SC TO-I

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Schedule TO
(Rule 13e-4)
Tender Offer Statement Under Section 14(d)(1) or 13(e)(1)
of the Securities Exchange Act of 1934

BROCADE COMMUNICATIONS SYSTEMS, INC.

(Name of Subject Company (issuer) and Filing Person (Offeror))

Options to Purchase Common Stock, Par Value $0.001 Per Share
(Title of Class of Securities)

111824 108
(CUSIP Number of Class of Securities Underlying Common Stock)

Gregory L. Reyes
Chairman and Chief Executive Officer
Brocade Communications Systems, Inc.
1745 Technology Drive

San Jose, CA 95110
Tel: (408) 487-8000
(Name, address and telephone number of person authorized to receive notices and
communications on behalf of filing person)

Copies to:
Larry W. Sonsini
Katharine A. Martin
John E. Aguirre
Wilson Sonsini Goodrich & Rosati,
Professional Corporation
650 Page Mill Road
Palo Alto, CA 94304-1050
(650) 493-9300

CALCULATION OF FILING FEE

Transaction Valuation*	Amount of Filing Fee
$38,095,180	$	3,505

* Calculated solely for purposes of determining the filing fee. This amount assumes that options to purchase 67,328,023 shares of common stock of Brocade Communications Systems, Inc. having an aggregate value of $38,095,180 as of December 9, 2002 will be exchanged or cancelled pursuant to this offer. The aggregate value of such options was calculated based on the Black-Scholes option pricing model. The amount of the filing fee, calculated in accordance with Rule 0-11(b) of the Securities Exchange Act of 1934, as amended, equals $92 for each $1,000,000 of the value of the transaction.

o Check the box if any part of the fee is offset as provided by Rule 0-11(a)(2) and identify the filing with which the offsetting fee was previously paid. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

Amount Previously Paid:
Form or Registration No.:
Filing party:
Date filed: Not applicable.
Not applicable.
Not applicable.
Not applicable.

o Check the box if the filing relates solely to preliminary communications made before the commencement of a tender offer.

Check the appropriate boxes below to designate any transactions to which the statement relates:

o
x
o
o third party tender offer subject to Rule 14d-1.
issuer tender offer subject to Rule 13e-4.
going-private transaction subject to Rule 13e-3.
amendment to Schedule 13D under Rule 13d-2.

Check the following box if the filing is a final amendment reporting the results of the tender offer:    o

TABLE OF CONTENTS

	Item 1. Summary Term Sheet.
	Item 2. Subject Company Information.
	Item 3. Identity and Background of Filing Person.
	Item 4. Terms of the Transaction.
	Item 5. Past Contacts, Transactions, Negotiations and Arrangements.
	Item 6. Purposes of the Transaction and Plans or Proposals.
	Item 7. Source and Amount of Funds or Other Consideration.
	Item 8. Interest In Securities of the Subject Company.
	Item 9. Person/Assets, Retained, Employed, Compensated or Used.
	Item 10. Financial Statements.
	Item 11. Additional Information.
	Item 12. Exhibits.
	Item 13. Information Required by Schedule 13E-3.
SIGNATURE
INDEX TO EXHIBITS
EXHIBIT (A)(1)(A)
EXHIBIT (A)(1)(B)
EXHIBIT (A)(1)(C)
EXHIBIT (A)(1)(D)
EXHIBIT (A)(1)(E)
EXHIBIT (A)(1)(F)
EXHIBIT (A)(1)(G)
EXHIBIT (A)(1)(H)

     This Tender Offer Statement on Schedule TO relates to an offer by Brocade Communications Systems, Inc., a Delaware corporation (“Brocade” or the “Company”), to exchange (the “Exchange Offer”) options to purchase an aggregate of 67,328,023 shares of Brocade’s common stock held by eligible employees, whether vested or unvested, that have been granted under its 1999 Stock Plan and its 1999 Nonstatutory Stock Option Plan (i) that have exercise prices equal to or greater than $12.00 per share and (ii) that have been granted on or after June 8, 2002 (the “Eligible Options”). These Eligible Options may be exchanged for new options (the “New Options”) that will be granted under the terms and subject to the conditions set forth in: (i) the Offer to Exchange Certain Outstanding Options for New Options, dated December 9, 2002 (the “Offer to Exchange” or “Offer”); (ii) the related Letter from Gregory L. Reyes, dated December 9, 2002; (iii) the Election Form; and (iv) the Withdrawal Form. These documents, as they may be amended or supplemented from time to time, together constitute the “Disclosure Documents” and are attached to this Schedule TO as Exhibits (a)(1)(a) through (a)(1)(d), respectively. An “eligible employee” refers to all persons who are employees, including officers, of Brocade as of December 9, 2002 and remain employees through the cancellation date, but does not include any employees who have received termination notices from Brocade or who have delivered termination notices to Brocade prior to the expiration date.

     The information in the Disclosure Documents, including all schedules and annexes to the Disclosure Documents, is incorporated by reference in answer to the items required in this Schedule TO.

Item 1. Summary Term Sheet.

     The information set forth under the caption “Frequently Asked Questions” in the Offer to Exchange is incorporated herein by reference.

Item 2. Subject Company Information.

     (a)  Name and Address.

     Brocade is the issuer of the securities subject to the Exchange Offer. The address of Brocade’s principal executive office is 1745 Technology Drive, San Jose, CA 95110 and the telephone number at that address is (408) 487-8000. The information set forth in the Offer to Exchange under the caption “The Offer—Information concerning Brocade” is incorporated herein by reference.

     (b)  Securities.

     The subject class of securities consists of the Eligible Options. The actual number of shares of common stock subject to the New Options to be issued in the Exchange Offer will depend on the number of shares of common stock subject to the outstanding options tendered by eligible employees and accepted for exchange and cancelled. The information set forth in the Offer to Exchange under the captions “Frequently Asked Questions” and “Risks of Participating in the Offer” and the sections under the caption “The Offer” entitled “Number of options; expiration date,” “Acceptance of options for exchange and issuance of new options,” and “Source and amount of consideration; terms of new options” is incorporated herein by reference.

     (c)  Trading Market and Price.

     The information set forth in the Offer to Exchange under the caption “The Offer—Price range of shares underlying the options” is incorporated herein by reference.

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Item 3. Identity and Background of Filing Person.

     (a)  Name and Address.

     The filing person is the issuer. The information set forth under Item 2(a) above is incorporated by reference.

     Pursuant to General Instruction C to Schedule TO, the information set forth on Schedule A to the Offer to Exchange is incorporated herein by reference.

     Item 4. Terms of the Transaction.

     (a)  Material Terms.

     The information set forth in the Offer to Exchange under the captions “Frequently Asked Questions” and the sections under the caption “The Offer” entitled “Eligibility,” “Number of options; expiration date,” “Procedures for electing to exchange options,” “Withdrawal rights and change of election,” “Acceptance of options for exchange and issuance of new options,” “Conditions of the offer,” “Source and amount of consideration; terms of new options,” “Price range of shares underlying the options,” “Status of options acquired by us in the offer; accounting consequences of the offer,” “Legal matters; regulatory approvals,” “Material U.S. federal income tax consequences,” Schedules C through N and “Extension of offer; termination; amendment” is incorporated herein by reference.

     (b)  Purchases.

     The information set forth in the Offer to Exchange under the caption “The Offer—Interests of directors and officers; transactions and arrangements concerning the options” is incorporated herein by reference.

Item 5. Past Contacts, Transactions, Negotiations and Arrangements.

     (e)  Agreements Involving the Subject Company’s Securities.

     The information set forth in the Offer to Exchange under the caption “The Offer—Interests of directors and officers; transactions and arrangements concerning the options” is incorporated by reference. The eligible option plans and related option agreements attached hereto as Exhibits (d)(1) through (d)(4) contain information regarding the subject securities.

Item 6. Purposes of the Transaction and Plans or Proposals.

     (a)  Purposes.

     The information set forth in the Offer to Exchange under the captions “Frequently Asked Questions” and “The Offer—Purpose of the offer” is incorporated herein by reference.

     (b)  Use of Securities Acquired.

     The information set forth in the Offer to Exchange under the captions “The Offer—Acceptance of options for exchange and issuance of new options” and “The Offer—Status of options acquired by us in the offer; accounting consequences of the offer” is incorporated herein by reference.

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     (c)  Plans.

     The information set forth in the Offer to Exchange under the captions “The Offer—Purpose of the offer” and the “The Offer—Information concerning Brocade” is incorporated herein by reference.

Item 7. Source and Amount of Funds or Other Consideration.

     (a)  Source of Funds.

     The information set forth in the Offer to Exchange under the captions “The Offer—Source and amount of consideration; terms of new options” is incorporated herein by reference.

     (b)  Conditions.

     Not applicable.

     (d)  Borrowed Funds.

     Not applicable.

Item 8. Interest In Securities of the Subject Company.

     (a)  Securities Ownership.

     The information set forth in the Offer to Exchange under the caption “The Offer—Interests of directors and executive officers; transactions and arrangements concerning the options” is incorporated herein by reference.

     (b)  Securities Transactions.

     The information set forth in the Offer to Exchange under the caption “The Offer—Interests of directors and executive officers; transactions and arrangements concerning the options” is incorporated herein by reference.

Item 9. Person/Assets, Retained, Employed, Compensated or Used.

     (a)  Solicitations or Recommendations.

     Not applicable.

Item 10. Financial Statements.

     (a)  Financial Information.

     The information set forth in Schedule B to the Offer to Exchange and in the Offer to Exchange under the captions “The Offer—Information concerning Brocade,” “The Offer—Financial statements,” and “The Offer—Additional information” is incorporated herein by reference. Brocade’s Annual Report on Form 10-K and the Quarterly Reports on Form 10-Q can also be accessed electronically on the SEC’s website at http://www.sec.gov.

-4-

     (b)  Pro Forma Information.

     Not applicable.

Item 11. Additional Information.

     (a)  Agreements, Regulatory Requirements and Legal Proceedings.

     The information set forth in the Offer to Exchange under the caption “The Offer—Legal matters; regulatory approvals” is incorporated herein by reference.

     (b)  Other Material Information.

     Not applicable.

Item 12. Exhibits.

Exhibit
Number	Description
(a)(1)(a)	Offer to Exchange Certain Outstanding Options for New Options, dated December 9, 2002.
(a)(1)(b)	Letter from Gregory L. Reyes, dated December 9, 2002.
(a)(1)(c)	Election Form.
(a)(1)(d)	Withdrawal Form.
(a)(1)(e)	Form of Promise to Grant Stock Option.
(a)(1)(f)	Stock Option Exchange Program Supplementary Australian Document.
(a)(1)(g)	Form of Option Calculator.
(a)(1)(h)	Press Release.
(b)	Not Applicable.
(d)(1)	1999 Nonstatutory Stock Option Plan (filed as Exhibit 4.4 to Brocade’s Registration Statement on Form S-8 filed on January 28, 2000, and incorporated herein by reference).
(d)(2)	Form of Stock Option Agreement for the 1999 Nonstatutory Stock Option Plan (included in Exhibit (d)(1) above).
(d)(3)	1999 Stock Plan (filed as Exhibit 4.1 to Brocade’s Registration Statement on Form S-8, filed on January 28, 2000, and incorporated herein by reference).
(d)(4)	Form of Stock Option Agreement for the 1999 Stock Plan (included in Exhibit (d)(3) above).
(g)	Not applicable.
(h)	Not applicable.

Item 13. Information Required by Schedule 13E-3.

     (a)  Not applicable.

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SIGNATURE

     After due inquiry and to the best of my knowledge and belief, I certify that the information set forth in this Schedule TO is true, complete and correct.

BROCADE COMMUNICATIONS SYSTEMS, INC.

/s/ Gregory L. Reyes

Gregory L. Reyes
Chairman and Chief Executive Officer

Date: December 9, 2002

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INDEX TO EXHIBITS

Exhibit
Number	Description
(a)(1)(a)	Offer to Exchange Certain Outstanding Options for New Options, dated December 9, 2002.
(a)(1)(b)	Letter from Gregory L. Reyes, dated December 9, 2002.
(a)(1)(c)	Election Form.
(a)(1)(d)	Withdrawal Form.
(a)(1)(e)	Form of Promise to Grant Stock Option.
(a)(1)(f)	Stock Option Exchange Program Supplementary Australian Document.
(a)(1)(g)	Form of Option Calculator.
(a)(1)(h)	Press Release.
(b)	Not Applicable.
(d)(1)	1999 Nonstatutory Stock Option Plan (filed as Exhibit 4.4 to Brocade’s Registration Statement on Form S-8 filed on January 28, 2000, and incorporated herein by reference).
(d)(2)	Form of Stock Option Agreement for the 1999 Nonstatutory Stock Option Plan (included in Exhibit (d)(1) above).
(d)(3)	1999 Stock Plan (filed as Exhibit 4.1 to Brocade’s Registration Statement on Form S-8, filed on January 28, 2000, and incorporated herein by reference).
(d)(4)	Form of Stock Option Agreement for the 1999 Stock Plan (included in Exhibit (d)(3) above).
(g)	Not applicable.
(h)	Not applicable.

EX-99.(A)(1)(A)

                                                               Exhibit (a)(1)(a)



                      BROCADE COMMUNICATIONS SYSTEMS, INC.



                                OFFER TO EXCHANGE
                           CERTAIN OUTSTANDING OPTIONS
                                 FOR NEW OPTIONS



   This document constitutes part of the prospectuses relating to the Brocade
     Communications Systems, Inc. 1999 Stock Plan and the 1999 Nonstatutory
         Stock Option Plan covering securities that have been registered
                       under the Securities Act of 1933.

                                DECEMBER 9, 2002

                      BROCADE COMMUNICATIONS SYSTEMS, INC.
                            OFFER TO EXCHANGE CERTAIN
                       OUTSTANDING OPTIONS FOR NEW OPTIONS



    THIS OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., PACIFIC TIME,
                   ON JANUARY 8, 2003 UNLESS WE EXTEND THEM.



      By this offer, we are giving you the opportunity to exchange all of your
outstanding options that have exercise prices equal to or greater than $12.00
per share, whether vested or unvested, for new options. You may participate in
this offer if you are an employee of Brocade Communications Systems, Inc. or our
subsidiaries (collectively referred to as Brocade, we, our or us). You may not
participate if you have received a termination notice from Brocade or if you
have delivered a termination notice to Brocade prior to the expiration of this
offer. Our non-employee directors may not participate in this offer.

      If you participate in this offer, the number of new options you receive
will depend on the date your exchanged options were granted. By exchanged
options, we mean any options that you exchange pursuant to this offer. Your
exchanged options will be exchanged for new options as follows:

      -     Exchanged options granted on or before March 15, 2000, will be
            replaced with new options at an exchange ratio of one (1) new option
            for every three (3) exchanged options.

      -     Exchanged options granted after March 15, 2000 and before April 17,
            2001, and options granted on April 17, 2001 as part of our
            Supplemental Stock Program ("supplemental options"), will be
            replaced with new options at an exchange ratio of one (1) new option
            for every two (2) exchanged options.

      -     Exchanged options granted after April 17, 2001, and exchanged
            options granted on April 17, 2001 other than supplemental options,
            will be replaced with new options at an exchange ratio of one (1)
            new option for every one (1) exchanged option.

      -     If Gregory L. Reyes, the Chairman and Chief Executive Officer of
            Brocade, elects to exchange any options, each exchanged option will
            be replaced with a new option at an exchange ratio of one (1) new
            option for every ten (10) exchanged options.

      If you participate in this offer, you must exchange (i) all options
granted to you that have exercise prices equal to or greater than $12.00 per
share and (ii) all options granted to you since June 8, 2002, regardless of
exercise price.

      We will grant new options on the first business day that is six months and
one day after the date on which we cancel the exchanged options. We refer to
this date as the new option grant date. We expect the new option grant date to
be July 10, 2003. Each new option will be subject to the same vesting schedule
as the exchanged option that it replaces. However, new options generally may not
be exercised until six months after the new option grant date. The exercise
price of new options will be equal to the closing price of our common stock on
the date of grant. However, the exercise price of new options granted to those
employees who are residents of Italy and France may be higher due to local laws
and the exercise price of new options granted to those employees who are Brocade
officers will not be less than 110% of the average closing price of our common
stock during the period of this offer.

      Our common stock is traded on the Nasdaq National Market under the symbol
"BRCD." On December 6, 2002, the closing price of our common stock was $4.96 per
share. You should evaluate current market quotes for our common stock, among
other factors, before deciding to participate in this offer.

      SEE "RISKS OF PARTICIPATING IN THE OFFER" BEGINNING ON PAGE 13 FOR A
DISCUSSION OF RISKS THAT YOU SHOULD CONSIDER BEFORE PARTICIPATING IN THIS OFFER.

                                    IMPORTANT

      If you participate in this offer, you must complete and sign the attached
election form, and fax it to Elizabeth Moore at fax number (408) 333-5900 or
hand deliver it to Elizabeth Moore at Office Number SJ6-2D12, 1745 Technology
Drive, San Jose, CA 95110 before 5:00 p.m., Pacific time, on January 8, 2003.
Only responses that are complete, signed and actually received by Elizabeth
Moore by the deadline will be accepted. Responses submitted by U.S. mail and
Federal Express are not recommended.

      Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
accuracy or adequacy of this offer. Any representation to the contrary is a
criminal offense.

      You should direct questions about this offer to Elizabeth Moore, Office
Number SJ6-2D12, Brocade Communications Systems, Inc., 1745 Technology Drive,
San Jose, CA 95110, telephone number (408) 392-5019.

                    OFFER TO EXCHANGE DATED DECEMBER 9, 2002.

      YOU SHOULD RELY ON THE INFORMATION CONTAINED IN THIS OFFER. WE HAVE NOT
AUTHORIZED ANYONE TO PROVIDE YOU WITH DIFFERENT INFORMATION. WE ARE NOT MAKING
AN OFFER OF THE NEW OPTIONS IN ANY JURISDICTION WHERE THE OFFER IS NOT
PERMITTED. HOWEVER, WE MAY, AT OUR DISCRETION, TAKE ANY ACTIONS NECESSARY FOR US
TO MAKE THE OFFER TO OPTION HOLDERS IN ANY OF THESE JURISDICTIONS. YOU SHOULD
NOT ASSUME THAT THE INFORMATION PROVIDED IN THIS OFFER IS ACCURATE AS OF ANY
DATE OTHER THAN THE DATE AS OF WHICH IT IS SHOWN, OR IF NO DATE IS OTHERWISE
INDICATED, THE DATE OF THIS OFFER. THIS OFFER SUMMARIZES VARIOUS DOCUMENTS AND
OTHER INFORMATION. THESE SUMMARIES ARE QUALIFIED IN THEIR ENTIRETY BY REFERENCE
TO THE DOCUMENTS AND INFORMATION TO WHICH THEY RELATE.

                                TABLE OF CONTENTS

                                                                                                                 
FREQUENTLY ASKED QUESTIONS......................................................................................      1
RISKS OF PARTICIPATING IN THE OFFER.............................................................................     13
THE OFFER.......................................................................................................     27
     1.   Eligibility...........................................................................................     27
     2.   Number of options; expiration date....................................................................     27
     3.   Purpose of the offer..................................................................................     28
     4.   Procedures for electing to exchange options...........................................................     29
     5.   Withdrawal rights and change of election..............................................................     31
     6.   Acceptance of options for exchange and issuance of new options........................................     31
     7.   Conditions of the offer...............................................................................     32
     8.   Price range of shares underlying the options..........................................................     34
     9.   Source and amount of consideration; terms of new options..............................................     35
     10.  Information concerning Brocade........................................................................     40
     11.  Interests of directors and executive officers; transactions and arrangements concerning the options...     41
     12.  Status of options acquired by us in the offer; accounting consequences of the offer...................     42
     13.  Legal matters; regulatory approvals...................................................................     42
     14.  Material U.S. federal income tax consequences.........................................................     43
     15.  Terms of the offer specific to participants residing in foreign jurisdictions.........................     45
     16.  Extension of offer; termination; amendment............................................................     45
     17.  Fees and expenses.....................................................................................     46
     18.  Additional information................................................................................     46
     19.  Financial statements..................................................................................     47
     20.  Miscellaneous.........................................................................................     47

SCHEDULE A    Information Concerning the Directors and Executive Officers of Brocade ...........................    A-1
SCHEDULE B    Financial Statements of Brocade Communications Systems, Inc.......................................    B-1
SCHEDULE C    Stock Option Exchange Program: A Guide to Issues in Australia.....................................    C-1
SCHEDULE D    Stock Option Exchange Program: A Guide to Issues in Canada........................................    D-1
SCHEDULE E    Stock Option Exchange Program: A Guide to Issues in China.........................................    E-1
SCHEDULE F    Stock Option Exchange Program: A Guide to Issues in Denmark.......................................    F-1
SCHEDULE G    Stock Option Exchange Program: A Guide to Issues in France........................................    G-1
SCHEDULE H    Stock Option Exchange Program: A Guide to Issues in Germany.......................................    H-1
SCHEDULE I    Stock Option Exchange Program: A Guide to Issues in Hong Kong.....................................    I-1
SCHEDULE J    Stock Option Exchange Program: A Guide to Issues in Italy.........................................    J-1
SCHEDULE K    Stock Option Exchange Program: A Guide to Issues in Japan.........................................    K-1
SCHEDULE L    Stock Option Exchange Program: A Guide to Issues in Korea.........................................    L-1
SCHEDULE M    Stock Option Exchange Program: A Guide to Issues in Singapore.....................................    M-1
SCHEDULE N    Stock Option Exchange Program: A Guide to Issues in Spain.........................................    N-1



                                      -i-

                           FREQUENTLY ASKED QUESTIONS

      The following are answers to some of the questions that you may have about
this offer. You should carefully read this entire offer, the accompanying letter
from our Chairman and Chief Executive Officer, Gregory L. Reyes, dated December
9, 2002, and the election and withdrawal forms together with their associated
instructions. This offer is made subject to the terms and conditions of these
documents as they may be amended. The information in this summary is not
complete. Additional important information is contained in the remainder of this
offer and the other offer documents. We have included in this summary references
to other sections in this offer to help you find a more complete description of
these topics.

Q1.   WHAT IS THE OFFER?

A1.   This offer is a voluntary opportunity for eligible employees to exchange
      outstanding options for new options. The following is a brief summary of
      the terms of this offer:

      ELIGIBLE OPTIONS

            -     All outstanding options with exercise prices equal to or
                  greater than $12.00 per share are eligible for exchange.

            -     If you participate in this offer, you must exchange (i) all of
                  your outstanding options with exercise prices equal to or
                  greater than $12.00 per share and (ii) all options granted on
                  or after June 8, 2002, regardless of exercise price. (Section
                  2)

      EXCHANGE RATIOS

            -     Exchanged options granted on or before March 15, 2000, will be
                  replaced with new options at an exchange ratio of one (1) new
                  option for every three (3) exchanged options.

            -     Exchanged options granted after March 15, 2000 and before
                  April 17, 2001, and supplemental options granted on April 17,
                  2001, will be replaced with new options at an exchange ratio
                  of one (1) new option for every two (2) exchanged options.

            -     Exchanged options granted after April 17, 2001, and exchanged
                  options granted on April 17, 2001 other than supplemental
                  options, will be replaced with new options at an exchange
                  ratio of one (1) new option for every one (1) exchanged
                  option.

            -     If Gregory L. Reyes, the Chairman and Chief Executive Officer
                  of Brocade, elects to exchange any options, each exchanged
                  option will be replaced with a new option at an exchange ratio
                  of one (1) new option for every ten (10) exchanged options.
                  (Section 2)

      For purposes of this offer, including the exchange ratios, the term
"option" refers to an option to purchase one share of Brocade common stock.

      NEW OPTIONS

            -     New options will be granted on the first business day that is
                  six months and one day after the cancellation date. We refer
                  to this date as the new option grant date. We expect that the
                  new option grant date will be July 10, 2003.

            -     All new options will be nonstatutory stock options.

      EXERCISE PRICE OF THE NEW OPTIONS

            -     The exercise price of new options will generally be equal to
                  the closing price of our common stock on the new option grant
                  date.

            -     For Brocade officers, the exercise price per share of all new
                  options will be equal to the closing price of our common stock
                  on the new option grant date. However, the exercise price of
                  new options granted to employees who are Brocade officers will
                  not be less than 110% of the average closing price of our
                  common stock during the period of this offer. Notwithstanding
                  the foregoing, if you are a resident of France or Italy, your
                  exercise price will be determined as described in Schedule G
                  or J, respectively. (Section 9)

      VESTING AND EXERCISEABILITY OF NEW OPTIONS

            -     The vesting schedule of each new option will be identical to
                  the vesting schedule of the exchanged option that it replaces.

            -     New options generally may not be exercised for a period of six
                  months following the new option grant date. This restriction
                  will expire in certain cases before the end of the six-month
                  period if your employment with Brocade terminates.
                  Notwithstanding the foregoing, if you are a resident of France
                  or China, you may be subject to additional restrictions as
                  described in Schedule G or E, respectively.

      TERMS USED IN THIS OFFER

            -     "offering period" refers to the period from the commencement
                  of this offer to the expiration date. We expect that this
                  period will commence on December 9, 2002 and end on January 8,
                  2003.

            -     "exchanged options" refers to all options that you exchange
                  pursuant to this offer.

            -     "new options" refers to the options issued pursuant to this
                  offer that replace your exchanged options.

            -     "expiration date" refers to the date that this offer expires.
                  We expect that the expiration date will be January 8, 2003 at
                  5:00 p.m., Pacific time. We may extend the expiration date at
                  our discretion. If we extend the offer, the term "expiration
                  date" will refer to the time and date at which the extended
                  offer expires.

            -     "cancellation date" refers to the first business day after the
                  expiration date. This is the date when exchanged options will
                  be cancelled. We expect that the cancellation date will be
                  January 9, 2003. If the expiration date is extended, then the
                  cancellation date will be similarly extended.

            -     "new option grant date" refers to the date that is six months
                  and one day after the cancellation date. This is the date when
                  new options will be granted. We expect that the new option
                  grant date will be July 10, 2003. If the expiration date is
                  extended, then the new option grant date will be similarly
                  extended.

Q2.   HOW DO I PARTICIPATE IN THIS OFFER?

A2.   If you choose to participate in this offer, you must do the following
      before 5:00 p.m., Pacific time, on January 8, 2003:

            1.    Properly complete and sign the attached election form.


                                                                             -2-

            2.    Deliver the completed and signed election form to Elizabeth
                  Moore either via facsimile at (408) 333-5900 or by hand at
                  Office Number SJ6-2D12, 1745 Technology Drive, San Jose, CA
                  95110.

      This is a one-time offer, and we will strictly enforce the election
      period. We reserve the right to reject any options tendered for exchange
      that we determine are not in appropriate form or that we determine are
      unlawful to accept. Subject to the terms and conditions of this offer, we
      will accept all properly tendered options promptly after the expiration of
      this offer. (Section 4)

      We may extend this offer. If we extend this offer, we will issue a press
      release, email or other communication disclosing the extension no later
      than 6:00 a.m., Pacific time, on the business day following the previously
      scheduled expiration date.

      THE DELIVERY OF ALL DOCUMENTS, INCLUDING ELECTION FORMS, IS AT YOUR RISK.
      WE INTEND TO CONFIRM THE RECEIPT OF YOUR ELECTION FORM AND/OR ANY
      WITHDRAWAL FORM WITHIN TWO (2) BUSINESS DAYS. IF YOU HAVE NOT RECEIVED A
      CONFIRMATION, YOU MUST CONFIRM THAT WE HAVE RECEIVED YOUR ELECTION FORM
      AND/OR ANY WITHDRAWAL FORM.

Q3.   WHY IS BROCADE MAKING THIS OFFER?

A3.   We believe that this offer will foster retention of our valuable employees
      and better align the interests of our employees and stockholders to
      maximize stockholder value. We issued the currently outstanding options to
      motivate our employees to perform at high levels and provide an effective
      means of recognizing employee contributions to our success. Some of our
      outstanding options, whether or not they are currently exercisable, have
      exercise prices that are significantly higher than the current market
      price for our stock. These options are commonly referred to as being
      "underwater." By making this offer, we intend to provide eligible
      employees with the opportunity to own options that over time may have a
      greater potential to increase in value. In addition, the new option
      pricing structure gives Brocade's officers further incentive to grow the
      business and meet our business objectives of maximizing stockholder value
      by setting a minimum exercise price for any new options they may receive
      in the exchange program.

      This offer is designed to decrease Brocade's option overhang, which is the
      number of options outstanding as a percent of the total number of common
      shares outstanding. The exchange ratios used in this offer are designed to
      help accomplish this goal. (Section 3)

Q4.   WHO MAY PARTICIPATE IN THIS OFFER?

A4.   You may participate in this offer if you are an employee of Brocade at the
      time of this offer and you remain an employee of Brocade through the
      cancellation date. You may not participate if you have received a
      termination notice from Brocade or if you have delivered a termination
      notice to Brocade prior to the expiration date. Non-employee members of
      our board of directors may not participate. To receive a new option, you
      must remain an employee of Brocade through the new option grant date.
      (Section 1)

Q5.   AM I REQUIRED TO PARTICIPATE IN THIS OPTION EXCHANGE?

A5.   No. Participation in this offer is completely voluntary. However, you
      cannot selectively exchange options. If you participate in this offer, you
      must exchange (i) all of your outstanding options with exercise prices
      equal to or greater than $12.00 per share and (ii) all options granted on
      or after June 8, 2002, regardless of exercise price. Options granted prior
      to June 8, 2002 with an exercise price that is


                                                                             -3-

below $12.00 per share are not eligible to participate and would not be included
in the exchange if you decide to participate in the offer with regard to your
eligible options. (Section 2)

Q6.   HOW MANY NEW OPTIONS WILL I RECEIVE FOR THE OPTIONS THAT I EXCHANGE?

A6.   As stated above, the number of new options that you receive will depend on
      the date your exchanged options were granted, as follows:

            -     Exchanged options granted on or before March 15, 2000, will be
                  replaced with new options at an exchange ratio of one (1) new
                  option for every three (3) exchanged options.

            -     Exchanged options granted after March 15, 2000 and before
                  April 17, 2001, and supplemental options granted on April 17,
                  2001, will be replaced with new options at an exchange ratio
                  of one (1) new option for every two (2) exchanged options.

            -     Exchanged options granted after April 17, 2001, and options
                  granted on April 17, 2001 other than supplemental options,
                  will be replaced with new options at an exchange ratio of one
                  (1) new option for every one (1) exchanged option.

            -     If Gregory L. Reyes, the Chairman and Chief Executive Officer
                  of Brocade, elects to exchange any options, each exchanged
                  option will be replaced with a new option at an exchange ratio
                  of one (1) new option for every ten (10) exchanged options.
                  (Section 2)

      Fractional options will be rounded up to the nearest whole option.

      Please note: The exchange ratios apply to each of your option grants
      separately. This means that the various options you have received may be
      subject to different exchange ratios. The number of new options that you
      receive will also be adjusted if there are any stock splits, subdivisions,
      combinations, stock dividends or similar events that occur after the
      cancellation date but before the new option grant date. (Section 2)

      EXAMPLE 1

      If you exchange 1,000 options originally granted on December 1, 1999, you
      will receive 334 new options.

      EXAMPLE 2

      If you exchange 1,000 options originally granted on September 30, 2000,
      you will receive 500 new options.

      EXAMPLE 3

      If you exchange 1,000 options originally granted on July 20, 2002, you
      will receive 1,000 new options.

      EXAMPLE 4

      If you exchange 1,000 options that were granted on April 17, 2001, you
      will receive 500 new options if the exchanged options were supplemental
      options. If the exchanged options were not supplemental options, you
      will receive 1,000 new options.


                                                                             -4-

      EXAMPLE 5

      If you exchange (i) 1,000 options that were granted on February 22, 2001
      with an exercise price of $20.00 per share, (ii) 1,000 options that were
      granted on June 11, 1999 with an exercise price of $15.00 per share and
      (iii) 1,000 options that were granted on September 30, 2002 with an
      exercise price of $8.00 per share, then all of the following apply:

            -     You must exchange all three options.

            -     In exchange for the options granted on February 22, 2001, you
                  will receive 500 new options.

            -     In exchange for the options granted on June 11, 1999, you will
                  receive 334 new options.

            -     In exchange for the options granted on September 30, 2002, you
                  will receive 1,000 new options.

      All new options will be nonstatutory stock options. (Sections 2 and 6)

Q7.   WHY ISN'T THE EXCHANGE RATIO SIMPLY ONE-FOR-ONE?

A7.   Our stock option exchange program must balance the interests of both
      employees and stockholders. The exchange ratios selected for this offer
      will decrease the total number of options outstanding and will benefit
      stockholders by decreasing potential stockholder dilution. (Section 3)

Q8.   WHAT WILL BE THE EXERCISE PRICE OF MY NEW OPTIONS?

A8.   The exercise price per share of the new options will be the closing price
      of our common stock on the new option grant date, which is expected to be
      July 10, 2003. However, the exercise price per share of new options
      granted to employees who are Brocade officers will not be less than 110%
      of the average closing price of Brocade common stock during the offering
      period (see Q&A 1 above). Notwithstanding the foregoing, if you are a
      resident of France or Italy, your exercise price will be determined as
      described in Schedule G or J, respectively.

      We cannot predict the exercise price of the new options. Because we will
      grant new options on the first business day that is six months and one day
      after the cancellation date, the new options may have a higher exercise
      price than some or all of your current options. (Section 9)

Q9.   ARE THERE ANY RESTRICTIONS ON WHEN I CAN EXERCISE ANY OF THE NEW OPTIONS
      THAT ARE GRANTED TO ME?

A9.   Yes. Your new options generally may not be exercised until six months
      after the new option grant date. Since the new option grant date is
      expected to be July 10, 2003, the six-month restriction is expected to
      expire on January 10, 2004. If your employment with Brocade continues,
      your new options will continue to vest while subject to the six-month
      restriction. However, if Brocade terminates your employment other than for
      cause or if your employment terminates due to your death or permanent
      disability, this six-month restriction will expire on your termination
      date. If you voluntarily leave Brocade or your employment with Brocade
      terminates for cause, this six-month restriction will not expire early.
      Your new options will stop vesting as of your termination date, but the
      six-month restriction will continue during this time. (Section 9)

      EXAMPLE 1

      You voluntarily terminate your employment with Brocade or are terminated
      for cause on September 15, 2003, two months after the expected new option
      grant date. Your option agreement


                                                                             -5-

      allows you to exercise the new options for three months after you
      terminate employment with Brocade. You may not exercise your new options
      because the three month post-termination exercise period will expire
      before the six-month restriction on exercising the new options expires.

      EXAMPLE 2

      You voluntarily terminate your employment with Brocade or are terminated
      for cause on December 15, 2003, five months after the expected new option
      grant date. Your option agreement allows you to exercise the new options
      for three months after you terminate employment with Brocade. You may
      exercise your new options between January 10, 2004 (the expiration of the
      six-month restriction on exercising new options) and before March 15, 2004
      (three months after your voluntary termination date), but only to the
      extent that your options were vested at termination.

      EXAMPLE 3

      You are terminated without cause (e.g., as part of a workforce reduction).
      Your option agreement allows you to exercise your new options for three
      months after you terminate employment with Brocade. Therefore, you may
      exercise your new option immediately after your termination to the extent
      the new option is vested.

      EXAMPLE 4

      Your employment terminates because of your death or permanent disability.
      Your option agreement allows you twelve months following the termination
      of your employment to exercise the option. The six-month restriction on
      exercise expires immediately upon your termination. Therefore, you or your
      estate may exercise the option up to twelve months after termination, but
      only to the extent that your option was vested at termination.

      If you are a non-U.S. resident, certain other restrictions may apply.
      Please refer to Schedules C through N for details regarding your specific
      country.

Q10.  WHEN WILL MY NEW OPTIONS VEST?

A10.  Each new option will vest on the same vesting schedule of your exchanged
      option, with vesting credit given for the period between the cancellation
      date and the new option grant date and during the six-month restriction on
      exercising new options. (Section 9)

      EXAMPLE 1

      Grant date of the exchanged options: December 1, 1999
      Number of exchanged options: 1,000
      Vesting schedule of the exchanged options: 25% vest on the first year
      anniversary of the date of grant, and 1/48th vest monthly thereafter.
      Number of new options: 334
      Vesting schedule of the new options: 25% vested on December 1, 2000 and
      1/48th continue to vest monthly thereafter. Therefore, 299 options will be
      vested as of the new option grant date.

      EXAMPLE 2

      Grant date of the exchanged options: September 30, 2000
      Number of exchanged options: 1,000 shares
      Vesting schedule of the exchanged options: 100% vest on the first year
      anniversary of the date of grant.


                                                                             -6-

      Number of new options: 500
      Vesting schedule of the new options: 100% vested September 30, 2001.
      Therefore, the new options are fully vested on the new option grant date.

Q11.  ARE THERE CIRCUMSTANCES UNDER WHICH I WOULD NOT BE GRANTED NEW OPTIONS?

A11.  Yes. If, for any reason, you are no longer an employee of Brocade on the
      new option grant date, you will not receive any new options. Unless
      expressly provided otherwise by the applicable laws of a non-U.S.
      jurisdiction, your employment with Brocade will remain "at-will"
      regardless of your participation in the offer and can be terminated by you
      or us at any time, with or without cause or notice. (Section 1)

      Moreover, even if we accept your options, we will not grant new options to
      you if we are prohibited from doing so by applicable laws. For example, we
      could become prohibited from granting new options as a result of changes
      in SEC or Nasdaq rules or the laws of a non-U.S jurisdiction. We do not
      anticipate any such prohibitions at this time. (Section 13)

Q12.  IF I PARTICIPATE IN THIS OFFER, DO I HAVE TO EXCHANGE ALL OF MY OPTIONS?

A12.  Yes. You cannot selectively exchange options. If you participate in this
      offer, you must exchange (i) all options granted to you with exercise
      prices equal to or greater than $12.00 per share and (ii) all options
      granted to you on or after June 8, 2002, regardless of exercise price.
      This also means that if you participate in this offer, you must exchange
      the remaining outstanding portion of any option that you have partially
      exercised that must be exchanged. However, you may not and are not
      required to exchange any options with exercise prices below $12.00 per
      share that were granted to you prior to June 8, 2002.

      For example, if you hold (1) 1,000 options with an exercise price of
      $20.00 per share, 700 of which you have already exercised, thereby leaving
      300 options outstanding, (2) 1,000 options with an exercise price of
      $25.00 per share, and (3) 2,000 options with an exercise price of $30.00
      per share, you may elect to exchange:

            -     all three of your outstanding options, or

            -     none of your options.

         These are your only choices in this example.  (Section 2)

Q13.  WHEN WILL MY EXCHANGED OPTIONS BE CANCELLED?

A13.  Your exchanged options will be cancelled on the first business day
      following the expiration date. We refer to this date as the cancellation
      date. We expect that the cancellation date will be January 9, 2003, unless
      the offer period is extended. (Section 6)

Q14.  ONCE I SURRENDER MY EXCHANGED OPTIONS, IS THERE ANYTHING I MUST DO TO
      RECEIVE THE NEW OPTIONS?

A14.  To receive new options, you must be employed by Brocade through the new
      option grant date.

      As discussed above, we will grant new options on the first business day
      that is six months and one day after the cancellation date. We expect that
      the new option grant date will be July 10, 2003. If, for any reason, you
      do not remain employed by Brocade through the new option grant date, you
      will not receive any new options or other compensation in exchange for
      your exchanged options. Unless expressly provided otherwise by the
      applicable laws of a non-U.S. jurisdiction, your employment


                                                                             -7-

      with Brocade remains "at will" and can be terminated by you or Brocade at
      any time, with or without cause or notice. (Section 1)

Q15.  WHEN WILL I RECEIVE MY NEW OPTIONS?

A15.  We will send you a promise to grant stock options promptly after the
      cancellation date. The promise to grant stock options represents our
      commitment to grant you a new option on the new option grant date,
      provided that you remain employed by Brocade through the new option grant
      date.

      We will grant the new options on the new option grant date. The new option
      grant date will be the first business day that is six months and one day
      after the date on which we cancel the options accepted for exchange. We
      will not grant the new options before the new option grant date. We expect
      the new option grant date will be July 10, 2003. If the expiration date is
      delayed, the new option grant date will be similarly delayed. (Section 6)

Q16.  WHY DO I HAVE TO EXCHANGE OPTIONS GRANTED ON OR AFTER JUNE 8, 2002, IF I
      CHOOSE TO PARTICIPATE?

A16.  Under current accounting rules, options that were granted during the
      six-month period before this offer commenced and the six-month period
      after the cancellation date could be viewed as "replacement" options for
      the exchanged options. As such, accounting rules would require unfavorable
      accounting treatment for these replacement options. (Section 12)

Q17.  WHAT EVIDENCE WILL I HAVE OF BROCADE'S PROMISE TO GRANT NEW OPTIONS TO ME
      ON THE NEW OPTION GRANT DATE?

A17.  Brocade will deliver to you a written promise to grant the new options to
      you on the new option grant date. Brocade will deliver the written promise
      to you promptly after the cancellation date. (Section 6)

Q18.  WHY WON'T I RECEIVE MY NEW OPTIONS IMMEDIATELY AFTER THE EXPIRATION DATE
      OF THE OFFER?

A18.  Accounting rules prohibit us from granting you new options for a period of
      six months and one day after the cancellation date, without significant
      adverse consequences to Brocade. (Section 12)

Q19.  CAN I EXCHANGE SHARES OF BROCADE COMMON STOCK THAT I ACQUIRED UPON
      EXERCISE OF BROCADE OPTIONS OR THROUGH THE BROCADE ESPP?

A19.  No. This offer relates only to outstanding Brocade options. You may not
      exchange shares of Brocade common stock in this offer. (Section 2)

Q20.  IF I PARTICIPATE IN THIS OFFER, MAY I RECEIVE OTHER OPTION GRANTS BEFORE I
      RECEIVE MY NEW OPTIONS?

A20.  No. If you participate in this offer, you cannot receive any other option
      grants before the new option grant date. Accounting rules prohibit us from
      granting additional options for a period of six months and one day after
      the cancellation date, without significant adverse consequences to
      Brocade. (Sections 6 and 12)

Q21.  IF I DO NOT PARTICIPATE IN THIS OFFER, MAY I RECEIVE ANY OPTION GRANTS
      BETWEEN NOW AND THE NEW OPTION GRANT DATE?

A21.  Yes. If you do not participate in this offer, you may receive new option
      grants between now and the new option grant date. However, we have no
      current plans to grant options to employees except in connection with this
      offer and in connection with newly hired employees. Therefore, you should
      not


                                                                             -8-

      expect to receive any option grants between now and the new option grant
      date if you decide not to participate in this offer. (Section 6)

Q22.  IS THIS A REPRICING OF OPTIONS?

A22.  No. This is a stock option exchange offer. The Financial Accounting
      Standards Board has adopted rules that result in unfavorable accounting
      consequences for companies that reprice options. If we repriced your
      options, our potential for profitability in the future would be
      significantly reduced because we would be required to record a charge
      against earnings with respect to any future appreciation of our common
      stock underlying the repriced options. (Section 12)

Q23.  WHY CAN'T YOU JUST GRANT ME ADDITIONAL OPTIONS?

A23.  While Brocade could grant additional options today, the number of
      outstanding options in relation to our shares outstanding, the "overhang,"
      must be reduced. Further, Brocade does not have authority to grant a
      sufficient number of stock options to make grants to employees that would
      achieve the same benefits to employees and stockholders that this program
      does, while allowing Brocade to maintain the flexibility it needs to
      provide ongoing grants, award additional options to recognize employee
      performance and grant options to newly hired employees. We believe this
      program is in the best interests of our employees and stockholders to
      incent our employees with appropriate stock options, reduce the
      outstanding stock option overhang, and conserve options for future grants.
      (Section 3)

Q24.  WILL I BE REQUIRED TO GIVE UP ALL OF MY RIGHTS UNDER THE CANCELLED
      OPTIONS?

A24.  Yes. Once we have accepted your exchanged options, your exchanged options
      will be cancelled and you will no longer have any rights under those
      options. We intend to cancel all exchanged options on the first business
      day following the expiration date. We refer to this date as the
      cancellation date. We expect that the cancellation date will be January 9,
      2003. (Section 6)

Q25.  WILL THE TERMS AND CONDITIONS OF MY NEW OPTIONS BE THE SAME AS MY
      EXCHANGED OPTIONS?

A25.  The terms and conditions of your new options may vary from the terms and
      conditions of your exchanged options, but such changes generally will not
      substantially and adversely affect your rights. (Section 9)

Q26.  WHAT IF BROCADE IS ACQUIRED BY ANOTHER COMPANY?

A26.  At this time, we are not anticipating being acquired. However, if Brocade
      were to be acquired between the time of the cancellation date and the new
      option grant date, then the acquiror must grant the new option under the
      same terms as provided in this offer. The type of stock and the number of
      shares covered by each new option would be determined in the same way as
      the consideration received by outstanding option holders would be
      determined at the time of the acquisition. Such new option would generally
      have an exercise price equal to the fair market value of the acquiror's
      stock on the new option grant date. As a result of this adjustment, you
      could receive options for more or fewer shares of the acquiror's common
      stock than the number of options you would have received if no acquisition
      had occurred. (Section 9)

Q27.  WHAT HAPPENS TO MY OPTIONS IF I CHOOSE NOT TO PARTICIPATE?

A27.  If you choose not to participate, your existing options will (i) remain
      outstanding until they expire by their terms, (ii) retain their current
      exercise price, and (iii) retain their current vesting schedule. (Section
      6)


                                                                             -9-

      You should note that there is a risk that any incentive stock options you
      have may be affected by this offer, even if you do not participate in the
      exchange. We believe that eligible options that you choose not to tender
      for exchange will not be subject to current U.S. federal income tax if you
      do not elect to participate in the option exchange program. We also
      believe that the option exchange program will not change the U.S. federal
      income tax treatment of subsequent grants and exercises of your incentive
      stock options (and sales of shares acquired upon exercises of such
      options) if you do not participate in this offer to exchange options.
      However, the IRS may characterize this offer to exchange options as a
      "modification" of those incentive stock options, even if you do not
      participate. In 1991, the IRS issued a private letter ruling in which
      another company's option exchange program was characterized as a
      "modification" of all of the incentive stock options that could be
      exchanged. This does not necessarily mean that our offer to exchange
      options will be viewed the same way. Private letter rulings given by the
      IRS contain the IRS's opinion regarding only the specific facts presented
      by a specific person or company. The person or company receiving the
      letter may rely on it, but no other person or company may rely on the
      letter ruling, nor may they assume the same opinion would apply to their
      situation, even if the facts at issue are similar. While such letters do
      not provide certainty, they may indicate how the IRS will view a similar
      situation. We, therefore, do not know if the IRS will assert the position
      that our offer constitutes a "modification" of incentive stock options
      eligible for tender. A successful assertion by the IRS of this position
      could extend the options' holding period to qualify for favorable tax
      treatment. Accordingly, to the extent you dispose of your incentive stock
      option shares prior to the lapse of the new extended holding period, your
      incentive stock option could be taxed similarly to a nonstatutory stock
      option. (Section 14)

Q28.  HOW DOES BROCADE DETERMINE WHETHER AN OPTION HAS BEEN PROPERLY TENDERED?

