Document:

<PAGE>

                                                                   EXHIBIT 10.23

                           PARTIAL SURRENDER OF LEASE
                                       AND
                          LEASE MODIFICATION AGREEMENT

THIS AGREEMENT dated for reference March 11, 2002.

BETWEEN:

          2725312 CANADA INC.

          (the "Landlord")

AND:

          REDBACK NETWORKS INC.

          (the "Tenant")

WHEREAS:

A.   By a lease (the "Lease") made October 3, 2000 between the Landlord and the
     Tenant, the Landlord leased to the Tenant all of the space situate in the
     building (the "Building") located at 2955 Virtual Way, Vancouver, British
     Columbia, as such premises are more particularly described in the Lease
     (the "Original Premises");

B.   The Tenant has requested that it be permitted to surrender its leasehold
     interest in that portion of the Original Premises located on the 5th floor
     of the Building and having a Rentable Area of 28,243.93 square feet (the
     "Surrendered Premises");

C.   The Landlord has agreed to permit the Tenant to surrender the Surrendered
     Premises to the Landlord on the terms and conditions set out in this
     Agreement and in connection with a new lease which is to be entered into
     between the Landlord and Klohn Crippen Consultants Ltd. (the "New Tenant")
     with respect to the Surrendered Premises (the "New Lease"); and

D.   In connection with the foregoing matters, the Landlord and the Tenant have
     also agreed to amend the Lease as set out herein;

THEREFORE, in consideration of the sum of One Dollar ($1.00) now paid by each
party to the other, the mutual covenants and agreements contained herein and
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged by the parties, the parties agree as follows:

                                   ARTICLE 1
                        SURRENDER OF SURRENDERED PREMISES

1.1  SURRENDER. The Tenant agrees that, effective as of 11:59 p.m. on May 31,
     2002 (the "Surrender Date"), the Tenant assigns, releases and surrenders to
     the Landlord all of the

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                                      - 2 -

     right, title and interest of the Tenant in and to the Lease in so far as it
     relates to the Surrendered Premises only and all of the right, title and
     interest of the Tenant in the Surrendered Premises, such that all rights of
     the Tenant in the Surrendered Premises shall be merged and extinguished in
     the reversion held by the Landlord and such that the Lease shall continue
     in full force and effect with respect to that portion of the Original
     Premises which does not include the Surrendered Premises (the "Remaining
     Premises").

1.2  SURRENDER PAYMENT FOR PERIOD PRE FEBRUARY 1, 2003. In consideration of the
     Landlord agreeing to the surrender by the Tenant of the Surrendered
     Premises, the Tenant covenants and agrees to pay to the Landlord a
     surrender payment of an amount (the "Pre Feb 1/03 Surrender Payment") that
     is equal to the Rent that would have been applicable to the Surrendered
     Premises for the period from June 1, 2002 to January 31, 2003 had the
     Surrendered Premises remained part of the "Premises" under the Lease until
     11:59 p.m. on January 31, 2003. The Pre Feb 1/03 Surrender Payment will be
     paid by the Tenant to the Landlord by monthly payments commencing June 1,
     2002 and to and including January 1, 2003 in the amount that would have
     been due as Rent for the Surrendered Premises had the Surrendered Premises
     remained part of the Premises. The Tenant acknowledges and agrees that the
     Pre Feb 1/03 Surrender Payment shall be secured by the Letter of Credit
     referred to in section 4.16 of the Lease (as the Lease is amended by this
     Agreement).

1.3  SURRENDER PAYMENT FOR PERIOD FROM AND AFTER FEBRUARY 1, 2003. In further
     consideration of the Landlord agreeing to the surrender by the Tenant of
     the Surrendered Premises, the Tenant covenants and agrees to pay to the
     Landlord a surrender payment of $992,291.11 plus GST (the "Post Feb 1/03
     Surrender Payment") on or before February 1, 2003. The Tenant acknowledges
     and agrees that the Post Feb 1/03 Surrender Payment shall be secured by the
     Letter of Credit referred to in section 4.16 of the Lease (as the Lease is
     amended by this Agreement).

1.4  ACCEPTANCE. In consideration of the Tenant's covenant and agreement to pay
     the Pre Feb 1/03 Surrender Payment to the Landlord as set out in section
     1.2 and the Post Feb 1/03 Surrender Payment to the Landlord as set out in
     section 1.3 and to pay the amount referred to in section 1.9, the Landlord
     accepts the assignment, release and surrender referred to in section 1.1.

1.5  REPRESENTATIONS AND WARRANTIES. The Tenant represents and warrants to the
     Landlord that the Tenant has the absolute right, power and authority to
     surrender to the Landlord the Surrendered Premises and the Tenant's
     interest in the Surrendered Premises as herein provided.

1.6  LANDLORD'S RELEASE. Effective as of the later of the Surrender Date and the
     receipt by the Landlord of the new Letter of Credit (or amendment to the
     existing Letter of Credit) referred to in section 2.3, the Landlord
     releases and forever discharges the Tenant and its successors and assigns
     of and from any and all manner and causes of action, suits, debts,
     contracts, claims, demands, liabilities and damages in respect of any
     matter in any way related to the Surrendered Premises or any of the rents,
     covenants, conditions and agreements contained in the Lease to the extent
     they are applicable to the Surrendered Premises. In no event shall the
     foregoing release and discharge be effective to release or discharge, or be
     interpreted or construed as releasing or discharging, the Tenant from its
     obligation to perform all of its

<PAGE>

                                     - 3 -

     agreements and covenants in the Lease (as amended by this Agreement) in so
     far as they related to the Remaining Premises or from its obligations to
     the Landlord as set out in sections 1.2, 1.3 and 1.9 and elsewhere in this
     Agreement.

1.7  TENANT'S RELEASE. Effective as of the Surrender Date, the Tenant releases
     and forever discharges the Landlord and its successors and assigns of and
     from any and all manner and causes of action, suits, debts, contracts,
     claims, demands, liabilities and damages in respect of any matter in any
     way related to the Landlord's obligations to the Tenant in respect of the
     Surrendered Premises as set out in the Lease.

