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EXHIBIT 10.7
ORGANIZATIONAL AGREEMENT
This Organizational Agreement, dated as of June 13, 1994, is by and
among Performance Packaging L.C., a Texas limited liability company (the
"Company"), Pinnacle Brands, Inc., a Delaware corporation ("Pinnacle"), and
Performance Printing Corporation, a Texas corporation ("Performance").
WHEREAS, Performance organized the Company as a limited liability
company under the laws of the State of Texas; and
WHEREAS, Pinnacle has agreed to acquire a limited liability company
interest in the Company and enter into that certain Packaging Services Agreement
(the "Packaging Agreement") with the Company on the condition that the parties
hereto enter into this Agreement;
NOW, THEREFORE, in consideration of the foregoing and of the
representations, covenants and agreements contained herein, and certain other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
ARTICLE I
ADMINISTRATION AND FINANCIAL MATTERS
1.01. Management of the Company. Performance agrees that during the
Initial Term (hereinafter defined) of the Packaging Agreement so long as the
Board of the Company (hereinafter defined) so desires, Performance will provide
at no charge to the Company, general oversight and management services for the
Company. Initially, Xxxx X. Xxxxx will serve as president of Packaging. Pinnacle
employees will work closely with the employees of the Company to make sure the
Company meets the needs of Pinnacle. The management personnel of Pinnacle will
be reasonably available to consult with the management personnel of Performance
on business issues facing the Company. As used herein, "Initial Term" means the
period beginning on the date hereof and ending on the last day of the Normal
Term (as defined in the Packaging Agreement) excluding any renewals or
extensions of the Normal Term.
1.02. Accounting Services. During the Bridge Term (as defined in the
Packaging Agreement), Performance will provide to the Company, at no charge, the
same types of in-house accounting services as have been provided for the Company
during the first three months of 1994. During the Normal Term (as defined in the
Packaging Agreement), Performance will provide such accounting services for a
fee of $1,700 per month. If Performance determines that its costs of providing
such accounting services to the Company are greater or less than the amount it
is charging the Company, Performance may give written notice to the Company and
Pinnacle that it is changing the accounting services fee to cover such increased
or decreased cost and a proposed date for the fee change not less than 30 days
from the date the notice is received by the Company and Pinnacle. The Company or
Pinnacle may at any time terminate such accounting services of Performance to
the Company by giving written notice of such termination to Performance stating
the date on which Performance shall cease to provide such services.
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1.03. Acquisition of Additional Assets. Performance agrees that, prior
to commencement of the Normal Term, it will arrange for the purchase by the
Company of approximately $530,000 of assets to be designated by Pinnacle,
provided that such assets are reasonably acceptable to Performance. Performance
further agrees that it will arrange financing for the Company's purchase of such
assets and guarantee the debt incurred by the Company therefor.
1.04. Working Capital. Performance will use its best efforts to obtain
a working capital line of credit for the Company during 1994 and 1995.
Performance will be responsible for providing working capital for jobs involving
projects whereby both Performance and the Company perform services for a third
party, and Pinnacle will be responsible for providing working capital for jobs
performed for Pinnacle or its Affiliates (as that term is defined in the
Packaging Agreement) and jobs involving projects whereby both Pinnacle and the
Company perform services for a third party.
1.05. Costs of Organization. The Company shall timely reimburse
Pinnacle and Performance for legal fees and related expenses actually paid by
each of them in connection with or related to the preparation and negotiation of
this Agreement, the Packaging Agreement, that certain Acquisition Agreement
between the parties hereto, the Amended and Restated Regulations of the Company,
and the agreements, documents and instruments executed pursuant hereto and
thereto.
ARTICLE II
PROVISION OF SERVICES
2.01. Services For Performance. The Company shall only provide services
to Performance at such prices and on such terms as may be agreed to from time to
time by the Board of the Company.
2.02. Sales to Third Parties. The Company, Performance and Pinnacle
shall mutually agree on prices and terms for services provided to parties other
than Performance and Pinnacle (the "Pricing Strategy"). Exceptions to the
Pricing Strategy will require either (a) the mutual agreement of the Company,
Pinnacle and Performance, or (b) if the Company, Pinnacle and Performance do not
so agree, the Board of the Company shall determine the Pricing Strategy and/or
whether such exception is acceptable.
2.03. Joint Projects. If at any time an opportunity arises whereby both
Performance and the Company or Pinnacle and the Company will provide services to
a third party or the Company will provide services to a customer of Performance
or Pinnacle (any of such events being called a "Joint Project"), then the
officers of the Company shall determine the price and terms for providing such
services (consistent with the Pricing Strategy) and shall, concurrently with
informing the third party of its proposed price for providing such services,
telecopy to the designated representatives of Pinnacle (or if a Performance
officer is not at the time the President of the Company, to the designated
representatives of Pinnacle and Performance) a copy of such proposed price,
along with other documents that Pinnacle (or if a Performance officer is not at
the time the President of the Company, that Pinnacle and Performance) may
reasonably request. The price for services provided by the Company to a third
party on a Joint Project shall be paid in full
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to the Company without any profit or xxxx-up to Pinnacle or Performance. The
allocation of proceeds received on a Joint Project (including the allocation of
xxxx-ups on outside services and materials) shall be determined either (a) by
agreement of the Company, Performance and Pinnacle, or (b) if they do not so
agree, by the Board of the Company. It is intended that the allocation of
proceeds is to be fairly allocated based on the materials and services provided.
