Document:

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                                                                     Exhibit 4.3

                          REGISTRATION RIGHTS AGREEMENT

                                  BY AND AMONG

                      BROCADE COMMUNICATIONS SYSTEMS, INC.

                                   AS ISSUER,

                                       AND

                       MORGAN STANLEY & CO. INCORPORATED,

                              GOLDMAN, SACHS & CO.,

                           SALOMON SMITH BARNEY INC.,

                                       AND

               MERRILL LYNCH, PIERCE FENNER AND SMITH INCORPORATED

                              AS INITIAL PURCHASERS

                             DATED DECEMBER 21, 2001

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       THIS REGISTRATION RIGHTS AGREEMENT is made and entered into as of
December 21, 2001, by and among Brocade Communications Systems, Inc., a Delaware
corporation (the "Company"), and Morgan Stanley & Co. Incorporated, Goldman,
Sachs & Co., Salomon Smith Barney Inc. and Merrill Lynch, Pierce Fenner and
Smith Incorporated pursuant to the Purchase Agreement, dated December 18, 2001
(the "Purchase Agreement"), among the Company and the Initial Purchasers. In
order to induce the Initial Purchasers to enter into the Purchase Agreement, the
Company has agreed to provide the registration rights set forth in this
Agreement. The execution of this Agreement is a condition to the closing under
the Purchase Agreement.

       The Company agrees with the Initial Purchasers, (i) for their benefit as
Initial Purchasers and (ii) for the benefit of the beneficial owners (including
the Initial Purchasers) from time to time of the Debentures (as defined herein)
and the beneficial owners from time to time of the Underlying Common Stock (as
defined herein) issued upon conversion of the Debentures (each of the foregoing
a "Holder" and together the "Holders"), as follows:

       SECTION 1. DEFINITIONS. Capitalized terms used herein without definition
shall have their respective meanings set forth in the Placement Agreement. As
used in this Agreement, the following terms shall have the following meanings:

       Additional Interest: See Section 2(e) hereof.

       Affiliate: With respect to any specified person, an "affiliate," as
defined in Rule 144, of such person.

       Amendment Effectiveness Deadline Date: See Section 2(d) hereof.

       Applicable Conversion Price: The Applicable Conversion Price as of any
date of determination means the Conversion Price in effect as of such date of
determination or, if no Debentures are then outstanding, the Conversion Price
that would be in effect were Debentures then outstanding.

       Business Day: Each Monday, Tuesday, Wednesday, Thursday and Friday that
is not a day on which banking institutions in The City of New York are
authorized or obligated by law or executive order to close.

       Common Stock: The shares of common stock, par value $0.001 per share, of
the Company and any other shares of common stock as may constitute "Common
Stock" for purposes of the Indenture, including the Underlying Common Stock.

       Conversion Price: Conversion Price shall have the meaning assigned such
term in the Indenture.

       Damages Accrual Period: See Section 2(e) hereof.

       Damages Payment Date: Each January 1 and July 1.

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       Debentures: The 2% Convertible Subordinated Debentures due 2007 of the
Company to be purchased pursuant to the Purchase Agreement.

       Deferral Notice: See Section 3(i) hereof.

       Deferral Period: See Section 3(i) hereof.

       Effectiveness Deadline Date: See Section 2(a) hereof.

       Effectiveness Period: The period of two years from the later of (a) the
Issue Date and (b) December 18, 2001.

       Event: See Section 2(e) hereof.

       Event Date: See Section 2(e) hereof.

       Event Termination Date: See Section 2(e) hereof.

       Exchange Act: The Securities Exchange Act of 1934, as amended, and the
rules and regulations of the SEC promulgated thereunder.

       Filing Deadline Date: See Section 2(a) hereof.

       Holder: See the second paragraph of this Agreement.

       Indenture: The Indenture, dated as of the date hereof, between the
Company and State Street Bank and Trust Company of California, N.A., as trustee,
pursuant to which the Debentures are being issued.

       Initial Purchasers: Means Morgan Stanley & Co. Incorporated, Goldman,
Sachs & Co., Salomon Smith Barney Inc. and Merrill Lynch & Co.

       Initial Shelf Registration Statement: See Section 2(a) hereof.

       Issue Date: December 21, 2001.

       Losses: See Section 6 hereof.

       Material Event: See Section 3(i) hereof.

       Notice and Questionnaire: A written notice delivered to the Company
containing substantially the information called for by the Selling
Securityholder Notice and Questionnaire attached as Annex A to the Offering
Memorandum of the Company issued December __, 2001 relating to the Debentures.

       Notice Holder: On any date, any Holder that has delivered an
appropriately completed Notice and Questionnaire to the Company on or prior to
such date.

       Purchase Agreement: See the preamble hereof.

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       Prospectus: The prospectus included in any Registration Statement
(including, without limitation, a prospectus that discloses information
previously omitted from a prospectus filed as part of an effective registration
statement in reliance upon Rule 430A promulgated under the Securities Act), as
amended or supplemented by any amendment or prospectus supplement, including
post-effective amendments, and all materials incorporated by reference or
explicitly deemed to be incorporated by reference in such Prospectus.

       Record Holder: (i) With respect to any Damages Payment Date relating to
any Debentures as to which any such Additional Interest has accrued, the holder
of record of such Debenture on the record date fifteen (15) days prior to such
Damages Payment Date and (ii) with respect to any Damages Payment Date relating
to the Underlying Common Stock as to which any such Additional Interest has
accrued, the registered holder of such Underlying Common Stock fifteen (15) days
prior to such Damages Payment Date.

       Registrable Securities: The Debentures until such Debentures have been
converted or exchanged into the Underlying Common Stock and, at all times
subsequent to any such conversion or exchange the Underlying Common Stock and
any securities into or for which such Underlying Common Stock have been
converted or exchanged, and any security issued with respect thereto upon any
stock dividend, split or similar event until, in the case of any such security,
(A) the earliest of (i) its effective registration under the Securities Act and
resale in accordance with the Registration Statement covering it, (ii)
expiration of the holding period that would be applicable thereto under Rule
144(k) were it not held by an Affiliate of the Company or (iii) its sale to the
public pursuant to Rule 144, and (B) as a result of the event or circumstance
described in any of the foregoing clauses (i) through (iii), the legends with
respect to transfer restrictions required under the Indenture are removed or
removable in accordance with the terms of the Indenture or such legends, as the
case may be.

       Registration Expenses: See Section 5 hereof.

       Registration Statement: Any registration statement of the Company that
covers any of the Registrable Securities pursuant to the provisions of this
Agreement including the Prospectus, amendments and supplements to such
registration statement, including post-effective amendments, all exhibits, and
all materials incorporated by reference or explicitly deemed to be incorporated
by reference in such registration statement.

       Restated Principal Amount: As this term is defined in the Indenture.

       Restricted Securities: As this term is defined in Rule 144.

       Rule 144: Rule 144 under the Securities Act, as such Rule may be amended
from time to time, or any similar rule or regulation hereafter adopted by the
SEC.

       Rule 144A: Rule 144A under the Securities Act, as such Rule may be
amended from time to time, or any similar rule or regulation hereafter adopted
by the SEC.

       SEC: The Securities and Exchange Commission.

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       Securities Act: The Securities Act of 1933, as amended, and the rules and
regulations promulgated by the SEC thereunder.

       Shelf Registration Statement: See Section 2(a) hereof.

       Subsequent Shelf Registration Statement: See Section 2(b) hereof.

       Tax Event: As this term is defined in the Indenture.

       TIA: The Trust Indenture Act of 1939, as amended.

       Trustee: State Street Bank and Trust Company of California, N.A. (or any
successor entity), the Trustee under the Indenture.

       Underlying Common Stock: The Common Stock into which the Debentures are
convertible or issued upon any such conversion.

       SECTION 2. SHELF REGISTRATION.

              (a) The Company shall use its reasonable efforts to prepare and
file or cause to be prepared and filed with the SEC, as soon as practicable but
in any event by the date (the "Filing Deadline Date") ninety (90) days after the
Issue Date, a Registration Statement for an offering to be made on a delayed or
continuous basis pursuant to Rule 415 of the Securities Act (a "Shelf
Registration Statement") registering the resale from time to time by Holders
thereof of all of the Registrable Securities (the "Initial Shelf Registration
Statement"). The Initial Shelf Registration Statement shall be on Form S-3 or
another appropriate form permitting registration of such Registrable Securities
for resale by such Holders in accordance with the methods of distribution
elected by the Holders and set forth in the Initial Shelf Registration
Statement. The Company shall use its reasonable efforts to cause the Initial
Shelf Registration Statement to be declared effective under the Securities Act
as promptly as is practicable but in any event by the date (the "Effectiveness
Deadline Date") that is one hundred eighty (180) days after the Issue Date, and
to keep the Initial Shelf Registration Statement (or any Subsequent Shelf
Registration Statement) continuously effective under the Securities Act until
the expiration of the Effectiveness Period. At the time the Initial Shelf
Registration Statement is declared effective, each Holder that became a Notice
Holder on or prior to the date ten (10) Business Days prior to such time of
effectiveness shall be named as a selling securityholder in the Initial Shelf
Registration Statement and the related Prospectus in such a manner as to permit
such Holder to deliver such Prospectus to purchasers of Registrable Securities
in accordance with applicable law. None of the Company's security holders (other
than the Holders of Registrable Securities) shall have the right to include any
of the Company's securities in the Shelf Registration Statement.

              (b) If the Initial Shelf Registration Statement or any Subsequent
Shelf Registration Statement (as defined below) ceases to be effective for any
reason at any time during the Effectiveness Period (other than because all
Registrable Securities registered thereunder shall have been resold pursuant
thereto or shall have otherwise ceased to be Registrable Securities), the
Company shall use its reasonable efforts to obtain the prompt withdrawal of any
order suspending the effectiveness thereof, and in any event shall within thirty

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(30) days of such cessation of effectiveness amend the Shelf Registration
Statement in a manner reasonably expected to obtain the withdrawal of the order
suspending the effectiveness thereof, or file an additional Shelf Registration
Statement covering all of the securities that as of the date of such filing are
Registrable Securities (a "Subsequent Shelf Registration Statement"). If a
Subsequent Shelf Registration Statement is filed, the Company shall use
reasonable efforts to cause the Subsequent Shelf Registration Statement to
become effective as promptly as is practicable after such filing and to keep
such Registration Statement (or Subsequent Shelf Registration Statement)
continuously effective until the end of the Effectiveness Period.

              (c) The Company shall supplement and amend the Shelf Registration
Statement if required by the rules, regulations or instructions applicable to
the registration form used by the Company for such Shelf Registration Statement,
if required by the Securities Act or as reasonably requested by the Initial
Purchasers or by the Trustee on behalf of the registered Holders or by any
managing underwriter in the event of an underwritten offering.

