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1999 Director Option Plan - Brocade Communications Systems Inc.

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                      BROCADE COMMUNICATIONS SYSTEMS, INC.

                            1999 DIRECTOR OPTION PLAN


        1. Purposes of the Plan. The purposes of this 1999 Director Option Plan
are to attract and retain the best available personnel for service as Outside
Directors (as defined herein) of the Company, to provide additional incentive to
the Outside Directors of the Company to serve as Directors, and to encourage
their continued service on the Board.

               All options granted hereunder shall be nonstatutory stock
options.

        2. Definitions. As used herein, the following definitions shall apply:

               (a) "Board" means the Board of Directors of the Company.

               (b) "Code" means the Internal Revenue Code of 1986, as amended.

               (c) "Common Stock" means the common stock of the Company.

               (d) "Company" means Brocade Communications Systems, Inc., a
Delaware corporation.

               (e) "Director" means a member of the Board.

               (f) "Disability" means total and permanent disability as defined
in section 22(e)(3) of the Code.

               (g) "Employee" means any person, including officers and
Directors, employed by the Company or any Parent or Subsidiary of the Company.
The payment of a Director's fee by the Company shall not be sufficient in and of
itself to constitute "employment" by the Company.

               (h) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.

               (i) "Fair Market Value" means, as of any date, the value of
Common Stock determined as follows:

                      (i) If the Common Stock is listed on any established stock
exchange or a national market system, including without limitation the Nasdaq
National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its
Fair Market Value shall be the closing sales price for such stock (or the
closing bid, if no sales were reported) as quoted on such exchange or system


<PAGE>   2
for the last market trading day prior to the time of determination as reported
in The Wall Street Journal or such other source as the Administrator deems
reliable;

                      (ii) If the Common Stock is regularly quoted by a
recognized securities dealer but selling prices are not reported, the Fair
Market Value of a Share of Common Stock shall be the mean between the high bid
and low asked prices for the Common Stock for the last market trading day prior
to the time of determination, as reported in The Wall Street Journal or such
other source as the Board deems reliable; or

                      (iii) In the absence of an established market for the
Common Stock, the Fair Market Value thereof shall be determined in good faith by
the Board.

               (j) "Inside Director" means a Director who is an Employee.

               (k) "Option" means a stock option granted pursuant to the Plan.

               (l) "Optioned Stock" means the Common Stock subject to an Option.

               (m) "Optionee" means a Director who holds an Option.

               (n) "Outside Director" means a Director who is not an Employee;
provided, however, that the term "Outside Director" shall not include Mark
Leslie or Larry Sonsini until January 31, 2002.

               (o) "Parent" means a "parent corporation," whether now or
hereafter existing, as defined in Section 424(e) of the Code.

               (p) "Plan" means this 1999 Director Option Plan.

               (q) "Share" means a share of the Common Stock, as adjusted in
accordance with Section 10 of the Plan.

               (r) "Subsidiary" means a "subsidiary corporation," whether now or
hereafter existing, as defined in Section 424(f) of the Internal Revenue Code of
1986.

        3. Stock Subject to the Plan. Subject to the provisions of Section 10 of
the Plan, the maximum aggregate number of Shares which may be optioned and sold
under the Plan is 200,000 Shares (the "Pool"). The Shares may be authorized, but
unissued, or reacquired Common Stock.

               If an Option expires or becomes unexercisable without having been
exercised in full, the unpurchased Shares which were subject thereto shall
become available for future grant or sale under the Plan (unless the Plan has
terminated). Shares that have actually been issued under the Plan shall not be
returned to the Plan and shall not become available for future distribution
under the Plan.


                                      -2-


<PAGE>   3
        4. Administration and Grants of Options under the Plan.

               (a) Procedure for Grants. All grants of Options to Outside
Directors under this Plan shall be automatic and nondiscretionary and shall be
made strictly in accordance with the following provisions; provided, however,
that the Board may, in its sole discretion, provide that certain Outside
Directors are not eligible to receive grants of Options for specified periods of
time.

                      (i) No person shall have any discretion to select which
Outside Directors shall be granted Options or to determine the number of Shares
to be covered by Options.

