Document:

EX-10.4 MANUFACTURING AGREEMENT DATED 7-12-06

 

Exhibit 10.4

MANUFACTURING AGREEMENT

This MANUFACTURING AGREEMENT is entered into as of this 12th day of July 2006 by and between CM
Solutions Corporation, a Mississippi corporation, whose principal place of business is located at
2674 South Harper Rd, Corinth, MS 38834 (hereinafter referred to as “Manufacturer”), and Verso
Technologies, Inc., a Minnesota corporation, and Verso Verilink, LLC, a Georgia limited liability
company, each having its principal office at 400 Galleria Parkway Suite 200 Atlanta, Georgia 30339
(hereinafter referred to collectively as “Purchaser”).

	1.	 	TERM
	 
	 	 	This Agreement shall become effective on the date hereof and shall continue in effect for
three (3) years and will automatically update and continue for One (1) year, unless
requested in writing by either party at least ninety (90) days prior to end of term.
	 
	2.	 	SPECIFICATIONS; QUALITY

	 	(a)	 	All products to be manufactured pursuant to this Agreement shall be identified
in a unique purchase order issued by the Purchaser to the Manufacturer defining all
requirements of the particular build (the “Products”). These Products shall be
manufactured in accordance with Purchaser’s specifications and drawings, which
have been provided to Manufacturer. All Products built by Manufacturer for Purchaser
are subject to the terms and conditions of this Agreement.
	 
	 	(b)	 	CM Solutions agrees to supply product built to RoHS standards, at a mutually
agreed to time and price.
	 
	 	(c)	 	All work performed by Manufacturer shall be performed in a skillful and
professional manner and shall be consistent with best commercial standards of the
industry, including but not limited to the following:

	 	(1)	 	ISO 9002
	 
	 	(2)	 	BABT
	 
	 	(3)	 	Production Quality Assurance Approval (PQAA) facility
certification
	 
	 	(4)	 	IPC-A-610 Class 2 (acceptability of Electronic Assemblies)

	 
	 	(5)	 	
IPC-3-815 Class 2 (SMT-acceptability of electronic assemblies)
	 
	 	(6)	 	IPC-R-700 (guidelines for modification and repair of PCB’s and
assemblies)
	 
	 	(7)	 	Purchaser’s “Quality Plan” (See Exhibit B)

	3.	 	TRANSPORTATION

			
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	 	 	Transportation services shall be provided by Manufacturer, for deliveries of assembled
boards to Madison, Alabama facility (FOB Purchaser’s Dock). Manufacturer will back haul
“consigned material” from Purchaser to the Manufacturer.

	4.	 	PAYMENT TERMS
	 
	 	 	Payment terms for all Products shall be net Thirty (30) days from the date of invoice. All
“invoices” shall contain such detail, as may be necessary to support Manufacturer’s charges.
	 
	 	 	Payments will be in U.S. dollars

	5.	 	INVENTORY — BONDED STORES ACCOUNT
	 
	 	 	Manufacturer will maintain a “Bonded Stores Inventory” account, which will include raw
materials inventory owned by Purchaser. While Purchaser owns the items in this “Bonded
Stores Inventory” account, the Manufacturer is responsible for staffing, maintenance, data
and inventory accuracy. A formal cycle count process and / or physical inventories will be
required by Manufacturer. In the event the Manufacturer’s inventory accuracy, defined as
book-to-physical units and dollars, falls below 98% accuracy, Purchaser will require
Manufacturer to complete a physical inventory, at Manufacturer’s expense, until such time
inventory accuracy is compliant. Failure to meet these requirements will require the
Manufacturer to provide a root cause analysis, containment plan, and preventive action plan
based on Purchaser’s periodic audits.
	 
