Memorandum of Understanding
December 6, 2000
GENERAL OVERVIEW:
This Memorandum of Understanding (MOU) between Honeywell and EFTC applies to all
EFTC sites providing product to Honeywell and replaces the current agreements
and contracts currently in place at each site. Effectivity is from 11/1/00
through the earlier of 1) Implementation of a new corporate contract governing
all business between Honeywell and EFTC, which will supercede this MOU or 2)
10/31/01.
This MOU defines the agreement reached for major negotiation points that will
carry forward into the corporate contract. Additional items not identified below
are still being addressed and will also be included in the corporate contract.
This MOU is being issued with the expectation that both EFTC and Honeywell will,
in good faith, negotiate the remaining contract items to achieve mutual
acceptance with an objective of completing the new contract by 1/31/01.
PIECE PART PRICING:
Unit prices for each part will be as shown on Attachment A and will be
firm/fixed for the contract period except to allow for changes due to
Engineering Change Orders or change in quantity as defined below in the "Volume"
section. Any change in pricing, for any reason, must be agreed to by both
parties in writing prior to implementation.
Pricing shown is contingent upon both Honeywell and EFTC jointly working
together in good faith to make best efforts to improve the demand
management/SIOP process. The corporate contract will potentially include a
metric(s) designed to measure progress in this area.
CONTRACT TERM:
The term of the new corporate contract will be effective for one year from
11/1/00.
PURCHASE PRICE VARIANCE:
See Attachment B, PPV Agreement, for terms and conditions.
PAYMENT TERMS:
Payment terms are Net 30 days from receipt of invoice through the earlier of
1/31/01 or implementation of service by GECC. If GECC is not utilized, payment
terms will be Net 60 days from receipt of invoice. The discount rate from GECC
will be based on 30 day terms for Phoenix deliveries, 60 days for all other
sites (as currently defined).
EXCESS/ZERO DEMANDINVENTORY:
For purposes of defining excess and zero demand inventory, six (6) months will
be utilized for zero demand and nine (9) months will be utilized for excess
inventory as the time horizons for determining demand. Each EFTC site will
conduct quarterly reviews to identify zero demand and excess components within
the respective time windows. The resulting lists will be jointly reviewed by
EFTC and Honeywell to determine appropriate action (take no action, pay carrying
costs, buy back...) on a case by case basis for each site.
VOLUME:
Pricing is subject to upward/downward revision on a site-by-site basis if total
Honeywell site specific revenue increases or decreases in excess of 30% from the
established baseline for each quarter. The annual baselines are shown in
Attachment C and are derived by multiplying the 12-month forecast for each part
by the new price and totaling the extended values at each facility. The
quarterly baseline is derived by dividing the annual baseline by 4.
To measure the change in revenues, the forecast from Honeywell for each quarter
will be compared to the quarterly baseline defined above. If the absolute value
of the difference exceeds 30%, pricing at the specific site is subject to
modification.
At any time revenue projections appear to be exceeding the +/-30% window for a
particular quarter, either Honeywell or EFTC will notify the other party for
review and discussion on proposed action.
Xxx Xxxx /s/ Xxxxx X. Xxxx Date:12/18/00
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EFTC, Chief Executive Officer
Xxxxxx Xxxxxxxx /s/ Xxxxxx Xxxxxxxx Date12/21/00
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Xxxxxxxxx, Director
