<PAGE>
EXHIBIT 10.8
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CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT.
ASTERISKS (*) DENOTE SUCH OMISSIONS.
CONFIDENTIAL AND PROPRIETARY INFORMATION OF
--------------------------------------------
AVICI SYSTEMS INC.
------------------
EMC MODULE SUPPLY AGREEMENT
THIS EMC MODULE SUPPLY AGREEMENT (the "Agreement") is made effective as of the -
5th day of May, 1999 (the "Effective Date") by and between Nortel Networks Inc.
("Nortel"), a Delaware corporation, having a place of business at 5555 Windward
Parkway, Alpharetta, Georgia, 30201-3895, and Avici Systems Inc., a Delaware
corporation, having a place of business at 101 Billerica Avenue, North
Billerica, MA 01862 (hereinafter "Avici").
W I T N E S S E T H:
WHEREAS, Avici desires to have Nortel manufacture and assemble certain Products
(as hereinafter defined) for use in Avici's Terabit Router (as described in the
Technology License Agreement (as hereinafter defined)) pursuant to one or more
Purchase Orders (as hereinafter defined) issued by Avici in accordance with this
Agreement.
WHEREAS, Nortel desires to manufacture and assemble such Products for Avici
hereunder;
NOW, THEREFORE, Avici and Nortel, in consideration of the mutual premises
contained herein and for other good an valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, agree as follows:
SECTION 1: DEFINITIONS
Capitalized terms used in this Agreement and not otherwise defined herein shall
have the meanings set forth below:
"ACTIVITY DESCRIPTION" shall mean Activity Description No. 98-017, EMC
Module and Shelf Design Adaptation, entered into by the parties hereto,
dated September 28, 1998, an addendum to the Assistance Agreement.
<PAGE>
"AFFILIATE" of Nortel shall mean, Nortel Networks Corporation, any entity
of which Nortel directly or indirectly owns or controls at least 50% of the
voting securities, and any entity of which Nortel Networks Corporation
directly or indirectly either owns or controls at least 50% of the voting
securities.
"ASSISTANCE AGREEMENT" shall mean the Nortel-Avici Assistance Agreement
entered into by the parties hereto, dated as of January 28, 1998.
"DAYS" shall mean calendar days, unless otherwise specified, provided that
if a deadline falls on a Saturday, Sunday, or holiday, it shall be extended
until the following regular business day.
"DELIVERY" shall mean Nortel's delivery of Products, FOB Nortel's North
American manufacturing facility, distribution center or approved supplier.
"DELIVERY DATE" shall mean the date of Delivery of Products.
"ESCROW MATERIALS" shall mean the design documentation for tooling
necessary to manufacture the OC-192 and X-Core Components of the Products
described in Schedule C.001000 6, Section 3.2 and 3.3.
"EVENTS OF RELEASE" shall mean the events listed in Section 16.2.
"PRICE" shall mean the amount payable for Products or Services, exclusive
of any commissions, bonds, levees, insurance, taxes, delivery charges and
other similar amounts. All Prices and other amounts in this Agreement
shall be construed to be in U.S. dollars ($U.S.).
"PRODUCTS" shall mean any one of: (1) circuit pack EMC enclosure piece
part sets: (II) EMC enclosure shelf assemblies (two (2) types); (III)
backplace EMC gasket hardware kits; and (IV) assembly of the faceplate
portion of circuit pack EMC enclosure piece part
<PAGE>
sets, to be delivered as a kit of parts, as such products are more fully
described in the Activity Description, to be manufactured by Nortel
pursuant to this Agreement. Delivery quantities will be defined by means of
Purchase Orders issued under this Agreement.
"PURCHASE ORDER" shall mean an order to purchase a specific quantity of a
Product submitted by Avici and accepted by Nortel in accordance with this
Agreement, which refers to the type and volume and timing of Products to be
manufactured and purchased; price terms; schedule Delivery Dates (unless
submitted on open Delivery terms); and "sold to," and "ship to" addresses.
The terms of this Agreement take precedence over any preprinted terms on a
Purchase Order acknowledgement, confirmation, or invoice and any
inconsistent terms in a Purchase Order unless expressly accepted by Nortel.
"SERVICES" shall mean the repair services described in Section 12.
"SCHEDULE C.00100 6" shall mean Schedule C.00100 6 entered into by the
parties hereto, dated as of September 30, 1998, a schedule to the
Technology License and Agreement.
"SPECIFICATIONS" shall mean the description of the Products, performance
and test requirements, and in-process and final test criteria, attached
hereto as Schedule A. Upon completion of the activity described in the
Activity Description the parties shall amend the Specifications to conform
to the results of such activity, to take effect as of the next
manufacturing cycle of the Product after the date of such amendment. Any
changes to the Specifications must be in writing and signed by authorized
representatives of the parties hereto.
"TECHNOLOGY LICENSE AND AGREEMENT" shall mean the Technology License and
Agreement entered into by the parties hereto, dated as of January 29, 1998.
<PAGE>
SECTION 2: SCOPE OF WORK
2.1 SCOPE
Nortel and Avici acknowledge and agree that this Agreement is an "EMC
Supply Agreement" as defined in Schedule C.00100 6, Section 6, Grant B.
Nortel agrees to perform for Avici the tasks and Services described
hereafter, with respect to the Products described in this Agreement and
according to the terms and conditions set forth herein, as modified from
time to time by mutual agreement, in writing, signed by both parties, under
the specific supervision of the technical coordinator by Avici.
2.2 MANUFACTURING OF PRODUCTS
Nortel shall manufacture and shall coordinate with such of its Affiliates
or subcontractors as necessary, and Avici shall order the manufacture of,
Products by Nortel, in accordance with the terms and conditions of this
Agreement. Nortel shall deliver to Avici's specified location only that
quantity of Products specified in Avici's Purchase Orders at the Prices set
forth herein. All applicable transportation and insurance costs incurred
by Nortel in connection with the Delivery of the Products to Avici shall be
for the account of Avici.
2.3 MANUFACTURING SCHEDULING
Nortel shall coordinate the manufacturing scheduling and pre-process
material planning with regard to the Products to be manufactured with all
necessary Affiliates and subcontractors and shall manage the overall
production plan and Deliveries thereunder in accordance with the Product
forecasts provided by Avici in accordance with Section 4.3 and the Delivery
Dates set forth in the Purchase Orders in accordance with Section 4.1.
2.4 QUALITY ASSURANCE
Nortel shall build and inspect the Products in accordance with the
Specifications. Inspection data will be maintained by Nortel for at least
two (2) years from the date of such inspection and will be available for
inspection by Avici during normal business hours upon reasonable notice.
2.5 REPAIRS
Nortel shall manage the Product repair process in accordance with Section
12 of this Agreement.
<PAGE>
2.6 TOOLING
Avici grants to Nortel a license to use or have used, and Avici shall
deliver to Nortel, the Specific EMC Tooling (as defined in Schedule C.00100
6, Section 3.3(b)) without charge, to manufacture Products.
SECTION 3: PRICING AND PAYMENT TERMS
3.1 PRICING OF PRODUCTS AND SERVICES
Prices for each Product and Service to be paid by Avici for Services
performed and Product(s) delivered under this Agreement are as follows:
(i) Schedule B contains a Price schedule for Products for the initial
term of this Agreement. [CONFIDENTIAL TREATMENT REQUESTED]/*/ Days
prior to the close of the first term, at Avici's option in accordance
with Section 15, the parties shall enter into good faith negotiation
with the intent to reach agreement on second term pricing in
accordance with Schedule C.00100 6, Section 6, Grant B, paragraph
(d).
