Separate from Stock Certificate

Exhibit 2:     Spouse Consent

Exhibit 3:     Copy of Purchaser's Check (and/or Secured Full Recourse 
               Promissory Note, if applicable)

Exhibit 4:     Stock Pledge Agreement (if applicable)

Exhibit 5:     Section 83(b) Election



<PAGE>   29




                                    EXHIBIT 1

                           STOCK POWER AND ASSIGNMENT
                         SEPARATE FROM STOCK CERTIFICATE





<PAGE>   30




                           STOCK POWER AND ASSIGNMENT
                         SEPARATE FROM STOCK CERTIFICATE



        FOR VALUE RECEIVED and pursuant to that certain Stock Option Exercise
Agreement No. ________ dated as of _______________, 19___, (the "AGREEMENT"),
the undersigned hereby sells, assigns and transfers unto _____________________,
shares of the Common Stock of Brocade Communications Systems, Inc., a California
corporation (the "COMPANY"), standing in the undersigned's name on the books of
the Company represented by Certificate No(s). ______ delivered herewith, and
does hereby irrevocably constitute and appoint the Secretary of the Company as
the undersigned's attorney-in-fact, with full power of substitution, to transfer
said stock on the books of the Company. THIS ASSIGNMENT MAY ONLY BE USED AS
AUTHORIZED BY THIS EXERCISE AGREEMENT AND ANY EXHIBITS THERETO.





                                       PURCHASER


                                       -----------------------------------------
                                       (Signature)


                                       -----------------------------------------
                                       (Please Print Name)


__________ Please check if no spouse                                            
                                       -----------------------------------------
                                       (Spouse's Signature, if any)


                                       -----------------------------------------
                                       (Please Print Spouse's Name)






INSTRUCTIONS: Please do not fill in any blanks other than the signature line.
The purpose of this Stock Power and Assignment is to enable the Company to
acquire the shares upon a default under Purchaser's Note, if such Note exists,
and to exercise its "Repurchase Option" and/or "Right of First Refusal" set
forth in this Exercise Agreement without requiring additional signatures on the
part of the Purchaser or Purchaser's Spouse, if any.




<PAGE>   31




                                    EXHIBIT 2

                                 SPOUSE CONSENT





<PAGE>   32



                                 SPOUSE CONSENT



        The undersigned spouse of Purchaser has read, understands, and hereby
approves the Stock Option Exercise Agreement between Purchaser and the Company
(the "AGREEMENT"). In consideration of the Company's granting my spouse the
right to purchase the Shares as set forth in this Exercise Agreement, the
undersigned hereby agrees to be irrevocably bound by this Exercise Agreement and
further agrees that any community property interest shall similarly be bound by
this Exercise Agreement. The undersigned hereby appoints Purchaser as my
attorney-in-fact with respect to any amendment or exercise of any rights under
this Exercise Agreement.



Date:____________________

                                          --------------------------------------
                                          Name of Purchaser - Please Print


__________ Please check if no spouse
                                          --------------------------------------
                                          Signature of Purchaser's Spouse


                                  Address:
                                          --------------------------------------



<PAGE>   33


                                    EXHIBIT 3

     COPY OF PURCHASER'S CHECK AND/OR SECURED FULL RECOURSE PROMISSORY NOTE





<PAGE>   34

                      SECURED FULL RECOURSE PROMISSORY NOTE


                           ______________, California



$__________________                                 __________________, 19___


        1. OBLIGATION. In exchange for the issuance to the undersigned
("PURCHASER") of ___________ shares (the "SHARES") of the Common Stock of
Brocade Communications Systems, Inc., a California corporation (the "COMPANY"),
receipt of which is hereby acknowledged, Purchaser hereby promises to pay to the
order of the Company on or before _________, 19___, at the Company's principal
place of business at _________________________________ California __________, or
at such other place as the Company may direct, the principal sum of
_______________________________________ Dollars ($__________) together with
interest compounded semi-annually on the unpaid principal at the rate of
_________ percent (___%), which rate is not less than the minimum rate
established pursuant to Section 1274(d) of the Internal Revenue Code of 1986, as
amended, on the earliest date on which there was a binding contract in writing
for the purchase of the Shares; provided, however, that the rate at which
interest will accrue on unpaid principal under this Note will not exceed the
highest rate permitted by applicable law.

        2. SECURITY. Payment of this Note is secured by a security interest in
the Shares granted to the Company by Purchaser under a Stock Pledge Agreement
dated of even date herewith between the Company and Purchaser (the "PLEDGE
AGREEMENT"). This Note is being tendered by Purchaser to the Company as [PART
OF] the Exercise Price of the Shares pursuant to that certain Stock Option
Exercise Agreement between Purchaser and the Company dated of even date with
this Note (the "PURCHASE AGREEMENT").

