Document:

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                                                                    EXHIBIT 10.1

                                                                  EXECUTION COPY

                        FORM OF STOCK OPTION AGREEMENT

     THIS STOCK OPTION AGREEMENT (this "Agreement") is made and entered into as
                                        ---------
of September 18, 2000 by and between Sun Microsystems, Inc., a Delaware
corporation ("Parent"), and Cobalt Networks, Inc., a Delaware corporation (the
              ------
"Company").
--------

                                   RECITALS:

     A.  Parent, Merger Sub (as defined below) and the Company have entered into
an Agreement and Plan of Merger and Reorganization (the "Reorganization
                                                         --------------
Agreement") which provides for the merger (the "Merger") of a wholly-owned
---------                                       ------
subsidiary of Parent ("Merger Sub") with and into the Company, pursuant to which
                       ----------
all outstanding capital stock of the Company will be converted into the right to
receive Common Stock of Parent. Capitalized terms used but not otherwise defined
herein shall have the respective meanings ascribed thereto in the Reorganization
Agreement.

     B.  As a condition to Parent's willingness to enter into the Reorganization
Agreement, Parent has requested that the Company agree, and the Company has so
agreed, to grant to Parent an option to acquire shares of Common Stock, par
value $0.0001 per share, of the Company ("Company Shares"), upon the terms and
                                          --------------
subject to the conditions set forth herein.

                                   AGREEMENT

     NOW, THEREFORE, in consideration of the foregoing premises, the mutual
covenants, promises and representations set forth herein and in the
Reorganization Agreement, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged and accepted, the
parties hereto hereby agree as follows:

     1.  Grant of Option.  On the terms and subject to the conditions set forth
         ---------------
herein, the Company hereby grants to Parent an irrevocable option (the "Option")
                                                                        ------
to acquire up to a number of Company Shares equal to 19.9% of the issued and
outstanding Company Shares as of the first date, if any, upon which an Exercise
Event (as defined in Section 2(a) hereof) shall occur (the "Option Shares"), for
                     ------------                           -------------
a purchase price of $57.63 per share (the "Exercise Price").
                                           --------------

     2.  Exercise of Option.  The Option may be exercised by Parent, in whole or
         ------------------
in part, at any time or from time to time if the Reorganization Agreement is
terminated pursuant to Section 7.1(b), Section 7.1(d) or Section 7.1(e) thereof,
and an event causing the Termination Fee to become payable pursuant to Section
7.3(b) of the Reorganization Agreement occurs (any of such events being referred
to herein as an "Exercise Event").  In the event that Parent shall elect to
                 --------------
exercise the Option pursuant to this Section 2, Parent shall deliver to the
                                     ---------
Company a written notice (each an "Exercise Notice") specifying the total number
                                   ---------------
of Option Shares that Parent wishes to acquire at such time pursuant to the
exercise of the Option.
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     3.  Closing of Option Exercise.
         --------------------------

          (a)  Each closing of a purchase of Option Shares pursuant to the
exercise of the Option (a "Closing") shall occur on a date and at a time, prior
                           -------
to the termination of the Option pursuant to Section 4 hereof, designated by
                                             ---------
Parent in an Exercise Notice delivered to the Company at least two (2) business
days prior to the date of such Closing, which Closing shall be held at the
principal offices of the Company. Subject to the terms of Section 3(b) hereof,
                                                          ------------
at any Closing, the Company shall deliver to Parent a single certificate in
definitive form representing the number of Company Shares designated by Parent
in its Exercise Notice, such certificate to be registered in the name of Parent
and to bear the legend set forth in Section 10 hereof, against payment by Parent
                                    ----------
to the Company of the aggregate purchase price in cash for the Company Shares so
designated and being purchased at such Closing by delivery of a certified check
or bank check, or wire transfer of immediately available funds to an account
designated by the Company in writing.

          (b)  The Company shall not be required to issue Option Shares to
Parent pursuant to the exercise of the Option unless and until all of the
following conditions have been satisfied or fulfilled:

               (i)    all waiting periods under the HSR Act and any foreign laws
which are applicable to the issuance of the Option Shares hereunder shall have
expired or been terminated, and all foreign antitrust approvals applicable to
such issuance shall have been obtained and shall be in full force and effect;

               (ii)   all material consents, approvals, orders or authorizations
of, or registrations, declarations or filings with, any Federal, state or local
administrative agency or commission or other Federal, state or local
governmental authority or instrumentality, if any, required in connection with
the issuance of the Option Shares hereunder will have been obtained or made, as
the case may be; and

               (iii)  no preliminary or permanent injunction or other order by
any court of competent jurisdiction prohibiting or otherwise restraining such
issuance will be in effect, and no statute, rule, regulation, executive order,
decree or other order applicable to the Company which has the effect of making
such issuance unlawful shall be in effect.

It is understood and agreed that at any time during which the Option is
exercisable, the parties will use their respective reasonable best efforts to
satisfy all conditions to Closing, so that a Closing may take place as promptly
as practicable.

     4.   Termination of Option.  The Option shall terminate upon the earlier
          ---------------------
to occur of (i) the Effective Time, (ii) twelve (12) full months following the
date on which the Reorganization Agreement is terminated pursuant to Section
7.1(b) or Section 7.1(d) thereof, if no event causing the Termination Fee to
become payable pursuant to Section 7.3(b)(ii) of the Reorganization Agreement
has occurred during such twelve (12) month period, (iii) twelve (12) full months
following the date on which the Reorganization Agreement is terminated pursuant
to Section 7.1(e) thereof, (iv) in the event the Reorganization Agreement has
been terminated pursuant to Section 7.1(b) or Section 7.1(d) thereof and the
Termination Fee became payable

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pursuant to Section 7.3(b)(ii) thereof, twelve (12) full months following the
payment of the Termination Fee; and (v) the date on which the Reorganization
Agreement is terminated if neither a Triggering Event nor the announcement of an
Acquisition Proposal by a third party occurred on or prior to the date of such
termination; provided, however, that if the Option cannot be exercised by reason
of any applicable governmental order or because the waiting period under the HSR
Act related to the issuance of the Option Shares shall not have expired or been
terminated, then the Option shall not terminate until the tenth (10th) business
day after such impediment to exercise has been removed or has become final and
not subject to appeal.

     5.  Representations, Warranties and Covenants of the Company.  The Company
         --------------------------------------------------------
hereby represents, warrants and covenants to Parent as follows:

          (a)  The Company is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware, and has the corporate
power and authority to enter into this Agreement and to carry out its
obligations hereunder.

          (b)  The execution and delivery of this Agreement by the Company, and
the performance by the Company of its obligations hereunder, have been duly
authorized by all necessary corporate action on the part of the Company, and no
other corporate proceedings on the part of the Company are necessary to
authorize this Agreement or any of the transactions contemplated hereby.

          (c)  This Agreement has been duly executed and delivered by the
Company and constitutes a legal, valid and binding obligation of the Company
and, assuming this Agreement constitutes a legal, valid and binding obligation
of Parent, is enforceable against the Company in accordance with its terms,
except as such legality, validity, binding effect and enforceability may be
limited by bankruptcy, insolvency, reorganization, arrangement, moratorium,
fraudulent transfer and other similar laws affecting the rights of creditors
generally, general principles of equity (whether enforcement is sought in a
proceeding in equity or at law).

