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EXHIBIT 10.6
FIRST RENEWAL
PACKAGING SERVICES AGREEMENT
This First Renewal Packaging Services Agreement (this "Agreement"),
dated as of March 1, 1997, is made by and among Pinnacle Trading Card Company,
a Delaware corporation ("Pinnacle"), Performance Printing Corporation, a Texas
corporation ("Performance"), and Performance Packaging, L.C., a Texas Limited
Liability Company ("Packaging").
In consideration of the mutual covenants and agreements contained
herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree
as follows:
1. Engagement. Packaging hereby agrees to provide to Pinnacle
or any Affiliate of Pinnacle (hereinafter defined), the slitting, collating,
over wrapping and boxing of any projects and other requested services relating
thereto (collectively, the "Services") as requested by Pinnacle during the
Normal Term (as such term is hereinafter defined), upon the terms and subject
to the conditions set forth herein. Pinnacle shall not be obligated to request
that Packaging perform any Services during the term of this Agreement. As used
herein, an "Affiliate" of Pinnacle shall mean any person or entity controlling,
controlled by or under common control with Pinnacle.
2. Services.
(a) Capacity. Packaging owns certain equipment and
leases certain facilities including, but not limited to, those
described on Schedule A hereto (along with replacements thereof and
substitutions therefor, the "Initial Equipment on Hand"). Packaging
has agreed to acquire additional equipment and a new facility
designated by Pinnacle and reasonably acceptable to Performance at a
cost not in excess of $1,230,000 (along with replacements thereof and
substitutions therefor, the "Initial Expansion Equipment").
If Pinnacle wants Packaging to acquire additional equipment
and/or facilities (in addition to the Initial Equipment on Hand and
the Initial Expansion Equipment) to meet Pinnacle's needs and agrees
in writing that its Fixed Cost Payments (hereinafter defined) will be
adjusted in the manner set forth in Section 4(a)(i) hereof, then
Packaging shall use its best efforts to acquire such additional
equipment and/or facilities (along with replacements thereof and
substitutions therefor, the "Additional Expansion Equipment"). It is
possible that Pinnacle will
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desire that Packaging acquire additional equipment and/or facilities
to meet Pinnacle's needs but that Pinnacle does not require the
full-time use of such additional equipment and/or facilities. If
Pinnacle and Packaging agree in writing that Pinnacle's Fixed Cost
Payments will be adjusted as a result of the acquisition of such
equipment and/or facilities (which adjustment would not reflect the
full amount of the debt service relating to the acquisition of such
equipment and/or facilities), such additional equipment and/or
facilities shall also be "Additional Expansion Equipment."
Except as hereinafter set forth in this Section 2(a),
Packaging shall at all times dedicate such equipment and labor as may
be necessary to provide the Services required by Pinnacle within the
time periods required by Pinnacle (even if that means preempting the
work of other Packaging customers). If the Services requested by
Pinnacle require the use of equipment then owned by Packaging other
than Initial Equipment on Hand, the Initial Expansion Equipment or any
Additional Expansion Equipment (the "Non-Fixed Cost Capacity
Equipment"), then such Non-Fixed Cost Capacity Equipment shall be
available to Pinnacle on a first-come, first- served basis along with
Packaging's other customers. If the Services requested by Pinnacle
require the use of Partial Additional Expansion Equipment (hereinafter
defined), then such Partial Additional Expansion Equipment shall be
available to Pinnacle on such basis (i) as is agreed to by Packaging,
Pinnacle and Performance at the time such Partial Additional Expansion
Equipment is acquired, or (ii) if they do not agree, as is determined
by the Board of Packaging (hereinafter defined) (such basis to mean
whether Pinnacle will be entitled to use such Partial Additional
Expansion Equipment on the basis described in the first sentence of
this paragraph or on a first-come, first-served basis along with
Packaging's other customers). The term "Partial Additional Expansion
Equipment" means Additional Expansion Equipment for which (i) Pinnacle
indicated at the time of the proposed acquisition of such Additional
Expansion Equipment that Pinnacle did not require the full-time use of
such Additional Expansion Equipment, and (ii) Pinnacle and Packaging
are able to agree in writing to the amount of Pinnacle's Fixed Cost
Payments for such Additional Expansion Equipment.
