Exhibit 10.3
GENERAL ELECTRIC COMPANY
GAS TURBINE SYSTEMS SOURCING OPERATION
REFERENCE: AGREEMENT NUMBER: GE - Mid-State - 0002
BETWEEN: General Electric Company (Purchaser)
Gas Turbine Sourcing Operation
300 Garlington Road
P.O. Box 648
Greenville, SC 29602-0648
And: Mid-State Machine Products, Inc. (Seller)
1501 Verti Drive
Winslow, Maine 04901
Whereas the parties wish to enter into a contractual relationship to establish
terms, delivery periods, and pricing for the purchase and sale of certain
machined products listed in Attachments "A" thru "D" and in consideration of
mutual promises, Purchaser and Seller agree as follows:
CONTRACT VISION
A commitment to fully satisfy the ultimate customer by entering into a
long term, mutually beneficial business relationship for a competitive
advantage through continuous improvement processes.
MUTUAL UNDERSTANDING:
* build a creative partnership with multi-functional partnering teams
to manage design integration, resource planning and quality
* manage the relationship not transactions
* commit totally to continuous improvement
* manage total cost for mutual profitability
* recognize co-destiny in business decisions through long term,
productivity-based Agreement
* share forecasts, plan long-range
* reduce cycles through stocking programs, smooth loading and
production control.
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* This portion of the agreement has been omitted and filed with the
Securities and Exchange Commission pursuant to a request for confidential
treatment in accordance with Rule 406 of Regulation C.
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1. TERM:
The initial term of this agreement starts Nov. 1, 1998 and continues
through those dates listed on Attachments "A" thru "D" with an option
to extend for subsequent years.
2. TERMINATION:
Purchaser or Seller may terminate this agreement at any time upon 180
days prior written notice to the other party. If the agreement is
terminated by the purchaser other than for Seller's default, the
purchaser is responsible to purchase from the Seller:
* Reserve quantities of materials that have been stocked
specifically for the Purchaser, provided, however, that in no
case shall Purchaser's obligation in this regard exceed 1
year's worth of requirements (prior to any reschedule) or items
normally stocked by Seller upon termination taking effect.
Purchaser will buy back in accordance with his production
schedule and will utilize this inventory prior to other
established inventories.
* Should potential cost reduction programs require equipment or
tooling which is agreed to by both parties and solely
beneficial to the Purchaser's process, the Purchaser will
reimburse the Seller for all moneys expended but not amortized
at the time of termination. Should this occur, Seller agrees to
transfer or convey titles to Purchaser any and all such tooling
and equipment as requested.
3. SCOPE:
Seller shall supply the Purchaser machined products to support the
Industrial & Power Systems Business in accordance with the items listed
in Attachments "A" thru "D", updated periodically to incorporate the
latest revisions.
4. GOAL:
The Goal is defined as the ability of the Seller to support the
Purchaser with quality parts, having on-time deliveries at competitive
pricing. Both parties working together have the responsibility to
achieve the Goal.
5. PRICING:
A) Base pricing is fixed and shall not increase for the term of this
Agreement
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* This portion of the agreement has been omitted and filed with the
Securities and Exchange Commission pursuant to a request for confidential
treatment in accordance with Rule 406 of Regulation C.
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except for when the Purchaser makes changes in design, materials,
or requirements (new prices shall be set on development, drawing
amendments or additional parts subsequently amending Attachments
"A" thru "D").
6. PRODUCTIVITY:
Seller will continue to implement continuous productivity gains through
6 Sigma project activities.
The productivity projects are jointly agreed on by both parties and
involve the following types of activities:
* Seller manufacturing process improvements, i.e.
(cellularization, dedicated equipment, new equipment,
upgraded tooling, etc.)
* Seller involvement in design to assure manufacturability.
* Joint effort at product standardization.
* Seller will maximize productivity on fixed processes.
* Seller will increase worker productivity.
* Inventory control to level load shop activities and to
maximize repeatability of similar units.
* Purchaser will evaluate suggestions on a timely basis and
rapidly implement those that are acceptable.
* Purchaser to review their product in depth with the Seller
to evaluate the feasibility of the following:
A) Reducing testing requirements
B) Relaxing tolerances when possible
C) Developing similar shapes and features
D) Material substitutions
E) Redesigning to optimize manufacturability.
* Scrap reduction for both mature and development parts.
* Review of processes and equipment to ensure quality.
