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(1)	The goodwill adjustments during the nine months ended July 28, 2012 were primarily a result of tax benefits from the exercise of stock awards of acquired companies.

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•	The Company’s operating forecasts;

•	Revenue growth rates; and

•	Risk-commensurate discount rates and costs of capital.

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(1)	Money market funds are reported within “Cash and cash equivalents” on the Condensed Consolidated Balance Sheets.

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(1)	Money market funds are reported within “Cash and cash equivalents” on the Condensed Consolidated Balance Sheets.

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(1)	These amounts are excluded from the computation of diluted net income per share.

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•	upon the sale of the subsidiary or all or substantially all of its assets;

•	upon the discharge of the guarantees under the credit facility or other debt provided that the credit facility has been paid in full and the applicable series of senior secured notes have an investment grade rating from both Standard & Poor's and Moody's;

•	upon designation of the subsidiary as an “unrestricted subsidiary” under the applicable Indenture;

•	upon the merger, consolidation or liquidation of the subsidiary into another subsidiary guarantor; and

•	upon legal or covenant defeasance or the discharge of the Company's obligations under the applicable indenture.

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•

The increase in Data Storage product revenues for the period was driven by a shift in mix to our high-end, higher bandwidth Director and Switch products, including the strong growth in sales of our 16 Gbps products. The number of ports shipped during the three months ended July 28, 2012 increased by 8%. Average selling price per port increased by 8% due to a favorable change in our product sales mix towards our high-end, higher bandwidth products;

•	The increase in Ethernet product revenues was due to higher revenues from our enterprise customers, driven by sales of our new Brocade ICX products, and higher revenue from United States (U.S.) federal government customers. Revenues from our service provider customers were slightly lower for the three months ended July 28, 2012 compared to the three months ended July 30, 2011; and

•	The decrease in Global Services revenues was primarily attributable to the sale of Strategic Business Systems, Inc. (“SBS”), a wholly-owned subsidiary of the Company, during the fourth quarter of fiscal year 2011. This decrease was partially offset by an increase in both Data Storage and Ethernet support revenues.

•	The increase in Data Storage product revenues for the period was driven by our high-end, higher bandwidth Director and Switch products. The number of ports shipped during the nine months ended July 28, 2012 increased by 3%, and average selling price per port increased by 5%;

•

The decrease in Ethernet product revenues reflects lower revenues from our enterprise customers, partially offset by an increase in revenues from both service provider and U.S. federal government customers. Our Ethernet business has been impacted by slower enterprise customer spending and the competitive enterprise environment. In addition, enterprise product revenue decreased due in part to our transition to a two-tier distribution channel model that adversely impacted sales volumes and average selling prices in the first two quarters of fiscal 2012; and

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•	The decrease in Global Services revenues was primarily attributed to the sale of SBS, a wholly-owned subsidiary of the Company, during the fourth quarter of fiscal year 2011.

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Data Storage gross margins relative to net revenues decreased primarily due to a benefit of 4.4% from the $14.3 million release of a reserve for certain pre-acquisition litigation during the three month period ended July 30, 2011. This was partially offset by a decrease in amortization of intangible assets relative to net revenues of 1.3% and a combined decrease of 0.9% in product costs and stock based compensation costs relative to net revenues during the three months ended July 28, 2012.

•	Ethernet products gross margins relative to net revenues decreased mainly due to the impact of lower average selling prices and a less profitable product mix; and

•	Global Services gross margins relative to net revenues increased due to a 5.0% decrease in service and support costs relative to net revenues, primarily from decreased headcount as a result of the sale of SBS. Additionally, stock-based compensation and amortization of intangible assets relative to net revenues decreased by 1.3%.

•

Data Storage gross margins relative to net revenues increased due to a 1.3% decrease in product costs and a 0.9% decrease in manufacturing costs relative to net revenues. Additionally, amortization of Data Storage related intangible assets decreased by 0.8% relative to net revenues. These benefits were partially offset by the impact of a non-recurring benefit of 1.4% from the $14.3 million release of a reserve for a certain pre-acquisition litigation during the nine month period ended July 30, 2011 relative to net revenues;

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•

Ethernet products gross margins relative to net revenues decreased due to a 1.9% increase in product costs relative to net revenues which is primarily as a result of the impact of a decrease in average selling prices and a less advantageous product mix as well as a 2.0% increase in manufacturing costs relative to net revenues. Additionally, amortization of Ethernet products related intangible assets and stock-based compensation increased relative to net revenues by 0.2%; and

•	Global Services gross margins relative to net revenues increased due to a 5.6% decrease in service and support costs relative to net revenues, primarily from decreased headcount as a result of the sale of SBS.

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•	pay dividends, make investments or make other restricted payments;

•	incur additional indebtedness;

•	sell assets;

•	enter into transactions with affiliates;

•	incur liens;

•	permit consensual encumbrances or restrictions on the Company’s restricted subsidiaries’ ability to pay dividends or make certain other payments to the Company;

•	consolidate, merge, sell or otherwise dispose of all or substantially all of the Company’s or its restricted subsidiaries’ assets; and

•	designate subsidiaries as unrestricted.

