CONFIDENTIAL TREATMENT REQUESTED

 

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*** TEXT OMITTED AND FILED SEPARATELY

    CONFIDENTIAL TREATMENT REQUESTED

    UNDER 17 C.F.R. 200.80(b)(4) AND 240.24b-2

 

 

                                                                    Exhibit 10.4

 

                          PURCHASE AND SUPPLY AGREEMENT

 

      REGARDING SALES OF COMPONENTS FROM VISTEON CORPORATION TO AUTOMOTIVE

                            COMPONENTS HOLDINGS, LLC

 

                                     BETWEEN

 

          AUTOMOTIVE COMPONENTS HOLDINGS, LLC (F/K/A VFH HOLDINGS, LLC)

 

                                       AND

 

                               VISTEON CORPORATION

 

                                 SELLER: VISTEON

                   BUYER: AUTOMOTIVE COMPONENTS HOLDINGS, LLC

 

                               September 30, 2005

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    PURCHASE AND SUPPLY AGREEMENT REGARDING SALES OF COMPONENTS FROM VISTEON

               CORPORATION TO AUTOMOTIVE COMPONENTS HOLDINGS, LLC

 

This Purchase and Supply Agreement Regarding Sales of Components from Visteon

Corporation to Automotive Components Holdings, LLC ("AGREEMENT") dated as of

September 30, 2005 is entered into by and between Visteon Corporation, a

Delaware corporation ("VISTEON"), and Automotive Components Holdings, LLC (f/k/a

VFH Holdings, LLC) ("NEWCO"), a Delaware limited liability company. Each of

Newco and Visteon is herein referred to as a "PARTY" and collectively, the

"PARTIES."

 

                                    RECITALS

 

A. Newco owns and operates manufacturing and assembly facilities in North

America that were formerly owned and operated by Visteon or its wholly-owned

subsidiaries ("NEWCO FACILITIES"). Visteon or its wholly-owned subsidiaries

supply motor-vehicle-related parts, components and systems from their

manufacturing and assembly facilities in North America ("VISTEON FACILITIES") to

Newco Facilities.

 

B. Except as described in Recital C, the purpose of this Agreement is to

describe supply obligations, pricing, and related matters for certain

motor-vehicle-related parts, components and systems that are manufactured by a

Visteon Facility and supplied by such Visteon Facility to a Newco Facility. It

does not cover the sale of motor-vehicle-related parts, components and systems

by Newco to Visteon (which is addressed in the Purchase and Supply Agreement

Regarding Sales of Components from Automotive Components Holdings, LLC to

Visteon Corporation between Newco and Visteon dated as of the date of this

Agreement). References in this Agreement to motor-vehicle-related parts,

components or systems that are "manufactured by a Visteon Facility and supplied

by such Visteon Facility to a Newco Facility" mean that such parts, components

or systems are manufactured by such Visteon Facility and supplied by such

Visteon Facility directly, or through a warehouse or shipping facility, to a

Newco Facility. Except as provided for in Exhibit 4, parts, components, or

systems that are merely supplied by a Visteon Facility to a Newco Facility, but

which are not manufactured by such Visteon Facility, are not covered under this

Agreement.

 

C. This Agreement does not cover motor-vehicle-related parts, components or

systems: (i) supplied by a Visteon facility that is not a facility of Visteon

Corporation or any of its wholly-owned subsidiaries in North America to a Newco

Facility; or (ii) which are Service Parts (as defined in Exhibit 5); in each

case except to the extent expressly set forth in EXHIBIT 4 or 5, as applicable

(or in Section 15.13 below, which shall apply to Service Parts). EXHIBIT 6 to

this Agreement lists (i) Visteon's Affiliates, including its wholly-owned

subsidiaries in North America, its Affiliates in North America which are not

wholly-owned subsidiaries, and its Affiliates outside of North America, and (ii)

Visteon Related Companies.