* Added volume of similar components.
All projects requiring Purchaser's approval will be documented and
responded to utilizing the supplier CRS input form.
An immediate reduction in the Seller's price will occur upon
implementation of a productivity project funded by the Purchaser
pursuant to Articles 4 and 5. For a productivity project funded by the
Seller, the Seller's price will be reduced only after the Seller's is
reimbursed for the tooling, fixturing, and/or equipment
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* This portion of the agreement has been omitted and filed with the
Securities and Exchange Commission pursuant to a request for confidential
treatment in accordance with Rule 406 of Regulation C.
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purchased for the project by the savings generated from the project
pursuant to Articles 4 and 5. In both cases, tooling, fixturing, and/or
equipment as identified in the productivity project will become the
property of Purchaser upon completion.
7. GENERAL COST SAVINGS:
Purchaser agrees to identify those savings and reductions gained
through 6 Sigma project activities which are directly related to
conducting business with the Seller and to share any savings that can
be calculated and audited as directly attributable in terms of credit
towards our cost reduction goals. Such examples are as listed:
* Reduced transportation costs as compared to existing
supplier use.
* Reduced applied overhead.
* Reduction of total effort extended by Purchaser to maintain
program integrity.
* Methods Changes
8. ORDERING:
Purchase orders shall be issued by the individual Purchaser locations
and subject to the Standard GE Conditions of Purchase. If a conflict
exists between the terms of this contract and the Conditions of
Purchase, the terms of this contract will take precedence FOR
COMMERCIAL ORDERS ONLY. On Government orders the Conditions of Purchase
shall take precedence. The purchase order shall contain the following
specific data:
A.) Purchase order number and date
B.) Location
C.) The FOB point and mode of shipment
D.) Name and address of the person representing the Seller
and Purchaser
Purchase orders may include supplemental agreement clauses applicable
to orders relating to the United States Government agreement and
sub-contract. It is the intent of this agreement, that each Purchaser,
when available, will order and invoice via Electronic Data Interchange
(EDI), on a daily basis or as required. Each EDI order will reference
the 1ocation's purchase order number, date ordered, and the name of the
person entering the order. This method is solely a vehicle for
transporting data between the parties.
Purchaser commits to place a full 100% of its annual requirements of
material and/or equipment covered under this Agreement with the
exception of customer directed procurements and any notes appearing on
attachments. Purchaser reserves the right on any purchase order issued
hereunder for the work covered by this Agreement, to award up to 100%
of its requirements to other suppliers in the event that one or more of
the following occurs:
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* This portion of the agreement has been omitted and filed with the
Securities and Exchange Commission pursuant to a request for confidential
treatment in accordance with Rule 406 of Regulation C.
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A.) Seller ceases to remain a qualified supplier pursuant to
Purchaser's qualification requirements.
B.) Seller is unable to meet Purchaser's delivery, quality,
or Goal requirements (Articles 8, 16, and 4,
respectively)
C.) Seller is in default of any of its obligations under this
Agreement or under purchase order issued pursuant to this
Agreement.
In the event, however, that Purchaser does not achieve this purchase
commitment, Seller may continue the relationship, on terms stated, or
terminate this Agreement as if Seller had given notice of termination
pursuant to Article 2. The preceding sentence states the sole recourse
of the Seller for any inability or failure by the Purchaser to meet the
stated purchase commitment.
9. CYCLE TIME:
Seller is committed to the Goal of continuous improvement on all
current cycle for commodities covered under this agreement.
10. AGREEMENT ADMINISTRATION:
Contractual agreement review meetings will be held on an as-needed
basis, but no fewer than one (1) per calendar year, to mutually
evaluate the performance of each of the parties. The GEPS Supplier
Scorecard will be the basis for the review with the areas to be
addressed will include, but not be limited, to the following:
- Information communication quality and accuracy
- Purchase volume/payment history
- Delivery/order lead time performance
- Emergency order handling
- Productivity teams status (i.e. Design Integration, Quality
and Resource Planning)
- Cost reductions implemented/documented
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* This portion of the agreement has been omitted and filed with the
Securities and Exchange Commission pursuant to a request for confidential
treatment in accordance with Rule 406 of Regulation C.
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At each review, the performance of each participant will be quantified
where applicable. Goals to be achieved before the next review will be
mutually established.
