Document:

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                                  EXHIBIT 10(l)

                                 [ALCATEL LOGO]

                                 1000 Coit Road
                                 Plano, TX 75075

                                     O.E.M.

                                SUPPLY AGREEMENT

                                 BY AND BETWEEN

                            Alcatel USA Sourcing L.P.

                                       AND

                           Pinnacle Data Systems, Inc.

                                                                   Page 1 of 100

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           Number                         Subject

         1                     Term of Agreement
         2                     Sale, Purchase, Resale
         3                     Definitions
         4                     Forecasts and Orders
         5                     Price
         6                     Shipment; Delivery and Risk of Loss; Packaging
         7                     Warranties
         8                     Quality Assurance
         9                     Inspection and Acceptance
         10                    Trademarks and Labeling
         11                    Installation and Service; Support
         12                    Changes
         13                    Confidentiality
         14                    Grant of Rights and Licenses
         15                    Indemnification and Limit to Liabilities
         16                    Inability to Supply
         17                    Termination; Consequences of Termination
         18                    Dispute Resolution
         19                    General Terms and Conditions
         Exhibit A             Pricing
         Attachment A1         Product Specifications
         Attachment A2         Milestone Delivery Schedule
         Attachment A3         Price, KanBan Parameters and Procedures
         Exhibit B             Inbound Routing Guide
         Exhibit C             General Packaging Specifications
         Exhibit D             Equipment Loan Agreement
         Attachment D1         List of Equipment and Software
         Attachment D2         Amendment to Equipment Loan Agreement
         Attachment D3         List of Equipment and Software
         Exhibit E             New Century Warranty
         Exhibit F             Serialization Requirements
         Attachment F1         Serialization Drawing (locations)
         Exhibit G             Service and Support
         Attachment G1         Support Flow Diagram
         Attachment G2         Support Services: Fees
         Attachment G3         Train-The-Trainer Program Outline
         Exhibit H             PCN Discontinuance and Obsolescence Procedure
         Exhibit I             Escrow Agreement
         Attachment I1         Escrow Agreement technical Information
         Attachment I2         Escrow Agreement Demand Notice
         Exhibit J             Alcatel Authorized Subcontractors
         Exhibit K             PDSi Quality System Audit and Action Plan

                                                                   Page 2 of 100

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                              OEM SUPPLY AGREEMENT

This OEM Supply Agreement (the "Agreement), made this 25th day of October, 2000
(the "Effective Date"), is by and between Pinnacle Data Systems, Inc.
(hereinafter "Supplier"), with offices at 6600 Port Road, Groveport, OH 43125,
and Alcatel USA Sourcing, L.P. (hereinafter "Alcatel"), a Texas limited
partnership, with offices at 1000 Coit Road, Plano, Texas 75075.

                             W I T N E S S E T H:
                             - - - - - - - - - -
WHEREAS, Supplier desires to sell to Alcatel and Alcatel desires to purchase
from Supplier the Products herein specified under the following terms and
conditions for internal use or resale:

NOW, THEREFORE, in consideration of the premise and the mutual promises set
forth in this Agreement, the parties agree as follows:

Section 1.  Term of Agreement.
------------------------------

     (a) The stated term of this agreement shall commence on the Effective Date
         and terminate on June 30, 2004. The terms and conditions of this
         Agreement shall apply to any purchase order for Products issued on or
         after the Effective Date and to the delivery and sale of any Product
         pursuant thereto. This Agreement shall automatically be renewed for an
         additional twelve (12) month period, commencing on July 1, 2004, unless
         either party notifies the other party in writing at any time prior to
         that date, stating renewal is not desired. Subsequent renewals shall be
         documented by a new Exhibit A, setting forth Alcatel's estimated
         quantities of purchases and Supplier's prices. Such renewal Exhibits
         shall be executed by both Alcatel and Supplier. All other terms and
         conditions shall remain the same during the subsequent renewals, except
         as mutually agreed upon by the parties as provided herein.

Section 2.   Sale, Purchase and Resale
--------------------------------------

     (a) Subject to the terms and conditions of this OEM Supply Agreement,
         Supplier shall sell to Alcatel and Alcatel shall purchase from Supplier
         for internal use or resale, the quantity of the Product which Alcatel
         orders from Supplier pursuant to Section 4c.

     (b) This Agreement in no way impairs Alcatel's ability to manufacture or
         have manufactured other similar assemblies using Alcatel's or its
         Affiliates' own technology (or other third party technologies). Alcatel
         maintains the right to source spare parts from the original
         manufacturer.

Section 3.  Definitions.  Where used in this Agreement, the following terms
-----------------------
shall have the following meanings:

     (a) "Affiliate" means any entity which controls, is controlled by or is
         under common control with a party. An entity is deemed to be in control
         of another entity (the "controlled entity") if it owns, directly or
         indirectly, not less than: (1) thirty-three and one-third percent
         (33 1/3%) of the controlled entity's assets or outstanding voting
         securities; or (2) the maximum percentage of the controlled entity's
         assets or outstanding voting securities allowed under the law of the
         country in which the controlled entity is organized.

     (b) "Product" or "Products" means collectively, unless the context
         indicates the singular, the Equipment, Software and Services provided
         by Supplier pursuant to this Agreement.

     (c) "Equipment" means the hardware portion and related Documentation of the
         Products purchased by Alcatel under this Agreement, as listed in
         Exhibit A.

     (d) "Specifications" means the latest Alcatel and/or Supplier drawings
         and/or functional and test specifications corresponding to the Alcatel
         part number as listed in Exhibit A or attached as Exhibit A1, "Price
         Schedule", as modified in writing from time to time upon agreement of
         the parties.

     (e) "Documentation" means the user manuals or other documentation
         describing the features, operation, and functionality of the Equipment
         or Software.

     (f) "Software" licensed under this Agreement is defined as machine readable
         and executable computer programs, instruction sequences, procedures,
         data, logic, and/or rules, scripts and related materials, and any
         modifications to any of the foregoing, in any form or media including,
         without limitation, magnetic tape, disc, semiconductor device,
         firmware, or other memory device or system memory.

     (g) "Technical Information" shall include but not be limited to all
         information and documentation related to design and manufacture of the
         Product, including but not limited to all piece part, assembly,
         tooling, and test fixture drawings; manufacturing processes,
         procedures, and instructions; test processes, procedures, and
         instructions; preventive maintenance procedures; raw materials spares
         parts description, including names and addresses of vendors.

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     (h) "End-user" shall include Alcatel for Products used internally by
         Alcatel or its Affiliates, and Alcatel's customer(s) of the Products.

Section 4.  Forecasts and Orders and Request for Quotes.
--------------------------------------------------------

     (a) Forecasts.  No later than thirty (30) business days after the Effective
         ---------
         Date, Alcatel shall provide Supplier with Alcatel's initial six (6)
         month Product forecast. Supplier shall maintain the capacity to
         supply the Product in quantities consistent with Alcatel's estimated
         needs under such forecast at the delivery intervals stated therein,
         provided that such delivery forecasts may be updated by Alcatel as
         set forth below.  Supplier understands and acknowledges that Alcatel
         has made no guarantee or commitment to purchase any minimum quantity
         of the Product and that the quantities of the Product actually
         purchased may vary from the estimates listed on the forecast.  By the
         first week of the last month of each quarter, Alcatel shall provide
         Supplier an updated Product forecast, to facilitate Supplier's
         capacity planning. Updated Product forecasts may be provided by mail,
         electronically (EDI) or by facsimile, at Alcatel's option. Pursuant
         to Section 19h, the use of EDI signaling enables Supplier to provide
         weekly updates to the projected forecast. Supplier acknowledges that
         such delivery forecasts are merely estimates, and that any firm
         orders shall be on Purchase Orders Alcatel issues hereunder.

     (b) Request for Quotes. Request for quotes for previously forecasted
         ------------------
         requirements will be responded to within three (3) business days.
         Requests for quotes for unforecasted requirements will be responded to
         within five (5) business days.

     (c) Orders. To purchase Products hereunder, Alcatel shall issue its
         ------
         Purchase Order(s) ("Purchase Order"), which shall specify the Alcatel
         part number, the quantity of each Product ordered, the price, the
         method of shipment, and the place(s) of delivery and the delivery
         date(s) per appropriate leadtimes (section A3) for each such Product
         and Supplier shall deliver the Product to Alcatel in accordance with
         the delivery schedule set forth in such Purchase Orders. As used in
         this Agreement, the "Delivery Date" of any Product means the date
         Seller is required to deliver the same to the designated location as
         determined pursuant to the instruction given on the Purchase Order(s).
         Supplier shall notify Alcatel at the time of shipment as to the
         quantity shipped and the specific shipping information. Shipping
         quantities may not vary from those established by the purchase order
         unless otherwise mutually agreed upon in writing by the parties. Dates
         specified on the Purchase Order are Alcatel's "on dock" dates at
         Alcatel's facility. Alcatel's acceptable delivery window is maximum
         five (5) calendar days early, zero (0) days late. In the event any
         shipment is delayed and may not be timely, then Alcatel may direct
         Supplier to ship such Products by premium transportation designated by
         Alcatel and, if such delay is not attributable to an event described in
         Section 16(a), the Supplier shall bear the expense of any difference in
         cost due to such premium transportation.

     (d) Acceptance of Orders. Supplier shall accept all Purchase Orders for the
         --------------------
         Product, including the requested Delivery Date, placed by Alcatel
         pursuant to this Section 4, and shall confirm its acceptance within one
         (1) business day after receipt of such Purchase Order.

     (e) Order of Precedence. The terms and conditions of this Agreement shall
         -------------------
         have precedence over the sale and purchase of the Product between the
         parties notwithstanding any additional or inconsistent terms or
         conditions in Alcatel's Purchase Order or similar document or in
         Supplier's confirmation, invoice or similar documents. When
         interpreting this Agreement, precedence shall be given to the
         respective parts in the following descending order:

         This body of this Agreement
         Exhibits/Attachments to this Agreement
         Purchase Orders

     (f) Cancellations/Reschedule. If Alcatel cancels all or any portion of
         ------------------------
         Product quantities stipulated in any Purchase Order hereunder and the
         Product is custom to Alcatel only, Alcatel shall be responsible to pay
         for such Product as provided in Section 17b. Requests to reschedule may
         be made by Alcatel at any time. Supplier agrees to accommodate this
         rescheduling as required by Alcatel.

     (g) Product Roadmap
         ---------------

         On a semi-annual basis, Supplier shall provide to Alcatel a written
         plan containing a roadmap of anticipated product enhancements and
         upgrades. This written plan shall be provided to Alcatel by the first
         week of the second quarter and fourth quarter of the calendar year for
         the life of this Agreement. Roadmaps delivered shall include formal
         closure dates, amendment dates, pricing and quality. Supplier provides
         this as a planning tool and does not warrant the deliverability of any
         product or enhancement in the presentation.

                                                                   Page 4 of 100

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Section 5.  Price.
------------------
     (a) Price. The price for the Product shall be as set forth on the Price
         -----
         Schedules attached hereto as Exhibit A, which includes Attachment A1,
         A2 and A3. Price shall be renegotiated on an annual basis or as
         specified in the Price Schedule, subject to any adjustments as provided
         for herein. Supplier represents and warrants to Alcatel that the prices
         charged under this Agreement will be equal to or not less favorable
         than the prices charged by Supplier during the term of this Agreement
         to any other purchaser like Alcatel of the same products, in the same
         or lesser quantities and under the same terms and conditions as are
         sold under this Agreement. In the event Supplier makes lower prices
         available to any other purchaser like Alcatel of the same products in
         the same or lesser quantities and under the same terms and conditions,
         Supplier shall promptly notify Alcatel and such lower prices shall
         immediately be made available to Alcatel on each such occasion. Such
         lower pricing shall apply to all Products then on order and thereafter
         ordered by Alcatel.

     (b) Payment Terms. Alcatel shall pay Supplier for the Product delivered to
         -------------
         Alcatel net forty-five (45) days after delivery by Supplier of such
         Product as evidenced by the appropriate receiving documentation.
         Supplier's invoices must reference the Alcatel Purchase Order number,
         and be sent to the "Bill to " address specified on Alcatel's Purchase
         Order. Supplier's packing list must reference the Alcatel Purchase
         Order number and be sent to the "Ship to" address on Alcatel's Purchase
         Order.

     (c) Taxes. All Product prices are FOB sellers premises, and do not include
         -----
         any sales, use, custom charges or duties, excise or any other taxes
         applicable to the sale, use or delivery of Products, or any charges for
         shipping, insurance or other fees. Should Supplier be required to
         collect any such taxes or other similar charges, such costs will be
         added as separate line item(s) to the invoice sent to Alcatel and shall
         be paid by Alcatel unless Alcatel provides Supplier with an applicable
         tax exemption certificate number on the Alcatel Purchase Order or
         similar document. Alcatel shall not be liable for any taxes based on
         Supplier's income.

     (d) Cost Reductions/Cost Increases. (i) At any time during the term of this
         ------------------------------
         Agreement, any cost reductions applicable to the manufacture of the
         Product identified by Alcatel shall be implemented by Supplier at
         Alcatel's prior request and written approval. Eighty percent (80%) of
         any such cost reduction as implemented shall be passed through to
         Alcatel as price reductions on the Product as and when said reductions
         are realized during Product manufacture. On any such cost reduction,
         the parties shall mutually agree as to who shall be responsible for all
         non-recurring engineering, implementation, or other similar costs
         associated with implementation of the cost reduction change, which
         costs, if to be paid by Alcatel, shall be approved in advance by
         Alcatel in writing.

     (e) Sale of Product by Supplier to Other Parties
         --------------------------------------------

         In consideration for ownership of certain design rights and
         non-recurring fees paid by Alcatel to Supplier for the development and
         NEBS certification of products under this Agreement, Supplier agrees to
         compensate Alcatel for certain product sales to other parties. If any
         of the products based on the original Alcatel product (as referenced in
         Exhibit A), and its subsequent modifications is sold by Supplier to
         parties other than Alcatel USA, Supplier will compensate Alcatel 5%
         (five percent) of the current Alcatel list price, excluding any taxes
         and shipping fees, up to an accumulated amount equal to the cost
         incurred by Alcatel for NEBS certification and 2% (two percent) for all
         product sold thereafter. Supplier is under no obligation to actively
         market products and is solely responsible for all marketing, pricing,
         and delivery activities. All compensation to Alcatel shall be in the
         form of a check issued to Alcatel on a quarterly basis, not later than
         30 days after the end of the quarter.

     (f) Royalty Reporting Format
         ------------------------

         Supplier shall provide a quarterly report in the following format after
         the first shipment of product is made to a non-Alcatel entity.

         Part Number:       Quantity Sold:       Sold To:       Date Shipped:

     (g) Royalty Reporting Audit
         -----------------------

         Supplier shall maintain for a period of three (3) years following any
         fiscal year a complete, clear, accurate record of the number of
         Products referenced in 5.e (above) distributed, sold or otherwise
         transferred sufficient to calculate any fees due to Alcatel USA.
         Alcatel USA shall be entitled to audit, with 30 days prior written
         notice and not more frequently than annually, Supplier's relevant
         records for the sole purpose of establishing the correctness of any
         amounts due or paid to Alcatel USA under this Agreement. Such audit
         shall be conducted by an independent third party auditor which has been
         approved by Supplier and such approval shall not be

                                                                   Page 5 of 100

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         unreasonably withheld or delayed. Alcatel USA shall pay for the cost
         of such audit except as stated below. The audit results shall be
         provided promptly to Supplier. If the results of such audit show that
         Supplier has underpaid Alcatel USA by ten percent (10%) or more, then
         Supplier shall pay the reasonable costs of such audit. If the results
         of such audit show that Supplier has overpaid, then Alcatel USA shall
         reimburse Supplier such overpayment within sixty (60) calendar days
         of such audit. If the results of such audit show that Supplier has
         underpaid Alcatel USA, then Supplier shall pay Alcatel USA such
         underpayment within sixty (60) calendar days of such audit.

Section 6.  Shipment; Delivery; and Risk of Loss; Packaging; NAFTA/ Duty
------------------------------------------------------------------------
Drawback.
---------

     (a) Shipment; Delivery. Alcatel shall provide Supplier with appropriate
         ------------------
         instructions for each shipment of the Product designated pursuant to
         Alcatel's Inbound Routing Guide, document number 003-3002-038 (Exhibit
         B), and Supplier shall deliver the Product covered by firm orders from
         Alcatel by delivering them to the carrier F.O.B. Supplier's
         manufacturing facility. Supplier shall promptly notify Alcatel if the
         designated carrier is unable to accept the shipment within one (1)
         business day and Alcatel shall promptly designate another carrier or
         carriers.

     (b) Title and Risk of Loss. Title to and risk of loss for a unit of the
         ----------------------
         Product sold and purchased under this Agreement shall pass from
         Supplier to Alcatel upon Supplier's delivery of the unit of the Product
         to the designated carrier. Notwithstanding the foregoing, except as
         otherwise expressly agreed between the parties, title to Software or
         other licensed materials shall remain in Supplier or its suppliers or
         licensors.

     (c) Packaging. Equipment to be supplied by Supplier shall be delivered in
         ---------
         proper packaging. Packing shall withstand air, rail and road transport
         and handling hazards under normal conditions. Supplier shall also make
         commercially reasonable efforts to comply with Alcatel's specific
         packing requirements and weight limitations for transit as outlined in
         Alcatel's General Packaging Specification document number 003-6601-014
         (Exhibit C). Supplier shall be responsible for all losses or damages
         caused or due to any defect in packing.

     (d) NAFTA; Duty Drawback.
         --------------------

         (1)  General Requirements and Liabilities.

              (A) Supplier shall become knowledgeable of, and comply with,
              government laws, regulations or requirements on importing and
              exporting.

              (B) Alcatel shall not be responsible for fines, penalties or
                  damages resulting from action taken by any government or
                  private party against Alcatel because of the failure of
                  Supplier to comply with the law, regulations or requirements.

              (C) Supplier shall indemnify Alcatel for fines, penalties, damages
                  or any other costs (including, but not limited to, attorney's
                  fees) associated with Supplier's failure to comply with the
                  law, regulations or requirements.

              (D) Supplier shall indemnify Alcatel for payments made
                  voluntarily to, or pursuant to an agreement with, any
                  government or private party associated with Supplier's failure
                  to comply with the law, regulations or requirements or with
                  Alcatel's reliance on Supplier's representations concerning,
                  among other issues, NAFTA and duty drawback.

         (2)  NAFTA.

              (A) Supplier shall provide Alcatel, upon request, complete and
                  properly executed North American Free Trade Agreement
                  ("NAFTA") Certificates of Origin for goods subject to this
                  contract which qualify under the NAFTA preference rules of
                  origin.

              (B) Supplier shall maintain and provide within ten (10) business
                  days of Alcatel's request all records necessary to support the
                  NAFTA status of the goods included in the Certificates.

              (C) Supplier shall notify Alcatel within five (5) business days of
                  any change that could affect the accuracy or validity of the
                  Certificates.

         (3)  Drawback.

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

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              (B) Supplier shall maintain all drawback documents provided to
                  Alcatel. Supplier also shall maintain and provide within
                  twenty-five (25) business days of Alcatel's request other
                  records or documents required pursuant to the U.S. Customs
                  regulations to support drawback claims.
              (C) Supplier shall notify Alcatel within five (5) business days of
                  any change that could affect the accuracy or validity of
                  drawback documents previously provided to Alcatel.

Section 7.  Warranties.
----------------------

         (a)  Good and Merchantable Title; Conformity to Specifications.
              ---------------------------------------------------------
              Supplier warrants that at the time of delivery to Alcatel that it
              shall convey good and merchantable title to all of the Equipment
              delivered under this Agreement and that each such unit of the
              Equipment shall conform to the Specifications and shall be free
              from defects in materials and workmanship for a period of two (2)
              years from delivery of the Equipment to Alcatel. Supplier shall
              repair or replace, at its sole discretion, at no cost to Alcatel,
              such items of Equipment which prove defective and/or are not in
              conformity with the Specifications. The remedy of repair or
              replacement under this Section shall be Alcatel's sole and
              exclusive remedy under the warranty, unless the Supplier
              repeatedly demonstrates it has not satisfied its obligations under
              such warranty. Then Alcatel may, at its option, return the
              defective Equipment and associated Software, and Supplier shall
              refund the amounts paid for such Equipment and associated Software
              upon receipt. Such warranty shall not apply where Equipment has
              been rendered defective or not in conformity with the
              Specifications as a result of Alcatel's or Alcatel's End-user's
              negligent operation or use, Excusable Delay, accident, use of
              improper supplies, modifications of a type not previously approved
              by Supplier, maintenance contrary to Supplier's written and
              previously communicated instructions, or other similar causes
              beyond normal use of the Equipment.

              (1) Shipping: Product In Warranty. The cost of shipping, both to
                  ------------------------------
                  and from Supplier, of Equipment in warranty for repair or
                  replacement shall be paid for by Supplier, except where
                  Supplier and Alcatel mutually agree that an analysis of
                  returned Equipment shows no defect found, in which case
                  Alcatel shall be billed for freight to and from Supplier.

              (2) Shipping: Product Out of Warranty. The cost of shipping, both
                  ----------------------------------
                  to and from Supplier, of Equipment out of warranty for repair
                  or replacement shall be paid for by Alcatel.

              (3) Out of Warranty Costs: The costs of out-of-warranty repairs
                  ----------------------
                  are subject to a charge as quoted by Supplier and accepted by
                  Alcatel or stated in Exhibit G. Such charges must be
                  authorized by Alcatel prior to Supplier performing any such
                  repairs. All charges shall be authorized by Alcatel Purchase
                  Order number, and will declare required mode of return
                  shipment.

              (4) Return Authorization. Return authorization numbers must be
                  ---------------------
                  obtained from Supplier prior to return of any Equipment for
                  repair or replacement. Such return authorization number(s)
                  shall be provided to Alcatel within one (1) business day of
                  such request by Alcatel. Should Supplier fail to respond with
                  a warranty return authorization within three (3) days, Alcatel
                  may, at its discretion, return such Equipment for repair or
                  credit without a return authorization number.

     (b) Software Warranty. Supplier warrants that when the Software is
         -----------------
         delivered, and for a period of twelve (12) months thereafter, that it
         will function in accordance with the Specification and will be free
         from design defects when used in accordance with the relevant
         Supplier's manuals. Supplier shall promptly correct any defect in
         Software at no charge to Alcatel. Except as provided hereafter, the
         remedy of correction of defects under this paragraph shall be
         Alcatel's sole and exclusive remedy under this warranty.
         Notwithstanding the foregoing, if, after repeated efforts, Alcatel
         notifies Supplier that this warranty has not been met, the parties
         shall conduct intensive good faith negotiations in order to bring the
         Software into conformity as soon as possible. If the parties are
         unable to reach agreement, then Alcatel, at its sole option, shall be
         entitled to return such Software and any related Product to Supplier,
         and Supplier shall refund the amounts paid to Supplier related to
         such Software and Product no later than upon receipt of such Software
         and Product.

     (c) Regulatory Compliance. Supplier warrants that the manufacture of each
         ---------------------
         item delivered hereunder, as well as the facilities used to manufacture
         such items, shall comply with all applicable federal, national, state,
         provincial and local laws and regulations, and all applicable Bellcore
         and Alcatel Supplier Quality Audit Standards including ISO 9000
         standards. All items that may be used for international sales shall
         comply with applicable European Union or other international EMC and
         safety requirements as specified in the Alcatel Product Specifications.

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

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         Such obligation shall continue until the expiration of ten (10) years
         from the date of last delivery of the Product to Alcatel as stated in
         Exhibit G paragraph 4.8 and 4.9.

     (e) New Century Warranty.  The New Century Warranty contained in Exhibit E,
         --------------------
         attached hereto and incorporated herein, shall also apply to all
         Products.

     (f) Services Warranty.  Supplier warrants that it will perform all services
         -----------------
         under this Agreement in a skillful and workmanlike manner.

     (g) Right to License.  Supplier represents and warrants that it owns, or
         ----------------
         has the right to license the Software and has the right to grant the
         licenses granted hereunder.

     (h) Infringement Warranty. Supplier warrants that it will not willfully or
         ---------------------
         knowingly deliver to Alcatel any portion of the Product which infringes
         any patent, trademark, copyright or other property right of any third
         party relating to proprietary or trade secret information.

     (i) Warranty Disclaimer. THE WARRANTIES SET FORTH IN THIS AGREEMENT ARE IN
         -------------------
         LIEU OF ALL OTHER WARRANTIES WHETHER EXPRESS OR IMPLIED, INCLUDING THE
         WARRANTIES OF MERCHANTABILITY AND FITNESS FOR INTENDED OR PARTICULAR
         PURPOSE.

Section 8. Quality Assurance.
-----------------------------
     (a) Quality System Requirements
         ---------------------------

         (1)  Alcatel USA understands that all Suppliers shall have a Quality
              System that supports the ISO9000 or Bellcore GR-1252-CORE or
              similar quality system. Suppliers will be subjected to audits in
              accordance with GR-1252-CORE, Quality System Generic Requirements
              for Hardware. Alcatel's objective is for its Telecommunication
              suppliers to adopt the TL9000 requirements for the appropriate
              product/services.

         (2)  Supplier hereby agrees to comply with the following requirements
              attendant to the workmanship and integrity of Product covered by
              this Agreement. Failure to comply with the provisions herein
              contained will be basis for Alcatel's rejection and return of
              Products shipped by Supplier, and cause for termination of this
              Agreement by Alcatel. Supplier hereby agrees to maintain a
              comprehensive process and quality control program that complies
              with all requirements of Alcatel's Document 004-8002-192, Supplier
              Quality System Requirements Specification and 259-0000-000, OEM
              Devices and Systems General Specifications. All resultant
              documentation for Product covered under this Agreement shall be
              maintained and made available to Alcatel upon request. All
              Products shall meet the applicable standards established by
              Bellcore Publication FR-2063 Network Equipment Building systems
              Requirements (NEBS) Family of Requirements (NEBSFR) as well as
              Alcatel's workmanship Standard 004-8003-100.

         (3)  Supplier's Quality System Implementation Plan is attached as
              Exhibit K.  Supplier will implement corrective actions in
              accordance with Alcatel's audit findings and observations.

     (b) Hardware Requirements
         ---------------------

         (1)  Compliance to the GR-78-CORE, Generic Requirements for the
              Physical Design and Alcatel Workmanship Manual on all designed
              equipment. On purchased product, the suppliers should meet
              IPC-610, class 1 standards. The supplier will address any Alcatel
              customer raised issues beyond IPC.

         (2)  Products are required to be compliant to GR-63-CORE, Network
              Equipment Builders Specification.

         (4)  Compliance to GR-1089-CORE, Electromagnetic Compatibility and
              Electrical Safety Generic Criteria for Telecommunications
              Equipment.

         (5)  Compliance to GR-284-CORE, Reliability and Quality Switching
              Systems Generic Requirements.

         (6)  Expected failure rate predictions data will be based on
              GR-332-CORE, Reliability Prediction Procedure or field
              performance.

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

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         (8)  If required by Alcatel, suppliers will be responsible for CLEI
              coding of the product as defined in GR-485-CORE, Common Language
              Equipment Coding Process and Guidelines Generic Requirement.

         (9)  Each field replaceable unit, backplane and chassis will be
              required to have a barcode serial number and barcode revision
              label applied. Alcatel will provide the barcode for the serial
              number and the revision label. The barcode will be installed by
              the supplier in a mutually agreed upon location on each unit. A
              history of repair actions on field returns and the number of times
              returned from the field should be tracked against each serial
              number.

         (10) Field returns hardware should not be upgraded to the latest
              shippable revision at the factory for new products when the
              upgrade has the potential to improve field performance unless
              approved in writing by Alcatel.

         (11) Functional defects on delivered product shall be less than 1% as
              measured at the module level.

         (12) Visual Mechanical defects on delivered product shall be less than
              1.5% as measured level.

     (c) Software Requirements

         (1)  As a supplier to multiple Bell Operating Companies, Alcatel is
              both required and compliant with the current versions of Bellcore
              Generic Requirements (GR's) and Technical References (TR's) for
              software quality as listed below. In order to maintain this level
              of quality throughout our system configuration these standards are
              flowed down to our sub-system suppliers and Supplier agrees to
              comply with such standards.

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------
      Bellcore Number                                          Title
      ---------------                                          -----
-----------------------------------------------------------------------------------------------------------

-----------------------------------------------------------------------------------------------------------
<S>                            <C>
GR-282-CORE                    Software Reliability and Quality Acceptance Criteria
-----------------------------------------------------------------------------------------------------------
TR-NWT-000179                  Quality System Generic Requirements for Software
-----------------------------------------------------------------------------------------------------------
TR-NWT-000284,                 Reliability and Quality Switching Systems Generic  Requirements  (RQSSGR),
Section 2.4                    Software Design and Architecture
-----------------------------------------------------------------------------------------------------------
GR-929-CORE                    Reliability and Quality Measurements for  Telecommunications Systems
-----------------------------------------------------------------------------------------------------------
</TABLE>

         (2)  The Supplier should provide the necessary support and data for any
              customer imposed performance-reporting metrics as defined in
              GR-929-CORE.

         (3)  The supplier shall have a documented Software Development
              Lifecycle that conforms to ISO-9001 as interpreted by ISO 9000-3.

         (4)  At the request of Alcatel customers, compliance to TR-NWT-000179,
              Software Reliability Program Requirements will be implemented.

         (5)  The supplier shall  demonstrate Level II capability as defined by
              SEI Software  Capability  Maturity Model (CMM).

Section 9.  Inspection and Acceptance.
-------------------------------------

     (a) Acceptance. Acceptance shall be based upon a test and inspection plan
         ----------
         designed to demonstrate specification compliance. Such test and
         inspection shall be documented by Supplier, demonstrated to conform to
         Alcatel's requirements, and then mutually accepted in writing. Product
         is subject to inspection by Alcatel at either Alcatel's facility,
         Supplier's subcontractor(s) facility, or Supplier's facility, at
         Alcatel's option. Alcatel shall be allowed thirty (30) business days
         from date of receipt of any Product to perform testing and inspection
         of such Product. If identical tests are performed by Supplier and
         Alcatel, the parties will work together to ensure that test equipment
         is properly calibrated to prevent improper rejection. In the event
         Alcatel does not reject the shipped Product within the above stated
         term, it shall automatically be deemed that acceptance of the shipped
         Product has been made by Alcatel.

     (b) If software is delivered, the following software acceptance criteria
         will apply:

         (1) 100% of all Test Cases from each module have been successfully
             executed.

                                                                   Page 9 of 100

<PAGE>

         (2) Feature Tests 100% executed with a 95% pass rate (each test
             individually).

         (3) System Functionality not degraded as measured by: Regression Tests
             100% executed with a 95% pass rate (overall).

         (4) Planned Exit Tests are 100% executed with 100% pass rate.

         (5) All fixed and packaged Change Requests have been verified as
             resolved or closed.

         (6) Requirements shall be traced throughout the process.

         (7) The supplier shall provide objective evidence that all software
             requirements have been met.

     (c) Testing and Certificate of Manufacturing Compliance.  Supplier shall
         ---------------------------------------------------
         inspect and test all Product prior to delivery to Alcatel for
         conformity to the Specifications. The tests and the performance
         criteria detailed in the Specifications shall comprise the tests and
         performance criteria to be implemented by Supplier for purposes of
         Product acceptability hereunder.  Supplier shall not modify the tests
         and criteria set forth on the Specifications without Alcatel's prior
         written approval. Prior to the release of any new lot of Product,
         Supplier shall complete a certificate of manufacturing compliance
         certifying that: (i) each unit of the Product in such lot meets the
         Specifications; and (ii) such lot passes all testing and performance
         criteria agreed upon by the parties, including but not limited to
         those set forth in the Specifications. Supplier shall maintain a
         record of these certificates of manufacturing compliance, available
         for review by Alcatel within two (2) business days of such review
         request. Supplier shall have each such certificate signed by a person
         duly-authorized to make such certifications.

     (d) Rejected Products and Shortages.  Notwithstanding any payment made by
         -------------------------------
         Alcatel for any unit of the Product hereunder, Alcatel may reject any
         Product which fails to meet the testing standards and performance
         criteria and/or the Specifications. Except as provided herein,
         Alcatel shall, within thirty (30) business days after its receipt of
         any shipment of the Product, notify Supplier of any claim relating to
         a rejected Product or any shortage in quantity of any shipment of the
         Product. In the event of such rejection or shortage, Supplier shall,
         at Alcatel's option, replace the rejected Product or make up the
         shortage promptly, not to exceed forty eight (48) hours, upon receipt
         of such notice, at no cost to Alcatel, and shall make arrangements
         with Alcatel for the return of any rejected Product, such return
         shipping charges to be paid by Supplier.

     (e) Alcatel Inspection. Alcatel may, at any time during normal business
         ------------------
         hours and upon request to Supplier, inspect Supplier's facilities for
         manufacturing the Product, and inspect Supplier's manufacturing
         procedures for compliance with applicable Bellcore standards and the
         other appropriate manufacturing standards described in Sections 7, 8,
         and 9 and may inspect Supplier's inventory, work-in-process, raw
         materials, production records and such other items related to the
         Product as Alcatel considers relevant to satisfy it that Supplier is
         manufacturing the Product in accordance with this Agreement.

Section 10.  Trademarks and Labeling.
------------------------------------

     (a) Trademarks.  Supplier acknowledges that all trademarks, trade names and
         ----------
         trade dress of Alcatel or Alcatel's Affiliate (the "Alcatel
         Trademarks") that shall accompany or are affixed to the Product
         and/or Product literature in accordance with the Specifications or
         other request of Alcatel are the property of Alcatel or Alcatel's
         Affiliate, and Supplier shall not claim or obtain any rights in the
         Alcatel Trademarks.  Supplier shall take no action that shall in any
         way impair Alcatel's or Alcatel's Affiliate's right, title and
         interest in and to the Alcatel Trademarks and shall not use for its
         own benefit or for the benefit of any party other than Alcatel, the
         Alcatel Trademarks or any confusingly similar trademarks, trade names
         or trade dress during or after the term of this Agreement.