                      (ii) Each Outside Director shall be automatically granted
an Option to purchase 2,500 Shares (the "First Option") on the date on which
such person first becomes an Outside Director, whether through election by the
shareholders of the Company or appointment by the Board to fill a vacancy;
provided, however, that an Inside Director who ceases to be an Inside Director
but who remains a Director shall not receive a First Option.

                      (iii) Each Outside Director shall be automatically granted
an Option to purchase 2,500 Shares (a "Subsequent Option") on the first day of
each quarter of each year provided he or she is then an Outside Director and if
as of such date, he or she shall have served on the Board for at least the
preceding month.

                      (iv) Notwithstanding the provisions of subsections (ii)
and (iii) hereof, any exercise of an Option granted before the Company has
obtained shareholder approval of the Plan in accordance with Section 16 hereof
shall be conditioned upon obtaining such shareholder approval of the Plan in
accordance with Section 16 hereof.

                      (v) The terms of a First Option granted hereunder shall be
as follows:

                           (A) the term of the First Option shall be ten (10)
years.

                           (B) the First Option shall be exercisable only while
the Outside Director remains a Director of the Company, except as set forth in
Sections 8 and 10 hereof.

                           (C) the exercise price per Share shall be 100% of the
Fair Market Value per Share on the date of grant of the First Option.

                           (D) subject to Section 10 hereof, the First Option
shall become exercisable as to one-hundred percent of the Shares subject to the
First Option on each anniversary of its date of grant, provided that the
Optionee continues to serve as a Director on such dates.


                                       -3-


<PAGE>   4
                      (vi) The terms of a Subsequent Option granted hereunder
shall be as follows:

                           (A) the term of the Subsequent Option shall be ten
(10) years.

                           (B) the Subsequent Option shall be exercisable only
while the Outside Director remains a Director of the Company, except as set
forth in Sections 8 and 10 hereof.

                           (C) the exercise price per Share shall be 100% of the
Fair Market Value per Share on the date of grant of the Subsequent Option.

                           (D) subject to Section 10 hereof, the Subsequent
Option shall become exercisable as to one-hundred percent of the Shares subject
to the Subsequent Option on each anniversary of its date of grant, provided that
the Optionee continues to serve as a Director on such dates.

                      (vii) In the event that any Option granted under the Plan
would cause the number of Shares subject to outstanding Options plus the number
of Shares previously purchased under Options to exceed the Pool, then the
remaining Shares available for Option grant shall be granted under Options to
the Outside Directors on a pro rata basis. No further grants shall be made until
such time, if any, as additional Shares become available for grant under the
Plan through action of the Board or the shareholders to increase the number of
Shares which may be issued under the Plan or through cancellation or expiration
of Options previously granted hereunder.

        5. Eligibility. Options may be granted only to Outside Directors. All
Options shall be automatically granted in accordance with the terms set forth in
Section 4 hereof.

               The Plan shall not confer upon any Optionee any right with
respect to continuation of service as a Director or nomination to serve as a
Director, nor shall it interfere in any way with any rights which the Director
or the Company may have to terminate the Director's relationship with the
Company at any time.

        6. Term of Plan. The Plan shall become effective upon the earlier to
occur of its adoption by the Board or its approval by the shareholders of the
Company as described in Section 16 of the Plan. It shall continue in effect for
a term of ten (10) years unless sooner terminated under Section 11 of the Plan.

        7. Form of Consideration. The consideration to be paid for the Shares to
be issued upon exercise of an Option, including the method of payment, shall
consist of (i) cash, (ii) check, (iii) other shares which (x) in the case of
Shares acquired upon exercise of an option, have been owned by the Optionee for
more than six (6) months on the date of surrender, and (y) have a Fair Market
Value on the date of surrender equal to the aggregate exercise price of the
Shares as to which


                                      -4-


<PAGE>   5
said Option shall be exercised, (iv) consideration received by the Company under
a cashless exercise program implemented by the Company in connection with the
Plan, or (v) any combination of the foregoing methods of payment.

