exhibit10-2.htm


     

     

     

     

     

     

     

     

     

     

     

     

     

     

    FORM OF TAX MATTERS AGREEMENT 

     

    BY AND AMONG 

     

    VISHAY INTERTECHNOLOGY, INC. AND 

     

    VISHAY PRECISION GROUP, INC. 

     

    [ ], 2010 

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    

    
    



    TAX MATTERS AGREEMENT 

     

         WHEREAS, Vishay Intertechnology, Inc. (“VSH”) and Vishay Precision Group,
Inc. (“VPG”), collectively the “Parties” entered into the Master Separation and
Distribution Agreement dated as of [ ], 2010 (the “Distribution Agreement”), pursuant to which (i) VSH will distribute to its stockholders all of
the stock of VPG (the “Distribution”); 

     

         WHEREAS, it is the intention of VSH and VPG that the Distribution
qualifies as a tax-free transaction described in Section 355 of the Internal
Revenue Code of 1986, as amended (the “Code”);


     

         WHEREAS, VSH has received a private letter ruling from the IRS regarding
certain tax aspects of the Distribution; and 

     

         WHEREAS, in contemplation of the Distribution pursuant to which VPG and
certain of its direct and indirect Subsidiaries will cease to be members of the
VSH Affiliated Group of which VSH is the common parent corporation, the Parties
desire to set forth their agreement on the rights and obligations with respect
to handling and allocating Taxes and related matters. 

     

         NOW, THEREFORE, in consideration of the foregoing and the terms,
conditions, covenants and provisions of this Agreement and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Parties, intending to be legally bound, hereby agree as
follows: 

     

    ARTICLE I 
DEFINITIONS 

     

              Section 1.1. Defined Terms. Capitalized terms used in this Agreement and
not defined herein shall have the meanings set forth in the Distribution
Agreement. For purposes of this Agreement, the following terms have the
following meanings: 

     

         “Affiliated Group”
means an affiliated group of corporations (as defined in Section 1504(a) of the
Code). 

     

         “Final Determination” means any final determination of liability in respect of a Tax that,
under Applicable Law, is not subject to further appeal, review or modification
through proceedings or otherwise (including the expiration of a statute of
limitations or a period for the filing of claims for refunds, amended returns or
appeals from adverse determinations), including a “determination” as defined in
Section 1313(a) of the Code or execution of an IRS Form 870AD. 

     

         “Income Tax” means
any U.S. federal, state, local or non-U.S. (i) Tax on or measured by net income
or (ii) franchise Tax. 

     

         “Interest” means
interest at a rate per annum equal to the Prime Rate as published in the
Wall Street Journal, Eastern Edition in effect
from time to time during the period such interest accrues. 

     

    

    
    



         “IRS” means the United States Internal Revenue
Service. 

     

         “Israeli Tax Returns”
means the Income Tax
Returns of VATL, Tedea Huntleigh
International, Tedea Huntleigh Technology and Tedea Huntleigh Industrial
Properties for 2008 and 2009 that are not filed prior to the Effective Time.


     

         “Post-Closing Tax Period” means any Tax period beginning after the Distribution Date; and, with
respect to a Tax period that begins on or before the Distribution Date and ends
thereafter, the portion of such Tax period beginning after the Distribution
Date. 

     

         “Pre-Closing Non-Income Taxes” means any Taxes of a VPG Entity other than
Income Taxes that are attributable to a Pre-Closing Tax Period, provided,
however, that it shall not include any such Taxes that are accrued as a current
liability (net of any prepaid taxes)on the balance sheet of the VPG Entity at
the Effective Time. 

     

         “Pre-Closing Tax Period” means any Tax period ending on or before the Distribution Date; and,
with respect to a Tax period that begins on or before the Distribution Date and
ends thereafter, the portion of such Tax period ending on the Distribution Date.


     

         “Proceeding” means
any claim, examination, suit, action, litigation, assessment or proceeding
(including any Tax audit), whether administrative or judicial. 

     

         “Tax” or “Taxes” means all U.S.
federal, state, local, or non-U.S. net or gross income, gross receipts, net
proceeds, sales, use, ad valorem, value added, franchise, , withholding,
payroll, employment, excise, property, deed, stamp, alternative or add-on
minimum, environmental, profits, windfall profits, , license, lease, service,
use, occupation, severance, energy, unemployment, social security, worker’s
compensation, capital, or other taxes, assessments, , or other similar
governmental charges, together with any interest, penalties, additions to tax,
or additional amounts with respect thereto. 

     

         “Tax Asset” means
any net operating loss, net capital loss, investment tax credit, foreign tax
credit, charitable deduction or any other credit or tax attribute that could be
carried forward or back to reduce Taxes (including without limitation deductions
and credits related to alternative minimum Taxes). 

     

         “Tax Item” means,
with respect to any Income Tax, any item of income, gain, loss, deduction or
credit. 

     

         “Treasury Regulations” means the U.S. federal income Tax regulations, as amended, including
temporary regulations, promulgated under the Code. 

     

         “VATL” means Vishay Advanced Technologies, Ltd and
its Subsidiaries after the Effective Time. 

     

         “VIL Assets” means the assets of Vishay Israel Limited
that are sold to VATL that are described in agreements between the parties that
refer to the transfer of the (i) Foil and Thermal Shroud business and (ii) the
Bonding business. 

     

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         “VIL” means Vishay Israel Limited 

     

         “VPG Capital Stock”
means all classes or series of stock of VPG and all options, warrants,
derivatives, rights to acquire stock, and other interests and instruments taken
into account for purposes of determining a “50-percent or greater interest”
within the meaning of Section 355(d)(4) of the Code. 

