Docstoc

Agreement - PINNACLE DATA SYSTEMS INC - 3-20-2002

Document Sample
Agreement - PINNACLE DATA SYSTEMS INC - 3-20-2002 Powered By Docstoc
					EXHIBIT 10(f) Agreement No. RPD-5680 REFERENCE DESIGN LICENSE AGREEMENT THIS REFERENCE DESIGN LICENSE AGREEMENT (the "Agreement") is made effective this 11th day of May , 1999 (the "Effective Date") by and between Sun Microsystems, Inc., a Delaware corporation with principal offices located at 901 San Antonio Road, Palo Alto, California 94303 ("Sun"), and Pinnacle Data Systems, Inc., an Ohio corporation with principal offices located at 6600 Port Road, Columbus, Ohio 43125 ("Licensee"). A. WHEREAS, the Microelectronics division of Sun ("SME") possesses certain Licensed Technology (as defined below) relating to. the design, development and manufacture of the Reference Design (as defined below); and B. WHEREAS, Licensee desires to develop, manufacture and sell to a specific customer Licensee Products (as defined below) based upon and using Licensed Technology; and C. WHEREAS, Sun desires to grant limited license rights to Licensee for such purposes, all on the terms and subject to the conditions set forth in this Agreement. NOW, THEREFORE, in consideration of the mutual covenants and conditions set forth below, the parties hereto agree as follows: 1. DEFINITIONS. 1.1 "Affiliate" means a business entity or entities controlled by, under common control with or controlling a party to this Agreement. 1.2 "CCT" means SME's AXmp product excluding the I/O board portion. 1.3 "Confidential Information" means (i) all technical information which Sun discloses to Licensee under this Agreement, (ii) that technical information of Licensee or business information of either party which a party discloses to the other pursuant to this Agreement which is designated as "confidential" or "proprietary" (or with words of similar meaning) in writing by the disclosing party, or if disclosed orally, designated as "confidential" or "proprietary" (or with words of similar meaning) at the time of disclosure, (iii) any source code provided under this Agreement, and (iv) the terms and conditions of this Agreement. 1.4 "Deliverables" means the items listed in Exhibit A. 1.5 Derivative Technology" means technology and information developed for use with or derived from the Licensed Technology by Licensee, excluding the Licensed Technology. 1.6 "Designated Customer(s)" means the customer(s) identified in Exhibit B. Designated Customer(s) may be added or deleted only with the prior written consent of Sun. 1.7 "Designated Equipment" means an equipment configuration comprising a single central processing unit, whether or not consisting of multiple microprocessors ("CPU"), as identified in Exhibit A. 1.8 "Designated Manufacturer" means the manufacturer identified in Exhibit B. -1-

1.9 "Designated Site" means the location controlled by Licensee and identified in Exhibit B where Licensee will use the Licensed Technology. 1.10 "Error Corrections" means changes or additions to the Licensed Technology made solely to: (i) establish material conformity to the published specifications for the Licensed Technology; or (ii) eliminate or avoid the occurrence or effect of an error in the License Technology. 1.11 "Intellectual Property Rights" means all intellectual property rights worldwide (but specifically excluding trademarks, service marks, trade dress, trade names, and design patent rights) under statutory or common law or by contract and whether or not perfected, including all (i) patent rights; (ii) rights associated with works of authorship including copyrights and mask work rights; (iii) rights relating to the protection of trade secrets and confidential information; (iv) any right analogous to those set forth herein and any other proprietary rights relating to intangible property, now existing, or hereafter filed, issued or acquired. 1.12 "Licensee Product" means the product designed by or for Licensee for the Designated Customer(s) which incorporates the Licensed Technology and Derivative Technology and which meets the specifications of the "DSC Fastbox Design". 1.13 "Licensed Technology" means the technology and information contained within or provided in connection with the Deliverables for the Reference Design. 1.14 "OBP/POST" means Sun's Open Boot PROM and Power On Self Test software identified in Exhibit A. 1.15 "Product Documentation" means those materials to be identified in writing by Licensee constituting the subset of the Licensed Technology which Licensee plans to distribute for use with Licensee Product. Licensee must receive Sun's written approval prior to any distribution of the Product Documentation. 1.16 "Reference Design" means SME's AXmp I/O board and complex A board. 1.17 "Upgrades" means any enhancements, improvements and/or modifications to OBP/POST, other than Error Corrections, made by or for Sun which, together with OBP/POST, Sun classifies as a new version of OBP/POST. 2. OWNERSHIP. 2.1 Licensed Technology. Licensee acknowledges and agrees that, as between the parties, Sun is and will remain the sole and exclusive owner of all right, title and interest in the Licensed Technology and all associated Intellectual Property Rights and that Licensee acquires no rights therein other than the license rights specifically granted in this Agreement. 2.2 Derivative Technology. Subject to Sun's Intellectual Property Rights in the Licensed Technology, Sun acknowledges and agrees that Licensee is and will remain the sole and exclusive owner of all right, title and interest in the Derivative Technology and all associated Intellectual Property Rights and that Sun acquires no rights therein pursuant to this Agreement. 2.3 Jointly-Developed Technology. Although the parties do not anticipate joint development of technology hereunder, in the event of joint development, all right, title, -2-

and interest in all ideas, inventions or technology which are made, created, developed, written, or conceived jointly by personnel of both parties in the course of, arising out of, or as a result of work done under this Agreement, and all associated Intellectual Property Rights, will be owned jointly by Sun and Licensee with each party having the undivided right to exploit and grant licenses to such ideas, inventions and technology and associated Intellectual Property Rights without accounting to the other party for remuneration received. The parties will negotiate in good faith, on a case-by-case basis, rights to file and prosecute patent applications. 2.4 Further Assurances. Each party will cooperate with the other and take reasonable actions and execute necessary agreements, instruments, and documents to perfect the other's ownership interest in accordance with the allocations set forth in this Section 2, including, without limitation, the execution of necessary and appropriate instruments of assignment. 3. GRANT OF LICENSES. 3.1 Licensed Technology. Subject to Licensee's payment obligations as set forth in Section 7, Sun hereby grants to Licensee a nonexclusive, nontransferable and worldwide license under Sun's Intellectual Property Rights in the Licensed Technology to (i) use, copy and modify the Licensed Technology at the Designated Site for the purposes of designing and developing the Licensee Product; provided, however that Licensee may not modify the signal routings of the Complex A portion of the Reference Design except for the power connector and the signals to the CPU module; (ii) copy and incorporate Licensed Technology (other than OBP/POST, except as permitted in Section 3.2 below) into the Licensee Product, (iii) make, have made and distribute the Licensee Product designed with and/or incorporating (as herein permitted) Licensed Technology, but such distribution may only be to the Designated Customer(s), and (iv) use the Licensed Technology to maintain and support Licensee Products. No license is granted for any other purpose and any other uses by Licensee, including but not limited to Licensee designing, developing or distributing a product incorporating all or a portion of the Licensed Technology or Derivative Technology that is not designed to meet the "DSC Fastbox Design" specifications or distributing the Licensee Product to a person or entity other than the Designated Customer(s), shall constitute a material breach of this Agreement. 3.2 OBP/POST. Sun grants to Licensee a nonexclusive and nontransferable license under Sun's Intellectual Property Rights in OBP/POST to (i) use, modify and create derivative works of the OBP/POST source code (ii) compile the OBP/POST and/or derivative source code into object code, (iii) copy, sublicense and distribute OBP/POST and Licensee's derivatives thereof worldwide only in object code PROM format and only for use in the Licensee Product. Licensee shall use and modify source code of OBP/POST only on the Designated Equipment at the Designated Site. Licensee shall have no right to distribute OBP/POST except as provided in this Section 3.2. Sun shall own all Error Corrections for OBP/POST made by or for Licensee and Licensee shall promptly upon completion deliver such error corrections to Sun. -3-

3.3 Distribution Rights - Product Documentation. Sun grants to Licensee a nonexclusive, nontransferable and worldwide license under Sun's Intellectual Property Rights in the Product Documentation, to (i) modify and incorporate the Product Documentation into materials that Licensee will distribute with the Licensee Product ("Licensee Materials"); and (ii) copy and distribute the Licensee Materials with the Licensee Product only in a manner consistent with Licensee's obligations to protect Sun's Intellectual Property Rights hereunder. 3.4 Independently Developed Technology License. Licensee grants to Sun a non-exclusive, worldwide, fully-paid and non-transferable license under License's Intellectual Property Rights in the Derivative Technology to (i) use, modify and create derivatives of information and technology independently developed by or for Sun and derivatives thereof ("Independently Developed Technology"), (ii) make, have made, use and sell products using or incorporating Independently Developed Technology, and (iii) sublicense the rights set forth in subsections (i) and (ii) above. 4. LIMITATIONS AND OBLIGATIONS. 4.1 Limitations on License Grants/No Other Licenses. Except as expressly provided in Section 3, Sun grants no other license, and other uses by Licensee of the Licensed Technology, or any part thereof, shall constitute a material breach of this Agreement. 4.2 Proprietary Notices. Licensee shall reproduce and not obliterate Sun's proprietary notices on any part of the Licensed Technology without the written permission of Sun. Notwithstanding the foregoing, Licensee shall remove all Sun Microsystems, Inc. and Sun logos and revision and serial numbers from the Layout Database included as part of the Licensed Technology prior to using the Database in the manufacture of the Licensee Product. Licensee must comply with all reasonable requests by Sun to include Sun's proprietary rights notices on any part of the Licensed Technology, Licensee Product or related materials. No license, right, title, or interest in any Sun Microsystems, Inc. trademark, trade name, trade dress, design patent or service mark is granted hereunder including, without limitation, "UltraSPARC". Licensee may use only the following, in its entirety, in connection with the marketing of products (where "XYZ" is the name of the Licensee Product): "XYZ is derived from designs licensed from Sun Microsystems, Inc." 4.3 Use of Third Parties. Licensee may retain third parties to furnish services to it in connection with its use of Licensed Technology, development of Derivative Technology and design and manufacture of the Licensee Product, only if reasonably required in connection with permitted activities. Third parties who perform work for Licensee must execute appropriate documents with Licensee effecting assignments of all rights with respect to such work to Licensee and undertaking sufficient obligations of confidentiality respecting the Licensed Technology. Sun may, upon its request, review the form of such agreements proposed for use by Licensee prior to use. 4.4 Manufacturing Limitations. Licensee may only utilize a Designated Manufacturer to manufacture the Licensee Product. Licensee may grant a sublicense to such -4-

Designated Manufacturer (on terms and conditions consistent with Licensee's obligations hereunder including without limitation, the provisions of Section 9) to use only that Licensed Technology as is necessary to enable the manufacturing facility to manufacture the Licensee Product. The Designated Manufacturer must agree to return the materials to Licensee upon termination of this Agreement or termination of production of the Licensee Product. Licensee may not provide source code for any Licensed Technology or Derivative Technology to any such Designated Manufacturer facilities without Sun's prior written consent. 5. DELIVERY OF TECHNOLOGY AND RISK OF LOSS. Sun shall use reasonable efforts to deliver to Licensee one (1) copy of each item of the Deliverables by the dates set forth in Exhibit A. Sun shall deliver the Licensed Technology to a common carrier Ex Works, Sun's facilities. Licensee assumes all risk of loss or damage upon delivery of such by Sun to the common carrier. 6. TRAINING, TRANSFER SUPPORT AND ERROR CORRECTIONS. 6.1 Transfer Support and Training. Sun shall provide to Licensee the transfer support and training set forth in Exhibit C. The transfer support specified in Exhibit C is provided only to Licensee and only to facilitate transfer of the Licensed Technology and to clarify Licensee's understanding of the Licensed Technology in order to assist Licensee in the design and manufacture of Licensee Products. 6.2 Error Corrections. Subject to the limitations set forth below, for a period of twelve (12) months following the Effective Date, Sun shall provide Error Corrections to Licensee promptly after first release by Sun. Sun has no obligation to create any Error Corrections on behalf of Licensee or otherwise (Sun's only obligation being to supply Error Corrections which Sun or its Affiliates independently creates for and implements on the Reference Design). Additional or extended technical support may be obtained from Sun under a separate support agreement. 7. PAYMENTS AND TAXES. Licensee shall pay the training and support fees set forth in Exhibit B. Training and support fees will be payable in U.S. dollars and without the necessity of receiving an invoice from Sun. All payments required under this Agreement are exclusive of taxes, and Licensee is responsible for the payment of all taxes, including, but not limited to, all sales, use, rental, receipt, personal property or other taxes and their equivalents which may be levied or assessed in connection with this Agreement (excluding only taxes based on Sun's net income). In the event that, under the laws of the applicable jurisdiction, Licensee is required to withhold any taxes based on the fees payable pursuant to Exhibit B, Licensee may deduct the taxes from such fees and will furnish Sun with written certification of such tax payment. 8. TERM AND TERMINATION. 8.1 Term. This Agreement shall commence as of the Effective Date and expire seven (7) years thereafter; provided, that this Agreement shall automatically renew for successive one (1) year periods unless either party notifies the other of its desire that this Agreement expire whereupon this Agreement shall so expire thirty (30) days -5-

following such notification. Upon expiration of this Agreement, Licensee shall immediately discontinue use of the Licensed Technology and shall promptly return all copies of the Licensed Technology in Licensee's possession to Sun. Notwithstanding the foregoing, Licensee may retain only such copies of Licensed Technology as are necessary to support its existing customers for the Licensee Product, provided that (i) Licensee agrees to treat such Licensed Technology in accordance with the terms of this Agreement including, without limitation, the terms of Section 9, and (ii) Licensee agrees to promptly return such Licensed Technology when it is no longer necessary to support Licensee's existing customers for the Licensee Product. In addition, Licensee shall permanently destroy or disable all electronically reproducible copies of the Licensed Technology (including that contained within the Derivative Technology) and all other electronic documents containing all or any portion of the Licensed Technology. 8.2 Termination. This Agreement may be terminated as follows: 8.2.1 By either party upon sixty (60) days' written notice specifying breach if the other party fails to comply with any of the material terms or conditions of this Agreement unless within the period of notice, all specified breaches have been remedied. 8.2.2 By Sun upon ten (10) days' written notice, if Licensee violates the provisions of Sections 4 or 9. 8.3 Effect of Termination - Licensee's Breach. In the event of termination of this Agreement due to a breach by Licensee, the rights and licenses granted by Sun to Licensee will immediately terminate and Licensee will have no further right to use the Licensed Technology or to manufacture, market, sell or sublicense the Licensee Product or Derivative Technology. Within ten (10) days after termination Licensee must return all copies of the Licensed Technology in Licensee's possession or control. In addition, Licensee must permanently destroy or disable all electronically reproducible copies of the Licensed Technology (including that contained within the Derivative Technology) and all other electronic documents containing all or any portion of the Licensed Technology. Promptly after destruction of all hard-copy and electronically reproducible copies of the Licensed Technology, a duly authorized officer of Licensee must certify to Sun that Licensee has destroyed or returned all copies of the Licensed Technology. 8.4 Effect of Termination - Sun's Breach. The grant of rights from Sun to Licensee to the Licensed Technology made in this Agreement will survive the termination of this Agreement as a result of a breach by Sun as, and to the extent, necessary for Licensee to continue manufacture and support of the Licensee Product as then constituted for sale as herein permitted. Such continuing rights are subject to Licensee's continued compliance with the terms of this Agreement. Nothing will require Sun to provide any Error Corrections or support or maintenance to Licensee after termination. 8.5 Limitation of Liability. Neither party shall have the right to recover damages or indemnification of any nature, whether by way of lost profits, expenditures for promotion, payment for goodwill or otherwise made in connection with the business contemplated by this Agreement, due to the expiration or permitted or lawful -6-

termination of this Agreement. EACH PARTY WAIVES AND RELEASES THE OTHER FROM ANY CLAIM TO COMPENSATION OR INDEMNITY FOR TERMINATION OF THE BUSINESS RELATIONSHIP UNLESS SUCH TERMINATION IS IN BREACH OF THIS AGREEMENT. 8.6 Survival. Rights and obligations under this Agreement which by their nature should survive, will remain in effect after termination or expiration hereof. 9. CONFIDENTIAL INFORMATION. 9.1 Obligation. Except as provided in this Agreement, a receiving party may not use, make, have made, distribute or disclose any copies of Confidential Information it receives from the disclosing party pursuant to this Agreement, in whole or in part, without the prior written authorization of disclosing party. Each party shall hold in confidence any Confidential Information received from the other pursuant to this Agreement and shall protect the confidentiality thereof with no less than reasonable care, for the term of this Agreement (but in no event less than five (5) years from the date of receipt of the Confidential Information, except for source code which shall be protected as in perpetuity). 9.2 Exceptions. Notwithstanding any provisions contained herein concerning nondisclosure and non-use of the Confidential Information, the obligations of Section 9.1 shall not apply to any portion of the Confidential Information which a receiving party can demonstrate: (i) is now, or hereafter through no act or failure to act on the part of receiving party becomes, generally known in the electronics industry; (ii) is known to receiving party at the time of receiving such Confidential Information without an obligation of confidentiality; (iii) is hereafter rightfully furnished to receiving party by a third party without restriction on disclosure; or (iv) is independently developed by receiving party without any use of the Confidential Information. 9.3 Employee Access. Confidential Information may only be disclosed to employees having a need to know such Confidential Information for purposes consistent with this Agreement. Each party shall inform its employees having access to the Confidential Information of the limitations, duties and obligations regarding nondisclosure and copying of any or all of the Confidential Information. 9.4 Notice of Violation. Each party agrees to provide notice to the other immediately after learning of or having reason to suspect a breach of any of the provisions of this Section 9. 10. DISCLAIMER OF WARRANTIES; AIRCRAFT PRODUCTS AND NUCLEAR APPLICATIONS. 10.1 Licensed Technology. Licensee acknowledges that the Licensed Technology may be in the process of change or development. Licensed Technology, Sun Confidential Information and Training and Support is provided "AS IS". -7-

10.2 Disclaimer. SUN DOES NOT MAKE AND DISCLAIMS ANY EXPRESS OR IMPLIED WARRANTIES OR CONDITIONS WITH RESPECT TO THE LICENSED TECHNOLOGY AND RELATED MATERIALS AND TRAINING AND SUPPORT INCLUDING, WITHOUT LIMITATION, ANY WARRANTY OF NON-INFRINGEMENT OF THIRD PARTY RIGHTS, DESIGN, MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR WARRANTIES ARISING FROM A COURSE OF DEALING OR PERFORMANCE OR USAGE OF TRADE. No agent of Sun is authorized to incur warranty obligations on behalf of Sun or modify the limitations as set forth herein. 10.3 Aircraft Product and Nuclear Applications. Licensed Technology is not designed or intended for use in online control of aircraft, air traffic, aircraft navigation or aircraft communications; or in the design, construction, operation or maintenance of any nuclear facility. Sun disclaims any express or implied warranty of fitness for such uses. Licensee represents that it will not use Licensed Technology or Derivative Technology and will I not use, distribute or resell the Licensee Product for such purposes and that it will use its best efforts to ensure that its customers and end-users are provided with a copy of the foregoing notice. 10.4 Product Liability. Licensee shall not, in connection with the marketing of the Licensee Product represent, either directly or indirectly, that Sun has certified or approved of the form, fit, function, performance or compatibility thereof. Licensee shall indemnify, release, defend and hold Sun harmless from all claims, damages, losses, costs and expenses, including reasonable attorneys' fees and expenses, arising in defense of any claim of product liability in any way relating to the Licensee Product, provided that Sun (i) gives Licensee written notice of such claim, (ii) cooperates with Licensee, at Licensee's expense, in the defense of the claim, and (iii) gives Licensee the right to control the defense and settlement of the claim, except that Licensee may not enter into any settlement that affects Sun's rights or interest without Sun's prior written approval. Sun has no authority to settle any claim on behalf of Licensee. 11. LIMITATION OF LIABILITY. 11.1 Infringement. SUN IS NOT RESPONSIBLE FOR ANY LIABILITY RELATED TO ANY CLAIM ALLEGING THAT THE USE OF LICENSED TECHNOLOGY, USE, MANUFACTURE OR, SALE OF THE LICENSEE PRODUCT INFRINGES THE INTELLECTUAL PROPERTY RIGHTS OF ANY THIRD PARTY. 11.2 General Limitation. Except for breach of Sections 4, 9, 10.3 or 10.4, and to the extent not prohibited by applicable law: A. Each party's aggregate liability to the other for claims relating to this Agreement, whether for breach or in tort, shall be limited to the total of the payments made by Licensee to Sun hereunder for the Licensed Technology. B. Neither party will be liable for any indirect, punitive, special, incidental or consequential damage in connection with or arising out of this Agreement (including loss of business, revenue, profits, use, data or other economic advantage), however it arises, whether for breach or in tort, even if that party has been previously advised of the possibility of such damage. -8-

C. Liability for damages shall be limited and excluded, even if any exclusive remedy provided for in this Agreement fails of its essential purpose. 12. MISCELLANEOUS.
12.1 Notices. All written notices required by this Agreement must be delivered in person or by means evidenced by a delivery receipt and will be effective upon receipt. Relationship. This Agreement is not relationship such as a partnership, agency, or employment relationship. a manner which expresses or implies that of independent contractor, nor intended to create a franchise, joint venture, Neither party may act in a relationship other than bind the other party.

12.2

12.3

Governing Law. Any action related to this Agreement will be governed by California law and controlling U.S. federal law. No choice of law rules of any jurisdiction will apply. Attorney's Fees. In addition to any other relief, the prevailing party in any action arising out of this Agreement shall be entitled to attorneys' fees and costs. Force Majeure. A party is not liable under this Agreement for non-performance caused by events or conditions beyond that party's control if the party makes reasonable efforts to perform. This provision does not relieve Licensee of its obligation to make payments then owing. Available Relief. Nothing herein is to be construed as limiting either party from seeking injunctive or other equitable relief at any time. Licensee acknowledges and agrees that (i) the restrictions on its use and disclosure of Sun's Confidential Information and the restrictions and limitations on the licenses granted to Licensee are reasonable and necessary to protect legitimate interests, (ii) in the event of a violation by Licensee of any of the provisions of Sections 3, 4, or 9, remedies at law will be inadequate and such violation will cause irreparable damages to Sun within a short period of time, and (iii) Sun will be entitled to injunctive relief against every violation of these Sections. Assignment. Neither party may assign or otherwise transfer any of its rights or obligations under this Agreement, without the prior written consent of the other party, except that Sun may assign its right to payment and may assign this Agreement to any of its Affiliates. Waiver. Any express waiver or failure to exercise promptly any right under this Agreement will not create a continuing waiver or any expectation of non-enforcement. Severability. If any provision of this Agreement is held invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby, and shall be interpreted, to the extent possible, to achieve the purposes as originally expressed in the invalid, illegal or unenforceable provision. Export Control. The Licensed Technology, Derivative Technology and Sun Confidential Information are subject to U.S. export control laws and may be subject -9-

12.4

12.5

12.6

12.7

12.8

12.9

12.10

to export or import regulations in other countries. Licensee agrees to comply strictly with all such laws and regulations and acknowledges that it has the responsibility to obtain such licenses to export, re-export or import as may be required after delivery to Licensee. 12.11 Entire Agreement. This Agreement, including the attached Exhibits, is the parties' entire agreement relating to its subject matter. It supercedes all prior or contemporaneous oral or written communications, proposals, conditions, representations and warranties and prevails over any conflicting or additional terms of any quote, order, acknowledgement, or other communication between the parties relating to its subject matter during the term of this Agreement. No modification to this Agreement will be binding, unless in writing and signed by an authorized representative of each party.

IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by their duly authorized representatives. Sun Microsystems, Inc. Pinnacle Data Systems, Inc.
BY: NAME: TITLE: DATE: /s/ Barbara J Gordon Barbara J Gordon VP 5/11/99 BY: NAME: TITLE: DATE: /s/ John Bair John Bair President/CEO 4/29/99

The Exhibits to this Agreement are: Exhibit A - Deliverables Exhibit B - Licensee Designated Equipment, Designated Site, Designated Customer(s), Designated Manufacturer and Training and Support Fees Exhibit C - Transfer Support, Training and Maintenance -10-

EXHIBIT A DELIVERABLES Deliverables for the Reference Design - To be delivered within thirty (30) days of the Effective Date, unless otherwise indicated. Reference Design Deliverables: Reference Design board schematics database in Concept format, including the components library Reference Design board layout file in Allegro (.brd) format, including the layout routing rules BOM for Reference Design board in txt format, including Sun part number and AVL information Crichton Specification ver. 1.0 CCT Interface pin assignment AXmp OEM manual Mechanical drawings: CCT cage, including the 1/0 board and pan assembly mechanical design database in PROE format. OBP/POST Deliverables: OBP/POST source code for the Reference Design The above referred Delivery Date is a target date only. It is anticipated that Sun will deliver the Deliverables to Licensee by the Delivery Date, however, the actual date may change. Sun will provide Licensee with notice of any change in Delivery Date. -11-

EXHIBIT B LICENSEE DESIGNATED EQUIPMENT, DESIGNATED SITE, DESIGNATED CUSTOMER, DESIGNATED MANUFACTURER AND TRAINING AND SUPPORT FEES DESIGNATED EQUIPMENT. [ Sun UltraSPARC 143 Mhz ] CPU Part #501-2836, CPU SN #013859 HOSTID: 80a568 IP Address: 8 : 0 : 20 : 80 : a5 :68 DESIGNATED SITE: [ Main Engineering Lab ] 6600 Port Road Columbus CH 43125 DESIGNATED CUSTOMER: Alcatel DESIGNATED MANUFACTURER: Celestica in Toronto, Canada TRAINING AND SUPPORT FEES: The fees for the training and support services described in Exhibit C will be $40,000, to be paid by Licensee to Sun as follows: 1. $10,000 To be paid at the start of the training and support described in Exhibit C, or within thirty (30) days of the Effective Date, whichever happens first; 2. $10,000 To be paid within ninety (90) days of the Effective Date; 3. $10,000 To be paid within one hundred sixty (160) days of the Effective Date or Licensee's bring-up of the Licensee Product, whichever happens first; and 4. $10,000 To be paid within twelve (12) months of the Effective Date, or upon Licensee's purchase of One Hundred Thousand Dollars ($100,000) worth of components from SME, whichever happens first. Address for Payment of Training and Support Fees: Sun Microelectronics A division of Sun Microsystems, Inc. c/o Bank of America File #72942 San Francisco, CA 94160-2942 Account #12339-21709 -12-

EXHIBIT C TRANSFER SUPPORT, TRAINING AND MAINTENANCE REFERENCE DESIGN TRANSFER SUPPORT: Sun shall provide Licensee with transfer support for the Reference Design which may be provided by phone or electronic mail. Licensee's right to receive transfer support shall commence only upon delivery to the Licensee of the Licensed Technology and shall expire ninety (90) days thereafter. OBP/POST TRANSFER SUPPORT: Sun shall provide Licensee with initial transfer support to further Licensee's understanding of OBP/POST which may be provided by phone or electronic mail. Licensee's right to receive the initial transfer support shall commence only upon Licensee's full completion of the initial training set forth above and shall expire one hundred eighty (180) days after completion of such initial training. OBP/POST TRAINING: Training for OBP/POST shall be provided at Sun's San Jose, California facilities. Licensee may designate up to five (5) of its personnel to attend such training. Licensee shall pay all living and outof-pocket expenses for its personnel including, without limitation, all commuting and other transportation costs. Upon Licensee's request, and subject to the availability of its personnel, Sun shall provide the initial training at Licensee's facilities; provided, that Licensee shall bear all reasonable travel and living expenses for Sun's training and support personnel and shall include three (3) travel days. In addition, Licensee shall provide suitable training facilities at its sole cost and expense. Licensee's right to receive initial OPB/POST training shall expire six (6) months after the Effective Date. MAINTENANCE: During the first twelve (12) months this Agreement is in effect, Sun shall provide Licensee Error Corrections and Upgrades to OBP/POST as they are generally made available. ADDITIONAL SUPPORT: Additional training and consulting services may be obtained from Sun pursuant to the terms and conditions of a separate agreement. -13-

REVISED AND AMENDED AS OF JUNE 25, 1999 LICENSEE DESIGNATED EQUIPMENT, DESIGNATED SITE, DESIGNATED CUSTOMER, DESIGNATED MANUFACTURER AND TRAINING AND SUPPORT FEES DESIGNATED EQUIPMENT. [ Sun UltraSPARC 143 Mhz ] CPU Part #501-2836, CPU SN #013859 HOSTID: 80a568 IP Address: 8 : 0 : 20 : 80 : a5 :68 DESIGNATED SITE: [ Main Engineering Lab ] 6600 Port Road Columbus CH 43125 DESIGNATED CUSTOMER: Alcatel, Westwave Communications DESIGNATED MANUFACTURER: Celestica in Toronto, Canada TRAINING AND SUPPORT FEES: The fees for the training and support services described in Exhibit C will be $40,000, to be paid by Licensee to Sun as follows:
1. $10,000 To be paid at the start of the training and support described in Exhibit C, or within thirty (30) days --------of the Effective Date, whichever happens first; To be paid within ninety (90) days of the Effective Date; To be paid within one hundred sixty (160) days of the Effective Date or Licensee's bring-up of the Licensee Product, whichever happens first; and To be paid within twelve (12) months of the Effective Date, or upon Licensee's purchase of One Hundred Thousand Dollars ($100,000) worth of components from SME, whichever happens first.

$10,000 2. 3. $10,000

4.

$10,000

Address for Payment of Training and Support Fees: Sun Microelectronics A division of Sun Microsystems, Inc. c/o Bank of America File #72942 San Francisco, CA 94160-2942 Account #12339-21709 -14-

EXHIBIT 10(l) [ALCATEL LOGO] 1000 Coit Road Plano, TX 75075 O.E.M. SUPPLY AGREEMENT BY AND BETWEEN Alcatel USA Sourcing L.P. AND Pinnacle Data Systems, Inc. Page 1 of 100

Number 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 Exhibit A Attachment Attachment Attachment Exhibit B Exhibit C Exhibit D Attachment Attachment Attachment Exhibit E Exhibit F Attachment Exhibit G Attachment Attachment Attachment Exhibit H Exhibit I Attachment Attachment Exhibit J Exhibit K

Subject Term of Agreement Sale, Purchase, Resale Definitions Forecasts and Orders Price Shipment; Delivery and Risk of Loss; Packaging Warranties Quality Assurance Inspection and Acceptance Trademarks and Labeling Installation and Service; Support Changes Confidentiality Grant of Rights and Licenses Indemnification and Limit to Liabilities Inability to Supply Termination; Consequences of Termination Dispute Resolution General Terms and Conditions Pricing Product Specifications Milestone Delivery Schedule Price, KanBan Parameters and Procedures Inbound Routing Guide General Packaging Specifications Equipment Loan Agreement List of Equipment and Software Amendment to Equipment Loan Agreement List of Equipment and Software New Century Warranty Serialization Requirements Serialization Drawing (locations) Service and Support Support Flow Diagram Support Services: Fees Train-The-Trainer Program Outline PCN Discontinuance and Obsolescence Procedure Escrow Agreement Escrow Agreement technical Information Escrow Agreement Demand Notice Alcatel Authorized Subcontractors PDSi Quality System Audit and Action Plan

A1 A2 A3

D1 D2 D3

F1 G1 G2 G3

I1 I2

Page 2 of 100

OEM SUPPLY AGREEMENT This OEM Supply Agreement (the "Agreement), made this 25th day of October, 2000 (the "Effective Date"), is by and between Pinnacle Data Systems, Inc. (hereinafter "Supplier"), with offices at 6600 Port Road, Groveport, OH 43125, and Alcatel USA Sourcing, L.P. (hereinafter "Alcatel"), a Texas limited partnership, with offices at 1000 Coit Road, Plano, Texas 75075. W I T N E S S E T H: WHEREAS, Supplier desires to sell to Alcatel and Alcatel desires to purchase from Supplier the Products herein specified under the following terms and conditions for internal use or resale: NOW, THEREFORE, in consideration of the premise and the mutual promises set forth in this Agreement, the parties agree as follows: Section 1. Term of Agreement. (a) The stated term of this agreement shall commence on the Effective Date and terminate on June 30, 2004. The terms and conditions of this Agreement shall apply to any purchase order for Products issued on or after the Effective Date and to the delivery and sale of any Product pursuant thereto. This Agreement shall automatically be renewed for an additional twelve (12) month period, commencing on July 1, 2004, unless either party notifies the other party in writing at any time prior to that date, stating renewal is not desired. Subsequent renewals shall be documented by a new Exhibit A, setting forth Alcatel's estimated quantities of purchases and Supplier's prices. Such renewal Exhibits shall be executed by both Alcatel and Supplier. All other terms and conditions shall remain the same during the subsequent renewals, except as mutually agreed upon by the parties as provided herein. Section 2. Sale, Purchase and Resale (a) Subject to the terms and conditions of this OEM Supply Agreement, Supplier shall sell to Alcatel and Alcatel shall purchase from Supplier for internal use or resale, the quantity of the Product which Alcatel orders from Supplier pursuant to Section 4c. (b) This Agreement in no way impairs Alcatel's ability to manufacture or have manufactured other similar assemblies using Alcatel's or its Affiliates' own technology (or other third party technologies). Alcatel maintains the right to source spare parts from the original manufacturer. Section 3. Definitions. Where used in this Agreement, the following terms shall have the following meanings: (a) "Affiliate" means any entity which controls, is controlled by or is under common control with a party. An entity is deemed to be in control of another entity (the "controlled entity") if it owns, directly or indirectly, not less than: (1) thirty-three and one-third percent (33 1/3%) of the controlled entity's assets or outstanding voting securities; or (2) the maximum percentage of the controlled entity's assets or outstanding voting securities allowed under the law of the country in which the controlled entity is organized. (b) "Product" or "Products" means collectively, unless the context indicates the singular, the Equipment, Software and Services provided by Supplier pursuant to this Agreement. (c) "Equipment" means the hardware portion and related Documentation of the Products purchased by Alcatel under this Agreement, as listed in Exhibit A. (d) "Specifications" means the latest Alcatel and/or Supplier drawings and/or functional and test specifications corresponding to the Alcatel part number as listed in Exhibit A or attached as Exhibit A1, "Price Schedule", as modified in writing from time to time upon agreement of the parties. (e) "Documentation" means the user manuals or other documentation describing the features, operation, and functionality of the Equipment or Software. (f) "Software" licensed under this Agreement is defined as machine readable and executable computer programs,

instruction sequences, procedures, data, logic, and/or rules, scripts and related materials, and any modifications to any of the foregoing, in any form or media including, without limitation, magnetic tape, disc, semiconductor device, firmware, or other memory device or system memory. (g) "Technical Information" shall include but not be limited to all information and documentation related to design and manufacture of the Product, including but not limited to all piece part, assembly, tooling, and test fixture drawings; manufacturing processes, procedures, and instructions; test processes, procedures, and instructions; preventive maintenance procedures; raw materials spares parts description, including names and addresses of vendors. Page 3 of 100

(h) "End-user" shall include Alcatel for Products used internally by Alcatel or its Affiliates, and Alcatel's customer (s) of the Products. Section 4. Forecasts and Orders and Request for Quotes. (a) Forecasts. No later than thirty (30) business days after the Effective Date, Alcatel shall provide Supplier with Alcatel's initial six (6) month Product forecast. Supplier shall maintain the capacity to supply the Product in quantities consistent with Alcatel's estimated needs under such forecast at the delivery intervals stated therein, provided that such delivery forecasts may be updated by Alcatel as set forth below. Supplier understands and acknowledges that Alcatel has made no guarantee or commitment to purchase any minimum quantity of the Product and that the quantities of the Product actually purchased may vary from the estimates listed on the forecast. By the first week of the last month of each quarter, Alcatel shall provide Supplier an updated Product forecast, to facilitate Supplier's capacity planning. Updated Product forecasts may be provided by mail, electronically (EDI) or by facsimile, at Alcatel's option. Pursuant to Section 19h, the use of EDI signaling enables Supplier to provide weekly updates to the projected forecast. Supplier acknowledges that such delivery forecasts are merely estimates, and that any firm orders shall be on Purchase Orders Alcatel issues hereunder. (b) Request for Quotes. Request for quotes for previously forecasted requirements will be responded to within three (3) business days. Requests for quotes for unforecasted requirements will be responded to within five (5) business days. (c) Orders. To purchase Products hereunder, Alcatel shall issue its Purchase Order(s) ("Purchase Order"), which shall specify the Alcatel part number, the quantity of each Product ordered, the price, the method of shipment, and the place(s) of delivery and the delivery date(s) per appropriate leadtimes (section A3) for each such Product and Supplier shall deliver the Product to Alcatel in accordance with the delivery schedule set forth in such Purchase Orders. As used in this Agreement, the "Delivery Date" of any Product means the date Seller is required to deliver the same to the designated location as determined pursuant to the instruction given on the Purchase Order(s). Supplier shall notify Alcatel at the time of shipment as to the quantity shipped and the specific shipping information. Shipping quantities may not vary from those established by the purchase order unless otherwise mutually agreed upon in writing by the parties. Dates specified on the Purchase Order are Alcatel's "on dock" dates at Alcatel's facility. Alcatel's acceptable delivery window is maximum five (5) calendar days early, zero (0) days late. In the event any shipment is delayed and may not be timely, then Alcatel may direct Supplier to ship such Products by premium transportation designated by Alcatel and, if such delay is not attributable to an event described in Section 16(a), the Supplier shall bear the expense of any difference in cost due to such premium transportation. (d) Acceptance of Orders. Supplier shall accept all Purchase Orders for the Product, including the requested Delivery Date, placed by Alcatel pursuant to this Section 4, and shall confirm its acceptance within one (1) business day after receipt of such Purchase Order. (e) Order of Precedence. The terms and conditions of this Agreement shall have precedence over the sale and purchase of the Product between the parties notwithstanding any additional or inconsistent terms or conditions in Alcatel's Purchase Order or similar document or in Supplier's confirmation, invoice or similar documents. When interpreting this Agreement, precedence shall be given to the respective parts in the following descending order: This body of this Agreement Exhibits/Attachments to this Agreement Purchase Orders (f) Cancellations/Reschedule. If Alcatel cancels all or any portion of Product quantities stipulated in any Purchase Order hereunder and the Product is custom to Alcatel only, Alcatel shall be responsible to pay for such Product as provided in Section 17b. Requests to reschedule may be made by Alcatel at any time. Supplier agrees to accommodate this rescheduling as required by Alcatel. (g) Product Roadmap On a semi-annual basis, Supplier shall provide to Alcatel a written plan containing a roadmap of anticipated product enhancements and upgrades. This written plan shall be provided to Alcatel by the first week of the second quarter and fourth quarter of the calendar year for the life of this Agreement. Roadmaps delivered shall

include formal closure dates, amendment dates, pricing and quality. Supplier provides this as a planning tool and does not warrant the deliverability of any product or enhancement in the presentation. Page 4 of 100

Section 5. Price. (a) Price. The price for the Product shall be as set forth on the Price Schedules attached hereto as Exhibit A, which includes Attachment A1, A2 and A3. Price shall be renegotiated on an annual basis or as specified in the Price Schedule, subject to any adjustments as provided for herein. Supplier represents and warrants to Alcatel that the prices charged under this Agreement will be equal to or not less favorable than the prices charged by Supplier during the term of this Agreement to any other purchaser like Alcatel of the same products, in the same or lesser quantities and under the same terms and conditions as are sold under this Agreement. In the event Supplier makes lower prices available to any other purchaser like Alcatel of the same products in the same or lesser quantities and under the same terms and conditions, Supplier shall promptly notify Alcatel and such lower prices shall immediately be made available to Alcatel on each such occasion. Such lower pricing shall apply to all Products then on order and thereafter ordered by Alcatel. (b) Payment Terms. Alcatel shall pay Supplier for the Product delivered to Alcatel net forty-five (45) days after delivery by Supplier of such Product as evidenced by the appropriate receiving documentation. Supplier's invoices must reference the Alcatel Purchase Order number, and be sent to the "Bill to " address specified on Alcatel's Purchase Order. Supplier's packing list must reference the Alcatel Purchase Order number and be sent to the "Ship to" address on Alcatel's Purchase Order. (c) Taxes. All Product prices are FOB sellers premises, and do not include any sales, use, custom charges or duties, excise or any other taxes applicable to the sale, use or delivery of Products, or any charges for shipping, insurance or other fees. Should Supplier be required to collect any such taxes or other similar charges, such costs will be added as separate line item(s) to the invoice sent to Alcatel and shall be paid by Alcatel unless Alcatel provides Supplier with an applicable tax exemption certificate number on the Alcatel Purchase Order or similar document. Alcatel shall not be liable for any taxes based on Supplier's income. (d) Cost Reductions/Cost Increases. (i) At any time during the term of this Agreement, any cost reductions applicable to the manufacture of the Product identified by Alcatel shall be implemented by Supplier at Alcatel's prior request and written approval. Eighty percent (80%) of any such cost reduction as implemented shall be passed through to Alcatel as price reductions on the Product as and when said reductions are realized during Product manufacture. On any such cost reduction, the parties shall mutually agree as to who shall be responsible for all non-recurring engineering, implementation, or other similar costs associated with implementation of the cost reduction change, which costs, if to be paid by Alcatel, shall be approved in advance by Alcatel in writing. (e) Sale of Product by Supplier to Other Parties In consideration for ownership of certain design rights and non-recurring fees paid by Alcatel to Supplier for the development and NEBS certification of products under this Agreement, Supplier agrees to compensate Alcatel for certain product sales to other parties. If any of the products based on the original Alcatel product (as referenced in Exhibit A), and its subsequent modifications is sold by Supplier to parties other than Alcatel USA, Supplier will compensate Alcatel 5% (five percent) of the current Alcatel list price, excluding any taxes and shipping fees, up to an accumulated amount equal to the cost incurred by Alcatel for NEBS certification and 2% (two percent) for all product sold thereafter. Supplier is under no obligation to actively market products and is solely responsible for all marketing, pricing, and delivery activities. All compensation to Alcatel shall be in the form of a check issued to Alcatel on a quarterly basis, not later than 30 days after the end of the quarter. (f) Royalty Reporting Format Supplier shall provide a quarterly report in the following format after the first shipment of product is made to a non-Alcatel entity. Part Number: Quantity Sold: Sold To: Date Shipped: (g) Royalty Reporting Audit Supplier shall maintain for a period of three (3) years following any fiscal year a complete, clear, accurate record of the number of Products referenced in 5.e (above) distributed, sold or otherwise transferred sufficient to calculate any fees due to Alcatel USA. Alcatel USA shall be entitled to audit, with 30 days prior written notice and not more frequently than annually, Supplier's relevant records for the sole purpose of establishing the correctness of any amounts due or paid to Alcatel USA under this Agreement. Such audit shall be conducted by

an independent third party auditor which has been approved by Supplier and such approval shall not be Page 5 of 100

unreasonably withheld or delayed. Alcatel USA shall pay for the cost of such audit except as stated below. The audit results shall be provided promptly to Supplier. If the results of such audit show that Supplier has underpaid Alcatel USA by ten percent (10%) or more, then Supplier shall pay the reasonable costs of such audit. If the results of such audit show that Supplier has overpaid, then Alcatel USA shall reimburse Supplier such overpayment within sixty (60) calendar days of such audit. If the results of such audit show that Supplier has underpaid Alcatel USA, then Supplier shall pay Alcatel USA such underpayment within sixty (60) calendar days of such audit. Section 6. Shipment; Delivery; and Risk of Loss; Packaging; NAFTA/ Duty Drawback. (a) Shipment; Delivery. Alcatel shall provide Supplier with appropriate instructions for each shipment of the Product designated pursuant to Alcatel's Inbound Routing Guide, document number 003-3002-038 (Exhibit B), and Supplier shall deliver the Product covered by firm orders from Alcatel by delivering them to the carrier F.O.B. Supplier's manufacturing facility. Supplier shall promptly notify Alcatel if the designated carrier is unable to accept the shipment within one (1) business day and Alcatel shall promptly designate another carrier or carriers. (b) Title and Risk of Loss. Title to and risk of loss for a unit of the Product sold and purchased under this Agreement shall pass from Supplier to Alcatel upon Supplier's delivery of the unit of the Product to the designated carrier. Notwithstanding the foregoing, except as otherwise expressly agreed between the parties, title to Software or other licensed materials shall remain in Supplier or its suppliers or licensors. (c) Packaging. Equipment to be supplied by Supplier shall be delivered in proper packaging. Packing shall withstand air, rail and road transport and handling hazards under normal conditions. Supplier shall also make commercially reasonable efforts to comply with Alcatel's specific packing requirements and weight limitations for transit as outlined in Alcatel's General Packaging Specification document number 003-6601-014 (Exhibit C). Supplier shall be responsible for all losses or damages caused or due to any defect in packing. (d) NAFTA; Duty Drawback. (1) General Requirements and Liabilities. (A) Supplier shall become knowledgeable of, and comply with, government laws, regulations or requirements on importing and exporting. (B) Alcatel shall not be responsible for fines, penalties or damages resulting from action taken by any government or private party against Alcatel because of the failure of Supplier to comply with the law, regulations or requirements. (C) Supplier shall indemnify Alcatel for fines, penalties, damages or any other costs (including, but not limited to, attorney's fees) associated with Supplier's failure to comply with the law, regulations or requirements. (D) Supplier shall indemnify Alcatel for payments made voluntarily to, or pursuant to an agreement with, any government or private party associated with Supplier's failure to comply with the law, regulations or requirements or with Alcatel's reliance on Supplier's representations concerning, among other issues, NAFTA and duty drawback. (2) NAFTA. (A) Supplier shall provide Alcatel, upon request, complete and properly executed North American Free Trade Agreement ("NAFTA") Certificates of Origin for goods subject to this contract which qualify under the NAFTA preference rules of origin. (B) Supplier shall maintain and provide within ten (10) business days of Alcatel's request all records necessary to support the NAFTA status of the goods included in the Certificates. (C) Supplier shall notify Alcatel within five (5) business days of any change that could affect the accuracy or validity of the Certificates.

