OEM Purchase Agreement

OEM PURCHASE AGREEMENT



BY AND BETWEEN



HEWLETT-PACKARD COMPANY

WORKGROUP NETWORKS DIVISION





FOUNDRY NETWORKS



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*Material has been omitted pursuant to a request for confidential treatment.

Such material has been filed separately with the Securities and Exchange





OEM AGREEMENT



TABLE OF CONTENTS





1. SCOPE OF AGREEMENT

1.1 General

1.2 Eligible Purchasers

1.3 Term Of Agreement



2. DEFINITIONS



3. ORDER AND SHIPMENT OF OEM PRODUCTS

3.1 Orders

3.2 Order Acknowledgment

3.3 Emergency Orders

3.4 Forecasts

3.5 Lead Time

3.6 Forecast Flexibility

3.7 Order Changes

3.8 Shipment Requirements

3.9 HP Option To Accept Overshipments

3.10 Meeting Delivery Dates

3.11 No Advance Shipment

3.12 Title And Risk Of Loss

3.13 Packing List

3.14 Packaging

3.15 Responsibility For Damage



4. PRICES AND PAYMENT TERMS

4.1 OEM Product Prices

4.2 Changed Prices

4.3 Payment Procedure

4.4. Most Favored Purchaser Warranty

4.5 Sales Taxes And Duties



5. NONCOMPLYING PRODUCTS

5.1 Credit, Repair, Or Replacement

5.2 Replenishment Period



6. RETURN OF NONCOMPLYING AND FAILING OEM PRODUCTS

6.1 Return Materials Authorization

6.2 Return Charges

6.3 Duty To Remove Marks Or Destroy Noncomplying Products

6.4 Failure Returns



*Material has been omitted pursuant to a request for confidential treatment.

Such material has been filed separately with the Securities and Exchange



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7. ENGINEERING PROCESS OR DESIGN CHANGES

7.1 Foundry Proposed Changes

7.2 Notice Of Proposed Change

7.3 HP Proposed Changes

7.4 Option To Terminate

7.5 Safety Standard Changes

7.6 HP Software Release Process



8. QUALITY

8.1 Quality Program

8.2. HP's Right To Inspect



9. WARRANTIES

9.1 Product Warranties

9.2 Survival Of Warranties

9.3 Epidemic Failure Warranty

9.4 DISCLAIMER



10. SUPPORT SERVICES

10.1 General

10.2 Equipment Loan

10.3 Substitute Products

10.4 Failure Rate

10.5 Class Failure Remedies

10.6 Anomalous Behavior

10.7 Purchase Hold

10.8 Survival Of Support Obligations



11. ASSURANCE OF SUPPLY

11.1 Discontinuance

11.2 HP's Right To Manufacture

11.3 Consulting Services

11.4 Deposit Agreement



12. TRAINING

12.1 Technical Training

12.2 HP's Rights In Training Classes And Materials



13. MARKETING AND LICENSING

13.1 Marketing Authority

13.2 No Rights In Marks

13.3 Private Labeling

13.4 Software License

13.5. Documentation License



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14. INTELLECTUAL PROPERTY PROTECTION

14.1 Foundry's Duty To Defend

14.2 HP's Duty To Notify

14.3 Remedies For Infringing Products

14.4 Limitations



15. COUNTRY OF MANUFACTURE AND DUTY DRAWBACK RIGHTS

15.1 Country Of Origin Certification

15.2 Country Of Origin Marking

15.3 Duty Drawback



16. GOVERNMENTAL COMPLIANCE

16.1 Duty To Comply

16.2 Procurement Regulations

16.3 Ozone Depleting Substances



17. FORCE MAJEURE EVENTS

17.1 Delaying Causes

17.2 HP Option

17.3 Resumption Of Agreement



18. EVENTS OF DEFAULT

18.1 Notice Of Breach

18.2 Causes Of Breach

18.3 H.P's Rights Upon Breach

18.4 Foundry's Rights Upon Breach



19. CONFIDENTIAL INFORMATION

19.1 Confidential Information

19.2 Exclusions



20. INSURANCE REQUIREMENTS

20.1 Insurance Coverage

20.2 Claims Made Coverage

20.3 Additional Requirements



21. LIMITATION OF LIABILITY



22. TERMINATION

22.1 Outstanding Orders

22.2 Return Of Property

22.3 Surviving Provisions



23. MISCELLANEOUS

23.1 Notices

23.2 Exhibits



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23.3 Independent Contractors