     

         “VPG Entity” means
any member of the VPG Group that was also a Subsidiary of VSH prior to the
Distribution Date. 

     

         “VPG Group” means VPG and its Subsidiaries after the
Effective Time. 

     

         “VPG Separate Tax Return” means with respect to a VPG Entity, any state or local Income Tax Return
for periods that end prior to or on the Distribution Date that are not filed on
an affiliated, consolidated, combined or unitary basis with one or more members
of the VSH Group. 

     

         “VPG Straddle Period Tax Return” means any Income Tax Return required to be
filed that includes both a Pre-Closing Tax Period and a Post-Closing Tax Period
of any VPG Entity. 

     

         “VPG Tax Return”
means any Income Tax Return required to be filed by a member of the VPG Group,
other than a VSH Income Tax Return. 

     

         “VPG Taxes” mean
all Taxes of any member of the VPG Group that are attributable to a Post-Closing
Tax Period.

     

         “VSH Consolidated Group” means, with respect to U.S. federal Income Taxes, the Affiliated Group
of which VSH is a member, and with respect to any other Income Tax, any
affiliated, consolidated, combined or unitary group of which any member of the
VSH Group is a member. 

     

         “VSH Group” means
VSH and its Subsidiaries other than the VPG Entities. 

     

         “VSH Income Tax Return” means (i) any U.S. federal Income Tax Return and any state or local
Income Tax Return that has been or will be filed by or with respect to any VSH
Consolidated Group on an affiliated, consolidated, combined or unitary basis for
a period that ends prior to or on or includes the Distribution Date, and (ii)
any VPG Separate Tax Returns. 

     

         “VSH Income Taxes” means all Income Taxes of any member of the VSH Group and any VPG Entity
attributable to a Pre-Closing Tax Period, including, without limitation, (i) all
Income Taxes attributable to the Distribution or any transaction taken to
facilitate the Distribution, (ii) all Income Taxes resulting from the removal of
the VPG Entities from any consolidated, unitary or combined Income Tax Return
pursuant to the Distribution, and (iii) any Income Taxes (after reduction for
any foreign tax credit realized with respect to the inclusion) resulting from
the inclusion by a VPG Entity of income pursuant to Section 951(a)(1)(A) of the
Code for income of a non-U.S. VSH Group member or a VPG Entity that is
attributable to a Pre-Closing Tax Period; provided, however, that VSH Income
Taxes shall not include any Income Taxes for which there was an accrual for
current taxes (net of any prepaid taxes) on the balance sheet of the VPG Entity
at the Effective Time; and provided further that for purposes of this
definition, the inclusion under Section 951(a)(1)(A) of the Code shall include
only those amounts incurred through the normal operations of the business and
shall not include amounts attributable to extraordinary events or to material
changes in business operations.

     

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    ARTICLE II 
ADMINISTRATIVE AND COMPLIANCE MATTERS 

     

              Section 2.1. Sole Tax Sharing Agreement. Any and all existing Tax Sharing Agreements,
whether written or unwritten, between any member of the VSH Group, on the one
hand, and any member of the VPG Group, on the other hand, shall be terminated as
of the Distribution Date as between such Parties. As of the Distribution Date,
neither the members of the VPG Group nor the members of the VSH Group shall have
any further rights or liabilities under any such agreement, and this Agreement
shall be the sole Tax Matters Agreement between the members of the VPG Group and
the members of the VSH Group. 

     

              Section 2.2. Designation of Agent. VPG and each member of the VPG Group, in
each case with respect to any VSH Consolidated Group of which such Person was a
member on or prior to the Distribution Date, hereby irrevocably authorizes VSH
to designate a member of VSH Group, or a successor of such member, as its agent,
coordinator, and administrator, for the purpose of taking any and all actions
(including the execution of waivers of applicable statutes of limitation) with
respect to any VSH Income Tax Return which are necessary or incidental to the
filing of any Tax Return, any amended Tax Return, or any claim for refund,
credit or offset of Tax (even where an item or Tax Asset giving rise to an
amended Tax Return or refund claim arises in a Post-Closing Tax Period) or to
any Proceedings, and for the purpose of making payments to, or collecting
refunds from, any Taxing Authority, in each case relating to any Pre-Closing Tax
Period. 

     

              Section 2.3. Preparation of VSH Income Tax
Returns. VSH and the
members of the VSH Group shall prepare or cause to be prepared, with assistance
as needed from the members of the VPG Group, and file or cause to be filed all
VSH Income Tax Returns. Such Tax Returns shall be prepared in a manner that is
consistent with the prior practice of the members of the VSH Group and the VPG
Entities, provided that an inconsistent position may be taken if such position
would not adversely impact any VPG Entity or is required by law, as reasonably
determined by VSH in good faith; provided however, for the avoidance of doubt,
the consolidated tax return that includes the Distribution Date shall include a
calculation of the overall foreign loss, as that term is defined in Section
904(d)(f), (“OFL”) for the group. 

     

                   (a) VSH shall provide to VPG for its comments a draft of (i) the calculation
of the OFL no later than 30 days prior to the due date for filing the 2010 U.S.
federal consolidated Tax Return, including any extensions thereof, for the
review and comment by VPG, and (ii) all VPG Separate Tax Returns and the
portions of each other VSH Income Tax Return that relate to the VPG Entities
(or, at VSH’s option, a pro forma Tax Return that relates solely to the VPG
Entities) no later than 15 days prior to the due date for filing such Tax
Return, including any extensions thereof, for the review and comments of VPG,
which comments shall be given due
regard, provided that any final decision with respect to the reporting of any
item on such Tax Return shall be made by VSH. 

