CONFORMED COPY
VOTING AGREEMENT
VOTING AGREEMENT (this "Agreement") dated as of August
10, 1997, by and among Confetti Acquisition, Inc., a
Delaware corporation ("Newco"), the Estate of Xxxx X.
Xxxxxxxxxxx (the "Stockholder") and Xxxxxxxxx
Xxxxxxxxxxx (the "Individual").
WHEREAS, Newco and Amscan Holdings, Inc., a
Delaware corporation (the "Company"), have entered into
an Agreement and Plan of Merger dated as of the date
hereof (the "Merger Agreement"; capitalized terms used
but not defined herein shall have the meanings set forth
in the Merger Agreement; provided that the terms Merger
and Merger Agreement shall not include any amendments or
modifications thereto unless such amendments and
modifications have been approved in writing by the
Stockholder and the Individual) providing for the merger
(the "Merger") of Newco with and into the Company, upon
the terms and subject to the conditions set forth in the
Merger Agreement; and
WHEREAS, the Stockholder beneficially owns
15,024,616 shares of Company Common Stock (such shares
of Company Common Stock, together with any other shares
of Company Common Stock that the Stockholder acquires
beneficial ownership of after the date hereof and during
the term of this Agreement, whether upon the exercise of
options, warrants or rights, the conversion or exchange
of convertible or exchangeable securities, or by means
of purchase, dividend, distribution or otherwise, being
collectively referred to herein as the "Subject
Shares"); and
WHEREAS, as a condition to its willingness to
enter into the Merger Agreement, Newco has requested
that the Stockholder and the Individual enter into this
Agreement.
NOW, THEREFORE, to induce Newco to enter into,
and in consideration of its entering into, the Merger
Agreement, and in consideration of the premises and the
representations, warranties and agreements contained
herein, the parties hereto agree as follows:
1. Representations and Warranties of the
Stockholder and the Individual. Each of the Stockholder
and the Individual hereby represents and warrants to
Newco as of the date hereof as follows:
(a) Authority; No Conflicts. The
Stockholder, through its duly designated representative,
the executrix, has the necessary legal capacity, power
and authority to execute
and deliver this Agreement, to
perform its obligations hereunder and to consummate the
transactions contemplated hereby. The Individual is the
duly appointed executrix of the Stockholder and has the
necessary legal capacity, power and authority to execute
and deliver this Agreement (on behalf of herself
individually and on behalf of the Stockholder as
executrix of the Stockholder), to perform her individual
obligations and as such executrix to perform the
Stockholder's obligations hereunder and to consummate
the transactions contemplated hereby on her individual
behalf and on behalf of the Stockholder as the
Stockholder's executrix. This Agreement has been duly
authorized, executed and delivered by and on behalf of
the Stockholder and by the Individual, and, assuming due
authorization, execution and delivery by Newco,
constitutes a legal, valid and binding obligation of the
Stockholder and the Individual, enforceable in
accordance with its terms. Except for the filings
required under the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvement Act of 1976, as amended (the "HSR Act"), (i)
no filing with, and no permit, authorization, consent or
approval of, any Governmental Entity or any other person
is necessary for the execution and delivery of this
Agreement by and on behalf of the Stockholder and by the
Individual and the consummation by the Stockholder and
the Individual of the transactions contemplated hereby
and (ii) none of the execution and delivery of this
Agreement by and on behalf of the Stockholder and by the
Individual, the consummation of the transactions
contemplated hereby and compliance with the terms hereof
by the Stockholder and the Individual will conflict
with, or result in any violation of, or default (with or
without notice or lapse of time or both) under any
provision of, any trust agreement, loan or credit
agreement, note, bond, mortgage, indenture, lease or
other agreement, instrument, permit, concession,
franchise, license, judgment, order, notice, decree,
statute, law, ordinance, rule or regulation applicable
to the Stockholder or the Individual or to the
Stockholder's or the Individual's property or assets.
(b) The Subject Shares. The Stockholder is
the beneficial owner of the Subject Shares and has, and
throughout the term of this Agreement will have, good
and marketable title to the Subject Shares free and
clear of all Liens and, upon delivery thereof to Newco
against delivery of the consideration therefor pursuant
to this Agreement, good and marketable title thereto,
free and clear of all Liens (other than any arising as a
result of actions taken or omitted by Newco), will pass
to Newco. Each of the Stockholder and the Individual
does not beneficially own any shares of capital stock of
the Company or securities convertible into or
exchangeable for shares of capital stock of the Company,
other than the Subject Shares. The Stockholder (through
the Individual as the executrix of the Stockholder) has
the sole right and power to vote and dispose
of the Subject Shares, and none of such Subject Shares is
subject to any voting trust or other agreement,
arrangement or restriction with respect to the voting or
transfer (other than the provisions of the Securities
Act) of any of the Subject Shares, except as
contemplated by this Agreement.