	6.	 	CONSIGNMENT OF EQUIPMENT; TRAINING
	 
	 	 	Purchaser will deliver to Manufacturer its test equipment and manufacturing equipment unique
to Purchaser’s Products for use by Manufacturer in manufacturing and testing
Products. Purchaser will retain title to such equipment, which shall be immediately
returned to Purchaser upon termination of this Agreement in good working order.
Manufacturer shall maintain and upgrade the equipment as may be required to perform its
obligations under this Agreement. Purchaser shall provide at its cost such additional test
equipment as may be necessary to meet production requirements. Any modifications required
to be made to equipment provided to Manufacturer pursuant to this section shall be
documented by an Engineering Change Order (“ECO”) or (Equivalent Manufacturing Control
Documents) and shall be at Purchaser’s expense. Purchaser shall provide such
training to Manufacturer’s personnel as may be necessary for Manufacturer to manufacture and
test Products. (The test equipment and manufacturing equipment provided pursuant to this
paragraph is collectively known as “Tools”.)

			
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	 	 	Manufacturer shall not assign, lease, license, pledge, loan, mortgage or otherwise part with
possession of, or the right to possess the Tools. Manufacturer shall allow no claims,
encumbrances or liens with respect to the Tools and shall not state or imply to any third
party that Manufacturer is the owner of the Tools.
	 
	 	 	Manufacturer agrees that all Tools provided under this Agreement will be used only to
manufacture Purchaser’s Products, unless otherwise approved by the Purchaser.
	 
	 	 	Manufacturer agrees that it will follow normal industrial practice in the identification and
maintenance of the property control records on all such tooling, and will make such records
available for inspection by the purchaser at all reasonable times. This includes annual
calibration requirements imposed by Purchaser.
	 
	7.	 	PRICING;
	 
	 	 	Manufacturer’s prices shall be identified in Exhibit “A” and shall be reviewed by both
parties after each 12-month period of this Agreement. Exhibit A will be updated
periodically, and revision controlled by “date”. Non-PCB materials (any items not included
on the bill-of-materials) will be included as part of Manufacturer’s cost of business, and
not directly reimbursable. Examples include, but are not limited to, flux, solder, labels,
adhesives and tape.

     NOTE: This pricing does not include RoHS Process.

8. PURCHASE ORDERS (for Consignment Production)

	 	(a)	 	Products purchased in accordance with the terms of this agreement related to
inventory stored in the bonded stores account, shall be made pursuant to a Purchase
Order, signed by an authorized representative of Purchaser and shall contain
Purchaser’s part number, revision level of Products to be shipped, and Purchaser’s
delivery schedule.
	 
	 	(b)	 	Purchaser’s expectation is normally a 2-week lead-time, as material shortages
are filled, for board assembly delivery to Purchaser. On occasion, Purchaser may need
expedited delivery.
	 
	 	(c)	 	Purchaser shall be entitled to cancel, reschedule or modify Purchase Orders.
If such action by Purchaser represents an acceleration of shipment date or increase in
quantity of Products, Manufacturer will use its best commercial efforts to meet
Purchaser’s request, subject to material availability and capacity, and expedited labor
charges, where applicable.

			
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	 	(d)	 	Whenever possible, Purchaser shall provide Manufacturer at the beginning of
each calendar month, a forecast of anticipated volume for board assemblies for the next
calendar month.

	9.	 	PURCHASE ORDERS: (for TURN-KEY Product)

	 	 	 	 	 
	 

	 	(a.)
	 	Products purchased in accordance with the terms of this Agreement as turnkey
products shall also be made pursuant to a Purchase Order, signed by an authorized
representative of Purchaser and shall contain Purchaser’s part number, revision level
of Products to be shipped, and Purchaser’s delivery schedule.
	 
	 	 	 	 
	 

	 	(b.)
	 	Purchaser will issue purchase orders at least 6 weeks in advance of delivery.
	 
	 	 	 	 
	 

	 	(c.)
	 	When possible, Purchaser will share with Manufacturer the forecasted product
volumes, and any forecast data will be deemed “non-binding to Purchaser”.