23.4 Assignment

23.5 No Waiver

23.6 Reference To Days

23.7 Headings

23.8 No Publication

23.9 Severability

23.10 Entire Agreement

23.11 Governing Law



24. DISPUTE RESOLUTION

24.1 Dispute Resolution Process

24.2 Exceptions to Dispute Resolution Process





EXHIBIT A OEM PRODUCTS AND SPECIFICATIONS EXHIBIT B ELIGIBLE PURCHASERS EXHIBIT C OEM PRODUCT PRICES TO HP EXHIBIT D SUPPORT TERMS EXHIBIT E EQUIPMENT LOAN AGREEMENT EXHIBIT F CONFIDENTIAL DISCLOS URE AGREEMENT EXHIBIT G RECIPIENTS FOR RECEIPT OF NOTICES AND RELATIONSHIP MANAGERS EXHIBIT H DEPOSIT AGREEMENT



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OEM PURCHASE AGREEMENT



THIS A GREEMENT is entered into between HEWLETT-PACKARD COMPANY, a Delaware corporation through its Workgroup Networks Division primarily located at 8000 Foothills Boulevard, Roseville, CA 95747 ("HP") and FOUNDRY NETWORKS, INC., a Delaware corporation having it s primary offices located at 680 W. Maude Avenue, Suite 3, Sunnyvale, CA 94086 ("Foundry"), effective as of January 6, 1999 (the " Effective Date"). The parties hereby agree as follows:



1. SCOPE OF AGREEMENT



1.1 General. This Agreement sets forth the terms and conditions under which

------- Foundry will sell, license and support the OEM Products listed in Exhibit A to

--------- this Agreement. The OEM Products are regarded as "Origi nal Equipment Manufacturer" products that will either be sold separately or incorporated into HP Products for resale worldwide under Foundry's label or under HP's private label. The OEM Products and the HP Products will be marketed, serviced, and supporte d by HP's field organization, subject to the marketing, service, and support obligations of Foundry pursuant to this Agreement. All OEM Products must be new, except as otherwise provided by the parties.



1.2 Eligible Purchasers. This Agreement enables HP, HP Subsidiaries and HP

------------------- Subcontractors as specified in Exhibit B to this Agreement to purchase OEM Products from Foundry under the terms of this Agreement or any subsequent Product Addendum. Unless a Product Addendum specifically r efers to and amends a term of this Agreement, the terms and conditions of this Agreement will control and take precedence over any conflicting terms in a Product Addendum.



1.3 Term Of Agreement. This Agreement will commence as of the Effective Date

----------------- and continue through May 18, 2000 (the "Term") , unless terminated earlier under the terms of this Agreement. After the initial Term, this Agreement will continue automatically for two (2) additional separate one (1) year periods, unles s terminated upon 60 days notice prior to expiration of the initial Term or of any additional periods. Extension of this Agreement beyond the initial Term and additional periods shall be as agreed by the parties in writing.



2. DEFINITIONS



The following capitalized terms will have these meanings throughout this Agreement.



"Days" means calendar days unless otherwise specified herein.

----



"Delivery Date" means the date specified in an Order for the delivery of OEM

------------- Products by Foundry to the destination required under the Order.



"Documentation" means the user and technical manuals and other documentation

------------- that Foundry will make available with the OEM Products.



"Eligible Purchasers" mean those parties authorized to purchase OEM Products

------------------- under this Agreement as listed in Section 1.2 above.

-----------



"Failing Products" means OEM Products which are found to be

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



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*Material has been omitted pursuant to a request for confidential treatment.

Such material has been filed separately with the Securities and Exchange





Noncomplying Products after delivery to HP customers.



"Forecast" means HP's estimate of its purchase requirements over a six-month

-------- period, or such other period mutually agreed to by the parties.



"HP Products" means the HP products or systems that will incorporate the OEM

----------- Products and that will be marketed and sold to end-user customers by HP and its distributors.



"HP Property" means all property, including without limitation, models, tools,

----------- equipment, copies of designs and documentation and other materials that may be furnished to Foundry by HP or on HP's behalf or separately paid for by HP for use by Foundry in connection with this Agreement.