(ii) Subject to any non-renewal notice provided pursuant to section 15.1,
thereafter, for each subsequent term, [CONFIDENTIAL TREATMENT
REQUESTED]/*/ Days prior to the close of the previous term, the
parties shall enter into good faith negotiations for subsequent-term
pricing.
(iii) Such price negotiation opportunities shall not apply to the
intellectual property rights buy-out prices set out in
Schedule C.00100 6.
(iv) Subsequent term pricing changes, if any, shall not be effective until
set out in writing, signed by both parties, and attached to this
Agreement as an amendment to Schedule B.
3.2 PAYMENT
Payment terms are as follows:
(i) Net [CONFIDENTIAL TREATMENT REQUESTED]/*/ Days from the date of
Nortel's Invoice to Avici;
(ii) Intentionally deleted;
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/*/ [CONFIDENTIAL TREATMENT REQUESTED] INDICATES MATERIAL THAT HAS BEEN
OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH
OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO RULE 406 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1933,
AS AMENDED.
<PAGE>
(iii) Avici shall pay Nortel in accordance with the above payment terms the
full amount due under each invoice, less amounts for shortages and/or
non-conforming Products or Services;
(iv) If Avici fails to pay any amount when due, Avici shall pay a late
payment charge equal to one percent (1%) per month (twelve (12%) per
annum) or the maximum rate permitted by applicable law, whichever is
lesser, calculated daily from the due date, on such unpaid amounts,
together with all costs and expenses, including reasonable attorney's
fees, incurred by Nortel in collecting such overdue amounts;
(v) If Avici disputes any invoice rendered, Avici shall so notify
Nortel and the parties will use their best efforts to resolve
such dispute expeditiously. Provided that Avici so notifies Nortel of
a disputed invoice and there is a good-faith basis for such dispute,
the time for paying the portion of the invoice in dispute shall be
extended by a period of time equal to the time between Nortel's
receipt of such notice from Avici and [CONFIDENTIAL TREATMENT
REQUESTED]/*/ Days after resolution of such dispute. Avici shall pay
for nondisputed items in accordance with the terms of this Agreement.
(vi) All payments hereunder shall be made in U.S. dollars ($U.S.).
3.3 INVOICING
Nortel may invoice for Products upon Delivery of such Products or
completion of Services, as applicable, pursuant to Purchase Orders.
Invoices shall be dated no earlier than the Delivery Date for such Products
and shall identify and show separately quantities of Products, unit prices,
total amount for each item, applicable sales or use taxes, discounts where
applicable, estimated shipping charges, if applicable, and total amount
due.
3.4 TAXES
Avici shall be responsible for sales, use, or custom taxes or duties
resulting from the manufacture and sale or Delivery of Products in
accordance with the Purchase Orders. Avici shall provide tax exemption
numbers, if applicable, for such purchases.
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/*/ [CONFIDENTIAL TREATMENT REQUESTED] INDICATES MATERIAL THAT HAS BEEN
OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH
OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO RULE 406 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1933,
AS AMENDED.
<PAGE>
SECTION 4: PURCHASE ORDERS
4.1 PURCHASE ORDERS
Subject to its buy-out rights as set out in Schedule C.00100 6, Avici will
provide to Nortel Purchase Order(s) on a quarterly basis for the following
quarter, no later than [CONFIDENTIAL TREATMENT REQUESTED]/*/ Days prior to
the commencement of Delivery for such quarter, unless otherwise agreed by
the parties, in accordance with the forecast to be provided by Avici to
Nortel in accordance with Section 4.3. During the initial 18-month term of
the Agreement, and notwithstanding Section 5, Avici shall purchase no less
than [CONFIDENTIAL TREATMENT REQUESTED]/*/ circuit pack EMC enclosure piece
part sets.
4.1.1 In the event the Agreement is extended for a second 18-month
term, Avici shall, during such second term, notwithstanding Section
5, purchase no less than [CONFIDENTIAL TREATMENT REQUESTED]/*/
circuit pack EMC enclosure piece part sets.
4.1.2 In the event of a conflict between the terms and conditions of
a Purchase Order and terms and conditions of this Agreement, this
Agreement shall govern unless otherwise mutually agreed.
4.1.3 All Purchase Orders submitted by Avici to Nortel pursuant to
this Agreement shall reference this Agreement.
4.1.4 The parties acknowledge and agree that the units of circuit
pack EMC enclosure piece part sets purchased by Avici from Nortel
pursuant to Avici Purchase Order No. 981492, dated April 1, 1999,
shall be credited towards the [CONFIDENTIAL TREATMENT REQUESTED]/*/
unit minimum purchase amount described in the opening paragraph of
this Section 4.1, and that Nortel shall credit the aggregate
difference between the price for the circuit pack EMC enclosure
piece part sets purchased pursuant to Purchase Order No. 981492 and
the Price for circuit pack EMC enclosure piece part sets against
payments owned by Avici in respect of circuit pack EMC enclosure
piece part sets purchased hereunder.
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/*/ [CONFIDENTIAL TREATMENT REQUESTED] INDICATES MATERIAL THAT HAS BEEN
OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH
OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO RULE 406 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1933,
AS AMENDED.
<PAGE>
4.2 ACCEPTANCE OF PURCHASE ORDERS
Nortel shall accept all Purchase Orders conforming to the requirements of
this Agreement delivered via facsimile (and confirmed by telephone
conversation) to the address and addressee of Nortel set forth in Section
17.6. Any Purchase Order not rejected within [CONFIDENTIAL TREATMENT
REQUESTED]/*/ business days of receipt by Nortel shall be deemed accepted.
Failure by Nortel to accept a conforming Purchase Order shall be considered
a material breach of this Agreement, provided Avici is not in material
breach thereof.
4.2.1 Nortel will maintain raw material inventory in stock and tooling on
hand sufficient to meet Avici orders and requirements.
4.2.2 Notwithstanding any provision in this Agreement to the contrary,
Nortel's supply of Products shall be limited to the capability, tool
life and/or quantity of the tools provided to Nortel by Avici
pursuant to Section 2.5.
4.2.3 Avici will reimburse Nortel [CONFIDENTIAL TREATMENT REQUESTED]/*/
percent ([CONFIDENTIAL TREATMENT REQUESTED]/*/%) of the cost of
finished goods inventory per month maintained by Nortel at Avici's
request.
4.3 PRODUCT FORECASTS
Avici shall provide Nortel with written 12-month forecasts by calendar
quarter of all Purchase Orders in respect of Products Avici expects to
place on Nortel, not later than [CONFIDENTIAL TREATMENT REQUESTED]/*/
months prior to the 12-month period covered thereby. Avici shall update
such forecasts every [CONFIDENTIAL TREATMENT REQUESTED]/*/ months and
report to Nortel any significant changes in the forecasts. Such forecasts
shall not be binding purchase obligations upon Avici. Firm purchase and
sale commitments shall be made through Purchase Orders issued by Avici and
accepted by Nortel.