•	Consolidated net income

•	Consolidated interest charges;

•	Provision for federal, state, local and foreign income taxes;

•	Depreciation and amortization expense;

•	Fees, costs and expenses incurred on or prior to the closing date of the Foundry acquisition in connection with the acquisition and the financing thereof;

•	Any cash restructuring charges and integration costs in connection with the Foundry acquisition, in an aggregate amount not to exceed $75.0 million;

•	Approved non-cash restructuring charges incurred in connection with the Foundry acquisition and the financing thereof;

•	Other non-recurring expenses reducing consolidated net income which do not represent a cash item in such period or future periods;

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•	Any non-cash stock-based compensation expense; and

•	Legal fees associated with the indemnification obligations for the benefit of former officers and directors in connection with Brocade’s historical stock option litigation;

•	Federal, state, local and foreign income tax credits; and

•	All non-cash items increasing consolidated net income.

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(1)	Amount reflects total anticipated cash payments, including anticipated interest payments.

(2)	Amount excludes contractual sublease income of $30.3 million, which consists of $6.6 million to be received in less than one year, $13.7 million to be received in one to three years and $10.0 million to be received in three to five years.

(3)	Amount reflects total gross purchase commitments under our manufacturing arrangements with third-party contract manufacturers. Of this amount, we have accrued $4.7 million for estimated purchase commitments that we do not expect to consume in normal operations within the next twelve months, in accordance with our policy.

(4)

As of July 28, 2012, we had a liability for unrecognized tax benefits of $117.0 million and a net accrual for the payment of related interest and penalties of $2.4 million. Due to availability of net operating losses and credits, a tax audit settlement is not expected to result in a significant tax payment. Given the uncertainty as to settlement terms, the timing of payments and the impact of such settlements on other uncertain tax positions, the range of estimated potential decreases in underlying uncertain tax positions is between $0 and $23 million in the next twelve months.

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•	The Company’s operating forecasts;

•	Revenue growth rates; and

•	Risk-commensurate discount rates and costs of capital.

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•	Properly determine the market for and define new products and services, which can be particularly challenging for initial product offerings in new markets;

•	Differentiate Brocade's new products and services from its competitors' technology and product offerings;

•	Address the complexities of interoperability of Brocade's products with its installed base, OEM partners' server and storage products and its competitors' products;

•	Meet or exceed customer requirements for product features, cost-effectiveness, and scalability; and

•	Maintain high levels of product quality and reliability.

•	The availability and price of competing products and alternative technologies;

•	The cost of certain product subcomponents, which could cause Brocade to modify prices to maintain adequate gross margins;

•	Product qualification requirements by Brocade's OEM partners, which can cause delays in the market acceptance;

•	The timing of the adoption of new industry standards relative to Brocade's development of new technologies and products; and

•	The ability of Brocade's OEM partners to successfully distribute, support and provide training for its products.

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•	Receipt of a high number of customer orders towards the end of a fiscal quarter will increase reported receivables outstanding as a fraction of reported sales for the period and result in higher days sales outstanding;

•	Disruptions, or a continued decline, in general economic conditions, particularly in the information technology industry and U.S. federal government budget cycles, especially governmental departments such as the Department of Defense and certain intelligence agencies that are likely to be negatively impacted by budget reductions and where Brocade's revenue is highly concentrated;

•	Announcements and/or rumors of pending or completed acquisitions or other strategic transactions by Brocade, its competitors or its partners;

•	Announcements, introductions and transitions of new products by Brocade, its competitors or its partners;

•	The timing of customer orders, product qualifications and product introductions of Brocade's partners;

•	Long and complex sales cycles;

•	Internal supply and inventory management objectives of Brocade's OEM partners and other customers;

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•	Brocade's ability to timely produce products that comply with new environmental restrictions or related requirements of its customers;

•	Brocade's ability to obtain sufficient supplies of sole- or limited-sourced components, including ASICs, microprocessors, certain connectors, certain logic chips and programmable logic devices;

•	Availability of supply or increases in prices of components used in the manufacture of Brocade's products;

•	Variations in the mix of Brocade's products sold and the mix of distribution channels and geographies through which they are sold;

•	Pending or threatened litigation, including any settlements or judgments related to such litigation;

•	Stock-based compensation expense that is affected by Brocade's stock price;

•	Examinations by government tax authorities that may have unfavorable outcomes and subject Brocade to additional tax liabilities;

•	New legislation and regulatory developments, including increases to tax rates or changes to treatment of an income or expense item; and

•	Other risk factors detailed in this section.

•	Exposure to economic instability or fluctuations in international markets that could cause reductions in customer and public sector IT spending;

•	Exposure to inflationary risks in China and the continuing sovereign debt risk and economic instability in Europe;

•	Reduced or limited protection of intellectual property rights, particularly in jurisdictions that have less developed intellectual property regimes such as China and India;

•	Managing research and development teams in geographically diverse locations, including teams divided between the United States and India;

•	Significant wage inflation in certain growing economies such as India;

•	Increased exposure to foreign currency exchange rate fluctuations, including the appreciation of foreign currencies such as the Chinese yuan or European Union's euro;

•	Communicating effectively across multiple geographies, cultures and languages;

•	Recruiting sales and technical support personnel with the skills to design, manufacture, sell and support Brocade's products in international markets;

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•	Complying with governmental regulation of encryption technology and regulation of imports and exports, including obtaining required import or export approval for its 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, regulations and practices, including differing export, import, tax, labor, anti-bribery and employment laws;

•	Longer sales cycles and manufacturing lead times;

•	Increased complexity and cost of providing customer support and maintenance for international customers;

•	Difficulties in collecting accounts receivable; and

•	Increased complexity of logistics and distribution arrangements.

