AUTHORIZED DISTRIBUTOR AGREEMENT

Exhibit 10.5

HCX5OO0/HCX5OOOi ^®

AUTHORIZED DISTRIBUTOR

AGREEMENT for 2004

by and between

HITACHI TELECOM (USA), INC.

and

XETA TECHNOLOGIES

AUTHORIZED DISTRIBUTOR AGREEMENT
TABLE OF CONTENTS

AUTHORIZED DISTRIBUTOR AGREEMENT

          AGREEMENT made this 1st day of January 2004, by and between HITACHI TELECOM (USA), INC., a Delaware corporation having an office at 3617 Parkway Lane, Norcross, GA, 30092 (hereinafter referred to as “HITEL’) and XETA TECHNOLOGIES, a corporation having an office at 1814 West Tacoma, Broken Arrow, OK 74012 (hereinafter referred to as “DISTRIBUTOR”).

WITNESSETH

          WHEREAS, HITEL is engaged in the business, among other things, of selling communication systems, materials and parts and licensing related application and other software, all as described in Exhibit A attached hereto (hereinafter referred to as “PRODUCTS”); and

          WHEREAS, DISTRIBUTOR desires to engage in the sale, installation and maintenance of PRODUCTS, subject to the terms and conditions hereinafter set forth;

          NOW, THEREFORE, in consideration of the mutual obligations set forth herein, the parties hereto agree as follows:

1.        MASTER AGREEMENT/COMMUNICATION

          This Agreement shall constitute an overriding master agreement fully setting forth the rights and responsibilities of the parties with respect to the subject matter hereof, and all sales and shipments of PRODUCTS shall be made on the terms and conditions set forth herein. The terms and conditions of this Agreement shall supersede the terms and conditions of any purchase order or other document submitted by DISTRIBUTOR, and HITEL shall not in any event be bound by the terms and conditions of DISTRIBUTOR’s purchase order forms or any other documents submitted by DISTRIBUTOR. Any conflicting or additional provisions on purchase orders issued by DISTRIBUTOR to HITEL (specifically including, without limitation, all terms and conditions printed on back of such documents), or on any acceptance, confirmation, acknowledgment or similar forms issued by HITEL shall be inapplicable to such agreements to purchase and sell, unless specifically and expressly agreed to in a single writing signed by both parties. DISTRIBUTOR will issue an individual Purchase Order for each system ordered.

2.        APPOINTMENT

          Subject to the terms and conditions hereinafter provided, HITEL hereby appoints DISTRIBUTOR and DISTRIBUTOR hereby accepts appointment by HITEL as a non-exclusive distributor of PRODUCTS for resale to end users as specified in this Agreement including its Exhibits.

3.        PRODUCT DEFINITION

          The term PRODUCTS, as used herein, shall refer only to PRODUCTS as identified in Exhibit A.

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4.        TERM

          The term of the Agreement shall commence on January 1, 2004 and shall continue until December 31, 2004. At the written request of either party given at least ninety (90) days prior to the expiration of the Agreement, both parties may negotiate in good faith and for a reasonable period for an extension of the term of this Agreement. Expiration shall not affect any liabilities occurring prior thereto, including, but not limited to, obligations with respect to payment and delivery in connection with orders accepted prior to expiration.

5.        SALES PROMOTION AND SERVICES

          (a)        DISTRIBUTOR shall use its best efforts to maintain a sales and service staff adequate to support effectively the sale, service and reputation of PRODUCTS in the geographic area(s) specified in Exhibit B. It is the expectation of HITEL and DISTRIBUTOR that DISTRIBUTOR will purchase and take delivery of new systems, upgrade orders, parts and subcomponents to meet the minimum purchase volume(s) for the contract year, as specified in Exhibit C.  DISTRIBUTOR’s failure to meet the specified minimum purchase volume(s) shall entitle HITEL to adjustments as described in Exhibit C in addition to all other remedies available to HITEL at law.

