SUPPLY AGREEMENT
BAJA ORIENTE
JANUARY 1, 1994
TABLE OF CONTENTS
Pages Contents
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1-4 Terms and Conditions
4 Signature Page
5 Exhibit I
6 Exhibit II
7 Attachment A, B
ALLIEDSIGNAL INC. - T&TBS
XXXXXXX AUTOMOTIVE GROUP
0000 X. Xxxxxx Xxxx.
Xxxxxxxx, XX 00000
SUPPLY AGREEMENT
Supplier Baja Oriente ("Seller"), address - 00000 Xxxxxxxxx Xx., Xxxxx Xx
Xxxxxxx, XX 00000, has entered into a supply agreement with AlliedSignal Inc.
on behalf of Xxxxxxx Automotive Group ("Buyer"). In consideration of the
mutual covenants and conditions herein, the parties agree as follows:
1. TERM
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1.1 The term of this supply agreement (the "Agreement") shall be a period of
three (3) year(s) commencing January 1, 1994 and ending on December 31,
1996. (the "Term")
2. SALE OF PROCEEDS
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2.1 Buyer agrees to purchase and Seller agrees to sell component parts used in
the manufacture of repair of Turbochargers and Charged Air Coolers and
specified on Exhibit I, and Exhibit II of Buyer requirement during the
Term for products as set forth on the fac of the purchase order (Form BWS-
1004A 1/93) as amended by the specific warranty clause, Attachment A,
which is attached hereto and is made a part of this agreement
("Products"). Buyer and Seller agree to commence negotiations for a new
supply agreement no later than September, 1996, and further agree to a
target date of December 1, 1996 for the signing of such new supply
agreement, provided such new supply agreement is acceptable to both
parties.
3. PRICE
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3.1(A) The initial price Buyer shall pay to Seller for Products are set
forth in Exhibit I, and Exhibit II.
3.2(B) The price of Aluminum is established at $0.62/lb for 319 Aluminum
alloy, and $0.67/lb for 356 Aluminum alloy per the American Metal
market dated 11/23/93. The prices shall be adjusted to reflect cost
decreases or increases by Seller resulting from changes to the
published prices of plus or minus ten percent (10%) from the prices
stated. The American Metal Market will serve as the agreed upon
published price source. Adjustments shall e no more frequent that
once during any three month period.
4. PRODUCTIVITY
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4.1 As of January 1, 1994, 1995 and 1996, Seller will reduce the price for
products by an amount no less than 2% for those items on Exhibit I, and 6%
for those items on Exhibit II commencing on January 1, 1995. The prices
will be reduced in a manner so that the effect of said reduction will
lower the base price of the total volume of work for each exhibit based on
the preceding 12 month period. The base pricing will only change based on
the
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adjustments for Aluminum ingot as defined in section 3.2, and exceptional
economic hardship as defined in section 5.
4.2 Successful productivity suggestions made under the ASPIRE program will
count 100% toward the commitments shown, up to 6%, after which said cost
savings will be shared with the supplier on a 50-50 basis.
4.3 Machined parts or other value added activity that results in a net savings
to Buyer will be credited 100% toward the productivity commitments
previously stated in section 4.1.
5. ECONOMIC ADJUSTMENT
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5.1 The prices identified in Exhibit I, and Exhibit II, are based on the
Seller's labor cost and raw material cost. From time to time, but no more
frequently than once during any 12 month period, Buyer or Seller may
initiate negotiations to adjust prices to account for extraordinary
changes to the labor portion of the product cost. The change to the labor
cost must e deemed extraordinary after such economic influences as the
Peso-Dollar Exchange rate is taken into consideration. The Seller will,
at the request of the Buyer, provide documentation to substantiate the
proposed change to the labor percentage of the part cost. The prices
referenced on Exhibit I will remain firm and fixed for entirety of 1994.
5.2 From time to time, but no more frequently than once during a three month
period, Buyer and Seller will agree to change the purchase price of
Product in accordance with section 3.2 to allow for fluctuations greater
than 10% to the published price of aluminum ingot per the American Metal
Market.
6. QUALITY CRITERIA
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6.1 Seller must maintain quality and delivery standards that are at least
consistent with a score of fifty (50) as measured by Buyer on Buyers
Quality Survey (BC-2522). If for some reason, Seller does not meet a
minimum score of fifty (50) on the Buyer's Quality Survey, Seller will
have six months to achieve this minimum score of fifty (50), otherwise,
Buyer may terminate the Agreement with respect to some or all of the
Products, without further obligations to the Seller.