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•	Difficulties in successfully integrating the acquired businesses and realizing any expected synergies;

•	Inability to effectively coordinate sales and marketing efforts to communicate the capabilities of the combined company;

•	Customer uncertainty that may cause delays or cancellations of customer purchases, as well as revenue attrition in excess of anticipated levels if existing customers alter or reduce their historical buying patterns;

•	Unanticipated costs, litigation and other contingent liabilities;

•	Diversion of management's attention from Brocade's daily operations and business;

•	Adverse effects on existing business relationships with suppliers and customers;

•	Risks associated with entering into markets in which Brocade has limited or no prior experience, including potentially less visibility into demand;

•	Inability to attract and retain key employees;

•	Inability to retain key customers, distributors, vendors and other business partners of the acquired business;

•	Inability to successfully develop new products and services on a timely basis that address the market opportunities of the combined company;

•	Inability to compete effectively against companies already serving the broader market opportunities expected to be available to the combined company;

•	Inability to qualify the combined company's products with OEM partners on a timely basis, or at all;

•	Inability to successfully integrate and harmonize financial reporting and information technology systems;

•	Failure to successfully manage additional remote locations, including the additional infrastructure and resources necessary to support and integrate such locations;

•	Assumption or incurrence of debt and contingent liabilities and related obligations to service such liabilities and Brocade's ability to satisfy financial and other negative operating covenants;

•

Additional costs such as increased costs of manufacturing and service costs, costs associated with excess or obsolete inventory, costs of employee redeployment, relocation and retention, including salary increases or bonuses, accelerated amortization of deferred equity compensation and severance payments, reorganization or closure of facilities, taxes, advisor and professional fees, and termination of contracts that provide redundant or conflicting services;

•	Incurrence of significant exit charges if products acquired in business combinations are unsuccessful;

•	Incurrence of significant charges if Brocade divests, disposes of or otherwise exits all or part of a business;

•	Incurrence of acquisition and integration related costs, accounting charges, or amortization costs for acquired intangible assets, that could negatively impact Brocade's operating results and financial condition; and

•	Potential write-down of goodwill, acquired intangible assets and/or deferred tax assets, which are subject to impairment testing on an annual basis, and could significantly impact Brocade's operating results.

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•	Authorizing the issuance of preferred stock without stockholder approval;

•	Prohibiting cumulative voting in the election of directors;

•	Limiting the persons who may call special meetings of stockholders; and

•	Prohibiting stockholder actions by written consent.

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(1)

As of July 28, 2012, the Company’s Board of Directors had authorized a stock repurchase program for an aggregate amount of up to $1.3 billion (consisting of an original $100 million authorization on August 18, 2004, plus subsequent authorizations of an additional $200 million on January 16, 2007, $500 million on November 29, 2007 and $500 million on May 16, 2012), which was used for determining the amounts in this column. The number of shares purchased and the timing of purchases are based on the level of the Company’s cash balances, the trading price of our common stock, general business and market conditions, and other factors, including alternative investment opportunities.

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4.	Amend Section 2.2, Payment terms, to read in its entirety as follows:

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8.	Delete Attachment B, Supplier Quality Attachment, in its entirety, and replace with the attached, Attachment B, Supplier Quality Requirements Document.

9.	Exhibit A of the SOW#1 is hereby deleted in its entirety and replaced with Exhibit A attached hereto.

10.	Add Exhibit B Product Unique Attachment for IBM System x, Intelligent Cluster. The purpose of this attachment is to define unique terms and conditions that apply to sales of Brocade products for use with the IBM System x, Intelligent Cluster only.

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12.

Scope of Indemnification. Brocade Network Advisor 11.2.x  (IP Pro) software shipped with the Product will be Brocade-branded and supported by Brocade.  The end user may choose to purchase a license or use a limited evaluation license obtained directly from Brocade or a Brocade channel partner.  End users use of such software will be subject to additional licensing provisions.  Brocade indemnifies IBM for Brocade Network Advisor 11.2.x  (IP Pro) as a Product under Section 9.0, Indemnifications, of Goods Agreement ROC-P-68.

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•	Section 1.1, Specifications - For the purpose of products listed in Schedule 2 to Exhibit A, Section 1.1 is deleted in its entirety.

•	Section 1.2, Certifications - For the purpose of products listed in Schedule 2 to Exhibit A, Section 1.2 to read in it's entirety as follows:

•	Section 2.9 Warranty Period - For the purpose of products listed in Schedule 2 to Exhibit A, the product warranty period shall be 39 months.

•	Section 3.0 Rescheduling/Cancellation - For the purpose of products listed in Schedule 2 to Exhibit A, all of this section is deemed deleted.