1.8  GOODS AND SERVICES TAX. The Tenant shall be responsible for the payment of
     the goods and services tax payable in respect of the surrender of the
     Surrendered Premises by the Tenant. Concurrently with the payments to the
     Landlord referred to in sections 1.2 and 1.3, the Tenant shall pay to the
     Landlord the goods and services tax applicable to such payments, in each
     case on the condition that the Landlord shall remit such tax amount to
     Canada Customs and Revenue Agency on account of the goods and services tax
     which it is the statutory obligation of the Landlord to collect and remit
     in connection with each such payment.

1.9  COMMISSION. The Tenant covenants and agrees that it shall pay when due any
     commission or fee (plus applicable goods and services tax thereon) which
     may be payable by the Tenant to any agent or broker retained by it which is
     in any way related to the Tenant's efforts to assign the Lease or sublet
     any portion of the Original Premises and that it shall indemnify and save
     harmless the Landlord from and against any costs or damages incurred or
     suffered by the Landlord in any way as a result of the failure of the
     Tenant to pay such amounts. In addition, the Tenant covenants and agrees to
     pay when due on or before July 1, 2002 a commission of $5.50 per rentable
     square foot of the Surrendered Premises (plus goods and services tax
     thereon) to Royal LePage Commercial Inc. which the Landlord will become
     obligated to pay to Royal LePage Commercial Inc. in connection with the
     execution of the New Lease. The Tenant acknowledges and agrees that the
     obligations of the Tenant to pay such amounts shall be secured by the
     Letter of Credit referred to in section 4.16 of the Lease (as the Lease is
     amended by this Agreement).

1.10 AMENDMENT TO LEASE. The parties agree that this Article 1 constitutes an
     amendment to the Lease, that each of the covenants set out in sections 1.2,
     1.3 and 1.9 hereof constitutes a covenant under the Lease by the Tenant in
     favour of the Landlord and that the term "Lease" as used in the Lease shall
     include this Article 1.

                                   ARTICLE 2
                             MODIFICATIONS TO LEASE

2.1  MODIFICATIONS TO LEASE. In connection with the surrender of the Surrendered
     Premises pursuant to Article 1, the Landlord and the Tenant agree that the
     Lease is amended as follows, effective as of the Surrender Date:

     (a)  section 1.5 (the definition of "Common Areas") is amended by adding to
          the end thereof the following words: "(which, for greater certainty,
          include any areas of the Building located below ground level or on the
          roof, the entrance foyer area and ground floor elevator foyer area of
          the Building, electrical rooms in the Building,

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                                     - 4 -

          central stairwells in the Building and all water, sewer and gas and
          all other mechanical systems servicing the Building, including the
          heating, ventilating and air-conditioning services and the elevator
          services in the Building which service the entire Building)";

     (b)  section 1.12 (the definition of "Operating Costs") is amended by
          adding to the end thereof the following new paragraph:

               "For greater certainty, Operating Costs include all expenses,
               costs and outlays of every nature incurred by the Landlord in
               cleaning, maintaining, repairing and operating the Common Areas
               located within the Building and the Tenant shall be responsible
               for paying its Proportionate Share of all such expenses, costs
               and outlays.";

     (c)  section 1.13 (the definition of "Premises") is amended by adding to
          the end of the first sentence, immediately after the words "Schedule
          "C" hereto", the words "except for any space located on the fifth
          floor of such Building and not including the Common Areas of the
          Building (which for greater certainty, include any areas of the
          Building located below ground level or on the roof, the entrance foyer
          area and ground floor elevator foyer area, electrical rooms, central
          stairwells and all water, sewer and gas and all other mechanical
          systems servicing the Building, including the heating, ventilating and
          air-conditioning services and the elevator services which service the
          entire Building)";

     (d)  section 1.16 (the definition of "Proportionate Share") is amended by
          deleting "100%, the Premises comprising the whole of the Building" and
          by substituting therefor "118,874.91/147,118.84, being a fraction
          having as its numerator the Rentable Area of the Premises and as its
          denominator the Rentable Area of the Building ;

     (e)  section 2.1 is deleted and replaced with the following:

               "The Rentable Area of the Premises is 118,874.91 square feet.";

     (f)  subsection 3.3(a) is amended by deleting "$4,650,987.00, subject to
          adjustment in accordance with section 2.1 of this Lease" therefrom and
          by substituting therefor "$3,922,872.03";

     (g)  section 4.2 is amended by deleting therefrom the existing columns in
          respect of "Period", "Annual Rent", "Monthly Rent" and "Rent Per
          Square Foot" and the information included therein and by substituting
          therefor the following:

<TABLE>
<CAPTION>
                                                                                                Rent Per
                                  "Period                     Annual Rent     Monthly Rent    Square Foot
                 <S>                                         <C>              <C>             <C>
                 From the Commencement Date to and           $2,721,698.54    $226,808.21       $18.50
                 including May 31, 2002

                 From June 1, 2002 to and including the      $2,199,185.84    $183,265.49       $18.50
                 last day in the fifth year of the Term

                 Years 6 to 10                               $2,615,248.02    $217,937.34       $22.00",
</TABLE>

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                                     - 5 -

          provided to it is understood that the foregoing is subject to section
          4.3;

     (h)  section 4.16 is amended as follows:

          (i)    by adding to the second (2nd) line thereof, immediately after
                 the word "Lease", the following words:

                    "(the "Leasing Obligations") and the Tenant's obligation to
                    make all of the payments contemplated hereunder";

          (ii)   by deleting from the third (3rd) line thereof the word
                 "obligations" and by substituting therefor the words "Leasing
                 Obligations or obligations secured by the Letter of Credit (as
                 defined below)";

          (iii)  by deleting from the information included under the "Term of
                 Letter of Credit" and "Face Amount of Letter of Credit"
                 headings in paragraph (a) thereof the following:

<TABLE>
                        <S>                                                            <C>
                        "From the date of lease execution to the 12th month of the     $7,250,000.00
                        Lease Term