 

NOW, THEREFORE, in consideration of the mutual promises contained in this

Agreement and intending to be legally bound, Visteon and Newco agree:

 

1. DEFINED TERMS

 

1.1 All terms with initial capitalization used herein shall have the following

definitions unless specifically stated otherwise. In this Agreement, except as

otherwise expressly provided or the context otherwise clearly requires, words in

the singular include the plural, and vice versa. The Recitals above are an

integral part of this Agreement.

 

"2003 PSA" means the Purchase and Supply Agreement Between Visteon Corporation

and Ford Motor Company dated December 19, 2003.

 

"AFFILIATE" means, with respect to any Person, any other Person directly or

indirectly Controlling, Controlled by or under common Control with such first

Person; provided, that neither Ford, nor any of its Affiliates, shall be deemed

to be an Affiliate (or subsidiary) of Newco for the purposes of this Agreement.

For the purpose of this

<PAGE>

definition, the term "Control" (including, with correlative meanings, the terms

"Controlling," "Controlled by" and "under common Control with"), as used with

respect to any Person, means having the right to elect a majority of the board

of directors or other comparable body responsible for management and direction

of such Person, or otherwise having, directly or indirectly, the power to direct

or cause the direction of the management and policies of such Person, by

contract or by virtue of share ownership.

 

"BUSINESS DAY" means a day, other than Saturday, Sunday or other day on which

commercial banks in Detroit, Michigan are authorized or required by law to

close.

 

"COMPONENTS" means motor-vehicle-related parts, components or systems

manufactured by a Visteon Facility and supplied by such Visteon Facility (or, in

regard to Existing Business - Future Model, to be manufactured by a Visteon

Facility and supplied by such Visten Facility) to a Newco Facility.

Notwithstanding anything to the contrary in the foregoing sentence, parts,

components and systems that are supplied to Newco by Visteon Affiliates (other

than wholly-owned subsidiaries of Visteon in North America), parts, components

and systems supplied by Visteon Related Companies, and Service Parts, are not

considered "Components".

 

"CONFIDENTIAL INFORMATION" has the meaning specified in Section 11.1.

 

"CONTRIBUTION AGREEMENT" means the Contribution Agreement between Visteon and

Automotive Components Holdings, Inc. (f/k/a VFH Holdings, Inc.) dated September

12, 2005.

 

"DAMAGES" means any and all obligations, liabilities, damages, penalties,

deficiencies, losses, judgments, costs and expenses (including, but not limited

to, costs and expenses incurred in connection with performing obligations,

interest, bonding and appellate costs and reasonable attorneys', accountants',

engineers' and investigators' fees and disbursements), in each case, after the

application of any and all amounts recovered under insurance contracts or

similar arrangements and from third parties by the person claiming indemnity.

 

"DEFAULTING PARTY" has the meaning specified in Section 9.1.

 

"DESIGN CHANGE" means any change to the physical Component, its performance, or

its interface with other parts or systems that results in a change to the part

number.

 

"DIRECTED TIER 2 SOURCING" means the situation where Newco directs a supplier

(as the tier 1 supplier to Newco) to purchase a specific Component from a

specific supplier (the tier 2 supplier to Newco) for incorporation into a

Component to be supplied by such tier 1 supplier to Newco.

 

"EVENT OF DEFAULT" has the meaning specified in Section 9.1.

 

"EXISTING AGREEMENTS" means the Purchase Orders, and Long Term Supply Agreements

(if any), covering Existing Business, as described in Section 2.3 or 2.4.

 

"EXISTING BUSINESS" means the Components that are Existing Business in

Production or Existing Business - Future Model.