SECTION 5: PURCHASE ORDER RESCHEDULING/CANCELLATIONS
5.1 RESCHEDULING
5.1.1 Avici may, by written notice received by Nortel [CONFIDENTIAL
TREATMENT REQUESTED]/*/ Days, or less, prior to the Delivery Date,
at no charge, reschedule the Delivery of ordered Products, provided
that such rescheduled Delivery Date shall not be later than
[CONFIDENTIAL TREATMENT REQUESTED]/*/ Days from the original
Delivery Date, and provided such rescheduled Delivery
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/*/ [CONFIDENTIAL TREATMENT REQUESTED] INDICATES MATERIAL THAT HAS BEEN
OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH
OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO RULE 406 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1933,
AS AMENDED.
<PAGE>
Date shall not exceed the then current term of this Agreement. The
Delivery Date for a particular Purchase Order may only be
rescheduled once pursuant to this Section 5.1.1.
5.1.2 Subsequent rescheduling [CONFIDENTIAL TREATMENT REQUESTED]/*/ Days,
or less, prior to the Delivery Date will be subject to an additional
fee of [CONFIDENTIAL TREATMENT REQUESTED]/*/ percent ([CONFIDENTIAL
TREATMENT REQUESTED]/*/%) of Nortel's Product Price.
5.1.3 Purchase orders may be rescheduled greater than [CONFIDENTIAL
TREATMENT REQUESTED]/*/ days but less than [CONFIDENTIAL TREATMENT
REQUESTED]/*/ days prior to the Delivery Date at no charge, provided
the rescheduled Delivery Date shall not be later than [CONFIDENTIAL
TREATMENT REQUESTED]/*/ Days from the original Delivery Date.
5.1.4 Purchase Orders may be re-scheduled more than [CONFIDENTIAL
TREATMENT REQUESTED]/*/ Days prior to the Delivery Date at no
charge, provided such rescheduled Delivery Date shall not exceed the
then current term of this Agreement.
5.1.5 There shall be no rescheduling charge applied to expedited
deliveries.
5.2 CANCELLATION CHARGES
5.2.1 Avici may cancel all or a portion of a Purchase Order already
accepted by Nortel by providing Nortel with a written notice of
cancellation and by paying to Nortel a fee equal to:
[CONFIDENTIAL TREATMENT REQUESTED]/*/
[CONFIDENTIAL TREATMENT REQUESTED]/*/
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/*/ [CONFIDENTIAL TREATMENT REQUESTED] INDICATES MATERIAL THAT HAS BEEN
OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH
OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO RULE 406 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1933,
AS AMENDED.
<PAGE>
[CONFIDENTIAL TREATMENT REQUESTED]/*/
5.2.2 In no event shall the cancellation charges set forth in this Section
5.2 exceed [CONFIDENTIAL TREATMENT REQUESTED]/*/.
5.2.3 Nortel will provide Avici with documentation adequate to support its
claim for cancellation charges. Components and completed work and
work-in-process that are paid for by Avici pursuant to such
cancellation charges shall be Avici's property subject to the terms
herein and shall be held or Delivered to Avici as Avici may
reasonably request. Notwithstanding the foregoing, Avici shall have
no obligation to pay cancellation charges if the cancellation is
occasioned by the failure of Nortel to perform its material
obligations under this Agreement unless Nortel's failure is the
result of Avici's failure to perform its material obligations
hereunder.
5.3 Notwithstanding any provision in this Agreement or Avici Purchase Order No.
981492, dated April 1, 1999, to the contrary, Avici covenants and agrees
that Avici may not cancel or reschedule (unless mutually agreed) all or any
part of Avici Purchase Order No. 981492, dated April 1, 1999, for any
reason.
SECTION 6: SHIPPING/DELIVERY/TITLE
6.1 FOB TERMS
All Deliveries of Products covered under this Agreement shall be made FOB
Nortel's North American manufacturing facility, distribution center or
approved supplier, freight collect. Such Delivery shall constitute
delivery to Avici. As of the moment a Product is delivered to Avici, Avici
accepts all risk of loss, mishandling, breakage, and other damages relating
thereto. Avici shall use is best efforts to specify the carrier at least
[CONFIDENTIAL TREATMENT REQUESTED]/*/ business Days prior to the Delivery
Date and shall be responsible for paying such carrier.
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/*/ [CONFIDENTIAL TREATMENT REQUESTED] INDICATES MATERIAL THAT HAS BEEN
OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH
OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO RULE 406 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1933,
AS AMENDED.
<PAGE>
In the event Avici does not so specify the carrier, Nortel shall select a
carrier and Deliver the Products as described above, in a reasonably
economical manner, freight prepaid by Nortel and charged to Avici in the
applicable invoice. If Products are designated for export, Avici is
responsible for assuring compliance with applicable export laws, and Avici
will provide Nortel with instructions for the handling of such export
shipments and shall reimburse Nortel for all costs associated therewith.
6.2 SHIPPING
Intentionally deleted.
6.3 PACKING
All products shipped hereunder shall be packed by Nortel, at no additional
charge to Avici, in containers adequate to prevent damage during shipping,
handling and storage.
6.4 DELIVERY IN INSTALLMENTS
Nortel may fill a Purchase Order in installments, but only in mutually
agreeable partial quantities and at mutually agreeable intervals. Nortel
may not ship incomplete Products at any time, unless pre-approved by Avici.
6.5 TITLE
Title to Products will pass to Avici upon Delivery. Avici grants to Nortel
a first priority security interest in the Products. Nortel may perfect
such interest, and Avici shall assist Nortel, as reasonably necessary, to
do so. Nortel may retain such interest until Avici has paid Nortel in full
for the Products. Prior to payment in full for such Products, Avici shall
not cause or permit the Products, or any portion thereof, to be sold,
leased or subjected to a lien or other encumbrance. Nothing contained in
this Section 6.5 shall be construed so as to vary the provisions contained
in the Activity Description or Schedule C.00100 6, as applicable, related
to ownership and licensing of, or other obligations related to, the
intellectual property, and rights therein, incorporated into Products.
6.6 LATE DELIVERY
(a) Nortel shall Deliver the Products and perform Services ordered by
Avici by the Delivery Date mutually agreed to by the parties. All
scheduled Delivery Dates of Products or performance of Services are
firm, and time shall be of the essence.
<PAGE>
(b) Nortel's Delivery obligations pursuant to Section 6 are subject to
the condition that the Delivery Dates specified in Purchase Orders
shall comply with minimum [CONFIDENTIAL TREATMENT REQUESTED]/*/ Days
lead time, unless Nortel expressly agrees to shorter intervals.
(c) Unless otherwise instructed by Avici, Nortel shall for all Purchase
Orders placed hereunder: (i) ship complete orders, (ii) ship to the
location designated in the Purchase Order; (iii) ensure that all
subordinate documents bear Avici's Purchase Order Number; (iv)
enclose a packing memorandum; (v) mark Avici's Purchase Order number
on all packages and shipping papers; and (vi) not Deliver earlier
than [CONFIDENTIAL TREATMENT REQUESTED]/*/ Days before the Delivery
Dates specified in the applicable Purchase Order unless otherwise
mutually agreed.
(d) Nortel shall immediately notify Avici of any anticipated late
Deliveries and any impending plant or facility shutdowns for any
reason, including vacation, tool repair, labor difficulties or
governmental order, which may adversely impact the scheduled
Delivery Dates. In the event that Nortel is delinquent on delivering
a Product to Avici for reasons other than those attributable to
Avici or in accordance with Section 17.11, Nortel shall deliver such
Product to Avici in the most expeditious manner possible and the
payment of premium transportation cots associated with the shipment
of the Product shall be at Nortel's expense.
