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EXHIBIT 10.3
PURCHASE AND SUPPLY AGREEMENT
This Purchase and Supply Agreement ("Agreement") dated as of January 1 2000 (the
Effective Date") is entered into by and between Visteon Corporation., a Delaware
corporation ("Visteon"), and FORD MOTOR COMPANY ("FORD "), a Delaware
corporation.
RECITALS
A. Ford and its subsidiaries and affiliates worldwide are engaged in, among
other things, the design, manufacture, and sale of motor vehicles and motor
vehicle related products. Prior to the Effective Date, all of the business
operations which are owned by Visteon were controlled by Ford. As of the
Effective Date, Visteon has separated from Ford and become an independent
entity.
B. Visteon and its subsidiaries and affiliates worldwide are engaged in among
other things, the design, manufacture, and sale of motor vehicle related
components and systems on certain Ford vehicles.
C. Following the separation of Visteon from Ford, Visteon wishes to continue to
supply and to assure that its subsidiaries and affiliates have the right, under
certain circumstances, to continue to supply Ford and certain of its
subsidiaries with motor vehicle related components and systems and Ford wishes
to continue acquiring such components and systems on a competitive basis from
Visteon and its subsidiaries and affiliates. Further, the parties believe that
cooperation with respect to restructuring actions during and after the
separation of Visteon from Ford is desirable.
D. Ford and Visteon desire to have Visteon positioned as a viable independent
supplier, treated in line with other Tier 1 suppliers of Ford with respect to
Ford's general purchasing policies and practices.
E. Ford and Visteon acknowledge that in order for Visteon to achieve this
objective and to remain competitive with other Tier 1 suppliers, they will need
to cooperate with each other to effectively and efficiently implement product,
process and design technologies identified and secured by Visteon into
components purchased by Ford.
NOW, THEREFORE, in consideration of the mutual promises contained in this
Agreement and intending to be legally bound, Visteon and Ford agree:
1. PRIOR PURCHASE AND SUPPLY AGREEMENTS
1.1 Subject only to the termination provisions of paragraph 4, Visteon and Ford
shall continue to honor the terms and conditions of all Purchase Orders, Long
Term Supply Agreements, Target Agreements, and Sourcing Confirmation Letters in
existence as of the Effective Date entered into by Ford on behalf of itself and
as agent for its affiliated companies ("Existing Agreements") regarding the
purchase and supply of motor vehicle related components and systems
("Components"), including all Components that have been awarded to Visteon
regardless of whether production for such program has commenced, as if Visteon
and Ford were separate legal entities at the time such agreements were made,
provided, however that the term of each Existing Agreement shall extend through
the later of (i) its stated term, or (ii) December 31, 2003. Ford agrees that
such Existing Agreements shall transfer to Visteon and shall issue amendments to
such documents as may be required by Ford's accounts payable system to include
the Visteon name.
1.2 The terms and conditions of Ford's standard Purchase Order (FGT26 rev. 4/97)
are incorporated herein and in the Existing Agreements by this reference;
provided, however, that in the event the specific agreed upon terms of an
Existing Agreement conflict with the terms of Ford's standard Purchase Order
terms, including the express omission of some or all of Ford's standard terms,
the specific agreed upon terms (including agreed upon omissions), of the
Existing Agreement shall control. In the event of a conflict between the terms
of an Existing
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Agreement and this Agreement, then the terms of this Agreement shall control.
Additionally, the parties agree that in situations where the parties are silent
with respect to the applicability of all of the standard Ford Purchase Order
terms and conditions, it shall be presumed that such terms and conditions apply.
1.3 The unit prices for each Component produced for each program will be equal
to the existing prices already established by Existing Agreements, and the
parties have mutually agreed to certain price reductions which are described in
a separate side letter agreement entered into contemporaneously with this
Agreement.
