SUBJECT TO CORPORATE AND LEGAL APPROVAL

4.

Liability for Excess Inventory - Seller will use Safety Stock on a “first-in, first-out” basis to satisfy Nortel Networks Purchase Orders for New UAS Products. Seller will carry unused Safety Stock at no additional cost to Nortel Networks for a period not to exceed [*] days from the date the Safety Stock is delivered to the Hub.  To the extent that Nortel Networks has not consumed unused Safety Stock by the end of the [*] day period, the Safety Stock will be classified as “Excess Inventory” and a Carrying Charge will begin accruing accrue for Excess Inventory beginning on the [*] day (“[*]”).  The Carrying Charge for Excess Inventory will continue to accrue for Excess Inventory until the earlier of (a) Nortel Networks’ purchasing all of the Excess Inventory from Seller, (b) the [*] day after the date the Carrying Charge began accruing, or (c) the effective date of Nortel Networks’ cancellation of the VMI program set out herein.  

0.1

Invoicing for Carrying Charges and Excess Inventory - Seller will invoice Nortel Networks for Carrying Charges on a monthly basis (prorated as applicable). If applicable, as of the date of either sub-part (b) or (c) of Section 4 above, Seller will invoice Nortel Networks for [*]of the cost of materials for any remaining Excess Inventory.  

1.

Cancellation of VMI Program – Nortel Networks may cancel the VMI program set out in this Attachment 2 upon written notice to that effect to Seller.  Upon cancellation Nortel Networks will have no further liability or obligation hereunder except (a) to the extent it is obligated for outstanding Demand-Pull Triggers under the general terms of the Agreement, and (b) for the cost of materials for Excess Inventory.

6.

Ordering – In addition to ordering under Section 2.1 above, Nortel Networks may from time-to-time issue Demand-Pull Trigger instructions to the Seller, or 3PL as the agent for the Seller, for purposes of ordering New UAS Products.

7.

Hub Operation - The parties will agree in writing on the Hub and the 3PL responsible for managing the Hub for Seller. Nortel Networks may at any time make a reasonable request to Seller to replace a3PL in which case the parties will agree in writing on the new 3PL and, if applicable, new Hub. In the event of a 3PL change, Seller will be responsible for ensuring that stocks of New UAS Products and operation of the Hub is transferred to the new 3PL without any loss or disruption in service to Nortel Networks in a time period acceptable to Nortel Networks. Upon Nortel Networks’ request and at no charge to Nortel Networks, Seller will conduct a Safety Stock check or other similar activity to be undertaken in the Hub and report the results to Nortel Networks.  

8.

Delivery and Invoicing -Seller will make its FCA delivery on  New UAS Products within one (1) business day after Nortel Networks issues a Demand-Pull Trigger to Seller.  Seller will ensure that the 3PL is responsible for providing Seller with notification by Electronic Means within one (1) business day of shipping New UAS Products to Nortel Networks.   

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ATTACHMENT 3

TO EXHIBIT A-1

DEPOSITOR ACCEPTANCE FORM AND AMENDMENT

Account Number ______________________

AudioCodes Ltd. (“Depositor”), Nortel Networks Inc. (the “Preferred Beneficiary”) and DSI Technology Escrow Services, Inc. (“DSI”), hereby acknowledge that AudioCodes Ltd. is the Depositor referred to in the Master Escrow Agreement (“Agreement”) effective February 1, 2003 with DSI as the escrow agent and Nortel Networks Limited as the Preferred Beneficiary.  In addition to DSI and the Preferred Beneficiary by its signature below, Depositor hereby agrees to be bound by all provisions of such Agreement; provided, however, the parties agree that for the limited purposes of AudioCodes Ltd.’s Deposit Materials under this Agreement the Agreement is amended as follows:

1.

For purposes of this Depositor acceptance form references to “License Agreement” in the Agreement will include OEM Purchase and Sale Agreement No. 011449 between Nortel Networks Inc. and AudioCodes Ltd.

2.

The first paragraph of Section 2.6 is deleted in its entirety and replaced with the following:  

“Preferred Beneficiary shall have the right, at Preferred Beneficiary's expense, to cause a verification of any Deposit Materials.  Preferred Beneficiary shall notify Depositor and DSI of Preferred Beneficiary’s request for verification.  Depositor shall have the right to be present at the verification. A “verification” determines, in different levels of detail, the accuracy, completeness, sufficiency and quality of the Deposit Materials. Preferred Beneficiary shall have the right to verify that the binary executable versions of any Deposit Materials (including those derived from any Deposit Materials) are complete and operate in accordance with their specifications and documentation.  If verification is requested by Preferred Beneficiary before Depositor delivers the Deposit Materials to DSI, at Depositor's expense Depositor must verify the Deposit Materials for Preferred Beneficiary in Depositor’s lab in North Carolina with Preferred Beneficiary’s technical representatives present during verification.  However, if Depositor’s lab is not available or is not sufficient for performing verification, the parties will agree on an alternate lab location and expenses related to the verification in the alternate location will be equally shared by the parties .  If Preferred Beneficiary requests a verification after the Deposit Materials have been delivered to DSI, then only DSI, or at DSI's election an independent person or company selected and supervised by DSI, may perform the verification.”

3.

The first sentence of Section 4.1 is deleted in its entirety and replaced with the following:

“Depositor hereby transfers to DSI the title to the media upon which the proprietary technology and materials are written or stored, which title will revert back to Depositor if this Agreement is terminated under Section 6.4; provided, under this Agreement Depositor is entitled to the return of the media on which the Deposit Materials are written and/or stored and requests the return under Section 6.4.”

4.

For purposes of governing AudioCodes Ltd.’s Deposit Materials Section 5.1 (Release Conditions) of the Agreement is deleted in its entirety and is replaced with the following:

“5.1

Release Conditions.  As used in this Agreement, "Release Condition" shall mean the following:

a.

Seller (i) files for voluntary dissolution in bankruptcy; (ii) files a petition for voluntary reorganization in bankruptcy (e.g., Chapter 11 in the U.S.), which is then converted to involuntary proceedings for dissolution based on a petition by a member of the creditor’s committee representing the creditors in the voluntary proceeding (or its equivalent in non-U.S. jurisdictions) and such proceedings are not dismissed within 90 days; or (iii) is declared insolvent under applicable bankruptcy/insolvency laws or other similar laws; or

b.

Over any [*] day period during the Term, a consistent, repetitive and material failure or refusal to comply with the terms of the Agreement that govern Nortel Networks’ purchase of New UAS Products (which failure or refusal is not otherwise excused under the Agreement), which Release Condition will be effective as of the date  Nortel Networks notifies Seller in writing of the [*]  day failure or refusal (which notice can be Nortel Networks’ notice to DSI under the Master Escrow Agreement with a copy to Seller, requesting a release of the Escrow Materials, that includes a description of the specific failures or refusals); or,

c.

Seller ceases to carry on normal business operations.  For purposes of sub-part c, a merger, reorganization or other permitted assign under any written agreement between the Preferred Beneficiary and AudioCodes Ltd. will not trigger a release of the Escrow Material as long as the resulting reorganized entity, assignee or merged entity carries on normal business operations (i.e., the manufacture and sale of UAS Products to the Preferred Beneficiary).”  

5.

For purposes of Section 6. 1 the term of the escrow arrangement for New UAS Products will not be 1 year, automatically renewable, but, rather, will be the first 3 years of the Term of the License Agreement, as “New UAS Products” and “Term” are defined under the License Agreement.  The described 3 year period will a fixed term for the escrow for New UAS Products and will not renew automatically.

DSI will not be required to inquire into the truth or evaluate merit of any statement or representation contained in any notice or document.  DSI shall not be responsible for failure to act as a result of causes beyond the reasonable control of DSI.

Requests to change the designated contact should be given in writing by the designated contact or an authorized employee.

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EXHIBIT ▇-▇

▇▇-▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ AND EMS PRODUCTS

PRICES, DISCOUNTS AND DELIVERY

1.

Pricing – The prices set out in Sections 1.1 through 1.3 below for the described Products will apply under this Exhibit A-2 (“Prices”).  With respect to any pricing designated as “TBD,” as necessary, the parties will agree in writing on the applicable Price and the time period during which it will be effective.

(a)

The [*] percent ([*]%) discount applicable under the subsections below will apply as of the Effective Date. The [*] percent ([*]%) discount indicated in the pricing matrixes in this Section 1 will replace the [*] percent ([*]%) one year after the effective date, but the [*] percent ([*]%) discount will not apply until Nortel Networks has purchased a total of $[*] million in Products (exclusive of support packages) from Seller under the Agreement.  Notwithstanding the preceding, Seller grants Nortel Networks a [*] percent ([*]%) discount, applicable as of the Effective Date, for  SIP based Mediant 2000 16 Span (1 T1/E1) and 1 Span (T1/E1) Products.  The [*] percent ([*]%) discount indicated in the pricing matrixes in this Section 1 will replace the [*] percent ([*]%), but the [*] percent ([*]%) discount will not apply until Nortel Networks has purchased a total of $[*] million in Products (exclusive of support packages) from Seller under the Agreement.  

(b)

Future Cost Reductions - With respect to Years [*] ([*]) and [*] ([*]) from the effective date, except where a cost reduction is not indicated (e.g. call control and indemnification options),   the parties will agree in writing in advance upon the applicable cost reduction to be applied; provided, however, unless stated otherwise in the written agreement, the reduction will not be less than [*] percent ([*]%) or more than [*] percent ([*]%).

(c)

Waiver of Indemnification - However, no discounts or cost reductions will apply to the pricing element related to vocoder indemnification in the matrixes below, except that Seller agrees that it will lower the G.723.1 indemnification Price by  [*] percent ([*]%) for the third an fourth year of the Term.  Seller agrees that for each of the G.729A and G.723.1 vocoder Products purchased by Nortel Networks Seller will invoice Nortel Networks for the applicable indemnification Price, until Nortel Networks waives in writing the indemnification protection for which Seller is obligated under Section 18 of the Agreement with respect to a vocoder Product.   Seller’s failure to invoice Nortel Networks for the indemnification Price before it receives a written waiver from Nortel Networks will not affect a waiver of Seller’s indemnification obligation.  Once Nortel Networks has waived the indemnification Price for a vocoder Product, all units of that Product purchased after the date of the waiver will no longer have Section 18 indemnification protection (i.e., Nortel Networks must retain the protection for all future purchases or waive protection for all future purchases).  

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1.1

Mediant 2000 Base Prices and Volume Discounts

1.2

TP-610  Base Prices and Discounts

_____________________

*  Confidential

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1.3

EMS Base Prices and Discounts

2.

Lead Times – The Purchase Order lead times set out below will apply to Products under this Exhibit A-2 and will apply to the Product part numbers/descriptions exclusive to this Exhibit A-2.  So, the Product types governed under this Exhibit A-2 may or may not have the same lead times as the same type of Products governed under Exhibit A-1.  

•

TP-610 Products lead time– [*] weeks

•

Mediant 2000 Products lead time– [*] weeks

3.

