Exhibit 10.13
X. X. XXXXX AG
Distribution Agreement
October 1, 1994
DISTRIBUTORSHIP AGREEMENT
(Pfaff - WG)
This AGREEMENT is made as of October 1, 1994, between X. X. Xxxxx AG, a
German limited liability company ("Pfaff"); and WG, Inc., a Delaware (U.S.A.)
corporation ("WG").
R E C I T A L S:
A. The parties desire to continue their existing business relationship
under new contractual arrangements.
B. To accomplish this, it is agreed that: (i) all existing contracts
between the parties are hereby terminated, as provided in Section 7.1 of this
Agreement; and (ii) the following new contract terms shall take effect as of
this date to govern the distribution by WG in the United States of America and
Puerto Rico (the "Territory") of all spare or replacement parts ("Parts") for
industrial sewing machines (i.e., equipment for industrial use which either is a
sewing machine or incorporates a sewing machine as a part thereof) and related
accessories and attachments manufactured or sold by Pfaff and its Affiliates
("Products") (excluding, however, those parts and industrial sewing machines and
related accessories and attachments excluded from the definition of Parts and
Products, respectively, by the provisions of Section 6.2 below).
1. Appointment
1.1 Subject to the terms and conditions of this Agreement, Pfaff grants to
WG the right to import, promote and sell Parts in the Territory. Such right
shall be exclusive for the exclusive period specified in Article 5 hereof except
for:
(i) Sales to United Shoe Machinery Corporation ("USM") which are
made directly from Xxxxx'x main facilities in Germany for replacement of
parts contained in machines sold by USM.
(ii) Sales or deliveries of Parts to Pfaff USA, Inc. ("PUSA") or any
other Affiliate of Pfaff or any successor of PUSA, but only to the extent
that such Parts are conversion Parts (designed to convert pocket-setting
machines or other automatic industrial sewing machines from one
design-dependent or special design sub-class to another). Conversion Parts
may be acquired from WG or from any other source. If acquired from WG,
conversion Parts shall be sold as provided in Section 4.3.
For purposes of this Agreement, an "Affiliate" of a person shall mean any person
who owns, is owned by or is owned by any owner of such person. For purposes of
this definition, a person owns: (i) a corporation when more than 50% of the
outstanding voting shares or total outstanding shares is owned directly or
indirectly by the person; or (ii) a partnership, trust or
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other entity when the person controls such entity or has any equity interest
therein greater than 50%. The term "Affiliate" when used with respect to Pfaff
shall not include The Singer Company, Semi-Tech (Global) Company Limited or any
of their affiliates, other than affiliates owned by Pfaff.
1.2 Except for parts and used machines and except to the extent necessary
to carry on distribution for export outside the Territory, during the exclusive
term of this Agreement WG and its Affiliates shall not engage in the
distribution in the Territory of industrial sewing equipment that competes with
Products. Equipment currently manufactured by Pegasus Sewing Machine Mfg. Co.,
Ltd. ("Pegasus") and currently sold by Pegasus or its Affiliates or agents in
the Territory, or subsequently introduced and sold by Pegasus or its Affiliates
or agents in the Territory which is of the same type and function as that
currently sold, shall be deemed non-competitive for these purposes. WG covenants
and agrees that it and its Affiliates shall not distribute or sell parts not
manufactured by or for Pfaff for use in or on the Products (other than generic
parts hereafter sold by WG or its Unity Division in the same manner as
heretofore).