(b) Supply of Materials. Pinnacle will timely provide
Packaging with all direct materials such as printed sheets, packaging
and packing materials including all boxes, wrapping materials and tape
that are required by Packaging in order to provide the Services. Said
materials shall be of the types and quality compatible with the
equipment to be used by Packaging in performing the
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Services. To the extent that additional costs are incurred by
Packaging due to delays in delivery of materials by Pinnacle or due to
substandard quality or incompatibility of materials supplied by
Pinnacle, Packaging shall timely inform Pinnacle (in advance of
performing the Services relating to such project when feasible), that
the cost to Pinnacle for that particular job shall be increased by the
amount of increased costs incurred by Packaging as a result of such
delays, substandard quality or incompatibility. If Packaging,
Pinnacle and Performance do not agree whether there are, or the amount
of, additional costs incurred, such additional costs, if any, shall be
determined by the Board of Packaging. Packaging is responsible for
providing normal operating supplies.
(c) Quality of Products; Scrap. All finished products,
when delivered to Pinnacle by Packaging in accordance herewith, will
adhere to the high standards of quality associated with Pinnacle's
products. For services listed on Schedule B hereto and under existing
production practices, to the extent 5% or more scrap is created on any
Program (i.e. -- a year specific, brand specific, sport specific,
product specific, packaging type specific and series specific
project), Packaging shall be liable to Pinnacle for Pinnacle's cost of
such excess scrap. Similar maximum acceptable scrap rates for new
services or new production practices will be set either (i)
unanimously by Packaging, Pinnacle and Performance or (ii) if they do
not agree, by the Board of Packaging. By written notice from
Pinnacle's President or Chief Financial Officer, Pinnacle shall be
entitled to offset such excess scrap cost against any payments due to
Packaging hereunder. If any party believes the then applicable
maximum acceptable scrap rate for a particular service or production
practice (whether the 5% or another rate) should be changed, it may
petition the Board of Packaging to change the rate and if the Board so
agrees the rate shall be so amended. All scrap shall be the property
of Pinnacle.
(d) Equipment. Packaging will at all times adequately
maintain the condition of, and repair, its equipment and machinery.
(e) Inspection. Packaging will provide to Pinnacle for
inspection the initial packages with respect to each project performed
pursuant to this Agreement. Prior to Packaging's going forward with
any such project, Pinnacle's representatives may inspect and approve
the initial packages for content, collation and quality (although it
shall have no obligation to do so). At any time and from time to time
during a project, Packaging shall deliver to Pinnacle for inspection,
such packages as Pinnacle may
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request. If a representative of Pinnacle disapproves of the initial
packages or any other packages, then Packaging shall, upon notice,
correct any such errors or flaws. Pinnacle may also inspect the
facilities of Packaging and observe the Services at any time or from
time to time.
(f) Delivery. Final products will be shipped by
Packaging as designated by Pinnacle. All shipping costs (both to and
from Packaging) will be payable by Pinnacle including all delivery
costs for materials, scrap and inspection items. Packaging is
responsible for (both with respect to physically and paying for)
loading and unloading products onto the trucks (or other
transportation) and for providing administrative support relating to
shipping. If Pinnacle requests fulfillment services from Packaging,
then such fulfillment services will be available to Pinnacle on such
basis (i) as is agreed to by Packaging, Pinnacle and Performance at
the time such fulfillment services are requested, or (ii) if they do
not agree, as is determined by the Board of Packaging.
3. Term. This Agreement shall commence on the date first above
written and terminate on the last day of the Normal Term.
(a) Normal Term. The "Normal Term" shall commence on
March 1, 1997, and shall end on (i) the fifth anniversary date of the
commencement of the Normal Term (or on such later date as to which
Pinnacle renews and extends the Normal Term), or (ii) such earlier
date as Pinnacle terminates this Agreement in accordance with the
terms hereof.
(b) Renewal. Pinnacle may, at its sole option and at any
time, renew and extend the Normal Term of this Agreement for up to
five successive one year terms (for one year at a time). If Pinnacle
does not provide written notice to Performance and Packaging at least
90 days prior to the end of the Normal Term (as it may be extended
from time to time) that it is not renewing and extending this
Agreement, the Normal Term of this Agreement shall automatically be
extended for a one year term on the terms and provisions hereinafter
set forth relating to renewals and extensions.