11. FORECASTING:
Purchaser will provide as much forecasting information as possible to
assist Seller in establishing and maintaining adequate stocking levels
and/or to apply effective production control techniques (i.e. level
load shop, perform line of balance, etc.)
12. TERMS OF PAYMENT:
Payment by Purchaser shall be Net 45 days following the later date of
Seller's invoices or receipt of product and services by Purchaser.
Seller will re-bill any unearned discounts beyond 17 calendar days. GE
Capital will negotiate payment discounts separately.
13. INVOICING:
Invoices will be submitted by Seller to the Purchaser location
indicated on the purchase order. Invoices will reference Purchaser's
purchase order number and will contain such other information as
Purchaser may reasonably request. As referenced in Article 8 "ORDERING"
in the future the Seller will invoice the Purchaser via Electronic Data
Interchange (EDI). Each EDI invoice must reference the 1ocation's
purchase order number, item number, schedule number, and other required
data as determined by Purchaser's Accounts Payable Organization.
14. SHIPPING TERMS:
All shipments will be FOB Shipping Point, title to said goods to pass
to Purchaser upon delivery to Purchaser's dock. Transportation charges
to be billed directly to Purchaser by carrier and will be borne by
Purchaser. Seller must use Purchaser's designated corporate- agreement
careers which are indicated on the purchase order. Risk of loss remains
with Seller until delivered to Purchaser.
15. SPECIFICATIONS:
Product supplied under this agreement to be either commercial grade or
specialty grade as defined by Purchaser's specifications or
manufacturer stock number. No substitutions will be allowed without
Purchaser's written approval.
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* This portion of the agreement has been omitted and filed with the
Securities and Exchange Commission pursuant to a request for confidential
treatment in accordance with Rule 406 of Regulation C.
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16. QUALITY:
Seller agrees to meet purchaser's quality requirements and to work
towards the established Purchaser's goal of a 6 Sigma Quality Level.
Purchaser requirements include:
* Process control of critical processes.
* Responding to corrective action requests.
* Established quality measurements.
* Established quality improvement measurements.
* A continuous improvement program to increase quality.
* A documented quality system.
* A documented quality program.
* Maintain ISO 9000 Certification.
The Seller also agrees to meet all quality requirements defined in
Purchaser's supplier product quality plans as set forth in the purchase
order. Failure of Seller to meet Purchaser's quality and qualification
requirements will result in disqualification.
17. SECRECY AGREEMENT:
The technical data and information which has been or may hereafter be
furnished to Seller by Purchaser in connection with the Seller's supply
of turbine related items, or purchasing services therefore, is the
property of Purchaser, and has been furnished solely to enable Seller
to render service to Purchaser, and has been furnished solely to enable
Seller to render service to Purchaser and with the understanding (1)
that Seller will not use or reproduce such technical data and
information for any other purpose, (2) that Seller will take all
reasonable care to ensure that such technical data and information is
not disclosed to other parties, except to enable such parties to render
service to Purchaser for products covered under this Agreement provided
that in all such cases Seller shall require acceptance of this
provision by the other party, (3) that Seller will not furnish,
disclose, ship, export or re-export, directly or indirectly, any
Purchaser furnished technical data or information (including computer
software) and direct products thereof without first receiving the prior
written consent of Purchaser and (4) that upon request Seller will
promptly return all such technical data and information at any time
during or after completion of such supply or purchasing services. The
foregoing restrictions on disclosure and use of Purchaser's technical
information and data shall not apply to any technical information and
data which:
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* This portion of the agreement has been omitted and filed with the
Securities and Exchange Commission pursuant to a request for confidential
treatment in accordance with Rule 406 of Regulation C.
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a.) is already in Seller's possession at the time of first
receipt from Purchaser; or
b.) is independently developed by Seller's employees who had
not had access to the technical information and data; or
c.) is or becomes part of the public domain without breach of
this agreement by Seller; or
d.) is rightfully obtained by Seller from third persons
without restriction or breach by this agreement by Seller.
Execution of this agreement by both Purchaser and Seller
indicates acceptance of the above provision.
18. INDEMNIFICATION:
The Seller agrees to hold harmless and indemnify the Purchaser (its
Customer) and other third parties from any rightful claims for personal
and property damage and any associated costs, including but not limited
to legal expenses, when such claims arise out of the performance of
this agreement and are determined to be the result of the willful
misconduct, or negligent acts or omissions of the Seller or Seller's
agents, employees, or subcontractors. Furthermore, Seller agrees to
maintain and provide insurance covering these liabilities in the amount
and form as required under the Insurance Clause of this agreement.
