Exhibit 10.31
OEM
PURCHASE AND SALE
AGREEMENT
By and Between
Nortel Networks Corporation
Avanex Corporation
and
Avanex Cayman
NOTE: Information in this document marked
with an "[*]" has been omitted and filed
separately with the Commission. Confidential
treatment has been requested with respect to
the omitted portions.
TABLE OF CONTENTS
Page
----
1. DEFINITIONS ....................................................... 1
2. SCOPE ............................................................. 3
3. EXHIBITS .......................................................... 5
4. NORTEL NETWORKS' PRODUCT QUALIFICATION AND
ACCEPTANCE PROGRAM ................................................ 5
5. PRODUCT AND PROCESS CHANGES ....................................... 7
6. QUALITY CONTROL AND RELIABILITY REQUIREMENTS,
SUPPLY MANAGEMENT AND NORTEL
NETWORKS' AUDITING RIGHTS ......................................... 9
7. PROPRIETARY COMPONENTS ............................................ 11
8. ORDERING .......................................................... 12
9. DELIVERY .......................................................... 13
10. PRICES AND PAYMENTS ............................................... 15
11. TITLE AND RISK OF LOSS ............................................ 16
12. ACCEPTANCE OR REJECTION ........................................... 16
13. WARRANTY .......................................................... 17
14. REPAIR PROCEDURES ................................................. 20
15. REPAIR SERVICES ................................................... 21
16. CONTINUING AVAILABILITY OF TECHNICAL ASSISTANCE,
REPAIR SERVICES, MAINTENANCE, REPLACEMENT
AND REPAIR PARTS .................................................. 25
17. TECHNICAL ASSISTANCE AND MARKETING SUPPORT ........................ 25
18. DOCUMENTATION ..................................................... 26
19. CONFIDENTIAL INFORMATION .......................................... 27
20. INTELLECTUAL PROPERTY RIGHT INFRINGEMENT .......................... 29
21. HAZARDOUS MATERIALS ............................................... 30
22. INDEMNITY ......................................................... 30
23. COMPLIANCE WITH LAWS .............................................. 31
24. CONSEQUENTIAL DAMAGES ............................................. 31
25. INSURANCE ......................................................... 32
26. FORCE MAJEURE ..................................................... 32
27. TERM .............................................................. 33
28. TERMINATION AND CONTINUING RIGHTS ................................. 33
29. NOTICES ........................................................... 34
30. MANUFACTURING ESCROW AND CONTINGENT LICENSE ....................... 34
31. GOVERNING LAW ..................................................... 35
32. GENERAL ........................................................... 35
EXHIBITS
Exhibit A - Product Lists, Part I and Part II, Prices, Discounts, Availability
Dates and FCA Delivery Locations
Exhibit B - Specifications and Acceptance Program
Exhibit C - Demand-Pull Program
Exhibit D - Repair Services Rates, FCA Repair Locations and Technical Assistance
Rates
Exhibit E - Procedures for Orders utilizing EDI and TDI
Exhibit F - Monthly Reports
Exhibit G - Change Notification
Exhibit H - Technical Assistance
Exhibit I - RUS Debarment Certificate
Exhibit J - Marketing Support
Exhibit K - North American Free Trade Agreement - Procedures
Exhibit L - Notices
Exhibit M - Initial Avanex Press Release
Page 2
OEM PURCHASE AND SALE AGREEMENT
This OEM Purchase and Sale Agreement ("Agreement") entered into by and among
Nortel Networks Corporation, a Canada corporation with offices located at 9300
Trans Canada Highway, Saint-Laurent, Quebec, H4S I K5, Canada on behalf of
itself and its parent, Nortel Networks Corporation and Subsidiaries of Nortel
Networks Corporation, (hereinafter collectively referred to as "Nortel
Networks") and Avanex Corporation, a Delaware corporation and Avanex Cayman, a
corporation incorporated under the laws of the Cayman Islands, and a
wholly-owned subsidiary of Avanex Corporation, both with principal executive
offices located at 40919 Encyclopedia Circle, Fremont, CA, 94538, U.S.A.
(hereinafter collectively referred to as "Avanex").
WITNESSETH that the Parties hereto hereby agree as follows:
1. DEFINITIONS
-----------
1.1 As used herein:
a) "ARO" means after receipt of a Purchase Order or Release.
b) "Blanket Purchase Order" means a Purchase Order which does not set
forth a Delivery Date.
c) "Business Day" means any day other than a Saturday, Sunday, a
non-working day or statutory holiday observed in the jurisdiction where
a right is to be exercised or an obligation to be executed hereunder.
Cl) Contract Manufacturer means a third party which enters into an
agreement with a Nortel Networks Company to (1) manufacture in modified
or unmodified form, a Nortel Networks product incorporating the
Product, and (2) lease, sell, sublicense or otherwise distribute
(directly or indirectly) through distributors such Nortel Networks
product under Nortel Networks' or the Contract Manufacturer's own brand
name.
d) "Delivery Date" means the date specified in a Purchase Order or a
Release when the Products are to be delivered to the FCA Delivery
Location except in the event Nortel Networks elects to take delivery of
such Products at Avanex's loading dock, in which case the Delivery Date
shall be the date Nortel Networks takes delivery of such Products at
Avanex's loading dock.
e) "Demand-Pull Program" means Nortel Networks' ordering process which may
be established by Nortel Networks pursuant to Section 8 (Ordering) and
Exhibit C.
f) "Documentation" means the documentation as described in Section 18.
g) "EDI" means the electronic data interchange procedures established in
Exhibit E.
h) "Effective Date" means January 1, 2000.
i) "Exhibit" means any Exhibit listed in Section 3 hereof.
j) "FCA Delivery Locations" means FCA delivery locations listed in Exhibit
A, Part III.
k) "FCA Repair Locations" means Avanex's FCA repair locations listed in
Exhibit D, Part II.
l) "Free Carrier" and "FCA" have the meaning set forth in the
International Chamber of Commerce document, "INCOTERMS 1990".
m) "Hardware" means the hardware components of the Products and any set of
programs in machine-executable code whether residing in fixed coded
instructions resident in read-only memory or equivalent devices forming
part of hardware and sometimes known as firmware or whether residing in
any other form of memory device such as `flash memory'.
n) "Party" means Nortel Networks or Avanex and "Parties" means Nortel
Networks and Avanex.
o) "Prices" means the prices applicable to the Products and Repair
Services determined in accordance with Section 10 (Prices and Payments)
hereof, Exhibit A, Part I and Part II and Exhibit D.
p) "Process" means a set of inter-related resources and activities which
transform inputs into outputs; resources may include personnel,
finance, facilities, equipment, techniques and methods.
q) "Product" means any one of the fibre optic components, as modified by
Avanex for Nortel Networks and listed in the Product List attached
hereto as Exhibit A, Part I, as such Exhibit A, Part I may be modified,
from time to time, in accordance herewith or by agreement of the
Parties and "Products" means some or all Products.
Whenever the term "product" is used in this Agreement with respect to
any Avanex product, such term designates any such product listed in
Exhibit A, Part II not yet accepted by Nortel Networks in accordance
with Section 4 (Nortel Networks' Product Qualification and Acceptance
Process) and "products" means some or all products.
r) "Purchase Order" means any purchase order issued (by any means of
transmission) or output of an electronic "paperless" process, initiated
by Nortel Networks, in respect of the Products and accepted pursuant to
Section 8 (Ordering).
s) "Release" means a verbal release confirmed in writing within two (2)
Business Days, the document issued (by any means of transmission) or
output of an electronic "paperless" process, initiated by Nortel
Networks, pursuant to a Blanket Purchase Order by which the Delivery
Date for such Blanket Purchase Order or portion(s) thereof is
requested.
Page 2
t) "Repair Date" means the date on which the repair of a Product is completed
as stamped on the Products in accordance with Section 14.4.
u) "Repair Services" means in the case of Hardware, the upgrade, the repair or
replacement of defective Hardware as set forth in Section 15 (Repair
Services) to be performed during and after the applicable Product Warranty
Period. For the purpose of this Agreement, "defective Hardware or Products"
means that either the Hardware or Products does not conform to the
Specifications, as described hereto.
v) "Specifications" means the technical specifications and the other
requirements listed, described or referred to in Exhibit B, Part I,
including acceptance test specifications, which are required to be met by
the Products and the Documentation.
w) "Subsidiary" means a corporation in which a Party effectively owns or
controls, and continues to own or control, directly or indirectly, more
than fifty percent (50%) of the voting stock or shares.
x) "Term" has the meaning ascribed to such term in Section 27 (Term) of this
Agreement.
y) "$" or "Dollars" means lawful money of the United States of America except
as otherwise expressly set forth herein.
1.2 Any reference in this Agreement to another agreement shall mean such other
agreement as executed by the Parties thereto and all amendments thereto,
unless otherwise explicitly stated.
2. SCOPE
2.1 From time to time Nortel Networks may request Avanex to sell the Products
to Nortel Networks and Avanex agrees to sell such Products to Nortel
Networks. The sale of Products by Avanex and the purchase of Products by
Nortel Networks shall be in accordance with the terms of this Agreement and
Exhibits thereto. The terms and conditions of this agreement shall cover
all commercial dealings between the Parties retroactively to January 1,
2000.
2.2 Nortel Networks shall have the right to request Avanex to customize any
Product, product or Documentation; and Avanex, upon Nortel Networks'
request will then utilize reasonable commercial efforts to so customize any
such Product, product or Documentation. Customization requirements, if any,
shall be incorporated in the Specifications and the sale and purchase of
any customized Product, product or Documentation shall be in accordance
with the terms and conditions of this Agreement and Exhibits thereto. At
the time any customized Product, product or Documentation is incorporated
in this Agreement, Exhibit A, Part II and Exhibit B shall be amended to add
thereto the prices and the availability date and the acceptance program
applicable to such customized Product, product or Documentation. This
Section is also applicable to Documentation included with the Products and
products.
Page 3
If requested by Nortel Networks, the Products will incorporate Nortel
Networks' reasonable branding requirements, in accordance with the
Specifications to include, as mutually agreed and without limitation,
Nortel Networks' name, trademark and logotype, Nortel Networks' color,
Nortel Networks' part number as per Specifications, Nortel Networks'
bar-codes and/or CLEI codes with each Product, packing material with Nortel
Networks' logotype and Nortel Networks' box bar coding, applicable to each
shipment.
2.3 Avanex hereby grants to Nortel Networks the non-exclusive worldwide right
to distribute and sell Products, whether directly or indirectly.
2.4 Nortel Networks and Avanex may from time to time, by mutual written
agreement, modify the Product lists contained in Exhibit A, to add thereto
other products offered for sale by Avanex, and/or to incorporate therein
enhancements or new features introduced in Products by Avanex. Avanex shall
advise Nortel Networks during scheduled Product marketing reviews and shall
upon mutually agreeable terms, offer and make available to Nortel Networks
for incorporation in this Agreement, any new product or Product enhancement
or new feature that Avanex makes generally available. Such notification
shall be made by Avanex to Nortel Networks within seven (7) calendar days
of the Avanex's internal design authorization allowing any such new
product, enhancement or feature. If Nortel Networks accepts Avanex's offer,
the actual incorporation in this Agreement of any such new product or any
Product enhancement or new feature will take place only after it complies
with Nortel Networks' acceptance requirements under Section 4 (Nortel
Networks' Product Qualification and Acceptance Process). At the time any
new product or Product enhancement or new feature is incorporated in this
Agreement, Exhibit A, Part II and Exhibit B shall be amended to add thereto
the prices and the availability date and the acceptance program applicable
to such new product or Product enhancement or new feature.
2.5 Except for the terms and conditions set out in Section 19 "Confidential
Information", nothing in this Agreement shall be interpreted or construed
to limit either Party's right to perform or to continue to perform its own
independent research, development, manufacturing or marketing of any type
of products or systems even if such research, development, manufacturing or
marketing pertains to technology or products similar to the Products or
products.
2.6 Avanex accepts and acknowledges that Nortel Networks may request it to sell
Products to Nortel Networks Companies and in such event this Agreement
shall be deemed to extend to and for the benefit of Nortel Networks
Companies which Nortel Networks Companies shall be entitled to exercise on
behalf of Nortel Networks, Nortel Networks' rights in respect of the
purchase of Products pursuant to this Agreement including, without
limitation, the right to place Purchase Orders together with the rights
which accrue in respect of the Products or in respect of the ordering or
delivery of such Products. For the purposes of giving effect to the above,
where a Nortel Networks Company purchases Products pursuant to this
Agreement, where the context so admits, references to Nortel Networks shall
be deemed to be to the relevant Nortel Networks Company which is ordering
and/or purchasing Products in accordance with the terms of this Agreement.
Each Blanket Purchase Order, Release and Purchase Order shall create rights
and obligations solely between Avanex and the Nortel Networks Company which
issues the Blanket Purchase Order, the Release and the Purchase Order. For
the purpose of this Agreement, "Nortel Networks Company" shall mean
individually or collectively: (i) a Contract Manufacturer and/or (ii) a
joint
Page 4
venture, which is a cooperative enterprise formed between a Nortel Networks
Company and one or more other autonomous entities to address more
effectively certain mutual business interests and opportunities; and (iii)
a corporation or other legal entity other than a Subsidiary in which a
Nortel Networks Company, directly or indirectly owns or controls, and
continues to own or control, twenty percent (20%) or more of the voting
stock or shares, or other control mechanism. Where Nortel wishes to have a
Nortel Networks Company purchase Products under the terms and conditions of
this Agreement, the parties shall meet to discuss, and subject to Avanex
being reasonably satisfied as to creditworthiness and other legal and
strategic obligations binding Avanex, the parties may amend this Agreement
in writing to include specifically named Nortel Networks Companies.
3. EXHIBITS
3.1 The following Exhibits, attached hereto, are an integral part of this
Agreement and are incorporated herein by reference:
Exhibit A - Product Lists, Part I and Part II, Prices, Discounts,
Availability Dates and FCA Delivery Locations
Exhibit B - Specifications and Acceptance Program
Exhibit C - Demand-Pull Program
Exhibit D - Repair Services Rates, FCA Repair Locations and Technical
Assistance Rates
Exhibit E - Procedures for Orders utilizing EDI and TDI
Exhibit F - Monthly Reports
Exhibit G - Change Notification
Exhibit H - Technical Assistance
Exhibit I - RUS Debarment Certificate
Exhibit J - Marketing Support
Exhibit K - North American Free Trade Agreements - Procedures
Exhibit L - Notices
Exhibit M - Initial Avanex Press Release
3.2 Any amendment to any Exhibit shall be in the form of a revised Exhibit duly
dated and signed by authorized representatives of the Parties and shall be
incorporated herein by reference.
4. NORTEL NETWORKS' PRODUCT QUALIFICATION AND ACCEPTANCE PROGRAM
4.1 Avanex undertakes to supply Products which comply with the Specifications.
Except as otherwise set forth herein, prior to being purchased by Nortel
Networks, the products listed in Exhibit A, Part II will undergo a program
of evaluation, qualification and acceptance by Nortel Networks ("Acceptance
Program") to verify their compliance with the Specifications. Products
listed in Exhibit A, Part I have been accepted by Nortel Networks in
accordance with this Section 4. The Acceptance Program will be conducted in
accordance with Exhibit B, Part II.
Page 5
4.2 It is acknowledged by Avanex that circumstances may arise where Nortel
Networks will desire to purchase one or more products as are listed in
Exhibit A, Part II, prior to acceptance thereof in accordance with this
Section 4. Such circumstances will be examined in good faith by the Parties
on a case-by-case basis. In the event Avanex accepts to sell any one of the
products, Nortel Networks will issue Purchase Order(s) covering same and
the provisions of Section 4.6 shall be applicable to such Purchase Order(s)
which, for the purpose of determining the rights and obligations of the
Parties hereunder, shall be deemed to have been issued in respect of
Products. Avanex shall not unreasonably refuse to accept Nortel Networks'
Purchase Orders covering products.
4.3 Acceptance by Nortel Networks of the products will take place upon
successful completion by Nortel Networks of its Acceptance Program. Nortel
Networks will notify Avanex in writing of its acceptance of the products
within three (3) Business Days from successful completion of its Acceptance
Program.
4.4 In the event that in the course of the carrying out of the Acceptance
Program, Nortel Networks determines that the products fail to comply with
the Specifications, Nortel Networks will promptly notify Avanex in writing
of such failure, with reasonable detail, and upon receipt of such notice,
Avanex will, at its expense, take prompt and effective action to correct
the notified deficiencies by the applicable Acceptance Date, as such term
is hereafter defined. Product acceptance dates shall be mutually agreed
upon by the Parties on a case-by-case basis, (herein referred to as
"Acceptance Date"), or extensions thereof, if any, granted in writing by
Nortel Networks. In such case, acceptance of the products will take place
upon verification by Nortel Networks that the notified deficiencies have
been corrected, and accepted products shall become Products hereunder and
be deemed to be included in Exhibit A, Part I.
4.5 In the event that acceptance of the products does not take place on or
before the Acceptance Date or extensions thereof, if any, granted in
writing by Nortel Networks, Nortel Networks may, in addition to any other
remedies hereunder, at law or in equity, recover all reasonable costs and
charges it has incurred as a result of the products not being accepted by
the Acceptance Date, including, without limitation as to the nature of such
costs and expenses, laboratory testing cancellation charges. In addition
Nortel Networks may, upon notice to Avanex to that effect, request that a
design review be held between Avanex's and Nortel Networks' engineers in
order to determine how far away the products actually are from acceptance.
4.6 In the event Avanex has accepted Nortel Networks' Purchase Order(s) for
products pursuant to Section 4.2 hereof, Nortel Networks may, in addition
to its rights under Section 4.5 hereof, request that Avanex provide, and in
such event, Avanex will provide as a temporary solution, functionally
equivalent equipment acceptable to Nortel Networks' customer(s). Once the
products have passed acceptance, Avanex shall, at cost and expense mutually
agreed to by the Parties, replace the functionally equivalent equipment
with the Products, and shall invoice Nortel Networks for the price of
Products and the agreed to costs and expenses once the Products have been
delivered to Nortel Networks' customer(s).
