UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
FORM 10-K
 
x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2010
or
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _______ to _______
 
Commission file number 1-34679
 
Vishay Precision Group, Inc.
(Exact name of registrant as specified in its charter)
 
Delaware 27-0986328
(State or other jurisdiction of (IRS employer identification no.)
incorporation or organization)  

3 Great Valley Parkway, Suite 150
Malvern, PA 19355
(Address of principal executive offices)
 
484-321-5300
(Registrant’s telephone number, including area code)
 
Securities registered pursuant to Section 12(b) of the Act:
Common Stock, $0.10 par value New York Stock Exchange
(Title of class) (Exchange on which registered)

Securities registered pursuant to Section 12(g) of the Act: None
 
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No x
 
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes  o No x
Note – Checking the box above will not relieve any registrant required to file reports under Section 13 or 15(d) of the Exchange Act from their obligations under those Sections.
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o
 
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (Section 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “accelerated filer”, “large accelerated filer”, and “smaller reporting company” in Rule 12b-2 of the Act. (Check one):
Large accelerated filer o Non-accelerated filer x
Accelerated filer o Smaller reporting company o

Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No x
 
As of March 24, 2011, registrant had 12,306,808 shares of its Class A common stock and 1,025,176 shares of its Class B common stock outstanding. As of July 3, 2010 (the last day of our most recently completed second quarter), all shares of our voting stock were held by Vishay Intertechnology, Inc. Our spin-off from Vishay Intertechnology, Inc., pursuant to which shares of our voting stock were distributed to holders of voting stock of Vishay Intertechnology, Inc., was completed on July 6, 2010.
 
DOCUMENTS INCORPORATED BY REFERENCE
 
Portions of the registrant’s definitive proxy statement, which will be filed within 120 days of December 31, 2010, are incorporated by reference into Part III of this Annual Report on Form 10-K.
 
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Vishay Precision Group, Inc.
Form 10-K for the year ended December 31, 2010
 
CONTENTS  
   
PART I  
Item 1. Business 3
Item 1A. Risk Factors 13
Item 1B. Unresolved Staff Comments 27
   
Item 2. Properties 28
Item 3. Legal Proceedings 28
Item 4. (Removed and Reserved) 29
   
PART II  
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities 30
Item 6. Selected Financial Data 32
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 35
Item 7A. Quantitative and Qualitative Disclosures About Market Risk 54
Item 8. Financial Statements and Supplementary Data 56
Item 9. Changes In and Disagreements With Accountants on Accounting and Financial Disclosure. 56
Item 9A. Controls and Procedures 56
Item 9B. Other Information 56
   
PART III  
Item 10. Directors, Executive Officers, and Corporate Governance 57
Item 11. Executive Compensation 57
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 57
Item 13. Certain Relationships and Related Transactions, and Director Independence 57
Item 14. Principal Accounting Fees and Services 57
   
PART IV  
Item 15. Exhibits, Financial Statement Schedules 58
   
SIGNATURES 61
   
Consolidated Financial Statements  
Report of Independent Registered Public Accounting Firm F-2
Combined and Consolidated Balance Sheets as of December 31, 2010 and 2009 F-3
Combined and Consolidated Statements of Operations for the years ended December 31, 2010, 2009, 2008 F-5
Combined and Consolidated Statements of Cash Flows for the years ended December 31, 2010, 2009, 2008 F-6
Combined and Consolidated Statements of Equity for the years ended December 31, 2010, 2009, 2008 F-7
Notes to Combined and Consolidated Financial Statements F-9

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PART I
 
Item 1. BUSINESS DESCRIPTION
 
General
 
Vishay Precision Group, Inc. (“VPG”, the “Company”, “we”, “us” or “our”) is an internationally recognized designer, manufacturer and marketer of sensors based on resistive foil technology and sensor-based systems specializing in the growing markets of stress, force, weight, and pressure measurements. We provide vertically integrated products and solutions that are primarily based upon our proprietary foil technology. These products are marketed under a variety of brand names that we believe are characterized as having a very high level of precision and quality. Our global operations enable us to produce a wide variety of products in strategically effective geographical locations that also optimize our resources for specific technologies, sensors, assemblies and systems. We operate in two segments: the Foil Technology Products segment; and the Weighing Modules and Control Systems segment. The Foil Technology Products segment is comprised of ultra-high precision foil resistors and foil strain gages. This segment’s products are sold to third-party customers and are utilized in the manufacture of the vertically integrated modules and systems that comprise our Weighing Modules and Control Systems segment.
 
Our products are sense elements, components, and transducers that convert mechanical inputs into an electronic signal for display, processing, interpretation, or control by our instrumentation and systems products. Precision sensors are essential to the accurate measurement, resolution and display of force, weight, pressure, tilt, motion, or acceleration, especially in the legal-for-trade, commercial, and industrial marketplace in a wide variety of applications. Our products are not typically used in the consumer market.
 
The precision sensor market is being influenced by the significant increase in intelligent products across virtually all end markets, including medical, agricultural, transportation, industrial, avionics, military, and space applications. We believe that as original equipment manufacturers (“OEMs”) strive to make products “smarter”, they are generally integrating more sensors to link the mechanical/physical world with digital control and/or response.
 
As a spin-off from Vishay Intertechnology, Inc. (“Vishay Intertechnology”), the Company has a decades-long track record of innovation in foil precision resistors, current sensors, and strain gages, which has served as a foundation for its more recent expansion into strain gage instrumentation, load cells and transducers, weighing modules, and complete systems for process control and on-board weighing.
 
Our History
 
In the 1950’s, Dr. Felix Zandman was issued patents for PhotoStress® coatings and instruments, used to reveal and measure the distribution of stresses in structures such as airplanes and cars under live load conditions. His research in this area led him to develop Bulk Metal® foil resistors and resistive current sensors with performance beyond any other resistor available in the global market.
 
Resistors are basic components used in all forms of electronic circuitry to adjust and regulate levels of voltage and current. They vary widely in precision and cost, and are manufactured from numerous materials and in many forms. Foil resistors are the most precise and stable type of resistors available.
 
In 1962, Dr. Zandman, with the financial help of the late Alfred P. Slaner, founded Vishay Intertechnology to develop and manufacture Bulk Metal® foil resistors. Concurrently, J.E. Starr, a colleague of Dr. Zandman, started to produce foil resistance strain gages, which also became part of Vishay Intertechnology. A strain gage is a special type of resistive sensor for measurement of weights and other types of stress.
 
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Throughout the 1960’s and 1970’s, Vishay Intertechnology established itself as a technical and market leader in ultra-precision foil resistors, resistor current sensors, PhotoStress® products, and resistance strain gages. These innovations were the genesis of the foil technology business that is the foundation of the Company. The subsequent advancement of foil resistance and strain gage technology opened the door to numerous commercial applications such as for weighing modules and control systems on a vertical market basis.
 
In the decade prior to our spin-off, Vishay Intertechnology expanded our measurements business through acquisitions, moving the business from its initial focus on precision foil resistors and foil strain gages to include transducers/load cells—a combination of strain gages and the metallic structures to which they are bonded; load cell modules that include electronic instrumentation and software for measuring the load cell output; measurement instrumentation; and complete systems for process control and on-board weighing.
 
On October 27, 2009, Vishay Intertechnology announced its intention to spin-off its precision measurement and foil resistor businesses into an independent, publicly traded company to be named Vishay Precision Group, Inc. On July 6, 2010, Vishay Intertechnology completed the spin-off through a tax-free stock dividend to Vishay Intertechnology’s stockholders and we became a publicly traded company. We are an established multi-national company that excels in sensors based on resistive foil technology and sensor-based systems specializing in the growing markets of stress, force, weight and pressure measurements.
 
To date, our growth and acquisition strategy largely focuses on vertical product integration, using our foil resistance strain gages in our load cell products and incorporating our load cells and electronic measurement instrumentation (containing foil resistors) and software into our modules and measurement systems. Current sensing foil resistor products are also part of certain control systems that we manufacture. Many of our acquisitions over the years have been directed towards furthering our vertical integration strategy, and we expect to continue to focus our acquisition strategy in this direction.
 
The following describes some of our acquisitions since 2002 when we were a part of Vishay Intertechnology:
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We also have manufacturing facilities in Wendell, North Carolina; Be’er Sheva, Israel; and Holon, Israel.
 
We were incorporated in Delaware on August 28, 2009. Our principal executive offices are located at 3 Great Valley Parkway, Suite 150, Malvern, PA 19355. Our main telephone number is 484-321-5300.
 
Key Business Strategies
 
Our strategy is to develop, manufacture, and sell sensors based on resistive foil technology and sensor-based systems specializing in the growing markets of stress, force, weight and pressure measurements. Specifically, we focus on the following strategic initiatives:
 
Vertical Integration
 
The Company utilizes a strategy of vertical product integration, growing from a manufacturer of strain gages to a producer of load cells that incorporate these strain gages, to a designer of sophisticated weighing and process control modules combining load cells with software and electronics, to a provider of complete systems that integrate load cells and load cell modules with comprehensive, real-time measurement, tracking and reporting capabilities. We are targeting the market for digital custom load cells/transducers and turnkey weighing and force measurement systems as a primary driver of our future growth.
 
Enhance Cost Structure
 
We seek to achieve significant production cost savings through the transfer and expansion of manufacturing operations to countries such as Costa Rica, India, Israel, the People’s Republic of China, and the Republic of China (Taiwan), where we can benefit from lower labor costs or available tax and other government-sponsored incentives.
 
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Invest in Innovation to Drive Growth
 
Our product portfolio is focused, to a significant extent, on specialty products that require us to form long-term relationships with our customers. We expect to continue to use our research and development, engineering, and product marketing resources to introduce new and innovative products. Our ability to react to changing customer needs and industry trends will continue to be key to our success. Our design, research, and product development teams, in partnership with our marketing teams, drive our efforts to bring innovations to market. We intend to leverage our insights into customer demand to continually develop and roll out new innovative products within our existing lines and to modify our existing core products in ways that make them more appealing, addressing changing customer needs and industry trends.
 
Acquisitions
 
We expect to make strategic acquisitions, particularly where opportunities present themselves to grow our weighing modules and control systems segment. Upon completion of acquisitions, we will seek to reduce selling, general, and administrative expenses through the integration or elimination of redundant sales offices and administrative functions at acquired companies. In addition, we believe acquired businesses will benefit from our current global manufacturing operations and distribution channels.
 
Products
 
Our foil resistors and sensors are based on our proprietary technology which we invented. We manufacture and sell ultra high precision foil resistors, foil strain gages and strain gage instruments containing foil resistors. Through our vertical integration strategy, we have added products such as load cell and transducer modules and complete systems for process control and on-board weighing applications.
 
Our product portfolio includes:
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Product Segments
 
Our products are primarily based on resistive foil technology which was originated and developed by our business while we were part of Vishay Intertechnology. This technology continues to evolve for different applications used in many markets.
 
Our products can be divided into two general classes: Foil Technology Products; and Weighing Modules and Control Systems. Foil Technology Products include our foil strain gages and ultra-precision foil resistors. Weighing Modules and Control Systems segment products include transducers/load cells, instruments, and control systems. These broad categories are also the basis used to determine our reporting segments for financial reporting purposes. See Note 15 to our combined and consolidated financial statements for additional information on revenues, income, and total assets by segment and by region.
 
Qualifications and Specifications
 
Certain of our products must be qualified or approved under various military and aerospace specifications and other standards.
 
We have qualified certain of our foil resistor and sensor products under various military specifications approved and monitored by the United States Defense Electronic Supply Center (“DESC”), and under certain European military specifications, and various aerospace standards approved by the U.S. National Aeronautics and Space Administration (“NASA”) and the European Space Agency (“ESA”).
 
Certain of our load cell products are approved by the National Type Evaluation Program (“NTEP”) and International Organization of Legal Metrology (“OIML”). Our on-board weighing systems must meet approved standards to make them legal-for-trade.
 
Qualification and specification levels are based in part upon the rate of failure of products. We must continuously perform tests on our products, and for products that are qualified, the results of these tests must be reported to the qualifying organization. If a product fails to meet the requirements for the applicable classification level, the product’s classification may be suspended or reduced to a lower level. During the time that the classification is suspended or reduced to a lower level, net revenues and earnings attributable to that product may be adversely affected.
 
Manufacturing Operations
 
Our principal manufacturing facilities are located in Israel, the United States (North Carolina), the People’s Republic of China, Japan, Costa Rica, and India. We also have manufacturing facilities in Germany, Sweden, the United Kingdom, the Republic of China (Taiwan), and France. Over the past several years, we have invested substantial resources to increase capacity and to maximize automation in our plants, which we believe will further reduce production costs.
 
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We are aggressively undertaking steps to have the quality systems at most of our major manufacturing facilities approved under the ISO 9001 international quality control standard and several have already received such approval. ISO 9001 is a comprehensive set of quality program standards developed by the International Standards Organization.
 
To maintain our cost competitiveness, we are pursuing a strategy to shift manufacturing emphasis to more advanced automation in higher-labor-cost regions and to relocate production to regions with skilled workforces and relatively lower labor costs. See Note 6 to our combined and consolidated financial statements for further information related to our restructuring efforts, as well as additional information in Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Cost Management.”
 
Sources of Supplies
 
Although most materials incorporated in our products are available from a number of sources, certain materials are available only from a relatively limited number of suppliers. The principal materials used in our products include metallic foil, aluminum, stainless steel, tool steel, plastics, and for a few products, gold. Some of the most highly specialized materials for our sensors are sourced from a single vendor. We maintain a safety stock inventory of certain critical materials at our facilities.
 
Due to our vertical product integration strategy, our Weighing Modules and Control Systems segment products are based principally on strain gages produced by us.
 
Israeli Government Incentives
 
We have substantial manufacturing operations in Israel, where we benefit from the government’s tax incentive and employment programs. These benefits take the form of reduced tax rates that are lower than those in the United States and government grants.
 
Inventory and Backlog
 
We manufacture both standardized products and those designed and produced to meet customer specifications. We maintain an inventory of standardized components, and monitor the backlog of outstanding orders for our products.
 
We include in our backlog only open orders that have been released by the customer for shipment in the next twelve months. Many of our customers for strain gages, load cells, and foil resistors encounter uncertain and changing demand for their products. They typically order products from us based on their forecasts. If demand falls below customers’ forecasts, or if customers do not control their inventory effectively, they may cancel or reschedule the shipments that are included in our backlog, in many instances without the payment of any penalty. Therefore, the backlog at any point in time is not necessarily indicative of the results to be expected for future periods.
 
Customers and Marketing
 
Our customer base is diversified in terms of industry, geographic region, and range of product needs. No single customer accounts for more than 5% of our net revenues. The vast majority of our products are used in the broad industrial market, with selected uses in military/aerospace, medical, agricultural, construction, and to a much lesser extent, consumer products. Within the broad industrial market, our products serve a wide variety of applications in waste management, bulk hauling, logging, scales manufacturing, engineering systems, pharmaceutical, oil, chemical, steel, paper, and food industries.
 
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Our sales are global, with approximately 37% of our net revenues attributable to customers in the Americas, approximately 44% of our revenues attributable to customers in Europe, and approximately 19% of our revenues attributable to customers in Asia. We also sell through a variety of sales channels, including OEMs, electronic manufacturing services companies (“EMS”) (which manufacture for OEMs on an outsourcing basis), independent distributors, and for our weighing modules and control systems products, end-use customers.
 
For our Foil Technology Products segment products, during 2010, approximately 61% of our sales were to OEMs, approximately 8% of our sales were to EMS companies, and approximately 31% of our sales were through distributors. For our Weighing Modules and Control Systems segment products, during 2010, approximately 57% of our sales were to OEMs, approximately 23% of our sales were through distributors, and approximately 20% of our sales were to end-users.
 
Many of our products have historically been sold by dedicated sales forces consisting mainly of field application engineers (“FAEs”) focusing on specific market segments or specific customers. The FAEs can help meet the needs of our customers for technical and applications support. Their in-depth knowledge of customer needs is a key factor in future research and development initiatives.
 
Competition
 
Competition in the markets where we sell the bulk of our products is extremely fragmented, both geographically and by application. As a result, we face numerous regional and niche product competitors, many of which are well established in their markets. To our knowledge, there are no competitors with the same product mix as us. Our direct competitors in the Foil Technology Product segment (competing head-to-head with similar products) normally compete on a single product line and are smaller and may have less financial resources than us. In our Weighing Modules and Control Systems segment, competitors (competing with alternative conventional products) range from very small, local companies to large, international companies with greater financial resources than us.
 
Our sensors and our foil resistors, where we maintain a leading market share, are based on our proprietary technology. Competitors often compete in this area with functionally equivalent but alternative products.
 
Our competitive position depends on our ability to maintain a competitive advantage on the basis of product quality, know-how, proprietary data, market knowledge, service capability, business reputation, superior product specification, and price competitiveness. Our sales and marketing programs aim to offer our customers a broad range of world-class technologies, superior global sales and support.
 
Research and Development
 
Many of our products and manufacturing techniques, technologies, and packaging methods have been invented, designed, and developed by our engineers and scientists. Special proprietary resistive metallic foil is the most important material in both our foil resistors and our foil resistance strain gages, and our research and development activities related to foil materials is an important linkage between these two products. We maintain strategically placed design centers where proximity to customers enables us to more easily gauge and satisfy the needs of local markets. These design centers are located in Israel, the United States, Sweden, Japan, the United Kingdom, India, the People’s Republic of China, the Republic of China (Taiwan), and France.
 
We also maintain research and development staff and promote programs at a number of our production facilities to develop new products and new applications of existing products, and to improve manufacturing techniques. This decentralized system encourages individualized product development at specific manufacturing facilities that occasionally has applications at other facilities.
 
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Our research and development staff and our sales force are linked. Our sales force is comprised of individuals with an engineering background who can help meet the needs of our customers for technical and applications support. This in-depth knowledge of customer needs is a key factor in future research and development initiatives.
 
Research and development will continue to play a key role in our efforts to introduce innovative products for new sales and to improve profitability. We expect to continue to expand our position as a leading supplier of resistive foil technology and sensor-based systems. We believe our R&D efforts should provide us with a variety of opportunities to leverage technology, products, and our manufacturing base and, ultimately, our financial performance. To that end, we expect to increase our R&D expenditures in order to fill the product development pipeline and lay the foundation for future sales growth.
 
Patents and Licenses
 
We have made a significant investment in securing intellectual property protection for our technology and products. We seek to protect our technology by, among other things, filing patent applications for technology considered important to the development of our business. Although we have numerous United States and foreign patents covering certain of our products and manufacturing processes, no particular patent is considered individually material to our business. We also rely upon trade secrets, unpatented know-how, and continuing technological innovation.
 
Our ability to compete effectively with other companies depends, in part, on our ability to maintain the proprietary nature of our technology. Although we have been awarded, have filed applications for, or have obtained numerous patents in the United States and other countries, there can be no assurance concerning the degree of protection afforded by these patents or the likelihood that pending patents will be issued.
 
We require all of our technical, research and development, sales and marketing, and management employees and most consultants and other advisors to execute confidentiality agreements upon the commencement of employment or consulting relationships with us. These agreements provide that all confidential information developed or made known to the entity or individual during the course of the entity’s or individual’s relationship with us is to be kept confidential and not disclosed to third parties except in specific circumstances. Substantially all of our technical, research and development, sales and marketing, and management employees have entered into agreements providing for the assignment to us of rights to inventions made by them while employed by us.
 
We have observed that in the current business environment, companies have become more aggressive in asserting and defending patent claims against competitors. We will continue to defend our intellectual property rights, and we may become party to disputes regarding patent licensing. An unfavorable outcome regarding one of these intellectual property matters could have a material adverse effect on our business and operating results.
 
Environmental, Health and Safety
 
We have an Environmental, Health and Safety Policy that commits us to achieve and maintain compliance with applicable environmental laws, to promote proper management of hazardous materials for the safety of our employees and the protection of the environment, and to minimize the hazardous materials generated in the course of our operations. This policy includes accountability to the board of directors. In addition, our manufacturing operations are subject to various federal, state, and local laws restricting discharge of materials into the environment.
 
Under the terms of our master separation agreement with Vishay Intertechnology, both we and Vishay Intertechnology have agreed to indemnify the other in respect of liabilities relating to its business, including environmental liability.
 
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We are not involved in any pending or threatened proceedings that would require curtailment of our operations. We continually expend funds to ensure that our facilities comply with applicable environmental regulations. While we believe that we are in compliance with applicable environmental laws, we cannot accurately predict future developments and do not necessarily have knowledge of all past occurrences on sites that we currently occupy. More stringent environmental regulations may be enacted in the future, and we cannot determine the modifications, if any, in our operations that any such future regulations might require, or the cost of compliance with such regulations. Moreover, the risk of environmental liability and remediation costs is inherent in the nature of our business and, therefore, there can be no assurance that material environmental costs, including remediation costs, will not arise in the future.
 
Employees
 
As of December 31, 2010, we employed approximately 2,300 full-time employees, of whom approximately 86% were located outside the United States. As a part of the spin-off, certain employees of Vishay Intertechnology who have been instrumental in the growth and development of our business have transferred to our company. Our future success is substantially dependent on our ability to attract and retain highly qualified technical and administrative personnel. Some of our employees outside the United States are members of trade unions. Our relationship with our employees is generally good. However, no assurance can be given that labor unrest or strikes will not occur.
 
Company Information and Website
 
We began filing annual, quarterly, and current reports, proxy statements, and other documents with the Securities and Exchange Commission (“SEC”) under the Securities Exchange Act of 1934 after our spin-off from Vishay Intertechnology on July 6, 2010. The public may read and copy any materials that we file with the SEC at the SEC’s Public Reference Room at Station Place, 100 F Street, NE, Washington, DC 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. Also, the SEC maintains an Internet website that contains reports, proxy and information statements, and other information regarding issuers, including us, that file electronically with the SEC. The public can obtain any documents that we file with the SEC at http://www.sec.gov.
 
In addition, our company website can be found on the Internet at www.vishaypg.com. The website contains information about us and our operations. Copies of each of our filings with the SEC on Form 10, Form 10-Q, and Form 8-K, and all amendments to those reports, can be viewed and downloaded free of charge as soon as reasonably practicable after the reports and amendments are electronically filed with or furnished to the SEC. To view the reports, access http://ir.vishaypg.com and click on “SEC Filings.”
 
The following corporate governance related documents are also available on our website:
To view these documents, access http://ir.vishaypg.com and click on “Corporate Governance.”
 
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Any of the above documents can also be obtained in print by any stockholder upon request to our Investor Relations Department at the following address:
 
      Corporate Investor Relations
  Vishay Precision Group, Inc.
  3 Great Valley Parkway, Suite 150
  Malvern, PA 19355

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Item 1A. RISK FACTORS
 
You should carefully consider the following risks and other information in this Form 10-K in evaluating our company and common stock. Any of the following risks, as well as additional risks and uncertainties not currently known to us or that we currently deem immaterial, could materially and adversely affect our business, results of operations or financial condition and could also adversely affect the trading price of our common stock.
 
Risks Related to Our Business
 
We face intense competition in our business.
 
We face various degrees and types of competition in our different businesses directly and, because we are vertically integrated, in certain instances these may each pose a threat to our business as a whole.
 
We have a significant market position in foil resistance strain gages and foil resistors. Foil resistance strain gages and foil resistors are also produced by competitors, principally located in China. We believe that our foil technology products provide superior performance relative to our competitors, but that could change if our competitors succeed in developing and introducing innovative competitive offerings. Also, our foil resistance strain gages compete with other types of strain gages, such as semiconductor strain gages, which we do not manufacture. We believe that other types of strain gages are not as reliable or stable as our foil resistance strain gages, but that could change as the technology for these other products continues to evolve. The ability of these competitors to improve the competitiveness or pricing of their products relative to our offering could adversely affect us.
 
The market for transducers/load cells products is highly fragmented and very competitive. Our load cell modules and systems face competition from numerous other system manufacturers. Competition for modules and systems is most often based on customer relationships, product reliability, technical performance, and the ability to anticipate and satisfy customer needs for specific design configurations. Many other manufacturers have more experience in particular geographic markets and specific applications than we do, and may be better positioned to compete in these areas. We cannot assure you that we will be able to successfully grow our business in the face of these competitive challenges.
 
Our strategy of vertical product integration exposes us to certain risks.
 
Our growth and acquisition strategy largely focuses on vertical product integration. For example, we use our strain gages in our transducer/load cell products and incorporate our load cells and our electronic measurement instrumentation and software into our systems. Our transducer/load cell business is our second largest customer for our strain gages. Our systems business is primarily using our transducer/load cells, although we also sell our transducer/load cells to third-party customers. Many of the acquisitions which form the core operations of our business in recent years have been directed towards furthering our vertical integration strategy, and we expect to continue to focus our acquisition strategy in this direction.
 
While we believe this has been and will continue to be a sound business strategy, vertical product integration and the resulting interdependencies of our divisions exposes us to certain risks. As a consequence of our vertical integration, we compete with certain of our customers and potential customers for strain gages and load cells, who, for that reason, may elect not to do business with us. Also, acquisitions that we pursue for purposes of promoting vertical integration may fail to be successfully combined with our existing businesses or may otherwise not succeed as we anticipate. Any of these outcomes could materially and adversely affect our company.
 
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In the past we have grown through successful integration of acquired businesses, but this may not continue.
 
Our long-term historical growth in revenues and net earnings has resulted in large part from our strategy of expansion through acquisitions. We cannot assure that we will identify, have the financial capabilities to acquire, or successfully complete transactions with suitable acquisition candidates in the future. We also cannot assure that acquisitions that we will complete in the future will be successful.
 
Such acquisitions or investments involve a number of risks, including the risks in assimilating the operations and personnel of acquired companies, realizing the value of the acquired assets relative to the price paid, distraction of management from our ongoing businesses and potential product disruptions associated with the sale of the acquired companies’ products. These factors could have a material adverse effect on our business, financial condition and operating results.
 
Future acquisitions could require us to incur or issue additional indebtedness or issue additional equity.
 
If we were to undertake a substantial acquisition for cash, the acquisition would likely need to be financed in part through bank borrowings or the issuance of public or private debt. This acquisition financing would likely decrease our ratio of earnings to fixed charges and adversely affect other credit metrics. Our revolving credit facility requires us to obtain the lenders’ consent for certain additional debt financing and to comply with other covenants including the application of specific financial ratios. We cannot assure that the necessary acquisition financing would be available to us on acceptable terms if and when required. If we were to make an acquisition with equity, the acquisition may have a dilutive effect on the interests of the holders of our common stock.
 
We might require additional capital to support business growth, and this capital might not be available.
 
We intend to continue to make investments to support our business growth and may require additional funds to respond to business challenges or opportunities, including the need to develop new offerings or enhance our existing offerings, enhance our operating infrastructure or acquire complementary businesses and technologies. Accordingly, we may need to engage in equity or debt financings to secure additional funds. If we raise additional funds through further issuances of equity or convertible debt securities, our existing stockholders could suffer significant dilution, and any new equity securities we issue could have rights, preferences and privileges superior to those of holders of our common stock. Any debt financing secured by us in the future could involve restrictive covenants relating to our capital raising activities and other financial and operational matters, which may make it more difficult for us to obtain additional capital and to pursue business opportunities, including potential acquisitions.
 
In addition, we may not be able to obtain additional financing on terms favorable to us, if at all. If we are unable to obtain adequate financing or financing on terms satisfactory to us, when we require it, our ability to continue to support our business growth and to respond to business challenges could be significantly limited.
 
To remain successful, we must continue to innovate, and our investments in new technologies may not prove successful.
 
Our future operating results depend on our ability to continually develop, introduce and market new and innovative products, to modify existing products, to respond to technological change, and to customize certain products to meet customer requirements. There are numerous risks inherent in this process, including the risks that we will be unable to anticipate the direction of technological change or that we will be unable to develop and market new products and applications in a timely fashion to satisfy customer demands. If this occurs, we could lose customers and experience adverse effects on our financial condition and results of operations.
 
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Our success is dependent upon our ability to protect our proprietary technology and other intellectual property.
 
We rely on a combination of the protections provided by applicable patent, trademark, copyright and trade secret laws, as well as on confidentiality procedures and other contractual arrangements, to establish and protect our rights in our technology and related materials and information. We enter into agreements with our customers and distributors. These agreements contain confidentiality and non-disclosure provisions, a limited warranty covering our products and indemnification for the customer from infringement actions related to our products.
 
Despite our efforts, it may be possible for others to copy portions of our products, reverse engineer them or obtain and use information that we regard as proprietary, all of which could adversely affect our competitive position. Furthermore, there can be no assurance that our competitors will not independently develop technology similar to ours. The laws of certain countries in which we manufacture do not protect our intellectual property rights to the same extent as the laws of the United States. In the Office of the United States Trade Representative (“USTR”) annual "Special 301" Report released on April 30, 2010, the adequacy and effectiveness of intellectual property protection in a number of foreign countries were analyzed.
 
A number of countries in which we manufacture are identified in the report as being on the Priority Watch List. Those countries where particular concern is expressed include China, where the USTR find China's intellectual property enforcement to be largely ineffective and a non-deterrent, India, where the expressed concern was India's inadequate legal framework and ineffective enforcement, and Russia which has failed to fully implement bilateral intellectual property agreements. Costa Rica, Mexico, Argentina and the Philippines were also identified because of problems in intellectual property enforcement. Indonesia was another country identified because of the overall deterioration of its intellectual property protection enforcement climate and an unreliable judicial system for intellectual property cases. In addition, Malaysia, Vietnam, and Thailand were identified as countries where piracy and counterfeiting remain widespread. The absence of harmonized intellectual property protection laws and effective enforcement makes it difficult to ensure consistent respect for patent and other intellectual property rights on a worldwide basis. As a result, it is possible for third parties to use our proprietary technology in certain countries without us having the ability to enforce our rights in those countries.
 
The success of our business is highly dependent on maintenance of intellectual property rights.
 
The unauthorized use of our intellectual property rights may increase the cost of protecting these rights or reduce our revenues. We may initiate, or be subject to, claims or litigation for infringement of proprietary rights or to establish the validity of our proprietary rights, which could result in significant expense to us, cause product shipment delays, require us to enter royalty or licensing agreements and divert the efforts of our technical and management personnel from productive tasks, whether or not such litigation were determined in our favor.
 
We may be exposed to product liability claims.
 
While our agreements with our customers and distributors typically contain provisions designed to limit our exposure to potential material product liability claims, including appropriate warranty, indemnification, waiver and limitation of liability provisions, it is possible that such provisions may not be effective under the laws of some jurisdictions, thus exposing us to substantial liability. Moreover, defending a suit, regardless of its merits, could entail substantial expense and require the time and attention of key management personnel. If product liability claims are brought against us, the costs associated with defending such claims may adversely affect our results of operations.
 
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We must expend significant resources to obtain design wins without assurance that we will be successful.
 
We are targeting the market for sophisticated load cell modules and turnkey weighing and force measurement systems as a primary driver of our future growth. In many cases, we must initiate communication with our customers, and convince the customer that our products and systems will offer solutions for its business that are technically superior and more cost effective compared to their existing arrangements. To do so we must often expend significant financial and human resources to develop technologically compelling products or systems with no guarantee that they will be adopted by our customers. The non-recurring engineering (“NRE”) costs for product development in these cases may be substantial.
 
Also, customers will often require a lengthy period of onsite testing before committing to purchase our module product or custom system, during which period we will not receive material revenue from the customer. While a design win for our custom module products and systems may result in a long period of recurring revenue during which we hope to recover our costs, we must often internally finance our development costs over significant time periods. If our custom-designed products or systems fail to gain acceptance with our customers, we will likely be forced to absorb substantial NRE costs, which could adversely affect our business.
 
The long development times for certain of our products and systems may result in unpredictable fluctuations in revenue and results of operations .
 
Our sophisticated load cell modules and custom weighing and force measurement systems often involve long product development cycles, both to develop the product or system and to secure customer acceptance following what may be a lengthy onsite testing period. During product development and testing, we may incur substantial costs without corresponding revenues. If our custom product or system is ultimately accepted by the customer, we may then begin to realize substantial revenues from our development efforts.
 
In particular, our precision weighing and force measurement systems can be priced for several hundred thousand dollars per unit, so that a contract to acquire one or more units can materially contribute to our revenues during the period or periods that we are permitted to recognize the contract revenues for accounting purposes. The nature of our custom product and system business may therefore result in substantial fluctuations in our operating results, including revenues and profitability, from period to period, even though there has been no fundamental change in our business or its prospects. This may make it difficult for investors to undertake period-to-period comparisons of our performance. Also, the fluctuating nature of key components of our revenues may limit the visibility of our management regarding performance in future periods and make it more difficult for our management to provide guidance to our investors.
 
We may not have adequate facilities to satisfy future increases in demand for our products.
 
Our business is cyclical and in periods of a rising economy, we may experience intense demand for our products. During such periods, we may have difficulty expanding our manufacturing capacity to satisfy demand. Factors which could limit such expansion include delays in procurement of manufacturing equipment, shortages of skilled personnel, and physical constraints on expansion at our facilities. If we are unable to meet our customers’ requirements and our competitors sufficiently expand production, we could lose customers and/or market share. These losses could have an adverse effect on our financial condition and results of operations. Also, capacity that we add during upturns in the business cycle may result in excess capacity during periods when demand for our products recedes, resulting in inefficient use of capital adversely affecting our business.
 
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The nature of the market for our load cell modules and foil technology products may render them particularly susceptible to downturns in the economic environment.
 
Our load cell modules and foil technology products businesses are designed to replace and provide superior functionality over existing product infrastructure utilized by our customers. Often, it is only after introductory demonstrations by our sales and engineering teams that our customers come to appreciate the advantages of our products and systems and the long-term benefits of their adoption. Market factors, such as the recession that we have recently experienced, may make customers less receptive to adopting new technological solutions at our suggestion; even ones with demonstrated operational and financial advantages. During these periods, customers may defer or even cancel orders for products and systems for which they have previously contracted or given indications of interest.
 
Also, since our business is concentrated largely in the industrial sector, we do not benefit from countervailing fluctuations in consumer demand. As a result, our business may be more significantly affected by the consequences of a general economic slowdown than other segments of our industry and may also take longer to recover from the effects of a slowdown.
 
Our backlog is subject to customer cancellation.
 
Many of the orders that comprise our backlog may be canceled by our customers without penalty. Our customers, particularly for our foil technology products, often cancel orders when business is weak and inventories are excessive, a situation that we have experienced during periods of economic slowdown. Therefore, we cannot be certain that the amount of our backlog does not exceed the level of orders that will ultimately be delivered. Our results of operations could be adversely impacted if customers cancel a material portion of orders in our backlog.
 
The complexity of our sophisticated measurement systems may require costly corrections if design flaws are found .
 
Our custom measurement systems combine sophisticated electronic hardware and computer software. We believe that the sophistication of our systems contributes to their competitive advantage over similar products offered by other system integrators. We go to substantial lengths to assure that our system products are free of design flaws when they are delivered to our customers for installation and testing. However, due to the systems’ complexity, design flaws may occur and require correction. If the requisite corrections are substantial or difficult to implement due to the system’s complexity, we may not be able to recover the costs of correction and retesting, with the result that our profit margins on these systems could be substantially reduced, or even negated by losses, and our results of operations could be materially and adversely affected.
 
Our results are sensitive to raw material availability, quality, and cost.
 
Although most materials incorporated in our products are available from a number of sources, certain materials are available only from a relatively limited number of suppliers. The materials that are only available from a limited number of sources include certain molding compound, metal package suppliers, low resistance switches, polyimide film and laminating adhesives. We maintain a two year supply of strategic raw materials for continuity and risk management. Our customers would need significant advance notification to qualify alternative materials, if we had to use them. Alternative suppliers are available worldwide for most of our raw materials, but significant time (between 3 to 12 months) would be required to qualify new suppliers and establish efficient production scheduling.
 
Certain metals used in the manufacture of our products are traded on active markets, and can be subject to significant price volatility.
 
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Our results of operations may be materially and adversely affected if we have difficulty obtaining these raw materials, the quality of available raw materials deteriorates, or there are significant price changes for these raw materials. For periods in which the prices of these raw materials are rising, we may be unable to pass on the increased cost to our customers, which would result in decreased margins for the products in which they are used. For periods in which the prices are declining, we may be required to write down our inventory carrying cost of these raw materials, since we record our inventory at the lower of cost or market. Depending on the extent of the difference between market price and our carrying cost, this write-down could have a material adverse effect on our net earnings. We also may need to record losses for adverse purchase commitments for these materials in periods of declining prices.
 
Our product sales may be adversely affected by changes in product classification levels under various qualification and specification standards.
 
Certain of our products must be qualified or approved under various military and aerospace specifications and other standards.
 
We have qualified certain of our foil resistor and sensor products under various military specifications approved and monitored by the DESC, and under certain European military specifications, and various aerospace standards approved by NASA and the ESA.
 
Certain of our load cell products are approved by the NTEP and OIML. Our on-board weighing systems must meet approved standards to make them legal-for-trade.
 
Qualification and specification levels are based in part upon product failure rate. We must continuously perform tests on our products, and for products that are qualified, the results of these tests must be reported to the qualifying organization. If a product fails to meet the requirements for the applicable classification level, the product’s classification may be suspended or reduced to a lower level. During the time that the classification is suspended or reduced to a lower level, net revenues and earnings attributable to that product may be adversely affected.
 
Our future success is substantially dependent on our ability to attract and retain highly qualified technical, managerial, marketing, finance, and administrative personnel.
 
The competitive environment of our business requires us to attract and retain highly qualified personnel to develop technological innovations and bring them to market on a timely basis. Our complex operations also require us to attract and retain highly qualified administrative personnel in functions such as legal, tax, accounting, financial reporting, auditing, and treasury. The market for personnel with such qualifications is highly competitive. We have not entered into employment agreements with many of our key personnel.
 
The loss of the services of or the failure to effectively recruit qualified personnel could have a material adverse effect on our business.
 
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Failure to maintain effective internal controls could adversely affect our ability to meet our reporting requirements.
 
Effective internal controls are necessary for us to provide reasonable assurance with respect to our financial reports and to effectively prevent fraud. Beginning with the year ending December 31, 2011, we will be required to furnish a report by management on internal control over financial reporting, including management’s assessment of the effectiveness of such control. Internal controls over financial reporting may not prevent or detect misstatements because of inherent limitations, including the possibility of human error, the circumvention or overriding of controls or fraud. Therefore, even effective internal controls can provide only reasonable assurance with respect to the preparation and fair presentation of financial statements. If we cannot provide reasonable assurance with respect to our financial reports and effectively prevent fraud, our operating results could be harmed. In addition, projections of any evaluation of effectiveness of internal control over financial reporting to future periods are subject to the risk that the control may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. If we fail to maintain the effectiveness of our internal controls, including any failure to implement required new or improved controls, or if we experience difficulties in their implementation, our business and operating results could be harmed, we could fail to meet our reporting obligations, and there could be a material adverse effect on our stock price.
 
Future changes in our environmental liability and compliance obligations may harm our ability to operate or increase costs.
 
Our manufacturing operations, products and/or product packaging are subject to environmental laws and regulations governing air emissions, wastewater discharges, the handling, disposal and remediation of hazardous substances, wastes and certain chemicals used or generated in our manufacturing processes, employee health and safety labeling or other notifications with respect to the content or other aspects of our processes, products or packaging, restrictions on the use of certain materials in or on design aspects of our products or product packaging, and responsibility for disposal of products or product packaging. We establish reserves for specifically identified potential environmental liabilities which we believe are adequate. Nevertheless, new liabilities could arise, and we may have unavoidably inherited certain pre-existing environmental liabilities, generally based on successor liability doctrines. Although we have never been involved in any environmental matter that has had a material adverse impact on our overall operations, there can be no assurance that in connection with any past or future operation, acquisition or otherwise, we will not be obligated to address environmental matters that could have a material adverse impact on our operations. In addition, more stringent environmental regulations may be enacted in the future, and we cannot presently determine the modifications, if any, in our operations that any such future regulations might require, or the cost of compliance with these regulations.
 
The integration of our information technology systems is complex, and any delay or problem with this integration may cause serious disruption or harm to our business.
 
As a result of the spin-off, we are in the process of integrating currently unrelated information technology systems across our company. We are subject to risk that we will not be able to absorb the level of systems change, commit or acquire the necessary resources, and focus the management attention necessary for the implementation to succeed. Many key strategic initiatives of major business functions depend on information technology systems, and if we fail to properly execute or if we miss critical deadlines in the implementation of this initiative, we could experience disruption and harm to our business, such as adversely affecting our ability to process orders, invoice, report our results, and manage our business.
 
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Our credit facility subjects us to financial and operating restrictions.
 
In October 2010, we entered into a three-year revolving credit agreement with banks which we expect to use for working capital and other purposes. The credit agreement subjects us to certain restrictions. These restrictions may affect, and in some cases significantly limit or prohibit, among other things, our ability to:
The credit agreement also requires us to maintain certain financial ratios. If we fail to comply with the covenant restrictions contained in the credit agreement, that failure could result in a default that accelerates the maturity of the indebtedness under the agreement.
 
Unexpected events, such as the recent natural disaster in Japan, could disrupt our operations and adversely affect our results of operations.
 
We have manufacturing and other facilities in countries around the world.  Unexpected events, including fires or explosions at facilities; natural disasters, such as hurricanes and earthquakes; war or terrorist activities; unplanned outages; supply disruptions; and failures of equipment or systems at any of our facilities could adversely affect our results of operation. We have a manufacturing facility in southeast Japan, which is our only business location in Japan.  Although this facility is not located near the epicenter of the March 2011 Sendai earthquake, our Japan operations have been affected by the general impact of the natural disaster affecting Japan generally. Specifically, we have experienced rolling blackouts, decreased access to raw materials and limited ability to ship inventory that may adversely affect our operations in Japan. If these conditions persist, or if they arise with respect to other facilities, they may result in customer disruption, physical damage to one or more key operating facilities, the temporary closure of one or more key operating facilities, the temporary disruptions of information systems, and/or an adverse effect on our results of operations.
 
Risks relating to our operations outside the United States
 
We obtain substantial benefits by operating in Israel, but these benefits may not continue.
 
We have substantial operations in Israel. The low tax rates in Israel applicable to earnings of our operations in that country, compared to the rates in the United States, have the general effect of increasing our net earnings. There can also be no assurance that in the future the Israeli government will continue to offer new tax incentive programs applicable to us or that, if it does, such programs will provide the same level of benefits we have historically received or that we will continue to be eligible to benefit from them. Any significant increase in the Israeli tax rates could have an adverse impact on our results of operations.
 
Also, we have benefited from employment incentive grants made by the Israeli government in the past. There can be no assurance that the Israeli government will continue to offer new grant programs applicable to us, and the lack of such grants may adversely affect the costs of our business in Israel in the future.
 
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We attempt to improve profitability by operating in countries in which labor costs are low, but the shift of operations to these regions may entail considerable expense.
 
Our strategy is aimed at achieving significant production cost savings through the transfer and expansion of manufacturing operations to and in countries with lower production costs or other incentives, such as Costa Rica, India, Israel, the People’s Republic of China, and the Republic of China (Taiwan). During this process, we may experience under-utilization of certain plants and factories in high-labor-cost regions and capacity constraints in plants and factories located in low-labor-cost regions. This under-utilization may result initially in production inefficiencies and higher costs. These costs include those associated with compensation in connection with workforce reductions and plant closings in the higher-labor-cost regions, and start-up expenses, manufacturing and construction delays, and increased depreciation costs in connection with the initiation or expansion of production in lower-labor-cost regions. In addition, as we implement transfers of certain of our operations we may experience strikes or other types of labor unrest as a result of layoffs or termination of our employees in high-labor-cost countries.
 
In connection with the transfer of manufacturing operations to lower-labor-cost countries, we are also increasing the level of automation in our plants for the purpose of seeking to optimize our capital and labor resources in production, inventory management, quality control, and warehousing. Although we have substantial experience with automation in several of our plants in higher-labor-cost countries, there are risks in seeking to increase the level of automation in plants which previously did not use a significant amount of automation. These risks include the possibility of inefficiencies and higher operating costs in the transition from manual to automated operations, and if the transition extends longer than anticipated, we could suffer product yield inefficiencies, contributing to higher product costs and increasing the time it will take for us to achieve a return on our investment in the capital equipment involved in the automation process. Furthermore, any layoffs or termination of our employees as a result of increased automation may lead to strikes or other types of labor unrest.
 
We are subject to the risks of political, economic, and military instability in countries outside the United States in which we operate.
 
Some of our products are produced in Israel, India, China, and other countries which are particularly subject to risks of political, economic, and military instability. This instability could result in wars, riots, nationalization of industry, currency fluctuations, and labor unrest. These conditions could have an adverse impact on our ability to operate in these regions and, depending on the extent and severity of these conditions, could materially and adversely affect our overall financial condition and operating results.
 
Our business has been in operation in Israel for 40 years. We have never experienced any material interruption in our operations attributable to these factors, in spite of several Middle East crises, including wars. However, we might be adversely affected if events were to occur in the Middle East that interfered with our operations in Israel.
 
We are subject to foreign currency exchange rate risks which may impact our results of operations.
 
We are exposed to foreign currency exchange rate risks, particularly due to market values of transactions in currencies other than the functional currencies of certain subsidiaries. From time to time, as part of Vishay Intertechnology, we utilized forward contracts to hedge a portion of projected cash flows from these exposures. As of December 31, 2010, we did not have any outstanding foreign currency forward exchange contracts.
 
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Our significant foreign subsidiaries are located in the United Kingdom, Germany, Israel, Japan, and India. We finance our operations in Europe and certain locations in Asia in local currencies. Our operations in Israel and certain locations in Asia are largely financed in U.S. dollars, but these subsidiaries also have significant transactions in local currencies. Our exposure to foreign currency risk is mitigated to the extent that the costs incurred and the revenues earned in a particular currency offset one another. Our exposure to foreign currency risk is more pronounced in situations where, for example, production labor costs are predominantly paid in local currencies while the sales revenue for those products is denominated in U.S. dollars. This situation in particular applies to our operations in Israel, China, and Taiwan.
 
A change in the mix of the currencies in which we transact our business could have a material effect on results of operations. Furthermore, the timing of cash receipts and disbursements could have a material effect on our results of operations, particularly if there are significant changes in exchange rates in a short period of time.
 
Risks Related to the Spin-off
 
Background
 
On October 27, 2009, Vishay Intertechnology announced its intention to spin-off its precision measurement and foil resistor businesses into an independent, publicly traded company to be named Vishay Precision Group, Inc. On July 6, 2010, Vishay Intertechnology completed the spin-off through a tax-free stock dividend to Vishay Intertechnology’s stockholders.
 
Our Relationship with Vishay Intertechnology following the Spin-off
 
Prior to the spin-off, we entered into a master separation agreement with Vishay Intertechnology that included the detailed terms of the spin-off and provided a framework for the relationship between Vishay Intertechnology and us following the spin-off. Among other things, this agreement allocated assets, liabilities and obligations between Vishay Intertechnology and us, required cooperation between the parties to fulfill the terms of the spin-off and specified the conditions to the spin-off. The parties also entered into various ancillary agreements, including a tax matters agreement, a license agreement pursuant to which we will be licensing the Vishay mark from Vishay Intertechnology, an agreement providing for treatment of our employees and their benefits, certain real property leases and transition services agreements, supply agreements and certain other agreements.
 
For a more detailed description of these agreements see our information statement filed with the SEC on June 22, 2010 as Exhibit 99.1 to our registration statement on Form 10.
 
We have a short operating history as an independent company upon which you can evaluate our performance and, accordingly, our prospects must be considered in light of the risks that any newly independent company encounters.
 
Prior to July 6, 2010, we operated as part of Vishay Intertechnology. Accordingly, we have a short experience operating as an independent company and performing various corporate functions, including human resources, tax administration, legal (including compliance with the Sarbanes-Oxley Act of 2002 and with the periodic reporting obligations of the Securities Exchange Act of 1934), treasury administration, investor relations, insurance, information technology and telecommunications services, as well as the accounting for many items such as equity compensation, income taxes, derivatives, intangible assets and pensions. Our prospects must be considered in light of the risks, expenses and difficulties encountered by companies in the early stages of independent business operations, all of which could have a material adverse effect on our business.
 
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We historically obtained benefits of being part of Vishay Intertechnology, but those benefits did not continue.
 
While we believe the benefits of being an independent company outweigh the drawbacks, prior to the spin-off we historically received certain benefits from being part of a larger organization, including access to certain resources and certain economies of scale. We may be unable to replace these benefits as an independent company, or only be able to do so at significant expense, which may adversely affect our business.
 
Some of our historical financial information is not necessarily indicative of our results as a separate company and therefore may not be reliable as an indicator of our future financial results.
 
Some of our historical financial statements have been created from Vishay Intertechnology’s financial statements using our historical results of operations and historical bases of assets and liabilities as part of Vishay Intertechnology. Accordingly, some of the historical financial information we have included in this document is not necessarily indicative of what our financial position, results of operations and cash flows would have been if we had been a separate, stand-alone entity during the periods presented.
 
The historical financial information is not necessarily indicative of what our results of operations, financial position and cash flows will be in the future. While the historical results of operations for when we were part of Vishay Intertechnology include all costs of Vishay Intertechnology’s precision measurement and foil resistor businesses, those historical costs and expenses do not include all of the costs that would have been or will be incurred by us as an independent company. In addition, we have not made adjustments to that historical financial information to reflect changes, many of which are significant, that have, or will, occur in our cost structure, financing and operations as a result of the spin-off. These changes include potentially increased costs associated with reduced access to resources, economies of scale, and purchasing power.
 
While our combined and consolidated financial statements are calculated on a separate tax return basis, our effective income tax rate as reflected in our historical financial statements also may not be indicative of our future effective income tax rate. Among other things, the rate may be materially impacted by changes in the mix of our earnings from the various jurisdictions in which we operate, the tax characteristics of our earnings, the timing and amount of earnings of foreign subsidiaries that we repatriate to the United States, which may increase our tax expense and taxes paid, the timing and results of any reviews of our income tax filing positions in the jurisdictions in which we transact business, and the expiration of the tax incentives for manufacturing operations in Israel.
 
We may not be successful in establishing an independent identity.
 
We have historically conducted our business under the Vishay trade name and trade names acquired as part of our vertical product integration. We believe our customers, suppliers, and potential employees recognize the value of those brand names, and accordingly, we entered into an agreement with Vishay Intertechnology to continue to use the Vishay trade name and trademarks as part of our marketing effort. As part of our separation from Vishay Intertechnology, we have been, and are, investing time, effort and resources to establish our independent identity in the marketplace. The shared use of the Vishay trade names may cause confusion in the marketplace and inappropriately link the two companies despite the spin-off. We do not know whether our effort to establish our independent identity will be successful, the cost of doing so may be substantial, and any resulting confusion could cause us substantial harm.
 
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Vishay Intertechnology provides a number of services to us pursuant to a transition services agreement. When the transition services agreement terminates, we will be required to replace Vishay Intertechnology’s services internally or through third parties on terms that may be less favorable to us.
 
Under the terms of a transition services agreement that we entered into with Vishay Intertechnology prior to the spin-off, Vishay Intertechnology provides us, for a fee, specified support services related to information technology for a period of up to 18 months following the spin-off. When the transition services agreement terminates, Vishay Intertechnology will no longer be obligated to provide any of these services to us, and we will be required to assume the responsibility for these functions ourselves. While we anticipate being prepared to perform these functions on our own at or before the expiration of the transition services agreement, there is no assurance of our ability to do so. If we cannot perform these services for ourselves, we may be required to retain an outside service provider at rates in excess of the fees that we will pay under the transition services agreement, which could adversely affect us.
 
The absence of representations and warranties and the “as is, where is” nature of the spin-off is customary for transactions of this nature, but these characteristics may be considered to be unfavorable to us in comparison to the types of contractual protections we might be expected to receive from a seller if we were instead purchasing all of our assets from Vishay Intertechnology in an arms-length negotiated transaction.
 