          (b)        DISTRIBUTOR may, from time to time, request HITEL to provide on-site sales support assistance to DISTRIBUTOR for pre-sale activities. Subject to available manpower and at HITEL’s sole discretion, HITEL may provide such services. This sales support assistance may be provided by HITEL or its assignee, designee, subcontractor or the like from a HITEL location, DISTRIBUTOR location or on-site at the customer location and shall be referred to as sales support. Whenever possible, DISTRIBUTOR shall request sales support from HITEL no less than fifteen (15) days prior to the date upon which DISTRIBUTOR would like such service to be performed. Shorter notice may result in increased travel costs, which HITEL, in its sole discretion, may require DISTRIBUTOR to pay in exchange for the support. Such charge must be negotiated and agreed between both parties before the date of the Sales Support.

          (c)        DISTRIBUTOR shall be responsible for the application, installation, repair and maintenance of PRODUCTS in such a manner as to further effectively promote the sale and use of PRODUCTS. DISTRIBUTOR shall comply with all applicable laws, ordinances and regulations of all applicable federal, state and local jurisdictions.

          (d)        DISTRIBUTOR agrees that sales of PRODUCTS will be to end users of PRODUCTS and DISTRIBUTOR will not sell PRODUCTS to distributors, dealers, sub-dealers or the like for the purpose of resale by such party(-ies) to end users unless agreed to in writing by HITEL, prior to any such sale to such distributor, dealer, sub-dealer or the like.

6.        FORECAST AND REPORTS

          Within thirty (30) days from the signing of this Agreement, DISTRIBUTOR shall inform HITEL of DISTRIBUTOR’S public business plan for PRODUCTS. DISTRIBUTOR shall also, (i) provide quarterly updates to said annual business plan no later than two (2) weeks before the beginning of each calendar quarter, (ii) keep HITEL informed of its activities relating to

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PRODUCTS, (iii) furnish HITEL with information relative to the number of proposals offered, the progress of potential sales orders and the reason for lost sale(s) and (iv) on a quarterly basis, furnish HITEL with information summarizing significant marketing activities, trends and conditions in DISTRIBUTOR’s Territory.

          From time to time, HITEL may advise DISTRIBUTOR of its public business plan for PRODUCTS.

          (b)        DISTRIBUTOR shall provide to HITEL a rolling forecast of PRODUCTS to be delivered. The forecast shall be provided by the 25th day of each month and cover the DISTRIBUTOR’S expected PRODUCTS order activity for the three (3) months immediately following the date of the forecast. The monthly forecast shall be in the format as provided in Exhibit D. DISTRIBUTOR understands that the completion and accuracy of such forecasts may affect its ability and priority to obtain PRODUCTS within the otherwise agreed delivery intervals.

7.        ORDERS, DELIVERY

          (a)        DISTRIBUTOR shall obtain PRODUCTS by placing firm orders on HITEL, which orders shall include a description and specification of PRODUCTS, quantities, prices, a “requested” delivery schedule, and the name and location of the end user (in the case of system orders).

          (b)        No order shall be binding upon HITEL unless and until it has been accepted by HITEL in writing. HITEL shall have the right to accept or reject any purchase order, and if HITEL rejects any purchase order, DISTRIBUTOR hereby agrees to indemnify HITEL and hold HITEL harmless from any claim resulting from HITEL’s refusal to accept purchase orders from DISTRIBUTOR. HITEL’s acceptance of purchase orders shall not be unreasonably withheld.

          (c)        HITEL may delay or stop any shipment to DISTRIBUTOR if DISTRIBUTOR fails to pay when due amounts owed to HITEL after demand for payment has been made by HITEL (in which case DISTRIBUTOR shall be charged for storage and cancellation at normal rates and at HITEL’s discretion) or if HITEL, in its reasonable discretion, shall have reservations concerning DISTRIBUTOR’S financial condition and DISTRIBUTOR fails to provide HITEL with adequate assurances of performance after demand by HITEL.

