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Vodavi Key System Agreement

Consulting Services Agreement

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 This Consulting Services Agreement involves

LG Electronics Inc. | Vodavi Communication Systems, Inc. | Vodavi Technology, Inc.

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Governing Law: Arizona     Date: 3/29/2005
Industry: Communications Equipment    

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Exhibit 10.59


This AGREEMENT is made and entered into on the 1st day of January, 2005, by and between LG Electronics Inc., a corporation organized and existing under the laws of the Republic of Korea (hereinafter referred to as LGE), and Vodavi Communication Systems, Inc., a subsidiary of Vodavi Technology, Inc., a Delaware corporation (hereinafter referred to as “Vodavi”).


WHEREAS, LGE is in a position to supply for sale in the Territory (as hereinafter defined) certain Products (as hereinafter defined) manufactured by LGE.

WHEREAS, Vodavi has the facilities, the personnel and experience to undertake the distribution of such Products.

NOW THEREFORE, in consideration of the premises and the mutual covenants contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledge, it is agreed as follows:







LGE hereby grants to Vodavi the exclusive right to distribute and sell the Products in the Territory, which means the United States of America, the Caribbean Islands(except Cuba) and Canada, and non-exclusive right to distribute and sell STS in Mexico during the term of the Agreement and Vodavi accept such right.












The terms Product, Products, and Models as used in this Agreement mean certain key systems, hybrid key systems, IP key systems, key telephones, IP key telephones, their associated parts and peripherals to make up an entire system and maintenance parts, jointly developed by the parties, that are manufactured by LGE and that will be sold by Vodavi under its trademarks and brand names in the Territory.




The Products are categorized as follows:






Starplus STS Systems and associated telephones and components




Vodavi XTS Systems and associated telephones and components






Telenium IP Systems and associated telephones and components






V44 Systems and Components






Analog – Digital Voice Mail Systems







Notwithstanding the provisions of Section 1, LGE may pursue relationships with other potential customers in the Territory so long as that Product sold to other customers is clearly differentiated from Vodavi’s Product, utilizing different software, utilizing different designed plastics for the telephones and associated terminals, and that the circuit boards will not be plug compatible in the key service units (KSU’s).




In the event Vodavi requests LGE to develop a new and proprietary Product for introduction to the market in the Territory, the cost of the sample working models and the dies necessary for the production of such new proprietary Product shall be borne by Vodavi. The development and related cost for development will be mutually agreed upon between the parties for each such development and Vodavi shall provide LGE with the information necessary for a new development such as functional specification, unit application detail specifications (UADS), target cost and forecast quantities for purchase.






Vodavi may want to provide LGE with a manufacturing package to contract manufacture Vodavi designed and developed products from time to time. Any such product developed by Vodavi will be proprietary to Vodavi and will not be manufactured by LGE for any other purpose except for use by Vodavi. Vodavi will consider a licensing agreement with LGE for any product developed by Vodavi at the request of LGE. Terms and conditions of any such licensing agreement will be addressed and mutually agreed upon by the parties for each individual case as the need by LGE might arise.






Any tools or dies purchased by Vodavi for the development of housings or plastics to be used as terminals will be considered the proprietary property of Vodavi, will not be used by LGE for any other purpose than for producing Product for Vodavi without the prior written consent of Vodavi, and will be returned to Vodavi at the request of Vodavi.










This Agreement shall be effective on the execution date hereon and unless terminated earlier as provided herein, will remain in full force and effect until December 31, 2009.




The expiration of the term of this Agreement will not affect the obligations of either party to the other party pursuant to any Purchase order previously delivered to and accepted by LGE, and the terms and conditions of this Agreement will continue to apply to such Purchase Orders as if this Agreement had not expired.











Vodavi makes the following purchase projection during the Contract Period. “ First (1) Year” shall mean the period commencing on the date of first shipment and having a duration of one year: and thereafter the period commencing in each subsequent year on the corresponding date having a duration of one year.





















1 ST Year


2 ND Year



3 rd Year



4 th Year



5 TH Year


























The prices for all current Products are set forth in Exhibit A. Prices for new Products added to this Agreement will be mutually agreed upon by the parties and will be added to Exhibit A from time to time as the need arises. The prices of the Products shall not include any sales, use or excise tax of any jurisdiction in the destination country, which if applicable, are the responsibility of Vodavi. The prices shall be F.O.B. Korean Seaport/F.C.A. Korean Airport. All field trial products will be 50% of F.O.B. price.




LGE may want to increase prices from time to time and Vodavi may want to decrease prices from time to time based on the competitiveness of the Products as determined by the market in the Territory. Any changes in price must be mutually agreed upon by the parties prior to any price changes taking effect. Any price increases must be mutually agreed upon one hundred twenty (120) days in advance of the effective price change date to allow Vodavi time to adjust its sales strategy and customer pricing.