(3) Drawback. (A) Supplier shall provide within ten (10) business days of Alcatel's request all documents necessary to file and complete drawback claims, including, but not limited to, entry summaries, liquidation/reliquidation notices, certificates of delivery, and certificates of manufacture and delivery. Page 6 of 100

(B) Supplier shall maintain all drawback documents provided to Alcatel. Supplier also shall maintain and provide within twenty-five (25) business days of Alcatel's request other records or documents required pursuant to the U.S. Customs regulations to support drawback claims. (C) Supplier shall notify Alcatel within five (5) business days of any change that could affect the accuracy or validity of drawback documents previously provided to Alcatel. Section 7. Warranties. (a) Good and Merchantable Title; Conformity to Specifications. Supplier warrants that at the time of delivery to Alcatel that it shall convey good and merchantable title to all of the Equipment delivered under this Agreement and that each such unit of the Equipment shall conform to the Specifications and shall be free from defects in materials and workmanship for a period of two (2) years from delivery of the Equipment to Alcatel. Supplier shall repair or replace, at its sole discretion, at no cost to Alcatel, such items of Equipment which prove defective and/or are not in conformity with the Specifications. The remedy of repair or replacement under this Section shall be Alcatel's sole and exclusive remedy under the warranty, unless the Supplier repeatedly demonstrates it has not satisfied its obligations under such warranty. Then Alcatel may, at its option, return the defective Equipment and associated Software, and Supplier shall refund the amounts paid for such Equipment and associated Software upon receipt. Such warranty shall not apply where Equipment has been rendered defective or not in conformity with the Specifications as a result of Alcatel's or Alcatel's Enduser's negligent operation or use, Excusable Delay, accident, use of improper supplies, modifications of a type not previously approved by Supplier, maintenance contrary to Supplier's written and previously communicated instructions, or other similar causes beyond normal use of the Equipment. (1) Shipping: Product In Warranty. The cost of shipping, both to and from Supplier, of Equipment in warranty for repair or replacement shall be paid for by Supplier, except where Supplier and Alcatel mutually agree that an analysis of returned Equipment shows no defect found, in which case Alcatel shall be billed for freight to and from Supplier. (2) Shipping: Product Out of Warranty. The cost of shipping, both to and from Supplier, of Equipment out of warranty for repair or replacement shall be paid for by Alcatel. (3) Out of Warranty Costs: The costs of out-of-warranty repairs are subject to a charge as quoted by Supplier and accepted by Alcatel or stated in Exhibit G. Such charges must be authorized by Alcatel prior to Supplier performing any such repairs. All charges shall be authorized by Alcatel Purchase Order number, and will declare required mode of return shipment. (4) Return Authorization. Return authorization numbers must be obtained from Supplier prior to return of any Equipment for repair or replacement. Such return authorization number(s) shall be provided to Alcatel within one (1) business day of such request by Alcatel. Should Supplier fail to respond with a warranty return authorization within three (3) days, Alcatel may, at its discretion, return such Equipment for repair or credit without a return authorization number. (b) Software Warranty. Supplier warrants that when the Software is delivered, and for a period of twelve (12) months thereafter, that it will function in accordance with the Specification and will be free from design defects when used in accordance with the relevant Supplier's manuals. Supplier shall promptly correct any defect in Software at no charge to Alcatel. Except as provided hereafter, the remedy of correction of defects under this paragraph shall be Alcatel's sole and exclusive remedy under this warranty. Notwithstanding the foregoing, if, after repeated efforts, Alcatel notifies Supplier that this warranty has not been met, the parties shall conduct intensive good faith negotiations in order to bring the Software into conformity as soon as possible. If the parties are unable to reach agreement, then Alcatel, at its sole option, shall be entitled to return such Software and any related Product to Supplier, and Supplier shall refund the amounts paid to Supplier related to such Software and Product no later than upon receipt of such Software and Product. (c) Regulatory Compliance. Supplier warrants that the manufacture of each item delivered hereunder, as well as the facilities used to manufacture such items, shall comply with all applicable federal, national, state, provincial and local laws and regulations, and all applicable Bellcore and Alcatel Supplier Quality Audit Standards including ISO 9000 standards. All items that may be used for international sales shall comply with applicable European Union or other international EMC and safety requirements as specified in the Alcatel Product Specifications.

(d) Product Life Cycle and Support. Supplier shall ensure continuity of availability from third parties of all parts, components and Software contained within the Products which are not manufactured or produced by Supplier. Page 7 of 100

Such obligation shall continue until the expiration of ten (10) years from the date of last delivery of the Product to Alcatel as stated in Exhibit G paragraph 4.8 and 4.9. (e) New Century Warranty. The New Century Warranty contained in Exhibit E, attached hereto and incorporated herein, shall also apply to all Products. (f) Services Warranty. Supplier warrants that it will perform all services under this Agreement in a skillful and workmanlike manner. (g) Right to License. Supplier represents and warrants that it owns, or has the right to license the Software and has the right to grant the licenses granted hereunder. (h) Infringement Warranty. Supplier warrants that it will not willfully or knowingly deliver to Alcatel any portion of the Product which infringes any patent, trademark, copyright or other property right of any third party relating to proprietary or trade secret information. (i) Warranty Disclaimer. THE WARRANTIES SET FORTH IN THIS AGREEMENT ARE IN LIEU OF ALL OTHER WARRANTIES WHETHER EXPRESS OR IMPLIED, INCLUDING THE WARRANTIES OF MERCHANTABILITY AND FITNESS FOR INTENDED OR PARTICULAR PURPOSE. Section 8. Quality Assurance. (a) Quality System Requirements (1) Alcatel USA understands that all Suppliers shall have a Quality System that supports the ISO9000 or Bellcore GR-1252-CORE or similar quality system. Suppliers will be subjected to audits in accordance with GR1252-CORE, Quality System Generic Requirements for Hardware. Alcatel's objective is for its Telecommunication suppliers to adopt the TL9000 requirements for the appropriate product/services. (2) Supplier hereby agrees to comply with the following requirements attendant to the workmanship and integrity of Product covered by this Agreement. Failure to comply with the provisions herein contained will be basis for Alcatel's rejection and return of Products shipped by Supplier, and cause for termination of this Agreement by Alcatel. Supplier hereby agrees to maintain a comprehensive process and quality control program that complies with all requirements of Alcatel's Document 004-8002-192, Supplier Quality System Requirements Specification and 259-0000-000, OEM Devices and Systems General Specifications. All resultant documentation for Product covered under this Agreement shall be maintained and made available to Alcatel upon request. All Products shall meet the applicable standards established by Bellcore Publication FR-2063 Network Equipment Building systems Requirements (NEBS) Family of Requirements (NEBSFR) as well as Alcatel's workmanship Standard 004-8003-100. (3) Supplier's Quality System Implementation Plan is attached as Exhibit K. Supplier will implement corrective actions in accordance with Alcatel's audit findings and observations. (b) Hardware Requirements (1) Compliance to the GR-78-CORE, Generic Requirements for the Physical Design and Alcatel Workmanship Manual on all designed equipment. On purchased product, the suppliers should meet IPC-610, class 1 standards. The supplier will address any Alcatel customer raised issues beyond IPC. (2) Products are required to be compliant to GR-63-CORE, Network Equipment Builders Specification. (4) Compliance to GR-1089-CORE, Electromagnetic Compatibility and Electrical Safety Generic Criteria for Telecommunications Equipment. (5) Compliance to GR-284-CORE, Reliability and Quality Switching Systems Generic Requirements. (6) Expected failure rate predictions data will be based on GR-332-CORE, Reliability Prediction Procedure or field performance.

(7) Drive to a minimal Quality level 2 as defined in TR-TSY-000357, Component Reliability Assurance. Page 8 of 100

(8) If required by Alcatel, suppliers will be responsible for CLEI coding of the product as defined in GR-485CORE, Common Language Equipment Coding Process and Guidelines Generic Requirement. (9) Each field replaceable unit, backplane and chassis will be required to have a barcode serial number and barcode revision label applied. Alcatel will provide the barcode for the serial number and the revision label. The barcode will be installed by the supplier in a mutually agreed upon location on each unit. A history of repair actions on field returns and the number of times returned from the field should be tracked against each serial number. (10) Field returns hardware should not be upgraded to the latest shippable revision at the factory for new products when the upgrade has the potential to improve field performance unless approved in writing by Alcatel. (11) Functional defects on delivered product shall be less than 1% as measured at the module level. (12) Visual Mechanical defects on delivered product shall be less than 1.5% as measured level. (c) Software Requirements (1) As a supplier to multiple Bell Operating Companies, Alcatel is both required and compliant with the current versions of Bellcore Generic Requirements (GR's) and Technical References (TR's) for software quality as listed below. In order to maintain this level of quality throughout our system configuration these standards are flowed down to our sub-system suppliers and Supplier agrees to comply with such standards.
--------------------------------------------------------------------------------------------------------Bellcore Number Title ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------GR-282-CORE Software Reliability and Quality Acceptance Criteria --------------------------------------------------------------------------------------------------------TR-NWT-000179 Quality System Generic Requirements for Software --------------------------------------------------------------------------------------------------------TR-NWT-000284, Reliability and Quality Switching Systems Generic Requirements (RQSSGR), Section 2.4 Software Design and Architecture --------------------------------------------------------------------------------------------------------GR-929-CORE Reliability and Quality Measurements for Telecommunications Systems ---------------------------------------------------------------------------------------------------------

(2) The Supplier should provide the necessary support and data for any customer imposed performancereporting metrics as defined in GR-929-CORE. (3) The supplier shall have a documented Software Development Lifecycle that conforms to ISO-9001 as interpreted by ISO 9000-3. (4) At the request of Alcatel customers, compliance to TR-NWT-000179, Software Reliability Program Requirements will be implemented. (5) The supplier shall demonstrate Level II capability as defined by SEI Software Capability Maturity Model (CMM). Section 9. Inspection and Acceptance. (a) Acceptance. Acceptance shall be based upon a test and inspection plan designed to demonstrate specification compliance. Such test and inspection shall be documented by Supplier, demonstrated to conform to Alcatel's requirements, and then mutually accepted in writing. Product is subject to inspection by Alcatel at either Alcatel's facility, Supplier's subcontractor(s) facility, or Supplier's facility, at Alcatel's option. Alcatel shall be allowed thirty (30) business days from date of receipt of any Product to perform testing and inspection of such Product. If identical tests are performed by Supplier and Alcatel, the parties will work together to ensure that test equipment is properly calibrated to prevent improper rejection. In the event Alcatel does not reject the shipped Product within the above stated term, it shall automatically be deemed that acceptance of the shipped Product has been

made by Alcatel. (b) If software is delivered, the following software acceptance criteria will apply: (1) 100% of all Test Cases from each module have been successfully executed. Page 9 of 100

(2) Feature Tests 100% executed with a 95% pass rate (each test individually). (3) System Functionality not degraded as measured by: Regression Tests 100% executed with a 95% pass rate (overall). (4) Planned Exit Tests are 100% executed with 100% pass rate. (5) All fixed and packaged Change Requests have been verified as resolved or closed. (6) Requirements shall be traced throughout the process. (7) The supplier shall provide objective evidence that all software requirements have been met. (c) Testing and Certificate of Manufacturing Compliance. Supplier shall inspect and test all Product prior to delivery to Alcatel for conformity to the Specifications. The tests and the performance criteria detailed in the Specifications shall comprise the tests and performance criteria to be implemented by Supplier for purposes of Product acceptability hereunder. Supplier shall not modify the tests and criteria set forth on the Specifications without Alcatel's prior written approval. Prior to the release of any new lot of Product, Supplier shall complete a certificate of manufacturing compliance certifying that: (i) each unit of the Product in such lot meets the Specifications; and (ii) such lot passes all testing and performance criteria agreed upon by the parties, including but not limited to those set forth in the Specifications. Supplier shall maintain a record of these certificates of manufacturing compliance, available for review by Alcatel within two (2) business days of such review request. Supplier shall have each such certificate signed by a person duly-authorized to make such certifications. (d) Rejected Products and Shortages. Notwithstanding any payment made by Alcatel for any unit of the Product hereunder, Alcatel may reject any Product which fails to meet the testing standards and performance criteria and/or the Specifications. Except as provided herein, Alcatel shall, within thirty (30) business days after its receipt of any shipment of the Product, notify Supplier of any claim relating to a rejected Product or any shortage in quantity of any shipment of the Product. In the event of such rejection or shortage, Supplier shall, at Alcatel's option, replace the rejected Product or make up the shortage promptly, not to exceed forty eight (48) hours, upon receipt of such notice, at no cost to Alcatel, and shall make arrangements with Alcatel for the return of any rejected Product, such return shipping charges to be paid by Supplier. (e) Alcatel Inspection. Alcatel may, at any time during normal business hours and upon request to Supplier, inspect Supplier's facilities for manufacturing the Product, and inspect Supplier's manufacturing procedures for compliance with applicable Bellcore standards and the other appropriate manufacturing standards described in Sections 7, 8, and 9 and may inspect Supplier's inventory, work-in-process, raw materials, production records and such other items related to the Product as Alcatel considers relevant to satisfy it that Supplier is manufacturing the Product in accordance with this Agreement. Section 10. Trademarks and Labeling. (a) Trademarks. Supplier acknowledges that all trademarks, trade names and trade dress of Alcatel or Alcatel's Affiliate (the "Alcatel Trademarks") that shall accompany or are affixed to the Product and/or Product literature in accordance with the Specifications or other request of Alcatel are the property of Alcatel or Alcatel's Affiliate, and Supplier shall not claim or obtain any rights in the Alcatel Trademarks. Supplier shall take no action that shall in any way impair Alcatel's or Alcatel's Affiliate's right, title and interest in and to the Alcatel Trademarks and shall not use for its own benefit or for the benefit of any party other than Alcatel, the Alcatel Trademarks or any confusingly similar trademarks, trade names or trade dress during or after the term of this Agreement. (b) Labeling. Supplier shall label the Product in accordance with the Specifications or other request of Alcatel. Supplier hereby grants Alcatel permission to use Supplier's Documentation in Alcatel's promotional literature; refer to Supplier as the manufacturer of the Product and use Alcatel labeling and promotional and other literature that may indicate Supplier is the manufacturer of the Product in accordance with applicable law. Alcatel shall be allowed to brand name the Products with names of its own choosing. (c) Serialization. If required by Alcatel, Supplier shall serialize the Product in accordance with the Specifications and Exhibit F, attached hereto and incorporated herein, regarding Alcatel's serialization procedures.

Section 11. Installation and Service; Support. Page 10 of 100

(a) Installation and Support. Alcatel shall be responsible for installing and supporting the Product for its Endusers, at Alcatel's expense, subject to the other provisions of this Agreement. Supplier shall provide technical and operational service and support according to the terms of Exhibit (G). (b) Equipment Loan Agreement Supplier and Alcatel will enter in to a equipment loan agreement, substantially similar to the Equipment Loan Agreement attached hereto as Exhibit D, and if required, to provide equipment to support Exhibit G Service and Support. Section 12. Changes. (a) Regulatory Changes. Should any change in any regulations promulgated by Bellcore or any other comparable foreign authority, or any change in the interpretation thereof, require changes in Supplier's manufacturing practices which increase the cost to Supplier of manufacturing the Product, the parties shall negotiate in good faith whether and to what extent prices of the Product should be adjusted to reflect such cost increases. (b) Alcatel-Requested Changes. Alcatel may from time to time request changes or enhancements to be made to the Product and corresponding changes made to the Specifications, any such request to be made in writing. Supplier shall respond in writing to any such request within ten (10) business days from receipt of the request, indicating when it can accommodate such request. If Supplier agrees to accommodate such request it shall, within twenty (20) business days of its response, submit to Alcatel a proposal that includes engineering specifications, cost estimates and an implementation schedule. Implementation of the change is to be made only after Alcatel notifies Supplier in writing of acceptance of the proposal and, as applicable, any necessary regulatory approvals therefor have been secured. Any Product which is in the process of production at the time of receipt of a change notice shall, with Alcatel's agreement, continue to be produced in accordance with the Specifications which had been in effect at the time of issuance of an appropriate purchase order by Alcatel. (a) Change Orders. (1) Supplier shall notify Alcatel of hardware and software Product changes that affect Product fit, form, function, performance, safety, or reliability at least six (6) months, or such period as may be amended by mutual agreement, prior to implementation of such change, and prior to shipment of Product. Notwithstanding the foregoing, if Alcatel has a contractual obligation to an End-user to give a longer notice of such Product changes, Alcatel shall notify Supplier of such obligation and Supplier shall give Alcatel such longer notice. Such notice and any accompanying retrofit disposition responsibilities, due to safety, reliability, or performance, shall support the requirements of Alcatel Engineering Change Order (ECO) and the current Alcatel Product Change Notice (PCN) Discontinuance (Obsolescence) Notice Procedures (007-0000-115) attached as Exhibit H. (2) Supplier will conduct testing of changes before release that insures there will be no degradation to the Enduser's Product or network, and Supplier will provide all required data and test results to support such changes at Alcatel's request. (3) Supplier will provide support for two previous software releases if such releases have been licensed to any End-user. Supplier shall provide support for additional prior releases, on a time and materials basis, based on Supplier's then standard rates. (4) Software patch creation, testing, and release shall support Alcatel documented guidelines and procedures, as found in Software Release and Patch Procedure, Alcatel Document No. 003-5300-236. (5) Alcatel's Purchase Order shall be the governing document for all change order activity. No new part number (s) shall be accepted without a Purchase Order. Section 13. Confidentiality. (a) Confidential Information. All technical information, documentation, Software, and other information or data, including information that is received from a third party under circumstances permitting its disclosure, that is provided by one party to the other party in connection with this agreement and which is marked or otherwise identified as confidential or proprietary shall hereinafter be collectively referred to as "Confidential Information". Orally conveyed Confidential Information must be confirmed in writing to the other party within 30 (thirty) days of the date of disclosure in order to be encompassed by this Section 13. Confidential Information disclosed by

either party to the other in connection with this Agreement is to be used only for the purpose of this Agreement and for no other purpose, and shall be protected by the recipient party from being divulged to others with no less than the same degree of care, but in no event less than reasonable care, given to its own Confidential Information that is intended to be protected from disclosure. The obligations in this paragraph shall survive termination or expiration of this Agreement. Page 11 of 100

(b) All Confidential Information shall be and remain the disclosing party's property and shall not be copied or duplicated in any manner or submitted to any third party for examination or otherwise, without the disclosing party's prior written consent. (c) Confidential Information will not be entitled to protection under this Section when it is (i) already known to the receiving party, from a source other than the disclosing party (ii) publicly known (or becomes publicly known) without the fault or negligence of the receiving party, (iii) received from a third party without restriction and without breach of this Agreement, (iv) independently developed by the receiving party, or (v) disclosed in accordance with a written authorization of the disclosing party. (d) The disclosing party understands that the receiving party may, currently or in the future, be developing information internally or receiving information from other parties which may be similar to the disclosing party's information. Accordingly, nothing in this Agreement shall be construed as a representation or inference that either party will not develop products, for itself or for others, which compete with products or systems contemplated by the other party's information provided, however, that the receiving party shall not use the disclosing party's Confidential Information in such development. (e) Disclosure to Government. Nothing contained in this Section shall be construed to restrict either party from disclosing confidential information as required for purposes of compliance with governmental, administrative or regulatory laws, regulations, orders or requests; provided that the party who is making such disclosure gives the other party sufficient notice of the intent to make and the content of such disclosure to enable such other party to contest the necessity of disclosing such other party's Confidential Information and/or to modify the content of the Confidential Information to be disclosed. Section 14. Grants of Rights and Licenses. (a) Supplier hereby grants to Alcatel a non-transferable, non-exclusive, fully paid-up, worldwide license to use, sublicense and distribute the Software, including distribution utilizing multi-tier distribution channels, solely for use with the Product. Unless otherwise specifically stated, Software delivered under this Agreement is licensed solely for use in the Product in which it is initially installed but may be transferred to a replacement Product at no additional license or sublicense fee. Software may be copied in whole or in part by Alcatel for its: (i) backup and archival purposes; (ii) internal use on the Product; and (iii) sublicensing of the Software, and the number of copies will be limited to those reasonably necessary to so conduct Alcatel's business. (b) All Software provided by Supplier with the Product(s) or provided by Supplier in conjunction with the Product(s) is Confidential Information of Supplier or Supplier's third party licensors, and Alcatel agrees to treat all such Software in accordance with Section 13 of this Agreement entitled "Confidential Information" (except to the extent that the obligations of Section 13 are in apparent or actual conflict with Alcatel's rights and licenses granted under this Section). Alcatel shall not reverse compile, disassemble or reverse engineer any Software nor, except as agreed to by Supplier in writing, modify any Software. (c) Alcatel is authorized to grant a non-exclusive sublicense to each End-user to use the Software solely in the Product in which it is initially installed or a replacement Product. Software which is a stand-alone Product may be sublicensed to operate on any hardware on which the Software will operate, and such hardware shall be treated as if it were the "Product" referred to in this paragraph. The End-user may not grant a further sublicense, and may not transfer its sublicense except with a transfer of the Product. Each such sublicense shall be in writing and include, (i) a prohibition of copying the Software except for backup and archival purposes, (ii) an obligation to reproduce proprietary legends on copies, (iii) treatment of the Software as Confidential Information, (iv) a restriction on the End-user to not decompile, modify, disassemble or reverse engineer any Software. (d) Escrow. To enable Alcatel to exercise its rights under this Agreement and to fulfill the obligations assumed by Alcatel in relation to Products, Supplier shall deposit with a mutually agreed-upon third party escrow agent, specializing in technology escrow, Technical Information under terms and conditions substantially similar to the escrow agreement attached in Exhibit I. The parties shall in good faith negotiate such agreement so that the deposit shall be made upon or prior to Alcatel's first permanent installation (i.e., non-field trial) of Product at a Alcatel End-user's site.

Section 15. Indemnification and Limit to Liability. (a) Indemnification. Supplier hereby indemnifies and holds Buyer, its directors, officers, agents, and employees harmless against any and all claims, actions, damages, liabilities, or expenses, including reasonable attorney fees and other associated costs and expenses for injury to or death of any person, and for loss of or damage to any Page 12 of 100

and all property arising out of the negligent or willful wrongful acts or omissions of Supplier, its employees, agents, subcontractors, or representatives. Buyer hereby indemnifies and holds Seller, its directors, officers, agents, and employees harmless against any and all claims, actions, damages, liabilities, or expenses, including reasonable attorney fees and other associated costs and expenses for injury to or death of any person, and for loss of or damage to any and all property arising out of the negligent or willful wrongful acts or omissions of Buyer, its employees, agents, subcontractors, or representatives. (b) Infringement Indemnification. Supplier will defend, at its own expense, any action brought against Alcatel or End-User(s) to the extent that it is based on a claim that any Supplier supplied Products, designs, material, processes, or documentation hereunder constitutes an infringement of any duly issued patent or infringement of any copyright, trade secret, or other proprietary rights of a third party. Supplier will pay all damages and costs finally awarded against Alcatel or End-User(s) in such action which are attributable to such action. Alcatel will promptly inform Supplier in writing and furnished a copy of each communication, notice, or other action relating to the alleged infringement and will give the Supplier authority, information, and reasonable assistance necessary to defend or settle such claim. Alcatel reserves the right to participate, at its expense, in such defense or settlement. Should Product delivered under this Agreement become, or in Supplier's opinion be likely to become, the subject of a claim of infringement of any patent or any copyright, trade secret, or other proprietary rights of a third party, then Supplier shall promptly, at its option: (i) procure for Alcatel and all End-User(s) the right to use such Product free of any liability for infringement; (ii) modify such Product so that it becomes non-infringing; or (iii) replace such Product with non-infringing substitutes otherwise complying substantially, to the satisfaction of Alcatel, with all the requirements of the Agreement. (c) Limitation of Liability EXCEPT AS EXPRESSLY PROVIDED IN THIS AGREEMENT, OR FOR BREACH OF SECTION 13, IN NO EVENT WILL EITHER PARTY BE LIABLE FOR INDIRECT, SPECIAL, INCIDENTAL, OR CONSEQUENTIAL DAMAGES. Section 16. Inability to Supply. (a) Excusable Delay. Any delay in the performance of any of the duties or obligations of a party hereto shall not be considered a breach of this Agreement provided that such delay is caused by or is the result of any acts of God, acts of the public enemy, insurrections, riots, fires, explosions, floods, or other unforeseeable causes beyond the control and without the fault or negligence of the party so affected ("Excusable Delay"). The party so affected shall give prompt notice to the other party of such cause and shall take whatever reasonable steps are necessary to relieve the effect of such cause as rapidly as possible. Notwithstanding the foregoing, should Supplier be prevented from performing its obligations hereunder due to Excusable Delay for thirty (30) or more consecutive days, then Alcatel may, at its option, terminate this Agreement upon written notice to Supplier, in addition to any option which Alcatel may exercise pursuant to Section 16(b). (b) Self-Manufacturing Right. Upon the occurrence of any of the events specified below, whether or not the events are due to Excusable Delay, or subject to Alcatel's right to terminate the Agreement pursuant to Section 17(a), Alcatel shall have the right at its option to self-manufacture or have a third party manufacture ("Second Source Manufacturer") under any relevant Supplier patents and know-how (if any) the Product and Product components. Supplier shall further cooperate with Alcatel in securing for Alcatel pursuant to this Section, and under terms no less favorable than realized by Supplier, any third party rights provided to Supplier that are required to manufacture the Product and Product components. Alcatel shall also have the right to acquire any unique equipment of Supplier's necessary to produce and/or test of the Product and Product components at Supplier's cost less accrued depreciation. Upon successful manufacture of the Product and/or Product component(s) by the Second Source Manufacturer, the obligations of the parties with respect to supply by Supplier to Alcatel of the Product shall be suspended. The right of manufacture by Alcatel shall be triggered by occurrence of any of the following events: (1) Continued failure by Supplier to deliver the Product to Alcatel in the quantity required as stated in Alcatel's purchase order for a period of two (2) consecutive months; or

(2) Continued failure by Supplier to deliver Product which conforms to Specifications, and/or other applicable compliance standards set forth in Section 7c, for a period of two (2) consecutive months; or (3) Any termination of this Agreement by Alcatel due to Supplier's breach of this Agreement or financial default; or Page 13 of 100

(4) Should Supplier and/or its successors and permitted assigns cease to engage in the business of manufacturing the Product at any time during the term hereof, or in the event that Supplier sells all or greater than fifty percent (50%) of its outstanding equity to a party that is a substantial direct competitor of Alcatel, or sells that part of its assets relating to the supply of the Product to such a party. (c) Upon notification by Alcatel to Supplier of Alcatel's intent to exercise its rights as set forth in this Section, Supplier shall have thirty (30) days to correct such problems that triggered such notification. Should Supplier correct such problem within such time period, Supplier may, at Alcatel's sole discretion, continue its manufacture and supply obligations hereunder. In the event that Alcatel exercises the right to manufacture for reasons of Supplier's failure to supply but thereafter Supplier demonstrates that it has corrected the problem that caused events that triggered disclosure, then Alcatel's right to manufacture may cease and Supplier may, at Alcatel's sole discretion, resume supply of the Product hereunder. Section 17. Termination; and Consequences of Termination. (a) Termination For Default. In addition to other termination provisions set forth in this Agreement, this Agreement may be terminated prior to the time described in Section 1(a) upon the occurrence of any of the following events: (1) Thirty (30) days' written notice by a party to the other party ("party in breach") in the event that the party in breach materially breaches any provision of this Agreement and fails to remedy the breach prior to expiration of such thirty (30) day period; (2) Written notice by a party to the other party ("insolvent party") upon: A. the insolvency of the insolvent party or the appointment of a receiver for the insolvent party or for all or any substantial part of its properties; or B. the adjudication of the insolvent party as a bankrupt; or C. the admission by the insolvent party in writing of its inability to pay its debts as they become due; or D. the execution by the insolvent party of an assignment for the benefit of its creditors; or E. the filing by the insolvent party of a petition to be adjudged a bankrupt, or a petition or answer admitting the material allegations of a petition filed against the insolvent party in any bankruptcy proceeding, or the act of the insolvent party in instituting or voluntarily being or becoming a party to any other judicial proceeding intended to effect a discharge of the debts of the insolvent party, in whole or in part; (3) Notwithstanding the provisions of Section 16 and upon notice from Alcatel to Supplier stating that Supplier failed to supply the total quantity of Product ordered by Alcatel pursuant to this Agreement for a total of sixty (60) days in any six (6) month period, Supplier shall cooperate with Alcatel for a period of up to eighteen (18) months from the effective date of such termination to enable Alcatel to continue to supply Alcatel's End-user(s) with the Product until Alcatel secures an alternative source capable of supplying Alcatel's requirements of Product. Such cooperation shall include, without limitation, providing end lot runs of whatever size Alcatel reasonably deems necessary under the circumstances and providing Alcatel and Alcatel's Third Party Manufacturer (as applicable) with manufacturing rights, information, equipment, and any technical assistance (as applicable) in accordance with the procedures outlined in Section 16(b). (b) Termination or Cancellation for Convenience 1) Alcatel may terminate this Agreement, any purchase orders, or any supplements thereto, at any time, for any reason at its own convenience. In such case, Alcatel's total liability for such cancellation shall be calculated from table 1A, (except for mutually agreed to long lead time parts):
Table 1A ----------------------------------------------------------Cancellation Notification Percent (%) Liability ----------------------------------------------------------0 - 5 business days 100% ----------------------------------------------------------6 - 15 business days 100% -----------------------------------------------------------

16 - 30 Days business days 50% ----------------------------------------------------------+ 30 Days business days 0% -----------------------------------------------------------

(2) Supplier shall use its best efforts to minimize cancellation charges by returning materials to outside suppliers, canceling materials on order, applying subject materials to other projects where possible, and by minimizing all work-in-process and finished product during manufacturing in support of Alcatel order requirements. In the event that a cancellation results in cancellation charges, such cancellation charges shall not be invoiced until after negotiations are conducted and mutual agreement is reached. An Alcatel Purchase Order is required for the payment of any cancellation charge. Upon payment of cancellation charges outlined above, all Product, work-inprogress, components and raw materials paid for by Alcatel shall, at Alcatel's option, be delivered to Page 14 of 100

and become the property of Alcatel. In no event shall cancellation charges exceed the aggregate applicable purchase price of items stated in Exhibit A or Exhibit A3 of this Agreement. (c) Consequences of Termination. Termination of this Agreement shall not relieve either party of its liability to perform its obligations pursuant to the terms and conditions of this Agreement incurred prior to such termination, nor shall it prevent either party from exercising its right to pursue any other remedy available to it. Upon request of a party, the other party shall return all copies of such party's Confidential Information (excluding Software). The provisions of Sections 3, 7, 8, 9, 10, 11, 13, 14, 15, 16(b), 17(a)3, 18, 19(a)(d) shall survive the termination of this Agreement for any reason. Section 18. Dispute Resolution. (a) Good Faith. The parties shall attempt to resolve any disputes arising out of or in relation to this Agreement ("Dispute" or "Disputes") by good faith discussions. In the event of the occurrence of such a Dispute, either party may, by notice to the other party, have such Dispute referred to the individuals designated below or their successors, for attempted resolution by good faith negotiations within thirty (30) days after such notice is received. Said designated individuals are as follows: For Alcatel - Jack Hostetter For Supplier - Bob Hahn, VP/COO In the event that such discussions are not successful in resolving a Dispute, then such Disputes between the parties, are to be settled and finally determined by binding arbitration conducted in accordance with the Commercial Arbitration Rules, or the then existing rules for commercial arbitration, of the American Arbitration Association pursuant to the procedures outlined in Section 18(b) herein. (b) Arbitration Procedures. If either party determines at any time that it wishes to submit a Dispute to arbitration, it shall first give the other party written notice, in reasonable detail, of the Dispute and of the intention to submit the Dispute to arbitration. If within twenty (20) business days after receipt of such notice by the other party (or such longer or shorter period as the parties may establish by mutual agreement at the time) the Dispute is not resolved by amicable negotiation between the parties, such Dispute may be submitted by either party to arbitration as provided herein. The arbitration shall be before a panel of three (3) arbitrators. Each party shall select an arbitrator and both parties shall jointly select the third arbitrator; provided, however, if the parties are unable to agree on the third arbitrator within twenty (20) business days after the Dispute is submitted to arbitration, the two arbitrators selected by the parties shall jointly select the third arbitrator. The arbitrators shall only interpret and apply the terms and provisions of this Agreement at issue, and shall not change any such terms or provisions or deprive any party to the Dispute of any right or remedy provided for in this Agreement. The arbitrators may award compensatory damages against a party to the Dispute by the arbitrators shall not be authorized to award, nor shall they award, damages in excess of the limitations contained herein, except as expressly permitted in this Agreement. The arbitration of any Dispute, including the determination of any amount of damages suffered by a party, shall be final and binding upon the Parties to the maximum extent permitted by law. Judgment upon the decision of the arbitrators may be entered in any court of competent jurisdiction. The cost and expenses of each party incurred in connection with the arbitration, including reasonable attorneys' fees, costs and expenses, and the costs of the arbitration itself, including the fees, costs and expenses of the arbitrators, shall be borne in accordance with the determination of the arbitrators with respect thereto. Section 19. General Provisions. (a) Notices. All notices and other communications delivered under this Agreement shall be in writing and shall be deemed to be given when received by telex or first class mail (postage prepaid) to: If to Supplier: Bob Hahn, VP/COO If to Alcatel: Jack Hostetter (b) Government Contracts. Supplier shall use its best efforts to comply with any additional legal and/or regulatory requirements not set forth herein that may apply to its provision of the Product to Alcatel as a subcontractor in

any government contract. (c) Nonpublicity. Neither party shall use the name of the other party in any news release, public announcement, advertisement, or other form of publicity without the prior, written consent of the other party. Except pursuant to Page 15 of 100

court order or as otherwise required under judicial or regulatory proceedings, or as reasonably necessary to exercise its rights or perform its obligations herein, neither party shall disclose the existence of nor the terms and conditions of this Agreement without the prior written consent of the other party. (d) Relationship of the parties. Supplier hereby declares and represents that Supplier is engaged in an independent business and will perform its obligations under this Agreement as an independent contractor and not as an employee of Alcatel; that the persons performing the services hereunder are not employees of Alcatel; that Supplier has and hereby retains, except as set forth herein, the right to exercise full control of obligations hereunder and full control over the employment, direction, compensation, and discharge of all employees, agents, and subcontractors assisting in the performance of such obligations; that Supplier will be solely responsible for all matters relating to payment of such employees, including compliance with worker's compensation, unemployment and disability insurance, social security withholding, and all such matters; and that Supplier will be responsible for the acts of Supplier and the acts of all agents, employees, and contractors employed by Supplier during the performance of Supplier obligations under this Agreement. (e) Affiliates, Subcontractors. Supplier agrees to sell to Alcatel, Alcatel authorized subcontractors(s), and Affiliates of Alcatel. Exhibit J, Alcatel Authorized Subcontractors, hereby annexed to and made a part of this Agreement, shall identify all Alcatel authorized subcontractors. The terms and conditions stated herein shall be binding on all subcontractor(s) or Alcatel purchasing locations. Except where the context is clearly inconsistent, for all purchases made by Alcatel's authorized subcontractor(s) or Affiliate(s), for the purposes of such purchase the term "Alcatel" shall refer to such Alcatel authorized subcontractor(s) or Affiliate(s). All invoices arising out of sales by Supplier to any authorized subcontractor(s) or Affiliate(s) shall be submitted to such subcontractor(s) or Affiliate(s) for payment. Alcatel assumes no responsibility for the credit worthiness nor assumes any liability for any debt incurred by any subcontractor(s) or Affiliate(s) for any Product ordered subsequent to this Agreement. (f) Assignment. This Agreement may not be assigned in whole or in part by either party without the written consent of the other party, except consent shall not be required if assignment is made by either party to an entity in which they or their parent hold at least 51% of the outstanding shares of stock or other ownership interest, and provided that in such event the party assigning this Agreement or any part thereof shall remain liable for all of its obligations according to this Agreement. The term "Parent" shall mean an entity which owns, directly or indirectly, a majority ownership interest in Alcatel. Notwithstanding the foregoing restrictions on assignment, Alcatel may assign this Agreement without such approval to an entity which is merged with, consolidated with, or otherwise acquires, directly or indirectly, a majority ownership interest in Alcatel, Alcatel's Parent, or Alcatel's or Alcatel's Parent's assets. (g) Business Reviews; Information. Supplier agrees to meet with Alcatel, at a minimum, twice per year for the purpose of conducting a business review to review Supplier's and Alcatel's overall performance, business issues, and/or technical problems or issues. In addition, Supplier agrees to share Product and Software release schedules, as available, for use in Alcatel's planning and marketing. (h) Electronic Communication. The Supplier agrees to maintain the ability to communicate with Alcatel via Internet e-mail, and further agrees to implement and maintain communication via Electronic Data Interchange (EDI). The minimum ANSI standard EDI transaction sets that Supplier will maintain are:
810 820 830 850 855 856 Electronic Invoice Electronic Funds Transfer Forecast Purchase Order Purchase Order Acknowledgment Advance Ship Notice 860 865 997 Purchase Order Change Purchase Order Change Acknowledgment Functional Acknowledgment

(i) Amendments and Waivers. This Agreement may not be amended or otherwise modified except by a writing signed by both of the parties. Either party may waive compliance by the other party with any provision of this Agreement required to be performed by such other party. Such waiver shall be in writing, and signed by a duly authorized representative of the party against whom enforcement of the waiver is sought. No such waiver shall be construed as a waiver of any subsequent compliance with any provision of this Agreement by the waiving party. (j) Severability. Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as

to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without affecting the validity or enforceability of such provision in any other jurisdiction or invalidating the remaining provisions of this Agreement. (k) Execution in Counterparts. This Agreement may be executed in two or more counterparts, each of which counterparts, when duly executed and delivered, shall be deemed to be an original and all of which counterparts, taken together, shall constitute one and the same Agreement. Page 16 of 100

(l) Governing Law. This Agreement shall be deemed to be a contract made under the laws of the State of Texas without giving effect to any choice or conflict of law provision or rule (whether of the State of Texas or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Texas. The UN Convention on Contracts for the International Sale of Goods is specifically excluded from this Agreement. (m) Construction. If, for any reason, this Agreement is translated into a language other than the English language, then the English language version of this Agreement shall be controlling for all purposes. (n) Headings. Headings used in this Agreement are for convenience of reference only and shall not affect the interpretation of this Agreement. (o) Utilization of Small and Small Disadvantaged Business Concerns Both Parties agree that compliance with the policy of the United States Government regarding Small Disadvantaged Business, Women-owned Business, and Protected Class Business concerns is essential to participate as subcontractors in the performance of contracts awarded by any federal agency or organization requiring compliance of Section 211 of Public Law 95-507 Office of Federal Procurement Policy's Policy Letters 80-2 and 80-4 and FAR 52.219.2. As a requirement of this compliance, Supplier agrees to support and report the following requirements for the direct and indirect purchases of raw materials, components, supplies and services:
(1) (2) (3) Small Disadvantaged (Minority) Business Concerns Woman-Owned Business Concerns Protected Class Business Concerns 5% 5% 1%

Reporting of such compliance shall be sent to: M/WBE Plan Administrator Alcatel Sourcing L.P. 1000 Coit Road M/S 305 Plano, TX 75075 (p) Entire Agreement. This Agreement and attached Exhibits, incorporated herein for all purposes, constitute the entire understanding between the parties and supersedes all prior oral or written understandings between the parties with respect to the subject matter of this Agreement.
Exhibit A Attachment Attachment Attachment Exhibit B Exhibit C Exhibit D Attachment Attachment Attachment Exhibit E Exhibit F Attachment Exhibit G Attachment Attachment Attachment Exhibit H Exhibit I Attachment Attachment Exhibit J Price Specification Milestone Delivery Price , Kanban Parameters and Procedures Inbound routing guide General Packaging Specification Equipment Loan Agreement List of Equipment and Software Amendment to Equipment Loan Agreement Amendment to List of Equipment and Software New Century Warranty Serialization Serialization Requirements for Supplier Service and Support Support Flow Diagram Support Services Fees Train-The-Trainer Program Outline PCN Discontinuance and Obsolescence Procedure Escrow Agreement Technical Information Listing Demand Notice Alcatel Authorized Subcontractors

A1 A2 A3

D1 D2 D3

F1 G1 G2 G3

I1 I2

IN WITNESS WHEREOF, the parties have caused their duly authorized representatives to execute and deliver this Agreement as of the Effective Date. Pinnacle Data Systems, Inc. Alcatel USA Sourcing, L.P. Page 17 of 100

By: By: Title: ____________________________ ____________________________ By: Title:

Alcatel USA GP, Inc. General Partner ________________________________ ________________________________

-------------------------------------------------------------------------------Date: _______________________ Date: ________________________________ --------------------------------------------------------------------------------

Page 18 of 100

EXHIBIT A (1) Pricing The price for the parts listed below shall be for a period of one (1) year ending June 30th, 2001. This is an indeterminate quantity Agreement Alcatel is in no way obligated to order any minimum quantity, service, or dollar amount. The Specification agreed to between Supplier and Alcatel is attached hereto and made a part hereof as Exhibit A1. Milestones delivery dates to between Alcatel and supplier is attached hereto and made a part hereof as Exhibit A2 Supplier provided Kanban parts and procedures is attached hereto and made a part hereof as Exhibit A3.
P/N --PDS-SPALCT516 (Production Units) Description ----------Customized AXmp Rackmount Solution Includes: Alcatel Enclosure w/ 450W P.S. & Cabling Ultra AXmp Motherboard Alarming Features (4) 400 MHz CPU Modules w/ 4 MB Cache 4096 MB Memory (16 x 256 MB Memory DIMMs) (2) 9.1 GB SCSI Hard Drives (2) Removable Hard Drive Kits 4mm 12-24 GB DAT Drive (STD22400NSB) 32X Plextor SCSI CD-ROM (4) Solaris 2.5.1 RTU Only Solaris 2.5.1 Pre-loaded One year return to depot warranty Pricing ------Initial Qty. 1-10 (already deliv $60,000.00 After intial quantity $46,746.00

P/N --PDS-SPALCT528

Description ----------Intelligent Processor Unit (IPU) -Configuration 1 1-5 Includes: 6-15 Alcatel Enclosure w/ 600W PS & Cabling w/ Alarm card 16-25 & 6U (6) Slot Modified CompactPCI Backplane 26-100 Sparc Engine Axmp+C Motherboard (1) 400 MHz CPU module w/4mb Cache (8) 64 MB Memory DIMM (Total of 512 MB) (2) 18.1 GB LVD 68-Pin SCSI 7,200 RPM Hard Drive 40/17X 68-Pin SCSI CD-ROM 12-24 GB 50-Pin DDS-3 4mm Tape Drive Solaris 2.6 Release 5/98 Pre-Loaded Solaris 2.6 (1-4) CPU RTU Server License, 5 User License, Media Kit One Year Return-To-Depot Warranty Description ----------Intelligent Processor Unit (IPU) -Configuration 2 Includes: Alcatel Enclosure w/ 600W PS & Cabling w/ Alarm card & 6U (6) Slot Modified CompactPCI Backplane Sparc Engine Axmp+C Motherboard (2) 400 MHz CPU module w/4mb Cache (8) 256 MB Memory DIMM (Total of 2048 MB) (2) 18.1 GB LVD 68-Pin SCSI 7,200 RPM Hard Drive (2) 6U CompactPCI Quad Ethernet Dual SCSI Board 40/17X 68-Pin SCSI CD-ROM

Pricing ------$21,830 $21,321 $20,845 $20,389

P/N --PDS-SPALCT529

Pricing ------1-5 $33,264 6-15 $32,462 16-25 $31,700 26-100 $30,976

Page 19 of 100

12-24 GB 50-Pin DDS-3 4mm Tape Drive Solaris 2.6 Release 5/98 Pre-Loaded Solaris 2.6 (1-4) CPU RTU Server License, 5 User License, Media Kit One Year Return-To-Depot Warranty
P/N --PDS-SPALCT530 Description ----------Intelligent Processor Unit (IPU) -Configuration 3 1-5 Includes: 6-15 Alcatel Enclosure w/ 600W PS & Cabling w/ Alarm card 16-25 & 6U (6) Slot Modified CompactPCI Backplane 26-100 Sparc Engine Axmp+C Motherboard (2) 400 MHz CPU module w/4mb Cache (8) 256 MB Memory DIMM (Total of 2048 MB) (2) 18.1 GB LVD 68-Pin SCSI 7,200 RPM Hard Drive 40/17X 68-Pin SCSI CD-ROM 12-24 GB 50-Pin DDS-3 4mm Tape Drive Solaris 2.6 Release 5/98 Pre-Loaded Solaris 2.6 (1-4) CPU RTU Server License, 5 User License, Media Kit One Year Return-To-Depot Warranty Description ----------Intelligent Processor Unit (IPU) -Configuration 4 1-5 Includes: 6-15 Alcatel Enclosure w/ 600W PS & Cabling w/ Alarm card 16-25 & 6U (6) Slot Modified CompactPCI Backplane 26-100 Sparc Engine Axmp+C Motherboard (4) 400 MHz CPU module w/4mb Cache (16) 256 MB Memory DIMM (Total of 4096 MB) (2) 18.1 GB LVD 68-Pin SCSI 7,200 RPM Hard Drive 40/17X 68-Pin SCSI CD-ROM 12-24 GB 50-Pin DDS-3 4mm Tape Drive Solaris 2.6 Release 5/98 Pre-Loaded Solaris 2.6 (1-4) CPU RTU Server License, 5 User License, Media Kit One Year Return-To-Depot Warranty Description ----------Intelligent Processor Unit (IPU) -Configuration 5 1-5 Includes: 6-15 Alcatel Enclosure w/ 600W PS & Cabling w/ Alarm card 16-25 & 6U (6) Slot Modified CompactPCI Backplane 26-100 Sparc Engine Axmp+C Motherboard (4) 400 MHz CPU module w/4mb Cache (8) 256 MB Memory DIMM (Total of 2048 MB) (2) 18.1 GB LVD 68-Pin SCSI 7,200 RPM Hard Drive (2) 6U CompactPCI Quad Ethernet Dual SCSI Board 40/17X 68-Pin SCSI CD-ROM 12-24 GB 50-Pin DDS-3 4mm Tape Drive Solaris 2.6 Release 5/98 Pre-Loaded Solaris 2.6 (1-4) CPU RTU Server License, 5 User License, Media Kit One Year Return-To-Depot Warranty Description ----------Intelligent Processor Unit (IPU) -Configuration 6 Pricing ------$29,184 $28,488 $27,827 $27,198

P/N --PDS-SPALCT531

Pricing ------$47,184 $46,020 $44,916 $43,865

P/N --PDS-SPALCT532

Pricing ------$43,582 $42,511 $41,495 $40,529

P/N --PDS-SPALCT533

1-5

Pricing ------$51,264

Page 20 of 100

Includes: 6-15 $49,994 Alcatel Enclosure w/ 600W PS & Cabling w/ Alarm card 16-25 $48,789 & 6U (6) Slot Modified CompactPCI Backplane 26-100 $47,643 Sparc Engine Axmp+C Motherboard (4) 400 MHz CPU module w/4mb Cache (16) 256 MB Memory DIMM (Total of 4096 MB) (2) 18.1 GB LVD 68-Pin SCSI 7,200 RPM Hard Drive (2) 6U CompactPCI Quad Ethernet Dual SCSI Board 40/17X 68-Pin SCSI CD-ROM 12-24 GB 50-Pin DDS-3 4mm Tape Drive Solaris 2.6 Release 5/98 Pre-Loaded Solaris 2.6 (1-4) CPU RTU Server License, 5 User License, Media Kit One Year Return-To-Depot Warranty

P/N --PDS-SPALCT534

Description ----------Intelligent Processor Unit (IPU) -Configuration 7 1-5 Includes: 6-15 Alcatel Enclosure w/ 600W PS & Cabling w/ Alarm card 16-25 & 6U (6) Slot Modified CompactPCI Backplane 26-100 Sparc Engine Axmp+C Motherboard (4) 400 MHz CPU module w/4mb Cache (8) 256 MB Memory DIMM (Total of 2048 MB) (2) 18.1 GB LVD 68-Pin SCSI 7,200 RPM Hard Drive 40/17X 68-Pin SCSI CD-ROM 12-24 GB 50-Pin DDS-3 4mm Tape Drive Solaris 2.6 Release 5/98 Pre-Loaded Solaris 2.6 (1-4) CPU RTU Server License, 5 User License, Media Kit One Year Return-To-Depot Warranty Description ----------Intelligent Processor Unit (IPU) -Configuration 8 1-5 Includes: 6-15 Alcatel Enclosure w/ 600W PS & Cabling w/ Alarm card 16-25 & 6U (6) Slot Modified CompactPCI Backplane 26-100 Sparc Engine Axmp+C Motherboard (4) 400 MHz CPU module w/4mb Cache (8) 256 MB Memory DIMM (Total of 2048 MB) (2) 9.1 GB LVD 68-Pin SCSI 7,200 RPM Hard Drive 40/17X 68-Pin SCSI CD-ROM 12-24 GB 50-Pin DDS-3 4mm Tape Drive Solaris 2.6 Release 5/98 Pre-Loaded Solaris 2.6 (1-4) CPU RTU Server License, 5 User License, Media Kit One Year Return-To-Depot Warranty

Pricing ------$39,502 $38,537 $37,622 $36,752

P/N --PDS-SPALCT526

Pricing ------$41,200 $40,191 $39,234 $38,324

Service Options Service Uplift Options (monthly pricing based on one year service contract) Pinnacle Care (5 day repair) Pinnacle Care+ (advanced exchange) Pre-loaded Customer Software (per unit, delivered via CD-ROM or FTP Site)

$ $ $

151.00 301.00 125.00

Lead Time with 6 months forecast Lead Time with no forecast Hardware Options (FRU)

4- 6 Weeks ARO 9-12 weeks ARO

Page 21 of 100

PDS880-8100 PDS880-8101 PDS880-8102 PDS880-8108 PDS880-8109 SME501-5500 PDS880-8121 PDS880-8103 PDS880-8105 PDS880-8104 PDS880-8106 PDS880-8107 PDS501-4849 PDS880-8120 PDS880-8112 PDS600-3810 PDS600-3904 PDS600-3920

AxmpC Motherboard Power Supply Assy Alarm Board 256 MB Memory DIMM Chassis 400 MHz Processor w/ 4MB Cache 128 MB Memory DIMM 32X CD-ROM Assy module 4mm 12-24 GB Tape Drive Assy module Hard Drive Assy module)9.1 GB Fan Tray Assembly Assy module Air Filter Assembly 300 MHz Proc. module w/ 2MB Cache HDD Assembly, 18GB Intraserver cPCI Card (Quad Ethernet Dual SCSI) Solaris 2.5.1 RTU only Solaris 2.6 RTU only Solaris 7 RTU only

$ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $

7,800.00 1,106.00 395.00 833.00 2,933.00 5,706.00 344.00 140.00 1079.00 457.00 120.00 100.00 2,600.00 812.00 1,912.00 476.00 242.00 210.00

Page 22 of 100

ATTACHMENT A1 iICE Box Assembly, SPARC Ultra AXmp, 4GB Memory, 2 Disks, 1 Tape, 1 CDROM, 4 cPCI Abstract: This specification establishes the requirements for an Intelligent Processor Unit (IPU) meeting the operational, environmental, and regulatory requirements of the Central Office (CO).
-------------------------------------------------------------------------------Keywords: -------------------------------------------------------------------------------Location: Richardson Documentation/Data Management (DDM under applicable part number.)

