Exhibit 10.1
Document of Understanding Between Advanced Energy Industries and Affiliates
MicroPac Industries Inc.
Contract Number: 1009
1. PREAMBLE
This agreement is made as of this 01st day of February 2003 by and between
Advanced Energy Industries, Inc. & Affiliates (hereinafter referred to as
"Buyer") and MicroPac Industries Inc. (hereinafter referred to as "Seller"),
under which services shall be performed. Affiliates shall mean any person, or
entity directly or indirectly controlled by, controlling or under common control
with Advanced Energy Industries, Inc. This contract will be reviewed on an
annual basis and unless terminated by either party, as provided for in Section
19, shall continue to be in force.
2. TERMS AND CONDITIONS
No terms and conditions other than the terms and conditions set forth in this
document in conjunction with the general terms and conditions placed on
http:\\xxx.xxxxxxxx-xxxxxx.xxx/xxxxx & conditions shall be binding unless
specifically accepted by both the Buyer's authorized Purchasing Agent or
Commodity Manager and the Seller's authorized agent. Any terms and conditions
set forth in any document attached to or incorporated by reference in this
contract shall be binding unless specifically accepted by both the Buyer's
authorized Purchasing Agent or Commodity Manager and the Seller's Authorized
agent. This contract is intended as the complete and final agreement of both
parties and exclusive statement of its terms and may not be changed, altered or
modified, except in writing by agreement of both parties.
3. WARRANTY
The Seller warrants the goods and materials furnished under this Contract for
workmanship, material and compliance with all specifications, for a period of
twelve (12) months. The Seller shall comply with all applicable Colorado State,
Federal and local laws, rules and regulations. The exclusive venue for any
litigation concerning this matter shall be in the Larimer County District Court
in Fort Xxxxxxx, Colorado.
4. LIABILITY
The Seller agrees that the relationship established by this order constitutes
the Seller as an independent contractor and that, no tax assessment or legal
liability of the Seller or of his agents or employees becomes, by reason of this
order, an obligation of the Buyer.
5. REMEDY
Seller will not be responsible for incidental or consequential damages. Seller's
entire remedy will be the value of the product sold to Buyer.
6. BUYER CHANGES
Buyer shall have the right to make changes to existing orders. Purchase order
changes will be allowed only if authorized by Buyer. If such change affects
delivery, quality or amount to be paid by Buyer, Seller shall notify Buyer of
such changes in writing.
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Document of Understanding Between Advanced Energy Industries and Affiliates
MicroPac Industries Inc.
Contract Number: 1009
7. ENGINEERING CHANGE ORDERS AND BUYER CHANGES
All engineering change orders will be communicated to Seller via an Engineering
Change Order (ECO). If such change affects delivery, quality or the amount to be
paid by Buyer, Seller shall notify Buyer immediately. The charges for scrap
and/or rework resulting from any change submitted via Buyer's ECO process, shall
be limited to the materials in process at the time of the change and within
Seller's manufacturing cycle, as defined in the related addendum. These charges
will be communicated in their entirety in writing, to Buyer, within fifteen (15)
working days of receipt of ECO. Buyer will not be responsible for any costs
associated with the change order which are not identified within the fifteen
(15) working day window.
8. DELIVERY
Seller is to schedule non-Kanban part shipments, as defined in the addendum,
such that deliveries are received no more than 3 days earlier than the due date
and zero (0) days late. The date specified in a purchase order, or required in
an addendum, is the date due in house. A Kanban part, as defined in the
addendum, may be delivered only after the supplier is signaled in the business
system software. Kanban parts may be delivered anytime prior to the due date and
zero (0) days late, where the due date is defined in the addendum. Seller is
responsible for all costs associated with expedited delivery when the need to
expedite is due to the Seller's inability to meet Buyer's demand. The only
exception is when Buyer pulls in demand within Seller's lead-time window.
9. PACKAGING
Identification of the goods shall occur when they are placed in the hands of the
Carrier. Title shall pass to Buyer upon delivery to Carrier. Seller agrees to
insure that shipments are properly packaged and described in accordance with
specifications and/or applicable carrier regulations. Seller is responsible for
packing any shipment correctly based on the carrier/mode utilized. Seller is
responsible for all shipments that are damaged in transit due to improper
packaging, improper judgment, or any other act of omission of the seller.
Charges for packing and crating shall be deemed part of the purchase price, and
no additional charges will be made unless specifically requested by Advanced
Energy. Seller agrees to ship via the carrier specified by Advanced Energy. If
no carrier is specified by Advanced Energy, then the seller will ship best way.
Shipments will be made at the lowest freight charges. All Kanban or PC shipments
received shall have either a copy of the AE Kanban signal or PC enclosed with
the packing slip or the following information listed on the outside of the box:
. AE Part Number
o # of parts in shipment
o box # of total boxes (i.e. 3 of 5)
o Indicate type KB for Kanbans of PC for Purchase Orders
o Kanban Bin Size
o Container #
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Document of Understanding Between Advanced Energy Industries and Afiliates
MicroPac Industries Inc.