User Manuals – The user manuals applicable to the Products Under this Exhibit A-2 are as follows:

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* Confidential

D R A F T

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EXHIBIT B

PRODUCT SPECIFICATIONS, MARKING AND LABELING

References to telecommunications standards in this Exhibit B will include amendments and replacements of the standards, as they occur from time to time during the Term.  

PART I:

SPECIFICATIONS

1.

Document Identification:  On a Product by Product basis the parties will identify and agree in writing on the documentation that contains the Specifications for the Product and incorporate the Specification documentation in this Part I of Exhibit B by reference.

2.

Certification -As needed, Seller will obtain the design certifications listed below for new or modified designs after production release; provided, however, Seller will not be responsible for obtaining certification for  BETA Products shipped to Nortel Networks before certification is obtained. The Nortel Networks Acceptance Program in Exhibit D of this Agreement will still apply.  At Seller’s expense Nortel Networks and Seller will make joint submissions to the certifying  regulatory bodies.  However, Nortel Networks will be responsible for any costs in excess of those for a solo submission.  The parties will notify each other about design changes that might invalidate a certification.  The exposure will be included in the Change Notification process whether or not the changed or modified design will be in a production release.

2.1

Seller will obtain the following certifications and any other certifications required by law in [*], [*] or [*] and such other countries as agreed upon in writing by the parties.

CEMark  

UK Type Approval

UL / CSA / EN safety

FCC part 15

PART II:

PRODUCT MARKING AND LABELING

A.

MARKING - Subject to the country of original marking requirements set out in Section III below, all Products will be marked as follows:

1.

Serial number:  bar-coded serial number will be placed on the Product

2.

Manufacturing date stamp: Seller will  use the SN on the Product to track  the date of shipment.

3.

 All Product marking under this Agreement will conform to Nortel Networks corporate standard 5014.00 for Serialization Codes for Nortel Networks Products and the Telecommunication Industry Forum standards (e.g., UCC EAN, ▇▇▇▇ & Bradstreet and Telcordia) product serialization and traceability standards.  In that regard Nortel Networks will provide Seller with its applicable corporate standard information.

4.

Seller’s PEC code and Nortel Networks’ PEC code, as provided by Nortel Networks, will be on the Product

5.

Repair date stamp:  Telcordia GR-78-CORE, 1997, Issue 01.  Nortel Networks will provide Seller with the applicable location code for Seller’s repair location(s) and ink specifications for stamping products.

6.

Seller will pack and ▇▇▇▇/label the Products using the following standards:

a)

Nortel Networks Corporate Standard CS152.50 on distribution packing.  

b)

Telcordia GR-CORE-1421 1995, Issue 02 and TR-NWT-000063;

c)

Nortel Networks Corporate Standard 157.0 ESD and Telcordia TR-NWT-870 1991, Issue 01on ESD protection.

d)

Nortel Networks’ then-current quality system procedures, as implemented under Section 6 of the Agreement, and  as it applies to Products in commercial service (e.g., quality procedures would not apply to products in use in beta testing or product trials).  Nortel Networks will notify Seller of any changes in Nortel Networks’ quality system procedures. Nortel Networks and Seller will discuss the changes in the notice and any additional cost Seller would incur to comply with the changes within 90 days of the date of the notice.  Upon Nortel Networks’ request and agreement to pay additional costs, if any, related to implementing the changes, Seller will implement the changes within 90 days of the date of notice; provided, however, absent an agreement, Seller will not be obligated to make the changes.  Notwithstanding the preceding, Seller agrees to obtain industry standards certifications, as requested by Nortel Networks under Section 6.1of the Agreement, without additional charge to Nortel Networks; provided, Seller has agreed that a commercial purpose exists for Seller to obtain certification. With respect to changes in industry standards under which Seller is certified, at no additional charge to Nortel Networks, Seller will implement the changes in the time period prescribed by the applicable standards governing body for implementing the change.  

e)

Telcordia's GR-CORE-14211995, Issue 02, TR-NWT-000063 and TR-NWT-870, 1991, Issue 01; American Society for Testing & Materials-ASTM D-4196 Performance Testing Of Shipping Containers and Systems; and, Telecordia (Bellcore) GR 63-Core Network Equipment Building Systems (NEBS) requirements: Physical Protection.   

f)

Labeling - Electronic Industries and Association Specification EIA-556B (Outer shipping container Bar Code Label Standard); and, Telecommunications Industry Forum 93-002 Implementation Guide to Packaging and Labeling.

If Seller approves of modifications requested by Nortel Networks, Seller will modify the packing boxes’ size and external markings (including branding).  

B.

LABEL REQUIREMENTS – Product labels must include the following:

Once the unit is repaired (a) the CPC prefix would change from “A0” (e.g., AO23456) to “AR” (i.e., the example would change to AR23456), (b) the repair date would be stamped under the manufacture date.

III

COUNTRY OF ORIGIN PRODUCT AND PACKAGING MARKING

1.

Product Marking for Country of Origin - All Products supplied to Nortel Networks or its customers must be marked in accordance with the applicable World Trade Organization and country-specific marking regulations.

2.

Product Packaging with Country of Origin - The Product packaging must be marked in accordance with the World Trade Organization and country specific governmental marking regulations. The country of origin shown on the packaging must agree with the Product marking. If the Product packaging contains composite items, each item must be marked, and the packaging must include a statement that lists the country of origin of the items contained in the packaging.

3.

Container Marking - If a container is packed with product of different origins, Seller agrees to ▇▇▇▇ the container with a marking statement that lists all the countries of origin of the items packed within the container or with the statement confirming “multiple origins contained”.  If Seller is required to reuse containers, the container itself must be marked with the containers origin.

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EXHIBIT C

REPAIRS AND TECHNICAL ASSISTANCE RATES

1.     Technical Support Rates – Seller’s charges for providing Technical Support Services for Products will be as determined below under Section 1.1 for remote services and Section 1.2 for on-site services.  For purposes of this Section 1, “Years of Support” is a period of time specified in the matrix below that begins with Product Acceptance of each major Software release used in conjunction with a Product.

1.1

Remote Technical Services – At Nortel Networks’ request Seller will provide Nortel Networks with remote technical support services, as described in Section 3 of Exhibit H to this Agreement, under (a) Seller’s Standard Support Package (b) Seller’s Enhanced Support Package, or (c) Seller’s Standard Support Package with 24X7 support (“24x7 Support Package”).

1.1.1

Support Package Charges –  Seller’s basic charges for the support packages described in Section 1.1 will be calculated at the end of each calendar quarter during the Term.  As of the last day of the calendar quarter, for each support package and each Product group (e.g., Mediant products) (and in the case of 24X7 Support Package in each control protocol) supported under a package, Seller will calculate the total Price of all Products in the Product group (and, if applicable, each control protocol under each Product group) purchased by Nortel Networks since the Effective Date (“Product Group Cumulative Volume”).

(a)

Standard and Enhanced - For the Standard support Program and the Enhanced Support Program Seller will apply the Product Group Cumulative Volume to the matrix in Subsection 1.1.2 below to determine the percentage to be used in calculating the technical support charges that will apply retroactively for the calendar quarter just ending.  Seller will divide the resulting effective annual dollar charge by 4 to calculate the quarterly charge to invoice. For example, as of the end of the third quarter of the second year of the Term, if Nortel Networks’ Product Group Cumulative Volume for Mediant Product supported under the Standard Support Package were $ [*] and the Product Group Cumulative Volume for Mediant Products supported under the Enhanced Support Package were $[*] million, then the applicable percentages to be used would be [*]% and [*]% respectively. Applying the percentages in the examples, the basic charges Seller would invoice Nortel Networks for the quarter would be $[*] for the Standard Support Package and $[*] for the Enhanced Support Package (i.e., the effective annual charge divided by [*]).  

(b)

24X7 Support Package - For the 24X7 Support Package only, Nortel Networks agrees that the applicable support charges will be determined by applying the Product Group Cumulative Volume on a per control protocol basis (i.e., a separate calculation for  each of MEGACO, SIP and TGCP/MGCP).  In that regard if the Product Group Cumulative Volume for one protocol for Mediant Products were $[*] million then Seller would invoice Nortel Networks for $[*] for the calendar quarter just ending (i.e., the effective annual charge divided by 4), based on the “greater than” requirement in the applicable matrix column in Subsection 1.1.2.

1.1.2

Determining  Remote Technical Support Charges - 

1.1.3

Cumulative Total Support Program Charge –  Notwithstanding Subsection 1.1.1 above, during the Term, if the total of all Product Group Cumulative Totals for a support package exceeds $ [*] million, and until the total of all Product Group Cumulative Totals for the same support package equals $[*] million, Nortel Networks will not be obligated to pay (i) more than $[*] in support charges in each future calendar quarter for Standard Support Package; or, (ii) more than $[*] in total support charges for all control protocols in each future calendar quarter for the 24X7 Support Package.  When the total of all Product Group Cumulative Totals for each of the Standard and 24X7 Support Packages equals $[*] million or more, the parties will agree on the applicable percentage to be used to calculate future support charges for the applicable support package.  No maximum quarterly payment will apply to the Enhanced Support Program with respect to the package purchases exceeding $[*] million, unless otherwise agreed in writing by the parties.

1.2   On-Site Technical Services – During the term of this Agreement, Seller’s labor rates for providing on-site technical service for its Products, as described in Section 3.9 in Exhibit H,  will be U.S.$[*] per hour  with a minimum 3 hours chargeable per on-site visit . With respect to on-site repair travel and living expenses for Seller’s personnel who are requested to travel from Seller location to a Nortel Networks specified location, Seller will invoice Nortel Networks for such travel and living expenses provided that (a) the expenses are usual, customary, and reasonable and without ▇▇▇▇-up of any kind (i.e., as invoiced by Seller’s third party provider or usual for travel related expenses), (b) do not exceed the Nortel Networks’ standard employee allowances for such travel.  When it requests on-site services, Nortel Networks will confirm in writing for Seller what Nortel Networks then-current, applicable standard allowances for travel and living expenses are for the location involved,  for example, CONUS per diem rates might apply to services provided in the U.S.

2.

FCA Repair Locations

AudioCodes Ltd.

Attention: ▇▇▇ ▇▇▇▇▇▇▇▇▇▇

▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇

▇▇▇▇▇ ▇▇▇▇▇

▇▇▇▇▇▇

Tel: ▇▇▇▇-▇-▇▇▇-▇▇▇▇

3.

Out of Warranty Replacement Service and Repairs

3.1

Replacement Service – At Nortel Networks’ request, Seller will deliver replacement Products, including FRU’s, after the expiration of the applicable Warranty Period.  Nortel Networks will pay freight expenses on the returned Product.  Seller will pay the freight expenses for the shipment of replacement Product.

1.1

No Fault Found – Charges for no-fault-found in Products submitted under Section 2.6 of Exhibit G of this Agreement  will be as defined in 3.3 below.

