NOTE: CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FROM THE SECURITIES AND
EXCHANGE COMMISSION FOR PORTIONS OF THIS EXHIBIT.
*** = confidential portion omitted and filed separately with SEC
LONG TERM SUPPLY AGREEMENT
This Long Term Supply Agreement is made this 19th day of March, 1999, by and
between Honeywell Inc., a Delaware corporation acting on behalf of its various
divisions and subsidiaries, with offices at ▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇
▇▇▇▇▇ (hereinafter collectively referred to as "Honeywell"), and EFTC
Corporation, a Colorado corporation with offices at ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (hereinafter referred to as "EFTC"). Honeywell and
EFTC are hereinafter referred to singly as the "Party", and collectively, as the
"Parties".
RECITALS
A. Honeywell entered into that certain Master Agreement Regarding Asset Purchase
and Related Transactions dated March 19, 1999 (the "Master Agreement") whereby
Honeywell agreed to transfer certain intellectual property, assets and employees
related to the manufacture of electronic assemblies to EFTC, EFTC agreed to
enter into a Long Term Supply Agreement with Honeywell providing for the
manufacture by EFTC of electronic assemblies for Honeywell and its affiliated
entities.
B. Honeywell and EFTC are entering into this Long Term Supply Agreement with the
purpose of establishing a long term relationship, based on continuous
improvement processes, leading toward world class benchmarks in quality, cost,
delivery, technology and service. The Parties' relationship shall be
characterized by mutually beneficial goals, trust and benefits.
C. This Agreement is intended to outline the specific contractual
responsibilities, procedures, and special terms and conditions for work to be
performed by EFTC in accordance with Honeywell's specifications, drawings, bills
of material and/or other pertinent instructions and/or documentation provided by
Honeywell as anticipated in the Master Agreement.
D. It is the intent of the Parties that this Agreement be a long term agreement
and that EFTC will perform in such a manner that Honeywell's Commercial Aviation
Systems business can eventually have EFTC act as its primary manufacture for
circuit card assemblies
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements hereinafter set forth, and in consideration of the
execution and performance of the Master Agreement, the parties hereto agree as
follows:
1. TERM OF AGREEMENT
1.1 The term of this Agreement will begin on the date first written above and
remain in full force and effect through December 31, 2010 (the "Term"). The Term
will automatically renew for additional five (5) year periods unless either
party gives written noticed to the other of its intention not to renew at least
one (1) year before the end of the initial Term or any renewal Term.
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2. PRICING
2.1 The prices for Products covered by this Agreement shall be the prices shown
in "Attachment A" and shall be effective as of the Inventory Transfer Date.
2.2 EFTC warrants the prices for Products purchased in this Agreement are no
higher than those charged other EFTC customers in similar transactions.
2.3 Additional Products as agreed by both Parties, may be added to this
Agreement at any time during the term of this Agreement, through a written
Addendum to this Agreement.
2.4 On an annual basis, either party may request a review and/or re-negotiation
of the price terms set forth in Attachment A, hereto. Such request shall be
submitted in writing to the other Party at least three (3) months prior to an
annual term and shall be consistent with Section 9 hereof. In the event that the
Parties are unable to agree to a change in price the existing price shall remain
in effect until the next annual pricing cycle. The Parties agree to negotiate
such pricing modification requests in good faith.
3. TERMS AND CONDITIONS
Honeywell's current General Purchase Order Terms and Conditions are hereby
incorporated into this Agreement. The current version of the Honeywell General
Purchase Order Terms and Conditions are referenced in "Attachment B". In the
event of a conflict between the terms and conditions of a Honeywell Purchase
Order and those appearing in this Agreement, the terms and conditions of this
Agreement shall take precedence.
4. PAYMENT TERMS
4.1 Payments by Honeywell to EFTC shall be net forty-five (45) days from
Honeywell receipt of Products (which shall be no earlier than the delivery date
stated in the Purchase Order), with a 2% discount for payments made within ten
(10) business days from Honeywell's receipt of Products.
4.2 All deliveries shall be FOB (INCOTERMS 1990) Honeywell's Dock, unless
otherwise agreed by the Parties in writing.