Page 6
4.7 Avanex represents and warrants that it has identified and will use its best
efforts to continue to identify to Nortel Networks any sole source/critical
components incorporated into the Products.
4.8 Acceptance of the Products by Nortel Networks under this Section 4 shall
not relieve Avanex from its obligations to manufacture, deliver, repair and
support the Products in accordance with this Agreement.
5. PRODUCT AND PROCESS CHANGES
5.1 Avanex shall notify Nortel Networks in writing of all proposed
modifications and changes that affect form, fit, function, performance or
Price (herein "Change(s)") to the Products and/or Processes. Such
notification shall be made by Avanex to Nortel Networks within seven (7)
calendar days of the Avanex's internal design authorization allowing any
such Change except in the cases contemplated in Section 5.6, in which case
Avanex shall promptly so notify Nortel Networks and initiate immediate
action to correct the situation. The Changes which require that a notice be
forwarded to Nortel Networks shall include, without limitation, any
proposed Change to the Products in accordance with the classifications
described in GR-209-CORE (herein "GR-209"). All Changes proposed outside
the spectrum of GR-209 shall be classified as "O". Avanex shall comply with
GR-209 except to the extent expressly set forth in this Section 5. The
reasonable interpretation of GR-209 resides with Nortel Networks. Avanex's
Change notifications (herein "Change Notifications") shall be in the form
and content of Exhibit G.
5.2 Avanex's written Change Notifications shall be numbered in a single
sequential numbering scheme and shall include the information specified in
GR-209 including the following: a detailed list of the Products and/or
Processes affected and associated Changes that must be implemented in
conjunction with or prior to the notified Change, the compatibility of the
Change with the Products and/or Processes currently deployed, a detailed
description of the reason for the Change, the effect on the Products and/or
Processes once the Change is implemented and the procedure of
implementation. In addition, a detailed description of the Change, the
consequences if the Change is not implemented and the planned
implementation date of the Change shall be included in the Change
Notification. Avanex will propose a disposition plan for Nortel Networks'
and its customers' stockrooms. Nortel Networks will notify Avanex of the
type and quantity of Products it requires for the implementation of the
Change and location where such Products should be delivered to.
5.3 Nortel Networks reserves the right to request reasonable test data
associated with any Product Changes. Furthermore, in the event Nortel
Networks determines it is necessary to verify the Change prior to
acceptance, Avanex shall supply, on loan and without charge, sufficient
production level quality Products for such verification, or offer some
other alternative arrangement, reasonably satisfactory to Nortel Networks,
for such verification.
5.4 If Nortel Networks disagrees with any classification issued by Avanex,
Avanex shall present evidence in writing, within a period of five (5)
Business Days from Nortel Networks' request therefor, that such a
classification is justified. If Nortel Networks still disagrees with the
justification, Avanex shall negotiate in good faith with Nortel Networks
until a final resolution is
Page 7
mutually agreed upon by the Parties within thirty (30) calendar days
from the date of Nortel Networks' notice of disagreement. In the event
that thirty (30) calendar days after the date of Nortel Networks'
notice of disagreement, the Parties still disagree on the Change
classification, Nortel Networks' reasonable determination shall
prevail and be final.
5.5 Avanex shall not implement a Change such as those contemplated above
without the prior written consent of Nortel Networks, which consent may
not be unreasonably withheld. Should Nortel Networks fail to respond
within a period of forty (40) calendar days from the date it has
received a notice forwarded by Avanex under this Section 5, then
Avanex shall have the right to implement such Change.
32.12 In addition to Avanex's warranty obligations contained in Section 13
(Warranty) and without diminishing Avanex's obligations under this
Section 5 and Sections 6 (Quality Control and Reliability
Requirements, Supply Management and Nortel Networks' Auditing Rights)
and 15 (Repair Services), in the event that, during the Product
Warranty Period or thereafter, an intrinsic design or manufacturing
defect of the Product(s), causes an inoperative or hazardous condition
of a nature as to require the introduction in the Product(s) of a
Class A or AC Change, as described in GR-209, Avanex shall, as
expeditiously as possible, at its expense, generate a Class A or AC
Change, as applicable, to eliminate the defect, and supply such
Change, at no charge, for installation by Nortel Networks at
reasonable costs, at Avanex's expense, in all defective units of the
Product(s), both installed and stocked, in accordance with a retrofit
program negotiated by Nortel Networks with its customers. A retrofit
program is a program that allows Nortel Networks to install the Change
in all of Nortel Networks' stockrooms and customer locations within a
period not to exceed one hundred and eighty (180) calendar days from
the date such inoperative, hazardous or unsatisfactory condition first
occurs. In the course of negotiations of the retrofit program with its
customers, Nortel Networks shall consult closely with Avanex with a
view to endeavor to achieve the twofold objective of customers'
satisfaction and minimization of retrofit costs to Avanex. For the
purpose of this Agreement, an "intrinsic design defect" is one that
occurs even though the Product itself complies with the
Specifications. Similarly, a "manufacturing defect" is one where
although the Product conforms to the Specifications, and standard
Product testing does not reveal the defect, the reliability of the
Product over a period of time is adversely affected, and results in
field failures at Nortel Networks' customers' sites.
Avanex shall provide, at its expense, seed stock units to support a
retrofit project completion within said one hundred and eighty (180)
days in quantities determined in accordance with the following
formulae: The one hundred and eighty (180) day period begins when all
the details of the retrofit program are determined by Nortel Networks.
Seed Stock Units = Material Cycle Time (Weeks) x Repair and Return Rate
Repair and Return Rate = Number of units to be retrofitted
--------------------------------------------
Change Completion Date - Implementation Date
5.7 Nortel Networks shall provide to Avanex Nortel Networks' Product
Engineering Code, the release number of the Product and the CLEI code of
the Product, if required, for each Product Change
Page 8
under this Section 5. At Nortel Networks' request, this information
shall be placed on the Products by Avanex in accordance with the
Specifications.
5.8 From acceptance of the Products by Nortel Networks in accordance with
Section 4 (Nortel Networks' Product Qualification and Acceptance
Process), Avanex shall provide Nortel Networks with a field baseline
report which will include: Nortel Networks' part number, Current
Revision Level, New Revision Level, Reason for Change, Parts affected by
Change, if applicable. This report will be updated for every Change.
Avanex will use its best efforts to produce these updates within seven
(7) Business Days of each Change date.
32.12 Throughout the Term, Avanex shall requalify the Products as frequently
as is required by telecommunications industry standards in accordance
with Bellcore Standard TR-NWT-000418, Issue 2 (Draft 3) September
1992, or its most recent version, as applicable.
5.10 Change notices relating to Product Changes should be sent to Nortel
Networks' System Engineering Department and Change notices relating to
Process Changes should be sent to Nortel Networks' Quality Department.
Avanex's Quality Department shall be responsible for the obligations
described in this Section 5.
6. QUALITY CONTROL AND RELIABILITY REQUIREMENTS, SUPPLY MANAGEMENT AND
NORTEL NETWORKS' AUDITING RIGHTS
6.1 ISO 9001 Certification
6.1.1 Avanex represents and warrants that it shall seek to obtain by
September 31, 2000, and in any event no later than December 31, 2000,
ISO 9001 certification or any applicable improvement to that standard.
Avanex undertakes to maintain ISO 9001 certification in effect
throughout the Term including in respect of Avanex's quality control
systems, and Avanex's continued failure to maintain ISO 9001
certification for a period of forty-five (45) calendar dates from the
loss of such certification, shall constitute a material breach by
Avanex of its obligations hereunder.
6.1.2 In the event Avanex receives any notice of non-conformance to ISO from
the ISO registrars, Avanex shall immediately advise Nortel Networks and
forthwith provide Nortel Networks with (i) the list and details of the
non-conformance and (ii) the detailed plan submitted to the ISO
registrars including timelines and goals to achieve compliance with ISO
9001.
6.2 Quality Control and Reliability Requirements
6.2.1 All Products delivered by Avanex to Nortel Networks shall comply with
the Specifications including Nortel Networks' quality and reliability
target metrics set out therein, such metrics to include, without
limitation, Mean Time Between Failure ("MTBF"), Return Rate ("RR") and
Supplier Product Quality Level ("SPQL"). In the event Nortel Networks
proposes any changes or additions to such quality and reliability
target metrics, Avanex shall not unreasonably refuse to agree or delay
compliance with such changes.
Page 9
6.2.2 Products furnished hereunder by Avanex shall be tested and inspected by
Avanex prior to shipment in accordance with testing and inspection
procedures as approved by Nortel Networks. Avanex agrees to perform all
quality control functions to ensure compliance of the Products with the
Specifications and conformance with good commercial practice. Avanex
warrants that all Products furnished hereunder shall meet all criteria
set forth in the Specifications. Detailed inspection records are to be
maintained by Avanex and made available to Nortel Networks upon
reasonable request.
6.2.3 Avanex shall provide Nortel Networks with a monthly report covering the
items shown in Exhibit F and any other items reasonably required by
Nortel Networks in a format acceptable to Nortel Networks.
6.2.4 Avanex shall, within seven (7) Business Days of becoming aware of any
such event, report to Nortel Networks by technical bulletin or report
any potential, suspected or actual (i) defect in design and/or
manufacturing of the Products, (ii) malfunction of the Products or of
products similar to the Products, (iii) failure of the Products to
conform to the Specifications or (iv) uses of the Products in
combination with other product(s) or services which cause or have the
potential of causing disruption in the services provided by end-users
using the Products.
6.3 Supply Management
6.3.1 Nortel Networks may, from time to time, identify in a notice to Avanex
those components and materials used in the manufacture of Products
which are subject to this Section 6.3. From the date of Nortel
Networks' notice to Avanex, all components and materials so identified
by Nortel Networks, and the vendors of such components and materials,
shall be reasonably approved by Nortel Networks and Avanex shall only
use such approved components and materials procured from such approved
vendors in its manufacture of the Products hereunder. Upon reasonable
request of Nortel Networks, Avanex shall provide Nortel Networks with
mutually agreeable information relating to Avanex's suppliers, insofar
as such information is not confidential information of such suppliers.
In the event an Avanex supplier is found to be reasonably unacceptable
to Nortel Networks, Avanex and Nortel Networks shall work together in
good faith to find a substitute vendor as soon as possible, without
unnecessarily disrupting supply of the Products.
6.3.2 In the event Nortel Networks reasonably determines that components,
materials and/or vendors are no longer approved for use in the
manufacture of Products and so advises Avanex, Avanex shall, without
unnecessarily disrupting supply of the Products, approve all
substitute vendors and perform the qualification of all substitute
components and materials to ensure that Products incorporating such
components and materials comply with the Specifications. The selection
of any substitute approved vendors by Avanex is subject to Nortel
Networks' audit to assess the acceptability and establish the
credibility of such vendors, which acceptance shall not be
unreasonably withheld. Avanex and Nortel Networks shall work together
in good faith to find a substitute vendor as soon as possible, without
unnecessarily disrupting the supply of Products.
Page 10
6.3.3 Avanex's supply management Processes and records are subject to audit
by Nortel Networks, to assess their efficiency and ensure corrective
and preventive actions are taken internally by Avanex or externally
with the approved vendors. Nortel Networks' audit of suppliers approved
by Avanex, other than those recognized by Nortel Networks' Integrated
Electronic Data Base ("IEDB") and Nortel Networks' Divisional Component
Database ("DCD"), and of the Processes and records for non-conforming
components and materials, may be held within thirty (30) calendar days
of evidence of receiving non-conforming Products from Avanex.
6.4 Nortel Networks' Inspection Rights
6.4.1 Upon fifteen (15) Business Days' written notice, Nortel Networks may
inspect or test, at all reasonable times and at Avanex's locations, any
Products covered by this Agreement. Avanex shall provide at no
additional cost such facilities, labor, data, specifications, manuals
and information as are reasonably required to allow Nortel Networks to
perform a full range of quality assurance functions without unduly
interfering with Avanex's normal day-to-day operations. Inspection of
Products may be performed in whole or in part prior to final assembly
and/or completion of manufacturing or repair Processes.
6.4.2 In addition to, and without restricting, Nortel Networks' auditing and
inspection rights described in this Section 6, Nortel Networks shall
have the right to visit Avanex's manufacturing location(s) for the
purpose of inspecting any of the Processes, upon fifteen (15) Business
Days' written notice. Nortel Networks shall request inspection no more
frequently than required by good commercial practices.
6.4.3 Nortel Networks shall keep Avanex promptly informed as to any problems
encountered with the Products and Processes and to communicate promptly
to Avanex any and all modifications or improvements to the Products and
Processes suggested by any customer, employee or agent, subject to any
confidentiality undertakings binding Nortel Networks to such customer,
employee or agent.
6.4.4 Any exercise of, or failure by Nortel Networks to inspect Products,
Processes and Avanex's manufacturing locations as set forth in this
Section 6 and Section 12 (Acceptance or Rejection) shall not
constitute, or be construed as acceptance of the Products and Processes
by Nortel Networks or as relieving Avanex from its obligation to
furnish all Products in compliance with this Agreement, including the
Specifications, and the applicable Blanket Purchase Order, Release or
Purchase Order.
7. (INTENTIONALLY OMMITTED)
8. ORDERING
8.1 Products will be purchased, at Nortel Networks' option, through Blanket
Purchase Orders and Releases under the Demand-Pull Program or, absent
such Demand-Pull Program, through Purchase Orders with a schedule of
delivery, which may be issued by Nortel Networks, from time
Page 11
to time, in accordance with this Agreement. The Parties acknowledge that
such Blanket Purchase Orders, Releases and Purchase Orders shall be
transmitted by electronic means, which is to be determined by the Parties
in good faith. The Parties will use commercially reasonable good faith
efforts to implement the above-mentioned electronic transmission medium as
soon as possible. If the Parties determine in good faith that EDI is the
most effective transmission medium, the EDI methods shall be as described
in Exhibit E. Avanex undertakes to be compliant with the Demand-Pull
Program by June 1, 2000, and in any event, shall be Demand-Pull compliant
no later than June 30, 2000.
8.2 Notwithstanding that a Blanket Purchase Order, a Release or a Purchase
Order issued in respect of Products does not refer to this Agreement, any
such Blanket Purchase Order, Release or Purchase Order issued by Nortel
Networks during the Term shall be deemed to have been issued pursuant to
this Agreement and shall be deemed to incorporate and be governed solely by
the terms and conditions set forth in this Agreement unless the Parties
expressly agree in writing to the contrary. Any printed terms and
conditions contained in any Blanket Purchase Order, Release or Purchase
Order or in any Avanex acknowledgment, invoice or other documentation shall
be deemed deleted and of no force or effect. Any additional typed and/or
written terms and conditions contained in any Purchase Order or Release and
any Avanex acknowledgment, invoice or other documentation shall be for
administrative purposes only, i.e. to identify the types and quantities of
Products to be supplied, line item Prices and total Price, delivery
schedule, and other similar ordering data, all in accordance with the
provisions of this Agreement.
8.3 Nortel Networks shall not be obligated to purchase any quantities of
Products hereunder, except and only to the extent required in order to
satisfy its obligations to purchase Products pursuant to the Demand-Pull
Program, if any, as expressly set forth in Exhibit C. Avanex acknowledges
that no minimum line item value or minimum order values shall apply to
Blanket Purchase Orders, Releases or Purchase Orders issued hereunder.
8.4 Avanex undertakes to accept any Blanket Purchase Orders and Releases or
Purchase Orders issued hereunder by Nortel Networks and Nortel Networks
Companies, provided that such Blanket Purchase Orders and Releases or
Purchase Orders are consistent with this Agreement. Avanex shall
acknowledge receipt of each Blanket Purchase Order or Purchase Order within
two (2) Business Days ARO.
8.5 Any change to the original Purchase Order or Release initiated by Nortel
Networks after Avanex's acknowledgment and any resulting adjustments to
prices, schedule and/or other requirements of the Purchase Order or Release
shall be negotiated and mutually agreed upon and subsequently detailed in a
written change to the Purchase Order or Release ("Change Order"),
referencing the original Purchase Order or Release and executed by
authorized representatives of Nortel Networks and Avanex. The adjustment of
the Purchase Order or Release price shall include actual reasonable charges
incurred by Avanex related to such work under the original Purchase Order
or Release. No such changes shall be performed until a Change Order has
been executed by Avanex and Nortel Networks as described above.
8.6 The Blanket Purchase Orders, Releases, or Purchase Orders shall:
Page 12
a) reference the number of Nortel Networks' Blanket Purchase Order, Release or
Purchase Order issued for the Products;
b) include a signature of an authorized employee of Nortel Networks (to be
provided by Nortel Networks);
c) have the correct Product and options description (including item numbers
and part numbers if shown for that item in the Product list);
d) have the correct Price in accordance with Exhibit A of this Agreement or
any amendments hereto;
e) specify the exact quantity of Products to be delivered;
f) provide tax status for each "ship-to" location including the exemption
certificate number if tax exempt;
g) have firm delivery schedules and a firm Delivery Date (where applicable)
for each shipment;
h) specify the FCA Delivery Location, "ship to" and the Nortel Networks
location where the invoice shall be rendered for payment;
i) specify the method of shipment including the names of carrier and broker,
if applicable; and
j) specify special shipping and transportation instructions, if any.
9. DELIVERY
9.1 Products shall be delivered as follows:
a) Products ordered pursuant to the Demand-Pull Program shall be
delivered by Avanex FCA Delivery Location set forth in the Release
within a delivery lead time not to exceed one (1) Business Day from
Nortel Networks' Release(s).
b) Products not ordered pursuant to the Demand-Pull Program shall be
delivered by Avanex FCA Delivery Location set forth in the Purchase
Order, within a delivery lead time not to exceed six (6) weeks ARO.
