SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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SCHEDULE 13D
(Rule 13d-101)
INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT TO 13d-
1(a) AND AMENDMENTS THERETO FILED PURSUANT TO 13d-2(a)
(Amendment No. )1
Party City Corporation
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(Name of Issuer)
COMMON STOCK, PAR VALUE $.01 PER SHARE
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(Title of Class of Securities)
702145103
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(CUSIP Number)
Matthew H. Kamens, Esq.
Wolf, Block, Schorr and Solis-Cohen, LLP
111 South 15th Street
Philadelphia, Pennsylvania 19102
Tel. No. (215) 977-2000
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(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
June 8, 1999
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(Date of Event Which Requires Filing of This Statement)
If the filing person has previously filed a statement on Schedule 13G to
report the acquisition which is the subject of this Schedule 13D, and is filing
this schedule because of Rule 13d-1(b)(3) or (4), check the following box [ ].
Note. Six copies of this statement, including all exhibits, should be filed
with the Commission. See Rule 13d-1 (a) for other parties to whom copies are to
be sent.
(Continued on the following pages)
(Page 1 of 44 Pages)
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* The remainder of this cover page shall be filled out for a reporting
person's initial filing on this form with respect to the subject class of
securities, and for any subsequent amendment containing information which would
alter disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be
deemed to the "filed" for the purpose of Section 18 of the Securities Exchange
Act of 1934 ("Act") or otherwise subject to the liabilities of that section of
the Act but shall be subject to all other provisions of the Act (however, see
the Notes).
<PAGE>
SCHEDULE 13D
CUSIP No. 702145103 Page 2 of 44 Pages
1 NAMES OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
Jack Futterman
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a)[ ] (b)[ ]
3 SEC USE ONLY
4 SOURCE OF FUNDS*
N/A
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS
2(d) OR 2(e) [ ] N/A
6 CITIZENSHIP OR PLACE OF ORGANIZATION
United States
7. NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH SOLE
VOTING POWER
1,026,500
8. NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH SHARED
VOTING POWER
0
9. NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH SOLE
DISPOSITIVE POWER
1,026,500
10. NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH SHARED
DISPOSITIVE POWER
0
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
1,026,500
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [ ]
N/A
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
8.2%
14 TYPE OF REPORTING PERSON*
IN
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
Item 1. Security and Issuer.
This Statement covers shares of common stock (the "Securities') , par
value $.01 per share (the "Common Stock"), of Party City Corporation, a Delaware
corporation (the "Company"), with its principal office at 400 Commons Way,
Rockaway, New Jersey 07866.
Item 2. Identity and Background.
This statement is being filed by Jack Futterman (the "Reporting
Person"). The Reporting Person is an individual, who is a citizen of the United
States, with an address c/o Party City Corporation, 400 Commons Way, Rockaway,
New Jersey 07866.
The Reporting Person is the Chairman of the Board and Chief Executive
Officer of Party City Corporation. The principal place of business and the
principal office of the Reporting Person is c/o Party City Corporation, 400
Commons Way, Rockaway, New Jersey 07866. During the last five years, the
Reporting Person has not been (i) convicted in a criminal proceeding or (ii) a
party to a civil proceeding of a judicial or administrative body of competent
jurisdiction and as a result of such proceeding has been subject to a judgment,
decree or final order enjoining future violations of, or prohibiting or
mandating activities subject to, federal or state securities laws or finding any
violation with respect to such laws.
Item 3. Source and Amount of Funds or Other Consideration.
Not applicable.
Item 4. Purpose of Transaction.
The Reporting Person assumed the position of Chief Executive Officer
on June 8, 1999. On such date, as incentive for the Reporting Person to assume
his new position as Chief Executive Officer, and to more fully allign his
interests with the shareholders' interest, Steven Mandell, a director of the
Company and the immediately preceding Chief Executive Officer of the Company
("Seller") and the Reporting Person entered into an Option Agreement (the
"Option Agreement"). The Option Agreement provides for an option to purchase by
the Reporting Person (and certain of his permitted transferees) an aggregate of
1,000,000 shares of Seller's Common Stock at a price of $3.00 per share (the
"Exercise Price") and the issuance and delivery to the Reporting Person of an
instrument evidencing such option. Such option is referred to herein as the
"Seller Option." The Seller Option issued to the Reporting Person is exercisable
for a period of five years commencing on the grant date thereof.
The Exercise Price of the Seller Option and the number of shares of
Common Stock issuable upon exercise thereof are subject to adjustment in the
event of a reorganization, recapitalization, stock split, stock dividend,
combination of shares or similar change in the Company's shares, and in the
event of a reorganization, consolidation or merger, or upon the sale of
substantially all of the assets of the Company, to insure that the Reporting
Person (or any of his permitted transferees) continues to hold substantially
similar rights after any such occurrence as the Reporting Person holds on the
date of grant.
To secure performance of Seller's obligations under the Option
Agreement, the Seller has pledged to the Reporting Person 1,000,000 shares of
Seller's Common Stock, under the terms and conditions of a certain Stock Pledge
Agreement, dated June 8, 1999, between the Seller and the Reporting Person (the
"Stock Pledge Agreement").
(Page 3 of 44)
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The Reporting Person has acquired the Seller Option for investment.
Except as set forth herein, the Reporting Person presently does not intend to
acquire additional Securities of the Company. However, if the Reporting Person
believes that further investment in the Company is attractive, whether because
of the market price of the Company's securities or otherwise, such Reporting
Person may acquire additional securities of the Company. Similarly, the
Reporting Person, subject to applicable law and depending upon market and other
factors, may from time to time determine to dispose some or all of the
Securities.
