EMPLOYMENT AGREEMENT
Exhibit 10.5
EMPLOYMENT AGREEMENT (“Agreement”), dated as of the 1st day of June, 2011 by and between Party
City Holdings Inc., a Delaware corporation (the “Company”), and Xxxxx X. Xxxxxxxx (the
“Executive”), and amended and restated as of the 1st of July, 2011.
WHEREAS, the Executive serves the Company as its President pursuant to an Employment Agreement
dated as of January 1, 2008, as amended from time to time (the “Prior Employment Agreement”); and
WHEREAS, the Company and the Executive desire to set forth in this Agreement the terms and
conditions under which the Executive will continue to be employed by the Company;
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. Employment Period. The Company shall employ the Executive, and the Executive
agrees to, and shall, serve the Company, on the terms and conditions set forth in this Agreement,
for the period commencing on January 1, 2011 and ending on December 31, 2015, unless sooner
terminated as set forth hereinafter (the “Employment Period”).
2. Position and Duties.
(a) During the Employment Period, the Executive shall be President 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 President 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, 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, (iii) serve on the board of
directors of other companies, so long as the Company approves such appointments (such approval not
to be unreasonably withheld), or (iv) 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.
3. Compensation.
(a) Base Salary. During the Employment Period, the Executive shall receive from the
Company an annual base salary (“Annual Base Salary”) of $1,030,837.50, payable in regular
intervals in accordance with the Company’s customary payroll practices in effect during
the Employment Period; provided that on the Company’s first customary payroll date
following the date hereof the Company will pay the Executive an amount equal to the difference
between the aggregate amount of base salary paid to the Executive in 2011 prior to the date hereof
pursuant to the Prior Employment Agreement and the aggregate amount of Annual Base Salary that the
Executive would have been paid during such period had this Agreement been entered into on January
1, 2011; and provided further that such Annual Base Salary shall be increased by 5%
(from the Annual Base Salary theretofore in effect) on each January 1 during the Employment Period
commencing January 1, 2012 and shall be payable in accordance with the preceding sentence.
(b) Other Compensation. In addition to the Annual Base Salary, the Executive shall be
entitled to receive annual bonus compensation (the “Annual Bonus”) consistent with the Company’s
bonus plan for key executives in effect from time to time (the “Bonus Plan”). The Annual Bonus, if
any, shall be paid no later than the 75th day following the end of the calendar year to which such
Annual Bonus corresponds. The target amount of the Annual Bonus shall be 100% of the Annual Base
Salary and the maximum amount of the Annual Bonus shall be 200% of the Annual Base Salary, with the
actual amount of the Annual Bonus, if any, to be determined in accordance with the Bonus Plan.
Except as otherwise provided in Section 5 of this Agreement, for any year during which the
Executive is employed by the Company for less than the entire calendar year (including a year in
which the Executive’s employment is terminated), the Annual Bonus, if any, shall be determined on a
pro rata basis for the period during which the Executive was 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 and payable no later than the 75th day
following the end of the year to which such Annual Bonus corresponds.
(c) Deferred Bonus.
(i) The Executive shall be entitled to receive a deferred bonus (any full or partial
payment hereunder, the “Deferred Bonus”), which shall accrue at the rate of $400,000.00 per
year, accruing monthly for each calendar month of employment hereunder at the rate of
$33,333.33 per month; provided that as of the date hereof the Company will credit
the Executive with an amount equal to the difference between the deferred bonus accrued in
2011 prior to the date hereof pursuant to the Prior Employment Agreement and the portion of
the Deferred Bonus that would have accrued during such period had this Agreement been
entered into on January 1, 2011. Any amount accrued under this Section 3(c), together with
any amount accrued under the Prior Employment Agreement with respect to the 2011 calendar
year prior to the date hereof, has been or will be, as applicable, credited to a notional
Deferred Bonus account (the “Deferred Bonus Account”). No interest or other earnings will
accrue on the Deferred Bonus Account.
