This Supply Agreement involves
Title: SUPPLY AGREEMENT
Governing Law: New York Date: 7/7/2010
Law Firm: Kramer Levin;Pepper Hamilton
Portions of this exhibit were omitted and filed separately with the Secretary of the Securities and Exchange Commission pursuant to an application for confidential treatment filed with the Securities and Exchange Commission pursuant to Rule 24b-2 under the Securities Exchange Act of 1934. Such portions are marked by [***].
by and between
Vishay Dale Electronics, Inc.,
a Delaware corporation,
Vishay Advanced Technology,
an Israeli company,
Dated as of July 6, 2010
This SUPPLY AGREEMENT (this “ Agreement ”) is made as of July 6, 2010 by and between Vishay Dale Electronics, Inc., a Delaware corporation (“ Supplier ”), and Vishay Advanced Technology, Ltd., an Israeli company (“ Buyer ”). Supplier and Buyer each may be referred to herein as a “ Party ” and collectively, as the “ Parties ”.
WHEREAS, subject to the terms, conditions, commitments and undertakings herein provided, Supplier is willing to manufacture and sell those products as set forth on Exhibit A hereto (as the same may be modified from time to time pursuant to the provisions hereof, the “ Products ”) to Buyer, and Buyer desires to purchase the Products from Supplier, in such quantities as Buyer shall request , as provided in this Agreement;
NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties, intending to be legally bound, agree as follows:
For purposes of this Agreement, the following terms shall have the meanings specified in this Article I:
“ Affiliate ” means, as applied to any Person, any other Person that, directly or indirectly, controls, is controlled by, or is under common control with that Person as of the date on which or at any time during the period for when such determination is being made. For purposes of this definition, “ control ” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities or other interests, by contract or otherwise, and the terms “ controlling ” and “ controlled ” have meanings correlative to the foregoing.
“ Applicable Law ” means any applicable law, statute, rule or regulation of any Governmental Authority, or any outstanding order, judgment, injunction, ruling or decree by any Governmental Authority.
“ Buyer ” has the meaning set forth in the preamble of this Agreement.
“ Confidential Information ” means all proprietary, design or operational information, data or material including, without limitation: (a) specifications, ideas and concepts for goods and services; (b) manufacturing specifications and procedures; (c) design drawings and models; (d) materials and material specifications; (e) quality assurance policies, procedures and specifications; (f) customer, client, manufacturer and supplier information; (g) computer software and derivatives thereof relating to design development or manufacture of goods; (h) training materials and information; (i) inventions, devices, new developments, methods and processes, whether patentable or unpatentable and whether or not reduced to practice; (j) all other know-how, methodology, procedures, techniques and Trade Secrets; (k) proprietary earnings reports and forecasts; (l) proprietary macro-economic reports and forecasts; (m) proprietary marketing, advertising and business plans, objectives and strategies; (n) proprietary general market evaluations and surveys; (o) proprietary financing and credit-
related information; (p) other copyrightable or patented works; (q) the terms of this Agreement; and (r) all similar and related information in whatever form; in each case, of one party which has been disclosed by Supplier or members of its Group on the one hand, or Buyer or members of its Group, on the other hand, in written, oral (including by recording), electronic, or visual form to, or otherwise has come into the possession of, the other Group.
“ Firm Order ” means Buyer’s non-cancelable purchase order for Products to be purchased by Buyer from Supplier pursuant to this Agreement for delivery.
“ FOB ” has the meaning and usage assigned to such words in the incoterms rules published by the International Chamber of Commerce.
“ Forecast ” means, with respect to any relevant period, a good faith non-binding forecast, based on information available to Buyer at the time of such forecast (which information, if reduced to writing, shall be made available to Supplier upon reasonable request), of the Firm Order for each Product that Buyer expects to deliver to Supplier for each calendar month during such period.