(c) Tax Indemnity. The Stockholder and the
Individual have entered into a Tax Indemnity Agreement
(the "Tax Indemnity") with the Company, a copy of which
is attached as Schedule I hereto. Such agreement is in
full force and effect and is a valid and binding
agreement of the Stockholder and the Individual and
enforceable in accordance with its terms against them
and, if applicable, their respective successors,
assigns, heirs, agents, representatives, beneficiaries
(including trust beneficiaries), attorneys, affiliates
and associates and all of their respective predecessors,
successors, permitted assigns, heirs, executors and
administrators, including any person to whom the
proceeds of the sale of the Subject Shares may be
distributed or contributed and any other person required
to become an additional indemnitor pursuant to Article 4
thereof.
2. Representations and Warranties of Newco.
Newco hereby represents and warrants to the Stockholder
and the Individual that Newco is a corporation duly
organized, validly existing and in good standing under
the laws of the State of Delaware and has the necessary
corporate power and authority to execute and deliver
this Agreement, to perform its obligations hereunder and
to consummate the transactions contemplated hereby.
This Agreement has been duly authorized, executed and
delivered by and on behalf of Newco and, assuming due
authorization, execution and delivery by the Stockholder
and the Individual, constitutes a legal, valid and
binding obligation of Newco enforceable in accordance
with its terms. Except for the filings required under
the HSR Act, (i) no filing with, and no permit,
authorization, consent or approval of, any Governmental
Entity or any other person is necessary for the
execution of this Agreement by and on behalf of Newco
and the consummation by Newco of the transactions
contemplated hereby and (ii) none of the execution and
delivery of this Agreement by Newco, the consummation of
the transactions contemplated hereby nor the compliance
with the terms hereof by Newco will conflict with, or
result in any violation of, or default (with or without
notice or lapse of time or both) under any provision of,
the certificate of incorporation or by-laws of Newco,
any trust agreement, loan or credit agreement, note,
bond, mortgage, indenture, lease or other agreement,
instrument, permit, concession, franchise, license,
judgment, order, notice, decree, statute, law,
ordinance, rule or regulation applicable to Newco or to
Newco's property or assets. If the Option (as defined
herein)
is exercised, the Subject Shares will be
acquired for investment for Newco's own account, not as
a nominee or agent and not with a view to the
distribution of any part thereof. Newco has no present
intention of selling, granting any participation in or
otherwise distributing the same nor does Newco have any
contract, undertaking, agreement or arrangement with any
person with respect to any of the Subject Shares. Newco
further understands that the Subject Shares may not be
sold, transferred or otherwise disposed of without
registration under the Securities Act or pursuant to an
exemption therefrom.
3. Covenants of the Stockholder and the
Individual. Until the termination of this Agreement in
accordance with Section 8 hereof, the Stockholder and
the Individual agree as follows:
(a) Voting of Subject Shares. At any meeting
of stockholders of the Company called to vote upon the
Merger and the Merger Agreement or at any adjournment
thereof or in any other circumstances upon which a vote
or other approval with respect to the Merger and the
Merger Agreement is sought, the Stockholder and the
Individual shall, and the Individual shall cause the
Stockholder to, vote the Subject Shares in favor of the
Merger, the adoption by the Company of the Merger
Agreement and the approval of the terms thereof and each
of the other transactions contemplated by the Merger
Agreement.
At any meeting of stockholders of the Company
or at any adjournment thereof or in any other
circumstances upon which the Stockholder's or the
Individual's vote, consent or other approval is sought,
the Stockholder and the Individual shall, and the
Individual shall cause the Stockholder to, vote the
Subject Shares against (i) any action or agreement that
would result in a breach in any material respect of any
covenant, representation or warranty or any other
obligation or agreement of the Company under the Merger
Agreement or of the Stockholder and the Individual
hereunder and (ii) any action or agreement that would
impede, interfere with, delay, postpone or attempt to
discourage the Merger, including, but not limited to:
(A) the adoption by the Company of a proposal regarding
(1) the acquisition of the Company by merger, tender
offer or otherwise by any person other than Newco or any
designee thereof (a "Third Party"); (2) the acquisition
by a Third Party of 10% or more of the assets of the
Company and its Subsidiaries, taken as a whole; (3) the
acquisition by a Third Party of 10% or more of the
outstanding shares of Company Common Stock; or (4) the
repurchase by the Company or any of its subsidiaries of
10% or more of the outstanding shares of Company Common
Stock; (B) any amendment of the Company's certificate of
incorporation or by-laws or other proposal or
transaction involving
the Company or any of its
Subsidiaries, which amendment or other proposal or
transaction would in any manner impede, frustrate,
prevent or nullify the Merger, the Merger Agreement or
any of the other transactions contemplated by the Merger
Agreement or change in any manner the voting rights of
any class of the Company's capital stock; (C) any change
in the management or board of directors of the Company;
(D) any material change in the present capitalization or
dividend policy of the Company; or (E) any other
material change in the Company's corporate structure or
business. Each of the Stockholder and the Individual
further agrees not to commit or agree to take any action
inconsistent with the foregoing.