1.3 The parties hereto agree that industrial sewing machine needles
manufactured by or for Pfaff and sold under one of the Trademarks shall be
deemed Parts for the purposes of this Agreement. WG agrees to use all reasonable
efforts to promote the sale of such needles for use with the Products and with
other industrial sewing machines manufactured by Pfaff but not marketed or sold
under any of the Trademarks (and therefore not constituting Products), including
without limitation distributing promotional flyers in fulfilling orders of
customers of WG for other Parts and supplying such needles to customers when
such customers order needles for Products or for other industrial sewing
machines manufactured by Pfaff. The parties agree that WG shall sell (meaning
the completion of the shipment and invoicing of such needles to customers in
such calendar year, less all returns to WG in such calendar year of such needles
previously sold to any customer) at least an aggregate of Two Million Five
Hundred Thousand (2,500,000) of such needles in calendar year 1995. For calendar
year 1996 and for each calendar year thereafter, said minimum sales quantity
shall increase by Twenty Percent (20%) over the minimum sales quantity for the
immediately preceding calendar year (being Three Million (3,000,000) for
calendar year 1996, Three Million Six Hundred Thousand (3,600,000) for calendar
year 1997, and so on). If WG shall fail to sell such quantity of such needles in
any calendar year, Pfaff at its option may terminate the exclusive distribution
rights of WG granted to WG pursuant to section 1.1 hereof in regard to such
needles only (but not in regard to any other Parts) by giving written notice to
WG to such effect no later than the latter of (i) sixty (60) days after Pfaff
shall learn of the total quantity of such needles sold by WG in the relevant
calendar year and (ii) ninety (90) days after the end of the relevant calendar
year, in which event WG's distribution rights in regard to such needles shall
become non-exclusive. The foregoing sentence shall not affect in any way the
rights of termination of the exclusive and non-exclusive terms of this Agreement
generally set forth in Article 5 hereof.
2. Terms of Sale
2.1 Pfaff shall provide WG such technical assistance and such printed
material (including operating and service manuals and sales literature) as may
be reasonably required by
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WG in the promotion, sale and servicing of Parts. The cost of such technical
assistance and printed material shall be borne by WG.
2.2 WG shall purchase Parts at prices set by Pfaff, ex works Xxxxx'x plant
in Germany, although Pfaff shall arrange for the shipment from its Plant. Prices
are subject to change from time to time by Pfaff on 60 days' written notice
prior to the effective date of any such change. Price changes shall apply to
orders submitted before the expiration of the 60-day period, if delivery is
scheduled to take place after such period expires. In any event, however, Pfaff
prices to WG shall not exceed the following:
(i) During the exclusive term hereof, Pfaff shall afford to WG prices
and other payment and shipping terms which are no less favorable to WG than
those afforded to USM.
(ii) During the non-exclusive term hereof, if any, Pfaff shall afford
to WG prices and other payment and shipping terms which are no less
favorable to WG than those afforded by Pfaff or any Affiliate to PUSA, to
any Affiliate or to any other person in the Territory.
2.3 Pfaff hereby extends to XX Xxxxx'x standard warranty with respect to
Parts. Pfaff disclaims, both under this Agreement and in connection with any
sales pursuant hereto, all express and implied warranties, including any
warranties of merchantability and fitness for purpose, other than those express
warranties specifically stated in Xxxxx'x then current standard warranty, and
Pfaff further excludes all remedies other than those specifically set forth in
such standard warranty. All consequential, punitive, and all other similar
damages are excluded. Xxxxx'x standard warranty shall incorporate the substance
of the preceding two sentences. WG agrees that it shall not give any warranty or
remedy in regard to Parts that is any longer in duration or broader in scope
than such Pfaff warranty without the prior written approval of Pfaff.
3. Trademarks, Tradenames and Patents
3.1 Pfaff grants to WG the right and license to use in the Territory,
without right of sublicense, all of the following now or hereafter during the
term of this Agreement owned or possessed by Pfaff and its Affiliates:
(i) all trademarks that are used by Pfaff or any of its Affiliates in
the manufacture, promotion or sale of Parts ("Trademarks");
(ii) the tradenames that are used by Pfaff or any of its Affiliates in
the manufacture, promotion or sale of Parts ("Tradenames") and
(iii) all patents and patent applications relating to the manufacture,
use or sale of Parts ("patents");
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but only for the purpose of importing, promoting and selling Parts in the
Territory and for no other purpose. The foregoing shall not constitute an
assignment of the Trademarks, Tradenames or Patents.
3.2 WG may place the Trademarks and Tradenames on its stationery,
catalogues, promotional literature, advertising material and signs, but only in
connection with the promotion, sale and servicing of Parts in the Territory. The
method of use of the Trademarks and Trade names by WG shall be strictly in
accordance with the instructions to be given by Pfaff and subject to the prior
written approval by Pfaff. WG shall submit to Pfaff for prior approval
representative samples of all leaflets and other advertising materials referred
to above. WG shall not be allowed to combine the Trademarks and Tradenames with
any other trademarks or tradenames or any sort of patterns or letters or
designs. WG shall not make any change or alteration to the original
configuration and colors of the Trademarks and Tradenames.