5. PURCHASE ORDERS
5.1 This Agreement supplements and forms a part of any purchase order(s) that
Honeywell may issue to EFTC for those items described in "Attachment A", as
amended from time to time (hereafter called the"Products"). All such purchase
order(s) shall reflect the applicable unit price(s) for the Products as agreed
to in "Attachment A". In the event of a conflict between this Agreement and any
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EFTC/Honeywell Proprietary/Confidential
additional terms and conditions contained in purchase orders, acknowledgments or
invoices, this Agreement will control.
5.2 This Agreement is not a firm commitment to purchase Products from EFTC.
Actual authorization to ship shall be Honeywell's Purchase Order or as otherwise
agreed in writing by the Parties (for example, electronic data interchange, bar
code information transfer or other agreed methods).
5.3 This Agreement shall be applicable to purchase orders issued to EFTC by any
location of Honeywell, it being agreed that all such Honeywell locations and
subsidiaries are expressly intended to be benefitted hereby. In the case of any
subsidiary, the term "Honeywell" as used herein shall be deemed to refer to the
subsidiary.
6. PERFORMANCE PROVISIONS
6.1 Both Parties have established a performance goal of i) 100% on-time delivery
as measured from the date specified in Honeywell's purchase order, and ii) 100%
quality acceptance of Products by Honeywell as measured from Honeywell's final
assembly product test. EFTC shall work to reduce and eliminate the need for
Honeywell inspection of Products and both Parties shall work to install
point-of-use ("PoU") delivery processes. These PoU processes involve the
creation of a predetermined amount of Products stored at Honeywell's facility
and Honeywell shall pay for Products as the Products are removed from the EFTC
PoU inventory. EFTC shall then replenish the Product inventory based on a
min/max criteria based on demand patterns and Product lead-times, which shall be
agreed upon by the Parties in writing.
6.2 Honeywell will monitor EFTC quality and delivery performance levels at a
frequency no longer than monthly and this information will be provided to EFTC
in a Supplier Rating Report via a password secured Internet site. The Parties
have established a performance threshold for the quality and delivery of
Products from EFTC and actual performance that falls below this threshold shall
trigger an escalation process to improve performance (such process is described
in Attachment D). These thresholds will be detailed at the individual Product or
Product group level, to be determined by Honeywell and EFTC, and updated at
least annually.
6.3 Honeywell will provide EFTC with a Supplier Rating Report via a password
secure Internet web site. EFTC shall provide corrective action to Honeywell
within ten (10) business days after each Supplier Rating Report is posted on the
Internet site.
6.4 Under the EFTC/Honeywell On-Site Services agreement, repairs will be
performed on Honeywell premises with no Return Material Authorization required.
Honeywell reserves the right to rework/repair EFTC's Product and EFTC's agrees
to honor the warranty on Honeywell repaired Product. Any failure analysis data
and/or corrective action reports, if required, shall be provided to Honeywell
within 10 days after receipt of request.
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6.5 EFTC's Product's determined to be defective by Honeywell and not the fault
of EFTC, may be returned to the EFTC for rework or replacement at Honeywell's
expense. The previous sentence does not absolve EFTC of the responsibility for
performing all its delivery, quality and other obligations under this Agreement,
including without limitation EFTC's responsibility for performing acceptable
verification of material purchased by EFTC for use in the Products.
7. QUALITY
7.1 Honeywell's commitment to offering products and services that meet its
customer needs and expectations is dependent upon the ability of EFTC to provide
quality Products in accordance with contractual and regulatory requirements,
including the Federal Aviation Administration (FAA) FAR- PART-21. In order to be
successful EFTC, jointly with its suppliers, must work towards continuous
quality and productivity improvement and have in place a documented continuous
improvement strategy for Product quality, cost, delivery and service.
7.1.1 EFTC's quality system shall be in compliance with Honeywell's,
Quality Control Requirements for Suppliers (QCS-210) attached as "Attachment C",
and any special QCS-210 codes or other quality requirements specified on the
Purchase Order.
7.1.2 Materials described in Honeywell's Specification Control Drawings
or Source Control Drawings (SCD) shall be purchased from the approved source(s)
of supply, including their part numbers, as found in Query (P7500683) Purchase
Part Source. This provides the process for defining administration requirements
for Purchase Specifications (P-SPEC) 7500683. The P-SPEC contains qualified
source of supply information for purchased part drawings.