A28.  We will determine, in our discretion, all questions about the validity,
      form, eligibility (including time of receipt), and acceptance of any
      options. Our determination of these matters will be final and binding on
      all parties. We reserve the right to reject any election form or any
      options tendered for exchange that we determine are not in appropriate
      form or that we determine are unlawful to accept. We will accept all
      properly tendered options that are not validly withdrawn. No tender of
      options will be deemed to have been properly made until all defects or
      irregularities have been cured or waived by us. We have no obligation to
      give notice of any defects or irregularities in any election form and we
      will not incur any liability for failure to give any notice. (Section 4)

Q29.  WILL I HAVE TO PAY TAXES IF I PARTICIPATE IN THE OFFER?

A29.  If you participate in the offer, you should not be required under current
      U.S. law to recognize income for U.S. federal income tax purposes at the
      time of the exchange. On the new option grant date, you will not be
      required under current law to recognize income for U.S. federal income tax
      purposes. (Section 14)

      If you are a tax resident or citizen of a foreign jurisdiction or are
      otherwise subject to a tax liability in a foreign jurisdiction, your tax
      consequences with respect to the exchange may vary from those tax
      consequences described above for United States citizens or permanent
      residents. Employees in foreign jurisdictions should refer to Schedules C
      through N for a discussion of the tax and legal consequences of electing
      to participate in the offer. Tax consequences may vary depending on each
      individual option holder's circumstances.

      YOU SHOULD CONSULT WITH YOUR OWN TAX ADVISOR TO DETERMINE THE PERSONAL TAX
      CONSEQUENCES TO YOU OF PARTICIPATING IN THIS OFFER. IF YOU ARE A RESIDENT
      OF, OR SUBJECT TO THE TAX LAWS IN MORE THAN ONE COUNTRY, YOU SHOULD BE
      AWARE THAT THERE MIGHT BE ADDITIONAL TAX AND SOCIAL INSURANCE CONSEQUENCES
      THAT MAY APPLY TO YOU.


                                                                            -10-

Q30.  WILL MY NEW OPTIONS BE INCENTIVE STOCK OPTIONS OR NONSTATUTORY STOCK
      OPTIONS?

A30.  All new options will be nonstatutory stock options for U.S. federal income
      tax purposes.

      We recommend that you read the tax discussion in this offer to exchange
      and discuss the personal tax consequences of nonstatutory stock options
      with your financial, legal and/or tax advisors. (Sections 9 and 14)

Q31.  WHEN WILL MY NEW OPTIONS EXPIRE?

A31.  Your new options will expire 10 years from the new option grant date, or
      earlier if your employment with Brocade terminates. (Section 9)

Q32.  WILL I RECEIVE A NEW OPTION AGREEMENT?

A32.  Yes. All new options will be subject to a new option agreement between you
      and Brocade (Section 9).

Q33.  IS THERE ANY CHANCE BROCADE WILL NOT PROCEED WITH THE OPTION EXCHANGE?

A33.  The completion of this offer is subject to a number of customary
      conditions that are described in Section 7 of this offer. If any of these
      conditions are not satisfied, we will not be obligated to exchange
      properly tendered eligible options, though we may do so at our discretion.
      For example, if 70% of the total options eligible for exchange are not
      tendered in this offer, Brocade may, in its discretion, either close the
      offer period and move forward with the offer, terminate the offer period
      and the offer and not proceed further, or extend the offer period for
      additional time.

      In addition, prior to the expiration date, we may change the offer for any
      or no reason. (Section 7)

Q34.  IF YOU EXTEND THE OFFER, HOW WILL YOU NOTIFY ME?

A34.  If we extend this offer, we will issue a press release or other public
      announcement disclosing the extension no later than 6:00 a.m., Pacific
      time, on the next business day following the previously scheduled
      expiration date. We will also send an email to all employees. (Sections 2
      and 16)

Q35.  CAN I CHANGE MY MIND AND WITHDRAW FROM THIS OFFER?

A35.  Yes. You may change your mind after you have submitted an election form
      and withdraw from the offer at any time before the expiration date. If we
      extend the expiration date, you may withdraw your election at any time
      until the extended offer expires. You may change your mind as many times
      as you wish, but you will be bound by the last properly submitted election
      or withdrawal form we receive before the expiration date. (Section 5)

Q36.  HOW WILL YOU NOTIFY ME IF THE OFFER IS CHANGED?

A36.  If we change the offer, we will issue a press release or other public
      announcement disclosing the change no later than 6:00 a.m., Pacific time,
      on the next business day following the day we change the offer. We will
      also send an email to all employees. (Sections 2 and 16)

Q37.  HOW DO I WITHDRAW MY ELECTION?

A37.  To withdraw your election, you must do the following before the expiration
      date:


                                                                            -11-

      1.    Properly complete and sign the attached withdrawal form.

      2.    Deliver the completed and signed withdrawal form to Elizabeth Moore
            via fascimile (at (408) 333-5900) or by hand at Office Number
            SJ6-2D12, 1745 Technology Drive, San Jose, CA 95110. (Section 5)

Q38.  WHAT IF I WITHDRAW MY ELECTION AND THEN DECIDE AGAIN THAT I WANT TO
      PARTICIPATE IN THIS OFFER?

A38.  If you have withdrawn your election to participate and then decide again
      that you would like to participate in this offer, you may re-elect to
      participate by submitting a new properly completed election form that is
      signed and dated after the date of your withdrawal form. See Q&A 3.
      (Section 5)

Q39.  ARE YOU MAKING ANY RECOMMENDATION AS TO WHETHER I SHOULD EXCHANGE MY
      ELIGIBLE OPTIONS?

A39.  No. We are not making any recommendation as to whether you should accept
      this offer. You must make your own decision as to whether or not to
      participate in this offer. For questions regarding personal tax
      implications or other investment-related questions, you should talk to
      your own legal counsel, accountant and/or financial advisor. (Section 3)

Q40.  WHO CAN I TALK TO IF I HAVE QUESTIONS ABOUT THE OFFER, OR IF I NEED
      ADDITIONAL COPIES OF THE OFFER DOCUMENTS?

A40.  For additional information or assistance, you should contact:

      Elizabeth Moore
      Office Number SJ6-2D12
      Brocade Communications Systems, Inc.
      1745 Technology Drive
      San Jose, CA 95110
      (408) 392-5019  (Section 10)


                                                                            -12-

                       RISKS OF PARTICIPATING IN THE OFFER

      Participating in the offer involves a number of risks, including those
described below. This list and the risk factors under the heading entitled
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" in our annual report on Form 10-K for the fiscal year ended October
27, 2001, and in our quarterly reports on Form 10-Q for the fiscal quarters
ended January 26, 2002, April 27, 2002 and July 27, 2002, filed with the
Securities and Exchange Commission (SEC) highlight the material risks of
participating in this offer. You should carefully consider these risks and are
encouraged to speak with an investment and tax advisor as necessary before
deciding to participate in the offer. In addition, we strongly urge you to read
the sections in this offer to exchange discussing the tax consequences in the
United States, as well as the rest of this offer to exchange for a more in-depth
discussion of the risks that may apply to you before deciding to participate in
the exchange offer.

      In addition, this offer and our SEC reports referred to above include
"forward-looking statements." When used in this offer to exchange, the words
"anticipate," "believe," "estimate," "expect," "intend" and "plan" as they
relate to us are intended to identify these forward-looking statements. All
statements by us regarding our expected future financial position and operating
results, our business strategy, our financing plans and expected capital
requirements, forecasted trends relating to our services or the markets in which
we operate and similar matters are forward-looking statements, and are dependent
upon certain risks and uncertainties, including delays in new product and
process technology announcements and product introductions by us or our
competitors, competitive pricing pressures, fluctuations in manufacturing
yields, changes in the mix or markets in which our products are sold,
availability and costs of raw materials, reliance on subcontractors, the
cyclical nature of the semiconductor industry, industry-wide wafer processing
capacity, political and economic conditions in various geographic areas, and
costs associated with other events, such as under-utilization or expansion of
production capacity, intellectual property disputes, litigation, or
environmental regulation and other factors described below. Actual results could
differ materially from those expressed in the forward-looking statements.

      The following discussion should be read in conjunction with the financial
statements and notes to the financial statements attached as Schedule B, as well
as our most recent Forms 10-K, 10-Q and 8-K. We caution you not to place undue
reliance on the forward-looking statements contained in this offer, which speak
only as of the date hereof. Brocade disclaims any obligation to publicly update
or revise any such statements to reflect any change in expectations or in
events, conditions, or circumstances on which any such statements may be based,
or that may affect the likelihood that actual results will differ from those set
forth in the forward-looking statements.

                                 ECONOMIC RISKS

IF THE PRICE OF OUR COMMON STOCK INCREASES AFTER THE DATE ON WHICH YOUR OPTIONS
ARE CANCELLED, YOUR CANCELLED OPTIONS MIGHT BE WORTH MORE THAN THE NEW OPTIONS
THAT YOU RECEIVE IN EXCHANGE FOR THEM.

      For example, if you cancel options with an exercise price of $20.00 per
share, and the price of our common stock increases to $22.00 per share when the
new options are granted, your new option will have a higher exercise price than
the cancelled option.


                                                                            -13-

IF YOU PARTICIPATE IN THE OFFER, YOU WILL BE INELIGIBLE TO RECEIVE ANY
ADDITIONAL OPTION GRANTS UNTIL JULY 10, 2003, AT THE EARLIEST.

      Employees generally are eligible to receive option grants at any time that
we choose to make such grants. However, if you participate in the offer, you
will not be eligible to receive any additional option grants until July 10,
2003, at the earliest.

IF WE ARE ACQUIRED BY OR MERGE WITH ANOTHER COMPANY, YOUR CANCELLED OPTIONS
MIGHT BE WORTH MORE THAN THE NEW OPTIONS THAT YOU RECEIVE IN EXCHANGE FOR THEM.

      A transaction involving us, such as a merger or other acquisition, could
have a substantial effect on our stock price, including significantly increasing
the price of our common stock. Depending on the structure and terms of this type
of transaction, option holders who elect to participate in the offer might be
deprived of the benefit of the appreciation in the price of our common stock
resulting from the merger or acquisition. This could result in a greater
financial benefit for those option holders who did not participate in this offer
and retained their original options.

IF YOUR EMPLOYMENT TERMINATES BEFORE WE GRANT THE NEW OPTIONS, INCLUDING AS THE
RESULT OF A REDUCTION-IN-FORCE OR ANOTHER COMPANY'S ACQUISITION OF US, YOU WILL
NEITHER RECEIVE A NEW OPTION NOR HAVE ANY OF YOUR CANCELLED OPTIONS RETURNED TO
YOU.

      Once we cancel the options that you elect to exchange, all of your rights
under the options terminate. Accordingly, if your employment with Brocade
terminates for any reason, including as the result of a reduction-in-force or
another company acquiring Brocade, before the grant of the new options, you will
have the benefit of neither the cancelled option nor any new option.

      Our revenues depend on the health of the economy and the growth of our
customers and potential customers. If the economic conditions in the United
States remain stagnant or worsen or if a wider or global economic slowdown
occurs, we may experience a material adverse impact on our business, operating
results, and financial condition and may undertake various measures to reduce
our expenses including a reduction-in-force. Should your employment be
terminated as part of any such reduction-in-force, you will have the benefit of
neither the cancelled option nor any new option.

      If another company acquires us, that company may, as part of the
transaction or otherwise, decide to terminate some or all of our employees
before the new option grant date. If your employment terminates for this or any
other reason before the new option grant date you will not receive a new option,
nor will you receive any other compensation for your options that were
cancelled.

                                TAX-RELATED RISKS

YOUR NEW OPTION WILL BE A NONSTATUTORY STOCK OPTION, WHEREAS YOUR CANCELLED
OPTION MAY HAVE BEEN AN INCENTIVE STOCK OPTION.

      The new option that will replace your exchanged option will be a
nonstatutory stock option. In general, nonstatutory stock options are less
favorable to you from a tax perspective. For more detailed information, please
read the rest of the offer to exchange, and see the tax disclosure set forth
under the section entitled "Material U.S. federal income tax consequences."


                                                                            -14-

EVEN IF YOU ELECT NOT TO PARTICIPATE IN THE OPTION EXCHANGE PROGRAM, YOUR
INCENTIVE STOCK OPTIONS MAY BE AFFECTED.

      We believe that you will not be subject to current U.S. federal income tax
if you do not elect to participate in the option exchange program. We also
believe that the option exchange program will not change the U.S. federal income
tax treatment of subsequent grants and exercises of your incentive stock options
(and sales of shares acquired upon exercises of such options) if you do not
participate in this offer to exchange options. However, the IRS may characterize
this offer to exchange options as a "modification" of those incentive stock
options, even if you decline to participate. In 1991, the IRS issued a private
letter ruling in which another company's option exchange program was
characterized as a "modification" of all of the incentive stock options that
could be exchanged. This does not necessarily mean that our offer to exchange
options will be viewed the same way. Private letter rulings given by the IRS
contain the IRS's opinion regarding only the specific facts presented by a
specific person or company. The person or company receiving the letter may rely
on it, but no other person or company may rely on the letter ruling, nor may
they assume the same opinion would apply to their situation, even if the facts
at issue are similar. While such letters do not provide certainty, they may
indicate how the IRS will view a similar situation. We therefore do not know if
the IRS will assert the position that our offer constitutes a "modification" of
incentive stock options eligible for tender. A successful assertion by the IRS
of this position could extend the options' holding period to qualify for
favorable tax treatment. Accordingly, to the extent you dispose of your
incentive stock option shares prior to the lapse of the new extended holding
period, your incentive stock option could be taxed similarly to a nonstatutory
stock option.

TAX-RELATED RISKS FOR TAX RESIDENTS OF NON-U.S. COUNTRIES.

      In addition, if you are a tax resident or citizen of a foreign
jurisdiction, you should refer to Schedules C through N for a discussion of some
of the tax and legal consequences that may apply to you.

TAX-RELATED RISKS FOR TAX RESIDENTS OF MULTIPLE COUNTRIES.

      If you are subject to the tax laws in more than one jurisdiction, you
should be aware that there may be tax and social security consequences that may
apply to you. You should be certain to consult your own tax advisor to discuss
these consequences.

                             BUSINESS-RELATED RISKS

OUR QUARTERLY REVENUES AND OPERATING RESULTS MAY FLUCTUATE IN FUTURE PERIODS FOR
A NUMBER OF REASONS, WHICH COULD ADVERSELY AFFECT THE TRADING PRICE OF OUR
STOCK.

      Our quarterly revenues and operating results may vary significantly in the
future due to a number of factors, any of which may cause our stock price to
fluctuate. We recently announced that we expect our revenues for the quarter
ending January 25, 2003 to be between $120 million and $125 million, down
approximately 18% to 22% from the prior quarter, and that we expected to break
even in terms of our earnings prior to restructuring and acquisition-related
charges. The primary basis for this guidance was continued uncertainty in IT
spending. Additionally, on November 5, 2002, we announced that we agreed to
acquire Rhapsody Networks, which if completed is expected to adversely affect
our earnings per share at least through our fiscal 2004.

      The primary factors that may impact the predictability of our quarterly
results include the following:

      -     changes in general economic conditions and specific economic
            conditions in the computer, storage, and networking industries. In
            particular, continuing economic uncertainty has resulted in


                                                                            -15-

            a general reduction in information technology (IT) spending. This
            reduction in IT spending has lead to a decline in our growth rates
            compared to historical trends;

      -     the timing of customer orders and product implementations,
            particularly large orders from and product implementations of our
            OEM customers;

      -     the effects of terrorist activity and armed conflict, such as
            disruptions or downturns in general economic activity;

      -     announcements, introductions, and transitions of new products by us
            and our competitors;

      -     the ability of new competitors to enter the market and effectively
            compete against us;

      -     deferrals of customer orders in anticipation of new products,
            services, or product enhancements introduced by us or our
            competitors;

      -     our ability to obtain sufficient supplies of sole or limited sourced
            components, including application specific integrated circuits
            (ASICs), microprocessors, certain logic chips, programmable logic
            devices, chassis, printed circuit boards and power supplies;

      -     increases in prices of components used in the manufacture of our
            products;

      -     our ability to attain and maintain production volumes and quality
            levels;

      -     variations in the mix of our products sold and the mix of
            distribution channels through which they are sold;

      -     litigation; and

      -     legislation or regulatory developments.

      Accordingly, the results of any prior periods should not be relied upon as
an indication of future performance. If our operating results are below the
expectations of stock market analysts or investors, our stock price may decline.

OUR REVENUES MAY BE IMPACTED BY CHANGES IN IT SPENDING LEVELS.

      In recent quarters, unfavorable economic conditions and reduced global IT
spending rates have adversely affected our operating results and led to a
decline in our growth rates compared to historical trends. We are unable to
predict when IT spending rates will return to historical levels, if at all. If
there are further reductions in either domestic or international IT spending
rates, or if IT spending rates do not return to historical levels, our revenues,
operating results and financial condition may be adversely affected.

OUR SUCCESS DEPENDS ON OUR ABILITY TO DEVELOP NEW AND ENHANCED PRODUCTS THAT
ACHIEVE WIDESPREAD MARKET ACCEPTANCE.

      We currently derive substantially all of our revenues from sales of our
SilkWorm family of products. We expect that revenue from this product family
will continue to account for a substantial portion of our revenues for the
foreseeable future. Therefore, widespread market acceptance of these products is
critical to our future success. Some of our products have been only recently
introduced and, therefore, the demand and market acceptance of these products is
uncertain. Factors that may affect the market acceptance of our products include
the performance, price and total cost of ownership of our products; the features
and


                                                                            -16-

functionality of our products; the availability and price of competing products
and technologies; and the success and development of our OEM partners, master
resellers and fabric partners. Many of these factors are beyond our control.

      Our future success depends upon our ability to address the rapidly
changing needs of our customers by developing and introducing high-quality,
cost-effective products and product enhancements on a timely basis and by
keeping pace with technological developments and emerging industry standards. We
have introduced the SilkWorm 12000 Core Fabric Switch which is targeted at
expanding our existing market, but is also targeted toward the "director" class
market. We expect to launch new products and product enhancements during the
next year. We further expect that our future revenue growth will be dependent on
the success of the SilkWorm 12000 Core Fabric Switch, the other members of our
current line of products, and the continued development of new products and
product enhancements. We have in the past experienced delays in product
development and such delays may occur in the future. If we are unable to achieve
market acceptance of our new products, our business and results of operations
could be harmed.

AS WE INTRODUCE NEW PRODUCTS, WE MUST MANAGE THE TRANSITION BETWEEN OUR NEW
PRODUCTS AND OUR OLDER PRODUCTS.

      As new or enhanced products are introduced, we must successfully manage
the transition from older products in order to minimize disruption in customers'
ordering patterns, avoid excessive levels of older product inventories, and
ensure that enough supplies of new products can be delivered to meet customers'
demands. Our failure to manage the transition to newer products in the future or
to develop and successfully introduce new products and product enhancements
could adversely affect our business and financial results. When we introduce new
products and product enhancements, we face risks relating to product
transitions, including risks relating to forecasting demand, as well as possible
product and software defects and a potentially different sales and support
environment due to the complexity of these new systems. If any of the foregoing
occurs, our business could be seriously harmed.

INCREASED MARKET COMPETITION MAY LEAD TO REDUCED SALES OF OUR PRODUCTS, REDUCED
MARGINS, REDUCED PROFITS, AND REDUCED MARKET SHARE.

      The markets for our SAN switching products are competitive, and are likely
to become even more competitive. Increased competition could result in pricing
pressures, reduced sales, reduced margins, reduced profits, reduced market share
or the failure of our products to achieve or maintain market acceptance. Our
products face competition from multiple sources and we may not be able to
compete successfully against current and future competitors. Furthermore, as the
SAN market evolves, non-Fibre Channel-based products may become available to
interconnect servers and storage. To the extent that these products provide the
ability to network servers and storage and support high-performance, block-data
storage applications, they may compete with our current and future products.
These products may include, but are not limited to, non-Fibre Channel based
emerging products based on Gigabit Ethernet, 10-Gigabit Ethernet and Infiniband.

INTERNATIONAL POLITICAL INSTABILITY MAY INCREASE OUR COST OF DOING BUSINESS AND
DISRUPT OUR BUSINESS.

      Increased international political instability, as demonstrated by the
September 2001 terrorist attacks, disruption in air transportation and further
enhanced security measures as a result of the September 2001 terrorist attacks,
the military action taken in Afghanistan, and the conflicts in the Middle East,
may halt or hinder our ability to do business and may increase our costs. This
increased instability may, for example, negatively impact the reliability and
cost of transportation, negatively impact the desire of our employees and
customers to travel, adversely affect our ability to obtain adequate insurance
at reasonable rates, and require us to take extra security precautions for our
operations. In addition, to the extent that air transportation is delayed or
disrupted, the operations of our contract manufacturers and suppliers may be
disrupted,


                                                                            -17-

particularly if shipments of components and raw materials are delayed. If this
international political instability continues or escalates, our business and
results of operations could be harmed.

FAILURE TO MANAGE OUR BUSINESS EFFECTIVELY COULD SERIOUSLY HARM OUR BUSINESS,
FINANCIAL CONDITION, AND PROSPECTS.

      Our ability to successfully implement our business plan, develop and offer
products, and manage our business in a rapidly evolving market requires a
comprehensive and effective planning and management process. We continue to
change the scope of our operations domestically and internationally, including
managing our headcount appropriately. In addition, the expected acquisition of
Rhapsody Networks and its integration into Brocade could present additional
management challenges. Changes in our business, headcount, organizational
structure and relationships with customers and other third parties has placed,
and will continue to place, a significant strain on management systems and
resources. Our failure to continue to improve upon our operational, managerial,
and financial controls, reporting systems, and procedures, and our failure to
continue to train, and manage our work force worldwide, could seriously harm our
business and financial results.

FAILURE TO ADEQUATELY ANTICIPATE FUTURE OEM AND END-USER PRODUCT NEEDS AND
FAILURE TO FORECAST OEM AND END-USER DEMAND COULD NEGATIVELY IMPACT THE DEMAND
FOR OUR PRODUCTS AND REDUCE OUR REVENUES.

      We market and sell our products through OEM partners, master resellers and
fabric partners. We must continually assess, anticipate, and respond to the
needs of these OEM partners, master resellers and fabric partners. We must also
ensure that our products integrate with solutions provided by these OEM
partners, master resellers and fabric partners. In addition, we must continually
assess, anticipate, and respond to the needs of their customers, who are the
end-users of our products. If we fail to respond to the needs of these groups,
our business and operating results could be harmed.

      Because we market and sell our products through OEM partners, master
resellers and fabric partners, our direct contact with the end-users of our
products is often limited. Although we make every effort to communicate with,
understand, and anticipate the current and future needs of the end-users of our
products, to a large extent we rely on our OEM partners, master resellers and
fabric partners for visibility into those end-user requirements. Our failure to
adequately assess and anticipate future end-user needs could negatively impact
the demand for our products and reduce our revenues.

      Similarly, we have limited ability to forecast the demand for our
products. In preparing sales and demand forecasts, we rely largely on input from
our OEM partners, master resellers and fabric partners. If our customers are
unable to accurately forecast demand, or we fail to effectively communicate with
our customers about end-user demand or other time sensitive information, sales
and demand forecasts may not reflect the most accurate, up-to-date information.
Because we make business decisions based on our sales and demand forecasts, if
these forecasts do not materialize, our business and financial results could be
negatively impacted. Furthermore, we may not be able to identify these forecast
differences until late in our fiscal quarter. Consequently, we may not be able
to make adjustments to our business model without negatively impacting our
earnings.

WE PLAN TO CONTINUE TO INCREASE OUR INTERNATIONAL SALES ACTIVITIES
SIGNIFICANTLY, WHICH WILL SUBJECT US TO ADDITIONAL BUSINESS RISKS.

      We plan to continue to expand our international sales activities
significantly. Expansion of international operations will involve inherent risks
that we may not be able to control, including:

      -     supporting multiple languages;


                                                                            -18-

      -     recruiting sales and technical support personnel with the skills to
            support our products;

      -     increased complexity and costs of managing international operations;

      -     commercial laws and business practices that favor local competition;

      -     multiple, potentially conflicting, and changing governmental laws
            and regulations, including differing labor and employment laws;

      -     longer sales cycles;

      -     difficulties in collecting accounts receivable;

      -     reduced or limited protections of intellectual property rights; and

      -     political and economic instability.

      To date, none of our international revenues and costs of revenues has been
denominated in foreign currencies. As a result, an increase in the value of the
United States dollar relative to foreign currencies could make our products more
expensive and, thus, less competitive in foreign markets. In the future, a
portion of our international revenues may be denominated in foreign currencies,
including the Euro, which will subject us to risks associated with fluctuations
in those foreign currencies. Additionally, we receive significant tax benefits
from sales to our international customers. These benefits are contingent upon
existing tax laws in both the United States and in the respective countries in
which our international customers are located.

      Future changes in domestic or international tax laws could affect the
continued realization of the tax benefits we are currently receiving and expect
to receive from sales to our international customers. In addition, a decrease in
the percentage of our total revenue from international customers, or in the mix
of international revenue among particular tax jurisdictions, could increase our
overall effective tax rate.

WE DEPEND ON OEM CUSTOMERS. THE LOSS OF ANY OF THESE OEM CUSTOMERS COULD
SIGNIFICANTLY REDUCE OUR REVENUES.

      Although our customer base has increased, we still depend on large,
recurring purchases from a limited number of large OEM customers. Our agreements
with our OEM customers are typically cancelable, non-exclusive, and have no
minimum purchase requirements. For the fiscal year ended October 26, 2002, three
customers each represented greater than ten percent of our total revenues for a
combined total of 62 percent of our total revenues. In addition, HP and Compaq,
two of our larger OEM customers, recently merged. This merger may result in a
decrease or a disruption in our sales to the combined company. We anticipate
that our revenues and operating results will continue to depend on sales to a
relatively small number of customers. Therefore, the loss of any one significant
customer, or a decrease in the level of sales to any one significant customer,
could seriously harm our financial condition and results of operations.

FAILURE TO EXPAND DISTRIBUTION CHANNELS AND MANAGE DISTRIBUTION RELATIONSHIPS
COULD SIGNIFICANTLY REDUCE OUR REVENUES.

      Our success will depend on our continuing ability to develop and manage
relationships with significant OEM partners, master resellers and fabric
partners, as well as on the sales efforts and success of these customers. Our
OEM customers may evaluate our products for a limited time period before they
begin to market and sell them. Assisting these customers through the evaluation
process may require significant sales, marketing, and management efforts on our
part, particularly if our products are being qualified with


                                                                            -19-

multiple customers at the same time. In addition, once our products have been
qualified, our customer agreements have no minimum purchase commitments. We may
not be able to maintain or expand our distribution channels, manage distribution
relationships successfully, or market our products through OEMs effectively. Our
failure to manage successfully our distribution relationships or the failure of
our customers to sell our products could reduce our revenues.

THE LOSS OF OUR RELATIONSHIP WITH SOLECTRON CORPORATION, OUR PRINCIPAL
MANUFACTURER, OR THE FAILURE TO ACCURATELY FORECAST DEMAND FOR OUR PRODUCTS OR
SUCCESSFULLY MANAGE OUR RELATIONSHIP WITH SOLECTRON, COULD NEGATIVELY IMPACT OUR
ABILITY TO MANUFACTURE AND SELL OUR PRODUCTS.

      We currently depend on Solectron, a third party manufacturer, to
manufacture most of our products. If we should fail to effectively manage our
relationship with Solectron, or if Solectron experiences delays, disruptions,
capacity constraints, or quality control problems in its manufacturing
operations, our ability to ship products to our customers could be delayed and
our competitive position and reputation could be harmed. Qualifying a new
contract manufacturer and commencing volume production is a lengthy and
expensive process. Although we recently qualified an additional third-party
contract manufacturer to manufacture some of our products, if we are required or
choose to change our principal contract manufacturer, we may lose revenue and
damage our customer relationships.

      We have entered into a manufacturing agreement with Solectron under which
we provide to Solectron a 12-month product forecast and place purchase orders
with Solectron 60 calendar days in advance of the scheduled delivery of products
to our customers. Although our purchase orders placed with Solectron are
cancelable, the terms of the agreement require us to purchase from Solectron all
inventory components not returnable or usable by other Solectron customers.
Accordingly, if we inaccurately forecast demand for our products, we may be
unable to obtain adequate manufacturing capacity from Solectron to meet
customers' delivery requirements or we may accumulate excess inventories.

WE ARE DEPENDENT ON SOLE SOURCE AND LIMITED SOURCE SUPPLIERS FOR CERTAIN KEY
COMPONENTS INCLUDING ASICS AND POWER SUPPLIES.

      We currently purchase several key components used in the manufacture of
our products from single or limited sources. We purchase ASICs, microprocessors,
certain connectors, certain logic chips, programmable logic devices, and chassis
from single sources, and printed circuit boards and power supplies from limited
sources. In addition, we license certain software from third parties that is
incorporated into the operating system of our products. If we are unable to buy
or license these components on a timely basis, we will not be able to deliver
our products to our customers in a timely manner. We use a rolling six-month
forecast based on anticipated product orders to determine component
requirements. If we overestimate component requirements, we may have excess
inventory, which would increase our costs. If we underestimate component
requirements, we may have inadequate inventory, which could interrupt the
manufacturing process and result in lost or deferred revenue. In addition, lead
times for components vary significantly and depend on factors such as the
specific supplier, contract terms, and demand for a component at a given time.
We also may experience shortages of certain components from time to time, which
also could delay the manufacturing and sales processes.

THE PRICES OF OUR PRODUCTS MAY DECLINE WHICH WOULD REDUCE OUR REVENUES AND GROSS
MARGINS.

      The average unit prices of our products may decrease in the future in
response to changes in product mix, competitive pricing pressures, increased
sales discounts, new product introductions by us or our competitors, or other
factors. If we are unable to offset these factors by increasing sales volumes,
our total revenues will decline. In addition, to maintain our gross margins we
must maintain or increase current shipment volumes and develop and introduce new
products and product enhancements, and we must continue


                                                                            -20-

to reduce the manufacturing cost of our products. Failure to reduce the
manufacturing cost of our products in response to declines in unit selling
prices would result in a decline in our gross margins. Moreover, most of our
expenses are fixed in the short-term or incurred in advance of receipt of
corresponding revenue. As a result, we may not be able to decrease our spending
to offset any unexpected shortfall in revenues. If this occurs, we could incur
losses and our operating results and gross margins may be below our expectations
and those of investors and stock market analysts.

UNDETECTED SOFTWARE OR HARDWARE ERRORS COULD INCREASE OUR COSTS AND REDUCE OUR
REVENUES.

      Networking products frequently contain undetected software or hardware
errors when first introduced or as new versions are released. Our products are
becoming increasingly complex and errors may be found from time to time in our
new or enhanced products. In addition, our products are combined with products
from other vendors. As a result, when problems occur, it may be difficult to
identify the source of the problem. These problems may cause us to incur
significant warranty and repair costs, divert the attention of engineering
personnel from product development efforts and cause significant customer
relations problems. Moreover, the occurrence of hardware and software errors,
whether caused by another vendor's SAN products, or ours, could delay or prevent
the development of the SAN market.

WE MAY NOT BE ABLE TO MAINTAIN PROFITABILITY.

      We may not be able to maintain profitability in the future. We expect to
incur significant costs and expenses for product development, sales and
marketing, customer support, and expansion of corporate infrastructure. We make
investment decisions based upon anticipated revenues and margins. If these
anticipated revenues and margins do not materialize our future profitability
could be adversely affected.

      We recently announced our intent to acquire Rhapsody Networks. If
completed, we expect this acquisition will adversely affect our earnings per
share at least through our fiscal 2004.

      We recently realigned our organization to reduce our expense structure.
These actions included the termination of approximately 160 employees, including
certain officers. Our planned reduction in spending is subject to risks and
uncertainties, including the difficulty of achieving anticipated cost reductions
due to unforeseen expenses we may incur in future quarters and an inability to
reduce expenses without jeopardizing further development, marketing and sales of
our products.

      These actions involve numerous risks, including unanticipated costs,
diversion of management's attention from our core business and adverse effects
on existing business relationships with suppliers, customers and employees.
Additionally, it is possible that these reductions in spending are not
sufficient to achieve their intended goals. Because we cannot predict our
revenue with certainty, it may also be necessary to do further restructuring in
the future to reduce our expenses.

      In addition, we have a limited operating history. Therefore, it is
difficult to forecast future operating results based on historical results. We
plan our operating expenses based in part on future revenue projections. Our
ability to accurately forecast quarterly revenue is limited for the reasons
discussed above in "Our quarterly revenues and operating results may fluctuate
in future periods for a number of reasons, which could adversely affect the
trading price of our stock." Moreover, most of our expenses are fixed in the
short-term or incurred in advance of receipt of corresponding revenue. As a
result, we may not be able to decrease our spending to offset any unexpected
shortfall in revenues. If this occurs, we could incur losses and our operating
results and gross margins may be below our expectations and those of investors
and stock market analysts.


                                                                            -21-

IF WE LOSE KEY PERSONNEL OR ARE UNABLE TO HIRE ADDITIONAL QUALIFIED PERSONNEL,
WE MAY NOT BE SUCCESSFUL.

      Our success depends to a significant degree upon the continued
contributions of key management, engineering, and sales and marketing personnel,
many of whom would be difficult to replace. We do not have key person life
insurance on any of our key personnel. We also believe that our success depends
to a significant extent on the ability of management to operate effectively,
both individually and as a group.

      We believe our future success will also depend in large part upon our
ability to attract and retain highly skilled managerial, engineering, sales and
marketing, finance, and operations personnel. We have experienced difficulty in
hiring qualified ASIC, software, system and test, sales and marketing, and
customer support personnel. We may not be successful in attracting and retaining
these individuals in the future. The loss of the services of any of our key
employees, the inability to attract or retain qualified personnel in the future,
or delays in hiring required personnel, particularly engineers and sales
personnel, could delay the development and introduction of, and negatively
impact our ability to sell, our products.

      In addition, companies in the computer storage and server industry whose
employees accept positions with competitors frequently claim that their
competitors have engaged in unfair hiring practices. We may receive such claims
in the future as we seek to hire qualified personnel. Such claims, if received,
may result in material litigation. We could incur substantial costs in defending
against these claims, regardless of their merits.

WE MAY BE UNABLE TO PROTECT OUR INTELLECTUAL PROPERTY, WHICH WOULD NEGATIVELY
AFFECT OUR ABILITY TO COMPETE.

      We rely on a combination of patent, copyright, trademark, and trade secret
laws, confidentiality agreements, and other contractual restrictions on
disclosure to protect our intellectual property rights. We also enter into
confidentiality or license agreements with our employees, consultants, and
corporate partners, and control access to and distribution of our technology,
software, documentation, and other confidential information. These measures may
not preclude competitors from independently developing products with
functionality or features similar to our products. Despite efforts to protect
our proprietary rights, unauthorized parties may attempt to copy or otherwise
obtain and use our products or technology. Monitoring unauthorized use of our
products is difficult and we cannot be certain that the steps we take to prevent
unauthorized use of our technology, particularly in foreign countries where the
laws may not protect proprietary rights as fully as in the United States, will
be effective.

OTHERS MAY BRING INFRINGEMENT CLAIMS, WHICH COULD BE TIME-CONSUMING AND
EXPENSIVE TO DEFEND, AGAINST US.

      In recent years, there has been significant litigation in the United
States involving patents and other intellectual property rights. On February 14,
2002, a suit captioned McDATA Corp. v. Brocade Communications Systems, Inc. was
filed against Brocade in the United States District Court for the District of
Colorado. The complaint alleged that the Brocade SilkWorm 3800 Enterprise Fibre
Channel Fabric Switch and Brocade SilkWorm 12000 Core Fabric Switch infringe
U.S. Patent No. 6,233,236, entitled "Method and Apparatus for Measuring Traffic
Within a Switch." The complaint seeks unspecified compensatory and exemplary
damages and to permanently enjoin Brocade from infringing the patent in the
future. On March 4, 2002, McDATA filed an amended complaint, in which it
additionally alleged that the Brocade SilkWorm 3200 Entry Fabric Switch
infringed this patent. In connection with this suit, on March 4, 2002, McDATA
filed a motion for a preliminary injunction against Brocade with regard to the
patent. A hearing on the motion for preliminary injunction was held on July 15,
2002, and on December 5, 2002, the Court issued its decision denying McData's
request for a preliminary injunction. We believe that we have meritorious
defenses to the


                                                                            -22-

claims and intend to defend the action vigorously. Additional action will be
required to finally dispose of this case.

      We may be a party to litigation in the future to protect our intellectual
property or as a result of an alleged infringement of others' intellectual
property. These claims and any resulting lawsuit, including the McDATA lawsuit,
could subject us to significant liability for damages and invalidation of
proprietary rights. These lawsuits, regardless of their success, would likely be
time-consuming and expensive to resolve and would divert management's time and
attention. Any potential intellectual property litigation, including the McDATA
litigation, also could force us to do one or more of the following:

      -     stop selling, incorporating or using products or services that use
            the challenged intellectual property;

      -     obtain from the owner of the infringed intellectual property a
            license to the relevant intellectual property, which license may
            require us to license our intellectual property to such owner, or
            may not be available on reasonable terms or at all; and

      -     redesign those products or services that use technology that is the
            subject of an infringement claim.

      If we are forced to take any of the foregoing actions, we may be unable to
manufacture, use, sell, import and export our products, which would reduce our
revenues.

WE MAY ENGAGE IN FUTURE ACQUISITIONS THAT DILUTE OUR STOCKHOLDERS AND CAUSE US
TO USE CASH, INCUR DEBT, OR ASSUME CONTINGENT LIABILITIES.

      We recently announced an agreement to acquire Rhapsody Networks. As part
of our strategy, we expect to continue to review opportunities to buy other
businesses or technologies that would complement our current products, expand
the breadth of our markets or enhance our technical capabilities, or that may
otherwise offer growth opportunities. We may buy other businesses, products, or
technologies in the future. In the event of any future purchases, we could:

      -     issue stock that would dilute our current stockholders' percentage
            ownership;

      -     use cash, which may result in a reduction of our liquidity;

      -     incur debt; or

      -     assume liabilities.

      These purchases also involve numerous risks, including:

      -     problems combining the purchased operations, technologies, personnel
            or products;

      -     unanticipated costs;

      -     diversion of management's attention from our core business;

      -     adverse effects on existing business relationships with suppliers
            and customers;

      -     risks associated with entering into markets in which we have no, or
            limited, prior experience; and


                                                                            -23-

      -     potential loss of key employees of acquired organizations.

      We may not be able to successfully integrate any businesses, products,
technologies, or personnel that we might acquire in the future.

OUR PRODUCTS MUST COMPLY WITH EVOLVING INDUSTRY STANDARDS AND GOVERNMENT
REGULATIONS.

      Industry standards for SAN products are continuing to emerge, evolve, and
achieve acceptance. To remain competitive, we must continue to introduce new
products and product enhancements that meet these industry standards. All
components of the SAN must interoperate together. Industry standards are in
place to specify guidelines for interoperability and communication based on
standard specifications. Our products comprise only a part of the entire SAN
solution utilized by the end-user, and we depend on the companies that provide
other components of the SAN solution, many of whom are significantly larger than
us, to support the industry standards as they evolve. The failure of these
providers to support these industry standards could adversely affect the market
acceptance of our products.

      In addition, in the United States, our products comply with various
regulations and standards defined by the Federal Communications Commission and
Underwriters Laboratories. Internationally, products that we develop will be
required to comply with standards established by authorities in various
countries. Failure to comply with existing or evolving industry standards or to
obtain timely domestic or foreign regulatory approvals or certificates could
materially harm our business.

PROVISIONS IN OUR CHARTER DOCUMENTS, CUSTOMER AGREEMENTS, DELAWARE LAW, AND OUR
STOCKHOLDER RIGHTS PLAN COULD PREVENT OR DELAY A CHANGE IN CONTROL OF BROCADE,
WHICH COULD HINDER STOCKHOLDERS' ABILITY TO RECEIVE A PREMIUM FOR OUR STOCK.

      Provisions of our certificate of incorporation and bylaws may discourage,
delay or prevent a merger or acquisition that a stockholder may consider
favorable. These provisions include:

      -     authorizing the issuance of preferred stock without stockholder
            approval;

      -     providing for a classified board of directors with staggered,
            three-year terms;

      -     prohibiting cumulative voting in the election of directors;

      -     limiting the persons who may call special meetings of stockholders;

      -     prohibiting stockholder actions by written consent; and

      -     requiring super-majority voting to effect amendments to the
            foregoing provisions of our certificate of incorporation and bylaws.

      Certain provisions of Delaware law also may discourage, delay, or prevent
someone from acquiring or merging with us. Further, our agreements with certain
of our customers require that we give prior notice of a change of control and
grant certain manufacturing rights following the change of control. In addition,
we currently have in place a stockholder rights plan. Any of these things could
prevent or delay a change in control of Brocade, which could hinder
stockholders' ability to receive a premium for our stock.


                                                                            -24-

WE EXPECT TO EXPERIENCE VOLATILITY IN OUR STOCK PRICE, WHICH COULD NEGATIVELY
AFFECT STOCKHOLDERS' INVESTMENTS.

      The market price of our common stock has experienced significant
volatility in the past and may continue to fluctuate significantly in response
to the following factors, some of which are beyond our control:

      -     macroeconomic conditions;

      -     actual or anticipated fluctuations in our operating results;

      -     changes in financial estimates by securities analysts;

      -     changes in market valuations of other technology companies;

      -     announcements of financial results by us or other technology
            companies;

      -     announcements by us, our competitors, customers, or similar
            businesses of significant technical innovations, contracts,
            acquisitions, strategic partnerships, joint ventures or capital
            commitments;

      -     losses of major OEM customers;

      -     additions or departures of key personnel;

      -     sales by us of common stock or convertible securities; and

      -     incurring additional debt.

      In addition, the stock market has experienced extreme volatility that
often has been unrelated to the performance of particular companies. These
market fluctuations may cause our stock price to fall regardless of how the
business performs.

OUR BUSINESS MAY BE HARMED BY CLASS ACTION LITIGATION DUE TO STOCK PRICE
VOLATILITY.

      In the past, securities class action litigation often has been brought
against a company following periods of volatility in the market price of its
securities. We are currently in litigation regarding alleged nondisclosure of
improprieties in the distribution of shares in our initial public offering by
our underwriters, including undisclosed fees and commissions received by the
underwriters and alleged laddering arrangements. We believe that the claims are
without merit and intend to defend ourselves vigorously. In addition, in the
future we may be the target of other securities litigation. Securities
litigation could result in substantial costs and divert management's attention
and resources.

BUSINESS INTERRUPTIONS COULD ADVERSELY AFFECT OUR BUSINESS.

      Our operations are vulnerable to interruption by fire, earthquake, power
loss, telecommunications failure, and other events beyond our control. A
substantial portion of our facilities, including our corporate headquarters, is
located near major earthquake faults. In the event of a major earthquake, we
could experience business interruptions, destruction of facilities and loss of
life. We neither carry earthquake insurance nor have we set aside funds or
reserves to cover such earthquake-related losses. Although we carry business
interruption insurance to mitigate the impact of potential business
interruptions, should a business interruption occur, our business could be
seriously harmed.


                                                                            -25-

OUR PRIVATE MINORITY EQUITY INVESTMENTS ARE SUBJECT TO EQUITY PRICE RISK AND
THEIR VALUE MAY FLUCTUATE.

      From time to time, we make equity investments for the promotion of
business and strategic objectives. The market price and valuation of the
securities that we hold in these companies may fluctuate due to market
conditions and other circumstances over which we have little or no control. To
the extent that the fair value of these securities is less than our cost over an
extended period of time, our operating results and financial condition could be
harmed.


                                                                            -26-

                                    THE OFFER

1.    ELIGIBILITY.

      You are an "eligible employee" if you are an employee, including an
officer, of Brocade and you remain employed by Brocade or a successor entity
through the date on which the exchanged options are cancelled. However,
employees who have received a termination notice from Brocade or who have
delivered a termination notice to Brocade prior to the expiration date are not
eligible to participate in the offer. Non-employee members of our board of
directors are also not eligible to participate in the offer. Our directors are
listed on Schedule A to this offer.

      To receive a new option, you must remain employed by Brocade or a
successor entity through the new option grant date, which will be the first
business day that is six months and one day after the cancellation date. If we
do not extend the offer, the new option grant date will be July 10, 2003. If,
for any reason, you do not remain an employee of Brocade or a successor entity
through the new option grant date, you will not receive any new options or other
compensation in exchange for your options that have been accepted for exchange.
For this purpose, employment would not include a period of garden leave and/or
notice period pursuant to local law. This means that if you quit, with or
without a good reason, or die or we terminate your employment with or without
cause, before the new option grant date, you will not receive anything for the
options that you elected to exchange and that we cancelled. Unless expressly
provided by the applicable laws of a non-U.S. jurisdiction, your employment with
Brocade will remain "at-will" and can be terminated by you or us at any time,
with or without cause or notice.

2.    NUMBER OF OPTIONS; EXPIRATION DATE.

      Subject to the terms and conditions of this offer, we will accept for
exchange outstanding, unexercised options with exercise prices equal to or
greater than $12.00 per share that are held by eligible employees and that are
properly elected to be exchanged, and are not validly withdrawn, before the
expiration date.

      If you participate in this offer, you must exchange (i) all options
granted to you with exercise prices equal to or greater than $12.00 per share
and (ii) all options granted to you on or after June 8, 2002, regardless of
exercise price. However, you may not and are not required to exchange any
options with exercise prices below $12.00 per share that were granted to you
prior to June 8, 2002. No shares of Brocade common stock, including common stock
acquired upon exercise of Brocade options or through the 1999 Employee Stock
Purchase Plan, may be exchanged in this offer.

