GADZOOX NETWORKS INC, DEF 14A, 2000-09-05

GADZOOX NETWORKS INC
DEF 14A, 2000-09-05
ELECTRONIC COMPONENTS & ACCESSORIES

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<PAGE> 1
SCHEDULE 14A INFORMATION

PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )

Filed by the Registrant [X]
Filed by a party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, For Use of the Commission
only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12

GADZOOX NETWORKS, INC.
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(Name of Registrant as Specified in its Charter)

GADZOOX NETWORKS, INC.
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(Name of Person(s) Filing Proxy Statement)

Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

(1) Title of each class of securities to which transaction
applies:

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(2) Aggregate number of securities to which transaction
applies:

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(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11:

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(4) Proposed maximum aggregate value of transaction:

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(5) Total fee paid:

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

(1) Amount Previously Paid:

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(2) Form, Schedule or Registration Statement No.:

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(3) Filing Party:

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(4) Date Filed:

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<PAGE> 2

[LOGO OF GADZOOX APPEARS HERE]

GADZOOX NETWORKS, INC.

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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

TO BE HELD OCTOBER 27, 2000

TO THE STOCKHOLDERS:

NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the
"Annual Meeting") of GADZOOX NETWORKS, INC., a Delaware corporation (the
"Company"), will be held on Friday, October 27, at 11:00 a.m. local time, at the
Silver Creek Valley Country Club located at 5460 Country Club Parkway, San Jose,
California 95138 for the following purposes:

1. To elect two (2) Class I directors to serve until the 2003 Annual
Meeting of Stockholders and until their successors are duly elected and
qualified.

2. To ratify the appointment of Arthur Andersen LLP as independent
auditors of the Company for the fiscal year ending March 31, 2001.

3. To approve an amendment of the Company's Amended and Restated 1993
Stock Plan to increase the number of shares of Common Stock reserved for
issuance thereunder by 1,400,000 shares, from 9,522,092 shares to 10,922,092
shares.

4. To transact such other business as may properly come before the
Annual Meeting, including any motion to adjourn to a later date to permit
further solicitation of proxies if necessary, or before any adjournments
thereof.

The foregoing items of business are more fully described in the proxy
statement accompanying this notice. Only stockholders of record at the close of
business on September 1, 2000 are entitled to notice of and to vote at the
Annual Meeting.

All stockholders are cordially invited to attend the Annual Meeting in
person. However, to assure your representation at the meeting, you are urged to
mark, sign, date and return the enclosed proxy as promptly as possible in the
postage-prepaid envelope enclosed for that purpose. Any stockholder attending
the Annual Meeting may vote in person even if he or she has returned a proxy.

Sincerely,

Michael Parides

President and Chief Executive Officer

San Jose, California
September 20, 2000

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YOUR VOTE IS IMPORTANT.

IN ORDER TO ASSURE YOUR REPRESENTATION AT THE ANNUAL MEETING, YOU ARE REQUESTED
TO COMPLETE, SIGN AND DATE THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE AND RETURN
IT IN THE ENCLOSED ENVELOPE.
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<PAGE> 3

GADZOOX NETWORKS, INC.

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PROXY STATEMENT FOR 2000
ANNUAL MEETING OF STOCKHOLDERS

INFORMATION CONCERNING SOLICITATION AND VOTING

GENERAL

The enclosed Proxy is solicited on behalf of the Board of Directors (the
"Board") of GADZOOX NETWORKS, INC., a Delaware corporation (the "Company" or
"Gadzoox"), for use at the Annual Meeting of Stockholders (the "Annual Meeting")
to be held Friday, October 27, 2000 at 11:00 a.m. local time, or at any
adjournment thereof, for the purposes set forth herein and in the accompanying
Notice of Annual Meeting of Stockholders. The Annual Meeting will be held at the
Silver Creek Valley Country Club located at 5460 Country Club Parkway, San Jose,
California 95138. The Company's principal executive offices are located at 5850
Hellyer Avenue, San Jose, California 95138, and its telephone number at that
location is (408) 360-4950.

These proxy solicitation materials and the Annual Report on Forms 10-K
and 10-K/A for the year ended March 31, 2000, including financial statements,
were first mailed on or about September 20, 2000 to all stockholders entitled to
vote at the meeting.

THE COMPANY SHALL PROVIDE WITHOUT CHARGE TO EACH STOCKHOLDER SOLICITED
BY THESE PROXY SOLICITATION MATERIALS A COPY OF THE ANNUAL REPORT ON FORMS 10-K
AND 10-K/A TOGETHER WITH THE FINANCIAL STATEMENTS AND FINANCIAL STATEMENT
SCHEDULES REQUIRED TO BE FILED WITH THE ANNUAL REPORT UPON REQUEST OF THE
STOCKHOLDER MADE IN WRITING TO GADZOOX NETWORKS, INC., 5850 HELLYER AVENUE, SAN
JOSE, CALIFORNIA 95138, ATTN: MICHAEL PARIDES, PRESIDENT AND CHIEF EXECUTIVE
OFFICER.

RECORD DATE; OUTSTANDING SHARES

Stockholders of record at the close of business on September 1, 2000
(the "Record Date") are entitled to notice of and to vote at the Annual Meeting.
The Company has one series of Common Shares outstanding, designated Common
Stock, $.005 par value per share. As of the Record Date, 27,837,025 shares of
the Company's Common Stock were issued and outstanding and held of record by 224
stockholders. As of the Record Date, no shares of the Company's Preferred Stock
were outstanding.

REVOCABILITY OF PROXIES

Any proxy given pursuant to this solicitation may be revoked by the
person giving it at any time before its use by (a) delivering to the Company
(Attention: Michael Parides, President and Chief Executive Officer) a written
notice of revocation or a duly executed proxy bearing a later date or (b)
attending the meeting and voting in person.

VOTING

Each stockholder is entitled to one vote for each share held.

<PAGE> 4

SOLICITATION OF PROXIES

This solicitation of proxies is made by the Company, and all related
costs will be borne by the Company. The Company is using Skinner & Co., an
outside proxy solicitation firm, to solicit proxies this year at a cost not to
exceed $7,500. In addition, the Company may reimburse brokerage firms and other
persons representing beneficial owners of shares for their expenses in
forwarding solicitation material to such beneficial owners. Proxies may also be
solicited by certain of the Company's directors, officers and regular employees,
without additional compensation, in person or by telephone or facsimile.

QUORUM; ABSTENTIONS; BROKER NON-VOTES

Votes cast by proxy or in person at the Annual Meeting will be tabulated
by the Inspector of Elections (the "Inspector") who will be an employee of
Equiserve, the Company's transfer agent. The Inspector will also determine
whether or not a quorum is present. Except in certain specific circumstances,
the affirmative vote of a majority of shares present in person or represented by
proxy at a duly held meeting at which a quorum is present is required under
Delaware law for approval of proposals presented to stockholders. In general,
Delaware law also provides that a quorum consists of a majority of shares
entitled to vote and present or represented by proxy at the meeting.

The Inspector will treat shares that are voted "WITHHELD" or "ABSTAIN"
as being present and entitled to vote for purposes of determining the presence
of a quorum but will not be treated as votes in favor of approving any matter
submitted to the stockholders for a vote. When proxies are properly dated,
executed and returned, the shares represented by such proxies will be voted at
the Annual Meeting in accordance with the instructions of the stockholder. If no
specific instructions are given, the shares will be voted for (i) the election
of the nominees for directors set forth herein; (ii) the ratification of Arthur
Andersen LLP as independent auditors of the Company for the fiscal year ending
March 31, 2001; (iii) the amendment of the Amended and Restated 1993 Stock Plan
and, at the discretion of the proxyholders, (iv) upon such other business as may
properly come before the Annual Meeting or any adjournment thereof.

If a broker indicates on the enclosed proxy or its substitute that such
broker does not have discretionary authority as to certain shares to vote on a
particular matter ("Broker Non-Votes"), those shares will not be considered as
present with respect to that matter. The Company believes that the tabulation
procedures to be followed by the Inspector are consistent with the general
statutory requirements in Delaware concerning voting of shares and determination
of a quorum.

DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS

Stockholders are entitled to present proposals for action at a
forthcoming meeting if they comply with the requirements of the proxy rules
established by the Securities and Exchange Commission. The Company intends to
hold its 2001 Annual Meeting of Stockholders on or about September 5, 2001.
Proposals of stockholders of the Company that are intended to be presented by
such stockholders at the Company's 2001 Annual Meeting of Stockholders must be
received by the Company no later than May 8, 2001 in order that they may be
considered for inclusion in the proxy statement and form of proxy relating to
that meeting.

The attached proxy card grants the proxy holders discretionary authority
to vote on any matter raised at the Annual Meeting. If a stockholder intends to
submit a proposal at the Company's 2001 Annual Meeting of Stockholders which is
not eligible for inclusion in the proxy statement relating to the meeting, and
the

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<PAGE> 5

stockholder fails to give the Company notice in accordance with the requirements
set forth in the Securities Exchange Act of 1934, as amended, no later than July
22, 2001, then the proxy holders will be allowed to use their discretionary
authority when and if the proposal is raised at the Company's Annual Meeting in
2001.

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<PAGE> 6

SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information regarding the
beneficial ownership of Common Stock of the Company as of July 31, 2000 as to
(i) each person who is known by the Company to own beneficially more than 5% of
the outstanding shares of Common Stock, (ii) each director and nominee for
director of the Company, (iii) each of the executive officers named in the
Summary Compensation Table below and (iv) all directors and executive officers
of the Company as a group. Unless otherwise indicated, the address of each
listed stockholder is c/o Gadzoox Networks, Inc., 5850 Hellyer Avenue, San Jose,
California 95138.

<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENT OF SHARES
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIALLY OWNED(1) BENEFICIALLY OWNED (1)
------------------------------------ --------------------- ----------------------
<S> <C> <C>
NAMED EXECUTIVE OFFICERS AND DIRECTORS

Michael Parides (2) 8,624 *

Kent Bridges(3) 303,917 1.09

Wayne Rickard (4) 367,834 1.32

William Hubbard (5) 115,171 *

Christine E. Munson (6) 167,970 *
1693 Ardenwood Drive
San Jose, CA 95129

K. William Sickler (7) 1,455,233 5.24
4665 La Rinconada Drive
Los Gatos, CA 95032

Alistair Black (8) 582,530 2.11
18164 Via Encanada
Monte Sereno, CA 95030

Howie Chin(9) 187,521 *
10081 Bret Avenue
Cupertino, CA 95014

Stephen Luczo (10) 5,292,973 19.13
c/o Seagate Technology
920 Disc Drive, Building One
Scotts Valley, CA 95066

Peter Morris (11) 484,670 1.75
c/o New Enterprise Associates
2490 Sand Hill Road
Menlo Park, CA 94025

Rob Kuhling (12) 150,885 *
c/o ONSET Ventures
2490 Sand Hill Road
Menlo Park, CA 94025

Milton Chang (13) 1,110,821 4.02
c/o New Focus, Inc.
2630 Walsh Avenue
Santa Clara, CA 95051

Denny R.S. Ko (14) 1,288,706 4.65
c/o Dynamics Technology, Inc.
21311 Hawthorne Blvd., Suite 300
Torrence, CA 90503-5610
</TABLE>

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<PAGE> 7

Seagate Technologies, Inc. 5,274,015 19.07
920 Disc Drive, Building One
Scotts Valley, CA 95066

Entities associated with Galleon Technology 1,613,300 5.83
Partners II, L.P. (15)
135 E. 57th Street
New York, NY 10022

All executive officers and directors as a 11,620,820 41.65
group (18 persons) (16)
</TABLE>

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

* Less than 1%

(1) Applicable percentage ownership is based on 27,655,977 shares of Common
Stock outstanding as of July 31, 2000, together with applicable options
for such stockholder. Beneficial ownership is determined in accordance
with the rules of the Securities and Exchange Commission (the
"Commission"), and includes voting and investment power with respect to
shares. Shares of Common Stock subject to options currently exercisable or
exercisable within 60 days after July 31, 2000 are deemed outstanding for
computing the percentage ownership of the person holding such options, but
are not deemed outstanding for computing the percentage of any other
person. Except as noted in the footnotes to this table, and subject to
applicable community property laws, the persons named in the table have
sole voting and investment power with respect to all shares of the
Company's Common Stock shown as beneficially owned by them.

(2) Includes 8,124 shares issuable upon exercise of options held by Mr.
Parides exercisable within 60 days of July 31, 2000.

(3) Includes 152,917 shares issuable upon exercise of options held by Mr.
Bridges exercisable within 60 days of July 31, 2000.

(4) Includes 267,834 shares issuable upon exercise of options held by Mr.
Rickard exercisable within 60 days of July 31, 2000.

(5) Includes 24,289 shares issuable upon exercise of options held by Mr.
Hubbard exercisable within 60 days of July 31, 2000.

(6) Ms. Munson resigned her position as Chief Financial Officer and Vice
President of Administration in August 2000. Includes 147,084 shares
issuable upon exercise of options held by Ms. Munson exercisable within 60
days of July 31, 2000.