                        Months 13 to 24 of Lease Term                                  $5,800,000.00",
</TABLE>

                 and by substituting therefor the following:

<TABLE>
                        <S>                                                            <C>
                        "From the date of lease execution to February 7, 2003          $7,250,000.00

                        From February 8, 2003 to month 24 of Lease Term                $5,800,000.00";
</TABLE>

          (iv)   by adding to the twelfth (12th) line of paragraph (c) thereof,
                 immediately after the word "damages", the following words:
                 "resulting from breaches of the Leasing Obligations and the
                 obligations secured by the Letter of Credit";

          (v)    by deleting from the third (3rd) line of subparagraph (ii) of
                 paragraph (c) thereof the words "to damages" and by
                 substituting therefor the following words: ", without prejudice
                 to the Landlord's right to pursue further damages or other
                 remedies,";

          (vi)   by deleting from the fifth-to-last line of paragraph (c)
                 thereof the words "obligations of the Tenant under the Lease"
                 and by substituting therefor the following words: "Leasing
                 Obligations";

          (vii)  by adding to the third-to-last line of paragraph (c) thereof,
                 immediately after the word "secure", the following words: "the
                 obligations secured by the Letter of Credit and"; and

          (viii) by deleting from the second-to-last line of paragraph (c)
                 thereof the word "obligations," and by substituting therefor
                 the following words: "Leasing Obligations or the obligations
                 secured by the Letter of Credit, such security to continue";

     (i)  section 5.12 ("Exterior Signage") is deleted;

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                                     - 6 -

     (j)  section 8.1 is amended as follows:

          (i)  by adding to the third (3rd) line thereof, immediately after the
               words "Common Areas", the following words: "(including any Common
               Areas located within the Building"); and

          (ii) by adding to the end thereof, as a new paragraph, the following:

                    "The Landlord shall be entitled to enter the Premises
                    pursuant to section 5.13 as reasonably required in
                    connection with viewing the state of any of the Common Areas
                    or with carrying out any work which is the responsibility of
                    the Landlord pursuant to this section 8.1."

     (k)  section 8.2 is amended by deleting therefrom subparagraph (i) of
          paragraph (a); and

     (l)  section 9.2 is amended by adding to the end thereof as new paragraph
          (g) the following:

               "Notwithstanding any prior provisions of this section 9.2 to the
               contrary, after the Landlord receives a request for consent to a
               subletting, it shall have the option, to be exercised by written
               notice within thirty (30) days after the receipt of such request,
               to terminate this Lease insofar as it relates to the portion of
               the Premises which the Tenant proposes to sublease, on not less
               than thirty (30) days and not more than ninety (90) days notice
               to the Tenant. If the Landlord elects to partially terminate this
               Lease as aforesaid, the Tenant shall not proceed with such
               subletting and shall execute and deliver to the Landlord,
               promptly upon receipt thereof from the Landlord, any agreement
               which the Landlord may require to evidence the surrender of such
               portion of the Premises to the Landlord and to make such
               amendments to this Lease as are required in connection
               therewith.".

2.2  CLARIFICATIONS. For greater certainty, the Landlord and the Tenant confirm
     and agree that, effective as of the Surrender Date:

     (a)  all references in the Lease, as amended hereby, to the "Premises"
          shall be read and construed as the Remaining Premises only;

     (b)  the covenants of the Tenant to pay, as set out in sections 1.2, 1.3
          and 1.9 hereof, are covenants under the Lease and, accordingly, any
          failure to pay the amounts set out in sections 1.2, 1.3 and 1.9 hereof
          in accordance with the terms thereof will constitute a default under
          the Lease pursuant to paragraph (a) of section 14.2 of the Lease;

     (c)  notwithstanding paragraph (a) of section 4.16 of the Lease, as amended
          hereby, the Tenant shall not be permitted to reduce the face amount of
          the Letter of Credit to $5,800,000.00 until such time as the Tenant
          has paid to the Landlord all those amounts set out in sections 1.2,
          1.3 and 1.9 hereof;

<PAGE>

                                     - 7 -

     (d)  section 15.11 of the Lease, being the option to renew provision, shall
          not apply to the Surrendered Premises;

     (e)  the number of parking stalls to which the Tenant is entitled pursuant
          to section 15.15 of the Lease shall be determined on the basis of the
          Rentable Area of the Remaining Premises, not on the Rentable Area of
          the Original Premises; and

     (f)  the Building will be treated as a multi-tenanted Building and,
          accordingly, all areas and all services located in the Building which
          are required in connection with the normal use and enjoyment of all
          premises within the Building will form part of the Common Areas of the
          Building.

2.3  NEW LETTER OF CREDIT. In connection with the amendments to section 4.16 of
     the Lease contained in this Agreement, the Tenant agrees to arrange for a
     new Letter of Credit (or for an appropriate amendment to the existing
     Letter of Credit) to be issued to the Landlord on or before April 1, 2002.
     The new Letter of Credit shall be in substantially the same form as the
     existing Letter of Credit except that the date on which the amount of the
     Letter of Credit is to be automatically reduced to CAD $5,800,000.00 shall
     be changed from "December 1, 2002" to "February 7, 2003" and each reference
     in the existing Letter of Credit to the Lease shall be amended to refer to
     the Lease "as amended from time to time".

                                   ARTICLE 3
                               GENERAL PROVISIONS

3.1  DEFINED TERMS. All terms defined in this Lease and used in this Agreement
     will have the respective meanings ascribed to them in the Lease unless the
     context otherwise requires or unless otherwise defined in this Agreement.
     The defined terms in the recitals to this Agreement will have such meanings
     throughout this Agreement, unless otherwise stated herein.

3.2  WHOLE AGREEMENT. The Lease will be read and construed in conjunction with
     this Agreement to the effect that the Lease and this Agreement will be read
     and construed as one document. For greater certainty, the parties confirm
     and agree that the Lease remains in full force and effect with respect to
     the Remaining Premises and is discharged and surrendered with respect to
     the Surrendered Premises only.

