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Exhibit 10.4
STOCKHOLDERS' AGREEMENT
STOCKHOLDERS' AGREEMENT, dated as of December 19, 1997 (the
"Agreement"), by and among AMSCAN HOLDINGS, INC., a Delaware corporation (the
"Company"), GS CAPITAL PARTNERS II, L.P., a Delaware limited partnership ("GSCP
II"), GS CAPITAL PARTNERS II OFFSHORE, L.P., a Cayman Islands exempt limited
partnership ("GSCP II Offshore"), XXXXXXX, XXXXX & CO. VERWAL-TUNGS GMBH, a
corporation recorded in the Commercial Register Frankfurt, as nominee for GS
Capital Partners II Germany C.L.P. ("GSCP II Germany"), STONE STREET FUND 1997,
L.P., a Delaware limited partnership ("Stone Street"), BRIDGE STREET FUND 1997,
L.P., a Delaware limited partnership ("Xxxxxx Xxxxxx" and, together with XXXX
XX, XXXX XX Xxxxxxxx, XXXX XX Xxxxxxx and Stone Street, "GSCP") and each of the
individuals and the Estate of Xxxx X. Xxxxxxxxxxx (the "Estate") listed on
Schedule I hereto (collectively, including the Estate, the "Management
Investors"). References herein to the Company shall mean the Company as the
surviving corporation in the Merger (as defined below). Employees, directors,
consultants and certain other Persons (as defined below) having significant
business relationships with the Company and its Affiliates (as defined below)
may be issued shares of Common Stock (as defined below) (or other equity
securities of the Company) or securities convertible into or exchangeable for
Common Stock (or other equity securities of the Company) subject to the terms of
this Agreement and, if so issued, the Company, without the consent of any other
party hereto, may amend this Agreement to allow any such Person the Company so
chooses to become an additional Management Investor hereunder, subject to such
Person becoming a signatory to this Agreement. The parties hereto (other than
the Company) and any other Person who shall hereafter acquire shares of Common
Stock of the Company (or other equity securities of the Company) or securities
convertible into or exchangeable for Common Stock (or other equity securities of
the Company) pursuant to the provisions of, and/or subject to the restrictions
and rights set forth in, this Agreement (including through participation in
certain Company stock or option plans) are sometimes hereinafter referred to
individually as a "Stockholder" or collectively as the "Stockholders."
RECITALS
A. The Company, as of the Effective Date (as defined herein), will
have an authorized capital stock consisting of 50,000,000 shares of Common
Stock, par value $0.10 per share (the "Common Stock"), each share of which is
entitled to one vote on all stockholder matters as more specifically provided
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in the amended certificate of incorporation of the Company (the "Amended
Certificate"), and of which 1,010 shares will be issued and outstanding
immediately after the Effective Date. As used in this Agreement, Common Stock
shall include any shares of Restricted Stock (as defined below) of the Company
granted to Management Investors; provided, however, that to the extent the
Transfer (as defined herein) thereof is otherwise prohibited or restricted, no
rights to Transfer, including pursuant to Section 2.4 or Article III, shall be
granted hereunder. In addition, the Company will have reserved, as of the
Effective Date, 120 shares of Common Stock for issuance pursuant to the Company
1997 Stock Incentive Plan (the "Stock Incentive Plan").
B. An Agreement and Plan of Merger, dated August 10, 1997 (the
"Merger Agreement"), has been executed by and among Confetti Acquisition, Inc.,
a Delaware corporation ("Confetti"), and the Company, pursuant to which Confetti
was merged with and into the Company (the "Merger") with the Company as the
surviving corporation in the Merger.
C. In connection with the Merger, Confetti entered into employment
and/or equity agreements with certain Management Investors (the "Employment
Agreements") that provide for, among other things, the investment by such
Management Investors in the Common Stock and the grant and/or rollover of
Options to such Management Investors. As of or immediately following the
Effective Date, the Company has executed or shall execute and become a party to
the Employment Agreements.
D. In connection with the Merger, Confetti entered into a Voting
Agreement, dated August 10, 1997 (the "Voting Agreement"), by and among
Confetti, the Estate and a certain individual.
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E. The individual holdings of Common Stock of each Stockholder,
immediately after the closing of the transactions contemplated in the Merger
Agreement and the Employment Agreements (not assuming the exercise of any
Options) are as follows:
Number of Shares
of Common Stock
Name Held After Closing
---- ------------------
GSCP II 517.6286775
XXXX XX Xxxxxxxx 000.0000000
XXXX XX Xxxxxxx 19.0926450
Stone Street 55.5348750
Bridge Street 26.9651250
Estate of Xxxx X. Xxxxxxxxxxx 100.0000000
Xxxxxx X. Xxxxxxxxxx 60.0000000
Xxxxx X. Xxxxxxxx 15.0000000
Xxxxxxx Xxxxxx 6.6666667
Xxxxx X. Xxxxx 1.3333333
Xxxxxxxxx X. Xxxxxxxx 2.0000000
-------------------------- -------------
Total 1,010.0000000
F. The individual holdings of Options to purchase shares of Common
Stock of each Stockholder, immediately after the closing of the transactions
contemplated in the Merger Agreement and the Employment Agreements are as set
forth as follows:
Number of Shares
of Common Stock
Subject to Options
Name Held After Closing
---- ------------------
Xxxxxx X. Xxxxxxxxxx 16.648
Xxxxx X. Xxxxxxxx 16.268
Xxxxxxx X. Xxxxxx 16.441
Xxxxx X. Xxxxx 11.827
Xxxxxxxxx X. Xxxxxxxx 11.577
Xxxxxx Xxxxxx 2.383
Xxxxxxx Xxxx 1.280
Xxxxxx Xxxxxxxxx 2.477
Xxxxx XxXxxxxx 1.477
Xxxxx Xxxxxxx 1.280
Xxxxxx Xxxxxxx 1.280
Xxxxxx Xxxxxxxx 1.144
Xxxxxxx Xxxxxxxx 0.478
Xxxxx Xxxxx 1.144
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Xxxx Xxxxxxxxx 1.238
Xxxxx Xxxxxx 0.718
Xxxx Xxxxxxxx 1.238
Xxxxxxxx Xxxxxx 1.238
Xxxxx Xxxxx 1.238
Xxxxxxx Xxxxxxxx 0.794
Xxxxxxx X. Xxxxxxxx 2.570
Xxxx Xxxxxx 0.555
Xxxxx Xxxxxxx 0.999
Xxxxxx Xxxxxx 0.555
Xxxxxx Xxxxxxxxx 0.999
Xxxxxxx Xxxxxx 0.555
Xxxxxx Xxxxxxx 0.555
Xxxxxx Xxxxxxxx 0.555
Xxxxx Xxxxx 0.555
Xxxxxx Xxxxxxx 0.555
Xxx Xxxxxxxx 0.555
-------------------------- -----------
Total 101.179
G. The parties hereto desire to restrict the sale, assignment,
transfer, encumbrance or other disposition of the Common Stock which the parties
hereto own or may hereafter acquire, and to provide for certain rights and
obligations in respect thereof as hereinafter provided.
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NOW, THEREFORE, in consideration of the premises and of the terms and
conditions contained herein, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
As used in this Agreement, the following terms shall have the
meanings ascribed to them below:
"Affected Holder" shall have the meaning ascribed to it in Section 5.10
hereof.
"Affiliate" of a Person shall mean a Person directly or indirectly
controlled by, controlling or under common control with such Person.
"Agreement" shall have the meaning ascribed to it in the Introduction
hereof.
"Amended Certificate" shall have the meaning ascribed to it in the
Recitals hereof.
"Bridge Street" shall have the meaning ascribed to it in the Introduction
hereof.
"Buy-Out Note" shall mean an unsecured promissory note of the Company, or
a direct or indirect subsidiary thereof, which shall have a stated maturity of
five (5) years, shall accrue interest at seven (7) percent per annum, shall be
prepayable at the option of the Company or such subsidiary at any time, in whole
or in part, at its principal amount plus any accrued and unpaid interest, shall
provide for the reimbursement of reasonable expenses incurred by the holder to
enforce the note and shall accelerate upon the earlier of a Change of Control or
the consummation of an IPO.
"Change of Control" shall mean (1) the acquisition by any individual,
entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the
Exchange Act) other than GSCP and their Affiliates of a majority of the
outstanding voting stock of the Company or (2) the sale of or other disposition
(other than by way of merger or consolidation) of all or substantially all of
the assets of the Company and its subsidiaries taken as a whole to any Person or
group of Persons, other than to a Person (or group of Persons) a majority of the
outstanding voting stock (or other interests) of which are beneficially owned by
GSCP and their Affiliates.
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"Claims" shall mean losses, claims, damages or liabilities, joint or
several, actions or proceedings (whether commenced or threatened).
"Common Stock" shall have the meaning ascribed to it in the Recitals
hereof.
"Company" shall have the meaning ascribed to it in the Introduction
hereof.
"Confetti" shall have the meaning ascribed to it in the Recitals hereof.
"Demand Registration" shall have the meaning ascribed to it in Section
3.1(b) hereof.
"Drag-Along Right" shall have the meaning ascribed to it in Section 2.5.1
hereof.
"Drag-Along Seller" shall have the meaning ascribed to it in Section 2.5.2
hereof.
"Effective Date" shall have the meaning ascribed to it in Section 5.1(a)
hereof.
"Employment Agreements" shall have the meaning ascribed to it in the
Recitals hereof.
"Estate" shall have the meaning ascribed to it in the Introduction
hereof.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
"Fair Market Value" shall mean fair value as reasonably determined by
Xxxxxxx Sachs in light of all circumstances including comparable recent bona
fide third party sales.
"Xxxxxxx Xxxxx" shall mean Xxxxxxx, Sachs & Co.
"GSCP", "GSCP II", "GSCP II Germany" and "GSCP II Offshore" shall have the
meanings ascribed to them in the Introduction hereof.
"IPO" shall mean an underwritten initial public offering or public
offerings (on a cumulative basis) of shares of Common Stock pursuant to a
registration statement or registration statements under the Securities Act with
aggregate gross proceeds to the Company of at least $50 million.
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"Management Investors" shall have the meaning ascribed to it in the
Introduction hereof.
"Merger" shall have the meaning ascribed to it in the Recitals hereof.
"Merger Agreement" shall have the meaning ascribed to it in the Recitals
hereof.
"NASD" shall mean the National Association of Securities Dealers, Inc.
"Nasdaq" shall mean The Nasdaq Stock Market, Inc.
"New Cost Per Share" shall have the meaning ascribed to it in the
Employment Agreement, by and between Xxxxx X. Xxxxxxxx and Confetti, dated as of
August 10, 1997, as in effect on the date hereof.
"Offer Shares" shall have the meaning ascribed to it in Section 2.4.1.
"Offeree Stockholders" shall have the meaning ascribed to it in Section
2.4.1.
"Options" shall mean options to purchase shares of Common Stock from the
Company, whether granted pursuant to the Stock Incentive Plan or otherwise.
"Permitted Transferee" shall have the meaning ascribed to it in Sections
2.3.3 and 2.3.4 hereof.
"Person" shall mean an individual, corporation, partnership, joint
venture, trust, unincorporated organization, government (or any department or
agency thereof) or other entity.
"Piggyback Notice" shall have the meaning ascribed to it in Section 3.1(a)
hereof.
"Piggyback Registration" shall have the meaning ascribed to it in Section
3.1(a) hereof.
"Proposed Transferee" means a Person or group as defined in Section
13(d)(3) of the Exchange Act, other than any Stockholders or their Affiliates
(whether any such Affiliate is such prior to or upon consummation of the
proposed Transfer, but not solely by virtue of becoming a party to this
Agreement), to whom Common Stock is proposed to be Transferred pursuant to the
terms of Section 2.4.3(a) or 2.5 of this Agreement.
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"Registrable Securities" shall mean the shares of Common Stock; provided,
however, as to any particular Registrable Securities, once issued such
securities shall cease to be Registrable Securities when (i) a registration
statement with respect to the sale of such securities shall have become
effective under the Securities Act and such securities shall have been disposed
of in accordance with such registration statement, (ii) such securities shall
have been sold pursuant to Rule 144 (or any successor provision) under the
Securities Act, (iii) such securities shall have been otherwise transferred and
new certificates for such securities not bearing a legend restricting further
transfer shall have been delivered by the Company, (iv) such securities shall
have ceased to be outstanding (and, in the case of shares of Common Stock
underlying options granted under the Stock Incentive Plan or underlying options
or warrants granted otherwise, such shares of Common Stock shall have ceased to
be outstanding after issuance pursuant to the exercise of such options or
warrants), or (v) in the case of shares of Common Stock held by a Management
Investor, such securities shall have been transferred to any Person other than a
Management Investor or a Permitted Transferee.
"Registration Expenses" shall mean any and all expenses incident to
performance of or compliance with Article III of this Agreement, including
without limitation, (i) all SEC and stock exchange or the NASD registration and
filing fees, (ii) all fees and expenses of complying with securities or "blue
sky" laws (including reasonable fees and disbursements of counsel for the
underwriters in connection with "blue sky" qualifications of the Registrable
Securities), (iii) all printing, messenger and delivery expenses, (iv) the fees
and disbursements of counsel for the Company and of the Company's independent
public accountants, including the expenses of any special audits and/or "cold
comfort" letters required by or incident to such performance and compliance, (v)
the reasonable fees and disbursements of one counsel retained by the
Stockholders (if GSCP is one of the selling Stockholders, such counsel to be
selected by GSCP) as a group in connection with each such registration, (vi) any
fees and disbursements of underwriters customarily paid by issuers or sellers of
securities and the reasonable fees and expenses of any special experts retained
in connection with the requested registration, including any fee payable to a
qualified independent underwriter within the meaning of the rules of the NASD,
but excluding underwriting discounts and commissions and transfer taxes, if any,
(vii) internal expenses of the Company (including, without limitation, all
salaries and expenses of its officers and employees performing legal or
accounting duties) and (viii) securities acts liability insurance (if the
Company elects to obtain such insurance).