1.4 Unless otherwise provided in Existing Agreements, no adjustments will be
made for changes in economics, including increases in Visteon's costs for labor,
material, or overhead. In the event of an unforeseen extraordinary occurrence
which is not the fault of either party and which may significantly affect
Visteon's cost of manufacturing and supplying Components to Ford or which
otherwise may place a significant financial burden on either party, Ford and
Visteon will negotiate in good faith an adjustment to the pricing terms, taking
into account all of the circumstances, with the view toward ensuring
profitability with respect to Components, as well as the vehicles incorporating
Components, to both Ford and Visteon.
2. NEW BUSINESS
2.1 Ford shall treat Visteon in the same manner as it treats its other Tier 1
suppliers with respect to Ford's general sourcing policies and practices,
including new purchasing and sourcing initiatives.
2.2 All new business agreements not constituting Existing Agreements hereunder
("New Business Agreements") awarded to Visteon will be governed by Ford's
standard Purchase Order terms and conditions (FGT 26 rev. 4/97 or subsequent
revisions), the applicable terms of this Agreement and any other specific terms
and conditions under which that business is awarded. During the term of this
Agreement, Visteon will continue to be included on Ford's list of suppliers
receiving Requests for Proposals, including Requests for Quotations, design
competitions and advanced technology development activities.
2.3 Other than business awarded pursuant to Visteon's exercise of its right of
last refusal, New Business Agreements awarded to Visteon, if any, will be at
Ford's sole discretion.
3. PAYMENT TERMS
3.1 The payment terms of all Existing Agreements shall remain unchanged as of
the Effective Date, however, Visteon recognizes its need to remain competitive
and agrees to participate with Ford, consistent with the participation of Ford's
other Tier 1 suppliers, as and when Ford moves to different supply chain models
and payment term constructs. Payments will be made to Visteon in the currency of
the country of final manufacture or assembly of the Components to the extent
consistent with payment terms applied to Ford's other Tier 1 suppliers. The
parties will continue the present monthly billing process for material shipments
until such time as the accounting functions for Visteon have been sufficiently
transitioned so that there is no longer the ability to continue the present
billing practices. After Visteon has transitioned from the Ford accounting
services necessary for the present billing process, Visteon will be reimbursed
based on normal Ford Tier 1 supplier payment terms and practices in effect at
that time.
4. RIGHT TO TERMINATE FOR NON-COMPETITIVENESS
4.1 If during the term of any Existing Agreement or New Business Agreement
relating to a given Component (collectively "Purchase and Supply Agreement"),
(a) there is a demonstrable decline in the overall quality of Visteon's products
or services, or (b) Visteon does not remain competitive in design, quality,
service, technology and delivery on any Component thereunder with other
responsible suppliers or potential suppliers, or (c) Ford can substitute
supplies of significantly advanced design or processing, Ford may terminate its
purchase obligations with respect to such Component in whole or in part without
further liability. Ford shall provide
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written notice to Visteon which outlines its causes for termination and
specifies a termination date at least three months after the date of the notice.
If Visteon demonstrates to Ford, at least one month prior to the specified date
of termination, that Visteon will correct the causes by the termination date or
a subsequent date acceptable to Ford, termination of the Purchase and Supply
Agreement with respect to the affected Component will be suspended and that
agreement will continue.
4.2 Ford will not be responsible for any supplemental or compensatory payments
to Visteon in the event that a Purchase and Supply Agreement is terminated
because of non-competitiveness, provided however that this provision shall not
vitiate any separate agreement between Ford and Visteon relating to ongoing
employee relationships.
5. QUALITY/COST IMPROVEMENT INITIATIVES
5.1 To insure a robust quality improvement process, Visteon will participate in
Ford quality improvement programs and Ford can require Visteon to achieve
reasonable increased quality standards, consistent with the current practice of
Ford's other Tier 1 suppliers All Visteon facilities that produce Components for
Ford shall achieve and retain Q1 status and shall also maintain ISO9000
compliance during the terms of any applicable Purchase and Supply Agreement.
5.2 Visteon will participate with Ford on its cost, warranty and customer
satisfaction improvement programs on all Components, whether covered by Existing
Agreements or New Business Agreements, including sharing the necessary
information requested by Ford, consistent with the current practice of Ford's
other Tier 1 suppliers.