In addition, the Reporting Person (a) holds options to purchase 25,000
shares of Common Stock (the "Incentive Options") granted by the Company under
its Incentive Stock Option Plan, which options are exercisable within 60 days
from the date hereof and (b) owns 1,500 shares of Common Stock outright. The
Incentive Options, together with the Seller Option are referred to herein as the
"Options". Of the Incentive Options, 22,500 were granted by the Company on
September 8, 1997, and have an exercise price of $16 per share and 2,500 were
granted on July 30, 1998, and have an exercise price of $23.1875.
Except as set forth herein, the Reporting Persons has no present
intention to engage or cause the Company to engage in any of the transactions or
activities specified in paragraphs (a) through (j) of Item 4 of Schedule 13D.
However, the Reporting Person reserves the right, either individually or
together with other persons, to act in respect of its interest in the Company in
accordance with its best judgment in light of the circumstances existing at that
time.
Item 5. Interest in Securities of the Issuer.
(a) The Reporting Person owns 1,500 shares of Common Stock and has
the right to acquire 1,000,000 shares of Common Stock from the Seller pursuant
to exercise of the Seller Option and 25,000 shares of Common Stock from the
Company pursuant to an exercise of the Incentive Options, representing, in the
aggregate, 8.2% of the outstanding shares of Common Stock.
Note: The percentage set forth above was calculated by (i) adding the
total number of shares of Common Stock that the Reporting Person owns (1,500)
and has the right to acquire from Seller within 60 days (1,000,000) to the total
number of shares that the Reporting Person has the right to acquire from the
Company within 60 days (25,000); (ii) adding the total amount of shares that are
not currently outstanding which the Reporting Person has a right to acquire
within 60 days of the date hereof (25,000) through the exercise of an option
from the Company to 12,448,863 (the number of shares of Common Stock outstanding
as of September 30, 1998, such number having been provided by the Company to the
Reporting Person) (the "Total Adjusted Outstanding Shares"), and then (iii)
dividing the amount in (i) by the Total Adjusted Outstanding Shares, and then
(iii) expressing such quotient in terms of a percentage.
(b) The Reporting Person has been granted the Options to purchase the
Securities, exercisable within 60 days. Accordingly, if the Reporting Person
were to exercise the Options and pay the exercise price, he would possesses the
sole power to vote and to dispose of the Securities.
(c) See Item 4 regarding particulars with respect to the grant of the
Options.
(d) None, except that until the Seller Option is exercised and
payment of the exercise price has been made by the Reporting Person, 1,000,000
shares of the Securities are held of record and beneficially by the Seller, and
he has the power to receive and direct receipt of dividends upon the Securities.
(Page 4 of 44)
<PAGE>
(e) Not applicable.
Item 6. Contracts, Arrangements, Understandings or Relationships With Respect
to Securities of the Issuer.
See Item 4, which is incorporated herein by reference.
In addition, the Company has granted to the Reporting Person
registration rights relating to his shares of Common Stock. The scope of the
registration rights entitles the Reporting Person to piggy back registrations
and one demand registration for his shares of Common Stock during the term of
the Reporting Person's employment with the Company and for a 5-year period after
termination of his employment. The registration rights sooner terminate at such
time as the Reporting Person can sell all of his shares of Common Stock in a
single sale in the public market under Rule 144 promulgated under the Securities
Act of 1933, as amended. These registration rights were granted in connection
with Reporting Person's employment agreement with the Company dated June 8, 1999
(the "Employment Agreement").
Item 7. Material to be filed as Exhibits.
The documents which have been filed as Exhibits are listed in the
Exhibit Index herein.
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in the statement is true, complete and
correct.
Dated: June 14, 1999
/s/ Jack Futterman
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JACK FUTTERMAN
(Page 5 of 44)
<PAGE>
EXHIBIT INDEX
Exhibit No.
1. Option Agreement, dated June 8, 1999, between Seller and the
Reporting Person.
2. Stock Pledge Agreement, dated June 8, 1999, between Seller and the
Reporting Person.
3. Employment Agreement, dated June 8, 1999, between the Company and
the Reporting Person.
(Page 6 of 44)
EXHIBIT 1
OPTION AGREEMENT
(Page 7 of 44)
<PAGE>
OPTION AGREEMENT
AGREEMENT, dated June 8, 1999, between Steven Mandell, having an address at
P.O. Box 85, New Vernon, New Jersey 07976, ("Seller") and Jack Futterman,
residing at 16315 Vintage Oaks Lane, Delray Beach, Florida 33484 ("Purchaser").
WHEREAS, the Seller is presently the Chief Executive Officer of Party City
Corporation, a Delaware corporation (the "Company"), and is the beneficial owner
of 2,457,500 shares of the Company's common stock, par value $.01 per share (the
"Common Stock"), and the record owner of at least 1,000,000 of such shares; and
WHEREAS, the Purchaser is becoming the Chief Executive Officer of the Company
on the date hereof; and
WHEREAS, the Seller wishes to grant to Purchaser an option to purchase
certain of his shares of Common Stock on the terms set forth herein, as an
inducement for Purchaser to take on the responsibility of Chief Executive
Officer of the Company; and
WHEREAS, Seller's inducement to grant this option is that by virtue of
Purchaser's new position as Chief Executive Officer, the value of Sellers's
shares that are not subject to the option may increase in value.
NOW, THEREFORE, in consideration of the foregoing and the mutual agreements
set forth herein, and for other good and valuable consideration, receipt of
which is hereby acknowledged, the parties hereto agree as follows:
I. OPTION.
1.01. GRANT OF THE OPTION; TERM. Subject to the terms of this
Agreement, in reliance on the representations, warranties and agreements of the
Purchaser contained herein, the Seller hereby grants to the Purchaser an option
to purchase, in whole or in part, 1,000,000 shares of Common Stock at any time
during the period commencing on the date hereof and ending on the fifth
anniversary of the date hereof, at the exercise price per share of $3.00 (the
"Purchase Price"). The option shall be evidenced by one or more option
certificates substantially in the form attached hereto as Exhibit A (the
"Option").