(b) Proxies. As security for the agreements
of the Stockholder and the Individual provided for
herein, the Stockholder and the Individual hereby grant
to Newco a proxy to vote the Subject Shares as indicated
in Section 3(a) above. The Stockholder and the
Individual agree that this proxy shall be irrevocable
during the term of this Agreement and coupled with an
interest and each will take such further action or
execute such other instruments as may be necessary to
effectuate the intent of this proxy and hereby revokes
any proxy previously granted by the Stockholder or the
Individual with respect to the Subject Shares.
(c) Transfer Restrictions. Each of the
Stockholder and the Individual agrees not to (i) sell,
transfer, pledge, encumber, assign or otherwise dispose
of (including by gift or by contribution or distribution
to any trust or similar instrument or to any
beneficiaries of the Stockholder, pursuant to the terms
of Xx. Xxxx X. Xxxxxxxxxxx'x will or otherwise)
(collectively, "Transfer"), or enter into any contract,
option or other arrangement or understanding (including
any profit sharing arrangement) with respect to the
Transfer of, any of the Subject Shares other than
pursuant to the terms hereof and the Merger Agreement,
(ii) enter into any voting arrangement or understanding,
whether by proxy, voting agreement or otherwise, or
(iii) take any action that would make any of its
representations or warranties contained herein untrue or
incorrect or have the effect of preventing or disabling
the Stockholder and the Individual from performing their
obligations under this Agreement.
(d) Appraisal Rights. Each of the
Stockholder and the Individual hereby irrevocably waives
any rights of appraisal with respect to the Merger or
rights to dissent from the Merger that the Stockholder
and the Individual may have.
(e) Election to Retain Company Common Stock.
Each of the Stockholder and the Individual agrees to
make a Mixed
Election to retain Company Common Stock and
to receive cash in the Merger pursuant to Section
2.1(c)(i) of the Merger Agreement with respect to all of
the Subject Shares and agrees that the Stockholder and
the Individual will request that all such Subject Shares
be issued and registered in the name of "Estate of Xxxx
X. Xxxxxxxxxxx." The shares of Company Common Stock
which the Stockholder retains pursuant to Section
2.1(c)(i) of the Merger Agreement are herein referred to
as the "Retained Shares."
(f) Merger Agreement. Each of the
Stockholder and the Individual accepts the terms and
conditions of the Merger Agreement as they apply to the
holders of shares of Company Common Stock.
(g) Stockholders Agreement. The Stockholder
agrees to execute and become a party to the Stockholders
Agreement, by and among the Company (as the surviving
company in the Merger) and certain stockholders and
executives of the Company, at or following the Effective
Time (as defined in the Merger Agreement), substantially
in the form delivered as of the date hereof.
(h) Affiliate Letter. The Stockholder shall
deliver to Newco on or prior to the Closing Date (as
defined in the Merger Agreement) a written agreement
substantially in the form attached as Annex A to the
Merger Agreement.
4. Option.
(a) The Stockholder and the Individual hereby
grant to Newco (or its designee, provided such designee
is an affiliate of the controlling stockholders of
Newco), an irrevocable option to purchase the Subject
Shares, on the terms and subject to the conditions set
forth herein (the "Option").
(b) The Option may be exercised by Newco, as
a whole and not in part, at any time during the period
commencing upon the occurrence of any of the following
events and ending on the date which is the 90th calendar
day following the first to occur of such events:
(i) the Merger Agreement shall have been
terminated by either the Company or Newco pursuant
to Section 8.1(b) or (c) thereof (other than a
termination by the Company pursuant to Section
8.1(c), which was based on an actual material
breach by Newco of its obligations under the Merger
Agreement (a "Newco Breach Termination"));
(ii) the Merger Agreement shall have
been terminated by Newco pursuant to Section
8.1(d) thereof; or
(iii) the Merger Agreement shall have
been terminated by the Company pursuant to Section
8.1(e) thereof.
