OEM Purchase & Development Agreement

EXHIBIT 10.26


OEM PURCHASE AND DEVELOPMENT AGREEMENT
BETWEEN


3COM CORPORATION


AND


COPPER MOUNTAIN NETWORKS, INC.


THIS OEM PURCHASE AND DEVELOPMENT AGREEMENT ("Agreement") is entered into effective as of November 24, 1998 ("Effective Date") between 3COM CORPORATION ("3Com"), a Delaware corporation located at 5400 Bayfront Plaza, Santa Clara, CA 95052-8145, and COPPER MOUNTAIN NETWORKS, INC. ("Seller"), a California corporation located at 2470 Embarcadero Way, Palo Alto, CA 94303


RECITALS


WHEREAS, Seller has developed certain proprietary symmetric digital subscriber line ("SDSL") technology and products and ISDN digital subscriber line ("ISDL") technology and products;


WHEREAS, 3Com desires to develop a small office/home office router product that operates with Seller's digital subscriber line ("DSL") networking system (the "Device");


WHEREAS, to enable 3Com to optimize the Device for performance with Seller's proprietary DSL networking system, Seller desires to disclose to 3Com, and 3Com desires to receive from Seller, certain DSL interoperability specifications (the "DSL Specifications");


WHEREAS, to achieve the development of the Device, the parties desire to engage in certain joint development work and technology licenses as set forth in this Agreement;


WHEREAS, the parties desire to engage in certain joint marketing efforts to achieve commercial success for the Device; and


WHEREAS, 3Com also desires to purchase and resell on a value-added, private-label basis, Seller's Copper Rocket/TM/ Model 201 SDSL and IDSL customer premises equipment product(s) (the "CR201").


NOW, THEREFORE, in consideration of the mutual promises contained herein the parties agree as follows:


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Confidential treatment has been requested for portions of this exhibit. The copy filed herewith omits the information subject to the confidentiality request. Omissions are designated as [***]. A complete version of this exhibit has been filed separately with the Securities and Exchange Commission.


TERMS AND CONDITIONS


1. DEFINITIONS.


1.1 "3COM BRANDED CR201" means CR201 units that have been rebranded by or for 3Com.


1.2 "3COM KNOW-HOW" means the proprietary techniques, inventions, practices, methods, knowledge, designs, skill and experience relating to customer premises equipment ("CPE") and networking systems which 3Com discloses to Seller under this Agreement.


1.3 "3COM PATENTS" means patents related to the subject matter of this Agreement issued as of the Effective Date and the patents to issue after the Effective Date on patent applications entitled to a filing date on or before the Effective Date related to the subject matter of this Agreement, including without limitation all foreign counterparts, all substitutions, extensions, reissues, renewals, divisions, continuations and continuations in part relating to such patents and their foreign counterparts, and which are owned or controlled by 3Com (where "controlled" means licensed by 3Com with a royalty- free right to grant sublicenses).


1.4 "3COM TECHNOLOGY" means (i) the inventions, designs, discoveries and processes claimed in the 3Com Patents and (ii) the 3Com Know-How.


1.5 "DEVICE SOFTWARE" means certain Seller DSL software, including but not limited to Seller's pre-activation signaling software and internal control protocol software, configured to run in the Device in a polled (i.e., non- interrupt driven) mode on a Motorola 68LC302 processor.


1.6 "IMPROVEMENTS" means any improvements, discoveries, developments, modifications or derivative works, whether or not patentable.


1.7 "INTELLECTUAL PROPERTY RIGHTS" means all current and future trade secrets, copyrights, patents and other patent rights, trademark rights, service mark rights, mask work rights and any and all other intellectual property or proprietary rights now known or hereafter recognized in any jurisdiction.


1.8 "PRODUCTS" means the CR201 or the 3Com Branded CR201, as applicable, including such updates or enhancements to the CR201 or the 3Com Branded CR201 that the parties may agree upon and implement pursuant to Section 14.


1.9 "PRODUCT SOFTWARE" means certain Seller DSL firmware that is embedded in the Products.