          (d)        Except for PRODUCTS covered by accepted purchase orders, HITEL may, at any time and from time to time, upon ninety (90) days notice to DISTRIBUTOR, or sooner if accepted by DISTRIBUTOR, suspend or discontinue the sale of any PRODUCTS of any type or model and substitute a new type or model, change the design or make improvements to PRODUCTS, eliminate any type or model, or completely discontinue the importation or sale of PRODUCTS, without any liability on its part to DISTRIBUTOR. HITEL shall not have any obligation to furnish or install any change, substitution or improvement on any PRODUCTS previously sold to DISTRIBUTOR whether previously delivered or undelivered and covered by an accepted purchase order. HITEL will provide to DISTRIBUTOR, on a timely basis, all engineering change notices issued. Upgrades, Spare Parts, sub-components and RMA orders will be provided at the current list prices minus applicable hardware discounts as set forth in Exhibit C.

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          (e)        A delivery schedule shall be established by HITEL for each order submitted by DISTRIBUTOR and accepted by HITEL within ten (10) business days of acceptance by HITEL. Delivery may be made in installments.  Default or delay by HITEL in delivering or shipping the whole or any part or installment of any order shall not affect any other portion thereof, nor shall it affect any other order between the parties. DISTRIBUTOR may cancel the order without penalty if HITEL is unable to ship the complete order (or a sufficient part or installment of the order so that PRODUCTS may be resold) within sixty (60) days of the delivery schedule established by HITEL at the time of acceptance of such order.

          (f)        Invoices for partial or installment deliveries shall be issued at the time of shipment of such partial order or installment, except where the systems delivered are incomplete to the point of being unsuitable for resale.

          (g)        Except as provided in Subsection (e) hereof, DISTRIBUTOR shall not have the right to cancel, reschedule, change or modify all or any portion or installment of any order for PRODUCT covered by this Agreement without HITEL’s prior written consent.

          (h)        DISTRIBUTOR may, pursuant to the terms and conditions of this Agreement, order and HITEL shall provide spare parts, software and third level technical support as required for the maintenance of PRODUCT for a period of nine (9) years from the ship date of PRODUCT, provided that DISTRIBUTOR is, at all times, in full compliance with this Agreement and HITEL has not terminated this Agreement due to DISTRIBUTOR’s material breach.

          (i)        The acceptance by HITEL of any purchase order from DISTRIBUTOR or the sale of any PRODUCTS by HITEL to DISTRIBUTOR after the termination of this Agreement shall not be construed as a renewal or an extension, or as a waiver of termination of this Agreement, but in the absence of a new written Agreement, all such transactions shall be governed by the provisions of this Agreement.

8.        PRICES

          The prices charged to DISTRIBUTOR shall be according to a written or “Configurator” quote provided to DISTRIBUTOR for each system, discounted according to the discount shown in Exhibit C. Each quote shall be valid for ninety (90) days from the date of such quotation. No verbal quotation or verbal confirmation given to DISTRIBUTOR shall be binding upon HITEL unless it is confirmed in writing by HITEL.

9.        PAYMENT AND ADDITIONAL DELIVERY TERMS

          Payment terms are net thirty (30) days after invoice from HITEL for the total outstanding invoiced amount, including new systems, parts, patches, upgrades, expansions, etc., within the preset credit line. For the portion, if any, exceeding the preset credit line, HITEL requires a cash payment or issuance of an irrevocable letter of credit before shipment. HITEL may revoke the net thirty (30) days payment terms at any time upon written notice to DISTRIBUTOR stating the reason(s) for such revocation and insist upon an irrevocable letter of credit, payment in advance or such other method as HITEL may determine for all goods to be delivered after such notice.