No partial shipment shall be made without Nortel Networks' prior written
consent.
9.2 Avanex shall package the Products in accordance with Nortel Networks'
standard packing and external marking practices in compliance with the
standards listed in Schedule B, Part III and the Specifications together
with any modification reasonably requested by Nortel Networks with respect
to size and external markings.
9.3 Avanex shall mark each Product listed in Exhibit A with the Avanex's model
number and where practical, the description of the Product and the revision
level. Each Product shall be marked, as outlined in Specifications, set
forth in Exhibit B, Part III. When requested by Nortel Networks, Product
shall include Nortel Networks' logotype.
Page 13
9.4 Avanex shall promptly advise Nortel Networks of any anticipated delay
in meeting the Delivery Date specified in any Purchase Order or
Release and shall cooperate with Nortel Networks in the implementation
by Avanex of any reasonably appropriate action or workaround plans
with a view to enable Nortel Networks to satisfy its customer
requirements. Without limiting the generality of the foregoing or
otherwise affecting Nortel Networks' rights, in the event a Nortel
Networks customer cancels one or more orders for Products as a result
of Avanex's delay in the delivery of Products of more than five (5)
calendar days, Nortel Networks shall have the right to cancel, without
charge or liability, the Purchase Order and/or Release issued to
Avanex in respect of Nortel Networks' customer cancelled order(s).
9.5 Nortel's Purchase Commitment and Avanex's Capacity Increase Obligations
Nortel intends to purchase specific and mutually agreed upon
fiber optic component products from Avanex hereunder, where the
forecasted quantity of each Product shall be that specified in
Exhibit A, during the first twelve (12) month period of this
Agreement (collectively "Nortel's Purchase Commitment").
In addition, in the event that Avanex's Product delivery, pricing
and ability to ramp-up to Nortel's demand meet or exceed Nortel's
reasonable expectations, then Nortel may purchase an additional
mutually agreeable quantity of Products from Avanex during the
first twelve (12) months of the Agreement.
9.5.1 Thereafter Nortel's said commitment to purchase shall continue for the
next twelve (12) month period of the Term of the Agreement
(collectively "Nortel's Purchase Commitment") on the following basis:
a) where Avanex has complied with the performance requirements set
out in Sub-Sections 9.5.2 and 9.5.3, to the reasonable
satisfaction of Nortel during such first twelve (12) month
period, Nortel's Purchase Commitment shall remain overall at the
said same level;
b) where Avanex has reasonably exceeded the performance requirements
set out in Sub-Sections 9.5.2 and 9.5.3, to the reasonable
satisfaction of Nortel during such first twelve (12) month
period, and subject to Nortel's other legal obligations and
commitments, Nortel shall in good faith use reasonable commercial
efforts to increase the percentage of business in Nortel's
Purchase Commitment to match the level of the exceeded
performance by Avanex, provided that Nortel makes no firm
commitment to effect such increase;
c) where Avanex has failed to meet the performance requirements set
out in Sub-Sections 9.5.2 and 9.5.3, to the reasonable
satisfaction of Nortel, during such first twelve (12) month
period, then the percentage of business in Nortel's Purchase
Commitment may be decreased by Nortel to the level calculated by
factoring in any reduced Nortel Purchase Commitment for any
particular Product.
Page 14
The Parties agree to meet prior to the end of the first twelve (12)
month period of the Agreement, to discuss Avanex's performance
hereunder and Nortel's Purchase Commitment in accordance with the
criteria, for the next twelve (12) month period of the Agreement.
9.5.2 Nortel's Purchase Commitment may decrease (and any such decrease may
subsequently be reversed as provided for herein) in accordance with the
following:
"Delayed Delivery" shall be any instance where Avanex fails to make a
shipment that a) is in compliance with the quantity of Products in a
Release and the delivery date of such Products in accordance with
Section 3.4 of Exhibit C, for Products supplied pursuant to the
Demand-Pull Program, or b) as per the mutually agreed-upon delivery
date with respect to Products ordered under a Purchase Order.
"Default Period" shall be any calendar week where Avanex has made a
Delayed Delivery.
"Delivery Default" will be deemed to occur if there are three
consecutive Default Periods, or five Default Periods, for the same
particular Product within any calendar quarter.
Upon the occurrence of a Delivery Default, Nortel may, upon written
notice to Avanex, reduce by up to ten (10) percent Nortel's Purchase
Commitment for the particular Product for that calendar quarter.
Upon the occurrence of a second Delivery Default for the same
particular Product within the same calendar quarter, Nortel may, upon
written notice to Avanex, reduce by up to an additional fifteen (15)
percent Nortel's Purchase Commitment for the particular Product for
that calendar quarter.
Upon the occurrence of a third Delivery Default for the same particular
Product within the same calendar quarter, Nortel may, upon written
notice to Avanex, reduce by up to an additional twenty (20) percent
Nortel's Purchase Commitment for the particular Product for that
calendar quarter.
In addition, and notwithstanding the terms of this Section 9.5, Avanex
herein recognizes Nortel's need to respond to increases in demand for
the Products, and to the extent that Avanex cannot meet such increases
in demand, it is understood that Nortel may seek, at its sole
discretion to have such increased demand fulfilled by another supplier.
If, at anytime within ninety (90) days from the date of written notice
to Avanex reducing Nortel's Purchase Commitment pursuant to the
foregoing provisions, there are no Default Periods for three
consecutive weeks for the particular Product, then such reduction to
Nortel's Purchase Commitment for that particular Product will be
reversed and returned to the original level of Nortel's Purchase
Commitment for that particular Product prior to such reduction;
provided, however, that if Nortel actually purchases and receives
delivery of the total quantity by which Avanex is in default under the
Delivery Default of that particular Product from an alternative vendor
for that particular Product covered by that Delivery Default, and if
such alternative vendor makes a permanent investment in capital
equipment, personnel and supply chain commitments in order to supply
such Products, then Nortel will have no obligation to make up the value
of the business Avanex has lost due to such Delivery Default.
Page 15
9.5.3 Avanex agrees to commit manufacturing capacity to provide Nortel with
the ability to increase its requirements for Products on the following
basis. The Parties agree to review the following manufacturing capacity
commitments early in the third quarter of calendar year 2000:
That for all Products, Avanex commits, in each of the first, second,
third and fourth 6-month periods of the Agreement, to a minimum
cumulative ramp-up flex of thirty percent (30%) of the mutually agreed
reference baseline quantities for Products tied to the Forecast run
rates effective at the beginning of each such 6-month period (the
"Baseline Product Quantity"). The ramp-up flex within any such 6-month
period shall be a twenty percent (20%) flex of the Baseline Product
Quantity in four (4) weeks, or a forty percent (40%) flex of the
Baseline Product Quantity in eight (8) weeks.
32.12.l In addition to Avanex respecting its obligations set out in
Sub-Sections 9.5.2 and 9.5.3, Nortel's Purchase Commitment is further
subject to Avanex's ability in achieving competitive pricing for
Products and new products. Where Avanex's proposed pricing for such
Products and new products is competitive with bona fide prices received
by Nortel from credible qualified third-party suppliers with the
reliable ability to supply the volumes quoted within the relevant time
frames, the Nortel Purchase Commitment for each specific Product or new
product shall remain at the level specified in Exhibit A. Where
Avanex's proposed pricing for such Products or new products is not so
competitive, the Parties shall discuss and seek to arrive at
competitive prices, whereupon the Nortel Purchase Commitment for each
specific Product or new product shall remain at the level specified in
Exhibit A. The determination of whether Avanex's pricing is
"competitive" will be made by Nortel acting in good faith, based on
competitive factors, including, but not limited to pricing (plus or
minus 3%) capacity to deliver, and supplier performance.
32.12.1 The Parties further agree to hold monthly operational and quarterly
executive reviews at mutually agreed upon times and places during the
term of the Agreement.
32.12 Nortel Networks may at any time for its convenience and without cause,
reschedule the Delivery Date of ordered Products, provided such
rescheduled Delivery Date shall not exceed ninety (90) Business Days
from the date the Products were originally scheduled to be delivered.
9.7 Nortel Networks can unilaterally: (i) cancel delivery of Products under
a Purchase Order, in whole or in part, subject to payment of a
cancellation fee based on the purchase price applicable to the
cancelled portion of the Purchase Order, in accordance with the
following:
Delivery Date Cancellation Fee
------------- ----------------
2 - 4 weeks 40% of purchase price
>4 - 6 weeks 25% of purchase price
>6 - 8 weeks 10% of purchase price
>8 weeks No cancellation fee
Provided however, that if the Products are custom to Nortel Networks
such that the Products cannot be sold to other customers of Avanex
without costs significantly greater than the
Page 16
Cancellation Fees set forth above, the parties shall negotiate in good
faith the Cancellation Fee for the Purchase Order for those Products,
provided however that Avanex has in good faith previously utilized
reasonable commercial efforts to minimize its damages and sell such
Products to other Avanex customers.
10. PRICES AND PAYMENTS
10.1 Except as specifically provided herein, any charges incurred by a Party
in performing its obligations hereunder shall be paid by that Party and
shall not be subject to reimbursement by the other Party.
10.2 Prices applicable to Blanket Purchase Orders, Releases and Purchase
Orders for Products and Repair Services issued hereunder shall be,
subject to the provisions of this Section 10, the Prices as set forth
in Exhibit A. Prices shall be firm throughout the Term except for cost
reductions and volume discounts. The Parties shall review Prices every
six (6) months --- retroactive to January 1, 2000 --- or sooner upon
mutual agreement of the Parties. Nortel Networks shall promptly, using
good faith and reasonable commercial efforts to do so no later than
forty-five days (45) from receipt of invoice, reimburse Avanex, upon
invoice, or shall pay directly, if so requested by Avanex, all taxes
and charges imposed by any federal, state, or local governmental or
taxing authority, relating to the purchase, ownership, possession, use,
operation or relocation of Products purchased, excluding, however, all
taxes computed upon the net income of Avanex.
10.3 Product Prices are: (a) FCA Avanex's Fremont plant; (b) stated and
payable in US currency; (c) include packing, and other import duties
and customs charges; and (d) exclude all applicable federal, state or
local taxes.
10.4 Avanex further represents and warrants that the Prices charged to
Nortel Networks for Products and Repair Services supplied hereunder are
and will continue to be as low as those charged by Avanex, at a
particular time, to any other party with whom Avanex has entered into
an OEM agreement (or similar contractual arrangement), for the same
Products and Repair Services or for products or services
interchangeable with, or equivalent to, the Products and Repair
Services, in the same year and in similar quantities.
10.5 To the extent that Avanex's records may be relevant in determining
whether Avanex is complying with the requirements of this Agreement,
Nortel Networks shall have the right, through independent Certified
Professional Accountants acceptable to both Parties, to examine and
audit, at most on a quarterly basis, during normal business hours, such
records as may, under recognized accounting practices, contain
information bearing upon the prices applicable to the providing of
repair services similar to, or interchangeable with, the Repair
Services to any other party or the sale of the same Products or
products similar to, or interchangeable with, the Products to any other
party, such records to be kept clear and accurate and in a form and
content sufficient and adequate to permit audit as aforesaid. Nortel
Networks shall retain such inspection and audit rights for so long as
it will be procuring Products and Repair Services from Avanex. Such an
audit will take
Page 17
place under a reasonable confidentiality agreement between Avanex and
the auditor. The auditor will disclose to Nortel only whether he / she
found Avanex to not be in compliance with the requirements of this
Agreement, and, if so, the amount and period of time of that
discrepancy.
10.6 Avanex shall promptly notify and extend to Nortel Networks any
reductions made by Avanex in its published list prices and any
increases in discounts for Products. Such price reductions and
increased discounts shall apply to Blanket Purchase Orders, Releases
and Purchase Orders received by Avanex on or after the effective date
of the price reduction. Any price decreases will be immediately applied
to any Blanket Purchase Orders, Releases or Purchase Orders received
and acknowledged but not delivered by Avanex, with the exception of
partial shipments on Purchase Orders already delivered.
10.7 In an effort to provide Nortel Networks the opportunity to
competitively and profitably offer Products in high volume
applications, Avanex shall offer to Nortel Networks, as agreed upon by
the Parties, additional discounts on Products set forth in Exhibit A
for Nortel Networks' use in high volume, competitive price proposals.
10.8 Payment shall be due to Avanex from Nortel Networks forty-five (45)
calendar days following the receipt by Nortel Networks of an invoice
for the Products, which invoice shall be delivered to Nortel Networks
no earlier than the Delivery Date of the Products.
10.9 Invoices for Products delivered hereunder and for any other amounts
which may be payable hereunder shall be forwarded directly to the
following address (unless Nortel Networks designates, in writing,
another address):
NORTEL NETWORKS CORPORATION
P.O. Box 90510
Nashville, TN 37208-0510
U.S.A.
Attention: Accounts Payable Dept.
11. TITLE AND RISK OF LOSS
11.1 Title to the Products (excluding Software) and risk of loss of and
damage to the Products will pass to Nortel Networks upon delivery FCA
Delivery Location specified by Nortel Networks in accordance with
Section 9 (Delivery) provided that under Section 13.6 (Warranty), 14.2
and 14.7 (Repair Procedures), risk of loss of or damage to the
replacement Products will pass to Nortel Networks upon the delivery
thereof at a Nortel Networks designated destination.
12. ACCEPTANCE OR REJECTION
12.1 Nortel Networks reserves the right to accept or reject Products ordered
hereunder after the delivery of such Products to Nortel Networks'
facility or, as the case may be, to a Nortel Networks customer's site.
Products shall be deemed accepted by Nortel Networks unless Nortel
Networks
Page 18
notifies Avanex that such Products are rejected and provides the
reasons for such rejection. Within thirty (30) calendar days after
Nortel Networks' receipt thereof at its facilities or, when the
Products are received at a Nortel Networks customer's site, as the case
may be, upon completion of installation and testing of the Products or
thirty (30) calendar days after such receipt of the Products at Nortel
Networks customer's site, whichever event occurs first.
12.2 Subject to Section 12.1 above if any Products are found not to be in
substantial conformance with this Agreement, including the
Specifications, applicable Purchase Order or Release, and/or fail to
meet any of the acceptance criteria specified in the applicable
Specifications, and/or in the event an excessive failure rate (as
defined in the Specifications) is observed by Nortel Networks with
respect to Products contained in a lot/shipment, Nortel Networks shall
have the right, notwithstanding the warranty provisions contained in
this Agreement, to reject the same and cancel the affected Purchase
Order or Release, or, at its option, require that such Products be
replaced or repaired within ten (10) Business Days at Avanex's risk and
expense (including shipping charges). Any notice of rejection issued by
Nortel Networks under this Section 12.2 will include a reasonably
complete description of the deficiencies.
12.3 Payment or acceptance by Nortel Networks under this Agreement shall not
be deemed to constitute a waiver of the rights which Nortel Networks
may have resulting from Avanex's delivery of faulty or defective
Products.
13. WARRANTY
13.1 Avanex warrants that:
a) Except for Products repaired in accordance with Section 15
hereto, Products shall, at the Delivery Date, be new and free and
clear of all security interest or other lien and other
encumbrance other than a purchase money security interest in
Products and products shipped by Avanex but not yet paid by
Nortel Networks;
b) for a period of [*] from the Delivery Date or, [*] from the
manufacturing date stamped on the Products, whichever period
expires last (such period being hereinafter referred to as the
"Product Warranty Period"), the Hardware shall be free from
defects in materials and workmanship and shall conform to and
operate in accordance with the Specifications;
c) with the exception of any notice which may be provided by Avanex
pursuant to Section 21 (Hazardous Materials), the Hardware
furnished by Avanex, as described in this Agreement, is safe for
normal use, is non-toxic, presents no abnormal hazards to persons
or their environment, and may be disposed of as normal refuse
without special precautions;
e) all Products provided pursuant to this Agreement, when used in
accordance with the Specifications and Documentation, as well as
all and any software, systems or tools of Avanex used by it in
the supply of Product and/or Services or performance of this
Page 19
[*] Certain information on this page has been omitted and filed separately
with the Commission. Confidential treatment has been requested with
respect to the omitted portions.
Agreement in any way, shall (1) process date and time related data
without causing any processing interruptions, abnormal
terminations, or changes in performance characteristics, and (2)
shall process and manipulate all date and time related functions
correctly. Without limiting the generality of the foregoing, all
Products and all and any software, systems or tools of Avanex
used by it in the supply of Product and/or Services or
performance provided pursuant to this Agreement, shall:
i) correctly handle date and time related data after
January 1, 2000, including but not limited to accepting
date and time input, providing date and time output, and
performing ongoing operations on dates and times and
portions of dates and times including, but not limited to,
calculating, comparing and sequencing of dates and times
(in both forward and backward operations spanning century
boundaries);
ii) correctly handle leap year calculations (including but not
limited to identification of leap years, interval
calculations, (in both forward and backward operations
spanning century boundaries), day-in-year calculations,
day-of-the-week calculations, and week-of-the-year
calculations);
iii) correctly handle all two digit date and time related input
in a manner that resolves ambiguity as to century in a
disclosed, defined and predetermined manner.
Avanex shall immediately notify Nortel Networks of any and all
date or time-related bugs, errors or deficiencies in the Products
and in all and any software, systems or tools of Avanex used by it
in the supply of Product and/or Services or performance of this
Agreement in any way. For the purpose of problem resolution, any
such date or time-related bugs, errors or deficiencies shall be
deemed (as established by the appropriate license or support
agreement) to be bugs, errors or deficiencies of the highest
priority level, and shall be resolved according to the procedures
provided for such priority level;
f) it has developed, is the owner of and/or possesses all necessary
rights, including, without limitation, rights in respect of third
party software, to use and to market the Products as contemplated
hereunder;
g) no license or other agreement is or will be violated by the terms
and conditions of this Agreement;
h) it is either the owner or is otherwise in possession of sufficient
licensed rights pertaining to any portion of the Products
(including the Product Hardware) in order to allow it to satisfy
all of its obligations hereunder;
i) without limiting the generality of the foregoing provisions,
Avanex represents and warrants that it has the authority to enter
into this Agreement and has obtained on each delivery date all
rights and waivers necessary to sell Products to Nortel Networks
and to grant the rights
Page 20
granted hereunder. Avanex represents and warrants that the
Products and the exercise of the rights granted in this
Agreement do not infringe any third-party patent, copyright,
trademark, trade secret or other intellectual property right.
