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Exhibit 10(c)
STOCK AGREEMENT
AGREEMENT, dated the 9th day of October, 1996, among Xxxxxx X.
Xxxxxxxxxx ("EMPLOYEE")', Xxxx Xxxxxxxxxxx ("XXXXXXXXXXX") and Amscan, Inc., a
New York corporation ("AMSCAN").
WHEREAS, Employee and Amscan are parties to an Employment Agreement,
dated as of November 27, 1991, as supplemented and amended (as so supplemented
and amended, the "EMPLOYMENT AGREEMENT"). Pursuant to the terms of the
Employment Agreement, among other provisions, the Employee is entitled to
receive certain bonus payments based upon the profits of the Amscan and certain
other payments and benefits in addition to his base compensation and fringe
benefits. Xxxxxxxxxxx is the sole shareholder of Amscan.
NOW, THEREFORE, in consideration of services rendered by Employee to
Amscan, and in order to induce Employee to terminate the Employment Agreement
and to enter into a new employment agreement which does not provide for the
bonus and certain other payments and benefits provided for in the Employment
Agreement which would otherwise create significant additional financial
obligaion to Amscan, and in consideration of the mutual covenants and agreements
contained herein, the parties agree, effective at and only upon the closing of
the proposed initial public offering of common stock of Amscan (or any security
issued to Amscan's shareholders in exchange for Amscan stock) (the "IPO") (the
date of such closing being referred to herein as the "EFFECTIVE Date"), as
follows:
1. Payments by Amscan.
a. In anticipation of a closing of the IPO for any amount,
Amscan will pay Employee $3,450,000 on the day prior to the date that the
underwriters of the IPO sign the Underwriters Agreement, ("Underwriting Date"),
without any responsibility by the Employee to refund any of such amount. Within
60 days of the closing of the IPO, Amscan will pay Employee an amount equal to
five percent (5%) of the "Net Proceeds of the IPO" (as defined below), less the
amount of any dividends or other distributions paid to Employee in respect of
the Shares prior to the Underwriting Date, and less the sum of $3,450,000
previously paid on account.
b. For purposes of this Paragraph 1, "Net Proceeds of the
IPO" shall mean the gross proceeds from the sale of all primary and secondary
shares in the IPO, including shares sold through the exercise of the rights
granted the underwriters ("Greenshoe"), reduced by the amount of all
underwriting discounts in connection with the IPO and reduced further by the
amount of all other expenses payable in connection with the IPO in the expense
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categories identified in the IPO registration statement.
2. Transfer of Shares. On the day prior to the Underwriting
Date, Amscan will transfer to Employee Amscan shares which when exchanged on a
tax free basis on the Underwriting Date for shares of Amscan Holdings, Inc. will
be equal to three (3%) percent of Amscan Holdings, Inc. shares to be issued and
outstanding after IPO excluding the shares issued pursuant to any Greenshoe.
(All of the shares to be issued to the Employee pursuant to this Paragraph 2 are
referred to herein as the "RESTRICTED SHARES").
3. Sale of Shares by Employee: Restrictions.
a. The Employee agrees that one-half of the Restricted Shares
which are received under Paragraph 2 will not be sold for a period of 18 months
following their transfer to Employee. Notwithstanding the foregoing Employee
shall be entitled to sell Restricted Shares prior to the end of the 18 months
(subject to the provisions of Paragraph 3b) with a fair market value equal to
two hundred (200%) percent of the amount of capital gains taxes incurred by the
Employee as a result of using Shares to pay off the principal indebtedness or
interest under the Loan Agreement between Xxxxxxxxxxx and Employee ("Loan
Agreement"). The remaining one-half of the Restricted Shares may be sold after
the third anniversary of the transfer of the Restricted Shares to Employee. In
order to assure compliance with the foregoing restrictions, the Restricted
Shares will bear a restrictive legend and appropriate stop transfer orders will
be given to Amscan's transfer agent.
b. If the Employee wishes to sell up to one-half of the
Restricted Shares to the extent permitted under the preceding paragraph, during
the period commencing 12 months after the issuance of the Restricted Shares to
him, and ending on the second anniversary of the issuance of such Restricted
Shares to him, Amscan will, on one occasion, prepare and file a registration
statement for the sale of one-half of the Restricted Shares, provided that (i)
such Restricted Shares, in the opinion of counsel to Amscan, may not otherwise
be sold by the Employee to the public due to the restrictions imposed by Rule
144 under the Securities Act of 1933, (ii) Amscan may register such Restricted
Shares on Form S-3 or any other appropriate registration statement, and (iii)
the Employee has given Amscan at least 90 days' prior notice no later than March
1, 1998, of his desire to have such Restricted Shares registered. In connection
with any such registration, Amscan will use its best efforts to cause a
registration to be timely filed, to become effective and maintained in effect
for such period of time as is reasonably necessary to permit the sale thereof.