(e) The rights and obligations of the parties under this Section 6.6
shall not apply to the extent that any delay in delivering a Product
is caused by a relevant delay in performance by Avici of its
obligations under this Agreement.
SECTION 7: QUALITY
7.1 QUALITY ASSURANCE
Prior to first production start, Nortel and Avici shall engage in good
faith negotiations to develop a mutually satisfactory quality plan, which
plan shall include failure root cause analysis and a corrective action plan
which meets the requirements of ISO 9001 or 9002, whichever is applicable.
This plan shall be set out in a separate document.
Nortel agrees that all Deliveries of Products shall be verified for
compliance with the Specifications for each Product(s).
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/*/ [CONFIDENTIAL TREATMENT REQUESTED] INDICATES MATERIAL THAT HAS BEEN
OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH
OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO RULE 406 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1933,
AS AMENDED.
<PAGE>
Further, the parties agree that regular quality reviews will be held no
less frequently than on a quarterly basis at such time and place as
mutually agreed to by the parties. Reasons for such meetings may include,
but shall not be limited to:
(a) Review of quality acceptance criteria;
(b) Quality performance and receiving inspection results;
(c) Corrective action results/change control; and
(d) Field problem reviews and regulatory impacts.
In addition, Nortel will:
(a) Respond in a timely manner to Avici's quality related corrective
action requests as a result of non-conformance to the quality plan;
(b) Allow inspections of Nortel Product manufacturing facilities and
periodic quality audits by Avici to determine Product conformance to
quality criteria described in the Specifications; and
(c) Manufacture Products in compliance with applicable Specifications.
7.2 INSPECTION AND ACCEPTANCE
Avici shall notify Nortel in writing of particular deficiencies in Products
that do not conform to the Specifications that Avici has knowledge of, from
time to time. Products will be deemed accepted by Avici if a notice of
deficiency is not received by Nortel via facsimile (and confirmed by
telephone conversation) to the address and addressee of Nortel set forth in
Section 17.6 within [CONFIDENTIAL TREATMENT REQUESTED]/*/ days after
Delivery of the Products. Such unaccepted non-conforming Products shall be
returned to Nortel at Nortel's expense for repair or replacement, at
Nortel's option and expense, as soon as commercially possible but no later
than thirty (30) Days after receipt of such non-conforming Product.
Nortel's responsibility for deficiencies discovered after the close of the
[CONFIDENTIAL TREATMENT REQUESTED]/*/day inspection period, but prior to
the close of the warranty period as set out in Section 11, shall be as
provided for under the warranty provisions of this Agreement.
7.3 MANUFACTURING PLANT INSPECTION
Nortel will allow Avici into its facility manufacturing Products pursuant
to this Agreement, at which any of the Products may be inspected upon
reasonable prior written notice as long as any such inspection will not
unduly interfere with Nortel's operations. Avici and its employees shall
comply with all Nortel rules and procedures when in or on Nortel's
premises.
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/*/ [CONFIDENTIAL TREATMENT REQUESTED] INDICATES MATERIAL THAT HAS BEEN
OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH
OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO RULE 406 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1933,
AS AMENDED.
<PAGE>
SECTION 8:
Intentionally deleted.
SECTION 9: QUARTERLY OPERATIONS REVIEWS
9.1 Reviews
Avici and Nortel will review quarterly the performance of each party
hereunder. Such review shall include items such as Product Delivery,
Product forecasts, Product performance, quality and cost.
SECTION 10: Intentionally deleted.
SECTION 11: WARRANTY
11.1 NORTEL'S WARRANTY
Nortel warrants that the Products manufactured hereunder, under normal use
and service, will be free from defects in material and workmanship, and
will perform substantially in accordance with the applicable
Specifications, for a period of [CONFIDENTIAL TREATMENT REQUESTED]/*/ from
Delivery (the "Warranty Period"); provided, however, that Nortel shall
have no liability for any defects as a result of design or Specification
flaws. This warranty shall not apply to items normally consumed in
operation, such as lamps and fuses. Nortel's sole obligation and Avici's
exclusive remedy under this warranty is limited to the replacement or
repair, at Nortel's option and expense, of the defective Products.
Replacement Products may be new or reconditioned to perform as new at
Nortel's option. The foregoing warranty does not apply: (i) if the defect
arises from mishandling; abuse; improper storage; improper performance of
installation, other service or maintenance other than by Nortel; misuse
(including, without limitation, any use of the Product beyond the
environmental parameters set forth in the applicable Specifications);
damage by fire, explosion, power failure, power surge or other power
irregularity (beyond such parameters which are set forth in the applicable
Specifications); or (ii) if any repair or
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/*/ [CONFIDENTIAL TREATMENT REQUESTED] INDICATES MATERIAL THAT HAS BEEN
OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH
OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO RULE 406 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1933,
AS AMENDED.
<PAGE>
modification (or attempted repair or modification) of the Product is made
other than by Nortel unless that repair or modification (or attempted
repair or modification) of the Product made by any party other than Nortel
has been specifically authorized in writing by Nortel. In the event a
repair is required as a result of (i) or (ii) above, Nortel will repair
the Product and Avici will pay to Nortel expenses incurred by Nortel in
connection therewith, in accordance with Nortel's then current standard
rates therefor. Turnaround time for warranty repair or replacement shall
be no greater than [CONFIDENTIAL TREATMENT REQUESTED]/*/ Days. Repair or
replacement Products furnished by Nortel during the Warranty Period shall
be warranted for a period of [CONFIDENTIAL TREATMENT REQUESTED]/*/ Days or
the remainder of the original Warranty Period, whichever is longer. The
aforementioned warranties shall inure to Avici, its successors and
assigns. Nortel warrants that the Products delivered to Avici are free and
clear of all liens and encumbrances. Notwithstanding the foregoing, the
warranty applicable to components supplied to Nortel by a third party and
forming a part of a Product shall be the warranty provided by such third
party supplier.
11.2 Y2K WARRANTIES
Nortel warrants that any software or systems of Nortel used by Nortel in
the supply of Products shall: (i) process date and time related data
without causing processing interruptions, abnormal terminations, or
changes in performance characteristics; and (ii) shall process and
manipulate all date and time related functions correctly.
11.3 NORTEL'S DUTIES
Nortel shall maintain such inspection logs for Products Delivered as
Nortel would create in the normal course, for a period of twenty-four (24)
months after such inspection and shall make such information available to
Avici on request. In the event Avici root cause analysis of field failures
of its Terabit Router reasonably indicate that non-conformance of Products
to the Specifications and/or defects in material and workmanship are the
cause of the failures, Nortel shall provide reasonable assistance to Avici
in performing root cause analysis of such Products and make such
information available to Avici on request.
11.4 CONFORMING PRODUCTS
For Products that are returned to Nortel by Avici for repair or
replacement pursuant to Section 11.1 and are found by Nortel to conform to
the applicable Specifications, Avici shall pay Nortel for all costs it has
incurred in connection with the handling and testing of the Products as
well as shipping charges and duties.
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OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH
OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO RULE 406 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1933,
AS AMENDED.