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"Restricted Stock" shall have the meaning ascribed to it in the Employment
Agreements.
"Rule 144" shall mean Rule 144 under the Securities Act.
"Sale Notice" shall have the meaning ascribed to it is Section 2.4.1.
"SEC" shall mean the Securities and Exchange Commission.
"Section 3.1 Sale Number" shall have the meaning ascribed to it in Section
3.1(d) hereof.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Stock Incentive Plan" shall have the meaning ascribed to it in the
Recitals hereof.
"Stone Street" shall have the meaning ascribed to it in the Introduction
hereof.
"Subsidiary Dividend" shall have the meaning ascribed to it in Section 4.1
hereof.
"Tag-Along Right" shall have the meaning ascribed to it in Section
2.4.3(a) hereof.
"Tag-Along Seller" shall have the meaning ascribed to it in Section
2.4.3(b) hereof.
"Tag-Along Shares" shall have the meaning ascribed to it in Section 2.4.2
hereof.
"Transfer" shall mean to sell, assign, pledge or encumber or otherwise
transfer, directly or indirectly, whether or not for consideration.
"Transferee" shall mean any Person to whom a Transfer is made, regardless
of the method of Transfer.
"Transferor" shall mean any Person by whom a Transfer is made, regardless
of the method of Transfer.
"Violation" shall have the meaning ascribed to it in Section 3.3(a)
hereof.
"Voting Agreement" shall have the meaning ascribed to it in the Recitals
hereof.
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ARTICLE II
RESTRICTIONS ON TRANSFERS OF STOCK
2.1 General Prohibition on Transfers.
(a) Prohibition on Transfers Generally. No Management Investor
shall, at any time prior to an IPO, Transfer any shares of Common Stock, unless
such Transfer is made in accordance with Section 2.3, 2.4 or 2.5 or pursuant to
a Piggyback Registration, and any Transfer by any Management Investor of any
shares of Common Stock owned as of the date hereof or hereafter acquired not in
accordance with such provisions shall be null and void.
(b) Recordation. The Company shall not record upon its books any
Transfer of shares of Common Stock held or owned by any of the Management
Investors to any other Person except Transfers in accordance with this
Agreement.
(c) Obligations of Transferees. No Transfer of shares of Common
Stock by a Management Investor otherwise permitted pursuant to this Agreement
(other than pursuant to a Piggyback Registration or pursuant to a Tag-Along
Right or Drag-Along Right) shall be effective unless (x) the Transferee
(including a Permitted Transferee pursuant to Section 2.3) shall have executed
an appropriate document in form and substance reasonably satisfactory to the
Company confirming that (i) the Transferee takes such shares subject to all the
terms and conditions of this Agreement to the same extent as its Transferor was
bound by and entitled to the benefits of such provisions and (ii) the shares
shall bear legends, substantially in the forms required by Section 2.6, and (y)
such document shall have been delivered to and approved (as described above) by
the Company prior to such Transferee's acquisition of shares of Common Stock.
(d) Transfers to Competitors. Notwithstanding anything to the
contrary in this Agreement, no Management Investor shall, at any time, directly
or indirectly, Transfer any shares of Common Stock to any Person who is a
competitor of the Company or to any Affiliate of such a competitor (other than
Transfers to the Company and its Affiliates), unless such Transfer (i) is made
in connection with the exercise of a Tag-Along Right pursuant to Section 2.4 or
in connection with the exercise of a Drag-Along Right pursuant to Section 2.5,
in which event such sale may be effected only in accordance with such Section
2.4 or Section 2.5, as applicable, or (ii) is made
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in accordance with the terms of this Agreement and is made pursuant to a widely
distributed, underwritten public offering registered under the Securities Act
(or an underwritten offering pursuant to the exercise of such Management
Investor's piggyback registration rights pursuant to Section 3.1(a) hereof) or
pursuant to a sale effected through an open market, nondirected broker's
transaction pursuant to Rule 144 in which the seller does not know that the
buyer is a competitor. For purposes of this provision, the good faith
determination of a majority of the entire Board that a proposed Transferee is a
"competitor," made within thirty (30) days of written notice to the Board of the
proposed Transfer, shall in all respects be conclusive.
2.2 Compliance with Securities Laws. No Management Investor shall Transfer
any shares of Common Stock unless the Transfer is made in accordance with the
terms of this Agreement and (i) the Transfer is pursuant to an effective
registration statement under the Securities Act and in compliance with any other
applicable federal securities laws and state securities or "blue sky" laws or
(ii) such Management Investor shall have furnished the Company with an opinion
of counsel, if reasonably requested by the Company, which opinion and counsel
shall be reasonably satisfactory to the Company, to the effect that no such
registration is required because of the availability of an exemption from
registration under the Securities Act and under any applicable state securities
or "blue sky" laws and that the Transfer otherwise complies with this Agreement
and any other applicable federal securities laws and state securities or "blue
sky" laws.
2.3 Permitted Transfers.
2.3.1 GSCP Transfers. (a) GSCP and any Affiliate of GSCP shall be
free to Transfer shares of Common Stock to any Person, in whole at any time, or
in part from time to time; provided, however, that if such Person is not
Affiliate of GSCP, such Transfer shall be subject to Section 2.4 and Section 2.5
hereof. In any Transfer made pursuant to the foregoing to an Affiliate of GSCP,
the Transferee shall agree, in connection with such Transfer, for the benefit of
the Company, that such Transferee will Transfer back to the Transferor or
another continuing Affiliate of GSCP (that will be similarly bound by this
sentence) any shares of Common Stock so Transferred, if the Transferee at any
time is no longer an Affiliate of GSCP.
(b) No Transfer of shares of Common Stock by GSCP or an Affiliate of
GSCP otherwise permitted pursuant to this Section 2.3.1 shall be effective
unless the Transferee (whether or not an Affiliate of GSCP) shall have executed
an appropriate
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document in form and substance reasonably satisfactory to the Company confirming
that the Transferee takes such shares subject to all the terms and conditions of
this Agreement to the same extent as its Transferor was bound by and entitled to
the benefits of such provisions.
2.3.2 Management Investors. (a) The restrictions contained in
Sections 2.1(a) of this Agreement with respect to Transfers by Management
Investors (other than the Estate) of shares of Common Stock shall not apply to
any Transfer by a Management Investor (other than the Estate): (i) to or among
such Management Investor's spouse, children, grandchildren or other living
descendants, or to a trust or family partnership of which there are no principal
(i.e., corpus) beneficiaries or partners other than the grantor or one or more
of such Management Investor, spouse or described relatives, and provided, in the
case of a trust, that the existing beneficiaries and/or trustee(s) and/or
grantor(s) of such trust have the power to act with respect to the trust's
assets without court approval and, in the case of a family partnership, that the
partners thereof have the power to act with respect to the partnership's assets
without court approval and the partnership is not permitted to (x) distribute
assets to Persons who are not among the relatives listed above or (y) have
partners who are not among the relatives listed above, and, in any case, all the
partners agree, for the benefit of the Company and GSCP, not to amend such
provisions; (ii) to a legal representative of such Management Investor in the
event such Management Investor becomes mentally incompetent or to such
Management Investor's personal representative following the death of such
Management Investor; (iii) with the prior written approval of the Company, which
approval may be granted or withheld by the Board of Directors of the Company in
its sole and absolute discretion; and (iv) pursuant to any pledge by a
Management Investor to the Company or an Affiliate thereof for money borrowed to
purchase shares of Common Stock pursuant to the Employment Agreements, if
applicable.
(b) The restrictions contained in Section 2.1(a) of this Agreement
with respect to Transfers by the Estate shall not apply to any of the following
Transfers by the Estate: (i) to a qualified terminable interest property trust
in accordance with the terms of the will of the decedent of the Estate or (ii)
with the prior written approval of the Company which approval may be granted or
withheld by the Board of Directors of the Company in its sole and absolute
discretion.
2.3.3 Permitted Transferees. Transferees to whom Transfers are
permitted pursuant to clauses (i), (ii) and (iii) of Section 2.3.2(a) and
clauses (i) and (ii) of Section
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2.3.2(b) are referred to herein as "Permitted Transferees." Any such permitted
Transfer shall be subject to the terms of this Agreement, including compliance
with Section 2.1(c).
2.3.4 Transfer by Permitted Transferees. The restrictions contained
in Section 2.1(a) of this Agreement with respect to Transfers by Management
Investors of shares of Common Stock shall not apply to any Transfer by a
Permitted Transferee of a Management Investor to such Management Investor or to
another Permitted Transferee of such Stockholder, and any such Transferee shall
also be a "Permitted Transferee," subject to the provisions of Section 2.3.3.
2.3.5 Other Transfer Restrictions. The restrictions contained in
Sections 2.1(a), 2.4 and 2.5 hereof and the provisions regarding Permitted
Transferees contained in this Section 2.3 shall be in addition to and not in
lieu or limitation of any restrictions on the ownership or Transfer of shares of
Common Stock (including with respect to any Restricted Stock) contained in any
Employment Agreement or any analogous provision of any employment, compensation
or benefit agreement or arrangement or other agreement between Confetti or the
Company and any Stockholder; provided, however, that upon the termination of any
such Employment Agreement or other such agreement or arrangement or lapsing of
such restrictions, the restrictions and provisions contained herein shall
continue in full force and effect pursuant to this Agreement.
2.4 Tag-Along Rights.
2.4.1 Sale Notice. If GSCP proposes to sell any of the Common Stock
owned by it, other than (a) to an Affiliate of GSCP, (b) pursuant to the
exercise of a Drag-Along Right pursuant to Section 2.5 of this Agreement, (c)
pursuant to a Demand Registration (which affords piggyback registration rights
pursuant to Section 3.1) or Piggyback Registration, or (d) following an IPO,
sales effected through open market, nondirected broker's transactions pursuant
to Rule 144, then GSCP shall first give written notice (the "Sale Notice") to
the Company and to each of the Management Investors (such Management Investors,
being referred to herein as the "Offeree Stockholders"), stating that GSCP
desires to make such sale, referring to Section 2.4 of this Agreement,
specifying the number of shares of Common Stock proposed to be sold by GSCP
pursuant to the offer (the "Offer Shares"), and specifying the price, the form
of consideration and the material terms pursuant to which such sale is proposed
to be made.
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2.4.2 Tag-Along Election. Within seven (7) days of the date of
receipt of the Sale Notice, each Offeree Stockholder, other than GSCP, shall
deliver to GSCP and to the Company a written notice stating whether the Offeree
Stockholder elects to sell a pro rata portion of its Common Stock (equal to (A)
the total number of shares of Common Stock owned by such Offeree Stockholder,
plus the total number of shares of Common Stock then issuable upon exercise of
vested Options then exercisable by such Offeree Stockholder, multiplied by (B) a
fraction, (i) the numerator of which is the number of Offer Shares and (ii) the
denominator of which is the total number of shares of Common Stock held by GSCP
plus the total number of shares of Common Stock then issuable upon exercise or
conversion of any convertible securities, if applicable, then exercisable or
convertible by GSCP) to such Proposed Transferee on the same terms and
conditions as GSCP (with respect to each Offeree Stockholder, its "Tag-Along
Shares"). An election pursuant to the first sentence of this Section 2.4.2 shall
constitute an irrevocable commitment by the Offeree Stockholder making such
election to sell such Common Stock to the Proposed Transferee if the sale of
Offer Shares to the Proposed Transferee occurs on the terms contemplated hereby.
2.4.3 Seller's Rights to Transfer.
(a) Third Party Sale; Tag-Along Buyer. A sale to a Proposed
Transferee pursuant to Section 2.4 shall only be consummated if the Proposed
Transferee shall purchase, within 120 days of the date of the Sale Notice,
concurrently with and on the same terms and conditions and at the same price as
the Offer Shares, all of each Offeree Stockholder's Tag-Along Shares with
respect to such sale, in accordance with their elections pursuant to Section
2.4.2 (the "Tag-Along Right").
(b) Sale Agreement. Each Offeree Stockholder electing to sell
Tag-Along Shares (a "Tag-Along Seller") agrees to cooperate in consummating such
a sale, including, without limitation, by becoming a party to the sales
agreement and all other appropriate related agreements (other than any amendment
to such Tag-Along Seller's Employment Agreement, if any), delivering at the
consummation of such sale, stock certificates and other instruments for such
Common Stock duly endorsed for transfer, free and clear of all liens and
encumbrances, and voting or consenting in favor of such transaction (to the
extent a vote or consent is required) and taking any other necessary or
appropriate action in furtherance thereof, including the execution and delivery
of any other appropriate agreements, certificates, instruments and other
documents. The foregoing notwithstanding, in connection with such sale, a
Tag-Along
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Seller, as such, shall not be required to make any representations and
warranties with respect to the Company or the Company's business or with respect
to any other seller. In addition, each Tag-Along Seller shall be severally
responsible for its proportionate share of the expenses of sale incurred by the
sellers in connection with such sale and the obligations and liabilities
incurred by the sellers in connection with such sale. Such obligations and
liabilities shall include (to the extent such obligations are incurred)
obligations and liabilities for indemnification (including for (x) breaches of
representations and warranties made in connection with such sale by the Company
or any other seller with respect to the Company or the Company's business, (y)
breaches of covenants and (z) other matters), and shall also include amounts
paid into escrow or subject to holdbacks, and amounts subject to post-closing
purchase price adjustments. The foregoing notwithstanding, (1) without the
written consent of a Tag-Along Seller, the amount of such obligations and
liabilities for which such Tag-Along Seller shall be responsible shall not
exceed the gross proceeds received by such Tag-Along Seller in such sale and (2)
a Tag-Along Seller shall not be responsible for the fraud of any other seller or
for any indemnification obligations and liabilities for breaches of
representations and warranties made by any other seller with respect to such
other seller's (i) ownership of and title to shares of capital stock of the
Company, (ii) organization, (iii) authority and (iv) conflicts and consents.