"Intellectual Property Rights" means all rights in patents, copyrights, trade

---------------------------- secrets, mask works, Marks and other similar rights.



"Lead Time" means the time between the date an Order is sent and the Delivery

--------- Date.



"Marks" means the trademarks, service marks, trade dress, trade names, logos,

----- insignia, symbols, designs or other marks identifying a party or its products.



"Noncomplying Product" means any OEM Product received by HP that does not comply

-------------------- with the Specifications, or otherwise does not comply with other provisions of this Agreement. Noncomplying Products include, without limitation, dead-on- arrival products.



"OEM Products" means the customized products listed and described in Exhibit A,

------------ --------- all related Documentation, Parts and other deliverables provided pursuant to this Agreement.



"Orders" means a written or electronic purchase order or release issued by HP to

------ Foundry for purchase of' the OEM Products.



"Parts" means the replacement parts, components, consumables or other products

----- that may be supplied in conjunction with or as additions to the OEM Products.



"Product Addendum" means an addendum to this Agreement entered into between

---------------- Foundry and an Eligible Purchaser naming additional OEM Products and product specific requirements in addition to those requirements specified in this Agreement.



"Software" means any software or firmware included or bundled with the OEM

-------- Products, as designated in the description of OEM Products in Exhibit A.

---------



"Specifications" means the technical, functional, aesthetic and other

-------------- requirements for the OEM Products as specified or referenced in Exhibit A or as

--------- agreed to by the parties.



"Subcontractor" means a third party listed in Exhibit B that may purchase OEM

------------- --------- Products under the terms of this Agreement on behalf of HP.



"Subsidiary" means an entity controlled by or under common control with a party

---------- to this Agreement, through ownership or control of more than 50% of the voting power of the shares or other means of ownership or control, provided that such control continues to exist.



"Support" means ongoing maintenance and technical support for the OEM

-------



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Such material has been filed separately with the Securities and Exchange







Products provided by Foundry to HP as more fully described in Exhibit D.

---------



"Technical Information" means Foundry's manufacturing information and technology

--------------------- deemed necessary by HP to support OEM Products and to exercise any manufacturin g rights provided under this Agreement, including, but not limited to: (i) specifications, software, schematics designs, drawings or other materials pertinent to the most current revision level of manufacturing of the OEM Products; (ii) copies of all insp e ction, manufacturing, test and quality control procedures and any other work processes; (iii) jig, fixture and tooling designs; (iv) Foundry technical history files; (v) support documentation; and (vi) any additional technical information or materials lis ted in the Escrow Agreement agreed to by the parties.



"Technical Materials" means jigs, fixtures and tools used by Foundry to

------------------- manufacture the OEM Products, and any production software used in such manufacture.



3. ORDER AND SHIPMENT OF OEM PRODUCTS



3.1. Orders. Each delivery of OEM Products will be initiated by an Order

------ issued to Foundry by HP. Each Order will include: (i) unit quantity; (ii) unit price; (iii) shipping destination; (iv) Delivery Date; and (v) other in structions or requirements pertinent to the Order. HP may schedule regular intervals for deliveries by an appropriate Order setting forth the intervals. To the extent of any inconsistency between the terms of an Order and the terms of this Agreement, the terms specified in this Agreement will control and take precedence.



3.2. Order Acknowledgment. An Order will be deemed to have been placed as of

-------------------- the date of receipt of the Order by Foundry. Foundry will promptly confirm the rec eipt of an Order through facsimile or electronically to HP by the end of the next working day following receipt of the order by Foundry. Orders within Forecasts and Lead Time requirements of this Agreement will be deemed accepted upon receipt by Foundry. For Orders exceeding Forecast, Foundry will have two (2) additional working day in which to reject or acknowledge the order with respect to the excess.



3.3. Emergency Orders. If HP deems it necessary, HP may order OEM Products by

---------------- f acsimile on an emergency basis ("Emergency Order") subject to the availability of such OEM Products in Foundry's inventory Foundry shall use its best efforts to ship the Emergency Order to HP's stipulated destinations as quickly as reasonably possible aft er the receipt by Foundry. Any reprioritization of HP Orders will be as agreed by the parties. Subject to HP's approval, HP will pay any additional expenses related to such Emergency Orders.