	10.	 	Management & Material Procurement

	 	 	 	 	 
	 

	 	(a.)
	 	Materials Management for the “Turn-key” portion of this agreement shall be in
keeping with the following goals:

	 	1.	 	The intent is to reduce Purchaser lead times to the
least number of weeks possible, with the standard being 6 weeks to point of
delivery.
	 
	 	2.	 	Manufacturer shall set up with suppliers for all
applicable items, with a “supplier managed bond quantity” available and
replenished as pulls are made.
	 
	 	3.	 	Purchaser and Manufacturer will agree in writing to a
“specific set of components”, referred to as “Strategic items”, for which
the Purchaser will manage and sell to Manufacturer, as required.
	 
	 	4.	 	Purchaser and Manufacturer will agree to a specific
list of components, referred to as “Critical Components”, which will be
purchased, stocked and managed by Manufacturer, and for which Purchaser
will have liability.
	 
	 	 	 	This listing will be jointly reviewed monthly for required action.
	 
	 	5.	 	Purchaser will identify to Manufacturer periodically a
listing of “available, excess inventory”, which Manufacturer will be
required to purchase from Purchaser first, until supply is exhausted.

			
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	 	(b.)
	 	Purchaser acknowledges its financial responsibility for the material purchased
by Manufacturer to support Purchaser’s purchase orders, as well as any other documented
and mutually agreed to “strategic and critical component buys”.
	 
	 	 	 	 
	 

	 	(c.)
	 	Manufacturer agrees to use commercially reasonable efforts to manage inventory
and purchase materials in a manner that is cost effective. However, in the event of a
change in material costs, Purchaser and Manufacturer agree that any such change in
pricing will be fully passed on to Purchaser upon depletion of the current inventory.
	 
	 	 	 	 
	 

	 	(d.)
	 	Manufacturer agrees to procure material specified by Purchaser’s bills of
material only from the manufacturers listed on the Approved Vendor List (AVL).
	 
	 	 	 	 
	 

	 	(e.)
	 	Manufacturer will charge Purchaser for any purchase premiums, expediting fees
or special freight costs incurred because of a Purchaser caused occurrence, including
but not limited to, Purchaser’s demand of assemblies.
	 
	 	 	 	 
	 

	 	(f.)
	 	Minimum production lot sizes will be reviewed and mutually agreed upon on a
periodic basis.
	 
	 	 	 	 
	 

	 	(g.)
	 	Purchaser agrees to pay non-recurring expenses (NRE) incurred by Manufacturer,
during the set-up of the supply chain, that have been pre-approved by Purchaser.
	 
	 	 	 	 
	 

	 	(h.)
	 	Manufacturer is authorized to purchase materials and make commitments to
vendors on the (AVL) using standard purchasing practices including, but not limited to
supplier imposed minimum order quantities (MOQ), minimum build quantities, and economic
order quantities.

	11.	 	Scheduling

	 	 	 	 	 
	 

	 	(a.)
	 	Increasing/Upside in Schedule; Manufacturer will use reasonably best
efforts to accommodate requests on a case-by-case basis. Requests for increase in
quantities may be subject to additional charges and will be contingent upon
manufacturing cycle time, and availability of material. Charges will be reviewed and
approved by Purchaser prior to the increase in schedule.
	 
	 

	 	(b.)
	 	Downside Scheduling: Downside rescheduling of Purchase orders will be subject
to the limitations set forth below:
	 
	 	 	 	 
	 

	 	 	 	Maximum Allowable reschedule Quantities/shipment Dates

			
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	# of Days before Delivery	 	Max Resch Qty	 	Max Reschedule Period
	0-30
	 	0	 	0
	31-60
	 	25%	 	60 days
	Beyond 61 days
	 	100%	 	unlimited

	 	 	 	 	 
	 

	 	(c.)
	 	Cancellation: In the event of a termination or cancellation of a purchase
order, discontinuance of a product, or creation of excess Manufacturer owned material,
due to an engineering change order, Purchaser agrees to purchase from Manufacturer such
Products and / or excess material in accordance with the terms and conditions
previously set forth in Section 10 “Management and Material Procurement” and Section 12
“Excess and Obsolete Inventory” of this Agreement.
	 