(c) No Liability. Notwithstanding any other provision contained in
this Section 2.4.3, there shall be no liability on the part of the Company or
GSCP in the event that the sale pursuant to this Section 2.4.3 is not
consummated for any reason whatsoever. The decision whether to effect a Transfer
pursuant to this Section 2.4.3 shall be in the sole and absolute discretion of
GSCP.
2.5 Drag-Along Right.
2.5.1 Exercise. If GSCP proposes to make a bona fide sale of all of
its shares of Common Stock to a Proposed Transferee, pursuant to a stock sale,
merger, business combination, recapitalization, consolidation, reorganization,
restructuring or similar transaction, GSCP shall have the right (a "Drag-Along
Right"), exercisable upon fifteen (15) days' prior written notice to the other
Stockholders, to require the other Stockholders to sell all of their shares of
Common Stock and, at the election of GSCP, Options (whether vested or unvested)
to the Proposed Transferee on the same terms and conditions and at the same
price (in the case of Options the purchase price of each Option shall be equal
to the purchase price attributable
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to the number of shares of Common Stock issuable upon exercise of such Option
less the exercise price thereof) as GSCP.
2.5.2 Sale Agreement. Each Stockholder selling shares of Common
Stock pursuant to a transaction contemplated by this Section 2.5 (a "Drag-Along
Seller") agrees to cooperate in consummating such a sale, including, without
limitation, by becoming a party to the sales agreement and all other appropriate
related agreements (other than any amendment to such Drag-Along Seller's
Employment Agreement, if any), delivering at the consummation of such sale,
stock certificates and other instruments for such shares of Common Stock duly
endorsed for transfer, free and clear of all liens and encumbrances, and voting
or consenting in favor of such transaction (to the extent a vote or consent is
required) and taking any other necessary or appropriate action in furtherance
thereof, including the execution and delivery of any other appropriate
agreements, certificates, instruments and other documents. The foregoing
notwithstanding, in connection with such sale, a Drag-Along Seller, as such,
shall not be required to make any representations and warranties with respect to
the Company or the Company's business or with respect to any other seller. In
addition, each Drag-Along Seller shall be severally responsible for its
proportionate share of the expenses of sale incurred by GSCP in connection with
such sale and the obligations and liabilities incurred by the seller in
connection with such sale. Such obligations and liabilities shall include (to
the extent such obligations are incurred) obligations and liabilities for
indemnification (including for (x) breaches of representations and warranties
made in connection with such sale by the Company or any other seller with
respect to the Company or the Company's business, (y) breaches of covenants and
(z) other matters), and shall also include amounts paid into escrow or subject
to holdbacks, and amounts subject to post-closing purchase price adjustments.
The foregoing notwithstanding, (1) without the written consent of a Drag-Along
Seller, the amount of such obligations and liabilities for which such Drag-Along
Seller shall be responsible shall not exceed the gross proceeds received by such
Drag-Along Seller in such sale and (2) a Drag-Along Seller shall not be
responsible for the fraud of any other seller or any indemnification obligations
and liabilities for breaches of representations and warranties made by any other
seller with respect to such other seller's (i) ownership of and title to shares
of capital stock of the Company, (ii) organization, (iii) authority and (iv)
conflicts and consents.
2.5.3 No Liability. Notwithstanding any other provision contained in
this Section 2.5, there shall be no liability on the part of the Company or GSCP
in the event that the sale pursuant to this Section 2.5 is not consummated for
any
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reason whatsoever. The decision whether to effect a Transfer pursuant to this
Section 2.5 shall be in the sole and absolute discretion of GSCP.
2.6 Additional Provisions Relating to Restrictions on Transfers.
2.6.1 Legends. Each of the Stockholders hereby agrees that each
outstanding certificate representing shares of Common Stock held or owned by
such Stockholder or its Transferee, including any certificate representing
shares of Common Stock acquired in accordance with the provisions of this
Agreement or the Employment Agreements and any certificates representing shares
of Common Stock issued upon exercise of the Options, in any case, subject to the
provisions of this Agreement and issued prior to the date when the applicable
restrictions are terminated pursuant to Section 2.6.3, shall bear endorsements
reading substantially as follows:
(a) The securities represented by this certificate have not
been registered under the Securities Act of 1933, as amended, or under the
securities laws of any state and may not be transferred, sold or otherwise
disposed of except while such a registration is in effect or pursuant to
an exemption from registration under said Act and applicable state
securities laws.
(b) The securities represented by this certificate are subject
to the terms and conditions set forth in a Stockholders' Agreement, dated
as of December 19, 1997, copies of which may be obtained from the issuer
or from the holder of this security. No transfer of such securities will
be made on the books of the issuer unless accompanied by evidence of
compliance with the terms of such agreement.
Each outstanding certificate representing shares of Common Stock
shall also bear any legend required by the terms of the Employment Agreements or
the Stock Incentive Plan or as the Company may otherwise deem appropriate.
2.6.2 Copy of Agreement. A copy of this Agreement shall be filed
with the corporate secretary of the Company and kept with the records of the
Company and shall be made available for inspection by any stockholder of the
Company at the principal executive offices of the Company.
2.6.3 Termination of Restrictions. The restriction referred to in
the endorsement required pursuant to Section 2.6.1(a) shall cease and terminate
as to any particular shares
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of Common Stock when, in the reasonable opinion of counsel for the Company, such
restriction is no longer required in order to assure compliance with the
Securities Act. The Company or the Company's counsel, at their election, may
request from any Stockholder a certificate or an opinion of such Stockholder's
counsel with respect to any relevant matters in connection with the removal of
the endorsement set forth in Section 2.6.1(a) from such Stockholder's stock
certificates, any such certificate or opinion of counsel to be reasonably
satisfactory to the Company and its counsel. The restrictions referred to in
Section 2.6.1(b) shall cease and terminate as to any particular shares of Common
Stock when, in the reasonable opinion of counsel for the Company, the provisions
of this Agreement are no longer applicable to such shares or this Agreement
shall have terminated in accordance with its terms. Any other restrictions
referred to in any other legends required pursuant to Section 2.6.1 shall cease
and terminate when, in the reasonable opinion of counsel for the Company, such
restrictions are no longer applicable. Whenever such restrictions shall cease
and terminate as to any shares of Common Stock, the Stockholder holding such
shares shall be entitled to receive from the Company, without expense (other
than applicable transfer taxes, if any, if such unlegended shares are being
delivered and transferred to any Person other than the registered holder
thereof), new certificates for a like number of shares of Common Stock not
bearing the relevant legend(s) set forth or referred to in Section 2.6.1.
ARTICLE III
REGISTRATION RIGHTS
3.1 Piggyback and Demand Registrations.
(a) Piggyback Registrations. If at any time the Company proposes to
register for sale by the Company under the Securities Act any of its equity
securities (other than a registration on Form S-4 or Form S-8, or any successor
or similar forms), or any shares of Common Stock held by GSCP pursuant to
Section 3.1(b), in a manner that would permit registration of Registrable
Securities for sale to the public under the Securities Act and in an
underwritten offering, the Company will each such time promptly give written
notice to all Stockholders who beneficially own any Registrable Securities of
its intention to do so, of the registration form of the SEC that has been
selected by the Company and of such holders' rights under this Section 3.1 (the
"Piggyback Notice"). The Company will use its reasonable best efforts to
include, and to cause the underwriter or underwriters to include, in the
proposed offering, on
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the same terms and conditions as the securities of the Company included in such
offering, all Registrable Securities that the Company has been requested in
writing, within fifteen (15) calendar days after the Piggyback Notice is given,
to register by the Stockholders thereof (each such registration pursuant to this
Section 3.1(a), a "Piggyback Registration"); provided, however, that (i) if, at
any time after giving a Piggyback Notice and prior to the effective date of the
registration statement filed in connection with such registration, the Company
shall determine for any reason not to register such equity securities (or, in
the case of a Demand Registration (as defined below), GSCP so determines), the
Company may, at its election (or, in the case of a Demand Registration where
GSCP so determines, the Company shall), give written notice of such
determination to all Stockholders who beneficially own any Registrable
Securities and, thereupon, shall be relieved of its obligation to register any
Registrable Securities in connection with such abandoned registration, and (ii)
in case of a determination by the Company to delay registration of its equity
securities (or, in the case of a Demand Registration, GSCP so determines), the
Company shall be permitted to (or, in the case of a Demand Registration where
GSCP so determines, the Company shall) delay the registration of such
Registrable Securities for the same period as the delay in registering such
other equity securities (provided that clauses (i) and (ii) shall not relieve
the Company of its obligations under Section 3.1(b)). In the case of any
registration of Registrable Securities in an underwritten offering pursuant to
this Section 3.1(a), all Stockholders proposing to distribute their securities
pursuant to this Section 3.1(a) shall, at the request of the Company (or, in the
case of a Demand Registration, GSCP), enter into an agreement in customary form
with the underwriter or underwriters selected by the Company (or, in the case of
a Demand Registration, selected by GSCP). Notwithstanding the foregoing,
following an IPO, the Company shall not be obligated to effect registration of
Registrable Securities for which Piggyback Registration is requested by a
Management Investor if, at the time of such request, all such Registrable
Securities are eligible for sale to the public by the requesting Management
Investor without registration under Rule 144 under the Securities Act, with such
sale not being limited by the volume restrictions thereunder.
(b) Demand Registrations. The Company, upon the reasonable request
of GSCP, shall, from time to time, use its reasonable best efforts to register
under the Securities Act any reasonable portion of Registrable Securities held
by GSCP (including, at the election of GSCP, in an underwritten offering) and
bear all expenses in connection with such offering in a manner consistent with
paragraph (c) below and shall enter into such other agreements in furtherance
thereof (including
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with underwriters selected by GSCP, including, in any case, Affiliates of GSCP
as lead underwriters, if requested by GSCP) (each such registration pursuant to
this Section 3.1(b), a "Demand Registration"), and the Company shall provide
customary indemnifications in such instances (in a manner consistent with the
indemnification provisions of this Article III) to GSCP and any such
underwriters; provided, however, that the Company shall not be obligated to
effect more than four Demand Registrations. A registration shall not count as a
Demand Registration unless and until the registration statement relating thereto
has been declared effective by the SEC and not withdrawn.
(c) Expenses. The Company shall pay all Registration Expenses in
connection with each registration of Registrable Securities requested pursuant
to this Section 3.1; provided, however, that each Stockholder shall pay all
underwriting discounts and commissions and transfer taxes, if any, relating to
the sale or disposition of such Stockholder's Registrable Securities pursuant to
a registration statement effected pursuant to this Section 3.1.
(d) Priority in Piggyback and Demand Registrations. If the managing
underwriter for a registration pursuant to this Section 3.1 shall advise the
Company in writing that, in its opinion, the number of securities requested to
be included in such registration exceeds the number (the "Section 3.1 Sale
Number") that can be sold in an orderly manner in such offering within a price
range acceptable to the Company (or, in the case of a Demand Registration, to
GSCP), the Company shall include in such offering (i) first, all the securities
the Company proposes to register for its own sale, and (ii) second, to the
extent that the securities the Company proposes to register are less than the
Section 3.1 Sale Number, all Registrable Securities requested to be included by
all Stockholders; provided, however, that if the number of such Registrable
Securities exceeds (x) the Section 3.1 Sale Number less (y) the number of
securities included pursuant to clause (i) hereof, then the number of such
Registrable Securities included in such registration shall be allocated pro rata
among all requesting Stockholders, on the basis of the relative number of shares
of such Registrable Securities each such Stockholder then holds. If there is any
reduction or exclusion of Registrable Securities pursuant to this Section 3.1(d)
in connection with a Demand Registration, such registration shall not be deemed
to be a Demand Registration for purposes of determining the maximum number of
Demand Registrations the Company is obligated to effect pursuant to Section
3.1(b) hereof.
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(e) Underwriting Requirements. In connection with any offering
involving any underwriting of securities in a Piggyback Registration, the
Company shall not be required to include any Stockholder's Registrable
Securities in such underwriting unless such Stockholder accepts the terms of the
underwriting as agreed upon between the Company and the underwriters in such
quantities and on such terms as set forth in Section 3.1(a) hereof, and such
Management Investor agrees to sell such Management Investor's securities on the
basis provided therein and completes and/or executes all questionnaires,
indemnities, lock-ups, underwriting agreements and other documents (including
powers of attorney and custody arrangements) required generally of all selling
Stockholders, in each case in customary form and substance, which are requested
to be executed in connection therewith.