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Any invoices which remain due and payable after thirty (30) days are subject to a 1.67 percent (1.67%) per month service charge for each month or the fraction thereof that the payment is not received by HITEL, or, if this interest rate exceeds the maximum allowed by applicable law, then at the maximum lawful rate.  HITEL is not responsible for delays caused by the United States Post Office.

Security Interest. So long as HITEL has not received full and complete payment for any delivered PRODUCTS, a purchase money security interest in the PRODUCTS shall be created and remain in HITEL until HITEL receives full payment of the full invoice amount thereof. It is further understood and agreed that until said security interests are extinguished as set forth herein, HITEL shall have the absolute right to repossess and resell the PRODUCTS.

It is understood by the parties hereto that the ability of DISTRIBUTOR to make the payments contemplated hereunder is of the essence of this Agreement and in the event that DISTRIBUTOR does not make the payments in accordance with the terms and conditions of this Agreement, for any reason or cause, including without limitation, by virtue of any regulation or order of any government authority, HITEL, in addition to whatever other remedies may be available to it, may elect to terminate this Agreement immediately.

Delivery terms for all PRODUCTS shall be FOB HITEL’s designated shipping point.  Any orders, which at DISTRIBUTOR’S request, are not shipped within sixty (60) days of acceptance by HITEL shall be subject to a storage charge as described in HITEL price guides.

DISTRIBUTOR shall not have the right to cancel, reschedule, change or modify all or any portion or installment of any PRODUCTS covered by this Agreement without HITEL’s prior written consent.  Each cancellation so agreed to by HITEL shall be subject to a cancellation fee as described in HITEL price guides.

10.      MAINTENANCE AND SERVICE

          (a)        DISTRIBUTOR shall be responsible for the installation, timely maintenance and service to users of PRODUCTS; and shall perform such responsibilities in a satisfactory manner to maintain and enhance HITEL’s and the PRODUCTS’ respective good name and reputations. Maintenance, services and consultation as provided by DISTRIBUTOR technicians at customer locations are referred to as first level support. Maintenance, services and consultation as provided by DISTRIBUTOR technical experts at a centralized location providing support to the first level support technicians are referred to as second level support. Both first and second level support is the responsibility of DISTRIBUTOR. For this purpose, DISTRIBUTOR shall maintain or have contracted with a number of competent Hitachi Certified technicians, as defined in Exhibit B, who are readily accessible to end users. DISTRIBUTOR shall, at its own expense, maintain the technical level of its staff to provide PRODUCT technical support in performing all of its activities under the Agreement. DISTRIBUTOR shall also maintain an adequate inventory of parts and equipment, in accordance with Exhibit E hereof, to maintain satisfactory operation of PRODUCTS being used by its customers, without relying upon urgent supplies from HITEL.

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          (b)        DISTRIBUTOR acknowledges that failure to fulfill its obligations under subparagraph (a) could irreparably damage the business reputation of PRODUCTS, and that HITEL, upon fifteen (15) days notice (one (1) day notice if system is not processing calls), may take corrective measures as may in HITEL’s discretion be required, holding DISTRIBUTOR fully responsible for cost and expenses thereof, if DISTRIBUTOR has not initiated appropriate corrective measures within the fifteen (15) days (one (1) day if system is not processing calls), following notice by HITEL.

          (c)        HITEL shall have access to customers at any time to review DISTRIBUTOR’S installation and maintenance performance and degree of customer satisfaction, and DISTRIBUTOR shall take such remedial action and/or make such improvements in service as may be reasonably requested by HITEL in writing. HITEL may request references from customers in connection with the promotion of HITEL sales. HITEL, in its sole discretion: may provide customers with PRODUCT or system passwords; or, upon the written request of customer(s), may change PRODUCT or system password(s) without notice to DISTRIBUTOR of the new password(s).