3.4. Forecasts. HP will provide a six month rolling Forecast of its projected

--------- monthly Orders. Any quantities listed in any Forecast or other correspondence between the parties are only estimates made as an accommodation for planning purposes and do not constitute a commitment on HP's part to purchase s uch quantity. HP may revise any Forecasts in its sole discretion. Notwithstanding the foregoing, any minimum purchase commitments set forth in Exhibit C apply to this Agreement.



3.5. Lead Time. Foundry will determine the Lead Time for each OEM Product,

--------- which in no event will exceed [ * ] days without HP's prior written consent. Foundry will, for any proposed increase of the Lead Time, give HP no less than [ * ] days advance notice to approve or reject any proposed increase in Lead Time.



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*Material has been omitted pursuant to a request for confidential treatment.

Such material has been filed separately with the Securities and Exchange





3.6 Forecast Flexibility. If any Order contains a Delivery Date which

-------------------- necessitates a shorter Lead Time, or any Order has a unit quantity such that the addition of such quantity to the total quantity of units for all Orders previously accepted duri ng the month in which the Order is placed, would result in a total number of units for that month that exceeds the Two-month Forecast for such month by [ * ] then Foundry will use its best efforts to accommodate such shorter Lead Time or fill such excess, as the case may be. All Orders which cumulatively are within such [ * ] upside will be deemed to be Orders within Forecast requirements for purposes of Section 3.2 of this Agreement. Unless otherwise agreed by the parties in writing, if the cumulative Ord e rs issued during any month is less than [ * ] of the Two-month Forecast, HP will be required to issue Orders which, in addition to the total quantity of units for all Orders previously accepted during the month in which the Order is placed, would result i n a total number of units for that month equal to [ * ] of the Two-month Forecast. For purposes of this Section 3.6, "Two-month Forecast" means the Forecast as provided by HP to Foundry 2 months prior to the month in which the applicable Order is issued.



3.7 Order Changes. Pursuant to Section 3.6 above, HP may without charge

------------- postpone, decrease, or increase any Order by notice to Foundry at least [ * ] [ * ] days prior to the Delivery Date. Postponement or decrease shall be for a perio d of not more than thirty (30) days from the original Delivery Date. Notwithstanding the forecast flexibility stated in Section 3.6 above, if HP proposes a postponement, decrease, or cancellation of an Order and Foundry accepts such postponement, decrease , or cancellation after such [ * ] day time period, Foundry will be entitled to be reimbursed by HP for actual costs incurred by Foundry as a direct result of such postponement, decrease, or cancellation that are not recoverable by the shipment of the OEM Products affected to HP or other authorized purchasers within a reasonable period of time or the exercise by Foundry, in a commercially reasonable manner, of other mitigation measures.



3.8 Shipment Requirements. All Orders are required to be shipped complete.

--------------------- Foundry will give HP immediate notice if it knows that it cannot meet a Delivery Date or that only a portion of the OEM Products will be available for shipment to meet a Delivery Date. For partial shipments, Foundry will ship the available OEM Products unless directed by HP to reschedule shipment. If Foundry ships any OEM Product by a method other than as specified in the corresponding Order, Foundry will pay any resulting increase in the cost of freight. HP may utilize d r op shipment options to any HP shipping destination. If HP designates a drop shipment location outside the country in which the Order is placed, HP agrees to pay any additional costs associated with the shipment. Without limiting the provisions of this Agr e ement with regard to Noncomplying OEM Products and OEM Product warranties, shipments will be considered by Foundry to have been accepted by HP in terms of conformance with the requirements of an Order, unless otherwise notified by HP within 2 days of rece ipt.



3.9 HP Option to Accept Overshipments. If Foundry ships more OEM Products

--------------------------------- than ordered, the amount of the overshipment may either be kept by HP for credit against future Orders or returned to Foundry pursuant to Article 6 below, at

--------- HP's election.



3.10 Meeting Delivery Dates. If due to Foundry's failure to make a

---------------------- timely shipment, the specified method of transportation would not permit Foundry to meet the Delivery Date, Foundry will notify HP of the late shipment and the OEM Products affected will be shipped by air



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*Material has been omitted pursuant to a request for confidential treatment.