3.2 Registration Procedures. If and whenever the Company is required to
use its reasonable best efforts to effect or cause the registration of any
Registrable Securities under the Securities Act as provided in this Article III,
the Company will, as soon as practicable:
(a) prepare and file with the SEC the requisite registration
statement with respect to such Registrable Securities and use its
reasonable best efforts to cause such registration statement to become and
remain effective;
(b) prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement
effective for such period as the Company shall deem appropriate and to
comply with the provisions of the Securities Act with respect to the sale
or other disposition of all securities covered by such registration
statement during such period;
(c) furnish to each seller of such Registrable Securities and each
underwriter such number of copies of such registration statement and of
each amendment and supplement thereto (in each case including all
exhibits), such number of copies of the prospectus included in such
registration statement (including each preliminary prospectus and summary
prospectus), in conformity with the requirements of the Securities Act,
and such other documents as such seller may reasonably request;
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(d) promptly notify each Stockholder that holds Registrable
Securities covered by such registration statement, (i) when such
registration statement or any post-effective amendment or supplement
thereto becomes effective, (ii) of the issuance by the SEC or any state
securities authority of any stop order, injunction or other order or
requirement suspending the effectiveness of such registration statement
(and take all reasonable action to prevent the entry of such stop order or
to remove it if entered, or the initiation of any proceedings for that
purpose), or (iii) of the happening of any event as a result of which the
registration statement, as then in effect, the prospectus related thereto
or any document included therein by reference includes an untrue statement
of a material fact or omits to state a material fact required to be stated
therein or necessary to make the statements therein not misleading in the
light of the circumstances under which they were made and promptly file
such amendments and supplements which may be required on account of such
event and use its reasonable best efforts to cause each such amendment and
supplement to become effective;
(e) promptly furnish counsel for each underwriter, if any, and for
the selling Stockholders of Registrable Securities copies of any written
request by the SEC or any state securities authority for amendments or
supplements to a registration statement and prospectus or for additional
information;
(f) use reasonable best efforts to obtain the withdrawal of any
order suspending the effectiveness of a registration statement at the
earliest possible time;
(g) use its best efforts to cause all such Registrable Securities
covered by such registration statement to be listed on the principal
securities exchange or authorized for quotation on Nasdaq on which similar
equity securities issued by the Company are then listed or authorized for
quotation, or eligible for listing or quotation, if the listing or
authorization for quotation of such securities is then permitted under the
rules of such exchange or the NASD;
(h) enter into an underwriting agreement with the underwriter of
such offering in the form customary for such underwriter for similar
offerings, including such representations and warranties by the Company,
provisions
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regarding the delivery of opinions of counsel for the Company and
accountants' letters, provisions regarding indemnification and
contribution, and such other terms and conditions as are at the time
customarily contained in such underwriter's underwriting agreements for
similar offerings (the sellers of Registrable Securities which are to be
distributed by such underwriter(s) may, at their option, require that any
or all of the representations and warranties by, and the other agreements
on the part of, the Company to and for the benefit of such underwriter(s)
shall also be made to and for the benefit of such sellers of Registrable
Securities);
(i) make available for inspection by representatives of the selling
Stockholders who hold Registrable Securities and any underwriters
participating in any disposition pursuant hereto and any counsel or
accountant retained by such Stockholders or underwriters, all relevant
financial and other records, pertinent corporate documents and properties
of the Company and cause the respective officers, directors and employees
of the Company to supply all information reasonably requested by any such
representative, underwriter, counsel or accountant in connection with a
registration pursuant hereto; provided, however, that, with respect to
records, documents or information which the Company determines, in good
faith, to be confidential and as to which the Company notifies such
representatives, underwriters, counsel or accountants in writing of such
confidentiality, such representatives, underwriters, counsel or
accountants shall not disclose such records, documents or information
unless (i) the release of such records, documents or information is
ordered pursuant to a subpoena or other order from a court of competent
jurisdiction, (ii) such records, documents or information have previously
been generally made available to the public, or (iii) the disclosure of
such records, documents or information is necessary, in the written
opinion of outside legal counsel, to avoid or correct a material
misstatement or omission in the registration statement and then only after
reasonable request has been made to the Company to make such disclosure
and the Company has denied such request. Each selling Stockholder of such
Registrable Securities agrees that information obtained by it as a result
of such inspections shall be deemed confidential and shall not be used by
it as the basis for any market transactions in the securities of the
Company or its Affiliates (or for such Stockholder's business purposes or
for any reason other than in connection with a registration hereunder)
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unless and until such information is made generally available (other than
by such Stockholder or where such Stockholder knows that such information
became publicly available as a result of a breach of any confidentiality
arrangement) to the public. Each selling Stockholder of such Registrable
Securities further agrees that it will, upon learning that disclosure of
such records is sought, give notice to the Company and allow the Company,
at its expense, to undertake appropriate action to prevent disclosure of
the records deemed confidential;
(j) permit any beneficial owner of Registrable Securities who, in
the sole judgment, exercised in good faith, of such holder, might be
deemed to be a controlling person of the Company, to participate in the
preparation of such registration or comparable statement and to require
the insertion therein of material, furnished to the Company in writing,
that in the judgment of such holder, as aforesaid, should be included; and
(k) make reasonably available its employees and personnel and
otherwise provide reasonable assistance to the underwriters (taking into
account the needs of the Company's businesses and the requirements of the
marketing process) in the marketing of Registrable Securities in any
underwritten offering.
The Company may require each seller of Registrable Securities as to
which any registration is being effected to furnish the Company such information
regarding such seller and the distribution of such securities as the Company may
from time to time reasonably request in writing. The Company shall not be
required to register or qualify any Registrable Securities covered by such
registration statement under any state securities, or "blue sky," laws of such
jurisdictions other than as it deems necessary in connection with the chosen
method of distribution or to take any other actions or do any other things other
than those it deems necessary or advisable to consummate such distribution, and
the Company shall not for any such purpose be required to qualify generally to
do business as a foreign corporation in any jurisdiction wherein it would not
otherwise be obligated to be so qualified, to subject itself to taxation in any
such jurisdiction or to consent to general service of process in any such
jurisdiction.
Each beneficial owner of Registrable Securities agrees that upon
receipt of any notice from the Company of the happening of any event of the kind
described in subclauses (i) and (ii) of clause (d) of this Section 3.2, such
beneficial owner will forthwith discontinue disposition of Registrable
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Securities pursuant to the registration statement covering such Registrable
Securities until such beneficial owner's receipt of the copies of the
supplemented or amended prospectus contemplated by clause (d) of this Section
3.2, and, if so directed by the Company, such beneficial owner will deliver to
the Company (at the Company's expense) all copies, other than permanent file
copies then in such beneficial owner's possession, of the prospectus covering
such Registrable Securities that was in effect prior to such amendment or
supplement.
3.3 Indemnification.
(a) In the event of any registration of any Registrable Securities
pursuant to this Article III, the Company will, and hereby does, indemnify and
hold harmless, to the fullest extent permitted by law, the seller of any
Registrable Securities covered by such registration statement, its directors,
officers, fiduciaries, employees and stockholders or general and limited
partners (and the directors, officers, fiduciaries, employees and stockholders
or general and limited partners thereof), each other Person who participates as
an underwriter or a qualified independent underwriter, if any, in the offering
or sale of such securities, each director, officer, fiduciary, employee and
stockholder or general and limited partner of such underwriter or qualified
independent underwriter, and each other Person (including any such Person's
directors, officers, fiduciaries, employees and stockholders or general and
limited partners), if any, who controls such seller or any such underwriter or
qualified independent underwriter, within the meaning of the Securities Act,
against any and all Claims in respect thereof and expenses (including reasonable
fees and expenses of counsel and any amounts paid in any settlement effected
with the Company's consent, which consent shall not be unreasonably withheld or
delayed) to which each such indemnified party may become subject under the
Securities Act, the Exchange Act or otherwise, insofar as such Claims or
expenses arise out of or are based upon any of the following actual or alleged
statements, omissions or violations (each, a "Violation"): (i) any untrue
statement or alleged untrue statement of a material fact contained in any
registration statement under which such securities were registered pursuant to
this Agreement under the Securities Act or the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading, (ii) any untrue statement or alleged untrue statement of a
material fact contained in any preliminary, final or summary prospectus or any
amendment or supplement thereto, together with the documents incorporated by
reference therein, or the omission or alleged omission to state therein a
material
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fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading, or (iii) any violation by the Company of any federal, state or
common law rule or regulation applicable to the Company and relating to action
required of or inaction by the Company in connection with any such registration,
and the Company will reimburse any such indemnified party for any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such Claim as such expenses are incurred;
provided, that the Company shall not be liable to any such indemnified party in
any such case to the extent such Claim or expense arises out of or is based upon
any Violation which occurs in reliance upon and in conformity with written
information furnished to the Company or its representatives by or on behalf of
such indemnified party expressly stating that such information is for use
therein.
(b) Each holder of Registrable Securities that are included in the
securities as to which any Demand Registration or Piggyback Registration is
being effected (and, if the Company requires as a condition to including any
Registrable Securities in any registration statement filed in connection with
any Demand Registration or Piggyback Registration, any underwriter and qualified
independent underwriter, if any) shall, severally and not jointly, indemnify and
hold harmless (in the same manner and to the same extent as set forth in
paragraph (a) of this Section 3.3), to the extent permitted by law, the Company,
its directors, officers, fiduciaries, employees and stockholders (and the
directors, officers, fiduciaries, employees and stockholders or general and
limited partners thereof) and each Person (including any such Person's
directors, officers, fiduciaries, employees and stockholders or general and
limited partners), if any, controlling the Company within the meaning of the
Securities Act and all other prospective sellers and their directors, officers,
fiduciaries, employees and stockholders or general and limited partners and
respective controlling Persons (including any such Person's directors, officers,
fiduciaries, employees and stockholders or general and limited partners) against
any and all Claims and expenses (including reasonable fees and expenses of
counsel and any amounts paid in any settlement effected with the consent of the
indemnifying party, which consent shall not be unreasonably withheld or delayed)
to which each such indemnified party may become subject under the Securities
Act, the Exchange Act or otherwise, insofar as such Claims or expenses arise out
of or are based upon any Violation which occurs in reliance upon and in
conformity with written information furnished to the Company or its
representatives by or on behalf of such holder or underwriter or qualified
independent underwriter, if any, expressly
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stating that such information is for use in connection with any registration
statement, preliminary, final or summary prospectus or amendment or supplement
or document incorporated by reference into any of the foregoing; provided,
however, that the aggregate amount which any such holder, underwriter or
qualified independent underwriter shall be required to pay pursuant to this
Section 3.3(b) and Sections 3.3(c) and (e) shall be limited to (x) in the case
of any such holder, the amount of the gross proceeds received by such holder
upon the sale of the Registrable Securities pursuant to the registration
statement giving rise to such claim and (y) in the case of any such underwriter
or qualified independent underwriter, the amount of the total sales price of the
Registrable Securities sold through or by it pursuant to the registration
statement giving rise to such claim.
(c) Indemnification similar to that specified in the preceding
paragraphs (a) and (b) of this Section 3.3 (with appropriate modifications)
shall be given by the Company and each seller of Registrable Securities (and, if
the Company requires as a condition to including any Registrable Securities in
any registration statement filed in connection with any Demand Registration or
Piggyback Registration, any underwriter and qualified independent underwriter,
if any) with respect to any required registration or other qualification of
securities under any state securities and "blue sky" laws.
(d) Any Person entitled to indemnification under this Agreement
shall notify promptly the indemnifying party in writing of the commencement of
any action or proceeding with respect to which a claim for indemnification may
be made pursuant to this Section 3.3, but the failure of any indemnified party
to provide such notice shall not relieve the indemnifying party of its
obligations under the preceding paragraphs of this Section 3.3, except to the
extent the indemnifying party is prejudiced thereby and shall not relieve the
indemnifying party from any liability which it may have to any indemnified party
otherwise than under this Section 3.3. In case any action or proceeding is
brought against an indemnified party and it shall notify the indemnifying party
of the commencement thereof, the indemnifying party shall be entitled to
participate therein and, unless in the reasonable opinion of outside counsel to
the indemnified party a conflict of interest between such indemnified and
indemnifying parties may exist in respect of such claim, to assume the defense
thereof jointly with any other indemnifying party similarly notified, to the
extent that it chooses, with counsel reasonably satisfactory to such indemnified
party, and after notice from the indemnifying party to such indemnified party
that it so chooses, the indemnifying party shall not be liable to such
indemnified party for any
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legal or other expenses subsequently incurred by such indemnified party in
connection with the defense thereof other than reasonable costs of
investigation; provided, however, that (i) if the indemnifying party fails to
take reasonable steps necessary to defend diligently the action or proceeding
within twenty (20) days after receiving notice from such indemnified party that
the indemnified party believes it has failed to do so; or (ii) if such
indemnified party who is a defendant in any action or proceeding which is also
brought against the indemnifying party reasonably shall have concluded that
there may be one or more legal defenses available to such indemnified party
which are not available to the indemnifying party; or (iii) if representation of
both parties by the same counsel is otherwise inappropriate under applicable
standards of professional conduct, then, in any such case, the indemnified party
shall have the right to assume or continue its own defense as set forth above
(but with no more than one firm of counsel for all indemnified parties in each
jurisdiction, except to the extent any indemnified party or parties reasonably
shall have concluded that there may be legal defenses available to such party or
parties which are not available to the other indemnified parties or to the
extent representation of all indemnified parties by the same counsel is
otherwise inappropriate under applicable standards of professional conduct) and
the indemnifying party shall be liable for any expenses therefor. No
indemnifying party shall, without the written consent of the indemnified party,
which consent shall not be unreasonably withheld, effect the settlement or
compromise of, or consent to the entry of any judgment with respect to, any
pending or threatened action or claim in respect of which indemnification or
contribution may be sought hereunder (whether or not the indemnified party is an
actual or potential party to such action or claim) unless such settlement,
compromise or judgment (A) includes an unconditional release of the indemnified
party from all liability arising out of such action or claim and (B) does not
include a statement as to or an admission of fault, culpability or a failure to
act, by or on behalf of any indemnified party.
(e) If for any reason the foregoing indemnity is unavailable or is
insufficient to hold harmless an indemnified party under Section 3.3(a), (b) or
(c), then each indemnifying party shall contribute to the amount paid or payable
by such indemnified party as a result of any Claim in such proportion as is
appropriate to reflect the relative fault of the indemnifying party on the one
hand and the indemnified party on the other from the relevant offering of
securities. If, however, the allocation provided in the immediately preceding
sentence is not permitted by applicable law, or if the indemnified party failed
to give the notice required by Section 3.3(d) above and
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29
the indemnifying party is prejudiced thereby, then each indemnifying party shall
contribute to the amount paid or payable by such indemnified party in such
proportion as is appropriate to reflect not only such relative fault of but also
the relative benefits received by the indemnifying party, on the one hand, and
the indemnified party, on the other hand, as well as any other relevant
equitable considerations. The relative fault shall be determined by reference
to, among other things, whether the Violation relates to information supplied by
the indemnifying party or the indemnified party and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such Violation. The parties hereto agree that it would not be just and equitable
if contributions pursuant to this Section 3.3(e) were to be determined by pro
rata allocation or by any other method of allocation which does not take account
of the equitable considerations referred to in the preceding sentences of this
Section 3.3(e). The amount paid or payable in respect of any Claim shall be
deemed to include any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any such Claim.