Neither we nor Vishay Intertechnology made any representation or warranty as to the assets or liabilities transferred or assumed, the value or freedom from any lien or other security interest of any assets transferred, the absence of any defenses relating to any claim of either party or the legal sufficiency of any conveyance documents or as to any consents or governmental approvals which may be required in connection with the transfers. Except as expressly set forth in the master separation agreement or in any ancillary agreement, all assets will be transferred on an “as is, where is” basis. The absence of representations and warranties and the “as is, where is” nature of the spin-off is customary for transactions of this nature, in which we acquired all of our assets, subject to specified liabilities being assumed, without paying a fair market value purchase price. These characteristics of the spin-off may be considered to be unfavorable to us in comparison to the types of contractual protections we might be expected to receive from a seller if we instead purchased all of our assets from Vishay Intertechnology in an arms-length negotiated transaction.
 
We agreed to certain restrictions in order to comply with U.S. federal income tax requirements for a tax-free spin-off and may not be able to engage in acquisitions with related parties and other strategic transactions that may otherwise be in our best interests.
 
Current U.S. federal tax law that applies to spin-offs generally creates a presumption that the spin-off would be taxable to Vishay Intertechnology but not to its stockholders if we engage in, or enter into an agreement to engage in, a plan or series of related transactions that would result in the acquisition of a 50% or greater interest (by vote or by value) in our stock ownership during the four-year period beginning on the date that begins two years before the spin-off, unless it is established that the transaction is not pursuant to a plan related to the spin-off. United States Treasury Regulations generally provide that whether an acquisition of our stock and a spin-off are part of a plan is determined based on all of the facts and circumstances, including specific factors listed in the regulations. In addition, the regulations provide certain “safe harbors” for acquisitions of our stock that are not considered to be part of a plan related to the spin-off.
 
There are other restrictions imposed on us under current U.S. federal tax law for spin-offs and with which we will need to comply in order to preserve the favorable tax treatment of the distribution, such as limitations on sales or redemptions of our common stock for cash or other property following the distribution.
 
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In the tax matters agreement with Vishay Intertechnology, we agreed that, among other things, we will not take any actions that would result in any tax being imposed on Vishay Intertechnology as a result of the spin-off. Further, for the two-year period following the spin-off, we agreed not to: (1) repurchase any of our stock except in certain circumstances permitted by the IRS guidelines, (2) voluntarily dissolve or liquidate or engage in any merger (except certain cash acquisition mergers), consolidation, or other reorganizations except for certain mergers of our wholly-owned subsidiaries to the extent not inconsistent with the tax-free status of the spin-off, or (3) sell, transfer, or otherwise dispose of more than 50% of our assets, excluding any sales conducted in the ordinary course of business.
 
We are, however, permitted to take certain actions otherwise prohibited by the tax matters agreement if we provide Vishay Intertechnology with an opinion of tax counsel or private letter ruling from the IRS, reasonably acceptable to Vishay Intertechnology, to the effect that these actions will not affect the tax-free nature of the spin-off. These restrictions could substantially limit our strategic and operational flexibility, including our ability to finance our operations by issuing equity securities, make acquisitions using equity securities, repurchase our equity securities, raise money by selling assets, or enter into business combination transactions.
 
In the tax matters agreement with Vishay Intertechnology, we agree to indemnify Vishay Intertechnology and its affiliates for any liability for taxes of Vishay Intertechnology resulting from: (1) any action or failure to act by us or any of our affiliates following the completion of the spin-off that would be inconsistent with or prohibit the spin-off from qualifying as a tax-free transaction to Vishay Intertechnology and to you under Sections 355 and 368(a)(1)(D) of the Code, or (2) any action or failure to act by us or any of our affiliates following the completion of the spin-off that would be inconsistent with or cause to be untrue any material information, covenant, or representation made in connection with the private letter ruling obtained by Vishay Intertechnology from the IRS relating to, among other things, the qualification of the spin-off as a tax-free transaction described under Sections 355 and 368(a)(1)(D) of the Code. For a more detailed discussion, see “Certain Relationships and Related Party Transactions – Agreements with Vishay Intertechnology—Tax Matters Agreement” in our information statement filed with the SEC on June 22, 2010 as Exhibit 99.1 to our registration statement on Form 10. Our indemnification obligations to Vishay Intertechnology and its affiliates are not limited in amount or subject to any cap. It is expected that the amount of any such indemnification to Vishay Intertechnology would be substantial.
 
Especially in the current environment, our smaller size may make it difficult for us to raise debt financing if we need to do so.
 
We currently have in place a revolving credit facility that will allow us to borrow up to $25 million to fund our working capital requirements and for other operational uses. In addition, we have $82 million in cash. While we expect that the combination of our cash and availability under the revolving credit facility will be sufficient to fund our liquidity needs for the foreseeable future, if we do require additional cash, for example for the purposes of financing acquisitions, we may have difficulty obtaining additional borrowings in the credit markets, on terms that we find commercially acceptable or at all. Since the beginning of the recent economic downturn, banks have tightened their lending standards. Our smaller size and the absence of an extended history of operations as a stand-alone company could make lenders reluctant to lend to us, especially in the current environment.
 
The terms of our spin-off from Vishay Intertechnology may reduce the likelihood of any potential change of control or unsolicited acquisition proposal that you might consider favorable.
 
The terms of our spin-off from Vishay Intertechnology could delay or prevent a change of control that you may favor. An acquisition or issuance of our common stock could trigger the application of Section 355(e) of the Code. Under the tax matters agreement we entered into with Vishay Intertechnology, we are required to indemnify Vishay Intertechnology for the resulting tax in connection with such an acquisition or issuance and this indemnity obligation might discourage, delay or prevent a change of control that you may consider favorable.
 
- 25 -
 
 

See our information statement filed with the SEC on June 22, 2010 as Exhibit 99.1 to our registration statement on Form 10 for a more detailed description of these agreements and of these provisions of Delaware law, our charter and bylaws.
 
We use the mark Vishay under license from Vishay Intertechnology, which could result in product and market confusion .
 
We use the mark Vishay as part of our name and in connection with many of our products. Our use of the Vishay mark is governed by an agreement between us and Vishay Intertechnology, giving us a perpetual, royalty-free, worldwide license for the use of the mark. We believe that it is important that we continue the use of the Vishay name in order to benefit from the reputation of the Visha y brand, which was first used in connection with our foil resistors and strain gages when Vishay Intertechnology was founded over 40 years ago.
 
There are risks associated with our use of the Vishay mark, however, both for us and for Vishay Intertechnology. Because both we and Vishay Intertechnology use the Vishay mark, confusion could arise in the market regarding the products offered by the two companies, and there could be a misplaced perception of our continuing to be associated with Vishay Intertechnology. Also, any negative publicity associated with one of the two companies in the future could adversely affect the public image of the other. Finally, Vishay Intertechnology will have the right to terminate the license agreement in certain extreme circumstances if we are in material and repeated breach of the terms of the agreement, which would likely have an adverse effect on us and our business.
 
Risks Relating to Our Common Stock
 
Our smaller size may affect the trading market for our shares.
 
We are considered a “microcap” company and our trading volume is likely to fluctuate. Also, it is possible that there will be less market and institutional interest in our shares, and that we will not attract substantial coverage in the analyst community. As a result, the trading market for our shares may be less liquid, making it more difficult for investors to dispose of their shares at favorable prices, and investors may have less independent information and analysis available to them concerning our company.
 
Our stock price could become more volatile and investments could lose value.
 
The market price of our common stock and the number of shares traded each day has experienced significant fluctuations and may continue to fluctuate significantly. The market price for our common stock may be affected by a number of factors, including, but not limited to:
A significant drop in our stock price could expose us to costly and time consuming litigation, which could result in substantial costs and divert management’s attention and resources, resulting in an adverse affect on our business.
 
- 26 -
 
 

The holders of Class B common stock have effective voting control of our company.
 
We have two classes of common stock: common stock and Class B common stock. The holders of common stock are entitled to one vote for each share held, while the holders of Class B common stock are entitled to 10 votes for each share held. As of March 24, 2011, the holders of Vishay Intertechnology Class B common stock hold approximately 45% of the voting power of that company. Directly, through family trusts, and as voting trustee under a voting trust agreement, Dr. Felix Zandman, executive chairman and chief technical and business development officer of Vishay Intertechnology who serves as an R&D consultant to our company, has (sole or shared) voting power over substantially all of the outstanding Class B common stock. The holders of Class B common stock are effectively able to cause the election of directors and approve other actions as stockholders without the approval of other stockholders of our company, including the sale, merger, or other transactions involving our company. This may adversely affect the market value of our stock.
 
Your percentage ownership of our common stock may be diluted in the future.
 
Your percentage ownership of our common stock may be diluted in the future because of equity awards that we expect will be granted to our directors, officers and employees, as well as due to certain convertible or exchangeable debt instruments, or stock purchase warrants. The Vishay Precision Group, Inc. 2010 Stock Incentive Program provides for the grant of equity-based awards, including restricted stock, restricted stock units, stock options, and other equity-based awards to our directors, officers and other employees, advisors and consultants.
 
Certain provisions of our certificate of incorporation and bylaws may reduce the likelihood of any unsolicited acquisition proposal or potential change of control that you might consider favorable.
 
Our bylaws contain provisions that could be considered “anti-takeover” provisions because they make it harder for a third party to acquire us without the consent of our incumbent board of directors. Under these by-law provisions:
These provisions could have the effect of discouraging an unsolicited acquisition proposal or delaying, deferring or preventing a change of control transaction that might involve a premium price or otherwise be considered favorable by our stockholders.
 
Item 1B. UNRESOLVED STAFF COMMENTS
 
None.
 
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Item 2. PROPERTIES
 
Our business has approximately 16 manufacturing locations. Our manufacturing facilities include owned locations and locations leased from third parties, including Vishay Intertechnology. The principal locations of our manufacturing facilities, along with available space including administrative offices, are listed below:
 
        Approx. Available
        Product segment         Space (square feet)
Owned Locations        
         
Wendell, North Carolina USA   Foil Technology Products   106,000
Holon, Israel   Foil Technology Products   97,000
Carmiel, Israel   Weighing Modules and Control Systems   80,000
Bradford, United Kingdom   Weighing Modules and Control Systems   86,000
Akita, Japan (a)   Foil Technology Products   45,000
Chartres, France   Foil Technology Products   11,000
Basingstoke, United Kingdom   Foil Technology Products   11,000
Alajuela, Costa Rica   Foil Technology Products   4,000
         
Third-Party Leased Locations        
         
Tianjin, People’s Republic of China   Weighing Modules and Control Systems   67,000
Beijing, People’s Republic of China   Weighing Modules and Control Systems   46,000
Chennai, India   Weighing Modules and Control Systems   35,000
Netanya, Israel   Weighing Modules and Control Systems   24,000
Be’er Sheva, Israel (b)   Foil Technology Products   14,000
Degerfors, Sweden   Weighing Modules and Control Systems   8,000
Taipei, Republic of China (Taiwan)   Weighing Modules and Control Systems   8,000
Teltow, Germany   Foil Technology Products   5,000

       (a)        A facility on the campus is leased to Vishay Intertechnology. Approximate available space reported above excludes the area leased.
     
       (b)   Denotes property leased from Vishay Intertechnology.
 
In the opinion of management, our properties and equipment generally are in good operating condition and are adequate for our present needs. We do not anticipate difficulty in renewing leases as they expire or in finding alternative facilities.
 
Our corporate headquarters are located at 3 Great Valley Parkway, Suite 150, Malvern, PA 19355.
 
Item 3. LEGAL PROCEEDINGS
 
None.
 
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Item 4. REMOVED AND RESERVED
 
EXECUTIVE OFFICERS OF REGISTRANT
 
The following table sets forth certain information regarding our executive officers as of March 24, 2011:
 
Name         Age       Positions  
Ziv Shoshani   44   Chief Executive Officer, President, and
               Director
William M. Clancy   48   Executive Vice President and Chief Financial
               Officer
Thomas P. Kieffer   58   Sr. Vice President – Chief Technical Officer

Ziv Shoshani is our Chief Executive Officer and President, and also serves on the board of directors. Mr. Shoshani was Chief Operating Officer of Vishay Intertechnology from January 1, 2007 to November 1, 2009. During 2006, he was Deputy Chief Operating Officer of Vishay Intertechnology. Mr. Shoshani was Executive Vice President of Vishay Intertechnology from 2000 to 2009 with various areas of responsibility, including Executive Vice President of the Capacitors and the Resistors businesses, as well as heading the Measurements Group and Foil Divisions. Mr. Shoshani had been employed by Vishay Intertechnology since 1995. He still serves on the Vishay Intertechnology board of directors. Mr. Shoshani is a nephew of Dr. Felix Zandman, the founder and executive chairman of Vishay Intertechnology who controls approximately 45% of the voting power of our Company at December 31, 2010.
 
William M. Clancy is our Executive Vice President and Chief Financial Officer. Mr. Clancy was Corporate Controller of Vishay Intertechnology from 1993 until November 1, 2009. He became a Vice President of Vishay Intertechnology in 2001 and a Senior Vice President of Vishay Intertechnology in 2005. Mr. Clancy served as Corporate Secretary of Vishay Intertechnology from 2006 to 2009. From June 16, 2000 until May 16, 2005 (the date Vishay Intertechnology acquired the noncontrolling interest in Siliconix incorporated), Mr. Clancy served as the principal accounting officer of Siliconix. Mr. Clancy had been employed by Vishay Intertechnology since 1988.
 
Thomas P. Kieffer is our Senior Vice President – Chief Technical Officer. Mr. Kieffer was promoted to the position of Senior Vice President – Corporate R&D for Vishay Intertechnology’s Measurements Group and Foil Resistors Division on January 1, 2008. Prior to that, Mr. Kieffer was Senior Vice President of Vishay Intertechnology’s Micro-Measurements and Load Cells Divisions. He became Division Head of Vishay Intertechnology’s Measurements Group Division in 2000 and from 2002 through 2005 was involved in several acquisitions of measurements businesses. Mr. Kieffer had been employed by Vishay Intertechnology since 1984.
 
- 29 -
 
 

PART II
 
Item 5.   MARKET FOR REGISTRANT’S COMMON EQUITY RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Our common stock is listed on the New York Stock Exchange under the symbol VPG. The following table sets forth the high and low sales prices for our common stock as reported on the New York Stock Exchange composite tape for the indicated fiscal quarters. Data is provided only for the third and fourth quarters of 2010 because VPG became a publicly traded company on July 6, 2010 (the first day of the third quarter). The Board of Directors may only declare dividends or other distributions with respect to the common stock or the Class B common stock if it grants such dividends or distributions in the same amount per share with respect to the other class of stock. Stock dividends or distributions on any class of stock are payable only in shares of stock of that class. Shares of either common stock or Class B common stock cannot be split, divided, or combined unless the other is also split, divided, or combined equally. Holders of record of our common stock totaled approximately 1,000 at March 24, 2011.
 
    2010
        High       Low
Fourth Quarter   $      19.25   $      15.12
Third Quarter   $ 16.08   $ 10.20

We have two classes of common stock: common stock and Class B common stock. The holders of common stock are entitled to one vote for each share held, while the holders of Class B common stock are entitled to 10 votes for each share held. At March 24, 2011 we had outstanding 1,025,176 shares of Class B common stock, par value $.10 per share. Currently, the holders of Vishay Intertechnology Class B common stock hold approximately 45% of the voting power of our Company. Directly, through family trusts, and as voting trustee under a voting trust agreement, Dr. Felix Zandman, executive chairman and chief technical and business development officer of Vishay Intertechnology who serves as an R&D consultant to our company, has sole or shared voting power over substantially all of the outstanding Class B common stock. The holders of Class B common stock are effectively able to cause the election of directors and approve other actions as stockholders without the approval of other stockholders of our company, including the sale, merger, or other transactions involving our company.
 
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Stock Performance Graph
 
The graph and table below compare the cumulative total stockholder return on the Company’s common stock over a six month period (from its initial listing on July 6, 2010), with the returns on the Russell 2000 Stock Index, and a peer group of companies selected by our management. The peer group is made up of eight publicly held manufacturers of sensors, sensor-based equipment, and sensor-based systems. Management believes that the product offerings of the companies contained in the peer group are more similar to our product offerings than those of the companies contained in any published industry index. The return of each peer issuer has been weighted according to the respective issuer’s stock market capitalization. The graph and table assume that $100 had been invested at July 6, 2010 and that all dividends were reinvested. The graph and table are not necessarily indicative of future investment performance.
 
 

    7/6/2010 7/30/2010 8/31/2010 9/30/2010 10/29/2010 11/30/2010 12/31/2010
Vishay Precision Group Inc Cum $ 100.00 108.12 123.85 133.42 145.30 143.16 161.03
Russell 2000 Index Cum $ 100.00 106.87 98.96 111.29 115.84 119.86 129.38
Peer Group* Cum $ 100.00 106.46 102.99 122.17 133.66 149.14 160.09

*The management-selected peer group includes: Measurement Specialties, MTS Systems, Kyowa Electronic Instruments, Mettler-Toledo, Spectris, Sensata Technologies, CTS Corp., Keithley Instruments
 
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Item 6. SELECTED FINANCIAL DATA
 
The following table presents our selected historical financial data. The statements of operations data for each of the four years ended December 31, 2010 and the balance sheet data as of December 31, 2010, 2009, and 2008 have been derived from our audited combined and consolidated financial statements.
 
The financial data as of December 31, 2007 and 2006 and for the year ended December 31, 2006 has been derived from our unaudited financial statements.
 
Our historical financial data are not necessarily indicative of our future performance or what our financial position and results of operations would have been if we had operated as a separate, stand-alone entity during the periods shown. The data should be read in conjunction with our historical financial statements and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this document.
 
- 32 -
 
 

(in thousands, except per share amounts)       As of and for the years ended December 31,
    2010       2009       2008 (c)       2007 (d)       2006
Statement of Operations Data:                                        
Net revenues   $     207,524     $      171,991     $      241,700     $      239,036     $      206,757  
Costs of products sold     130,396       119,286       161,804       154,525       128,227  
Gross profit     77,128       52,705       79,896       84,511       78,530  
                                         
Selling, general, and administrative expenses     57,297       43,356       51,714       48,017       44,510  
Restructuring and severance costs     -       2,048       6,349       356       1,619  
Impairment of goodwill     -       -       93,465       -       -  
Operating income (loss)     19,831       7,301       (71,632 )     36,138       32,401  
                                         
Other income (expense):                                        
       Interest expense     (390 )     (1,237 )     (1,574 )     (2,294 )     (2,946 )
       Other     (928 )     714       4,780       2,788       1,012  
       Other income (expense) - net     (1,318 )     (523 )     3,206       494       (1,934 )
                                         
Income (loss) before taxes     18,513       6,778       (68,426 )     36,632       30,467  
                                         
Income tax expense     6,770       5,057       5,689       8,829       7,663  
Net earnings (loss)     11,743       1,721       (74,115 )     27,803       22,804  
Less: net earnings attributable to                                        
       noncontrolling interests     37       17       15       111       56  
Net earnings (loss) attributable to VPG                                        
       stockholders /parent (b)   $ 11,706     $ 1,704     $ (74,130 )   $ 27,692     $ 22,748  
                                       
                                       
Earnings (loss) per share data:                                        
       Basic   $ 0.88     $ 0.13     $ (5.56 )   $ 2.08     $ 1.71  
       Diluted   $ 0.85     $ 0.13     $ (5.56 )   $ 2.08     $ 1.71  
                                         
Wt. avg. shares outstanding – basic (a)     13,332       13,332       13,332       13,332       13,332  
Wt. avg. shares outstanding – diluted (a)     13,787       13,332       13,332       13,332       13,332  
                                         
Balance Sheet Data:                                        
Cash and cash equivalents   $ 82,245     $ 63,192     $ 70,381     $ 56,803     $ 30,138  
Total assets     248,713       209,779       254,863       319,981       250,411  
Net payable to affiliates     -       18,495       47,436       29,477       38,658  
Long-term debt, less current portion     11,692       1,551       1,761       2,237       3,262  
Working capital     136,429       102,489       145,363       127,667       92,401  
Total VPG stockholders'/parent equity     176,785       148,090       150,158       229,420       154,116  

(a)       For periods prior to July 6, 2010, the operations comprising VPG's business were wholly owned by various subsidiaries of Vishay Intertechnology. As of the date of the spin-off, VPG issued 13.3 million shares of capital stock. This share amount is being utilized for the calculation of basic and diluted earnings per common share for periods presented prior to July 6, 2010, as no common stock of the Company existed prior to July 6, 2010.
 
- 33 -
 
 

(b)       For the period from July 6, 2010 to December 31, 2010, net earnings is attributable to VPG stockholders and for the periods prior to July 6, 2010, net earnings (loss) is attributable to parent.
 
(c)   Includes the results of Vishay Transducers India Limited from June 30, 2008 and of Powertron GmbH from July 23, 2008, the respective dates of acquisition.
 
(d)   Includes the results of PM Group from April 19, 2007, the date of acquisition.
 
- 34 -
 
 

Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
Overview
 
VPG is an internationally recognized designer, manufacturer and marketer of sensors based on resistive foil technology and sensor-based systems specializing in the growing markets of stress, force, weight and pressure measurements. We provide vertically integrated products and solutions that are primarily based upon our proprietary foil technology. These products are marketed under a variety of brand names that we believe are characterized as having a very high level of precision and quality. Our global operations enable us to produce a wide variety of products in strategically effective geographical locations that also optimize our resources for specific technologies, sensors, assemblies and systems. We operate in two segments: the Foil Technology Products segment and the Weighing Modules and Control Systems segment. The Foil Technology Products segment is comprised of ultra-high precision foil resistors and foil strain gages. This segment’s products are sold to third-party customers and are utilized in the manufacture of the vertically integrated modules and systems that comprise our Weighing Modules and Control Systems segment.
 
The Company’s products are sense elements, components, and transducers that convert mechanical inputs into an electronic signal for display, processing, interpretation, or control by our instrumentation and systems products. Precision sensors are essential to the accurate measurement, resolution and display of force, weight, pressure, tilt, motion, or acceleration, especially in the legal-for-trade, commercial, and industrial marketplace in a wide variety of applications. Our products are not typically used in the consumer market.
 
The precision sensor market is being influenced by the significant increase in intelligent products across virtually all end markets, including medical, agricultural, transportation, industrial, avionics, military, and space applications. We believe that as OEMs strive to make products “smarter”, they are generally integrating more sensors to link the mechanical/physical world with digital control and/or response.
 
Until July 6, 2010, our business was part of Vishay Intertechnology, and our assets and liabilities consisted of those that Vishay Intertechnology attributed to its precision measurement and foil resistor businesses. Following the spin-off on July 6, 2010, we are an independent, publicly traded company, and Vishay Intertechnology does not retain any ownership interest in us.
 
VPG reports in two product segments: Foil Technology Products; and Weighing Modules and Control Systems. The Foil Technology reporting segment is comprised of the foil resistors and strain gage operating segments, which include strain gages, ultra-precision foil resistors, and current sensors. The Weighing Module and Control Systems reporting segment is comprised of the load cells and weighing systems operating segments, which include transducers/load cells, instruments, weighing modules, and complete systems for process control or on-board weighing applications.
 
Net revenues for the year ended December 31, 2010 were $207.5 million versus $172.0 million for the comparable prior year period. Net earnings for the year ended December 31, 2010 were $11.7 million, or $0.85 per diluted share, versus $1.7 million, or $0.13 per diluted share, for the comparable prior year period. Net earnings for the year ended December 31, 2009 were negatively impacted by pretax charges of $2.0 million for restructuring and severance costs.
 
In the second half of 2009, we began to see signs of economic recovery, including sequential increases in quarterly revenues and gross margins which continued into the second quarter of 2010. In the third quarter of 2010, we experienced a seasonal slowdown due to the European holidays and therefore our revenues and gross margins decreased compared to the second quarter of 2010 but increased compared to the prior year period. In the fourth quarter of 2010 our revenues grew sequentially compared to the first, second, and third quarters. While revenues have not yet returned to pre-recession levels, we remain confident about the long-term prospects of our business.
 
- 35 -
 
 

Financial Metrics
 
We utilize several financial measures and metrics to evaluate the performance and assess the future direction of our business. These key financial measures and metrics include net revenues, gross profit margin, end-of-period backlog, book-to-bill ratio, and inventory turnover.
 
Gross profit margin is computed as gross profit as a percentage of net revenues. Gross profit is generally net revenues less costs of products sold, but could also include certain other period costs. Gross profit margin is clearly a function of net revenues, but also reflects our cost-cutting programs and our ability to contain fixed costs.
 
End-of-period backlog is one indicator of potential future sales. We include in our backlog only open orders that have been released by the customer for shipment in the next twelve months. If demand falls below customers’ forecasts, or if customers do not control their inventory effectively, they may cancel or reschedule the shipments that are included in our backlog, in many instances without the payment of any penalty. Therefore, the backlog is not necessarily indicative of the results to be expected for future periods.
 
Another important indicator of demand in our industry is the book-to-bill ratio, which is the ratio of the amount of product ordered during a period compared with the product that we ship during that period. A book-to-bill ratio that is greater than one indicates that demand is higher than current revenues and manufacturing capacities and it indicates that we may generate increasing revenues in future periods. Conversely, a book-to-bill ratio that is less than one is an indicator of lower demand compared to existing revenues and current capacities and may foretell declining sales.
 
We focus on our inventory turnover as a measure of how well we are managing our inventory. We define inventory turnover for a financial reporting period as our costs of products sold for the four fiscal quarters ending on the last day of the reporting period divided by our average inventory (computed using each quarter-end balance) for this same period. A higher level of inventory turnover reflects more efficient use of our capital.
 
The quarter-to-quarter trends in these financial metrics can also be an important indicator of the likely direction of our business. The following table shows net revenues, gross profit margin, the end-of-period backlog, the book-to-bill ratio, and the inventory turnover for our business as a whole during the five quarters beginning with the fourth quarter of 2009 and through the fourth quarter of 2010 (dollars in thousands) :
 
        4th Quarter   1st Quarter   2nd Quarter   3rd Quarter   4th Quarter
    2009       2010       2010       2010       2010
Net revenues   $      46,848     $      48,175     $        52,914     $      51,608     $      54,827  
                                         
Gross profit margin     32.0 %     35.4 %     37.8 %     37.1 %     38.2 %
                                         
End-of-period backlog   $ 32,700     $ 36,200     $ 38,400     $ 42,200     $ 40,300  
                                         
Book-to-bill ratio     1.06       1.12       1.06       1.04       0.97  
                                         
Inventory turnover     2.60       2.71       2.97       2.88       2.87  

See “Financial Metrics by Segment” below for net revenues, gross profit margin, end-of-period backlog, book-to-bill ratio, and inventory turnover broken out by segment.
 
- 36 -
 
 

Our revenues and operating results were significantly impacted by the global economic recession experienced during 2008 and 2009. In the second half of 2009, we began to see signs of economic recovery, with increasing orders which translated into increased revenues in future periods. The recovery of our business continued during 2010. Net revenues for the fourth fiscal quarter of 2010 increased on a sequential basis due to an increase in demand in both segments. Gross margins also increased sequentially due to increased volume.
 
Financial Metrics by Segment
 
The following table shows net revenues, gross profit margin, end-of-period backlog, book-to-bill ratio, and inventory turnover broken out by segment for the five quarters beginning with the fourth quarter of 2009, through the fourth quarter of 2010 (dollars in thousands) :
 
        4th Quarter   1st Quarter   2nd Quarter   3rd Quarter   4th Quarter
    2009       2010       2010       2010       2010
Foil Technology Products                                        
Net revenues   $      19,701     $      23,897     $        25,584     $      25,557     $      26,519  
Gross profit margin     48.0 %     49.9 %     49.1 %     45.2 %     46.6 %
End-of-period backlog   $ 16,400     $ 18,400     $ 19,400     $ 21,200     $ 20,500  
Book-to-bill ratio     1.24       1.16       1.05       1.04       0.98  
Inventory turnover     3.24       3.58       3.73       3.81       3.56  
                                         
Weighing Modules and                                        
Control Systems                                        
Net revenues   $ 27,147     $ 24,278     $ 27,330     $ 26,051     $ 28,308  
Gross profit margin     20.4 %     21.1 %     27.1 %     29.2 %     30.4 %
End-of-period backlog   $ 16,300     $ 17,800     $ 19,000     $ 21,000     $ 19,800  
Book-to-bill ratio     0.93       1.08       1.07       1.04       0.97  
Inventory turnover     2.38       2.36       2.62       2.42       2.53  

Acquisition Strategy
 
We have a vertical product integration strategy to grow our weighing modules and control systems business and to promote our sophisticated products that integrate the precision measurement components that we design and produce.
 
As part of our growth strategy, we seek to expand through acquisition of other manufacturers of products that are similar or complementary to our existing product portfolio, particularly manufacturers who have established positions in major markets, reputations for product quality and reliability, and product lines with which we have substantial marketing and technical expertise. We also explore opportunities to acquire smaller targets to gain market share, effectively penetrate different geographic markets, enhance new product development, or grow our high margin niche market businesses.
 
We expect to continue our program of strategic acquisitions, particularly where opportunities present themselves to grow our systems business. Upon completion of acquisitions, we seek to reduce selling, general, and administrative expenses through the integration or elimination of redundant sales offices and administrative functions at acquired companies.
 
There is no assurance that we will be able to identify and acquire suitable acquisition candidates at price levels and on terms and conditions we consider acceptable.
 
- 37 -
 
 

2008 Activities
 
During 2008, we made two acquisitions. On June 30, 2008, we acquired our partner’s 51% interest in a transducers manufacturing joint venture in India for approximately $9.6 million. The transaction was funded using cash on-hand. On July 23, 2008, we acquired Powertron GmbH, a manufacturer of specialty precision resistors, for approximately $14.7 million, including the repayment of certain debt of Powertron. The transaction was funded using cash on hand.
 
2007 Activities
 
On April 19, 2007, we declared our cash tender offer for all shares of PM Group PLC wholly unconditional, and assumed ownership of PM Group. PM Group is an advanced designer and manufacturer of systems used in the weighing and process control industries, located in the United Kingdom. The aggregate cash paid for all shares of PM Group was approximately $45.7 million. The transaction was funded using cash on hand. We immediately sold PM Group’s electrical contracting subsidiary for approximately $16.1 million.
 
Research and Development
 
Research and development will continue to play a key role in our efforts to introduce innovative products for new sales and to improve profitability. To that end, we expect to increase our R&D expenditures in order to fill the product development pipeline and lay the foundation for future sales growth. We expect to continue to expand our position as a leading supplier of resistive foil technology and sensor-based systems. We believe our R&D efforts should provide us with a variety of opportunities to leverage technology, products, and our manufacturing base and, ultimately, our financial performance. The amount charged to expense for research and development aggregated $6.0 million, $4.6 million, and $4.8 million for the years ended December 31, 2010, 2009, and 2008, respectively.
 
Cost Management
 
To be successful, we believe we must seek new strategies for controlling operating costs. Through automation in our plants, we believe we can optimize our capital and labor resources in production, inventory management, quality control, and warehousing. We are in the process of moving some manufacturing from higher-labor-cost countries to lower-labor-cost countries, such as Costa Rica, India, Israel, the People’s Republic of China, and the Republic of China (Taiwan). This will enable us to become more efficient and cost competitive, and also maintain tighter controls of the operation.
 
A primary tenet of our business strategy is expansion through acquisitions. In addition to the primary objective of enhancing our strategy of vertical product integration, our acquisition strategy includes a focus on reducing selling, general, and administrative expenses and achieving significant production cost savings at acquired companies. The plant closure and employee termination costs subsequent to acquisitions are also integral to our cost reduction programs.
 
Under previous accounting standards, plant closure and employee termination costs that we incurred in connection with our acquisition activities were included in the costs of our acquisitions and did not affect earnings or losses on our statement of operations. Accounting Standards Codification (“ASC”) Topic 805, which we adopted effective January 1, 2009, requires such costs to be recorded as expenses in our statement of operations, as such expenses are incurred.
 
We evaluate potential restructuring projects based on an expected payback period. The payback period represents the number of years of annual cost savings necessary to recover the initial cash outlay for severance and other exit costs plus the noncash expenses recognized for asset write-downs. In general, a restructuring project must have a payback of less than 3 years to be considered beneficial.
 
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These production transfers, facility consolidations, and other long-term cost-cutting measures require us to initially incur significant severance and other exit costs. We anticipate that we will realize the benefits of our restructuring through lower labor costs and other operating expenses in future periods. However, these programs to improve our profitability also involve certain risks which could materially impact our future operating results, as further detailed in Item 1A “Risk Factors” of this annual report on Form 10-K.
 
In response to the economic downturn, during the latter half of 2008 and continuing into 2009, we undertook significant measures to reduce costs. This included a temporary idling of manufacturing capacity to adapt to sellable volume and limiting the building of product for inventory. It also included permanent employee terminations, and temporary layoffs and shutdowns. We incurred restructuring and severance costs of $2.6 million as a result of these programs in response to the global recession. Of these amounts, $2.0 million were recorded in the year ended December 31, 2009.
 
We did not initiate any new restructuring programs during the year ended December 31, 2010 and thus did not record any restructuring expenses during the year ended December 31, 2010.
 
We are presently executing plans to further reduce our costs by consolidating additional manufacturing operations with our expansion into India. These plans will require us to incur restructuring and severance costs in future periods. However, after implementing these plans, we do not anticipate significant restructuring and severance costs for our business except in the context of acquisition integration.
 
While streamlining and reducing fixed overhead, we are exercising caution so that we will not negatively impact our customer service or our ability to further develop products and processes.
 
Our operations in Japan were not directly impacted by the March 2011 Sendai earthquake; however, management will continue to assess and ensure the safety and efficacy of our operations in Japan in an effort to manage costs and minimize disruption to our operations and customers.
 
Israeli Government Incentives
 
We have substantial manufacturing operations in Israel, where we benefit from the government’s tax incentive and employment programs. These benefits take the form of reduced tax rates that are lower than those in the United States and government grants.
 
Foreign Currency
 
We are exposed to foreign currency exchange rate risks, particularly due to transactions in currencies other than the functional currencies of certain subsidiaries. U.S. generally accepted accounting principles (“GAAP”) require that entities identify the “functional currency” of each of their subsidiaries and measure all elements of the financial statements in that functional currency. A subsidiary’s functional currency is the currency of the primary economic environment in which it operates. In cases where a subsidiary is relatively self-contained within a particular country, the local currency is generally deemed to be the functional currency. However, a foreign subsidiary that is a direct and integral component or extension of the parent company’s operations generally would have the parent company’s currency as its functional currency. We have both situations among our subsidiaries.
 
Foreign Subsidiaries which use the Local Currency as the Functional Currency
 
We finance our operations in Europe and certain locations in Asia in local currencies, and accordingly, these subsidiaries utilize the local currency as their functional currency. For those subsidiaries where the local currency is the functional currency, assets and liabilities in the consolidated balance sheets have been translated at the rate of exchange as of the balance sheet date. Translation adjustments do not impact the results of operations and are reported as a separate component of equity.
 
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For those subsidiaries where the local currency is the functional currency, revenues and expenses are translated at the average exchange rate for the year. While the translation of revenues and expenses into U.S. dollars does not directly impact the consolidated statement of operations, the translation effectively increases or decreases the U.S. dollar equivalent of revenues generated and expenses incurred in those foreign currencies.
 
Foreign Subsidiaries which use the U.S. Dollar as the Functional Currency
 
Our operations in Israel and certain locations in Asia are largely financed in U.S. dollars, and accordingly, these subsidiaries utilize the U.S. dollar as their functional currency. For those foreign subsidiaries where the U.S. dollar is the functional currency, all foreign currency financial statement amounts are remeasured into U.S. dollars. Exchange gains and losses arising from remeasurement of foreign currency-denominated monetary assets and liabilities are included in the results of operations. While these subsidiaries transact most business in U.S. dollars, they may have significant costs, particularly payroll-related, which are incurred in the local currency. The cost of products sold and selling, general, and administrative expense for the twelve months of 2010 have been unfavorably impacted (compared to the prior year period) by local currency transactions of subsidiaries which use the U.S. dollar as their functional currency.
 
Off-Balance Sheet Arrangements
 
As of December 31, 2010 and 2009, we do not have any off-balance sheet arrangements.
 
Critical Accounting Policies and Estimates
 
Our significant accounting policies are summarized in Note 2 to our combined and consolidated financial statements. We identify here a number of policies that entail significant judgments or estimates by management.
 
Revenue Recognition
 
We recognize revenue on product sales during the period when the sales process is complete. This generally occurs when products are shipped to the customer in accordance with terms of an agreement of sale, title and risk of loss have been transferred, collectability is reasonably assured, and pricing is fixed or determinable. For a small percentage of sales where title and risk of loss passes at point of delivery, we recognize revenue upon delivery to the customer, assuming all other criteria for revenue recognition are met.
 
Some of our larger systems products have post-shipment obligations, such as customer acceptance, training, or installation. In such circumstances, revenue is deferred until the obligation has been completed unless such obligation is deemed inconsequential and perfunctory.
 
Given the specialized nature of our products, we generally do not allow product returns.
 
Accounts Receivable
 
Our receivables represent a significant portion of our current assets. We are required to estimate the collectability of our receivables and to establish allowances for the amount of receivables that will prove uncollectible. We base these allowances on our historical collection experience, the length of time our receivables are outstanding, the financial circumstances of individual customers, and general business and economic conditions.
 
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Inventories
 
We value our inventories at the lower of cost or market, with cost determined under the first-in, first-out method and market based upon net realizable value. The valuation of our inventories requires our management to make market estimates. For work in process goods, we are required to estimate the cost to completion of the products and the prices at which we will be able to sell the products. For finished goods, we must assess the prices at which we believe the inventory can be sold. Inventories are also adjusted for estimated obsolescence and written down to net realizable value based upon estimates of future demand, technology developments and market conditions.
 
Estimates of Restructuring and Severance Costs and Purchase-Related Restructuring Costs
 
To maintain our cost competitiveness, we are shifting manufacturing emphasis to more advanced automation in higher-labor-cost regions and relocating production to regions with skilled workforces and relatively lower labor costs. We also incur similar costs when we acquire companies.
 
These production transfers, facility consolidations, and other long-term cost-cutting measures require us to initially incur significant severance and other exit costs. We anticipate that we will realize the benefits of our restructuring efforts through lower labor costs and other operating expenses in future periods.
 
Restructuring and severance costs are expensed during the period in which we become obligated to pay those costs and all other requirements for accrual are met. Because transfers of manufacturing operations sometimes occur incrementally over a period, the expense initially recorded is often based on estimates.
 
Because these costs are recorded based on estimates, our actual expenditures for restructuring activities may differ from the initially recorded costs. If this happens, we will need to adjust our estimates in future periods, either by recording additional expenses in future periods, if our initial estimates were too low, or by reversing part of the charges that we recorded initially, if our initial estimates were too high.
 
Under previous accounting standards, plant closure and employee termination costs that we incurred in connection with our acquisition activities were included in the costs of our acquisitions and did not affect earnings or losses on our statement of operations. ASC Topic 805, which we adopted effective January 1, 2009, now requires such costs to be recorded when incurred, as expenses in our statement of operations.
 
Goodwill
 
Goodwill represents the excess of the cost of businesses acquired over the fair value of the net assets acquired at the date of acquisition. Goodwill is not amortized but rather tested for impairment at least annually. We perform our annual impairment test as of the first day of the fiscal fourth quarter. These impairment tests must be performed more frequently if there are triggering events.
 
ASC Topic 350, Intangibles - Goodwill and Other , prescribes a two-step method for determining goodwill impairment. In the first step, we determine the fair value of the reporting unit and compare that fair value to the net book value of the reporting unit. The fair value of the reporting unit is determined using various valuation techniques, including a discounted cash flow analysis (an income approach) and a comparable companies market multiple approach.
 
To measure the amount of the impairment, ASC Topic 350 prescribes that we determine the implied fair value of goodwill in the same manner as if we had acquired those reporting units. Specifically, we must allocate the fair value of the reporting unit to all of the assets of that unit, including any unrecognized intangible assets, in a hypothetical calculation that would yield the implied fair value of goodwill. The impairment loss is measured as the difference between the book value of the goodwill and the implied fair value of the goodwill computed in step two.
 
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For periods prior to the spin-off, Vishay Intertechnology evaluated the goodwill associated with our business as a separate reporting unit for ASC Topic 350 evaluation purposes. For the purposes of the combined and consolidated financial statements presented on a stand-alone basis, we have evaluated our goodwill using our reporting units.
 
In light of a sustained decline in market capitalization for Vishay Intertechnology and its peer group companies, and other factors, Vishay Intertechnology determined that an interim impairment test was necessary as of the end of the second, third, and fourth fiscal quarters of 2008.
 
Based on Vishay Intertechnology’s interim impairment tests performed as of the end of the second, third, and fourth quarters of 2008, we performed retrospective goodwill impairment tests for our reporting units as of the end of the second, third, and fourth quarters of 2008.
 
After completing step one of the impairment tests as of June 28, 2008 and as of September 27, 2008, which was the date of our annual impairment test, we determined that the estimated fair values of our reporting units were greater than the book values of those units, and accordingly, no second step was required as of those dates.
 
Given the further deterioration of market conditions in the fourth quarter of 2008, an additional impairment test was performed as of December 31, 2008 (the end of the fourth fiscal quarter). After completing step one of the impairment tests as of December 31, 2008, we determined that the estimated fair value of each of our reporting units was less than the net book values of those reporting units. This required the completion of the second step of the impairment evaluation. Upon completion of the step two analyses, we recorded impairment charges. Subsequent to recording these impairment charges, there was no remaining goodwill recorded on the combined and consolidated balance sheet. In total, we recorded goodwill impairment charges aggregating $93.5 million for the year ended December 31, 2008.
 
The determination of the fair value of the reporting units and the allocation of that value to individual assets and liabilities within those reporting units requires us to make significant estimates and assumptions. These estimates and assumptions primarily include, but are not limited to: the selection of appropriate comparable companies; control premiums appropriate for acquisitions in the industries in which we compete; the discount rate; terminal growth rates; and forecasts of revenue, operating income, depreciation and amortization, and capital expenditures. The allocation requires several analyses to determine fair value of assets and liabilities including, among others, completed technology, trade names, in-process research and development, customer relationships, and certain property and equipment (valued at replacement costs).
 
Due to the inherent uncertainty involved in making these estimates, actual financial results could differ from those estimates. Changes in assumptions concerning future financial results or other underlying assumptions could have a significant impact on either the fair value of the reporting unit or the amount of the goodwill impairment charge.
 
The goodwill impairment charge is noncash in nature and does not affect our liquidity or cash flows from operating activities, and will not have a material impact on future operations.
 
Impairment of Long-Lived Assets
 
We assess the impairment of our long-lived assets other than goodwill, including property and equipment and identifiable intangible assets subject to amortization, whenever events or changes in circumstances indicate the carrying value may not be recoverable. Factors we consider important, which could trigger an impairment review, include significant changes in the manner of our use of the asset, changes in historical or projected operating performance, and significant negative economic trends.
 
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Pension and Other Postretirement Benefits
 
Accounting for defined benefit pension and other postretirement plans involves numerous assumptions and estimates. The discount rate at which obligations could effectively be settled and the expected long-term rate of return on plan assets are two critical assumptions in measuring the cost and benefit obligations of our pension and other postretirement benefit plans. Other important assumptions include the anticipated rate of future increases in compensation levels, estimated mortality, and for postretirement medical plans, increases or trends in health care costs. Management reviews these assumptions at least annually. We use independent actuaries to assist us in formulating assumptions and making estimates. These assumptions are updated periodically to reflect the actual experience and expectations on a plan-specific basis as appropriate.
 
Our defined benefit plans are concentrated in the United States and the United Kingdom. Plans in these countries comprise approximately 84% of our retirement obligations at December 31, 2010. We utilize published long-term high-quality bond indices to determine the discount rate at the measurement date. We utilize bond yields at various maturity dates to reflect the timing of expected future benefit payments. We believe the discount rates selected are the rates at which these obligations could effectively be settled.
 
For benefit plans which are funded, we establish strategic asset allocation percentage targets and appropriate benchmarks for significant asset classes with the aim of achieving a prudent balance between return and risk. We set the expected long-term rate of return based on the expected long-term average rates of return to be achieved by the underlying investment portfolios. In establishing this rate, we consider historical and expected returns for the asset classes in which the plans are invested, advice from pension consultants and investment advisors, and current economic and capital market conditions. The expected return on plan assets is incorporated into the computation of pension expense. The difference between this expected return and the actual return on plan assets is deferred.
 
We believe that the current assumptions used to estimate plan obligations and annual expense are appropriate in the current economic environment. However, if economic conditions change, we may be inclined to change some of our assumptions, and the resulting change could have a material impact on the combined and consolidated statements of operations and on the combined and consolidated balance sheet.
 
Income Taxes
 
On July 6, 2010, we entered into a tax matters agreement with Vishay Intertechnology under which Vishay Intertechnology will be responsible for all income taxes for periods before the date of the spin-off other than those taxes for which a liability was recorded on our books at the time of the spin-off. Vishay Intertechnology is also principally responsible for managing any income tax audits by the various tax jurisdictions for pre-spin-off periods.
 
We have recorded deferred tax assets representing future tax benefits, but may not be able to realize these future tax benefits in certain jurisdictions. Significant judgment is required in determining the expected future realizability of these deferred tax assets. We periodically evaluate the realizability of our deferred tax assets by assessing the valuation allowance and by adjusting the amount of such allowance, if necessary. The factors used to assess the likelihood of realization include our forecast of future taxable income and available tax planning strategies that could be implemented to realize the net deferred tax assets.
 
Earnings generated by our non-U.S. subsidiaries are deemed to be reinvested outside of the United States indefinitely. Accordingly, generally no provision has been made for U.S. federal and state income taxes on these foreign earnings. Upon distribution of those earnings in the form of dividends or otherwise, we would be subject to U.S. income taxes (subject to an adjustment for foreign tax credits), state income taxes, incremental foreign income taxes, and withholding taxes payable to various foreign countries.
 
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We are or will be subject to income taxes in the U.S. and numerous foreign jurisdictions. Significant judgment is required in evaluating our tax positions and determining our provision for income taxes. During the ordinary course of business, there are many transactions and calculations for which the ultimate tax determination is uncertain. We establish reserves for tax-related uncertainties based on estimates of whether, and the extent to which, additional taxes will be due. These reserves are established when we believe that certain positions might be challenged despite our belief that our tax return positions are supportable. We adjust these reserves in light of changing facts and circumstances and the provision for income taxes includes the impact of reserve provisions and changes to reserves that are considered appropriate.
 
We have joint and several liability with Vishay Intertechnology to multiple tax authorities. However, under the terms of the Tax Matters Agreement, Vishay Intertechnology has agreed to assume this liability and any similar liability for U.S. federal, state or local and foreign income taxes that are determined on a separate company, consolidated, combined, unitary or similar basis for each taxable period in which VPG was a part of Vishay Intertechnology’s affiliated group prior to July 6, 2010.
 
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Results of Operations – Years Ended December 31, 2010, 2009, and 2008
 
Statement of operations’ captions as a percentage of net revenues and the effective tax rates were as follows:
 
    Years ended December 31,
        2010       2009       2008
Costs of products sold   62.8 %   69.4 %   66.9 %
Gross profit   37.2 %   30.6 %   33.1 %
Selling, general, and administrative expenses   27.6 %   25.2 %   21.4 %
Operating income (loss)   9.6 %   4.2 %   -29.6 %
Income (loss) before taxes   8.9 %   3.9 %   -28.3 %
Net earnings (loss)   5.7 %   1.0 %   -30.7 %
Net earnings (loss) attributable to VPG
       stockholders/Parent 		  5.6 %   1.0 %   -30.7 %
Effective tax rate   36.6 %   74.6 %   -8.3 %

Net Revenues
 
Net revenues were as follows (dollars in thousands) :
 
    Years ended December 31,
        2010       2009       2008
Net revenues   $      207,524     $      171,991     $      241,700
Change versus prior year   $ 35,533     $ (69,709 )      
Percentage change versus prior year     20.7 %     -28.8 %      
 
Changes in net revenues were attributable to the following:
 
 
        2010 vs. 2009       2009 vs. 2008
Change attributable to:            
Change in volume   22.1 %   -28.4 %
Change in average selling prices   -0.5 %   1.1 %
Foreign currency effects   -0.6 %   -2.8 %
Acquisitions   0.0 %   0.9 %
Other   -0.3 %   0.4 %
Net change   20.7 %   -28.8 %
 
During the year ended December 31, 2010, our sales volume increased due to improving economic conditions.
 
During the year ended December 31, 2009, our revenues were negatively impacted by the recession, with a significant reduction in volumes across both of our segments and across all geographic areas.
 
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Gross Profit and Margins
 
Gross profit margin for year ended December 31, 2010 was 37.2% as compared to 30.6% for the year ended December 31, 2009. The increase in gross profit margin reflects manufacturing efficiencies resulting from higher production volume and our fixed cost reduction programs.
 
Gross profit margin for year ended December 31, 2009 was 30.6% as compared to 33.1% for the year ended December 31, 2008. The decrease in gross profit margin in 2009 reflects significantly lower production volume attributable to the economic recession and resulting decrease in demand, partially offset by our fixed cost reduction programs and favorable currency conditions.
 
Segments
 
Analysis of revenues and gross profit margins for our reportable segments is provided below.
 
Foil Technology Products
 
Net revenues of the Foil Technology Products segment were as follows (dollars in thousands):
 
    Years ended December 31,
        2010       2009       2008
Net revenues   $      101,557     $ 71,871     $      92,904
Change versus prior year   $ 29,686     $      (21,033 )      
Percentage change versus prior year     41.3 %     -22.6 %      

Changes in Foil Technology Products segment net revenues were attributable to the following:
 
        2010 vs. 2009       2009 vs. 2008
Change attributable to:            
Change in volume   42.1 %   -23.9 %
Change in average selling prices   -0.1 %   1.0 %
Foreign currency effects   -0.4 %   -0.9 %
Acquisitions   0.0 %   1.2 %
Other   -0.3 %   0.0 %
Net change   41.3 %   -22.6 %
             
Gross profit as a percentage of net revenues for the Foil Technology Products segment was as follows:
 
    Years ended December 31,
        2010       2009       2008
Gross margin percentage   47.7 %   42.3 %   45.8 %

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Weighing Modules and Control Systems
 
Net revenues of the Weighing Modules and Control Systems segment were as follows (dollars in thousands):
 
    Years ended December 31,
        2010       2009       2008
Net revenues   $      105,967     $      100,120     $      148,796
Change versus prior year   $ 5,847     $ (48,676 )      
Percentage change versus prior year     5.8 %     -32.7 %      

Changes in Weighing Modules and Control Systems segment net revenues were attributable to the following:
 
        2010 vs. 2009       2009 vs. 2008
Change attributable to:            
Change in volume   7.6 %   -31.3 %
Change in average selling prices   -0.8 %   1.2 %
Foreign currency effects   -0.5 %   -3.2 %
Acquisitions   0.0 %   0.7 %
Other   -0.5 %   -0.1 %
Net change   5.8 %   -32.7 %
             

Gross profit as a percentage of net revenues for the Weighing Modules and Control Systems segment was as follows:
 
    Years ended December 31,
        2010       2009       2008
Gross margin percentage   27.1 %   22.3 %   25.1 %

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Selling, General, and Administrative Expenses
 
Selling, general, and administrative (“SG&A”) expenses are summarized as follows (dollars in thousands):
 
    Years ended December 31,
        2010       2009       2008
Total SG&A expenses   $      57,297     $      43,356     $      51,714  
       as a percentage of sales     27.6 %     25.2 %     21.4 %

Given the specialized nature of our products and our direct sales approach, we incur significant selling, general, and administrative costs.
 
SG&A expenses for the year ended December 31, 2010 increased versus the comparable prior year period, primarily due to increased personnel costs incurred in connection with our transition to being an independent, publicly traded company. Personnel costs have also increased due to the resumption of employee bonus programs that were suspended in 2009 due to the recession and share based compensation expenses.
 
The overall decrease in SG&A expenses for 2009 as compared to 2008 is primarily attributable to lower sales and our cost containment initiatives. The increase in SG&A as a percentage of revenues is primarily due to the decrease in revenues.
 