6. RIGHT OF LAST REFUSAL ON REPLACEMENT BUSINESS
6.1 Beginning January 1, 2000 (the "Effective Date") and continuing through May
31, 2003 (the "ROLR Term"), Visteon shall be granted a right of last refusal
under competitive purchase order terms for the first replacement cycle of
existing product programs (in the United States, Europe, Canada, and Mexico
production for export to the United States) for those Components currently
provided by Visteon pursuant to Existing Agreements provided that it is
competitive in terms of quality, service and delivery on those Components at the
time it wishes to exercise the right of last refusal, and further provided that
it can demonstrate to Ford's reasonable satisfaction its capability to be
competitive in design and technology for the replacement cycle Components. For
Visteon's manufacturing operations not covered by the foregoing sentence,
Visteon shall be deemed to be the "incumbent" supplier and will be treated by
Ford in the same manner as Ford treats its other incumbent suppliers. The
parties agree that right of last refusal for those Components produced in Mexico
for use in the United States shall not be subject to the Sourcing Council
process. The right of last refusal for Components supplied by Visteon facilities
in Western Europe will be administered to be consistent with Ford's sourcing
obligations described in the Agreement Governing the Separation of the Ford
Visteon Organization dated January 25, 2000 as it may be amended from time to
time. The mechanics of Visteon's right of last refusal shall operate in
accordance with Exhibit I provided, however, that any Visteon manufacturing
operation that has not achieved Q1 status, or whose Q1 status has been revoked
will be considered to be on New Business Hold and during such period, the right
of last refusal may not be invoked for Components that would be produced at that
manufacturing operation.
6.2 Except as specifically provided above, the right of last refusal does not
apply to Asia, new markets, Mexico (other than production of Components for
export for use in the United States and Components assembled into vehicles in
Mexico that will be exported to the United States), or South America.
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7. TOOLING
7.1 The ownership of tooling for the production of Components is governed by the
Master Transfer Agreement.
7.2 Use of Ford-owned tooling for the production of service and replacement
parts and other aftermarket applications is governed by the Relationship
Agreement Between Automotive Consumer Services Group and Visteon Corporation.
7.3 Visteon shall not use Ford-owned tooling to produce products for other
customers if such tooling is used to produce products for serial production for
Ford; provided, however, that Visteon shall be allowed to continue the use of
such tooling to the extent necessary to satisfy already awarded contracts or
extensions of such contracts, where Visteon has previously used such tooling to
produce such products. Visteon will have the burden of establishing, upon Ford's
reasonable request, the existence of a binding contract with other customer(s)
and prior use of particular tooling for those specific customer(s) prior to the
Effective Date. If Visteon is unable to establish such facts with respect to
particular tooling, Visteon will not have the right to use the applicable
tooling. Moreover, Visteon agrees that it will not expand the use of any tooling
described in this Section to new products, new customers or new contracts, other
than for or with Ford.
7.4 In the event that (i) any Excusable Delay (as defined in Ford's standard
Purchase Order terms) prevents Visteon from producing or delivering products, or
(ii) Ford resources products to another supplier as permitted under this
Agreement Visteon will permit Ford to take possession of all Ford-owned tooling
which is used to produce serial production parts for Ford in accordance with
Ford's Purchase Order Terms and Conditions; provided, however, that in the event
such tooling is being used by Visteon to produce products for other customers
(as permitted pursuant to Section 7.3 above, it being understood and agreed that
Visteon shall have the burden of proving such eligibility), Ford will to the
extent practicable, allow the new supplier to use such tooling to produce
products for sale to Visteon to permit Visteon to satisfy Visteon's pre-existing
contractual commitments to other customers.
7.5 Ford agrees to return to Visteon all tooling of which Ford obtains
possession as a result of an event constituting an Excusable Delay as promptly
as commercially reasonable under the circumstances, following the cessation of
that Excusable Delay event; provided, however, that Ford shall not be required
to return any such tooling to Visteon until after Ford has satisfied any
contractual commitments that Ford may have made to other suppliers regarding
products produced from such tooling.