3.3

Out of Warranty Repair Services Rates

After the Product Warranty Period, provided a Product is not UTR (as defined in Exhibit G, Section 2.8), Seller will repair a Product based on the following matrix, and, if not included in the matrix, for a price to be agreed upon in writing by the parties. If a Product is UTR, then Nortel Networks may request Seller to replace the Product at the FRU prices set out below. If replacement prices are not included in the matrix, then Seller will replace Products for a price to be agreed upon in writing by the parties.  For units that have the same price in the FRU New Price column and FRU Repair Price Fee column, the implication is that the unit is not repairable. 

3.4

Emergency Advance Exchange Charge

If Nortel Networks requests that Seller ship repaired Products or replacement Products directly to Nortel Networks’ customer, Seller will do so at Nortel's expense, but Seller will only charge Nortel Networks for its actual cost for shipping the Products (i.e., shipping price invoiced by its third party vendor, without ▇▇▇▇-up).  

4.

Training Fees

Seller’s training fee rate for providing Nortel Networks and its customers with Technical Training, as described in Section 1.1 in Exhibit H, for its Products is U.S. $[*] per day, including all applicable training materials for up to 12 participants. Travel and living for Seller’s trainers who are requested to travel from Seller location to a Nortel Networks specified location will be paid by Nortel Networks provided that (a) the expenses are usual, customary, and reasonable and without ▇▇▇▇-up of any kind (e.g., as invoiced by Seller’s third party provider), (b) do not exceed Nortel Networks’ allowances for such travel for its own employees. When it requests on-site services, Nortel Networks will confirm in writing for Seller what Nortel Networks then-current, applicable standard allowances for travel and living expenses are for the location involved,  for example, CONUS per diem rates might apply to services provided in the U.S.

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EXHIBIT D

ACCEPTANCE PROGRAM

Nortel Networks may put a sample of each Seller product through its evaluation, qualification and acceptance program (Acceptance Program) to verify that the Seller product meets the Specifications.  Seller will provide Nortel Networks with (a) products for the Acceptance Program, and (b) any reasonable support required by Nortel Networks.   At least one of each new Seller product design and each mechanically different product design will go through the Acceptance Program.  Nortel Networks will make reasonable efforts to avoid testing design factors that a Seller product may have in common with previously accepted Products.

1.

Product Acceptance Dates –The parties will agree in writing on the Acceptance Test Program (ATP) and scheduled Acceptance date for each Seller product (Acceptance Date).  

1.1

Prior to shipments of Products that will be placed in commercial service by a customer of Nortel Networks, Nortel Networks and Seller must complete Product Acceptance test of the Products or agree there will be no test program conducted with respect to the Products. Notwithstanding the preceding, with respect to Mediant and TP-610 Products, shipments of Products being placed in commercial service are deemed to be shipments of: a) greater than  [*] units of Mediant 2000 and b) greater than [*] units of TP-610 Products.  If Nortel Networks and Seller agree to waive the Acceptance Test Program, the Product will be deemed to have met Acceptance.

2.

Failure to Comply with Specifications – If a Seller product fails the Acceptance Program, Nortel Networks will notify Seller, identifying the problem.    Upon receipt of the notice, Seller will, at its expense, correct the problem by the Acceptance Date.  However, Nortel Networks is not obligated to accept a Product until Nortel Networks has verified to its satisfaction that the problem is resolved.

2.1

Recover Expenses – If a Seller product cannot pass the Acceptance Program by the Acceptance Date, Seller will refund to Nortel Networks the Price of the Product purchased by for the specific Acceptance Test Program for the failed product.  If the Seller has a functionally equivalent product, at its expense Seller will also provide Nortel Networks with a functionally equivalent product until the original Seller product successfully undergoes the Acceptance Test Program.  When the original Seller product successfully passes the Acceptance Program, at its expense, Seller will replace the functionally equivalent products with Products at its expense.  

3.

Acceptance Report – Upon Acceptance Seller will provide Nortel Networks with a written report with the Product details, as requested by Nortel Networks (e.g., Product part number and current Product revision level).

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EXHIBIT E

CHANGES

1.

All Changes to products under this Agreement as a result of a product/process change notice (PCN) will be made in compliance with JEDEC standards including JESD46 and JESD48, as may be amended or replaced during the Term of this Agreement, including the following:

1.1

Seller will notify Nortel Networks of all product changes in accordance with the PCN process for all changes that affect form, fit and functions.

1.2

Timeframes for Notifications –  [*] days

1.3

Product Change Notice (PCN) Content-

At a minimum a PCN will contain the following data:

* - Notification Number (normally a PCN number) for traceability

* - Reason for the change

* - Description of the change

* - Sufficient information to allow for proper assessment of the change

* - Timeframe in which the change will take effect

* - Complete list of supplier's component impacted

* - How changed product can be identified

+ - Nortel identifying codes (i.e. CPC and ENGCODE) for items on the Nortel Database

+ - Identifying codes for those items used by Nortel that are still using `acquired' company codes

     (e.g. STC's 13 digit code, Bay Networks’ part id, etc.)

* - Supplier contact to answer questions about the change

* - Final date (not to exceed 15 days) for any feedback from Nortel indicating acceptance/acknowledgment of the change

* - LTB (last time buy) date

* - LTD (last time delivery) date

* - Any conditions that are being put on the change (LTQ [last time quota], etc.).

Notes:

Items identified with an "*" are deemed mandatory

Items identified with an "+" are deemed necessary for the Nortel user locations to help in the resolution of the PCN.  For additional detail reference Nortel Networks CS1528 change order process and CS1529 product change notice process,

It is absolutely necessary for suppliers to identify explicitly the master list of impacted parts. This requirement is the only method that will enable Nortel to assess the total impact of a change and know what the exposure is and not just the exposure for items that were purchased by Nortel in some defined timeframe.

Seller will notify Nortel Networks’ System Engineering and Quality Control Departments about a Change involving form, fit, function or performance (only if performance is degraded) within 14 working days after Seller’s authorizing it. The changes to which Paragraph 1 and Paragraph 3 refers will be as defined in what is tested in the Acceptance Procedure. The changes to which this paragraph refers will not include new Software revisions (either major on minor),as these new revisions are documented using a standard release notes, and as unlike HW modifications Nortel has the freedom to decide whether to use these new versions or stick with previous versions.  Seller will use the form attached to and incorporated in this Exhibit E as Attachment 1 to notify Nortel Networks (Change Notice).  The Change Notice will (a) comply with the requirements of JESD46-B for Mediant 2000 or Telcordia GR-209 for TP-610 Product, if applicable as stated in Exhibit E Section 3, (b) detail the reason for the Change, (c) describe the effect on the Product, (d) describe the effect if the Change is not implemented, (e) identify the planned implementation date, and (f) describe Seller’s plan for providing changed Products to Nortel Networks and its customers.  

1.4

If Nortel Networks has not responded to a Change Notice within [*] business days of receipt, Seller may implement the Change.

2.

Within [*] days of receipt of Nortel Networks’ request for further justification for a Change, Seller will respond in writing with additional evidence or rely on the information included in the Change Notice.    If Nortel Networks disagrees with the evidence given, the parties will have [*]days from the date of the Change Notice to resolve the disagreement.  If not resolved at the end of the [*]days, Nortel Networks’ reasonable resolution of the disagreement will be the final resolution.  `

3.

At its expense Seller will make Class A or AC changes required by GR-209 (i.e., redesign and retrofit) to eliminate  material, service affecting defects in Products.   Seller will install the Class A or AC change at its expense in all installed and stocked Products through the retrofit program that Nortel Networks negotiates with its customers, based on an implementation plan agreed upon in writing in advance by the parties.  Seller will implement the retrofit in no more than [*] days from the day of receiving the change notice. During its customer retrofit negotiations, Nortel Networks will use reasonable efforts to minimize Seller’s retrofit costs. The retrofit remedy will be in addition to any other remedies under the agreement.  

3.1

On Seller’s request, Nortel Networks will give Seller Nortel Networks’  (a) Product Engineering Code, (b) Product release number, (c) CLEI Product code for each retrofitted Product and (d) any other information regarding the defect or failure deemed relevant by the Seller.  On Nortel Networks’ request, the information will be stamped on the Products or in the case of the TP1610 may need to be tagged, not stamped due to space restrictions on the Products.

4.

Within [*] business days of Acceptance of a changed Product, Seller will update the Acceptance report described in Exhibit D.

5.

At any ▇▇▇▇ ▇▇▇▇▇▇ updates a Product to a new release, the Product will be stamped with a product code that clearly identifies product version and identifies the new release separately, next to the serial number, for purposes of distinguishing it from previous releases of the Product.

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D R A F T

SUBJECT TO CORPORATE AND LEGAL APPROVAL

ATTACHMENT 1

to Exhibit E

Product Change Notice

Background Data

PCN Data

Approvals

Distribution:

 FAEs:      

 Sales:      

 B.C.s:      

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D R A F T

SUBJECT TO CORPORATE AND LEGAL APPROVAL

EXHIBIT F

MONTHLY REPORTS

Unless otherwise agreed by the parties, Seller will only be obligated to provide the reports described in this Exhibit F to the Nortel Networks points of contact in that regard, as identified from time to time by Nortel Networks to Seller.   

1.

Monthly Reports: Repaired Products - By the 21st day of each month during the Term Seller will provide a Repair Failure Analysis Report and a Unit Failure Analysis Report to Nortel Networks’ designated repair, quality control and product brand managers.  

All occurrences of Product failure in the field, analysis results, corrective actions and implementation plans will be included in the monthly report, including:

(a)

Number of Products delivered and number of Products returned in the previous month.

(b)

Number of Products delivered and number of Products returned year to date.

(c)

Number of Products delivered and number of Products returned to date.

(d)

Number of replacement devices provided in the current month and the same on a cumulative basis.

(e)

Post Repair Information for Products sent for repair by Nortel Networks based on compiling Product information from Seller’s repair reports on a defect-by defect basis (e.g., information  for each specific defect noted during the previous month, including number of replacements, cumulative time since delivery [in months])

(f)

Trend chart using a time of replacement rate value (RpR)

(g)

Actual mean-time-between-failure (MTBF) measurement: The actual annualized MTBF will be calculated from the cumulative replacement rate recorded monthly.  

(h)

On Time service level for (i) repair and return, (ii) retrofit, (iii) fast cycle failure analysis (FCFA), and  (iv) return material authorization (RMA).

2.

Minimum Field Baseline Report - On the 21st day of each month after the date the Products pass the Acceptance Program, Seller will provide to Nortel Networks’ designated repair, quality control and product brand managers a Minimum Field Baseline Report with the minimum applicable release level number for the in-service operation of the Products and the release level of new Products shipped during the previous month.  For each Hardware and Software release the report will detail the (a) the contents of the release, (b) backward and forward compatibility, (c) ability to upgrade the release, (d) any other information reasonably requested by Nortel Networks.

3.

General Business Report - On the 21st day of each month after the date the Products pass the Acceptance Program, Seller will provide to Nortel Networks’ designated repair, quality control and product brand managers a General Business Report. On a per PEC basis, the report will detail the

(a)

Number of Products delivered to Nortel Networks in the previous month.