1.10 "SELLER KNOW-HOW" means the proprietary techniques, inventions, practices, methods, knowledge, designs, skill and experience relating to the modification of CPE to comply with the DSL Specifications or the operation of Seller's proprietary DSL networking systems which Seller discloses to 3Com under this Agreement.


1.11 "SELLER PATENTS" means patents issued as of the Effective Date related to the subject matter of this Agreement and the patents to issue after the Effective Date on patent


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applications entitled to a filing date on or before the Effective Date related to the subject matter of this Agreement, including without limitation all foreign counterparts, all substitutions, extensions, reissues, renewals, divisions, continuations and continuations in part relating to such patents and their foreign counterparts, and which are owned or controlled by Seller (where "controlled" means licensed by Seller with a royalty-free right to grant sublicenses).


1.12 "SELLER SOFTWARE" means the Device Software and the Product Software.


1.13 "SELLER TECHNOLOGY" means (i) the inventions, designs, discoveries and processes claimed in the Seller Patents and (ii) the Seller Know-How.


1.14 "SPECIFICATIONS" means specifications for the Products to be agreed upon by the parties and to be attached hereto as Exhibit B (Product Specifications).


1.15 "TESTING CRITERIA" means the test criteria and procedures mutually agreed upon by the parties to ensure the Device's compatibility with the DSL Specifications. The Testing Criteria will be set forth in Schedule A to Exhibit D attached hereto.


2. DEVELOPMENT OF THE DEVICE. 3Com shall design the [***] as set forth in Exhibit D attached hereto.


3. PURCHASE OF PRODUCTS; SUPPORT SERVICES.


3.1 PURCHASE OF PRODUCTS. Seller agrees to sell the Products to 3Com and to accept purchase orders for the Products from 3Com under the terms and conditions of this Agreement. It is expressly understood that 3Com has no obligation to purchase any, or any minimum number of, Products hereunder. Further, nothing in this Agreement shall prevent 3Com from manufacturing or procuring from other sources like or comparable products.


3.2 DOCUMENTATION LICENSE. Subject to the terms and conditions of this Agreement, Seller hereby grants 3Com, a nonexclusive, nontransferable, worldwide, fully-paid and royalty-free license to use, reproduce, modify, create derivative works based on, support, demonstrate and distribute through single or multiple tiers of distribution all end user documentation, including all subsequent updates or enhancements thereto or replacements therefor, delivered as part of or together with the Products or otherwise provided under this Agreement. Any modifications or derivative works are subject to Seller's technical approval prior to demonstration or distribution.


3.3 SUPPORT SERVICES. Training and support services for the Products shall be provided as set forth in Exhibit C attached hereto.


3.4 TRADEMARK RIGHTS. 3Com requests and Seller agrees to provide certain markings and identification, which includes the trademark(s) and/or trade name of 3Com, on the Products ordered and delivered to 3Com. 3Com acknowledges that initial Product production runs may not have 3Com branding, but the parties anticipate that the Product units sold to 3Com will display 3Com trademarks by approximately January 2, 1999. Such markings and identification


3.


[***] = Certain information on this page has been omitted and filed separately
with the Commission. Confidential treatment has been requested with
respect to the omitted portions.


shall be strictly in accordance with the requirements of 3Com as set forth in 3Com's Trademark Guidelines, as provided to Seller and as may be updated from time to time by 3Com. Seller is not authorized to use the trademark(s) and trade names of 3Com on any products, other than Products ordered by and delivered to 3Com, or for any other purpose. Seller is hereby granted a limited trademark license with respect to the 3Com trademarks set out in the above-mentioned markings and identification, solely for the above-mentioned use. All other use is prohibited. This license shall terminate on the earlier of termination of this Agreement or failure of Seller to maintain the quality requirements set out in this Agreement. Seller shall obtain no rights to or interest of any kind in any 3Com trademarks or trade names other than the limited right to use set out above.