The Employer will pay all expenses incident to such registration. The Employee
will pay any underwriting commissions or discounts, if the Employee decides to
sell such Restricted
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Shares through an underwriter. The Employer and the Employee shall enter into
the usual indemnification agreements with respect to information furnished by
the indemnitor which is included in the registration statement.
c. Any shares transferred by Employee to Xxxxxxxxxxx pursuant
to the terms of the Loan Agreement shall not be deemed to be a sale of the
Restricted Shares.
d. Employee shall be entitled to make gifts of the Restricted
Shares, which gifts shall not be deemed to be sales of the Restricted Shares.
Employee personally agrees and agrees on behalf of the donees of the Restricted
Shares that none of the donees of his gifts will sell the Restricted Shares
prior to the third anniversary of the transfer of the Restricted shares to him.
The parties agree that none of the Restricted Shares that were gifted shall be
registered pursuant to Paragraph 3b.
4. Future Payments by Xxxxxxxxxxx.
a. In the event that Xxxxxxxxxxx, his wife, his issue, or his
estate (collectively "Xxxxxxxxxxx") should sell any of his shares of Amscan
stock in any public or private sale (other than in the IPO) during the period
commencing on the Effective Date and continuing as long as Employee is employed
during the initial three (3) year Term of his new employment agreement with
Amscan Holdings, Inc. ("New Employment Agreement") and further continuing during
the three (3) year or shorter period during which the Restrictive Covenant is
enforceable under the New Employment Agreement, Xxxxxxxxxxx will pay to the
Employee an amount equal to five percent (5%) of the Net Proceeds of such sale.
b. For purposes of this Paragraph 4. "NET PROCEEDS" of such
sale shall mean the gross proceeds from the sale of Xxxxxxxxxxx'x shares, less
all expenses (including any underwriting discounts or commissions and any
transfer taxes) payable by Xxxxxxxxxxx in connection with such sale.
c. The payment to be made to Employee pursuant to this
Paragraph 4 shall be made in cash within 30 days following the closing of the
sale of shares by Xxxxxxxxxxx.
d. The issuance of Shares by Amscan to make acquisitions or
to effect any mergers shall not be sales of Amscan stock by Xxxxxxxxxxx.
5. Corporation Taxes. In the event that Employee is liable for
the payment of any taxes based upon the net income of Amscan for that portion of
Amscan 1996-97 fiscal year or 1997-1998 fiscal year, as the case may be, during
which it is a Subchapter S corporation, Xxxxxxxxxxx agrees that he shall pay to
Employee an
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amount sufficient to pay such tax liability of Employee including interest and
penalties and any tax liability resulting from the undertaking hereby by
Xxxxxxxxxxx to pay such tax liability.
6. Xxxxxxxxxxx Loan. Xxxxxxxxxxx agrees to loan the Employee the
amounts requested by Employee, in accordance with the Loan Agreement.
7. Miscellaneous.
a. No portion of the payment to be made to the Employee as
provided in Paragraph 1 hereof and no portion of the value of the shares to be
transferred to Employee under Paragraph 2 hereof shall be deducted from the
profits of Amscan for the purpose of computing the bonuses payable to Employee
under the Employment Agreement.
b. In the event that the shareholders of Amscan receive
securities in exchange for their Amscan common stock, whether as a result of the
formation of a holding company for Amscan, a merger or other transaction, the
obligations of Amscan hereunder shall he binding on the issuer of the securities
exchanged for Amscan common stock. Following such exchange, all references
herein to Amscan or Amscan securities shall be deemed to be references to such
issuer or its securities.
c. This Agreement shall be binding upon and shall inure to
the benefit of the parties hereto and their respective successors, assigns,
heirs, administrators and legal representatives.
d. This Agreement will be governed by and interpreted and
enforced in accordance with the laws of the State of New York.
e. This Agreement may be executed in counterparts, each of
which shall constitute an original, but all of which shall constitute a single
agreement.
f. This Agreement represents the entire agreement of the
parties hereto with respect to the subject matter hereof. This Agreement may not
be modified or amended except in a writing
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signed by the party or parties to be bound by such modification or amendment.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
/S/ XXXXXX X. XXXXXXXXXX AMSCAN, INC.
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Xxxxxx X. Xxxxxxxxxx
/S/ XXXX XXXXXXXXXXX By: /S/ XXXX XXXXXXXXXXX
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Xxxx Xxxxxxxxxxx Name:
Title:
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