 

In the event that the vehicle or power-train program of Ford (or of another OEM

Customer of Newco or its customer), in regard to which Newco is purchasing (or

intends to purchase) Components which are Existing Business, is or will be

subject to a major refreshening or will be replaced by, or will become, a new

program, as determined by Ford as described below, or as determined by such

other OEM Customer in accordance with its then-current processes and policies,

respectively, such Components ("AFFECTED COMPONENTS") will no longer be

considered to be Existing Business for the purposes of this Agreement as of the

date that Newco begins purchasing the motor-vehicle-related parts, components,

or systems for the refreshened or new program which

 

 

                                       3

<PAGE>

replace the Affected Components; provided, however, that:

 

          (i) the motor-vehicle-related parts, components, or systems for the

          refreshened or new program ("REPLACEMENT END-ITEM") which replace the

          parts, components, or systems supplied by Newco to Ford (or to the

          applicable other OEM Customer of Newco) into which such Affected

          Components purchased by Newco from Visteon are incorporated are (or

          were prior to the date of this Agreement) put up for award by Ford or

          such other OEM Customer of Newco; and,

 

          (ii) the motor-vehicle-related parts, components, or systems for the

          refreshened or new program which replace the Affected Components are

          (or were prior to the date of this Agreement) put up for award by

          Newco. For components put up for award prior to this agreement, the

          status of such components will be evaluated during reconciliation of

          Exhibit 2.

 

For the purposes of this definition: "put up for award" means the issuance of a

Request for Quote by Ford or Newco for the Replacement End-Item or such

motor-vehicle-related parts, components, or systems for the refreshened or new

program which replace the Affected Components, respectively; and, "Request for

Quote" means a request issued by Ford or Newco to one or more suppliers to

provide a quotation for the supply of the Replacement End-Item or such

motor-vehicle-related parts, components, or systems for the refreshened or new

program which replace the Affected Components, respectively. "Put up for award"

does not mean quoting design changes to a carryover component for a new program

or following the change control process.

 

Nothing in this Agreement or in any Purchase Order, Long Term Supply Agreement,

Sourcing Agreement, or Target Agreement prohibits Newco from sourcing such

motor-vehicle-related parts, components, or systems which replace the Affected

Components to a supplier of its choice, or from purchasing the same from such

supplier.

 

For the purposes of the prior paragraph, a "major refreshening" or "new program"

means, in regard to a Ford vehicle or power-train program, a change to a vehicle

or power-train program with a "S3" or higher designation, for a vehicle program,

or a "P3" or higher designation, for a power-train program, under the Ford

Product Development System (FPDS), or the equivalent designation in Ford's

Global Product Development System (GPDS) or any future product development

system of Ford replacing FPDS or GPDS (as applicable).

 

"EXISTING BUSINESS IN PRODUCTION" has the meaning specified in Section 2.1(a).

 

"EXISTING BUSINESS - FUTURE MODEL" has the meaning specified in Section 2.1(b).

 

"FORD" means Ford Motor Company, a Delaware corporation.

 

"FORD MASTER AGREEMENT WORKERS" means the Ford hourly employees who are

represented by the UAW under the Master Agreement and who have been assigned to

work at Ford or Newco plants.

 

"FORD VEHICLE" means a Ford, Lincoln, or Mercury-brand vehicle manufactured in

North America by Ford or one of its Affiliates.

 

"FORD-VEHICLE COMPONENTS" mean Components which are, or which are supplied for

incorporation into another part, component, or system, for ultimate use in a

Ford Vehicle.

 

"FORD - VISTEON DIRECTED COMPONENTS" means Components which were, prior to the

date of this Agreement, direct-sourced by Ford to a Visteon Facility (as the

Tier 2 supplier) for supply to a Newco Facility (as the Tier 1 supplier) (which

was, prior to the date of this Agreement, a Visteon Facility) for which Ford

negotiated the price directly with the Visteon Facility supplying the Component

(such Components include, without limitation, EATCs, instrument clusters, and

audio parts and components supplied by Visteon Facilities to Newco Facilities).

 

 

                                       4

<PAGE>

For the purposes of this definition, "direct-sourced" means that Ford directed

the Tier 1 supplier (i.e., the applicable Visteon Facility) to purchase the

specific Component from the Tier 2 supplier (i.e., the supplying Visteon

Facility) for supply by, or for incorporation into another Component to be

supplied by, Visteon to Ford for use in a Ford Vehicle.