     

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              Section 2.4. General Allocation of VSH and VPG
Income. VSH will determine
the items of income, gain, loss, deduction and credit of the VPG Entities to be
included on each VSH Income Tax Return filed by a VSH Consolidated Group for any
taxable year in which any VPG Entity ceases to be a member of the VSH
Consolidated Group in good faith in accordance with Treasury Regulations Section
1.1502-76(b) (or any comparable provision of state or local law). VPG its
Affiliates shall file their respective Tax Returns for the taxable period
beginning on the first day after the Distribution Date consistently with such
determinations, except as otherwise required by law.. 

     

                   (a) Transaction Treated as Extraordinary
Items. For purposes of
preparing any federal, state or local Income Tax Return that is filed on a
consolidated, combined or unitary basis for a period that ends on the
Distribution Date, or starts on the day after the Distribution Date, in
determining the apportionment of income and Taxes between any Pre-Closing Tax
Period and Post-Closing Tax Period, any Tax Items relating to the Distributions
shall be treated as extraordinary items described in Treasury Regulations
Section 1.1502-76(b)(2)(ii)(C) and shall (to the extent occurring on or prior to
the Distribution Date) be allocated to Pre-Closing Tax Periods, and any Income
Taxes related to such items shall be treated under Treasury Regulations Section
1.1502-76(b)(2)(iv) as relating to such extraordinary item and shall (to the
extent occurring on or prior to the Distribution Date) be allocated to
Pre-Closing Tax Periods. 

     

                   (b) Apportionment of Earnings and Profits and Tax
Attributes. VSH and VPG
shall jointly determine the portion, if any, of any earnings and profits, Tax
Asset, or other consolidated, combined or unitary attribute to be allocated or
apportioned to the VPG Entities under applicable law and in accordance with the
private letter ruling received with respect to the Distribution from the IRS.
VPG and all members of the VPG Group shall prepare all Tax Returns in accordance
with such determination. In the event that any temporary or final amendments to
Treasury Regulations are promulgated after the date of this Agreement that
provide for any election to apply such regulations retroactively, then any such
election shall be made only to the extent that VSH and VPG collectively agree to
make such election. 

     

              Section 2.5. VPG Tax Returns. VPG and the members of the VPG Group shall
prepare or cause to be prepared, with the assistance of the members of the VSH
Group (to the extent necessary) and file or cause to be filed, all VPG Tax
Returns. VPG shall provide to VSH a draft of each VPG Straddle Period Tax Return
(and any VPG Tax Return with respect to a Pre-Closing Tax Period) (with copies
of any relevant schedules, work papers and other documentation then available)
no later than 15 days prior to the due date, including extensions, for the
filing of such Tax Return, for VSH’s review and approval, which approval shall
not be unreasonably withheld, delayed or conditioned. Any VPG Straddle Period
Tax Return (and any VPG Tax Return with respect to a Pre-Closing Tax Period)
shall be prepared in a manner consistent with the prior practice of the VSH
Group and the VPG Entities, unless otherwise required by law.

     

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              Section 2.6. Preparation of other Tax Returns. Except as
limited by Section 2.7 below, any Tax Return required to be filed by VSH or its
Subsidiaries, or VPG or its Subsidiaries for which responsibility is not
specifically allocated in this Article II shall be prepared and filed by the
entity that is required to file the Tax Return; provided, however, that (i) such
Tax Returns shall be prepared in a manner consistent with past practice except
to the extent otherwise required by law and (ii) at the request of VPG, VSH
shall prepare the Israeli Income Tax Returns for filing in a timely manner by
VPG as mutually agreed by VSH and VPG (iii) and provided, further however, that,
at the request of VSH, VPG shall provide to VSH a copy of each such Tax Return
that is prepared by VPG with respect to Taxes for which VSH is liable hereunder
(with copies of any relevant schedules, work papers and other documentation then
available), and if practically feasible such Tax Return shall be provided to VSH
prior to the filing of such Tax Returns. 

     

              Section 2.7. Amended Returns. VPG shall not, and shall not permit any of
its Subsidiaries to, with respect to any VPG Entity, file an amended Tax Return,
or file a Tax Return in a jurisdiction in which the VPG Entity has not
previously filed a Tax Return for a Pre-Closing Period without the prior written
consent of VSH, which shall not be unreasonably withheld, delayed or
conditioned, except as required by law. 

     

    ARTICLE III 
LIABILITY FOR TAXES


     

              Section 3.1. Responsibility for Income
Taxes. Subject to the
indemnification provided for in Section 6.1 of this Agreement, VSH shall be
liable for and shall timely pay, or cause to be paid, to VPG, or at VPG’s
request, the applicable Taxing Authority all VSH Income Taxes, whether payable
at the time of the filing of the Tax Return, pursuant to an audit, or otherwise.
The tax liability for a period that begins before and ends after the
Distribution Date, shall be apportioned between VPG and VSH in a
manner that reasonably reflects the portion of such tax liability attributable
to VPG for the Post-Closing Tax Period, and the VPG Entities for the Pre-Closing
Tax Period, respectively, as if there had been a closing of the books on the
date of the Distribution. With respect to the apportionment of Income Taxes, any
amounts that are determined on an annual basis, such as depreciation, Section
951(a)(1)(A) inclusions, etc., shall be apportioned between VSH and VPG based on
the number of days in each of the Pre-Closing Tax Periods and the Post Closing
Tax Periods, respectively. Within 15 days prior to the filing of a VPG Straddle
Period Tax Return, VPG shall provide to VSH for its review and approval (which
shall not be unreasonably withheld, delayed or conditioned) written notice of
the Taxes allocable to VSH pursuant to this Section 3.1 and VSH shall promptly
reimburse VPG for such amounts to the extent the Income Taxes attributable to
the Pre-Closing Tax Periods constitute VSH Income Taxes.