(b)

Total business in dollars delivered to Nortel Networks in the previous month.

(c)

Number of Products delivered year to date to Nortel Networks.

(d)

Total business in dollars delivered year to date to Nortel Networks.

(e)

Number of Products delivered to date to Nortel Networks.

(f)

Total business in dollars delivered to date to Nortel Networks.

(g)

Total number of shipments that were missed or delivered short by Seller in the previous month.

(h)

Price in effect in the previous and current months.

(i)

Prices paid for Nortel Networks proprietary components in the last month.

(j)

Total number of problem resolution system (PRS reports ) and customer service requests (CSR) raised in the previous month on the Products and a summary of each problem.

(k)

Total number of calls received from the Nortel Networks Customer Service center in the previous month.

(l)   Scorecard metrics, consisting of:

(i)

Delivery performance – percentage of Product delivered on time to Nortel Networks for the month

(ii)

Cost reduction performance –actual cost vs. cost reduction targets

(iii)

TL9000 return rates

•

DOA/ELF return rates First year return rates

•

Long term return rates

4.

Repair Failure Analysis Report  

For Products being repaired Seller will track each Product by its PEC and unique serial number throughout the repair process.  Seller will maintain and provide to Nortel Networks at Nortel Networks request repair failure analysis data in the form of an electronic file (e.g. Word or Excel file), partially including, but not limited to, the information set out in the matrix below. At a minimum Seller will provide the failure repair data described in the EDI fields listed under “Field Name” in the matrix set out in and in the manner required under the terms of Attachment 1, attached to and incorporated in this Exhibit F, including any updates and amendments that may be communicated during the Term to Seller by Nortel Networks.  However, Seller will not be obligated to provide the information in the EDI format before the expiration of 90 days from the Effective Date.

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D R A F T

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ATTACHMENT 1

TO EXHIBIT F

ELECTRONIC DATA SPECIFICATIONS

SELLER FAILURE DATA

20 DATA ELEMENT SPECIFICATION

♦

All fields are variable length with the delimiter being “|”.  Most fields are 100 characters.  However, when repair data loads into QDM, the vendor field and part number field merge for a combined total of 100 characters.  Currently, if more than 100 characters are entered between the vendor and part number fields, data is lost.

♦

File is an ASCII, Word or other electronic text file.

♦

The repair data file that each Contractor submits should be called “I_repair_(your contractor name)_datetime.dat” (e.g.:  I_repair_Contractor_200005101330.dat).

Which translates to I_repair_Contractor_May 10, 2000 1:30pm = YYYYMMDDHHMM.

♦

Ensure that the repair failure data is an accurate first-hand account of the technician who witnessed the actual data as it was generated the test/debug repair process within the parameters of the 20 data fields set forth in this procedure.

♦

Do not skip fields.  Each line item must have 20 data fields.  If a field is “not applicable” or “not available” do not leave the field blank, either enter “NA” or add a “|” to act as a placeholder.

♦

Post file on your FTP site.  Provide Nortel Networks with FTP Address, Username, Password and File Path.

The 20 Data Fields are:

NOTE: Conditional fields are dependant upon the entry of a problem code.

PROCESS   Detail Information for reporting 20 data fields:

Field 1.

RA_NO:   RMA Number of the returned part (e.g.:  R123456-1 or R123456789 or RA12345678 (the A can be any letter A-Z).

•

RMA information must be exact to be accepted by QDM.

•

RA numbers cannot be prefixed with a zero (can not be –01)

Field 2.

RA_LINE_NO:  Line Number of Nortel Networks RMA.

•

If Clarify RA (R123456-1), Line Number usually is a default of (-1)

•

Regular D1 10 digit RMAs can have over 100 line items.  

•

Each line item listed for a D1 RMA indicates a specific piece of material and serial number. RMA information must be exact in the repair data report. If not, the data feed will be rejected.

•

RA line items cannot be prefixed with a zero (can not be –01)

Field 3.

MODEL_ RECEIVED:  Nortel Networks model number or part number of unit received.   (Such as: DM1401062, AG1004001, 114368-64, etc.).

•

Model number or Part Number along with the Serial Number listed on the D1 RMA must match exactly.  If not, the data feed will be rejected.

Field 4.

SERIAL_NOs:  Full Serial Number(s) of the received part(s). (e.g.: ▇▇▇▇▇▇▇▇▇). (need mechanism to supply more than a single SN but rather a quantity and multiple serial numbers)

•

The Model number or Part Number along with the Serial Number listed on the D1 RMA must match exactly.  If not, the data feed will be rejected.

Field 5.

INCOMING_REV_NO:  Functional Numeric Hardware Revision.

•

Revision Register of received part listed on Assembly level BOM.

•

Can also be alphanumeric.

•

Or, if not present on Assy BOM, use the Sub-assembly level Mother Board BOM revision.

Field 6.

INCOMING_AGENT_REV:  Revision level of the Operating Software / Agent Code of the received part, if applicable.

Field 7.

RECEIVE_DATE:  Date part was received at repair vendor.

•

Must be in this format: (10-MAY-2002)

Field 8.

REPAIR_DATE:  Date repair was completed.

•

Must be in this format (10-MAY-2002). This date must be equal to or greater than the receive date.

Field 9.

MODEL_ REPAIRED:  Nortel Networks model number or part number of unit repaired.  (Such as: DM1401062, AG1004001, 114368-64 etc…).

•

Model number or Part Number along with the Serial Number listed on the D1 RMA must match exactly to what was transmitted on the EDI 864 feed.

Field 10.

TEST_RESULTS:  Specific description of the step of the test that the part failed during the repair test process (e.g.: PPX Floating 1 RX Address Bit Test, No lights at Boot up, Power Supply failure).

Note: This is the actual failed test or results observed from the test stage failure noted in field 11.

Field 11.

TEST_STAGE_FAILURE:  The stage in the repair process where the part failed.

•

If material fails at multiple stages, use more than one code in this field such as: FUNCTIONAL TEST / BURN-IN or INCOMING INSPECTION / FUNCTIONAL TEST etc….

Required if the Problem Code listed in item # 12 is: DEFECTIVE,

MULTIPLE, SOLDER, BARE BD, DAMAGED, INSTALL WR.

Approved Test Stage Failure codes:

Field 12.

PROBLEM_CODE:  Problem Code which categorizes root cause of the repair. The parties will work together to align additional problem categories and codes.

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D R A F T

SUBJECT TO CORPORATE AND LEGAL APPROVAL

NOTE: Material processed due to Nortel Networks Purge or Deviation cannot be coded as NO FAULT. Use COMMENTS (field #20) to note the Purge or Deviation number that you are implementing.

Field 13.

REPAIR_LOCATION:  Reference designator (e.g.:  U12, P/S) that indicates the board location of the failed component that caused the original failure specified in the TEST_RESULTS field.  

Required if Problem Code is: DEFECTIVE, MULTIPLE, SOLDER, BARE BD, DAMAGED, INSTALL WR.

•

Note: When multiple entries are made in Field 13, 14, 15 and 16, they must be corresponding and separated by commas.

(e.g. U7, T2, R204)

Note: Not Required if Problem Code is:  NO FAULT, NFF-UPGRADE.

Field 14.

COMPONENT_PART_NO:  The Nortel Networks part number of the failed component specified in the REPAIR_LOCATION field.  Note: Seller will provide component part numbers to Nortel Networks for board-level parts but not electronic components on the board.

Required if Problem Code is: DEFECTIVE, MULTIPLE, DAMAGED.

•

Note: When multiple entries are made in Field 13, 14, 15 and 16, they must be corresponding and separated by commas.

(e.g.:  112412, 101231, 100496)

Note: Not Required if Problem Code is:  NO FAULT, NFF-UPGRADE.

Field 15.

COMPONENT_MANUFACTURER:  Manufacturer (e.g.:  AMD, LSI) of the failed component specified in the REPAIR_LOCATION field.  

Required if Problem Code is: DEFECTIVE, MULTIPLE, DAMAGED.

•

Note: When multiple entries are made in Field 13, 14, 15 and 16, they must be corresponding and separated by commas.

(e.g.:  AMD, ▇▇▇▇▇ ▇, ▇/▇)

Note: Not Required if Problem Code:  NO FAULT, NFF-UPGRADE.

Field 16.

COMPONENT_DATE_CODE:  Date code (e.g.:  9912, 9834) of the failed component specified in the REPAIR_LOCATION field.  

Required if Problem Code: DEFECTIVE, MULTIPLE, DAMAGED

•

Mfg date code is usually a four-digit number containing the year of manufacture and the week of manufacture.

•

Leading zeros should be included in the date code (e.g.: 0015)

•

Note: When multiple entries are made in Field 13, 14, 15 and 16, they must be corresponding and separated by commas.

(e.g.:  9905, 0104, N/A)

Note: Not Required if Problem Code:  NO FAULT, NFF-UPGRADE.

Field 17.

OUTGOING_REV_NO:  Functional Numeric Hardware Revision:

•

Revision register of the returned part after repair and EC update has been completed. Listed on the Assy level BOM.

•

Can be alphanumeric.  

•

Or, if not present on Assy BOM, use the Sub-assembly level Mother Board BOM revision.

Field 18.

REPAIR_FACILITY:  Name of repair facility completing repair.

Field 19.

SCRAP_CODE:  Code A through H based on definitions below. (Seller needs copy of this document to determine the values)

Scrap Code A - Nortel Networks Directed Excess/Obsolete Stock

Scrap Code B - Nortel Networks Directed Purged Stock

Scrap Code C - Third Time Returned as No Fault Found with no other work done

Scrap Code D - Physical Damage

Scrap Code E - Uneconomical to Repair

Scrap Code F - Unable to Repair

Scrap Code G – Prototype or Pilot Unit

Scrap Code H – Unable to obtain repair part

Field 20.

COMMENTS:  Miscellaneous information such as Purge, Deviation numbers and descriptions. This is a free form text data field.  If the unit / board has a Manufacturing Date Code, please enter it in this field. Enter in this field any further explanations that cannot be placed in one of the other 19 data fields.

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D R A F T

SUBJECT TO CORPORATE AND LEGAL APPROVAL

EXHIBIT G

HARDWARE WARRANTY AND POST WARRANTY SUPPORT

References to Telcordia or Nortel Networks proprietary telecommunications standards in this Exhibit G will include amendments and replacements of the standards, as they occur from time to time during the Term.  

1.

REPAIR PROCEDURE

1.1

If Nortel Networks has purchased the 24X7 Support Package described in Exhibit H for a given Product, Seller will give Nortel Networks a return material authorization (RMA) number within  [*] of receipt of Nortel Networks’ notice of a defective Hardware (component of the Product) and will notify Nortel Networks about the FCA repair location to which Nortel Networks will ship defective Hardware.  If Nortel Networks does not purchase the 24X7 Support Package described in Exhibit H, Seller will provide Nortel Networks with an RMA number within [*] business days of receipt of notice.  Nortel Networks will ▇▇▇▇ the return shipping package with the RMA number.  The parties will agree in writing on a procedure for return of Hardware for repair.  The agreed procedure will be attached to and incorporated into this Exhibit G as Attachment 1.  