      IF YOU PARTICIPATE IN THIS OFFER, YOU MUST EXCHANGE ALL OF YOUR OPTIONS
THAT WERE GRANTED TO YOU ON OR AFTER JUNE 8, 2002. This rule applies even if
these options have exercise prices less than $12.00 per share. For example, if
you received an option grant in January 2000 and a grant in July 2002 and you
want to exchange your January 2000 option grant, you also must exchange your
July 2002 option grant. This includes all options granted to you between the
commencement of this offer on December 9, 2002 and the expiration date.

      Subject to the terms of this offer and upon our acceptance of your
properly tendered options, your exchanged options will be cancelled and you will
be granted new options as follows:

      -     Exchanged options granted on or before March 15, 2000, will be
            replaced with new options at an exchange ratio of one (1) share for
            every three (3) shares exchanged.

      -     Exchanged options granted after March 15, 2000 and before April 17,
            2001, or options granted on April 17, 2001 as part of the
            Supplemental Stock Program ("supplemental


                                                                            -27-

            options"), will be replaced with new options at an exchange ratio of
            one (1) share for every two (2) shares exchanged.

      -     Exchanged options granted after April 17, 2001, or options granted
            on April 17, 2001 other than supplemental options, will be replaced
            with new options at an exchange ratio of one (1) share for every one
            (1) share exchanged.

      -     If Gregory L. Reyes, the Chairman and Chief Executive Officer of
            Brocade, elects to exchange any options, each exchanged option will
            be replaced with a new option at an exchange ratio of one (1) share
            for every ten (10) shares exchanged.

      The number of new options you will receive will be rounded up to the
nearest whole option. The number of new options is subject to adjustment for any
stock splits, subdivisions, combinations, stock dividends and similar events
that occur after the cancellation date but before the new option grant date. All
new options will be subject to the terms of the option plan under which they are
granted, and to a new option agreement between you and Brocade. Each new option
will be granted under either our 1999 Stock Plan or our 1999 Nonstatutory Stock
Option Plan, as determined by our board of directors. The forms of option
agreement under each plan are attached as an exhibit or incorporated by
reference to the Schedule TO with which this offer has been filed.

      The expiration date for this offer will be 5:00 p.m., Pacific time, on
January 8, 2003, unless we extend the offer. We may, in our discretion, extend
the offer, in which event the expiration date shall refer to the latest time and
date at which the extended offer expires. See Section 16 of this offer for a
description of our rights to extend, terminate and amend the offer.

3.    PURPOSE OF THE OFFER.

      We issued the outstanding options to motivate our employees to perform at
high levels and provide an effective means of recognizing employee contributions
to our success.

      We believe that this offer will foster retention of our valuable employees
and better align the interests of our employees and stockholders to maximize
stockholder value. We issued the currently outstanding options to motivate our
employees to perform at high levels and provide an effective means of
recognizing employee contributions to our success. Some of our outstanding
options, whether or not they are currently exercisable, have exercise prices
that are significantly higher than the current market price for our stock. These
options are commonly referred to as being "underwater." By making this offer, we
intend to provide eligible employees with the opportunity to own options that
over time may have a greater potential to increase in value. In addition, the
new option pricing structure gives Brocade's officers further incentive to grow
the business and meet our business objectives of maximizing stockholder value by
setting a minimum exercise price for any new options they may receive in the
exchange program.

      This offer is designed to decrease Brocade's option overhang, which is the
number of options outstanding as a percent of the total number of common shares
outstanding. The exchange ratios used in this offer are designed to help
accomplish this goal.

                                                                            -28-

      Except as otherwise disclosed in this offer or in our SEC filings, Brocade
(excluding our subsidiaries) presently has no plans or proposals that relate to
or would result in:

      -     any extraordinary transaction, such as a merger, reorganization or
            liquidation involving Brocade;

      -     any purchase, sale or transfer of a material amount of our assets,

      -     any material change in our present dividend rate or policy, or our
            indebtedness or capitalization,

      -     any change in our present board of directors or management,
            including a change in the number or term of directors or to fill any
            existing board vacancies or to change any executive officer's
            material terms of employment,

      -     any other material change in our corporate structure or business,

      -     our common stock being delisted from the Nasdaq National Market or
            not being authorized for quotation in an automated quotation system
            operated by a national securities association,

      -     our common stock becoming eligible for termination of registration
            pursuant to Section 12(g)(4) of the Securities Exchange Act of 1934,
            as amended (the Exchange Act),

      -     the suspension of our obligation to file reports pursuant to Section
            15(d) of the Exchange Act,

      -     the acquisition by any person of an amount of our securities or the
            disposition of an amount of any of our securities, or

      -     any change in our certificate of incorporation or bylaws, or any
            actions that may impede the acquisition of control of us by any
            person.

Brocade currently has a search underway to add additional independent directors
to its board of directors.

      Neither we nor our board of directors makes any recommendation as to
whether you should accept this offer, nor have we authorized any person to make
any such recommendation. You should evaluate carefully all of the information in
this offer and consult your own investment and tax advisors. You must make your
own decision about whether to participate in this offer.

4.    PROCEDURES FOR ELECTING TO EXCHANGE OPTIONS.

      PROPER ELECTION TO EXCHANGE OPTIONS.

      Participation is this offer is voluntary. To participate in this offer,
you must, in accordance with the instructions of the election form, properly
complete, sign and deliver the election form to Elizabeth Moore via facsimile at
(408) 333-5900 or by hand at Office Number SJ6-2D12, Brocade Communications
Systems, Inc., 1745 Technology Drive, San Jose, CA, 95110, along with any other
required documents. Elizabeth Moore must receive the properly completed and
signed election forms before the expiration date. The expiration date will be
5:00 p.m., Pacific time, on January 8, 2003, unless we extend the offer.

      If you participate in this offer, you must exchange (i) all options that
we granted to you with exercise prices equal to or greater than $12.00 per share
and (ii) all options we granted to you since June 8, 2002, even if those options
have an exercise price less than $12.00 per share and would otherwise be
ineligible for exchange.


                                                                            -29-

      THE DELIVERY OF ALL DOCUMENTS, INCLUDING ELECTION FORMS, IS AT YOUR RISK.
WE INTEND TO CONFIRM THE RECEIPT OF YOUR ELECTION FORM AND/OR ANY WITHDRAWAL
FORM WITHIN TWO (2) BUSINESS DAYS. IF YOU HAVE NOT RECEIVED A CONFIRMATION, YOU
MUST CONFIRM THAT WE HAVE RECEIVED YOUR ELECTION FORM AND/OR ANY WITHDRAWAL
FORM.

      Our receipt of your election form is not by itself an acceptance of your
options for exchange. For purposes of this offer, we will be deemed to have
accepted options for exchange that are validly elected to be exchanged and are
not properly withdrawn as of the time when we give oral or written notice to the
option holders generally of our acceptance of options for exchange. We may issue
this notice of acceptance by press release, e-mail or other methods of
communication. Options accepted for exchange will be cancelled on the
cancellation date, which we presently expect will be January 9, 2003.

      DETERMINATION OF VALIDITY; REJECTION OF OPTIONS; WAIVER OF DEFECTS; NO
OBLIGATION TO GIVE NOTICE OF DEFECTS.

      We will determine, in our discretion, all questions as to the validity,
form, eligibility (including time of receipt) and acceptance of any options. Our
determination of these matters will be final and binding on all parties. We
reserve the right to reject any election form or any options elected to be
exchanged that we determine are not in appropriate form or that we determine are
unlawful to accept. We will accept all properly tendered options that are not
validly withdrawn. We also reserve the right to waive any of the conditions of
the offer or any defect or irregularity in any tender of any particular options
or for any particular option holder, provided that if we grant any such waiver,
it will be granted with respect to all option holders and tendered options. No
tender of options will be deemed to have been properly made until all defects or
irregularities have been cured by the tendering option holder or waived by us.
Neither we nor any other person is obligated to give notice of any defects or
irregularities in tenders, nor will anyone incur any liability for failure to
give any notice. This is a one-time offer. We will strictly enforce the election
period, subject only to an extension that we may grant in our discretion.

      OUR ACCEPTANCE CONSTITUTES AN AGREEMENT.

      Your election to exchange options through the procedures described above
constitutes your acceptance of the terms and conditions of this offer. OUR
ACCEPTANCE OF YOUR OPTIONS FOR EXCHANGE WILL CONSTITUTE A BINDING AGREEMENT
BETWEEN BROCADE AND YOU UPON THE TERMS AND SUBJECT TO THE CONDITIONS OF THIS
OFFER.

      To administer this offer, we must collect, use and transfer certain
information regarding you and your option grants, and may have to pass that
information on to third parties who are assisting with the offer. By submitting
an election form or a withdrawal form, you agree to such collection, use and
transfer of your personal data by us and the third parties assisting us with the
offer, but only for the purpose of administering your participation in this
offer. By submitting an election form or a withdrawal form, you also acknowledge
and agree that:

      -     the parties receiving this data may be located outside of the United
            States, and the recipient's country may have different data privacy
            laws and protections than the United States,

      -     the data will be held only as long as necessary to administer and
            implement the program,

      -     you can request from us a list of the parties that may receive your
            data,

      -     you can request additional information about how the data is stored
            and processed, and


                                                                            -30-

      -     you can request that the data be amended if it is incorrect.

      If you are an option holder in certain foreign jurisdictions, you can
withdraw your consent to the collection, use and transfer of your data by
contacting us. However, if you withdraw your consent, you may not participate in
this offer. Please contact us if you have any questions.

5.    WITHDRAWAL RIGHTS AND CHANGE OF ELECTION.

      You may withdraw all options that you previously elected to exchange only
in accordance with the provisions of this section.

      You may withdraw all options that you previously elected to exchange at
any time before the expiration date, which is expected to be 5:00 p.m., Pacific
time, on January 8, 2003. If we extend the offer, you may withdraw your options
at any time until the extended expiration date.

      In addition, although we intend to accept all validly tendered options
promptly after the expiration of this offer, if we have not accepted your
options by 9:00 p.m., Pacific time, on February 5, 2003, you may withdraw your
options at any time thereafter.

      To validly withdraw all of the options that you previously elected to
exchange, you must deliver to Elizabeth Moore via facsimile (fax # (408)
333-5900 or by hand to Office Number SJ6-2D12, 1745 Technology Drive, San Jose,
CA 95110, in accordance with the procedures listed in Section 4 above, a signed
and dated withdrawal form with the required information, while you still have
the right to withdraw the options.

      You may not rescind any withdrawal. All options that you withdraw will be
deemed not properly tendered for purposes of the offer, unless you properly
re-elect to exchange all options before the expiration date. To re-elect to
exchange all of your withdrawn options, you must submit a new election form to
Elizabeth Moore before the expiration date by following the procedures described
in Section 4 of this offer. This new election form must be properly completed,
signed and dated after your original election form and after your withdrawal
form. You will be bound by the last properly tendered election or withdrawal
form we receive before the expiration date.

      Neither we nor any other person is obligated to give you notice of any
defects or irregularities in any withdrawal form or any new election form, nor
will anyone incur any liability for failure to give any notice. We will
determine, in our discretion, all questions as to the form and validity,
including time of receipt, of withdrawal forms and new election forms. Our
determination of these matters will be final and binding.

      THE DELIVERY OF ALL DOCUMENTS, INCLUDING ANY WITHDRAWAL FORMS AND ANY NEW
ELECTION FORMS, IS AT YOUR RISK. WE INTEND TO CONFIRM THE RECEIPT OF YOUR
WITHDRAWAL FORM AND/OR ANY ELECTION FORM WITHIN TWO (2) BUSINESS DAYS. IF YOU
HAVE NOT RECEIVED A CONFIRMATION, YOU MUST CONFIRM THAT WE HAVE RECEIVED YOUR
WITHDRAWAL FORM AND/OR ANY ELECTION FORM.

6.    ACCEPTANCE OF OPTIONS FOR EXCHANGE AND ISSUANCE OF NEW OPTIONS.

      Upon the terms and conditions of this offer and promptly following the
expiration date, we will accept for exchange and cancel all eligible options
properly elected for exchange and not validly withdrawn before the expiration
date. Once the options are cancelled, you no longer will have any rights with
respect to those options. Subject to the terms and conditions of this offer, if
your options are properly tendered by you for exchange and accepted by us, these
options will be cancelled as of the cancellation date, which we anticipate to be
January 9, 2003.


                                                                            -31-

      For purposes of the offer, we will be deemed to have accepted options for
exchange that are validly tendered and are not properly withdrawn as of the time
when we give oral or written notice to the option holders generally of our
acceptance for exchange of the options. This notice may be made by press
release, email or other method of communication. Subject to our rights to
terminate the offer, discussed in Section 16 of this offer, we currently expect
that we will accept promptly after the expiration date all properly tendered
options that are not validly withdrawn.

      Promptly after the expiration date, we will issue to you a promise to
grant stock options. The promise to grant stock option represents our commitment
to grant you a new stock option on the new option grant date, provided that you
remain an employee of Brocade or a successor entity through the new option grant
date. This promise to grant stock options will list the number of new options
you will receive.

      We will grant the new options on the new option grant date, which is the
first business day that is six months and one day after the cancellation date.
We expect the new option grant date to be July 10, 2003. All new options will be
nonstatutory stock options and will be granted under either our 1999 Stock Plan
or our 1999 Nonstatutory Stock Option Plan. Our board of directors will
determine under which of the plans each new option will be granted. However, all
new options granted to Brocade officers will be granted under the 1999 Stock
Plan.

      If, for any reason, you are not an employee of Brocade or a successor
entity through the new option grant date, you will not receive any new options
or other compensation in exchange for your options that have been cancelled
pursuant to this offer.

      If we accept options you elect to exchange in the offer, we will defer
granting to you any other options for which you otherwise may be eligible before
the new option grant date. Consequently, we will not grant you any new options
until six months and one day after any of your options have been cancelled.

      If you do not participate in this offer, you may receive new option grants
between now and the new option grant date. However, we have no current plans to
grant options to employees other than in connection with this offer and to newly
hired employees. Therefore, you should not expect to receive any option grants
between now and the new option grant date if you decide not to participate in
this offer.

      Options that we do not accept for exchange will remain outstanding until
they expire by their terms and will retain their current exercise price and
current vesting schedule.

7.    CONDITIONS OF THE OFFER.

      Notwithstanding any other provision of this offer, we will not be required
to accept any options tendered for exchange, and we may terminate the offer, or
postpone our acceptance and cancellation of any options tendered for exchange,
in each case, subject to Rule 13e-4(f)(5) under the Exchange Act, if at any time
on or after the date this offer begins, and before the expiration date, any of
the following events has occurred, or has been determined by us to have
occurred:

      -     fewer than 70% of the options eligible for exchange have been
            validly tendered and not withdrawn pursuant to the terms of this
            offer,

      -     there shall have been threatened or instituted or be pending any
            action, proceeding or litigation seeking to enjoin, make illegal or
            delay completion of the offer or otherwise relating in any manner,
            to the offer,


                                                                            -32-

      -     any order, stay, judgment or decree is issued by any court,
            government, governmental authority or other regulatory or
            administrative authority and is in effect, or any statute, rule,
            regulation, governmental order or injunction shall have been
            proposed, enacted, enforced or deemed applicable to the offer, any
            of which might restrain, prohibit or delay completion of the offer
            or impair the contemplated benefits of the offer to us,

      -     there shall have occurred:

            -     any general suspension of trading in, or limitation on prices
                  for, our securities on any national securities exchange or in
                  the over-the-counter market in the United States,

            -     the declaration of a banking moratorium or any suspension of
                  payments in respect of banks in the United States,

            -     any limitation, whether or not mandatory, by any governmental,
                  regulatory or administrative agency or authority on, or any
                  event that, in our reasonable judgment, might affect the
                  extension of credit to us by banks or other lending
                  institutions in the United States,

            -     in our reasonable judgment, any extraordinary or material
                  adverse change in U.S. financial markets generally, including,
                  a decline of at least 10% in either the Dow Jones Industrial
                  Average, the Nasdaq Index or the Standard & Poor's 500 Index
                  from the date of commencement of the exchange offer,

            -     the commencement of a war or other national or international
                  calamity directly or indirectly involving the United States,
                  which would reasonably be expected to affect materially or
                  adversely, or to delay materially, the completion of the
                  exchange offer, or

            -     if any of the situations described above existed at the time
                  of commencement of the exchange offer and that situation, in
                  our reasonable judgment, deteriorates materially after
                  commencement of the exchange offer,

      -     as the term "group" is used in Section 13(d)(3) of the Exchange Act:

            -     any person, entity or group acquires more than 5% of our
                  outstanding shares of common stock, other than a person,
                  entity or group which had publicly disclosed such ownership
                  with the SEC prior to the date of commencement of the exchange
                  offer,

            -     any such person, entity or group which had publicly disclosed
                  such ownership prior to such date shall acquire additional
                  common stock constituting more than 1% of our outstanding
                  shares, or

            -     any new group shall have been formed that beneficially owns
                  more than 5% of our outstanding shares of common stock that in
                  our judgment in any such case, and regardless of the
                  circumstances, makes it inadvisable to proceed with the
                  exchange offer or with such acceptance for exchange of
                  eligible options,

      -     there shall have occurred any change, development, clarification or
            position taken in generally accepted accounting principles that
            could or would require us to record for financial reporting purposes
            compensation expense against our earnings in connection with the
            offer,


                                                                            -33-

      -     a tender or exchange offer, other than this exchange offer by us,
            for some or all of our shares of outstanding common stock, or a
            merger, acquisition or other business combination proposal involving
            us, shall have been proposed, announced or made by another person or
            entity or shall have been publicly disclosed,

      -     any event or events occur that have resulted or may result, in our
            reasonable judgment, in an actual or threatened material adverse
            change in our business or financial condition,

      -     any event or events occur that have resulted or may result, in our
            reasonable judgment, in a material impairment of the contemplated
            benefits of the offer to us (see Section 3 of this offer to exchange
            for a description of the contemplated benefits of the offer to us),
            or

      -     any rules or regulations by any governmental authority, the National
            Association of Securities Dealers, the Nasdaq National Market, or
            other regulatory or administrative authority or any national
            securities exchange have been enacted, enforced or deemed applicable
            to Brocade.

      If any of the above events occur, we may:

      -     terminate the exchange offer and promptly return all tendered
            eligible options to tendering holders,

      -     complete and/or extend the exchange offer and, subject to your
            withdrawal rights, retain all tendered eligible options until the
            extended exchange offer expires,

      -     amend the terms of the exchange offer, or

      -     waive any unsatisfied condition and, subject to any requirement to
            extend the period of time during which the exchange offer is open,
            complete the exchange offer.

      The conditions to this offer are for our benefit. We may assert them in
our discretion regardless of the circumstances giving rise to them before the
expiration date. We may waive any condition, in whole or in part, at any time
and from time to time before the expiration date, in our discretion, whether or
not we waive any other condition to the offer. Our failure at any time to
exercise any of these rights will not be deemed a waiver of any such rights. The
waiver of any of these rights with respect to particular facts and circumstances
will not be deemed a waiver with respect to any other facts and circumstances.
Any determination we make concerning the events described in this Section 7 will
be final and binding upon all persons.

8.    PRICE RANGE OF SHARES UNDERLYING THE OPTIONS.

      The Brocade common stock that underlies your options is traded on the
Nasdaq National Market under the symbol "BRCD." The following table shows, for
the periods indicated, the high and low bid information per share of our common
stock as reported by the Nasdaq National Market.


                                                                            -34-



                                                               HIGH        LOW
                                                             --------    -------
                                                                   
FISCAL YEAR 2003
   1st Quarter (through December 6, 2002)..................  $   8.10    $  4.76
FISCAL YEAR 2002
   1st Quarter.............................................  $  41.37    $ 23.08
   2nd Quarter.............................................  $  37.50    $ 21.61
   3rd Quarter.............................................  $  25.96    $ 14.16
   4th Quarter.............................................  $  20.16    $  5.21
FISCAL YEAR 2001
   1st Quarter.............................................  $ 131.15    $ 65.75
   2nd Quarter.............................................  $ 108.06    $ 16.75
   3rd Quarter.............................................  $  55.25    $ 27.74
   4th Quarter.............................................  $  39.34    $ 12.60


      On December 6, 2002, the last reported sale price of our common stock, as
reported by the Nasdaq National Market was $4.96 per share.

      YOU SHOULD EVALUATE CURRENT MARKET QUOTES FOR OUR COMMON STOCK, AMONG
OTHER FACTORS, BEFORE DECIDING WHETHER OR NOT TO ACCEPT THIS OFFER.

9.    SOURCE AND AMOUNT OF CONSIDERATION; TERMS OF NEW OPTIONS.

      CONSIDERATION.

      We will issue new options in exchange for eligible outstanding options
properly elected to be exchanged by you and accepted by us for such exchange.
Each new option will be granted under either our 1999 Nonstatutory Stock Option
Plan or our 1999 Stock Plan. All new options will be subject to a new stock
option agreement between you and us. Subject to any adjustments for stock
splits, subdivisions, combinations, stock dividends and similar events that
occur after the cancellation date and before the new option grant date and
subject to the other terms and conditions of this offer, upon our acceptance of
your properly tendered options, you will be entitled to receive new options
based on the grant date of your exchanged options as follows:

      -     Exchanged options granted on or before March 15, 2000, will be
            replaced with new options at an exchange ratio of one (1) new option
            for every three (3) exchanged options.

      -     Exchanged options granted after March 15, 2000 and before April 17,
            2001, or supplemental options granted on April 17, 2001, will be
            replaced with new options at an exchange ratio of one (1) new option
            for every two (2) exchanged options.

      -     Exchanged options granted after April 17, 2001, or options granted
            on April 17, 2001 other than supplemental options, will be replaced
            with new options at an exchange ratio of one (1) new option for
            every one (1) exchanged option.

      -     If Gregory L. Reyes, the Chairman and Chief Executive Officer of
            Brocade, elects to exchange any options, each exchanged option will
            be replaced with a new option at an exchange ratio of one (1) new
            option for every ten (10) exchanged options.

      Fractional options shall be rounded up to the nearest whole option.

      If we receive and accept tenders from eligible employees of all options
eligible to be tendered, subject to the terms and conditions of this offer, we
will grant new options to purchase a total of approximately 35.7


                                                                            -35-

million shares of our common stock, or approximately 15% of the total shares of
our common stock outstanding as of December 5, 2002.

      GENERAL TERMS OF NEW OPTIONS.

      New options will be granted under either our 1999 Stock Plan or our 1999
Nonstatutory Stock Option Plan. Our board of directors will determine, in its
discretion, under which plan each new option will be granted. However, all new
options granted to employees who are Brocade officers will be granted under the
1999 Stock Plan. All new options will be subject to the terms of the plan under
which it is granted and to a new option agreement between you and us. The terms
and conditions of the new options may vary from the terms and conditions of the
options that you tendered for exchange, but such changes generally will not
substantially and adversely affect your rights. The vesting schedule of your new
options will be identical to the vesting schedule of your exchanged option.

      New options generally may not be exercised until six months after the new
option grant date. However, if Brocade terminates your employment other than for
cause or if your employment terminates due to your death or permanent
disability, this six-month restriction will expire on your termination date. If
you voluntarily leave Brocade or your employment with Brocade terminates for
cause, this six-month restriction will not expire early. Your new options will
stop vesting as of your termination date, but the six-month restriction will
continue during this time. If your employment with Brocade continues, your new
options will continue to vest while subject to the six-month restriction.

      New options will be nonstatutory stock options regardless of whether the
exchanged options were incentive stock options or nonstatutory stock options.

      In addition, because we will not grant new options until the first
business day that is six months and one day after the cancellation date, your
new option may have a higher exercise price than some or all of the options that
you elect to exchange.

      The following description summarizes the material terms of our 1999 Stock
Plan and 1999 Nonstatutory Stock Option Plan and the new options we plan to
grant under this offer. Unless we need to distinguish between each of these
plans, we will refer to each as a plan and together, as the plans. Our
statements in this offer to exchange concerning each plan and the new options
are merely summaries and do not purport to be complete. The statements are
subject to, and are qualified in their entirety by reference to, the plans, and
the forms of option agreement under the plans, which have been filed as exhibits
to the Schedule TO of which this offer is a part. Please contact us at Brocade
Communications Systems, Inc., 1745 Technology Drive, San Jose, CA 95110,
Attention: Elizabeth Moore (telephone: (408) 392-5019), to receive a copy of any
of the plans, and the form of option agreement thereunder. We will promptly
furnish you copies of these documents upon request at our expense.

      1999 STOCK PLAN.

      The maximum number of common shares subject to options currently
outstanding under our 1999 Stock Plan is approximately 36.6 million shares. The
1999 Stock Plan permits the granting of incentive stock options and nonstatutory
stock options to employees. All new options granted pursuant to this offer will
be nonstatutory stock options.

      1999 NONSTATUTORY STOCK OPTION PLAN.

      The maximum number of common shares subject to options currently
outstanding under our 1999 Nonstatutory Stock Option Plan is approximately 40.5
million shares. The 1999 Nonstatutory Stock Option


                                                                            -36-

Plan permits the granting of nonstatutory stock options, but does not permit the
granting of incentive stock options.

      GENERAL TERMS OF THE PLANS.

      Each plan is administered by our board of directors or a committee
appointed by our board of directors, which we refer to as the administrator.
Subject to the other provisions of the plans, the administrator has the power to
determine the terms and conditions of the options granted, including the
exercise price, the number of shares subject to the option and the
exercisability of the options.

      TERM.

      All new options will have a term of 10 years from the new option grant
date.

      TERMINATION OF EMPLOYMENT BEFORE THE NEW OPTION GRANT DATE.

      If, for any reason, you are not an employee of Brocade or a successor
entity from the date on which you elect to exchange your options through the new
option grant date, you will not receive any new options or any other
compensation in exchange for your options that have been accepted for exchange.
This means that if you quit with or without good reason, or die, or we terminate
your employment with or without cause, before the new option grant date, you
will receive nothing for the options that you tendered and which we cancelled.

      TERMINATION OF EMPLOYMENT AFTER THE NEW OPTION GRANT DATE.

      The plans generally provide that if your employment terminates, other than
as a result of your permanent and total disability or your death, you may
exercise your option within the time specified in your option agreement. If no
time is specified, you may exercise your option within three months after
termination, but only to the extent that you are entitled to exercise it at
termination. The new options will also be subject to a six-month restriction on
exercise. This means that the new options generally cannot be exercised until
six months after the new option grant date. If Brocade terminates your
employment other than for cause or your employment terminates due to your death
or permanent disability, this six-month restriction on the exercise of your new
options will expire on the date of your termination, and you may exercise the
options, to the extent vested. If you voluntarily leave Brocade or your
employment with Brocade terminates for cause, this six-month restriction will
not expire early. Your new options will stop vesting as of your termination
date, but the six-month restriction will continue to lapse during the three
month period after your termination. To the extent you are vested and this
six-month restriction has lapsed, you may exercise your options in accordance
with the terms of your stock option agreement and the plan under which the
option was granted.

      The plans generally provide that if your employment terminates because of
your permanent and total disability or death, you or your personal
representatives, heirs or legatees may exercise any option held by you on the
date of your termination, to the extent that it was exercisable immediately
before termination, within the time frame specified in your option agreement. If
no time is specified, your option may be exercised for 12 months following
termination. As noted above, the new options will be subject to a six-month
restriction on exercise. However, if your employment terminates because of your
permanent and total disability or death, this six-month restriction on the
exercise of your new options will expire on the date of your termination. You or
your personal representatives, heirs or legatees may exercise the new options,
to the extent vested.


                                                                            -37-

      If you are a non-U.S. resident, certain other restrictions may apply.
Please refer to Schedules C through N for details regarding your specific
country.

      EXERCISE PRICE.

      The administrator generally determines the exercise price at the time the
option is granted. The exercise price per share of the new options will be the
closing price of Brocade common stock reported by the Nasdaq Stock Market on the
new option grant date. However, that the exercise price per share of new options
granted to employees who are Brocade officers shall not be less than 110% of the
average closing price of Brocade common stock during the period of this offer.
Notwithstanding the foregoing, if you are a resident of France or Italy, your
exercise price will be determined as described in Schedule G or J, respectively.
Accordingly, we cannot predict the market price of the new options. Your new
options may have a higher exercise price than some or all of your current
options.

      VESTING AND EXERCISE.

      Each stock option agreement specifies the term of the option and the date
on which the option becomes exercisable. The administrator determines the terms
of vesting. The vesting schedule for the new options will be identical to the
vesting schedule of the exchanged option. However, new options generally may not
be exercised until six months after the new option grant date. However, if
Brocade terminates your employment other than for cause or if your employment
terminates due to your death or permanent disability, this six-month restriction
will expire on your termination date. If you voluntarily leave Brocade or your
employment with Brocade terminates for cause, this six-month restriction will
not expire early. Your new options will stop vesting as of your termination
date, but the six-month restriction will continue during this time. As
long as your employment with Brocade continues, each new option will vest on the
same vesting schedule of your exchanged option, with vesting credit given for
the period between the cancellation date and the new option grant date and
during the six-month restriction on exercising new options.

      Notwithstanding the foregoing, if you are a resident of France, your
options may not be exercised until one year after the new option grant date, and
the shares will be subject to further sale restrictions precluding sale prior to
four years from the new option grant date. Please see Schedule G for details.

      Additionally, if you are a resident of France and you die while your new
options are outstanding, the new options will become immediately vested, and
your heirs will have six months from the date of your death in which to exercise
the new option. As noted above, the six-month restriction on exercise expires
immediately if you die while you are an employee.

      If you are a resident of China, you will not be permitted to obtain
shares upon exercise of your options. Instead, you must use the cashless- method
of exercise whereby all the shares you are entitled to at exercise are
immediately sold and the proceeds less the grant price, applicable taxes and
brokers' fees, if any, are remitted to you in cash. Please see Schedule E for
details.

      ADJUSTMENTS UPON CERTAIN EVENTS.

      Events Occurring before the New Option Grant Date. Although we are not
anticipating any acquisition, if Brocade is acquired between the cancellation
date and the new option grant date, then the acquiror must grant the new options
under the same terms as provided in this offer. However, the type of stock and
the number of shares covered by each new option will be determined in the same
way as the consideration received by outstanding option holders is determined at
the time of the acquisition. Such new option would generally have an exercise
price equal to the fair market value of the acquiror's stock on the


                                                                            -38-

new option grant date. As a result of this adjustment, you may receive options
for more or fewer shares of the acquiror's common stock than the number of
options you would have received if no acquisition had occurred.

      The new options for the purchase of an acquiror's stock will have an
exercise price equal to the fair market value of the acquiror's stock on the new
option grant date. If the acquiror's stock was not traded on a public market,
the fair market value of the acquiror's stock may be determined in good faith by
the acquiror's board of directors, and the exercise price of the new options
would reflect that determination. If we are acquired by another entity, options
that are not tendered for exchange may receive a lower or higher exercise price,
depending on the terms of the transaction, than those options that are tendered
for exchange.

      Regardless of any such acquisition, the new option grant date will be the
first business day that is six months and one day after the cancellation date.
Consequently, you may not be able to exercise your new options until after the
effective date of the acquisition. If you participate in the offer and the
acquisition occurs after the expiration date but before the new option grant
date, you will not be able to exercise your option to purchase Brocade common
stock before the effective date of the acquisition.

      You should be aware that these types of transactions could significantly
affect our stock price, including potentially substantially increasing the price
of our shares. Depending on the timing and structure of a transaction of this
type, you might lose the benefit of any price appreciation in our common stock
resulting from an acquisition. The exercise price of new options granted to you
after the announcement of an acquisition of Brocade would reflect any
appreciation in our stock price resulting from the announcement, and could
therefore exceed the exercise price of your current options. This could result
in option holders who do not participate in this offer receiving a greater
financial benefit than option holders who do participate. In addition, your new
options may be exercisable for stock of the acquiror, not Brocade common stock,
while option holders who decide not to participate in this offer could exercise
their options before the effective date of the acquisition and sell their
Brocade common stock before the effective date.

      Finally, if we are acquired, the acquiror may, as part of the transaction
or otherwise, decide to terminate some or all of our employees before the new
option grant date. Termination of your employment for this or any other reason
before the new option grant date means that you will not receive any new
options, and will not receive any other compensation for your exchanged options.

      If a change in our capitalization, such as a stock split, subdivision,
combination, stock dividend or other similar event, occurs after the
cancellation date but before the new option grant date, an appropriate
adjustment will be made to the number of shares subject to each option, without
any change in the aggregate purchase price.

      Events Occurring after the New Option Grant Date. If a change in our
capitalization, such as a stock split, reverse stock split, combination, stock
dividend, reclassification or other similar event, occurs after the new option
grant date, an appropriate adjustment will be made to the number of shares
subject to each option, without any change in the aggregate purchase price.

      If we liquidate or dissolve, your outstanding options will terminate
immediately before the consummation of the liquidation or dissolution. The
administrator may, however, provide for the acceleration of the exercisability
of any option.

      Each plan provides that if we merge or are consolidated with another
corporation, or if our property or stock is acquired by another corporation,
each option may be assumed by the successor corporation or an equivalent option
or right, may be substituted for the option by the successor corporation. If an
option is not so assumed or substituted for, the administrator will notify the
optionees that the options accelerate and


                                                                            -39-

become fully exercisable for a period of fifteen days from the date of the
notice, and the option will terminate upon the expiration of such period.

      TRANSFERABILITY OF OPTIONS.

      New options may not be transferred, other than by will or the laws of
descent and distribution, unless the administrator indicates otherwise in your
option agreement. In the event of your death, any person who acquires the right
to exercise the option by bequest or inheritance may exercise issued options.

      REGISTRATION OF SHARES UNDERLYING OPTIONS.

      All of the shares of Brocade common stock issuable upon exercise of new
options will be registered under the Securities Act of 1933, as amended (the
Securities Act) on registration statements on Form S-8 filed with the SEC.
Unless you are one of our affiliates, you will be able to sell the shares
issuable upon exercise of your new options free of any transfer restrictions
under applicable U.S. securities laws.

      U.S. FEDERAL INCOME TAX CONSEQUENCES.

      You should refer to Section 14 of this offer for a discussion of the U.S.
federal income tax consequences of the new options and the exchanged options, as
well as the consequences of accepting or rejecting this offer. If you are a
resident of the United States, but are also subject to the tax laws of another
non-U.S. jurisdiction, you should be aware that there might be other tax and
social security consequences that may apply to you. Please refer to Schedules C
through N for more information. We strongly recommend that you consult with your
own advisors to discuss the consequences to you of this transaction.

      TAX CONSEQUENCES IN OTHER COUNTRIES.

      You should refer to Schedules C through N of this offer to exchange for a
discussion of the tax consequences in your country of the new options and the
options tendered for exchange, as well as the consequences of accepting or
rejecting this offer. If you are a resident of more than one country, you should
be aware that there might be other tax and social insurance consequences that
may apply to you. We strongly recommend that you consult with your own advisors
to discuss the consequences to you of this transaction.

10.   INFORMATION CONCERNING BROCADE.

      Our principal executive offices are located at 1745 Technology Drive, San
Jose, CA 95110, and our telephone number is (408) 487-8000. Questions regarding
this option exchange should be directed to Elizabeth Moore at Brocade at
telephone number: (408) 392-5019.

      Brocade is a provider of infrastructure for Storage Area Networks (SANs),
offering a product family of Fibre Channel fabric switches which provide an
intelligent networking foundation for SANs. Brocade delivers products, and
provides education and services that allow companies to implement highly
available, scalable, manageable, and secure environments for business-critical
applications. The Brocade SilkWorm family of Fibre Channel fabric switches
enables customers to create a high-performance SAN fabric that is highly
reliable and scalable to support the interconnection of server and storage
devices, providing investment protection for the customer. Brocade products are
sold through original equipment manufacturer (OEM) partners, master resellers
and fabric partners.

      The financial information included in our annual report on Form 10-K for
the fiscal year ended October 27, 2001 and our quarterly report on Form 10-Q for
the quarter ended July 27, 2002 is incorporated herein by reference. Please see
Section 18 of this offer to exchange entitled, "Additional Information," for


                                                                            -40-

instructions on how you can obtain copies of our SEC filings, including filings
that contain our financial statements.

      We had a book value per share of $2.85 at July 27, 2002.

      The following table sets forth our ratio of earnings to fixed charges for
the periods specified:



                                                 FISCAL YEAR ENDED
                                              ------------------------  NINE MONTHS ENDED
                                              OCTOBER 28,  OCTOBER 27,      JULY 27,
                                                 2000         2001            2002
                                              -----------  -----------  -----------------
                                                               
Ratio of earnings to fixed charges..........     62.9x        4.2x            5.8x


      The ratio of earnings to fixed charges is computed by dividing earnings by
fixed charges. For the purposes of computing the ratio of earnings to fixed
charges, earnings consist of income before provision for income taxes plus fixed
charges. Fixed charges consist of interest expense, amortization of debt
discount and issuance costs on all indebtedness, and the estimated portion of
rental expense deemed by Brocade to be representative of the interest factor of
rental payments under operating leases.

11.   INTERESTS OF DIRECTORS AND EXECUTIVE OFFICERS; TRANSACTIONS AND
      ARRANGEMENTS CONCERNING THE OPTIONS.

      A list of our directors and executive officers is attached to this offer
to exchange as Schedule A. Non-employee directors may not participate in this
offer. Gregory L. Reyes is the only employee director, and therefore is the only
director eligible to participate in this offer. As of December 9, 2002, our
executive officers and directors (8 persons) as a group beneficially owned
options outstanding under the 1999 Stock Plan to purchase a total of 15,455,760
of our shares, which represented approximately 42% of the shares subject to all
options outstanding under the 1999 Stock Plan as of that date. As of the same
date, our executive officers and directors as a group beneficially owned options
outstanding under our 1999 Nonstatutory Stock Option Plan to purchase a total of
342,026 of our shares, which represented approximately 1% of the shares subject
to all options outstanding under the 1999 Nonstatutory Stock Option Plan.
Executive officers and directors as a group beneficially owned options
outstanding under all of the above-referenced plans to purchase a total of
15,797,786 of our shares, which represented approximately 20% of the shares
subject to all options outstanding under these plans as of that date. Of the
options owned by executive officers, 15,572,786 are eligible to be tendered in
the offer.

      The following table below sets forth the beneficial ownership of each of
our executive officers and directors of options under the eligible plans
outstanding as of December 9, 2002. The percentages in the table below are based
on the total number of outstanding options (i.e., whether or not eligible for
exchange) to purchase shares of our common stock under the eligible plans and
eligible agreements, which was 77,168,751 as of December 9, 2002. Executive
officers are eligible to participate in the offer. As noted on the table,
non-employee directors are not eligible to participate in the offer.


                                                                            -41-



                                                                                     NUMBER OF SHARES      PERCENTAGE OF
                                                                                        COVERED BY             TOTAL
                                                                                        OUTSTANDING         OUTSTANDING
                                                                                      OPTIONS GRANTED      OPTIONS UNDER
                                                                                    UNDER THE ELIGIBLE     THE ELIGIBLE
                 NAME                                    POSITION                          PLANS               PLANS
- -----------------------------------     -------------------------------------       -----------------      -------------
                                                                                                  
Gregory L. Reyes...................     Chairman and Chief Executive Officer           11,032,133               14%
Michael J. Byrd....................     President and Chief Operating Officer           1,891,268                2%
Antonio Canova.....................     Vice President, Finance and Chief                 831,162                1%
                                           Financial Officer
Jack Cuthbert......................     Vice President, Worldwide Sales                 1,893,223                2%
Neal Dempsey**.....................     Director                                           75,000                *
Seth D. Neiman**...................     Director                                           75,000                *
Christopher B. Paisley**...........     Director                                               --               --
Larry W. Sonsini**.................     Director                                               --               --


- ----------
*  Less than 1%
** Not eligible to participate in the offer.

      Neither we, nor, to the best of our knowledge, any of our directors or
executive officers, nor any affiliates of ours, engaged in transactions
involving options to purchase our common stock under the plans, or in
transactions involving our common stock during the past 60 days before and
including December 9, 2002.

12.   STATUS OF OPTIONS ACQUIRED BY US IN THE OFFER; ACCOUNTING CONSEQUENCES OF
      THE OFFER.

      Options that we acquire through the offer will be cancelled and the shares
subject to those options will be returned to the pool of shares available for
grants of new awards under the plan pursuant to which they were granted. To the
extent shares returning to the plans are not fully reserved for issuance upon
exercise of the new options to be granted in connection with the offer, the
shares will be available for future awards to employees and other eligible plan
participants, respectively, without further stockholder action, except as
required by applicable law or the rules of the Nasdaq National Market or any
other securities quotation system or any stock exchange on which our shares are
then quoted or listed.

      If we were to grant the new options under a traditional stock option
repricing, in which an employee's current options would be immediately repriced,
or on any date that is earlier than six months and one day after the date on
which we cancel the options accepted for exchange, we would be required for
financial reporting purposes to treat the new options as variable awards. This
means that we would be required to record the non-cash accounting impact of
increases in our stock price as a compensation expense for the new options
issued under this offer. We would have to continue this variable accounting for
these new options until they were exercised, forfeited or terminated. The higher
the market value of our shares, the greater the compensation expense we would
have to record. By deferring the grant of the new options for six months and one
day, we believe that we will not have to treat the new options as variable
awards and will avoid these accounting charges. As a result, we believe that we
will not incur any compensation expense solely as a result of the transactions
contemplated by the offer.

13.   LEGAL MATTERS; REGULATORY APPROVALS.

      We are not aware of any license or regulatory permit that appears to be
material to our business that might be adversely affected by our exchange of
options and issuance of new options as contemplated by the offer, or of any
approval or other action by any government or governmental, administrative or
regulatory authority or agency or any Nasdaq listing requirements that would be
required for the acquisition or ownership of our options as contemplated herein.
Should any additional approval or other action be required, we presently
contemplate that we will seek such approval or take such other action. We cannot
assure you that any such approval or other action, if needed, could be obtained
or what the conditions imposed in connection with such approvals would entail or
whether the failure to obtain any such approval or other action


                                                                            -42-

would result in adverse consequences to our business. Our obligation under the
offer to accept tendered options for exchange and to issue new options for
tendered options is subject to the conditions described in Section 7 of this
offer to exchange.

      If we are prohibited by applicable laws or regulations from granting new
options on the new option grant date, we will not grant any new options. We are
unaware of any such prohibition at this time, and we will use reasonable efforts
to effect the grant, but if the grant is prohibited on the new option grant date
we will not grant any new options and you will not receive any other
compensation for the options you tendered.

14.   MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES.

      The following is a general summary of the material U.S. federal income tax
consequences of the exchange of options pursuant to the offer. This discussion
is based on the Internal Revenue Code, its legislative history, treasury
regulations thereunder and administrative and judicial interpretations as of the
date of this offering circular, all of which are subject to change, possibly on
a retroactive basis. This summary does not discuss all of the tax consequences
that may be relevant to you in light of your particular circumstances, nor is it
intended to be applicable in all respects to all categories of option holders.
If you are a resident of the United States, but are also subject to the tax laws
of another country, you should be aware that there might be other tax and social
security consequences that may apply to you. We strongly recommend that you
consult with your own advisors to discuss the consequences to you of this
transaction.

      Option holders who exchange outstanding options for new options should not
be required to recognize income for U.S. federal income tax purposes at the time
of the exchange. We believe that the exchange will be treated as a non-taxable
exchange.

      The new options granted in exchange for your exchanged options will be
nonstatutory stock options.

      WE RECOMMEND THAT YOU CONSULT YOUR OWN TAX ADVISOR WITH RESPECT TO THE
FEDERAL, STATE AND LOCAL TAX CONSEQUENCES OF PARTICIPATING IN THE OFFER, AS THE
TAX CONSEQUENCES TO YOU ARE DEPENDENT ON YOUR INDIVIDUAL TAX SITUATION.

      INCENTIVE STOCK OPTIONS.

      Under current U.S. tax law, an option holder will not realize taxable
income upon the grant of an incentive stock option. In addition, an option
holder generally will not realize taxable income upon the exercise of an
incentive stock option. However, an option holder's alternative minimum taxable
income will be increased by the amount that the aggregate fair market value of
the shares underlying the option, which is generally determined as of the date
of exercise, exceeds the aggregate exercise price of the option. Except in the
case of an option holder's death or disability, if an option is exercised more
than 3 months after the option holder's termination of employment, the option
ceases to be treated as an incentive stock option and is subject to taxation
under the rules that apply to nonstatutory stock options.

      If an option holder sells the option shares acquired upon exercise of an
incentive stock option, the tax consequences of the disposition depend upon
whether the disposition is qualifying or disqualifying. The disposition of the
option shares is qualifying if it is made:

      -     at least 2 years after the date the incentive stock option was
            granted, and

      -     at least 1 year after the date the incentive stock option was
            exercised.


                                                                            -43-

      If the disposition of the option shares is qualifying, any excess of the
sale price of the option shares over the exercise price of the option will be
treated as long-term capital gain taxable to the option holder at the time of
the sale. Any such capital gain will be taxed at the long-term capital gain rate
in effect at the time of sale. If the disposition is not qualifying, which we
refer to as a "disqualifying disposition," the excess of the fair market value
of the option shares on the date the option was exercised over the exercise
price will be taxable income to the option holder at the time of the
disposition.

      Of that income, the amount up to the excess of the fair market value of
the shares at the time the option was exercised over the exercise price will be
ordinary income for income tax purposes and the balance, if any, will be
long-term or short-term capital gain, depending upon whether or not the shares
were sold more than 1 year after the option was exercised.

      Unless an option holder engages in a disqualifying disposition, we will
not be entitled to a deduction with respect to an incentive stock option. If an
option holder engages in a disqualifying disposition, we will be entitled to a
deduction equal to the amount of compensation income taxable to the option
holder.

      You should note that there is a risk that any incentive stock options you
have may be affected, even if you do not participate in the exchange. We do not
believe that our offer to you will change any of the terms of your eligible
incentive stock options if you do not accept the offer. We believe that you will
not be subject to current U.S. federal income tax if you do not elect to
participate in the option exchange program. We also believe that the option
exchange program will not change the U.S. federal income tax treatment of
subsequent grants and exercises of your incentive stock options (and sales of
shares acquired upon exercises of such options) if you do not participate in
this offer to exchange options. However, the IRS may characterize this offer to
exchange options as a "modification" of those incentive stock options, even if
you decline to participate. In 1991, the IRS issued a private letter ruling in
which another company's option exchange program was characterized as a
"modification" of all of the incentive stock options that could be exchanged.
This does not necessarily mean that our offer to exchange options will be viewed
the same way. Private letter rulings given by the IRS contain the IRS's opinion
regarding only the specific facts presented by a specific person or company. The
person or company receiving the letter may rely on it, but no other person or
company may rely on the letter ruling, nor may they assume the same opinion
would apply to their situation, even if the facts at issue are similar. While
such letters do not provide certainty, they may indicate how the IRS will view a
similar situation. We therefore do not know if the IRS will assert the position
that our offer constitutes a "modification" of incentive stock options eligible
for tender. A successful assertion by the IRS of this position could extend the
options' holding period to qualify for favorable tax treatment. Accordingly, to
the extent you dispose of your incentive stock option shares prior to the lapse
of the new extended holding period, your incentive stock option could be taxed
similarly to a nonstatutory stock option.