--------------------------------------------------------------------------------------------------------1F 000705 Add Alcatel part numbers El --------------------------------------------------------------------------------------------------------1E 000620 Misc. corrections, add PDSI part El numbers, convert to Alcatel format --------------------------------------------------------------------------------------------------------1D 991217 Re-write External Resets Section El 3.5 --------------------------------------------------------------------------------------------------------1C 991214 Add alarm requirements, Section Eli 3.4 --------------------------------------------------------------------------------------------------------1B 991117 Regulatory Standards, Diff SCSI El --------------------------------------------------------------------------------------------------------1A 990803 Re-write to make generic El --------------------------------------------------------------------------------------------------------00 990702 Initial Draft Manuel Martinez El ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ED DATE CHANGE NOTE APPRAISAL AUTHORITY OR --------------------------------------------------------------------------------------------------------iICE Box Assembly, SPARC Ultra AXmp, 4GB Memory, 2 Disks, 1 Ta CDROM, 4 cPCI.

Page 23 of 100

TABLE OF CONTENTS:
Scope......................................................... Acronyms................................................ Applicable documents.......................................... Industry................................................ Military................................................ Telcordia (Formally Bell Communications Research)...... Alcatel USA............................................. Requirements.................................................. General................................................. Order of Precedence................................ Approved Suppliers................................. Characteristics.................................... Special or Critical Requirements................... General IPU Configuration............................... Hardware........................................... Processor Module..................................... Memory Modules....................................... SCSI Devices......................................... Hard Disk Drives.................................. Tape Drive........................................ CDROM Drive....................................... Compact PCI Cards.................................... Software........................................... Operating System..................................... Manufacturer Specific Software....................... Disk Partitioning.................................. Electrical Requirements................................. Input Power........................................ Internal Power Capacity............................ Grounding.......................................... Circuit Breakers................................... Alarms.................................................. Fan Alarm.......................................... Power Input / Breaker Fail Alarm................... Power Output Fail Alarm............................ Out Of Tolerance Levels.............................. Processor Fail Alarm............................... Alarm Board Fail Alarm............................. Programmable Time Intervals........................ Standby-to-Active.................................... Processor Heartbeat Check............................ Reset Delay Time..................................... External Resets......................................... Push Button Resets................................. System Reset......................................... Alarm Card Reset..................................... External Reset .................................... 28 28 29 29 29 30 31 32 32 32 32 33 33 34 34 35 35 36 36 37 37 38 39 39 39 39 40 40 40 41 41 42 42 42 43 43 43 44 44 44 44 44 45 45 45 45 45

Page 24 of 100

Reset Protocol..................................... Displays................................................ Lamp Test.......................................... Physical Interface Requirements......................... Power.............................................. Test Points........................................ Alarms and External Resets......................... Serial Ports....................................... LAN Ports.......................................... SCSI Ports......................................... Optional Jumpers/Terminators............................ Hard Disk Drive Configuration...................... Compact PCI Cards.................................. Mechanical Requirements................................. Dimensions......................................... Materials.......................................... Finishes........................................... Marking............................................ Air Flow........................................... Environmental Requirements.............................. Electromagnetic Compatibility........................... Product Safety.......................................... Product Change Notice................................... Data Requirements....................................... Documentation........................................... Quality Assurance Provisions.................................. General Requirements.................................... Qualification requirements......................... Qualification failure.............................. Qualification data................................. Use of vendor supplied data........................ Re-qualification................................... Periodic re-qualification.......................... Flammability requirements.......................... Quality................................................. Quality Program.................................... Workmanship........................................ Quality Inspection Plans........................... Quality Reports.................................... Quality Audits..................................... Reliability............................................. Required MTBF...................................... Design Reviews..................................... Component Parts.................................... Aluminum Electrolytic Capacitors................... Potentiometers..................................... Derating Guidelines................................ Burn-in............................................ EMI................................................ Alcatel Engineering Approval............................ Safety Agency Approval..................................

46 47 47 48 48 48 49 50 50 51 52 52 52 53 53 53 53 54 54 55 56 57 58 58 58 59 59 59 59 59 59 60 60 60 61 61 61 61 61 61 62 62 62 62 62 62 63 63 63 64 64

Page 25 of 100

Warranty................................................ PACKAGING..................................................... Packaging Requirements.................................. Shielding Material...................................... Anti-Static Material.................................... Unit Container Marking.................................. Exterior Shipping Container Marking..................... Notes......................................................... Handling .............................................. Return of defective devices.............................

64 65 65 65 65 65 65 66 66 66

Page 26 of 100

LIST OF FIGURES: Figure Figure Figure Figure 1. 2. 3. 4. Mechanical Outline and Dimensions..............................67 Front Panel....................................................68 Rear Panel.....................................................68 Recommended Reset Circuit......................................69 LIST OF TABLES: Table Table Table Table Table Table Table Table Table Table Table Table Table Table Table Table 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. Major IPU Components............................................34 Approved Processor Modules......................................35 Approved Memory DIMMs...........................................35 SCSI Device IDs.................................................36 Approved Hard Disk Drives.......................................36 Approved Tape Drives............................................37 Approved CDROM Drives...........................................37 Approved cPCI Cards.............................................38 Included Operating System Software..............................39 Manufacturer Specific Software.................................39 DC Voltage Out of Tolerance Levels.............................43 Serial Port Connections........................................50 Hard Disk Drive Configuration..................................52 Environmental Requirements.....................................55 Electromagnetic Compatibility (EMC)............................56 Product Safety Requirements....................................57

Page 27 of 100

Scope This specification establishes the requirements for an Intelligent Processor Unit (IPU) meeting the operational, environmental, and regulatory requirements of the Central Office (CO). The unit consists of one (1) 24" rack mount chassis, one (1) SPARC Ultra AXmp type motherboard, up to four (4) UltraSPARC II CPU modules, up to 4GB DIMM memory, one (1) tape drive, two (2) disk drives, one (1) CDROM, four (4) compact PCI slots, alarm circuitry, as well as, the necessary power and cooling subsystems. ACRONYMS
Amp(s) ANSI AVL AWG CDROM CO cPCI CPU CSA DC DSC EIA EMI ESD FCC GB ID IPU MTBF PCI PDSI PN SCSI SIMM SPARC SUN TTL UL V VDC Ampere(s) American National Standards Institute Approved Vendor List American Wire Gauge Compact Disk Read Only Memory Central Office Compact PCI Central Processor Unit Canadian Standards Association Direct Current Alcatel USA (Formally DSC Communication Corporation) Electronic Industries Association ElectroMagnetic Interference ElectroStatic Discharge Federal Communications Commission GigaByte IDentification Intelligent Processor Unit Mean Time Between Failure Peripheral Component Interconnect Pinnacle Data Systems Inc. Part Number Small Computer Systems Interface Single Inline Memory Module Scalable Processor Architecture Reduced instruction set Computer SUN Microsystems Inc. Transistor - Transistor Logic Underwriters Laboratory Volts Volts Direct Current

Page 28 of 100

Applicable documents The following documents and specifications form a part of this specification to the extent specified herein. INDUSTRY
ANSI/EIA Rack, Panels, and Associated Equipment STD310 Packaging material standards for ESD sensitive items Test for Flammability of Plastics Material for Parts in Devices and Appliances Standard for Safety of Information Technology Equipment, 3rd edition July 28, 1995 CAN/CSA-C22.2 No. 950-95, Standard for Safety of Equipment, 3rd edition July 28, 1995 Information Technology

EIA IS-5-A UL 94 UL 1950 CSA 950

CSA Standard C108.8-M1983 REV 1/1/1988 Canadian Radio Interference Regulation Amendment Dated 9/15/88, CS-3 FCC Rules and Regulations, Part 15, Subpart B, Class A Radio Frequency Devices, July 1981 IPC-610B Workmanship Standards for Electronic Equipment

MILITARY
MIL-STD-883 MIL-STD-130 MIL-F-14072 MIL-STD-889 Test Methods and Procedures for Microelectronics Military Standard Identification Marking of U.S. Military Property Finishes for Ground Electronic Equipment Dissimilar Metals

Page 29 of 100

TELCORDIA (FORMALLY BELL COMMUNICATIONS RESEARCH)
GR-78-CORE Generic Requirements for the Physical Design and Manufacture of Telecommunications Products and Equipment, Issue 1, September 1997 Reliability Prediction Procedure, Issue 6, September 1997 Generic Requirements for Assuring the Reliability of Components used in Telecommunications Equipment, Issue 2, December 1993 Network Equipment Building Standard, Issue 1, October 1995 Service Control Point Node Generic Requirements, Issue 1, September 1990 Reliability and Quality Switching Systems Generic Requirements, Issue 2, December 1993 Quality System Generic Requirements for Hardware, Issue 1, May 1995 Electromagnetic Compatibility and Electrical Safety - Generic Criteria for Network Telecommunications Equipment, Issue 2, November 1997

TR-332 TR-NWT-000357

GR-63-CORE TR-NWT-000029

TR-NWT-000284

GR-1252-CORE GR-1089-CORE

Page 30 of 100

ALCATEL USA
Label, Software Shutdown Label, Servicing DSC Packaging Specification Paint, Polyurethane, Black, Textured Process Specification, Conductive Coating DSC Derating Guidelines DSC Workmanship Standards Manual 1 - PCB Assembly Requirements Supplier Quality Systems Requirements Specification Approved Vendor List (AVL) Procedure Supplier Product Change Notice & Discontinuance (Obsolescence) Notice Procedure Supplier Product Change Notice Procedure Label, Silver, Adhesive Backed, Serial Number General Specification for OEM Equipment Label, Caution, Power, Disk Drive Quality Manual, Revision 6, August 1999 Specific configurations

003-6601-014 004-6100-007 004-6100-013 004-8003-001 004-8003-100 004-8208-192 007-0000-071 007-0000-115 007-0000-130 153-3002-001 259-0000-000 400-0002-179 8BD 0000 1000 QRZZA 3EM 04772 xxxx UDZZA

Page 31 of 100

Requirements GENERAL The IPU is a highly reliable, SPARC based processing platform that simultaneously supports multiple databaserelated Intelligent Network services, intended to support a large subscriber base and to provide a high number of Transactions Per Second (TPS). All major IPU components are Field Replaceable Units (FRUs) from the front with the exception of the cPCI cards. The cPCI cards are accessible from the rear of the IPU. The IPU consists of a SPARC based motherboard and CPU(s) along with the necessary memory, disks, tape drive, and CDROM drive. In addition to these basic compute and storage needs, the necessary cooling and alarming are designed in to meet the environmental, operational, and regulatory requirements of a CO. The FAST IPU is designed for deployment in N+1 configurations and is not considered to be "Fault Tolerant". Order of Precedence In the event of a conflict between the text of this specification and the references cited herein, the precedence in which the requirements shall govern, in descending order, is as follows: A. This specification. B. Documents referenced in the Applicable documents Section of this document utilizing the revision in effect at the time of placement of the Alcatel purchase order. Approved Suppliers Parts furnished under this specification shall be purchased from suppliers in accordance with the Approved Vendor List Procedure, 007-0000-071. Supplier names and part numbers listed in this document are for reference only, unless they have no associated Alcatel part number. Page 32 of 100

Characteristics The electrical and mechanical characteristics shall be in accordance with those published by the approved manufacturer for the device or part specified herein and as contained in the attachments. A change in the published information, made after the date of listing on the AVL, is considered a change of process and is subject to the same notification requirements as defined in the Supplier Product Change Notice Procedure, 007-0000130 or 007-0000-115. Special or Critical Requirements In the event a special or critical requirement is identified, that requirement will be noted and documented herein. The manufacturer shall supply a detailed specification for each FRU assembly to Alcatel USA. This specification shall include, as a minimum: 1. Reliability report 2. Schematic 3. Functional Description 4. Parts List 5. Fabrication Drawing 6. Assembly Drawing 7. Test Specification 8. Qualification Test Report Page 33 of 100

GENERAL IPU CONFIGURATION Hardware IPUs are configured for a 24-inch rack mount chassis. This section details all of the possible subassemblies that can be used within the chassis. The exact configuration of the IPU will be handled by individual Alcatel USA part numbers. See Alcatel specification 3EM 04772 xxxx UDZZA for the specific configurations.
--------------------------------------------------------------------------------------------------------Manuf. Manuf. PN Alcatel PN Description --------------------------------------------------------------------------------------------------------PDSI 880-8109 3EM 04662 AA 4U Rackmount Enclosure Assembly --------------------------------------------------------------------------------------------------------PDSI 880-8100 3EM 04652 AA AXmp+C Main Motherboard Assembly --------------------------------------------------------------------------------------------------------PDSI * * UltraSPARC II processor module --------------------------------------------------------------------------------------------------------PDSI * * Kit Memory DIMMs --------------------------------------------------------------------------------------------------------PDSI * * Hard Disk Drive Assembly --------------------------------------------------------------------------------------------------------PDSI * * DAT Tape Drive Assembly --------------------------------------------------------------------------------------------------------PDSI * * CDROM Drive Assembly --------------------------------------------------------------------------------------------------------PDSI 880-8101 3EM 04621 AA Power Supply Assembly --------------------------------------------------------------------------------------------------------PDSI 270-8115 3EM 04621 AB Power Supply Air Deflector Assembly --------------------------------------------------------------------------------------------------------PDSI 880-8102 3EM 04549 AA Alarm Assembly --------------------------------------------------------------------------------------------------------PDSI 880-8106 3EM 04653 AA Cooling Fan Assembly --------------------------------------------------------------------------------------------------------PDSI 880-8107 3EM 04654 AA Air Filter Assembly ---------------------------------------------------------------------------------------------------------

* see the tables in the following paragraphs Table 1. Major IPU Components Page 34 of 100

PROCESSOR MODULE The motherboard shall be capable of accommodating the UltraSPARC II family of processor modules.
--------------------------------------------------------------------------------------------------------Manuf. Manuf. PN Alcatel PN Description --------------------------------------------------------------------------------------------------------PDSI 501-4849 3EM 04650 AA UltraSPARC II processor module, 300MHz, 2MB cache --------------------------------------------------------------------------------------------------------SUN TBD TBD UltraSPARC II processor module, 400MHz, 2MB cache --------------------------------------------------------------------------------------------------------PDSI 501-5420 3EM 04650 AB UltraSPARC II processor module, 400MHz, 4MB cache ---------------------------------------------------------------------------------------------------------

Table 2. Approved Processor Modules MEMORY MODULES The system shall have two banks of memory. Each bank shall support 8 DIMM memory modules, for a total of 16 memory modules. The system minimum memory configuration is 512MB (eight 64MB). The maximum memory configuration is 4096MB (sixteen 256MB). Note: The 64MB DIMMs are not recommended, thus no part number information is given here.
--------------------------------------------------------------------------------------------------------Manuf. Manuf. PN Alcatel PN Description --------------------------------------------------------------------------------------------------------PDSI 880-8121 3EM 04651 AB 256MB DIMM Memory Kit (two 128MB sticks) --------------------------------------------------------------------------------------------------------PDSI 880-8108 3EM 04651 AA 512MB DIMM Memory Kit (two 256MB sticks) ---------------------------------------------------------------------------------------------------------

Table 3. Approved Memory DIMMs Page 35 of 100

SCSI DEVICES The SCSI devices shall be installed in the chassis as shown in Figure 2. All devices shall be of type Ultra Wide SCSI (16 bit, 40MB/s). The SCSI IDs shall be set according to the following table. Termination resistors shall not be installed on any of the SCSI devices.
-------------------------------------------SCSI Device SCSI ID -------------------------------------------Disk 1 (boot) 0 -------------------------------------------Disk 2 (application) 1 -------------------------------------------Tape 4 -------------------------------------------CDROM 6 --------------------------------------------

Table 4. SCSI Device IDs The SCSI IDs shall be easily set using a rotary switch located on the shuttle assembly. Hard Disk Drives The IPU shall use SCSI hard disk drive(s) that have passed the required Alcatel USA qualification process and shall be capable of no less than 9GB in storage capacity. A minimum of two shuttle bays shall be provided exclusively for the use of disk storage. The hard disk shall be mounted on a shuttle and removable from the front of the IPU for ease of servicing. The disk drives shall be capable of working with the Solaris operating system from SUN.
--------------------------------------------------------------------------------------------------------Manufacturer Manuf. PN Alcatel PN Description --------------------------------------------------------------------------------------------------------PDSI 880-8104 3EM 04622 AB 9GB SCSI Disk Drive Assembly --------------------------------------------------------------------------------------------------------PDSI 880-8120 3EM 04622 AA 18GB SCSI Disk Drive Assembly ---------------------------------------------------------------------------------------------------------

Table 5. Approved Hard Disk Drives Page 36 of 100

Tape Drive The IPU shall optionally be equipped with a SCSI 4mm DDS-3 tape drive that has passed the required Alcatel USA qualification process and shall be capable of no less than 8GB in storage capacity. The tape drive shall be mounted on a shuttle and removable from the front of the IPU for ease of servicing. The tape drive shall be capable of working with the Solaris operating system from SUN.
------------------------------------------------------------------------------Manufacturer Manuf. PN Alcatel PN Description ------------------------------------------------------------------------------PDSI 880-8105 3EM 04640 AA 24GB DDS3 DAT Tape Drive Assembly -------------------------------------------------------------------------------

Table 6. Approved Tape Drives CDROM Drive The IPU shall optionally be equipped with a SCSI CDROM drive that has passed the required Alcatel USA qualification process. The CDROM drive shall be mounted on a shuttle and removable from the front of the IPU for ease of servicing. The CDROM drive shall be capable of working with the Solaris operating system from SUN.
------------------------------------------------------------------------------Manuf. Manuf. PN Alcatel PN Description ------------------------------------------------------------------------------PDSI 880-8103 3EM 04644 AA 40X CD-ROM Drive Assembly ------------------------------------------------------------------------------Table 7. Approved CDROM Drives

Page 37 of 100

COMPACT PCI CARDS The IPU shall optionally be equipped with up to four (4) cPCI cards that have passed the required Alcatel USA qualification process. The cPCI cards are removable from the rear of the IPU. Each card shall be supplied with the corresponding driver software. See Figure 3 for the location of the cPCI slots.
------------------------------------------------------------------------------Manuf. Manuf. PN Alcatel PN Description ------------------------------------------------------------------------------PDSI 880-8112 3EM 04661 AA Intraserver Quad Ethernet, Dual SCSI -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

NOTE: The PDSI cPCI backplane accommodates 5 cPCI cards. The Intraserver card occupies the first slot leaving 4 slots available. Table 8. Approved cPCI Cards Page 38 of 100

Software OPERATING SYSTEM IPUs are supported with standard SUN Solarus operating system software products. One of the Run Time Licenses for the following software packages listed below, are to be supplied with each unit. The version shall be indicated on the Alcatel purchase order.
------------------------------------------------------------------------------Manuf. Manuf. PN Alcatel PN Description ------------------------------------------------------------------------------PDSI 600-3811 TBD Solaris release 2.5.1 with patches (Y2K) ------------------------------------------------------------------------------PDSI 600-3904 TBD Solaris release 2.6 ------------------------------------------------------------------------------PDSI 600-3920 TBD Solaris release 7 -------------------------------------------------------------------------------

Table 9. Included Operating System Software MANUFACTURER SPECIFIC SOFTWARE The manufacturer shall supply all driver and related software for all parts associated with the device which are not part of the Solaris software. These can include but are not limited by, specific alarm software, specific cPCI card driver software.
------------------------------------------------------------------------------Manuf. Manuf. PN Alcatel PN Description ------------------------------------------------------------------------------PDSI 600-3926 TBD PDSI patches and alarm software -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Table 10. Manufacturer Specific Software Disk Partitioning The disk drive partitioning is subject to the software load to be installed on the IPU. The software loading procedure for each load will list the partitioning information for each of the disk drives included in the IPU. Page 39 of 100

ELECTRICAL REQUIREMENTS Input Power The IPU shall have two external -48VDC inputs for power sources. The IPU shall be able to operate over an input range from -42 to -56 volts. Even though the primary inputs may feed into a single power supply, the inputs must be isolated to prevent a failure of one input upon the loss of the other. In normal operation, the two power sources shall operate in a load sharing mode. Upon the failure of one power input, the other power input shall assume the entire load for the chassis. Each of the two power inputs shall be located in separate connectors located on the back of the IPU, see Figure 3. Isolated test points shall be placed on the back of the IPU to measure the difference in voltage between the two power inputs and the point where the two sources are internally combined to feed the single power supply, see Figure 3. Internal Power Capacity The IPU power supply shall be able to supply all of the subassemblies with the proper voltages and current that each subassembly requires. Sufficient over-capacity should be available for future growth of the IPU peripherals. Page 40 of 100

Grounding Logic ground, chassis ground, and the -48V return shall be isolated from each other. Peripherals such as disk drives that have metal enclosures connected to logic ground shall be isolated from the disk shuttles to prevent a connection to frame ground. The grounding terminal for logic ground shall be located at the center pin of both of the -48V power entry connectors, see Figure 3. The grounding terminal for each -48V return shall be located at the third pin of both of the -48V power entry connectors, see Figure 3. The IPU shall have a chassis (frame) ground terminal located on the back of the IPU. This terminal shall have an 12 inch long, green #14 AWG wire attached terminating with a #10 ring lug (AMP part number 34161 or equivalent). Circuit Breakers Each -48V power input shall have a slow trip circuit breaker with a capacity of 20 Amps. The breakers shall have a toggle switch which will allow the breakers to be opened manually, see Figure 3. The breakers will indicate through a separate pair of contacts if the circuit breaker has tripped. The breaker sense contacts shall be normally closed when the breakers are conducting current. When tripped, the breaker sense line shall show an open state. (Airpax IEL series with auxiliary switch or equivalent with 80VDC capability shall be used.) A switch guard is required that will prevent accidental movement of the breaker on/off switch by personnel. Page 41 of 100

ALARMS NOTE: THERE SHALL BE NO AUDIBLE ALARM ON THE IPU. The IPU shall provide dry contact closure interfaces for the following alarms. 1. Fan alarm 2. Power Input / Breaker Fail alarm 3. Power output Fail alarm 4. Processor Fail alarm 5. Alarm Board Fail alarm The alarms shall be energized to a closed state during normal operation. Whenever a failure state occurs, the interface shall assume an open state. If input power fails, all alarm contacts assume an open state. All alarms shall be placed in a connector located on the back of the IPU, see Figure 3. Fan Alarm The fan alarm circuit shall normally remain closed unless a failure with one or more of the IPU fans is detected. When a fan failure is detected, the fan alarm circuit shall assume an open state. When the condition clears, the alarm will automatically reset. Power Input / Breaker Fail Alarm The power input / breaker fail alarm circuit shall normally remain closed unless a failure is detected on one or both of the -48V inputs, or at a sense point after the diode OR'ing, or on one or both of the power breakers. When a power input / breaker failure is detected, the power input / breaker fail alarm circuit shall assume an open state. When the condition clears, the alarm will automatically reset. Page 42 of 100

Power Output Fail Alarm The power output fail alarm circuit shall normally remain closed unless a failure or out of tolerance condition is detected on any of the internal DC power supply output voltages. When an internal power fault or out of tolerance condition is detected, the power output fail alarm circuit shall assume an open state. When the condition clears, the alarm board circuitry will initiate a restart to re-evaluate the alarm conditions. This alarm circuit is intended to monitor only the internal IPU power supply. OUT OF TOLERANCE LEVELS Out of tolerance level for the power supply are defined as follows:
DC Voltage Out of Tolerance Levels ----------------------------------------------------------* |3.3| **** +/- 3% ----------------------------------------------------------+3.3 **** +/- 3% ----------------------------------------------------------+5 **** +/- 5% -----------------------------------------------------------5 **** +/- 5% ----------------------------------------------------------+12 **** +/- 5% -----------------------------------------------------------12 **** +/- 5% ----------------------------------------------------------** |12| **** +/- 5% -----------------------------------------------------------

Table 11. DC Voltage Out of Tolerance Levels Processor Fail Alarm The processor fail alarm circuit shall normally remain closed unless an abnormal condition within the processor is detected. When an abnormal condition is detected, the processor fail alarm shall assume an open state. When the condition clears, the alarm will automatically reset. The alarm card shall have a watchdog timer circuit to monitor processor activity. During normal operation, the processor sends a heartbeat (keep-alive signal) via a daemon background program to the alarm card, preventing the watchdog timer from expiring. When a processor failure occurs, the heartbeat signal stops. The alarm card will no longer detect the heartbeat signal from the processor, and declares the alarm. /1/ * represents less then
/2/ ** represents greater then /3/ **** represents greater then equal to

Page 43 of 100

Alarm Board Fail Alarm The alarm board fail alarm circuit shall normally remain closed unless an failure condition is detected. This can be implemented by a watchdog timer which is periodically reset by onboard firmware. If the alarm board fails, the watchdog timer will expire and the circuit will assume an open state. When the condition clears, the alarm will automatically reset. Depending upon the implementation, this alarm may not be required. For instance, a card containing only alarm sensing with no intelligence. Programmable Time Intervals The alarm card shall have three programmable time intervals. The time intervals may be set using jumpers or switches. The preferred method is via a command from the processor. An ASCII file on disk can be used by the processor to set the time intervals. The timing of the signals shall be +/-10% or better. STANDBY-TO-ACTIVE The Standby-to-Active (S2A) time is the amount of time that the alarm card will remain in the standby state waiting for a CPU heartbeat. The settings shall be 10-180 seconds at 10 second intervals. The default time shall be 180 seconds. PROCESSOR HEARTBEAT CHECK The Processor Heartbeat Check (PHC) time is the amount of time that the alarm card will wait between checking for a received heartbeat signal from the processor. The settings shall be 10-60 seconds at 10 second intervals. The default time shall be 60 seconds. RESET DELAY TIME The Reset Delay Time (RDT) is the amount of time the alarm card will wait between the receipt of a reset signal (and issuance of a halt signal to the processor) and the application of the hardware reset. The setting shall be 30240 seconds at 30 second intervals. The default time shall be 120 seconds. Page 44 of 100

EXTERNAL RESETS Push Button Resets SYSTEM RESET The IPU shall contain an external system reset push button switch. The location may be either on the front or on the back of the IPU. Activating this switch shall cause the reset protocol listed below to be executed. A switch guard is required that will prevent accidental movement of the system reset push button switch. ALARM CARD RESET The IPU shall contain an alarm card reset push button switch. The location may be either on the front or on the back of the IPU. Activating this switch shall cause the alarm card to execute a power up restart. A switch guard is required that will prevent accidental movement of the alarm card reset push button switch. Depending upon the implementation, the alarm card reset switch may not be required. For instance, a card containing only alarm sensing with no intelligence. External Reset The IPU shall provide a means to externally initiate a system reset via either of two system reset interfaces located in the same connector with the alarms on the back of the IPU. The IPU shall reboot, following the reset protocol listed below, whenever a reset signal is detected on either of the two reset interfaces. Each reset interface has two signals; RESET and RESET RETURN. There are currently two different implementation of the driver circuit, see Figure 3. The recommendation is to use a TTL compatible input with a pullup resistor and logic ground as the interface for each of the two reset circuits. Page 45 of 100

Reset Protocol Upon assertion of one of the system reset inputs for 150 milliseconds or longer, the follow procedure will be performed. 1. The alarm card detects and validates the system reset switch or one of the external system reset inputs. 2. The alarm card issue a HALT message to the processor for an orderly system shutdown. 3. The alarm card wait for the pre-programmed (or default) Reset Delay Time to allow for the completion of file synchronization. 4. The alarm card applies the appropriate hardware reset to the main IPU board to reset all CPUs. 5. The alarm card restarts it's on-board firmware. 6. The system initiate a normal power-up sequence. Page 46 of 100

DISPLAYS The IPU shall provide, as a minimum, the following indicators. See Figure 2.
1. Indicator located on the front panel of the IPU shall be green for normal condition and red whenever a fan failure is detected. Power Input Alarm Indicator located on the front panel of the IPU shall be green for normal condition and red whenever any circuit breaker or power input to the IPU has failed. Power Output Alarm Indicator located on the front panel of the IPU shall be green for normal condition and red whenever an internal power fail condition is detected. Activity Status Indicator located on the front panel of the IPU shall be green for normal condition and red whenever a failure condition within the processor unit is detected. Standby Status Amber indicator located on the front panel of the IPU shall be lit whenever the processor is assigned to the standby state. Power Indicator Green indicator located on the back panel of the IPU shall be lit whenever -48V is applied to the internal power supply. Alarm Card Indicator located on the front panel of the IPU shall be green for normal condition and red whenever the alarm card has failed Fan Alarm

2.

3.

4.

5.

6.

7.

Lamp Test The IPU shall contain a lamp test button located on the front panel that will turn all of the single colored lamps on the front panel "on" and "off" while pushed. Also, all multicolored lamps will alternate through the various colors and "off" while the button is pushed. Page 47 of 100

PHYSICAL INTERFACE REQUIREMENTS All of the physical interface connections shall be located on the rear of the chassis. See Figure 3. Power Connectors J2-A (-48V "A") and J3-B (-48V "B") are for the DC power input and shall be polarized three pin AMP Mate-N-Lok connectors. Pin assignments shall be as follows:
Pin 1. Pin 2. Pin 3. -48 volts Logic ground -48 volt return

The following AMP part numbers or equivalent shall be used:

Housing 770025-1 Crimp Socket 193797-1 The mating AMP connector part number is: Mating Housing 770018-1 Mating Crimp Pin 193796-1 (for 10 AWG wire) Each DC power input shall be protected by a circuit breaker as specified in the Circuit Breakers Section. Test Points Isolated test points for each DC power input and for the point where the two input sources are combined are available at the back of the IPU. Standard test probes may be used. Page 48 of 100

Alarms and External Resets All alarm outputs and the two reset inputs shall be placed in a single 15 pin "D" type female connector with 4-40 screw lock fasteners. The following AMP part number is currently used as the Alcatel mating connector: Mating Connector AMP PN 747322-3 The pinout of the Alarm/Reset connector shall be as follows:
Pin No. -----1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Signal Name ----------Fan Alarm Fan Alarm Return Power Input/Breaker Alarm Power Input/Breaker Alarm Return Processor Alarm Processor Alarm Return Power Output Alarm Power Output Alarm Return Alarm Board Failure Alarm Board Failure Return Reset 1 Reset 1 Return Reset 2 Reset 2 Return No connection

Page 49 of 100

Serial Ports The IPU shall have four (4) serial ports located on the rear of the chassis. Two ports are programmable to operate in synchronous mode or asynchronous mode, while two are only asynchronous. In asynchronous mode, each port is independently programmable to operate at various baud rates. In synchronous mode, either a programmable clock or an external clock source may be used. Each port shall be an RS-232 DTE device interfaced with a standard 25 pin `D' type female connector with 4-40 screw lock fasteners. The following signals shall be supported:
------------------------------------------------------------------------PIN SIGNAL NAME PIN SIGNAL NAME ------------------------------------------------------------------------1 14 ------------------------------------------------------------------------2 TXD 15 TRXC * ------------------------------------------------------------------------3 RXD 16 ------------------------------------------------------------------------4 RTS 17 RXC * ------------------------------------------------------------------------5 CTS 18 ------------------------------------------------------------------------6 DSR 19 ------------------------------------------------------------------------7 Logic Ground 20 DTR ------------------------------------------------------------------------8 DCD 21 ------------------------------------------------------------------------9 22 ------------------------------------------------------------------------10 23 ------------------------------------------------------------------------11 +12 Volts 24 TXC * ------------------------------------------------------------------------12 +12 Volt Return 25 ------------------------------------------------------------------------13 -------------------------------------------------------------------------

* for synchronous ports only Note : Pins without signal names have no connection. Table 12. Serial Port Connections The +12 Volt connections are to provide power for an external optical isolator. The estimated maximum current draw is 0.030 amps. There shall be a jumper option to disconnect the power from these pins. LAN Ports The IPU shall have four (4) 10/100-Base-T(x) ethernet ports located on the rear of the chassis. Each port shall support auto sensing for speed independent of the other ports. Speed sensing is performed in accordance with the IEEE 802.3u auto-negotiation standard. The connector for each port shall be a shielded, 8 position, RJ-45 female connector. The connector shall mate with AMP PN 5-569542-*. Page 50 of 100

SCSI Ports The IPU shall have two (2) Ultra Wide SCSI ports (16bit, 40MB/s,) located at the rear of the chassis. Each port shall be configurable for either single-ended or differential operation. Each connector is a 68 pin high density `D' connector compatible with the SCSI-2 specification such as AMP PN 749076-7. Each port shall be capable of driving up to 16 devices with a total cable length not to exceed 3 meters. Each of the two SCSI ports shall be an independent SCSI port. Each of the initiator IDs shall be easily set by separate jumpers or switches to any of the possible 16 device IDs. A jumper option shall allow for the enabling/disabling of the SCSI termination. A second shall allow for the enabling/disabling of termination power. Page 51 of 100

OPTIONAL JUMPERS/TERMINATORS Hard Disk Drive Configuration The disk drives shall have the following jumper configuration.
------------------------------------------------Function Position ------------------------------------------------External LED Not used ------------------------------------------------SCSI Parity Enabled ------------------------------------------------Delay Start 6/12 Disabled ------------------------------------------------Auto Start Delay Disabled ------------------------------------------------Enable TI-SDTR Disabled ------------------------------------------------Unit Attention Disabled ------------------------------------------------SCSI Terminator Disabled ------------------------------------------------Auto Spin Up Enabled ------------------------------------------------SCSI ID * -------------------------------------------------

* Specified in the SCSI Devices Section Table 13. Hard Disk Drive Configuration Compact PCI Cards To Be Determined Page 52 of 100

MECHANICAL REQUIREMENTS Dimensions Overall dimensions are shown in Figure 1. The front panel dimensions are for a four (4) RETMA UNIT panel in accordance with ANSI/EIA Standard 310. The following tolerances shall apply unless otherwise specified:
Two decimal places Three decimal places Angles Up to 0.250" hole size Above 0.250" hole size +/- 0.02" +/- 0.010" +/- 1 degree +/- 0.003" +/- 0.005"

All dimensions are in inches and include applied finishes All burrs and sharp edges shall be removed prior to finishes being applied. Materials Metallic materials shall be selected using good engineering judgment. Non-metallic materials shall be flame rated V-0 in accordance with UL94. Refer to GR-63-CORE Section 4.3 Fire Resistance. Finishes Surface finishes shall be in accordance with MIL-F-14072, and shall be "Alcatel Black" in accordance with Alcatel specification 004-6100-007. For areas requiring metal to metal electrical contact for safety, EMI, or ESD purposes; masking over conductive areas is required prior to the paint application including contacts between the front panel and mounting rails per 004-6100-013 or equivalent as approved by Alcatel engineering. Page 53 of 100

MARKING Part and subassembly marking shall be in accordance with MIL-STD-130. Each FRU shall be marked with the Alcatel USA part number and serial number. All interface connectors and lugs shall be marked with the appropriate reference designator or function as shown in Figure 3. The manufacturer shall apply an identification label (or silkscreen) to each IPU. This label shall be located of the back of the IPU as show in Figure 3, and shall include a minimum of the Alcatel USA part number, the revision level to which the IPU was built, the manufacturer's name, a unique serial number, the date of manufacture, and the appropriate agency approvals. See Figure 3. The manufacturer shall leave blank areas on the back of the unit as shown in Figure 3. These are for Alcatel's use. No corporate logo shall be visible from the front of the IPU. AIR FLOW The IPU shall be capable of operating at the conditions stated in the Environmental Requirements section. The fan (if required) shall be fitted with filters which have a minimum dust arrestance of 80% and a minimum fire rating of Class 2 in accordance with Section 8.1.3.3 of GR-78-CORE. The fan filters shall be accessible from the front of the unit, and shall be easily removable for cleaning or replacement without shutting down the IPU. The cooling air flow shall be from right to left when view from the front of the IPU. Page 54 of 100

ENVIRONMENTAL REQUIREMENTS The IPU shall conform to the requirements specified in the following table.
--------------------------------------------------------------------------------------------------------CONDITIONS LIMITS Ex --------------------------------------------------------------------------------------------------------Spatial NEBS 2000 Framework Criteria GR --------------------------------------------------------------------------------------------------------Operating Temperature +41/Degree/F to +104/Degree/F GR +5/Degree/C to +40/Degree/C --------------------------------------------------------------------------------------------------------System Short Term Temperature +23/Degree/F to +122/Degree/F GR (**** 96 consecutive hours) -5/Degree/C to +50/Degree/C --------------------------------------------------------------------------------------------------------Non-operating Temperature -40/Degree/F to +158/Degree/F GR (**** 72 consecutive hours) -40/Degree/C to +70/Degree/C --------------------------------------------------------------------------------------------------------Operating Maximum Rate of Temp 54/Degree/F per hour GR Change 30/Degree/C per hour --------------------------------------------------------------------------------------------------------Operating Relative Humidity 5% to 85% GR --------------------------------------------------------------------------------------------------------Short Term Relative Humidity 5% to 90% and *0.024 lbs of water per lb of dry air GR --------------------------------------------------------------------------------------------------------Non-operating Relative Humidity 90% to 95% for 96 hrs at 40/Degree/C GR --------------------------------------------------------------------------------------------------------Heat Dissipation 1450 W/m/2/ (134.7 W/ft/2/) - convection cooled GR 1950 W/m/2/ (181.2 W/ft/2/) - internal forced fan air Aisle-facing surface *** 38/Degree/C (100/Degree/F) --------------------------------------------------------------------------------------------------------Altitude 60 m (197 ft/ below sea level to 4000m (13,125 ft) above GR sea level at 50/Degree/C --------------------------------------------------------------------------------------------------------Fire Resistant Materials Composite oxygen index of 28% or greater and rated UL GR standard 94V-1 or better of ignitability --------------------------------------------------------------------------------------------------------Unpackaged Shock 0 to *10 kg (0 to *22 lb): 100mm (3.9 in ) drop GR 10 to *25 kg (22 to *55.1 lb): 75 mm (3 in) drop 25 to *50 kg (55.1 to *110.2 lb): 50 mm (2 in) drop 50 kg or greater: 25 mm (1 in) drop --------------------------------------------------------------------------------------------------------Packaged Shock (Circuit packs and 0 to *10 kg (0 to *22 lb): 750mm GR other indiv. Components * 100 kg), (29.5 in ) drop non-palletized) 10 to *25 kg (22 to *55.1 lb): 600 mm (23.6 in) drop 25 to *50 kg (55.1 to *110.2 lb): 525 mm (20.7 in) drop

50 to *100 kg (110.2 to *220.5 lb): 450 mm (18.5 in) drop --------------------------------------------------------------------------------------------------------Packaged Shock (components **** 100kg * 450 kg (992 lb): 300 mm (11.8 in) drop GR (frames), or palletized) **** 450 kg (992 lb): 150 mm (5.9 in) drop --------------------------------------------------------------------------------------------------------Transportation Vibration Refer to GR-63-CORE, Sec. 4.4.4 for pattern of 5-500Hz, GR 0.5g-3.0g vibration --------------------------------------------------------------------------------------------------------Earthquake Zone 4 GR --------------------------------------------------------------------------------------------------------Office Vibration 0.1g from 5-100Hz GR --------------------------------------------------------------------------------------------------------Acoustic Noise *** 60 dBA GR --------------------------------------------------------------------------------------------------------Airborne Contaminants Refer to GR-63-CORE, Sec. 4.5 GR --------------------------------------------------------------------------------------------------------Illumination GR --------------------------------------------------------------------------------------------------------Board Level ESD 8Kv & 15Kv GR ---------------------------------------------------------------------------------------------------------

Table 14. Environmental Requirements * represents less than ** represents greater than *** represents less than or equal to **** represents greater than or equal to

Page 55 of 100

ELECTROMAGNETIC COMPATIBILITY The following table contains criteria covering Electromagnetic Compatibility (EMC) necessary for equipment to perform reliably and safely in a telephone network environment. DOMESTIC REQUIREMENTS:
FCC PART 15, SUBPART B, Class A (class B is an objective) -------------------------------------------------------------------------------FCC PART 68 * -------------------------------------------------------------------------------BELLCORE GR-1089-CORE; -------------------------------------------------------------------------------Section 2 Electrostatic Discharge, (ESD) -------------------------------------------------------------------------------Section 3 Electromagnetic Interference -------------------------------------------------------------------------------Section 4 Lightning and AC Power Fault -------------------------------------------------------------------------------Section 5 Steady State Power Induction -------------------------------------------------------------------------------Section 6 DC Potential Difference --------------------------------------------------------------------------------

EUROPEAN REQUIREMENTS: EN55022, ETS 300 386-1 sub-clause 7.2.3; Radiated Emissions, Class A(Required); Class B (Objective) EN50082-1; Generic Immunity Standard Part 1: Domestic, Commercial & Light
Industry -------------------------------------------------------------------------------IEC 1000-4-2, Level 4 Electrostatic Discharge (ESD) -------------------------------------------------------------------------------IEC 1000-4-3, Level 2 Radiated Immunity -------------------------------------------------------------------------------IEC 1000-4-4, Level 2 Fast Transient Immunity -------------------------------------------------------------------------------EN 61000-4-5, Level 2, ETS 300 386-1 sub-clause 6.4.2; Surge Immunity -------------------------------------------------------------------------------EN 61000-4-6, Level 2 Conducted Immunity -------------------------------------------------------------------------------EN 61000-4-11(1994): Voltage dips, short interruptions and voltage variations; Immunity tests. -------------------------------------------------------------------------------ITU-T Recommendation K.20 (1993): Resistibility of telecommunications switching equipment to over-voltages and over-currents. -------------------------------------------------------------------------------ETS 300 132-2 (1996): Equipment Engineering; Power supply interface at the input to telecommunications equipment Part 2: Operated by Direct Current (DC). -------------------------------------------------------------------------------ETS 300 386-1 & -2 Telecommunication network equipment EMC requirements * --------------------------------------------------------------------------------

ETS 300 126 ISDN EMC requirements * Australian Requirements: AS/NZS 3548 International Requirements: CISPR 22, Class A (class B is an objective)

ITU-T Recommendation K.27 (05/96); Protection against interference: Bonding configurations & earthing inside a telecommunications building. NOTE: * Indicates additional requirements for products connected directly to the public Telecommunication network Table 15. Electromagnetic Compatibility (EMC) Page 56 of 100

PRODUCT SAFETY The following table contains criteria covering electrical safety necessary for equipment to perform reliably and safely in a telephone network environment. Product Safety Domestic Requirements: CSA 22.2 NO. 950 - 95 UL 1950 THIRD EDITION BELLCORE GR-1089-CORE, Section 7, Electrical Safety Criteria European Requirements: EN 60950 with amendments A1, A2 & A3. International Requirements: IEC 950 with amendments A1, A2, & A3 Bonding and Grounding Domestic Requirements: BELLCORE GR-1089-CORE Section 8 Corrosion Section 9 Bonding and Grounding European and International Requirements: ETS 300 253 Table 16. Product Safety Requirements Page 57 of 100

PRODUCT CHANGE NOTICE The manufacturer is required to provide written notification to Alcatel USA prior to delivery of any device that has undergone a product change that has been implemented after the device has been qualified. Alcatel USA will determine the testing necessary to retain qualification status. A product change shall be considered any change affecting one or more of the following items: form, fit, function, performance, reliability, and/or safety of the device. DATA REQUIREMENTS Data shall be provided by the manufacturer to Alcatel USA to satisfy the requirements for qualification, lot acceptance and screening as required in the Quality Assurance Provisions Section of this document. DOCUMENTATION The manufacturer shall provide full documentation; including schematics, part lists, specifications control drawing, assembly, and manufacturing drawings upon request. A user's guide shall be included with each unit shipped. The user's guide shall include, as a minimum, the following information: product description, controls and indicators, diagnostics, and a section on trouble shooting and repair. Page 58 of 100