     (b) Labeling. Supplier shall label the Product in accordance with the
         --------
         Specifications or other request of Alcatel. Supplier hereby grants
         Alcatel permission to use Supplier's Documentation in Alcatel's
         promotional literature; refer to Supplier as the manufacturer of the
         Product and use Alcatel labeling and promotional and other literature
         that may indicate Supplier is the manufacturer of the Product in
         accordance with applicable law. Alcatel shall be allowed to brand name
         the Products with names of its own choosing.

     (c) Serialization. If required by Alcatel, Supplier shall serialize the
         -------------
         Product in accordance with the Specifications and Exhibit F, attached
         hereto and incorporated herein, regarding Alcatel's serialization
         procedures.

Section 11.  Installation and Service; Support.
----------------------------------------------

                                                                  Page 10 of 100

<PAGE>

     (a) Installation and Support. Alcatel shall be responsible for installing
         ------------------------
         and supporting the Product for its End-users, at Alcatel's expense,
         subject to the other provisions of this Agreement. Supplier shall
         provide technical and operational service and support according to the
         terms of Exhibit (G).

     (b) Equipment Loan Agreement Supplier and Alcatel will enter in to a
         ------------------------
         equipment loan agreement, substantially similar to the Equipment Loan
         Agreement attached hereto as Exhibit D, and if required, to provide
         equipment to support Exhibit G Service and Support.

Section 12.  Changes.
--------------------

     (a) Regulatory Changes. Should any change in any regulations promulgated by
         ------------------
         Bellcore or any other comparable foreign authority, or any change in
         the interpretation thereof, require changes in Supplier's manufacturing
         practices which increase the cost to Supplier of manufacturing the
         Product, the parties shall negotiate in good faith whether and to what
         extent prices of the Product should be adjusted to reflect such cost
         increases.

     (b) Alcatel-Requested Changes. Alcatel may from time to time request
         -------------------------
         changes or enhancements to be made to the Product and corresponding
         changes made to the Specifications, any such request to be made in
         writing. Supplier shall respond in writing to any such request within
         ten (10) business days from receipt of the request, indicating when it
         can accommodate such request. If Supplier agrees to accommodate such
         request it shall, within twenty (20) business days of its response,
         submit to Alcatel a proposal that includes engineering specifications,
         cost estimates and an implementation schedule. Implementation of the
         change is to be made only after Alcatel notifies Supplier in writing of
         acceptance of the proposal and, as applicable, any necessary regulatory
         approvals therefor have been secured. Any Product which is in the
         process of production at the time of receipt of a change notice shall,
         with Alcatel's agreement, continue to be produced in accordance with
         the Specifications which had been in effect at the time of issuance of
         an appropriate purchase order by Alcatel.

     (a) Change Orders.
         -------------

         (1)  Supplier shall notify Alcatel of hardware and software Product
              changes that affect Product fit, form, function, performance,
              safety, or reliability at least six (6) months, or such period as
              may be amended by mutual agreement, prior to implementation of
              such change, and prior to shipment of Product. Notwithstanding the
              foregoing, if Alcatel has a contractual obligation to an End-user
              to give a longer notice of such Product changes, Alcatel shall
              notify Supplier of such obligation and Supplier shall give Alcatel
              such longer notice. Such notice and any accompanying retrofit
              disposition responsibilities, due to safety, reliability, or
              performance, shall support the requirements of Alcatel Engineering
              Change Order (ECO) and the current Alcatel Product Change Notice
              (PCN) Discontinuance (Obsolescence) Notice Procedures
              (007-0000-115) attached as Exhibit H.

         (2)  Supplier will conduct testing of changes before release that
              insures there will be no degradation to the End-user's Product or
              network, and Supplier will provide all required data and test
              results to support such changes at Alcatel's request.

         (3)  Supplier will provide support for two previous software releases
              if such releases have been licensed to any End-user. Supplier
              shall provide support for additional prior releases, on a time and
              materials basis, based on Supplier's then standard rates.

         (4)  Software patch creation, testing, and release shall support
              Alcatel documented guidelines and procedures, as found in Software
              Release and Patch Procedure, Alcatel Document No. 003-5300-236.

         (5)  Alcatel's Purchase Order shall be the governing document for all
              change order activity. No new part number(s) shall be accepted
              without a Purchase Order.

Section 13.  Confidentiality.
----------------------------

     (a) Confidential Information. All technical information, documentation,
         ------------------------
         Software, and other information or data, including information that
         is received from a third party under circumstances permitting its
         disclosure, that is provided by one party to the other party in
         connection with this agreement and which is marked or otherwise
         identified as confidential or proprietary shall hereinafter be
         collectively referred to as "Confidential Information".  Orally
         conveyed Confidential Information must be confirmed in writing to the
         other party within 30 (thirty) days of the date of disclosure in
         order to be encompassed by this Section 13.  Confidential Information
         disclosed by either party to the other in connection with this
         Agreement is to be used only for the purpose of this Agreement and
         for no other purpose, and shall be protected by the recipient party
         from being divulged to others with no less than the same degree of
         care, but in no event less than reasonable care, given to its own
         Confidential Information that is intended to be protected from
         disclosure. The obligations in this paragraph shall survive
         termination or expiration of this Agreement.

                                                                  Page 11 of 100

<PAGE>

     (b) All Confidential Information shall be and remain the disclosing party's
         property and shall not be copied or duplicated in any manner or
         submitted to any third party for examination or otherwise, without the
         disclosing party's prior written consent.

     (c) Confidential Information will not be entitled to protection under this
         Section when it is (i) already known to the receiving party, from a
         source other than the disclosing party (ii) publicly known (or becomes
         publicly known) without the fault or negligence of the receiving party,
         (iii) received from a third party without restriction and without
         breach of this Agreement, (iv) independently developed by the receiving
         party, or (v) disclosed in accordance with a written authorization of
         the disclosing party.

     (d) The disclosing party understands that the receiving party may,
         currently or in the future, be developing information internally or
         receiving information from other parties which may be similar to the
         disclosing party's information. Accordingly, nothing in this Agreement
         shall be construed as a representation or inference that either party
         will not develop products, for itself or for others, which compete with
         products or systems contemplated by the other party's information
         provided, however, that the receiving party shall not use the
         disclosing party's Confidential Information in such development.

     (e) Disclosure to Government. Nothing contained in this Section shall be
         ------------------------
         construed to restrict either party from disclosing confidential
         information as required for purposes of compliance with governmental,
         administrative or regulatory laws, regulations, orders or requests;
         provided that the party who is making such disclosure gives the other
         party sufficient notice of the intent to make and the content of such
         disclosure to enable such other party to contest the necessity of
         disclosing such other party's Confidential Information and/or to modify
         the content of the Confidential Information to be disclosed.

Section 14. Grants of Rights and Licenses.
-----------------------------------------

     (a) Supplier hereby grants to Alcatel a non-transferable, non-exclusive,
         fully paid-up, worldwide license to use, sublicense and distribute the
         Software, including distribution utilizing multi-tier distribution
         channels, solely for use with the Product. Unless otherwise
         specifically stated, Software delivered under this Agreement is
         licensed solely for use in the Product in which it is initially
         installed but may be transferred to a replacement Product at no
         additional license or sublicense fee. Software may be copied in whole
         or in part by Alcatel for its: (i) backup and archival purposes; (ii)
         internal use on the Product; and (iii) sublicensing of the Software,
         and the number of copies will be limited to those reasonably necessary
         to so conduct Alcatel's business.

     (b) All Software provided by Supplier with the Product(s) or provided by
         Supplier in conjunction with the Product(s) is Confidential Information
         of Supplier or Supplier's third party licensors, and Alcatel agrees to
         treat all such Software in accordance with Section 13 of this Agreement
         entitled "Confidential Information" (except to the extent that the
         obligations of Section 13 are in apparent or actual conflict with
         Alcatel's rights and licenses granted under this Section). Alcatel
         shall not reverse compile, disassemble or reverse engineer any Software
         nor, except as agreed to by Supplier in writing, modify any Software.

     (c) Alcatel is authorized to grant a non-exclusive sublicense to each
         End-user to use the Software solely in the Product in which it is
         initially installed or a replacement Product. Software which is a
         stand-alone Product may be sublicensed to operate on any hardware on
         which the Software will operate, and such hardware shall be treated as
         if it were the "Product" referred to in this paragraph. The End-user
         may not grant a further sublicense, and may not transfer its sublicense
         except with a transfer of the Product. Each such sublicense shall be in
         writing and include, (i) a prohibition of copying the Software except
         for backup and archival purposes, (ii) an obligation to reproduce
         proprietary legends on copies, (iii) treatment of the Software as
         Confidential Information, (iv) a restriction on the End-user to not
         decompile, modify, disassemble or reverse engineer any Software.

     (d) Escrow. To enable Alcatel to exercise its rights under this Agreement
         ------
         and to fulfill the obligations assumed by Alcatel in relation to
         Products, Supplier shall deposit with a mutually agreed-upon third
         party escrow agent, specializing in technology escrow, Technical
         Information under terms and conditions substantially similar to the
         escrow agreement attached in Exhibit I. The parties shall in good faith
         negotiate such agreement so that the deposit shall be made upon or
         prior to Alcatel's first permanent installation (i.e., non-field trial)
         of Product at a Alcatel End-user's site.

Section 15.  Indemnification and Limit to Liability.
---------------------------------------------------

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

                                                                  Page 12 of 100

<PAGE>

         and all property arising out of the negligent or willful wrongful acts
         or omissions of Supplier, its employees, agents, subcontractors, or
         representatives.

         Buyer hereby indemnifies and holds Seller, its directors, officers,
         agents, and employees harmless against any and all claims, actions,
         damages, liabilities, or expenses, including reasonable attorney fees
         and other associated costs and expenses for injury to or death of any
         person, and for loss of or damage to any and all property arising out
         of the negligent or willful wrongful acts or omissions of Buyer, its
         employees, agents, subcontractors, or representatives.

     (b) Infringement Indemnification.  Supplier will defend, at its own
         ----------------------------
         expense, any action brought against Alcatel or End-User(s) to the
         extent that it is based on a claim that any Supplier supplied
         Products, designs, material, processes, or documentation hereunder
         constitutes an infringement of any duly issued patent or infringement
         of any copyright, trade secret, or other proprietary rights of a
         third party. Supplier will pay all damages and costs finally awarded
         against Alcatel or End-User(s) in such action which are attributable
         to such action.  Alcatel will promptly inform Supplier in writing and
         furnished a copy of each communication, notice, or other action
         relating to the alleged infringement and will give the Supplier
         authority, information, and reasonable assistance necessary to defend
         or settle such claim.  Alcatel reserves the right to participate, at
         its expense, in such defense or settlement. Should Product delivered
         under this Agreement become, or in Supplier's opinion be likely to
         become, the subject of a claim of infringement of any patent or any
         copyright, trade secret, or other proprietary rights of a third
         party, then Supplier shall promptly, at its option: (i) procure for
         Alcatel and all End-User(s) the right to use such Product free of any
         liability for infringement; (ii) modify such Product so that it
         becomes non-infringing; or (iii) replace such Product with
         non-infringing substitutes otherwise complying substantially, to the
         satisfaction of Alcatel, with all the requirements of the Agreement.

     (c) Limitation of Liability EXCEPT AS EXPRESSLY PROVIDED IN THIS AGREEMENT,
         -----------------------
         OR FOR BREACH OF SECTION 13, IN NO EVENT WILL EITHER PARTY BE LIABLE
         FOR INDIRECT, SPECIAL, INCIDENTAL, OR CONSEQUENTIAL DAMAGES.

Section 16.  Inability to Supply.
--------------------------------

     (a) Excusable Delay.  Any delay in the performance of any of the duties or
         ---------------
         obligations of a party hereto shall not be considered a breach of
         this Agreement provided that such delay is caused by or is the result
         of any acts of God, acts of the public enemy, insurrections, riots,
         fires, explosions, floods, or other unforeseeable causes beyond the
         control and without the fault or negligence of the party so affected
         ("Excusable Delay").  The party so affected shall give prompt notice
         to the other party of such cause and shall take whatever reasonable
         steps are necessary to relieve the effect of such cause as rapidly as
         possible.  Notwithstanding the foregoing, should Supplier be
         prevented from performing its obligations hereunder due to Excusable
         Delay for thirty (30) or more consecutive days, then Alcatel may, at
         its option, terminate this Agreement upon written notice to Supplier,
         in addition to any option which Alcatel may exercise pursuant to
         Section 16(b).

     (b) Self-Manufacturing Right.  Upon the occurrence of any of the events
         ------------------------
         specified below, whether or not the events are due to Excusable
         Delay, or subject to Alcatel's right to terminate the Agreement
         pursuant to Section 17(a), Alcatel shall have the right at its option
         to self-manufacture or have a third party manufacture ("Second Source
         Manufacturer") under any relevant Supplier patents and know-how (if
         any) the Product and Product components.  Supplier shall further
         cooperate with Alcatel in securing for Alcatel pursuant to this
         Section, and under terms no less favorable than realized by Supplier,
         any third party rights provided to Supplier that are required to
         manufacture the Product and Product components. Alcatel shall also
         have the right to acquire any unique equipment of Supplier's
         necessary to produce and/or test of the Product and Product
         components at Supplier's cost less accrued depreciation.  Upon
         successful manufacture of the Product and/or Product component(s) by
         the Second Source Manufacturer, the obligations of the parties with
         respect to supply by Supplier to Alcatel of the Product shall be
         suspended.  The right of manufacture by Alcatel shall be triggered by
         occurrence of any of the following events:

         (1)  Continued failure by Supplier to deliver the Product to Alcatel in
              the quantity required as stated in Alcatel's purchase order for a
              period of two (2) consecutive months; or

         (2)  Continued failure by Supplier to deliver Product which conforms to
              Specifications, and/or other applicable compliance standards set
              forth in Section 7c, for a period of two (2) consecutive months;
              or

         (3)  Any termination of this Agreement by Alcatel due to Supplier's
              breach of this Agreement or financial default; or

                                                                  Page 13 of 100

<PAGE>

         (4)  Should Supplier and/or its successors and permitted assigns cease
              to engage in the business of manufacturing the Product at any time
              during the term hereof, or in the event that Supplier sells all or
              greater than fifty percent (50%) of its outstanding equity to a
              party that is a substantial direct competitor of Alcatel, or sells
              that part of its assets relating to the supply of the Product to
              such a party.

     (c) Upon notification by Alcatel to Supplier of Alcatel's intent to
         exercise its rights as set forth in this Section, Supplier shall have
         thirty (30) days to correct such problems that triggered such
         notification.  Should Supplier correct such problem within such time
         period, Supplier may, at Alcatel's sole discretion, continue its
         manufacture and supply obligations hereunder.  In the event that
         Alcatel exercises the right to manufacture for reasons of Supplier's
         failure to supply but thereafter Supplier demonstrates that it has
         corrected the problem that caused events that triggered disclosure,
         then Alcatel's right to manufacture may cease and Supplier may, at
         Alcatel's sole discretion, resume supply of the Product hereunder.

Section 17. Termination; and Consequences of Termination.
--------------------------------------------------------

     (a) Termination For Default.  In addition to other termination provisions
         -----------------------
         set forth in this Agreement, this Agreement may be terminated prior to
         the time described in Section 1(a) upon the occurrence of any of the
         following events:

         (1)  Thirty (30) days' written notice by a party to the other party
              ("party in breach") in the event that the party in breach
              materially breaches any provision of this Agreement and fails to
              remedy the breach prior to expiration of such thirty (30) day
              period;

         (2)  Written notice by a party to the other party ("insolvent party")
              upon:

              A.  the insolvency of the insolvent party or the appointment of a
                  receiver for the insolvent party or for all or any substantial
                  part of its properties; or
              B.  the adjudication of the insolvent party as a bankrupt; or
              C.  the admission by the insolvent party in writing of its
                  inability to pay its debts as they become due; or
              D.  the execution by the insolvent party of an assignment for the
                  benefit of its creditors; or
              E.  the filing by the insolvent party of a petition to be adjudged
                  a bankrupt, or a petition or answer admitting the material
                  allegations of a petition filed against the insolvent party in
                  any bankruptcy proceeding, or the act of the insolvent party
                  in instituting or voluntarily being or becoming a party to any
                  other judicial proceeding intended to effect a discharge of
                  the debts of the insolvent party, in whole or in part;

         (3)  Notwithstanding the provisions of Section 16 and upon notice from
              Alcatel to Supplier stating that Supplier failed to supply the
              total quantity of Product ordered by Alcatel pursuant to this
              Agreement for a total of sixty (60) days in any six (6) month
              period, Supplier shall cooperate with Alcatel for a period of up
              to eighteen (18) months from the effective date of such
              termination to enable Alcatel to continue to supply Alcatel's
              End-user(s) with the Product until Alcatel secures an alternative
              source capable of supplying Alcatel's requirements of Product.
              Such cooperation shall include, without limitation, providing end
              lot runs of whatever size Alcatel reasonably deems necessary under
              the circumstances and providing Alcatel and Alcatel's Third Party
              Manufacturer (as applicable) with manufacturing rights,
              information, equipment, and any technical assistance (as
              applicable) in accordance with the procedures outlined in Section
              16(b).

     (b) Termination or Cancellation for Convenience

         1)   Alcatel may terminate this Agreement, any purchase orders, or any
              supplements thereto, at any time, for any reason at its own
              convenience. In such case, Alcatel's total liability for such
              cancellation shall be calculated from table 1A, (except for
              mutually agreed to long lead time parts):

                                       Table  1A
                 -----------------------------------------------------------
                    Cancellation Notification               Percent (%)
                                                            Liability
                 -----------------------------------------------------------
                       0 - 5 business days                   100%
                 -----------------------------------------------------------
                       6 - 15 business days                  100%
                 -----------------------------------------------------------
                      16 - 30 Days business days              50%
                 -----------------------------------------------------------
                         + 30 Days business days              0%
                 -----------------------------------------------------------

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

                                                                  Page 14 of 100

<PAGE>

              and become the property of Alcatel. In no event shall cancellation
              charges exceed the aggregate applicable purchase price of items
              stated in Exhibit A or Exhibit A3 of this Agreement.

     (c) Consequences of Termination. Termination of this Agreement shall not
         ---------------------------
         relieve either party of its liability to perform its obligations
         pursuant to the terms and conditions of this Agreement incurred prior
         to such termination, nor shall it prevent either party from exercising
         its right to pursue any other remedy available to it. Upon request of a
         party, the other party shall return all copies of such party's
         Confidential Information (excluding Software). The provisions of
         Sections 3, 7, 8, 9, 10, 11, 13, 14, 15, 16(b), 17(a)3, 18, 19(a)(d)
         shall survive the termination of this Agreement for any reason.

Section 18.  Dispute Resolution.
-------------------------------

     (a) Good Faith. The parties shall attempt to resolve any disputes arising
         ----------
         out of or in relation to this Agreement ("Dispute" or "Disputes") by
         good faith discussions. In the event of the occurrence of such a
         Dispute, either party may, by notice to the other party, have such
         Dispute referred to the individuals designated below or their
         successors, for attempted resolution by good faith negotiations within
         thirty (30) days after such notice is received. Said designated
         individuals are as follows:

         For Alcatel - Jack Hostetter

         For Supplier - Bob Hahn, VP/COO

         In the event that such discussions are not successful in resolving a
         Dispute, then such Disputes between the parties, are to be settled and
         finally determined by binding arbitration conducted in accordance with
         the Commercial Arbitration Rules, or the then existing rules for
         commercial arbitration, of the American Arbitration Association
         pursuant to the procedures outlined in Section 18(b) herein.

     (b) Arbitration Procedures.  If either party determines at any time that it
         ----------------------
         wishes to submit a Dispute to arbitration, it shall first give the
         other party written notice, in reasonable detail, of the Dispute and
         of the intention to submit the Dispute to arbitration.  If within
         twenty (20) business days after receipt of such notice by the other
         party (or such longer or shorter period as the parties may establish
         by mutual agreement at the time) the Dispute is not resolved by
         amicable negotiation between the parties, such Dispute may be
         submitted by either party to arbitration as provided herein. The
         arbitration shall be before a panel of three (3) arbitrators.  Each
         party shall select an arbitrator and both parties shall jointly
         select the third arbitrator; provided, however, if the parties are
         unable to agree on the third arbitrator within twenty (20) business
         days after the Dispute is submitted to arbitration, the two
         arbitrators selected by the parties shall jointly select the third
         arbitrator. The arbitrators shall only interpret and apply the terms
         and provisions of this Agreement at issue, and shall not change any
         such terms or provisions or deprive any party to the Dispute of any
         right or remedy provided for in this Agreement. The arbitrators may
         award compensatory damages against a party to the Dispute by the
         arbitrators shall not be authorized to award, nor shall they award,
         damages in excess of the limitations contained herein, except as
         expressly permitted in this Agreement.  The arbitration of any
         Dispute, including the determination of any amount of damages
         suffered by a party, shall be final and binding upon the Parties to
         the maximum extent permitted by law.  Judgment upon the decision of
         the arbitrators may be entered in any court of competent
         jurisdiction. The cost and expenses of each party incurred in
         connection with the arbitration, including reasonable attorneys'
         fees, costs and expenses, and the costs of the arbitration itself,
         including the fees, costs and expenses of the arbitrators, shall be
         borne in accordance with the determination of the arbitrators with
         respect thereto.

Section 19.  General Provisions.
-------------------------------

     (a) Notices. All notices and other communications delivered under this
         -------
         Agreement shall be in writing and shall be deemed to be given when
         received by telex or first class mail (postage prepaid) to:

         If to Supplier:  Bob Hahn, VP/COO

         If to Alcatel:   Jack Hostetter

     (b) Government Contracts.  Supplier shall use its best efforts to comply
         --------------------
         with any additional legal and/or regulatory requirements not set
         forth herein that may apply to its provision of the Product to
         Alcatel as a subcontractor in any government contract.

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

                                                                  Page 15 of 100

<PAGE>

         court order or as otherwise required under judicial or regulatory
         proceedings, or as reasonably necessary to exercise its rights or
         perform its obligations herein, neither party shall disclose the
         existence of nor the terms and conditions of this Agreement without
         the prior written consent of the other party.

     (d) Relationship of the parties. Supplier hereby declares and represents
         ---------------------------
         that Supplier is engaged in an independent business and will perform
         its obligations under this Agreement as an independent contractor and
         not as an employee of Alcatel; that the persons performing the services
         hereunder are not employees of Alcatel; that Supplier has and hereby
         retains, except as set forth herein, the right to exercise full control
         of obligations hereunder and full control over the employment,
         direction, compensation, and discharge of all employees, agents, and
         subcontractors assisting in the performance of such obligations; that
         Supplier will be solely responsible for all matters relating to payment
         of such employees, including compliance with worker's compensation,
         unemployment and disability insurance, social security withholding, and
         all such matters; and that Supplier will be responsible for the acts of
         Supplier and the acts of all agents, employees, and contractors
         employed by Supplier during the performance of Supplier obligations
         under this Agreement.

     (e) Affiliates, Subcontractors. Supplier agrees to sell to Alcatel, Alcatel
         --------------------------
         authorized subcontractors(s), and Affiliates of Alcatel. Exhibit J,
         Alcatel Authorized Subcontractors, hereby annexed to and made a part of
         this Agreement, shall identify all Alcatel authorized subcontractors.
         The terms and conditions stated herein shall be binding on all
         subcontractor(s) or Alcatel purchasing locations. Except where the
         context is clearly inconsistent, for all purchases made by Alcatel's
         authorized subcontractor(s) or Affiliate(s), for the purposes of such
         purchase the term "Alcatel" shall refer to such Alcatel authorized
         subcontractor(s) or Affiliate(s). All invoices arising out of sales by
         Supplier to any authorized subcontractor(s) or Affiliate(s) shall be
         submitted to such subcontractor(s) or Affiliate(s) for payment. Alcatel
         assumes no responsibility for the credit worthiness nor assumes any
         liability for any debt incurred by any subcontractor(s) or Affiliate(s)
         for any Product ordered subsequent to this Agreement.

     (f) Assignment. This Agreement may not be assigned in whole or in part by
         ----------
         either party without the written consent of the other party, except
         consent shall not be required if assignment is made by either party to
         an entity in which they or their parent hold at least 51% of the
         outstanding shares of stock or other ownership interest, and provided
         that in such event the party assigning this Agreement or any part
         thereof shall remain liable for all of its obligations according to
         this Agreement. The term "Parent" shall mean an entity which owns,
         directly or indirectly, a majority ownership interest in Alcatel.
         Notwithstanding the foregoing restrictions on assignment, Alcatel may
         assign this Agreement without such approval to an entity which is
         merged with, consolidated with, or otherwise acquires, directly or
         indirectly, a majority ownership interest in Alcatel, Alcatel's Parent,
         or Alcatel's or Alcatel's Parent's assets.

     (g) Business Reviews; Information. Supplier agrees to meet with Alcatel, at
         -----------------------------
         a minimum, twice per year for the purpose of conducting a business
         review to review Supplier's and Alcatel's overall performance, business
         issues, and/or technical problems or issues. In addition, Supplier
         agrees to share Product and Software release schedules, as available,
         for use in Alcatel's planning and marketing.

     (h) Electronic Communication. The Supplier agrees to maintain the ability
         ------------------------
         to communicate with Alcatel via Internet e-mail, and further agrees to
         implement and maintain communication via Electronic Data Interchange
         (EDI). The minimum ANSI standard EDI transaction sets that Supplier
         will maintain are:

         810  Electronic Invoice             860  Purchase Order Change
         820  Electronic Funds Transfer      865  Purchase Order Change
         830  Forecast                            Acknowledgment
         850  Purchase Order                 997  Functional Acknowledgment
         855  Purchase Order Acknowledgment
         856  Advance Ship Notice

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

     (j) Severability. Any provision of this Agreement which is prohibited or
         ------------
         unenforceable in any jurisdiction shall, as to such jurisdiction, be
         ineffective to the extent of such prohibition or unenforceability
         without affecting the validity or enforceability of such provision in
         any other jurisdiction or invalidating the remaining provisions of this
         Agreement.

     (k) Execution in Counterparts. This Agreement may be executed in two or
         -------------------------
         more counterparts, each of which counterparts, when duly executed and
         delivered, shall be deemed to be an original and all of which
         counterparts, taken together, shall constitute one and the same
         Agreement.

                                                                  Page 16 of 100

<PAGE>

     (l) Governing Law. This Agreement shall be deemed to be a contract made
         -------------
         under the laws of the State of Texas without giving effect to any
         choice or conflict of law provision or rule (whether of the State of
         Texas or any other jurisdiction) that would cause the application of
         the laws of any jurisdiction other than the State of Texas. The UN
         Convention on Contracts for the International Sale of Goods is
         specifically excluded from this Agreement.

     (m) Construction. If, for any reason, this Agreement is translated into a
         ------------
         language other than the English language, then the English language
         version of this Agreement shall be controlling for all purposes.

     (n) Headings.  Headings used in this Agreement are for convenience of
         --------
         reference only and shall not affect the interpretation of this
         Agreement.

     (o) Utilization of Small and Small Disadvantaged Business Concerns
         Both Parties agree that compliance with the policy of the United States
         Government regarding Small Disadvantaged Business, Women-owned
         Business, and Protected Class Business concerns is essential to
         participate as subcontractors in the performance of contracts awarded
         by any federal agency or organization requiring compliance of Section
         211 of Public Law 95-507 Office of Federal Procurement Policy's Policy
         Letters 80-2 and 80-4 and FAR 52.219.2. As a requirement of this
         compliance, Supplier agrees to support and report the following
         requirements for the direct and indirect purchases of raw materials,
         components, supplies and services:

             (1)   Small Disadvantaged (Minority) Business Concerns     5%
             (2)   Woman-Owned Business Concerns                        5%
             (3)   Protected Class Business Concerns                    1%

         Reporting of such compliance shall be sent to:
         M/WBE Plan Administrator
         Alcatel Sourcing L.P.
         1000 Coit Road  M/S 305
         Plano, TX 75075

     (p) Entire Agreement. This Agreement and attached Exhibits, incorporated
         ----------------
         herein for all purposes, constitute the entire understanding between
         the parties and supersedes all prior oral or written understandings
         between the parties with respect to the subject matter of this
         Agreement.

               Exhibit A          Price
               Attachment A1      Specification
               Attachment A2      Milestone Delivery
               Attachment A3      Price , Kanban Parameters and Procedures
               Exhibit B          Inbound routing guide
               Exhibit C          General Packaging Specification
               Exhibit D          Equipment Loan Agreement
               Attachment D1      List of Equipment and Software
               Attachment D2      Amendment to Equipment Loan Agreement
               Attachment D3      Amendment to List of Equipment and Software
               Exhibit E          New Century Warranty
               Exhibit F          Serialization
               Attachment F1      Serialization Requirements for Supplier
               Exhibit G          Service and Support
               Attachment G1      Support Flow Diagram
               Attachment G2      Support Services Fees
               Attachment G3      Train-The-Trainer Program Outline
               Exhibit H          PCN Discontinuance and Obsolescence Procedure
               Exhibit I          Escrow Agreement
               Attachment I1      Technical Information Listing
               Attachment I2      Demand Notice
               Exhibit J          Alcatel Authorized Subcontractors

IN WITNESS WHEREOF, the parties have caused their duly authorized
representatives to execute and deliver this Agreement as of the Effective Date.

Pinnacle Data Systems, Inc.                     Alcatel USA Sourcing, L.P.

                                                                  Page 17 of 100

<PAGE>

                                       By:      Alcatel USA GP, Inc.
                                                General Partner
By:      ____________________________  By:      ________________________________

Title:   ____________________________  Title:   ________________________________

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

                                                                  Page 18 of 100

<PAGE>

                                  EXHIBIT A
                                  ---------

(1)  Pricing
     -------

The price for the parts listed below shall be for a period of one (1) year
ending June 30th, 2001. This is an indeterminate quantity Agreement Alcatel is
in no way obligated to order any minimum quantity, service, or dollar amount.

The Specification agreed to between Supplier and Alcatel is attached hereto and
made a part hereof as Exhibit A1.

Milestones delivery dates to between Alcatel and supplier is attached hereto and
made a part hereof as Exhibit A2

Supplier provided Kanban parts and procedures is attached hereto and made a part
hereof as Exhibit A3.