3.3  CONFIRMATION AND RATIFICATION. The Landlord and the Tenant hereby confirm
     and ratify the terms and conditions contained in the Lease, as partially
     surrendered and amended hereby. Without limiting the generality of the
     foregoing, the parties confirm that the Commencement Date under the Lease
     was December 1, 2001 and that the Tenant is not entitled to any free Rent
     pursuant to subsection 3.2(b) of the Lease.

3.4  COUNTERPARTS/FACSIMILE. This Agreement may be executed in any number of
     counterparts, with the same effect as if both parties had signed the same
     document, and will become effective when one or more counterparts have been
     signed by both the parties and delivered to each of the parties. All
     counterparts will be construed together and evidence only one agreement,
     which, notwithstanding the dates of execution of any counterparts, will be
     deemed to be dated the date first above written. This Agreement may be
     executed by the parties and transmitted by facsimile and if so executed and
     transmitted this Agreement will

<PAGE>

                                     - 8 -

     be for all purposes as effective as if the parties had delivered an
     executed original Agreement.

3.5  ENUREMENT. This Agreement shall enure to the benefit of and be binding upon
     the parties hereto and their respective heirs, executors, administrators,
     successors and permitted assigns. The Tenant will, at the request of the
     Landlord, promptly execute and deliver such further documents and
     instruments and do all such further acts and things as may be required in
     order to effect or perfect the surrender and cancellation of the Lease with
     respect to the Surrendered Premises or to otherwise evidence, carry out and
     give full effect to this Agreement.

                                   ARTICLE 4
                               CONDITION PRECEDENT

4.1  CONDITION PRECEDENT. This Agreement is subject to the Landlord and the New
     Tenant entering into the New Lease on terms and conditions acceptable to
     the Landlord, in its sole discretion, and any conditions precedent in
     favour of the New Tenant which may be contained therein having been waived
     by the New Tenant, in each case on or before March 15th, 2002. The Landlord
     and the Tenant agree that this Agreement will become an unconditional
     agreement with respect to the surrender of the Surrendered Premises and the
     modifications of the Lease as set out herein forthwith upon the
     satisfaction or waiver by the Landlord of the foregoing condition
     precedent. The foregoing condition precedent is for the Landlord's sole
     benefit and may be waived, unilaterally by the Landlord, at the Landlord's
     election. The condition precedent will not be considered satisfied or
     waived unless the Landlord confirms to the Tenant in writing that the
     condition has been satisfied or waived. If the Landlord does not give the
     Tenant notice of the satisfaction or waiver of the condition precedent on
     or before March 19, 2002, then this Agreement and all of the terms hereof
     (including the surrender of the Surrendered Premises and the modifications
     of the Lease set out herein) will be null and void and of no force or
     effect whatsoever.

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

2725312 CANADA INC.                        REDBACK NETWORKS INC.

By:  /s/ Remco Daal
     -------------------------------
     Authorized Signatory                  By:  /s/ Thomas C. Cronan III
                                                --------------------------------
                                                Authorized Signatory

By:  /s/ Jacob Silberberg
     -------------------------------
     Authorized Signatory<PAGE>
                    Manufacturing Services Letter Agreement

                                                                   EXHIBIT 10.24

                                                         [LOGO OF JABIL CIRCUIT]

Redback Networks, Incorporated
1195 Borregas Avenue
Sunnyvale, California  94089

        Re: Jabil Circuit, Inc. Manufacturing Services

Dear Marty Di Pietro:

     This letter ("Letter Agreement"), dated as of September 14, 2000
("Effective Date"), sets forth the terms under which Jabil Circuit, Inc.
("Jabil") will provide to Redback Networks, Inc. ("Redback") those manufacturing
services specifically identified in Schedule 1 hereto ("Manufacturing
Services"). Redback and Jabil are referred to herein as "Party" or "Parties".
Jabil and Redback have agreed that the terms and conditions set forth in this
Letter Agreement shall control and govern our Manufacturing Services
relationship prior to the execution of a more detailed and definitive
Manufacturing Services Agreement, and that any prior agreements executed,
discussions had or negotiations engaged in, between the Parties before the
Effective Date shall have no force or effect with regard to the Manufacturing
Services except that Redback shall remain liable to pay Jabil the price of all
work performed by Jabil thereunder. Pre-printed language on each Party's forms,
including purchase orders, shall not constitute part of this Letter Agreement
and shall be deemed unenforceable. Notwithstanding the foregoing, the terms and
conditions of any Design Services Letter Agreement or Design Services Agreement
executed by the Parties shall control and govern the design services
relationship of the Parties unless the Parties specifically intend to superCede
the same and so indicate in writing.

1.   Manufacturing Services. Jabil will use commercially reasonable efforts to
     perform the Manufacturing Services in conformity
     with the Statement of Work ("SOW") set forth in Schedule 1 hereto, as
     amended or modified in writing from time to time by mutual agreement
     between the Parties.

2.   Payment and Acceptance. Redback shall pay Jabil all amounts when due,
     including all Non-Recurring Engineering Costs ("NRE Costs"), that Jabil may
     incur in the performance of the Manufacturing Services. Redback shall pay
     Jabil all undisputed invoiced amounts within thirty (30) days from the date
     of Jabil's invoice therefor. Redback may only dispute an invoice provided
     that Redback notifies Jabil in writing, within three (3) business days
     after the date of receipt, that the invoice contains a material error that
     impedes payment thereof. Such notification shall identify the alleged error
     in the invoice, a justification for considering this error material,
     together with any supporting documentation. Redback will remain liable and
     will issue payment without delay in accordance to this Section for any
     undisputed portions or amounts in the invoice. In the event of
     cancellation, expiration or termination of this Letter Agreement for any
     reason, Redback shall remain liable for all fees, costs of material and
     expenses incurred by Jabil as set forth herein up to and including the date
     of such cancellation, expiration or termination.