All payments for the sale of the products shall be made in U.S. Dollars and the terms will be 60 days from the on board date.




Vodavi shall pay the interest which will be charged at daily basis for some deferred payment, if any, from the due date of each payment. The interest of such deferred payment will be calculated by the following formula.






In case that Vodavi informs LGE to postpone the payment with the written notice to LGE showing the requested period of postponement five(5) banking days prior to the due date:

















(LIBOR + 1.5 + 2)

































LIBOR: Three (3) months LIBOR New York closing rate on invoicing date.





In case that the payment is delayed without Vodavi’s prior notice to LGE.






















































Purchases and sales between the parties hereto under the Agreement shall be affected by the placement of Purchase Orders (P/Os) by Vodavi and of acceptance thereof by LGE. Vodavi shall issue the P/Os ninety (90) days prior to Vodavi’s requested on-board date by e-mail transmission addressed to LGE. Notice of acceptance of any P/O or rejection of items for any reason shall be sent to Vodavi within fourteen (14) days after the receipt by LGE of the P/O. LGE will acknowledge the on-board date to Vodavi within fourteen (14) days after the receipt of the P/O by LGE. If LGE fails to acknowledge any P/O within fourteen (14) days after the receipt of such order, then the requested on-board date shall be the acknowledged on-board date.




Except to the extent that other terms and conditions are agreed to in writing signed by both parties and specifically stating that such other terms and conditions shall apply in lieu of or in addition to the terms and conditions provided for herein, and notwithstanding anything to the contrary provided in Vodavi’s Order or in LGE acknowledgement thereof, each Order from Vodavi shall be subject only to the terms and conditions set forth in this Agreement.






Vodavi shall release P/Os and a MRP reflecting the forecast to LGE within the first week of each month.










LGE shall on board the Products by the date or dates acknowledged by LGE to Vodavi. In the event that LGE’s actual delivery date of the P/O is delayed more than ten (10) days past LGE’s acknowledged on-board date. LGE will pay the freight expense for air shipment if requested by Vodavi. In the event LGE fails to ship within one hundred twenty (120) days ARO, LGE will pay their freight plus a penalty based on the following formula:





























































Unless otherwise agreed by Vodavi, LGE shall for all P/Os placed hereunder: (1) ship P/Os complete unless instructed otherwise, (2) ship to the destination designated in the P/O in accordance with Vodavi’s specific instructions. (3) ensure that all subordinate documents bear Vodavi’s P/O number, (4) enclose a packing memorandum and when more than one package is shipped, identify the package containing such packing memorandum, and (5) mark Vodavi’s P/O number on all packages and shipping papers.




All Products purchased shall be packed by LGE, at no additional charge to Vodavi, in containers adequate to prevent damage during shipping, handling and storage.










Subject to the terms of this Agreement, LGE shall sell to Vodavi such Products described herein as are ordered by Vodavi hereunder, and such other Products as are ordered by Vodavi hereunder, and such other Products as the parties may agree to include hereunder. All P/Os must be consistent with this Agreement including Exhibit A unless mutually agreed to in writing by the parties.




Each such P/O shall be numbered and shall include at least the following items, as applicable to the Products covered by such P/O:






The date of the P/O,




The incorporation of this Agreement by reference,






A complete list of the products covered by the P/O, specifying, attaching or referencing the quantity, model number, program name or identification number






The price of each Product discount (if any),






The address to which LGE’s invoice shall be sent,






Shipping instructions,






The destination to which the products will be delivered and the date and time the shipment goes on board and scheduled delivery.






Any special terms and conditions mutually agreed upon.










The prices of the products shall not include any sales, use or excise taxes of any jurisdiction in the destination country, which if applicable, are the responsibility of Vodavi. The prices shall be F.O.B. Korean Seaport/F.C.A. Korean Airport. Upon delivery, the title and risk of loss passes to Vodavi and all charges and expenses incurred thereafter shall be for the account of Vodavi (including insurance coverage and expenses for the point of passage of the title).











No information furnished by Vodavi to LGE or by LGE to Vodavi hereunder or in contemplation hereof shall be considered to be confidential or proprietary unless it is conspicuously marked as such. If either party provides the other party with any proprietary or confidential information which is conspicuously marked as such, during the term of this Agreement they shall use the same degree of care to prevent its use by or disclosure to others as they use with respect to their own proprietary or confidential information.






Notwithstanding the above paragraph, the obligations with respect to the confidential or proprietary information shall not apply to any information which either party can show:






is already in the possession the other party; or




is independently developed by the other party; or






is or becomes publicly available without breach of this Agreement by the other party; or






is rightfully received by the other party from a third party not under an obligation of confidence to the party with respect thereto; or






is released for disclosure by the other party with its written consent; or






is disclosed pursuant to the requirement of a government agency or operation of law, provided that each party is obligated to use its best efforts to prevent disclosure under such circumstances; or






is furnished to a

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