7.1.3 Materials under Honeywell's design control drawings shall be
purchased from an EFTC approved supplier. EFTC's supplier approval process must
be approved by a Honeywell quality assurance representative. Accompanied by an
EFTC Quality Assurance Representative, Honeywell may conduct a survey and/or
surveillance, of EFTC's suppliers to evaluate the degree of ability to comply
with the approval process.
7.1.4 EFTC shall, upon receiving a request from Honeywell for
corrective action, respond within ten (10) business days. The response will
state a corrective action implemented to avoid recurrence of the reported
deficiency, together with the effectivity of the correction. The response must
include the scope of the problem and a statement addressing any additional
defective Product that may have by passed EFTC's quality system.
7.1.5 EFTC shall promptly notify Honeywell if it has reason to believe
that there may be a form, fit, function, usability, or reliability problem with
Products that have already been delivered to Honeywell.
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7.1.6 Manufacturing and test process capability for Product
characteristics determined to be most important to Honeywell, or related to
potential manufacturing problems, shall be identified and controlled using
Statistical Process Control (SPC) practices.
7.2 Nonconformity Material Review Board (MRB).
7.2.1 Nonconforming materials or Products for use as described in
Honeywell proprietary designs shall be submitted to Honeywell's MRB for
disposition, unless after initial review by EFTC's MRB, it is determined that
discrepant materials or Products will be: i) reworked to meet the specified
requirements, ii) scrapped, or iii) returned to EFTC's supplier.
7.2.2 When Honeywell furnished material has been used in the
fabrication of non- salvageable items, the material may not be scrapped without
Honeywell's prior written consent.
7.2.3 Any non-conforming materials used in EFTC proprietary designs
(not a Honeywell part number), may be disposed of by EFTC's MRB.
7.3 Products supplied under the terms of this Agreement may be utilized
in equipment which has been or will be subject to Federal Aviation
Administration type certification or Technical Standard Order
Authorizations/Parts Manufacturer Approval. EFTC's facility and quality system
are subject to surveillance by authorized representatives of the Federal
Aviation Administration. EFTC shall provide all reasonable facilities and
assistance to the authorized FAA representatives, upon request.
8. DEMAND PLANNING
8.1 Honeywell forecasts for Products shall be provided to EFTC on a weekly
basis. EFTC will procure material based on such forecast. However, Honeywell's
liability to pay for material purchased by EFTC in reliance on Honeywell's
forecast shall be limited to material purchased three (3) months prior to
Honeywell's delivery date or industry lead-time, which ever is longer.
8.2 Standard lead-time for Products to be supplied by EFTC shall be two (2)
weeks on forecasted items. Forecasts or Purchase Orders may be rescheduled (in
or out) as follows, or as mutually agreed to by both Parties (subject to the
terms in Section 8.1):
Days remaining until original schedule Rescheduling (in or out) options*
(calendar days)
0-14 days No rescheduling or cancellations.
15-45 days Honeywell may reschedule or cancel up to
25% of Purchase Order/Forecast volume
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NOTE: Certain information on this page has been omitted and filed separately
with the Securities and Exchange Commission. Omissions are designed as
***. Confidential treatment has been requested with respect to the
omitted portions.
45-90 days Honeywell may reschedule or cancel up to
50% of Purchase Order/Forecast volume
90 days or more Honeywell may reschedule or cancel up to
100% of Purchase Order/Forecast volume
*The above schedule is based on material and resource availability for
rescheduling in.
9. COST CONTAINMENT
9.1 Starting January 1, 2001, EFTC shall offer *** . By July 30, 2000
the Parties shall mutually agree to establish the Product price base line that
will be used as the basis for the *** . EFTC and Honeywell agree to ***. The
Parties will, in good faith, review and revise as appropriate these commitments
every two years beginning in December 2003.
9.2 At Honeywell's convenience and upon reasonable notice to EFTC, Honeywell's
buyers, accountants, and other representatives shall have full access to inspect
all properties, books, accounts, records, contracts, and other documents
relating to EFTC business with Honeywell, to ensure cost control is being
managed for both Parties' benefits.
