EXHIBIT 10.58
SUPPLY AGREEMENT
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This Supply Agreement ("Agreement") is made and entered into as of May
13th, 1997, by and among Coinmach Corporation ("Coinmach") and Super Laundry
Equipment Corporation ("Super Laundry") (Coinmach and Super Laundry being
collectively referred to herein as "Buyer"), and Raytheon Appliances, Inc., a
Delaware corporation ("Seller").
WITNESSETH
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WHEREAS, Buyer is in the business of providing vended and non-vended
laundry equipment services for multi-family housing units, and is also a
distributor of laundromat equipment and turnkey laundromat stores; and
WHEREAS, Buyer wishes to assure itself of an ongoing business
relationship with Seller beneficial to Buyer in terms of assuring that Buyer has
access in sufficient quantities to the Seller's latest products and technology
in the Buyer's business, and other complementary benefits; and
WHEREAS, SAS Acquisitions, Inc. ("SAS") and Solon Automated Services,
Inc. ("Solon"; SAS and Solon are each a predecessor-in-interest to Coinmach
Corporation) previously entered into a Supply Agreement with Speed Queen Company
(a predecessor-in-interest to Seller), dated as of July 26, 1995 (the "Existing
Supply Agreement"), in which it was anticipated that Coinmach Corporation and
certain of its subsidiaries could, in the future, become entitled to the
benefits accruing to SAS as a "Buyer" under the Existing Supply Agreement; and
WHEREAS, Coinmach Corporation has subsequently succeeded to the rights
and interests of SAS and Solon under the Existing Supply Agreement, and has,
either directly or through its affiliated entities which are also parties to
this Agreement, consummated a series of substantial acquisitions which have
materially increased the laundry equipment purchasing requirements of Buyer
hereunder from the purchasing requirements which were applicable at the time the
Existing Supply Agreement was entered into; and
WHEREAS, Buyer and Seller hereunder now desire to enter into this
Agreement, pursuant to which Buyer will purchase its requirements of the
Products (as defined herein) from Seller, in replacement of the Existing Supply
Agreement, in order to extend the term of the relationship between Buyer and
Seller, to put into effect the current pricing structure as reflected on
Exhibits A and B attached hereto (taking into account the present volume
requirements, and reflecting appropriate current volume discounts, applicable to
Buyer's current operations), and to include certain existing affiliates of
Coinmach Corporation directly as Buyer under this Agreement.
NOW, THEREFORE, in consideration of Ten Dollars ($10.00) and other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties agree as follows:
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1. Requirements Contract - For the term hereof (as defined in Section
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10), so long as Seller is a manufacturer of the Products defined in Section 2
herein and so long as Buyer leases and/or operates premises on which one or more
coin-operated or card-operated washing machines and/or dryers are located;
and/or is an authorized distributor for Seller's Products in one or more
territories, Seller agrees to sell to Buyer, and Buyer agrees to purchase from
Seller, Buyer's requirements of Products on the terms and conditions contained
herein. In the event Buyer wishes to lease Products, Buyer further agrees to
specify to the lessor that such Products must be purchased from Seller.
2. Definition of Products - For purposes of this Agreement, the parties
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agree that the following are the defined "Products" referenced in this
Agreement;
a. All coin-operated or card-operated washing machines and front
load washers;
b. All coin-operated or card-operated dryers, stacked dryers, and
tumbler dryers;
c. All new replacement and new repair parts for any and all of
Seller's coin-operated or card-operated washing machines,
dryers, frontload washers, stacked dryers and tumbler dryers
owned by, leased to or serviced by Buyer.
3. Price - The current prices to be charged Buyer for the current
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formulations of the Speed Queen branded products are those set forth in Exhibit
A and Xxxxxxx branded products are those set forth in Exhibit B attached hereto
and by this reference made a part hereof. The current prices to be charged
Buyer for replacement and repair parts are those set forth in Seller's published
parts price lists stated as either a net price or a suggested list price;
however, if such price is listed as a suggested list price, Buyer shall be
charged suggested list price less a 55% discount.
The prices set forth in Exhibit A are stated as a net price and are FOB
shipping point for tumblers and washer extractors; and freight prepaid on
washers, dryers and stack dryers.
The prices set forth in Exhibit B will be subject to Seller's Commercial
Laundry Volume Rebate Program, attached hereto and by this reference made a part
of Exhibit B; provided, however, Buyer's net purchases of serial numbered Speed
Queen branded equipment and serial numbered Xxxxxxx branded equipment will be
combined for determining the percent (%) rebate, to be applied to Buyer's net
purchases of Xxxxxxx branded equipment, to determine the rebate amount to be
paid quarterly by Seller to Buyer within thirty days following the end of each
rebated period, which shall be the calendar quarters ended March, June,
September and December. The rebate percent to be used to determine the amount
paid for the first three quarters shall be based on Buyer's annualized net
purchases of equipment for the quarter which will be calculated by taking
Buyer's net purchases of equipment for the quarter times four (4). The rebate
paid for the fourth quarter ended December, will reflect any adjustments
necessary (either up or down) to reflect rebates earned on an annual basis. The
prices set forth in Exhibit B are
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stated on a FOB shipping point basis, except Seller will prepay freight on
orders of 42 or more units of Seller's washers and dryers (21 or more for
stacked dryers) for shipments within the continental United States. Further,
Seller agrees to establish a Merchandising Fund for Xxxxxxx branded equipment
invoiced which Buyer may present claims for reimbursement by Seller subject to
the Merchandising Fund Policy as set forth in Exhibit C.