 

"FORD - VISTEON DIRECTED AUDIO COMPONENTS" means audio parts and components

which are Ford-Visteon Directed Components.

 

"GLOBAL TERMS" means, subject to Section 14, Visteon's Global Terms for

Production and Non-Production Goods and Services (VGT Rev. 04/03), which will be

used by Newco, instead of Visteon (i.e., with Newco as the "Buyer" and Visteon

as the "Seller").

 

"GOOD CAUSE" means:

 

          (i) A significant quality or delivery issue for a given Component; or

 

          (ii) An unilateral upward re-pricing on the applicable Component

          (including, without limitation, uncompetitive pricing by Visteon for

          Design Changes to the Component), excluding mutually agreed price

          increases; or

 

          (iii) A material default by Visteon under the terms of a Purchase

          Order or Long Term Supply Agreement with respect to a given Component.

 

"LONG TERM SUPPLY AGREEMENT" means a multiple-year contract with a supplier

committing Newco to procure and the supplier to supply goods or services for a

specified time period on specified terms.

 

"MASTER AGREEMENT" means the collective bargaining agreement and all supplements

thereto between Ford and the UAW dated September 15, 2003, as well as any

successor agreement (and supplements thereto) to such collective bargaining

agreement entered into prior to the expiration of this Agreement.

 

"MASTER AGREEMENT PLANT" means a facility where some or all of the hourly

employees working there are represented by the UAW under the Master Agreement.

 

"NON-DEFAULTING PARTY" has the meaning specified in Section 9.1.

 

"NON-FORD COMPONENTS" mean Components which are, or which are supplied for

incorporation into another part, component or system, for ultimate use in a

vehicle other than a Ford Vehicle.

 

"NORTH AMERICA" means Canada, Mexico and the United States.

 

"NORTH AMERICAN SOURCING COUNCIL" means a Ford process to ensure that Ford

honors commitments to Ford Master Agreement Workers at Ford or Newco facilities

in the United States with respect to sourcing actions; to provide a framework

for avoiding labor disturbances and lost production; and to ensure that Ford

senior management concurs with sourcing decisions.

 

For the purposes of this Agreement, in determining whether the North American

Sourcing Council process was or is required to be followed, or its approval was

or is required, in regard to a particular action:

 

          (i) taken prior to the date of this Agreement, the North American

          Sourcing Council process and requirements in effect at the time the

          applicable action was taken (including, without limitation, any

          applicable requirements under the 2003 PSA) apply; and,

 

          (ii) for actions taken on or after the date of this Agreement, the

          North American Sourcing Council process will be required to be

          followed, and its approval obtained, if one or more Ford Master

 

 

                                       5

<PAGE>

          Agreement Workers' jobs would be impacted by such action.

 

"OEM CUSTOMER" means a Person in the business of manufacturing motor vehicles.

 

"PARTY" or "PARTIES" has the meaning specified in the opening paragraph of this

Agreement.

 

"PERSON" means an individual, a partnership, a corporation, a limited liability

company, an association, a joint stock company, a trust, a joint venture, an

unincorporated organization or a governmental entity or any department, agency

or political subdivision thereof.

 

"PURCHASE ORDER" means, in regard to particular Components, the Purchase Order

or Long Term Supply Agreement between Visteon and Newco covering such Components

(as described in Section 2.3 or 2.4, in regard to Existing Business).

 

"SERVICE PARTS" is as defined in Exhibit 5.

 

"SUBCOMPONENTS" means Components incorporated into, or that are a part of,

another Component.

 

"VISTEON RELATED COMPANY" is as defined in Exhibit 4.

 

1.2 Subject to Section 15.3, except in regard to the identification of the

Parties to this Agreement above or where the context clearly requires otherwise,

a reference in this Agreement to "Newco" includes Newco and its applicable

Affiliates, and to "Visteon" includes Visteon and its wholly-owned subsidiaries

in North America.