     

              Section 3.2. Responsibility for Non-Income
Taxes. VPG and VSH will
each be responsible for one half of any Pre-Closing Non-Income Taxes that are
required to be paid after the Effective Time. 

     

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              Section 3.3. Responsibility for the Taxes that are Accrued.
VPG shall be liable for all Taxes that are accrued as a current liability (net
of any prepaid taxes) on the balance sheet of the VPG Entity at the Effective
Time. 

     

    ARTICLE IV 
REFUNDS AND OTHER MATTERS 

     

              Section 4.1. Refunds and Tax Benefits for
VSH. Except as otherwise
provided in Section 4.2, VSH shall be entitled to all refunds and
credits of any VSH Income Taxes, and one half of any refund or credit for any
Pre-Closing Non-Income Taxes, including any interest thereon, received by a VPG
Entity. VPG shall promptly pay or cause to be paid to VSH all such refunds
received by a VPG Entity. If in lieu of receiving any such refund a VPG Entity
reduces a Tax liability with respect to a Post-Closing Tax Period VPG shall
promptly pay or cause to be paid to VSH the amount of such reduction in Tax
liability when such reduction occurs. It is agreed that any amounts included as
prepaid taxes on the balance sheet of a VPG Entity on the Distribution Date,
whether separately stated or included in the accrual for current income taxes,
shall not constitute a tax refund or credit or benefit for purposes of this
Agreement. 

     

              Section 4.2. Carryforwards and
Carrybacks. To the extent
permitted by Applicable Law, VPG shall (or shall cause or permit the members of
the VPG Group to) elect to relinquish any carryback of a Tax Asset to any
Pre-Closing Tax Period. No Party shall be obligated to compensate any other
Party for the carryforward of Tax Assets from a Pre-Closing Tax Period to a
Post-Closing Tax Period or for the carryback of Tax Assets from a Post-Closing
Tax Period to a Pre-Closing Tax Period. For the avoidance of doubt, if a Tax
Asset arises in a Post-Closing Tax Period on a non-U.S separate company Tax
Return, and it is required by law that it be carried back to a Pre-Closing Tax
Period, such carryback will be permitted, and any resulting refund, credit or other benefit shall inure to VPG.


     

    ARTICLE V 
COVENANTS AND REPRESENTATIONS 

     

              Section 5.1. Representations of VSH. VSH represents that as of the date hereof,
and covenants that on the Distribution Date, it has no plan or intention to (i)
become a controlling shareholder or a ten-percent shareholder of VPG after the
Distribution Date within the meaning of Treasury Regulations Sections
1.355-7(d)(7) and (h) or (ii) take any action that would reasonably be expected
to prevent the Distribution from qualifying as a transaction described in
Section 355(a) of the Code, including any action inconsistent with the
information and representations furnished to the IRS in connection with the
request for a private letter ruling with respect to the Distributions or to Tax
counsel in connection with the preparation of the Tax Opinion. 

     

              Section 5.2. Representations of VPG. VPG and the other members of the VPG Group
represent that as of the date hereof, and covenants that on the Distribution
Date, it has no plan or intention to take any action that would reasonably be
expected to prevent the Distribution from qualifying as a transaction described
in Section 355(a) of the Code or the VPG Common Stock from being treated as
“qualified property” for purposes of Section 355(c)(2) or Section 361(c)(2) of
the Code, including any action inconsistent with the information and representations furnished to the IRS in
connection with the request for a private letter ruling with respect to the
Distributions or to Tax counsel in connection with the preparation of the Tax
Opinion. 

     

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              Section 5.3. Covenant of VSH. VSH covenants that during the two-year period
following the Distribution Date it will not take any action that could prevent
the Distribution from qualifying as a transaction described in Section 355(a) of
the Code. 

     

              Section
5.4. Covenants of VPG Relating to the
Distribution.


     

                   (a) VPG covenants and agrees that: (i) during the two-year period following
the Distribution Date, no member of the VPG Group conducting an active trade or
business relied upon in connection with the Distribution and Separation, which
members are Tedea-Huntleigh International Ltd. and Vishay PM Onboard Ltd., will
liquidate, merge or consolidate with any other Person except for the merger of
Tedea-Huntleigh International Ltd. with its two wholly owned subsidiaries in
which Tedea-Huntleigh International Ltd. is the surviving entity, (ii) during the
two-year period following the Distribution Date, no member of the VPG Group will
sell or otherwise dispose of any of its assets, except in the ordinary course of
business, (iii) during the two-year period following the Distribution Date, VPG
will continue (independently from VSH and with separate employees, officers and
directors from VSH) the active conduct of the historic businesses relied upon in
connection with the Distribution and Separation that were conducted by VPG
throughout the five-year period prior to the Distributions, (iv) it will not
take, nor will it permit any member of the VPG Group to take, any action
inconsistent with the information and representations furnished to the IRS in
connection with the request for a private letter ruling with respect to the
Distribution and Separation or to Tax counsel pursuant to Section 4.3 of the
Distribution Agreement, (v) during the two-year period following the
Distribution Date, it will not, and will not permit any member of the VPG Group,
to purchase VPG Capital Stock, (vi) during the two-year period following the
Distribution Date, it will not issue VPG Capital Stock to any Person, other than
pursuant to the exercise of employee, director or consultant stock options,
stock awards, stock purchase rights or other employment related arrangement
under any stock incentive plan in existence immediately after the Mergers,
provided in each case that such stock issuance meets the requirements for the
safe harbor contained in Treasury Regulations Section 1.355-7(d)(8), (vii) it
will not enter into any transaction or, to the extent it has the right to
prohibit any such transaction, permit such transaction to occur, or enter into
negotiations to enter into any transaction that may cause the Distribution or
any Separation Transaction to be treated as part of a plan or series of related
transactions pursuant to which one or more persons acquire directly or
indirectly VPG Capital Stock representing a “50-percent or greater interest”
within the meaning of Section 355(d)(4) of the Code, and (viii) it will not take
any other action that would reasonably be expected to prevent (i) the
Distribution from qualifying as a transaction described in Section 355(a) of the
Code or (ii) the VPG Common Stock from being treated as “qualified property” for
purposes of Section 355(c)(2) or Section 361(c)(2) of the Code. 