4. Compensation and Sales to PUSA
4.1 WG shall pay to PUSA with respect to any calendar year during the
exclusive term of this Agreement a commission equal to ten percent of WG's total
net sales of Parts under this Agreement. Payment of commissions shall be a
minimum of $80,000 per month commencing September 1, 1994. If commissions for
the calendar year exceed $80,000 per month, such excess commissions will be paid
by WG no later than February 15 of the following calendar year. If commissions
for the calendar year are less than $80,000 per month, such deficiency shall be
carried forward and applied as a credit against excess commissions for
subsequent calendar years. Any deficiency still outstanding at the time the
exclusive term of this Agreement expires or is terminated for any reason will
not be refunded to WG but rather will be deemed earned by PUSA as a minimum
commission. Payments shall be made within 15 days after the end of each month.
For purposes of this Section 4.1, net sales shall be computed net of discounts,
allowances, credits and returns and without consideration of any charges for
taxes, freight, shipping costs, import duties or the like.
4.2 WG shall provide a $100 Gift Certificate to PUSA for each Pegasus
manufactured machine sold by PUSA on or after September 1, 1994. Gift
Certificates will be redeemable by PUSA customers against purchases of Pegasus
parts from WG. PUSA may redeem the Gift Certificates issued in any calendar year
for cash equal to 50% of the face value of the Gift Certificates.
4.3 Conversion Parts (as described in clause (ii) of Section 1.1) shall be
sold by WG to PUSA at WG's cost plus an amount equal to 2% of such cost, on the
30-day terms referred to in Section 4.3. Customer-rejected conversion Parts
returned by PUSA to WG shall be repurchased by WG at WG's cost less an amount
equal to 2% of such cost, on such 30-day terms, provided such conversion Parts
are not obsolete and provided that, to the extent WG's inventory supply of any
Part, based upon average monthly sales of such Part over the preceding 18
months, exceeds 36 months, then the aggregate amount WG shall be required to pay
in any calendar year upon repurchases of such excess supply of such Part shall
not exceed $15,000 (which $15,000 limit shall be increased for any calendar year
by an amount which is in the same ratio to $15,000
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as the ratio of (i) the number of PUSA machine manufactured by Pfaff or Pegasus
("Machines") sold during the year in excess of 4,000 to (ii) 4,000).
4.4 Purchases of PUSA Machines or other merchandise by WG from PUSA shall
be paid for by WG within 30 days.
5. Termination
5.1 This Agreement shall continue in full force and effect on an exclusive
basis until December 31, 1996.
(i) It shall automatically be renewed on such exclusive basis for
successive periods of two (2) years each, unless one of the parties to this
Agreement gives written notice of termination to the other at least one
year prior to the expiration of said initial period or any successive
two-year period, whichever is applicable, such termination to be effective
at the end of the initial period or the relevant two-year extension
thereof: in the event such one-year termination notice is given, this
Agreement shall continue on an exclusive basis during the one-year
termination period, and shall continue thereafter on a non-exclusive basis.
(ii) If the notice of termination of the exclusive period of this
Agreement has previously been given, either party may terminate the
non-exclusive term of this Agreement at the end of any calendar year ending
after the calendar year in which the exclusive term ends by giving at least
one year's prior written notice of such termination of the non-exclusive
term: in the event such one-year termination of the nonexclusive term is
given, this Agreement shall continue in force during the one-year
termination period on a non-exclusive basis; but this Agreement shall end
and be of no further force or effect thereafter.
(iii) Either party may terminate both the exclusive and non-exclusive
term of this Agreement while the Agreement is still on an exclusive basis,
effective as of the end of any calendar year at which the termination of
the exclusive term may become effective pursuant to clause (i) above, by
giving at least two (2) years prior written notice of such termination of
both the exclusive and non-exclusive terms of this Agreement: subject to
the provisions of the following clause (iv), in the event such two-year
termination notice is given, this Agreement shall in both years of such
termination period remain in force on an WG exclusive basis; but this
Agreement shall end and be of no further force or effect thereafter.
(iv) Anything in this Section 5.1 hereof to the contrary
notwithstanding, any termination of the non-exclusive term of this
Agreement may not be effective prior to December 31, 1998.