“ Governmental Authority ” means any U.S. or non-U.S. federal, state, local, foreign or international court, arbitration or mediation tribunal, government, department, commission, board, bureau, agency, official or other regulatory, administrative or governmental authority.
“ Group ” means, with respect to any Person, each Subsidiary of such Person and each other Person that is controlled directly or indirectly by such Person.
“ Intellectual Property ” means all domestic and foreign patents and patent applications, together with any continuations, continuations-in-part or divisional applications thereof, and all patents issuing thereon (including reissues, renewals and re-examinations of the foregoing); design patents; invention disclosures; mask works; all domestic and foreign copyrights, whether or not registered, together with all copyright applications and registrations therefor; all domain names, together with any registrations therefor and any goodwill relating thereto; all domestic and foreign trademarks, service marks, trade names, and trade dress, in each case together with any applications and registrations therefor and all goodwill relating thereto; all Trade Secrets, commercial and technical information, know-how, proprietary or Confidential Information, including engineering, production and other designs, notebooks, processes, drawings, specifications, formulae, and technology; computer and electronic data processing programs and software (object and source code), data bases and documentation thereof; all inventions (whether or not patented); all utility models; all registered designs, certificates of invention and all other intellectual property under the laws of any country throughout the world.
“ Last-Time Buy Order ” has the meaning set forth in Section 4.5 .
“ Liability ” means, with respect to any Person, any and all losses, claims, charges, debts, demands, Actions, causes of action, suits, damages, obligations, payments, costs and expenses, sums of money, accounts, reckonings, bonds, specialties, indemnities and similar obligations, exoneration covenants, obligations under contracts, guarantees, make whole agreements and similar obligations, and other liabilities and requirements, including all contractual obligations, whether absolute or contingent, matured or unmatured, liquidated or unliquidated, accrued or
unaccrued, known or unknown, joint or several, whenever arising, and including those arising under any Applicable Law, action, threatened or contemplated action (including the costs and expenses of demands, assessments, judgments, settlements and compromises relating thereto and attorneys’ fees and any and all costs and expenses, whatsoever reasonably incurred in investigating, preparing or defending against any such actions or threatened or contemplated actions) or order of any Governmental Authority or any award of any arbitrator or mediator of any kind, and those arising under any contract, in each case, whether or not recorded or reflected or otherwise disclosed or required to be recorded or reflected or otherwise disclosed, on the books and records or financial statements of any Person, including any Liability for taxes.
“ Person ” (whether or not initially capitalized) means any corporation, limited liability company, partnership, firm, joint venture, entity, natural person, trust, estate, unincorporated organization, association, enterprise, government or political subdivision thereof, or Governmental Authority.
“ Product ” has the meaning set forth in the preamble of this Agreement.
“ Product Warranty ” has the meaning set forth in Section 6.1(a) .
“ Raw Materials Cost ” means the direct cost of material used in a finished Product, including the normal quantity of material wasted in the production process, purchasing costs, inbound freight charges and any applicable subcontractor charges.
“ Six-Month Forecast ” means a forward-looking Forecast for a period of six consecutive calendar months, beginning on July 1 and January 1 of each calendar year, or, if earlier with respect to any Product, the last day of the Term for such Product.
“ Subsidiary ” of any Person means a corporation or other organization whether incorporated or unincorporated of which at least a majority of the securities or interests having by the terms thereof ordinary voting power to elect at least a majority of the board of directors or others performing similar functions with respect to such corporation or other organization is directly or indirectly owned or controlled by such Person or by any one or more of its Subsidiaries, or by such Person and one or more of its Subsidiaries; provided , however , that no Person that is not directly or indirectly wholly-owned by any other Person shall be a Subsidiary of such other Person unless such other Person controls, or has the right, power or ability to control, that Person.
“ Supplier ” has the meaning set forth in the preamble of this Agreement.
“ Supplier’s Other Manufacturing Obligations ” means the manufacturing obligations and commitments of Supplier to Persons other than Buyer, including Supplier’s Affiliates.
“ Specifications ” means, with respect to any Product, the design, composition, dimensions, other physical characteristics, chemical characteristics, packaging, unit count and trade dress of such Product.
“ Term ” has the meaning set forth in Section 7.1 .
“ Trade Secrets ” means information, including a formula, program, device, method, technique, process or other Confidential Information that derives independent economic value, actual or potential, from not being generally known to the public or to other Persons who can obtain economic value from its disclosure or use and is the subject of efforts that are reasonable, under the circumstances, to maintain its secrecy.
“ Wholly-Owned Subsidiary ” of a Person means a Subsidiary of that Person substantially all of whose voting securities and outstanding equity interest are owned either directly or indirectly by such Person or one or more of its Subsidiaries or by such Person and one or more of its Subsidiaries.
The terms “ herein ”, “ hereof ”, “ hereunder ” and like terms, unless otherwise specified, shall be deemed to refer to this Agreement in its entirety and shall not be limited to any particular section or provision hereof. The term “ including ” as used herein shall be deemed to mean “including, but not limited to.” The term “ days ” shall refer to calendar days unless specified otherwise. References herein to “ Articles ”, “ Sections ” and “ Exhibits ” shall be deemed to mean Articles, Sections of and Exhibits to this Agreement unless otherwise specified.
PURCHASE AND SALE OF PRODUCTS
SECTION 2.1 Agreement to Purchase and Sell Products . (a) During the Term, Supplier hereby agrees to manufacture and sell to Buyer, and Buyer hereby agrees to purchase and accept from Supplier, such amounts of Products, as from time to time shall be ordered by Buyer.
(b) All Products to be sold to Buyer pursuant to this Agreement shall be manufactured by Supplier or an Affiliate of Supplier; provided , however , that Supplier may subcontract the manufacture of any Product to a manufacturer that is not an Affiliate of Supplier with Buyer’s prior written consent, which consent shall not be unreasonably withheld, provided that any such subcontracting shall not relieve Supplier of its obligations hereunder.
SECTION 2.2 Product Specifications . (a) Supplier shall manufacture all Products according to the Specifications in effect as of the date of this Agreement, with such changes or additions to the Specifications of the Products related thereto as shall be requested by Buyer in accordance with this Section or as otherwise agreed in writing by the Parties. All other Products shall be manufactured with such Specifications as the Parties shall agree in writing.
(b) Buyer may request changed or additional Specifications for any Product by delivering written notice thereof to Supplier not less than one hundred twenty (120) days in advance of the first Firm Order for such Product to be supplied with such changed or additional Specifications. Notwithstanding the foregoing, if additional advance time would reasonably be required in order to implement the manufacturing processes for production of a Product with any changed or additional Specifications, and to commence manufacture and delivery thereof, Supplier shall so notify Buyer, and Supplier shall not be required to commence delivery of such Product until the passage of such additional time.
(c) Supplier shall be required to accommodate any change of, or additions to, the Specifications for any Product, if and only if (i) in Supplier’s good faith judgment, such changed
or additional Specifications would not require Supplier to violate good manufacturing practice, (ii) the representation and warranty of Buyer deemed made pursuant to Subsection (e) below is true and correct, and (iii) Buyer agrees to reimburse Supplier for the incremental costs and expenses incurred by Supplier in accommodating the changed or additional Specifications, including the costs of acquiring any new machinery and tooling. For the avoidance of doubt, such costs and expenses shall be payable by Buyer separately from the cost of Products at such time or times as Supplier shall request.
(d) Supplier shall notify Buyer in writing within thirty (30) days of its receipt of any request for changed or additional Specifications (i) whether Supplier will honor such changed or additional Specifications, (ii) if Supplier declines to honor such changed or additional Specifications, the basis therefor and (iii) if applicable, the estimated costs and expenses that Buyer will be required to reimburse Supplier in respect of the requested changes or additions, as provided in Subsection (c) above. Buyer shall notify Supplier in writing within fifteen (15) days after receiving notice of any required reimbursement whether Buyer agrees to assume such reimbursement obligation.