          (d)        Within one hundred twenty (120) days of cutover, HITEL or its assignee may perform a technical audit to determine if the PRODUCT installation meets HITEL’s published standards as defined in current system documentation. If installation of the PRODUCT does not meet such standards, HITEL may require the DISTRIBUTOR to take corrective action to meet HITEL’s standards. If DISTRIBUTOR fails to take such action within thirty (30) days, HITEL may take such action and invoice DISTRIBUTOR at published technical support rates. Failure of DISTRIBUTOR to take such actions is cause for HITEL to terminate this Agreement.

          (e)        DISTRIBUTOR may request on-site Technical Support from HITEL by submitting written purchase orders therefore to HITEL. Subject to its available manpower and in HITEL’s reasonable discretion, HITEL may agree to provide such on-site Technical Support assistance to DISTRIBUTOR for installation and/or troubleshooting of systems. Any and all such on-site Technical Support shall be provided by HITEL at the rates set forth in HITEL Price Guides at the time HITEL accepts the purchase order(s) for such Technical Support, and shall include separate charges for the use of test equipment and all travel and living expenses related to HITEL’s provision of such Technical Support. This activity, as provided by HITEL or its assignee either from a HITEL location or at a DISTRIBUTOR or customer location (on-site), is referred to as third level support. The rate shall be subject to change upon ninety (90) days prior written notice. This charge will be waived if: (i) the system is in-warranty and on-site third level support is initiated by HITEL; or (ii) the system is out of warranty, the on-site third level support is initiated by DISTRIBUTOR and the problem was found to be caused by in-warranty PRODUCT. Case (i) does not require a purchase order. DISTRIBUTOR shall make every reasonable effort to inform HITEL two (2) weeks in advance when on-site third level support is requested, and such support may be limited by HITEL as it may deem necessary in view of its available manpower.

          (f)        Subject to its available manpower, HITEL Technical Support engineers shall give telephone assistance for PRODUCTS. Telephone assistance for out of warranty PRODUCTS will be billed at the rates set forth in HITEL Price Guides with time charged to the nearest one-half (1/2) hour. If HITEL determines that DISTRIBUTOR’s request for third level support should not be included in third level support, including, but not limited to, problems that are related to installation, configuration, integration, third party repair or unintended usage, DISTRIBUTOR will be billed as described above regardless of warranty status. Rates are subject to change upon ninety (90) days prior written notice.

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          (g)        HITEL will only accept calls for assistance from HITEL Certified Technicians currently registered with HITEL by an Authorized DISTRIBUTOR and only if the system in question is equipped for remote access and the technician has ready access to spare parts.

          (h)        Nothing contained in this Section 10, or otherwise in this Agreement, shall be construed as obligating HITEL, in any way, to take any action with respect to any customer of DISTRIBUTOR.

11.      TRAINING

          Technical courses will be conducted for DISTRIBUTOR’s technicians at HITEL facilities in Norcross, Georgia. Training shall be approximately two weeks for Technicians. All pertinent, required documentation will be furnished by HITEL to attendees.

          The training will be conducted by HITEL employee(s) who will be dedicated to this function whenever a class is in progress. The training will be conducted in a suitable area reserved for this purpose.

          DISTRIBUTOR shall bear all salary, transportation and other expenses for its personnel in addition to tuition and material charges set forth in HITEL Price Guides. HITEL will not release a system for shipment until DISTRIBUTOR has had a minimum number (as defined in Exhibit B) of Technicians complete the initial training required to receive Hitachi certification and DISTRIBUTOR provides written authorization for Hitachi Certified technician’s call privilege level to HITEL. A purchase order for a training class shall be issued by DISTRIBUTOR listing the technician’s name, the geographical area to be served by the technician after certification and charges for the class.