      NONSTATUTORY STOCK OPTIONS.

      All exchanged options will be replaced with options that are nonstatutory
stock options for purposes of the Internal Revenue Code, regardless of whether
the exchanged options are incentive stock options or nonstatutory stock options.

      Under current law, an option holder will not realize taxable income upon
the grant of a nonstatutory stock option. However, when an option holder
exercises the option, the difference between the exercise price of the option,
and the fair market value of the shares subject to the option on the date of
exercise will be compensation income taxable to the option holder.

      We will be entitled to a deduction equal to the amount of compensation
income taxable to the option holder if we comply with eligible reporting
requirements.


                                                                            -44-

      WE RECOMMEND THAT YOU CONSULT YOUR OWN TAX ADVISOR WITH RESPECT TO THE
FEDERAL, STATE AND LOCAL TAX CONSEQUENCES OF PARTICIPATING IN THE OFFER.

15.   TERMS OF THE OFFER SPECIFIC TO PARTICIPANTS RESIDING IN FOREIGN
      JURISDICTIONS.

      If you are a tax resident or citizen of a foreign jurisdiction or are
otherwise subject to a tax liability of a foreign jurisdiction, your tax
consequences with respect to the exchange will vary from those tax consequences
described above for United States citizens or permanent residents. Employees in
foreign jurisdictions should refer to Schedules C through N for a discussion of
the tax and legal consequences of electing to participate in the offer.

      WE RECOMMEND THAT YOU CONSULT YOUR OWN TAX ADVISOR TO DETERMINE THE TAX
AND SOCIAL INSURANCE CONTRIBUTION CONSEQUENCES OF THIS OFFER, AS THE TAX
CONSEQUENCES TO YOU ARE DEPENDENT ON YOUR INDIVIDUAL TAX SITUATION.

      IN ADDITION, IF YOU ARE A RESIDENT OF MORE THAN ONE COUNTRY, YOU SHOULD BE
AWARE THAT THERE MIGHT BE OTHER TAX AND SOCIAL SECURITY CONSEQUENCES THAT MAY
APPLY TO YOU. WE STRONGLY RECOMMEND THAT YOU CONSULT WITH YOUR OWN ADVISORS TO
DISCUSS THE CONSEQUENCES TO YOU OF THIS TRANSACTION.

16.   EXTENSION OF OFFER; TERMINATION; AMENDMENT.

      We reserve the right, in our discretion, at any time and regardless of
whether or not any event listed in Section 7 of this offer to exchange has
occurred or is deemed by us to have occurred, to extend the period of time
during which the offer is open and delay the acceptance for exchange of any
options. If we elect to extend the period of time during which this offer is
open, we will give you oral or written notice of the extension and delay, as
described below. If we extend the expiration date, we will also extend your
right to withdraw tenders of eligible options until such extended expiration
date. In the case of an extension, we will issue a press release or other public
announcement no later than 6:00 a.m., Pacific time, on the next business day
after the previously scheduled expiration date.

      We also reserve the right, in our reasonable judgment, before the
expiration date to terminate or amend the offer and to postpone our acceptance
and cancellation of any options elected to be exchanged if any of the events
listed in Section 7 of this offer to exchange occurs, by giving oral or written
notice of the termination or postponement to you or by making a public
announcement of the termination. Our reservation of the right to delay our
acceptance and cancellation of options elected to be exchanged is limited by
Rule 13e-4(f)(5) under the Exchange Act which requires that we must pay the
consideration offered or return the options promptly after termination or
withdrawal of a tender offer.

      Subject to compliance with applicable law, we further reserve the right,
before the expiration date, in our discretion, and regardless of whether any
event listed in Section 7 of this offer to exchange has occurred or is deemed by
us to have occurred, to amend the offer in any respect, including by decreasing
or increasing the consideration offered in this offer to option holders or by
decreasing or increasing the number of options being sought in this offer.

      The minimum period during which the offer will remain open following
material changes in the terms of the offer or in the information concerning the
offer, other than a change in the consideration being offered by us or a change
in amount of existing options sought, will depend on the facts and circumstances
of such change, including the relative materiality of the terms or information
changes. If we modify the number of eligible options being sought in this offer
or the consideration being offered by us for the eligible options in this offer,
the offer will remain open for at least 10 business days from the date of notice
of such modification. If any term of the offer is amended in a manner that we
determine constitutes a material change adversely


                                                                            -45-

affecting any holder of eligible options, we will promptly disclose the
amendments in a manner reasonably calculated to inform holders of eligible
options of such amendment, and we will extend the offer's period so that at
least 5 business days, or such longer period as may be required by the tender
offer rules, remain after such change.

      For purposes of the offer, a "business day" means any day other than a
Saturday, Sunday or a U.S. federal holiday and consists of the time period from
12:01 a.m. through 12:00 midnight, Eastern time.

17.   FEES AND EXPENSES.

      We will not pay any fees or commissions to any broker, dealer or other
person for soliciting options to be exchanged through this offer.

18.   ADDITIONAL INFORMATION.

      This offer to exchange is part of a Tender Offer Statement on Schedule TO
that we have filed with the SEC. This offer to exchange does not contain all of
the information contained in the Schedule TO and the exhibits to the Schedule
TO. We recommend that you review the Schedule TO, including its exhibits, and
the following materials that we have filed with the SEC before making a decision
on whether to elect to exchange your options:

      1.    The description of our Common Stock contained in our registration
            statement on Form 8-A filed with the SEC on March 19, 1999 and any
            further amendment or report filed hereafter for the purpose of
            updating such description,

      2.    The description of our Preferred Stock Purchase Rights contained in
            our registration statement on Form 8-A filed with the SEC on
            February 11, 2002 and any further amendment or report filed
            hereafter for the purpose of updating such description,

      3.    Our annual report on Form 10-K for our fiscal year ended October 27,
            2001,

      4.    Our current report on Form 8-K filed with the SEC on February 8,
            2002,

      5.    Our current report on Form 8-K filed with the SEC on June 21, 2002,

      6.    Our quarterly report on Form 10-Q for fiscal quarter ended January
            26, 2002,

      7.    Our quarterly report on Form 10-Q for fiscal quarter ended April 27,
            2002,

      8.    Our quarterly report on Form 10-Q for fiscal quarter ended July 27,
            2002,

      9.    Our current report on Form 8-K dated November 7, 2002, and

      10.   Our current report on Form 8-K filed with the SEC on November 25,
            2002.

      These filings, our other annual, quarterly and current reports, our proxy
statements and our other SEC filings may be examined, and copies may be
obtained, at the SEC's public reference room at 450 Fifth Street, N.W., Room
1024, Washington, D.C. 20549. You may obtain information on the operation of the
public reference room by calling the SEC at 1-800-SEC-0330. Our SEC filings are
also available to the public on the SEC's Internet site at http://www.sec.gov.


                                                                            -46-

      Each person to whom a copy of this offer to exchange is delivered may
obtain a copy of any or all of the documents to which we have referred you,
other than exhibits to such documents, unless such exhibits are specifically
incorporated by reference into such documents, at no cost, by writing to us at
Brocade Communications Systems, Inc. 1745 Technology Drive, San Jose, CA 95110,
Attention: Elizabeth Moore, or telephoning Elizabeth Moore at (408) 392-5019.

      As you read the documents listed above, you may find some inconsistencies
in information from one document to another. If you find inconsistencies between
the documents, or between a document and this offer to exchange, you should rely
on the statements made in the most recent document.

      The information contained in this offer about us should be read together
with the information contained in the documents to which we have referred you,
in making your decision as to whether or not to participate in this offer.

19.   FINANCIAL STATEMENTS.

      Attached as Schedule B to this offer are our financial statements that are
included in our annual report on Form 10-K for our fiscal year ended October 27,
2001, and our quarterly report on Form 10-Q for our fiscal quarter ended July
27, 2002. More complete financial information may be obtained by accessing our
public filings with the SEC by following the instructions in Section 18 of this
offer to exchange.

20.   MISCELLANEOUS.

      We are not aware of any jurisdiction where the making of the offer is not
in compliance with applicable law. If we become aware of any jurisdiction where
the making of the offer is not in compliance with any valid applicable law, we
will make a good faith effort to comply with such law. If, after such good faith
effort, we cannot comply with such law, the offer will not be made to, nor will
options be accepted from the option holders residing in such jurisdiction.

      WE HAVE NOT AUTHORIZED ANY PERSON TO MAKE ANY RECOMMENDATION ON OUR BEHALF
AS TO WHETHER YOU SHOULD ELECT TO EXCHANGE YOUR OPTIONS THROUGH THE OFFER. YOU
SHOULD RELY ONLY ON THE INFORMATION IN THIS DOCUMENT OR DOCUMENTS TO WHICH WE
HAVE REFERRED YOU. WE HAVE NOT AUTHORIZED ANYONE TO GIVE YOU ANY INFORMATION OR
TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THE OFFER OTHER THAN THE
INFORMATION AND REPRESENTATIONS CONTAINED IN THIS OFFER TO EXCHANGE AND IN THE
RELATED OPTION EXCHANGE PROGRAM DOCUMENTS. IF ANYONE MAKES ANY RECOMMENDATION OR
REPRESENTATION TO YOU OR GIVES YOU ANY INFORMATION, YOU MUST NOT RELY UPON THAT
RECOMMENDATION, REPRESENTATION OR INFORMATION AS HAVING BEEN AUTHORIZED BY US.


                      Brocade Communications Systems, Inc.
                                December 9, 2002


                                                                            -47-

                                   SCHEDULE A

                  INFORMATION CONCERNING THE EXECUTIVE OFFICERS
              AND DIRECTORS OF BROCADE COMMUNICATIONS SYSTEMS, INC.



      The directors of Brocade Communications Systems, Inc. are set forth in the
following table:



                 NAME                             POSITION AND OFFICES HELD
- ------------------------------------  ---------------------------------------------------
                                   
Gregory L. Reyes....................  Chairman and Chief Executive Officer
Neal Dempsey........................  Director
Seth D. Neiman......................  Director
Christopher B. Paisley..............  Director
Larry W. Sonsini....................  Director
Michael J. Byrd ....................  President and Chief Operating Officer
Antonio Canova .....................  Vice President, Finance and Chief Financial Officer
Jack Cuthbert ......................  Vice President, Worldwide Sales


      The address of each executive officer and director is: c/o Brocade
Communications Systems, Inc., 1745 Technology Drive, San Jose, CA 95110.

      None of the directors listed on this Schedule A, except Gregory L. Reyes,
are eligible to participate in this option exchange program.


                                      A-1

                                   SCHEDULE B

                              FINANCIAL STATEMENTS
                     OF BROCADE COMMUNICATIONS SYSTEMS, INC.




                                                                                    PAGE
                                                                                    ----
                                                                                 
Condensed Consolidated Statements of Operations for the Three and Nine Months
Ended July 27, 2002 and July 28, 2001                                                B-2

Condensed Consolidated Balance Sheets as of July 27, 2002 and October 27, 2001       B-3

Condensed Consolidated Statements of Cash Flows for the Nine Months Ended
July 27, 2002 and July 28, 2001                                                      B-4

Notes to Condensed Consolidated Financial Statements                                 B-5

Report of Independent Public Accountants                                            B-15

Consolidated Statements of Operations for the Fiscal Years Ended October 27, 2001,
October 28, 2000 and October 31, 1999                                               B-16

Consolidated Balance Sheets as of October 27, 2001 and October 28, 2000             B-17

Consolidated Statements of Stockholders' Equity as of October 27, 2001 and
October 28, 2000                                                                    B-18

Consolidated Statements of Cash Flows for the Fiscal Years Ended October 27, 2001,
October 28, 2000 and October 31, 1999                                               B-19

Notes to Consolidated Financial Statements                                          B-20



                                      B-1

                      BROCADE COMMUNICATIONS SYSTEMS, INC.

                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                      (IN THOUSANDS, EXCEPT PER SHARE DATA)
                                   (UNAUDITED)



                                                           THREE MONTHS ENDED               NINE MONTHS ENDED
                                                    -------------------------------   ------------------------------
                                                    JULY 27, 2002     JULY 28, 2001   JULY 27, 2002    JULY 28, 2001
                                                    -------------     -------------   -------------    -------------
                                                                                           
Net revenues                                          $ 151,234         $116,279        $ 409,262         $396,509
Cost of revenues                                         60,299           46,484          162,950          158,611
                                                      ---------         --------        ---------         --------
     Gross margin                                        90,935           69,795          246,312          237,898
                                                      ---------         --------        ---------         --------
Operating expenses:
   Research and development                              33,209           27,419           95,523           81,952
   Sales and marketing                                   30,338           22,599           82,722           69,632
   General and administrative                             4,756            4,387           14,139           13,373
   Amortization of deferred stock compensation              243              280              727              840
                                                      ---------         --------        ---------         --------
     Total operating expenses                            68,546           54,685          193,111          165,797
                                                      ---------         --------        ---------         --------
Income from operations                                   22,389           15,110           53,201           72,101
Interest and other income, net                            6,827            2,098           16,823            8,654
Interest expense                                         (3,387)              --           (8,057)              --
                                                      ---------         --------        ---------         --------
Income before provision for income taxes                 25,829           17,208           61,967           80,755
Provision for income taxes                                7,481            5,163           17,970           24,227
                                                      ---------         --------        ---------         --------
Net income                                            $  18,348         $ 12,045        $  43,997         $ 56,528
                                                      =========         ========        =========         ========

Net income per share - Basic                          $    0.08         $   0.05        $    0.19         $   0.26
                                                      =========         ========        =========         ========
Net income per share - Diluted                        $    0.08         $   0.05        $    0.18         $   0.23
                                                      =========         ========        =========         ========
Shares used in per share calculation - Basic            233,017          222,863          230,819          219,619
                                                      =========         ========        =========         ========
Shares used in per share calculation - Diluted          240,106          246,219          244,672          244,272
                                                      =========         ========        =========         ========


              The accompanying notes are an integral part of these
                  Condensed Consolidated Financial Statements.


                                      B-2

                      BROCADE COMMUNICATIONS SYSTEMS, INC.

                      CONDENSED CONSOLIDATED BALANCE SHEETS
                        (IN THOUSANDS, EXCEPT PAR VALUE)



                                                                    JULY 27, 2002    OCTOBER 27, 2001
                                                                    -------------    ----------------
                                                                     (unaudited)
                                                                               
ASSETS

Current assets:
   Cash and cash equivalents                                         $   195,784         $ 150,118
   Short-term investments                                                 76,723           105,030
                                                                     -----------         ---------
      Total cash, cash equivalents and short-term investments            272,507           255,148
Marketable equity securities                                                 193               332
Accounts receivable, net of allowances of $3,563 and
   $3,025, respectively                                                   87,857            68,900
Inventories, net                                                           7,064            10,307
Deferred tax assets, net                                                  29,386            28,025
Prepaid expenses and other current assets                                 15,910            10,022
                                                                     -----------         ---------
      Total current assets                                               412,917           372,734

Long-term investments                                                    609,802                --
Property and equipment, net                                              138,193            97,457
Deferred tax assets, net                                                 219,385           207,209
Convertible subordinated debt issuance costs                              10,891                --
Other assets                                                               9,401             6,322
                                                                     -----------         ---------
      Total assets                                                   $ 1,400,589         $ 683,722
                                                                     ===========         =========

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
   Accounts payable                                                  $    58,292         $  25,082
   Accrued employee compensation                                          19,412            21,994
   Deferred revenue                                                       18,332            12,630
   Current liabilities associated with lease losses                        9,291            11,339
   Other accrued liabilities                                              52,881            43,895
                                                                     -----------         ---------
      Total current liabilities                                          158,208           114,940

Non-current liabilities associated with lease losses                      23,963            30,896
Convertible subordinated debt                                            550,000                --

Commitments and contingencies (Note 7)

Stockholders' equity:
   Preferred stock, $0.001 par value
      5,000 shares authorized, no shares outstanding                          --                --
Common stock, $0.001 par value, 800,000 shares authorized:
   Issued and outstanding: 234,214 and 229,762 shares at
      July 27, 2002 and October 27, 2001, respectively                       234               230
Additional paid-in capital                                               569,929           493,738
Deferred stock compensation                                                 (311)           (1,038)
Accumulated other comprehensive income                                    10,135               522
Retained earnings                                                         88,431            44,434
                                                                     -----------         ---------
      Total stockholders' equity                                         668,418           537,886
                                                                     -----------         ---------
      Total liabilities and stockholders' equity                     $ 1,400,589         $ 683,722
                                                                     ===========         =========


              The accompanying notes are an integral part of these
                  Condensed Consolidated Financial Statements.


                                      B-3

                      BROCADE COMMUNICATIONS SYSTEMS, INC.

                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
                                   (UNAUDITED)



                                                                                              NINE MONTHS ENDED
                                                                                         ----------------------------
                                                                                          JULY 27,          JULY 28,
                                                                                            2002              2001
                                                                                         ----------        ----------
                                                                                                     
CASH FLOWS FROM OPERATING ACTIVITIES:

Net income                                                                               $  43,997         $  56,528
Adjustments to reconcile net income to net cash provided by operating activities:
   Tax benefits from employee stock option transactions                                     26,200           123,523
   Deferred taxes                                                                          (20,293)         (105,830)
   Depreciation, amortization, and loss on disposal of property and equipment               22,734            11,407
   Amortization of debt issuance costs                                                       1,484                --
   Gain on sale of marketable equity securities                                                 --            (6,632)
   Impairment losses on investments                                                             --             4,700
   Provision for doubtful accounts receivable and sales returns                              1,700             1,145
   Non-cash compensation expense                                                               727               857
   Changes in operating assets and liabilities:
     Accounts receivable                                                                   (20,657)           (1,282)
     Inventories                                                                             3,243            (7,183)
     Prepaid expenses and other assets                                                      (8,967)           (9,378)
     Accounts payable                                                                       33,210             1,460
   Accrued employee compensation                                                            (2,582)          (13,212)
     Deferred revenue                                                                        5,702            11,340
     Other accrued liabilities                                                               8,986            13,397
     Liabilities associated with lease losses                                               (5,580)               --
                                                                                         ---------         ---------
       Net cash provided by operating activities                                            89,904            80,840
                                                                                         ---------         ---------

CASH FLOWS FROM INVESTING ACTIVITIES:

   Purchases of property and equipment                                                     (65,179)          (63,599)
   Purchases of investments                                                               (640,777)          (23,195)
   Proceeds from maturities of short-term investments                                       74,098            57,690
   Proceeds from sale of marketable equity securities                                           --            11,632
   Other investing activities                                                                   --           (17,062)
                                                                                         ---------         ---------
     Net cash used in investing activities                                                (631,858)          (34,534)
                                                                                         ---------         ---------

CASH FLOWS FROM FINANCING ACTIVITIES:

   Proceeds from issuance of common stock, net                                              49,995            73,806
   Proceeds from issuance of convertible subordinated debt                                 537,625                --
                                                                                         ---------         ---------
     Net cash provided by financing activities                                             587,620            73,806
                                                                                         ---------         ---------
                                                                                            45,666           120,112
Net increase in cash and cash equivalents
Cash and cash equivalents, beginning of period                                             150,118            27,265
                                                                                         ---------         ---------
Cash and cash equivalents, end of period                                                 $ 195,784         $ 147,377
                                                                                         =========         =========


              The accompanying notes are an integral part of these
                  Condensed Consolidated Financial Statements.


                                       B-4


                      BROCADE COMMUNICATIONS SYSTEMS, INC.

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (unaudited)

1.       ORGANIZATION AND OPERATIONS OF BROCADE

         Brocade Communications Systems, Inc. (Brocade or the Company) is the
world's leading provider of infrastructure for Storage Area Networks (SANs),
offering a product family of Fibre Channel fabric switches which provide an
intelligent networking foundation for SANs. Brocade delivers products and
provides education and services that allow companies to implement highly
available, scalable, manageable, and secure environments for business-critical
applications. The Brocade SilkWorm family of Fibre Channel fabric switches
enables customers to create a high-performance SAN fabric that is highly
reliable and scalable to support the interconnection of server and storage
devices, providing investment protection for the customer. Brocade products are
sold through original equipment manufacturer (OEM) partners, master resellers
and fabric partners.

         Brocade was incorporated on May 14, 1999 as a Delaware corporation and
is the successor to operations originally begun on August 24, 1995. The
Company's headquarters are located in San Jose, California.

2.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         BASIS OF PRESENTATION

         The accompanying financial data as of July 27, 2002, and for the three
and nine-month periods ended July 27, 2002 and July 28, 2001, have been prepared
by the Company, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission (SEC). Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with accounting principles generally accepted in the United States of America
have been condensed or omitted pursuant to such rules and regulations. The
October 27, 2001 Condensed Consolidated Balance Sheet was derived from audited
consolidated financial statements, but does not include all disclosures required
by generally accepted accounting principles. However, the Company believes that
the disclosures are adequate to make the information presented not misleading.
These Condensed Consolidated Financial Statements should be read in conjunction
with the Consolidated Financial Statements and notes thereto included in the
Company's Annual Report on Form 10-K for the fiscal year ended October 27, 2001.

         In the opinion of management, all adjustments (which include only
normal recurring adjustments) necessary to present a fair statement of financial
position as of July 27, 2002, results of operations for the three and nine-month
periods ended July 27, 2002 and July 28, 2001, and cash flows for the nine-month
periods ended July 27, 2002 and July 28, 2001, have been made. The results of
operations for the three and nine-month periods ended July 27, 2002 are not
necessarily indicative of the operating results for the full fiscal year or any
future periods.

         CASH, CASH EQUIVALENTS, SHORT-TERM INVESTMENTS AND LONG-TERM
         INVESTMENTS

         The Company considers all highly liquid investment securities with
original maturities of three months or less to be cash equivalents. Investment
securities with original maturities of more than three months but less than one
year are considered short-term investments. Investment securities with original

                                      B-5

maturities of one year or more are considered long-term investments. The
Company's investments consist of debt securities issued by United States
government agencies. All investments are classified as available-for-sale.
Unrealized gains and losses are included in accumulated other comprehensive
income in the accompanying Condensed Consolidated Balance Sheets, net of any
related tax effect.

         MARKETABLE EQUITY SECURITIES AND OTHER INVESTMENTS

         Marketable equity securities consist of equity holdings in public
companies and are classified as available-for-sale when there are no
restrictions on the Company's ability to immediately liquidate such securities.
The fair value of marketable equity securities is determined using quoted market
prices for those securities. Unrealized gains and losses are included in
accumulated other comprehensive income in the accompanying Condensed
Consolidated Balance Sheets, net of any related tax effect. Realized gains and
losses are calculated based on the specific identification method and are
included in interest and other income, net in the Condensed Consolidated
Statements of Operations.

         The Company also has certain other minority equity investments in
non-publicly traded companies. These investments are included in other assets in
the accompanying Condensed Consolidated Balance Sheets, are carried at cost, and
are accounted for under the cost method. The Company holds less than 20 percent
of the voting equity of such companies, and neither has nor seeks control or
significant influence over the respective company's operating and financial
policies. The Company monitors its investments for impairment on a quarterly
basis and makes appropriate reductions in carrying values when such impairments
are determined to be other-than-temporary. Factors used in determining an
impairment include, but are not limited to, the current business environment
including competition and uncertainty of financial condition; going concern
considerations such as the inability to obtain additional private financing to
fulfill the investee company's stated business plan and cash burn rate; the need
for changes to the respective investee company's existing business model due to
changing business environments and its ability to successfully implement
necessary changes; and comparable valuations. If an investment is determined to
be impaired, a determination is made as to whether such impairment is
other-than-temporary.

         For the three and nine-month periods ended July 28, 2001, the Company
recorded impairment charges of $1.2 million and $4.7 million, respectively,
related to other-than-temporary declines in the fair value of certain minority
equity investments in non-publicly traded companies. The impairment charges
reduced the carrying value of the Company's investments to the estimated fair
value. The impairment charges are included in interest and other income, net in
the accompanying Condensed Consolidated Statements of Operations. No impairment
charges were recorded for the three and nine-month periods ended July 27, 2002.
As of July 27, 2002, and October 27, 2001, the carrying value of the Company's
minority equity investments in non-publicly traded companies was $2.2 million.

         NOTES RECEIVABLE FROM NON-EXECUTIVE EMPLOYEES

         The Company occasionally provides loans to various employees generally
related to the respective employees' relocation to the San Francisco Bay area in
connection with their employment with the Company. The loans are generally
evidenced by secured promissory notes to the Company and bear interest at
prevailing rates. Notes receivable from employees are included in prepaid
expenses and other current assets, and other assets in the accompanying
Condensed Consolidated Balance Sheets. None of these loans have been issued to
executive officers.

                                      B-6

         REVENUE RECOGNITION

         Product revenue. Product revenue is generally recognized when
persuasive evidence of an arrangement exists, delivery has occurred, fee is
fixed or determinable, and collectibility is probable. However, revenue
recognition is deferred for shipments to new customers and for shipments to
existing customers when significant support services are required to
successfully integrate Brocade products into the customer's products. These
revenues, and related costs, are deferred and recognized when the customer has
successfully integrated Brocade products into its product offerings and Brocade
has met any support obligations. In addition, revenue from sales to master
resellers is recognized upon reported sell-through.

         Service revenue. Service revenue, which to date has not been material,
consists of training, warranty, and maintenance arrangements, including
post-contract customer support (PCS) services. PCS services are offered under
renewable, annual fee-based contracts or as part of multiple element
arrangements and typically include upgrades and enhancements to the Company's
software operating system, and telephone support. For multiple element
arrangements, the Company allocates revenue to each element based upon
vendor-specific objective evidence (VSOE). VSOE for each element is based upon
the price charged when the element is sold separately. Service revenue,
including revenue allocated to undelivered elements, is deferred and recognized
ratably over the contractual period, which is generally one to three years.
Training revenue is recognized upon completion of the training.

         The Company accrues for warranty costs and reduces revenue for
estimated sales returns and other allowances at the time of shipment. Warranty
costs, sales returns and other allowances are estimated based upon historical
experience.

         COMPUTATION OF NET INCOME PER SHARE

         Basic net income per share is computed using the weighted-average
number of common shares outstanding during the period, less shares subject to
repurchase. Diluted net income per share is computed using the weighted-average
number of common and dilutive potential common shares outstanding during the
period. Dilutive potential common shares result from the assumed exercise of
outstanding stock options that have a dilutive effect on earnings per share, and
from the assumed conversion of outstanding convertible debt if it has a dilutive
effect on earnings per share.

         CONCENTRATIONS

         Financial instruments that potentially subject the Company to
concentrations of credit risk consist primarily of cash equivalents, short-term
and long-term investments, and accounts receivable. Cash, cash equivalents, and
short-term and long-term investments are primarily maintained at four major
financial institutions in the United States. Deposits held with banks may exceed
the amount of insurance provided on such deposits. Generally, these deposits may
be redeemed upon demand. The Company generally invests in United States
government agency debt securities and limits the amount of credit exposure to
any one entity. During the nine months ended July 27, 2002, the Company invested
$640.8 million, primarily consisting of the proceeds from its convertible debt
offering, in debt securities of three separate United States government
agencies.

         For the quarters ended July 27, 2002 and July 28, 2001, four and three
customers each contributed greater than 10 percent of the Company's total
revenues, for combined totals of 76 percent and 54 percent of total revenues,
respectively. For the nine-month periods ended July 27, 2002 and July 28, 2001,
four and two customers each contributed greater than 10 percent of the Company's
total revenues, for combined totals of 73 percent and 48 percent of total
revenues, respectively. The level of sales to any single customer may vary

                                      B-7

and the loss of any one of these customers, or a decrease in the level of sales
to any one of these customers, could have a material adverse impact on the
Company's financial condition or results of operations.

         A majority of the Company's trade receivable balance is derived from
sales to OEM partners in the computer storage and server industry. As of July
27, 2002, and October 27, 2001, 72 percent and 76 percent of accounts
receivable, respectively, were concentrated with five customers. The Company
performs on-going credit evaluations of its customers and generally does not
require collateral on accounts receivable. The Company has established reserves
for credit losses and sales returns and other allowances. The Company has not
experienced material credit losses in any of the periods presented.

         The Company's business is concentrated in the storage area networking
industry, which has been impacted by unfavorable economic conditions and reduced
information technology (IT) spending rates. Accordingly, the Company's future
success depends upon the buying patterns of customers in the storage area
networking industry, their response to current and future IT investment trends,
and the continued demand by such customers for the Company's products. The
Company's continued success will depend upon its ability to enhance its existing
products and to develop and introduce, on a timely basis, new cost-effective
products and features that keep pace with technological developments and
emerging industry standards.

         COMPREHENSIVE INCOME

         The components of comprehensive income, net of tax, are as follows (in
thousands):



                                                                         THREE MONTHS ENDED           NINE MONTHS ENDED
                                                                       -----------------------     -----------------------
                                                                       JULY 27,      JULY 28,      JULY 27,       JULY 28,
                                                                         2002          2001          2002           2001
                                                                       --------      --------      --------       --------
                                                                                                     
    Net income ...................................................      $18,348      $ 12,045       $43,997      $ 56,528
    Other comprehensive income:
         Change in net unrealized gains (losses) on marketable
             equity securities and investments ...................        9,241          (786)        9,613       (30,666)
         Reclassification adjustment for gains previously included
             in net income .......................................         --             632          --           4,642
                                                                        -------      --------       -------      --------
    Total comprehensive income ...................................      $27,589      $ 11,891       $53,610      $ 30,504
                                                                        =======      ========       =======      ========


         RECLASSIFICATIONS

         Certain prior year amounts have been reclassified to conform to the
current year presentation.

         RECENT ACCOUNTING PRONOUNCEMENTS

         In October 2001, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 144 "Accounting for the
Impairment or Disposal of Long-Lived Assets" (SFAS 144). SFAS 144 supersedes
SFAS No. 121 "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of" (SFAS 121), and certain provisions of APB
Opinion No. 30 "Reporting the Results of Operations-Reporting the Effects of
Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently
Occurring Events and Transactions" (APB 30). SFAS 144 establishes standards for
long-lived assets to be disposed of, and redefines the valuation and
presentation of

                                      B-8

discontinued operations. SFAS 144 is effective for fiscal years beginning after
December 15, 2001, and interim periods within those fiscal years. Management
does not expect the adoption of SFAS 144 to have a material effect on the
Company's financial position, results of operations, or cash flows.

3.       FAIR VALUE OF FINANCIAL INSTRUMENTS

         The following tables summarize the Company's available-for-sale
securities (in thousands):



                                                                             GROSS            GROSS
                                                          AMORTIZED       UNREALIZED        UNREALIZED          FAIR
                                                            COST             GAINS            LOSSES            VALUE
                                                          ---------        ---------        ---------         ---------
                                                                                                  
JULY 27, 2002
U.S. government agency debt securities............        $ 669,479        $  17,046        $     --          $ 686,525
Marketable equity securities......................              347              --              (154)              193
                                                          ---------        ---------        ---------         ---------
         Total....................................        $ 669,826        $  17,046        $    (154)        $ 686,718
                                                          =========        =========        =========         =========

Reported as:
     Short-term investments.......................                                                            $  76,723
     Marketable equity securities.................                                                                  193
     Long-term Investments........................                                                              609,802
                                                                                                              ---------
         Total....................................                                                            $ 686,718
                                                                                                              =========

OCTOBER 27, 2001

U.S. government agency debt securities............        $ 104,493        $     537        $     --          $ 105,030
Marketable equity securities......................              347               24              (39)              332
                                                          ---------        ---------        ---------         ---------
         Total....................................        $ 104,840        $     561        $     (39)        $ 105,362
                                                          =========        =========        =========         =========

Reported as:
     Short-term investments.......................                                                            $ 105,030
     Marketable equity securities.................                                                                  332
                                                                                                              ---------
         Total....................................                                                            $ 105,362
                                                                                                              =========


         No gains or losses were realized for the three and nine-month periods
ended July 27, 2002. For the three and nine-month periods ended July 28, 2001,
gross gains of $0.9 million and $6.6 million, respectively, were realized on the
sale of marketable equity securities and are included in interest and other
income, net in the accompanying Condensed Consolidated Statements of Operations.
As of July 27, 2002, and October 27, 2001, net unrealized holding gains of $16.9
million and $0.5 million, respectively, were included in accumulated other
comprehensive income in the accompanying Condensed Consolidated Balance Sheets,
net of any related tax effect.

         The following table summarizes maturities of the Company's investments
in debt securities issued by United States government agencies as of July 27,
2002 (in thousands):



                                            AMORTIZED COST             FAIR VALUE
                                            --------------             ----------
                                                                 
    Less than one year                        $ 76,275                  $ 76,723
    Due in 1 - 2 years                          46,031                    47,151
    Due in 2 - 3 years                         547,173                   562,651
                                              --------                  --------
                 Total                        $669,479                  $686,525
                                              ========                  ========


                                      B-9

4.       LIABILITIES ASSOCIATED WITH FACILITIES LEASE LOSSES

         During the quarter ended October 27, 2001, the Company recorded a
charge of $39.8 million related to estimated facilities lease losses, net of
expected sublease income, and a charge of $5.7 million in connection with the
impairment of certain related leasehold improvements. These estimated charges
represented the low-end of an estimated range that may be adjusted upon the
occurrence of future triggering events. Under certain circumstances, the
high-end of this range was estimated to be $63.0 million. Triggering events may
include, but are not limited to, changes in estimated time to sublease the
facilities, sublease terms, and sublease rates.

         During the quarter ended July 27, 2002, the Company revised certain
estimates and assumptions used to calculate its reserves for facilities lease
losses and related asset impairment charges including those related to expected
sublease rates, estimated time to sublease, expected future operating costs, and
expected future use of the facilities. These revised estimates and assumptions
were based on current conditions and events. The net impact of these changes in
estimates and assumptions was not material. Should there be further changes in
real estate market conditions or should it take longer than expected to find a
suitable tenant to sublease the facilities, adjustments to the facilities lease
losses reserve may be necessary in future periods based upon the then current
actual events and circumstances.

         The following table summarizes the activity for the facilities lease
losses reserve, net of expected sublease income, for the nine-month period ended
July 27, 2002 (in thousands):



                                                                                                      FACILITIES
                                                                                                     LEASE LOSSES
                                                                                                     ------------

                                                                                                  
Reserve balances at October 27, 2001.....................................................              $  38,834
Cash payments............................................................................                 (5,209)
Non-cash charges and adjustments.........................................................                   (371)
                                                                                                       ---------
     Reserve balances at July 27, 2002...................................................              $  33,254
                                                                                                       =========


         Cash payments for facilities leases related to the above noted
facilities lease losses will be paid over the respective lease terms through
fiscal 2006.

5.       CONVERTIBLE SUBORDINATED DEBT

         On December 21, 2001, and January 10, 2002, the Company sold, in
private placements pursuant to Section 4(2) of the Securities Act of 1933, as
amended, $550 million in aggregate principal amount of 2 percent convertible
subordinated notes due 2007. The initial purchasers of the notes were Morgan
Stanley & Co. Incorporated, Goldman, Sachs & Co., Salomon Smith Barney, Inc. and
Merrill Lynch Pierce Fenner and Smith Incorporated, who purchased the notes from
the Company at a discount of 2.25 percent of the aggregate principal amount.
Holders of the notes may, in whole or in part, convert the notes into shares of
the Company's common stock at a conversion rate of 22.8571 shares per $1,000
principal amount of notes (aggregate of approximately 12.6 million shares) at
any time prior to maturity on January 1, 2007. At any time on or after January
5, 2005, the Company may redeem the notes in whole or in part at the following
prices expressed as a percentage of the principal amount:



REDEMPTION PERIOD                                                                                             PRICE
- -----------------                                                                                            -------
                                                                                                          
Beginning on January 5, 2005 and ending on December 31, 2005........................................         100.80%
Beginning on January 1, 2006 and ending on December 31, 2006........................................         100.40%
On January 1, 2007..................................................................................         100.00%


                                      B-10

         The Company is required to pay interest on January 1 and July 1 of each
year, beginning July 1, 2002. Debt issuance costs of $12.4 million are being
amortized over a five-year term using the straight-line method, which
approximates the effective interest rate method. The amortization of debt
issuance costs will accelerate upon early redemption or conversion of the notes.
During the quarter ended April 27, 2002, the net proceeds of $537.6 million were
invested in United States government agency debt securities. The net proceeds
remain available for general corporate purposes, including working capital and
capital expenditures.

6.       BALANCE SHEET DETAIL

         Inventories consisted of the following and are shown net of reserves
for excess and obsolete inventory (in thousands):



                                                                                            July 27,          October 27,
                                                                                              2002                2001
                                                                                           ---------           ---------
                                                                                                         
Raw materials....................................................................          $   1,835           $   6,572
Finished goods...................................................................              5,229               3,735
                                                                                           ---------           ---------
     Total.......................................................................          $   7,064           $  10,307
                                                                                           =========           =========


         Property and equipment, net consisted of the following (in thousands):



                                                          JULY 27,        OCTOBER 27,
                                                            2002            2001
                                                         ---------        --------
                                                                   
    Computers, equipment and software                    $ 148,471       $  98,775
    Furniture and fixtures                                   3,356           3,200
    Leasehold improvements                                  28,730          18,435
                                                         ---------       ---------
                                                           180,557         120,410
    Less: Accumulated depreciation and amortization        (42,364)        (22,953)
                                                         ---------       ---------
         Total                                           $ 138,193       $  97,457
                                                         =========       =========


         Leasehold improvements at July 27, 2002, and October 27, 2001, are
shown net of estimated impairments related to facilities lease losses (see Note
4).

7.       COMMITMENTS AND CONTINGENCIES

         LEASES

         The Company leases its facilities and certain equipment under various
operating lease agreements expiring through November 2013. In connection with
its facilities lease agreements, the Company has signed unconditional,
irrevocable letters of credit totaling $18.7 million as security for the leases.
Future minimum lease payments under all non-cancelable operating leases as of
July 27, 2002 were $269.5 million. In addition to base rent on its facilities
leases, many of the operating lease agreements require that the Company pay a
proportional share of the respective facilities' operating expenses.

         As of July 27, 2002, the Company had a facilities lease losses reserve,
net of expected sublease income, related to future facilities lease commitments
of $33.3 million (see Note 4).

         MANUFACTURING AND PURCHASE COMMITMENTS

         The Company has a manufacturing agreement with Solectron Corporation
(Solectron) under which the Company provides to Solectron a twelve-month product
forecast and places purchase orders with

                                      B-11

Solectron sixty calendar days in advance of the scheduled delivery of products
to the Company's customers. As of July 27, 2002, the Company's commitment to
Solectron for such inventory components, net of purchase commitment reserves,
was $35.9 million, which the Company expects to utilize during future normal
ongoing operations. Although the Company's purchase orders placed with Solectron
are cancelable, the terms of the agreement require the Company to purchase from
Solectron all inventory components not returnable or usable by other Solectron
customers.

         In addition, the Company purchases several key components used in the
manufacture of its products. As of July 27, 2002, the Company had non-cancelable
purchase commitments for various components, net of purchase commitment
reserves, totaling $12.4 million, which the Company expects to utilize during
future normal ongoing operations.

         The Company has established purchase commitment reserves of $3.2
million for excess inventory components committed to be purchased from Solectron
and other key component vendors that it believes may not be realizable during
future normal ongoing operations. These purchase commitment reserves represent
the difference between the cost of the components and their estimated fair value
based upon assumptions about market conditions and the Company's current
forecast of revenue. To the extent that such forecasts are not achieved or
actual market conditions are less favorable than those projected, the Company's
commitments and associated reserve levels may change. The Company monitors its
purchase commitment reserve requirements on a quarterly basis.

         LEGAL PROCEEDINGS

         On February 14, 2002, a suit captioned McDATA Corp. v. Brocade
Communications Systems, Inc. was filed against the Company in the United States
District Court for the District of Colorado. The complaint alleged that the
Brocade SilkWorm 3800 Enterprise Fibre Channel Fabric Switch and Brocade
SilkWorm 12000 Core Fabric Switch infringe U.S. Patent No. 6,233,236, entitled
"Method and Apparatus for Measuring Traffic Within a Switch." The complaint
seeks unspecified compensatory and exemplary damages and to permanently enjoin
the Company from infringing the patent in the future. On March 4, 2002, McDATA
Corporation (McDATA) filed an amended complaint, in which it additionally
alleged that the Brocade SilkWorm 3200 Entry Fabric Switch infringed this
patent. In connection with this suit, on March 4, 2002, McDATA filed a motion
for a preliminary injunction against the Company with regard to the patent. The
Company filed an answer and counterclaims on April 8, 2002 asserting, among
other things, no infringement and that the patent is invalid, unenforceable and
covered by an existing covenant not to sue between the Company and McDATA. A
hearing on McDATA's motion for preliminary injunction was held on July 15, 2002,
and the Company is awaiting a decision on the matter. The Company believes that
it has meritorious defenses to the claims and intends to defend the action
vigorously.

         On July 20, 2001, the first of a number of putative class actions was
filed in the United States District Court for the Southern District of New York
against the Company, certain of its officers and directors, and certain of the
underwriters in the Company's initial public offering. Those cases were
consolidated under the caption Chae v. Brocade Communications Systems, Inc. et
al. The complaints generally alleged that various investment bank underwriters
engaged in improper and undisclosed activities related to the allocation of
shares in the Company's initial public offering. On March 1, 2002, the Court
entered an order dismissing without prejudice all claims against the Company and
its officers and directors named in the consolidated proceeding. On April 19,
2002, a consolidated amended class action captioned In Re Brocade Communications
Systems, Inc. Initial Public Offering Securities Litigation, 01 CV 6613, was
filed asserting claims against the Brocade parties that are substantially
similar to those alleged in the earlier case. The complaint seeks unspecified
damages on behalf of a purported class of purchasers of common stock from

                                      B-12

May 24, 1999 to December 6, 2000. Motions to dismiss have been filed. The
Company believes that it has meritorious defenses to the claims and intends to
defend the action vigorously.

8.       STOCKHOLDER RIGHTS PLAN

         On February 5, 2002, the Company's Board of Directors adopted a
stockholder rights plan. Under the plan, the Company declared and paid a
dividend of one right for each share of common stock held by stockholders of
record as of the close of business on February 19, 2002. Each right initially
entitles stockholders to purchase a fractional share of the Company's preferred
stock at $280 per share. However, the rights are not immediately exercisable and
will become exercisable only upon the occurrence of certain events. If a person
or group acquires or announces a tender or exchange offer that would result in
the acquisition of 15 percent or more of the Company's common stock while the
stockholder rights plan remains in place, then, unless the rights are redeemed
by the Company for $0.001 per right, the rights will become exercisable by all
rights holders except the acquiring person or group for shares of the Company or
the third party acquirer having a value of twice the right's then-current
exercise price. The stockholder rights plan may have the effect of deterring or
delaying a change in control of Brocade.

9.       NET INCOME PER SHARE

         The following table presents the calculation of basic and diluted net
income per common share (in thousands, except per share data):



                                                                  THREE MONTHS ENDED              NINE MONTHS ENDED
                                                             -------------------------       -------------------------
                                                              JULY 27,        JULY 28,         JULY 27,        JULY 28,
                                                               2002            2001             2002             2001
                                                             ---------       ---------       ---------       ---------
                                                                                                 
    Net income                                               $  18,348       $  12,045       $  43,997       $  56,528
                                                             =========       =========       =========       =========
    Basic and diluted net income per share:
       Weighted-average shares of common stock                 233,760         228,068         232,573         226,006
         outstanding

       Less: Weighted-average shares of common stock
         subject to repurchase                                    (743)         (5,205)         (1,754)         (6,387)
                                                             ---------       ---------       ---------       ---------
    Weighted-average shares used in computing basic net
       income per share                                        233,017         222,863         230,819         219,619
    Dilutive potential common shares                             7,089          23,356          13,853          24,653
                                                             ---------       ---------       ---------       ---------
    Weighted-average shares used in computing diluted
       net income per share                                    240,106         246,219         244,672         244,272
                                                             =========       =========       =========       =========
    Basic net income per share                               $    0.08       $    0.05       $    0.19       $    0.26
                                                             =========       =========       =========       =========
    Diluted net income per share                             $    0.08       $    0.05       $    0.18       $    0.23
                                                             =========       =========       =========       =========


         For the quarters ended July 27, 2002 and July 28, 2001, potential
common shares in the form of stock options to purchase 65.1 million and 27.9
million weighted-average shares of common stock, respectively, were antidilutive
and, therefore, not included in the computation of diluted earnings per share.
For the nine-month periods ended July 27, 2002 and July 28, 2001, potential
common shares in the form of stock options to purchase 43.9 million and 18.8
million weighted-average shares of common stock, respectively, were antidilutive
and therefore not included in the computation of diluted earnings per share. In
addition, for the three and nine-month periods ended July 27, 2002, potential
common shares resulting from the potential conversion of the Company's
convertible subordinated debt of 12.6 million and 10.0 million weighted-average
common shares, respectively, were antidilutive and, therefore, not included in
the computation of diluted earnings per share.

                                      B-13

10.      SEGMENT INFORMATION

         The Company is organized and operates as one operating segment: the
design, development, manufacturing, marketing and selling of infrastructure for
SANs. The Chief Executive Officer is the Company's Chief Operating Decision
Maker (CODM), as defined by SFAS 131, "Disclosures about Segments of an
Enterprise and Related Information." The CODM allocates resources and assesses
the performance of the Company based on consolidated revenues and overall
profitability.

         Revenues are attributed to geographic areas based on the location of
the customer to which products are shipped. Domestic and international revenues
were 75 percent and 25 percent of total revenues, respectively, for the quarter
ended July 27, 2002, and 71 percent and 29 percent, respectively, for the
nine-month period ended July 27, 2002. Domestic and international revenues were
71 percent and 29 percent of total revenues, respectively, for the quarter ended
July 28, 2001, and 72 percent and 28 percent of total revenues, respectively,
for the nine-month period ended July 28, 2001. Domestic revenues include sales
to certain OEM customers who then distribute Brocade product to their
international customers. To date service revenue has not exceeded 10 percent of
total revenues. Identifiable assets located in foreign countries were not
material as of July 27, 2002, and October 27, 2001.

