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Exhibit 10(l)
TAX INDEMNIFICATION AGREEMENT
This Indemnification Agreement is made and entered into as of
December __, 1996 between Amscan Holdings, Inc., a Delaware corporation
("Amscan"), and Xxxx X. Xxxxxxxxxxx ("Xxxxxxxxxxx").
WHEREAS, as of the date hereof, Amscan has acquired all of the
business operations of Amscan Inc., Am-Source, Inc., JCS Realty Corp. and SSY
Realty Corp. (individually, a "Subchapter S Company" and, collectively, the
"Subchapter S Companies");
WHEREAS, the Subchapter S Companies elected under Section 1362
of the Internal Revenue Code of 1986, as amended (the "Code"), to be treated and
operated as Subchapter S corporations;
WHEREAS, Xxxxxxxxxxx was for a number of years the sole
shareholder of Amscan Inc., JCS Realty Corp. and SSY Realty Corp. and since 1993
owned a 50% interest in Am-Source, Inc.;
NOW, THEREFORE, in consideration of the premises and mutual
provisions hereinafter set forth, the parties hereto hereby agree as follows:
Article 1. AMSCAN INDEMNITY. Amscan will indemnify xxxxxxxxxxx
for any United States Federal income tax liability, to the extent such liability
is attributable to a claim by the Internal Revenue Service that Xxxxxxxxxxx'x
income with respect to his ownership of stock in any of the Subchapter S
Companies for any taxable year exceeds the income reported to Xxxxxxxxxxx by a
Subchapter S Company on its Internal Revenue Service Form K-1 for such taxable
year and for any United States Federal income tax liability of Xxxxxxxxxxx in
respect of payments to Xxxxxxxxxxx pursuant to this Article 1; provided,
however, that Amscan's obligation to indemnify Xxxxxxxxxxx shall be limited to
taxes on income which create a tax benefit to any of the Subchapter S Companies
(whether by reason of deduction, amortization, credit or otherwise) for a
taxable year(s) which end(s) after closing.
Article 2. XXXXXXXXXXX INDEMNITY. Xxxxxxxxxxx will indemnify
Amscan for Amscan's United States Federal income tax liability resulting from a
claim by any taxing authority that a Subchapter S Company was not properly
treated as a Subchapter S corporation for any period in which such Subchapter S
Company filed a tax return on which it claimed that it was properly treated as a
Subchapter S corporation; provided, however, that Xxxxxxxxxxx'x obligation to
indemnify Amscan shall be limited to the amount that Xxxxxxxxxxx would be
entitled to receive as a refund of United States
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Federal income taxes previously paid with respect to his share of income
generated by a Subchapter S Company..
Article 3. PROCEDURES RELATING TO INDEMNIFICATION. If notice
of a pending or threatened audit is not given to the indemnifying party promptly
after receipt of correspondence from any taxing authority, or in reasonable
detail to apprise the indemnifying party of the nature of the proposed
adjustments, such failure to provide notice promptly shall not relieve the
indemnifying party of its obligations under this agreement, except to the extent
that the failure to notify timely actually prejudices the indemnifying party's
ability to contest such matter. With respect to any audit, the indemnifying
party shall control all proceedings taken solely in connection with such audit
(including, without limitation, selection of and payment for counsel reasonably
acceptable to indemnitee) and, without limiting the foregoing, may in its sole
discretion pursue or forego any and all administrative appeals, proceedings,
hearings and conferences with any taxing authority with respect thereto, and
may, in its sole discretion, either pay the tax claimed and xxx for a refund
where applicable law permits such refund suits or contest the audit adjustments
in any permissible manner; provided, however, that if (i) the results of such
proceedings, suit, contest, claim, hearing, compromise or proposed settlement
could reasonably be expected to have a material adverse effect on the assets,
business, operations or financial condition of Amscan or Xxxxxxxxxxx, or their
ability to treat any income or losses in a particular manner for tax calculation
purposes for taxable periods ending after the closing of the exchange of certain
shares of capital stock owned by Xxxxxxxxxxx for shares of Common Stock of
Amscan or (ii) any such proceeding, suit, contest, claim, hearing, compromise or
proposed settlement or procedure involves taxes other than taxes subject to
indemnification, the parties hereto shall consult and mutually agree on a
reasonable good faith basis upon all aspects of the conduct of such matters. The
indemnitee and the indemnifying party shall cooperate in contesting any audit,
which cooperation shall include, without limitation, the retention and provision
to the indemnifying party of records and information which are reasonably
relevant to such audit and making employees available on a mutually convenient
basis to provide additional information or explanation of any material provided
hereunder or to testify at proceedings relating to such audit.
