
<PAGE>
 
                                                                   Exhibit 10.12
                                                                   -------------

                             FORBEARANCE AGREEMENT
                             ---------------------

     THIS FORBEARANCE AGREEMENT (hereinafter, this "Agreement") made this 14th 
day of October, 1998 by and among:

          BANKBOSTON, N.A. (hereinafter, the "Bank"), a bank organized under the
     laws of the United States of America with its principal office located at
     100 Federal Street, Boston, Massachusetts;

          BANCBOSTON LEASING, INC. (hereinafter, the "Lessor"), a Massachusetts
     corporation with its principal office located at 100 Federal Street, 
     Boston, Massachusetts;

          ACT MANUFACTURING, INC. (hereinafter, the "Company"), a Massachusetts 
     corporation with its principal office located at 108 Forest Avenue, Hudson,
     Massachusetts;

          JOHN A. PINO, TRUSTEE OF RE-ACT REALTY TRUST (hereinafter, the 
     "Trust"), under Declaration of Trust dated September 21, 1984 and recorded
     with the Middlesex County (Southern District) Registry of Deeds at Book
     15823, Page 351, as amended from time to time; and

          JOHN A. PINO (hereinafter, "Pino"), an individual with an address c/o 
     2 Cabot Road, Hudson, Massachusetts.

                                  Background
                                  ----------

     The "Lease Transactions".  Reference is made to certain lease arrangements 
     ------------------------   
entered into by and between the Lessor and the Company evidenced by, among other
things, a Master Lease Agreement (hereinafter, the "Master Lease") dated October
27, 1992 entered into by and between the Lessor and Automated Component 
Technologies, Inc. and assumed by the Company pursuant to an Assumption 
Agreement dated December 15, 1994. The Master Lease covers those leases 
(hereinafter collectively, the "Leases") of the equipment (hereinafter, the 
"Equipment") listed on Schedule 1, annexed hereto. As security for the Master 
Lease and the Leases, the Company granted the Lessor a security interest in and 
to all of the Company's business assets (hereinafter, the "Collateral") pursuant
to a certain Subordinate Security Agreement dated January 12, 1995.

     The "Trust Transactions".  Reference is further made to a certain 
     ------------------------
Reimbursement Agreement (hereinafter, the "Reimbursement Agreement") dated 
October 1, 1988 entered into by and between the Bank and the Trust, as amended
from time to time, with respect to a certain Letter of Credit (hereinafter, the
"Letter of Credit") issued by the Bank for the account of the Trust of support
that issue of certain
<PAGE>
 
industrial revenue bonds (hereinafter, the "Bonds") of the Massachusetts 
Industrial Finance Agency designated "Re-Act Realty Trust Project". The 
Reimbursement Agreement is secured by a certain Mortgage and Security Agreement 
(hereinafter, the "Mortgage") dated October 1, 1988 and recorded with the
Middlesex County (Southern District) Registry of Deeds at Book 19427, Page 427,
as amended from time to time. In addition, Pino executed and delivered to the
Bank a Limited Guaranty (hereinafter, the "Guaranty") dated February 14, 1995
and a certain Pledge Agreement (hereinafter, the "Pledge Agreement") each dated
February 14, 1995 as additional security for the Trust's obligations to the Bank
under the Reimbursement Agreement.

     Current Status.  The Company defaulted under the Master Lease and the 
     --------------
Leases and the Letter of Credit was to expire by its terms on October 1, 1998. 
The Company and the Trust have requested that (i) the Bank and the Lessor 
forbear from exercising their respective rights and remedies upon default, (ii) 
the Bank extend the expiry date of the Letter of Credit, and (iii) the Lessor 
release its security interest in the Collateral. In exchange therefor, the 
Company and the Trust have offered to (i) provide the Lessor with additional 
security for the Master Lease and the Leases, (ii) satisfy all amounts due under
the Master Lease and the Leases on or before February 28, 1999, and (iii) 
replace the Letter of Credit on or before December 15, 1998. The Bank and the 
Lessor have agreed to the Company's and the Trust's requests, but only upon the 
terms and conditions set forth herein.