•	Section 4.0 Replenishment Logistics Attachment - For the purpose of products listed in Schedule 2 to Exhibit A, all of this section is deemed deleted.

•	Section 5.0 Documentation - For the purpose of the Products listed in Schedule 2 to Exhibit A, the first paragraph of this Section is deleted and replaced with the following language:

•	Section 9.1 Product Repair - Field Failures - For the purpose of products listed in Schedule 2 to Exhibit A, this section is deemed deleted.

•	Section 9.7 Software Maintenance and Support Program - For the purpose of products listed in Schedule 2 to Exhibit A, shall be modified to read as follows:

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•	Section 9.8 Field Replace Units (FRU) Emergency - For the purpose of products listed in Schedule 2 to Exhibit A, this section is deemed deleted.

•	Attachment A, IBM CSP Requirements - For the purpose of products listed in Schedule 2 to Exhibit A, this section is deemed deleted.

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•	Section 12.0 Hazardous Substance and Environmental Law Requirements - For the purpose of products listed in Schedule 2 to Exhibit A, this section shall be amended to read as follows.

•	Section 12.1 - For the purpose of products listed in Schedule 2 to Exhibit A, this section is deemed deleted.

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•	Section 1.1, Specifications - For the purpose of products listed in Schedule 3 to Exhibit A, Section 1.1 is deleted in its entirety.

•	Section 1.2, Certifications - For the purpose of products listed in Schedule 3 to Exhibit A, Section 1.2 to read in it's entirety as follows:

•	Section 3.0 Rescheduling/Cancellation - For the purpose of products listed in Table 2 (SystemX), Schedule 3 to Exhibit A, this section is deemed deleted and replaced with the following:

3.1

Hub Arrangement The parties hereby agree that “Hub Product” is defined as any Supplier Product for which a portion of sales of such Product are subject to a hubbing arrangement.  The following terms and conditions will apply to any Hub Product(s) for which an agreement has been executed between and among Supplier, Buyer, and/or third party (“Hub Provider”) to allow such Hub Product to be shipped to and held in a third party's warehouse (or warehouses) (“Hub(s)”).  The parties agree that, as of the Effective Date of Amendment Number 45 to the Agreement, the Brocade [**] for IBM System x will be a Hub Product.

3.2

Hub Stocking  On a weekly basis Buyer, or Hub Provider, will provide a 13-week rolling forecast to Supplier showing the demand for the Hub Products to be sent to the Hub(s), such quantities shall be identified by the specific geographic locations of the Hubs (“Hub Forecast”).  Supplier and Buyer will review the weekly forecast and mutually agree to the final Hub Forecast for calculation of the appropriate stocking levels.  Supplier agrees to ship quantities of such Product to the Hubs sufficient to meet at least [**] weeks of demand, and at most [**] weeks of demand, both of which are based on the forward-looking [**] week period forecast (“Minimum Stock Level”). Should Buyer pull more than the Hub Forecast amount, Supplier will have [**] weeks to restock the Hub to the Minimum Stock Level.  The Minimum Stock Level will include the balance of the material physically in the hub location available for immediate sale (“On-Hand Balance”) plus the material en route to the hub location scheduled for arrival within the transit lead time for that hub (“In-Transit Balance”).

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3.3

Ship Performance   Supplier's goal will be to satisfy a [**] percent [**] product availability rate at each Hub location. Product Availability is defined as Hub Products being available for pull by Hub Provider at a time a valid pull notification is received.  At the beginning of each calendar quarter, Buyer and Supplier may discuss the above Product Availability rate goal. Should the parties agree that the Product Availability rate goal was not achieved, Supplier will immediately acknowledge the deficiency.  Within three (3) days of such acknowledgement, Supplier will begin the Corrective/Preventive Action Process to determine the root cause, and will develop an appropriate corrective action.  Hub Product pull requests in excess of Hub Forecast will not be used in the calculation of the product availability rate, nor in the determination of root cause.  In addition, should Supplier experience an allocation situation, the allocation provisions of SOW3 PUA Section 7.0 “Supply of Products” shall apply.

3.4

Shipping  Supplier will be responsible for shipping charges of the Hub Product from Supplier's point of origin to the Hub.  Pursuant to Section 1.0 of this Attachment 5 these costs may be included in the Product price.  All shipments from the Hub will be EXW the Hub, and Buyer is responsible for all shipping charges thereafter.  Buyer will act as the importer of record for all Hub Product shipped from the Hub and will be responsible for associated customs, duty, and Value Add Tax (VAT) administration.  Title to and risk of loss of the Hub Product will pass to Buyer upon physical removal of such Hub Product from Brocade's designated area within the applicable Hub.

3.5	Product Discontinuance for Products Held in Hub  Discontinuance of any Hub Product shall be in accordance with the terms set forth in the SOW.  The parties agree to work together to minimize the liability of each party upon end-of-life notice of a Hub Product.

•	Section 4.0 Replenishment Logistics Attachment - For the purpose of products listed in Schedule 3 to Exhibit A, all of this section is deemed deleted.