7.6 Nothing contained in this Article 7 shall be construed to restrict Visteon's
use of tooling beyond the specific rights herein granted, to the extent that
Ford may in the future, expand such rights with respect to Tier 1 suppliers
generally.
8. PROCESS FOR VISTEON TO EXIT CERTAIN BUSINESSES
Visteon shall not sell or exit any of its business operations engaged in the
production of Components for Ford without first advising Ford of its intent to
do so, providing sufficient detail with respect to the means by which Visteon
expects to assure Ford of a continued supply of affected Components on the same
terms and conditions, through the remaining terms of the affected Purchase
Orders and Long Term Supply Agreements. Visteon will reasonably consider Ford's
input and concerns and Ford will cooperate in good faith with Visteon in any
restructuring actions.
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9. RAW MATERIALS AND PURCHASED COMPONENTS
To the extent mutually practical and consistent with all applicable laws and
regulations and consistent with the terms of all Existing Agreements, Visteon
will participate in Ford's raw materials supply system or directed buy programs
for raw materials as amended from time to time, in the same manner as Ford's
other Tier 1 suppliers
10. TERM AND TERMINATION
10.1 The term of this Agreement shall commence on the Effective Date and
continue as long as any Existing Agreement is in effect, including any
extensions of any Existing Agreement.
10.2 Either Ford or Visteon may terminate this Agreement in the event that (a)
the other party materially breaches this Agreement; (b) the other party becomes
insolvent or enters bankruptcy, receivership, liquidation, composition of
creditors, dissolution or similar proceeding; or (c) a significant portion of
the assets of the other party necessary for the performance of this Agreement
becomes subject to attachment, embargo or expropriation. In addition, Ford may
terminate this Agreement in the following events: (i) thirty-five percent or
more of the voting shares of Visteon become owned or controlled, directly or
indirectly, by a competitor of Ford in the business of manufacturing motor
vehicles; or (ii) all of the Existing Agreements become subject to termination
or cancellation pursuant to their terms.
10.3 A party intending to terminate this Agreement pursuant to this Article 10
shall first notify the other party of the grounds for the intended termination.
If the other party fails to remedy such grounds for termination within sixty
(60) days of such notice (or any longer period of time as mutually agreed by the
parties), then the terminating party may terminate this Agreement effective upon
notice to the other party without the need for any judicial action.
10.4 The provisions of this Article 10 are without prejudice to any other rights
or remedies either party may have by reason of the default of the other party.
10.5 In the event a competitor of Ford in the business of manufacturing motor
vehicles acquires a significant interest in Visteon (directly or indirectly)
Visteon will provide Ford with reasonable assurances that Visteon will utilize
its best efforts to preserve the confidentiality of all information related to
products produced for Ford and Ford product programs.
11. GENERAL PROVISIONS
11.1 No Agency. This Agreement does not constitute either party the agent or
legal representative of the other party. Neither party is authorized to create
any obligation on behalf of the other party.
11.2 Notices. Any notice under this Agreement must be in writing (letter,
facsimile) and will be effective when received by the addressee at its address
indicated below.
(a) Notice sent to Visteon will be addressed as follows:
Visteon: Visteon Corporation
5500 Auto Club Drive
Dearborn, MI 48126
Attention: General Counsel
Fax: (313) 390-2718
(b) Notice sent to Ford will be addressed as follows:
Ford Motor Company
Office of the Secretary
One American Road
12th Floor World Headquarters
Dearborn, Michigan 48126
Fax: (313) 248-7036
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(c) The parties by notice hereunder may designate other addresses to which
notices will be sent.
