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Exhibit 10.5
EMPLOYMENT AGREEMENT
AGREEMENT (the "Agreement") by and between Confetti Acquisition,
Inc., a Delaware corporation ("Confetti"), and Xxxxxx X. Xxxxxxxxxx (the
"Executive"), dated as of the 10th day of August, 1997.
WHEREAS, Confetti and Amscan Holdings, Inc., a Delaware corporation
(the "Company"), have, simultaneously with the execution and delivery of this
Agreement, entered into an Agreement and Plan of Merger, dated as of the date
hereof (the "Merger Agreement"), by and between Confetti and the Company
pursuant to which, among other things, Confetti will be merged with and into the
Company (the "Merger") and the Company will be the surviving company in the
Merger (references herein to the Company include, where applicable, the Company
as the surviving company in the Merger);
WHEREAS, Confetti is also entering into a Voting Agreement, dated as
of the date hereof (the "Voting Agreement"), by and among Confetti, the Estate
of Xxxx X. Xxxxxxxxxxx and Xxxxxxxxx Xxxxxxxxxxx;
WHEREAS, Confetti, the Company, the Executive and certain other
stockholders of the Company will enter into a Stockholders Agreement at or prior
to the Effective Time (as defined in the Merger Agreement), substantially in the
form delivered on the date hereof (the "Stockholders Agreement");
WHEREAS, the Board of Directors of Confetti has determined that it
will be in the best interests of Confetti to retain the employment of the
Executive as Chief Executive Officer of the Company after the Merger and the
Executive desires to serve in that capacity;
WHEREAS, the Executive desires to invest in the Company, as the
surviving company in the Merger, as an equity investor; and
WHEREAS, Confetti and the Executive desire to set forth in a written
agreement the terms and conditions under which the Executive will retain an
equity interest in the Company and will continue to be employed by the Company
after the Merger.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. Employment Period. (a) Initial Term. The Company shall employ
the Executive, and the Executive agrees to,
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and shall, serve the Company, on the terms and conditions set forth in this
Agreement, for the period commencing on the Closing Date (as defined in the
Merger Agreement) of the Merger and ending on the third anniversary of such date
(the "Initial Term").
(b) Extension of Initial Term. The Initial Term of this Agreement
will be automatically extended after the third anniversary of the Closing Date
for additional successive periods of one year each, each such extension to be
effective immediately after the last day of the term then in effect, with the
first such extension period beginning on the third anniversary of the Closing
Date (each such additional period, an "Additional Term") (the Initial Term and
any Additional Term thereof pursuant to this Section 1(b) being hereinafter
referred to as the "Employment Period"), unless either the Company gives the
Executive or the Executive gives the Company not less than twelve months written
notice prior to the end of the Initial Term or any such Additional Term of such
party's intention not to extend the Employment Period.
2. Position and Duties. (a) During the Employment Period, the
Executive shall be Chief Executive Officer of the Company with such duties and
responsibilities as are assigned to him by the Board of Directors of the Company
(the "Board") consistent with his position as Chief Executive Officer of the
Company, including, as the Board may request, without additional compensation,
to serve as an officer or director of certain subsidiaries and other affiliated
entities of the Company.
(b) During the Employment Period, and excluding any periods of
vacation and sick leave to which the Executive is entitled, the Executive shall
devote his full attention and time during normal business hours to the business
and affairs of the Company and shall perform his services primarily at the
Company's headquarters, wherever the Board may from time to time designate them
to be, but in any case, within a 100-mile radius of Elmsford, New York, and
shall use his reasonable best efforts to carry out the responsibilities assigned
to the Executive faithfully and efficiently. It shall not be considered a
violation of the foregoing for the Executive to (i) serve on civic or charitable
boards or committees, (ii) deliver lectures, fulfill speaking engagements or
teach at educational institutions or (iii) manage personal investments, so long
as such activities do not compete with and are not provided to or for any entity
that competes with or intends to compete with the Company or any of its
subsidiaries and affiliates and do not interfere with the performance of the
Executive's responsibilities as an employee of the Company in accordance with
this Agreement.
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3. Compensation. (a) Base Salary. During the Initial Term, the
Executive shall receive from the Company an annual base salary ("Annual Base
Salary") of $295,000, payable in regular intervals in accordance with the
Company's customary payroll practices in effect during the Employment Period.