12.      CLAIMS

          Risk of loss and/or damage shall pass to DISTRIBUTOR upon delivery by HITEL, at HITEL’s designated shipping point.  The issuance of a clean bill of lading by the railroad or trucker or the issuance of a clean receipt by the freight agent designated by DISTRIBUTOR, upon such delivery, shall constitute conclusive proof that the package(s) containing PRODUCTS were not damaged at the time of delivery to DISTRIBUTOR and that the number of packages delivered were those set forth on such bill of lading or receipt. Any claim for shortages or damage to PRODUCTS shall be made by DISTRIBUTOR to HITEL (2002 says and, except for those claims covered by the warranty hereinafter set forth, shall be made by DISTRIBUTOR to HITEL) within thirty (30) days after delivery by the railroad, trucker or freight agent, as the case may be. Such claims shall be in writing, shall specify the items under claim and the nature of the damages, and all other details as may be reasonably required by HITEL to consider such claim. HITEL or its representatives shall have the right to inspect and/or test the PRODUCTS covered by such claim. If, in the reasonable opinion of HITEL, such claim is justified, HITEL shall have the right, at its option, to promptly repair or replace the PRODUCTS or part, or issue a credit for the invoice value thereof.

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          HITEL shall not under any circumstances or for any cause, be liable for any actual, consequential, special or other damages or loss of use of PRODUCTS. If DISTRIBUTOR does not make its claim within the time above provided, it shall be deemed to have unconditionally accepted the PRODUCTS.

13.      TOLL FRAUD/DISCLAIMER

          DISTRIBUTOR understands that the PRODUCTS are not immune from unauthorized use or fraudulent intrusions and that third parties may commit various forms of toll fraud using the PRODUCTS as conduits. HITEL hereby expressly disclaims that the PRODUCTS have been designed to completely prevent or are otherwise immune from such unauthorized uses and toll fraud. DISTRIBUTOR shall notify and warn each of its customers, verbally and in writing, of the possibility that the PRODUCTS may be fraudulently used including, but not limited to, unauthorized or fraudulent use of the PRODUCT’s interconnection to long distance services, equal access (101XXXX or other types of calling), external call forwarding, trunk to trunk calling, voice mail and DISA. In no event shall HITEL be liable to DISTRIBUTOR, DISTRIBUTOR’s customers or subsequent purchasers or users of PRODUCTS for any claim relating in any way to unauthorized use of the PRODUCT or toll fraud.

14.      LIMITED WARRANTY

          HITEL warrants to DISTRIBUTOR alone, that PRODUCTS sold to DISTRIBUTOR pursuant to this Agreement will be delivered free from defects in material and workmanship under normal and proper use and will materially conform to HlTEl’s specifications at the time of delivery to DISTRIBUTOR, with the term of said warranty being fifteen (15) months for all PRODUCTS, from the date of delivery to DISTRIBUTOR provided that:

          (a)        HITEL is promptly notified in writing of any warranty claim: and

          (b)        DISTRIBUTOR provides HITEL with the means and access to examine and test the PRODUCTS within a reasonable period of time, and at DISTRIBUTOR’s cost; and

          (c)        HITEL’s examination of such items shall disclose to its reasonable satisfaction that the claimed defect in the PRODUCTS constitutes a breach of the above warranty and was not caused by such occurrences as misuse, abuse, neglect, improper handling, installation, operation, maintenance, unauthorized repair, alteration or accident. Modification of PRODUCTS by DISTRIBUTOR or at DISTRIBUTOR’s direction, unless specifically authorized in writing by HITEL, shall invalidate the above warranty; and

          (d)        DISTRIBUTOR complies in all respects with the procedures for implementing HITEL’s warranty protections set forth in HITEL’s Return Material Authorization (RMA) program description.  A copy of the current RMA program description is attached as Exhibit E.

          This Limited Warranty does not cover any items normally consumed in operation of Products (such as lamps, fuses, etc.) or cosmetic damage.