     

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                     (b) Notwithstanding the foregoing, a member of the VPG Group may take actions
inconsistent with the covenants contained in Section 5.04(a), if: 

       

    

              (i) VPG obtains a ruling from the IRS to the effect that such actions will
not result in the Distribution being taxable to VSH or their shareholders, or


     

              (ii) VPG obtains an opinion of counsel reasonably acceptable to VSH to the
same effect as Section 5.04(b)(i), provided that such opinion is reasonably
acceptable to VSH. 

     

              Section 5.5. Other Covenants of VPG. VPG covenants and agrees that (i) it will
not, and will not cause or permit any member of the VPG Group to (A) take any
action on the Distribution Date other than in the ordinary course of business or
(B) make or change any Tax election, take any Tax position on any Income Tax
Return, or take or omit to take any other action that results in any increased
Tax liability or reduction of any Tax Asset of the VSH or the VPG Entities in
respect of any Pre-Closing Tax Period or Post-Closing Tax Period. 

     

    ARTICLE VI 
INDEMNIFICATION


     

              Section 6.1. Indemnification of VSH by
VPG. VPG shall indemnify
the members of the VSH Group, and hold them harmless from and against any and
all damages, losses, liabilities and expenses (including reasonable expenses of
investigation and reasonable attorneys’ fees and expenses in connection with any
action, suit or proceeding) arising out of, without duplication: 

     

                   (a) Any Tax for which any member of the VPG Group is liable under this
Agreement; and 

     

                   (b) Any Tax attributable to a misrepresentation or a breach of any warranty,
covenant or obligation in this Agreement by any member of the VPG Group.


     

              Section 6.2. Indemnification of VPG by
VSH. VSH shall indemnify
the members of the VPG Group, and hold them harmless from and against any and
all damages, losses, liabilities and expenses (including reasonable expenses of
investigation and reasonable attorneys’ fees and expenses in connection with any
action, suit or proceeding) arising out of, without duplication: 

     

                   (a) Any Tax for which any member of the VSH Group is liable under this
Agreement; 

     

                   (b) any Tax attributable to a misrepresentation or a breach of any warranty,
covenant or obligation in this Agreement by any member of the VSH Group.


     

    ARTICLE VII 
PAYMENTS 

     

              Section 7.1. Payments under this
Agreement. Any payment
required to be made pursuant to this Agreement by one Party to another Party or
Person shall be made according to this Section 7.01. 

     

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                   (a) In General. All payments shall be made within the time
prescribed for payment in this Agreement, or if no period is prescribed, within
twenty days after delivery of written notice of the payment due and owing (and
to the extent applicable, approval of the amount of such payment), together with
a schedule calculating in reasonable detail the amounts that are due and owing.
Payments shall be deemed made when received. Any payment that is not made when
due shall bear Interest, provided, however, to the extent the amount due and owing is
Taxes, such amount shall not begin to accrue Interest pursuant to this Section
7.01(a) until the later of the time prescribed for payment pursuant to this
Agreement or the time such Taxes are actually paid by the indemnified Party.


     

                   (b) Treatment of Payments. 

     

              (i) Payments made pursuant to this Agreement by any member of the VPG Group
to or on behalf of any member of the VSH Group shall be treated for all Tax
purposes as distributions by VPG to VSH occurring immediately before the
Distribution, and none of the Parties shall take any position inconsistent with
such treatment, except to the extent that a Final Determination with respect to
the recipient Party causes any such payment to not be so treated. 

     

              (ii) Payments made pursuant to this Agreement by any member of the VSH Group
to or on behalf of any member of the VPG Group shall be treated for all Tax
purposes as a reduction in the distribution occurring before the Distribution,
or a contribution to VPG by VSH immediately prior to the Distribution and none
of the Parties shall take any position inconsistent with such treatment, except
to the extent that a Final Determination with respect to the recipient Party
causes any such payment to not be so treated. 

     

                   (c) Except as provided in Article 9 of this Agreement, in calculating amounts
payable to an indemnified Party, the amount of indemnification payable pursuant
to this Agreement shall be computed net of any Tax benefit actually realized by
the indemnified Party or any of its Affiliates that is related or attributable
to such indemnification. 

     

                   (d) If any amount paid by an indemnifying Party pursuant to this Agreement
results in any increase in Tax liability or any reduction of a Tax Asset of the
indemnified Party, the indemnifying Party shall indemnify the indemnified Party
and hold it harmless from any interest or penalty attributable to such increased
Tax liability or reduced Tax Asset and shall pay to the indemnified Party, in
addition to amounts otherwise owed, an additional amount necessary to reflect
the Tax consequences of the receipt or accrual of the relevant payment.


     

    ARTICLE VIII 
PROCEEDINGS


     

              Section 8.1. Notice. Within ten Business Days after a Party
receives a written notice or other information from a Taxing Authority of the
existence of a Tax issue relating to the application of Section 355(e) to the
Distributions, relating to the qualification of the Distribution as tax-free
transactions described in Section 355 of the Code or that may require
indemnification pursuant to this Agreement (a “Tax Claim”) such
Party shall notify the other Party to
this Agreement of such issue, and thereafter shall promptly forward to the other
Parties copies of notices and material communications with any Taxing Authority
relating to the Tax Claim. The failure of one Party to notify the other Party of
any Tax matter shall not relieve such other Party of any liability and/or
obligation which it may have under this Agreement with respect to such Tax
matter, except to the extent that the indemnifying Party’s rights under this
Agreement are materially prejudiced by such failure. 