1.2

Nortel Networks will ship RMA Hardware to Seller, freight prepaid and reasonably insured.  Nortel Networks will prepare export documentation, showing Nortel Networks’ ownership of the RMA Hardware and complying with the preferential trade requirements in Section 23.2 (Preferential Trade Agreement - Procedures) of the Agreement.  The following information with Hardware returned to Seller for Repair Services:

(a)

Nortel Networks’ name and complete address;

(b)

quantities and model numbers of Hardware being delivered for repair;

(c)

the nature of the defect or failure, if known;

(d)

Purchase Order number under which repairs are to be made, if Hardware is no longer under warranty;

(e)

name(s) and telephone number(s) of Nortel Networks’ point of contact concerning the Repair Services requested;

(f)

ship-to address or Nortel Networks’ location for return of repaired or replacement Hardware; and,

(g)

whether or not returned Hardware are under warranty.

1.3

Seller will date stamp each repaired and returned Hardware with the repair date and type of repair “pre fix” as per Telcordia GR-209 and the Specifications for the TP-610 Product (and for the Mediant 2000 Products, as per JESD46-B). Hardware repaired by Seller will be stamped as per Telcordia GR-78-CORE at a readily visible location on the unit.  Board level Products may have such stamps placed on accompanying documentation instead.

1.4

On receipt of notice of a defective Hardware, Seller will notify Nortel Networks about (a) its point of contact for the Repair Service requested, and (b) any special packing for Hardware returns.

1.5

Seller’s invoice to Nortel Networks for out-of-warranty repairs will contain:

(a)

Nortel Networks’ PO number for the Repair Services;

(b)

the quantities and the PEC number of Hardware repaired and associated repair charges;

(c)

the applicable sales or excise taxes;

(d)

the total amount payable; and,

(e)

the address to which payment should be made.

Upon request a description of the repairs carried out shall be provided to Nortel Networks.

1.6

Seller will deliver repaired Hardware and replacements to Nortel Networks’ designated location, freight prepaid and reasonably insured.  Seller will prepare export documentation, showing Nortel Networks’ ownership of the RMA Hardware and complying with Preferential Trade Agreement requirements.

2.

REPAIR AND REPLACEMENT SERVICES

2.1

Spares

2.1.1

Seller is not responsible for providing Nortel Networks’ customers with the necessary spare parts/ units required for immediate Hardware replacement.

2.1.2

At Seller’s factory or at a location agreed on by the parties, Seller will store the Repair Services Pool.  The quantity of spares will be agreed on in writing by the parties, based on the (a) volume of Hardware delivered, (b) the applicable mean time between failure rates, and (c) Nortel Networks’ desire to provide its customers with immediate Hardware replacement.  Seller will not use the Repair Services Pool for retrofits or upgrades.  The parties may agree in writing to change the quantity of spares, based on changes in the installed base of Hardware.

2.1.3

At all times Seller will maintain the agreed quantity of spares in the Repair Services Pool.  Spares added to the Repair Services Pool will (a) be functionally equal or better than the inventory being replenished, (b) be backward compatible, and (c) meet the minimum field baseline.  Seller may provide new Hardware as spares.

2.2

Information about the status of Hardware being repaired will be included in the Monthly Report described in Subsection 6.2.3 of the Agreement.

2.3

Product Repair Service Process – Seller will:

(a)

ship repaired Hardware freight and insurance prepaid;

(b)

track any defective Hardware by its unique serial number throughout the repair process;

(a)

repair and update the Hardware to the minimum field baseline;

(b)

return the same Hardware shipped by Nortel Networks for repair.  If the returned Hardware’s serial number has changed, Seller will put the following on repair tag originally provided by Nortel Networks: (i) old serial number, (ii) new serial number and (iii) reason(s) for change; and,

(e)

complete the Same-for-Same process within [*]calendar days of having received up to [*] units of  the defective Hardware at Seller’s repair facility.

2.4

Fast Cycle Failure Analysis - At Nortel Networks’ request and Seller’s expense, Seller will perform a Fast Cycle Failure Analysis (FCFA) related to Hardware defects that are material, service affecting defects.  Seller will issue a separate RMA number for each Hardware returned for an FCFA.  As part of the FCFA, Seller will:  

(a)

perform a detailed root cause analysis of the problem, using the engineering tools required to find the cause of the failure  (e.g.,  Environment Stress Screening [ESS]);

(b)

track any defective Hardware by its serial number throughout the repair process;

(a)

repair and update the Hardware to the minimum field baseline;

(b)

return the same Hardware shipped by Nortel Networks for repair.  If the returned Hardware’s serial number has changed, Seller will put the following on repair tag originally provided by Nortel Networks and in the FCFA report: (i) old serial number, (ii) new serial number and (iii) reason(s) for change.  Seller will not upgrade or repair Hardware going through an FCFA until the Products successfully complete the FCFA test cycle.

(e)

return repaired Hardware with a written report, documenting all FCFA findings;

(f)

make reasonable efforts complete the FCFA process within [*]consecutive days after receiving the defective Hardware;

(g)

notify Nortel Networks about the return shipping information (e.g., the date shipped, carrier, waybill number); and,

(h)

change the Hardware to eliminate Hardware deficiencies found during the FCFA.  

2.5

DO/ELF Hardware - Products that become defective within the first  [*] days of use by Nortel Networks’ customer will be referred to as Dead On Arrival (DOA) or Early Life Failure (ELF).  Nortel Networks will return the DOA/ELF Hardware to Seller with the RMA documentation.  At its expense Seller will perform a root cause analysis on returned DOA/ELF Hardware. The root cause analysis will consist of functional tests and ESS.  

a.1.1

After testing, Seller will repair, re-▇▇▇▇▇▇▇, upgrade (to the latest version or release), stamp (with the repair date) and return the Hardware to Nortel Networks.  Returned DOA/ELF Hardware will be considered new Hardware.  Within 30 days of Nortel Networks’ notice, Seller will do a root cause analysis and implement a plan of correction if the rate of failure of a DOA/ELF Hardware exceeds [*] percent ([*]%) of the Hardware’s return rate (RR) defined in the Specifications. Seller will update Nortel Networks in writing with the findings of the root cause analysis as well as with the corrective plan of action.

2.6

No Fault Found

2.6.1

Seller may invoice Nortel Networks if no fault is found in the returned Hardware (NFF).   The invoice will be Seller’ then-current charges for full functional tests and ESS, as set out in Exhibit C, and a reasonable charge for return freight.  Seller will return the Products to Nortel Networks, using Nortel Networks’ chosen carrier.  Seller will take no more than [*] days from the later of its receipt of Nortel Networks’ PO or the returned Hardware to test the Hardware and return them to Nortel Networks.  

2.6.2

If NFF Hardware are more than [*] percent ([*]%) of the Hardware RRs, after Seller has shipped to Nortel Networks [*] units of a specific Hardware, as defined in the Specifications, Seller will (a) perform a root cause analysis, and (b) implement a plan to correct the NFF occurrences within [*] days of reaching the [*]% level.   Seller will include the analysis results and the plan in the Monthly Report described in Subsection 6.2.3 of the Agreement.

2.7

Reimburse Expenses - If the repair turn around time (TAT) (a) for an out of warranty Hardware exceeds the agreed to TAT threshold, Seller will not charge Nortel Networks for the repair, and (b) for an  in-warranty defective Product Seller will credit Nortel Networks in the amount of the FRU price.

2.8

Uneconomical To Repair - The Seller will promptly notify Nortel Networks of any returned Hardware that is UTR in the opinion of the Seller.  However, a Hardware will only be UTR if Nortel Networks and Seller agree in writing that it is UTR.  Seller will return UTR Hardware to Nortel Networks at the expense of the party that agrees to cover the cost of the return in the written agreement characterizing the Hardware as UTR.

3.

LONG TERM SUPPORT - For discontinued Hardware, Seller will make available repair services for Hardware until the earlier of the expiration of [*] years from the effective date of termination of the Agreement or [*] years from the effective date of discontinuation of the Hardware version.  

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D R A F T

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EXHIBIT G

ATTACHMENT 1

SELLER’S PROCEDURE FOR RETURN OF PRODUCTS FOR REPAIR

(In this Attachment 1 “Customer” means the Nortel Networks entity purchasing the Product and Seller will be known as “AudioCodes.”) If the terms and conditions of this Attachment 1 conflict with the terms and conditions of the body of Exhibit G, the terms and conditions of the body of Exhibit G will prevail.

RMA - Instructions to Customer

Customer satisfaction is one of the main objectives in AudioCodes’ business strategy. We believe a thorough and quick response to customer needs is highly important in achieving this objective.

In the event that AudioCodes’ product is malfunctioning, please act as follows:

1.

Contact your regional AudioCodes’ Customer Support, preferably by an e-mail, and report the event. Based on the data you supply, and possibly some more testing, Customer Support will verify with you that indeed an RMA is required. If approved, the RMA process will continue. If the request is not approved AudioCodes will notify you of the reason why.

2.

You are kindly requested to fill out an RMA Defective Product Report form or RMA-Defective Chip Report form, as applicable. Please contact your local AudioCodes sales office for a copy of these forms. If necessary Customer Support will help you fill out the form.

Note: It is extremely important to fill out the form in detail. The more data Nortel Networks supplies, the faster AudioCodes will be able to process the RMA.

3.

If the product is still under warranty, your regional AudioCodes’ Sales Administrator will provide Nortel Networks with an RMA number and shipping instructions.

4.

If the product is out of the warranty period, or the failure was not due to AudioCodes’ fault, Nortel Networks will be notified and receive a quotation for the repair cost. If Nortel Networks decides to repair the Product and accept the quotation, Nortel Networks will be asked to issue a Purchase Order for the repair. Upon PO receipt, the applicable regional AudioCodes’ Sales Administrator will provide Nortel Networks with an RMA number and shipping instructions.

5.

Carefully pack the RMA approved product and ship it according to the local office instructions. Please insert one copy of the RMA report form into the external FEDEX envelope, and one copy into the shipped box.

6.

Upon receipt at AudioCodes, an e-mail notification will be sent to you acknowledging receipt.

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D R A F T

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EXHIBIT H

TECHNICAL ASSISTANCE AND MARKETING SUPPORT

SELLER’S 24x7 SUPPORT PACKAGE

The terms and conditions set out in this Exhibit H also describe Seller’s Standard Support Package and Enhanced Support Package, unless otherwise stated herein.

1.

Training

1.1

Training During the Term - During the Term of the Agreement, at its expense, Seller will hold Product training sessions for Nortel Networks technicians.  The parties will agree on the number of sessions and participants.  During training, Seller will provide the Nortel Networks technicians with enough information to allow them to provide training to other Nortel Networks technicians and Nortel Networks’ customers.  For the duration of this Agreement, Seller grants Nortel the right to modify and republish training materials in accordance with the confidentiality provisions of this Agreement for the specific use of Nortel Networks training, including Nortel Networks using the materials and documentation to train its customers technical personnel.