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          HITEL’s liability under this warranty is limited to repairing, replacing or issuing a credit in the amount of the unit Agreement price, at its election, for any such claim. Any repair or replacement shall not extend the warranty period, except as provided in Exhibit E hereof. If HITEL elects to replace a defective PRODUCT, HITEL’s obligation is limited to making a replacement PRODUCT available to DISTRIBUTOR FO  HITEL’s designated shipping point, and does not include such items as the provision of any labor involved or connected therewith, such as that which is required to diagnose trouble, service faults, etc., or removing or installing any PRODUCT, responsibility for any transportation expense other than delivery to the FOB point, and any taxes, duties or the like in connection therewith. HITEL may replace PRODUCTS hereunder with new or refurbished parts or PRODUCTS, in HITEL’s discretion.

           DISCLAIMER OF WARRANTY . THIS WARRANTY IS EXTENDED TO DISTRIBUTOR ONLY AND IS NOT TRANSFERABLE TO SUBSEQUENT PURCHASERS OR USERS OF PRODUCTS. THIS WARRANTY IS GIVEN IN LIEU OF ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. IN NO EVENT SHALL HITEL BE LIABLE FOR DAMAGES IN EXCESS OF THE VALUE OF THE DEFECTIVE PRODUCT(S) OR PART, NOR SHALL HITEL BE LIABLE FOR ANY INDIRECT, SPECIAL OR CONSEQUENTIAL DAMAGES, LOSS OF PROFITS OF ANY KIND OR FOR LOSS OF USE OF THE PRODUCTS.

15.      REPAIR OUT OF WARRANTY

          HITEL agrees to perform repair service on HITEL PRODUCTS returned by DISTRIBUTOR to HITEL’s designated repair facility during the term of this Agreement and for a period of three (3) years after the last delivery of PRODUCT under this Agreement. All PRODUCT returned by DISTRIBUTOR to HITEL for repair will be repaired only if deemed repairable in HITEL’s sole discretion. DISTRIBUTOR will follow the procedure in HITEL’s RMA program, (which may be changed at HITEL’s sole discretion) for the return of  PRODUCT for repair. Repaired PRODUCT will be shipped to DISTRIBUTOR within the period specified in the RMA program after receipt of PRODUCT at HITEL’s designated repair facility. DISTRIBUTOR will be billed for such repair at HITEL’s current prices in effect at the time DISTRIBUTOR presents PRODUCT for repair. A copy of HITEL’s current repair price list is attached as Exhibit E. In no event will HITEL be liable for data stored on PRODUCTS presented for repair.

16.      REPAIR AND RETURN PROCEDURE

          The repair and return procedure for handling repairs of PRODUCTS both in and out of warranty (Sections—14 and 15) is set forth in HITEL’s Return Material Authorization (RMA) program description. The RMA program description is available to DISTRIBUTOR upon request and may be changed by HITEL upon thirty (30) days written notice by HITEL.  A copy of the current RMA program description is attached as Exhibit E.

17.      INSPECTION AND TESTING

          (a)        Unless otherwise agreed in writing, HITEL’s or its suppliers’ inspection shall be final.

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          (b)        Should any specific inspection or test be requested by DISTRIBUTOR, all expenses therefor shall be at DISTRIBUTOR’S expense and the delivery period and validity period (if any) shall be adjusted accordingly.

18.      PRODUCT MARKING

          All PRODUCTS sold to DISTRIBUTOR under this Agreement which bear the HITEL or Hitachi name and/or logo, shall not have such name or logo removed nor defaced by DISTRIBUTOR. The placing of the DISTRIBUTOR logo on PRODUCTS sold under this Agreement is permitted only upon the prior written consent of HITEL.