6.2 In addition to Seller's obligations under Paragraph 6.1, Seller shall also
maintain a cumulative rejection rate per Attachment B. Dates for
continued improvements by Seller are included in Attachment B which is
attached to and made a part hereof.
6.3 In the event Seller ships non-conforming Products, Buyer shall so notify
Seller and allow Seller a maxzimum of twenty-four (24) hours to ship
Products conforming to Buyer's specifications. Buyer shall debit Seller a
fee of $105 per rejected shipment whether rejected in whole or in part to
cover internal processing of the rejection and notify Seller of the
rejection and estimated charges. If Seller fails to ship conforming
Products within the twenty-four (24) hour period referred to above, Buyer
shall debit Seller $75 per hour that may be
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required to sort and/or modify Products to meet specifications only if
approval is obtained by Seller of total cost estimate. Additionally,
Buyer shall debit the costs of returning the non-conforming Products to
the Seller. The $105 per shipment charge will be waived for Seller, given
that the improvements listed on Attachment B are met and that cumulative
rejects of less than 1% are achieved on a quarterly basis subsequent to
January 1, 1994.
7. CHANGES
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7.1 If Buyer initiates design, process, or other changes which result in
decreased production costs, prices will be decreased to reflect the entire
effect of the decreased production costs. If Seller initiates design,
process, or other changes as through the framework of the ASPIRE program,
the net effect of the decrease after non-recurring costs will count 100%
toward the commitments mentioned in section 4.1. Additional savings after
the commitment is met will be shared 50-50 between Buyer and Seller.
8. INVENTORY
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8.1 Prior to the expiration of any of Seller's labor contracts, Seller will
make best effort to , at its expense, fabricate and locate in an area not
to be affected by any labor disruption, a finished inventory of salable
Products sufficient to fulfill Seller's obligation to Buyer for a minimum
of thirty (30) calendar days after expiration of such contracts.
8.2 As per the terms on the reverse side of Buyer's production schedule, Buyer
commits to thirty (30) days forward schedule during which all efforts will
be made by Buyer to maintain consistent scheduling. In the event that
unforeseen events cause radical changes to the requirements of Buyer, a
mutually acceptable arrangement will be made to relieve Seller of on hand
and in process inventory.
9. PROHIBITION OF USE OF PRODUCTS AND TOOLING
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9.1 Seller shall not sell or transfer to any third party or allow any such
third party to use Products (including rejected Products, Buyer's drawings
and specifications, or any other confidential information of Buyer) for
any reason whatsoever. Furthermore, Seller shall not manufacture parts
for other customers which would engage the use of Buyer's Tooling, without
the prior written consent of Buyer.
10. SERVICE REPLACEMENT
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10.1 At Buyer's request, during the seven year period after Buyer completes
current purchases, Seller, will sell Product to fulfill Buyer's past model
service and replacement requirements at the prices specified in this
Agreement plus reasonable actual setup or manufacturing costs. During the
seventh year of such period, Buyer and Seller will negotiate in good faith
with regard to Seller's continued manufacture of service and replacement
Products.
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11. TERMINATION
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11.1 In addition to its rights under Section 6 and Article 11 of Buyer's
Purchase Order Form, Buyer may terminate this Agreement without liability
upon at least ninety (90) days of written notice if, (a) Buyer determines
in its reasonable discretion that Seller is no longer competitive in price
(including non-competitiveness due to exchange rate fluctuations, if
applicable) or delivery, or quality levels fall below the acceptability
limits established by section 6 and Attachment B, or, (b) Buyer can
substitute parts of significantly advance design or pricing. Upon Buyer's
notice, Seller may respond to Buyer's notice no later than sixty (60) days
prior to the effective date of such termination it being understood that
Seller's opportunity to respond to Buyer's notice shall in no way limit,
modify, or alter Buyer's sole right to terminate this Agreement. Seller
will be given the last right of refusal to meet the competitive price
thereby retaining the business on the part in question. If Buyer
determines that Seller is no longer competitive in price for a product, or
if Quality and Delivery performance falls below acceptable limits, the
Agreement for that part may be terminated by the Agreement for the Balance
of the parts will remain in effect in accordance with the balance of the
terms of this Agreement.
