1999 Directors' Option Plan - Redback Networks Inc.

                              REDBACK NETWORKS INC.

                           1999 DIRECTORS' OPTION PLAN

                     (AS ADOPTED EFFECTIVE _______ __, 1999)



















                                TABLE OF CONTENTS





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ARTICLE 1.  INTRODUCTION.....................................................................1

ARTICLE 2.  ADMINISTRATION...................................................................1
        2.1  Committee Composition...........................................................1
        2.2  Committee Responsibilities......................................................1

ARTICLE 3.  SHARES AVAILABLE FOR GRANTS......................................................1
        3.1  Basic Limitation................................................................1
        3.2  Annual Increase in Shares.......................................................1
        3.3  Additional Shares...............................................................2

ARTICLE 4.  AUTOMATIC OPTION GRANTS TO NON-EMPLOYEE DIRECTORS................................2
        4.1  Eligibility.....................................................................2
        4.2  Initial Grants..................................................................2
        4.3  Annual Grants...................................................................2
        4.4  Accelerated Exercisability......................................................2
        4.5  Exercise Price..................................................................3
        4.6  Term............................................................................3
        4.7  Affiliates of Non-Employee Directors............................................3
        4.8  Stock Option Agreement..........................................................3

ARTICLE 5.  PAYMENT FOR OPTION SHARES........................................................3
        5.1  Cash............................................................................3
        5.2  Surrender of Stock..............................................................3
        5.3  Exercise/Sale...................................................................3
        5.4  Other Forms of Payment..........................................................3

ARTICLE 6.  PROTECTION AGAINST DILUTION......................................................4
        6.1  Adjustments.....................................................................4
        6.2  Dissolution or Liquidation......................................................4
        6.3  Reorganizations.................................................................4

ARTICLE 7.  LIMITATION ON RIGHTS.............................................................4
        7.1  Stockholders' Rights............................................................4
        7.2  Regulatory Requirements.........................................................4
        7.3  Withholding Taxes...............................................................5

ARTICLE 8.  FUTURE OF THE PLAN...............................................................5
        8.1  Term of the Plan................................................................5
        8.2  Amendment or Termination........................................................5


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ARTICLE 9.  DEFINITIONS......................................................................5

ARTICLE 10.  EXECUTION.......................................................................7


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                              REDBACK NETWORKS INC.

                           1999 DIRECTORS' OPTION PLAN


        ARTICLE 1. INTRODUCTION.

               The Plan was adopted by the Board effective as of the date of the
Company's initial public offering. The purpose of the Plan is to promote the
long-term success of the Company and the creation of stockholder value by (a)
encouraging Non-Employee Directors to focus on critical long-range objectives,
(b) encouraging the attraction and retention of Non-Employee Directors with
exceptional qualifications and (c) linking Non-Employee Directors directly to
stockholder interests through increased stock ownership. The Plan seeks to
achieve this purpose by providing for automatic and non-discretionary grants of
Options to Non-Employee Directors.

               The Plan shall be governed by, and construed in accordance with,
the laws of the State of Delaware (except their choice-of-law provisions).


        ARTICLE 2. ADMINISTRATION.

        2.1  COMMITTEE COMPOSITION. The Plan shall be administered by the
Committee. The Committee shall consist exclusively of two or more directors of
the Company, who shall be appointed by the Board. In addition, the composition
of the Committee shall satisfy such requirements as the Securities and Exchange
Commission may establish for administrators acting under plans intended to
qualify for exemption under Rule 16b-3 (or its successor) under the Exchange
Act.

        2.2  COMMITTEE RESPONSIBILITIES. The Committee shall interpret the
Plan and make all decisions relating to the operation of the Plan. The Committee
may adopt such rules or guidelines as it deems appropriate to implement the
Plan. The Committee's determinations under the Plan shall be final and binding
on all persons.


        ARTICLE 3. SHARES AVAILABLE FOR GRANTS.

        3.1  BASIC LIMITATION. Common Shares issued pursuant to the Plan may
be authorized but unissued shares or treasury shares. The aggregate number of
Common Shares subject to Options granted under the Plan shall not exceed (a)
200,000 plus (b) the additional Common Shares described in Sections 3.2 and 3.3.
The limitations of this Section 3.1 and Section 3.2 shall be subject to
adjustment pursuant to Article 6.

        3.2  ANNUAL INCREASE IN SHARES. As of January 1 of each year,
commencing with the year 2000, the aggregate number of Common Shares available
for the grant of Options under the Plan shall automatically be increased by the
number necessary to cause the total number of Common Shares then available to be
restored to 200,000.