Quality Assurance Provisions GENERAL REQUIREMENTS Products supplied to this specification shall be in accordance with the provisions of 259-0000-000 for Class 1 components. Alcatel USA reserves the right to return shipment of any product found to be defective or noncompliant with the requirements specified herein. Qualification requirements Qualification to the requirements of this specification will be required before production units are received at Alcatel USA. Qualification failure Devices which fail any aspect of the qualification sequence are defined as failing the qualification evaluation. Appropriate failure analysis and corrective action are required before retest. When the corrective action requires a significant change in the device processing, assembly, or screening; the entire qualification sequence must be repeated. Qualification data Vendor supplied attributes data shall be provided to Alcatel USA, when requested, to satisfy the requirements of qualification. Use of vendor supplied data In the case where the manufacturer performs qualification testing comparable to the requirements herein (e.g. data from in-line process control), data from such testing may be submitted to satisfy portions of the overall qualification of the device, subject to Alcatel QRA approval. Page 59 of 100

Re-qualification Re-qualification shall be initiated by the Alcatel QRA group if at any time: a) A significant manufacturing and/or field use problem is identified or b) The manufacturer introduces significant changes in its design or processing and assembly practices. Periodic re-qualification In the absence of any manufacturing or field related problems, the IPU may be periodically requalified. Flammability requirements The flame retardancy of all devices shall be demonstrated through the use of UL and oxygen index testing. When UL and oxygen index tests are not physically feasible (small electronic components), IEC flammability tests ("glow-wire" and "needle-flame") may be used. Substitution of other tests or changes in any test limits shall require written approval of Alcatel USA. Page 60 of 100

QUALITY Quality Program The manufacturer shall maintain a quality assurance program meeting the requirements of ISO9000 or Telcordia GR-1252-CORE or similar quality system. Workmanship Unless otherwise specified, devices supplied under this specification must conform to the GR-78-CORE, Generic Requirements for the Physical Design and the DSC Workmanship Manuals 004-8003-100 and 004-8003-200. Quality Inspection Plans The manufacturer shall develop and implement inspection plans. These plans shall have detailed areas that require inspection, accept/reject criteria, and inspection form for tracking trends, and a program to certify the inspectors. These plans shall be provided to Alcatel USA upon request. Quality Reports Quality reports shall be documented and consist of all discrepancies during build up of assemblies and failures at the test level. These reports shall be explicit and depict the call outs by assembly, list the goals, and be tracked by the week or the month. Trends of test failures, and field returns shall be analyzed and made available to Alcatel USA when requested. Failure analysis data on field returns shall be maintained. This data should include as a minimum; replaced device, part number, manufacture, date code, and reference designator. On all field returns the units shall be tested first before updating/repaired to more accurately identify No Trouble Found (NTF) conditions. On hardware returned to a third party for repair, the supplier shall work with this third party to obtain the required failure analysis information. Trends of failures shall be analyzed and made available to Alcatel USA when requested. Quality Audits Alcatel USA will perform quality audits in accordance with GR-1252-CORE as required to ascertain that the quality system is adequate, maintained, and is providing this visibility to their management. Alcatel USA will provide a minimum of one weeks notice prior to the visitation. Page 61 of 100

RELIABILITY Required MTBF The reliability of the device shall be demonstrated by vendor supplied MTBF based on 100% duty cycle. This reliability shall be computed employing Bellcore Reliability Prediction Procedure (TR-332), 40 degree C environment, ground benign and procured part quality level. The MTBF of the entire IPU as well as each FRU shall be supplied to Alcatel USA. Design Reviews The manufacturer shall conduct design reviews to evaluate the design, parts, stress, producibility, testability, meeting of the specification, qualification testing and any other task required. Minutes of these design reviews shall be documented and made available to Alcatel USA upon request. Component Parts All component parts used in the device shall be documented in specifications, which are controlled and maintained. All parts shall be inspected at incoming quality control, and vendor quality audits performed periodically. All vendors shall be qualified, and an approved vendor list established and maintained with a vendor rating system. All component part shall meet a minimal Quality level 2 as defined in TR-TSY-000357. Critical parts shall be qualified to applicable requirements of MIL-STD-883 Method 5005. Aluminum Electrolytic Capacitors All aluminum electrolytic capacitors shall be protected with solvent proof end seals and have a minimum temperature rating of not less than 105 degrees C. Potentiometers All potentiometers, except voltage adjust, shall be factory sealed to prevent adjustments. Page 62 of 100

Derating Guidelines Components shall be derated in accordance with Alcatel's derating guidelines as established be Alcatel specification 004-8003-001. Burn-in All deliverable devices shall be burned-in for no less than 48 hours, failure free, at plus fifty plus zero/minus three (+50 +0/-3) degrees C per GR-63-CORE. EMI Devices supplied under this specification must meet the conducted and radiated requirements for a Class A device specified in subpart J, part 15 of FCC Rules and Regulations; CSA Standard C108.8-M1983 Revision 1/1/1988; and Canadian Radio Interference Regulation Amendment dated 9/15/88 CS-03. Page 63 of 100

ALCATEL ENGINEERING APPROVAL Alcatel Engineering approval, through purchasing, is required prior to production and for any changes made to the device. SAFETY AGENCY APPROVAL The device shall be UL and CSA safety recognized/certified for use in Information Technology Equipment (ITE) as defined by UL Standard 1950 3rd edition and CSA Standard CSA-22.2 No. 950-95, 3rd edition for North America. For European and other international applications the device shall be certified to EN60950/IEC 950 safety for use in ITE. WARRANTY The device shall have a minimum documented warranty period of one (1) year from the date the unit ships to Alcatel USA. The device shall also have a minimum specified support life of ten (10) years. Page 64 of 100

PACKAGING Each device shall be packaged in accordance with Alcatel packaging specification 003-6601-014. PACKAGING REQUIREMENTS The packaging of ESD sensitive devices shall be accomplished such that the devices are completely enclosed within electrostatic shielding material. No other type of material is to be allowed within this package unless it possesses anti-static properties. SHIELDING MATERIAL Electrostatic shielding material shall have a conductive layer with a surface resistivity of less than 10,000 Ohms/square, or a volume resistivity of less than 100 Ohm-cm. ANTI-STATIC MATERIAL Anti-static material used in packaging of ESD sensitive devices shall have a maximum classification of 50 volts as determined by EIA Standard IS-5-A, Appendix B, C, or D, as applicable. UNIT CONTAINER MARKING The unit container shall be marked with the following information as a minimum: a) The part number identified in the device specification b) The manufacturer's name or registered trademark. EXTERIOR SHIPPING CONTAINER MARKING The exterior container shall be marked with the following information as a minimum: a) Alcatel purchase order number b) The manufacturer's name or registered trademark c) Alcatel part number d) OEM serial number e) Manufacture Date Code f) CLEI Code Label (if applicable) Page 65 of 100

Notes HANDLING Devices delivered to Alcatel must be handled with precautions to avoid damage due to accumulation of static charge (ESD) or handling. RETURN OF DEFECTIVE DEVICES. Alcatel reserves the right to return defective devices to the manufacturer for replacement or refund. Page 66 of 100

[GRAPHIC APPEARS HERE] Figure 1. Mechanical Outline and Dimensions Page 67 of 100

[GRAPHIC APPEARS HERE] Figure 2. Front Panel [GRAPHIC APPEARS HERE] Figure 3. Rear Panel Page 68 of 100

[GRAPHIC APPEARS HERE] Figure 4. Recommended Reset Circuit END OF DOCUMENT Page 69 of 100

ATTACHMENT A2 Milestone Delivery Schedule: Page 70 of 100

ATTACHMENT A3 (1) Price, Kanban Parameters and Procedures (2) Item Part number Description Min Level/Max Level Leadtime Price Page 71 of 100

EXHIBIT B (Insert Here) Inbound Routing Guide - (Doc No. 003-3002-038) Page 72 of 100

EXHIBIT C (Insert Here) General Packaging Specification - (Doc No. 003-6601-014) Page 73 of 100

EXHIBIT D EQUIPMENT LOAN AGREEMENT This Equipment Loan Agreement ("Agreement") is made this _______ day of __________, _____ ("Effective Date") by and between Alcatel USA Sourcing L.P, with offices at 1000 Coit Road, Plano, Texas 75075, ("ALCATEL"), and ____________________________________________, with offices at _______________ ____________________________________("Supplier"). RECITALS: WHEREAS, Alcatel and Supplier have agreed that it is in their mutual interest that one or both of them have temporary use on a loan basis of the Equipment (the "Equipment"), including all related software (the "Software"), listed in Exhibit D1 for use at the other's site; and WHEREAS, Alcatel and Supplier have agreed that a standard set of terms and conditions should be established to govern such loan(s); NOW, THEREFORE, in consideration of the promises and the faithful performance of the mutual covenants herein contained, it is agreed: 1. The providing party ("Owner") agrees to provide to the other party ("Recipient") temporary use on a loan basis all of the equipment listed in Attachment D1 (the "Equipment"), including all related software (the "Software"), and related documentation ("Documentation") during the term of the Agreement unless otherwise mutually extended in writing by both parties, or terminated earlier by the Owner upon written notice to the Recipient (the "Loan Period"). Unless the Owner agrees otherwise in writing, the Recipient may use the Equipment and Software only for the permitted use ("Permitted Use") identified on Attachment D1. Additional equipment loaned shall be listed separately on an amendment, signed by authorized representatives of the parties, and attached hereto (the format of such amendment is attached hereto as Attachment D2). 2. The term of this Agreement shall be one (1) year. However, either party may terminate this Agreement upon thirty (30) days notice to the other party. 3. Unless otherwise agreed by the parties on Attachment D1: A. There will be no charge to the Recipient for the temporary loan and use of the Equipment and Software; B. The Owner shall bear all shipping costs; C. The Recipient shall pay the Owner any applicable installation fee; D. At the end of the Loan Period or upon termination or cancellation of this Agreement, the Owner shall deinstall and return the Equipment and Software at the Owner's expense. Any other necessary or additional terms and conditions, including system or Equipment configuration, shall mutually be agreed to prior to shipment. 4. The Recipient is hereby granted a revocable, nonexclusive, nontransferable, indivisible personal license to use the Software only on the Owner's Equipment during the Loan Period. The Recipient agrees that it shall: (a) not alter, merge, or adapt any portion of the Owner's Software in any way, including reverse engineering, disassembling, or decompiling the Owner's Software or the functioning of any Owner's Equipment, or permit others to do the same without the prior, written consent of the Owner; Page 74 of 100

(b) not reproduce, modify, copy (except for archival or backup purposes), or transmit to other persons or entities any aspect of the Owner's Documentation or the Owner's Software, or make available the Owner's Documentation or the Owner's Software to other persons or entities to reproduce, modify, copy, or transmit to other persons or entities any aspect of the Owner's Documentation or the Owner's Software; (c) limit access to the Owner's Documentation and the Owner's Software to its employees having a legitimate "need to know" in connection with their respective job responsibilities; (d) take no less than reasonable measures to maintain the confidentiality of the contents of the Owner's Documentation and the Owner's Software, and treat such Owner's Documentation and Owner's Software with no less than the same degree of care that the Recipient takes with its own confidential or proprietary information; (e) not export or re-export the Owner's Software from the country in which it was received from the Owner without the appropriate United States government license; and (f) return to the Owner all originals and copies of the Owner's Documentation and the Owner's Software at the end of the Loan Period or, at the Owner's sole discretion provided to the Recipient in writing, confirm in writing to the Owner that all originals and copies of the Owner's Documentation and the Owner's Software in the Recipient's possession or control have been destroyed. Software licensed under this Agreement is defined as machine readable computer programs, instruction sequences, procedures, data, logic, and/or rules that are provided by the Owner, exclusive of source code, in firmware, or any other form or media for use exclusively on the Owner's Equipment. 5. Title to the Equipment and Software will remain in the Owner, its suppliers or licensors. The Owner reserves all intellectual property rights in and to its Equipment and Software, including, but not limited to, rights in patents, trademarks, trade names, trade secrets, copyrights, industrial designs, and any modifications made to the Equipment or Software in order that they may be used for the Recipient's applications. 6. All technical information, documentation, Software and expertise supplied by the Owner to the Recipient under this Agreement shall, as between the parties hereto, be treated as confidential information of the Owner, and the Recipient shall not disclose such confidential information to any third party without the prior written consent of the Owner. 7. The Owner will bear all risk of loss or damage to the Equipment, except for damage arising from the negligence or misconduct of the Recipient, the Recipient's employees or agents. 8. THE EQUIPMENT AND SOFTWARE ARE PROVIDED ON AN "AS IS" BASIS, WITHOUT WARRANTY OF ANY KIND, EXPRESS OR IMPLIED, AND ANY WARRANTIES TERMS OR CONDITIONS THAT WOULD OTHERWISE BE IMPLIED INTO THIS AGREEMENT, INCLUDING BUT NOT LIMITED TO MERCHANTABILITY, QUALITY, AND FITNESS FOR PURPOSE, ARE HEREBY EXPRESSLY EXCLUDED. 9. EXCEPT FOR BREACH OF ITS OBLIGATIONS UNDER SECTIONS 4 OR 6 AND In no event will EITHER PARTY be liable for any indirect, special or consequential damages arising under this Agreement, including, but not limited to, lost business or profits. Page 75 of 100

10. Each party's obligations set forth above, including but not limited to its confidentiality and nondisclosure obligations with respect to the confidential information, shall survive the termination or expiration of the Agreement. 11. Neither party shall use the name of the other party in any news release, public announcement, advertisement, or other form of publicity without the prior, written consent of such other party. 12. The terms and conditions of this Agreement and performance hereunder shall be construed in accordance with the laws of the State of Texas without regard to its conflicts of laws principles. 13. This Agreement shall not be assignable by either party without the written consent of the other party, and any purported assignment, including full or partial assignment or delegation, not permitted hereunder shall be void. 14. This document constitutes the entire agreement between the parties with respect to the subject matter hereof, and supersedes all previous communications, representations, understandings, and agreements, either oral or written, between the parties or any official or representative thereof. This Agreement and any attachment hereto shall be modified only by an instrument in writing and signed by duly authorized representatives of the parties. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their duly authorized representatives.
Supplier Alcatel USA Sourcing, L.P. By: Alcatel USA GP, Inc General Partner By: ____________________________

By:

_______________________________

Title:_______________________________

Title: ____________________________

-----------------------------------------------------------------------------Date: _______________________________ Date: ____________________________ ------------------------------------------------------------------------------

Page 76 of 100

ATTACHMENT D1 LIST OF EQUIPMENT AND SOFTWARE Sequence Number __________ SEE ATTACHED Permitted Use: _________________________________________________________________
Charge for temporary loan and use of the Equipment and Software (Standard is "$0.00") Shipping costs will be paid by (Standard is "Owner") Installation fee will be paid by (Standard is "Recipient") Deinstallation by (Standard is "Owner") Deinstallation and return expenses will be paid by (Standard is "Owner") ___________

___________

___________

___________

___________

Page 77 of 100

ATTACHMENT D2 AMENDMENT TO EQUIPMENT LOAN AGREEMENT This Amendment to Equipment Loan Agreement ("Amendment") is made this ____ day of __________, 2000 ("Amendment Effective Date") by and between Alcatel USA Sourcing L.P., having a place of business at 1000 Coit Road, Plano, Texas 75075, ("ALCATEL"), and PINNACLE DATA SYSTEMS, with offices at 6600 PORT RD, GROVEPORT, OH ("Supplier"). W I T N E S S E T H: WHEREAS, Alcatel and Supplier entered into an Equipment Loan Agreement, dated _______________, ________ ("Agreement"), and Alcatel and Supplier wish to amend the Agreement as stated herein; NOW, THEREFORE, in consideration of the promises and the faithful performance of the mutual covenants herein contained, it is agreed: 1. Definitions. Capitalized terms used herein and not otherwise defined herein have the same meaning given those terms in the Agreement. 2. Additional or Modified Equipment List. The Agreement is hereby modified by the attached Exhibit(s) D, which is (are) in addition to or replace(s) one or more existing Exhibit(s) Ds. 3. Agreement Terms and Conditions. Except as provided for herein, all provisions of the Agreement shall remain unchanged and in full force and effect, and be binding on the parties hereto. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their duly authorized representatives.
Supplier Alcatel USA Sourcing, L.P. By: Alcatel USA GP, Inc General Partner By: ____________________________

By:

_______________________________

Title:_______________________________

Title: ____________________________

-----------------------------------------------------------------------------Date: _______________________________ Date: ____________________________ ------------------------------------------------------------------------------

Page 78 of 100

ATTACHMENT D3 LIST OF EQUIPMENT AND SOFTWARE This Attachment D3 (mark through the inapplicable statement): Is a new Attachment A Sequence Number__________ Replaces the existing Attachment A Sequence Number__________ SEE ATTACHED Permitted Use:_________________________________________________________________
Charge for temporary loan and use of the Equipment and Software (Standard is "$0.00") Shipping costs will be paid by (Standard is "Owner") Installation fee will be paid by (Standard is "Recipient") Deinstallation by (Standard is "Owner") Deinstallation and return (Standard is "Owner") expenses will be paid by __________

__________

__________

__________

__________

Page 79 of 100

Exhibit E NEW CENTURY WARRANTY 1. Definitions. Capitalized terms used herein and not otherwise defined herein have the same meaning given those terms in the Agreement. Capitalized terms used and defined herein, regardless of whether or not defined in the Agreement, shall have, solely for the purposes of this Exhibit, the meaning defined herein. A. "Product" or "Products" means the hardware and software components of any good, services, or work product provided to Alcatel under this Agreement, including, but not limited to, microcode, firmware, operating systems, application programs, files and databases, mechanical and electrical timing devices, application specific integrated circuits, mask works, and building construction, design, or renovation. "Product" or "Products" includes, but is not limited to, any electronic control devices for (i) elevators, (ii) security systems, (iii) electric services, (iv) telecommunication and telephone services, (v) plumbing and waste disposal services, (vi) chemical metering, supply and disposal systems, and (vii) heating and cooling systems. B. "Four Digit Year Format" shall mean the format which represents all four digits of the calendar year. The first two digits represent the century and the last two digits represent the year within the century (e.g., the century and year nineteen hundred and ninety-six is represented by "1996"). C. "Leap Year" shall mean the year during which an extra day is added in February (February 29th). Leap Year occurs in all years evenly divisible by 4, except those years representing a century end (e.g., 1800, 1900, 2000, 2100) which is not evenly divisible by 400. For example, 1996 is a Leap Year since it is divisible by 4. The year 1900 was not a Leap Year because it is not evenly divisible by 400, but the year 2000 is a Leap Year since it is evenly divisible by 400. D. "Year 2000 Compliant" shall mean all calendar year representations used within the Products which, when operated on (including, but not limited to, arithmetic, comparison and sorting operations) before, during and after the actual calendar year 2000 AD shall not produce subsequent operations and/or general output which yield results in variance with the normal course of operations of the Product or error conditions which are the direct result of the use of a calendar year representation. By way of example, but not of limitation, (i) dates are not represented by a two-digit year, with the century assumed or defaulting to "19", or (ii) a date which falls on a century end, whereby the last two digits of the year are "00", will not cause a divide or subtraction error in arithmetic calculations, and (iii) when sorting dates the year 1999 is less than 2000, and 2000 is less than 2001. E. "Calendar-Related" refers to date values based on the Gregorian calendar, and to all uses in any manner of those date values, including without limitation, manipulations, calculations, conversions, comparisons, and presentations. Page 80 of 100

2. Supplier warrants the following for a period of fifteen (15) years: A. That all of the Products provided hereunder are, and will continue to be, Year 2000 Compliant; and B. That all of the Products provided hereunder will process Calendar- Related data (including, but not limited to, arithmetic, manipulations, calculations, conversions, comparisons, presentations, and sorting) using a Four Digit Year Format unless otherwise instructed in writing by Alcatel; and C. That all of the Products provided hereunder will correctly process calendar dates for Leap Year; and D. That Calendar-Related data processed by the Products provided hereunder will be compatible between the Products which are not Year 2000 Compliant and the Products which are Year 2000 Compliant; and E. That in connection with provided Calendar-Related data to and accepting Calendar-Related data from other automated, computerized, and/or software systems and users via user interfaces, electronic interfaces, and data storage, the Products provided hereunder represent dates in Four Digit Year Format unless otherwise instructed in writing by Alcatel; and F. That Supplier has verified through testing that the Products provided hereunder are Year 2000 Compliant, and that the testing included, without limitation, each of the following specific dates and the transition to and from each such date: December 31, 1998; January 1, 1999; December 31, 1999; January 1, 2000; February 29, 2000; March 1, 2000; December 31, 2000; January 1, 2001; December 31, 2004; and January 1, 2005. G. That to the extent Supplier performs services which consist of designs for systems, processes, or Products ("Designs"), such Designs shall not be done in a manner which would expressly or impliedly require a Product created pursuant to such Designs to not be Year 2000 Compliant (e.g., a Design which allows for non-leap-year calculations but does not allow for leap-year calculations). All Designs shall specify and incorporate such portions of this Exhibit as necessary to require that all systems, processes, or Products used to implement such Designs shall be Year 2000 Compliant at the time of delivery. H. That Alcatel will be provided, at no additional charge to Alcatel during the warranty period, with additional Products, including, but not limited to, hardware and/or software patches, versions or revisions of the Products and documentation thereto which satisfy the warranties described above. 3. Supplier hereby agrees to provide Alcatel promptly upon request with a copy of its testing results which verify that the Products are Year 2000 Compliant. 4. Supplier hereby agrees that it has a continuing obligation, notwithstanding termination or cancellation of the Agreement, to notify Alcatel if Supplier knows or has reason to believe that any of the Products are not Year 2000 Compliant Page 81 of 100

EXHIBIT F SERIALIZATION Alcatel SERIALIZATION REQUIREMENTS for SUPPLIER SERIALIZATION: 1. All PCB's and Power Modules that may be `field replaceable' under warranty service require serial numbers, hereafter called "S/Ns". 2. Alcatel Purchasing will supply a block of serial numbers to Supplier. These may be used on ANY Alcatel purchase order and are NOT Purchase Order specific. The intent is to provide serial numbers to cover orders and emergency shipments.
3. Supplier will create bar-coded labels with the S/Ns supplied, to ensure each is `unique' when loaded to the Alcatel Serial Data Tracking System, hereafter called `SDT'.

4. The label must have `Alcatel' printed on it to distinguish from any other labels. 5. The location of the label: . Triplicate labels should be printed for each serial number. . First one for placement on the equipment, where it will not interfere with installation or operation. . Second label is to be placed on the front of the packaging, (or as required by Alcatel), NEXT TO the Alcatel part number label, where it can be read when placed on the stocking shelf. When `kits' or `paired' units are ordered, each unit shall have its
own unique part number and S/N. Both part numbers and S/Ns must appear on the outside packing, as noted above. Third label is to be placed on the Alcatel packing list NEXT TO the Alcatel part number and revision of the item shipping.

.

1. Size should be large enough to allow use of a bar-code reader without interfering with operation of equipment in anyway.
2. Tracking: All Alcatel S/Ns will be recorded ON THE Alcatel PACKING LIST by Supplier, as noted above, before shipping to final destination noted on the Purchase Order.

3. For orders shipped to Alcatel Plano facilities for stocking,the
S/Ns will only be entered in to SDT when equipment is pulled for shipment to end customers. 4. For orders `Drop Shipping' directly to customers, Supplier will fax a copy of the Packing List to Alcatel Planning with the following information: . S/N next to part number used on. Revision of the part number shipped. . Waybill # . Carrier Weight of Shipment . Number of Boxes and/or Skids . Shipping Charges when applicable. Note all shipments to be scheduled via Alcatel's specified requirements

Alcatel Planning will submit to Production Control to enter in to SDT and `Ship Confirm' the order.

Page 82 of 100

ATTACHMENT F1 Alcatel SERIALIZATION REQUIREMENTS FOR SUPPLIER Sample [GRAPHICS APPEARS HERE] Page 83 of 100

EXHIBIT G SERVICE AND SUPPORT PURPOSE This Exhibit establishes the terms and conditions under which Supplier will support Alcatel's service of individual customers purchasing the Product provided by the Agreement. 1.0 TRAINING 1.A Supplier will provide Product support training ("Skills Training") that is sufficient for qualified Alcatel technical personnel to be enabled to provision, configure, operate, install, test, maintain, commission and troubleshoot the Product and applications associated with the Agreement. Supplier shall provide such training within three (3) months of the Effective Date. 1.A.1 The "Skills Training" will be comprised of any Supplier provided visual aids or reference materials, on-thejob training, and information "chalkboard" sessions, as typically found in support skills training programs. A Skills Training plan will be mutually developed within thirty (30) days of the Effective Date and will be focused on developing Alcatel's capabilities pursuant to its support role as defined herein. Such a plan will reflect the essence of Supplier's Certification Plan, where applicable. 1.A.2 Supplier shall provide, within ten (10) days of Effective Date, documented prerequisites, if any, for such training. 1.A.3 The agreed upon Skills Training will be provided at Alcatel's facility in Dallas, Texas, or at a mutually agreed upon location, at no charge, and shall include but not be limited to each of the published Product courses Supplier makes available to its customers. Alcatel will be responsible for providing working Product. OR If requested by Alcatel, Supplier will provide an equivalent amount of training at its own facility and assume responsibility for training equipment and the availability of working Product: 1.B If requested by Alcatel, Supplier will furnish at no charge a qualified instructor within 12 months from the date of request to provide "Train-the-Trainer" instruction. 1.B.1 Subject to modification mutually agreed upon at the time of the request for Train-the-Trainer instruction, it is expected that such training generally comply with the guidelines in Attachment G3. 1.B.2 Supplier will develop and provide Alcatel at no charge a complete set of Product courseware, including, but not limited to: teaching aids, lab exercises, student guides, and instructor guides for Alcatel customer use. Alcatel may modify, reproduce, and distribute such training materials pursuant to its support role as defined herein. 1.B.3 Such courseware will be provided in a format and quality equivalent to that level exhibited by Alcatel's Curriculum Developer's or at a standard equivalent to that level specified by Bellcore. Page 84 of 100

1.B.4 Supplier will be responsible for incorporating in all courseware Alcatel's private label specifications. 1.B.5 Supplier will provide such courseware electronically in a format that is compatible with Interleaf (Unixbased) or Microsoft Work and PowerPoint for PC Windows application. 1.B.6 Courseware shall be available at least ninety (90) days prior to the first customer shipment. 1.B.7 Supplier will provide courseware and Train-the-Trainer instruction for the following courses: . Overview of Product . Operations of Product . Maintenance of Product . Engineering and Planning . Administration and Provisioning . Database 1.C Any additional training beyond the above stated entitlements requested by Alcatel will be provided by Supplier at the price noted in Attachment B. 2.0 DOCUMENTATION 2.1 Supplier will provide Alcatel at no charge a complete set of end-user Product documentation and ongoing updates required to support Alcatel's customer documentation requirements. 2.1.1 Such documentation will be provided at a standard in organization, format and material quality equivalent to that level exhibited by Supplier Publication Issue__, Month, Year, entitled _____________, or as per Alcatel's Technical Publications Documentation Standards Guide (460-001-000), Issue 2, February 1994, or at a standard equivalent to that level specified by Bellcore Technical Reference TR-TSY-000454, Issue 1, July 1988 and Bellcore Technical Advisory TA-OPT-000454, Issue 3, July 1992. (note: the appropriate reference is selected from above list). 2.1.2 Supplier will be responsible for incorporating all documentation modifications required by Alcatel's private label specifications. 2.1.3 Upon request, Supplier will provide documents in CD-ROM. 2.1.4 Upon request, Supplier will ship appropriate Product documentation intact with each shipment of Product itself. As applicable, such documentation shall include but not be limited to installation/user manuals, product user manuals, Operations & Maintenance guide, network diagnostics, softcopy (diskette or CD ROM, as requested) and hardcopy of all hardware components within the configuration (including pin-out diagrams). 2.2 If requested by Alcatel, Supplier will electronically provide, at no charge, end-user documentation and updates for the purpose of reproduction and distribution to Alcatel's Product customers. Such electronic documentation shall be in metafiles, viewable by Interleaf WorldView, or Acrobat viewing software, or supplied in Interleaf. Supplier grants Page 85 of 100

Alcatel license to use, modify and copy, and distribute the documentation provided for this purpose. 2.3 Supplier will provide Alcatel all information and related documentation regarding user impact of design changes (software/hardware) that affect the operation, maintenance or installation, ninety (90) days prior to the effective date of the change. 2.4 Supplier will provide software load description documents ("Release Notes") for every major software release, point release, and maintenance release to include; a list and description of the major features of the release, description of changes to system software and related hardware, man-machine interface information, list of customer deliverables, resolved and open problems, and installation procedures. 3.0 FVO SUPPORT 3.1 If requested by Alcatel, Supplier will support the first customer site installation of each: Product release; Supplier software release; or significant upgrade. This support will be provided at no charge, either remotely or on-site, at Alcatel's discretion. 4.0 REPAIR & RETURN 4.1 Any replacement, or repaired, Equipment shall be warranted for a period of one (1) year, or for the remainder of the unexpired period of the Warranty Period, whichever is longer. 4.2 Supplier will repair/replace and return all Equipment to Alcatel within an average of ten (10) calendar days and maximum of twenty (20) calendar days (from the time of shipment from Alcatel to time of receipt from Supplier), based on availability of material. 4.2.1 Supplier will make every reasonable attempt to repair the unit returned. Should circumstances prevent completion of repair within the stated cycle time, replacement Equipment is to be provided to ALCATEL. If replacement equipment is not available, then Supplier shall refund to Alcatel the price of such Equipment and all related taxes, shipping charges, insurance charges, and other amounts paid for such Equipment. 4.2.2 In the event replacement Equipment is provided, failure analysis data as set forth in Section 4.5 below on the returned Equipment is still required. 4.2.3 All repaired Equipment will be brought to the current field revision level if previously approved by Alcatel. 4.3 All transportation charges for, and risk of in-transit loss or damage to repaired or replacement Equipment shall be borne by the originating point of shipment. 4.4 Upon request, in Emergency situations, Supplier will provide Alcatel with emergency unit level replacement service, (advance shipment of replacement unit as soon as possible, but within 24 hours of request) will be provided at no charge to Alcatel 24 hours a day 7 days a week. 4.5 Failure analysis data on field returns needs to be maintained. This data should include (per serial number) as a minimum; replaced device, part number, manufacture, date code and reference designator. All field returns shall be tested before any updating or repair work is performed to more accurately identify No Trouble Found (NTF) conditions. On hardware returned to a third party or supplier's site for repair, the supplier shall work with Page 86 of 100

the third party or manufacturing to obtain the required failure analysis information within 15 working days after receipt of returned material. The data collection shall include field replaceable units, backplanes, top level assembly, field return hardware and functional defects on delivered products. This information will be reported on a minimum of a monthly basis. 4.6 Out of warranty repairs will be provided to Alcatel at mutually agreed upon prices unless otherwise indicated in Attachment G2. 4.7 Supplier shall ensure continuity of availability from third parties of all parts, components and software contained within the Products which are not manufactured or produced by Supplier. Such obligation shall continue until the expiration of ten (10) years from the date of last delivery of the Product to Alcatel. Notwithstanding the foregoing, if Alcatel has a contractual obligation to an End-user to provide continuity of availability for a longer period, Alcatel shall notify Supplier of such obligation and Supplier shall endeavor in good faith to ensure continuity of availability for such longer period. In the event of non-availability of such parts, components or software, Supplier shall use all reasonable efforts to identify and incorporate alternatives in a manner which minimizes the financial and practical impact on Alcatel or End-User(s). 4.8 Supplier shall make available spare parts, replacement parts and/or repair services for the Products for a period of ten (10) years from the date of the last delivery of the Product to Alcatel under the terms of this Agreement and at prices and delivery schedules which are current at the time of delivery of such parts. Notwithstanding the foregoing, if Alcatel has a contractual obligation to an End-user to make available spare parts, replacement parts and/or repair services for the Products for a longer period, Alcatel shall notify Supplier of such obligation and Supplier shall make available spare parts, replacement parts and/or repair services for the Products for such longer period. 5.0 TECHNICAL SUPPORT 5.1 On-going technical support via telephone shall be provided to Alcatel, at no charge from Supplier 24 hours a day, 7 days a week for the Term of the Agreement or for the remainder of the End-user's Warranty period, whichever is longer. Such support will be rendered from Supplier's location at Groveport ,Ohio . This support will be rendered in accordance with a mutually developed support operation procedure that documents critical support elements such as but not inclusively: call reporting and closure, remote access control, performance measurements and reporting, escalation, criticality classification and response, software patch management, call-out procedures, and engineering complaint responses. Such operating procedures will be documented within ninety (90) days of Effective Date. 5.1.1 Such support will include software fixes to Alcatel CTAC reported problems related to Supplier provided software within a range to include the current market release to the two prior market releases. 5.2 In emergency service affecting situations, Supplier will make available to Alcatel 24 hour on-site technical assistance. Such assistance will be dispatched within 4 hours of request. 5.2.1 Such assistance will be provided at no charge, if both parties agree that reasonable remote efforts have been exhausted. Should the problem not be due to the Product's performance, Alcatel will reimburse Supplier for actual expenses incurred. Page 87 of 100

5.3 Supplier will provide Alcatel's CTAC organization with access to it's Electronic Bulletin Board to an extent equivalent to what is provided to Supplier's own Technical Support Group. 5.4 Documented problems referred to Supplier by CTAC that were generated during the Term of this Agreement and remain unresolved upon termination of the Agreement will be pursued to resolution by Supplier at no charge to Alcatel. 5.5 Supplier shall refer all Alcatel customer service inquiries directly to Alcatel's CTAC organization at (972) 519-4141, or such other number(s) provided by Alcatel, in support of the intended relationship as depicted in Attachment A, Alcatel/Supplier Product Support Flow. 6.0 TECHNICAL SUPPORT LEVELS 6.1 Alcatel shall provide its customer the initial point of contact for technical support through the Customer Technical Assistance Center (CTAC). Access to such support shall be 24 hours a day 7 days a week and shall be provided in accordance with CTAC Escalation Procedure (Document #003-9000-403). In this regard Alcatel will provide the initial 4 levels of support, defined as: Level 0 . . . CTAC Screener . . . Responsible for identifying the customer support needs and subsequently assigning the task as appropriate. Enters initial call report information and performs all logging responsibilities. Level 1 . . . CTAC Engineer . . . Frontline technical support person whose expertise is such that operational and known problems or issues can be resolved. Troubleshooting is accomplished via use of existing "decision trees" and research of call report database. Level 2 . . . Product Support Specialist . . .A technical employee expected to have a comprehensive Product, technology and network understanding as a foundation to resolve difficult and/or complex problems. Expected to be able to address multi-layered application issues and to articulate such issues at a level that ensures effective referral to Development Engineers as required. Level 3 . . . System Support Engineer . . . This resource will assist in troubleshooting, diagnostics, problem determination and resolution. As required, will provide problem isolation sufficient for referral to Level 4 support or OEM technical support organization. Expertise is such that application fixes (patches) are issued at this level. In this regard Supplier will provide Level 4 and Level 5 support, defined as: Level 4 . . . Technical Support Engineer . . . The first point of contact for Alcatel's technical support staff. Since Alcatel will have, at this point in the escalation process, already applied the resources of its sustaining development engineering group, it is expected that Supplier's Technical Support group will expeditiously refer the reported problem to it's R&D engineers. Utilization of Supplier's technical center is intended to serve primarily as a point of entry (logging, classification, documentation) for the reported problem. Level 5 . . . R&D Engineer . . . This resource will primarily focus on assistance with Supplier system software/hardware, networks and interoperability issues. Sustaining engineering expertise and responsibility allows this 4th level support to create patches (fixes) for system software, generate ECOs (hardware) and initiate Product change requests related to problem resolution to OEM providers. Page 88 of 100

7.0 PROBLEM TRACKING SYSTEM 7.1 The "Parties" agree to negotiate in good faith an electronic interface between Alcatel's Clear Support component of CTAC'S Integrated Service and Technical Assistance Tool (iSTAT), and Supplier's service call management system for documentation of troubleshooting efforts. Page 89 of 100

ATTACHMENT G1 ALCATEL PRODUCT SUPPORT FLOW [ILLUSTRATION OF FLOW CHART] Page 90 of 100

ATTACHMENT G2 SUPPORT SERVICES This Customer Service Price list may be changed in accordance with Section ___ (Pricing) of the Agreement. Training (1.C) . Internal Skills Training . Customer Training . Product Course Fee . Hourly Assistance Rate Out of Warranty Equipment Repair (4.6)
Part Number Description Price --------------------------------------------------------------------------------(Provided by Supplier) 259-5000-049 259-5000-056 259-5000-064 259-5000-096 259-5000-097 INTELLIGENT PROCESSOR UNIT (IPU) NEBS/CO IPU, SGL DK (1DU), SPARC2, 64 MB MEM 24" RACK MTN IPU, GBYTE DISKS (2DU), SPARC2, 64 MB MEM 24" RACK MTN SPARC-2, 64 MB SIMM, 1/2 HIGH 3.5" 1GB SCSI, 1/2 HIGH 1GB QIC TAPE DRIVE, HIS SBUS, SPC CARD IPU, SPARC-2, 64MB SIMM, 32MB P EXPANSION, 32MB S ECPANSION, 1/2HIGH 3.5" 1GB SCSI, 1/2 HIGH 1GB QIC TAPE DRIVE, SBUS, ENET IPU, SPARC-2, 64MB SIMM, 32MB P EXPANSION, 32MB S EXPANSION, 1/2 HIGH 3.5" 1GB SCSI, SBUS ENET SPARC-20, 256 MB SIMM, (2) 3.5" 1GB SCSI, 1GB QIC TAPE DRIVE, (2) SCSI/ETHERNET PLATFORM MANAGER SPARC-20, 512MB SIMM, (1) 3.5" 1GB SCSI, (2) SCSI/ ETHERNET PLATFORM MANAGER IPU, RAM DK UNIT, 256MB, 24" RACK MOUNT IPU, SAPRC-2 WITH 64MB SIMM, 1/2 HIGH 3.5" 1GB SCSI , 1/2 HIGH 1GB QIC TAPE DRIVE IN THE INSTANCE THAT PDSI CANNOT REPAIR A UNIT THERE WILL BE A FEE OF:(PER SYSTEM) IN THE INSTANCE THAT ALCATEL REQUEST FOR PDSI TO LOAD IN SOFTWARE THERE WILL BE A FEE OF: (PER SYSTEM) $650.00 $650.00 $650.00 $650.00

$650.00

259-5000-098

$650.00

259-5000-109

$650.00 $650.00 $650.00 $650.00

259-5000-110 259-5000-111 259-5005-007

UNREPAIRABLE

$300.00

SOFTWARE

$100.00

Page 91 of 100

ATTACHMENT G3 TRAIN-THE-TRAINER PROGRAM OUTLINE The instructor trainee will take part in a program requiring active participation in course modules as a student, instructor trainee, co-instructor, and eventually as a certified instructor. This requires the candidate to first attend the class(es) as a student to the full extent of participating in lab work and all standard testing. The candidate next attends the class as an `instructor trainee", concentrating on the syllabus and the actual presentation of the material. Considerable "off-line" time is spent one-on-one with the instructor to become fully acquainted with the courseware, learn optional training exercises, practice the delivery of material, and have expanded hands-on time with the equipment. Subsequently the candidate will participate in a class by sharing the platform and grading duties of the instructor. Time outside of actual class time is utilized as necessary for the candidate to increase personal familiarity and comfort with the documentation and equipment. Finally, the candidate takes responsibility for conducting an entire class with a certified instructor who is in the room for evaluative purposes and assistance if required. Upon successful completion of the above program the newly certified instructor is provided with a single copy of all material used in the instruction. Page 92 of 100

EXHIBIT H PCN DISCONTINUANCE AND OBSOLESCENCE PROCEDURE Attach Alcatel procedure and specification 007-0000-115 Rev B. Here Page 93 of 100

EXHIBIT I ESCROW AGREEMENT THIS AGREEMENT, dated as of this _____ day of __________, ________ is entered into among _________________ ("Licensor"), Data Securities International, Inc. (DSI) with offices located at P.O. Box 185325 Ft. Worth Texas 76181, and ALCATEL USA Sourcing L.P. ("Licensee"). This Agreement is entered into pursuant to pertinent provisions of the ___________ Agreement, signed on the ____ day of _____________, ______ between Licensor and Licensee ("XXX Agreement"). In consideration of the mutual covenants set forth in this Agreement, Licensor, Licensee, and DSI Technology Escrow Services agree as follows: 1. Technical Information. DSI Technology Escrow Services, as escrow agent, agrees to accept from Licensor, for storage purposes only, the source code and other items described on the attached Exhibit A for the computer programs owned by Licensor, and the source code for updates to such computer programs, if any, and other items described on the attached Exhibit A, which Licensor may deliver from time to time (collectively, "Technical Information"). For each such delivery DSI will issue receipts to Licensor. Licensor will furnish to DSI a list naming or describing all computer programs for which Technical Information are deposited into escrow. This list will be supplemented and updated by Licensor with each future deposit or withdrawal of Technical Information. For each deposit, DSI will provide to Licensee a copy of such updated list. 2. Safekeeping of Technical Information. DSI will hold the Technical Information in a safe deposit box or similar fully protected location and will provide Licensor with notice of the location of the depository for the Technical Information. DSI will release or provide access to the Technical Information to Licensee or Licensor only upon the specific terms and conditions set forth in this Agreement. 3. Release of Technical Information. 3.1 Upon receipt of written instructions signed by both parties, DSI, Inc. shall release the Technical Information in accordance with such written instructions. 3.2 Release to Licensee. DSI shall release the Technical Information to Licensee pursuant to Section ____ of the XXX Agreement, or if Licensee would be entitled to terminate the XXX Agreement, or if Licensor is in breach of any of the provisions of the XXX Agreement which survive termination or expiration of the XXX Agreement as identified in Section ____ of the XXX Agreement. 3.3 Release to Licensee Procedure. Upon the occurrence of any of the circumstances set forth in Section 3.2, the following procedures shall be followed: (a) Licensee shall provide written notice ("Demand Notice") to both DSI and Licensor in the form provided in attached Exhibit B, along with a copy of Licensee's notice to Licensor of the failure to deliver as required by Section 3.2 of this Agreement. (b) Upon receipt of a Demand Notice, Licensor has five (5) business days to make a written objection ("Objection Notice") to Licensee and DSI that states it is Licensor's good faith belief that all the circumstances stated in Section 3.2 have not occurred or have been timely cured. (c) If DSI receives an Objection Notice from Licensor, then the Technical Information will not be released until DSI receives either (i) a written agreement signed by Licensor and Licensee authorizing release or (ii) a court order from a court of competent jurisdiction requiring release. The release shall be in accordance with the written agreement, the arbitrator's decision or the court order. Page 94 of 100

(d) If (i) DSI does not receive an Objection Notice or (ii) DSI receives either the written agreement or the court order specified in Section 3.3(C) of this Agreement, then DSI will release the Technical Information to Licensee. (e) Upon release of the Technical Information, this Agreement will terminate except as provided in Section 13 of this Agreement. 3.4 Release to Licensor. DSI will release the Technical Information to Licensor only if this Agreement has been terminated pursuant to Section 10 of this Agreement 3.5 Release to Licensor Procedure. Upon the occurrence of the circumstances set forth in Section 3.4, the following procedures shall be followed: (a) In the event termination pursuant to Section 10 of this Agreement occurs due to Licensor and Licensee agreeing in writing to terminate this Agreement, Licensor shall notify DSI in writing thereof and attach a copy of Licensor's and Licensee's written agreement, whereupon DSI shall release the Technical Information to Licensor; or (b) In the event termination pursuant to Section 10 of this Agreement occurs pursuant to the terms of the XXX Agreement and this termination is not due to Licensor's inability to perform or willful failure to perform under the XXX Agreement; Licensor shall notify DSI in writing thereof and attach a copy of Licensee's written acknowledgment thereof, whereupon DSI shall release the Technical Information to Licensor. If Licensee fails or refuses to provide such written acknowledgement, then the parties shall utilize the procedure outlined in Sections 3.3(a) through 3.3(d) with the terms "Licensee" and "Licensor" reversed; and (c) Upon release of the Technical Information, this Agreement will terminate except as provided in Section 13 of this Agreement. 4. Possession, Use and Protection of the Information. If the Technical Information are released to Licensee pursuant to the terms of this Agreement, then Licensee may use the Technical Information only as set forth in Section ____ of the XXX Agreement. 5. Fees. Licensee shall pay to DSI, in advance, DSI's fees at the standard rate prescribed from time to time by DSI for performance of services under this Agreement. 6. No Duty to Inquire into Truth, Authenticity, or Authority; Right to Require Additional Documents. DSI shall not be required to inquire into the truth of any statements or representations contained in any notices, certificates, or other documents required or otherwise provided under this Agreement, and shall be entitled to assume that the signatures on such documents are genuine, that the persons signing on behalf of any party thereto are duly authorized to execute the same, and that all actions necessary to render any such documents binding on the party purportedly executing the same have been duly undertaken. Without in any way limiting the foregoing, DSI may in its discretion require from Licensor or Licensee additional documents which it deems to be necessary or desirable in the course of performing its obligations under this Agreement. 7. No Liability. DSI will incur no liability with respect to any action reasonably taken by DSI in accordance with the terms of this Agreement in the absence of DSI's own willful misconduct or gross negligence. 8. Notices. Notices under this Agreement shall be in writing, and shall be delivered by registered or certified mail, return receipt requested, to the intended recipient at the address set forth adjacent to such party's signature hereto, or to such other address as such recipient shall have designated by notice to the sending party. Notices shall be deemed to have been given and received when signed for on the return receipt. 9. Modification. Except as provided in Section 1 with respect to modification of Exhibit A, this Agreement or any provision of this Agreement may not be modified, released, Page 95 of 100

discharged, changed, amended, or waived except in writing signed by DSI, Licensor, and Licensee. 10. Termination. Unless terminated earlier pursuant to Section 3.3(e) of this Agreement, this Agreement shall only terminate if either: (a) Licensor and Licensee in writing agree to terminate this Agreement; or (b) XXX Agreement is terminated pursuant to the terms of the XXX Agreement under circumstances which do not provide for the survival of Section ____ of the XXX Agreement; or (c) If for any reason DSI, shall refuse or fail to act as escrow agent, ALCATEL USA shall designate a new escrow agent reasonably satisfactory to Licensor and DSI shall, upon receipt of written request from ALCATEL USA, deliver the Technical Information to such new escrow agent. 11. Governing law. This Agreement shall be governed by the local laws of the State of Texas, without reference to its principles of conflicts of law. 12. Restrictions. DSI understands and acknowledges that (a) the Technical Information are the product of an extraordinary expenditure of time and money by Licensor and that the Technical Information include Licensor's trade secrets and confidential information, (b) any dissemination, disclosure, use, or transfer of the Technical Information in violation of this Agreement could cause extraordinary and irreparable harm to Licensor, and /C/ DSI has no title to or ownership of the Technical Information supplied by Licensor and that the Technical Information at all times will remain the sole property of Licensor. DSI is prohibited from duplicating, copying, disclosing, disseminating, distributing, selling, subleasing, sublicensing, renting, or otherwise in any manner, directly or indirectly, in whole or in part, assigning, transferring, or otherwise disposing of the Technical Information for any purpose or in any manner except as permitted under this Agreement. 13. Survival. All obligations of DSI under Section 12 will survive any termination or expiration of this Agreement. 14. Successors and Assigns. This Agreement will not be assigned or in any way transferred, by operation of law or otherwise, by DSI without the prior written consent of Licensor. This Agreement will inure to the benefit of the successors and assigns of Licensor and Licensee. 15. Entire Agreement. This Agreement, including Exhibits A and B, constitutes the sole and entire agreement between the parties to this Agreement with respect to its subject matter. No representations, undertakings, or agreements have been made or relied upon in the making of this Agreement other than those set forth in this Agreement. Page 96 of 100