<TABLE>
<CAPTION>
P/N                        Description                                  Pricing
---                        -----------                                  -------
<S>                        <C>                                          <C>
PDS-SPALCT516              Customized AXmp Rackmount Solution            Initial Qty. 1-10 (already delivered)
(Production Units)         Includes:                                    $60,000.00
                           Alcatel Enclosure w/ 450W P.S. & Cabling      After intial quantity
                           Ultra AXmp Motherboard                       $46,746.00
                           Alarming Features
                           (4) 400 MHz CPU Modules w/ 4 MB Cache
                           4096 MB Memory (16 x 256 MB Memory DIMMs)
                           (2) 9.1 GB SCSI Hard Drives
                           (2) Removable Hard Drive Kits
                           4mm 12-24 GB DAT Drive (STD22400NSB)
                           32X Plextor SCSI CD-ROM
                           (4) Solaris 2.5.1 RTU Only
                           Solaris 2.5.1 Pre-loaded
                           One year return to depot warranty
</TABLE>

<TABLE>
<CAPTION>
P/N                              Description                                                Pricing
---                              -----------                                                -------
<S>                  <C>                                                             <C>
PDS-SPALCT528          Intelligent Processor Unit (IPU) -Configuration 1             1-5    $21,830
                       Includes:                                                     6-15   $21,321
                       Alcatel Enclosure w/ 600W PS & Cabling w/ Alarm card          16-25  $20,845
                       & 6U (6) Slot Modified CompactPCI Backplane                   26-100 $20,389
                       Sparc Engine Axmp+C Motherboard
                       (1)  400 MHz CPU module w/4mb Cache
                     (8)  64 MB Memory DIMM (Total of 512 MB)
                       (2)  18.1 GB LVD 68-Pin SCSI 7,200 RPM Hard Drive
                       40/17X 68-Pin SCSI CD-ROM
                       12-24 GB 50-Pin DDS-3 4mm Tape Drive
                       Solaris 2.6 Release 5/98 Pre-Loaded
                      Solaris 2.6 (1-4) CPU RTU Server License, 5 User License, Media Kit
                      One Year Return-To-Depot Warranty

P/N                              Description                                                Pricing
---                              -----------                                                -------
PDS-SPALCT529          Intelligent Processor Unit (IPU) -Configuration 2             1-5    $33,264
                       Includes:                                                     6-15   $32,462
                       Alcatel Enclosure w/ 600W PS & Cabling w/ Alarm card          16-25  $31,700
                       & 6U (6) Slot Modified CompactPCI Backplane                   26-100 $30,976
                       Sparc Engine Axmp+C Motherboard
                       (2) 400 MHz CPU module w/4mb Cache
                     (8)  256 MB Memory DIMM (Total of 2048 MB)
                       (2) 18.1 GB LVD 68-Pin SCSI 7,200 RPM Hard Drive
                       (2) 6U CompactPCI Quad Ethernet Dual SCSI Board
                       40/17X 68-Pin SCSI CD-ROM
</TABLE>

                                                                  Page 19 of 100

<PAGE>

                       12-24 GB 50-Pin DDS-3 4mm Tape Drive
                       Solaris 2.6 Release 5/98 Pre-Loaded
                       Solaris 2.6 (1-4) CPU RTU Server License, 5 User License,
                          Media Kit
                       One Year Return-To-Depot Warranty

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

P/N                              Description                                                Pricing
---                              -----------                                                -------
PDS-SPALCT531          Intelligent Processor Unit (IPU) -Configuration 4             1-5    $47,184
                       Includes:                                                     6-15   $46,020
                       Alcatel Enclosure w/ 600W PS & Cabling w/ Alarm card          16-25  $44,916
                       & 6U (6) Slot Modified CompactPCI Backplane                   26-100 $43,865
                       Sparc Engine Axmp+C Motherboard
                       (4)  400 MHz CPU module w/4mb Cache
                     (16)  256 MB Memory DIMM (Total of 4096 MB)
                       (2)  18.1 GB LVD 68-Pin SCSI 7,200 RPM Hard Drive
                       40/17X 68-Pin SCSI CD-ROM
                       12-24 GB 50-Pin DDS-3 4mm Tape Drive
                       Solaris 2.6 Release 5/98 Pre-Loaded
                       Solaris 2.6 (1-4) CPU RTU Server License, 5 User License, Media Kit
                       One Year Return-To-Depot Warranty

P/N                              Description                                                Pricing
---                              -----------                                                -------
PDS-SPALCT532          Intelligent Processor Unit (IPU) -Configuration 5             1-5    $43,582
                       Includes:                                                     6-15   $42,511
                       Alcatel Enclosure w/ 600W PS & Cabling w/ Alarm card          16-25  $41,495
                       & 6U (6) Slot Modified CompactPCI Backplane                   26-100 $40,529
                       Sparc Engine Axmp+C Motherboard
                       (4)  400 MHz CPU module w/4mb Cache
                     (8)  256 MB Memory DIMM (Total of 2048 MB)
                       (2) 18.1 GB LVD 68-Pin SCSI 7,200 RPM Hard Drive
                       (2)  6U CompactPCI Quad Ethernet Dual SCSI Board
                       40/17X 68-Pin SCSI CD-ROM
                       12-24 GB 50-Pin DDS-3 4mm Tape Drive
                       Solaris 2.6 Release 5/98 Pre-Loaded
                       Solaris 2.6 (1-4) CPU RTU Server License, 5 User License, Media Kit
                       One Year Return-To-Depot Warranty

P/N                              Description                                                Pricing
---                              -----------                                                -------
PDS-SPALCT533          Intelligent Processor Unit (IPU) -Configuration 6             1-5    $51,264
</TABLE>

                                                                  Page 20 of 100

<PAGE>

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

<TABLE>
<CAPTION>
P/N                              Description                                                Pricing
---                              -----------                                                -------
<S>                  <C>                                                             <C>
PDS-SPALCT534          Intelligent Processor Unit (IPU) -Configuration 7             1-5    $39,502
                       Includes:                                                     6-15   $38,537
                       Alcatel Enclosure w/ 600W PS & Cabling w/ Alarm card          16-25  $37,622
                       & 6U (6) Slot Modified CompactPCI Backplane                   26-100 $36,752
                       Sparc Engine Axmp+C Motherboard
                       (4) 400 MHz CPU module w/4mb Cache
                     (8) 256 MB Memory DIMM (Total of 2048 MB)
                       (2) 18.1 GB LVD 68-Pin SCSI 7,200 RPM Hard Drive
                       40/17X 68-Pin SCSI CD-ROM
                       12-24 GB 50-Pin DDS-3 4mm Tape Drive
                       Solaris 2.6 Release 5/98 Pre-Loaded
                       Solaris 2.6 (1-4) CPU RTU Server License, 5 User License, Media Kit
                       One Year Return-To-Depot Warranty

P/N                              Description                                                Pricing
---                              -----------                                                -------
PDS-SPALCT526          Intelligent Processor Unit (IPU) -Configuration 8             1-5    $41,200
                       Includes:                                                     6-15   $40,191
                       Alcatel Enclosure w/ 600W PS & Cabling w/ Alarm card          16-25  $39,234
                       & 6U (6) Slot Modified CompactPCI Backplane                   26-100 $38,324
                       Sparc Engine Axmp+C Motherboard
                       (4)  400 MHz CPU module w/4mb Cache
                     (8)  256 MB Memory DIMM (Total of 2048 MB)
                       (2)  9.1 GB LVD 68-Pin SCSI 7,200 RPM Hard Drive
                       40/17X 68-Pin SCSI CD-ROM
                       12-24 GB 50-Pin DDS-3 4mm Tape Drive
                       Solaris 2.6 Release 5/98 Pre-Loaded
                       Solaris 2.6 (1-4) CPU RTU Server License, 5 User License, Media Kit
                       One Year Return-To-Depot Warranty
</TABLE>

<TABLE>
<CAPTION>
Service Options
<S>                                                                                     <C>
Service Uplift Options (monthly pricing based on one year service contract)
   Pinnacle Care (5 day repair)                                                         $   151.00
   Pinnacle Care+ (advanced exchange)                                                   $   301.00
   Pre-loaded Customer Software (per unit, delivered via CD-ROM or FTP Site)            $   125.00
</TABLE>

Lead Time with 6 months forecast    4- 6 Weeks ARO
Lead Time with no forecast          9-12 weeks ARO

Hardware Options (FRU)

                                                                  Page 21 of 100

<PAGE>

<TABLE>
<S>                        <C>                                                          <C>
PDS880-8100                AxmpC Motherboard                                            $ 7,800.00
PDS880-8101                Power Supply Assy                                            $ 1,106.00
PDS880-8102                Alarm Board                                                  $   395.00
PDS880-8108                256 MB Memory DIMM                                           $   833.00
PDS880-8109                Chassis                                                      $ 2,933.00
SME501-5500                   400 MHz Processor w/ 4MB Cache                            $ 5,706.00
PDS880-8121                128 MB Memory DIMM                                           $   344.00
PDS880-8103                32X CD-ROM Assy module                                       $   140.00
PDS880-8105                4mm 12-24 GB Tape Drive Assy module                          $  1079.00
PDS880-8104                Hard Drive Assy module)9.1 GB                                $   457.00
PDS880-8106                Fan Tray Assembly Assy module                                $   120.00
PDS880-8107                Air Filter Assembly                                          $   100.00
PDS501-4849                300 MHz Proc. module w/ 2MB Cache                            $ 2,600.00
PDS880-8120                HDD Assembly, 18GB                                           $   812.00
PDS880-8112                Intraserver cPCI Card (Quad Ethernet Dual SCSI)              $ 1,912.00
PDS600-3810                Solaris 2.5.1 RTU only                                       $   476.00
PDS600-3904                Solaris 2.6 RTU only                                         $   242.00
PDS600-3920                Solaris 7 RTU only                                           $   210.00
</TABLE>

                                                                  Page 22 of 100

<PAGE>

                                ATTACHMENT A1

                              iICE Box Assembly,

        SPARC Ultra AXmp, 4GB Memory, 2 Disks, 1 Tape, 1 CDROM, 4 cPCI
--------------------------------------------------------------------------------

Abstract:

             This specification establishes the requirements for an Intelligent
             Processor Unit (IPU) meeting the operational, environmental, and
             regulatory requirements of the Central Office (CO).

--------------------------------------------------------------------------------
   Keywords:

--------------------------------------------------------------------------------
   Location:          Richardson Documentation/Data Management (DDM under
                      applicable part number.)

<TABLE>
----------------------------------------------------------------------------------------------------------------------------------
   <S>    <C>      <C>                                          <C>                                    <C>
   1F     000705        Add Alcatel part numbers                                                       Eliot Johnston

----------------------------------------------------------------------------------------------------------------------------------
   1E     000620    Misc. corrections, add PDSI part                                                   Eliot Johnston
                   numbers, convert to Alcatel format

----------------------------------------------------------------------------------------------------------------------------------
   1D     991217   Re-write External Resets Section                                                    Eliot Johnston
                                   3.5

----------------------------------------------------------------------------------------------------------------------------------
   1C     991214   Add alarm requirements, Section                                                    Eliot Johnston
                                   3.4
----------------------------------------------------------------------------------------------------------------------------------
   1B     991117   Regulatory Standards, Diff SCSI                                                     Eliot Johnston

----------------------------------------------------------------------------------------------------------------------------------
   1A     990803      Re-write to make generic                                                         Eliot Johnston

----------------------------------------------------------------------------------------------------------------------------------
   00     990702          Initial Draft                           Manuel Martinez                      Eliot Johnston

----------------------------------------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------------------------------------
   ED     DATE              CHANGE NOTE                         APPRAISAL AUTHORITY                    ORIGINATOR

----------------------------------------------------------------------------------------------------------------------------------

                                                              iICE Box Assembly,
                                                              SPARC Ultra AXmp, 4GB Memory, 2 Disks, 1 Tape, 1
                                                              CDROM, 4 cPCI.
</TABLE>

                                                                  Page 23 of 100

<PAGE>

                              TABLE OF CONTENTS:

<TABLE>
<S>                                                             <C>
Scope.........................................................  28
      Acronyms................................................  28

Applicable documents..........................................  29
      Industry................................................  29
      Military................................................  29
      Telcordia  (Formally Bell Communications Research)......  30
      Alcatel USA.............................................  31

Requirements..................................................  32
      General.................................................  32
           Order of Precedence................................  32
           Approved Suppliers.................................  32
           Characteristics....................................  33
           Special or Critical Requirements...................  33
      General IPU Configuration...............................  34
           Hardware...........................................  34
         Processor Module.....................................  35
         Memory Modules.......................................  35
         SCSI Devices.........................................  36
            Hard Disk Drives..................................  36
            Tape Drive........................................  37
            CDROM Drive.......................................  37
         Compact PCI Cards....................................  38
           Software...........................................  39
         Operating System.....................................  39
         Manufacturer Specific Software.......................  39
           Disk Partitioning..................................  39
      Electrical Requirements.................................  40
           Input Power........................................  40
           Internal Power Capacity............................  40
           Grounding..........................................  41
           Circuit Breakers...................................  41
      Alarms..................................................  42
           Fan Alarm..........................................  42
           Power Input / Breaker Fail Alarm...................  42
           Power Output Fail Alarm............................  43
         Out Of Tolerance Levels..............................  43
           Processor Fail Alarm...............................  43
           Alarm Board Fail Alarm.............................  44
           Programmable Time Intervals........................  44
         Standby-to-Active....................................  44
         Processor Heartbeat Check............................  44
         Reset Delay Time.....................................  44
      External Resets.........................................  45
           Push Button Resets.................................  45
         System Reset.........................................  45
         Alarm Card Reset.....................................  45
           External Reset ....................................  45
</TABLE>

                                                                  Page 24 of 100

<PAGE>

<TABLE>
<S>                                                             <C>
           Reset Protocol.....................................  46
      Displays................................................  47
           Lamp Test..........................................  47
      Physical Interface Requirements.........................  48
           Power..............................................  48
           Test Points........................................  48
           Alarms and External Resets.........................  49
           Serial Ports.......................................  50
           LAN Ports..........................................  50
           SCSI Ports.........................................  51
      Optional Jumpers/Terminators............................  52
           Hard Disk Drive Configuration......................  52
           Compact PCI Cards..................................  52
      Mechanical Requirements.................................  53
           Dimensions.........................................  53
           Materials..........................................  53
           Finishes...........................................  53
           Marking............................................  54
           Air Flow...........................................  54
      Environmental Requirements..............................  55
      Electromagnetic Compatibility...........................  56
      Product Safety..........................................  57
      Product Change Notice...................................  58
      Data Requirements.......................................  58
      Documentation...........................................  58

Quality Assurance Provisions..................................  59
      General Requirements....................................  59
           Qualification requirements.........................  59
           Qualification failure..............................  59
           Qualification data.................................  59
           Use of vendor supplied data........................  59
           Re-qualification...................................  60
           Periodic re-qualification..........................  60
           Flammability requirements..........................  60
      Quality.................................................  61
           Quality Program....................................  61
           Workmanship........................................  61
           Quality Inspection Plans...........................  61
           Quality Reports....................................  61
           Quality Audits.....................................  61
      Reliability.............................................  62
           Required MTBF......................................  62
           Design Reviews.....................................  62
           Component Parts....................................  62
           Aluminum Electrolytic Capacitors...................  62
           Potentiometers.....................................  62
           Derating Guidelines................................  63
           Burn-in............................................  63
           EMI................................................  63
      Alcatel Engineering Approval............................  64
      Safety Agency Approval..................................  64
</TABLE>

                                                                  Page 25 of 100

<PAGE>

<TABLE>
<S>                                                             <C>
      Warranty................................................  64

PACKAGING.....................................................  65
      Packaging Requirements..................................  65
      Shielding Material......................................  65
      Anti-Static Material....................................  65
      Unit Container Marking..................................  65
      Exterior Shipping Container Marking.....................  65

Notes.........................................................  66
      Handling  ..............................................  66
      Return of defective devices.............................  66
</TABLE>

                                                                  Page 26 of 100

<PAGE>

<TABLE>
<S>                                                                       <C>
                               LIST OF FIGURES:

Figure 1.  Mechanical Outline and Dimensions..............................67
Figure 2.  Front Panel....................................................68
Figure 3.  Rear Panel.....................................................68
Figure 4.  Recommended Reset Circuit......................................69

                               LIST OF TABLES:

Table 1.  Major IPU Components............................................34
Table 2.  Approved Processor Modules......................................35
Table 3.  Approved Memory DIMMs...........................................35
Table 4.  SCSI Device IDs.................................................36
Table 5.  Approved Hard Disk Drives.......................................36
Table 6.  Approved Tape Drives............................................37
Table 7.  Approved CDROM Drives...........................................37
Table 8.  Approved cPCI Cards.............................................38
Table 9.  Included Operating System Software..............................39
Table 10.  Manufacturer Specific Software.................................39
Table 11.  DC Voltage Out of Tolerance Levels.............................43
Table 12.  Serial Port Connections........................................50
Table 13.  Hard Disk Drive Configuration..................................52
Table 14.  Environmental Requirements.....................................55
Table 15.  Electromagnetic Compatibility (EMC)............................56
Table 16.  Product Safety Requirements....................................57
</TABLE>

                                                                  Page 27 of 100

<PAGE>

Scope

             This specification establishes the requirements for an Intelligent
             Processor Unit (IPU) meeting the operational, environmental, and
             regulatory requirements of the Central Office (CO). The unit
             consists of one (1) 24" rack mount chassis, one (1) SPARC Ultra
             AXmp type motherboard, up to four (4) UltraSPARC II CPU modules, up
             to 4GB DIMM memory, one (1) tape drive, two (2) disk drives, one
             (1) CDROM, four (4) compact PCI slots, alarm circuitry, as well as,
             the necessary power and cooling subsystems.

ACRONYMS

<TABLE>
<S>                <C>
Amp(s)             Ampere(s)
ANSI               American National Standards Institute
AVL                Approved Vendor List
AWG                American Wire Gauge
CDROM              Compact Disk Read Only Memory
CO                 Central Office
cPCI               Compact PCI
CPU                Central Processor Unit
CSA                Canadian Standards Association
DC                 Direct Current
DSC                Alcatel USA  (Formally DSC Communication Corporation)
EIA                Electronic Industries Association
EMI                ElectroMagnetic Interference
ESD                ElectroStatic Discharge
FCC                Federal Communications Commission
GB                 GigaByte
ID                 IDentification
IPU                Intelligent Processor Unit
MTBF               Mean Time Between Failure
PCI                Peripheral Component Interconnect
PDSI               Pinnacle Data Systems Inc.
PN                 Part Number
SCSI               Small Computer Systems Interface
SIMM               Single Inline Memory Module
SPARC              Scalable Processor Architecture Reduced instruction set Computer
SUN                SUN Microsystems Inc.
TTL                Transistor - Transistor Logic
UL                 Underwriters Laboratory
V                  Volts
VDC                Volts Direct Current
</TABLE>

                                                                  Page 28 of 100

<PAGE>

Applicable documents

             The following documents and specifications form a part of this
             specification to the extent specified herein.

INDUSTRY

<TABLE>
<S>               <C>
ANSI/EIA          Rack, Panels, and Associated Equipment
                  STD310

EIA IS-5-A        Packaging material standards for ESD sensitive items

UL 94             Test for Flammability of Plastics Material for Parts in Devices and Appliances

UL 1950           Standard for Safety of Information Technology Equipment, 3rd edition July 28, 1995

CSA 950           CAN/CSA-C22.2 No. 950-95, Standard for Safety of  Information Technology
                  Equipment, 3rd edition July 28, 1995

CSA Standard C108.8-M1983 REV 1/1/1988

Canadian Radio Interference Regulation Amendment Dated 9/15/88, CS-3

FCC Rules and Regulations, Part 15, Subpart B, Class A Radio Frequency Devices, July 1981

IPC-610B           Workmanship Standards for Electronic Equipment
</TABLE>

MILITARY

<TABLE>
<S>             <C>
MIL-STD-883     Test Methods and Procedures for Microelectronics

MIL-STD-130     Military Standard Identification Marking of U.S. Military Property

MIL-F-14072     Finishes for Ground Electronic Equipment

MIL-STD-889     Dissimilar Metals
</TABLE>

                                                                  Page 29 of 100

<PAGE>

TELCORDIA  (FORMALLY BELL COMMUNICATIONS RESEARCH)

<TABLE>
<S>                        <C>
GR-78-CORE                 Generic Requirements for the Physical Design and Manufacture of
                           Telecommunications Products and Equipment, Issue 1, September 1997

TR-332                     Reliability Prediction Procedure, Issue 6, September 1997

TR-NWT-000357              Generic Requirements for Assuring the Reliability of Components used
                           in Telecommunications Equipment, Issue 2, December 1993

GR-63-CORE                 Network Equipment Building Standard, Issue 1, October 1995

TR-NWT-000029              Service Control Point Node Generic Requirements, Issue 1, September
                           1990

TR-NWT-000284              Reliability and Quality Switching Systems Generic Requirements, Issue
                           2, December 1993

GR-1252-CORE               Quality System Generic Requirements for Hardware, Issue 1, May 1995

GR-1089-CORE               Electromagnetic Compatibility and Electrical Safety - Generic Criteria
                           for Network Telecommunications Equipment, Issue 2, November 1997
</TABLE>

                                                                  Page 30 of 100

<PAGE>

ALCATEL USA

<TABLE>
<S>                      <C>
                         Label, Software Shutdown
                         Label, Servicing
003-6601-014             DSC Packaging Specification
004-6100-007             Paint, Polyurethane, Black, Textured
004-6100-013             Process Specification, Conductive Coating
004-8003-001             DSC Derating Guidelines
004-8003-100             DSC Workmanship Standards Manual 1 - PCB Assembly Requirements
004-8208-192             Supplier Quality Systems Requirements Specification
007-0000-071             Approved Vendor List (AVL) Procedure
007-0000-115             Supplier Product Change Notice & Discontinuance (Obsolescence) Notice
                         Procedure
007-0000-130             Supplier Product Change Notice Procedure
153-3002-001             Label, Silver, Adhesive Backed, Serial Number
259-0000-000             General Specification for OEM Equipment
400-0002-179             Label, Caution, Power, Disk Drive
8BD 0000 1000 QRZZA      Quality Manual, Revision 6, August 1999
3EM 04772 xxxx UDZZA     Specific configurations
</TABLE>

                                                                  Page 31 of 100

<PAGE>

Requirements

GENERAL

             The IPU is a highly reliable, SPARC based processing platform that
             simultaneously supports multiple database-related Intelligent
             Network services, intended to support a large subscriber base and
             to provide a high number of Transactions Per Second (TPS).

             All major IPU components are Field Replaceable Units (FRUs) from
             the front with the exception of the cPCI cards. The cPCI cards are
             accessible from the rear of the IPU.

             The IPU consists of a SPARC based motherboard and CPU(s) along with
             the necessary memory, disks, tape drive, and CDROM drive. In
             addition to these basic compute and storage needs, the necessary
             cooling and alarming are designed in to meet the environmental,
             operational, and regulatory requirements of a CO.

             The FAST IPU is designed for deployment in N+1 configurations and
             is not considered to be "Fault Tolerant".

Order of Precedence

             In the event of a conflict between the text of this specification
             and the references cited herein, the precedence in which the
             requirements shall govern, in descending order, is as follows:

                 A.  This specification.
                 B.  Documents referenced in the Applicable documents Section of
                     this document utilizing the revision in effect at the time
                     of placement of the Alcatel purchase order.

Approved Suppliers

             Parts furnished under this specification shall be purchased from
             suppliers in accordance with the Approved Vendor List Procedure,
             007-0000-071.

             Supplier names and part numbers listed in this document are for
             reference only, unless they have no associated Alcatel part number.

                                                                  Page 32 of 100

<PAGE>

Characteristics

             The electrical and mechanical characteristics shall be in
             accordance with those published by the approved manufacturer for
             the device or part specified herein and as contained in the
             attachments. A change in the published information, made after the
             date of listing on the AVL, is considered a change of process and
             is subject to the same notification requirements as defined in the
             Supplier Product Change Notice Procedure, 007-0000-130 or
             007-0000-115.

Special or Critical Requirements

             In the event a special or critical requirement is identified, that
             requirement will be noted and documented herein.

             The manufacturer shall supply a detailed specification for each FRU
             assembly to Alcatel USA. This specification shall include, as a
             minimum:
                 1.  Reliability report
                 2.  Schematic
                 3.  Functional Description
                 4.  Parts List
                 5.  Fabrication Drawing
                 6.  Assembly Drawing
                 7.  Test Specification
                 8.  Qualification Test Report

                                                                  Page 33 of 100

<PAGE>

GENERAL IPU CONFIGURATION

Hardware

             IPUs are configured for a 24-inch rack mount chassis. This section
             details all of the possible subassemblies that can be used within
             the chassis. The exact configuration of the IPU will be handled by
             individual Alcatel USA part numbers.
             See Alcatel specification 3EM 04772 xxxx UDZZA for the specific
             configurations.

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------
<S>                 <C>                <C>                        <C>                                         <C>
Manuf.              Manuf.  PN         Alcatel PN                 Description                                   Qty
-----------------------------------------------------------------------------------------------------------------------
PDSI                880-8109          3EM 04662 AA                4U Rackmount Enclosure Assembly                1
-----------------------------------------------------------------------------------------------------------------------
PDSI                880-8100          3EM 04652 AA                AXmp+C Main Motherboard Assembly               1
-----------------------------------------------------------------------------------------------------------------------
PDSI                *                 *                           UltraSPARC II processor module              Up to 4
-----------------------------------------------------------------------------------------------------------------------
PDSI                *                 *                           Kit Memory DIMMs                             4 or 8
-----------------------------------------------------------------------------------------------------------------------
PDSI                *                 *                           Hard Disk Drive Assembly                     1 or 2
-----------------------------------------------------------------------------------------------------------------------
PDSI                *                 *                           DAT Tape Drive Assembly                        1
-----------------------------------------------------------------------------------------------------------------------
PDSI                *                 *                           CDROM Drive Assembly                           1
-----------------------------------------------------------------------------------------------------------------------
PDSI                880-8101          3EM 04621 AA                Power Supply Assembly                          1
-----------------------------------------------------------------------------------------------------------------------
PDSI                270-8115          3EM 04621 AB                Power Supply Air Deflector Assembly            1
-----------------------------------------------------------------------------------------------------------------------
PDSI                880-8102          3EM 04549 AA                Alarm Assembly                                 1
-----------------------------------------------------------------------------------------------------------------------
PDSI                880-8106          3EM 04653 AA                Cooling Fan Assembly                           1
-----------------------------------------------------------------------------------------------------------------------
PDSI                880-8107          3EM 04654 AA                Air Filter Assembly                            1
-----------------------------------------------------------------------------------------------------------------------
</TABLE>
   *  see the tables in the following paragraphs

                          Table 1. Major IPU Components

                                                                  Page 34 of 100

<PAGE>

PROCESSOR MODULE

             The motherboard shall be capable of accommodating the UltraSPARC II
             family of processor modules.

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------
Manuf.           Manuf. PN                 Alcatel PN             Description
------------------------------------------------------------------------------------------------------------
<S>              <C>                       <C>                    <C>
PDSI             501-4849                  3EM 04650 AA           UltraSPARC II processor module, 300MHz,
                                                                  2MB cache
------------------------------------------------------------------------------------------------------------
SUN              TBD                       TBD                    UltraSPARC II processor module, 400MHz,
                                                                  2MB cache
------------------------------------------------------------------------------------------------------------
PDSI             501-5420                  3EM 04650 AB           UltraSPARC II processor module, 400MHz,
                                                                  4MB cache
------------------------------------------------------------------------------------------------------------
</TABLE>

                       Table 2. Approved Processor Modules

MEMORY MODULES

             The system shall have two banks of memory. Each bank shall support
             8 DIMM memory modules, for a total of 16 memory modules. The system
             minimum memory configuration is 512MB (eight 64MB). The maximum
             memory configuration is 4096MB (sixteen 256MB).

             Note:    The 64MB DIMMs are not recommended, thus no part number
             information is given here.

<TABLE>
------------------------------------------------------------------------------------------------------------
<S>             <C>               <C>                             <C>
Manuf.          Manuf. PN         Alcatel PN                      Description
------------------------------------------------------------------------------------------------------------
PDSI            880-8121          3EM 04651 AB                    256MB DIMM Memory Kit (two 128MB
                                                                  sticks)
------------------------------------------------------------------------------------------------------------
PDSI            880-8108          3EM 04651 AA                    512MB DIMM Memory Kit (two 256MB
                                                                  sticks)
------------------------------------------------------------------------------------------------------------
</TABLE>

                         Table 3. Approved Memory DIMMs

                                                                  Page 35 of 100

<PAGE>

SCSI DEVICES

             The SCSI devices shall be installed in the chassis as shown in
             Figure 2. All devices shall be of type Ultra Wide SCSI (16 bit,
             40MB/s). The SCSI IDs shall be set according to the following
             table. Termination resistors shall not be installed on any of the
             SCSI devices.

                      --------------------------------------------
                       SCSI Device                       SCSI ID
                      --------------------------------------------
                       Disk 1  (boot)                       0
                      --------------------------------------------
                       Disk 2  (application)                1
                      --------------------------------------------
                       Tape                                 4
                      --------------------------------------------
                       CDROM                                6
                      --------------------------------------------

                              Table 4. SCSI Device IDs

             The SCSI IDs shall be easily set using a rotary switch located on
             the shuttle assembly.

Hard Disk Drives

             The IPU shall use SCSI hard disk drive(s) that have passed the
             required Alcatel USA qualification process and shall be capable of
             no less than 9GB in storage capacity. A minimum of two shuttle bays
             shall be provided exclusively for the use of disk storage. The hard
             disk shall be mounted on a shuttle and removable from the front of
             the IPU for ease of servicing. The disk drives shall be capable of
             working with the Solaris operating system from SUN.

<TABLE>
---------------------------------------------------------------------------------------------------------------
<S>                     <C>               <C>                          <C>
Manufacturer            Manuf. PN         Alcatel PN                   Description
---------------------------------------------------------------------------------------------------------------
PDSI                    880-8104          3EM 04622 AB                 9GB SCSI Disk Drive Assembly
---------------------------------------------------------------------------------------------------------------
PDSI                    880-8120          3EM 04622 AA                 18GB SCSI Disk Drive Assembly
---------------------------------------------------------------------------------------------------------------
</TABLE>

                       Table 5. Approved Hard Disk Drives

                                                                  Page 36 of 100

<PAGE>

Tape Drive

             The IPU shall optionally be equipped with a SCSI 4mm DDS-3 tape
             drive that has passed the required Alcatel USA qualification
             process and shall be capable of no less than 8GB in storage
             capacity. The tape drive shall be mounted on a shuttle and
             removable from the front of the IPU for ease of servicing. The tape
             drive shall be capable of working with the Solaris operating system
             from SUN.

-------------------------------------------------------------------------------
Manufacturer         Manuf. PN         Alcatel PN          Description
-------------------------------------------------------------------------------
PDSI                 880-8105          3EM 04640 AA        24GB DDS3 DAT Tape
                                                           Drive Assembly
-------------------------------------------------------------------------------

                          Table 6. Approved Tape Drives

CDROM Drive

             The IPU shall optionally be equipped with a SCSI CDROM drive that
             has passed the required Alcatel USA qualification process. The
             CDROM drive shall be mounted on a shuttle and removable from the
             front of the IPU for ease of servicing. The CDROM drive shall be
             capable of working with the Solaris operating system from SUN.

-------------------------------------------------------------------------------
Manuf.          Manuf. PN             Alcatel PN             Description
-------------------------------------------------------------------------------
PDSI            880-8103              3EM 04644 AA           40X CD-ROM
                                                             Drive Assembly
-------------------------------------------------------------------------------

                         Table 7. Approved CDROM Drives

                                                                  Page 37 of 100

<PAGE>

COMPACT PCI CARDS

             The IPU shall optionally be equipped with up to four (4) cPCI cards
             that have passed the required Alcatel USA qualification process.
             The cPCI cards are removable from the rear of the IPU. Each card
             shall be supplied with the corresponding driver software. See
             Figure 3 for the location of the cPCI slots.

-------------------------------------------------------------------------------
Manuf.         Manuf. PN         Alcatel PN             Description
-------------------------------------------------------------------------------
PDSI           880-8112          3EM 04661 AA           Intraserver Quad
                                                        Ethernet, Dual SCSI
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------

NOTE: The PDSI cPCI backplane accommodates 5 cPCI cards.  The Intraserver card
occupies the first slot leaving 4 slots available.

                          Table 8. Approved cPCI Cards

                                                                  Page 38 of 100

<PAGE>

Software

OPERATING SYSTEM

             IPUs are supported with standard SUN Solarus operating system
             software products. One of the Run Time Licenses for the following
             software packages listed below, are to be supplied with each unit.
             The version shall be indicated on the Alcatel purchase order.

-------------------------------------------------------------------------------
Manuf.         Manuf. PN         Alcatel PN         Description
-------------------------------------------------------------------------------
PDSI           600-3811          TBD                Solaris release 2.5.1 with
                                                    patches (Y2K)
-------------------------------------------------------------------------------
PDSI           600-3904          TBD                Solaris release 2.6
-------------------------------------------------------------------------------
PDSI           600-3920          TBD                Solaris release 7
-------------------------------------------------------------------------------

                   Table 9. Included Operating System Software

MANUFACTURER SPECIFIC SOFTWARE

             The manufacturer shall supply all driver and related software for
             all parts associated with the device which are not part of the
             Solaris software. These can include but are not limited by,
             specific alarm software, specific cPCI card driver software.

-------------------------------------------------------------------------------
Manuf.         Manuf. PN         Alcatel PN         Description
-------------------------------------------------------------------------------
PDSI           600-3926          TBD                PDSI patches and alarm
                                                    software
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------

                    Table 10. Manufacturer Specific Software

Disk Partitioning

             The disk drive partitioning is subject to the software load to be
             installed on the IPU. The software loading procedure for each load
             will list the partitioning information for each of the disk drives
             included in the IPU.

                                                                  Page 39 of 100

<PAGE>

ELECTRICAL REQUIREMENTS

Input Power

             The IPU shall have two external -48VDC inputs for power sources.
             The IPU shall be able to operate over an input range from -42 to
             -56 volts. Even though the primary inputs may feed into a single
             power supply, the inputs must be isolated to prevent a failure of
             one input upon the loss of the other. In normal operation, the two
             power sources shall operate in a load sharing mode. Upon the
             failure of one power input, the other power input shall assume the
             entire load for the chassis.

             Each of the two power inputs shall be located in separate
             connectors located on the back of the IPU, see Figure 3.

             Isolated test points shall be placed on the back of the IPU to
             measure the difference in voltage between the two power inputs and
             the point where the two sources are internally combined to feed the
             single power supply, see Figure 3.

Internal Power Capacity

             The IPU power supply shall be able to supply all of the
             subassemblies with the proper voltages and current that each
             subassembly requires. Sufficient over-capacity should be available
             for future growth of the IPU peripherals.

                                                                  Page 40 of 100

<PAGE>

Grounding

             Logic ground, chassis ground, and the -48V return shall be isolated
             from each other. Peripherals such as disk drives that have metal
             enclosures connected to logic ground shall be isolated from the
             disk shuttles to prevent a connection to frame ground.

             The grounding terminal for logic ground shall be located at the
             center pin of both of the -48V power entry connectors, see Figure
             3.

             The grounding terminal for each -48V return shall be located at the
             third pin of both of the -48V power entry connectors, see Figure 3.

             The IPU shall have a chassis (frame) ground terminal located on the
             back of the IPU. This terminal shall have an 12 inch long, green
             #14 AWG wire attached terminating with a #10 ring lug (AMP part
             number 34161 or equivalent).

Circuit Breakers

             Each -48V power input shall have a slow trip circuit breaker with a
             capacity of 20 Amps. The breakers shall have a toggle switch which
             will allow the breakers to be opened manually, see Figure 3. The
             breakers will indicate through a separate pair of contacts if the
             circuit breaker has tripped. The breaker sense contacts shall be
             normally closed when the breakers are conducting current. When
             tripped, the breaker sense line shall show an open state. (Airpax
             IEL series with auxiliary switch or equivalent with 80VDC
             capability shall be used.) A switch guard is required that will
             prevent accidental movement of the breaker on/off switch by
             personnel.

                                                                  Page 41 of 100

<PAGE>

ALARMS

             NOTE:  THERE SHALL BE NO AUDIBLE ALARM ON THE IPU.

             The IPU shall provide dry contact closure interfaces for the
             following alarms.

                1.    Fan alarm
                2.    Power Input / Breaker Fail alarm
                3.    Power output Fail alarm
                4.    Processor Fail alarm
                5.    Alarm Board Fail alarm

             The alarms shall be energized to a closed state during normal
             operation. Whenever a failure state occurs, the interface shall
             assume an open state. If input power fails, all alarm contacts
             assume an open state. All alarms shall be placed in a connector
             located on the back of the IPU, see Figure 3.

Fan Alarm

             The fan alarm circuit shall normally remain closed unless a failure
             with one or more of the IPU fans is detected. When a fan failure is
             detected, the fan alarm circuit shall assume an open state. When
             the condition clears, the alarm will automatically reset.

Power Input / Breaker Fail Alarm

             The power input / breaker fail alarm circuit shall normally remain
             closed unless a failure is detected on one or both of the -48V
             inputs, or at a sense point after the diode OR'ing, or on one or
             both of the power breakers. When a power input / breaker failure is
             detected, the power input / breaker fail alarm circuit shall assume
             an open state. When the condition clears, the alarm will
             automatically reset.

                                                                  Page 42 of 100

<PAGE>

Power Output Fail Alarm

             The power output fail alarm circuit shall normally remain closed
             unless a failure or out of tolerance condition is detected on any
             of the internal DC power supply output voltages. When an internal
             power fault or out of tolerance condition is detected, the power
             output fail alarm circuit shall assume an open state. When the
             condition clears, the alarm board circuitry will initiate a restart
             to re-evaluate the alarm conditions. This alarm circuit is intended
             to monitor only the internal IPU power supply.