3.5 INDEMNIFICATION. 3Com shall indemnify and hold Seller harmless from and against any and all damages, costs and expenses (including without limitation reasonable attorneys' and expert witness fees) incurred by Seller in connection with any action, suit, proceeding, demand, assessment or judgment arising out of or related to any claims by third parties based on any infringement by the 3Com trademarks, logos or trade names of any trademark, logo or trade name of any other person or entity; provided that (i) Seller promptly notifies 3Com of such action, claim or proceeding; (ii) 3Com shall have the sole right to compromise, settle or defend any such action, claim or proceeding; provided, however, that 3Com shall not compromise or settle any such action, claim, or proceeding in a manner that does not unconditionally release Seller without Seller's prior written consent; and (iii) Seller provides 3Com reasonable assistance at 3Com's request and expense in the defense of such action, claim or proceeding.


4. ORDER FORECAST.


3Com shall provide Seller with a nine (9) month non-binding, forward- looking rolling forecast and update such forecast on a monthly basis. Seller shall use such forecast for internal material planning requirements only. Such forecast does not represent any commitment by 3Com to purchase Products. Further, Seller shall view all forecasts as Confidential Information in accordance with Section 21 below.


5. PURCHASE ORDERS.


5.1 LEADTIME. Seller agrees to supply Products to 3Com within fifty-six (56) calendar days leadtime. Seller will make good faith, commercially reasonable efforts to reduce this leadtime. Seller will notify 3Com immediately upon any changes in leadtime.


5.2 PURCHASE ORDERS. Purchases shall be initiated by 3Com's written or electronically dispatched purchase orders referencing the quantity, the Product, applicable price, shipping instructions and requested in house delivery dates. All purchase orders for Products placed by 3Com hereunder shall be governed by the terms and conditions of this Agreement. In the event of a conflict between the provisions of this Agreement and the terms and conditions of 3Com's purchase order or Seller's acknowledgment or other written communications, the provisions of this Agreement shall prevail and any such conflicting terms or conditions are hereby rejected.


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5.3 ISSUANCE AND ACCEPTANCE. Seller shall notify 3Com of acceptance of purchase order by telephone or facsimile (and promptly confirm in writing) within five (5) business days after receipt of 3Com's purchase order. Failure of Seller to confirm or respond to 3Com's purchase order within five (5) business days shall constitute acceptance. The parties anticipate approximately a six (6) to eight (8) week delivery cycle from purchase order to fulfillment. All orders are subject to acceptance in writing by Seller and shall not be binding until acceptance. If orders for the Product units exceed Seller's inventory, Seller shall allocate available inventory on a basis Seller, in its reasonable discretion, deems equitable. In such event, Seller will use good faith efforts to allocate supply of Products to 3Com on a pro-rata basis, taking into account 3Com's current and historical purchase history for the Product compared against Seller's total current and historical sales of Products. If Seller cannot allocate to 3Com such pro-rata share in such circumstances, the parties shall discuss in good faith a mutually acceptable course of action. Seller shall use reasonable efforts to fill orders promptly, but shall not be liable for any damage to 3Com or any third party for failure to fill any orders, or for any delay in delivery or error in filling any orders. Notwithstanding any prior acceptance by Seller of a purchase order for Product units, Seller shall not be obligated to ship Product units if 3Com is in breach of this Agreement at the time of scheduled shipment.


5.4 CHANGE ORDERS. Change orders shall be provided by written or electronically dispatched notice from 3Com. Seller shall notify 3Com of acceptance of change order by telephone or facsimile (and promptly confirm in writing) within two (2) business days after receipt of 3Com's change order or change order request. Failure of Seller to confirm or respond to 3Com's change order within two (2) business days shall constitute acceptance.


5.4.1 CANCELLATION. 3Com may cancel without liability any purchase order upon written notice to Seller within forty-five (45) days from the date such purchase order was accepted by Seller. Notwithstanding the foregoing, if Seller incurs substantial liability (as determined by Seller in its reasonable, good faith judgment) as a result of such cancellation or a series of cancellations because of the materials and work in process costs incurred by Seller to meet such purchase order(s), and Seller and 3Com cannot reasonably use such materials and work in process within a reasonable time frame, the parties agree to discuss in good faith a mutually acceptable plan to limit such liability in future and to compensate Seller for the materials and work in process costs it has incurred as a result of such cancellation or cancellations.