	 

	 	 	 	Purchaser requests to cancel shipments of Products will be reviewed by Manufacturer
and cancellation charges will be assessed on the following items: (i) finished
goods, (ii) work in process, and (iii) material components on hand and on order with
suppliers, which cannot be rescheduled or cancelled.
	 
	 

	 	 	 	Manufacturer shall undertake reasonable efforts to cancel all applicable component
purchase orders and reduce component inventory through return for credit programs or
allocation of components to other programs.

	12.	 	Excess and Obsolete Inventory

	 	 	 	 	 
	 

	 	(a.)
	 	Excess Inventory is defined as inventory quantities on hand and any
non-cancelable/non-returnable quantities on order that will be in excess of demand as
identified in either Purchaser’s Purchase Orders, or deemed excess from the “Strategic
Parts Listing” and/or “Critical Parts Listing”, as identified in Section 10.a.3 and
10.a.4. Non-cancelable/non-returnable material includes all components acquired under
Manufacturer or Purchaser negotiated agreements with suppliers that do not provide for
return and / or cancellation free of charge. Non-returnable shall include “broken”
packages due to subsequent processing.
	 
	 	 	 	 
	 

	 	(b.)
	 	Manufacturer will carry raw material inventory for up to 90 days of demand at
no charge to Purchaser. Purchaser will be charged a monthly carrying charge at the
rate of 0.5 % of the inventory value exceeding 90 days demand from the date it is
reported as excess until 180 days when it will be dispositioned. Manufacturer and
Purchaser may agree to hold Excess Inventory for periods longer than indicated above
upon mutual agreement of terms and carrying charge(s).
	 
	 	 	 	 
	 

	 	(c.)
	 	OBSOLETE INVENTORY: Purchaser shall take receipt of obsolete inventory with-in
thirty (30) days of both parties agreeing to same, at current cost, plus 12.5 %
material markup.

			
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	13.	 	WARRANTY

	 	(a)	 	Manufacturer warrants that the Product sold hereunder will be free from defects
in material (as it relates to Purchaser’s approved vendor list) and workmanship
according to IPC 610 Workmanship Standards and other appropriate quality standards for
a period of one (1) year from the date of shipment, provided that: (i) Manufacturer is
notified in writing by Purchaser within thirty (30) days after Purchaser’s discovery of
any Product failure, or (ii) the defective Product is returned to Manufacturer no later
than ten (10) days following the last day of the warranty period. Manufacturer shall
include serial numbers and/or date stamps, as designated by Purchaser, on each Product
to facilitate warranty tracking. Purchaser shall forward defective Products to
Manufacturer freight prepaid, and Manufacturer will use its best efforts to
return the repaired or replaced Products freight prepaid by Manufacturer to Purchaser
no later than thirty (30) days from the date Manufacturer received the defective
Product. The foregoing warranty shall not be valid if the Product or component parts
have been subjected to abuse, misuse, accident, alteration, neglect, unauthorized
repair or installation.
	 
	 	(b)	 	Subject to Exhibit B, the foregoing warranty provisions set forth
Manufacturer’s sole liability and the Purchaser’s exclusive remedies for claims (except
as to title) based on defects in, or failure of, any Product sold hereunder when the
claim is based on breach of warranty. Upon the expiration of the applicable warranty
for any Product sold hereunder, all such liability shall terminate.
	 
	 	(c)	 	The above warranty periods shall not be extended by the repair or replacement
of Products pursuant to any of the above warranties. The above warranties shall apply
to Purchaser, its successors, assigns and those who purchase or use Products.
Purchaser shall deal directly with Manufacturer for returns and repairs.
	 
	 	(d)	 	Except as hereinabove provided, the foregoing warranties are exclusive and in
lieu of all other warranties, express or implied, or statutory, including the implied
warranty of merchantability or fitness for a particular purpose.

	14.	 	DELIVERY

	 	(a)	 	Products shall be delivered to Purchaser in accordance with the delivery dates
as specified on Purchaser’s Purchase Orders as agreed to by Manufacturer.

			
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	 	(b)	 	Upon learning of any potential delays, Manufacturer will immediately notify
Purchaser by e-mail in writing as to the cause and extent of such delay. Manufacturer
and Purchaser will review the cause and extent of such delay, and the Purchase Order
line item delivery date will be modified if material is determined to be on allocation,
defective, or incorrect, in a manner that could not be reasonably anticipated by
Manufacturer. If the above circumstances do not apply, the delivery schedule in the
purchase order shall remain in effect.
	 
	 	(c)	 	Purchaser has entered into contractual agreements with customers, to provide
“on time” deliveries for certain product, which provide penalties for late
deliveries. In the event Manufacturer is solely responsible for Purchaser’s late
delivery of product to its customer and pays actual penalties to such customer, then
Manufacturer and Purchaser will negotiate in good faith to determine the amount of such
penalty, if any, that Manufacturer is required to pay.

	15.	 	TERMINATION
	 
	 	 	This Agreement may be terminated by either party at any time upon the occurrence of any one
or more of the following events of default:

	 	(a)	 	Failure of the other party (i) to perform pursuant to the terms and conditions
of this Agreement; and (ii) to cure such performance deficiency within thirty (30) days
after receiving written notice thereof given by the aggrieved party;
	 
	 	(b)	 	The entering into or filing by the other party of a petition, arrangement or
proceeding seeking an order for relief under the bankruptcy laws of the United States,
a receivership for any of the assets of the other party, a composition with or
assignment for the benefit of its creditors, a readjustment of debt, or the dissolution
or liquidation of the other party;

	16.	 	INSPECTION

	 	(a)	 	Source Inspection: Upon request from Purchaser, Manufacturer agrees to
allow Purchaser to inspect and review the work being performed under this Agreement,
including materials and supplies being used. However, shipments will not be delayed if
Purchaser fails to conduct such source inspection. Source inspection does not
constitute acceptance of Products.
	 
	 	(b)	 	Approved Vendor List:  Manufacturer shall be provided access to
Purchaser’s Approved Vendor Listing (“AVL”) via on-line access and/or hard copy, and
shall insure that all components and material used in the

			
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	 	 	 	manufacture of Purchaser’s Products adheres specifically to this “Approved Vendor
Listing” (A.V.L.).

	17.	 	ENGINEERING CHANGE ORDERS (“ECOs”)
	 
	 	 	From time to time, Manufacturer will be asked to implement ECOs. The following shall apply
to ECOs:

	 	(a)	 	Purchaser shall notify Manufacturer in writing of a proposed ECO. This
notification should include the documentation of the change to effectively support
Manufacturer’s investigation of the impact of this proposal.
	 
	 	(b)	 	Upon notice of a change, Manufacturer will make best effort to review all costs
impacted within three (3) working days. All cost impacts and material availability
issues will be mutually reviewed and agreed to with Purchaser prior to implementation.
	 
	 	(c)	 	Emergency ECOs will be immediately implemented at Purchaser’s request.
Purchaser will be liable for costs associated with emergency ECO implementation.

	18.	 	CONFIDENTIALITY
	 
	 	 	Both parties acknowledge that, by reason of their relationship, they may have access to
certain information and materials concerning the other’s business, plans, and products
(including, but not limited to, information and materials contained in technical data
provided to the other party) which is confidential and of substantial value to the other
party, and which value would be impaired if such information were used by the other party or
disclosed to third parties. Both parties agree that they shall not use in any way, for
their own account or the account of any third party, nor disclose to any third party, any
such confidential information which is revealed to it by the other party without written
authorization from the other party. Each party will take every reasonable precaution to
protect the confidentiality of such information consistent with the efforts exercised by it
with respect to its own confidential information. Each party shall advise the other of
information or materials it considers confidential. Upon termination of this Agreement, all
confidential information shall be returned to owners of that confidential information. This
provision shall survive termination of this Agreement.
	 
	19.	 	INDEMNIFICATION AND INSURANCE
	 
	 	 	Each party shall indemnify and defend the other party against all claims, suits, losses,
expenses and liabilities for bodily injury, personal injury, death and property damage
directly or indirectly caused by any Products or through the

			
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	 	 	intentional acts or negligence of a party or of any person for whose actions such party is
legally liable.
	 
	 	 	Each party shall have and maintain, during the term hereof and for one year thereafter, (i.)
Commercial Liability Insurance (including, but not limited to, premises-operations, broad
form property damage, products/completed operations, contractual liability, independent
contractors, personal injury) with limits of at least $ 2,000,000 combined single limit for
each occurrence (limits may be satisfied with primary and /or excess coverage), (ii)
Commercial Automobile Liability Insurance with limits of at least $ 2,000,000 combined
single limit for each occurrence, and (iii) Workers’ Compensation Insurance as required by
Statue, and Employer’s Liability insurance with limits of not less than $ 1,000,000 per
occurrence.
	 
	 	 	The insurer must be licensed to do business in the state in which the work is performed and
must have Best Rating “Ax” or better. Annually, Manufacturer shall deliver a certificate of
insurance on which Purchaser is included as additional insured with reference to (i) in the
paragraph above. Certificates of insurance must be provided prior to any work being
performed and must be kept in force during the term of this Agreement. It is also agreed
that Manufacturer’s policy is primary.
	 
	20.	 	COMPLIANCE WITH APPLICABLE LAWS
	 
	 	 	Manufacturer has been, and shall continue to be, in material compliance with the provisions
of all applicable federal, state and local laws, regulations, rules and ordinances
applicable to the transactions governed by this Agreement.
	 
	21.	 	FORCE MAJEURE
	 
	 	 	In the event that performance by either party of its obligations under this Agreement is
prevented due to any Act of God, fire, casualty, flood, earthquake, war, strike, lockout,
epidemic, destruction of production facilities, riot, insurrection, or any other similar
cause beyond the reasonable control of the party invoking this section, and if such party
shall give prompt written notice to the other party, the time for its performance shall be
excused, and the time for the performance shall be extended for the period of delay or
inability to perform due to such occurrences.
	 
	22.	 	MISCELLANEOUS

	 	(a)	 	Severability: In the event that one or more of the provisions, or parts
thereof, contained in this Agreement shall for any reason be held to be invalid,
illegal, or unenforceable by a court of competent jurisdiction, the same shall not
invalidate or otherwise affect any other provision in the

			
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	 	 	 	Agreement, and the Agreement shall be construed as if such invalid, illegal or
unenforceable provision had never been contained herein.
	 
	 	(b)	 	Entire Agreement; Modification: This Agreement constitutes the entire
and exclusive statement by Purchaser and Manufacturer of the terms of their agreement.
Notwithstanding the above, any additional terms that may be contained in any purchase
order, invoice or other form of Purchaser will also apply. In the event terms in this
Agreement conflict with terms contained in one of these other forms of Purchaser, the
terms of this Agreement will govern. All prior and contemporaneous proposals,
negotiations, representations and agreements are merged into this Agreement. The terms
of this Agreement may not be altered, modified, superseded, amended or rescinded, and
no additional terms shall become a part of this Agreement, except pursuant to a writing
specifically referencing this Agreement and signed by a representative of the party
against whom enforcement is sought.
	 
	 	(c)	 	Notice: Unless otherwise specified in this Agreement, all notices and
other communications permitted or required by the provisions hereof shall be in writing
and shall be mailed, faxed or delivered to the other party at the address set forth
below (or at such other address as either party shall designate in writing to the other
party during the term of this Agreement) and shall be effective and deemed received:
i) if mailed, when actually received; ii) if faxed, when actually received; or iii) if
personally delivered, when delivered. Each notice to Manufacturer or Purchaser shall
be addressed, until notice of change thereof, as follows:

	 	i)	 	If intended for Manufacturer, to:
	 
	 	 	 	C.M. Solutions Corporation

2674 South Harper Rd.

Corinth, MS 38834

Attn: Michael Driste
	 
	 	ii)	 	If intended for Purchaser, to:
	 
	 	 	 	Verso Technologies, Inc.

127 Jetplex Circle

Madison, AL 35758-8989

Attn: Steve Odom
	 
	 	 	 	With a copy to
	 
	 	 	 	Verso Technologies, Inc.

400 Galleria Parkway, Suite 200

Atlanta, GA 30339

			
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	 	 	 	Attn: Chief Financial Officer

	 	(d)	 	Assignment: This Agreement shall not be assignable by either party
without the prior written consent of the other party.
	 
	 	(e)	 	Relationship of parties: The parties are and shall be independent
contractors to one another, and nothing herein shall be deemed to cause this Agreement
to create an agency, partnership, joint venture and any other relationship between the
parties.
	 
	 	(f)	 	Waiver: No failure or delay on the part of either party hereto in
exercising any right or remedy under this Agreement, or any single or partial exercise
of any such right or remedy, shall operate as a waiver thereof. No provision of this
Agreement may be waived except in writing signed by the party granting such waiver.
	 
	 	(g)	 	Governing Law; Interpretation: This Agreement shall be governed by and
construed in accordance with the laws of the State of Alabama. Acceptance or
acquiescence in a course of performance rendered under this Agreement shall not be
relevant to determining the meaning of the Agreement, even though the accepting or
acquiescing party had knowledge of the nature of the performance and an opportunity for
objection. No course of prior dealing between the parties and no usage of the trade
shall be relevant to supplement or explain any terms used in this Agreement.

	23.	 	RETURN MATERIAL AUTHORIZATION
	 
	 	 	If product is found to be defective pursuant to Section 13 of this Agreement, Purchaser will
notify Manufacturer and Manufacturer will provide a Return Material
Authorization number prior to Purchaser returning the Product. Manufacturer will
make best effort to provide an RMA number within twenty- four (24) hours.

	24.	 	QUARTERLY REVIEWS.
	 
	 	 	Purchaser and Manufacturer will meet quarterly to review all processes associated with this
contract, and jointly work towards process improvements in the following areas:

	 	§	 	Price
	 
	 	§	 	Quality
	 
	 	§	 	Cycle Time
	 
	 	§	 	On-time Delivery
	 
	 	§	 	Design improvements on manufacturability, quality and price

			
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	25.	 	Exhibit attachment schedule:

	 	•	 	Exhibit A shall represent “current” pricing, and shall be amended and
rev controlled by DATE, as required.
	 
	 	•	 	Exhibit B shall represent “Quality Plan”.

	 	 	 	 	 	 	 	 	 	 	 
	ACCEPTED FOR

Verso Technologies, Inc.	 	ACCEPTED FOR

CM Solutions Corporation
	 
	 	 	 	 	 	 	 	 	 	 
	By:

	 	 /s/ Juliet M. Reising	 	By:	 	 /s/ Michael Driste	 	 	 	 
	 

	 	 
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	Print:

	 	 Juliet M. Reising	 	Print:	 	 Michael Driste	 	 	 	 
	 

	 	 
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	Title:

	 	 EVP & CFO	 	Title:	 	 President	 	 	 	 
	 

	 	 
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	Date:

	 	 7 - 17 - 06	 	Date:	 	 7 - 17 - 06	 	 	 	 
	 

	 	 
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	ACCEPTED FOR

Verso Verilink, LLC	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	By:
	 	 /s/ Juliet M. Reising	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	Print:
	 	 Juliet M. Reising	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	Title:
	 	 EVP	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	Date:
	 	 7 - 17 - 06	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	 

			
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Exhibit 10.5

June 30, 2006

CITEL Technologies Limited, a company organized under the laws of England and Wales
(“CITEL (U.K.)”), and CITEL Technologies, Inc., a Delaware corporation (“CITEL
(U.S.)” are the obligors under a Secured Promissory Note, dated January 21, 2005 in the
original principal amount of $3,500,000 (the “Note”) payable to Verso Technologies, Inc.,
a Minnesota corporation (“Verso”). Capitalized Terms used herein but not otherwise defined
herein shall have the meanings ascribed to such terms in the Note.