(ii) The Deferred Bonus that is accrued with respect to the period beginning on January
1, 2011 and ending on December 31, 2012 shall be paid to the Executive on December 31, 2012,
subject to the Executive’s remaining continuously employed by the Company on such date. If
the Executive’s employment with the Company terminates prior to December 31, 2012, the
Executive’s right to, and the payment of, the Deferred
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Bonus shall be governed by subsection (iii) below. If the Executive receives a payment
under the terms of this subsection (ii), upon such payment, the Company shall have no
further obligation to the Executive with respect to the portion of the Deferred Bonus that
is accrued with respect to the period beginning on January 1, 2011 and ending on December
31, 2012, and any Deferred Bonus accrued with respect to the period beginning on January 1,
2013 in accordance with the provisions of subsection (i) above shall be paid in accordance
with the provisions of subsection (iii) below.
(iii) Subject to subsection (ii) above, the Deferred Bonus shall be payable on the
earlier to occur of the date that is sixty (60) days following the expiration of the
Employment Period hereunder, or the date that is sixty (60) (seventy-four (74) in the case
of a termination of employment due to the Executive’s death) days following the earlier
termination of the Executive’s employment as set forth in Section 5 hereinafter, except as
otherwise set forth in Section 5.
(iv) The Executive acknowledges and agrees that the amount of the deferred bonus
credited under Section 3(c) of the Prior Employment Agreement as of December 31, 2010 is
$750,000. The Company agrees to pay this amount to the Executive within seven (7) days
following execution of this Agreement and the Executive acknowledges and agrees that, upon
such payment, the Company will have no further obligation to him with respect to any amounts
accrued or any deferred bonus under Section 3(c) of the Prior Employment Agreement.
(d) 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; (ii) the Company shall pay on the Executive’s behalf, disability
insurance premiums up to $2,000.00 per month pursuant to which policy the Executive shall be
entitled to designate the beneficiary; and (iii) 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
other welfare benefit plans, practices, policies and programs provided by the Company (including,
to the extent provided, without 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, restricted stock,
bonus or other incentive award, plan, practice, policy or program. The term “peer executives”
means the Chief Executive Officer and Senior Vice Presidents of the Company, if such positions
exist, and if such positions do not exist, the definition of the term “peer executives” shall be
determined by the Board in good faith.
(e) 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.
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4. Termination of Employment.
(a) Death or Permanent 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 Permanent Disability
during the Employment Period. “Permanent Disability” means that the Executive (i) is unable to
perform his duties under this Agreement by reason of any medically determinable physical or mental
impairment which can be expected to result in death or can be expected to last for a continuous
period of not less than 12 months; (ii) is, by reason of any medically determinable physical or
mental impairment which can be expected to result in death or can be expected to last for a
continuous period of not less than 12 months receiving income replacement benefits for a period of
not less than three months under an accident and health plan covering employees of the Company, or
(iii) has been determined to be totally disabled by the Social Security Administration. A
termination of the Executive’s employment by the Company for Permanent 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 before such 30th day. In the event of a dispute as to whether the Executive
has suffered a Permanent Disability, the final determination shall be made by a licensed physician
selected by the Board of Directors of the Company and acceptable to the Executive in the
Executive’s reasonable judgment.
(b) Other than Death or Disability. The Company may terminate the Executive’s
employment at any time during the Employment Period at any time with or without Cause upon notice
to the Executive.
(c) Good Reason. The Executive may terminate his employment at any time during the
Employment Period for Good Reason, upon written notice to the Company setting forth in reasonable
detail the nature of such Good Reason, as set forth below. For purposes of this Agreement, “Good
Reason” is defined as any one or more of the following: any attempt to relocate the Executive to a
work location that is more than 100 miles from the Company’s offices in Elmsford, New York; any
material diminution in the nature or scope of the Executive’s responsibilities or duties as defined
under this Agreement; any material breach by the Company or any affiliate of the Company of any
provision of this Agreement or any other written agreement with the Executive, which breach is not
cured within twenty (20) days following written notice by the Executive to the Company; or any
material failure of the Company to provide the Executive with at least the Annual Base Salary
and/or any other compensation or benefits in accordance with the terms of Section 3 hereof, other
than an inadvertent failure which is cured within ten (10) business days following written notice
from the Executive specifying in reasonable detail the nature of such failure. Notwithstanding the
foregoing, the appointment of an interim President during any period of the Executive’s disability
(which may potentially result in a Permanent Disability) will not be considered “Good Reason” (so
long as the Executive continues to be compensated pursuant to the terms of this Agreement), until
the occurrence of a Permanent Disability as defined in Section 4(a).