        8. Exercise of Option.

               (a) Procedure for Exercise; Rights as a Shareholder. Any Option
granted hereunder shall be exercisable at such times as are set forth in Section
4 hereof; provided, however, that no Options shall be exercisable until
shareholder approval of the Plan in accordance with Section 16 hereof has been
obtained.

               An Option may not be exercised for a fraction of a Share.

               An Option shall be deemed to be exercised when written notice of
such exercise has been given to the Company in accordance with the terms of the
Option by the person entitled to exercise the Option and full payment for the
Shares with respect to which the Option is exercised has been received by the
Company. Full payment may consist of any consideration and method of payment
allowable under Section 7 of the Plan. Until the issuance (as evidenced by the
appropriate entry on the books of the Company or of a duly authorized transfer
agent of the Company) of the stock certificate evidencing such Shares, no right
to vote or receive dividends or any other rights as a shareholder shall exist
with respect to the Optioned Stock, notwithstanding the exercise of the Option.
A share certificate for the number of Shares so acquired shall be issued to the
Optionee as soon as practicable after exercise of the Option. No adjustment
shall be made for a dividend or other right for which the record date is prior
to the date the stock certificate is issued, except as provided in Section 10 of
the Plan.

               Exercise of an Option in any manner shall result in a decrease in
the number of Shares which thereafter may be available, both for purposes of the
Plan and for sale under the Option, by the number of Shares as to which the
Option is exercised.

               (b) Termination of Continuous Status as a Director. Subject to
Section 10 hereof, in the event an Optionee's status as a Director terminates
(other than upon the Optionee's death or Disability), the Optionee may exercise
his or her Option, but only within three (3) months following the date of such
termination, and only to the extent that the Optionee was entitled to exercise
it on the date of such termination (but in no event later than the expiration of
its ten (10) year term). To the extent that the Optionee was not entitled to
exercise an Option on the date of such termination, and to the extent that the
Optionee does not exercise such Option (to the extent otherwise so entitled)
within the time specified herein, the Option shall terminate.

               (c) Disability of Optionee. In the event Optionee's status as a
Director terminates as a result of Disability, the Optionee may exercise his or
her Option, but only within twelve (12) months following the date of such
termination, and only to the extent that the Optionee was entitled


                                      -5-


<PAGE>   6
to exercise it on the date of such termination (but in no event later than the
expiration of its ten (10) year term). To the extent that the Optionee was not
entitled to exercise an Option on the date of termination, or if he or she does
not exercise such Option (to the extent otherwise so entitled) within the time
specified herein, the Option shall terminate.

               (d) Death of Optionee. In the event of an Optionee's death, the
Optionee's estate or a person who acquired the right to exercise the Option by
bequest or inheritance may exercise the Option, but only within twelve (12)
months following the date of death, and only to the extent that the Optionee was
entitled to exercise it on the date of death (but in no event later than the
expiration of its ten (10) year term). To the extent that the Optionee was not
entitled to exercise an Option on the date of death, and to the extent that the
Optionee's estate or a person who acquired the right to exercise such Option
does not exercise such Option (to the extent otherwise so entitled) within the
time specified herein, the Option shall terminate.

        9. Non-Transferability of Options. The Option may not be sold, pledged,
assigned, hypothecated, transferred, or disposed of in any manner other than by
will or by the laws of descent or distribution and may be exercised, during the
lifetime of the Optionee, only by the Optionee.

        10. Adjustments Upon Changes in Capitalization, Dissolution, Merger or
Asset Sale.

               (a) Changes in Capitalization. Subject to any required action by
the shareholders of the Company, the number of Shares covered by each
outstanding Option, the number of Shares which have been authorized for issuance
under the Plan but as to which no Options have yet been granted or which have
been returned to the Plan upon cancellation or expiration of an Option, as well
as the price per Share covered by each such outstanding Option, and the number
of Shares issuable pursuant to the automatic grant provisions of Section 4
hereof shall be proportionately adjusted for any increase or decrease in the
number of issued Shares resulting from a stock split, reverse stock split, stock
dividend, combination or reclassification of the Common Stock, or any other
increase or decrease in the number of issued Shares effected without receipt of
consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration". Except as expressly provided herein, no
issuance by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall affect, and no adjustment
by reason thereof shall be made with respect to, the number or price of Shares
subject to an Option.