          (d)  Except for any filings required under the HSR Act and applicable
foreign laws, the Company has taken all necessary corporate and other action to
authorize and reserve for issuance, and to permit the Company to issue upon
exercise of the Option, and at all times from the date hereof until the
termination of the Option will have reserved for issuance, a sufficient number
of unissued Company Shares to enable Parent to exercise the Option in full, and
shall take all necessary corporate or other action to authorize and reserve for
issuance all additional Company Shares or other securities which may be issuable
pursuant to Section 9(a) hereof upon exercise of the Option, all of which, upon
            ------------
their issuance and delivery in accordance with the terms of this Agreement, will
be duly authorized and validly issued, fully paid and nonassessable.

          (e)  Upon delivery of the Company Shares and any other securities to
Parent upon exercise of the Option, Parent will acquire such Company Shares or
other securities free and clear of all claims, liens, charges, encumbrances and
security interests of any kind or nature whatsoever, excluding those imposed by
or in respect of Parent.

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          (f)  The execution and delivery of this Agreement by the Company do
not, and the performance by the Company of its obligations hereunder will not,
(i) conflict with or violate the Certificate of Incorporation or Bylaws or
equivalent organizational documents of the Company or any of its subsidiaries,
(ii) conflict with or violate any law, rule, regulation, order, judgment or
decree applicable to the Company or any of its subsidiaries or by which its or
any of their respective properties is bound or affected, or (iii) result in any
breach of, or constitute a default (or an event that with notice or lapse of
time or both would become a default) under, or impair the Company's or any of
its subsidiaries' rights or alter the rights or obligations of any third party
under, or give to others any rights of termination, amendment, acceleration or
cancellation of, or result in the creation of a lien or encumbrance on any of
the properties or assets of the Company or any of its subsidiaries pursuant to,
any material note, bond, mortgage, indenture, contract, agreement, lease,
license, permit, franchise or other instrument or obligation to which the
Company or any of its subsidiaries is a party or by which the Company or any of
its subsidiaries or its or any of their respective properties are bound or
affected.

          (g)  The execution and delivery of this Agreement by the Company does
not, and the performance by the Company of its obligations hereunder will not,
require any consent, approval, authorization or permit of, or filing with, or
notification to, any Governmental Entity except pursuant to the HSR Act and any
applicable foreign antitrust laws.

     6.   Parent "Put" Rights.
          -------------------

          (a)  Right to "Put" Option Shares.  At the request of and upon notice
               ----------------------------
by Parent to the Company (the "Put Notice"), at any time prior to the
                               ----------
termination of the Option pursuant to Section 4 hereof (the "Purchase Period"),
                                      ---------              ---------------
the Company (or any successor entity thereof) shall purchase the Option from
Parent, to the extent not previously exercised, at the purchase price set forth
in Section 6(a)(i) hereof (subject to and as limited by Section 6(a)(iii)
   ---------------                                      -----------------
hereof), and the Option Shares, if any, previously acquired by Parent pursuant
to the exercise of the Option, at the price set forth in Section 6(a)(ii) hereof
                                                         ----------------
(subject to and as limited by Section 6(a)(iii) hereof):
                              -----------------

               (i)    The product obtained by multiplying (x) the difference
between (A) the Market/Tender Offer Price (as defined below) for the Company
Shares as of the date Parent delivers a Put Notice, and (B) the Exercise Price,
by (y) the aggregate number of Company Shares that may then be purchased
pursuant to the exercise of the Option, but only if the Market/Tender Offer
Price is greater than the Exercise Price. For all purposes of and under this
Agreement, the term "Market/Tender Offer Price" shall mean the higher of (A) the
                     -------------------------
highest price per share offered as of such date pursuant to any Acquisition
Proposal which was made prior to such date, and (B) the highest closing sale
price of Company Shares then on the Nasdaq National Market during the twenty
(20) consecutive trading days ending on the trading day immediately preceding
such date. For purposes of determining the highest price offered pursuant to any
Acquisition Proposal which involves consideration other than cash, the value of
such consideration shall be equal to the higher of (A) if securities of the same
class of the proponent of such consideration are traded on any national
securities exchange or by any registered securities association, a value based
on the final closing sale price during regular trading hours or the median
between the final bid and asked prices at the close of regular trading hours for
such securities on their principal trading market on such date, and (B) the
value ascribed to such

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consideration by the proponent of such Acquisition Proposal, or if no such value
     is ascribed, a value determined in good faith by the Board of Directors of
     the Company.

               (ii)   The product obtained by multiplying (x) the sum of (A) the
Exercise Price paid by Parent for Company Shares previously acquired pursuant to
the exercise of the Option, and (B) the difference between (1) the Market/Tender
Offer Price, and (2) such Exercise Price (but only if the Market/Tender Offer
Price is greater than the Exercise Price), by (y) the number of Company Shares
so purchased.

               (iii)  Notwithstanding anything to the contrary set forth in this
Section 6(a), the Company shall not be required to pay Parent, pursuant to the
------------
exercise by Parent of its rights under this Section 6, any amounts in excess of
                                            ---------
(x) $79,000,000, plus (y) the Exercise Price paid by Parent for Company Shares
previously acquired pursuant to the exercise of the Option, minus (z) any
amounts paid to Parent by the Company pursuant to Section 7.3(b) of the
Reorganization Agreement.

          (b)  Payment and Redelivery of Option or Option Shares.  In the event
               -------------------------------------------------
that Parent exercises its rights under Section 6(a) hereof, the Company shall,
                                       ------------
within five (5) business days after Parent delivers a Put Notice to the Company
pursuant to Section 6(a) hereof, pay to Parent the required amount in cash by
            ------------
wire transfer of immediately available funds to an account designated by Parent
in writing, and Parent shall surrender to the Company the Option and the
certificates evidencing the Company Shares previously purchased by Parent
pursuant to the exercise of the Option.

     7.   Registration Rights of Parent.
          -----------------------------

          (a)  Following the termination of the Reorganization Agreement, Parent
may by written notice to the Company (a "Registration Notice") request the
                                         -------------------
Company to register under the Securities Act all or any part of the shares
acquired by Parent pursuant to this Agreement (such shares requested to be
registered being referred to in this Section 7 as "Registrable Securities") in
                                     ---------     ----------------------
order to permit the sale or other disposition of any or all shares of the
Registrable Securities that have been acquired by or are issuable to Parent upon
exercise of the Option in accordance with the intended method of sale or other
disposition stated by Parent, including a "shelf" registration statement under
Rule 415 under the Securities Act (or any successor provision thereto). Parent
shall cause, and shall cause any underwriters of any sale or other disposition
to cause, any sale or other disposition pursuant to such registration statement
to be effected on a widely distributed basis so that, upon consummation thereof,
no purchaser or transferee will own beneficially more than five percent (5%) of
the then-outstanding voting power of the Company. Upon a request by Parent for
registration of Registrable Securities pursuant to the delivery to the Company
of a Registration Notice, the Company shall have the option, exercisable by
written notice to Parent within ten (10) business days after the receipt of such
Registration Notice, to irrevocably agree to purchase all or any part of the
Registrable Securities for cash at a purchase price (the "Option Price") equal
                                                          ------------
to the product obtained by multiplying (x) the number of Registrable Securities
so purchased, by (y) the per share average of the closing sale prices of the
Company's Common Stock on the Nasdaq National Market for the ten (10)
consecutive trading days immediately preceding the date of the Registration
Notice. Any such purchase of Registrable Securities by the Company hereunder
shall take place at a

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closing to be held at the principle executive offices of the Company or its
counsel at any reasonable date and time designated by the Company in such notice
within ten (10) business days after delivery of such notice. The payment of the
Option Price for the shares to be so purchased shall be made at the time of such
closing by wire transfer in immediately available funds to an account designated
by Parent in writing.

          (b)  If the Company shall not elect to exercise its option to purchase
Registrable Securities pursuant to Section 7(a) hereof with respect to all
                                   ------------
Registrable Securities, the Company shall use commercially reasonable efforts to
effect, as promptly as practicable, the registration under the Securities Act of
the unpurchased Registrable Securities requested to be registered in the
Registration Notice and to keep such registration statement effective for such
period (not in excess of one hundred and twenty (120) calendar days from the day
such registration statement first becomes effective) as may be reasonably
necessary to effect such sale or other disposition; provided, however, that
Parent shall not be entitled to more than an aggregate of three (3) effective
registration statements hereunder. The obligations of the Company to file a
registration statement and to maintain its effectiveness pursuant hereto may be
suspended for up to one hundred and twenty (120) calendar days in the aggregate
if the Board of Directors of the Company shall have determined that the filing
of such registration statement or the maintenance of its effectiveness would
require premature disclosure of material nonpublic information that would
materially and adversely affect the Company or otherwise interfere with or
adversely affect any pending or proposed offering of securities of the Company
or any other material transaction involving the Company. If consummation of the
sale of any Registrable Securities pursuant to a registration hereunder shall
not occur within one hundred and twenty (120) calendar days after the filing
with the SEC of the initial registration statement therefor, the provisions of
this Section 7 shall again be applicable to any proposed registration. The
     ---------
Company shall use commercially reasonable efforts to cause any Registrable
Securities registered pursuant to this Section 7 to be qualified for sale under
                                       ---------
the securities or "blue sky" laws of such jurisdictions as Parent may reasonably
request and to continue such registration or qualification in effect in such
jurisdictions; provided, however, that the Company shall not be required to
qualify to do business in, or to consent to general service of process in, any
jurisdiction by reason of this provision. If the Company shall effect a
registration under the Securities Act of Company Common Stock for its own
account or for any other stockholders of the Company (other than on Form S-4 or
Form S-8, or any successor form thereto), the Company shall allow Parent the
right to participate in such registration by selling its Registrable Securities,
and such participation will not affect the obligation of the Company to effect
the registration of Registrable Securities for Parent pursuant to this Section
                                                                       -------
7; provided however, that, if the managing underwriters of such offering advise
-
the Company in writing that in their opinion the number of shares of Company
Common Stock requested to be included in such registration exceeds the number
which can be sold in such offering, the Company shall include the shares
requested to be included therein by Parent pro rata with the shares intended to
be included therein by the Company.

          (c)  In connection with the registration of any Registrable Securities
pursuant to this Section 7, Parent shall provide the Company with such
                 ---------
information with respect to Parent's Registrable Securities, the plan for
distribution thereof, and such other information with respect to Parent as, in
the reasonable judgment of counsel for the Company, is necessary to enable the
Company to include in a registration statement all facts regarding Parent and
its

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<PAGE>

Registrable Securities required to be disclosed with respect to a registration
of Registrable Securities thereunder.

          (d)  The Company shall pay all fees and expenses incurred in
connection with the registration of Registrable Securities pursuant to this
Section 7, except for underwriting discounts and commissions and the fees and
---------
expenses of counsel to Parent, and the Company shall provide to the underwriters
all such documentation (including certificates, opinions of counsel and
"comfort" letters from auditors) as is customary in connection with underwritten
public offerings and as such underwriters may reasonably require. In connection
with any registration of Registrable Securities pursuant to this Section 7,
                                                                 ---------
Parent and the Company agree to enter into an underwriting agreement reasonably
acceptable to each such party, in form and substance customary for transactions
of this type, with the underwriters participating in such offering.

          (e)  Indemnification.
               ---------------

               (i)  The Company shall indemnify Parent, each of its directors
and officers and each person who controls Parent within the meaning of Section
15 of the Securities Act, and each underwriter of the Company's securities, with
respect to any registration, qualification or compliance which has been effected
pursuant to this Agreement, against all expenses, claims, losses, damages or
liabilities (or actions in respect thereof), including any of the foregoing
incurred in settlement of any litigation, commenced or threatened, arising out
of or based on any untrue statement (or alleged untrue statement) of a material
fact contained in any registration statement, prospectus, offering circular or
other document, or any amendment or supplement thereto, incident to any such
registration, qualification or compliance, or based on any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances in which
they were made, not misleading, or any violation by the Company of any rule or
regulation promulgated under the Securities Act applicable to the Company in
connection with any such registration, qualification or compliance, and the
Company shall reimburse Parent, and each of its directors and officers and each
person who controls Parent within the meaning of Section 15 of the Securities
Act, and each underwriter, for any legal and any other expenses reasonably
incurred in connection with investigating, preparing or defending any such
claim, loss, damage, liability or action; provided, however, that the Company
shall not be liable in any such case under this Section 7(e)(i) to the extent
                                                ---------------
that any such claim, loss, damage, liability or expense arises out of or is
based on any untrue statement or omission, or alleged untrue statement or
omission, made in reliance upon and in conformity with written information
furnished to the Company by Parent, or director, officer or controlling person
of Parent, or any underwriter seeking indemnification from the Company pursuant
to this Section 7(e)(i).
        ---------------

               (ii)   Parent shall indemnify the Company, each of its directors
and officers and each underwriter of the Company's securities covered by such
registration statement and each person who controls the Company within the
meaning of Section 15 of the Securities Act, against all expenses, claims,
losses, damages and liabilities (or actions in respect thereof), including any
of the foregoing incurred in settlement of any litigation, commenced or
threatened, arising out of or based on any untrue statement (or alleged untrue
statement) of a material fact contained in any such registration statement,
prospectus, offering circular or other document, or

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<PAGE>

any amendment or supplement thereto, incident to any such registration,
qualification or compliance, or based on any omission (or alleged omission) to
state therein a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances in which they were made,
not misleading, or any violation by Parent of any rule or regulation promulgated
under the Securities Act applicable to Parent in connection with any such
registration, qualification or compliance, and Parent shall reimburse the
Company, and each of the Company's directors, officers, control persons and
underwriters for any legal or any other expenses reasonably incurred in
connection with investigating, preparing or defending any such claim, loss,
damage, liability or action, in each case to the extent, but only to the extent,
that such untrue statement (or alleged untrue statement) or omission (or alleged
omission) is made in such registration statement, prospectus, offering circular
or other document in reliance upon and in conformity with written information
furnished to the Company by Parent for use therein; provided, however, that in
no event will any liability for indemnification under this Section 7(e)(ii)
                                                           ----------------
exceed the net proceeds of the registered offering received by Parent.

               (iii)  Each party entitled to indemnification under this Section
                                                                        -------
7(e) (the "Indemnified Party") shall give written notice to the party required
----       -----------------
to provide indemnification under this Section 7(e) (the "Indemnifying Party")
                                      ------------       ------------------
promptly after such Indemnified Party has obtained actual knowledge of any claim
as to which indemnity may be sought under this Section 7(e), and shall permit
                                               ------------
the Indemnifying Party to assume the defense of any such claim or any litigation
resulting therefrom; provided, however, that counsel for the Indemnifying Party,
who shall conduct the defense of such claim or litigation, shall be approved by
the Indemnified Party (whose approval shall not unreasonably be withheld or
delayed), and the Indemnified Party may participate in such defense at such
party's expense; provided, however, that the Indemnifying Party shall pay such
expense if representation of the Indemnified Party by counsel retained by the
Indemnifying Party would be inappropriate due to actual or potential differing
interests between the Indemnified Party and any other party represented by such
counsel in such proceeding; and provided further, however, that the failure of
any Indemnified Party to give prompt notice as provided herein shall not relieve
the Indemnifying Party of its obligations under this Section 7(e) unless the
                                                     ------------
failure to give such notice is materially prejudicial to an Indemnifying Party's
ability to defend such action. No Indemnifying Party, in the defense of any such
claim or litigation shall, except with the consent of each Indemnified Party,
consent to entry of any judgment or enter into any settlement which does not
include as an unconditional term thereof the giving by the claimant(s) or
plaintiff(s) to such Indemnified Party of a release from all liability in
respect to such claim or litigation. No Indemnifying Party shall be required to
indemnify any Indemnified Party with respect to any settlement entered into
without such Indemnifying Party's prior consent (which will not be unreasonably
withheld or delayed).

     8.  Profit Limitation.
         -----------------

          (a)  Notwithstanding any other provision in this Agreement or the
Reorganization Agreement, in no event shall Parent's Total Profit (as defined
below) exceed $79,000,000 (the "Maximum Profit") and, if Parent's Total Profit
                                --------------
otherwise would exceed the Maximum Profit, Parent, at its sole discretion, shall
either (i) reduce the number of Option Shares subject to the Option, (ii)
deliver to the Company for cancellation Option Shares (or other securities into
which such Option Shares are converted or exchanged) previously purchased by
Parent, (iii) pay cash to the Company or (iv) any combination of the foregoing,
so that Parent's

                                      -8-
<PAGE>

actually realized Total Profit shall not exceed the Maximum Profit after taking
into account the foregoing actions; provided, however, that to the extent the
                                    -----------------
payment by the Company of cash to Parent in satisfaction of the Termination Fee
pursuant to Section 7.3 of the Reorganization Agreement would cause Parent's
Total Profit to exceed the Maximum Profit, then the Company need not pay such
cash portion of the Termination Fee.

          (b)  For purposes of this Agreement, "Total Profit" shall mean: (i)
                                                ------------
the aggregate amount (before taxes) of (A) any excess of (x) the net cash
amounts or fair market value of any property received by Parent pursuant to a
sale of Option Shares over (y) the Parent's aggregate purchase price for such
Option Shares (or other securities), plus (B) any amounts received by Parent
pursuant on the repurchase of the Option by the Company pursuant to Section 6,
plus (C) any termination fee paid in cash by the Company and received by Parent
pursuant to the Reorganization Agreement, minus (ii) the amounts of any cash
previously paid by Parent to the Company pursuant to this Section 8 plus the
value of the Option Shares previously delivered by Parent to the Company for
cancellation pursuant to this Section 8.

          (c)  For purposes of Section 8(a) and clause (ii) of Section 8(b), the
value of any Option Shares delivered by Parent to the Company shall be the
Market/Tender Offer Price of such Option Shares.

     9.   Adjustment Upon Changes in Capitalization; Stockholder Rights Plans.
          -------------------------------------------------------------------

          (a)  In the event of any change in the Company Shares by reason of
stock dividends, stock splits, reverse stock splits, mergers (other than the
Merger), recapitalizations, combinations, exchanges of shares and the like, the
type and number of shares or securities subject to the Option and the Exercise
Price shall be adjusted appropriately, and proper provision shall be made in the
agreements governing such transaction, so that Parent will receive, upon
exercise of the Option, the number and class of shares or other securities or
property that Parent would have received in respect of the Company Shares if the
Option had been exercised immediately prior to such event or the record date
therefor, as applicable.

          (b)  At any time prior to the termination of the Option pursuant to
Section 4 hereof, and at any time after the Option is exercised (in whole or in
---------
part, if at all), the Company shall not adopt (nor permit the adoption of) a
stockholders rights plan that contains provisions for the distribution or
exercise of rights thereunder as a result of Parent or any affiliate or
transferee thereof becoming the beneficial owner of shares of the Company by
virtue of the Option being exercisable or having been exercised (or as a result
of beneficially owning shares issuable in respect of any Option Shares).

     10.  Restrictive Legends.  Each certificate representing Option Shares
          -------------------
issued to Parent hereunder shall include a legend in substantially the following
form:

     THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
     REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY
     BE REOFFERED OR SOLD ONLY IF SO REGISTERED OR IF AN EXEMPTION
     FROM SUCH REGISTRATION IS AVAILABLE. SUCH SECURITIES ARE ALSO
     SUBJECT TO ADDITIONAL

                                      -9-
<PAGE>

     RESTRICTIONS ON TRANSFER AS SET FORTH IN THE STOCK OPTION
     AGREEMENT DATED AS OF SEPTEMBER 18, 2000, A COPY OF WHICH MAY BE
     OBTAINED FROM THE ISSUER.

It is understood and agreed that (i) the reference to restrictions arising under
the Securities Act in the above legend shall be removed by delivery of
substitute certificate(s) without such reference if such Option Shares have been
registered pursuant to the Securities Act, such Option Shares have been sold in
reliance on and in accordance with Rule 144 under the Securities Act or Parent
has delivered to Company a copy of a letter from the staff of the SEC, or an
opinion of counsel in form and substance reasonably satisfactory to the Company
and its counsel, to the effect that such legend is not required for purposes of
the Securities Act, and (ii) the reference to restrictions pursuant to this
Agreement in the above legend will be removed by delivery of substitute
certificate(s) without such reference if the Option Shares evidenced by
certificate(s) containing such reference have been sold or transferred in
compliance with the terms and provisions of this Agreement under circumstances
that do not require the retention of such reference.

     11.  Listing and HSR Filing.  The Company, upon the request of Parent,
          ----------------------
shall promptly file an application to list the Company Shares to be acquired
upon exercise of the Option for quotation on the Nasdaq National Market and
shall use its commercially reasonable best efforts to obtain approval of such
listing as soon as practicable. Promptly after the date hereof, each of the
parties hereto shall promptly file with the Federal Trade Commission and the
Antitrust Division of the United States Department of Justice all required
premerger notification and report forms and other documents and exhibits
required to be filed under the HSR Act to permit the acquisition of the Company
Shares subject to the Option at the earliest possible date.

     12.  Miscellaneous.
          -------------

          (a)  Binding Effect.  This Agreement shall be binding upon and inure
               --------------
to the benefit of the parties hereto and their respective successors and
permitted assigns. Nothing contained in this Agreement, express or implied, is
intended to confer upon any person other than the parties hereto and their
respective successors and permitted assigns any rights or remedies of any nature
whatsoever by reason of this Agreement. Any Company Shares sold in compliance
with the provisions of Section 7 hereof shall, upon consummation of such sale,
                       ---------
be free of the restrictions imposed with respect to such shares by this
Agreement and any transferee of such shares shall not be entitled to the rights
of a party hereto. Certificates representing shares sold in a registered public
offering pursuant to Section 7 hereof shall not be required to bear the legend
                     ---------
set forth in Section 10 hereof.
             ----------

          (b)  Specific Performance.  The parties hereto recognize and agree
               --------------------
that if for any reason any of the terms and provisions of this Agreement are not
performed in accordance with their specific terms or are otherwise breached,
immediate and irreparable harm or injury would be caused for which money damages
would not be an adequate remedy. Accordingly, each party hereto agrees that, in
addition to other remedies, the other party hereto shall be entitled to an
injunction restraining any violation or threatened violation of the terms and
provisions of this Agreement or the right to enforce any of the covenants or
agreements set forth herein by specific performance. In the event that any
action will be brought in equity to enforce

                                      -10-
<PAGE>

the terms and provisions of the Agreement, neither party hereto will allege, and
each party hereto hereby waives the defense, that there is an adequate remedy at
law.

          (c)  Entire Agreement.  This Agreement and the Reorganization
               ----------------
Agreement set forth the entire agreement and understanding of the Company and
Parent with respect to the subject matter hereof, and supersede all other prior
discussions, agreements and understandings between the Company and Parent, both
written and oral, with respect to the subject matter hereof and thereof.

          (d)  Further Assurances.  Each party hereto will execute and deliver
               ------------------
all such further documents and instruments and take all such further action as
may be necessary in order to consummate the transactions contemplated hereby.

          (e)  Validity.  The invalidity or unenforceability of any provision of
               --------
this Agreement will not affect the validity or enforceability of the other
provisions of this Agreement, which will remain in full force and effect. In the
event any Governmental Entity of competent jurisdiction holds any provision of
this Agreement to be null, void or unenforceable, the parties hereto will
negotiate in good faith and will execute and deliver an amendment to this
Agreement in order, as nearly as possible, to effectuate, to the extent
permitted by law, the intent of the parties hereto with respect to such
provision.

          (f)  Notices.  All notices and other communications hereunder will be
               -------
in writing and will be deemed given if delivered personally or by commercial
delivery service, or sent via telecopy (receipt confirmed) to the parties at the
following addresses or telecopy numbers (or at such other address or telecopy
numbers for a party as will be specified by like notice):

          If to Parent, to:

               Sun Microsystems, Inc.
               901 San Antonio Road
               Palo Alto, CA 94303
               Attention:  General Counsel
               Telephone No.:  (650) 960-1300
               Telecopy No.:  (650) 336-0530

          with a copy to:

               Wilson Sonsini Goodrich & Rosati
               Professional Corporation
               650 Page Mill Road
               Palo Alto, California 94304-1050
               Attention: Larry W. Sonsini, Esq.
                          Katharine A. Martin, Esq.
               Telephone: (650) 493-9300
               Telecopy: (650) 493-6811

                                      -11-
<PAGE>

          and to:

               Wilson Sonsini Goodrich & Rosati
               Professional Corporation
               One Market, Spear Street Tower
               Suite 3300
               San Francisco, California  94105
               Attention:  Michael S. Dorf, Esq.
               Telephone:  (415) 947-2000
               Telecopy:  (415) 947-2099

          If to the Company, to:

               Cobalt Networks, Inc.
               555 Ellis Street
               Mountain View, CA 94043
               Attention:  President
               Telephone No.: (650) 623-2500
               Telecopy No.:  (650) 623-2546

          with a copy to:

               Brobeck, Phleger & Harrison LLP
               Two Embarcadero Place
               2200 Geng Road
               Palo Alto, California 94303
               Attention:  Rod J. Howard, Esq.
                           John Montgomery, Esq.
               Telephone No.: (650) 424-0160
               Telecopy No.: (650) 496-2885

          (g)  Governing Law.  This Agreement will be governed by and construed
               -------------
in accordance with the laws of the State of Delaware applicable to agreements
made and to be performed entirely within such State.(h) Expenses. Except as
                                                        --------
otherwise expressly provided herein or in the Reorganization Agreement, all
costs and expenses incurred in connection with the transactions contemplated by
this Agreement will be paid by the party incurring such expenses.

          (h)  Amendments; Waiver.  This Agreement may be amended by the parties
               ------------------
hereto and the terms and conditions hereof may be waived only by an instrument
in writing signed on behalf of each of the parties hereto, or, in the case of a
waiver, by an instrument signed on behalf of the party waiving compliance.

          (i)  Assignment.  Neither of the parties hereto may sell, transfer,
               ----------
assign or otherwise dispose of any of its rights or obligations under this
Agreement or the Option created hereunder to any other person, without the
express written consent of the other party, except that

                                      -12-
<PAGE>

the rights and obligations hereunder will inure to the benefit of and be binding
upon any successor of a party hereto.

          (j)  Counterparts.  This Agreement may be executed in several
               ------------
counterparts, each of which shall be deemed an original, and all of which
together shall constitute one and the same instrument.

                 [Remainder of Page Intentionally Left Blank]

                                      -13-
<PAGE>

     IN WITNESS WHEREOF, the undersigned have caused this Agreement to be
executed by their respective thereunto duly authorized officers as of the date
first written above.

                                    SUN MICROSYSTEMS, INC.

                                    By: /s/ JONATHAN SCHWARTZ
                                       -------------------------------------

                                    Name: __________________________________

                                    Title: _________________________________

                                    COBALT NETWORKS, INC.

                                    By: /s/ STEPHEN W. DEWITT
                                       -------------------------------------

                                    Name: Stephen W. Dewitt
                                          __________________________________

                                    Title: President and CEO
                                           _________________________________

                  * * * * * STOCK OPTION AGREEMENT * * * * *

                                      -14-<PAGE>

                                                                    EXHIBIT 10.6

                                    WARRANT

                                                               WARRANT NO.   2
                                                                           -----

               THIS WARRANT OR THE SHARES ISSUABLE HEREUNDER HAVE NOT
          BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
          AMENDED. THIS WARRANT, OR THE SHARES ISSUABLE HEREUNDER, MAY
          NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE
          REGISTRATION STATEMENT UNDER SAID ACT OR THE AVAILABILITY OF
          AN EXEMPTION FROM REGISTRATION THEREUNDER.

                            EXTREME NETWORKS, INC.

                       WARRANT TO PURCHASE COMMON STOCK
                           Void after April 3, 2002

          This certifies that, for value received, 3Com Corporation or
registered assigns ("Holder") is entitled, subject to the terms set forth below,
to purchase from Extreme Networks, Inc. (the "Company"), a Delaware corporation,
1,500,000 shares (such number of shares being referred to herein as the
"Original Amount") of the Common Stock of the Company (the "Common Stock"), as
constituted on the date hereof (the "Warrant Issue Date"), upon surrender
hereof, at the principal office of the Company referred to below, with the
notice of exercise form attached hereto duly executed, and simultaneous payment
therefor in lawful money of the United States or otherwise as hereinafter
provided, at the Exercise Price as set forth in Section 2 below. The Original
Amount, character and Exercise Price of such shares of Common Stock are subject
to adjustment as provided below. The term "Warrant" as used herein shall include
this Warrant, and any warrants delivered in substitution or exchange therefor as
provided herein.