        3.3 ADDITIONAL SHARES. If Options are forfeited or terminate for any
other reason before being exercised, then the Common Shares subject to such
Options shall again become available for the grant of Options under the Plan.


        ARTICLE 4. AUTOMATIC OPTION GRANTS TO NON-EMPLOYEE DIRECTORS.

        4.1 ELIGIBILITY. Only Non-Employee Directors shall be eligible for the
grant of Options under the Plan.

        4.2 INITIAL GRANTS. Each Non-Employee Director who first becomes a
member of the Board after the date of the Company's initial public offering
shall receive a one-time grant of an Option covering 25,000 Common Shares
(subject to adjustment under Article 6) on the date when such Non-Employee
Director first joins the Board. Each Non-Employee Director who is a member of
the Board on the date of the Company's initial public offering, and who did not
previously receive an option to purchase Common Shares, shall receive a one-time
grant of an Option covering 25,000 Common Shares on the date of the Company's
initial public offering. Options granted under this Section 4.2 shall become
exercisable in equal monthly installments over the 48-month period commencing on
the date of grant, except that all of the first 12 installments shall become
exercisable on the first anniversary of the date of grant. A Non-Employee
Director who previously was an Employee shall not receive a grant under this
Section 4.2.

        4.3 ANNUAL GRANTS. Upon the conclusion of each regular annual meeting
of the Company's stockholders held in the year 2000 or thereafter, each
Non-Employee Director who will continue serving as a member of the Board
thereafter shall receive an Option covering 10,000 Common Shares (subject to
adjustment under Article 6), except that such Option shall not be granted in the
calendar year in which the same Non-Employee Director received the Option
described in Section 4.2. Options granted under this Section 4.3 shall become
exercisable in equal monthly installments over the 12-month period commencing on
the date of grant. A Non-Employee Director who previously was an Employee shall
be eligible to receive grants under this Section 4.3.

        4.4 ACCELERATED EXERCISABILITY. All Options granted to a Non-Employee
Director under this Article 4 shall also become exercisable in full in the event
of:

                      (a) The termination of such Non-Employee Director's
        service because of death or total and permanent disability; or

                      (b) A Change in Control with respect to the Company,
        except as provided in the next following sentence.

If the Company and the other party to the transaction constituting a Change in
Control agree that such transaction is to be treated as a 'pooling of interests'
for financial reporting purposes, and if such transaction in fact is so treated,
then the acceleration of exercisability shall not occur to the extent that the
Company's independent accountants and such other party's independent 



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accountants separately determine in good faith that such acceleration would
preclude the use of 'pooling of interests' accounting.

        4.5 EXERCISE PRICE. The Exercise Price under all Options granted to a
Non-Employee Director under this Article 4 shall be equal to 100% of the Fair
Market Value of a Common Share on the date of grant, payable in one of the forms
described in Article 5.

        4.6 TERM. All Options granted to a Non-Employee Director under this
Article 4 shall terminate on the earlier of (a) the 10th anniversary of the date
of grant or (b) the date 12 months after the termination of such Non-Employee
Director's service for any reason.

        4.7 AFFILIATES OF NON-EMPLOYEE DIRECTORS. The Committee may provide
that the Options that otherwise would be granted to a Non-Employee Director
under this Article 4 shall instead be granted to an affiliate of such
Non-Employee Director. Such affiliate shall then be deemed to be a Non-Employee
Director for purposes of the Plan, provided that the service-related vesting and
termination provisions pertaining to the Options shall be applied with regard to
the service of the Non-Employee Director.

        4.8 STOCK OPTION AGREEMENT. Each grant of an Option under the Plan
shall be evidenced by a Stock Option Agreement between the Optionee and the
Company. Such Option shall be subject to all applicable terms of the Plan and
may be subject to any other terms that are not inconsistent with the Plan.


        ARTICLE 5. PAYMENT FOR OPTION SHARES.

        5.1 CASH. All or any part of the Exercise Price may be paid in cash or
cash equivalents.

        5.2 SURRENDER OF STOCK. All or any part of the Exercise Price may be
paid by surrendering, or attesting to the ownership of, Common Shares that are
already owned by the Optionee. Such Common Shares shall be valued at their Fair
Market Value on the date when the new Common Shares are purchased under the
Plan. The Optionee shall not surrender, or attest to the ownership of, Common
Shares in payment of the Exercise Price if such action would cause the Company
to recognize compensation expense (or additional compensation expense) with
respect to the Option for financial reporting purposes.