 1.2

Additional training sessions would be provided subject to the fees defined in Section 4 in Exhibit C.

1.3

Supplemental Training Access During and After the Term - Supplementing training, Seller will provide trained Nortel Networks technicians with telephone access to Seller's technical personnel during regular business hours. Nortel Networks and Seller will agree in writing on a process for providing the telephone access and identifying the Seller personnel who will provide the training and the trained Nortel Networks technicians who will have the access to the supplemental training.  

2.

Marketing Support  - During the Term, on Nortel Networks’ request,  [*] charge to Nortel Networks, Seller will endeavor to provide the following marketing support:  

2.1

Assistance in providing Nortel Networks’ customers and potential customers with point by point responses to requests for quotations and requests for information concerning the Products.  

2.2

Review and provide feedback on Product promotional material.

2.3

Provide non-operational demonstration units that look like the actual Products.

3.

Technical Support – During the Term and for [*] years after the termination of the Agreement, Seller will make available to Nortel Networks the technical support services described in this Article 3.  For discontinued Software, Seller will make available repair services for Software until the earlier of the expiration of [*] years from the effective date of termination of the Agreement or [*] years from the effective date of discontinuation of the Software version.  

3.1

Definitions - As used in this Schedule, unless otherwise defined:

 "Critical Problem(s)" means any condition in a Product that renders the service or operation of the Product wholly unusable or inoperative and is due to non-conformance of the Product with its Specification or design defect.  Critical Problem includes, but is not limited to, loss of all transaction processing capability, significant reduction in capacity or traffic handling capability, any loss of safety or emergency capability, loss of the ability to perform automatic system reconfiguration, inability to restart a processor or the system, loss of billing capability, corruption of billing or system databases that requires service affecting corrective actions, loss of access to maintenance or recovery operations, or loss of the system's ability to provide any required Critical Problem or Major Problem notification.

"Major Problem(s)" means any condition in a Product that interferes with the ability of the Product to provide routine service or operation at all times due to non-conformance of the Product with its Specifications or design defect.  Major Problem includes, but is not limited to, any reduction in capacity or traffic, any loss of functional visibility or diagnostic capability, any loss of routine administrative activity, any significant degradation of the system's ability to provide maintenance or recovery operations, any significant degradation of the system's ability to provide any required Critical Problem or Major Problem notification, any significant increase in system related trouble reports by Nortel Networks’ customer, and any corruption of the system billing databases that does not result in service affecting corrective actions.

"Minor Problem(s)" means any condition in a Product that is not a Critical or Major Problem, but is a condition that affects the service or operation of a Product and is due to non-conformance of the Product with its Specifications or a design defect.  Without limiting the generality of the foregoing, Minor Problems shall include any defects or inaccuracies in the Product Documentation.

"Permanent Solution(s)" means a resolution to a Problem that, (a) causes the Product to conform with its Specifications, and (b) restores the service and operation of a Product without any loss of functionality.

 “Problem” means a Critical Problem, Major Problem or Minor Problem.

“Technical Support Services” means those Seller technical support services described in this Article 3.

"Work-Around(s)" means a temporary resolution for a Problem, which resolution to the extent technically possible can be implemented in the customer’s network without interruption of service or operation.

3.2

Technical Support Services - Seller must make available and provide to Nortel Networks those Technical Support Services necessary to ensure (a) the continued operation of the Product, (b) that the Product contains no design defects and that it remains in compliance with its Specifications (c) the Specifications remain complete and accurate, and (d) the Product remains free of Problems.  Nortel Networks will provide the first line of support to its customers

3.3

Priority Levels For Technical Support Services- Nortel Networks will categorize Problems and Seller will provide Technical Support Services according to the definitions in Section 3.1 above and the priority levels set forth in this Section 3.3.  

3.3.1

Critical Problems:  Seller must work continuously, and must use all reasonable commercial efforts, until a Work-Around or a Permanent Solution is successfully implemented.  If a Permanent Solution is successfully implemented, but the Permanent Solution cannot be deployed in a Product operating in the Nortel Networks’ customer’s network without affecting service or operation, Seller will provide Nortel Networks with a Work-Around.  Seller will use commercially reasonable efforts to provide a Work-Around or Permanent Solution (subject to the restrictions described in the preceding sentence) within [*] hours of  a Critical Problem being reported to Seller by Nortel Networks; provided, however, for purposes of Seller’s Standard and Enhanced Support Packages, Seller will only be obligated to provide the Work-Around or Permanent Solution within [*] business days, rather than [*] hours.   If a Work-Around is successfully implemented, a Critical Problem shall be reclassified to a Major Problem.

3.3.2

Major Problems:  Seller must work continuously and must use all reasonable commercial efforts, until a Work-Around or Permanent Solution is successfully implemented.  If a Permanent Solution is successfully implemented, but the Permanent Solution cannot be deployed in a Product operating in Nortel Networks’ customer’s network without affecting service or operation, Seller will provide North with a Work-Around.  Seller will use commercially reasonable efforts to provide a Work-Around or Permanent Solution (subject to the restrictions described in the preceding sentence) within [*] calendar days of a Major Problem being reported to Seller by Nortel Networks.

3.3.3

Minor Problems:  Seller must use all reasonable commercial efforts to provide a Work-Around or Permanent Solution.  If a Permanent Solution is successfully implemented, but the Permanent Solution cannot be deployed in a Product operating in Nortel Networks’ customer’s network without affecting service or operation, Seller must provide Nortel Networks with a Work-Around.  Seller will endeavor to provide a Work-Around or a Permanent Solution (subject to the restrictions described in the preceding sentence) within [*] calendar days of a Minor Problem being reported to Seller by Nortel Networks.

3.3.4

Seller’s failure to reproduce a Problem on a Seller-specified reference machine will not prejudice or impact the attention that Seller gives to such Problem.

3.4

Delivery of Work-Arounds and Permanent Solutions

Permanent Solutions: Seller agrees to deliver a Permanent Solution to Nortel Networks as soon as reasonably possible.  If applicable, a Permanent Solution must include a patch for Software, if such patch can be deployed in a Product operating in Nortel Networks’ customer’s network without affecting service or operation.  The patch will be provided within the times described in Section 3.3 above. If such a patch cannot be provided, Seller will provide a Work-Around within the times described in Section 3.3.   

3.5

Service Level Objective - The parties acknowledge the potentially idiosyncratic nature of any Problem in the Products.  While the response times in Section 3.3 constitute targeted goals of the Technical Support Services to be provided by Seller to Nortel Networks, the parties agree that Seller will use all reasonable commercial efforts to attempt to resolve any Problems within the target times specified in Section 3.3  (for the relevant priority level) [*] percent ([*]%) of the time.  Seller’s meeting the targeted times less than [*] percent ([*]%) of the time, but at least [*] percent ([*]%) of the time will not constitute a failure by Seller to perform a material provision of the Agreement.  For the purposes of compiling the statistical data, the parties shall ignore faults and defects ultimately found attributable to hardware and/or software not supplied by Seller.

3.6

Problem Reporting - For each request by Nortel Networks for Technical Support Services from Seller, Nortel Networks will provide Seller with a description ("Problem Report") of the Problem encountered and, -, any other information and/or access to software and or hardware reasonably requested by Seller, including by way of example a description of how to repeat the condition which brought about the Problem.  Nortel Networks will include the priority level, determined to be applicable in its sole discretion, in each Problem Report.  Seller will identify each outstanding issue relating to a Problem Report with a unique "Case Number" for tracking purposes.  Seller will communicate Case Numbers the Seller production manager responsible for the described Product within [*] of Seller’s receipt of the Problem Report.

3.7

Communications – Seller will provide unlimited, toll-free telephone support to Nortel Networks on issues relating to Products, as follows: (a) Seller will provide Nortel Networks with toll-free telephone access and support between the hours of [*]. EST and [*] p.m. EST Sunday through Friday; and, (b) 24 hours per day, 7 days a week, Seller will provide Nortel Networks with pager access and respond to Nortel Networks’ pages within [*] minutes of receiving a page.  Seller will provide Nortel Networks with two pager numbers (i.e., more than one person to access) with respect to the described pager with telephone response support.  One of the pager numbers must provide Nortel Networks with a Seller escalation party who Nortel Networks (a) may call if the other pager number does not respond as described and (b) can resolve support issues resulting from Nortel Networks’ initial contact with Seller’s support representative (e.g., engineers cannot decide on a timeframe for Problem resolution).  Seller will staff its telephone and pager support service with qualified technical representatives or persons with immediate access to qualified technical representatives with a detailed working knowledge of the Products.  

Notwithstanding the preceding, under Seller’s Standard and Enhanced Support Packages, Seller will only be obligated to provide unlimited, toll-free telephone support to Nortel Networks on issues relating to Products between the hours of [*]a.m. eastern standard time (EST) and [*] p.m. EST, seven (7) days a week.  Seller will have no obligation to provide page access under the Standard and Enhanced Support Packages. Further, with respect to the two packages Seller will staff its telephone support service only with qualified technical representatives with a detailed working knowledge of the Products.  

The parties may augment the telephone and pager communications described above with the use of facsimile transmission and secure electronic mail.

3.7.1

The Parties shall use reasonable efforts to establish security measures for the electronic exchange of Problem Reports and other information.

 3.8

Information – Once a month during the Term Seller will provide Nortel Networks with a report, listing the following information for Products sold to Nortel Networks that have experienced Problems reported and experienced by Nortel Networks: all known bugs, errors, or defects in the Product, and the classification of each; any resolutions or fixes; and any available Work-Arounds.  Seller’s failure to report a bug, error or defect that is not material and service affecting will not be a material breach of this Agreement.

3.8.1

Upon Nortel Networks’ request, Seller will provide a "Status Report" on any Problem logged for Nortel Networks; provided that Nortel Networks identifies the particular Problem by the Case Number assigned to it by Seller.  For Problems that have been resolved, the Status Report will include the Case Number, the closing resolution for the Problem, the expected date that a Permanent Solution will be released, and a description of any known Work-Around. For Problems that have not yet been resolved, the Status Report shall include the Case Number, a Problem resolution plan, and a description of any known Work-Around.  Each Problem logged for Nortel Networks will remain open until closure notification is received from Seller and accepted by Nortel Networks.

3.9

For the purpose of definition, the technical support services described in Sections 3.1 -3.8 are collectively defined as the Standard Support Program.

3.10

In addition to Seller’s obligations under this Exhibit H for providing its Enhanced Support Package, the Enhanced Support Package will include Seller’s providing  Nortel Networks with Major Software Version releases that include performance enhancements as well as additional features..

3.11

On-site Technical Service – If Nortel Networks requests the on-site presence of a qualified Seller technical support representative at a Nortel Networks location or customer site to diagnose and resolve a Problem, Seller will make reasonable efforts to have a qualified technical representative available at the location or site within the shortest time reasonably possible; provided that Nortel Networks reimburses Seller as provided in section 1.2 of Exhibit C.

3.12

Termination – Nortel Networks may cancel Technical Support for Products upon [*]days prior written notice to Seller.  Upon receipt of Nortel Networks’ notice, Seller will continue to provide Technical Support for the Products until the termination date specified in the notice.  Nortel Networks shall not be entitled to receive from Seller a refund of, or other credit for, the remainder of the applicable (annual or otherwise) Technical Support fee.

3.13

Technical Support Service Level Activities

Nortel Networks shall be responsible for Service ▇▇▇▇▇ ▇ activities and Seller shall be responsible for Service ▇▇▇▇▇ ▇ and Service Level 3 activities described below: Service Level 1 means handling all customer or end user contact.

A.

Level 1: Level 1 Support activities require a relatively low but broad degree of product expertise.  ▇▇▇▇▇ ▇ support activities include, without limitation, the following activities:

(i)

Receipt and logging of customer problem calls

(ii)

Service entitlement verification

(i)

Provision of primary support for installation activities, including configuration problems, installation related problems, and post-installation reconfiguration.

(ii)

Problem verification

(v)

Problem classification as Hardware, Software, driver or configuration problems

(vi)

Troubleshooting using diagnostic utilities provided by OEM

(vii)

Attempted resolution of Software problems

(viii)

Response to frequently asked questions (“FAQ”) provided by OEM related to OEM Product

(ix)

Decoding of error messages and attempted provision of corrective action provided by OEM

(x)

Verification of software release level and distribution of updates if necessary

(xi)

Distribution of software updates and major releases to End-Users in accordance with Nortel Networks standard entitlement and distribution process.

B.

Level 2: Level 2 activities require (i) both broad and in-depth product expertise, including thorough knowledge of product interdependencies and relationships and (ii) problem determination, problem trouble-shooting, and the development of prevention plans and workarounds. Level 2 support activities also include, without limitation, the following activities:

(i)

Identification of code-level problems

(ii)

Gather and attempt to analyze trace information

(i)

Determination if the failure was caused by configuration or microcode

(ii)

Provision of Work Around where available

(iv)

Adherence to the escalation procedures agreed by both parties.

C.

Level 3: Level 3 Support activities require system engineering level technical support expertise and provision of timely and accurate (i) determination of product defects and (ii) resolution plans to Nortel Networks.  Level 3 Support activities also include, without limitation, the following:

(i)

Engineering Support

(ii)

Analysis of traces and processor dumps

(i)

Development, test and release of microcode corrections

(iv)

Permanent Solution

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D R A F T

SUBJECT TO CORPORATE AND LEGAL APPROVAL

EXHIBIT I

DOCUMENTATION

1.

Draft Product Documentation - For Nortel Networks’ review Seller will provide 1 hard copy and 1 electronic version of the Product Documentation, marked “Draft.”   Nortel Networks will provide Seller with comments (e.g., an ordering section) on the draft documentation within 2 weeks after receipt.   Seller will integrate Nortel Networks’ comments into the Product Documentation.   Seller will provide Nortel Networks with the final Product Documentation by the end of the corresponding Acceptance Program.  The Product Documentation will be revised as the Product is updated.

2.

Product Documentation at No Charge – Subject to Article 3 below, at its expense Seller will provide Nortel Networks Product Documentation with each Product.  The Product Documentation will include the Product descriptions, planning guides, operations manuals, installation manuals, and maintenance manuals normally provided by Seller to customers to facilitate the customers’ installation, use, and maintenance of the Products.

3.

Nortel Networks Standard Format – At its expense Seller will provide Nortel Networks with  (a) hard and electronic copies of Seller's marketing and product documentation (i.e., manuals, application notes and sales collateral), (b) technical assistance reasonably deemed necessary by Seller to be required by Nortel Networks to adapt Seller’s documentation to Nortel Networks’ standard format, (c) and updates of Seller’s documentation.  

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D R A F T

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EXHIBIT J

TRADE AND SHIPPING REQUIREMENTS

1.

Preferential Trade Agreement - Seller will assist Nortel in performing all administrative actions necessary to qualify Products for preferential treatment under the rules of any trade treaty by completion of certificates of origin and distribution to the below Vastera address (Section 1.4.2), including, but not limited to the North American Free Trade Agreement, Canada Chile Free Trade Agreement, Canada Israel Free Trade Agreement, US Israel Free Trade Agreement, and EU-Mediterranean Agreement.

1.1

On a calendar quarter basis, where blanket certificates of origin are allowed, Seller will provide Vastera with a list of Products that do not qualify for the preferential treatment. On or before “December 1^st” of each calendar year,  Seller will provide Vastera, Southfield Michigan with a valid blanket certificate for products that seller intends to sell to Nortel or it’s affiliates or Nortel’s end customers in the following calendar year.

1.2

Supplier will respond to Preferential Trade Agreement questionnaires in a timely manner concerning any certificates of origin issued and assist Nortel Networks in resolving product eligibility for preferential trade agreement qualification.  

1.3

Seller agrees to notify Vastera at least 90 days in advance of any changes in Seller’s manufacturing process or supply chain that would impact the validity for any certificate of origin provided by Seller to Nortel Networks or its customers.  Seller will indemnify Nortel Networks under the Agreement against liabilities resulting from Nortel Networks’ Exporter’s Certificate of Origin being deemed invalid by a government authority and/or unavailable at time of export by the supplier.

1.4

In accordance with the trade agreement certificates of origin should be completed and distributed as follows:

1.4.1

Per Shipment - If an Exporter’s Certificate of Origin is prepared for each shipment, Seller will (a) retain the original Exporter’s Certificate of Origin (b) attach a copy of the Exporter’s Certificate of Origin to the customs/shipping documents for qualifying Products, and (c) ▇▇▇▇ the customs/shipping documents with: Copy of the Exporter’s Certificate of Origin attached.

1.4.2

Blanket Certificate of Origin - If a blanket Exporter’s Certificate of Origin is prepared, Seller will (a) retain the original Exporter’s Certificate of Origin  (b) ▇▇▇▇ the customs/shipping documents for the qualifying Product with: Copy of blanket Exporter’s Certificate of Origin on file and (c) e-mail or mail copies of the blanket Exporter’s Certificate of Origin to the following address or such other address of which Nortel Networks or Vastera may notify Seller in writing:    

Vastera,

20700 ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇,

▇^▇▇ ▇▇▇▇▇ – Suite 500,

Southfield, Michigan

USA 48076

Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇

Phone (▇▇▇) ▇▇▇-▇▇▇▇

e-mail:  ▇▇▇▇▇.▇▇▇▇▇▇▇@▇▇▇▇▇▇▇.▇▇▇.

2.

Customs Invoices and Country of Origin Declarations/Documents - Seller ensure that customs invoices and Country of Origin declarations/documents for all Product shipments crossing international borders comply with all laws, treaties and regulations of both the exporting country and the importing country. Seller will indemnify Nortel Networks against any customs liabilities for non-compliance with the above.

2.1

Seller will ensure that the customs invoices contain the following information:      

(a) in addition to the vendor and shipper address, the Nortel Networks entity to which the goods are being sold  and       delivered 

(b) a clear description of the Products

(c) the quantity of units sold, including the units of measure 

(d) the purchase price as well as any related  freight charges and insurance charges  

(e) the terms of sale including the Incoterms

(f) depending on country of destination, when requested by Nortel Networks or its customer, the international tariff to the 6 digit level

(g) the country of origin of each line item

1.

Export Licenses - Seller will apply for all licenses necessary for the export of, software, or technology being sold to Nortel Networks and notify Nortel Networks when the license is granted, and, if not granted, why the license was denied.  To the extent a license is denied Seller's shall be excused of delivery under this Agreement. Seller will submit license applications in a timely manner and advise Nortel Networks in writing of any anticipated delays in shipping that may result from delayed approval of an application. Nortel Networks shall provide timely assistance and full co-operation in obtaining any end user undertakings required in order to obtain the export license.

4.

C-TPAT Compliance – Supplier shall take all administrative actions required to become a member of the Customs & Trade Partnership Against Terrorism (“C-TPAT”) and /or to demonstrate to Nortel Networks Supplier’s compliance with C-TPAT guidelines as described by U.S. Customs athttp://▇▇▇.▇▇▇▇▇▇▇.▇▇▇/▇▇/▇▇▇▇/▇▇▇▇▇▇/▇▇▇▇▇▇▇▇▇▇_▇▇▇▇▇▇▇▇▇▇▇/▇▇▇▇▇/ or such other site as may be provided by the U.S. government from time to time, or similar international supply chain programs designed to protect against acts of terrorism (“Customs Guidelines”). Demonstration of C-TPAT compliance shall include, without limitation, assessment in accordance with the Customs Guidelines the current supply chain security measures used by Supplier, and addressing any potential security weaknesses in Supplier’s supply chain.

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D R A F T

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EXHIBIT K

DEBARMENT CERTIFICATE

(S A M P L E)

CERTIFICATION REGARDING DEBARMENT, SUSPENSION, INELIGIBILITY AND VOLUNTARY EXCLUSION - LOWER TIER COVERED TRANSACTIONS

This certification is required by the regulations implementing Executive Order 12549, Debarment and Suspension, 7 CFR Part 3017, Section 3017.510, Participants’ responsibilities.  The regulations were published as Part IV of the January 30, 1989, Federal Register (pages 4722-4733).

(BEFORE COMPLETING CERTIFICATION, READ INSTRUCTIONS ON REVERSE)

(1)

The prospective lower tier participant certifies, by submission of this proposal, that neither it nor its principals is presently debarred, suspended, proposed for debarment, declared ineligible, or voluntarily excluded from participation in this transaction by any Federal department or agency.

(2)

Where the prospective lower tier participant is unable to certify to any of the statements in this certification, such prospective participant shall attach an explanation to this proposal.

Organization Name

PR/Award Number or Project Name

Name and Title of Authorized Representative

Signature

Date

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D R A F T

SUBJECT TO CORPORATE AND LEGAL APPROVAL

Instructions For Certification

1.

By signing and submitting this form, the prospective lower tier participant is providing the certification set out on the reverse side in accordance with these instructions.

2.

The certification in this clause is a material representation of fact upon which reliance was placed when this transaction was entered into.  If it is later determined that the prospective lower tier participant knowingly rendered an erroneous certification, in addition to other remedies available to the Federal Government, the department or agency with which this transaction originated may pursue available remedies, including suspension and/or debarment.

3.

The prospective lower tier participant shall provide immediate written notice to the person to which this proposal is submitted if at any time the prospective lower tier participant learns that its certification was erroneous when submitted or has become erroneous by reason of changed circumstances.

4.

The terms “covered transaction”, “debarred”, “suspended”, “ineligible”, “lower tier covered transaction”, “participant”, “person”, “primary covered transaction”, “principal”, “proposal”, and “voluntarily excluded”, as used in this clause, have the meanings set out in the Definitions and Coverage sections of rules implementing Executive Order 12549.  You may contact the person to which this proposal is submitted for assistance in obtaining a copy of those regulations.