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5.2 Pfaff shall have the right to declare this Agreement non-exclusive (if
not then non-exclusive) upon 30 days prior written notice given within 120 days
after the end of any calendar year ending after January 1, 1994, if in the
calendar year in question WG failed to purchase Parts having an aggregate
purchase price (computed in DM), based upon the invoice price set forth on the
invoice from Pfaff to WG (without consideration of charges for taxes, freight,
shipping costs, import duties, or the like), equal to at least 25% of the
average annual amount of purchases of Products by PUSA (computed in DM) based
upon the invoice price of such Products (excluding automatic machines) without
consideration of any charges for taxes, freight, shipping costs, import duties,
or the like, and using the same concept of invoice price as used in determining
the aggregate purchase price of Parts) as invoiced by Pfaff or any Affiliate of
Pfaff to PUSA for sale or use in the Territory, for the three full calendar
years ended immediately preceding the calendar year in question (including under
the predecessor to this Agreement). For purposes of this Section 5.1:
(i) Parts purchased by WG during a calendar year shall mean Parts
actually invoiced by Pfaff and its Affiliates during such year plus Parts
on order as of October 1 of such year but not delivered during the year,
provided, however, that such ordered but not delivered Parts shall not be
included in the calculation of purchases the following year.
(ii) If purchases of Parts by WG during the calendar year immediately
preceding the calendar year in question exceeded the amount of purchases
required for such year in order to meet the aforesaid 25% minimum or
average purchases of Products, the amount of such excess may be carried
forward and applied as a credit against the purchases requirement for the
calendar year in question but not no subsequent calendar year.
(iii) Products purchased by PUSA and sold to USM shall be included in
determining the said aggregate purchase price.
(iv) Parts purchased or ordered prior to October 1, 1994, under the
predecessor of this Agreement (i.e., the agreement of September 1982
between and Xxxxxxx & Xxxxx, Inc.) shall be counted for purposes of meeting
the minimum aggregate purchase provisions of this Section 5.2.
5.3 This Agreement may be terminated by the aggrieved party immediately
upon written notice to the other ("Defaulting Party"), in the event that after
the date hereof:
(i) The Defaulting Party commits a material breach or default under
this Agreement, which breach or default shall not be remedied within 30
days after giving of notice thereof to the Defaulting Party; or
(ii) The Defaulting Party is unable to meet its debts as they fall due
or enters into liquidating or dissolution or becomes bankrupt or insolvent,
or if a trustee or receiver is appointed for such party, whether by
voluntary act or otherwise, or if any proceeding is instituted by or
against such party under the
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provisions of any bankruptcy act or amendment thereto which results in the
entry of an order for relief against it which is not stayed or remains
undismissed for a period of 60 days, or if it enters into a voluntary
arrangement with its creditors.
5.4 Upon termination of both the exclusive and nonexclusive terms of this
Agreement, Pfaff is entitled to restrict or even stop entirely deliveries of
Parts to WG including deliveries on orders already received at the time of
notice of termination. However, Pfaff is required to make Parts available to WG
in order to enable WG to maintain its own delivery commitments existing before
termination becomes effective subject to proof being given by WG to Pfaff.
5.5 Upon termination of both the exclusive and nonexclusive terms of this
Agreement, all of WG's rights with respect to the Trademarks and Tradenames
shall immediately cease, and shall repurchase all usable advertising and printed
matter made available by it to WG. WG shall have no further right to use the
designation "Pfaff" in any manner.
5.6 Neither party hereto is under any obligation to continue this
Agreement in effect, nor to continue the legal and contractual arrangement
established hereunder, after termination of this Agreement in accordance with
this Article 5. Both parties recognized the necessity of making expenditures in
performing and in preparing to perform this Agreement. The parties nevertheless
agree that neither party shall be liable to the other for termination of this
Agreement in accordance with this Article 5, including but not limited to, for
loss or damage due to investments, leases and sales, and advertising and
promotional activities, whether incurred in connection with the preparation to
perform or the performance of this Agreement or in the expectation of its
renewal or extension.