1.02. EXERCISE OF THE OPTION AND PURCHASE OF THE SHARES. The Option
shall be exercised upon receipt by the Seller of a duly executed and completed
facsimile of the form for such purpose attached hereto as Exhibit A, accompanied
by a bank or certified check issued by any domestic office of a bank organized
under the laws of the United States of America or any state thereof, which has
net assets of not less than $100 million, in the amount of the Purchase Price
for the number of shares being purchased in accordance with the terms set forth
below. Notwithstanding the foregoing the
1
(Page 8 of 44)
<PAGE>
Option may not be exercised at any time for less than 100,000 Option Shares (as
hereinafter defined and as the same may be adjusted under Section 1.04 hereof),
and the Option shall not be exercised more than six times over the course of the
five-year term, unless the same shall be waived in writing by Seller.
1.03. DELIVERY BY THE SELLER OF THE OPTION SHARES. As promptly as
practicable after any exercise of the Option, the Seller shall do all things
necessary or appropriate and execute and deliver all documents and instruments
necessary or appropriate, including without limitation, duly executed stock
powers, to cause certificate(s) registered in the name of the Purchaser to be
delivered to Purchaser, or his permitted transferees, for the shares of Common
Stock so purchased.
1.04. ADJUSTMENT. The price and number of shares subject to the Option
shall be appropriately adjusted in the event of a reorganization,
recapitalization, stock split, stock dividend, combination of shares or similar
change in the Company's shares. Upon the subdivision or combination of the
outstanding shares of Common Stock or the issuance of a stock dividend, payable
in shares, to holders of Common Stock, the Purchase Price shall be adjusted by
multiplying the Purchase Price by a fraction, the numerator of which is equal to
the number of issued and outstanding shares of Common Stock immediately prior to
such subdivision, combination or stock dividend, and the denominator of which is
equal to the number of issued and outstanding shares of Common Stock immediately
following such subdivision, combination or stock dividend. If the Company shall
be reorganized, consolidated, or merged with another corporation, or if all or
substantially all of the assets of the Company shall be sold or exchanged, or if
there is a recapitalization, stock split, stock dividend, combination of shares
or similar change in the Company's shares, the Purchaser shall at the time of
issuance of the stock under such corporate event be entitled to receive, upon
the exercise of his Option, the same number and kind of shares of stock or the
same amount of property, cash or securities as the Purchaser would have been
entitled to receive upon the occurrence of any such corporate event as if the
Purchaser had been, immediately prior to such event, the holder of the number of
shares covered by his Option so exercised.
1.05. PLEDGE OF SHARES. The Option evidenced hereby shall be secured by
Seller's pledge of 1,000,000 shares of Common Stock to Purchaser, upon the terms
and subject to the conditions contained in a Stock Pledge Agreement (the "Stock
Pledge Agreement") mutually agreed to by the parties. As and when the option is
exercised, the Option Shares, deliverable upon such exercise shall be released
from the pledge.
II. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER.
The Purchaser hereby represents and warrants to the Seller as follows:
2.01. AUTHORITY. The Purchaser has the power and authority to enter
into and perform his obligations under this Agreement and the Option and to
consummate the transactions contemplated hereby and thereby. This Agreement has
been duly executed and delivered by the Purchaser.
2
(Page 9 of 44)
<PAGE>
2.02. VALID AND BINDING OBLIGATIONS. This Agreement and the Option
constitute the valid and binding obligations of the Purchaser enforceable
against the Purchaser in accordance with their respective terms, except that the
remedy of specific performance and other forms of equitable relief may be
subject to equitable defenses and to the discretion of the court before which
any proceeding therefor may be brought.
2.03. INVESTMENT INTENT. The Purchaser represents, warrants and agrees
that he is acquiring the Option and upon the exercise of the Option, he will
acquire the shares of common stock issued pursuant thereto (the "Option Shares")
for his own account and not with a view to the sale or distribution thereof
other than in accordance with the Securities Act of 1933, as amended, (the
"Securities Act") or pursuant to this Agreement and that there will be placed on
the certificate or certificates representing the Option, and/or the Option
Shares or any certificates delivered in substitution for any of the foregoing, a
legend stating in substance:
"This option and the securities issuable upon exercise of this option
are restricted securities, as defined in Rule 144 promulgated under the
Securities Act of 1933, as amended, and have not been registered under
such Act. Accordingly, in the absence of such registration, these
securities may only be sold or transferred pursuant to that rule or
under another exemption from registration under said Act."
2.04. NO VIOLATION. The execution and delivery of this Agreement by the
Purchaser and the consummation by the Purchaser of the transactions contemplated
hereby will not violate or conflict with the terms, conditions or provisions of
any agreement or obligation or any order, arbitration award, judgment or decree
or (to the knowledge of Purchaser) any law, rule or regulation to which the
Purchaser is subject, or by which his assets may be bound, which would prohibit
the Purchaser from consummating the transactions contemplated hereby.
2.05. NO CONSENTS. No approval, consent, order, authorization of or
exemption by any governmental authority or any person not a party to this
Agreement is required by or with respect to the Purchaser in connection with the
execution, delivery and performance of this Agreement by the Purchaser or the
consummation by the Purchaser of the transactions contemplated hereby.
2.06. NO BROKERS OR FINDERS. The Purchaser has not engaged or agreed to
pay any commission, fee or like remuneration to any finder, broker or agent in
connection with this Agreement, or the performance by the parties of any of
their obligations under this Agreement which could result in any obligation of
the Seller or the Company.
