MASTER QUALITY AGREEMENT
This Quality Agreement (this "Agreement") is made as of the
July 24, 1997, by and between PHILIPS CONSUMER ELECTRONICS
COMPANY, a division of PHILIPS ELECTRONICS NORTH AMERICA
CORPORATION (hereinafter called "PURCHASER") and CIRCUIT
SYSTEMS OF TENNESSEE, LP (hereinafter called "SUPPLIER") and
provides as follows:
W I T N E S S E T H:
FOR AND IN CONSIDERATION of the mutual promises contained
herein and for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, Purchaser and
Supplier agree on the quality program for Products (as such term
is defined in that certain Printed Circuit Board Purchase
Agreement between Purchaser and Supplier, initially dated July 29,
1997 (the "Purchase Agreement") as follows:
1. Definitions
Product Specification shall be defined as the Lightning
Stroke "General Printed Circuit Board Specifications for the Sound
& Vision (S&V) Classes 1, 2 and 3, "Draft", issue date of 05-15-
1997." This specification will govern unless otherwise specified
by Engineering (as set forth in Lightning Stroke) and agreed upon
in writing.
"Field Call Rate" or "FCR" shall be identified as the
calculated failure rate for all Products within a specific Product
category and for all model years.
"Paid Call Rate" or "PCR" shall be identified as the
calculated failure rate for all Products within a specific Product
category for a specified model year introduction.
"PPM" or Parts Per Million shall be defined as the
measurement of a Products general quality as measured by the
PURCHASER or PURCHASER's designate as defined by the Product
Specification or other written agreements. The PPM goal will be
as stated in Exhibit A attached hereto as such may be amended from
time to time.
"Final Instrument Facilities" shall be defined as Five Rivers
Manufacturing, LLC, located in Greeneville, Tennessee (to the
extent such facility manufacturers Products for Purchaser) and
Philips Electronics, Juarez, Mexico, plants 2 and 5.
1. Purpose
a. For Products to be procured by PURCHASER from the
SUPPLIER, the purpose of this Master Quality Agreement (MQA) is to
establish the quality system elements, and to more fully define
the obligations of PURCHASER and SUPPLIER, and to establish the
working relationship and the feedback system between the
PURCHASER, Final Instrument Facilities and SUPPLIER.
b. The Master Quality Agreement establishes also the basic
elements which are required and aimed on the continuous
improvement of the Product conformity and reliability performance.
c. This document supplements the terms and conditions as set
out by the Purchase Agreement.
2. Zero-Defects
a. SUPPLIER, PURCHASER and Final Instrument Facilities have
committed to the principle of Zero Defects in which all Product
defects and failure, and quality discrepancies are to be
considered as unacceptable.
b. SUPPLIER, PURCHASER and Final Instrument Facilities will
actively cooperate to investigate the causes of failure and the
implementation of corrective as well as preventive actions and
generally assist each other in the achievement of mutually
beneficial opportunities for quality improvement.
c. As evidence of SUPPLIER's commitment to the Zero Defect
goal, SUPPLIER agrees to supply Products in accordance with the
PPM targets as specified in the Product Quality Addendum shown in
Exhibit A as well as the applicable terms of the Purchase
Agreement.
3. Applicable Documents
a. Product Specifications
UAN-D1829/020
b. Underwriters Laboratory, Inc. Process Certification
c. Purchase Agreement
Note: Prior to the procurement of Products by the PURCHASER,
both parties will agree on the Product specification. SUPPLIER is
responsible for ensuring that any Product shipped to PURCHASER
meets the requirements of the Product specification.