(c) Termination.
(i) Pinnacle may terminate this
Agreement at any time without further obligation and without
payment of cancellation fees or other amounts upon giving 90
days' advance written notice of the termination to Packaging
and Performance if Pinnacle
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believes that the delivery times or quality of services
rendered by Packaging hereunder is not up to the standards
expected by Pinnacle whether or not it is entitled to
terminate this Agreement pursuant to Section 3(c)(iii) hereof
(such delivery and quality standards to include, but not be
limited to (A) Packaging's failure to meet Pinnacle's delivery
schedule twice during the term of this Agreement, or (B) with
respect to any Program, Packaging's making more than two
specific quality infractions which have been designated in
writing by Pinnacle). The effective date of the termination
shall be the ninetieth day following delivery of the written
notices to Packaging and Performance.
(ii) Pinnacle may terminate this Agreement at any
time without cause and without further obligation upon
tendering to Packaging the cancellation fee specified opposite
from the year of cancellation below, such termination to be
effective as of the date such cancellation fee is tendered:
(A) the cancellation fee for
termination of this Agreement pursuant to this
Section 3(c)(ii) in any year shall be equal to the
amount set forth opposite that year below:
TWELVE MONTHS
ENDING MARCH 1ST: PAYMENT
1998 $500,000
1999 $400,000
2000 $300,000
2001 $200,000
2002 $100,000
(B) In addition, if Packaging has
acquired prior to such date of termination any
Additional Expansion Equipment and this Agreement is
being terminated pursuant to this Section 3(c)(ii),
then an amount, if any, equal to the excess of the
debt then owing on such Additional Expansion
Equipment over the aggregate fair market value of the
Initial Equipment on Hand, the Initial Expansion
Equipment, and other Additional Expansion Equipment
shall also be paid by Pinnacle (but such additional
payment shall not be considered part of the
cancellation fee).
(iii) Pinnacle may terminate this Agreement
at any time without further obligation and without payment of
cancellation fees or other amounts
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upon giving written notice thereof to Performance upon the
occurrence of any of the following events:
(A) the material breach by Packaging
or Performance of any covenant or other agreement set
forth in this Agreement, the Amended and Restated
Regulations of Packaging; that certain Acquisition
Agreement entered into on June 13, 1994 (the
"Acquisition Agreement") or that certain
Organizational Agreement entered into on June 13,
1994 (the Organizational Agreement); provided that,
if such breach is curable, such breach is not cured
by Packaging or Performance within 30 days after
Pinnacle notifies Packaging of such breach and
provided further that Packaging and Performance shall
be entitled to cure the breach of a particular
covenant or agreement only once during the term of
this Agreement, and Packaging and Performance shall
only be entitled to cure an aggregate of three
breaches of covenant or agreement during the term of
this Agreement;
(B) any representation or warranty
made by Packaging or Performance in this Agreement,
the Amended and Restated Regulations of Packaging,
the Acquisition Agreement or the Organizational
Agreement shall have been materially incorrect, false
or misleading when made;
(C) the commission by Packaging,
Performance or any of their employees of any criminal
act or act of dishonesty relating to the Services or
otherwise relating to or affecting Pinnacle;
(D) Packaging or Performance makes an
assignment for the benefit of creditors or becomes
insolvent or fails generally to pay its debts as they
become due, or petitions or applies to any tribunal
for the appointment of a trustee, custodian, receiver
(or other similar official) of Packaging or
Performance or of all or any substantial part of the
assets of Packaging or Performance or commences a
voluntary case or any other proceedings relating to
Packaging or Performance under any bankruptcy,
reorganization, compromise arrangement, insolvency,
readjustment of debt, dissolution or liquidation or
similar law ("bankruptcy law") of any jurisdiction;
or
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(E) any such petition or application
is filed, or any such proceedings are commenced,
against Packaging or Performance, and Packaging or
Performance by any act or omission indicates its
approval, consent, or acquiescence, or an order for
relief is entered in any involuntary case under the
federal bankruptcy laws as now or hereafter
constituted, or an order, judgment or decree is
entered appointing any such trustee, custodian,
receiver, liquidator, or similar official or
adjudicating Packaging or Performance bankrupt or
insolvent, or approving the petition in any such
proceedings, and such order, judgment, or decree
remains in effect for 60 days.