               (b) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, to the extent that an Option has not
been previously exercised, it shall terminate immediately prior to the
consummation of such proposed action.

               (c) Merger or Asset Sale. In the event of a merger of the Company
with or into another corporation or the sale of substantially all of the assets
of the Company, outstanding Options may be assumed or equivalent options may be
substituted by the successor corporation or a Parent or


                                      -6-


<PAGE>   7
Subsidiary thereof (the "Successor Corporation"). If an Option is assumed or
substituted for, the Option or equivalent option shall continue to be
exercisable as provided in Section 4 hereof for so long as the Optionee serves
as a Director or a director of the Successor Corporation. Following such
assumption or substitution, if the Optionee's status as a Director or director
of the Successor Corporation, as applicable, is terminated other than upon a
voluntary resignation by the Optionee, the Option or option shall become fully
exercisable, including as to Shares for which it would not otherwise be
exercisable. Thereafter, the Option or option shall remain exercisable in
accordance with Sections 8(b) through (d) above.

        If the Successor Corporation does not assume an outstanding Option or
substitute for it an equivalent option, the Option shall become fully vested and
exercisable, including as to Shares for which it would not otherwise be
exercisable. In such event the Board shall notify the Optionee that the Option
shall be fully exercisable for a period of thirty (30) days from the date of
such notice, and upon the expiration of such period the Option shall terminate.

        For the purposes of this Section 10(c), an Option shall be considered
assumed if, following the merger or sale of assets, the Option confers the right
to purchase or receive, for each Share of Optioned Stock subject to the Option
immediately prior to the merger or sale of assets, the consideration (whether
stock, cash, or other securities or property) received in the merger or sale of
assets by holders of Common Stock for each Share held on the effective date of
the transaction (and if holders were offered a choice of consideration, the type
of consideration chosen by the holders of a majority of the outstanding Shares).
If such consideration received in the merger or sale of assets is not solely
common stock of the successor corporation or its Parent, the Administrator may,
with the consent of the successor corporation, provide for the consideration to
be received upon the exercise of the Option, for each Share of Optioned Stock
subject to the Option, to be solely common stock of the successor corporation or
its Parent equal in fair market value to the per share consideration received by
holders of Common Stock in the merger or sale of assets.

        11. Amendment and Termination of the Plan.

               (a) Amendment and Termination. The Board may at any time amend,
alter, suspend, or discontinue the Plan, but no amendment, alteration,
suspension, or discontinuation shall be made which would impair the rights of
any Optionee under any grant theretofore made, without his or her consent. In
addition, to the extent necessary and desirable to comply with any applicable
law, regulation or stock exchange rule, the Company shall obtain shareholder
approval of any Plan amendment in such a manner and to such a degree as
required.

               (b) Effect of Amendment or Termination. Any such amendment or
termination of the Plan shall not affect Options already granted and such
Options shall remain in full force and effect as if this Plan had not been
amended or terminated.


                                      -7-


<PAGE>   8
        12. Time of Granting Options. The date of grant of an Option shall, for
all purposes, be the date determined in accordance with Section 4 hereof.

        13. Conditions Upon Issuance of Shares. Shares shall not be issued
pursuant to the exercise of an Option unless the exercise of such Option and the
issuance and delivery of such Shares pursuant thereto shall comply with all
relevant provisions of law, including, without limitation, the Securities Act of
1933, as amended, the Exchange Act, the rules and regulations promulgated
thereunder, state securities laws, and the requirements of any stock exchange
upon which the Shares may then be listed, and shall be further subject to the
approval of counsel for the Company with respect to such compliance.

               As a condition to the exercise of an Option, the Company may
require the person exercising such Option to represent and warrant at the time
of any such exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares, if, in the
opinion of counsel for the Company, such a representation is required by any of
the aforementioned relevant provisions of law.

