EXHIBIT 10.7
CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION. THE LOCATIONS OF THE OMITTED MATERIALS ARE INDICATED
BY THE FOLLOWING NOTATION: [***].
DISTRIBUTION AGREEMENT
THIS AGREEMENT (the "Agreement") is made as of July 5, 2007 between Sanken
Electric Co., Ltd., a Japanese corporation with its principal offices at 0-0-0
Xxxxxx, Xxxxx-xxx, Xxxxxxx, Xxxxx ("Sanken"); and Allegro MicroSystems, Inc., a
Delaware corporation with its principal offices at 000 Xxxxxxxxx Xxxxxx,
Xxxxxxxxx, Xxxxxxxxxxxxx 00000 ("Allegro").
WHEREAS, Sanken desires to sell its semiconductor products in the continents of
North and South America and Allegro has the capability to market such products
in the continents of North and South America; and
WHEREAS, Allegro and Sanken wish to stipulate the terms and conditions upon
which Allegro will market Sanken semiconductor products in the continents of
North and South America; and
WHEREAS, the parties wish to supersede all prior agreements or understandings
concerning the distribution of Sanken semiconductor products by Allegro in the
continents of North and South America, including without limitation that certain
Purchase and Sale Agreement dated September 1, 1994.
NOW, THEREFORE, the parties hereby agree as follows:
1. DEFINITIONS.
In this Agreement, the following terms shall have the meanings set forth below:
1.1 "Commencement Date" means July 20, 2007.
1.2 "Intellectual Property" means any patent, copyright, trademark or other
industrial or intellectual property right of Sanken in respect of the Products.
1.3 "Products" means all semiconductor products produced by Sanken during
the term of this Agreement, except for any products excluded from the scope of
this Agreement by written agreement of the parties.
1.4 "Territory" means North and South America, including Puerto Rico.
2. EXCLUSIVE DISTRIBUTORSHIP.
2.1 Appointment and Acceptance. With the exception of those customers
listed on Exhibit A or customers otherwise excluded pursuant to the written
consent of the parties, Sanken hereby appoints Allegro as its exclusive
distributor for the sale of Products in the Territory and Allegro accepts such
appointment, subject to the terms and conditions of this Agreement. It is agreed
that Allegro may sell Products to customers through sub-distributors in the
Territory. Allegro shall not distribute Products to any customer listed on
Exhibit A.
2.2 Scope of Appointment. Allegro shall not knowingly sell Products to
purchasers in the Territory who intend to sell the Products outside of the
Territory.
2.3 Designed In Products Compensation. Allegro may work with customers in
the Territory to design into the products of such customers Products that will
be shipped by Sanken to customer locations outside the Territory for assembly
into such customers' products (such activities by Allegro being referred to
herein as "design in efforts and support"). Allegro will exert reasonable
efforts to secure such work within the Territory. As compensation for Allegro's
design in efforts and support, Allegro shall receive from Sanken a commission as
specified on Exhibit B, Section B, to this Agreement.
2.4 Relationship. The relationship between Sanken and Allegro pursuant to
this Agreement is (a) in the case of all provisions other than Section 2.3 and
Exhibit B, Section B that of Sanken as seller and Allegro as purchaser, and not
Sanken as principal and Allegro as agent, and (b) in the case of Section 2.3 and
Exhibit B, Section B with respect to design in efforts and support, the
relationship shall be that of Sanken as principal and Allegro as representative.
Neither Sanken (as seller or principal, as applicable) nor Allegro (as purchaser
or representative, as applicable) shall have the right or authority to incur or
create any warranty, liability or obligation of any kind on behalf of the other
party.
3. ALLEGRO'S OBLIGATIONS.
Allegro shall, during the term of this Agreement:
3.1 Exert commercially reasonable efforts to promote the sale of Products
in the Territory through a qualified sales organization.
3.2 Maintain an effective system for shipping inventory of Products on a
first in-first out basis, and maintain all inventories of Products in accordance
with any applicable Sanken warehouse requirements.