11.3 Subsidiaries and Affiliates. The following Ford subsidiaries and affiliates
are bound to this Agreement: Volvo Car Corporation ("Volvo"), Mazda Motor
Corporation ("Mazda"), and Jaguar Cars Ltd. ("Jaguar"); provided, however that
neither the Right of Last Refusal as described in Appendix I nor the price
reductions referenced in Section 1.3 shall apply to Jaguar, Volvo or Mazda brand
sourcing regardless of whether Ford Motor Company is the entity that issued the
Existing Agreements on behalf of Volvo or Mazda, and further provided that Ford
will use reasonable efforts to secure a similar commitment from Mazda and will
use reasonable efforts to ensure that, during the ROLR Term, Visteon is given
the opportunity by Jaguar and Volvo to quote for all new business for components
that it is able to produce. Ford will not transfer sourcing responsibility to an
entity that is not bound by the Right of Last Refusal for the purpose of
avoiding such obligation. No other subsidiaries or affiliates of Ford are
parties to this Agreement and they are not bound by the provisions herein unless
and until they separately agree to be so bound.
11.4 Amendments. No amendment to this Agreement will be binding upon either
party unless it is in writing and is signed by a duly authorized representative
of each party. This Agreement supersedes any prior agreements between the
parties concerning the subject matter herein.
l1.5 Assignments. This Agreement shall be binding upon and inure to the benefit
of the parties, and their respective successors and permitted assigns, but no
rights, interests or obligations of either party herein may be assigned without
the prior written consent of the other, which consent shall not be unreasonably
withheld.
11.6 Severability. If any provision of this Agreement, or portion thereof, is
invalid or unenforceable under any statute, regulation, ordinance, executive
order or other rule of law, such provision, or portion thereof, shall be deemed
reformed or deleted, but only to the extent necessary to comply with such
statute, regulation, ordinance, order or rule, and the remaining provisions of
this Agreement shall remain in full force and effect.
11.7 Governing Law. This Agreement will be construed and enforced in accordance
with the laws of the State of Michigan, excluding its conflict of laws rules.
Each party consents, for purposes of enforcing this Agreement, to personal
jurisdiction, service of process and venue in any state or federal court within
the State of Michigan having jurisdiction over the subject matter. The parties
exclude the application of the 1980 United Nations Convention on Contracts for
the International Sale of Goods, if otherwise applicable.
If a dispute arises between the Parties relating to this Agreement, the
following procedure shall be implemented except that either Party may seek
injunctive relief from a court where appropriate in order to maintain the status
quo while this procedure is being followed:
(1) The Parties shall hold a meeting promptly, attended by
persons with decision-making authority regarding the dispute,
to attempt in good faith to negotiate a resolution of the
dispute; provided, however, that no such meeting shall be
deemed to vitiate or reduce the obligations and liabilities of
the Parties or be deemed a waiver by a party hereto of any
remedies to which such Party would otherwise be entitled.
(2) If within thirty (30) days after such meeting, the Parties
have not succeeded in negotiating a resolution of the dispute,
they agree to submit the dispute to mediation in accordance
with the then-current Model Procedure for Mediation of
Business Disputes of the Center for Public Resources and to
bear equally the costs of the mediation. The Parties will
jointly appoint a mutually acceptable mediator, seeking
assistance in such regard from the Center for Public
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Resources if they have been unable to agree upon such
appointment within twenty (20) days from the conclusion of the
negotiation period.
(3) The Parties agree to participate in good faith in the
mediation and negotiations related thereto for a period of
thirty (30) days. If the Parties are not successful in
resolving the dispute through the mediation, then the Parties
agree to submit the matter to binding arbitration in
accordance with the Center for Public Resources Rules for
Non-Administered Arbitration, by a sole arbitrator.
(4) Mediation or arbitration shall take place in the City of
Dearborn, Michigan. Equitable remedies shall be available in
any arbitration. Punitive or exemplary damages shall not be
awarded. This clause is subject to the Federal Arbitration
Act, 9 U.S.C.A. Section 1 et seq., or comparable legislation
in non-U.S. jurisdictions, and judgment upon the award
rendered by the arbitrator, if any, may be entered by any
court having jurisdiction thereof.
11.8 Counterparts. This Agreement may be executed by the parties in separate
counterparts, each of which when so executed and delivered will be an original,
but all such counterparts will together constitute one and the same instrument.
IN WITNESS WHEREOF, Ford and Visteon have caused this Agreement to be executed
in multiple counterparts by their duly authorized representatives.
