Exhibit 10.1
Confidential Materials omitted and filed
separately with the
Securities and Exchange Commission.
Asterisks denote omissions.
Nortel Agreement No:
Addendum
to
Optical Components Supply Agreement
This Addendum, including attached
exhibits, (the “Agreement”) dated the 7th day of
February, 2005, (the “Effective Date”) is made between
Nortel Networks Limited, a Canadian corporation with offices
located at 8200 Dixie Road, Suite 100, Brampton, Ontario L6T
5P6 (“ NNL ”) and Bookham Technology plc
a company incorporated under the laws of England and Wales with
office located at Towcester, Northamptonshire, NN12 8EQ, United
Kingdom ( “ Supplier ” and, together with NNL,
the “ Parties ”);
WHEREAS:
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1.
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NNL
and Supplier entered into an Optical Components Supply Agreement
effective November 8, 2002 (the “ Supply
Agreement ”);
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2.
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NNL
wishes to ensure the security of supply for certain Products (as
defined below);
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3.
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Supplier has agreed to take certain
steps to secure the supply of Products to Nortel;
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4.
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The
Parties have agreed to amend and supplement the Supply
Agreement;
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NOW, THEREFORE
, in consideration of the premises
and promises set forth herein, and the execution, simultaneously
with this Agreement, of the Notes Amendment and Waiver Agreement
and other good and valuable consideration (the receipt and
sufficiency of which are hereby acknowledged), the Parties agree as
follows:
Definitions and
Interpretation
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1.1
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Definitions. Except as otherwise defined herein,
the defined terms used in this Agreement will be as defined in the
Supply Agreement.
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1.1.1
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“Alternate Suppliers”
has the meaning set out in Exhibit D
Section 2.5.
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1.1.2
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“CPW Build Price” has
the meaning set out in Section 3.2.
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1.1.3
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“CPW Price” has the
meaning set out in Section 3.3.
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1.1.4
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“Critical IP” means the
[**].
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1.1.5
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“Critical Products” mean
the Products identified as Critical in Exhibit B attached here
to.
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1.1.6
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“Critical Product Wafer”
means the wafers identified in Exhibit C attached
hereto.
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1.1.7
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“First Trigger: has the
meaning set out in Exhibit D – Section 2
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1.1.8
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“LTB Schedule” has the
meaning in Section 2.1.
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1.1.9
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“LTB Products” has the
meaning in Section 2.1.
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1.1.10
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“Product” means Critical
Products, LTB Products and Sole Sourced Products.
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1.1.11
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“Second Trigger” has the
meaning set out in Exhibit D – Section 3
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1.1.12
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“Series A-2 Note”
means the Series A-2 Note as defined in the Notes Amendment
and Waiver Agreement.
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1.1.13
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“Series B-1 Note”
means the Series B-1 Note as defined in the Notes Amendment
and Waiver Agreement.
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1.1.14
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“[**] Products” means
the products and Products listed as such in Exhibit B hereto,
including the Critical Products. [**] such products, [**] such
relevant product will be [**]. For the purposes of clarity [**]
pursuant to the Grant of Rights in Exhibit D [**].
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1.2
Interpretation
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1.2.1
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This Agreement amends and
supplements to the Supply Agreement. To the extent there is a
conflict between the terms of this Agreement and the Supply
Agreement, this Agreement shall govern. Unless modified by the
terms of this Agreement, the Supply Agreement shall remain
unchanged.
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1.2.2
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Nothing contained in this Agreement
negates the Supply Agreement and its ongoing force and effect with
respect to the content thereto.
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2.1
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Supplier has advised that it intends
to discontinue manufacturing the Products listed on Exhibit A
attached hereto (“LTB Products”). The Parties have
agreed to a schedule for the production and delivery of the LTB
Products as set out in Exhibit A (the “LTB
Schedule”). Nortel agrees to purchase the product identified
in the final detailed LTB Schedule as Supplier manufactures and
delivers such product and not solely as in accordance with the
delivery schedule. Nortel shall have no obligation to purchase
quantities of product in excess of the total aggregate quantities
for each product as set out in the final detailed LTB Schedule to
be provided within 2 weeks of the Effective Date. Supplier
agrees that it will supply LTB Products to meet Nortel’s
requirements as set out in the LTB Schedule, notwithstanding the
provisions of Section 15.2 of the Supply Agreement with
respect to production capacity. The Prices of the LTB Products
shall be as set out in Exhibit A. Nortel may designate Nortel
Affiliates to purchase the LTB Product and Supplier agrees to sell
the LTB Product to such Nortel Affiliates.