(iv) Pinnacle agrees to notify the Lender
(hereinafter defined) if it terminates this Agreement pursuant
to this Section 3(c). As used herein, the term "Lender" means
the lender, if any, designated by written notice from the
Board of Packaging to Pinnacle as the lender holding a
security interest in the rights of Packaging hereunder.
4. Payment.
(a) Fixed Cost Payments. Pinnacle shall pay Packaging
on the first day of each month during the Normal Term an amount
calculated as follows (the "Fixed Cost Payments"): (i) the budget
payments determined in accordance with Section 4(a)(iii), below; plus
(ii) the amount set forth as the "Financing Portion of the Fixed
Costs" on Schedule C hereto. Such Fixed Cost Payments are payable in
advance and cover the month beginning on the day such Fixed Cost
Payments are due and payable. Notwithstanding the foregoing, if this
Agreement terminates on a date other than the last day of a month, the
last Fixed Cost Payment shall be reduced pro rata based on the number
of days covered by the last month of this Agreement.
(iii) The budgeted payments each month shall be the
amount determined as follows:
(A) Pinnacle will designate a person (the
"Designated Reviewer") to receive the proposed fixed
cost budget (the "Fixed Cost Budget") for each month.
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(B) Performance will forward to the
Designated Reviewer the proposed Fixed Cost Budget no
less than one week prior to the start of the month,
along with a reconciliation of the prior month's
Fixed Cost Budget compared to the actual results for
the prior month. For example, for the month of
June, the proposed Fixed Cost Budget would include a
reconciliation for the month of April.
(C) Unless a proposed change is suggested by
Pinnacle within three working days of the date the
proposed Fixed Cost Budget is received by Pinnacle,
the proposed budget will become the Fixed Cost Budget
for that month and the amount will be paid by
Pinnacle along with the Financing Portion of the
Fixed Cost Payment by the first work day of the
month.
(D) If Pinnacle does timely propose a change
to the Fixed Cost Budget, Performance will work with
Pinnacle to reach an agreement on the Fixed Cost
Budget before the start of the month. If Performance
and Pinnacle are unable to reach agreement, the Board
of Packaging will meet and establish the Fixed Cost
Budget for the month.
(iv) Notwithstanding the foregoing and the
provisions set forth on Schedule C hereto, the Fixed Cost
Payments shall be altered to reflect additions of Additional
Expansion Equipment (which additions and agreement to alter
the Fixed Cost Payments would require the agreement of
Pinnacle) in an amount determined either (x) by the mutual
agreement of Packaging, Pinnacle and Performance, or (y) if
Packaging, Pinnacle and Performance do not agree on the amount
of an adjustment to Fixed Cost Payments to reflect additions
of Additional Expansion Capacity, the Board of Packaging shall
determine the amount of such adjustment.
(v) If the Normal Term is renewed and extended,
the Fixed Cost Payments during the extended term will be
reduced to reflect the completion or reduction of equipment
financing or other debt service payments. Changes to the
Fixed Cost Payments for the extended period (other than
reductions to reflect the completion or reduction of financing
or other debt service payments) will be determined either (x)
by the mutual agreement of Packaging, Performance and Pinnacle
determined on a basis consistent with the amount initially set
for the Fixed Cost Payments during the Normal Term, or (y) if
Packaging, Performance and Pinnacle do not so agree, the Board
of
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Packaging will make such determination on the basis set forth
in clause (x) of this sentence.
(vi) The Fixed Cost Payments of Pinnacle hereunder
shall cease on the earlier of: (x) the expiration of the
Normal Term (as it may be extended); or (y) the effective date
of the termination of this Agreement with or without cause by
Pinnacle in accordance herewith.
(b) Variable Prices. In addition to the Fixed Cost Payments,
Pinnacle shall pay a Variable Price for Services if and to the extent
such Services are requested by Pinnacle and rendered by Packaging
during the Normal Term. The Variable Price shall be computed using the
Variable Price List, except that:
(i) Beginning on the first anniversary of the
start of the Normal Term, and continuing on each anniversary
thereafter, the Variable Prices set forth on the Variable
Price List shall be adjusted to reflect changes in the wage
rates at Packaging and changes in efficiency in performing the
Services set forth on the Variable Price List. The adjusted
prices set forth in the Variable Price List shall be
determined either (x) by the mutual agreement of Packaging,
Pinnacle and Performance, or (y) if they do not so agree, by
the Board of Packaging.