10. DESIGN PARTICIPATION
10.1 EFTC shall participate in Honeywell's training and on-site Concurrent
Development Process (CDP) and Earlier Supplier Involvement (ESI) programs on
Honeywell's new products development programs as appropriate to supplement
EFTC's own continuous improvement efforts.
10.2 It is the intention of the Parties to maintain technology leadership in
respective industries. In order to ▇▇▇▇▇▇ mutual technological advances,
technology exchange seminars will occur on a periodic basis as determined by the
Parties.
11. VALUE ENGINEERING
Both Parties agree to continually participate in individual and joint value
engineering cost reduction programs. The goal of such programs shall be to lower
costs by implementing the following: box sets, point of use delivery, cycle-time
improvements through lead-time reduction on material, pull system using EDI
releases, card testing, adding ▇▇▇▇▇▇▇▇▇ ▇▇▇▇ of Materials into EFTC's Component
Obsolescence Program (COP) and other agreed methods.
12. THIRD PARTY SALES
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12.1 EFTC agrees not to sell any items covered by this Agreement or information
and tooling provided by Honeywell for the purpose this Agreement to any third
party, except as otherwise agreed in writing by the Parties.
12.2 EFTC will extend the terms of this Agreement to all Honeywell locations,
subsidiaries, and subcontractors. With respect to Honeywell subcontractors,
Honeywell shall provide EFTC with written notice authorizing the subcontractor
to purchase under this Agreement, and Products purchased by the subcontractor
shall be used exclusively for work contracted by Honeywell and no other purpose.
All purchases described in this section will be included in Honeywell's total
volumes for pricing discounts. EFTC reserves the right to verify such
subcontractors credit worthiness.
13. USE OF HONEYWELL AGREEMENTS
EFTC agrees that any Products, materials, or services acquired under the
provisions of Honeywell agreements with other supplier will be for the sole use
of EFTC under the terms of this Agreement, and will not be sold to any party
other than a Honeywell business unit, subsidiary or subcontractor unless
otherwise agreed by the Parties in writing. Both Parties agree to pursue
opportunities for consortium buying that will benefit the Parties, under
separate written agreements.
14. NOTICES
Any notice or communication given pursuant to this Agreement by a Party hereto
to the other party shall be in writing and hand delivered, or mailed by
registered or certified mail, postage prepaid, return receipt requested (notices
so mailed shall be deemed given when mailed), or sent via facsimile, with an
original mailed as follows:
If to Seller: Honeywell Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
Attn: Off-Load Manager
FAX: (▇▇▇) ▇▇▇-▇▇▇▇
If to Purchaser: EFTC Corporation
▇▇▇▇ ▇▇▇▇▇ ▇▇., ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: Chief Financial Officer
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
15. BUSINESS OR OFFSET REQUIREMENTS
While it is Honeywell's intent to closely align its Product needs with EFTC,
Honeywell reserves the right to have specific Products covered by this Agreement
manufactured in its own facilities. In
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EFTC/Honeywell Proprietary/Confidential
addition, Honeywell may have requirements in its contracts with specific
customers to purchase Products from sources other than EFTC, which right is also
reserved by Honeywell.
16. TERMINATION
16.1 For reasons other than described in section 6.3 either Party shall have the
right to terminate this Agreement thirty (30) days after sending written notice
of default and right to cure, in the event that the other party, its officers or
employees commits a material violation of any provision of this Agreement, its
Attachments or purchase orders and fails to cure such violation within the
thirty (30) day period. If either Party dissolves, terminates or suspends its
business, becomes subject to any bankruptcy or insolvency proceeding under
Federal or state statute, becomes insolvent or subject to direct control by a
trustee, receiver or similar authority or becomes a party to any action relating
to the bankruptcy or insolvency which is not dismissed within 30 days, then the
other Party shall have the option to either:
16.1.1 terminate this Agreement and/or purchase orders giving ten days
written notice to the other Party, or
16.1.2 treat this Agreement and/or purchase orders as in full force and
effect and take steps to enforce its terms.