12 INCORPORATION BY REFERENCE
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12.1 The terms anc conditions set forth in Buyer's Purchase Order Form (BWS-
1004A-1/93), as amended by Buyer's warranty clause, per Attachment A, and
any releases issued thereunder (GAR-637-5/91) are incorporated herein and
are made a part hereof, in the event of any conflict between the terms and
conditions of the reverse side of the purchase order forms, and the terms
and conditions of the Agreement, the terms and conditions of this
Agreement shall prevail.
SELLER
By: "XXXXXXX XXXXX"
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Title: President
BUYER
ALLIED SIGNAL INC.
AUTOMOTIVE SECTOR
By: "X.X. XXXXXXX"
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Title: Vice President, Materials
Management
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EXHIBIT I
Garret Automotive - Mexicali Charged Air Systems
The following pricing structure is based on current pricing and the terms of
this Agreement. FOB will remain "DESTINATION" for the duration of this
Agreement. Allied Signal agrees to procure 100% of the casting requirements
for the following parts as the provisions of this Agreement are upheld.
Additional work that is rewarded to Baja Oriente after January 1, 1994, will
follow a 6% year or year productivity improvement schedule
PART NUMBER CALENDAR '94 CALENDAR '95 CALENDAR '96
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485442-0002 16.43 16.13 15.80
485444-0002 20.04 19.63 19.23
485446-0002 18.22 17.85 17.49
485448-0002 18.22 17.85 17.49
485456-0001 16.29 15.96 15.64
485458-0001 16.93 16.59 16.25
485622-0003 16.93 16.59 16.25
485622-0004 16.93 16.59 16.25
485632-0001 18.47 18.10 17.73
485634-0001 20.87 20.45 20.04
485642-0002 17.40 17.05 16.70
485644-0002 18.81 18.43 18.06
485806-0001 16.82 16.48 16.15
486002-0001 18.03 17.66 17.30
486004-0001 17.54 17.18 16.83
486122-0003 18.34 17.97 17.61
486124-0003 18.34 17.97 17.61
486132-0005 21.80 21.36 20.93
486132-0006 21.80 21.36 20.93
493815-0002 18.90 18.52 18.14
493816-0002 18.90 18.52 18.14
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EXHIBIT II
Xxxxxxx Automotive - Lomita Turbo Charging
The pricing set forth in this exhibit is reflective of the current prices
quoted by Baja Oriente. Prices shown are FOB Ensenada with delivery to Santa
Fe Springs, CA quoted at .08/lb.
Allied Signal agrees to procure 100% of the casting requirements of the
following parts as long as the provisions of this Agreement are upheld.
Additional work that is awarded to Baja Oriente after January 1, 1994, will
follow a 6% year over year productivity improvement schedule.
PART NUMBER EAU CALENDAR '94 CALENDAR '95 CALENDAR '96
----------- ------ ------------ ------------ ------------
409168-0608 6200 23.94 22.50 21.15
443534-0751 3000 19.63 18345 17.34
447296-0004 40,000 25.88 24.33 22.87
442820-0750 5000 20.97 19.71 18.53
442087-0950 1800 20.03 18.82 17.69
442087-0750 7200 20.96 19.70 18.52
408173-0139 8000 7.58 7.15 6.72
443567-0012 6000 25.62 24.08 22.64
448709-0011 23,000 7.33 *6.89 *6.48
* This part is currently scheduled to be phased down by end of calendar year
1994.
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ATTACHMENT A
WARRANTY LIABILITY
Beginning January 1, 1994, if Buyer can prove that a failure in the field is
directly attributable to a deviant condition caused by Sell, whether is to the
Seller's part or Seller's part directly causes the failure of another part,
Seller agrees to pay warranty penalty according to the following scale:
Failure Rate Liability
1 to 10,000 PPM Seller replaces the cost of the casting at the current
cost as determined by this Agreement.
> 10,001 PPM * Seller agrees to pay the replacement cost of the
Turbocharger or Charged Air Cooler.
* Estimated liability - Turbo Charger: $250
- CAC: $275
ATTACHMENT B
PPM IMPROVEMENT SCHEDULE
As with reductions to the salable prices of the Products in this Agreement,
Seller agrees that the learning curve guarantee by this long term Agreement
will facilitate the following improvement to Part Per Million Reject Rate. PPM
will be measured starting January 1, 1994, based on a 12 month rolling average.
1994 - 10,000 PPM
1995 - 7,500 PPM
1996 - 5,000 PPM
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