        5.3 EXERCISE/SALE. All or any part of the Exercise Price and any
withholding taxes may be paid by delivering (on a form prescribed by the
Company) an irrevocable direction to a securities broker approved by the Company
to sell all or part of the Common Shares being purchased under the Plan and to
deliver all or part of the sales proceeds to the Company.

        5.4 OTHER FORMS OF PAYMENT. At the sole discretion of the Committee,
all or any part of the Exercise Price and any withholding taxes may be paid in
any other form that is consistent with applicable laws, regulations and rules.




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        ARTICLE 6. PROTECTION AGAINST DILUTION.

        6.1  ADJUSTMENTS. In the event of a subdivision of the outstanding
Common Shares, a declaration of a dividend payable in Common Shares, a
declaration of a dividend payable in a form other than Common Shares in an
amount that has a material effect on the price of Common Shares, a combination
or consolidation of the outstanding Common Shares (by reclassification or
otherwise) into a lesser number of Common Shares, a recapitalization, a spin-off
or a similar occurrence, the Committee shall make such adjustments as it, in its
sole discretion, deems appropriate in one or more of (a) the number of Common
Shares available for future grants under Article 3, (b) the number of Options to
be granted to Non-Employee Directors under Article 4, (c) the number of Common
Shares covered by each outstanding Option or (d) the Exercise Price under each
outstanding Option. Except as provided in this Article 6, an Optionee shall have
no rights by reason of any issue by the Company of stock of any class or
securities convertible into stock of any class, any subdivision or consolidation
of shares of stock of any class, the payment of any stock dividend or any other
increase or decrease in the number of shares of stock of any class.

        6.2  DISSOLUTION OR LIQUIDATION. To the extent not previously
exercised, Options shall terminate immediately prior to the dissolution or
liquidation of the Company.

        6.3  REORGANIZATIONS. In the event that the Company is a party to a
merger or other reorganization, outstanding Options shall be subject to the
agreement of merger or reorganization. Such agreement shall provide for (a) the
continuation of the outstanding Options by the Company, if the Company is a
surviving corporation, (b) the assumption of the outstanding Options by the
surviving corporation or its parent or subsidiary, (c) the substitution by the
surviving corporation or its parent or subsidiary of its own options for the
outstanding Options, (d) full exercisability and accelerated expiration of the
outstanding Options or (e) settlement of the full value of the outstanding
Options in cash or cash equivalents followed by cancellation of such Options.


        ARTICLE 7. LIMITATION ON RIGHTS.

        7.1  STOCKHOLDERS' RIGHTS. A Optionee shall have no dividend rights,
voting rights or other rights as a stockholder with respect to any Common Shares
covered by his or her Option prior to the time when he or she becomes entitled
to receive such Common Shares by filing a notice of exercise and paying the
Exercise Price. No adjustment shall be made for cash dividends or other rights
for which the record date is prior to such time, except as expressly provided in
the Plan.

        7.2  REGULATORY REQUIREMENTS. Any other provision of the Plan
notwithstanding, the obligation of the Company to issue Common Shares under the
Plan shall be subject to all applicable laws, rules and regulations and such
approval by any regulatory body as may be required. The Company reserves the
right to restrict, in whole or in part, the delivery of Common Shares pursuant
to any Option prior to the satisfaction of all legal requirements relating to
the issuance of such Common Shares, to their registration, qualification or
listing or to an exemption from registration, qualification or listing.



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        7.3  WITHHOLDING TAXES. To the extent required by applicable federal,
state, local or foreign law, an Optionee or his or her successor shall make
arrangements satisfactory to the Company for the satisfaction of any withholding
tax obligations that arise in connection with the Plan. The Company shall not be
required to issue any Common Shares or make any cash payment under the Plan
until such obligations are satisfied.


        ARTICLE 8. FUTURE OF THE PLAN.

        8.1  TERM OF THE PLAN. The Plan, as set forth herein, shall become
effective on the date of the Company's initial public offering. The Plan shall
remain in effect until it is terminated under Section 8.2.

        8.2  AMENDMENT OR TERMINATION. The Board may, at any time and for any
reason, amend or terminate the Plan. An amendment of the Plan shall be subject
to the approval of the Company's stockholders only to the extent required by
applicable laws, regulations or rules. No Options shall be granted under the
Plan after the termination thereof. The termination of the Plan, or any
amendment thereof, shall not affect any Option previously granted under the
Plan.


        ARTICLE 9. DEFINITIONS.

        9.1  'BOARD' means the Company's Board of Directors, as constituted from
time to time.