2.07. NO RELIANCE ON SELLER. Purchaser represents and warrants that he
has made his own independent evaluation of the Company before entering into this
Agreement and has not and is not relying on any representations or warranties
made by the Seller relating to the Company. In no event shall Purchaser be
entitled to assert any claim against Seller, except for any breach by Seller of
any of his express representations and warranties contained in this Agreement.
3
(Page 10 of 44)
<PAGE>
III. REPRESENTATIONS AND WARRANTIES OF THE SELLER.
The Seller hereby represents and warrants to the Purchaser as follows:
3.01. AUTHORITY OF THE SELLER. The Seller has the power and authority
to enter into and perform his obligations under this Agreement and the Option
and to consummate the transactions contemplated hereby and thereby. This
Agreement has been duly executed and delivered by the Seller.
3.02. OPTION VALID AND BINDING OBLIGATIONS. This Agreement and the
Option constitute the valid and binding obligations of the Seller enforceable
against the Seller in accordance with their respective terms, except that the
remedy of specific performance and other forms of equitable relief may be
subject to equitable defenses and to the discretion of the court before which
any proceeding therefor may be brought.
3.03. OPTION SHARES. The Option Shares owned by the Seller are fully
paid and non-assessable to the Seller, and are free and clear of any lien,
encumbrance or claim whatsoever, other than those created in favor of Purchaser
pursuant to the Stock Pledge Agreement. There is no outstanding agreement,
option, warrant or right to purchase or otherwise acquire by or from the Seller
any shares or securities of the Company or any calls thereon or commitments
relating thereto.
3.04. NO VIOLATION. The execution and delivery of this Agreement and
the Option by the Seller and the consummation by the Seller of the transactions
contemplated hereby and thereby will not violate the terms, conditions or
provisions of any agreement or obligation or any order, arbitration award,
judgment or decree or (to the knowledge of the Seller) any law, rule or
regulation to which the Seller is subject, or by which any of his assets may be
bound, which would prohibit the Seller from consummating the transactions
contemplated hereby and thereby.
3.05. NO CONSENTS. No approval, consent, order, authorization of or
exemption by any governmental authority or any person not a party to this
Agreement or the Option is required by or with respect to the Seller in
connection with the execution, delivery and performance of this Agreement or the
Option by the Seller or the consummation by the Seller of the transactions
contemplated hereby or thereby except for filings required under Federal
securities laws or state securities or "blue sky" laws which have been made or
which, according to such applicable law, may be made following the date hereof
and which the Seller has committed to make within the prescribed time period.
3.06. SOLVENCY. As of the date hereof and after giving effect to the
transactions contemplated by this Agreement and the Seller is able to pay his
debts as they become due and the value of the Seller's assets valued at fair
market value exceeds his liabilities excluding any contingent liabilities on
account of pending shareholder suits, copies of which have been supplied to
Seller.
3.07. NO BROKERS OR FINDERS. The Seller has not engaged or agreed to
pay any commission, fee or like remuneration to any finder, broker or agent in
connection with this Agreement or the
4
(Page 11 of 44)
<PAGE>
Option or the performance by the parties of any of their obligations under this
Agreement or the Option which could result in any obligation of the Purchaser.
3.08. SELLER'S CONSIDERATION. The Seller acknowledges that he has made
the business decision to enter into this Option for the consideration set forth
in the recitals.
IV. COVENANTS OF THE PARTIES.
4.01. RESTRICTIONS ON TRANSFERABILITY.
(a) The Purchaser covenants and agrees that so long as the
Purchaser is the record or beneficial owner of the Option, any Option Shares or
any other securities of the Company which are entitled to vote or which are
convertible into securities of the Company which are entitled to vote ("Voting
Securities") (collectively the Option, upon exercise, the Option Shares and
Voting Securities are referred to as the "Securities"), the Purchaser shall not,
directly or indirectly (by operation of law or otherwise) sell, assign,
mortgage, hypothecate, transfer, pledge, create a security interest in or lien
upon, encumber, give or otherwise dispose of any of such Securities (a
"Transfer") except:
(i) Purchaser's Transfer of all or a portion of the
Securities following Purchaser's death by will or intestacy to Purchaser's legal
representative, heir or legatee;
(ii) Purchaser's Transfer of any or all of the Securities
owned by Purchaser as a gift or gifts during Purchaser's lifetime to Purchaser's
spouse, children (including stepchildren), grandchildren or a trust or other
legal entity for the benefit of Purchaser or any of the foregoing;
(iii) sales of Securities pursuant to a distribution to the
public, registered under the Securities Act;
(iv) sales of Securities pursuant to Rule 144 of the General
Rules and Regulations under the Securities Act;
(v) sales of any Securities to the Company or the Seller or
to any person, corporation, entity or group designated by the Seller;
(vi) sales of Securities pursuant to a private placement in
accordance with the provisions of Regulation D under the Securities Act in which
each of the proposed purchasers agrees in advance in writing to be bound by the
provisions of this Agreement as if such person were the Purchaser; or
(vii) sales of Securities pursuant to an exemption from
registration under the Securities Act.
5
(Page 12 of 44)
<PAGE>
The Purchaser shall notify the Seller, for his records, of all Transfers of
all or a portion of the Option as and when the Transfers are effected. Promptly
upon Purchaser's written request, Seller shall execute one or more option
certificates in the name of one or more of Purchaser's permitted transferees, in
such amounts as shall be requested by Purchaser (so long as in the aggregate all
of the Option Shares represented by all outstanding option certificates plus all
shares purchased upon exercise of option certificates do not exceed 1,000,000
Option Shares, as the same may be adjusted under the terms of this Agreement).
4.02. TRANSFEREE'S RIGHTS. Any transferee of any of Purchaser's rights
in the Option or this Agreement shall be deemed to have agreed to be bound by
and be subject to all of the provisions of this Agreement (including but not
limited to Section 2.07).