16.2 In the event that a Honeywell customer cancels booked orders due to
economic downturn or enforceable situation hereunder, in whole of from time to
time in part, Honeywell may cancel such purchase orders pursuant to Section 8
hereof. In such event Honeywell would still be responsible for material as
specified in other sections of this Agreement.
16.3 Termination of the Agreement and/or purchase orders pursuant to it shall
not relieve either Party of its obligations incurred prior to such termination.
16.4 (a) If this Agreement is terminated by Honeywell on or before April 2, 2003
either (i) because EFTC is unable to pay its debts generally as they come due or
is declared insolvent or bankrupt, is the subject of any proceedings relating to
its liquidation, insolvency or for the appointment of a receiver or similar
officer for it which is not dismissed or otherwise terminated within thirty (30)
days of its inception, makes an assignment for the benefit of all or
substantially all of its creditors, or enters into an agreement for the
composition, extension or readjustment of all or substantially all of its
obligations; or (ii) because there has been a degradation of performance by EFTC
as described in Section 6 hereof then Honeywell shall have the option to
re-acquire from EFTC the Business and the Assets (as such terms are defined in
the Master Agreement) and such other assets of EFTC as are located at the
principal location in Phoenix, Arizona, at which the Products are produced and
are necessary for manufacture of the Products, and to offer to employ such of
EFTC's employees as are necessary to operate the Business and are employed at
such location. Honeywell may exercise such option giving at least 10 business
days prior written notice
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EFTC/Honeywell Proprietary/Confidential
thereof to EFTC. If such option is exercised by Honeywell, the Parties promptly
shall take such actions as are necessary and appropriate to facilitate (x) the
transfer to Honeywell of the assets being acquired by it and the production of
the Products by Honeywell and (y) the retention by EFTC of other contracts and
business unrelated to the Products and the transfer of the means of producing
such other contracts and business to other facilities operated by EFTC. The
assets to be acquired by Honeywell pursuant to this Section 16.4 shall be sold
and transferred to Honeywell by EFTC on a basis comparable to that applicable to
Honeywell as seller under the Master Agreement to the extent appropriate and the
price Honeywell shall pay for such assets shall be calculated using the method
for determining the price of such assets described in Exhibit 2.1 of the Master
Agreement.
(b) If this Agreement is terminated after April 2, 2003 for either of the
reasons specified in Section 16.4(a), then Honeywell shall have the option to
re-acquire from EFTC the Business and the Assets as specified in Section
16.4(a), except that Honeywell and EFTC shall segregate the assets to be
acquired and the employees to be hired by Honeywell in a manner consistent with
types of products being produced by EFTC at the facility at the time of such
termination and the customers for whom such products are then being produced,
and the parties shall agree to a reasonable allocation of leased space and other
resources necessary to permit each to produce the products for which it is
responsible for production after such termination.
16.5 Termination of this Agreement shall be in addition to and not in lieu
of any remedies available at law or in equity to the Parties.
16.6 Obligations under this Agreement which by their very nature would continue
beyond the termination of the Agreement will survive such termination or
expiration.
17. FORCE MAJEURE
If a Party is unable to meet its obligations under this Agreement as a result of
flood, earthquake, storm, other act of God, fire, war, riot, embargo, act of
government or governmental agency or any other similar cause beyond the
reasonable control of such party ("Force Majeure"), the obligations of the
Parties hereto shall be suspended for the duration of the Force Majeure. The
Party claiming Force Majeure shall, within five (5) days from the date of
disability, excluding Saturdays, Sundays and holidays, notify the other Party of
the existence of a Force Majeure condition and will similarly notify the other
Party within a period of five (5) days, excluding Saturdays, Sundays and
holidays, when the Force Majeure has ended. If EFTC's performance is delayed for
these reasons for a cumulative period of sixty (60) days or more, Honeywell may
terminate this Agreement or any Purchase Order by giving EFTC written notice,
which termination will become effective upon receipt of such notice. If
Honeywell terminates this Agreement under this Section 17, its sole liability
under this Agreement or any Purchase Order will be to pay any balance due for
conforming Products or services (1) delivered by EFTC before receipt of
Honeywell's termination notice; and (2) ordered by Honeywell for delivery and
actually delivered within 15 days after receipt of
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Honeywell's termination notice. If EFTC cannot deliver Products because of a
Force Majeure condition, Honeywell may immediately seek substitute performance.
18. LIABILITY AND INDEMNIFICATION
18.1 Each Party will hold harmless and indemnify the other Party from and
against any and all injuries, damages, fines, costs, and expenses (including,
but not limited to, reasonable attorneys' fees) caused by or resulting from any
negligent act, error or omission of the indemnifying Party in the performance of
its duties under this Agreement or caused by, or resulting from, any breach by
the indemnifying Party of any of the terms and conditions of this Agreement.
18.2 Nothing in this Agreement is intended to confer any rights or remedies
under or by reason of this Agreement on any persons other than Honeywell, EFTC
and their respective successors and permitted assigns. Nothing in this Agreement
is intended to relieve or discharge the obligations or liabilities of any third
persons to Honeywell or EFTC.
18.3 EFTC will defend, at its own expense, any suit or claim that may be
instituted against Honeywell for alleged infringement of patents, copyrights or
mask work rights relating to the maintenance, sale, or use of Products under
this Agreement, except for any such infringement resulting from EFTC's
compliance with detailed designs provided by Honeywell or resulting from EFTC's
use of information data or know-how licensed by Honeywell to EFTC (except to the
extent the infringement results from modifications of such information, data or
know-how made by EFTC). EFTC will indemnify and hold Honeywell harmless for all
costs and damages arising out of such alleged infringement.
18.4 Honeywell will defend, at its own expense, any suit or claim that may be
instituted against EFTC for alleged infringement of patents, copyrights or mask
work rights relating to EFTC's compliance with detailed designs provided by
Honeywell. Honeywell will indemnify and hold EFTC harmless for all costs and
damages arising out of such alleged infringement.
18.5 To the fullest extent permitted by law, EFTC will indemnify and hold
harmless Honeywell, its agents and employees, from and against all claims,
damages, losses, and expenses, including but not limited to attorney's fees,
arising out of or resulting from any actual or alleged defect in the Product or
services provided by EFTC under this Agreement, except for matters for which
Honeywell is obligated to indemnify EFTC under Section 18.6.
18.6 To the fullest extent permitted by law, Honeywell will indemnify and hold
harmless EFTC, its agents and employees, from and against all claims, damages,
losses, and expenses, including but not limited to attorney's fees, arising out
of or resulting from any actual or alleged defect in the Product to the extent
that such defect results from a Honeywell directed design or specification.
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18.7 It is expressly agreed that in no event shall either Party be liable for
any special, indirect, contingent or consequential loss or damage (including,
without limitation, loss of contract, loss of business, loss of revenue, loss of
goodwill, loss of market, loss of profit or loss of anticipated profit), expense
or cost whatsoever or howsoever suffered or incurred, whether or not the same
are foreseeable and whether arising in contract, tort or otherwise, relating to
or arising out of performance of this Agreement pursuant to this Agreement, even
if either Party had been advised, knew or should have known of the possibility
thereof. The terms of this Section 18.6 shall not apply in the event of willful
misconduct of either Party.
18.8 The parties agree to cooperate, to the extent reasonable, to mitigate any
potential damage exposure that may accrue in connection with any such suit or
claim covered by Sections 18.3 or 18.4. Claims for indemnification under this
Section 18 shall be made in compliance with procedures for indemnification
comparable to those set forth in Section 14.3 of the Master Agreement.
19. AGREEMENT MODIFICATION
This Agreement shall not be subject to change or modification except with the
prior written mutual consent of the each Party. Any deviations from Purchase
Orders or any exceptions or alterations must be approved by each Party in
writing. If so approved, such modification to the original Purchase Order shall
bind each Party as if it were part of the original Purchase Order.
20. CONSTRUCTION
When the context so requires, references herein to the singular number shall
include the plural and vice versa and pronouns in the masculine or neuter gender
shall include the feminine. The headings contained in this Agreement and the
tables of contents, exhibits and schedules are for reference purposes only and
shall not affect the meaning or interpretation of this Agreement.
21. ASSIGNMENT
This Agreement may not be assigned without the prior written consent of the
other Party hereto, which consent shall not unreasonably be withheld.
22. AMENDMENT
This Agreement may be amended only by written Agreement duly executed by
representatives of all parties hereto.
23. APPLICABLE LAW
This Agreement shall be construed in accordance with the laws of the State of
Arizona, disregarding its conflicts of laws principles which may require the
application of the laws of another jurisdiction.
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24. WAIVERS
Any waiver of rights hereunder must be set forth in writing. A waiver of any
breach or failure to enforce any of the terms or conditions of this Agreement
shall not in any way affect, limit or waive either party's rights at any time to
enforce strict compliance thereafter with every term or condition of this
Agreement.
25. SEVERABILITY
If and to the extent that any court of competent jurisdiction holds any
provisions (or any part thereof) of this Agreement to be invalid or
unenforceable, such holding shall in no way affect the validity of the remainder
of this Agreement.
26. COMPLETE AGREEMENT
This Agreement, including all other Agreements expressly incorporated herein by
reference, constitutes the entire Agreement between the parties respecting the
subject matter hereof, and there are merged herein all prior and pre-existing
representations and Agreements made by the between Honeywell and EFTC.
27. PUBLICITY
Neither Party shall release any information, advertisements, announcements or
other publicity concerning the other Party or this Agreement without the prior
written consent of the other Party, unless required by law.
28. RELATIONSHIP OF THE PARTIES
This Agreement is not intended to and does not constitute a joint venture,
partnership or other formal business organization. Each Party hereto shall act
as an independent contractor and shall not, except as specifically authorized
and provided herein, act as an agent for the other Party for any purpose
whatsoever and no Party shall have the authority to bind the other or make any
commitment or incur any costs or expenses for or in the name of the other Party
except to the extent found herein.
29. ARBITRATION
Any controversy, claim or dispute arising out of or relating to this Agreement
or the transactions contemplated hereby or the breach, termination, enforcement,
interpretation or validity hereof, including the determination of the scope or
applicability of this agreement to arbitrate (collectively "Dispute"), shall be
determined by arbitration in Phoenix, Arizona before a sole arbitrator. The
following shall apply to any such arbitration:
Long Term Sup. Agmt. Page 13 (3-18-99)(jb)(klm)
EFTC/Honeywell Proprietary/Confidential
29.1 The arbitration shall be administered by the American Arbitration
Association ("AAA") pursuant to its Commercial Rules and Supplementary
Procedures for Large, Complex Disputes. The arbitrator shall not be an officer,
employee, director or affiliate of any party hereto or of its affiliates or
Subsidiaries. If the parties are unable to agree on an arbitrator within 30 days
of the filing of the Demand for Arbitration, an arbitrator shall be selected
pursuant to the rules and procedures of the AAA.
29.2 Any party may seek from any court interim or provisional relief that is
necessary to protect the rights or property of that party, pending the
appointment of the arbitrator or pending the arbitrator's determination of the
merits of the controversy.
29.3 The parties shall bear their own costs and expenses, including attorneys'
fees, but the arbitrator may, in the award, allocate all of the administrative
costs of the arbitration (and mediation, if applicable), including the fees of
the arbitrator and mediator, against the party who did not prevail.
29.4 The arbitration award shall be in writing and shall specify the factual and
legal bases for the award. Judgment on the award may be entered in any court
having jurisdiction.
30. NEGOTIATED TERMS
All terms of this Agreement were negotiated between the Parties at arm's length,
recognizing the special needs, knowledge, and benefits of each Party. The
Parties agree that in the event a dispute arises in connection with this
Agreement, the terms contained in this Agreement shall be given their plain
meaning, and that no term shall be construed in favor of one Party over the
other by virtue of one Party having drafted a term in this Agreement.
31. REVIEW MEETINGS
31.1 Immediately following the effective date of this Agreement the Parties
shall establish a Operation Committee which will oversee the business
relationship between the Parties. The Operational Committee meetings will be
held on a regular basis to review programs, performance measurements and
barriers to progress and to review appropriate action to eliminate barriers, but
no less frequently than monthly during the calendar year. Topics to be addressed
will include, but not be limited to the following: i) information communication
quality and accuracy, ii) purchase volume and payment history, iii) Delivery and
Purchase Order lead time performance, iv) emergency Purchase Order handling, v)
value engineering initiatives, continuous improvement activities, and vi)
applicable pricing.