(c) If Newco wishes to exercise the Option,
Newco shall send a written notice to the Stockholder and
the Individual of its intention to exercise the Option,
specifying the place, and, if then known, the time and
the date (the "Option Closing Date") of the closing (the
"Option Closing") of the purchase. The Option Closing
Date shall occur on the fifth business day (or such
longer period as may be required by applicable law or
regulation) after the later of (i) the date on which
such notice is delivered and (ii) the satisfaction of
the conditions set forth in Section 4(f).
(d) At the Option Closing, the Stockholder
and the Individual shall deliver to Newco (or its
designee) all of the Subject Shares by delivery of a
certificate or certificates evidencing such Subject
Shares duly endorsed to Newco or accompanied by powers
duly executed in favor of Newco, with all necessary
stock transfer stamps affixed.
(e) At the Option Closing, Newco shall pay to
the Stockholder pursuant to the exercise of the Option,
by wire transfer, cash in immediately available funds to
the account of the Stockholder (such account to be
specified in writing at least two days prior to the
Option Closing, an amount equal to the product of $9.83
and the number of Subject Shares (the "Subject Purchase
Price").
(f) The Option Closing shall be subject to
the satisfaction of each of the following conditions:
(i) no court, arbitrator or governmental
body, agency or official shall have issued any
order, decree or ruling and there shall not be any
statute, rule or regulation, restraining, enjoining
or prohibiting the consummation of the purchase and
sale of the Subject Shares pursuant to the exercise
of the Option;
(ii) any waiting period applicable to
the consummation of the purchase and sale of the
Subject Shares pursuant to the exercise of the
Option under the HSR Act shall have expired or been
terminated; and
(iii) all actions by or in respect of,
and any filing with, any governmental body, agency,
official, or
authority required to permit the
consummation of the purchase and sale of the
Subject Shares pursuant to the exercise of the
Option shall have been obtained or made and shall
be in full force and effect.
(g) Newco hereby agrees that, in the event
that it purchases the Subject Shares pursuant to the
Option, as promptly as practicable thereafter, Newco
will make a tender offer for the remaining shares of
Company Common Stock to the stockholders of the Company
(the consummation of which shall be subject only to the
condition that no court, arbitrator or governmental
body, agency or official shall have issued any order,
decree or ruling and there shall not be any statute,
rule or regulation, restraining, enjoining or
prohibiting the consummation of such tender offer)
pursuant to which the stockholders of the Company (other
than the Company, any direct or indirect subsidiary of
the Company or Newco) will receive an amount of cash
consideration per share of Company Common Stock equal to
$16.50, and will take such actions as may be necessary
or appropriate in order to effectuate such tender offer
at the earliest practicable time.
5. Further Assurances. Each of the
Stockholder and the Individual will, from time to time,
execute and deliver, or cause to be executed and
delivered, such additional or further consents, proxies,
documents and other instruments as Newco or the Company
may reasonably request for the purpose of effectively
carrying out the transactions contemplated by this
Agreement.
6. Stop Transfer Order. Each of the
Stockholder and the Individual hereby authorizes and
requests the Company's counsel to notify the Company's
transfer agent that there is a stop transfer order with
respect to all of the Subject Shares (and that this
Agreement places limits on the voting of the Subject
Shares).
7. Assignment. Neither this Agreement nor
any of the rights, interests or obligations hereunder,
except as expressly provided herein with respect to
Newco's rights under the Option, shall be assigned by
any of the parties without the prior written consent of
the other parties, except that Newco may assign, in its
sole discretion, any or all of its rights, interests and
obligations hereunder to any direct or indirect wholly
owned subsidiary of Newco. Subject to the preceding
sentence, this Agreement will be binding upon, inure to
the benefit of and be enforceable by the parties and
their permitted assigns and their respective successors
(including the Company as successor to Newco pursuant to
the Merger), heirs,
agents, representatives, trust
beneficiaries, attorneys, affiliates and associates and
all of their respective predecessors, successors,
permitted assigns, heirs, executors and administrators.
The Company shall be a beneficiary of and be entitled to
enforce Newco's obligation under Section 4(g) hereof.
8. Termination. Except as set forth in
Section 4, this Agreement shall terminate, and no party
shall have any rights or obligations hereunder and this
Agreement shall become null and void and have no further
effect immediately following the earliest to occur of
(x) the Effective Time, (y) the 91st day following the
termination of the Merger Agreement pursuant to Section
8.1(b), 8.1(c) (other than in the case of a Newco Breach
Termination), 8.1(d) or 8.1(e) thereof or (z) the
termination of the Merger Agreement pursuant to Section
8.1(a) thereof or Section 8.1(c) thereof (only in the
case of a Newco Breach Termination). Notwithstanding
the foregoing, in the event the Option shall have been
exercised in accordance with Section 4, but the Option
Closing shall not have occurred, the provisions of
Sections 1 and 3 shall survive until the Option Closing.