              (d) Each Holder of Registrable Securities agrees that if such
Holder wishes to sell Registrable Securities pursuant to a Shelf Registration
Statement and related Prospectus, it will do so only in accordance with this
Section 2(d) and Section 3(i). Each Holder of Registrable Securities wishing to
sell Registrable Securities pursuant to a Shelf Registration Statement and
related Prospectus agrees to deliver a Notice and Questionnaire to the Company
prior to any intended distribution of Registrable Securities under the Shelf
Registration Statement. From and after the date the Initial Shelf Registration
Statement is declared effective, the Company shall, as promptly as practicable
after the date a Notice and Questionnaire is delivered, and in any event upon
the later of (x) fifteen (15) Business Days after such date or (y) fifteen (15)
Business Days after the expiration of any Deferral Period in effect when the
Notice and Questionnaire is delivered or put into effect, (i) if required by
applicable law, file with the SEC a post-effective amendment to the Shelf
Registration Statement (and if the Company shall receive a Notice and
Questionnaire from another Holder before such post-effective amendment has been
declared effective by the SEC, the Company shall have thirty (30) Business Days
to file another post-effective amendment with the SEC with respect to such
Holder) or prepare and, if required by applicable law, file a supplement to the
related Prospectus or a supplement or amendment to any document incorporated
therein by reference or file any other required document so that the Holder
delivering such Notice and Questionnaire is named as a selling securityholder in
the Shelf Registration Statement and the related Prospectus in such a manner as
to permit such Holder to deliver such Prospectus to purchasers of the
Registrable Securities in accordance with applicable law and, if the Company
shall file a post-effective amendment to the Shelf Registration Statement, use
reasonable efforts to cause such post-effective amendment to be declared
effective under the Securities Act as promptly as is practicable, but in any
event by the date (the "Amendment Effectiveness Deadline Date") that is
forty-five (45) days after the date such post-effective amendment is required by
this clause to be filed; (ii) provide such Holder copies of any documents filed
pursuant to Section 2(d)(i); and (iii) notify such Holder as promptly as
practicable after the effectiveness under the Securities Act of any
post-effective amendment filed pursuant to Section 2(d)(i); provided, that if
such Notice and Questionnaire is delivered during a Deferral Period, the Company
shall so inform the Holder delivering such Notice and Questionnaire and shall
take the actions set forth in clauses (i), (ii) and (iii) above upon expiration
of the Deferral Period in accordance with Section 3(i). Notwithstanding anything
contained herein to the contrary, (i) the Company shall be under no obligation
to name any

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Holder that is not a Notice Holder as a selling securityholder in any
Registration Statement or related Prospectus and (ii) the Amendment
Effectiveness Deadline Date shall be extended by up to ten (10) Business Days
from the expiration of a Deferral Period (and the Company shall incur no
obligation to pay Additional Interest during such extension) if such Deferral
Period shall be in effect on the Amendment Deadline Effective Date.

              (e) The parties hereto agree that the Holders of Registrable
Securities will suffer damages, and that it would not be feasible to ascertain
the extent of such damages with precision, if (i) the Initial Shelf Registration
Statement has not been filed on or prior to the Filing Deadline Date, (ii) the
Initial Shelf Registration Statement has not been declared effective under the
Securities Act on or prior to the Effectiveness Deadline Date, (iii) the Company
has failed to perform its obligations set forth in Section 2(d) within the time
period required therein, (iv) the aggregate duration of Deferral Periods in any
period exceeds the number of days permitted in respect of such period pursuant
to Section 3(i) hereof or (v) the number of Deferral Periods in any period
exceeds the number permitted in respect of such period pursuant to Section 3(i)
hereof (each of the events of a type described in any of the foregoing clauses
(i) through (v) are individually referred to herein as an "Event," and the
Filing Deadline Date in the case of clause (i), the Effectiveness Deadline Date
in the case of clause (ii), the date by which the Company is required to perform
its obligations set forth in Section 2(d) in the case of clause (iii) (including
the filing of any post-effective amendment prior to the Amendment Effectiveness
Deadline Date), the date on which the aggregate duration of Deferral Periods in
any period exceeds the number of days permitted by Section 3(i) hereof in the
case of clause (iv), and the date of the commencement of a Deferral Period that
causes the limit on the number of Deferral Periods in any period under Section
3(i) hereof to be exceeded in the case of clause (v), being referred to herein
as an "Event Date"). Events shall be deemed to continue until the "Event
Termination Date," which shall be the following dates with respect to the
respective types of Events: the date the Initial Shelf Registration Statement is
filed in the case of an Event of the type described in clause (i), the date the
Initial Shelf Registration Statement is declared effective under the Securities
Act in the case of an Event of the type described in clause (ii), the date the
Company performs its obligations set forth in Section 2(d) in the case of an
Event of the type described in clause (iii) (including, without limitation, the
date the relevant post-effective amendment to the Shelf Registration Statement
is declared effective under the Securities Act), termination of the Deferral
Period that caused the limit on the aggregate duration of Deferral Periods in a
period set forth in Section 3(i) to be exceeded in the case of the commencement
of an Event of the type described in clause (iv), and termination of the
Deferral Period the commencement of which caused the number of Deferral Periods
in a period permitted by Section 3(i) to be exceeded in the case of an Event of
the type described in clause (v).

       Accordingly, commencing on (and including) any Event Date and ending on
(but excluding) the next date on which there are no Events that have occurred
and are continuing (a "Damages Accrual Period"), the Company agrees to pay, as
additional interest and not as a penalty, an amount (the "Additional Interest"),
payable on the Damages Payment Dates to Record Holders of Debentures that are
Registrable Securities and of shares of Underlying Common Stock issued upon
conversion of Debentures that are Registrable Securities, as the case may be,
accruing, for each portion of such Damages Accrual Period beginning on and
including a Damages Payment Date (or, in respect of the first time that the
Additional Interest is to be paid to Holders on a Damages Payment Date as a
result of the occurrence of any particular Event,

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from the Event Date) and ending on but excluding the first to occur of (A) the
date of the end of the Damages Accrual Period or (B) the next Damages Payment
Date, at a rate per annum equal to one-half of one percent (0.5%) of the
principal amount at maturity of such Debentures (or, following a Tax Event, of
the Restated Principal Amount plus accrued but unpaid interest) or one-half of
one percent (0.5%) of the Applicable Conversion Price of such shares of
Underlying Common Stock, as the case may be, in each case determined as of the
Business Day immediately preceding the next Damages Payment Date; provided, that
in the case of a Damages Accrual Period that is in effect solely as a result of
an Event of the type described in clause (iii) of the immediately preceding
paragraph, such Additional Interest shall be paid only to the Holders that have
delivered Notice and Questionnaires that caused the Company to incur the
obligations set forth in Section 2(d) the non-performance of which is the basis
of such Event, provided further, that any Additional Interest accrued with
respect to any Debenture or portion thereof called for redemption on a
redemption date or converted into Underlying Common Stock on a conversion date
prior to the Damages Payment Date, shall, in any such event, be paid instead to
the Holder who submitted such Debenture or portion thereof for redemption or
conversion on the applicable redemption date or conversion date, as the case may
be, on such date (or promptly following the conversion date, in the case of
conversion). Notwithstanding the foregoing, no Additional Interest shall accrue
as to any Registrable Security from and after the earlier of (x) the date such
security is no longer a Registrable Security and (y) expiration of the
Effectiveness Period. The rate of accrual of the Additional Interest with
respect to any period shall not exceed the rate provided for in this paragraph
notwithstanding the occurrence of multiple concurrent Events. Following the cure
of all Events requiring the payment by the Company of Additional Interest to the
Holders of Registrable Securities pursuant to this Section, the accrual of
Additional Interest will cease (without in any way limiting the effect of any
subsequent Event requiring the payment of Additional Interest by the Company).

       The Trustee shall be entitled, on behalf of Holders of Debentures or
Underlying Common Stock, to seek any available remedy for the enforcement of
this Agreement, including for the payment of any Additional Interest.
Notwithstanding the foregoing, the parties agree that the sole damages payable
for a violation of the terms of this Agreement with respect to which Additional
Interest are expressly provided shall be such Additional Interest. Nothing shall
preclude a Notice Holder or Holder of Registrable Securities from pursuing or
obtaining specific performance or other equitable relief with respect to this
Agreement.

       All of the Company's obligations set forth in this Section 2(e) that are
outstanding with respect to any Registrable Security at the time such security
ceases to be a Registrable Security shall survive until such time as all such
obligations with respect to such security have been satisfied in full
(notwithstanding termination of this Agreement pursuant to Section 8(k)).

       The parties hereto agree that the Additional Interest provided for in
this Section 2(e) constitute a reasonable estimate of the damages that may be
incurred by Holders of Registrable Securities by reason of the failure of the
Shelf Registration Statement to be filed or declared effective or available for
effecting resales of Registrable Securities in accordance with the provisions
hereof.

       SECTION 3. REGISTRATION PROCEDURES. In connection with the registration
obligations of the Company under Section 2 hereof, the Company shall:

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              (a) A reasonable time before filing any Registration Statement or
Prospectus or any amendments or supplements thereto with the SEC, furnish to
counsel to the Initial Purchasers copies of all such documents proposed to be
filed and use reasonable efforts to reflect in each such document when so filed
with the SEC such comments as counsel to the Initial Purchasers reasonably shall
propose within five (5) Business Days of the delivery of such copies to the
Initial Purchasers.

              (b) Prepare and file with the SEC such amendments and
post-effective amendments to each Registration Statement as may be necessary to
keep such Registration Statement continuously effective for the applicable
period specified in Section 2(a); cause the related Prospectus to be
supplemented by any required Prospectus supplement, and as so supplemented to be
filed pursuant to Rule 424 (or any similar provisions then in force) under the
Securities Act; and use its reasonable efforts to comply with the provisions of
the Securities Act applicable to it with respect to the disposition of all
securities covered by such Registration Statement during the Effectiveness
Period in accordance with the intended methods of disposition by the sellers
thereof set forth in such Registration Statement as so amended or such
Prospectus as so supplemented.

              (c) As promptly as practicable give notice to counsel to the
Notice Holders and the Initial Purchasers (i) when any Prospectus, Prospectus
supplement, Registration Statement or post-effective amendment to a Registration
Statement has been filed with the SEC and, with respect to a Registration
Statement or any post-effective amendment, when the same has been declared
effective, (ii) of any request, following the effectiveness of the Initial Shelf
Registration Statement under the Securities Act, by the SEC or any other federal
or state governmental authority for amendments or supplements to any
Registration Statement or related Prospectus or for additional information,
(iii) of the issuance by the SEC or any other federal or state governmental
authority of any stop order suspending the effectiveness of any Registration
Statement or the initiation or threatening of any proceedings for that purpose,
(iv) of the receipt by the Company of any notification with respect to the
suspension of the qualification or exemption from qualification of any of the
Registrable Securities for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose, (v) of the occurrence of (but
not the nature of or details concerning) a Material Event and (vi) of the
determination by the Company that a post-effective amendment to a Registration
Statement will be filed with the SEC, which notice may, at the discretion of the
Company (or as required pursuant to Section 3(i)), state that it constitutes a
Deferral Notice, in which event the provisions of Section 3(i) shall apply.

              (d) Use reasonable efforts to obtain the withdrawal of any order
suspending the effectiveness of a Registration Statement or the lifting of any
suspension of the qualification (or exemption from qualification) of any of the
Registrable Securities for sale in any jurisdiction in which they have been
qualified for sale, in either case at the earliest possible moment.

              (e) If reasonably requested by any Initial Purchaser or any Notice
Holder, as promptly as practicable incorporate in a Prospectus supplement or
post-effective amendment to a Registration Statement such information as the
Initial Purchaser or such Notice Holder shall, on the basis of a written opinion
of nationally-recognized counsel experienced in such matters,

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determine to be required to be included therein by applicable law and make any
required filings of such Prospectus supplement or such post-effective amendment.