Seller reserves the right to select the carrier and shipping point for
Products. Payment terms shall be ninety (90) days from date of invoice;
provided, however, that Seller retains the right to adjust payment terms in the
event that Buyer fails to maintain its timeliness of payment in all material
respects.
4. Rights with Respect to Future Prices - Seller shall have the right
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to change the prices charged Buyer for Products upon sixty (60) days prior
written notice. The percentage increases in prices by Seller shall not exceed
the percentage price increases which are implemented with respect to Seller's
other route customers as documented by Seller's published manufacturer's list
prices. In any event, increases in price by Seller shall not exceed three
percent (3%) annually, for the first three years this Agreement is in effect.
5. Competitive Product - In consideration of Seller's agreement to
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provide significant volume-based discount pricing, Buyer agrees to purchase at
least 80% of its needed Products from Seller during the term of the Agreement.
In addition, if (a) Seller is unable to deliver Products which Buyer has ordered
within forty-five (45) days of the date such Products would be shipped in the
ordinary course of Seller's business, and (b) such order is in an amount
customarily ordered by Buyer, Buyer has the right to instead purchase a like
number of pieces of equipment of comparable grade and quality from Seller's
competitors.
6. Technical Support - Seller will commit resources to work directly
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with Buyer on projects mutually beneficial to both parties, including but not
limited to audit control, electronic display, card-actuated washers and dryers
and stacked frontload washer/dryer combinations. This is required by Buyer to
ensure timely response to competitive new product developments and to allow
Buyer to be more competitive by offering more efficient customer friendly
laundry equipment services.
7. Product Reliability - Buyer will share with Seller service history
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and product reliability data which is readily available to Buyer concerning the
performance of Seller's products.
8. Warranty - All Products sold to Buyer shall be sold to Buyer with
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Seller's standard commercial limited parts warranties, unless otherwise
specified by Seller and mutually agreed to by Buyer in advance of any sales;
except, however, the Speed Queen branded Washers, Dryers and Stack Dryers
shipped by Seller to Buyer on or after January 27, 1997 shall be sold to Buyer
without warranty; provided, however, that Seller shall reimburse Buyer for any
cost of material (but not labor) incurred by Buyer which is attributable to
Seller's verified "Epidemic Failure" of component parts. An "Epidemic Failure"
of a component part occurs when there is in excess of a 10% failure rate for the
proceeding twelve (12) months for that component.
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9. Default and Arbitration - Each of the following shall constitute an
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Event of Default under this Agreement:
A. Default in the payment when due of any amount owed to either
Party by the other under this Agreement, if such failure continues for a period
of thirty days after payment was due;
B. Default in the obligation to obtain all Products from Seller in
the manner set forth in Sections 1, 2 and 5; and
C. Default in any of Seller's obligations to Buyer hereunder.
Upon the occurrence and continuation of an Event of Default hereunder,
Seller shall have the right to commence appropriate proceedings in any state or
federal court located in Fond du Lac, Wisconsin, Buyer hereby agreeing that it
irrevocably submits to the jurisdiction of such court and waives, to the fullest
extent such party may effectively do so, the defense of an inconvenient forum to
the maintenance of any such action or proceeding. The foregoing
notwithstanding, if there is a dispute arising out of any of the other terms of
this Agreement, such dispute shall be immediately submitted to arbitration in
Chicago, Illinois, by a retired judge provided by the Judicial Arbitration and
Mediation Service in accordance of the commercial rules then in effect of the
American Arbitration Association, and any award of such arbitration shall be
final and binding upon the parties.
10. Term - The initial term of this Agreement shall be three (3) years,
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commencing on the date hereof and ending on May 31, 2000. This Agreement shall
thereafter be automatically renewed for one (1) year terms (to December 31 of
each year) until one party gives a written notice of non-renewal to the other
party at least six (6) months prior to the termination date of any term or
renewal term of this Agreement; provided, however, that this Agreement may be
terminated at Buyer's option by providing Seller written Notice within thirty
(30) days following the occurrence of a Change of Control (hereinafter defined)
affecting Seller. For purposes of this Agreement, a Change of Control regarding
Seller shall be deemed to have occurred if all or substantially all of either
the assets of Seller or a majority of the issued and outstanding capital stock
representing the ownership interest in Seller is sold, transferred, or otherwise
disposed of to any person; provided, however, that no Change of Control shall be
deemed to have occurred if the person acquiring the stock or assets in Seller is
either (1) in a manner similar to Seller, also an affiliate of Raytheon Company
or (2) a non-North American manufacturer of appliances (whether or not such
appliances include laundry equipment), or controls, is controlled by, or is
commonly controlled with a non-North American manufacturer of appliances, and
which entity has a net worth, determined in accordance with generally accepted
accounting principles, of at least $250,000,000.
11. Notice - Except as otherwise provided herein, any notice required
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hereunder shall be in writing and shall be deemed to have been validly served,
given, or delivered upon (a) deposit in the United States certified or
registered mails, with proper postage prepaid, (b) deposit with a reputable
overnight courier with all charges prepaid, or (c) delivery, if hand-delivered
by messenger, all of which must be properly addressed to the party to be
notified as follows:
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a. If to Seller at: Attn: President
Raytheon Appliances Commercial Laundry
Xxxxxxx Xxxxxx
X.X. Xxx 000
Xxxxx, XX 00000-0000
with a copy to: Attn: Vice President Sales and Marketing
Raytheon Appliances Commerical Laundry
Xxxxxxx Xxxxxx
X.X. Xxx 000
Xxxxx, XX 00000-0000
b. If to Buyer at: Coinmach Laundry Corporation
00 Xxxxxx Xxxx
Xxxxxx, Xxx Xxxx 00000
Attn: Xx. Xxxxxx X. Xxxxx
with a copy to: Xxxxxxxx, Kill & Olick , P.C.
1251 Avenue of the Americas
Xxx Xxxx, Xxx Xxxx 00000-0000
Attn: Xxxxxx X. Xxxxx, Esq.
or to such other address as each party may designate for itself by like notice.
13. Choice of Law - This Agreement shall be governed by the laws of
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the State of Wisconsin.
14. Successors and Assigns - This Agreement shall be binding upon
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and inure to the benefit of the parties hereto and their respective successors,
legal representatives, and assigns.
15. Counterparts Clause: Telecopy Execution - This Agreement may
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be executed in several counterparts, each of which shall be an original and all
of which shall constitute but one and the same instrument. Delivery of an
executed counterpart of this Agreement by telefacsimile shall be equally as
effective as delivery of a manually executed counterpart of this Agreement. Any
party delivering an executed counterpart of this Agreement by telefacsimile
shall also deliver a manually executed counterpart of this Agreement, but the
failure to deliver a manually executed counterpart shall not affect the
validity, enforceability, and binding effect of this Agreement.
16. Future Acquisitions - Buyer may, in the future, acquire other
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route businesses from independent operators and operate such either under a new
wholly-owned subsidiary (if such acquisition is structured as a stock purchase
with the acquired corporation not thereafter being merged into one of the
entities comprising Buyer) or under one of Buyer's existing operating entities
(if such acquisition is structured as an asset purchase). In the event that
Buyer consummates any such future acquisitions, Buyer or its applicable
subsidiary shall remain entitled to the same benefits hereunder as if such
person were a party, as an additional
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"Buyer," to this Agreement, and in the event any such acquisition is structured
as a stock purchase, resulting in a new wholly-owned or controlled subsidiary of
Buyer, Buyer shall cause such new subsidiary to execute an agreement, in form
and substance satisfactory to Seller, adopting the terms of this Agreement as a
"Buyer" hereunder and agreeing to be bound by all the terms and provisions
hereof; provided, however, that until such time as such new subsidiary has
adopted this Agreement, Buyer shall cause such new subsidiary to abide and be
bound by the terms hereof in the same manner as if such new subsidiary were a
party hereto. However, in the event of a stock purchase in which Buyer's new
subsidiary is already a party to a non-cancellable Supply Agreement, Buyer is
not bound to cause such new subsidiary to execute an agreement adopting the
terms of this Agreement. In the event that Buyer consummates one or more
acquisitions which result, in the aggregate, in a twenty five percent (25%)
increase in Buyer's annual purchasing requirements, as measured by Buyer's and
Kwik Wash Laundries L.P.'s (Kwik Wash Laundries, L.P. was acquired by Coinmach
Laundry Corporation, Buyers parent company, during the first quarter of 1997 and
was subsequently merged into Coinmach) 1996 combined purchases which shall be
deemed the base amount for determining whether Buyer's annual purchases have
increased by twenty five percent (25%), Buyer and Seller shall mutually agree to
reconsider whether the specific pricing established by Exhibit A and B attached
hereto continues to be appropriate in light of Buyer's expanded operations.
17. Complete Agreement - This Agreement, those documents expressly
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referred to herein and other documents of even date herewith (i) embody the
complete agreement and understanding among the parties, and (ii) supersede and
preempt any prior summaries of terms and conditions, understandings, agreements
or representations by or among the parties, written or oral, which may have
related to the subject matter hereof in any way.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date and year first above written.
BUYER: SELLER:
COINMACH CORPORATION, RAYTHEON APPLIANCES, INC.,
a Delaware corporation a Delaware corporation
/s/ XXXXXXX X. XXXXXXXX /s/ XXXXXX L'ESPERANCE
By:___________________________ By:_____________________________
Chief Executive Officer PRESIDENT
Title:________________________ Title:__________________________
SUPER LAUNDRY EQUIPMENT CORPORATION,
a New York corporation
/s/ XXXXXXX X. XXXXXXXX
By:___________________________
Chief Executive Officer
Title:________________________
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