 

2. PURCHASE AND SUPPLY COMMITMENTS

 

2.1 General. Subject to the terms and conditions of this Agreement, but

notwithstanding any term or condition of any Existing Agreement, Purchase Order,

Long Term Supply Agreement, Sourcing Agreement, or Target Agreement, Visteon

shall supply to Newco, and Newco shall purchase from Visteon, each of the

following Components during the term of this Agreement:

 

     (a) "EXISTING BUSINESS IN PRODUCTION," which means all Components which, as

     of May 1, 2005, were manufactured by a Visteon Facility and supplied by

     such Visteon Facility to a Newco Facility. Such Components are set forth in

     EXHIBIT 1 to this Agreement.

 

     (b) "EXISTING BUSINESS - FUTURE MODEL," which means Components which, as of

     May 1, 2005, were planned by Visteon to be manufactured by a Visteon

     Facility and supplied by such Visteon Facility to a Newco Facility (i)

     pursuant to a reasonably developed and documented plan, and (ii) for supply

     to, or for inclusion in another part, component, or system to be supplied

     to, Ford or another customer of Visteon that was sourced to Visteon

     pursuant to a signed Sourcing Agreement with Pricing, Target Agreement, or

     purchase order (in the case of Ford) or a written sourcing commitment with

     pricing established or purchase order (in the case of another customer of

     Visteon), in each case issued prior to May 1, 2005, but which were not

     being manufactured and supplied as of May 1, 2005. Such Components are set

     forth in EXHIBIT 2 to this Agreement.

 

     Subject to Sections 2.1(c) and (d) below, Components which do not meet the

requirements set forth in Section 2.1(a) or (b) are not Existing Business,

except as Newco and Visteon specifically agree otherwise in writing. References

in this Section 2.1 to a "Newco Facility" refer, for the avoidance of doubt, to

facilities which were manufacturing or assembly facilities of Visteon or its

Affiliates in North America as of May 1, 2005, but were transferred to Newco.

Visteon warrants and represents to Newco that, to the best of its knowledge as

of the date of this Agreement, Exhibits 1 and 2 are accurate and complete.

 

 

                                       6

<PAGE>

     (c) Without limiting any rights or remedies of either Party, and subject

     to, and without limiting, Section 2.1(d) below:

 

          (i) In the event that Components which should have been included in

          Exhibit 1 (as determined in accordance with Section 2.1(a)) are

          excluded from such Exhibit, and such Components are discovered to have

          been excluded:

 

               (A) on or before 6 months after the date of this Agreement, such

               Components will be added to Exhibit 1, unless the Parties

               otherwise agree in writing; or,

 

               (B) after 6 months after the date of this Agreement, the Parties

               will discuss in good faith as to whether such Components will be

               added to Exhibit 1, and such Components will be added if the

               Parties agree in writing.

 

          (ii) In the event that Components which should have been included in

          Exhibit 2 (as determined in accordance with Section 2.1(b)) are

          excluded from such Exhibit, and such Components are discovered to have

          been excluded:

 

               (A) on or before three months after the date of this Agreement,

               and such Components are to go into production prior to or on such

               date, such Components will be added to Exhibit 2; or,

 

               (B) after three months after the date of this Agreement (or prior

               to such date, but which are not covered under Section

               2.1(c)(ii)(A) above), the Parties will discuss in good faith as

               to whether such Components will be added to Exhibit 2, and such

               Components will be added if the Parties agree in writing.