Several items included in SG&A expenses impact the comparability of these amounts, as summarized below (in thousands) :
 
    Years ended December 31,
        2010       2009       2008
Allocation of corporate overhead costs   $      1,179   $      1,813   $ 2,771  
Amortization of intangible assets     3,033     3,019     2,441  
Net loss (gain) on sales of assets     32     34          (1,189 )

Through the date of the spin-off, we had significant agreements, transactions, and relationships with Vishay Intertechnology operations outside the defined scope of our business. While these transactions are not necessarily indicative of the terms we would have achieved had we been a separate entity, management believes they are reasonable. A description of these transactions and allocations is included in Note 3 to our combined and consolidated financial statements.
 
Historically, we used the corporate services of Vishay Intertechnology for a variety of functions including treasury, tax, legal, internal audit, human resources, and risk management. As of the spin-off, we are an independent, publicly traded company and we incurred additional SG&A costs associated with being an independent, publicly traded company. These additional costs are not reflected in the historical combined and consolidated financial statements.
 
Pursuant to the Transition Services Agreement, Vishay Intertechnology provides VPG certain information technology support services for our foil resistor business. The cost of the services under the transition services agreement is estimated to be less than $0.5 million in the aggregate. As of December 31, 2010, $0.2 million has been paid to Vishay Intertechnology for transition services.
 
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Restructuring and Severance Costs and Related Asset Write-Downs
 
There were no restructuring and severance costs recorded in 2010. We recorded restructuring and severance costs of $2.0 million and $6.3 million during the fiscal years 2009 and 2008, respectively. These costs were incurred as part of our cost reduction initiatives and/or in response to the global economic recession.
 
During 2008, we announced the closure of our load cell manufacturing facility in Breda, the Netherlands, and transferred all manufacturing operations to Israel. We incurred $5.7 million of restructuring and severance costs associated with the closure of our Breda, Netherlands facility.
 
In response to the economic downturn during the latter half of 2008 and 2009, we undertook significant measures to cut costs. This included a strict adaptation of manufacturing capacity to sellable volume and limiting the building of product for inventory. It also included permanent employee terminations, and temporary layoffs and shutdowns. We incurred restructuring and severance costs of $2.0 million and $0.6 million in 2009 and 2008, respectively, as a result of these programs in response to the global recession.
 
Other Income (Expense)
 
Total interest expense for year ended December 31, 2010 decreased by $0.8 million versus the comparable prior year period, primarily attributable to lower interest rates and a lower balance of net payable to Vishay Intertechnology. Interest expense on the net payable to Vishay Intertechnology through the date of the spin-off is included in the combined and consolidated financial statements based on the prevailing interest rate of Vishay Intertechnology’s revolving credit facility, or if greater, an interest rate required by local tax authorities.
 
Foreign currency exchange gains and losses represent the impact of changes in foreign currency exchange rates with, among other things, the revaluation of balance sheet accounts. The Company recorded a foreign exchange loss of $1.0 million during 2010 as compared to a foreign exchange gain of $0.1 million during 2009.
 
The foreign exchange loss during the year is largely due to the revaluation of the non-U.S. dollar-denominated assets at the Company's Israeli operations.
 
The following table analyzes the components of the line “Other” on the combined and consolidated statement of operations (in thousands):
 
    Years ended December 31,    
        2010       2009       Change
Foreign exchange gain (loss)   $      (1,006 )   $ 122     $      (1,128 )
Interest income     355       725       (370 )
Other     (277 )          (133 )     (144 )
    $ (928 )   $ 714     $ (1,642 )
                         
Total interest expense for the year ended December 31, 2009 decreased by $0.3 million compared to the prior year, primarily attributable to lower interest rates and a lower balance of net payable to Vishay Intertechnology. Interest expense on the net payable to Vishay Intertechnology is included in the combined and consolidated financial statements based on the prevailing interest rate of Vishay Intertechnology’s revolving credit facility, or if greater, an interest rate required by local tax authorities.
 
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The following table analyzes the components of the line “Other” on the combined and consolidated statement of operations (in thousands):
 
    Years ended December 31,    
        2009       2008       Change
Foreign exchange gain   $ 122     $      2,470     $      (2,348 )
Interest income     725       1,902       (1,177 )
Income recognized on the equity method     -       444       (444 )
Other          (133 )     (36 )     (97 )
    $ 714     $ 4,780     $ (4,066 )
                         
Income Taxes
 
The effective tax rate, based on earnings before income taxes, for the year ended December 31, 2010 was 36.6%, as compared to 74.6% for the year ended December 31, 2009 and (8.3%) for the year ended December 31, 2008.
 
The effective tax rates reflect the fact that we could not recognize for accounting purposes the tax benefit of losses incurred in certain jurisdictions, although these losses may be available to offset future taxable income. Under applicable accounting principles, we may not recognize deferred tax assets for loss carryforwards in jurisdictions where there is a recent history of cumulative losses, where there is no taxable income in the carryback period, where there is insufficient evidence of future earnings to overcome the loss history and where there is no other positive evidence, such as the likely reversal of taxable temporary differences, that would result in the utilization of loss carryforwards for tax purposes.
 
The high effective tax rate for the year ended December 31, 2009 was principally driven by the down turn in our business and the inability to record a deferred tax benefit due to losses in certain foreign jurisdictions. However, as our business has recovered, we saw an improvement in the 2010 effective tax rate as compared to the same period in 2009.
 
The negative tax rate for the year ended December 31, 2008 was principally attributable to the goodwill impairment charge recorded in 2008. The vast majority of our goodwill was not deductible for income tax purposes. We recognized tax benefits of $1.0 million during 2008, associated with the goodwill impairment charge.
 
We operate in an international environment with significant operations in various locations outside the U.S. Accordingly, the consolidated income tax rate is a composite rate reflecting our earnings and the applicable tax rates in the various locations where we operate. Part of our strategy is to achieve cost savings through the transfer and expansion of manufacturing operations to countries where we can benefit from lower labor costs and available tax and other government-sponsored incentives. Changes in the effective tax rate are largely attributable to changes in the mix of pretax income among our various taxing jurisdictions.
 
Additional information about income taxes is included in Note 7 to our combined and consolidated financial statements.
 
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Financial Condition, Liquidity, and Capital Resources
 
At December 31, 2010 and December 31, 2009, we had significant cash balances and limited third-party debt. Prior to the spin-off, we had significant intercompany balances payable to Vishay Intertechnology and its affiliates. In connection with the spin-off, our outstanding intercompany payable of $19.4 million was paid in full on July 6, 2010. Vishay Intertechnology made capital contributions of $19.0 million, effective as of July 6, 2010, pursuant to the master separation agreement, to ensure that we had net cash within the range specified in the master separation agreement.
 
Effective July 6, 2010, we issued approximately $10.0 million aggregate principal amount of exchangeable notes in accordance with the terms of Vishay Intertechnology's outstanding exchangeable notes due 2102, which required that the existing exchangeable notes of Vishay Intertechnology be exchanged in connection with the spin-off, for a combination of new notes of Vishay Intertechnology and notes issued by VPG. The maturity date of these notes is December 13, 2102.
 
Our other long-term debt is not significant and consists of debt held by our Japanese subsidiary of approximately $1.7 million at December 31, 2010.
 
On October 14, 2010, we entered into a Credit Agreement among the Company, the lenders, RBS Citizens, National Association as joint book-runner and JPMorgan Chase Bank, National Association as agent for such lenders (“the Agent”), pursuant to which the lenders have made available to the Company a multi-currency, secured credit facility. The credit facility consists of a secured revolving facility in an aggregate principal amount of $25.0 million with sublimits of (i) $5.25 million which can be used for letters of credit, and (ii) up to $5.0 million which can be used for loans outstanding for up to 5 business days (“Swing Loans”). The Revolving Facility terminates on October 14, 2013.
 
Interest payable on the Revolving Facility is based upon the Agent’s prime rate, the Federal Funds Rate, or LIBOR (“Base Rate”). Depending upon the Company’s leverage ratio or the type of advance, an interest rate margin ranging from 0.00% to 2.75% per annum is added to the applicable Base Rate to determine the interest payable on the Revolving Facility. The Company paid a one-time fee on the commitment and is required to pay a quarterly fee of 0.30% per annum to 0.50% per annum on the unused portion of the Revolving Facility which is determined based on the Company’s leverage ratio each quarter. Additional customary fees apply with respect to letters of credit.
 
The obligations under the Revolving Facility are secured by pledges of stock in certain domestic and foreign subsidiaries, as well as guarantees by substantially all of the Company’s domestic subsidiaries. The obligations of the Company and the guarantors under the Revolving Facility are secured by substantially all the assets (excluding real estate) of the Company and such guarantors. The Credit Agreement restricts the Company from paying cash dividends and requires the Company to comply with other customary covenants, representations and warranties, including the maintenance of specific financial ratios.
 
The financial maintenance covenants include (a) a leverage ratio of not more than 2.5 to 1.0; and (b) a fixed charges coverage ratio of not less than 2.5 to 1.0. We were in compliance with all covenants at December 31, 2010. Our leverage ratio and fixed charges ratio were 0.4 to 1.0 and 30.0 to 1.0, respectively. We expect to continue to be in compliance with these covenants based on current projections. If we are not in compliance with all of the required financial covenants, the credit facility could be terminated by the lenders, and all amounts outstanding pursuant to the credit facility could become immediately payable.
 
The Credit Agreement is structured to permit the Company to enter into a second secured revolving credit facility of up to a maximum principal amount not to exceed $15.0 million (or the equivalent thereof in Israeli shekels to be determined at the time the facility is entered into), on terms and conditions reasonably satisfactory to the Agent and secured separately by assets of the Company based primarily in Israel. See Note 8 to our combined and consolidated financial statements for more details.
 
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Due to our strong product portfolio and market position, our business has historically generated significant cash flow. During the year ended December 31, 2010, we generated $21.7 million of cash from operating activities, versus $29.2 million during the comparable prior year period. Our cash flow gives us the flexibility to create stockholder value by investing in our business. The cash generated from operations is used to fund our capital expenditure plans, and cash in excess of our capital expenditure needs is available to fund our acquisition strategy.
 
We refer to the amount of cash generated from operations in excess of our capital expenditure needs and net of proceeds from the sale of assets as “free cash,” a measure which management uses to evaluate our ability to fund acquisitions. We historically have generated positive “free cash,” even in the recent recession, and we expect to continue to be able to do so.
 
Our cash flows from operating activities during the year ended December 31, 2010 were negatively impacted by the transition of selling activities to VPG’s dedicated sales forces for certain of our Foil Technology products effective June 1, 2010, in anticipation of the spin-off. These sales activities were previously performed by Vishay Intertechnology. As a result of this transition, our third-party accounts receivable increased significantly, which has a corresponding impact on cash flows from operating activities. Approximately 86% and 98% of our cash and cash equivalents balance at December 31, 2010 and December 31, 2009, respectively, was held by our non-U.S. subsidiaries. If cash is repatriated to the United States, we would be subject to additional U.S. income taxes (subject to an adjustment for foreign tax credits), state income taxes, incremental foreign income taxes, and withholding taxes payable to various foreign countries.
 
The following table summarizes the components of net cash (debt) at December 31, 2010 and at December 31, 2009 (in thousands) :
 
    December 31,
        2010       2009
Cash and cash equivalents   $      82,245   $      63,192
             
Third-party debt, including current and long-term            
       Revolving credit facility   $ -   $ -
       Third-party debt held by Japanese subsidiary     1,734     1,735
       Exchangeable notes due 2102     9,958     -
       Notes payable to banks     85     9
              Total third-party debt     11,777     1,744
       Net payable to affiliates     -     18,495
              Net cash   $ 70,468   $ 42,953
             
Measurements such as “free cash” and “net cash (debt)” do not have uniform definitions and are not recognized in accordance with U.S. GAAP. Such measures should not be viewed as alternatives to GAAP measures of performance or liquidity. However, management believes that “free cash” is a meaningful measure of our ability to fund acquisitions, and that an analysis of “net cash (debt)” assists investors in understanding aspects of our cash and debt management. These measures, as calculated by us, may not be comparable to similarly titled measures used by other companies.
 
Our financial condition as of December 31, 2010 is strong, with a current ratio (current assets to current liabilities) of 4.6 to 1, as compared to a ratio of 3.7 to 1 at December 31, 2009. This increase in the current ratio is primarily due to an increase in cash and accounts receivable; partially offset by an increase in trade accounts payable and payroll related liabilities at December 31, 2010. Assuming the repayment of the net payable to Vishay Intertechnology from cash on-hand, our current ratio at December 31, 2009 would have been 6.4 to 1.0.
 
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Our business is not particularly capital intensive. Cash paid for property and equipment for the year ended December 31, 2010 and December 31, 2009 was $8.4 million and $2.2 million, respectively. We limited our capital expenditures in 2009 as a result of the economic uncertainty. During 2010, capital expenditures increased in anticipation of the spin-off. Capital expenditures for 2011 are expected to be approximately $16.0 million to $20.0 million. The capital expenditures are primarily required to: (1) construct a new manufacturing facility in India that will consolidate the majority of our existing manufacturing capacity in the Weighing Modules and Control Systems segment into a low-labor-rate facility; (2) facilitate a new manufacturing line that will begin producing a new product offering in the Foil Technology Products segment; and (3) maintain our business systems and facilities.
 
“Other investing activities” on the combined and consolidated statements of cash flows principally represent principal payments on a long-term note related to the sale of AeroGo, a business acquired as part of the acquisition of SI Technologies and divested in 2005. At December 31, 2009, the note receivable related to the disposition of the AeroGo business has been fully repaid.
 
Contractual Commitments
 
As of December 31, 2010, we had contractual obligations as follows (in thousands) :
 
          Payments due by period
          Less than   1-3   4-5   After 5
        Total       1 year       years       years       years
Long-term debt   $ 11,692   $ -   $ -   $ 1,011   $ 10,681
Interest payments on long-term debt     3,061     131     244     84     2,602
Operating leases     4,440     1,980     1,793     434     233
Notes payable     85     85     -     -     -
Non-competition agreements     1,755     390     780     585     -
Expected pension and                              
       postretirement plan funding     7,169     490     1,152     1,312     4,215
Total contractual cash obligations   $        28,202   $       3,076   $        3,969   $        3,426   $        17,731
  

Inflation
 
Normally, inflation does not have a significant impact on our operations as our products are not generally sold on long-term contracts. Consequently, we can adjust our selling prices, to the extent permitted by competition, to reflect cost increases caused by inflation.
 
Recent Accounting Pronouncements
 
See Note 2 to our combined and consolidated financial statements for a discussion of recent accounting pronouncements.
 
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Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 
We are exposed to certain financial risks, including fluctuations in foreign currency exchange rates, interest rates, and commodity prices. We manage our exposure to these market risks through internally established policies and procedures and, when deemed appropriate, through the use of derivative financial instruments. Our policies do not allow speculation in derivative instruments for profit or execution of derivative instrument contracts for which there are no underlying exposures. We do not use financial instruments for trading purposes and we are not a party to any leveraged derivatives. We monitor our underlying market risk exposures on an ongoing basis and believe that we can modify or adapt our strategies as needed.
 
Interest Rate Risk
 
We are exposed to changes in interest rates as a result of our borrowing activities and our cash balances.
 
At December 31, 2010 we have $10.0 million outstanding on our exchangeable notes, which bear interest at LIBOR.
 
The Company entered into a revolving credit facility on October 14, 2010. Interest payable on the facility is based upon the agent’s prime rate, the federal funds rate or LIBOR. At December 31, 2010, the Company had nothing outstanding under the revolving credit facility.
 
At December 31, 2010, we have $82.2 million of cash and cash equivalents, which accrues interest at various variable rates.
 
We historically have had significant amounts payable to Vishay Intertechnology affiliates. These balances were repaid at spin-off.
 
Based on the debt and cash positions at December 31, 2010, we would expect a 50 basis point increase or decrease in interest rates to increase or decrease our annualized net earnings by approximately $0.3 million.
 
See Note 8 to our combined and consolidated financial statements for additional information about our long-term debt.
 
Foreign Exchange Risk
 
We are exposed to foreign currency exchange rate risks, particularly due to market values of transactions in currencies other than the functional currencies of certain subsidiaries. As of December 31, 2010 and 2009, we did not have any outstanding foreign currency forward exchange contracts.
 
Our significant foreign currency exposures are to the British pound, Israeli shekel, Euro, Indian rupee, Japanese yen, Swedish krona, Taiwanese dollar, and Chinese renminbi.
 
We finance our operations in Europe and certain locations in Asia in local currencies. Our operations in Israel and certain locations in Asia are largely financed in U.S. dollars, but these subsidiaries also have significant transactions in local currencies. Our exposure to foreign currency risk is mitigated to the extent that the costs incurred and the revenues earned in a particular currency offset one another. Our exposure to foreign currency risk is more pronounced in Israel and China because the percentage of expenses denominated in Israeli shekels and Chinese renminbi to total expenses is much greater than the percentage of sales denominated in Israeli shekels and Chinese renminbi to total sales. Therefore, if the Israeli shekel and Chinese renminbi strengthen against all or most of our other major currencies, our operating profit is reduced. We also have a higher percentage of British pound-denominated sales than expenses. Therefore, when the British pound strengthens against all or most of our other major currencies, our operating profit is increased. Accordingly, we monitor several important cross currency rates.
 
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We have performed a sensitivity analysis as of December 31, 2010, using a model that measures the change in the values arising from a hypothetical 10% adverse movement in foreign currency exchange rates relative to the U.S. dollar, with all other variables held constant. The foreign currency exchange rates we used were based on market rates in effect at December 31, 2010. The sensitivity analysis indicated that a hypothetical 10% adverse movement in foreign currency exchange rates would impact our net earnings by approximately $1.3 million for the year ended December 31, 2010, although individual line items in our combined and consolidated statement of operations would be materially affected. For example, a 10% weakening in all foreign currencies would increase the U.S. dollar equivalent of operating income generated in foreign currencies, which would be offset by foreign exchange losses of our foreign subsidiaries that have significant transactions in U.S. dollars or have the U.S. dollar as their functional currency.
 
A change in the mix of the currencies in which we transact our business could have a material effect on the estimated impact of the hypothetical 10% movement in the value of the U.S. dollar. Furthermore, the timing of cash receipts and disbursements could result in materially different actual results versus the hypothetical 10% movement in the value of the U.S. dollar, particularly if there are significant changes in exchange rates in a short period of time.
 
Commodity Price Risk
 
Although most materials incorporated in our products are available from a number of sources, certain materials are available only from a relatively limited number of suppliers.
 
Some of the most highly specialized materials for our sensors are sourced from a single vendor. We maintain a safety stock inventory of certain critical materials at our facilities.
 
Certain metals used in the manufacture of our products are traded on active markets, and can be subject to significant price volatility.
 
Our results of operations may be materially and adversely affected if we have difficulty obtaining these raw materials, the quality of available raw materials deteriorates, or there are significant price changes for these raw materials. For periods in which the prices of these raw materials are rising, we may be unable to pass on the increased cost to our customers which would result in decreased margins for the products in which they are used. For periods in which the prices are declining, we may be required to write down our inventory carrying cost of these raw materials, since we record our inventory at the lower of cost or market. Depending on the extent of the difference between market price and our carrying cost, this write-down could have a material adverse effect on our net earnings. We also may need to record losses for adverse purchase commitments for these materials in periods of declining prices.
 
We estimate that a 10% increase or decrease in the costs of raw materials subject to commodity price risk would decrease or increase our net earnings by $0.3 million, assuming that such changes in our costs have no impact on the selling prices of our products and that we have no pending commitments to purchase metals at fixed prices.
 
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Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 
The financial statements required by this Item are included herein, commencing on page F-1 of this report.
 
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
 
None.
 
Item 9A. CONTROLS AND PROCEDURES
 
Under the rules and regulations of the Securities and Exchange Commission, we are not required to comply with the requirements of Section 404 of the Sarbanes-Oxley Act of 2002 until we file our Annual Report on Form 10-K for our fiscal year ending December 31, 2011, so long as we continue to meet the definition of a non-accelerated filer. In our Annual Report on Form 10-K for the year ending December 31, 2011, management and our independent registered public accounting firm will be required to provide an assessment as to the effectiveness of our internal controls over financial reporting as of December 31, 2011.
 
Disclosure Controls and Procedures
 
An evaluation was performed under the supervision and with the participation of our management, including the Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), of the effectiveness of the design and operation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) and Rule 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Based on that evaluation, our CEO and CFO concluded that our disclosure controls and procedures were effective as of the end of the period covered by this annual report to ensure that information required to be disclosed in reports that we file or submit under the Exchange Act are: (1) recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms; and (2) accumulated and communicated to our management, including our CEO and CFO, as appropriate to allow timely decisions regarding required disclosure.
 
Internal Controls and Procedures
 
This annual report does not include a report of management’s assessment regarding internal control over financial reporting or an attestation report of the company’s registered public accounting firm due to a transition period established by rules of the Securities and Exchange Commission for newly public companies.
 
Changes in Internal Controls over Financial Reporting
 
There were no changes in our internal control over financial reporting during the period covered by this report that have materially affected, or are reasonably likely to materially affect our internal control over financial reporting.
 
Item 9B. OTHER INFORMATION
 
None.
 
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Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
 
The information contained under the heading “Executive Officers” in Item 4 hereof and the information contained under the heading “Nominees for Election by Shareholders” in the definitive Proxy Statement for the Company’s 2011 Annual Meeting of Shareholders, which will be filed within 120 days of December 31, 2010, our most recent fiscal year end and is incorporated herein by reference.
 
The Company has adopted codes of conduct that constitute “codes of ethics” as that term is defined in paragraph (b) of Item 406 of Regulation S-K and that apply to the Company’s principal executive officer, principal financial officer, principal accounting officer or controller and to any persons performing similar functions. Such codes of conduct are posted on the Company’s internet website, the address of which is www.VishayPG.com.
 
In addition to the certifications of the Company’s Chief Executive Officer and Chief Financial Officer filed as exhibits to this Annual Report on Form-10K, on March 24, 2011, the Company’s Chief Executive Officer submitted to the New York Stock Exchange the annual certification regarding compliance with the NYSE’s corporate governance listing standards required by Section 303A.12 (a) of the NYSE Listed Company Manual.
 
Item 11. EXECUTIVE COMPENSATION
 
Information required under this item will be contained in our definitive proxy statement for the Company’s 2011 Annual Meeting of Shareholders, which will be filed within 120 days of December 31, 2010, our most recent fiscal year end, and is incorporated herein by reference.
 
Item 12.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
 
Information required under this item will be contained in our definitive proxy statement for the Company’s 2011 Annual Meeting of Shareholders, which will be filed within 120 days of December 31, 2010, our most recent fiscal year end, and is incorporated herein by reference.
 
Item 13 . CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS, AND DIRECTOR INDEPENDENCE
 
Information required under this item will be contained in our definitive proxy statement for the Company’s 2011 Annual Meeting of Shareholders, which will be filed within 120 days of December 31, 2010, our most recent fiscal year end, and is incorporated herein by reference.
 
Item 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
 
Information required under this item will be contained in our definitive proxy statement, which will be filed within 120 days of December 31, 2010, our most recent fiscal year end, and is incorporated herein by reference.
 
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PART IV
 
Item 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES  
 
(a)     Documents Filed as part of Form 10-K
       
       1)        Financial Statements
   
      The Combined and Consolidated Financial Statements for the year ended December 31, 2010 are filed herewith. See index to the Combined and Consolidated Financial Statements on page F-1 of this report.
   
  2)   Financial Statement Schedules
   
      All financial statement schedules for which provision is made in the applicable accounting regulation of the Securities and Exchange Commission are not required under the related instructions or are inapplicable and therefore have been omitted.
   
  3)   Exhibits
 
Exhibit No.       Description  
3.1   Amended and Restated Certificate of Incorporation of Vishay Precision Group, Inc., effective June 25, 2010 (previously filed as an exhibit to the Registrant’s Current Report on Form 8-K filed with the SEC on July 1, 2010 and incorporated herein by reference)
3.2   Amended and Restated By-Laws of Vishay Precision Group, Inc., effective July 6, 2010 (previously filed as an exhibit to the Registrant’s Current Report on Form 8-K filed with the SEC on July 7, 2010 and incorporated herein by reference)
10.1   Master Separation and Distribution Agreement, dated June 22, 2010, between Vishay Precision Group, Inc. and Vishay Intertechnology, Inc. (previously filed as an exhibit to the Registrant’s Form 10 Registration Statement of Vishay Precision Group, Inc., filed with the Securities and Exchange Commission on June 22, 2010 and incorporated herein by reference)
10.2   Employee Matters Agreement, dated June 22, 2010, by and among Vishay Intertechnology, Inc. and Vishay Precision Group, Inc. (previously filed as an exhibit to the Registrant’s Current Report on Form 8-K filed with the SEC on June 23, 2010 and incorporated herein by reference)
10.3   Tax Matters Agreement, dated July 6, 2010, between Vishay Precision Group, Inc. and Vishay Intertechnology, Inc. (previously filed as an exhibit to the Registrant’s Current Report on Form 8-K filed with the SEC on July 7, 2010 and incorporated herein by reference)
10.4   Trademark License Agreement, dated July 6, 2010, between Vishay Precision Group, Inc. and Vishay Intertechnology, Inc. (previously filed as an exhibit to the Registrant’s Current Report on Form 8-K filed with the SEC on July 7, 2010 and incorporated herein by reference)
10.5   Transition Services Agreement, dated July 6, 2010, between Vishay Precision Group, Inc. and Vishay Intertechnology, Inc. (previously filed as an exhibit to the Registrant’s Current Report on Form 8-K filed with the SEC on July 7, 2010 and incorporated herein by reference)
10.6*   Supply Agreement, dated July 6, 2010, between Vishay Advanced Technology, Ltd. and Vishay Dale Electronics, Inc. (previously filed as an exhibit to the Registrant’s Current Report on Form 8-K filed with the SEC on July 7, 2010 and incorporated herein by reference)

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Exhibit No.       Description  
10.7   Secondment Agreement, dated July 6, 2010, between Vishay Precision Group, Inc. and Vishay Intertechnology, Inc. (previously filed as an exhibit to the Registrant’s Current Report on Form 8-K filed with the SEC on July 7, 2010 and incorporated herein by reference)
10.8*    Patent License Agreement, dated July 6, 2010, between Vishay Precision Group, Inc. and Vishay Dale Electronics, Inc. (previously filed as an exhibit to the Registrant’s Current Report on Form 8-K filed with the SEC on July 7, 2010 and incorporated herein by reference)
10.9   Lease Agreement, dated July 4, 2010, between Vishay Advanced Technology, Ltd. and V.I.E.C. Ltd. (previously filed as an exhibit to the Registrant’s Current Report on Form 8-K filed with the SEC on July 7, 2010 and incorporated herein by reference)
10.10*   Supply Agreement, dated July 6, 2010, between Vishay Dale Electronics, Inc. and Vishay Advanced Technology, Ltd. (previously filed as an exhibit to the Registrant’s Current Report on Form 8-K filed with the SEC on July 7, 2010 and incorporated herein by reference)
10.11*   Supply Agreement, dated July 6, 2010, between Vishay Measurements Group, Inc. and Vishay S.A. (previously filed as an exhibit to the Registrant’s Current Report on Form 8-K filed with the SEC on July 7, 2010 and incorporated herein by reference)
10.12*   Manufacturing Agreement, dated July 6, 2010, between Vishay S.A. and Vishay Precision Foil GmbH (previously filed as an exhibit to the Registrant’s Current Report on Form 8-K filed with the SEC on July 7, 2010 and incorporated herein by reference)
10.13   Intellectual Property License Agreement, dated July 6, 2010, between Vishay S.A. and Vishay Precision Foil GmbH (previously filed as an exhibit to the Registrant’s Current Report on Form 8-K filed with the SEC on July 7, 2010 and incorporated herein by reference)
10.14*   Supply Agreement, dated July 6, 2010, between Vishay Precision Foil GmbH and Vishay S.A. (previously filed as an exhibit to the Registrant’s Current Report on Form 8-K filed with the SEC on July 7, 2010 and incorporated herein by reference)
10.15   Intellectual Property License Agreement, dated July 6, 2010, between Vishay S.A. and Vishay Measurements Group, Inc. (previously filed as an exhibit to the Registrant’s Current Report on Form 8-K filed with the SEC on July 7, 2010 and incorporated herein by reference)
10.16   Lease Agreement, between Alpha Electronics Corp. and Vishay Japan Co., Ltd. (previously filed as an exhibit to the Registrant’s Current Report on Form 8-K filed with the SEC on July 7, 2010 and incorporated herein by reference)
10.17   Lease Agreement, dated July 6, 2010, between Vishay Intertechnology, Inc. and Vishay Precision Group, Inc. (previously filed as an exhibit to the Registrant’s Current Report on Form 8-K filed with the SEC on July 7, 2010 and incorporated herein by reference)
10.18   Lease Agreement, dated July 4, 2010, between Vishay Precision Israel, Ltd. and Vishay Israel, Ltd. (previously filed as an exhibit to the Registrant’s Current Report on Form 8-K filed with the SEC on July 7, 2010 and incorporated herein by reference)
10.19   Vishay Precision Group, Inc. 2010 Stock Incentive Program, effective July 6, 2010. (previously filed as an exhibit to the Registrant’s Current Report on Form 8-K filed with the SEC on July 7, 2010 and incorporated herein by reference)
10.20   Warrant Agreement, dated July 21, 2010, by Vishay Precision Group, Inc. and American Stock Transfer & Trust Co.
10.21   Note Instrument, dated July 21, 2010, by Vishay Precision Group, Inc.
10.22   Put and Call Agreement, dated July 21, 2010, by and among Vishay Precision Group, Inc., American Stock Transfer & Trust Co. and the noteholders whose signatures are set forth on the signature pages thereto

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Exhibit No.       Description  
10.23   Credit Agreement, dated October 14, 2010, by and among Vishay Precision Group, Inc., JPMorgan Chase Bank, National Association, as agent, and lenders party thereto (previously filed as an exhibit to the Registrant’s Current Report on Form 8-K filed with the SEC on October 20, 2010 and incorporated herein by reference)
10.24   Security Agreement, dated October 14, 2010, by and among Vishay Precision Group, Inc., certain of its domestic subsidiaries, and JPMorgan Chase Bank, National Association, as agent (previously filed as an exhibit to the Registrant’s Current Report on Form 8-K filed with the SEC on October 20, 2010 and incorporated herein by reference)
10.25   Form of Stock Option Award Agreement (previously filed as an exhibit to the Registrant’s Quarterly Report on Form 10-Q filed with the SEC on November 2, 2010 and incorporated herein by reference)
10.26   Form of Restricted Stock Unit Award Agreement for Director Grants (previously filed as an exhibit to the Registrant’s Quarterly Report on Form 10-Q filed with the SEC on November 2, 2010 and incorporated herein by reference)
10.27   Form of Restricted Stock Unit Award Agreement for Employee Grants (previously filed as an exhibit to the Registrant’s Quarterly Report on Form 10-Q filed with the SEC on November 2, 2010 and incorporated herein by reference)
10.28   Employment Agreement, dated November 17, 2010, by and among Vishay Advanced Technology and Ziv Shoshani (previously filed as an exhibit to the Registrant’s Current Report on Form 8-K filed with the SEC on November 23, 2010 and incorporated herein by reference)
10.29   Employment Agreement, dated November 17, 2010, by and among Vishay Precision Group, Inc. and William M. Clancy (previously filed as an exhibit to the Registrant’s Current Report on Form 8-K filed with the SEC on November 23, 2010 and incorporated herein by reference)
10.30   Employment Agreement, dated November 17, 2010, by and among Vishay Precision Group, Inc. and Thomas P. Kieffer (previously filed as an exhibit to the Registrant’s Current Report on Form 8-K filed with the SEC on November 23, 2010 and incorporated herein by reference)
21.1   List of Subsidiaries
23.1   Consent of Ernst & Young LLP relating to the Registrant’s financial statements
31.1   Certification pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 – Ziv Shoshani, Chief Executive Officer
31.2   Certification pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 – William M. Clancy, Chief Financial Officer
32.1   Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 – Ziv Shoshani, Chief Executive Officer
32.2   Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 – William M. Clancy, Chief Financial Officer
99.1   Information Statement of Vishay Precision Group, Inc. (previously filed as an exhibit to the Registrant’s Form 10 Registration Statement of Vishay Precision Group, Inc., filed with the Securities and Exchange Commission on June 22, 2010 and incorporated herein by reference).
____________________

* Confidential treatment has been accorded to certain portions of this Exhibit. Omitted portions have been filed separately with the Securities and Exchange Commission.
 
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SIGNATURES
 
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
  VISHAY PRECISION GROUP, INC.
     
  By:   /s/ Ziv Shoshani
    Ziv Shoshani
Date: March 24, 2011   President and Chief Executive Officer

P OWER OF A TTORNEY
 
Vishay Precision Group, Inc., a Delaware corporation, and each person whose signature appears below constitutes and appoints each of Ziv Shoshani and William M. Clancy, and either of them, such person’s true and lawful attorney-in-fact, with full power of substitution and resubstitution, for such person and in such person’s name, place and stead, in any and all capacities, to sign on such person’s behalf, individually and in each capacity stated below, any and all amendments to this Annual Report on Form 10-K and other documents in connection therewith, and to file the same and all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact, and each of them, full power and authority to do and perform each and every act and thing necessary or desirable to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, thereby ratifying and confirming all that said attorneys-in-fact, or any of them, or their or his or her substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
 
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this Form 10-K has been signed by the following persons on behalf of the Registrant in the capacities and on the date indicated below.
 
Signature       Title       Date
/s/ Ziv Shoshani   Chief Executive Officer and Director   March 24, 2011
Ziv Shoshani   (Principal Executive Officer)    
         
/s/ William M. Clancy   Executive Vice President & Chief Financial Officer   March 24, 2011
William M. Clancy   (Principal Financial and Accounting Officer)    
         
/s/ Marc Zandman   Director   March 24, 2011
Marc Zandman        
         
/s/ Samuel Broydo   Director   March 24, 2011
Samuel Broydo        
         
/s/ Saul V. Reibstein   Director   March 24, 2011
Saul V. Reibstein        
         
/s/ Timothy V. Talbert   Director   March 24, 2011
Timothy V. Talbert        

- 61 -
 
 

Vishay Precision Group Inc.
Index to Combined and Consolidated Financial Statements
 
Report of Independent Registered Public Accounting Firm       F-2
Combined and Consolidated Balance Sheets   F-3
Combined and Consolidated Statements of Operations   F-5
Combined and Consolidated Statements of Cash Flows   F-6
Combined and Consolidated Statements of Equity   F-7
Notes to Combined and Consolidated Financial Statements   F-9

F-1
 
 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
The Board of Directors and Stockholders of Vishay Precision Group, Inc.
 
We have audited the accompanying combined and consolidated balance sheets of Vishay Precision Group, Inc. (the “Company”) as of December 31, 2010 and 2009, and the related combined and consolidated statements of operations, equity, and cash flows for each of the three years in the period ended December 31, 2010. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
 
We conducted our audits in accordance with standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Company’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
 
In our opinion, the financial statements referred to above present fairly, in all material respects, the combined and consolidated financial position of Vishay Precision Group, Inc. at December 31, 2010 and 2009, and the combined and consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2010, in conformity with U.S. generally accepted accounting principles.
 
/s/ Ernst & Young LLP

Philadelphia, Pennsylvania
March 24, 2011
 
F-2
 
 

VISHAY PRECISION GROUP, INC.
Combined and Consolidated Balance Sheets
(In thousands, except share amounts)
 
    December 31,   December 31,
        2010       2009
Assets                
Current assets:                
       Cash and cash equivalents   $           82,245     $          63,192  
       Accounts receivable, net of allowances for doubtful                
              accounts of $707 and $952, respectively     33,988       23,345  
                 
       Raw materials     14,361       13,341  
       Work in process     15,360       13,214  
       Finished goods     18,616       17,247  
              Net inventories     48,337       43,802  
       Deferred income taxes     4,022       4,960  
       Prepaid expenses and other current assets     5,540       4,522  
Total current assets     174,132       139,821  
                 
Property and equipment, at cost:                
Land     1,991       2,003  
Buildings and improvements     40,036       38,486  
Machinery and equipment     68,566       64,681  
Software     4,274       3,607  
Construction in progress     2,282       338  
Accumulated depreciation     (70,402 )     (64,516 )
      46,747       44,599  
                 
Intangible assets, net     14,500       17,217  
                 
Other assets     13,334       8,142  
Total assets   $ 248,713     $ 209,779  
                 

Continues on the following page.
 
F-3
 
 

VISHAY PRECISION GROUP, INC.
Combined and Consolidated Balance Sheets (continued)
(In thousands, except share amounts)
 
    December 31,   December 31,
        2010       2009
Liabilities and equity                
Current liabilities:                
       Notes payable to banks   $           85     $          9  
       Trade accounts payable     11,537       5,805  
       Net payable to affiliates     -       18,495  
       Payroll and related expenses     12,554       6,619  
       Other accrued expenses     8,680       4,573  
       Income taxes     4,847       1,647  
       Current portion of long-term debt     -       184  
Total current liabilities     37,703       37,332  
                 
Long-term debt, less current portion     11,692       1,551  
Deferred income taxes     4,212       5,993  
Other liabilities     7,468       6,141  
Accrued pension and other postretirement costs     10,708       10,549  
Total liabilities     71,783       61,566  
                 
Commitments and contingencies                
                 
Equity:                
       Preferred stock, par value $1.00 per share:                
              authorized - 1,000,000 shares; none issued                
       Common stock, par value $0.10 per share:                
              authorized 25,000,000 shares; 12,306,788 shares outstanding                
              as of December 31, 2010 and 0 shares outstanding as of                
              December 31, 2009     1,231       -  
       Class B convertible common stock, par value $0.10 per share:                
              authorized 3,000,000 shares; 1,025,196 shares outstanding                
              as of December 31, 2010 and 0 shares outstanding as of                
              December 31, 2009     103       -  
       Capital in excess of par value     180,142       -  
       Retained earnings     5,894       -  
       Parent net investment     -       157,258  
       Accumulated other comprehensive income (loss)     (10,585 )     (9,168 )
       Total Vishay Precision Group, Inc. stockholders' or parent equity     176,785       148,090  
Noncontrolling interests     145       123  
Total equity     176,930       148,213  
Total liabilities and equity   $ 248,713     $ 209,779  
                 

See accompanying notes.
 
F-4
 
 

VISHAY PRECISION GROUP, INC.
Combined and Consolidated Statements of Operations
(In thousands, except per share amounts)
 
    Years ended December 31,
        2010       2009       2008
Net revenues   $       207,524     $      171,991     $      241,700  
Costs of products sold     130,396       119,286       161,804  
Gross profit     77,128       52,705       79,896  
                         
Selling, general, and administrative expenses     57,297       43,356       51,714  
Restructuring and severance costs     -       2,048       6,349  
Impairment of goodwill     -       -       93,465  
Operating income (loss)     19,831       7,301       (71,632 )
                         
Other income (expense):                        
       Interest expense     (390 )     (1,237 )     (1,574 )
       Other     (928 )     714       4,780  
              Other income (expense) - net     (1,318 )     (523 )     3,206  
                         
Income (loss) before taxes     18,513       6,778       (68,426 )
                         
Income tax expense     6,770       5,057       5,689  
                         
Net earnings (loss)     11,743       1,721       (74,115 )
Less: net earnings attributable to                        
              noncontrolling interests     37       17       15  
Net earnings (loss) attributable to VPG stockholders/parent   $ 11,706     $ 1,704     $ (74,130 )
                         
Basic earnings (loss) per share                        
              attributable to VPG stockholders/parent   $ 0.88     $ 0.13     $ (5.56 )
Diluted earnings (loss) per share                        
              attributable to VPG stockholders/parent   $ 0.85     $ 0.13     $ (5.56 )
                         
Weighted average shares outstanding - basic     13,332       13,332       13,332  
                         
Weighted average shares outstanding - diluted     13,787       13,332       13,332  

See accompanying notes.
 
F-5
 
 

VISHAY PRECISION GROUP, INC.
Combined and Consolidated Statements of Cash Flows
(In thousands)
 
    Years ended December 31,
        2010       2009       2008
Operating activities                        
Net earnings (loss)   $       11,743     $      1,721     $      (74,115 )
Adjustments to reconcile net earnings (loss) to                        
       net cash provided by operating activities:                        
       Impairment of goodwill     -       -       93,465  
       Depreciation and amortization     10,578       11,465       10,851  
       Loss (gain) on disposal of property and equipment     32       34       (1,189 )
       Inventory write-offs for obsolescence     1,158       3,114       1,555  
       Deferred income taxes     (1,971 )     139       (3,162 )
       Other     2,259       (2,177 )     1,594  
Net changes in operating assets and liabilities,                        
       net of effects of businesses acquired:                        
       Accounts receivable     (10,829 )     9,407       5,384  
       Inventories     (5,719 )     11,694       (6,286 )
       Prepaid expenses and other current assets     (1,042 )     2,562       (2,328 )
       Accounts payable     5,750       (2,821 )     (1,217 )
       Other current liabilities     9,736       (5,902 )     (2,091 )
Net cash provided by operating activities     21,695       29,236       22,461  
                         
Investing activities                        
Capital expenditures     (8,398 )     (2,181 )     (7,391 )
Proceeds from sale of property and equipment     56       812       1,554  
Purchase of businesses, net of cash acquired     -       -       (24,272 )
Other investing activities     -       1,438       450  
Net cash (used in) provided by investing activities     (8,342 )     69       (29,659 )
                         
Financing activities                        
Principal payments on long-term debt and capital leases     (193 )     (569 )     (1,129 )
Net changes in short-term borrowings     74       (541 )     (22 )
Distributions to noncontrolling interests     (15 )     (16 )     (64 )
Transactions with Vishay Intertechnology     7,252       (36,876 )     12,600  
Contributions from Vishay Intertechnology for acquisitions     -       -       14,653  
Net cash provided by (used in) financing activities     7,118       (38,002 )     26,038  
Effect of exchange rate changes on cash and cash equivalents     (1,418 )     1,508       (5,262 )
Increase (decrease) in cash and cash equivalents     19,053       (7,189 )     13,578  
                         
Cash and cash equivalents at beginning of year     63,192       70,381       56,803  
Cash and cash equivalents at end of year   $ 82,245     $ 63,192     $ 70,381  
                         

See accompanying notes.
 
F-6
 
 

VISHAY PRECISION GROUP, INC.
Combined and Consolidated Statements of Equity
(In thousands)
 
                            Accumulated           Total VPG Inc.                
          Class B   Capital in         Other           Stockholders' or                
    Common   Convertible   Excess of   Retained   Comprehensive   Parent Net   Parent   Noncontrolling   Total
     Stock    Common Stock    Par Value    Earnings    Income (Loss)    Investment    Equity    Interests    Equity
Balance at January 1, 2008   $ -   $ -   $ -   $ -   $ 1,353     $      228,067     $ 229,420     $ 171     $      229,591  
Net earnings (loss)     -     -     -     -     -       (74,130 )     (74,130 )     15       (74,115 )
Foreign currency translation
       adjustment (net of tax) 		    -     -     -     -     (14,568 )     -       (14,568 )     -       (14,568 )
Pension and other                                                                
       postretirement actuarial
       items (net of tax) 		    -     -     -     -     19       -       19       -       19  
Comprehensive income (loss)                                             (88,679 )     15       (88,664 )
Contribution from Vishay
       for acquisitions 		    -     -     -     -     -       14,653       14,653       -       14,653  
Other transactions with
       Vishay - net 		    -     -     -     -     -       (5,359 )     (5,359 )     -       (5,359 )
Stock compensation expense     -     -     -     -     -       123       123       -       123  
Distributions to
       noncontrolling interests 		    -     -     -     -     -       -       -       (64 )     (64 )
Balance at December 31, 2008   $ -   $ -   $ -   $ -   $ (13,196 )   $ 163,354     $ 150,158     $ 122     $ 150,280  
Net earnings (loss)     -     -     -     -     -       1,704       1,704       17       1,721  
Foreign currency translation
       adjustment (net of tax) 		    -     -     -     -     4,523       -       4,523       -       4,523  
Pension and other                                                                
       postretirement actuarial
       items (net of tax) 		    -     -     -     -     (495 )     -       (495 )     -       (495 )
Comprehensive income                                             5,732       17       5,749  
Other transactions with
       Vishay - net 		    -     -     -     -     -       (7,935 )     (7,935 )     -       (7,935 )
Stock compensation expense     -     -     -     -     -       135       135       -       135  
Distributions to
       noncontrolling interests 		    -     -     -     -     -       -       -       (16 )     (16 )
Balance at December 31, 2009   $ -   $ -   $ -   $ -   $ (9,168 )   $ 157,258     $ 148,090     $ 123     $ 148,213  
                                                                 

Continues on the following page.
 
F-7
 
 

VISHAY PRECISION GROUP, INC.
Combined and Consolidated Statements of Equity (continued)
(In thousands)
 
                            Accumulated           Total VPG Inc.                
          Class B   Capital in         Other           Stockholders' or                
    Common   Convertible   Excess of   Retained   Comprehensive   Parent Net   Parent   Noncontrolling   Total
     Stock    Common Stock    Par Value    Earnings    Income (Loss)    Investment    Equity    Interests    Equity
Balance at December 31, 2009   $ -   $ -   $ -   $ -   $ (9,168 )   $ 157,258     $ 148,090     $ 123     $ 148,213  
Net earnings from January 1, 2010                                                                
       through July 5, 2010     -     -     -     -     -       5,811       5,811       59       5,870  
Net earnings from July 6, 2010                                                                
       through December 31, 2010     -     -     -     5,894     -       -       5,894       (21 )     5,873  
Foreign currency translation
       adjustment (net of tax) 		    -     -     -     -     (1,120 )     -       (1,120 )     -       (1,120 )
Other     -     -     -     -     -       -       -       (1 )     (1 )
Pension and other                                                                
       postretirement actuarial
       items (net of tax) 		    -     -     -     -     (297 )     -       (297 )     -       (297 )
Comprehensive income                                             10,288       37       10,325  
Other transactions with
       Vishay - net 		    -     -     -     -     -       23,930       23,930       -       23,930  
Consummation of spin-off                                                                
       transaction on July 6, 2010     1,231     103     179,965     -     -       (187,071 )     (5,772 )     -       (5,772 )
Stock compensation expense     -     -     177     -     -       72       249       -       249  
Distributions to
       noncontrolling interests 		    -     -     -     -     -       -       -       (15 )     (15 )
Balance at December 31, 2010   $ 1,231   $ 103   $ 180,142   $ 5,894   $ (10,585 )   $ -     $ 176,785     $ 145     $ 176,930  
                                                                 

See accompanying notes.
 
F-8
 
 

Vishay Precision Group, Inc.
Notes to Combined and Consolidated Financial Statements
 
Note 1 – Basis of Presentation
 
Background
 
On July 6, 2010, Vishay Intertechnology, Inc. (“Vishay Intertechnology”) completed the spin-off of Vishay Precision Group, Inc. (“VPG” or the “Company”) through a tax-free stock dividend to Vishay Intertechnology’s stockholders. See Note 3 to our combined and consolidated financial statements.
 
VPG is an internationally recognized designer, manufacturer and marketer of sensors based on resistive foil technology and sensor-based systems specializing in the growing markets of stress, force, weight and pressure measurements. The Company provides vertically integrated products and solutions that are all based upon its proprietary foil technology. These products are marketed under a variety of brand names that are characterized as having a very high level of precision and quality. The global operations enable the Company to produce a wide variety of products in strategically effective geographical locations that also optimize its resources for specific technologies, sensors, assemblies and systems. The Company operates in two segments: the Foil Technology Products segment; and the Weighing Modules and Control Systems segment. The Foil Technology Products segment is comprised of ultra-high precision foil resistors and foil strain gages. This segment’s products are sold to third-party customers and are utilized in the manufacture of the vertically integrated modules and systems that comprise the Weighing Modules and Control Systems segment.
 
Carve-out Basis of Presentation
 
Until July 6, 2010, VPG was part of Vishay Intertechnology and its assets and liabilities consisted of those that Vishay Intertechnology attributed to its precision measurement and foil resistor businesses.
 
Prior to July 6, 2010, the VPG business was conducted by various direct and indirect subsidiaries of Vishay Intertechnology. The accompanying combined and consolidated financial statements for periods prior to July 6, 2010 have been derived from Vishay Intertechnology’s historical accounting records and are presented on a carve-out basis.
 
Before effecting the spin-off, all assets and liabilities associated with the precision measurement and foil resistor businesses of Vishay Intertechnology were contributed to Vishay Precision Group, Inc.
 
For periods prior to July 6, 2010, the combined and consolidated statements of operations include all revenues and expenses directly attributable to VPG, including costs for facilities, functions, and services used by VPG at shared sites and costs for certain functions and services performed by centralized Vishay Intertechnology organizations outside of the defined scope of VPG and directly charged to VPG based on usage. The results of operations also include allocations of (i) costs for administrative functions and services performed on behalf of VPG by centralized staff groups within Vishay Intertechnology, (ii) Vishay Intertechnology general corporate expenses, (iii) pension and other postemployment benefit costs, (iv) interest expense, and (v) current and deferred income taxes. See Note 3 for a description of the allocation methodologies utilized.
 
All of the allocations and estimates in the accompanying combined and consolidated financial statements for periods prior to July 6, 2010, are based on assumptions that Vishay Intertechnology and VPG management believe are reasonable, and reasonably approximate the historical costs that VPG would have incurred as a separate entity for the same level of service or support. However, these allocations and estimates are not necessarily indicative of the costs and expenses that would have resulted if VPG had been operated as a separate entity.
 
F-9
 
 

Note 1 – Basis of Presentation (continued)
 
Carve-out Basis of Presentation (continued)
 
Since the spin-off, VPG is incurring incremental costs to both replace Vishay Intertechnology support and to allow VPG to function as an independent, publicly-traded company.
 
Actual costs that may have been incurred if VPG had been a stand-alone company, for periods prior to July 6, 2010, would depend on a number of factors, including the chosen organizational structure, what functions were outsourced or performed by employees, and strategic decisions made in areas such as information technology and infrastructure. Following the spin-off, VPG is performing these functions using its own resources or purchasing these services.
 
Earnings Per Share
 
Until July 6, 2010, the operations comprising VPG's business were wholly owned by various subsidiaries of Vishay Intertechnology. As of the date of the spin-off, VPG issued 13.3 million shares of capital stock. This share amount is being utilized for the calculation of basic earnings per common share for periods presented prior to July 6, 2010 as no common stock of the Company existed prior to July 6, 2010. For periods prior to December 31, 2009, the same number of shares is being used for diluted earnings per common share as for basic earnings per common share as no common stock of the Company existed prior to July 6, 2010 and no dilutive securities of the Company were outstanding for any prior period. For the year ended December 31, 2010, the Company assumed that the dilutive securities were outstanding for the entire period, and therefore were included in the denominator of diluted earnings per share.
 
Note 2 – Summary of Significant Accounting Policies
 
Principles of Combination and Consolidation
 
The combined and consolidated financial statements include the accounts of the individual entities which comprise the Company in which Vishay Intertechnology maintained a controlling financial interest for periods prior to the spin-off on July 6, 2010. The consolidated financial statements after July 6, 2010 include the accounts of the individual entities in which the Company maintained a controlling financial interest. For those subsidiaries in which the Company’s ownership is less than 100 percent, the outside stockholders’ interests are shown as noncontrolling interests in the accompanying combined and consolidated balance sheets. Investments in affiliates over which the Company has significant influence but not a controlling interest are carried on the equity basis. Investments in affiliates over which the Company does not have significant influence are accounted for by the cost method.
 
Certain transactions have been accounted for as mergers of entities under common control and thus recorded in a manner similar to a pooling of interests. Accordingly, the accompanying combined and consolidated financial statements include the accounts of these entities for all relevant periods presented.
 
All transactions, accounts, and profits between individual members comprising the Company have been eliminated in combination.
 
Use of Estimates
 
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the combined and consolidated financial statements and accompanying notes. Actual results could differ significantly from those estimates.
 
F-10
 
 

Note 2 – Summary of Significant Accounting Policies (continued)
 
Revenue Recognition
 
The Company recognizes revenue on product sales during the period when the sales process is complete. This generally occurs when products are shipped to the customer in accordance with terms of an agreement of sale, title and risk of loss have been transferred, collectability is reasonably assured, and pricing is fixed or determinable. For a small percentage of sales where title and risk of loss passes at point of delivery, the Company recognizes revenue upon delivery to the customer, assuming all other criteria for revenue recognition are met.
 