3.3 In respect of each calendar month during the term of this Agreement,
submit a monthly point of sale report to Sanken, in such format and within such
time period as reasonably required by Sanken, concerning Products sold by
Allegro during each such month.
3.4 Keep Sanken informed of developments in the market for Products in the
Territory, including changes in applicable regulatory requirements in the
Territory, and submit
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such other information relating to the sale and service of Products by Allegro
as Sanken may reasonably require from time to time.
3.5 If Allegro elects to advertise the Products in the Territory, Sanken
shall be given the opportunity to review and approve advertising materials
reasonably in advance.
3.6 Not knowingly sell any Product for use in any life-support device or
system if a failure of such Product can reasonably be expected to cause a
failure of that life-support device or system or to affect the safety or
effectiveness of that device or system.
3.7 Promptly notify Sanken of any material issue concerning Products that
could result in a monetary claim against Allegro or Sanken or any material issue
that could negatively impact future sales of Products to any customer in the
Territory.
3.8 Maintain complete and accurate records of all sales and service by
Allegro of Products in the Territory.
3.9 Comply with all laws and regulations relating to the import of Products
into the Territory applicable to Allegro in its capacity as the purchaser and
importer of such Products, including, without limitation, licensing and
documentation requirements in the Territory and such other jurisdictions with
jurisdiction over Allegro and such purchase and import activities.
3.10 If requested by Sanken, and at Sanken's expense, either at the
premises of Sanken or at Allegro's premises, make its employees available for
instruction by Sanken in the use, sale, maintenance and application of the
Products.
4. SANKEN'S OBLIGATIONS.
Sanken shall, during the term of this Agreement:
4.1 Provide adequate training for Allegro employees and reasonable field
sales support.
4.2 Provide such information and support as may reasonably be requested by
Allegro with respect to the Products, including then existing marketing
materials, brochures and other information regarding the Products.
4.3 As mutually agreed with Allegro, participate with Allegro in fairs and
exhibitions in the Territory.
4.4 Comply with all laws and regulations relating to the export of Products
from the place of their manufacture or assembly into the Territory applicable to
Sanken in its capacity as the seller and exporter of such Products, including,
without limitation, licensing and documentation requirements in such
jurisdictions with jurisdiction over Sanken and such sale and export activities.
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Notwithstanding the foregoing, Sanken reserves the right to withdraw its support
for previously sold Products if Sanken determines that any customer's use of the
Products is not suitable for such customer's application.
5. PAYMENT TERMS, ORDERS AND DELIVERY.
5.1 Prices and Payment Terms. The prices of the Products and the terms of
payment shall be as set forth on Exhibit B to this Agreement.
5.2 Governing Terms. The terms of this Agreement shall be controlling in
the event of any conflict or inconsistency between this Agreement and the terms
of any purchase order, quotation, acknowledgment or other form or correspondence
between the parties concerning the subject matter of this Agreement.
5.3 Orders. Allegro shall place orders for Products according to procedures
indicated by Sanken from time to time. Sanken reserves the right to reject any
order at its sole discretion provided that Sanken shall make commercially
reasonable efforts to accept Allegro's orders.
5.4 Cancellation and Rescheduling. Sanken will accept cancellations or
rescheduling of orders for Products at no cost to Allegro, if Allegro provides
written notice to Sanken at least [***] days prior to the original
scheduled delivery date. For the purposes of this Section 5.4, the original
scheduled delivery date means the delivery date specified in Sanken's original
order acknowledgement, and does not mean any rescheduled delivery date. Allegro
shall send such notice to the attention of a person at the applicable Sanken
business unit who is designated by Sanken from time to time.
5.5 Shipment. Sanken shall designate the freight carrier for shipments. In
the event of expedited delivery requests accepted by Sanken, the parties shall
negotiate reasonable charges above the customary shipment costs.
5.6 Delivery Dates. Delivery dates requested by Allegro, even though
accepted by Sanken, shall be understood by Allegro only as best estimates.
