Common use of Supply Constraints Clause in Contracts

Supply Constraints. “Supply Constraint Situation” means a shortage of supply, components, materials or capacity affecting the supply of the Products or a particular Product that (a) is industry- or sector-wide, or (b) is caused by demand from TDK’s internal or external customers (including but not limited to Imation and its Subsidiaries). TDK will give Imation reasonable notice of any Supply Constraint Situation that may affect the supply of Products to Imation or any of its Subsidiaries which TDK has an obligation to supply under Section 4.1(c) (the “Supply Constraint Product”). TDK will use commercially reasonable efforts to give priority to orders for Supply Constraint Products other than those that are LTO Products from Imation and its Subsidiaries over orders from TDK’s other customers, subject to pre-existing commitments by TDK, during a Supply Constraint Situation; provided that Imation and its Subsidiaries, in the aggregate, are the largest customer of TDK by revenue and volume for the Supply Constraint Product in the six (6)-month period preceding TDK’s notice of a potential Supply Constraint Situation. Imation may, upon reasonable advance written notice to TDK, request that TDK allocate a Supply Constraint Product among Imation and its Subsidiaries; provided, that the total allocation for Imation and its Subsidiaries will not be increased or decreased thereby. In the event of a Supply Constraint Situation which is not caused in significant part by demand from Imation and its Subsidiaries, (i) the parties will negotiate in good faith a plan to alleviate the Supply Constraint Situation, including without limitation extending shipment dates, prioritizing certain Purchase Orders for the Supply Constraint Product and similar actions and (ii), if the parties are unable to agree upon such a plan with respect to such Supply Constraint Product, Imation will have a right to the extent TDK is unable to meet its commitments under Section 4.1(c) to purchase Supply Constraint Products from third parties for the duration of the Supply Constraint Situation and a reasonable transition period thereafter. Notwithstanding anything else in this Agreement or otherwise, the above priority and right to purchase Supply Constraint Products from a third party will be Imation’s sole remedy and TDK’s sole liability for shipment delays and failure to supply any Product during a Supply Constraint Situation and all of TDK’s obligations under this Agreement shall be expressly subject to the terms and conditions set forth in this Section 4.6.