16. Other Provisions. The headings contained in this Agreement are for convenience of reference only and will not affect the interpretation or meaning of this Agreement. If any provision of this Agreement is declared void or unenforceable by any court, the validity of any other provisions and of the entire Agreement will not be affected by the declaration. The waiver of any breach or default of this Agreement at any time or times will not constitute the waiver of any subsequent breach or default. The parties have executed this Agreement as of the date first written above.
DSI Technology Services DSI By:______________________________ Print Name:______________________ Title:___________________________ Date:____________________________

Licensor: By:______________________________ Print Name:______________________ Title:___________________________ Date:____________________________ Licensee: -------By:______________________________ Print Name:______________________ Title:___________________________ Alcatel USA Sourcing.L.P. By: Alcatel USA GP,Inc., General Partner

Date:____________________________ Page 97 of 100

ATTACHMENT I1 TO THE ESCROW AGREEMENT The Technical Information that is commonly available in a digital format and is to be placed into escrow, and updated periodically, consists of the following: . Source Code modules and listings . Firmware Source Code . Object Code Programs . Programming Tools used to design, develop, and test . Data Files . Software Releases . Software Patches . Drawings and Artwork Copies . Drawings, wiring list, schematics, all art work and assembly instructions . Mechanical drawings or sketches for all assemblies . Source code of all firmware and proms and/or on board memory functions Page 98 of 100

ATTACHMENT I2 TO THE ESCROW AGREEMENT DEMAND NOTICE STATE OF ____________________ COUNTY OF ____________________ The undersigned, being duly sworn upon an oath, does state the following: 1. The undersigned is the Licensee under the_______________________________ Agreement ("XXX Agreement") between_____________________, ("Licensor") and ALCATEL USA Sourcing L.P. ("Licensee"), signed on__________________, ________. 2. The undersigned is also the Licensee under an Escrow Agreement ("Escrow Agreement"), dated______________________,___________, between DSI, Licensor, and Licensee. 3. Licensee is entitled to possession of the Technical Information pursuant to the restrictions of Section ____ in the XXX Agreement. 4. The Escrow Agreement has not been terminated pursuant to Section 10 of the Escrow Agreement. 5. This Demand Notice is executed by a duly authorized officer or representative of Licensee. DATED this _____ day of____________________,________ Name of Licensee:______________________________________ By:____________________________________________________ Print Name:____________________________________________ Title:_________________________________________________ Subscribed and sworn before me, a Notary Public, this_______________day of _______________,________. NOTARY PUBLIC FOR: My Commission Expires:________________________ Page 99 of 100

EXHIBIT J ALCATEL AUTHORIZED SUBCONTRACTORS Page 100 of 100

EXHIBIT 10(m) HPCS DIVISIONAL SERVICE AGREEMENT HP/PINNACLE DATA SYSTEMS, INC. AGREEMENT # 01-17-6261

TABLE OF CONTENTS
1.0 2.0 3.0 4.0 5.0 6.0 7.0 8.0 9.0 10.0 11.0 12.0 13.0 14.0 15.0 16.0 17.0 18.0 19.0 20.0 21.0 22.0 23.0 24.0 25.0 26.0 27.0 28.0 29.0 30.0 31.0 32.0 33.0 34.0 35.0 36.0 37.0 38.0 39.0 40.0 41.0 42.0 43.0 44.0 45.0 Purpose Scope of Work Definitions Agreement Terms of Agreement and Terminations Time DELETED Cost Schedule Invoicing and Payment Right to Audit Record Keeping Changes Warranties Insurance Intellectual Property Indemnification Continuing Obligations Documentation Supervision Back-up Personnel Subcontractors HP Property HP Products Limitation of Liability Tooling and Equipment Facility and Equipment Performance Program Process, Reporting. Metrics and Measures Governing Law and Compliance Assignment Safety and the Environment Background and Drug Screening Relationship of the Parties Taxes and Benefits General Responsibilities Materials Management Design, Material and Process Change Pricing and Cost Notices Business Continuity Plan Force Majeure No Waiver Severability Modification and Amendment Exhibits and Appendices attached

Exhibit Exhibit Exhibit Exhibit Exhibit Exhibit Exhibit Exhibit Exhibit

A B C D E F G H I

Expenditure Proposal Contractor Security Requirements Equipment Loan Agreement Performance Evaluation (TQRDCE) Packaging Standards HP Holiday Schedule Pinnacle Holiday Schedule Pinnacle Business Continuity Plan Electrostatic Discharge Control Standard

2

Program Agreement Hp Commercial Support (Hpcs) Contract Number 01-17-6261 This Divisional Service Agreement is entered into by and between Hewlett-Packard Company, a Delaware corporation, its divisions, sub-divisions, affiliates and subsidiaries (hereinafter referred to as "HP"), and Pinnacle Data Systems, Inc., an Ohio corporation (hereinafter referred to as "Contractor"). 1.0 PURPOSE 1.1. Purpose: This Agreement specifies the terms and conditions under which Contractor will provide to HP, Program Services as set forth in each Appendix attached here to, and develop written processes therefore with respect to products as designated by HP. The terms and conditions herein constitute the Divisional Service Agreement for all Program Services provided by Contractor to HP. 1.2. Relationship between the Divisional Agreement and Appendices: This Agreement is the Divisional Service Agreement ("DSA") that sets forth the terms and conditions of the overall agreement between HP and Contractor. Contractor will provide PROGRAM Services for HP pursuant to the terms set forth in the attached Appendices. This Agreement is incorporated into each Appendix so that this Agreement and each Appendix form a separate and divisible contract for the applicable Program. 1.3. Unless otherwise agreed upon in writing by the parties in an Appendix that specifically cites the Articles in this Agreement that will be modified or changed, to the extent there are any inconsistencies between the terms of an Appendix and the terms of this Agreement, the terms specified in this Agreement will control and take precedence. If an Appendix is terminated, this Agreement and/or any other Appendices will not be affected. 1.4 The provisions of this Agreement and the attached Appendices take precedence over HP's or Contractor's additional or different terms and conditions, to which notice of objection is hereby given. No change or modification of any of the terms or conditions herein shall be valid or binding on either party unless in writing and signed by an authorized representative of each party. 1.5 In the event of any conflict between the provisions of this Agreement and any release or Appendix, the order of precedence is as follows: a) This Agreement; b) The Appendix to this Agreement; c) Any instructions on the front of HP's written or electronic release; d) The preprinted provisions on either parties written release. In consideration of the above and the mutual promises contained herein, HP and Contractor agree as follows: 2.0 SCOPE OF WORK 2.1 This Agreement covers Program Services and processes for HP Products to the specifications supplied to Contractor by HP. The processes/work may take place on and within HP property or in a CONTRACTOR leased or owned facility. Program Services covered under this Agreement shall include, but not be limited, to the following: 1. Warehousing of Hewlett-Packard goods 2. Supply Chain Management 3

3. Kitting and Parts Assembly 4. Inventory Management 5. Packaging 6. Planning and Procurement 7. Testing 2.2 It is clearly understood and acknowledged by Contractor that the list stated in 2.1 is not meant to be all inclusive; instead, it is intended to serve as a general outline, supplemented by the Appendices, attached hereto and incorporated herein. 2.3 Changes in the pricing or processes associated with Contractor's process location shall be reviewed and agreed to by both parties in writing prior to their implementation. While in an HP owned or leased facility, or while in a Contractor owned or leased facility and using HP owned or leased equipment, systems, or processes, Contractor shall notify the appropriate HP division and the HP Account Manager in writing sixty (60) days prior to its intent to provide services using said HP Facility or HP owned or leased equipment, systems or processes to other HP entities or companies other than HP. HP will promptly review any such notice, and Contractor shall not provide any such services unless and until HP approves Contractor's request in writing. 2.4 In the event that HP may, from time to time, make changes or modifications to any scope of work or Appendix, Contractor hereby agrees to make any and all changes, furnish the materials and perform all such work that HP may require, without nullifying this Agreement, at a reasonable addition to, or reduction from, the Agreement Cost stated herein. Contractor shall adhere strictly to the performance metrics and processes unless both parties mutually agree upon a change. 3.0 DEFINITIONS 3.1 "BFT(s)" means a Business Fundamental Table (metrics) used as measurements of how CONTRACTOR is performing in defined areas per each Appendix. 3.2 "Capital Expenditure" means an investment in a tangible asset in excess of five thousand dollars ($5,000.00). 3.3 "Contractor Developments" means any Intellectual Property Rights developed solely by Contractor under this Agreement and not "Paid for by HP". 3.4 "Cost(s)" means the actual cost(s), including any related rebates, discounts or leveraged volumes, paid or incurred by CONTRACTOR prior to any mark up or margin by CONTRACTOR. 3.5 "Days" means calendar days (unless otherwise stated). 3.6 "Epidemic Failure" means any failure that is over twice the average monthly rate, based on the previous 3 month average, of Dead On Arrival and Time To Failure rates for that item. 3.7 "Equipment" means manufacturing tooling fixtures and the like used to perform work under this Agreement, including but not limited to: equipment, test equipment and fixtures, inspection equipment and fixtures, storage equipment and fixtures used to repair, move, and store inventory. 3.8 "Contractor Inventory" means units, sub-assemblies, and parts purchased by Contractor that are physically located within any location that Contractor uses to perform the work under this Agreement and will be systematically tracked by Contractor as Contractor owned inventory. 3.9 "HP" means Hewlett-Packard Company, its divisions, subsidiaries, worldwide affiliates and any controlled entity. 4

3.10 "HP Property" means real property, equipment, materials and information, including Tools that are provided to Contractor by HP or on HP's behalf, or separately paid for by HP for use by Contractor in connection with its performance of Program Services. 3.11 "HP Processes" means processes developed by HP and made available to HP suppliers and service contractors as part of the Program. Such processes include, but are not limited to, production processes, inventory reconciliation processes, data management processes, information access processes, financial reporting processes and metrics reporting. These processes are at all times owned by HP and any changes to such processes, must be approved by HP. 3.12 "HP Inventory" means units, sub-assemblies, and parts either purchased by Contractor and paid for by HP or provided to Contractor by HP that are physically located within any location that Contractor uses to perform the work under this Agreement and will be systematically tracked by Contractor as HP owned inventory. 3.13 "HP Products" means any part, sub-assembly, or unit that HP either manufactures, markets, or distributes. 3.14 "HP or HP Authorized vendor" means (i) HP (ii) third parties selected, approved and qualified by HP in writing; and (iii) with HP's prior written approval, third parties selected by Contractor. 3.15 "Intellectual Property Rights" means all rights in and to inventions (which are potentially patentable subject matter within the meaning of 35 U.S.C. 101), patents, patent applications, utility models, copyrights, author's rights, moral rights, trade secrets, mask works, names and marks used in trade, and all rights of a similar nature. 3.16 "Itemized Cost Statement" means a non-audited statement of itemized costs incurred by Contractor during a billing period. 3.17 "Labor Fees" means the mutually agreed dollar amount that CONTRACTOR will charge HP for each labor hour worked on HP products. 3.18 "Part" means a component of a unit or sub-assembly. 3.19 "Pre-Existing Intellectual Property" means any trade secret, invention, work of authorship, mask work, process design or protectable design that has already been conceived or developed by anyone other than HP before Contractor renders any Program Services. 3.20 "Pre-Existing Intellectual Property Rights" means Intellectual Property Rights of a party in the Preexisting Intellectual Property defined in 3.20. 3.21 "Program" means the Program Services provided by Contractor pursuant to the terms and conditions of an Appendix. 3.22 "Standard Unit Cost" means the inventory cost for HP Product as set forth in HP's accounting system. 3.23 "Sub-Assembly" means a module or replaceable part of a unit. 3.24 "Tools" means any tooling, dies, jigs or fixtures or other property either built or acquired by Contractor in connection with its performance of Program Services. 3.25 "Unit" means a shipping level part number. 5

4.0 AGREEMENT. 4.1 This Divisional Services Agreement (hereinafter "Agreement") outlines the arrangement between Contractor and HP. HP desires to engage Contractor as a service provider to perform certain assembly, repair and refurbishment services, warehouse management services and special projects to HP and all designated distribution centers. 4.2 Each provision of the Agreement and its Appendices shall be valid and enforceable to the fullest extent permitted by law. If any provision of this Agreement or the application of such provision, to any extent, is found to be invalid or unenforceable, the remainder of this Agreement or the application of such provisions shall remain in full force and effect without impairment or invalidation. 4.3 This Agreement shall replace and supersede any and all other previous Agreements, expressed and/or implied to the extent that they are inconsistent with this Agreement. All such aforementioned documents and instruments including all Appendices and Exhibits attached shall form the Agreement. 4.4 Contractor certifies and agrees that it is fully familiar with all of the terms, conditions and obligations of all the work that is required and specified in this Agreement, the location of the job site, and the conditions under which the work is to be performed, and that Contractor enters into this Agreement based upon such knowledge and previous experience with HP. 4.5 Independent Contractor Status. The express intention of the parties is that Contractor is an independent contractor and not an employee, agent, joint venturer or partner of HP. Nothing in this Agreement shall be interpreted or construed as creating or establishing the relationship of employee and employer between Contractor or any of its employees, agents and/or subcontractors and HP or of HP's subsidiaries, divisions or departments. Both parties acknowledge Contractor is not an employee for state or federal tax purposes. Contractor declares that it is in compliance with all federal, state and local business permits and licensing requirements necessary to perform the duties described in this Agreement. Contractor also declares that it is in compliance with all necessary federal, state and local employment tax requirements and that Contractor shall file all necessary tax returns and pay all of the necessary employment taxes. HP shall not assist Contractor with any federal or state income tax withholdings, or make any tax contributions on behalf of Contractor, nor shall HP pay for or reimburse Contractor for any profit-sharing programs, any health or group insurance programs, or any worker's compensation insurance or for any other benefit of employment. 4.6 HP, at its sole and absolute discretion, reserves the right to modify, alter, reduce or remove any scope of work or business activity without Contractor's prior consent. 5.0 TERMS OF AGREEMENT AND TERMINATION. 5.1 Term. This Agreement shall become effective from September 01, 2001 (the "Effective Date") and shall automatically terminate without notice at midnight on August 31, 2004 (the "Expiration Date") with the option to extend this Agreement for a subsequent additional one-year period, provided that both parties mutually agree in writing at least sixty 60 days prior to the expiration of the then-current term. 5.2 Termination:
5.2.1 Notwithstanding the provisions of Article 5.1 above, this Agreement shall terminate immediately and automatically upon either: (i) the expiration of the Term; (ii) Assignment or transfer by Contractor; (iii) Contractor's default and/or breach of any portion of this Agreement. 6

5.2.2

HP may terminate this Agreement with ninety (90) days written notice to Contractor at anytime, with or without cause. In addition to the above, this Agreement may be terminated immediately and automatically by HP, at HP's sole and absolute discretion, if any of the following events occur: 5.2.3.1 Contractor makes any materially false or misleading statement or representation which induces HP to enter into this Agreement, or which is relevant to the relationship between the parties hereto; or, Contractor becomes insolvent or commits an act of bankruptcy or takes advantage of any law for the benefit of debtors or Contractor's creditors, or if a receiver is appointed for Contractor; or, Contractor engages in fraud or criminal misconduct or is convicted of a felony or of a misdemeanor involving fraud, or commercial dishonesty, whether or not the crime arose from Contractor's relationship with HP or not; or, Contractor intentionally and/or deliberately invoices, bills or charges HP for any services, cost, or expense(s) or invoices, bills or requests payment for any other reimbursements not contracted for or covered in this Agreement; or, For any of the reasons set forth in any applicable statute, law, regulation or judicial decision.

5.2.3

5.2.3.2

5.2.3.3

5.2.3.4

5.2.3.5

5.3 If this Agreement or any Appendix is terminated, then HP has the right, but not the obligation:
5.3.1 To assume for the remainder of the term of the Appendix, subject to the landlord's approval, and without being assessed any fees or penalties, each facility lease entered into by Contractor for any terminated Program or applicable portion thereof. To purchase from Contractor or assume Contractor's lease of any capital equipment that is an integral part of or was exclusively purchased or leased by Contractor for the Program. The purchase price of such equipment will be an amount equal to its unamortized cost, using the depreciation period specified in the applicable Program Contract, plus applicable sales and transfer taxes.

5.3.2

5.4 Termination of this Agreement by either party for any reason shall not relieve the parties of any obligation theretofore accrued under this Agreement. In the event that this Agreement is terminated, regardless of the cause or reason, Contractor's services during the time of notice of such Termination until the last day of its services shall not be diminished in any way and Contractor shall continue to provide first class service. 5.5 Default by Contractor. In the event Contractor, at any time, refuses or neglects to supply a sufficient number of properly skilled employees or a sufficient quantity of materials of proper quality, or files any kind of arrangement proceeding with any governmental agency or court, or makes an assignment for benefit of creditors without HP's consent, or fails in any respect to properly and diligently prosecute the work covered by this Agreement, or otherwise fails to perform fully any portion or all of the appendices or conditions precedent herein contained, HP may at its option, after the lapse of fourteen (14) days from the giving of a written deficiency notice to Contractor (during which time Contractor shall have the right to cure said default as more specifically set forth in section 5.7), terminate Contractor's right to proceed with the work. If HP so terminates Contractor's right to proceed with the work, Contractor shall immediately cease performing Program Services, and HP shall withhold any outstanding payments owed to Contractor at the time of such termination. HP will then promptly begin working to find an alternative provider to perform the Program

Services performed by Contractor, and Contractor shall be responsible for all incremental labor costs and expenses associated with procuring an alternative provider. However, in no event shall Contractor be responsible for any incremental labor costs or expenses incurred more than 180 days after the 7

date HP terminates Contractor's right to proceed with the work. All incremental labor costs and expenses shall be deducted from any outstanding balance owed by HP to Contractor at the time of termination. If the costs and expenses incurred by HP exceed the outstanding balance owed by HP at the time of termination, then Contractor shall reimburse HP for the difference within fifteen (15) days after receiving a final bill from HP. 5.6 The remedies referred in section 5.5 shall not be exclusive, and the provisions herein do not in any way limit HP's entitlement to any other remedy, legal or equitable. 5.7 If at anytime Contractor shall fail to remedy any default under this Agreement within fourteen (14) days after receipt of written notice of any such default with respect to any of the provisions, terms or conditions of this Agreement, then in the event the default cannot reasonably be cured within said fourteen (14) day period, Contractor shall not be in default under this Agreement if Contractor commences to cure the default within the fourteen (14) day period and diligently and in good faith continues to cure the default. 5.8 Upon the occurrence of any default by CONTRACTOR not cured within the applicable period provided for in sections 5.5 and 5.7 above, in addition to any or all other rights or remedies of HP provided by law, HP shall have the right, at HP's sole option, to declare this Agreement terminated as more specifically set forth in section 5.5 above. 5.9 Rights and Duties Upon Termination. Upon termination of this Agreement, for any reason, Contractor agrees to surrender any and all property, equipment and inventory on the date specified in the notice of termination and to immediately discontinue all functions and services. HP shall have the absolute right, immediately upon termination, to take possession of all property, equipment and inventory. Contractor shall return all proprietary information, documentation, trademark or other such property to HP. 6.0 TIME 6.1 Time and production are the essence of this Agreement and Contractor shall use its best efforts to complete any or all of its duties in the timeliest manner possible. Should Contractor be delayed in the prosecution or completion of the work by the act, neglect or default of HP, or should Contractor be delayed waiting for materials, if required by this Agreement to be furnished by HP, or by damage caused by fire or other casualty for which Contractor is not responsible, or in the event of a lockout by HP, then the time herein fixed for the completion of work shall be extended the number of days that Contractor has thus been delayed, but no allowance or extension shall be made unless a formal request is presented in writing to HP within forty-eight (48) hours of the commencement of such delay, and under no circumstances, excepting circumstances outside the control of Contractor, which in the judgment of HP, could have reasonably resulted in such delay, shall the time for completion be extended to a date which will prevent HP from completing the work within the time HP allows for such completion. 7.0 DELETED 8.0 COST SCHEDULE 8.1 Because of expected changes in costs due to cost improvements, business needs, inflationary measures, etc., the cost schedule will be documented as an Appendix, which may be amended from time to time, whereby any changes will not impact the content of this Agreement. 9.0 INVOICING AND PAYMENTS 9.1 Terms of Payment: 8

Contractor will prepare and submit its invoices to HP in accordance with the terms set forth in the applicable Appendix. HP will pay Contractor invoices that are prepared as specified in the applicable Appendix within forty-five (45) calendar days of receipt. 9.2 Billing:
9.2.1 For each Program, Contractor will invoice all services at the end of each 30-day billing period for services provided during that period. One copy will be delivered to the appropriate Program Manager and one copy to the appropriate HP Finance Service Center. The Itemized Cost Statement will be in a form agreed to by the appropriate Program Manager and the Contractor Program Manager and as set forth in the applicable Appendix. HP will have the right, upon request, to audit invoices to ensure compliance with the Program. Audits are limited to services (hours, units processed, inventory, space, etc.) and actual cost data for non-reoccurring expense. Contractor will prepare Itemized Cost Statements in accordance with Generally Accepted Accounting Principles (GAAP). Within sixty (60) days following the end of each HP fiscal year during the term of this Agreement, the designated representative of the Contractor will certify to HP that the Itemized Cost Statements submitted to HP during that fiscal year have been prepared in accordance with GAAP and accurately and fairly represents the costs associated with the Program Services provided. At HP's request, HP may audit Contractor's adherence to GAAP. Any billings for charges incurred outside of the current invoice cycle must be accompanied by a written statement of explanation supporting their applicability and are subject to HP's approval.

9.2.2

9.2.3

9.2.4

9.3 Cost and Expenses:
9.3.1 Capital Expenditures: 9.3.1.1 Without HP's prior written authorization, Contractor will not incur any individual capital expenditure with respect to which HP will be invoiced for any costs, either as an amortization or depreciation expense, if HP will be carrying the termination risk. If Contractor deems it reasonable and necessary to incur a capital expenditure requiring written authorization, Contractor will complete and submit to HP an Expenditure Proposal (EP) in the form set forth in Exhibit A.

9.3.1.2

9.3.2

Excluded Costs: Costs reimbursable by or allocated to HP will exclude any and all fines and penalties with respect to violations of any statute, ordinance, regulation, rule, order, judgment or decree (including settlement thereof) by Contractor or its subcontractors, all of which will be the sole responsibility of Contractor. Expense and Cost Containment: Contractor will use its best efforts to implement procedures to reduce or contain its expenses and costs without adversely affecting the performance of the Program Services. At HP's request, Contractor will provide HP information about and access to records and operations to allow HP to ensure compliance with this obligation. Access to

9.3.3

Contractors actual cost records is limited to non-reoccurrence ("direct bill") items. HP will measure Contractor's compliance with this obligation in accordance with the terms set for in the applicable Appendix.

9

9.4 Rates and Charges:
9.4.1 General: HP will pay Contractor for the Program Services provided pursuant to this Agreement at the rates and subject to the terms and conditions set forth in the applicable Appendices. Additional Services: Services requested by HP, in addition to those identified in the Appendices, will be negotiated separately, and are subject to mutual agreement on terms and conditions applicable to such requirements. Any additional services will result in a reissue/amendment of all affected Appendices prior to performance of the additional services.

9.4.2

9.4.3 Rate Increases and Decreases:
9.4.3.1 All rates and charges set forth in an Appendix will be effective for a period of not less than one (1) year from the effective date. These rates will reflect prevailing business conditions (activity and product volumes and processes). After the expiration of the initial one-year period, if the business conditions have changed in a manner that alters the costs used to determine the initial rates, HP will consider changes to rates, provided Contractor submits a written request to change the rates no less than 60 days prior to the expiration of the initial one-year period. After the expiration of the initial one-year period, Contractor and HP will meet quarterly to review the business conditions and rates. Any rate or charge increase must be agreed to in writing by HP's and Contractor's respective Program Managers before it becomes effective. The format for communicating this change shall be outlined in the applicable Appendix.

9.4.3.2

10.0

RIGHT TO AUDIT.

10.1 HP has the right, but not the obligation, to inspect at any time during business hours, and with or without prior notice to Contractor, any Contractor facility at which Program Services are performed; all processes, operations, and records associated with Contractor's performance of Program Services; and all HP Products under the possession or control of Contractor. 10.2 HP's inspection may be for any reason directly related to this Agreement or any Appendix, including ensuring Contractor's compliance with the requirements of this Agreement or the applicable Appendix. 10.3 HP's right of inspection, with coordinating efforts with the Contractor, will also apply to any vendor or subcontractor of Contractor. Contractor will inform such vendors or subcontractors of HP's right to inspect and, if necessary, use all reasonable effort to secure such rights for HP. 10.4 Any inspection by HP will be solely for HP's benefit and not for the benefit of any other party, including Contractor or any of its vendors or subcontractors. Notwithstanding the foregoing, upon request, HP will provide Contractor a copy of all audit or inspection results. 10.5 HP shall have the right at anytime and upon request, to audit any Itemized Cost Statements, invoice or bills provided by Contractor and to audit Contractor's use of the HP Processes to ensure compliance with the

Program. In the event that the results of such audit reveal an inconsistency or are in contradiction to any invoices forwarded to and/or paid by HP, or are not covered by or are out of scope of this Agreement, then HP shall have the right to correct 10

such inconsistencies or request a cash refund, adjust CONTRACTOR's affected invoices, or withhold any future payment until such inconsistent balances are corrected. 11.0 RECORD KEEPING 11.1 Contractor will keep and maintain records and reports of business measures for the Program. Upon request, HP will have the option to audit one-week period statements and to audit period statements in accordance with generally accepted principles and practices. 11.2 Contractor will provide record retention of all forms, reports and other paperwork as required by HP's Corporate Audit Guidelines. Copies of the relevant portion of HP's Corporate Audit Guidelines are attached as exhibits to the Appendices as deemed applicable by HP. 11.3 Licenses: Contractor at its sole cost and expense, will procure and --------maintain any and all licenses, permits, and authorizations required by applicable laws or regulations for the performance of this Agreement except for those licenses and fees that by law or regulation must be the sole responsibility of HP due to the nature of the products or processes being supported by Contractor for HP. HP agrees to pay for licenses and fees, which are or become its sole responsibility. 12.0 CHANGES 12.1 HP may change, modify, alter, reduce or remove any portion of any scope of work or business activity at any time in any project at any time. In the event of any such change, the price shall be adjusted accordingly. Any such change shall be requested and documented by Contractor's Approval Process before the change is performed. 12.2 Except as provided in Section 12.1 (Changes) above, any claim by Contractor for additional compensation arising out of this Agreement must be made in writing within ten days after the commencement of the event, giving rise to the claim. Otherwise, any such claim shall be deemed waived by CONTRACTOR, notwithstanding actual notice thereof on the part of HP. 13.0 WARRANTIES 13.1 With respect to the goods and Program Services provided by Contractor pursuant to this Agreement, Contractor hereby warrants as follows: 13.1.1 All goods and Programs Services shall conform in all material respects to the design criteria, specifications, descriptions, drawings, samples, and other requirements that are set forth in this Agreement, applicable Appendix, or otherwise agreed to by the parties for a period of 180 days; Any rework that must be done within the 180 day period will be done at the expense of the Contractor; All goods and Program Services shall be free from material defects in design, material, and workmanship; All goods and Program Services shall be free of all liens, encumbrances, and other claims against title; All goods and Program Services shall be manufactured, processed, and assembled, as applicable, by Contractor under Contractor's direction;

13.1.2

13.1.3

13.1.4

13.1.5

13.2 DISCLAIMER: EXCEPT AS EXPRESSLY PROVIDED IN THIS AGREEMENT OR THE ---------ATTACHED APPENDICES, CONTRACTOR MAKES NO OTHER WARRANTIES, EITHER EXPRESS OR IMPLIED, REGARDING ANY HP PRODUCTS AND SERVICES, OR REGARDING THEIR MERCHANTABILITY OR THEIR FITNESS FOR ANY PARTICULAR PURPOSE.

11

14.0

INSURANCE 14.1 Coverage: During the term and at all times that CONTRACTOR performs services for HP, CONTRACTOR shall maintain in full force and effect the following minimum insurance coverages. 14.1.1 Workers' Compensation and Employer's Liability Insurance Workers' Compensation insurance shall be provided as required by law or regulation. Employer's Liability insurance shall be provided in amounts not less than $1,000,000 per accident for bodily injury by accident, $1,000,000 policy limit by disease, and $1,000,000 per employee for bodily injury by disease. If employees or subcontractors of CONTRACTOR are exposed to injury which may fall under the U.S. Longshoremen and Harbor Workers' Compensation Act, the Jones Act, or under laws, regulations, or statutes to maritime or railroad employees, then coverage will be included for such injuries or claims. 14.1.2 General Liability Insurance: CONTRACTOR shall carry either comprehensive general liability insurance or commercial general Liability insurance with limits of liability and coverage as indicated below: (A) Premises, operations, and equipment; (B) Products and completed operations; (C) Contractual Liability; (D) Bodily injury Liability; (E) Personal injury Liability. Comprehensive general liability policy limits shall be not less than combined single limits of $1,000,000 per occurrence and general aggregate of $2,000,000. Commercial general liability (occurrence) policy limits shall not be less than $1,000,000 per occurrence (combined single limit for bodily injury and property damage), $1,000,000 for personal injury liability, $1,000,000 aggregate for products and completed operations, and $2,000,000 general aggregate. Except with respect to products and completed operations coverage, the aggregate limits shall apply separately to CONTRACTOR's services under this Agreement. If "claims made" policies are provided, CONTRACTOR shall maintain such policies without endangering aggregate limits at the above stated minimums, for at least five years after the expiration of the term. Such policies shall name HP, its officers, directors and employees as Additional Insureds and shall stipulate that the insurance offered Additional Insureds shall apply as primary insurance and that no other insurance carried by any of them shall be called upon to contribute to a loss covered thereunder. Such policies shall not be construed to imply that CONTRACTOR offers insurance to or on behalf of HP employees.

14.1.2.1

14.1.2.2

14.1.2.3

14.1.2.4

14.1.2.5

14.1.3

Automobile Liability Insurance: CONTRACTOR shall carry bodily injury, property damage, and automobile contractual liability coverage for owned, hired, and non-owned autos with a combined single limit of liability for each accident of not less than $1,000,000. Fidelity / Crime Bond: CONTRACTOR will be covered by Fidelity Insurance or Commercial Crime Bond as respects CONTRACTOR's agents, employees, and subcontractors performing under this Agreement with blanket limits of at least $100,000 per occurrence. 12

14.1.4

14.1.5

Property / Warehouse Liability: CONTRACTOR will carry Property or Warehouse Liability insurance in amounts adequate to cover risks of damage or loss to HP Property in its care, custody and control, as assumed under the terms of this Agreement. Any such insurance will name HP as Loss Payee.

14.2

Certificate of Insurance: Certificates of Insurance evidencing the required coverage and limits shall be furnished to HP before any services are commenced hereunder and shall provide that there will be no cancellation or reduction of coverage without thirty (30) days prior written notice to HP. A company authorized to do business in the State where the services are rendered shall write all insurance policies. CONTRACTOR shall furnish copies of any endorsements subsequently issued, which amend coverage or limits.

15.0

INTELLECTUAL PROPERTY 15.1 Confidential Information: Neither Contractor nor Contractor's employees, agents, or subcontractors shall use or disclose to any person or entity any Confidential Information of HP (whether in written, oral, electronic, or other form) which is obtained from HP or otherwise prepared or discovered either in the performance of this Agreement, through access to HP's Information Assets/Systems, or while on HP premises. As used herein, the term "Confidential Information" shall include, without limitation, all Work Product, all information designated by HP as confidential, all information or data concerning or related to HP's products (including the discovery, invention, research, improvement, development, manufacture, or sale thereof), processes, or general business operations (including sales costs, profits, pricing methods, organization and employee lists), and any information obtained through access to any Information Assets/Systems (including computers, websites, networks, voicemail, etc.) which, if not otherwise described above, is of such a nature that a reasonable person would believe it to be confidential or proprietary. For avoidance of doubt, all order-specific data (including dates, product data, shipment data, etc) relating to HP Products, HP Property or HP Processes shall be automatically deemed HP's Confidential Information. For purposes of this Agreement, Information Assets/Systems shall include, but are not limited to, computers, voice and data networks, databases, records systems, voicemail, security systems, tokens, logon scripts, passwords, and such other hardware, software, firmware, or other device as may be used to access such systems/assets. These restrictions on using, publishing, or revealing Confidential Information continue perpetually unless HP agrees otherwise in writing or unless the Confidential Information becomes public. Exclusions: The foregoing confidentiality obligations will not apply to Confidential Information that (a) is already known to Contractor prior to disclosure by HP; (b) is or becomes a matter of public knowledge through no fault of Contractor; (c) is rightfully received from a third party by Contractor without a duty of confidentiality; (d) is independently developed by Contractor; (e) is disclosed under operation of law; or (f) is disclosed by Contractor with the prior written approval of HP. Work Product. "Work Product" means models, devices, reports, computer programs, tooling, schematics and other diagrams, instructional materials, and anything else the Contractor produces in connection with this Agreement or any Statement of Work and paid for by HP. All Work Product will belong to HP. HP shall have the sole right to use, sell, license, publish or otherwise disseminate or transfer rights of such Work Product. As long as this Agreement is in effect Contractor will have the right to use said Work Product in its performance of this Agreement. Contractor will deliver all Work Product to HP upon the earlier of completion of Services or HP's request. Contractor will promptly disclose to HP any inventions made in connection with this Agreement and paid for by HP. HP will own all intellectual property rights in such inventions. Contractor will sign any necessary documents and will otherwise assist HP, at HP's expense, in obtaining patent registrations and otherwise

15.2

15.3

15.4

protecting such inventions in any country.

13

15.5

Works of Authorship. Contractor will promptly disclose to HP any works of authorship created in connection with this Agreement and paid for by HP. Contractor hereby assigns to HP all copyrights in such works. To the extent permitted by law, Contractor waives any moral rights, such as the right to be named as author, the right to modify, the right to prevent mutilation and the right to prevent commercial exploitation, whether arising under the Berne Convention or otherwise. Contractor will sign any necessary documents and will otherwise assist HP, at HP's expense, in registering HP's copyrights and otherwise protecting HP's rights in such works in any country. Access to Information Assets/Systems: Access, if any, is granted solely to facilitate the business relationship described in the Agreement, and is limited to those specific Assets/Systems, time periods and personnel designated by Contractor as are separately agreed to by HP and Contractor from time to time. Access is subject to business control and information protection policies, standards, and guidelines as may be provided by HP. Use of any other Assets/Systems is expressly prohibited. This prohibition applies even when an Asset/System which Contractor is authorized to access serves as a gateway to other Assets/Systems outside the scope of Contractor's authorization. Use of Assets/Systems during other time periods or by individuals not authorized by HP is expressly prohibited. Without limiting the foregoing, Contractor warrants that it has adequate security measures in place to comply with the above obligations and to insure that access granted hereunder will not impair the integrity and availability of HP information asset/systems. Upon reasonable notice, HP may audit Contractor to verify Contractor's compliance with these obligations. Unless prior written approval is provided to Contractor by the providing HP entity, Contractor can only use any information assets/systems, hardware, or software, either supplied by HP or funded by HP, for the HP entity that provided or funded that information Assets/Systems, hardware, or software. Security of Information: Without limiting the foregoing, each party agrees to maintain security measures to comply with the above obligations and to ensure that access granted will not impair the integrity and availability of the others party's Systems. Upon reasonable notice, HP may audit Contractor to verify Contractor's compliance with these obligations. Pre-Existing Intellectual Property: Contractor will not use any Pre-Existing Intellectual Property including, but not limited to, any trade secret, invention, work of authorship, mask work or protectable design that has already been conceived or developed by anyone other than HP before Contractor renders any services under this Agreement, unless Contractor has the right to use it for HP's benefit. If Contractor is not the owner of such Pre-Existing Intellectual Property, Contractor will obtain from the owner any rights necessary to enable Contractor to comply with this Agreement. If Contractor uses any Pre-Existing Intellectual Property in connection with this Agreement, and HP requires rights to that Pre-Existing Intellectual Property to utilize the services, Contractor hereby grants to HP a non-exclusive, royalty-free, worldwide, perpetual license to make, have made, sell, use, reproduce, modify, adapt, display, distribute, make other versions of and disclose the property and to sublicense others to do these things. Contractor will give HP notice immediately if at any time the Contractor knows or reasonably should know of any third party claim to any intellectual property provided by Contractor pursuant to this Agreement. Intellectual Property Infringement Warranty. Contractor hereby represents and warrants that all goods and Program Services furnished by Contractor and/or its subcontractors under this Agreement will not violate or infringe any third party intellectual property rights and Contractor further warrants

15.6

15.7

15.8

15.9

that it is not aware of any facts upon which such claim could be made. If Contractor learns of any claim or any facts upon which a claim could be made, it will promptly notify HP of this information. 15.10 Additional Obligations. Contractor warrants that each employee, agent, or subcontractor who performs services or other work in connection with this Agreement has been informed of the obligations contained herein and has agreed to be bound by them. If Contractor engages any third party in furtherance of its duties under this Agreement, Contractor shall cause such 14

third party to execute a written agreement binding such third party under all provisions of this Section 15, as if such party were Contractor.

16.0 INDEMNIFICATION
16.1 General Indemnity. 16.1.1 Contractor shall defend, indemnify and hold harmless the HP from and against any and all claims, losses, demands, attorney fees, damages, liabilities, costs, expenses, obligations, causes of action, suits, or settlement costs for damage or injury (including death) to any person (including employees) or damage to or loss of any property arising out of or resulting from any negligent or willful act or omission by Contractor or its employees or agents except to the extent of HP's negligence or willful misconduct. Contractor shall defend, indemnify and hold harmless HP from and against any and all claims, losses, demands, attorney fees, damages, liabilities, costs, expenses, obligations, causes of action, suits, or settlement costs arising out of labor, materials, services or supplies furnished by Contractor, or its subcontractors (it being understood that Contractor shall be responsible to HP, relating to any such defective Contractor work performed as a subcontractor for HP) or having an impact upon the performance of this Agreement (including but not limited to any laborer's, materialmen's or mechanics' liens). Contractor shall also defend, indemnify and hold HP harmless from any claims or suits against HP arising from Contractor's use of HP Equipment loaned to Contractor by HP, including use by its employees, agents or subcontractors. Contractor will pay all costs, damages, losses and expenses (including reasonable attorneys' fees) incurred by HP and will pay any award with respect to any such claim or agreed to in any settlement.

16.1.2

16.1.3

16.2 Intellectual Property Indemnity. Contractor will give HP notice immediately if at any time Contractor knows or reasonably should know of any third party claim to any intellectual property used by Contractor to perform Program Services for HP, provided by Contractor to HP, or made accessible by Contractor to HP, pursuant to this Agreement. Contractor will defend, indemnify and hold harmless HP from all liability arising from the use of such intellectual property. 16.3 Mechanics of Indemnity. The party claiming a right to indemnity will provide the indemnifying party with prompt notice of, and reasonable assistance (at the indemnifying party's expense) with, any claim, action or proceeding covered by the indemnity obligations set forth in sections 16.1 and 16.2 above. The party claiming a right to indemnity will give the indemnifying party the authority necessary to defend or settle any such claim, action, or proceeding. The indemnifying party will have the exclusive right to defend any such claim, action or proceeding. However, neither HP nor Contractor shall settle or compromise any such claim, action or proceeding without prior written consent of the other party. Said written consent will not be unreasonably withheld by either party. In the event the indemnifying party does not diligently pursue resolution of the claim, action or proceeding or provide the other party with reasonable assurances that the indemnifying party will diligently pursue resolution, then the other party may, without in any way limiting its other rights and remedies, defend and/or settle or compromise such claim, action or proceeding. If the other party defends such a claim, action or proceeding, indemnifying party will pay, in addition to any damages awarded, the actual and reasonable costs and expenses incurred by the other party in connection with such defense. 17.0 CONTINUING OBLIGATIONS

15

17.1 Upon any termination of this Agreement or any Appendix, sections 9, 10, 13, 14, 15, 16, 21, 22, 23, 24, 25, 26, 29, 31, 34, 38, and this section 17, shall survive in accordance with their terms. 18.0 DOCUMENTATION 18.1 HP shall provide any proprietary or non-proprietary documentation (as HP deems necessary) to Contractor regarding the products to service and support, including but not limited to schematics, material lists and engineering change orders. 19.0 SUPERVISION 19.1 All persons engaged in the work described in this Agreement shall be subject to the exclusive direction, supervision, and control of Contractor. Contractor shall ensure that all persons involved in the work are appropriately skilled for that portion of the work assigned to them. 20.0 BACK-UP PERSONNEL 20.1 Contractor shall provide back-up personnel for each of their employee(s) assigned to HP's account in the event of their illness, disability, vacation, leave, or absence for any reason. Said back-up personnel are expected to cover all duties and responsibilities of Contractor's regular personnel with no disruption in service. 21.0 SUBCONTRACTORS 21.1 Subcontractors. Contractor will not subcontract any of the Services to other persons or entities without the prior written approval of HP. All obligations imposed upon Contractor will be similarly imposed by Contractor upon any authorized Subcontractor.Contractor's execution of any subcontracts, including subcontracts approved by HP, will not relieve, waive or diminish any obligation Contractor may have to HP under this Agreement. Fees for subcontracted Services will be included in the fees and costs billed by Contractor. 21.2 Other Contracts. HP may contract with other Providers in connection with the Services. Contractor will cooperate with any other Contractors retained by HP. 21.3 Co-existence. Contractor will not use any process, equipment, or facility supplied by, developed for, or funded by HP without the prior written approval of the appropriate HP entity. Since HP-HPCS is the HP division that oversees the Contractor account with HP and this Agreement, Contractor will notify HP's HPCS Account Manager within two (2) working days when any HP division or non HP business request Contractor to perform similar work using the same equipment or facilities as HP. 21.4 List of Personnel. Contractor shall maintain a list of all Contractor employees or Contractor's subcontractors, who have been granted access to HP information systems and will provide such list to HP as requested by HP. Upon termination of any employee, Contractor will inform HP, and take all necessary actions to remove that person's ability to access Contractor or HP property or information. 22.0 HP PROPERTY 22.1 Contractor shall ensure that its employees do not remove any HP Property from the work premises without HP's written permission. Upon the request of HP, Contractor shall return any HP Property to HP. Upon the departure of an Contractor employee, Contractor shall ensure that such employee has returned all HP Property to Contractor. In the event Contractor is unable to secure the return of HP's Property from a departing Contractor employee, Contractor shall be responsible for making diligent efforts to effect the return of the item and for reimbursing HP for the value of the HP Property should it not be returned or replaced 16

within a reasonable time period not to exceed thirty (30) days after the employee's termination date. 23.0 HP PRODUCTS 23.1 Consignment. With respect to all HP Products, Equipment or other property owned by HP and consigned to Contractor (referred to as "Consignee" in this section), Consignee hereby grants to HP (referred to as "Consignor" in this section) its power of attorney to file a UCC-1 financing statement or similar notice describing the Consigned Goods or HP Products and the proceeds thereof [in substantially the form attached hereto as Exhibit ___, wherever HP deems appropriate to provide notice to other parties that the Consigned Goods are not property of Consignee. Should this Agreement or the transactions under this Agreement be deemed for any reason to pass title of the Consigned Goods to Consignee, Consignee agrees that HP shall be deemed to hold, and Consignee hereby grants to HP, a purchase money security interest in the Consigned Goods, and the proceeds thereof including without limitation the cash and checks described above, to secure all of its obligations to HP including without limitation obligations under this Agreement
23.2 Liability for Loss or Damage to HP Products. 23.2.1 General Liability. Contractor shall be liable to HP for actual loss of, or damage to, HP Products owned by HP other than loss or damage caused by intentional acts or gross negligence as set forth in section 23.2.2 below, with a maximum liability of $1,000,000.00 (US) per occurrence. The value of all HP Products will be the invoice price for the HP Products. Contractor's overall liability under this section shall be subject to the $5,000,000.00 Limitation of Liability set forth in section 24.1 below. Liability for Intentional Acts or Gross Negligence. In the case of intentional or grossly negligent acts or omissions, dishonest acts, or the failure to follow any provision of the agreed upon security requirements on the part of Contractor or its employees, agents or subcontractors, Contractor will be liable to HP for the actual loss of, or damage to, HP Products owned by HP. The value of all HP Products will be the invoice price for the HP Products. Contractor's liability under this section will not be subject to the liability limitations set forth in sections 23.2.1 or 24.1. Security Requirements. CONTRACTOR and its employees, agents or subcontractors agree to follow the attached security plan Exhibit B. Inventory Shrinkage Losses. Contractor will be liable to HP for inventory shrinkage losses as a business risk and will not charge HP for any separate insurance to cover this liability. Contractor's liability to HP for shrinkage losses are excluded from the limitations of liability set forth in sections 23.2.1 and 23.2.2 above, as well as section 24.1 below. Fire or Water Damage. Contractor will be liable for any Fire or Water damage that causes loss to HP owned equipment or parts. Claims Procedure. 23.2.6.1 Contractor must promptly notify HP upon discovering any loss of, or damage to, HP Products. Within 60 days following receipt of such notice, HP will file a claim for such loss, including loss due to inventory shrinkage. Contractor will acknowledge all claims within 30 days of occurrence; resolve all

23.2.2

23.2.3

23.2.4

23.2.5

23.2.6

23.2.6.2

undisputed claims filed by HP within 60 days of submission by HP; and resolve all disputed claims filed by HP within 120 days. For any claims outstanding after 120 days, Contractor will be required to provide written statements to HP concerning the status of each claim. 23.2.6.3 Reconciliation of all claims filed by HP against Contractor will not be contingent upon Contractor's recovery of HP Products or funds from its

17

subcontractors. HP must file any legal proceedings regarding a disputed claim within 12 months following receipt of notice of loss or damage. 23.2.7 Limitation of Liability Related to HP Products. Contractor and its subcontractors will not be liable for loss or damage resulting from: 23.2.7.1 The negligence or willful misconduct of HP, the recipient of the HP Products, or anyone with an ownership interest in the HP Products; 23.2.7.2 Failure of HP systems impacting HP revenues; 23.2.7.3 Any pre-existing defect of the HP Products; 23.2.7.4 Actions of government or sovereign power, or by any authority maintaining or using military, naval or air forces; or 23.2.7.5 Earthquakes or other Acts of God. 23.2.8 Dispositions. 23.2.8.1 Contractor, or Contractor's agents and subcontractors, agree to use its best efforts to protect HP's product integrity and brand names in the event of transit damage to said products. HP shall have the exclusive control over the disposition of salvage and the disposition of partially damaged product, subject, however to the laws governing the Contractor's right to an allowance for any salvage or residual value for products destroyed by HP in lieu of their sale on the salvage market. 23.2.8.2 Contractor, or Contractor's agents and subcontractors have thirty (30) days to return a product that has been damaged, or refused delivery by Customer to HP. 23.2.8 Contractor, or Contractor's agents and subcontractors are not permitted to keep damaged or defective freight without prior written consent from HP.