(ii) If all or any of the Services provided by
Packaging to Pinnacle are different from those included in the
Variable Price List, the Variable Price for such different
Services shall be the amount determined either (x) by
agreement among Packaging, Pinnacle and Performance or (y) if
they do not so agree, by the Board of Packaging. The parties
hereto agree that it is intended that the Variable Prices for
such different Services shall be based on the methodology set
forth on Schedule B hereto and shall not be treated as an
opportunity to increase the profits of Packaging in excess of
the amount of profits which may result from application of
such methodology.
(iii) If the Services requested by Pinnacle are not
able to be provided by Packaging using the Initial Equipment
on Hand, the Initial Expansion Equipment and the Additional
Expansion Equipment because that equipment is not the right
type of equipment to provide such Services, but the Services
requested by Pinnacle are able to provided by Packaging using
Non-Fixed Cost Capacity Equipment, then Packaging shall
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offer such Services to Pinnacle at a cost to be agreed upon by
Pinnacle and Packaging that may be different from the variable
price set forth on the Variable Price List.
(iv) If the Normal Term is extended, any changes
in the Variable Prices during the extended term will be
determined before the start of the extended term by either (x)
the mutual agreement of Packaging, Performance and Pinnacle on
a basis consistent with the amount initially set for the
Variable Prices during the Normal Term, or (y) if Packaging,
Performance and Pinnacle do not agree on such Variable Prices,
the Variable Prices for the extended term will be determined
by the Board of Packaging on the basis set forth in clause (x)
of this sentence.
(c) Alternative Pricing. Pinnacle may at any time and
from time to time request a firm quote for all or a portion of the
Services provided during the Normal Term, in which event Packaging
shall offer to provide such Services to Pinnacle at a price determined
either (i) by the mutual agreement of Packaging, Pinnacle and
Performance or (ii) if they do not agree, by the Board of Packaging.
At Pinnacle's option, the quoted price may be substituted for the
Variable Price for the project quoted.
(d) Payment Terms. All Variable Prices payable by
Pinnacle and all alternative pricing amounts payable by Pinnacle shall
be due and payable 45 days after delivery of a completed project to
Pinnacle, subject to any advance deposit as may be determined to be
necessary by Pinnacle, Packaging and Performance or, if they do not
agree, by the Board of Packaging.
5. Miscellaneous.
(a) Relationship. Packaging is furnishing the Services
to Pinnacle hereunder only as an independent contractor. This
Agreement does not create, and shall not be construed to create, any
employer- employee, joint venture or partnership relationship between
Packaging and Pinnacle. No officer, employee, agent or independent
contractor of Packaging or Pinnacle shall at any time be deemed to be
an employee, agent or contractor of the other.
(b) Notices. Any notice, consent, or other communication
to be given under this Agreement by any party to any other party shall
be in writing and shall be either (i) personally delivered, (ii)
mailed by registered or certified mail, postage prepaid with return
receipt requested, (iii) delivered by overnight express delivery
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service or same-day local courier service, or (iv) delivered by telex
or facsimile transmission, to the address set forth below or such
other address as may be designated by the parties from time to time in
accordance with this Section 5(b). Notices delivered personally, by
overnight express delivery service or by local courier service shall
be deemed given as of actual receipt. Mailed notices shall be deemed
given three business days after mailing. Notices delivered by telex
or facsimile transmission shall be deemed given upon receipt by the
sender of the answer back (in the case of a telex) or transmission
confirmation (in the case of a facsimile transmission).
If to Pinnacle: Pinnacle Brands, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Chief Financial Officer
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy (which Gardere & ▇▇▇▇▇, L.L.P.
shall not constitute ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇
notice) to: ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
If to Performance: Performance Printing Corporation
▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: President
Telecopier: (▇▇▇)▇▇▇-▇▇▇▇
with a copy (which ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ & Oaks ▇▇▇▇▇▇▇▇
shall not constitute ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
notice) to: ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
If to Packaging: Performance Packaging, L.C.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Telecopier: (▇▇▇)▇▇▇-▇▇▇▇
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Whenever a matter is required pursuant to this Agreement to be
approved or consented to by Pinnacle and Performance, such approvals
or consents must be obtained from Pinnacle by ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ or ▇▇▇▇
Worth and from Performance by ▇▇▇▇ ▇. ▇▇▇▇▇ or ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, or
such other persons as the applicable Member shall designate from time
to time.