The warranty provisions contained in this Section 13.1 shall apply
during and after the Product Warranty Period, except as expressly set
forth in 13.1 b) and c) above.
13.2 This warranty does not apply to items normally consumed in operation,
such as lamps and fuses and to any defect which has been caused by
Nortel Networks or its customers and arises from mishandling, misuse,
neglect or improper testing or repair.
13.3 Avanex shall, at its expense, during the Product Warranty Period,
provide Repair Services in accordance with Section 15 (Repair Services)
in respect of Hardware, which have failed to conform to above
warranties.
13.4 All Hardware supplied under Section 15 (Repair Services) pursuant to
Avanex's warranty obligations under this Section 13, shall be
functionally equal or better than the vintage of the replaced units and
must be backward compatible and meet the minimum field baseline.
13.5 Hardware repairs or replacements effected during the Product Warranty
Period shall be warranted, as above provided, for the remainder of the
Product Warranty Period or for ninety (90) days from the Repair Date,
whichever is longer. Hardware repairs or replacements effected after
expiry of the Product Warranty Period shall be warranted, as above
provided, for a period of ninety (90) days after the Repair Date
stencilled or otherwise identified in accordance with Section 14.4
(Repair Procedures). All transportation and other expenses arising from
shipping the non-conforming Products to, and the repaired or
replacement Products from, Avanex shall be paid by Avanex.
13.6 Above warranty shall survive inspection, acceptance and payment. In the
event Avanex does not so perform under the warranty provisions for
repair or replacement in accordance with this Section, then upon Nortel
Networks' request, and in addition to any other right available to
Nortel Networks hereunder, Avanex shall: (a) refund to Nortel Networks
the Price of such Products; and (b) be entitled to the return of such
Products. All transportation and other expenses arising from shipping
the non-conforming Products to, and the repaired or replacement
Products from, the Delivery Location shall be paid by Avanex.
13.7 Any failure by Avanex to execute its warranty obligations as contained
in this Section 13 and Section 15 (Repair Services) shall constitute a
material breach of Avanex's obligations hereunder.
13.8 EXCEPT FOR THE EXPRESS WARRANTIES STATED IN THIS AGREEMENT, AVANEX
DISCLAIMS ALL WARRANTIES ON PRODUCTS FURNISHED UNDER THIS AGREEMENT,
INCLUDING, WITHOUT LIMITATION, ALL IMPLIED WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
Page 21
14. REPAIR PROCEDURES
14.1 This Section 14 shall be applicable to the providing of Repair Services
described in Section 15 by Avanex during and after the Product Warranty
Period.
14.2 a) Prior to returning any defective Products to the FCA Repair
Location, Nortel Networks will notify Avanex in writing of the
defect, if known at that time, and will request authorization
from Avanex for the return of such Products. Upon such request,
Avanex shall provide Nortel Networks with a Return Material
Authorization ("RMA") number to be prominently displayed on the
shipping container for the defective Products and advise Nortel
Networks of the FCA Repair Location to which the Products should
be returned.
b) In all cases covered in Section 15 (Repair Services), Nortel
Networks shall then ship such Products to Avanex, freight prepaid
and properly insured. Nortel Networks shall prepare proper export
documentation as per Avanex's instructions, evidencing Nortel
Networks' ownership of the Products and shall comply with the
requirements set forth in Exhibit L (NAFTA).
14.3 Nortel Networks shall furnish the following information with Products
returned to Avanex for Repair Services:
i) Nortel Networks' or the Nortel Networks Company's name and
complete address;
ii) quantities and model numbers of Products being delivered for
repair;
iii) the nature of the defect or failure, if known;
iv) Avanex's above-mentioned RMA number and the Purchase Order number
under which repairs are to be made, if Product is no longer under
warranty;
v) name(s) and telephone number(s) of Nortel Networks' employee(s) or
other designated persons to contact in case of questions about the
Products;
vi) ship-to address or Nortel Networks' location to which repaired or
replacement Products should be returned;
vii) whether or not returned Products are under warranty.
14.4 Avanex shall date stamp each repaired and returned Product with
the Repair Date and type of repair "pre fix" as per Bellcore GR-209
specifications and Specifications described in Exhibit B. Hardware
repaired by Avanex shall be stamped in accordance with requirements
outlined in Bellcore TR-NWT-000078. Without limiting the generality of
the foregoing, the stamping shall include the Repair Date stenciled or
otherwise identified in a permanent manner at a readily visible
location on the Hardware, unless otherwise directed by Nortel
Networks.
14.5 Avanex shall promptly provide a written notice to Nortel Networks with
the name(s) and telephone number(s) of the individual(s) to be
contacted concerning any questions that may arise with respect to the
Repair Services, and if required, specify any special packing of
Products which might be necessary to provide adequate in-transit
protection from transportation damage.
Page 22
14.6 Once Products have been repaired or replaced by Avanex, Avanex shall
reissue to Nortel Networks an invoice for such repaired or replacement
Products and the charges applicable to the providing of Repair Services,
if any, as set forth in Exhibit D. Avanex's invoice shall contain the
following:
i) Nortel Networks' Purchase Order number for these Repair Services;
ii) a detailed description of the Repair Services provided by Avanex
and the need therefor;
iii) quantities and model numbers of Products repaired and associated
repair charges;
iv) applicable sales or excise taxes;
v) total amount payable;
vi) address to which payment should be made.
14.7 The repaired or replacement Products shall be delivered by Avanex to the
destination specified by Nortel Networks, freight prepaid and properly
insured. Avanex shall prepare proper export documentation as per Nortel
Networks' instructions, evidencing Nortel Networks' ownership of the
Products and shall comply with the requirements set forth in Exhibit L
(NAFTA).
14.8 Avanex shall promptly notify Nortel Networks of returned Products which
are found by Avanex to be beyond repair. Products shall only be
considered beyond repair after agreement of the Parties to that effect.
All Products which are found to be beyond repair shall be returned to
Nortel Networks.
15. REPAIR SERVICES
15.1 Repair Services shall be available to Nortel Networks in accordance with
the provisions contained in this Section 15 and in Section 14 (Repair
Procedures).
15.2 This Section 15 shall be applicable to the providing of Repair Services
by Avanex during and after the Product Warranty Period.
15.3 To order Repair Services after expiry of the applicable Product Warranty
Period, Nortel Networks shall issue a Purchase Order and such Purchase
Order shall contain the description of the requested Repair Services.
15.4 Repair Services shall be provided by Avanex at no charge to Nortel
Networks during the Product Warranty Period. After expiry of the Product
Warranty Period, Repair Services shall be at prices set forth in
Exhibit D (Repair Services and Technical Assistance Rates) unless
otherwise set forth in this Section 15 or unless covered by Section 5
(Product and Process Changes).
15.5 Like-for-Like Repair Services
15.5.1 Avanex shall hold at its expense and at its Fremont, CA plant a quantity
of spares at the module level ("Spare Buffer"), such quantity to be
determined and agreed to by the Parties on the basis of the volume of
Products delivered hereunder and the applicable Mean Time Between
Failure ("MTBF") rates. In any event, the Spare Buffer to be held by
Avanex shall be sufficient to enable immediate replacement of Products
by Nortel Networks to its customers in all cases of failure
Page 23
which do not fall in the category of a retrofit. Avanex's obligations
under this Section 15.5.1 do not cover spares which may be required by
Nortel Networks for Product retrofits or upgrades.
15.5.2 Nortel Networks will at its option provide customers with one of the
following replacement services:
i) replacement of Products from the Spare Buffer after the receipt
of defective Products; or
ii) in exceptional cases, replacement of the Products from the Spare
Buffer on a "Phone-in" advance replacement basis. The
defective Products are generally returned to Nortel Networks by
end-user customers within sixty calendar days.
Avanex will maintain sufficient Products in the Spare Buffer to
accommodate both replacement services.
Avanex will in good faith utilize reasonable commercial efforts to
immediately replenish the Spare Buffer with Product replacements that
are functionally equal or better than the vintage of the replaced
Products, are backward compatible and meet the minimum field baseline,
or with new Products, at Avanex's option.
In cases of "catastrophic" failure, Avanex shall divert manufacturing
output for replacement of faulty modules. Avanex must use its
reasonable commercial efforts not to affect the delivery schedule of
new Products but should delays in delivery occur, they shall not
constitute a breach of this Agreement.
15.5.3 Products returned to Avanex for Repair Services shall be shipped by
Nortel Networks freight and insurance prepaid.
15.5.4 Avanex shall track any defective Product by its unique serial number
throughout the repair process and provide a failure analysis report as
set forth in Exhibit F.
15.6 Same-for-Same Repair Services
The following procedures will apply:
a) Products returned to Avanex for Repair Services shall be shipped
by Nortel Networks freight and insurance prepaid.
b) Avanex shall track any defective Product by its unique serial
number throughout the repair process.
c) Avanex shall return, after having repaired and updated the
Products to the minimum field baseline, the exact same Products
having the same serial number. If the serial number has to
change for any reason, Avanex shall, on the `repair tag'
originally provided by Nortel Networks, document the following
information: old serial number, new serial number and
reason(s) for change.
Page 24
d) Avanex shall return any repaired Products with the `repair tag'
that was originally provided by Nortel Networks with the
defective Products. Avanex shall provide all post-repair
information as required on the `repair tag'.
e) Avanex shall complete the Same-for-Same process within ten (10)
calendar days of having received the defective Product.
15.7 Fast Cycle Failure Analysis
15.7.1 Avanex shall perform a Fast Cycle Failure Analysis ("FCFA"), at no cost
during the Product Warranty Period and upon mutually agreeable terms
outside the Product Warranty Period, to Nortel Networks on Products
which have caused any service interruption in the field or
as may otherwise be reasonably requested by Nortel Networks. Nortel
Networks will request a separate RMA number for each Product returned
for a FCFA. A FCFA shall be performed by Avanex in accordance with the
following additional requirements:
a) FCFA shall include a detailed root cause analysis, using
engineering tools such as Environment Stress Screening ("ESS")
and any other tools which may be required to determine the cause
of the failure.
b) Avanex shall track any defective Product by its unique serial
number throughout the repair process.
c) Avanex shall return, after having repaired and updated the
Products to the minimum field baseline, the exact same Products
having the same serial number. If the serial number has to change
for any reason, Avanex shall, on the `repair tag' originally
provided by Nortel Networks, document the following information:
old serial number, new serial number and reason(s) for change.
This information will also be documented in the FCFA report. The
Products shall not be "upgraded" to other than the actual unit
release vintage until root cause analysis is completed and the
Products successfully pass the complete test cycle. The Products
shall not be repaired without completion of the FCFA activity.
d) Avanex shall return the repaired Products with a written report
documenting all findings as a result of the FCFA.
e) Avanex shall complete the FCFA process within ten (10) Business
Days of having received the defective Products at its FCA Repair
Location mentioned in Exhibit D herein. Nortel Networks shall
provide all available technical information to allow Avanex to
understand the circumstances and environmental conditions that
led to the failure of the Products.
f) Avanex shall inform Nortel Networks of the return Product
shipping information as soon as it is available. The shipping
information will include, date shipped, carrier, waybill number
and any other information that will help Nortel Networks expedite
the return of the Products.
g) In the event that the results of the FCFA indicate deficiencies
with the Product Hardware or Software, then Avanex will modify
the Products to eliminate such deficiencies. Such modifications
will be implemented in accordance with Section 5 (Product and
Process Changes).
Page 25
15.8 Products found defective within the first ninety (90) calendar days
from their initial utilization at customer site, (referred to as `Dead
On Arrival' ("DOA") or Early Life Failure ("ELF")), shall be returned
to Avanex along with the RMA documentation. Returned DOA/ELF Products
shall, at no charge to Nortel Networks, be tested through full
functional tests and ESS as appropriate in order to provide a root
cause analysis, then repaired, re-furbished, upgraded to the latest
version or release, stamped with the Repair Date and returned to Nortel
Networks as new Products. Should the DOA/ELF occurrence represent more
than twenty percent (20%) of the Products RR as defined in the
Specifications, then Avanex shall, in addition to performing root cause
analysis, implement a corrective plan of action within thirty (30)
calendar days of this occurrence being reported. Avanex will update
Nortel Networks in writing with the findings of the root cause analysis
as well as with the corrective plan of action.
15.9 In case of a No Fault Found ("NFF") in respect of Products returned or
if Nortel Networks requests re-testing of Products reasonably known to
Nortel Networks as being in good condition, Avanex shall invoice Nortel
Networks at the Prices specified in Exhibit D for their full functional
tests and ESS and such Products shall be returned to Nortel Networks
after the tests are completed, freight collect using Nortel Networks'
designated carrier. Test turnaround time shall not exceed ten (10)
Business Days from the date the Product is received at Avanex
facilities and a Purchase Order number has been received from Nortel
Networks.
15.10 Should the Product failures classified by Avanex as NFF represent more
than twenty percent (20%) of the Products RR as defined in the
Specifications, then Avanex shall, in addition to performing a root
cause analysis, implement a corrective plan of action within thirty
(30) calendar days of this occurrence being reported. Avanex will
update Nortel Networks in writing with the findings of the root cause
analysis as well as with the corrective plan of action.
15.11 Emergency Replacement Products
In emergency situations threatening continuity of service or Nortel
Networks end-user's in-service date, Avanex shall in good faith, at
Nortel Networks' option, utilize reasonable commercial efforts to
deliver to Nortel Networks or its end-users emergency replacement
Products within twenty-four (24) hours of Nortel Networks' request,
which may be conveyed to Avanex by telephone or facsimile. All Products
supplied under this Section shall be functionally equal or better than
the vintage of the replaced units and must be backward compatible and
meet the minimum field baseline. Emergency replacement Products shall
be delivered via next day service and, for Products not under warranty,
invoiced at rates then current for Products. Nortel Networks agrees to
pay such invoices within forty-five (45) calendar days. In addition to
above twenty-four (24) hour emergency replacement service, Avanex shall
make available to Nortel Networks at a price premium specified in
Exhibit D, a 24 hours a day/7 days a week emergency replacement
service for cases where Nortel Networks cannot deliver from its
emergency stock. Under this service, Avanex will in good faith utilize
reasonable commercial efforts to ship new units to the destination
designated by Nortel Networks, freight collect using Nortel Networks'
designated carrier within three (3) hours of Nortel Networks' verbal
request, such verbal request to be confirmed by Nortel Networks in
writing and transmitted by facsimile or other means of communications,
prior to
Page 26
shipment of the units by Avanex. In the case of shipment outside of the
United States, Avanex shall prepare proper export documentation as per
Nortel Networks' instructions, evidencing Nortel Networks' ownership of the
Product; customs clearance and duty fees (as applicable) shall be the
responsibility of Nortel Networks. This emergency service shall be
available to Nortel Networks through the following Avanex's emergency
telephone number: 1-877-928-2639.
16. CONTINUING AVAILABILITY OF TECHNICAL ASSISTANCE, REPAIR SERVICES,
MAINTENANCE, REPLACEMENT AND REPAIR PARTS
16.1 In no event shall the Products be discontinued until after the expiry of a
period of twelve (12) months, or such other period as may be agreed upon by
the Parties, from Nortel Networks' written consent and Avanex shall accept
all Releases and Purchase Orders submitted by Nortel Networks within such
period for any such affected Products, regardless of quantity.
16.2 During, and for a period of five (5) years after the expiry or termination
of this Agreement, Avanex agrees to provide Repair Services on all Products
ordered hereunder and to offer for sale to Nortel Networks, functionally
equivalent maintenance, replacement and repair parts as may be necessary
for the continued maintenance of the Products, including discontinued
Products.
16.3 Avanex, upon supply discontinuance notices from its suppliers, of any sole
source/critical components incorporated into the Products, shall notify
Nortel Networks immediately upon receipt of such notice. Avanex shall
endeavor to have its suppliers provide notices one (1) year in advance of
discontinuance. Avanex and Nortel Networks shall determine the quantity of
such components to be ordered as last time buy to cover for Nortel
Networks' spare parts requirements. Avanex and Nortel Networks will
determine the quantity of such components to be ordered as last time buy to
cover for spare maintenance, replacement and repair parts requirements as
described in Section 15 (Repair Services). Furthermore, should the
unavailability of a component require Avahex to develop a replacement
product, Avanex will jointly decide with Nortel Networks on last time buys
for such component to ensure continuity of supply until the replacement
product is approved by Nortel Networks and ready to be manufactured. The
provisions contained in this Section 16.3 shall be applicable for a period
of five (5) years after the expiry or termination of this Agreement.
16.4 During, and for a period of five (5) years after the expiry or termination
of this Agreement, Avanex agrees to provide technical assistance in
accordance with Section 17 (Technical Assistance and Marketing Support).
17. TECHNICAL ASSISTANCE AND MARKETING SUPPORT
17.1 Technical assistance consists of those services described in this Section
and in Exhibit H.
17.2 Product training shall be provided by Avanex to Nortel Networks as set
forth in Exhibit H.
17.3 In addition, Avanex shall provide Nortel Networks with Product training
documentation and related information material as set forth in Exhibit H,
Part II.