Some of the Company’s larger systems products have post-shipment obligations, such as customer acceptance, training, or installation. In such circumstances, revenue is deferred until the obligation has been completed unless such obligation is deemed inconsequential or perfunctory.
 
Given the specialized nature of our products, the Company generally does not allow product returns.
 
Shipping and Handling Costs
 
Shipping and handling costs are included in costs of products sold.
 
Research and Development Expenses
 
Research and development costs are expensed as incurred. The amount charged to expense for research and development was $6.0 million, $4.6 million, and $4.8 million for the years ended December 31, 2010, 2009, and 2008, respectively. The Company spends additional amounts for the development of machinery and equipment for new processes and for cost reduction measures.
 
Income Taxes
 
The provision for income taxes is determined using the asset and liability approach of accounting for income taxes. Under this approach, deferred taxes represent the future tax consequences expected to occur when the reported amounts of assets and liabilities are recovered or paid. The provision for income taxes represents income taxes paid or payable for the current year plus the change in deferred taxes during the year. Deferred taxes result from differences between the financial and tax bases of the Company’s assets and liabilities and are adjusted for changes in tax rates and tax laws when changes are enacted. Valuation allowances have been established for deferred tax assets which the Company believes do not meet the “more likely than not” criteria established by ASC Topic 740, Income Taxes . This criteria requires a level of judgment regarding future taxable income, which may be revised due to changes in market conditions, tax laws, or other factors. If the Company’s assumptions and estimates change in the future, valuation allowances established may be increased, resulting in increased tax expense. Conversely, if the Company is ultimately able to utilize all or a portion of the deferred tax assets for which a valuation allowance has been established, then the related portion of the valuation allowance can be released, resulting in decreased tax expense.
 
F-11
 
 

Note 2 – Summary of Significant Accounting Policies (continued)
 
Cash and Cash Equivalents
 
Cash and cash equivalents include demand deposits and highly liquid investments with maturities of three months or less when purchased. Highly liquid investments with maturities greater than three months are classified as short-term investments. There were no investments classified as short-term investments at December 31, 2010 or 2009.
 
The Company’s subsidiaries in Europe participated in a formal cash pooling agreement through December 31, 2009, with Vishay Europe GmbH, an affiliate of Vishay Intertechnology, acting as the cash pool leader, effectively serving as a bank for these subsidiaries. The individual entity has discretion over the use of its cash, and accordingly, the combined and consolidated financial statements classify the cash pool balances as “cash and cash equivalents.”
 
Allowance for Doubtful Accounts
 
The Company maintains an allowance for doubtful accounts for estimated losses resulting from the inability of its customers to make required payments. The allowance is determined through an analysis of the aging of accounts receivable and assessments of risk that are based on historical trends and an evaluation of the impact of current and projected economic conditions. The Company evaluates the past-due status of its trade receivables based on contractual terms of sale. If the financial condition of the Company’s customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required. The allowance for doubtful accounts at December 31, 2010 and 2009 was $0.7 million and $1.0 million, respectively. Bad debt expense (income realized upon subsequent collection) was $(0.1 million), $0.4 million, and $(0.5 million) for the years ended December 31, 2010, 2009, and 2008, respectively.
 
Inventories
 
Inventories are stated at the lower of cost, determined by the first-in, first-out method, or market. Inventories are adjusted for estimated obsolescence and written down to net realizable value based upon estimates of future demand, technology developments, and market conditions.
 
Property and Equipment
 
Property and equipment is carried at cost and is depreciated principally by the straight-line method based upon the estimated useful lives of the assets. Machinery and equipment are being depreciated over useful lives of seven to ten years. Buildings and building improvements are being depreciated over useful lives of twenty to forty years or the life of the leased property. Construction in progress is not depreciated until the assets are placed in service. Depreciation expense was $7.5 million, $8.5 million, and $8.4 million for the years ended December 31, 2010, 2009, and 2008, respectively.
 
Goodwill and Other Intangible Assets
 
Goodwill and indefinite-lived intangible assets are not amortized but rather are tested for impairment at least annually. These tests are performed more frequently if there are triggering events.
 
Definite-lived intangible assets are amortized over their estimated useful lives. Patents and acquired technology are being amortized over useful lives of seven to twenty years. Customer relationships are being amortized over useful lives of five to fifteen years. Trade names are being amortized over useful lives of seven to ten years. Non-competition agreements are being amortized over periods of five to ten years. The Company continually evaluates the reasonableness of the useful lives of these assets.
 
F-12
 
 

Note 2 – Summary of Significant Accounting Policies (continued)
 
Goodwill and Other Intangible Assets (continued)
 
ASC Topic 350, Intangibles - Goodwill and Other , prescribes a two-step method for determining goodwill impairment. In the first step, the Company determines the fair value of the reporting unit and compares that fair value to the net book value of the reporting unit. The fair value of the reporting unit is determined using various valuation techniques, including a discounted cash flow analysis (an income approach) and a comparable companies market multiple approach.
 
If the net book value of the reporting unit were to exceed the fair value, the Company would then perform the second step of the impairment test, which requires allocation of the reporting unit’s fair value to all of its assets and liabilities in a manner similar to a purchase price allocation, with any residual fair value being allocated to goodwill. An impairment charge will be recognized only when the implied fair value of a reporting unit’s goodwill is less than its carrying amount.
 
For the purposes of the combined and consolidated financial statements presented on a stand-alone basis, the Company has evaluated its goodwill using its operating segments, namely, Foil Technology Products and Weighing Modules and Control Systems, as its reporting units.
 
As more fully described in Note 5, in light of a sustained decline in market capitalization for Vishay Intertechnology and its peer group companies, and other factors, Vishay Intertechnology determined that an impairment test was necessary as of the end of the second, third, and fourth fiscal quarters of 2008.
 
Based on Vishay Intertechnology’s interim impairment tests performed as of the end of the second, third, and fourth quarters of 2008, the Company performed retrospective goodwill impairment tests for its reporting units as of the end of the second, third, and fourth quarters of 2008 and deemed the reporting units’ goodwill to still be impaired.
 
The Company’s required annual impairment test is completed as of the first day of the fourth fiscal quarter of each year. The interim impairment test performed as of September 27, 2008, the last day of the fiscal third quarter, was effectively the Company’s annual impairment test for 2008.
 
Impairment of Long-Lived Assets
 
The carrying value of long-lived assets held-and-used, other than goodwill, is evaluated when events or changes in circumstances indicate the carrying value may not be recoverable. The carrying value of a long-lived asset group is considered impaired when the total projected undiscounted cash flows from such asset group are separately identifiable and are less than the carrying value. In that event, a loss is recognized based on the amount by which the carrying value exceeds the fair market value of the long-lived asset group. Fair market value is determined primarily using present value techniques based on projected cash flows from the asset group. Losses on long-lived assets held-for-sale, other than goodwill and indefinite-lived intangible assets, are determined in a similar manner, except that fair market values are reduced for disposal costs.
 
Foreign Currency Translation
 
The Company has significant operations outside of the United States. The Company finances its operations in Europe and certain locations in Asia in local currencies, and accordingly, these subsidiaries utilize the local currency as their functional currency. The Company’s operations in Israel and certain locations in Asia are largely financed in U.S. dollars, and accordingly, these subsidiaries utilize the U.S. dollar as their functional currency.
 
F-13
 
 

Note 2 – Summary of Significant Accounting Policies (continued)
 
Foreign Currency Translation (continued)
 
For those subsidiaries where the local currency is the functional currency, assets and liabilities in the combined and consolidated balance sheets have been translated at the rate of exchange as of the balance sheet date. Revenues and expenses are translated at the average exchange rate for the year. Translation adjustments do not impact the combined and consolidated statements of operations and are reported as a separate component of equity. Foreign currency transaction gains and losses are included in the results of operations.
 
For those foreign subsidiaries where the U.S. dollar is the functional currency, all foreign currency financial statement amounts are remeasured into U.S. dollars. Exchange gains and losses arising from remeasurement of foreign currency-denominated monetary assets and liabilities are included in the combined and consolidated statements of operations.
 
Share-Based Compensation
 
Compensation costs related to share-based payments are recognized in the combined and consolidated financial statements. The amount of compensation cost is measured based on the grant-date fair value of the equity (or liability) instruments issued. Compensation cost is recognized over the period that an officer, employee, or non-employee director provides service in exchange for the award. For performance based awards, certain criteria must be met. For options and restricted stock units subject to graded vesting, the Company recognizes expense over the service period for each separately vesting portion of the award as if the award was in-substance, multiple awards.
 
Reclassifications
 
Certain prior year amounts have been reclassified to conform to the 2010 financial statement presentation.
 
Commitments and Contingencies
 
Liabilities for loss contingencies arising from claims, assessments, litigation, fines, penalties, and other sources are recorded when it is probable that a liability has been incurred and the amount of the assessment and/or remediation can be reasonably estimated.
 
New Accounting Pronouncements
 
In January 2010, the Financial Accounting Standards Board (“FASB”) updated the accounting guidance related to fair value measurements disclosures. The updated guidance (i) requires separate disclosure of significant transfers out of Levels 1 and 2 fair value measurements, (ii) requires disclosure of Level 3 fair value measurements activity on a gross basis, (iii) clarifies existing disaggregation requirements, and (iv) clarifies existing input and valuation technique disclosure requirements. The updated guidance is effective for interim and annual reporting periods beginning after December 15, 2009, except for the Level 3 fair value measurement disclosure requirements, which are effective for fiscal years beginning after December 15, 2010. VPG adopted the aspects of the guidance that are currently effective as of January 1, 2010 and will adopt the remaining guidance on January 1, 2011. The adoption of the effective guidance had no effect on VPG’s financial position, results of operations, or liquidity and the adoption of the remaining guidance is not expected to have any effect on VPG’s financial position, results of operations, or liquidity.
 
F-14
 
 

Note 3 – Related Party Transactions
 
Through July 6, 2010, VPG had significant agreements, transactions, and relationships with Vishay Intertechnology operations outside the defined scope of the VPG business. While these transactions are not necessarily indicative of the terms VPG would have achieved had it been a separate entity, management believes they are reasonable.
 
Historically, VPG has used the corporate services of Vishay Intertechnology to fulfill a variety of functions including treasury, tax, legal, internal audit, human resources, and risk management. Subsequent to the spin-off, VPG is an independent, publicly traded company, and is incurring additional costs associated with being an independent, publicly traded company. These additional anticipated costs are not reflected in VPG’s historical combined and consolidated financial statements for periods prior to July 6, 2010.
 
Sales Organizations
 
Prior to the spin-off, a portion of the VPG’s Foil Technology products were sold by the Vishay Intertechnology worldwide sales organization, which operates through regionally-based legal entities. The third-party sales of these products are presented in the combined and consolidated financial statements as if they were made by VPG, although legal entities outside of the defined scope of VPG actually made these sales. Third-party sales made through the Vishay Intertechnology worldwide sales organization totaled $6.6 million, $13.0 million, and $16.9 million during the years ended December 31, 2010, 2009, and 2008, respectively.
 
The selling entities received selling commissions on these sales. Commission rates were set at the beginning of each year based on budgeted selling expenses expected to be incurred by the Vishay Intertechnology sales organization. Commission expense charged to VPG by the Vishay Intertechnology worldwide sales organization was $0.3 million, $0.7 million, and $0.7 million during the years ended December 31, 2010, 2009, and 2008.
 
The net cash generated by these transactions is retained by the Vishay Intertechnology selling entity, and is presented in the combined and consolidated balance sheets as a reduction in parent net investment, and is presented in the combined and consolidated statements of cash flows as a financing activity in the caption “Transactions with Vishay Intertechnology.”
 
These sales activities were transitioned to VPG’s dedicated sales forces effective June 1, 2010, in anticipation of the spin-off.
 
Shared Facilities
 
VPG and operations of Vishay Intertechnology outside the defined scope of VPG shared certain manufacturing and administrative sites. Costs were allocated based on relative usage of the respective facilities.
 
Subsequent to the spin-off, VPG and Vishay Intertechnology continue to share certain manufacturing locations. VPG owns one location in Israel and one location in Japan, and leases space to Vishay Intertechnology. Vishay Intertechnology owns one location in Israel and one location in the United States, and leases space to VPG.
 
F-15
 
 

Note 3 – Related Party Transactions (continued)
 
Administrative Service Sharing Agreements
 
Through July 6, 2010, the combined and consolidated financial statements include transactions with other Vishay Intertechnology operations involving administrative services (including expenses primarily related to personnel, insurance, logistics, other overhead functions, corporate IT support, and network communications support) that were provided to VPG by Vishay Intertechnology operations outside the defined scope of VPG. Amounts charged to the Company for these services during the years ended December 31, 2010, 2009, and 2008 were $1.1 million, $2.5 million, and $1.9 million, respectively. VPG assumed the responsibility for these functions, either internally or by purchasing these services from third-party vendors, following the spin-off.
 
Allocated Corporate Overhead Costs
 
Through July 6, 2010, the costs of certain services that are provided by the Vishay Intertechnology corporate office to VPG have been reflected in the combined and consolidated financial statements, including charges for services such as accounting matters for all SEC filings, investor relations, tax services, cash management, legal services, and risk management on a global basis. These allocated costs are included in selling, general, and administrative expenses in the accompanying combined and consolidated statements of operations, and are presented in the combined and consolidated balance sheet as a reduction in parent net investment.
 
The total amount of allocated costs was $1.2 million, $1.8 million, and $2.8 million for the years ended December 31, 2010, 2009, and 2008, respectively. These costs were allocated on the ratio of VPG’s revenues to total revenues and represent management’s reasonable allocation of the costs incurred. However, these amounts are not representative of the costs necessary for VPG to operate as an independent, publicly traded company.
 
Centralized Cash Management
 
Prior to July 6, 2010, in the United States, cash deposits from VPG historically were transferred to Vishay Intertechnology on a regular basis and were netted against intercompany payables, or occasionally remitted to the parent as a dividend. See “Net Payable to Affiliates” below.
 
The Company’s subsidiaries in Europe participated in a formal cash pooling agreement through December 31, 2009, with Vishay Europe GmbH, an affiliate of Vishay Intertechnology, acting as the cash pool leader, effectively serving as a bank for these subsidiaries. The individual entity has discretion over the use of its cash, and accordingly, the combined and consolidated financial statements classify the cash pool balances as “cash and cash equivalents.”
 
Vishay Europe GmbH, as cash pool leader, pays interest on these funds based on the prevailing interest rates at third-party lending institutions in Europe. The combined and consolidated financial statements reflect cash pool interest income of $0.0 million, $0.3 million and $0.9 million for the years ended December 31, 2010, 2009 and 2008, respectively.
 
F-16
 
 

Note 3 – Related Party Transactions (continued)
 
Net Payable to Affiliates
 
The net amount payable to Vishay Intertechnology and affiliated companies outside the defined scope of the VPG business primarily reflects balances carried forward from funding provided by Vishay Intertechnology to make certain acquisitions, to retire certain debt assumed in acquisitions, or as part of Vishay Intertechnology’s global working capital allocation strategy.
 
As further described above, through July 6, 2010, VPG had significant agreements, transactions, and relationships with Vishay Intertechnology operations outside the defined scope of the VPG business. The net payable to affiliates also includes the effects of these transactions.
 
At December 31, 2009, the net payable to affiliates was presented as a current liability. These amounts were all repaid prior to the spin-off on July 6, 2010.
 
Through July 6, 2010, the combined and consolidated financial statements include charges for interest based on the prevailing interest rate of Vishay Intertechnology’s revolving credit facility, or if greater, an interest rate required by local tax authorities. Interest expense on the net amount payable to affiliates was $0.3 million, $1.2 million, and $1.5 million during the years ended December 31, 2010, 2009, and 2008. Of these amounts, $0.2 million, $0.5 million, and $0.9 million were not historically charged by Vishay Intertechnology to VPG, and accordingly, these amounts of imputed interest are reflected as an increase to parent net investment in the combined and consolidated balance sheet. The remaining interest expense was charged to VPG and paid in accordance with local statutory requirements.
 
Exchangeable Notes
 
On December 13, 2002, Vishay Intertechnology issued $105.0 million in nominal (or principal) amount of its floating rate unsecured exchangeable notes due 2102 in connection with an acquisition. The notes are governed by a note instrument, made by Vishay Intertechnology on December 13, 2002, and a put and call agreement, dated as of December 13, 2002. The notes may be put to Vishay Intertechnology in exchange for shares of its common stock and, under certain circumstances, may be called by Vishay Intertechnology for similar consideration.
 
Under the terms of the put and call agreement, by reason of the spin-off, Vishay Intertechnology was required to take action so that the existing notes were deemed exchanged as of the date of the spin-off, for a combination of new notes of Vishay Intertechnology and notes issued by Vishay Precision Group, Inc.
 
Except for Vishay Intertechnology’s contractual obligation to issue new notes of any spin-off company, these notes have no direct historical connection to the VPG business. Accordingly, these exchangeable notes are not included in the historical combined and consolidated financial statements prior to the spin-off date. See Note 8.
 
Transactions with Vishay Intertechnology at Spin-Off
 
At July 3, 2010, VPG had a net payable to Vishay Intertechnology and affiliates of $19.3 million, which was fully paid prior to the spin-off on July 6, 2010.
 
As described above, effective as of the spin-off date, VPG assumed the liability for $10.0 million principal amount of Vishay Intertechnology exchangeable notes due 2102. The assumption of this liability was recorded as a reduction in parent net investment just prior to the spin-off.
 
Pursuant to the master separation agreement, the net cash balance of VPG at the spin-off date was $58.5 million, which was within 10% of the target net cash balance.
 
F-17
 
 

Note 3 – Related Party Transactions (continued)
 
Commitments, Contingencies, and Concentrations
 
Relationships with Vishay Intertechnology after Spin-Off
 
In connection with the spin-off, on July 6, 2010, the Company and its subsidiaries entered into several agreements with Vishay Intertechnology and its subsidiaries that govern the relationship of the parties following the spin-off.
 
Transition Services Agreement
 
Under the terms of a transition services agreement that VPG entered into with Vishay Intertechnology on July 6, 2010, Vishay Intertechnology agreed to provide to VPG, for a fee, specified support services for a period of up to 18 months after the spin-off. Vishay Intertechnology will provide to VPG certain information technology support services for the Company’s foil resistor business. The cost of the services under the transition services agreement is estimated to be less than $0.5 million in the aggregate. As of December 31, 2010, $0.2 million has been paid to Vishay Intertechnology for transition services.
 
Lease Agreements
 
Subsequent to the spin-off, VPG and Vishay Intertechnology continue to share certain manufacturing locations.
 
Future minimum lease payments by VPG for these facilities are estimated as follows (in thousands) :
 
2011 $      152
2012   152
2013   152
2014   152
2015   75
Thereafter   -

Future minimum lease receipts from Vishay Intertechnology for these shared facilities are estimated as follows (in thousands) :
 
2011 $      39
2012   39
2013   39
2014   39
2015   9
Thereafter   -

Supply Agreements
 
After the spin-off, VPG and Vishay Intertechnology each will require certain products manufactured by the other for manufacture and sale of its respective products. VPG and Vishay Intertechnology have entered into multiple supply agreements pursuant to which one party will be obligated to supply to the other certain products described in the supply agreements, up to a maximum aggregate quantity for each product, at pricing set forth in the supply agreements. The term of each supply agreement is perpetual unless sooner terminated. Either party may terminate the supply agreement at any time upon written notice to the other party at least one year prior to the requested date of termination. The parties will negotiate in good faith as to the pricing for each product on an annual basis taking into account ascertainable market inputs. The purchase price of products purchased annually from Vishay Intertechnology is not considered material.
 
F-18
 
 

Note 4 – Acquisition Activities
 
We have a vertical product integration strategy to grow our weighing modules and control systems business and to promote our sophisticated products that integrate the precision measurement components that we design and produce.
 
In pricing an acquisition, the Company focuses primarily on the target’s revenues and customer base, the strategic fit of the target’s product line with the Company’s existing product offerings (particularly how the target’s products fit into the Company’s vertical product integration strategy), opportunities for cost-cutting and integration with the Company’s existing operations and production, and other post-acquisition synergies, rather than on the target’s assets, such as its property, equipment, and inventory. As a result, the fair value of the acquired assets may correspond to a relatively smaller portion of the acquisition price, with the Company recording a substantial amount of goodwill related to the acquisition (see Note 5).
 
Year ended December 31, 2008
 
The Company made two acquisitions during the year ended December 31, 2008.
 
Acquisition of Partner’s Interest in India Joint Venture
 
On June 30, 2008, in the Company’s fiscal third quarter, the Company acquired its partner’s interest in a joint venture in India. VPG previously owned 49% of this entity, which is engaged in the manufacture and distribution of transducers. The entity has been renamed Vishay Transducers India Private Limited.
 
As a non-controlled investment, Vishay Transducers India Private Limited had been accounted for using the equity basis. Effective June 30, 2008, the Company began reporting this entity as a consolidated subsidiary, included in the Weighing Modules and Control Systems segment. The Company recognized revenues of $0.3 million during the year ended December 31, 2008, on sales to this affiliate, prior to acquiring control of this entity. The Company made purchases of $1.5 million during the year ended December 31, 2008 from this affiliate, prior to acquiring control of this entity.
 
The acquisition has been accounted for as a step-acquisition in accordance with then-applicable U.S. generally accepted accounting principles. Accordingly, the cost to acquire the partner’s 51% interest has been allocated on a pro rata basis to assets acquired and liabilities assumed based on their fair values, with the excess being allocated to goodwill, as follows (in thousands) :
 
Working capital $      219  
Property and equipment   495  
Trade names   125  
Completed technology   58  
Non-competition agreements   5,000  
Customer relationships   317  
Other assets (liabilities), net   (1,850 )
Pro rata share of identifiable assets $ 4,364  
       
Purchase price including direct costs of acquisition      
       and net of cash acquired $ 9,598  
Goodwill $ 5,234  
       
The intangible assets associated with this transaction are being amortized over weighted-average useful lives of 10 years.
 
F-19
 
 

Note 4 – Acquisition Activities (continued)
 
Acquisition of Partner’s Interest in India Joint Venture (continued)
 
The goodwill associated with this transaction is not deductible for income tax purposes. The goodwill associated with this transaction was subsequently written off as part of the goodwill impairment charges recorded in 2008 (see Note 5).
 
Acquisition of Powertron GmbH
 
On July 23, 2008, the Company acquired Powertron GmbH, a manufacturer of specialty precision resistors. For financial reporting purposes, the results of operations for Powertron have been included in the Foil Technology Products segment from July 23, 2008.
 
The acquisition has been accounted for under the purchase method of accounting in accordance with then applicable U.S. generally accepted accounting principles. Accordingly, the purchase price has been allocated as follows, to the assets acquired and liabilities assumed based on their fair values, with the excess being allocated to goodwill (in thousands) :
 
Working capital $      (302 )
Property and equipment   474  
Trade names   59  
Completed technology   110  
Non-competition agreements   3,500  
Customer relationships   903  
Other assets (liabilities), net   37  
Total identifiable assets $ 4,781  
       
Purchase price including direct costs of acquisition      
       and net of cash acquired $ 14,674  
Goodwill $ 9,893  
       
The non-competition agreements, trade names, completed technology, and customer relationships are being amortized over weighted-average useful lives of 5 years, 7 years, 10 years, and 15 years, respectively.
 
The goodwill associated with this transaction is not deductible for income tax purposes. The goodwill associated with this transaction was subsequently written off as part of the goodwill impairment charges recorded in 2008 (see Note 5).
 
F-20
 
 

Note 4 – Acquisition Activities (continued)
 
Pro forma Results
 
The unaudited pro forma results would have been as follows, assuming the acquisitions had occurred at the beginning of the period presented (in thousands):
 
  Year ended
  December 31,
  2008
Pro forma net revenues $             245,313  
       
Pro forma net earnings attributable to Parent $ (74,128 )
       
The pro forma information reflects adjustments to depreciation based on the fair value of property and equipment acquired, adjustments to amortization based on the fair value of intangible assets, and related tax effects, as well as the inclusion of Vishay Transducers India, Ltd. in the combined and consolidated financial statements as a wholly owned subsidiary rather than an equity-method investment.
 
The unaudited pro forma results are not necessarily indicative of the results that would have been attained had the acquisitions occurred at the beginning of the periods presented.
 
Note 5 – Goodwill and Other Intangible Assets
 
Goodwill represents the excess of the cost of businesses acquired over the fair value of the net assets acquired at the date of acquisition. Goodwill is not amortized but rather tested for impairment at least annually. The Company performs its annual impairment test as of the first day of the fiscal fourth quarter. These impairment tests must be performed more frequently if there are triggering events.
 
ASC 350, Intangibles - Goodwill and Other , prescribes a two-step method for determining goodwill impairment. In the first step, the Company determines the fair value of the reporting unit and compares that fair value to the net book value of the reporting unit. The fair value of the reporting unit is determined using various valuation techniques, including a discounted cash flow analysis (an income approach) and a comparable companies market multiple approach.
 
To measure the amount of the impairment, ASC 350 prescribes that the Company determine the implied fair value of goodwill in the same manner as if the Company had acquired those reporting units. Specifically, the Company must allocate the fair value of the reporting unit to all of the assets of that unit, including any unrecognized intangible assets, in a hypothetical calculation that would yield the implied fair value of goodwill. The impairment loss is measured as the difference between the book value of the goodwill and the implied fair value of the goodwill computed in step two.
 
Prior to the spin-off, Vishay Intertechnology evaluated the goodwill associated with the Company as a separate reporting unit for ASC 350 evaluation purposes. For the purposes of the combined and consolidated financial statements presented on a stand-alone basis, we have evaluated our goodwill using our reporting units.
 
In light of a sustained decline in market capitalization for Vishay Intertechnology and its peer group companies, and other factors, Vishay Intertechnology determined that an interim impairment test was necessary as of the end of the second, third, and fourth fiscal quarters of 2008.
 
F-21
 
 

Note 5 – Goodwill and Other Intangible Assets (continued)
 
Based on Vishay Intertechnology’s interim impairment tests performed as of the end of the second, third, and fourth quarters of 2008, the Company performed retrospective goodwill impairment tests for its reporting units as of the end of the second, third, and fourth quarters of 2008.
 
After completing step one of the impairment tests as of June 28, 2008 and as of September 27, 2008, which was the date of our annual impairment test, the Company determined that the estimated fair value of its reporting units were greater than the book values of those units, and accordingly, no second step was required as of those dates.
 
Given the further deterioration of market conditions in the fourth quarter of 2008, an additional impairment test was performed as of December 31, 2008 (the end of the fourth fiscal quarter). After completing step one of the impairment test as of December 31, 2008, the Company determined that the estimated fair value of each of its reporting units was less than the net book values of those reporting units. This required the completion of the second step of the impairment evaluation. Upon completion of the step two analysis, the Company recorded impairment charges. Subsequent to recording these impairment charges, there was no remaining goodwill recorded on the combined and consolidated balance sheet.
 
The determination of the fair value of the reporting units and the allocation of that value to individual assets and liabilities within those reporting units requires the Company to make significant estimates and assumptions. These estimates and assumptions primarily include, but are not limited to: the selection of appropriate comparable companies; control premiums appropriate for acquisitions in the industries in which the Company competes; the discount rate; terminal growth rates; and forecasts of revenue, operating income, depreciation and amortization, and capital expenditures. The allocation requires several analyses to determine fair value of assets and liabilities including, among others, completed technology, trade names, in-process research and development, customer relationships, and certain property and equipment (valued at replacement costs).
 
Due to the inherent uncertainty involved in making these estimates, actual financial results could differ from those estimates. Changes in assumptions concerning future financial results or other underlying assumptions could have a significant impact on either the fair value of the reporting unit or the amount of the goodwill impairment charge.
 
The goodwill impairment charge is noncash in nature and does not affect the Company’s liquidity, cash flows from operating activities, and will not have a material impact on future operations.
 
The changes in the carrying amounts of goodwill by segment for the year ended December 31, 2008 was as follows (in thousands):
 
    Foil Technology   Weighing Modules        
        Products       & Control Systems       Total
Balance at December 31, 2007   $                 4,436     $                       81,580     $      86,016  
Goodwill acquired during the year     9,893       5,234       15,127  
Impairment charges     (13,199 )     (80,266 )     (93,465 )
Currency translation adjustments     (1,130 )     (6,548 )     (7,678 )
Balance at December 31, 2008   $ -     $ -     $ -  
                         
F-22
 
 

Note 5 – Goodwill and Other Intangible Assets (continued)
 
Other intangible assets were as follows (in thousands) :
 
    December 31,
        2010       2009
Intangible assets subject to amortization                
       (Definite-lived):                
              Patents and acquired technology   $ 4,038     $ 4,074  
              Customer relationships     6,603       6,638  
              Trade names     2,031       1,960  
              Non-competition agreements     15,594       14,904  
      28,266       27,576  
       Accumulated amortization:                
              Patents and acquired technology     (2,443 )     (2,198 )
              Customer relationships     (3,401 )     (2,670 )
              Trade names     (1,264 )     (964 )
              Non-competition agreements     (6,658 )     (4,527 )
      (13,766 )     (10,359 )
       Net intangible assets subject to amortization   $        14,500     $       17,217  
                 
Intangible assets are subject to foreign currency translation. Amortization expense was $3.0 million, $3.0 million, and $2.4 million, for the years ended December 31, 2010, 2009, and 2008, respectively.
 
Estimated annual amortization expense for each of the next five years is as follows (in thousands) :
 
2011 $      3,081
2012   2,891
2013   2,349
2014   1,940
2015   1,557

As part of certain acquisitions, the Company entered into non-competition agreements with certain employees, former employees, and owners of acquired companies. Some payments under these agreements are made over the non-competition period. At December 31, 2010 and 2009, the Company had liabilities of $1.8 million and $2.3 million, respectively, pursuant to these agreements.
 
F-23
 
 

Note 6 – Restructuring and Severance Costs
 
Restructuring and severance costs reflect the cost reduction programs implemented by the Company. These include the closing of facilities and the termination of employees. Restructuring and severance costs include one-time exit costs, severance benefits pursuant to an on-going benefit arrangement recognized, and related pension curtailment and settlement charges recognized . Restructuring costs are expensed during the period in which the Company determines it will incur those costs and all requirements of accrual are met. Because these costs are recorded based upon estimates, actual expenditures for the restructuring activities may differ from the initially recorded costs. If the initial estimates are too low or too high, the Company could be required either to record additional expenses in future periods or to reverse part of the previously recorded charges. Asset write-downs are principally related to buildings and equipment that will not be used subsequent to the completion of restructuring plans presently being implemented, and cannot be sold for amounts in excess of carrying value.
 
The following table summarizes the Company’s restructuring programs during the years ended December 31, 2009 and 2008 (in thousands):
 
    Years ended December 31,
        2009       2008
Response to global recession   $ 2,048   $ 644
Closure of Breda, the Netherlands facility     -     5,705
Total restructuring expense   $       2,048   $       6,349
             
Restructuring Programs in Response to Global Economic Recession
 
In response to the economic downturn during the latter half of 2008 and 2009, the Company undertook significant measures to cut costs. This included a strict adaptation of manufacturing capacity to sellable volume and limiting the building of product for inventory. The Company incurred employee termination costs covering technical, production, administrative, and support employees located in nearly every country in which the Company operates.
 
The following table summarizes activity to date related to restructuring programs in response to the global economic recession (in thousands, except for number of employees):
 
                            Employees
    Severance   Other       to be
        Costs       Exit Costs       Total       Terminated
Balance at December 31, 2008   $ 135     $ -     $ 135     100  
Restructuring and severance costs     1,602       446       2,048     199  
Utilized     (1,696 )     (330 )     (2,026 )   (299 )
Foreign currency translation     (41 )     16       (25 )   -  
Balance at December 31, 2009   $ -     $ 132     $ 132     -  
Utilized     -       (132 )     (132 )   -  
Balance at December 31, 2010   $            -     $            -     $            -                     -  
                               
F-24
 
 

Note 6 – Restructuring and Severance Costs (continued)
 
Closure of Breda, the Netherlands Facility
 
During 2008, we announced the closure of our load cell manufacturing facility in Breda, the Netherlands, and transferred all manufacturing operations to Israel.
 
The following table summarizes activity to date related to the closure of the Breda facility (in thousands, except for number of employees):
 
                            Employees
    Severance   Other           to be
        Costs       Exit Costs       Total       Terminated
Balance at December 31, 2008   $ 1,272     $ 46     $ 1,318     2  
Utilized     (1,272 )     (46 )     (1,318 )   (2 )
Balance at December 31, 2009   $        -     $             -     $          -                           -  
                               
F-25
 
 

Note 7 – Income Taxes
 
Income (loss) before taxes consists of the following components (in thousands) :
 
    Years ended December 31,
        2010       2009       2008
Domestic   $ 8,165   $ 6,365   $ (7,474 )
Foreign     10,348     413     (60,952 )
    $       18,513   $       6,778   $         (68,426 )
                     
Significant components of income taxes are as follows (in thousands) :
 
    Years ended December 31,
        2010       2009       2008
Current:                        
       Federal   $ 3,311     $ 837     $ 3,027  
       State and local     837       320       692  
       Foreign     4,593       3,761       5,132  
      8,741       4,918       8,851  
Deferred:                        
       Federal     (1,705 )     950       (1,433 )
       State and local     (264 )     183       (259 )
       Foreign     (2 )     (994 )     (1,470 )
      (1,971 )     139       (3,162 )
Total income tax expense   $          6,770     $         5,057     $         5,689  
                         
A reconciliation of income tax expense at the U.S. federal statutory income tax rate to actual income tax provision is as follows (in thousands) :
 
    Years ended December 31,
        2010       2009       2008
Tax at statutory rate   $ 6,480     $ 2,372   $ (23,949 )
State income taxes, net of U.S. federal tax                      
       benefit     373       214     454  
Effect of foreign operations     2,060       2,307     (2,332 )
US foreign tax credit     (2,546 )     -     -  
Goodwill impairment     -       -     31,797  
Other     403       164     (281 )
Total income tax expense   $         6,770     $         5,057   $         5,689  
                       
F-26
 
 

Note 7 – Income Taxes (continued)
 
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts for income tax purposes. Significant components of the Company’s deferred tax assets and liabilities are as follows (in thousands) :
 
    December 31,
        2010       2009
Deferred tax assets:            
       Pension and other retiree obligations   $ 3,969     $ 3,404  
       Inventories     2,544       3,201  
       Net operating loss carryforwards     6,426       7,154  
       Tax credit carryforwards     1,424       102  
       Other accruals and reserves     3,899       2,068  
              Total gross deferred tax assets     18,262       15,929  
              Less valuation allowance     (7,357 )     (7,002 )
      10,905       8,927  
Deferred tax liabilities:                
       Tax over book depreciation     398       1,357  
       Intangible assets other than goodwill     4,007       5,042  
       Other - net     -       15  
       Total gross deferred tax liabilities     4,405       6,414  
                 
       Net deferred tax assets   $         6,500     $         2,513  
                 
The Company makes significant judgments regarding the realizability of its deferred tax assets (principally net operating losses). The carrying value of the net deferred tax asset is based on the Company’s assessment that it is more likely than not that the Company will realize these assets after consideration of all available positive and negative evidence.
 
Income taxes that are presented in the combined and consolidated financial statements are calculated on a separate tax return basis, although our operations have historically been included in Vishay Intertechnology’s U.S. federal, certain state and foreign tax returns. Accordingly, our tax results are not necessarily indicative of future performance and do not necessarily reflect the results that we would have generated as an independent, publicly traded company for the periods presented prior to July 6, 2010. The Company recognized a deferred tax asset of $2.0 million relating to internal restructuring in preparation of the spin-off. The recognition of this deferred tax asset is reflected as a contribution from Vishay Intertechnology with the offset to capital in excess of par value.
 
A valuation allowance is required when it is more likely than not that all or a portion of a deferred tax asset will not be realized. The Company has recorded a valuation allowance against certain jurisdictional net operating loss carryforwards and other tax attributes. As of December 31, 2010 and 2009, the valuation allowance was $7.4 million and $7.0 million respectively. During the years ended December 31, 2010 and 2009, the Company increased its valuation allowance in the amount of $0.4 million and $2.7 million, respectively.
 
F-27
 
 

Note 7 – Income Taxes (continued)
 
At December 31, 2010, the Company had the following significant valuation allowances for tax purposes (in thousands) :
 
Jurisdiction    
Belgium $       421
Israel   5,106
Netherlands   489
Taiwan   222
UK   900

At December 31, 2010 and 2009, the Company had tax credit carryforwards of $1.4 million and $0.1 million, respectively. The primary component of the 2010 tax credit carryforward is a U.S. foreign tax credit of $1.4 million. The Company has evaluated its ability to utilize the existing U.S. foreign tax credit carryforward and believes that it is more likely than not to be recovered and requires no valuation allowance. The U.S. foreign tax credit carryforward is set to expire in year 2020.
 
At December 31, 2010, the Company had the following significant net operating loss carryforwards for tax purposes (in thousands) :
 
Jurisdiction         Expires
Belgium       $       1,237       No expiration
Israel     19,838   No expiration
Netherlands     2,283   2016-2018
United Kingdom     2,993   No expiration

At December 31, 2010, no provision has been made for U.S. federal and state income taxes on approximately $81.2 million of foreign earnings, which the Company continues to expect to be reinvested outside of the United States indefinitely. Upon distribution of those earnings in the form of dividends or otherwise, the Company would be subject to U.S. income taxes (subject to an adjustment for foreign tax credits), state income taxes, incremental foreign income taxes, and withholding taxes payable to the various foreign countries. Determination of the amount of unrecognized deferred U.S. income tax liability is not practicable because of the complexities associated with the hypothetical calculation.
 
As part of the reorganization to effectuate the spin-off, $14.5 million of unremitted earnings were transferred to Vishay Intertechnology and affiliates.
 
Net income taxes paid were $2.7 million, $2.7 million and $11.7 million for the years ended December 31, 2010, 2009 and 2008, respectively.
 
The Company and its subsidiaries are subject to income taxes in the U.S. and numerous foreign jurisdictions. Significant judgment is required in evaluating our tax positions and determining our provision for income taxes. During the ordinary course of business, there are many transactions and calculations for which the ultimate tax determination is uncertain. The Company establishes reserves for tax-related uncertainties based on estimates of whether, and the extent to which, additional taxes will be due. These reserves are established when the Company believes that certain positions might be challenged despite its belief that its tax return positions are fully supportable. The Company adjusts these reserves in light of changing facts and circumstances and the provision for income taxes includes the impact of reserve provisions and changes to reserves that are considered appropriate.
 
F-28
 
 
 
 
 

Note 7 – Income Taxes (continued)
 
The Company took positions on its tax returns that may be challenged by domestic and foreign taxing authorities. Certain of these tax positions arose in the context of transactions involving the purchase, sale or exchange of businesses or assets. All such transactions were subject to substantial tax due diligence and planning, in which the underlying form, substance and structure of the transaction was evaluated. Although the Company believes it had support for the positions taken on these tax returns, the Company has recorded a liability for its best estimate of the probable loss on certain of these transactions.
 
These accruals for tax-related uncertainties are based on management’s best estimate of potential tax exposures. When particular matters arise, a number of years may elapse before such matters are audited and finally resolved. Favorable resolution of such matters could be recognized as a reduction to our effective tax rate in the year of resolution. Unfavorable resolution of any particular issue could increase the effective tax rate and may require the use of cash in the year of resolution.
 
As a member of Vishay Intertechnology’s worldwide group, the Company has (and will continue to have following the spin-off) joint and several liability with Vishay Intertechnology to multiple tax authorities. However, under the terms of the Tax Matters Agreement, Vishay Intertechnology has agreed to assume this liability and any similar liability for U.S. federal, state or local and foreign income taxes that are determined on a separate company, consolidated, combined, unitary or similar basis for each taxable period in which VPG was a part of Vishay Intertechnology’s affiliated group.
 
Upon the effectiveness of the Tax Matters Agreement, Vishay Intertechnology is contractually obligated for any increase in contingent income tax liabilities recorded in connection with the Company’s uncertain tax positions previously taken by Vishay Intertechnology on its separate company, consolidated, combined, unitary or similar tax returns with respect to a VPG entity up to the date of the spin-off. As a result, at the date of the spin-off, the Company recorded a liability of $1.0 million (including accrued interest and penalties) related to these tax positions in other noncurrent liabilities with a corresponding offsetting receivable from Vishay Intertechnology recorded in other noncurrent assets.
 
The following table summarizes changes in the Company's gross liabilities, excluding interest and penalties, associated with unrecognized tax benefits (in thousands) :
 
  Year ended
  December 31,
  2010
Balance at beginning of year $ -  
Allocation of reserves from Vishay Intertechnology   914  
Addition based on tax positions related to current year   42  
Balance before indemnification receivable   956  
Receivable from Vishay Intertechnology for indemnification   (914 )
Balance at end of year $                 42  
       
The Company recognizes interest and penalties related to unrecognized tax benefits in income tax expense. The liability balance as of December 31, 2010 does not include interest and penalties of $0.1 million, which is also reflected as part of the indemnification receivable.
 
F-29
 
 

Note 7 – Income Taxes (continued)
 
Including tax positions for which the Company determined that the tax position would not meet the more-likely-than-not recognition threshold upon examination by the taxing authorities based upon technical merits of the position, the total estimated unrecognized tax benefit that, if recognized at December 31, 2010, would affect the Company’s effective tax rate is approximately $1.0 million. The Company believes that it is unlikely that any of the unrecognized tax benefits will reverse within the next twelve months of the reporting date of the Company’s consolidated financial statements as a result of expiration of the statutes of limitations in certain jurisdictions.
 
The Company and its subsidiaries file U.S. federal income tax returns, as well as income tax returns in multiple U.S. state and local and foreign jurisdictions. The Company files income tax returns on a combined, unitary, or stand-alone basis in multiple state and local jurisdictions, which generally have statutes of limitations ranging from 3 to 4 years. Additionally, the Company's foreign subsidiaries file income tax returns in the countries in which they have operations. Generally, these countries have statutes of limitations ranging from 3 to 10 years.
 
Note 8 – Long Term Debt
 
Long-term debt consists of the following (in thousands) :
 
    December 31,
        2010       2009
Credit facility - revolving debt   $ -   $ -
Exchangeable unsecured notes, due 2102     9,958     -
Other debt     1,734     1,735
      11,692     1,735
Less current portion     -     184
    $       11,692   $       1,551
             
Credit Facility
 
On October 14, 2010, the Company entered into a Credit Agreement among the Company, the lenders, RBS Citizens, National Association as joint book-runner and JPMorgan Chase Bank, National Association as agent for such lenders (“the Agent”), pursuant to which the lenders have made available to the Company a multi-currency, secured credit facility. The credit facility consists of a secured revolving facility (“Revolving Facility”) in an aggregate principal amount of $25.0 million with sublimits of (i) $5.25 million which can be used for letters of credit, and (ii) up to $5.0 million which can be used for loans outstanding for up to 5 business days (“Swing Loans”). The Revolving Facility terminates on October 14, 2013.
 
Interest payable on the Revolving Facility is based upon the Agent’s prime rate, the Federal Funds Rate, or LIBOR (“Base Rate”). Depending upon the Company’s leverage ratio or the type of advance, an interest rate margin ranging from 0.00% to 2.75% per annum is added to the applicable Base Rate to determine the interest payable on the Revolving Facility. The Company paid a one-time fee on the commitment and is required to pay a quarterly fee of 0.30% per annum to 0.50% per annum on the unused portion of the Revolving Facility which is determined based on the Company’s leverage ratio each quarter. Additional customary fees apply with respect to letters of credit.
 
F-30
 
 

Note 8 – Long Term Debt (continued)
 
Credit Facility (continued)
 
The obligations under the Revolving Facility are secured by pledges of stock in certain domestic and foreign subsidiaries, as well as guarantees by substantially all of the Company’s domestic subsidiaries. The obligations of the Company and the guarantors under the Revolving Facility are secured by substantially all the assets (excluding real estate) of the Company and such guarantors. The Credit Agreement restricts the Company from paying cash dividends and requires the Company to comply with other customary covenants, representations and warranties, including the maintenance of specific financial ratios. There is a provision in the Credit Agreement that if the Company is in default of more than $1.5 million in debt elsewhere, which is not cured, the credit facility could default.
 
The financial maintenance covenants include (a) a leverage ratio of not more than 2.5 to 1.0; and (b) a fixed charges coverage ratio of not less than 2.5 to 1.0. The Company was in compliance with all covenants at December 31, 2010. The leverage ratio and fixed charges ratio were 0.4 to 1.0 and 30.0 to 1.0, respectively. The Company expects to continue to be in compliance with these covenants based on current projections. If the Company is not in compliance with all of the required financial covenants, the credit facility could be terminated by the lenders, and all amounts outstanding pursuant to the credit facility could become immediately payable.
 
The Credit Agreement is structured to permit the Company to enter into a second secured revolving credit facility of up to a maximum principal amount not to exceed $15.0 million (or the equivalent thereof in Israeli shekels to be determined at the time the facility is entered into), on terms and conditions reasonably satisfactory to the Agent and secured separately by assets of the Company based primarily in Israel.
 
Exchangeable Unsecured Notes, due 2102
 
As described in Note 3, by reason of the spin-off, Vishay Intertechnology was required to take action so that the existing exchangeable notes of Vishay Intertechnology are deemed exchanged as of the date of the spin-off, for a combination of new notes of Vishay Intertechnology and notes issued by Vishay Precision Group, Inc.
 
Based on the relative trading prices of Vishay Intertechnology and VPG common stock on the ten trading days following the spin-off, VPG assumed the liability for an aggregate $10.0 million principal amount of exchangeable notes effective July 6, 2010. The maturity date of the notes is December 13, 2102.
 
The notes are subject to a put and call agreement under which the holders may at any time put the notes to the Company in exchange for 441,176 shares of the Company’s common stock in the aggregate, and the Company may call the notes in exchange for cash or for shares of its common stock at any time after January 1, 2018. The put/call rate of the VPG notes is $22.57 per share of common stock.
 
The notes bear interest at LIBOR. Interest is payable quarterly on March 31, June 30, September 30, and December 31 of each calendar year.
 
F-31
 
 

Note 8 – Long Term Debt (continued)
 
Other debt consists of debt held by VPG’s Japanese subsidiary.
 
Aggregate annual maturities of long-term debt are as follows (in thousands):
 
2011 $      -
2012   -
2013   -
2014   867
2015   144
Thereafter   10,681

Interest paid on third-party debt during the year ended December 31, 2010 was $0.1 million. Interest paid on third-party debt for the years ended December 31, 2009 and 2008 was not material.
 
Credit Lines
 
At December 31, 2010 and 2009, certain subsidiaries of the Company had committed and uncommitted short-term credit lines with various foreign banks aggregating approximately $0.9 million and $2.0 million, respectively. The outstanding balances related to these arrangements are presented as “Notes payable to banks” on the combined and consolidated balance sheet.
 
Note 9 – Stockholders’ Equity
 
Issuance of Stock of Vishay Precision Group, Inc.
 
On July 6, 2010, Vishay Intertechnology common stockholders of record as of June 25, 2010 (“Record Date”) received 1 share of VPG common stock for every 14 shares of Vishay Intertechnology common stock they held on the Record Date, and Vishay Intertechnology Class B common stockholders received 1 share of VPG Class B convertible common stock for every 14 shares of Vishay Intertechnology Class B common stock they held on the Record Date.
 
As a result of the spin-off, the Company issued 12,306,788 shares of common stock, par value $0.10, and 1,025,196 shares of Class B common stock, par value $0.10.
 
The Company’s Class B convertible common stock carries ten votes per share. The common stock carries one vote per share. Class B shares are transferable only to certain permitted transferees while the common stock is freely transferable. Class B shares are convertible on a one-for-one basis at any time into shares of common stock. Transfers of Class B shares other than to permitted transferees result in the automatic conversion of the Class B shares into common stock.
 
The Board of Directors may only declare dividends or other distributions with respect to the common stock or the Class B common stock if it grants such dividends or distributions in the same amount per share with respect to the other class of stock. As noted above, the Company is restricted from paying cash dividends. Stock dividends or distributions on any class of stock are payable only in shares of stock of that class. Shares of either common stock or Class B common stock cannot be split, divided, or combined unless the other is also split, divided, or combined equally.
 
The Board of Directors is authorized, without further stockholder approval, to issue from time to time up to an aggregate of 1,000,000 shares of preferred stock in one or more series. The Board of Directors may fix or alter the designation, preferences, rights and any qualification, limitations, restrictions of the shares of any series, including the dividend rights, dividend rates, conversion rights, voting rights, redemption terms and prices, liquidation preferences and the number of shares constituting any series. No shares of our preferred stock are currently outstanding.
 
F-32
 
 

Note 9 – Stockholders’ Equity (continued)
 
Issuance of Stock Purchase Warrants of Vishay Precision Group, Inc.
 
Effective July 6, 2010, the Company issued 630,252 warrants to acquire shares of VPG common stock to holders of Vishay Intertechnology warrants pursuant to a warrant agreement entered into by Vishay Intertechnology and its transfer agent dated December 13, 2002. In accordance with the terms of the 2002 warrant agreement, the exercise prices of these warrants were determined based on the relative trading prices of Vishay Intertechnology and VPG common stock on the ten trading days following the spin-off. Of these warrants, 500,000 have an exercise price of $26.56 per share and 130,252 have an exercise price of $40.23 per share. These warrants expire in December 2012.
 
Note 10 – Additional Financial Statement Information
 
The caption “Other” on the consolidated statements of operations consists of the following (in thousands) :
 
    Years ended December 31,
        2010       2009       2008
Foreign exchange (loss) gain   $ (1,006 )   $ 122     $ 2,470  
Interest income     355       725       1,902  
Income recognized on the equity method     -       -       444  
Other     (277 )     (133 )     (36 )
    $         (928 )   $         714     $        4,780  
                         
Other accrued expenses consist of the following (in thousands ) :
 
    December 31,
        2010       2009
Restructuring   $ -   $ 132
Goods received, not yet invoiced     2,861     877
Other     5,819     3,564
    $       8,680   $       4,573
             
F-33
 
 

Note 11 – Other Comprehensive Income (Loss)
 
The cumulative balance of each component of other comprehensive income (loss) and the income tax effects allocated to each component are as follows (in thousands) :
 
    Beginning   Before-Tax   Tax   Net-of-Tax   Ending
        Balance       Amount   Effect       Amount   Balance
December 31, 2008                                        
Pension and other                                        
       postretirement actuarial items   $ (714 )   $ 55         $ (29 )   $ 26     $ (688 )
Reclassification adjustment for                                        
       recognition of actuarial items             (11 )     4       (7 )     (7 )
Currency translation adjustment     2,067       (14,568 )     -       (14,568 )     (12,501 )
    $ 1,353     $ (14,524 )   $ (25 )   $      (14,549 )   $ (13,196 )
                                         
December 31, 2009                                        
Pension and other                                        
       postretirement actuarial items   $ (695 )   $ (897 )   $      353     $ (544 )   $ (1,239 )
Reclassification adjustment for                                        
       recognition of actuarial items             76       (27 )     49       49  
Currency translation adjustment     (12,501 )     4,523       -       4,523       (7,978 )
    $      (13,196 )   $ 3,702     $ 326     $ 4,028     $ (9,168 )
                                         
December 31, 2010                                        
Pension and other                                        
       postretirement actuarial items   $ (1,190 )   $ (427 )   $ 94     $ (333 )   $ (1,523 )
Reclassification adjustment for                                        
       recognition of actuarial items             60       (24 )     36       36  
Currency translation adjustment     (7,978 )     (1,120 )     -       (1,120 )         (9,098 )
    $ (9,168 )   $      (1,487 )   $ 70     $ (1,417 )   $      (10,585 )
                                         
F-34
 
 

Note 12 – Pensions and Other Postretirement Benefits
 
Defined Benefit Plans
 
Employees of VPG participate in various defined benefit pension and other postretirement benefit plans.
 
Prior to July 6, 2010, certain employees of VPG in the United States and the United Kingdom have historically participated in defined benefit pension and other postretirement plans sponsored by Vishay Intertechnology. The annual cost of the Vishay Intertechnology defined benefit plans was allocated to all of the participating businesses based upon a specific actuarial computation, and accordingly, is reflected in the accompanying combined and consolidated statements of operations.
 