         For the quarters ended July 27, 2002 and July 28, 2001, four and three
customers each contributed greater than 10 percent of the Company's total
revenues, for combined totals of 76 percent and 54 percent of total revenues,
respectively. For the nine-month periods ended July 27, 2002 and July 28, 2001,
four and two customers each contributed greater than 10 percent of the Company's
total revenues, for combined totals of 73 percent and 48 percent of total
revenues, respectively.

                                      B-14

                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Brocade Communications Systems, Inc.:

         We have audited the accompanying consolidated balance sheets of Brocade
Communications Systems, Inc. (a Delaware corporation) and subsidiaries as of
October 27, 2001 and October 28, 2000, and the related consolidated statements
of operations, stockholders' equity and cash flows for each of the three years
in the period ended October 27, 2001. These financial statements and the
schedule referred to below are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements and
schedule based on our audits.

         We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

         In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Brocade
Communications Systems, Inc. and subsidiaries as of October 27, 2001 and October
28, 2000 and the results of their operations and their cash flows for each of
the three years in the period ended October 27, 2001, in conformity with
accounting principles generally accepted in the United States.

         Our audit was made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule listed under Item 14(a)(2)
is presented for purposes of complying with the Securities and Exchange
Commission's rules and is not part of the basic financial statements. This
schedule has been subjected to the auditing procedures applied in the audit of
the basic financial statements and, in our opinion, fairly states in all
material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.

                                              ARTHUR ANDERSEN LLP

San Jose, California
November 20, 2001
(except with respect to the matters discussed in Note 12, as to which the date
is January 10, 2002.)

                                      B-15

                      BROCADE COMMUNICATIONS SYSTEMS, INC.

                      CONSOLIDATED STATEMENTS OF OPERATIONS
                      (IN THOUSANDS, EXCEPT PER SHARE DATA)



                                                                   FISCAL YEAR ENDED
                                                       -----------------------------------------
                                                       OCTOBER 27,     OCTOBER 28,   OCTOBER 31,
                                                          2001            2000          1999
                                                       -----------     -----------   -----------
                                                                            
    Net revenues                                        $ 513,030       $329,045      $ 68,692
    Cost of revenues                                      212,956        137,456        33,497
                                                        ---------       --------      --------
         Gross margin                                     300,074        191,589        35,195
                                                        ---------       --------      --------
    Operating expenses:
       Research and development                           110,749         50,505        15,267
       Sales and marketing                                 94,931         46,524        13,288
       General and administrative                          17,737         10,506         3,849
       Amortization of deferred stock compensation          1,082          1,120         1,937
       Facilities lease losses and other charges           49,888           --            --
                                                        ---------       --------      --------
         Total operating expenses                         274,387        108,655        34,341
                                                        ---------       --------      --------
    Income from operations                                 25,687         82,934           854
    Interest and other income, net                          8,207          5,382         1,737
    Loss on investments, net                              (16,092)          --            --
                                                        ---------       --------      --------
    Income before provision for income taxes               17,802         88,316         2,591
    Provision for income taxes                             14,954         20,385           106
                                                        ---------       --------      --------
    Net income                                          $   2,848       $ 67,931      $  2,485
                                                        =========       ========      ========

    Net income per share - Basic                        $    0.01       $   0.33      $   0.02
                                                        =========       ========      ========
    Net income per share - Diluted                      $    0.01       $   0.28      $   0.01
                                                        =========       ========      ========
    Shares used in per share calculation - Basic          221,051        207,454       104,376
                                                        =========       ========      ========
    Shares used in per share calculation - Diluted        243,162        242,504       204,584
                                                        =========       ========      ========


  The accompanying notes are an integral part of these consolidated financial
                                  statements.

                                      B-16

                      BROCADE COMMUNICATIONS SYSTEMS, INC.

                           CONSOLIDATED BALANCE SHEETS
                        (IN THOUSANDS, EXCEPT PAR VALUE)



                                                                       OCTOBER 27,     OCTOBER 28,
                                                                           2001           2000
                                                                       -----------     -----------
                                                                                 
    ASSETS

    Current assets:
      Cash and cash equivalents                                         $ 150,118       $  27,265
      Short-term investments                                              105,030         127,774
                                                                        ---------       ---------
          Total cash, cash equivalents and short-term investments         255,148         155,039
      Marketable equity securities                                            332          49,251
      Accounts receivable, net of allowances for doubtful accounts
       of $3,025 and $2,970, respectively                                  68,900          72,242
      Inventories, net                                                     10,307             798
      Deferred tax assets, net                                             28,025          13,775
      Prepaid expenses and other current assets                            10,022           3,225
                                                                        ---------       ---------
          Total current assets                                            372,734         294,330
    Property and equipment, net                                            97,457          38,769
    Deferred tax assets, net                                              207,209         116,475
    Other assets                                                            6,322           5,605
                                                                        ---------       ---------
          Total assets                                                  $ 683,722       $ 455,179
                                                                        =========       =========

    LIABILITIES AND STOCKHOLDERS' EQUITY

    Current liabilities:
      Accounts payable                                                  $  25,082       $  23,958
      Accrued employee compensation                                        21,994          23,363
      Deferred revenue                                                     12,630           2,056
      Current liabilities associated with lease losses                     11,339            --
      Other accrued liabilities                                            43,895          14,925
                                                                        ---------       ---------
          Total current liabilities                                       114,940          64,302

    Non-current liabilities associated with lease losses                   30,896            --

    Commitments and contingencies (Note 6)

    Stockholders' equity:
      Preferred stock, $0.001 par value
       5,000 shares authorized, no shares outstanding                        --              --
      Common stock, $0.001 par value, 800,000 shares authorized:
       Issued and outstanding: 229,762 and 222,559 shares at
       October 27, 2001 and October 28, 2000, respectively                    230             223
      Additional paid-in capital                                          493,738         306,868
      Deferred stock compensation                                          (1,038)         (2,320)
      Accumulated other comprehensive income                                  522          44,520
      Retained earnings                                                    44,434          41,586
                                                                        ---------       ---------
          Total stockholders' equity                                      537,886         390,877
                                                                        ---------       ---------
          Total liabilities and stockholders' equity                    $ 683,722       $ 455,179
                                                                        =========       =========


  The accompanying notes are an integral part of these consolidated financial
                                  statements.

                                      B-17

                      BROCADE COMMUNICATIONS SYSTEMS, INC.

                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                                 (IN THOUSANDS)




                                                                       REDEEMABLE
                                                                       CONVERTIBLE                                COMMON
                                                                     PREFERRED STOCK                              STOCK
                                                       ---------------------------------------              -----------------------
                                                       SHARES            AMOUNT       WARRANTS              SHARES           AMOUNT
                                                       ------            ------       --------              ------           ------
                                                                                                              
    Balances at October 31, 1998                      9,235            $35,261           $ 648              41,560            $  42
    Issuance of Series D redeemable
       convertible preferred stock, net                 299              2,322            (326)               --               --
    Conversion of redeemable convertible
       preferred stock to common stock               (9,534)            37,583)           (322)            117,000              117
    Issuance of common stock                             --                 --              --              35,680               35
    Issuance of stock for notes receivable
       from stockholders                                 --                 --              --              18,816               19
    Repayments on notes receivable from
       stockholders                                      --                 --              --                  --               --
    Exercise of warrants for common stock                --                 --              --               2,272                2
    Compensation charges                                 --                 --              --                  --               --
    Deferred stock compensation                          --                 --              --                  --               --
    Amortization of deferred stock
       compensation                                      --                 --              --                  --               --
    Repurchase of common stock                           --                 --              --              (1,248)              (1)
    Change in unrealized gain (loss) on
       short-term investments                            --                 --              --                  --               --
    Net income                                           --                 --              --                  --               --
                                                     ------            -------           -----            --------            -----
    Balances at October 31, 1999                         --                 --              --             214,080              214

    Issuance of common stock                             --                 --              --               8,479                9
    Repayments on notes receivable from
       stockholders                                      --                 --              --                  --               --
    Tax benefits of employee stock transactions          --                 --              --                  --               --
    Amortization of deferred stock
       compensation                                      --                 --              --                  --               --
    Change in unrealized gain (loss) on
       marketable equity securities and
       short-term investments                            --                 --              --                  --               --
    Net income                                           --                 --              --                  --               --
                                                     ------            -------           -----            --------            -----
    Balances at October 28, 2000                         --                 --              --             222,559              223
    Issuance of common stock                             --                 --              --               7,369                7
    Tax benefits of employee stock transactions          --                 --              --                  --               --
    Charitable contribution of stock                     --                 --              --                  42               --
    Compensation charges                                 --                 --              --                  --               --
    Deferred stock compensation adjustment               --                 --              --                  --               --
    Amortization of deferred stock
       compensation                                      --                 --              --                  --               --
    Repurchase of common stock                           --                 --              --                (208)              --
    Change in unrealized gain (loss) on
       marketable equity securities and
       short-term investments                            --                 --              --                  --               --
    Reclassification adjustment for gains
       previously included in net income                 --                 --              --                  --               --

    Net income                                           --                 --              --                  --               --
                                                     ------            -------           -----            --------            -----
    Balances at October 27, 2001                         --              $  --             $--             229,762            $ 230
                                                     ======            =======           =====            ========            =====





                                                                                   WARRANTS                              NOTES
                                                               ADDITIONAL           FOR             DEFERRED          RECEIVABLE
                                                                PAID-IN            COMMON            STOCK               FROM
                                                                CAPITAL             STOCK         COMPENSATION        STOCKHOLDERS
                                                               -----------        ---------       ------------        ------------
                                                                                                          
    Balances at October 31, 1998                               $   2,183            $  --            $  (300)           $  (450)
    Issuance of Series D redeemable
       convertible preferred stock, net                               --               --                 --                 --
    Conversion of redeemable convertible
       preferred stock to common stock                            37,466              322                 --                 --
    Issuance of common stock                                      67,999               --                 --                 --
    Issuance of stock for notes receivable
       from stockholders                                           6,393               --                 --             (6,412)
    Repayments on notes receivable from
       stockholders                                                   --               --                 --              1,202
    Exercise of warrants for common stock                            380             (322)                --                 --
    Compensation charges                                              80               --                 --                 --
    Deferred stock compensation                                    5,077               --             (5,077)                --
    Amortization of deferred stock
       compensation                                                   --               --              1,937                 --
    Repurchase of common stock                                       (92)              --                 --                 --
    Change in unrealized gain (loss) on
       short-term investments                                         --               --                 --                 --
    Net income                                                        --               --                 --                 --
                                                               ---------            -----            -------            -------
    Balances at October 31, 1999                                 119,486               --             (3,440)            (5,660)

    Issuance of common stock                                      39,026               --                 --                 --
    Repayments on notes receivable from
       stockholders                                                   --               --                 --              5,660
    Tax benefits of employee stock transactions                  148,356               --                 --                 --
    Amortization of deferred stock
       compensation                                                   --               --              1,120                 --
    Change in unrealized gain (loss) on
       marketable equity securities and
       short-term investments                                         --               --                 --                 --
    Net income                                                        --               --                 --                 --
                                                               ---------            -----            -------            -------
    Balances at October 28, 2000                                 306,868               --             (2,320)                --
    Issuance of common stock                                      81,328               --                 --                 --
    Tax benefits of employee stock transactions                  104,682               --                 --                 --
    Charitable contribution of stock                               1,000               --                 --                 --
    Compensation charges                                             107               --                 --                 --
    Deferred stock compensation adjustment                          (200)              --                200                 --
    Amortization of deferred stock
       compensation                                                   --               --              1,082                 --
    Repurchase of common stock                                       (47)              --                 --                 --
    Change in unrealized gain (loss) on
       marketable equity securities and
       short-term investments                                         --               --                 --                 --
    Reclassification adjustment for gains
       previously included in net income                              --               --                 --                 --

    Net income                                                        --               --                 --                 --
                                                               ---------            -----            -------            -------
    Balances at October 27, 2001                               $ 493,738            $  --            $(1,038)             $  --
                                                               =========            =====            =======            =======






                                                           ACCUMULATED                             TOTAL
                                                             OTHER            RETAINED           STOCKHOLDERS'
                                                          COMPREHENSIVE       EARNINGS             EQUITY            COMPREHENSIVE
                                                          INCOME (LOSS)       (DEFICIT)           (DEFICIT)          INCOME (LOSS)
                                                          -------------       ---------          -------------       -------------
                                                                                                         
    Balances at October 31, 1998                           $     --            $(28,830)           $ (27,355)
    Issuance of Series D redeemable
       convertible preferred stock, net                          --                  --                   --                    --
    Conversion of redeemable convertible
       preferred stock to common stock                           --                  --               37,905                    --
    Issuance of common stock                                     --                  --               68,034                    --
    Issuance of stock for notes receivable
       from stockholders                                         --                  --                   --                    --
    Repayments on notes receivable from
       stockholders                                              --                  --                1,202                    --
    Exercise of warrants for common stock                        --                  --                   60                    --
    Compensation charges                                         --                  --                   80                    --
    Deferred stock compensation                                  --                  --                   --                    --
    Amortization of deferred stock
       compensation                                              --                  --                1,937                    --
    Repurchase of common stock                                   --                  --                  (93)                   --
    Change in unrealized gain (loss) on
       short-term investments                                   (49)                                     (49)                 (49)
    Net income                                                  --                 2,485               2,485                 2,485
                                                           --------            --------            ---------             ---------
    Balances at October 31, 1999                                (49)            (26,345)              84,206             $   2,436
                                                                                                                         =========
    Issuance of common stock                                     --                  --               39,035                    --
    Repayments on notes receivable from
       stockholders                                              --                  --                5,660                    --
    Tax benefits of employee stock transactions                  --                  --              148,356                    --
    Amortization of deferred stock
       compensation                                              --                  --                1,120                    --
    Change in unrealized gain (loss) on
       marketable equity securities and
       short-term investments                                44,569                  --               44,569                44,569
    Net income                                                   --                67,931             67,931                67,931
                                                           --------            --------            ---------             ---------
    Balances at October 28, 2000                             44,520              41,586              390,877             $ 112,500
                                                                                                                         =========
    Issuance of common stock                                     --                  --               81,335                    --
    Tax benefits of employee stock transactions                  --                  --              104,682                    --
    Charitable contribution of stock                             --                  --                1,000                    --
    Compensation charges                                         --                  --                  107                    --
    Deferred stock compensation adjustment                       --                  --                   --                    --
    Amortization of deferred stock
       compensation                                              --                  --                1,082                    --
    Repurchase of common stock                                   --                  --                  (47)                   --
    Change in unrealized gain (loss) on
       marketable equity securities and
       short-term investments                               (43,998)                 --              (43,998)              (43,998)
    Reclassification adjustment for gains
       previously included in net income                         --                  --                   --                 8,112

    Net income                                                   --               2,848                2,848                 2,848
                                                           --------            --------            ---------             ---------
    Balances at October 27, 2001                           $    522            $ 44,434            $ 537,886             $ (33,038)
                                                           ========            ========            =========             =========


   The accompanying notes are an integral part of these consolidated financial
                                   statements.

                                      B-18

                      BROCADE COMMUNICATIONS SYSTEMS, INC.

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                                 (IN THOUSANDS)



                                                                                        FISCAL YEAR ENDED
                                                                            ------------------------------ -----------
                                                                            OCTOBER 27,     OCTOBER 28,    OCTOBER 31,
                                                                               2001           2000            1999
                                                                            -----------     -----------    -----------
                                                                                                   
CASH FLOWS FROM OPERATING ACTIVITIES:
       Net income                                                           $   2,848       $  67,931       $  2,485
       Adjustments to reconcile net income to net cash
         provided by operating activities:
         Tax benefits from employee stock option transactions                 104,682         148,356           --
         Deferred taxes                                                      (104,984)       (130,250)          --
         Depreciation and amortization                                         16,959           6,876          3,693
         Impairment losses on investments, net of gains                        16,092            --             --
         Provisions for doubtful accounts receivable and sales returns          1,444           1,097          2,218
         Non-cash compensation expense                                          1,189           1,120          2,017
         Charitable stock contribution charge                                   1,000            --             --
         Asset impairment charges                                               6,683            --             --
         Changes in assets and liabilities:
           Accounts receivable                                                  1,898         (56,200)       (15,927)
           Inventories                                                        (10,020)            539            407
           Prepaid expenses and other assets                                   (8,157)         (1,479)        (4,168)
           Accounts payable                                                     1,124          13,294          7,417
           Accrued employee compensation                                       (1,369)         18,949          3,786
           Deferred revenue                                                    10,574          (5,632)         7,145
           Other accrued liabilities                                           32,924           5,053          7,397
           Liabilities associated with lease losses                            38,834            --             --
                                                                            ---------       ---------       --------
             Net cash provided by operating activities                        111,721          69,654         16,470
                                                                            ---------       ---------       --------
    CASH FLOWS FROM INVESTING ACTIVITIES:

       Purchases of property and equipment                                    (82,330)        (40,698)        (3,317)
       Purchases of short-term investments                                    (49,194)        (90,306)       (75,769)
       Proceeds from maturities of short-term investments                      72,207          26,619         12,000
       Proceeds from sales of marketable equity securities                     12,765            --             --
       Purchases of non-marketable minority equity investments                (23,562)         (7,799)          --
                                                                            ---------       ---------       --------
             Net cash used in investing activities                            (70,114)       (112,184)       (67,086)
                                                                            ---------       ---------       --------
    CASH FLOWS FROM FINANCING ACTIVITIES:
       Proceeds from issuance of redeemable convertible
         preferred stock and warrants                                            --              --            1,996
       Proceeds from issuance of common stock, net                             81,288          39,035         67,952
       Proceeds from notes receivable from stockholders                          --             5,660          1,202
       Payments on line of credit                                                --              --           (1,672)
       Payments on capital lease obligations                                      (42)           (436)          (784)
       Proceeds from notes payable                                               --              --              247
       Payments on notes payable                                                 --              --           (3,209)
                                                                            ---------       ---------       --------
             Net cash provided by financing activities                         81,246          44,259         65,732
                                                                            ---------       ---------       --------
    Net increase in cash and cash equivalents                                 122,853           1,729         15,116
    Cash and cash equivalents, beginning of year                               27,265          25,536         10,420
                                                                            ---------       ---------       --------
    Cash and cash equivalents, end of year                                  $ 150,118       $  27,265       $ 25,536
                                                                            =========       =========       ========
    Supplemental disclosure of cash flow information:
       Cash paid for interest                                               $     236       $     475       $    359
                                                                            =========       =========       ========
       Cash paid for income taxes                                           $     537       $      26       $   --
                                                                            =========       =========       ========
       Conversion of redeemable convertible preferred stock
         upon initial public offering                                       $    --         $    --         $ 37,905
                                                                            =========       =========       ========
       Issuance of stock for notes receivable from stockholders             $    --         $    --         $  6,412
                                                                            =========       =========       ========


  The accompanying notes are an integral part of these consolidated financial
                                  statements.

                                      B-19

                      BROCADE COMMUNICATIONS SYSTEMS, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.       ORGANIZATION AND OPERATIONS OF BROCADE

         Brocade Communications Systems, Inc. (Brocade or the Company) is the
world's leading provider of infrastructure for Storage Area Networks (SANs),
offering a product family of Fibre Channel fabric switches which provide an
intelligent networking foundation for SANs. Brocade delivers products, and
provides education and services that allow companies to implement highly
available, scalable, manageable, and secure environments for business-critical
storage applications. The Brocade SilkWorm family of Fibre Channel fabric
switches enables customers to create a high-performance SAN fabric that is
highly reliable and scalable to support the interconnection of hundreds of
server and storage devices, and is compatible with existing and recently
introduced products, providing investment protection for the customer. Brocade
products are sold through OEM partners, master resellers, and fabric partners.

         Brocade was incorporated on May 14, 1999 as a Delaware corporation and
is the successor to operations originally begun on August 24, 1995. The
Company's headquarters are located in San Jose, California.

2.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         FISCAL YEAR

         The Company changed its fiscal year end to the last Saturday in
October, beginning with the fiscal year ended October 28, 2000. This change did
not have a material impact on the Company's financial position or results of
operations.

         PRINCIPLES OF CONSOLIDATION

         The Consolidated Financial Statements include the accounts of Brocade
Communication Systems, Inc. and its subsidiaries. All significant intercompany
accounts and transactions have been eliminated.

         CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS

         The Company considers all highly liquid investment securities with
original maturities of three months or less to be cash equivalents. Investment
securities with original maturities of more than three months but less than one
year are considered short-term investments. The Company's short-term investments
consist of U.S. Treasuries and Federal Agency debt securities with original
maturity dates between three months and one year. All short-term investments are
classified as available-for-sale. Unrealized holding gains and losses are
included in accumulated other comprehensive income in the accompanying
consolidated balance sheets, net of any related tax effect. Realized gains and
losses are included in loss on investments, net in the consolidated statements
of operations and the specific identification method is used to determine the
cost basis of securities sold. For the years ended October 27, 2001, October 28,
2000, and October 31, 1999, no gains or losses were realized on the sale of
short-term investments.

         MARKETABLE EQUITY SECURITIES AND OTHER INVESTMENTS

         Marketable equity securities consist of equity holdings in public
companies and are classified as available-for-sale when there are no
restrictions on the Company's ability to immediately liquidate such securities.
The fair value of marketable equity securities is determined using quoted market
prices for those

                                      B-20

securities. Unrealized holding gains and losses are included in
accumulated other comprehensive income in the accompanying consolidated balance
sheets, net of any related tax effect. Realized gains and losses are calculated
based on the specific identification method and are included in loss on
investments, net in the consolidated statements of operations.

         The Company also has certain other minority equity investments in
non-publicly traded companies. These investments are included in other assets on
the Company's consolidated balance sheets, are carried at cost, and are
accounted for under the cost method. The Company holds less than 20 percent of
the voting equity of such companies, and neither has nor seeks corporate
governance or significant influence over the respective company's operating and
financial policies. The Company monitors its investments for impairment on a
quarterly basis and makes appropriate reductions in carrying values when such
impairments are determined to be other-than-temporary. Factors used in
determining an impairment include, but are not limited to, the current business
environment including competition and uncertainty of financial condition; going
concern considerations such as the inability to obtain additional private
financing to fulfill the investee's stated business plan and cash burn rate; the
need for changes to the respective investee's existing business model due to
changing business environments and its ability to successfully implement
necessary changes; and comparable valuations. If an investment is determined to
be impaired, a determination is made as to whether such impairment is
other-than-temporary (see Note 4).

         FAIR VALUE OF FINANCIAL INSTRUMENTS

         Carrying amounts of certain of the Company's financial instruments,
including cash and cash equivalents, marketable equity securities, accounts
receivable, employee notes receivables, accounts payable, and accrued
liabilities, approximate fair value because of their short maturities. The fair
values of short-term investments and marketable equity securities are determined
using quoted market prices for those securities or similar financial
instruments.

         INVENTORIES, NET

         Inventories are stated at the lower of cost or market, using the first
in, first out method. Inventory costs include material, labor and overhead.
Inventories consisted of the following and are shown net of reserves for excess
and obsolete inventory (in thousands):



                                           OCTOBER 27,      OCTOBER 28,
                                              2001             2000
                                           -----------      -----------
                                                      
    Raw materials                           $ 6,572            $352
    Work-in-process                            --                 2
    Finished goods                            3,735             444
                                           -----------      -----------
         Total                              $10,307            $798
                                           ===========      ===========


         PROPERTY AND EQUIPMENT, NET

         Property and equipment are stated at cost less accumulated depreciation
and amortization. Depreciation is computed using the straight-line method over
the estimated useful lives of the assets, generally four years except for the
Company's enterprise-wide, integrated business information system, which is
being depreciated over seven years. Leasehold improvements are amortized using
the straight-line method over the shorter of the useful life of the asset or the
remaining term of the lease. Property and equipment consisted of the following
(in thousands):

                                      B-21



                                                         OCTOBER 27,     OCTOBER 28,
                                                            2001             2000
                                                         ---------       --------
                                                                   
    Computer equipment and software                      $ 104,236       $ 37,449
    Furniture and fixtures                                   3,200          2,006
    Leasehold improvements                                  12,974          8,517
                                                         ---------       --------
                                                           120,410         47,972
    Less: Accumulated depreciation and amortization        (22,953)        (9,203)
                                                         ---------       --------
         Total                                           $  97,457       $ 38,769
                                                         =========       ========


         Leasehold improvements at October 27, 2001, are shown net of estimated
asset impairments related to facilities lease losses (see Note 3). Included in
property and equipment at October 27, 2001, and October 28, 2000, are assets
acquired under capital lease obligations with a total cost and related
accumulated amortization of $2.6 million.

         ACCRUED EMPLOYEE COMPENSATION

         Accrued employee compensation consists of accrued wages, commissions,
payroll taxes, vacation, payroll deductions for the employee stock purchase plan
and other employee benefit payroll deductions.

         OTHER ACCRUED LIABILITIES

         Other accrued liabilities consisted of the following (in thousands):



                             OCTOBER 27,      OCTOBER 28,
                               2001             2000
                             -----------     -----------
                                       
    Income taxes payable      $17,030         $ 2,290
    Purchase commitments       13,216           1,572
    Accrued warranty            4,765           4,815
    Other                       8,884           6,248
                              -------         -------
         Total                $43,895         $14,925
                              =======         =======


         CONCENTRATIONS

         Financial instruments that potentially subject the Company to
concentrations of credit risk consist primarily of cash equivalents, short-term
investments, and accounts receivable. Cash, cash equivalents, and short-term
investments are primarily maintained at three major financial institutions in
the United States. Deposits held with banks may exceed the amount of insurance
provided on such deposits. Generally, these deposits may be redeemed upon
demand. The Company generally invests only in high credit quality, short-term
debt instruments and limits the amount of credit exposure to any one entity.

         A majority of the Company's trade receivable balance is derived from
sales to original equipment manufacturers in the computer storage and server
industry. At October 27, 2001, and October 28, 2000, 76 percent and 70 percent
of accounts receivable, respectively, were concentrated with five customers. The
Company performs on going credit evaluations of its customers and generally does
not require collateral on accounts receivable. The Company has established
reserves for credit losses and product sales returns. The Company has not
experienced material credit losses in any of the periods presented.

         For the fiscal years ended October 27, 2001, October 28, 2000, and
October 31, 1999, three, two, and three customers each contributed over 10
percent of the Company's total revenues for combined totals of 56 percent, 49
percent, and 70 percent of total revenues, respectively. The level of sales to
any single customer

                                      B-22

may vary and the loss of any one of these customers, or a decrease in the level
of sales to any one of these customers, could have a material adverse impact on
the Company's financial condition or results of operations. In addition, HP and
Compaq, two of the Company's OEM customers, have announced their intent to
merge, which could result in a disruption in the Company's sales to these two
customers.

         The Company currently relies on single and limited supply sources for
several key components used in the manufacture of its products. Additionally,
the Company relies on a single third party manufacturer for the production of
its products. The inability of the Company's single and limited source suppliers
or the inability of the Company's third party manufacturer to fulfill supply and
production requirements, respectively, could negatively impact future results.

         The Company's business is concentrated in the storage area networking
industry. Accordingly, the Company's future success depends upon the buying
patterns of such customers and the continued demand by such customers for the
Company's products. The Company's continued success will depend upon its ability
to enhance its existing products and to develop and introduce, on a timely
basis, new products and features that keep pace with technological developments
and emerging industry standards.

         REVENUE RECOGNITION

         Product revenue is generally recognized when persuasive evidence of an
arrangement exists, delivery has occurred, fee is fixed or determinable, and
collectibility is probable. However, revenue recognition is deferred for
shipments to new customers and for shipments of next generation products to
existing customers when significant support services are required to
successfully integrate the Company's product into the customer's products. These
revenues, and related costs, are deferred and recognized when the customer has
successfully integrated the Company's product into its product offerings and the
Company has met its support obligations. In addition, revenue from sales to
master resellers is recognized upon reported sell-through. The Company's
post-sales obligations are generally limited to product warranties. Service
revenue is recognized over the contractual period, generally one to three years.
Warranty costs, sales returns, and other allowances are accrued based on
experience at the time of shipment.

         WARRANTY EXPENSE

         The Company provides for estimated expenses for warranty obligations as
revenue is recognized to the extent not covered by its third-party contract
manufacturer. The Company has not experienced any material warranty claims.

         RESEARCH AND DEVELOPMENT

         Costs to develop the Company's products are expensed as incurred in
accordance with Statement of Financial Accounting Standards No. 2, "Accounting
for Research and Development Costs" (SFAS 2).

         SOFTWARE DEVELOPMENT COSTS

         In accordance with Statement of Financial Accounting Standards No. 86,
"Accounting for the Costs of Computer Software to be Sold, Leased, or Otherwise
Marketed," (SFAS 86), the Company capitalizes eligible computer software
development costs upon the establishment of technological feasibility, which it
has defined as completion of designing, coding and testing activities. For the
years ended October 27, 2001, October 28, 2000, and October 31, 1999, the amount
of costs eligible for capitalization, after consideration of factors such as
realizable value, were not material and, accordingly, all software development
costs have been charged to research and development expense in the accompanying
consolidated statements of operations for all periods presented.

                                      B-23

         Costs related to internally developed software and software purchased
for internal use are capitalized in accordance with Statement of Position 98-1,
"Accounting for Costs of Computer Software Developed or Obtained for Internal
Use." During the year ended October 28, 2000, the Company purchased an
enterprise-wide, integrated business information system. At October 27, 2001,
$15.3 million in capitalized costs related to the purchase and subsequent
implementation of this system were included in property and equipment. These
costs are being depreciated over a period of seven years.

         ADVERTISING COSTS

         The Company expenses all advertising costs as incurred.

         IMPAIRMENT OF LONG-LIVED ASSETS

         The company accounts for the impairment of long-lived assets pursuant
to Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of,"
(SFAS 121). Long-lived assets to be held and used are reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount of
such assets may not be recoverable. Determination of recoverability is based on
an estimate of undiscounted future cash flows resulting from the use of the
asset and its eventual disposition. Measurement of an impairment loss for
long-lived assets that management expects to hold and use is based on the fair
value of the asset. Long-lived assets to be disposed of are reported at the
lower of carrying amount or fair value less costs to sell. During the fourth
quarter ended October 27, 2001, the Company recorded a charge of $5.7 million
related to the impairment of certain leasehold improvements associated with
estimated facilities lease losses, and a charge of $4.4 million primarily
related to the impairment of certain 1 Gbit/sec related equipment no longer used
in research and development and sales and marketing efforts (see Note 3).

         INCOME TAXES

         The Company accounts for income taxes pursuant to Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes," (SFAS
109). Income tax expense is based on pretax financial accounting income.
Deferred tax assets and liabilities are recognized for the expected tax
consequences of temporary differences between the tax bases of assets and
liabilities and their reported amounts. The Company believes its deferred tax
assets will be realized through future profitable operations.

         COMPUTATION OF NET INCOME PER SHARE

         Net income per share is presented in conformity with Statement of
Financial Accounting Standards No. 128, "Earnings Per Share," (SFAS 128), for
all periods presented. In accordance with SFAS 128, basic net income per share
is computed using the weighted-average number of common shares outstanding
during the period, less shares subject to repurchase. Diluted net income per
share is computed using the weighted-average number of common and dilutive
common-equivalent shares outstanding during the period. Dilutive
common-equivalent shares result from the assumed exercise of outstanding stock
options that have a dilutive effect when applying the treasury stock method.

         The following table presents the calculation of basic and diluted net
income per common share (in thousands, except per share amounts):



                                                                                   FISCAL YEAR ENDED
                                                                      -----------------------------------------
                                                                      OCTOBER 27,     OCTOBER 28,      OCTOBER 31,
                                                                          2001           2000            1999
                                                                      ---------       ---------       ---------
                                                                                             
    Net income                                                        $   2,848       $  67,931       $   2,485
                                                                      =========       =========       =========
    Basic and diluted net income per share:


                                      B-24



                                                                                   FISCAL YEAR ENDED
                                                                      -----------------------------------------
                                                                      OCTOBER 27,     OCTOBER 28,      OCTOBER 31,
                                                                          2001           2000            1999
                                                                      ---------       ---------       ---------
                                                                                             
       Weighted-average common shares outstanding                       226,798         218,368         121,056
         Less: Weighted-average shares subject to repurchase             (5,747)        (10,914)        (16,680)
                                                                      ---------       ---------       ---------
           Weighted-average shares used in computing basic net
           income per share                                             221,051         207,454         104,376
       Dilutive effect of common share equivalents                       22,111          35,050         100,208
                                                                      ---------       ---------       ---------
           Weighted-average shares used in computing diluted net
           income per share                                             243,162         242,504         204,584
                                                                      =========       =========       =========
    Basic net income per share                                        $    0.01       $    0.33       $    0.02
                                                                      =========       =========       =========
    Diluted net income per share                                      $    0.01       $    0.28       $    0.01
                                                                      =========       =========       =========


         COMPREHENSIVE INCOME (LOSS)

         Comprehensive income is comprised of net income and unrealized holding
gains (losses) on marketable equity securities and short-term investments.

         STOCK-BASED COMPENSATION

         The Company accounts for its stock option plans and its Employee Stock
Purchase Plan in accordance with the provisions of Accounting Principles Board
Opinion 25, "Accounting for Stock Issued to Employees," (APB 25), whereby the
difference between the exercise price and the fair value at the date of grant is
recognized as compensation expense. Statement of Financial Accounting Standards
No. 123, "Accounting for Stock-Based Compensation," (SFAS 123), established a
fair value based method of accounting for stock-based plans. Companies that
elect to account for stock-based compensation plans in accordance with APB 25
are required to disclose the pro forma net income (loss) that would have
resulted from the use of the fair value based method under SFAS 123.
Accordingly, pro forma disclosures required under SFAS 123 are included in Note
7.

         STOCK SPLITS

         On November 8, 1999, January 21, 2000, and November 29, 2000, the
Company's Board of Directors approved two-for-one splits of the Company's common
stock. The stock began trading on a split-adjusted basis on December 3, 1999,
March 15, 2000, and December 22, 2000, respectively. All references in the
accompanying consolidated financial statements and notes thereto to earnings per
share and the number of common shares have been retroactively restated to
reflect the common stock splits.

         DERIVATIVES

         During the first quarter of fiscal 2001, the Company adopted Statement
of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities," (SFAS 133). SFAS 133, as amended,
establishes accounting and reporting standards for derivative instruments and
hedging activities and requires that an entity recognize derivatives as either
assets or liabilities on the balance sheet and measure those instruments at fair
value. The accounting for changes in the fair value of a derivative depends on
the intended use of the derivative and the resulting designation. The adoption
of SFAS 133 did not have a material impact on the Company's operations or
financial position. At October 27, 2001, the Company did not hold any derivative
instruments.

         FOREIGN CURRENCY TRANSLATION

         Assets and liabilities of non-U.S. subsidiaries that operate where the
local currency is the functional currency are translated to U.S. dollars at
exchange rates in effect at the balance sheet date with the resulting

                                      B-25

translation adjustments recorded directly to a separate component of accumulated
other comprehensive income. Income and expense accounts are translated at
average exchange rates during the year. Where the U.S. dollar is the functional
currency, translation adjustments are recorded in income. Foreign currency
translation adjustments have, to date, not been material. Gains and losses from
foreign currency transactions, which were not material for any of the years
presented, are included in interest and other income, net in the Company's
consolidated statements of operations.

         USE OF ESTIMATES IN PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS

         The preparation of consolidated financial statements and related
disclosures in conformity with accounting principles generally accepted in the
United States requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the consolidated financial statements, and
the reported amounts of revenues and expenses during the reporting period.
Estimates are used for but not limited to the useful lives of fixed assets,
allowances for doubtful accounts and product returns, inventory and warranty
reserves, fixed asset and investment impairment charges, facilities lease losses
and other charges, accrued liabilities and other reserves, taxes, and
contingencies. Actual results could differ from these estimates.

         RECLASSIFICATIONS

         Certain prior year amounts have been reclassified to conform to the
current year presentation.

         RECENT ACCOUNTING PRONOUNCEMENTS

         During the fourth quarter of the year ended October 27, 2001, the
Company adopted Staff Accounting Bulletin No. 101, "Revenue Recognition in
Financial Statements" (SAB 101). The adoption of SAB 101 did not have a material
impact on the Company's operating results or financial position.

         In July 2001, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 141 "Business Combinations"
(SFAS 141) and Statement of Financial Accounting Standards No. 142 "Goodwill and
Other Intangible Assets" (SFAS 142). SFAS 141 requires that all business
combinations initiated after June 30, 2001 be accounted for using the purchase
method of accounting, thereby eliminating use of the pooling of interests
method. SFAS 141 also requires that an intangible asset acquired in a business
combination be recognized apart from goodwill if: (i) the intangible asset
arises from contractual or other legal rights or (ii) the acquired intangible
asset is capable of being separated from the acquired enterprise, as defined in
SFAS 141.

         SFAS 142 requires, among other things, that goodwill not be amortized
but should be subject to impairment testing at the "reporting unit level" at
least annually and more frequently upon the occurrence of certain events, as
defined by SFAS 142. A reporting unit is the same level as or one level below an
operating segment, as defined by Statement of Financial Accounting Standards No.
131 "Disclosures About Segments of an Enterprise and Related Information."

         The Company is required to apply SFAS 141 to business combinations
initiated after June 30, 2001 and is required to adopt SFAS 142 at the beginning
of fiscal 2003, with the exception of goodwill and intangible assets with
indefinite lives acquired after June 30, 2001, which will be immediately subject
to the non-amortization and amortization provisions as defined by SFAS 142.

         Management does not expect the adoption of either SFAS 141 or SFAS 142
to have a material impact on the Company's financial position, results of
operations, or cash flows.

                                      B-26

         In October 2001, the FASB issued Statement of Financial Accounting
Standards No. 144 "Accounting for the Impairment or Disposal of Long-Lived
Assets" (SFAS 144). SFAS 144 supersedes SFAS No. 121 "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of"
(SFAS 121), and certain provisions of APB Opinion No. 30 "Reporting the Results
of Operations-Reporting the Effects of Disposal of a Segment of a Business, and
Extraordinary, Unusual and Infrequently Occurring Events and Transactions" (APB
30). SFAS 144 establishes standards for long-lived assets to be disposed of, and
redefines the valuation and presentation of discontinued operations. SFAS 144 is
effective for fiscal years beginning after December 15, 2001, and interim
periods within those fiscal years. Management does not expect the adoption of
SFAS 144 to have a material effect on the Company's financial position, results
of operations, or cash flows.

3.       FACILITIES LEASE LOSSES AND ASSET IMPAIRMENT CHARGES

         FACILITIES LEASE LOSSES AND RELATED ASSET IMPAIRMENT CHARGES

         During the year ended October 27, 2001, the Company experienced the
impact of unfavorable economic conditions and a reduction in IT spending rates.
As a result of these continuing unfavorable economic conditions and the
Company's reevaluation of future employee hiring in terms of timing and
geographic location, the Company performed a comprehensive analysis of its real
estate facility requirements and identified excess facility space, which has
been offered for sublease. Factors considered in the analysis included, but were
not limited to, anticipated future revenue growth rates and anticipated future
headcount requirements for both headquarters and field personnel.

         Based upon the results of this analysis and the excess facilities space
identified, during the fourth quarter ended October 27, 2001, the Company
recorded a charge of $39.8 million related to facilities lease losses and a
charge of $5.7 million in connection with the impairment of certain related
leasehold improvements. In determining the facilities lease losses and related
asset impairment charges, net of cost recovery efforts from expected sublease
income, various assumptions were made, including, the time period over which the
building will be vacant; expected sublease terms; and expected sublease rates.

         The facilities lease losses and related asset impairment charges are
estimates in accordance with SFAS No. 5, "Accounting for Contingencies," and
represent the low-end of an estimated range that may be adjusted upon the
occurrence of future triggering events. Triggering events may include, but are
not limited to, changes in estimated time to sublease, sublease terms, and
sublease rates. Should operating lease rental rates continue to decline in
current markets or should it take longer than expected to find a suitable tenant
to sublease the facility, adjustments to the facilities lease losses reserve
will be made in future periods, if necessary, based upon the then current actual
events and circumstances. The Company has estimated that under certain
circumstances the facilities lease losses could increase to $63.0 million.

A summary of the facilities lease losses incurred for the fiscal year ended
October 27, 2001, is outlined as follows (in thousands):



                                                       FACILITIES
                                                       LEASE LOSSES
                                                       ------------
                                                    
Total charge                                             $ 39,804
Cash portion                                                 (970)
                                                       ------------
   Reserve balances at October 27, 2001                  $ 38,834
                                                       ============


         The Company expects to make payments related to the above noted
facilities lease losses over the next five years. In addition to the $38.8
million reserved for future lease commitments, net of expected sublease income,
the Company has accrued $3.4 million for purchase commitments in connection with
certain related

                                      B-27

leasehold improvements currently under construction. The Company expects to
fully incur these purchase commitments during the first half of calendar year
2002.

         ASSET IMPAIRMENTS RELATED TO PRODUCT TRANSITION

         During the fourth quarter ended October 27, 2001, the Company announced
the general availability of its SilkWorm 3800 enterprise fabric switch, the
first in an expected family of 2 Gbit/sec per second products. As a result of
the expected accelerated transition of the Company's product offerings from 1 to
2 Gbit/sec technology, the Company recorded a charge of $4.4 million primarily
related to the impairment of certain 1 Gbit/sec related equipment no longer used
in research and development and sales and marketing efforts.

4.       LOSS ON INVESTMENTS, NET

         Loss on investments, net for the year ended October 27, 2001, consisted
of impairment losses on minority equity investments in non-publicly traded
companies of $24.2 million, partially offset by gross realized gains on sales of
marketable equity securities of $8.1 million.

The Company has made certain minority equity investments in non-publicly traded
companies that develop technology or provide services that are complementary to
or broaden the markets for its products, and to promote its business and
strategic objectives. The Company's minority equity investments in non-public
companies are included in other assets on the Company's consolidated balance
sheets, are carried at cost, and are accounted for under the cost method. The
Company holds less than 20 percent of the voting equity of such companies, and
neither has nor seeks corporate governance or significant influence over the
respective company's operating and financial policies. The Company monitors its
investments for impairment on a quarterly basis and makes appropriate reductions
in carrying values when such impairments are determined to be
other-than-temporary. Factors used in determining an impairment include, but are
not limited to, the current business environment including competition and
uncertainty of financial condition; going concern considerations such as the
inability to obtain additional private financing to fulfill the investee's
stated business plan and cash burn rate; the need for changes to the respective
investee's existing business model due to changing business environments and its
ability to successfully implement necessary changes; and comparable valuations.
If an investment is determined to be impaired, a determination is made as to
whether such impairment is other-than-temporary.

         During the year ended October 27, 2001, the Company made minority
equity investments in non-publicly traded companies of $23.6 million. The
investments were made primarily in companies in the storage networking, Internet
infrastructure, fabless semiconductor, networking services, and managed storage
service provider industries. These companies were, and continue to be,
development stage companies with significant risks. During the year ended
October 27, 2001, the industries in which these companies compete experienced
considerable market declines associated with a depressed macroeconomic
environment and there remains significant uncertainty regarding the timing of
any recovery. Many of these companies had spent the majority of their funding on
operating activities and/or lost key business partners due to bankruptcy, and
the Company determined that the carrying value of its investments were impaired.
Based upon current market conditions and substantial doubt about these
companies' ability to raise additional funding, achieve positive cash flow, and
achieve projected revenues, the Company concluded the impairments were
other-than-temporary and recorded impairment charges of $24.2 million. The
impairment charges reduced the carrying value of the Company's investments to
the estimated fair value. At October 27, 2001, and October 28, 2000, the
carrying values of the Company's minority equity investments in non-publicly
traded companies were $2.2 million and $2.8 million, respectively.

                                      B-28

5.       FAIR VALUE OF FINANCIAL INSTRUMENTS

         The following tables summarize the Company's available-for-sale
securities (in thousands):



                                                                             GROSS            GROSS
                                                                          UNREALIZED       UNREALIZED           FAIR
                                                           COST              GAINS           LOSSES             VALUE
                                                      --------------    --------------   --------------    --------------
                                                                                               
      OCTOBER 27, 2001
      U.S. government obligations                     $      104,493    $          537   $          --     $      105,030
      Marketable equity securities                               347                24              (39)              332
                                                      --------------    --------------   --------------    --------------
           Total                                      $      104,840    $          561   $          (39)   $      105,362
                                                      ==============    ==============   ==============    ==============

      Reported as:
        Short-term investments                                                                             $      105,030
        Marketable equity securities                                                                                  332
                                                                                                           --------------
           Total                                                                                           $      105,362
                                                                                                           ==============

      OCTOBER 28, 2000

      U.S. government obligations                     $      127,456    $          355   $          (37)   $      127,774
      Marketable equity securities                             5,000            44,251              --             49,251
                                                      --------------    --------------   --------------    --------------
           Total                                      $      132,456    $       44,606   $          (37)   $      177,025
                                                      ==============    ==============   ==============    ==============

      Reported as:
        Short-term investments                                                                             $      127,774
        Marketable equity securities                                                                               49,251
                                                                                                           --------------
           Total                                                                                           $      177,025
                                                                                                           ==============


         For the year ended October 27, 2001, gross gains of $8.1 million were
realized on the sale of marketable equity securities. No gains or losses were
realized on the sale of marketable equity securities for the years ended October
28, 2000, and October 31, 1999. At October 27, 2001, and October 28, 2000, net
unrealized holding gains of $0.5 million and $44.5 million, respectively, were
included in accumulated other comprehensive income in the accompanying
consolidated balance sheets.

6.       COMMITMENTS AND CONTINGENCIES

         LEASES

         The Company leases its facilities under various operating lease
agreements expiring through November 2013. In connection with these agreements
the Company has signed unconditional, irrevocable letters of credit totaling
$18.7 million as security for the leases. In addition to base rent, many of the
operating lease agreements require that the Company pay a proportional share of
the respective facilities' operating expenses. Rent expense for the years ended
October 27, 2001, October 28, 2000, and October 31, 1999, was $16.5 million,
$4.1 million, and $1.3 million, respectively.

         Future minimum lease payments under all noncancelable operating leases
at October 27, 2001 were as follows (in thousands):

                                      B-29



                                                               OPERATING
FISCAL YEAR ENDED OCTOBER,                                       LEASES
- --------------------------                                  -------------
                                                         
2002                                                        $      25,407
2003                                                               25,950
2004                                                               25,215
2005                                                               24,611
2006                                                               25,175
Thereafter                                                        154,330
                                                            -------------
  Total minimum lease payments                              $     280,688
                                                            =============


         At October 27, 2001, the Company had recorded $38.8 million in
facilities lease loss reserves related to future lease commitments, net of
expected sublease income (see Note 3).