 

     (d) Without limiting any rights or remedies of Newco, if a part, component,

     or system is listed on Exhibit 2 ("LISTED COMPONENT"), which Listed

     Component replaces a part, component, or system manufactured, as of May 1,

     2005, at a Newco Facility, and North American Sourcing Council approval was

     not obtained to have such Listed Component manufactured at a facility other

     than a Master Agreement Plant, such Listed Component will, upon Newco's

     written request to Visteon, be removed from Exhibit 2 and may be added to

     Exhibit 2 to the Purchase and Supply Agreement Regarding Sales of

     Components from Automotive Components Holdings, LLC to Visteon Corporation

     between Newco and Visteon dated as of the date of this Agreement.

 

2.2 Expiration of Term or Cessation of Existing Business Designation. Upon the

termination or expiration of this Agreement, or when any Components that are

Existing Business cease to be designated as Existing Business as provided for

under this Agreement, Newco's rights to cease purchasing such Components from

Visteon, and Visteon's rights to cease supply of such Components to Newco, shall

be as specified under the applicable Purchase Order or Long Term Supply

Agreement, including the Global Terms, for such Components (without regard to

any amendment or supplement to the same provided for under this Agreement, but

subject to Sections 13 and 14 below).

 

2.3 Contract Covering Sale and Purchase of Components Which Are Existing

Business In Production.

 

     (a) Purchase Order or Long Term Supply Agreement Issued. When a Purchase

     Order or Long Term Supply Agreement (as applicable) is issued after the

     date of this Agreement by Newco to Visteon for Components which are

     Existing Business In Production, the terms and conditions of the same

     (including the Global Terms) will apply in regard to the sale and purchase

     of such Components, except to the extent that such Purchase Order, Long

     Term Supply Agreement, or Global Terms are modified or supplemented under,

     or conflict with, this Agreement in regard to such Components. Visteon

     agrees to accept any such Purchase Order or Long Term Supply Agreement (as

     applicable) issued by Newco to Visteon for such Components, provided that

     the terms and conditions of the same are consistent with

 

 

                                       7

<PAGE>

     this Agreement in regard to such Components. Newco agrees to issue such

     Purchase Orders and Long Term Supply Agreements as soon as reasonably

     practicable after the date of this Agreement. Any such Purchase Order or

     Long Term Supply Agreement issued will be an Existing Agreement for the

     purposes of this Agreement.

 

     (b) Prior to Issuance of Purchase Order or Long Term Supply Agreement.

     Until such time as a Purchase Order or Long Term Supply Agreement (as

     applicable) is issued after the date of this Agreement by Newco to Visteon

     for Components which are Existing Business In Production, a Purchase Order,

     on Visteon's standard form (as of May 1, 2005) attached hereto as Exhibit 3

     (including the Global Terms) (as if issued by Newco, not Visteon) will be

     deemed to apply in regard to the sale by Visteon and purchase by Newco of

     such Components, except to the extent that such Purchase Order, Long Term

     Supply Agreement, or Global Terms are modified or supplemented under, or

     conflict with, this Agreement in regard to such Components. Any such

     Purchase Order deemed to apply will be an Existing Agreement for the

     purposes of this Agreement.

 

2.4 Contract Covering Sale and Purchase of Existing Business - Future Model.

Components which are Existing Business - Future Model supplied by Visteon to

Newco will be supplied under the Purchase Order or Long Term Supply Agreement

(as applicable) (including the Global Terms) issued after the date of this

Agreement by Newco to Visteon for the same, except to the extent that such

Purchase Order, Long Term Supply Agreement, or Global Terms are modified or

supplemented under, or conflict with, this Agreement in regard to such

Components. Visteon agrees to accept any such Purchase Order or Long Term Supply

Agreement (as applicable) issued by Newco to Visteon for such Components,

provided that the terms and conditions of the same are consistent with this

Agreement in regard to such Components. Newco agrees to issue such Purchase

Orders and Long Term Supply Agreements as soon as reasonably practicable after

the date of this Agreement. Any such Purchase Order or Long Term Supply

Agreement issued will be an Existing Agreement for the purposes of this

Agreement.