19. INSURANCE:
The Seller shall comply with the Social Security and Unemployment
Insurance Laws, as now or hereafter enforced, and holds the Purchaser
harmless against any demands for contribution of taxes with respect to
the work payable under any such laws. Without limiting any of the other
obligations or liabilities of the Seller, the Seller shall, before
commencing work on the Purchaser's or its Customer's premises provide
and maintain, until the work is completed and accepted by the
Purchaser, minimum insurance coverage as follows:
TYPE OF COVERAGE LIMITS
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Workmen's Compensation, including Statutory
coverage under Longshoremen's and Harbor
Worker's act, where applicable
Employer's Liability $1,000,000 Each Occurrence
Comprehensive General Liability $2,000,000
Bodily Injury... Combined Single Limit Property
Damage (including coverage for damaged Each Occurrence
caused by blasting, collapse or structural
injury and/or damage to property in the
Seller's care, custody, or control)
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* This portion of the agreement has been omitted and filed with the
Securities and Exchange Commission pursuant to a request for confidential
treatment in accordance with Rule 406 of Regulation C.
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TYPE OF COVERAGE LIMITS
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Contractor's Protective Liability, operations of $1,000,000 covering
subcontractors, where applicable Combined Single Limit
Bodily Injury... Each Occurrence
Property Damage...
Contractor's Liability in accordance $1,000,000
with agreement(s) between Purchaser and Seller Combined Single Limit
Bodily Injury... Each Occurrence
Property Damage...
Comprehensive Automobile Liability covering $1,000,000
all owned, hired and non-owned automotive Combined Single Limit
equipment used by or with the permission of Each Occurrence
the Seller (including the loading and unloading
thereof) with the Purchaser included as an
additional insured Bodily Injury...
Property Damage...
All such insurance policies shall be delivered to the Purchaser, if and
when directed by the Purchaser, and in any event, the Seller shall
arrange with the insurance carriers to furnish the Purchaser with a
completed Certificate of Insurance Form, indicating that the required
coverage are in force and will not be canceled or changed until ten
(10) days after written notice is given to the Purchaser.
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* This portion of the agreement has been omitted and filed with the
Securities and Exchange Commission pursuant to a request for confidential
treatment in accordance with Rule 406 of Regulation C.
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20. PROPRIETARY RIGHTS AND PATENT INDEMNIFICATIONS:
(a) If Seller provides Purchaser with one of Seller's "off-the-shelf"
items which has been designed and developed by Seller, Purchaser
acknowledges that Seller has all proprietary rights to such items, and
Seller provides Purchaser with a license to use such items by selling
said items to Purchaser. Such items are subject to the patent
indemnification provisions of Article 18 of the "Conditions of
Purchase".
b) If Purchaser and Seller work together to design and develop a
product or a process, all proprietary rights in such product or process
will belong to Purchaser. Seller agrees to assign all rights in such
products or processes to Purchaser. Purchaser reserves the right to
assign or license all or part of such proprietary rights to Seller on a
case-by-case basis, depending on several factors such as the amount of
any development funds provided by Seller, the amount of time spent by
Seller's engineers in developing a product or process at Seller's
expense, and the amount of risk incurred by Seller with respect to the
final commercial acceptability of the product or process. Any such
assignment or license will be subject to GE Corporate Policy No. 30-10.
The patent indemnification provisions of Article 18 of the "Conditions
of Purchase" will not apply when Purchaser owns all proprietary rights;
however, when Purchaser assigns or licenses all or part of the
proprietary rights to Seller, the patent indemnification provisions of
Article 18 of the "Conditions of Purchase" will be reviewed for
applicability on a case-by-case basis.
(c) If Purchaser provides Seller with specifications for a product or
process, and Purchaser has designed and developed the specifications at
its own cost through its own employees, consultants, subcontractors,
etc., then all proprietary rights to the product or process belong to
Purchaser. In this case, the patent indemnification provisions of
Article 18 of the "Conditions of Purchase" will not apply to Seller.