5.4.2 RESCHEDULING. 3Com shall be entitled to reschedule delivery of Products or quantities of Product scheduled for a particular delivery at any time for a particular purchase order; provided, however, that 3Com cannot reschedule a delivery of Products beyond ninety (90) days from the original delivery date. Seller shall accommodate a request to expedite the ship date, if reasonably able to do so.


6. DELIVERY TERMS.


6.1 DELIVERY POINT. All shipments shall be F.C.A. origin (Seller's U.S. shipping dock). Title and risk of loss shall pass to 3Com upon Seller's tender of delivery to the common carrier or 3Com's designee.


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6.2 SHIPPING. All shipments are freight collect. Seller may ship partial orders provided Seller notifies 3Com and 3Com agrees prior to shipment. 3Com's purchase order shall specify the carrier or means of transportation or routing, and Seller will comply with 3Com's instructions. If 3Com fails to provide shipping instructions, Seller shall select the best available carrier, on a commercially reasonable basis.


6.3 PACKING INSTRUCTIONS. All Products shall be packaged and prepared for shipment in a manner which (i) follows 3Com's packaging and routing guidelines, a copy of which will be provided to Seller, (ii) follows good commercial practice, (iii) is acceptable to common carriers for shipment and (iv) is adequate to ensure safe arrival. Seller shall mark the outside of each shrink wrapped pallet with the applicable 3Com part numbers and any necessary lifting and handling information. Each shipment shall be accompanied by a packing slip which will include 3Com's part numbers, purchase order number, Seller's part number and the quantity shipped.


6.4 RESPONSIBILITY FOR EXPORT LICENSING. Subject to all the rules and regulations stated in Section 17, Seller agrees, upon 3Com's request, to deliver Products to 3Com's freight forwarder for export from the country of origin. Subject to the terms of this Agreement, 3Com will be responsible for obtaining the appropriate licenses or permits necessary to export Products from the country of origin. Seller shall furnish 3Com or 3Com's designee with the information necessary for 3Com to timely obtain all required export and import documentation.


6.5 DELIVERY SCHEDULE. Delivery shall be pursuant to the schedule set forth in 3Com's purchase order or as otherwise agreed upon by the parties. Seller shall immediately notify 3Com in writing of any anticipated delay in meeting the delivery schedule, stating the reasons for the delay. If Seller's delivery fails to meet the committed delivery schedule, then Seller, upon 3Com's request, shall expedite the routing at Seller's expense, however, if Seller's delivery fails to meet the schedule by in excess of twenty (20) days, then 3Com, at its sole option and without penalty or any additional expense, may (i) require Seller to expedite the routing by the fastest available commercial carrier; (ii) reschedule the delivery; or (iii) cancel the delivery in whole or in part.


6.6 EARLY DELIVERY. Seller shall not deliver any Products prior to the scheduled delivery date, without 3Com's written consent, and 3Com may return early or excess shipments to Seller at Seller's sole risk and expense.


6.7 IN-STOCK MINIMUM. Seller agrees to use commercially reasonable efforts to carry in "safety stock" a minimum of two weeks supply (as set forth on the latest monthly forecast) of completed units of each of the Products to accommodate any unforeseen or expedited demand on the part of 3Com.


6.8 COUNTRY OF MANUFACTURER. Seller represents and warrants that the Product is manufactured in the United States. Seller shall promptly advise 3Com at least ninety (90) days prior to a change in or addition to any such manufacturing locations.


6.9 COMMODITY CLASSIFICATION. Seller shall provide 3Com with a copy of the Commodity Classification for the Products or, if this is not available, Seller shall provide 3Com with the ECCN that was used by Seller for self- certification. A copy of the Commodity


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Classification is required for any Product containing security or encryption technology. In addition, Seller shall advise 3Com as to the License Exception, if applicable, pursuant to which the Product may be exported.