Article 4. GOVERNING LAW. This Agreement shall be governed by
and construed in accordance with the laws of the State of New York, without
giving effect to principles of conflicts of laws.
Article 5. NOTICES. All notices or other communications
provided for under this Agreement shall be given in writing and shall be
delivered personally or sent by post, telex or facsimile transmission to the
other party at the following address or to such other address as to which a
party has given notice as provided herein.
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If to Amscan:
Amscan Holdings, Inc.
00 Xxxxxxxxxx Xxxx
Xxxxxxxx, Xxx Xxxx 00000
If to Xxxxxxxxxxx:
Xxxx X. Xxxxxxxxxxx
c/o Amscan Holdings, Inc.
00 Xxxxxxxxxx Xxxx
Xxxxxxxx, Xxx Xxxx 00000
Article 6. ASSIGNMENT. Except as otherwise specifically
provided herein, this Agreement and any rights and obligations hereunder may not
be assigned by either party without the prior written approval of the other
party, and any attempted assignment not in compliance with this Article shall be
void and of no effect.
Article 7. COSTS. In any proceeding to enforce any rights
under this Agreement by legal proceedings or otherwise, the prevailing party
shall be reimbursed by the defaulting party for all of the costs and expenses of
the prevailing party in pursuing such proceeding, including, without limitation,
reasonable attorneys' or solicitors' fees.
Article 8. PARTIES NOT PARTNERS. Nothing contained in this
Agreement shall constitute a partnership or other agency agreement between the
parties hereto or their respective subsidiaries or any of them, nor shall
anything contained in this Agreement give any of the parties hereto or any of
the respective subsidiaries the right to bind, or pledge the credit of, any of
the other parties hereto or any of their respective subsidiaries.
Article 9. ANNUAL REVIEW. This Agreement may be amended by
mutual consultation between the parties, evidenced in a writing signed by both
parties, and the parties agree to engage in mutual consultation in good faith
during each annual period from the date hereof at the request of any party to
maintain in this Agreement the principles of fairness and equity, and to amend
this Agreement accordingly.
Article 10. SEVERABILITY. If any provision in this Agreement
is found by any court or administrative body of competent jurisdiction to be
invalid or unenforceable, the invalidity or unenforceability of such provision
shall not affect the other provisions of this Agreement and all provisions not
affected by such invalidity or unenforceability shall remain in full force and
effect unless the severance of the invalid or unenforceable provision would
unreasonably frustrate the commercial purposes of this Agreement. The parties
hereby agree to attempt to substitute for any invalid or unenforceable provision
a
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valid or enforceable provision which achieves to the greatest extent possible
the economic objectives of the invalid or unenforceable provision.
Article 11. WAIVER. The waiver by either party of a breach or
default of any of the provisions of this Agreement by the other party shall not
be construed as a waiver of any succeeding breach of the same or other
provisions nor shall any delay or omission on the part of either party to
exercise or avail itself of any right, power or privilege that it has or may
have hereunder operate as a waiver of any breach or default by the other party.
Article 12. ENTIRE AGREEMENT. This Agreement constitutes the
entire and only Agreement between the parties hereto relating to the subject
matter hereof and overrides and supersedes any prior arrangements or oral
discussions and shall not be modified except in writing by agreement between the
parties.
IN WITNESS WHEREOF, the parties have caused this Agreement to
be executed and delivered as of the day and year first above written.
AMSCAN HOLDINGS, INC.
By: ___________________________________
Name:
Title:
___________________________________
Xxxx X. Xxxxxxxxxxx