Such material has been filed separately with the Securities and Exchange





transportation or other expedient means acceptable to HP. Foundry will pay for any resulting increase in the freight cost over that which HP would have been required to pay by the specified method of transportation.



3.11 No Advance Shipment. If OEM Products are delivered more than ten (10)

------------------- days in advance of the Delivery Date. HP may, at its option, either return the OEM Products pursuant to Article 6 below or keep the OEM Products with payment

--------- due as provided in Section 4.3 below.

-----------



3.12 Title And Risk Of Loss. Unless otherwise specified in writing by HP,

---------------------- HP will designate the carrier on each shipment and shipments will be FCA, Foundr y's dock or freight forwarder. Title to OEM Product hardware and media ordered hereunder and risk of loss or damage will pass from Foundry to HP upon Foundry's delivery of the OEM Products to the common carrier specified by HP, subject to the provisions below with respect to packing and handling.



3.13 Packing List. Each delivery of OEM Products to HP must include a packing

------------ list that contains at least:



(a) The Order number and the HP part number;



(b) The quantity of OEM Products or Parts shipped; and



(c) The date of shipment



3.14 Packaging. Foundry must preserve, package, handle, and pack all OEM

--------- Products so as to protect the OEM Products from loss or damage, in conformance with good commercial pr actice, the Specifications, government regulations, and other applicable standards. Special static protection must be provided for OEM Products requiring such packaging.



3.15 Responsibility For Damage. Foundry will be liable for any loss or damage

------------------------- due to its failure to properly preserve, package, handle, or pack OEM Products. HP will not be required to assert any claims for such loss or damage against the common carrier involved. Further, HP will not be liable for any los s or damage due to a release of chemicals or other hazardous materials to the environment prior to HP's actual receipt of the corresponding OEM Products.



4. PRICES AND PAYMENT TERMS



4.1. OEM Product Prices. Foundry's prices for the OEM Products are listed in

------------------ Exhibit C, in U.S. currency unless otherwise stated and may only be changed as - --------- stated in Exhibit C. The prices for Parts will be Foundry's published prices,

--------- less any applicable discounts, unless the parties agree to a price schedule for Parts.



4.2. Changed Prices. If, during the Term, changed prices or price formulas

-------------- are put in effect by mutual agreement of HP and Fo undry or reduced prices or price formulas are otherwise put in effect by Foundry, such prices or price formulas (if resulting in lower prices than the then current price) will apply to all Orders issued by HP after the effective date of such prices or pri ce formulas and to all unshipped Orders.



4.3. Payment Procedure. Payment for OEM Products will be net 37 days, after

----------------- the latest of receipt by HP of an appropriate invoice from Foundry, the corresponding OEM Products or Parts, or t he Delivery Date. Except as otherwise provided in this Agreement, associated freight expenses and duties will be paid directly by HP. HP will not be liable



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*Material has been omitted pursuant to a request for confidential treatment.

Such material has been filed separately with the Securities and Exchange





for any costs related to or payments for unordered or Nonconforming Products.



4.4. Most Favored Purchaser Warranty. If during the term, Foundry offers a

------------------------------- materially better price or pricing formula to other purchasers or similar volumes of OEM Products, then Foundry agrees to offer such price or pricing formula to HP for the next Order and for all future Orders.



4.5. Sales Taxes And Duties. Prices are exclusive of all taxes or duties after

---------------------- delivery to the designated destination (other than taxes levied on Foundry's income) that Foundry may be required to collect or pay upon shipment of the OEM Products. Any such taxes or duties must appear as a separate item on Foundry's invoice. HP agrees to pay such taxes or duties unless HP is exempt from such taxes or duties. Where applicable, HP will provide Foundry with an exemption resale certificate.



5. NONCOMPLYING PRODUCTS



5.1. Credit, Repair, or Replacement. HP may elect in its sole discretion to

------------------------------ return a Noncomplying Product for credit, replacement or repair at Foundry 's expense. In addition, HP may return for repair or replacement an entire lot of OEM Products if a tested sample, which consists of two (2) or more of the same OEM Product, of that lot contains Noncomplying Products. In the event of an overshipment, HP m ay elect to keep the additional units, subject to the payment procedures in Section 4.3.

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