VPG assumed most of the obligations for employees in the United States and the United Kingdom that were employed by VPG after the spin-off, and accordingly, those obligations are included in VPG’s combined and consolidated balance sheets. An allocation of plan assets is also reflected in the disclosures below for the periods prior to July 6, 2010. Plan assets were transferred to VPG as of the spin-off and invested in money market funds and company-owned life insurance policies.
 
Vishay Intertechnology’s principal qualified U.S. pension plan, the Vishay Retirement Plan (“VRP”), was frozen effective January 1, 2009. Due to the freeze of the VRP, participants no longer accrue benefits. Given the frozen nature of the VRP, participants who became employees of VPG at the spin-off were terminated, vested participants of the VRP as of the spin-off date and Vishay Intertechnology retained the pension obligations.
 
Employees who participated in the Vishay Nonqualified Retirement Plan, who became employees of VPG at the spin-off, transferred into the newly created Vishay Precision Group Nonqualified Retirement Plan. The Vishay Nonqualified Retirement Plan was frozen effective January 1, 2009. Accordingly, the Vishay Precision Group Nonqualified Retirement Plan is also frozen; therefore, participants do not accrue benefits.
 
The Vishay Precision Group Nonqualified Retirement Plan, like all nonqualified plans, is considered to be unfunded. VPG maintains a nonqualified trust, referred to as a “rabbi” trust, to fund benefits under this plan. Rabbi trust assets are subject to creditor claims under certain conditions and are not the property of employees. Therefore, they are accounted for as other noncurrent assets. Effective July 6, 2010, Vishay Intertechnology deposited an allocation of assets into a newly created rabbi trust for VPG. The combined and consolidated balance sheets include these rabbi trust assets of $1.4 million at December 31, 2010 and an allocation of $1.2 million at December 31, 2009, which approximate the pension liability at those dates.
 
F-35
 
 

Note 12 – Pensions and Other Postretirement Benefits (continued)
 
The following table sets forth a reconciliation of the benefit obligation, plan assets, and funded status related to pension and other postretirement benefit plans (in thousands):
 
    December 31, 2010   December 31, 2009
    Pension       OPEB   Pension   OPEB
    Plans   Plans       Plans   Plans
Change in benefit obligation:                                    
Benefit obligation at beginning of year   $ 14,358     $ 2,353     $ 11,508     $ 2,106  
Service cost (adjusted for actual                                
       employee contributions)     441       39       253       34  
Interest cost     834       133       639       135  
Plan transfers     2,662       151       -       -  
Contributions by participants     62       -       61       -  
Actuarial (gains) losses     106       43       1,269       247  
Benefits paid     (368 )     (193 )     (326 )     (169 )
Currency translation     (413 )     -       954       -  
Benefit obligation at end of year   $      17,682     $ 2,526     $ 14,358     $ 2,353  
                                 
Change in plan assets:                                
Fair value of plan assets at beginning                                
       of year   $ 8,674     $ -     $ 6,640     $ -  
Actual return on plan assets     476       -       991       -  
Plan transfers     489       -       -       -  
Company contributions     921       -       684       -  
Contributions by participants     62       -       61       -  
Benefits paid     (368 )     -       (326 )     -  
Currency translation     (274 )     -       624       -  
Fair value of plan assets at end of year   $ 9,980     $ -     $ 8,674     $ -  
Funded status at end of year   $ (7,702 )   $      (2,526 )   $      (5,684 )       $      (2,353 )
                                 
F-36
 
 

Note 12 – Pensions and Other Postretirement Benefits (continued)
 
Amounts recognized in the combined and consolidated balance sheet consist of the following pretax amounts (in thousands):
 
    December 31, 2010   December 31, 2009
    Pension   OPEB       Pension       OPEB
        Plans       Plans   Plans   Plans
Accrued pension and other postretirement costs   $ (7,702 )   $ (2,526 )   $ (5,684 )   $      (2,353 )
Accumulated other comprehensive loss     1,693       499       1,444       380  
    $ (6,009 )   $      (2,027 )   $      (4,240 )   $ (1,973 )
                                 
Actuarial items consist of the following (in thousands):
 
    December 31, 2010   December 31, 2009
    Pension       OPEB       Pension       OPEB
        Plans   Plans   Plans   Plans
Unrecognized net actuarial loss   $      1,680   $      444   $      1,444   $ 298
Unrecognized prior service cost     5     -     -     -
Unamortized transition obligation     8     55     -     82
    $ 1,693   $ 499   $ 1,444   $      380
                         
The following table sets forth additional information regarding the projected and accumulated benefit obligations for the pension plans (in thousands):
 
  December 31,
  2010       2009
Accumulated benefit obligation, all plans $      16,353   $      13,575
Plans for which the accumulated benefit          
       obligation exceeds plan assets:          
Projected benefit obligation $ 17,502   $ 14,240
Accumulated benefit obligation   16,277     13,516
Fair value of plan assets   9,857     8,575

F-37
 
 

Note 12 – Pensions and Other Postretirement Benefits (continued)
 
The following table sets forth the components of net periodic cost of pension and other postretirement benefit plans (in thousands):
 
    Years ended December 31,
    2010   2009   2008
    Pension   OPEB   Pension   OPEB   Pension       OPEB
        Plans       Plans       Plans       Plans   Plans   Plans
Annual service cost   $      503     $ 39   $ 314     $ 34   $ 543     $ 34
Less employee                                          
       contributions     62       -     61       -     72       -
Net service cost     441       39     253       34     471       34
Interest cost     834       133     639       135     817       126
Expected return on                                          
       plan assets     (505 )     -     (424 )     -     (643 )     -
Amortization of actuarial                                          
       losses (gains)     13       21     50       -     (39 )     -
Amortization of                                          
       transition obligation     -       27     -       27     -       27
Net periodic benefit cost   $ 783     $      220   $      518     $      196       $      606     $      187
                                           
See Note 11 for the pretax, tax effect, and after tax amounts included in other comprehensive income during the years ended December 31, 2010, 2009, and 2008. The estimated actuarial items that will be amortized from accumulated other comprehensive loss into net periodic pension cost during 2011 approximate the amounts amortized in 2010.
 
The following weighted-average assumptions were used to determine benefit obligations at December 31 of the respective years:
 
    2010   2009
    Pension       OPEB   Pension       OPEB
        Plans   Plans       Plans   Plans
Discount rate   4.96 %   5.75 %   5.70 %   5.75 %
Rate of compensation increase   2.89 %   0.00 %   3.24 %   0.00 %

The following weighted-average assumptions were used to determine the net periodic pension costs for the years ended December 31, 2010 and 2009:
 
    2010   2009
    Pension       OPEB   Pension   OPEB
        Plans   Plans   Plans       Plans
Discount rate   5.70 %   5.75 %       5.84 %   6.25 %
Rate of compensation increase   3.24 %   0.00 %   2.66 %   0.00 %
Expected return on plan assets   5.78 %   0.00 %   5.88 %   0.00 %

The impact of a one-percentage-point change in assumed health care cost trend rates on the net periodic benefit cost and postretirement benefit obligation is not material.
 
F-38
 
 

Note 12 – Pensions and Other Postretirement Benefits (continued)
 
The plan’s expected return on assets is based on management’s expectation of long-term average rates of return to be achieved by the underlying investment portfolios. In establishing this assumption, management considers historical and expected returns for the asset classes in which the plans are invested, advice from pension consultants and investment advisors, and current economic and capital market conditions.
 
The investment mix between equity securities and fixed income securities is based upon achieving a desired return, balancing higher return, more volatile equity securities, and lower return, less volatile fixed income securities.
 
Plan assets are comprised of:
 
    December 31, 2010   December 31, 2009
    Pension   OPEB   Pension   OPEB
    Plans       Plans       Plans   Plans
Equity securities       51 %   -   41 %       -
Fixed income securities   32 %   -   32 %   -
Cash and cash equivalents   17 %   -   27 %   -
Total   100 %   -   100 %   -
                     

Estimated future benefit payments are as follows (in thousands):
 
    Pension   OPEB
        Plans       Plans
2011   $      331   $      159
2012     404     141
2013     485     122
2014     506     110
2015     574     122
2016-2020     3,604     611

The Company anticipates making contributions to its pension and postretirement benefit plans of approximately $1.2 million during 2011.
 
F-39
 
 

Note 12 – Pensions and Other Postretirement Benefits (continued)
 
Other Retirement Obligations
 
The Company participates in various other defined contribution and government-mandated retirement plans based on local law or custom. The Company periodically makes required contributions for certain of these plans. At December 31, 2010 and 2009, the combined and consolidated balance sheets include $0.5 million and $2.5 million, respectively, within accrued pension and other postretirement costs related to these plans.
 
Most of the Company’s U.S. employees are eligible to participate in 401(k) savings plans which provide company matching under various formulas. Concurrent with the freezing of U.S. pension benefits effective January 1, 2009, the company-match percentage for affected employees was increased. The Company’s matching expense for the plans was $0.7 million, $0.7 million, and $0.6 million for the years ended December 31, 2010, 2009, and 2008, respectively. No material amounts are included in the combined and consolidated balance sheets related to unfunded 401(k) contributions.
 
Prior to July 6, 2010, certain key employees participated in a nonqualified deferred compensation plan sponsored by Vishay Intertechnology. These employees transferred to a newly created nonqualified deferred compensation plan of VPG. The accompanying combined and consolidated balance sheets include a liability within other noncurrent liabilities related to these deferrals. Vishay Intertechnology maintains a nonqualified trust, referred to as a “rabbi” trust, to fund payments under this plan. Rabbi trust assets are subject to creditor claims under certain conditions and are not the property of employees. Therefore, they are accounted for as other noncurrent assets. Effective July 6, 2010, Vishay Intertechnology deposited an allocation of assets into a newly created rabbi trust for VPG. The combined and consolidated balance sheets include these rabbi trust assets of $2.6 million at December 31, 2010 and allocations of $2.3 million at December 31, 2009. Assets held in trust are intended to approximate VPG’s liability under this plan.
 
F-40
 
 

Note 13 – Share-Based Compensation
 
Effective July 6, 2010, the Company’s Board of Directors and Vishay Intertechnology (as the Company’s sole stockholder prior to the spin-off) approved the adoption of the Vishay Precision Group, Inc. 2010 Stock Incentive Program (the “2010 program”). The 2010 Program permits the grant of up to 500,000 shares of restricted stock, unrestricted stock, restricted stock units (“RSUs”), and stock options to officers, employees and non-employee directors. At December 31, 2010, the Company had reserved 367,000 shares of common stock for future grant of equity awards, pursuant to the 2010 program. If any outstanding awards are forfeited by the holder or cancelled by the Company, the underlying shares would be available for regrant to others.
 
Stock Options
 
In connection with the spin-off, VPG agreed to issue certain replacement awards to VPG employees holding equity-based awards of Vishay Intertechnology based on VPG’s common stock. The vesting schedule, expiration date, and other terms of these awards are generally the same as those of the Vishay Intertechnology equity–based awards they replaced. A large group of options expired approximately three months after the spin-off and were out of the money throughout existence.
 
The following table summarizes the Company’s stock option activity. Note that the activity presented for 2009 and 2008 represents the stock options held by VPG employees under the Vishay Intertechnology Stock Incentive plan. For 2010, the impact of the conversion of the Vishay Intertechnology options to VPG options is disclosed (number of options in thousands):
 
    Years ended December 31,
    2010   2009   2008
    Number   Weighted   Number   Weighted   Number   Weighted
    of   Average   of   Average   of   Average
    VPG   Exercise   Vishay   Exercise   Vishay   Exercise
        Options   Price   Options   Price   Options   Price
Outstanding:                                    
Beginning of year   102         $ 20.24       171         $ 18.26       170         $ 18.22
Conversion at spin-off *   (26 )     -   -       -   -       -
Granted   -       -   -       -   6       8.98
Exercised   -       -   -       -   (5 )     5.60
Cancelled/expired   (44 )     33.37   (69 )     15.33   -       -
End of year *   32     $      18.03   102     $      20.24   171     $ 18.26
Vested and                                    
       expected to vest   32           102           171        
Exercisable:                                    
End of year   20           79           141        
                                     
* The weighted average grant date fair value of the stock options included in the line item “Conversion at spin-off” is equal to the weighted average grant date fair value of such stock options prior to the spin-off, as reduced by the spin-off adjustment. The weighted average grant date fair value of the stock options outstanding as of December 31, 2010 also reflects the decrease in the grant date fair value as a result of the spin-off adjustment.
 
F-41
 
 

Note 13 – Share-Based Compensation (continued)
 
The following table summarizes information concerning stock options outstanding and exercisable at December 31, 2010 (number of options in thousands) :
 
Ranges of   Options   Options
Exercise Prices   Outstanding   Exercisable
        Weighted                
        Average   Weighted       Weighted
        Remaining   Average       Average
    Number of   Contractual   Exercise   Number of   Exercise
    Options   Life       Price       Options       Price
$11.92 - $17.87       9       5.02   $ 14.90   7   $ 16.38
$18.92   19   6.16     18.92   9     18.92
$20.58   4   3.58     20.58   4     20.58
Total   32   5.48   $ 18.03   20   $ 18.53
                         
The fair value of each option award is estimated on the date of grant using the Black-Scholes option-pricing model. There were no options granted in 2010 or 2009. Options granted in 2008 had a weighted-average grant-date fair value of $5.04. The following weighted-average assumptions were incorporated into the model used to value the options granted in 2008:
 
Expected dividend yield        0.0 %
Risk-free interest rate   3.6 %
Expected volatility   58.3 %
Expected life (in years)   7.2  

The expected life of the options was estimated based on historical experience for a group of employees similar to the respective grantees. The expected volatility was estimated based on historical volatility of the Vishay Intertechnology stock price over a period equal to the expected life of the options.
 
The pretax aggregate intrinsic value (the difference between the closing stock price of VPG’s common stock on the last trading day of 2010 of $18.84 per share and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options on December 31, 2010 is not material. No options were exercised during the year ended December 31, 2010. The total intrinsic value of options exercised during the year ended December 31, 2009 and 2008 was also not material.
 
Restricted Stock Units
 
The VPG Board of Directors agreed to grant “founders’ equity” awards pursuant to the 2010 Plan to directors and executive officers. The fair value of the awards to directors is recognized over a three year vesting schedule. The fair value of the awards to the executive officers is vested at the end of the three year period. Each RSU entitles the recipient to receive a share of common stock when the RSU vests.
 
F-42
 
 

Note 13 – Share-Based Compensation (continued)
 
Restricted Stock Units (continued)
 
RSU activity for the year ended December 31, 2010 is presented below (number of RSUs in thousands) :
 
    Number   Weighted
    of   Average
    VPG   Grant-date
    RSUs   Fair Value
Outstanding:          
Beginning of year       -       $ -
Granted   101     15.79
Exercised   -     -
Cancelled   -     -
End of year   101   $      15.79
           
The weighted average remaining contractual term for the RSUs is 2.5 years. The amount of compensation cost related to share-based payment transactions is measured based on the grant-date fair value of the equity instruments issued. VPG determines compensation cost for RSU’s based on the grant-date fair value of the underlying common stock. Compensation cost is recognized over the period that the participant provides service in exchange for the award.
 
Restricted Stock Units (Performance Based)
 
VPG’s three executive officers will also be entitled to annual performance-based equity awards with an aggregate target grant-date fair value of $0.6 million. Performance criteria include measures of operating margin and EBITDA for the Company. Awards will vest in annual installments over four years. As of December 31, 2010, $0.1 million of compensation expense has been recorded for these awards, as the Company expects all performances based vesting criteria to be achieved.
 
The following table summarizes share-based compensation expense recognized. Note that 2009 and 2008 data and the first six months of 2010 represent the portion of the expense related to Vishay Intertechnology programs in which employees of VPG participated (in thousands):
 
    Years ended December 31,
        2010   2009       2008
Stock options   $ 32       $ 65   $ 66
Restricted stock units     174     51     -
Restricted stock units (performance based)     147     -     -
Other     44     19     57
Total   $      397   $      135   $      123
                   
F-43
 
 

Note 14 – Commitments, Contingencies, and Concentrations
 
Leases
 
The Company uses various leased facilities and equipment in its operations. In the normal course of business, operating leases are generally renewed or replaced by other leases. Certain operating leases include escalation clauses.
 
Total rental expense under operating leases was $3.5 million, $3.6 million, and $3.9 million for the years ended December 31, 2010, 2009, and 2008, respectively.
 
Future minimum lease payments for operating leases (excluding related party leases as detailed in Note 3) with initial or remaining noncancelable lease terms in excess of one year are as follows (in thousands) :
 
2011       $      1,980
2012     1,337
2013     456
2014     277
2015     157
Thereafter     233

Litigation
 
From time to time, the Company is a party to various claims and lawsuits arising in the normal course of business. The Company is of the opinion that these litigations or claims will not have a material negative effect on its consolidated financial position, results of operations, or cash flows.
 
Executive Employment Agreements
 
The Company has employment agreements with its executive officers which outline base salary, incentive compensation, and equity-based compensation. The employment agreement with the Company’s President and Chief Executive Officer also provided for a special sign-on bonus of $0.4 million, which became payable on July 6, 2010, and is being ratably amortized to selling, general, and administrative expense over the initial term of his employment agreement. The Company’s President and Chief Executive Officer will be required to repay this bonus if he terminates his employment with VPG during the initial three-year term of his employment arrangement, except under certain circumstances. The employment agreements with the Company’s executive officers also provide for incremental compensation in the event of termination without cause or for good reason.
 
Sources of Supplies
 
Although most materials incorporated in the Company’s products are available from a number of sources, certain materials are available only from a relatively limited number of suppliers.
 
Some of the most highly specialized materials for the Company’s sensors are sourced from a single vendor. The Company maintains a safety stock inventory of certain critical materials at its facilities.
 
Certain metals used in the manufacture of our products are traded on active markets, and can be subject to significant price volatility.
 
Purchase Commitments
 
The Company has various purchase commitments incidental to the ordinary conduct of business. Such commitments are at prices which are not in excess of current market prices.
 
F-44
 
 

Note 14 – Commitments, Contingencies, and Concentrations (continued)
 
Market Concentrations
 
No single customer comprises greater than 10% of net revenues.
 
The vast majority of the Company’s products are used in the broad industrial market, with selected uses in military/aerospace, automotive, and to much lesser extent, consumer products. Within the industrial segment, the Company’s products serve wide applications in the waste management, bulk hauling, logging, scale, engineering systems, pharmaceutical, oil, chemical, steel, paper, and food industries.
 
Credit Risk Concentrations
 
Financial instruments with potential credit risk consist principally of cash and cash equivalents, accounts receivable, and notes receivable. The Company maintains cash and cash equivalents with various major financial institutions. Concentrations of credit risk with respect to receivables are generally limited due to the Company’s large number of customers and their dispersion across many countries and industries. At December 31, 2010 and 2009, the Company had no significant concentrations of credit risk.
 
Geographic Concentration
 
The Company has significant manufacturing operations in Israel in order to benefit from that country’s tax abatement programs, lower wage rates, highly skilled labor force, and government-sponsored grants. Israeli incentive programs have contributed substantially to the growth and profitability of the Company. The Company might be materially and adversely affected if these incentive programs were no longer available to the Company or if events were to occur in the Middle East that materially interfered with the Company’s operations in Israel.
 
Note 15 –Segment and Geographic Data
 
VPG reports in two product segments: Foil Technology Products; and Weighing Modules and Control Systems. The Foil Technology Products reporting segment is comprised of the foil resistors and strain gage operating segments and the Weighing Modules and Control Systems reporting segment is comprised of the transducers/load cells and weighing systems operating segments.
 
VPG evaluates reporting segment performance based on operating income, exclusive of certain items. Management believes that evaluating segment performance, excluding items such as restructuring and severance costs, and other items is meaningful because it provides insight with respect to intrinsic operating results of VPG. The accounting policies of the segments are the same as those described in the summary of significant accounting policies (see Note 2). Reporting segment assets are the owned or allocated assets used by each segment. Products are transferred between segments on a basis intended to reflect, as nearly as practicable, the market value of the products.
 
F-45
 
 

Note 15 – Segment and Geographic Data (continued)
 
The following table sets forth reporting segment information (in thousands) :
 
  Weighing Modules   Foil Technology   Corporate/        
  & Control Systems   Products   Other   Total
2010                            
Net third-party revenues $                     105,967       $               101,557       $      -         $      207,524  
Intersegment revenues   84     1,873     (1,957 )     -  
Gross margin   28,738     48,390     -       77,128  
Segment operating income (loss)   8,659     32,628     (21,456 )     19,831  
Depreciation expense   3,945     3,563     37       7,545  
Capital expenditures   2,608     5,446     344       8,398  
Total assets   141,430     86,918     20,365       248,713  
                           
2009                            
Net third-party revenues $ 100,120   $ 71,871   $ -     $ 171,991  
Intersegment revenues   61     1,301     (1,362 )     -  
Gross margin   22,282     30,423     -       52,705  
Segment operating income (loss)   4,066     18,444     (15,209 )     7,301  
Restructuring and severance costs   1,854     194     -       2,048  
Depreciation expense   4,721     3,725     -       8,446  
Capital expenditures   1,386     795     -       2,181  
Total assets   115,187     94,592     -       209,779  
                           
2008                            
Net third-party revenues $ 148,796  
$
92,904   $ -     $ 241,700  
Intersegment revenues   277     3,230     (3,507 )     -  
Gross margin   37,304     42,592     -       79,896  
Segment operating income (loss)   12,821     27,749     (112,202 )     (71,632 )
Restructuring and severance costs   6,251     98     -       6,349  
Impairment of goodwill   80,266     13,199     -       93,465  
Depreciation expense   5,060     3,350     -       8,410  
Capital expenditures   4,093     3,298     -       7,391  
Total assets   153,491     101,372     -       254,863  

F-46
 
 

Note 15 – Segment and Geographic Data (continued)
 
The “Corporate/Other” column for segment operating income (loss) includes unallocated selling, general, and administrative expenses and certain items which management excludes from segment results when evaluating segment performance, as follows (in thousands):
 
    Years ended December 31,
    2010   2009   2008
Unallocated selling, general, and administrative expenses       $      (21,456 )       $      (13,161 )       $      (12,388 )
Restructuring and severance costs     -       (2,048 )     (6,349 )
Impairment of goodwill     -       -       (93,465 )
    $ (21,456 )   $ (15,209 )   $ (112,202 )
                         
The following geographic data include net revenues based on revenues generated by subsidiaries located within that geographic area and property and equipment based on physical location (in thousands) : 
    Years ended December 31,
Net Revenues   2010   2009   2008
United States       $      77,130       $      58,795         $      80,449
United Kingdom     27,509     26,568       40,851
Other Europe     56,056     51,454       73,038
Israel     12,002     17,899       23,898
Asia     34,827     17,275       23,464
    $ 207,524   $ 171,991     $ 241,700
 
    December 31,      
Property and Equipment - Net   2010   2009      
United States   $ 6,729   $ 5,124        
United Kingdom     6,026     6,434        
Other Europe     958     1,026        
Israel     16,952     17,162        
Asia     15,872     14,715        
Other     210     138        
    $ 46,747   $ 44,599        
 

F-47
 
 

Note 16 – Earnings Per Share
 
Basic earnings per share is computed using the weighted average number of common shares outstanding during the periods presented. Diluted earnings per share is computed using the weighted average number of common shares outstanding, adjusted to include the potentially dilutive effect of stock options and restricted stock units (see Note 13), warrants (see Note 9), and other potentially dilutive securities.
 
The following table sets forth the computation of basic and diluted earnings per share attributable to VPG stockholders (in thousands, except earnings per share) :
 
    Years ended December 31,
    2010   2009   2008
Numerator:                    
                     
Numerator for basic earnings per share:                    
Net earnings (loss) attributable to VPG stockholders/parent       $       11,706       $      1,704       $      (74,130 )
                     
Adjustment to the numerator for net earnings:                    
       Interest savings assuming conversion of                    
              dilutive exchangeable notes, net of tax     13     -     -  
                     
Numerator for diluted earnings per share:                    
Net earnings (loss) attributable to VPG stockholders/parent   $ 11,719   $ 1,704   $ (74,130 )
                     
Denominator:                    
Denominator for basic earnings per share:                    
       Weighted average shares     13,332     13,332     13,332  
                     
Effect of dilutive securities:                    
       Exchangeable notes     441     -     -  
       Employee stock options     1     -     -  
       Restricted stock units     13     -     -  
       Dilutive potential common shares     455     -     -  
                     
Denominator for diluted earnings per share:                    
       Adjusted weighted average shares     13,787     13,332     13,332  
                     
Basic earnings (loss) per share attributable to VPG                    
       stockholders/parent   $ 0.88   $ 0.13   $ (5.56 )
                     
Diluted earnings (loss) per share attributable to VPG                    
       stockholders/parent   $ 0.85   $ 0.13   $ (5.56 )

F-48
 
 

Note 16 – Earnings Per Share (continued )
 
Until July 6, 2010, the operations comprising VPG's business were wholly owned by various subsidiaries of Vishay Intertechnology. As of the date of the spin-off, VPG issued 13.3 million shares of capital stock. This share amount is being utilized for the calculation of basic earnings per common share for periods presented prior to July 6, 2010 as no common stock of the Company existed prior to July 6, 2010. For periods prior to December 31, 2009, the same number of shares is being used for diluted earnings per common share as for basic earnings per common share as no common stock of the Company existed prior to July 6, 2010 and no dilutive securities of the Company were outstanding for any prior period. For the year ended December 31, 2010, the Company assumed that the dilutive securities were outstanding for the entire period, and therefore were included in the denominator of diluted earnings per share. See Note 9 for a discussion of shares of common stock and Class B common stock issued pursuant to the spin-off.
 
Diluted earnings per share for the periods presented do not reflect the following weighted average potential common shares, as the effect would be antidilutive (in thousands) :
 
    Years ended December 31,
        2010       2009       2008
Exchangeable notes:            
     Exchangeable Unsecured Notes, due 2102   -   -   -
Weighted average employee stock options   -   -   -
Weighted average warrants   630   -   -
Weighted average other   -   -   -

F-49
 
 

Note 17 – Fair Value Measurements
 
The Company adopted ASC Topic 820, Fair Value Measurements and Disclosures, for financial assets and liabilities as of January 1, 2008, and for nonfinancial assets and liabilities as of January 1, 2009. The adoption did not have a material effect on the Company’s financial position, results of operations, or liquidity.
 
ASC Topic 820 establishes a valuation hierarchy of the inputs used to measure fair value. This hierarchy prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The following is a brief description of those three levels:
 
Level 1: Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities.
 
Level 2: Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.
 
Level 3: Unobservable inputs that reflect the Company’s own assumptions.
 
An asset or liability’s classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement.
 
The following tables provide the financial assets and liabilities carried at fair value measured on a recurring basis (in thousands) :
 
As of December 31, 2010:         Fair value measurements at reporting date using:
    Total   Level 1   Level 2   Level 3
    Fair Value   Inputs   Inputs   Inputs
Assets held in rabbi trusts       $      3,943       $      778       $      3,165       $      -
                         
Defined benefit pension plan assets                        
       Equity securities   $ 5,121   $ 5,121   $ -   $ -
       Fixed income securities     3,158     3,158     -     -
       Cash and cash equivalents     1,701     1,701     -     -
 
As of December 31, 2009:         Fair value measurements at reporting date using:
    Total   Level 1     Level 2   Level 3
    Fair Value   Inputs   Inputs   Inputs
Assets held in rabbi trusts   $ 3,515   $ 955   $ 2,560   $ -
                         
Defined benefit pension plan assets                        
       Equity securities   $ 3,561   $ 3,561   $ -   $ -
       Fixed income securities     2,748     2,748     -     -
       Cash and cash equivalents     2,365     2,365     -     -

F-50
 
 

Note 17 – Fair Value Measurements (continued)
 
The Company maintains nonqualified trusts, referred to as “rabbi” trusts, to fund payments under deferred compensation and nonqualified pension plans. Rabbi trust assets consist primarily of marketable securities, classified as available-for-sale money market funds at December 31, 2010 and company-owned life insurance assets. The marketable securities held in the rabbi trusts are valued using quoted market prices on the last business day of the year. The company-owned life insurance assets are valued in consultation with the Company’s insurance brokers using the value of underlying assets of the insurance contracts. The fair value measurement of the marketable securities held in the rabbi trust is considered a Level 1 measurement and the measurement of the company-owned life insurance assets is considered a Level 2 measurement within the fair value hierarchy.
 
The Company maintains defined benefit retirement plans in certain of its subsidiaries. The assets of the plans are measured at fair value.
 
Equity securities held by the defined benefit retirement plans consist of equity securities that are valued based on quoted market prices on the last business day of the year. The fair value measurement of the equity securities is considered a Level 1 measurement within the fair value hierarchy.
 
Fixed income securities held by the defined benefit retirement plans consist of government bonds and corporate notes that are valued based on quoted market prices on the last business day of the year. The fair value measurement of the fixed income securities is considered a Level 1 measurement within the fair value hierarchy.
 
Cash held by the defined benefit retirement plans consists of deposits on account in various financial institutions. The carrying amount of the cash approximates its fair value.
 
The fair value of the long-term debt at December 31, 2010 is approximately $10.4 million. The Company estimates the fair value of its long-term debt using a combination of quoted market prices for similar financing arrangements and expected future payments discounted at risk-adjusted rates. The carrying amount of long-term debt at December 31, 2009 approximated its fair value.
 
The Company’s financial instruments include cash and cash equivalents, accounts receivable, long-term notes receivable, short-term notes payable, and accounts payable. The carrying amounts for these financial instruments reported in the combined and consolidated balance sheets approximate their fair values.
 
F-51
 
 

Note 18 – Summary of Quarterly Financial information (Unaudited)
 
(in thousands, except per share                                                      
amounts)   2010 ( c )   2009 ( c )
    First   Second   Third   Fourth   First   Second   Third   Fourth
Statement of Operations data:                                                      
Net revenues       $       48,175       $       52,914       $       51,608       $       54,827         $      43,705       $      41,333         $      40,105         $      46,848
Gross profit     17,049     19,982   19,142     20,955       14,051     10,979       12,681       14,994
Operating income (loss)     3,841     6,152     4,785     5,053       2,548     (542 )     2,236       3,059
Net earnings (loss)     1,803     4,066     2,630     3,244       596     (170 )     518       777
Less: net earnings (loss) attributable to                                                      
       noncontrolling interests     26     32     11     (32 )     7     (54 )     (4 )     68
Net earnings (loss) attributable to VPG                                                      
stockholders/parent     1,776     4,035     2,619     3,276       589     (116 )     522       709
                                                       
Per Share Data: (a) (b)                                                      
Basic earnings per share   $ 0.13   $ 0.30   $ 0.20   $ 0.25     $ 0.04   $ (0.01 )   $ 0.04     $ 0.05
Diluted earnings per share   $ 0.13   $ 0.30   $ 0.19   $ 0.24     $ 0.04   $ (0.01 )   $ 0.04     $ 0.05
                                                       
Certain Items Recorded                                                      
during the Quarters:                                                      
Restructuring and severance costs   $ -   $ -   $ -   $ -     $ 479   $ 1,390     $ 175     $ 4

      (a)       For periods prior to July 6, 2010, the operations comprising VPG's business were wholly owned by various subsidiaries of Vishay Intertechnology. As of the date of the spin-off, VPG issued 13.3 million shares of capital stock. This share amount is being utilized for the calculation of basic and diluted earnings per common share for periods presented prior to July 6, 2010, as no common stock of the Company existed prior to July 6, 2010.
   
  (b)   Subsequent to July 6, 2010, the number of shares used to calculate basic earnings per share is based on the number of shares our common stock outstanding and diluted earnings per share takes into consideration the effects of any dilutive securities.
   
  (c)   The Company reports interim financial information for the 13-week periods beginning on a Sunday and ending on a Saturday, except for the first fiscal quarter, which always begins on January 1, and the fourth fiscal quarter, which always ends on December 31. The first, second, third and fourth quarters of 2010 ended on April 3 rd , July 3 rd , October 2 nd and December 31 st , respectively. The first, second, third and fourth quarters of 2009 ended on March 28 th , June 27 th , September 26 th and December 31 st , respectively.

F-52

WARRANT AGREEMENT
 
     WARRANT AGREEMENT (this “Agreement”) dated as of July 21, 2010 between Vishay Precision Group, Inc., a Delaware corporation (the “Company”), and American Stock Transfer & Trust Co., a New York corporation, as warrant agent (the “Warrant Agent”).
 
     WHEREAS, Vishay Intertechnology, Inc, a Delaware corporation (“Vishay Intertechnology”), and American Stock Transfer & Trust Co. entered into that certain Warrant Agreement, dated as of December 13, 2002 (the “Vishay Intertechnology Warrant Agreement”); and
 
     WHEREAS, pursuant to the Vishay Intertechnology Warrant Agreement, Vishay Intertechnology agreed that, in case it shall at any time pay a dividend or make a distribution to all holders of its common stock consisting of the capital stock of any class or series, or similar interests, of or relating to a subsidiary or other business entity of Vishay Intertechnology, then each holder of a class A warrant and each holder of a class B warrant issued pursuant to the Vishay Intertechnology Warrant Agreement shall be entitled to a warrant evidencing a right to purchase shares of capital stock of the subsidiary or other business entity whose capital stock was paid as a dividend or distributed by Vishay Intertechnology, with such terms as are specified in the Vishay Intertechnology Warrant Agreement; and
 
     WHEREAS, Vishay Intertechnology and the Company entered into that certain Master Separation Agreement, dated as of June 22, 2010 (the “Master Separation Agreement”), providing for the spin-off of the Company by Vishay Intertechnology in the form of a tax free dividend of the then-outstanding shares of Common Stock to the holders of the common stock of Vishay Intertechnology and the then-outstanding shares of class B common stock of the Company to the holders of class B common stock of Vishay Intertechnology; and
 
     WHEREAS, the Company has agreed under the terms of the Master Separation Agreement to comply with the obligation under the Vishay Intertechnology Warrant Agreement to issue the Company’s warrants to the holders of the Vishay Intertechnology class A warrants and the class B warrants; and
 
     WHEREAS, in furtherance of its obligations under the Vishay Intertechnology Warrant Agreement and the Master Separation Agreement, the Company desires to enter into this Warrant Agreement and to issue (i) to the holders of the Vishay Intertechnology class A warrants, the Company’s warrants to purchase up to an aggregate of 500,000 shares of Common Stock, as evidenced by warrant certificates in the form attached hereto as Exhibit A (the “Class A Warrants”) at the Class A Exercise Price and (ii) to the holders of the Vishay Intertechnology class B warrants, the Company’s warrants to purchase up to 130,252 shares of Common Stock, as evidenced by warrant certificates in the form attached hereto as Exhibit B (the “Class B Warrants”) at the Class B Exercise Price; and
 
     WHEREAS, the Company desires the Warrant Agent to act on behalf of the Company, and the Warrant Agent is willing to so act, in connection with the issuance, exercise, exchange and replacement of the certificates representing the Warrants (as defined herein) (the “Warrant Certificates”) and other matters provided herein.
 
 

     NOW, THEREFORE, in consideration of the premises and the mutual agreements herein set forth, the parties hereto agree as follows:
    
     SECTION 1. Definitions. As used in this Agreement, the following terms, when capitalized, shall have the meanings assigned below:
 
     “Affiliate” means, with respect to any Person, any entity which controls such Person, any entity which such Person controls, or any entity which is under common control with such Person.
 
     “Business Day” means any day other than a Saturday, Sunday or legal holiday on which the commercial banks in the City of New York, Borough of Manhattan, are required or permitted by law to remain closed.
 
     “Class A Warrants” has the meaning specified in the preamble.
 
     “Class A Exercise Price” means US $26.56, as such price may be modified from time to time in accordance with the provisions herein.
 
     “Class B Warrants” has the meaning specified in the preamble.
 
     “Class B Exercise Price” means US $40.23, as such price may be modified from time to time in accordance with the provisions herein.
 
     “Common Stock” means the common stock, par value $0.10 per share, of the Company and any other security exchanged or substituted for such common stock or into which such common stock is converted in any recapitalization, reorganization, merger, consolidation, share exchange or other business combination transaction, including any reclassification consisting of a change in par value or a change from par value to no par value or vice versa.
 
     “Daily Market Price” for any trading day means the volume-weighted average of the per share selling prices on the New York Stock Exchange or other principal United States securities exchange or inter-dealer quotation system on which the relevant security is then listed or quoted or, if there are no reported sales of the relevant equity security on such trading day, the average of the high bid and low ask price for the relevant equity security on the last trading day on which such sale was reported or, if there are no high bid and low ask prices, the Daily Market Price shall be the per share fair market value of the relevant equity security as determined by an investment banking firm of national reputation and standing selected by the Company and reasonably acceptable to a Majority of the Warrant Holders (in which case, only a single determination of value need be made by an investment banking firm, notwithstanding any provision in the Agreement requiring an average over more than one (1) trading day).
 
     “Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder, as the same may be amended from time to time.
 
     “Exercise Notice” has the meaning specified in Section 5.
 
     “Exercise Price” means the Class A Exercise Price (with respect to the Class A Warrants) or the Class B Exercise Price (with respect to the Class B Warrants).
 
     “Expiration Date” means 5:00 P.M. New York City time, December 13, 2012.
 
     “ Holder” means the Initial Holders and their successors and permitted assigns who become holders of Warrants in a manner permitted under this Agreement, in each case until the relevant person ceases to be a Holder of Warrants in accordance with the provisions hereof.
 
-2-
 
 

     “Initial Holder” means the persons to whom or for whose benefit Warrants are issued in accordance with the terms of the Master Separation Agreement, in each case until the relevant person ceases to be a Holder of Warrants in accordance with the provisions hereof.
 
     “Issue Date” means the date of this Agreement, which is the date as of which the Warrants are first being issued.
 
     “Majority of the Warrant Holders” means, at any relevant time, the Holders of Warrants that are exercisable for more than 50% of the Warrant Shares for which all outstanding Warrants are exercisable at such time.
 
     “Master Separation Agreement” has the meaning specified in the preamble.
 
     “Person” means any individual, corporation, partnership, limited liability company, trust, foundation, joint venture, association, joint stock company, unincorporated organization, government agency, estate or other entity of any nature.
 
     “Regulation S” means Regulation S under the Securities Act, including any successor rule or regulation.
 
     “Rule 144” means Rule 144 under the Securities Act, including any successor rule or regulation.
 
     “Rule 144A” means Rule 144A under the Securities Act, including any successor rule or regulation.
 
     “SEC” means the United States Securities and Exchange Commission.
 
     “Securities Act” means the United States Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder, as the same may be amended from time to time.
 
     “Transfer” means any disposition of any Warrants or of any interest therein, which would constitute a “sale” within the meaning of the Securities Act.
 
     “Transfer Agent” has the meaning specified in Section 10.
 
     “Transfer Document” has the meaning specified in Section 4.
 
     “Vishay Intertechnology Warrant Agreement” has the meaning specified in the preamble.
 
     “Warrants” means Class A Warrants or Class B Warrants, subject to adjustment as specified in this Agreement.
 
     “Warrant Agent” has the meaning specified in the preamble.
 
     “Warrant Certificates” has the meaning specified in the preamble.
 
     “Warrant Register” has the meaning specified in Section 3.
 
     “Warrant Shares” means shares of Common Stock issuable or issued upon exercise of the Warrants, which shall be subject to adjustment as specified in this Agreement.
 
-3-
 
 

     Where the reference “hereof,” “hereby” or “herein” appears in this Agreement, such reference shall be deemed to be a reference to this Agreement as a whole. Whenever the words “include,” “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation.” Words denoting the singular include the plural, and vice versa, and references to it or its or words denoting any gender shall include all genders.
 
     SECTION 2. Warrant Certificates.
 
     (a) Initial Issuance. Promptly following the execution of this Agreement, the Company shall deliver to the Warrant Agent a list of the names of the Initial Holders and the number and class of Warrants to which each Initial Holder is entitled, totaling, in the aggregate, Warrants to issue 630,252 shares of Common Stock. The Company shall deliver to the Warrant Agent, along with this Agreement, a sufficient number of duly executed Warrant Certificates. The Warrant Agent is hereby authorized by the Company to promptly issue and deliver (i) the Class A Warrants, as evidenced by warrant certificates in the form attached hereto as Exhibit A, to purchase the number of shares of Common Stock of the Company as set forth in the Purchase Agreement and (ii) the Class B Warrants, as evidenced by warrant certificates in the form attached hereto as Exhibit B, to purchase the number of shares of Common Stock of the Company as set forth in the Purchase Agreement. The Warrant Certificates requested by the Company shall be completed and countersigned by the Warrant Agent and promptly delivered to the Company to be mailed or delivered to the Holders pursuant to the terms hereof.
 
     (b) Forms of Warrant Certificates. Each Warrant Certificate to be delivered pursuant to the Vishay Intertechnology Warrant Agreement and the Master Separation Agreement, and any additional Warrant Certificate that may be issued upon partial exercise, replacement or transfer of any Warrant, shall be in registered form only and shall be substantially in the form set forth in Exhibit A hereto (if such Warrant is a Class A Warrant) or Exhibit B (if such Warrant is a Class B Warrant) (including the form of election and the form of assignment). A single Warrant Certificate may evidence the issuance to a holder thereof of more than one Warrant; provided, however, that Class A Warrants and Class B Warrants may not be evidenced together by the same certificate. Warrants may be divided or combined with other Warrants owned by the same Holder upon presentation at the office of the Warrant Agent, together with a written notice specifying the denominations in which new Warrants are to be issued, signed by the Holder thereof or its agent or attorney. As to any such division or combination, the Company shall execute and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants to be divided or combined.
 
     (c) Execution of Warrant Certificates. Warrant Certificates shall be signed on behalf of the Company by the Chairman or Vice Chairman of the Board or its President or a Vice President or its Secretary or an Assistant Secretary under its corporate seal, and countersigned by an authorized officer of the Warrant Agent. Each such signature upon the Warrant Certificates may be in the form of a facsimile signature of the present or any future Chairman or Vice Chairman of the Board, President, Vice President, Secretary or Assistant Secretary and may be imprinted or otherwise reproduced on the Warrant Certificates, and for that purpose the Company may adopt and use the facsimile signature of any person who shall have been Chairman or Vice Chairman of the Board, President, Vice President, Secretary or Assistant Secretary, notwithstanding the fact that at the time the Warrant Certificates shall be delivered or disposed of he shall have ceased to hold such office. The seal of the Company may be in the form of a facsimile thereof and may be impressed, affixed, imprinted or otherwise reproduced on the Warrant Certificates.
 
     In case any officer of the Company who shall have signed any of the Warrant Certificates shall cease to be such officer before the Warrant Certificates so signed shall have been disposed of by the Company, such Warrant Certificates nevertheless may be delivered or disposed of as though such person had not ceased to be such officer of the Company; and any Warrant Certificate may be signed on behalf of the Company by any person who, at the actual date of the execution of such Warrant Certificate, shall be a proper officer of the Company to sign such Warrant Certificate, although at the date of the execution of this Warrant Agreement any such person was not such an officer. 
 
-4-
 
 

     (d) Rights Conferred. Each Class A Warrant shall evidence the right to purchase one share of Common Stock at the Class A Exercise Price of $26.56 (subject to adjustment as described herein). Each Class B Warrant shall evidence the right to purchase one share of Common Stock at the Class B Exercise Price of $40.23 (subject to adjustment as described herein). Following the Expiration Date, any Warrant not previously exercised shall be null and void.
 
     SECTION 3. Warrant Register. The Warrant Agent shall number and register the Warrant Certificates in a register (the “Warrant Register”) as they are issued. The Company may deem and treat such registered Holders of the Warrant Certificates as the absolute owners thereof (notwithstanding any notation of ownership or other writing thereon made by anyone), for all purposes, and shall not be affected by any notice to the contrary.
 
     SECTION 4. Transfers.
 
     (a) Restrictions on Transfer. Each Holder agrees that any proposed Transfer of any Warrant may be effected only (1)(w) inside the United States (I) to a person who the seller reasonably believes is a qualified institutional buyer within the meaning of Rule 144A in a transaction meeting the requirements of Rule 144A, (II) in accordance with Rule 144 or (III) pursuant to another exemption from the registration requirements of the Securities Act, (x) to the Company, (y) outside the United States (I) to a non-U.S. person (within the meaning of Regulation S) in a transaction meeting the requirements of Regulation S or (II) pursuant to another exemption from the registration requirements of the Securities Act or (z) pursuant to an effective registration statement and (2) in each case, in accordance with the applicable securities laws of any state of the United States or any other applicable jurisdiction. Each Holder agrees to notify any purchaser of the resale restrictions set forth above.
 
     (b) Requirements Prior to Transfer. Prior to any Transfer or proposed Transfer of any restricted Warrants, the Holder thereof shall deliver written notice, a form of which is attached hereto, to the Company and the Warrant Agent of such holder’s intention to effect such transfer. If the Transfer or proposed Transfer is pursuant to clause (1)(w) or (1)(y) of the first sentence of the preceding paragraph, then upon receipt of such notice, the Company may request any or all of the following (each, a “Transfer Document”) in a form reasonably acceptable to the Company:
 
          (i) an agreement by such transferee to the impression of the restrictive investment legend set forth below on the Warrant;
 
          (ii) an agreement by such transferee, in form and substance reasonably satisfactory to the Company, to be bound by the provisions of this Section 4 relating to the transfer of such Warrant; and
 
          (iii) an opinion of counsel with expertise in securities law matters reasonably satisfactory to the Company that such Transfer complies with applicable securities laws.
 
     If the Company requests any Transfer Document(s), it shall do so as promptly as practicable following receipt of the Holder’s notice of intention to Transfer. The Company shall thereafter cause the Transfer to be recorded and a certificate or other evidence of ownership in the name of the transferee to be delivered as soon as practicable after it has received Transfer Documents complying with the terms of this Section 4(b).
 
-5-
 
 

     (c) Legend. The Holders agree that each Warrant Certificate shall bear a legend to the following effect:
 
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR ANY OTHER APPLICABLE SECURITIES LAWS AND HAVE BEEN ISSUED IN RELIANCE UPON AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND SUCH OTHER SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED, OR OTHERWISE DISPOSED OF, EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR PURSUANT TO A TRANSACTION THAT IS EXEMPT FROM SUCH REGISTRATION.
 
The foregoing legend shall be in addition to any other legend required by law.
 
     (d) Termination of Restrictions. The restrictions referenced in Section 4(a), 4(b), and 4(c) of this Agreement, including the legend, shall cease and terminate as to any particular Warrants or Warrant Certificates when (x) such Warrants or Warrant Shares have been transferred in a transaction pursuant to Rule 144 or a registration statement or (y) in the reasonable opinion of counsel for the Company, such restriction is no longer required in order to assure compliance with the Securities Act and applicable state securities laws. Whenever such restrictions shall cease and terminate as to any Warrants, the Holder of such Warrants shall be entitled to receive from the Company, without expense (other than applicable transfer taxes, if any, if such unlegended shares are being delivered and transferred to any person other than the registered Holder thereof), new certificates for a like number of Warrants not bearing the relevant legend(s) set forth in Section 4(c).
 
     (e) Registration of Warrants. The Warrant Agent shall from time to time register the Transfer of any outstanding Warrant Certificates in the Warrant Register upon surrender thereof accompanied by a written instrument or instruments of transfer in the form set forth herein, duly executed by the registered Holder or Holders thereof or by the duly appointed legal representative thereof or by a duly authorized attorney. Upon any such registration of Transfer, the Warrant Agent shall issue a new Warrant Certificate to the transferee(s), and the surrendered Warrant Certificate shall be canceled and disposed of by the Warrant Agent. If less than all of the Warrants represented by a Warrant Certificate are Transferred, the Warrant Agent shall issue to the Holder a Warrant Certificate representing the remaining Warrants.
 
     SECTION 5. Exercise of Warrants.
 
     (a) Exercise. A Warrant may be exercised upon surrender to the Warrant Agent (at its office designated for such purpose, the initial address of such office being listed in Section 15 hereof) of the Warrant Certificate or Certificates evidencing the Warrants to be exercised with the form of election to purchase attached hereto (the “Exercise Notice”) duly filled in and signed, together with any documentation or opinion reasonably required by the Company or the Warrant Agent specified in Section 5(b) below, and (except as provided in Section 5(e)) upon payment to the Company of the applicable Exercise Price for the number of Warrant Shares in respect of which such Warrants are then exercised. Payment of such aggregate Exercise Price shall be made by wire transfer to an account of the Company or by certified or official bank check to the order of the Company. All Warrant Certificates surrendered upon exercise of Warrants shall be canceled and disposed of by the Warrant Agent. Each Warrant initially shall be exercisable for one share of Common Stock, subject to adjustment as provided herein. 
 
-6-
 
 

     (b) Certain Conditions of Exercise. Unless the issuance of Warrant Shares upon exercise of the Warrants shall have been registered under the Securities Act, the Warrants may only be exercised pursuant to an exemption from registration under the Securities Act (which in the case of non-U.S. persons may be pursuant to Regulation S). As a condition of any proposed exercise of the Warrants in these circumstances, if requested by the Company, the Holder shall deliver to the Company (i) an agreement by the Holder (or any transferee of the Holder if the Warrant Shares are to be issued in a name other than the name in which the Warrant Certificate is registered), in form and substance reasonably satisfactory to the Company, to the effect that the Warrant Shares may not be transferred except pursuant to an exemption from registration under the Securities Act and (ii) an opinion of counsel with expertise in securities law matters reasonably satisfactory to the Company that such exercise complies with applicable securities laws. In addition, the Holders agree that each certificate representing the Warrant Shares shall bear a legend to the effect recited in Section 4(c). If the Warrant Shares are issued without registration, they shall be subject to the same restrictions and have the same rights with respect to termination of restrictions as provided with respect to the Warrants under Section 4.
 
     (c) Exercise in Whole or in Part. The Warrants represented by a Warrant Certificate shall be exercisable, at the election of the Holder thereof, either in full or from time to time in part and, in the event that a Warrant Certificate is exercised in respect of fewer than all of the Warrants represented thereby at any time prior to the date of expiration of the Warrants, a new Warrant Certificate evidencing the remaining Warrant or Warrants will be issued and delivered by the Warrant Agent pursuant to the provisions of this Section and of Section 2 hereof.
 
     (d) Issuance of Warrant Shares. Subject to the provisions of this Agreement (including, but not limited to Section 5(e)), upon such surrender of the Warrant Certificates and receipt of the Exercise Price, the Company shall issue and cause to be delivered to or upon the written order of the Holder and, subject to Section 5(b) above, in such name or names as the Warrant Holder may designate, a certificate or certificates or other evidences of ownership for the aggregate number of fully paid and nonassessable Warrant Shares issuable upon the exercise of such Warrants together with payment of the applicable Exercise Price. The stock certificate or certificates representing such Warrant Shares shall be delivered in such denominations as may be specified in the Exercise Notice received by the Company and shall be registered in the name of such holder or in such other name or names as shall have been designated in the Exercise Notice. Such certificate or certificates shall be deemed to have been issued and any person so designated to be named therein shall be deemed to have become a Holder of record of such Warrant Shares as of the date of the surrender of such Warrant Certificates and payment of the Exercise Price.
 
     (e) Exercise in Connection with Certain Transfers. If a Holder or Holders shall sell Warrant Shares in an underwritten offering, the Company shall cooperate with the Holders and the underwriters for such offering so that the Warrants may be exercised and the Warrant Shares delivered to the underwriters for sale in the offering and, upon consummation of the offering, the underwriters shall deliver the Exercise Price for the Warrants to the Company out of the proceeds of the offering.
 
     SECTION 6. Specific Limitations on the Rights of Warrant Holders. Prior to the exercise of the Warrants, except as may be specifically provided for herein and, without prejudice to Section 11(b)(ii) hereof, (i) no Holder of a Warrant Certificate, as such, shall be entitled to any of the rights of a holder of Common Stock, including, without limitation, the right to vote at or receive any notice of any meetings of stockholders; (ii) the consent of any such Holder shall not be required with respect to any action or proceeding of the Company; (iii) no such Holder, by reason of the ownership or possession of a Warrant or the Warrant Certificate representing the same, shall have any right to receive any cash dividends, stock dividends, allotments or rights or other distributions paid, allotted or distributed or distributable to the stockholders of the Company prior to, or for which the relevant record date preceded, the date of the exercise of such Warrant; and (iv) no such Holder shall have any right not expressly conferred by the Warrant or Warrant Certificate held by such Holder. 
 