Page 27
17.4 All technical assistance rendered during the Product Warranty Period shall
be provided to Nortel Networks at no charge. In all other cases, Avanex's
current rates applicable to technical assistance are those set forth in
Exhibit D. Any technical assistance which Avanex shall provide to Nortel
Networks or its customers shall be pursuant to a written request from
Nortel Networks' designated personnel, or such other individual that Nortel
Networks may from time to time designate. The availability or performance
of technical assistance under this Section 17, shall not be construed as
altering or affecting Avanex's other obligations under this Agreement,
including under Sections 6 (Quality Control and Reliability Requirements,
Supply Management and Nortel Networks' Audit Rights), 13 (Warranty) and 5
(Product and Process Changes).
17.5 Avanex shall provide technical assistance as set forth in Exhibit H, Part
II in order to facilitate the providing by Nortel Networks of technical
assistance to its customers. In order to facilitate Nortel Networks'
support of its customers, Avanex shall, subject to Section 17.4 hereof,
provide to designated Nortel Networks personnel only for a period of five
(5) years following the expiration of this Agreement, telephone access to
qualified Avanex's technical personnel twenty-four (24) hours per day,
seven (7) days per week, every day of the year.
17.6 It shall be Nortel Networks' responsibility to provide `first line'
technical assistance to its customers as described in Exhibit H, Part I.
17.7 Avanex's failure to provide technical assistance in any material respect as
required under this Section 17 shall constitute a material breach of
Avanex's obligations hereunder.
17.8 In order to assist Nortel Networks in its Product related marketing
activities, Avanex shall provide Nortel Networks with marketing support in
accordance with Exhibit J.
18. DOCUMENTATION
18.1 The Product Documentation shall be developed by Avanex in accordance with
the Specifications, and be made suitable for Nortel Networks' customers by
including Nortel Networks-specific items such as warranty, logos, Product
names and drawings. A hard copy and an electronic version of the
documentation marked "Draft" shall be provided to Nortel Networks for
review. After two (2) weeks, Nortel Networks shall return the draft
documentation with comments. These reasonable comments shall be integrated
by Avanex into the Documentation, so long as they do not affect the
Specifications. An ordering section shall be provided by Nortel Networks to
Avanex in both the hard and electronic form for inclusion by Avanex into
the Documentation. The Documentation shall be ready for release to
customers by the end of the corresponding Acceptance Program. Updated
versions of the ordering section shall be provided by Nortel Networks as
the product line(s) develop(s) and new configurations pass the Acceptance
Program.
18.2 Avanex shall provide, at no charge to Nortel Networks, for each Product
delivered one (1) set of the following Product Documentation in accordance
with the Specifications: all Product descriptions, planning guides,
operations manuals, installation manuals, and maintenance manuals
Page 28
normally provided by Avanex to customers to facilitate their installation.
use, and maintenance of the Products.
18.3 Avanex shall supply to Nortel Networks, at no additional charge, hard and
electronic copies of Avanex's Product Documentation (i.e., manuals,
application notes and sales collateral) and any technical assistance
reasonably required by Nortel Networks to adapt such Documentation to
Nortel Networks' standard format. Avanex shall also continue to provide to
Nortel Networks, at no additional charge, during the Term of this Agreement
any updates to Avanex's Product Documentation, as soon as they are
available.
18.4 Avanex hereby grants to Nortel Networks, at no cost, the right to use,
copy, modify and translate promotional material, the Product Documentation
furnished hereunder and other material made generally available by Avanex
to its end-users and to use such material to further Nortel Networks'
Product marketing efforts.
18.5 Any modifications to the Product Documentation shall be notified to Nortel
Networks by Avanex as described in Section 5 (Product and Process Changes).
19. CONFIDENTIAL INFORMATION
19.1 It is expected that the Parties will disclose to each other certain
business, marketing, technical, scientific or other information of any
Party, including, without limitation, Specifications and Software which, at
the time of disclosure, is designated as confidential (or like
designation), is disclosed in circumstances of confidence, or would be
understood by the Parties, exercising reasonable business judgment, to be
confidential information ("Confidential Information") and each Party
recognizes the value and importance of the protection of the other's
Confidential Information. All Confidential Information owned or controlled
by one Party and disclosed to the other Party shall remain solely the
property and a trade secret of the disclosing Party, and its
confidentiality shall be maintained and protected by the other Party with
the same degree of care used to protect its own proprietary and
confidential information of a similar nature, but no less than reasonable
care, to prevent the unauthorized use, dissemination or publication of the
Confidential Information. Except to the extent required or expressly
permitted by this Agreement, both Parties agree not to duplicate or use in
any manner the other's Confidential Information or to disclose it to any of
their employees not having a need to know for the purposes of this
Agreement or to any third party. In addition, the receiving Party shall not
(i) attempt to or assist others to develop or produce any product based on
or utilizing such Confidential Information, (ii) make any other use of such
Confidential Information in any way or for any purpose other than to
exercise the receiving Party's rights or to perform the receiving Party's
obligations under this Agreement, or, (iv) reverse engineer any of the
disclosing Party's Products, products, or any portions thereof.
The receiving Party's employees having a need to know the Confidential
Information for the purpose of this Agreement may receive disclosure of the
Confidential Information provided such employees are bound by
confidentiality obligations no less stringent than those set forth in this
Section 19. The confidentiality provisions contained herein shall survive
the expiration or termination of this Agreement for a period of ten (10)
years.
Page 29
19.2 Confidential Information shall not include information which:
a) now is, or hereafter becomes, available to the public through no act
or omission of the receiving Party; or
b) is documented as being known by the receiving Party prior to its
disclosure by the other Party; or
c) is independently developed by the receiving Party by persons who
have not had access to the Confidential Information and without
recourse to any Confidential Information received under this
Agreement and is so documented; or
d) is lawfully obtained by the receiving Party from a third party or
parties without breach of confidentiality obligations or is
disclosed hereafter to the receiving Party by a third party who did
not acquire the information directly or indirectly from the
disclosing Party; or
e) is disclosed in response to a valid order of a court or other
governmental body or any political subdivision thereof, but only to
the extent and for the purpose of such order and only if the
receiving Party, to the extent possible, first notifies the
disclosing Party, of such order and permits and reasonably assists
it in seeking an appropriate protective order.
19.3 Subject to the provisions of Sections 19.1 and 19.2 above, nothing in
this Agreement shall be interpreted or construed to limit either
Party's right to perform or to continue to perform its own independent
research, development, manufacturing or marketing of any type of
Products or systems even if such research, development, manufacturing
or marketing pertains to technology or products similar to the
Products.
19.4 Prior to the publication or use by a Party hereto of any advertising,
sales promotions, press releases or other publicity matters relating to
the Products or this Agreement in which the name or logo of the other
Party is mentioned or language from which the connection of said name
can be reasonably inferred or implied, each Party shall obtain the
prior written consent of the other Party. Terms, conditions and general
information of this Agreement shall be held in confidence by both
Parties and only disclosed as may be agreed to by both Parties or as
may be required to meet securities disclosure or export permit
requirements. Neither Party shall make public statements or issue
publicity or media releases with regard to this Agreement or the
relationship between the Parties without the prior written approval of
the other Party.
19.5 Notwithstanding any provision contained herein, Nortel Networks shall
retain all right, title and interest in and to, the Nortel Networks
corporate name, trademarks, logos, color and part number (the "Nortel
Brands") and other proprietary rights related to the Nortel Brands.
19.6 The Parties acknowledge and agree that a breach of this Agreement may
result in irreparable and continuing harm to the disclosing Party for
which there may be no adequate remedy at law. In the event of a breach
or a threatened or intended breach of this Agreement by the receiving
Party, the disclosing Party shall be entitled to seek preliminary
injunctions unilaterally without notice, and final injunctions with
notice, enjoining and restraining such breach, or threatened or
intended breach, and to such other rights and remedies as are available
at law or in equity to the disclosing Party except as expressly set
forth herein.
Page 30
20. INTELLECTUAL PROPERTY RIGHT INFRINGEMENT
20.1 Avanex shall defend and indemnify Nortel Networks and Nortel Networks
Companies (including their directors, officers, employees and agents)
against any and all claims brought against Nortel Networks (including,
without limitation, claims by third parties, distributors, end users
and contractors against Nortel Networks), and shall hold Nortel
Networks and Nortel Networks Companies harmless from all corresponding
damages, liabilities, settlements, costs and expenses (including
attorney's fees) arising out of any claim that the use, copying,
licensing, sublicensing, sale and/or distribution of any Product
delivered hereunder or the exercise of any of the rights granted in
this Agreement infringes any third-party patent, copyright, trademark,
trade secret or other intellectual property right (herein "Infringement
Claim"). Similarly, Nortel Networks shall defend and indemnify Avanex
to the extent Nortel Networks' systems and products are the direct
cause of an Infringement Claim relating to systems-level intellectual
property. (Need to discuss this last wording further). Each Party, as
the case may be, shall give the other prompt notice of, and authority
to defend or settle, any such Infringement Claim and shall give, at
such other Party's reasonable expense, reasonable information and
assistance. Avanex will notify Nortel Networks if Avanex is subject to
any claim or lawsuit in respect of patent, copyright, trade secret or
other intellectual property right infringement regarding any Product
delivered hereunder or any part thereof.
20.2 When notified of an action or motion that seeks to restrict the use,
copying, licensing, sublicensing, sale and/or distribution of any
Product delivered hereunder or the exercise of any of the rights
granted hereunder, Avanex may, (and in the case of a judgment, order or
injunction that restricts the use, copying, licensing, sublicensing,
sale and/or distribution of any Product delivered hereunder or the
exercise of any of the rights granted hereunder, shall), at its option
and expense, (a) obtain the right for Nortel Networks, Nortel Networks
Companies, distributors, end users and contractors to use, copy,
license, sublicense sell and/or distribute any Product delivered
hereunder or exercise any of the rights granted hereunder, (b)
substitute other functionally equivalent product that does not
infringe, or (c) modify such Product so that it no longer infringes.
20.3 The indemnity obligations under the foregoing provisions shall survive
the termination or expiration of this Agreement.
20.4 The foregoing indemnification obligations by Avanex shall not be
applicable in the event the Infringement Claim arises solely from:
a) compliance of the Product with Nortel Networks' or Nortel Networks
Companies' designs; or
b) modification by Nortel Networks or Nortel Networks Companies of the
Product; or
c) use of the Product by Nortel Networks or Nortel Networks
Companies in combination with other products not provided by Avanex
provided the infringement arises from such combination and such
combination was not authorized by or actually known to Avanex.
Page 31
20.5 Nothing contained in this Agreement shall be deemed to grant, either
directly or indirectly or by implication, any license under any patents
or patent applications of Avanex, except that Nortel Networks shall
have the normal non-exclusive, royalty-free license to use that which
is implied, or otherwise arises by operation of law, in the use,
copying, licensing, sublicensing, sale and/or distribution of the
Products.
21. HAZARDOUS MATERIALS
21.1 Avanex shall identify and list in a notice forwarded to Nortel Networks
all of the hazardous or toxic materials which may be contained in the
Products prior to shipping the Products. For the purposes of this
Section 21.1, the hazardous and/or toxic materials shall be those
mentioned in the following: the Toxic Substances Control Act, Resource
Conservation and Recovery Act of 1976, Hazardous Materials
Transportation Act, Occupational Safety and Health Act of 1970,
Comprehensive Environmental Response, Compensation and Liability Act of
1980, Consumer Product Safety Act, Radiation Control for Health and
Safety Act of 1968, Clean Air Act, and Clean Water Act.
32.12 Avanex shall periodically, but no less than annually, review the
pertinent regulations and the materials contained in the Products and
update the lists of hazardous and/or toxic materials accordingly.
32.12 Avanex hereby warrants to Nortel Networks that, with the exception of
the notice referred to above, the Products furnished by Avanex, as
described in this Agreement, are safe for normal use, are non-toxic,
present no abnormal hazards to persons or their environment, and may be
disposed of as normal refuse without special precautions.
21.4 Avanex shall indemnify Nortel Networks for any expenses (including the
cost of substitute materials, less accumulated depreciation) that
Nortel Networks may incur by reason of the recall or prohibition
against continued use or disposal of the Products furnished by Avanex,
whether such recall or prohibition is directed by Avanex, or occurs
under compulsion of law. Nortel Networks shall cooperate with Avanex to
facilitate and minimize the expense of any recall or prohibition
against use of the Products directed by Avanex or under compulsion of
law.
21.5 Avanex shall indemnify, defend and hold harmless Nortel Networks from
any claims, demands, suits, judgments, liabilities, costs and expenses
(including, without limitation, reasonable attorneys' fees) which
Nortel Networks may incur under any of the laws, rules and regulations
referred to in Section 21.1 or any amendment to said statutes by reason
of Nortel Networks' acquisition, use, sale or disposal of the Products
furnished by Avanex. Nortel Networks shall give Avanex prompt notice
of, and authority to defend or settle any such claim, demand, suit,
judgement or liability and shall give, at Avanex's reasonable expense,
reasonable information and assistance.
22. INDEMNITY
Page 32
22.1 General
22.1.1 Each Party shall indemnify and save harmless as "Indemnitees" the other
and its employees, officers and directors from and against any and all
fines, penalties, losses, costs, damages, injuries, claims, expenses or
liabilities as a result of injury to, or death of, any person, or
damage to, or loss or destruction of, any property, arising out of, or
resulting from, or in connection with, this Agreement or the
performance of this Agreement and caused by the negligence or willful
misconduct of the indemnifying Party or a contractor or an agent of the
indemnifying Party or an employee of any one of them (hereinafter
individually and collectively "Liabilities").
22.1.2 Upon request of an Indemnitee, the other Party shall, at no cost or
expense to such Indemnitee, defend or settle any suit or other legal
proceeding asserting a claim for Liabilities, and the other Party shall
pay any reasonable costs and attorneys' fees that may be incurred by
such Indemnitee in connection with any such claim, proceeding or suit.
22.1.3 The Indemnitee shall as soon as practicable notify the other Party of
the assertion of any such claim of which the Indemnitee is aware and
the other Party shall (a) keep the Indemnitee subject to any such claim
fully informed as to the progress of such defense, and (b) afford such
Indemnitee, each at its own expense, an opportunity to participate
fully with the other Party in the defense or settlement of any such
claim, but the other Party shall have sole control of any such
settlement or defense.
22.2 Product Liability
22.2.1 In addition to, and without limiting the generality of, the provisions
contained in Section 22.1, Avanex shall indemnify and save harmless
Nortel Networks and its customers from and against any and all losses,
costs, damages and liabilities (including, without limitation,
reasonable attorneys' fees) and amounts agreed upon in settlement or
awarded in connection with any claim, suit or proceeding which arises
from any injury or death to persons or loss of or damage to property
and which is caused by a Product only to the extent that the Product
caused such injury, death, loss or damage.
22.2.2 Upon request of Nortel Networks, Avanex shall, at no cost or expense to
Nortel Networks, defend or settle any suit or other legal proceeding
asserting a claim, suit or proceeding described in Section 22.2.1, and
Avanex shall pay any reasonable costs and attorneys' fees that may be
incurred by Nortel Networks and its customers in connection with any
such claim, proceeding or suit.
22.2.3 Nortel Networks shall as soon as practicable notify Avanex of the
assertion of any such claim, proceeding or suit of which Nortel
Networks is aware and Avanex shall (a) keep Nortel Networks fully
informed as to the progress of such defense, and (b) afford Nortel
Networks, each at its own expense, an opportunity to participate fully
with Avanex in the defense or settlement of any such claim, proceeding
or suit, but Avanex shall have sole control of any such settlement or
defense.
23. COMPLIANCE WITH LAWS
Page 33
23.1 Avanex represents and warrants that it complies with and shall continue
to comply with and has obtained and will continue to maintain in effect
all licenses and permits required by, and Products shall be in
conformance with, all applicable laws and governmental orders and
regulations in effect in Canada and the United States at the time of
the Delivery Date applicable thereto.
24. CONSEQUENTIAL DAMAGES
24.1 Neither Party shall be liable pursuant to this Agreement for any
incidental or consequential damages or for any damages for loss of
profits or revenues to the extent such damages have been unforeseeable
to the Party, except that (a) Avanex shall pay, without limitation, all
litigation costs, reasonable attorneys' fees, settlement payments and
any damages awarded resulting from any suit, claim or proceeding as set
forth in Section 20 (Intellectual Property Right Infringement) and (b)
Avanex shall hold Nortel Networks and Nortel Networks Companies
harmless from any damages Nortel Networks and the Nortel Networks
Companies have incurred as a result of Avanex's breach of the warranty
set forth in Section 13.1 i).
25. INSURANCE
32.12 Avanex shall procure and maintain in full force and effect during the
period that this Agreement is in effect and for a period of [*]
thereafter, with an insurance company a Comprehensive General
Liability insurance policy with third party liability coverage
protecting Nortel Networks and Nortel Networks Companies against any
loss, liability or expense due to bodily injury, death or property
damage arising out of this Agreement or Products delivered hereunder,
to the extent such loss, liability or expense is due to the negligence
of Avanex. Such policy shall have a combined single limit of a minimum
of [*], shall provide coverage worldwide and shall not be restricted
to occurrences in the country of insurer of Avanex. Nortel Networks
and Nortel Networks Companies shall be additional insureds under such
insurance policy.
25.2 Nortel Networks may at its own expense, and upon [*] written notice
increase the foregoing minimum amount in order to comply with Nortel
Networks' obligations to any customer of any Products provided any
such increase shall not exceed an amount equal to [*] of the
applicable minimum amounts and shall be subject to the availability of
such insurance.
25.3 Such policy shall be endorsed to be primary insurance and shall provide
that it will not be cancelled or altered without [*] prior written
notice to Nortel Networks. Not later than [*] following the execution
of this Agreement, Avanex shall furnish Nortel Networks with a
certificate of such insurance and evidence that the premiums therefore
have been paid. Maintenance of such insurance and the performance by
Avanex of its obligations under this Section 25 shall not relieve
Avanex of liability under the indemnity provisions set forth in this
Agreement.
26. FORCE MAJEURE
Page 34
[*] Certain information on this page has been omitted and filed separately
with the Commission. Confidential treatment has been requested with
respect to the omitted portions.