               Inability of the Company to obtain authority from any regulatory
body having jurisdiction, which authority is deemed by the Company's counsel to
be necessary to the lawful issuance and sale of any Shares hereunder, shall
relieve the Company of any liability in respect of the failure to issue or sell
such Shares as to which such requisite authority shall not have been obtained.

        14. Reservation of Shares. The Company, during the term of this Plan,
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.

        15. Option Agreement. Options shall be evidenced by written option
agreements in such form as the Board shall approve.

        16. Shareholder Approval. The Plan shall be subject to approval by the
shareholders of the Company within twelve (12) months after the date the Plan is
adopted. Such shareholder approval shall be obtained in the degree and manner
required under applicable state and federal law and any stock exchange rules.


                                      -8-


<PAGE>   9
                      BROCADE COMMUNICATIONS SYSTEMS, INC.


                            DIRECTOR OPTION AGREEMENT



        Brocade Communications Systems, Inc., (the "Company"), has granted to
(the "Optionee"), an option to purchase a total of [ ] shares of the Company's
Common Stock (the "Optioned Stock"), at the price determined as provided herein,
and in all respects subject to the terms, definitions and provisions of the
Company's 1999 Director Option Plan (the "Plan") adopted by the Company which is
incorporated herein by reference. The terms defined in the Plan shall have the
same defined meanings herein. 

        1. Nature of the Option. This Option is a nonstatutory option and is not
intended to qualify for any special tax benefits to the Optionee.

        2. Exercise Price. The exercise price is $_______ for each share of
Common Stock. 

        3. Exercise of Option. This Option shall be exercisable during its term
in accordance with the provisions of Section 8 of the Plan as follows: 

            (a) Right to Exercise. 

                (i) This Option shall become exercisable in installments
cumulatively with respect to [ ] percent (%) of the Optioned Stock one year
after the date of grant, and as to an additional [ ] percent (%) of the Optioned
Stock on each anniversary of the date of grant, so that one hundred percent
(100%) of the Optioned Stock shall be exercisable [ ] years after the date of
grant; provided, however, that in no event shall any Option be exercisable prior
to the date the stockholders of the Company approve the Plan. 

                (ii) This Option may not be exercised for a fraction of a share.

                (iii) In the event of Optionee's death, disability or other
termination of service as a Director, the exercisability of the Option is
governed by Section 8 of the Plan.

            (b) Method of Exercise. This Option shall be exercisable by written
notice which shall state the election to exercise the Option and the number of
Shares in respect of which the Option is being exercised. Such written notice,
in the form attached hereto as Exhibit A, shall be signed by the Optionee and
shall be delivered in person or by certified mail to the Secretary of the
Company. The written notice shall be accompanied by payment of the exercise
price.


<PAGE>   10

        4. Method of Payment. Payment of the exercise price shall be by any of
the following, or a combination thereof, at the election of the Optionee:

            (a) cash; 

            (b) check; or 

            (c) surrender of other shares which (x) in the case of Shares
acquired upon exercise of an Option, have been owned by the Optionee for more
than six (6) months on the date of surrender, and (y) have a Fair Market Value
on the date of surrender equal to the aggregate exercise price of the Shares as
to which said Option shall be exercised; or

                (iv) delivery of a properly executed exercise notice together
with such other documentation as the Company and the broker, if applicable,
shall require to effect an exercise of the Option and delivery to the Company of
the sale or loan proceeds required to pay the exercise price. 

        5. Restrictions on Exercise. This Option may not be exercised if the
issuance of such Shares upon such exercise or the method of payment of
consideration for such shares would constitute a violation of any applicable
federal or state securities or other law or regulations, or if such issuance
would not comply with the requirements of any stock exchange upon which the
Shares may then be listed. As a condition to the exercise of this Option, the
Company may require Optionee to make any representation and warranty to the
Company as may be required by any applicable law or regulation. 

        6. Non-Transferability of Option. This Option may not be transferred in
any manner otherwise than by will or by the laws of descent or distribution and
may be exercised during the lifetime of Optionee only by the Optionee. The terms
of this Option shall be binding upon the executors, administrators, heirs,
successors and assigns of the Optionee. 