Contract Number: 1009
10. SHIPPING
The goods described herein shall be delivered FOB Garland TX. Buyer's Purchasing
Agent or Commodity Manager shall authorize means of shipment. If seller chooses
alternative method of shipment without Buyer's authorization, Seller is
responsible for any incremental shipping charges.
11. KANBAN PULL PROCESS
Seller will participate in a Kanban pull process for specifically agreed upon
part numbers, as listed in addendum. This list will be updated as parts are
added to or deleted from the Kanban program, with agreement between Buyer and
Seller.
Buyer's authorized Purchasing Agent or Commodity Manager and Seller shall agree
on the Kanban quantity and replenishment strategy for each part number. Kanban
quantities for all part numbers will be reviewed by Buyer on an as required
basis and adjusted accordingly. Buyer's quantity of Finished Goods Bins is
subject to change dependent upon Seller's ability to reduce manufacturing
lead-time. Changing the quantity of Finished Goods Bins at the buyer's facility
does not necessitate re-negotiation of this contact. Seller agrees that no
shipments will be made to Buyer unless authorized by Buyer.
12. PURCHASE ORDER
Buyer will also be entitled to issue purchase orders for individual items
separate from the Kanban Pull process and the Schedule Agreement Process, as
quoted by Seller and agreed to in writing by Buyer.
13. SCHEDULE AGREEMENT
Schedule Agreements will be issued with agreement by Buyer and Seller for a
specific time frame, by part number, negotiated price and estimate annual usage.
Buyer shall provide Seller with demand information as part of the planning and
forecasting process, to be updated periodically as agreed upon by Buyer and
Seller. This report is for use as a planning tool only. Seller is responsible
for any and all material purchased beyond the agreed upon liabilities, as stated
in addendum.
14. LIMITATION OF MATERIAL LIAB1LITY
The extent and limitation of Buyer's liability for materials purchased by Seller
are as defined in the addendum. On all standard or non-NCNR parts, AE will
assume
No liability. When the size of a bin is reduced, the inventory liability will be
a function of the old bin size minus pulls. The goal is to consume excess
inventory driven by the old bin size down to the new bin size liability. At
which point, this would become the contractual addendum amount AE is liable to
purchase. AE's expectation is that the seller's supply chain be decreased
accordingly and consistently.
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Document of Understanding Between Advanced Energy Industries and Affiliates
MicroPac Industries Inc.
Contract Number: 1009
15. PRICING
Buyer and Seller agree to the price(s) set forth in the appropriate addendum.
Any change in the contracted price must have written approval by Buyer's
Commodity Manager or Purchasing Agent, prior to implementation. Seller will
establish a cost reduction program, which will be reviewed on an annual basis.
Cost changes will be reflected in price adjustments and a revised addendum to
this document.
16. PAYMENT TERMS
Terms of payment are net 30 days for each shipment invoiced, unless otherwise
expressly provided for and confirmed in writing by the Seller. Method of payment
for goods receipt is electronic receipt settlement (ERS). Seller shall use
standard invoicing for charges on any items that do not require a goods receipt.
17. PROPRIETARY INFORMATION
It is understood that the Buyer may provide proprietary information to the
Seller, likewise, Seller may provide proprietary information to Buyer in the
performance of this contract. "Proprietary Information" shall be deemed to
include all information conveyed by one party to the other party orally, in
writing, by demonstration or by magnetic or other media. If the disclosure is in
other than written form, the information shall not be deemed Proprietary
Information after thirty (30) days unless within that period the disclosing
party has identified it as such in written summary communicated to the receiving
party. Proprietary Information may also include, by way of example but without
limitations, data, know-how, formulas, algorithms, processes, design, sketches,
photographs, plans, drawings, specifications, samples, reports, customer and
distributor names, pricing information, market definitions, inventions and
ideas.
Proprietary Information shall not include information, which can be clearly
demonstrated to be:
a) generally known or available to the public, through no act of
omission on the part of the receiving party; or
b) known to the receiving party prior to disclosure under this
agreement; or
c) provided to the receiving party by a third party without any
restriction on disclosure and without breach of any obligation of
confidentiality to a party.
Both parties to this agreement, agree to return to the forwarding party all
documents containing propriety information and to retain no copies thereof. In
addition, ownership and possession of all product assembly and test fixtures,
tooling, test programs, Non-Recurring Engineering (NRE) tooling, test equipment
and consigned equipment, shall revert to Buyer. Both parties to the agreement
agree that the obligation to protect proprietary information shall be ongoing
and shall riot cease upon completion or termination of this contract.
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Document of Understanding Between Advanced Energy Industries and Affiliates
MicroPac Industries Inc.