     Redback will be deemed to have accepted any Product (as defined in
     Section 4 below) prepared as part of the Manufacturing Services unless,
     within ten (10) days following Jabil's delivery of such Product, Redback
     provides a detailed written notice, as referenced in Section 15 herein,
     setting forth the manner in which such Product - fails to comply with the
     SOW.

3.   Build Schedule Forecasts. Within ten (10) business days following the
     execution of this Letter Agreement, Redback shall provide Jabil with a
     monthly forecast, in writing, of quantity requirements of each Product (as
     defined in Section 4 below) that Redback anticipates requiring during the
     next twelve (12) month period ("Build Schedule Forecast"). The Build
     Schedule Forecast shall be updated by Redback in writing, on at least a
     monthly basis. Any rescheduling or cancellation of the orders set forth in
     a Build Schedule Forecast shall be subject to the terms set forth in
     Schedule 2 hereto, Rescheduled Delivery, Cancellation of Orders and Letter
     Agreement Expiration and Termination Charges.

4.   Product Manufacture. Jabil will manufacture the products as more
     particularly described in Schedule 1 hereto including any updates,
     renewals, modifications or amendments thereto (the "Product") in accordance
     with the specifications set forth

JBL993                                  Manufacturing Services Letter Agreement

<PAGE>

     in Schedule 1 and otherwise supplied and/or approved by Redback
     ("Specifications") and any build schedule approved by Jabil ("Build
     Schedule"). Jabil will reply to each proposed Build Schedule that is
     submitted in accordance with the terms of this Letter Agreement by
     notifying Redback of its acceptance or rejection within five (5) business
     days of receipt of any proposed Build Schedule. In the event of Jabil's
     rejection of a proposed Build Schedule, Jabil's notice of rejection will
     specify the basis for such rejection. Jabil will test all Product according
     to the testing specifications, standards, procedures and parameters set
     forth in Schedule 1 and otherwise supplied and/or approved by Redback
     ("Test Procedures") and will package and ship the Product in accordance
     with the packaging and shipping specifications set forth in Schedule 1 and
     otherwise supplied and/or approved by Redback ("Packaging and Shipping
     Specifications"). Redback shall be solely responsible for the sufficiency
     and adequacy of the Specifications, Packaging and Shipping Specifications
     and Test Procedures and shall hold Jabil harmless for any claim arising
     therefrom.

5.   Materials Procurement. Jabil will use reasonable commercial efforts to
     ---------------------
     procure components, per Redback's approved vendor list, necessary to
     fulfill mutually agreed upon Build Schedules. Redback shall be responsible
     for the performance of suppliers and quality of the components.

6.   Jabil Warranty, Exclusive Remedy and Limitation of Damages. Jabil warrants
     ----------------------------------------------------------
     (a) that it will manufacture the Product in accordance with Jabil
     Workmanship Standards, and (b) that at the time of manufacture, the Product
     will conform, in all material respects to the Specifications. The above
     warranty shall remain in effect for a period of one year from the date any
     Product is initially delivered to Redback or to Redback's designated
     carrier ("Warranty Period"). This warranty is extended to, and may only be
     enforced by, Redback.

     In accordance with Jabil's standard return material authorization process
     and procedure ("RMA"), Jabil will either repair or replace, in its sole
     discretion, any Product that contains a defect caused by a breach of the
     warranty set forth in this Section 6 provided that the Product is received
     within thirty (30) days following the end of any applicable Warranty Period
     ("RMA Product"). If Redback desires to return a Product based on a claim of
     breach of the warranty set forth in this Section 6, Redback shall request
     an RMA number from Jabil. Redback shall then consign the alleged defective
     Product, to Jabil's designated repair facility at Redback's risk and
     expense, and specify the Jabil assigned RMA number. Jabil will analyze any
     such RMA Product and, if a breach of warranty is found ("Defect"), then
     Jabil will repair or replace the RMA Product within twenty (20) business
     days of receipt by Jabil of the RMA Product and all required associated
     documentation. In the event a Defect is found, Jabil will reimburse Redback
     for the reasonable cost of transporting the RMA Product to Jabil's
     designated repair facility and Jabil will deliver the repaired RMA Product
     or its replacement, to Redback's designated destination at Jabil's risk and
     expense. If no such Defect is found, Redback shall reimburse Jabil for all
     fees, costs and expenses incurred to analyze and, if requested by Redback,
     repair or replace the non-Defective RMA Product and Redback shall bear
     responsibility for all transportation costs to and from Jabil's designated
     repair facility.

     THE FOREGOING SHALL CONSTITUTE REDBACK'S SOLE AND EXCLUSIVE REMEDY FOR A
     BREACH OF THE WARRANTY MADE BY JABIL HEREIN OR ANY OTHER OBLIGATION OF
     JABIL HEREUNDER. THE WARRANTY SET FORTH IN THIS SECTION 6 IS IN LIEU OF,
     AND JABIL EXPRESSLY DISCLAIMS, AND REDBACK EXPRESSLY WAIVES, ALL OTHER
     WARRANTIES AND REPRESENTATIONS OF ANY KIND WHATSOEVER WHETHER EXPRESS,
     IMPLIED, STATUTORY, ARISING BY COURSE OF DEALING OR PERFORMANCE, CUSTOM,
     USAGE IN THE TRADE OR OTHERWISE, INCLUDING, WITHOUT LIMITATION, ANY
     WARRANTY OF MERCHANTABILITY, OR FITNESS FOR A PARTICULAR PURPOSE OR
     INFRINGEMENT OR MISAPPROPRIATION OF ANY RIGHT, TITLE OR INTEREST OF REDBACK
     OR ANY THIRD PARTY. REDBACK UNDERSTANDS AND AGREES THAT IT SHALL HAVE FULL
     AND EXCLUSIVE LIABILITY WITH RESPECT TO ANY PRODUCT, WHETHER FOR PRODUCT
     DESIGN LIABILITY, PRODUCT LIABILITY, DAMAGE TO PERSON OR PROPERTY AND/OR
     INFRINGEMENT OR MISAPPROPRIATION OF THIRD PARTY RIGHTS. NO ORAL OR WRITTEN
     STATEMENT OR REPRESENTATION BY JABIL, ITS AGENTS OR EMPLOYEES SHALL
     CONSTITUTE OR CREATE A WARRANTY OR EXPAND THE SCOPE OF ANY WARRANTY
     HEREUNDER.