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(d) Change in Control. If there occurs a “Change in Control” (as hereinafter defined)
during the Employment Period, 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 Change in Control;
provided, however, that the Company shall have no obligations to the Executive
under this Section 4 if the Executive is hired or offered employment on substantially similar terms
by the purchaser of the stock or assets of the Company, if the Executive’s employment hereunder is
continued by the Company or one of its continuing affiliates, or if the Executive does not actually
terminate employment. As used herein, a “Change in Control” shall be deemed to have occurred upon
the occurrence of any of the following events:
(i) a change in the ownership of the Company within the meaning of Treasury Regulation
Section 1.409A-3(i)(5)(v) as in effect on the date hereof;
(ii) a change in the effective control of the Company within the meaning of Treasury
Regulation Section 1.409A-3(i)(5)(vi)(2) as in effect on the date hereof; or
(iii) a change in the ownership of all or substantially all of the Company’s assets
within the meaning of Treasury Regulation Section 1.409A-3(i)(5)(vii) as in effect on the
date hereof.
Notwithstanding anything to the contrary set forth in d(i)(ii) or (iii) hereinabove, no Change
of Control shall be deemed to have occurred so long as Berkshire Partners and Weston Presidio
continue to own at least 50% of the stock of the Company in the aggregate.
(f) 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, including by
reason of the expiration of the Employment Period.
5. Obligations of the Company Upon Termination.
(a) By the Company Upon the Executive’s Death or Permanent Disability. If the
Executive dies during the Employment Period or the Company terminates the Executive’s employment
due to the Executive’s Permanent Disability, the Company shall pay the Executive or his legal
representative:
(i) The following amounts in a lump sum in cash after the Date of Termination:
(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 Annual 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; and (3) any accrued but unpaid
vacation pay; and
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(B) The Deferred Bonus equal to the sum of (x) the amount credited to the
Deferred Bonus Account pursuant to Section 3(c) above, minus any amount paid
under Section 3(c)(ii) above, and (y) if the Date of Termination is not
December 31st, a pro-rated portion of the Deferred Bonus for the year in
which such termination occurs based on the number of months in such calendar
year the Executive was so employed; and
(ii) The Executive shall also be entitled to receive a pro rata Annual Bonus for the year of
termination, calculated and paid in accordance with Section 3(b).
The Accrued Obligations shall be payable within thirty (30) days of the Date of Termination.
The Deferred Bonus shall be payable on the date that is sixty (60) days after the Date of
Termination in the case of a termination of employment due to the Executive’s Permanent Disability
and on the date that is seventy-four (74) days after the Date of Termination in the case of a
termination of employment due to the Executive’s death. Notwithstanding anything to the contrary
set forth herein, the Executive shall not be entitled any payment pursuant to clauses (i)(B) or
subsection (ii) of this Section 5(a) or Section 9(d)(i) unless the Executive (or the Executive’s
beneficiary previously designated in writing to the Company or, if no such beneficiary has been so
designated, the Executive’s estate, as applicable) shall have, at the written request of the
Company, executed a release of any and all legal claims in the form attached hereto as Exhibit A
(the “Release”) no later than forty-five (45) days following the Date of Termination (which period
shall be sixty-five (65) days following the Date of Termination in the case of a termination of the
Executive’s employment due to his death) and shall not have revoked such release in accordance with
its terms.