31.2 Immediately following the effective date of this Agreement the Parties
shall establish a Executive Steering Committee which will oversee the business
relationship between the Parties. The Executive Steering Committee meetings will
be held as needed, but not less than four times per year from the Effective
Date.
Long Term Sup. Agmt. Page 14 (3-18-99)(jb)(klm)
EFTC/Honeywell Proprietary/Confidential
32. YEAR 2000
To the extent that Product contains software and excluding Product containing
software designed or specified by Honeywell, EFTC warrants that all such Product
will process dates and times in such a manner that the software will continue to
materially comply with specifications without interruption by dates prior to and
during the Year 2000. Further, EFTC will demonstrate a process to ensure that
there will be no delay in delivery or performance as anticipated by this
Agreement due any failure to properly accommodate the date transition to the
Year 2000.
33. OBSOLETE & EXCESS MATERIAL
33.1 Honeywell does not intend to be engaged in the ongoing managing of material
required for this Agreement. EFTC has expertise in material management and the
ability to design and manage a Component Obsolescence Program. Therefore, EFTC
shall be responsible for all such material which shall include Last Time/Life
Time Buy and Obsolete Inventory (hereafter referred to as "LTB".
33.2 As compensation for EFTC buying and managing LTB inventory on a recurring
basis with the intent that Honeywell will have no future obligation to buy back
such LTB inventory, after the unit price of the assembly's have been
established, Honeywell shall pay EFTC and additional one percent (1%) over the
material cost of all inventory purchased by EFTC for Honeywell and sold to
Honeywell (hereafter such compensation shall be referred to as "LTB Cost").
33.3 The LTB Cost will be reviewed annually for reasonableness. If the parties
agree that there has been a significant change in the amount of LTB inventory
reserve needed, the LTB Cost will be re-negotiated or the Parties shall agree to
adjustment.
33.4 For the purpose of calculating Honeywell's Product pricing, attached as
Attachment A, EFTC will exclude its net purchase price of LTB inventory acquired
under the Master Agreement..
33.5 Any sale of LTB inventory by EFTC to a third party must be approved in
writing by Honeywell.
33.6 Piece Part Material Purchases. Honeywell will, from time to time, purchase
piece parts from EFTC. The objective of such piece part purchases shall be to
limit Honeywell's transaction costs and allow Honeywell to purchase such piece
parts at EFTC prices.
33.6.1 All piece part purchases by Honeywell will be under a blanket
purchase order. When possible, Honeywell will attempt to order piece parts on a
regular batch basis. The purchase price paid by Honeywell will be EFTC's price
plus a handling charge not to exceed the fully burdened cost
Long Term Sup. Agmt. Page 15 (3-18-99)(jb)(klm)
EFTC/Honeywell Proprietary/Confidential
of one full time equivalent EFTC buyer. Such purchase price shall be reviewed
annually by the Parties. The intent is to fully cover EFTC's direct cost of
providing this service to Honeywell.
33.6.2 Only piece parts in EFTC's active bills of material will be
available for sale to Honeywell, with the exception of Honeywell's new design
materials list.. If such piece parts are not in stock, EFTC shall not be
obligated to purchase such piece parts for Honeywell, with the exception of
Honeywell's new design materials list.
NOW, THEREFORE, intending to be legally bound, Honeywell and EFTC execute this
Agreement on the date first written above.
Honeywell Inc. EFTC
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇ By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇
------------------------------- -------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇ Name: ▇▇▇▇ ▇▇▇▇▇▇▇▇
----------------------------- ------------------------------
Title: President Title: Chief Executive Officer
---------------------------- -----------------------------
Date: 3/19/99 Date: 3/19/99
----------------------------- ------------------------------
Attachments to this Agreement
Attachment A - Product Prices
Attachment B - Honeywell General Terms and Conditions
Attachment C - Honeywell Quality Control Requirements
Attachment D - Performance Threshold Process
Long Term Sup. Agmt. Page 16 (3-18-99)(jb)(klm)
EFTC/Honeywell Proprietary/Confidential