     JABIL'S WARRANTY SHALL NOT APPLY TO ANY PRODUCT JABIL DETERMINES TO HAVE
     BEEN SUBJECTED TO TESTING FOR OTHER THAN SPECIFIED ELECTRICAL
     CHARACTERISTICS OR TO OPERATING AND/OR ENVIRONMENTAL CONDITIONS IN EXCESS
     OF THE MAXIMUM VALUES ESTABLISHED IN APPLICABLE SPECIFICATIONS, OR TO HAVE
     BEEN THE SUBJECT OF MISHANDLING, ACCIDENT, MISUSE, NEGLECT, IMPROPER
     TESTING, IMPROPER OR UNAUTHORIZED REPAIR

                                     Page 2

<PAGE>

     ALTERATION, DAMAGE, ASSEMBLY, PROCESSING OR ANY OTHER INAPPROPRIATE OR
     UNAUTHORIZED ACTION OR INACTION THAT ALTERS PHYSICAL OR ELECTRICAL
     PROPERTIES. THIS WARRANTY SHALL NOT APPLY TO ANY DEFECT IN THE PRODUCT
     ARISING FROM ANY DRAWING, DESIGN, SPECIFICATION, PROCESS, TESTING OR OTHER
     PROCEDURE, ADJUSTMENT OR MODIFICATION SUPPLIED AND/OR APPROVED BY REDBACK.

     EXCEPT WITH REGARD TO ANY INDEMNITIES SET FORTH HEREIN, UNDER NO
     CIRCUMSTANCES SHALL EITHER PARTY BE LIABLE TO THE OTHER PARTY OR TO ANY
     OTHER PERSON OR ENTITY UNDER ANY CONTRACT, TORT, STRICT LIABILITY,
     NEGLIGENCE, OR OTHER LEGAL OR EQUITABLE CLAIM OR THEORY FOR ANY SPECIAL,
     INCIDENTAL, CONSEQUENTIAL, OR INDIRECT DAMAGES, LOSS OF GOODWILL OR
     BUSINESS PROFITS, LOST REVENUE, WORK STOPPAGE, DATA LOSS, COMPUTER FAILURE
     OR MALFUNCTION, OR FOR ANY AND ALL OTHER DAMAGES, LOSS, OR EXEMPLARY OR
     PUNITIVE DAMAGES WHETHER SUCH PARTY WAS INFORMED OR WAS AWARE OF THE
     POSSIBILITY OF SUCH LOSS OR DAMAGE. THE FOREGOING SHALL NOT EXCLUDE OR
     LIMIT EITHER PARTY'S LIABILITY FOR DEATH OR PERSONAL INJURY RESULTING FROM
     ITS NEGLIGENCE TO THE EXTENT THAT SUCH LIABILITY CANNOT BY LAW BE LIMITED
     OR EXCLUDED.

 7.  Jabil Existing Intellectual Property. Jabil shall retain all right,
     ------------------------------------
     title and ownership to any "Jabil Existing Intellectual Property" that is
     incorporated into any Product that is prepared as part of the Manufacturing
     Services or as part of any other work provided pursuant to this Letter
     Agreement or any other related agreement executed by the Parties. As used
     herein, the term "Jabil Existing Intellectual Property" means any
     discoveries, inventions, technical information, procedures, manufacturing
     or other processes, software, firmware, technology, know-how or other
     intellectual property rights owned, developed or obtained by Jabil outside
     of this Letter Agreement or known by Jabil prior to the execution of this
     Letter Agreement that are used by Jabil in creating, or are embodied
     within, any Product, the Manufacturing Services or other work performed
     under this Letter Agreement.

     Upon full payment of all monies due and owing under this Letter Agreement
     and all other monies due and owing to Jabil pursuant to any other related
     agreement executed by the Parties, Jabil will grant to Redback a worldwide
     wide, non-exclusive, fully paid-up, royalty free right and license to use,
     sell, and distribute the Jabil Existing Intellectual Property only insofar
     as is required for Redback to use, sell or distribute the Product provided
     as part of the Manufacturing Services performed by Jabil pursuant to this
     Letter Agreement.

8.   Jabil Created Intellectual Property. Jabil shall retain all right, title
     -----------------------------------
     and ownership to any "Jabil Created Intellectual Property" that is
     incorporated into any Product that is prepared as part of the Manufacturing
     Services or into any other work provided pursuant to this Letter Agreement
     or any other related agreement executed by the Parties. As used herein,
     the term "Jabil Created Intellectual Property" means any discoveries,
     inventions, technical information, procedures, manufacturing or other
     processes, software, firmware, technology, know-how or other intellectual
     property rights created, developed or reduced to practice by or for Jabil
     in (a) preparing any Product provided pursuant to this Letter Agreement, or
     (b) which is otherwise embodied within the Manufacturing Services or any
     other work provided pursuant to this Letter Agreement.

     Upon full payment of all monies due and owing under this Letter Agreement
     and all other monies due and owing to Jabil pursuant to any other related
     agreement executed by the Parties, Jabil will assign to Redback all right,
     title and interest in and to the Jabil Created Intellectual Property.
     Redback hereby grants to Jabil a worldwide, non-exclusive, fully paid-up,
     royalty-free right and license in and to the Product and the Jabil Created
     Intellectual Property.

     Jabil Created Intellectual Property and Jabil Existing Intellectual
     property shall hereinafter be referred to collectively as "Jabil
     Intellectual Property".