The Company is not to receive a windfall from the allocation of sale proceeds,
and it is not to subsidize the profits of Performance or Pinnacle by charging
disproportionately low prices for the services to be performed by the Company.
The selling expenses (sales commissions, travel and other sales related
expenses) incurred in connection with a Joint Project are be allocated among the
parties providing materials and services for the Joint Project either (a) by the
agreement of the Company, Performance and Pinnacle, or (b) if they do not so
agree, by the Board of the Company. The collection risks are to be borne
proportionately between each of the service providers. For example, if a joint
project is invoiced at $100,000 for a job with printing (by Performance) being
30%, marked-up outside services and materials being 40% and packaging (by the
Company) being 30%, and if the job is completed, the outside services and
materials would be paid for first, 50% of the other payments received on the job
would belong to the Company and 50% would belong to Performance, and if
additional amounts remained they would be paid based on the agreed allocation of
the xxxx-up on outside services and materials. If a Joint Project is cancelled
or otherwise not completed, the proceeds received shall be allocated among the
parties providing materials and services for the incomplete Joint Project either
(a) by the agreement of the Company, Performance and Pinnacle, or (b) if they do
not so agree, by the Board of the Company.
2.04. Business Opportunity. During the Initial Term of the Packaging
Agreement, Performance and Xxxx X. Xxxxx, Xxxxx Xxxxxxxx and Xxxx Xxxx (certain
of its principals) agree not to render any services that the Company is capable
of performing or enter into any packaging business unless Performance or such
principal notifies Pinnacle and the Company that it is providing the Company the
opportunity to perform such services or get into such business (in accordance
with the procedures hereinafter set forth) and the Company declines such
opportunity to perform such services or enter into such proposed business
opportunity. In the event that Performance or such principals would like to
render such services or enter into such line of business, whether in response to
a particular opportunity or otherwise, it must first provide the Company and
Pinnacle with a detailed description of such services or such line of business
and of any particular opportunity or job to provide such services of which it is
aware or which it has been offered, indicating in writing that should the
Company choose not to provide such services or enter into such line of business,
Performance or its principals plan to do so. Pinnacle shall have ten days from
the date of such notice to indicate to Performance that the Company would like
to provide such services or enter into such line of business. If Pinnacle so
indicates and the Company diligently pursues entry into such line of business,
demonstrating, on a timely basis, its financial ability and commitment to pursue
such line of business, then Performance or such principals may not provide such
services or enter into such line of business thereafter during the Initial Term
of the Packaging Agreement. Any disputes arising from this Section 2.04 shall be
resolved by the Board of the Company.
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ARTICLE III
PREEMPTIVE RIGHTS
The Company may issue, sell or distribute limited liability company
interests in the Company ("Interests") only on the terms and conditions of this
Article III. If the Company desires to offer Interests to existing members or to
third parties, the Company shall notify Pinnacle and Performance in writing of
such intended sale at least 30 days prior to the date thereof, the purchase
price and other terms and conditions of such proposed issuance (or the purchase
price or basis for determining the same), and the date on or about which such
sale is to be made.
(a) Within 30 days after receipt of notice from the Company,
each of Pinnacle and Performance may notify the Company that it intends to
purchase an amount of such Interests equal to up to the percentage ownership
interest it then holds in the Company multiplied by the amount of the Interests
offered, on the same terms and conditions set forth in the Company's notice to
Pinnacle and Performance. The closing of such purchase shall be within 45 days
after the notice from the Company is received by such member.
(b) If, within 30 days after receipt by a member of notice
from the Company, the member does not send notice pursuant to subsection (a)
above, then the Company shall offer to sell the Interests to the other member
(if the other member exercised its right to purchase its percentage of the
offered Interests pursuant to subsection (a) above) on substantially the same
terms and conditions as those contained in the notice sent to Pinnacle and
Performance. If, within 15 days after receipt by such member of the offer to
purchase the remaining Interests pursuant to this subsection (b), the member
does not accept such offer, then the Company shall be free to sell the Interests
to a third party but only on substantially the same terms and conditions as
those contained in the notice sent to Pinnacle and Performance.
(c) Any notice given by the Company as described above, shall,
when taken together with the notice sent by Pinnacle or Performance to the
Company pursuant to subsection (a) or (b) above, constitute a legal, valid and
binding agreement on the terms and conditions therein set forth, it being
understood that any modification, amendment, variance or other charge by
Pinnacle or Performance to the terms and conditions set forth in such notice
given by the Company other than as provided herein shall be of no force and
effect unless consented to in writing by the Company.
(d) The Company shall be entitled to rely conclusively upon
any notice received, or the failure to receive any notice, pursuant to this
Article III and shall not be affected by or be required to give any effect to
any notice received pursuant thereto or otherwise from any persons other than
Pinnacle or Performance.