     Accordingly, for good and valuable consideration, the receipt and 
sufficiency of which are hereby acknowledged, it is hereby agreed by and between
(i) the Bank and the Lessor, and (ii) the Company, the Trust, and Pino 
(hereinafter collectively, the "Obligors"), as follows:

                 Ratification of Documents; Further Assurances
                 ---------------------------------------------

     1.   The Obligors:

     (a)  Hereby ratify, confirm, and reaffirm all and singular the terms and
          conditions of the documents, instruments, and agreements evidencing
          the Lease Transactions and the Trust Transactions. The Obligors
          further acknowledge and agree that, except as specifically modified in
          this Agreement, all terms and conditions of the those documents,
          instruments, and agreements shall remain in full force and effect; and

     (b)  Shall, from and after the execution of this Agreement, execute and
          deliver to the Bank and/or the Lessor whatever additional documents,
          instruments, and agreements that the Bank and/or the Lessor, as the
          case may be, may require in order to vest or perfect those documents
          and any

                                       2
<PAGE>
 
           collateral granted therein more securely in the Bank and the Lessor,
           and otherwise to give effect to the terms and conditions of this
           Agreement.

           Substitute Security for the Master Lease and the Leases
           -------------------------------------------------------

     2.    Simultaneously with the execution of this Agreement, the Company is
satisfying all amounts owed to the Bank, among others, under a certain Amended 
and Restated Loan and Security Agreement (the "Loan Agreement") dated December 
18, 1994.  Upon receipt by the Bank of all amounts required to be paid in 
connection therewith, the Company shall, no later than October 15, 1998, 
present to the Lessor a standby letter of credit (hereinafter, the "Standby 
L/C") for the benefit of the Lessor in the amount of $750,000.00.

     (a)   The Standby L/C shall be issued by The Chase Manhattan Bank and shall
           be in form and substance satisfactory to the Lessor in all respects,
           in the Lessor's sole and exclusive discretion, and drawable by the
           Lessor immediately upon the occurrence of an Event of Default, as
           defined in Paragraph 7, below, through the presentation of an
           executed Draw Certificate in the form of Exhibit "A", annexed hereto.

     (b)   In exchange for the Standby L/C, the Lessor shall release any
           security interests held by the Lessor in and to any of the
           Collateral.

           Amendment of the Master Lease and the Leases
           --------------------------------------------

     3.    From and after the execution of this Agreement and receipt by the 
Lessor of the Standby L/C, the Master Lease and the Leases are and shall be 
amended, as follows:

     (a)   The Company shall continue to make all otherwise regularly scheduled
           payments due under the Master Lease and the Leases as and when due
           each month.

     (b)   The Financial Performance Covenants incorporated into the Master
           Lease and the Leases by reference to the Loan Agreement are hereby
           deleted in their entirety.

     (c)   The term of the Master Lease and the Leases is amended and shall
           expire on February 28, 1999. Accordingly, on or before that date, the
           Company shall pay to the Lessor the amounts set forth on Schedule 2
           annexed hereto with respect to each Lease (hereinafter, the "Buyout
           Amounts").


                                       3
<PAGE>
 
   (d)  The payment to the Lessor of the Buyout Amounts shall constitute full
        satisfaction of the Company's obligations to the Lessor under the Master
        Lease and the Leases, including the Company's exercise of its option to
        purchase the Equipment for its fair market value at the end of the term
        of each Lease.

   (e)  Notwithstanding the release by the Lessor of its security interest in
        the Collateral, the Lessor shall, pending payment of the Buyout Amounts,
        retain all of its right, title, and interest in and to the Equipment.
        Upon payment to the Lessor of the Buyout Amounts, the Lessor shall
        convey all of its right, title, and interest in and to the Equipment to
        the Company, or to that person designated by the Company.

                      Replacement of the Letter of Credit
                      -----------------------------------

   4.   The Bank has extended the expiry date of the Letter of Credit to 
December 31, 1998. On or before December 15, 1998, the Trust shall replace the 
Letter of Credit with a replacement letter of credit to support the Bonds, or 
shall otherwise retire or refinance the Bonds, and the original Letter of Credit
shall be returned to the Bank. Upon consummation of the foregoing:

   (a)  The Trust's obligations to the Bank under the Reimbursement Agreement 
        shall be satisfied in full.