Contract Number: 1009
18. COPY EXACT
Technical expectation for Design Confrol and Change Management
Design Changes and Resolution
o A supplier shall not make changes to a design that alters the specifications,
manufacturing process, form, fit, or function of such items. A supplier may be
allowed to submit a change request to an item using Advanced Energy's Supplier
Callback Process (FPOO16). This change cannot be implemented until the supplier
has received written approval from Advanced Energy via Supplier Callback Form
(QFOO6O).
Process Changes and Resolution
o The supplier shall obtain approval from Advanced Energy of any process or
sub-tier suppliers' changes, including without limitation any changes in the
manufacturing process of a sub-tier supplier, even when specifications are being
met The supplier must receive approval in writing from Advanced Energy before
implementing such changes. If required by Advanced Energy, the supplier must use
special process suppliers from the list of approved suppliers.
Suppliers Subcontracts
o A supplier shall not sub-contract any components and/or processes without
Advanced Energy's prior written approval.
19. SUPPLIER CERTIFICATION
The Commodity Team will grade the Seller on a Quarterly basis as part of the AE
Supplier Certification Program. The Seller's performance will be graded based
upon their Quality, Delivery, Cost, and Service. If the Seller meets the minimum
scores in each category, the Seller will be classified as a AE Certified
Supplier for a period of 1 year.
20. REVIEWS
Buyer and Seller agree to conduct Quarterly Business Reviews, at an agreed
venue. Such reviews shall be conducted by the Buyer's Commodity Manager or
authorized Purchasing Agent. Pricing will be reviewed annually, by the Seller
and the Buyer's Commodity Manager or authorized Purchasing Agent. Supplier will
establish and maintain a formal cost reduction program. Material or labor cost
savings identified by the Seller shall be implemented immediately and shared
equally between the Buyer and the Seller.
21. DEFECTIVE MATERIAL RETURN POLICY
The Buyer will issue a DMR to the Seller prior to returning failed product to
the Seller. Seller shall acknowledge Buyer DMR with an RMA number within
twenty-four (24) hours. Seller shall repair or replace failed products under
warranty in 15 working days, at Seller's discretion, at Seller's expense. The
Seller will pay freight on goods returned to the Buyer which are covered by
warranty.
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Document of Understanding Between Advanced Energy Industries and Affiliates
MicroPac Industries Inc.
Contract Number: 1009
22. QUALITY ASSURANCE
All sold to Advanced Energy by the seller will be built and packaged in
accordance with the Advanced Energy Workmanship Manual Revision AA. All parts
and/or materials may be subject to an incoming inspection criteria of AQL=1.5
C=0 to the applicable manufacturer and/or AE drawings and/or specifications.
Seller, when acting as a Distributor, will ship only those parts listed on AE's
Approved Vendor List (AVL). Furthermore, Seller shall meet specific
qualification requirements and agree to follow all quality procedures specified
in the AE material specifications. Supplier shall o Participate in the Supplier
Certification Program if applicable o Allow annual Supplier Audits o Provide
within 10 working days a response to all Supplier Corrective Action Requests
(SCAR) o Generate any Supplier Action Plans (SAPs) as requested by SQE/CE o
Utilize Supplier Call Back Procedure for any change request or issues o Ensure
that when verbal instructions are given, a Supplier Callback Form is sent with 5
working days to AE to document the instructions o Comply with all first article
requirements listed in First Article Procedure (FP0125)
MicroPac Quality Contact is ______________.
23. COMPLETE AGREEMENT
This contract is intended as the complete and final agreement of ~the parties
and exclusive statement of its terms. This contract may not be changed, altered
or modified, except in writing by the party against whom enforcement is sought.
Either party with (thirty (30)) days written notice may terminate this
agreement. This clause is subject to review after one year.
24. MATERIAL PIPELINE REQUIREMENTS
The Seller is responsible setting up and maintaining a pipeline of finished
goods for the items listed in the addendum that will meet the following demands:
a. Be able to provide product to the Buyer in the specified quantities
and delivery times set forth in the Kanban agreements
b. Be able to meet and sustain the demands of a 50% ramp immediately
c. Be able to meet and sustain the demands of a 100% ramp in 8 weeks.
The Seller is solely responsible for managing this pipeline and ensuring their
ability to meet the requirements listed above. The Buyer may at its discretion
audit the Seller's material pipeline if problems arise with the On Time Delivery
(OTD) or quantity of product delivered.
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Document of Understanding Between Advanced Energy Industries and Affiliates
MicroPac Industries Inc.
Contract Number: 1009
25. SIGNATURE PAGE:
Signature attests that the parties have reviewed this agreement and concur with
the parameters:
Advanced Energy Industries, Inc. MicroPac Industries
By: /s/ Xxxxx Xxxxxx By: /s/ Xxxxxx Xxxx
-------------------------------- -------------------
Xxxxx Xxxxxx, SRVP of Operations Xxxxxx X. Xxxx,
CEO & President
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