(c) Board of Packaging. The business and affairs of
Packaging are managed under the direction of its Managers in
accordance with its Amended and Restated Regulations. In this
Agreement, several items may be determined by the "Board of
Packaging." That phrase means a determination by a majority of the
Managers then serving provided that such determination is made in
accordance with the Amended and Restated Regulations of Packaging.
Performance and Pinnacle acknowledge and agree that the
members of Packaging have unanimously approved of this Agreement, and
that pursuant to the Amended and Restated Regulations of Packaging,
Pinnacle has the right to designate a majority of the Managers of
Packaging and that those designees and the designees of Performance
might be considered to be "interested" in a particular matter decided
by the Board of Packaging under this Agreement. Performance and
Pinnacle agree that (i) they have been informed of the material facts
as to the relationships between Pinnacle, Performance and Packaging,
the interests of the Managers of Packaging relating thereto, and as to
the contracts and transactions between them, (ii) Performance and
Pinnacle specifically approve of this Agreement, including but not
limited to the provision pursuant to which certain matters are decided
by a majority of the Managers (including interested Managers), (iii)
the above-described matters shall be voted upon by all Managers
including the above-referenced designees who might be considered to be
"interested", and (iv) neither this Agreement nor any decision made by
the "Board of Packaging" pursuant to this Agreement shall be void or
voidable solely because the Managers may be directors or officers or
have a financial interest in Pinnacle or Performance, solely because
such a Manager is present at or participates in the meeting of
Managers which decides an issue to be determined by the Board of
Packaging, or solely because such Manager's or Managers' votes are
counted for such purpose, if:
(i) The material facts as to the relationship or
interest and as to such contract or transaction are disclosed
or are known to the Managers, and the Managers in good faith
authorize the contract or transaction by the affirmative vote
of a majority of
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the disinterested Managers, even though the disinterested
Managers be less than a quorum; or
(ii) The material facts as to the relationship or
interest and as to such contract or transaction are disclosed
or are known to the Members entitled to vote thereon, and the
contract or transaction is specifically approved in good faith
by vote of the Members; or
(iii) The contract or transaction is fair as to
Packaging as of the time it is authorized, approved, or
ratified by the Managers or Members.
The parties hereto agree that neither Packaging nor any Member
of Packaging shall be entitled to assert that a contract or
transaction is not fair as to Packaging unless (i) Packaging or a
Member of Packaging asserts in writing within 100 days after such
contract or transaction is authorized, approved or ratified that it is
asserting a claim in accordance with this Section 5(c) that an
approved contract or transaction was not fair as to Packaging at the
time it was approved or ratified and (ii) such written claim is
delivered to each of the Managers of Packaging within 100 days after
such approval. The parties hereto agree that a failure to assert a
claim in the manner and within the time periods set forth herein shall
be deemed (i) specific approval in good faith by the Members of such
contract or transaction and (ii) conclusive proof that such
transaction is fair to Packaging. If any party challenges the
fairness of a particular contract or transaction (whether or not a
lawsuit is filed) but such party did not assert and deliver the
written claim in accordance with, and pursuant to the time
requirements set forth in, this Section 5(c), such party agrees to
indemnify the interested party and the Manager that is affiliated with
the interested party from and against any and all obligations,
liabilities, costs, damages and expenses ("Loss") (including
reasonable attorneys' fees and damages resulting from the cancellation
or voiding of an applicable contract or transaction) incurred by
either of them, as such Loss is incurred, arising out of or relating
to such challenge. In addition, Packaging and each Member agree that
they shall not be entitled to assert against a Manager a claim for
breach of fiduciary duty or any other claim relating in any way to
approval of a contract or transaction unless (i) Packaging or such
Member expressly asserts in writing within 100 days after such
approval that it is asserting a claim against a Manager and (ii) such
written claim is delivered to the Manager against which such claim is
asserted within 100 days after such approval. If Packaging or any
Member asserts against a Manager a claim for breach
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of fiduciary duty or any other claim relating in any way to approval
of a contract or transaction (whether or not a lawsuit is filed), but
Packaging or such Member did not assert and deliver the written claim
to the Manager against which such claim is asserted in accordance
with, and pursuant to the time requirements set forth in the immediate
preceding sentence of this Section 5(c), Packaging and/or such Member,
as applicable, agrees to indemnify the Manager against which such
claim is asserted from and against any and all Loss (including
reasonable attorneys' fees) incurred by him, as such Loss is incurred,
arising out of or relating to such claim or the assertion of such
claim.
None of the provisions of this Agreement (including this
Section 5(c)) are intended to supersede, limit or define the fiduciary
duties of the Managers to the Members of Packaging. The terms
"Managers" and "Members" have the same meanings herein as in the
Amended and Restated Regulations of Packaging.
(d) Amendment. This Agreement may be amended, modified
or supplemented only by an instrument in writing executed by all of
the parties hereto.
(e) Waiver. The failure of any party hereto to seek
redress for violation, or to insist upon the strict performance, of
any covenant, agreement, provision or condition of this Agreement,
shall not constitute a waiver of the terms of such covenant,
agreement, provision or condition at that time or at subsequent times
or of the terms of any other covenant, agreement, provision or
condition, and the parties hereto shall have all remedies provided
herein with respect to that act or any subsequent act which would have
originally constituted the violation hereunder.
(f) Nondisclosure of Confidential Information. During
the term of this Agreement, Packaging and Performance will have access
to and become familiar with various trade secrets and proprietary and
confidential information of Pinnacle and its Affiliates, including,
but not limited to, processes, compilations of information, records,
sales procedures, customer requirements, pricing techniques, customer
lists, methods of doing business and other confidential information
(collectively referred to as "Confidential Information"), which are
owned by Pinnacle and/or its Affiliates and regularly used in the
operation of its business, and as to which Pinnacle and/or its
Affiliates take precautions to prevent dissemination. During the term
of this Agreement, Pinnacle may have access to and become familiar
with various trade secrets and
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proprietary and confidential information of Performance which are
owned by Performance and regularly used in the operation of its
business and as to which Performance takes precautions to prevent
dissemination. Packaging and Performance acknowledge and agree that
the Confidential Information (i) is secret and not known in the
industry; (ii) gives Pinnacle or its Affiliates an advantage over
competitors who do not know or use the Confidential Information; (iii)
is of such value and nature as to make it reasonable and necessary to
protect and preserve the confidentiality and secrecy of the
Confidential Information; and (iv) is comprised of valuable, special
and unique assets of Pinnacle or its Affiliates, the disclosure of
which could cause substantial injury and loss of profits and goodwill
to Pinnacle or its Affiliates. Packaging and Performance may not use
or in any way disclose any of the Confidential Information, directly
or indirectly, either during the term of this Agreement or at any time
thereafter, except for disclosure among employees of Packaging
necessary to carry out this Agreement. All files, records, documents,
information, data and similar items relating to the business of
Pinnacle, whether prepared by Packaging or Performance or otherwise
coming into their possession, will remain the exclusive property of
Pinnacle, and in any event must be promptly delivered to Pinnacle upon
termination of this Agreement. Packaging and Performance agree that
upon receipt of any subpoena, process or other request to produce or
divulge, directly or indirectly, any Confidential Information to any
entity, agency, tribunal or person, it shall timely notify and
promptly hand deliver a copy of the subpoena, process or other request
to Pinnacle. For this purpose, each of Packaging and Performance
irrevocably nominates and appoints Pinnacle (including any attorney
retained by Pinnacle), as its true and lawful attorney-in-fact, to act
in its name, place and stead to perform any act that Packaging or
Performance might perform to defend and protect against any disclosure
of any Confidential Information. Notwithstanding the provisions set
forth in Section 3 hereof, the provisions set forth in this Section
5(f) shall survive and remain effective after the other provisions set
forth herein terminate. Pinnacle agrees to be bound by the provisions
of this Section 5(f) with respect to the trade secrets and proprietary
and confidential information of Performance to the same extent as
Performance is bound by the provisions of this Section 5(f) with
respect to the Confidential Information. Pinnacle agrees that
Performance shall have the same rights, responsibilities and remedies
with respect to the trade secrets and proprietary and confidential
information of Performance as Pinnacle has pursuant to this Section
5(f) with respect to the Confidential Information.