     

    -10- 

     

    

    
    



              Section
8.2. Proceedings Generally.


     

                   (a) Proceedings Relating to Income Taxes for
Pre-Closing Tax
Periods. VSH, at its
expense, shall control the defense and settlement of any Proceeding relating to
Income Taxes attributable to a Pre-Closing Tax Period, provided however, that
VPG shall be entitled to participate in the defense of such Proceeding at its
own cost and expense, including the right to attend (or participate in), any
meetings (or material conference calls with respect to which VSH has reasonable
advance notice) with Taxing Authorities or before any judicial authorities in
connection with such Proceeding; VSH shall in good faith keep VPG informed of
all developments relating to such Proceeding on a timely basis, shall in good
faith afford VPG the opportunity to review any submissions related to such
Proceeding, shall provide VPG with final copies of any submissions, and, to the
extent such Proceeding could reasonably result in adverse tax consequences to
the VPG Group with respect to Post-Closing Tax Periods, shall not unreasonably
reject any suggestions made by VPG with respect to such Proceeding, and VSH
shall not settle or compromise such Proceeding without the consent of VPG, which
consent shall not be unreasonably withheld, delayed or conditioned. VPG will
fully cooperate and assist VSH in a Proceeding that VSH controls pursuant to
this Section 8.2(a), including making available personnel and books and records
as reasonably requested by VSH. The Parties shall in good faith cooperate with
each other in connection with such Proceeding and provide such information to
each other as may be necessary or useful with respect to such Proceeding in a
timely manner. 

     

                   (b) Proceedings Relating to Non-Income Taxes for
Pre-Closing Periods. VPG, at its expense, shall control the defense and settlement of
any Proceeding relating to any Pre-Closing Non-Income Taxes, provided, however,
that VSH shall be entitled to participate in the defense of such Proceeding at
its own cost and expense including the right to attend (or participate in), any
meetings (or material conference calls with respect to which VPG has reasonable
advance notice) with Taxing Authorities or before any judicial authorities in
connection with such Proceeding; VPG shall keep VSH informed of all developments
relating to such Proceeding on a timely basis, shall in good faith afford VSH
the opportunity to review any submissions related to such Proceeding, shall not
unreasonably reject any suggestions made by VSH with respect to such Proceeding,
and shall provide VSH with final copies of any submissions; and VPG shall not
settle or compromise such Proceeding without the consent of VSH , which consent
shall not be unreasonably withheld, delayed or conditioned. VSH will fully
cooperate and assist VPG in a Proceeding that VPG controls pursuant to this
Section 8.2(a), including making available personnel and books and records as
reasonably requested by VPG. The Parties shall in good faith cooperate with each
other in connection with such Proceeding and provide such information to each
other as may be necessary or useful with respect to such Proceeding in a timely
manner. 

     

    -11- 

     

    

    
    



                   (c) If, with respect to any Proceeding described in this Article 8 the Party
responsible for controlling the Proceeding (the “Defaulting Party”) fails to
diligently prosecute, manage and defend the Tax Claim by failing to respond in a
timely manner to inquires by a Taxing Authority, or failing to meet a material
filing deadline or by a similar action or inaction and either the other Party
(the “Defending Party”) could reasonably be subject to adverse tax
consequences if such Tax Claim is not prosecuted, the Defending Party shall
thereafter have the right (but not the obligation) to defend or prosecute, at
the sole cost, expense and risk of the Defaulting Party, such Tax Claim. The
Defending Party shall have full control of such defense or prosecution and such
Proceedings, including any settlement or compromise thereof. If requested by the
Defending Party, the Defaulting Party shall cooperate in good faith with the
Defending Party and its authorized representatives in order to contest
effectively such claim. In the case of any claim with respect to Taxes that is
defended or prosecuted by the Defending Party pursuant to this Section 8.2(c),
the Defending Party shall, from time to time, be entitled to current payment
from the Defaulting Party with respect to costs and expenses incurred by the
Defending Party in connection with such defense or prosecution (including,
without limitation, reasonable attorneys’, accountants’, and experts’ fees and
disbursements, settlement costs, court costs, and any other costs or expenses
for investigating, defending or prosecuting such claim, in each case on an after
tax basis. 

     

    ARTICLE IX 
SPECIFIC COVENANT WITH RESPECT TO ASSET SALE 

     

              Section 9.1. Transaction. It is expected that the sale of the VIL
Assets to VATL (the “VIL Asset Sale”)
will not create any cash tax liability for VIL in Israel in the tax year of the
sale because of the ability to offset the any gain on the transaction against
the existing net operating loss (“NOL”) in
VIL.

     

              Section 9.2. Filing of Tax Return. VSH will
actively pursue obtaining an opinion or other acceptable form of advice from its
Israeli tax advisors that confirms at a “more likely than note” or higher level
of comfort that the NOL may be used by VIL to offset any gain on the sale of the
VIL Assets (the “Advice”). Provided that VSH receives such Advice, VSH agrees
that the Tax Return for VIL that includes the VIL Asset Sale shall be prepared
and filed on the assumption that the NOL of VIL offsets the gain on the VIL
Asset Sale and VSH shall not and shall not permit any member of the VSH Group to
take a different position on any Tax Return or in any discussion, whether
written or oral, with any Tax Authorities. 