No person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. Notwithstanding
anything in this Section 3.3(e) to the contrary, no indemnifying party (other
than the Company) shall be required pursuant to this Section 3.3(e) to
contribute any amount in excess of (x) in the case of an indemnifying party that
is a holder of Registrable Securities, the gross proceeds received by such
indemnifying party from the sale of Registrable Securities in the offering to
which the losses, claims, damages or liabilities of the indemnified parties
relate, or (y) in the case of an indemnifying party that is an underwriter or a
qualified independent underwriter, the amount of the total sales price of the
Registrable Securities sold through or by it in the offering to which the
losses, claims, damages or liabilities of the indemnified parties relate, less,
in any such case referred to in (x) and (y), the amount of all indemnification
and contribution payments made pursuant to Sections 3.3(b) and (c) and this
Section 3.3(e), as the case may be, in connection with such offering.
(f) The indemnity agreements contained herein shall be in addition
to any other rights to indemnification or contribution which any indemnified
party may have pursuant to law or contract and shall remain operative and in
full force and effect regardless of any investigation made or omitted by or on
behalf of any indemnified party and shall survive the transfer of the
Registrable Securities by any such party.
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30
(g) The indemnification and contribution required by this Section
3.3 shall be made by periodic payments of the amount thereof during the course
of the investigation or defense, as and when bills are received or expense,
loss, damage or liability is incurred.
(h) In connection with underwritten offerings, the Company will use
reasonable best efforts to negotiate terms of indemnification that are
reasonably favorable to the various sellers pursuant thereto, as appropriate
under the circumstances.
3.4 Holdback Agreement.
(a) If requested in writing by the Company or the underwriter, if
any, of any offering affording Stockholders registration rights pursuant to
Section 3.1 (whether or not some or all of such Stockholder's Registrable
Securities are subject to a cutback pursuant to Section 3.1 of this Agreement),
including without limitation an IPO, each Stockholder agrees not to effect any
public sale or distribution, including any sale pursuant to Rule 144, of any
Registrable Securities or any other equity security of the Company or of any
security convertible into or exchangeable or exercisable for any equity security
of the Company (in each case, other than as part of such underwritten public
offering) within fourteen (14) days before or 180 days after the effective date
of a registration statement affording Stockholders registration rights pursuant
to Section 3.1 (including where subject to a cutback pursuant to Section
3.1(d)).
(b) If requested in writing by the underwriter of any offering in
connection with a Demand Registration, the Company agrees not to effect any
public sale or distribution (other than public sales or distributions solely by
and for the account of the Company of securities issued (x) pursuant to any
employee or director benefit or similar plan or any dividend reinvestment plan
or (y) in any acquisition by the Company) of any Registrable Securities or any
other equity security of the Company or of any security convertible into or
exchangeable or exercisable for any equity security of the Company (in each
case, other than as part of such underwritten public offering), within fourteen
(14) days before or 180 days after the effective date of a registration
statement filed in connection with a Demand Registration, or for such shorter
period as the sole or lead managing underwriter shall request, in any such case,
unless consented to by such underwriter.
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31
ARTICLE IV
MANAGEMENT INVESTORS' PUTS AND CALLS
4.1 Call Rights. If, prior to the consummation of an IPO, a Management
Investor (other than the Estate or the Estate's Permitted Transferees) dies or
the Management Investor's (other than the Estate or the Estate's Permitted
Transferees) employment by the Company terminates for any reason (including due
to a Disability, as defined in such Management Investor's Employment Agreement
or any analogous provision of any employment, compensation or benefit agreement
or arrangement, if any, and if not so defined, upon the good faith determination
of the Board of Directors of the Company of such Disability), the Company shall
have the right, at its election, to purchase all (but not less than all) of the
Management Investor's shares of Common Stock (including any shares held by its
Permitted Transferees) within six (6) months after such termination, or fifteen
(15) months after such termination in the case of death of the Management
Investor (with respect to any shares of Common Stock acquired after such
termination or death upon the exercise of Options held by the Management
Investor, such period to run from the date of exercise) at a price equal to the
Fair Market Value of such Common Stock determined as of, in all cases other than
the death of the Management Investor, the date such termination is effective
and, in the case of the Management Investor's death, as of the date of death.
The Company shall pay the purchase price in cash to the extent that (x)
subsidiaries of the Company are permitted to dividend the funds for such
purchase to the Company (a "Subsidiary Dividend") (under both applicable law and
the indebtedness of the Company and its Affiliates) and (y) the Company is
permitted to purchase such shares for cash (under both applicable law and such
indebtedness). The Company shall fund any amount not permitted to be funded
through a Subsidiary Dividend or to be used to purchase such shares with a
Buy-Out Note. The Board of Directors of the Company may, in its discretion,
assign the rights and obligations of the Company under this Section 4.1 to any
other Person, but no such assignment shall relieve the Company of its
obligations hereunder to the extent not satisfied by such assignee.
4.2 Put Rights. If, prior to the consummation of an IPO, a Management
Investor (other than the Estate or the Estate's Permitted Transferee) dies or
the Management Investor's (other than the Estate or the Estate's Permitted
Transferee's) employment by the Company is terminated by the Company for any
reason (including due to a Disability, as defined in such Management Investor's
Employment Agreement or any analogous provision of any employment, compensation
or benefit
-27-
32
agreement or arrangement, if any, and if not so defined, upon the good faith
determination of the Board of Directors of the Company of such Disability), the
Management Investor or the Management Investor's legal representative or
trustee, as the case may be, shall have the right, within three (3) months after
such termination is effective (or one year after the date of death in the case
of the Management Investor's death), to require the Company to purchase all (but
not less than all) of the Management Investor's Common Stock (including any
shares held by its Permitted Transferees) at a price equal to (A) in the case of
termination by reason of death or Disability, the Fair Market Value thereof
determined as of the date of death (in the case of termination due to death) or
the date such other termination is effective and (B) in the case of termination
by the Company for any other reason, the lower of (1) Fair Market Value and (2)
the product of (x) the number of shares of Common Stock and (y) the New Cost Per
Share (subject to adjustment to reflect any adjustments to the Common Stock made
to reflect any merger, reorganization, consolidation, recapitalization, spinoff,
stock dividend, stock split, extraordinary distribution with respect to the
Common Stock or other change in corporate structure affecting the Common Stock,
as the Company reasonably shall deem fair and appropriate). To the extent the
funds for such purchase are permitted under the indebtedness of the Company and
its Affiliates and applicable law to be funded through a Subsidiary Dividend and
to be used to purchase such shares, the Company shall pay the purchase price in
cash. The Company shall pay any amount not permitted to be funded through a
Subsidiary Dividend or to be used to purchase such shares with a Buy-Out Note.
The Board of Directors of the Company may, in its discretion, assign the rights
and obligations of the Company under this Section 4.2 to any other Person, but
no such assignment shall relieve the Company of its obligations hereunder to the
extent not satisfied by such assignee.
ARTICLE V
MISCELLANEOUS
5.1 Effectiveness; Term. (a) This Agreement shall become effective (the
"Effective Date") simultaneously with the closing of the transactions under the
Merger Agreement and shall terminate without liability or penalty on the part of
any party or its directors, officers, fiduciaries, employees and stockholders or
general and limited partners (and the directors, officers, fiduciaries,
employees and stockholders or general and limited partners thereof) to any other
party or such
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33
other party's Affiliates upon the termination of the Merger Agreement pursuant
to its terms.
(b) Unless theretofore terminated pursuant to the preceding
paragraph, the rights and obligations of, and restrictions on, the Stockholders
under Article II of this Agreement shall terminate when GSCP and its Affiliates
no longer hold in the aggregate at least 40% of the fully diluted shares of
Common Stock then outstanding. Notwithstanding the foregoing, in the event the
Company enters into any agreement to merge with or into any other Person or
adopts any other plan of recapitalization, consolidation, reorganization or
other restructuring transaction as a result of which the Stockholders and their
respective Permitted Transferees (including GSCP and any Affiliates thereof)
shall own less than a majority of the outstanding voting power of the entity
surviving such transaction, this Agreement shall terminate.
(c) Unless theretofore terminated pursuant to Section 5.1(a), and
notwithstanding anything in Section 5.1(b) to the contrary, the provisions
contained in Article III hereof shall continue to remain in full force and
effect until the earlier to occur of the twentieth anniversary of the date
hereof and the date on which there are no longer any Registrable Securities
outstanding or issuable or thereafter available for or subject to issuance to
any Stockholder upon exercise or conversion of any options, warrants, rights or
other convertible securities; provided, however, that the provisions of Section
3.3 hereof shall survive termination pursuant to Section 5.1(b) or (c) of this
Agreement.
5.2 No Voting or Conflicting Agreements. Prior to an IPO, no Management
Investor shall grant any proxy or enter into or agree to be bound by any voting
trust with respect to the Common Stock nor, at any time, shall any Management
Investor enter into any stockholder agreements or arrangements of any kind with
any Person with respect to the Common Stock inconsistent with the provisions of
this Agreement (whether or not such agreements and arrangements are with other
Management Investors or holders of Common Stock that are not parties to this
Agreement). The foregoing prohibition includes, but is not limited to,
agreements or arrangements with respect to the acquisition, disposition or
voting of shares of Common Stock inconsistent with the provisions of this
Agreement. No Management Investor shall act, at any time, for any reason, as a
member of a group or in concert with any other Persons in connection with the
acquisition, disposition or voting of shares of Common Stock in any manner which
is inconsistent with the provisions of this Agreement.
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34
5.3 Approval of Stock Incentive Plan by Stockholders.
The Stockholders by their execution of this Agreement, hereby
approve the Stock Incentive Plan, a copy of which is attached hereto as Exhibit
A.
5.4 Specific Performance. The parties hereto acknowledge that there would
be no adequate remedy at law if any party fails to perform any of its
obligations hereunder, and accordingly agree that each party, in addition to any
other remedy to which it may be entitled at law or in equity, shall be entitled
to compel specific performance of the obligations of any other party under this
Agreement in accordance with the terms and conditions of this Agreement. Any
remedy under this Section 5.4 is subject to certain equitable defenses and to
the discretion of the court before which any proceedings therefor may be
brought.
5.5 Notices. All notices, statements, instructions or other documents
required to be given hereunder shall be in writing and shall be given either
personally or by mailing the same in a sealed envelope, by overnight courier or
by first-class mail, postage prepaid and either certified or registered, in
either case, return receipt requested, or by telecopy, addressed to the Company
at its principal offices and to the other parties at their addresses reflected
on the signature pages hereto. Each party hereto, by written notice given to the
other parties hereto in accordance with this Section 5.5, may change the address
to which notices, statements, instructions or other documents are to be sent to
such party. All notices, statements, instructions and other documents hereunder
that are mailed or telecopied shall be deemed to have been given on the date of
mailing or, in the case of telecopying, upon confirmation of receipt.
5.6 Successors and Assigns. This Agreement shall be binding upon and shall
inure to the benefit of the parties, and their respective successors and
assigns. If any Stockholder or any Affiliate thereof or any Transferee of any
Stockholder shall acquire any shares of Common Stock in any manner, whether by
operation of law or otherwise, such shares shall be held subject to all of the
terms of this Agreement, and by taking and holding such shares such Person shall
be conclusively deemed to have agreed to be bound by and to perform all of the
terms and provisions of this Agreement.
5.7 Recapitalizations and Exchanges Affecting Common Stock. The provisions
of this Agreement shall apply, to the full extent set forth herein with respect
to Common Stock, to any and all shares of capital stock or equity securities of
the
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35
Company or any successor or assign of the Company (whether by merger,
consolidation, sale of assets or otherwise) which may be issued in respect of,
in exchange for, or in substitution of, the Common Stock, or which may be issued
by reason of any stock dividend, stock split, reverse stock split, combination,
recapitalization, reclassification or otherwise. Upon the occurrence of any of
such events, numbers of shares and amounts hereunder shall be appropriately
adjusted, as determined in good faith by the Board of Directors of the Company.
5.8 Governing Law. This Agreement shall be governed and construed and
enforced in accordance with the laws of the State of New York, without regard to
the principles of conflicts of law thereof.
5.9 Descriptive Headings, Etc. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning of terms contained herein. Unless the context of this Agreement
otherwise requires, references to "hereof," "herein," "hereby," "hereunder" and
similar terms shall refer to this entire Agreement.
5.10 Amendment; Waiver; Bylaws. This Agreement may not be amended or
supplemented except by an instrument in writing signed by the Company and by
Stockholders holding a majority of the then outstanding shares of Common Stock
held by all Stockholders; provided that any amendment, supplement or
modification of this Agreement which adversely affects the rights and
obligations of any Stockholder (an "Affected Holder") differently than those of
any other Stockholder shall also require the approval of such Affected Holder;
provided further, the foregoing proviso notwithstanding, any amendment,
supplement or modification of this Agreement that adversely affects the
Management Investors (or a group thereof) as a class may be approved by
Management Investors (or members of such group, as the case may be) holding
Common Stock or Options to purchase Common Stock, which together represent a
majority of the sum of the total number of (x) the shares of such Common Stock
and (y) the shares of Common Stock issuable upon exercise of such Options held
by all the Management Investors (or such group, as the case may be). The
foregoing notwithstanding, (i) the Company, without the consent of any other
party hereto, may amend Schedule I and the signature pages hereto, in order to
add any Management Investor or any other party that becomes a holder of Common
Stock or securities convertible into or exercisable for Common Stock and (ii)
GSCP and the Company may amend Article III of this Agreement (other than in a
manner that would materially reduce the Management Investor's rights or
materially increase the Management Investor's obligations with respect to
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36
Piggyback Registrations) without the agreement or consent of any Management
Investor.