Sanken shall attempt to meet all delivery dates requested by Allegro but shall
not be liable for damages arising from any delay in delivery.
5.7 Title. Title to the Products and risk of loss shall pass to Allegro
upon delivery of Products by Sanken to the freight carrier.
5.8 Order Termination. Sanken reserves the right to terminate the balance
of any accepted customer order if Sanken learns that the customer's use of the
Products is not suitable for such customer's application, or if the customer
intends to use the Products for any use described in Section 3.6 of this
Agreement.
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6. WARRANTY.
6.1 Product Warranty. Sanken warrants to Allegro that Products delivered
pursuant to this Agreement will, at the time of delivery to the freight carrier
and for a period of [***] thereafter, be free from defects in materials or
workmanship and meet any applicable specifications set forth in any purchase
order accepted by Sanken.
6.2 Remedy for Breach. In the event of any breach of Sanken's warranty set
forth in Section 6.1, Sanken shall either repair or replace the defective
Products or, at the election of either Sanken or Allegro, Sanken shall refund
the amount paid for such Products, provided that (a) Allegro promptly notifies
Sanken of the defects in such Products and in any event within [***]
after delivery thereof; (b) such defects are not caused by wear and tear,
neglect, abnormal conditions or misuse; and (c) such defective Products have not
been repaired or altered by a party other than Sanken.
6.3 Warranty Limitation. The warranty set forth in Section 6.1 is the
exclusive warranty with respect to Products sold by Sanken to Allegro under this
Agreement. ALL OTHER WARRANTIES, WHETHER STATUTORY, EXPRESS OR IMPLIED,
INCLUDING ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE,
ARE HEREBY EXCLUDED.
7. INTELLECTUAL PROPERTY.
7.1 License Grant. During the term of this Agreement, Sanken hereby grants
to Allegro a license and privilege to use the trademarks included within the
Intellectual Property in the Territory for the specific purposes of this
Agreement. Sanken warrants that it owns the rights to the Intellectual Property
in the Territory, or has a valid license to such rights. Sanken shall retain
ownership of its Intellectual Property; and Allegro shall not by operation of
this Agreement acquire or retain any ownership interest therein other than such
interests that Allegro has been granted or has otherwise retained under other
agreements to which Sanken and Allegro are parties and which are in force and
effect during the term of this Agreement.
7.2 Protection of Intellectual Property. Allegro will not modify Products,
alter or remove trademarks from Products, or use any trademarks or trade names
in the Territory that are likely to cause confusion with the trademarks or trade
names of Sanken. Following the receipt of notice or other knowledge of any
actual, threatened or suspected infringement in the Territory of any
Intellectual Property or any claim of a third party that the sale of Products in
the Territory infringes such party's intellectual property rights, Allegro will
promptly notify Sanken thereof. Allegro will assist Sanken, at Sanken's expense,
in maintaining Sanken's ownership rights to the Intellectual Property in the
Territory, including any action against infringement of the Intellectual
Property in the Territory, or negotiation of any permit or license.
7.3 Infringement Indemnification. Sanken shall defend and hold Allegro and
its customers harmless from and against any and all claims, damages, suits,
causes of action, liabilities or expenses (including, without limitation,
reasonable attorneys' fees) arising from any allegation or claim that the sale
of the Products in the Territory infringes the intellectual property
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rights of any third party. Allegro shall cooperate with Sanken in connection
with such defense efforts by Sanken.
8. TERM AND TERMINATION.
8.1 Term. This Agreement shall take effect on the Commencement Date and
shall remain in effect until March 31, 2010. This Agreement may be terminated as
of March 31, 2010 by either party upon twelve (12) months prior written notice
to the other party. If neither party gives such notice of termination, this
Agreement shall be renewed until March 31, 2013. Thereafter, this Agreement
shall automatically renew for successive three year periods until either party
gives notice of termination at least twelve (12) months prior to the expiration
of any renewal term.
8.2 Termination. Either party hereto may immediately terminate this
Agreement as follows: (a) if proceedings in bankruptcy or insolvency are
instituted by or against the other party, a receiver or trustee is appointed, or
such party makes an assignment for the benefit of its creditors or enters into
any voluntary arrangement with creditors, or a substantial part of the assets of
such party is the subject of attachment; or (b) upon default by the other party
in the performance of its obligations under this Agreement, whereby such default
is not cured within sixty (60) days after the receipt by the defaulting party of
written notice of the default.
8.3 Effect of Termination. Upon the termination or expiration of this
Agreement for any reason:
8.3.1 Allegro will promptly return to Sanken, or otherwise dispose of as
Sanken may instruct, all Confidential Information (as defined in Section 9.1),
technical instruction manuals, sales promotion materials, specifications, or
other documents relating to any of the Products.
8.3.2 Allegro will immediately cease to advertise the Products in the
Territory; provided that Allegro may complete the sale of any Products subject
to any orders that had been accepted by Sanken prior to such termination.
8.3.3 Sanken shall satisfy all orders for Products placed by Allegro and
accepted by Sanken prior to the date of termination; provided that any rights
that Sanken would otherwise have with respect to such orders in accordance with
the provisions of this Agreement shall remain in full force and effect.
8.3.4 Allegro may return to Sanken any undamaged Products in Allegro's
inventory, free and clear of liens and encumbrances, to the extent that Sanken
deems the Products saleable, at Sanken's discretion, and further, provided that
the Products are less than two years old as indicated on the date code marked on
the Product or its package. Allegro shall comply with Sanken's reasonable return
authorization procedures within sixty (60) days following the date of
termination or expiration. Sanken will pay Allegro an amount equal to the
original purchase price paid by Allegro for Products accepted for return by
Sanken. The cost of returning the Products shall be borne by Allegro.
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8.3.5 Except for commissions due under Section 2.3 for actions taken prior
to termination, Allegro shall not be entitled to a commission or other
compensation following termination.
9. CONFIDENTIALITY.
9.1 Confidential Information. Except as provided in Section 9.2, neither
party shall disclose to any third party, nor use for any purpose other than the
purchase or sale of Products under this Agreement, any Confidential Information
of the other party without the other party's prior written consent. As used in
this Agreement, "Confidential Information" shall include but not be limited to
all information regarding current or future Products, designs, marketing plans,
processes, inventions, formulae, pricing and cost information, specifications,
drawings, samples or other confidential or proprietary information or data
furnished by one party to the other. "Confidential Information" shall not
include any information that is publicly known through no fault of the receiving
party, was previously known to or developed by the receiving party or an
employee of the receiving party who has not had access to any Confidential
Information of the disclosing party, or was received from a third party without
breach of any confidentiality obligation imposed on that third party.
9.2 Permitted Disclosures. A party may disclose Confidential Information
(i) to the extent required by law or by court order or other governmental
action, but only to the extent so ordered; or (ii) to the extent necessary to
implement this Agreement, to the party's employees, agents or subcontractors as
reasonably necessary or appropriate, provided that before disclosure such
recipients are informed of the confidentiality requirements of this Agreement.
The disclosing party shall ensure compliance by its employees, agents or
subcontractors with the confidentiality provisions of this Agreement.
9.3 Governmental Filings. Each party shall determine in its sole discretion
whether such party is required to file or otherwise submit this Agreement and/or
any description hereof with or to any governmental authorities or securities
exchanges, including, without limitation, the U.S. Securities and Exchange
Commission, NASDAQ, the Japanese Securities and Exchange Surveillance Commission
or the Tokyo Stock Exchange. If a party (as the Submitting Party) determines
that it is required to file or otherwise submit this Agreement and/or any
description hereof with or to any such governmental authority or securities
exchange, as applicable, then such Submitting Party shall with respect to such
proposed filing or submission: (i) provide a copy of such filing or submission
to the other party (as the Non-Submitting Party) reasonably prior to its filing
or submission, and (ii) to the extent that the Submitting Party intends to
request confidential treatment for any portion or portions of this Agreement,
the Submitting Party will (A) provide a reasonable amount of time for the
Non-Submitting Party's review of such confidentiality request and any redactions
comprising such intended request and (B) give good faith consideration to the
Non-Submitting Party's comments and requests for any additional or different
redactions.
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10. RECORDS; AUDIT.
10.1 Records. Allegro shall maintain all books and records relating to its
activities in connection with this Agreement for a minimum of three years from
the date of generation thereof. Such obligation shall survive the termination of
this Agreement.
10.2 Audit Rights. Sanken may engage a reputable certified public
accountant to examine and audit Allegro's books and records relating to its
activities under this Agreement, provided that Allegro shall be given not less
than fifteen (15) days advance notice and no more than one audit may be
conducted during any calendar year. Any claims resulting from any such audit, in
favor of either party, shall be limited to transactions occurring within three
(3) years immediately preceding the audit. Any such audit shall be at Sanken's
expense unless such audit reveals an underpayment of the amounts due from
Allegro to Sanken under this Agreement of five per cent (5%) or more, in which
case Allegro shall reimburse Sanken for the expense of the certified public
accountant.
11. MISCELLANEOUS PROVISIONS.
11.1 Entire Agreement. This Agreement, and the attached Exhibits,
constitutes the entire understanding between the parties with respect to the
distribution or design in the Products by Allegro in North and South America,
and supersedes all prior agreements, negotiations and discussions between the
parties regarding such subject matter including without limitation that certain
Purchase and Sale Agreement between the parties dated September 1, 1994. It is
understood that Allegro may act as a distributor or sales representative of
Sanken with respect to designated Sanken products other than Products pursuant
to a separate agreement or understanding.
11.2 Amendments. No amendment or modification of this Agreement shall be
effective unless set forth in writing and signed by a duly authorized
representative of each party.
11.3 Assignment. Neither party shall assign any or all of its rights and
obligations under this Agreement without the prior written consent of the other
party.
11.4 Waiver. Any failure by a party to exercise or enforce any right under
this Agreement shall not be deemed a waiver of such party's right thereafter to
enforce each and every term and condition of this Agreement.
11.5 Force Majeure. The obligations of a party under this Agreement will be
suspended during the period and to the extent that such party is prevented or
hindered from complying therewith by any cause beyond its reasonable control
including (insofar as such cause is beyond such party's control but without
prejudice to the generality of the foregoing expression): strikes, lockouts,
labor disputes, act of God, war, riot, civil commotion, malicious damage,
compliance with any law or governmental order, rule, regulation or direction,
accident, breakdown of plant or machinery, fire, flood or storm. In the event of
either party being so hindered or prevented such party will give notice of
suspension as soon as reasonably possible to the other party stating the date
and extent of such suspension and the cause thereof and the
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omission to give such notice will forfeit the rights of such party to claim such
suspension. Any party whose obligations have been suspended as aforesaid will
not be deemed to be in default of its contractual obligations nor will any
penalties or damages be payable. Any such party will resume the performance of
such obligations as soon as reasonably possible after the removal of the cause
and will so notify the other party. In the event that such cause continues for
more than three months either party may terminate this Agreement on fourteen
(14) days written notice.
11.6 Indemnification. Each party shall fully indemnify the other party
against all actions, claims, demands, costs, charges, expenses or liabilities
arising from or in connection with any breach of its obligations under this
Agreement. NEITHER PARTY SHALL BE LIABLE TO THE OTHER (OR TO ANYONE ASSERTING A
CLAIM ON A PARTY'S BEHALF) FOR CONSEQUENTIAL, SPECIAL OR PUNITIVE DAMAGES OF ANY
NATURE, INCLUDING WITHOUT LIMITATION LOST PROFITS OR REVENUES. The obligation of
Sanken to so indemnify Allegro under this Section 11.6 is in addition to any
indemnity provided by Sanken to Allegro under Section 7.3. [***]
11.7 Language. This Agreement was drafted and executed in the English
language.
11.8 Notices. Notices under this Agreement may be sent by e-mail or courier
service. Notice shall be sent to the address set forth on the first page of this
Agreement or to such other address and contact person as a party may designate,
or to the email address of any such designated contact person.
11.9 Severability. The invalidity or unenforceability of any portion of
this Agreement shall not affect the validity or enforceability of the remainder
of this Agreement.
11.10 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of Japan. The parties opt out of the United Nations
Convention on Contracts for the International Sale of Goods, which shall have no
application to Products or the performance of the parties under this Agreement.
11.11 Dispute Resolution. The parties shall make best efforts to try to
resolve any and all claims, controversies or difficulties between the parties
("Claims") by mutual discussions in good faith. Should the parties be unable to
reach resolution themselves, Claims shall be finally settled by arbitration as
follows: if Sanken initiates the arbitration proceedings, arbitration will be
held in the State of Massachusetts in accordance with the Commercial Arbitration
Rules of the American Arbitration Association; and if Allegro initiates the
arbitration proceedings, arbitration will be held in Tokyo, Japan in accordance
with the Commercial Arbitration Rules of the Japan Commercial Arbitration
Association.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date and
year first written above.
SANKEN ELECTRIC CO., LTD. ALLEGRO MICROSYSTEMS, INC.
By: /s/ Hirohito Sekine By: /s/ Xxxxxx Xxxxxxxxxx
--------------------------------- ------------------------------------
Xx. Xxxxxxxx Sekine Xx. Xxxxxx Xxxxxxxxxx
General Manager, Sales Vice President Sales
Headquarters
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EXHIBIT A
Exclusions
A. Products sales to the following customers in the Territory are excluded
from the scope of this Agreement:
[***]
[***]
B. Products sales through trading companies to the following customers in the
Territory are excluded from the scope of this Agreement:
[***]
[***]
[***]
C. For clarification purposes, it is agreed that varistors are excluded from
the scope of this Agreement.
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EXHIBIT B
Pricing and Payment Terms
A. The following terms shall apply to purchases of Products by Allegro:
1. Prices.
Unless otherwise agreed to by Allegro and Sanken in writing, the price of
Products sold by Sanken to Allegro, for distribution within the Territory,
shall be equal to [***]% of the selling price to Allegro's end customer
(not the intermediary price(s) between Allegro and Allegro's representative
or distributors) at the time Allegro places the order to Sanken. Prices
shall be converted from local currency to U.S. Dollars pursuant to #3
below. For the avoidance of doubt, this Section A.1 does not apply to
Products covered under Section 2.3 herein.
2. Payment in Dollars.
All payments shall be made to Sanken in U.S. Dollars.
3. Exchange Rate.
Sales prices shall be converted from local currency into Dollars on a
monthly basis pursuant to procedures established by the parties from time
to time.
4. Freight Terms.
C.I.P. (carriage and insurance paid to port of entry in the Territory).
5. Payment Terms.
Unless otherwise agreed to by Sanken, Allegro will pay all Sanken invoices
by the end of the calendar month following the month in which the invoices
are received by Allegro.
B. The following terms shall apply to commissions paid by Sanken to Allegro
pursuant to Section 2.3:
1. Commission.
Unless otherwise agreed between Sanken and Allegro in writing, Allegro
shall be entitled to a commission of [***] percent ([***]%) of the "Net
Sales" of designated Products. The term "Net Sales" shall mean the total
revenues for applicable Products shipped
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during a month less returns and less the amount of any revenues previously
included in net sales that Sanken determines during such month to be
uncollectible.
2. Payment in Dollars.
Payments shall be made to Allegro in U.S. Dollars.
3. Exchange Rate.
Commissions shall be converted from local currency into U.S. Dollars on a
monthly basis pursuant to procedures established by the parties from time
to time.
4. Payment Terms.
Payments shall be made to Allegro by the end of the month following the
month for which Net Sales are calculated.
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