     

              Section 9.3. Impact of
Transaction. If a Final
Determination is reached that the NOL cannot be used to offset the gain, (as
opposed to a determination that the NOL is not sufficiently large to offset the
gain, or some other reason), then VATL shall make a payment to VSH as follows:


     

                   (a) To the extent VATL has been able to amortize or depreciate the VIL Assets
and realize a reduction in its tax, the aggregate amount of such reduction
actually realized by the time of the Final Determination shall be paid by VATL
to VSH within 15 days of the Final Determination. 

     

    -12- 

     

    

    
    



                   (b)
To the extent the VIL Assets at
the time of the Final Determination have not been fully amortized or depreciated
for tax purposes by VATL, and a deferred tax asset is recorded on the books of
VATL for the future tax benefit of the amortization or depreciation of the VIL
Assets and there is no valuation allowance or similar impairment taken against
the deferred tax asset, within 30 days after the Final Determination VATL shall
pay to VSH the net present value of the deferred tax benefit. The net present
value shall be determined using a discount rate equal to the rate of Interest in
effect on the date of the Final Determination.

     

                   (c)
In no event shall the amount
payable by VPG pursuant to this Section 9.3 exceed the Tax liability of VIL that
arises solely by virtue of the inability to apply its NOL to offset the gain
recognized on the VIL Asset Sale. 

     

              Section 9.4. Advice Not Received If the Israeli tax advisors are unable to
render the Advice, and because of that the VIL Tax Return does not offset the
gain on the sale of the VIL Assets with the NOL, VATL shall make a payment to
VSH as follows: 

     

                   (a)
If a deferred tax asset is
recorded on the books of VATL for the future tax benefit of the amortization or
depreciation of the VIL Assets and there is no valuation allowance or similar
impairment taken against the deferred tax asset, within 30 days after the VSH
pays the Taxes due on the VIL Asset Sale VATL shall pay to VSH the net present
value of the deferred tax benefit. The net present value shall be determined
using a discount rate equal to the rate of Interest in effect on the date of the
Final Determination.

     

                   (b)
In no event shall the amount
payable by VPG pursuant to this Section 9.4 exceed the Tax liability of VIL that
arises solely by virtue of the inability to apply its NOL to offset the gain
recognized on the VIL Asset Sale. 

     

              Section 9.5. Audit Management. Notwithstanding anything to the contrary in
the this Agreement, if VSH or a VSH Group member receives notice, whether
written or otherwise, that the Israeli tax authorities may challenge the ability
to offset the gain on the VIL asset sale with the NOL, VSH shall promptly notify
VPG. The control of such Proceedings and the settlement shall be handled as
provided in section 8.2(a) of this Agreement.

     

    ARTICLE X 
MISCELLANEOUS PROVISIONS 

     

              Section 10.1. Cooperation. The Parties shall each cooperate fully (and
each shall cause its respective Affiliates to cooperate fully) with all
reasonable requests from the other Parties, or from an agent, representative or
advisor to such Parties, including the delivery of information, documents access
to employees etc, in connection with the preparation and filing of Tax Returns,
claims for refund, Proceedings, and other matters, in each case, related to
Taxes covered by this Agreement, and with respect to the preparation by VPG of a
claim for an R&D credit (as provided by Section 41 of the Code) with respect
to the first or second Post-Closing Tax Period following the Distribution
Date.

     

    -13- 

     

    

    
    



    if to VSH, to:


     

    Vishay Intertechnology, Inc. 
63 Lancaster Avenue 
Malvern, PA
19355-2120 
Attention: Dr.
Lior E. Yahalomi, Chief Financial Officer 
Facsimile: 610.889.2161


     

    with a copy (which shall
not constitute notice) to: 

     

    Kramer Levin Naftalis & Frankel LLP 
1177 Avenue of the Americas

New York, NY 10036 
Attention: Abbe L. Dienstag, Esq. 
Facsimile:
212.715.8000 

     

    if to VPG, to:


     

    Vishay Precision Group, Inc. 
[Address] 
Attention: William M. Clancy, Chief Financial
Officer 
Telephone: [____________] 
Facsimile: [____________]


     

    with a copy (which shall
not constitute notice) to: 

     

    Pepper Hamilton LLP 
3000 Two Logan Square 
18th & Arch Streets 
Philadelphia,
PA 19103 
Attention: Barry M.
Abelson, Esq. 
Facsimile No.: 215.689.4803

     

              Section 10.2. Notices. All notices, requests and other
communications to any Party hereunder shall be in writing (including facsimile
transmission) and shall be given, or to such other address or facsimile number
as such Party may hereafter specify for the purpose by notice to the other
Parties hereto. All such notices, requests and other communications shall be
deemed received on the date of receipt by the recipient thereof if received
prior to 5:00 p.m. on a Business Day in the place of receipt. Otherwise, any
such notice, request or communication shall be deemed to have been received on
the next succeeding Business Day in the place of receipt. 

     

              Section
10.3. Changes in Law. 

     

                   (a) Any reference to a provision of the Code, Treasury Regulations, or a law of another jurisdiction
shall include a reference to any applicable successor provision or law.


     

                   (b) If, due to any change in Applicable Law or regulations or their
interpretation by any court of law or other governing body having jurisdiction
subsequent to the date hereof,
performance of any provision of this Agreement or any transaction contemplated
hereby shall become impracticable or impossible, the Parties hereto shall use
their commercially reasonable best efforts to find and employ an alternative
means to achieve the same or substantially the same result as that contemplated
by such provision. 

     

    -14- 

     

    

    
    



              Section
10.4. Binding Effect; Benefit;
Assignment. 

     

                   (a) The provisions of this Agreement shall be binding upon and inure to the
benefit of the Parties hereto and their respective successors and assigns. No
provision of this Agreement is intended to confer any rights, benefits,
remedies, obligations or liabilities hereunder upon any Person other than the
Parties hereto and their respective successors and assigns. 