          1.   Term of Warrant.
               ---------------

               (a)  Subject to the terms and conditions set forth herein and
compliance with any applicable regulatory requirements, this Warrant shall be
exercisable, in whole or in part, at any time during the term commencing on
April 3, 2000 and ending at 5:00 p.m., Pacific standard time, on April 3, 2002
(the "Expiration Date"), and, except as otherwise provided herein, shall be void
thereafter. This Warrant shall expire earlier upon the closing of an event in
which more than fifty percent (50%) of the Company's assets or capital stock is
acquired by or merged into another corporation that is not under direct or
indirect control of the persons who are the shareholders of the Company
immediately prior to such acquisition or merger, provided that Holder is given
at least 20 days prior written notice of such acquisition or merger in which to
exercise this Warrant in advance of its expiration.

               (b)  In the event that the Expiration Date of this Warrant
falls on a day which is not a Business Day, the Expiration Date shall be
adjusted to the Business Day immediately following such Expiration Date. As used
herein, the term "Business Day" means each day other
<PAGE>

than a Saturday, Sunday or other day on which banks in the location of the
principal office of the Company are legally authorized to close.

     2.   Exercise Price. The Exercise Price at which this Warrant may be
          --------------
exercised shall be $79.00 per share of Common Stock, as adjusted from time to
time pursuant to Section 11 hereof (the "Exercise Price").

     3.   Exercise of Warrant.
          -------------------

          (a)  The purchase rights represented by this Warrant are exercisable
by the Holder in whole or in part subject to compliance with applicable
regulatory requirements, at any time and from time to time, during the term
hereof as described in Section 1 above, by the surrender of this Warrant and the
Notice of Exercise annexed hereto duly completed and executed on behalf of the
Holder, at the office of the Company (or such other office or agency of the
Company as it may designate by notice in writing to the Holder at the address of
the Holder appearing on the books of the Company), upon payment (i) in cash or
by check acceptable to the Company, (ii) by cancellation by the Holder of
indebtedness of the Company to the Holder, or (iii) by a combination of (i) and
(ii), of an amount equal to the then applicable Exercise Price per share
multiplied by the number of shares then being purchased. For so long as the
Company remains a publicly listed company, the Holder may pay the Exercise Price
of the Warrant (i) by surrendering to the Company shares of the Company's Common
Stock having a value equal to the Exercise Price of the Warrant being exercised
or (ii) by directing the Company to apply toward payment of the Exercise Price
from the number of shares of the Common Stock for which the Warrant is being
exercised, shares of the Common Stock having a value equal to the Exercise Price
of the Warrant being exercised. For purposes of this Section 3, the value of
each share of Common Stock shall be the average of the daily closing prices of
the Common Stock for the five consecutive Trading Days ending on the Trading Day
preceding the date of such exercise. As used herein the term "Trading Days" with
respect to Common Stock means (i) if the Common Stock is quoted on the NASDAQ
Stock Markets, Inc. any similar system of automated dissemination of quotations
of securities prices, days on which trades may be made on such system or (ii) if
the Common Stock is listed or admitted for trading on any national securities
exchange, days on which such national securities exchange is open for business.

          (b)  This Warrant shall be deemed to have been exercised immediately
prior to the close of business on the date of its surrender for exercise as
provided above, and the person entitled to receive the shares of Common Stock
issuable upon such exercise shall be treated for all purposes as the holder of
record of such shares as of the close of business on such date. As promptly as
practicable on or after such date and in any event within ten (10) days
thereafter, the Company, at its expense, shall issue and deliver to the person
or persons entitled to receive the same a certificate or certificates for the
number of shares issuable upon such exercise. In the event that this Warrant is
exercised in part, the Company, at its expense, will execute and deliver a new
Warrant of like tenor exercisable for the number of shares for which this
Warrant may then be exercised.

                                      -2-
<PAGE>

     4.   Fractional Shares. No fractional shares will be issued in connection
          -----------------
with any exercise of this Warrant, and the number of shares to which the Holder
is entitled upon exercise of this Warrant shall be rounded down to the nearest
whole number.

     5.   Replacement of Warrant. On receipt of evidence reasonably
          ----------------------
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of loss, theft or destruction, on delivery of an
indemnity agreement reasonably satisfactory in form and substance to the Company
or, in the case of mutilation, on surrender and cancellation of this Warrant,
the Company at its expense shall execute and deliver, in lieu of this Warrant, a
new warrant of like tenor and amount.

     6.   No Rights as Stockholder. Subject to Sections 9 and 11 of this
          ------------------------
Warrant, the Holder shall not be entitled to vote or receive dividends pursuant
to this Warrant or be deemed the holder of Common Stock pursuant to this
Warrant, nor shall anything contained herein be construed to confer upon the
Holder, as such, any of the rights of a stockholder of the Company or any right
to vote for the election of directors or upon any matter submitted to
stockholders at any meeting thereof, or to give or withhold consent to any
corporate action (whether upon any recapitalization, issuance of stock,
reclassification of stock, change of par value, or change of stock to no par
value, consolidation, merger, conveyance, or otherwise) or to receive notice of
meetings, or to receive dividends or subscription rights or otherwise until the
Warrant shall have been exercised as provided herein.

     7.   Transfer of Warrant. As this warrant is issued in furtherance of the
          -------------------
relationship between the Company and the initial Holder, this warrant may not be
transferred without the written approval of the Company, which consent may be
withheld for any reason.

          (a)  The Company will maintain a register (the "Warrant Register")
containing the names and addresses of the Holder or Holders. Any Holder of this
Warrant or any portion thereof may change his address as shown on the Warrant
Register by written notice to the Company requesting such change. Any notice or
written communication required or permitted to be given to the Holder may be
delivered or given by mail to such Holder as shown on the Warrant Register and
at the address shown on the Warrant Register. Until this Warrant is transferred
on the Warrant Register of the Company, the Company may treat the Holder as
shown on the Warrant Register as the absolute owner of this Warrant for all
purposes, notwithstanding any notice to the contrary.

          (b)  The Company may, by written notice to the Holder, appoint an
agent for the purpose of maintaining the Warrant Register referred to in Section
7(a) above, issuing the Common Stock or other securities then issuable upon the
exercise of this Warrant, exchanging this Warrant, replacing this Warrant, or
any or all of the foregoing. Thereafter, any such registration, issuance,
exchange, or replacement, as the case may be, shall be made at the office of
such agent.

          (c)  This Warrant may not be transferred or assigned in whole or in
part without compliance with applicable federal and state securities laws by the
transferor and the transferee. Subject to the provisions of this Warrant with
respect to compliance with the Securities Act of 1933, as amended (the "Act"),
title to this Warrant may be transferred by

                                      -3-
<PAGE>

endorsement (by the Holder executing the Assignment Form annexed hereto) and
delivery in the same manner as a negotiable instrument transferable by
endorsement and delivery.

          (d)  On surrender of this Warrant for exchange, properly endorsed on
the Assignment Form and subject to the provisions of this Warrant with respect
to compliance with the Act and with the limitations on assignments and transfers
contained in this Section 7, the Company at its expense shall issue to or on the
order of the Holder a new warrant or warrants of like tenor, in the name of the
Holder or as the Holder (on payment by the Holder of any applicable transfer
taxes) may direct, for the number of shares issuable upon exercise hereof.