7. PRICING; TAXES.


7.1 PRICES. The prices charged by Seller for the Products shall be those set forth as Exhibit A, less the applicable discount, if any, stated in Exhibit A. All prices are F.C.A. origin (Seller's shipping dock). Prices are exclusive of costs of transportation, insurance, taxes, customs, duties, landing, storage and handling fees, and/or documents or certificates required for exportation or importation, which will be separately itemized and billed to 3Com in accordance with the billing and payment provisions of this Agreement.


7.2 QUARTERLY PRICE REVIEWS. Seller and 3Com agree to meet each 3Com fiscal quarter (3Com's fiscal year is June through May) and review prices of each Product. [***]


7.3 PRICE CHANGES. [***]


7.4 TAXES AND DUTIES. The prices for the Products are exclusive of all taxes. 3Com shall pay all import duties, customs fees, sales (unless an exemption certificate is furnished by 3Com to Seller), use, and value added taxes (except for taxes imposed on Seller's net income) with respect to any products sold or licensed and any services rendered to 3Com in respect of this Agreement. Such taxes, when applicable, will appear as separate items on Seller's invoice. If applicable law requires 3Com to withhold any taxes levied by the United States on payments to be made pursuant to this Agreement ("Withholding Tax"), 3Com shall be entitled to deduct such Withholding Tax from the payments due Seller hereunder. If Seller is eligible to take advantage of the reduced Withholding Tax provided for by an applicable United States tax treaty then in force, Seller shall furnish 3Com with all appropriate forms, documents and paperwork required under the treaty to obtain such reduced Withholding Tax, including a completed US Internal Revenue Service (IRS) Form 1001, Certificate of Reduced Withholding, otherwise 3Com will apply the non- treaty withholding tax rate on applicable payments.


7.5 LICENSE FEES. In consideration for the licenses granted to it under this Agreement, [***] to [***] of [***] of [***] for the [***]. For purposes hereof, [***] means the [***] from the [***] all [***] in a [***] within [***] the end of [***] and send to Seller a report detailing the number of [***] the [***] to which the [***] set forth above applies, the rates at which [***] the [***] of [***,] and all additional details necessary to show how these amounts were determined. 3Com will provide Seller with a written quarterly report, whether or not any [***].


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[***] = Certain information on this page has been omitted and filed separately
with the Commission. Confidential treatment has been requested with
respect to the omitted portions.


7.6 WAIVER OF PAYMENT OBLIGATION. Notwithstanding Section 7.5 above, if 3Com fulfills the marketing commitments set forth in Exhibit E attached hereto, [***] will [***] so long as 3Com [***].


7.7 LATE PAYMENT. Any payment not made within fifteen (15) days after it is due shall bear interest at a rate equal to one and one half percent (1 1/2%) per month or the highest rate permitted by applicable law, whichever is less, on the unpaid amounts from time to time outstanding from the date on which portions of such amounts became due and owing until payment thereof in full.


7.8 NO SET-OFF. Except as set forth in Section 7.6 above, no part of any amount payable to Seller hereunder may be reduced due to any counterclaim, set-off, adjustment or other right which 3Com may have against Seller.


7.9 MOST FAVORED CUSTOMER PRICING. [***]


8. AUDIT.


8.1 RECORDS. 3Com shall keep complete and accurate records pertaining to the sale of the Devices. Such records will be maintained for a three (3) year period following the year in which any such payments were made hereunder.


8.2 AUDIT REQUEST. Seller will have the right to engage, at its own expense, an independent auditor reasonably acceptable to 3Com, to examine 3Com's records from time to time as may be necessary, but no more than once every six (6) calendar months, to determine, with respect to any calendar year, the correctness of any report or payment made under this Agreement. Such audit shall be conducted upon at least five (5) days advance written notice and shall be conducted during 3Com's normal business hours. If any such audit reveals an underpayment of more than five percent (5%) of the correct amount of royalties due hereunder, such audit will be at the expense of 3Com. If any audit conducted on behalf of Seller shall show that 3Com underpaid the royalties due to Seller under the licenses herein as to the period subject to the audit, then 3Com shall immediately pay to Seller any such deficiency with interest thereon at a rate equal to the lower of one and a half percent per month or the highest rate allowed by law from the date due until paid or at such lower rate as shall be the maximum rate permitted by law.