 

2.5 Volumes. No specific volume commitments by Newco for Existing Business will

exist. However, without limiting the foregoing sentence, Newco will continue to

purchase at least the same percentage of its requirements (at a Component-level)

for Existing Business from Visteon as Newco Facilities were purchasing or

receiving (at normal, non-exceptional, operational levels) from Visteon

Facilities on and prior to May 1, 2005 (when such Newco Facilities were Visteon

Facilities), and Visteon will supply such percentage, in each case except to the

extent that Newco Facilities are sold, transferred, exited, or closed (in regard

to the applicable Components purchased by the same), Newco's purchase

obligations relating to such Components are terminated, expire, or are assigned

in accordance with this Agreement, or as otherwise agreed upon by the Parties in

writing. For example, if Newco Facilities were purchasing or receiving 70% of

their requirements for a specific Component from Visteon Facilities on and prior

to May 1, 2005 at normal operational levels, Newco will continue to purchase at

least 70% of its requirements for such specific Component from Visteon during

the term of this Agreement (subject to the specific exceptions referred to in

the prior sentence). The foregoing will not, however, permit Visteon to cease

supplying at such percentage to the assignee of any Existing Agreement upon

assignment of such Existing Agreement by Newco to such assignee.

 

2.6 No Obligation to Issue Long Term Supply Agreement; Conflict with this

Agreement. Newco shall have no obligation under this Agreement to issue a Long

Term Supply Agreement (as opposed to a Purchase Order) to Visteon for any

Existing Business or other Components. In the event of a conflict between the

terms of any Purchase Order, Long Term Supply Agreement, or Global Terms and

this Agreement in regard to specific Components, the terms of this Agreement

shall control in regard to such Components.

 

2.7 Use of Standard-Form Visteon Purchasing Documents. It is anticipated that

Newco will need to utilize standard-form Visteon purchasing documents (e.g.,

Purchase Orders, Long Term Supply Agreements, Sourcing Agreements, Target

Agreements, etc.) as its own purchasing documents for some period of time after

the date of this Agreement in regard to Newco's procurement of Components from

Visteon. As such, for the purposes of

 

 

                                       8

<PAGE>

applying any such documents, the following terms used in such documents shall

have the following meanings: "Buyer" will mean Newco; "Seller" will mean

Visteon; and, "Supplies" will mean the applicable Components. In addition, in

any such Visteon documents a reference to Visteon's Global Terms For Production

Parts and Non-Production Goods and Services (VGT REV 4/03) will be deemed to

refer to the Global Terms.

 

2.8 Affect on Other Agreements. Any agreements between a Newco Facility (which,

at the time, would have been a Visteon Facility) and a Visteon Facility in

effect as of the date of this Agreement relating to the supply of Components

from such Visteon Facility to such Newco Facility covered under this Agreement

are superseded (except for use in establishing pricing as described in Section

3.1(a) or (b)) by the applicable terms and conditions of this Agreement, and by

any Purchase Order or Long Term Supply Agreement issued pursuant to this

Agreement, relating to such Components.

 

3. PRICING

 

3.1 Pricing.

 

     (a) Existing Business in Production. Subject to Sections 3.1(c) - (e), for

     Existing Business in Production, the prices of such Components will be the

     documented and substantiated prices in effect for the same, as of May 1,

     2005, between the Visteon Facility manufacturing and supplying such

     Components and the Newco Facility to which such Components were supplied as

     of May 1, 2005 (which Newco Facility was, at the time, a Visteon Facility),

     as set forth in Exhibit 1, adjusted for productivity price reductions taken

     after May 1, 2005 but prior to the date of this Agreement, as set forth in

     Exhibit 1. In regard to any Components listed in Exhibit 1 for which no

     prices are specified, Visteon and Newco will negotiate in good faith and

     agree upon such prices.

