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
SECOND AMENDMENT
TO
LONG TERM SUPPLY AGREEMENT
This Second Amendment to Long Term Supply Agreement (the "Amendment")
is entered into by and between Honeywell, Inc., a Delaware corporation acting on
behalf of its various divisions and subsidiaries ("Honeywell") and EFTC
Corporation, a Colorado corporation ("EFTC") and is effective as of February __,
2000.
RECITALS
A. Honeywell and EFTC entered into a Long Term Supply Agreement dated
as of March 19, 1999 (the "Original Supply Agreement"), as amended by the
Amendment to Long Term Supply Agreement dated as of May 21, 1999 (the "May
Amendment"; the Original Supply Agreement and the May Amendment are collectively
referred to herein as the "Supply Agreement"), which provided for the
manufacture by EFTC of electronic assemblies for Honeywell and its affiliated
entities.
B. The prices for Products covered by the Supply Agreement were based
on estimated annual revenues to EFTC in 2000 of approximately $170 million from
the Long Term Agreement, as stated in Honeywell's May 1999 forecast.
C. Honeywell had estimated annual revenues to EFTC in 2000 of
approximately $120 million from the Supply Agreement, as stated in Honeywell's
November 1999 forecast.
D. Honeywell has now informed EFTC that as a result of Honeywell
divesting its Traffic Collision Avoidance System operations (the "TCAS
Divestiture"), annual revenues to EFTC in 2000 and 2001 are expected to be
decreased by approximately an additional $5 million and 12 million,
respectively.
E. The parties therefore desire to amend the Supply Agreement as
follows:
AGREEMENT
1. All capitalized terms used in this Agreement without definition
shall have the meanings ascribed thereto in the Original Supply Agreement or the
May Amendment. All capitalized terms used in the Original Supply Agreement
without definition shall have the meaning ascribed to them in the Master
Agreement, as amended. Except as specifically provided in this amendment, all
other terms and conditions of the Supply Agreement shall remain in full force
and effect.
2. A new Section 2.5 is added as follows:
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.
2.5 The price for the Product manufactured by EFTC in 2000 will
be increased by a total amount of $6 million. This amount
shall be paid in twelve monthly installments with each
installment being due and payable on the first day of each
month, commencing January 1, 2000. Payments by Honeywell
shall be made net thirty (30) days.
3. Section 9.1 of the May Amendment is hereby amended to add the
following language after the first sentence:
Honeywell will provide EFTC with its revenue forecasts for
2001 as soon as such forecasts are available.
4. Section 9.1 of the May Amendment is hereby further amended to delete
the fourth sentence and add the following language instead:
By September 30, 2000, EFTC and Honeywell will evaluate
Honeywell's revenue forecasts for 2001. Both Parties will
agree upon the prices for the Products and adjust invoices
and purchase order prices for Products manufactured by EFTC
in 2001 based on mutually agreed upon profits and returns
for EFTC. This product pricing will be considered the base
line price that will be used as the basis ***. EFTC's
delivery performance levels and ability to transition
Product to EFTC's Facility in accordance with Honeywell's
transition dates, as such may be modified from time to time
by mutual agreement of the Parties, will be considered by
the Parties in negotiating such product price base line.
5. A new Section 34 is hereby added to the Supply Agreement:
34. PRICING REVIEW DUE TO TCAS DIVESITURE.
Beginning July 1, 2000, EFTC and Honeywell agree to meet and
evaluate the overall economic impact of the TCAS Divestiture
on EFTC's projected revenues from the Supply Agreement. In
light of the TCAS Divestiture and the impact of such
divestiture on the projected revenues to EFTC from the
Supply Agreement, the Parties agree to review pricing on all
Products manufactured by EFTC for Honeywell in Phoenix and
the Parties further agree to consider, in good faith, a
price increase on such Products. The Parties agree that such
price review and potential price increase is fair and
reasonable in light of the changes to Honeywell's forecasts,
on which EFTC initially based the pricing for the Products,
caused by the TCAS Divestiture. Both Parties agree to
explore, in good faith, further steps to mitigate the
economic impact of the TCAS Divestiture on EFTC and its
revenues from the Supply Agreement, including, but not
limited to, increasing Honeywell business to EFTC from other
Honeywell divisions and cooperative efforts to improve
management of overall costs related to EFTC's Phoenix
facility.
6. As of the date hereof and through December 31, 2000, Attachment D is
hereby amended in the following manner:
The term "3 consecutive months" is deleted and replaced with
the term "2 consecutive months".
The term "6 consecutive months" is deleted and replaced with
the term "4 consecutive months".
The term "12 consecutive months" is deleted and replaced
with the term "6 consecutive months".
7. As of January 1, 2001 and through the remaining term of the Supply
Agreement, Attachment D (as amended by Section 6 above) is hereby further
amended in the following manner:
The term "2 consecutive months" is deleted and replaced with
the term "current month".
The term "4 consecutive months" is deleted and replaced with
the term "2 consecutive months".
The term "6 consecutive months" is deleted and replaced with
the term "3 consecutive months".
IN WITNESS WHEREOF, the undersigned have executed this Amendment as of
the day and year first above written.
HONEYWELL, INC. EFTC CORPORATION
By: /s/ By: /s/Stuart W. Fuhlendorf
Its: Vice President Its: Chief Financial Officer
Integrated Supply Chain