Such Annual Base Salary shall be increased by 5% (from the Annual Base Salary
theretofore in effect) at the beginning of each Additional Term and shall be
payable in accordance with the preceding sentence.
(b) Other Compensation. In addition to the Annual Base Salary, the
Executive shall be eligible for an annual bonus for each calendar year of
employment hereunder (the "Bonus"). Any Bonus shall be paid no later than the
March 15th following the end of the calendar year to which such Bonus
corresponds. The exact amount of the Bonus, if any, payable to the Executive
hereunder shall be determined as follows:
(i) A non-discretionary bonus, which shall be awarded, if earned, in
an amount equal to 50% of the Executive's Annual Base Salary if
certain operational and financial targets, determined from time to
time by the Board in consultation with the Executive, are attained;
and
(ii) A discretionary bonus awarded in the sole discretion of the
Board.
For any calendar year during which the Executive is employed by the Company for
less than the entire year, any Bonus shall be payable on a pro rata basis for
the period during which the Executive is employed during such calendar year
(based on the number of days in such calendar year the Executive was so employed
divided by 365), as determined in good faith by the Board; provided, however,
that in no event will the Executive be entitled to a Bonus for any calendar year
during which the Executive's employment is terminated during the Employment
Period other than as provided in Section 6(c) of this Agreement, if applicable.
(c) Other Benefits. During the Employment Period: (i) the Executive
shall be entitled to participate in all incentive, savings and retirement plans,
practices, policies and programs of the Company, and shall be entitled to paid
vacation, to the same extent and on the same terms and conditions as peer
executives; and (ii) the Executive and/or the Executive's family, as the case
may be, shall be eligible for participation in, and shall receive all benefits
under, all welfare benefit plans, practices, policies and programs provided by
the Company (including, to the extent provided, without
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limitation, medical, prescription, dental, disability, employee life insurance,
group life insurance, accidental death and travel accident insurance plans and
programs) to the same extent and on the same terms and conditions as peer
executives; provided, however, that nothing in this Agreement shall impose on
the Company any obligation to offer to the Executive participation in any stock,
stock option, bonus or other incentive award, plan, practice, policy or program
other than the awards made pursuant to paragraphs (b) and (e) of this Section 3
and the Options granted in accordance with paragraph (f) of this Section 3. The
term "peer executives" means the President and Senior Vice President in charge
of Sales and Marketing of the Company, if such positions exist.
(d) Expenses. During the Employment Period, the Executive shall be
entitled to receive reimbursement for all reasonable travel and other expenses
incurred by the Executive in carrying out the Executive's duties under this
Agreement, provided that the Executive complies with the policies, practices and
procedures of the Company for submission of expense reports, receipts, or
similar documentation of such expenses.
(e) Stock. (i) The Executive hereby agrees to contribute to Confetti
immediately prior to the Effective Time (as defined in the Merger Agreement),
272,728 shares of the Company's common stock, par value $.10 per share, and
receive in exchange therefor shares of common stock of Confetti having an
aggregate value equal to (x) 272,728 multiplied by (y) the Cash Election Price
(as defined in the Merger Agreement), such Confetti shares to be valued based on
the purchase price for which GS Capital Partners II, L.P. ("GSCP") and its
affiliates purchase common shares of Confetti immediately prior to the Effective
Time (the "New Purchase Price") (the shares so acquired, both before and after
they are converted into shares of the Company's common stock pursuant to the
Merger, are collectively referred to herein as the "Rollover Stock"). (For
example, if the New Purchase Price is $10 per share and the Cash Election Price
is $16.50 per share, then the Executive would receive, prior to the Effective
Time, 450,001 shares of Confetti common stock in exchange for the 272,728 shares
of Company common stock.) At the Effective Time, the Rollover Stock shall be
converted from shares of Confetti into shares of the Company (as the surviving
company in the Merger) pursuant to the Merger on the same basis as all other
common shares of Confetti are converted.
(ii) After the Effective Time, shares of Rollover Stock shall be
evidenced by issuance of one or more stock certificates registered in the name
of the Executive and bearing appropriate legends referring to the terms,
conditions, and
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restrictions applicable to such Rollover Stock, as provided in the Stockholders
Agreement.