1. Supplier Obligations
a. SUPPLIER is responsible for the quality of delivered
Products and warrants that all Products will meet the requirements
of the Product Specification as well as the applicable terms of
the Purchase Agreement.
b. SUPPLIER shall perform and retain records of all the
necessary regulatory compliance testing and verification on all
Products manufactured for the PURCHASER (reference item 4b).
c. SUPPLIER shall assist the PURCHASER or Final Assembly
Facilities in the performance of, or make equipment available for
the investigation of Product failure.
d. SUPPLIER shall provide formal quotation which will
include the following:
1. Tooling cost breakdown
2. Engineering charges (if applicable)
3. Lead time for tooling
4. Lead time for samples
5. Production start date after sample approval
6. Minimum order quantity
7. Samples not electrically tested (fixture ordered
after sample approval)
1. Purchasers Obligations
Except as otherwise set forth in the Purchase Agreement:
a. PURCHASER shall provide tooling package to the SUPPLIER
capable of meeting Product Specifications.
b. PURCHASER shall issue purchase order for required tooling.
c. PURCHASER is responsible for final sample approval.
d. PURCHASER shall assist the SUPPLIER in investigation of
causes of failure and the implementation of corrective and
preventive actions and assist in the achievement of continuous
quality improvement.
e. PURCHASER shall ensure that the SUPPLIER has the latest
information concerning PCB manufacturing design rules.
2. Mutual Access, Verification and Confidentiality
a. SUPPLIER's manufacturing and distribution facilities
shall be accessible to PURCHASER's representatives in order to
verify whether SUPPLIER observes its obligations under this
agreement.
b. To the extent allowable under Purchaser's Contracts for
Products from the Greeneville, Tennessee facilities of Five Rivers
Mfg. LLC, PURCHASER's manufacturing facilities will be accessible
to SUPPLIER's representatives to observe the handling and
processing of SUPPLIER's Products.
c. In both cases, the normal courtesies of prior
notification and agreement will be observed.
d. Both parties agree to keep in strictest confidence and
ont use for itself or disclose to any third party any confidential
and propriety information disclosed by one of the parties during
the course of audits, visits and discussions, unless agreed
otherwise between SUPPLIER and PURCHASER.
3. Qualifications
a. System
i) SUPPLIER shall maintain ISO 9002 and ISO 14000
certification of its system, or document a quality system of
equivalent standard. This system shall ensure conformance to the
requirements of this agreement and the Purchase Agreement.
Moreover, the system will provide for the prevention and early
detection of discrepancies and for timely corrective and
preventative actions.
ii) Upon prior notification, the PURCHASER shall at
least once per year be afforded the opportunity to visit the
SUPPLIER facility to perform a quality system audit on the basis
of the appropriate ISO 9000 document.
b. Process
i) SUPPLIER shall have a documented process description.
This description shall ensure that Products meet the requirements
of the Product specification.
ii) PURCHASER upon prior notification and agreement
with the SUPPLIER, shall be afforded the opportunity to perform a
process audit in the SUPPLIER production or manufacturing
location.
c. Product
i) SUPPLIER shall use only qualified and approved
materials in the design and manufacture of Products and shall have
appropriate documentation and procedures which support the
qualification process. A joint understanding and agreement of the
qualification process shall be established prior to the delivery
of any Products (see Product Quality Addendum attached).
Exceptions to the agreed upon Product Specification shall be
requested by the SUPPLIER to the PURCHASER and shall be jointly
approved in writing.
ii) After qualification, the SUPPLIER shall not
introduce any significant manufacturing process change without
prior notice to and approval of PURCHASER, if the change effects
the final Product beyond the Product specifications.
iii) PURCHASER reserves the right to refuse shipment
lots in those cases where it has been determined and agreed via
analytical methods that Products are not conforming to the Product
Specifications.
4. Safety
a. SUPPLIER is responsible for maintaining all appropriate
regulatory certification as evidenced in "Attachment B".
b. Safety defects will be considered as critical defects.
Every Product will be submitted to inspection on critical defects
during SUPPLIER's manufacturing process. SUPPLIER will
immediately notify PURCHASER an defected Final Assembly Facilities
upon detection of any Product with a safety defect or upon
acquiring information that the risk exists that Products with such
defects have been delivered to PURCHASER. A joint action plan
shall be initiated.
c. Should the PURCHASER and/or Final Instrument Facilities
discovery any single safety defect, the SUPPLIER shall be notified
and a joint action plan will be initiated.