   (b)  The Bank shall promptly:

           (i)  Release and discharge the Mortgage and any other lien or
        encumbrance held by the Bank as security for the Reimbursement
        Agreement, and execute and deliver to the Trust all documents reasonably
        required to effect such release and discharge;

           (ii) Return the Guaranty to Pino and release to Pino all collateral 
        pledged to the Bank pursuant to the Pledge Agreement.

                        Forbearance by Bank and Lessor
                        ------------------------------

   5.   In consideration of the Obligors' performance in accordance with this 
Agreement:

   (a)  The Bank and the Lessor shall each forbear from enforcing their
        respective rights and remedies as a result of the Obligors' defaults,
        until the occurrence of an Event of Default, as defined in Paragraph 7,
        below.

                                       4


<PAGE>
 
     (b)   The Lessor hereby WAIVES any default or event of default under the 
           Master Lease or the Leases existing as of the date of this Agreement.

                                Forbearance Fee
                                ---------------

     6.    In consideration of the agreement of the Bank and the Lessor to 
forbear as set forth in this Agreement, upon the execution of this Agreement,
the Obligors shall pay to the Bank a forbearance fee in the amount of $25,000.00
(the "Forbearance Fee"). The Forbearance Fee shall be fully earned by the Bank
and the Lessor as of the execution of this Agreement. The Forbearance Fee shall
be retained by the Bank and the Lessor under all circumstances and shall not be
applied in reduction of any amounts otherwise owed to either the Bank or the
Lessor.

                               Events of Default
                               -----------------

     7.    The occurrence of any one or more of the following events shall 
constitute an event of default (hereinafter, an "Event of Default") under this 
Agreement:

     (a)   The failure of the Obligors to promptly, punctually, or faithfully
           perform any term or condition of this Agreement as and when due,
           including without limitation the replacement of the Letter of Credit
           on or before December 15, 1998, it being expressly acknowledged and
           agreed that TIME IS OF THE ESSENCE;

     (b)   The failure of the Obligors to pay any amount required to be paid to
           the Bank or the Lessor under this Agreement as and when due,
           including without limitation payment of the Buyout Amounts on or
           before February 28, 1999, it being expressly acknowledged and agreed
           that TIME IS OF THE ESSENCE; or

     (c)   Except with respect to payment of the Buyout Amounts on or before
           February 28, 1999, the failure of the Company to pay any amount
           required to be paid to the Lessor under the Master Lease or the
           Leases, which failure shall continue for Fifteen (15) days after
           delivery by the Lessor to the Company of written notice thereof.

                              Rights Upon Default
                              -------------------

     8.    Upon the occurrence of any Event of Default:

     (a)   The Bank's and the Lessor's agreement to forbear as set forth in this
           Agreement shall automatically terminate and the Bank and the Lessor
           may immediately commence enforcing their respective rights and
           remedies.

                                       5

<PAGE>
 
     (b)   All liabilities, obligations, and indebtedness of every kind, nature,
           and description due to the Bank and/or the Lessor by any of the
           Obligors shall be immediately due and payable in full, without
           demand, notice, or protest, all of which are hereby expressly WAIVED;

     (c)   The Lessor may draw under the Standby L/C up to the full amount 
           thereof.

                              Costs of Collection
                              -------------------

     9.    In addition, upon the occurrence of any Event of Default, the 
Obligors shall reimburse the Bank and the Lessor on demand for any and all 
costs, expenses, and costs of collection (including attorneys' fees) hereafter 
reasonably incurred by the Bank and/or the Lessor in connection with the 
protection, preservation, and enforcement by them of their respective its rights
and remedies. The $25,000.00 reserve paid to the Bank in connection with the 
satisfaction of the amounts due under the Loan Agreement shall also be held by 
the Bank and the Lessor as additional security for the payment of the foregoing 
costs, expenses, and costs of collection.