26.1 If the performance of any obligation under this Agreement or a Release
or Purchase Order is interfered with by reason of any circumstances
beyond the reasonable control of the Party affected, including, without
limitation, fire, explosion, power failure, acts of God, war,
revolution, civil commotion, delays of the other Party in the
performance of any of its obligations hereunder, acts of the public
enemy, or any law, order, regulation, ordinance or requirement of any
government or legal body, and labor difficulties, including without
limitation, delays in procuring adequate supplies, strikes, slowdowns,
picketing or boycotts; then the Party affected shall be excused from
such performance for a period equal to the delay resulting from any
such causes and such additional period as may be reasonably necessary
to allow the Party to resume its obligations, (and the other Party
shall likewise be excused from performance of its obligations to the
extent such Party's obligations relate to the performance which was
interfered with). The Party so affected shall make reasonable efforts
to remove such causes of nonperformance; provided, however, in the
event any such cause of nonperformance extends for more than thirty
(30) Business Days, Nortel Networks shall have the right, without
obligation or liability, to cancel any Release or Purchase Order
affected by such cause.
26.2 Either Party shall notify the other Party in writing within ten (10)
Business Days after becoming aware of the occurrence of any force
majeure event which may cause any delay or failure on the part of such
Party to perform its obligations hereunder.
27. TERM
27.1 This Agreement shall become effective on the Effective Date and shall
remain in effect for a period of twenty-four (24) months and will be
automatically renewed for successive twelve (12) month period(s) unless
one Party gives to the other Party a notice to the effect that this
Agreement will not be renewed, all such period(s) being referred to
herein as "Term", unless and until terminated in accordance with this
Agreement.
28. TERMINATION AND CONTINUING RIGHTS
28.1 The Agreement may be terminated upon notice by one Party, at its sole
discretion, in the event the other Party is affected by any one of the
following events:
a) the institution by one Party of insolvency, receivership or
bankruptcy proceedings or any other material proceedings for the
settlement of its debts, including, without limitation, a
reorganization, a compromise, an arrangement or assignment for
the benefit of its creditors; the institution of such
proceedings against a Party which such Party has failed to
resolve in its favor within thirty (30) Business Days after
appropriate services of process; a Party making a general
assignment for the benefit of creditors; or a Party's dissolution
or ceasing to do business in the normal course; or
b) has a substantial part of its assets seized; or
c) assigns the Agreement or any part thereof in violation of Section
32.4 (Assignment);
Page 35
the affected Party is obliged to immediately give notice to the other of
the occurrence of any such event.
28.2 The Agreement and/or any Purchase Order or Release may be terminated, in
whole or in part, by Nortel Networks, upon written notice to Avanex, in
the event another party acquires a controlling interest in Avanex or a
majority equity participation in Avanex, without a prior written
guarantee from such party to Nortel Networks that such party will
continue to abide by the terms of this Agreement.
28.3 The Agreement and/or any Purchase Order or Release may be terminated,
in whole or in part by either Party, upon a thirty (30) calendar day
written notice, in the event the other Party fails to execute any one
of its material obligations hereunder and fails to remedy the default
within said period of thirty (30) calendar days.
28.4 Above termination rights shall be in addition to other termination
rights contained herein, and shall be without prejudice to the rights
or claims one Party may have against the other with respect to the
performance, nonperformance, or breach of such Party's obligations
hereunder, and shall not operate so as to extinguish any rights or
obligations which arose prior to the date of termination, and each
Party shall have the right to pursue each and every available remedy at
law and in equity, including, without limitation, withholding payments
of any amount owed by Nortel Networks to Avanex pending resolution of
any claims made by Nortel Networks in good faith against Avanex.
28.5 In the event this Agreement is terminated by Avanex for default by
Nortel Networks or for any other reason hereunder, Nortel Networks and
its customers shall thereafter retain such rights, as may be necessary
in order to allow Nortel Networks and its customers to provide Product
support and maintenance to their end-user customers, provided however
the Products, in respect of which support and maintenance services will
be provided, have been paid for by Nortel Networks.
28.6 This Agreement may be terminated upon agreement of the Parties to that
effect.
28.7 Notwithstanding any termination or expiry of this Agreement, the
provisions of Sections 1 (Definitions), 5 (Product and Process
Changes), 7 (Proprietary Components), 10 (Prices and Payments), 13
(Warranty), 16 (Continuing Availability of Technical Assistance, Repair
Services, Maintenance, Replacement and Repair Parts), 19 (Confidential
Information), 20 (Intellectual Property Right Infringement), 22
(Indemnity), 24 (Consequential Damages), 25 (Insurance) 28 (Termination
and Continuing Rights), 30 (Manufacturing Escrow and Contingent
License) and all consequent rights, obligations and liabilities, shall
survive the termination or expiry of this Agreement.
29. NOTICES
29.1 Unless explicitly set forth in this Agreement, any and all notices or
other information to be given by one of the Parties to the other
hereunder shall be sent by registered or certified mail, postage
prepaid, return receipt requested, by confirmed fax, by hand delivery
or by email to the other Party at the addresses set forth in Exhibit L.
Each Party shall use commercially reasonable best efforts to use
electronic media to transmit information pursuant to this Agreement.
Page 36
29.2 Notices given pursuant to Section 29.1 shall be deemed to have been
received five (5) Business Days after mailing if given by mail, and one
business day after sending if given by telecopy and upon delivery if
given by hand.
29.3 Either Party may change its address at any time by giving fifteen (15)
Business Days prior written notice to the other Party as provided above.
30. MANUFACTURING ESCROW AND CONTINGENT LICENSE
32.12 In the event Avanex acquires a controlling interest in one of its
competitors for the Products or new products, or that one of its
competitors for the Products or new products acquires a controlling
interest in Avanex such that the combined entity provides greater than
[*] of a Product or new product to Nortel Networks, then Avanex
warrants that it will in good faith utilize its reasonable commercial
efforts to execute an escrow agreement for the intellectual property
underlying the affected Product or new product to Nortel Network's
reasonable satisfaction.
31. GOVERNING LAW
31.1 The validity, construction, interpretation and performance of this
Agreement and the rights and obligations of the Parties and any
purchase made hereunder shall be governed by the courts and laws of the
State of New York, except for its rules with respect to the conflict of
laws. The application of the U.N. Convention on Contracts for the
International Sale of Goods is specifically excluded from this
Agreement.
32. GENERAL
32.1 Severability
If any of the provisions of this Agreement shall be adjudged invalid or
unenforceable, such invalidity or unenforceability shall not invalidate
or render this Agreement unenforceable, but rather this Agreement shall
be construed as if not containing the particular invalid or
unenforceable provision or provisions, and the rights and obligations
of the Parties shall be construed and enforced accordingly, provided
that, in the event either Nortel Networks or Avanex would not have
entered into this Agreement without such provision, that Party shall
have the right to terminate this Agreement upon written notice to the
other Party.
32.2 North America Free Trade Agreement - Procedures
Avanex shall assist Nortel Networks in performing all administrative
actions required to qualify Products for preferential treatment under
the rules of any applicable trade pursuant to the procedures set out in
Exhibit K.
Page 37
[*] Certain information on this page has been omitted and filed separately
with the Commission. Confidential treatment has been requested with
respect to the omitted portions.
32.3 Debarment Certificate
At no additional charge to Nortel Networks, Avanex shall comply with
any applicable import requirements and with any third party
requirements specifically set forth herein or any document referenced
herein. In addition, Avanex shall as soon as practicable, upon written
request of Nortel Networks, provide a properly executed certificate in
the form attached as Exhibit I (as such form may be modified from time
to time by the United States Rural Utilities Service) and in accordance
with the requirements specified therein with respect to any Products
furnished by Avanex and which Nortel Networks provides to a customer
which requires Nortel Networks to provide a similar certificate.
Products and services furnished by Avanex shall be in conformance with
all applicable laws and governmental orders and regulations in effect
at the time of shipment thereof or the performance of such services,
including, without limitation, the following United States laws and
regulations: Veterans Readjustment Assistance Act of 1972,
Rehabilitation Act of 1973, and the clauses set forth in Federal
Acquisition Regulation (subject to "Avanex," "Subcontractor" and
"Contract" used in such clauses meaning Nortel Networks, Avanex and
Agreement, respectively) 52.219-8, 52.219-9, 52.219-13, 52.220-4,
52.2221, 52.222-4, 52.222-20, 52.222-26, [subparagraphs b(1)-b(11)],
52.222-35 and 52.222-36.
32.4 Assignment
Subject to Section 28.2, neither Party shall assign or otherwise
transfer all or any part of this Agreement or any rights or payments to
be made hereunder, or any interest herein, without the prior written
consent of the other Party, except that either Party may assign or
subcontract any of its rights or obligations hereunder to any of its
Subsidiaries or successor corporations.
32.5 Waiver
Except as specifically provided for in a waiver signed by duly
authorized representatives of Nortel Networks and Avanex, failure by
either Party at any time to require performance by the other Party or
to claim a breach of or to enforce any provision of this Agreement
shall not be construed as affecting any subsequent breach or the right
to require performance with respect thereto or to claim a breach with
respect thereto and shall not constitute a waiver of such provisions or
the right of such Party to enforce each and every provision.
32.6 Interim Waiver
For the period beginning on the Effective Date and ending on April 28,
2000, Nortel Networks agrees to waive the obligations of Avanex under
Sections 4.5, 5.1, 5.2, 6.2.3, 6.2.4, 9.1, and 9.4 of this Agreement.
32.7 Avanex Initial Press Release
Nortel Networks agrees and consents, pursuant to Section 19.4 of this
Agreement, to Avanex's issuing the press release set forth in Exhibit M
hereto, which shall not be issued unless Nortel Networks is notified
prior to its issuance.
Page 38
32.8 Independent Contractors
Nortel Networks, Nortel Networks Companies and Avanex are independent
contractors in all relationships and actions under and contemplated by
this Agreement. This Agreement shall not be construed to create or to
authorize the creation of any employment, partnership or agency
relation, or to authorize Nortel Networks, Nortel Networks Companies or
Avanex to enter into or make any commitment, agreement, representation
or warranty binding on the other, or to allow one Party to accept
service of any legal process addressed to, or intended for, the other
Party. Nothing contained in this Agreement shall limit, in any manner,
Nortel Networks or Avanex's right to enter into other agreements with
other parties.
32.9 Section Headings
Section headings are inserted herein for convenience only and shall not
affect the meaning or interpretation of this Agreement or any provision
hereof.
32.10 Nortel Networks' Authority to enter into Agreement
Nortel Networks Corporation represents and warrants that it has full
power and authority to enter into this Agreement on behalf of all
Nortel Networks Companies (now and hereafter a party to this Agreement)
and that each Nortel Network Company is fully bound by the terms and
conditions of this Agreement as if it was a signatory to this
Agreement.
32.11 Entire Agreement
This Agreement, including Exhibits A through M attached hereto,
comprises all the terms, conditions and agreements of the Parties
hereto with respect to the subject matter herein, and save as expressly
provided herein, may not be altered or amended except in writing signed
by authorized representatives of each Party hereto. This Agreement
cancels and supersedes all prior agreements and communications on the
said subject matter.
32.12 Counterparts
This Agreement may be executed in one or more counterparts, all of
which shall be considered one and the same agreement.
Page 39
32.12 Telecopy Execution and Delivery
A facsimile, telecopy or other reproduction of this Agreement may be
executed by one or more Parties, and an executed copy of this Agreement
may be delivered by one or more Parties by facsimile or similar
electronic transmission device pursuant to which the signature of or on
behalf of such Party can be seen, and such execution and delivery shall
be considered valid, binding and effective for all purposes. At the
request of any Party, all Parties hereto agree to execute an original
of this Agreement as well as any facsimile, telecopy or other
reproduction hereof.
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on the day
and year last written below.
AVANEX CORPORATION NORTEL NETWORKS CORPORATION
By: /s/ Walter Alessandrini By: /s/ David Wilson
----------------------------------------- ----------------------------------------
(Signature) (Signature)
Name: Walter Alessandrini Name: David Wilson
----------------------------------------- ---------------------------------------
(Printed Name) (Printed Name)
Title: President and Chief Executive Officer Title: Senior Counsel
---------------------------------------- --------------------------------------
Date: 4/28/00 Date: 4/28/00
----------------------------------------- ---------------------------------------
By: /s/E.G. Parker
----------------------------------------
(Signature)
AVANEX CAYMAN Name: E.G. Parker
---------------------------------------
(Printed Name)
By: /s/Jessy Chao Title: Supply Management Support Services
----------------------------------------- --------------------------------------
(Signature)
Date: April 28, 2000
Name: Jessy Chao ---------------------------------------
-----------------------------------------
(Printed Name)
Title: President
----------------------------------------
Date: 4/28/00
-----------------------------------------
Page 40
EXHIBIT A
PRODUCT LISTS, PART I AND PART II, PRICES, DISCOUNTS,
AVAILABILITY DATES AND FCA DELIVERY LOCATIONS
Part I: Product List: Accepted Products, Prices and Discounts
Part I: Product List: Accepted Products, Prices and Discounts
CPC Code Description 12-Month Volume Price in US$
- -------- ----------- --------------- ------------
[*] [*] [*] [*]
[*] [*] [*] [*]
[*] [*] [*] [*]
[*] [*] [*] [*]
[*] [*] [*] [*]
[*] [*] [*] [*]
[*] [*] [*] [*]
[*] [*] [*] [*]
Part II: Product List: Non-accepted products, Prices, Discounts and
Availability Dates
To be determined
Part III: FCA Delivery Locations
Avanex Corporation
40919 Encyclopedia Circle
Fremont, CA
94538
U.S.A
[*] Certain information on this page has been omitted and filed separately
with the Commission. Confidential treatment has been requested with
respect to the omitted portions.
EXHIBIT B
SPECIFICATIONS AND ACCEPTANCE PROGRAM
PART I: SPECIFICATIONS
1. Document Identification:
[*]
[*] Certain information on this page has been omitted and filed separately
with the Commission. Confidential treatment has been requested with
respect to the omitted portions.
[*]
2. Certification
Avanex shall use reasonable due diligence to pursue the certifications listed
below (as applicable) as soon as new or modified designs have passed Avanex's
production release milestone, and this without prejudice to Nortel Networks'
Acceptance Program outlined in Exhibit B, Part II. Avanex and Nortel Networks
shall arrange for joint submission to the regulatory bodies and Nortel Networks
shall repay to Avanex the additional costs incurred through the joint
submissions. All Changes to existing designs that could invalidate any one of
the certifications shall be discussed
Page 2
[*] Certain information on this page has been omitted and filed separately
with the Commission. Confidential treatment has been requested with
respect to the omitted portions.
between Avanex and Nortel Networks as part of the Change Notification procedure
even if they do not require a production release.
The list of required certifications will be mutually agreed to in good faith and
may include those below:
CEMark
UK Type Approval
UL / CSA / EN safety
FCC parts 15 and 101
Should other certifications be required, they shall be discussed between Avanex
and Nortel Networks. Avanex shall use its reasonable commercial efforts in
supporting Nortel Networks' regulatory activities.
Support groups: Avanex's Product Engineering group
Nortel Networks' Design Engineering group.
PART II: PRODUCT ACCEPTANCE PROGRAM
1. In order to verify that the products or modified Products meet the
applicable Specifications, Nortel Networks will undertake an Acceptance
Program covering verification and product integrity testing.
2. Avanex shall loan to Nortel Networks, [*] Nortel Networks, up to a maximum
of [*], and beyond that, upon mutually agreeable terms, the products
necessary to perform the Acceptance Program and shall provide support to
the Nortel Networks group during the testing. Such support includes
diligence in replacing failed products, availability of technically
knowledgeable individuals to discuss testing results and teaming of at
least one Avanex individual with the Nortel Networks testing group for all
tests to occur on Avanex's premises. Nortel Networks shall endeavor to
limit as much as possible the products needed for the acceptance in terms
of number of components and duration of the loan by taking into
consideration design commonalties with already accepted Products.
3. As a minimum, each new design shall be tested by Nortel Networks Design
Engineering team.
4. Primeships:
Nortel Networks Design Engineering group is prime for the verification
testing; Avanex's Engineering department in Fremont, CA is prime for
supporting Nortel Networks' Acceptance Program.
PART III: PRODUCT MARKING
1. Serial number: bar-coded serial number, as per relevant Specifications
Page 3
[*] Certain information on this page has been omitted and filed separately
with the Commission. Confidential treatment has been requested with
respect to the omitted portions.
2. Manufacturing date stamp: Avanex stamps date as agreed upon by the parties.
3. Avanex's model number as agreed upon by the parties.
4. Nortel Networks' CPC will also be placed on the module.
5. Repair Date Stamp: Bellcore TR-NWT-000078 (issue 3, December 1991), section
12.2. The location code for Avanex ("LL") and how Avanex rubber stamps this
shall be mutually agreed to.
6. Product marking and packaging requirements pursuant to this Agreement:
a) [*]
b) [*]
c) [*]
d) [*]
Avanex shall package the Products for shipment in accordance with [*]
standard packing practices, with any modifications specified by Nortel
Networks and agreed to by Avanex, related to the size and external markings
(including branding) of the boxes. [*] shall be responsible for any damage
to Products including damage caused by packing noncompliant with [*]
requirements.
7. Cables: As per relevant Specifications.
Page 4
[*] Certain information on this page has been omitted and filed separately
with the Commission. Confidential treatment has been requested with
respect to the omitted portions.
EXHIBIT C
DEMAND-PULL PROGRAM
1. SCOPE
1.1 This Exhibit C sets forth the terms and conditions applicable to the
ordering of Products pursuant to the Demand-Pull Program.