9. INVOICING AND PAYMENT.


Subject to acceptance of Products as provided in Section 10, invoices shall be due and payable forty-five (45) days after the date of actual receipt of the Products or Seller's invoice, whichever is later.


10. ACCEPTANCE; QUALITY ASSURANCE.


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[***] = Certain information on this page has been omitted and filed separately
with the Commission. Confidential treatment has been requested with
respect to the omitted portions.


10.1 ACCEPTANCE. The Product and any change to the Product pursuant to Section 14 are subject to an initial acceptance test procedure by 3Com at 3Com's facility before final acceptance as set forth in this Section 10.1. If the Product delivered hereunder fails to conform to the Specifications or with the parties' agreed-upon testing and acceptance criteria, 3Com shall notify Seller of such failure, the parties will promptly discuss means to resolve any such failure, and Seller shall have up to thirty (30) days (or such longer period as the parties may agree) to deliver to 3Com conforming Products. If Seller fails to deliver conforming Products within such thirty (30) day period, absent separate agreement, 3Com shall have the right, without liability, to either cancel purchase orders for that Product and any other Products, the acceptance of which is impractical in 3Com's reasonable opinion as a result of Seller's failure to meet the Specifications, or require expedited shipping of the conforming Products at Seller's sole cost. After initial acceptance of a Product or a modified Product, further deliveries of such Product shall be deemed accepted upon delivery.


10.2 3COM TESTING. Seller acknowledges that 3Com will conduct period testing of Product deliveries, likely by testing sample units within a lot delivery. Should such sample testing reveal a likelihood of more than a minimal number of failures of the Products delivered to comply with the limited warranty set forth in Section 18.1, 3Com may return the entire Product lot delivered to 3Com pursuant to the RMA procedures set forth in this Agreement for further testing by Seller.


10.3 INSPECTION RIGHTS. 3Com shall have the right to perform vendor qualifications and/or on-site source inspections at Seller's manufacturing facilities and Seller shall reasonably cooperate with 3Com in that regard. If an inspection or test is made on Seller's premises, Seller shall provide 3Com's inspectors with reasonable facilities and assistance at no additional charge. 3Com may conduct such inspections no more frequently than once a calendar quarter unless an epidemic failure as described in Section 10.5 has occurred. 3Com must provide advance written notice of a desire to conduct an inspection of at least five (5) days prior to the beginning of such inspection. Such inspection shall be conducted only during normal business hours and in compliance with all Seller's safety and security requirements.


10.4 ISO 9002 COMPLIANT SUPPLIER. Seller represents that Seller will obtain ISO 9002 compliance within eighteen (18) months after the Effective Date. Should Seller lose the ISO 9002 registration thereafter, Seller will notify 3Com immediately. Seller will then use commercially reasonable measures to obtain reregistration within sixty (60) days. The parties acknowledge that Seller may subcontract manufacture of Products to a subcontractor and that such subcontractor is likely to be ISO 9002 registered.


10.5 EPIDEMIC FAILURE. "Epidemic Failure" shall mean (i) a failure of more than five percent (5%) of three (3) consecutive deliveries to conform to the warranty in Section 18.1 or a failure of four (4) out of six (6) deliveries to conform to the warranty in Section 18.1, or (ii) a failure of more than three and a half percent (3.5%) of total deployed 3Com Branded CR201s in any six (6) month rolling period. In the case of an Epidemic Failure, Seller's obligations shall be, within ten (10) business days, to propose an action plan to fix the failure of any affected Products and to implement this action plan upon 3Com's acceptance thereof. If the action plan is not acceptable to 3Com in its reasonable, good faith judgment, 3Com can require Seller to repair or replace, at Seller's option, the affected Products. Th ...