 9.  Manufacturing Rights. In consideration of the transfer by Jabil of the
     --------------------
     rights to the Jabil Intellectual Property, Redback grants Jabil exclusive
     manufacturing rights for one hundred percent (100%) of Redback's products
     which contain any Jabil Intellectual Property and/or any Redback product
     containing a "derivative" of the Jabil Intellectual Property. For the
     purposes of this Letter Agreement, a derivative is defined as "a design
     that is based in full or in part on the Jabil Intellectual Property". These
     manufacturing rights shall remain exclusive for the life of any Redback
     product unless the Parties mutually agree that the term of manufacturing
     exclusivity shall be for a shorter period as specifically set forth in

                                         Manufacturing Services Letter Agreement

                                     Page 3

<PAGE>

     any other related agreement executed by the Parties. In the event that
     manufacturing is subsequently transferred to a third party, Redback and
     Jabil shall mutually agree upon the terms and conditions of, and shall use
     commercially reasonable efforts to facilitate, such transfer. In such
     event, Redback shall, at a minimum, be liable for all monies due Jabil as
     set forth herein and any other monies due Jabil as set forth in any other
     related agreement executed by the Parties.

10.  Redback Warranty and Indemnification. Jabil shall not be responsible to
     ------------------------------------
     conduct nor shall Redback hold Jabil liable for failure to conduct any
     patent, trademark and copyright searches necessary to identify and evaluate
     any potential infringement claims with respect to the Product. Redback
     agrees to indemnify, defend and hold Jabil and its, directors, employees,
     subsidiaries, affiliates, successors and assigns harmless from and against
     all claims, damages, losses, costs and expenses, including attorneys' fees,
     arising from any third party claims asserted against Jabil and its
     employees, subsidiaries, affiliates, successors and assigns that are based
     in part or in whole on any of the following: (a) Specifications, Redback
     proprietary information and technology, any Product, or intellectual
     property, information, technology and processes supplied and/or approved by
     Redback or otherwise required by Redback of Jabil; and (b) that any item in
     subsection (a) infringes or violates any patent, copyright or other
     intellectual property right of a third party, and (c) design or product
     liability alleging that any item in subsection (a) has caused or will in
     the future cause damages of any kind. Jabil may employ counsel, at its own
     expense to assist Jabil with respect to any such claims, provided that if
     such counsel is necessary because of a conflict of interest with Redback or
     its counsel or because Redback does not assume control of the defense of a
     claim for which Redback is obligated to indemnify Jabil hereunder, Redback
     shall bear such expense. Redback shall not enter into any settle that
     affects Jabil's rights or interest without Jabil's prior written approval,
     which shall not be unreasonably withheld. Jabil will provide such
     assistance and cooperation as is reasonably requested by Redback or its
     counsel in connection with such indemnified claims.

11.  Confidentiality Obligations. In order to protect both Parties' proprietary
     ---------------------------
     information, intellectual property and technology ("Confidential
     Information") the Parties agree that each Party shall use the same degree
     of care, but no less than a reasonable degree of care, as such Party uses
     with respect to its own similar information to protect the Confidential
     Information of the other Party and to prevent any use of Confidential
     Information other than for the purposes of this Letter Agreement. This
     Section 11 imposes no obligation upon a Party with respect to Confidential
     Information which (a) was known to such Party before receipt from the
     disclosing Party; (b) is or becomes publicly available through no fault of
     the receiving Party; (c) is rightfully received by the receiving Party from
     a third party without a duty of confidentiality; (d) is disclosed by the
     disclosing Party to a third party without imposing a duty of
     confidentiality on the third party; (e) is independently developed by the
     receiving Party without a breach of this Letter Agreement; or (f) is
     disclosed by the receiving Party with the disclosing Party's prior written
     approval. If a Party is required by a government body or court of law to
     disclose Confidential Information, then such Party agrees to give the other
     Party reasonable advance notice so that the other Party may seek a
     protective order or otherwise contest the disclosure.

12.  Term. The term of this Letter Agreement shall begin on the Effective Date
     ----
     and shall end upon final payment to Jabil of all monies due to Jabil under
     this Letter Agreement. Notwithstanding the foregoing 2, 4, 5, 6, 7, 8, 9,
     10, 11, 12, 16, and 17 herein shall survive the expiration or termination
     of this Letter Agreement.

13.  Force Majeure. Neither Party will be liable for any delay in performing or
     -------------
     for failing to perform its obligations under this Letter Agreement (other
     than the payment of money) resulting from any cause beyond its reasonable
     control including, without limitation, acts of God; blackouts; power
     failures; inclement weather; fire; explosions; floods; hurricanes;
     tornadoes; earthquakes; epidemics; strikes; work stoppages; labor,
     component or material shortages; slow-downs; industrial disputes, sabotage;
     accidents; destruction of production facilties; riots or civil
     disturbances; acts of government or governmental agencies, including
     changes in law or regulations that materially and adversely impact the
     Party; provided that the Party affected by such event promptly notifies
     (and in no event more than ten (10) business days of discovery of the
     event) the other Party of the event. If the delays caused by the force
     majeure conditions are not cured within sixty (60) days of the force
     majeure event, then either Party may immediately terminate this Letter
     Agreement. Termination of this Letter Agreement pursuant to this Section 13
     shall not affect Redback's obligation to pay Jabil, as set forth herein.

14.  Partial Invalidity. Whenever possible, each provision of this Letter
     ------------------
     Agreement shall be interpreted in such a way as to be effective and valid
     under applicable law. If a provision is prohibited by or invalid under
     applicable law, it shall be ineffective only to the extent of such
     prohibition or invalidity, without invalidating the remainder of such
     provision or the remaining provisions of this Letter Agreement.