21. FORCE MAJEURE:
Neither party shall be liable to the other for default or delay in the
performance of any of its obligations hereunder due to act of God,
accident, fire, flood, storm, riot, war, sabotage, explosion, strike,
government law, labor disturbance, national defense requirement,
ordinance, rule or regulation, inability to obtain electricity or other
type of energy, raw material, labor, equipment, or transportation, or
any other cause beyond its reasonable control and without its fault or
negligence, or as
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* This portion of the agreement has been omitted and filed with the
Securities and Exchange Commission pursuant to a request for confidential
treatment in accordance with Rule 406 of Regulation C.
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otherwise provided herein. Seller shall notify Purchaser in writing of
any impending delay due to the occurrence of any of the preceding
events. In the event of a partial interruption or failure of Seller's
sources of product or distribution capability, Purchaser shall have the
right to determine the distribution of its allocation among it's
locations serviced from Seller's producing points.
22. COMPLETE AGREEMENT:
This Agreement, including all matters expressly incorporated herein by
reference, and the partnering agreement dated May 8th 1992, constitutes
the entire and any agreement between the parties respecting the subject
matter hereof, and there are merged herein all prior and pre-existing
representations and agreements made by and between Purchaser and
Seller.
23. NOTICES:
Notices, reports, and other communications made with respect to this
agreement shall be given in writing, addressed to the parties at the
following addresses or such other addresses as may be designated in
writing by either party to the other. All notices required to be given
hereunder shall be effective when delivered by hand or when deposited
in the United States Mail, with proper postage for First Class Mail
Prepaid.
To Purchasers:
Manny Gaspar Others on distribution:
Jay Valachovic Walter Rhodes
Strategic Sourcing
General Electric Company
GE Power Systems
P.O. Box 648
Greenville, SC 29602
To Seller: Others on distribution:
Richard M. Bolduc Douglas Sukeforth
Outside Sales Contracts Manager Jim Ashton
Ralph Robbins
Manager of Sales
Mid-State Machine Products, Inc.
1501 Verti Drive
Winslow, ME 04901
(207) 873-6136
24. AMENDMENTS AND WAIVERS:
No terms or provisions of this agreement may be changed, waived,
discharged or terminated orally but only by an instrument in writing
signed by the party against
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* This portion of the agreement has been omitted and filed with the
Securities and Exchange Commission pursuant to a request for confidential
treatment in accordance with Rule 406 of Regulation C.
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whom the enforcement of such change, waiver, discharge or termination
is sought.
25. GOVERNING LAW:
The validity, interpretation and performance of this agreement shall be
determined in accordance with the Laws of the State of New York.
IN WITNESS WHEREOF THE PARTIES HAVE CAUSED THIS
AGREEMENT TO BE EXECUTED:
PURCHASER SELLER
General Electric Company Mid-State Machine Products, Inc.
Power Systems Sourcing Operation 1501 Verti Drive
P.O. Box 648, 300 Garlington Road Winslow, ME 04901
Greenville, SC 29602
Signed /s/ Manny Gaspar Signed /s/ Richard M. Bolduc
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By: Manny Gaspar By: Richard M. Bolduc
Title: Strategic Sourcing Title: Outside Sales Contracts
Manager
Date 12/01/98 Date 12/01/98
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Signed: /s/ Jay B. Valachovic Signed: /s/ Ralph Robbins
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By: Jay Valachovic By: Ralph Robbins
Title: Strategic Sourcing Title: Manager of Sales
Date: 12/01/98 Date: 12/01/98
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rbgeagre
November 9, 1998
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* This portion of the agreement has been omitted and filed with the
Securities and Exchange Commission pursuant to a request for confidential
treatment in accordance with Rule 406 of Regulation C.
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STANDARD SCRAP AGREEMENT
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* This portion of the agreement has been omitted and filed with the
Securities and Exchange Commission pursuant to a request for confidential
treatment in accordance with Rule 406 of Regulation C.
ATTACHMENT A
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* This portion of the agreement has been omitted and filed with the
Securities and Exchange Commission pursuant to a request for confidential
treatment in accordance with Rule 406 of Regulation C.
ATTACHMENT B
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* This portion of the agreement has been omitted and filed with the
Securities and Exchange Commission pursuant to a request for confidential
treatment in accordance with Rule 406 of Regulation C.
ATTACHMENT C
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* This portion of the agreement has been omitted and filed with the
Securities and Exchange Commission pursuant to a request for confidential
treatment in accordance with Rule 406 of Regulation C.
ATTACHMENT D
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* This portion of the agreement has been omitted and filed with the
Securities and Exchange Commission pursuant to a request for confidential
treatment in accordance with Rule 406 of Regulation C.