(7) Mr. Sickler resigned his position as President and Chief Executive Officer
in August 2000. Represents 99,999 shares issuable upon exercise of options
held by Mr. Sickler exercisable within 60 days of July 31, 2000, 1,341,605
shares held by K. William Sickler and Gail A. Sickler, Trustees UTA Dated
July 16, 1992, 4,543 shares held by K. William Sickler, Trustee, or his
successor under the Brett Ellen Sickler Trust, 4,543 shares held by K.
William Sickler, Trustee, or his successor under the Cole William Sickler
Trust, and 4,543 shares held by K. William Sickler, Trustee, or his
successor under the Joanna Jackson Sickler Trust. Mr. Sickler disclaims
beneficial ownership of the shares held in trust for his children.

(8) Mr. Black resigned his position as Chief Technical Officer in November
1999. Represents 545,494 shares held by The Savage/Black Living Trust,
Alistair D. Black and Deborah A. Savage, Trustees, 18,518 shares held by
Alistair Black, custodian for Duncan Oliver Black, under the California
Uniform Transfers to Minors Act and 18,518 shares held by Alistair Black,
custodian for Dylan Savage Black, under the California Uniform Transfers
to Minors Act. Mr. Black disclaims beneficial ownership of the share held
by him as custodian for his children.

(9) Mr. Chin resigned his position as Chief Strategic Officer in December
1999.

(10) Mr. Luczo is the chief executive officer of Seagate and a director of the
Company. Represents 5,274,015 shares held by Seagate, 12,813 shares of
Common Stock held by Mr. Luczo and 6,145 shares issuable upon exercise of
options held by Mr. Luczo exercisable within 60 days of July 31, 2000. Mr.
Luczo disclaims beneficial ownership of shares held by Seagate.

(11) Mr. Morris is a general partner of New Enterprise Associates VIII and a
director of the Company. Represents 119,446 shares held by New Enterprise
Associates VI, Limited Partnership, 324,317 shares held by New Enterprise
Associates VIII, Limited Partnership, 2,500 shares held by NEA Presidents
Fund, L.P., 64 shares held by NEA Onset Partners III LP, 30,843 shares
held by Mr. Morris and 7,500 shares issuable upon exercise of options held
by Mr. Morris exercisable within 60 days of July 31, 2000. Mr. Morris
disclaims beneficial ownership of shares held by these entities, except
for his proportional interest arising from his partnership interest in
such funds.

(12) Mr. Kuhling is a general partner of ONSET Ventures and a director of the
Company. Represents 83,190 shares held by ONSET Enterprise Associates II,
L.P., 59,075 shares held by Robert Frank Kuhling, Jr. and Michele Denise
Wilcox, Co-Trustees of the Kuhling-Wilcox 1990 Trust, 1,120 shares held by
Mr. Kuhling and 7,500 shares issuable upon exercise of options held by Mr.
Kuhling exercisable within 60 days of July 31, 2000. Mr. Kuhling disclaims
beneficial ownership of shares held by ONSET, except to the extent of his
proportional interest arising from his partnership interest in ONSET.

(13) Represents 1,103,321 shares held by Mr. Chang and 7,500 shares issuable
upon exercise of options held by Mr. Chang exercisable within 60 days of
July 31, 2000.

(14) Dr. Ko is the chairman of the Dynamics Technology, Inc. ("Dynamics") and a
director of the Company. Represents 1,259,206 shares held by Dynamics,
22,000 shares issuable upon exercise of options held by Dynamics and
29,500 shares issuable upon exercise of options exercisable within 60 days
of July 31, 2000. Dr. Ko disclaims beneficial ownership with respect to
the shares held by Dynamics except to the extent of his proportional
interest therein.

(15) Includes 81,983 shares held by Galleon Technology Partners I, L.P.,
311,380 shares held by Galleon Technology Partners II, L.P., 90,850 shares
held by Galleon New Media Partners, L.P. and 1,129,087 shares held by
Galleon Management, L.P.

(16) Includes 247,083 shares issuable upon exercise of options held by these
individuals exercisable within 60 days of July 31, 2000.

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* Less than one percent of the outstanding Common Stock.

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<PAGE> 8

PROPOSAL ONE

ELECTION OF DIRECTORS

NOMINEES

The Company has a classified board of directors currently consisting of
three Class I directors, Michael Parides, Peter Morris and Denny R.S. Ko, one
Class II director, Milton Chang, and two Class III directors, Stephen Luczo and
Rob Kuhling, who will serve until the annual meetings of stockholders to be held
in 2000, 2001, and 2002, respectively, and until their respective successors are
duly elected and qualified. At each annual meeting of stockholders, directors
are elected for a term of three years to succeed those directors whose terms
expire on the annual meeting dates.

The nominees for election at the Annual Meeting to Class I of the board
of directors are Michael Parides and Peter Morris. Dr. Ko has declined to stand
for re-election. If elected, Mr. Parides and Mr. Morris will each serve as a
director until the annual meeting in 2003, and until their respective successors
are elected and qualified or until their earlier resignation or removal. The
proxy holders may not vote the proxies for a greater number of persons than the
number of nominees named. Unless otherwise instructed, the proxy holders will
vote the proxies received by them for the Company's two nominees. In the event
that any nominee of the Company is unable or declines to serve as a director at
the time of the Annual Meeting, the proxies will be voted for any nominee who
shall be designated by the present board of directors to fill the vacancy. The
Company is not aware of any nominee who will be unable or will decline to serve
as a director. In the event that additional persons are nominated for election
as directors, the proxy holders intend to vote all proxies received by them in
such a manner as will assure the election of as many of the nominees listed
below as possible, and, in such event, the specific nominees to be voted for
will be determined by the proxy holders.

VOTE REQUIRED

If a quorum is present and voting, the two nominees receiving the
highest number of votes will be elected to the Board. Abstentions and "broker
non-votes" are not counted in the election of directors.

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<PAGE> 9

DIRECTORS AND NOMINEES

The following table sets forth certain information regarding the
Company's directors and nominees as of September 1, 2000:

<TABLE>
<CAPTION>
DIRECTOR
NAME AGE POSITION SINCE
------------------------------------- ----- -------------------------------------- ----------
<S> <C> <C> <C>
Class I nominees to be elected at
the Annual Meeting:

Michael Parides................... 42 President, Chief Executive Officer and 2000
Director
Peter Morris(2)................... 44 Director 1996

Class II director whose term expires
at the 2001 annual meeting of
stockholders:

Dr. Milton Chang (1).............. 57 Director 1992

Class III directors whose terms
expire at the 2002 annual meeting of
stockholders:

Stephen J. Luczo.................. 43 Director 1997
Robert Kuhling (1)................ 51 Director 1996
</TABLE>

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

(1) Member of Compensation Committee.

(2) Member of Audit Committee. Dr. Ko also presently is a member of the Audit
Committee.

There is no family relationship between any director or executive
officer of the Company.

Michael Parides has served as the Company's President and Chief
Executive Officer since August 2000. From June 2000 to August 2000, Mr. Parides
served as the Company's Chief Operating Officer and from January 2000 to June
2000, he served as Vice President of Advanced SAN Solutions and Customer
Service. From June 1999 to January 2000 Mr. Parides was the Group Vice President
of the Storage, Computer Systems, Software and Documents Management businesses
at Dataquest/Gartner Group. From November 1997 to June 1999, Mr. Parides was an
independent consultant. From September 1996 to November 1997, he served as Vice
President of Marketing of the Workstation, System and Server Division at Quantum
Corporation. From June 1995 to September 1996, Mr. Parides was the Vice
President of Marketing, Consumer Desktops at IBM. Mr. Parides holds a B.S. in
electrical engineering from Rutgers University and an MBA from Duke University.

Peter Morris has served as a director of the Company since September
1996. Mr. Morris is a general partner at New Enterprise Associates, a venture
capital firm, where he has been employed since 1992. Mr. Morris holds a B.S. in
electrical engineering and an M.B.A. from Stanford University.

Milton Chang has served as a director of the Company since its inception
in April 1992. Dr. Chang is the chairman of the board of directors of New Focus,
Inc., a supplier of photonics tools for laser applications, which he founded in
1990. From 1996 to 1998, Dr. Chang served on the Visiting Committee for Advanced
Technology of the National Institute of Standards and Technology. Dr. Chang
holds a B.S. in electrical engineering from the University of Illinois and an
M.S. and Ph.D. in electrical engineering from the California Institute of
Technology.

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<PAGE> 10

Stephen J. Luczo has served as a director of the Company since June
1997. Mr. Luczo currently serves as chief executive officer, president and a
director of Seagate. Mr. Luczo joined Seagate in October 1993 as senior vice
president, corporate development, was promoted to executive vice president,
corporate development in March 1995, and was promoted to president and chief
operating officer in September 1997. In July 1998, Mr. Luczo was promoted to the
position of chief executive officer of Seagate and to the board of directors.
Mr. Luczo also serves as a member of the board of directors of Veritas Software
Corporation ("Veritas"). Prior to the merger of Veritas and Seagate, Mr. Luczo
also served as chairman of the board of directors of Seagate Software. Prior to
becoming Seagate Software's chairman in July 1997, Mr. Luczo served as Seagate
Software's chief operating officer between March 1995 and July 1997. Mr. Luczo
received a M.B.A. from Stanford University Graduate School of Business and an
A.B. from Stanford University in economics and psychology.

Robert Kuhling has served as a director of the Company since September
1996. Mr. Kuhling has been a general partner of venture capital funds managed by
ONSET Ventures since 1987. He is a director of Accelerated Networks, a
manufacturer of telecommunications equipment, and Euphonix, Inc., a digital
sound integration company for professional recording studios, as well as several
private companies. Mr. Kuhling holds an M.B.A. from Harvard University and an
A.B. in economics from Hamilton College.

BOARD MEETINGS AND COMMITTEES

The Board held a total of eight meetings during the fiscal year ending
March 31, 2000. Except for Mr. Luczo, no director attended fewer than 75% of the
meetings of the Board and committees thereof held during the fiscal year ended
March 31, 2000, if any, upon which such director served.

The Company's Board currently has two committees: an audit committee and
a compensation committee. The audit committee consists of Dr. Ko and Mr. Morris.
The audit committee makes recommendations to the Board regarding the selection
of independent auditors, reviews the results and scope of audit and other
services provided by the Company's independent auditors and reviews the
accounting principles and auditing practices and procedures to be used for the
Company's financial statements. The compensation committee consists of Dr. Chang
and Mr. Kuhling. The compensation committee makes recommendations to the Board
regarding stock plans and the compensation of officers and other managerial
employees. The Compensation Committee and the Audit Committee each held one
meeting during fiscal 2000. The Board has no nominating committee or any
committee performing such functions.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

None of the members of the compensation committee is currently or has
been, at any time since the formation of the Company, an officer or employee of
the Company. No member of the compensation committee serves as a member of the
board of directors or compensation committee of any entity that has one or more
executive officers serving as a member of the Company's board of directors or
compensation committee.

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<PAGE> 11

PROPOSAL TWO

RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS

The Board has selected Arthur Andersen LLP, independent auditors, to
audit the financial statements of the Company for the fiscal year ending March
31, 2001, and recommends that stockholders vote for ratification of such
appointment. Although action by stockholders is not required by law, the Board
has determined that it is desirable to request approval of this selection by the
stockholders. Notwithstanding the selection, the Board, in its discretion, may
direct the appointment of new independent auditors at any time during the year,
if the Board feels that such a change would be in the best interest of the
Company and its stockholders. In the event of a negative vote on ratification,
the Board will reconsider its selection.

Arthur Andersen LLP has audited the Company's financial statements
annually since February 1998. Representatives of Arthur Andersen LLP are
expected to be present at the meeting with the opportunity to make a statement
if they desire to do so and are expected to be available to respond to
appropriate questions.

THE BOARD UNANIMOUSLY RECOMMENDS VOTING "FOR" THE RATIFICATION OF THE
APPOINTMENT OF ARTHUR ANDERSEN LLP AS INDEPENDENT AUDITORS OF THE COMPANY FOR
THE FISCAL YEAR ENDING MARCH 31, 2001.

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<PAGE> 12

PROPOSAL THREE

AMENDMENT OF THE AMENDED AND RESTATED 1993 STOCK PLAN

At the Annual Meeting, the stockholders are being asked to approve an
amendment to the Amended and Restated 1993 Stock Plan (the "1993 Plan") to
increase the number of shares authorized for issuance thereunder by 1,400,000
shares, from 9,522,092 shares to 10,922,092 shares. The 1993 Plan was adopted by
the Board in May 1999 and by the stockholders in June 1999. The 1993 Plan
provides for the grant of incentive stock options to the Company's employees and
nonstatutory stock options and stock purchase rights to the Company's employees,
directors and consultants. The Company initially reserved an aggregate of
8,180,000 shares of Common Stock for issuance under the 1993 Plan. The number of
shares reserved for issuance under the 1993 Plan automatically increased by
1,342,092 shares on April 1, 2000 pursuant to a term of the 1993 Plan which
provides for the automatic annual increase in the number of shares reserved
under the 1993 Plan on the first day of each fiscal year equal to the lesser of
(a) 1,500,000 shares, (b) 5% of the outstanding shares on that date or (c) a
lesser amount as determined by the Board. In August 2000, the Board authorized
an amendment to the 1993 Plan, subject to stockholder approval, to increase the
number of authorized shares of Common Stock reserved for issuance thereunder by
1,400,000 shares, from 9,522,092 shares to 10,922,092 shares. The stockholders
of the Company are being asked to approve this amendment at the Annual Meeting.

