Manufacturing Services Agreement

QTOI-95


MANUFACTURING SERVICES AGREEMENT


This Manufacturing Services Agreement is entered into this 10th day of January, 1995 "COMPANIA DOMINICANA DE TELEFONOS, C. POR A. (CODETEL)", a Dominican Republic company, with principal offices at Ave. Abraham Lincoln No. 1101, Santo Domingo, Dominican Republic and EXECUTONE Information Systems, Inc., a Virginia Corporation with principal office at 478 Wheelers Farms Road, Milford, CT 06460 U.S.A. ("Buyer').


Whereas, Buyer desires to have CODETEL manufacture units of a specific product or products designed by Buyer and sell such product(s) to Buyer in accordance with the provisions of this Agreement, and


Whereas, CODETEL is willing to manufacture and sell such product units to Buyer in accordance with the provisions of this Agreement.


Now therefore, in consideration of the mutual representations, warranties and covenants set forth herein, Buyer and CODETEL hereby agree as follows:


1 Definition of Terms.


1.1 Throughout this Agreement, except as the context may otherwise require:


(a) "Agreement" means this agreement for the manufacture and sale of the Product or Products specified in Schedule A, to be attached hereto.


(b) "Bill of Material" means the list of components and materials required by CODETEL in order to manufacture the Products, together with a price list of such items, specified in Schedule E to be attached hereto.


(c) "Change Order" means a written order from Buyer to CODETEL requesting any changes to the Products which Buyer may desire to make, including changes in the drawings, designs, specifications, method of shipment, and/or packing of the Products.


(d) "Consigned Tooling" means the tooling, software programs and/or equipment specified in Schedule D, to be attached hereto, which Buyer shall consign to CODETEL for purposes of the manufacture and testing of the Products.


(e) "Price" means the Free On Board (F.O. B.) Port (Sea - Haina, Air - Las Americas) price as set forth in Schedule B, to be attached hereto, or as may be otherwise agreed to in writing by the parties.


(f) "Product" or "Products" means the product(s) to be manufactured by CODETEL as specified in Schedule A, to be attached hereto.


(g) "Purchase Order" means a written purchase order issued by Buyer containing information with respect to each purchase made under this Agreement, including a description of the Products, purchase quantity, purchase delivery schedule, nominated carrier, routing instructions, destination, and confirmation of price.


(h) "Quality Plan" means the Product testing and inspection procedures specified in Schedule C, to be attached hereto.


(i) "Q-TEL" means CODETEL'S Quality Telecommunications Products division, a duty-free zone operation located in the ltabo Industrial Park, city of Haina, province of San Cristobal, Dominican Republic, dedicated to the Manufacturing, Assembling and Rehabilitation of Telecommunications products.


2. The Products.


2.1 Q-TEL will manufacture and sell to Buyer the Product or Products specified in Schedule A, to be attached hereto.


2.2 Additional items may be added to Schedule A and B upon the mutual agreement of Buyer and Q-TEL. In such event, the manufacture and sale of such additional items shall be made in accordance with the provisions of this Agreement.


3. Purchase Orders.


3.1 The purchase and sale of Products shall be made against specific written Purchase Orders submitted by Buyer to Seller during the term of this Agreement. All Purchase Orders for Products submitted by Buyer shall state the following: (i) Buyer's name and address; (ii) a description of the Products ordered; (iii) the quantities of Products ordered; (iv) the requested delivery dates; (v) the destination of the Products ordered; (vi) the price(s) for Products ordered, and (vii) a specific reference to this Agreement and to the contract number (if any) assigned by Q-TEL to this Agreement.


3.2 Buyer shall mail any Purchase Orders to Q-TEL and shall, on the day of dispatch of any such Purchase Order, confirm by facsimile or telex the quantity of the Products ordered and the Purchase Order number. Q-TEL shall acknowledge by facsimile or telex, the details of the Purchase Order described in any such telex received from Buyer within (14) fourteen calendar days of receiving such order.