6. Non-Competition
6.1 Subject to the exceptions contained in Article 1, during the exclusive
term of this Agreement Pfaff and its Affiliates shall not directly or indirectly
(by equity or management participation, beneficial ownership, contract
arrangement or otherwise) contribute to, participate in or furnish material
goods or information for the selling, offering for sale or distribution of Parts
in the Territory, and shall each use its best efforts to prevent any such sale,
offer or distribution, other than by WG. Without limitation Pfaff and its
Affiliates shall not so contribute to, participate in, or furnish material goods
or information for the selling, offering for sale or distribution of Parts for
the Products in the Territory other than under one of the Trademarks.
6.2 The parties hereto hereby acknowledge and agree that the Singer
Company, Semi-Tech (Global) Company Limited and their affiliates other than
those affiliates owned by Pfaff (the "ISTM Group") may from time to time sell in
the Territory industrial sewing machines and related accessories and attachments
manufactured by Pfaff or its Affiliates and bearing one or more of the
Trademarks or Tradenames or none of the Trademarks or Tradenames.
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(i) The parties hereto agree that such industrial sewing machines and
related accessories and attachments (even if manufactured by Pfaff) shall
not be deemed included within the definition of Products as used in this
Agreement unless the same bear or are sold under one of the Trademarks or
Tradenames. In this connection, the definition of "Parts" as used in this
Agreement shall not include any parts sold by the ISTM Group or Pfaff for
any such industrial sewing machines and related accessories and attachments
which are not included within the definition of Products. However, the
immediately preceding sentence shall not be deemed to exclude from the
definition of Parts" any such parts which are sold by Pfaff or the ISTM
Group under any of the Trademarks or Tradenames but this sentence shall not
be applicable to the sale of certain parts manufactured by Pfaff which are
stamped with the "Pfaff" name and sold for sewing machines, accessories and
attachments referred to in the immediately preceding sentence.
(ii) WG covenants and agrees (A) to sell conversion Parts to the ISTM
Group for such industrial sewing machines and related accessories and
attachments, even if the same are not "Products," on the same terms and
conditions, including price, as Parts are sold by WG to PUSA for Products
hereunder and (B) to sell other Parts to the ISTM Group for such industrial
sewing machines and related accessories and attachments, even if the same
are not "Products," on the same terms and conditions, including price, as
if selling to its dealers for Products.
7. Miscellaneous Provisions
7.1 In addition to termination of existing contracts between Pfaff and W&G,
all existing contracts between Pfaff or any Pfaff Affiliate (on the one hand)
and WG or any WG Affiliate (on the other hand) are hereby terminated. Such
terminations shall be without liability of any party to any other party.
Notwithstanding the foregoing, ordinary commercial dealings such as those
involving the sale, purchase or delivery of Parts or payment therefor,
uncompleted at the date hereof, shall be completed in accordance with the
parties' regular trade practices.
7.2 Neither of the parties hereto shall be responsible for or liable to the
other party for any damages or loss of any kind, directly or indirectly
resulting from fire, flood, explosion, riot, rebellion, revolution, war, labor
trouble (whether or not due to the fault of either party), requirements or acts
of any government or subdivision thereof, mechanical breakdown or any other
cause beyond the reasonable control of the party. The occurrence and the
termination of such force majeure shall be promptly communicated to the other
party.
7.3 All notices, requests, demands and other communication hereunder shall
be in writing and shall be given by delivery against receipt, by facsimile
transmission, by telex or by registered air mail, postage prepaid, addressed as
follows, or to such other address or person as a party may designate by giving
notice to the other party hereunder:
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(i) To WG, to (ii) If to Pfaff, to:
WG, Inc. Pfaff USA Inc.
000 Xxxxxxx Xxxxxx 0000 XxXxxxxx Xxxxx Xxxx
Xxx Xxxx, Xxx Xxxx 00000 Xxxxxxx, Xxxxxxx 00000
Attention: Chairman of the Board Attention: President
Communications hereunder by facsimile transmission or telex shall be deemed
given at the time of transmission and communications hereunder by airmail shall
be deemed given ten days after the date of registration.
7.4 This Agreement shall be governed by the laws of the State of New York.
Xxxxx'x standard terms and conditions of sale and delivery of equipment, however
shall be governed by German law so long as not in conflict with the terms of
this Agreement. In all events, the United Nations Convention on Contracts for
the International Sale of Goods shall be inapplicable.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the
day first above written.
X.X. XXXXX AG WG, INC.
By: /s/ X.X. Xxxxxxxx By: /s/ Xxxx X. Xxxxxxx
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