OUT OF TOLERANCE LEVELS

             Out of tolerance level for the power supply are defined as follows:
-----------------------------------------------------------
DC Voltage             Out of Tolerance Levels
-----------------------------------------------------------
* |3.3|                **** +/-  3%
-----------------------------------------------------------
+3.3                   **** +/-  3%
-----------------------------------------------------------
+5                     **** +/-  5%
-----------------------------------------------------------
-5                     **** +/-  5%
-----------------------------------------------------------
+12                    **** +/-  5%
-----------------------------------------------------------
-12                    **** +/-  5%
-----------------------------------------------------------
** |12|                **** +/-  5%
-----------------------------------------------------------

                  Table 11. DC Voltage Out of Tolerance Levels

Processor Fail Alarm

             The processor fail alarm circuit shall normally remain closed
             unless an abnormal condition within the processor is detected. When
             an abnormal condition is detected, the processor fail alarm shall
             assume an open state. When the condition clears, the alarm will
             automatically reset.

             The alarm card shall have a watchdog timer circuit to monitor
             processor activity. During normal operation, the processor sends a
             heartbeat (keep-alive signal) via a daemon background program to
             the alarm card, preventing the watchdog timer from expiring. When a
             processor failure occurs, the heartbeat signal stops. The alarm
             card will no longer detect the heartbeat signal from the processor,
             and declares the alarm.

/1/ * represents less then
/2/ ** represents greater then
/3/ **** represents greater then equal to

                                                                  Page 43 of 100

<PAGE>

Alarm Board Fail Alarm

             The alarm board fail alarm circuit shall normally remain closed
             unless an failure condition is detected. This can be implemented by
             a watchdog timer which is periodically reset by onboard firmware.
             If the alarm board fails, the watchdog timer will expire and the
             circuit will assume an open state. When the condition clears, the
             alarm will automatically reset.

             Depending upon the implementation, this alarm may not be required.
             For instance, a card containing only alarm sensing with no
             intelligence.

Programmable Time Intervals

             The alarm card shall have three programmable time intervals. The
             time intervals may be set using jumpers or switches. The preferred
             method is via a command from the processor. An ASCII file on disk
             can be used by the processor to set the time intervals.

             The timing of the signals shall be +/-10% or better.

STANDBY-TO-ACTIVE

             The Standby-to-Active (S2A) time is the amount of time that the
             alarm card will remain in the standby state waiting for a CPU
             heartbeat. The settings shall be 10-180 seconds at 10 second
             intervals. The default time shall be 180 seconds.

PROCESSOR HEARTBEAT CHECK

             The Processor Heartbeat Check (PHC) time is the amount of time that
             the alarm card will wait between checking for a received heartbeat
             signal from the processor. The settings shall be 10-60 seconds at
             10 second intervals. The default time shall be 60 seconds.

RESET DELAY TIME

             The Reset Delay Time (RDT) is the amount of time the alarm card
             will wait between the receipt of a reset signal (and issuance of a
             halt signal to the processor) and the application of the hardware
             reset. The setting shall be 30-240 seconds at 30 second intervals.
             The default time shall be 120 seconds.

                                                                  Page 44 of 100

<PAGE>

EXTERNAL RESETS

Push Button Resets

SYSTEM RESET

             The IPU shall contain an external system reset push button switch.
             The location may be either on the front or on the back of the IPU.
             Activating this switch shall cause the reset protocol listed below
             to be executed. A switch guard is required that will prevent
             accidental movement of the system reset push button switch.

ALARM CARD RESET

             The IPU shall contain an alarm card reset push button switch. The
             location may be either on the front or on the back of the IPU.
             Activating this switch shall cause the alarm card to execute a
             power up restart. A switch guard is required that will prevent
             accidental movement of the alarm card reset push button switch.

             Depending upon the implementation, the alarm card reset switch may
             not be required. For instance, a card containing only alarm sensing
             with no intelligence.

External Reset

             The IPU shall provide a means to externally initiate a system reset
             via either of two system reset interfaces located in the same
             connector with the alarms on the back of the IPU. The IPU shall
             reboot, following the reset protocol listed below, whenever a reset
             signal is detected on either of the two reset interfaces.

             Each reset interface has two signals; RESET and RESET RETURN. There
             are currently two different implementation of the driver circuit,
             see Figure 3. The recommendation is to use a TTL compatible input
             with a pullup resistor and logic ground as the interface for each
             of the two reset circuits.

                                                                  Page 45 of 100

<PAGE>

Reset Protocol

             Upon assertion of one of the system reset inputs for 150
             milliseconds or longer, the follow procedure will be performed.

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

                                                                  Page 46 of 100

<PAGE>

DISPLAYS

             The IPU shall provide, as a minimum, the following indicators.  See
             Figure 2.

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

Lamp Test

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

                                                                  Page 47 of 100

<PAGE>

PHYSICAL INTERFACE REQUIREMENTS

             All of the physical interface connections shall be located on the
             rear of the chassis.  See Figure 3.

Power

             Connectors J2-A (-48V "A") and J3-B (-48V "B") are for the DC power
             input and shall be polarized three pin AMP Mate-N-Lok connectors.
             Pin assignments shall be as follows:

                   Pin 1.       -48 volts
                   Pin 2.       Logic ground
                   Pin 3.       -48 volt return

             The following AMP part numbers or equivalent shall be used:
                   Housing               770025-1
                   Crimp Socket          193797-1

             The mating AMP connector part number is:
                   Mating Housing                 770018-1
                   Mating Crimp Pin               193796-1  (for 10 AWG wire)

             Each DC power input shall be protected by a circuit breaker as
             specified in the Circuit Breakers Section.

Test Points

             Isolated test points for each DC power input and for the point
             where the two input sources are combined are available at the back
             of the IPU. Standard test probes may be used.

                                                                  Page 48 of 100

<PAGE>

Alarms and External Resets

             All alarm outputs and the two reset inputs shall be placed in a
             single 15 pin "D" type female connector with 4-40 screw lock
             fasteners. The following AMP part number is currently used as the
             Alcatel mating connector:

                  Mating Connector  AMP PN  747322-3

             The pinout of the Alarm/Reset connector shall be as follows:

    Pin No.      Signal Name
    ------       -----------
       1         Fan Alarm
       2         Fan Alarm Return
       3         Power Input/Breaker Alarm
       4         Power Input/Breaker Alarm Return
       5         Processor Alarm
       6         Processor Alarm Return
       7         Power Output Alarm
       8         Power Output Alarm Return
       9         Alarm Board Failure
       10        Alarm Board Failure Return
       11        Reset 1
       12        Reset 1 Return
       13        Reset 2
       14        Reset 2 Return
       15        No connection

                                                                  Page 49 of 100

<PAGE>

Serial Ports

             The IPU shall have four (4) serial ports located on the rear of the
             chassis. Two ports are programmable to operate in synchronous mode
             or asynchronous mode, while two are only asynchronous. In
             asynchronous mode, each port is independently programmable to
             operate at various baud rates. In synchronous mode, either a
             programmable clock or an external clock source may be used.

             Each port shall be an RS-232 DTE device interfaced with a standard
             25 pin `D' type female connector with 4-40 screw lock fasteners.
             The following signals shall be supported:

-------------------------------------------------------------------------
PIN          SIGNAL NAME                 PIN         SIGNAL NAME
-------------------------------------------------------------------------
1                                        14
-------------------------------------------------------------------------
2            TXD                         15          TRXC  *
-------------------------------------------------------------------------
3            RXD                         16
-------------------------------------------------------------------------
4            RTS                         17          RXC  *
-------------------------------------------------------------------------
5            CTS                         18
-------------------------------------------------------------------------
6            DSR                         19
-------------------------------------------------------------------------
7            Logic Ground                20          DTR
-------------------------------------------------------------------------
8            DCD                         21
-------------------------------------------------------------------------
9                                        22
-------------------------------------------------------------------------
10                                       23
-------------------------------------------------------------------------
11           +12 Volts                   24          TXC  *
-------------------------------------------------------------------------
12           +12 Volt Return             25
-------------------------------------------------------------------------
13
-------------------------------------------------------------------------
                           * for synchronous ports only
             Note : Pins without signal names have no connection.

                        Table 12. Serial Port Connections

             The +12 Volt connections are to provide power for an external
             optical isolator. The estimated maximum current draw is 0.030 amps.
             There shall be a jumper option to disconnect the power from these
             pins.

LAN Ports

             The IPU shall have four (4) 10/100-Base-T(x) ethernet ports located
             on the rear of the chassis. Each port shall support auto sensing
             for speed independent of the other ports. Speed sensing is
             performed in accordance with the IEEE 802.3u auto-negotiation
             standard.

             The connector for each port shall be a shielded, 8 position, RJ-45
             female connector. The connector shall mate with AMP PN 5-569542-*.

                                                                  Page 50 of 100

<PAGE>

SCSI Ports

             The IPU shall have two (2) Ultra Wide SCSI ports (16bit, 40MB/s,)
             located at the rear of the chassis. Each port shall be configurable
             for either single-ended or differential operation. Each connector
             is a 68 pin high density `D' connector compatible with the SCSI-2
             specification such as AMP PN 749076-7. Each port shall be capable
             of driving up to 16 devices with a total cable length not to exceed
             3 meters.

             Each of the two SCSI ports shall be an independent SCSI port. Each
             of the initiator IDs shall be easily set by separate jumpers or
             switches to any of the possible 16 device IDs.

             A jumper option shall allow for the enabling/disabling of the SCSI
             termination. A second shall allow for the enabling/disabling of
             termination power.

                                                                  Page 51 of 100

<PAGE>

OPTIONAL JUMPERS/TERMINATORS

Hard Disk Drive Configuration

             The disk drives shall have the following jumper configuration.

-------------------------------------------------
Function                          Position
-------------------------------------------------
External LED                      Not used
-------------------------------------------------
SCSI Parity                       Enabled
-------------------------------------------------
Delay Start 6/12                  Disabled
-------------------------------------------------
Auto Start Delay                  Disabled
-------------------------------------------------
Enable TI-SDTR                    Disabled
-------------------------------------------------
Unit Attention                    Disabled
-------------------------------------------------
SCSI Terminator                   Disabled
-------------------------------------------------
Auto Spin Up                      Enabled
-------------------------------------------------
SCSI ID                           *
-------------------------------------------------
                     * Specified in the SCSI Devices Section

                     Table 13. Hard Disk Drive Configuration

Compact PCI Cards

             To Be Determined

                                                                  Page 52 of 100

<PAGE>

MECHANICAL REQUIREMENTS

Dimensions

             Overall dimensions are shown in Figure 1. The front panel
             dimensions are for a four (4) RETMA UNIT panel in accordance with
             ANSI/EIA Standard 310.

             The following tolerances shall apply unless otherwise specified:

                  Two decimal places         +/- 0.02"
                  Three decimal places       +/- 0.010"
                  Angles                            +/- 1 degree
                  Up to 0.250" hole size     +/- 0.003"
                  Above 0.250" hole size     +/- 0.005"

             All dimensions are in inches and include applied finishes

             All burrs and sharp edges shall be removed prior to finishes being
             applied.

Materials

             Metallic materials shall be selected using good engineering
             judgment.

             Non-metallic materials shall be flame rated V-0 in accordance with
             UL94. Refer to GR-63-CORE Section 4.3 Fire Resistance.

Finishes

             Surface finishes shall be in accordance with MIL-F-14072, and shall
             be "Alcatel Black" in accordance with Alcatel specification
             004-6100-007.

             For areas requiring metal to metal electrical contact for safety,
             EMI, or ESD purposes; masking over conductive areas is required
             prior to the paint application including contacts between the front
             panel and mounting rails per 004-6100-013 or equivalent as approved
             by Alcatel engineering.

                                                                  Page 53 of 100

<PAGE>

MARKING

             Part and subassembly marking shall be in accordance with
             MIL-STD-130.

             Each FRU shall be marked with the Alcatel USA part number and
             serial number.

             All interface connectors and lugs shall be marked with the
             appropriate reference designator or function as shown in Figure 3.

             The manufacturer shall apply an identification label (or
             silkscreen) to each IPU. This label shall be located of the back of
             the IPU as show in Figure 3, and shall include a minimum of the
             Alcatel USA part number, the revision level to which the IPU was
             built, the manufacturer's name, a unique serial number, the date of
             manufacture, and the appropriate agency approvals. See Figure 3.

             The manufacturer shall leave blank areas on the back of the unit as
             shown in Figure 3. These are for Alcatel's use.

             No corporate logo shall be visible from the front of the IPU.

AIR FLOW

             The IPU shall be capable of operating at the conditions stated in
             the Environmental Requirements section.

             The fan (if required) shall be fitted with filters which have a
             minimum dust arrestance of 80% and a minimum fire rating of Class 2
             in accordance with Section 8.1.3.3 of GR-78-CORE. The fan filters
             shall be accessible from the front of the unit, and shall be easily
             removable for cleaning or replacement without shutting down the
             IPU.

             The cooling air flow shall be from right to left when view from the
             front of the IPU.

                                                                  Page 54 of 100

<PAGE>

ENVIRONMENTAL REQUIREMENTS

             The IPU shall conform to the requirements specified in the
             following table.

<TABLE>
--------------------------------------------------------------------------------------------------------------------------------
<S>                                       <C>                                                          <C>
CONDITIONS                                LIMITS                                                       Ext. Ref.
--------------------------------------------------------------------------------------------------------------------------------
Spatial                                   NEBS 2000 Framework Criteria                                 GR-63, Sec. 2&3
--------------------------------------------------------------------------------------------------------------------------------
Operating Temperature                     +41/Degree/F to +104/Degree/F                                GR-63, Sec. 4.1.2
                                          +5/Degree/C to +40/Degree/C
--------------------------------------------------------------------------------------------------------------------------------
System Short Term Temperature             +23/Degree/F to +122/Degree/F                                GR-63, Sec. 4.1.2
(**** 96 consecutive hours)               -5/Degree/C to +50/Degree/C
--------------------------------------------------------------------------------------------------------------------------------
Non-operating Temperature                 -40/Degree/F to +158/Degree/F                                GR-63, Sec. 4.1.1
(**** 72 consecutive hours)               -40/Degree/C to +70/Degree/C
--------------------------------------------------------------------------------------------------------------------------------
Operating Maximum Rate of Temp            54/Degree/F per hour                                         GR-63, Sec. 4.1.2
Change                                    30/Degree/C per hour
--------------------------------------------------------------------------------------------------------------------------------
Operating Relative Humidity               5% to 85%                                                    GR-63, Sec. 4.1.2
--------------------------------------------------------------------------------------------------------------------------------
Short Term Relative Humidity              5% to 90% and *0.024 lbs of water per lb of dry air          GR-63, Sec. 4.1.2
--------------------------------------------------------------------------------------------------------------------------------
Non-operating Relative Humidity           90% to 95% for 96 hrs at 40/Degree/C                         GR-63, Sec. 4.1.1
--------------------------------------------------------------------------------------------------------------------------------
Heat Dissipation                          1450 W/m/2/  (134.7 W/ft/2/) - convection cooled             GR-63, Sec. 4.1.4
                                          1950 W/m/2/ (181.2 W/ft/2/) - internal forced fan air
                                          Aisle-facing surface *** 38/Degree/C (100/Degree/F)
--------------------------------------------------------------------------------------------------------------------------------
Altitude                                  60 m (197 ft/ below sea level to 4000m (13,125 ft) above     GR-63, Sec. 4.1.3
                                          sea level at 50/Degree/C
--------------------------------------------------------------------------------------------------------------------------------
Fire Resistant Materials                  Composite oxygen index of 28% or greater and rated UL        GR-63, Sec. 4.2.3
                                          standard 94V-1 or better of ignitability
--------------------------------------------------------------------------------------------------------------------------------
Unpackaged Shock                          0 to *10 kg (0 to *22 lb):             100mm (3.9 in ) drop  GR-63, Sec. 4.3.2
                                          10 to *25 kg (22 to *55.1 lb):         75 mm (3 in) drop
                                          25 to *50 kg (55.1 to *110.2 lb):      50 mm (2 in) drop
                                          50  kg or greater:                     25 mm (1 in) drop

--------------------------------------------------------------------------------------------------------------------------------
Packaged Shock (Circuit packs and         0 to *10 kg (0 to *22 lb):             750mm                 GR-63, Sec. 4.3.1.1
other indiv. Components * 100 kg),        (29.5 in ) drop
non-palletized)                           10 to *25 kg (22 to *55.1 lb):         600 mm (23.6 in) drop

                                          25 to *50 kg (55.1 to *110.2 lb):      525 mm (20.7 in) drop

                                          50 to *100 kg (110.2 to *220.5 lb):    450 mm (18.5 in) drop
--------------------------------------------------------------------------------------------------------------------------------
Packaged Shock (components **** 100kg     * 450 kg (992 lb): 300 mm (11.8 in) drop                     GR-63, Sec. 4.3.1.2
(frames), or palletized)                  **** 450 kg (992 lb): 150 mm (5.9 in) drop
--------------------------------------------------------------------------------------------------------------------------------
Transportation Vibration                  Refer to GR-63-CORE, Sec. 4.4.4 for pattern of 5-500Hz,      GR-63, Sec. 4.4.4
                                          0.5g-3.0g vibration
--------------------------------------------------------------------------------------------------------------------------------
Earthquake                                Zone 4                                                       GR-63, Sec. 4.4.1
--------------------------------------------------------------------------------------------------------------------------------
Office Vibration                          0.1g from 5-100Hz                                            GR-63, Sec. 4.4.3
--------------------------------------------------------------------------------------------------------------------------------
Acoustic Noise                            *** 60 dBA                                                   GR-63, Sec. 4.6
--------------------------------------------------------------------------------------------------------------------------------
Airborne Contaminants                     Refer to GR-63-CORE, Sec. 4.5                                GR-63, Sec. 4.5
--------------------------------------------------------------------------------------------------------------------------------
Illumination                                                                                           GR-63, Sec. 4.7
--------------------------------------------------------------------------------------------------------------------------------
Board Level ESD                           8Kv & 15Kv                                                   GR-78, Sec. 9.4
--------------------------------------------------------------------------------------------------------------------------------
</TABLE>

                      Table 14. Environmental Requirements

*    represents less than
**   represents greater than
***  represents less than or equal to
**** represents greater than or equal to

                                                                  Page 55 of 100

<PAGE>

ELECTROMAGNETIC COMPATIBILITY

             The following table contains criteria covering Electromagnetic
             Compatibility (EMC) necessary for equipment to perform reliably and
             safely in a telephone network environment.

--------------------------------------------------------------------------------
DOMESTIC REQUIREMENTS:
--------------------------------------------------------------------------------
FCC PART 15, SUBPART B, Class A                     (class B is an objective)
--------------------------------------------------------------------------------
FCC PART 68 *
--------------------------------------------------------------------------------
BELLCORE GR-1089-CORE;
--------------------------------------------------------------------------------
          Section 2              Electrostatic Discharge, (ESD)
--------------------------------------------------------------------------------
          Section 3              Electromagnetic Interference
--------------------------------------------------------------------------------
          Section 4              Lightning and AC Power Fault
--------------------------------------------------------------------------------
          Section 5              Steady State Power Induction
--------------------------------------------------------------------------------
          Section 6              DC Potential Difference
--------------------------------------------------------------------------------
EUROPEAN REQUIREMENTS:
--------------------------------------------------------------------------------
EN55022, ETS 300 386-1 sub-clause 7.2.3; Radiated Emissions,
Class A(Required);        Class B (Objective)
--------------------------------------------------------------------------------
EN50082-1; Generic Immunity Standard Part 1: Domestic, Commercial & Light
           Industry
--------------------------------------------------------------------------------
IEC 1000-4-2, Level 4           Electrostatic Discharge (ESD)
--------------------------------------------------------------------------------
IEC 1000-4-3, Level 2           Radiated Immunity
--------------------------------------------------------------------------------
IEC 1000-4-4, Level 2           Fast Transient Immunity
--------------------------------------------------------------------------------
EN 61000-4-5, Level 2, ETS 300 386-1 sub-clause 6.4.2; Surge Immunity
--------------------------------------------------------------------------------
EN 61000-4-6, Level 2           Conducted Immunity
--------------------------------------------------------------------------------
EN 61000-4-11(1994):   Voltage dips, short interruptions and voltage
                       variations; Immunity tests.
--------------------------------------------------------------------------------
ITU-T Recommendation K.20 (1993):        Resistibility of telecommunications
                                         switching equipment to over-voltages
                                         and over-currents.
--------------------------------------------------------------------------------
ETS 300 132-2 (1996):     Equipment Engineering; Power supply interface at the
                          input to telecommunications equipment Part 2:
                          Operated by Direct Current (DC).
--------------------------------------------------------------------------------
ETS 300 386-1 & -2   Telecommunication network equipment EMC requirements *
--------------------------------------------------------------------------------
ETS 300 126 ISDN EMC requirements *
--------------------------------------------------------------------------------
Australian Requirements:
--------------------------------------------------------------------------------
AS/NZS 3548
--------------------------------------------------------------------------------
International Requirements:
--------------------------------------------------------------------------------
CISPR 22, Class A            (class B is an objective)
--------------------------------------------------------------------------------
ITU-T Recommendation K.27 (05/96); Protection against interference: Bonding
configurations & earthing inside a telecommunications building.
--------------------------------------------------------------------------------
NOTE:     * Indicates additional requirements for products connected directly
          to the public Telecommunication network
--------------------------------------------------------------------------------
                  Table 15. Electromagnetic Compatibility (EMC)

                                                                  Page 56 of 100

<PAGE>

PRODUCT SAFETY

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

                  Table 16. Product Safety Requirements

                                                                  Page 57 of 100

<PAGE>

PRODUCT CHANGE NOTICE

             The manufacturer is required to provide written notification to
             Alcatel USA prior to delivery of any device that has undergone a
             product change that has been implemented after the device has been
             qualified. Alcatel USA will determine the testing necessary to
             retain qualification status. A product change shall be considered
             any change affecting one or more of the following items: form, fit,
             function, performance, reliability, and/or safety of the device.

DATA REQUIREMENTS

             Data shall be provided by the manufacturer to Alcatel USA to
             satisfy the requirements for qualification, lot acceptance and
             screening as required in the Quality Assurance Provisions Section
             of this document.

DOCUMENTATION

             The manufacturer shall provide full documentation; including
             schematics, part lists, specifications control drawing, assembly,
             and manufacturing drawings upon request.

             A user's guide shall be included with each unit shipped. The user's
             guide shall include, as a minimum, the following information:
             product description, controls and indicators, diagnostics, and a
             section on trouble shooting and repair.

                                                                  Page 58 of 100

<PAGE>

Quality Assurance Provisions

GENERAL REQUIREMENTS

             Products supplied to this specification shall be in accordance with
             the provisions of 259-0000-000 for Class 1 components. Alcatel USA
             reserves the right to return shipment of any product found to be
             defective or non-compliant with the requirements specified herein.

Qualification requirements

             Qualification to the requirements of this specification will be
             required before production units are received at Alcatel USA.

Qualification failure

             Devices which fail any aspect of the qualification sequence are
             defined as failing the qualification evaluation. Appropriate
             failure analysis and corrective action are required before retest.
             When the corrective action requires a significant change in the
             device processing, assembly, or screening; the entire qualification
             sequence must be repeated.

Qualification data

             Vendor supplied attributes data shall be provided to Alcatel USA,
             when requested, to satisfy the requirements of qualification.

Use of vendor supplied data

             In the case where the manufacturer performs qualification testing
             comparable to the requirements herein (e.g. data from in-line
             process control), data from such testing may be submitted to
             satisfy portions of the overall qualification of the device,
             subject to Alcatel QRA approval.

                                                                  Page 59 of 100

<PAGE>

Re-qualification

             Re-qualification shall be initiated by the Alcatel QRA group if at
             any time:
               a)  A significant manufacturing and/or field use problem is
                   identified or
               b)  The manufacturer introduces significant changes in its design
                   or processing and assembly practices.

Periodic re-qualification

             In the absence of any manufacturing or field related problems, the
             IPU may be periodically requalified.

Flammability requirements

             The flame retardancy of all devices shall be demonstrated through
             the use of UL and oxygen index testing. When UL and oxygen index
             tests are not physically feasible (small electronic components),
             IEC flammability tests ("glow-wire" and "needle-flame") may be
             used. Substitution of other tests or changes in any test limits
             shall require written approval of Alcatel USA.

                                                                  Page 60 of 100

<PAGE>

QUALITY

Quality Program

             The manufacturer shall maintain a quality assurance program meeting
             the requirements of ISO9000 or Telcordia GR-1252-CORE or similar
             quality system.

Workmanship

             Unless otherwise specified, devices supplied under this
             specification must conform to the GR-78-CORE, Generic Requirements
             for the Physical Design and the DSC Workmanship Manuals
             004-8003-100 and 004-8003-200.

Quality Inspection Plans

             The manufacturer shall develop and implement inspection plans.
             These plans shall have detailed areas that require inspection,
             accept/reject criteria, and inspection form for tracking trends,
             and a program to certify the inspectors. These plans shall be
             provided to Alcatel USA upon request.

Quality Reports

             Quality reports shall be documented and consist of all
             discrepancies during build up of assemblies and failures at the
             test level. These reports shall be explicit and depict the call
             outs by assembly, list the goals, and be tracked by the week or the
             month. Trends of test failures, and field returns shall be analyzed
             and made available to Alcatel USA when requested.
             Failure analysis data on field returns shall be maintained. This
             data should include as a minimum; replaced device, part number,
             manufacture, date code, and reference designator. On all field
             returns the units shall be tested first before updating/repaired to
             more accurately identify No Trouble Found (NTF) conditions. On
             hardware returned to a third party for repair, the supplier shall
             work with this third party to obtain the required failure analysis
             information. Trends of failures shall be analyzed and made
             available to Alcatel USA when requested.

Quality Audits

             Alcatel USA will perform quality audits in accordance with
             GR-1252-CORE as required to ascertain that the quality system is
             adequate, maintained, and is providing this visibility to their
             management. Alcatel USA will provide a minimum of one weeks notice
             prior to the visitation.

                                                                  Page 61 of 100

<PAGE>

RELIABILITY

Required MTBF

             The reliability of the device shall be demonstrated by vendor
             supplied MTBF based on 100% duty cycle. This reliability shall be
             computed employing Bellcore Reliability Prediction Procedure
             (TR-332), 40 degree C environment, ground benign and procured part
             quality level. The MTBF of the entire IPU as well as each FRU shall
             be supplied to Alcatel USA.

Design Reviews

             The manufacturer shall conduct design reviews to evaluate the
             design, parts, stress, producibility, testability, meeting of the
             specification, qualification testing and any other task required.
             Minutes of these design reviews shall be documented and made
             available to Alcatel USA upon request.

Component Parts

             All component parts used in the device shall be documented in
             specifications, which are controlled and maintained. All parts
             shall be inspected at incoming quality control, and vendor quality
             audits performed periodically. All vendors shall be qualified, and
             an approved vendor list established and maintained with a vendor
             rating system. All component part shall meet a minimal Quality
             level 2 as defined in TR-TSY-000357. Critical parts shall be
             qualified to applicable requirements of MIL-STD-883 Method 5005.

Aluminum Electrolytic Capacitors

             All aluminum electrolytic capacitors shall be protected with
             solvent proof end seals and have a minimum temperature rating of
             not less than 105 degrees C.

Potentiometers

             All potentiometers, except voltage adjust, shall be factory sealed
             to prevent adjustments.

                                                                  Page 62 of 100

<PAGE>

Derating Guidelines

             Components shall be derated in accordance with Alcatel's derating
             guidelines as established be Alcatel specification 004-8003-001.

Burn-in

             All deliverable devices shall be burned-in for no less than 48
             hours, failure free, at plus fifty plus zero/minus three (+50
             +0/-3) degrees C per GR-63-CORE.

EMI

             Devices supplied under this specification must meet the conducted
             and radiated requirements for a Class A device specified in subpart
             J, part 15 of FCC Rules and Regulations; CSA Standard C108.8-M1983
             Revision 1/1/1988; and Canadian Radio Interference Regulation
             Amendment dated 9/15/88 CS-03.

                                                                  Page 63 of 100

<PAGE>

ALCATEL ENGINEERING APPROVAL

             Alcatel Engineering approval, through purchasing, is required prior
             to production and for any changes made to the device.

SAFETY AGENCY APPROVAL

             The device shall be UL and CSA safety recognized/certified for use
             in Information Technology Equipment (ITE) as defined by UL Standard
             1950 3rd edition and CSA Standard CSA-22.2 No. 950-95, 3rd edition
             for North America.
             For European and other international applications the device shall
             be certified to EN60950/IEC 950 safety for use in ITE.

WARRANTY

             The device shall have a minimum documented warranty period of one
             (1) year from the date the unit ships to Alcatel USA. The device
             shall also have a minimum specified support life of ten (10) years.

                                                                  Page 64 of 100

<PAGE>

PACKAGING

             Each device shall be packaged in accordance with Alcatel packaging
specification 003-6601-014.

PACKAGING REQUIREMENTS

             The packaging of ESD sensitive devices shall be accomplished such
             that the devices are completely enclosed within electrostatic
             shielding material. No other type of material is to be allowed
             within this package unless it possesses anti-static properties.

SHIELDING MATERIAL

             Electrostatic shielding material shall have a conductive layer with
             a surface resistivity of less than 10,000 Ohms/square, or a volume
             resistivity of less than 100 Ohm-cm.

ANTI-STATIC MATERIAL

             Anti-static material used in packaging of ESD sensitive devices
             shall have a maximum classification of 50 volts as determined by
             EIA Standard IS-5-A, Appendix B, C, or D, as applicable.

UNIT CONTAINER MARKING

             The unit container shall be marked with the following information
             as a minimum:
               a)  The part number identified in the device specification
               b)  The manufacturer's name or registered trademark.

EXTERIOR SHIPPING CONTAINER MARKING

             The exterior container shall be marked with the following
             information as a minimum:
               a)  Alcatel purchase order number
               b)  The manufacturer's name or registered trademark
               c)  Alcatel part number
               d)  OEM serial number
               e)  Manufacture Date Code
               f)  CLEI Code Label (if applicable)

                                                                  Page 65 of 100

<PAGE>

Notes

HANDLING

             Devices delivered to Alcatel must be handled with precautions to
             avoid damage due to accumulation of static charge (ESD) or
             handling.

RETURN OF DEFECTIVE DEVICES.

             Alcatel reserves the right to return defective devices to the
             manufacturer for replacement or refund.

                                                                  Page 66 of 100

<PAGE>

[GRAPHIC APPEARS HERE]

                   Figure 1. Mechanical Outline and Dimensions

                                                                  Page 67 of 100

<PAGE>

[GRAPHIC APPEARS HERE]

                              Figure 2. Front Panel

[GRAPHIC APPEARS HERE]

                              Figure 3. Rear Panel

                                                                  Page 68 of 100

<PAGE>

[GRAPHIC APPEARS HERE]

                       Figure 4. Recommended Reset Circuit

                               END OF DOCUMENT

                                                                  Page 69 of 100

<PAGE>

                                ATTACHMENT A2
                                -------------

Milestone Delivery Schedule:
---------------------------

                                                                  Page 70 of 100

<PAGE>

                                ATTACHMENT A3
                                -------------

(1)  Price, Kanban Parameters and Procedures
     ---------------------------------------

(2)  Item   Part number   Description   Min Level/Max Level   Leadtime   Price
     -------------------------------------------------------------------------

                                                                  Page 71 of 100

<PAGE>

                                  EXHIBIT B
                                  ---------

(Insert Here)       Inbound Routing Guide - (Doc No. 003-3002-038)

                                                                  Page 72 of 100

<PAGE>

                                  EXHIBIT C
                                  ---------

(Insert Here)  General Packaging Specification - (Doc No. 003-6601-014)

                                                                  Page 73 of 100

<PAGE>

                                  EXHIBIT D
                                  ---------

                          EQUIPMENT LOAN AGREEMENT

This Equipment Loan Agreement ("Agreement") is made this _______ day of
__________, _____ ("Effective  Date") by and between Alcatel USA Sourcing
L.P, with offices at 1000 Coit Road, Plano, Texas 75075, ("ALCATEL"), and
____________________________________________, with offices at _______________
____________________________________("Supplier").

RECITALS:

WHEREAS,  Alcatel and Supplier have agreed that it is in their mutual interest
that one or both of them have temporary use on a loan basis of the Equipment
(the "Equipment"), including  all related software (the "Software"), listed in
Exhibit D1 for use at the other's site; and

WHEREAS, Alcatel and Supplier have agreed that a standard set of terms and
conditions should be established to govern such loan(s);

NOW, THEREFORE, in consideration of the promises and the faithful performance of
the mutual covenants herein contained, it is agreed:

1.   The providing party ("Owner") agrees to provide to the other party
     ("Recipient") temporary use on a loan basis all of the equipment listed in
     Attachment D1 (the "Equipment"), including all related software (the
     "Software"), and related documentation ("Documentation") during the term of
     the Agreement unless otherwise mutually extended in writing by both
     parties, or terminated earlier by the Owner upon written notice to the
     Recipient (the "Loan Period"). Unless the Owner agrees otherwise in
     writing, the Recipient may use the Equipment and Software only for the
     permitted use ("Permitted Use") identified on Attachment D1. Additional
     equipment loaned shall be listed separately on an amendment, signed by
     authorized representatives of the parties, and attached hereto (the format
     of such amendment is attached hereto as Attachment D2).

2.   The term of this Agreement shall be one (1) year. However, either party may
     terminate this Agreement upon thirty (30) days notice to the other party.

3.   Unless otherwise agreed by the parties on Attachment D1:

     A.  There will be no charge to the Recipient for the temporary loan and use
         of the Equipment and Software;
     B.  The Owner shall bear all shipping costs;
     C.  The Recipient shall pay the Owner any applicable installation fee;
     D.  At the end of the Loan Period or upon termination or cancellation of
         this Agreement, the Owner shall deinstall and return the Equipment and
         Software at the Owner's expense. Any other necessary or additional
         terms and conditions, including system or Equipment configuration,
         shall mutually be agreed to prior to shipment.