FOR VALUE RECEIVED, CITEL (U.K.), CITEL U.S., and Verso hereby agree conditional upon Admission
(as defined below) to amend the Note as follows effective as of today’s date:

1. Section 2 shall be deleted and replaced with the following:

“2. Payment of Principal and Interest. If not sooner paid or converted
according to the terms hereof, and the due date is not accelerated according to the
terms hereof or extended by mutual written agreement of CITEL (U.K.), CITEL (U.S.)
and Verso, the principal balance of this note shall be due and payable as follows;

2.1 $870,000 shall be paid within one business day of Admission; followed
by

2.2
6 monthly installments of $75,000 commencing 12 months from the date
of Admission; and

2.3 all remaining outstanding principal and accrued interest under this note will
be due and payable on the third anniversary of the date hereof (being the date of
this note)”.

2. Upon the completion of the admission of Citel plc’s entire issued share
capital to the AIM market of the London Stock Exchange plc (“AIM”)
(“Admission”), Verso agrees to irrevocably waive its rights (such waiver to be
effective concurrent with the on Admission) to be prepaid the Note in accordance
with Section 5.2 of the Note arising from (and limited to the transactions
associated with) the Admission; it being understood that, the waiver given by
Verso hereby shall not waive any subsequent right to be prepaid the Note in
accordance with Section 5.2 of the Note;

3. Section 6.1 of the Note will be deleted and replaced with the following
clause:

“Conversion at the option of Verso. Subject to Section 6.2 Verso shall have
the right to convert, at its sole option and from time to time, the remaining
unpaid principal amount under the Note (together with accrued and unpaid interest
thereon) into shares of the capital stock of Citel plc (the “Conversion Shares”),
such shares shall be valued at fair market value as of the day immediately prior to
such conversion, and Citel shall take all action necessary to permit Verso to
freely

 

 

transfer and sell such Conversion Shares on AIM (or any such other market upon which the
capital stock of Citel trades at the time of such conversion)”;

4 the words “and any prepayment notice given by Citel pursuant to this section 6.2 shall be
irrevocable” will be added to the last sentence of section 6.2 after the words “Conversion
Notice”; and

5. the words “Save that Verso acknowledges it will be required to enter into a contractual
commitment not to sell such shares prior to the date 12 months from Admission and for a
further period of 12 months from such date only to sell through the company’s broker” will
be as a new sentence at the end of Section 6.2.

Except as provided above, the provisions of the Note shall remain in effect,

IN WITNESS WHEREOF, CITEL (U.K.) and CITEL (U.S.) have caused this amendment to the Note to
be executed as of the effective date first above written.

	 	 	 	 	 
	 	 	CITEL TECHNOLOGIES, INC.
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	Name:	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	Title:	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 	 	CITEL TECHNOLOGIES LIMITED
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	Name:	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 	 	Title: Chief Executive Officer
	 
	 	 	 	 
	 	 	CITEL TECHNOLOGIES LIMITED
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	Name:	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 	 	Title: Secretary

	 	 	 	 	 
	Acknowledged and agreed:	 	 
	 
	 	 	 	 
	VERSO TECHNOLOGIES, INC,	 	 
	 
	 	 	 	 
	BY:

	 	/s/ Juliet M. Reising	 	 
	 	 	 	 	 
	Name: Juliet M. Reising	 	 
	Title: EVP & CFO	 	 

2

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