(e) By its request for any changed or additional Specifications for any Product, Buyer shall be deemed to represent and warrant to Supplier that the manufacture and sale of the Product incorporating Buyer’s changed or additional Specifications, as a result of such incorporation, will not and could not reasonably be expected to (i) violate or conflict with any contract, agreement, arrangement or understanding to which Buyer and/or any of its Affiliates is a party, including this Agreement and any other contract, agreement, arrangement or understanding with Supplier and/or its Affiliates, (ii) infringe on any trademark, service mark, copyright, patent, trade secret or other intellectual property rights of any Person, or (iii) violate any Applicable Law. Buyer shall indemnify and hold Supplier and its Affiliates harmless (including with respect to reasonable attorneys’ fees and disbursements) from any breach of this representation and warranty.
SECTION 2.3 New Products . If Buyer shall request in writing that Supplier manufacture and sell to Buyer an item that is not at the time a Product, Supplier shall consider such request in good faith, giving due consideration to Supplier’s available manufacturing capacity, Supplier’s Other Manufacturing Obligations, existing know-how, technical feasibility, cost, profitability and other relevant factors. Supplier shall inform Buyer within a reasonable time of Supplier’s determination in principle whether to manufacture such Product, and if Supplier has determined not to manufacture such Product, the reasons therefor. If Supplier shall inform Buyer that it is willing in principle to manufacture and sell such Product, Buyer and Supplier shall negotiate in good faith with respect to the terms of such manufacture and sale, including pricing and the Exhibits to this Agreement shall be modified accordingly; provided , however , that neither Party shall be bound with respect to the manufacture and sale of any such Product unless the Parties shall have so agreed in writing.
SECTION 2.4 Supplier’s Supply Obligations . Supplier shall be obligated to manufacture and sell Products to Buyer, in accordance with Buyer’s Firm Orders, to the extent of Supplier’s then existing manufacturing capacity, taking into account Supplier’s Other Manufacturing Obligations; provided , however , the Supplier shall give equal priority to the orders of Buyer, on the one hand, and Supplier’s Other Manufacturing Obligations, on the other.
SECTION 2.5 Product Changes . Supplier shall communicate any change in the Specifications for any Product or its manufacture in accordance with Supplier’s product change notification process. Buyer shall be deemed to have accepted such change unless, within thirty (30) days after receipt of notice from Supplier, Buyer informs Supplier that such change is not acceptable. If Buyer informs Supplier that such change is not acceptable, Supplier may by notice to Buyer either (x) continue to supply the Product in accordance with the original Specifications and manufacturing procedures or (y) terminate this Agreement with respect to such Product on a date specified by Supplier in a notice of termination, which date shall not be earlier than the earlier of (I) one (1) year from the date of Buyer’s information that it does not accept the change proposed by Supplier and (II) if such notice of termination is delivered more than ninety (90) days before the end of the then current Term, the end of such Term; subject to the right of the Buyer to submit a Last-Time Buy Order in accordance with Section 4.5 .
SECTION 2.6 Product Discontinuation . At any time Supplier may notify Buyer that Supplier is discontinuing the manufacture and sale of a Product. Such discontinuation shall take effect on a date specified by Supplier in a notice of discontinuation, which date shall not be earlier than one (1) year from the date of the notice of discontinuation; subject to the right of the Buyer to submit a Last-Time Buy Order in accordance with Section 4.5 .
SECTION 2.7 Consultation and Support . At either Party’s reasonable request, the Parties shall meet and discuss the nature, quality and level of supply services contemplated by this Agreement. In addition, Supplier will make available on a commercially reasonable basis and at commercially reasonable times qualified personnel to provide knowledgeable support service with respect to the Products. The Parties shall negotiate in good faith with respect to any fees and other charges incurred by Supplier in providing other than routine product support.