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2.2
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In
event the Supplier fails to meet a milestone for an LTB Product by
more than 10%, for 3 consecutive weeks and does not fully rectify
such failure within 30 days of its occurrence, the LTB Product
shall be deemed to be a Critical Product and immediately become
subject to the provisions Section 5 the Grant of License and
Exhibit D.
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2.3
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The
parties acknowledge that the LTB Schedule contains, as of the
Effective Date, the following variables: (i) Nortel has [**];
(ii) Nortel has [**] as of the Effective Date.
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2.4
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Nortel will provide a final detailed
LTB Plan setting out final LTB Product quantities and LTB Product
mix (as described in 2.3) within 14 days of the Effective
Date. The parties agree that the quantities in the LTB Plan will
not increase, but may decrease, from the quantities as of the
Effective Date.
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2.5
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The
parties further agree that Supplier shipments of product during the
entire month of February will be counted towards its LTB Plan
obligations pursuant to an existing last time buy purchase order .
In addition, the parties agree that Supplier shipments of SiV
product during the months of January and February will be counted
towards its LTB Plan obligations pursuant to an existing last time
buy purchase order.
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2.6
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Intentionally Deleted.
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3.
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Wafer Build and
Inventory
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3.1
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Supplier agrees to increase capacity
for, and produce the wafers for, the Critical Products
(“Critical Product Wafers”), as described in
Exhibit C, to meet Nortel’s requirements. The Parties
have agreed on a plan, as set out in Exhibit C, to meet
Nortel’s requirements for Critical Product Wafers (the
“CPW Plan”).
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3.2
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To
the extent Nortel requires Supplier to build an inventory of
Critical Product Wafers, Nortel will issue a Purchase Order to
Supplier setting out the quantities of the Wafers and the price.
The parties agree that the price to build and hold in inventory the
Critical Product Wafers will be [**] as described in Exhibit E
(“CPW Build Price”). Nortel will have the right to
reasonably request and Supplier will provide documentation [**].
Payment of the CPW Build Price will be payable monthly [**] as the
wafers are placed into inventory. Title to the Critical Product
Wafers will transfer to Nortel or the Alternate Supplier upon
payment of the CPW Price. Within [**] of the Effective Date Nortel
will provide Bookham a plan for use or disposition of the Critical
Product Wafers held pursuant to the CPW Plan.
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3.3
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Supplier agrees that it will hold
the Critical Product Wafers in inventory for Nortel’s
benefit, in a segregated area, [**]. The Purchase Order for the
Critical Product Wafers, shall specify whether the Supplier is
required to coat, dice and/or assemble to “chip on
carrier” level, prior to delivery. The total price to Nortel
of the Critical Product Wafers is described in Exhibit E (the
“CPW Price”). The parties agree that any prior payment
by Nortel of the CPW Build Price will be credited against any
payable CPW Price amounts. [**]. The parties also agree that in the
event Supplier uses Critical Product Wafers for the purposes of
manufacturing Critical Product for Nortel, Supplier will provide a
credit to Nortel on the Critical Product Price for any CPW Build
Price or CPW Price previously paid by Nortel.
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3.4
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In
the event Nortel’s demand for the Critical Product Wafers
would require Supplier to increase its capital equipment to meet
such demand in the agreed time period, Nortel may, at its option,
offer to supply additional capital equipment, on terms to be
agreed, or extend the time period for meeting its
demand.
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3.5
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Supplier will reasonably assure the
good quality of the Critical Product Wafers using its standard
manufacturing processes. For example Supplier will utilize wafer
level process control monitors, SPC and monitor on going product
reliability and performance through wafers processed for current
production requirements. If process indicators suggest potential
quality issues with a Critical Product Wafer, such wafer shall not
be put in inventory on Nortel’s behalf, and Nortel shall not
be required to pay for same. During Critical Product Wafer
manufacturing Bookham will perform the additional quality assurance
tests and protocols as described in Exhibit F.
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3.6
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The
Critical Product Wafer will be subject to indemnifications rights
and obligations as set out in the Supply Agreement.