        9.2  'CHANGE IN CONTROL' means:

                      (a) The consummation of a merger or consolidation of the
        Company with or into another entity or any other corporate
        reorganization, if persons who were not stockholders of the Company
        immediately prior to such merger, consolidation or other reorganization
        own immediately after such merger, consolidation or other reorganization
        50% or more of the voting power of the outstanding securities of each of
        (i) the continuing or surviving entity and (ii) any direct or indirect
        parent corporation of such continuing or surviving entity;

                      (b) The sale, transfer or other disposition of all or
        substantially all of the Company's assets;

                      (c) A change in the composition of the Board, as a result
        of which 50% or fewer of the incumbent directors are directors who
        either (i) had been directors of the Company on the date 24 months prior
        to the date of the event that may constitute a Change in Control (the
        'original directors') or (ii) were elected, or nominated for election,
        to the Board with the affirmative votes of at least a majority of the
        aggregate of the original directors who were still in office at the time
        of the election or nomination and the directors whose election or
        nomination was previously so approved; or

                      (d) Any transaction as a result of which any person is the
        'beneficial owner' (as defined in Rule 13d-3 under the Exchange Act),
        directly or 



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        indirectly, of securities of the Company representing at least 50% of
        the total voting power represented by the Company's then outstanding
        voting securities. For purposes of this Subsection (d), the term
        'person' shall have the same meaning as when used in sections 13(d) and
        14(d) of the Exchange Act but shall exclude (i) a trustee or other
        fiduciary holding securities under an employee benefit plan of the
        Company or of a Parent or Subsidiary and (ii) a corporation owned
        directly or indirectly by the stockholders of the Company in
        substantially the same proportions as their ownership of the common
        stock of the Company.

A transaction shall not constitute a Change in Control if its sole purpose is to
change the state of the Company's incorporation or to create a holding company
that will be owned in substantially the same proportions by the persons who held
the Company's securities immediately before such transaction.

        9.3  'CODE' means the Internal Revenue Code of 1986, as amended.

        9.4  'COMMITTEE' means a committee of the Board, as described in Article
2.

        9.5  'COMMON SHARE' means one share of the common stock of the Company.

        9.6  'COMPANY' means Redback Networks Inc., a Delaware corporation.

        9.7  'EMPLOYEE' means a common-law employee of the Company, a Parent or
a Subsidiary.

        9.8  'EXCHANGE ACT' means the Securities Exchange Act of 1934, as
amended.

        9.9  'EXERCISE PRICE' means the amount for which one Common Share may
be purchased upon exercise of such Option, as specified in the applicable Stock
Option Agreement.

        9.10 'FAIR MARKET VALUE' means the market price of Common Shares,
determined by the Committee in good faith on such basis as it deems appropriate.
The Committee's determination of Fair Market Value by shall be based on the
prices reported in The Wall Street Journal whenever possible, except that the
Fair Market Value on the date of the Company's initial public offering shall be
equal to the price of Common Shares to the public in such offering. Such
determination shall be conclusive and binding on all persons.

        9.11 'NON-EMPLOYEE DIRECTOR' means a member of the Board who is not an
Employee.

        9.12 'OPTION' means an option granted under the Plan and entitling the
holder to purchase Common Shares. Options do not qualify as incentive stock
options described in section 422(b) of the Code.

        9.13 'OPTIONEE' means an individual or estate who holds an Option.

        9.14 'PARENT' means any corporation (other than the Company) in an
unbroken chain of corporations ending with the Company, if each of the
corporations other than the Company 



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owns stock possessing 50% or more of the total combined voting power of all
classes of stock in one of the other corporations in such chain. A corporation
that attains the status of a Parent on a date after the adoption of the Plan
shall be considered a Parent commencing as of such date.

        9.15 'PLAN' means this Redback Networks Inc. 1999 Directors' Option
Plan, as amended from time to time.

        9.16 'STOCK OPTION AGREEMENT' means the agreement between the Company
and an Optionee that contains the terms, conditions and restrictions pertaining
to his or her Option.

        9.17 'SUBSIDIARY' means any corporation (other than the Company) in an
unbroken chain of corporations beginning with the Company, if each of the
corporations other than the last corporation in the unbroken chain owns stock
possessing 50% or more of the total combined voting power of all classes of
stock in one of the other corporations in such chain. A corporation that attains
the status of a Subsidiary on a date after the adoption of the Plan shall be
considered a Subsidiary commencing as of such date.


        ARTICLE 10. EXECUTION.

               To record the adoption of the Plan by the Board on March 3, 1999,
the Company has caused its duly authorized officer to execute this document in
the name of the Company.


                                    REDBACK NETWORKS INC.



                                    By:_________________________________________

                                    Title:______________________________________




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