-7-
 
 

     SECTION 7. Exercise Period; Expiration.
 
     (a) Exercise Period. Each Warrant shall be exercisable at any time during the period from and after the Issue Date until its respective Expiration Date.
 
     (b) Expiration. Any Warrant not exercised prior to its respective Expiration Date shall become void, and all rights thereunder and all rights in respect thereof under this Agreement shall cease as of such time.
 
     SECTION 8. Payment of Taxes. The Company will pay all documentary stamp taxes attributable to the initial issuance of Warrant Shares upon the exercise of Warrants; provided, however, that the Company shall not be required to pay any tax or taxes which may be payable in respect of any transfer involved in the issue of any Warrant Certificates or any certificates for Warrant Shares in a name other than that of the registered Holder of a Warrant Certificate surrendered for registration of transfer or upon the exercise of a Warrant, and the Company shall not be required to issue or deliver such Warrant Certificates unless and until the person or persons requesting the issuance thereof shall have paid to the Company the amount of such tax or shall have established to the reasonable satisfaction of the Company that such tax has been paid.
 
     SECTION 9. Mutilated or Missing Warrant Certificates. In case any of the Warrant Certificates shall be mutilated, lost, stolen or destroyed, the Warrant Agent shall issue, in exchange and substitution for and upon cancellation of the mutilated Warrant Certificate, or in lieu of and substitution for the Warrant Certificate lost, stolen or destroyed, a new Warrant Certificate of like tenor and representing an equivalent number of Warrants, and may in its discretion require evidence reasonably satisfactory to it of such loss, theft or destruction of such Warrant Certificate and indemnity reasonably satisfactory to it. Applicants for such substitute Warrant Certificates shall also comply with such other reasonable regulations and pay such other reasonable charges as the Company may require.
 
     SECTION 10. Covenants of the Company.
 
     (a) Reservation of Warrant Shares. The Company will at all times reserve and keep available, out of the aggregate of its authorized but unissued shares of Common Stock or its authorized and issued shares of Common Stock held in its treasury, for the purpose of enabling it to satisfy any obligation to issue Warrant Shares upon exercise of Warrants, the maximum number of shares of Common Stock which may then be deliverable upon the exercise of all outstanding Warrants. The Company or, if appointed, the transfer agent for the Common Stock (the “Transfer Agent”) and every subsequent transfer agent for any shares of the Company’s capital stock issuable upon the exercise of any of the Warrants shall be authorized and directed at all times to reserve such number of authorized shares as shall be required for such purpose. The Company shall keep a copy of this Agreement on file with the Transfer Agent and with every subsequent transfer agent for any shares of the Company’s capital stock issuable upon the exercise of the Warrants. The Company will furnish such Transfer Agent a copy of all notices of adjustments and certificates related thereto, transmitted to each Holder.
 
     (b) Due Issuance. Warrant Shares, when issued pursuant to the terms and conditions hereof, shall be duly and validly issued and fully-paid and non-assessable, and free from all liens, encumbrances and other charges thereon.
 
-8-
 
 

     (c) Authorizations. Before taking any action which would result in an adjustment in the number of shares of Common Stock, the Company shall obtain all authorizations or exemptions thereof, or consents thereto, as may be required by law, except where failure to do so would not result in a material adverse effect on the rights of the Holders or the Company.
 
     (d) Listing. The Company will list or cause to have quoted such Common Stock issuable upon exchange of the Warrants on each securities exchange or such other market on which the Common Stock is then listed or quoted.
 
     SECTION 11. Adjustment of Number of Warrant Shares and Exercise Price. The number of Warrant Shares issuable upon the exercise of each Warrant and its Exercise Price are subject to adjustment from time to time upon the occurrence of the events enumerated in this Section 11.
 
     (a) Declaration of Stock Dividend, Splits, Reverse Splits or Reclassification or Reorganization; Other Distributions.
 
          (i) In case the Company shall declare any dividend or other distribution upon its outstanding shares of Common Stock payable in Common Stock or shall subdivide its outstanding shares of Common Stock into a greater number of shares, then the number of shares of Common Stock which may thereafter be purchased upon the exercise of any Warrant shall be increased in proportion to the increase in the number of shares of Common Stock outstanding through such dividend, other distribution, or subdivision and the Exercise Price per share shall be decreased in such proportion such that the amount payable to the Company upon the exercise of a Warrant shall be the same after such adjustment as before such adjustment. In case the Company shall at any time combine the outstanding shares of its Common Stock into a smaller number of shares, the number of shares of Common Stock which may thereafter be purchased upon the exercise of any Warrant shall be decreased in proportion to the decrease in the number of shares of Common Stock outstanding through such combination and the Exercise Price per share shall be increased in such proportion such that the amount payable to the Company upon the exercise of a Warrant shall be the same after such adjustment as before such adjustment. The Company shall cause a notice to be mailed to each Holder at least ten (10) Business Days prior to the applicable record date for the activity covered by this Section 11(a)(i). The Company’s failure to give the notice required by this Section 11(a)(i) or any defect therein shall not affect the validity of the activity covered by this Section 11(a)(i). Notwithstanding the foregoing, nothing in this paragraph will prejudice the rights of the Holders pursuant to this Agreement.
 
          (ii) In case the Company shall at any time (including in connection with any merger, consolidation or sale of all or substantially all the assets of the Company in which Section 11(d) hereof is not applicable) (i) issue any evidence of indebtedness, shares of its stock or any other securities to all holders of shares of Common Stock by reclassification of its shares of Common Stock, (ii) distribute any rights, options or warrants to purchase or subscribe for any evidence of indebtedness, shares of its stock (other than distributions for which adjustment may be made pursuant to Section 11(b) or Section 11(e)) or any other securities to all holders of shares of Common Stock, (iii) distribute cash (other than regular quarterly or semi-annual cash dividends) or other property to all holders of shares of Common Stock, or (iv) issue by means of a capital reorganization other securities of the Company in lieu of the Common Stock or in addition to the Common Stock, then the Warrant shall be adjusted so that the Warrant shall be exercisable into the kind and number of shares or other securities of the Company or the successor entity or cash or other property as that the Holder would have owned or have been entitled to receive after the happening of the event described above, had such Warrant been exercised immediately prior to the happening of such event or any record date with respect thereto. The Company shall cause a notice to be mailed to each Holder at least ten (10) Business Days prior to the applicable record date for the activity covered by this Section 11(a)(ii). The Company’s failure to give the notice required by this Section 11(a)(ii) or any defect therein shall not affect the validity of the activity covered by this Section 11(a)(ii). Notwithstanding the foregoing, nothing in this paragraph will prejudice the rights of the Holders pursuant to this Agreement.  
 
-9-
 
 

          (iii) An adjustment made pursuant to this Section 11(a) shall become effective immediately after the effective date of such event retroactive to the record date, if any, for such event.
 
     (b) Adjustment for Rights Issuance.
 
          (i) (A) In case the Company shall at any time distribute any rights, options or warrants to all holders of Common Stock entitling them, for a period expiring sixty (60) days or less after the date of determination of the stockholders entitled to receive such rights (the “Record Date”) (or any longer period resulting from the extension of the exercise period which is announced following the time that the rights, options or warrants are first issued) for such distribution, to purchase or subscribe for shares of Common Stock at a price per share less than ninety percent (90%) of the Daily Market Price of the Common Stock on the Record Date, then the number of shares issuable upon exercise of each Warrant immediately prior thereto shall be adjusted in accordance with the formula:
 
N = No x (O + A)/ (O + (C/M))
 
where:
 
N   =   the adjusted number of Warrant Shares issuable upon exercise of such Warrant.
         
No   =   the number of Warrant Shares issuable upon exercise of such Warrant prior to such adjustment.
         
O   =   the number of shares outstanding immediately prior to the issuance of such rights, options or warrants as referred to in this Section 11(b)(i)(A).
         
A   =   the maximum number of shares issuable pursuant to such rights, options or warrants as referred to in this Section 11(b)(i)(A).
         
C   =   the aggregate consideration receivable by the Company for the issuance of Common Stock upon exercise of such rights, options or warrants as referred to in this Section 11(b)(i)(A).
         
M       =       the average of the Daily Market Prices of the Common Stock for the ten (10) consecutive trading days immediately preceding the Record Date.

Provided that, in no adjustment shall N be less than No.
 
               (B) If any adjustment is made to increase the number of shares issuable upon exercise of any Warrant pursuant to this Section 11(b), the Exercise Price per share of such Warrant shall be correspondingly decreased, such that the amount payable to the Company upon the exercise of a Warrant shall be the same after such adjustment as before such adjustment. The adjustment shall become effective immediately after the Record Date for the determination of shareholders entitled to receive the rights, warrants or options to which this Section 11(b) applies. If less than all of such rights, warrants or options have been exercised when such rights, warrants or options expire, then the number of shares issuable upon the exercise of each Warrant and corresponding adjustment to the Exercise Price of each such Warrant shall promptly be readjusted to the number of shares issuable upon the exercise of each Warrant and the Exercise Price that would then be in effect had the adjustment upon the issuance of such rights, warrants or options been made on the basis of the actual number of shares of Common Stock issued upon the exercise of such rights, warrants or options. 
 
-10-
 
 

          (ii) In case the Company shall at any time distribute any rights, options or warrants to all holders of Common Stock entitling them, for a period expiring more than sixty (60) days after the Record Date therefor (excluding any rights, options or warrants originally issued with an exercise period of sixty (60) days or less, which, by virtue of one or more extensions, expire more than sixty (60) days after the Record Date therefor), to purchase or subscribe for shares of Common Stock at a price per share less than ninety percent (90%) of the Daily Market Price of the Common Stock as of such Record Date, then the Company shall similarly distribute such rights, options or warrants to the Holders on such Record Date (without any exercise of Warrants by Holders) as if such Holders had exercised their Warrants immediately prior to the Record Date.
 
     (c) Liquidation, Dissolution or Winding Up. Notwithstanding any other provisions hereof, in the event of the liquidation, dissolution, or winding up of the affairs of the Company (other than in connection with a consolidation, merger or sale or conveyance of all or substantially all of its assets or a Change or Spin-Off), the right to exercise this Warrant shall terminate and expire at the close of business on the last full business day before the earliest date fixed for the payment of any distributable amount on the Common Stock. The Company shall cause a notice to be mailed to each Holder at least ten (10) Business Days prior to the applicable record date for such payment stating the date on which such liquidation, dissolution or winding up is expected to become effective, and the date on which it is expected that holders of record of shares of Common Stock shall be entitled to exchange their shares of Common Stock for securities or other property or assets (including cash) deliverable upon such liquidation, dissolution or winding up, and that each Holder may exercise outstanding Warrants during such ten (10) Business Day period and, thereby, receive consideration in the liquidation on the same basis as other previously outstanding shares of the same class as the shares acquired upon exercise. The Company’s failure to give notice required by this Section 11(c) or any defect therein shall not affect the validity of such liquidation, dissolution or winding up. Notwithstanding the foregoing, nothing in this paragraph will prejudice the rights of the Holders pursuant to this Agreement.
 
     (d) Merger, Consolidation, Etc.
 
          (i) In any event when (A) any person (the “Acquirer”) directly or indirectly acquires the Company in a transaction in which the Company is merged with or into or consolidated with another person or (B) the Company sells or conveys all or substantially all of its assets to another person (unless, subsequent to such merger, consolidation or the transaction, the Company is the surviving entity and has reporting obligations under the Exchange Act as a result of having common equity securities outstanding, in which case, this Section shall not apply with respect to such merger, consolidation or other transaction)(such merger, consolidation or other transaction referred to hereinafter as a “Change”), then, upon exercise of each Warrant at any time after the consummation of the Change but prior to the Expiration Date, in lieu of the shares of the Company’s Common Stock (or other securities, cash, assets or other property) purchasable upon the exercise of the Warrant prior to such Change, the Holder shall be entitled to receive such shares of stock, securities, cash, assets or any other property whatsoever (including warrants or other purchase or subscription rights) which such Holder would have been entitled to receive after the happening of such Change had such Warrant been exercised immediately prior to such Change.
 
-11-
 
 

          (ii) Notwithstanding the foregoing, but subject to the following sentence, if a Holder of a Warrant so elects by giving written notice thereof to the Company on or before the day immediately preceding the date of the consummation of such Change, the Holder shall not be required to make any payment upon exercise of the Warrant, and shall be entitled to receive from the Company or the Acquirer (in lieu of the adjustment provided for in Section 11(d)(i) above) a cash amount equal to the Black-Scholes Value of the Warrant (the “Cash-Out Option”) upon surrender of the Warrant Certificate representing such Warrant. The right of a Holder to elect the Cash-Out Option shall not be available if 
 
               (A) the payment or offering of any Cash-Out Option would
 
(x) in the reasonable opinion of counsel to the Company, prevent a Change from otherwise being treated as a tax-free reorganization; or
 
(y) in the reasonable opinion of counsel or accountants to the Company, prevent a Change from being accounted for using a pooling of interests accounting method or other similar accounting method, if any, under US GAAP which would otherwise be available; and
 
               (B) the payment of the Cash-Out Option in the form of securities of the Acquirer, as described below, would not preserve such tax or accounting treatment.
 
If the payment of the Cash-Out Option in the form of Acquirer securities issued to the Company’s stockholders in the Change (the “Acquirer Securities”) would preserve the tax or accounting treatment of the Change, the Holders shall have the right to elect the Cash-Out Option, but only in the form of Acquirer Securities. In such case,
 
                    (1) the Cash-Out Option will be payable in the Acquirer Securities; and
 
                    (2) the number of securities payable to the Holder on exercise of the Cash-Out Option will equal (x) the dollar amount of the Cash-Out Option divided by (y) the per share (or other unit) fair market value of the securities in which the Cash-Out Option is payable.
 
“Fair market value” for this purpose means the average Daily Market Price of the securities of the Acquirer for the first ten (10) consecutive trading days immediately preceding but not including the date of effectiveness of the Change; provided, however, that if the securities of the Acquirer are not listed or traded on an exchange or interdealer quotation system, then the “fair market value” of such securities shall be determined by an investment banking firm of national reputation and standing selected by the Company and reasonably acceptable to a Majority of the Warrant Holders. If the Holders of the Warrants do not have the right to elect the Cash-Out Option provided in Section 11(d)(ii) herein, the adjustment provided for in Section 11(d)(i) above shall apply.
 
          (iii) Notwithstanding the foregoing, in the case of any such Change where,
 
                (A) the Acquirer is a company with reporting obligations under the Exchange Act with respect to common equity securities (such common equity securities being referred to herein as the “Acquirer Shares”), and
 
-12-
 
 

                (B) the Acquirer is offering as consideration with respect to the Change a combination of Acquirer Shares and cash or other consideration, if a Holder of a Warrant so elects by giving written notice thereof to the Company on or before the day immediately preceding the effective date of such Change, then, in lieu of the adjustment to the Warrant provided under Section 11(d)(i), upon the consummation of the Change and surrender of the Certificate representing the Warrant, the Holder shall receive (x) a warrant (an “Acquirer Warrant”) exercisable for Acquirer Shares, in an amount and for an exercise price calculated as described below, and (y) a cash amount, calculated as described below (the “Adjusted Cash-Out Option”). The terms of the Acquirer Warrants shall be identical to the terms of the Warrants mutatis mutandis, except that the exercise price and the number of securities issuable upon the exercise of the Acquirer Warrants (subject to adjustment as provided therein) shall be determined as provided below: 
 
the Exercise Price of the Acquirer Warrants shall be calculated as follows:
 
Ew = (Eo x (Pa/Pt))
 
where:
 
Ew   =   the adjusted Exercise Price of the Acquirer Warrants.
         
Eo   =   the Exercise Price of the Warrants immediately prior to such adjustment.
         
Pt   =   the average of the Daily Market Prices of the Common Stock for the ten (10) consecutive trading days immediately preceding the effective date of the Change.
         
Pa       =       the fair market value per share of the Acquirer Shares. As used in this formula, “fair market value” shall mean the average Daily Market Price of the Acquirer Shares for the ten (10) consecutive trading days immediately preceding the effective date of the Change.

The number of Acquirer Shares issuable upon exercise of an Acquirer Warrant shall be calculated as follows:
 
N = a x No
 
where:
 
N   =   the number of shares issuable by the Acquirer upon exercise of the Acquirer Warrant.
         
a   =   the number of Acquirer Shares delivered in the Change to holders of Common Stock for each share of Common Stock.
         
No       =       the number of Warrant Shares issuable upon exercise of the original Warrant in exchange for which the Acquirer Warrant was issued.

If the Holders of Common Stock may elect to receive in the Change Acquirer Shares, cash or other consideration, or a combination of Acquirer Shares and cash or other consideration as selected by the Holders (whether or not subject to proration), then the number of Acquirer Shares delivered in the Change for each share of Common Stock shall be determined, for purposes of the preceding formula and the determination below of the amount of the Adjusted Cash-Out Option, as follows:
 
a = Nas/Nts
 
where
 
Nas   =   the aggregate number of Acquirer Shares delivered in the Change to holders of Common Stock.
         
Nts       =       the total number of shares of Common Stock outstanding immediately prior to the effectiveness of the Change and exchanged for consideration in the Change.

-13-
 
 


The amount of the Adjusted Cash-Out Option for a Warrant shall be calculated as follows:
 
AC = BSw x (1-((a x Pa) /C ))
 
where the symbols previously defined in this Section have their previously defined meanings and:
 
AC   =   the amount of the Adjusted Cash-Out Option of the Warrant
         
BSw   =   the Black-Scholes Value of the Warrant, ignoring the effect of the Change, as determined pursuant to (iv) below.
         
C       =       the total fair market value of the consideration delivered in the Change to Holders of Common Stock for each share of Common Stock. For purposes of determining this amount—

               (A) the fair market value of the component of the consideration consisting of Acquirer Shares shall equal (x) the average Daily Market Price of the Acquirer Shares for the first ten (10) consecutive trading days immediately preceding the effective date of the Change multiplied by (y) the number of Acquirer Shares delivered in the Change for each share of Common Stock;
 
               (B) the fair market value of any cash component shall be the amount of the cash delivered in the Change for each share of Common Stock; and
 
               (C) the fair market value of any other consideration delivered in the Change for each share of Common Stock shall be as determined by an investment banking firm of national reputation and standing selected by the Company and reasonably acceptable to a Majority of the Warrant Holders.
 
The right to make the election to receive Acquirer Shares and the Adjusted Cash-Out Option as provided in this Section 11(d)(iii) shall be subject to the same limitations as provided in Section 11(d)(ii)(A) and (B) above regarding the right to elect the Cash-Out Option; provided, however, that if the payment of the Adjusted Cash-Out Option in the form of Acquirer Securities would preserve the tax or accounting treatment of the Change, the election may be exercised with the Adjusted Cash-Out Option being paid in Acquirer Securities as provided in clauses (1) and (2) of Section 11(d)(ii).
 
          (iv) As used herein, “Black-Scholes Value” of the Warrants, shall be determined on the basis of the Black-Scholes methodology by an investment banking firm of national reputation and standing, selected by the Company and reasonably acceptable to a Majority of the Warrant Holders; provided, however, that no Black-Scholes Value of a Warrant shall exceed the Daily Market Price of the Common Stock on the day immediately preceding the Change. For purposes of applying the Black-Scholes methodology, (i) the price per share of the Common Stock shall be deemed to be the average of the Daily Market Prices for the ten (10) full trading days ending ten (10) trading days prior to the first public announcement of the Change, and (ii) the methodology shall be applied as if the relevant Change had not occurred.
 
          (v) The Company shall give written notice of any Change to each Holder, in accordance with Section 15 hereof, at least ten (10) Business Days prior to the effective date of the Change; provided, however, that if either Section 11(d)(ii) or (iii) is applicable, one or more notices shall be given to the Holders sufficiently in advance of the Change to allow for selection of the investment banking firm referred to in the previous paragraph and for notice to the Holders of the Black-Scholes Value at least ten (10) Business Days prior to the effective date of the Change. The Company’s failure to give notice required by this Section 11(d) or any defect therein shall not affect the validity of the Change covered by this Section 11(d). However, if the Company fails to give notice, the responsibilities of the Company with respect to this Section 11(d) shall be assumed by the Acquirer and nothing in this paragraph will prejudice the rights of the Holders pursuant to this Agreement. 
 
-14-
 
 

     (e) Spin-Off.
 
          (i) In case the Company shall at any time pay a dividend or make a distribution to all holders of its Common Stock consisting of the capital stock of any class or series, or similar interests, of or relating to a subsidiary or other business unit of the Company (such transaction, a “Spin-Off”; such capital stock or other interests, the “Spin-Off Shares”; and such subsidiary or business unit, the “Spin-Off Company”), then each holder of a Warrant outstanding and unexercised on the date of the Spin Off shall become entitled to a spin-off warrant (“Spin-Off Warrants”) evidencing a right to purchase a number of shares of capital stock of the Spin-Off Company that the Holder would have received had the Holder exercised such Warrants immediately prior to the record date for the Spin-Off (the “Spin-Off Record Date”); provided, however, that in the event that the distribution of Spin-Off Shares to the Holders would, in the reasonable opinion of counsel to the Company, (y) prevent the tax-free nature of such Spin-Off or (z) require registration with the SEC in circumstances where registration would not otherwise be required, then at the election of the Company, either (y) the Holders shall not receive Spin-Off Warrants pursuant to this Section 11(e)(i) and the Warrants shall instead be adjusted pursuant to the terms of Section 11(e)(ii) or (z) the Holders shall receive Spin-Off Warrants as contemplated above in this Section 11(e)(i). The terms of the Spin-Off Warrants shall be identical to the terms of the Warrants mutatis mutandis, except that the exercise price of a Spin-Off Warrant (subject to adjustment as provided therein) shall be determined by the following formula:
 
Es = Eo x Ps / (Pp+ (r x Ps))
 
where:
 
Es   =   the Exercise Price per Spin-Off Share of the Spin-Off Warrants.
         
Eo   =   the Exercise Price per share of Common Stock of the relevant Warrant immediately prior to adjustment for the relevant Spin-Off.
         
Pp   =   the average of the Daily Market Prices of the Common Stock for the ten (10) full consecutive trading days following the date on which the Spin-Off is consummated.
         
r   =   the number of Spin-Off Shares (which may be one or a fraction less than or greater than one) distributed pursuant to the Spin-Off in respect of each share of Common Stock.
         
Ps       =       the fair market value per share of the Spin-Off Shares. As used in this section, “fair market value” shall mean the average Daily Market Price of the Spin-Off Shares for the first ten (10) consecutive trading days following the date on which the Spin-Off is consummated; provided, however, that if such distributed securities do not begin trading within two trading days of the consummation of such Spin-Off or do not trade for at least ten (10) consecutive trading days within twenty (20) days after the Spin-Off, then the “fair market value” of such distributed securities shall be determined by an investment banking firm of national reputation and standing selected by the Company and reasonably acceptable to a Majority of the Warrant Holders on the Spin-Off Record Date.

-15-
 
 

     Following the Spin-Off, the Exercise Price of each Warrant shall be adjusted in accordance with the following formula:
 
En = Eo x Pp / (Pp+ (r x Ps))
 
where:
 
En       =       the adjusted exercise price per share of Common Stock of the Warrants.

(with the other symbols in such formula having the meanings specified in the preceding formula).
 
          (ii) In case the Company shall engage in a Spin-Off, and Section 11(e)(i) shall not be available to the Holders as a result of the proviso in the first paragraph of Section 11(e)(i), then the Holders shall not receive Spin-Off Warrants and instead the number of shares issuable upon the exercise of each Warrant immediately prior thereto shall be adjusted in accordance with the formula:
 
N = No x (Pp + (Ps x r))/Pp
 
where:
 
N   =   the adjusted number of Warrant Shares issuable upon exercise of such Warrant.
         
No   =   the number of Warrant Shares issuable upon exercise of such Warrant prior to such adjustment.
         
Pp   =   the average of the Daily Market Prices of the Common Stock for the ten (10) full consecutive trading days following the date on which the Spin-Off is consummated.
         
Ps       =       the average Daily Market Price of the Spin-Off Shares for the first ten (10) full consecutive trading days following the date on which the Spin-Off is consummated; provided, however, that if such distributed securities do not begin trading within two trading days of the consummation of such Spin-Off or do not trade for at least ten (10) consecutive trading days within twenty (20) days after the Spin-Off, then this quantity shall mean the “fair market value” per share of the Spin-Off Shares as of the date the Spin-Off is consummated, determined by an investment banking firm of national reputation and standing selected by the Company and acceptable to a Majority of the Warrant Holders on the Spin-Off Record Date.
         
r   =   the number of Spin-Off Shares (which may be one or a fraction less than or greater than one) distributed pursuant to the Spin-Off in respect of each share of Common Stock.

     If any adjustment is made to increase the number of Warrant Shares issuable upon exercise of any Warrant pursuant to this Section 11(e)(ii), the Exercise Price per share of such Warrant shall be adjusted in accordance with the following formula.
 
En = Eo x (No/N)
 
Where:
 
En   =   the adjusted exercise price per share of Common Stock of the Warrants.
         
Eo       =       the Exercise Price per share of Common Stock of the relevant Warrant immediately prior to adjustment for the relevant Spin-Off.

-16-
 
 

(with the other symbols in such formula having the meanings specified in the preceding formula).
 
          (iii) An adjustment made pursuant to Section 11(e)(ii) shall become effective immediately after the determination of the adjusted number of Warrant Shares issuable upon exercise of the Warrants, retroactive to the date for the Spin-Off.
 
          (iv) The Company shall give written notice of any Spin-Off, in accordance with Section 15 hereof, at least ten (10) Business Days prior to the Record Date therefor. The Company’s failure to give notice required by this Section 11(e)(iv) or any defect therein shall not affect the validity of the Spin-Off covered by this Section 11(e). Notwithstanding the foregoing, nothing in this paragraph will prejudice the rights of the Holders pursuant to this Agreement.
 
     (f) Good Faith Determination.
 
          (i) Subject to the following clause (ii), any determination as to whether an adjustment or limitation of exercise is required pursuant to this Section 11 (and the amount of any adjustment) shall be binding upon the Holders and the Company if made in good faith by the board of directors of the Company.
 
          (ii) If a Majority of the Warrant Holders shall object to any determination of the board of directors of the Company within ten (10) Business Days of receipt of notice of such determination, then such determination shall be referred to a national independent accounting firm in the United States (the “Accounting Firm”) selected by the Company and reasonably acceptable to a Majority of the Warrant Holders. The determination of the adjustment made by the Accounting Firm shall be strictly in accordance with the terms of this Agreement and shall be binding upon the Holders and the Company. The Accounting Firm shall be instructed to notify the Company and such Majority of the Warrant Holders of its determination regarding the adjustment within fifteen (15) Business Days of such referral.
 
          (iii) Whenever this Agreement provides for the reasonable approval or acceptance of a Majority of the Warrant Holders of any action or determination, such approval or acceptance shall be deemed to be given if a Majority of the Warrant Holders do not reasonably object to such action or determination by written notice to the Company within ten (10) Business Days of the date on which notice thereof is first given to the Holders. No objection shall be deemed reasonable if the reasons for such objection are not set forth in reasonable detail in the notice of objection given to the Company as aforesaid.
 
     (g) Notice of Adjustment. Whenever the number of shares of Common Stock purchasable upon the exercise of the Warrants or the Exercise Price is adjusted, the Company shall promptly file, in the custody of its Secretary or an Assistant Secretary at its principal office and with the Warrant Agent, an officer’s certificate setting forth the number of shares of Common Stock purchasable upon the exercise of the Warrants, the Exercise Price after such adjustment, a statement, in reasonable detail, of the facts requiring such adjustment and the computation by which such adjustment was made. Each such officer’s certificate shall be made available during regular business hours for inspection by the Holders at the office of the Warrant Agent.
 
-17-
 
 

     (h) No Change of Warrant Necessary. Irrespective of any adjustment in the Exercise Price or in the number or kind of shares issuable upon exercise of the Warrants, the Warrant Certificates may continue to express the same price and number and kind of shares as are stated in the Warrant Certificates as initially issued.
 
     (i) Subsequent Adjustments. The adjustment provisions of this Section 11 shall be applied successively and from time to time as the circumstances requiring such adjustments shall occur. If as a result of an adjustment made pursuant to this Section 11 (except as otherwise specifically provided herein) the Holder of any Warrants thereafter surrendered for conversion shall be entitled to receive any securities other than shares of Common Stock, the number and kind of the securities issuable upon exercise of the Warrants and the Exercise Price therefor shall be subject to adjustment, from time to time, in a manner and on terms as nearly equivalent as practicable to the provisions with respect to the Common Stock contained in this Section 11.
 
     SECTION 12. Fractional Interests. The Company shall not be required to issue fractional shares of Common Stock on the exercise of the Warrants. If any fraction of a share of Common Stock would be issuable upon the exercise of the Warrants (or any specified portion thereof), the Company shall pay an amount in cash equal to the product of (x) such fraction and (y) the Daily Market Price of the Common Stock on the trading day prior to the date the Warrant is exercised.
 
     SECTION 13. Appointment of Warrant Agent. The Company hereby appoints the Warrant Agent as its agent to issue the Warrant Certificates, as set forth herein, subject to resignation or replacement of the Warrant Agent as provided herein. The Warrant Agent agrees to accept such appointment, subject to the terms and conditions as set forth herein and to issue, transfer and exchange the Warrant Certificates pursuant to the terms provided for herein and to notify the Company to issue or cause to be issued the certificates or other evidence of ownership representing the appropriate number of shares of Common Stock (or other consideration) upon exercise of the Warrants.
 
     SECTION 14. Duties of the Warrant Agent. The Warrant Agent acts hereunder as agent and in a ministerial capacity for the Company, and its duties shall be determined solely by the provisions hereof. The Warrant Agent shall not by issuing and delivering Warrant Certificates, or by any other act hereunder, be deemed to make any representations (i) as to the validity, value or authorization of the Warrant Certificates or the Warrants represented thereby or of any securities or other property delivered upon exercise of any Warrant, or (ii) whether any stock issued upon exercise of any Warrant is fully paid and nonassessable.
 
     Without prejudice to any liability of any other party hereof, the Warrant Agent shall not at any time be under any duty or responsibility to any Holder of Warrant Certificates to make or cause to be made any adjustment of the Warrant Price provided in this Agreement, or to determine whether any fact exists that may require any such adjustment, or with respect to the nature or extent of any such adjustment, when made, or with respect to the method employed in making the same. The Warrant Agent shall not (i) be liable for any recital or statement of facts contained herein or for any action taken, suffered or omitted by it in reliance on any Warrant Certificate or other document or instrument believed by it in good faith to be genuine and to have been signed or presented by the proper party or parties, (ii) be responsible for any failure on the part of the Company to comply with any of its covenants and obligations contained in this Agreement or in any Warrant Certificate, or (iii) be liable for any act or omission in connection with this Agreement except for its own gross negligence or willful misconduct.
 
     Any notice, statement, instruction, request, direction, order or demand of the Company shall be sufficiently evidenced by an instrument signed by the Company’s Chairman or Vice Chairman of the Board, President, any Vice President, its Secretary, or Assistant Secretary (unless other evidence in respect thereof is herein specifically prescribed). Without prejudice to any liability of any other party hereof, the Warrant Agent shall not be liable for any action taken, suffered or omitted by it in accordance with such notice, statement, instruction, request, direction, order or demand believed by it to be genuine.
 
-18-
 
 

     The Company agrees to pay the Warrant Agent reasonable compensation for its services hereunder and to reimburse it for its reasonable expenses hereunder and further agrees to indemnify the Warrant Agent and save it harmless against any and all losses, expenses and liabilities, including judgments, costs and counsel fees, for anything done or omitted by the Warrant Agent in the execution of its duties and powers hereunder except losses, expenses and liabilities arising as a result of the Warrant Agent’s gross negligence or willful misconduct.
 
     The Warrant Agent may resign its duties and be discharged from all further duties and liabilities hereunder (except liabilities arising as a result of the Warrant Agent’s own gross negligence or willful misconduct), after giving thirty days’ prior written notice to the Company. At least fifteen (15) days prior to the date such resignation is to become effective, the Warrant Agent shall cause a copy of such notice of resignation to be mailed to the Holder of each Warrant Certificate at the Company’s expense. Upon such resignation, or any inability of the Warrant Agent to act as such hereunder, the Company shall appoint a new warrant agent in writing. The Company shall have complete discretion in the naming of a new warrant agent, who may be an affiliate, subsidiary or department of the Company, or any person used by the Company as transfer agent for the Common Stock. If the Company shall fail to make such appointment within a period of thirty (30) days after it has been notified in writing of such resignation by the resigning Warrant Agent, then the Holder of any Warrant Certificate may apply to any court of competent jurisdiction for the appointment of a new warrant agent.
 
     The Company may, upon notice to the Holders, remove and replace the Warrant Agent if the Warrant Agent is the transfer agent for the Company’s Common Stock and the Warrant Agent ceases to be the transfer agent for the Company’s Common Stock for any reason.
 
     After acceptance in writing of an appointment by a new warrant agent is received by the Company, such new warrant agent shall be vested with the same powers, rights, duties and responsibilities as if it had been originally named herein as the Warrant Agent, without any further assurance, conveyance, act or deed. Any former warrant agent hereby agrees to cooperate with and deliver all records and Warrant Certificates to the new warrant agent at the direction of the new agent and the Company.
 
     Any corporation into which the Warrant Agent or any new warrant agent may be converted or merged or any corporation resulting from any consolidation to which the Warrant Agent or any new warrant agent shall be a party or any corporation succeeding to the trust business of the Warrant Agent shall be a successor warrant agent under this Agreement without any further act. Any such successor warrant agent shall promptly cause notice of its succession as warrant agent to be mailed to the Company and to each Holder.
 
     The Warrant Agent shall perform its duties with all due care and attention. If for any period no person is acting as Warrant Agent, then the Company shall discharge the obligations that would otherwise fall to be discharged by the Warrant Agent during such period.
 
     Nothing herein shall preclude the Warrant Agent from acting in any other capacity for the Company.
 
-19-
 
 

     SECTION 15. Notices. Any notice or demand authorized by this Agreement to be given or made to or on the Company or the Warrant Agent shall be sufficiently given or made when and if delivered by a recognized international courier service or hand delivery, or by telecopier with copy sent by first class or registered mail, postage prepaid, to the applicable address set forth below (until the Holders are otherwise notified in accordance with this Section by the Company):
 
     If to the Company, then to:
 
     Vishay Precision Group, Inc.
     3 Great Valley Parkway
     Malvern, PA 19355-1307
     Attn.: Chief Financial Officer
     Telecopier No.: (484)-321-5301
     Confirm No.: (484)-321-5300
 
     If to the Warrant Agent, then to:
 
     American Stock Transfer & Trust Co.,
     59 Maiden Lane
     New York, NY 10038
     Attn.: Exchange Department
     Telecopier No. 718-234-5001
     Confirm No. 718-921-8200
 
     Any notice pursuant to this Agreement to be given to any Holder of any Warrant Certificate shall be sufficiently given when and if delivered to such Holder at the address appearing on the Warrant Register of the Company (until the Company and the Warrant Agent are otherwise notified in accordance with this Section by such Holder). Any such notice shall be delivered by overnight or hand delivery, by telecopier with copy sent by first class mail, postage prepaid, or by first class or registered mail, postage prepaid.
 
     SECTION 16. Supplements and Amendments. The Company and the Warrant Agent may from time to time amend or supplement this Agreement in good faith without the approval of any Holders only in order to cure any ambiguity or to correct or supplement any provision contained herein which may be defective or inconsistent with any other provision herein. Any other amendment or supplement to this Agreement shall require the written consent of a Majority of the Warrant Holders.
 
     SECTION 17. Successors. All the covenants and provisions of this Agreement by or for the benefit of the Company or the Warrant Agent shall bind and inure to the benefit of its successors and assigns hereunder; provided, however, that any assignment by the Company shall not relieve the Company of any of its obligations hereunder. This Agreement shall be binding upon and inure to the benefit of the successors and registered assigns of the Initial Holders and all subsequent Holders of Warrants.
 
     SECTION 18. Governing Law. THIS AGREEMENT AND EACH WARRANT CERTIFICATE ISSUED HEREUNDER SHALL BE DEEMED TO BE A CONTRACT MADE UNDER THE LAWS OF THE STATE OF NEW YORK AND FOR ALL PURPOSES SHALL BE CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF SAID STATE.
 
     SECTION 19. No Third Party Beneficiaries. Nothing in this Agreement shall be construed to give to any Person other than the Company, the Warrant Agent and the Holders of the Warrants or holders of Warrant Shares any legal or equitable right, remedy or claim under this Agreement; but this Agreement shall be for the sole and exclusive benefit of the Company, the Warrant Agent and the Holders of the Warrants and the holders of Warrant Shares.
 
-20-
 
 

     SECTION 20. Notification of Delisting. Prior to the occurrence of a Delisting Event, the Company will, at least ten (10) Business Days before the occurrence thereof, notify each Holder of such event. Any notice will be in writing and shall specify the date of such Delisting Event. For these purposes “Delisting Event” means the common stock of the Company being delisted from the principal United States national or regional securities exchange or national quotation system on which the shares of common stock are then listed or traded.
 
     SECTION 21. Headings. The descriptive headings of the several sections and subsections of this Agreement are inserted for convenience only, do not constitute a part of this Agreement and shall not affect in any way the meanings or interpretation of this Agreement.
 
     SECTION 22. Counterparts. This Agreement may be executed in counterparts and all such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument.
 
[Signature Page Follows.]
 
-21-
 
 

     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed, as of the day and year first above written.
 
  VISHAY PRECISION GROUP, INC.
   
   
  By: /s/ William Clancy
    Name: William Clancy
     
    Title: Executive Vice President, Chief
    Financial Officer and Secretary
   
   
  AMERICAN STOCK TRANSFER & TRUST CO.
   
   
  By: /s/ Paula Caroppoli
    Name: Paula Caroppoli
    Title: Vice President

-22-
 
 

EXHIBIT A
 
[Form of Class A Warrant Certificate]
 
[Face]
 
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR ANY OTHER APPLICABLE SECURITIES LAWS AND HAVE BEEN ISSUED IN RELIANCE UPON AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND SUCH OTHER SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED, OR OTHERWISE DISPOSED OF, EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR PURSUANT TO A TRANSACTION THAT IS EXEMPT FROM SUCH REGISTRATION.*
 
EXERCISABLE ON OR BEFORE 5:00 P.M. NEW YORK CITY TIME ON DECEMBER 13, 2012.
 
No.          Warrants

Class A Warrant Certificate
Vishay Precision Group, Inc.
 
     This Warrant Certificate certifies that _______________, or registered assigns, is the registered holder (the “Holder”) of ___________ Class A Warrants expiring December 13, 2012 (the “Warrants” or “Class A Warrants”) to purchase Common Stock, $0.10 par value per share (the “Common Stock”), of Vishay Precision Group, Inc., a Delaware corporation (the “Company”). Each Class A Warrant entitles the Holder upon exercise to receive from the Company, on or before 5:00 p.m. New York City Time on December 13, 2012 (the “Expiration Date”), one fully paid and nonassessable share of Common Stock (a “Warrant Share”) at the initial exercise price (the “Exercise Price”) of $26.56 share (subject to adjustment as provided herein), payable in lawful money of the United States of America upon surrender of this Warrant Certificate at the office of the Company designated for such purpose, but only subject to the conditions set forth herein and in the Warrant Agreement, as defined below. Capitalized terms not otherwise defined herein shall have the meaning ascribed to them in the Warrant Agreement.
 
     This Warrant Certificate and each Class A Warrant represented hereby are issued pursuant to and are subject in all respects to the terms and conditions set forth in the Warrant Agreement (the “Warrant Agreement”), dated July 21, 2010 by and between the Company and American Stock Transfer & Trust Co.(the “Warrant Agent”), which Warrant Agreement is hereby incorporated by reference in and made a part of this instrument and is hereby referred to for a description of the rights, limitation of rights, obligations, duties and immunities thereunder of the Company and the Holders (the words “Holder” or “Holders” meaning the registered holder or registered holders of the Warrants). A copy of the Warrant Agreement may be obtained by the Holder from the Company at 3 Great Valley Parkway, Malvern, PA 19355-1307 by a written request from the Holder hereof and may be inspected by the Holder or his agent at the principal office of the Warrant Agent.
 
 
 
 
 
____________________ 
     * This legend may be removed if such removal is permitted pursuant to the Warrant Agreement.
 
A-1
 
 

     This Class A Warrant shall be exercisable at any time during the period from and after the Issue Date until the Expiration Date.
 
     The number of Warrant Shares issuable upon exercise of the Warrants and the Exercise Price are subject to adjustment upon the occurrence of certain events set forth in the Warrant Agreement.
 
     No Warrant may be exercised after 5:00 p.m., New York City time on the Expiration Date, and to the extent not exercised by such time, such Warrants shall become void.
 
     The Holder of Class A Warrants evidenced by this Warrant Certificate may exercise them by surrendering this Warrant Certificate, with the form of election to purchase set forth hereon properly completed and executed, together with payment of the Exercise Price in cash at the office of the Company designated for such purpose. In the event that upon any exercise of Class A Warrants evidenced hereby the number of Class A Warrants exercised shall be less than the total number of Class A Warrants evidenced hereby, there shall be issued to the Holder hereof or his assignee a new Warrant Certificate evidencing the number of Class A Warrants not exercised.
 
     The Warrant Agreement provides that upon the occurrence of certain events the number of Warrant Shares issuable upon exercise of each Warrant set forth on the face hereof and the Exercise Price thereof shall be adjusted. No fractions of a share of Common Stock will be issued upon the exercise of any Class A Warrant, but the Company will pay the cash value thereof determined as provided in the Warrant Agreement.
 
     Warrant Certificates, when surrendered at the office of the Company by the registered Holder thereof in person or by its legal representative or attorney duly authorized in writing, may be exchanged, in the manner and subject to the limitations provided in the Warrant Agreement, but without payment of any service charge, for another Warrant Certificate or Warrant Certificates of like tenor evidencing in the aggregate a like number of Class A Warrants.
 
     Upon due presentation for registration of transfer of this Warrant Certificate at the office of the Company, a new Warrant Certificate or Warrant Certificates of like tenor and evidencing in the aggregate a like number of Class A Warrants shall be issued to the transferee(s) in exchange for this Warrant Certificate, subject to the limitations provided in the Warrant Agreement, without charge except for any tax or other governmental charge imposed in connection therewith.
 
     The Company may deem and treat the registered Holder(s) of this Warrant Certificate as the absolute owner(s) thereof (notwithstanding any notation of ownership or other writing hereon made by anyone), for the purpose of any exercise hereof, of any distribution to the Holder(s) hereof, and for all other purposes, and the Company shall not be affected by any notice to the contrary. Neither the Class A Warrants nor this Warrant Certificate entitles any Holder hereof to any rights of a stockholder of the Company.
 
     IN WITNESS WHEREOF, Vishay Precision Group, Inc. has caused this Class A Warrant Certificate to be signed by its Secretary and has caused its corporate seal to be affixed hereunto or implied hereon.
 
Dated: July 21, 2010
 
A-2
 
 

  By:  
    Name:
    Title:
     
     
  AMERICAN STOCK TRANSFER & TRUST CO.
   
   
  By:  
    Name:
    Title:

A-3
 
 

ASSIGNMENT FORM
 
     If you, the Holder, want to assign this Class A Warrant, fill in the form below: I or we assign and transfer this Class A Warrant to:
 
(Print or type name, address and zip code and
social security or tax ID number of assignee)
 
and irrevocably appoint _________________________________________ agent to transfer this Class A Warrant on the books of the Company. The agent may substitute another to act for him.
 
Date:      Signed:   
      (Signed exactly as your name appears on the
      other side of this Warrant)

     In connection with any transfer of this Class A Warrant occurring prior to the date of the declaration by the Securities and Exchange Commission of the effectiveness of a registration statement under the Securities Act of 1933, as amended (the “Securities Act”), covering resales of this Class A Warrant (which effectiveness shall not have been suspended or terminated at the date of transfer) at all times when such securities are deemed to be “restricted securities” within the meaning of the Securities Act, the undersigned confirms that it has not utilized any general solicitation or general advertising in connection with the transfer and that this Class A Warrant is being transferred:
 
[Check One]
 
(1)       o       to the Company or a subsidiary thereof; or
         
(2)   o   pursuant to and in compliance with Rule 144A under the Securities; or
         
(3)   o   to an institutional “accredited investor” (as defined in Rule 501(a)(1),(2), (3) or (7) under the Securities Act); or
         
(4)   o   outside the United States to a person who is not a “US person,” in compliance with Rule 904 of Regulation S under the Securities Act; or
         
(5)   o   pursuant to the exemption from registration provided by Rule 144 under the Securities Act; or
         
(6)   o   pursuant to another available exemption from the registration requirements of the Securities Act.

Unless one of the boxes is checked, the Company shall not be obligated to register any of the Class A Warrants evidenced by this certificate in the name of any person other than the registered Holder thereof. If box (3), (4), (5) or (6) is checked, the Company may require, upon the terms described in the Warrant Agreement, prior to registering any such transfer of the Warrant Certificate, such legal opinions, certifications and other information as the Company reasonably requests to confirm that such transfer is being made pursuant to an exemption from, or in a or in a transaction not subject to, the registration requirements of the Securities Act.
 
Date:      Signed:   
      (Signed exactly as your name appears on the
      other side of this Warrant Certificate)

A-4
 
 

ELECTION TO PURCHASE FORM
 
     If you, the Holder, want to exercise the Class A Warrants represented by this Certificate, fill in the form below.
 
     I or we, the registered owner of the Class A Warrants represented by this Certificate irrevocably exercise _______________________________ Class A Warrants for the purchase of ______________________________ shares or other securities or property
 
of Common Stock of Vishay Precision Group, Inc., at the price and on the terms and conditions specified in the Class A Warrants and request that certificates for the shares of Common Stock hereby purchased (and any securities or other property issuable or transferable upon such exercise) be issued in the name of and delivered to:
 
(Print or type name, address and zip code and
social security or tax ID number of owner)
 
and, if such Class A Warrants shall not constitute all of the Class A Warrants represented by this Certificate, that a new Class A Warrant Certificate of like tenor and date for the balance of the Class A Warrants represented hereby be delivered to the undersigned.
 
Number of Class A Warrants represented by this Certificate  
      Number of Class A Warrants being exercised  
  Balance  

Date:      Signed:   
      (Signed exactly as your name appears on this
      Warrant)

Note:       Each certificate represents a certain number of Warrants. Each Warrant is exercisable for one share, subject to adjustment (which may result in exercisability for other securities on property).

A-5
 
 

EXHIBIT B
 
[Form of Class B Warrant Certificate]
 
[Face]
 
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR ANY OTHER APPLICABLE SECURITIES LAWS AND HAVE BEEN ISSUED IN RELIANCE UPON AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND SUCH OTHER SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED, OR OTHERWISE DISPOSED OF, EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR PURSUANT TO A TRANSACTION THAT IS EXEMPT FROM SUCH REGISTRATION.*
 
EXERCISABLE ON OR BEFORE 5:00 P.M. NEW YORK CITY TIME ON DECEMBER 13, 2012.
 
No.          Class B Warrants

Class B Warrant Certificate
Vishay Precision Group, Inc.
 
     This Warrant Certificate certifies that _______________, or registered assigns, is the registered holder (the “Holder”) of ___________ Class B Warrants expiring December 13, 2012 (the “Warrants” or “Class B Warrants”) to purchase Common Stock, $0.10 par value per share (the “Common Stock”), of Vishay Precision Group, Inc., a Delaware corporation (the “Company”). Each Class B Warrant entitles the Holder upon exercise to receive from the Company, on or before 5:00 p.m. New York City Time on December 13, 2012 (the “Expiration Date”), one fully paid and nonassessable share of Common Stock (a “Warrant Share”) at the initial exercise price (the “Exercise Price”) of $40.23 per share (subject to adjustment as provided herein), payable in lawful money of the United States of America upon surrender of this Warrant Certificate at the office of the Company designated for such purpose, but only subject to the conditions set forth herein and in the Warrant Agreement, as defined below. Capitalized terms not otherwise defined herein shall have the meaning ascribed to them in the Warrant Agreement.
 
     This Warrant Certificate and each Class B Warrant represented hereby are issued pursuant to and are subject in all respects to the terms and conditions set forth in the Warrant Agreement (the “Warrant Agreement”), dated July 21, 2010 by and between the Company and American Stock Transfer & Trust Co.(the “Warrant Agent”), which Warrant Agreement is hereby incorporated by reference in and made a part of this instrument and is hereby referred to for a description of the rights, limitation of rights, obligations, duties and immunities thereunder of the Company and the Holders (the words “Holder” or “Holders” meaning the registered holder or registered holders of the Warrants). A copy of the Warrant Agreement may be obtained by the Holder from the Company at 3 Great Valley Parkway, Malvern, PA 19355-1307 by a written request from the Holder hereof and may be inspected by the Holder or his agent at the principal office of the Warrant Agent.
 
 
 
____________________
     * This legend may be removed if such removal is permitted pursuant to the Warrant Agreement.
 
B-1
 
 

     This Class B Warrant shall be exercisable at any time during the period from and after the Issue Date until the Expiration Date.
 
     The number of Warrant Shares issuable upon exercise of the Warrants and the Exercise Price are subject to adjustment upon the occurrence of certain events set forth in the Warrant Agreement.
 
     No Class B Warrant may be exercised after 5:00 p.m., New York City time on the Expiration Date, and to the extent not exercised by such time, such Class B Warrants shall become void.
 
     The Holder of Class B Warrants evidenced by this Warrant Certificate may exercise them by surrendering this Warrant Certificate, with the form of election to purchase set forth hereon properly completed and executed, together with payment of the Exercise Price in cash at the office of the Company designated for such purpose. In the event that upon any exercise of Class B Warrants evidenced hereby the number of Class B Warrants exercised shall be less than the total number of Class B Warrants evidenced hereby, there shall be issued to the Holder hereof or his assignee a new Warrant Certificate evidencing the number of Class B Warrants not exercised.
 
     The Warrant Agreement provides that upon the occurrence of certain events the number of Warrant Shares issuable upon exercise of each Class B Warrant set forth on the face hereof and the Exercise Price thereof shall be adjusted. No fractions of a share of Common Stock will be issued upon the exercise of any Class B Warrant, but the Company will pay the cash value thereof determined as provided in the Warrant Agreement.
 
     Warrant Certificates, when surrendered at the office of the Company by the registered Holder thereof in person or by its legal representative or attorney duly authorized in writing, may be exchanged, in the manner and subject to the limitations provided in the Warrant Agreement, but without payment of any service charge, for another Warrant Certificate or Warrant Certificates of like tenor evidencing in the aggregate a like number of Class B Warrants.
 
     Upon due presentation for registration of transfer of this Warrant Certificate at the office of the Company, a new Warrant Certificate or Warrant Certificates of like tenor and evidencing in the aggregate a like number of Class B Warrants shall be issued to the transferee(s) in exchange for this Warrant Certificate, subject to the limitations provided in the Warrant Agreement, without charge except for any tax or other governmental charge imposed in connection therewith.
 
     The Company may deem and treat the registered Holder(s) of this Warrant Certificate as the absolute owner(s) thereof (notwithstanding any notation of ownership or other writing hereon made by anyone), for the purpose of any exercise hereof, of any distribution to the Holder(s) hereof, and for all other purposes, and the Company shall not be affected by any notice to the contrary. Neither the Class B Warrants nor this Warrant Certificate entitles any Holder hereof to any rights of a stockholder of the Company.
 
B-2
 
 

     IN WITNESS WHEREOF, Vishay Precision Group, Inc. has caused this Class B Warrant Certificate to be signed by its Secretary and has caused its corporate seal to be affixed hereunto or implied hereon.
 
Dated: July 21, 2010
 
  By: /s/ William Clancy
    Name: William Clancy
     
    Title: Executive Vice President, Chief
    Financial Officer and Secretary
   
   
  AMERICAN STOCK TRANSFER & TRUST CO.
   