5. Application Validation
a. PURCHASER shall ensure that the final material PQA
(Part's Qualification Approval) or a wavier is provided to the
SUPPLIER prior to production start up.
b. The final responsibility for the application of the
material remains with the PURCHASER.
6. Change Control
a. SUPPLIER shall notify PURCHASER a minimum of 90 days in
advance of any intended change that would impact the performance
or specifications of the final instrument/material.
b. Notifications by the SUPPLIER of such changes shall be
accompanied by information which explains the reason for the
change and the possible impact to the final instrument process
and/or performance.
c. SUPPLIER may request from the PURCHASER a time within
which to respond to the change notification. The PURCHASER may
also ask for additional time in order to complete the evaluation
of impact and shall agree with the SUPPLIER as to the appropriate
time.
d. Both the PURCHASER and SUPPLIER shall be in agreement as
to the necessary requalification of the Product prior to the
manufacture of the Product.
e. Emergency instances shall be handled on a case-by-case
basis where a temporary waiver may be granted by the PURCHASER
based on the current information available.
7. Process Control
a. Statistical Process Control shall be applied throughout
the SUPPLIER's process (where applicable and reasonable). Process
capability indexes (Cpk's) shall be established for the critical
Product parameters and the correlating process parameters.
b. The critical Product parameters shall be established in
mutual agreement with the PURCHASER or via Product specifications.
The minimum Cpk goal shall be 1.33.
8. Product Inspection, Monitoring and Reporting
a. SUPPLIER shall use a monitoring scheme to establish the
reliability and outgoing quality level of Products supplied to the
PURCHASER and shall report the details upon request by the
PURCHASER.
b. SUPPLIER shall notify PURCHASER upon detection of
potential problems which may lead to a deterioration of
PURCHASER's conformity or reliability levels in its development,
manufacturing and customer locations.
c. SUPPLIER shall notify PURCHASER verbally of any
potential quality or reliability problems associated with supplied
Products and confirm in writing. This shall then be supported by
weekly status reports to the PURCHASER until corrective and
preventative actions are in place.
d. The detection of a potential safety hazard, by either
PURCHASER or SUPPLIER shall be cause for immediate joint
notification and action.
9. PPM Management
a. An essential element of PPM management is PPM co-
operation. The purpose of PPM Co-operation is to achieve overall
qualify improvement, whereby the ultimate goal is ZERO DEFECTS.
For certain Products, the PURCHASER may start a PPM management
activity with the SUPPLIER and provide feedback on a monthly
basis.
b. Final Instrument facilities shall provide the SUPPLIER a
monthly summary report of material performance.
c. SUPPLIER and PURCHASER shall establish corrective and
preventative actions that will focus on PPM improvement and
reduction and shall organize regular follow up to ensure that
actions taken are sufficient.
d. SUPPLIER, PURCHASER, and Final Instrument Facilities
shall jointly perform at a minimum of one (1) time per year, a
review of the PPM Management Process.
10. Complaints
PURCHASER may, but shall not be required to subject all
Products supplied to the PURCHASER to inspections and acceptance
or rejection; however, the PURCHASER shall be under no obligation
to perform Incoming Materials Inspection. Areas where rejects may
be identified:
a. Incoming Materials Inspection
(1) Lots with defects identified by PURCHASER during a
sample inspection may be handled in the following ways:
o return the entire shipment to SUPPLIER for
replacement (RA number required.
o PURCHASER may elect to do 100% inspection of the
defective shipment on site based upon agreed cost
to the SUPPLIER.
o destroy the shipment with written approval from the
SUPPLIER.
o require SUPPLIER to have its personnel and the
necessary equipment attend at PURCHASER's premises
to do a 100% re-inspection and re-work of the
Products.