24.0 LIMITATION OF LIABILITY 24.1 IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER PARTY FOR ANY SPECIAL, INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES IN ANY WAY ARISING OUT OF OR RELATING TO THIS AGREEMENT EVEN IF THE POSSIBILITY OF SUCH DAMAGES HAS BEEN COMMUNICATED TO THE OTHER PARTY. IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER FOR DAMAGES FOR ANY CAUSE WHATSOEVER IN AMOUNT IN EXCESS OF $5,000,000.00. NOTWITHSTANDING THE FOREGOING, THERE SHALL BE NO LIMIT ON THE AMOUNT OR TYPE OF DAMAGES RELATING TO BREACH OF ANY CONFIDENTIALITY OBLIGATION (SECTION 15.1), INTELLECTUAL PROPERTY INDEMNIFICATION (SECTION 16.2), PERSONAL INJURY OR PROPERTY DAMAGE INDEMNIFICATION (SECTION 16.1.1) OR CONTRACTOR'S GROSSLY NEGLIGENT OR INTENTIONAL ACTS OR OMISSIONS RESULTING IN LOSS OR DAMAGE TO HP PRODUCT (SECTION 23.2.2). 25.0 TOOLING AND EQUIPMENT 25.1 General. All designs, materials and equipment furnished to Contractor by HP or paid for by HP in connection with this Agreement (collectively "HP Property") shall: a) Be clearly marked or tagged as property of HP;

b) Be subject to inspection by HP at any time during normal business hours; c) Be used only in performing work under this Agreement; d) Be kept reasonably separate from other materials, tools, or property of Contractor or held by Contractor; 18

e) Not be modified in any manner by Contractor without prior agreement by HP; f) Have periodic maintenance performed by Contractor; g) Be kept free of liens and encumbrances which may arise due to actions of Contractor; and h) Will be tracked and documented by Contractor on a consolidated list of all HP property. This list will be provided to the HP Account Manager on a quarterly basis,noting changes since prior list was provided. 25.2 Equipment Loan to CONTRACTOR. In the event HP is willing to assign any equipment or tools for CONTRACTOR's use during this Agreement, the parties shall execute a separate Equipment Loan Agreement ("ELA"). An example of an ELA is attached hereto as Exhibit C. 25.3 Equipment Use. Contractor agrees that persons operating HP Property will be fully trained in the proper use thereof. Contractor hereby releases HP of all liability arising out of the misuse, or damage caused by Contractor or Contractor's agents to HP equipment or tools as provided for in Section 26 (Facility and Equipment). 25.4 Depreciation and Taxes. Contractor shall be solely responsible to conform to all tax laws and depreciation schedules on all tools and equipment either leased or procured by Contractor to perform work under this Agreement. If HP deems necessary, HP may assume the lease of said tools and equipment. At any time after Contractor's lease of said tools and equipment is complete, HP may, at HP's discretion, procure any of said tools and equipment from Contractor for the total sum of one (1) U.S. dollar. 26.0 FACILITY AND EQUIPMENT 26.1 With the exception of equipment, warehouse facilities, and computer systems owned by HP, utilized in carrying out the Scope of Work as described in each Appendices, all equipment, warehouse facilities, and computer systems used by Contractor in the performance of the Program Services hereunder shall at all times be owned or leased by Contractor. Use of HP owned equipment and computer systems by Contractor shall be at the discretion of HP and shall be restricted to only those processes that directly support HP and no other customer of Contractor. 26.2 All expenses incurred by Contractor in the operation of the equipment, warehouse facilities, and computer systems shall be paid by Contractor without reimbursement from HP unless specifically identified for reimbursement in each Appendices. Contractor's sole compensation for the Program services and other services rendered to HP and sole work performed for HP shall be as provided for in this Appendix. 26.3 Contractor's administration operation shall provide the computing systems and peripherals necessary to transact business with its corporate headquarters or to other Contractor entities. 26.4 All equipment purchased and/or replaced by Contractor must have the ability to be supported, maintained, and repaired by HP. Contractor will verify through HP's IT department the supportability of the equipment before purchase. 26.5 Any and all electronic devices and or wiring connected to HP business processing systems shall become the property of HP and HP shall retain title to such devices and/or wiring. It is clearly understood and acknowledged, that prior to connecting any such electronic devices or wiring to any HP system, HP must pre-approve of such, in writing, otherwise the Contractor shall be fully and solely responsible for and liable for any and all damage. Furthermore, HP shall be responsible for the purchase, repair and maintenance of such equipment, provided, however, that HP has pre-approved such, in writing. 26.6 Contractor shall retain title to all other equipment (except as expressed in Section 26.1 (Facilities and Equipment) and the (Equipment Loan Agreement) and all documentation related to or 19

accompanying the equipment. Contractor shall not loan, transfer, encumber, sell or otherwise dispose of the equipment without HP's prior written permission. If any of the above provisions are not met in their entirety then it shall be deemed that Contractor is in default of this Agreement. 26.7 Contractor employees, agents and/or subcontractors are hereby strictly prohibited from removing any equipment, inventory or proprietary information that is the sole property of HP from HP's or Contractor's premises or warehouses. In the event that any equipment, inventory or proprietary information is removed from any of HP's or Contractor's premises or warehouses, then HP shall have the sole and absolute right to immediately terminate this Agreement as provided in Section 5.0 (Termination) and Contractor shall be responsible to immediately reimburse HP for the full retail value of any such inventory or equipment. 27.0 PERFORMANCE 27.1 Delivery. Contractor commits to Program Services within the time frame defined in each Appendix. If Contractor fails to meet these requirements for 2 (two) consecutive months, or any 3 months of a 6 month period, HP shall so inform Contractor in writing, and if Contractor is unable to remedy the problem within sixty (60) days, HP may in addition to any other rights it may have, terminate this Agreement without further liability. 27.2 Supplier Financial Reports. Upon reasonable request from HP, Contractor shall furnish information concerning its financial status in relation to this Agreement, including but not limited to: balance sheet, income statement, and statement of cash flows, to HP. A copy of all public filings (SEC 10K's and annual reports) will be provided to HP when they are provided to the public. 27.3 Reports. On a weekly basis, updates of all BFT's, material shortages, and written reports of the cumulative quantities of materials processed or in process will be provided to the HP Account Manager. Such reports shall be submitted on a form agreed upon by HP and Contractor, and shall be returned to HP in accordance with the mutually agreed upon reporting schedule. 27.4 Inspection. HP shall have the right to physically inspect at will, during normal business hours, the Program Services being performed by Contractor under this Agreement. HP shall also have the right to perform audits of processes to ensure that inventory, quality, process, and business controls are maintained and as to Contractor's compliance to pre-established Electro Static Discharge (ESD) handling procedures. HP's inspection may be for any purpose reasonably related to this Agreement, including without limitation to ensure Contractor's compliance with HP's quality requirements, referenced in each applicable Appendix. If requested to do so, Contractor will use commercially reasonable efforts to extend HP inspection rights to any vendor or supplier of Contractor. 27.5 BFT's. Contractor will run the business to maintain all Business Fundamental Tables within the agreed control limits and goals set forth in each Appendix. Contractor will report the BFT's per each site Appendix as included. Failure on Contractor's part to report BFT's as agreed or maintain the goals and control limits for 2 (two) consecutive months or any 3 months of a 6-month period, are grounds for the termination of this Agreement. Included with the monthly BFT's, Contractor will provide HP a deviation report for any BFT metric that is outside the control limits or goals. The deviation report must include an action plan of how and time line of when the metric will be corrected within the control limits or goals. 28.0 PROGRAM PROCESS, REPORTING, METRICS AND MEASURES 28.1 Contractor will be measured through the most currently approved version of HP's Supplier Performance Rating tool, that may focus on Technology, Quality, Responsiveness, Delivery, Communication, Environment, Strategic Alliance Relationship, Operational Performance, and Cost Controls. 20

28.2 An example of the Supplier Performance Evaluation is shown in Exhibit D (TQRDCE Performance Evaluation). The measures will be jointly developed and supported by HP and Contractor.
28.2.1 Contractor and HP are required to jointly establish operational metrics for all the Distribution Process. The management representatives of Contractor and HP will ensure the operational metrics are kept current and available to their respective companies. It is acknowledged that the operational metrics may be modified from time to time to reflect changes in HP's business, and that HP and Contractor shall keep each other currently advised as to any such changes which affect the metrics and the metrics will be modified accordingly. Contractor is expected to track the data and provide the information to HP. Contractor and HP will mutually agree on the operational metrics that Contractor will be measured and held accountable for. These metrics will in all attempts measure those processes that Contractor is in control of. Contractor commits to perform distribution services per the established metrics as listed in each Appendix. HP reserves the right to re-set goals every quarter. HP and Contractor will mutually agree on any goals that are re-set.

28.2.2

28.2.3

28.3 Contractor management representatives will lead regularly scheduled meetings between HP and Contractor to review Contractor's performance in accordance with this Agreement. These reviews will include but not be limited to:
28.3.1 Monthly BFT reviews. will include: Contractor deliverables, at a minimum,

28.3.1.1 Reporting on metrics, discussing deviation reports, and root cause analysis issues.

28.3.1.2 Analyze and report on Program targets vs. actual costs. 28.3.1.3 Report on rolling three month, six month, yearly goals and progress made to date. 28.3.1.4 Overtime if it exceeds 5%, notification should be discussed. 28.3.1.5 Cycle Count.
28.3.2 Year-End Review. schedule. Will be conducted with a pre-published

28.3.3

Process Documentation and Changes: All documentation will be in ISO format or Contractor shall demonstrate to the HP there are appropriate quality measures designated performance metrics.

processes similar standard. Account Manager that in place to meet

28.3.4

TQRDCE will be the method used for these reviews on a semi-annual basis.

29.0 GOVERNING LAW AND COMPLIANCE 29.1 General. Contractor shall comply with all applicable federal, state, local and foreign laws, rules, regulations, or orders issued by any public authority having jurisdiction over their respective obligations under this Agreement, and furnish to HP any information required to enable HP to comply with such laws, rules and regulations in its use of services including without limitation:
29.1.1 The Williams-Steiger Occupational Safety Health Act of 1970, as amended, and any rules, regulations, or order issued thereunder;

29.1.2

All applicable nondiscrimination requirements, including without limitation the provisions of Presidential Executive Order 11246 and the rules and regulations issued thereunder; The Fair Labor Standards Act, as amended, including all applicable requirements of the act and the regulations and orders of the U. S. Department of Labor; Vocational Rehabilitation Act, American Disability Act, and the Vietnam Era Veterans' Readjustment Act; and

29.1.3

29.1.4

21

29.1.5 All applicable Environmental Regulations and Laws.
29.2 Dispute Resolution. The Agreement and all rights and obligations hereunder, including matters of construction, validity, and performance, shall be governed by the laws of California without giving effect to the conflict of laws provisions thereof. Contractor and HP consent to the jurisdiction and venue of such courts. As a pre-condition to bringing any such action, the parties shall attempt to settle any controversy, claim, or dispute between HP and Contractor arising out of or in connection with this Agreement or any breach, termination or invalidity thereof, promptly and in good faith, through authorized representatives of the parties having the authority to resolve any such dispute. If that does not resolve the dispute, each party shall appoint a senior official to attempt in good faith to settle the dispute.

30.0

ASSIGNMENT 30.1 Neither party may, directly or indirectly, in whole or in part, neither by operation of law or otherwise, assign or transfer this Agreement or delegate any of its obligations under this Agreement without the other party's written consent. Any attempted assignment, transfer or delegation without such prior written consent will be void. Notwithstanding the foregoing, HP, or its permitted successive assignees or transferees, may assign or transfer this Agreement or delegate any rights or obligations hereunder without consent to any entity controlled by, or under common control with, HP, or its permitted successive assignees or transferees. Without limiting the foregoing, this Agreement will be binding upon and inure to the benefit of the parties and their permitted successors and assigns.

31.0 SAFETY AND THE ENVIRONMENT 31.1 Safety.
31.1.1 Contractor shall maintain the facilities and operations and perform all Program Services under this Agreement in compliance with all applicable laws and regulations of any governmental entity or sovereign authority with jurisdiction over any applicable Program Services, whether federal, state or local and whether of the United States or another country or countries, which pertain to safety, security, fire protection, and loss control standards. Upon reasonable written notice, Contractor will allow HP and its designated representatives which have been previously approved by Contractor, to visit any facility at which Program Services are performed and conduct loss control audits of the facility and operations. Contractor shall provide to its employees, agents or subcontractors such suitable safety appliances as may be needed to safely perform all Program Services. As an independent contractor, Contractor acknowledges and agrees that it is and will remain solely responsible for the health and safety of its employees, agents and/or subcontractors. Contractor shall establish and maintain such programs, processes and procedures, provide such equipment and training and take such other steps as may be required by applicable laws and regulations to protect the health and safety of Contractor's employees, agents and subcontractors performing work or services for Contractor under this Agreement, and

31.1.2

31.1.3

31.1.4

HP shall have no responsibility or liability therefore, except as provided by law, per Section 29 (Governing Law and Compliance).

31.2 Environment. 22

31.2.1

Ozone Depleting Substances. Contractor shall not use any Class I or Class II substances, as those terms are defined in 42 U.S.C. 7671, and in the implementation regulations of the United States Environmental Protection Agency, at 40 CFR Part 82 in its performance of Program Services. Disposition of Excess Materials. Contractor shall recycle or dispose of any non-regulated, non-hazardous excess or waste materials resulting from HP Products or HP Property in compliance with the provisions of this Agreement and the applicable Exhibits, and with the laws and regulations of any governmental entity or sovereign authority with jurisdiction. Contractor shall recycle or dispose of any other non-regulated, non-hazardous excess materials generated from its operations in performance of Program Services in compliance with the laws and regulations of any governmental entity or sovereign authority with jurisdiction. Any revenue generated from these operations will be used to offset Contractor's costs or will be applied as a credit on applicable invoices. HP has the right to determine disposition of any excess materials. Processes and Compliance. Contractor shall continuously implement and maintain processes and policies designed, to protect the environment and will adhere to all applicable laws and regulations regarding protection of the environment at any facility, whether owned or leased by Contractor or by HP, at which Program Services are performed by Contractor. Contractor shall establish and maintain such programs, processes, and procedures, provide such equipment, and training, and take such other steps as may be required by applicable laws and regulations, to protect the health and safety of Contractor's employees, agents and subcontractors performing work or services for Contractor under this Agreement, and HP will have no responsibility or liability therefore, except as provided by law. Contractor shall stack and store Material in compliance with HP's Packaging Standards, marked as Exhibit E, attached hereto and incorporated herein.

31.2.2

31.2.2

31.2.3

31.2.4

32.0 BACKGROUND AND DRUG SCREENING 32.1 Requiring background and drug screenings is in keeping with HP's objectives to provide and maintain a safe and secure working environment; to reduce the risk of thefts of property, funds, and proprietary information; and to have a work force of the highest quality and integrity. 32.2 Contractor shall conduct background and drug screenings as established in the Contractor's Background and Drug Screening policies. Should the Contractor's Program Services operation be conducted on a HP owned or leased facility, then Contractor shall be required to follow HP's Drug and Background Screening Guidelines which is attached to each applicable Appendix. 32.3 Should any portion of Contractor's work be subcontracted, Contractor shall warrant and ensure that commensurate background and drug screenings, which equal or exceed the expectations set forth for Contractor and Contractor's employees, have been completed on all subcontractors, and subcontractor's employees, subcontractors, and/or agents prior to those individuals performing work directly or indirectly involving HP or those individuals who otherwise have access to HP sites, data, products, and assets. 33.0 RELATIONSHIP OF THE PARTIES

33.1 The relationship of the parties to this Agreement is that of owner and independent contractor. Neither Contractor nor Contractor's employees, consultants, contractors or agents are agents, employees or joint ventures of HP, nor do they have any authority to bind HP by contract or otherwise to any obligation. They will not represent to the contrary, either expressly, implicitly, by appearance or otherwise. Contractor will determine, in Contractor's sole discretion,the 23

manner and means by which the work under this Agreement is accomplished, subject to the express condition that Contractor will at all times comply with applicable law. 34.0 TAXES AND BENEFITS 34.1 It is Contractor's obligation to appropriately report all compensation received by Contractor pursuant to this Agreement and pay all taxes due on such compensation. Contractor will indemnify HP against and hold it harmless from any obligation imposed on HP to pay any employee withholding taxes, social security, unemployment insurance, workers' compensation insurance,disability insurance or similar items, including interest and penalties thereon, in connection with any payments made to Contractor by HP pursuant to this Agreement. 35.0 GENERAL RESPONSIBILITIES. 35.1 Contractor shall:
35.1.1 Be solely responsible for the means, methods, techniques, sequences, and/or results of the work and all acts and omissions of Contractor's employees and agents; Obtain all permits required to perform the work; Abide by all written/verbal safety, and security procedures of HP while on HP premises; Coordinate all work without unreasonable interference with HP's employees or operations in areas around the work site; Proceed in good faith to comply with all applicable Federal, State, and Local laws, statutes and regulations; and; Meet, at minimum, HP's environmental guidelines.

35.1.2 35.1.3

35.1.4

35.1.5

35.1.6

36.0 MATERIALS MANAGEMENT 36.1 Packaging. Product packaging for Finished Goods Inventory (FGI) material shall be in accordance with the HP's packaging guidelines as stated in each applicable Appendix. Any varying requirements will be specified by project. 37.0 DESIGN, MATERIAL AND PROCESS CHANGE 37.1 Approval of changes. Contractor will not change any process, material, or component used in repairing product for HP that affects Form, Fit, Function, or any specification of any component, material, or unit without obtaining HP's prior written approval. Any such changes, including changes that will increase HP's costs in any way, must be approved by HP prior to Contractor implementing the change. 37.2 At Contractor's request. Contractor's request will include applicable test results and any cost, schedule, or other impact of such change to HP at least thirty (30) days before it wishes to implement such a change. If required, HP may request, at HP's expense, (within 5 days) Contractor to provide sample units of the modified product for HP's evaluation. HP will approve or disapprove Contractor's request within ten (10) days after the receipt of information or sample units. 37.3 At HP's request. Should HP desire modifications to the design of a product, HP will submit a written Production Change Order ("PCO") to Contractor. Contractor will implement the PCO as stated within the PCO and notify HP of any impact in cost or schedule within 3 working days of receipt of PCO. 37.4 Continued Process Improvement. Contractor will conduct business in a manner that promotes a work environment that continually results in process and quality improvements.

24

38.0 PRICING AND COST
38.1 Currency and pricing. The price for all Program Services and HP processes, including but not limited to warehousing, receiving, shipping, and logistic sevices shall be in U.S. dollars, unless otherwise stated, and shall remain in effect during the Term as defined in each Appendix. Prices and volumes will be reviewed mutually on a quarterly basis. Both HP and CONTRACTOR must agree to price changes in writing prior to the change going into effect. Costing Data. Contractor agrees to help HP understand Contractor's costs. Contractor further agrees to disclose all the cost components of the Program Services and Program processes performed for HP with the intent of reducing overall costs.

38.2

39.0

NOTICES 39.1 Notices from CONTRACTOR. Any notices sent by Contractor pursuant to this DSA are to be sent to the address listed below. If the notice pertains to any of the attached Appendices of this Agreement, then the notice shall be sent to the address listed in each applicable Appendix: Hewlett-Packard, 8000 Foothills Blvd., M/S 5781 Roseville, CA 95747 Attn: Ryan Donovan 39.2 Notices from HP. shall be sent to CONTRACTOR at: Pinnacle Data Systems, Inc. 6600 Port Road Groveport, Ohio 43125 Attn: Bob Hahn

40.0 BUSINESS CONTINUITY PLAN 40.1 Contractor will develop and keep current a business continuity plan which details strategies for response to and recovery from a broad spectrum of potential disasters that could disrupt operations and timely delivery of materials required pursuant to this Agreement.("Disaster" means a serious disruption of the functioning of an organization, causing widespread human, material or environmental losses that exceed the ability of the organization to cope using only its own resources.) 40.2 This plan will include a baseline hazard analysis, a written recovery plan, and procedures, a mitigation plan to prevent losses or minimize effects of unavoidable ones and a crisis communication plan. "Hazard" means an existing or unusual occurrence in the natural or human-made environment that may adversely affect human life, property, or activity to the extent of a disaster. Industrial/Technological Hazards include aircraft crashes, destruction of data storage, retrieval, and processing facilities, hazardous materials release, loss of data systems integrity from breaches of security, power failures, structural failures, telecommunications failures and transportation failures Natural Hazards include earthquake, flood, hurricane, landslide, tornado, tsunami, volcano, wild or forest fire, windstorm and winter storm. 40.3 Contractor will conduct an annual test and evaluation of its business continuity plan to ensure expected systemic and process responsiveness from the Contractor. Any reasonable costs related to physical movement or relocation of equipment or material related to this test, will be paid by HP per pre-approved plan. 25

40.4 Upon request, Contractor will make its business continuity plan and the annual evaluation available to HP or its designated representative for review. 41.0 FORCE MAJEURE 41.1 Neither Contractor or HP will be liable for any failure or delay in its performance under this Agreement due to causes, including, but not limited to acts of God, acts of civil or military authority, fires, epidemics, floods, earthquakes, riots, wars, sabotage, labor shortages or disputes, governmental actions, and the unavailability of materials and components necessary for the repair of units or sub-assemblies provided that: 41.1.2 performance or delay is beyond CONTRACTOR's reasonable control; Contractor gives HP written notice of such cause promptly, and in any event within five (5) days of discovery thereof; and Contractor uses its reasonable efforts to correct such failure or delay in performance.

41.1.3

41.1.4

41.2 Contractor's time for performance or cure under this section will be extended for a period equal to the duration of the cause or sixty (60) days, whichever is less. In the event of a delaying cause, HP may elect to suspend the Agreement in whole or in part for the duration of the delaying cause. 42.0 NO WAIVER 42.1 The waiver of any term, condition, or provision of this Agreement must be in writing and signed by an authorized representative of both parties. Any such waiver will not be construed as a waiver of any other term, condition, or provision except as provided in writing, nor as a waiver of any subsequent breach of the same term, condition, or provision. 43.0 SEVERABILITY 43.1 If any provision in this Agreement or any Exhibit, or Appendix is held invalid or unenforceable by a body of competent jurisdiction, such provision will be construed, limited or, if necessary, severed to the extent necessary to eliminate such invalidity or unenforceability. The parties agree to negotiate in good faith a valid, enforceable substitute provision that most nearly effects the parties' original intent in entering into this Agreement or to provide an equitable adjustment in the event no such provision can be added. The other provisions of this Agreement or any Exhibit or Appendix will remain in full force and effect. 44.0 MODIFICATION AND AMENDMENT 44.1 No modification or amendment of this Agreement or any Exhibit or Appendix will be binding on either party unless it is in writing and signed by an authorized representative of each party and it expressly states that it is a modification or amendment to this Agreement or any Exhibit or Appendix. 45.0 EXHIBITS and APPENDICES ATTACHED All exhibits and Appendices attached to this Agreement shall be deemed a part of this Agreement and incorporated herein. Terms that are defined in this Agreement, and used in any exhibit and appendix, have the same meaning in the exhibit and appendix as in the Agreement. The following exhibits are hereby made a part of this Agreement: Exhibit A: Exhibit B: Expenditure Proposal Contractor Security Requirements 26

Exhibit C: Exhibit D: Exhibit E: Exhibit F: Exhibit G: Exhibit H: Exhibit I:

Equipment Loan Agreement Performance Evaluation (TQRDCE) Packaging Standards HP Holiday Schedule Pinnacle Holiday Schedule Pinnacle Business Continuity Plan Electrostatic Discharge Control Standard

This Agreement, including all exhibits, is approved and agreed to by:
Hewlett-Packard Company - HP ---------------------------Name: Title: Bruno Pillet HP Customer Support Manager PINNACLE DATA SYSTEMS, INC. --------------------------Name: Title: Bob Hahn Vice President/COO

Signature: _______________________ Name: Title: William Shadle Sourcing Development Manager

Signature: _______________________

Signature: _______________________ 27

Exhibit A Expenditure Proposal EXPENDITURE PROPOSAL FORM The following items have been approved by the ________________________Division of Hewlett-Packard for purchase for the ______________________________ program operated by [Contractor's Name] ("Contractor") for the benefit of Hewlett-Packard. It is acknowledged that these items exceed the pre-approved expenditure allowance of $___________.
----------------------------------------------------------------------ITEM/DESCRIPTION COST AMORTIZATION OWNER AFTER PERIOD DEPRECIATION --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------SUBMITTED BY: DATE: ----------------------------------------------------------------------APPROVED BY: DATE: Hewlett-Packard Co. ----------------------------------------------------------------------APPROVED BY: DATE: Contractor -----------------------------------------------------------------------

NOTE: For each item listed above, a separate document MUST be attached that fully describes how transfer of ownership of the item, or distribution of funds from sale or salvage of the item, will be handled in each the following situations: 1. The item will no longer be required for the program being managed by Contractor, OR 2. Either HP or the Contractor terminates the contract for the program being managed by Contractor. 28

Exhibit B Contractor Security Guidelines 1. ACCESS CONTROL 1.1. ACCESS CONTROL (EMPLOYEES, CONTRACTORS, TRUCKERS) A formal access control program is required for all individuals that enter a warehouse where HP products are stored, manufactured, repaired or shipped to other destinations. All individuals should be granted access on a business need only basis. HP reserves the right to refuse access to any individual for business, security or safety reasons. 1.2. VISITOR BADGE PROCESS and ESCORT PROGRAM All visitors should be properly identified and issued ID badges accordingly. Any person other than an employee of the third party vendor should be required to be escorted at all times while in the facility. An exception to this would be employees of the third party supplier. 1.3. SIGN IN and OUT PROCEDURE All individuals should be required to sign in and out of any third party warehouse facility. An exception to this would be if the facility is under card key control. Those individuals who hold valid card keys would use the system to log in and out. All others would still be required to sign the log. All logs should be archived for a period of one year. 1.4. TOUR CONTROL Any individual (including Hewlett-Packard employees) should be required to have pre-authorization from HP Program Manager or their representative PRIOR to any tour into designated areas of facilities where services are being provided or inventory is being stored for HP. 2. ALARM SYSTEMS 2.1. DOCK DOORS and ALARM CONTACTS A process should exist to prevent unauthorized access via dock doors. The process shall include: 2.1.1. Ensuring that doors are only open when a trailer is properly attached and sealed to the building; 2.1.2. Ensuring that security officers are present in the case of any open door(s); 2.1.3. Ensuring that all doors are equipped with alarm contacts linked to a local security command center or central monitoring station. 2.2. EMERGENCY EXITS and ARMING, I.E. LOCAL SCREAMERS, ETC. All non-staffed emergency exits should at a minimum be alarmed with local screamers that require reset by a key. Additional enhancements could include reporting back to a command center or central monitoring station. 2.3. INTERIOR ELECTRONIC DETECTION IN BUILDING/ZONING OF ALARM SYSTEM To compliment perimeter controls, infrared protection within the facility has proven to be beneficial especially in low use areas. Consideration may be given to establishing zone patterns for alarms. This will enable management to provide additional protection to low use areas as well as component storage during normal business hours. 29

2.4. ALL MANNED DOORS SHOULD HAVE LATCH PLATES INSTALLED External doors should have latch plates installed to prevent unauthorized entry. 2.5. ROOF HATCHES Roof hatches should be assessed for adequate protection levels. Considerations should be given to monitor contact alarms or steel grates/bars preventing easy intrusion. 2.6. ALARM REPORTING RESPONSE AND ALARM ARMING A process should be in place to ensure timely reporting and escalation of all alarm conditions. This process should include alarm & de-alarming procedures, i.e. times of day, who can authorize an unlock, etc. 2.7. ALARM CHECKS AND PM PROCESSES Written procedures should be in place to ensure that all alarms are checked frequently to ensure proper operation. A preventative maintenance program should compliment this process. 3. SECURITY SYSTEMS 3.1. DOCK AND PERSONNEL DOOR CAMERAS It is preferable to have surveillance cameras at all non-staffed employees access doors. All shipping and receiving docks should have cameras installed to adequately monitor all activities in these areas. 3.2. ARCHIVING VCR TAPES Tapes that have been used to record access, egress and dock activities should be archived for a minimum of ninety (90) days. New, replacement tapes should be provided to replace tapes that begin to deteriorate in picture quality & resolution. 4. PRODUCT and INVENTORY PROTECTION 4.1. HP PRODUCT PROTECTION All Hewlett-Packard property and products should be stored in such a way that they are not mixed in with other companies' property. Where possible, motion sensors should compliment segregation procedures to enhance inventory protection. High-risk materials should not be stored outside of the warehouse, i.e. not left in trailers or on exterior docks. 4.2. SMALL COMPONENTS IN CAGES Small components such as microprocessors and other chips with high street dollar values should be stored in cages that have additional security procedures for access. This would include limited access, which could be controlled by card key access, high level key systems and/or sign in and out logs. Cameras should be installed to monitor the inventories stored in these cages. 5. EXTERIOR and PERIMETER PROTECTION 5.1. EXTERIOR LIGHTING Lighting should be adequate enough to cover all building perimeters and personnel parking areas. All gatehouses should be well illuminated to enable proper identification of employees and vehicles. 5.2. PERIMETER FENCING and GATES All facilities should be fenced, at least seven (7) feet high with chain link fabric of number nine (9) wire, and with

three (3) strands of barbed wire on outward supports at the top. All gates should be locked when not in use. Gatehouses should be staffed by a security officer during normal business hours and locked when not in use. 30

Exhibit C Equipment Loan Agreement THIS EQUIPMENT LOAN AGREEMENT, NO. ____ (the "Agreement") is entered into between HEWLETT-PACKARD COMPANY, a Delaware corporation ("HP"), and __________________, a ______________ company located at_________________________ ("Recipient"). This Agreement is effective as of _______________, _____ (the "Effective Date"). [Recipient and HP are currently parties to a _________________________ Agreement (the "Master Service Agreement"), dated as of______________, _____.] 1 Loan of Equipment. HP hereby loans to Recipient, for the applicable Term defined below, the HP-owned equipment (collectively, "HP Equipment"), which may consist of hardware, software and documentation described in the HP Equipment Schedule attached as Attachment 1. HP may, from time to time, add, upgrade, or remove HP Equipment from Recipient's site during the Term. All HP Equipment received by Recipient during the Term will be described in an amended HP Equipment Schedule signed by Recipient and appended to this Equipment Loan Agreement. Recipient agrees, by its receipt of HP Equipment, that all HP Equipment is subject to the provisions of this Agreement. 2 Term. This Agreement will begin as of the Effective Date and run for a term of _________ months (the "Term"), unless earlier terminated by HP or Recipient upon thirty (30) days written notice to the other. HP may in writing extend the Term, or establish a separate Term with respect to particular items of HP Equipment. 3 Use. Recipient may use the HP Equipment solely for purpose of: ______________________________ [in accordance with the Master Service Agreement]. Recipient may not move any HP Equipment from the location specified in the HP Equipment Schedule without the prior written consent of HP. Recipient's right to use the HP Equipment is non-transferable. 4 Software and Documentation. All software provided with the HP Equipment is hereby licensed to Recipient under HP's Software License Terms, a current form of which is attached as Attachment 2. If Recipient requires a license to use any software other than as stated in the Software License Terms, that license must be specified in the HP Equipment Schedule. Any documentation listed in the HP Equipment Schedule is licensed to Recipient for its use solely for the purposes stated in Section 3 above. If Recipient wishes to make copies of any documentation, it must first obtain HP's prior written consent. 5 Ownership. HP retains all right, title and ownership to the HP Equipment, unless Recipient purchases any such HP Equipment. Recipient hereby nominates and appoints HP as its attorney-in-fact for the sole purpose of executing and filing, on Recipient's behalf, UCC-1 financing statements (and any appropriate amendments thereto) or a suitable substitute document (including this Agreement) under the provisions of the Uniform Commercial Code for the HP Equipment loaned to Recipient hereunder. A form of an UCC-1 financing statement will be used for this purpose. If requested by HP, Recipient will affix any label or marking supplied by HP evidencing HP's ownership of the HP Equipment. HP may, from time to time, inspect the HP Equipment. Recipient may not sell, transfer, assign, pledge, or in any way encumber or convey the HP Equipment or any portion or component of such equipment. 6 Warranty Disclaimer. ALL HP EQUIPMENT IS PROVIDED "AS IS", WITHOUT WARRANTY OF ANY KIND, WRITTEN OR ORAL, EXPRESS OR IMPLIED, INCLUDING BUT NOT LIMITED TO ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. Recipient understands that some newly manufactured HP Equipment may contain remanufactured parts equivalent to new in performance. 31

7 Indemnification. Recipient hereby agrees to defend, indemnify and hold HP harmless from any claims or suits against HP arising from Recipient's use of the HP Equipment, including use by its employees, agents or subcontractors. Recipient will pay all costs, damages, losses and expenses (including reasonable attorneys' fees) incurred by HP and will pay any award with respect to any such claim or agreed to in any settlement. 8 Maintenance. During the Term, Recipient will maintain all HP Equipment in good operating order and condition. All maintenance must be provided by personnel authorized by HP. HP will provide standard installation, support and maintenance for the HP Equipment [at no cost] [at HP's standard rates] to Recipient during the Term; however, all maintenance costs and expenses due to Recipient's negligence will be borne by Recipient. Recipient will be responsible for providing HP personnel ready and safe access to the HP Equipment for such maintenance and support. 9 Risk of Loss. Recipient will bear all risk of loss with respect to the HP Equipment from receipt until such HP Equipment is returned to HP. All HP Equipment returned to HP must include the same components as received by Recipient, and must be in good operating order and condition. Charges may be imposed by HP if Recipient fails to return the HP Equipment in such condition or within the return timeframe set forth herein. 10 Shipping Costs. Unless otherwise agreed in writing by HP, Recipient will be responsible for and pay all delivery, freight and rigging charges, all taxes and duties, and all other shipping costs and expenses with respect to the delivery or return of any HP Equipment hereunder. 11 Limitation of Liability. HP WILL NOT BE LIABLE FOR ANY DIRECT, INDIRECT, SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES, WHETHER BASED ON CONTRACT, TORT, OR ANY OTHER LEGAL THEORY, ARISING OUT OF THIS EQUIPMENT LOAN AGREEMENT OR RECIPIENT'S USE OF THE HP EQUIPMENT. 12 Termination. Upon expiration or earlier termination of the Term, Recipient will return to HP all HP Equipment within 10 workdays. HP may permit Recipient to purchase certain items of the HP Equipment upon termination under the purchase terms set forth below. In the event that Recipient is permitted to purchase any of the HP Equipment and fails to return that Equipment to HP upon expiration of the Term within such 10-day period, Recipient will be deemed to have elected to purchase the HP Equipment, and HP will invoice Recipient accordingly. 13 Purchase Option. If HP permits Recipient to purchase any of the HP Equipment, Recipient may elect to purchase those items of the HP Equipment under HP's then current standard terms and conditions, provided that such HP Equipment may not be purchased solely for resale. Upon purchase, such HP Equipment will be provided with HP's then current standard warranty provisions for used equipment. The purchase price for HP Equipment purchased under this Section will be the then current list price less a ______% discount. No other promotional or purchase discounts will apply. Such purchase will not qualify for any stock rotation or price protection under any other agreement that Recipient may have with HP. 14 General Provisions. a) Notices . All notices to be given under this Agreement must be in writing and addressed to the location specified in the Master Agreement or as designated in the opening Section of this Agreement if there is no Master Agreement. Notices are validly given upon the earlier of confirmed receipt by the receiving party or three days after dispatch by courier or certified mail, postage prepaid, properly addressed to the receiving party. Notices may also be delivered by telex and will be validly given upon oral or written confirmation of receipt. Either party may change its address for purposes of notice by giving notice to the other party in accordance with these provisions. 32

b) No Assignment. Neither this Agreement nor any right, privilege, license or obligation set forth herein may be assigned, transferred or shared by Recipient without HP's prior written consent, and any such attempted assignment or transfer is void. Any merger, consolidation, reorganization, transfer of substantially all assets of Recipient or other change in control or ownership of Recipient will be considered an assignment for the purposes of this Agreement. c) Entire Agreement. This Agreement and the attached Exhibits comprise the entire understanding between the parties with respect to its subject matter and supersede any previous communications, representations, or agreements, whether oral or written. No modification of this Agreement will be binding on either party unless in writing and signed by an authorized representative of each party. d) Governing Law. This Agreement will be governed in all respects by the laws of ____________ without reference to any choice of laws provisions, as though this Agreement were entered into by residents of that State to be wholly performed within that State. The parties hereby waive any application of the United Nations Convention on Contracts for the International Sale of Goods (as promulgated in 1980 and any successor or subsequent conventions) with respect to the performance or interpretation of this Agreement.
APPROVED AND AGREED: RECIPIENT:_____________________ By: Print Name: Title: 33 HEWLETT-PACKARD COMPANY By: Print Name: Title:

PROGRAM EQUIPMENT LOAN AGREEMENT AND ASSET LIST

--------------------------------------------------------------------------------------------------------Program Equipment and Asset List --------------------------------------------------------------------------------------------------------Contract # Location Contractor Name: --------------------------------------------------------------------------------------------------------Responsible Date ID # or Equipment Equipment Description Equipment for Dispositio Listed HP Asset # Serial # Manufacturer Model # Condition Maintenance Date -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

34

Exhibit D Performance Evaluation (TQRDCE) TQRDCE is a set of performance expectations and measurement criteria for use in qualifying new service CONTRACTORs, and managing the ongoing long-term business relationship with existing service CONTRACTORs. The initials TQRDCE represent: Technology, Quality, Responsiveness, Delivery, Cost and Environment. The success of service CONTRACTOR performance is rightfully shared with our service CONTRACTORs who specifically contribute to our commitment to excellence. Successful service CONTRACTOR performance in the areas of TQRDCE will increase the opportunity for repeat business, increased sales, and profitable growth. A primary objective for procurement is: To maintain a competitive advantage by providing materials of the highest quality and lowest cost, with the best delivery, responsiveness, and technology available, by selecting fewer but better service CONTRACTORs. In order to accomplish this objective, the TQRDCE criteria were developed. Technology HP must compete in the world market on the basis of manufacturing technology, as well as design technology. We expect our service CONTRACTORs to be technological leaders in their respective fields of design and manufacturing. Service CONTRACTORs are expected to participate in mutual engineering throughout HP's products' life cycle to enable timely introductions and continuous quality and cost improvements. Quality HP set a quality goal of zero defective products for electrical, mechanical, cosmetic, and administrative reasons. HP's quality expectation is defect-free materials. Quality and reliability are expected to be achieved through superior design, process control and continuous process improvements. All material is to be fit for use, and to be cosmetically acceptable. Responsiveness HP expects service CONTRACTORs to be responsive to swings in demand, with short cycle times, and appropriate inventory management, while maintaining flexible capacity capabilities to successfully resolve problems and improve worldwide service. Delivery HP expects deliveries to be 100% on time all the time within a window of -3/+0 (three days early and no days late). To achieve this expectation there must be continuous improvement in overall delivery performance and our service CONTRACTORs must be prepared to meet commitments worldwide. Lead times must be short by industry standards, reliable and decreasing over time. COST HP expects to minimize costs and obtain the lowest average price worldwide. Environment HP recognizes its obligations to be a good citizen in each nation and community in which it operates. HP must conduct its operations in such a manner that protects the environmental quality of these countries and communities. Our service CONTRACTORs are an integral part of this effort; therefore, HP service CONTRACTORs are expected to conduct their operations in an environmentally responsible manner. By setting service CONTRACTOR expectations HP hopes to: - maximize customer satisfaction; 35

- maximize profitability for all contributors to the system; - maximize responsiveness to change; and - provide a framework for effective communications To accomplish these objectives HP will need to: - establish and maintain long-term commitments; - promote effective communications; - obtain mutual agreement on expectations and goals; - treat a service CONTRACTOR's process as an extension of HP's processes; - and utilize a team approach to achieve performance improvements (proactive/cooperative). The success of service CONTRACTOR performance is rightfully shared with our service CONTRACTORs who specifically contribute to our commitment to excellence. Successful service CONTRACTOR performance in the areas of TQRDCE will increase the opportunity for repeat business, increased sales, and profitable growth. 36

Exhibit E HP Packaging Standards 37

Exhibit F HP HOLIDAY SCHEDULE
========================================================================================= HP 2001 2002 2003 Company-Designated Date/Day Date/Day Date/Day Holiday Observed Observed Observed ========================================================================================= ========================================================================================= New Year's Day Jan 01 (Mon) Jan 01 (Tue) Jan 1 (Wed) ========================================================================================= Martin Luther Jan 15 (Mon) Jan 21 (Mon) Jan 20 (Mon) King Day ========================================================================================= Presidents' Day Feb 19 (Mon) Feb 18 (Mon) Feb 17 (Mon) ========================================================================================= Memorial Day May 28 (Mon) May 27 (Mon) May 26 (Mon) ========================================================================================= Independence Day July 04 (Wed) Jul 04 (Thu) Jul 04 (Fri) ========================================================================================= Floater ----------Jul 05 (Fri) ----------========================================================================================= Labor Day Sep 03 (Mon) Sep 02 (Mon) Sep 01 (Mon) ========================================================================================= Thanksgiving Nov 22 (Thu) Nov 28 (Thu) Nov 27 (Thu) ========================================================================================= Day After Thanksgiving Nov 23 (Fri) Nov 29 (Fri) Nov 28 (Fri) ========================================================================================= Floater Dec 24 (Mon) --------------------========================================================================================= Christmas Dec 25 (Tue) Dec 25 (Wed) Dec 25 (Thu) ========================================================================================= Floater --------------------Dec 26 (Fri) =========================================================================================

March 01, 2001 38

Exhibit G Contractor Holiday Schedule 39

Exhibit H Contractor Business Continuity Plan 40

Exhibit I Electrostatic Discharge Control Standard (begins on following page) 41

EXHIBIT 10(n) HP/pinnacle Data Systems, Inc. DIRECT CONNECT VS SUPPLIER SERVICES AGREEMENT #C2-607 TERMS & CONDITIONS This Virtual Sourcing, e-Fulfillment Services Agreement (hereinafter referred to as "Services Agreement") is made and entered into by and between Hewlett-Packard Company ("HP"), a Delaware corporation, and its divisions and the Virtual Source Supplier, Pinnacle Data Systems, Inc. ("PDS"), a Ohio corporation, located at 6600 Port Road, Groveport, Ohio 43125. 1. VIRTUAL SOURCING DIRECT CONNECT SUPPLIER PROGRAM SCOPE. The primary goal of the Virtual Sourcing, e-Fulfillment Program is to electronically route Hewlett-Packard customer orders directly to suppliers who will fulfill these orders on a same day basis from available inventory and electronically message back to Hewlett-Packard the details specific to the shipment sent directly to the customer. To provide a foundation of HP's expectations of the VS Supplier, included below is an outline of HP and VS Supplier responsibilities specific to the Virtual Sourcing, e-fulfillment Program. 2. RELATIONSHIP OF THE PARTIES. (a) Neither this Services Agreement nor any of the services described in the attached Exhibits are intended by the parties to interfere with or change for any reason the relationship between VS Supplier and all other divisions at HP governed by the Divisional Services Agreement #01-176261. (b) The relationship of VS Supplier to HP shall be that of independent contractor. All inventory, equipment, warehouse facilities, and computer systems used by VS Supplier in the performance of the services rendered hereunder shall at all times be owned or leased by VS Supplier or loaned to the supplier by HP. This Agreement does not create any agency or partnership relationship between HP and the VS Supplier. (c) All expenses incurred by VS Supplier in the operation of the equipment, warehouse facilities, and computer systems shall be paid by VS Supplier without reimbursement from HP. VS Supplier' s sole compensation for the fulfillment services rendered to HP and work performed for HP under this Service Agreement shall be as provided in this Services Agreement. (d) HP may let other contracts in connection with, or similar to, the services performed by VS Supplier. (e) This Agreement provides no assurance or guarantees of any order or services. 3. TERM OF AGREEMENT. This Agreement is effective as of September 01, 2001 ("Effective Date") for a period of one (1) year (the "Term"). The parties may, by mutual agreement in writing, renew the term for additional one (1) year periods. This Agreement is no guarantee of future business for the VS Supplier and will not ensure the continuation of the Virtual Sourcing business to the above VS Supplier. 4. TERMINATION. 4.1 Any of the services or functions described in this Services Agreement may be terminated by either party with or without cause with thirty (30) days written notice to the other party. 4.2 If either party is in breach of any provision of this Services Agreement, the nonbreaching party may, by notice to the breaching party, terminate the whole or any part of this Services Agreement or any Order, unless the breaching party cures the breach within 15 days after receipt of notice. 4.3 In the event of termination of this Services Agreement or any of the services described in the attached Exhibits for any reason, HP shall have no liability other than payments of amounts then due or accrued until the effective date of termination of said Services Agreement. 4.4 The termination of this Services Agreement or any of the services described in the attached Exhibits for any reason shall not have any impact on the relationship of the parties governed by the Divisional Services Agreement #01-17-6261. 5. PAYMENT TERMS. (a) HP will pay invoices within forty-five (45) calendar days of receipt of the invoice. (b) Billing Excluded Costs: Costs allocated to HP shall exclude any and all domestic and/or international fines and penalties with respect to violations of any statute, ordinance, regulation, rule, order, judgment or decree (including settlement thereof) by VS Supplier and the foregoing shall be the responsibility of VS Supplier. 6. CONFIDENTIAL INFORMATION/INTELLECTUAL PROPERTY. 6.1 (a) Confidential Information: Other than in the performance of this Agreement, neither VS Supplier nor VS

Supplier's agents, employees, or subcontractors shall use or disclose to any person or entity any confidential information of HP (whether in written, oral, electronic or other form) which is obtained from HP or otherwise prepared or discovered either in the performance of this Agreement, through access to HP Assets/Systems, or while on HP premises. As used herein, the term "confidential information" shall include, without limitation, this Services Agreement, all information related to the Virtual Sourcing, e-Fulfillment Program, all Work Product, all information designated by HP as confidential or private, all information or data concerning or related to HP's products (including the discovery, invention, research, improvement, development, manufacture, or sale thereof), processes, or general business operations (including sales costs, profits, pricing methods, organization and employee lists), and any information obtained through access to any Information Assets/Systems Page 1

(including computers,networks, voice mail, etc.) which, if not otherwise described above, is of such a nature that a reasonable person would believe it to be confidential or proprietary. (b) VS Supplier shall not disassemble, decompile, reverse engineer, decrypt, or otherwise analyze the HP software or Confidential Information, or allow others to do so. (c) Access to HP Information Assets/Systems: Access, if any, is granted solely to facilitate the business relationship described in this Agreement, and is limited to those specific Assets/Systems, time periods, and personnel designated by VS Supplier as are separately agreed to by HP and VS Supplier from time to time. Access is subject to business control and information protection policies, standards, and guidelines as may be provided by HP. Use of any other HP Assets/Systems is expressly prohibited. This prohibition applies even when an HP Asset/System which VS Supplier is authorized to access serves as a gateway to other HP Assets/Systems outside the scope of VS Supplier's authorization. Use of Assets/Systems during other time periods or by individuals not authorized by HP is expressly prohibited. Without limiting the foregoing, VS Supplier warrants that it has adequate security measures in place to comply with the above obligations and to insure that access granted hereunder will not impair the integrity and availability of HP information assets/systems. Upon reasonable notice, HP may audit VS Supplier to verify VS Supplier's compliance with these obligations. Further, the warranty regarding adequate security measures and audit verification described above shall also apply to any servers used by VS Supplier in the performance of this Agreement. 6.2 The foregoing confidentiality obligations will not apply to Confidential Information that (a) is already known to VS Supplier prior to disclosure by HP; (b) is or becomes a matter of public knowledge through no fault of VS Supplier; (c) is rightfully received from a third party by VS Supplier without a duty of confidentiality; (d) is independently developed by VS Supplier; (e) is disclosed under operation of law; or (f) is disclosed by VS Supplier with the prior written approval of HP. 6.3 WORK PRODUCT. "Work Product" means models, devices, reports, computer programs, tooling, schematics and other diagrams, instructional materials, and anything else VS Supplier, its agents, employees, and subcontractors produce in connection with this Services Agreement. All Work Product will belong to HP. VS Supplier, its agents, employees, and subcontractors will deliver all Work Product to HP upon the earlier of the expiration/termination of this Services Agreement or HP's request. 6.4 WORKS OF AUTHORSHIP. VS Supplier will promptly disclose to HP any works of authorship, including but not limited to, drawings, designs, plans, specifications, notebooks, tape recordings, computer programs, computer output, models, tracings, schematics, photographs, reports, findings, recommendations, educational materials, data and memoranda of every description and anything else VS Supplier produces in connection with this Services Agreement, and VS Supplier hereby assigns to HP all copyrights in such works. To the extent permitted by law, VS Supplier waives any moral rights, such as the right to be named as author, the right to modify, the right to prevent mutilation and the right to prevent commercial exploitation, whether arising under the Berne Convention or otherwise. VS Supplier will sign any necessary documents and will otherwise assist HP, at HP's expense, in registering HP's copyrights and otherwise protecting HP's rights in such works in any country. HP will own all patents, copyrights or trade secrets covering such materials and will have full rights to use the materials without claim on the part of VS Supplier for additional compensation. 6.5 INVENTIONS. VS Supplier will promptly disclose to HP any inventions or discoveries made in connection with this Services Agreement and paid for by HP. HP will own all intellectual property rights in such inventions or discoveries. VS Supplier will sign any necessary documents and will otherwise assist HP, at HP's expense, in obtaining patents or mask work registrations and otherwise protecting such inventions in any country. 6.6 PRE-EXISTING INTELLECTUAL PROPERTY. (1) "Pre-Existing Intellectual Property" means any trade secret, invention, work of authorship, mask work or protectable design that has already been conceived or developed by anyone other than HP before VS Supplier renders any services under this Services Agreement. (2) VS Supplier will not use any Pre-Existing Intellectual Property in connection with this Agreement unless VS Supplier has the right to use it for HP's benefit. If VS Supplier is not the owner of such Pre-Existing Intellectual Property, VS Supplier will obtain from the owner any rights necessary to enable VS Supplier to comply with this Agreement. (3) If VS Supplier uses any Pre-Existing Intellectual Property in connection with this Agreement, VS Supplier hereby grants HP non-exclusive, royalty-free, worldwide, perpetual license to make, have made, sell, use, reproduce, modify, adapt, display, distribute, make other versions of, and disclose the Property and to sublicense other to do these things. (4) Indemnification: VS Supplier will give HP notice immediately if at any time VS Supplier knows or reasonable should know of any third party claim to any intellectual property provided by VS Supplier to HP pursuant to this Agreement. VS Supplier will indemnify and hold harmless HP from all liability arising from HP's use of such intellectual property. 6.7 LICENSE. HP grants to VS Supplier the license described in Exhibit D for use of the e-Fulfillment Specifications and Software Components during the term of this Agreement, for the purpose of performing its obligations pursuant to the terms of this Agreement and the license.