        3. DEFAULT; ACCELERATION OF OBLIGATION. Purchaser will be deemed to be
in default under this Note and the principal sum of this Note, together with all
interest accrued thereon, will immediately become due and payable in full: (a)
upon Purchaser's failure to make any payment when due under this Note; (b) in
the event Purchaser is Terminated (as defined in the Company's 1998 Equity
Incentive Plan) for any reason; (c) upon the filing by or against Purchaser of
any voluntary or involuntary petition in bankruptcy or any petition for relief
under the U.S. Federal bankruptcy code or any other state or U.S. Federal law
for the relief of debtors; or (d) upon the execution by Purchaser of an
assignment for the benefit of creditors or the appointment of a receiver,
custodian, trustee or similar party to take possession of Purchaser's assets or
property.

        4. REMEDIES ON DEFAULT. Upon any default of Purchaser under this Note,
the Company will have, in addition to its rights and remedies under this Note
and the Pledge Agreement, full recourse against any real, personal, tangible or
intangible assets of Purchaser, and may pursue any legal or equitable remedies
that are available to it.

        5. PREPAYMENT. Prepayment of principal and/or interest due under this
Note may be made at any time without penalty. Unless otherwise agreed in writing
by the Company, all payments will be made in lawful tender of the United States
and will be applied first to the payment of accrued interest, and the remaining
balance of such payment, if any, will then be applied to the payment of
principal. If Purchaser prepays all or a portion of the principal amount of this
Note, the Shares paid for by the portion of principal so paid will continue to
be held in pledge under the Pledge Agreement to serve as independent collateral
for the outstanding portion of this Note for the purpose of commencing the
holding period under Rule 144(d) of the Securities and Exchange Commission with
respect to other Shares purchased with this Note unless Purchaser notifies the
Company in writing otherwise and the Company consents to release of the Shares
from the Pledge Agreement.


<PAGE>   35

        6. GOVERNING LAW; WAIVER. The validity, construction and performance of
this Note will be governed by the internal laws of the State of California,
excluding that body of law pertaining to conflicts of law. Purchaser hereby
waives presentment, notice of non-payment, notice of dishonor, protest, demand
and diligence.

        7. ATTORNEYS' FEES. If suit is brought for collection of this Note,
Purchaser agrees to pay all reasonable expenses, including attorneys' fees,
incurred by the holder in connection therewith whether or not such suit is
prosecuted to judgment.

        8. RULE 144 HOLDING PERIOD. PURCHASER UNDERSTANDS THAT THE HOLDING
PERIOD SPECIFIED UNDER RULE 144(d) OF THE SECURITIES AND EXCHANGE COMMISSION
WILL NOT BEGIN TO RUN WITH RESPECT TO SHARES PURCHASED WITH THIS NOTE UNTIL
EITHER (A) THE EXERCISE PRICE OF SUCH SHARES IS PAID IN FULL IN CASH OR BY OTHER
PROPERTY ACCEPTED BY THE COMPANY, OR (B) THIS NOTE IS SECURED BY COLLATERAL,
OTHER THAN THE SHARES THAT HAVE NOT BEEN FULLY PAID FOR, HAVING A FAIR MARKET
VALUE AT LEAST EQUAL TO THE AMOUNT OF PURCHASER'S THEN OUTSTANDING OBLIGATION
UNDER THIS NOTE (INCLUDING ACCRUED INTEREST).

        IN WITNESS WHEREOF, Purchaser has executed this Note as of the date and
year first above written.




---------------------------------            -----------------------------------
Purchaser's Name [type or print]             Purchaser's Signature




             [SIGNATURE PAGE TO BROCADE COMMUNICATIONS SYSTEMS, INC.
                     SECURED FULL RECOURSE PROMISSORY NOTE]


                                      -2-

<PAGE>   36


                                    EXHIBIT 4

                             STOCK PLEDGE AGREEMENT





<PAGE>   37



                             STOCK PLEDGE AGREEMENT



        This Stock Pledge Agreement is made and entered into as of
_______________, 19___ between Brocade Communications Systems, Inc., a
California corporation (the "COMPANY"), and __________________ ("Pledgor").


                                 R E C I T A L S

        A. In exchange for Pledgor's Secured Full Recourse Promissory Note to
the Company of even date herewith (the "NOTE"), the Company has issued and sold
to Pledgor _______________ shares of its Common Stock (the "SHARES") pursuant to
the terms and conditions of that Stock Option Exercise Agreement between the
Company and Pledgor of even date herewith (the "PURCHASE AGREEMENT").

        B. Pledgor has agreed that repayment of the Note will be secured by the
pledge of the Shares pursuant to this Stock Pledge Agreement.