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3.7
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Supplier warrants that :
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3.7.1
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Critical Product Wafers shall, at
the actual delivery date, be new and free and clear of all security
interests or other liens or any other encumbrances;
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3.7.2
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Critical Product Wafer shall be free
from any defect in materials or workmanship, or any other
condition, which causes the dye of Critical Product Wafers to fail
to conform to and operate in accordance with the final product
Specifications, provided such wafers are stored, handled, has
passed testing and used in accordance with professional standards
and any written instructions provided by Supplier to
Nortel;
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3.7.3
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Critical Product Wafers furnished by
Supplier, and used in accordance with professional standards and
any written instructions provided by Supplier to Nortel, 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.
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3.8
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The
parties will meet quarterly to review the CPW Plan.
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3.8.1
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At
the time of such quarterly meeting, Nortel may cancel the Supplier
build against the CPW Plan by up to [**]% provided [**] prior
written notice is given to Supplier and may cancel the remaining
[**]% of the Critical Product Wafers upon [**] notice, without any
further liability or obligations .
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3.8.2
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At
the time of such quarterly meeting, Nortel may request a volume
increase and/or a change in the product or wavelength mix of
Critical Product Wafers. Supplier and Nortel shall mutually agree
on any such product or wavelength mix changes or volume increases.
In the event Supplier agrees, any such changes will only be
implemented [**] after such agreement.
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4.0
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Inventory and
Capacity
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4.1
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In
the event of the Second Trigger:
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a)
Nortel will have the right to purchase and Supplier agrees to sell
to Nortel, any finished goods inventory or work in progress
associated with products and Products supplied under the Supply
Agreement, for which Supplier does not have a binding contractual
obligation to sell to other customers. The price attributable to
the work in progress inventory will be a percentage of the Product
Price based on the level of completion of the inventory;
b)
Provided Nortel issues binding purchase orders to consume the
output of such allocation as it becomes available and subject to
Supplier’s binding contractual obligations to its other
customers, Supplier shall allocate production, manufacturing,
assembly and/or testing capacity to Nortel, equivalent to
Nortel’s demand for
products and Products supplied under the Supply
Agreement, on a product family basis, from the previous financial
quarter .
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5.1
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In
addition to, and not in substitution for, the License granted in
Section 29 of the Supply Agreement the Parties have agreed to
an additional grant of License as set out in
Exhibit D.
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6.1
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Nortel may inspect Supplier’s
facilities, Products and/or Critical Product Wafers during the
facilities’ regular business hours to assess Supplier’s
ability to meet milestones and comply with the terms of this
Agreement. Nortel will give reasonable advance notice of any
inspection. However, Nortel must give at least 2 days advance
notice to inspect a manufacturing facility and/or operations
facilities. At Nortel’s expense, Supplier will provide
whatever is reasonably required by Nortel to perform its
inspection. Nortel may perform a quality assurance inspection of
Supplier’s manufacturing and/or operations facilities, if
Nortel does not unreasonably interfere with Supplier’s normal
day-to-day operations. If in Nortel’s reasonable opinion
Supplier is unlikely to meet a milestone set out in the LTB
Schedule or CPW Plan, at Nortel’s request, the Parties will
hold regularly scheduled update meetings to report on the status of
the milestones but not less than monthly.
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7.1
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In
addition to any other rights and remedies Nortel may have in law or
equity, in the event of an “Prepayment Event” described
in Exhibit G a prepayment under the Series B-1 Note and
Series A-2 Note will become exercisable by Nortel.
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8.1
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With the exception of Exhibit D
which shall terminate in accordance with Exhibit D, Section 6,
this Agreement shall terminate upon the expiry of the Renewal Term
of the Supply Agreement referred to in Section 9.8
below.
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9.1
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This Agreement may be executed in
counterparts, each of which shall be deemed an original, but both
of which together shall constitute one and the same instrument. A
faxed signature shall have the same legally binding effect as an
original signature. The section headings contained in this
Agreement are for reference purposes only and shall not affect the
meaning of this Agreement.
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9.2
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If
any provision of this Agreement is determined to be legally
unenforceable or invalid, the remaining provisions will continue in
effect. The parties will substitute a provision that most closely
approximates the economic effect and intent of the invalid
provision.
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9.3
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Neither party will assign or
transfe
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