4.   The Recipient is hereby granted a revocable, nonexclusive,
     nontransferable, indivisible personal license to use the Software only on
     the Owner's Equipment during the Loan Period.  The Recipient agrees that
     it shall:

        (a) not alter, merge, or adapt any portion of the Owner's Software in
            any way, including reverse engineering, disassembling, or
            decompiling the Owner's Software or the functioning of any Owner's
            Equipment, or permit others to do the same without the prior,
            written consent of the Owner;

                                                                  Page 74 of 100

<PAGE>

        (b) not reproduce, modify, copy (except for archival or backup
            purposes), or transmit to other persons or entities any aspect of
            the Owner's Documentation or the Owner's Software, or make
            available the Owner's Documentation or the Owner's Software to
            other persons or entities to reproduce, modify, copy, or transmit
            to other persons or entities any aspect of the Owner's
            Documentation or the Owner's Software;

        (c) limit access to the Owner's Documentation and the Owner's
            Software to its employees having a legitimate "need to know" in
            connection with their respective job responsibilities;

        (d) take no less than reasonable measures to maintain the
            confidentiality of the contents of the Owner's Documentation and
            the Owner's Software, and treat such Owner's Documentation and
            Owner's Software with no less than the same degree of care that
            the Recipient takes with its own confidential or proprietary
            information;

        (e) not export or re-export the Owner's Software from the country in
            which it was received from the Owner without the appropriate
            United States government license; and

        (f) return to the Owner all originals and copies of the Owner's
            Documentation and the Owner's Software at the end of the Loan
            Period or, at the Owner's sole discretion provided to the
            Recipient in writing, confirm in writing to the Owner that all
            originals and copies of the Owner's Documentation and the Owner's
            Software in the Recipient's possession or control have been
            destroyed. Software licensed under this Agreement is defined as
            machine readable computer programs, instruction sequences,
            procedures, data, logic, and/or rules that are provided by the
            Owner, exclusive of source code, in firmware, or any other form
            or media for use exclusively on the Owner's Equipment.

5.   Title to the Equipment and Software will remain in the Owner, its
     suppliers or licensors.  The Owner reserves all intellectual property
     rights in and to its Equipment and Software, including, but not limited
     to, rights in patents, trademarks, trade names, trade secrets, copyrights,
     industrial designs, and any modifications made to the Equipment or
     Software in order that they may be used for the Recipient's applications.

6.   All technical information, documentation, Software and expertise supplied
     by the Owner to the Recipient under this Agreement shall, as between the
     parties hereto, be treated as confidential information of the Owner, and
     the Recipient shall not disclose such confidential information to any
     third party without the prior written consent of the Owner.

7.   The Owner will bear all risk of loss or damage to the Equipment, except
     for damage arising from the negligence or misconduct of the Recipient, the
     Recipient's employees or agents.

8.   THE EQUIPMENT AND SOFTWARE ARE PROVIDED ON AN "AS IS" BASIS, WITHOUT
     WARRANTY OF ANY KIND, EXPRESS OR IMPLIED, AND ANY WARRANTIES TERMS OR
     CONDITIONS THAT WOULD OTHERWISE BE IMPLIED INTO THIS AGREEMENT, INCLUDING
     BUT NOT LIMITED TO MERCHANTABILITY, QUALITY, AND FITNESS FOR PURPOSE, ARE
     HEREBY EXPRESSLY EXCLUDED.

9.   EXCEPT FOR BREACH OF ITS OBLIGATIONS UNDER SECTIONS 4 OR 6 AND In no event
     will EITHER PARTY be liable for any indirect, special or consequential
     damages arising under this Agreement, including, but not limited to, lost
     business or profits.

                                                                  Page 75 of 100

<PAGE>

10.  Each party's obligations set forth above, including but not limited to its
     confidentiality and nondisclosure obligations with respect to the
     confidential information, shall survive the termination or expiration of
     the Agreement.

11.  Neither party shall use the name of the other party in any news release,
     public announcement, advertisement, or other form of publicity without the
     prior, written consent of such other party.

12.  The terms and conditions of this Agreement and performance hereunder shall
     be construed in accordance with the laws of the State of Texas without
     regard to its conflicts of laws principles.

13.  This Agreement shall not be assignable by either party without the written
     consent of the other party, and any purported assignment, including full or
     partial assignment or delegation, not permitted hereunder shall be void.

14.  This document constitutes the entire agreement between the parties with
     respect to the subject matter hereof, and supersedes all previous
     communications, representations, understandings, and agreements, either
     oral or written, between the parties or any official or representative
     thereof. This Agreement and any attachment hereto shall be modified only by
     an instrument in writing and signed by duly authorized representatives of
     the parties.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by their duly authorized representatives.

Supplier                                       Alcatel USA Sourcing, L.P.
                                               By: Alcatel USA GP, Inc
                                                   General Partner

By:   _______________________________      By:    ____________________________

Title:_______________________________      Title: ____________________________

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

------------------------------------------------------------------------------

                                                                  Page 76 of 100

<PAGE>

                                ATTACHMENT D1
                                -------------

                       LIST OF EQUIPMENT AND SOFTWARE

Sequence Number __________

SEE ATTACHED

Permitted Use: _________________________________________________________________

Charge for temporary loan and use of the Equipment and Software      ___________
(Standard is "$0.00")

Shipping costs will be paid by                                       ___________
(Standard is "Owner")

Installation fee will be paid by                                     ___________
(Standard is "Recipient")

Deinstallation by                                                    ___________
(Standard is "Owner")

Deinstallation and return expenses will be paid by                   ___________
(Standard is "Owner")

                                                                  Page 77 of 100

<PAGE>

                                ATTACHMENT D2
                                -------------

                      AMENDMENT TO EQUIPMENT LOAN AGREEMENT
                      -------------------------------------

This Amendment to Equipment Loan Agreement ("Amendment") is made this ____ day
of __________, 2000 ("Amendment Effective Date") by and between Alcatel USA
Sourcing L.P., having a place of business at 1000 Coit Road, Plano, Texas 75075,
("ALCATEL"), and PINNACLE DATA SYSTEMS, with offices at 6600 PORT RD, GROVEPORT,
OH ("Supplier").

                             W I T N E S S E T H:
WHEREAS, Alcatel and Supplier entered into an Equipment Loan Agreement, dated
_______________, ________ ("Agreement"), and Alcatel and Supplier wish to amend
the Agreement as stated herein;

NOW, THEREFORE, in consideration of the promises and the faithful performance of
the mutual covenants herein contained, it is agreed:

1.   Definitions. Capitalized terms used herein and not otherwise defined
     -----------
     herein have the same meaning given those terms in the Agreement.

2.   Additional or Modified Equipment List. The Agreement is hereby
     -------------------------------------
     modified by the attached Exhibit(s) D, which is (are) in addition to or
     replace(s) one or more existing Exhibit(s) Ds.

3.   Agreement Terms and Conditions. Except as provided for herein, all
     ------------------------------
     provisions of the Agreement shall remain unchanged and in full force and
     effect, and be binding on the parties hereto.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by their duly authorized representatives.

Supplier                                          Alcatel USA Sourcing, L.P.
                                                  By: Alcatel USA GP, Inc
                                                        General Partner

By:   _______________________________      By:    ____________________________

Title:_______________________________      Title: ____________________________

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

------------------------------------------------------------------------------

                                                                  Page 78 of 100

<PAGE>

                                  ATTACHMENT D3
                                  --------------

                         LIST OF EQUIPMENT AND SOFTWARE

This Attachment D3 (mark through the inapplicable statement):

         Is a new Attachment A                        Sequence Number__________

         Replaces the existing Attachment A           Sequence Number__________

SEE ATTACHED

Permitted Use:_________________________________________________________________

Charge for temporary loan and use of the Equipment and Software      __________
(Standard is "$0.00")

Shipping costs will be paid by                                       __________
(Standard is "Owner")

Installation fee will be paid by                                     __________
(Standard is "Recipient")

Deinstallation by                                                    __________
(Standard is "Owner")

Deinstallation and return  expenses will be paid by                  __________
(Standard is "Owner")

                                                                  Page 79 of 100

<PAGE>

                                  Exhibit E

                            NEW CENTURY WARRANTY

1.       Definitions. Capitalized terms used herein and not otherwise defined
         -----------
 herein have the same meaning given those terms in the Agreement.  Capitalized
terms used and defined herein, regardless of whether or not defined in the
Agreement, shall have, solely for the purposes of this Exhibit, the meaning
defined herein.

         A.  "Product" or "Products" means the hardware and software components
         of any good, services, or work product provided to Alcatel under this
         Agreement, including, but not limited to, microcode, firmware,
         operating systems, application programs, files and databases,
         mechanical and electrical timing devices, application specific
         integrated circuits, mask works, and building construction, design, or
         renovation. "Product" or "Products" includes, but is not limited to,
         any electronic control devices for (i) elevators, (ii) security
         systems, (iii) electric services, (iv) telecommunication and telephone
         services, (v) plumbing and waste disposal services, (vi) chemical
         metering, supply and disposal systems, and (vii) heating and cooling
         systems.

         B.  "Four Digit Year Format" shall mean the format which represents
         all four digits of the calendar year. The first two digits represent
         the century and the last two digits represent the year within the
         century (e.g., the century and year nineteen hundred and ninety-six is
         represented by "1996").

         C.  "Leap Year" shall mean the year during which an extra day is added
         in February (February 29th).  Leap Year occurs in all years evenly
         divisible by 4, except those years representing a century end
         (e.g., 1800, 1900, 2000, 2100) which is not evenly divisible by 400.
         For example, 1996 is a Leap Year since it is divisible by 4. The year
         1900 was not a Leap Year because it is not evenly divisible by 400,
         but the year 2000 is a Leap Year since it is evenly divisible by 400.

         D.  "Year 2000 Compliant" shall mean all calendar year
         representations used within the Products which, when operated on
         (including, but not limited to, arithmetic, comparison and sorting
         operations) before, during and after the actual calendar year 2000 AD
         shall not produce subsequent operations and/or general output which
         yield results in variance with the normal course of operations of the
         Product or error conditions which are the direct result of the use of
         a calendar year representation. By way of example, but not of
         limitation, (i) dates are not represented by a two-digit year, with
         the century assumed or defaulting to "19", or (ii) a date which falls
         on a century end, whereby the last two digits of the year are "00",
         will not cause a divide or subtraction error in arithmetic
         calculations, and (iii) when sorting dates the year 1999 is less than
         2000, and 2000 is less than 2001.

         E.  "Calendar-Related" refers to date values based on the Gregorian
         calendar, and to all uses in any manner of those date values,
         including without limitation, manipulations, calculations,
         conversions, comparisons, and presentations.

                                                                  Page 80 of 100

<PAGE>

2.       Supplier warrants the following for a period of fifteen (15) years:

         A.  That all of the Products provided hereunder are, and will continue
         to be, Year 2000 Compliant; and

         B.  That all of the Products provided hereunder will process Calendar-
         Related data (including, but not limited to, arithmetic,
         manipulations, calculations, conversions, comparisons, presentations,
         and sorting) using a Four Digit Year Format unless otherwise
         instructed in writing by Alcatel; and

         C.  That all of the Products provided hereunder will correctly
         process calendar dates for Leap Year; and

         D.  That Calendar-Related data processed by the Products provided
         hereunder will be compatible between the Products which are not Year
         2000 Compliant and the Products which are Year 2000 Compliant; and

         E.  That in connection with provided Calendar-Related data to and
         accepting Calendar-Related data from other automated, computerized,
         and/or software systems and users via user interfaces, electronic
         interfaces, and data storage, the Products provided hereunder
         represent dates in Four Digit Year Format unless otherwise instructed
         in writing by Alcatel; and

         F.  That Supplier has verified through testing that the Products
         provided hereunder are Year 2000 Compliant, and that the testing
         included, without limitation, each of the following specific dates and
         the transition to and from each such date: December 31, 1998;
         January 1, 1999; December 31, 1999; January 1, 2000; February 29,
         2000; March 1, 2000; December 31, 2000; January 1, 2001; December
         31, 2004; and January 1, 2005.

         G.  That to the extent Supplier performs services which consist of
         designs for systems, processes, or Products ("Designs"), such Designs
         shall not be done in a manner which would expressly or impliedly
         require a Product created pursuant to such Designs to not be Year 2000
         Compliant (e.g., a Design which allows for non-leap-year calculations
         but does not allow for leap-year calculations). All Designs shall
         specify and incorporate such portions of this Exhibit as necessary to
         require that all systems, processes, or Products used to implement
         such Designs shall be Year 2000 Compliant at the time of delivery.

         H.  That Alcatel will be provided, at no additional charge to Alcatel
         during the warranty period, with additional Products, including, but
         not limited to, hardware and/or software patches, versions or
         revisions of the Products and documentation thereto which satisfy the
         warranties described above.

3.       Supplier hereby agrees to provide Alcatel promptly upon request
         with a copy of its testing results which verify that the Products are
         Year 2000 Compliant.

4.       Supplier hereby agrees that it has a continuing obligation,
         notwithstanding termination or cancellation of the Agreement, to
         notify Alcatel if Supplier knows or has reason to believe that any of
         the Products are not Year 2000 Compliant

                                                                  Page 81 of 100

<PAGE>

                                  EXHIBIT F
                                  ---------

                                SERIALIZATION

Alcatel SERIALIZATION REQUIREMENTS for SUPPLIER

SERIALIZATION:

1.       All PCB's and Power Modules that may be `field replaceable' under
         warranty service require serial numbers, hereafter called "S/Ns".

2.       Alcatel Purchasing will supply a block of serial numbers to Supplier.
         These may be used on ANY Alcatel purchase order and are NOT Purchase
         Order specific. The intent is to provide serial numbers to cover
         orders and emergency shipments.

3.       Supplier will create bar-coded labels with the S/Ns supplied, to
         ensure each is `unique' when loaded to the Alcatel Serial Data
         Tracking System, hereafter called `SDT'.

4.       The label must have `Alcatel' printed on it to distinguish from any
         other labels.

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

1.       Size should be large enough to allow use of a bar-code reader without
         interfering with operation of equipment in anyway.

2.       Tracking: All Alcatel S/Ns will be recorded ON THE Alcatel PACKING
         LIST by Supplier, as noted above, before shipping to final destination
         noted on the Purchase Order.

3.       For orders shipped to Alcatel Plano facilities for stocking,the
         S/Ns will only be entered in to SDT when equipment is pulled for
         shipment to end customers.

4.       For orders `Drop Shipping' directly to customers, Supplier will fax a
         copy of the Packing List to Alcatel Planning with the following
         information:
         .  S/N next to part number used on. Revision of the part number
            shipped.
         .  Waybill #
         .  Carrier Weight of Shipment
         .  Number of Boxes and/or Skids
         .  Shipping Charges when applicable. Note all shipments to be
            scheduled via Alcatel's specified requirements

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

                                                                  Page 82 of 100

<PAGE>

                                  ATTACHMENT F1

               Alcatel SERIALIZATION REQUIREMENTS FOR SUPPLIER

Sample

[GRAPHICS APPEARS HERE]

                                                                  Page 83 of 100

<PAGE>

                                  EXHIBIT G
                                  ---------

                             SERVICE AND SUPPORT

PURPOSE
This Exhibit establishes the terms and conditions under which Supplier will
support Alcatel's service of individual customers purchasing the Product
provided by the Agreement.

1.0      TRAINING

     1.A Supplier will provide Product support training ("Skills Training") that
         is sufficient for qualified Alcatel technical personnel to be enabled
         to provision, configure, operate, install, test, maintain, commission
         and troubleshoot the Product and applications associated with the
         Agreement. Supplier shall provide such training within three (3) months
         of the Effective Date.

         1.A.1 The "Skills Training" will be comprised of any Supplier provided
             visual aids or reference materials, on-the-job training, and
             information "chalkboard" sessions, as typically found in support
             skills training programs. A Skills Training plan will be mutually
             developed within thirty (30) days of the Effective Date and will
             be focused on developing Alcatel's capabilities pursuant to its
             support role as defined herein. Such a plan will reflect the
             essence of Supplier's Certification Plan, where applicable.

         1.A.2 Supplier shall provide, within ten (10) days of Effective Date,
             documented prerequisites, if any, for such training.

         1.A.3 The agreed upon Skills Training will be provided at Alcatel's
             facility in Dallas, Texas, or at a mutually agreed upon location,
             at no charge, and shall include but not be limited to each of the
             published Product courses Supplier makes available to its
             customers. Alcatel will be responsible for providing working
             Product.

                                      OR
If requested by Alcatel, Supplier will provide an equivalent amount of training
at its own facility and assume responsibility for training equipment and the
availability of working Product:

1.B      If requested by Alcatel, Supplier will furnish at no charge a
qualified instructor within 12 months from the date of request to provide
"Train-the-Trainer" instruction.

     1.B.1     Subject to modification mutually agreed upon at the time of the
         request for Train-the-Trainer instruction, it is expected that such
         training generally comply with the guidelines in Attachment G3.

     1.B.2     Supplier will develop and provide Alcatel at no charge a
         complete set of Product courseware, including, but not limited to:
         teaching aids, lab exercises, student guides, and instructor guides
         for Alcatel customer use. Alcatel may modify, reproduce, and
         distribute such training materials pursuant to its support role as
         defined herein.

     1.B.3     Such courseware will be provided in a format and quality
         equivalent to that level exhibited by Alcatel's Curriculum Developer's
         or at a standard equivalent to that level specified by Bellcore.

                                                                  Page 84 of 100

<PAGE>

     1.B.4     Supplier will be responsible for incorporating in all courseware
         Alcatel's private label specifications.

     1.B.5     Supplier will provide such courseware electronically in a format
         that is compatible with Interleaf (Unix-based) or Microsoft Work and
         PowerPoint for PC Windows application.

     1.B.6     Courseware shall be available at least ninety (90) days prior to
         the first customer shipment.
     1.B.7     Supplier will provide courseware and Train-the-Trainer
         instruction for the following courses:

        .  Overview of Product
        .  Operations of Product
        .  Maintenance of Product
        .  Engineering and Planning
        .  Administration and Provisioning
        .  Database

1.C     Any additional training beyond the above stated entitlements requested
        by Alcatel will be provided by Supplier at the price noted in
        Attachment B.

2.0     DOCUMENTATION
     2.1 Supplier will provide Alcatel at no charge a complete set of end-user
         Product documentation and ongoing updates required to support
         Alcatel's customer documentation requirements.

         2.1.1  Such documentation will be provided at a standard in
             organization, format and material quality equivalent to that level
             exhibited by Supplier Publication Issue__, Month, Year,
             entitled _____________, or as per Alcatel's Technical Publications
             Documentation Standards Guide (460-001-000), Issue 2,
             February 1994, or at a standard equivalent to that level specified
             by Bellcore Technical Reference TR-TSY-000454, Issue 1, July 1988
             and Bellcore Technical Advisory TA-OPT-000454, Issue 3, July 1992.
             (note: the appropriate reference is selected from above list).

         2.1.2  Supplier will be responsible for incorporating all
             documentation modifications required by Alcatel's private label
             specifications.

         2.1.3  Upon request, Supplier will provide documents in CD-ROM.

         2.1.4  Upon request, Supplier will ship appropriate Product
             documentation intact with each shipment of Product itself. As
             applicable, such documentation shall include but not be limited to
             installation/user manuals, product user manuals, Operations &
             Maintenance guide, network diagnostics, softcopy (diskette or
             CD ROM, as requested) and hardcopy of all hardware components
             within the configuration (including pin-out diagrams).

     2.2 If requested by Alcatel, Supplier will electronically provide, at no
         charge, end-user documentation and updates for the purpose of
         reproduction and distribution to Alcatel's Product customers. Such
         electronic documentation shall be in metafiles, viewable by Interleaf
         WorldView, or Acrobat viewing software, or supplied in Interleaf.
         Supplier grants

                                                                  Page 85 of 100

<PAGE>

         Alcatel license to use, modify and copy, and distribute the
         documentation provided for this purpose.

     2.3 Supplier will provide Alcatel all information and related
         documentation regarding user impact of design changes
         (software/hardware) that affect the operation, maintenance or
         installation, ninety (90) days prior to the effective date of the
         change.

     2.4 Supplier will provide software load description documents ("Release
         Notes") for every major software release, point release, and
         maintenance release to include; a list and description of the major
         features of the release, description of changes to system software and
         related hardware, man-machine interface information, list of customer
         deliverables, resolved and open problems, and installation procedures.

3.0      FVO SUPPORT

         3.1    If requested by Alcatel, Supplier will support the first
                customer site installation of each: Product release; Supplier
                software release; or significant upgrade.  This support will be
                provided at no charge, either remotely or on-site, at Alcatel's
                discretion.

4.0      REPAIR & RETURN
     4.1 Any replacement, or repaired, Equipment shall be warranted for a
         period of one (1) year, or for the remainder of the unexpired period
         of the Warranty Period, whichever is longer.

     4.2 Supplier will repair/replace and return all Equipment to
         Alcatel within an average of ten (10) calendar days and maximum of
         twenty (20) calendar days (from the time of shipment from Alcatel to
         time of receipt from Supplier), based on availability of material.

         4.2.1  Supplier will make every reasonable attempt to repair the unit
             returned. Should circumstances prevent completion of repair
             within the stated cycle time, replacement Equipment is to be
             provided to ALCATEL. If replacement equipment is not available,
             then Supplier shall refund to Alcatel the price of such
             Equipment and all related taxes, shipping charges, insurance
             charges, and other amounts paid for such Equipment.

         4.2.2  In the event replacement Equipment is provided, failure
             analysis data as set forth in Section 4.5 below on the returned
             Equipment is still required.

         4.2.3  All repaired Equipment will be brought to the current field
             revision level if previously approved by Alcatel.

     4.3 All transportation charges for, and risk of in-transit loss or damage
         to repaired or replacement Equipment shall be borne by the originating
         point of shipment.

     4.4 Upon request, in Emergency situations, Supplier will provide Alcatel
         with emergency unit level replacement service, (advance shipment of
         replacement unit as soon as possible, but within 24 hours of request)
         will be provided at no charge to Alcatel 24 hours a day 7 days a week.

     4.5 Failure analysis data on field returns needs to be maintained. This
         data should include (per serial number) as a minimum; replaced device,
         part number, manufacture, date code and reference designator. All field
         returns shall be tested before any updating or repair work is performed
         to more accurately identify No Trouble Found (NTF) conditions. On
         hardware returned to a third party or supplier's site for repair, the
         supplier shall work with

                                                                  Page 86 of 100

<PAGE>

         the third party or manufacturing to obtain the required
         failure analysis information within 15 working days after receipt of
         returned material. The data collection shall include field
         replaceable units, backplanes, top level assembly, field return
         hardware and functional defects on delivered products. This
         information will be reported on a minimum of a monthly basis.

     4.6 Out of warranty repairs will be provided to Alcatel at mutually agreed
         upon prices unless otherwise indicated in Attachment G2.

     4.7 Supplier shall ensure continuity of availability from third parties of
         all parts, components and software contained within the Products which
         are not manufactured or produced by Supplier. Such obligation shall
         continue until the expiration of ten (10) years from the date of last
         delivery of the Product to Alcatel. Notwithstanding the foregoing, if
         Alcatel has a contractual obligation to an End-user to provide
         continuity of availability for a longer period, Alcatel shall notify
         Supplier of such obligation and Supplier shall endeavor in good faith
         to ensure continuity of availability for such longer period. In the
         event of non-availability of such parts, components or software,
         Supplier shall use all reasonable efforts to identify and incorporate
         alternatives in a manner which minimizes the financial and practical
         impact on Alcatel or End-User(s).

     4.8 Supplier shall make available spare parts, replacement parts and/or
         repair services for the Products for a period of ten (10) years from
         the date of the last delivery of the Product to Alcatel under the terms
         of this Agreement and at prices and delivery schedules which are
         current at the time of delivery of such parts. Notwithstanding the
         foregoing, if Alcatel has a contractual obligation to an End-user to
         make available spare parts, replacement parts and/or repair services
         for the Products for a longer period, Alcatel shall notify Supplier of
         such obligation and Supplier shall make available spare parts,
         replacement parts and/or repair services for the Products for such
         longer period.

5.0  TECHNICAL SUPPORT

     5.1 On-going technical support via telephone shall be provided to Alcatel,
         at no charge from Supplier 24 hours a day, 7 days a week for the Term
         of the Agreement or for the remainder of the End-user's Warranty
         period, whichever is longer. Such support will be rendered from
         Supplier's location at Groveport ,Ohio . This support will be rendered
         in accordance with a mutually developed support operation procedure
         that documents critical support elements such as but not inclusively:
         call reporting and closure, remote access control, performance
         measurements and reporting, escalation, criticality classification and
         response, software patch management, call-out procedures, and
         engineering complaint responses. Such operating procedures will be
         documented within ninety (90) days of Effective Date.

         5.1.1 Such support will include software fixes to Alcatel CTAC
             reported problems related to Supplier provided software within a
             range to include the current market release to the two prior
             market releases.

     5.2 In emergency service affecting situations, Supplier will make available
         to Alcatel 24 hour on-site technical assistance. Such assistance will
         be dispatched within 4 hours of request.

         5.2.1  Such assistance will be provided at no charge, if both parties
             agree that reasonable remote efforts have been exhausted. Should
             the problem not be due to the Product's performance, Alcatel will
             reimburse Supplier for actual expenses incurred.

                                                                  Page 87 of 100

<PAGE>

     5.3 Supplier will provide Alcatel's CTAC organization with access to it's
         Electronic Bulletin Board to an extent equivalent to what is provided
         to Supplier's own Technical Support Group.

         5.4  Documented problems referred to Supplier by CTAC that were
              generated during the Term of this Agreement and remain unresolved
              upon termination of the Agreement will be pursued to resolution
              by Supplier at no charge to Alcatel.

         5.5  Supplier shall refer all Alcatel customer service inquiries
              directly to Alcatel's CTAC organization at (972) 519-4141, or
              such other number(s) provided by Alcatel, in support of the
              intended relationship as depicted in Attachment A,
              Alcatel/Supplier Product Support Flow.

6.0      TECHNICAL SUPPORT LEVELS
     6.1 Alcatel shall provide its customer the initial point of
         contact for technical support through the Customer Technical
         Assistance Center (CTAC). Access to such support shall be 24 hours a
         day 7 days a week and shall be provided in accordance with CTAC
                                                                    ----
         Escalation Procedure (Document #003-9000-403).
         --------------------

         In this regard Alcatel will provide the initial 4 levels of support,
         defined as:

         Level 0 . . . CTAC Screener . . . Responsible for identifying the
         customer support needs and subsequently assigning the task as
         appropriate.  Enters initial call report information and performs all
         logging responsibilities.

         Level 1 . . . CTAC Engineer . . . Frontline technical support person
         whose expertise is such that operational and known problems or issues
         can be resolved. Troubleshooting is accomplished via use of existing
         "decision trees" and research of call report database.

         Level 2 . . . Product Support Specialist . . .A technical employee
         expected to have a comprehensive Product, technology and network
         understanding as a foundation to resolve difficult and/or complex
         problems. Expected to be able to address multi-layered application
         issues and to articulate such issues at a level that ensures effective
         referral to Development Engineers as required.

         Level 3 . . . System Support Engineer . . . This resource will assist
         in troubleshooting, diagnostics, problem determination and resolution.
         As required, will provide problem isolation sufficient for referral to
         Level 4 support or OEM technical support organization. Expertise is
         such that application fixes (patches) are issued at this level.

         In this regard Supplier will provide Level 4 and Level 5 support,
         defined as:

         Level 4 . . . Technical Support Engineer . . . The first point of
         contact for Alcatel's technical support staff. Since Alcatel will
         have, at this point in the escalation process, already applied the
         resources of its sustaining development engineering group, it is
         expected that Supplier's Technical Support group will expeditiously
         refer the reported problem to it's R&D engineers. Utilization of
         Supplier's technical center is intended to serve primarily as a point
         of entry (logging, classification, documentation) for the reported
         problem.

         Level 5 . . . R&D Engineer . . . This resource will primarily focus on
         assistance with Supplier system software/hardware, networks and
         interoperability issues. Sustaining engineering expertise and
         responsibility allows this 4th level support to create patches
         (fixes) for system software, generate ECOs (hardware) and initiate
         Product change requests related to problem resolution to OEM
         providers.

                                                                  Page 88 of 100

<PAGE>

7.0      PROBLEM TRACKING SYSTEM

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

                                                                  Page 89 of 100

<PAGE>

                                 ATTACHMENT G1
                                 -------------

                        ALCATEL PRODUCT SUPPORT FLOW

                          [ILLUSTRATION OF FLOW CHART]

                                                                  Page 90 of 100

<PAGE>

                                 ATTACHMENT G2
                                 -------------

                               SUPPORT SERVICES

This Customer Service Price list may be changed in accordance with Section ___
(Pricing) of the Agreement.

Training (1.C)
   .   Internal Skills Training
   .   Customer Training
       .   Product Course Fee
       .   Hourly Assistance Rate

Out of Warranty Equipment Repair (4.6)

<TABLE>
<CAPTION>
Part Number                                Description                     Price
---------------------------------------------------------------------------------
<S>                <C>                                                    <C>
(Provided by Supplier)

259-5000-049       INTELLIGENT PROCESSOR UNIT (IPU) NEBS/CO               $650.00
259-5000-056       IPU, SGL DK (1DU), SPARC2, 64 MB MEM
                   24" RACK MTN                                           $650.00
259-5000-064       IPU, GBYTE DISKS (2DU), SPARC2, 64 MB MEM
                   24" RACK MTN                                           $650.00
259-5000-096       SPARC-2, 64 MB SIMM, 1/2 HIGH 3.5" 1GB SCSI, 1/2 HIGH
                    1GB QIC TAPE DRIVE, HIS SBUS, SPC CARD                $650.00
259-5000-097       IPU, SPARC-2, 64MB SIMM, 32MB P EXPANSION,
                   32MB S ECPANSION, 1/2HIGH 3.5" 1GB SCSI, 1/2 HIGH
                    1GB QIC TAPE DRIVE, SBUS, ENET                        $650.00
259-5000-098       IPU, SPARC-2, 64MB SIMM, 32MB P EXPANSION,
                   32MB S EXPANSION, 1/2 HIGH 3.5" 1GB SCSI, SBUS
                   ENET                                                   $650.00
259-5000-109       SPARC-20, 256 MB SIMM, (2) 3.5" 1GB SCSI,
                    1GB QIC TAPE DRIVE, (2) SCSI/ETHERNET
                   PLATFORM MANAGER                                       $650.00
259-5000-110       SPARC-20, 512MB SIMM, (1) 3.5" 1GB SCSI, (2) SCSI/
                   ETHERNET PLATFORM MANAGER                              $650.00
259-5000-111       IPU, RAM DK UNIT, 256MB, 24" RACK MOUNT                $650.00
259-5005-007       IPU, SAPRC-2 WITH 64MB SIMM, 1/2 HIGH 3.5" 1GB
                   SCSI , 1/2 HIGH 1GB QIC TAPE DRIVE                     $650.00

UNREPAIRABLE       IN THE INSTANCE THAT PDSI CANNOT REPAIR A
                   UNIT THERE WILL BE A FEE OF:(PER SYSTEM)               $300.00

SOFTWARE           IN THE INSTANCE THAT ALCATEL REQUEST FOR
                   PDSI TO LOAD IN SOFTWARE THERE WILL BE A
                   FEE OF: (PER SYSTEM)                                   $100.00
</TABLE>

                                                                  Page 91 of 100

<PAGE>

                                 ATTACHMENT G3
                                 -------------

                       TRAIN-THE-TRAINER PROGRAM OUTLINE

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

Upon successful completion of the above program the newly certified instructor
is provided with a single copy of all material used in the instruction.

                                                                  Page 92 of 100

<PAGE>

                                   EXHIBIT H
                                   ---------

                PCN DISCONTINUANCE AND OBSOLESCENCE PROCEDURE

     Attach Alcatel procedure and specification 007-0000-115 Rev B. Here

                                                                  Page 93 of 100

<PAGE>

                                   EXHIBIT I
                                   ---------

                               ESCROW AGREEMENT

THIS AGREEMENT, dated as of this _____ day of __________, ________ is entered
into among _________________ ("Licensor"), Data Securities International, Inc.
(DSI) with offices located at P.O. Box 185325 Ft. Worth Texas 76181, and
ALCATEL USA Sourcing L.P. ("Licensee"). This Agreement is entered into pursuant
to pertinent provisions of the ___________ Agreement, signed on the ____ day of
_____________, ______ between Licensor and Licensee ("XXX Agreement"). In
consideration of the mutual covenants set forth in this Agreement, Licensor,
Licensee, and DSI Technology Escrow Services agree as follows:

1.  Technical Information. DSI Technology Escrow Services, as escrow agent,
    ---------------------
    agrees to accept from Licensor, for storage purposes only, the source code
    and other items described on the attached Exhibit A for the computer
    programs owned by Licensor, and the source code for updates to such computer
    programs, if any, and other items described on the attached Exhibit A, which
    Licensor may deliver from time to time (collectively, "Technical
    Information"). For each such delivery DSI will issue receipts to Licensor.
    Licensor will furnish to DSI a list naming or describing all computer
    programs for which Technical Information are deposited into escrow.
    This list will be supplemented and updated by Licensor with each future
    deposit or withdrawal of Technical Information. For each deposit, DSI will
    provide to Licensee a copy of such updated list.

2.  Safekeeping of Technical Information. DSI will hold the Technical
    ------------------------------------
    Information in a safe deposit box or similar fully protected location and
    will provide Licensor with notice of the location of the depository for the
    Technical Information. DSI will release or provide access to the Technical
    Information to Licensee or Licensor only upon the specific terms and
    conditions set forth in this Agreement.

3.  Release of Technical Information.
    --------------------------------

     3.1 Upon receipt of written instructions signed by both parties, DSI, Inc.
         shall release the Technical Information in accordance with such written
         instructions.

     3.2 Release to Licensee. DSI shall release the Technical Information to
         -------------------
         Licensee pursuant to Section ____ of the XXX Agreement, or if Licensee
         would be entitled to terminate the XXX Agreement, or if Licensor is in
         breach of any of the provisions of the XXX Agreement which survive
         termination or expiration of the XXX Agreement as identified in Section
         ____ of the XXX Agreement.