6.8 SURVIVAL. The provisions of this section 6 regarding use and disclosure of Confidential Information shall survive termination of this Agreement. 7. INDEMNIFICATION. General: VS Supplier shall defend, indemnify, and hold harmless HP, its officers, directors, and employees from any claims, losses, attorney's fees, damages, liabilities, costs, expenses, or suits: for injury or death to any person (including VS Supplier or its employees), damage to or loss of property, or any other claim arising out of or resulting Page 2

from any act or omission of VS Supplier, its employees, agents, or subcontractors in VS Supplier's performance of this Agreement, the presence of VS Supplier or its personnel on HP's premises, or the driving of HP motor vehicles. In no event, however, shall VS Supplier be responsible for the sole negligence of HP. 8. LIMITATION OF LIABILITY. In no event shall HP be liable to VS Supplier for any special, indirect, incidental or consequential damages in any way arising out of or relating to this Agreement even if HP has been advised of the possibility of such damages. 9. WARRANTY. 9.1 VS Supplier warrants to HP that: 9.1.1 All Services will be performed by VS Supplier in a professional manner, consistent with the standard of skill and care exercised by the best professional consultants on projects of comparable scope and complexity, in a similar location, and in conformance with the requirements of this Services Agreement. 9.1.2 All work shall be of good quality and workmanship, free from faults and defects, and in conformity with the requirements of this Services Agreement, including any plans or specifications incorporated in this Services Agreement. 9.1.3 VS Supplier is sufficiently experienced, properly qualified, registered, licensed, equipped, organized, and financed to perform the Services in compliance with the terms of this Services Agreement. 9.1.4 VS Supplier will devote such time, personnel and resources for the performance of its duties under this Services Agreement and any Purchase Order, and within the deadlines set by HP. 9.1.5 Nothing in this Warranty section shall be deemed to relieve VS Supplier of any warranties included in the Divisional Services Agreement #01-17-6261. 10. DELETED. 11. INSURANCE. During the Term and at all times that VS Supplier performs services for HP, VS Supplier shall maintain in full force and effect, at VS Supplier expense, the following minimum insurance coverages. Certificates of insurance evidencing the required coverages and limits shall be furnished to HP before any Work is commenced hereunder, name HP as additional insured, and provide that there will be no cancellation or reduction of coverage without 30 days prior written notice to HP. (a) Workers Compensation: Workers' Compensation shall be provided as required by law or regulation. Employer's Liability insurance shall be provided in amounts not less than $1,000,000 per accident for bodily injury by accident, $1,000,000 policy limit by disease, and $1,000,000 per employee for bodily injury by disease. (b) General Liability: VS Supplier shall carry either Comprehensive or Commercial General Liability Insurance with coverage to include Premises and Operations, Products and Completed Operations, Contractual Liability, Broad Form Property Damage (including completed operations), and Personal Injury Liability with combined single limits of $1,000,000 per occurrence and general aggregate of $10,000,000. (c) Automobile Liability: VS Supplier shall carry bodily injury, property damage, and automobile contractual liability coverage for owned, hired, and non-owned autos with a combined single limit of liability for each accident of not less than $1,000,000. (d) Such policies shall name HP, its officers, directors, and employees as Additional Insureds to the extent of the indemnity herein and shall stipulate that the insurance afforded Additional Insureds to the extent of its indemnity herein shall apply as primary insurance and that no other insurance carried by any of them shall be called upon to contribute to a loss covered thereunder. 12. GOVERNING LAW. Both parties shall comply with all applicable federal, state, and local laws, rules, regulations, or orders issued by any public authority having jurisdiction over their respective obligations under this Services Agreement. This Services Agreement and all rights and obligations hereunder, including matters of construction, validity, and performance, shall be governed by the law of California without giving effect to the conflict of law provisions thereof. Any dispute arising under this Services Agreement shall be heard in courts of the State of California. 13. COUNTRY OF MANUFACTURE AND DUTY DRAWBACK RIGHTS. 13.1 Country of Origin Certification. Upon HP's request, VS Supplier will provide HP with an appropriate certification stating the country of origin for the Products sold, sufficient to satisfy the requirements of the customs authorities of the country of receipt and any applicable export licensing regulations, including those of the United States. 13.2 Country of Origin Marking. VS Supplier will mark each Product, or the container if there is no room on the Product, with the country of origin. VS Supplier will, in marking the Products, comply with the requirements of

the customs authorities of the country of receipt. 13.3 Duty Drawback. If the Products delivered under this Agreement are imported, VS Supplier will when possible allow HP to be the importer of record. If HP is not the importer of record and VS Supplier obtains duty drawback rights to the Products sold, VS Supplier will, upon HP's request, provide HP with documents required by the customs authorities of the country of receipt to prove importation and to transfer duty drawback rights to HP. Page 3

14. GOVERNMENTAL COMPLIANCE. 14.1 Duty To Comply. VS Supplier agrees to comply with all federal, state, local and foreign laws, rules and regulations applicable to its performance of this Agreement or to the Products sold, including any approvals necessary to allow for HP's sale and customers' use of the Products. Without limiting the generality of the foregoing sentence, VS Supplier represents that:
14.1.1 VS Supplier will comply with all government or freight regulations and requirements for each country to which the Products are shipped; VS Supplier will comply with all equal employment opportunity and non-discrimination requirements prescribed by Presidential Executive Orders, including the requirements of Executive Order 11246, the Vocational Rehabilitation Act, and the Vietnam Era Veterans' Readjustment Assistance Act; Each chemical substance contained in the Products sold is on the inventory of chemical substances compiled and published by the Environmental Protection Agency pursuant to the Toxic Substances Control Act; All Products sold will be shipped in conformance with government or freight regulations and requirements applicable to chemicals; and VS Supplier will provide complete and accurate material safety data sheets prior to shipping any Product sold.

14.1.2

14.1.3

14.1.4

14.1.5

14.2 Procurement Regulations. For the Products purchased under this Agreement for incorporation into products to be sold under a federal contract or subcontract, those applicable procurement regulations that are required by federal statute or regulation to be inserted in contracts or subcontracts will upon notice to VS Supplier be deemed incorporated in this Agreement and made to apply to all Orders. 14.3 Ozone Depleting Substances. VS Supplier certifies that no Product sold nor any component of any Product sold:
14.3.1 Contains any Class I Substance, or Class II Substance, as those terms are defined in 42 USC Section 7671 and implementing regulations of the United States Environmental Protection Agency at 40 CFR Part 82, as now in existence or hereafter amended.

14.4 In addition to the requirements and specifications for Products and their packaging set forth elsewhere in this Agreement and in Divisional Services Agreement #01-17-6261, all Products and their packaging will comply with HP's General Specifications for Environment, DWG No. A-5951-1745-1. www.hp.com/go/supplierE 15. MODIFICATIONS/REVISIONS/ASSIGNMENT. (a) This Agreement represents the entire Agreement of the Parties with respect to the Virtual Sourcing, e-Fulfillment Program, and may not be amended or modified except by a written instrument signed by both VS Supplier and HP. (b) VS Supplier shall neither delegate any duties nor assign any rights under this Agreement without the prior written consent of HP. Any such attempted delegation or assignment shall be void. Any use of sub-contractors by VS Supplier in the performance of this Agreement does not relieve VS Supplier of any obligations contained herein. In situations where terms and conditions of this Services Agreement #C2-607 and Divisional Services Agreement #01-17-6261 articles are inconsistent, VS Supplier and HP hereby acknowledge that, with respect to parts listed in Exhibit B of this Services Agreement and on order by any HP customer via a HP Electronic Purchase Order (EPO), the terms and conditions found in this Services Agreement #C2-607 will prevail. 16. EXHIBITS. All Exhibits attached to this Agreement shall be deemed a part of this Agreement and incorporated herein. The following Exhibits are hereby made part of this Agreement: Exhibit A - Virtual Sourcing Specific Business Conditions Exhibit B - Parts/Pricing List Exhibit C - Confidential Disclosure Agreement Exhibit D - HP e-fulfillment Specifications and Software Components License Terms 17. SUBCONTRACTORS. VS Supplier will not subcontract any of the Services to other persons or entities without the prior written approval of HP. All obligations imposed upon VS Supplier will be similarly imposed by

VS Supplier upon any authorized Subcontractor. VS Supplier's execution of any subcontracts, including subcontracts approved by HP, will not relieve, waive or diminish any obligation VS Supplier may have to HP under this Services Agreement. Fees for subcontracted Services will be included in the fees and costs billed by VS Supplier according to Exhibit A, Section 11 below. 18. RECORDS. VS Supplier will maintain books, records, documents and other evidence pertaining to costs, charges, fees, and other expenses to the extent and in such detail as will properly evidence all costs for labor, materials, equipment, supplies, and services, and other costs and expenses of whatever nature for which reimbursement is claimed under the provisions of this Services Agreement. HP may examine or audit all books, documents, papers, or records of VS Supplier pertaining to the Services at all reasonable times during the term of this Services Agreement; and VS Supplier will safeguard and make them available to HP for inspection for a period of up to four (4) years following the completion of termination of this Services Agreement. Page 4

IN WITNESS WHEREOF, this Services Agreement has been entered into as of September 01, 2001 (Effective Date).
HEWLETT-PACKARD COMPANY Date: By: _______________________________ Printed Name: Bruno Pillet Title: HP Customer Support General Manager HEWLETT-PACKARD COMPANY Date: By: _______________________________ Printed Name: William Shadle Title: Sourcing Development Manager PINNACLE DATA SYSTEMS, INC. Date: By: _______________________ Printed Name: Bob Hahn Title: Vice President/COO

Page 5

EXHIBIT A Virtual Sourcing Specific Business Conditions 1. PRICE SETTING. 1.1 At random, Hewlett-Packard shall monitor program part numbers to ensure VS Supplier is providing "fair market" value. Exhibit B provides the Unit Cost for each part to be provided under the terms of this Agreement. 1.2 Hewlett-Packard and VS Supplier agree to review and or adjust pricing as appropriate within the terms in the Statement of Work. Pricing changes will not be effective until documented in writing with authorized signatures from both parties. 2. HP CARRIER FREIGHT AUTHORIZATION. 2.1 Hewlett-Packard will establish exclusive "carrier freight" accounts for use by VS Supplier. 2.2 VS Supplier shall use these exclusive accounts for the purpose of shipping ONLY to Hewlett-Packard customers whose orders were received "electronically".
2.2.1 HP Carrier Specification: -----------------------2.2.1.1. As mentioned in 2.2 above, VS Supplier shall use the specific HP approved carriers and shall use only the specific account numbers assigned by HP to VS Supplier. 2.2.1.2. VS Supplier shall use the HP routing guide and approved logistics process to ship HP Product. 2.2.1.3. Exception: "First Flight Customer Orders." VS Supplier shall use the HP designated carrier for shipment of First Flight Customer Orders.

2.3 Individual Packaging. All products shipped by VS Supplier to HP customers shall be packaged in individual packaging ("single-pack"), and shall be in accordance with HP packaging standards contained in Packaging Standard Requirements for HP Support Hardware document number A-5961-4800-1. Individual box labeling shall include the following information, at a minimum: HP's Replacement/Exchange Part Number, Part Description, Part Revision, Part Serial Number, Unit of Measure, and Country of Origin. 2.4 Bar Coding requirements. All HP Products shipped by VS Supplier to HP customers shall be in accordance with the 3 of 9 Bar Coding accepted as industry standard and the VS Supplier Handbook. 3. CUSTOMER ORDER FULLFILLMENT. 3.1 VS Supplier shall ship directly to the customer all electronically received HP customer orders on the day received. This includes all Hotline and Standard customer orders. 3.2 VS Supplier must exceed a monthly success rate of 98% in fulfilling all orders based upon the shipment cutoff times set forth in Attachment A-1. 3.3 If less than 100% of orders are fulfilled as described in Section 3.2 due to fault on the part of VS Supplier, HP shall be reimbursed by VS Supplier for all additional costs incurred by HP. 3.4 Corrective Action Process: In addition, in the event order fulfillment fails to meet the 100% requirement for 3 consecutive work days, VS Supplier must submit a one page summary corrective action plan along with associated root cause analysis in writing to HP within 24 hours of the third missed transaction day. 3.5 Shipping Errors: In the event an HP Customer submits a shipment discrepancy claim, HP and VS Supplier will mutually resolve the claim using one of the following remedies:
3.5.1 Customer claims product was not received. Remedy: HP will submit another order for the item. HP and VS Supplier will review the issue. If VS Supplier is at fault, VS Supplier will issue credit for the original order. Customer claims wrong part received. Remedy: HP will issue a new order. Customer will send incorrect part to HP Roseville. HP will contact VS Supplier regarding return of item and credit. Wrong part will be returned to VS Supplier for credit. Customer claims the wrong quantity was received. Remedy too few: HP will submit another order for the quantity short. VS Supplier

3.5.2

3.5.3

3.5.4

3.5.5

will ship the order at no charge or issue a credit for the same quantity. Remedy too many: Customer to return excess items to HP. HP will contact VS Supplier regarding return authorization and VS Supplier will issue a credit if necessary. Customer claims incomplete part received (i.e. missing item in kit). Remedy: HP will issue a new order. Customer will return incomplete part to HP. HP and VS Supplier will review, VS Supplier will send missing item(s) to HP at no charge to HP. Customer claims that a part was damaged upon receipt. Remedy: HP will submit a new order. Customer will return damaged part to HP. HP and VS Supplier will review the damage, if VS Supplier is responsible, credit will be issued. Page 6

3.5.6

Customer wishes to return or reject receipt of order. Remedy: Customer will return product to HP. HP will place Product in inventory. No VS Supplier action required.

4. NOTICES. 4.1 All notices will be directed to the following:
If to Hewlett-Packard Company: Attn: Ryan Donovan Account Manager 8000 Foothills Blvd. Roseville, CA 95747 Phone: (916) 785-9098 Fax: (916) If to Pinnacle Data Systems, Inc. Attn: Bob Hahn Vice President Service 6600 Port Road Groveport, Ohio 43125 Phone: 614/748-1150 Fax: 614/748-1209

e-mail: e-mail: 4.2 The HP Account Manager will coordinate the distribution of all notices received from VS Supplier to the appropriate HP department/entity. 5. PROGRAM COVERAGE AVAILABILITY. 5.1 VS Supplier shall make available (a) Systems and (b) Staffing to ensure Program coverage of 7x24x365 (7 Days by 24 Hours by 365 Calendar Days Per Year). 6. DISASTER RECOVERY. 6.1 Hewlett-Packard and VS Supplier have documented appropriate disaster recovery plans (DRP) to assure the non-interruption of customer order fulfillment. The aforementioned plans will comply with the HP VS Supplier Handbook supplied by HP. 7. PERFORMANCE REPORTING. 7.1 Hewlett-Packard will measure the program performance of VS Supplier and report results on a daily basis. 7.2 HP will perform an semiannual business review of VS Supplier. 7.3 VS Supplier will assign a VS Program Lead and the VS Program Lead shall be identified in an HP approved Escalation Matrix. The HP account manager will perform a review of VS Suppliers' delivery metric compliance on a monthly basis. 8. QUALITY AUDITS. 8.1 VS Supplier shall provide access to Hewlett-Packard for the purpose of on-site/ process inspection audits. 9. WARRANTY TRACKING. 9.1 VS Supplier shall track product/part warranty, issue credit and report on a monthly basis to Hewlett-Packard as appropriate. 10. ACTIVITY REPORTING. 10.1 VS Supplier shall submit a daily Activity Report to Hewlett-Packard. Each Report must include the following:
10.1.1 10.1.2 10.1.3 10.1.4 10.1.5 Customer Order Number, Hewlett-Packard Part Number, Description, Quantity Shipped, Unit of Measure,

10.1.6 10.1.7 10.1.8 10.2 10.3

Date Shipped, Ship Confirmation ID Price

Each Daily Activity Report must have a month-to-date cumulative summary section by part number of quantity shipped. Activity Reports are to be electronically submitted or mailed to: Hewlett-Packard Attn: Ryan Donovan Page 7

8000 Foothills Blvd. M/S 5781 Roseville, CA 95747 11. TRANSACTIONAL BILLING. --------------------Orders Electronically Received. HP will invoice the HP Financial Operations electronically on behalf of the VS Supplier. If VS Supplier has invoicing reconciliation issues, VS Supplier shall contact the HP account manager and supply the following data. The data required includes and is not limited to: 11.1.1 11.1.2 11.1.3 11.1.4 11.1.5 11.1.6 11.1.7 11.1.8 11.3 Customer Order Number, Ship Confirmation ID, Hewlett-Packard Part Number, Description, Quantity Shipped, Unit of Measure, Date Shipped, Price

11.1

Any credits issued for missed shipments should be identified by customer order number and listed in a separate monthly invoice and sent to the following address: Hewlett-Packard Company Financial Operations PO Box 2810 Colorado Springs, Colorado 80901-2810 OWNERSHIP OF HP PRODUCTS. -----------------------Pursuant to this Agreement, VS Supplier will receive HP Products (whether considered functional, non-functional or defective) returned by HP and/or HP customer sites. All such HP Products shall be owned by HP and consigned to VS Supplier unless and until VS Supplier purchases the HP Product from HP as more specifically set forth in the applicable Statement of Work. With respect to all such HP Products owned by HP and consigned to VS Supplier (the Consigned Goods), VS Supplier hereby grants to HP its power of attorney to file a UCC-1 Financing statement or similar notice describing the Consigned Goods or HP Products and the proceeds thereof, wherever HP deems appropriate to provide notice to other parties that the Consigned Goods are not property of VS Supplier. Should this Agreement or the transactions under this Agreement be deemed for any reason to pass ownership of the Consigned Goods to VS Supplier, VS Supplier agrees that HP shall be deemed to hold, and VS Supplier hereby grants to HP, a purchase money security interest in the Consigned Goods, and the proceeds thereof including without limitation the cash and checks described above, to secure all of its obligations to HP including without limitation obligations under this Agreement. HP PRODUCT DISPOSITION. ---------------------VS Supplier shall confirm receipt of all defective or non-conforming returns via the Web Return Tool. See the VS Supplier Handbook for additional information regarding the Web Return Tool. 13.1.1 VS Supplier shall provide additional information via the Web Return Tool. Additional information required includes and is not limited to: 13.1.1.1 13.1.1.2 13.1.1.3 13.1.1.4 Condition: Good or Bad Quantity received Transaction ID/RMA Number Date assembly returned

12.

12.1

12.2

13.

13.1

13.2 13.3 13.4

VS Supplier shall maintain inventory accuracy and report the results upon HP's request. VS Supplier shall keep Defectives separate from finished goods inventory and clearly marked as such. Both Scrap quantities and disposition channel of all material, (FGI, HP

proprietary components, defective returns, and F-code inventory) will be subject to prior HP approval. Page 8

14.

HANDBOOK. -------VS Supplier will comply with all instructions as stated in the Virtual Sourcing Supplier's Handbook provided by HP.

14.1

Page 9

EXHIBIT A-I VS Supplier Order Fulfillment Criteria 1. VS Supplier must exceed a monthly success rate of 98% in fulfilling all orders based upon the shipment cutoff times set forth in the following. 1.1. If a domestic hotline customer order is received by VS Supplier by 4:00 PM PST, then shipment must be completed and made available for picked up by the carrier no later than midnight the same day. The shipment must also be delivered to the customer no later than 10:30 am customer's local time the next day. 1.2. If a domestic standard customer order is received by VS Supplier by 4:00 PM PST, then shipment must be completed and made available for picked up by the carrier no later than twenty four (24) hours after the order was received. 1.3. If an international hotline or international standard customer order is received by VS Supplier by 12:30 PM PST, then shipment must be completed and made available for picked up by the carrier no later than midnight the same day. 1.4. First Flight, Four (4) Hour Special, After Hours, and/or other Expedited Shipments must be completed and made available for pick up by the carrier no later than midnight PST the same day regardless of what time VS Supplier receives the customer order. 1.5. Supplier shall make reasonable efforts to ensure that International shipments received before 12:30 PM PST are consolidated prior to shipment. Refer to the VS Supplier Handbook for detail on how to implement. 2. VS Supplier must meet or exceed the following order fulfillment requirements. 2.1. 98% of all orders received will ship within 24 hours of receipt by PDS from HP's VS order systems. 2.2. 99% of all orders received will ship within 48 hours of receipt by PDS from HP's VS order systems. 2.3. 100% of all orders received will ship within 72 hours of receipt by PDS from HP's VS order systems. 2.3.1. Inability to fulfill orders within 72 hours will require corrective actions as specified in 3.4 of Exhibit A Page 10

2 EXHIBIT B Parts/Pricing List Part Number Description Lead Time Price Page 11

EXHIBIT C CONFIDENTIAL DISCLOSURE AGREEMENT In order to protect certain confidential information, HP and Pinnacle Data Systems, Inc. agree to the following: 1. Definitions. A Discloser is a party disclosing confidential information. A Recipient is a party receiving disclosed confidential information. An Associate is a subsidiary, parent or corporate affiliate of Recipient, or a third party contractually bound to Recipient in accord with this Agreement. 2. Agreement Coordinator. Each party designates the following person, if any, as its Agreement Coordinator for coordinating the disclosure or receipt of confidential information: HP: Ryan Donovan phone: (916) 785-9098 Pinnacle: Bob Hahn phone: (614) 748-1150 3. HP Confidential Information. (a) Confidential information, if any, disclosed by HP to Participant is described as: Any and all program specific information and programming code related to Virtual Sourcing and Virtual Hub e-Fulfillment Program without the express permission of an HP General Manager and HP-GSL Virtual Sourcing e-Fulfillment Program Manager. This includes but is not limited to any Virtual Sourcing specific information related to pricing, freight account information, customer base, information technology integration and any and all information regarding shipment profile. (b) and may be used by the Recipient and its Associates, if any, only for the following purpose and subject to the obligations under Section 5: To fulfill HP Virtual Sourcing e-Fulfillment Program requirements. 4. Pinnacle Data Systems Confidential Information. (a) Confidential information, if any, disclosed by Pinnacle to HP is described as: Information related to ERP system integration, inventory management and distribution processes, procedures and reports; customer order fulfillment processes, procedures, and reports; and pricing-related information specific to parts or products placed on Virtual Sourcing Program. (b) and may be used by the Recipient and its Associates, if any, only for the following purpose and subject to the obligations under Section 5: To fulfill service requirements of this Agreement. 5. Recipient's Obligations. (a) Recipient will protect, and will ensure its participating Associates will protect, the disclosed confidential information by using the same degree of care, but no less than a reasonable degree of care, to prevent the unauthorized use, dissemination or publication of the confidential information as Recipient uses to protect its own confidential information of a like nature. Recipient may reassign its employees. Recipient will provide reasonable prior notice to Discloser if Recipient is required to disclose the confidential information under operation of law. (b) Recipient will comply with all applicable export laws. 6. Disclosure and Protection Periods. The Disclosure Period starts on the Begin Disclosure Date. Recipient's obligations under Section 5(a) only apply to confidential information disclosed during the Disclosure Period. Recipient's obligations under Section 5(a) stop at the end of the Protection Period. The Disclosure Period will be one month, and the Protection Period will be one year, if not specified below. The Begin Disclosure Date is: September 01, 2001 The Disclosure Period ends on the following date or at the end of the following time period: August 31, 2002, renewable by HP for additional one year periods. The Protection Period ends on August 31, 2007. 7. Marking. Recipient's obligations under this Agreement extend only to confidential information that is (a) itemized in Section 3(a) or 4(a); or (b) both described generally in Section 3(a) or 4(a) and (i) marked at the time of disclosure to show its confidential nature, or (ii) unmarked (for example, orally or visually disclosed) but treated as confidential at the time of disclosure, and designated as confidential in a written message sent to Recipient's Agreement Coordinator within thirty days after

disclosure, summarizing the disclosed confidential information sufficiently for identification. 8. Exclusions. This Agreement imposes no obligation upon Recipient with respect to information that (a) was in Recipient's possession before receipt from Discloser, (b) is or becomes publicly known without breach by Recipient, (c) is rightfully received by Recipient from a third party without a duty of confidentiality, (d) is disclosed by Discloser to a third party without a duty of confidentially on the third party, (e) is independently developed or learned by Recipient or (f) is disclosed by Recipient with Discloser's prior written approval. 9. Choice of Law. Without regard to choice of law provisions, this Agreement is governed by and will be construed in accordance with the laws of the State of California and the USA. 10. Warranty. Each Discloser warrants that it has the right to make the disclosures under this Agreement. Each Recipient warrants that its participating Associates will protect disclosed confidential information in accordance with the terms of this Agreement. NO OTHER WARRANTIES ARE MADE BY EITHER PARTY UNDER THIS AGREEMENT. ANY CONFIDENTIAL INFORMATION DISCLOSED UNDER THIS AGREEMENT IS PROVIDED "AS IS." 11. Miscellaneous. This Agreement imposes no obligation on either party to purchase, sell, license, transfer or otherwise dispose of any technology, services or products. This Agreement does not create any agency or partnership relationship. Both parties shall adhere to all applicable laws, regulations and rules relating to the export of technical data, and shall not export or reexport any technical data, any products received from Discloser, or the direct product of such technical data to any proscribed country listed in such applicable laws, regulations and rules unless properly authorized. All additions or modifications to this Agreement must be made in writing and must be signed by both parties. The undersigned acknowledges on behalf of HP and Pinnacle Data Systems, Inc. that the terms and conditions included in this agreement shall be applicable both party's employees, agents, and subcontractors. Page 12

HP HEWLETT-PACKARD COMPANY Global Support Logistics ------------------------------------------------------(Company Name) 8000 Foothills Blvd. ------------------------------------------------------(Address) Roseville, California 95747 ------------------------------------------------------(Address) By ____________________________________________________ (Functional Manager's Signature) William Shadle ------------------------------------------------------(Name) Sourcing Development Manager C200 ------------------------------------------------------(Title) (Entity)

PINNACLE DATA SYSTEMS, INC. PINNACLE DATA SYSTEMS --------------------------------------------(Company Name) 6600 Port Road --------------------------------------------(Address) Groveport, OH 43125 --------------------------------------------(Address) By __________________________________________ (Authorized Signature) Bob Hahn --------------------------------------------(Name) Vice President/COO --------------------------------------------(Title)

Page 13

EXHIBIT D HP e-FULFILLMENT SPECIFICATIONS AND SOFTWARE COMPONENTS LICENSE TERMS The following License Terms govern Pinnacle Data Systems, Inc.'s (PDS) use of the HP e-Fulfillment Specifications and Software Components: 1.0 License Grant. HP grants PDS a license to Use the e-Fulfillment Specifications and Software Components solely for the purpose of implementing the HP/PDS Direct Connect VS Supplier Agreement #C2-607 dated September 01, 2001, and for no other purpose. "Use" means configuring, storing, loading, installing, executing or displaying the e-Fulfillment Specifications and Software Components. PDS may not modify the e-Fulfillment Specifications and Software Components or disable any licensing or control features of the e-Fulfillment Specifications and Software Components. 2.0 Ownership. The e-Fulfillment Specifications and Software Components are owned and copyrighted by HP or its third party suppliers. PDS's license confers no title or ownership and is not a sale of any rights in the eFulfillment Specifications and Software Components, their documentation or the media on which they are recorded or printed. Third party suppliers may protect their rights in the e-Fulfillment Specifications and Software Components in the event of any infringement. 3.0 Copies and Adaptations. PDS may only make copies or adaptations of the e-Fulfillment Specifications and Software Components for archival purposes or when copying or adaptation is an essential step in the authorized Use of the e-Fulfillment Specifications and Software Components on a backup product, provided that copies and adaptations are used in no other manner and provided further that Use on the backup product is discontinued when the original or replacement product becomes operable. PDS must reproduce all copyright notices in the original e-Fulfillment Specifications and Software Components on all copies or adaptations. PDS may not copy the e-Fulfillment Specifications and Software Components onto any public or distributed network. 4.0 No Disassembly or Decryption. PDS may not disassemble or decompile the e-Fulfillment Specifications and Software Components without HP's prior written consent. Where PDS has other rights under statute, PDS will provide HP with reasonably detailed information regarding any intended disassembly or decompilation. PDS may not decrypt the e-Fulfillment Specifications and Software Components unless necessary for the legitimate use of the e-Fulfillment Specifications and Software Components. 5.0 Transfer. PDS's license will automatically terminate upon any transfer of the e-Fulfillment Specifications and/or Software Components. Upon transfer, PDS must deliver the e-Fulfillment Specifications and Software Components, including any copies and related documentation, to the transferee. The transferee must accept these License Terms as a condition to the transfer. 6.0 Term and Termination. PDS's license shall run concurrently with the term of the VS Supplier Agreement to which it is appended. Notwithstanding the foregoing, HP may terminate PDS's license upon notice for failure to comply with any of these License Terms or for any reason whatsoever. Upon termination, PDS must immediately destroy the e-Fulfillment Specifications and Software Components, together with all copies, adaptations and merged portions in any form, and certify such destruction to HP. 7.0 Warranty. The e-Fulfillment Specifications and Software Components are provided AS-IS, and HP makes no warranties with regard to their performance or suitability for a particular purpose. 8.0 Export Requirements. PDS may not export or re-export the e-Fulfillment Specifications and Software Components or any copy or adaptation in violation of any applicable laws or regulations. 9.0 U.S. Government Restricted Rights. The e-Fulfillment Specifications and Software Components and any accompanying documentation have been developed entirely at private expense. They are delivered and licensed as "commercial computer software" as defined in DFARS 252.227-7013 (Oct 1988), DFARS 252.211-7015 (May 1991) or DFARS 252.227-7014 (Jun 1995), as a "commercial item" as defined in FAR 2.101(a), or as "Restricted computer software" as defined in FAR 52.227-19 (Jun 1987)(or any equivalent agency regulation or contract clause), whichever is applicable. PDS has only those rights provided for such e-Fulfillment Specifications and Software Components and any accompanying documentation by the applicable FAR or DFARS clause.

Page 14

EXHIBIT 10(o) EMPLOYMENT AGREEMENT This Employment Agreement is made as of September 1, 2001, at Groveport, Ohio, between Pinnacle Data systems, Inc., an Ohio corporation (the "Company"), and C. Robert Hahn (the "Employee"), who hereby agree as follows: [sect]1. Employment. The Company hereby renews and continues the Employee's employment, and the Employee hereby accepts such employment renewal and continuation by the company, on the terms and subject to the conditions set forth in this agreement. [sect]2. Term of Employment. The term of this Employee's employment as renewed pursuant to this agreement shall begin as of the date of this agreement and shall terminate, unless sooner terminated in accordance with the provisions of [sect]6, below, on September 1, 2003. The term of employment under this Agreement shall be automatically extended for successive one (1) year periods commencing on each September 1 each year unless either party shall have given written notice to the other party no later than the preceding August 15 of his or its intention that the term hereof not be extended beyond its then current term. [sect]3. Services. The Employee shall be employed as Vice President of the Service Group, and will at all times faithfully, industriously, and to the best of his ability, experience and talents, perform all of the duties that may be required of and from him pursuant to the express and implicit terms hereof and such other duties as may be assigned to him from time to time by the Company, acting by and through its Chief Executive Officer ("CEO") or its Board of Directors. The Employee shall report to the Company's CEO and President. [sect]4. Compensation. During the term of his employment pursuant to this agreement, the Employee shall be entitled to receive the following compensation: (a) Salary. An annual base salary of $125,000 (one hundred twenty-five thousand) per year. (b) Bonus. An incentive cash bonus equal to a percentage of the pre-tax net income of the company (or based upon other factors deemed appropriate by the CEO and President) for each fiscal year ending during the term of employment under this agreement (calculated prior to the deduction of the bonus). The bonus percentage or other factors for each year will be determined by the CEO and President or the Board or Directors or its Compensation Committee no later than March of that year. -1-

The base salary will be payable in accordance with the Company's general policies for payment of compensation to salaried personnel. The bonus will be payable after the end of each fiscal year of the Company as soon as practical after the Company's independent auditors have completed the year-end audit of the Company's financial statements for such year. [sect]5. Fringe Benefits. During the term of employment pursuant to this agreement, the Employee shall be entitled to the following fringe benefits: (a) Vacation. Employee is entitled to 20 days of Paid Time Off ("PTO"). PTO will be taken pursuant to the Company's PTO policy as amended or changed from time to time. (b) Disability Payments. If at any time during the term of employment the Employee shall be unable to perform his duties hereunder for a period not to exceed six (6) months, Employee shall nonetheless be entitled to receive any compensation the Employee would otherwise be entitled to pursuant to [sect]4(a), above, during the period of such disability, provided, however, that his "disability" be documented by a competent medical doctor selected to examine the Employee at the request of the disinterested Board of Directors, which examination expense shall be borne by the Employer. In the event said disability shall continue for a period greater than six (6) months, then it shall be considered a "long-term disability", the Employee shall no longer be entitled to receive any compensation under [sect]4 of this agreement during the remaining period of such disability, and upon the vote of a majority of the disinterested Directors, said Employee shall be terminated in consonance with the provisions of [sect]6 hereof as if said disabled Employee had voluntarily terminated his services hereunder. (c) Executive Development. The Employee shall be required to attend a personal executive development or experiential learning seminar of his choice for up to three days during each year of the employment term, with spousal accommodations. (d) Other Fringe Benefits. The Employee shall be entitled to such other fringe benefits and perquisites as may be provided generally for the Company's executive management pursuant to policies established or changed from time to time by the Board. -2-

[sect]6. Termination of Employment. Notwithstanding the provisions of [sect]3 above, the Agreement may be terminated by either party as follows: (a) By the Employee within six months after a Change in Control of the Company (as defined below); provided that after such Change in Control of the Company, the Employee's base salary or other benefits have been reduced or the Employee's authority or responsibilities have been significantly reduced. If the Employee terminates his employment pursuant to this provision, he shall be entitled to receive his salary and benefits to the date of termination, any bonus for such year to which he would otherwise be entitled, prorated for the portion of the year during which the Employee was employed, and a payment from the Company, in a lump sum, in an amount equal to one year's base salary. (b) By the Company immediately upon the occurrence of cause (as defined below) or at any time thereafter. For purposes of this agreement, "cause" shall mean the Employee's failure to operate the Company's business in accordance with the policies, programs, budgets, procedures, and directions established from time to time by the Board or the CEO, the Employee's failure fully to perform and observe all obligations and conditions to be performed and observed by the Employee under this agreement, or the Employee's dishonesty, conviction of a crime (other than minor traffic offenses), habitual drunkenness, using illegal drugs, embezzlement, conflict of interest, willful insubordination, or neglect of duty. If the Company terminates the Employee's employment pursuant to this provision, he shall be entitled to receive only his base salary through the date of termination. (c) By the Company with or without cause upon giving not less than 60 days advance written notice prior to the date of termination. If the Company terminates the Employee's employment pursuant to this provision, he shall be entitled to receive his salary to the date of termination, any bonus for such year to which he would otherwise be entitled, prorated for the portion of the year during which the Employee was employed, and a payment from the Company, in a lump sum, in an amount equal to one year's base salary. -3-

(d) By the Company if the Employee is under a long-term disability, at which time the Employee will receive any amounts due to him under a long-term disability policy of the Company, if any, and due to him pursuant to [sect]5 (b). For purposes of this agreement, the term "long-term disability" shall have the same meaning as set forth in [sect]5(b) and employment may be terminated as provided in [sect]5(b). For purposes of this agreement, a Change in Control shall be deemed to occur: (i) When any "person" as defined in [sect].3(a)(9) of the Securities Exchange Act of 1934 (the "Exchange Act") and as used in [sect][sect]13(d) and 14(d) thereof, including a "group" as defined in [sect]13(d) of the Exchange Act, but excluding the Company and any subsidiary and any employee benefit plan sponsored or maintained by the Company or any subsidiary (including any trustee of such plan acting as trustee), directly or indirectly, becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act, as amended from time to time), of securities of the Company representing 30% or more of the combined voting power of the Company's then outstanding securities; (ii) When, during any period of 24 consecutive months during the existence of this agreement, the individuals who, at the beginning of such period, constitute the Board (the "Incumbent Directors") cease for any reason other than death to constitute at least a majority thereof; provided, however, that a director who was not a director at the beginning of such 24-month period shall be deemed to have satisfied such 24-month requirement (and be an Incumbent Director) if such director was elected by, or on the recommendation of or with the approval of, at least two-thirds of the directors who then qualified as Incumbent Directors either actually (because they were directors at the beginning of such 24-month period) or by prior operation of this paragraph; or (iii) Upon the occurrence of a transaction requiring shareholder approval for the acquisition of the Company by an entity other than the Company or a subsidiary through purchase of assets, by merger, or otherwise. -4-

[sect]7. Noncompetition; Nondisclosure; Ownership of Developments. In consideration of the substantial increase in base salary and other benefits provided to the Employee, the Company and the Employee agree as follows: (a) During the term of the Employee's employment by the Company, pursuant to this agreement or otherwise, and for a period of one year immediately after termination of such employment, the Employee shall not directly or indirectly: (i) Engage in or participate in any business similar to the business of the Company within the United States and within any other country in which the Company has engaged in business during the term of the Employee's employment by the Company; or (ii) Sell or perform the same or similar services or products as then provided by the Company to, or solicit, any of the Company's present customers or accounts or persons or businesses which were customers or accounts within three years preceding the Employee's termination of employment with the Company; or (iii) Promote or assist, financially or otherwise, any person, firm, association, corporation, or other entity which directly or indirectly competes with the Company; or (iv) Otherwise enter into or engage in any business which directly or indirectly competes with the business carried on by the Company. (b) The Employee shall not at any time, either during the term of his employment with the Company or after the termination of such employment for whatever reason: (i) Disclose to anyone (except to the extent necessary as a benefit to the Company in the performance of his duties) any trade secrets or confidential information (as defined below): (ii) Solicit any of the Company's employees to leave the employ of the Company; or -5-

(iii) Seek to employ any of the Company's employees (other than on behalf of the Company). (c) All inventions, discoveries, concepts, improvements, formulas, processes, devices, methods, innovations, designs, ideas, and product developments (collectively, the "Developments") developed or conceived by the Employee, solely or jointly with others, whether or not patentable or copyrightable, at any time during the term of his employment with the Company or within one year after the termination of such employment for any reason, whether or not during normal working hours, and which relate in any way to the actual or planned business activities of the Company shall be considered to be developed or conceived by the Employee on behalf of the Company within the scope of his employment, and all of the Employee's right, title, and interest therein shall be the exclusive property of the Company. The Employee hereby assigns, transfers, and conveys to the Company all of his right, title, and interest in and to any and all such Developments. Employee shall disclose fully, as soon as practicable and in writing, all Developments to the Board. At any time and from time to time, upon the request of the Company, the Employee shall execute and deliver to the Company any and all instruments, documents, and papers, give evidence, and do any and all other acts which, in the opinion of counsel for the Company, are or may be necessary or desirable to document such transfer or to enable the Company to file and prosecute applications for, and to acquire, maintain, and enforce, any and all patents, trademark registrations, or copyrights under United States or foreign law with respect to any such Developments or to obtain any validation, reissuance, continuance, or renewal of any such patent, trademark, or copyright. The Company will be responsible for the preparation of any such instruments, documents, and papers and for the prosecution of any such proceedings and will reimburse the Employee for all reasonable expenses the Employee incurs upon authorization of the Board. (d) The Employee understands that this section is an essential element of this agreement and that the Company would not have entered into this agreement without this section being included in it. The Employee has consulted with his legal counsel and has been fully advised concerning the reasonableness and propriety of this section in the specific context of the operations and business of the Company, and the Employee acknowledges that this section is reasonable and appropriate in all respects. In the event of any violation or attempted violation of this section, Employee specifically acknowledges and agrees that the Company's remedy at law will be inadequate, that the Company, its business, and business relationships will suffer irreparable injury and, therefore, that the Company shall be entitled to injunctive relief upon such breach in -6-

addition to any other remedy to which it may be entitled, either at law or in equity, without the necessity of proof of actual damage. (e) As used in this agreement, the terms "trade secrets" and "confidential information" shall mean any information which is not generally known to the public, and include without limitation any information relating to the Company's business operations and structure, sales methods, practices and techniques, technical know-how, Developments, advertising, marketing methods and practices, and the Company's relationships with suppliers, employees, or other persons or entities doing business with the Company. (f) For purposes of this agreement, "directly or indirectly" shall mean and include participation for the Employee's own account or as an owner, shareholder, member, partner, director, officer, employee, creditor, or agent of any other person or organization or through the Employee's spouse or other family relation, but shall not include a passive investment of not more than two percent of the outstanding stock of a company whose shares are then being regularly traded in open-market brokerage transactions (either on a stock exchange or over-the-counter). (g) In the event that a court of competent jurisdiction finally determines that any provision of this section is unenforceable, the Company and the Employee agree that such court shall have jurisdiction to reform this agreement and such provision so that it is enforceable to the maximum extent permitted by law, and the parties agree to abide by such court's determination. [sect]8. General. This document contains the entire agreement between the parties and supersedes any prior discussions, negotiations, representations, or agreements between them relating to the employment of the Employee. No additions or other changes to this agreement shall be made or be binding on either party unless made in writing and signed by each party to this agreement. Any notice or other communication required or desired to be given to any party under this agreement shall be in writing and shall be deemed given when either delivered personally to that party or deposited in the United States mail, first-class postage prepaid, addressed to that party at the address set forth below its or his name below. Any party may change the address to which notices and other communications are to be given by giving the other parties notice of such change. All questions concerning the validity, intention, or meaning of this agreement or relating to the rights and obligations of the parties with respect to performance hereunder shall be construed and resolved under the laws of Ohio. If and to the extent that any court of competent jurisdiction determines that it is impossible or violative of any -7-

legal prohibition to construe any provision of this agreement consistently with any law, legal prohibition, or public policy and consequently holds that provision to be invalid or prohibited, such holding shall in no way affect the validity of the other provisions of this agreement, which shall remain in full force and effect. No failure by any party to insist upon strict compliance with any term of this agreement, to exercise any option, to enforce any right, or to seek any remedy upon any default of any other party shall affect, or constitute a waiver of, the first party's right to insist upon such strict compliance, exercise that option, enforce that right, or seek that remedy with respect to that default or any prior, contemporaneous, or subsequent default; nor shall any custom or practice of the parties at variance with any provision of this agreement affect, or constitute a waiver of, any party's right to demand strict compliance with all provisions of this agreement. The captions of the various sections of this agreement are not part of the context of this agreement, but are only labels to assist in locating those sections, and shall be ignored in construing this agreement. This agreement shall be personal to the Employee and no rights or obligations of the Employee under this agreement may be assigned by him. PINNACLE DATA SYSTEMS, INC.
__________________________________ C. ROBERT HAHN By____________________________________ John D. Bair, President and Chief Executive Officer Address: 6600 Port Road, Suite 100 Groveport, OH 43125