        NOW, THEREFORE, the parties agree as follows:

               1. CREATION OF SECURITY INTEREST. Pursuant to the provisions of
the California Commercial Code, Pledgor hereby grants to the Company, and the
Company hereby accepts, a first and present security interest in the Shares as
collateral to secure the payment of Pledgor's obligation to the Company under
the Note. Pledgor herewith delivers to the Company Common Stock certificate(s)
No(s). _________, representing all the Shares, together with one stock power for
each certificate in the form attached as an Exhibit to the Purchase Agreement,
duly executed (with the date and number of shares left blank) by Pledgor and
Pledgor's spouse, if any. For purposes of this Stock Pledge Agreement, the
Shares pledged to the Company hereby, together with any additional collateral
pledged pursuant to Sections 5 and 6 hereof, will hereinafter be collectively
referred to as the "COLLATERAL." Pledgor agrees that the Collateral pledged to
the Company will be deposited with and held by the Escrow Holder (as defined in
the Purchase Agreement) and that, notwithstanding anything to the contrary in
the Purchase Agreement, for purposes of carrying out the provisions of this
Stock Pledge Agreement, Escrow Holder will act solely for the Company as its
agent.

               2. REPRESENTATIONS AND WARRANTIES. Pledgor hereby represents and
warrants to the Company that Pledgor has good title (both record and beneficial)
to the Collateral, free and clear of all claims, pledges, security interests,
liens or encumbrances of every nature whatsoever, and that Pledgor has the right
to pledge and grant the Company the security interest in the Collateral granted
under this Stock Pledge Agreement. Pledgor further agrees that, until the entire
principal sum and all accrued interest due under the Note has been paid in full,
Purchaser will not, without the Company's prior written consent, (i) sell,
assign or transfer, or attempt to sell, assign or transfer, any of the
Collateral, or (ii) grant or create, or attempt to grant or create, any security
interest, lien, pledge, claim or other encumbrance with respect to any of the
Collateral.

               3. RIGHTS ON DEFAULT. In the event of default (as defined in the
Note) by Pledgor under the Note, the Company will have full power to sell,
assign and deliver the whole or any part of the Collateral at any broker's
exchange or elsewhere, at public or private sale, at the option of the Company,
in order to satisfy any part of the obligations of Pledgor now existing or
hereinafter arising under the Note. On any such sale, the Company or its assigns
may purchase all or any part of the Collateral. In addition, at its sole option,
the Company may elect to retain all the Collateral in full satisfaction of
Pledgor's obligation under the Note, in accordance with the provisions and
procedures set forth in the California Commercial Code.

               4. ADDITIONAL REMEDIES. The rights and remedies granted to the
Company herein upon default under the Note will be in addition to all the
rights, powers and remedies of the Company under the California Commercial Code
and applicable law and such rights, powers and remedies will be exercisable by
the Company with respect to all of the Collateral. Pledgor agrees that the
Company's reasonable expenses of holding



<PAGE>   38

the Collateral, preparing it for resale or other disposition, and selling or
otherwise disposing of the Collateral, including attorneys' fees and other legal
expenses, will be deducted from the proceeds of any sale or other disposition
and will be included in the amounts Pledgor must tender to redeem the
Collateral. All rights, powers and remedies of the Company will be cumulative
and not alternative. Any forbearance or failure or delay by the Company in
exercising any right, power or remedy hereunder will not be deemed to be a
waiver of any such right, power or remedy and any single or partial exercise of
any such right, power or remedy hereunder will not preclude the further exercise
thereof.

               5. DIVIDENDS; VOTING. All dividends hereinafter declared on or
payable with respect to the Collateral during the term of this pledge (excluding
only ordinary cash dividends, which will be payable to Pledgor so long as
Pledgor is not in default under the Note) will be immediately delivered to the
Company to be held in pledge under this Stock Pledge Agreement. Notwithstanding
this Stock Pledge Agreement, so long as Pledgor owns the Shares and is not in
default under the Note, Pledgor will be entitled to vote any shares comprising
the Collateral, subject to any proxies granted by Pledgor.

               6. ADJUSTMENTS. In the event that during the term of this pledge,
any stock dividend, reclassification, readjustment, stock split or other change
is declared or made with respect to the Collateral, or if warrants or any other
rights, options or securities are issued in respect of the Collateral, then all
new, substituted and/or additional shares or other securities issued by reason
of such change or by reason of the exercise of such warrants, rights, options or
securities, will be immediately pledged to the Company to be held under the
terms of this Stock Pledge Agreement in the same manner as the Collateral is
held hereunder.