     3.3 Release to Licensee Procedure. Upon the occurrence of any of the
         -----------------------------
         circumstances set forth in Section 3.2, the following procedures shall
         be followed:

         (a) Licensee shall provide written notice ("Demand Notice") to both DSI
             and Licensor in the form provided in attached Exhibit B, along with
             a copy of Licensee's notice to Licensor of the failure to deliver
             as required by Section 3.2 of this Agreement.
         (b) Upon receipt of a Demand Notice, Licensor has five (5) business
             days to make a written objection ("Objection Notice") to Licensee
             and DSI that states it is Licensor's good faith belief that all the
             circumstances stated in Section 3.2 have not occurred or have been
             timely cured.
         (c) If DSI receives an Objection Notice from Licensor, then the
             Technical Information will not be released until DSI receives
             either (i) a written agreement signed by Licensor and Licensee
             authorizing release or (ii) a court order from a court of competent
             jurisdiction requiring release. The release shall be in accordance
             with the written agreement, the arbitrator's decision or the court
             order.

                                                                  Page 94 of 100

<PAGE>

         (d) If (i) DSI does not receive an Objection Notice or (ii) DSI
             receives either the written agreement or the court order specified
             in Section 3.3(C) of this Agreement, then DSI will release the
             Technical Information to Licensee.
         (e) Upon release of the Technical Information, this Agreement will
             terminate except as provided in Section 13 of this Agreement.

     3.4 Release to Licensor. DSI will release the Technical Information to
         -------------------
         Licensor only if this Agreement has been terminated pursuant to
         Section 10 of this Agreement

     3.5 Release to Licensor Procedure. Upon the occurrence of the circumstances
         -----------------------------
         set forth in Section 3.4, the following procedures shall be followed:

         (a) In the event termination pursuant to Section 10 of this Agreement
             occurs due to Licensor and Licensee agreeing in writing to
             terminate this Agreement, Licensor shall notify DSI in writing
             thereof and attach a copy of Licensor's and Licensee's written
             agreement, whereupon DSI shall release the Technical Information
             to Licensor; or

         (b) In the event termination pursuant to Section 10 of this Agreement
             occurs pursuant to the terms of the XXX Agreement and this
             termination is not due to Licensor's inability to perform or
             willful failure to perform under the XXX Agreement; Licensor shall
             notify DSI in writing thereof and attach a copy of Licensee's
             written acknowledgment thereof, whereupon DSI shall release the
             Technical Information to Licensor. If Licensee fails or refuses to
             provide such written acknowledgement, then the parties shall
             utilize the procedure outlined in Sections 3.3(a) through 3.3(d)
             with the terms "Licensee" and "Licensor" reversed; and

         (c) Upon release of the Technical Information, this Agreement will
             terminate except as provided in Section 13 of this Agreement.

4.  Possession, Use and Protection of the Information. If the Technical
    -------------------------------------------------
    Information are released to Licensee pursuant to the terms of this
    Agreement, then Licensee may use the Technical Information only as set forth
    in Section ____ of the XXX Agreement.

5.  Fees. Licensee shall pay to DSI, in advance, DSI's fees at the standard rate
    ----
    prescribed from time to time by DSI for performance of services under this
    Agreement.

6.  No Duty to Inquire into Truth, Authenticity, or Authority; Right to Require
    ---------------------------------------------------------------------------
    Additional Documents. DSI shall not be required to inquire into the truth of
    --------------------
    any statements or representations contained in any notices, certificates, or
    other documents required or otherwise provided under this Agreement, and
    shall be entitled to assume that the signatures on such documents are
    genuine, that the persons signing on behalf of any party thereto are duly
    authorized to execute the same, and that all actions necessary to render any
    such documents binding on the party purportedly executing the same have been
    duly undertaken. Without in any way limiting the foregoing, DSI may in its
    discretion require from Licensor or Licensee additional documents which it
    deems to be necessary or desirable in the course of performing its
    obligations under this Agreement.

7.  No Liability. DSI will incur no liability with respect to any action
    ------------
    reasonably taken by DSI in accordance with the terms of this Agreement in
    the absence of DSI's own willful misconduct or gross negligence.

8.  Notices. Notices under this Agreement shall be in writing, and shall be
    -------
    delivered by registered or certified mail, return receipt requested, to the
    intended recipient at the address set forth adjacent to such party's
    signature hereto, or to such other address as such recipient shall have
    designated by notice to the sending party. Notices shall be deemed to have
    been given and received when signed for on the return receipt.

9.  Modification. Except as provided in Section 1 with respect to modification
    ------------
    of Exhibit A, this Agreement or any provision of this Agreement may not be
    modified, released,

                                                                  Page 95 of 100

<PAGE>

    discharged, changed, amended, or waived except in writing signed by DSI,
    Licensor, and Licensee.

10. Termination. Unless terminated earlier pursuant to Section 3.3(e) of this
    -----------
    Agreement, this Agreement shall only terminate if either:

    (a) Licensor and Licensee in writing agree to terminate this Agreement; or

    (b) XXX Agreement is terminated pursuant to the terms of the XXX Agreement
        under circumstances which do not provide for the survival of Section
        ____ of the XXX Agreement; or

    (c) If for any reason DSI, shall refuse or fail to act as escrow agent,
        ALCATEL USA shall designate a new escrow agent reasonably satisfactory
        to Licensor and DSI shall, upon receipt of written request from ALCATEL
        USA, deliver the Technical Information to such new escrow agent.

11. Governing law. This Agreement shall be governed by the local laws of the
    -------------
    State of Texas, without reference to its principles of conflicts of law.

12. Restrictions. DSI understands and acknowledges that (a) the Technical
    ------------
    Information are the product of an extraordinary expenditure of time and
    money by Licensor and that the Technical Information include Licensor's
    trade secrets and confidential information, (b) any dissemination,
    disclosure, use, or transfer of the Technical Information in violation of
    this Agreement could cause extraordinary and irreparable harm to Licensor,
    and /C/ DSI has no title to or ownership of the Technical Information
    supplied by Licensor and that the Technical Information at all times will
    remain the sole property of Licensor. DSI is prohibited from duplicating,
    copying, disclosing, disseminating, distributing, selling, subleasing,
    sublicensing, renting, or otherwise in any manner, directly or indirectly,
    in whole or in part, assigning, transferring, or otherwise disposing of the
    Technical Information for any purpose or in any manner except as permitted
    under this Agreement.

13. Survival. All obligations of DSI under Section 12 will survive any
    --------
    termination or expiration of this Agreement.

14. Successors and Assigns. This Agreement will not be assigned or in any way
    ----------------------
    transferred, by operation of law or otherwise, by DSI without the prior
    written consent of Licensor. This Agreement will inure to the benefit of the
    successors and assigns of Licensor and Licensee.

15. Entire Agreement. This Agreement, including Exhibits A and B, constitutes
    ----------------
    the sole and entire agreement between the parties to this Agreement with
    respect to its subject matter. No representations, undertakings, or
    agreements have been made or relied upon in the making of this Agreement
    other than those set forth in this Agreement.

                                                                  Page 96 of 100

<PAGE>

16. Other Provisions. The headings contained in this Agreement are for
    ----------------
    convenience of reference only and will not affect the interpretation or
    meaning of this Agreement. If any provision of this Agreement is declared
    void or unenforceable by any court, the validity of any other provisions and
    of the entire Agreement will not be affected by the declaration. The waiver
    of any breach or default of this Agreement at any time or times will not
    constitute the waiver of any subsequent breach or default.

    The parties have executed this Agreement as of the date first written above.

    DSI Technology Services            DSI
                                       By:______________________________
                                       Print Name:______________________
                                       Title:___________________________
                                       Date:____________________________

Licensor:
   By:______________________________
   Print Name:______________________
   Title:___________________________
                                       Date:____________________________

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

                                       Date:____________________________

                                                                  Page 97 of 100

<PAGE>

                    ATTACHMENT I1 TO THE ESCROW AGREEMENT
                    -------------------------------------

The Technical Information that is commonly available in a digital format and
is to be placed into escrow, and updated periodically, consists of the
following:

   .   Source Code modules and listings
   .   Firmware Source Code
   .   Object Code Programs
   .   Programming Tools used to design, develop, and test
   .   Data Files
   .   Software Releases
   .   Software Patches
   .   Drawings and Artwork Copies
   .   Drawings, wiring list, schematics, all art work and assembly instructions
   .   Mechanical drawings or sketches for all assemblies
   .   Source code of all firmware and proms and/or on board memory functions

                                                                  Page 98 of 100

<PAGE>

                    ATTACHMENT I2 TO THE ESCROW AGREEMENT
                    -------------------------------------
                                DEMAND NOTICE

STATE OF  ____________________

COUNTY OF ____________________

   The undersigned, being duly sworn upon an oath, does state the following:

   1.  The undersigned is the Licensee under the_______________________________
       Agreement ("XXX Agreement") between_____________________, ("Licensor")
       and ALCATEL USA Sourcing L.P. ("Licensee"), signed on__________________,
       ________.

   2.  The undersigned is also the Licensee under an Escrow Agreement ("Escrow
       Agreement"), dated______________________,___________, between DSI,
       Licensor, and Licensee.

   3.  Licensee is entitled to possession of the Technical Information pursuant
       to the restrictions of Section ____ in the XXX Agreement.

   4.  The Escrow Agreement has not been terminated pursuant to Section 10 of
       the Escrow Agreement.

   5.  This Demand Notice is executed by a duly authorized officer or
       representative of Licensee.

DATED this _____ day of____________________,________
   Name of Licensee:______________________________________

   By:____________________________________________________

   Print Name:____________________________________________

   Title:_________________________________________________

Subscribed and sworn before me, a Notary Public, this_______________day of
_______________,________.

NOTARY PUBLIC FOR:

   My Commission Expires:________________________

                                                                  Page 99 of 100

<PAGE>

                                  EXHIBIT J
                                  ---------

                      ALCATEL AUTHORIZED SUBCONTRACTORS

                                                                 Page 100 of 100<PAGE>

                                  EXHIBIT 10(m)

                                      HPCS
                          DIVISIONAL SERVICE AGREEMENT

                         HP/PINNACLE DATA SYSTEMS, INC.

                             AGREEMENT # 01-17-6261

<PAGE>

TABLE OF CONTENTS

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

             Exhibit A             Expenditure Proposal
             Exhibit B             Contractor Security Requirements
             Exhibit C             Equipment Loan Agreement
             Exhibit D             Performance Evaluation (TQRDCE)
             Exhibit E             Packaging Standards
             Exhibit F             HP Holiday Schedule
             Exhibit G             Pinnacle Holiday Schedule
             Exhibit H             Pinnacle Business Continuity Plan
             Exhibit I             Electrostatic Discharge Control Standard

                                      2

<PAGE>

                                Program Agreement
                          Hp Commercial Support (Hpcs)
                           Contract Number 01-17-6261

This Divisional Service Agreement is entered into by and between Hewlett-Packard
Company, a Delaware corporation, its divisions, sub-divisions, affiliates and
subsidiaries (hereinafter referred to as "HP"), and Pinnacle Data Systems, Inc.,
an Ohio corporation (hereinafter referred to as "Contractor").

1.0  PURPOSE

     1.1.   Purpose: This Agreement specifies the terms and conditions under
            -------
            which Contractor will provide to HP, Program Services as set forth
            in each Appendix attached here to, and develop written processes
            therefore with respect to products as designated by HP. The terms
            and conditions herein constitute the Divisional Service Agreement
            for all Program Services provided by Contractor to HP.

     1.2.   Relationship between the Divisional Agreement and Appendices: This
            ------------------------------------------------------------
            Agreement is the Divisional Service Agreement ("DSA") that sets
            forth the terms and conditions of the overall agreement between HP
            and Contractor. Contractor will provide PROGRAM Services for HP
            pursuant to the terms set forth in the attached Appendices. This
            Agreement is incorporated into each Appendix so that this Agreement
            and each Appendix form a separate and divisible contract for the
            applicable Program.

     1.3.   Unless otherwise agreed upon in writing by the parties in an
            Appendix that specifically cites the Articles in this Agreement that
            will be modified or changed, to the extent there are any
            inconsistencies between the terms of an Appendix and the terms of
            this Agreement, the terms specified in this Agreement will control
            and take precedence.  If an Appendix is terminated, this Agreement
            and/or any other Appendices will not be affected.

     1.4    The provisions of this Agreement and the attached Appendices take
            precedence over HP's or Contractor's additional or different terms
            and conditions, to which notice of objection is hereby given. No
            change or modification of any of the terms or conditions herein
            shall be valid or binding on either party unless in writing and
            signed by an authorized representative of each party.

     1.5    In the event of any conflict between the provisions of this
            Agreement and any release or Appendix, the order of precedence is as
            follows:

            a)   This Agreement;
            b)   The Appendix to this Agreement;
            c)   Any instructions on the front of HP's written or electronic
                 release;
            d)   The preprinted provisions on either parties written release.

            In consideration of the above and the mutual promises contained
            herein, HP and Contractor agree as follows:

2.0  SCOPE OF WORK

     2.1    This Agreement covers Program Services and processes for HP Products
            to the specifications supplied to Contractor by HP. The
            processes/work may take place on and within HP property or in a
            CONTRACTOR leased or owned facility. Program Services covered under
            this Agreement shall include, but not be limited, to the following:

                 1.   Warehousing of Hewlett-Packard goods
                 2.   Supply Chain Management

                                      3

<PAGE>

                 3.   Kitting and Parts Assembly
                 4.   Inventory Management
                 5.   Packaging
                 6.   Planning and Procurement
                 7.   Testing

        2.2    It is clearly understood and acknowledged by Contractor that the
               list stated in 2.1 is not meant to be all inclusive; instead, it
               is intended to serve as a general outline, supplemented by the
               Appendices, attached hereto and incorporated herein.

        2.3    Changes in the pricing or processes associated with Contractor's
               process location shall be reviewed and agreed to
               by both parties in writing prior to their implementation. While
               in an HP owned or leased facility, or while in a Contractor
               owned or leased facility and using HP owned or leased equipment,
               systems, or processes, Contractor shall notify the appropriate
               HP division and the HP Account Manager in writing sixty (60)
               days prior to its intent to provide services using said HP
               Facility or HP owned or leased equipment, systems or processes
               to other HP entities or companies other than HP. HP will
               promptly review any such notice, and Contractor shall not
               provide any such services unless and until HP approves
               Contractor's request in writing.

        2.4    In the event that HP may, from time to time, make changes or
               modifications to any scope of work or Appendix, Contractor hereby
               agrees to make any and all changes, furnish the materials and
               perform all such work that HP may require, without nullifying
               this Agreement, at a reasonable addition to, or reduction from,
               the Agreement Cost stated herein. Contractor shall adhere
               strictly to the performance metrics and processes unless both
               parties mutually agree upon a change.

3.0  DEFINITIONS

        3.1    "BFT(s)" means a Business Fundamental Table (metrics) used as
               measurements of how CONTRACTOR is performing in defined areas per
               each Appendix.

        3.2    "Capital Expenditure" means an investment in a tangible asset in
               excess of five thousand dollars ($5,000.00).

        3.3    "Contractor Developments" means any Intellectual Property Rights
               developed solely by Contractor under this Agreement and not "Paid
               for by HP".

        3.4    "Cost(s)" means the actual cost(s), including any related
               rebates, discounts or leveraged volumes, paid or incurred by
               CONTRACTOR prior to any mark up or margin by CONTRACTOR.

        3.5    "Days" means calendar days (unless otherwise stated).

        3.6    "Epidemic  Failure" means any failure that is over twice the
               average monthly rate,  based on the previous 3 month average, of
               Dead On Arrival and Time To Failure rates for that item.

        3.7    "Equipment" means manufacturing tooling fixtures and the like
               used to perform work under this Agreement, including but not
               limited to: equipment, test equipment and fixtures, inspection
               equipment and fixtures, storage equipment and fixtures used to
               repair, move, and store inventory.

        3.8    "Contractor Inventory" means units, sub-assemblies, and parts
               purchased by Contractor that are physically located within any
               location that Contractor uses to perform the work under this
               Agreement and will be systematically tracked by Contractor as
               Contractor owned inventory.

        3.9    "HP" means Hewlett-Packard Company, its divisions, subsidiaries,
               worldwide affiliates and any controlled entity.

                                      4

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        3.10   "HP Property" means real property, equipment, materials and
               information, including Tools that are provided to Contractor by
               HP or on HP's behalf, or separately paid for by HP for use by
               Contractor in connection with its performance of Program
               Services.

        3.11   "HP Processes" means processes developed by HP and made available
               to HP suppliers and service contractors as part of the Program.
               Such processes include, but are not limited to, production
               processes, inventory reconciliation processes, data management
               processes, information access processes, financial reporting
               processes and metrics reporting. These processes are at all
               times owned by HP and any changes to such processes, must be
               approved by HP.

        3.12   "HP Inventory" means units, sub-assemblies, and parts either
               purchased by Contractor and paid for by HP or provided to
               Contractor by HP that are physically located within any location
               that Contractor uses to perform the work under this Agreement
               and will be systematically tracked by Contractor as HP owned
               inventory.

        3.13   "HP Products" means any part, sub-assembly, or unit that HP
               either manufactures, markets, or distributes.

        3.14   "HP or HP Authorized vendor" means (i) HP (ii) third parties
               selected, approved and qualified by HP in writing; and (iii)
               with HP's prior written approval, third parties selected by
               Contractor.

        3.15   "Intellectual Property Rights" means all rights in and to
               inventions (which are potentially patentable subject matter
               within the meaning of 35 U.S.C. 101), patents, patent
               applications, utility models, copyrights, author's rights, moral
               rights, trade secrets, mask works, names and marks used in
               trade, and all rights of a similar nature.

        3.16   "Itemized Cost Statement" means a non-audited statement of
               itemized costs incurred by Contractor during a billing period.

        3.17   "Labor  Fees" means the  mutually  agreed  dollar  amount that
               CONTRACTOR  will charge HP for each labor hour worked on HP
               products.

        3.18   "Part" means a component of a unit or sub-assembly.

        3.19   "Pre-Existing Intellectual Property" means any trade secret,
               invention, work of authorship, mask work, process design or
               protectable design that has already been conceived or developed
               by anyone other than HP before Contractor renders any Program
               Services.

        3.20   "Pre-Existing Intellectual Property Rights" means Intellectual
               Property Rights of a party in the Preexisting Intellectual
               Property defined in 3.20.

        3.21   "Program" means the Program Services provided by Contractor
               pursuant to the terms and conditions of an Appendix.

        3.22   "Standard Unit Cost" means the inventory cost for HP Product as
               set forth in HP's accounting system.

        3.23   "Sub-Assembly" means a module or replaceable part of a unit.

        3.24   "Tools" means any tooling, dies, jigs or fixtures or other
               property either built or acquired by Contractor in connection
               with its performance of Program Services.

        3.25   "Unit" means a shipping level part number.

                                      5

<PAGE>

4.0  AGREEMENT.

        4.1    This Divisional Services Agreement (hereinafter "Agreement")
               outlines the arrangement between Contractor and HP. HP desires
               to engage Contractor as a service provider to perform certain
               assembly, repair and refurbishment services, warehouse
               management services and special projects to HP and all
               designated distribution centers.

        4.2    Each provision of the Agreement and its Appendices shall be
               valid and enforceable to the fullest extent permitted by law. If
               any provision of this Agreement or the application of such
               provision, to any extent, is found to be invalid or
               unenforceable, the remainder of this Agreement or the
               application of such provisions shall remain in full force and
               effect without impairment or invalidation.

        4.3    This Agreement shall replace and supersede any and all other
               previous Agreements, expressed and/or implied to the extent that
               they are inconsistent with this Agreement. All such
               aforementioned documents and instruments including all
               Appendices and Exhibits attached shall form the Agreement.

        4.4    Contractor certifies and agrees that it is fully familiar with
               all of the terms, conditions and obligations of all the work
               that is required and specified in this Agreement, the location
               of the job site, and the conditions under which the work is to
               be performed, and that Contractor enters into this Agreement
               based upon such knowledge and previous experience with HP.

        4.5    Independent Contractor Status. The express intention of the
               -----------------------------
               parties is that Contractor is an independent contractor and not
               an employee, agent, joint venturer or partner of HP. Nothing in
               this Agreement shall be interpreted or construed as creating or
               establishing the relationship of employee and employer between
               Contractor or any of its employees, agents and/or subcontractors
               and HP or of HP's subsidiaries, divisions or departments. Both
               parties acknowledge Contractor is not an employee for state or
               federal tax purposes. Contractor declares that it is in
               compliance with all federal, state and local business permits
               and licensing requirements necessary to perform the duties
               described in this Agreement. Contractor also declares that it is
               in compliance with all necessary federal, state and local
               employment tax requirements and that Contractor shall file all
               necessary tax returns and pay all of the necessary employment
               taxes. HP shall not assist Contractor with any federal or state
               income tax withholdings, or make any tax contributions on behalf
               of Contractor, nor shall HP pay for or reimburse Contractor for
               any profit-sharing programs, any health or group insurance
               programs, or any worker's compensation insurance or for any
               other benefit of employment.

        4.6    HP, at its sole and absolute discretion, reserves the right
               to modify, alter, reduce or remove  any scope of work or
               business activity without Contractor's prior consent.

5.0  TERMS OF AGREEMENT AND TERMINATION.

        5.1    Term.

               This Agreement shall become effective from September 01, 2001
               (the "Effective Date") and shall automatically terminate without
               notice at midnight on August 31, 2004 (the "Expiration Date")
               with the option to extend this Agreement for a subsequent
               additional one-year period, provided that both parties mutually
               agree in writing at least sixty 60 days prior to the expiration
               of the then-current term.

        5.2    Termination:

             5.2.1  Notwithstanding the provisions of Article 5.1 above, this
                    Agreement shall terminate immediately and automatically upon
                    either: (i) the expiration of the Term; (ii) Assignment or
                    transfer by Contractor; (iii) Contractor's default and/or
                    breach of any portion of this Agreement.

                                      6

<PAGE>

             5.2.2   HP may terminate this Agreement with ninety (90) days
                     written notice to Contractor at anytime, with or without
                     cause.

             5.2.3   In addition to the above, this Agreement may be terminated
                     immediately and automatically by HP, at HP's sole and
                     absolute discretion, if any of the following events occur:

                   5.2.3.1   Contractor makes any materially false or
                             misleading statement or representation which
                             induces HP to enter into this Agreement, or which
                             is relevant to the relationship between the
                             parties hereto; or,

                   5.2.3.2   Contractor becomes insolvent or commits an act of
                             bankruptcy or takes advantage of any law for the
                             benefit of debtors or Contractor's creditors, or
                             if a receiver is appointed for Contractor; or,

                   5.2.3.3   Contractor engages in fraud or criminal misconduct
                             or is convicted of a felony or of a misdemeanor
                             involving fraud, or commercial dishonesty,
                             whether or not the crime arose from Contractor's
                             relationship with HP or not; or,

                   5.2.3.4   Contractor intentionally and/or deliberately
                             invoices, bills or charges HP for any services,
                             cost, or expense(s) or invoices, bills or
                             requests payment for any other reimbursements not
                             contracted for or covered in this Agreement; or,

                   5.2.3.5   For any of the reasons set forth in any applicable
                             statute, law, regulation or judicial decision.

        5.3    If this Agreement or any Appendix is terminated, then HP has the
               right, but not the obligation:

             5.3.1   To assume for the remainder of the term of the Appendix,
                     subject to the landlord's approval, and without being
                     assessed any fees or penalties, each facility lease entered
                     into by Contractor for any terminated Program or applicable
                     portion thereof.

             5.3.2   To purchase from Contractor or assume Contractor's lease
                     of any capital equipment that is an integral part of or
                     was exclusively purchased or leased by Contractor for the
                     Program. The purchase price of such equipment will be an
                     amount equal to its unamortized cost, using the
                     depreciation period specified in the applicable Program
                     Contract, plus applicable sales and transfer taxes.

        5.4    Termination of this Agreement by either party for any reason
               shall not relieve the parties of any obligation theretofore
               accrued under this Agreement. In the event that this Agreement
               is terminated, regardless of the cause or reason, Contractor's
               services during the time of notice of such Termination until
               the last day of its services shall not be diminished in any way
               and Contractor shall continue to provide first class service.

        5.5    Default by Contractor. In the event Contractor, at any time,
               refuses or neglects to supply a sufficient number of properly
               skilled employees or a sufficient quantity of materials of
               proper quality, or files any kind of arrangement proceeding
               with any governmental agency or court, or makes an assignment
               for benefit of creditors without HP's consent, or fails in any
               respect to properly and diligently prosecute the work covered
               by this Agreement, or otherwise fails to perform fully any
               portion or all of the appendices or conditions precedent herein
               contained, HP may at its option, after the lapse of fourteen
               (14) days from the giving of a written deficiency notice to
               Contractor (during which time Contractor shall have the right
               to cure said default as more specifically set forth in section
               5.7), terminate Contractor's right to proceed with the work. If
               HP so terminates Contractor's right to proceed with the work,
               Contractor shall immediately cease performing Program Services,
               and HP shall withhold any outstanding payments owed to
               Contractor at the time of such termination. HP will then
               promptly begin working to find an alternative provider to
               perform the Program Services performed by Contractor, and
               Contractor shall be responsible for all incremental labor costs
               and expenses associated with procuring an alternative provider.
               However, in no event shall Contractor be responsible for any
               incremental labor costs or expenses incurred more than 180 days
               after the

                                      7

<PAGE>

               date HP terminates Contractor's right to proceed with the work.
               All incremental labor costs and expenses shall be deducted from
               any outstanding balance owed by HP to Contractor at the time of
               termination. If the costs and expenses incurred by HP exceed the
               outstanding balance owed by HP at the time of termination, then
               Contractor shall reimburse HP for the difference within fifteen
               (15) days after receiving a final bill from HP.

        5.6    The remedies referred in section 5.5 shall not be exclusive, and
               the provisions herein do not in any way limit HP's entitlement
               to any other remedy, legal or equitable.

        5.7    If at anytime Contractor shall fail to remedy any default under
               this Agreement within fourteen (14) days after receipt of
               written notice of any such default with respect to any of the
               provisions, terms or conditions of this Agreement, then in the
               event the default cannot reasonably be cured within said
               fourteen (14) day period, Contractor shall not be in default
               under this Agreement if Contractor commences to cure the
               default within the fourteen (14) day period and diligently and
               in good faith continues to cure the default.

        5.8    Upon the occurrence of any default by CONTRACTOR not cured within
               the applicable period provided for in sections 5.5 and 5.7
               above, in addition to any or all other rights or remedies of HP
               provided by law, HP shall have the right, at HP's sole option,
               to declare this Agreement terminated as more specifically set
               forth in section 5.5 above.

        5.9    Rights and Duties Upon Termination. Upon termination of this
               Agreement, for any reason, Contractor agrees to surrender any
               and all property, equipment and inventory on the date specified
               in the notice of termination and to immediately discontinue all
               functions and services. HP shall have the absolute right,
               immediately upon termination, to take possession of all
               property, equipment and inventory. Contractor shall return all
               proprietary information, documentation, trademark or other such
               property to HP.

6.0  TIME

        6.1    Time and production are the essence of this Agreement and
               Contractor shall use its best efforts to complete any or all of
               its duties in the timeliest manner possible. Should Contractor
               be delayed in the prosecution or completion of the work by the
               act, neglect or default of HP, or should Contractor be delayed
               waiting for materials, if required by this Agreement to be
               furnished by HP, or by damage caused by fire or other casualty
               for which Contractor is not responsible, or in the event of a
               lockout by HP, then the time herein fixed for the completion of
               work shall be extended the number of days that Contractor has
               thus been delayed, but no allowance or extension shall be made
               unless a formal request is presented in writing to HP within
               forty-eight (48) hours of the commencement of such delay, and
               under no circumstances, excepting circumstances outside the
               control of Contractor, which in the judgment of HP, could have
               reasonably resulted in such delay, shall the time for
               completion be extended to a date which will prevent HP from
               completing the work within the time HP allows for such
               completion.

7.0  DELETED

8.0  COST SCHEDULE

        8.1    Because of expected changes in costs due to cost improvements,
               business needs, inflationary measures, etc., the cost schedule
               will be documented as an Appendix, which may be amended from
               time to time, whereby any changes will not impact the content
               of this Agreement.

9.0  INVOICING AND PAYMENTS

        9.1    Terms of Payment:

                                      8

<PAGE>

               Contractor will prepare and submit its invoices to HP in
               accordance with the terms set forth in the applicable Appendix.
               HP will pay Contractor invoices that are prepared as specified in
               the applicable Appendix within forty-five (45) calendar days of
               receipt.

        9.2    Billing:

                9.2.1   For each Program, Contractor will invoice all services
                        at the end of each 30-day billing period for services
                        provided during that period. One copy will be delivered
                        to the appropriate Program Manager and one copy to the
                        appropriate HP Finance Service Center. The Itemized Cost
                        Statement will be in a form agreed to by the appropriate
                        Program Manager and the Contractor Program Manager and
                        as set forth in the applicable Appendix.

                9.2.2   HP will have the right, upon request, to audit invoices
                        to ensure compliance with the Program. Audits are
                        limited to services (hours, units processed, inventory,
                        space, etc.) and actual cost data for non-reoccurring
                        expense.

                9.2.3   Contractor will prepare Itemized Cost Statements in
                        accordance with Generally Accepted Accounting Principles
                        (GAAP). Within sixty (60) days following the end of each
                        HP fiscal year during the term of this Agreement, the
                        designated representative of the Contractor will certify
                        to HP that the Itemized Cost Statements submitted to HP
                        during that fiscal year have been prepared in accordance
                        with GAAP and accurately and fairly represents the costs
                        associated with the Program Services provided. At HP's
                        request, HP may audit Contractor's adherence to GAAP.

                9.2.4   Any billings for charges incurred outside of the current
                        invoice cycle must be accompanied by a written statement
                        of explanation supporting their applicability and are
                        subject to HP's approval.

        9.3    Cost and Expenses:

                9.3.1   Capital Expenditures:

                      9.3.1.1  Without HP's prior written authorization,
                               Contractor will not incur any individual capital
                               expenditure with respect to which HP will be
                               invoiced for any costs, either as an amortization
                               or depreciation expense, if HP will be carrying
                               the termination risk.

                      9.3.1.2  If Contractor deems it reasonable and necessary
                               to incur a capital expenditure requiring
                               written authorization, Contractor will complete
                               and submit to HP an Expenditure Proposal (EP)
                               in the form set forth in Exhibit A.

                9.3.2   Excluded Costs: Costs reimbursable by or allocated to HP
                        will exclude any and all fines and penalties with
                        respect to violations of any statute, ordinance,
                        regulation, rule, order, judgment or decree (including
                        settlement thereof) by Contractor or its
                        subcontractors, all of which will be the sole
                        responsibility of Contractor.

                9.3.3   Expense and Cost Containment: Contractor will use its
                        best efforts to implement procedures to reduce or
                        contain its expenses and costs without adversely
                        affecting the performance of the Program Services. At
                        HP's request, Contractor will provide HP information
                        about and access to records and operations to allow HP
                        to ensure compliance with this obligation. Access to
                        Contractors actual cost records is limited to
                        non-reoccurrence ("direct bill") items. HP will
                        measure Contractor's compliance with this obligation
                        in accordance with the terms set for in the applicable
                        Appendix.

                                      9

<PAGE>

        9.4    Rates and Charges:

                9.4.1   General: HP will pay Contractor for the Program Services
                        provided pursuant to this Agreement at the rates and
                        subject to the terms and conditions set forth in the
                        applicable Appendices.

                9.4.2   Additional Services: Services requested by HP, in
                        addition to those identified in the Appendices, will be
                        negotiated separately, and are subject to mutual
                        agreement on terms and conditions applicable to such
                        requirements. Any additional services will result in a
                        reissue/amendment of all affected Appendices prior to
                        performance of the additional services.

                9.4.3   Rate Increases and Decreases:

                      9.4.3.1     All rates and  charges set forth in an
                                  Appendix will be effective for a period of
                                  not less than one (1) year from the
                                  effective date.  These rates will reflect
                                  prevailing business conditions (activity and
                                  product volumes and processes).  After the
                                  expiration of the initial one-year period,
                                  if the business conditions have changed in a
                                  manner that alters the costs used to
                                  determine the initial rates, HP will
                                  consider changes to rates, provided
                                  Contractor submits a written request to
                                  change the rates no less than 60 days prior
                                  to the expiration of the initial one-year
                                  period.  After the expiration of the initial
                                  one-year period, Contractor and HP will meet
                                  quarterly to review the business conditions
                                  and rates.

                      9.4.3.2     Any rate or charge increase must be agreed to
                                  in writing by HP's and Contractor's
                                  respective Program Managers before it becomes
                                  effective. The format for communicating this
                                  change shall be outlined in the applicable
                                  Appendix.

10.0  RIGHT TO AUDIT.

        10.1  HP has the right, but not the obligation, to inspect at any time
              during business hours, and with or without prior notice to
              Contractor, any Contractor facility at which Program Services are
              performed; all processes, operations, and records associated with
              Contractor's performance of Program Services; and all HP Products
              under the possession or control of Contractor.

        10.2  HP's inspection may be for any reason directly related to this
              Agreement or any Appendix, including ensuring Contractor's
              compliance with the requirements of this Agreement or the
              applicable Appendix.

        10.3  HP's right of inspection, with coordinating efforts with the
              Contractor, will also apply to any vendor or subcontractor of
              Contractor. Contractor will inform such vendors or subcontractors
              of HP's right to inspect and, if necessary, use all reasonable
              effort to secure such rights for HP.

        10.4  Any inspection by HP will be solely for HP's benefit and not for
              the benefit of any other party, including Contractor or any of its
              vendors or subcontractors. Notwithstanding the foregoing, upon
              request, HP will provide Contractor a copy of all audit or
              inspection results.

        10.5  HP shall have the right at anytime and upon request, to audit any
              Itemized Cost Statements, invoice or bills provided by Contractor
              and to audit Contractor's use of the HP Processes to ensure
              compliance with the Program. In the event that the results of such
              audit reveal an inconsistency or are in contradiction to any
              invoices forwarded to and/or paid by HP, or are not covered by or
              are out of scope of this Agreement, then HP shall have the right
              to correct

                                     10

<PAGE>

              such inconsistencies or request a cash refund, adjust
              CONTRACTOR's affected invoices, or withhold any future payment
              until such inconsistent balances are corrected.