Nothing in this Section 8 shall relieve any party of
liability for breach of this Agreement and the
Stockholder and the Individual shall be jointly and
severally liable for any breach of this Agreement by
either of them.
9. General Provisions.
(a) Amendments. This Agreement may not be
amended except by an instrument in writing signed by
each of the parties hereto.
(b) Notice. All notices and other
communications hereunder shall be in writing and shall
be deemed given if delivered personally or sent by
overnight courier (providing proof of delivery) to Newco
in accordance with Section 9.2 of the Merger Agreement
and to the Stockholder, the Individual or any
acknowledging persons c/o Kurzman & Xxxxxxxxx, Xxx Xxxxx
Xxxxxxxx, Xxxxx Xxxxxx, XX 00000, Attn: Xxx Xxxxxxxxx
(Telecopier No.: (000) 000-0000) (or at such other
address for a party as shall be specified by like
notice).
(c) Interpretation. When a reference is made
in this Agreement to Sections, such reference shall be
to a Section of this Agreement unless otherwise
indicated. The headings contained in this Agreement are
for reference purposes only and shall not affect in any
way the meaning or interpretation of this Agreement.
Wherever the words "include," "includes" or "including"
are used in this Agreement, they shall be deemed to be
followed by the words "without limitation."
(d) Counterparts. This Agreement may be
executed in one or more counterparts, all of which shall
be considered one and the same agreement, and shall
become effective when one or more of the counterparts
have been signed by each of the parties and delivered to
the other parties, it being understood that each party
need not sign the same counterpart.
(e) Governing Law. This Agreement shall be
governed by, and construed in accordance with, the laws
of the State of New York regardless of the laws that
might otherwise govern under applicable principles of
conflicts of law thereof, except to the extent the laws
of the State of Delaware are required to be applicable
under applicable choice of law principles.
10. Enforcement. The parties agree that
irreparable damage would occur in the event that any of
the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties
shall be entitled to an injunction or injunctions to
prevent breaches of this Agreement and to enforce
specifically the terms and provisions of this Agreement
in any Federal court of the United States located in the
Southern District of the State of New York or in a New
York state court located in Manhattan, this being in
addition to any other remedy to which they are entitled
at law or in equity. In addition, each of the parties
hereto (i) consents to submit such party to the personal
jurisdiction of any Federal court located in the
Southern District of the State of New York or any New
York state court located in Manhattan in the event any
dispute arises out of this Agreement or any of the
transactions contemplated hereby, (ii) agrees that such
party will not attempt to deny or defeat such personal
jurisdiction by motion or other request for leave from
any such court, (iii) agrees that such party will not
bring any action relating to this Agreement or the
transactions contemplated hereby in any court other than
a Federal court sitting in the Southern District of the
State of New York or a New York state court located in
Manhattan and (iv) waives any right to trial by jury
with respect to any claim or proceeding related to or
arising out of this Agreement or any of the transactions
contemplated hereby.
IN WITNESS WHEREOF, Newco and the Stockholder
have each caused this Agreement to be signed by its
signatory thereunto duly authorized, and the Individual
has signed this Agreement, each as of the date first
written above.
CONFETTI ACQUISITION, INC.
/s/ Xxxxxxx X. X'Xxxxx
By: Xxxxxxx X. X'Xxxxx
Title: Chairman of the Board
and President
THE ESTATE OF XXXX X. XXXXXXXXXXX
/s/ Xxxxxxxxx Xxxxxxxxxxx
By: Xxxxxxxxx Xxxxxxxxxxx
Title: Executrix
/s/ Xxxxxxxxx Xxxxxxxxxxx
Xxxxxxxxx Xxxxxxxxxxx
The following individuals, in their capacities
as trustees or other fiduciaries (whether on the date
hereof or at any point in the future) of any trust or
similar instrument created by or at the instruction of,
or under the last will and testament of, Xxxx X.