V. INDEMNITY.
5.01. INDEMNIFICATION BY SELLER. Seller shall indemnify Purchaser, his
successors and assigns and permitted transferees and hold Purchaser and the
foregoing named persons harmless from any charges, claims, damages, settlements,
costs, judgments, decrees, expenses (including reasonable counsel fees and
expenses), penalties and liabilities of any kind or nature whatsoever which may
be sustained or suffered by or secured against Purchaser and/or any of the
foregoing named persons, arising out of or as a result of any breach by Seller
of any of his covenants, agreements, representations or warranties under any of
the provisions of this Agreement.
5.02. INDEMNIFICATION BY PURCHASER. Purchaser shall indemnify Seller,
his successors and assigns, and hold Seller and the foregoing named persons
harmless from any charges, claims, damages, settlements, costs, judgments,
decrees, expenses (including reasonable counsel fees and expenses), penalties
and liabilities of any kind or nature whatsoever which may be sustained or
suffered by or secured against Seller and/or any of the foregoing named persons,
arising out of or as a result of any breach by Purchaser of any of his
covenants, agreements, representations or warranties under any of the provisions
of this Agreement.
VI. MISCELLANEOUS.
6.01. ASSIGNMENT. This Agreement and the Option granted hereby is
assignable, in whole or in part, by the Purchaser to the permitted transferees
only to the extent permitted in Section 4.01(a).
6.02. PARTIES IN INTEREST. All of the terms and provisions of this
Agreement shall be binding upon, shall inure to the benefit of, and shall be
enforceable by and against the respective heirs, devisees, legal
representatives, successors, permitted assigns and other permitted transferees
of the parties hereto, including without limitation, the Stock Pledge Agreement.
6.03. SURVIVAL OF REPRESENTATIONS. All representations, warranties and
agreements made by the Seller and Purchaser in this Agreement shall survive the
exercise of the Option.
6
(Page 13 of 44)
<PAGE>
6.04. FURTHER ASSURANCES. The parties hereto will execute and deliver
any and all documents and will take any and all actions in addition to those
provided for herein that may be appropriate or necessary to effectuate the
provisions of this Agreement, whether at or after the Closing.
6.05. ENTIRE AGREEMENT; AMENDMENTS. This Agreement and the other
agreements delivered simultaneously herewith, including, without limitation, the
Stock Pledge Agreement, contain the entire understanding of the parties with
respect to its subject matter. There are no restrictions, agreements, promises,
warranties, covenants or undertakings other than those expressly set forth
herein. This Agreement may be amended only by a written instrument duly executed
by the parties or their respective successors or assigns.
6.06. HEADINGS. The Article and Section headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
6.07. NOTICES. All notices and other communications hereunder shall be
in writing and shall be deemed given on the date of delivery, if by personal
delivery, or on the next day if delivered by overnight mail by a nationally
recognized courier service, or on the third business day after mailing if sent
by mail (registered or certified mail, postage prepaid, return receipt
requested) to the respective parties as follows:
to the Seller:
Steven Mandell
P.O. Box 85
New Vernon, New Jersey 07976
With a copy to
Dewey Ballantine LLP
1301 Avenue of the Americas
New York, NY 10019
Attention: Stuart Hirshfield, Esq.
If to the Purchaser:
Jack Futterman
16315 Vintage Oaks Lane
Delray Beach, FL 33484
7
(Page 14 of 44)
<PAGE>
With a copy to
Prior to 7/4/99 After 7/4/99
------------------------------------- -------------------------------------
Wolf, Block, Schorr & Solis-Cohen LLP Wolf, Block, Schorr & Solis-Cohen LLP
12th Floor, Packard Building 1650 Arch Street
Philadelphia, PA 19102 Philadelphia, PA 19103
Attention: Matthew H. Kamens, Esq. Attention: Matthew H. Kamens, Esq
or to such other address as either party may have furnished to the other in
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt.
6.08. ARBITRATION. Any dispute or controversy arising out of or
relating to this Agreement, any document or instrument delivered pursuant to, in
connection with, or simultaneously with this Agreement, including without
limitation, the Stock Pledge Agreement, or any breach of this Agreement or any
such document or instrument shall be settled by arbitration to be held in Essex
County in New Jersey in accordance with the rules then in effect of the American
Arbitration Association or any successor thereto. The arbitrator may grant
injunction or other relief in such dispute or controversy and may, if requested
by either of the parties, determine which or both of the parties shall bear the
costs of the arbitration (other than the costs of each party's legal fees which
costs shall be borne by the party incurring same) and, if both parties shall
bear the costs, then the allocation of such costs between them. The decision of
the arbitrator shall be final, conclusive, and binding on the parties to the
arbitration. Judgment may be entered on the arbitrator's decision in any court
having jurisdiction, and the parties irrevocably consent to the jurisdiction of
the United States District Court for the District of New Jersey for this
purpose. In any such arbitration, the parties waive personal service of any
process or other papers and agree that service thereof may be made in accordance
with Paragraph 6.07.
6.09. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be an original, but all of which together
shall constitute one and the same Agreement.
6.10. GOVERNING LAW. This Agreement shall be and construed in
accordance with the laws of the State of New York.
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by
the parties hereto through duly authorized officers on the day and year first
above written.
/S/ Steven Mandell
--------------------
STEVEN MANDELL
/S/ Jack Futterman
--------------------
JACK FUTTERMAN
8
(Page 15 of 44)
<PAGE>
EXHIBITS
--------
Exhibit A: Option Certificate
9
(Page 16 of 44)
<PAGE>
SCHEDULE A
----------
List of share certificates to be pledged:
1. Certificate No. ____ evidencing 500,000 shares
2. Certificate No. ____ evidencing 100,000 shares
3. Certificate No. ____ evidencing 100,000 shares
4. Certificate No. ____ evidencing 100,000 shares
5. Certificate No. ____ evidencing 100,000 shares
6. Certificate No. ____ evidencing 100,000 shares
10
(Page 17 of 44)
<PAGE>
EXHIBIT A
THE SECURITIES REPRESENTED HEREBY AND THE SHARES OF COMMON STOCK ISSUABLE UPON
EXERCISE OF THESE OPTIONS ARE RESTRICTED SECURITIES, AS DEFINED IN RULE 144
PROMULGATED UNDER THE SECURITIES ACT OF 1933 AND HAVE NOT BEEN REGISTERED UNDER
SUCH ACT. ACCORDINGLY, IN THE ABSENCE OF SUCH REGISTRATION, THESE SECURITIES MAY
ONLY BE SOLD OR TRANSFERRED PURSUANT TO THAT RULE OR UNDER ANOTHER EXEMPTION
FROM REGISTRATION UNDER SAID ACT.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO, AND MAY BE SOLD,
TRANSFERRED OR OTHERWISE DISPOSED OF ONLY UPON COMPLIANCE WITH THE TERMS AND
PROVISIONS OF THAT CERTAIN OPTION AGREEMENT DATED JUNE 8, 1999, BY AND BETWEEN
STEVEN MANDELL AND JACK FUTTERMAN, A COPY OF WHICH IS ON FILE AT THE OFFICE OF
THE SECRETARY OF PARTY CITY CORPORATION.
OPTION CERTIFICATE
1,000,000 SHARES OF COMMON STOCK
STEVEN MANDELL, having an address at P.O. Box 85, New Vernon, New Jersey
07976, hereby certifies that, for value received, Jack Futterman, with a
residence at 16315 Vintage Oaks Lane, Delray Beach, Florida 33484, and/or any of
his permitted transferees (the "Option Holder"), is entitled, subject to the
terms of this Option Certificate, to purchase from Steven Mandell, in whole or
in part, at any time during the five-year period commencing on the date hereof
(the "Commencement Date") and ending on the fifth anniversary from the
Commencement Date, 1,000,000 shares of the common stock, par value $.01 per
share (the "Common Stock") of Party City Corporation (the "Company"), at a
purchase price per share equal to $3.00 per share (the "Purchase Price"). The
number of shares of Common Stock that may be purchased upon the exercise of the
Option (the "Option Shares") and payment of the Purchase Price, as set forth in
the preceding sentence, are subject to adjustment as provided in this Option
Certificate.
1. EXERCISE OF OPTION. This Option Certificate may be exercised at any time
or from time to time, in whole or in part, during the period commencing on the
Commencement Date and ending at 5:00 p.m. on the fifth anniversary of the
Commencement Date by delivery of this Option Certificate to Steven Mandell at
the address listed above (or such other address as Steven Mandell may designate
in writing to the Option Holder in accordance with Section 8), together with an
Exercise Form in the form attached hereto and payment in an amount equal to the
Purchase Price multiplied by the number of shares being acquired (the "Aggregate
Purchase Price"). Notwithstanding the foregoing, the Option Holder may not
exercise the Option evidenced hereby at any time for less than 100,000 Option
Shares (as the same may be adjusted under the terms of Section 4 hereof) and the
Option Holder, together with any and all other Option Holders, may not exercise
the Option evidenced by this Option Certificate and by any other Option
Certificate issued pursuant to the Option Agreement dated June
11
(Page 18 of 44)
<PAGE>
8, 1999, between Steven Mandell and Jack Futterman, in the aggregate, more than
six (6) times over the course of the five-year term, unless the same shall be
waived in writing by Steven Mandell. Payment shall be made by delivery to Steven
Mandell of a certified check or bank check issued by any domestic office of a
bank organized under the laws of the United States of America or any state
thereof, which has net assets of not less than $100 million, payable to the
order of Steven Mandell in an amount equal to the Aggregate Purchase Price. As
promptly as practicable after any exercise of the Option evidenced by this
Option Certificate, Steven Mandell shall do all things necessary or appropriate
and execute and deliver all documents and instruments necessary or appropriate,
including without limitation, stock powers duly executed, to cause a certificate
or certificates registered in the name of the Option Holder for the shares of
Common Stock so purchased to be delivered to the Option Holder. If the Option
Holder exercises the Option to purchase fewer than all the Option Shares subject
to this Option Certificate, Steven Mandell shall, on the date of delivery of the
certificate representing the Option Shares so purchased, deliver to the Option
Holder a new Option Certificate evidencing an option to purchase the number of
Option Shares resulting from the subtraction of the number of Option Shares
purchased from the number of Option Shares evidenced by this Option Certificate
immediately prior to the exercise.
2. FRACTIONAL SHARES AND OPTIONS. The Option Holder may not exercise the
option to purchase a fraction of an Option Share, but may purchase only an
integral number of Option Shares. If, at the time of exercise of the Options
evidenced by this Option Certificate, a fractional share of the Common Stock
would be deliverable to the Option Holder, Steven Mandell, at his option, may
pay the Option Holder an amount equal to the current market price of the Common
Stock on the date of exercise multiplied by the same fraction.
3. TRANSFERABILITY. By acceptance of this Option, (a) the Option Holder
confirms his representations and agreements set forth in the Option Agreement of
even date herewith between Steven Mandell and the Option Holder relating to the
Option Holder's investment intent and restrictions on transferability of the
Options and the Option Shares and (b) any transferee of this Option agrees to be
subject to the Option Agreement as if he or it were the Purchaser thereunder.