<PAGE>
11.5 DISCLAIMER
THE FOREGOING WARRANTIES AND REMEDIES CONSTITUTE THE ONLY WARRANTIES,
GUARANTEES OR CONDITIONS WITH RESPECT TO PRODUCTS AND SERVICES AND ARE
AVICI'S EXCLUSIVE REMEDIES IN THE EVENT SUCH WARRANTIES ARE BREACHED. SUCH
WARRANTIES ARE IN LIEU OF ALL OTHER WARRANTIES, GUARANTEES OR CONDITIONS,
WRITTEN OR ORAL, STATUTORY, EXPRESS OR IMPLIED, INCLUDING WITHOUT
LIMITATION, ANY WARRANTY WITH RESPECT TO ANY OTHER SERVICES PROVIDED BY
NORTEL HEREUNDER OR OTHERWISE, AND ANY WARRANTY OF MERCHANTABILITY,
FITNESS FOR A PARTICULAR PURPOSE OR NON-INFRINGEMENT. NORTEL SHALL NOT BE
RESOPNSIBILE FOR ANY WARRANTY OFFERED BY AVICI TO ANY CUSTOMER(S) OF
AVICI. IN NO EVENT SHAL NORTEL BE LIABLE FOR ANY INCIDENTAL, INDIRECT,
SPECIAL OR CONSEQUENTIAL DAMAGES RELATING TO BREACH OF WARRANTY.
SECTION 12: REPAIRS
12.1 Nortel agrees to provide repair Services during the period described in
Section 12.4 for the Products it manufactures. Repair Services for items
supplied to Nortel by third parties will be subject to any agreement
between Nortel and such third party.
12.2 REPAIRS UNDER WARRANTY
Nortel is responsible for the cost of repairs, including return shipment
costs from Nortel to Avici, in respect of Product repair pursuant to
Section 11.1. Avici shall be responsible for shipment costs to Nortel from
Avici for such Products.
12.3 REPAIRS OUT OF WARRANTY
The Price to Avici for out-of-warranty repairs shall be at Nortel's
standard rate therefor at such time. Turnaround time for such repairs
shall be [CONFIDENTIAL TREATMENT REQUESTED]/*/ Days. Invoices for out-of-
warranty repairs shall be paid by Avici within [CONFIDENTIAL TREATMENT
REQUESTED]/*/ Days of the date of invoice for the cost of such repairs.
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OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH
OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO RULE 406 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1933,
AS AMENDED.
<PAGE>
12.4 TIME LIMITATIONS
Nortel must retain repair capabilities for each Product for a period of
[CONFIDENTIAL TREATMENT REQUESTED]/*/ years from the date such Product was
last manufactured by Nortel, provided, in the event Avici transfers the
manufacture of such Product to a third party, to the extent permitted in
Schedule C.00100 6, the obligation imposed upon Nortel in this Section
shall terminate as of such date.
12.5 OUT-OF-WARRANTY REPLACEMENTS
During the period described in Section 12.4, in the event that any Product
is beyond repair, it shall, at Avici's option, be returned to Avici as is
at Avici's expense. If, during the period described in Section 12.4, the
Warranty Period for such Product has expired and, in such case, should
Avici request a replacement Product, the applicable price for such
replacement will be the full cost of the Product, plus all transportation
costs, at such time.
12.6 PRODUCT RETURNS
Avici shall be responsible for the return of the Products to Nortel,
subject to Section 12.2, replaced under Section 12.5. In the event that
Nortel ships a replacement Product pursuant to Section 12.5 prior to
receiving the Product being returned, Nortel must receive the returned
Product within [CONFIDENTIAL TREATMENT REQUESTED]/*/ Days of shipping the
replacement. If Nortel has not received the returned Product within such
[CONFIDENTIAL TREATMENT REQUESTED]/*/ Days, Nortel shall be entitled to
invoice Avici for the returned Product.
SECTION 13: LIMITATION OF LIABILITY
13.1 EXCLUSION OF CERTAIN DAMAGES
WITH THE EXCEPTION OF VIOLATIONS OF SECTION 14 BELOW, IN NO EVENT SHALL
EITHER PARTY BE LIABLE FOR INDIRECT, SPECIAL, INCIDENTAL, OR CONSEQUENTIAL
DAMAGES, LOSS OF PROFITS, LOSS OF USE, OR DATA OR INTERRUPTION OF
BUSINSES, WHETHER SUCH ALLEGED DAMAGES ARE LABELED IN TORT, CONTRACT, OR
INDEMNITY, EVEN IF SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH
DAMAGES. WITH THE EXCEPTION OF VIOLATIONS OF SECTION 14 BELOW, IN NO EVENT
SHAL NORTEL BE LIABLE FOR DAMAGES FOR ANY CAUSE WHATSOEVER, INCLUDING BUT
NOT LIMITED TO BREACH OF CONTRACT (INCLUDING FUNDAMENTAL BREACH), TORT
(INCLUDING NEGLIGENCE), INDEMNITY OR OTHERWISE, IN AN AMOUNT IN EXCESS OF,
IN THE AGGREGATE, THE PAYMENTS RECEIVED BY NORTEL FROM AVICI PURSUANT TO
THIS AGREEMENT TO THE DATE OF SUCH LIABILITY, OR ONE HUNDRED THOUSAND
DOLLARS (US $100,000.00), WHICHEVER IS GREATER.
WITH THE EXCEPTION OF VIOLATIONS OF SECTION 14 BELOW, IN NO EVENT SHALL
AVICI BE LIABLE FOR DAMAGES FOR ANY CAUSE WHATSOEVER, INCLUDING BUT NOT
LIMITED TO BREACH OF CONTRACT (INCLUDING FUNDAMENTAL BREACH), TORT
(INCLUDING NEGLIGENCE),
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OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH
OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO RULE 406 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1933,
AS AMENDED.
<PAGE>
INDEMNITY OR OTHERWISE, IN AN AMOUNT IN EXCESS OF, IN THE AGGREGATE, THE
PAYMENTS RECEIVED BY NORTEL FROM AVICI PURSUANT TO THIS AGREEMENT TO THE
DATE OF SUCH LIABILITY, OR [CONFIDENTIAL TREATMENT REQUESTED]/*/ DOLLARS
(US $[CONFIDENTIAL TREATMENT REQUESTED]/*/ ), WHICHEVER IS GREATER.
WITH THE EXCEPTION OF VIOLATIONS OF SECTION 14 BELOW, IN NO EVENT SHALL
AVICI BE LIABLE FOR DAMAGES FOR ANY CAUSE WHATSOEVER, INCLUDING BUT NOT
LIMITED TO BREACH OF CONTRACT (INCLUDING FUNDAMENTAL BREACH), TORT
(INCLUDING NEGLIGENCE), INDEMNITY OR OTHERWISE, IN AN AMOUNT IN EXCESS OF,
IN THE AGGREGATE, THE PAYMENTS OWED TO NORTEL BY AVICI PURSUANT TO THIS
AGREEMENT TO THE DATE OF SUCH LIABILITY, OR [CONFIDENTIAL TREATMENT
REQUESTED]/*/ DOLLARS (US $[CONFIDENTIAL TREATMENT REQUESTED]/*/),
WHICHEVER IS GREATER.
SECTION 14: INTELLECTUAL PROPERTY
RIGHTS AND CONFIDENTIALITY PROVISIONS
14.1 The rights and obligations of Nortel and Avici related to the Products and
Services shall be subject to Schedule C.00100 6, Section 6, Grant B and C,
as applicable.