ARTICLE IV
MISCELLANEOUS
4.01. Termination of this Agreement. This Agreement shall continue
until, and shall terminate immediately upon, (a) execution of a written
agreement of termination by the Company, Pinnacle and Performance or (b)
effectiveness of a registration statement filed with the Securities and Exchange
Commission pursuant to which the Company would become a public company.
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4.02. Amendment. This Agreement may be amended, modified or
supplemented only by an instrument in writing executed by the party against
which enforcement of the amendment, modification or supplement is sought.
4.03. Notice. Any notice or communication must be in writing and given
by (a) deposit in the United States mail, addressed to the party to be notified,
postage prepaid and registered or certified with return receipt requested, (b)
delivery in person or by courier service providing evidence of delivery or (c)
transmission by telecopy. Each notice or communication that is mailed, delivered
or transmitted in the manner described above shall be deemed sufficiently given,
served, sent and received, in the case of mailed notices, on the third business
day following the date on which it is mailed and, in the case of notices
delivered by hand, courier service or telecopy, at such time as it is delivered
to the addressee (with the delivery receipt or the affidavit of messenger) or at
such time as delivery is refused by the addressee upon presentation. For
purposes of notice, the addresses of the parties shall be: If to Pinnacle:
Pinnacle Brands, Inc.
000 Xxxxxx X Xxxx
Xxxxx Xxxxxxx, Xxxxx 00000
Attention: Chief Financial Officer
Telecopier: (000) 000-0000
with a copy (which Gardere & Xxxxx, L.L.P.
shall not constitute 0000 Xxx Xxxxxx
notice) to: Xxxxx 0000
Xxxxxx, Xxxxx 00000
Attention: Xxxxxxxxx X. Xxxxxxx
Telecopier: (000) 000-0000
If to Performance: Performance Printing Corporation
0000 Xxxxx Xxxxxx
Xxxxxx, Xxxxx 00000
Attention: President
Telecopier: (000) 000-0000
with a copy to (which) Xxxxx XxXxxxxxx & Oaks Xxxxxxxx
shall not constitute 000 Xxxxxxxx Xxxxx
notice) to: Xxxxx 0000
Xxxxxx, Xxxxx 00000-0000
Attention: Xxxxxxx Xxx
Telecopier: (000) 000-0000
If to the Company: Performance Packaging L.C.
0000 Xxxxxxxxx Xxx
Xxxxxx, Xxxxx 00000
Telecopier: (000) 000-0000
Any party may change its address for notice by written notice given to
the other parties.
4.04. Board of the Company. The business and affairs of the Company are
managed under the direction of Managers. In this Agreement, several items may be
determined by the
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"Board of the Company". That phrase means a determination by a majority of the
Managers then serving.
4.05. Entire Agreement. This Agreement supersedes all prior agreements
and understandings relating to the subject matter hereof, except that the
obligations of any party under the Acquisition Agreement, the Packaging
Agreement, the Amended and Restated Regulations of the Company and any agreement
executed or required to be executed pursuant hereto or thereto shall not be
affected by this Section.
4.06. Severability. If any provision of this Agreement is held to be
illegal, invalid or unenforceable under present or future laws effective during
the term hereof, such provision shall be fully severable and this Agreement
shall be construed and enforced as if such illegal, invalid or unenforceable
provision never comprised a part hereof; and the remaining provisions hereof
shall remain in full force and effect and shall not be affected by the illegal,
invalid or unenforceable provision or by its severance herefrom. Furthermore, in
lieu of such illegal, invalid or unenforceable provision, there shall be added
automatically as part of this Agreement, a provision as similar in its terms to
such illegal, invalid or unenforceable provision as may be possible and be
legal, valid and enforceable.
4.07. Governing Law. This Agreement and rights and obligations of the
parties hereto shall be governed, construed and enforced in accordance with the
laws of the State of Texas.
4.08. Captions. The captions in this Agreement are for convenience of
reference only and shall not limit or otherwise affect any of the terms or
provisions hereof.
4.09. Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original, and all of which together shall
constitute one and the same instrument.
4.10. Number and Gender. Whenever the context requires, references in
this Agreement to the singular number shall include the plural, the plural
number shall include the singular and words denoting gender shall include the
masculine, feminine and neuter.
4.11. Legal Representation. All of the parties to this Agreement
acknowledge that they have had the opportunity to seek and have sought counsel
to review this Agreement and to obtain the advice of such counsel relating
thereto.
4.12. Non-assignability. This Agreement shall not be assignable by any
party to this Agreement without the prior written consent of the other parties
hereto except that it may be transferred to a permitted transferee of a member's
limited liability company interest.
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IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement effective as of the date first above written.
PERFORMANCE PACKAGING L.C.
By:
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Its:
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PINNACLE BRANDS, INC.
By:
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Its:
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PERFORMANCE PRINTING CORPORATION
By:
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Its:
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The undersigned join in this Agreement for purposes of agreeing to be
bound by the provisions of Section 2.04 hereof applicable to "principals."
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Xxxx X. Xxxxx
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Xxxxx Xxxxxxxx
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Xxxx Xxxx