Xxxxxxxxxxx or the Stockholder, acknowledge this
Agreement and agree to be bound by the terms hereof in
each such capacity, such agreement being for the benefit
of each of the parties hereto, and such individuals
further agree to cause any such trust or similar
instrument upon its formation to become a party to this
Agreement with the same obligations as the Stockholder
and the Individual hereunder, and in accordance herewith
have agreed to and acknowledged this Agreement:
By: /s/ Xxxxxxxxx Xxxxxxxxxxx Dated: August 10, 1997
Name: Xxxxxxxxx Xxxxxxxxxxx
Title: Trustee
By: /s/ Xxxxx Xxxxxx Dated: August 10, 1997
Name: Xxxxx Xxxxxx
Title: Trustee
SCHEDULE I
TAX INDEMNITY AGREEMENT
CONFORMED COPY
TAX INDEMNIFICATION AGREEMENT
This Indemnification Agreement
("Indemnification Agreement") is made and entered into
as of August 10, 1997 by and between Amscan Holdings,
Inc., a Delaware corporation ("Amscan"), on the one
hand, and Xxxxxxxxx Xxxxxxxxxxx (the "Individual") and
the Estate of Xxxx X. Xxxxxxxxxxx (the "Estate" and
together, jointly and severally, with the Individual,
the "Xxxxxxxxxxx Indemnitors"), on the other.
WHEREAS, effective as of July 31, 1996, Amscan
Inc. was the surviving constituent corporation in the
merger of Kookaburra USA, Ltd., Deco Paper Products,
Inc. and Amscan Inc.;
WHEREAS, as of December 18, 1996, Amscan
acquired all of the business operations of Amscan Inc.
(including Kookaburra USA, Ltd. and Deco Paper Products,
Inc. which were previously merged into Amscan Inc.),
Am-Source, Inc., Trisar, Inc., JCS Realty Corp. and SSY
Realty Corp. (individually, a "Subject Company" and,
collectively, the "Subject Companies");
WHEREAS, prior to such acquisition, each of
the Subject Companies had elected under Section 1362 of
the Internal Revenue Code of 1986, as amended (the
"Code"), to be treated and operated as S corporations
(as defined in the Code and hereinafter referred to as
"Subchapter S Corporations");
WHEREAS, Xxxx X. Xxxxxxxxxxx ("Xxxxxxxxxxx"),
the deceased spouse of the Individual and the decedent
of the Estate was for a number of years the controlling
shareholder of Amscan Inc., Kookaburra USA, Ltd., Deco
Paper Products, Inc., Trisar, Inc., JCS Realty Corp. and
SSY Realty Corp. and since 1993 owned a 50% interest in
Am-Source, Inc.;
WHEREAS, as of the date hereof, Amscan and
Confetti Acquisition, Inc., a Delaware corporation
("Confetti"), have entered into a Merger Agreement (the
"Merger Agreement") and in connection therewith,
Confetti, the Individual and the Estate have entered
into a Voting Agreement (the "Voting Agreement"), in
each case dated as of the date hereof.
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 the Xxxxxxxxxxx Indemnitors for any increase
in Xxxxxxxxxxx'x Federal, state or other income tax
liability (together with any penalties and interest
thereon), to the extent such liability is attributable
to an understatement of Xxxxxxxxxxx'x share (in his
capacity as a shareholder) of a Subject Company's income
as previously reported to Xxxxxxxxxxx by a Subject
Company on its Internal Revenue Service Form K-1 (or any
similar state or other form) and for any Federal, state
or other income tax liability of Xxxxxxxxxxx in respect
of payments to Xxxxxxxxxxx pursuant to this Article 1;
provided, however, that Amscan's obligation to indemnify
the Xxxxxxxxxxx Indemnitors shall be limited to the
actual reduction in taxes to any of the Subject
Companies (whether by reason of deduction, amortization,
credit or otherwise) for a taxable year(s) which end(s)
after December 18, 1996, and shall be reduced by any
payments paid by Amscan pursuant to Article 1 of the Tax
Indemnification Agreement, by and between Xxxxxxxxxxx
and Amscan, dated as of December 18, 1996 (the
"Xxxxxxxxxxx Indemnity Agreement").
ARTICLE 2. INDIVIDUAL AND ESTATE INDEMNITY.
The Xxxxxxxxxxx Indemnitors will indemnify Amscan for
Amscan's and its subsidiaries Federal, state or other
income tax liability (together with any interest or
penalties thereon) arising out of or resulting from a
claim by any taxing authority that a Subject Company was
not a Subchapter S Corporation for any period in which
such Subject Company filed a tax return on which it
claimed that it was a Subchapter S Corporation,
provided, however, that the Xxxxxxxxxxx Indemnitors'
obligation to indemnify Amscan shall be reduced by any
payments paid by the Xxxxxxxxxxx Indemnitors pursuant to
Article 2 of the Xxxxxxxxxxx Indemnity Agreement.
ARTICLE 3. PROCEDURES RELATING TO
INDEMNIFICATION.