4. ADJUSTMENT IN NUMBER OF SHARES AND PURCHASE PRICE. If the total number of
outstanding shares of Common Stock of the Company is hereafter changed by reason
of any stock dividend, stock split, combination, subdivision or
recapitalization, an appropriate adjustment will be made in the number of shares
that can be purchased hereunder and the exercise price. Upon the subdivision or
combination of the outstanding shares of Common Stock or the issuance of a stock
dividend, payable in shares, to holders of Common Stock, the Purchase Price
shall be adjusted by multiplying the Purchase Price by a fraction, the numerator
of which is equal to the number of issued and outstanding shares of Common Stock
immediately prior to such subdivision, combination or stock dividend, and the
denominator of which is equal to the number of issued and outstanding shares of
Common Stock immediately following such subdivision, combination or stock
dividend. If the Company shall be reorganized, consolidated, or merged with
another corporation, or if all or substantially all of the assets of the Company
shall be sold or exchanged, or if there is a recapitalization, stock split,
stock dividend, combination of shares or similar change in the Company's shares,
the Purchaser shall at the time of issuance of the stock under such corporate
event be entitled to receive, upon the exercise of his or her Option, the same
number and kind of shares of
12
(Page 19 of 44)
<PAGE>
stock or the same amount of property, cash or securities as the Purchaser would
have been entitled to receive upon the occurrence of any such corporate event as
if the Optionee had been, immediately prior to such event, the holder of the
number of shares covered by his or her Option so exercised.
5. NO RIGHTS AS STOCKHOLDER. The Option Holder, by virtue of holding the
Option evidenced by this Option Certificate, shall not be entitled to vote or
receive dividends or be deemed to be or be entitled to any rights of a
stockholder of the Company and the Option Holder shall have no rights other than
those specifically set forth herein.
6. COMPLETE AGREEMENT; MODIFICATION AND TERMINATION. This Option Certificate
contains, or otherwise makes reference to, a complete statement of all the
arrangements with respect to the Options evidenced by this Option Certificate
and cannot be changed or terminated orally.
7. NOTICE. All notices and other communications relating to the Options
shall be in writing and shall be deemed to have been duly given when delivered
personally or mailed (registered or certified mail, postage prepaid, return
receipt requested) as follows:
(a) if to the Option Holder, then to
Jack Futterman
16315 Vintage Oaks Lane
Delray Beach, FL 33484
(b) if to Steven Mandell, to:
Steven Mandell
P.O. Box 85
New Vernon, New Jersey 07976
or to such other address as the party to whom notice is to be given shall have
previously furnished the other party in writing in the manner set forth above.
8. GOVERNING LAW. The Options evidenced by this Option Certificate shall be
governed by and construed in accordance with the laws of the State of New York.
9. HEADINGS. The headings in this Option Certificate are solely for
convenience of reference and shall not affect the meaning or interpretation of
this Option Certificate.
Dated: June 8, 1999
/s/ Steven Mandell
------------------------------------
STEVEN MANDELL
13
(Page 20 of 44)
<PAGE>
EXERCISE FORM
-------------
(To be executed by the Option Holder to exercise the Option
evidenced by the attached Option Certificate)
Mr. Steven Mandell
P.O. Box 85
New Vernon, New Jersey 07976
Dear Mr. Mandell:
The undersigned, pursuant to and in accordance with the terms and conditions
of the option certificate (the "Option Certificate") issued by you, on
____________________, hereby irrevocably exercises his option evidenced by the
Option Certificate, and requests that a certificate for ____ shares of Party
City Corporation Common Stock, par value $____ per share ("Common Stock"),
issuable upon the exercise of the option be issued in the name of the
undersigned and delivered to the undersigned at the address stated below.
Pursuant to Section 1 of the Option Certificate and in complete satisfaction
of the Aggregate Purchase Price for the shares of Common Stock specified herein
issuable upon the exercise of the option, the undersigned is delivering to you
herewith, a certified or bank cashier's check payable to your order in the
amount of $__________.
The undersigned agrees that the undersigned shall not offer, sell, transfer or
otherwise dispose of any shares of Common Stock issuable upon the exercise of
the option evidenced by the Option Certificate except in accordance with the
terms of that certain Option Agreement dated as of June 8, 1999, by and between
Jack Futterman and Steven Mandell.
Dated:
By:________________________
Registered Holder
Address:
14
(Page 21 of 44)
EXHIBIT 2
STOCK PLEDGE AGREEMENT
(Page 22 of 44)
<PAGE>
STOCK PLEDGE AGREEMENT
This STOCK PLEDGE AGREEMENT (this "Agreement"), dated as of June
__,1999, is by and between STEVEN MANDELL, having an address at P.O. Box 85, New
Vernon, New Jersey 07976 ("Pledgor"), and JACK FUTTERMAN, residing at 16315
Vintage Oaks Lane, Delray Beach, Florida 33484 ("Secured Party").
WITNESSETH:
WHEREAS, Secured Party and Pledgor have entered into that certain
Option Agreement (the "Option") of even date, whereby Pledgor has granted to
Secured Party an option to purchase 1,000,000 shares (the "Shares") of Pledgor's
common stock, par value $.01 per share ("Common Stock"), of Party City
Corporation, a Delaware corporation (the "Company") at an exercise price of
$3.00 per share (as more fully described in the Option); and
WHEREAS, as security for performance of the Option and under any other
instrument, document, or agreement executed and delivered by Pledgor pursuant to
the Option (if any, the "Other Documents"), Pledgor has agreed to pledge and
grant a lien and security interest to Secured Party in the Shares and Pledgor
has agreed to execute and deliver this Agreement to Secured Party.
NOW, THEREFORE, in consideration of the foregoing premises and for
other good and valuable consideration, the receipt of which is hereby
acknowledged, each party intending to be legally bound hereby, the Pledgor and
the Secured Party hereby agree as follows:
1. DEFINITIONS. Unless the context otherwise requires, all terms
used but not expressly defined herein shall have the meanings, if any, given to
them in the Option or, if they are not defined in the Option but are defined in
the Uniform Commercial Code, as enacted in New York (the "Code"), they shall
have the same meaning herein as in the Code.