2. NORTEL NETWORKS' RESPONSIBILITIES
2.1 For Products that are ordered under the Demand-Pull Program Nortel Networks
shall, on the first business day of each week during the Term, provide
Avanex with a [*] forecast ("Forecast") of its Product requirements, if
any. Concurrently with its presentation of the first Forecast to Avanex,
Nortel Networks shall issue a Blanket Purchase Order for the quantity of
Products shown for [*] of such Forecast which Blanket Purchase Order shall
be updated as required. Releases for Products covered by a Blanket Purchase
Order issued under this Section will be issued in accordance with Nortel
Networks' designated purchasing department representative's weekly demands.
2.2 Attachment A sets forth the applicable Product stocking requirements stated
on a Target Finished Goods ("Target FG") and Target Work-In Process
(modules, dies components and parts) ("Target WIP") basis, (collectively
referred to as "Target Products Total Stock"). The Target Products Total
Stock will be jointly established by the Parties in writing based on the
run rate and agreed upon number of weeks, as referred to in Section 3.2
hereof, taking into consideration the Avanex's Products manufacturing lead
time as well as the unique component purchasing lead time, all as stated in
Attachments A and B hereof. The Target Products Total Stock shall be
jointly monitored and may be revised by agreement of the Parties in writing
as fluctuations in the run rate so require and Attachment A updated
accordingly. The Forecasts shall be used by the Avanex for planning
purposes only, and Nortel Networks shall not be obligated to purchase any
Products covered by Forecasts and Blanket Purchase Orders issued by Nortel
Networks except as expressly set forth in the immediately following
paragraph.
4.1 Nortel Networks' obligation to purchase Products under this Agreement or
otherwise shall be limited to the purchase of the Target Products Total
Stock as shown in Attachment A as revised from time to time in accordance
with Section 2.2 hereof as well as for associated quantities of unique
components inside of the lead times specified in Attachment B.
4.1 If the Target FG is inactive for more than [*], the Parties
shall negotiate towards reaching a mutually acceptable agreement in respect
of the disposition of the Target Products Total Stock or portion thereof.
[*] Certain information on this page has been omitted and filed separately
with the Commission. Confidential treatment has been requested with
respect to the omitted portions.
2.5 It is acknowledged by the Parties that although Products have been
included in Attachment A, any such Products may, from time to time at
Nortel Networks' option, be purchased by Nortel Networks otherwise than
pursuant to the Demand-Pull Program and in such event, Nortel Networks
will issue Purchase Orders for its requirements for such Products.
3. AVANEX'S RESPONSIBILITIES
3.1 Avanex shall manufacture the Target Products Total Stock in accordance
with the run rate as set forth in Attachment A which may be revised as
provided hereunder but shall only deliver Products per latest written
instruction from Nortel Networks.
3.2 Avanex shall maintain Target FG and Target WIP quantities representing
a maximum of [*], respectively, of the run rate set forth in
Attachment A which may be revised as provided hereunder.
3.3 Avanex's manufacturing operations and processes shall be established
and maintained throughout the Term so as to ensure that Avanex's
manufacturing capacity may be increased from the then applicable Target
Product Total Stock, in accordance with the terms of Section 9.5.3 of
the Agreement.
3.4 Products ordered pursuant to the Demand-Pull Program shall be
delivered FCA Avanex's Fremont plant, within [*] from Nortel Networks'
Release(s) communicated to Avanex via facsimile.
3.5 Avanex shall provide to Nortel Networks' designated Purchasing
Department representative a weekly report of Avanex's Actual Products
Total Stock status.
4. CANCELLATION OF THE DEMAND-PULL PROGRAM
4.1 Nortel Networks may terminate the Demand-Pull Program in whole or in
part by means of a written notice to that effect, forwarded to Avanex
at least [*] in advance. Should the Demand-Pull Program be terminated,
the applicable Blanket Purchase Order will be closed after disposition
of the Target Product Total Stock in accordance with this Section 4.
Should the Demand-Pull Program be terminated the applicable delivery
lead time to the Product affected by the termination will be agreed
upon by the Parties but shall in no event exceed [*] ARO.
4.2 Nortel Networks' obligation to purchase under this Agreement shall be
that stated in Section 2.3 hereof.
4.3 Nortel Networks' obligation to purchase under this Agreement shall be
reduced by the amount of Products that can be purchased by Purchase
Orders or that may be purchased by other customers of Avanex. In
addition, Avanex shall use all reasonable endeavors to minimize any
such costs by, inter alia, returning components to suppliers or reducing
cancellation costs to suppliers, and such savings will be passed on to
Nortel Networks.
Page 2
[*] Certain information on this page has been omitted and filed separately
with the Commission. Confidential treatment has been requested with
respect to the omitted portions.
N.B.: To be completed by the Parties once Avanex becomes Demand-Pull compliant.
ATTACHMENT A
WEEK: ________
- --------------------------------------------------------------------------------
CPC NO. DESCRIPTION RUN TARGET TARGET ACTUAL ACTUAL LEAD
RATE FG STK WIP FG STK WIP TIME
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NORTEL NETWORKS _________________________
APPROVAL:
DATE: ____________
SUPPLIER APPROVAL: _________________________
DATE: _____________
____
Page 3
ATTACHMENT B
BOM of Products
* = Unique Components
Page 4
EXHIBIT D
REPAIR SERVICES RATES, FCA REPAIR LOCATIONS AND TECHNICAL ASSISTANCE RATES
I. TECHNICAL ASSISTANCE RATES
1. Training
a) Avanex offers installation and maintenance training at its
offices, or optionally at Nortel Networks site.
II. FCA REPAIR LOCATIONS
a) Avanex's Fremont, CA location
III. REPAIR SERVICES RATES
1. Advance Replacement Service
Avanex shall, at the request of Nortel Networks, deliver an advance
replacement of such Products providing that:
a) Nortel Networks pays the freight expense on the returned Product;
Avanex pays the freight expense for the advance replacement.
b) Service charges applied: To be mutually agreed to in good faith
by the Parties.
2. No Fault Found
To be mutually agreed to in good faith by the Parties
3. Verification or Certification Test
Nortel Networks may return a Product for operational verification
tests for a charge to be mutually agreed upon in good faith by the
Parties.
4. Out of Warranty Repairs
Nortel Networks may return a Product for repairs not covered under
warranty, during the Term, for a charge to be mutually agreed upon in
good faith by the Parties.
Page 2
EXHIBIT E
PROCEDURES FOR ORDERS UTILIZING EDI AND TDI
(Rev NAESGA_970321)
PART I
ELECTRONIC DATA INTERCHANGE ("EDI") TRANSMISSION
This Part I of Exhibit E contemplates EDI transmissions of information and
Purchase Orders, Blanket Purchase Orders, Transaction Set 850 Releases or
EDIFACT 2.0 P.O. Releases (collectively, in this Exhibit E, "Orders"),
acknowledgments and invoices. The EDI transactions shall be governed by the
Agreement, as modified by this Part I of Exhibit E. This Part I of Exhibit E
shall not apply to Orders delivered solely in hard copy document form.
EDI transactions shall be made through a third-party computer network with which
the Nortel Networks Companies and Avanex have a services agreement ("Network").
EDI transactions shall be made in accordance with the version of either 1) the
American National Standards Institute ("ANSI") Business Data Interchange
Standards ANSI X12, or 2) Electronic Data Interchange for Administration,
Commerce and Transportation Issue No. 2.0 ("EDIFACT"), which each Nortel
Networks Company then utilizes, inclusive of transaction sets or comparable
EDIFACT electronic messages, data dictionary, data elements and transmission
control. Each party shall be responsible for its respective costs incurred in
sending and receiving EDI transmissions.
Avanex shall access at least once on each business day the Network to determine
whether it has received any Orders (ANSI X12, Transaction Set 850 or EDIFACT 2.0
ORDERS). A functional Acknowledgment of Receipt of Transmission (ANSI X12,
Transaction Set 997) or an EDIFACT functional Acknowledgment Receipt of P.O.
Message shall be transmitted immediately upon receipt of an EDI Order. A full
Transaction Acknowledgment (ANSI X12, Transaction Set 855 or EDIFACT 2.0 ORDSP)
shall be transmitted by Avanex within two (2) Business Days after transmittal of
the functional Acknowledgment of Receipt of Transmission. Each Order shall
contain and each full Transaction Acknowledgment shall confirm the price,
quantity, Product description by part number, FCA Delivery Location, location to
which the invoice shall be rendered for payment, method of shipment, Delivery
Date.
To reschedule, cancel or otherwise change an Order, a Nortel Networks Company
shall transmit a Purchase Order Change (ANSI X12, Transaction Set 860 or EDIFACT
2.0 ORDCHG) and Avanex shall transmit a Purchase Order Change Acknowledgment
(ANSI X12, Transaction Set 865 or EDIFACT 2.0 ORDSP) to the appropriate Nortel
Networks Company within two (2) Business Days after receipt by Avanex of the
Purchase Order Change.
Any forecast information shall be sent using ANSI X12, Transaction Set 830 with
a quantity status code of "D" shown in the applicable time period field or
EDIFACT 2.0 DELFOR with a delivery plan status indicator of 4. A Transaction Set
830 Release (ANSI X12, Transaction Set 830 with a quantity status code of "C"
shown in the applicable time period field on such Transaction Set) or EDIFACT
2.0 DELFOR with a delivery plan status indicator of 1 shall be transmitted by a
Nortel Networks Company
to confirm a Delivery Date for specific quantities of Products covered by a
Blanket Purchase Order, where that Nortel Networks Company requires Avanex to
send an Advanced Shipment Notice (ANSI X12, Transaction Set 856 or EDIFACT 2.0
DESADV) prior to shipment. Upon receipt of such Transaction Set 830 Release or
EDIFACT 2.0 DELFOR, Avanex shall transmit to the Nortel Networks Company such
Advanced Shipment Notice not less than the number of days agreed upon between
the FCA Delivery Location and Avanex prior to shipment of the quantity of
Products covered by such Transaction Set 830 Release or EDIFACT 2.0 DELFOR.
Each Nortel Networks Company ordering under this Agreement shall access the
Network at least once on each Business Day to determine whether it has received
any "Invoices" (ANSI X12, Transaction Set 810 or EDIFACT 2.0 INVOIC). A
functional Acknowledgment of Receipt of Transmission (ANSI X12, Transaction Set
997 or comparable EDIFACT 2.0 electronic message) shall be transmitted
immediately upon receipt of an Invoice.
Neither Party shall have any liability to the other for Orders or Invoices
erroneously transmitted to or received due to the malfunction of or a defect in
the Network or other causes beyond a Party's reasonable control. If either Party
receives a distorted EDI transmission, it shall immediately contact the Network
to reject the distorted transmission and request that such transmission be
resent. If Avanex receives an Order by EDI transmission stating a quantity
and/or price significantly higher or lower than the typical quantity and/or
Price shown on Orders issued by that Nortel Networks Company ordering location,
Avanex shall immediately contact such ordering location to confirm the accuracy
of the electronically transmitted Order.
Each Party shall adopt as its signature an electronic identification consisting
of symbol(s) or code(s) which shall be affixed to or contained in each document
transmitted by such Party ("Signatures"). Each Party agrees that its Signature
shall be sufficient to verify that such Party originated and authorized such
document. Each Party shall use reasonable efforts to not disclose the Signature
of the other Party to any unauthorized third party.
Any document properly transmitted pursuant to this Part I of Exhibit E shall be
deemed to be a "writing" or "in writing", and any such document when containing,
or to which there is affixed, a Signature ("Signed Documents") shall be deemed
for all purposes (a) to have been duly authorized and executed and (b) to
constitute an "original" when printed from electronic files or records
established and maintained in the normal course of business. The Parties agree
not to contest the validity or enforceability of Signed Documents under the
provisions of any applicable law relating to whether certain agreements are to
be in writing or signed by the Party to be bound thereby. Signed Documents, if
introduced as evidence on paper in any judicial, arbitration, mediation or
administrative proceedings, shall be admissible as between the Parties to the
same extent and under the same conditions as other business records originated
and maintained in documentary form.
Page 2
PART II
TECHNICAL DATA INTERCHANGE ("TDI") TRANSMISSION
This Part II of Exhibit E contemplates the electronic transmission of various
types of data files, including but not limited to engineering and material
specifications, drawings, computer-aided designs ("CADs"), models, plot and flat
files ("Technical Data Interchange" or "TDI"). The TDI transmissions between
each Nortel Networks Company and Avanex shall be governed by the Agreement and
this Part II of Exhibit E.
TDI transmissions shall be made through a third-party computer network with
which each of the Nortel Networks Companies and Avanex have a services agreement
("Network"). Each Party shall be responsible for its respective costs incurred
in sending and receiving TDI transmissions.
Each Party shall access the Network at least once on each Business Day to
determine whether it has received any TDI transmissions.
Each Party acknowledgesand agrees the other shall not have any liability for
TDI transmissions erroneously transmitted to or received by it due to a
malfunction of or a defect in the Network or other causes beyond either Party's
reasonable control. If either Party receives a distorted TDI transmission, it
shall immediately contact the Network to reject the distorted transmission and
request that such transmission be resent.
The Parties shall comply with such security precautions and rules as may be
initiated by the Network to protect TDI transmissions from unauthorized access.
The Parties shall treat each TDI transmission as confidential information under
the applicable provisions of the Agreement.
Each Party shall adopt as its signature an electronic identification consisting
of symbol(s) or code(s) which shall be affixed to or contained in each document
transmitted by such Party ("Signature"). Each Party agrees that its Signature
shall be sufficient to verify that such Party originated such document. Each
Party shall use reasonable efforts to not disclose the Signature of the other
Party to any unauthorized third party.
Page 3
EXHIBIT F
MONTHLY REPORTS
1. Avanex will provide monthly reports in the following areas:
a) Repair and Return;
b) Baseline Report;
c) General Business.
2. Avanex shall provide a Unit Failure Analysis report on all field returned
Products and a Component Failure Analysis report on a monthly basis to
Nortel Networks' Repair Manager, to Nortel Networks' Quality Manager and
to Nortel Networks' Product Brand Manager. This report which will be
issued no later than three (3) Business Days after the start of every
month shall contain the following information:
a) The number of Products delivered to Nortel Networks (on a per PEC
level) in previous month.
b) The number of Products returned to Avanex (on a per PEC level) in
previous month.
c) The number of Products delivered to Nortel Networks (on a per PEC
level) year to date.
d) The number of Products returned to Avanex (on a per PEC level) year
to date.
e) The number of Products delivered to Nortel Networks (on a per PEC
level) to date.
f) The number of Products returned to Avanex (on a per PEC level) to
date.
g) Pareto of replacement devices of current month per PEC code.
h) Pareto of replacement devices cumulative per PEC code.
i) Post Repair Information on a per unit basis returned to Avanex for
repair under the "like-for-like" program for the previous month to
include the following information:
- Symptoms of replacement devices per unit;
- Cumulative In-service time (in months) per PEC code;
- Annualized replacement rate per PEC code.
j) Trend chart in time of replacement rate value (RpR)
k) Actual MTBF measurement. Actual annualized MTBF will be calculated
from the cumulative replacement rate recorded monthly. Based on
results, additional requirements can be determined upon agreement of
both Parties.
l) On Time service level for 1) Repair and Return 2) Retrofit 3) FCFA
4) RMA.
For all occurrences of Product failure in the field, analysis results,
corrective actions and implementation plan have to be included in the
monthly report.
3. From the date the Products will have successfully passed the Acceptance
Program in accordance with Section 4 of the Agreement, Avanex shall
provide to Nortel Networks' Repair Manager, to Nortel Networks' Quality
Manager and to Nortel Networks' Product Brand Manager a monthly "Minimum
Field Baseline" report indicating the minimum applicable release level
(number) for the in-service operation of the Products and a "New Product
Shipped Baseline". The reports shall contain aforementioned information
for all current and previous releases of the Products:
a) backward and forward compatibility;
b) upgradability from any release to any other release;
c) the current Product releases.
4. From the date the Products will have successfully passed the Acceptance
Program in accordance with Section 4 of the Agreement, Avanex shall
provide to Nortel Networks' Product Brand Manager a monthly "General
Business" report which includes the following information:
a) Number of Products (on a per PEC level) delivered to Nortel Networks
in the previous month.
b) Total business in dollars on a per PEC level delivered to Nortel
Networks in the previous month.
c) Number of Products (on a per PEC level) delivered year to date to
Nortel Networks.
d) Total business in dollars on a per PEC level delivered year to date
to Nortel Networks.
e) Number of Products (on a per PEC level) delivered to date to Nortel
Networks.
f) Total business in dollars on a per PEC level delivered to date to
Nortel Networks.
g) Total number of shipments that were missed or delivered short by
Avanex in the previous month.
h) Price in effect on a per PEC level in the previous and current months.
i) Prices paid for Nortel Networks proprietary components in the last
month.
j) Total number of PRS and CSR raised in the previous month against the
Products and a summary of each problem.
k) Total number of calls received from the Nortel Networks Customer
Service center in the previous month.
5. In addition to the above, Nortel Networks may, from time to time, request
that Avanex provides detailed Unit Failure Analysis and Component Failure
Analysis reports.
Page 2
EXHIBIT G
Chance Notification
(Example)
Page 1 of 2
- -----------------------------------------------------------------------------------------------------
1. SUPPLIER INFORMATION: 2. PRODUCT CHANGE NOTICE:
1997xxxx
ISSUE: 01
- -----------------------------------------------------------------------------------------------------
3. ISSUE DATE: 4. PRODUCT IDENTIFICATION:
MAJOR SYSTEM :
SUB SYSTEM :
HWARE: ? FWARE: ? SWARE: ? PLUGIN: ?
- -----------------------------------------------------------------------------------------------------
5. NEW PROD RLSE 7. NEW CLEI CODE 6. OLD PROD RLSE 8. OLD CLEI CODE
NTxxxxxx tbd tbd NTxxxxxx xx xxxxxxxxx
- -----------------------------------------------------------------------------------------------------
9. ASSOCIATED PRODUCTS OR CHANGES AFFECTED:
- -----------------------------------------------------------------------------------------------------
10. DRAWING NUMBER: 11. CHANGE CLASSIFICATION:
ADxxxxxx A/AC/B . . . . . . .