•	Section 9.7 Software Maintenance and Support Program - For the purpose of products listed in Schedule 3 to Exhibit A, all of this section is deemed deleted and replaced with the following:

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•	Section 9.8 Field Replace Units (FRU) Emergency - For the purpose of products listed in Schedule 3 to Exhibit A, other than those products identified below, this section is deemed deleted.

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•	Attachment A, IBM CSP Requirements - For the purpose of products listed in Schedule 3 to Exhibit A, this section is deemed deleted.

•	Section 12.0 Hazardous Substance and Environmental Law Requirements - For the purpose of products listed in Schedule 3 to Exhibit A, this section shall be amended to read as follows.

•	Section 12.1 - For the purpose of products listed in Schedule 3 to Exhibit A, this section is deemed deleted.

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1)	Transition; Termination Date; Employment Status; Acknowledgements; Retention Bonus.

(a)

Transition. From the Transition Period Commencement Date through the date on which Employee terminates employment with the Company (the “Transition Period”), the Parties agree that Employee will continue to be employed pursuant to the current terms of his employment, as amended by this Agreement. Prior to the Successor Commencement Date, Employee will continue in his role as Chief Executive Officer on a full-time basis, reporting to the Company's Board of Directors (the “Board”).

(b)	Termination Date. Employee's termination date will occur on the Successor Commencement Date, or earlier as provided in Paragraph 1(c) (the date of Employee's actual termination of employment with the Company being the “Actual Termination Date”).

(c)

Employment Status. Employee's employment remains at-will. Employee is free to terminate his employment at any time prior to the Successor Commencement Date, for any reason or for no reason. Similarly, the Company is free to terminate Employee's employment at any time prior to the Successor Commencement Date, for any reason or for no reason. As described in Paragraphs 1(e) and Paragraph 2, Employee may be entitled to retention and/or severance benefits depending on the circumstances of Employee's termination of employment with the Company.

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(d)

Continued Compensation During Transition Period. During the Transition Period, Employee will continue to (i) receive the compensation, and (ii) participate in the Company's employee benefit plans, in each case, pursuant to the current terms of his employment. For the avoidance of doubt, if Employee remains employed with the Company through the end of the Company's fiscal year 2012, then Employee will continue to be eligible to receive his incentive payment under the Brocade Senior Leadership Plan, as revised October 25, 2011 (the “Fiscal 2012 SLP”), subject to the satisfaction of the performance criteria and the terms and conditions set forth in the Fiscal 2012 SLP.

(e)

Additional Compensation for Transition Period. If (i) Employee remains employed with the Company through the Successor Commencement Date, and (ii) in the good faith judgment of the Board, Employee is deemed to have continued to perform his executive duties during the Transition Period in the same professional manner and at the same professional standard as Employee performed his executive duties prior to the Transition Period Commencement Date (such requirement, the “Continued Efforts Requirement”), then, subject to Employee executing and not revoking the Supplemental Separation Agreement, which must become effective and irrevocable no later than the Supplemental Release Deadline (as defined below), and also subject to Employee's compliance with this Agreement, Employee will receive the payments (collectively, the “Retention Bonus”) described in Paragraph 1(e)(i), and, if applicable, Paragraphs 1(e)(ii) - Paragraphs 1(e)(vii), in all cases subject to Paragraphs 2(c) and 2(f):

(i)	A lump sum payment of $320,000, less applicable withholdings, payable within fifteen (15) calendar days following the effective date of the Supplemental Separation Agreement.

(ii)

Provided that the Successor Commencement Date occurs prior to the end of the Company's fiscal year 2012, a lump sum payment equal to the remainder of the base salary that Employee would have been paid had he been employed through the end of the Company's fiscal year 2012, less applicable withholdings, payable within fifteen (15) calendar days following the effective date of the Supplemental Separation Agreement. For the avoidance of doubt, notwithstanding anything in this Paragraph 1(e), if the Successor Commencement Date occurs on or following the end of the Company's fiscal year 2012, Employee will continue to receive his base salary in accordance with Paragraph 1(d).

(iii)	Provided that the Successor Commencement Date occurs prior to the end of the Company's fiscal year 2012, Employee will continue to be eligible to receive his incentive payment under the Fiscal 2012 SLP as if he had been employed through the end of the Company's fiscal year 2012, subject to the

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(iv)

Provided that the Successor Commencement Date occurs prior to date thirty (30) days following the end of the Company's fiscal year 2012, the Equity Awards will accelerate and vest as to such number of shares as if Employee had continued employment through the date thirty (30) days following the end of the Company's fiscal year 2012, subject to the terms and conditions of the Equity Agreements, including, but not limited to, the satisfaction of any performance-related vesting conditions. For the avoidance of doubt, notwithstanding anything in this Paragraph 1(e), if the Successor Commencement Date occurs on or following the date thirty (30) days following the end of the Company's fiscal year 2012, Employee will be entitled to receive vesting of the Equity Awards in accordance with the terms of such awards.

(v)

Provided that the Successor Commencement Date occurs during the Company's fiscal year 2013, a lump sum payment equal to Employee's target incentive for fiscal year 2013 (pro-rated based on the number of days that Employee was employed during the Company's fiscal year 2013), less applicable withholding, payable within fifteen (15) calendar days following the effective date of the Supplemental Separation Agreement.