                                    Notices
                                    -------

     10.   Any communication between the Bank and/or the Lessor and the Obligors
shall be forwarded via certified mail, return receipt requested, or via 
recognized overnight courier, addressed as follows:

     If to the Bank or the Lessor:

                         BankBoston, N.A.
                         100 Federal Street
                         Mail Stop: MA-BOS 01-06-01
                         Boston, Massachusetts 02110
                         Attention:  Mr. Peter Haley
                                     Vice President

     With a copy via telecopier to:  Donald E. Rothman, Esquire
                                     Riemer & Braunstein
                                     Three Center Plaza
                                     Boston, Massachusetts 02108
                                     Telecopier No. (617) 723-6831

     If to the Obligors:

                         ACT Manufacturing, Inc.
                         2 Cabot Road

                                       6



<PAGE>
 
                          Hudson, Massachusetts 01749
                          Attention:  Mr. Douglas Greenlaw
                                      Chief Financial Officer

            With a copy via telecopier to:  Mark D. Smith, Esquire
                                            Testa, Hurwitz & Thibeault, LLP
                                            125 High Street
                                            Boston, Massachusetts 02110
                                            Telecopier No. (817) 248-7100

                                    Waivers
                                    -------

   11.  Waiver of Claims. The Obligors hereby acknowledge and agree that they 
have no offsets, defenses, claims, or counterclaims against the Bank or the 
Lessor, or their respective officers, directors, employees, attorneys, 
representatives, predecessors, successors, or assigns with respect to the Lease 
Transactions or the Trust Transactions, or otherwise, and that if the Obligors 
now have, or ever did have, any offsets, defenses, claims, or counterclaims 
against the Bank or the Lessor, or their respective officers, directors, 
employees, attorneys, representatives, predecessors, successors, or assigns, 
whether known or unknown, at law or in equity, from the beginning of the 
world through this date and through the time of execution of this Agreement, all
of them are hereby expressly WAIVED, and the Obligors each hereby RELEASE the 
Bank and the Lessor, and their respective officers, directors, employees, 
attorneys, representatives, predecessors, successors, and assigns from any 
liability therefor.

   12.  Non-Interference. From and after the occurrence of any Event of Default,
the Obligors agree not to interfere with the exercise by the Bank and/or the 
Lessor of any of their respective rights and remedies. The Obligors further 
agree that they shall not seek to distrain or otherwise hinder, delay, or impair
the Bank's or the Lessor's efforts to realize upon any collateral, or otherwise 
to enforce their rights and remedies. The provisions of this Paragraph 12 shall 
be specifically enforceable by the Bank and/or the Lessor.

   13.  Automatic Stay. The Obligors agree that upon the filing of any Petition 
for Relief by or against any one or more of the Obligors under the United States
Bankruptcy Code, the Bank and/or the Lessor shall be entitled to immediate and 
complete relief from  the automatic stay, and the Bank and/or the Lessor 
shall be permitted to proceed to protect and enforce their respective rights and
remedies under state law. The Obligors hereby expressly assent to any motion 
filed by the Bank and/or the Lessor seeking relief from the automatic stay. The 
Obligors further hereby expressly WAIVE the protections afforded under Section 
362 of the United States Bankruptcy Code with respect to the Bank and the 
Lessor.

                                       7
<PAGE>
 
     14.  Jury Trial. The Obligors hereby make the following waiver knowingly, 
voluntarily, and intentionally, and understand that the Bank and the Lessor, in 
entering into this Agreement or making any financial accommodations to the 
Obligors, whether now or in the future, are relying on such a waiver: THE 
OBLIGORS HEREBY IRREVOCABLY WAIVE ANY PRESENT OR FUTURE RIGHT TO A JURY IN ANY 
TRIAL OF ANY CASE OR CONTROVERSY IN WHICH THE BANK OR THE LESSOR BECOMES A PARTY
(WHETHER SUCH CASE OR CONTROVERSY IS INITIATED BY OR AGAINST THE BANK OR THE 
LESSOR OR IN WHICH THE BANK OR THE LESSOR IS JOINED AS A PARTY LITIGANT), WHICH 
CASE OR CONTROVERSY ARISES OUT OF, OR IS IN RESPECT OF, ANY RELATIONSHIP BETWEEN
THE OBLIGORS, OR ANY OTHER PERSON, AND THE BANK OR THE LESSOR.