14.2 All technical information, specifications, drawings, documentation and
"know-how" of every kind and description whatsoever disclosed in writing
and identified as confidential by either party to the other under this
Agreement (the "Information"), except insofar as it may be in the public
domain or be established to have been independently developed and so
documented by the other party or obtained by any person not in breach of
any confidentiality obligations to the disclosing party, is the exclusive
property of the disclosing party. The recipient party, except as
specifically authorized in writing by the disclosing party, or as
permitted hereunder, shall treat and protect the Information as
confidential, shall not reproduce the Information except to the extent
reasonably required for the performance of this Agreement, shall not
divulge the Information in whole or in part to any third parties (except
for, in the case of Nortel, Nortel Affiliates, subcontractors
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OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH
OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO RULE 406 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1933,
AS AMENDED.
<PAGE>
and suppliers), and shall use the Information only for purposes necessary
for the performance of this Agreement or as may be required for the use of
the Products and/or Services provided hereunder. This obligation shall
survive the termination of this Agreement for a period of [CONFIDENTIAL
TREATMENT REQUESTED]/*/ years. Each party shall disclose the Information
only to those of its employees or agents (including, in the case of
Nortel, those of its Affiliates, subcontractors and suppliers) who shall
have a "need-to-know" the Information for the purposes described herein
after first making such employees or agents aware of the confidentiality
obligations set forth above.
SECTION 15: TERM AND TERMINATION
15.1 TERM
This Agreement shall become effective on the Effective Date and shall
remain in effect for a period of eighteen (18) months, at the conclusion
of which, at Avici's option, subject to agreement by the parties with
regard to second term pricing and provided Avici does not exercise buy-out
options pursuant to Schedule C.00100 6, the Agreement may be renewed for a
second 18-month term. Subject to Section 15.2, the Agreement shall be
self-renewing thereafter for successive one (1) year renewal periods
unless either party notifies the other in writing of its intent to not
renew the Agreement and such notice is received at least ninety (90) Days
prior to the end of the then current term, all such period(s) being
referred to herein as "term," unless and until terminated in accordance
with this Agreement.
15.2 TERMINATION OF AGREEMENT
(a) This Agreement may not be terminated by either party earlier than
eighteen (18) months after the Effective Date, other than for
material breach as set out in (b) below.
(b) This Agreement may be terminated at any time upon the occurrence of
any one or more of the following events of default:
(i) By either party if the other party defaults in the performance
of any material requirement or obligation under this Agreement,
and such default is not cured within (a) in the case of an
issue requiring initiation of a new production cycle to cure
such default, forty-five (45) Days after written
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OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH
OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO RULE 406 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1933,
AS AMENDED.
<PAGE>
notice of such default is sent to such party or (b) in the case
of any other issue, thirty (30) Days after written notice of
such default is sent to such party (in either (a) or (b), the
"Cure Period"). This Agreement shall not, however, terminate if
the other party has cured the breach prior to the expiration of
the Cure Period or, if such breach cannot be cured within such
Cure Period, the other party has initiated actions to cure such
breach within such Cure Period, and thereafter cures such
breach as soon as reasonably practicable;
(ii) By either party if the other party defaults in the performance
of any material requirement or obligation under Schedule
C.00100 6, and such default is not cured within forty-five (45)
days after written notice of such default is sent to such
party;
(iii) By Nortel if Avici fails to make (in full) any payment required
by this Agreement to Nortel on the date due, and fails to cure
such default within forty-five (45) Days after written notice
of such default is sent to Avici; or
(iv) By either party if the other party ceases to do business, makes
a composition or assignment for the benefit of its creditors,
makes a general arrangement with its creditors concerning any
extension or forgiveness of any of its secured debt, becomes
bankrupt or insolvent, suffers or seeks the appointment of a
receiver to the whole or any material part of its business,
takes any action to liquidate or wind up the whole or any
material part of its business, is found subject to any
provisions of any bankruptcy code concerning involuntary
bankruptcy or similar proceeding, or suffers a material adverse
change in its financial position such that payments hereunder
may be affected or delayed by a creditor or administrator of
the business of the other party.
(c) Either party may terminate this Agreement for convenience on a ninety
(90)-Day prior written notice to the other party. In the event Avici
so terminates for convenience, Avici shall reimburse Nortel for the
actual costs incurred in connection with the Agreement work to the
date of such termination. The amount of such actual costs shall be
comprised of [CONFIDENTIAL TREATMENT REQUESTED]/*/
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OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH
OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO RULE 406 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1933,
AS AMENDED.
<PAGE>
[CONFIDENTIAL TREATMENT REQUESTED]/*/
(d) Termination for convenience by Avici, or termination by Nortel
pursuant to (b) above, during the first term is subject to
reimbursement by Avici of Nortel's $[CONFIDENTIAL TREATMENT
REQUESTED]/*/ unrecovered sunk costs in respect of the Activity
Description less $[CONFIDENTIAL TREATMENT REQUESTED]/*/ per circuit
pack EMC enclosure piece part set Delivered to date. Termination for
convenience by Avici, or termination by Nortel pursuant to (b) above
during the second term is subject to reimbursement by Avici of
Nortel's $[CONFIDENTIAL TREATMENT REQUESTED]/*/ unrecovered sunk
costs in respect of the Activity Description less $[CONFIDENTIAL
TREATMENT REQUESTED]/*/ per circuit pack EMC enclosure piece part set
Delivered to date during such second term.
(e) Termination for convenience by Nortel during the first term will
result in Nortel's forfeiture of any remaining portion of such
$[CONFIDENTIAL TREATMENT REQUESTED]/*/ sunk costs. Termination for
convenience by Nortel during the second term will result in Nortel's
forfeiture of any remaining portion of such $[CONFIDENTIAL TREATMENT
REQUESTED]/*/ sunk costs.
(f) In the event of failure to reach agreement after good faith
negotiations with regard to subsequent-term pricing at the conclusion
of a given term, the Agreement terminates as of the end of the then-
current term.
(g) In addition, in the event Nortel terminates for convenience, Avici
shall have the right within ninety (90) Days of receipt of such
notice to
(i) place a Purchase Order(s) for Products which Avici shall deem
necessary for support of its own products for three (3) months.
The number of units ordered under this subsection shall not be
greater than the monthly average of units ordered during the
six (6) months prior to Avici's receipt of notice of
termination. The Delivery of such Products shall be in
accordance with Section 4.1 above, but no later than ninety
(90) Days of the date of such termination; and
(ii) at Nortel's discretion, Nortel will I) provide on-going supply
of re-used parts or make available information necessary for
Avici to permit the fabrication of the tools to fabricate the
necessary part or II) Avici shall have access to the Escrowed
Materials in accordance with Section 16.
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OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH
OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO RULE 406 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1933,
AS AMENDED.
<PAGE>
(h) In the event the Agreement is not renewed for a second eighteen (18)
month term for any reason (other than termination of convenience by
Nortel), Avici shall pay Nortel $[CONFIDENTIAL TREATMENT REQUESTED]/*/
in respect of Nortel's unrecovered sunk costs and (g)(ii) shall apply.
15.3 PAYMENT OBLIGATIONS
No termination or expiry of this Agreement shall release Avici from any
obligation to pay Nortel any amount that has accrued or become payable at
or prior to the date of termination or expiry.