11.0  RECORD KEEPING

        11.1 Contractor will keep and maintain records and reports of business
             measures for the Program. Upon request, HP will have the option to
             audit one-week period statements and to audit period statements in
             accordance with generally accepted principles and practices.

        11.2 Contractor will provide record retention of all forms, reports and
             other paperwork as required by HP's Corporate Audit Guidelines.
             Copies of the relevant portion of HP's Corporate Audit Guidelines
             are attached as exhibits to the Appendices as deemed applicable by
             HP.

        11.3 Licenses: Contractor at its sole cost and expense, will procure and
             ---------
             maintain any and all licenses, permits, and authorizations required
             by applicable laws or regulations for the performance of this
             Agreement except for those licenses and fees that by law or
             regulation must be the sole responsibility of HP due to the nature
             of the products or processes being supported by Contractor for HP.
             HP agrees to pay for licenses and fees, which are or become its
             sole responsibility.

12.0  CHANGES

        12.1 HP may change, modify, alter, reduce or remove any portion of any
             scope of work or business activity at any time in any project at
             any time. In the event of any such change, the price shall be
             adjusted accordingly. Any such change shall be requested and
             documented by Contractor's Approval Process before the change is
             performed.

        12.2 Except as provided in Section 12.1 (Changes) above, any claim by
             Contractor for additional compensation arising out of this
             Agreement must be made in writing within ten days after the
             commencement of the event, giving rise to the claim. Otherwise, any
             such claim shall be deemed waived by CONTRACTOR, notwithstanding
             actual notice thereof on the part of HP.

13.0  WARRANTIES

        13.1 With respect to the goods and Program Services provided by
             Contractor pursuant to this Agreement, Contractor hereby warrants
             as follows:

            13.1.1  All goods and Programs Services shall conform in all
                    material respects to the design criteria, specifications,
                    descriptions, drawings, samples, and other requirements that
                    are set forth in this Agreement, applicable Appendix, or
                    otherwise agreed to by the parties for a period of 180 days;

            13.1.2  Any rework that must be done within the 180 day period will
                    be done at the expense of the Contractor;

            13.1.3  All goods and Program Services shall be free from material
                    defects in design, material, and workmanship;

            13.1.4  All goods and Program Services shall be free of all liens,
                    encumbrances, and other claims against title;

            13.1.5  All goods and Program Services shall be manufactured,
                    processed, and assembled, as applicable, by Contractor under
                    Contractor's direction;

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

                                     11

<PAGE>

14.0  INSURANCE

        14.1 Coverage: During the term and at all times that CONTRACTOR performs
             services for HP, CONTRACTOR shall maintain in full force and effect
             the following minimum insurance coverages.

            14.1.1  Workers' Compensation and Employer's Liability Insurance
                    Workers' Compensation insurance shall be provided as
                    required by law or regulation.

                    Employer's Liability insurance shall be provided in amounts
                    not less than $1,000,000 per accident for bodily injury by
                    accident, $1,000,000 policy limit by disease, and
                    $1,000,000 per employee for bodily injury by disease.

                    If employees or subcontractors of CONTRACTOR are exposed to
                    injury which may fall under the U.S. Longshoremen and
                    Harbor Workers' Compensation Act, the Jones Act, or under
                    laws, regulations, or statutes to maritime or railroad
                    employees, then coverage will be included for such injuries
                    or claims.

           14.1.2   General Liability Insurance: CONTRACTOR shall carry either
                    comprehensive general liability insurance or commercial
                    general Liability insurance with limits of liability and
                    coverage as indicated below:
                    (A)   Premises, operations, and equipment;
                    (B)   Products and completed operations;
                    (C)   Contractual Liability;
                    (D)   Bodily injury Liability;
                    (E)   Personal injury Liability.

               14.1.2.1   Comprehensive general liability policy limits shall
                          be not less than combined single limits of $1,000,000
                          per occurrence and general aggregate of $2,000,000.
               14.1.2.2   Commercial general liability (occurrence) policy
                          limits shall not be less than $1,000,000 per
                          occurrence (combined single limit for bodily injury
                          and property damage), $1,000,000 for personal injury
                          liability, $1,000,000 aggregate for products and
                          completed operations, and $2,000,000 general
                          aggregate.
               14.1.2.3   Except with respect to products and completed
                          operations coverage, the aggregate limits shall apply
                          separately to CONTRACTOR's services under this
                          Agreement.

               14.1.2.4   If "claims made" policies are provided, CONTRACTOR
                          shall maintain such policies without endangering
                          aggregate limits at the above stated minimums, for at
                          least five years after the expiration of the term.
               14.1.2.5   Such policies shall name HP, its officers, directors
                          and employees as Additional Insureds and shall
                          stipulate that the insurance offered Additional
                          Insureds shall apply as primary insurance and that no
                          other insurance carried by any of them shall be
                          called upon to contribute to a loss covered
                          thereunder. Such policies shall not be construed to
                          imply that CONTRACTOR offers insurance to or on
                          behalf of HP employees.

           14.1.3   Automobile Liability Insurance: CONTRACTOR shall carry
                    bodily injury, property damage, and automobile contractual
                    liability coverage for owned, hired, and non-owned autos
                    with a combined single limit of liability for each accident
                    of not less than $1,000,000.

           14.1.4   Fidelity / Crime Bond: CONTRACTOR will be covered by
                    Fidelity Insurance or Commercial Crime Bond as respects
                    CONTRACTOR's agents, employees, and subcontractors
                    performing under this Agreement with blanket limits of at
                    least $100,000 per occurrence.

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<PAGE>

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

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

15.0  INTELLECTUAL PROPERTY

        15.1  Confidential Information: Neither Contractor nor Contractor's
              employees, agents, or subcontractors shall use or disclose to any
              person or entity any Confidential Information of HP (whether in
              written, oral, electronic, or other form) which is obtained from
              HP or otherwise prepared or discovered either in the performance
              of this Agreement, through access to HP's Information
              Assets/Systems, or while on HP premises. As used herein, the term
              "Confidential Information" shall include, without limitation, all
              Work Product, all information designated by HP as confidential,
              all information or data concerning or related to HP's products
              (including the discovery, invention, research, improvement,
              development, manufacture, or sale thereof), processes, or general
              business operations (including sales costs, profits, pricing
              methods, organization and employee lists), and any information
              obtained through access to any Information Assets/Systems
              (including computers, websites, networks, voicemail, etc.) which,
              if not otherwise described above, is of such a nature that a
              reasonable person would believe it to be confidential or
              proprietary. For avoidance of doubt, all order-specific data
              (including dates, product data, shipment data, etc) relating to HP
              Products, HP Property or HP Processes shall be automatically
              deemed HP's Confidential Information. For purposes of this
              Agreement, Information Assets/Systems shall include, but are not
              limited to, computers, voice and data networks, databases, records
              systems, voicemail, security systems, tokens, logon scripts,
              passwords, and such other hardware, software, firmware, or other
              device as may be used to access such systems/assets. These
              restrictions on using, publishing, or revealing Confidential
              Information continue perpetually unless HP agrees otherwise in
              writing or unless the Confidential Information becomes public.

        15.2  Exclusions: The foregoing confidentiality obligations will not
              apply to Confidential Information that (a) is already known to
              Contractor prior to disclosure by HP; (b) is or becomes a matter
              of public knowledge through no fault of Contractor; (c) is
              rightfully received from a third party by Contractor without a
              duty of confidentiality; (d) is independently developed by
              Contractor; (e) is disclosed under operation of law; or (f) is
              disclosed by Contractor with the prior written approval of HP.

        15.3  Work Product. "Work Product" means models, devices, reports,
              computer programs, tooling, schematics and other diagrams,
              instructional materials, and anything else the Contractor produces
              in connection with this Agreement or any Statement of Work and
              paid for by HP. All Work Product will belong to HP. HP shall have
              the sole right to use, sell, license, publish or otherwise
              disseminate or transfer rights of such Work Product. As long as
              this Agreement is in effect Contractor will have the right to use
              said Work Product in its performance of this Agreement. Contractor
              will deliver all Work Product to HP upon the earlier of completion
              of Services or HP's request.

        15.4  Contractor will promptly disclose to HP any inventions made in
              connection with this Agreement and paid for by HP. HP will own all
              intellectual property rights in such inventions. Contractor will
              sign any necessary documents and will otherwise assist HP, at HP's
              expense, in obtaining patent registrations and otherwise
              protecting such inventions in any country.

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        15.5      Works of Authorship. Contractor will promptly disclose to HP
                  any works of authorship created in connection with this
                  Agreement and paid for by HP. Contractor hereby assigns to
                  HP all copyrights in such works. To the extent permitted by
                  law, Contractor waives any moral rights, such as the right
                  to be named as author, the right to modify, the right to
                  prevent mutilation and the right to prevent commercial
                  exploitation, whether arising under the Berne Convention or
                  otherwise. Contractor will sign any necessary documents and
                  will otherwise assist HP, at HP's expense, in registering
                  HP's copyrights and otherwise protecting HP's rights in such
                  works in any country.

        15.6      Access to Information Assets/Systems: Access, if any, is
                  granted solely to facilitate the business relationship
                  described in the Agreement, and is limited to those specific
                  Assets/Systems, time periods and personnel designated by
                  Contractor as are separately agreed to by HP and Contractor
                  from time to time. Access is subject to business control and
                  information protection policies, standards, and guidelines
                  as may be provided by HP. Use of any other Assets/Systems is
                  expressly prohibited. This prohibition applies even when an
                  Asset/System which Contractor is authorized to access serves
                  as a gateway to other Assets/Systems outside the scope of
                  Contractor's authorization. Use of Assets/Systems during
                  other time periods or by individuals not authorized by HP is
                  expressly prohibited. Without limiting the foregoing,
                  Contractor warrants that it has adequate security measures
                  in place to comply with the above obligations and to insure
                  that access granted hereunder will not impair the integrity
                  and availability of HP information asset/systems. Upon
                  reasonable notice, HP may audit Contractor to verify
                  Contractor's compliance with these obligations. Unless prior
                  written approval is provided to Contractor by the providing
                  HP entity, Contractor can only use any information
                  assets/systems, hardware, or software, either supplied by HP
                  or funded by HP, for the HP entity that provided or funded
                  that information Assets/Systems, hardware, or software.

        15.7      Security of Information: Without limiting the foregoing, each
                  party agrees to maintain security measures to comply with
                  the above obligations and to ensure that access granted will
                  not impair the integrity and availability of the others
                  party's Systems. Upon reasonable notice, HP may audit
                  Contractor to verify Contractor's compliance with these
                  obligations.

        15.8      Pre-Existing Intellectual Property: Contractor will not use
                  any Pre-Existing Intellectual Property including, but not
                  limited to, any trade secret, invention, work of authorship,
                  mask work or protectable design that has already been
                  conceived or developed by anyone other than HP before
                  Contractor renders any services under this Agreement, unless
                  Contractor has the right to use it for HP's benefit. If
                  Contractor is not the owner of such Pre-Existing
                  Intellectual Property, Contractor will obtain from the owner
                  any rights necessary to enable Contractor to comply with
                  this Agreement. If Contractor uses any Pre-Existing
                  Intellectual Property in connection with this Agreement, and
                  HP requires rights to that Pre-Existing Intellectual
                  Property to utilize the services, Contractor hereby grants
                  to HP a non-exclusive, royalty-free, worldwide, perpetual
                  license to make, have made, sell, use, reproduce, modify,
                  adapt, display, distribute, make other versions of and
                  disclose the property and to sublicense others to do these
                  things. Contractor will give HP notice immediately if at any
                  time the Contractor knows or reasonably should know of any
                  third party claim to any intellectual property provided by
                  Contractor pursuant to this Agreement.

        15.9      Intellectual Property Infringement Warranty. Contractor hereby
                  represents and warrants that all goods and Program Services
                  furnished by Contractor and/or its subcontractors under this
                  Agreement will not violate or infringe any third party
                  intellectual property rights and Contractor further warrants
                  that it is not aware of any facts upon which such claim could
                  be made.  If Contractor learns of any claim or any facts upon
                  which a claim could be made, it will promptly notify HP of
                  this information.

        15.10     Additional Obligations. Contractor warrants that each
                  employee, agent, or subcontractor who performs services or
                  other work in connection with this Agreement has been
                  informed of the obligations contained herein and has agreed
                  to be bound by them.  If Contractor engages any third party
                  in furtherance of its duties under this Agreement,
                  Contractor shall cause such

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

16.0  INDEMNIFICATION

        16.1      General Indemnity.

                16.1.1   Contractor shall defend, indemnify and hold harmless
                         the HP from and against any and all claims, losses,
                         demands, attorney fees, damages, liabilities, costs,
                         expenses, obligations, causes of action, suits, or
                         settlement costs for damage or injury (including
                         death) to any person (including employees) or damage
                         to or loss of any property arising out of or resulting
                         from any negligent or willful act or omission by
                         Contractor or its employees or agents except to the
                         extent of HP's negligence or willful
                         misconduct.

                16.1.2   Contractor shall defend, indemnify and hold harmless
                         HP from and against any and all claims, losses,
                         demands, attorney fees, damages, liabilities, costs,
                         expenses, obligations, causes of action, suits, or
                         settlement costs arising out of labor, materials,
                         services or supplies furnished by Contractor, or its
                         subcontractors (it being understood that Contractor
                         shall be responsible to HP, relating to any such
                         defective Contractor work performed as a
                         subcontractor for HP) or having an impact upon the
                         performance of this Agreement (including but not
                         limited to any laborer's, materialmen's or mechanics'
                         liens).

                16.1.3   Contractor shall also defend, indemnify and hold HP
                         harmless from any claims or suits against HP arising
                         from Contractor's use of HP Equipment loaned to
                         Contractor by HP, including use by its employees,
                         agents or subcontractors.  Contractor will pay all
                         costs, damages, losses and expenses (including
                         reasonable attorneys' fees) incurred by HP and will
                         pay any award with respect to any such claim or
                         agreed to in any settlement.

        16.2      Intellectual Property Indemnity. Contractor will give HP
                  notice immediately if at any time Contractor knows or
                  reasonably should know of any third party claim to any
                  intellectual property used by Contractor to perform Program
                  Services for HP, provided by Contractor to HP, or made
                  accessible by Contractor to HP, pursuant to this Agreement.
                  Contractor will defend, indemnify and hold harmless HP from
                  all liability arising from the use of such intellectual
                  property.

        16.3      Mechanics of Indemnity. The party claiming a right to
                  indemnity will provide the indemnifying party with prompt
                  notice of, and reasonable assistance (at the indemnifying
                  party's expense) with, any claim, action or proceeding
                  covered by the indemnity obligations set forth in sections
                  16.1 and 16.2 above. The party claiming a right to indemnity
                  will give the indemnifying party the authority necessary to
                  defend or settle any such claim, action, or proceeding. The
                  indemnifying party will have the exclusive right to defend
                  any such claim, action or proceeding. However, neither HP nor
                  Contractor shall settle or compromise any such claim, action
                  or proceeding without prior written consent of the other
                  party. Said written consent will not be unreasonably withheld
                  by either party. In the event the indemnifying party does not
                  diligently pursue resolution of the claim, action or
                  proceeding or provide the other party with reasonable
                  assurances that the indemnifying party will diligently pursue
                  resolution, then the other party may, without in any way
                  limiting its other rights and remedies, defend and/or settle
                  or compromise such claim, action or proceeding. If the other
                  party defends such a claim, action or proceeding,
                  indemnifying party will pay, in addition to any damages
                  awarded, the actual and reasonable costs and expenses
                  incurred by the other party in connection with such defense.

17.0  CONTINUING OBLIGATIONS

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        17.1    Upon any termination of this Agreement or any Appendix, sections
                9, 10, 13, 14, 15, 16, 21, 22, 23, 24, 25, 26, 29, 31, 34, 38,
                and this section 17, shall survive in accordance with their
                terms.

18.0  DOCUMENTATION

        18.1   HP shall provide any proprietary or non-proprietary documentation
               (as HP deems necessary) to Contractor regarding the products to
               service and support, including but not limited to schematics,
               material lists and engineering change orders.

19.0  SUPERVISION

        19.1   All persons engaged in the work described in this Agreement shall
               be subject to the exclusive direction, supervision, and control
               of Contractor. Contractor shall ensure that all persons involved
               in the work are appropriately skilled for that portion of the
               work assigned to them.

20.0  BACK-UP PERSONNEL

        20.1   Contractor shall provide back-up personnel for each of their
               employee(s) assigned to HP's account in the event of their
               illness, disability, vacation, leave, or absence for any reason.
               Said back-up personnel are expected to cover all duties and
               responsibilities of Contractor's regular personnel with no
               disruption in service.

21.0  SUBCONTRACTORS

        21.1   Subcontractors.  Contractor will not subcontract any of the
               Services to other persons or entities without the prior written
               approval of HP. All obligations imposed upon Contractor will be
               similarly imposed by Contractor upon any authorized
               Subcontractor.Contractor's execution of any subcontracts,
               including subcontracts approved by HP, will not relieve, waive
               or diminish any obligation Contractor may have to HP under this
               Agreement. Fees for subcontracted Services will be included in
               the fees and costs billed by Contractor.

        21.2   Other Contracts. HP may contract with other Providers in
               connection with the Services.  Contractor will cooperate with
               any other Contractors retained by HP.

        21.3   Co-existence. Contractor will not use any process, equipment, or
               facility supplied by, developed for, or funded by HP without the
               prior written approval of the appropriate HP entity. Since
               HP-HPCS is the HP division that oversees the Contractor account
               with HP and this Agreement, Contractor will notify HP's HPCS
               Account Manager within two (2) working days when any HP division
               or non HP business request Contractor to perform similar work
               using the same equipment or facilities as HP.

        21.4   List of Personnel. Contractor shall maintain a list of all
               Contractor employees or Contractor's subcontractors, who have
               been granted access to HP information systems and will provide
               such list to HP as requested by HP. Upon termination of any
               employee, Contractor will inform HP, and take all necessary
               actions to remove that person's ability to access Contractor or
               HP property or information.

22.0  HP PROPERTY

        22.1   Contractor shall ensure that its employees do not remove any HP
               Property from the work premises without HP's written permission.
               Upon the request of HP, Contractor shall return any HP Property
               to HP. Upon the departure of an Contractor employee, Contractor
               shall ensure that such employee has returned all HP Property to
               Contractor. In the event Contractor is unable to secure the
               return of HP's Property from a departing Contractor employee,
               Contractor shall be responsible for making diligent efforts to
               effect the return of the item and for reimbursing HP for the
               value of the HP Property should it not be returned or replaced

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               within a reasonable time period not to exceed thirty (30) days
               after the employee's termination date.

23.0  HP PRODUCTS

        23.1   Consignment. With respect to all HP Products, Equipment or other
               property owned by HP and consigned to Contractor (referred to as
              "Consignee" in this section), Consignee hereby grants to HP
              (referred to as "Consignor" in this section) its power of attorney
               to file a UCC-1 financing statement or similar notice describing
               the Consigned Goods or HP Products and the proceeds thereof [in
               substantially the form attached hereto as Exhibit ___, wherever
               HP deems appropriate to provide notice to other parties that the
               Consigned Goods are not property of Consignee. Should this
               Agreement or the transactions under this Agreement be deemed for
               any reason to pass title of the Consigned Goods to Consignee,
               Consignee agrees that HP shall be deemed to hold, and Consignee
               hereby grants to HP, a purchase money security interest in the
               Consigned Goods, and the proceeds thereof including without
               limitation the cash and checks described above, to secure all of
               its obligations to HP including without limitation obligations
               under this Agreement

        23.2     Liability for Loss or Damage to HP Products.

                23.2.1   General Liability. Contractor shall be liable to HP for
                         actual loss of, or damage to, HP Products owned by HP
                         other than loss or damage caused by intentional acts or
                         gross negligence as set forth in section 23.2.2 below,
                         with a maximum liability of $1,000,000.00 (US) per
                         occurrence. The value of all HP Products will be the
                         invoice price for the HP Products. Contractor's overall
                         liability under this section shall be subject to the
                         $5,000,000.00 Limitation of Liability set forth in
                         section 24.1 below.

                23.2.2   Liability for Intentional Acts or Gross Negligence. In
                         the case of intentional or grossly negligent acts or
                         omissions, dishonest acts, or the failure to follow
                         any provision of the agreed upon security requirements
                         on the part of Contractor or its employees, agents or
                         subcontractors, Contractor will be liable to HP for
                         the actual loss of, or damage to, HP Products owned by
                         HP. The value of all HP Products will be the invoice
                         price for the HP Products.  Contractor's liability
                         under this section will not be subject to the
                         liability limitations set forth in sections 23.2.1 or
                         24.1.

                23.2.3   Security Requirements.  CONTRACTOR and its employees,
                         agents or subcontractors agree to follow the attached
                         security plan Exhibit B.

                23.2.4   Inventory Shrinkage Losses. Contractor will be liable
                         to HP for inventory shrinkage losses as a business
                         risk and will not charge HP for any separate
                         insurance to cover this liability. Contractor's
                         liability to HP for shrinkage losses are excluded
                         from the limitations of liability set forth in
                         sections 23.2.1 and 23.2.2 above, as well as section
                         24.1 below.

                23.2.5   Fire or Water Damage. Contractor will be liable for any
                         Fire or Water damage that causes loss to HP owned
                         equipment or parts.

                23.2.6   Claims Procedure.

                          23.2.6.1  Contractor must promptly notify HP upon
                                    discovering any loss of, or damage to, HP
                                    Products. Within 60 days following receipt
                                    of such notice, HP will file a claim for
                                    such loss, including loss due to inventory
                                    shrinkage.

                          23.2.6.2  Contractor will acknowledge all claims
                                    within 30 days of occurrence; resolve all
                                    undisputed claims filed by HP within 60
                                    days of submission by HP; and resolve all
                                    disputed claims filed by HP within 120
                                    days. For any claims outstanding after 120
                                    days, Contractor will be required to
                                    provide written statements to HP concerning
                                    the status of each claim.

                          23.2.6.3  Reconciliation of all claims filed by HP
                                    against Contractor will not be contingent
                                    upon Contractor's recovery of HP Products or
                                    funds from its

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               subcontractors. HP must file any legal
               proceedings regarding a disputed claim within 12
               months following receipt of notice of loss or
               damage.

     23.2.7  Limitation of Liability Related to HP Products. Contractor
             and its subcontractors will not be liable for loss or damage
             resulting from:

              23.2.7.1 The negligence or willful misconduct of HP, the
                       recipient of the HP Products, or anyone with an
                       ownership interest in the HP Products;

              23.2.7.2 Failure of HP systems impacting HP revenues;

              23.2.7.3 Any pre-existing defect of the HP Products;

              23.2.7.4 Actions of government or sovereign power, or by any
                       authority maintaining or using military, naval or air
                       forces; or

              23.2.7.5 Earthquakes or other Acts of God.

     23.2.8  Dispositions.

              23.2.8.1 Contractor, or Contractor's agents and subcontractors,
                       agree to use its best efforts to protect HP's product
                       integrity and brand names in the event of transit
                       damage to said products. HP shall have the exclusive
                       control over the disposition of salvage and the
                       disposition of partially damaged product, subject,
                       however to the laws governing the Contractor's right to
                       an allowance for any salvage or residual value for
                       products destroyed by HP in lieu of their sale on the
                       salvage market.

              23.2.8.2 Contractor, or Contractor's agents and
                       subcontractors have thirty (30) days to return a
                       product that has been damaged, or refused delivery
                       by Customer to HP.

              23.2.8   Contractor, or Contractor's agents and
                       subcontractors are not permitted to keep damaged
                       or defective freight without prior written consent
                       from HP.

24.0  LIMITATION OF LIABILITY

     24.1     IN NO EVENT  SHALL  EITHER  PARTY BE LIABLE TO THE OTHER  PARTY
              FOR ANY SPECIAL, INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES IN
              ANY WAY ARISING OUT OF OR RELATING TO THIS AGREEMENT EVEN IF THE
              POSSIBILITY OF SUCH DAMAGES HAS BEEN COMMUNICATED TO THE OTHER
              PARTY.  IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER FOR
              DAMAGES FOR ANY CAUSE WHATSOEVER IN AMOUNT IN EXCESS OF
              $5,000,000.00.  NOTWITHSTANDING THE FOREGOING, THERE SHALL BE NO
              LIMIT ON THE AMOUNT OR TYPE OF DAMAGES RELATING TO BREACH OF ANY
              CONFIDENTIALITY OBLIGATION (SECTION 15.1), INTELLECTUAL PROPERTY
              INDEMNIFICATION (SECTION 16.2), PERSONAL INJURY OR PROPERTY
              DAMAGE INDEMNIFICATION (SECTION 16.1.1) OR CONTRACTOR'S GROSSLY
              NEGLIGENT OR INTENTIONAL ACTS OR OMISSIONS RESULTING IN LOSS OR
              DAMAGE TO HP PRODUCT (SECTION 23.2.2).

25.0  TOOLING AND EQUIPMENT

   25.1  General. All designs, materials and equipment furnished to Contractor
         by HP or paid for by HP in connection with this Agreement
         (collectively "HP Property") shall:

               a) Be clearly marked or tagged as property of HP;

               b) Be subject to inspection by HP at any time during normal
                  business hours;

               c) Be used only in performing work under this
                 Agreement;

               d) Be kept reasonably separate from other materials, tools, or
                  property of Contractor or held by Contractor;

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               e) Not be modified in any manner by Contractor without prior
                  agreement by HP;

               f) Have periodic maintenance performed by Contractor;

               g) Be kept free of liens and encumbrances which may arise due
                  to actions of Contractor; and

               h) Will be tracked and documented by Contractor on a consolidated
                  list of all HP property. This list will be provided to the HP
                  Account Manager on a quarterly basis,noting changes since
                  prior list was provided.

   25.2  Equipment Loan to CONTRACTOR. In the event HP is willing to assign any
         equipment or tools for CONTRACTOR's use during this Agreement, the
         parties shall execute a separate Equipment Loan Agreement ("ELA"). An
         example of an ELA is attached hereto as Exhibit C.

   25.3  Equipment Use. Contractor agrees that persons operating HP Property
         will be fully trained in the proper use thereof. Contractor hereby
         releases HP of all liability arising out of the misuse, or damage
         caused by Contractor or Contractor's agents to HP equipment or tools
         as provided for in Section 26 (Facility and Equipment).

   25.4  Depreciation and Taxes. Contractor shall be solely responsible to
         conform to all tax laws and depreciation schedules on all tools and
         equipment either leased or procured by Contractor to perform work
         under this Agreement. If HP deems necessary, HP may assume the lease
         of said tools and equipment. At any time after Contractor's lease of
         said tools and equipment is complete, HP may, at HP's discretion,
         procure any of said tools and equipment from Contractor for the total
         sum of one (1) U.S. dollar.

26.0  FACILITY AND EQUIPMENT

   26.1  With the exception of equipment, warehouse facilities, and computer
         systems owned by HP, utilized in carrying out the Scope of Work as
         described in each Appendices, all equipment, warehouse facilities, and
         computer systems used by Contractor in the performance of the Program
         Services hereunder shall at all times be owned or leased by
         Contractor. Use of HP owned equipment and computer systems by
         Contractor shall be at the discretion of HP and shall be restricted to
         only those processes that directly support HP and no other customer of
         Contractor.

   26.2  All expenses incurred by Contractor in the operation of the equipment,
         warehouse facilities, and computer systems shall be paid by Contractor
         without reimbursement from HP unless specifically identified for
         reimbursement in each Appendices. Contractor's sole compensation for
         the Program services and other services rendered to HP and sole work
         performed for HP shall be as provided for in this Appendix.

   26.3  Contractor's administration operation shall provide the computing
         systems and peripherals necessary to transact business with its
         corporate headquarters or to other Contractor entities.

   26.4  All equipment purchased and/or replaced by Contractor must have the
         ability to be supported, maintained, and repaired by HP. Contractor
         will verify through HP's IT department the supportability of the
         equipment before purchase.

   26.5  Any and all electronic devices and or wiring connected to HP business
         processing systems shall become the property of HP and HP shall retain
         title to such devices and/or wiring. It is clearly understood and
         acknowledged, that prior to connecting any such electronic devices or
         wiring to any HP system, HP must pre-approve of such, in writing,
         otherwise the Contractor shall be fully and solely responsible for and
         liable for any and all damage. Furthermore, HP shall be responsible
         for the purchase, repair and maintenance of such equipment, provided,
         however, that HP has pre-approved such, in writing.

   26.6  Contractor shall retain title to all other equipment (except as
         expressed in Section 26.1 (Facilities and Equipment) and the
         (Equipment Loan Agreement) and all documentation related to or

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         accompanying the equipment. Contractor shall not loan, transfer,
         encumber, sell or otherwise dispose of the equipment without HP's
         prior written permission. If any of the above provisions are not met
         in their entirety then it shall be deemed that Contractor is in
         default of this Agreement.

   26.7  Contractor employees, agents and/or subcontractors are hereby strictly
         prohibited from removing any equipment, inventory or proprietary
         information that is the sole property of HP from HP's or Contractor's
         premises or warehouses. In the event that any equipment, inventory or
         proprietary information is removed from any of HP's or Contractor's
         premises or warehouses, then HP shall have the sole and absolute right
         to immediately terminate this Agreement as provided in Section 5.0
         (Termination) and Contractor shall be responsible to immediately
         reimburse HP for the full retail value of any such inventory or
         equipment.

27.0  PERFORMANCE

   27.1  Delivery. Contractor commits to Program Services within the time frame
         defined in each Appendix. If Contractor fails to meet these
         requirements for 2 (two) consecutive months, or any 3 months of a 6
         month period, HP shall so inform Contractor in writing, and if
         Contractor is unable to remedy the problem within sixty (60) days, HP
         may in addition to any other rights it may have, terminate this
         Agreement without further liability.

   27.2  Supplier Financial Reports. Upon reasonable request from HP,
         Contractor shall furnish information concerning its financial status
         in relation to this Agreement, including but not limited to: balance
         sheet, income statement, and statement of cash flows, to HP. A copy of
         all public filings (SEC 10K's and annual reports) will be provided to
         HP when they are provided to the public.

   27.3  Reports. On a weekly basis, updates of all BFT's, material shortages,
         and written reports of the cumulative quantities of materials
         processed or in process will be provided to the HP Account Manager.
         Such reports shall be submitted on a form agreed upon by HP and
         Contractor, and shall be returned to HP in accordance with the
         mutually agreed upon reporting schedule.

   27.4  Inspection. HP shall have the right to physically inspect at will,
         during normal business hours, the Program Services being performed by
         Contractor under this Agreement. HP shall also have the right to
         perform audits of processes to ensure that inventory, quality,
         process, and business controls are maintained and as to Contractor's
         compliance to pre-established Electro Static Discharge (ESD) handling
         procedures. HP's inspection may be for any purpose reasonably related
         to this Agreement, including without limitation to ensure Contractor's
         compliance with HP's quality requirements, referenced in each
         applicable Appendix. If requested to do so, Contractor will use
         commercially reasonable efforts to extend HP inspection rights to any
         vendor or supplier of Contractor.

   27.5  BFT's. Contractor will run the business to maintain all Business
         Fundamental Tables within the agreed control limits and goals set
         forth in each Appendix. Contractor will report the BFT's per each site
         Appendix as included. Failure on Contractor's part to report BFT's as
         agreed or maintain the goals and control limits for 2 (two)
         consecutive months or any 3 months of a 6-month period, are grounds
         for the termination of this Agreement. Included with the monthly
         BFT's, Contractor will provide HP a deviation report for any BFT
         metric that is outside the control limits or goals. The deviation
         report must include an action plan of how and time line of when the
         metric will be corrected within the control limits or goals.

28.0  PROGRAM PROCESS, REPORTING, METRICS AND MEASURES

   28.1  Contractor will be measured through the most currently approved
         version of HP's Supplier Performance Rating tool, that may focus on
         Technology, Quality, Responsiveness, Delivery, Communication,
         Environment, Strategic Alliance Relationship, Operational Performance,
         and Cost Controls.

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   28.2  An example of the Supplier Performance Evaluation is shown in Exhibit
         D (TQRDCE Performance Evaluation). The measures will be jointly
         developed and supported by HP and Contractor.

         28.2.1  Contractor and HP are required to jointly establish
                 operational metrics for all the Distribution Process. The
                 management representatives of Contractor and HP will ensure
                 the operational metrics are kept current and available to
                 their respective companies. It is acknowledged that the
                 operational metrics may be modified from time to time to
                 reflect changes in HP's business, and that HP and Contractor
                 shall keep each other currently advised as to any such
                 changes which affect the metrics and the metrics will be
                 modified accordingly. Contractor is expected to track the
                 data and provide the information to HP.

         28.2.2  Contractor and HP will mutually agree on the operational
                 metrics that Contractor will be measured and held
                 accountable for. These metrics will in all attempts measure
                 those processes that Contractor is in control of.

         28.2.3  Contractor commits to perform distribution services per the
                 established metrics as listed in each Appendix. HP reserves
                 the right to re-set goals every quarter. HP and Contractor
                 will mutually agree on any goals that are re-set.

   28.3  Contractor management representatives will lead regularly scheduled
         meetings between HP and Contractor to review Contractor's performance
         in accordance with this Agreement. These reviews will include but not
         be limited to:

        28.3.1  Monthly BFT reviews.  Contractor deliverables, at a minimum,
                will include:

             28.3.1.1 Reporting on metrics, discussing deviation reports, and
                      root cause analysis issues.
             28.3.1.2 Analyze and report on Program targets vs. actual costs.
             28.3.1.3 Report on rolling three month, six month, yearly goals
                      and progress made to date.
             28.3.1.4 Overtime if it exceeds 5%, notification should be
                      discussed.
             28.3.1.5 Cycle Count.

        28.3.2  Year-End Review.  Will be conducted with a pre-published
                schedule.

        28.3.3  Process Documentation and Changes: All processes
                documentation will be in ISO format or similar standard.
                Contractor shall demonstrate to the HP Account Manager that
                there are appropriate quality measures in place to meet
                designated performance metrics.