              (f) If requested by any Initial Purchaser or any Notice Holder, as
promptly as practicable furnish to each Notice Holder and the Initial
Purchasers, without charge, at least one (1) conformed copy of the Registration
Statement and any amendment thereto, including financial statements but
excluding schedules, all documents incorporated or deemed to be incorporated
therein by reference and all exhibits (unless requested in writing to the
Company by such Notice Holder or the Initial Purchasers, as the case may be).

              (g) During the Effectiveness Period, deliver to each Notice Holder
in connection with any sale of Registrable Securities pursuant to a Registration
Statement, without charge, as many copies of the Prospectus or Prospectuses
relating to such Registrable Securities (including each preliminary prospectus)
and any amendment or supplement thereto as such Notice Holder may reasonably
request; and the Company hereby consents (except during such periods that a
Deferral Notice is outstanding and has not been revoked) to the use of such
Prospectus or each amendment or supplement thereto by each Notice Holder in
connection with any offering and sale of the Registrable Securities covered by
such Prospectus or any amendment or supplement thereto in the manner set forth
therein.

              (h) Prior to any public offering of the Registrable Securities
pursuant to the Shelf Registration Statement, register or qualify or cooperate
with the Notice Holders in connection with the registration or qualification (or
exemption from such registration or qualification) of such Registrable
Securities for offer and sale under the securities or Blue Sky laws of such
jurisdictions within the United States as any Notice Holder reasonably requests
in writing (which request may be included in the Notice and Questionnaire);
prior to any public offering of the Registrable Securities pursuant to the Shelf
Registration Statement, keep each such registration or qualification (or
exemption therefrom) effective during the Effectiveness Period in connection
with such Notice Holder's offer and sale of Registrable Securities pursuant to
such registration or qualification (or exemption therefrom) and do any and all
other acts or things necessary or advisable to enable the disposition in such
jurisdictions of such Registrable Securities in the manner set forth in the
relevant Registration Statement and the related Prospectus; provided, that the
Company will not be required to (i) qualify as a foreign corporation or as a
dealer in securities in any jurisdiction where it would not otherwise be
required to qualify but for this Agreement or (ii) take any action that would
subject it to general service of process in suits or to taxation in any such
jurisdiction where it is not then so subject.

              (i) Upon (A) the issuance by the SEC of a stop order suspending
the effectiveness of the Shelf Registration Statement or the initiation of
proceedings with respect to the Shelf Registration Statement under Section 8(d)
or 8(e) of the Securities Act, (B) the occurrence of any event or the existence
of any fact (a "Material Event") as a result of which any Registration Statement
shall contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading, or any Prospectus shall contain any untrue statement of
a material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, or (C) the occurrence or existence
of any pending corporate development that, in the reasonable discretion

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of the Company, makes it appropriate to suspend the availability of the Shelf
Registration Statement and the related Prospectus, (i) in the case of clause (B)
above, subject to the next sentence, as promptly as practicable prepare and
file, if necessary pursuant to applicable law, a post-effective amendment to
such Registration Statement or a supplement to the related Prospectus or any
document incorporated therein by reference or file any other required document
that would be incorporated by reference into such Registration Statement and
Prospectus so that such Registration Statement does not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading, and
such Prospectus does not contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary to make
the statements therein, in the light of the circumstances under which they were
made, not misleading, as thereafter delivered to the purchasers of the
Registrable Securities being sold thereunder, and, in the case of a
post-effective amendment to a Registration Statement, subject to the next
sentence, use its reasonable efforts to cause it to be declared effective as
promptly as is practicable, and (ii) give notice to the Notice Holders that the
availability of the Shelf Registration Statement is suspended (a "Deferral
Notice") and, upon receipt of any Deferral Notice, each Notice Holder agrees not
to sell any Registrable Securities pursuant to the Registration Statement until
such Notice Holder's receipt of copies of the supplemented or amended Prospectus
provided for in clause (i) above, or until it is advised in writing by the
Company that the Prospectus may be used, and has received copies of any
additional or supplemental filings that are incorporated or deemed incorporated
by reference in such Prospectus. The Company will use all reasonable efforts to
ensure that the use of the Prospectus may be resumed (x) in the case of clause
(A) above, as promptly as is practicable, (y) in the case of clause (B) above,
as soon as, in the sole judgment of the Company, public disclosure of such
Material Event would not be prejudicial to or contrary to the interests of the
Company or, if necessary to avoid unreasonable burden or expense, as soon as
practicable thereafter and (z) in the case of clause (C) above, as soon as, in
the discretion of the Company, such suspension is no longer appropriate. The
Company shall be entitled to exercise its right under this Section 3(i) to
suspend the availability of the Shelf Registration Statement or any Prospectus,
without incurring or accruing any obligation to pay Additional Interest pursuant
to Section 2(e), no more than one (1) time in any three month period or four (4)
times in any twelve month period, and any such period during which the
availability of the Registration Statement and any Prospectus is suspended (the
"Deferral Period") shall, without incurring any obligation to pay Additional
Interest pursuant to Section 2(e), not exceed 30 days; provided, that in the
case of a Material Event relating to an acquisition or a probable acquisition or
financing, recapitalization, business combination or other similar transaction,
the Company may, without incurring any obligation to pay Additional Interest
pursuant to Section 2(e), deliver to Notice Holders a second notice to the
effect set forth above, which shall have the effect of extending the Deferral
Period by up to an additional 30 days, or such shorter period of time as is
specified in such second notice, provided, that the aggregate duration of any
Deferral Periods shall not, without incurring any obligation to pay Additional
Interest pursuant to Section 2(e), exceed 60 days in any three month period or
90 days in any twelve (12) month period.

              (j) If requested in writing in connection with a disposition of
Registrable Securities pursuant to a Registration Statement, make reasonably
available for inspection during normal business hours by a representative for
the Notice Holders of such Registrable Securities and any broker-dealers,
attorneys and accountants retained by such Notice Holders, all relevant

                                       11
<PAGE>

financial and other records, pertinent corporate documents and properties of the
Company and its subsidiaries, and cause the appropriate officers, directors and
employees of the Company and its subsidiaries to make reasonably available for
inspection during normal business hours on reasonable notice all relevant
information reasonably requested by such representative for the Notice Holders
or any such broker-dealers, attorneys or accountants in connection with such
disposition, in each case as is customary for similar "due diligence"
examinations; provided, however, that such persons shall first agree in writing
with the Company that any information that is reasonably and in good faith
designated by the Company in writing as confidential at the time of delivery of
such information shall be kept confidential by such persons and shall be used
solely for the purposes of exercising rights under this Agreement, unless (i)
disclosure of such information is required by court or administrative order or
is necessary to respond to inquiries of regulatory authorities, (ii) disclosure
of such information is required by law (including any disclosure requirements
pursuant to federal securities laws in connection with the filing of any
Registration Statement or the use of any Prospectus referred to in this
Agreement), (iii) such information becomes generally available to the public
other than as a result of a disclosure or failure to safeguard by any such
person or (iv) such information becomes available to any such person from a
source other than the Company and such source is not bound by a confidentiality
agreement, and provided further, that the foregoing inspection and information
gathering shall, to the greatest extent possible, be coordinated on behalf of
all the Notice Holders and the other parties entitled thereto by the counsel
referred to in Section 5.

              (k) Use reasonable efforts to comply with all applicable rules and
regulations of the SEC and make generally available to its securityholders
earning statements (which need not be audited) satisfying the provisions of
Section 11(a) of the Securities Act and Rule 158 thereunder (or any similar rule
promulgated under the Securities Act) no later than 45 days after the end of any
3-month period (or 90 days after the end of any 12-month period if such period
is a fiscal year) commencing on the first day of the first fiscal quarter of the
Company commencing after the effective date of a Registration Statement, which
statements shall cover said periods.

              (l) Cooperate with each Notice Holder to facilitate the timely
preparation and delivery of certificates representing Registrable Securities
sold or to be sold pursuant to a Registration Statement, which certificates
shall not bear any restrictive legends, and cause such Registrable Securities to
be in such denominations as are permitted by the Indenture and registered in
such names as such Notice Holder may request in writing at least two (2)
Business Days prior to any sale of such Registrable Securities.

              (m) Provide a CUSIP number for all Registrable Securities covered
by each Registration Statement not later than the effective date of such
Registration Statement and provide the Trustee and the transfer agent for the
Common Stock with printed certificates for the Registrable Securities that are
in a form eligible for deposit with The Depository Trust Company.

              (n) Provide such information as is required for any filings
required to be made with the National Association of Securities Dealers, Inc.

              (o) Upon (i) the filing of the Initial Registration Statement and
(ii) the effectiveness of the Initial Registration Statement, announce the same,
in each case by release to Reuters Economic Services and Bloomberg Business
News.

                                       12
<PAGE>

       SECTION 4. HOLDER'S OBLIGATIONS. Each Holder agrees, by acquisition of
the Registrable Securities, that no Holder of Registrable Securities shall be
entitled to sell any of such Registrable Securities pursuant to a Registration
Statement or to receive a Prospectus relating thereto, unless such Holder has
furnished the Company with a Notice and Questionnaire as required pursuant to
Section 2(d) hereof (including the information required to be included in such
Notice and Questionnaire) and the information set forth in the next sentence.
Each Notice Holder agrees promptly to furnish to the Company all information
required to be disclosed in order to make the information previously furnished
to the Company by such Notice Holder not misleading and any other information
regarding such Notice Holder and the distribution of such Registrable Securities
as the Company may from time to time reasonably request. Any sale of any
Registrable Securities by any Holder shall constitute a representation and
warranty by such Holder that the information relating to such Holder and its
plan of distribution is as set forth in the Prospectus delivered by such Holder
in connection with such disposition, that such Prospectus does not as of the
time of such sale contain any untrue statement of a material fact relating to or
provided by such Holder or its plan of distribution and that such Prospectus
does not as of the time of such sale omit to state any material fact relating to
or provided by such Holder or its plan of distribution necessary to make the
statements in such Prospectus, in the light of the circumstances under which
they were made, not misleading.

       SECTION 5. REGISTRATION EXPENSES. The Company shall bear all fees and
expenses incurred in connection with the performance by the Company of its
obligations under Sections 2 and 3 of this Agreement whether or not any of the
Registration Statements are declared effective. Such fees and expenses shall
include, without limitation, (i) all registration and filing fees (including,
without limitation, fees and expenses (x) with respect to filings required to be
made with the National Association of Securities Dealers, Inc. and (y) of
compliance with federal and state securities or Blue Sky laws (including,
without limitation, reasonable fees and disbursements of the counsel specified
in the next sentence in connection with Blue Sky qualifications of the
Registrable Securities under the laws of such jurisdictions as the Notice
Holders of a majority of the Registrable Securities being sold pursuant to a
Registration Statement may designate), (ii) printing expenses (including,
without limitation, expenses of printing certificates for Registrable Securities
in a form eligible for deposit with The Depository Trust Company), (iii)
duplication expenses relating to copies of any Registration Statement or
Prospectus delivered to any Holders hereunder, (iv) fees and disbursements of
counsel for the Company in connection with the Shelf Registration Statement, (v)
reasonable fees and disbursements of the Trustee and its counsel and of the
registrar and transfer agent for the Common Stock and (vi) Securities Act
liability insurance obtained by the Company in its sole discretion. In addition,
the Company shall bear or reimburse the Notice Holders for the reasonable fees
and disbursements of one firm of legal counsel for the Holders, which shall
initially be Gray Cary Ware & Freidenrich LLP, but which may, with the written
consent of the Initial Purchasers (which shall not be unreasonably withheld), be
another nationally recognized law firm experienced in securities law matters
designated by the Company. In addition, the Company shall pay the internal
expenses of the Company (including, without limitation, all salaries and
expenses of officers and employees performing legal or accounting duties), the
expense of any annual audit, the fees and expenses incurred in connection with
the listing of the Registrable Securities on any securities exchange on which
similar securities of the Company are then listed and the fees and expenses of
any person, including special experts, retained by the

                                       13
<PAGE>

Company. Notwithstanding the provisions of this Section 5, each seller of
Registrable Securities shall pay selling expenses and all registration expenses
to the extent required by applicable law.