 

     (b) Existing Business - Future Model. Subject to Sections 3.1(c) - (e), for

     Existing Business - Future Model, the prices of such Components will be the

     documented and substantiated prices (as determined in accordance with the

     reasonably developed and documented plan described in Section 2.1(b)), in

     effect as of May 1, 2005, (if available) for the same between the Visteon

     Facility planned to manufacture and supply such Components and the Newco

     Facility to which such Components were planned to be supplied as of May 1,

     2005 (which Newco Facility was, at the time, a Visteon Facility), as set

     forth in Exhibit 2. In regard to any Components listed in Exhibit 2 for

     which no prices are specified, Visteon and Newco will negotiate in good

     faith and agree upon such prices.

 

     (c) Design or Other Changes. The prices of Components described in Sections

     3.1(a) and (b) will be adjusted for any Design Change or productivity price

     reduction agreed upon by Visteon and Ford in writing prior to the date of

     this Agreement, or agreed upon by Visteon and Newco in writing after the

     date of this Agreement (including, without limitation, the productivity

     reductions specified in Section 3.2 below), or for any price change

     resulting from Directed Tier 2 Sourcing (as described in Section 8.2). No

     other changes to the prices of such Components will occur unless agreed

     upon by the Parties in writing.

 

     (d) Prices for Ford - Visteon Directed Components. Notwithstanding Section

     3.1(a) or (b), the price to Newco for a Ford - Visteon Directed Component

     will be the price for the same agreed upon by Visteon and Ford, and such

     price will be adjusted for any Design Change or productivity price

     reduction agreed upon by Visteon and Ford in writing (including, without

     limitation, the productivity reductions specified in Section 3.2 below).

 

     (e) Prices for Non-Ford Components. In the event that Newco's customer for

     parts, components, or systems supplied by Newco incorporating Non-Ford

     Components supplied by Visteon requests a price reduction for such parts,

     components, or systems supplied by Newco, or for such Non-Ford Components

     supplied by Visteon, Visteon will, to the extent requested by Newco,

     negotiate in good faith with Newco regarding the price reduction.

 

 

                                       9

<PAGE>

3.2 Productivity Price Reductions. (a) Visteon shall reduce the prices for all

Ford-Vehicle Components (including, without limitation, any Ford - Visteon

Directed Components, but excluding Ford - Visteon Directed Audio Components

after December 31, 2006) supplied to Newco and included in the calculation of

Newco Carryover Frozen Turnover (as described below) beginning on the date of

this Agreement through December 8, 2008 by the following percentages (such

reductions will be made effective as of January 1 of the applicable calendar

year as described in Subsection 3.3 below):

 

<TABLE>

<CAPTION>

    Calendar Year      2005   2006   2007   2008

--------------------   ----   ----   ----   ----

<S>                    <C>    <C>    <C>    <C>

Percentage Reduction    ***    ***    ***    ***

</TABLE>

 

For a given calendar year, the aggregate productivity price reduction for all

Components included in the calculation of Newco Carryover Frozen Turnover will

be calculated by applying the applicable Percentage Reduction for such calendar

year against the "Newco Carryover Frozen Turnover." The "Newco Carryover Frozen

Turnover" shall be equal to the Total Frozen Turnover, less the Target Agreement

Turnover, less the Newco Buy Turnover, less any Components excluded from the

calculation of the Newco Carryover Frozen Turnover as described in Section

3.2(b) below, less Ford - Visteon Directed Audio Components after December 31,

2006. The following definitions shall apply to this calculation:

 

"Total Frozen Turnover" shall be equal to the total projected sales of

Components by Visteon to Newco using Newco's budgeted volume, mix and rates

assumptions for the applicable calendar year.

 

"Target Agreement Turnover" means that portion of the Total Frozen Turnover for

Components that will be launched during the applicable calendar year where Newco

and Visteon have entered into signed Target Agreements (or the sourcing document

of Newco that is the equivalent of a Ford Target Agreement).

 

"Newco Buy Turnover" means that portion of the Total Frozen Turnover for which

Newco has negotiated the price on behalf of Visteon pursuant to Section 8.2.

 

The productivity price reductions for 2005 described above