VISTEON CORPORATION FORD MOTOR COMPANY
By: /s/ Daniel R. Coulson /s/ Carlos Mazzorin
------------------------------------ -----------------------------------
Daniel R. Coulson Carlos Mazzorin
Title: Executive Vice President and Group Vice President
Chief Financial Officer Global Purchasing and South America
Date: April 1, 2000 Date: April 1, 2000
---------------------------------- -------------------------------
/s/ Malcolm S. Macdonald
-----------------------------------
By: Malcolm S. Macdonald
------------------------------------ Vice President-Treasurer
Title:
---------------------------------
Date: March 30, 2000
----------------------------
Date:
----------------------------
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Appendix I
RIGHT OF LAST REFUSAL
In order to invoke the right of last refusal, Visteon must be competitive in
terms of quality, service and delivery with respect to the Components for which
Visteon is exercising its right of last refusal.
(a) Upon commencement of a product program covered by the right of last
refusal specified in Section 6.1 (a "ROLR Product"), Ford will submit to
prospective suppliers, including Visteon, a request for proposal in accordance
with its customary procedures including but not limited to, the bundling of ROLR
Products for any Component with ROLR Products for other Components; provided,
however, that the bundling of ROLR Products will involve naturally related
components, systems and modules, consistent with Ford's standard commodity
sourcing practices.
(b) When such bundled sourcing packages including two or more ROLR
Products are offered, Visteon will have the right of last refusal on any such
ROLR Product(s) in the bundle. For those products in the bundle not currently
provided by Visteon, the right of last refusal shall not apply.
(c) If Visteon wishes to exercise the right of last refusal with regard to
a ROLR Product, Visteon must participate in the sourcing process, including
developmental work, the advance purchasing/engineering process, and the
submission of bids, all on the same basis as other potential suppliers.
(d) In the event Ford determines that a proposal submitted by an entity
other than Visteon is the most favorable (the "Favorable Proposal"), Ford will
notify Visteon in writing of the material terms (including price, other
financial considerations (including, without limitation, the economic impact of
price reductions on other current and future products) material content,
investment, timing, non-proprietary technology, and the existence of proprietary
technology) of the Favorable Proposal (the "Terms Notice"), and will request
that Visteon notify Ford in writing whether Visteon wishes to supply such ROLR
Product(s) on terms the same as or substantially the same as (as mutually
determined by the parties in their reasonable discretion) the terms of the Terms
Notice.
(e) Following receipt by Visteon of the Terms Notice from Ford, Visteon
must notify Ford in writing of its willingness and ability to supply such ROLR
Products on such terms within seven (7) business days if no new technology is
included in the Favorable Proposal, or fifteen (15) business days if new
technology is included in the Favorable Proposal. Visteon must demonstrate to
Ford's reasonable satisfaction that it has the capability to be competitive in
design and technology with the Favorable Proposal.
(f) If Visteon so notifies Ford that it is willing and able to supply such
ROLR Product(s) on such terms, then Visteon will be awarded the sourcing of such
ROLR Product(s) for the relevant Purchase and Supply Agreement term.
(g) If Visteon fails to so notify Ford or notifies Ford that it is
unwilling or unable to supply such ROLR Product(s) on such terms, Ford may
source the ROLR Product(s) on terms no less favorable to Ford than those set
forth in the Terms Notice.
(h) If for any reason Ford determines to source such ROLR Product(s) on
terms less favorable to Ford than the terms of the Terms Notice, then Visteon
will again have the right of last refusal to supply such ROLR Product(s) in the
manner described in this Appendix.
(i) Under no circumstances will Ford be responsible for any supplemental
or compensatory payments to Visteon in the event Visteon fails to exercise its
right of last refusal or can not provide the Components on a competitive basis.
The right of last refusal for those Components produced in Mexico for use in the
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States shall not be subject to the Sourcing Council process. The right of last
refusal for Components supplied by Visteon facilities in Western Europe will be
administered to be consistent with Ford's sourcing obligations described in the
Agreement Governing the Separation of the Ford Visteon Organization dated
January 25, 2000 as it may be amended from time to time.
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