          (e)  The Holder of this Warrant, by acceptance hereof, acknowledges
that the Holder will not offer, sell or otherwise dispose of this Warrant or any
shares of Common Stock to be issued upon exercise hereof except in compliance
with the registration requirements of the Act, subject, nevertheless, to the
disposition of the Holder's property being at all times within its control.

          (f)  This Warrant and all shares of Common Stock issued upon exercise
hereof (unless registered under the Act) shall be stamped or imprinted with a
legend in substantially the following form:

          THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
          UNDER THE SECURITIES ACT OF 1933, AS AMENDED. SUCH
          SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF
          AN EFFECTIVE REGISTRATION STATEMENT UNDER SAID ACT OR THE
          AVAILABILITY OF AN EXEMPTION FROM REGISTRATION THEREUNDER.

     8.   Reservation of Stock; Stock Fully Paid. The Company covenants that
          --------------------------------------
during the term this Warrant is exercisable, the Company will reserve from its
authorized and unissued Common Stock a sufficient number of shares to provide
for the issuance of Common Stock upon the exercise of this Warrant and, from
time to time, will take all steps necessary to amend its Certificates of
Incorporation (the "Certificates") to provide sufficient reserves of shares of
Common Stock issuable upon exercise of the Warrant and will refrain from
effecting any amendment to the Certificates which in any manner would affect the
rights or privileges of the holders of its Common Stock. The Company further
covenants that all shares that may be issued upon the exercise of rights
represented by this Warrant, upon exercise of the rights represented by this
Warrant and payment of the Exercise Price, all as set forth herein, will be duly
authorized, validly issued, fully paid and nonassessable, and free from all
taxes, liens and charges in respect of the issue thereof (other than taxes in
respect of any transfer occurring contemporaneously). The Company agrees that
its issuance of this Warrant shall constitute full authority to its officers who
are charged with the duty of executing stock certificates to execute and issue
the necessary certificates for shares of Common Stock upon the exercise of this
Warrant.

     9.   Notices.
          -------

                                      -4-
<PAGE>

          (a)  Whenever the Exercise Price or number of shares purchasable
hereunder shall be adjusted pursuant to Section 11 hereof, the Company shall
issue a certificate signed by its chief financial officer setting forth, in
reasonable detail, the event requiring the adjustment, the amount of the
adjustment, the method by which such adjustment was calculated, and the Exercise
Price and number of shares purchasable hereunder after giving effect to such
adjustment, and shall cause a copy of such certificate to be mailed (by first-
class mail, postage prepaid) to the Holder of this Warrant.

          (b)  In case: (i) the Company shall take a record of the holders of
its Common Stock (or other stock or securities at the time receivable upon the
exercise of this Warrant) for the purpose of entitling them to receive any
dividend or other distribution, or any right to subscribe for or purchase any
shares of stock of any class or any other securities, or to receive any other
right, or

               (ii)  of any capital reorganization of the Company, any stock
split or subdivision, or reverse stock split or combination, or any similar
event involving the Common Stock, any reclassification of the capital stock of
the Company, any consolidation or merger of the Company with or into another
corporation, or any sale, transfer or other conveyance of all or substantially
all of the assets of the Company to another corporation, or

               (iii) of any voluntary dissolution, liquidation or winding-up of
the Company, then, and in each such case, the Company will mail or cause to be
mailed to the Holder or Holders a notice specifying, as the case may be, (A) the
date on which a record is to be taken for the purpose of such dividend,
distribution or right, and stating the amount and character of such dividend,
distribution or right, or (B) the date on which a record is to be taken for
determining stockholders entitled to vote upon such reorganization,
reclassification, consolidation, merger, conveyance, dissolution, liquidation or
winding-up is to take place, and the time, if any is to be fixed, as of which
the holders of record of Common Stock (or such stock or securities at the time
receivable upon the exercise of this Warrant) shall be entitled to exchange
their shares of Common Stock (or such other stock or securities) for securities
or other property deliverable upon such reorganization, reclassification,
consolidation, merger, conveyance, dissolution, liquidation or winding-up. Such
notice shall be mailed at least 10 days prior to the date therein specified.

          (c)  All such notices, advices and communications shall be deemed to
have been received (i) in the case of personal delivery, on the date of such
delivery and (ii) in the case of mailing, on the third business day following
the date of such mailing.

     10.  Amendments.
          ----------

          (a)  This Warrant and any term hereof may be changed, waived,
discharged or terminated only by an instrument in writing signed by the party
against which enforcement of such change, waiver, discharge or termination is
sought.

                                      -5-
<PAGE>

          (b)  No waivers of, or exceptions to, any term, condition or provision
of this Warrant, in any one or more instances, shall be deemed to be, or
construed as, a further or continuing waiver of any such term, condition or
provision.

     11.  Adjustments.
          -----------

          (a)  The Exercise Price and the number of shares purchasable hereunder
shall be subject to adjustment from time to time as follows:

               (i)  The Exercise Price shall be adjusted from time to time in
the case of any stock split, subdivision of the number of shares of the Common
Stock or similar event involving Common Stock (a "Split") or any reverse stock
split, combination or similar event involving the Common Stock (a "Combination")
and, accordingly, the Exercise Price shall be proportionately decreased in the
case of a Split or increased in the case of a Combination, as of the close of
business on the date the Split or Combination becomes effective, computed to the
nearest cent.

               (ii) In case of any reclassification or change of outstanding
shares of Common Stock (except a split or combination, or a change in par value,
or a change from par value to no par value, or a change from no par value to par
value), or in case of any consolidation or merger to which the Company is a
party (other than a consolidation or merger that results in the termination of
this Warrant under Section 1 or in which the Company is the surviving
corporation and which does not result in any reclassification of or change in
the outstanding Common Stock of the Company) or any sale, transfer or other
conveyance of all or substantially all of the Company's assets, the Company, or
its successor, as the case may be, shall assume, by written instrument executed
and delivered to the registered holder of this Warrant at such Holder's address
shown on the registration books of the Company the obligation to deliver to the
Holder of this Warrant, upon due exercise thereof, the kind and amount of stock
and other securities and property receivable upon such reclassification, change,
consolidation, merger, sale, transfer or conveyance by a Holder of the number of
shares which would have been issued to such Holder had this Warrant been
exercised immediately prior thereto.

               As evidence of the kind and amount of stock or other securities
or property which shall be issuable upon the exercise of this Warrant after any
such reclassification, change, consolidation, merger, sale, transfer or
conveyance, the Company shall maintain in its records at its principal office a
certificate of any firm of independent public accountants (who may be the
regular auditors retained by the Company) with respect thereto.

               The provisions of this clause (ii) shall similarly apply to
successive reclassifications, changes, consolidations, mergers, sales, transfers
or conveyances.

               Upon any adjustment of the Exercise Price herein above provided
for, the number of shares issuable upon exercise of this Warrant shall be
changed to the number of shares calculated to the next highest whole share
obtained by dividing (A) the aggregate Exercise Price payable for the purchase
of all shares issuable upon exercise prior to such adjustment by (B) the
Exercise Price in effect immediately after such adjustment.