3.3 All Purchase Orders (and any amendments thereto) issued by Buyer shall provide a minimum lead time of one-hundred and twenty (120) days for the delivery of any finished units of the Products (with a grace period of fifteen 15 days to complete the delivery of such Products). All Purchase Orders (and any amendments thereto) are subject to acceptance by Q-TEL which acceptance shall be indicated by return of a copy of Buyer's Purchase Order appropriately signed by Q-TEL so as to indicate acceptance of any such order of units of the Products. For the purposes of this Agreement , acceptance may be understood in the form of an acknowledgement document signed by the appropriate Q-TEL representative.


3.4 If any conflict arises between the terms stated in any Purchase Order and the terms and conditions of this Agreement, the provisions of this Agreement shall prevail. None of the preprinted terms and conditions stated on Buyer's Purchase Order form or on any related documents delivered or transmitted to Q-TEL shall be of any force or effect.


3.5 This Agreement is entered into by Buyer for the benefit of itself and its parent, subsidiary and affiliated companies. Buyer's parent company, subsidiaries, and/or affiliated companies, wherever located, will be entitled to place Purchase Orders with Q-TEL subject to the terms and conditions herein contained; provided, however, Q-TEL may refuse to accept any such Purchase Order unless placed directly by Buyer.


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4. Agreement Period.


4.1 This Agreement shall commence on December 23, 1994 and, unless sooner terminated in accordance with the provisions of this Agreement, shall remain in full force and effect for an initial period of thirty-six (36) months. Expiration date is December 22, 1997.


4.2 Upon the expiration of the initial thirty-six (36) month term, this Agreement shall be automatically renewed and shall continue in full force and effect until terminated by either party for any reason by giving not less than three (3) months written notice to the other party. In the event either party provides such notice of termination, this Agreement shall terminate immediately upon the expiration of the required notice period.


5. Firm Orders and Order Forecasts.


5.1 Concurrent with the execution of this Agreement, Buyer shall provide Q-TEL with its initial schedule of purchases of the Products, specified by model number, for the seven (7) month period commencing with the expiration of the minimum lead time requirement specified in Subsection 3.3 above. Buyers schedule of purchases of the Products for this period will be only estimates of its orders of the Products during such period (the "Forecasted Orders").


5.2 On or before the fifteenth day of each calendar month following the execution of this Agreement, Buyer shall provide Q-TEL, with: (i) a written Purchase Order updating and amending its Firm Order commitment; and (ii) an updated forecast of its Forecasted Orders during the seven (7) month period subsequent to the last delivery scheduled in the updated Purchase Order provided pursuant to clause (i) of this Subsection.


5.3 On the fifteenth day of each calendar month following the execution of this Agreement, orders forecasted for the first month of the Forecast Order period will be deemed to be zero unless confirmed by Buyer issuing a Purchase Order with respect to such month. Prior to any Forecasted Order becoming a Firm Order, Buyer may increase, decrease or cancel any such Forecasted Order.


5.4 Q-TEL shall be entitled to purchase long lead components for all Firm Orders issued by Buyer. Q-TEL's purchase of long lead time components required to satisfy Buyer's forecasted orders shall require Buyer's prior approval.


6. Pricing.


6.1 The applicable Price for any units of the Products ordered hereunder has been set forth in Schedule B, to be attached hereto.


6.2 The prices specified in Schedule B include all costs of packaging and packing, export documentation, and Dominican Republic government taxes applicable to the sale and export of the Products. Prices for the Products are exclusive of any other federal, state, or local sales, use, excise, or other similar taxes or duties, which Q-TEL may be required to collect or pay as a consequence of the sale or delivery of any units of the Products to Buyer, and Buyer shall be responsible for the payment or reimbursement of any such taxes, fees, or other charges. No taxes have been allocated as part of Q-TEL's price to Buyer on Products. No tax requirement is expected to duly-free zone operations within the Dominican Republic,


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however, unexpected changes in the law may signify in a price adjustment if required.