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

29.0  GOVERNING LAW AND COMPLIANCE

   29.1  General. Contractor shall comply with all applicable federal, state,
         local and foreign laws, rules, regulations, or orders issued by any
         public authority having jurisdiction over their respective obligations
         under this Agreement, and furnish to HP any information required to
         enable HP to comply with such laws, rules and regulations in its use
         of services including without limitation:

         29.1.1  The Williams-Steiger Occupational Safety Health Act of 1970,
                 as amended, and any rules, regulations, or order issued
                 thereunder;

         29.1.2  All applicable nondiscrimination requirements, including
                 without limitation the provisions of Presidential Executive
                 Order 11246 and the rules and regulations issued thereunder;

         29.1.3  The Fair Labor Standards Act, as amended,  including all
                 applicable  requirements of the act and the regulations and
                 orders of the U. S. Department of Labor;

         29.1.4   Vocational Rehabilitation Act, American Disability Act, and
                  the Vietnam Era Veterans' Readjustment Act; and

                                      21

<PAGE>

                29.1.5   All applicable Environmental Regulations and Laws.

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

30.0  ASSIGNMENT

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

31.0  SAFETY AND THE ENVIRONMENT

        31.1    Safety.

                31.1.1   Contractor shall maintain the facilities and
                         operations and perform all Program Services under
                         this Agreement in compliance with all applicable laws
                         and regulations of any governmental entity or
                         sovereign authority with jurisdiction over any
                         applicable Program Services, whether federal, state
                         or local and whether of the United States or another
                         country or countries, which pertain to safety,
                         security, fire protection, and loss control
                         standards. Upon reasonable written notice, Contractor
                         will allow HP and its designated representatives
                         which have been previously approved by Contractor, to
                         visit any facility at which Program Services are
                         performed and conduct loss control audits of the
                         facility and operations.

                31.1.2   Contractor shall provide to its employees, agents or
                         subcontractors such suitable safety appliances as may
                         be needed to safely perform all Program Services.

                31.1.3   As an independent contractor, Contractor acknowledges
                         and agrees that it is and will remain solely
                         responsible for the health and safety of its
                         employees, agents and/or subcontractors.

                31.1.4   Contractor shall establish and maintain such
                         programs, processes and procedures, provide such
                         equipment and training and take such other steps as
                         may be required by applicable laws and regulations to
                         protect the health and safety of Contractor's
                         employees, agents and subcontractors performing work
                         or services for Contractor under this Agreement, and
                         HP shall have no responsibility or liability
                         therefore, except as provided by law, per Section 29
                         (Governing Law and Compliance).

        31.2    Environment.

                                      22

<PAGE>

                31.2.1   Ozone Depleting Substances.  Contractor shall not use
                         any Class I or Class II substances,  as those terms
                         are defined in 42 U.S.C. 7671, and in the
                         implementation  regulations of the United States
                         Environmental Protection Agency, at 40 CFR Part 82 in
                         its performance of Program Services.

                31.2.2   Disposition of Excess Materials. Contractor shall
                         recycle or dispose of any non-regulated, non-hazardous
                         excess or waste materials resulting from HP Products or
                         HP Property in compliance with the provisions of this
                         Agreement  and the  applicable  Exhibits,  and with the
                         laws and regulations of any governmental  entity or
                         sovereign  authority with  jurisdiction.  Contractor
                         shall recycle or dispose of any other  non-regulated,
                         non-hazardous excess materials generated from its
                         operations in performance of Program  Services in
                         compliance  with the laws and  regulations of any
                         governmental  entity or sovereign authority  with
                         jurisdiction.  Any  revenue  generated  from  these
                         operations  will be used to  offset Contractor's costs
                         or will be applied as a credit on applicable  invoices.
                         HP has the right to determine disposition of any excess
                         materials.

                31.2.2   Processes and Compliance. Contractor shall
                         continuously implement and maintain processes and
                         policies designed, to protect the environment and
                         will adhere to all applicable laws and regulations
                         regarding protection of the environment at any
                         facility, whether owned or leased by Contractor or by
                         HP, at which Program Services are performed by
                         Contractor.

                31.2.3   Contractor shall establish and maintain such
                         programs, processes, and procedures, provide such
                         equipment, and training, and take such other steps as
                         may be required by applicable laws and regulations,
                         to protect the health and safety of Contractor's
                         employees, agents and subcontractors performing work
                         or services for Contractor under this Agreement, and
                         HP will have no responsibility or liability
                         therefore, except as provided by law.

                31.2.4   Contractor shall stack and store Material in
                         compliance with HP's Packaging Standards, marked as
                         Exhibit E, attached hereto and incorporated herein.

32.0  BACKGROUND AND DRUG SCREENING

        32.1   Requiring background and drug screenings is in keeping with HP's
               objectives to provide and maintain a safe and secure working
               environment; to reduce the risk of thefts of property, funds,
               and proprietary information; and to have a work force of the
               highest quality and integrity.

        32.2   Contractor shall conduct background and drug screenings as
               established in the Contractor's Background and Drug Screening
               policies. Should the Contractor's Program Services operation be
               conducted on a HP owned or leased facility, then Contractor shall
               be required to follow HP's Drug and Background Screening
               Guidelines which is attached to each applicable Appendix.

        32.3   Should any portion of Contractor's work be subcontracted,
               Contractor shall warrant and ensure that commensurate
               background and drug screenings, which equal or exceed the
               expectations set forth for Contractor and Contractor's employees,
               have been completed on all subcontractors, and subcontractor's
               employees, subcontractors, and/or agents prior to those
               individuals performing work directly or indirectly involving HP
               or those individuals who otherwise have access to HP sites, data,
               products, and assets.

33.0  RELATIONSHIP OF THE PARTIES

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

                                      23

<PAGE>

               manner and means by which the work under this
               Agreement is accomplished, subject to the express condition that
               Contractor will at all times comply with applicable law.

34.0  TAXES AND BENEFITS

        34.1   It is Contractor's obligation to appropriately report all
               compensation received by Contractor pursuant to this Agreement
               and pay all taxes due on such compensation. Contractor will
               indemnify HP against and hold it harmless from any obligation
               imposed on HP to pay any employee withholding taxes, social
               security, unemployment insurance, workers' compensation
               insurance,disability insurance or similar items, including
               interest and penalties thereon, in connection with any payments
               made to Contractor by HP pursuant to this Agreement.

35.0  GENERAL RESPONSIBILITIES.

        35.1   Contractor shall:
                35.1.1   Be solely responsible for the means, methods,
                         techniques, sequences, and/or results of the work and
                         all acts and omissions of Contractor's employees and
                         agents;

                35.1.2   Obtain all permits required to perform the work;

                35.1.3   Abide by all written/verbal safety, and security
                         procedures of HP while on HP premises;

                35.1.4   Coordinate all work without unreasonable interference
                         with HP's employees or operations in areas around the
                         work site;

                35.1.5   Proceed in good faith to comply with all applicable
                         Federal, State, and Local laws, statutes and
                         regulations; and;

                35.1.6   Meet, at minimum, HP's environmental guidelines.

36.0  MATERIALS MANAGEMENT

        36.1   Packaging. Product packaging for Finished Goods Inventory (FGI)
               material shall be in accordance with the HP's packaging
               guidelines as stated in each applicable Appendix. Any varying
               requirements will be specified by project.

37.0  DESIGN, MATERIAL AND PROCESS CHANGE

        37.1   Approval of changes. Contractor will not change any process,
               material, or component used in repairing product for HP that
               affects Form, Fit, Function, or any specification of any
               component, material, or unit without obtaining HP's prior
               written approval. Any such changes, including changes that will
               increase HP's costs in any way, must be approved by HP prior to
               Contractor implementing the change.

        37.2   At Contractor's request. Contractor's request will include
               applicable test results and any cost, schedule, or other
               impact of such change to HP at least thirty (30) days before
               it wishes to implement such a change. If required, HP may
               request, at HP's expense, (within 5 days) Contractor to
               provide sample units of the modified product for HP's evaluation.
               HP will approve or disapprove Contractor's request within
               ten (10) days after the receipt of information or sample units.

        37.3   At HP's request. Should HP desire modifications to the design of
               a product, HP will submit a written Production Change Order
               ("PCO") to Contractor. Contractor will implement the PCO as
               stated within the PCO and notify HP of any impact in cost or
               schedule within 3 working days of receipt of PCO.

        37.4   Continued Process Improvement. Contractor will conduct business
               in a manner that promotes a work environment that continually
               results in process and quality improvements.

                                      24

<PAGE>

38.0  PRICING AND COST

        38.1   Currency and pricing. The price for all Program Services and HP
               processes, including but not limited to warehousing, receiving,
               shipping, and logistic sevices shall be in U.S. dollars, unless
               otherwise stated, and shall remain in effect during the Term as
               defined in each Appendix. Prices and volumes will be reviewed
               mutually on a quarterly basis. Both HP and CONTRACTOR must agree
               to price changes in writing prior to the change going into
               effect.

        38.2   Costing Data. Contractor agrees to help HP understand
               Contractor's costs. Contractor further agrees to disclose all
               the cost components of the Program Services and Program processes
               performed for HP with the intent of reducing overall costs.

39.0  NOTICES

        39.1   Notices from CONTRACTOR. Any notices sent by Contractor pursuant
               to this DSA are to be sent to the address listed below. If the
               notice pertains to any of the attached Appendices of this
               Agreement, then the notice shall be sent to the address listed
               in each applicable Appendix:

                                      Hewlett-Packard,
                                      8000 Foothills Blvd., M/S 5781
                                      Roseville, CA  95747
                                      Attn:  Ryan Donovan

        39.2   Notices from HP. shall be sent to CONTRACTOR at:

                                      Pinnacle Data Systems, Inc.
                                      6600 Port Road
                                      Groveport, Ohio 43125
                                      Attn: Bob Hahn

40.0  BUSINESS CONTINUITY PLAN

        40.1   Contractor will develop and keep current a business continuity
               plan which details strategies for response to and recovery from
               a broad spectrum of potential disasters that could disrupt
               operations and timely delivery of materials required pursuant to
               this Agreement.("Disaster" means a serious disruption of the
               functioning of an organization, causing widespread human,
               material or environmental losses that exceed the ability of the
               organization to cope using only its own resources.)

        40.2   This plan will include a baseline hazard analysis, a written
               recovery  plan, and procedures, a mitigation plan to prevent
               losses or minimize  effects of unavoidable ones and a crisis
               communication plan. "Hazard" means an existing or unusual
               occurrence in the natural or human-made environment that may
               adversely affect human life, property, or activity to the extent
               of a disaster. Industrial/Technological Hazards include aircraft
               crashes, destruction of data storage, retrieval, and processing
               facilities, hazardous materials release, loss of data systems
               integrity from breaches of security, power failures, structural
               failures, telecommunications failures and transportation failures
               Natural Hazards include earthquake, flood, hurricane, landslide,
               tornado, tsunami, volcano, wild or forest fire, windstorm and
               winter storm.

        40.3   Contractor will conduct an annual test and evaluation of its
               business continuity plan to ensure expected systemic and process
               responsiveness from the Contractor. Any reasonable costs related
               to physical movement or relocation of equipment or material
               related to this test, will be paid by HP per pre-approved plan.

                                      25

<PAGE>

        40.4 Upon request, Contractor will make its business continuity plan
             and the annual evaluation available to HP or its designated
             representative for review.

41.0  FORCE MAJEURE

        41.1 Neither Contractor or HP will be liable for any failure or delay in
             its performance under this Agreement due to causes, including, but
             not limited to acts of God, acts of civil or military authority,
             fires, epidemics, floods, earthquakes, riots, wars, sabotage, labor
             shortages or disputes, governmental actions, and the unavailability
             of materials and components necessary for the repair of units or
             sub-assemblies provided that:

                41.1.2  performance or delay is beyond CONTRACTOR's reasonable
                        control;

                41.1.3  Contractor  gives HP written  notice of such cause
                        promptly,  and in any event within five (5) days of
                        discovery  thereof; and

                41.1.4  Contractor uses its reasonable efforts to correct such
                        failure or delay in performance.

        41.2 Contractor's time for performance or cure under this section will
             be extended for a period equal to the duration of the cause or
             sixty (60) days, whichever is less. In the event of a delaying
             cause, HP may elect to suspend the Agreement in whole or in part
             for the duration of the delaying cause.

42.0  NO WAIVER

        42.1 The waiver of any term, condition, or provision of this Agreement
             must be in writing and signed by an authorized representative of
             both parties. Any such waiver will not be construed as a waiver of
             any other term, condition, or provision except as provided in
             writing, nor as a waiver of any subsequent breach of the same
             term, condition, or provision.

43.0  SEVERABILITY

        43.1 If any provision in this Agreement or any Exhibit, or Appendix is
             held invalid or unenforceable by a body of competent jurisdiction,
             such provision will be construed, limited or, if necessary,
             severed to the extent necessary to eliminate such invalidity or
             unenforceability. The parties agree to negotiate in good faith a
             valid, enforceable substitute provision that most nearly effects
             the parties' original intent in entering into this Agreement or to
             provide an equitable adjustment in the event no such provision can
             be added. The other provisions of this Agreement or any Exhibit or
             Appendix will remain in full force and effect.

44.0  MODIFICATION AND AMENDMENT

        44.1 No modification or amendment of this Agreement or any Exhibit or
             Appendix will be binding on either party unless it is in writing
             and signed by an authorized representative of each party and it
             expressly states that it is a modification or amendment to this
             Agreement or any Exhibit or Appendix.

45.0  EXHIBITS and APPENDICES ATTACHED

        All exhibits and Appendices attached to this Agreement shall be deemed
        a part of this Agreement and incorporated herein. Terms that are
        defined in this Agreement, and used in any exhibit and appendix, have
        the same meaning in the exhibit and appendix as in the Agreement.

        The following exhibits are hereby made a part of this Agreement:

        Exhibit A:  Expenditure Proposal

        Exhibit B:  Contractor Security Requirements

                                      26

<PAGE>

        Exhibit C:  Equipment Loan Agreement

        Exhibit D:  Performance Evaluation (TQRDCE)

        Exhibit E:  Packaging Standards

        Exhibit F:  HP Holiday Schedule

        Exhibit G:  Pinnacle Holiday Schedule

        Exhibit H:  Pinnacle Business Continuity Plan

        Exhibit I:  Electrostatic Discharge Control Standard

This Agreement, including all exhibits, is approved and agreed to by:

Hewlett-Packard Company - HP                 PINNACLE DATA SYSTEMS, INC.
----------------------------                 ---------------------------

Name:    Bruno Pillet                        Name:  Bob Hahn

Title:   HP Customer Support Manager         Title:    Vice President/COO

Signature: _______________________           Signature: _______________________

Name:    William Shadle

Title:   Sourcing Development Manager

Signature: _______________________

                                      27

<PAGE>

                                Exhibit A

                          Expenditure Proposal

                       EXPENDITURE PROPOSAL FORM
                       -------------------------

The following items have been approved by the ________________________Division
of Hewlett-Packard for purchase for the ______________________________ program
operated by [Contractor's Name] ("Contractor") for the benefit of
Hewlett-Packard. It is acknowledged that these items exceed the pre-approved
expenditure allowance of $___________.

        -----------------------------------------------------------------------
            ITEM/DESCRIPTION       COST      AMORTIZATION      OWNER AFTER
                                               PERIOD          DEPRECIATION
        -----------------------------------------------------------------------
        -----------------------------------------------------------------------
        -----------------------------------------------------------------------
        -----------------------------------------------------------------------
        -----------------------------------------------------------------------
        -----------------------------------------------------------------------
        -----------------------------------------------------------------------

        -----------------------------------------------------------------------
          SUBMITTED BY:                                      DATE:
        -----------------------------------------------------------------------
          APPROVED BY:                                       DATE:

                           Hewlett-Packard Co.
        -----------------------------------------------------------------------
          APPROVED BY:                                       DATE:

                           Contractor
        -----------------------------------------------------------------------

NOTE: For each item listed above, a separate document MUST be attached that
fully describes how transfer of ownership of the item, or distribution of funds
from sale or salvage of the item, will be handled in each the following
situations:

        1.  The item will no longer be required for the program being managed
            by Contractor, OR

        2.  Either HP or the Contractor terminates the contract for the program
            being managed by Contractor.

                                      28

<PAGE>

                                   Exhibit B

                         Contractor Security Guidelines

1.  ACCESS CONTROL

     1.1.   ACCESS CONTROL (EMPLOYEES, CONTRACTORS, TRUCKERS)

            A formal access control program is required for all individuals that
            enter a warehouse where HP products are stored, manufactured,
            repaired or shipped to other destinations. All individuals should be
            granted access on a business need only basis. HP reserves the right
            to refuse access to any individual for business, security or safety
            reasons.

     1.2.   VISITOR BADGE PROCESS and ESCORT PROGRAM

            All visitors should be properly identified and issued ID badges
            accordingly. Any person other than an employee of the third party
            vendor should be required to be escorted at all times while in the
            facility. An exception to this would be employees of the third party
            supplier.

     1.3.   SIGN IN and OUT PROCEDURE

            All individuals should be required to sign in and out of any third
            party warehouse facility. An exception to this would be if the
            facility is under card key control. Those individuals who hold valid
            card keys would use the system to log in and out. All others would
            still be required to sign the log. All logs should be archived for a
            period of one year.

     1.4.   TOUR CONTROL

            Any individual (including Hewlett-Packard employees) should be
            required to have pre-authorization from HP Program Manager or their
            representative PRIOR to any tour into designated areas of facilities
            where services are being provided or inventory is being stored for
            HP.

2.  ALARM SYSTEMS

     2.1.   DOCK DOORS and ALARM CONTACTS

            A process should exist to prevent unauthorized access via dock
            doors. The process shall include:

            2.1.1.   Ensuring that doors are only open when a trailer is
                     properly attached and sealed to the building;

            2.1.2.   Ensuring that security officers are present in the case of
                     any open door(s);

            2.1.3.   Ensuring that all doors are equipped with alarm contacts
                     linked to a local security command center or central
                     monitoring station.

     2.2.   EMERGENCY EXITS and ARMING, I.E. LOCAL SCREAMERS, ETC.

            All non-staffed emergency exits should at a minimum be alarmed with
            local screamers that require reset by a key. Additional enhancements
            could include reporting back to a command center or central
            monitoring station.

     2.3.   INTERIOR ELECTRONIC DETECTION IN BUILDING/ZONING OF ALARM SYSTEM

            To compliment perimeter controls, infrared protection within the
            facility has proven to be beneficial especially in low use areas.
            Consideration may be given to establishing zone patterns for alarms.
            This will enable management to provide additional protection to low
            use areas as well as component storage during normal business hours.

                                      29

<PAGE>

     2.4.   ALL MANNED DOORS SHOULD HAVE LATCH PLATES INSTALLED

            External doors should have latch plates installed to prevent
            unauthorized entry.

     2.5.   ROOF HATCHES

            Roof hatches should be assessed for adequate protection levels.
            Considerations should be given to monitor contact alarms or steel
            grates/bars preventing easy intrusion.

     2.6.   ALARM REPORTING RESPONSE AND ALARM ARMING

            A process should be in place to ensure timely reporting and
            escalation of all alarm conditions. This process should include
            alarm & de-alarming procedures, i.e. times of day, who can authorize
            an unlock, etc.

     2.7.   ALARM CHECKS AND PM PROCESSES

            Written procedures should be in place to ensure that all alarms are
            checked frequently to ensure proper operation. A preventative
            maintenance program should compliment this process.

3.   SECURITY SYSTEMS

     3.1.   DOCK AND PERSONNEL DOOR CAMERAS

            It is preferable to have surveillance cameras at all non-staffed
            employees access doors. All shipping and receiving docks should have
            cameras installed to adequately monitor all activities in these
            areas.

     3.2.   ARCHIVING VCR TAPES

            Tapes that have been used to record access, egress and dock
            activities should be archived for a minimum of ninety (90) days.
            New, replacement tapes should be provided to replace tapes that
            begin to deteriorate in picture quality & resolution.

4.   PRODUCT and INVENTORY PROTECTION

     4.1.   HP PRODUCT PROTECTION

            All Hewlett-Packard property and products should be stored in such a
            way that they are not mixed in with other companies' property. Where
            possible, motion sensors should compliment segregation procedures to
            enhance inventory protection. High-risk materials should not be
            stored outside of the warehouse, i.e. not left in trailers or on
            exterior docks.

     4.2.   SMALL COMPONENTS IN CAGES

            Small components such as microprocessors and other chips with high
            street dollar values should be stored in cages that have additional
            security procedures for access. This would include limited access,
            which could be controlled by card key access, high level key systems
            and/or sign in and out logs. Cameras should be installed to monitor
            the inventories stored in these cages.

5.   EXTERIOR and PERIMETER PROTECTION

     5.1.   EXTERIOR LIGHTING

            Lighting should be adequate enough to cover all building perimeters
            and personnel parking areas. All gatehouses should be well
            illuminated to enable proper identification of employees and
            vehicles.

     5.2.   PERIMETER FENCING and GATES

            All facilities should be fenced, at least seven (7) feet high with
            chain link fabric of number nine (9) wire, and with three (3)
            strands of barbed wire on outward supports at the top. All gates
            should be locked when not in use. Gatehouses should be staffed by a
            security officer during normal business hours and locked when not in
            use.

                                      30

<PAGE>

                                    Exhibit C

                            Equipment Loan Agreement

THIS EQUIPMENT LOAN AGREEMENT, NO. ____ (the "Agreement") is entered into
between HEWLETT-PACKARD COMPANY, a Delaware corporation ("HP"), and
__________________, a ______________ company located at_________________________
("Recipient").  This Agreement is effective as of _______________, _____
(the "Effective Date").

[Recipient and HP are currently parties to a _________________________ Agreement
(the "Master Service Agreement"), dated as of______________, _____.]

1     Loan of Equipment. HP hereby loans to Recipient, for the applicable Term
      -----------------
      defined below, the HP-owned equipment (collectively, "HP Equipment"),
      which may consist of hardware, software and documentation described in the
      HP Equipment Schedule attached as Attachment 1. HP may, from time to time,
                                        ------------
      add, upgrade, or remove HP Equipment from Recipient's site during the
      Term. All HP Equipment received by Recipient during the Term will be
      described in an amended HP Equipment Schedule signed by Recipient and
      appended to this Equipment Loan Agreement. Recipient agrees, by its
      receipt of HP Equipment, that all HP Equipment is subject to the
      provisions of this Agreement.

2     Term. This Agreement will begin as of the Effective Date and run for a
      ----
      term of _________ months (the "Term"), unless earlier terminated by HP
      or Recipient upon thirty (30) days written notice to the other. HP may
      in writing extend the Term, or establish a separate Term with respect
      to particular items of HP Equipment.

3     Use.  Recipient  may  use  the  HP  Equipment  solely  for  purpose  of:
      ---
      ______________________________  [in  accordance  with the Master  Service
      Agreement].  Recipient  may not move any HP  Equipment from the location
      specified in the HP Equipment Schedule without the prior written consent
      of HP.  Recipient's right to use the HP Equipment is non-transferable.

4     Software and Documentation. All software provided with the HP Equipment is
      --------------------------
      hereby licensed to Recipient under HP's Software License Terms, a current
      form of which is attached as Attachment 2. If Recipient requires a license
                                   ------------
      to use any software other than as stated in the Software License Terms,
      that license must be specified in the HP Equipment Schedule. Any
      documentation listed in the HP Equipment Schedule is licensed to Recipient
      for its use solely for the purposes stated in Section 3 above. If
      Recipient wishes to make copies of any documentation, it must first obtain
      HP's prior written consent.

5     Ownership. HP retains all right, title and ownership to the HP Equipment,
      ---------
      unless Recipient purchases any such HP Equipment. Recipient hereby
      nominates and appoints HP as its attorney-in-fact for the sole purpose of
      executing and filing, on Recipient's behalf, UCC-1 financing statements
      (and any appropriate amendments thereto) or a suitable substitute document
      (including this Agreement) under the provisions of the Uniform Commercial
      Code for the HP Equipment loaned to Recipient hereunder. A form of an
      UCC-1 financing statement will be used for this purpose. If requested by
      HP, Recipient will affix any label or marking supplied by HP evidencing
      HP's ownership of the HP Equipment. HP may, from time to time, inspect the
      HP Equipment. Recipient may not sell, transfer, assign, pledge, or in any
      way encumber or convey the HP Equipment or any portion or component of
      such equipment.

6     Warranty Disclaimer. ALL HP EQUIPMENT IS PROVIDED "AS IS", WITHOUT
      -------------------
      WARRANTY OF ANY KIND, WRITTEN OR ORAL, EXPRESS OR IMPLIED, INCLUDING BUT
      NOT LIMITED TO ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR
      PURPOSE. Recipient understands that some newly manufactured HP Equipment
      may contain remanufactured parts equivalent to new in performance.

                                      31

<PAGE>

7     Indemnification. Recipient hereby agrees to defend, indemnify and hold HP
      ---------------
      harmless from any claims or suits against HP arising from Recipient's use
      of the HP Equipment, including use by its employees, agents or
      subcontractors. Recipient will pay all costs, damages, losses and expenses
      (including reasonable attorneys' fees) incurred by HP and will pay any
      award with respect to any such claim or agreed to in any settlement.

8     Maintenance. During the Term, Recipient will maintain all HP Equipment in
      -----------
      good operating order and condition. All maintenance must be provided by
      personnel authorized by HP. HP will provide standard installation, support
      and maintenance for the HP Equipment [at no cost] [at HP's standard rates]
      to Recipient during the Term; however, all maintenance costs and expenses
      due to Recipient's negligence will be borne by Recipient. Recipient will
      be responsible for providing HP personnel ready and safe access to the HP
      Equipment for such maintenance and support.

9     Risk of Loss. Recipient will bear all risk of loss with respect to the HP
      ------------
      Equipment from receipt until such HP Equipment is returned to HP. All HP
      Equipment returned to HP must include the same components as received by
      Recipient, and must be in good operating order and condition. Charges may
      be imposed by HP if Recipient fails to return the HP Equipment in such
      condition or within the return timeframe set forth herein.

10    Shipping Costs. Unless otherwise agreed in writing by HP, Recipient will
      --------------
      be responsible for and pay all delivery, freight and rigging charges, all
      taxes and duties, and all other shipping costs and expenses with respect
      to the delivery or return of any HP Equipment hereunder.

11    Limitation of Liability. HP WILL NOT BE LIABLE FOR ANY DIRECT, INDIRECT,
      -----------------------
      SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES, WHETHER BASED ON CONTRACT,
      TORT, OR ANY OTHER LEGAL THEORY, ARISING OUT OF THIS EQUIPMENT LOAN
      AGREEMENT OR RECIPIENT'S USE OF THE HP EQUIPMENT.

12    Termination. Upon expiration or earlier termination of the Term, Recipient
      -----------
      will return to HP all HP Equipment within 10 workdays. HP may permit
      Recipient to purchase certain items of the HP Equipment upon termination
      under the purchase terms set forth below. In the event that Recipient is
      permitted to purchase any of the HP Equipment and fails to return that
      Equipment to HP upon expiration of the Term within such 10-day period,
      Recipient will be deemed to have elected to purchase the HP Equipment,
      and HP will invoice Recipient accordingly.

13    Purchase Option. If HP permits Recipient to purchase any of the HP
      ---------------
      Equipment, Recipient may elect to purchase those items of the HP Equipment
      under HP's then current standard terms and conditions, provided that such
      HP Equipment may not be purchased solely for resale. Upon purchase, such
      HP Equipment will be provided with HP's then current standard warranty
      provisions for used equipment. The purchase price for HP Equipment
      purchased under this Section will be the then current list price less
      a ______% discount. No other promotional or purchase discounts will apply.
      Such purchase will not qualify for any stock rotation or price protection
      under any other agreement that Recipient may have with HP.

14    General Provisions.
      ------------------

      a)  Notices . All notices to be given under this Agreement must be in
          -------
          writing and addressed to the location specified in the Master
          Agreement or as designated in the opening Section of this
          Agreement if there is no Master Agreement. Notices are validly
          given upon the earlier of confirmed receipt by the receiving party or
          three days after dispatch by courier or certified mail, postage
          prepaid, properly addressed to the receiving party. Notices may also
          be delivered by telex and will be validly given upon oral or written
          confirmation of receipt. Either party may change its address for
          purposes of notice by giving notice to the other party in accordance
          with these provisions.

                                      32

<PAGE>

     b)     No Assignment. Neither this Agreement nor any right, privilege,
            -------------
            license or obligation set forth herein may be assigned,
            transferred or shared by Recipient without HP's prior written
            consent, and any such attempted assignment or transfer is void.
            Any merger, consolidation, reorganization, transfer of
            substantially all assets of Recipient or other change in control
            or ownership of Recipient will be considered an assignment for the
            purposes of this Agreement.

     c)     Entire Agreement. This Agreement and the attached Exhibits
            ----------------
            comprise the entire understanding between the parties with respect
            to its subject matter and supersede any previous communications,
            representations, or agreements, whether oral or written. No
            modification of this Agreement will be binding on either party
            unless in writing and signed by an authorized representative of
            each party.

     d)     Governing Law. This Agreement will be governed in all respects by
            -------------
            the laws of ____________ without reference to any choice of laws
            provisions, as though this Agreement were entered into by
            residents of that State to be wholly performed within that State.
            The parties hereby waive any application of the United Nations
            Convention on Contracts for the International Sale of Goods (as
            promulgated in 1980 and any successor or subsequent conventions)
            with respect to the performance or interpretation of this
            Agreement.

APPROVED AND AGREED:

RECIPIENT:_____________________                         HEWLETT-PACKARD COMPANY

By:                                                     By:

Print Name:                                             Print Name:

Title:                                                  Title:

                                      33

<PAGE>

                                         PROGRAM EQUIPMENT LOAN AGREEMENT

                                                  AND ASSET LIST

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------------------
                                                Program Equipment and Asset List                                             Page 1
----------------------------------------------------------------------------------------------------------------------------------
Contract #                                      Location                     Contractor Name:
----------------------------------------------------------------------------------------------------------------------------------
                                                                                 Responsible
Date     ID # or               Equipment     Equipment  Description  Equipment   for           Disposition   Disposition  Name of
Listed   HP Asset #  Serial #  Manufacturer  Model #                 Condition   Maintenance   Date          Description  Disposer
----------------------------------------------------------------------------------------------------------------------------------
<S>      <C>         <C>       <C>           <C>        <C>          <C>         <C>           <C>          <C>
----------------------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

                                      34

<PAGE>

                                    Exhibit D

                         Performance Evaluation (TQRDCE)

TQRDCE is a set of performance expectations and measurement criteria for use in
qualifying new service CONTRACTORs, and managing the ongoing long-term business
relationship with existing service CONTRACTORs.

The initials TQRDCE represent: Technology, Quality, Responsiveness, Delivery,
Cost and Environment.

The success of service CONTRACTOR performance is rightfully shared with our
service CONTRACTORs who specifically contribute to our commitment to
excellence.  Successful service CONTRACTOR performance in the areas of TQRDCE
will increase the opportunity for repeat business, increased sales, and
profitable growth.

A primary objective for procurement is: To maintain a competitive advantage by
providing materials of the highest quality and lowest cost, with the best
delivery, responsiveness, and technology available, by selecting fewer but
better service CONTRACTORs. In order to accomplish this objective, the TQRDCE
criteria were developed.

Technology
HP must compete in the world market on the basis of manufacturing technology, as
well as design technology. We expect our service CONTRACTORs to be technological
leaders in their respective fields of design and manufacturing. Service
CONTRACTORs are expected to participate in mutual engineering throughout HP's
products' life cycle to enable timely introductions and continuous quality and
cost improvements.

Quality
HP set a quality goal of zero defective products for electrical, mechanical,
cosmetic, and administrative reasons. HP's quality expectation is defect-free
materials. Quality and reliability are expected to be achieved through superior
design, process control and continuous process improvements. All material is to
be fit for use, and to be cosmetically acceptable.

Responsiveness
HP expects service CONTRACTORs to be responsive to swings in demand, with short
cycle times, and appropriate inventory management, while maintaining flexible
capacity capabilities to successfully resolve problems and improve worldwide
service.

Delivery
HP expects deliveries to be 100% on time all the time within a window of -3/+0
(three days early and no days late). To achieve this expectation there must be
continuous improvement in overall delivery performance and our service
CONTRACTORs must be prepared to meet commitments worldwide. Lead times must be
short by industry standards, reliable and decreasing over time.

COST
HP expects to minimize costs and obtain the lowest average price worldwide.

Environment
HP recognizes its obligations to be a good citizen in each nation and community
in which it operates. HP must conduct its operations in such a manner that
protects the environmental quality of these countries and communities. Our
service CONTRACTORs are an integral part of this effort; therefore, HP service
CONTRACTORs are expected to conduct their operations in an environmentally
responsible manner.

By setting service CONTRACTOR expectations HP hopes to:
- maximize customer satisfaction;

                                      35

<PAGE>

- maximize profitability for all contributors to the system;
- maximize responsiveness to change; and
- provide a framework for effective communications
         To accomplish these objectives HP will need to:
         - establish and maintain long-term commitments;
         - promote effective communications;
         - obtain mutual agreement on expectations and goals;
         - treat a service CONTRACTOR's process as an extension of HP's
           processes;
         - and utilize a team approach to achieve performance improvements
           (proactive/cooperative).

         The success of service CONTRACTOR performance is rightfully shared
         with our service CONTRACTORs who specifically contribute to our
         commitment to excellence. Successful service CONTRACTOR performance in
         the areas of TQRDCE will increase the opportunity for repeat business,
         increased sales, and profitable growth.

                                      36

<PAGE>

                                    Exhibit E

                             HP Packaging Standards

                                      37

<PAGE>

                                     Exhibit F

                               HP HOLIDAY SCHEDULE

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

                                                                  March 01, 2001

                                      38

<PAGE>

                                    Exhibit G

                           Contractor Holiday Schedule

                                      39

<PAGE>

                                    Exhibit H

                       Contractor Business Continuity Plan

                                      40

<PAGE>

                                    Exhibit I

                    Electrostatic Discharge Control Standard

                          (begins on following page)

                                      41

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