- -----------------------------------------------------------------------------------------------------
12. CLASSIFICATION SUBSTANTIATION:
- -----------------------------------------------------------------------------------------------------
13. REASON FOR CHANGE:
- -----------------------------------------------------------------------------------------------------
14. DESCRIPTION OF CHANGE:
VERIFICATION PROCEDURES:
BACKOUT PROCEDURES:
- -----------------------------------------------------------------------------------------------------
15. EFFECT OF CHANGE:
Enhanced features and easier installability.
SAFETY HAZARD: ? FIRE HAZARD: ? SRVC AFFCTG: ? TRANS AFFCTG: ?
MNTNCE AFFCTG: ? RELIA AFFCTG: ? POWR AFFCTG: ? TRAF AFFCTG: ?
- -----------------------------------------------------------------------------------------------------
16. MATERIAL AFFECTED:
- -----------------------------------------------------------------------------------------------------
17. DOCUMENTATION AFFECTED:
- -----------------------------------------------------------------------------------------------------
Page 2 of 2
- --------------------------------------------------------------------------------
18. IMPLEMENTATION DATE: 19. CHANGE COMPLETION DATE:
MM/DD/YY N/A
- --------------------------------------------------------------------------------
20. MODIFICATION LOCATION:
N/A
TRIALED: N (Field Lab Na)
- --------------------------------------------------------------------------------
21. INSTALLATION HOURS AND MATERIAL COST:
- --------------------------------------------------------------------------------
HOURS: N/A
COST : N/A
- --------------------------------------------------------------------------------
22. LOCATION AND QUANTITY OF EQUIPMENT:
N/A
- --------------------------------------------------------------------------------
23. ATTACHMENTS:
None
- --------------------------------------------------------------------------------
24. COMMENTS:
Page 2
EXHIBIT H
TECHNICAL ASSISTANCE
I. Technical Assistance by Nortel Networks
1. It shall be Nortel Networks' responsibility to provide "first line" (Level
1) technical assistance and support to its customers at its own cost.
Nortel Networks' customers will not contact Avanex directly. Nortel
Networks will at its option provide any of the following services to its
customers as Level 1 support.
Level 1 Support:
a) Telephone Service Desk
b) On site support
c) Preventative maintenance
d) Monitor alarms/malfunctions
e) Corrective action and logging
f) Product alarm knowledge
g) Escalate and report problems
h) Remote modem access
i) Communication junction to allow Avanex access to customers' sites
j) Log and track problems on Nortel Networks CSR database
k) Isolate subsystem faults
l) Product temporary system solutions
m) Software upgrade loads distribution to customers
n) Multi-vendor product expertise
o) Local spares holding
p) Board and module swap
q) Manage return of defective units to Avanex
r) Provide Product training to Nortel Networks customers
II. Technical Assistance by Avanex
1. Avanex shall at no cost to Nortel Networks, provide Product training
information and Documentation upon terms to be mutually agreed to.
2. As Nortel Networks accepts additional Products under this Agreement, Avanex
shall provide to Nortel Networks' personnel, at no charge to Nortel
Networks, upon mutually agreeable terms, training and training
documentation on such additional Products such that Nortel Networks'
personnel shall be able to train other Nortel Networks personnel and
customers.
3. Any additional training which Nortel Networks may require from Avanex for
its own benefit or for the benefit of its customers shall be requested by
Nortel Networks, and carried out by Avanex, at times and places and in
accordance with prices as agreed upon between Nortel Networks and Avanex at
the time such training is requested by Nortel Networks.
4. Telephone access to qualified Avanex's technical personnel with the
following structure:
a) Non-Urgent Technical Support: Pager service will be available
Monday to Friday between the hours of 8 a.m. and 6 p.m. EST (The
waiting period for qualified technical assistance shall not exceed
thirty (30) minutes). At all other times, voice-mail service shall
be available at the same number. The telephone number to reach
Avanex's non-urgent technical support personnel at all times will
be provided by Avanex.
Avanex shall advise Nortel Networks of any telephone number change for this
service at least thirty (30) calendar days prior to the change.
5. Once Nortel has provided Level 1 Support to its customers, and such Level 1
Support does not completely remedy the problem which is the object of the
customers' call, then Avanex, at Nortel's request, shall provide, to Nortel
Networks and to Nortel Networks' customers, at no charge, from Monday to
Friday between the hours of 8 a.m. and 6 p.m. EST, "Second line" (Level 2)
technical assistance which will include the following services:
Level 2 Support:
a) Provide assistance at the request of Nortel Networks
b) Provide Avanex technical support contacts (24 hours a day)
c) Log and track problems using Nortel Networks' PRS system
d) Isolate subsystem and design faults (in-house)
e) Perform in-house simulation and testing
f) Provide remote modem access to Nortel Networks' Technical Service
Center
g) Deliver Software upgrades and Software builds to Nortel Networks'
distribution center
h) Perform escalation and reporting to Nortel Networks
i) Provide Emergency Site Support (at customer/Nortel Networks site)
j) Perform Root Cause Analysis
k) Provide Spare Buffer (at Nortel Networks' premises)
l) Maintain Emergency Spares holding, (at Avanex's premises)
m) Update Engineering Changes (ECs) on PAS
n) Provide design authority support interfaces
o) Analyze and resolve design problems (Hardware and Software)
p) Prepare patches and modifications
q) Incorporate patches into new builds, test perform sanity checks and
deliver the builds and Hardware to Nortel Networks' distribution
center
r) Provide Product temporary solutions
s) In-house simulation
t) Database problem solution
u) Third party product support
6. Notwithstanding any provision set forth in this Exhibit H and/or the
Agreement, Avanex will provide on-site support and assistance at no cost to
Nortel Networks in the following cases:
Page 2
a) Where Nortel Networks is unable to resolve a problem through normal
maintenance activities and technical support is provided remotely by
Avanex.
b) Where Nortel Networks is able to resolve a problem but cannot
determine the root cause of the problem.
c) Where a problem with the Product leads a customer to specifically
request technical presence.
d) Where a problem with the Product exists in the field and Avanex's
presence is requested by Nortel Networks Senior Management.
However, Nortel Networks will reimburse Avanex for its actual and
reasonable expenses according to the technical assistance rates as set
forth in Exhibit D in cases where the problem which initiated the
requirement for the on-site support is attributed to reasons that are not
related to a fault or deficiency in the Products.
7. Any other technical support which Avanex shall provide to Nortel Networks
or its customers shall be pursuant to a written request from Nortel
Networks' designated personnel, or such other individual designated, from
time to time, by Nortel Networks. Such support shall be at prices set forth
in Exhibit D and on terms and conditions agreed upon by the Parties.
8. Technical assistance support will be provided remotely to Nortel Networks
and/or to the customer in conjunction with Nortel Networks, but not by
Avanex alone (unless authorized in writing to do so by Nortel Networks).
9. Avanex will provide Nortel Networks with a template of required information
to be supplied by Nortel Networks when referring a problem for resolution.
10. Avanex will document all known problems and deficiency (service reports
[SR] referred by Nortel Networks and discovered by development) with the
Products in Nortel Networks' PRS database.
11. Avanex will provide Pager Response Time and Mobilization based on the
Problem Classification as prescribed in the following table.
========================== ===================== =======================
Problem Classification* Pager Response Time Mobilization
-------------------------- --------------------- -----------------------
E1 & E2 [*] [*]
-------------------------- --------------------- -----------------------
S1 & S2 [*] [*]
-------------------------- --------------------- -----------------------
Non service affecting [*] [*]
========================== ===================== =======================
*Problem Classifications are as defined below:
The turnaround times for response and closure of SRs are summarized below.
========================== ===================== =======================
SR Priority SR Response SR Closure
-------------------------- --------------------- -----------------------
E1/E2 [*] [*]
-------------------------- --------------------- -----------------------
E3/E4 [*] [*]
-------------------------- --------------------- -----------------------
MJ [*] [*]
-------------------------- --------------------- -----------------------
Page 3
[*] Certain information on this page has been omitted and filed separately
with the Commission. Confidential treatment has been requested with
respect to the omitted portions.
---------------------- --------------------------- --------------------
MN [*] [*]
====================== =========================== ====================
The progress of the SR resolution is continually updated in the CSDS
database. Information concerning the SR is exchanged between the Technical
Services representative and the customer until an acceptable solution is
achieved.
12. Avanex will provide support consistent with the Problem Classification
Definitions as defined below. Target resolution date is from service report
(SR) opened, not the date the PRS is referred to Avanex.
13. Problem Classification:
E1 Emergency Outage/System Fail
- Resolution Objective = [*]
- Escalation = [*]
- Updates to Nortel Networks = [*]
- Written report at point of closure to E3
E2 Potential Traffic Degradation or Outage
- Resolution Objective = [*]
- Escalation = [*]
- Updates to Nortel Networks = [*]
- Written report at point of closure to E3
E3 E1 Follow-up (Opened internally)
- Target Resolution = [*]
- Updates to Nortel Networks = [*]
Page 4
[*] Certain information on this page has been omitted and filed separately
with the Commission. Confidential treatment has been requested with
respect to the omitted portions.
E4 E2 Follow-up (Opened internally)
- Target Resolution = [*]
- Updates to Nortel Networks = [*]
MJ Major-Serious Service Affecting Incident or Operational Impact
- Immediate Objective = [*]
- Escalation = [*]
- Target Resolution = [*]
- Updates to Nortel Networks = [*]
MN Minor Non-Service Affecting Query or Service Request
- Procedural Deficiencies
- Documentation Flaws
- Operational Product Improvement
14. The following will be the PRIORITY LEVEL DEFINITIONS.
E1 Emergency Outage/System Fail
- System or Major System Inoperative
- Major Loss of Service
- (Escalation into Nortel Networks and customer management)
E2 Potential Traffic Degradation or Outage
- Potential/Partial Loss of Service
- Management System Down/UnAvailable
- Loss of Redundancy/Redundant System
E3 E1 Follow-up (not raised by customer)
Page 5
[*] Certain information on this page has been omitted and filed separately
with the Commission. Confidential treatment has been requested with
respect to the omitted portions.
- An E3 is opened after closure of an E1
- Root Cause Analysis (RCA) performed
E4 E2 Follow-up (not raised by customer)
- An E4 is opened after closure of an E2
- Root Cause Analysis (RCA) performed
MJ Major-Serious Service Affecting Incident or Operational Impact
- Traffic errors
- Hardware or Software lockups/unusable
- Any fault that prevents traffic from being put into service
MN Minor Operational Impact
- Procedural Deficiencies
- Documentation Flaws
- Operational Product Improvement.
Page 6
EXHIBIT I
RUS
DEBARMENT CERTIFICATE
S A M P L E
- --------------------------------------------------------------------------------
CERTIFICATION REGARDING DEBARMENT, SUSPENSION, INELIGIBILITY AND VOLUNTARY
EXCLUSION - LOWER TIER COVERED TRANSACTIONS
- --------------------------------------------------------------------------------
This certification is required by the regulations implementing Executive Order
12549, Debarment and Suspension, 7 CFR Part 3017, Section 3017.510,
Participants' responsibilities. The regulations were published as Part IV of the
January 30, 1989, Federal Register (pages 4722-4733).
(BEFORE COMPLETING CERTIFICATION, READ INSTRUCTIONS ON REVERSE)
(1) The prospective lower tier participant certifies, by submission of this
proposal, that neither it nor its principals is presently debarred,
suspended, proposed for debarment, declared ineligible, or voluntarily
excluded from participation in this transaction by any Federal department
or agency.
(2) Where the prospective lower tier participant is unable to certify to any of
the statements in this certification, such prospective participant shall
attach an explanation to this proposal.
- --------------------------------------------------------------------------------
Organization Name PR/Award Number or Project Name
- --------------------------------------------------------------------------------
Name and Title of Authorized Representative
- --------------------------------------------------------------------------------
Signature Date
- --------------------------------------------------------------------------------
Instructions For Certification
1. By signing and submitting this form, the prospective lower tier participant
is providing the certification set out on the reverse side in accordance
with these instructions.
2. The certification in this clause is a material representation of fact upon
which reliance was placed when this transaction was entered into. If it is
later determined that the prospective lower tier participant knowingly
rendered an erroneous certification, in addition to other remedies
available to the Federal Government, the department or agency with which
this transaction originated may pursue available remedies, including
suspension and/or debarment.
3. The prospective lower tier participant shall provide immediate written
notice to the person to which this proposal is submitted if at any time the
prospective lower tier participant learns that its certification was
erroneous when submitted or has become erroneous by reason of changed
circumstances.
4. The terms "covered transaction", "debarred", "suspended", "ineligible",
"lower tier covered transaction", "participant", "person", "primary covered
transaction", "principal", "proposal", and "voluntarily excluded", as used
in this clause, have the meanings set out in the Definitions and Coverage
sections of ruffles implementing Executive Order 12549. You may contact the
person to which this proposal is submitted for assistance in obtaining a
copy of those regulations.
5. The prospective lower tier participant agrees by submitting this form that,
should the proposed covered transaction be entered into, it shall not
knowingly enter into any lower tier covered transaction with a person who
is debarred, suspended, declared ineligible, or voluntarily excluded from
participation in this covered transaction, unless authorized by the
department or agency with which this transaction originated.
6. The prospective lower tier participant further agrees by submitting this
form that it will include this clause titled "Certification Regarding
Debarment, Suspension, Ineligibility and Voluntary Exclusion - Lower Tier
Covered Transactions", without modification, in all lower tier covered
transactions and in all solicitations for lower tier covered transactions.
7. A participant in a covered transaction may rely upon a certification of a
prospective participant in a lower tier covered transaction that it is not
debarred, suspended, ineligible, or voluntarily excluded from the covered
transaction, unless it knows that the certification is erroneous. A
participant may decide the method and frequency by which it determines the
eligibility of its principals. Each participant may, but is not required
to, check the Non-procurement List.
8. Nothing contained in the foregoing shall be construed to require
establishment of a system of records in order to render in good faith the
certification required by this clause. The knowledge and information of a
participant is not required to exceed that which is normally possessed by a
prudent person in the ordinary course of business dealings.
9. Except for transactions authorized under paragraph 5 of these instructions,
if a participant in a covered transaction knowingly enters into a lower
tier covered transaction with a person who is suspended, debarred,
ineligible, or voluntarily excluded from participation in this transaction,
in addition to other remedies available to the Federal Government, the
department or agency with which this transaction originated may pursue
available remedies, including suspension and/or debarment.
Page 2
EXHIBIT J
MARKETING SUPPORT
Nortel Networks may, at its option, request Avanex to provide the following
marketing support at no cost:
1. Avanex will assist Nortel Networks in providing point-by-point responses to
RFQs (Request for Quotations) and RFIs (Request for Information) with
respect to the Products.
2. Avanex will review and provide feedback on promotional material.
3. Avanex will make available a reasonable number of non-operational demo
units, up to a maximum of six (6) units, which have the same "Look" as the
final Products.
EXHIBIT K
NORTH AMERICAN FREE TRADE AGREEMENT - PROCEDURES
1.1 Avanex shall perform all administrative actions required to qualify
Products and maintain qualification for preferential treatment under the
rules of any applicable trade treaty between Canada, USA and Mexico
including, without limitation, the North American Free Trade Agreement
("NAFTA"). If a Product qualifies under NAFTA, Avanex shall prepare and
distribute a NAFTA Exporter's Certificate of Origin according to Sections
1.2 and 1.3 below, whichever applies, and any other documents required.
Avanex shall respond to NAFTA Exporter's Certificate of Origin
questionnaires and assist each Nortel Networks Company in resolving any
Product eligibility issues. Any penalties and costs resulting from a NAFTA
Exporter's Certificate of Origin subsequently being determined to be
invalid shall be acquitted upon terms to be mutually agreed to by the
Parties.
1.2 If a NAFTA Exporter's Certificate of Origin is prepared for each shipment,
Avanex shall (a) retain the original NAFTA Exporter's Certificate of
Origin in Avanex's files with appropriate backup documentation, (b) attach
a copy of the Exporter's Certificate of Origin to the customs/shipping
documents for the qualifying Product, and (c) mark these customs/shipping
documents with the legend: "Copy of the NAFTA Exporter's Certificate of
Origin attached."
1.3 If a blanket NAFTA Exporter's Certificate of Origin is prepared, Avanex
shall: (a) retain the original NAFTA Exporter's Certificate of Origin in
Avanex's files with appropriate backup documentation, (b) mark the
customs/shipping documents for the qualifying Product with the legend:
"Copy of blanket NAFTA Exporter's Certificate of Origin on file at Nortel
Networks customs offices in Milton, Ontario (Canada) and in Tonawanda, NY
(USA)," and (c) mail copies of the blanket NAFTA Exporter's Certificate of
Origin to the following offices:
Canada: USA:
Nortel Networks Corporation Nortel Networks Inc.
Dept. 1560 77 Oriskany Drive
901 Steeles Avenue Tonawanda, NY, 14150
Milton, Ontario, Canada L9T 4B6 USA
EXHIBIT L
NOTICES
AVANEX: Avanex Corporation
40919 Encyclopedia Circle
Fremont, CA
94538
U.S.A.
Attention: Jim Pickering, Vice President of Quality
Facsimile No: (510) 897-4189
NORTEL NETWORKS: Nortel Networks Corporation
3500 Carling Avenue
Nepean, Ontario
Canada K2H 8E9
Attention: Senior Counsel, Supply Management &
Microelectronics
Facsimile No: (613) 763-1552
and: Nortel Networks Corporation
9300 Trans Canada Highway
St. Laurent, QC
Canada H4S 1K5
Attention: Director of Purchasing and Component Engineering
Facsimile No: (514) 818-3222.
EXHIBIT M
INITIAL AVANEX PRESS RELEASE
To be determined by the parties in good faith as soon as practicable after April
28, 2000.