(vi)

Provided that the Successor Commencement Date occurs during the Company's fiscal year 2013, each of Employee's Equity Awards (both time-based vesting awards and performance-based vesting awards) will accelerate and vest as to such numbers of shares that would have vested on the Successor Commencement Date had there been daily vesting during each Equity Award's vesting period, rounded down to the nearest whole share. For purposes of this Paragraph 1(e)(vi), each Equity Award subject to

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(vii)

The Company will investigate and, to the extent that it can under commercially reasonable practices, address health insurance coverage for certain of Employee's children (the “Dependent”) until the earlier of such time as Employee is eligible for such coverage through a plan of a successor employer that may cover the Dependent, an alternative economically reasonable plan becomes available to Employee for Dependent, Employee becomes eligible for Medicare or Employee's sixty-fifth (65th) birthday.

2)

Severance. If Employee remains employed with the Company through the Successor Commencement Date, or, if prior to the Successor Commencement Date, Employee incurs a “separation from service” within the meaning of Section 409A as a result of his employment being terminated for any reason other than for Cause, then, subject to Employee executing and not revoking the Supplemental Separation Agreement, which must become effective and irrevocable no later than the sixtieth (60th) day following Employee's “separation from service” within the meaning of Section 409A (or if payment is triggered by the Successor Commencement Date, then the sixtieth (60th) day following the Successor Commencement Date) (in either case, the “Supplemental Release Deadline”), and also subject to Employee's compliance with this Agreement, Employee will receive the payments (collectively, the “Severance Payment”) described in Paragraphs 2(a) and 2(b), in all cases subject to Paragraphs 2(c) and 2(f):

(a)	A lump sum payment of $2,000,000, which is equal to the sum of one year of base salary and the annual target bonus, less applicable withholdings, payable within fifteen (15) calendar days following the effective date of the Supplemental Separation Agreement.

(b)

A lump sum payment, within fifteen (15) calendar days following the effective date of the Supplemental Separation Agreement, in an amount equal to 100% of: (A) the monthly premium that Employee would be required to pay to continue Employee's group plan coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”) at the rates in effect on the date of the Actual Termination Date, multiplied by (B) twelve (12), which payment will be made regardless of whether Employee elects COBRA continuation coverage.

(c)	If the Supplemental Separation Agreement does not become effective and

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(d)

For avoidance of doubt, Employee will be entitled to receive the Severance Payment under this Paragraph 2 upon a “separation from service” within the meaning of Section 409A for any reason other than a termination by the Company for Cause. Further, Employee agrees that he is not now and never became eligible for severance benefits under Section 2 of the Change of Control Agreement. Employee and the Company agree that the Change of Control Agreement is void and of no further effect as of the Transition Period Commencement Date.

(e)

For purposes of this Agreement, “Cause” means (i) Employee's willful and continued failure to perform the duties and responsibilities of his position that is not corrected within a thirty (30) day correction period that begins upon delivery to Employee of a written demand for performance from the Board that describes the basis for the Board's belief that Employee has not substantially performed his duties; (ii) any act of personal dishonesty taken by Employee in connection with his responsibilities as an employee of the Company with the intention or reasonable expectation that such may result in substantial personal enrichment of Employee; (iii) Employee's conviction of, or plea of nolo contendere to, a felony that the Board reasonably believes has had or will have a material detrimental effect on the Company's reputation or business, or (iv) Employee materially breaching Employee's Confidentiality Agreement, which breach is (if capable of cure) not cured within thirty (30) days after the Company delivers written notice to Employee of the breach.

(f)	Notwithstanding anything to the contrary in this Agreement, no severance payments

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3)

Release of All Claims. In exchange for the consideration under this Agreement (including the Retention Bonus and the Severance Payment), the Parties knowingly and voluntarily release and forever discharge both Parties and the Company's past, present and future officers, agents, directors, employees, investors, stockholders, administrators, attorneys, insurers, affiliates, divisions, subsidiaries, parents, predecessors, successors, and assigns, and the Company's current and former employees, attorneys, officers, directors and agents thereof, both individually and in their official capacities (collectively referred to throughout the remainder of this Agreement as “Releasees”) of and from any and all claims and causes

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(a)	any and all claims relating to or arising from Employee's offer or acceptance of employment, any agreements between Employee and the Company, Employee's employment relationship with the Company, and the termination of that employment relationship;

(b)	any and all claims relating to or arising from Employee's right to purchase, or actual purchase of shares of stock of the Company, including, without limitation, any claims for fraud, misrepresentation, breach of fiduciary duty, breach of duty under applicable state corporate law, and securities fraud under any state or federal law;

(c)

any and all claims for violation of any federal, state or municipal statute, including, but not limited to, Title VII of the Civil Rights Act of 1964, the Civil Rights Act of 1991, Sections 1981 through 1988 of Title 42 of the United States Code, the Age Discrimination in Employment Act of 1967, the Americans with Disabilities Act of 1990, the Fair Labor Standards Act, the Employee Retirement Income Security Act of 1974 (except for any vested benefits under any tax qualified benefit plan), the Immigration Reform and Control Act, the Fair Credit Reporting Act, the Worker Adjustment and Retraining Notification Act, any and all state employment law legislation including, but not limited to, the California Fair Employment and Housing Act, the California WARN Act and any and all claims arising under the provisions of the California Labor Code as well as the regulations issued thereunder, except where prohibited by law;

(d)	any and all claims for violation of any other federal, state, local law, rule, regulation, or ordinance as well as the regulations issued thereunder, except where prohibited by law;

(e)	any and all claims for violation of any public policy, wrongful termination, breach of contract or common-law tort; and

(f)	any claims for costs, fees, or other expenses including attorneys' fees.