         MANUFACTURING AND PURCHASE COMMITMENTS

         The Company has a manufacturing agreement with Solectron Corporation
under which the Company provides to Solectron a twelve-month product forecast
and places purchase orders with Solectron sixty calendar days in advance of the
scheduled delivery of products to the Company's customers. Although the
Company's purchase orders placed with Solectron are cancelable, the terms of the
agreement would require the Company to purchase from Solectron all inventory
components not returnable or usable by other Solectron customers. At October 27,
2001, the Company's commitment to Solectron for such inventory components was
$37.9 million, net of purchase commitment reserves, which the Company expects to
utilize during future normal ongoing operations.

         Independently of Solectron, the Company purchases several key
components used in the manufacture of its products. At October 27, 2001, the
Company had non-cancelable purchase commitments for various components totaling
$8.3 million, net of purchase commitment reserves, which the Company expects to
utilize during future normal ongoing operations.

         The Company has established purchase commitment reserves for inventory
component commitments to Solectron and other key component vendors that it
believes may not be realizable during future normal ongoing operations.

         LEGAL PROCEEDINGS

         The Company is subject to various legal proceedings, claims, and
litigation that arise in the normal course of business. While the outcome of
these matters is currently not determinable, management does not expect that the
ultimate costs to resolve these matters will have a material adverse effect on
the Company's consolidated financial position, results of operations, or cash
flows.

         On July 20, 2001, a putative class action captioned Chae v. Brocade
Communications Systems, Inc. et al. was filed against the Company and three of
its officers and directors (collectively the "Individual Defendants") in the
United States District Court for the Southern District of New York. Also named
as defendants were Morgan Stanley & Co., Inc., BT Alex Brown, Inc., and Dain
Rauscher, Inc., the underwriters in the Company's initial public offering. The
complaint alleges violations of Section 10(b) of the Securities Act of 1934 (and
Rule 10b-5 promulgated thereunder) against all defendants and violations of
Section 20(a) of the Securities Act of 1934 against the Individual Defendants.
The complaint seeks unspecified damages on behalf of a purported class of
purchasers of common stock between May 24, 1999 and July 17, 2001. A second,
substantively similar complaint, Radliff v. Brocade Communications Systems,
Inc., was filed in the same court on September 25, 2001. The Company believes
that the claims are without merit and intends to defend the actions vigorously.

                                      B-30

7.       EMPLOYEE STOCK AND SAVINGS PLANS

         DEFERRED STOCK COMPENSATION

         In connection with the grant of certain stock options to employees
during the year ended October 31, 1999, the Company recorded deferred stock
compensation of $5.1 million, representing the difference between the deemed
fair value of the common stock for accounting purposes and the option exercise
price of such options at the date of grant. Such amounts are presented as
reductions of stockholders' equity and amortized ratably over the vesting period
of the applicable options. $1.1 million, $1.1 million, and $1.9 million were
expensed during the years ended October 27, 2001, October 28, 2000, and October
31, 1999, respectively. Deferred stock compensation is decreased in the period
of forfeiture for any accrued but unvested compensation arising from the early
termination of an option holder's services. No deferred stock compensation
related to any other periods presented has been recorded.

         1999 EMPLOYEE STOCK PURCHASE PLAN

         In March 1999, the Board of Directors approved the adoption of the
Company's 1999 Employee Stock Purchase Plan (the "Purchase Plan"), and the
Company's shareholders approved the Purchase Plan in April 1999. The Purchase
Plan permits eligible employees to purchase shares of the Company's common stock
through payroll deductions at 85 percent of the fair market value at certain
plan-defined dates. The maximum number of shares of the Company's common stock
available for sale under the Purchase Plan is 1.6 million shares, plus an annual
increase to be added on the first day of the Company's fiscal year, equal to the
lesser of 20.0 million shares, or 2.5 percent of the outstanding shares of
common stock at such date. Accordingly, on October 28, 2001, 5.7 million
additional shares were made available for issuance under the Purchase Plan.
During the years ended October 27, 2001, and October 28, 2000, 190,000 shares
and 604,000 shares were issued under the Purchase Plan, respectively. No shares
were issued during fiscal 1999. At October 27, 2001, 11.7 million shares were
available for future issuance under the Purchase Plan.

         1999 STOCK PLAN

         In March 1999, the Board of Directors approved the Company's 1999 Stock
Plan (the "1999 Plan") and the Company's shareholders approved the 1999 Plan in
April 1999. The 1999 Plan provides for the grant of incentive stock options
and/or nonstatutory stock options to employees. Per the terms of the 1999 Plan,
the maximum number of shares of the Company's common stock available for sale
under the 1999 Plan is 60.9 million shares, plus an annual increase to be added
on the first day of the Company's fiscal year, equal to the lesser of 40.0
million shares, or 5.0 percent of the outstanding shares of common stock at such
date. Accordingly, on October 28, 2001, 11.5 million additional shares were made
available for grant under the 1999 Plan. At October 27, 2001, the Company had
reserved 32.1 million shares of authorized but unissued shares of common stock
for future issuance under the 1999 Plan. Of this amount, 31.8 million shares
were outstanding and 252,000 shares were available for future grants.

         1999 DIRECTOR OPTION PLAN

         In March 1999, the Board of Directors approved the 1999 Director Option
Plan (the "Director Plan") and the Company's shareholders approved the Director
Plan in April 1999. The Director Plan provides for the grant of common stock to
Directors of the Company. At October 27, 2001, the Company had reserved 1.5
million shares of authorized but unissued shares of common stock for future
issuance under the Director Plan. Of this amount, 480,000 shares were
outstanding and 1.0 million shares were available for future grants.

                                      B-31

         1999 NONSTATUTORY STOCK OPTION PLAN

         In September 1999, the Board of Directors approved the Company's 1999
Nonstatutory Stock Option Plan (the "NSO Plan"). The NSO Plan provides for the
grant of nonstatutory stock options to employees and consultants. A total of
51.4 million shares of common stock have been reserved for issuance under the
NSO Plan. At October 27, 2001, the Company had reserved approximately 48.5
million shares of authorized but unissued shares of common stock for future
issuance under the NSO Plan. Of this amount, 48.4 million shares were
outstanding and 88,000 shares were available for future grants.

         STOCK OPTIONS

         The Company, under the various stock option plans (the "Plans")
discussed above, grants stock options for shares of common stock to employees
and directors. In accordance with the Plans, the stated exercise price for
Nonqualified Stock Options (NSOs) shall not be less than 85 percent of the
estimated fair market value of common stock on the date of grant. Incentive
Stock Options (ISOs) may not be granted at less than 100 percent of the
estimated fair market value of the common stock, and stock options granted to a
person owning more than 10 percent of the combined voting power of all classes
of stock of the Company must be issued at 110 percent of the fair market value
of the stock on the date of grant. The Plans provide that the options shall be
exercisable over a period not to exceed ten years. The majority of options
granted under the Plans generally vest over a period of four years. Certain
options granted under the Plans vest over a period of one year. At October 27,
2001, the Company had reserved 82.1 million shares of authorized but unissued
shares of common stock for future issuance under all of the Plans. Of this
amount, 80.7 million shares were outstanding and 1.4 million shares were
available for future grants.

         The following table summarizes stock option plan activity under all of
the Plans (in thousands except per share amounts):



                                           FISCAL YEAR ENDED             FISCAL YEAR ENDED             FISCAL YEAR ENDED
                                            OCTOBER 27, 2001              OCTOBER 28, 2000              OCTOBER 31, 1999
                                         ---------------------         ---------------------         ----------------------
                                                      WEIGHTED                      WEIGHTED                      WEIGHTED
                                                      AVERAGE                       AVERAGE                       AVERAGE
                                                      EXERCISE                      EXERCISE                      EXERCISE
                                           SHARES       PRICE            SHARES       PRICE            SHARES       PRICE
                                           ------     ---------          ------     --------           ------     --------
                                                                                                 
Outstanding at beginning of year           44,871      $ 33.24           23,462      $  4.70           28,183      $  0.23
Granted                                    49,835      $ 34.15           30,756      $ 47.78           21,424      $  5.22
Exercised                                  (7,179)     $ 10.32           (7,873)     $  4.60          (24,605)     $  0.32
Cancelled                                  (6,806)     $ 36.90           (1,474)     $ 32.30           (1,540)     $  0.24
                                           ------                        ------                        ------
Outstanding at end of year                 80,721      $ 35.43           44,871      $ 33.24           23,462      $  4.70
                                           ======                        ======                        ======
Exercisable at end of year                 14,837      $ 33.23            3,418      $  7.50            1,799      $  0.22


         The following table summarizes information about stock options
outstanding and exercisable at October 27, 2001 (in thousands except number of
years and per share amounts):



                                       OPTIONS OUTSTANDING                                 OPTIONS EXERCISABLE
- -------------------------------------------------------------------------------        -------------------------
                                                    WEIGHTED           WEIGHTED                         WEIGHTED
                                                    AVERAGE            AVERAGE                          AVERAGE
                                                   REMAINING           EXERCISE                        EXERCISE
 RANGE OF EXERCISE PRICES           NUMBER           YEARS              PRICE            NUMBER          PRICE
 ------------------------           ------         ---------           --------          ------        ---------
                                                                                        
$  0.03  --  $  12.90               15,746            8.64             $ 8.35            3,672         $  4.51
$ 13.56  --  $  20.70               24,708            9.39             $20.60            3,147         $ 20.39
$ 22.28  --  $  44.66               16,250            8.27             $33.40            3,524         $ 34.09
$ 45.06  --  $  76.88               20,333            8.86             $66.46            3,458         $ 58.15
$ 78.00  --  $ 105.19                3,684            8.74             $88.30            1,036         $ 87.93
- ---------------------                -----            ----             ------            -----         -------
$  0.03  --  $ 105.19               80,721            8.86             $35.43           14,837         $ 33.23
=====================               ======            ====             ======           ======         =======


                                      B-32

         At October 27, 2001, 3.8 million shares issued upon exercise of stock
options with a weighted-average exercise price of $0.40 per share were subject
to repurchase by the Company.

         During the 12-month period ended March 2001, the Company granted to
employees 23.6 million options to purchase shares of its common stock at an
average exercise price of approximately $71.00 per share. Also, during that same
12-month period, the Company hired in excess of 500 employees, which represented
approximately 60 percent of the Company's workforce at that time. During the
first calendar quarter of 2001, the Company's stock price experienced a
considerable decline in value. As a result of this decline, the exercise prices
of the majority of options granted to employees were well in excess of the
market price of the Company's common stock. The Company believed it was in the
best interest of its shareholders to ensure that its employee base was both
retained and financially motivated. Accordingly, in April of 2001, the Company
granted 20.3 million incremental options with exercise prices of $20.70 per
share to its employees with existing options whose exercise prices were
significantly in excess of the market price per share of the Company's common
stock. The dilutive effect of common share equivalents associated with stock
options for the years ended October 27, 2001, October 28, 2000, and October 31,
1999, were 16.4 million shares, 24.1 million shares, and 15.6 million shares,
respectively.

         SFAS 123 requires disclosure of pro forma information regarding option
grants made to employees based on specified valuation techniques that produce
estimated compensation expense. Had compensation expense been determined under
the provisions of SFAS 123, net income would have decreased to the following pro
forma amounts, (in thousands except per share data):




                                                           FISCAL YEAR ENDED
                                           -----------------------------------------------
                                            OCTOBER 27,       OCTOBER 28,      OCTOBER 31,
                                              2001               2000             1999
                                           -----------       -----------       -----------
                                                                      
    Net income - as reported               $     2,848       $    67,931       $   2,485
    Net loss - Pro Forma                   $  (591,692)      $  (172,331)      $  (1,933)
    Basic earnings (loss) per share
        As reported                        $      0.01       $      0.33       $    0.02
        Pro Forma                          $     (2.68)      $     (0.83)      $   (0.02)
    Diluted earnings (loss) per share
        As reported                        $      0.01       $      0.28       $    0.01
        Pro Forma                          $     (2.68)      $     (0.83)      $   (0.02)


         The fair value of each option grant is estimated on the date of grant
using the Black-Scholes option-pricing model with the following weighted-average
assumptions for each respective fiscal year ended:



                                         EMPLOYEE STOCK OPTION PLANS                  EMPLOYEE STOCK PURCHASE PLANS
                                --------------------------------------------  -------------------------------------
                                 OCTOBER 27,    OCTOBER 28,     OCTOBER 31,    OCTOBER 27,     OCTOBER 28,     OCTOBER 31,
                                     2001           2000            1999           2001            2000           1999
                                -------------  -------------   -------------  -------------   -------------    -----------
                                                                                             
     Expected dividend yield            0.0%           0.0%            0.0%           0.0%            0.0%           *
     Risk-free interest rate        2.1-4.6%       5.4-5.9%        5.0-5.3%           2.1%            6.0%           *
     Expected volatility              127.4%          93.4%           60.0%         123.4%           80.3%           *
     Expected life from vest
       date (in years)                  0.5            0.5             0.5            0.5             0.5            *


         * Not applicable

         The Black-Scholes option-pricing model was developed for use in
estimating the fair value of traded options that have no vesting restrictions
and are fully transferable. In addition, option-pricing models require the input
of highly subjective assumptions, including the expected stock price volatility.
Because the Company's employee stock options have characteristics significantly
different from those of traded options,

                                      B-33

and because changes in the subjective input assumptions can materially affect
the fair value estimate, in management's opinion, the existing models do not
necessarily provide a reliable single measure of the fair value of the Company's
options. Based upon the above assumptions, the weighted-average fair value of
employee stock options granted during the years ended October 27, 2001, October
28, 2000, and October 31, 1999, were $26.17, $30.82, and $2.42 per share,
respectively.

         EMPLOYEE 401(K) PLAN

         The Company sponsors a savings plan, the Brocade Communications Systems
401(k) Plan (the Plan), which qualifies under Section 401(k) of the Internal
Revenue Code and is designed to provide retirement benefits for its eligible
employees through tax deferred salary deductions. Eligible employees may
contribute from 1 percent to 20 percent of their annual compensation to the
Plan, limited to a maximum annual amount as set periodically by the Internal
Revenue Service. The Company matches employee contributions dollar for dollar up
to a maximum of $1,500 per year per person. All matching contributions vest
immediately. The Company's matching contributions to the Plan totaled $1.4
million and $0.6 million for the years ended October 27, 2001, and October 28,
2000, respectively.

8.  INCOME TAXES

         Income (loss) before provision for income taxes consisted of the
following (in thousands):



                                                                        FISCAL YEAR ENDED
                                               --------------------------------------------------------------------
                                                OCTOBER 27,                   OCTOBER 28,              OCTOBER 31,
                                                    2001                         2000                       1999
                                               -------------              -------------               -------------
                                                                                             
United States                                  $     (20,933)             $      88,316               $       2,591
International                                         38,735                        --                          --
                                               -------------              -------------               ------------
      Total                                    $      17,802              $      88,316               $       2,591
                                               =============              =============               =============


         The provision for income taxes consisted of the following (in
thousands):



                                                             FISCAL YEAR ENDED
                                 -------------------------------------------------------------------------
                                  OCTOBER 27,                   OCTOBER 28,                   OCTOBER 31,
                                      2001                         2000                          1999
                                 -------------                -------------                 --------------
                                                                                   
Federal:
   Current                       $      27,141                $      27,458                 $         393
   Deferred                            (19,626)                      (8,684)                         (323)
                                 -------------                -------------                 -------------
                                         7,515                       18,774                            70
                                 -------------                -------------                 -------------
State:
   Current                               8,706                        8,098                         1,516
   Deferred                             (4,966)                      (6,487)                       (1,480)
                                 -------------                -------------                 -------------
                                         3,740                        1,611                            36
                                 -------------                -------------                 -------------
Foreign:
   Current                               3,699                          --                            --
   Deferred                                --                           --                            --
                                 -------------                -------------                 ------------
                                         3,699                          --                            --
                                 -------------                -------------                 ------------
      Total                      $      14,954                $      20,385                 $         106
                                 =============                =============                 =============



                                      B-34

         The difference between the U.S. federal statutory rate and the
Company's income tax provision for financial statement purposes consisted of the
following:



                                                                                  FISCAL YEAR ENDED
                                                                    ---------------------------------------------
                                                                     OCTOBER 27,     OCTOBER 28,     OCTOBER 31,
                                                                        2001            2000            1999
                                                                   -------------   -------------     ------------
                                                                                            
Provision for income taxes at statutory rate                            35.0%           35.0%           35.0%
State taxes, net of federal tax benefit                                  6.1             7.7             5.7
Losses for which no tax benefit recognized                               --              --            (33.5)
Stock compensation not deductible for tax                                1.4             0.4            31.7
R&D tax credit                                                          (4.2)           (4.3)          (40.3)
NOL and credit carryforwards                                             --             (6.9)            --
Decrease in valuation allowance                                          --            (10.8)            --
Investment losses, not benefited                                        61.0             --              --
Foreign income taxed at other than U.S. rates                          (17.9)            --              --
Other nondeductible expenses                                             2.6             2.0             5.4
                                                                   -------------   -------------     ------------
   Provision for income taxes                                           84.0%           23.1%            4.0%
                                                                   =============   =============     ============


         At October 27, 2001, the Company did not have sufficient unrealized
capital gains to offset capital losses resulting from impairments of minority
equity investments in non-publicly traded companies recorded during the year
ended October 27, 2001. Therefore, no tax benefit has been recorded associated
with the impairment of those investments.

         U.S. income taxes were not provided for undistributed earnings of
certain non-U.S. subsidiaries taxed at rates lower than U.S. rates. The Company
intends to utilize these earnings through expansion of its business operations
outside the United States for an indefinite period of time.

         The components of net deferred tax assets are as follows (in
thousands):



                                           OCTOBER 27,             OCTOBER 28,
                                               2001                   2000
                                          -------------          -------------
                                                           
Net operating loss carryforwards          $     158,527          $     107,166
Tax credit carryforwards                         37,920                  7,914
Capitalized startup costs                           --                     390
Reserves and accruals                            34,035                  9,295
Other                                              (156)                   979
Capitalized research expenditures                 4,908                  4,506
                                          -------------          -------------
   Total                                  $     235,234          $     130,250
                                          =============          =============


         As of October 27, 2001, the Company had federal net operating loss
carryforwards of $420.2 million and state net operating loss carryforwards of
$242.8 million. The federal net operating loss and other tax credit
carryforwards expire on various dates between 2010 through 2021. The state net
operating loss carryforwards expire on various dates between 2003 through 2021.
Under current tax law, net operating loss and credit carryforwards available to
offset future income in any given year may be limited upon the occurrence of
certain events, including significant changes in ownership interests.

         The Company's income taxes payable for federal, state, and foreign
purposes have been reduced and the deferred tax assets increased by the tax
benefits associated with employee stock options. The benefits were credited
directly to stockholders' equity and amounted to $104.7 million for the year
ended October 27, 2001. Benefits reducing taxes payable amounted to $22.4
million and benefits increasing gross deferred tax assets amounted to $82.3
million for the year ended October 27, 2001. The Company believes that all
deferred tax assets will be realized through profitable future operations and
accordingly, there is no need for a valuation allowance for any of the deferred
tax assets.

                                      B-35

9.       INTEREST AND OTHER INCOME, NET

         Interest and other income, net consisted of the following (in
thousands):



                                                             FISCAL YEAR ENDED
                                     ----------------------------------------------------------------
                                       OCTOBER 27,              OCTOBER 28,               OCTOBER 31,
                                           2001                     2000                      1999
                                     -------------            -------------             -------------
                                                                               
Interest income                      $      10,201            $       5,301             $       2,210
Interest expense                              (236)                     (45)                     (459)
Other income (expense), net                 (1,758)                     126                       (14)
                                     -------------            -------------             -------------
      Total                          $       8,207            $       5,382             $       1,737
                                     =============            =============             =============


10.      RELATED PARTY TRANSACTIONS

         During the year ended October 31, 1999, the Company sold 18.8 million
shares of its common stock to officers and a director of the Company in
consideration for full recourse promissory notes in the aggregate amount of $6.4
million. Should the officers terminate employment, the shares are subject to a
right of repurchase by the Company that lapses over a four-year period. At
October 27, 2001, all such promissory notes had been repaid in full and there
were no outstanding balances.

         The Company holds minority equity investments in certain companies with
which it does business. In addition, a member of the Company's Board of
Directors serves as a Director of a company with whom the Company does business.
For the years ended October 27, 2001, and October 28, 2000, total revenues from
such companies were $7.0 million and $13.1 million, respectively. Accounts
receivable balances due from such companies were $804,000 and $2.7 million at
October 27, 2001, and October 28, 2000, respectively. Sales transactions with
such companies were on terms no more favorable than those with unrelated
parties.

         At October 27, 2001, the Company had outstanding loans to various
employees totaling $4.5 million. These loans are generally related to the
respective employees' relocation and subsequent purchase of a home in the San
Francisco Bay Area in connection with their employment with the Company. The
loans are evidenced by secured promissory notes to the Company and generally
bear interest at rates ranging from 5.0 percent to 6.1 percent.

11.      SEGMENT INFORMATION

         The Company is organized and operates as one operating segment; the
design, development, manufacturing, marketing and selling of switching solutions
for SANs. The Company's Chief Operating Decision Maker, as defined by SFAS 131,
"Disclosures about Segments of an Enterprise and Related Information," allocates
resources and assesses the performance of the Company based on revenues and
overall profitability. Revenues are attributed to geographic areas based on the
location of the customer to which product is shipped. Domestic revenues include
sales to certain OEM customers who then distribute product to their
international customers. To date, service and software revenues have not
exceeded 10 percent of total revenues.

         For the year ended October 27, 2001, three customers accounted for 26
percent, 20 percent, and 10 percent of total revenues respectively. For the year
ended October 28, 2000, two customers accounted for 31 percent and 18 percent of
total revenues, respectively. For the year ended October 31, 1999, three
customers accounted for 34 percent, 26 percent, and 10 percent of total
revenues, respectively. The level of sales to any customer may vary from quarter
to quarter and the Company expects that significant customer concentration will
continue for the foreseeable future. The loss of any one of these customers, or
a decrease in the level of

                                      B-36

sales to any one of these customers, could have a material adverse impact on the
Company's consolidated financial condition or results of operations.

         Geographic information for the years ended October 27, 2001, and
October 28, 2000, are presented below (in thousands). For the year ended October
31, 1999, international revenues were not material. Identifiable assets located
in foreign countries were not material at October 27, 2001, and October 28,
2000.



                                                                                          FISCAL YEAR ENDED
                                                                                   ----------------------------
                                                                                     OCTOBER 27,    OCTOBER 28,
                                                                                         2001           2000
                                                                                   -------------  -------------
                                                                                            
Net Revenues:
   North America (principally the United States)                                   $     364,270  $     257,690
   Europe, the Middle East, and Africa                                                   117,896         69,217
   Asia Pacific                                                                           30,864          2,138
                                                                                   -------------  -------------
      Total                                                                        $     513,030  $     329,045
                                                                                   =============  =============


12.      SUBSEQUENT EVENTS

         On December 21, 2001, and January 10, 2002, the Company sold, in
private placements pursuant to Section 4(2) of the Securities Act of 1933, as
amended, $550 million in aggregate principal amount of 2 percent convertible
subordinated notes due 2007. The initial purchasers of the notes were Morgan
Stanley & Co. Incorporated, Goldman, Sachs & Co., Salomon Smith Barney, Inc. and
Merrill Lynch, Pierce Fenner and Smith Incorporated, who purchased the notes
from us at a discount of 2.25 percent of the aggregate principal amount. Holders
of the notes may, in whole or in part, convert the notes into shares of the
Company's common stock at a conversion rate of 22.8571 shares per $1,000
principal amount of notes at any time prior to maturity on January 1, 2007. The
Company is required to pay interest on January 1 and July 1 of each year,
beginning July 1, 2002. The Company intends to use the net proceeds of the
offering of $537.6 million for general corporate purposes, including working
capital and capital expenditures.

                                      B-37




                                   SCHEDULE C

                      BROCADE COMMUNICATIONS SYSTEMS, INC.
          STOCK OPTION EXCHANGE PROGRAM: A GUIDE TO ISSUES IN AUSTRALIA


      The following is a general summary of the tax consequences of the
cancellation of eligible options and grant of new options for individuals
subject to tax in Australia. This summary is general in nature and does not
discuss all of the tax consequences that may be relevant to you in light of your
particular circumstances, nor is it intended to be applicable in all respects to
all categories of option holders. Please note that tax laws change frequently
and occasionally on a retroactive basis. We advise all option holders
considering replacing their eligible options to consult with their own tax or
financial advisors.

      If you are a citizen or resident of another country for local law
purposes, the information contained in this summary may not be applicable to
you. You are advised to seek appropriate professional advice as to how the tax
or other laws in your country apply to your specific situation.

OPTION EXCHANGE

      The voluntary relinquishment of the eligible stock options in exchange for
the right to receive a new option will give rise to a taxable amount (which may
be nil in certain circumstances). This occurs because the cancellation of the
eligible stock option will constitute a disposal of the option in exchange for
the right to receive a new option at a later date ("New Right"). Note that the
tax consequences of the exchange arise in relation to the cancellation of the
eligible options and the issue of the New Right as opposed to the grant of new
options.

   WHERE NO ELECTION WAS MADE

      If you did not make an election to be taxed in the income year of grant of
the cancelled options, the exchange will be a taxable event. In this case, you
will be subject to tax on the market value (as defined under Australian tax law)
of the cancelled options on the cancellation date at your marginal rate of tax.

      Because the grant price of the cancelled options exceeds the current
market value of the underlying shares at the time of the cancellation, the
market value of the cancelled options is determined in accordance with a
statutory formula. In accordance with the statutory formula, the market value of
the cancelled option will be nil where the market value of the underlying shares
at the time of cancellation is less than 50% of the grant price.

   WHERE AN ELECTION WAS MADE

      If you made an election to be taxed in the year of the grant of
outstanding options, the exchange will be subject to capital gains tax. The
capital gains tax consequences will arise when the agreement for the exchange is
entered into.

      Where the market value of the cancelled options exceeds the cost base of
the options, the assessable capital gain will be equal to:

      -     where the cancelled options have been held for at least 12 months
            prior to the agreement for the exchange - the difference between the
            market value of the cancelled options at the time the


                                      C-1

            exchange contract is entered into and the cost base of the cancelled
            options, less any prior year or current year capital losses,
            multiplied by 50%; or

      -     where the options have been held for less than 12 months prior to
            the agreement for the exchange - the difference between the market
            value of the cancelled options at the time the exchange contract is
            entered into and the cost base of the cancelled options.

      Where:

      -     the cost base of the cancelled options is the market value of the
            cancelled options on the date of grant; and

      -     the market value of the cancelled options.

      If the market value of the cancelled option is less than the cost base of
the cancelled options, a capital loss equal to the difference should arise.

ACQUISITION OF NEW RIGHT

      The acquisition of the New Right (that is the conditional right to receive
a new option 6 months and 1 day after the cancellation of the eligible options)
will constitute the acquisition of a qualifying right under an employee share
option scheme. You will not be subject to taxation on the acquisition of the New
Right, unless you make an election to that effect. If you do not make an
election, you will be subject to tax in respect of the New Right at a later
date. The tax consequences under the alternatives are detailed below.

   ELECTION IS MADE - TAXED ON EXCHANGE

      If you make the election, then you must include an amount in your
assessable income in the income year that the exchange offer was accepted. The
amount included in your assessable income will be the market value of the New
Right less the market value of the cancelled options (as detailed above). The
market values are determined as at the date of the exchange pursuant to the
offer.

      Note that if you make the election, then it will cover each right, option
and share in Brocade Communications Systems, Inc. that you acquire during the
income year.

   NO ELECTION IS MADE - ALTERNATIVE ASSESSMENT TIME

      If you do not make the election, then you must include an amount in your
assessable income for the income year in which the earliest of the following
assessment times occurs in relation to the New Right ("Alternative Assessment
Time"):

      (i)   when you dispose of the new option acquired pursuant to the New
            Right (other than by exercising it);

      (ii)  when your employment with the Brocade Communications Systems, Inc.
            (or its affiliates) ceases;

      (iii) when the new option acquired pursuant to the New Right is exercised;
            and

      (iv)  when the new option acquired pursuant to the New Right expires
            (subject to a 10 year limit).


                                      C-2

      The amount which you must include in your assessable income for the income
year in which the Alternative Assessment Time occurs in relation to the New
Right will be:

      (i)   where you dispose of the new option (or the shares acquired as a
            result of exercising the new option) in an arm's length transaction
            within 30 days after the Alternative Assessment Time - the amount or
            value of any consideration you receive for the disposal less the
            consideration paid to acquire the New Right (reduced by the exercise
            price of the new option, if the new option has been exercised); or

      (ii)  in any other case - the market value of the New Right or new option
            (or the shares acquired as a result of exercising the new option) at
            the Alternative Assessment Time less the consideration paid to
            acquire the New Right (reduced by the grant price of the new option,
            if the new option has been exercised).

      The consideration paid to acquire the New Right is equal to the market
value of the eligible options as at the date they were cancelled (detailed
above).

NO BENEFIT WHERE NEW RIGHT OR NEW OPTIONS LOST

      If you lose the benefit of either the New Right or any new options without
having been exercised (e.g., you cease working for Brocade Communications
Systems, Inc. or its affiliates), you will be deemed to have never acquired the
New Rights or the new options. In that case, no amount needs to be included in
your assessable income in relation to the acquisition of the New Right. Where
necessary, you may amend an assessment to exclude an amount previously included
in assessable income in relation to the acquisition of the New Right. You may
also be entitled to a capital loss equal to the consideration paid to acquire
the New Right (being the market value of the outstanding options as at the date
of their cancellation).

SALE OF SHARES

      If you exercise your new options for shares, you will be subject to
capital gains tax on any gain you realize when you sell the shares. Provided you
sell the shares in an arm's length transaction, the taxable amount will be:

      (i)   where you have held the shares for less than one year - the
            difference between the sale proceeds and the cost base of the
            shares; or

      (ii)  where you have held the shares for at least one year - one half the
            difference between the sale proceeds and the cost base of the shares
            (subject to you first applying any prior year or current year
            capital losses against the full capital gain).

      The cost base of the shares will be the market value of the shares as at
the date of their issue (i.e., at the time of exercise). Provided the shares are
sold in an arm's length transaction, if the sale proceeds are less than the cost
base of the shares, then a capital loss will be available to offset current year
or future year capital gains. A capital loss cannot be used to offset other
income.

WITHHOLDING AND REPORTING

      Under current laws, your employer is not required to withhold for taxes
with respect to the exchange, the issuance or sale of shares. You will be
responsible for reporting and paying any taxes arising due to the exchange, the
issuance and/or sale of shares, including income tax and Medicare levy and
surcharge (if applicable).


                                      C-3

EXCHANGE CONTROL INFORMATION

      Exchange control reporting is required for cash transactions exceeding
A$10,000 and international fund transfers.


                                      C-4

                                   SCHEDULE D

                      BROCADE COMMUNICATIONS SYSTEMS, INC.
           STOCK OPTION EXCHANGE PROGRAM: A GUIDE TO ISSUES IN CANADA


      The following is a general summary of the tax consequences of the
cancellation of eligible options and grant of new options for individuals
subject to tax in Canada. This summary is general in nature and does not discuss
all of the tax consequences (including provincial variations) that may be
relevant to you in light of your particular circumstances, nor is it intended to
be applicable in all respects to all categories of option holders. Please note
that tax laws change frequently and occasionally on a retroactive basis. We
advise all option holders considering replacing their eligible options to
consult with their own tax or financial advisors.

      If you are a citizen or resident of another country for local law
purposes, the information contained in this summary may not be applicable to
you. You are advised to seek appropriate professional advice as to how the tax
or other laws in your country apply to your specific situation.

OPTION EXCHANGE

      The tax treatment as a result of the exchange of an eligible option for a
new option is uncertain. It is possible that the Canada Customs and Revenue
Agency (the "CCRA") will treat the exchange as: (i) a tax-neutral exchange of
options; (ii) a taxable exchange of employee stock options; or (iii) two
separate transactions (i.e., a tender of outstanding options for cancellation,
followed by a grant of new and unrelated options), whereby the tender is viewed
as a disposition for no consideration and no taxable income arises. For the
purposes of this summary, it is assumed that the new options will qualify as two
separate transactions under Canadian tax law, although this result is not
certain.

GRANT OF NEW OPTION

      You will not be subject to tax when the new option is granted to you.

EXERCISE OF NEW OPTION

      Subject to the potential deferral provisions discussed in the paragraph
below, you must include in your income when you exercise your new options the
difference between the fair market value of the shares on the date of exercise
and the grant price. Only one-half of this "gain" is subject to tax; that is,
you can permanently exclude one-half of this "gain" from the taxable amount. You
will be subject to tax on the remaining one-half of the gain at your applicable
marginal tax rate.

      You may be able to defer taxation of the taxable portion of the gain
arising upon exercise (i.e., the remaining one-half of the difference between
the fair market value of the shares on the date of exercise and the grant price)
until the earliest of: (i) when you sell the shares purchased upon exercise;
(ii) when you die; or (iii) when you become a non-resident of Canada. In order
to be eligible for this deferral, you must file an election with your employer
by January 15 of the year following the year in which shares are purchased upon
exercise.

      You may defer the tax only on the spread at exercise on C$100,000 worth of
options that vest in any one year. For the purpose of calculating this limit,
the value of an option equals the fair market value of the shares subject to the
option at the time the option was granted.


                                      D-1

      If CCRA successfully treats the transaction as a continuation of the old
option (i.e., a tax-neutral exchange), the deferral will not be available.

SALE OF SHARES

      If you acquire shares upon exercise, you will be subject to tax when you
subsequently sell the shares. The taxable amount will be one-half of the
difference between the sale proceeds and the adjusted cost basis of the shares
(generally, the fair market value on the date of exercise), less any brokerage
fees. In addition, any amount on which taxation was deferred at exercise, if
applicable, will become taxable at the time the shares are sold. Income tax will
be assessed on the taxable income at your marginal income tax rate.

      If you own other shares of Brocade Communications Systems, Inc., which you
have acquired upon exercise of other options or otherwise, your adjusted cost
basis may be different than described above. In order to preserve the cost basis
of shares sold in a cashless exercise, you will have to specifically identify
any such shares in your annual tax return. Shares acquired upon the exercise of
options for which a taxation deferral election has been filed will also retain
their own cost basis. You are strongly advised to consult your tax advisor in
any of these situations.

      One-half of any loss arising on the sale of the shares (including any
brokerage fees) may be deducted from any taxable capital gain for the year, the
previous three taxation years, or any subsequent year.

WITHHOLDING AND REPORTING

      Your employer will report the income recognized at exercise, any amount
excluded under the one-half exemption rule and the value of any deferred stock
option benefit, if applicable, to the CCRA. A copy of the T4 form containing
this information will be delivered to you prior to the last day of February in
the year following the year in which you exercise your new option.

      Your employer is not required to withhold income tax or social insurance
contributions on any portion of the taxable benefit from exercise/sale of
shares, etc. You will not be subject to additional social insurance
contributions if your annual salary exceeds the applicable ceiling. You will be
responsible for paying tax and any applicable social insurance contributions on
the income arising from the exercise of options and the sale of shares. For each
year that you defer taxation, if applicable, you must file a Form T1212 with the
CCRA with your annual tax return.


                                      D-2

                                   SCHEDULE E

                      BROCADE COMMUNICATIONS SYSTEMS, INC.
            STOCK OPTION EXCHANGE PROGRAM: A GUIDE TO ISSUES IN CHINA

      The following is a general summary of the tax consequences of the
cancellation of existing options and grant of new options for individuals
subject to tax in China. This summary is general in nature and does not discuss
all of the tax consequences that may be relevant to you in light of your
particular circumstances, nor it is intended to be applicable in all respects to
all categories of option holders. Please note that tax laws change frequently
and occasionally on a retroactive basis. We advise all option holders
considering replacing their existing options to consult with their own tax or
financial advisors.

      If you are a citizen or resident of another country for local law
purposes, the information contained in this summary may not be applicable to
you. You are advised to seek appropriate professional advice as to how the tax
or other laws in your country apply to your specific situation.

OPTION EXCHANGE

      It is unlikely that you will be subject to tax as a result of the exchange
of an existing option for a new option.

GRANT OF NEW OPTION

      You will not be subject to tax when the new option is granted to you.

EXERCISE OF NEW OPTION

      Due to legal restrictions in China, you will not be permitted to obtain
shares upon exercise of your options. Instead, you must use the cashless- sell
all method of exercise whereby all the shares you are entitled to at exercise
are immediately sold and the proceeds less the grant price, applicable taxes and
brokers' fees, if any, are remitted to you in cash. When you exercise the new
option, you will be subject to tax on the difference between the fair market
value of the shares on the date you exercise your option and the grant price.

SALE OF SHARES

      You are not eligible to obtain shares pursuant to the terms of the new
option.

WITHHOLDING AND REPORTING

      Your employer may be required to withhold and report for income tax and
social insurance purposes when you exercise your new option, although this
result is not certain. You will be responsible for paying any difference between
the actual tax liability and the amount withheld, if any.


                                      E-1

                                   SCHEDULE F

                      BROCADE COMMUNICATIONS SYSTEMS, INC.
           STOCK OPTION EXCHANGE PROGRAM: A GUIDE TO ISSUES IN DENMARK

      The following is a general summary of the tax consequences of the
cancellation of existing options and grant of new options for individuals
subject to tax in Denmark. This summary is general in nature and does not
discuss all of the tax consequences that may be relevant to you in light of your
particular circumstances, nor is it intended to be applicable in all respects to
all categories of option holders. Please note that tax laws change frequently
and occasionally on a retroactive basis. We advise all option holders
considering replacing their existing options to consult with their own tax or
financial advisors.

      If you are a citizen or resident of another country for local law
purposes, the information contained in this summary may not be applicable to
you. You are advised to seek appropriate professional advice as to how the tax
or other laws in your country apply to your specific situation.

OPTION EXCHANGE

      You will likely be subject to tax as a result of the exchange of an
existing option for a new option because it will likely be considered a disposal
of the existing options. The taxable amount will be the value of the new option
less the amount you paid for the existing option (which will be zero). The value
of the new options will likely be calculated in accordance with a statutory
formula, although the precise application of the formula in this context is
uncertain. Please consult your tax advisor to determine your taxable amount.

GRANT OF NEW OPTION

      You will not be subject to tax when the new option is granted to you.

EXERCISE OF NEW OPTION

      Under current law, when you exercise the new option, you likely will be
subject to tax on the difference between the fair market value of the shares on
the date of exercise and the grant price. It is not clear whether you will be
entitled to a credit/reduction for tax paid as a result of the option exchange,
if any.

      New tax legislation may be enacted as of 1 January 2003, which would
affect the tax treatment of your new option. If the legislation is enacted in
its current form, you may be able to defer taxation until the sale of your
shares. The taxable amount may be subject to capital gains treatment, depending
upon whether certain conditions and holding periods are satisfied. You should
consult with your tax advisor regarding these proposed changes and whether they
will apply to the new option.

SALE OF SHARES

      You will be subject to tax when you subsequently sell the shares. The
taxable amount will be the difference between the sale proceeds and the fair
market value of the shares on the date of exercise. If you hold the shares for
less than three years, your gain will be taxed as investment income. Losses may
be deducted from gains on shares held for less than three years. If you hold the
shares for three years or more, the gain is tax-free, provided the fair market
value of your total portfolio of quoted shares for the three years preceding the
sale has not exceeded a specified amount, which is set at DKK125,100 (or
DKK250,100 for married couples) for 2002. Please consult your tax advisor to
determine how this amount is calculated. If the


                                      F-1

threshold is exceeded, the gain is taxed as share income. Share income, which
does not exceed DKK39,700 per year (or DKK79,400 for married couples) for 2002
is taxed at a rate of 28%; share income exceeding the threshold is taxed at a
rate of 43%. Losses may be deducted from gains on quoted shares held for three
years or more.

WITHHOLDING AND REPORTING

      Your employer is not required to withhold or report income tax or social
insurance contributions as a result of the exchange transaction, the exercise or
sale. However, your employer is required to report the taxable amount to the
Danish tax administration. It is your responsibility to pay any taxes (including
social insurance taxes) resulting from the exchange transaction, the exercise of
your new options, the sale of shares or the receipt of any dividends.

EXCHANGE CONTROL INFORMATION

      If you make or receive payments in excess of DKK250,000 (a per transaction
limit), the transaction should be reported to the Danish National Bank. If you
instruct a local bank to transfer an amount in excess of DKK250,000 to a foreign
recipient, the local bank will request that you inform it of the reason for the
transfer; it will then submit the relevant information to the Danish National
Bank on your behalf. If you transfer in excess of DKK250,000 to a local bank
(e.g., as a result of the sale of shares), the local bank similarly will request
certain information regarding the transaction from you; it will then submit the
relevant information to the Danish National Bank on your behalf. Therefore, in
most circumstances, the local bank involved in the transaction will satisfy the
reporting obligation.

      If you establish a "safety-deposit account" (i.e., an account holding
shares) or a "deposit account" (i.e., an account holding cash) abroad, you must
report the account to the Danish National Bank. The form which should be used in
this respect can be obtained from your local bank. (Please note that these
obligations are separate from and in addition to the obligations described
below).

      You may hold shares acquired through the exchange in a safety-deposit
account (e.g., a brokerage account) with either a Danish bank or with an
approved foreign broker or bank. If the shares are held with a foreign broker or
bank, you are required to inform the Danish Tax Administration about the
safety-deposit account. For this purpose, you must file a Form V (Erklaering V)
with the Danish Tax Administration. Both you and the broker or bank must sign
the Form V. By signing the Form V, the broker or bank undertakes an obligation,
without further request each year, to forward information to the Danish Tax
Administration concerning the shares in the account. By signing the Form V, you
authorize the Danish Tax Administration to examine the account. A sample of the
Form V can be found at the following website:
www.erhverv.toldskat.dk/blanketter/49023.pdf.

      In addition, if you open a brokerage account (or a deposit account with a
U.S. bank), the brokerage account (or bank account, as applicable) will be
treated as a deposit account because cash can be held in the account. Therefore,
you must also file a Form K (Erklaering K) with the Danish Tax Administration.
Both you and the broker must sign the Form K. By signing the Form K, the broker
undertakes an obligation, without further request each year, to forward
information to the Danish Tax Administration concerning the content of the
deposit account. By signing the Form K, you authorize the Danish Tax
Administration to examine the account. A sample of Form K can be found at the
following website: www.erhverv.toldskat.dk/blanketter/49021.pdf.


                                      F-2

      If you use the cashless-sell all method of exercise, you are not required
to file a Form V because you will not hold any shares. However if you open a
deposit account with a foreign broker or bank to hold the cash proceeds, you are
required to file a Form K as described above.


                                      F-3

                                   SCHEDULE G

                      BROCADE COMMUNICATIONS SYSTEMS, INC.
           STOCK OPTION EXCHANGE PROGRAM: A GUIDE TO ISSUES IN FRANCE


      The following is a general summary of the tax consequences of the
cancellation of outstanding options and grant of new options for individuals
subject to tax in France. This summary is general in nature and does not discuss
all of the tax consequences that may be relevant to you in light of your
particular circumstances, nor it is intended to be applicable in all respects to
all categories of option holders. Please note that tax laws change frequently
and occasionally on a retroactive basis. We advise all option holders
considering replacing their outstanding options to consult with their own tax or
financial advisors.

      If you are a citizen or resident of another country for local law
purposes, the information contained in this summary may not be applicable to
you. You are advised to seek appropriate professional advice as to how the tax
or other laws in your country apply to your specific situation.

OPTION EXCHANGE

      It is unlikely that you will be subject to tax as a result of the exchange
of an outstanding option for a new option.

GRANT OF NEW OPTION

      You will not be subject to tax when the new option is granted to you.

EXERCISE OF NEW OPTION

      Because your new option will be granted as part of a French sub-plan for
qualified options under sections L. 225-177 to L 225-186 of the French
Commercial Code, as amended, you will not be subject to tax on the spread (i.e.,
the difference between the fair market value of the underlying shares at
exercise and the option price) when you exercise your new option. In order for
an option plan to qualify for this favorable tax treatment, certain requirements
must be met.

      For example, your new option will not be exercisable until the first
anniversary of the grant date of the new option and you may not sell or
otherwise dispose of your shares before the day following the fourth anniversary
of the grant date of the new option, in order to satisfy the minimum period
required by Section 163 bis C of the French tax code, (or any minimum holding
period required under this law as subsequently amended) for French qualified
options.

      To the extent that the grant price is less than 95% of the average trading
price of the underlying shares for the 20 trading days prior to the effective
grant date or less than 95% of the average purchase price paid for such shares
by Brocade Communications Systems, Inc., this "excess discount" will be treated
as an additional taxable salary at the time of exercise. This income will be
taxed at the progressive rate up to 53.25%. This amount is also subject to
social security contributions, to CSG at the rate of 7.5% and CRDS at the rate
of 0.5%.


                                      G-1

SALE OF SHARES

      If you sell the shares after the four-year anniversary of the grant date
of the new option (or the minimum holding period subsequently required under
French law) and the spread is less than or equal to E152,500, you will be taxed
at the rate of 40% (30%, plus 10% additional contributions) on the spread. If
you sell the shares after the four-year holding period (or the minimum holding
period required under French law) but the spread is higher than E152,500, then
the portion of the spread under or equal to E152,500 would be taxed at 40% and
the portion of the spread above E152,500 would be taxed at 50% (40%, plus 10%
additional contributions).

      You may receive even more favorable tax treatment if you wait an
additional two years after the expiration of the four year or other minimum
holding period) to sell your shares. If you sell the shares two years after the
exercise of the option when the four-year holding period is met and the spread
is less than or equal to E152,500, you will be taxed at the rate of 26% (16%,
plus 10% additional contributions). If you sell the shares two years after the
exercise of the option when the four-year holding period is met but the spread
is higher than E152,500, the portion of the spread under or equal to E152,500 is
taxed at the rate of 26% and the portion of the spread above E152,500 is taxed
at the rate of 40%.

      In any case, the difference between the sales price of the stock and its
fair market value at the time of exercise (i.e., any capital gains) is taxed at
the rate of 26% (i.e., 16% income tax, plus 10% additional contributions).

      The tax of the spread and capital gains, if any, applies only when the
aggregate gross proceeds from your sales of securities for the year concerned
exceed a certain amount, which is set annually (E7,650 for 2002).