Address:

5765 Lee High Circle Nashport, OH 43830

-8-

EXHIBIT 10(p) EMPLOYMENT AGREEMENT This Employment Agreement is made as of September 1, 2001, between Michael R. Sayre, an individual residing at 4523 Neiswander Square, New Albany, Ohio 43054 (the "Employee"), and Pinnacle data Systems, Inc., an Ohio corporation whose principal place of business is located at 6600 Port Road, Suite 100, Groveport, Ohio 43125 (the "Company"). Background A. Company is engaged in the business of providing depot repair services for electronic equipment and providing customized engineering applications and CPU board design and manufacturing for integration into existing systems. B. Employee is willing to be employed by Company, and Company is willing to employ Employee, on the terms, covenants and condition hereinafter set forth. Statement of Agreement Therefore, the Company and Employee agree as follows: [sect]1. Employment. The Company hereby employs, engages and hires Employee as Executive Vice President Corporate Strategy and Finance. Employee shall also render such other executive services and duties as may be assigned to him from time to time by the Company, acting by and through its Chief Executive Officer ("CEO") or Board of Directors. Such duties shall be primarily rendered in Groveport, Ohio, and at such other places as Company shall in good faith require or as the interest, needs, business, or opportunity of Company shall require. Employee hereby accepts and agrees to such hiring, engagement, and employment, subject to the general supervision and pursuant to the orders, advice, and direction of Company, acting by and through its CEO and its Board of Directors. Employee shall report to the Company's CEO. [sect]2. Standard of Performance of Employee. Employee shall at all times faithfully, industriously, and to the best of his ability, experience and talents, perform all of the duties that may be required of and from him pursuant to the express and implicit terms hereof. -1-

[sect]3. Term of Employment. The term of Employee's employment pursuant to this agreement shall begin as of the date hereof, and shall have an initial term expiring on September 1, 2003, unless sooner terminated pursuant to the provisions of [sect].6, below. The term of employment shall be automatically extended for successive one (1) year periods on each September 1 unless either party shall have given written notice to the other party no later than the preceding August 15 of his or its intention that the term hereof not be extended beyond its then current term. [sect]4. Compensation. During the term of his employment pursuant to this agreement, the Employee shall be entitled to receive the following compensation: (a) Salary. An annual base salary of $140,000 (one hundred forty thousand) per year. (b) Bonus. An incentive cash bonus of $25,000 for 2001 contingent upon the successful completion of goals and accomplishments determined by the Company's CEO and its Board of Directors and agreed to with the Employee. A $50,000 bonus for 2002 based upon performance against annual goals established by the Company's CEO and its Board of Directors. Thereafter, Employee is eligible for annual base salary increases and bonuses in amounts and dependent upon accomplishments and goals determined by the Company's CEO and its Board of Directors. The base salary will be payable in accordance with the Company's general policies for payment of compensation to salaried personnel. The bonus will be payable after the end of each fiscal year of the Company as soon as practical after verification of the successful accomplishment of the goals described in [sect].4(b) by the Board of Directors or its compensation committee. [sect]5. Fringe Benefits. During the term of employment pursuant to this agreement, the Employee shall be entitled to the following fringe benefits: (a) Vacation. For the year 2001, Employee will have ten (10) days of Paid Time Off ("PTO"). Beginning in 2002, Employee will be entitled to 20 days of PTO. PTO will be taken pursuant to the Company's PTO policy, as amended or changed from time to time. -2-

(b) Stock Options. Employee will receive 75,000 stock options, exercisable at the last reported sale price on the American Stock Exchange on the day prior to approval of the grant by the Board of Directors, and vesting at the rate of one-third (25,000 options) per year for three years on the anniversary of the original grant date. All stock options received by the Employee prior to and during the term of this agreement will immediately (forward) vest upon a Change in Control of the Company (as defined below). (c) Disability Payments. If at any time during the term of employment the Employee shall be unable to perform his duties hereunder for a period not to exceed six (6) months, Employee shall nonetheless be entitled to receive any compensation the Employee would otherwise be entitled to pursuant to [sect]4(a), above, during the period of such disability, provided, however, that his "disability" be documented by a competent medical doctor selected to examine the Employee at the request of the disinterested Board of Directors, which examination expense shall be borne by the Company. In the event said disability shall continue for a period greater than six (6) months, then it shall be considered a "long-term disability", the Employee shall no longer be entitled to receive any compensation under [sect]4 of this agreement during the remaining period of such disability, and upon the vote of a majority of the disinterested Directors, said Employee shall be terminated in consonance with the provisions of [sect]6 hereof as if said disabled Employee had voluntarily terminated his services hereunder. (d) Executive Development. The Employee shall be required to attend a personal executive development or experiential learning seminar of his choice for up to three days during each year of the employment term, with spousal accommodations. (e) Other Fringe Benefits. The Employee shall be entitled to such other fringe benefits and perquisites as may be provided generally for the Company's executive management pursuant to policies established or changed from time to time by the Board. [sect]6. Termination of Employment. Notwithstanding the provisions of [sect]3 above, the Agreement may be terminated by either party as follows: -3-

(a) By the Employee within six months after a Change in Control of the Company (as defined below); provided that after such Change in Control of the Company, the Employee's benefits have been reduced or the Employee's authority or responsibilities have been significantly reduced. If the Employee terminates his employment pursuant to this provision, he shall be entitled to receive his salary and benefits to the date of termination, any bonus for such year to which he would otherwise be entitled, prorated for the portion of the year during which the Employee was employed, and a payment from the Company, in a lump sum, in an amount equal to one year's base salary. (b) By the Company immediately upon the occurrence of cause (as defined below) or at any time thereafter. For purposes of this agreement, "cause" shall mean the Employee's failure to operate the Company's business in accordance with the policies, programs, budgets, procedures, and directions established from time to time by the Board of Directors or the CEO, the Employee's failure fully to perform and observe all obligations and conditions to be performed and observed by the Employee under this agreement, or the Employee's dishonesty, conviction of a crime (other than minor traffic offenses), habitual drunkenness, using illegal drugs, embezzlement, material conflict of interest, willful insubordination, or material neglect of duty. If the Company terminates the Employee's employment pursuant to this provision, he shall be entitled to receive only his base salary through the date of termination. (c) By the Company with or without cause upon giving not less than 60 days advance written notice prior to the date of termination. If the Company terminates the Employee's employment pursuant to this provision on or before June 30, 2002, Employee shall be entitled to receive a severance of full salary and benefits (excluding accrual of PTO) payable on regular payroll dates, and a pro-rated applicable bonus through at least June 30, 2002, with a six-month minimum of such severance. If such termination of employment occurs after June 30, 2002, Employee will receive six (6) months of severance as described above. (d) By the Company if the Employee is under a long-term disability, at which time the Employee will receive any amounts due to him under a long-term disability policy of the Company, if any, and due to him pursuant to [sect]5 (c). For purposes of this agreement, the term "long-term disability" shall have the same meaning as set forth in [sect]5(c), and employment may be terminated as provided in [sect]5(c). -4-

For purposes of this agreement, a Change in Control shall be deemed to occur: (i) When any "person" as defined in [sect]3(a)(9) of the Securities Exchange Act of 1934 (the "Exchange Act") and as used in [sect][sect]13(d) and 14(d) thereof, including a "group" as defined in [sect]13(d) of the Exchange Act, but excluding the Company and any subsidiary and any employee benefit plan sponsored or maintained by the Company or any subsidiary (including any trustee of such plan acting as trustee), directly or indirectly, becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act, as amended from time to time), of securities of the Company representing 30% or more of the combined voting power of the Company's then outstanding securities; (ii) When, during any period of 24 consecutive months during the existence of this agreement, the individuals who, at the beginning of such period, constitute the Board (the "Incumbent Directors") cease for any reason other than death to constitute at least a majority thereof; provided, however, that a director who was not a director at the beginning of such 24-month period shall be deemed to have satisfied such 24-month requirement (and be an Incumbent Director) if such director was elected by, or on the recommendation of or with the approval of, at least two-thirds of the directors who then qualified as Incumbent Directors either actually (because they were directors at the beginning of such 24-month period) or by prior operation of this paragraph; or (iii)Upon the occurrence of a transaction requiring shareholder approval for the acquisition of the Company by an entity other than the Company or a subsidiary through purchase of assets, by merger, or otherwise. [sect]7. Noncompetition; Nondisclosure; Ownership of Developments. In consideration of his employment, the base salary and other benefits provided to the Employee, the Company and the Employee agree as follows: -5-

(a) During the term of the Employee's employment by the Company, pursuant to this agreement or otherwise, and for a period of one year immediately after termination of such employment, the Employee shall not directly or indirectly: (i) Engage in or participate in any business similar to the business of the Company within the United States and within any other country in which the Company has engaged in business during the term of the Employee's employment by the Company; or (ii) Sell or perform the same or similar services or products as then provided by the Company to, or solicit, any of the Company's present customers or accounts or persons or businesses which were customers or accounts within three years preceding the Employee's termination of employment with the Company; or (iii) Promote or assist, financially or otherwise, any person, firm, association, corporation, or other entity which directly or indirectly competes with the Company; or (iv) Otherwise enter into or engage in any business which directly or indirectly competes with the business carried on by the Company. (b) The Employee shall not at any time, either during the term of his employment with the Company or after the termination of such employment for whatever reason: (i) Disclose to anyone (except to the extent necessary as a benefit to the Company in the performance of his duties) any trade secrets or confidential information (as defined below): (ii) Solicit any of the Company's employees to leave the employ of the Company; or -6-

(iii) Seek to employ any of the Company's employees (other than on behalf of the Company). (c) All inventions, discoveries, concepts, improvements, formulas, processes, devices, methods, innovations, designs, ideas, and product developments (collectively, the "Developments") developed or conceived by the Employee, solely or jointly with others, whether or not patentable or copyrightable, at any time during the term of his employment with the Company or within one year after the termination of such employment for any reason, whether or not during normal working hours, and which relate in any way to the actual or planned business activities of the Company shall be considered to be developed or conceived by the Employee on behalf of the Company within the scope of his employment, and all of the Employee's right, title, and interest therein shall be the exclusive property of the Company. The Employee hereby assigns, transfers, and conveys to the Company all of his right, title, and interest in and to any and all such Developments. Employee shall disclose fully, as soon as practicable and in writing, all Developments to the Board. At any time and from time to time, upon the request of the Company, the Employee shall execute and deliver to the Company any and all instruments, documents, and papers, give evidence, and do any and all other acts which, in the opinion of counsel for the Company, are or may be necessary or desirable to document such transfer or to enable the Company to file and prosecute applications for, and to acquire, maintain, and enforce, any and all patents, trademark registrations, or copyrights under United States or foreign law with respect to any such Developments or to obtain any validation, reissuance, continuance, or renewal of any such patent, trademark, or copyright. The Company will be responsible for the preparation of any such instruments, documents, and papers and for the prosecution of any such proceedings and will reimburse the Employee for all reasonable expenses the Employee incurs upon authorization of the Board. (d) The Employee understands that this section is an essential element of this agreement and that the Company would not have entered into this agreement without this section being included in it. The Employee has consulted with his legal counsel and has been fully advised concerning the reasonableness and propriety of this section in the specific context of the operations and business of the Company, and the Employee acknowledges that this section is reasonable and appropriate in all respects. In the event of any violation or attempted violation of this section, Employee specifically acknowledges and agrees that the Company's remedy at law will be inadequate, that the Company, its business, and business relationships will suffer irreparable injury and, therefore, that the Company shall be entitled to injunctive relief upon such breach in -7-

addition to any other remedy to which it may be entitled, either at law or in equity, without the necessity of proof of actual damage. (e) As used in this agreement, the terms "trade secrets" and "confidential information" shall mean any information which is not generally known to the public, and include without limitation any information relating to the Company's business operations and structure, sales methods, practices and techniques, technical know-how, Developments, advertising, marketing methods and practices, and the Company's relationships with suppliers, employees, or other persons or entities doing business with the Company. (f) For purposes of this agreement, "directly or indirectly" shall mean and include participation for the Employee's own account or as an owner, shareholder, member, partner, director, officer, employee, creditor, or agent of any other person or organization or through the Employee's spouse or other family relation, but shall not include a passive investment of not more than two percent of the outstanding stock of a company whose shares are then being regularly traded in open-market brokerage transactions (either on a stock exchange or over-the-counter). (g) In the event that a court of competent jurisdiction finally determines that any provision of this section is unenforceable, the Company and the Employee agree that such court shall have jurisdiction to reform this agreement and such provision so that it is enforceable to the maximum extent permitted by law, and the parties agree to abide by such court's determination. [sect]8. General. This document contains the entire agreement between the parties and supersedes any prior discussions, negotiations, representations, or agreements between them relating to the employment of the Employee. No additions or other changes to this agreement shall be made or be binding on either party unless made in writing and signed by each party to this agreement. Any notice or other communication required or desired to be given to any party -8-

under this agreement shall be in writing and shall be deemed given when either delivered personally to that party or deposited in the United States mail, first-class postage prepaid, addressed to that party at the address set forth below its or his name below. Any party may change the address to which notices and other communications are to be given by giving the other parties notice of such change. All questions concerning the validity, intention, or meaning of this agreement or relating to the rights and obligations of the parties with respect to performance hereunder shall be construed and resolved under the laws of Ohio. If and to the extent that any court of competent jurisdiction determines that it is impossible or violative of any legal prohibition to construe any provision of this agreement consistently with any law, legal prohibition, or public policy and consequently holds that provision to be invalid or prohibited, such holding shall in no way affect the validity of the other provisions of this agreement, which shall remain in full force and effect. No failure by any party to insist upon strict compliance with any term of this agreement, to exercise any option, to enforce any right, or to seek any remedy upon any default of any other party shall affect, or constitute a waiver of, the first party's right to insist upon such strict compliance, exercise that option, enforce that right, or seek that remedy with respect to that default or any prior, contemporaneous, or subsequent default; nor shall any custom or practice of the parties at variance with any provision of this agreement affect, or constitute a waiver of, any party's right to demand strict compliance with all provisions of this agreement. The captions of the various sections of this agreement are not part of the context of this agreement, but are only labels to assist in locating those sections, and shall be ignored in construing this agreement. This agreement shall be personal to the Employee and no rights or obligations of the Employee under this agreement may be assigned by him. PINNACLE DATA SYSTEMS, INC.
____________________________________ MICHAEL R. SAYRE By_________________________________ John D. Bair, President and Chief Executive Officer Address: 6600 Port Road Groveport, OH 43125

Address:

4523 Neiswander Square New Albany, OH 43054

-9-

MICHAEL R. SAYRE 2001 BONUS OBJECTIVES Pinnacle Data Systems, Inc. (the "Company") and Michael R. Sayre hereby agree that the goals to be accomplished by Mr. Sayre for him to receive his bonus for 2001, as set forth in [sect]4(b) of his employment agreement, are as follows: 1. Successful development of a one-year financial plan for the Company; 2. The successful raising of capital necessary to support that plan through 2001; and 3. The successful development of a three-year business plan for the Company for the years 2002-2004. Date: _____________, 2001 PINNACLE DATA SYSTEMS, INC. ______________________________ By_____________________________________ MICHAEL R. SAYRE John D. Bair, President and CEO -10-

EXHIBIT 10(q) EMPLOYMENT AGREEMENT This Employment Agreement is made between Christopher L. Winslow, an individual residing at 1944 Tremont Road, Upper Arlington, Ohio 43212 (the "Employee"), and Pinnacle Data Systems, Inc., an Ohio corporation whose principal place of business is located at 6600 Port Road, Suite 100, Groveport, Ohio 43125 (the "Company"). Statement of Agreement [sect]1. Employment. The Company hereby renews and continues the Employee's employment as Vice President, Product Group, and Employee hereby accepts such employment renewal and continuation by the Company, on the terms and subject to the conditions set forth in this agreement. Employee shall also render such other executive services and duties as may be assigned to him from time to time by the Company, acting by and through its Chief Executive Officer ("CEO") or Board of Directors. Such duties shall be primarily rendered in Groveport, Ohio, and at such other places as Company shall in good faith require or as the interest, needs, business, or opportunity of Company shall require. Employee shall report to the Company's CEO. [sect]2. Standard of Performance of Employee. Employee shall at all times faithfully, industriously, and to the best of his ability, experience and talents, perform all of the duties that may be required of and from him pursuant to the express and implicit terms hereof. [sect]3. Term of Employment. The term of Employee's employment pursuant to this agreement shall begin as of the date hereof, and shall have an initial term expiring on __________________, unless sooner terminated pursuant to the provisions of[sect].6, below. The term of employment shall be automatically extended for successive one (1) year periods on each ________________ 1 unless either party shall have given written notice to the other party no later than the preceding _____________ 15 of his or its intention that the term hereof not be extended beyond its then current term. [sect]4. Compensation. During the term of his employment pursuant to this agreement, the Employee shall be entitled to receive the following compensation: (a) Salary. An annual base salary of $160,000 (one hundred sixty thousand) per year. (b) Bonus. An incentive cash bonus equal to a percentage of the pretax net income of the Company (or based upon other factors deemed appropriate by the President and CEO, or board of Directors) for each fiscal year ending -1-

during the term of employment under this agreement (calculated prior to the deduction of the bonus). The bonus percentage or other factors for each year will be determined by the President and CEO of the Board of Directors, or its Compensation Committee no later than March of that year. The base salary will be payable in accordance with the Company's general policies for payment of compensation to salaried personnel. The bonus will be payable after the end of each fiscal year of the Company as soon as practical after the Company's independent auditors have completed the year-end audit of the Company's financial statements for such year. [sect]5. Fringe Benefits. During the term of employment pursuant to this agreement, the Employee shall be entitled to the following fringe benefits: (a) Vacation. Employee is entitled to 20 days of Paid Time Off ("PTO"). PTO will be taken pursuant to the Company's PTO policy, as amended or changed from time to time. (b) Stock Options. All stock options received by the Employee prior to and during the term of this agreement will immediately (forward) vest upon a Change in Control of the Company (as defined below). (c) Disability Payments. If at any time during the term of employment the Employee shall be unable to perform his duties hereunder for a period not to exceed six (6) months, Employee shall nonetheless be entitled to receive any compensation the Employee would otherwise be entitled to pursuant to [sect]4(a), above, during the period of such disability, provided, however, that his "disability" be documented by a competent medical doctor selected to examine the Employee at the request of the disinterested Board of Directors, which examination expense shall be borne by the Company. In the event said disability shall continue for a period greater than six (6) months, then it shall be considered a "long-term disability", the Employee shall no longer be entitled to receive any compensation under [sect]4 of this agreement during the remaining period of such disability, and upon the vote of a majority of the disinterested Directors, said Employee shall be terminated in consonance with the provisions of [sect]6 hereof as if said disabled Employee had voluntarily terminated his services hereunder. (d) Executive Development. The Employee is entitled to attend a personal executive development or experiential learning seminar of his choice for up to three days during each year of the employment term, with spousal accommodations. The Employee is also entitled to maintain membership with a reasonable number of industry associations. Such membership fees will be paid by the Company. -2-

(e) Other Fringe Benefits. The Employee shall be entitled to such other fringe benefits and perquisites as may be provided generally for the Company's executive management pursuant to policies established or changed from time to time by the Board. [sect]6. Termination of Employment. Notwithstanding the provisions of.[sect]3 above, the Agreement may be terminated by either party as follows: (a) By the Employee within six months after a Change in Control of the Company (as defined below); provided that after such Change in Control of the Company, the Employee's benefits have been reduced or the Employee's authority or responsibilities have been significantly reduced. If the Employee terminates his employment pursuant to this provision, he shall be entitled to receive his salary and benefits to the date of termination, any bonus for such year to which he would otherwise be entitled, prorated for the portion of the year during which the Employee was employed, and a payment from the Company, in a lump sum, in an amount equal to one year's base salary. (b) By the Company immediately upon the occurrence of cause as defined below) or at any time thereafter. For purposes of this agreement, "cause" shall mean the Employee's failure to operate the Company's business in accordance with the policies, programs, budgets, procedures, and directions established from time to time by the Board of Directors or the CEO, the Employee's failure fully to perform and observe all obligations and conditions to be performed and observed by the Employee under this agreement, or the Employee's dishonesty, conviction of a crime (other than minor traffic offenses), habitual drunkenness, using illegal drugs, embezzlement, material conflict of interest, willful insubordination, or material neglect of duty. If the Company terminates the Employee's employment pursuant to this provision, he shall be entitled to receive only his base salary through the date of termination. (c) By the Company with or without cause upon giving not less than 60 days advance written notice prior to the date of termination. If the Company terminates the Employee's employment pursuant to this provision, he shall be entitled to receive his salary to the date of termination, any bonus for such year to which he would otherwise be entitled, prorated for the portion of the year during which the Employee was employed, and a payment for the Company, in a lump sum, in an amount equal to one year's base salary. (d) By the Company if the Employee is under a long-term disability, at which time the Employee will receive any amounts due to him under a long-term -3-

disability policy of the Company, if any, and due to him pursuant to [sect]5(c). For purposes of this agreement, the term "long-term disability" shall have the same meaning as set forth in [sect]5(c), and employment may be terminated as provided in[sect]5(c) For purposes of this agreement, a Change in Control shall be deemed to occur: (i) When any "person" as defined in [sect]3(a) (9) of the Securities Exchange Act of 1934 (the "Exchange Act") and as used in [sect]13(d) and 14(d) thereof, including a "group" as defined in [sect]13(d) of the Exchange Act, but excluding the Company and any subsidiary and any employee benefit plan sponsored or maintained by the Company or any subsidiary (including any trustee of such plan acting as trustee), directly or indirectly, becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act, as amended from time to time), of securities of the Company representing 30% or more of the combined voting power of the Company's then outstanding securities; (ii) When, during any period of 24 consecutive months during the existence of this agreement, the individuals who, at the beginning of such period, constitute the Board (the "Incumbent Directors") cease for any reason other than death to constitute at least a majority thereof; provided, however, that a director who was not a director at the beginning of such 24-month period shall be deemed to have satisfied such 24-month requirement (and be an Incumbent Director) if such director was elected by, or on the recommendation of or with the approval of, at least two- thirds of the directors who then qualified as Incumbent Directors either actually (because they were directors at the beginning of such 24-month period) or by prior operation of this paragraph; or (iii)Upon the occurrence of a transaction requiring shareholder approval for the acquisition of the Company by an entity other than the Company or a subsidiary through purchase of assets, by merger, or otherwise. [sect]7. Noncompetition; Nondisclosure; Ownership of Developments In consideration of his employment, the base salary and other benefits provided to the Employee, the Company and the Employee agree as follows: -4-

(a) During the term of the Employee's employment by the Company, pursuant to this agreement or otherwise, and for a period of one year immediately after termination of such employment, the Employee shall not directly or indirectly: (i) Engage in or participate in any business that directly competes with the business of the Company within the United States and within any other country in which the Company has engaged in business during the term of the Employee's employment by the Company; or (ii) Sell or perform the same or similar services or products as then provided by the Company to, or solicit, any of the Company's present customers or accounts or persons or businesses which were customers or accounts within three years preceding the Employee's termination of employment with the Company; or (iii) Promote or assist, financially or otherwise, any person, firm, association, corporation, or other entity which directly or indirectly competes with the Company; or (iv) Otherwise enter into or engage in any business which directly or indirectly competes with the business carried on by the Company. (v) Solicit any of the Company's employees to leave the employ of the Company; or (vi) Seek to employ any of the Company's employees (other than on behalf of the Company). (b) The Employee shall not at any time, either during the term of his employment with the Company or after the termination of such employment for whatever reason, disclose to anyone (except to the extent necessary as a benefit to the Company in the performance of his duties) any trade secrets or confidential information (as defined below). (c) All inventions, discoveries, concepts, improvements, formulas, processes, devices, methods, innovations, designs, ideas, and product developments (collectively, the "Developments") developed or conceived by the -5-

Employee, solely or jointly with others, whether or not patentable or copyrightable, at any time during the term of his employment with the Company or within one year after the termination of such employment for any reason, whether or not during normal working hours, and which relate in any way to the actual or planned business activities of the Company shall be considered to be developed or conceived by the Employee on behalf of the Company within the scope of his employment, and all of the Employee's right, title, and interest therein shall be the exclusive property of the Company. The Employee hereby assigns, transfers, and conveys to the Company all of his right, title, and interest in and to any and all such Developments. Employee shall disclose fully, as soon as practicable and in writing, all Developments to the Board. At any time and from time to time, upon the request of the Company, the Employee shall execute and deliver to the Company any and all instruments, documents, and papers, give evidence, and do any and all other acts which, in the opinion of counsel for the Company, are or may be necessary or desirable to document such transfer or to enable the Company to file and prosecute applications for, and to acquire, maintain, and enforce, any and all patents, trademark registrations, or copyrights under United States or foreign law with respect to any such Developments or to obtain any validation, reissuance, continuance, or renewal of any such patent, trademark, or copyright. The Company will be responsible for the preparation of any such instruments, documents, and papers and for the prosecution of any such proceedings and will reimburse the Employee for all reasonable expenses the Employee incurs upon authorization of the Board. (d) The Employee understands that this section is an essential element of this agreement and that the Company would not have entered into this agreement without this section being included in it. The Employee has consulted with his legal counsel and has been fully advised concerning the reasonableness and propriety of this section in the specific context of the operations and business of the Company, and the Employee acknowledges that this section is reasonable and appropriate in all respects. In the event of any violation or attempted violation of this section, Employee specifically acknowledges and agrees that the Company's remedy at law will be inadequate, that the Company, its business, and business relationships will suffer irreparable injury and, therefore, that the Company shall be entitled to injunctive relief upon such breach in addition to any other remedy to which it may be entitled, either at law or in equity, without the necessity of proof of actual damage. (e) As used in this agreement, the terms "trade secrets" and "confidential information" shall mean any information which is not generally known to the public, and include without limitation any information relating to the Company's business operations and structure, sales methods, practices and techniques, technical know-how , Developments, advertising, marketing methods -6-

and practices, and the Company's relationships with suppliers, employees, or other persons or entities doing business with the Company. (f) For purposes of this agreement, "directly or indirectly" shall mean and include participation for the Employee's own account or as an owner, shareholder, member, partner, director, officer, employee, creditor, or agent of any other person or organization or through the Employee's spouse or other family relation , but shall not include a passive investment of not more than two percent of the outstanding stock of a company whose shares are then being regularly traded in open-market brokerage transactions (either on a stock exchange or over-the-counter). (g) In the event that a court of competent jurisdiction finally determines that any provision of this section is unenforceable ,the Company and the Employee agree that such court shall have jurisdiction to reform this agreement and such provision so that it is enforceable to the maximum extent permitted by law, and the parties agree to abide by such court's determination. [sect]8. General. This document contains the entire agreement between the parties and supersedes any prior discussions, negotiations, representations, or agreements between them relating to the employment of the Employee. No additions or other changes to this agreement shall be made or be binding on either party unless made in writing and signed by each party to this agreement Any notice or other communication required or desired to be given to any party under this agreement shall be in writing and shall be deemed given when either delivered personally to that party or deposited in the United States mail, first-class postage prepaid, addressed to that party at the address set forth below its or his name below. Any party may change the address to which notices and other communications are to be given by giving the other parties notice of such change. All questions concerning the validity, intention, or meaning of this agreement or relating to the rights and obligations of the parties with respect to performance hereunder shall be construed and resolved under the laws of Ohio. If and to the extent that any court of competent jurisdiction determines that it is impossible or violative of any legal prohibition to construe any provision of this agreement consistently with any law, legal prohibition, or public policy and consequently holds that provision to be invalid or prohibited, such holding shall in no way affect the validity of the other provisions of this agreement, which shall remain in full force and effect . No failure by any party to insist upon strict compliance with any term of this agreement, to exercise any option, to enforce any right, or to seek any remedy upon any default of any other party shall affect, or constitute a waiver of, the first party's right to insist upon such strict compliance, exercise that option, enforce that right, or seek that remedy with respect to that default or any prior, contemporaneous, or subsequent default; nor shall any custom or practice of the -7-

parties at variance with any provision of this agreement affect, or constitute a waiver of, any party's right to demand strict compliance with all provisions of this agreement. The captions of the various sections of this agreement are not part of the context of this agreement, but are only labels to assist in locating those sections, and shall be ignored in construing this agreement. This agreement shall be personal to the Employee and no rights or obligations of the Employee under this agreement may be assigned by him. PINNACLE DATA SYSTEMS, INC.
____________________________ CHRISTOPHER L. WINSLOW By ______________________________ John D. Bair, President and Chief Executive Officer Address: 1944 Tremont road Upper Arlington, OH 43212 Address: 6600 Port Road Groveport, OH 43125

-8-

EXHIBIT 10(r) AMENDMENT TO PROMISSORY NOTE This Amendment to Promissory Note ("the Amendment") is made at Columbus, Ohio as of February 21st, 2002 ("the Effective Date"), by Pinnacle Data Systems, Inc. ("Borrower"), and agreed to and acknowledged by KEYBANK NATIONAL ASSOCIATION ("Lender"). WITNESSETH: WHEREAS, Borrower executed and delivered to Lender a certain Promissory Note dated as of August 10, 2000, in the principal amount of Seven Million and 00/100 Dollars ($7,000,000.00), as it may from time to time be amended, restated or otherwise modified (the "Note"); and WHEREAS, each term herein shall be defined in accordance with the Note; and WHEREAS, Borrower and Lender desire to modify the principal amount and the interest rate. NOW, THEREFORE, for good and valuable consideration, including the terms and conditions of this Amendment, the receipt and sufficiency of which are hereby acknowledged, Borrower states as follows: 1. The Note is hereby amended to delete "Principal Amount" in its entirety and replace it with the following: "Principal Amount": $6,000,000.00. 2. The Note is hereby amended to delete "Initial Rate" in its entirety and replace it with the following: "Initial Rate": 4.750%. 3. The Note is hereby amended to delete the section "Promise to Pay" in its entirety and replace it with the following: "Promise to Pay" Pinnacle Data Systems, Inc. ("Borrower") promises to pay to KeyBank National Association ("Lender"), or order, in lawful money of the United States of America, on demand, the principal amount of Six Million & 00/100 Dollars ($6,000,000.00) or so much as may be outstanding, together with interest on the unpaid outstanding principal balance of each advance. Interest shall be calculated from the date of each advance until repayment of each advance. 4. The Note is amended to delete the Section "Variable Interest Rate" in its entirety and to replace it with the following: "Variable Interest Rate" The interest rate on this Note is subject to change from time to time based on changes in an index which is the Key Bank Prime (the "Index"). The interest rate will change on the date of each announced change of the Index within KeyBank. The Index is not necessarily the lowest rate charged by -1-

Lender on its loans and is set by Lender in its sole discretion. If the Index becomes unavailable during the term of this loan, the Lender may designate a substitute index after notifying Borrower. Lender will tell Borrower the current Index upon Borrower's request. Borrower understands that Lender may make loans based on other rates as well The interest rate change will not occur more often than each day that the rate changes. The Index currently is 4.750%. The interest rate to be applied to the unpaid principal balance of this Note will be at a rate equal to the Index, resulting in an initial rate of 4.750% per annum NOTICE: Under no circumstances will the interest rate on this Note be more than the maximum rate allowed by applicable law. 5. No possible Event of Default exists under the Note, nor will any occur immediately after the execution and delivery of this Amendment or by the performance or observance of any provision hereof. 6. Each reference that is made in any related security documents or any other writing shall hereafter be construed as a reference to the Note as amended hereby. 7. Except as expressly set forth in this Amendment, all other conditions, covenants, obligations, provisions and terms set forth in the Note and any security documents and in effect as of the Effective Date shall remain in full force and effect, including, without limitation, the following for further acknowledgment: Borrower authorizes any attorney at law at any time or times after maturity, to appear in any state or federal court of record in the United States of America, to waive the issuance and service of process, to admit the maturity of this Note and the nonpayment thereof when due, to confess judgment against Borrower in favor of the holder of this Note for the amount then appearing due, together with interest and costs of suit, and thereupon to release all errors and to waive all rights of appeal and stay of execution. The foregoing warrant of attorney shall survive any judgment, and if any judgment be vacated for any reason, the holder thereof nevertheless may thereafter use the foregoing warrant of attorney to obtain an additional judgment or judgments against Borrower. Borrower agrees that Lender=s attorney may confess judgment pursuant to the foregoing warrant of attorney Borrower further agrees that the attorney confessing judgment pursuant to the foregoing warrant of attorney may receive a legal fee or other compensation from Lender. -2-

WARNING --BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT TRIAL. IF YOU DO NOT PAY ON TIME A COURT JUDGMENT MAY BE TAKEN AGAINST YOU WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO COLLECT FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR WHETHER FOR RETURNED GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THE AGREEMENT OR ANY OTHER CAUSE. PINNACLE DATA SYSTEMS, INC. By: Michael R. Sayre Its: Executive Vice President AGREED TO AND ACKNOWLEDGED BY: KEYBANK NATIONAL ASSOCIATION By: Mary L. Patton Title: Vice President -3-

EXHIBIT 10(S) FIRST AMENDMENT AGREEMENT This First Amendment Agreement made as of the 21st day of February, 2002, by and between Pinnacle Data Systems, Inc. (the "Borrower") and KeyBank National Association (the "Lender"): WHEREAS, Borrower and Lender are parties to a certain Loan Agreement dated August 10, 2000, as it may from time to time be amended, supplemented or otherwise modified (the "Loan Agreement"); WHEREAS, Borrower and Lender desire to amend the Loan Agreement by decreasing the amount of the line of credit and by modifying certain other provisions thereof; and WHEREAS, each term used herein shall be defined in accordance with the Loan Agreement. NOW, THEREFORE, in consideration of the premises and of the mutual covenants herein and for other valuable considerations, Borrower and Lender agree as follows: 1. The Loan Agreement is hereby amended by deleting the definition of "Borrowing Base" in its entirety and by inserting in place thereof the following: The words "Borrowing Base" mean, as determined by Lender from time to time, the lesser of: (a) $6,000,000.00 or (b) the sum of (i) 85.000% of the aggregate amount of Eligible Accounts less than 90 days, plus (ii) 50.000% of the aggregate amount of Eligible Inventory (not to exceed in corresponding Loan amount, based on Eligible Inventory, $3,000,000.00). 2. The Credit Agreement is hereby amended by adding the following new definitions to the section "Definitions": "EBITDA" means the net earnings of Borrower plus the aggregate amounts deducted in determining such net income in respect of interest expenses, taxes, depreciation and amortization; but not, however, giving effect to extraordinary losses or gains in calculating net income. "Subordinated Debt" means Indebtedness and liabilities of Borrower which have been subordinated by written agreement to Indebtedness owed by Borrower to Lender in form and substance acceptable to Lender. "Tangible Net Worth" means Borrower's total assets excluding all intangible assets (i.e., goodwill, trademarks, patents, copyrights, organization expenses, and similar intangible items, but including leaseholds and leasehold improvements) less Total Debt. "Total Debt" means all of Borrower's liabilities including Subordinated Debt.

3. The Credit Agreement is hereby amended by adding the following section "Financial Covenants": Borrower covenants and agrees with Lender that while this Agreement is in effect, Borrower shall: A) Maintain a cumulative minimum EBITDA based upon the financial statements of Borrower for the most recently completed four fiscal quarters which shall be tested on a quarterly basis as follows: As of Borrower's first fiscal quarter, March 31, 2002: **** $(340,000) As of Borrower's second fiscal quarter, June 30, 2002: **** $250,000 B) Maintain a Total Debt to Tangible Net Worth ratio of greater than or equal to 2.50 to 1.00 which shall be tested on a quarterly basis based upon the financial statements of Borrower for the most recently completed fiscal quarter. 4. Borrower hereby represents and warrants to Lender that (a) Borrower has the legal power and authority to execute and deliver this First Amendment Agreement; (b) officials executing this First Amendment Agreement have been duly authorized to execute and deliver the same and bind Borrower with respect to the provisions hereof; (c) the execution and delivery hereof by Borrower and the performance and observance by Borrower of the provisions hereof do not violate or conflict with the organizational agreements of Borrower or any law applicable to Borrower or result in a breach of any provision of or constitute a default under any other agreement, instrument or document binding upon or enforceable against Borrower; (d) no Event of Default exists under the Loan Agreement, nor will any occur immediately after the execution and delivery of the First Amendment Agreement or by the performance or observance of any provision hereof; (e) neither Borrower (nor any subsidiary) has any claim or offset against, or defense or counterclaim to, any of Borrower's (or any subsidiary's) obligations or liabilities under the Loan Agreement or any Related Documents, and Borrower (and each subsidiary) hereby waives and releases Lender from any and all such claims, offsets, defenses and counterclaims of which Borrower (and any subsidiary) is aware, such waiver and release being with full knowledge and understanding of the circumstances and effect thereof and after having consulted legal counsel with respect thereto, and (f) this First Amendment Agreement constitutes a valid and binding obligation of Borrower in every respect, enforceable in accordance with its terms. 5. Each reference that is made in the Loan Agreement or any other writing shall hereafter be construed as a reference to the Loan Agreement as amended hereby. Except as herein otherwise specifically provided, all provisions of the Loan Agreement shall remain in full force and effect and be unaffected hereby. 6. The rights and obligations of all parties hereto shall be governed by the laws of the State of Ohio. **** represents greater than or equal to. 2

7. JURY TRIAL WAIVER. BORROWER AND LENDER WAIVE ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE, BETWEEN BORROWER AND LENDER, ARISING OUT OF, IN CONNECTION WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION WITH THIS AGREEMENT OR ANY NOTE OR OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH OR THE TRANSACTIONS RELATED THERETO. THIS WAIVER SHALL NOT IN ANY WAY AFFECT, WAIVE, LIMIT, AMEND OR MODIFY LENDER'S ABILITY TO PURSUE REMEDIES PURSUANT TO ANY CONFESSION OF JUDGMENT OR COGNOVIT PROVISION CONTAINED IN ANY NOTE OR OTHER INSTRUMENT, DOCUMENT OR AGREEMENT BETWEEN BORROWER AND LENDER.
Address: Pinnacle Data Systems, Inc. 6600 Port Road Groveport, Ohio 43125 Attn: Michael R. Sayre PINNACLE DATA SYSTEMS, INC.

By: Michael R. Sayre -------------Its:Executive Vice President -----KEY BANK NATIONAL ASSOCIATION

Address:

Key Bank National Association 88 East Broad Street Columbus, Ohio 43215 Attn: Roger D. Campbell

By:

Mary L. Patton -----------------------Its: Vice President ------------------------

3

EXHIBIT 10(t) SECOND AMENDMENT AGREEMENT This Second Amendment Agreement made as of the 7th day of March, 2002, by and between Pinnacle Data Systems, Inc. (the "Borrower") and KeyBank National Association (the "Lender"): WHEREAS, Borrower and Lender are parties to a certain Loan Agreement dated August 10, 2000, as amended on February 21st , 2002 (the "Loan Agreement"); WHEREAS, Borrower and Lender desire to amend the Loan Agreement by modifying a financial covenant; and WHEREAS, each term used herein shall be defined in accordance with the Loan Agreement. NOW, THEREFORE, in consideration of the premises and of the mutual covenants herein and for other valuable considerations, Borrower and Lender agree as follows: 1. The Loan Agreement is hereby amended by deleting Section "A" of the "Financial Covenants" Section and replacing it with the following: (A) Based on the Borrower's financial statements for the following periods, achieve a minimum EBITDA of: For the three months ending March 31, 2002: EBITDA ** ($340,000) For the six months ending, June 30, 2002: EBITDA ** $250,000 2. Borrower hereby represents and warrants to Lender that (a) Borrower has the legal power and authority to execute and deliver this Second amendment Agreement; (b) officials executing this Second amendment Agreement have been duly authorized to execute and deliver the same and bind Borrower with respect to the provisions hereof; (c) the execution and delivery hereof by Borrower and the performance and observance by Borrower of the provisions hereof do not violate or conflict with the organizational agreements of Borrower or any law applicable to Borrower or result in a breach of any provision of or constitute a default under any other agreement, instrument or document binding upon or enforceable against Borrower; (d) no Event of Default exists under the Loan Agreement, nor will any occur immediately after the execution and delivery of the Second amendment Agreement or by the performance or observance of any provision hereof; (e) neither Borrower (nor any subsidiary) has any claim or offset against, or defense or counterclaim to, any of Borrower's (or any subsidiary's) obligations or liabilities under the Loan Agreement or any Related Documents, and Borrower (and each subsidiary) hereby waives and releases Lender from any and all such claims, offsets, defenses and counterclaims of which Borrower (and any subsidiary) is aware, such waiver and release being with full knowledge and understanding of the circumstances and effect thereof and after having consulted legal counsel with respect thereto, and (f) this Second amendment Agreement ** represents greater than.

constitutes a valid and binding obligation of Borrower in every respect, enforceable in accordance with its terms. 3. Each reference that is made in the Loan Agreement or any other writing shall hereafter be construed as a reference to the Loan Agreement as amended hereby. Except as herein otherwise specifically provided, all provisions of the Loan Agreement shall remain in full force and effect and be unaffected hereby. 4. The rights and obligations of all parties hereto shall be governed by the laws of the State of Ohio. 5. JURY TRIAL WAIVER. BORROWER AND LENDER WAIVE ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE, BETWEEN BORROWER AND LENDER, ARISING OUT OF, IN CONNECTION WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION WITH THIS AGREEMENT OR ANY NOTE OR OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH OR THE TRANSACTIONS RELATED THERETO. THIS WAIVER SHALL NOT IN ANY WAY AFFECT, WAIVE, LIMIT, AMEND OR MODIFY LENDER'S ABILITY TO PURSUE REMEDIES PURSUANT TO ANY CONFESSION OF JUDGMENT OR COGNOVIT PROVISION CONTAINED IN ANY NOTE OR OTHER INSTRUMENT, DOCUMENT OR AGREEMENT BETWEEN BORROWER AND LENDER.
Address: Pinnacle Data Systems, Inc. 6600 Port Road Groveport, Ohio 43125 Attn: Michael R. Sayre -------------------PINNACLE DATA SYSTEMS, INC.

By:________________________________ Its: Michael R. Sayre, Executive VP

Address:

Key Bank National Association 88 East Broad Street Columbus, Ohio 43215 Attn: Roger D. Campbell ---------------------

KEY BANK NATIONAL ASSOCIATION

By:________________________________ Its: Mary L. Patton, Vice President

2

EXHIBIT 21 LIST OF SUBSIDIARIES None

EXHIBIT 23 INDEPENDENT AUDITORS CONSENT [HAUSSER + TAYLOR LETTERHEAD] INDEPENDENT AUDITORS CONSENT We consent to the incorporation by reference in the Registration Statements under the Securities Act of 1933, on Form S-8 (file number 333-33214) and on Form S-8 (file number 333-47824), of our report dated February 5, 2002 relating to the balance sheets of Pinnacle Data Systems, Inc. as of December 31, 2001 and 2000, and the related statements of income, stockholders' equity, and cash flows for the years then ended, which report appears in the report on Form 10-KSB of Pinnacle Data Systems, Inc.
/s/ HAUSSER + TAYLOR LLP HAUSSER + TAYLOR LLP Columbus, Ohio March 19, 2002

POWER OF ATTORNEY FOR ANNUAL REPORT ON FORM 10-KSB The undersigned, a director or officer of Pinnacle Data Systems, Inc., an Ohio corporation (the "Company"), hereby constitutes and appoints John D. Bair, my true and lawful attorney-in-fact and agent, with full power to act, for me and in my name, place, and stead, in my capacity as director or officer of the Company, to execute the Company's Form 10-KSB Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the Company's fiscal year ended December 31, 2001, and any and all amendments thereto, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as I might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, may lawfully do or cause to be done by virtue hereof. The undersigned has executed and delivered this Power of Attorney on March 8, 2002.
/S/ Hugh C.Cathey ---------------------------------Signature Hugh C. Cathey ---------------------------------Print or Type Name Director ---------------------------------Position(s) with the Company

POWER OF ATTORNEY FOR ANNUAL REPORT ON FORM 10-KSB The undersigned, a director or officer of Pinnacle Data Systems, Inc., an Ohio corporation (the "Company"), hereby constitutes and appoints John D. Bair, my true and lawful attorney-in-fact and agent, with full power to act, for me and in my name, place, and stead, in my capacity as director or officer of the Company, to execute the Company's Form 10-KSB Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the Company's fiscal year ended December 31, 2001, and any and all amendments thereto, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as I might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, may lawfully do or cause to be done by virtue hereof. The undersigned has executed and delivered this Power of Attorney on March 8, 2002.
/s/ C.R. Hahn ------------------------------Signature C.R.Hahn ------------------------------Print or Type Name Vice President/Director ----------------------------------Position(s) with the Company

POWER OF ATTORNEY FOR ANNUAL REPORT ON FORM 10-KSB The undersigned, a director or officer of Pinnacle Data Systems, Inc., an Ohio corporation (the "Company"), hereby constitutes and appoints John D. Bair, my true and lawful attorney-in-fact and agent, with full power to act, for me and in my name, place, and stead, in my capacity as director or officer of the Company, to execute the Company's Form 10-KSB Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the Company's fiscal year ended December 31, 2001, and any and all amendments thereto, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as I might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, may lawfully do or cause to be done by virtue hereof. The undersigned has executed and delivered this Power of Attorney on March 8, 2002.
/s/ Paul H. Lambert -----------------------------------Signature Paul H.Lambert -----------------------------------Print or Type Name Director ---------------------------Position(s) with the Company

POWER OF ATTORNEY FOR ANNUAL REPORT ON FORM 10-KSB The undersigned, a director or officer of Pinnacle Data Systems, Inc., an Ohio corporation (the "Company"), hereby constitutes and appoints John D. Bair, my true and lawful attorney-in-fact and agent, with full power to act, for me and in my name, place, and stead, in my capacity as director or officer of the Company, to execute the Company's Form 10-KSB Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the Company's fiscal year ended December 31, 2001, and any and all amendments thereto, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as I might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, may lawfully do or cause to be done by virtue hereof. The undersigned has executed and delivered this Power of Attorney on March 8, 2002.
/s/ Thomas M. O'Leary ----------------------------------Signature Thomas M.O'Lerry ----------------------------------Print or Type Name Director ---------------------------Position(s) with the Company

POWER OF ATTORNEY FOR ANNUAL REPORT ON FORM 10-KSB The undersigned, a director or officer of Pinnacle Data Systems, Inc., an Ohio corporation (the "Company"), hereby constitutes and appoints John D. Bair, my true and lawful attorney-in-fact and agent, with full power to act, for me and in my name, place, and stead, in my capacity as director or officer of the Company, to execute the Company's Form 10-KSB Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the Company's fiscal year ended December 31, 2001, and any and all amendments thereto, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as I might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, may lawfully do or cause to be done by virtue hereof. The undersigned has executed and delivered this Power of Attorney on March 8, 2002.
/s/ Robert V.R Ostrander -------------------------------------Signature Robert V.R.Ostrander -------------------------------------Print or Type Name Director ---------------------------Position(s) with the Company


				
DOCUMENT INFO
Shared By:
Stats:
views:13
posted:12/26/2009
language:English
pages:253