(b) By the Company for Cause. If the Executive’s employment is terminated by the
Company for “Cause” (as hereinafter defined), then the Executive shall be entitled to only the
payment of the Accrued Obligations which shall be paid to the Executive in cash in a lump sum
within thirty (30) days of the Date of Termination 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 Vehicle and Traffic Code of the State of New York or any similar law of another state
within the United States of America); (2) any act of intentional fraud in connection with his
duties under this Agreement; (3) any act of gross negligence or willful misconduct with respect to
the Executive’s duties under this Agreement; and (4) any act of willful disobedience in violation
of specific reasonable directions of the Board consistent with the Executive’s duties.
(c) By the Company for any reason other than Cause or by the Executive for Good
Reason. If the Executive’s employment is terminated during the Employment Period (i) by the
Company other than for Cause (including by reason of a Change in Control), death or Permanent
Disability or (ii) by the Executive for Good Reason, the Company shall pay to the Executive (A) the
Accrued Obligations, (B) the Deferred Bonus (as calculated in accordance with Section 5(a)(i)(B)),
(C) the Executive will also be entitled to receive a pro rata Annual Bonus for the year of
termination, calculated and paid in accordance with Section 3(b), and (D) a Severance Payment (the
“Severance Payment”), in an amount equal to (x) the sum of (1) the Executive’s then current Annual
Base Salary and (2) $400,000 multiplied by (y) the number of years in the post employment
Restriction Period, calculated in accordance with Section 9(d)
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hereinafter. Notwithstanding anything to the contrary set forth herein, in the event that
termination of the Executive’s employment pursuant to this Paragraph occurs within six (6) months
following a Change of Control, the Severance Payment shall equal the sum of (x) three (3) years of
Base Salary, plus (y) the amount of the Annual Bonus paid to the Executive with respect to the last
full calendar year of the Executive’s employment prior to the Change of Control. All amounts
payable hereunder (except the Annual Bonus which is payable in accordance with Section 3(b) and the
Accrued Obligations, which shall be payable in a lump sum in cash within thirty (30) days of the
Date of Termination) shall be payable in cash in a lump sum on the date that is sixty (60) days
following the Date of Termination. Notwithstanding anything to the contrary set forth herein, the
Executive shall not be entitled any payment pursuant to clauses (B), (C) or (D) of this Section
5(c) unless the Executive shall have, at the written request of the Company, executed the Release
no later than forty-five (45) days following the Date of Termination and shall not have revoked
such release in accordance with its terms.
(d) By the Executive other than for Good Reason. If during the Employment Period the
Executive terminates his employment with the Company other than for Good Reason, the Company shall
pay the Accrued Obligations to the Executive in a lump sum in cash within thirty (30) days of the
Date of Termination and the Company shall have no further obligations under this Agreement.
(e) Expiration of the Term. Unless otherwise terminated pursuant to any of the
foregoing clauses of this Section 5, the Executive’s employment hereunder will automatically
terminate at the expiration of the Employment Period and the Company shall pay to the Executive (i)
the Accrued Obligations, (ii) the Annual Bonus for the year in which the Employment Period ends and
(iii) the Deferred Bonus (as calculated in accordance with Section 5(a)(i)(B)). All amounts
payable hereunder (except the Annual Bonus which is payable in accordance with Section 3(b) and the
Accrued Obligations, which shall be payable in a lump sum in cash within thirty (30) days of the
Date of Termination) shall be payable in cash in a lump sum on the date that is sixty (60) days
following the Date of Termination. Notwithstanding anything to the contrary set forth herein, the
Executive shall not be entitled any payment pursuant to clauses (ii) and (iii) of this Section 5(e)
unless the Executive shall have, at the written request of the Company, executed the Release no
later than forty-five (45) days following the Date of Termination and shall not have revoked such
release in accordance with its terms. Upon expiration of the Employment Period, no Severance
Payment will be due and no further Restriction Period shall apply.
(f) Continuing Rights under Benefits Programs. Notwithstanding anything to the
contrary set forth herein, upon termination of employment for any reason other than death,
termination by the Company for Cause, or termination by the Executive without Good Reason, the
Executive shall be entitled to receive at the Executive’s expense, continued coverage under the
Company’s health insurance policy comparable to the family coverage received by the Executive at
the Date of Termination, so long as the Company’s Plan at the Date of Termination and thereafter
permits coverage of former employees.