(a) Any party seeking indemnification
pursuant to Article 1 or Article 2 hereof (in any case,
the "indemnitee") from the other party or parties (the
"indemnifying party or parties"), upon receipt of
written notice from any taxing authority, shall promptly
provide the indemnifying party with notice of such
receipt including information of reasonable detail to
apprise the indemnifying party of the nature of the
proposed adjustments; provided, however, that failure to
provide such notice promptly shall not relieve the
indemnifying party of its obligations under Article 1 or
Article 2 hereof, as applicable, except to the extent
that such failure results in actual prejudice to the
indemnifying party's ability to contest the matter to
which such notice relates.
(b) With respect to an audit by any taxing
authority, 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 the Xxxxxxxxxxx Indemnitors, or their ability
to treat any income or losses in a particular manner for
tax calculation purposes for taxable periods ending
after December 18, 1996 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 such 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. ADDITIONAL INDEMNITORS. Each of
the Xxxxxxxxxxx Indemnitors agrees that it will not
cause or permit the Estate to transfer, whether in one
transfer or a number of transfers to a single transferee
or a group of related transferees, any substantial
amount of the property of the Estate, including, without
limitation, (i) any shares of common stock of Amscan
(the transfer of which is prohibited by the terms and
conditions of the Voting Agreement prior to the Merger
and thereafter will be subject to certain restrictions),
(ii) any Merger Consideration (as defined in the Merger
Agreement) received pursuant to the Merger (as defined
in the Merger Agreement) and (iii) any direct or
indirect proceeds of any of the foregoing or of any
subsequent reinvestment thereof, unless, in each case,
the transferee thereof agrees in writing for the benefit
of Amscan to be jointly and severally liable with the
Xxxxxxxxxxx Indemnitors pursuant to this Indemnification
Agreement. Each of the Xxxxxxxxxxx Indemnitors agrees
not to take any action (including any transfers of
assets) which has the effect of frustrating or otherwise
significantly diminishing any of the respective rights
of, or protections afforded hereunder to, the parties to
this Indemnification Agreement.
ARTICLE 5. GOVERNING LAW. This
Indemnification Agreement shall be governed by, and
construed in accordance with, the
laws of the State of
New York regardless of the laws that might otherwise
govern under applicable principles of conflicts of law
thereof.
ARTICLE 6. NOTICES. All notices or other
communications provided for under this Indemnification
Agreement shall be given in writing and shall be
delivered personally or sent by first class or overnight
mail (prepaid postage and return receipt requested) or
facsimile transmission to the other parties at the
following addresses or to such other addresses as to
which a party has given notice as provided herein.
If to Amscan:
Amscan Holdings, Inc.
00 Xxxxxxxxxx Xxxx
Xxxxxxxx, XX 00000
Attention: Corporate Secretary
Facsimile: (000) 000-0000
If to the Estate, the Trustees,
the Trusts or the Individual:
c/o Kurzman & Xxxxxxxxx
Xxx Xxxxx Xxxxxxxx
Xxxxx Xxxxxx, XX 00000
Attn: Xxx Xxxxxxxxx
Telecopier No.: (000) 000-0000
If to Confetti:
Confetti Acquisition, Inc.
c/o GS Capital Partners II, L.P.
00 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxx X. Xxxxxxxxx
Facsimile: (000) 000-0000
with a copy to:
Wachtell, Lipton, Xxxxx & Xxxx
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxxx X. Xxxxxxx
Facsimile: (000) 000-0000
ARTICLE 7. ASSIGNMENT; SUCCESSORS. Except as
otherwise specifically provided herein, this
Indemnification Agreement and any rights and obligations
hereunder may not be assigned by any party hereto
without the prior written approval of the other parties
hereto, and any attempted assignment not in compliance
with this Article shall be void and of no effect. This
Indemnification Agreement shall be binding upon the
parties hereto and each of their respective successors,
assigns, heirs, agents, representatives, beneficiaries
(including trust beneficiaries), attorneys, affiliates
and associates and all of their respective predecessors,
successors, permitted assigns, heirs, executors and
administrators, including any person (as defined in the
Merger Agreement) to whom the proceeds of the sale of
the Subject Shares (as defined in the Voting Agreement)
may be distributed or contributed and any other person
required to become an additional indemnitor pursuant to
Article 4 hereof.
ARTICLE 8. COSTS. In any proceeding to
enforce any rights under this Indemnification 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 9. PARTIES NOT PARTNERS. Nothing
contained in this Indemnification 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 Indemnification 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 10. ANNUAL REVIEW. This
Indemnification Agreement may be amended by mutual
consultation between the parties, evidenced in a writing
signed by all 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 Indemnification Agreement the
principles of fairness and equity, and to amend this
Indemnification Agreement accordingly.