      If the sale price is less than the fair market value of the shares at the
date of exercise, you will realize a capital loss. This capital loss can be
offset against the spread and the excess against capital gain of the same nature
realized during the same year or during the five following years. This capital
loss cannot be offset against other kinds of income.

REPORTING

      Your employer must send to you, no later than 15 February of the year
following the year of exercise of the new option, an individual statement
providing the following information:

      -     its corporate purpose, the place of location of its principal
            establishment and, if different, the place of location of its
            registered office;

      -     the date on which the new option was granted and the date of
            exercise of the new option;

      -     the number of shares acquired and the new option price; and

      -     the excess discount, if any, at the time of grant based on the
            restriction for French qualified options.

      At the same time, your employer must also send duplicates of the
individual statements to the tax office ("Direction des Services Fiscaux") with
which it files its tax return.


                                      G-2

      To benefit from the favorable tax regime (i.e., deferral of taxation at
exercise), you must attach the above individual statement to your annual French
income tax return for the year in which the option was exercised (e.g., for the
exercise of an option in 2004, you would have to attach the individual statement
to the income tax return for the income earned in 2004, which you file with the
French tax authorities in 2005).

      Upon the sale of the shares (and provided that the four-year holding
period or minimum holding period is met), you will have to report both the
spread and the capital gain realized upon sale on your income tax return for the
year in which the underlying shares were sold.

EXCHANGE CONTROL INFORMATION

      You may hold shares purchased under the new option outside of France
provided you declare all foreign accounts, whether open, current, or closed, in
your income tax return. You must also declare to the customs and excise
authorities any cash or securities you import or export without the use of a
financial institution when the value of the cash or securities is equal to or
exceeds E7,600.

TERMINATION DUE TO DEATH

      If you die holding outstanding options, the new option will become
immediately vested, and your heirs will have six months as of the date of your
death in which to exercise the new option.

HOLDING PERIOD

      Your new option will not become exercisable until the one-year anniversary
of the new grant date and your shares acquired upon exercise cannot be sold
before the day following the fourth anniversary of the grant date of the new
option, which satisfies the minimum period required by Section 163 bis C of the
French Tax Code (or the minimum holding period required under this law as
subsequently amended) for French qualified options.

GRANT DATE

      Under French law, qualified options cannot be granted during specific
closed periods. Your new option grant date may be different than your colleagues
outside of France to comply with this requirement.

OPTION PRICE

      The option price of your new options will be the greater of: (i) the fair
market value of the underlying shares on the grant date, as determined under the
U.S. Plan; or (ii) 80% of the average quotation price during the 20 trading days
preceding the grant of the new options.


                                      G-3

                                   SCHEDULE H

                      BROCADE COMMUNICATIONS SYSTEMS, INC.
          STOCK OPTION EXCHANGE PROGRAM: A GUIDE TO ISSUES IN GERMANY


      The following is a general summary of the tax consequences of the
cancellation of existing options and grant of new options for individuals
subject to tax in Germany. This summary is general in nature and does not
discuss all of the tax consequences that may be relevant to you in light of your
particular circumstances, nor is it intended to be applicable in all respects to
all categories of option holders. Please note that tax laws change frequently
and occasionally on a retroactive basis. We advise all option holders
considering replacing their existing options to consult with their own tax or
financial advisors.

      If you are a citizen or resident of another country for local law
purposes, the information contained in this summary may not be applicable to
you. You are advised to seek appropriate professional advice as to how the tax
or other laws in your country apply to your specific situation.

OPTION EXCHANGE

      It is unlikely that you will be subject to tax as a result of the exchange
of an existing option for a new option.

GRANT OF NEW OPTION

      You will not be subject to tax when the new option is granted to you.

EXERCISE OF NEW OPTION

      When you exercise your new option, you will be subject to income tax on
the difference (or spread) between the fair market value of the shares on the
date of exercise and the grant price. You also will be subject to social
insurance contributions on the spread to the extent you have not already
exceeded the applicable contribution ceiling.

      Pursuant to Section 19a of the German Income Tax Act
(Einkommensteuergesetz), you may be able to deduct E154 per calendar year from
the taxable amount because this income results from the purchase of stock in
your employer's parent company. You should consult with your tax advisor to
determine if this deduction applies to your specific situation.

SALE OF SHARES

      Currently, you will not be subject to tax when you subsequently sell
shares provided you own the shares for at least 12 months, do not own 1% or more
of Brocade Communications Systems, Inc. stated capital (and have not owned 1% or
more at any time in the last five years) and the shares are not held as business
assets. However, for sales after 2002, proposed legislation in Germany may
require you to pay tax upon any gain realized from the sale of shares
(calculated as the sale proceeds less the fair market value of the underlying
shares at exercise), regardless of your ownership of Brocade Communications
Systems, Inc.'s stated capital and regardless of how long the shares are held.
If you are subject to tax upon sale, you will be subject to tax on one-half of
the gain as capital gain (less one-half of the sales related expenses).
Furthermore, you will only be subject to tax if your total capital gain exceeds
E512 in the relevant tax year. In this case, you will be taxed on the full gain
(and not only the gain in excess of E512).


                                      H-1

WITHHOLDING AND REPORTING

      Your employer is required to withhold and report income tax and social
insurance contributions (to the extent that you have not exceeded the applicable
contribution ceiling) when you exercise the new options. If your actual tax
liability differs from the amount withheld, it is your responsibility to pay the
additional tax. Your employer is not required to withhold or report upon the
subsequent sale of the shares.

EXCHANGE CONTROL INFORMATION

      Cross-border payments in excess of E12,500 must be reported monthly. If
you use a German bank to affect a cross-border payment in excess of E12,500 in
connection with the purchase or sale of Brocade Communications Systems, Inc.
shares or other securities, the bank will make the report. In which case, you
will not have to report the transaction yourself. In addition, you must report
any receivables or payables or debts in foreign currency exceeding an amount of
E5,000,000 on a monthly basis. Finally, you must also report on an annual basis,
in the unlikely event that you hold shares representing 10% or more of the total
or voting capital of Brocade Communications Systems, Inc.


                                       H-2

                                   SCHEDULE I

                      BROCADE COMMUNICATIONS SYSTEMS, INC.
          STOCK OPTION EXCHANGE PROGRAM: A GUIDE TO ISSUES IN HONG KONG


      The following is a general summary of the tax consequences of the
cancellation of existing options and grant of new options for individuals
subject to tax in Hong Kong. This summary is general in nature and does not
discuss all of the tax consequences that may be relevant to you in light of your
particular circumstances, nor is it intended to be applicable in all respects to
all categories of option holders. Please note that tax laws change frequently
and occasionally on a retroactive basis. We advise all option holders
considering replacing their existing options to consult with their own tax or
financial advisors.

      If you are a citizen or resident of another country for local law
purposes, the information contained in this summary may not be applicable to
you. You are advised to seek appropriate professional advice as to how the tax
or other laws in your country apply to your specific situation.

OPTION EXCHANGE

      It is unlikely that you will be subject to income tax as a result of the
exchange of an existing option for a new option.

GRANT OF NEW OPTION

      You will not be subject to tax when the new option is granted to you.

EXERCISE OF NEW OPTION

      When you exercise the new option, you will be subject to tax on the
difference between the fair market value of the shares on the date of exercise
and the grant price.

SALE OF SHARES

      You will not be subject to tax when you subsequently sell your shares.

WITHHOLDING AND REPORTING

      Your employer is not required to withhold salaries tax or Mandatory
Provident Fund contributions when you exercise the new option or when you
subsequently sell the shares. However, your employer will report your taxable
benefits resulting from the exercise of your option as part of its normal annual
return. It is your responsibility to report and pay all applicable taxes.

SECURITIES INFORMATION

      This document is private and confidential and has been printed in limited
numbers and distributed to selected employees of Brocade. It is for the
exclusive use of the person to whom it is addressed and should be returned if
such person decides not to participate in the exchange program.


                                      I-1

                                   SCHEDULE J

                      BROCADE COMMUNICATIONS SYSTEMS, INC.
            STOCK OPTION EXCHANGE PROGRAM: A GUIDE TO ISSUES IN ITALY


      The following is a general summary of the tax consequences of the
cancellation of outstanding options and grant of new options for individuals
subject to tax in Italy. This summary is general in nature and does not discuss
all of the tax consequences that may be relevant to you in light of your
particular circumstances, nor is it intended to be applicable in all respects to
all categories of option holders. Please note that tax laws change frequently
and occasionally on a retroactive basis. We advise all option holders
considering replacing their outstanding options to consult with their own tax or
financial advisors.

      If you are a citizen or resident of another country for local law
purposes, the information contained in this summary may not be applicable to
you. You are advised to seek appropriate professional advice as to how the tax
or other laws in your country apply to your specific situation.

OPTION EXCHANGE

      It is unlikely that you will be subject to tax as a result of the exchange
of an outstanding option for a new option.

GRANT OF NEW OPTION

      You will not be subject to tax when the new option is granted to you.

EXERCISE OF NEW OPTION

      You should not be subject to tax when you exercise the new option because
the exercise price will be the highest of: (i) the fair market value at the time
of the regrant; (ii) the Italian Fair Market Value (i.e., the average of the
official prices over the month preceding the regrant date) at the time of the
regrant, and, in the case of officers of Brocade Communications Systems, Inc.,
(iii) 110% of the average closing price of the common stock of Brocade
Communications Systems, Inc. during the period of this offer.

SALE OF SHARES

      You will be subject to capital gains tax when you subsequently sell the
shares. The taxable amount will likely be the difference between the sale
proceeds and the exercise price. Capital gains are currently taxed at a flat
rate of 12.5%.

      You may also elect to be taxed under one of two alternative tax regimes.
To be eligible for either of these methods, you must transfer your stock
certificates to the custody of a broker authorized by the Italian Ministry of
Finance.

Administered Savings Method

      Under the administered savings method, you deposit shares with an
authorized broker, but you retain the right to make investment decisions. Under
this method, a 12.5% flat withholding tax is levied on the capital gains for
each transaction. Your broker pays the tax from the sale proceeds at the time of
the sale of the shares, so that capital gain is not included on your annual tax
return. The advantage of this tax regime is


                                      J-1

that it preserves the anonymity of the owner of the shares. The tax effect,
however, is the same as described above in the Sale of Shares.

Managed Savings Method

      Under the managed savings method, you deposit shares with an authorized
broker and leave the administration and investment decisions to the broker. In
this case, the 12.5% flat withholding tax is levied not on the capital gain
actually realized through the sale of the shares but on the net result of your
entire investment portfolio with the broker, i.e., the difference between the
value of your portfolio at the end of the year and the value of the portfolio at
the beginning of the year, subject to some adjustment. Once again, the broker
pays the tax at the end of the year from your account and the gain is not
included on your individual tax return. The advantage of this method is that it
preserves the anonymity of the owner of the shares. The disadvantage is that
your taxable amount is not equal to capital gains actually realized through the
sale of the shares, but rather is based on the increased value of the shares
held in your portfolio.

WITHHOLDING AND REPORTING

      Your employer is likely not required to withhold and report income tax
and/or social insurance contributions when you exercise the new option or
subsequently sell the shares. Proper reporting and payment of taxes in
connection with your option and any shares received upon exercise are your
personal responsibility.

EXCHANGE CONTROL INFORMATION

      Exchange control reporting is required if you transfer cash or shares to
or from Italy in excess of E10,329.14 or the equivalent amount in U.S. dollars.
You may be exempt from this formality if the payments are made through an
authorized broker resident in Italy, as that entity would comply with the
reporting obligation. Exchange control reporting is also required if you have
any foreign investment (including stock) held outside Italy in excess of
E10,329.14. The reporting must be done on your individual tax return.


                                      J-2

                                   SCHEDULE K

                      BROCADE COMMUNICATIONS SYSTEMS, INC.
            STOCK OPTION EXCHANGE PROGRAM: A GUIDE TO ISSUES IN JAPAN


      The following is a general summary of the tax consequences of the
cancellation of outstanding options and grant of new options for individuals
subject to tax in Japan. This summary is general in nature and does not discuss
all of the tax consequences that may be relevant to you in light of your
particular circumstances, nor is it intended to be applicable in all respects to
all categories of option holders. Please note that tax laws change frequently
and occasionally on a retroactive basis. We advise all option holders
considering replacing their outstanding options to consult with their own tax or
financial advisors.

      If you are a citizen or resident of another country for local law
purposes, the information contained in this summary may not be applicable to
you. You are advised to seek appropriate professional advice as to how the tax
or other laws in your country apply to your specific situation.

OPTION EXCHANGE

      It is unlikely that you will be subject to income tax as a result of the
exchange of an outstanding option for a new option, although this result is not
certain.

GRANT OF NEW OPTION

      You will not be subject to tax when the new option is granted to you.

EXERCISE OF NEW OPTION

      When you exercise the new option, you will be subject to tax on the
difference between the fair market value of the shares on the date of exercise
and the exercise price. Your income likely will be treated as "remuneration
income" and will be taxed at your marginal tax rate, although a recent decision
by the Tokyo District Court upheld the characterization of the income as
occasional income.

SALE OF SHARES

      You will be subject to tax when you subsequently sell the shares acquired
at exercise, if any. You will be taxed on the difference between the sale
proceeds and the fair market value of the shares on the date of exercise. As of
January 1, 2003, the tax rate on net capital gains for certain listed shares
(including those listed on a foreign stock market) will be lowered to 20% if
they are sold through a securities broker designated in Japan. Additional
favorable capital gain tax treatment may apply on a temporary basis between 2003
and 2007. This treatment will apply to shares of publicly listed companies
(including foreign listed companies) that satisfy certain additional conditions.
You should confirm the tax treatment of your gain realized upon sale of the
shares with your personal tax advisor.

WITHHOLDING AND REPORTING

      Although income from the exercise of stock options is classified as
remuneration income for individual income tax purposes, your employer is
generally not required to withhold income tax or social security contributions
when you exercise your option. It is your responsibility to file a personal tax
return and to report and pay any taxes resulting from the exercise of your
option.


                                      K-1

                                   SCHEDULE L

                      BROCADE COMMUNICATIONS SYSTEMS, INC.
            STOCK OPTION EXCHANGE PROGRAM: A GUIDE TO ISSUES IN KOREA


      The following is a general summary of the tax consequences of the
cancellation of existing options and grant of new options for individuals
subject to tax in Korea. This summary is general in nature and does not discuss
all of the tax consequences that may be relevant to you in light of your
particular circumstances, nor is it intended to be applicable in all respects to
all categories of option holders. Please note that tax laws change frequently
and occasionally on a retroactive basis. We advise all option holders
considering replacing their existing options to consult with their own tax or
financial advisors.

      If you are a citizen or resident of another country for local law
purposes, the information contained in this summary may not be applicable to
you. You are advised to seek appropriate professional advice as to how the tax
or other laws in your country apply to your specific situation.

OPTION EXCHANGE

      You will not be subject to tax as a result of the exchange of an existing
option for a new option.

GRANT OF NEW OPTION

      You will not be subject to tax when the new option is granted to you.

EXERCISE OF NEW OPTION

      When you exercise the new option, you will be subject to income tax at the
rate applicable to salary income (progressive rates from 9.9% to 39.6%) and
potentially social insurance contributions on the difference between the fair
market value of the shares on the date of exercise and the grant price.

SALE OF SHARES

      You will be subject to capital gains tax (22% including residence surtax)
when you subsequently sell your shares acquired at exercise. The taxable amount
will be the difference between the sale proceeds and the fair market value of
the shares on the date of exercise, unless the amount of shares (and any other
company shares) sold in that year is less than the exempt amount, which is
KRW2,500,000 per type of asset. Any gain you realize on stock assets that
exceeds KRW2,500,000 will be subject to capital gains tax. No securities
transaction tax will likely apply to your subsequent disposition of shares
acquired pursuant to exercise of your options.

WITHHOLDING AND REPORTING

      Your employer is not required to withhold income tax or social security
contributions when you exercise the new options. It is your responsibility to
file a personal tax return and to report and pay any income tax and social
insurance contribution liability that may arise.


                                      L-1

EXCHANGE CONTROL INFORMATION

      When you exercise your new option, your remittance of funds must be
"confirmed" by a foreign exchange bank in Korea. This procedure does not require
approval of the remittance from the bank. You must submit the following
documents to the bank with a confirmation application available from the bank:
(i) the notice of grant; (ii) the plan document; (iii) the stock option award
letter or agreement indicating the type of shares to be acquired and the amount
of shares; and (iv) a certificate of employment from your local employer.

      Exchange control laws also require Korean residents who realize US$50,000
or more from the sale of shares to repatriate the proceeds back to Korea within
six months of the sale.


                                      L-2

                                   SCHEDULE M

                      BROCADE COMMUNICATIONS SYSTEMS, INC.
          STOCK OPTION EXCHANGE PROGRAM: A GUIDE TO ISSUES IN SINGAPORE


      The following is a general summary of the tax consequences of the
cancellation of outstanding options and grant of new options for individuals
subject to tax in Singapore. This summary is general in nature and does not
discuss all of the tax consequences that may be relevant to you in light of your
particular circumstances, nor is it intended to be applicable in all respects to
all categories of option holders. Please note that tax laws change frequently
and occasionally on a retroactive basis. We advise all option holders
considering replacing their outstanding options to consult with their own tax or
financial advisors.

      If you are a citizen or resident of another country for local law
purposes, the information contained in this summary may not be applicable to
you. You are advised to seek appropriate professional advice as to how the tax
or other laws in your country apply to your specific situation.

OPTION EXCHANGE

      You may be subject to tax as a result of the exchange of an outstanding
option for a new option as Inland Revenue may view the exchange as a taxable
release. Please consult with your tax advisor.

GRANT OF NEW OPTION

      You may be subject to tax when the new option is granted to you if the new
option is considered obtained by reason of the release of an existing right.

EXERCISE OF NEW OPTION

      Assuming you are not taxed at grant, when you exercise the new option you
will likely be subject to tax on the difference between the fair market value of
the shares on the date of exercise and the exercise price unless you are
eligible for an exemption or deferral as discussed below. Please consult your
tax advisor to determine if an exemption or deferral applies to you.

COMPANY EMPLOYEE EQUITY-BASED REMUNERATION SCHEME ("CEEBR SCHEME")(1)

      You may be able to claim a tax exemption on the first S$2,000 of spread
per year and 25% of the remaining spread per year subject to a total exemption
of S$1 million over a 10-year period beginning in the year you exercise your
options. To take advantage of this tax exemption, the vesting provisions of your
options must be as follows:

      (a)   where the exercise price is equal to at least the fair market value
of the underlying shares on the date of grant, the option may not be exercised
within one year of the grant of the option; and

- ----------
(1)  Formerly called the "Company Stock Option Scheme"


                                      M-1

      (b)   where the exercise price is less than the fair market value of the
underlying shares on the date of grant (i.e., discounted option), the option may
not be exercised within two years of the grant of the option.

      In addition, the CEEBR Scheme must be offered to at least 50% of the
Singapore company's employees.

      You should consult your tax advisor to determine if you qualify for this
exemption in whole or in part (i.e., the portion, if any, of the new option
vesting one year or more after the new grant date).

QUALIFIED EMPLOYEE EQUITY-BASED REMUNERATION ("QEEBR SCHEME")(2)

      You may also be able, in certain circumstances, to defer the tax due at
exercise under the QEEBR Scheme on the portion of the spread that was not
exempt, if any, from tax under the CEEBR Scheme. You should consult with a tax
adviser to determine if you qualify for this deferral. If you think that you
qualify, you should apply to the to the Inland Revenue of Singapore (the "IRAS")
for a deferral. If you qualify for deferral under the QEEBR Scheme, you will
accrue interest on the deferral tax as explained below.

      To qualify for tax deferral under the QEEBR Scheme, you would have to
satisfy the following conditions:

      (a)   you are employed in Singapore at the time the stock option is
exercised;

      (b)   the stock option was granted to you by the company for whom you are
working at the time of exercise of the stock option or an associated company of
that company;

      (c)   the tax payable on the QEEBR gains is not borne by your employer;
and

      (d)   the minimum vesting periods that are applicable to CEEBR Schemes
(discussed above) must be met.

      You will not qualify for the QEEBR Scheme if:

      (a)   you are an undischarged bankrupt;

      (b)   IRAS records show that you are a delinquent taxpayer; or

      (c)   the tax deferred under the QEEBR Scheme is less than S$200.

      You should consult your tax advisor to determine if you qualify for the
QEEBR Scheme in whole or in part (i.e., the portion, if any, of the new option
vesting one year or more after the new grant date).

      If you are a qualifying employee, you may apply to the IRAS for tax
deferral at the time of filing your income tax return for the Year of Assessment
("YOA") (i.e., the year in which option is exercised and the spread would be
subject to tax unless deferred). You would have to submit to the IRAS the
Application Form for Deferment of Tax on Gains from the QEEBR, together with
your employer's certification on the Application Form that the QEEBR is properly
qualified and your tax returns.

- ----------
(2)  Formerly called the "Qualified Employee Stock Option Plan Scheme"


                                      M-2

      The maximum deferral period is five years starting from 1 January after
the YOA. Subject to the maximum of five years, an employee can choose to defer
the payment of the tax on the QEEBR gains for any period of time.

      The interest charge on the deferred tax will commence one month after the
date of assessment (i.e., the date you exercise the option). The interest rate
chargeable will be pegged to the average prime rate of the Big Four Banks
offered on 15 April of each year and interest will be computed annually based on
said rate using the simple interest method. The tax deferred and the
corresponding amount of interest would be due on the expiration of the deferral
period. You may settle the deferred tax earlier in one lump sum.

      Tax payment deferral will cease and payment of the tax plus the
corresponding interest will become due immediately:

      (a)   in the case of a foreign employee (including a Singapore PR), when
            you

            (i)   terminate your employment in Singapore and leave Singapore;

            (ii)  are posted overseas; or

            (iii) leave Singapore for any period exceeding three months;

      (b)   when you become bankrupt; and

      (c)   when you die (the deferred tax would be recovered from your estate).

SALE OF SHARES

      You will generally not be subject to tax when you subsequently sell the
shares acquired at exercise, if any, provided you are not in the business of
buying and selling securities.

WITHHOLDING AND REPORTING

      Your employer is not required to withhold income tax or Central Provident
Fund contributions on the spread at exercise and/or the gain upon sale of
shares. Your employer will report the new option to Inland Revenue and provide
you with a copy of the report. It is your responsibility to report and pay all
applicable taxes.

SECURITIES INFORMATION

      If you are a director, associate director or shadow director of a
Singapore affiliate of Brocade Communications Systems, Inc., you are subject to
certain notification requirements under the Singapore Companies Act. Among these
requirements is an obligation to notify the Singapore affiliate in writing when
you receive an interest (e.g., options, shares) in Brocade Communications
Systems, Inc. or any related companies. Please contact Brocade Communications
Systems, Inc. to obtain a copy of the notification form. In addition, you must
notify the Singapore affiliate when you sell shares of Brocade Communications
Systems, Inc. or any related company (including when you sell shares acquired
under the exchange program). These notifications must be made within two days of
acquiring or disposing of any interest in Brocade Communications Systems, Inc.
or any related company. In addition, a notification must be made of your
interests in Brocade Communications Systems, Inc. or any related company within
two days of becoming a director.


                                      M-3

                                   SCHEDULE N

                      BROCADE COMMUNICATIONS SYSTEMS, INC.
            STOCK OPTION EXCHANGE PROGRAM: A GUIDE TO ISSUES IN SPAIN


      The following is a general summary of the tax consequences of the
cancellation of eligible options and grant of new options for individuals
subject to tax in Spain. This summary is general in nature and does not discuss
all of the tax consequences that may be relevant to you in light of your
particular circumstances, nor is it intended to be applicable in all respects to
all categories of option holders. Please note that tax laws change frequently
and occasionally on a retroactive basis. We advise all option holders
considering replacing their eligible options to consult with their own tax or
financial advisors.

      If you are a citizen or resident of another country for local law
purposes, the information contained in this summary may not be applicable to
you. You are advised to seek appropriate professional advice as to how the tax
or other laws in your country apply to your specific situation.

OPTION EXCHANGE

      It is unlikely that you will be subject to tax as a result of the exchange
of an eligible option for a new option.

GRANT OF NEW OPTION

      You will not be subject to tax when the new option is granted to you.

EXERCISE OF NEW OPTION

      When you exercise the new option, you will be subject to tax on the
difference between the fair market value of the shares on the date of exercise
and the grant price (or "spread"). The spread will likely be considered
compensation in-kind subject to payment on account.

      Exemption. Notwithstanding the above, the first E3005.06 per 12-month
period (or E6010.12 over the last five years) of the spread at exercise will not
be taxable provided you hold the shares for at least three years after exercise
and certain conditions are met. If you dispose of your shares prior to the
expiration of the three-year period, the spread at exercise will be taxable to
you. In the event of a sale within three years, it will be your responsibility
to file a supplemental tax return for the tax year in which the option was
exercised. Please consult your tax advisor to determine if this exemption is
available to you. Please also note that the income tax act may be modified
effective 1 January 2003. Pursuant to the proposed modifications in the tax law,
this exemption may be increased to E12,000. Please consult with your tax advisor
to determine if the changes will impact you.

SALE OF SHARES

      You will be subject to tax when you subsequently sell the shares acquired
at exercise, if any. The taxable amount will be the difference between the sale
proceeds and the fair market value of the underlying shares at exercise.

      If you hold the shares for one year or less, the gain is taxed at your
general income tax rate. If you hold the shares for more than one year, the gain
will be taxed at a flat rate.


                                      N-1

WITHHOLDING AND REPORTING

      Under current laws, if the spread at exercise is considered compensation
in-kind and it exceeds E3005.06 per 12-month period (or E6,010.12 over the last
five years), there may be a payment on account obligation. The payment on
account obligation will be charged to you. Such amount will be withheld from
either the proceeds or your salary. You will be entitled to deduct the payment
on account and obtain a tax credit from your income tax obligation.

SECURITIES INFORMATION

      This offer is considered a private placement outside of the scope of
Spanish law on public offerings and issuances.

EXCHANGE CONTROL INFORMATION

      It is your responsibility to comply with exchange control regulations in
Spain. The purchase of Brocade Communications Systems, Inc. shares must be
declared by the purchaser for statistical purposes to the Spanish "Direccion
General de Comercio e Inversiones" (the "DGCI"). If you purchase shares through
the use of a Spanish financial institution, that institution will automatically
make the declaration to the DGCI for you. Otherwise, you make the declaration
yourself by filing the appropriate form with the DGCI.

      When receiving foreign currency payments derived from the ownership of
Brocade Communications Systems, Inc. shares (i.e., as a result of the sale of
the shares), you must inform the financial institution receiving the payment of
the basis upon which such payment is made. You will need to provide the
institution with the following information: (i) your name, address, and fiscal
identification number; (ii) the name and corporate domicile of Brocade
Communications Systems, Inc.; (iii) the amount of the payment; (iv) the currency
used; (v) the country of origin; (vi) the reasons for the payment; and (vii)
additional information that may be required.

      If you wish to import the ownership title of the Brocade Communications
Systems, Inc. shares (i.e., share certificates) into Spain, you must declare the
importation of such securities to the DGCI.


                                      N-2

EX-99.(A)(1)(B)

                                                               Exhibit (a)(1)(b)


FROM:     Greg Reyes
SUBJECT:  Stock Option Exchange Program
DATE:     December 9, 2002

Brocadians -

Today, I am happy to announce that we are offering you the opportunity to
participate in an employee Stock Option Exchange Program. Stock options are a
valuable motivation and retention tool and, as such, help to align employee and
stockholder interests. Many of the currently outstanding stock options held by
our employees are "underwater", which means that the per share exercise prices
of the stock options are greater than the current market price of our common
stock. As a result, the Board of Directors has approved a Stock Option Exchange
Program, which is structured to help assure that employees are appropriately
incented to continue to grow our business and meet our objectives.

The Stock Option Exchange Program will allow you to exchange certain underwater
stock options for new stock options. These new stock options will be granted on
the first business day that is six months and one day after the exchanged stock
options are cancelled. The price of these new options will be equal to the
closing price of our common stock on the new option grant date.

Below is a summary of some aspects of the Stock Option Exchange Program.

      Eligible Options: All outstanding options with exercise prices equal to or
      greater than $12.00 per share are eligible for exchange. If you
      participate in this offer, you must exchange (i) all of your outstanding
      options with exercise prices equal to or greater than $12.00 per share and
      (ii) all options granted on or after June 8, 2002, regardless of exercise
      price.

      Exchange Ratio: The number of new stock options you will be granted will
      be determined according to the grant date of the exchanged stock options
      they will be replacing.

      -     Exchanged options granted on or before March 15, 2000 will be
            replaced with new options at an exchange ratio of one (1) new option
            for every three (3) exchanged options.

      -     Exchanged options granted after March 15, 2000 and before April 17,
            2001, and options granted on April 17, 2001 as part of our
            Supplemental Stock Program ("Supplemental Options"), will be
            replaced with new options at an exchange ratio of one (1) new option
            for every two (2) exchanged options.

      -     Exchanged options granted after April 17, 2001, and options granted
            on April 17, 2001 other than Supplemental Options, will be replaced
            with new options at an exchange ratio of one (1) new option for
            every one (1) exchanged option.

      -     If I elect to exchange any options, each exchanged option will be
            replaced with a new option at an exchange ratio of one (1) new
            option for every ten (10) exchanged options.


                                      -1-

      Vesting: The new options will be subject to the same vesting schedule as
      the exchanged options, subject to your continued employment on each
      relevant vesting date.

      Exercise Price of the New Options: The exercise price of the new options
      will be the fair market value on the date of grant, which will generally
      be equal to the closing price of Brocade common stock on the Nasdaq
      National Market on the new option grant date. However, the exercise price
      of the new options granted to Brocade's officers will not be less than
      110% of the average closing price of our common stock during the offer
      period. Since the new option grant date is in the future, we cannot
      predict the exercise price of the new options.

SEC regulations require that we have an offer period that gives you at least 20
business days to decide whether to participate in the Stock Option Exchange
Program. At the end of the 20 business days, we will close the offer period and
the exchanged options that are accepted for inclusion in the Stock Option
Exchange Program will be cancelled. Accounting regulations require us to wait a
minimum of six months and one day from the cancellation date before we grant the
new options. We expect the offer period to close on January 8, 2003 and the
exchanged options to be cancelled on January 9, 2003. Accordingly, we expect to
grant new options on July 10, 2003. Please note that the dates may change if we
choose to extend the offer period. You must be an employee of Brocade
continuously until the date we grant the new options in order to receive new
options.

Each new option granted under the Stock Option Exchange Program generally may
not be exercised until six months following the date of grant of these new
options. This six-month period will expire early in certain cases if your
employment with Brocade terminates. If the offer is not extended, this six-month
period will expire on January 10, 2004.

The Stock Option Exchange Program is being made under the terms and subject to
the conditions of an Offer to Exchange and the related Election Form and
Withdrawal Form, which are available on our intranet site at
http://emp.brocade.com/ and in the SEC filing which can be accessed on the SEC's
web site at www.sec.gov. You should carefully read all of these documents before
you decide whether to participate in the offer.

We have attempted to anticipate many of the questions you may have regarding the
terms of the Stock Option Exchange Program and have included some frequently
asked questions as part of the Offer to Exchange, which you may view or download
from the two web sites identified above. We are also making available on our
intranet site a "calculator" that you can use to run various "what if" scenarios
to see how the Stock Option Exchange Program may affect you. We will distribute
to you a summary of your outstanding stock options by internal mail.

Participation is completely voluntary. Participating in the offer involves risks
that are discussed in the Offer to Exchange. We recommend that you speak with
your personal financial, legal and/or tax advisors to weigh the benefits and
risks involved in participating in the Stock Option Exchange Program. If you
choose not to participate, you will retain your current options under their
current terms and conditions.

To participate in the Stock Option Exchange Program, you must properly complete
and sign the Election Form and return it to Elizabeth Moore before the offer
expires at 5:00 p.m., Pacific time, on


                                      -2-

January 8, 2003 by facsimile at 408.333.5900 or by hand at office SJ6-2D12. If
Elizabeth Moore has not received your properly completed and signed Election
Form before the offer expires, you will have rejected this offer and you will
keep your current options. These forms are included in the Offer to Exchange,
which is available on our intranet site listed above or outside Elizabeth
Moore's office.

Please carefully read all of the offer documents. This letter is an introduction
to the offer, but does not detail all the terms and conditions that apply.
Please direct any questions you may have to stockex@brocade.com.

NOTE: The 2003 Human Resources Kickoff Meetings scheduled during the weeks of
December 9th and 16th will address the Stock Option Exchange Program. Please
plan to attend one of these informative sessions.


                                      -3-

EX-99.(A)(1)(C)

                                                               EXHIBIT (a)(1)(c)

                      BROCADE COMMUNICATIONS SYSTEMS, INC.
                            OFFER TO EXCHANGE OPTIONS

                                  ELECTION FORM

      BEFORE SIGNING THIS ELECTION FORM, PLEASE MAKE SURE YOU HAVE RECEIVED,
READ AND UNDERSTAND THE DOCUMENTS THAT MAKE UP THIS OFFER, including: (1) the
Offer to Exchange Certain Outstanding Options for New Options (referred to as
the offer to exchange); (2) the letter from Gregory L. Reyes, dated December 9,
2002; (3) this election form; and (4) the withdrawal form. The offer is subject
to the terms of these documents as they may be amended. The offer provides
eligible employees who hold eligible stock options the opportunity to exchange
these options for new options covering a smaller number of shares, with exercise
prices as set forth in Section 9 of the offer. This offer expires at 5:00 p.m.,
Pacific time, on January 8, 2003 unless extended. PLEASE FOLLOW THE INSTRUCTIONS
ATTACHED TO THIS FORM.

      In accordance with the terms outlined in the offer documents, the number
of new options you receive will be based on the exchange ratios set forth in
Section 2 of the offer. If you participate in this offer, you must exchange all
outstanding options granted to you by Brocade with exercise prices equal to or
greater than $12.00 per share and all options granted to you by Brocade since
June 8, 2002, regardless of exercise price. All new options will be subject to
the same vesting schedule as the exchanged options, subject to your continued
employment on each relevant vesting date. However, new options generally may not
be exercised until six months after the new option grant date. You will lose
your rights to all exchanged options that are cancelled under the offer. Your
cancelled options will not be reinstated and you will not receive new options if
your employment with Brocade ends for any reason before July 10, 2003.

      BY PARTICIPATING, YOU AGREE TO ALL TERMS OF THE OFFER AS SET FORTH IN THE
OFFER DOCUMENTS.

      If you would like to participate in this offer, please indicate your
election by checking the box below and completing and signing this election
form. Please be sure to follow the instructions, which are attached.

      You may withdraw this election by submitting a properly completed and
signed withdrawal form prior to the expiration date which will be 5:00 p.m.,
Pacific time, January 8, 2003 unless extended.

      [ ] YES, I WISH TO TENDER FOR EXCHANGE ALL OUTSTANDING OPTIONS GRANTED TO
ME BY BROCADE WITH EXERCISE PRICES EQUAL TO OR GREATER THAN $12.00 PER SHARE AND
ALL OUTSTANDING OPTIONS GRANTED TO ME BY BROCADE ON OR AFTER JUNE 8, 2002,
REGARDLESS OF EXERCISE PRICE.

____________________________________  __________________________________________
Employee Signature                    Employee Workforce ID Number

____________________________________  __________________________________________
Employee Name (Please print)          E-mail Address               Date and Time

        RETURN TO ELIZABETH MOORE NO LATER THAN 5:00 P.M., PACIFIC TIME,
                               ON JANUARY 8, 2003

                      BROCADE COMMUNICATIONS SYSTEMS, INC.
                            OFFER TO EXCHANGE OPTIONS

                                  INSTRUCTIONS

              FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER

1.    DELIVERY OF ELECTION FORM.

      A properly completed and signed original of this election form (or a
facsimile of it) must be received by Elizabeth Moore either via hand delivery at
Office Number SJ6-2D12, Brocade Communications Systems, Inc., 1745 Technology
Drive, San Jose, California, 95110, attention: Elizabeth Moore, or via facsimile
(fax number: (408) 333-5900), on or before 5:00 p.m., Pacific time, on January
8, 2003 (referred to as the expiration date).

      THE DELIVERY OF ALL REQUIRED DOCUMENTS, INCLUDING ELECTION FORMS, IS AT
YOUR RISK. DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY BROCADE
COMMUNICATIONS SYSTEMS, INC. (SOMETIMES REFERRED TO AS THE COMPANY). YOU MAY
HAND DELIVER YOUR ELECTION FORM TO ELIZABETH MOORE AT OFFICE NUMBER SJ6-2D12,
BROCADE COMMUNICATIONS SYSTEMS INC., 1745 TECHNOLOGY DRIVE, SAN JOSE, CALIFORNIA
95110, OR YOU MAY FAX IT TO ELIZABETH MOORE AT (408) 333-5900. IN ALL CASES, YOU
SHOULD ALLOW SUFFICIENT TIME TO ENSURE TIMELY DELIVERY. WE INTEND TO CONFIRM THE
RECEIPT OF YOUR ELECTION FORM WITHIN TWO (2) BUSINESS DAYS. IF YOU HAVE NOT
RECEIVED SUCH A CONFIRMATION, IT IS YOUR RESPONSIBILITY TO ENSURE THAT YOUR
ELECTION FORM HAS BEEN RECEIVED BY JANUARY 8, 2003.

      Our receipt of your election form is not by itself an acceptance of your
options for exchange. For purposes of the offer, we will be deemed to have
accepted options for exchange that are validly tendered and not properly
withdrawn as of when we give oral or written notice to the option holders
generally of our acceptance for exchange of such options, which notice may be
made by press release, e-mail or other method of communication.

      Brocade will not accept any alternative, conditional or contingent
tenders. Although it is our intent to send you a confirmation of receipt of this
election form, by signing this election form, you waive any right to receive any
notice of the receipt of the tender of your options, except as provided for in
the offer to exchange. Any confirmation of receipt sent to you will merely be a
notification that we have received your election form and does not mean that
your options have been cancelled. Your options that are accepted for exchange
will be cancelled on the first business day following the expiration of the
offer, which cancellation is scheduled to be January 9, 2003.

2.    WITHDRAWAL AND ADDITIONAL TENDERS.

      Tenders of options made through the offer may be withdrawn at any time
before 5:00 p.m., Pacific time, on January 8, 2003. If Brocade extends the offer
beyond that time, you may withdraw your tendered options at any time until the
extended expiration of the offer. In addition, although Brocade currently
intends to accept your validly tendered options promptly after the expiration of
the offer, if we have not accepted your options by 9:00 p.m., Pacific time, on
February 5, 2003, you may withdraw your tendered options at any time thereafter.
To withdraw tendered options you must hand deliver (Office Number SJ6-2D12,
Brocade Communications Systems, Inc., 1745 Technology Drive, San Jose, CA 95110)
or fax (fax number: (408) 333-5900) a signed and dated withdrawal form, with the
required information, to Elizabeth Moore while you still have the right to
withdraw the tendered options. You may not rescind any withdrawal and any
eligible options withdrawn will be deemed not properly tendered for purposes of
the offer, unless you properly re-elect to exchange all options before the
expiration date. To re-elect to exchange all of your withdrawn options, you must
submit a new election form to Elizabeth Moore before the expiration date by


                                      -2-

following the procedures described in these instructions. Your new election form
must include the required information regarding all of your options and must be
signed and clearly dated after the date of your original election form and any
withdrawal form you have submitted. Upon the receipt of such a new, properly
filled out, signed and dated election form, any previously submitted election
form or withdrawal form will be disregarded and will be considered replaced in
full by the new election form. You will be bound by the last properly tendered
election or withdrawal form we receive before the expiration date.

3.    TENDERS.

      As more fully set forth in the offer, Brocade will not accept partial
tenders of options. Accordingly, you may elect to exchange all or none of the
eligible options you elect to exchange. Therefore, if you participate in this
offer, you must elect to exchange all options granted to you with exercise
prices equal to or greater than $12.00 per share and all options granted to you
since June 8, 2002, regardless of exercise price.

5.    SIGNATURES ON THIS ELECTION FORM.

      If this election form is signed by the holder of the options, the
signature must correspond with the name as written on the face of the option
agreement or agreements to which the options are subject without alteration,
enlargement or any change whatsoever. If your name has been legally changed
since your option agreement was signed, please submit proof of the legal name
change.

      If this election form is signed by a trustee, executor, administrator,
guardian, attorney-in-fact, officer of a corporation or other person acting in a
fiduciary or representative capacity, that person should so indicate when
signing, and proper evidence satisfactory to Brocade of the authority of that
person to act in that capacity must be submitted with this election form.

6.    OTHER INFORMATION ON THIS ELECTION FORM.

      In addition to signing this election form, you must print your name and
indicate the date and time at which you signed. You must also include a current
e-mail address and your employee workforce identification number.

7.    REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES.

      Any questions or requests for assistance, as well as requests for
additional copies of the offer to exchange or this election form may be directed
to Elizabeth Moore, at Brocade Communications Systems, Inc., 1745 Technology
Drive, San Jose, California 95110, telephone number (408) 392-5019. Copies will
be furnished promptly at Brocade's expense.

8.    IRREGULARITIES.

      We will determine, in our discretion, all questions as to the form of
documents and the validity, form, eligibility, including time of receipt, and
acceptance of any options. Our determination of these matters will be final and
binding on all parties. We reserve the right to reject any election form or any
options elected to be exchanged that we determine are not in appropriate form or
that we determine are unlawful to accept. We will accept all properly tendered
options that are not validly withdrawn. We also reserve the right to waive any
of the conditions of the offer or any defect or irregularity in any tender of
any particular options or for any particular option holder, provided that if we
grant any such waiver, it will be granted with respect to all option holders and
tendered options. No tender of options will be deemed to have been properly made
until all defects or irregularities have been cured by the tendering option
holder or waived by us. Neither we nor any other person is obligated to give
notice of any defects or irregularities in tenders, nor will anyone incur any


                                      -3-

liability for failure to give any notice. This is a one-time offer, and we will
strictly enforce the election period, subject only to an extension that we may
grant in our discretion.

      IMPORTANT: THE ELECTION FORM (OR A FACSIMILE COPY OF IT) TOGETHER WITH ALL
OTHER REQUIRED DOCUMENTS MUST BE RECEIVED BY ELIZABETH MOORE, ON OR BEFORE 5:00
P.M., PACIFIC TIME, ON JANUARY 8, 2003.

9.    ADDITIONAL DOCUMENTS TO READ.

      You should be sure to read the offer, all documents referenced therein,
and the letter from Gregory L. Reyes, dated December 9, 2002, before deciding to
participate in the offer.

10.   IMPORTANT TAX INFORMATION.

      If you are subject to tax in the United States, you should refer to
Section 14 of the offer, which contains important federal income tax
information. If you are subject to tax in another country, you should refer to
Schedules C through N, as applicable, which contain important tax information.
We also recommend that you consult with your personal advisors before deciding
whether or not to participate in this offer.

11.   MISCELLANEOUS.

      A. Data Privacy. By accepting this offer, you hereby explicitly and
unambiguously consent to the collection, use and transfer, in electronic or
other form, of your personal data as described in this document by and among, as
applicable, Brocade Communications Systems, Inc. and/or any of its subsidiaries
and affiliates for the exclusive purpose of implementing, administering and
managing your participation in the offer.

      You understand that Brocade Communications Systems, Inc. and/or any of its
subsidiaries and affiliates may hold certain personal information about you,
including, but not limited to, your name, home address and telephone number,
date of birth, social insurance number or other identification number, salary,
nationality, job title, any shares of stock or directorships held in Brocade
Communications Systems, Inc. and/or any of its subsidiaries and affiliates,
details of all options or any other entitlement to shares of stock awarded,
canceled, exercised, vested, unvested or outstanding in your favor, for the
purpose of implementing, administering and managing the offer (Data). You
understand that Data may be transferred to any third parties assisting in the
implementation, administration and management of the offer, that these
recipients may be located in your country, or elsewhere, and that the
recipient's country may have different data privacy laws and protections than
your country. You understand that you may request a list with the names and
addresses of any potential recipients of the Data by contacting your local human
resources representative. You authorize the recipients to receive, possess, use,
retain and transfer the Data, in electronic or other form, for the purposes of
implementing, administering and managing your participation in the offer,
including any requisite transfer of such Data as may be required to a broker or
other third party with whom you may elect to deposit any shares of stock
acquired upon exercise of the option. You understand that Data will be held only
as long as is necessary to implement, administer and manage your participation
in the offer. You understand that you may, at any time, view Data, request
additional information about the storage and processing of Data, require any
necessary amendments to Data or if you are a resident of certain countries,
refuse or withdraw the consents herein, in any case without cost, by contacting
in writing your local human resources representative. You understand, however,
that refusing or withdrawing your consent means that you may not participate in
the offer. For more information on the consequences of your refusal to consent
or withdrawal of consent, you understand that you may contact your local human
resources representative.

      B. Acknowledgement and Waiver. By accepting this offer, you acknowledge
that: (1) your acceptance of the offer is voluntary; (2) your acceptance of the
offer shall not create a right to further


                                      -4-

employment with your employer and shall not interfere with the ability of your
employer to terminate your employment relationship at any time with or without
cause; (3) no claim or entitlement to compensation or damages arises from the
termination or diminution in value; (4) the future value of Brocade's shares is
uncertain and cannot be predicted with certainty; and (5) the offer, the
exchanged options and the new options are not part of normal or expected
compensation or salary for any purposes, including, but not limited to,
calculating any severance, resignation, redundancy, end of service payments,
bonuses, long-service awards, pension or retirement benefits or similar
payments.


                                      -5-

EX-99.(A)(1)(D)

                                                               EXHIBIT (a)(1)(d)


        COMPLETE AND RETURN THIS FORM ONLY IF YOU HAVE CHANGED YOUR MIND
                  AND YOU DO NOT WANT TO EXCHANGE YOUR OPTIONS

                      BROCADE COMMUNICATIONS SYSTEMS, INC.
                            OFFER TO EXCHANGE OPTIONS

                                 WITHDRAWAL FORM

      You previously received (i) a copy of the offer to exchange; (ii) the
letter from Gregory L. Reyes, dated December 9, 2002; and (iii) an election
form. You signed and returned the election form, in which you elected to ACCEPT
Brocade's offer to exchange all of your eligible options. You should submit this
form only if you now wish to change that election and REJECT Brocade's offer to
exchange your eligible options.