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(g) Assignment. The rights and duties created by this
Agreement shall not be assigned or delegated by any party hereto
without the prior written consent of the other parties hereto. Any
assignment or delegation made without such prior written consent shall
be null and void.
(h) Entire Agreement. This Agreement, the schedules and
exhibits hereto, and the other documents executed or delivered
pursuant to this Agreement, contain the complete agreement among the
parties with respect to the transactions contemplated hereby and
supersede all prior agreements and understandings, whether oral or
written, among the parties with respect to such transactions, except
that the obligations of any party under any agreement executed
pursuant to or contemporaneously with this Agreement shall not be
affected by this Section 5(h).
(i) Governing Law and Venue. The parties acknowledge and
agree that this Agreement and the obligations and undertakings of the
parties hereunder will be performable in Dallas, Dallas County, Texas.
This Agreement shall be governed by, and construed and enforced in
accordance with, the laws of the State of Texas. If any action is
brought to enforce or interpret this Agreement, venue for such action
shall be in Dallas County, Texas.
(j) Counterparts. This Agreement may be executed in any
number of counterparts, each of which when so executed and delivered
shall be deemed an original, and such counterparts together shall
constitute only one original.
6. Condition Subsequent. In the event Packaging fails to obtain
the financing described below (the Refinancing") on or before March 31, 1997,
Packaging shall notify Pinnacle in writing and Pinnacle shall have the option
to terminate this Agreement.
(a) Refinancing. The Refinancing shall be in the total
amount of $2,425,000.00, payable in 60 equal installments of principal
and interest with interest accruing at the rate of eleven percent
(11%) per annum.
(b) Method of Termination. Pinnacle's termination of this
Agreement hereunder shall be effective as of the date on which written
notice is received by Performance and Packaging. No termination shall
be effective unless received by Performance and Packaging prior to
Packaging's obtaining the Refinancing, regardless of the date of the
Refinancing.
(c) Prior Agreement. In the event of termination
pursuant to this Section 6, this Agreement shall become null and void,
and the previous Packaging Services
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Agreement among the parties hereto, dated June 13, 1994, as amended
from time to time prior to the date hereof, shall be reinstated and
fully effective as the agreement of the parties hereto with respect to
the matters covered therein.
IN WITNESS WHEREOF, this Agreement has been entered into as of the
date first written above.
PINNACLE BRANDS, INC.
By:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇,
Executive Vice President
PERFORMANCE PRINTING CORPORATION
By:
▇▇▇▇ ▇. ▇▇▇▇▇,
President
PERFORMANCE PACKAGING, L.C.
By:
▇▇▇▇ ▇. ▇▇▇▇▇,
President
SCHEDULE C
FINANCING PORTION OF THE FIXED COSTS
The Financing Portion of the Fixed Costs shall be determined each month during
the Normal Term, in accordance with the following:
1. For the first sixty months of the Normal Term, beginning with the
Fixed Cost Budget for March, 1997, it shall include the monthly payments on
$2,425,000, in the amount of $52,725.38 per month.
2. If Pinnacle approves the acquisition of Additional Expansion
Equipment, the note payments for such equipment shall be payable as part of the
Financing Portion of the Fixed Costs. The notes shall be payable over the
balance of the Normal Term or if one or more of Packaging, Performance and/or
Pinnacle desire
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that the notes be payable over a period other than the balance of the Normal
Term, the period over which such notes shall be payable shall be determined
either (a) by the agreement of Packaging, Performance and Pinnacle or (b) by
the Board of Packaging. It is possible that Pinnacle, with the written consent
of Performance, will desire that Packaging acquire additional equipment and/or
facilities to meet Pinnacle's needs but that Pinnacle does not require the
full-time use of such additional equipment and/or facilities. If that is the
case, the full amount of the note payments for such equipment shall not be
payable as part of the Financing Portion of the Fixed Costs, and Pinnacle's
Fixed Cost Payments will only be adjusted in such amount as shall be agreed to
in writing by Pinnacle, Performance and Packaging (which adjustment would not
reflect the full amount of the debt service relating to the acquisition of such
equipment and/or facilities).