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4)	Other Compensation and Benefits.

(a)	Employee acknowledges and represents that the Employee has received and/or been paid for all leaves (paid and unpaid), salary, wages, bonuses, commissions, accrued vacation, and any and all other compensation and benefits that the Employee earned or was entitled to during the Employee's employment with the Company.

(b)	The vesting of Employee's outstanding Equity Awards, if any, shall cease as of the Actual Termination Date. The vested RSUs or other vested Equity Awards or the exercise of any vested stock options, if any, shall continue to be subject to the terms and conditions of the Stock Plans and the Equity Agreements.

5)	Confidential Information.

(a)

Employee shall continue to maintain the confidentiality of all confidential and proprietary information of the Company and shall not disclose to any person, firm or corporation without written authorization of the Chairman of the Board or the General Counsel of the Company, any Confidential Information of the Company. “Confidential Information” means any Company proprietary information, technical data, trade secrets or know-how, including, but not limited to, research, product plans, products, services, customer lists and customers (including, but not limited to, customers of the Company on whom Employee called or with whom Employee became acquainted during the term of Employee's employment), markets, software, developments, inventions, processes, formulas, technology, designs, drawings,

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(b)

Employee shall return all Company property, including, but not limited to, any devices, records, data, notes, reports, proposals, lists, correspondence, specifications, drawings, blueprints, sketches, materials, equipment, computer source code or other documents, or reproductions of any of the aforementioned items, and confidential and proprietary information in Employee's possession to the Company on or before the Effective Date (as defined in Paragraph 7 herein).

6)

Employee represents that Employee has to the best of his knowledge complied with all the terms of the Confidentiality Agreement, including the reporting of any inventions and original works of authorship (as defined therein), conceived or made by Employee (solely or jointly with others) covered by the Confidentiality Agreement. Employee further represents and agrees that Employee will continue to comply with Employee's ongoing obligations under the Confidentiality Agreement following the Actual Termination Date, including, but not limited to, Employee's obligation to assist the Company in the preparation of assignments of intellectual property rights created while Employee was employed by the Company.

7)

Acknowledgment of Waiver of Claims under the ADEA. Employee acknowledges that Employee is waiving and releasing any rights and/or claims Employee may have under the Age Discrimination in Employment Act of 1967 (“ADEA”) and that this waiver and release is knowing and voluntary (the “ADEA Waiver”). Employee and the Company agree that this ADEA Waiver does not apply to any rights or claims that may arise under the ADEA after the date on which Employee signs this Agreement. Employee acknowledges that the consideration given for this ADEA Waiver is in addition to anything of value to which Employee is already entitled. Employee further acknowledges that Employee has been advised by this writing that (a) Employee should consult with an attorney prior to executing this Agreement; (b) Employee has twenty-one (21) days within which to consider this Agreement (although Employee may choose voluntarily to sign the Agreement sooner); (c) Employee has seven (7) days following Employee's execution of this Agreement to revoke this ADEA Waiver; (d) this ADEA Waiver shall not be effective until the date upon which the revocation period has expired, which will be the eighth (8th) day after Employee signs this Agreement (the “Effective Date”); and (e) nothing in this Agreement prevents or precludes Employee from challenging or seeking a determination in good faith of the

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8)

Revocation of ADEA Waiver. Any revocation by Employee of the ADEA Waiver must be in writing and state, “I hereby revoke my ADEA Waiver,” and be delivered to Brocade Communications Systems, Inc.'s Vice President and General Counsel, by certified mail within seven (7) calendar days of execution. The revocation of the ADEA Waiver must be postmarked within the seven (7) day period; be properly addressed to the Vice President and General Counsel at the address identified below; and be sent by certified mail return receipt requested. The mailing address is: Vice President and General Counsel, Brocade Communications Systems, Inc. 130 Holger Way, San Jose, California 95134.

9)	Civil Code Section 1542. Employee understands and agrees that this Agreement extinguishes all claims known or unknown, suspected or unsuspected, asserted or unasserted against Releasees. Employee expressly waives any rights or benefits under California Civil Code Section 1542, which provides as follows:

10)	Affirmations. Employee affirms that Employee has no lawsuits, claims, or actions pending in Employee's name, or on behalf of any other person or entity concerning any matter referred to in this Agreement. Employee further affirms that Employee has no known workplace injuries or occupational diseases, for which Employee has not already filed a claim.