   
  By:  
    Name:
    Title:

B-3
 
 

ASSIGNMENT FORM
 
     If you, the Holder, want to assign this Class B Warrant, fill in the form below:
 
I or we assign and transfer this Class B Warrant to:
 
(Print or type name, address and zip code and
social security or tax ID number of assignee)
 
and irrevocably appoint _________________________________________ agent to transfer this Class B Warrant on the books of the Company. The agent may substitute another to act for him.
 
Date:      Signed:   
      (Signed exactly as your name appears on the
      other side of this Warrant)

     In connection with any transfer of this Class B Warrant occurring prior to the date of the declaration by the Securities and Exchange Commission of the effectiveness of a registration statement under the Securities Act of 1933, as amended (the “Securities Act”), covering resales of this Class B Warrant (which effectiveness shall not have been suspended or terminated at the date of transfer) at all times when such securities are deemed to be “restricted securities” within the meaning of the Securities Act, the undersigned confirms that it has not utilized any general solicitation or general advertising in connection with the transfer and that this Class B Warrant is being transferred:
 
[Check One]
 
(1)       o       to the Company or a subsidiary thereof; or
         
(2)   o   pursuant to and in compliance with Rule 144A under the Securities; or
         
(3)   o   to an institutional “accredited investor” (as defined in Rule 501(a)(1),(2), (3) or (7) under the Securities Act); or
         
(4)   o   outside the United States to a person who is not a “US person,” in compliance with Rule 904 of Regulation S under the Securities Act; or
         
(5)   o   pursuant to the exemption from registration provided by Rule 144 under the Securities Act; or
         
(6)   o   pursuant to another available exemption from the registration requirements of the Securities Act.

Unless one of the boxes is checked, the Company shall not be obligated to register any of the Class B Warrants evidenced by this certificate in the name of any person other than the registered Holder thereof. If box (3), (4), (5) or (6) is checked, the Company may require, upon the terms described in the Warrant Agreement, prior to registering any such transfer of the Warrant Certificate, such legal opinions, certifications and other information as the Company reasonably requests to confirm that such transfer is being made pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act.
 
Date:      Signed:   
      (Signed exactly as your name appears on the
      other side of this Warrant Certificate)

B-4
 
 

ELECTION TO PURCHASE FORM
 
     If you, the Holder, want to exercise the Class B Warrants represented by this Certificate, fill in the form below.
 
I or we, the registered owner of the Class B Warrants represented by this Certificate irrevocably exercise ______________________________ Class B Warrants for the purchase of _________________________________ shares or other securities or property
 
of Common Stock of Vishay Precision Group, Inc., at the price and on the terms and conditions specified in the Class B Warrants and request that certificates for the shares of Common Stock hereby purchased (and any securities or other property issuable or transferable upon such exercise) be issued in the name of and delivered to:
 
(Print or type name, address and zip code and
social security or tax ID number of owner)
 
and, if such Class B Warrants shall not constitute all of the Class B Warrants represented by this Certificate, that a new Class B Warrant Certificate of like tenor and date for the balance of the Class A Warrants represented hereby be delivered to the undersigned.

Number of Class B Warrants represented by this Certificate  
      Number of Class B Warrants being exercised  
  Balance  

Date:      Signed:   
      (Signed exactly as your name appears on this
      Warrant)

Note:       Each certificate represents a certain number of Warrants. Each Warrant is exercisable for one share, subject to adjustment (which may result in exercisability for other securities on property).

B-5
 
 

*****ELECTION TO PURCHASE FORM
 
     If you, the Holder, want to exercise the Class B Warrants represented by this Certificate, fill in the form below.
 
     I or we, the registered owner of the Class B Warrants represented by this Certificate irrevocably exercise _______________________________ Class B Warrants for the purchase of ________________________________ shares or other securities or property of Common Stock of Vishay Precision Group, Inc., at the price and on the terms and conditions specified in the Class B Warrants and request that certificates for the shares of Common Stock hereby purchased (and any securities or other property issuable or transferable upon such exercise) be issued in the name of and delivered to:
 
(Print or type name, address and zip code and
social security or tax ID number of owner)
 
and, if such Class B Warrants shall not constitute all of the Class B Warrants represented by this Certificate, that a new Class B Warrant Certificate of like tenor and date for the balance of the Class A Warrants represented hereby be delivered to the undersigned.
 
Number of Class B Warrants represented by this Certificate  
      Number of Class B Warrants being exercised  
  Balance  

Date:      Signed:   
      (Signed exactly as your name appears on this
      Warrant)

Note:       Each certificate represents a certain number of Warrants. Each Warrant is exercisable for one share, subject to adjustment (which may result in exercisability for other securities or property).

B-6
 

July 21, 2010
 
 
 
 
 
 
 
VISHAY PRECISION GROUP, INC.
(as Issuer)
 
 
 
_______________________________________________
 
NOTE INSTRUMENT
constituting
up to $9,958,460
FLOATING RATE
UNSECURED LOAN NOTES 2102
_______________________________________________________
 
 

THIS INSTRUMENT is made as of the 21st day of July, 2010 by VISHAY PRECISION GROUP, INC. a company incorporated in the State of Delaware USA, (the Company ).
 
Whereas
 
(A)       Vishay Intertechnology issued loan notes (the “ Vishay Intertechnology Loan Notes ”) pursuant to that certain Note Instrument dated as of December 13, 2002 (the “ Vishay Intertechnology Note Instrument ”); and
 
(B)   Vishay Intertechnology, American Stock Transfer & Trust Co. and the holders of the Vishay Intertechnology Loan Notes entered into that certain Put and Call Agreement, dated as of December 13, 2002 (the “ Vishay Intertechnology Put and Call Agreement ”); and
 
(C)   Pursuant to the Vishay Intertechnology Put and Call Agreement, Vishay Intertechnology agreed that in case it shall at any time pay a dividend or make a distribution to all holders of its common stock consisting of the capital stock of any class or series, or similar interests, of or relating to a subsidiary or other business entity of Vishay Intertechnology, then Vishay Intertechnology shall take such action and shall cause the subsidiary or other business entity whose capital stock was paid as a dividend or distributed by Vishay Intertechnology to take such action so that each of the loan notes issued pursuant to the Vishay Intertechnology Note Instrument shall be deemed exchanged as of the effective date of such transaction, for a combination of new floating rate unsecured Vishay Intertechnology loan notes and floating rate unsecured loan notes of the subsidiary or other business entity whose capital stock was paid as a dividend or distributed by Vishay Intertechnology; and
 
(D)   Vishay Intertechnology and the Company entered into that certain Master Separation Agreement, dated as of June 22, 2010 (the “ Master Separation Agreement ”), providing for the spin-off of the Company by Vishay Intertechnology in the form of a tax free dividend of the common stock of the Company to the holders of the common stock of Vishay Intertechnology and the class B common stock of the Company to the holders of class B common stock of Vishay Intertechnology; and
 
(E)   The Company has agreed under the terms of the Master Separation Agreement to comply with the obligation under the Vishay Intertechnology Put and Call Agreement to issue floating rate unsecured loan notes to the holders of the Vishay Intertechnology Loan Notes; and
 
(F)   Accordingly, the Company has authorized Floating Rate Unsecured Loan Notes 2102 in the initial principal amount of $9,958,460 and has determined to constitute the said Loan Notes as hereinafter provided.

Now This Instrument Witnesses And The Company Hereby Declares as follows:
 
1. In this Instrument and in the Schedules hereto the following expressions shall, where the context permits, have the following meanings:
 
the Conditions means the conditions to be endorsed on the Loan Notes in the form or substantially in the form set out in Schedule 2 hereto as the same may from time to time be modified in accordance with the provisions herein contained;
 
Directors means the Board of Directors for the time being of the Company or a duly authorized committee of the Board of Directors;
 
 

Exchange Act means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder, as the same may be amended from time to time;
 
Instrument means this instrument and the Schedules hereto as from time to time modified in accordance with the provisions herein contained;
 
LIBOR means, in relation to any amount owed by the Company hereunder and any interest period:
 
(a)       the percentage rate per annum equal to the offered quotation which appears on the page of the Telerate Screen which displays an average British Bankers Association Interest Settlement Rate for US Dollars for such period at or about 11.00 a.m. (London time) on the first day of the relevant interest period; or
 
(b)   if a rate is not available pursuant to (a) above, the percentage rate per annum which is the arithmetic mean of the rates as supplied to the Company at its request quoted by three banks selected by the Company (one of which shall include, if in existence at the time, Barclays Bank plc) to leading banks in the London inter-bank market for three month deposits of similar size and currency.

Loan Notes means up to $9,958,460 Floating Rate Unsecured Loan Notes 2102 of the Company to be issued under this Instrument or (as the context may require) the principal amount thereof for the time being issued and outstanding;
 
Noteholders means the several persons for the time being entered in the Register;
 
Put and Call Agreement means the put and call agreement relating to the Loan Notes entered into by the Company and other persons in connection with the transaction contemplated by the Master Separation Agreement on or about the date hereof;
 
Register means the register of Noteholders referred to in clause 8 hereof;
 
Registration Rights Agreement means the registration rights agreement entered into by Vishay Intertechnology and other persons in connection with the SPA on or about December 13, 2002;
 
SPA means the share sale and purchase agreement entered into by Vishay Intertechnology as purchaser and other persons on or about December 13, 2002 pursuant to which the Vishay Intertechnology Loan Notes were issued; and
 
Vishay Precision Group means the Company (including its successors) and its subsidiaries from time to time.
 
Words denoting the singular number only shall include the plural number and vice versa. Words denoting persons shall include corporations.
 
2. The Loan Notes shall be known as the Vishay Precision Group, Inc. Floating Rate Unsecured Loan Notes 2102 and shall be issued in amounts and multiples of $1,000 by the Company to such persons at such times and on such terms as the Directors may determine.
 
3. The aggregate principal amount of the Loan Notes is limited to $9,958,460. The Loan Notes, as and when issued, and all accrued and unpaid interest thereon, shall (except as regards the first payment of interest) rank pari passu equally and rateably without discrimination or preference as an unsecured debt obligation of the Company.
 
-2-
 
 

4. As and when the Loan Notes or any part thereof fall to be redeemed or repaid in accordance with the provisions hereof, the Company will pay to the Noteholders entitled thereto the principal amount of the Loan Notes to be repaid together with accrued interest (subject to any requirement to deduct any income tax therefrom).
 
5. Until such time as the Loan Notes are redeemed or repaid in accordance with the provisions hereof, the Company will pay to the Noteholders interest (subject to any requirement to deduct any income tax therefrom) on the principal amount of the Loan Notes outstanding at the rates and the times and as otherwise provided in the Conditions.
 
6. Every Noteholder shall be entitled without charge to one certificate for the Loan Notes held by it. However, joint holders of Loan Notes will be entitled only to one Loan Note certificate (provided that the Company shall not be bound to register more than four persons as the joint holders of any Loan Note) and such Loan Note will be sent to that one of the joint holders who is first named in the Register. Every Loan Note certificate shall be issued under the common or securities seal of the Company and shall be substantially in the form set out in Schedule 1 hereto and shall have the Conditions endorsed thereon. The Company shall comply with the provisions of the Loan Notes and the Conditions and the Loan Notes shall be held subject to all such provisions which shall be binding on the Company and the Noteholders and all persons claiming through or under them respectively.
 
7. Each Noteholder shall be entitled to require all or any part (being $1,000 nominal amount or any integral multiple thereof) of the Loan Notes held by it to be repaid at par together with accrued interest (subject to any requirement to deduct any income tax therefrom) if:
 
(a)       any principal or interest on any of the Loan Notes held by that Noteholder due to it shall fail to be paid in full within thirty days after receipt of written demand by the Company, addressed to its financial controller (with a copy to Robert Friedel of Pepper Hamilton LLP) and made by the relevant Noteholder following failure to pay; or
 
(b)   the Company breaches any of its obligations to issue shares or, if applicable, to pay cash under the Put and Call Agreement and such breach, if capable of remedy, is not remedied within ten days after written notification to the Company addressed to its financial controller (with a copy to Robert Friedel of Pepper Hamilton LLP); or
 
(c)   any indebtedness of any member or members of the Vishay Precision Group having in aggregate a principal amount in excess of US $50,000,000 is not paid on its due date or within any applicable grace period, and such default in payment is not waived or remedied within a period of one month; or
 
(d)   the Company pursuant to or under or within the meaning of any Bankruptcy Law:
 
    (i)       commences a voluntary case or proceeding;
 
    (ii)   consents to the entry of an order for relief against it in an involuntary case or proceeding or the commencement of any case against it;
 
    (iii)   consents to the appointment of a Custodian of it or for any substantial part of its property;

-3-
 
 

        (iv)       makes a general assignment for the benefit of its creditors;
 
    (v)   files a petition in bankruptcy or answer or consent seeking reorganization or relief; or
 
    (vi)   consents to the filing of such petition or the appointment of or taking possession by a Custodian; or
 
(e)   a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that:
 
    (i)   is for relief against the Company in an involuntary case or proceeding, or adjudicates the Company insolvent or bankrupt;
 
    (ii)   appoints a Custodian of the Company for any substantial part of its property; or
 
    (iii)   orders the winding up or liquidation of the Company; and the order or decree remains unstayed and in effect for 60 days; or
 
(f)   any event analogous to (d) or (e) above occurs in any jurisdiction.

In paragraphs (d) and (e) above:
 
Bankruptcy Law means Title 11, United States Code, or any similar Federal or state law for the relief of debtors.
 
Custodian means any receiver, trustee, assignee, liquidator, custodian or similar official under any Bankruptcy Law.
 
The Company shall notify each of the Noteholders forthwith on the occurrence of any of the events described in sub-clause (a) to (f) of this clause 7.
 
8. A register of the Noteholders will be kept at 3 Great Valley Parkway, Malvern, Pennsylvania 19355-1307 (or at such other place as the Company may from time to time have appointed for the purpose and have notified to the Noteholders) and there shall be entered in the Register:
 
(a)       the names and addresses of the Noteholders;
 
(b)   the telecopier numbers of the Noteholders;
 
(c)   the principal amount of the Loan Notes held by each Noteholder;
 
(d)   the date on which the name of each Noteholder is entered in respect of the Loan Notes standing in its name; and
 
(e)   the serial number of each Loan Note.

9. Any change of name or address on the part of any Noteholder which is notified to the Company at the address set out in clause 8 above shall be entered in the Register.
 
10. Any Noteholder may at all reasonable times during office hours inspect the Register.
 
11. The Company hereby covenants with the Noteholders and each of them duly to perform and observe the obligations herein contained and imposed on it to the intent that these presents shall enure for the benefit of all Noteholders, each of whom may sue for the performance or observance of the provisions hereof so far as its holding of Loan Notes is concerned.
 
-4-
 
 

12. The Conditions and provisions contained in the Schedules hereto shall have effect in the same manner as if such Conditions and provisions were herein set forth.
 
13. A memorandum of execution of any instrument supplemental to this Instrument shall be endorsed by the Company on this Instrument.
 
14. This Instrument and the Loan Notes shall be governed by and construed in accordance with the laws of the State of New York.
 
15. Each of the parties agrees that the courts of the State of New York are to have exclusive jurisdiction to settle any disputes that may arise in connection with this Agreement.
 
In Witness Whereof this Instrument has been duly executed by the Company the day and year first above written.
 
The Company
 
VISHAY PRECISION GROUP, Inc.
 
By:    /s/ Steven Klausner
 
         Name:  Steven Klausner
         Title: Vice President, Treasurer

-5-
 
 

SCHEDULE 1
 
Form of Loan Note
 
No. _____ Amount $_____
 
VISHAY PRECISION GROUP, INC.
 
(Incorporated in the State of Delaware)
 
UP TO $9,958,460 VISHAY PRECISION GROUP, INC. FLOATING RATE
UNSECURED LOAN NOTES 2102
 
THIS IS TO CERTIFY THAT _____ _____ is/are the registered holder(s) of the above principal amount of the Vishay Precision Group, Inc. Unsecured Loan Notes 2102 (the Loan Notes) constituted by an Instrument entered into by the Company on July 21, 2010 (together with any instruments supplemental thereto) (the Instrument) and issued with the benefit of, and subject to the provisions contained in, the Instrument and the Conditions endorsed hereon. The Loan Notes further take the benefit of certain representations and warranties contained in the Note Purchase Agreement referred to in the Instrument as if made by Company as of July 21, 2010, to the extent relating to the Instrument and the Loan Notes.
 
Interest is payable on the Loan Notes quarterly in arrears on the interest payment dates in each year and at a floating rate determined in accordance with the Conditions endorsed hereon.
 
The Loan Notes are redeemable in accordance with Condition 8 endorsed hereon.
 
The Loan Notes are transferable on the terms set out in the Conditions endorsed hereon. This Loan Note certificate must be surrendered before any transfer can be registered or any new Loan Note certificate can be issued in exchange.
 
The Loan Notes have not been, and will not be, registered under the United States Securities Act of 1933, as amended and, accordingly, certain restrictions on ownership and transfer apply to the Loan Notes. 1
 
Copies of the Instrument constituting the Loan Notes are available for inspection at the registered office of the Company.
 
The Loan Notes shall be governed by and construed in accordance with the laws of the State of New York.
 

____________________
 
1       The provisions of the Registration Rights Agreement dated as of December 13, 2002 made between Vishay Intertechnology and the Original Holders (as such term is defined in the Registration Rights Agreement) shall govern whether or not legends in compliance with the United States Securities Act of 1933 appear on the face of the Loan Note certificates.

 

IN WITNESS whereof Vishay Precision Group, Inc. has executed this Loan Note Certificate.
 
 
 
VISHAY PRECISION GROUP, Inc.
 
By:     
     
         Name:   
     
         Title:  

Issued on July 21, 2010
 
 

SCHEDULE 2
 
The Conditions
 
1. The Loan Notes are issued in amounts and multiples of $1,000 and constitute unsecured obligations of the Company.
 
2. Interest on the Loan Notes will be calculated on the basis of a 360 day year and will be payable (subject to any requirement to deduct any income tax therefrom) by quarterly installments in arrears on 31 March, 30 June, 30 September and 31 December in each year (or if such day is not a business day in New York and Frankfurt, on the immediately preceding common business day in such cities) (interest payment dates) in respect of the preceding interest period (as defined below) ending on the interest payment date at a rate calculated for each interest period as provided in Condition 3 below, except that the first interest payment on the Loan Notes, which shall be made on September 30, 2010 will be in respect of the period from (and including) June 30, 2010. The period from (and including) June 30 to (but excluding) September 30, 2010 and the period from (and including) September 30, 2010 or any subsequent quarter date (where quarter date means any of 31 March, 30 June, 30 September or 31 December) to (but excluding) the next following quarter date is herein called an interest period.
 
3. (a) Subject to Condition 3(b), the rate of interest on the Loan Notes for any interest period will be LIBOR for such interest period.
 
(b)       If at any time during the period beginning on the date of issue of the Loan Notes and ending on 31 December 2010, the Common Stock has a Market Value of equal to or more than the Target Price per share for 30 or more consecutive trading days, then the rate of interest on the Loan Notes for all interest periods commencing on or after 1 January 2011 will be the rate per annum equal to fifty per cent. (50%) of LIBOR for such interest period.

In this Condition 3:
 
Common Stock means the common stock, par value US $0.10, of the Company and any other security exchanged or substituted for such common stock or into which such common stock is converted in any recapitalization, reorganization, merger, consolidation, share exchange or other business combination transaction, including any reclassification consisting of a change in par value or a change from par value to no par value or vice versa;
 
Majority of the Noteholders means, at any relevant time, the Noteholders of a majority of the principal amount of the Loan Notes that are at any relevant time outstanding;
 
Market Value for any trading day means the volume-weighted average of the per share selling prices on the New York Stock Exchange or other principal United States securities exchange or inter-dealer quotation system on which the Common Stock is then listed or quoted (or, if there is no sale of the Common Stock reported on such trading day, the average of the low ask and high bid price for the Common Stock reported on the last trading day in which such sale was reported) or, if there are no high bid and low ask prices, the Market Value shall be the per share fair market value of the Common Stock or other security as determined by an investment banking firm of national reputation and standing selected by the Company and reasonably acceptable to the Majority of the Noteholders;
 
Target Price means $46.47 per share of Common Stock, provided that if any event(s) described in Article IV of the Put and Call Agreement shall occur, then the Target Price shall be subject to adjustment in the manner and to the extent applicable to the Target Price (as defined in the Put and Call Agreement);
 
 

trading day means any day on which securities are traded or quoted on the principal securities exchange or interdealer quotation system on which the Common Stock is listed for trading or quotation; and
 
Securities Act means the United States Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder, as the same may be amended from time to time.
 
4. If the Company fails to pay any amount payable by it under this Instrument or the Loan Notes, it must immediately on demand by the relevant Noteholder pay interest on the overdue amount from its due date up to the date of actual payment, both before, on and after judgment at the rate per annum equal to the Relevant Rate plus one percent (1%). For these purposes the Relevant Rate is the rate for the time being applicable pursuant to Condition 3 above.
 
5. Each interest payment shall be made (subject to any requirement to deduct any income tax therefrom) to the Noteholder on the register of Noteholders at the close of business on the twenty-eighth day preceding the date for payment of such interest and every such Noteholder shall be deemed, for the purpose of these presents, to be the holder on such interest payment date of the Notes held by it on such preceding date notwithstanding any intermediate transfer or transmission of any such Notes.
 
6. In circumstances where the Company is required (or would in the absence of any relevant filing be required) to make a deduction or withholding for or on account of any taxes or any other deductions, (and where any Noteholder is entitled to a reduced rate of withholding), the Company shall (to the extent it is entitled or required to do so) co-operate in a timely manner in filing such forms and documents as the Internal Revenue Service and any other taxation authority may require in order to enable the Company to make relevant payments under the Loan Notes without having to make such deduction or withholding, or at the relevant reduced rate of withholding.
 
7.1 If the Company at any time is subject to a transaction pursuant to which it becomes a subsidiary of any other person, it will thereafter procure that its ultimate parent company from time to time, as soon as practicable after becoming such, provides the Noteholders with a binding, irrevocable and unconditional guarantee of all of the obligations of the Company in respect of the Notes, the Registration Rights Agreement and the Put and Call Agreement in customary form.
 
7.2 If the Company ceases to be a reporting company under Section 13(d) or 15 of the Exchange Act (a Reporting Entity ), then, for so long as it does not have a holding company that has issued a guarantee to the Noteholders as required by Condition 7.1, it will in respect of each of its financial quarters provide each Noteholder promptly after the same is prepared with such quarterly and annual financial statements as it prepares in the ordinary course in respect of itself and its subsidiaries and as is of the type customarily provided to bank creditors.
 
7.3 If a guarantee of a holding company is in effect as contemplated by Condition 7.1 above but the relevant guarantor is not a Reporting Entity, then the Company shall be obliged to procure that the relevant guarantor for the time being provides to each Noteholder the information referred to in Condition 7.2 above in respect of itself and its subsidiaries within the timeframe contemplated by that Condition.
 
8. Each Noteholder shall be entitled to require all or any part (being $1000 nominal amount or any integral multiple thereof) of the Loan Notes held by it to be repaid at par together with accrued interest (subject to any requirement to deduct any income tax therefrom) up to (but excluding the date of repayment) in the circumstances specified in clause 7 of the Instrument. Unless previously repaid, redeemed or purchased and cancelled, the Company will redeem the Loan Notes on 31 December, 2102 at par together with accrued interest (subject to any requirement to deduct income tax therefrom) up to (but excluding) the date of repayment.
 
 

9. Any Loan Notes repaid, redeemed or purchased pursuant to Condition 8 shall forthwith be cancelled and the Company shall not be at liberty to reissue the same.
 
10. Every Noteholder any of whose Loan Notes is due to be repaid or redeemed under these Conditions shall, not later than the due date for such repayment or redemption, deliver up to the Company, at the address specified in clause 8 of the Instrument constituting the Loan Notes, the Loan Notes which are due to be repaid or redeemed in order that the same may be cancelled. Upon such delivery and against a receipt for the principal moneys payable in respect of the Loan Notes to be repaid or redeemed, the Company shall pay to the Noteholder the amount payable to it in respect of such repayment or redemption.
 
11. Interest shall cease to accrue on any Loan Notes becoming liable to repayment or redemption as from the due date for repayment or redemption of such Loan Notes, unless (upon the Noteholder demanding on or after such date and at the address specified in clause 8 of the Instrument payment of the principal moneys payable in respect thereof and tendering the certificate(s) therefor and a receipt for such moneys duly signed and authenticated in such manner as the Company may reasonably require) payment of such moneys shall not be made by the Company, in which case interest will accrue from the date of such demand until (but excluding) the date of payment by the Company.
 
12. Amounts in respect of interest on any Loan Notes which remain unclaimed by the Noteholder for a period of five years and amounts due in respect of principal which remain unclaimed for a period of ten years, in each case from the date on which the relevant payment first becomes due, shall revert to the Company and the Noteholder shall cease to be entitled thereto.
 
13. Any Notes acquired by or on behalf of any member of the Vishay Precision Group shall be automatically cancelled.
 
14. The provisions of the Instrument constituting the Loan Notes and the rights of the Noteholders are subject to modification, abrogation or compromise in any respect but only in accordance with the provisions of Schedule 4 of the said Instrument and with the consent of the Company.
 
15. The Loan Notes are in registered form, and are transferable in accordance with the provisions of Schedule 3 of the Instrument.
 
16. All Loan Notes shall form a single series and shall rank pari passu equally and rateably without discrimination or preference as an unsecured debt obligation of the Company.
 
17. No application has been or is intended to be made to any stock exchange for the Loan Notes to be listed or dealt in.
 
18. Any notice or other document (including a Loan Note certificate) to be given to a Noteholder may be given or sent to the Noteholder at its registered address for the giving of notice to it by a method permitted pursuant to Condition 19. In the case of joint registered holders of any Loan Notes, a notice given to the Noteholder whose name stands first in the register in respect of such Loan Notes shall be sufficient notice to all joint holders. Notice may be given to the persons entitled to any Loan Notes in consequence of the bankruptcy of any Noteholder by sending the same by a method permitted pursuant to Condition 19 addressed to them by name or by the title of the representative or trustee of such holder at the address (if any) in the United Kingdom supplied for the purpose by such persons or (until such address is supplied) by giving notice in the manner in which it would have been given if the bankruptcy had not occurred.
 
 

19. Any notice required to be given to the Company under the Instrument shall be sent in writing to the address specified in clause 8 of the Instrument and shall be sufficiently given or made when and if delivered by a recognized international courier service or hand delivery, or by telecopier with in each case a copy sent by first class or registered mail, post prepaid.
 
20. Words and expressions defined in the Instrument shall have the same respective meanings whenever used in these Conditions.
 
 

SCHEDULE 3
 
Provisions as to Registration, Transfer and Other Matters
 
1. Except as required by law or as ordered by a court of competent jurisdiction, the Company will recognise the registered holder of any Loan Notes as the absolute owner thereof and shall not be bound to take notice or see to the execution of any trust, whether express, implied or constructive, to which any Loan Notes may be subject. The receipt of the registered holder for the time being of any Loan Notes or, in the case of joint registered holders, the receipt of any of them for the interest from time to time accruing due in respect thereof or any other moneys payable in respect thereof shall be a good discharge to the Company, notwithstanding any notice it may have, whether express or otherwise, of the right, title, interest or claim of any other person to or in such Loan Notes, interest or moneys. The Company shall not be bound to enter notice of any trust, whether express, implied or constructive, on the register in respect of any Loan Notes.
 
2. Every Noteholder will be recognised by the Company as entitled to its Loan Notes free from any equity, set-off or counter-claim on the part of the Company against the original or any intermediate holder of the Loan Notes.
 
3. The Loan Notes are transferable:
 
(a)       in whole or in part (but in the case of a transfer of part in a minimum principal amount of at least $2,000,000 and such that the transferor’s holding of Loan Notes after such transfer would not be less than $2,000,000) (and for these purposes a transfer of less than $2,000,000 shall not be a transfer in whole if it does not relate to all of the Loan Notes held by a transferor and its affiliates);
 
(b)   subject to compliance with the restrictions set out in Schedule 6; and
 
(c)   in whole or in part to any affiliate of a Noteholder provided that, in the case of a transfer in part, the transferor and the transferee have entered into such documentation as the Company may reasonably require to provide that:
 
    (i)       one member of the transferor’s group shall act as administrative agent for all Noteholders who are members of such group, with the effect that the Company will only be required to deal with one member of the transferor’s group in relation to the Loan Notes; and
 
    (ii)   if the transferee ceases to be an affiliate of the transferor, the Company will be notified and able to require the relevant Loan Notes promptly to be transferred back to the transferor.

For these purposes, an affiliate of any person is (i) any other person that is a holding company or subsidiary of the first, or a subsidiary of any such holding company; (ii) in the case of a transferor that is a fund management company, investment company, or venture capital or private equity company, any fund, limited partnership or similar entity that is advised or managed by that transferor; and (iii) in the case of a transferor that is a fund, limited partnership or similar entity, any other such entity that is under common management with the transferor.
 
No assignment, transfer, sale or other disposal of any holding of Loan Notes will be registered except in accordance with paragraphs 4 and 5 below.
 
 

4. Every instrument of transfer shall be substantially in the form set out in Schedule 5 and must be signed by the transferor and the transferor shall be deemed to remain the owner of the Loan Notes to be transferred until the name of the transferee is entered in the register in respect thereof and until the transferee shall have executed an assignment substantially in the form set out in Annex I to the Put and Call Agreement.
 
5. Every instrument of transfer must be left for registration with the Company at the address specified in clause 8 of the Instrument accompanied by the certificate for the Loan Notes to be transferred together with any certificates required and such other evidence as the Directors may require to prove the title of the transferor or its right to transfer the Loan Notes, and, if the instrument of transfer is executed by some other person on its behalf, the authority of that person to do so. The transfer will then (subject to paragraphs 3 and 4 above) be registered and a note of such registration will be entered in the Register and a new certificate for Loan Notes issued accordingly.
 
6. All instruments of transfer that are registered shall be retained by the Company.
 
7. No fee shall be charged for the registration of any transfer or other document relating to or affecting the title to any Loan Notes.
 
8. Any person becoming entitled to Loan Notes in consequence of the bankruptcy of a holder of Loan Notes or of any other event giving rise to the transmission of such Loan Notes by operation of law may, upon producing such evidence that it sustains the character in respect of which it proposes to act under this Condition or of its title as the Company shall think sufficient be registered itself as the holder of such Loan Notes.
 
9. The interest or other moneys payable in respect of the Loan Notes and the principal amount of the Loan Notes or any part thereof may be paid by electronic transfer to the bank account notified for such purpose by the relevant Noteholder to the Company no less than 14 days prior to the relevant date for payment; or if no such account is so satisfied, by cheque sent through the post at the risk of the holder or holders to the registered address of the holder or, in the case of joint registered holders, to the registered address of that one of the joint registered holders who is first named on the register in respect of such holding, or to such person and to such address as the registered holder or the joint registered holders may in writing direct. Every such cheque shall be made payable to the order of the person to whom it is sent and payment of the cheque shall be a satisfaction of the moneys represented thereby.
 
10. If any Loan Note certificate is defaced, lost or destroyed, it may be replaced on such terms (if any) as to evidence and indemnity as the Company may require but so that, in the case of defacement, the defaced Loan Note certificate shall be surrendered before the new Loan Note certificate is issued.
 
 

SCHEDULE 4
 
Amendments, Supplements and Waivers
 
Except as described below the Company may amend the terms of the Loan Notes with the written consent of Noteholders holding 66% of the aggregate principal amount of the then outstanding Loan Notes. Noteholders holding a 66% of the aggregate principal amount of the outstanding Loan Notes may waive compliance by the Company with any provision of the Loan Notes. However, without the consent of each affected Noteholder, an amendment, supplement or waiver may not:
 
(a)       change the maturity of the principal of or any instalment of interest on any Loan Note in a manner adverse to the Noteholders;
 
(b)   reduce the principal amount of any Loan Note;
 
(c)   reduce the rate of or extend the time for payment of interest on any Loan Note;
 
(d)   change the place or currency of payment of principal of or interest on any Loan Note;
 
(e)   modify any provision of the Loan Notes relating to the waiver of past defaults or the right of the Noteholders to institute suit for the enforcement of any payment on or with respect to any Loan Notes or the modification and amendment provisions of the Loan Notes;
 
(f)   reduce the percentage of the principal amount of outstanding Loan Notes necessary for amendment to or waiver of compliance with any provision of the Loan Notes or for waiver of any breach of the terms thereof;
 
(g)   waive a default in the payment of principal of, interest on, or redemption payment with respect to, the Loan Notes;
 
(h)   modify the ranking or priority of any Loan Note in any manner adverse to the Noteholders;

It shall not be necessary for the consent of the Noteholders under this Schedule 4 to approve the particular form of any proposed amendment, supplement or waiver, but it shall be sufficient if such consent approves the substance thereof.
 
After an amendment, supplement or waiver under this Schedule 4 becomes effective, the Company shall notify the Noteholders affected thereby with a notice briefly describing the amendment; supplement or waiver. Any failure by the Company to send such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such amendment, supplement or waiver.
 
 

SCHEDULE 5
 
Form of Transfer Certificate
 
To:       Vishay Precision Group, Inc. (the Company)
 
TRANSFER CERTIFICATE
 
This Transfer Certificate relates to the Instrument constituting up to $_____________ Vishay Precision Group, Inc. Floating Rate Loan Notes 2102 dated ____________, 2010 of Vishay Precision Group, Inc. (the Instrument ). Capitalised terms defined in the Instrument shall have, unless otherwise defined in this Transfer Certificate, the same meanings when used in this Transfer Certificate.
 
1. [Transferor] (the Transferring Holder ) confirms that the principal outstanding amount of Notes that it holds is $[_____] (the Transferring Holder’s Notes ).
 
2. The Transferring Holder requests:
 
(a)       [___________] [Transferee] (the Transferee ) to accept and procure the transfer to the Transferee of [the Transferring Holder’s Notes//[_____] principal amount of the Transferring Holder’s Notes, being a principal amount greater than $2,000,000] as further specified in the Appendix (the Transfer Notes ) by countersigning and delivering this Transfer Certificate to the Company at its address for the service of notices specified in the Instrument; [and
 
(b)   the Company to issue a certificate in its name in relation to that portion of the Transferring Holder’s Notes not comprising the Transfer Notes (the Retained Notes ) in accordance with clause 6 of the Instrument. For the avoidance of doubt, the Transferor acknowledges that this Transfer Certificate shall not affect its rights, undertakings, liabilities and obligations in respect of the Retained Notes.]

3. The Transferring Holder makes no representation or warranty and assumes no responsibility with respect to the legality, validity, effectiveness, adequacy or enforceability of the Instrument or any document relating thereto and assumes no responsibility for the financial condition of the Company or for the performance and observance by the Company of any of its respective undertakings, liabilities and obligations under the Instrument or any document relating thereto, and any and all such conditions and warranties, whether express or implied by law or otherwise, are hereby excluded.
 
4. In connection with the transfer of the Transfer Notes, the Transferring Holder confirms that it has not utilised any general solicitation or general advertising in connection with the Transfer Notes or the transfer of the Transfer Notes.
 
5. Unless, either (i), one of the boxes below is checked by the Transferring Holder or (ii) the Loan Notes are transferred pursuant to an effective registration statement under the Securities Act, the Company shall not be obliged to register any of the Loan Notes evidenced in the name of any person other than the Transferring Holder.
 
 

6. By checking the box checked bow, the Transferring Holder confirms that the Transfer Notes are being transferred 2 :
 
(a)       [_____] to the Company or a subsidiary thereof; or
 
(b)   [_____] pursuant to and in compliance with Rule 144A under the Securities Act; or
 
(c)   [_____] to an institutional “accredited investor” (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act); or
 
(d)   [_____] outside the United States to a “foreign person” in compliance with Rule 904 of Regulation S under the Securities Act; or
 
(e)   [_____] pursuant to the exemption from registration provided by Rule 144 under the Securities Act; or
 
(f)   [_____] pursuant to another available exemption from the registration requirements of the Securities Act.

7. The Transferee hereby requests the Company:
 
(a)       to accept this Transfer Certificate as being delivered to it pursuant to, and for the purposes of, paragraph 5 of Schedule 3 to the Instrument in relation to the Transfer Notes; and
 
(b)   to register it in the Register as the Noteholder in respect of the Transfer Notes; and
 
(c)   to issue a certificate in its name in relation to the Transfer Notes in accordance with clause 6 of the Instrument.

8. The Transferee confirms that it has acceded to the Put and Call Agreement in accordance with paragraph 4 of Schedule 3 to the Instrument and encloses herewith:
 
(a)       a copy of the form of assignment prescribed by the Put Call Agreement duly executed by it; and
 
(b)   the certificate that evidences the Transferring Holder’s title to the Transfer Notes.

9. The Transferee warrants that it has received a copy of the Instrument together with such other information as it has required in connection with this transaction and that it has not relied, and will not hereafter rely, on the Transferring Holder to check or enquire on its behalf into the legality, validity, effectiveness, adequacy, accuracy or completeness of any such information and further agrees that it has not relied, and will not rely, on the Transferring Holder to assess or keep under review on its behalf the financial condition, creditworthiness, condition, affairs, status or nature of the Company.
 

____________________
 
2       If box (iii), (iv), (v) or (vi) is checked, the Company may require, prior to registering any such transfer of the Transfer Notes such legal opinions, as the Company reasonably requests to confirm that such transfer is being made pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act.

 

10. The Transferee hereby undertakes with the Transferring Holder and each of the other parties to the Instrument that it will perform in accordance with their terms all those undertakings, liabilities and obligations that by the terms of the Instrument will be assumed by it after delivery of this Transfer Certificate to the Company and satisfaction of the conditions subject to which this Transfer Certificate is expressed to take effect.
 
11. This Transfer Certificate is not assignable or otherwise negotiable (without prejudice to the provisions of Schedule 3 to the Instrument which shall be applicable to the Transferring Holder in respect of the Retained Notes and to the Transferee in relation to any transfer or assignment of the rights, undertakings, liabilities and obligations assumed by it pursuant hereto).
 
12. This Transfer Certificate and the rights, undertakings, liabilities and obligations of the parties hereunder shall be governed by and construed in accordance with the laws of the State of New York.
 
13. Each of the Transferor and the Transferee agrees that the courts of the State of New York are to have exclusive jurisdiction to settle any disputes that may arise in connection with this Agreement.
 
 

APPENDIX
 
[Insert details of Transfer Notes.]    
 
  		      
For and on behalf of the Transferring Holder   For and on behalf of the Transferee

 

SCHEDULE 6
 
Restrictions on Transfer of Loan Notes
 
(a)       Each Noteholder agrees that any proposed transfer of any Loan Notes, or any shares of Common Stock issuable upon conversion or exchange thereof, may be effected only (1)(w) inside the United States of America (I) to a person who the seller reasonably believes is a qualified institutional buyer within the meaning of Rule 144A in a transaction meeting the requirements of Rule 144A, (II) in accordance with Rule 144 or (III) pursuant to another exemption from the registration requirements of the Securities Act, (x) to the Company, (y) outside the United States of America (A) to a non-U.S. person (within the meaning of Regulation S) in a transaction meeting the requirements of Regulation S or (B) pursuant to another exemption from the registration requirements of the Securities Act or (z) pursuant to an effective registration statement and (2) in each case, in accordance with the application securities laws of any state of the United States of America or any other application jurisdiction. Each Noteholder agrees to notify any purchaser of the resale restrictions set forth above.
 
(b)   Prior to any Transfer or proposed Transfer of any Loan Notes, the Noteholder thereof shall deliver written notice to the Company in the form set out in Schedule 5 of such Noteholder’s intention to effect such transfer. If the transfer or proposed transfer is pursuant to clause (1)(w) or (1)(y) of the first sentence of the preceding paragraph, then upon receipt of such notice, the Company may request any or all of the following (each a Transfer Document ) in a form reasonably acceptable to the Company:
 
    (i)       an agreement by such transferee to the impression of the restrictive investment legend set forth below on the Loan Note certificates, or any shares of Common Stock issuable upon conversion or exchange thereof;
 
    (ii)   an agreement by such transferee, in form and substance reasonably satisfactory to the Company, to be bound by the provisions of this Schedule 6 relating to the transfer of such Loan Notes, or any shares of Common Stock issuable upon conversion or exchange thereof; and
 
    (iii)   an opinion of counsel with expertise in securities law matters reasonably satisfactory to the Company that such transfer complies with applicable securities laws.
 
    If the Company requests any Transfer Document(s), it shall do so as promptly as practicable following receipt of the Holder’s notice of intention to Transfer. The Company shall thereafter cause the Transfer to be recorded and a certificate or other evidence of ownership in the name of the transferee to be delivered as soon as practicable after it has received Transfer Documents complying with the terms of this Schedule.
 
(c)   The Noteholders agree that each certificate issued to evidence Loan Notes, or any shares of Common Stock issuable upon conversion of exchange thereof shall bear a legend to the following effect:

 

    THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE ACT), OR ANY OTHER APPLICABLE SECURITIES LAWS AND HAVE BEEN ISSUED IN RELIANCE UPON AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND SUCH OTHER SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED, OR OTHERWISE DISPOSED OF, EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR PURSUANT TO A TRANSACTION THAT IS EXEMPT FROM SUCH REGISTRATION.
 
        The foregoing legend shall be in addition to any other legend required by law.
 
(d)   The restrictions referenced in this Schedule, including the legend, shall cease and terminate as to any particular Loan Notes, or any shares Common Stock issuable upon conversion or exchange thereof when (x) such Loan Notes, or any shares Common Stock issuable upon conversion or exchange thereof have been transferred in a transaction pursuant to Rule 144 or a registration statement or (y) in the reasonable opinion of counsel for the Company, such restriction is no longer required in order to assure compliance with the Securities Act and applicable state securities laws. Whenever such restrictions shall cease and terminate as to any Notes, the Noteholder shall be entitled to received from the Company, without expense (other than applicable transfer taxes, if any, if such unlegended shares are being delivered and transferred to any person other than the registered Noteholder thereof), new certificates for a like number of Notes not bearing the relevant legend(s) set forth in this Schedule.


PUT AND CALL AGREEMENT
 
     PUT AND CALL AGREEMENT (this “Agreement”) dated as of July 21, 2010 between Vishay Precision Group, Inc., a Delaware corporation (the “Company”), the Put/Call Agent (as defined herein) and each of the holders of the Notes due December 13, 2102 (the “Notes”) issued by the Company.
 
     WHEREAS, Vishay Intertechnology, Inc., a Delaware corporation (“Vishay Intertechnology”) issued notes (the “Vishay Intertechnology Notes”) pursuant to that certain Note Instrument dated as of December 13, 2002 (the “Vishay Intertechnology Note Instrument”); and
 
     WHEREAS, Vishay Intertechnology, American Stock Transfer & Trust Co. and the holders of the Vishay Intertechnology Notes entered into that certain Put and Call Agreement, dated as of December 13, 2002 (the “Vishay Intertechnology Put and Call Agreement”); and
 
     WHEREAS, pursuant to the Vishay Intertechnology Put and Call Agreement, Vishay Intertechnology agreed that in case it shall at any time pay a dividend or make a distribution to all holders of its common stock consisting of the capital stock of any class or series, or similar interests, of or relating to a subsidiary or other business entity of Vishay Intertechnology, then Vishay Intertechnology shall take such action and shall cause the subsidiary or other business entity whose capital stock was paid as a dividend or distributed by Vishay Intertechnology to take such action so that each of the notes issued pursuant to the Vishay Intertechnology Note Instrument shall be deemed exchanged as of the effective date of such transaction, for a combination of new floating rate unsecured Vishay Intertechnology loan notes and floating rate unsecured loan notes of the subsidiary or other business entity whose capital stock was paid as a dividend or distributed by Vishay Intertechnology; and
 
     WHEREAS, Vishay Intertechnology and the Company entered into that certain Master Separation Agreement, dated as of June 22, 2010 (the “Master Separation Agreement”), providing for the spin-off of the Company by Vishay Intertechnology in the form of a tax free dividend of the then-outstanding shares of Common Stock to the holders of the common stock of Vishay Intertechnology and the then-outstanding shares of class B common stock of the Company to the holders of class B common stock of Vishay Intertechnology; and
 
     WHEREAS, the Company has agreed under the terms of the Master Separation Agreement to comply with the obligation under the Vishay Intertechnology Put and Call Agreement to issue floating rate unsecured loan notes to the holders of the Vishay Intertechnology Notes; and
 
     NOW, THEREFORE, in consideration of the premises and the mutual agreements herein set forth, the parties hereto agree as follows:
 
ARTICLE I
DEFINITIONS
 
     Section 1.01. Definitions . As used in this Agreement, the following terms, when capitalized, shall have the meanings assigned below:
 
     “ Assignment Form ” means an assignment form substantially in the form attached hereto as Annex I.
 
 

     “ Business Day ” means any day other than a Saturday, Sunday or legal holiday on which the commercial banks in the City of New York, Borough of Manhattan, are required or permitted by law to remain closed.
 
     “ Call ” means the right of the Company to call all of the Notes in exchange for the issuance of shares of Common Stock or cash in accordance with the provisions of Article III.
 
     “ Call Exercise Notice ” has the meaning described in Section 3.02.
 
     “ Call Period ” means the period beginning on January 2, 2018 and ending on the date that is 30 days prior to the Maturity Date.
 
     “ Call Target Price ” means $46.47 per share of Common Stock, which price shall be appropriately adjusted in the event of any stock dividend, stock split, reverse stock split, combination, recapitalization, reclassification, exchange or similar transaction with respect to the shares of Common Stock.
 
     “ Common Stock ” means the common stock, par value US$.10 per share, of the Company and any other security exchanged or substituted for such common stock or into which such common stock is converted in any recapitalization, reorganization, merger, consolidation, share exchange or other business combination transaction, including any reclassification consisting of a change in par value or a change from par value to no par value or vice versa.
 
     “ Company ” has the meaning set forth in the introduction to this Agreement.
 
     “ Daily Market Price ” for any trading day means the volume-weighted average of the per share selling prices on the New York Stock Exchange or other principal United States securities exchange or inter-dealer quotation system on which the relevant equity security is then listed or quoted or, if there are no reported sales of the relevant equity security on such trading day, the average of the high bid and low ask price for the relevant equity security on the last trading day on which such sale was reported or, if there are no high bid and low ask prices, the Daily Market Price shall be the per share fair market value of the relevant equity security as determined by an investment banking firm of national reputation and standing selected by the Company and reasonably acceptable to a Majority of the Holders (in which case, only a single determination of value need be made by an investment banking firm, notwithstanding any provision in the Agreement requiring an average over more than one (1) trading day).
 
     “ Exchange Act ” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder, as the same may be amended from time to time.
 
     “ Holder ” means the Initial Holders and their successors and permitted assigns who become holders of Notes in a manner permitted thereunder, in each case until the relevant person ceases to be a holder of Notes in accordance with the provisions of the Notes and this Agreement.
 
     “ Initial Holder ” means the persons to whom or for whose benefit the Notes are issued under the terms of the Vishay Intertechnology Put and Call Agreement and the terms of the Master Separation Agreement and whose names appear on the signature page to this Agreement, in each case until the relevant person ceases to be a Holder of Notes in accordance with the provisions hereof.
 
     “ Interest Rate Hurdle ” means the “Target Price” (initially $59.75 per Common Share), as defined in Schedule 2 of the Notes which may be adjusted pursuant to the provisions herein, and whereby (pursuant to Schedule 2, Item 3(c) of the Notes) the interest rate on the Notes is adjusted for the period commencing on or after January 1, 2011 based upon certain performance parameters of the shares of Common Stock.
 
-2-
 
 

     “ Issue Date ” means the date of this Agreement, which is the date as of which the Notes are first issued.
 
     “ Majority of the Holders ” means, at any relevant time, the Holders of a majority of the nominal amount of the Notes that are at any relevant time outstanding.
 
     “ Maturity Date ” means December 31, 2102, the final maturity date of the Notes. “Notes” has the meaning set forth in the introduction to this Agreement.
 
     “ person ” means any individual, corporation, partnership, limited liability company, trust, foundation, joint venture, association, joint stock company, unincorporated organization, government agency, estate or other entity of any nature.
 
     “ Put ” means the right of a Holder to require the Company to exchange the Notes, in whole or in part (as permitted herein), for shares of Common Stock in accordance with the provisions of Article II.
 
     “ Put/Call Agent ” means American Stock Transfer & Trust Co., a New York corporation, or any successor as provided in Article V.
 
     “ Put/Call Rate ” means $22.57 per share, subject to adjustment pursuant to Article IV herein.
 
     “ Put Exercise Notice ” means the notice of intention to exercise the Put in the form attached to this Agreement in the form of Annex II.
 
     “ Put Period ” means the period during which the Notes are outstanding, ending on the Maturity Date.
 
     “ SEC ” means the United States Securities and Exchange Commission.
 
     “ Securities Act ” means the United States Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder, as the same may be amended from time to time.
 
     Where the reference “hereof,” “hereby” or “herein” appears in this Agreement, such reference shall be deemed to be a reference to this Agreement as a whole. Whenever the words “include,” “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation.” Words denoting the singular include the plural, and vice versa, and references to it or its or words denoting any gender shall include all genders.
 
ARTICLE II
THE PUT
 
     Section 2.01. Put Exercise Generally . At any time during the Put Period, a Holder may exercise the Put with respect to (i) the aggregate nominal amount of all Notes held by such Holder or (ii) a portion of the nominal amount of any Note in integral multiples of US$2,000,000. The number of shares of Common Stock issuable upon exercise of the Put shall equal (i) the nominal amount of the Notes for which the Put is being exercised by the Holders, divided by (ii) the Put/Call Rate as of the Put Date (as defined below). No adjustment to the Put/Call Rate shall be made in respect of any accrued but unpaid interest on the Notes, whether before or after the record date for payment of any such interest.
 
-3-
 
 

     Section 2.02. Put Exercise Procedure . To exercise the Put, the Holder must (i) surrender to the Put/Call Agent (at its office designated for such purpose, the initial address of such office being listed in Section 6.01 hereof) the certificate or certificates representing the Notes to be exchanged together with the Put Exercise Notice duly completed and executed, (ii) deliver a form of transfer in the form specified by the Notes executed by the Holder with the name of the transferee left blank and (iii) pay any transfer or similar tax required to be paid by the Holder pursuant to Section 2.04.
 
     The date on which the Holder satisfies all the requirements for exercise of the Put is referred to as the “Put Date.” As soon as practicable after the Put Date, the Company will cause the Put/Call Agent to deliver to the Holder in exchange for the Notes (or, pursuant to this Section 2.02, a portion thereof) as to which the Put has been exercised a certificate (or other evidence of ownership) ,for the number of full shares of Common Stock issuable upon the exercise of the Put and cash in lieu of any fractional share determined pursuant to Section 2.03. The person in whose name the certificate is registered shall be treated as a stockholder of record on and after the Put Date, and such person, following the exchange of the relevant Note or part thereof in accordance herewith, shall no longer be a Holder of the Notes as to which the Put has been exercised as of such date.
 
     If the Holder exercises the Put for more than one Note at the same time, the number of shares of Common Stock issuable upon exchange of the Notes shall be based on the total nominal amount of the Notes exchanged.
 
     Upon surrender of a Note that is exchanged in part, the Company will execute and deliver to the Holder a Note certificate in an authorized denomination equal in nominal amount to the unexchanged portion of the Note surrendered.
 
     Section 2.03.  Fractional Shares . The Company will not issue a fractional share of Common Stock upon exchange of a Note. Instead, the Company will deliver cash for the fractional share, to the nearest 1/10,000th of a share, equal to an amount determined by multiplying (i) such fractional share by (ii) the closing sale price of the Common Stock on the principal exchange or quotation system on which the Common Stock is then traded (or if there is no sale of the Common Stock reported on such trading day, the average of the low ask and high bid prices for the Common Stock on such trading day) on the last trading day prior to the Put Date and rounding the product to the nearest whole cent.
 
     Section 2.04. Taxes on Conversion . If a Holder exercises the Put, the Company shall pay any documentary, stamp or similar issue or transfer tax due on the issue of shares of Common Stock upon exchange. However, the Holder shall pay any such tax which is due because the Holder requests the shares to be issued in a name other than the Holder’s name. The Put/Call Agent may refuse to deliver the certificates representing the Common Stock being issued in a name other than the Holder’s name until the Put/Call Agent receives a sum sufficient to pay any tax which will be due because the shares are to be issued in a name other than the Holder’s name. Nothing herein shall preclude any tax withholding required by law or regulations by the Company.
 