       SECTION 6. INDEMNIFICATION.

              (a) Indemnification by the Company. The Company shall indemnify
and hold harmless each Notice Holder and each person, if any, who controls any
Notice Holder (within the meaning of either Section 15 of the Securities Act or
Section 20 of the Exchange Act) from and against any losses, liabilities,
claims, damages and expenses (including, without limitation, any legal or other
expenses reasonably incurred in connection with defending or investigating any
such action or claim) (collectively, "Losses"), arising out of or based upon any
untrue statement or alleged untrue statement of a material fact contained in any
Registration Statement or Prospectus or in any amendment or supplement thereto
or in any preliminary prospectus, or arising out of or based upon any omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, provided,
however, that the Company shall not be liable in any such case to the extent
that any such Losses arise out of or are based upon an untrue statement or
alleged untrue statement contained in or omission or alleged omission from any
of such documents in reliance upon and conformity with any of the information
relating to the Holders furnished to the Company in writing by a Holder
expressly for use therein; provided further, that the indemnification contained
in this paragraph shall not inure to the benefit of any Holder of Registrable
Securities (or to the benefit of any person controlling such Holder) on account
of any such Losses arising out of or based upon an untrue statement or alleged
untrue statement or omission or alleged omission made in any preliminary
prospectus provided in each case the Company has performed its obligations under
Section 3(a) hereof if either (A) (i) such Holder failed to send or deliver a
copy of the Prospectus with or prior to the delivery of written confirmation of
the sale by such Holder to the person asserting the claim from which such Losses
arise and (ii) the Prospectus would have corrected such untrue statement or
alleged untrue statement or such omission or alleged omission, or (B) (x) such
untrue statement or alleged untrue statement, omission or alleged omission is
corrected in an amendment or supplement to the Prospectus and (y) having
previously been furnished by or on behalf of the Company with copies of the
Prospectus as so amended or supplemented, such Holder thereafter fails to
deliver such Prospectus as so amended or supplemented, with or prior to the
delivery of written confirmation of the sale of a Registrable Security to the
person asserting the claim from which such Losses arise.

              (b) Indemnification by Holders of Registrable Securities. Each
Holder agrees severally and not jointly to indemnify and hold harmless the
Company and its respective directors and officers, and each person, if any, who
controls the Company (within the meaning of either Section 15 of the Securities
Act or Section 20 of the Exchange Act) or any other Holder, from and against all
Losses arising out of or based upon any untrue statement or alleged untrue
statement of a material fact contained in any Registration Statement or
Prospectus or in any amendment or supplement thereto or in any preliminary
prospectus, or arising out of or based upon any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, to the extent, but only to the extent,
that such untrue statement or alleged untrue statement or omission or alleged
omission was made in reliance upon and in conformity with information furnished
to the Company by such Holder expressly for use in such Registration Statement
or Prospectus or amendment or

                                       14
<PAGE>

supplement thereto. In no event shall the liability of any selling Holder of
Registrable Securities hereunder be greater in amount than the dollar amount of
the proceeds received by such Holder upon the sale of the Registrable Securities
pursuant to the Registration Statement giving rise to such indemnification
obligation.

              (c) Conduct of Indemnification Proceedings. In case any proceeding
(including any governmental investigation) shall be instituted involving any
person in respect of which indemnity may be sought pursuant to either of the two
preceding paragraphs, such person (the "indemnified party") shall promptly
notify the person against whom such indemnity may be sought (the "indemnifying
party") in writing and the indemnifying party, upon request of the indemnified
party, shall retain counsel reasonably satisfactory to the indemnified party to
represent the indemnified party and any others the indemnifying party may
designate in such proceeding and shall pay the reasonable fees and disbursements
of such counsel related to such proceeding. In any such proceeding, any
indemnified party shall have the right to retain its own counsel, but the fees
and expenses of such counsel shall be at the expense of such indemnified party
unless (i) the indemnifying party and the indemnified party shall have mutually
agreed to the retention of such counsel or (ii) the named parties to any such
proceeding (including any impleaded parties) include both the indemnifying party
and the indemnified party and representation of both parties by the same counsel
would be inappropriate due to actual or potential differing interests between
them. It is understood that the indemnifying party shall not, in respect of the
legal expenses of any indemnified party in connection with any proceeding or
related proceedings in the same jurisdiction, be liable for the fees and
expenses of more than one separate firm (in addition to any local counsel) for
all indemnified parties, and that all such fees and expenses shall be reimbursed
as they are incurred. Such separate firm shall be designated in writing by, in
the case of parties indemnified pursuant to Section 6(a), the Holders of a
majority (with Holders of Debentures deemed to be the Holders, for purposes of
determining such majority, of the number of shares of Underlying Common Stock
into which such Debentures are or would be convertible or exchangeable as of the
date on which such designation is made) of the Registrable Securities covered by
the Registration Statement held by Holders that are indemnified parties pursuant
to Section 6(a) and, in the case of parties indemnified pursuant to Section
6(b), the Company. The indemnifying party shall not be liable for any settlement
of any proceeding effected without its written consent, but if settled with such
consent or if there be a final judgment for the plaintiff, the indemnifying
party agrees to indemnify the indemnified party from and against any loss or
liability by reason of such settlement or judgment. Notwithstanding the
foregoing sentence, if at any time an indemnified party shall have requested an
indemnifying party to reimburse the indemnified party for fees and expenses of
counsel and the indemnified party would be entitled thereto pursuant to the
second and third sentences of this paragraph, the indemnifying party agrees that
it shall be liable for any settlement of any proceeding effected without its
written consent if (i) such settlement is entered into more than 45 days after
receipt by such indemnifying party of the aforesaid request and (ii) such
indemnifying party shall not have reimbursed the indemnified party in accordance
with such request prior to the date of such settlement. No indemnifying party
shall, without the prior written consent of the indemnified party, effect any
settlement of any pending or threatened proceeding in respect of which any
indemnified party is or could have been a party and indemnity could have been
sought hereunder by such indemnified party, unless such settlement includes an
unconditional release of such indemnified party from all liability on claims
that are the subject matter of such proceeding.

                                       15
<PAGE>

              (d) Contribution. To the extent that the indemnification provided
for in this Section 6 is unavailable to an indemnified party under Section 6(a)
or 6(b) hereof in respect of any Losses or is insufficient to hold such
indemnified party harmless, then each applicable indemnifying party, in lieu of
indemnifying such indemnified party, shall contribute to the amount paid or
payable by such indemnified party as a result of such Losses (i) in such
proportion as is appropriate to reflect the relative benefits received by the
indemnifying party or parties on the one hand and the indemnified party or
parties on the other hand or (ii) if the allocation provided by clause (i) above
is not permitted by applicable law, in such proportion as is appropriate to
reflect not only the relative benefits referred to in clause (i) above but also
the relative fault of the indemnifying party or parties on the one hand and of
the indemnified party or parties on the other hand in connection with the
statements or omissions that resulted in such Losses, as well as any other
relevant equitable considerations. Benefits received by the Company shall be
deemed to be equal to the total net proceeds from the initial placement pursuant
to the Purchase Agreement (before deducting expenses) of the Registrable
Securities to which such Losses relate. Benefits received by any Holder shall be
deemed to be equal to the value of receiving Registrable Securities that are
registered under the Securities Act. The relative fault of the Holders on the
one hand and the Company on the other hand shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a material
fact or the omission or alleged omission to state a material fact relates to
information supplied by the Holders or by the Company, and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission. The Holders' respective obligations to contribute
pursuant to this paragraph are several in proportion to the respective number of
Registrable Securities they have sold pursuant to a Registration Statement, and
not joint.

       The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 6(d) were determined by pro rata
allocation or by any other method or allocation that does not take into account
the equitable considerations referred to in the immediately preceding paragraph.
The amount paid or payable by an indemnified party as a result of the Losses
referred to in the immediately preceding paragraph shall be deemed to include,
subject to the limitations set forth above, any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim. Notwithstanding this Section 6(d), an
indemnifying party that is a selling Holder of Registrable Securities shall not
be required to contribute any amount in excess of the amount by which the total
price at which the Registrable Securities sold by such indemnifying party and
distributed to the public were offered to the public exceeds the amount of any
damages that such indemnifying party has otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation.

              (e) The indemnity, contribution and expense reimbursement
obligations of the parties hereunder shall be in addition to any liability any
indemnified party may otherwise have hereunder, under the Purchase Agreement or
otherwise.

              (f) The indemnity and contribution provisions contained in this
Section 6 shall remain operative and in full force and effect regardless of (i)
any termination of this

                                       16
<PAGE>

Agreement, (ii) any investigation made by or on behalf of any Holder or any
person controlling any Holder, or the Company, or the Company's officers or
directors or any person controlling the Company and (iii) the sale of any
Registrable Securities by any Holder.

       SECTION 7. INFORMATION REQUIREMENTS.

       The Company covenants that, if at any time before the end of the
Effectiveness Period the Company is not subject to the reporting requirements of
the Exchange Act, it will cooperate with any Holder of Registrable Securities
and take such further reasonable action as any Holder of Registrable Securities
may reasonably request in writing (including, without limitation, making such
reasonable representations as any such Holder may reasonably request), all to
the extent required from time to time to enable such Holder to sell Registrable
Securities without registration under the Securities Act within the limitation
of the exemptions provided by Rule 144 and Rule 144A under the Securities Act
and customarily taken in connection with sales pursuant to such exemptions. Upon
the written request of any Holder of Registrable Securities, the Company shall
deliver to such Holder a written statement as to whether it has complied with
such filing requirements, unless such a statement has been included in the
Company's most recent report filed pursuant to Section 13 or Section 15(d) of
the Exchange Act. Notwithstanding the foregoing, nothing in this Section 7 shall
be deemed to require the Company to register any of its securities (other than
the Common Stock) under any section of the Exchange Act.

       SECTION 8. MISCELLANEOUS.

              (a) No Conflicting Agreements. The Company is not, as of the date
hereof, a party to, nor shall it, on or after the date of this Agreement, enter
into, any agreement with respect to its securities that conflicts with the
rights granted to the Holders of Registrable Securities in this Agreement. The
Company represents and warrants that the rights granted to the Holders of
Registrable Securities hereunder do not in any way conflict with the rights
granted to the holders of the Company's securities under any other agreements.

              (b) Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given, unless the Company has obtained the written consent of Holders
of a majority of the then outstanding Underlying Common Stock constituting
Registrable Securities (with Holders of Debentures deemed to be the Holders, for
purposes of this Section, of the number of outstanding shares of Underlying
Common Stock into which such Debentures are or would be convertible or
exchangeable as of the date on which such consent is requested). Notwithstanding
the foregoing, a waiver or consent to depart from the provisions hereof with
respect to a matter that relates exclusively to the rights of Holders of
Registrable Securities whose securities are being sold pursuant to a
Registration Statement and that does not directly or indirectly affect the
rights of other Holders of Registrable Securities may be given by Holders of at
least a majority of the Registrable Securities being sold by such Holders
pursuant to such Registration Statement; provided, that the provisions of this
sentence may not be amended, modified, or supplemented except in accordance with
the provisions of the immediately preceding sentence. Each Holder of Registrable
Securities outstanding at the time of any such amendment, modification,
supplement, waiver or consent or thereafter shall be bound by any such
amendment, modification,

                                       17
<PAGE>

supplement, waiver or consent effected pursuant to this Section 8(b), whether or
not any notice, writing or marking indicating such amendment, modification,
supplement, waiver or consent appears on the Registrable Securities or is
delivered to such Holder.

              (c) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand delivery, by telecopier, by
courier guaranteeing overnight delivery or by first-class mail, return receipt
requested, and shall be deemed given (i) when made, if made by hand delivery,
(ii) upon confirmation, if made by telecopier, (iii) one (1) Business Day after
being deposited with such courier, if made by overnight courier or (iv) on the
date indicated on the notice of receipt, if made by first-class mail, to the
parties as follows:

                     (w)    if to a Holder of Registrable Securities, at the
                            most current address given by such Holder to the
                            Company in a Notice and Questionnaire or any
                            amendment thereto;

                     (x)    if to the Company, to:

                            Brocade Communications Systems, Inc.
                            1745 Technology Drive
                            San Jose, CA 95110
                            Attention: Chief Financial Officer
                            Telecopy No.: (408) 487-8101

                            and

                            Wilson Sonsini Goodrich & Rosati
                            650 Page Mill Road
                            Palo Alto, California 94304-1050
                            Attention: Katharine Martin, Esq.
                            Telecopy No.: (650) 493-6811

                     (y)    if to the Initial Purchasers, to:

                            Morgan Stanley & Co.  Incorporated
                            1585 Broadway
                            New York, New York  10036
                            Attention: Equity Capital Markets
                            Telecopy No.: (212) 761-0356

                            and

                            Gray Cary Ware & Freidenrich LLP
                            400 Hamilton Avenue
                            Palo Alto, California 94301-1825
                            Attention: Gregory Gallo, Esq.
                            Telecopy No.: (650) 833-2001

                                       18
<PAGE>

or to such other address as such person may have furnished to the other persons
identified in this Section 8(c) in writing in accordance herewith.

              (d) Approval of Holders. Whenever the consent or approval of
Holders of a specified percentage of Registrable Securities is required
hereunder, Registrable Securities held by the Company or its affiliates (as such
term is defined in Rule 405 under the Securities Act) (other than the Initial
Purchasers or subsequent Holders of Registrable Securities if such subsequent
Holders are deemed to be such affiliates solely by reason of their holdings of
such Registrable Securities) shall not be counted in determining whether such
consent or approval was given by the Holders of such required percentage.

              (e) Successors and Assigns. Any person who purchases any
Registrable Securities from the Initial Purchasers shall be deemed, for purposes
of this Agreement, to be an assignee of the Initial Purchasers. This Agreement
shall inure to the benefit of and be binding upon the successors and assigns of
each of the parties and shall inure to the benefit of and be binding upon each
Holder of any Registrable Securities.

              (f) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be original and all of which taken together
shall constitute one and the same agreement.

              (g) Headings. The headings in this Agreement are for convenience
of reference only and shall not limit or otherwise affect the meaning hereof.

              (h) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.

              (i) Severability. If any term provision, covenant or restriction
of this Agreement is held to be invalid, illegal, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions set forth herein
shall remain in full force and effect and shall in no way be affected, impaired
or invalidated thereby, and the parties hereto shall use their best efforts to
find and employ an alternative means to achieve the same or substantially the
same result as that contemplated by such term, provision, covenant or
restriction, it being intended that all of the rights and privileges of the
parties shall be enforceable to the fullest extent permitted by law.

              (j) Entire Agreement. This Agreement is intended by the parties as
a final expression of their agreement and is intended to be a complete and
exclusive statement of the agreement and understanding of the parties hereto in
respect of the subject matter contained herein and the registration rights
granted by the Company with respect to the Registrable Securities. Except as
provided in the Purchase Agreement, there are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein,
with respect to the registration rights granted by the Company with respect to
the Registrable Securities. This Agreement supersedes all prior agreements and
undertakings among the parties with respect to such registration rights. No
party hereto shall have any rights, duties or obligations other than

                                       19
<PAGE>

those specifically set forth in this Agreement. In no event will such methods of
distribution take the form of an underwritten offering of the Registrable
Securities without the prior agreement of the Company.

              (k) Termination. This Agreement and the obligations of the parties
hereunder shall terminate upon the end of the Effectiveness Period, except for
any liabilities or obligations under Section 4, 5 or 6 hereof and the
obligations to make payments of and provide for Additional Interest under
Section 2(e) hereof to the extent such damages accrue prior to the end of the
Effectiveness Period, each of which shall remain in effect in accordance with
its terms.

                                       20
<PAGE>

       IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.

                                        BROCADE COMMUNICATIONS
                                        SYSTEMS, INC.

                                        By: /s/ Antonio Canova
                                            ------------------------------------
                                            Name: Antonio Canova
                                            Title: Chief Financial Officer

Confirmed and accepted as of
the date first above written:

MORGAN STANLEY & CO. INCORPORATED
GOLDMAN, SACHS & CO.
SALOMON SMITH BARNEY INC.
MERRILL LYNCH, PIERCE FENNER
     AND SMITH INCORPORATED

By: Morgan Stanley & Co. Incorporated

By: /s/ David A. Schwarzbach
    ------------------------------------
    Name: David A. Schwarzbach
    Title: Vice President<PAGE>
                                                                   Exhibit 10.08

                          CADENCE DESIGN SYSTEMS, INC.

                         1994 DEFERRED COMPENSATION PLAN

                              AMENDED AND RESTATED

                            EFFECTIVE JANUARY 1, 2001

<PAGE>

                          CADENCE DESIGN SYSTEMS, INC.
                         1994 DEFERRED COMPENSATION PLAN
                              AMENDED AND RESTATED
                            EFFECTIVE JANUARY 1, 2001

        CADENCE DESIGN SYSTEMS, INC., a Delaware Corporation (referred to
hereafter as the "Employer") established effective October 1, 1994 and amended
and restated effective October 1, 1996, this Cadence Design Systems, Inc. 1994
Deferred Compensation Plan (the "Plan"), an unfunded plan for the purpose of
providing deferred compensation for a select group of management and highly
compensated executives. The Employer hereby amends and restates the Plan in its
entirety effective January 1, 2001 to reflect prior and new amendments to the
Plan.

                                    RECITALS

        WHEREAS, those employees identified by the Compensation Committee of the
Board of Directors of the Employer or any other committee designated by the
Board of Directors of the Employer to administer this Plan in accordance with
Section 8 hereof (hereinafter referred to as the "Committee") as eligible to
participate in this Plan (each of whom are referred to hereafter as the
"Employee" or collectively as the "Employees") are employed by Employer;

        WHEREAS, Employer previously adopted an unfunded deferred compensation
plan and the Employees desire the Employer to continue to pay certain deferred
compensation and/or related benefits to or for the benefit of Employees, or a
designated Beneficiary or both; and

        WHEREAS, Employer believes it is in the best interest of Plan
participants and beneficiaries to amend and restate the Plan;

        NOW, THEREFORE, the Employer hereby amends and restates the Plan
effective as of January 1, 2001.

                                   SECTION 1

                                   DEFINITIONS

        1.1 "Account" shall mean the separate account(s) established under this
Plan and the Trust for each participating Employee. Employer shall furnish each
participant with a statement of his or her account balance at least annually.

        1.2 "Beneficiary" shall mean the Beneficiary designated by the Employee
to receive Employee's deferred compensation benefits in the event of his or her
death.

        1.3 "Change in Control" shall have the meaning set forth in Section 5.1
of the Plan.

        1.4 "Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time, and the rules and regulations promulgated thereunder.

        1.5 "Committee" shall mean the Compensation Committee of the Board of
Directors of the Employer or any other committee designated by the Board of
Directors of the Employer to administer this Plan in accordance with Section 8
hereof.

<PAGE>

        1.6 "Compensation" shall, for the period on or before April 1, 1998,
mean the base salary and cash bonuses described in Section 3.1. On or after
April 1, 1998, "Compensation" shall mean the base salary, cash bonuses, and
director fees described in Section 3.1.

        1.7 "Effective Date" of the Plan shall mean October 1, 1994, unless
otherwise specified by the Employer in a corporate resolution approving and
adopting this Plan. The effective date of this amendment and restatement shall
be January 1, 2001.

        1.8 "Eligible Compensation" shall mean, for the period prior to April 1,
1998, projected annual compensation from the Employer, determined on an annual
basis by the Employer at or before the beginning of the Plan Year, which may
consist of salary, bonus, and/or incentive payments, determined before any
deductions under any qualified plan of the Employer (including a Section 401(k)
plan or a Section 125 plan) and excluding any special or non-recurring
compensatory payments such as moving or relocation bonuses or automobile
allowances. Effective on and after April 1, 1998, the term shall mean projected
annual compensation from the Employer determined on an annual basis by the
Employer at or before the beginning of the Plan, which may consist of salary,
bonus, and, and/or incentive payments, determined before any deductions under
any qualified plan of the Employer (including a Section 401(k) plan or a Section
125 plan) and excluding any special or non-recurring compensatory payments such
as moving or relocation bonuses or automobile allowances.

        1.9 "Employee" shall, for the period before April 1, 1998, mean, each
employee of Employer. Effective on or after April 1, 1998, the term shall also
include each Non-Employee Director. The term shall also include reference to an
Employee's Beneficiary where the context so requires.

        1.10 "Employer" shall mean Cadence Design Systems, Inc., a Delaware
corporation, and any successor organization thereto, and any Subsidiaries, as
defined in Section 7.3, of the Company.

        1.11 "Employer Contributions" shall mean the Employer's discretionary
contribution, if any, pursuant to Section 3.1(b) of the Plan.

        1.12 "Hardship" shall have the meaning set forth in Section 3.5 of the
Plan.

        1.13 "Non-Employee Director" shall mean a director of the Employer who
is not otherwise an employee of the Employer.

        1.14 "Plan Year" shall mean the year beginning each January 1 and ending
December 31; notwithstanding the foregoing, the initial Plan Year shall mean the
period beginning with the Effective Date and ending on December 31, 1994.

        1.15 "Plan" shall mean the Cadence Design Systems, Inc. 1994 Deferred
Compensation Plan, including any amendments thereto.

        1.16 "Permanent Disability" shall mean that the Employee is unable to
engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment that can be expected to result in
death or otherwise meets the definition of

<PAGE>

"Permanent Disability" as set forth in the Employer's Long Term Disability Plan.
An Employee will not be considered to have a Permanent Disability unless he or
she furnishes proof of such condition sufficient to satisfy the Employer, in its
sole discretion.

        1.17 "Subsidiary" shall mean any corporation (other than the Employer)
in an unbroken chain of corporations or other entities beginning with the
Employer, if each of the entities other than the last entity in the unbroken
chain owns stock, partnership rights or other ownership interest possessing
fifty (50) percent or more of the total combined voting power of all classes of
stock, partnership rights or other ownership interest in one of the other
entities in such chain.

        1.18 "Tality" shall mean the entity formed to own and operate Cadence
Design Systems, Inc.'s electronics design services group business under the name
"Tality Corporation" or any other name.

        1.19 "Trust" or "Trust Agreement" shall mean the Cadence Design Systems,
Inc. 1994 Deferred Compensation Plan Rabbi Trust Agreement, including any
amendments thereto, entered into between the Employer and the Trustee to carry
out the provisions of the Plan.

        1.20 "Trust Fund" shall mean the cash and other assets and/or properties
held and administered by Trustee pursuant to the Trust to carry out the
provisions of the Plan.

        1.21 "Trustee" shall mean the designated Trustee acting at any time
under the Trust.

                                   SECTION 2

                                   ELIGIBILITY

        2.1 ELIGIBILITY. Eligibility to participate in the Plan shall be limited
to Employees of the Employer who (a) have Eligible Compensation of at least
$150,000 for the Plan Year, (b) are classified as officers, vice-presidents,
directors, or an equivalent title, and (c) have been selected by the Committee
to participate in the Plan. The Committee shall designate Employees who shall be
covered by this Plan in a separate Acknowledgment (in the form attached hereto
as Appendix 1) for each such Employee. Participation in the Plan shall commence
as of the date such Acknowledgment is signed by the Employee and delivered to
the Employer, provided that deferral of compensation under the Plan shall not
commence until the Employee has complied with the election procedures set forth
in Section 3.3. Nothing in the Plan or in the Acknowledgment should be construed
to require any contributions to the Plan on behalf of the Employee by Employer.

        Notwithstanding the foregoing, Non-Employee Directors shall be eligible
to participate in the Plan and a Non-Employee Director shall commence
participation in the Plan as of the later of April 1, 1998 or the date the
Non-Employee Director first becomes a Non-Employee Director, provided that
deferral of Compensation under the Plan shall not commence until the
Non-Employee Director has complied with the election procedures set forth in
Section 3.3.

<PAGE>

                                   SECTION 3

                              DEFERRED COMPENSATION

3.1     DEFERRED COMPENSATION.

            (a) Each participating Employee may elect, in accordance with
Section 3.3 of this Plan, to defer semi-annually the receipt of a portion of the
Compensation for active service otherwise payable to him or her by Employer
during each semi-annual period or portion of a semi-annual period that the
Employee shall be employed by the Employer. Any Compensation deferred by
Employee pursuant to Section 3.3 shall be recorded by the Employer in an
Account, maintained in the name of the Employee, which Account shall be credited
with a dollar amount equal to the total amount of Compensation deferred during
each semi-annual period under the Plan, together with earnings thereon credited
in accordance with Section 3.7. The amount or percentage of Compensation that
Employee elects to defer under Section 3.3 will remain constant for the
semi-annual period and shall not be subject to change during such semi-annual
period. Effective April 1, 1998, each such deferral election as to "base salary"
or "director's fees" or discontinuance of a deferral election as to "base
salary" or "director's fees" will continue in force for each successive year or
semi-annual period, as appropriate, until or unless suspended or modified by the
filing of a subsequent election with the Employer by the Employee or
Non-Employee Director in accordance with Section 3.3 of the Plan. Each deferral
election as to an Employee's "cash bonus" shall continue in force only for the
single semi-annual period in which it is paid, regardless of the period of time
as to which it is awarded, and shall not apply to any successive semi-annual
periods. Any deferral election with respect to a "cash bonus" must be made prior
to the time the amount of the bonus is determined, prior to the end of the
period of time as to which the bonus is awarded, and at a time that the amount
of any such bonus remains substantially uncertain. All deferrals pursuant to
this Section 3.1 shall be fully vested at all times. Effective April 1, 1998,
deferral elections shall be subject to minimum dollar and maximum percentage
amount limits as follows: (i) the minimum semi-annual deferral amount is $2,500
(prior to July 1, 1998, the minimum annual deferral amount was $5,000), which
shall be withheld from the Employee's or Non-Employee Director's Compensation,
and (ii) the maximum deferral percentage amount is 80% of the Employee's "base
salary," 100% of the Employee's "cash bonus," and 100% of the Non-Employee
Director's "director's fees." For purposes of the Plan, "base salary" for a
given semi-annual period means an "Employee's regular compensation payable
during the semi-annual period, excluding bonuses, commissions, overtime,
incentive payments, non-monetary awards, compensation deferred pursuant to all
Section 125 (cafeteria) or Section 401(k) (savings) plans of the Employer and
other special compensation, and reduced by the tax withholding obligations
imposed on the Employer and any other withholding requirements imposed by law
with respect to such amounts. For purposes of the Plan, "cash bonus" shall mean
amounts (if any) awarded under the bonus policies maintained by the Employer and
any commissions earned on sales. For purposes of the Plan, "director's fees" for
a given semi-annual period means the annual retainer, per meeting fees,
committee meeting fees, and consulting fees payable during the semi-annual
period. Except as otherwise expressly provided herein, this Section 3.1(a) is
effective as of July 1, 1998.

            (b) Employer shall not be obligated to make any other contribution
to the Plan on behalf of any Employee at any time. Employer may make Employer
Contributions to the

<PAGE>

Plan on behalf of one or more Employees. Employer Contributions, if any, made to
Accounts of Employees shall be determined in the sole and absolute discretion of
the Employer, and may be made without regard to whether the Employee to whose
Account such contribution is credited has made, or is making, contributions
pursuant to Section 3.1(a). The Employer shall not be bound or obligated to
apply any specific formula or basis for calculating the amount of any Employer
Contributions and Employer shall have sole and absolute discretion as to the
allocation of Employer Contributions among participating Employee Accounts. The
use of any particular formula or basis for making an Employer Contribution in
one year shall not bind or obligate the Employer to use such formula or basis in
any other year. Employer Contributions may be subject to a substantial risk of
forfeiture in accordance with the terms of a vesting schedule, which may be
selected by the Employer in its sole and absolute discretion.

            (c) Amounts deferred under the Plan shall be calculated and withheld
from the Employee's base salary and/or cash bonus after such compensation has
been reduced to reflect salary reduction contributions to the Employer's Code
Section 125 (cafeteria) and Code Section 401(k) (savings) plans, but before any
reductions for contributions to the Code Section 423 (employee stock purchase)
plan.

            (d) Effective April 1, 2000, the Committee in its sole discretion
may direct the Trustee to accept the transfer of funds held in trust under the
Cadence Design Systems, Inc. 1996 Deferred Compensation Venture Investment Trust
Agreement ("Telos Trust"), for a participant in the Cadence Design Systems, Inc.
1996 Deferred Compensation Venture Investment Plan ("Telos Plan"), which is an
unfunded nonqualified deferred compensation plan for a select group of
management and highly compensated executives of the Company, in which case the
transferred funds shall be held by the Trustee under and be subject to the terms
of the Plan and invested and accounted for as directed by the Committee except
as otherwise provided in Section 3.2(e). Such amounts transferred from the Telos
Trust to the Trust ("Transferred Funds") may not be returned to the Telos Plan
or Telos Trust. The transfer of such Transferred Funds shall not cause any of
the participant's rights to a distribution under the Plan or the Telos Plan
(including the Transferred Funds) to be a secured right to a distribution under
either plan.

        3.2 PAYMENT OF ACCOUNT BALANCES.

            (a) Effective July 1, 1998, the Employee shall elect whether he or
she will receive distribution of his or her entire Account, subject to tax
withholding requirements, (i) upon reaching a specified age, (ii) upon passage
of a specified number of years, (iii) upon termination of employment of Employee
with Employer, (iv) upon the earlier to occur of (A) termination of employment
of Employee with Employer or (B) passage of a specified number of years or
attainment of a specified age, or (v) upon the later to occur of (A) termination
of employment of Employee with Employer or (B) passage of a specified number of
years or attainment of a specified age, as elected by Employee in accordance
with the form established by the Committee. Such form may permit an election
among some or all of the alternatives listed in this Section 3.2(a), as
determined in the Committee's sole discretion. A designation of the time of
distribution shall be required as a condition of participation under this Plan.
The Employee shall also elect to receive all amounts payable to him or her in a
lump sum or in equal monthly installments over a designated period of five or
ten years, pursuant to the provisions of Section 3.2(e). These elections shall
be made in accordance with Section 3.4 of this Plan.

<PAGE>

            (b) Distributions shall be made to the maximum extent allowable
under the election made by Employee, except that no distribution shall be made
to the extent that the receipt of such distribution, when combined with the
receipt of all other "applicable employee remuneration" (as defined in Code
Section 162(m)(4)) would cause any remuneration received by the Employee to be
nondeductible by the Employer under Code Section 162(m)(1). The portion of any
distributable amount that is not distributed by operation of this Section 3.2(b)
shall be distributed in subsequent years in the manner elected by the Employee
until the Employee's Account has been fully liquidated. The commencement date of
the lump sum payment or the five- or ten-year period (whichever is applicable)
shall be automatically extended, when necessary to satisfy the requirements of
this subsection, for one-year periods until all Account balances have been
distributed in the manner elected by the Employee.

            (c) Effective July 1, 1998, upon termination of Employee's
employment with Employer by reason of death or Permanent Disability prior to the
time when payment of Account balances otherwise would commence under the
provisions of Section 3.2(a), Employee or Employee's designated Beneficiary will
be entitled to receive all amounts credited to the Account of Employee as of the
date of his or her death or Permanent Disability (notwithstanding any contrary
election to receive distributions under the first sentence of Section 3.2(a)).
Upon termination of Employee's employment with Employer by reason other than
death or Permanent Disability prior to the date when payment of Account balances
otherwise would commence under the provisions of Section 3.2(a), the Employer
may, in the sole discretion of the Committee, distribute to Employee or
Employee's designated Beneficiary all amounts credited to the Employee's Account
as of the date of such termination (notwithstanding any contrary election to
receive distributions under the first sentence of Section 3.2(a)). Said amounts
shall be payable in the form determined pursuant to the provisions of Section
3.2(e).

            (d) Upon the death of Employee prior to complete distribution to him
or her of the entire balance of his or her Account (and after the date of
termination of employment with Employer), the balance of his or her Account on
the date of death shall be payable to Employee's designated Beneficiary pursuant
to Section 3.2(e). Effective July 1, 1998, notwithstanding any other provision
of the Plan to the contrary, the Employee's designated Beneficiary may receive
the distribution of the remaining portion of such deceased Employee's Account in
the form of a lump sum if the Beneficiary requests such a distribution and the
Committee, in its sole discretion, consents to such a distribution.

            (e) The Employer shall distribute or direct distribution of the
balance of amounts previously credited to Employee's Account, in a lump sum, or
in monthly installments over a period of five (5) years or ten (10) years as
Employee shall designate. A designation of the form of distribution shall be
required as a condition of participation under this Plan. Distribution of the
lump sum or the first installment shall be made or commence within ninety (90)
days following the date specified in the first sentence of Section 3.2(a), or as
otherwise provided in 3.2(c). Subsequent installments, if any, shall be made on
the first day of each month following the last installment as determined by
Employer. The amount of each installment shall be calculated by dividing the
Account balance as of the date of the distribution by the number of installments
remaining pursuant to the Employee's distribution election. Each such
installment, if any, shall take into account earnings credited to the balance of
the Account remaining unpaid. The Employee's distribution election shall be made
on a form provided by Employer.

<PAGE>

            Notwithstanding any provision herein to the contrary, effective
April 1, 2000, Transferred Funds from the Telos Trust under the Telos Plan to
the Trust for the benefit of a participant in the Telos Plan, shall be
distributable under the Plan according to the terms of the elections permitted
and made by the participant under the Telos Plan unless subsequently modified by
the participant as permitted under this Plan.

            (f) Effective April 1, 1998, for purposes of this Section 3.2,
reference to termination of employment shall also include termination of service
as a Non-Employee Director of the Employer (except in the event such termination
is due to becoming an Employee).

        3.3 ELECTION TO DEFER COMPENSATION. Each election of an Employee to
defer compensation as provided in Section 3.1 of this Plan shall be in writing,
signed by the Employee, and delivered to Employer, together with all other
documents required under the provisions of this Plan, within such time as
determined by the Committee and communicated to those Employees who are eligible
to participate in the Plan. Such deferral elections must be delivered to
Employer prior to the beginning of the Plan Year with respect to which the
Compensation to be deferred is otherwise payable to Employee. Provided, however,
that effective April 1, 1998, an Employee who is hired or promoted to a position
of eligibility for participation in the Plan during a Plan Year (effective
January 1, 2001, on or before the first business day of a semi-annual period) or
a Non-Employee Director who is elected to become a Non-Employee Director shall
have thirty (30) days from the date of notification of eligibility for
participation in the Plan in which to submit the required election documents for
the then current semi-annual period. Any deferral election made by Employee
shall be irrevocable with respect to any Compensation covered by such election,
including Compensation payable in the semi-annual period in which the election
suspending or modifying the prior deferral election is delivered to Employer.
Notwithstanding the foregoing, with respect to cash bonuses payable to an
Employee for the year ended December 31, 1996, but which will not be paid to the
Employee until after January 1, 1997, the Employee may make a separate deferral
election with respect to, or revise a previous deferral election with respect
to, such cash bonuses until such time on or before December 31, 1996 as
determined by the Committee, so long as at that time the amount of any such
bonus has not yet been determined and remains substantially uncertain. The
Employer shall withhold the amount or percentage of base salary specified to be
deferred in equal amounts for each payroll period and shall withhold the amount
or percentage of each cash bonus specified to be deferred at the time or times
such bonus is or otherwise would be paid to the Employee. The election to defer
Compensation shall be made on the form provided by Employer. Effective April 1,
1998, the Employer shall withhold the amount or percentage of director's fees
specified to be deferred at the time or times such director's fees are or
otherwise would be paid to the Non-Employee Director. Notwithstanding the
foregoing, with respect to Compensation payable to a Non-Employee Director for
the Plan Year ending December 31, 1998, but which will not be paid to the
Non-Employee Director until after March 31, 1998, the Non-Employee Director may
make a deferral election with respect to such Compensation until March 31, 1998.
Notwithstanding any other provision of the Plan to the contrary, with respect to
base salary and cash bonuses payable to an Employee for the six-month period
from July 1, 1998 through December 31, 1998, prior to July 1, 1998, the Employee
may revise a previous deferral election with respect to such base salary to
increase (but not decrease) the amount or percentage of base salary to be
deferred. Except as otherwise expressly provided herein, this Section 3.3 is
effective as of July 1, 1998.

<PAGE>

        3.4 DISTRIBUTION ELECTION. The initial distribution election of an
Employee as provided in Section 3.2 of this Plan shall be in writing, signed by
the Employee, and delivered to Employer, together with all other documents
required under the provisions of this Plan, within such period of time
determined by the Committee and communicated to those Employees who are eligible
to participate in the Plan. Such deferral elections must be delivered to the
Employer prior to the beginning of the first Plan Year in which Employee is
eligible to participate in the Plan. Provided however, that effective April 1,
1998, an Employee who is hired or promoted to a position of eligibility for
participation in the Plan or a Non-Employee Director who is elected to become a
Non-Employee Director during a Plan Year shall have thirty (30) days from the
date of notification of eligibility for participation in the Plan in which to
submit the required distribution election documents. If permitted by the
Committee, an Employee may change the terms of his or her initial distribution
election by making a new election, and any such new election will be effective
as of the later of the date that is (a) six (6) months following the date the
new election is made or (b) the first day of the Plan Year following the Plan
Year in which the new election is made and such new election will apply to the
Employee's entire account. An Employee may not make a new election once
distributions from the Plan have commenced or which would first become effective
at a time when distributions from the Plan have commenced. Employee's
distribution election shall be in the form established by the Committee in
accordance with the terms of the Plan.

        3.5 PAYMENT UPON CHANGE IN CONTROL. Notwithstanding any other provisions
of this Plan (including without limitation Section 3.2), the aggregate balance
credited to and held in the Employees' Accounts shall be distributed to
Employees in a lump sum on the thirtieth day following a Change in Control
(except that distribution shall be on the sixtieth day in the case of a Change
in Control under Section 5.1(a)), as defined in Section 5.1, unless the
Committee, the Board of Directors of the Employer, or the 401(k)/NQDC
Administrative Committee of the Employer (as each is composed immediately prior
to such Change in Control), in the sole discretion of any of the foregoing,
decides prior to that date that Employees' Accounts shall remain in the Plan.

        3.6 HARDSHIP.

            (a) An Employee may apply for distributions from his or her Account
to the extent that the Employee demonstrates to the reasonable satisfaction of
the Committee that he or she needs the funds due to Hardship. For purposes of
this Section 3.6, a distribution is made on account of Hardship only if the
distribution is made on account of an unforeseeable immediate and heavy
emergency financial need of the Employee and is necessary to satisfy that
emergency financial need. Whether an Employee has an immediate and heavy
emergency financial need shall be determined by the Committee based on all
relevant facts and circumstances, and shall include, but not be limited to: the
need to pay funeral expenses of a family member; the need to pay expenses for
medical care for Employee, the Employee's spouse or any dependent of Employee
resulting from sudden unexpected illness or accident; payments necessary to
prevent the eviction of Employee from Employee's principal residence or
foreclosure on the mortgage on that residence; or other similar extraordinary
and unforeseeable circumstances arising as a result of events beyond the control
of Employee. A Hardship distribution shall not exceed the amount required to
relieve the financial need of the Employee, nor shall a Hardship distribution be
made if the need may be satisfied from other resources reasonably available to
the Employee. For

<PAGE>

purposes of this paragraph, an Employee's resources shall be deemed to include
those assets of the Employee's spouse and minor children that are reasonably
available to the Employee. Prior to approving a Hardship distribution, Employer
shall require the Employee to certify in writing that the Employee's financial
need cannot reasonably be relieved:

                (i) through reimbursement or compensation by insurance or
otherwise; or

                (ii) by other distributions or nontaxable (at the time of the
loan) from plans maintained by the Employer or by any other employer, or by
borrowing from commercial sources on reasonable commercial terms, in an amount
sufficient to satisfy the need.

            (b) Any Employee receiving a Hardship distribution under this
section shall be ineligible to defer any additional compensation under the Plan
until the first day of the Plan Year following the second anniversary of the
date of the distribution. In addition, a new Election of Deferral must be
submitted to the Employer as a condition of participation in the Plan.

        3.7 EMPLOYEE'S RIGHT UNSECURED. The right of the Employee or his or her
designated Beneficiary to receive a distribution hereunder shall be an unsecured
claim against the general assets of the Employer, and neither the Employee nor
his or her designated Beneficiary shall have any rights in or against any amount
credited to his or her Account or any other specific assets of the Employer,
except as otherwise provided in the Trust. Nothing contained in this Plan, and
no action taken pursuant to its provisions, shall create or be construed to
create a trust of any kind or a fiduciary relationship between the Plan and the
Employer or any other person.

        3.8 INVESTMENT OF CONTRIBUTION.

            (a) The investment options available to each Employee shall be
determined by the Employer and set forth in a separate written document, a copy
of which shall be attached hereto and by this reference is incorporated herein.
Each Employee shall have the sole and exclusive right to direct the Trustee as
to the investment of his or her Accounts in accordance with policies and
procedures implemented by the Trustee. The right of an Employee to direct the
investment of his or her Account into one or more of the available investment
options shall not in any way be considered to alter the fact that an Account is
a bookkeeping account only that measures the Employer's obligation to pay
benefits hereunder, that the assets being invested at the direction of an
Employee are assets of the Employer and that the Employee's rights under the
Plan remain those of an unsecured, general creditor of the Employer.

            Employer shall not be liable for any investment decision made by any
Employee while such funds are held by the Trustee.

            (b) Accounts shall be credited with the actual financial performance
or earnings generated by such investments directed by the Employee and made by
the Trustee, until the Account has been fully distributed to the Employee or to
the Employee's designated Beneficiary.

<PAGE>

            (c) Notwithstanding any other provision in this Section 3.8 to the
contrary, the Committee may determine not to take account of Employee's
designated investments and determine to have the Employee's Account invested in
any other manner as the Committee shall determine.

                                   SECTION 4

                           DESIGNATION OF BENEFICIARY

        4.1 DESIGNATION OF BENEFICIARY. Employee may designate a Beneficiary or
Beneficiaries to receive any amount due hereunder by Employee by written notice
thereof to Employer at any time prior to Employee's death and may revoke or
change the Beneficiary designated therein without the Beneficiary's consent by
written notice delivered to Employer at any time and from time to time prior to
Employee's death. If Employee is married and a resident of a community property
state, one half of any amount due hereunder which is the result of an amount
contributed to the Plan during such marriage is the community property of the
Employee's spouse and Employee may designate a Beneficiary or Beneficiaries to
receive only the Employee's one-half interest. If Employee shall have failed to
designate a Beneficiary, or if no such Beneficiary shall survive him or her,
then such amount shall be paid to his or her estate. Designations of
Beneficiaries shall be made on the form provided by Employer.

                                   SECTION 5

                                CHANGE IN CONTROL

        5.1 CHANGE IN CONTROL. For the purposes of this Plan, "Change in
Control" means, the happening of any of the following:

            (a) The first public announcement or public acknowledgment
(including without limitation, a report filed pursuant to Section 13(d) of the
Securities Exchange Act of 1934 as amended (the "Exchange Act")) by the Employer
that a "person," as such term is used in Sections 13(d) and 14(d) of the
Exchange Act (other than the Employer, a Subsidiary or an employee benefit plan
of the Employer or a Subsidiary, or other controlled affiliate of the Employer,
including any trustee of such plan acting as trustee), is or has become the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act or
comparable successor rule), directly or indirectly, of securities of the
Employer representing fifty percent (50%) or more of the combined voting power
of the Employer's then outstanding Common Stock entitled to vote in the election
of directors, where such person's beneficial ownership of the Employer's Common
Stock was not initiated by the Employer or approved by the Employer's Board of
Directors;

            (b) The sale, lease or other disposition of all or substantially all
of the assets of the Employer (but, effective September 15, 2000, not including
the formation or any public offering (including but not limited to the initial
or any subsequent public offering) of the common stock of Tality;

            (c) The merger or consolidation of the Employer with or into another
corporation not initiated by the Employer, in which the Employer is not the
surviving

<PAGE>

corporation and the stockholders of the Employer immediately prior to the merger
or consolidation fail to possess direct or indirect beneficial ownership of more
than eighty percent (80%) of the voting power of the securities of the surviving
corporation (or if the surviving corporation is a controlled affiliate of
another entity, then the required beneficial ownership shall be determined with
respect to the securities of that entity which controls the surviving
corporation and is not itself a controlled affiliate of any other entity)
immediately following such transaction, or a reverse merger not initiated by the
Employer, in which the Employer is the surviving corporation and the
stockholders of the Employer immediately prior to the reverse merger fail to
possess direct or indirect beneficial ownership of more than eighty percent
(80%) of the securities of the Employer (or if the Employer is a controlled
affiliate of another entity, then the required beneficial ownership shall be
determined with respect to the securities of that entity which controls the
Employer and is not itself a controlled affiliate of any other entity)
immediately following the reverse merger. For purposes of this Section 5.1(c),
any person who acquired securities of the Employer prior to the occurrence of a
merger, reverse merger, or consolidation in contemplation of such transaction
and who after such transaction possesses direct or indirect beneficial ownership
of at least ten percent (10%) of the Common Stock of the Employer or the
surviving corporation (or if the Employer or the surviving corporation is a
controlled affiliate, then of the appropriate entity as determined above)
immediately following such transaction shall not be included in the group of
stockholders of the Employer immediately prior to such transaction;

            (d) A change in the composition of the Board of Directors of the
Employer, as a result of which fewer than a majority of the directors are
Incumbent Directors. "Incumbent Directors" shall mean directors who either (i)
are directors of the Employer as of the date hereof, or (ii) are elected, or
nominated for election, to the Board of Directors of the Employer with the
affirmative votes of at least a majority of the Incumbent Directors at the time
of such election or nomination (but shall not include an individual whose
election or nomination is in connection with an actual or threatened proxy
contest relating to the election of directors to the Employer); or

            (e) Any liquidation or dissolution of the Employer.

                                   SECTION 6

                                TRUST PROVISIONS

        6.1 TRUST AGREEMENT. The Employer may establish the Trust for the
purpose of retaining assets set aside by Employer pursuant to the Trust
Agreement for payment of all or a portion of the amounts payable pursuant to the
Plan. Any benefits not paid from the Trust shall be paid solely from Employer's
general funds, and any benefits paid from the Trust shall be credited against
and reduce by a corresponding amount the Employer's liability to Employees under
the Plan. No special or separate fund, other than the Trust Agreement, shall be
established and no other segregation of assets shall be made to assure the
payment of any benefits hereunder. All Trust Funds shall be subject to the
claims of general creditors of the Employer in the event the Employer is
Insolvent as defined in Section 3 of the Trust Agreement. The obligations of the

<PAGE>

Employer to pay benefits under the Plan constitute an unfunded, unsecured
promise to pay and Employees shall have no greater rights than general creditors
of the Employer.

                                   SECTION 7

                AMENDMENT, TERMINATION AND TRANSFERS BY COMMITTEE

        7.1 AMENDMENT. The Committee shall have the right to amend this Plan at
any time and from time to time, including a retroactive amendment. Any such
amendment shall come effective upon the date stated therein, and shall be
binding on all Employees, except as otherwise provided in such amendment;
provided, however, that said amendment shall not affect adversely benefits
payable to an affected Employee without the Employee's written approval.

        7.2 TERMINATION. The Committee shall have the right to terminate this
Plan at any time and direct the lump sum payments of all assets held by the
Trust if the Employer is not Insolvent (as defined in Article 3 of the Trust
Agreement) at that time.

        7.3 TRANSFERS BY COMMITTEE.

            (a) In the event that an Employee transfers employment from the
Employer to a Subsidiary, the Committee shall have the right, but no obligation,
to direct the Trustee to transfer funds in an amount equal to the amount
credited to such Employee's Account (the "Transferred Account") to a trust
established under a Transferee Plan maintained by such Subsidiary. The Committee
shall determine, in its sole discretion, whether such transfer shall be made and
the timing of such transfer. Such transfer shall be made only if, and to the
extent, approval of such transfer is obtained from the Trustee. No transfer
shall be made unless the Subsidiary meets the requirements of subsection
7.3(b)(i) as of the date of the transfer.

            (b) DEFINITIONS.

                (i) For purposes of this Section 7.3, "Subsidiary" shall mean
any corporation (other than the Employer) in an unbroken chain of corporations
beginning with the Employer, if each of the corporations other than the last
corporation in the unbroken chain owns stock possessing fifty (50) percent or
more of the total combined voting power of all classes of stock in one of the
other corporations in such chain.

                (ii) For purposes of this Section 7.3, "Transferee Plan" shall
mean an unfunded, nonqualified deferred compensation plan described in Section
201(2), 301(a)(3) and 401(a)(1) of the Employee Retirement Income Security Act
of 1974 ("ERISA").

            (c) No transfer shall be made under this Section 7.3 unless the
Employee for whose benefit the Transferred Account is held executes a written
waiver of all of such Employee's rights and benefits under this Plan in such
form as shall be acceptable to the Committee.

                                   SECTION 8

                                 ADMINISTRATION

<PAGE>

        8.1 ADMINISTRATION. The Committee shall administer and interpret this
Plan in accordance with the provisions of the Plan and the Trust Agreement. Any
determination or decision by the Committee shall be conclusive and binding on
all persons who at any time have or claim to have any interest whatever under
this Plan. The Committee may employ legal counsel, consultants, actuaries and
agents as it may deem desirable in the administration of the Plan and may rely
on the opinion of such counsel or the computations of such consultant or other
agent. The Committee shall have the authority to delegate some or all of the
powers and responsibilities under the Plan and the Trust Agreement to such
person or persons as it shall deem necessary, desirable or appropriate for
administration of the Plan.

        8.2 LIABILITY OF COMMITTEE; INDEMNIFICATION. To the maximum extent not
prohibited by law, no member of the Committee shall be liable to any person and
in any event shall be indemnified by the Employer for any action taken or
omitted in connection with the interpretation and administration of this Plan
unless attributable to his or her own bad faith or willful misconduct.

        8.3 EXPENSES. The costs of the establishment of the Plan and the
adoption of the Plan by Employer, including but not limited to legal and
accounting fees, shall be borne by Employer. The expenses of administering the
Plan and the Trust shall be borne by the Trust unless the Employer elects in its
sole discretion to pay some or all of those expenses; provided, however, that
Employer shall bear, and shall not be reimbursed by, the Trust for any tax
liability of Employer associated with the investment of assets by the Trust.

                                   SECTION 9

                            GENERAL AND MISCELLANEOUS

        9.1 RIGHTS AGAINST EMPLOYER. Except as expressly provided by the Plan,
the establishment of this Plan shall not be construed as giving to any Employee
or to any person whomsoever, any legal, equitable or other rights against the
Employer, or against its officers, directors, agents or shareholders, or as
giving to any Employee or Beneficiary any equity or other interest in the
assets, business or shares of Employer stock or giving any Employee the right to
be retained in the employment of the Employer. Neither this plan nor any action
taken hereunder shall be construed as giving to any Employee the right to be
retained in the employ of the Employer or as affecting the right of the Employer
to dismiss any Employee. Any benefit payable under the Plan shall not be deemed
salary or other compensation for the purpose of computing benefits under any
employee benefit plan or other arrangement of the Employer for the benefit of
its Employees. Nothing in the Plan or in any instrument executed pursuant
thereto shall confer upon any Non-Employee Director any right to continue in the
service of the Employer in any capacity or shall affect any right of the
Employer, its Board of Directors or stockholders to remove any Non-Employee
Director pursuant to the Employer's By-Laws and the provisions of the Delaware
General Corporation Law.

        9.2 ASSIGNMENT OR TRANSFER. No right, title or interest of any kind in
the Plan shall be transferable or assignable by any Employee or Beneficiary or
be subject to alienation, anticipation, encumbrance, garnishment, attachment,
execution or levy of any kind, whether voluntary or involuntary, nor subject to
the debts, contracts, liabilities, engagements, or torts of

<PAGE>

the Employee or Beneficiary. Any attempt to alienate, anticipate, encumber,
sell, transfer, assign, pledge, garnish, attach or otherwise subject to legal or
equitable process or encumber or dispose of any interest in the Plan shall be
void.

        9.3 SEVERABILITY. If any provision of this Plan shall be declared
illegal or invalid for any reason, said illegality or invalidity shall not
affect the remaining provisions of this Plan but shall be fully severable, and
this Plan shall be construed and enforced as if said illegal or invalid
provision had never been inserted herein.

        9.4 CONSTRUCTION. The article and section headings and numbers are
included only for convenience of reference and are not to be taken as limiting
or extending the meaning of any of the terms and provisions of this Plan.
Whenever appropriate, words used in the singular shall include the plural or the
plural may be read as the singular. When used herein, the masculine gender
includes the feminine gender.

        9.5 GOVERNING LAW. The validity and effect of this Plan and the rights
and obligations of all persons affected hereby shall be construed and determined
in accordance with the laws of the State of California unless superseded by
federal law.

        9.6 PAYMENT DUE TO INCOMPETENCE. If the Committee receives evidence that
an Employee or Beneficiary entitled to receive any payment under the Plan is
physically or mentally incompetent to receive such payment, the Committee may,
in its sole and absolute discretion, direct the payment to any other person or
Trust which has been legally appointed by the courts or to any other person
determined by the Employer to be a proper recipient on behalf of such person
otherwise entitled to payment, or any of them, in such manner and proportion as
the Employer may deem proper. Any such payment shall be in complete discharge of
the Employer's obligations under this Plan.

        9.7 TAX. The Employer may withhold from any benefits payable under this
Plan, all federal, state, city or other taxes as shall be required pursuant to
any law or governmental regulation or ruling.

        9.8 ATTORNEY'S FEES. Employer shall pay the reasonable attorney's fees
incurred by any Employee in an action brought against Employer to enforce
Employee's rights under the Plan, provided that such fees shall only be payable
in the event that the Employee prevails in. such action.

        9.9 PLAN BINDING ON SUCCESSORS/ASSIGNEES. This Plan shall be binding
upon and inure to the benefit of the Employer and its successor and assigns and
the Employee and the Employee's designee and estate.

<PAGE>

        The Employer has caused its authorized officer to execute this amended
and restated Plan this ____ day of ________________, 2001.

                                              CADENCE DESIGN SYSTEMS, INC.

                                              By: ___________________________
                                                     __________________

<PAGE>

                                   APPENDIX 1

                                 ACKNOWLEDGMENT

        The undersigned Employee hereby acknowledges that Employer has selected
him or her as a participant in the Cadence Design Systems, Inc. 1994 Deferred
Compensation Plan, subject to all terms and conditions of the Plan, a copy of
which has been received, read, and understood by the Employee in conjunction
with executing this Acknowledgment. Employee acknowledges that he or she has had
satisfactory opportunity to ask questions regarding his or her participation in
the Plan and has received satisfactory answers to any questions asked. Employee
also acknowledges that he or she has sufficient knowledge and experience in
financial and business matters to be capable of evaluating the merits and risks
of participation in the Plan. Employee understands that his or her participation
in the Plan shall not begin until this Acknowledgment has been signed by
Employee and returned to Employer.

        Dated:
                 -------------------------------------

        Signed:
                 -------------------------------------
                      Employee

        Dated:
                 -------------------------------------
                      CADENCE DESIGN SYSTEMS, INC.

        Signed:
                 -------------------------------------
                      [Officer]

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