SECTION 16: ESCROW AND MANUFACTURING RIGHTS
16.1 Escrow
Nortel shall deposit the Escrow Materials for the Products with an escrow
agent to be mutually agreed upon by the parties. The Escrow Materials
shall be in machine-readable or hard copy form, as appropriate, suitable
for reproduction and use by Avici. During this term of this Agreement,
Nortel shall keep the Escrow Materials current by promptly depositing
updates that correspond to any Escrow Materials.
16.2 EVENTS OF RELEASE
Events of Release are as follows:
(a) A material breach of this Agreement by Nortel, including, without
limitation, a consistent and material failure or refusal, or an
intentional refusal at any time when Avici is not in material breach
of this Agreement, to provide Products as required pursuant to this
Agreement for any reasons within control of Nortel, where such failure
or refusal has been the subject of a notice in writing to Nortel that
its continued failure or refusal would cause Avici to invoke its
rights under this Section 16 forty-five (45) Days after the receipt by
Nortel of such notice;
(b) An intentional refusal to accept a conforming Purchase Order from
Avici, where such refusal has been the subject of a notice in writing
to Nortel that its continued refusal
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OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH
OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO RULE 406 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1933,
AS AMENDED.
<PAGE>
would cause Avici to invoke its rights under this Section 16 forty-
five (45) Days after the recipient by Nortel of such notice of breach
under Section 15.2(i)(a), or thirty (30) Days after the receipt by
Nortel of such notice of breach under Section 15.2(i)(b);
(c) Nortel makes an assignment, or enters into an arrangement with or for
the general benefit of its creditors, or files a notice of intention
to make a proposal under any applicable bankruptcy or other similar
laws, is subject to the appointment of a trustee, custodian, receiver,
or receiver manager of itself or of any substantial part of its
assets, or otherwise ceases to carry on normal business operation.
16.3 RELEASE
16.3.1 If Avici reasonably believes that an Event of Release has occurred, and
wishes to have the Escrow Materials released, it shall provide written
notice of the occurrence of an Event of Release to the escrow agent. Upon
receipt of such notice, the escrow agent shall release the Escrow Materials
to Avici, and provide notice of such release to Nortel. If Nortel wishes
to dispute the occurrence of an Event of Release, it shall provide written
notice of its objection to Avici within thirty (30) Days of the date or
receipt of the escrow agent's notice.
16.4 LICENSE
(a) The use of Escrow Materials shall be subject to Schedule C.00100 6,
Section 6, Grant C.
16.5 LIQUIDATED DAMAGES
In the event Avici obtains release of the Escrow Materials and it is
subsequently proven by Nortel that an Event of Release did not occur: (I)
Avici shall pay to Nortel an amount equal to $[CONFIDENTIAL TREATMENT
REQUESTED]/*/ (and an additional amount for Nortel's reasonable attorney's
fees), which amount represents Nortel's liquidated damages resulting from
such action by Avici; (II) Avici shall forthwith return all Escrow
Materials to the escrow agent, or destroy all such Escrow Materials and
certify to Nortel that all such Escrow Materials have been destroyed; and
(III) the license granted by Nortel to Avici pursuant to Section 16.4 shall
terminate immediately.
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OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH
OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO RULE 406 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1933,
AS AMENDED.
<PAGE>
SECTION 17: GENERAL
17.1 Severability
In the event that any provision of this Agreement is found to be invalid,
voidable or unenforceable, the parties agree that unless such provision
materially affects the entire intent and purpose of this Agreement, such
invalidity, voidability or unenforceability shall affect neither the
validity of this Agreement nor the remaining portion herein, and that the
provision in question shall be deemed to be replaced with a valid and
enforceable provision most closely reflecting the intent and purpose of the
original provision.
17.2 SURVIVAL
Notwithstanding any termination or expiry of this Agreement, the provisions
of Sections 1 (Definitions). 3 (Pricing and Payment Terms), 5 (Purchase
Order Rescheduling/Cancellation), 6.5 (Title), 11 (Warranty), 12 (Repairs),
13 (Limitation of Liability), 14 (Intellectual Property Rights and
Confidentiality Provisions), 15 (Term and Termination) and all consequent
rights, obligations and liabilities shall survive the termination or the
expiry of this Agreement.
17.3 ASSIGNMENT
Neither party shall assign its rights or delegates its duties under this
Agreement without the prior written consent of the other, provided that
Avici may assign all of its rights hereunder as part of a sale of
substantially all of the assets of Avici and Nortel may assign all of its
obligations hereunder as part of a sale of substantially all of the assets
of Nortel or its Affiliates used in fulfilling such obligations, subject to
the terms hereof. Notwithstanding the foregoing, Nortel shall have the
right to delegate or assign this Agreement to any Affiliate subject to the
consent of Avici, which consent shall not be unreasonably withheld. Nortel
may subcontract any of its obligations hereunder without Avici's consent.
<PAGE>
17.4 WAIVER
The failure of either party to enforce at any time or for any period of
time any of the provisions of this Agreement shall not constitute a waiver
of such provisions or the right of either party to enforce each and every
provision.
17.5 GOVERNING LAW
The rights and obligations arising under the Agreement shall be governed by
and construed in accordance with the laws of the Commonwealth of
Massachusetts and the federal laws of the United States applicable therein,
without regard to its conflicts of law rules.
17.6 NOTICES
(a) Any and all notices or other information required to be given by one
of the parties to the other shall be deemed sufficiently given when
forwarded by prepaid registered mail, overnight delivery service,
cable, telegrams, facsimile, telex or hand-delivery to the other party
at the following address:
AVICI
-----
Avici Systems, Inc.
101 Billerica Ave., Building 6
North Billerica, MA
01862
Attention: President and Chief Executive Officer
NORTEL
------
Northern Telecom Limited
NSPaN Marketing Operations
10 Brewer Hunt Way
Kanata, Ontario, Canada
K2K 2B5
Attn: Marketing Operations Manager
P: 613-765-5989
F: 613-763-9431
<PAGE>
With a copy of all legal notices to:
Northern Telecom Limited
8200 Dixie Road, Suite 100
Brampton, Ontario
L6T 5P6
Attention: Secretary
Copy to: Law Department
and such notices shall be deemed to have been received five (5) business
Days after mailing if forwarded by mail, and the following business Day if
forwarded by telegram, telex, overnight service, facsimile or hand-
delivery.
(b) The aforementioned address of either party may be changed at any time
by giving fifteen (15) business Days prior notice to the other party in
accordance with the foregoing.
(c) In the event of a generally prevailing labor dispute or other situation
which will delay or impede the giving of notice by any such means, the
notice shall be given by such specified mode as will be most reliable and
expeditious and least affected by such dispute or situation.
17.7 EXPORT COMPLIANCE
The rights and obligations of the parties may be subject to United States
and Canadian laws and regulations governing the license and delivery of
technology abroad by persons subject to the jurisdiction of the United
States and Canada, including the Export Administration Act of 1979, as
amended, and the Export Administration regulations issued by the U.S.
Department of Commerce, International Trade Administration, Office of
Export Administration. Each party shall not, directly or indirectly,
export, reexport, or transmit technology, software, components, or
products, in such manner as to violate such laws and regulations in effect
from time to time to the extent that such laws are applicable to a party.
17.8 NAFTA
17.8.1 Both parties shall perform all administrative actions required to
qualify each Product sold under this Agreement for preferential treatment
under the rules of any
<PAGE>
applicable trade treaty, including, without limitation, the North American
Free Trade Agreement ("NAFTA"). If a Product qualifies under NAFTA, the
parties shall prepare and distribute a NAFTA Certificate of Origin, and any
other documents required. The parties shall respond to requests from the
other party for information regarding any NAFTA Certificates of Origin and
assist each other in resolving any eligibility issues.