                                      -6-
<PAGE>

               (iii)  Whenever the Exercise Price or the number of shares
purchasable upon the exercise of this Warrant is adjusted as herein provided,
the Company shall:

                      (A)  forthwith place on file at its office a certificate
signed by the chief financial officer of the Company, showing in appropriate
detail the facts requiring such adjustment, the computation thereof, the
Exercise Price after such adjustment, and the number of shares purchasable upon
the exercise of this Warrant after such adjustment with respect to each share
originally purchasable upon exercise hereof, and shall exhibit the same from
time to time to any holder of this Warrant desiring an inspection thereof, and

                      (B)  within ten (10) days thereafter cause a notice to be
mailed to the Holder hereof at its address shown in the registration books of
the Company stating that such adjustment has been effected and the adjusted
Exercise Price and the number of shares purchasable as aforesaid.

               (iv)   Irrespective of any adjustments in the Exercise Price or
the number of shares or the number or kind of other securities purchasable upon
exercise of this Warrant, this Warrant or any Warrant thereafter issued may
continue to express the same price and number and kind of shares as are stated
in the Warrants initially issued by the Company.

          (b)  In the event that the Company (i) issues as a dividend or other
similar distribution (an "Extraordinary Dividend") on all of its then
outstanding Common Stock, (A) securities of the Company of a class other than
Common Stock, (B) rights, warrants or options (individually, a "Right" and
collectively, the "Rights") to acquire any securities of the Company (including
Common Stock) or (C) evidences of its indebtedness or assets (any securities
(other than Rights) issued as an Extraordinary Dividend or issued upon exercise
of any Rights issued as an Extraordinary Dividend shall be referred to as
"Dividend Securities"):

               (x)    this Warrant shall thereafter be exercisable for (1) the
Original Amount of shares of Common Stock (subject to adjustment as herein
provided), (2) such Dividend Securities and Rights as would theretofore have
been issued in respect of such shares (adjusted as herein provided) had such
shares been outstanding at the time of such Extraordinary Dividend; and

               (y)    any Right issued as an Extraordinary Dividend shall (1)
expire upon the later of (a) the original expiration date of such Right or (b)
the 180th day following the exercise of this Warrant, and (2) be exercisable for
the Dividend Securities issuable upon exercise of such Right.

          (c)  In the event that at any time while this Warrant is outstanding,
the Company shall offer to sell to all of the holders of Common Stock as a
class, rights or options to purchase Common Stock or rights or options to
purchase any stock or securities convertible into or exchangeable for Common
Stock (such exchangeable or convertible stock or securities being herein called
"Convertible Securities"), whether or not such rights or options are immediately
exercisable, and the price per share for which Common Stock is issuable upon the
exercise of such rights or options or upon conversion or exchange of such
Convertible Securities (determined by dividing (i) the total amount received or
receivable by the Company upon

                                      -7-
<PAGE>

issuance and sale of such rights or options, plus the aggregate amount of
additional consideration payable to the Company upon the exercise of all such
rights or options, plus, in the case of rights or options which relate to
Convertible Securities, the aggregate amount of additional consideration, if
any, payable upon the conversion or exchange of all such Convertible Securities,
by (ii) the total maximum number of shares of Common Stock issuable upon the
exercise of all such rights or options or upon the conversion or exchange of all
such Convertible Securities issuable upon the exercise of all such rights or
options) shall be less than the Exercise Price in effect immediately prior to
the initial sale of any such rights or options, the Company shall offer to sell
to the Holder, at the price and upon the terms at which such rights or options
are offered to holders of its Common Stock, such number of such rights or
options as the Holder would have been entitled to purchase had the Holder
exercised this Warrant immediately prior to the commencement of the offering of
such rights or options.

          (d)  If any event occurs as to which in the opinion of the Board of
Directors of the Company the other provisions of this Section 11 are not
strictly applicable or if strictly applicable would not adequately protect from
dilution the exercise rights of the Holder in accordance with the intent and
principles of such provisions, then the Board of Directors of the Company shall
make an equitable adjustment in the application of such provisions, in
accordance with such intent and principles of such provisions, so as to protect
such exercise rights as aforesaid, but in no event shall such adjustment have
the effect of increasing the Exercise Price.

     12.  Taxes. The issue of any stock or other certificate upon the exercise
          -----
of this Warrant shall be made without charge to the Holder for any documentary,
stamp or similar tax in respect of the issue of such stock or certificate.

     13.  Valid Issuance. Company represents to Holder that this Warrant and the
          --------------
shares of Common Stock issuable upon the exercise of this Warrant have been duly
authorized by all necessary corporate actions, this Warrant has been duly
executed and delivered and constitutes a legally binding agreement of the
Company enforceable in accordance with the terms hereof, the Company has
reserved out of its authorized and unissued shares of Common Stock a number of
shares sufficient to provide for the exercise of the rights represented by this
Warrant, and the shares of Common Stock issuable upon exercise of this Warrant,
when issued in accordance with the terms hereof, will be validly issued, fully
paid and nonassessable.

     14.  Registration Rights. The Company hereby undertakes to use its best
          -------------------
efforts to grant "piggy back" registration rights to the Holder, entitling the
Holder to include in a registration statement filed by the Company with the
Securities Exchange Commission the shares issuable upon exercise of this
Warrant. Such rights shall be on the same terms as certain existing holders of
the Company's common stock held pursuant to the Company's registration rights
agreement with its investors, and may require amendment of such agreement, which
amendment the Company will seek to obtain immediately following the issuance of
this Warrant.

     15.  Governing Law.  This Warrant shall be governed by, construed, and
          -------------
enforced in accordance with the laws of the State of Delaware without reference
to its principles of conflicts of law.

                                      -8-
<PAGE>

     IN WITNESS WHEREOF, Extreme Networks, Inc. has caused this Warrant to be
executed by its officers thereunto duly authorized.

Dated as of: April 3, 2000

                                             EXTREME NETWORKS, INC.

                                             By:_____________________________

                                      -9-
<PAGE>

                              NOTICE OF EXERCISE

To: Extreme Networks, Inc.

          (1)  The undersigned hereby elects to purchase ______ shares of Common
Stock of Extreme Networks, Inc., pursuant to the terms of the attached Warrant,
and tenders herewith payment of the purchase price for such shares in full.

          (2)  Please issue a certificate or certificates representing said
shares of Common Stock in the name of the undersigned or in such other name as
is specified below:

                       ________________________________
                                    (Name)

                       ________________________________
                                   (Address)

          (3)  Please issue a new Warrant for the unexercised portion of the
attached Warrant in the name of the undersigned or in such other name as is
specified below:

                       ________________________________
                                    (Name)

____________________                         ___________________________________
(Date)                                       (Signature)
<PAGE>

                              FORM OF ASSIGNMENT

          FOR VALUE RECEIVED, the undersigned registered owner of this Warrant
hereby sells, assigns and transfers unto the Assignee named below all of the
rights of the undersigned under the within Warrant, with respect to the number
of shares of Common Stock set forth below:

Name of Assignee         Address        No. of Shares
----------------         -------        -------------

and does hereby irrevocably constitute and appoint Attorney _____________ to
make such transfer on the books of Extreme Networks, Inc., maintained for the
purpose, with full power of substitution in the premises.

Dated:__________________

                                             ________________________________
                                             Signature of Holder

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00015-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00015-of-00352.parquet"}]]