(iii) The Executive shall not be permitted to sell, assign,
transfer, pledge or otherwise encumber any Options (as defined below), shares of
Rollover Stock, or shares acquired upon exercise of such Options ("Option
Shares"), except as provided in the Stockholders Agreement and the Option
Documents (as defined below), and the shares of Rollover Stock and Option Shares
shall be subject to the terms of the Stockholders Agreement.
(f) Options. Promptly following the Effective Time, the Executive
shall be granted options (the "Options") to purchase a number of shares of
common stock of the Company (as the surviving company in the Merger) equal to
1.50% of the total number of outstanding shares of common stock of the Company
immediately after the Effective Time on a Fully Diluted Basis For New Options
(including, if necessary, options to purchase fractions of a share), at an
exercise price equal to GSCP's effective cost per share of the Company's common
stock, based on the New Purchase Price adjusted to reflect the change in the
number of shares of the Company's common stock into which GSCP's shares of
Confetti common stock are converted pursuant to the Merger. (For example, if the
New Purchase Price is $10 per share, and, in the Merger, GSCP receives one share
of the Company's common stock for every 100 shares of Confetti common stock it
owned prior to the Merger, GSCP's per share cost of the Company's common stock
would be $1,000.) Such Options shall be granted pursuant to a stock incentive
plan and related option agreement (together, the "Option Documents"), which will
be adopted by the Company at or following the Effective Time. Such Options will
vest in equal annual installments over a five-year period and will be subject to
forfeiture upon termination of the Executive's employment, if not vested and
exercised within the time periods specified in the Option Documents. Unless
sooner exercised or forfeited as provided for in the Option Documents, the
Options shall expire on the tenth anniversary of the Effective Time. For
purposes of this Agreement, the number of shares on a "Fully Diluted Basis For
New Options" immediately after the Effective Time shall mean, the total number
of shares of common stock of the Company that would be outstanding immediately
after the Effective Time if all of the then-outstanding options to purchase
Company common stock granted, or options reserved for future grants (other than
any options converted from options outstanding prior to the Effective Time),
pursuant to the Option Documents were exercised at or immediately following the
Effective Time (regardless of whether such options are actually exercised).
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4. Executive's Representations, Warranties and Agreements. The
Executive hereby makes the following representations, warranties and agreements:
(a) Investment Intention; No Resales. The Executive represents and
warrants that such Executive is acquiring the Rollover Stock for investment
purposes only, solely for his own account and not with a view to, or for resale
in connection with, the distribution or other disposition thereof or with any
present intention of distributing or reselling any Rollover Stock thereof,
except for such distributions and dispositions as are both explicitly permitted
under this Agreement and the Stockholders Agreement and effected in compliance
with the Securities Act of 1933, as amended (the "Securities Act"), and the
rules and regulations thereunder, and all applicable state securities or "blue
sky" laws. The Executive agrees and acknowledges that such Executive will not,
directly or indirectly, offer, transfer, sell, assign, pledge, hypothecate or
otherwise dispose of any Rollover Stock, or solicit any offers to purchase or
otherwise acquire or take a pledge of any Rollover Stock, other than transfers,
sales, assignments, pledges, hypothecations or other dispositions explicitly
permitted by the Stockholders Agreement and provided that (x) any such transfer,
sale, assignment, pledge, hypothecation or other disposition is in accordance
with the terms and provisions of the Stockholders Agreement and (y) (i) the
transfer, sale, assignment, pledge, hypothecation or other disposition is
pursuant to an effective registration statement under the Securities Act and has
been registered under all applicable state securities or "blue sky" laws, or
(ii) the Executive shall have furnished the Company with an opinion of counsel
(which counsel and the form and substance of which opinion 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 the rules and regulations in effect thereunder and under all
applicable state securities or "blue sky" laws.
(b) Stock Unregistered. The Executive acknowledges and represents
that such Executive has been advised that (i) the Rollover Stock, upon issuance,
will not have been registered under the Securities Act; (ii) the Rollover Stock
must be held for an indefinite period and such Executive must continue to bear
the economic risk of the investment in the Rollover Stock unless it is
subsequently registered under the Securities Act or an exemption from such
registration is available; (iii) there is no, and it is not anticipated that
there will be any, public market for the Rollover Stock; (iv) Rule 144
promulgated under the Securities Act ("Rule 144") will not be available
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with respect to the sales of any securities of the Company following the
Effective Time, and the Company has made no covenant to make such Rule 144
available; (v) if and when the Rollover Stock may be disposed of without
registration in reliance on Rule 144, such disposition can be made only in
limited amounts in accordance with the terms and conditions of such Rule 144
and, in any event, any such disposition must be in accordance with the
Stockholders Agreement; (vi) if the Rule 144 exemption is not available, public
offer or sale without registration will require the availability of an exemption
under the Securities Act; (vii) a restrictive legend or legends as provided for
in the Stockholders Agreement shall be placed on the certificates representing
the Rollover Stock; (viii) the Stockholders Agreement restricts the sale or
transfer of shares of Rollover Stock other than at specified times and under
specified circumstances; and (ix) a notation shall be made in the appropriate
records of the Company indicating that the Rollover Stock is subject to
restrictions on transfer and, if the Company should at some time in the future
engage the services of a securities transfer agent, appropriate stop-transfer
instructions may be issued to such transfer agent with respect to the Rollover
Stock.
(c) Additional Investment Representations. The Executive represents
and warrants that (i) the Executive's financial situation is such that the
Executive can afford to bear the economic risk of holding the Rollover Stock for
an indefinite period of time and suffer complete loss of the Executive's
investment in the Rollover Stock; (ii) the Executive's knowledge and experience
in financial and business matters (and, in particular, with respect to the
Company) are such that the Executive is capable of evaluating the merits and
risks of the Executive's investment in the Rollover Stock; (iii) the Executive
understands that the Rollover Stock is a speculative investment which involves a
high degree of risk of loss of the Executive's investment therein, that there
are substantial restrictions on the transferability of the Rollover Stock and
that on the date of this Agreement and for an indefinite period following such
date there will be no public market for the Rollover Stock and, accordingly, it
may not be possible to liquidate the Executive's investment in the Company at
all, including in case of emergency; (iv) the Executive and the Executive's
representatives, including the Executive's professional, tax and other advisors,
have carefully reviewed the financial and other information with respect to the
Company, and its subsidiaries (including with respect to the Merger) supplied to
them and the Executive understands and has taken cognizance of (or has been
advised by the Executive's representatives as to) all the risks related to an
investment in the
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Rollover Stock; (v) in making the Executive's decision to invest in the Rollover
Stock hereunder, the Executive has relied upon independent investigations made
by the Executive and, to the extent believed by the Executive to be appropriate,
the Executive's representatives, including the Executive's own professional, tax
and other advisors; (vi) the Executive and the Executive's representatives have
received and read this Agreement, the Stockholders Agreement, the Merger
Agreement and all other documents related to and executed or to be executed in
connection with the transactions contemplated hereby and thereby, and have been
given the opportunity to examine for a reasonable time prior to the date hereof
all documents and to ask questions of, and to receive answers from, the Company,
Confetti and their respective representatives concerning the terms and
conditions of the investment in the Rollover Stock and to obtain any additional
information which Confetti and its subsidiaries possess or can acquire without
unreasonable effort or expense, necessary to verify the accuracy of the
information supplied to it, and the Executive and the Executive's
representatives have received all additional information requested by them, and
no representations have been made to the Executive or such representatives
concerning the Rollover Stock, their respective affiliates, their businesses or
prospects or other matters, except as set forth in this Agreement; and (vii) the
Executive is an officer of the Company holding the position of President as of
the date hereof, is familiar with the operations and businesses of the Company,
has access to all material financial and other information available from the
Company, and has significant business experience in the party goods or similar
business and, in any such case, expects, after the Merger, to be an officer of
the Company.
(d) The Executive represents and warrants that such Executive has
read and understands the Merger Agreement and the related agreements and the
Stockholders Agreement, is familiar with and understands the respective terms
thereof and consents and agrees to the treatment of the Executive's shares of
Rollover Stock, Options, and Option Shares pursuant thereto, to whatever extent
each applies respectively. The Executive covenants that he will execute and
become a party to the Stockholders Agreement substantially in the form delivered
as of the date hereof.
5. Termination of Employment. (a) Death or Disability. The
Executive's employment shall terminate automatically upon the Executive's death
during the Employment Period. The Company shall be entitled to terminate the
Executive's employment because of the Executive's Disability during the
Employment Period. "Disability" means that the Executive has been unable, for a
period of (i) 180 consecutive days or (ii)
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an aggregate of 210 days in a period of 365 consecutive days, to perform his
duties under this Agreement, as a result of physical or mental illness or
injury. A termination of the Executive's employment by the Company for
Disability shall be communicated to the Executive by written notice, and shall
be effective on the 30th day after receipt of such notice by the Executive (the
"Disability Effective Date"), unless the Executive returns to full-time
performance of the Executive's duties in accordance with the provisions of
Section 2 of this Agreement before the Disability Effective Date. In the event
of a dispute as to whether Executive has suffered a Disability, the final
determination shall be made by a licensed physician selected by the Board of
Directors of the Company and acceptable to Executive in Executive's reasonable
judgment.
(b) Not Death or Disability. The Company may terminate the
Executive's employment at any time during the Employment Period with or without
Cause. The Executive may terminate his employment at any time during the
Employment Period for any reason.
(c) Date of Termination. The "Date of Termination" means the date of
the Executive's death, the Disability Effective Date, or the date on which the
termination of the Executive's employment by the Company, or by the Executive,
is effective, as the case may be.
6. Obligations of the Company Upon Termination. (a) By the Company,
Other Than for Death or Disability. If, during the Employment Period, the
Company terminates the Executive's employment other than due to the Executive's
death or Disability, the Company shall, except as provided in clause (ii) below,
pay the amounts described in subparagraph (i) below to the Executive in a lump
sum in cash within 30 days after the Date of Termination:
(i) The amounts to be paid in a lump sum as described above are:
(A) The Executive's accrued but unpaid cash compensation (the
"Accrued Obligations"), which shall equal the sum of (1) any
portion of the Executive's Annual Base Salary through the Date
of Termination that has not yet been paid; (2) any Bonus that
the Executive has earned for a prior full calendar year that
has ended prior to the Date of Termination but which has not
yet been calculated and paid; (3) any compensation previously
deferred by the Executive (together with any accrued interest
or earnings
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thereon) that has not yet been paid (subject to any applicable
provisions of any deferred compensation plan with respect to
the payment thereof); and (4) any accrued but unpaid vacation
pay; and
(B) Severance pay equal to the Annual Base Salary; provided,
however, that in connection with a termination by the Company
other than for Cause following a Sale Event, such severance
pay shall be equal to the Annual Base Salary multiplied by the
number of years constituting the Post-Termination Restriction
Period (as defined in Section 9(a)(ii)). (For example, if the
Company, pursuant to its Restriction Election (as defined in
Section 9(a)(ii)), elects a two-year Post-Termination
Restriction Period, then severance pay will be equal to two
times the Annual Base Salary.)
(ii) Notwithstanding the foregoing, if the Executive's employment is
terminated for Cause, the Executive shall not be entitled to the
payments contemplated by clause (i)(B) of this Section 6(a) and the
payment to the Executive in connection therewith shall be limited to
payment of the Accrued Obligations and the Company shall have no
further obligations under this Agreement. For purposes of this
Agreement, "Cause" shall mean (1) conviction of the Executive by a
court of competent jurisdiction of a felony (excluding felonies
under the Motor Vehicle Code); (2) any act of intentional fraud
against the Company; (3) any act of gross negligence or wilful
misconduct with respect to the Executive's duties under this
Agreement; and (4) any act of wilful disobedience in violation of
specific reasonable directions of the Board consistent with the
Executive's duties.
(b) Death or Disability. If the Executive's employment is terminated
by reason of the Executive's death or Disability during the Employment Period,
the Company shall pay the Accrued Obligations to the Executive or the
Executive's estate or legal representative, as applicable, in a lump sum in cash
within 30 days of the Date of Termination and the Company shall have no further
obligations under this Agreement.
(c) Bonus. If (i) the Executive's employment is terminated during
the Employment Period (1) by the Company other than for Cause or (2) by reason
of the Executive's death
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or Disability, or (ii) the Employment Period is not renewed at the expiration
thereof (other than for Cause), the Company shall pay to the Executive or the
Executive's estate or legal representative, as applicable, an amount equal to
the Bonus which the Executive would otherwise have been entitled to receive for
the calendar year in which the Executive's employment is so terminated or not
renewed, determined on a pro rata basis for the period during which the
Executive is employed during such calendar year (based on the number of days in
such calendar year the Executive was so employed divided by 365). For purposes
of this Section 6(c), the Bonus shall be calculated in accordance with Section
3(b) at the end of the calendar year in which such Bonus would otherwise have
been payable and shall be paid to the Executive no later than March 15th
following the end of the calendar year to which such Bonus corresponds.
(d) By the Executive. If the Executive terminates his employment
with the Company, the Company shall pay the Accrued Obligations to the Executive
in a lump sum in cash within 30 days of the Date of Termination and the Company
shall have no further obligations under this Agreement.
(e) Effect of Employment of Executive by Certain Stock or Asset
Purchasers. If all or substantially all of the stock or assets of the Company is
sold or otherwise disposed of to a third party not affiliated with the Company,
and the Executive is not offered employment on substantially similar terms by
the Company or one of its continuing affiliates immediately thereafter, then,
for all purposes of this Agreement, the Executive's employment shall be deemed
to have been terminated by the Company other than for Cause effective as of the
date of such sale or other disposition; provided, however, that the Company
shall have no obligations to the Executive under this Section 6 of this
Agreement if the Executive is hired or offered employment on substantially
similar terms by the purchaser of the stock or assets of the Company or if the
Executive's employment is continued by the Company.
7. Full Settlement. The Company's obligations to make the payments
provided for in, and otherwise to perform its obligations under, this Agreement
shall not be affected by any set-off, counterclaim, recoupment, defense or other
claim, right or action that the Company may have against the Executive or
others. In no event shall the Executive be obligated to seek other employment or
take any other action by way of mitigation of the amounts payable to the
Executive under any of the provisions of this Agreement and such amounts shall
not be reduced, regardless of whether the Executive obtains other employment.
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8. Confidential Information. The Executive shall hold in a fiduciary
capacity for the benefit of the Company all secret or confidential information,
knowledge or data relating to the Company or any company affiliated with the
Company and its respective businesses that the Executive obtains during the
Executive's employment by the Company (whether before, during or after the
Employment Term) and that is not public knowledge (other than as a result of the
Executive's violation of this Section 8) ("Confidential Information"). The
Executive shall not communicate, divulge or disseminate Confidential Information
at any time during or after the Executive's employment with the Company, except
with the prior written consent of the Company or as otherwise required by law.
9. Noncompetition; Nonsolicitation. (a) (i) During the Employment
Period and during the three-year period (subject to section 9(a)(ii)) following
any termination of the Executive's employment with the Company and any of its
affiliates, including due to expiration of the Employment Period (the
"Restriction Period"), the Executive shall not directly or indirectly
participate in or permit his name directly or indirectly to be used by or become
associated with (including as an advisor, representative, agent, promoter,
independent contractor, provider of personal services or otherwise) any person,
corporation, partnership, firm, association or other enterprise or entity (a
"person") that is, or intends to be, engaged in any business which is in
competition with the business of the Company, or any of its subsidiaries or
controlled affiliates in any country in which the Company or any of its
subsidiaries or controlled affiliates operate, compete or are engaged in such
business or at such time intend so to operate, compete or become engaged in such
business (a "Competitor"). For purposes of this Agreement, the term
"participate" includes any direct or indirect interest, whether as an officer,
director, employee, partner, sole proprietor, trustee, beneficiary, agent,
representative, independent contractor, consultant, advisor, provider of
personal services, creditor, owner (other than by ownership of less than five
percent of the stock of a publicly-held corporation whose stock is traded on a
national securities exchange or in an over-the-counter market).
(ii) In the event the Employment Period is terminated by the Company
other than for Cause following a Sale Event (as defined below), the Company
shall elect (a "Restriction Election"), in its sole and absolute discretion
(subject to the provisions of Section 6(a)(i)(B) of this Agreement), to limit
the remainder of the Restriction Period following such termination to a one, two
or three-year period (the "PostTermination Restriction Period"). If no
Restriction Election
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is made, the Company shall be deemed to have elected a three-year
Post-Termination Restriction Period. For purposes of this Agreement, "Sale
Event" shall mean either (1) the acquisition by any individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act")) that is a Competitor, other than
GSCP and its 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 that is a
Competitor; provided, however, that in no event shall an underwritten initial
public offering or public offerings of shares of Company common stock pursuant
to a registration statement under the Securities Act constitute a Sale Event.
For purposes of this paragraph, the assignment to the Executive of any duties
materially inconsistent with the position with the Company that the Executive
held immediately prior to the Sale Event, or a material adverse change in the
status, position or conditions of the Executive's employment or the nature of
the Executive's responsibilities in effect immediately prior to such Sale Event
shall be deemed a termination by the Company without Cause.
(b) During the portion of the Restriction Period following any
termination of the Executive's employment with the Company and any of its
affiliates, the Executive shall not, directly or indirectly, encourage or
solicit, or assist any other person or firm in encouraging or soliciting, any
person that during the three-year period preceding such termination of the
Executive's employment with the Company is or was engaged in a business
relationship with the Company, any of its subsidiaries or controlled affiliates
to terminate its relationship with the Company or any of its subsidiaries or
controlled affiliates or to engage in a business relationship with a Competitor.
(c) During the portion of the Restriction Period following any
termination of the Executive's employment with the Company and any of its
affiliates, the Executive will not, except with the prior written consent of the
Company, directly or indirectly, induce any employee of the Company, or any of
its subsidiaries or controlled affiliates to terminate employment with such
entity, and will not, directly or indirectly, either individually or as owner,
agent, employee, consultant or otherwise, employ, offer employment or cause
employment to be offered to any person (including employment as an independent
contractor) who is or was employed by the Company or any of its respective
subsidiaries or controlled affiliates unless such person shall have ceased to be
employed by such entity for a
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period of at least twelve months. For purposes of this Section 9(c),
"employment" shall be deemed to include rendering services as an independent
contractor and "employees" shall be deemed to include independent contractors.
(d) Promptly following the Executive's termination of employment,
including due to expiration of the Employment Period, the Executive shall return
to the Company all property of the Company and its respective subsidiaries and
affiliates, and all copies thereof in the Executive's possession or under his
control, including, without limitation, all Confidential Information in whatever
media such Confidential Information is maintained.
(e) The Executive acknowledges and agrees that the Restriction
Period and the covenants and obligations of the Executive in Section 8 and this
Section 9 with respect to non-competition, nonsolicitation and confidentiality
and with respect to the property of the Company and its subsidiaries and
controlled affiliates, and the territories covered thereby, are fair and
reasonable and the result of negotiation. The Executive further acknowledges and
agrees that the covenants and obligations of the Executive in Section 8 and this
Section 9 with respect to noncompetition, nonsolicitation and confidentiality
and with respect to the property of the Company and its subsidiaries and
controlled affiliates, and the territories covered thereby, relate to special,
unique and extraordinary matters and that a violation of any of the terms of
such covenants and obligations will cause the Company and its subsidiaries and
affiliates irreparable injury for which adequate remedies are not available at
law. Therefore, the Executive agrees that the Company shall be entitled to an
injunction, restraining order or such other equitable relief as a court of
competent jurisdiction may deem necessary or appropriate to restrain the
Executive from committing any violation of such covenants and obligations. These
injunctive remedies are cumulative and are in addition to any other rights and
remedies the Company may have at law or in equity. If, at the time of
enforcement of Section 8 and/or this Section 9, a court holds that the
restrictions stated herein are unreasonable under circumstances then existing,
the parties hereto agree that the maximum period, scope, or geographical area
legally permissible under such circumstances will be substituted for the period,
scope or area stated herein.
10. Successors. (a) This Agreement is personal to the Executive and
shall not be assignable by the Executive. This Agreement shall inure to the
benefit of and be enforceable by the Executive's legal representatives.
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(b) This Agreement shall inure to the benefit of and be binding upon
Confetti and its successors and assigns, and upon the effectiveness of the
Merger shall inure to the benefit of and be binding upon the Company (as the
surviving company in the Merger) and its successors and assigns, and at the
Effective Time, the Company shall execute a counterpart to this Agreement
acknowledging that it is bound by the terms hereof.
11. Miscellaneous. (a) This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York, without
reference to principles of conflict of laws. The captions of this Agreement are
not part of the provisions hereof and shall have no force or effect. This
Agreement may not be amended or modified except by a written agreement executed
by the parties hereto or their respective successors and legal representatives.
(b) All notices and other communications under this Agreement shall
be in writing and shall be given by hand delivery to the other party or by
overnight courier or by registered or certified mail, return receipt requested,
postage prepaid, addressed as follows:
If to the Executive:
Xxxxxx X. Xxxxxxxxxx
00 Xxxxx Xxxxx
Xxxxxxx, XX 00000
If to the Company:
Confetti Acquisition, Inc.
c/o GS Capital Partners II, L.P.
00 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxx X. Xxxxxxxxx
Telecopier No. (000) 000-0000
or to such other address as either party furnishes to the other in writing in
accordance with this paragraph (b) of this Section 11. Notices and
communications shall be effective when actually received by the addressee.
(c) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement.
(d) Notwithstanding any other provision of this Agreement, the
Company may withhold from amounts payable under
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this Agreement all federal, state, local and foreign taxes that are required to
be withheld by applicable laws or regulations.
(e) Any party's failure to insist upon strict compliance with any
provision of, or to assert any right under, this Agreement shall not be deemed
to be a waiver of such provision or right or of any other provision of or right
under this Agreement.
(f) The Executive acknowledges that this Agreement (together with
the Stockholders Agreement, and the Voting Agreement and the other agreements
referred to herein and therein) supersedes all other agreements and
understandings, both written and oral, between the Executive and Confetti, and
upon the effectiveness of this Agreement between the Executive and the Company
concerning the subject matter hereof, and any prior employment agreement between
the Executive and the Company or any direct or indirect subsidiary of the
Company, shall be terminated as of the Effective Time; provided, however, that
the Employment Agreement, between the Company and the Executive, dated as of
October 9, 1996 (the "Prior Employment Agreement"), is intended to continue to
be in full force and effect in accordance with its terms until the Effective
Time, at which time the Prior Employment Agreement shall be terminated and no
further payments shall be made by the Company to the Executive thereunder. Until
the Effective Time, the Executive will not consent to any amendment or waiver of
the Prior Employment Agreement without the prior written consent of Confetti.
(g) The effectiveness of this Agreement is contingent upon (i) the
Closing and the effectiveness of the Merger and (ii) there being no termination
of the Prior Employment Agreement for any reason prior to the Effective Time. If
(x) the Closing does not occur and the Merger Agreement is terminated or (y) the
Prior Employment Agreement is terminated (and in the case of termination of the
Prior Employment Agreement, upon the election of Confetti), this Agreement shall
have no effect and shall be void ab initio without any party hereto having any
liability to any other party hereto (provided, that the foregoing shall not
limit the rights of Confetti and the Company under the Merger Agreement).
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IN WITNESS WHEREOF, the Executive has hereunto set the Executive's
hand and, pursuant to the authorization of its Board of Directors, Confetti has
caused this Agreement to be executed in its name on its behalf, all as of the
day and year first above written.
CONFETTI ACQUISITION, INC.
By: /s/ XXXXXXX X. X'XXXXX
-----------------------------------
Name: Xxxxxxx X. X'Xxxxx
Title: Chairman of the Board and
President
/s/ XXXXXX X. XXXXXXXXXX
-----------------------------------
Xxxxxx X. Xxxxxxxxxx
IN WITNESS WHEREOF, Amscan Holdings, Inc. as the surviving company
in the Merger, which has been consummated, pursuant to the authorization of its
Board of Directors, has caused this Agreement to be executed in its name on its
behalf, all as of the 19th day of December, 1997.
AMSCAN HOLDINGS, INC.
By: /s/ XXXXX X. XXXXXXXX
-----------------------------------
Name: Xxxxx X. Xxxxxxxx
Title: President
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