               7. RIGHTS UNDER PURCHASE AGREEMENT. Pledgor understands and
agrees that the Company's rights to repurchase the Collateral under the Purchase
Agreement, if any, will continue for the periods and on the terms and conditions
specified in the Purchase Agreement, whether or not the Note has been paid
during such period of time, and that to the extent that the Note is not paid
during such period of time, the repurchase by the Company of the Collateral may
be made by way of cancellation of all or any part of Pledgor's indebtedness
under the Note.

               8. REDELIVERY OF COLLATERAL. Upon payment in full of the entire
principal sum and all accrued interest due under the Note, and subject to the
terms and conditions of the Purchase Agreement, the Company will immediately
redeliver the Collateral to Pledgor and this Stock Pledge Agreement will
terminate; provided, however, that all rights of the Company to retain
possession of the Shares pursuant to the Purchase Agreement will survive
termination of this Stock Pledge Agreement.

               9. SUCCESSORS AND ASSIGNS. This Stock Pledge Agreement will inure
to the benefit of the respective heirs, personal representatives, successors and
assigns of the parties hereto.

             10. GOVERNING LAW; SEVERABILITY. This Stock Pledge Agreement will
be governed by and construed in accordance with the internal laws of the State
of California, excluding that body of law relating to conflicts of law. Should
one or more of the provisions of this Stock Pledge Agreement be determined by a
court of law to be illegal or unenforceable, the other provisions nevertheless
will remain effective and will be enforceable.

             11. MODIFICATION; ENTIRE AGREEMENT. This Stock Pledge Agreement
will not be amended without the written consent of both parties hereto. This
Stock Pledge Agreement constitutes the entire agreement of the parties hereto
with respect to the subject matter hereof and supersedes all prior agreements
and understandings related to such subject matter.

                                      -2-

<PAGE>   39




        IN WITNESS WHEREOF, the parties hereto have executed this Stock Pledge
Agreement as of the date and year first above written.

BROCADE COMMUNICATIONS SYSTEMS, INC.         PLEDGOR


By:
   -----------------------------------       -----------------------------------
                                             (Signature)

--------------------------------------       -----------------------------------
(Please print name)                          (Please print name)

--------------------------------------  
(Please print title)





[SIGNATURE PAGE TO BROCADE COMMUNICATIONS SYSTEMS, INC. STOCK PLEDGE AGREEMENT]


                                      -3-

<PAGE>   40



                                    EXHIBIT 5

                             SECTION 83(b) ELECTION



<PAGE>   41


                       ELECTION UNDER SECTION 83(b) OF THE
                              INTERNAL REVENUE CODE

The undersigned Taxpayer hereby elects, pursuant to Section 83(b) of the
Internal Revenue Code of 1986, as amended, to include the excess, if any, of the
fair market value of the property described below at the time of transfer over
the amount paid for such property, as compensation for services in the
calculation of: (1) regular gross income; (2) alternative minimum taxable income
or (3) disqualifying disposition gross income, as the case may be.

1.    TAXPAYER'S NAME:
                              --------------------------------------------------
      TAXPAYER'S ADDRESS:                   
                              --------------------------------------------------

                              --------------------------------------------------
      SOCIAL SECURITY NUMBER:
                              --------------------------------------------------

2.    The property with respect to which the election is made is described as
      follows: _______ shares of Common Stock of Brocade Communications Systems,
      Inc., a California corporation, which were transferred upon exercise of an
      option (the "Company"), which is Taxpayer's employer or the corporation
      for whom the Taxpayer performs services.

3.    The date on which the shares were transferred pursuant to the exercise of
      the option was ________, 199__ and this election is made for calendar year
      199__.

4.    The shares received upon exercise of the option are subject to the
      following restrictions: The Company may repurchase all or a portion of the
      shares at the Taxpayer's original purchase price under certain conditions
      at the time of Taxpayer's termination of employment or services.

5.    The fair market value of the shares (without regard to restrictions other
      than restrictions which by their terms will never lapse) was $___ per
      share at the time of exercise of the option.

6.    The amount paid for such shares upon exercise of the option was $___ per
      share.

7.    The Taxpayer has submitted a copy of this statement to the Company.

THIS ELECTION MUST BE FILED WITH THE INTERNAL REVENUE SERVICE ("IRS"), AT THE
OFFICE WHERE THE TAXPAYER FILES ANNUAL INCOME TAX RETURNS, WITHIN 30 DAYS AFTER
THE DATE OF TRANSFER OF THE SHARES, AND MUST ALSO BE FILED WITH THE TAXPAYER'S
INCOME TAX RETURNS FOR THE CALENDAR YEAR. THE ELECTION CANNOT BE REVOKED WITHOUT
THE CONSENT OF THE IRS.

Dated: 
      --------------------------                  ------------------------------
                                                   Taxpayer's Signature



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