6. Section 409A. The parties intend for the compensation provided under this
Agreement to comply with, or be exempt from, the provisions of Section 409A of the Internal
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Revenue Code of 1986, as amended (together with the regulations thereunder, “Section 409A”).
Notwithstanding the foregoing, in no event shall the Company have any liability to the Executive or
to any other person claiming rights under this Agreement relating to the failure or alleged failure
of any payment or benefit under this Agreement to comply with, or be exempt from, the provisions of
Section 409A.
(a) Definitions. For purposes of this Agreement, all references to “termination of
employment” and similar or correlative phrases shall be construed to require a “separation from
service” (as defined in Section 1.409A-1(h) of the Treasury regulations after giving effect to the
presumptions contained therein), and the term “specified employee” means an individual determined
by the Company to be a specified employee under Treasury regulation Section 1.409A-1(i).
(b) Certain Delayed Payments. If any payment or benefit hereunder constituting
“nonqualified deferred compensation” subject to Section 409A would be subject to subsection
(a)(2)(B)(i) of Section 409A (relating to payments made to “specified employees” of publicly-traded
companies upon separation from service), any such payment or benefit to which the Executive would
otherwise be entitled during the six (6) month period following the Executive’s separation from
service will instead be provided or paid without interest on the first business day following the
expiration of such six (6) month period, or if earlier, the date of the Executive’s death.
(c) Separate Payments. Each payment made under this Agreement shall be treated as a
separate payment.
(d) Reimbursements. Notwithstanding anything to the contrary in this Agreement, any
reimbursement that constitutes or could constitute nonqualified deferred compensation subject to
Section 409A will be subject to the following additional requirements: (i) the expenses eligible
for reimbursement will have been incurred during the term of this Agreement, (ii) the amount of
expenses eligible for reimbursement during any calendar year will not affect the expenses eligible
for reimbursement in any other taxable year; (iii) reimbursement will be made not later than
December 31 of the calendar year following the calendar year in which the expense was incurred; and
(iv) the right to reimbursement will not be subject to liquidation or exchange for any other
benefit.
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.
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
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or after the Employment Period) 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) Non-Competition. During the Employment Period, and following termination of the
Executive’s employment with the Company and any of its affiliates, during the “Restriction Period”
(as hereinafter defined), 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 any
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”); provided, however, that the foregoing will not prohibit
the Executive from participating in or becoming associated with a person if (i) less than 10% of
the consolidated gross revenues of such person, together with its affiliates, derive from
activities or businesses that are in competition with any business of the Company or any of its
subsidiaries or controlled affiliates (a “Competitive Business”) and (ii) the Executive does not,
directly or indirectly, participate in, become associated with, or otherwise have responsibilities
that relate to the conduct or operations of, any Competitive Business that is conducted by such
person or a division, group, or subsidiary or affiliate of such person. 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, or 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).
(b) Non-Solicitation. During the Employment Period, and during the Restriction Period
following termination of employment, 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) No Hire. During the Employment Period, and during the Restriction Period
following termination of employment, 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
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(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 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) Restriction Period. The term “Restriction Period” as used herein, shall mean the
following periods:
(i) In the event the Employment Period is terminated by (1) the Company prior to its
expiration (except as provided in Section 9(d)(iii) hereinafter) other than (A) for Cause or
(B) due to the Executive’s death or Permanent Disability, or (2) the Executive for Good
Reason, the Company shall elect, in its sole and absolute discretion, to limit the
Restriction Period following termination to a one, two or three-year period (but no event
less than one year), and the Company shall pay the Executive the Severance Payment
(calculated based on the number of years of the elected Restriction Period). If no
Restriction Period election is made, the Company shall be deemed to have elected a
three-year Restriction Period. The Severance Payment shall be payable in a lump sum on the
date that is sixty (60) days following the Date of Termination.
(ii) In the event the Executive is terminated by the Company for Cause, or if the
Executive resigns without Good Reason, then the Restriction Period shall be three years
following termination of employment and no Severance Payment shall be payable to the
Executive.
(iii) Notwithstanding anything to the contrary set forth herein, in the event the
Executive’s employment is terminated by the Company following a Change of Control, or by the
Executive for Good Reason following a Change of Control, the Restriction Period shall be
three years following the Change of Control and the Company shall pay the Executive the
Severance Payment for the three year Restriction Period in cash in a lump sum on the date
that is sixty (60) days following the Date of Termination.
(e) Return of Confidential Information. 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.
(f) Injunctive Relief. 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
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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 any of the restrictions stated herein are unreasonable
under circumstances then existing, the parties hereto agree that the maximum period, scope, and/or
geographical area legally permissible under such circumstances will be substituted for the period,
scope and/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 and heirs and successors.
(b) This Agreement shall inure to the benefit of and be binding upon the Company and its
successors and assigns.
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 heirs, 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, or by facsimile (with receipt confirmation),
addressed as follows:
If to the Executive:
|
Xxxxx X. Xxxxxxxx | |
| 00 Xxxx Xxxxxx | ||
| Xxxx Xxxxxxxxx, XX 00000 | ||
If to the Company:
|
Party City Holdings Inc. | |
| 00 Xxxxxxxxxx Xxxx | ||
| Xxxxxxxx, XX 00000 | ||
| Attention: Corporate Secretary | ||
| Fax no.: (000) 000-0000 |
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or to such other address as either party furnishes to the other in writing in accordance with this
Section 11(b). 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 this Agreement all federal, state, local and foreign taxes that are required
to be withheld by applicable laws or regulations. In addition, the obligations of the Company under
this Agreement shall be conditional on compliance with this Section 11(d), and the Company shall,
to the extent permitted by law, have the right to deduct any such taxes from any payment otherwise
due to the Executive.
(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 Exhibits hereto (and the
other agreements referred to herein and therein), supersedes all other agreements and
understandings, both written and oral, between the Executive and the Company with respect to the
subject matter hereof, including, without limitation, the Prior Employment Agreement. Upon
execution of this Agreement, the Prior Agreement shall terminate and be of no further force and
effect.
(g) This Agreement may be executed in counterparts, each of which shall be deemed to be an
original, but all of which shall together constitute one and the same instrument.
(h) Provisions of this Agreement shall survive any termination of employment if so provided
herein or if necessary or desirable to accomplish the purposes of other surviving provisions,
including, without limitation, the obligations of the Executive under Sections 8 and 9 hereof.
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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, the Company has caused this Agreement to be executed in
its name on its behalf, all as of the day and year first above written.
| PARTY CITY HOLDINGS INC. | ||||
| By: | /s/ Xxxxxxx X. Xxxxxxxx | |||
| Name: | Xxxxxxx X. Xxxxxxxx | |||
| Title: | CFO | |||
| /s/ Xxxxx X. Xxxxxxxx | ||||
| XXXXX X. XXXXXXXX | ||||
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Exhibit A
FORM OF RELEASE OF CLAIMS
This Release of Claims is provided by me, Xxxxx X. Xxxxxxxx (or by my designated beneficiary,
in the event of my death during my employment), pursuant to the Employment Agreement between me and
Party City Holdings, Inc. (the “Company”) dated as of June 1, 2011 and amended and restated as of
July 1, 2011 (the “Employment Agreement”).