5.11 Severability. If any term or provision of this Agreement shall to any
extent be invalid or unenforceable, the remainder of this Agreement shall not be
affected thereby, and each term and provision of this Agreement shall be valid
and enforceable to the fullest extent permitted by law. Upon the determination
that any term or other provision is invalid, illegal or incapable of being
enforced, the parties shall negotiate in good faith to modify this Agreement so
as to effect their original intent as closely as possible in an acceptable
manner to the end that transactions contemplated hereby are fulfilled to the
extent possible.
5.12 Further Assurances. The parties hereto shall from time to time
execute and deliver all such further documents and do all acts and things as the
other party may reasonably require to effectively carry out or better evidence
or perfect the full intent and meaning of this Agreement, including, to the
extent necessary or appropriate, using all reasonable efforts to cause the
amendment of the Amended Certificate or the By-Laws in order to provide for the
enforcement of this Agreement in accordance with its terms. In furtherance and
not in limitation of the foregoing, in the event of any amendment, modification
or termination of this Agreement in accordance with its terms, the Stockholders
shall cause the Board to meet within thirty (30) days following such amendment,
modification or termination or as soon thereafter as is practicable for the
purpose of amending the Amended Certificate and By-Laws, as may be required as a
result of such amendment, modification or termination, and, to the extent
required by law, proposing such amendments to the stockholders of the Company
entitled to vote thereon, and such action shall be the first action to be taken
at such meeting.
5.13 Complete Agreement; Counterparts. This Agreement (together with the
Merger Agreement, the Voting Agreement, the Stock Incentive Plan, the Employment
Agreements and the other agreements referred to herein and therein) constitutes
the entire agreement and supersedes all other agreements and understandings,
both written and oral, among the parties or any of them, with respect to the
subject matter hereof. This Agreement may be executed by any one or more of the
parties hereto in any number of counterparts, each of which shall be deemed to
be an original, but all such counterparts shall together constitute one and the
same instrument.
5.14 Certain Transactions. The parties hereto agree that Xxxxxxx Xxxxx
shall have the exclusive right to perform all
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37
consulting, financing, investment banking and similar services for the Company
and its subsidiaries (including as lead underwriter or in any analogous role in
connection with any public or private offering of securities or debt, and
including in connection with the Merger), for customary compensation and on
other terms that are customary for similar engagements with unaffiliated third
parties, and neither the Company nor its subsidiaries shall engage any other
Person to perform such services during the term of this Agreement except to the
extent Xxxxxxx Sachs shall consent thereto or shall decline, at its sole
election, to perform such services.
5.15 No Third Party Beneficiaries. The provisions of this Agreement shall
be only for the benefit of the parties to this Agreement, and no other Person
(other than Xxxxxxx Xxxxx with respect to Section 5.14) shall have any third
party beneficiary or other right hereunder.
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38
IN WITNESS WHEREOF, the parties hereto have caused this instrument
to be duly executed on the date first written above.
AMSCAN HOLDINGS, INC.
By: /s/ XXXXXX X. XXXXXXXXXX
-------------------------------------
Name: Xxxxxx X. Xxxxxxxxxx
Title: Chief Executive Officer
Address: 00 Xxxxxxxxxx Xxxx
Xxxxxxxx, Xxx Xxxx 00000
Attn: Secretary
Telecopier No.: (000) 000-0000
GS CAPITAL PARTNERS II, L.P.
By: GS Advisors, L.P.
General Partner
By: GS Advisors Inc., its
General Partner
By: /s/ XXXXXXX X. XXXXXXXX
-------------------------------------
Name: Xxxxxxx X. Xxxxxxxx
Title: President
Address: c/o Goldman, Sachs & Co.
00 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxx X. Xxxxxxxxx
Telecopier No.: (000) 000-0000
39
GS CAPITAL PARTNERS II OFFSHORE, L.P.
By: GS Advisors II (Cayman), L.P.
General Partner
By: GS Advisors II, Inc., its
General Partner
By: /s/ XXXXXXX X. XXXXXXXX
-------------------------------------
Name: Xxxxxxx X. Xxxxxxxx
Title: President
Address: c/o Goldman, Sachs & Co.
00 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxx X. Xxxxxxxxx
Telecopier No.: (000) 000-0000
XXXXXXX, SACHS & CO. VERWALTUNGS GMBH
By: /s/ XXXXXXX X. XXXXXXXX
-------------------------------------
Name: Xxxxxxx X. Xxxxxxxx
Title: Managing Agent
By: /s/ XXX XXXXXXXX
-------------------------------------
Name: Xxx Xxxxxxxx
Title: Registered Agent
Address: c/o Goldman, Xxxxx & Co.
00 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxx X. Xxxxxxxxx
Telecopier No.: (212) 357-5505
00
XXXXX XXXXXX XXXX 0000, L.P.
By: Stone Street Asset Corp.
General Partner
By: /s/ XXXXXXX X. XXXXXXXX
-------------------------------------
Name: Xxxxxxx X. Xxxxxxxx
Title:
Address: c/o Goldman, Xxxxx & Co.
00 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxx X. Xxxxxxxxx
Telecopier No.: (000) 000-0000
XXXXXX XXXXXX XXXX 0000, X.X.
By: Stone Street Asset Corp.
Managing General Partner
By: /s/ XXXXXXX X. XXXXXXXX
-------------------------------------
Name: Xxxxxxx X. Xxxxxxxx
Title:
Address: c/o Goldman, Xxxxx & Co.
00 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxx X. Xxxxxxxxx
Telecopier No.: (000) 000-0000
41
THE ESTATE OF XXXX X. XXXXXXXXXXX
By: /s/ XXXXXXXXX XXXXXXXXXXX
------------------------------------
Name: Xxxxxxxxx Xxxxxxxxxxx
Title: Executrix
Address:
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 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 as a Permitted Transferee pursuant to
Section 2.3.3 hereof (and as if a Management Investor hereunder) and in
accordance herewith have agreed to and acknowledged this Agreement:
By: /s/ XXX XXXXXXXX XXXXXX Dated: December 19, 1997
-------------------------- -----------------------
Name: Xxx Xxxxxxxx Xxxxxx
Title: Attorney-In-Fact for Trustee
Address: 0 Xxxxx Xxxxxxxx
Xxxxx Xxxxxx, XX 00000
By: /s/ XXXXX X. XXXXXX Dated: December 19, 1997
-------------------------- -----------------------
Name: Xxxxx X. Xxxxxx
Title: Trustee
Address: 0 Xxxxx Xxxxxxxx
Xxxxx Xxxxxx, XX 00000
42
/s/ XXXXXX X. XXXXXXXXXX Dated: December 19, 1997
-------------------------- -----------------------
Xxxxxx X. Xxxxxxxxxx
Management Investor
Address:
43
/s/ XXXXX X. XXXXXXXX Dated: December 19, 1997
-------------------------- -----------------------
Xxxxx X. Xxxxxxxx
Management Investor
Address:
44
/s/ XXXXXXX XXXXXX Dated: December 19, 1997
-------------------------- -----------------------
Xxxxxxx Xxxxxx
Management Investor
Address:
45
/s/ XXXXX X. XXXXX Dated: December 19, 1997
-------------------------- -----------------------
Xxxxx X. Xxxxx
Management Investor
Address:
46
/s/ XXXXXXXXX X. XXXXXXXX Dated: December 19, 1997
-------------------------- -----------------------
Xxxxxxxxx X. Xxxxxxxx
Management Investor
Address:
47
/s/ XXXXXX XXXXXXX Dated: December 19, 1997
-------------------------- -----------------------
Xxxxxx Xxxxxxx
Management Investor
Address:
48
/s/ XXXXXXX XXXX Dated: December 19, 1997
-------------------------- -----------------------
Xxxxxxx Xxxx
Management Investor
Address:
49
/s/ XXXXX XXXXXXXX Dated: December 19, 1997
-------------------------- -----------------------
Xxxxx XxXxxxxx
Management Investor
Address:
50
/s/ XXXXXX XXXXXXX Dated: December 19, 1997
-------------------------- -----------------------
Xxxxxx Xxxxxxx
Management Investor
Address:
51
/s/ XXXX XXXXXXXXX Dated: December 19, 1997
-------------------------- -----------------------
Xxxx Xxxxxxxxx
Management Investor
Address:
52
/s/ XXXX XXXXXXXX Dated: December 19, 1997
-------------------------- -----------------------
Xxxx Xxxxxxxx
Management Investor
Address:
53
/s/ XXXXXXX XXXXXXXX Dated: December 19, 1997
-------------------------- -----------------------
Xxxxxxx Xxxxxxxx
Management Investor
Address:
54
/s/ XXXX XXXXXX Dated: December 19, 1997
-------------------------- -----------------------
Xxxx Xxxxxx
Management Investor
Address:
55
/s/ XXXXXX XXXXXXXXX Dated: December 19, 1997
-------------------------- -----------------------
Xxxxxx Xxxxxxxxx
Management Investor
Address:
56
/s/ XXXXXX XXXXXXXX Dated: December 19, 1997
-------------------------- -----------------------
Xxxxxx Xxxxxxxx
Management Investor
Address:
57
/s/ XXXXXXX XXXXXX Dated: December 19, 1997
-------------------------- -----------------------
Xxxxxxx Xxxxxx
Management Investor
Address:
58
/s/ XXXXXX XXXXXXXXX Dated: December 19, 1997
-------------------------- -----------------------
Xxxxxx Xxxxxxxxx
Management Investor
Address:
59
/s/ XXXXX XXXXXXX Dated: December 19, 1997
-------------------------- -----------------------
Xxxxx Xxxxxxx
Management Investor
Address:
60
/s/ XXXXXXX XXXXXXXX Dated: December 19, 1997
-------------------------- -----------------------
Xxxxxxx Xxxxxxxx
Management Investor
Address:
61
/s/ XXXXX XXXXX Dated: December 19, 1997
-------------------------- -----------------------
Xxxxx Xxxxx
Management Investor
Address:
62
/s/ XXXXXXXX XXXXXX Dated: December 19, 1997
-------------------------- -----------------------
Xxxxxxxx Xxxxxx
Management Investor
Address:
63
/s/ XXXXX XXXXX Dated: December 19, 1997
-------------------------- -----------------------
Xxxxx Xxxxx
Management Investor
Address:
64
/s/ XXXXX XXXXXXX Dated: December 19, 1997
-------------------------- -----------------------
Xxxxx Xxxxxxx
Management Investor
Address:
65
/s/ XXXXXXX XXXXXX Dated: December 19, 1997
-------------------------- -----------------------
Xxxxxxx Xxxxxx
Management Investor
Address:
66
/s/ XXXXX XXXXX Dated: December 19, 1997
-------------------------- -----------------------
Xxxxx Xxxxx
Management Investor
Address:
67
/s/ XXXXXX XXXXXX Dated: December 19, 1997
-------------------------- -----------------------
Xxxxxx Xxxxxx
Management Investor
Address:
68
/s/ XXXXX XXXXX Dated: December 19, 1997
-------------------------- -----------------------
Xxxxx Xxxxx
Management Investor
Address:
69
/s/ XXXXXX XXXXXXXX Dated: December 19, 1997
-------------------------- -----------------------
Xxxxxx Xxxxxxxx
Management Investor
Address:
70
/s/ XXXXX XXXXX Dated: December 19, 1997
-------------------------- -----------------------
Xxxxx Xxxxx
Management Investor
Address:
71
/s/ XXXXX XXXXXX Dated: December 19, 1997
-------------------------- -----------------------
Xxxxx Xxxxxx
Management Investor
Address:
72
/s/ XXXXX XXXXX Dated: December 19, 1997
-------------------------- -----------------------
Xxxxx Xxxxx
Management Investor
Address:
73
/s/ XXXXXXX X. XXXXXXXX Dated: December 19, 1997
-------------------------- -----------------------
Xxxxxxx X. Xxxxxxxx
Management Investor
Address:
74
/s/ XXXXXX XXXXXX Dated: December 19, 1997
-------------------------- -----------------------
Xxxxxx Xxxxxx
Management Investor
Address:
75
/s/ XXXXXX XXXXXXX Dated: December 19, 1997
-------------------------- -----------------------
Xxxxxx Xxxxxxx
Management Investor
Address:
76
/s/ XXXXXX XXXXXXX Dated: December 19, 1997
-------------------------- -----------------------
Xxxxxx Xxxxxxx
Management Investor
Address:
77
/s/ XXX XXXXXXXX Dated: December 19, 1997
-------------------------- -----------------------
Xxx Xxxxxxxx
Management Investor
Address:
78
EXHIBIT A
[STOCK INCENTIVE PLAN]
79
AMSCAN HOLDINGS, INC.
1997 STOCK INCENTIVE PLAN
SECTION 1. Purpose; Definitions
The purpose of the Plan is to give Amscan Holdings, Inc. (the "Company")
and its Affiliates (each as defined below) a competitive advantage in
attracting, retaining and motivating officers, employees, consultants and
directors, and to provide the Company and its subsidiaries with a stock plan
providing incentives linked to the financial results of the Company's
businesses and increases in shareholder value.
For purposes of the Plan, the following terms are defined as set forth
below:
"Affiliate" of a Person means a Person directly or indirectly controlled
by, controlling or under common control with such Person.
"Award" means a Stock Appreciation Right, Stock Option or Restricted
Stock.
"Award Agreement" means a Restricted Stock Agreement or Option Agreement.
An Award Agreement may consist of provisions of an employment agreement.
"Board" means the Board of Directors of the Company.
"Change in Control" shall mean (1) the acquisition by any individual,
entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the
Exchange Act) other than GSCP (as defined in the Stockholders' Agreement) and
their Affiliates of a majority of the outstanding voting stock of the Company
or (2) the sale of or other disposition (other than by way of merger or
consolidation) of all or substantially all of the assets of the Company and its
subsidiaries taken as a whole to any Person or group of Persons, other than to
a Person (or group of Persons) a majority of the outstanding voting stock (or
other voting interests) of which are beneficially owned by GSCP and their
Affiliates.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time, and any successor thereto.