(1) PURCHASER/Final Instrument Manufacturer, shall
provide SUPPLIER samples of defective material with initial
paperwork requesting corrective action and/or financial
reimbursement.
b. SUPPLIER shall prepare a corrective action plan which
addresses the following items and shall be forwarded to the
PURCHASER and Final Instrument Manufacturer primary contact.
(1) Problem Description (if found to be
other than original)
(2) Interim Containment Action and the
Date and Product Identification of
the implemented action.
(3) Root Cause analysis
(4) Implementation of Permanent Corrective Action
(5) Actions to Prevent Recurrence
c. SUPPLIER Products, packaging or components that have
been reworked shall be readily identifiable by an agreed-upon
marking.
2. Shelf Life and Warranty
a. The shelf life of components, assemblies, sub-assemblies
or finished goods received from the SUPPLIER will be as specified
in the component or Product specifications as set forth in the
Purchase Agreement or Product Specification.
b. Products found to be older than specified upon incoming
inspection shall be subject to return to the SUPPLIER for
replacement by new production. Other options may be agreed upon
between the SUPPLIER and PURCHASER.
3. Product Traceability
a. SUPPLIER shall maintain a Product tracking system
capable of identifying production batches in the manufacturing and
supply chain.
4. Amendment
This agreement and the attachments and exhibits hereto shall
serve as the Quality Agreement between the parties until amended
in writing as set forth herein or in the Purchase Agreement.
IN WITNESS WHEREOF, Purchaser and Supplier, intending to be
legally bound, have executed this Agreement as of the date and
year first above written.
CIRCUIT SYSTEMS OF TENNESSEE, LP
"Supplier"
By: /s/ Xxxxx X.Xxxx
Xxxxx X. Xxxx
Vice President
PHILIPS ELECTRONICS NORTH
AMERICA CORPORATION
"Purchaser"
By:/s/ Xxxxxx X. Xxxxxx
Xxxxxx X. Xxxxxx, Vice President
and General Counsel
Philips Consumer Electronics
Company, a division of Philips
Electronics North America Corporation
EXHIBIT "A"
Quality Agreement between
Philips Consumer Electronics and
Circuit Systems of Tennessee, L.P.
1997-98 Quality Goals
Product Category: 1997 Goals 1998 Goals
Printed Circuit Board Material
o FRI or FR2 base material
o CEM base material
Impound Number
o TBD
Quality Goals shall be determined after a six month monitoring and
review of the data from the Final Instrument Facilities in
Greeneville, TN. (Five Rivers Mfg., LLC) and Juarez, Mexico
(Philips Plants 2, 4 and 5).
*"ppm" = Parts Per Million as measured by PURCHASER or PURCHASER's
designated Final Instrument Manufacturing Facilities.
EXHIBIT "B"
Generic Quality Specification between
Philips Consumer Electronics and
Circuit Systems of Tennessee, L.P.
1997-98 Specification
a) Product Safety Certificate/UL Process Certification
o UL Certification Number: E38049
b) Designated Contacts with Signature Authority:
SUPPLIER PURCHASER
1) _______________________
____________________________
Circuit Systems of Philips Consumer Electronics
Tennessee, L.P. Development Engineering
____________________________
Philips Consumer Electronics
V.P. Development Engineering
____________________________
Philips Consumer Electronics
Director Quality, Reliab. &
Comp.
____________________________
Philips Consumer Electronics
Manager Product Compliance
c) Statistical Process Control shall be utilized by the
SUPPLIER when processing Products for the PURCHASER. Process
Control points shall be mutually agreed upon or identified per the
Product Specification prior to the initiation of production.
EXHIBIT "C"
Product Quality Addendum between
Philips Consumer Electronics and
Circuit Systems of Tennessee, L.P.
1997-98
see attached document from S&V Engineering.
(Draft Process of supplier qualification and
Product Specifics)