ARTICLE 11. SEVERABILITY. If any provision
in this Indemnification 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 Indemnification 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 Indemnification Agreement. The parties
hereby agree to attempt to substitute for any invalid or
unenforceable provision a valid or enforceable provision
which achieves to the greatest extent possible the
economic objectives of the invalid or unenforceable
provision.
ARTICLE 12. WAIVER. The waiver by any party
of a breach or default of any of the provisions of this
Indemnification Agreement by any 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 any 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 any other party. Confetti is an intended third party
beneficiary of this Indemnification Agreement, and no
waiver, amendment or modification of this
Indemnification Agreement or the rights or obligations
of the parties hereto shall be valid without the prior
written consent of Confetti.
ARTICLE 13. ENTIRE AGREEMENT. This
Indemnification 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; provided, however, that the Xxxxxxxxxxx
Indemnity Agreement remains a separate valid and binding
agreement between the parties thereto enforceable in
accordance with its terms.
ARTICLE 14. SPECIFIC PERFORMANCE. The
parties agree that irreparable damage would occur in the
event that any of the provisions of this Indemnification
Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to
an injunction or injunctions to prevent breaches of this
Indemnification Agreement and to enforce specifically
the terms and provisions of this Indemnification
Agreement in any Federal court of the United States
located in the Southern District of the State of New
York or in a New York state court located in Manhattan,
this being in addition to any other remedy to which they
are entitled at law or in equity. In addition, each of
the parties hereto (i) consents to submit such party to
the personal jurisdiction of any Federal court located
in the Southern District of the State of New York or any
New York state court located in Manhattan in the event
any dispute arises out of this Indemnification Agreement
or any of the transactions contemplated hereby, (ii)
agrees that such party will not attempt to deny or
defeat such personal jurisdiction by motion or other
request for leave from any such court, (iii) agrees that
such party will not bring any action relating to this
Indemnification Agreement or the transactions
contemplated hereby in any court other than a Federal
court sitting in the Southern District of the State of
New York or a New York state court located in Manhattan
and (iv) waives any right to trial by jury with respect
to any claim or proceeding related to or arising out of
this Indemnification Agreement or any of the
transactions contemplated hereby.
ARTICLE 15. EFFECTIVENESS. The effectiveness
of this Indemnification Agreement is contingent upon the
Closing and the effectiveness of the Merger (as such
terms are defined in the Merger Agreement) or upon the
exercise by Newco or its designee of the Option (as
defined in the Voting Agreement). If the Closing does
not occur and the Merger Agreement is terminated, and if
Newco (or its designee) does not exercise the Option,
then this Indemnification Agreement shall have no effect
and shall be void ab initio without any party hereto
having any liability to any other party hereto.
IN WITNESS WHEREOF, the parties have caused
this Indemnification Agreement to be executed and
delivered as of the day and year first above written.
AMSCAN HOLDINGS, INC.
By: /s/ Xxxxxx X. Xxxxxxxxxx
Name: Xxxxxx X. Xxxxxxxxxx
Title: Acting Chairman of the Board
and President
THE ESTATE OF XXXX X. XXXXXXXXXXX
By: /s/ Xxxxxxxxx Xxxxxxxxxxx
Name: Xxxxxxxxx Xxxxxxxxxxx
Title: Executrix
/s/ Xxxxxxxxx Xxxxxxxxxxx
Xxxxxxxxx Xxxxxxxxxxx
The following individuals, in their capacities as
trustees or other fiduciaries (whether on the date
hereof or at any point in the future) of any trust or
similar instrument created by or at the instruction of,
or under the last will and testament of, Xxxx X.
Xxxxxxxxxxx or the Estate, acknowledge this
Indemnification Agreement and agree to be bound by the
terms hereof in each such capacity, such agreement being
for the benefit of each of the parties hereto, and such
individuals further agree to cause any such trust or
similar instrument upon its formation to become a party
to this Indemnification Agreement as an additional
indemnitor pursuant to Article 4 hereof (and as if a
Xxxxxxxxxxx Indemnitor hereunder) and in accordance
herewith have agreed to and acknowledged this
Indemnification Agreement:
By: /s/ Xxxxxxxxx Xxxxxxxxxxx Dated: August 10, 1997
Name: Xxxxxxxxx Xxxxxxxxxxx
Title: Trustee
By: /s/ Xxxxx Xxxxxx Dated: August 10, 1997
Name: Xxxxx Xxxxxx
Title: Trustee