                                         Manufacturing Services Letter Agreement

JBL993

                                     Page 4

                              JABIL CIRCUIT, INC.
   30 Great Oaks Boulevard, San Jose, California 95119 / Phone (408) 361-3200
                                 www.jabil.com

<PAGE>

15.  Notices. All notices, demands and other communications made hereunder shall
     -------
     be in writing and shall be given either by personal delivery, by nationally
     recognized overnight courier (with charges prepaid), by facsimile or EDI
     (with telephone confirmation) addressed to the respective Parties at the
     following addresses:

Notice to Jabil:        Jabil Circuit, Inc.
---------------         30 Great Oaks Boulevard
                        San Jose, CA  95119
                        Facsimile: (408) 361-3300
                        Attn:  Ed Hendricks

with a copy to:         Jabil Circuit, Inc.
--------------          10560 9th Street North
                        St. Petersburg, FL  33716
                        Facsimile: (727) 803-3352
                        Attn:  General Counsel

Notice to Redback:      Redback Networks, Inc.
-----------------       ----------------------
                        1195 Borregas Avenue
                        --------------------
                        Sunnyvale, CA  94089
                        --------------------
                        Facsimile: (408) 541-0339
                        -------------------------
                        Attn:  Marty Di Pietro
                               ---------------

with a copy to:         --------------------------------
--------------          --------------------------------
                        --------------------------------
                        --------------------------------
                        Attn:---------------------------

16.  Dispute Resolution. Any disputes arising under this Letter Agreement shall
     ------------------
     be resolved by binding arbitration conducted the county of Santa Clara,
     California according to the procedures set forth in the American
     Arbitration Code.

                                        Manufacturing Services Letter Agreement

                                     Page 5

<PAGE>

17.  Governing Law and Jurisdiction. This Letter Agreement and the
     ------------------------------
     interpretation of its terms shall be governed by the laws of the State of
     California, without application of conflicts of law principles. The
     provisions of the United Nations Convention on Contracts for the
     International Sale of Goods shall not apply to this Letter Agreement. The
     Parties hereby agree that the United States District Court for the Northern
     District of California or the California State courts serving the county of
     Santa Clara shall have exclusive jurisdiction over any litigation arising
     hereunder.

Please indicate your acceptance of the terms and conditions set forth herein by
executing both copies of this Letter Agreement enclosed and returning to me a
fully executed original.

                                        Very truly yours,

                                        /s/ Ed Hendricks

                                        Ed Hendricks
                                        Business Unit Manager
                                        Jabil Circuit, Inc.

ACCEPTED AND AGREED:

/s/ Marty Di Pietro
-------------------------------
Redback

By:      Marty Di Pietro

Title:   Director of Operations

Date:    9/14/00

                                        Manufacturing Services Letter Agreement

                                     Page 6

<PAGE>

                                   SCHEDULE 1

                   TO MANUFACTURING SERVICES LETTER AGREEMENT

                           BETWEEN JABIL AND REDBACK

                               STATEMENT OF WORK

.. Product description:

.. Specifications:

.. NRE Costs:

.. Components and materials requirements:

.. Test Procedures:

.. Packaging and Shipping Specifications:

.. Suppliers Designated by Redback:

                                        Manufacturing Services Letter Agreement

                                     Page 7

<PAGE>

                                   SCHEDULE 2

                   TO MANUFACTURING SERVICES LETTER AGREEMENT

                           BETWEEN JABIL AND REDBACK

       Rescheduled Delivery, Cancellation of Orders and Letter Agreement
       -----------------------------------------------------------------
                         Termination/Expiration Charges
                         ------------------------------

     Redback may request Jabil to reschedule the delivery date for Product(s)
     and cancel pending orders in accordance with this schedule. The charges to
     Redback for deferring or accelerating delivery of an order (rescheduled),
     cancellation of an order or termination or expiration of this Letter
     Agreement for any reason are outlined below;

<TABLE>
<CAPTION>

Days Prior to                Reschedule                                          Cancellation/Termination/Expiration
-------------                ----------                                          -----------------------------------
Delivery Date                Terms                                               LiabilIty
-------------                -----                                               --------
<S>                          <C>                                                 <C>
0-30 Days                    Redback may not reschedule an order within          Redback may not cancel an order to be delivered
                             30 days of the delivery date without payment        within 30 days of the applicable delivery date
                             in full for the order.                              without payment to Jabil in full for the order.

31-60 Days from original     Redback may reschedule the delivery of up to        Redback will be charged 2.0% of Jabil's incurred
delivery date                40% of an order without additional liability        cost plus applicable margin for any order
                             provided that such rescheduled order is             cancelled more than 30 and up to 60 days from the
                             rescheduled to be delivered within 30 days of       applicable delivery date.
                             the original delivery date.

61-90 days from original     Redback may reschedule delivery of up to            Redback will be charged 2.0% of Jabil's incurred
delivery date                60% of an order without additional liability        cost plus applicable margin for any order
                             provided that such rescheduled order is             cancelled more than 60 and up to 90 days from the
                             rescheduled to be delivered within 90 days of       applicable delivery date.
                             the original delivery date.

90 days and beyond from      Redback may reschedule 100% of an order             Redback will be charged 2.0% of Jabil's incurred
original delivery date       without additional liability provided that such     cost plus applicable margin for any order
                             rescheduled order is rescheduled to be              cancelled more than 90 days prior to the
                             delivered within 180 days of the original           applicable delivery date.
                             delivery date.

</TABLE>

     Redback shall be responsible for all costs of all inventory resulting from
     a reschedule, cancellation, termination or expiration. Where applicable,
     carry costs will be billed on a monthly basis and based on the prime rate
     as announced in The Wall Street Journal as of the date of reschedule (the
                     -----------------------
     prime rate shall be adjusted on the first business day of each calendar
     month thereafter for as long as the rescheduled order is maintained in
     inventory) plus two percent (2%) per annum and shall be applied to the
     inventory applicable to the rescheduled or cancelled order. Reschedules in
     excess of the maximum deferred quantity or period (set forth above) will be
     considered cancellations and subject to applicable cancellation charges.
     Reschedules and cancellations may result in revised product pricing. In
     addition to the costs set forth above, Redback shall also be liable for the
     applicable depreciation (determined in accordance with U.S. generally
     accepted accounting principles) for the period of time any piece of
     equipment is idle as a result of the reschedule, cancellation, termination
     or expiration for up to six months from the date of cancellation,
     termination or expiration.

JBL993                                   Manufacturing Services Letter Agreement

                                     Page 8

                              JABIL CIRCUIT, INC.
   30 Great Oaks Boulevard, San Jose, California 95119 / Phone (408) 361-3200
                                 www.jabil.com

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