SECTION 3.1 Forecasts . (a) As soon as possible, but in no event later than thirty (30) days following the distribution of shares of common stock of Vishay Precision Group, Inc. (“VPG”) to the shareholders of Vishay Intertechnology, Inc. (“Vishay Intertechnology”) under that certain Master Separation and Distribution Agreement between Vishay Intertechnology and VPG (the “Master Separation Agreement”), Buyer shall provide to Supplier an initial Forecast for the period ending on December 31, 2010. Beginning on December 1, 2010, and thereafter, on May 31 and December 1 of each calendar year, Buyer shall provide to Supplier a Six-Month Forecast for the 6-month period beginning on the immediately following July 1 and January 1, respectively.
(b) If it is commercially impracticable for Buyer to deliver a Six-Month Forecast for a particular Product, Buyer shall deliver Forecasts to Supplier at such intervals and for such periods as reasonable under the circumstances, and Supplier shall in good faith consider such Forecasts delivered by Buyer.
(c) Supplier shall use all Forecasts delivered by Buyer under this Agreement for capacity and raw material planning purposes only, and such Forecasts will not constitute a commitment of any type by Buyer to purchase any Product.
SECTION 3.2 Forecasts in Excess of Capacity . Upon receipt of each Forecast, Supplier shall determine whether it will have the capacity to manufacture and sell to Buyer the Products in the forecasted amounts. If Supplier determines that it will not have the capacity to manufacture and deliver any Product to Buyer as forecasted, Supplier shall so notify Buyer as promptly as practicable. Supplier and Buyer shall thereafter negotiate in good faith in order to match Supplier’s manufacturing capacity with Buyer’s requirements for the specified Product, such as by advancing or deferring the delivery of the Product to other periods. In the event that Supplier and Buyer shall agree to accommodate Buyer’s forecasted requirements in a manner that will require the expenditure by Supplier of unbudgeted costs and expenses in addition to the costs and expenses that Supplier would otherwise be required to expend in order to fulfill its obligations under this Agreement, Buyer shall be obligated to reimburse Supplier for such costs and expenses as have actually been expended by Supplier, notwithstanding that the manufacture and sale of Products in accordance with the Firm Orders subsequently delivered by Buyer for the relevant periods do not require such expenditure.
SECTION 3.3 Firm Orders in Excess of Forecasts . In the event that the Firm Order for any Product shall exceed the Forecast contained in the most recent prior Forecast for such Product (as such Forecast may have been modified by agreement of the Parties in the manner contemplated in Section 3.2 ; such excess being referred to as the “ Excess Order ”), Supplier shall notify Buyer, as promptly as reasonably practicable after receipt of such Firm Order, whether Supplier has sufficient available capacity to accommodate the Excess Order, taking into consideration Supplier’s manufacturing capacity for such Product and Supplier’s Other Manufacturing Obligations. If Supplier shall not have sufficient available capacity to accommodate the Excess Order, Supplier and Buyer shall negotiate in good faith in order to match Supplier’s available manufacturing capacity with Buyer’s requirements for the specified Product, such as by advancing or deferring the delivery of the Product to other periods.
ORDERS AND PAYMENT
SECTION 4.1 Purchase Orders . (a) Buyer may place a Firm Order for the Products with Supplier at any time and from time to time.
(b) Each Firm Order shall specify (i) number of units of the Product to be purchased and (ii) the requested delivery date, provided that Buyer shall request a delivery date with a lead delivery time that is customary for the particular Product, unless otherwise agreed upon by the Parties. Supplier agrees to provide Buyer prompt notice if it knows it cannot meet a requested delivery date.
(c) If Buyer requires a Product on an emergency basis and so informs Supplier, and Supplier has the Product available in its uncommitted inventory, Supplier agrees to use reasonable commercial efforts to fill the emergency order as promptly as practicable. Buyer