      To withdraw your election to exchange your eligible options, you must
sign, date and deliver this withdrawal form via facsimile, fax number: (408)
333-5900, or hand delivery to Elizabeth Moore at Office Number SJ6-2D12, Brocade
Communications Systems, Inc., 1745 Technology Drive, San Jose, California 95110
by 5:00 p.m., Pacific time, on January 8, 2003.

      You should note that if you withdraw your acceptance of the offer, you
will not receive any new options pursuant to the offer in replacement for the
withdrawn options. You will keep all of the options that you withdraw. These
options will continue to be governed by the stock option plan under which they
were granted and by the existing option agreements between you and Brocade.

      You may change this withdrawal, and again elect to exchange all eligible
options by submitting a new election form to Elizabeth Moore via facsimile (fax
number: (408) 333-5900) or hand delivery to Elizabeth Moore at Office Number
SJ6-2D12, Brocade Communications Systems, Inc., 1745 Technology Drive, San Jose,
California 95110, by 5:00 p.m., Pacific time, on January 8, 2003.

      Please check the box below and sign this form where indicated if you do
not want to exchange your eligible options for new options:

      [ ] I WISH TO WITHDRAW ALL THE OPTIONS LISTED ON MY ELECTION FORM AND
INSTEAD REJECT THE OFFER TO EXCHANGE OPTIONS. I DO NOT WISH TO EXCHANGE ANY
OPTIONS.

      Please sign this withdrawal form and print your name exactly as it appears
on the election form.

____________________________________  __________________________________________
Employee Signature                    Employee Workforce ID Number

____________________________________  __________________________________________
Employee Name (Please print)          E-mail Address               Date and Time

        RETURN TO ELIZABETH MOORE NO LATER THAN 5:00 P.M., PACIFIC TIME,
                               ON JANUARY 8, 2003


                                      -1-

                      BROCADE COMMUNICATIONS SYSTEMS, INC.
                            OFFER TO EXCHANGE OPTIONS

                       INSTRUCTIONS TO THE WITHDRAWAL FORM

              FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER

1.    DELIVERY OF WITHDRAWAL FORM.

      A properly completed and executed original of this withdrawal form (or a
facsimile of it), must be received by Elizabeth Moore, either via hand delivery
at Office Number SJ6-2D12, Brocade Communications Systems, Inc., 1745 Technology
Drive, San Jose, California 95110 or via the facsimile, fax number (408)
333-5900 on or before 5:00 p.m., Pacific time, on January 8, 2003 (referred to
as the expiration date). If Brocade Communications Systems, Inc. (sometimes
referred to as the Company) extends the offer, this withdrawal form must be
received by Elizabeth Moore by the date and time of the extended expiration of
the offer.

      THE DELIVERY OF ALL REQUIRED DOCUMENTS, INCLUDING WITHDRAWAL FORMS AND ANY
NEW ELECTION FORMS, IS AT YOUR RISK. DELIVERY WILL BE DEEMED MADE ONLY WHEN
ACTUALLY RECEIVED BY BROCADE COMMUNICATIONS SYSTEMS, INC. YOU MAY HAND DELIVER
YOUR ELECTION FORM TO ELIZABETH MOORE AT OFFICE NUMBER SJ6-2D12, BROCADE
COMMUNICATIONS SYSTEMS, INC., 1745 TECHNOLOGY DRIVE, SAN JOSE, CALIFORNIA 95110,
OR YOU MAY FAX IT TO ELIZABETH MOORE AT FAX NUMBER (408) 333-5900. IN ALL CASES,
YOU SHOULD ALLOW SUFFICIENT TIME TO ENSURE TIMELY DELIVERY. WE INTEND TO CONFIRM
THE RECEIPT OF YOUR WITHDRAWAL FORM WITHIN TWO (2) BUSINESS DAYS; IF YOU HAVE
NOT RECEIVED SUCH A CONFIRMATION OF RECEIPT, IT IS YOUR RESPONSIBILITY TO ENSURE
THAT YOUR WITHDRAWAL FORM HAS BEEN RECEIVED BY ELIZABETH MOORE.

      As noted in the offer, you may not select individual option grants to be
tendered for exchange. You may not withdraw some of your options from the offer
while continuing to elect others to be exchanged in the offer.

      Although by submitting a withdrawal form you have withdrawn all of your
previously tendered options from the offer, you may change your mind and
re-elect to exchange all of the withdrawn options until the expiration of the
offer. You should note that you may not rescind any withdrawal and any eligible
options withdrawn will be deemed not properly tendered for purposes of the
offer, unless you properly re-elect to exchange those options before the
expiration date. Tenders to re-elect to exchange options may be made at any time
before the expiration date. If Brocade extends the offer beyond that time, you
may re-tender your options at any time until the extended expiration of the
offer. To re-elect to tender the withdrawn options, you must deliver a later
dated and signed election form with the required information to Elizabeth Moore,
while you still have the right to participate in the offer. Your options will
not be properly tendered for purposes of the offer unless the withdrawn options
are properly re-tendered before the expiration date by delivery of the new
election form following the procedures described in the instructions to the
election form. This new election form must be signed and dated after your
original election form and any withdrawal form you have submitted. Upon the
receipt of such a new, properly filled out, signed and dated election form, any
previously submitted election form or withdrawal form will be disregarded and
will be considered replaced in full by the new election form. You will be bound
by the last properly tendered election or withdrawal form we receive before the
expiration date.

      Although it is our intent to send you a confirmation of receipt of this
withdrawal form, by signing this withdrawal form, you waive any right to receive
any notice of the withdrawal of the tender of your options.

2.    SIGNATURES ON THIS WITHDRAWAL FORM.

      If this withdrawal form is signed by the holder of the eligible options,
the signature must correspond with the name as written on the face of the option
agreement or agreements to which the options are subject without alteration,
enlargement or any change whatsoever. If your name has been legally changed
since your option agreement was signed, please submit proof of the legal name
change.

      If this withdrawal form is signed by a trustee, executor, administrator,
guardian, attorney-in-fact, officer of a corporation or other person acting in a
fiduciary or representative capacity, that person should so indicate when


                                      -2-

signing, and proper evidence satisfactory to Brocade of the authority of that
person so to act must be submitted with this withdrawal form.

3.    OTHER INFORMATION ON THIS WITHDRAWAL FORM.

      In addition to signing this withdrawal form, you must print your name and
indicate the date and time at which you signed. You must also include a current
e-mail address and your employee workforce identification number.

4.    REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES.

      Any questions or requests for assistance, as well as requests for
additional copies of the offer to exchange, the election form or this withdrawal
form should be directed to Elizabeth Moore, at Brocade Communications Systems,
Inc., 1745 Technology Drive, San Jose, California 95110, telephone number (408)
392-5019. Copies will be furnished promptly at Brocade's expense.

5.    IRREGULARITIES.

      All questions as to the validity, form, eligibility (including time of
receipt) and acceptance of this withdrawal from the offer will be determined by
Brocade in its discretion. Brocade's determinations shall be final and binding
on all parties. Brocade reserves the right to reject any or all withdrawal forms
that Brocade determines not to be in proper form or the acceptance of which may,
in the opinion of Brocade's counsel, be unlawful. Brocade also reserves the
right to waive any of the conditions of the offer and any defect or irregularity
in the withdrawal form, and Brocade's interpretation of the terms of the offer
(including these instructions) will be final and binding on all parties. No
withdrawal form will be deemed to be properly made until all defects and
irregularities have been cured or waived. Unless waived, any defects or
irregularities in connection with withdrawal forms must be cured within the time
as Brocade shall determine. Neither Brocade nor any other person is or will be
obligated to give notice of any defects or irregularities in withdrawal forms,
and no person will incur any liability for failure to give any such notice.

      IMPORTANT: THE WITHDRAWAL FORM (OR A FACSIMILE COPY OF IT) TOGETHER WITH
ALL OTHER REQUIRED DOCUMENTS MUST BE RECEIVED BY ELIZABETH MOORE, ON OR BEFORE
THE EXPIRATION DATE.

6.    ADDITIONAL DOCUMENTS TO READ.

      You should be sure to read the offer to exchange, all documents referenced
therein, and the letter from Gregory L. Reyes dated December 9, 2002, before
making any decisions regarding participation in, or withdrawal from, the offer.

7.    IMPORTANT TAX INFORMATION.

      If you are subject to tax in the United States, you should refer to
Section 14 of the offer to exchange, which contains important federal income tax
information. If you are subject to tax in another country, you should refer to
Schedules C through N, as applicable, which contain important tax information.
We also recommend that you consult with your personal advisors before deciding
whether or not to participate in this offer.


                                      -3-

EX-99.(A)(1)(E)

                                                               EXHIBIT (a)(1)(e)


                                     FORM OF
                          PROMISE TO GRANT STOCK OPTION

TO _________________________

      In exchange for your agreement to cancel all of your outstanding stock
options to purchase shares of Brocade Communications Systems, Inc. (Brocade)
common stock that you received from Brocade with exercise prices equal to or
greater than $12.00 per share or that were granted to you on or after June 8,
2002 regardless of exercise price, Brocade hereby promises to grant you a
nonstatutory stock option to purchase [______] shares of Brocade's common stock
granted under the [PLAN NAME] [AND A NONSTATUTORY STOCK OPTION TO PURCHASE
[__________] SHARES OF BROCADE'S COMMON STOCK GRANTED UNDER THE [PLAN NAME]]
([COLLECTIVELY,] the New Option). We will grant the New Option on July 10, 2003.

      The exercise price of each New Option will be the closing price of Brocade
common stock on July 10, 2003. However, if you are an officer of Brocade, the
exercise price of the New Options will not be less than 110% of the average
closing price of Brocade Common Stock during the period between December 9, 2002
and the expiration date. Also, if you are a resident of Italy or France, the
exercise price per share of the New Option will be as set forth in the Offer.

      Each New Option will have the same vesting schedule as the exchanged
option (subject to your continued employment with Brocade or one of its
subsidiaries through each vesting date).

      No New Option may be exercised until six months following the date of
grant or January 10, 2004, except as otherwise set forth in the offer to
exchange.

      Each New Option will be subject to the standard terms and conditions of
the stock option plan under which it is granted and the appropriate form of
stock option agreement thereunder.

      Before the grant of the New Option on July 10, 2003, it is possible that
Brocade may merge or consolidate with or be acquired by another entity. This
promise to grant stock option (this Promise) is evidence of a binding commitment
that Brocade's successors must honor. In the event of any such transaction, the
successor entity would be obligated to grant you a stock option on July 10,
2003. However, the type of stock and the number of shares covered by each New
Option would be determined in the same way as the consideration received by
outstanding option holders is determined at the time of the acquisition. Such
New Option would generally have an exercise price equal to the fair market value
of the acquiror's stock on the grant date of the New Option.

      To receive your New Option, you must continue to be employed by Brocade
(or one of its subsidiaries or successors) as of July 10, 2003. This Promise
does not constitute a guarantee of employment with Brocade or any of its
subsidiaries for any period. Unless expressly provided otherwise by the
applicable laws of a non-U.S. jurisdiction, your employment with Brocade or its
subsidiaries will remain "at will" and can be terminated by you or Brocade at
any time, with or without cause or notice. If your employment with Brocade or
one of its subsidiaries or successors terminates before July 10, 2003, for any
reason, you will lose all rights under this Promise to receive a New Option.

      This Promise is subject to the terms and conditions of the offer as set
forth in: (1) the Offer to Exchange Certain Outstanding Options for New Options
(referred to as the offer to exchange); (2) the letter from Gregory L. Reyes,
dated December 9, 2002; (3) the Election Form; and (4) the Withdrawal Form
(collectively, the Exchange Offer Documents), all of which are incorporated
herein by reference. This Promise and the Exchange Offer Documents reflect the
entire agreement between you and Brocade with respect to this transaction. This
Promise may be amended only by means of a writing signed by you and an
authorized officer of Brocade.


                                        BROCADE COMMUNICATIONS SYSTEMS, INC.

                                        By:_____________________________________

                                        Date:___________________________________

                                        Title:__________________________________


                                      -2-

EX-99.(A)(1)(F)

                                                               Exhibit (a)(1)(f)


                      BROCADE COMMUNICATIONS SYSTEMS, INC.


                         STOCK OPTION EXCHANGE PROGRAM
                       SUPPLEMENTARY AUSTRALIAN DOCUMENT


                              1999 STOCK PLAN AND

                      1999 NONSTATUTORY STOCK OPTION PLAN






              OFFER TO ELIGIBLE AUSTRALIAN EMPLOYEE OPTIONHOLDERS






                                DECEMBER 9, 2002






INVESTMENT IN SHARES INVOLVES A DEGREE OF RISK. EMPLOYEES WHO PARTICIPATE IN THE
OFFER AND PLANS SHOULD MONITOR THEIR PARTICIPATION AND CONSIDER ALL RISK FACTORS
RELEVANT TO THE CANCELLATION AND GRANT OF OPTIONS UNDER THE OFFER AND PLANS AS
SET OUT IN THIS SUPPLEMENTARY AUSTRALIAN DOCUMENT AND THE ADDITIONAL DOCUMENTS.
EMPLOYEES SHOULD SEEK INDEPENDENT ADVICE REGARDING PARTICIPATION IN THE OFFER
AND PLANS.


                                      -1-

               OFFER TO ELIGIBLE AUSTRALIAN EMPLOYEE OPTIONHOLDERS

                      BROCADE COMMUNICATIONS SYSTEMS, INC.

                        (THE "CORPORATION" OR "BROCADE")

                          STOCK OPTION EXCHANGE PROGRAM
                        SUPPLEMENTARY AUSTRALIAN DOCUMENT

                               1999 STOCK PLAN AND

                       1999 NONSTATUTORY STOCK OPTION PLAN


To our staff optionholders in Australia:

We are pleased to provide you with information regarding Brocade's offer to
exchange eligible options for new options under the Brocade 1999 Stock Plan and
1999 Nonstatutory Stock Option Plan (collectively, the "Plans").

Unless otherwise defined herein, terms defined in the document entitled "Offer
to Exchange" dated December 9, 2002 and in the Plans have the same meaning in
this Supplementary Australian Document.

1.    OFFER

This is an offer by the Corporation to eligible persons in Australia to exchange
certain options to purchase shares of common stock of the Corporation ("Shares")
previously granted by the Corporation for new options that the Corporation will
grant under the 1999 Stock Plan and/or the 1999 Nonstatutory Stock Option Plan,
as applicable.

The offer expires at 5:00 p.m., Pacific Time (U.S.) on January 8, 2003 unless
the offer is extended by the Corporation.

2.    WHO IS ELIGIBLE TO PARTICIPATE

To be eligible for this offer in Australia, you must hold eligible options
(i.e., options to purchase Shares, whether vested or unvested, with exercise
prices equal or greater than U.S.$12.00) and be employed by the Corporation or
any of its subsidiaries on the date of this offer through the date on which the
options elected to be exchanged are cancelled.

To obtain the new option grant you must remain employed by Brocade, or one of
its subsidiaries, through the new option grant date, which is the date on which
the new options are granted. If you terminate your employment or your employment
is terminated prior to the new grant date for any reason, you will not receive
anything for the options that you elected to exchange and that Brocade
cancelled.

3.    ADDITIONAL DOCUMENTS

In addition to the information set out in this Supplementary Australian
Document, attached are copies of the following documents (the "Additional
Documents"):

      (a)   Brocade 1999 Stock Plan;


                                      -2-

      (b)   Brocade 1999 Nonstatutory Stock Option Plan;

      (c)   the Offer to Exchange;

      (d)   Election Form;

      (e)   Withdrawal Form;

      (f)   Promise to Grant Stock Option Form;

      (g)   Letter from Gregory L. Reyes, Chief Executive Officer of Brocade;
            and

      (h)   the Australian Addendum.

The Additional Documents, particularly the Offer to Exchange, provide important
information necessary to make an informed investment decision in relation to
your participation in the offer. Please read these documents carefully.

4.    RELIANCE ON STATEMENTS

You should not rely upon any oral statements made to you in relation to this
offer. You should only rely upon the statements contained in this Supplementary
Australian Document together with the Additional Documents when considering your
participation in the offer.

5.    HOW DOES THE EXCHANGE WORK?

You may exchange your outstanding options to purchase shares of Brocade common
stock at exercise prices above U.S. $12.00 per share, whether vested or
unvested, for new stock options. If you participate in the offer, you must also
elect to cancel all of your options granted since June 8, 2002 in exchange for
new options, regardless of the exercise price. Please see the Offer to Exchange
for more details.

6.    WHAT ARE THE MATERIAL TERMS OF THE NEW OPTIONS

(a)   UNDER WHICH PLAN WILL NEW OPTIONS BE GRANTED?

The new options will be granted under the Brocade 1999 Stock Plan or 1999
Nonstatutory Stock Option Plan, as determined by the Board of Directors. The new
options granted to you will be subject to a new option agreement between you and
Brocade.

(b)   WHEN IS THE GRANT DATE OF NEW OPTIONS?

Those eligible options which are properly tendered for exchange and not validly
withdrawn will be cancelled on the first business day following the expiration
date of the offer on January 9, 2003, unless extended by Brocade. Subject to the
terms of the offer, and upon Brocade's acceptance of your properly tendered
options, the new options will be issued on the first business day at least 6
months and one day following the cancellation date. If Brocade does not extend
the offer, the new option grant date will be July 10, 2003.


                                      -3-

(c)   WHAT IS THE VESTING SCHEDULE AND EXPIRATION DATE OF NEW OPTIONS?

The vesting schedule for the new options will be the same as the vesting
schedule of the options tendered for exchange. However, any new options granted
to you may not be exercised for a period of six months from the date of grant.
There are certain events which may occur after the grant date of the new options
(such as a reduction in force, death or disability) which may result in the
early expiration of the six-month restriction. All new options granted under the
terms of the offer will expire ten years from their grant date. Please see the
Offer to Exchange for details.

(d)   IF I ELECT TO EXCHANGE AN ELIGIBLE OPTION, DO I HAVE TO ELECT TO EXCHANGE
      ALL OF THE SHARES COVERED BY THAT OPTION?

Yes. Brocade is not accepting partial tenders of options. If you participate in
this offer, you must exchange (i) all options granted to you with exercise
prices equal to or greater than $12.00 per share and (ii) all options granted to
you on or after June 8, 2002, regardless of the exercise price. This also means
that if you participate in this offer, you must exchange the remaining portion
of any option that you partially exercised that must be exchanged. Please see
the Offer to Exchange for details.

(e)   WHAT IS THE EXERCISE PRICE OF THE NEW OPTIONS?

The exercise price per Share of the new options will be 100% of the fair market
value of our common stock on the new option grant date (except for new options
granted to officers of the Corporation), which would be the closing price
reported by the Nasdaq National Market for our common stock on the new option
grant date, which is expected to be July 10, 2003.

We cannot predict the exercise price of the new options. Because we will grant
new options on the first business day that is at least 6 months and 1 day after
the date on which we cancel the options accepted for exchange, the new options
may have a higher exercise price than some or all of your current options.

The exercise price of the new options will be expressed in U.S. dollars and the
Shares acquired through the exercise of the new options must be purchased in
U.S. dollars.

The Australian dollar equivalent of the U.S. exercise price will change with
fluctuations in the U.S.$/A$ exchange rates. The Australian dollar amount
required to purchase the Shares will be that amount which, when converted into
U.S. dollars on the date of exercise, equals the U.S. exercise price. The
exchange rate used for these calculations will be the applicable U.S. dollar
sell rate used by your bank when converting your Australian dollars into U.S.
dollars.

By way of example only, assuming the date of grant of the new options was the
date of this offer document, December 9, 2002, the last reported sale price of
the Corporation's common stock on the Nasdaq National Market (being U.S.$4.96)
would be the U.S. dollar exercise price and the Australian dollar equivalent
would be A$8.79 (which is calculated by dividing U.S.$4.96 by the U.S. dollar
sell rate published by an Australian bank on the previous business day, which
was 0.5642).


                                      -4-

This example is provided for informational purposes only. It is not a prediction
of the Australian dollar equivalent of the closing price of the Corporation's
Shares on the Nasdaq National Market on the new option grant date, or the
applicable exchange rate on that date.

Neither Brocade nor the Board of Directors makes any recommendation as to
whether you should tender or refrain from tendering your options for exchange.
You must make your own decision whether to tender your options.

(f)   HOW MANY NEW OPTIONS WILL I RECEIVE?

The number of new options you may be entitled to receive will depend on the date
that your eligible options were granted, as follows.

            -     Options granted on or before March 15, 2000 will be replaced
                  with new options at an exchange ratio of one (1) new option
                  for every three (3) exchanged options.

            -     Options granted after March 15, 2000 and before April 17,
                  2001, and options granted on April 17, 2001 as part of our
                  Supplemental Stock Program ("supplemental options"), will be
                  replaced with new options at an exchange ratio of one (1) new
                  option for every two (2) exchanged options.

            -     Options granted after April 17, 2001, and options granted on
                  April 17, 2001, other than supplemental options, will be
                  replaced with new options at an exchange ratio of (1) new
                  option for every one (1) exchanged option.

Please see the Offer to Exchange for details.

(g)   MAY I WITHDRAW OPTIONS THAT I HAVE PREVIOUSLY TENDERED?

You may withdraw any options that you previously elected to exchange at any time
before the offer expires at 5:00 p.m., Pacific Time, on January 8, 2003. If we
extend the offer beyond that time, you may withdraw any options that you
previously elected to exchange at any time before the extended expiration of the
offer. To withdraw some or all of your options, you must deliver to Elizabeth
Moore, via facsimile at (408) 333-5900 or by hand delivery to Elizabeth Moore at
Office Number SJ6-2D12, 1745 Technology Drive, San Jose, CA 95110, a signed
withdrawal form, with the required information completed before the expiration
date. If you withdraw options, you may re-elect to exchange them only by
delivering a new election form.

Although we intend to accept all options validly elected to be exchanged
promptly after the expiration of this offer, if we have not accepted your
options by 9:00 p.m., Pacific Time, on February 5, 2003, you may withdraw
your options.


                                      -5-


7.    HOW TO TENDER YOUR OPTIONS FOR EXCHANGE

If you elect to exchange your options, you must deliver, before 5:00 p.m.,
Pacific Time, on January 8, 2003, or such later date and time as we may extend
the expiration of the offer, a properly completed and executed election form via
facsimile (fax #(408) 333-5900) or hand deliver it to Elizabeth Moore at the
above address. This is a one-time offer, and we will strictly enforce the
election period. We reserve the right to reject any or all options tendered for
exchange that we determine are not in appropriate form or that we determine are
unlawful to accept. Subject to the terms and conditions described in the
Additional Documents, we will accept all other properly tendered options
promptly after the expiration of the offer.

8.    WHAT IF I LEAVE BROCADE?

If, for any reason, you do not remain employed by Brocade or one of our
subsidiaries or a successor entity through the new option grant date, you will
not receive any new options or other compensation in exchange for the eligible
options that you tendered and that we accepted for exchange and subsequently
cancelled. Your employment with Brocade or one of our subsidiaries remains "at
will" and can be terminated by you or Brocade or one of our subsidiaries at any
time, with or without cause or notice.

You should, therefore, be aware that there are risks in participating in the
offer if your circumstances of employment change, in particular if such a change
occurs after your eligible options are tendered and cancelled and prior to the
new option grant date. The Offer to Exchange contains a more detailed
description of these and other risks that should be considered in connection
with your participation in the offer.

9.    HOW CAN I OBTAIN UPDATED INDICATIVE EXAMPLES OF THE CURRENT MARKET PRICE
      IN AUSTRALIAN DOLLARS?

Within a reasonable period following your request, the Corporation will provide
you with the Australian dollar equivalent of the current market price for a
share of our common stock, as of the date of your request. The Australian dollar
equivalent will be calculated using the U.S. dollar sell rate of exchange
published by an Australian bank on the day prior to your request.

You should direct your request to:

Elizabeth Moore
Brocade Communications Systems, Inc.
1745 Technology Drive
San Jose, CA 95110 U.S.A.
Phone: (408) 392-5019
Fax:   (408) 333-5900


                                      -6-

10.   WHAT ADDITIONAL RISK FACTORS APPLY TO AUSTRALIAN ELIGIBLE EMPLOYEE'S
      PARTICIPATION IN THE OFFER?

In addition to fluctuations in value caused by the success of the Corporation,
the value of shares of our common stock as well as the exercise price will be
affected by the U.S.$/A$ exchange rates.

11.   EXTENSION OF THE OFFER

The offer expires at 5:00 p.m., Pacific Time, on January 8, 2003, unless we
extend it. We may, in our discretion, extend the offer at any time, but we do
not currently expect to do so. If we extend the offer, we will issue a press
release or other public announcement disclosing the extension no later than 6:00
a.m., Pacific Time, on the next business day following the previously scheduled
expiration date of the offer.

12.   WHAT ARE THE AUSTRALIAN TAXATION CONSEQUENCES OF PARTICIPATION IN THE
      OFFER?

The following is a general summary of the income tax consequences and certain
other considerations of the voluntary cancellation of existing options and grant
of new options for individuals subject to tax in Australia. This summary is
general in nature and does not discuss all of the tax consequences that may be
relevant to you in light of your particular circumstances, nor it is intended to
be applicable in all respects to all categories of option holders. Please note
that tax laws change frequently and occasionally on a retroactive basis. We
advise all option holders considering exchanging their options to consult with
their own tax or financial advisors.

If you are a citizen or resident of another country for local law purposes, the
information contained in this summary may not be applicable to you. If you
intend to accept the offer, you should not rely on the summary as anything other
than a broad guide and you are advised to obtain independent taxation advice
specific to your particular circumstances before making the decision to
participate.

12.1  OPTION EXCHANGE

The voluntary relinquishment of existing options in exchange for the right to
receive new options will give rise to a taxable amount (which may be nil in
certain circumstances). This occurs because the cancellation of the existing
options will constitute a disposal of the options in exchange for the right to
receive new options ("New Right") at a later date. Note that the taxation
consequences from the new issue arise in relation to the issue of the New Right
as opposed to the new option.

The following is a summary of the tax issues which will arise on the:

            -     relinquishment of the existing options; and

            -     issue of the New Right and subsequent new options.

The following taxation summary assumes that you did not make the election to be
taxed on receipt of the existing options.


                                      -7-

12.2  RELINQUISHMENT OF EXISTING OPTIONS

If you accept the offer and exchange existing options for the right to receive
new options at a later date, you will be deemed to have disposed of your
existing options at the time of their cancellation, which gives rise to a
taxable event.

You will likely be taxed in relation to the market value of the existing options
as at the date of the cancellation.

Market Value of Existing Options. The market value of the existing options at
the time of cancellation will depend upon whether you made the election to be
taxed on the existing options in the income year in which you received the
options. Where you did not make an election to be taxed on the existing options
in the income year of receipt, the market value of the existing options is
determined as the higher of:

            -     the market value of the underlying Shares as at the date of
                  cancellation, less the exercise price; and

            -     the value determined in accordance with a statutory formula.
                  This value is based on the exercise price, market value of
                  Shares and the exercise period of the option.

As the existing options are underwater, the statutory formula will apply. Note
that where the market value of the underlying Shares of the existing options at
the time of relinquishment is less than 50% of the exercise price, the market
value of the existing options will be nil. Therefore, in these circumstances, no
tax will be payable upon the cancellation of the existing options.

Where you made the election to be taxed on the existing options in the income
year of receipt, the market value of the existing options as at the date of
their cancellation will be determined under the capital gains tax provisions.
Pursuant to the capital gains tax provisions, the market value of the options
will be price at which an arm's length purchaser would be willing to acquire the
existing options. Therefore, there is no requirement to apply the statutory
formula in these circumstances. However, the Commissioner of Taxation is likely
to accept the value determined under the statutory formula as the arm's length
price in the circumstances.

12.3  ACQUISITION OF NEW RIGHT

The acquisition of the New Right (that is, the right to receive new options
after the cancellation of the existing options) will constitute the acquisition
of a "qualifying right" under an employee share scheme.

You only will be subject to taxation on the acquisition of the New Right where
you make an election to that effect (the "Election"). Where the Election is not
made, you will be subject to taxation at a later date, known as the Cessation
Time.

(a)   ELECTION IS MADE - TAXED ON EXCHANGE

If you make the Election, then you will be subject to tax on market value of the
New Right less the market value of the existing options at the time of
cancellation. As the exercise price of the new options cannot be determined at
this date, the market value of the New Right will


                                      -8-

be equal to the market value of the Shares which are able to be obtained when
the new options are issued.

(b)   NO ELECTION IS MADE - CESSATION TIME

If you do not make the Election, then you will be taxed in the income year in
which the earliest of the following occurs (the "Cessation Time"):

            -     the time when you dispose of the New Right or the new options
                  acquired pursuant to the New Right (other than by exercising
                  them);

            -     the time when your employment with Brocade or one of its
                  affiliates ceases;

            -     the time when the new options acquired pursuant to the New
                  Right are exercised; and

            -     the expiration date of the New Right.

You will be taxed:

            -     where you dispose of the New Right or the new options (or the
                  Shares acquired as a result of exercising the new options) in
                  an arm's length transaction within 30 days after the Cessation
                  Time - on the consideration you receive for the disposal less
                  the consideration paid to acquire the New Right (reduced by
                  the exercise price of the new options, if the new options have
                  been exercised); or

            -     in any other case - on the market value of the New Right or
                  the new options (or the Shares acquired as a result of
                  exercising the new options) at the Cessation Time less the
                  consideration paid to acquire the New Right (reduced by the
                  exercise price of the new options, if the new options have
                  been exercised).

The consideration paid to acquire the New Right is equal to the market value of
the existing options as at the date they were cancelled (detailed above).

12.4  SALE OF SHARES

You also will be liable to capital gains tax on any gain made on the disposal of
the Shares acquired as a result of exercising the new options (other than gains
made on the disposal of Shares in an arm's length transaction within 30 days of
the Cessation Time, which will be assessed as ordinary income).

The assessable capital gain will be:

      (i)   if you have held the Shares for less than one year - the difference
            between the market value of the Shares at the time of disposal and
            the cost base of the Shares; or

      (ii)  if you have held the Shares for at least one year - one half the
            difference between the market value of the Shares at the time of
            disposal and the cost


                                      -9-

            base of the Shares (subject to you first applying any capital losses
            against the full capital gain).

If you made the Election in respect of the New Right, then the cost base of the
Shares will be the market value of the New Right at the time it was acquired
plus the exercise price of the new options.

If you did not make the Election in respect of the New Right, then the cost base
of the Shares will be the market value of the Shares as at the Cessation Time.

If the market value of the Shares at the time of disposal is less than the cost
base of the Shares, then a capital loss equal to the difference will be
available to offset same year or future year capital gains. That is, a capital
loss cannot be used to offset other income (including salary and wage income).

12.5  NO BENEFIT WHERE NEW RIGHT OR NEW OPTIONS LOST

If you lose the benefit of either the New Right or any new options (e.g., you
cease employment prior to exercise), you will be deemed to have never acquired
the New Right or the new options. In such case, no amount needs to be included
in your assessable income for the New Right. If you have been subject to
taxation prior to this date, you may apply to the Commissioner of Taxation to
amend the relevant year's tax return and obtain a refund of the tax paid in
relation to the New Right.

You may also be entitled to a capital loss equal to the consideration paid to
acquire the New Right (being the market value of the existing options as at the
date of their cancellation).

13.   WHAT ARE THE U.S. INCOME TAXATION CONSEQUENCES OF PARTICIPATION IN THE
      OFFER?

Employees who are not U.S. citizens or tax residents will not be subject to U.S.
income tax by reason only of the exchange of eligible options for new options or
the grant of new options. However, liability to U.S. taxes may accrue if an
employee is otherwise subject to U.S. taxes.

The above is an indication only of the likely U.S. income tax consequences for
Australian eligible employees who agree to participate in the offer. Employees
should seek their own advice as to the U.S. taxation consequences of
participation.


                               *   *   *   *   *


We urge you to carefully review the information contained in this Supplementary
Australian Document and the Additional Documents and consult with your tax or
financial advisor to assist in your decision making.

Sincerely,


BROCADE COMMUNICATIONS SYSTEMS, INC.


                                      -10-

EX-99.(A)(1)(G)

                                                            Exhibit 99.(a)(1)(g)

                      BROCADE COMMUNICATIONS SYSTEMS, INC.
                         STOCK OPTION EXCHANGE PROGRAM
                                   CALCULATOR

 This calculator is being provided to assist you in running "what if" scenarios
   to determine how the Stock Option Exchange Program would affect you under
 various user-defined anticipated future market prices of Brocade common stock.
 This calculator tells you the potential gain you would realize on your existing
 options and from the options you would receive if you chose to participate in
 Stock Option Exchange Program assuming all options were fully vested. Brocade
 is not making any recommendation as to whether you should accept the offer to
 exchange your options. You must make your own decision as to whether or not to
                               accept the offer.

 This document, the Schedule TO and the Disclosure Documents contain important
 information about the offer. You should carefully read all of these materials,
consult your tax and financial advisors, and understand the risks before making
            any decision about whether to participate in the offer.


        12/9/02   Tender Offer Date
$         12.00   Price Floor
$          7.00   The exercise price per share at which you expect the new
                  options to be granted.
$         25.00   Your future expected price per share beyond the grant date at
                  which you might be interested in exercising and selling
                  your options.



                                                                                                       POTENTIAL      POTENTIAL
                        CELLS REQUIRING INPUT ARE IN YELLOW                                               GAIN           GAIN
                                                                                                         SHOULD         SHOULD
                                     4/17/01                       OPTIONS                  OPTIONS    YOU CHOOSE     YOU CHOOSE
            OPTION      OPTION      GRANT TYPE        OPTIONS       TO BE    CANCEL:GRANT    TO BE       NOT TO       TO ACCEPT
             DATE       PRICE    (IF APPLICABLE)    OUTSTANDING   CANCELLED      RATIO      GRANTED   PARTICIPATE     THE OFFER
- ---------------------------------------------------------------------------------------------------   -----------     ----------
                                                                                          
Option A    11/19/99    $32.13                           12,000      12,000       3:1         4,000   $        --     $   72,000
Option B    11/29/00    $76.88                            2,000       2,000       2:1         1,000   $        --     $   18,000
Option C     4/17/01    $20.70    Supplemental            1,480       1,480       2:1           740   $     6,364     $   13,320
Option D     4/17/01    $20.70       Other                1,590       1,590       1:1         1,590   $     6,837     $   28,620
Option E     10/1/01    $12.90                               --          --       1:1            --   $        --     $       --
Option F    10/30/01    $24.20                              875         875       1:1           875   $       700     $   15,750
Option G     10/8/02    $ 5.38                              900         900       1:1           900   $    17,658     $   16,200
Option H
Option I
Option J
Option K
Option L
Option M
Option N
                                                                  ---------                 -------   -----------     ----------
                                                                     18,845                   9,105   $    31,559     $  163,890
                                                                  =========                 =======   ===========     ==========


Instructions:

- - Enter the option grant information from your "Personnel Option Status" report
  in the appropriate cells above.

- - You will need to enter the option grant information for each of your separate
  option grants.

- - If you have an option grant dated 4/17/01, select either "Supplemental" or
  "Other" from the pull-down menu within the appropriate cell above. This
  calculator will not calculate 4/17/01 option grants unless you select either
  "Supplemental" or "Other." No selection is required for grants made on any
  other grant date.

- - Your 4/17/01 "Supplemental" options, if applicable, will be highlighted in
  yellow on your Personnel Option Status report.

  Run "what if" scenarios by entering different expected exercise prices per
  share for your new options and different expected prices per share at which
  you would be interested in exercising and selling your options.

- - You will need to enter your expected future market price of Brocade common
  stock as of both the grant date and a future date beyond the grant date.


                                                            Exhibit 99.(a)(1)(g)

                      BROCADE COMMUNICATIONS SYSTEMS, INC.
                         STOCK OPTION EXCHANGE PROGRAM
                                   CALCULATOR

 This calculator is being provided to assist you in running "what if" scenarios
   to determine how the Stock Option Exchange Program would affect you under
 various user-defined anticipated future market prices of Brocade common stock.
 This calculator tells you the potential gain you would realize on your existing
 options and from the options you would receive if you chose to participate in
 Stock Option Exchange Program assuming all options were fully vested. Brocade
 is not making any recommendation as to whether you should accept the offer to
 exchange your options. You must make your own decision as to whether or not to
                               accept the offer.

 This document, the Schedule TO and the Disclosure Documents contain important
 information about the offer. You should carefully read all of these materials,
consult your tax and financial advisors, and understand the risks before making
            any decision about whether to participate in the offer.


        12/9/02    Tender Offer Date
$         12.00    Price Floor
$          7.00(1) The exercise price per share at which you expect the new
                   options to be granted.
$         25.00(2) Your future expected price per share beyond the grant date at
                   which you might be interested in exercising and selling
                   your options.

Run various "what if" scenarios by entering the exercise price per share at
which you expect the new options to be granted.

Run various "what if" scenarios by entering your future expected price per share
beyond the grant date at which you might be interested in exercising and selling
your options.



                                                                                                       POTENTIAL      POTENTIAL
                        CELLS REQUIRING INPUT ARE IN YELLOW                                               GAIN           GAIN
                                                                                                         SHOULD         SHOULD
                                     4/17/01                       OPTIONS                  OPTIONS    YOU CHOOSE     YOU CHOOSE
            OPTION      OPTION      GRANT TYPE        OPTIONS       TO BE    CANCEL:GRANT    TO BE       NOT TO       TO ACCEPT
            DATE(4)    PRICE(4) (IF APPLICABLE)(3) OUTSTANDING(4) CANCELLED      RATIO      GRANTED   PARTICIPATE     THE OFFER
- ---------------------------------------------------------------------------------------------------   -----------     ----------
                                                                                          
Option A    11/19/99    $32.13                           12,000      12,000       3:1         4,000   $        --     $   72,000
Option B    11/29/00    $76.88                            2,000       2,000       2:1         1,000   $        --     $   18,000
Option C     4/17/01    $20.70    Supplemental            1,480       1,480       2:1           740   $     6,364     $   13,320
Option D     4/17/01    $20.70       Other                1,590       1,590       1:1         1,590   $     6,837     $   28,620
Option E     10/1/01    $12.90                               --          --       1:1            --   $        --     $       --
Option F    10/30/01    $24.20                              875         875       1:1           875   $       700     $   15,750
Option G     10/8/02    $ 5.38                              900         900       1:1           900   $    17,658     $   16,200
Option H
Option I
Option J
Option K
Option L
Option M
Option N
                                                                  ---------                 -------   -----------     ----------
                                                                     18,845                   9,105   $    31,559     $  163,890
                                                                  =========                 =======   ===========     ==========


Instructions:

- - Enter the option grant information from your "Personnel Option Status" report
  in the appropriate cells above.

- - You will need to enter the option grant information for each of your separate
  option grants.

- - If you have an option grant dated 4/17/01, select either "Supplemental" or
  "Other" from the pull-down menu within the appropriate cell above. This
  calculator will not calculate 4/17/01 option grants unless you select either
  "Supplemental" or "Other." No selection is required for grants made on any
  other grant date.

- - Your 4/17/01 "Supplemental" options, if applicable, will be highlighted in
  yellow on your Personnel Option Status report.

  Run "what if" scenarios by entering different expected exercise prices per
  share for your new options and different expected prices per share at which
  you would be interested in exercising and selling your options.

- - You will need to enter your expected future market price of Brocade common
  stock as of both the grant date and a future date beyond the grant date.

- ----------
(1)   Run various "what if" scenarios by entering the exercise price per share
      at which you expect the new options to be granted.

(2)   Run various "what if" scenarios by entering your future expected price per
      share beyond the grant date at which you might be interested in exercising
      and selling your options.

(3)   - If an option date is 4/17/01, please select either Supplemental or
      "Other" from the pull-down menu within the calculator.

      - If an option date is other than 4/17/01, please leave blank.

      - Your 4/17/01 Supplemental options, if applicable, will be highlighted in
      yellow on your Personnel Option Status report.

(4)   - Enter the option grant information from your "Personnel Option Status"
      report here.

      - You will need to enter each of your separate option grants.


                                                                          
PERSONNEL OPTION STATUS            BROCADE COMMUNICATIONS SYSTEMS, INC.         Page: 1
                                   1745 Technology Drive                        File: Optstmt
                                   San Jose, CA 95110                           Date: 12/9/2002
                                                                                Time: 6:11:00PM



AS OF 12/9/2002                 FICTIONAL DATA:
                         FOR ILLUSTRATION PURPOSES ONLY

JOHN Q. EMPLOYEE               ID: 111-22-3333
123 ABC AVE
SOMEWHERE, IN US 60537



          OPTION
NUMBER    DATE(3)(4)       PLAN  TYPE  GRANTED  PRICE(3)(4)  EXERCISED   VESTED  CANCELLED  UNVESTED  OUTSTANDING(3)(4)  EXERCISABLE
- --------  ----------       ----  ----  -------  -----------  ---------  -------  ---------  --------  -----------------  -----------
                                                                                        
99999999  11/19/1999        NSO   NQ    40,000  $32.1300      28,000     30,833      0        9,167      12,000             2,833
88888888  11/29/2000        NSO   NQ     2,000  $76.8800           0          0      0        2,000       2,000                 0
77777777   4/17/2001(1)(2)  NSO   NQ     6,460  $20.7000           0      4,980      0        1,480       6,460             4,980
66666666   4/17/2001        NSO   NQ     1,590  $20.7000           0          0      0        1,590       1,590                 0
55555555   10/1/2001        NSO   NQ       216  $12.9000         216        216      0            0           0                 0
44444444  10/30/2001        NSO   NQ       875  $24.2000           0          0      0          875         875                 0
33333333   10/8/2002        NSO   NQ       900  $ 5.3800           0          0      0          900         900                 0
                                       -------                ------     ------     ---      ------      ------             -----
                                        52,041                28,216     36,029      0       16,012      23,825             7,813


- ----------
(1)   If you received an option grant on April 17, 2001 as part of our
      Supplemental Stock Program, it will be highlighted in yellow on your
      Personnel Option Status report.

(2)   This is the option grant you should identify as "Supplemental" in the
      calculator.

(3)   Populate the appropriate calculator cells with the data from these three
      columns.

(4)   You will need to input each of your separate option grants into the
      calculator.


INFORMATION CURRENTLY ON FILE



TAX                         RATE %      OPTION SDS BROKER         REGISTRATION                   ALTERNATE ADDRESS
- ---------------             ----------  -------------------       -----------------------------  ----------------------------------
                                                                                     
Federal                     27.000
IN-State                     9.300
Social Security              6.200
Medicare                     1.450



We are providing this information as a courtesy to you. This information is
based on our stock records. While we believe that this information is accurate,
we do not guarantee its accuracy. You should refer to your stock option
agreement(s) to verify the accuracy of this information. To the extent that a
discrepancy exists between the information presented here and that contained in
your stock option agreement(s), your stock option agreement(s) shall control.

EX-99.(A)(1)(H)

                                                               Exhibit (a)(1)(h)


                                 [BROCADE LOGO]


FOR IMMEDIATE RELEASE


BROCADE CONTACTS

MEDIA RELATIONS                       INVESTOR RELATIONS
Fenella Tigner                        Shirley Stacy
Tel: 408.392.6843                     Tel: 408.392.5752
ftigner@brocade.com                   sstacy@brocade.com



            BROCADE ANNOUNCES EMPLOYEE STOCK OPTION EXCHANGE PROGRAM

SAN JOSE, CALIF. -- DECEMBER 9, 2002 -- Brocade Communications Systems, Inc.
(Brocade(R)) (Nasdaq: BRCD), the world's leading provider of infrastructure
solutions for Storage Area Networks (SANs), announced today that its Board of
Directors has approved a voluntary stock option exchange program for Brocade
employees.

Under the program, Brocade employees will be offered the opportunity to exchange
outstanding stock options with exercise prices equal to or greater than $12.00
per share for new stock options, which will be granted at an exchange ratio
determined by the grant date of the original stock option. Employees will
receive new stock options in exchange for outstanding stock options at an
exchange ratio of either 1 for 1, 1 for 2; or 1 for 3, depending on the grant
date of the original stock option. The new stock options will be granted on the
first business day that is six months and one day after the cancellation of the
exchanged options. Brocade expects the new option grant date to be July 10,
2003.

The exercise price per share of the new options will be the fair market value of
Brocade common stock at the close of regular trading on the new option grant
date. However, the exercise price to Brocade officers will not be less than 110
percent of the average closing price of Brocade common stock during the exchange
offer period. Members of the Brocade Board of Directors who are not employees
are not eligible to participate in this program.

Brocade expects there will be no compensation charges as a result of the stock
option exchange program. The terms and conditions of the stock option exchange
program are contained in a Tender Offer Statement on Schedule TO that Brocade
filed with the Securities and Exchange Commission today.


                      BROCADE COMMUNICATIONS SYSTEMS, INC.
                     1745 Technology Dr. San Jose, CA 95110
                          T 408.487.8000 F 408.487.8101
                                 www.brocade.com

BROCADE ANNOUNCES EMPLOYEE STOCK OPTION EXCHANGE PROGRAM                  PAGE 2


ABOUT BROCADE COMMUNICATIONS SYSTEMS, INC.

Brocade (Nasdaq: BRCD) offers the industry's leading intelligent platform for
networking storage. The world's leading systems, applications, and storage
vendors have selected Brocade to provide a networking foundation for their SAN
solutions. The Brocade SilkWorm(R) family of fabric switches and software is
designed to optimize data availability and storage and server resources in the
enterprise. Using Brocade solutions, companies can simplify the implementation
of storage area networks, reduce the total cost of ownership of data storage
environments, and improve network and application efficiency. For more
information, visit the Brocade website at www.brocade.com or contact the company
at info@brocade.com.

                                       ###

Brocade, the B weave logo and SilkWorm are registered trademarks of Brocade
Communications Systems, Inc. or its subsidiaries in the United States or in
other countries. All other brands, products, or service names are or may be
trademarks or service marks of, and are used to identify, products or services
of their respective owners. All products, plans, and dates are subject to change
without notice.


IMPORTANT INFORMATION ABOUT FORWARD-LOOKING STATEMENTS

This press release contains forward-looking statements, as defined under the
Federal securities laws. These forward-looking statements include statements
regarding the expected timing of the new option grant date and the accounting
consequences of the stock option exchange program. These statements are
predictions and involve risks and uncertainties. Actual results may differ
materially from those anticipated in these forward-looking statements. These
risks include changes in the expected timing of the stock option exchange
program, changes in accounting rules, and other risks that are set forth in more
detail in the company's Tender Offer Statement on Schedule TO, its Form 10-K for
the year ended October 27, 2001 and its Form 10-Q for the quarter ended July 27,
2002. Brocade expressly assumes no obligation to update any such forward-looking
statements.