     

                   (b) No Party may assign, delegate or otherwise transfer any of its rights or
obligations under this Agreement without the consent of each other Party hereto.


     

              Section 10.5. Authority. Each of the Parties hereto represents to
each of the other Parties that (a) it has the corporate power (corporate or
otherwise) and authority to execute, deliver and perform this Agreement, (b) the
execution, delivery and performance of this Agreement by it have been duly
authorized by all necessary corporate or other action, (c) it has duly and
validly executed and delivered this Agreement, and (d) this Agreement is a
legal, valid and binding obligation, enforceable against it in accordance with
its terms subject to applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting creditors’ rights generally and
general equity principles. 

     

              Section 10.6. Entire Agreement. This Agreement, the Distribution Agreement,
and the other Ancillary Agreements constitute the entire agreement between the
Parties with respect to the subject matter of this Agreement and supersede all
prior agreements and understandings, both oral and written, between the Parties
with respect to the subject matter of this Agreement. 

     

              Section 10.7. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York, without regard
to the conflicts of law rules of such state. 

     

              Section 10.8. Counterparts; Effectiveness. This Agreement may be signed in any number
of counterparts, each of which shall be an original, with the same effect as if
the signatures thereto and hereto were upon the same instrument. This Agreement
shall become effective when each Party hereto shall have received a counterpart
hereof signed by all of the other Parties hereto. Until and unless each Party
has received a counterpart hereof signed by the other Party hereto, this
Agreement shall have no effect and no Party shall have any right or obligation
hereunder (whether by virtue of any other oral or written agreement or other
communication). 

     

              Section 10.9. Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or
other Governmental Authority to be invalid, void or unenforceable, the remainder
of the terms, provisions, covenants and restrictions of this Agreement shall
remain in full force and effect and shall in no way be affected, impaired or invalidated so long as
the economic or legal substance of the transactions contemplated hereby is not
affected in any manner materially adverse to any Party. Upon such a
determination, the Parties shall negotiate in good faith to modify this
Agreement so as to affect the original intent of the Parties as closely as
possible in an acceptable manner in order that the transactions contemplated
hereby are consummated as originally contemplated to the fullest extent
possible. 

     

    -15- 

     

    

    
    



              Section
10.10. Waiver and Amendment. 

     

                   (a) Any provision of this Agreement may be amended or waived prior to the
Effective Time if, but only if, such amendment or waiver is in writing and is
signed, in the case of an amendment, by each Party to this Agreement or, in the
case of a waiver, by each Party against whom the waiver is to be effective.


     

                   (b) No failure or delay by any Party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies herein
provided shall be cumulative and not exclusive of any rights or remedies
provided by Applicable Law. 

     

              Section
10.11. Interpretation. 

     

                   (a) When a reference is made in this Agreement to an Article or Section, such
reference shall be to an Article or Section of or to this Agreement unless
otherwise indicated. 

     

                   (b) Whenever the words “include,” “includes” or “including” are used in this
Agreement, they shall be deemed to be followed by the words “without
limitation.” 

     

                   (c) Unless the context requires otherwise, the terms “hereof,” “herein,”
“hereby,” “hereto” and derivative or similar words in this Agreement refer to
this entire Agreement. 

     

                   (d) Unless the context requires otherwise, words in this Agreement using the
singular or plural number also include the plural or singular, respectively, and
the use of any gender herein shall be deemed to include the other gender.


     

                   (e) Except as otherwise specifically provided herein, where any action is
required to be taken on a particular day and such day is not a Business Day and,
as a result, such action cannot be taken on such day, then this Agreement shall
be deemed to provide that such action shall be taken on the first Business Day
after such day. 

     

                   (f) This Agreement was prepared jointly by the Parties and no rule that it be
construed against the drafter will have any application in its construction or
interpretation. 

     

    -16- 

     

    

    
    



              Section 10.12. Headings. The headings contained in this Agreement are
inserted for convenience only and shall not be considered in interpreting or
construing any of the provisions contained in this Agreement. 

     

              Section 10.13. Exclusivity. Except as otherwise explicitly provided in
the Distribution Agreement, all matters related to Taxes or Tax Returns of the
Parties shall be governed by this Agreement. In the event of a conflict, this
Agreement shall govern and control. Notwithstanding any other provision of this
Agreement, in no event shall any Party or any other Person be liable for any
Taxes, expenses or any other losses or damages of any kind pursuant to this
Agreement or otherwise except as expressly set forth herein or in the
Distribution Agreement. 

     

              Section 10.14. Dispute Resolution. Any disputes arising under this Agreement
shall be resolved by applying Sections 8.2 and 8.3 of the Distribution
Agreement, provided however, that to the extent the dispute is to an amount of
Tax, or an amount or allocation of a Tax Asset, the mediator referenced in
Section 8.2(d) shall, to the extent possible, be a person with a national
reputation as an expert in U.S. federal income tax. 

     

              Section 10.15. Survival. The covenants and agreements of the Parties
hereunder (including indemnification of the Parties) shall survive until 90 days
following the expiration of the applicable statute of limitations (taking into
account all extensions thereof), if any, of the claim that gave rise to the
indemnification. Notwithstanding the foregoing, in the event of notice for
indemnification has been given within the applicable survival period, such
indemnification shall survive until such time as such claim is finally
resolved.

     

    -17- 

     

    

    
    



         IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written. 

     

    
      	
            	VISHAY INTERTECHNOLOGY, INC.  
	
            	 
	
            	 
	
            	Name:  
	
            	Title:  
	
            	
 
	
            	VISHAY PRECISION GROUP, INC.  
	
            	
 
	
            	Name:  
	
            	Title: