Exhibit 10.31

 

Hawaiian Telcom Confidential

  

AMENDMENT ONE TO SUPPLY CHAIN SERVICES AGREEMENT

BETWEEN

SPRINT NORTH SUPPLY COMPANY AND HAWAIIAN TELCOM MERGERSUB,

INC.

This Amendment One (“Amendment One”) to the Supply Chain Services Agreement
dated December 10, 2004 (“Agreement “) is effective April, 28, 2005 is between
Sprint North Supply Company, an Ohio Corporation (“Supplier”) and Hawaiian
Telcom MergerSub, Inc., a Delaware Corporation (“Hawaiian Telcom”). Except as
otherwise indicated, defined terms in this Amendment One have the same meaning
as in the Agreement.

 

1. General

Supplier shall provide to Hawaiian Telcom OSP copper cable Product designated as
consigned inventory in Section 10 (“Consigned Inventory”) which shall be located
at Hawaiian Telcom’s warehouse facility (“Warehouse”) located in Honolulu,
Hawaii. Locations may be added or deleted upon mutual agreement.

 

2. Hawaiian Telcom Responsibilities

 

(a) Hawaiian Telcom shall receive, warehouse, cut to designated length, seal and
ship Consigned Inventory on steel or wooden reels to Hawaiian Telcom’s end user
Hawaiian Telcom base. Hawaiian Telcom will be responsible for entering all
inventory transactions into Supplier’s computer systems described in
Section 3(d) below in accordance with the guidelines and instructions issued by
Supplier.

 

(b) Hawaiian Telcom will not grant any security interest in or permit the
creation of any lien or encumbrance upon Consigned Inventory and will not permit
any creditor of Hawaiian Telcom to assert any right to or any claim of any kind
or nature for Consigned Inventory.

 

(c) Hawaiian Telcom shall separate Consigned Inventory from other inventory in
Warehouse and shall clearly label Consigned Inventory for easy identification.

 

(d) Hawaiian Telcom will perform periodic physical inventories at the direction
of Supplier and in accordance with the guidelines and instructions issued by
Supplier, provided that Hawaiian Telcom shall not be obligated to conduct such
inventories more than once in a calendar year.

 

3. Supplier Responsibilities

 

(a)

Supplier will identify and purchase from Hawaiian Telcom current supplier of
Consigned Inventory existing consigned inventory (i.e., such inventory existing
at

 

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Hawaiian Telcom Confidential

 

 

Hawaiian Telcom’s Warehouse as of the date this Amendment One is executed by
both Parties) that, at Supplier’s reasonable discretion, is deemed by the
Supplier to be “good” and “usable” lengths.

 

(b) During the term, Supplier shall ship Consigned Inventory to the Warehouse as
necessary to maintain adequate inventory levels based on historical demand,
forecasts, criteria for consignment eligibility (i.e. Master reel turns) as
mutually developed between the parties, and as necessary to meet any applicable
Service Levels as mutually agreed upon by parties.

 

(c) Hawaiian Telcom shall send orders to Supplier and Supplier shall update
Supplier’s computer system located at the Warehouse by allocating such orders to
the Consigned Inventory and shall otherwise process the orders for invoicing in
accordance with the Agreement.

 

(d) Supplier will provide, install, and test at its cost and expense Computer
terminals and other equipment at Hawaiian Telecom’s warehouse that will enable
Hawaiian Telcom to enter and process the orders through the cut cycle. The
Supplier shall retain all ownership interest in the computer terminals and other
equipment furnished to Hawaiian Telcom under this Amendment One.

 

4. Pricing

Cable requirements and Pricing are outlined in Attachment No. Two, Honolulu Cut
Center. Steel Reel Costs are outlined in Attachment No. Three, Steel Reel
Replacement Costs. Prices are subject to change quarterly due to fluctuation in
copper costs. Current prices at the time of purchase are held firm.

Supplier shall invoice Hawaiian Telcom for all Consigned Inventory ordered by
Hawaiian Telcom at the time Hawaiian Telcom enters the order for such inventory
into the Supplier equipment described in Section 3(d), and Hawaiian Telcom shall
pay such invoices in accordance with Section 10 of the Agreement. For clarity,
Supplier shall itemize all Consigned Inventory orders for such month (including
type of product, length of cut, and date of order) on the report described in
Section 10.3(b) of the Agreement.

 

5. Quality Assurance/Inspection

Supplier has the option to audit Consigned Inventory upon forty-eight hours
notice to Hawaiian Telcom. Consigned Inventory audits must be conducted during
normal business hours or at a specific time mutually agreed to between Supplier
and Hawaiian Telcom. Supplier may inspect, count or catalog Consigned Inventory
located at Hawaiian Telcom’s facility. Any condition which does not conform to
the terms of this Agreement shall be promptly corrected by Hawaiian Telcom.

 

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Hawaiian Telcom Confidential

 

6. Title And Risk Of Loss

Title to Consigned inventory shall remain with Supplier until Consigned
Inventory has been staged for shipment from Warehouse. Hawaiian Telcom shall be
responsible for any and all loss or damage to Consigned Inventory while in the
possession Hawaiian Telcom including losses stemming from cutting errors. Title
to the Consigned Inventory shall pass to Hawaiian Telcom upon Hawaiian Telcom’s
staging of Consigned Inventory for shipment from Warehouse. For the purposes of
this Section, Staging shall be when Consigned Inventory is cut by Hawaiian
Telcom in preparation of Hawaiian Telcom’s use of such inventory.

 

7. Liability For Inventory Discrepancies

Supplier shall notify Hawaiian Telcom of any discrepancy discovered during a
Consigned Inventory audit. If Supplier demonstrates that Supplier has not
received payment for any Consigned Inventory no longer located at the Warehouse,
Supplier shall invoice Hawaiian Telcom for such Consigned Inventory. Payment
shall be due to Supplier within thirty (30) days after the receipt of Supplier’s
invoice.

 

8. Insurance

Upon request by Supplier, Hawaiian Telcom shall provide certificates of
insurance from insurance companies acceptable to Supplier representing
comprehensive general liability insurance and property insurance policies with
appropriate property casualty coverage that include liability coverage for such
amounts and against such loss or damage from such hazards and risks as is
usually carried by companies owning properties similar to the Warehouse and
operating in the same general areas in which Hawaiian Telcom operates. Hawaiian
Telcom shall provide to Supplier written notice at least ten (10) days prior to
any cancellation or lapse of any such policy of insurance.

 

9. Scrap

Supplier’s minimum scrap length for all Consigned Inventory shall be one hundred
(100) feet. Once individual Consigned Inventory lengths fall below the one
hundred (100) foot minimum, Consigned Inventory shall be removed from the reel
and placed in the scrap containers provided by Supplier. Full scrap containers
shall be returned to Supplier at Supplier’s expense. Hawaiian Telcom shall
arrange for the loading of scrap containers on Supplier’s carrier at designated
Warehouse locations; however, Supplier’s agent or subcontractor shall be
responsible for properly securing scrap containers before leaving Hawaiian
Telcom’s Warehouse. Supplier shall provide scrap containers as required.

 

10. Inventory Taxes

Supplier shall be responsible for all local or federal taxes on Consigned
Inventory located at Hawaiian Telcom’s Warehouse.

 

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Hawaiian Telcom Confidential

 

11. Termination

Upon termination of the Agreement for convenience, Hawaiian Telcom may either
return to Supplier as outlined in Attachment No. Four, Steel Reel Return Policy
or purchase any remaining Consigned Inventory at the Warehouse. If Hawaiian
Telcom elects to purchase all or a portion of the Consigned Inventory upon
termination, Supplier shall invoice Hawaiian Telcom for such Consigned Inventory
upon termination and payment shall be due to Supplier within thirty (30) days
after the receipt of Supplier’s invoice. In the event of Termination for Cause,
the non-terminating party is responsible for any associated freight and/or
shipping charges related to remaining Consigned Inventory.

 

12. Consigned Inventory

The parties agree that the Consigned Inventory listed in Attachment No. Two
Cable Requirements will be available to Hawaiian Telcom at the Warehouse as of
the date of Parties mutually defined inventory audit prior to close as outlined
in Attachment No. One Audit Process with current third party and during the
Term. Actual Consigned Inventory during the Term may vary as agreed by the
Parties. In the event of Termination for Cause, the non-terminating party is
responsible for any associated freight and/or shipping charges related to
remaining Consigned Inventory.

Except as express1y provided in this Amendment One, all terms of the Agreement
applicable to “Products” shall be applicable to Consigned Inventory, and all
services provided by Supplier under this addendum shall be deemed “Services”
under the Agreement.

SIGNED:

 

SPRINT NORTH SUPPLY COMPANY     HAWAIIAN TELCOM MERGERSUB, INC.

(Signature)

 

/s/ John Campanelli

   

(Signature)

 

/s/ Harvey Plummer

(Name)

 

John Campanelli

   

(Name)

 

Harvey Plummer

(Title)

 

Vice President-Field Sales and Client Solutions

   

(Title)

 

SVP Operations

(Date)

 

May 3, 2005

   

(Date)

 

April 29, 2005

 

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