11)	Confidentiality. Employee agrees to maintain in confidence the existence of this Agreement, the contents and terms of this Agreement, and the consideration for this

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12)

No Cooperation. Subject to the prohibitions set forth in Section 16600 of the California Business and Professions Code (“Section 16600”), Employee agrees Employee will not act in any manner that might damage the business of the Company. Employee agrees that Employee will not counsel or assist any attorneys or their clients in the presentation or prosecution of any disputes, differences, grievances, claims, charges, or complaints by any third party against the Company and/or any officer, director, employee, agent, representative, stockholder or attorney of the Company, unless under a subpoena or other court order to do so.

13)

Non-Solicitation and Non-Disparagement. The Parties will, at all times in the future, refrain from making any incorrect or disparaging statements about either Party, its products or services, its officers, directors, employees, investors, stockholders, administrators, affiliates, divisions, subsidiaries, predecessors and successor corporations, and assigns. Employee further agrees that for a period of one year following the Separation Date, Employee will not directly or indirectly solicit, induce, recruit or encourage any employee or consultant of the Company to terminate his or her employment or consultancy with the Company, either for Employee or any other person or entity. Subject to Section 16600, Employee further agrees that Employee will refrain from interfering with the contracts and relationships of the Company and its officers, directors, employees, investors, stockholders, administrators, affiliates, divisions, subsidiaries, predecessor and successor corporations, and assigns. Employee and his staff will be responsible for the initial drafting of public announcements and filings with respect to this Agreement, the Transition Period and Employee's departure from the Company, but the Board will retain final authority over all aspects of such announcements and filings.

14)

No Admission of Liability. Employee understands and acknowledges that this Agreement constitutes a compromise and separation of disputed claims. No action taken by the Company, either previously or in connection with this Agreement shall be deemed or construed at any time or for any purposes to be (a) an admission of the truth or falsity of any claims made by Employee or (b) an acknowledgment or admission by the Company of any fault or liability whatsoever to Employee or to any third party,

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15)	Costs. The Parties shall each bear their own costs, expert fees, attorneys' fees and other fees incurred in connection with any disputes between them, except as otherwise provided in Paragraph 3. The Company agrees to pay Employee's reasonable and documented legal fees associated with the negotiation and preparation of this Agreement up to a maximum of $25,000.

16)

Arbitration. The Parties agree that any and all disputes arising out of the terms of this Agreement, their interpretation, and any of the matters herein released, including any potential claims of harassment, discrimination or wrongful termination, shall be subject to final, binding and, to the extent permitted by law, confidential arbitration in Santa Clara, California conducted before a single arbitrator by the American Arbitration Association under its National Rules for the Resolution of Employment Disputes, the current version of which are available for review at www.adr.org. The Parties each acknowledge that by agreeing to this arbitration procedure, they waive the right to resolve any such dispute, claim or demand through a trial by jury or judge or by administrative proceeding. The Company shall pay all administrative fees in excess of the amount of those administrative fees Employee would have been required to pay if Employee's claims were decided in a court of law. The Parties agree that the prevailing party in any arbitration shall be entitled to injunctive relief in any court of competent jurisdiction to enforce the arbitration award. Provided, however, that this arbitration provision shall not apply to any claims for injunctive relief by either of the Parties.

17)	Authority. Employee represents and warrants that Employee has the capacity to act on Employee's own behalf and on behalf of all who might claim through Employee to bind them to the terms and conditions of this Agreement.

18)	No Representations. Employee represents that Employee has had the opportunity to consult with an attorney, and has carefully read and understands the scope and effect of the provisions of this Agreement. Neither party has relied upon any representations or statements made by the other party hereto which are not specifically set forth in this Agreement.

19)	Severability. In the event that any provision hereof becomes or is declared by a court of competent jurisdiction to be illegal, unenforceable or void, this Agreement shall continue in full force and effect without said provision.

20)	Entire Agreement. This Agreement, the Equity Agreements, the Stock Plans, the ADEA Disclosure and the Confidentiality Agreement represent the entire agreement and understanding between the Company and Employee, and supersede and replace any and all prior agreements and understandings concerning Employee's relationship with the Company and Employee's compensation by the Company.

21)	No Oral Modification. This Agreement may only be amended in writing signed by Employee and the Chairman of the Board.

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22)	Governing Law. This Agreement shall be governed by the internal substantive laws, but not the choice of law rules, of the State of California.

23)	Counterparts. This Agreement may be executed in counterparts, and each counterpart shall have the same force and effect as an original and shall constitute an effective, binding agreement on the part of each of the undersigned.

24)	Knowing and Voluntary Execution of Agreement. Employee acknowledges that:

(a)	Employee has read this Agreement;

(b)	Employee has been informed by the Company in writing to consult with an attorney before signing this Agreement and has either (a) been advised by legal counsel of Employee's own choosing in the execution of this Agreement or (b) has voluntarily declined to seek such counsel; and

(c)

Employee apprised himself or herself of sufficient relevant information to intelligently exercise Employee's own judgment and understands the terms and consequences of this Agreement, the releases it contains, and its legal and binding effect. Employee freely and knowingly and without any duress or undue influence enters into this Agreement intending to waive, settle and release all claims Employee has or might have against Releasees in exchange for the additional benefits to which Employee would not otherwise be entitled.

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