17.8.2 If a NAFTA Certificate of Origin is prepared for each shipment,
each party shall: (a) retain the original NAFTA Certificates of Origin
with appropriate backup documentation, (b) attach a copy of the NAFTA
Certificate of Origin to the customs/shipping documents for the qualifying
component or Product, and (c) mark the customs/shipping documents with the
legend: "Copy of NAFTA Certificate of Origin attached." If a blanket
NAFTA Certificate of Origin is prepared, the parties shall: (a) retain the
original NAFTA Certificate of Origin with appropriate backup documentation,
(b) mark the customs/shipping documents for the qualifying component or
Product with the legend: "Copy of blanket NAFTA Certificate of Origin on
file at Nortel's customs office in Milton, Ontario, Canada." and (c) mail
copies of the NAFTA Certificate of Origin to the other party.
17.9. U.N. CONVENTION CONTRACTS
The parties agree that the U.N. Convention on Contracts for the
International Sale of Goods (Vienna, 1980) and the 1974 Convention on the
Limitation Period in the International Sale of Goods (the "1974
Convention") and the Protocol amending the 1974 Convention, done at Vienna
April 11, 1980, shall not apply to this Agreement nor to any dispute or
transaction arising out of this Agreement.
17.10 PUBLICITY
Prior to the publication or use by a party hereto of any advertising, sale
promotions, press releases or other publicity matters relating to the
Products or this Agreement in which the names or logo of other party is
mentioned or can be reasonably inferred, the party shall obtain the prior
written consent of the other party. Such consent shall not be unreasonably
withheld. Terms, conditions, and general terms of this Agreement shall be
<PAGE>
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 or as may be otherwise required by applicable
law. 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, except
as may be otherwise required by law or stock exchange regulations. Nothing
herein shall prevent a party from disclosing the terms of this Agreement to
potential investors (other than to any of the entities listed in Schedule C
by Avici, except as necessary pursuant to a bona fide offer by such a party
to purchase all or substantially all of the assets or shares of Avici) as
reasonably required by such potential investors to evaluate a potential
investment in, or purchase of assets of, such party, provided that such
potential investor agrees in writing to keep such information in confidence
and to use such information solely for purposes of evaluating the business
and financial condition of such party.
17.11 FORCE MAJEURE
Nortel shall not be responsible or liable to Avici for any delay or failure
to perform hereunder if such delay or failure results from fire, explosion,
labor dispute, earthquake, casualty or accident, lack or failure of
transportation facilities, epidemic, flood, drought, or by reason of war,
declared or undeclared, revolution, civil commotion, the act of a public
enemy, blockade or embargo, act of God, any inability to obtain any
requisite license, permit or authorization, or by reason of law,
proclamation, regulation, ordinance, demand, or requirement of any
government or by reason of any other cause whatsoever, whether similar or
dissimilar to those enumerated, beyond the reasonable control of Nortel.
With respect to labor disputes as described above, Nortel shall not be
obligated to accede to any demands being made by employees or other
personnel. All such causes will delay Nortel's performance hereunder for a
period equal to the delay resulting from any such causes and such
additional period as may be reasonably necessary to allow Nortel to resume
its obligations.
<PAGE>
17.12 ENTIRE AGREEMENT
This Agreement and Schedules thereto set forth the entire agreement and
understanding between the parties and supersede and cancel all previous
negotiations, agreements, commitments and writings in respect of the
subject matter hereof (except for the Activity Description, Schedule
C.00100 6 and Avici Purchase Order No. 981492, dated April 1, 1999) and
there are no understandings representations, conditions, warranties,
express or implied, statutory or otherwise made or assumed by the parties,
other than those expressly contained in this Agreement. Neither party
shall be bound by any term, clause, provision or conditions save as
expressly provided herein or as duly set forth on or subsequent to the date
of this Agreement in writing signed by duly authorized officers of the
parties.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
attested by the hands of their duly authorized representative on dates indicated
below.
AVICI SYSTEMS INC. NORTEL NETWORKS INC.
By: /S/ [Authorized Officer] By:/s/Naser Partovi
----------------
Naser Partovi
-------------
Name (Print or Type) Name (Print or Type)
Title: Title:V.P. Emerging Markets & Technologies
------------------------------------
Date: Date:
SCHEDULE A
SPECIFICATIONS
See Avici Module and Shelf File description attached hereto.
<PAGE>
SCHEDULE A
AVICI MODULE AND SHELF FILE DEFINITION
--------------------------------------
The stocklists below define the Nortel drawing numbers, with their vintage
control Stream and Issue, for the Avici TSR Module and Shelf design.
[CONFIDENTIAL TREATMENT REQUESTED]/*/
---------------------
/*/ [CONFIDENTIAL TREATMENT REQUESTED] INDICATES MATERIAL THAT HAS BEEN
OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH
OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO RULE 406 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1933,
AS AMENDED.
<PAGE>
[CONFIDENTIAL TREATMENT REQUESTED]/*/
---------------------
/*/ [CONFIDENTIAL TREATMENT REQUESTED] INDICATES MATERIAL THAT HAS BEEN
OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH
OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO RULE 406 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1933,
AS AMENDED.
<PAGE>
SCHEDULE B
PRICES
<TABLE>
<CAPTION>
Product Price Per Product
<C> <S> <C>
1. Circuit Pack EMC Enclosure Piece Part Set $[CONFIDENTIAL TREATMENT REQUESTED]/*/
2. Assembly of Face Plate Portion of Circuit Pack EMC a maximum of $[CONFIDENTIAL TREATMENT REQUESTED]/*/
Enclosure Piece Part Set for the first [CONFIDENTIAL TREATMENT REQUESTED]/*/ units*** a
maximum of $[CONFIDENTIAL TREATMENT REQUESTED]/*/
thereafter****
3. EMC Enclosure Shelf Assemblies(2 types)* $[CONFIDENTIAL TREATMENT REQUESTED]/*/
4. Backplane EMC Gasket Hardware Kit** $[CONFIDENTIAL TREATMENT REQUESTED]/*/
</TABLE>
*Must be ordered in lots of [CONFIDENTIAL TREATMENT REQUESTED]/*/ units
**Must be ordered in lots of [CONFIDENTIAL TREATMENT REQUESTED]/*/ units
***Such [CONFIDENTIAL TREATMENT REQUESTED]/*/ units does not include the units
ordered under Avici Purchase Order No. 981492, dated April 1, 1999, for which
Avici shall pay the charges set out in such purchase order
****Avici shall be charged, via the applicable invoice,
[CONFIDENTIAL TREATMENT REQUESTED]/*/
---------------------
/*/ [CONFIDENTIAL TREATMENT REQUESTED] INDICATES MATERIAL THAT HAS BEEN
OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH
OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO RULE 406 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1933,
AS AMENDED.
<PAGE>
SCHEDULE C
[CONFIDENTIAL TREATMENT REQUESTED]/*/
11. Subsidiaries and affiliates (including parent corporations) of the
foregoing
---------------------
/*/ [CONFIDENTIAL TREATMENT REQUESTED] INDICATES MATERIAL THAT HAS BEEN
OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH
OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO RULE 406 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1933,
AS AMENDED.