"Committee" means (a) before an IPO, the Executive Committee of the Board,
or such other committee of the Board as the Board may designate for such
purpose under the Plan, and (b)
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after an IPO, such committee of the Board as the Board may designate, which
shall be composed of not less than two Non-Employee Directors, each of whom
shall be appointed by and serve at the pleasure of the Board.
"Common Stock" means the Common Stock, par value $0.10 per share, of the
Company.
"Company" means Amscan Holdings, Inc., a Delaware corporation.
"Employment" means, unless otherwise defined in an applicable Restricted
Stock Agreement, Option Agreement or Employment Agreement, employment with, or
service as a director of or as a consultant to, the Company or any of its
Affiliates.
"Exchange Act" means the Securities Exchange Act of 1934, as amended from
time to time, and any successor thereto.
"Fair Market Value" of the Common Stock means, as of any given date, the
mean between the highest and lowest reported sales prices of the Common Stock
on the New York Stock Exchange or, if not listed on such exchange, on any other
national securities exchange on which the Common Stock is listed or, if not so
listed, on the Nasdaq National Market. If such sales prices are not so
available, the Fair Market Value of the Common Stock shall be determined by the
Committee in good faith.
"IPO" means the consummation of a registered underwritten public offering
or offerings of Common Stock with gross proceeds to the Company in the
aggregate of at least $50 million.
"Incentive Stock Option" means any Stock Option designated as, and
qualified as, an "incentive stock option" within the meaning of Section 422 of
the Code.
"Nasdaq" means The Nasdaq Stock Market, Inc.
"Non-Employee Director" means a member of the Board who qualifies as a
Non-Employee Director as defined in Rule 16b--3(b)(3), as promulgated by the
SEC under the Exchange Act, or any successor definition adopted by the SEC.
"Nonqualified Stock Option" means any Stock Option that is not an
Incentive Stock Option.
"Option Agreement" means an agreement setting forth the terms and
conditions of an Award of Stock Options and, if applicable, Stock Appreciation
Rights.
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"Participant" has the meaning set forth in Section 4.
"Person" means an individual, corporation, partnership, limited liability
company, joint venture, trust, unincorporated organization, government (or any
department or agency thereof) or other entity.
"Plan" means the Amscan Holdings, Inc. 1997 Stock Incentive Plan, as set
forth herein and as hereinafter amended from time to time.
"Plan Shares" has the meaning set forth in Section 12(b).
"Restricted Stock" means an Award granted under Section 7.
"Restricted Stock Agreement" means an agreement setting forth the terms
and conditions of an Award of Restricted Stock.
"Rule 13d-3" means Rule 13d-3, as promulgated by the SEC under the
Exchange Act, as amended from time to time.
"SEC" means the Securities and Exchange Commission or any successor
agency.
"Securities Act" means the Securities Act of 1933, as amended from time to
time, and any successor thereto.
"Stock Appreciation Right" means a right granted under Section 6.
"Stock Option" means an option granted under Section 5.
"Stockholders' Agreement" has the meaning as set forth in Section 12(a).
In addition, certain other terms used herein have definitions otherwise
ascribed to them herein.
SECTION 2. Administration
The Plan shall be administered by the Committee, or, if no Committee has
been designated or appointed, by the Board (in which case all references herein
to the Committee shall include the Board).
Among other things, the Committee shall have the authority, subject to the
terms of the Plan, to:
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(a) select the Participants to whom Awards may from time to time be
granted;
(b) determine whether and to what extent Incentive Stock Options,
Nonqualified Stock Options, Stock Appreciation Rights and Restricted Stock or
any combination thereof are to be granted hereunder;
(c) determine the number of shares of Common Stock to be covered by each
Award granted hereunder;
(d) determine the terms and conditions of any Award granted hereunder
(including, but not limited to, the option price, any vesting conditions,
restrictions or limitations (which may be related to the performance of the
Participant, the Company or any of its Affiliates)) and any acceleration of
vesting or waiver of forfeiture regarding any Award and the shares of Common
Stock relating thereto, based on such factors as the Committee shall determine;
(e) modify, amend or adjust the terms and conditions of any Award, at any
time or from time to time;
(f) determine to what extent and under what circumstances Common Stock and
other amounts payable with respect to an Award shall be deferred;
(g) determine under what circumstances an Award may be settled in cash or
Common Stock under Section 5(g);
(h) adopt, alter and repeal such administrative rules, guidelines and
practices governing the Plan as it shall from time to time deem advisable;
(i) interpret the terms and provisions of the Plan and any Award issued
under the Plan (and any agreement relating thereto); and
(j) otherwise supervise the administration of the Plan.
The Committee may act only by a majority of its members then in office,
except that the members thereof may authorize any one or more of their number
or any officer of the Company to execute and deliver documents on behalf of the
Committee.
Any dispute or disagreement which may arise under, or as a result of, or
in any way relate to, the interpretation, construction or application of the
Plan or an Award (or related Award Agreement) granted hereunder shall be
determined by the Committee. Any determination made by the Committee pursuant
to
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the provisions of the Plan with respect to the Plan, any Award or Award
Agreement shall be made in the sole discretion of the Committee and, with
respect to an Award, at the time of the grant of the Award or, unless in
contravention of any express term of the Plan, at any time thereafter. All
decisions made by the Committee shall be final and binding on all persons,
including the Company and the Participants.
SECTION 3. Common Stock Subject to Plan
The total number of shares of Common Stock reserved and available for
grant under the Plan shall be 120. Shares subject to an Award under the Plan
may be authorized and unissued shares or may be treasury shares.
If any shares of Restricted Stock are forfeited or if any Stock Option
(and related Stock Appreciation Right, if any) terminates without being
exercised, or if any Stock Appreciation Right is exercised for cash, the shares
subject to such Awards shall again be available for distribution in connection
with Awards under the Plan.
In the event of any merger, reorganization, consolidation,
recapitalization, spinoff, stock dividend, stock split, reverse stock split,
extraordinary distribution with respect to the Common Stock or other change in
corporate structure affecting the Common Stock, the Committee or the Board may
make such substitution or adjustment in the aggregate number and kind of shares
or other property reserved for issuance under the Plan, in the number, kind and
Exercise Price (as defined herein) of shares or other property subject to
outstanding Stock Options and Stock Appreciation Rights, in the number and kind
of shares or other property subject to Restricted Stock Awards, and/or such
other equitable substitution or adjustments as it may determine to be fair and
appropriate in its sole discretion. Any such adjusted Exercise Price shall also
be used to determine the amount payable by the Company upon the exercise of any
Stock Appreciation Right associated with any Stock Option.
SECTION 4. Participants
Officers, employees, consultants and non-employee directors of the Company
and its Affiliates who are responsible for or contribute to the management,
growth and profitability of the business of the Company and its Affiliates
shall be "Participants" eligible to be granted Awards under the Plan.
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SECTION 5. Stock Options
The Committee shall have the authority to grant any Participant Incentive
Stock Options, Nonqualified Stock Options or both types of Stock Options (in
each case with or without Stock Appreciation Rights). Incentive Stock Options
may be granted only to employees of the Company and its subsidiaries (within
the meaning of Section 424(f) of the Code). To the extent that any Stock Option
is not designated as an Incentive Stock Option or even if so designated does
not qualify as an Incentive Stock Option, it shall constitute a Nonqualified
Stock Option.
Stock Options shall be evidenced by Option Agreements, which shall include
such terms and provisions as the Committee may determine from time to time. An
Option Agreement shall expressly indicate whether it is intended to be an
agreement for an Incentive Stock Option or a Nonqualified Stock Option. The
grant of a Stock Option shall occur on the date the Committee by resolution
selects an individual to be a Participant in any grant of a Stock Option,
determines the number of shares of Common Stock to be subject to such Stock
Option to be granted to such individual and specifies the terms and provisions
of the Stock Option, or on such other date as the Committee may determine. The
Company shall notify a Participant of any grant of a Stock Option, and a
written Option Agreement shall be duly executed and delivered by the Company to
the Participant. Subject to Section 12(a), such agreement shall become
effective upon execution by the Company and the Participant.
Anything in the Plan to the contrary notwithstanding, no term of the Plan
relating to Incentive Stock Options shall be interpreted, amended or altered,
nor shall any discretion or authority granted under the Plan be exercised, so
as to disqualify the Plan under Section 422 of the Code or, without the consent
of the Participant affected, to disqualify any Incentive Stock Option under
such Section 422.
Stock Options shall be subject to the following terms and conditions and
shall contain such additional terms and conditions as the Committee shall deem
desirable:
(a) Exercise Price. The price per share of Common Stock purchasable under
a Stock Option shall be determined by the Committee and set forth in the Option
Agreement (the "Exercise Price").
(b) Option Term. The term of each Stock Option shall be fixed by the
Committee. Absent any such term being fixed by the Committee, pursuant to an
Option Agreement or otherwise, such term shall be ten years.
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(c) Exercisability. Except as otherwise provided herein, Stock Options
shall be exercisable at such time or times and subject to such terms and
conditions as shall be determined by the Committee. If the Committee provides
that any Stock Option is exercisable only in installments, the Committee may at
any time waive such installment exercise provisions, in whole or in part, based
on such factors as the Committee may determine. In addition, the Committee may
at any time accelerate the exercisability of any Stock Option.
(d) Method of Exercise. Subject to the provisions of this Section 5,
vested Stock Options may be exercised, in whole or in part, at any time during
the option term by giving written notice of exercise to the Company specifying
the number of shares of Common Stock subject to the Stock Option to be
purchased.
Such notice shall be accompanied by payment in full of the purchase price
by certified or bank check or such other instrument as the Company may accept.
If approved by the Committee, payment, in full or in part, may also be made in
the form of unrestricted Common Stock already owned by the Participant of the
same class as the Common Stock subject to the Stock Option (based on the Fair
Market Value of the Common Stock on the date the Stock Option is exercised);
provided, however, that, in the case of an Incentive Stock Option the right to
make a payment in the form of already owned shares of Common Stock of the same
class as the Common Stock subject to the Stock Option may be authorized only at
the time the Stock Option is granted.
In the discretion of the Committee, after an IPO, payment for any shares
subject to a Stock Option may also be made by delivering a properly executed
exercise notice to the Company, together with a copy of irrevocable
instructions to a broker to deliver promptly to the Company the amount of sale
or loan proceeds to pay the purchase price, and, if requested by the Company,
the amount of any federal, state, local or foreign withholding taxes. To
facilitate the foregoing, the Company may enter into agreements for coordinated
procedures with one or more brokerage firms.
In addition, in the discretion of the Committee, payment for any shares
subject to a Stock Option may also be made by instructing the Committee to
withhold a number of such shares having a Fair Market Value on the date of
exercise equal to the aggregate exercise price of such Stock Option.
No shares of Common Stock shall be issued until full payment therefor has
been made. Except as otherwise provided in
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the Stockholders' Agreement or the applicable Option Agreement, subject to a
Participant's compliance with Section 12(a) hereof, a Participant shall have
all of the rights of a stockholder of the Company holding the class or series
of Common Stock that is subject to such Stock Option (including, if applicable,
the right to vote the shares and the right to receive dividends and
distributions), when the Participant has given written notice of exercise, has
paid in full for such shares and, if requested, has given the representations
referred to in Section 12(c).
(e) Nontransferability of Stock Options. No Stock Option shall be
transferable by the Participant other than (i) by will or by the laws of
descent and distribution or (ii) in the case of a Nonqualified Stock Option, as
otherwise expressly permitted under the applicable Option Agreement including,
if so permitted, pursuant to a qualified domestic relations order (as defined
in the Code) or pursuant to a gift to such Participant's spouse, children,
grandchildren or other living descendants, whether directly or indirectly or by
means of a trust, partnership, limited liability company or otherwise. All
Stock Options shall be exercisable, subject to the terms of this Plan, during
the Participant's lifetime, only by the Participant or any person to whom such
Stock Option is transferred pursuant to the preceding sentence, including such
Participant's guardian, legal representative and other transferee. The term
"Participant" includes the estate of the Participant or the legal
representative of the Participant named in the Option Agreement and any person
to whom an Option is otherwise transferred in accordance with this Section
5(e), by will or the laws of descent and distribution; provided, however, that
references herein to Employment of a Participant or termination of Employment
of a Participant shall continue to refer to the Employment or termination of
Employment of the applicable grantee of an Award hereunder.
(f) Termination of Employment. Except as otherwise provided by the
Committee or in the applicable Option Agreement, upon the Participant's death
or when the Participant's Employment is terminated for any reason, the
Participant:
a. shall forfeit all Stock Options that have not previously
vested;
b. shall have three months to exercise the Participant's vested
Stock Options that are vested on the date of the Participant's
termination of Employment if such termination is for any reason
other than the Participant's death; and
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c. shall have one year to exercise the Participant's vested
Stock Options that are vested on the date of death if the
Participant's termination of Employment is due to the Participant's
death.
Any vested Stock Options not exercised within the permissible period of time
shall be forfeited by the Participant. Notwithstanding any of the foregoing,
the Participant shall not be permitted to exercise any Stock Option at a time
beyond the initial option term.
(g) Cashing Out of Stock Option. On receipt of written notice of exercise,
the Committee may elect to cash out all or any portion of the shares of Common
Stock for which a Stock Option is being exercised by paying the Participant an
amount, in cash or Common Stock, equal to the excess of the Fair Market Value
of one share of Common Stock over the Exercise Price per share times the number
of shares of Common Stock for which the Option is being exercised on the
effective date of such cashout.
SECTION 6. Stock Appreciation Rights
(a) Grant and Exercise. Stock Appreciation Rights may be granted in
conjunction with all or part of any Stock Option granted under the Plan. In the
case of a Nonqualified Stock Option, such rights may be granted either at or
after the time of grant of such Stock Option. In the case of an Incentive Stock
Option, such rights may be granted only at the time of grant of such Stock
Option. A Stock Appreciation Right shall terminate and no longer be exercisable
upon the termination or exercise of the related Stock Option. In either case,
the terms and conditions of a Stock Appreciation Right shall be set forth in
the Option Agreement for the related Stock Option or an amendment thereto.
A Stock Appreciation Right may be exercised by a Participant in accordance
with Section 6(b) by surrendering the applicable portion of the related Stock
Option in accordance with procedures established by the Committee. Upon such
exercise and surrender, the Participant shall be entitled to receive an amount
determined in the manner prescribed in Section 6(b). Stock Options which have
been so surrendered shall no longer be exercisable to the extent the related
Stock Appreciation Rights have been exercised.
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(b) Terms and Conditions. Stock Appreciation Rights shall be subject to
such terms and conditions as shall be determined by the Committee, including
the following:
(i) Stock Appreciation Rights shall be exercisable only at such
time or times and to the extent that the Stock Options to which they
relate are exercisable in accordance with the provisions of Section 5
and this Section 6;
(ii) upon the exercise of a Stock Appreciation Right, a
Participant shall be entitled to receive an amount equal to the
product of (a) the excess of the Fair Market Value of one share of
Common Stock over the Exercise Price per share specified in the
related Stock Option times (b) the number of shares in respect of
which the Stock Appreciation Right shall have been exercised, in
cash, shares of Common Stock or both, with the Committee having the
right to determine the form of payment;
(iii) Stock Appreciation Rights shall be transferable only with
the related Stock Option in accordance with Section 5(e); and
(iv) upon the exercise of a Stock Appreciation Right (other than
an exercise for cash), the Stock Option or part thereof to which such
Stock Appreciation Right is related shall be deemed to have been
exercised for the purpose of the limitation set forth in Section 3 on
the number of shares of Common Stock to be issued under the Plan, but
only to the extent of the number of shares covered by the Stock
Appreciation Right at the time of exercise.
SECTION 7. Restricted Stock
The Committee shall determine the Participants to whom and the time or
times at which grants of Restricted Stock will be awarded, the number of shares
to be awarded to any Participant, the conditions for vesting, the time or times
within which such Awards may be subject to forfeiture and restrictions on
transfer and any other terms and conditions of the Awards (including provisions
(i) relating to placing legends on certificates representing shares of
Restricted Stock, (ii) permitting the Company to require that shares of
Restricted Stock be held in custody by the Company with a stock power from the
owner thereof until restrictions lapse and (iii) relating to any rights to
purchase the Restricted Stock on the part of the Company and
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89
its Affiliates), in addition to those contained in the Stockholders'
Agreement. The terms and conditions of Restricted Stock Awards shall be set
forth in a Restricted Stock Agreement, which shall include such terms and
provisions as the Committee may determine from time to time. Except as provided
in this Section 7, the Restricted Stock Agreement, the Stockholders' Agreement
and any other relevant agreements, the Participant shall have, with respect to
the shares of Restricted Stock, all of the rights of a stockholder of the
Company holding the class or series of Common Stock that is the subject of the
Restricted Stock Award, including, if applicable, the right to vote the shares
and, subject to the following sentence, the right to receive any cash dividends
or distributions (but, subject to the third paragraph of Section 3, not the
right to receive non-cash dividends or distributions). If so determined by the
Committee in the applicable Restricted Stock Agreement, cash dividends and
distributions on the class or series of Common Stock that is the subject of the
Restricted Stock Award shall be automatically deferred and reinvested in
additional Restricted Stock, held subject to the vesting of the underlying
Restricted Stock, or held subject to meeting conditions applicable only to
dividends and distributions.
SECTION 8. Tax Offset Bonuses
At the time an Award is made hereunder or at any time thereafter, the
Committee may grant to the Participant receiving such Award the right to
receive a cash payment in an amount specified by the Committee, to be paid at
such time or times (if ever) as the Award results in compensation income to the
Participant, for the purpose of assisting the Participant to pay the resulting
taxes, all as determined by the Committee, and on such other terms and
conditions as the Committee shall determine.
SECTION 9. Change in Control Provisions
Notwithstanding any other provision of the Plan to the contrary, unless
otherwise provided in the applicable Award Agreement or the Stockholders'
Agreement, in the event of a Change in Control:
(a) immediately prior to the occurrence of a Change in Control, all
Stock Options and Stock Appreciation Rights outstanding as of such date,
and which are not then exercisable and vested, shall become fully
exercisable and vested to the full extent of the original grant; and
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(b) the restrictions and deferral limitations applicable to any
Restricted Stock (and any dividends or distributions in respect of
Restricted Stock) shall lapse, and such Restricted Stock (and any
dividends or distributions in respect of Restricted Stock) shall become
free of all restrictions, fully vested and transferable to the full extent
of the not theretofore forfeited portion of the original grant.
SECTION 10. Term, Amendment and Termination
The Plan will terminate ten years after the effective date of the Plan.
Awards outstanding as of such date shall not be affected or impaired by the
termination of the Plan.
The Board may amend, alter, or discontinue the Plan, prospectively or
retroactively, but no amendment, alteration or discontinuation shall be made
which would impair the rights of any Participant under an Award theretofore
granted without the Participant's consent.
The Committee may amend the terms of any Award theretofore granted,
prospectively or retroactively, but no such amendment shall be made which would
impair the rights of any Participant thereunder without the Participant's
consent.
SECTION 11. Unfunded Status of Plan
It is presently intended that the Plan constitute an "unfunded" plan for
incentive and deferred compensation. The Committee may authorize the creation
of trusts or other arrangements to meet the obligations created under the Plan
to deliver Common Stock or make payments; provided, however, that unless the
Committee otherwise determines, the existence of such trusts or other
arrangements is consistent with the "unfunded" status of the Plan.
SECTION 12. General Provisions
(a) Stockholders' Agreement. Notwithstanding anything in this Plan to the
contrary, unless the Committee determines otherwise, it shall be a condition to
receiving any Award under the Plan or transferring any Option in accordance
with Section 5(e) or any other transfer permitted under the terms of an Award
Agreement or otherwise, that a Participant (or transferee in the case of such
transfer) shall become a party to the Stockholders' Agreement, dated as of
December 19, 1997,
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91
among the Company and certain stockholders of the Company, as amended from time
to time (the "Stockholders' Agreement"), and such Participant (or transferee in
the case of such transfer) shall become a "Management Investor" thereunder (or
such transferee shall become a "Permitted Transferee" of a "Management
Investor" thereunder).
(b) Awards and Certificates. Shares of Restricted Stock and shares of
Common Stock issuable upon the exercise of a Stock Option or Stock Appreciation
Right (together, "Plan Shares") shall be evidenced in such manner as the
Committee may deem appropriate, including book-entry registration or issuance
of one or more stock certificates. Any certificate issued in respect of Plan
Shares shall be registered in the name of such Participant and shall bear
appropriate legends referring to the terms, conditions, and restrictions
applicable to such Award, substantially in the following form:
"The transferability of this certificate and the shares of stock
represented hereby are subject to the terms, conditions and
restrictions (including forfeiture) of the Amscan Holdings, Inc. 1997
Stock Incentive Plan and a Restricted Stock Agreement and/or an
Option Agreement, as the case may be, between the issuer and the
registered holder hereof. Copies of such Plan and Agreement are on
file at the offices of Amscan Holdings, Inc., 00 Xxxxxxxxxx Xxxx,
Xxxxxxxx, Xxx Xxxx 00000."
"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended, or under the
securities laws of any state, and may not be sold or otherwise
disposed of except pursuant to an effective registration statement
under said Act and applicable state securities laws or an applicable
exemption to the registration requirements of such Act and laws."
Such shares may bear other legends to the extent the Committee or the Board
determines it to be necessary or appropriate, including any required by the
Stockholders' Agreement or pursuant to any applicable Restricted Stock
Agreement or Option Agreement. If and when all restrictions expire without a
prior forfeiture of the Plan Shares theretofore subject to such restrictions,
new certificates for such shares shall be delivered to the Participant without
the first legend listed above.
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92
The Committee may require that any certificates evidencing Plan Shares be
held in custody by the Company until the restrictions thereon shall have lapsed
and that the Participant deliver a stock power, endorsed in blank, relating to
the Plan Shares.
(c) Representations and Warranties. The Committee may require each person
purchasing or receiving Plan Shares to (i) represent to and agree with the
Company in writing that such person is acquiring the shares without a view to
the distribution thereof and (ii) make any other representations and warranties
that the Committee deems appropriate.
(d) Additional Compensation. Nothing contained in the Plan shall prevent
the Company or any of its Affiliates from adopting other or additional
compensation arrangements for its employees.
(e) No Right of Employment. Adoption of the Plan or grant of any Award
shall not confer upon any employee any right to continued Employment, nor shall
it interfere in any way with the right of the Company or any of its Affiliate
thereof to terminate the Employment of any employee at any time.
(f) Withholding Taxes. No later than the date as of which an amount first
becomes includible in the gross income of a Participant for federal income tax
purposes with respect to any Award under the Plan, such Participant shall pay
to the Company or, if appropriate, any of its Affiliates, or make arrangements
satisfactory to the Committee regarding the payment of, any federal, state,
local or foreign taxes of any kind required by law to be withheld with respect
to such amount. If approved by the Committee, withholding obligations may be
settled with Common Stock, including Common Stock that is part of the Award
that gives rise to the withholding requirement. The obligations of the Company
under the Plan shall be conditional on such payment or arrangements, and the
Company and its Affiliates shall, to the extent permitted by law, have the
right to deduct any such taxes from any payment otherwise due to the
Participant. The Committee may establish such procedures as it deems
appropriate, including making irrevocable elections, for the settlement of
withholding obligations with Common Stock.
(g) Beneficiaries. The Committee shall establish such procedures as it
deems appropriate for a Participant to designate a beneficiary to whom any
amounts payable in the event of the Participant's death are to be paid or by
whom any rights of the Participant, after the Participant's death, may be
exercised.
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93
(h) Pooling of Interests. Notwithstanding any other provision of this
Plan, if any right (or the exercise of such right) granted pursuant to this
Plan would make a Change in Control transaction ineligible for
pooling-of-interests accounting under XXX Xx. 00 that but for the nature of
such grant or grants would otherwise be eligible for such accounting treatment,
the Committee shall have the ability to substitute for the cash payable
pursuant to such grant or grants Common Stock with a Fair Market Value equal to
the cash that would otherwise be payable hereunder, or make any other
appropriate adjustment.
(i) Governing Law. The Plan and all Awards made and actions taken
thereunder shall be governed by and construed and enforced in accordance with
the laws of the State of New York without regard to the principles of conflicts
of law thereof.
(j) Compliance with Laws. If any law or any regulation of any commission
or agency having jurisdiction shall require the Company or a Participant
seeking to exercise Stock Options or Stock Appreciation Rights to take any
action with respect to the Plan Shares to be issued upon the exercise of Stock
Options or Stock Appreciation Rights then the date upon which the Company shall
issue or cause to be issued the certificate or certificates for the Plan Shares
shall be postponed until full compliance has been made with all such
requirements of law or regulation; provided, that the Company shall use its
reasonable efforts to take all necessary action to comply with such
requirements of law or regulation. Moreover, in the event that the Company
shall determine that, in compliance with the Securities Act or other applicable
statutes or regulations, it is necessary to register any of the Plan Shares
with respect to which an exercise of a Stock Option or Stock Appreciation Right
has been made, or to qualify any such Plan Shares for exemption from any of the
requirements of the Securities Act or any other applicable statute or
regulation, no Stock Options or Stock Appreciation Rights may be exercised and
no Plan Shares shall be issued to the exercising Participant until the required
action has been completed; provided, that the Company shall use its reasonable
efforts to take all necessary action to comply with such requirements of law or
regulation. Notwithstanding anything to the contrary contained herein, neither
the Board nor the members of the Committee owes a fiduciary duty to any
Participant in his or her capacity as such.
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94
SECTION 13. Effective Date of Plan
The Plan shall be effective as of the date it is approved by the holders
of a majority of the outstanding shares of Common Stock, which approval is
evidenced by Section 5.3 under the Stockholders' Agreement.
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95
Schedule I
Management Investors
Options
-------
Xxxxxx X. Xxxxxxxxxx 16.648
Xxxxx X. Xxxxxxxx 16.268
Xxxxxxx X. Xxxxxx 16.441
Xxxxx X. Xxxxx 11.827
Xxxxxxxxx X. Xxxxxxxx 11.577
Xxxxxx Xxxxxx 2.383
Xxxxxxx Xxxx 1.280
Xxxxxx Xxxxxxxxx 2.477
Xxxxx XxXxxxxx 1.477
Xxxxx Xxxxxxx 1.280
Xxxxxx Xxxxxxx 1.280
Xxxxxx Xxxxxxxx 1.144
Xxxxxxx Xxxxxxxx 0.478
Xxxxx Xxxxx 1.144
Xxxx Xxxxxxxxx 1.238
Xxxxx Xxxxxx 0.718
Xxxx Xxxxxxxx 1.238
Xxxxxxxx Xxxxxx 1.238
Xxxxx Xxxxx 1.238
Xxxxxxx Xxxxxxxx 0.794
Xxxxxxx X. Xxxxxxxx 2.570
Xxxx Xxxxxx 0.555
Xxxxx Xxxxxxx 0.999
Xxxxxx Xxxxxx 0.555
Xxxxxx Xxxxxxxxx 0.999
Xxxxxxx Xxxxxx 0.555
Xxxxxx Xxxxxxx 0.555
Xxxxxx Xxxxxxxx 0.555
Xxxxx Xxxxx 0.555
Xxxxxx Xxxxxxx 0.555
Xxx Xxxxxxxx 0.555