     Section 2.05. Reservation of Stock, Validity of Shares; Listing . The Company will at all times reserve and keep available, out of the aggregate of its authorized but unissued shares of Common Stock or its authorized and issued shares of Common Stock held in its treasury, for the purpose of enabling it to satisfy any obligation to issue shares of Common Stock upon exchange of the Notes following exercise of the Put, the maximum number of shares of Common Stock which may then be deliverable upon the exchange of all outstanding Notes upon the exercise of the Put. The Company may in its discretion use such shares of Common Stock reserved for the Put pursuant to this Section with respect to any Call. The Company or, if appointed, the transfer agent for the Common Stock (the “Transfer Agent”) and every subsequent transfer agent for any shares of the Company’s capital stock issuable upon the exchange of any of the Notes upon exercise of the Put shall be authorized and directed at all times to reserve such number of authorized ‘shares as shall be required for such purpose. The Company shall keep a copy of this Agreement on file with the Transfer Agent and with every subsequent transfer agent for any shares of the Company’s capital stock issuable upon the exchange of the Notes. The Company will furnish such Transfer Agent a copy of all notices of adjustments and certificates related thereto, transmitted to each Holder.
 
-4-
 
 

     All shares of Common Stock delivered upon exchange of the Notes following exercise of the Put shall be newly issued shares or treasury shares, shall be duly and validly issued and fully paid and nonassessable and shall be free from preemptive rights and free of any lien or adverse claim.
 
     The Company will list or cause to have quoted such shares of Common Stock issuable upon exercise of the Put on each securities exchange or such other market on which the Common Stock is then listed or quoted.
 
ARTICLE III
THE CALL
 
     Section 3.01. Call Exercise Generally . At any time during the Call Period, the Company, at its option, may exercise the Call with respect to all of the Notes, as provided herein. Upon exercise of the Call,
 
          (i) if the Common Stock has had a Daily Market Price at or above the Call Target Price then in effect for 20 or more out of 30 consecutive trading days at any time after the Issue Date, the Company shall issue to the Holders that number of shares of Common Stock equal to (x) the nominal amount of the Notes exchanged divided by (y) the Put/Call Rate as of the Call Date (as defined below) and pay to the Holders an amount in cash equal to accrued but unpaid interest on the Notes to the Call Date or;
 
          (ii) if the Common Stock has not had a Market Value at or above the Call Target Price for 20 or more out of 30 consecutive trading days at any time after the Issue Date, at the election of the Company, the Company shall either-
 
               (1) issue to the Holders that number of shares of Common Stock equal to (x) the nominal amount of the Notes exchanged divided by (y) the average of the Daily Market Prices for the ten trading days ending two trading days prior to the date that the Call Exercise Notice is first sent to Holders, and pay to the Holders an amount in cash equal to accrued but unpaid interest on the Notes to the Call Date; or
 
               (2) pay to the Holders $1.00 for each $1.00 nominal amount of Notes subject to the Call, plus an amount in cash equal to any accrued but unpaid interest on the Notes to the Call Date.
 
     No adjustment to the Put/Call Rate shall be made in respect of any accrued but unpaid interest on the Notes, whether before or after the record date for payment of any such interest.
 
     The date that the Company specifies for the exchange of the Notes pursuant to exercise of the Call as specified herein is referred to as the “Call Date.”
 
-5-
 
 

     The Company shall give the notice of a Call to the Put/Call Agent at least thirty (30) days but not more than sixty (60) days before the Call Date (unless a shorter notice shall be satisfactory to the Put/Call Agent). The Company shall accompany such notice with a copy of the register of the record owners of the Notes then outstanding and shall promptly furnish the Put/Call Agent with any changes in such register prior to the Call Date.
 
     Section 3.02. Call Exercise Notice . At least thirty (30) days but not more than sixty (60) days before a Call Date, the Company shall send a notice of redemption (“Call Exercise Notice”), by a method permitted for the delivery of a notice to the Holders pursuant to Section 6.1 below, to each Holder of Notes at its registered address.
 
     The Call Exercise Notice shall state:
 
               (1) the Call Date;
 
               (2) whether the Call is for shares or cash;
 
               (3) if the call is for shares, the Put/Call Rate (as subject to adjustment pursuant to Article IV prior to the Call Date) or, in the case of a Call exercised pursuant to clause (ii)(1) of Section 3.01, the number of shares of Common Stock exchangeable for each $1,000 nominal amount of Notes;
 
               (4) if the Call is for cash, that the Company will pay to the Holders $1.00 for each $1.00 nominal amount of Notes subject to the Call;
 
               (5) the accrued but unpaid interest to the Call Date, to the extent it can be determined;
 
               (6) the name and address of the Put/Call Agent;
 
               (7) that the Notes must be surrendered to the Put/Call Agent to receive the cash or shares of Common Stock issuable in exchange for the Notes, as applicable; and
 
               (8) that, unless the Company defaults in issuing the shares of Common Stock or to pay the cash as the case may be, in exchange for the Notes called for exchange, such Notes will cease to accrue interest on and after the Call Date.
 
     At the Company’s request, the Put/Call Agent shall give the notice of exercise of the Call in the Company’s name and at the Company’s expense, provided that the Company makes such request at least fifteen (15) days (unless a shorter period shall be acceptable to the Put/Call Agent) prior to the date such notice of redemption must be mailed.
 
     Section 3.03. Competing Notices/Effect of Notice of Redemption . If, following service of a Call Exercise Notice and prior to the date falling five (5) days before the relevant Call Date, a Put Exercise Notice is served by any Holder pursuant to Article II above, then that Call Exercise Notice shall cease to have effect in relation to the Notes subject to the Put Exercise Notice. Subject thereto and provided the relevant Notes remain outstanding on the Call Date, once notice of exercise of the Call is given pursuant to Section 3.02, the Notes will become mandatorily exchangeable on the Call Date. Upon surrender to the Put/Call Agent, the Notes shall be exchanged for shares of Common Stock or cash in accordance with Section 3.01.
 
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     Section 3.04. Call Date . Subject only to Section 3.03 above and Section 3.05 below, on the Call Date, -upon surrender by a Holder to the Put/Call Agent of, and provision to the Put/Call Agent of a duly executed form of transfer in relation to, the Notes, the Notes of any Holder shall be exchanged on the Call Date by the Put/Call Agent for the appropriate number of shares of Common Stock or cash as provided in Section 3.01 above, and the Put/Call Agent shall in addition pay to each Holder its entitlement of cash in lieu of any fractional share determined pursuant to Section 3.06 herein and any interest accrued but unpaid.
 
     Section 3.05. Deposit of Redemption Price . The Company shall make available to the Put/Call Agent sufficient Common Stock to exchange the Notes on the Call Date, together with cash in lieu of fractional shares as provided in Section 3.06 and in respect of accrued but unpaid interest.
 
     Section 3.06. Fractional Shares . The Company will not issue a fractional share of Common Stock upon exchange of a Note. Instead, the Company will deliver cash for the fractional share, to the nearest 1/10,000th of a share, equal to an amount determined by multiplying (i) such fractional share by (ii) the closing sale price of the Common Stock on the principal exchange or quotation system on which the Common Stock is then traded (or if there is no sale of the Common Stock reported on such trading day, the average of the low ask and high bid prices for the Common Stock on such trading day) on the last trading day prior to the Call Date and rounding the product to the nearest whole cent.
 
     Section 3.07. Taxes on Conversion . If the Company exercises the Call, the Company shall pay any documentary, stamp or similar issue or transfer tax due on the issue of shares of Common Stock upon exchange. However, the Holder shall pay any such tax which is due because the Holder requests the shares to be issued in a name other than the Holder’s name. The Put/Call Agent may refuse to deliver the certificates representing the Common Stock being issued in a name other than the Holder’s name until the Put/Call Agent receives a sum sufficient to pay any tax which will be due because the shares are to be issued in a name other than the Holder’s name. Nothing herein shall preclude any tax withholding required by law or regulations by the Company.
 
     Section 3.08. Validity of Shares, Listing . All shares of Common Stock delivered upon exchange of the Notes following exercise of the Call shall be newly issued shares or treasury shares, shall be duly and validly issued and fully paid and nonassessable and shall be free from preemptive rights and free of any lien or adverse claim.
 
     The Company will list or cause to have quoted such shares of Common Stock issuable upon exercise of the Call on each securities exchange or such other market on which the Common Stock is then listed or quoted.
 
ARTICLE IV
ADJUSTMENTS TO THE PUT/CALL RATE
 
     Section 4.01. Adjustments to the Put/Call Rate . The Put/Call Rate is subject to adjustment from time to time upon the occurrence of the events enumerated in this Section 4.01.
 
          (a) Declaration of Stock Dividend, Splits, Reverse Splits or Reclassification or Reorganization: other Distributions .
 
               (i) In case the Company shall declare any dividend or other distribution upon its outstanding shares of Common Stock payable in Common Stock or shall subdivide its outstanding shares of Common Stock into a greater number of shares, then the Put/Call Rate, the Call Target Price and the Interest Rate Hurdle shall be decreased in inverse proportion to the increase in the number of shares of Common Stock outstanding through such dividend, other distribution, or subdivision. In case the Company shall at any time combine the outstanding shares of its Common Stock into a smaller number of shares, the Put/Call Rate, the Call Target Price and the Interest Rate Hurdle shall be increased in inverse proportion to the decrease in the number of shares of Common Stock outstanding through such combination. The Company shall cause a notice to be mailed to each Holder at least ten (10) days prior to the applicable record date for the activity covered by this Section 4.01(a)(i). The Company’s failure to give the notice required by this Section 4.01(a)(i) or any defect therein shall not affect the validity of the activity covered by this Section 4.01(a)(i). Notwithstanding the foregoing, nothing in this paragraph will prejudice the rights of the Holders pursuant to this Agreement.
 
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               (ii) In case the Company shall at any time (including in connection with any merger, consolidation or sale of all or substantially all the assets of the Company in which Section 4.01(d) hereof is not applicable) (i) issue any evidence of indebtedness, shares of its stock or any other securities to all holders of shares of Common Stock by reclassification of its shares of Common Stock, (ii) distribute any rights, options or warrants to purchase or subscribe for any evidence of indebtedness, shares of its stock (other than distributions for which adjustment may be made pursuant to Section 4.01(b) or Section 4.01(e)) or any other securities to all holders of shares of Common Stock, (iii) distribute cash (other than regular quarterly or semi-annual cash dividends) or other property to all holders of shares of Common Stock, or (iv) issue by means of a capital reorganization other securities of the Company in lieu of the Common Stock or in addition to the Common Stock, then the Note shall be adjusted as is determined to be appropriate so that the Holder of each Note shall be entitled to receive the kind and number of shares or other securities of the Company or the successor entity or cash or other property that the Holder would have owned or have been entitled to receive after the happening of the event described above, had such Note been converted immediately prior to the happening of such event or any record date with respect thereto. The Company shall cause a notice to be mailed to each Holder at least ten (10) days prior to the applicable record date for the activity covered by this Section 4.01(a)(ii). The Company’s failure to give the notice required by this Section 4.01(a)(ii) or any defect therein shall not affect the validity of the activity covered by this Section 4.01(a)(ii). Notwithstanding the foregoing, nothing in this paragraph will prejudice the rights of the Holders pursuant to this Agreement.
 
               (iii) An adjustment made pursuant to this Section 4.01(a) shall become effective immediately after the effective date of such event retroactive to the record date, if any, for such event.
 
          (b) Adjustment for Rights Issuance .
 
               (i) (A) In case the Company shall at any time distribute any rights, options or warrants to all holders of Common Stock entitling them, for a period expiring within sixty (60) days after the date of determination of the stockholders entitled to receive such rights (the “Record Date”) (or any longer period resulting from the extension of the exercise period which is announced following the time that the rights, options or warrants are first issued) for such distribution, to purchase or subscribe for shares of Common Stock at a price per share less than ninety percent (90%) of the Daily Market Price of the Common Stock on the Record Date, then the Put/Call Rate, the Call Target Price and the Interest Rate Hurdle in effect immediately prior thereto shall be adjusted as provided below:
 
     Put Call Rate Adjustment . The Put Call Rate Adjustment shall be determined by the following formula:
 
R = R o    x   (O + C/M)
    (O + A)

-8-
 
 

      where:
       
  R        =       the adjusted Put/Call Rate;
       
  R o = the Put/Call Rate immediately prior to such adjustment;
       
  0 = the number of shares outstanding immediately prior to the issuance of such rights, options or warrants as referred to in this Section 4.01(b)(i)(A);
       
  A = the maximum number of shares issuable pursuant to such rights, options or warrants as referred to in this Section 4.01(b)(i)(A);
    
  C = the aggregate consideration receivable by the Company for the issuance of Common Stock upon exercise of such rights, options or warrants as referred to in this Section 4.01(b)(i)(A); and
       
  M = the average of the Daily Market Prices of the Common Stock for the ten (10) consecutive trading days immediately preceding the Record Date;

     Call Target Price Adjustment . The Call Target Price shall be determined in accordance with the following formula:
 
T = T o    x   (O + C/M)
    (O + A)

      where:
       
  T        =       the adjusted Call Target Price;
       
  T o = the Call Target Price immediately prior to such adjustment;

and the other symbols in such formula have the meanings specified under “Put/Call Rate Adjustment” above and the preceding paragraph.
 
     Interest Rate Hurdle Adjustment . The Interest Rate Hurdle applicable shall be determined in accordance with the following formula:
 
I = I o    x   (O + C/M)
    (O + A)

      where:
       
  I        =       the adjusted Interest Rate Hurdle;
       
  I o = the Interest Rate Hurdle immediately prior to such adjustment;

and the other symbols in such formula have the meanings specified under “Put/Call Rate Adjustment” above and the preceding paragraph; provided that no adjustments shall be made in the event that R would exceed R o .
 
-9-
 
 

                    (B) The adjustments shall become effective immediately after the Record Date for the determination of shareholders entitled to receive the rights, warrants or options to which this Section 4.01(b)(i) applies. If less than all of such rights, warrants or options have been exercised when such rights, warrants or options expire, then the Put/Call Rate, the Call Target Price and the Interest Rate Hurdle shall promptly be readjusted to the Put/Call Rate, the Call Target Price and the Interest Rate Hurdle that would then be in effect had the adjustment upon the issuance of such rights, warrants or options been made on the basis of the actual number of shares of Common Stock issued upon the exercise of such rights, warrants or options.
 
               (ii) In case the Company shall at any time distribute any rights, options or warrants to all holders of Common Stock entitling them, for a period expiring more than sixty (60) days after the Record Date therefor (excluding any rights, options or warrants originally issued with an exercise period of sixty (60) days or less, which, by virtue of one or more extensions, expire more than sixty (60) days after the Record Date therefor), to purchase or subscribe for shares of Common Stock at a price per share less than ninety percent (90%) of the Market Price of the Common Stock as of such Record Date, then the Company shall similarly distribute such rights, options or warrants to the Holders on such Record Date (without any exercise of the Put by Holders) as if such Holders had exercised their Put immediately prior to the Record Date.
 
          (c) Liquidation, Dissolution or Winding Up . Notwithstanding any other provisions hereof, in the event of the liquidation, dissolution, or winding up of the affairs of the Company (other than in connection with a consolidation, merger or sale or conveyance of all or substantially all of its assets or a Change or Spin-Off), the right to exchange the Notes shall terminate and expire at the close of business on the last full Business Day before the earliest date fixed for the payment of any distributable amount on the Common Stock. The Company shall cause a notice to be mailed to each Holder at least ten (10) Business Days prior to the applicable record date for such payment stating the date on which such liquidation, dissolution or winding up is expected to become effective, and the date on which it is expected that holders of record of shares of Common Stock shall be entitled to exchange their shares of Common Stock for securities or other property or assets (including cash) deliverable upon such liquidation, dissolution or winding up, and that each Holder may exercise the Put during such ten (10) Business Day period and, thereby, receive consideration in the liquidation on the same basis as other previously outstanding shares of the same class as the shares acquired upon exercise. The Company’s failure to give notice required by this Section 4.01(c) or any defect therein shall not affect the validity of such liquidation, dissolution or winding up. Notwithstanding the foregoing, nothing in this paragraph will prejudice the rights of the Holders pursuant to this Agreement.
 
          (d) Merger, Consolidation, etc. In any event when (A) any person (the “ Acquirer”) directly or indirectly acquires the Company in a transaction in which the Company is merged with or into or consolidated with another person or (B) the Company sells or conveys all or substantially all of its assets to another person (unless, subsequent to such merger, consolidation or other transaction, the Company is the surviving entity and has reporting obligations under the Exchange Act as a result of having common equity securities outstanding, in which case, this Section shall not apply with respect to such merger, consolidation or other transaction) (such merger, consolidation or other transaction referred to hereinafter as a “ Change”)), then, in the case of each such Change, the following shall occur:
 
               (i) The Company shall give written notice of any Change to each Holder, in accordance with Section 6.01 hereof, at least ten (10) Business Days immediately preceding but not including the date of effectiveness of the Change and shall also include in such written notice whether the Acquirer is effecting Section 4.01(d)(ii) or Section 4.01(d)(iii) below. The Company’s failure to give notice required by this Section 4.01(d) or any defect therein shall not affect the validity of the Change covered by this Section 4.01(d). Notwithstanding the foregoing, nothing in this paragraph will prejudice the rights of the Holders pursuant to this Agreement.
 
-10-
 
 

     In addition, at the option of the Acquirer, the Acquirer will effect either Section 4.01(d)(ii) or Section 4.01(d)(iii) below, with respect to the rights provided to the Holders pursuant to the Notes and the Put and Call (provided that, if Section 4.01(d)(ii) below is not available for whatever reason, the Acquirer will effect Section 4.01(d)(iii) below). Notwithstanding the foregoing, if the Acquirer is not a public company with reporting obligations under the Exchange Act (or is a continuing public company only by virtue of securities which are not common equity securities under the Exchange Act), then the Acquirer will effect the steps described in Section 4.01(d)(iii)(A),(B), (C) and (D) below (and shall result in the automatic election of Section 3.01(ii)(2).
 
               (ii) The Roll-Over Option .
 
                    (A) The Notes shall remain the outstanding obligations of the Company.
 
                    (B) The Company shall procure that the Acquirer provides a full and unconditional guarantee on terms reasonably satisfactory to a Majority of the Holders, which shall inure for the benefit of all holders of the Notes (the “Guarantee”) of the prompt payment when due by the Company of principal and interest under or arising out of the Notes. Such Guarantee shall rank pari passu equally and ratably without discrimination, subordination or preference as an unsecured debt obligation of the Acquirer.
 
                    (C) The Company shall procure that the Acquirer executes an agreement supplemental hereto that provides that the Acquirer will be bound by this Agreement;
 
                    (D) In the case of each such Change, thereafter each Holder shall receive, upon such Holder’s exercise of the Put pursuant to this Agreement, shares of the Acquirer (the “Acquirer Shares”) as opposed to shares of the Company, as provided for prior to such Change. In addition, the Put/Call Rate, the Call Target Price, and the Interest Rate Hurdle on the Notes shall be determined by the following formulae:
 
     Put/Call Rate Adjustment . After the Change, the Put/Call Rate shall be adjusted in the following manner:
 
PC = PC o x (M/M o )

      where:
       
  PC        =       the adjusted Put/Call Rate.
       
  PC o = the Put/Call Rate immediately prior to such adjustment.
       
  M o = the average of the Daily Market Prices of the Common Stock for the first ten (10) consecutive trading days-immediately preceding but not including the date of effectiveness of the Change.
       
  M = the fair market value per share of the Acquirer Shares. As used in this formula, “fair market value” shall mean the average Daily Market Price of the Acquirer Shares for the ten (10) consecutive trading days immediately preceding but not including the date of effectiveness of the Change.

-11-
 
 

     Call Target Price Adjustment . After the Change, the Call Target Price shall be adjusted in the following manner:
 
T = T o x (M/ M o )

      Where:
       
  T        =       the adjusted Call Target Price.
       
  T o = the Call Target Price immediately prior to such adjustment.

and the other symbols in such formula have the meanings specified under “Put/Call Rate Adjustment” above and the preceding paragraph.
 
     Interest Rate Hurdle Adjustment . After the Change, the Interest Rate Hurdle applicable to the Notes shall be adjusted in the following manner:
 
I = I o x (M/ M o )

      Where:
       
  I        =       the adjusted Interest Rate Hurdle;
       
  I o = the Interest Rate Hurdle immediately prior to such adjustment.

and the other symbols in such formula have the meanings specified under “Put/Call Rate Adjustment” above and the preceding paragraph.
 
               (iii) The Acceleration Option. If the Acquirer chooses, or if Section 4.01(d)(ii) above is not available, or if the Acquirer is required to do so pursuant to Section 4.01(d)(i) above, the Acquirer shall provide a notice to the Company to such effect at least ten (10) Business Days immediately preceding but not including the date of effectiveness of the Change, and the Company shall inform the Holders as soon as reasonably practicable thereafter, but in any event not later than five (5) Business Days immediately preceding but not including the effective date of the Change. In any such case, the following shall occur:
 
                    (A) The Call Date shall be accelerated to be immediately prior to the effectiveness of the Change;
 
                    (B) Except as provided in (C) below, the terms and conditions under Section 3.01 shall apply without the adjustments provided for in Section 4.01(d)(ii) above; provided, however, that if the Change is not effected, the provisions of this Section 4.01(d)(iii) shall not apply;
 
                    (C) If, with respect to this Section 4.01(d)(iii), Section 3.01(ii) is applicable, in no event will the payment made or fair market value of shares of Common Stock issued by the Company to the Holders be less than the fair market value of the Notes. As used herein, the “fair market value” of the Notes shall be determined by an investment banking firm of national reputation and standing selected by the Company and reasonably acceptable to a Majority of the Holders. The fair market value shall be determined as of the day immediately preceding the first public announcement of the Change, and if payment for purposes of this Section 4.01(d)(iii) is in Common Stock, the Common Stock shall be valued at the closing price for the Common Stock on the effective date of the Change; and
 
-12-
 
 

                    (D) Notwithstanding the provisions of Section 3.02, the Call Notice shall be sent as soon as practicable following notice of the Acquirer as described above.
 
          (e) Spin-Off .
 
               (i) In case the Company shall at any time pay a dividend or make a distribution to all holders of its Common Stock consisting of the capital stock of any class or series, or similar interests, of or relating to a subsidiary or other business unit of the Company (such transaction, a “Spin-Off”; such capital stock or other interests, the “Spin-Off Shares”; and such subsidiary or business unit, the “Spin-Off Company”), then the Company shall take such action, and shall cause the Spin-Off Company to take such action, so that the Notes shall be deemed exchanged as of the effective date of the Spin-Off, without action by any Holder, for a combination of new floating rate unsecured loan notes of the Company (the “New Notes”) and floating rate unsecured loan notes of the Spin-Off Company (“Spin-Off Notes”), as provided in this Section 4.01(e); provided, however, that in the event that the distribution of Spin-Off Notes to the Holders would, in the reasonable opinion of counsel to the Company, (i) jeopardize the tax-free nature of such Spin-Off or (ii) require registration with the SEC in circumstances where registration would not otherwise be required, then, at the election of the Company, either (y) the Holders shall not receive New Notes and Spin-Off Notes pursuant to this Section 4.01(e)(i) and the Put/Call Rate shall instead be adjusted pursuant to the terms of Section 4.01(e)(ii) or (z) the Holders shall receive New Notes and Spin-Off Notes as contemplated above in this Section 4.01(e)(i). The terms of the New Notes and the Spin-Off Notes shall be identical to the terms of the Notes mutatis mutandis, except that the Put/Call Rates, the nominal amounts, the Call Target Prices and the Interest Rate Hurdles (subject to adjustment as provided therein) of the New Notes and the Spin-Off Notes shall be determined as follows:
 
     Put/Call Rate Adjustment . The Put/Call Rate of the Spin-Off Notes shall be determined in accordance with the following formula:
 
R s = R o x P s / (P p + (r x P s ))

      where:
       
  R s        =       the Put/Call Rate of the Spin-Off Notes;
       
  R o = the Put/Call Rate of the Notes immediately prior to adjustment for the Spin-Off pursuant to this Section 4.01(e)(i);
       
  P p = the average of the Daily Market Prices of the Common Stock for the ten (10) consecutive trading days following the date on which the Spin-Off is consummated;
       
  r = the number of Spin-Off Shares (which may be one or a fraction less than or greater than one) distributed pursuant to the Spin-Off in respect of each share of Common Stock; and

-13-
 
 

      P s        =       the fair market value per share of the Spin-Off Shares. As used in this section, “fair market value” shall mean the average Daily Market Price of the Spin-Off shares for the first ten (10) consecutive trading days following the date on which the Spin-Off is consummated; provided, however, that if such distributed securities do not begin trading within two trading days of the consummation of such Spin-Off or if the Spin-Off Shares do not trade for at least ten (10) consecutive trading days within twenty (20) days after the Spin-Off, then the “fair market value” of such distributed securities shall be determined by an investment banking firm of national reputation and standing selected by the Company and acceptable to a Majority of the Holders on the record date of the Spin-Off.

     The Put/Call Rate of the New Notes shall be determined in accordance with the following formula:
 
R n = R o x P s / (P p + (r x P s ))

      where :
       
  R n        =       the Put/Call Rate of the New Notes,

and the other symbols in such formula have the meanings specified in the preceding paragraph of this Section 4.01(e)(i).
 
     Nominal Amount Adjustment . The nominal amount of each Spin-Off Note shall be determined in accordance with the following formula:
 
A s = A o x (P s x r)/(P p + (P s x r))

      where:
       
  A s        =       the nominal amount of the Spin-Off Note issued in exchange for any Note;
       
  A o = the nominal amount of the Note for which the Spin-Off Note is exchanged;

and the other symbols in such formula have the meanings specified under “Put/Call Rate Adjustment” above in this Section 4.01(e)(i).
 
     The nominal amount of each New Note shall be determined in accordance with the following formula:
 
A n = A o x P p / (P p + (r x P s ))

      where:
       
  A n        =       the nominal amount of the New Note issued in exchange for any Note;

and the other symbols in such formula have the meanings specified under “Put/Call Rate Adjustment” above and the preceding paragraph, in each case in this Section 4.01(e)(i).
 
-14-
 
 

     Call Target Price Adjustment . The Call Target Price for the Spin-Off Notes shall be determined in accordance with the following formula:
 
Ts = T o x Ps / (P p + (r x P s ))

      Where:
       
  T s        =       the adjusted Call Target Price for the Spin-Off Notes.
       
  T o = the Call Target Price immediately prior to such adjustment.

and the other symbols in such formula have the meanings specified under “Put/Call Rate Adjustment” above and the preceding paragraph, in each case in this Section 4.01(e)(i).
 
     The Call Target Price for the New Notes shall be determined in accordance with the following formula:
 
Tn = T o x P p / (P p + (r x P s ))

      Where:
       
  T o        =       the adjusted Call Target Price for the New Notes.

and the other symbols in such formula have the meanings specified under “Put/Call Rate Adjustment” above and the preceding paragraph, in each case in this Section 4.01(e)(i).
 
     Interest Rate Hurdle Adjustment . The Interest Rate Hurdle applicable on the Spin-Off Notes shall be determined in accordance with the following formula:
 
I s = I o x P s / (P p + (r x P s ))

      Where:
       
  I s        =       the adjusted Interest Rate Hurdle;
       
  I o = the Interest Rate Hurdle immediately prior to such adjustment.

and the other symbols in such formula have the meanings specified under “Put/Call Rate Adjustment” above and the preceding paragraph, in each case in this Section 4.01(e)(i).
 
     The Interest Rate Hurdle applicable on the New Notes shall be determined in accordance with the following formula:
 
I s = I o x P p / (P p + (r x P s ))

      Where:
       
  I n        =       the adjusted Interest Rate Hurdle
       
  I o = the Interest Rate Hurdle immediately prior to such adjustment.

-15-
 
 

and the other symbols in such formula have the meanings specified under “Put/Call Rate Adjustment” above and the preceding paragraph, in each case in this Section 4.01(e)(i).
 
               (ii) In case the Company shall engage in a Spin-Off, and Section 4.01(e)(i) shall not be available to the Holders as a result of the proviso in the first paragraph of Section 4.01(e)(i), then the Holders shall not receive New Notes and Spin-Off Notes and immediately prior thereto the following shall be adjusted in accordance with the following formulae:
 
     Put/Call Rate Adjustment . The Put/Call Rate of the Notes shall be determined in accordance with the following formula:
 
R x = R o x P p / (P p + (r x P s ))

      where:
       
  R x        =       the adjusted Put/Call Rate.
       
  R o = the Put/Call Rate immediately prior to adjustment pursuant to this Section 4.01(e)(ii).
       
  P p = the average of the Daily Market Prices of the Common Stock for the ten (10) consecutive trading days following the date on which the Spin-Off is consummated.
       
  P s = the fair market value per share of the Spin-Off Shares. As used in this section, “fair market value” shall mean the average Daily Market Price of the Spin-Off shares for the first ten (10) consecutive trading days following the date on which the Spin-Off is consummated; provided, however, that if such distributed securities do not begin trading within two trading days of the consummation of such Spin-Off or if the Spin-Off Shares do not trade for at least ten (10) consecutive trading days within twenty (20) days after the Spin-Off, then the “fair market value” of such distributed securities shall be determined by an investment banking firm of national reputation and standing selected by the Company and acceptable to a Majority of the Holders on the record date of the Spin-Off.
       
  r = the number of Spin-Off Shares (which may be one or a fraction less than or greater than one) distributed pursuant to the Spin-Off in respect of each share of Common Stock.

     Call Target Price Adjustment . The Call Target Price for the Notes shall be determined in accordance with the following formula:
 
Tx = T o x P p / (P p + (r x P s ))

      Where:
       
  Tx        =       the adjusted Call Target Price for the Notes.
       
  T o = the Call Target Price for the Notes immediately prior to such adjustment.

-16-
 
 

and the other symbols in such formula have the meanings specified immediately above under “Put/Call Rate Adjustment”.
 
     Interest Rate Hurdle Adjustment . The Interest Rate Hurdle applicable on the Notes shall be determined in accordance with the following formula:
 
I x = I o x P p / (P p + (r x P s ))

      Where:
       
  I x        =       the adjusted Interest Rate Hurdle.
       
  I o = the Interest Rate Hurdle immediately prior to such adjustment

and the other symbols in such formula have the meanings specified immediately above under “Put/Call Rate Adjustment”.
 
     An adjustment made pursuant to this Section 4.01(e)(ii) shall become effective immediately after the determination of the adjustments referred to in this Section 4.01(e), retroactive to the date for the Spin-Off.
 
               (iii) The Company shall give written notice of any Spin-Off, in accordance with Section 6.01 hereof, at least ten (10) Business Days prior to the record date therefor. The Company’s failure to give notice required by this Section 4.01(e)(iii) or any defect therein shall not affect the validity of the Spin-Off covered by this Section 4.01(e). Notwithstanding the foregoing, nothing in this paragraph will prejudice the rights of the Holders pursuant to this Agreement.
 
     Section 4.02. General Adjustment Provisions .
 
          (a) Notice of Adjustment. Whenever the Put/Call Rate is adjusted, or the type of securities for which the Notes are exchangeable pursuant to the Put and the Call is changed, the Company shall promptly file, in the custody of its Secretary or an Assistant Secretary at its principal office and with the Put/Call Agent, an officer’s certificate setting forth the adjusted Put/Call Rate, Call Target Price and Interest Rate Hurdle, and, if applicable, Nominal Amount and the kind or nature of any other securities or assets for which the Notes shall become exchangeable, a statement, in reasonable detail, of the facts requiring such adjustment and the computation by which such adjustment was made. Each such officer’s certificate shall be made available at all reasonable times for inspection by the Holders at the office of the Put/Call Agent.
 
          (b) Good Faith Determination .
 
               (i) Subject to the following clause (ii), any determination as to whether an adjustment or limitation of exercise is required pursuant to this Section 4.01 (and the amount of any adjustment), shall be binding upon the Holders and the Company if made in good faith by the board of directors of the Company.
 
               (ii) If a Majority of the Holders shall object to any determination of the board of directors of the Company within ten (10) Business Days of receipt of notice of such determination, then such determination shall be referred to a national independent accounting firm in the United States (the “Accounting Firm”) selected by the Company and reasonably acceptable to a Majority of the Holders. The determination of the adjustment made by the Accounting Firm shall be strictly in accordance with the terms of this Agreement and shall be binding upon the Holders and the Company. The Accounting Firm shall be instructed to notify the Company and the Holders of its determination regarding the adjustment within fifteen (15) Business Days of such referral.
 
-17-
 
 

               (iii) Whenever this Agreement provides for the reasonable approval of a Majority of the Holders of any action or determination, such approval shall be deemed to be given if a Majority of the Holders do not reasonably object to such action or determination by written notice to the Company within ten (10) Business Days of the date on which notice thereof is first given to the Holders. No objection shall be deemed reasonable if the reasons for such objection are not set forth in reasonable detail in the notice of objection given to the Company as aforesaid.
 
          (c) Subsequent Adjustments . The adjustment provisions of this Article IV shall be applied successively and from time to time as the circumstances requiring such adjustments shall occur. If as a result of an adjustment made pursuant to this Article IV (except as otherwise specifically provided herein) the Holder of any Notes thereafter surrendered for conversion shall be entitled to receive any securities other than shares of Common Stock into which the Notes were originally convertible, the Put/Call Rate, the Call Target Price and the Interest Rate Hurdle shall be subject to adjustment, from time to time, in a manner and on terms as nearly equivalent as practicable to the provisions with respect to the Common Stock contained in this Article IV.
 
ARTICLE V
THE PUT/CALL AGENT
 
     Section 5.01. Appointment . The Company hereby appoints the Put/Call Agent as its agent to act as set forth herein, subject to resignation or replacement of the Put/Call Agent as provided herein. The Put/Call Agent agrees to accept such appointment, subject to the terms and conditions as set forth herein.
 
     Section 5.02. Duties of the Put/Call Agent . The Put/Call Agent acts hereunder as agent and in a ministerial capacity for the Company, and its duties shall be determined solely by the provisions hereof. The Put/Call Agent shall not by any act hereunder be deemed to make any representations as to the validity, value or authorization of any securities or other property delivered upon exercise of the Put or the Call.
 
     Without prejudice to any liability of any other party hereof, the Put/Call Agent shall not (i) be liable for any recital or statement of facts contained herein or for any action taken, suffered or omitted by it in reliance on any document or instrument believed by it in good faith to be genuine and to have been signed or presented by the proper party or parties, (ii) be responsible for any failure on the part of the Company to comply with any of its covenants and obligations contained in this Agreement or in any Note or (iii) be liable for any act or omission in connection with this Agreement except for its own gross negligence or willful misconduct.
 
     Any notice, statement, instruction, request, direction, order or demand of the Company shall be sufficiently evidenced by an instrument signed by the Company’s Chairman or Vice Chairman of the Board, President, any Vice President, its Secretary, or Assistant Secretary (unless other evidence in respect thereof is herein specifically prescribed). Without prejudice to any liability of any other party hereof, the Put/Call Agent shall not be liable for any action taken, suffered or omitted by it in accordance with such notice, statement, instruction, request, direction, order or demand believed by it to be genuine.
 
     The Company agrees to pay the Put/Call Agent reasonable compensation for its services hereunder and to reimburse it for its reasonable expenses hereunder and further agrees to indemnify the Put/Call Agent and save it harmless against any and all losses, expenses and liabilities, including judgments, costs and counsel fees, for anything done or omitted by the Put/Call Agent in the execution of its duties and powers hereunder, except losses, expenses and liabilities arising as a result of the Put/Call Agent’s gross negligence or willful misconduct.
 
-18-
 
 

     The Put/Call Agent may resign its duties and be discharged from all further duties and liabilities hereunder (except liabilities arising as a result of the Put/Call Agent’s own gross negligence or willful misconduct), after giving thirty (30) days’ prior written notice to the Company. At least fifteen (15) days prior to the date such resignation is to become effective, the Put/Call Agent shall cause a copy of such notice of resignation to be mailed to the Holder of each Note at the Company’s expense. Upon such resignation, or any inability of the Put/Call Agent to act as such hereunder, the Company shall appoint a new Put/Call Agent in writing. The Company shall have complete discretion in the naming of a new Put/Call Agent, who may be an affiliate, subsidiary or department of the Company, or any person used by the Company as transfer agent for the Common Stock. If the Company shall fail to make such appointment within a period of thirty (30) days after it has been notified in writing of such resignation by the resigning Put/Call Agent, then the Holder of any Note may apply to any court of competent jurisdiction for the appointment of a new Put/Call Agent.
 
     The Company may, upon notice to the Holders, remove and replace the Put/Call Agent if the Put/Call Agent is the transfer agent for the Company’s Common Stock and the Put/Call Agent ceases to be the transfer agent for the Company’s Common Stock for any reason. If for any period no person is acting as Put/Call Agent, then the Company shall discharge the obligations that would otherwise fail to be discharged by the Put/Call Agent during such period.
 
     After acceptance in writing of an appointment by a new Put/Call Agent is received by the Company, such new Put/Call Agent shall be vested with the same powers, rights, duties and responsibilities as if it had been originally named herein as the Put/Call Agent, without any further assurance, conveyance, act or deed. Any former Put/Call Agent hereby agrees to cooperate with and deliver all records to the new Put/Call Agent at the direction of the new agent and the Company.
 
     Any corporation into which the Put/Call Agent or any new Put/Call Agent may be converted or merged or any corporation resulting from any consolidation to which the Put/Call Agent or any new Put/Call Agent shall be a party or any corporation succeeding to the trust business of the Put/Call Agent shall be a successor Put/Call Agent under this Agreement without any further act. Any such successor Put/Call Agent shall promptly cause notice of its succession as Put/Call Agent to be mailed to the Company and to each Holder.
 
     Nothing herein shall preclude the Put/Call Agent from acting in any other capacity for the Company.
 
ARTICLE VI
MISCELLANEOUS PROVISIONS
 
     Section 6.01. Notices . Any notice or demand authorized by this Agreement to be given or made to or on the Company or the Put/Call Agent shall be sufficiently given or made when and if delivered by a recognized international courier service or hand delivery, or by telecopier with copy sent by first class or registered mail, postage prepaid, to the applicable address set forth below (until the Holders are otherwise notified in accordance with this Section by the Company):
 
-19-
 
 

     If to the Company, then to:
 
     Vishay Precision Group, Inc. 
     3 Great Valley Parkway
     Malvern, PA 19355-1307
     Attn.: Chief Financial Officer
     Telecopier No.: (484)-321-5301
     Confirm No.: (484)-321-5300
 
     If to the Put/Call Agent, then to:
 
     American Stock Transfer & Trust Co.
     59 Maiden Lane
     New York, NY 10038
     Attn.: Exchange Department
     Telecopier No: 718-234-5001
     Confirm No: 718-921-8200
 
     Any notice pursuant to this Agreement to be given to any Holder of Notes shall be sufficiently given when and if delivered to such Holder at the address appearing on the register maintained for that purpose by the Company (until the Company and the Put/Call Agent are otherwise notified in accordance with this Section by such Holder). Any such notice shall be delivered, by overnight or hand delivery, by telecopier with copy sent by first class mail, postage prepaid, or by first class or registered mail, postage prepaid.
 
     Section 6.02. Supplements and Amendments . The Company and the Put/Call Agent may from time to time amend or supplement this Agreement in good faith without the approval of any Holders only in order to cure any ambiguity or to correct or supplement any provision contained herein which may be defective or inconsistent with any other provision herein. Any other amendment or supplement to this Agreement shall require the written consent of the Holders of two-thirds (2/3) in nominal amount of the Notes then outstanding.
 
     Section 6.03. Assignments/Successors . All the covenants and provisions of this Agreement by or for the benefit of the Company or the Put/Call Agent shall bind and inure to the benefit of its successors and assigns hereunder; provided, however, that any assignment by the Company shall not relieve the Company of any of its obligations hereunder; provided, further, that no Holder may assign its rights and obligations except to an assignee who has executed and delivered to the Company an Assignment Form, which Assignment Form, when executed by the transferor and transferee thereunder, shall inure to the benefit of and be binding upon, the Company, the Put/Call Agent and each of the other Holders. This Agreement shall be binding upon and inure to the benefit of the successors and registered assigns of the Initial Holders and all subsequent Holders of Notes.
 
     Section 6.04. Governing Law . THIS AGREEMENT SHALL BE DEEMED TO BE A CONTRACT MADE UNDER THE LAWS OF THE STATE OF NEW YORK AND FOR ALL PURPOSES SHALL BE CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF SAID STATE.
 
     Section 6.05. No Third Party Beneficiaries . Nothing in this Agreement shall be construed to give to any person other than the Company, the Put/Call Agent and the Holders of the Notes any legal or equitable right, remedy or claim under this Agreement; but this Agreement shall be for the sole and exclusive benefit of the Company, the Put/Call Agent and the Holders of the Notes.
 
-20-
 
 

     Section 6.06. Registered Holders . The Company and the Put/Call Agent shall be entitled to treat as the Holders of the Notes solely those persons in whose names the Notes are registered in the register maintained for that purpose by the Company.
 
     Section 6.07. Securities Laws . It is the intention of the parties that the issuance of the shares of Common Stock upon exercise of the Put or the Call shall be exempt from registration under the United States securities laws pursuant to Section 3(a)(9) of the Securities Act or any successor statute. If and to the extent that this exemption is not available, the parties will take such action as may be required to permit the delivery of the shares of Common Stock in exchange for the Notes in compliance with the United States securities laws and the rules and regulations of the SEC then in effect.
 
     Section 6.08. Notification of Delisting . Prior to the occurrence of a Delisting Event, the Company will, at least ten (10) Business Days before the occurrence thereof, notify each holder of such event. Any notice will be in writing and shall specify the date of such Delisting Event. For these purposes “Delisting Event” means the common stock of the Company being delisted from the principal United States national or regional securities exchange or national quotation system on which the shares of common stock are then listed or traded.
 
     Section 6.09. Headings . The descriptive headings of the several sections and subsections of this. Agreement are inserted for convenience only, do not constitute a part of this Agreement and shall not affect in any way the meanings or interpretation of this Agreement.
 
     Section 6.10. Counterparts . This Agreement may be executed in counterparts and all such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument.
 
[Remainder of this page left blank.]
 
-21-
 
 

     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed, as of the day and year first above written.
 
VISHAY PRECISION GROUP, INC
   
By:  /s/ Steven Klausner
  Name: Steven Klausner
  Title: Vice President - Treasurer
   
AMERICAN STOCK TRANSFER & TRUST
COMPANY
   
By: /s/ Paula Carropoli
  Name: Paula Carropoli
  Title: Vice President

[ Signature pages continue ]
 
 
 
 
 
[Signature page to Put and Call Agreement dated as of July 21, 2010]
 
 

NMS SERVICES (CAYMAN) INC.
   
By: /s/ John Servidio
  Name: John Servidio
  Title: Authorized Officer
 
 
UBS AG, LONDON BRANCH
    
By: /s/ Joseph Pozolante
  Name: Joseph Pozolante
  Title: Associate Director Operations

[Signature page to Put and Call Agreement dated as of July 21, 2010]
 
 

ANNEX I
Form of Assignment
 
     THIS ASSIGNMENT dated [_____20______] is supplemental to a Put and Call Agreement (the “Agreement”) dated July 21, 2010 (as amended and restated from time to time) between Vishay Precision Group, Inc., a Delaware corporation (the “Company”), UBS AG, London Branch , and [________] each an “Initial Holder”) and _________, a ___________the (“Put/Call Agent”).
 
     Unless otherwise defined in this Assignment, words and expressions defined in the Agreement shall have the same meaning when used in this Assignment.
 
     Whereas:
 
     (A) [_______] (the “Transferor”) is a Holder of [_________] nominal amount of Notes (the “Transferred Notes”).
 
     (B) The Transferor proposes to transfer the Transferred Notes [(being all the Notes held by it)] to [_______] (the “Transferee”).
 
     [(C) The Transferor proposes to retain [__________] nominal amount of Notes (the “Retained Notes”).]
 
Assignment
 
     With effect from the date on which the transfer of the transferred Notes takes effect in accordance with the terms of the Notes, in respect of the Agreement and the Transferred Notes only:
 
     (a) the Transferor shall be released from further undertakings, liabilities and obligations to the Company and the Put/Call Agent and each of the other Holders (the “Non-transferring Parties”), and each of the Non-transferring Parties shall be released from further undertakings, liabilities and obligations to the Transferor, and their respective rights shall be cancelled (the discharged rights and obligations); and
 
     (b) the Transferee shall assume such undertakings, liabilities and obligations towards, and acquire rights against, each of the Non-transferring Parties and each of the Non-transferring Parties shall assume such undertakings, liabilities and obligations towards, and acquire rights against, the Transferee that differ from such discharged rights and obligations only insofar as each such Non-transferring Party and the Transferee have assumed and acquired the same in place of each such Non-transferring Party and the Transferor.
 
     For the avoidance of doubt, this Assignment shall not affect the rights, undertakings, liabilities and obligations of the Transferor in respect of the Retained Notes.
 
     The Transferee hereby notifies the Company that its address for notices for the purposes of Section 6.01 of the Agreement is:
 
            [______]
  Fax No:   [______]
  Attention:   [______]
 
     This Assignment is governed by the laws of the State of New York.
 
Signed by
 
  
Transferor
 
  
Transferee

Annex I-1
 
 

ANNEX II
PUT EXERCISE NOTICE
 
     If you, the Holder, want to exercise the Put, fill in the form below.
 
     I or we, the registered owner of Notes, irrevocably Put to the Company Notes in the nominal amount of $_________________ (if less than the aggregate nominal amount of all Notes held by the Holder, must be in $2,000,000 denominations) at the Put/Call Rate and on the terms and conditions specified in that certain Put and Call Agreement, dated as of July 21, 2010 by and among the parties thereto, and request that certificates for the shares of Common Stock hereby exchanged for the indicated nominal amount being put to the Company (and any securities or other property issuable or transferable upon such exercise) be issued in the name of and delivered to:
 
     (Print or type name, address and zip code and social security or tax ID number of owner)
 
and, if such nominal amount listed above shall be less than the full nominal amount of the Note(s) of which I am the Holder, that a new Note of like tenor and date for the balance of the nominal amount thereunder be delivered to the undersigned.
 
     Nominal amount of Note held immediately prior to exercise of the Put:
 
     Nominal amount of Note for which this Put is being exercised:
 
     Balance in nominal amount to be issued as a new Note:
 
Date: Signed:   
    (Signed exactly as your name appears on the Note)

Annex II-1
 

Exhibit 21.1
 
SUBSIDIARIES OF THE REGISTRANT
 
Note: Name of Subsidiaries are indented under name of its parent. Subsidiaries are wholly owned unless otherwise noted. (Director's or other share required by statute in foreign jurisdictions and totaling less that 1% of equity are omitted)
 
Vishay Precision Foil, Inc. Delaware        
    Vishay Precision Foil GmbH
Germany    
         Vishay Measurements Group GmbH Germany    
         Powertron GmbH Germany    
       
Vishay Nobel AB Sweden    
     AB Givareteknik Sweden    
     Vishay Nobel AS Norway    
       
Vishay Measurements Group, Inc. Delaware    
     Vishay Transducers, Ltd. Delaware   (A)
         Vishay Transducers India Private Limited India    
         Vishay Revere Transducers Europe B.V. Netherlands    
         Pharos de Costa Rica, S.A. Costa Rica    
         Vishay Celtron Technologies, Inc. Taiwan    
         Vishay Precision Holdings B.V. Netherlands    
             Vishay Precision España, S.L. Spain    
         Vishay Precision Asia Investments Pte., Ltd. Singapore    
             Vishay Precision Measurement Trading (Shanghai) Co., Ltd. China    
             Vishay Precision Transducers India Private Limited India    
             Vishay Celtron (Tianjin) Technologies Co., Ltd. China    
             Vishay Tedea-Huntleigh (Beijing) Electronics Co., Ltd. China    
       
Vishay Precision Foil K.K. Japan    
Alpha Electronics Corp. Japan   (B)
       
Vishay Precision Israel Ltd. Israel    
     Vishay Measurements Group UK Ltd. England and Wales    
     Tedea-Huntleigh Europe Limited England and Wales    
     Vishay Advanced Technologies, Ltd. Israel    
         Tedea-Huntleigh B.V. Netherlands    
             Tedea-Huntleigh International, Ltd. Israel    
                 T-H Industrial Properties, Ltd. Israel    
                 T-H Technology, Ltd. Israel    
                     Vishay Measurements Group France S.A.S. France    
                         SCI Vijafranc France    
 
 

Subsidiaries of the Registrant (continued)      
         Vishay PM Group Ltd England and Wales    
             Vishay PM Onboard (Ireland) Limited Ireland    
             Vishay MD Technik GmbH Germany    
             Vishay Waste Collections Systems B.V. Netherlands   (C)
             Vishay Waste Collections Systems NV Belgium       (D)
             Vishay PME France SARL France    
             Vishay PM Onboard Ltd England and Wales    
             Fleet Weighting Limited England and Wales    
             PM Electronics Limited England and Wales    
             Waste Collections Systems Limited England and Wales    
             Vishay PM Belgium NV
Belgium   (E)

(A) Registrant has a direct ownership interest of 62% in Vishay Transducers, Ltd.
(B) Registrant has a direct ownership interest of 99.7% in Alpha Electronics Corp.
(C) Registrant has a 90% indirect interest in Vishay Waste Collections Systems B.V.
(D) Registrant has a 97% indirect interest in Vishay Waste Collections Systems N.V.
(E) Vishay PM Onboard Ltd. Owns 50% of Vishay - PM Belgium N.V.
 

Exhibit 23.1
 
Consent of Independent Registered Public Accounting Firm
 
We consent to the incorporation by reference in the Registration Statement No. 333-168256 on Form S-8 of Vishay Precision Group, Inc., of our report dated March 24, 2011, with respect to the combined and consolidated financial statements of Vishay Precision Group, Inc. included in this Annual Report (Form 10-K) for the year ended December 31, 2010.
 
/s/ Ernst & Young LLP
Philadelphia, Pennsylvania
March 24, 2011
 

EXHIBIT 31.1
 
CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
 
I, Ziv Shoshani, certify that:
 
     1. I have reviewed this Form 10-K of Vishay Precision Group, Inc.;
 
     2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
 
     3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
 
     4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
 
          (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
 
          (b) [ Omitted pursuant to SEC Release No. 34-54942 ]
 
          (c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
 
          (d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
 
     5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s Board of Directors (or persons performing the equivalent functions):
 
          (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
 
          (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
 
Dated: March 24, 2011       /s/ Ziv Shoshani  
    Ziv Shoshani
    Chief Executive Officer


EXHIBIT 31.2
 
CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
 
I, William M. Clancy, certify that:
 
     1. I have reviewed this Form 10-K of Vishay Precision Group, Inc.;
 
     2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
 
     3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
 
     4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
 
          (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

          (b) [ Omitted pursuant to SEC Release No. 34-54942 ]
 
          (c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
 
          (d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
 
     5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s Board of Directors (or persons performing the equivalent functions):
 
          (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
 
          (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
 
Dated: March 24, 2011       /s/ William M. Clancy  
    William M. Clancy
    Chief Financial Officer


EXHIBIT 32.1
 
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
 
In connection with the Annual Report of Vishay Precision Group, Inc. (the “Company”) on Form 10-K for the fiscal year ended December 31, 2010 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Ziv Shoshani, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002, that:
 
(1)        The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
     
(2)   The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
 
Dated: March 24, 2011       /s/ Ziv Shoshani  
    Ziv Shoshani
    Chief Executive Officer


EXHIBIT 32.2
 
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
 
In connection with the Annual Report of Vishay Precision Group, Inc. (the “Company”) on Form 10-K for the fiscal year ended December 31, 2010 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, William M. Clancy, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002, that:
 
(1)        The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
 
(2)   The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
 
Dated: March 24, 2011       /s/ William M. Clancy  
    William M. Clancy
    Chief Financial Officer