As of July 31, 2000, options to purchase an aggregate of 4,483,312
shares of the Company's Common Stock were outstanding under the 1993 Plan with a
weighted average exercise price of $16.11 per share, options to purchase an
aggregate of 4,876,665 shares of the Company's Common Stock had been exercised
and 218,437 shares of Common Stock were available for future grant under the
1993 Plan.

The 1993 Plan is structured to allow the Board of Directors broad
discretion in creating equity incentives in order to assist the Company in
attracting, retaining and motivating the best available personnel for the
successful conduct of the Company's business. The Company believes that linking
employee compensation to corporate performance motivates employees to improve
stockholder value. The Company has, therefore, consistently included equity
incentives as a significant component of compensation for its employees.

In addition to the 1993 Plan, in July 2000, the Board adopted the 2000
Nonstatutory Stock Option Plan (the "NSO Plan"). The NSO Plan provides for the
grant of nonstatutory stock options to the Company's employees and consultants.
Officers and directors of the Company are not eligible to receive stock option
grants under the NSO Plan, provided however, that stock options may be granted
to an officer as an essential inducement to an officer entering into an
employment agreement regarding his or her initial service with the Company.
2,300,000 shares of Common Stock are reserved for issuance under the NSO Plan.
As of September 1, 2000, options to purchase an aggregate of 903,786 shares of
the Company's Common Stock were outstanding under the NSO Plan with a weighted
average exercise price of $11.81 per share, no options had been exercised, and
1,396,214 shares of Common Stock were available for future grant under the NSO
Plan.

Non-employee directors also are eligible to receive nonstatutory
option grants of the Company's Common Stock under the 1999 Director Option Plan
(the "Director Plan"). The Director Plan was adopted by the Board in May 1999
and by the stockholders in June 1999. The Company initially reserved an
aggregate of 50,000 shares of Common Stock for issuance under the Director Plan.
The number of shares

-10-
<PAGE> 13
reserved for issuance under the Director Plan automatically increased by 25,000
shares on April 1, 2000 pursuant to a term of the Director Plan which provides
for the automatic annual increase in the number of shares reserved under the
Director Plan on the first day of each fiscal year equal to a number of shares
sufficient to bring the number of shares available for future option grants to
50,000. As of July 31, 2000, options to purchase an aggregate of 37,500 shares
of the Company's Common Stock were outstanding under the Director Plan with a
weighted average exercise price of $22.34 per share, options to purchase an
aggregate of 4,480 shares of the Company's Common Stock had been exercised and
37,500 shares of Common Stock were available for future grant under the Director
Plan.

In August 2000, the Company promoted Michael Parides to Chief Executive
Officer and President of the Company. To adequately compensate and properly
motivate Mr. Parides in this new position, the Board of Directors approved,
subject to stockholder approval of this Proposal Three, a grant of options to
Mr. Parides to purchase an additional 500,000 shares of Common Stock under the
1993 Plan. Because Mr. Parides is an officer of the Company, he is ineligible to
receive stock option grants under the NSO Plan and the Director Plan.
Additionally, the Company recently hired a new Vice President of Marketing,
currently is seeking to hire additional executive officers and anticipates there
will be a need to hire additional technical or management employees during
fiscal 2001. It will be necessary to offer equity incentives to attract,
motivate and retain these individuals, particularly in the extremely competitive
job market in Silicon Valley. Furthermore, in order to retain the services of
valuable employees as the Company matures and its employee base grows larger, it
will be necessary to grant additional options to current employees as older
options become fully vested. The number of shares currently reserved under the
1993 Plan are inadequate to satisfy to Board's commitment to Mr. Parides.
Additionally, the Board believes that the number of shares reserved under the
1993 Plan, NSO Plan and the Director Plan will be inadequate to satisfy the
other equity needs of the Company through April 1, 2001, the date of the next
automatic share increase under the 1993 Plan, and that the proposed increase in
the number of shares of Common Stock reserved under the 1993 Plan would be in
the best interests of the Company and its stockholders.

VOTE REQUIRED

If a quorum is present, the affirmative vote of a majority of the Votes
Cast will be required to approve the amendment to the 1993 Plan. For this
purpose, the "Votes Cast" are defined to be the shares of the Company's Common
Stock represented and voting at the Annual Meeting.

THE BOARD UNANIMOUSLY RECOMMENDS VOTING "FOR" THE AMENDMENT OF THE
AMENDED AND RESTATED 1993 STOCK PLAN.

SUMMARY OF THE PLAN

The following is a summary of the material features of the 1993 Plan, as
proposed to be amended. We encourage you to read the complete copy of the 1993
Plan, as last amended by the Board, attached to this Proxy Statement as Appendix
A.

General. The purpose of the 1993 Plan is to attract and retain the best
available personnel for positions of substantial responsibility with the
Company, to provide additional incentive to the employees and consultants of the
Company and its parent and subsidiaries and to directors of the Company and to
promote the success of the Company's business. Options and stock purchase rights
may be granted under the 1993

-11-
<PAGE> 14

Plan. Options granted under the 1993 Plan may be either "incentive stock
options" or nonstatutory stock options.

Administration. The 1993 Plan may generally be administered by the Board
or a committee appointed by the Board (as applicable, the "Administrator"). The
Administrator determines the terms of the options and stock purchase rights
granted, including the exercise price, number of shares subject to the options
and stock purchase rights and the exercisability thereof. All questions of
interpretation are determined by the Administrator and its decisions are final
and binding upon all participants. Members of the Board receive no additional
compensation for their services in connection with the administration of the
1993 Plan.

Eligibility. Nonstatutory stock options and stock purchase rights may be
granted under the 1993 Plan to directors of the Company and to employees and
consultants of the Company and any parent or subsidiary of the Company.
Incentive stock options may be granted only to employees. The 1993 Plan provides
a limit of $100,000 on the aggregate fair market value of shares subject to all
incentive stock options which are exercisable for the first time by an optionee
in any one calendar year. The Administrator, in its discretion, selects the
employees, directors and consultants to whom options and stock purchase rights
may be granted, the time or times at which such options and stock purchase
rights shall be granted, and the exercise price and number of shares subject to
each such grant.

Limitations. Section 162(m) of the Code places limits on the
deductibility for federal income tax purposes of compensation paid to certain
executive officers of the Company. In order to preserve the Company's ability to
deduct the compensation income associated with options granted to such persons,
the 1993 Plan provides that no employee, director or consultant of the Company
may be granted, in any fiscal year of the Company, options to purchase more than
1,000,000 shares of Common Stock. Notwithstanding this limit, however, in
connection with such individual's initial employment with the Company, he or she
may be granted options to purchase up to an additional 1,500,000 shares of
Common Stock.

Terms and Conditions of Options. Each option is evidenced by a stock
option agreement between the Company and the optionee, and is subject to the
following terms and conditions:

(a) Exercise Price. The Administrator determines the exercise price of
options at the time the options are granted. The exercise price of an incentive
stock option may not be less than 100% of the fair market value of the Common
Stock on the date such option is granted; provided, however, that the exercise
price of an incentive stock option granted to a 10% stockholder may not be less
than 110% of the fair market value on the date such option is granted. The 1993
Plan provides that if the Company desires to preserve its ability to deduct the
compensation income associated with options granted under the 1993 Plan pursuant
to Section 162(m) of the Code, the exercise price of a nonstatutory stock option
may not be less than 100% of the fair market value of the Common Stock on the
date such option is granted. The fair market value of the Common Stock is
generally determined with reference to the closing sale price for the Common
Stock (or the closing bid if no sales were reported) on the last market trading
day prior to the date the option is granted. The closing sale price of the
Company's Common Stock on September 1, 2000 was $9.1563.

(b) Exercise of Option; Form of Consideration. The Administrator
determines when options become exercisable, and may in its discretion,
accelerate the vesting of any outstanding option. The means of payment for
shares issued upon exercise of an option is specified in each option agreement.
The 1993 Plan permits payment to be made by cash, check, promissory note, other
shares of Common Stock of the

-12-
<PAGE> 15

Company (with some restrictions), pursuant to a cashless exercise procedure, a
reduction in the amount of any company liability to the individual, any other
form of consideration permitted by applicable law, or any combination thereof.

(c) Term of Option. The term of an incentive stock option may be no more
than ten (10) years from the date of grant; provided, however, that in the case
of an incentive stock option granted to a 10% stockholder, the term of the
option may be no more than five (5) years from the date of grant. No option may
be exercised after the expiration of its term.

(d) Termination of Service. If an optionee's service relationship
terminates for any reason (excluding death or disability), then the optionee may
exercise the option within a period of time as determined by the Administrator
to the extent that the option is vested on the date of termination, (but in no
event later than the expiration of the term of such option as set forth in the
option agreement). In the absence of a specified time set forth in the option
agreement, the option shall remain exercisable for three months following the
termination of the optionee's service relationship. If an optionee's service
relationship terminates due to the optionee's disability, the optionee may
exercise the option within a period of time as determined by the Administrator
to the extent the option was vested on the date of termination (but in no event
later than the expiration of the term of such option as set forth in the option
agreement). In the absence of a specified time in the option agreement, the
option shall remain exercisable for the 12 months following the termination of
the optionee's service relationship. If an optionee's service relationship
terminates due to the optionee's death, the optionee's estate or the person who
acquires the right to exercise the option by bequest or inheritance may exercise
the option within a period of time as determined by the Administrator to the
extent the option was vested on the date of death (but in no event later than
the expiration of the term of such option as set forth in the option agreement).
In the absence of a specified time in the option agreement, the option shall
remain exercisable for 12 months following the optionee's death.

(e) Nontransferability of Options. Unless otherwise determined by the
Administrator, options and stock purchase rights granted under the 1993 Plan are
not transferable other than by will or the laws of descent and distribution, and
may be exercised during the optionee's lifetime only by the optionee.

(f) Other Provisions. The stock option agreement may contain other
terms, provisions and conditions not inconsistent with the 1993 Plan as may be
determined by the Administrator.

Stock Purchase Rights. In the case of stock purchase rights, unless the
Administrator determines otherwise, the restricted stock purchase agreement
shall grant the Company a repurchase option exercisable upon the voluntary or
involuntary termination of the purchaser's employment with the Company for any
reason (including death or disability). The purchase price for shares
repurchased pursuant to the restricted stock purchase agreement shall be the
original price paid by the purchaser and may be paid by cancellation of any
indebtedness of the purchaser to the Company. The repurchase option shall lapse
at a rate determined by the Administrator.

Adjustments Upon Changes in Capitalization. In the event that the stock
of the Company changes by reason of any stock split, reverse stock split, stock
dividend, combination, reclassification or other similar change in the capital
structure of the Company effected without the receipt of consideration,
appropriate adjustments shall be made in the number and class of shares of stock
subject to the 1993 Plan, the number and class of shares of stock subject to any
option or stock purchase right outstanding under the 1993 Plan, and the exercise
price of any such outstanding option or stock purchase right.

-13-
<PAGE> 16

In the event of a liquidation or dissolution, any unexercised options
and stock purchase rights will terminate. The Administrator may, in its sole
discretion, provide that each optionee shall have the right to exercise all or
any part of the optionee's options and stock purchase rights, including those
not otherwise exercisable. In addition, the Administrator may provide that any
Company repurchase option applicable to any shares purchased upon exercise of an
option shall lapse as to all such shares.

In connection with any merger of the Company with or into another
corporation or the sale of all or substantially all of the assets of the
Company, each outstanding option and stock purchase right shall be assumed or an
equivalent option or stock purchase right substituted by the successor
corporation. If the successor corporation refuses to assume the options or stock
purchase rights or to substitute substantially equivalent options or stock
purchase rights, the optionee shall have the right to exercise the option or
stock purchase rights as to all the stock subject to the option or stock
purchase right, including shares not otherwise vested or exercisable.

Amendment and Termination of the 1993 Plan. The Board may amend, alter,
suspend or terminate the 1993 Plan, or any part thereof, at any time and for any
reason. However, the Company shall obtain stockholder approval for any amendment
to the 1993 Plan to the extent necessary and desirable to comply with applicable
law. No such action by the Board or stockholders may alter or impair any option
or stock purchase right previously granted under the 1993 Plan without the
written consent of the optionee. Unless terminated earlier, the 1993 Plan shall
terminate in May 2009.

FEDERAL INCOME TAX CONSEQUENCES

Incentive Stock Options. An optionee who is granted an incentive stock
option does not recognize taxable income at the time the option is granted or
upon its exercise, although the exercise is an adjustment item for alternative
minimum tax purposes and may subject the optionee to the alternative minimum
tax. Upon a disposition of the shares more than two years after grant of the
option and one year after exercise of the option, any gain or loss is treated as
long-term capital gain or loss. Net capital gains on shares held more than 12
months may be taxed at a maximum federal rate of 20%. Capital losses are allowed
in full against capital gains and up to $3,000 against other income. If these
holding periods are not satisfied, the optionee recognizes ordinary income at
the time of disposition equal to the difference between the exercise price and
the lower of (i) the fair market value of the shares at the date of the option
exercise or (ii) the sale price of the shares. Any gain or loss recognized on
such a premature disposition of the shares in excess of the amount treated as
ordinary income is treated as long-term or short-term capital gain or loss,
depending on the holding period. A different rule for measuring ordinary income
upon such a premature disposition may apply if the optionee is also an officer,
director, or 10% stockholder of the Company. Unless limited by Section 162(m) of
the Code, the Company is entitled to a deduction in the same amount as the
ordinary income recognized by the optionee.

Nonstatutory Stock Options. An optionee does not recognize any taxable
income at the time he or she is granted a nonstatutory stock option. Upon
exercise, the optionee recognizes taxable income generally measured by the
excess of the then fair market value of the shares over the exercise price. Any
taxable income recognized in connection with an option exercise by an employee
of the Company is subject to tax withholding by the Company. Unless limited by
Section 162(m) of the Code, the Company is entitled to a deduction in the same
amount as the ordinary income recognized by the optionee. Upon a disposition of
such shares by the optionee, any difference between the sale price and the
optionee's exercise price, to the extent not recognized as taxable income as
provided above, is treated as long-term or short-term capital gain or loss,

-14-
<PAGE> 17

depending on the holding period. Net capital gains on shares held more than 12
months may be taxed at a maximum federal rate of 20%. Capital losses are allowed
in full against capital gains and up to $3,000 against other income.

Stock Purchase Rights. Stock purchase rights will generally be taxed in
the same manner as nonstatutory stock options. However, restricted stock is
generally purchased upon the exercise of a stock purchase right. At the time of
purchase, restricted stock is subject to a "substantial risk of forfeiture"
within the meaning of Section 83 of the Code, because the Company may repurchase
the stock when the purchaser ceases to provide services to the Company. As a
result of this substantial risk of forfeiture, the purchaser will not recognize
ordinary income at the time of purchase. Instead, the purchaser will recognize
ordinary income on the dates when the stock is no longer subject to a
substantial risk of forfeiture (i.e., when the Company's right of repurchase
lapses). The purchaser's ordinary income is measured as the difference between
the purchase price and the fair market value of the stock on the date the stock
is no longer subject to right of repurchase.

The purchaser may accelerate to the date of purchase his or her
recognition of ordinary income, if any, and begin his or her capital gains
holding period by timely filing, (i.e., within thirty days of the purchase), an
election pursuant to Section 83(b) of the Code. In such event, the ordinary
income recognized, if any, is measured as the difference between the purchase
price and the fair market value of the stock on the date of purchase, and the
capital gain holding period commences on such date. The ordinary income
recognized by a purchaser who is an employee will be subject to tax withholding
by the Company. Different rules may apply if the purchaser is also an officer,
director, or 10% stockholder of the Company.

THE FOREGOING IS ONLY A SUMMARY OF THE EFFECT OF FEDERAL INCOME TAXATION
UPON OPTIONEES AND THE COMPANY WITH RESPECT TO THE GRANT AND EXERCISE OF OPTIONS
AND STOCK PURCHASE RIGHTS UNDER THE PLAN. IT DOES NOT PURPORT TO BE COMPLETE,
AND DOES NOT DISCUSS THE TAX CONSEQUENCES OF THE EMPLOYEE'S OR CONSULTANT'S
DEATH OR THE PROVISIONS OF THE INCOME TAX LAWS OF ANY MUNICIPALITY, STATE OR
FOREIGN COUNTRY IN WHICH THE EMPLOYEE OR CONSULTANT MAY RESIDE.

PARTICIPATION IN THE 1993 PLAN

The grant of options under the 1993 Plan to directors and executive
officers, including the officers named in the Summary Compensation Table below,
is subject to the discretion of the Administrator. As of the date of this proxy
statement, there has been no determination by the Administrator with respect to
future awards under the 1993 Plan. Accordingly, future awards are not
determinable. The table of option grants under "Executive Compensation and Other
Matters--Option Grants in Last Fiscal Year" provides information with respect to
the grant of options to the Named Executive Officers (identified in that table)
during fiscal 2000. Information regarding options granted to non-employee
Directors during fiscal 2000 is set forth under the heading "Certain
Relationships and Related Transactions - Executive Officer and Director Option
Grants." During fiscal 2000, all executive officers and directors as a group and
all other employees as a group were granted options to purchase 562,000 shares
of Common Stock and 1,378,050 shares of Common Stock, respectively, pursuant to
the 1993 Plan.

-15-
<PAGE> 18

EXECUTIVE COMPENSATION AND OTHER MATTERS

EXECUTIVE COMPENSATION

SUMMARY COMPENSATION TABLE

The following Summary Compensation Table sets forth certain information
regarding the compensation of the President and Chief Executive Officer of the
Company, the other four most highly compensated executive officers of the
Company and the former President and Chief Executive Officer, Chief Technology
Officer and Chief Strategic Officer of the Company (the "Named Executive
Officers") for services rendered in all capacities to the Company in the fiscal
years ended March 31, 1999 and March 31, 2000.

<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
ANNUAL COMPENSATION SECURITIES
FISCAL ------------------------ UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) OPTIONS(#) COMPENSATION($)
------------------------------------ -------- -------- -------- ------------- ---------------
<S> <C> <C> <C> <C> <C>
Michael Parides(1) ................. 2000 $ 48,471 -- 130,000 --
Kent Bridges ....................... 2000 138,000 $ 63,030(2) 15,000 --
Vice President of 1999 137,667 63,451(2) 20,000 --
Worldwide Sales
Wayne Rickard ...................... 2000 163,041 -- 15,000 --
Senior Vice President of 1999 143,826 -- 45,000 --
Research and Development
William Hubbard .................... 2000 149,440 -- 15,000 --
Vice President of 1999 137,000 -- 20,000 --
Manufacturing
Christine Munson(3) ................ 2000 139,747 9,643 15,000 --
Chief Financial Officer 1999 126,043 -- 20,000 --
and V.P. of Administration
K. William Sickler(4) .............. 2000 215,000 -- 125,000 --
President and Chief 1999 198,750 -- 100,000 --
Executive Officer
Alistair Black ..................... 2000 117,360 -- 15,000 $38,617(5)
Former Chief Technology 1999 142,500 -- 55,000 --
Officer
Howie Chin(6) ...................... 2000 96,446 33,249(7) 15,000 33,978(8)
Former Chief Strategic 1999 125,158 -- 20,000 --
Officer
</TABLE>

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

(1) Mr. Parides was appointed President and Chief Executive Officer in August,
2000. From June 2000 until August 2000, Mr. Parides served as the
Company's Chief Operating Officer and from January 2000 until June 2000,
he served as Vice President of Advanced SAN Solutions and Customer
Service.

(2) Represents sales commissions and bonus.

(3) In August 2000, Ms. Munson resigned her position as the Company's Chief
Financial Officer and Vice President of Administration.

(4) In August, 2000, Mr. Sickler resigned as the Company's President and Chief
Executive Officer. In April 1996, Mr. Sickler acquired 1,200,000 shares of
restricted stock at $0.075 per share, subject to the Company's right to
repurchase such shares in the event of the termination of his employment.
The Company's right to repurchase lapses at a rate of 25% of these shares
per year. As of March 31, 2000, Mr. Sickler held 50,000 shares of
restricted Common Stock subject to the Company's right of repurchase, with
an aggregate value of $2,397,000 (based on a per share price of $47.94,
the fair market value of the Company's Common Stock as of March 31, 2000.)
No dividends will be paid on this stock.

(5) In November 1999, Mr. Black resigned as Chief Technical Officer. The sum
represented above is for consulting fees paid to Mr. Black for services
rendered.

(6) In November 1995, Mr. Chin acquired 200,000 shares subject to the
Company's right of repurchase in the event of his termination. The
Company's right of repurchase lapses at a rate of 25% of these shares per
year. As of March 31, 2000, Mr. Chin held no shares of restricted common
stock subject to the Company's right of repurchase.

(7) In December 1999, Mr. Chin resigned as Chief Strategic Officer. The sum
represented above is for severance paid to Mr. Chin.

(8) The sum represented above is for consulting fees paid to Mr. Chin for
services rendered.

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<PAGE> 19

OPTION GRANTS IN LAST FISCAL YEAR

The following table sets forth certain information for each grant of
options to purchase the Company's Common Stock during fiscal 2000 to each of the
Named Executive Officers. Each of these options granted by the Company was
granted under the 1993 Stock Option Plan, as amended (the "Plan"). Each option
has a term of 10 years, subject to earlier termination in the event the
optionee's services to the Company cease. In accordance with the rules of the
Securities and Exchange Commission, also shown below is the potential realizable
value over the term of the option (the period from the grant date to the
expiration date) based on assumed rates of stock appreciation of 5% and 10%,
compounded annually. These amounts are mandated by the Securities and Exchange
Commission and do not represent the Company's estimate of future stock price.
Actual gains, if any, on stock option exercises will depend on the future
performance of the Company's Common Stock.

<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------------------------------------------ POTENTIAL REALIZABLE
PERCENT OF VALUE AT ASSUMED
NUMBER OF TOTAL OPTIONS ANNUAL RATES OF STOCK
SECURITIES GRANTED TO EXERCISE APPRECIATION FOR
UNDERLYING EMPLOYEES IN PRICE PER OPTION TERM(5)
OPTIONS FISCAL SHARE EXPIRATION ----------------------------
NAME GRANTED(1) 2000(2) ($/SHARE)(3) DATE(4) 5% 10%
------------------------- ---------- ------------ ------------ ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Michael Parides ......... 130,000 9.4% $ 42.00 01/19/10 $ 735,807 $1,864,679
Kent Bridges(6) ......... 15,000 1.1 9.00 05/04/09 84,901 215,155
Wayne Rickard ........... 15,000 1.1 9.00 05/04/09 84,901 215,155
20,000 1.5 60.75 10/25/09 764,107 1,936,397
William Hubbard ......... 15,000 1.1 9.00 05/04/09 84,901 215,155
Christine Munson ........ 15,000 1.1 9.00 05/04/09 84,901 215,155
K. William Sickler ...... 125,000 9.1 9.00 05/04/09 707,506 1,792,960
Alistair Black .......... 15,000 1.1 9.00 05/04/09 84,901 215,155
Howie Chin .............. 15,000 1.1 9.00 05/04/09 84,901 215,155
</TABLE>

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

(1) The options for each of the Named Executive Officers vest at the rate of
2.08% of the shares subject to the option per month, except for the option
granted to Dr. Black. Dr. Black's option vests at the rate of 3.79% of the
shares subject to the option per month. Under the Plan, the Board of
Directors retains the discretion to modify the terms, including the price,
of outstanding options.

(2) Based on an aggregate of 1,378,050 options granted to employees and
consultants, including the Named Executive Officers, in fiscal 2000. Also
includes 154,500 options approved by the Board in Fiscal 2000, but issued
in April 2000, to the former employees of SmartSAN Systems, Inc.

(3) Options were granted at an exercise price equal to the fair market value
of the Company's Common Stock, as determined by reference to the closing
price reported on the Nasdaq National Market on the date of grant, or as
determined by the Board of Directors prior to the Company's securities
being traded on the Nasdaq National Market. The Board of Directors based
its determination on the Company's financial results and prospects, the
share price derived for arms-length transactions and evaluations conducted
by valuation experts.

(4) Options may terminate before their expiration dates if the optionee's
status as an employee is terminated or upon the optionee's death or
disability.

(5) The potential realizable value is net of exercise price before taxes and
calculated assuming that the fair market value of the Common Stock on the
date of grant appreciates at the indicated annual rate compounded annually
for the entire term of the option (ten years) and that the option is
exercised and sold on the last day of its term for the appreciated stock
price.

(6) Upon a change of control, 50% of the unvested portion of each stock option
held by Mr. Bridges will automatically accelerate.

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<PAGE> 20

AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES

The following table sets forth information with respect to the Named
Executive Officers concerning exercisable and unexercisable options held as of
March 31, 2000.

<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
SHARES VALUE UNDERLYING UNEXERCISED IN-THE-MONEY
ACQUIRED ON REALIZED OPTIONS AT MARCH 31, 2000 OPTIONS AT MARCH 31, 2000(2)
NAME EXERCISE (#) ($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
------------------------ ------------ ---------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Michael Parides ........ -- -- -- 130,000 -- $ 771,875
Kent Bridges(3) ........ 130,000 $4,540,000 156,042 88,958 $ 7,405,146 4,104,742
Wayne Rickard .......... 100,000 2,255,000 244,584 81,416 11,499,093 2,605,762
William Hubbard ........ 32,309 5,426,995 18,625 83,333 837,683 3,804,718
Christine Munson ....... 20,000 844,000 118,542 66,458 5,604,452 2,026,486
K. William Sickler ..... -- -- 163,542 153,125 7,506,188 6,341,474
Alistair Black ......... 100,000 4,200,000 128,333 41,667 6,065,922 1,830,953
Howie Chin ............. -- -- 135,209 45,791 6,412,576 2,041,341
</TABLE>

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

(1) Fair market value of the Company's Common Stock at the exercise date minus
the per share exercise price.

(2) Based on a value of $47.9375 per share, the fair market value of the
Company's Common Stock as of March 31, 2000, minus the per share exercise
price.

(3) Upon a change of control, 50% of the unvested portion of each stock option
held by Mr. Bridges will automatically accelerate. If a change of control
had occurred on March 31, 2000, an additional 44,479 shares subject to
options held by Mr. Bridges would have vested.

CHANGE OF CONTROL, SEVERANCE AND CONSULTING ARRANGEMENTS

In August 2000, Mr. Sickler resigned his position as President and Chief
Executive Officer of the Company and as a member of the Board of Directors. The
Company entered into a Resignation Agreement and Mutual General Release pursuant
to which, in consideration for Mr. Sickler's agreement to provide consulting
services for a period of one year (the "Consulting Term"), Mr. Sickler would
receive the following benefits and payments: (i) continuation of Mr. Sickler's
salary in effect immediately prior to his resignation during the Consulting
Term; (ii) the acceleration and immediate vesting of 56,250 stock options (with
the balance of any stock options not so accelerated being returned to the Plan);
(iii) payment by the Company of COBRA premiums and (iv) ownership of his laptop
and home computer system.

In August 2000, the Board approved the material terms of an Employment,
Change of Control and Severance Agreement (the "Employment Agreement") with Mr.
Parides pursuant to which, upon the termination of his employment with the
Company without cause, Mr. Parides would receive (i) continuation of his salary
in effect immediately prior to his termination for a one-year period, (ii)
continued vesting of his options for a one-year period and (iii) payment by the
Company of COBRA premiums. Additionally, pursuant to the terms of the Employment
Agreement, the Company has agreed that in the event of a change of control of
the Company, (a) one-half of the unvested portion of any stock option will be
accelerated and the Company's repurchase option applicable to one-half of any
stock subject to such repurchase option shall lapse and (b) if Mr. Parides'
employment with the Company is terminated (or constructively terminated) within
one year after the occurrence of the change of control event, then the balance
of any unvested options as of the termination date will be accelerated and the
Company's repurchase option applicable to the balance of any stock subject to
such repurchase option shall lapse. However, if the acceleration of vesting or
lapse of any applicable repurchase option would cause the transaction resulting
in the change of control to not be eligible for accounting treatment as a
"pooling of interests," then the vesting of Mr. Parides' stock options

-18-
<PAGE> 21

will not accelerate and any applicable repurchase option will not lapse on an
accelerated basis. The Employment Agreement also provides for an annual salary
of $250,000, the grant of options to purchase 500,000 shares of Common Stock
(subject to stockholder approval of Proposal Three) with an exercise price equal
to the fair market value of the Common Stock as of the date of stockholder
approval of Proposal Three (the "Future FMV") and a cash bonus payable from time
to time in varying amounts as and when Mr. Parides exercises vested portions of
the option equal to the product of (a) the number of vested shares subject to
the Option then being exercised and (b) the difference between the Future FMV
and 120% of the fair market value of the Company's Common Stock as of September
11, 2000, if any.

We have entered into a change of control agreement with Kent Bridges. In
the event of a change of control and regardless of whether the employment
relationship continues following the change of control, the vesting with respect
to a portion of the outstanding stock options issued to Mr. Bridges will be
accelerated and the Company's option to repurchase applicable to a portion of
his restricted stock, if any, will lapse.

Mr. Bridges' change of control agreement provides that one-half of the
unvested portion of any stock option will be accelerated and the Company's
repurchase option applicable to one-half of any stock subject to such repurchase
option shall lapse upon a change of control. The balance of any unvested shares
not accelerated will continue to vest over the original vesting schedule and the
repurchase option, if any, applicable to any shares will continue to lapse over
the original schedule.

The change of control agreement provides that if the acceleration of
vesting or lapse of any applicable repurchase option would cause the transaction
resulting in the change of control to not be eligible for accounting treatment
as a "pooling of interests," then the vesting of Mr. Bridges' stock options will
not accelerate and any applicable repurchase option will not lapse on an
accelerated basis.

In November 1999, Alistair Black resigned as our Chief Technical Officer
and we entered into a Consulting Agreement with Mr. Black for the period from
November 25, 1999 through April 30, 2000. Under the terms of the Consulting
Agreement, Mr. Black provided technical and strategic consulting services in
exchange for consulting fees of approximately $14,353 per month.

In December 1999, Howey Chin resigned as our Chief Strategic Officer and
was paid severance of approximately $33,249. Additionally, we entered into a
Consulting Agreement with Mr. Chin for the period from December 4, 1999 through
April 30, 2000, pursuant to which Mr. Chin provided strategic marketing
consulting services in exchange for consulting fees of approximately $11,931 per
month.

DIRECTORS' COMPENSATION

The Company's non-employee directors are reimbursed for expenses
incurred in connection with attending Board and committee meetings but are not
compensated for their services as Board or committee members. The Company grants
non-employee directors options to purchase the Company's Common Stock pursuant
the terms of the Director Plan. Directors also are eligible to receive option
grants to purchase the Company's Common Stock pursuant to the terms of the 1993
Plan. See "Security Ownership of Certain Beneficial Owners and Management" and
"Certain Relationships and Related Transactions - Executive Officer and Director
Option Grants."

The Director Plan provides for the automatic grant of 5,000 shares of
Common Stock to each non-employee director on the date on which such person
first becomes a non-employee director. Additionally, each non-employee director
shall automatically be granted an option to purchase 2,500 shares of Common

-19-
<PAGE> 22

Stock each year on May 1, if on that date he or she has served on the Board for
at least the preceding six months. Each option shall have a term of three years,
and each option is immediately exercisable. The exercise price of all options
shall be 100% of the fair market value per share of the Common Stock, as of the
date of grant. The fair market value per share was determined by the Company's
Board of Directors prior to the existence of a public market for Common Stock.
Thereafter, the fair market value per share has been the price reported on the
Nasdaq Stock Market's National Market as the closing price of Common Stock on
the date of grant or on the last trading day prior to the date of grant, if the
grant is made on a holiday.

Options granted under the Director Plan must be exercised within three
months after the end of an optionee's tenure as a member of the Board, or within
12 months after his or her death or disability, but in any case not later than
the expiration of the option's term.

REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION

The following is the report of the Compensation Committee with respect
to the compensation paid to the Company's executive officers during fiscal 2000.
Actual compensation earned during fiscal 2000 by the Named Executive Officers is
shown in the Summary Compensation Table.

Compensation Philosophy

The Company operates in the extremely competitive and rapidly changing
high technology industry. The Committee believes that the compensation programs
for its executive officers should be designed to attract, motivate and retain
talented executives responsible for the success of the Company and should be
determined within a competitive framework and based on the achievement of
designated business objectives, individual contribution, customer satisfaction
and financial performance. Within this overall philosophy, the Committee's
objectives are to:

- provide a competitive total compensation package that takes into
consideration the compensation practices of companies with which the Company
competes for executive talent; and

- align the financial interests of executive officers with those of
stockholders by providing executives with an equity stake in the Company.

Components of Executive Compensation

The compensation program for the Company's executive officers consists
of the following components:

- base salary; and

- long-term stock option incentives

Base Salary

The Compensation Committee reviewed and approved fiscal 2000 salaries
for the Chief Executive Officer and other Named Executive Officers at the
beginning of the fiscal year. Base salaries were established by the Committee
based upon competitive compensation data, an executive's job responsibilities,
level of experience, individual performance and contribution to the business. In
making base salary decisions, the Committee exercised its discretion and
judgment based upon these factors. No specific formula

-20-
<PAGE> 23

was applied to determine the weight of each factor. The Committee based its
determination of Mr. Sickler's salary on both his individual performance and the
salaries paid to chief executive officers of peer companies.

Long-Term Stock Option Incentives

The Compensation Committee provides the Company's executive officers
with long-term incentive compensation through grants of options to purchase the
Company's Common Stock. The goal of the long-term stock option incentive program
is to align the interests of executive officers with those of the Company's
stockholders and to provide each executive officer with a significant incentive
to manage the Company from the perspective of an owner with an equity stake in
the business. It is the belief of the Committee that stock options directly
motivate an executive to maximize long-term stockholder value. The options also
utilize vesting periods that encourage key executives to continue in employ of
the Company. The Committee considers the grant of each option subjectively,
reviewing factors such as the individual performance, the anticipated future
contribution toward the attainment of the Company's long-term strategic
performance goals and the number of unvested options held by each individual at
the time of the new grant. On May 4, 1999, the Board of Directors granted to Mr.
Sickler, based upon the recommendations of the Compensation Committee, options
to purchase 125,000 shares of common stock at a purchase price of $9.00 per
share and based their decision to grant such options on competitive compensation
data, Mr. Sickler's job responsibilities, anticipated future contributing toward
the attainment of the Company's strategic goals, the number of unvested options
held at the time of the new grant and other factors. No specific formula was
applied to determine the weight of each factor considered.

SECTION 162(m)

The Company has considered the potential future effects of Section
162(m) of the Internal Revenue Code on the compensation paid to the Company's
executive officers. Section 162(m) disallows a tax deduction for any publicly
held corporation for individual compensation exceeding $1.0 million in any
taxable year for any of the Named Executive Officers, unless compensation is
performance-based. The Company has adopted a policy that, where reasonably
practicable, the Company will seek to qualify the variable compensation paid to
its executive officers for an exemption from the deductibility limitations of
Section 162(m).

Respectfully submitted by:

Milton Chang
Robert Kuhling

-21-
<PAGE> 24

PERFORMANCE GRAPH

Set forth below is a line graph comparing the annual percentage change
in the cumulative return to the stockholders of the Company's Common Stock with
the cumulative return of the Nasdaq Stock Market (U.S.) Index and of the Nasdaq
Electronic Components Index for the period commencing July 20, 1999 and ending
on March 31, 2000. Returns for the indices are weighted based on market
capitalization at the beginning of each measurement point. The graph assumes
that $100 was invested on July 20, 1999 in the Company's Common Stock, the
Nasdaq Stock Market (U.S.) Index and the Nasdaq Electronic Components Index and
that all dividends were reinvested. No dividends have been declared or paid on
the Company's Common Stock. Stockholder returns over the indicated period should
not be considered indicative of future stockholder returns.

COMPARISON OF EIGHT MONTH CUMULATIVE TOTAL RETURN
AMONG GADZOOX NETWORKS, INC.,
THE NASDAQ STOCK MARKET (U.S.) INDEX
AND THE NASDAQ ELECTRONIC COMPONENTS INDEX

[PERFORMANCE GRAPH]

<TABLE>
<CAPTION>
Cumulative Total Return
------------------------------------------------------------------------------------------------
7/20/99 7/99 8/99 9/99 10/99 11/99 12/99 1/00 2/00 3/00
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
100.00 358.33 430.36 256.55 226.79 376.19 207.44 180.95 315.48 228.28
100.00 96.47 100.53 100.63 108.69 121.87 148.66 143.26 170.47 166.93
100.00 104.16 120.13 112.72 123.18 131.72 150.04 173.90 228.69 241.19
</TABLE>

-22-
<PAGE> 25

The information contained above under the captions "Report of the
Compensation Committee on Executive Compensation" and "Performance Graph" shall
not be deemed to be "soliciting material" or to be "filed" with the Securities
and Exchange Commission, nor shall such information be incorporated by reference
into any future filing under the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934, as amended, except to the extent that the
Company specifically incorporates it by reference into such filing.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") requires the Company's executive officers and directors, and
persons who own more than ten percent of a registered class of the Company's
equity securities to file reports of ownership and changes in ownership with the
Securities and Exchange Commission ("Commission") and the National Association
of Securities Dealers, Inc. Executive officers, directors and greater than ten
percent stockholders are required by Commission regulation to furnish the
Company with copies of all Section 16(a) forms they file. Based solely on its
review of the copies of such forms received by it, or written representations
from certain reporting persons, the Company believes that during fiscal 2000,
all executive officers and directors of the Company complied with all applicable
filing requirements.

-23-
<PAGE> 26

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Since the beginning of the Company's last fiscal year, there has not
been nor is there currently proposed any transaction or series of similar
transactions to which the Company was or is to be a party in which the amount
involved exceeds $60,000 and in which any director, executive officer, holder of
more than 5% of the Common Stock of the Company or any member of the immediate
family of any of the foregoing persons had or will have a direct or indirect
material interest other than (1) compensation agreements and other arrangements,
which are described where required in "Change of Control, Severance and
Consulting Arrangements" and (2) the transactions described below.

TRANSACTIONS WITH DIRECTORS, EXECUTIVE OFFICERS AND 5% STOCKHOLDERS

Pursuant to a sale and rights transfer agreement dated as of May 26,
1999, a third-party investor sold all of the shares of the Company's capital
stock that it held, a total of 784,314 shares of Series H preferred stock, to
three investors. Of these 784,314 shares, the third-party investor sold 459,317
shares to New Enterprise Associates VIII, Limited Partnership, 2,500 shares to
N.E.A. Presidents Fund, L.P. and 322,497 shares to ONSET Enterprise Associates
III, L.P., at a per share purchase price of $10.00 for an aggregate purchase
price of $7,843,140. Peter Morris, a director of the Company, is a partner of
New Enterprise Associates. Mr. Morris disclaims any beneficial ownership of the
securities held by New Enterprise Associates VIII, Limited Partnership and
N.E.A. Presidents Fund, L.P., except to the extent of his proportional
partnership interest in these entities. Rob Kuhling, a director of the Company,
is a partner with ONSET Enterprise Associates. Mr. Kuhling disclaims any
beneficial ownership of the securities held by ONSET Enterprise Associates III,
L.P., except to the extent of his proportional partnership interest in this
entity.

LOAN TO EXECUTIVE OFFICER

On June 26, 2000, the Company loaned $285,000 to Clark S. Foy, the
Company's Vice President of Marketing. The outstanding principal balance accrues
interest at the rate of 6% per annum and is due on June 26, 2004. The sum of
$17,812.50 shall be payable quarterly; however, this amount shall be forgiven as
and when it becomes due so long as Mr. Foy remains an employee of the Company.

EXECUTIVE OFFICER AND DIRECTOR OPTION GRANTS

On various occasions since the beginning of fiscal 2000, the Company has
granted the following options to purchase Common Stock to the following current
and former executive officers and directors of the Company:

<TABLE>
<CAPTION>
NUMBER OF EXERCISE PRICE/
NAME DATE OF GRANT OPTIONS SHARE
--------------------------------------------- ------------- --------- ---------------
<S> <C> <C> <C>
Stephen Luczo................................ 5/4/99 5,000 $ 9.00
5/1/00 2,500 37.56
Peter Morris................................. 5/4/99 5,000 9.00
5/1/00 2,500 37.56
Rob Kuhling.................................. 5/4/99 5,000 9.00
5/1/00 2,500 37.56
Denny Ko..................................... 5/4/99 5,000 9.00
5/1/00 2,500 37.56
Milton Chang................................. 5/4/99 5,000 9.00
5/1/00 2,500 37.56
</TABLE>

-24-
<PAGE> 27

<TABLE>
<CAPTION>
NUMBER OF EXERCISE PRICE/
NAME DATE OF GRANT OPTIONS SHARE
--------------------------------------------- ------------- --------- ---------------
<S> <C> <C> <C>
Michael Parides.............................. 1/19/00 130,000 $42.00
K. William Sickler........................... 5/4/99 125,000 9.00
Alistair Black............................... 5/4/99 15,000 9.00
Howey Chin................................... 5/4/99 15,000 9.00
Christine E. Munson.......................... 5/4/99 15,000 9.00
Kurt Chan.................................... 5/4/99 15,000 9.00
Wayne Rickard................................ 5/4/99 15,000 9.00
Kent Bridges................................. 5/4/99 15,000 9.00
David Tang................................... 5/4/99 50,000 9.00
William Hubbard.............................. 5/4/99 15,000 9.00
</TABLE>

Additionally, in August 2000, the Board approved, subject to stockholder
approval of Proposal Three, a grant of options to purchase 500,000 shares of
Common Stock with an exercise price equal to the fair market value of the Common
Stock as of the date of such stockholder approval (the "Future FMV"). The Board
also agreed to pay Mr. Parides a cash bonus from time to time in varying amounts
as and when Mr. Parides exercises vested portions of the option described above
equal to the product of (i) the number of vested shares subject to the option
then being exercised and (ii) the difference between the Future FMV and 120% of
the fair market value of the Common Stock on September 11, 2000, if any.

RELATIONSHIP WITH SEAGATE TECHNOLOGY, INC.

The Company has developed a strategic partnership with Seagate
Technology, Inc. ("Seagate Technology") pursuant to which the Company has
collaborated with Seagate Technology on the development of industry standards,
the design and development of new SAN products, the interoperability of
products, strategic planning and SAN market development. In addition, Seagate
Technology has made several investments in the Company as described below.
Stephen J. Luczo, a director, is also the chief executive officer of Seagate
Technology.

On September 18, 1998, the Company entered into a $15,000,000
convertible note purchase agreement with Seagate Technology bearing simple
interest of 5.75% per annum. On July 31, 2000, the Company repaid the
outstanding principal balance and accrued and unpaid interest under the
convertible note in the amount of $3,110,728. The Company had the option to
convert any portion of the outstanding balance of principal and interest into
Common Stock at a price per share of $7.65. The Company converted approximately
$12,766,000 of accrued interest and principal into 1,668,722 shares of Common
Stock under the convertible note.

Pursuant to an agreement that the Company entered into with Seagate
Technology and a third-party investor (which third-party investor subsequently
sold all of its shares of Common Stock to funds affiliated with New Enterprise
Associates and ONSET Ventures) on October 12, 1998, Seagate Technology agreed to
certain restrictions on its ownership of Common Stock. Specifically, unless the
Board consents, Seagate Technology has agreed not to:

- acquire beneficial ownership of any shares of the Company's capital
stock if after acquiring the shares, Seagate Technology would
beneficially own more than 19.9% of the Company's outstanding voting
stock;

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<PAGE> 28

- form, join or in any way participate in a group acting together for
the purpose of acquiring, holding or disposing of shares of the
Company's capital stock if the group beneficially owns more than 5%
of the Company's outstanding voting stock;

- submit any resolution to the Company's stockholders or become a
participant in a proxy solicitation in opposition to the
recommendation of a majority of the Company's directors; or

- enter into any voting arrangement with respect to any shares of the
Company's capital stock.

In addition, if Seagate Technology acquires more than 19.9% of the
Company's voting stock the Company has the right to purchase from Seagate
Technology a sufficient number of shares of voting stock so as to reduce the
voting stock held by Seagate Technology to no more than 19.9% of the Company's
outstanding voting stock. To purchase shares held by Seagate Technology pursuant
to this right, the Company would have to pay the average per share cash price
paid by Seagate Technology calculated on a last purchased, first sold basis.

These limitations on Seagate Technology's ownership of the Company's
capital stock expire upon the earlier to occur of (1) July 19, 2002, (2) when a
tender offer is made for not less than 50% of the Company's outstanding shares
or (3) when another entity or group acquires not less than 25% ownership of the
total combined voting power of all of the Company's outstanding shares.

Pursuant to the stockholders' agreement, Seagate Technology agreed that
it will not, nor will it permit any of its affiliates to, sell or transfer any
shares of the Company's capital stock to a person or entity that is engaged in
or has publicly announced its intention to enter into the business of
developing, manufacturing, marketing or selling storage area networks.

In addition, for so long as Seagate Technology owns at least 7% of the
Company's outstanding voting stock, Seagate Technology agreed that it will not,
nor will it permit any of its affiliates to, sell or transfer any shares of the
Company's capital stock, except under the following circumstances:

- to a person or entity who owned the Company's voting stock
immediately prior to the closing of the Company's initial public
offering;

- to the Company or to any person approved by the Company;

- pursuant to a bona fide public offering registered under the
Securities Act;

- pursuant to Rule 144 under the Securities Act;

- pursuant to a bona fide pledge of shares of the Company's capital
stock to an institutional lender to secure a loan, guarantee or other
financial support, provided that the lender agrees to hold such stock
subject to the same restrictions applicable to Seagate Technology or
the other investor;

- in the event of a merger or consolidation in which the Company is
acquired by another corporation, or pursuant to a plan for the
Company's liquidation;

-26-
<PAGE> 29

- to a wholly-owned subsidiary that has executed an agreement to be
bound by the same restrictions applicable to Seagate Technology or
the other investor;

- sales into any tender or exchange offer (A) which is made by the
Company or on the Company's behalf; (B) which is made by another
person or group and is not opposed by the Board; or (C) subject to
the Company's right of first refusal, which is made by another person
or group and which would result in such person or group owning more
than 50% of the Company's total outstanding voting stock; or

- public distributions, provided that, in cases other than public
distributions underwritten by an underwriter selected by the Company,
no single purchaser is known to be acquiring more than 5% of our
outstanding capital stock in the distribution.

Pursuant to the stockholders' agreement, Seagate Technology granted the
Company certain rights of first refusal with respect to any shares of the
Company's Common Stock held immediately after the closing of the Company's
initial public offering or those shares of Common Stock issuable to Seagate
Technology upon conversion of the convertible note issued to Seagate Technology.
The Company has a right of first refusal to purchase any of these shares sold by
Seagate Technology for so long as Seagate Technology owns at least 7% of the
Company's outstanding voting stock. Certain sales of the Company's voting stock
by Seagate Technology, including sales through a registered public offering, are
not subject to this right of first refusal.

INDEMNIFICATION

The Company has entered into indemnification agreements with each of its
directors and officers. Such indemnification agreements require the Company to
indemnify its directors and officers to the fullest extent permitted by Delaware
law.

CONFLICT OF INTEREST POLICY

The Company believes that all transactions with affiliates described
above were made on terms no less favorable to the Company than could have been
obtained from unaffiliated third parties. The Company's policy is to require
that a majority of the independent and disinterested outside directors on the
Board approve all future transactions between the Company and its officers,
directors, principal stockholders and their affiliates. Such transactions will
continue to be on terms no less favorable to the Company than it could obtain
from unaffiliated third parties.

All future transactions, including loans, between the Company and its
officers, directors, principal stockholders and their affiliates will be
approved by a majority of the Board, including a majority of the independent and
disinterested outside directors, and will continue to be on terms no less
favorable to the Company than could be obtained from unaffiliated third parties.

-27-
<PAGE> 30

OTHER MATTERS

The Company knows of no other matters to be submitted at the meeting. If
any other matters properly come before the meeting, it is the intention of the
persons named in the enclosed form of Proxy to vote the shares they represent as
the Board may recommend.

THE BOARD OF DIRECTORS

Dated: September 20, 2000

-28-
<PAGE> 31

APPENDIX A

GADZOOX NETWORKS, INC.

AMENDED AND RESTATED
1993 STOCK PLAN
(AS AMENDED AND RESTATED MAY 4, 1999 AND
LAST AMENDED ON AUGUST 30, 2000)

1. Purposes of the Plan. The purposes of this 1993 Stock Plan are:

- to attract and retain the best available personnel for
positions of substantial responsibility,

- to provide additional incentive to Employees, Directors and
Consultants, and

- to promote the success of the Company's business.

Options granted under the Plan may be Incentive Stock Options or
Nonstatutory Stock Options, as determined by the Administrator at the time of
grant. Stock Purchase Rights may also be granted under the Plan.

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

(a) "Administrator" means the Board or any of its Committees as
shall be administering the Plan, in accordance with Section 4 of the Plan.

(b) "Applicable Laws" means the requirements relating to the
administration of stock option plans under U. S. state corporate laws, U.S.
federal and state securities laws, the Code, any stock exchange or quotation
system on which the Common Stock is listed or quoted and the applicable laws of
any foreign country or jurisdiction where Options or Stock Purchase Rights are,
or will be, granted under the Plan.

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

(e) "Committee" means a committee of Directors appointed by the
Board in accordance with Section 4 of the Plan.

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

(g) "Company" means Gadzoox Networks, Inc., a Delaware
corporation.

(h) "Consultant" means any person, including an advisor, engaged
by the Company or a Parent or Subsidiary to render services to such entity.

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

<PAGE> 32

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

(k) "Employee" means any person, including Officers and
Directors, employed by the Company or any Parent or Subsidiary of the Company. A
Service Provider shall not cease to be an Employee in the case of (i) any leave
of absence approved by the Company or (ii) transfers between locations of the
Company or between the Company, its Parent, any Subsidiary, or any successor.
For purposes of Incentive Stock Options, no such leave may exceed ninety days,
unless reemployment upon expiration of such leave is guaranteed by statute or
contract. If reemployment upon expiration of a leave of absence approved by the
Company is not so guaranteed, on the 181st day of such leave any Incentive Stock
Option held by the Optionee shall cease to be treated as an Incentive Stock
Option and shall be treated for tax purposes as a Nonstatutory Stock Option.
Neither service as a Director nor payment of a director's fee by the Company
shall be sufficient to constitute "employment" by the Company.

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

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

(i) If the Common Stock is listed on any established stock
exchange or a national market system, including without limitation the Nasdaq
National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its
Fair Market Value shall be the closing sales price for such stock (or the
closing bid, if no sales were reported) as quoted on such exchange or system for
the last market trading day prior to the time of determination, as reported in
The Wall Street Journal or such other source as the Administrator deems
reliable;

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

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

(n) "Incentive Stock Option" means an Option intended to qualify
as an incentive stock option within the meaning of Section 422 of the Code and
the regulations promulgated thereunder.

(o) "Nonstatutory Stock Option" means an Option not intended to
qualify as an Incentive Stock Option.

(p) "Notice of Grant" means a written or electronic notice
evidencing certain terms and conditions of an individual Option or Stock
Purchase Right grant. The Notice of Grant is part of the Option Agreement.

(q) "Officer" means a person who is an officer of the Company
within the meaning of Section 16 of the Exchange Act and the rules and
regulations promulgated thereunder.

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

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<PAGE> 33

(s) "Option Agreement" means an agreement between the Company and
an Optionee evidencing the terms and conditions of an individual Option grant.
The Option Agreement is subject to the terms and conditions of the Plan.

(t) "Option Exchange Program" means a program whereby outstanding
Options are surrendered in exchange for Options with a lower exercise price.

(u) "Optioned Stock" means the Common Stock subject to an Option
or Stock Purchase Right.

(v) "Optionee" means the holder of an outstanding Option or Stock
Purchase Right granted under the Plan.

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

(x) "Plan" means this Amended and Restated 1993 Stock Plan.

(y) "Restricted Stock" means shares of Common Stock acquired
pursuant to a grant of Stock Purchase Rights under Section 11 of the Plan.

(z) "Restricted Stock Purchase Agreement" means a written
agreement between the Company and the Optionee evidencing the terms and
restrictions applying to stock purchased under a Stock Purchase Right. The
Restricted Stock Purchase Agreement is subject to the terms and conditions of
the Plan and the Notice of Grant.

(aa) "Rule 16b-3" means Rule 16b-3 of the Exchange Act or any
successor to Rule 16b-3, as in effect when discretion is being exercised with
respect to the Plan.

(bb) "Section 16(b) " means Section 16(b) of the Exchange Act.

(cc) "Service Provider" means an Employee, Director or
Consultant.

(dd) "Share" means a share of the Common Stock, as adjusted in
accordance with Section 13 of the Plan.

(ee) "Stock Purchase Right" means the right to purchase Common
Stock pursuant to Section 11 of the Plan, as evidenced by a Notice of Grant.

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

3. Stock Subject to the Plan. Subject to the provisions of Section 13 of
the Plan, the maximum aggregate number of Shares which may be optioned and sold
under the Plan is 10,922,092 Shares (which includes 8,180,000 Shares initially
reserved under the Plan, 1,342,092 Shares automatically reserved in April 2000
and 1,400,000 Shares approved by the Board of Directors in August 2000), plus an
annual increase to be added on the first day of the Company's fiscal year
beginning in 2000 equal to the lesser of (i) 1,500,000 shares, (ii) 5% of the
outstanding shares on such date or (iii) a lesser amount determined by the
Board. The Shares may be authorized, but unissued, or reacquired Common Stock.

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<PAGE> 34

If an Option or Stock Purchase Right expires or becomes
unexercisable without having been exercised in full, or is surrendered pursuant
to an Option Exchange Program, the unpurchased Shares which were subject thereto
shall become available for future grant or sale under the Plan (unless the Plan
has terminated); provided, however, that Shares that have actually been issued
under the Plan, whether upon exercise of an Option or Right, shall not be
returned to the Plan and shall not become available for future distribution
under the Plan, except that if Shares of Restricted Stock are repurchased by the
Company at their original purchase price, such Shares shall become available for
future grant under the Plan.

4. Administration of the Plan.

(a) Procedure.

(i) Multiple Administrative Bodies. The Plan may be
administered by different Committees with respect to different groups of Service
Providers.

(ii) Section 162(m). To the extent that the Administrator
determines it to be desirable to qualify Options granted hereunder as
"performance-based compensation" within the meaning of Section 162(m) of the
Code, the Plan shall be administered by a Committee of two or more "outside
directors" within the meaning of Section 162(m) of the Code.

(iii) Rule 16b-3. To the extent desirable to qualify
transactions hereunder as exempt under Rule 16b-3, the transactions contemplated
hereunder shall be structured to satisfy the requirements for exemption under
Rule 16b-3.

(iv) Other Administration. Other than as provided above,
the Plan shall be administered by (A) the Board or (B) a Committee, which
committee shall be constituted to satisfy Applicable Laws.

(b) Powers of the Administrator. Subject to the provisions of the
Plan, and in the case of a Committee, subject to the specific duties delegated
by the Board to such Committee, the Administrator shall have the authority, in
its discretion:

(i) to determine the Fair Market Value;

(ii) to select the Service Providers to whom Options and
Stock Purchase Rights may be granted hereunder;

(iii) to determine the number of shares of Common Stock to
be covered by each Option and Stock Purchase Right granted hereunder;

(iv) to approve forms of agreement for use under the Plan;

(v) to determine the terms and conditions, not
inconsistent with the terms of the Plan, of any Option or Stock Purchase Right
granted hereunder. Such terms and conditions include, but are not limited to,
the exercise price, the time or times when Options or Stock Purchase Rights may
be exercised (which may be based on performance criteria), any vesting
acceleration or waiver of forfeiture restrictions, and any restriction or
limitation regarding any Option or Stock Purchase Right or the shares of Common
Stock relating thereto, based in each case on such factors as the Administrator,
in its sole discretion, shall determine;

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<PAGE> 35

(vi) to reduce the exercise price of any Option or Stock
Purchase Right to the then current Fair Market Value if the Fair Market Value of
the Common Stock covered by such Option or Stock Purchase Right shall have
declined since the date the Option or Stock Purchase Right was granted;

(vii) to institute an Option Exchange Program;

(viii) to construe and interpret the terms of the Plan and
awards granted pursuant to the Plan;

(ix) to prescribe, amend and rescind rules and regulations
relating to the Plan, including rules and regulations relating to sub-plans
established for the purpose of qualifying for preferred tax treatment under
foreign tax laws;

(x) to modify or amend each Option or Stock Purchase Right
(subject to Section 15(c) of the Plan), including the discretionary authority to
extend the post-termination exercisability period of Options longer than is
otherwise provided for in the Plan;

(xi) to allow Optionees to satisfy withholding tax
obligations by electing to have the Company withhold from the Shares to be
issued upon exercise of an Option or Stock Purchase Right that number of Shares
having a Fair Market Value equal to the amount required to be withheld. The Fair
Market Value of the Shares to be withheld shall be determined on the date that
the amount of tax to be withheld is to be determined. All elections by an
Optionee to have Shares withheld for this purpose shall be made in such form and
under such conditions as the Administrator may deem necessary or advisable;

(xii) to authorize any person to execute on behalf of the
Company any instrument required to effect the grant of an Option or Stock
Purchase Right previously granted by the Administrator;

(xiii) to make all other determinations deemed necessary
or advisable for administering the Plan.

(c) Effect of Administrator's Decision. The Administrator's
decisions, determinations and interpretations shall be final and binding on all
Optionees and any other holders of Options or Stock Purchase Rights.

5. Eligibility. Nonstatutory Stock Options and Stock Purchase Rights may
be granted to Service Providers. Incentive Stock Options may be granted only to
Employees.

6. Limitations.

(a) Each Option shall be designated in the Option Agreement as
either an Incentive Stock Option or a Nonstatutory Stock Option. However,
notwithstanding such designation, to the extent that the aggregate Fair Market
Value of the Shares with respect to which Incentive Stock Options are
exercisable for the first time by the Optionee during any calendar year (under
all plans of the Company and any Parent or Subsidiary) exceeds $100,000, such
Options shall be treated as Nonstatutory Stock Options. For purposes of this
Section 6(a), Incentive Stock Options shall be taken into account in the order
in which they were granted. The Fair Market Value of the Shares shall be
determined as of the time the Option with respect to such Shares is granted.

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<PAGE> 36

(b) Neither the Plan nor any Option or Stock Purchase Right shall
confer upon an Optionee any right with respect to continuing the Optionee's
relationship as a Service Provider with the Company, nor shall they interfere in
any way with the Optionee's right or the Company's right to terminate such
relationship at any time, with or without cause.

(i) No Service Provider shall be granted, in any fiscal
year of the Company, Options to purchase more than 1,000,000 Shares.

(ii) In connection with his or her initial service, a
Service Provider may be granted Options to purchase up to an additional
1,500,000 Shares which shall not count against the limit set forth in subsection
(i) above.

(iii) The foregoing limitations shall be adjusted
proportionately in connection with any change in the Company's capitalization as
described in Section 13.

(iv) If an Option is cancelled in the same fiscal year of
the Company in which it was granted (other than in connection with a transaction
described in Section 13), the cancelled Option will be counted against the
limits set forth in subsections (i) and (ii) above. For this purpose, if the
exercise price of an Option is reduced, the transaction will be treated as a
cancellation of the Option and the grant of a new Option.

7. Term of Plan. Subject to Section 19 of the Plan, the Plan (as amended
and restated) shall become effective upon its adoption by the Board. It shall
continue in effect for a term of ten (10) years (until May 3, 2009) unless
terminated earlier under Section 15 of the Plan.

8. Term of Option. The term of each Option shall be stated in the Option
Agreement. In the case of an Incentive Stock Option, the term shall be ten (10)
years from the date of grant or such shorter term as may be provided in the
Option Agreement. Moreover, in the case of an Incentive Stock Option granted to
an Optionee who, at the time the Incentive Stock Option is granted, owns stock
representing more than ten percent (10%) of the total combined voting power of
all classes of stock of the Company or any Parent or Subsidiary, the term of the
Incentive Stock Option shall be five (5) years from the date of grant or such
shorter term as may be provided in the Option Agreement.

9. Option Exercise Price and Consideration.

(a) Exercise Price. The per share exercise price for the Shares
to be issued pursuant to exercise of an Option shall be determined by the
Administrator, subject to the following:

(i) In the case of an Incentive Stock Option

(A) granted to an Employee who, at the time the
Incentive Stock Option is granted, owns stock representing more than ten percent
(10%) of the voting power of all classes of stock of the Company or any Parent
or Subsidiary, the per Share exercise price shall be no less than 110% of the
Fair Market Value per Share on the date of grant.

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<PAGE> 37

(B) granted to any Employee other than an Employee
described in paragraph (A) immediately above, the per Share exercise price shall
be no less than 100% of the Fair Market Value per Share on the date of grant.

(ii) In the case of a Nonstatutory Stock Option, the per
Share exercise price shall be determined by the Administrator. In the case of a
Nonstatutory Stock Option intended to qualify as "performance-based
compensation" within the meaning of Section 162(m) of the Code, the per Share
exercise price shall be no less than 100% of the Fair Market Value per Share on
the date of grant.

(iii) Notwithstanding the foregoing, Options may be
granted with a per Share exercise price of less than 100% of the Fair Market
Value per Share on the date of grant pursuant to a merger or other corporate
transaction.

(b) Waiting Period and Exercise Dates. At the time an Option is
granted, the Administrator shall fix the period within which the Option may be
exercised and shall determine any conditions which must be satisfied before the
Option may be exercised.

(c) Form of Consideration. The Administrator shall determine the
acceptable form of consideration for exercising an Option, including the method
of payment. In the case of an Incentive Stock Option, the Administrator shall
determine the acceptable form of consideration at the time of grant. Such
consideration may consist entirely of:

(i) cash;

(ii) check;

(iii) promissory note;

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

(v) consideration received by the Company under a cashless
exercise program implemented by the Company in connection with the Plan;

(vi) a reduction in the amount of any Company liability to
the Optionee, including any liability attributable to the Optionee's
participation in any Company-sponsored deferred compensation program or
arrangement;

(vii) any combination of the foregoing methods of payment;
or

(viii) such other consideration and method of payment for
the issuance of Shares to the extent permitted by Applicable Laws.

10. Exercise of Option.

(a) Procedure for Exercise; Rights as a Stockholder. Any Option
granted hereunder shall be exercisable according to the terms of the Plan and at
such times and under such conditions as

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<PAGE> 38

determined by the Administrator and set forth in the Option Agreement. Unless
the Administrator provides otherwise, vesting of Options granted hereunder shall
be tolled during any unpaid leave of absence. An Option may not be exercised for
a fraction of a Share.

An Option shall be deemed exercised when the Company receives:
(i) written or electronic notice of exercise (in accordance with the Option
Agreement) from the person entitled to exercise the Option, and (ii) full
payment for the Shares with respect to which the Option is exercised. Full
payment may consist of any consideration and method of payment authorized by the
Administrator and permitted by the Option Agreement and the Plan. Shares issued
upon exercise of an Option shall be issued in the name of the Optionee or, if
requested by the Optionee, in the name of the Optionee and his or her spouse.
Until the Shares are issued (as evidenced by the appropriate entry on the books
of the Company or of a duly authorized transfer agent of the Company), no right
to vote or receive dividends or any other rights as a stockholder shall exist
with respect to the Optioned Stock, notwithstanding the exercise of the Option.
The Company shall issue (or cause to be issued) such Shares promptly after the
Option is exercised. No adjustment will be made for a dividend or other right
for which the record date is prior to the date the Shares are issued, except as
provided in Section 13 of the Plan.

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

(b) Termination of Relationship as a Service Provider. If an
Optionee ceases to be a Service Provider, other than upon the Optionee's death
or Disability, the Optionee may exercise his or her Option within such period of
time as is specified in the Option Agreement to the extent that the Option is
vested on the date of termination (but in no event later than the expiration of
the term of such Option as set forth in the Option Agreement). In the absence of
a specified time in the Option Agreement, the Option shall remain exercisable
for three (3) months following the Optionee's termination. If, on the date of
termination, the Optionee is not vested as to his or her entire Option, the
Shares covered by the unvested portion of the Option shall revert to the Plan.
If, after termination, the Optionee does not exercise his or her Option within
the time specified by the Administrator, the Option shall terminate, and the
Shares covered by such Option shall revert to the Plan.

(c) Disability of Optionee. If an Optionee ceases to be a Service
Provider as a result of the Optionee's Disability, the Optionee may exercise his
or her Option within such period of time as is specified in the Option Agreement
to the extent the Option is vested on the date of termination (but in no event
later than the expiration of the term of such Option as set forth in the Option
Agreement). In the absence of a specified time in the Option Agreement, the
Option shall remain exercisable for twelve (12) months following the Optionee's
termination. If, on the date of termination, the Optionee is not vested as to
his or her entire Option, the Shares covered by the unvested portion of the
Option shall revert to the Plan. If, after termination, the Optionee does not
exercise his or her Option within the time specified herein, the Option shall
terminate, and the Shares covered by such Option shall revert to the Plan.

(d) Death of Optionee. If an Optionee dies while a Service
Provider, the Option may be exercised within such period of time as is specified
in the Option Agreement (but in no event later than the expiration of the term
of such Option as set forth in the Notice of Grant), by the Optionee's estate or
by a person who acquires the right to exercise the Option by bequest or
inheritance, but only to the extent that the Option is vested on the date of
death. In the absence of a specified time in the Option Agreement, the Option
shall remain exercisable for twelve (12) months following the Optionee's
termination. If, at the time of death,

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<PAGE> 39

the Optionee is not vested as to his or her entire Option, the Shares covered by
the unvested portion of the Option shall immediately revert to the Plan. The
Option may be exercised by the executor or administrator of the Optionee's
estate or, if none, by the person(s) entitled to exercise the Option under the
Optionee's will or the laws of descent or distribution. If the Option is not so
exercised within the time specified herein, the Option shall terminate, and the
Shares covered by such Option shall revert to the Plan.

(e) Buyout Provisions. The Administrator may at any time offer to
buy out for a payment in cash or Shares an Option previously granted based on
such terms and conditions as the Administrator shall establish and communicate
to the Optionee at the time that such offer is made.

11. Stock Purchase Rights.

(a) Rights to Purchase. Stock Purchase Rights may be issued
either alone, in addition to, or in tandem with other awards granted under the
Plan and/or cash awards made outside of the Plan. After the Administrator
determines that it will offer Stock Purchase Rights under the Plan, it shall
advise the offeree in writing or electronically, by means of a Notice of Grant,
of the terms, conditions and restrictions related to the offer, including the
number of Shares that the offeree shall be entitled to purchase, the price to be
paid, and the time within which the offeree must accept such offer. The offer
shall be accepted by execution of a Restricted Stock Purchase Agreement in the
form determined by the Administrator.

(b) Repurchase Option. Unless the Administrator determines
otherwise, the Restricted Stock Purchase Agreement shall grant the Company a
repurchase option exercisable upon the voluntary or involuntary termination of
the purchaser's service with the Company for any reason (including death or
Disability). The purchase price for Shares repurchased pursuant to the
Restricted Stock Purchase Agreement shall be the original price paid by the
purchaser and may be paid by cancellation of any indebtedness of the purchaser
to the Company. The repurchase option shall lapse at a rate determined by the
Administrator.

(c) Other Provisions. The Restricted Stock Purchase Agreement
shall contain such other terms, provisions and conditions not inconsistent with
the Plan as may be determined by the Administrator in its sole discretion.

(d) Rights as a Stockholder. Once the Stock Purchase Right is
exercised, the purchaser shall have the rights equivalent to those of a
stockholder, and shall be a stockholder when his or her purchase is entered upon
the records of the duly authorized transfer agent of the Company. No adjustment
will be made for a dividend or other right for which the record date is prior to
the date the Stock Purchase Right is exercised, except as provided in Section 13
of the Plan.

12. Non-Transferability of Options and Stock Purchase Rights. Unless
determined otherwise by the Administrator, an Option or Stock Purchase Right may
not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any
manner other than by will or by the laws of descent or distribution and may be
exercised, during the lifetime of the Optionee, only by the Optionee. If the
Administrator makes an Option or Stock Purchase Right transferable, such Option
or Stock Purchase Right shall contain such additional terms and conditions as
the Administrator deems appropriate.

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

(a) Changes in Capitalization. Subject to any required action by
the stockholders of the Company, the number of shares of Common Stock covered by
each outstanding Option and Stock Purchase

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<PAGE> 40

Right, the number of shares of Common Stock which have been authorized for
issuance under the Plan but as to which no Options or Stock Purchase Rights have
yet been granted or which have been returned to the Plan upon cancellation or
expiration of an Option or Stock Purchase Right, the price per share of Common
Stock covered by each such outstanding Option or Stock Purchase Right and the
number of shares set forth in Sections 6(c)(i) and (ii), shall be
proportionately adjusted for any increase or decrease in the number of issued
shares of Common Stock resulting from a stock split, reverse stock split, stock
dividend, combination or reclassification of the Common Stock, or any other
increase or decrease in the number of issued shares of Common Stock effected
without receipt of consideration by the Company; provided, however, that
conversion of any convertible securities of the Company shall not be deemed to
have been "effected without receipt of consideration." Such adjustment shall be
made by the Board, whose determination in that respect shall be final, binding
and conclusive. Except as expressly provided herein, no issuance by the Company
of shares of stock of any class, or securities convertible into shares of stock
of any class, shall affect, and no adjustment by reason thereof shall be made
with respect to, the number or price of shares of Common Stock subject to an
Option or Stock Purchase Right.

(b) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, the Administrator shall notify each
Optionee at least fifteen days prior to the effective date of such proposed
transaction. The Administrator in its discretion may provide for an Optionee to
have the right to exercise his or her Option until ten (10) days prior to such
transaction as to all of the Optioned Stock covered thereby, including Shares as
to which the Option would not otherwise be exercisable. In addition, the
Administrator may provide that any Company repurchase option applicable to any
Shares purchased upon exercise of an Option or Stock Purchase Right shall lapse
as to all such Shares, provided the proposed dissolution or liquidation takes
place at the time and in the manner contemplated. To the extent it has not been
previously exercised, an Option or Stock Purchase Right will terminate
immediately prior to the consummation of such proposed action.

(c) Merger or Asset Sale. In the event of a merger of the Company
with or into another corporation, or the sale of substantially all of the assets
of the Company, each outstanding Option and Stock Purchase Right shall be
assumed or an equivalent option or right substituted by the successor
corporation or a Parent or Subsidiary of the successor corporation. In the event
that the successor corporation refuses to assume or substitute for the Option or
Stock Purchase Right, the Optionee shall fully vest in and have the right to
exercise the Option or Stock Purchase Right as to all of the Optioned Stock,
including Shares as to which it would not otherwise be vested or exercisable. If
an Option or Stock Purchase Right becomes fully vested and exercisable in lieu
of assumption or substitution in the event of a merger or sale of assets, the
Administrator shall notify the Optionee in writing or electronically that the
Option or Stock Purchase Right shall be fully vested and exercisable for a
period of fifteen (15) days from the date of such notice, and the Option or
Stock Purchase Right shall terminate upon the expiration of such period. For the
purposes of this paragraph, the Option or Stock Purchase Right shall be
considered assumed if, following the merger or sale of assets, the option or
right confers the right to purchase or receive, for each Share of Optioned Stock
subject to the Option or Stock Purchase Right immediately prior to the merger or
sale of assets, the consideration (whether stock, cash, or other securities or
property) received in the merger or sale of assets by holders of Common Stock
for each Share held on the effective date of the transaction (and if holders
were offered a choice of consideration, the type of consideration chosen by the
holders of a majority of the outstanding Shares); provided, however, that if
such consideration received in the merger or sale of assets is not solely common
stock of the successor corporation or its Parent, the Administrator may, with
the consent of the successor corporation, provide for the consideration to be
received upon the exercise of the Option or Stock Purchase Right, for each Share
of Optioned Stock subject to the Option or Stock Purchase Right, to be

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<PAGE> 41

solely common stock of the successor corporation or its Parent equal in fair
market value to the per share consideration received by holders of Common Stock
in the merger or sale of assets.

14. Date of Grant. The date of grant of an Option or Stock Purchase
Right shall be, for all purposes, the date on which the Administrator makes the
determination granting such Option or Stock Purchase Right, or such other later
date as is determined by the Administrator. Notice of the determination shall be
provided to each Optionee within a reasonable time after the date of such grant.

15. Amendment and Termination of the Plan.

(a) Amendment and Termination. The Board may at any time amend,
alter, suspend or terminate the Plan.

(b) Stockholder Approval. The Company shall obtain stockholder
approval of any Plan amendment to the extent necessary and desirable to comply
with Applicable Laws.

(c) Effect of Amendment or Termination. No amendment, alteration,
suspension or termination of the Plan shall impair the rights of any Optionee,
unless mutually agreed otherwise between the Optionee and the Administrator,
which agreement must be in writing and signed by the Optionee and the Company.
Termination of the Plan shall not affect the Administrator's ability to exercise
the powers granted to it hereunder with respect to Options granted under the
Plan prior to the date of such termination.

16. Conditions Upon Issuance of Shares.

(a) Legal Compliance. Shares shall not be issued pursuant to the
exercise of an Option or Stock Purchase Right unless the exercise of such Option
or Stock Purchase Right and the issuance and delivery of such Shares shall
comply with Applicable Laws and shall be further subject to the approval of
counsel for the Company with respect to such compliance.

(b) Investment Representations. As a condition to the exercise of
an Option or Stock Purchase Right, the Company may require the person exercising
such Option or Stock Purchase Right to represent and warrant at the time of any
such exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares if, in the
opinion of counsel for the Company, such a representation is required.

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

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

19. Stockholder Approval. The Plan shall be subject to approval by the
stockholders of the Company within twelve (12) months after the date the Plan is
adopted. Such stockholder approval shall be obtained in the manner and to the
degree required under Applicable Laws.

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<PAGE> 42

PROXY
GADZOOX NETWORKS, INC. PROXY
2000 ANNUAL MEETING OF STOCKHOLDERS

SEPTEMBER 20, 2000

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS

The undersigned stockholder of GADZOOX NETWORKS, INC., a Delaware
corporation, hereby acknowledges receipt of the Notice of Annual Meeting of
Stockholders and Proxy Statement, each dated September 20, 2000, and hereby
appoints Michael Parides as proxy and attorney-in-fact, with full power of
substitution, on behalf and in the name of the undersigned, to represent the
undersigned at the 2000 Annual Meeting of Stockholders of GADZOOX NETWORKS, INC.
to be held on Friday, October 27, 2000 at 11:00 a.m. local time, at the Silver
Creek Valley Country Club located at 5460 Country Club Parkway, San Jose,
California 95138 and at any adjournment or adjournments thereof, and to vote all
shares of common stock which the undersigned would be entitled to vote if then
and there personally present, on the matters set forth on the reverse side.

(Continued, and to be signed on the other side)

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

<TABLE>
<S> <C>
1. ELECTION OF DIRECTORS: WITHHOLD
NOMINEES: FOR FOR ALL
Michael Parides [ ] [ ]
Peter Morris

INSTRUCTION: To withhold authority to vote for
any individual nominee, write that nominee's name
in the space provided below

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

FOR AGAINST ABSTAIN

2. Appointment of Arthur Andersen LLP as independent [ ] [ ] [ ]
auditors of Gadzoox Networks, Inc. for the fiscal
year ending March 31, 2001.

3. Amendment to the Amended and Restated 1993 Stock [ ] [ ] [ ]
Plan.
</TABLE>

and, in their discretion, upon such other matter or matters which may properly
come before the meeting or any adjournment or adjournments thereof. THIS PROXY
WILL BE VOTED AS DIRECTED OR, IF NO CONTRARY DIRECTION IS INDICATED, WILL BE
VOTED FOR THE COMPANY'S NOMINEES FOR ELECTION TO THE BOARD OF DIRECTORS, THE
APPOINTMENT OF ARTHUR ANDERSEN LLP, THE AMENDMENT TO THE AMENDED AND RESTATED
1993 STOCK PLAN OR AS SAID PROXIES DEEM ADVISABLE ON SUCH OTHER MATTERS AS MAY
PROPERLY COME BEFORE THE MEETING, INCLUDING, AMONG OTHER THINGS, CONSIDERATION
OF ANY MOTION MADE FOR ADJOURNMENT OF THE MEETING.

Signature(s) Dated , 2000
------------------------------------ --------------

This proxy should be marked, dated and signed by the stockholder(s) exactly as
his or her name appears hereon, and returned promptly in the enclosed envelope.
Persons signing in a fiduciary capacity should so indicate. If shares are held
by joint tenants or as community property, both should sign.