5.

The prospective lower tier participant agrees by submitting this form that, should the proposed covered transaction be entered into, it shall not knowingly enter into any lower tier covered transaction with a person who is debarred, suspended, declared ineligible, or voluntarily excluded from participation in this covered transaction, unless authorized by the department or agency with which this transaction originated.

6.

The prospective lower tier participant further agrees by submitting this form that it will include this clause titled “Certification Regarding Debarment, Suspension, Ineligibility and Voluntary Exclusion - Lower Tier Covered Transactions”, without modification, in all lower tier covered transactions and in all solicitations for lower tier covered transactions.

7.

A participant in a covered transaction may rely upon a certification of a prospective participant in a lower tier covered transaction that it is not debarred, suspended, ineligible, or voluntarily excluded from the covered transaction, unless it knows that the certification is erroneous.  A participant may decide the method and frequency by which it determines the eligibility of its principals.  Each participant may, but is not required to, check the Non-procurement List.

8.

Nothing contained in the foregoing shall be construed to require establishment of a system of records in order to render in good faith the certification required by this clause.  The knowledge and information of a participant is not required to exceed that which is normally possessed by a prudent person in the ordinary course of business dealings.

1.

Except for transactions authorized under paragraph 5 of these instructions, if a participant in a covered transaction knowingly enters into a lower tier covered transaction with a person who is suspended, debarred, ineligible, or

10.

Voluntarily excluded from participation in this transaction, in addition to other remedies available to the Federal Government, the department or agency with which this transaction originated may pursue available remedies, including suspension and/or debarment.

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D R A F T

SUBJECT TO CORPORATE AND LEGAL APPROVAL

EXHIBIT L

LICENSED USE OF SOFTWARE

Nortel Networks grants customer a nonexclusive license to use a copy of the Software to the extent of the activation or authorized usage level.  To the extent Software is furnished for use with designated Products or customer furnished equipment (“CFE”), customer is granted a nonexclusive license to use Software only on such Products or CFE, as applicable.  Software contains trade secrets and customer agrees to treat Software as Information.  Customer will ensure that anyone who uses the Software does so only in compliance with the terms of this Agreement.  Customer shall not a) use, copy, modify, transfer or distribute the Software except as expressly authorized; b) reverse assemble, reverse compile, reverse engineer or otherwise translate the Software; c) create derivative works or modifications unless expressly authorized; or d) sublicense, rent or lease the Software. Licensors of intellectual property to Nortel Networks are beneficiaries of this provision. Upon termination or breach of the license by customer or in the event designated Product or CFE is no longer in use customer will promptly return the Software to Nortel Networks or certify its destruction.  Nortel Networks may audit by remote polling or other reasonable means to determine customer’s Software activation or usage levels. With respect to Third Party Software, customer agrees to abide by the terms provided by Nortel Networks with respect to any such software. Customer further agrees that the terms contained in any Nortel Networks or third party “shrink wrap” or “click” licenses shall govern the use of such software.

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D R A F T

SUBJECT TO CORPORATE AND LEGAL APPROVAL

EXHIBIT M

DEMAND-PULL PROGRAM AND VENDOR MANAGED INVENTORY

If required by Nortel Networks, the parties will enter into a demand pull/vendor managed inventory agreement (with or without Seller’s managing inventory through a third party logistics provider).  The parties have created this Exhibit M only for the purpose of providing a guide to establishing the elements for demand pull agreements case-by-case.

A

DEMAND-PULL PROGRAM

1.

Demand-Pull Program Forecast - On the first business day of each week, the Nortel Networks will provide Seller with a weekly rolling, forecast of its Demand-Pull Program Product requirements (“Demand-Pull Forecast”).  The Demand-Pull Forecast will be non-binding and Nortel Networks will have no obligation to purchase any of the forecasted quantity of Products; however, subject to Section 7 of the Agreement and Section 6 of this Exhibit M, Nortel Networks will issue a Blanket Purchase Order for the quantity of Products shown for the first _________ [weeks; months] of the first Forecast (“Demand-Pull Blanket Purchase Order”). Nortel Networks will not be obligated to pay for any of Seller’s stock of manufacturing material/components used in manufacturing Products to the extent the stock exceeds what Seller needs to manufacture the Products ordered under the Committed Blanket Purchase Order.

2.

Target Products Total Stock  - Target Product Total Stock means the total quantity of finished modules, dies, components and parts targeted (Target Finished Goods) plus works in progress (Target WIP). The Product run rate chart is attached to and incorporated in this Exhibit M as Attachment 1.  Seller will maintain __to ___weeks of a target for total Product Stock (Target Product Total Stock).   The parties will mutually agree in writing on the Target Product Total Stock and the exact number of weeks to be maintained.  However, if the Target Finished Goods is inactive for more than 180 days, the parties will agree on a reasonable disposition of all or part of the Target Product Total Stock.

2.1

Increase Target Product Total Stock - Seller will have the capability of increasing the then-current Target Product Total Stock by (a) ___% within 1month after Nortel Networks’ written request for the increase, and (b) ___% within ___ months after Nortel Networks’ written request.

3.

Delivery - Demand-Pull Program Products will be delivered FCA, Seller’s plant (as designated in the applicable Purchase Order), within [*] after Nortel Networks issues the Release(s) to Seller.  

4.

Non-Demand Pull PO – Nortel Networks may purchase Products included in the Demand-Pull Program by issuing a P.O. for the Products under terms of the Agreement rather than the terms of the Demand-Pull Program.   The Products purchased under the P.O. will count towards Nortel Networks’ purchases of Target Product Total Stock.  

5.

Target Finished Goods Report - Seller will provide Nortel Networks’ designated purchasing department representative with a weekly written report detailing the status of the Target Finished Goods

6.

Cancellation - Nortel Networks may cancel the Demand-Pull Program in whole or in part by 30 days advance notice to Seller.  The current Blanket Purchase Order will be cancelled and the parties will agree on a (a) reasonable disposition of the Target Product Total Stock, and (b) Product delivery lead time not to exceed 26 weeks.

B.

VENDOR MANAGED INVENTORY PROGRAM

1.

Definitions –For purposes of Part B the following definitions will apply

“3PL” shall mean a third party logistics provider with whom the Seller will contract with for the provision of warehousing services for the VMI Products Seller expects to sell to Nortel Networks when the Nortel Networks issues a Demand-Pull Trigger.

“Demand-Pull Trigger” shall mean a Purchase Order or Release that is only sent by electronic or other written recorded means from Nortel Networks to the 3PL as the agent for Seller to deliver VMI Products.

“Electronic Means” shall mean any form of electronic communication, including e-mail, Electronic Data Interchange (“EDI”), Internet Web based, fax, but excluding telephone.

“Forecast” shall mean the projected requirement for the VMI Products set out in Attachment 1, attached to and incorporated in this Exhibit M.

“Hub” shall mean a storage facility or warehouse, owned and/or managed by the 3PL, within close proximity of the System house set out in Schedule 1a, in which the Seller warehouses VMI Products prior to delivery to the Nortel Networks.

“Lead-time” shall mean the length of the manufacturing process time between the start of a known requirement and the actual delivery of such VMI Products for replenishment as set out in Attachment 1.

“OEM Products” means those VMI Products described in Attachment 1.

“Safety Stock” shall mean the minimum level of VMI Products, as identified in Attachment 1, which Seller shall use best commercial efforts to maintain in the Hub based upon consumption consistent with Forecast rates.

“VMI Products” shall mean the components or products in Attachment 1, as may be amended in writing by the parties from time to time.

2.

Forecasts

By Electronic Means Nortel Networks will provide a weekly Forecast to Seller of Nortel Networks’ requirement for VMI Products for the following fifty-two (52) weeks.  Seller will meet Nortel Networks’ requirements for any quantity of VMI Products in a Forecast up to [*] of the immediately preceding Forecast and Seller will use its best efforts to meet any quantity of Products in a Forecast that are in excess of the [*].  The Seller shall advise Nortel Networks if the Seller does not receive a Forecast within [*]calendar days of the previous Forecast.  Notwithstanding the preceding a Forecast is not a binding commitment to purchase and Nortel Networks may at any time change its Forecast for VMI Products.

2.1

Purchase Orders - The Nortel Networks will periodically issue Demand-Pull Trigger instructions to the Seller, or 3PL as the agent for the Seller, for purposes of ordering VMI Products.

3.

Lead Time - Seller will immediately advise Nortel Networks in writing of any requested change in the Lead-times for any VMI Products and will provide Nortel Networks with a monthly update on the Lead-time for all VMI Products.

4.

Hub Operation - The parties will agree upon the Hub and the 3PL responsible for managing the Hub for Seller. Nortel Networks may at any time, on reasonable notice to the Seller, change the designated 3PL. In the event of a 3PL change, Seller will be responsible for ensuring that stocks of VMI Products and operation of the Hub is transferred to the new 3PL without any loss or disruption in service to Nortel Networks in a time period acceptable to Nortel Networks. Upon Nortel Networks’ request and at no charge to Nortel Networks, Seller will conduct a stock check or other similar activity to be undertaken in the Hub and report the results to Nortel Networks.  

5.

Delivery and Invoicing -Seller will deliver VMI Products FCA Hub dock within [*] after Nortel Networks issues Demand-Pull Trigger to Seller.  Seller will ensure that 3PL is responsible for providing Seller with notification by Electronic Means within [*] hours of shipping VMI Products to Nortel Networks.   If the Hub is a bonded facility, Seller will provide Nortel Networks with the commercial invoice details for the relevant bonded inventory within one working day of notification of the Demand-Pull Trigger.

6.

Stock levels in the Hub and Flexibility -At the Hub Seller will maintain VMI Products in stock at a level between the Safety Stock and maximum level set out in Attachment 1.  Nortel Networks will not be responsible or liable for any Products stored at the Hub in excess of the maximum level set out in Attachment 1. Seller agrees to use its best commercial efforts to maintain the Safety Stock levels in cases in which Forecasts increase inside of the Lead-time.  Nortel Networks may at its sole discretion increase a Forecast outside of the Lead-time. Seller will ensure that all VMI Products, including Forecasted VMI Products and Safety Stock held in the Hub, are in compliance with Seller’s then-current specifications for the Products and that Seller and the 3PL use strict “first-in/first-out” management. If a particular line item VMI Product in the Hub has not been ordered under a Demand-Pull Trigger for at least [*], within [*] business days after the [*] day, Seller will notify Nortel Networks to that effect, identifying the line item VMI Product and the last applicable Demand-Pull Trigger date. After Nortel Networks’ receipt of the notice, Nortel Networks and Seller will agree in writing upon the disposition of VMI Products identified.  

7.      

Title and Risk of Loss - Title and risk of loss to a VMI Product will pass from Seller to Nortel Networks at the time that the VMI Product is delivered to Nortel Networks’ carrier from the Hub dock.  

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D R A F T

SUBJECT TO CORPORATE AND LEGAL APPROVAL

EXHIBIT M

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