This Release of Claims is given in consideration of the severance benefits to be provided to
me (or, in the event of my death during my employment, to my designated beneficiary) in connection
with the termination of my employment under Section 5 of the Employment Agreement (the “Separation
Payments”), which are conditioned on my signing this Release of Claims and to which I am not
otherwise entitled, and for other good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged. On my own behalf and that of my heirs, executors, administrators,
beneficiaries, representatives and assigns, and all others connected with or claiming through me, I
hereby release and forever discharge the Company from any and all causes of action, rights or
claims of any type or description, known or unknown, which I have had in the past, now have or
might have, through the date of my signing of this Release of Claims. This includes, without
limitation, any and all causes of action, rights or claims in any way resulting from, arising out
of or connected with my employment by the Company or the termination of that employment or pursuant
to any federal, state or local law, regulation or other requirement, including without limitation
Title VII of the Civil Rights Act of 1964, the Americans with Disabilities Act, the Age
Discrimination in Employment Act, the fair employment practices statutes of the state or states in
which I have provided services to the Company or any other federal, state, local or foreign law,
all as amended, any contracts of employment, any tort claims, or any agreements, plans or policies.
For purposes of this Release of Claims, the word “Company” always includes the Company, the
subsidiaries and affiliates of the Company and all of their respective past, present and future
officers, directors, trustees, shareholders, employees, employee benefit plans and any of the
trustees or administrators thereof, agents, general and limited partners, members, managers,
investors, joint venturers, representatives, predecessors, successors and assigns, and all others
connected with any of them, both individually and in their official capacities.
Excluded from the scope of this Release of Claims is any rights to benefits that were vested
under the Company’s employee benefit plans on the date on which my employment with the Company
terminated, in accordance with the terms of such plans.
In signing this Release of Claims, I give the Company assurance that I have returned to the
Company any and all documents, materials and information related to the business, whether present
or otherwise, of the Company and all keys and other property of the Company that were in my
possession or control, all as required by and consistent with Section 9(e) of the Employment
Agreement. I agree that I will not, for any purpose, attempt to access or use any computer or
computer network or system of the Company, including without limitation their
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electronic mail systems. I further acknowledge that I have disclosed to the Company all passwords
necessary or desirable to enable the Company to access all information which I have
password-protected on its computer network or system.
In signing this Release of Claims, I agree that I have been paid in full all compensation due
to me, whether for services rendered by me to the Company or otherwise, through the date on which
my employment with the Company terminated and that, exclusive only of the Separation Payments, no
further compensation of any kind shall be due to me by the Company, whether arising under the
Employment Agreement or otherwise, in connection with my employment or the termination thereof. I
also agree that except for any right I and my eligible dependents may have to continue
participation in the Company’s health and dental plans under the federal law commonly known as
COBRA, my right to participate in any employee benefit plan of the Company will be determined in
accordance with the terms of such plan.
I acknowledge that my eligibility for the Separation Payments is not only contingent on my
signing and returning this Release of Claims to the Company in a timely manner and not revoking it
thereafter, but also is subject to my compliance with the covenants contained in the Employment
Agreement.
In signing this Release of Claims, acknowledge that I have not relied on any promises or
representations, express or implied, that are not set forth expressly in this Release of Claims. I
further acknowledge that I am waiving and releasing any rights I may have under the Age
Discrimination in Employment Act of 1967, as amended (“ADEA”), and that this waiver and release is
knowing and voluntary and is being done with a full understanding of its terms. I agree that the
consideration given for this wavier and release is in addition to anything of value to which I was
already entitled. I further acknowledge that I have been advised by this writing as required by
the ADEA that:
1. I have the right to and am advised by the Company to consult with an attorney prior to
executing this Release of Claims; and I acknowledge that I have had sufficient time to consider
this Release of Claims and to consult with an attorney, if I wished to do so, or to consult with
any other person of my choosing before signing;
2. I may not sign this Release of Claims prior to the termination of my employment, but that I
may consider the terms of this Release of Claims for up to twenty-one days (or, if the Company so
instructs me in writing, for up to forty-five days) from the later of the date my employment with
the Company terminates or the date I receive this Release of Claims;
3. I have seven (7) days following execution of this Release of Claims to revoke this Release
of Claims; and
4. This Release of Claims shall not be effective until the revocation period has expired.
Intending to be legally bound, I have signed this Release of Claims under seal as of the date
written below.
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Signature:
|
Date signed: | |||||
| Party City Holdings Inc. | ||||||
Name: |
||||||
Title: |
||||||
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