19.      FORCE MAJEURE

          Any cause beyond the reasonable control of HITEL or HITEL’s suppliers, including but not limited to sabotage, fires, floods, strikes, riots, labor difficulties, insurrection, war, embargo priorities created at the request or for the benefit of, directly or indirectly, any government authority, agency or agencies thereof, act of God, breakdown of machinery or equipment, or inability to obtain material, labor, equipment or transportation, or any failure by any of HITEL’s suppliers to deliver or supply PRODUCT, parts or components which results in HITEL’s failure to perform in accordance with the terms hereof, shall not give rise to any liability or damages on account of such delay or nonperformance, but shall be deemed an excuse for HITEL’s performance. In any such event, HITEL shall have the right, at its election and without any liability on it to DISTRIBUTOR to (a) cancel all or any portion of this Agreement, or (b) perform the Agreement as so restricted or modified to the extent determined by HITEL in its sole and absolute discretion or (c) perform the Agreement within a reasonable time after the causes for nonperformance or delay have terminated.

20.      ADVERTISING AND MEDIA RELATIONS

          HITEL may, as it deems necessary and desirable, advertise PRODUCTS on a national or local basis. HITEL may list DISTRIBUTOR’s name, address and telephone numbers in its advertising and promotional materials, at its discretion, for as long as this Agreement is in force.

21.      TRADEMARKS

          DISTRIBUTOR does not have and is not granted any right or interest in or to the name “HITACHI”, “HITACHI TELECOM (USA), INC.”, “HITEL’ or any trademark or trade names owned, used or to be owned or used by HITEL or HITACHI, LTD.  Any use of such names, trade names or trademarks by DISTRIBUTOR shall be only upon the prior written consent of HITEL and for HITEL’s exclusive benefit. Under no circumstances shall DISTRIBUTOR register any such name, trademarks or trade name. DISTRIBUTOR further agrees not to contest or dispute, directly or indirectly, HITEL’s or HITACHI, LTD.’s proprietary interest in or ownership of the name “HITACHI”, or any trade names owned or used by HITACHI, LTD. or HITEL. DISTRIBUTOR shall not remove, obliterate, alter or cover the trademark or name “HITACHI” on any PRODUCT. However, DISTRIBUTOR may place on PRODUCTS its own name or trademark.

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22.      PATENTS

          (a)        HITEL agrees to defend, at its expense, any suit or proceeding brought against DISTRIBUTOR based upon a third party claim of direct infringement of a U.S. patent by PRODUCTS furnished hereunder. HITEL also agrees to hold DISTRIBUTOR harmless against actual damages for such direct infringement.

          (b)        HITEL’s agreement to defend and its obligation to indemnify DISTRIBUTOR herein, which extends only to actual damages for direct infringement of a U. S. patent which are awarded against DISTRIBUTOR in such suit or proceeding, are subject to the following terms and conditions:

                       (1)        The agreement and obligation shall arise only if DISTRIBUTOR gives HITEL prompt notice of the infringement claim; grants HITEL, in writing, exclusive control over its defense and settlement; and provides reasonable information and assistance to HITEL at HITEL’s expense, in the defense of such claim;

                       (2)        The agreement and obligation will cover only the PRODUCT as delivered by HITEL to DISTRIBUTOR and not to any modification or addition made by DISTRIBUTOR or third parties;

                       (3)        The agreement and obligation shall not cover: (i) any claim based on the furnishing of any information, service or technical support to DISTRIBUTOR; or (ii) any claim of infringement of any third party’s rights arising from use of any HITEL PRODUCT furnished hereunder in combination with any other products or articles if such infringement would be avoided by the use of the PRODUCT alone, nor does it extend to any PRODUCT furnished hereunder of DISTRIBUTOR’S design or formula; or (iii) any claim that the use of the PRODUCTS furnished hereunder infringes any third party’s process patent rights; or (iv) any claim of infringement of any third party’s rights in respect to patents, where it is the policy of such third party to offer patent license agreements separately to end users;

                       (4)        If an infringement claim is asserted, or if HITEL believes one likely, HITEL will have the right, but not the obligation: (i) to procure for DISTRIBUTOR the right to use the PRODUCTS furnished hereunder for the use contemplated by HITEL and DISTRIBUTOR in making this Agreement; (ii) to modif