        7. Term of Option. This Option may not be exercised more than ten (10)
years from the date of grant of this Option, and may be exercised during such
period only in accordance with the Plan and the terms of this Option. 

        8. Taxation Upon Exercise of Option. Optionee understands that, upon
exercise of this Option, he or she will recognize income for tax purposes in an
amount equal to the excess of the then Fair Market Value of the Shares purchased
over the exercise price paid for such Shares. Since the Optionee is subject to
Section 16(b) of the Securities Exchange Act of 1934, as amended, under certain
limited circumstances the measurement and timing of such income (and the
commencement of any capital gain holding period) may be deferred, and the
Optionee is advised to contact a tax advisor concerning the application of
Section 83 in general and the availability a Section 83(b) election in
particular in connection with the exercise of the Option. Upon a resale of such
Shares by the Optionee, any difference between the sale price and the Fair
Market Value of the Shares on the date of exercise of the Option, to the extent
not included in income as described above, will be treated as capital gain or
loss.




                                      -2-

<PAGE>   11

        DATE OF GRANT:  ______________

        BROCADE COMMUNICATIONS SYSTEMS, INC.,

        a Delaware corporation

        By:_________

        Optionee acknowledges receipt of a copy of the Plan, a copy of which is
attached hereto, and represents that he or she is familiar with the terms and
provisions thereof, and hereby accepts this Option subject to all of the terms
and provisions thereof. Optionee hereby agrees to accept as binding, conclusive
and final all decisions or interpretations of the Board upon any questions
arising under the Plan.

        Dated: ____________________

        ___________________________

        Optionee









                                       -3-
<PAGE>   12


                                    EXHIBIT A



                         DIRECTOR OPTION EXERCISE NOTICE


        Brocade Communications Systems, Inc.
        1901 Guadalupe Parkway
        San Jose CA  95131

        Attention:  Corporate Secretary

1.      Exercise of Option. The undersigned ("Optionee") hereby elects to
        exercise Optionee's option to purchase ______ shares of the Common Stock
        (the "Shares") of Brocade Communications Systems, Inc. (the "Company")
        under and pursuant to the Company's 1999 Director Option Plan and the
        Director Option Agreement dated _______________ (the "Agreement").

2.      Representations of Optionee. Optionee acknowledges that Optionee has
        received, read and understood the Agreement.

3.      Federal Restrictions on Transfer. Optionee understands that the Shares
        must be held indefinitely unless they are registered under the
        Securities Act of 1933, as amended (the "1933 Act"), or unless an
        exemption from such registration is available, and that the
        certificate(s) representing the Shares may bear a legend to that effect.
        Optionee understands that the Company is under no obligation to register
        the Shares and that an exemption may not be available or may not permit
        Optionee to transfer Shares in the amounts or at the times proposed by
        Optionee.

4.      Tax Consequences. Optionee understands that Optionee may suffer adverse
        tax consequences as a result of Optionee's purchase or disposition of
        the Shares. Optionee represents that Optionee has consulted with any tax
        consultant(s) Optionee deems advisable in connection with the purchase
        or disposition of the Shares and that Optionee is not relying on the
        Company for any tax advice.

5.      Delivery of Payment. Optionee herewith delivers to the Company the
        aggregate purchase price for the Shares that Optionee has elected to
        purchase and has made provision for the payment of any federal or state
        withholding taxes required to be paid or withheld by the Company.

6.      Entire Agreement. The Agreement is incorporated herein by reference.
        This Exercise Notice and the Agreement constitute the entire agreement
        of the parties and supersede in their entirety all prior undertakings
        and agreements of the Company and Optionee




                                      -4-

<PAGE>   13

        with respect to the subject matter hereof. This Exercise Notice and the
        Agreement are governed by Delaware law except for that body of law
        pertaining to conflict of laws.

Submitted by:                                Accepted by:

OPTIONEE:                                    BROCADE COMMUNICATIONS SYSTEMS,
                                             INC.



______________________________               By:______________________________

                                             Its:_____________________________

                                             Address: 1901 Guadalupe Parkway
                                             San Jose CA  95131

Dated:______________________________         Dated:___________________________



                                      -5-