6.3 The Prices specified in Schedule B are in United States Dollars and shall remain fixed, except for any price increases due to specific Product changes (as described in Section 10) Q-TEL in manufacturing and delivering the Products to Buyer because of any event or circumstance beyond Q-TEL control. Q-TEL will conduct quarterly price reviews internally and will inform Buyer of results: Price reductions, maintaining price or price increases. In any case of price variation, it will only be effective after expressly approved by both parties.


6.4 Any increase in the Price payable for any of the Products pursuant to Subsection 6.3, immediately above, shall be agreed between the parties and any such price increase will only become effective thirty (30) days after such agreement. In the absence of agreement between the parties concerning any such price increase, either party shall be entitled to terminate this Agreement, subject to the provisions of Subsection 12.3, below.


6.5 In the case where Price changes are resulting from Change Orders, special requirements from Buyer, special freight costs and/or temporary cost increase on parts and raw material in general, such changes in Prices, once approved by Buyer, must be effective to the date the situation or circumstance originating the change started or to the change implementation date.


7. Delivery.


7.1 All Products shall be delivered F.O.B., Port as indicated in 1.1 (a).Q- TEL shall deliver the Products at its own expense on the scheduled delivery date set forth in any effective Purchase Order to Buyer's nominated carrier as may be specified in such Purchase Order. The Products shall be packed and marked for shipment at Buyers expense and in accordance with Buyer's instructions set forth in such Purchase Order. In the absence of specific shipping instructions, Q-TEL shall select a carrier who shall be deemed to act as Buyers agent, notwithstanding any payment by Q-TEL of freight charges made for Buyers account. Q-TEL shall have no liability for any events occurring during shipment. Any claim for damages or loss must be filed with the nominated or selected carrier.


7.2 Risk of loss or damage to any units of the Product shall pass to Buyer upon Q-TEL delivery of such units of the Product to the nominated carrier specified by Buyer, or, in the absence of such instruction, to the qualified carrier selected by Q-TEL. Title to any units of the Product shall pass to Buyer upon Q-TEL receipt of payment in full for such units of the Product.


7.3 Buyer will be entitled to reject any units of the Product delivered more than thirty (30) days in advance of the scheduled delivery date specified in any effective Purchase Order (see 7.5 below), and to return such units of the Products to Q-TEL, at Q-TEL's expense for subsequent delivery to Buyer in conformity with the applicable Purchase Order.


7.4 Subject to the exceptions specified in Section 14. below, Q-TEL agrees that in the event it shall deliver any units of the Products more than fifteen (1 5) working days after the ex factory delivery date specified in any corresponding Purchase Order (see 7.5) issued by Buyer and accepted by Q-TEL hereunder. Q- TEL shall be responsible for the difference between the sea freight charges which would ordinarily be incurred by Buyer to deliver such units of the Products to Buyer's receiving destination in the United States and the reasonable air freight charges


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necessarily incurred to expedite delivery of such Product units to Buyer's receiving destination.


7.5 Contract delivery dates for Products included on Purchase Orders may differ from dates stated on such Purchase Orders. In such case, an Acknowledgement must be made by Q-TEL stating the new contract delivery dates. Delivery schedules submitted by Q-TEL may also change Purchase Order's delivery dates, becoming contract delivery dates, upon the approval of Buyer.


7.6 Both parties agree that shipments will be made under mutual coordination, to fill a forty (40) foot sea freight container to at least 75% of capacity, and air containers as directed by Buyer. A twenty (20) foot container will be used at the discretion of the Buyer. Buyer will only delay shipment of a full container for reasons specified in Section 7.6 and 7.3 above.


7.7 Delays in delivering Products in accordance with Purchase Order's or later agreed dates, resulting from delays in receiving parts and components purchased by Q-TEL from Buyer, will not be under the responsibility of Q-TEL, neither the associated penalties or additional costs. In such cases Buyer will be notified and new contract delivery dates shall be agreed.


8. Inspection and Acceptance.


8.1 Q-TEL shall manufacture and inspect the Product in accordance with the Quality Plan specified in Schedule C, to be attached heret ...