                               Entire Agreement
                               ----------------

     15.  This Agreement shall be binding upon, and shall inure to the benefit 
of the Obligors, the Bank, and the Lessor, and their respective employees, 
representatives, successors, and assigns. This Agreement and all documents, 
instruments, and agreements executed in connection herewith incorporate all of
the discussions and negotiations between the Obligors and the Bank and the 
Lessor, either expressed or implied, concerning the matters included herein and 
in such other documents, instruments and agreements, any statute, custom, or 
usage to the contrary notwithstanding. No such discussions or negotiations shall
limit, modify, or otherwise affect the provisions hereof. No modification, 
amendment, or waiver of any provision of this Agreement, or any provision of any
other document, instrument, or agreement between the Obligors and the Bank or 
the Lessor shall be effective unless executed in writing by the party to be 
charged with such modification, amendment, or waiver, and if such party be the 
Bank or the Lessor, then by a duly authorized officer thereof.

                           Construction of Agreement
                           -------------------------

     16.  In connection with the interpretation of this Agreement and all other 
documents, instruments, and agreements incidental hereto:

     (a)  All rights and obligations hereunder and thereunder, including matters
          of construction, validity, and performance, shall be governed by and
          construed in accordance with the law of The Commonwealth of
          Massachusetts and are intended to take effect as sealed instruments.

     (b)  The captions of this Agreement are for convenience purposes only, and
          shall not be used in construing the intent of the Bank, the Lessor,
          and the Obligors under this Agreement.

                                       8
<PAGE>
 
     (c)   In the event of any inconsistency between the provisions of this
           Agreement and any other document, instrument, or agreement entered
           into by and between the Bank and/or the Lessor and the Obligors, the
           provisions of this Agreement shall govern and control.

     (d)   The Bank, the Lessor, and the Obligors have prepared this Agreement
           and all documents, instruments, and agreements incidental hereto with
           the aid and assistance of their respective counsel. Accordingly, all
           of them shall be deemed to have been drafted by the Bank, the Lessor,
           and the Obligors and shall not be construed against any of the Bank,
           the Lessor, or the Obligors.

                        Illegality or Unenforceability
                        ------------------------------

     17.   Any determination that any provision or application of this Agreement
is invalid, illegal, or unenforceable in any respect, or in any instance, shall
not affect the validity, legality, or enforceability of any such provision in 
any other instance, or the validity, legality, or enforceability of any other 
provision of this Agreement.

                              Informed Execution
                              ------------------

     18.   The Obligors warrant and represent to the Bank and the Lessor that 
the Obligors:

     (a)   Have read and understand all of the terms and conditions of this 
           Agreement;

     (b)   Intend to be bound by the terms and conditions of this Agreement;

     (c)   Are executing this Agreement freely and voluntarily, without duress, 
           after consultation with independent counsel of their own selection; 
           and
     
     (d)   Acknowledge and agree that the forbearance provided to the Obligors
           by the Bank and the Lessor pursuant to this Agreement constitutes a
           fair and reasonable time frame within which the Obligors may pay and
           perform each and all of their obligations to the Bank and the Lessor.

               (REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK)

                                       9

<PAGE>
 
     IN WITNESS WHEREOF, this Agreement has been executed this 14th day of 
October, 1998.


BANKBOSTON, N.A.                             ACT MANUFACTURING, INC.


By: /s/ Peter Haley                          By: /s/ Douglass C. Greenlaw
   ---------------------------                  ----------------------------
     Title: VICE PRESIDENT                        Title:



BANCBOSTON LEASING, INC.                     RE-ACT REALTY TRUST


By: /s/ Peter Haley                          By: /s/ John A. Pino
   ---------------------------                  ----------------------------
     Title: VICE PRESIDENT                        John A. Pino, Trustee
            AUTHORIZED OFFICER


                                             /s/ John A. Pino
                                             -------------------------------
                                             John A. Pino, Individually

                                      10