2. PLEDGE OF THE PLEDGED COLLATERAL AND ADJUSTMENTS.
(a) As security for the performance of the Pledgor's obligations
under the Option (collectively, the "Obligations"), Pledgor hereby pledges,
delivers and sets over unto Secured Party, and grants a lien and security
interest to Secured Party, in the following (collectively, the "Pledged
Collateral"):
(i) the Shares;
(ii) Pledgor's rights in any stock dividend,
reclassification, readjustment or other change declared or made by the Company
with respect to or affecting the Shares;
(iii) Pledgor's rights in any subscription warrants or any
other rights or options issued by the Company in connection with the Shares; and
(iv) all proceeds of any of the foregoing upon sale,
exchange or other disposition of any of the foregoing (but excluding cash
payments or distributions made by the Company with respect to any of the
foregoing as a result of owning, rather than disposing of, any of the
foregoing-which payments or distributions are referred to herein as
"Distributions").
1
(Page 23 of 44)
<PAGE>
(b) All new, substituted and additional shares (such shares to be
included within the definition of the Shares hereunder), warrants, rights,
options or other securities, issued by reason of any of the foregoing, in
respect of the Pledged Collateral, shall be immediately delivered to and held by
(or otherwise retained by) the Secured Party under the terms of this Pledge
Agreement and shall constitute Pledged Collateral hereunder.
(c) Simultaneously with the execution of this Pledge Agreement,
Pledgor hereby delivers to the Secured Party the original stock certificate(s)
evidencing the Shares, as described in more detail on Schedule A hereto,
accompanied by stock powers in the form of Exhibit A attached hereto and made a
part hereof, duly executed in blank for all of the Shares.
(d) In addition, the Pledgor shall, upon request of the Secured
Party, deliver to the Secured Party such financing statements as may be
necessary or desirable, in the reasonable opinion of the Secured Party to
perfect the security interest created herein. Pledgor hereby authorizes Secured
Party to file, and appoints Secured Party his attorney-in-fact for the purpose
of executing and filing financing statements or continuation statements to the
extent permitted by applicable law.
3. POWER OF ATTORNEY.
(a) The Secured Party shall have no obligation with respect to
the Pledged Collateral or any other property held or received by it hereunder
except to use reasonable care in the custody thereof to the extent required by
law. The Secured Party may hold the Pledged Collateral in the form in which it
is received by it.
(b) The Pledgor, to the full extent permitted by law, hereby
constitutes and irrevocably appoints the Secured Party (and any officer or agent
of the Secured Party, with full power of substitution and revocation) as the
Pledgor's true and lawful attorney-in-fact, in the Pledgor's stead and in the
name of the Pledgor, to transfer, upon the occurrence of an Event of Default,
the Pledged Collateral on the books of the Company, in whole or in part, to the
name of the Secured Party or such other Person or Persons as the Secured Party
may designate in accordance with the terms of the Option and, upon the
occurrence of an Event of Default, to take all such other and further actions as
the Pledgor could have taken with respect to the Pledged Collateral and as the
Secured Party in its reasonable discretion determines to be necessary or
appropriate to accomplish the purposes of this Agreement and the Option.
(c) The limited powers of attorney granted pursuant to this
Agreement and all authority hereby conferred are granted and conferred solely to
protect the Secured Party's interests in the Pledged Collateral and shall not
impose any duty upon the attorney-in-fact to exercise such powers. Such powers
of attorney shall be irrevocable prior to the performance in full of the
Obligations or expiration of the Option, and shall not be terminated prior
thereto or affected by any act of the Pledgor or other Persons or by operation
of law.
4. VOTING RIGHTS, DIVIDENDS, ETC. During the term of this Pledge
Agreement, and except as otherwise provided in this Section 4, (a) Pledgor shall
have the right to vote the Shares on all corporate questions in a manner not
inconsistent with the terms of this Pledge Agreement and any other agreement,
instrument or document executed pursuant thereto or in connection therewith and
(b) all Distributions, if any, in respect of the Pledged Collateral, shall be
the property of the Pledgor.
2
(Page 24 of 44)
<PAGE>
Any Distributions received by Secured Party prior to either the exercise of the
Option with respect to any Shares or prior to the occurrence of an Event of
Default shall be promptly forwarded to Pledgor. After the Option has been duly
exercised, including payment of the exercise price, (x) the Secured Party may,
at the Secured Party's option and following written notice from the Secured
Party to Pledgor, exercise all voting powers pertaining to the Pledged
Collateral, and Pledgor hereby grants Secured Party an irrevocable proxy,
coupled with an interest, therefor, and (y) all Distributions, if any, in
respect of the Pledged Collateral, shall be the property of the Secured Party.
Any Distributions received by Pledgor after either the exercise of the Option
with respect to any Shares, including payment of the exercise price therefor, or
after the occurrence of an Event of Default shall be promptly forwarded to
Secured Party.
5. PLEDGOR'S COVENANTS, REPRESENTATIONS AND WARRANTIES.
(a) Pledgor reaffirms his representations, warranties and
covenants set forth in the Option Agreement; and
(b) Pledgor agrees to defend the Pledged Collateral from all
claims, liens, suits, or asserted rights of all other parties to the Pledged
Collateral arising out of an action or omission of Pledgor.
6. RETURN OF THE PLEDGED COLLATERAL UPON TERMINATION; TERMINATION OF
FINANCING STATEMENT. The Pledged Collateral shall be released, in whole or in
part, from the lien created by this Agreement to the extent that the Secured
Party exercises its Option. Upon expiration of the Option, Secured Party shall
cause to be transferred to Pledgor all of the Pledged Collateral then in its
possession, to the extent Secured Party has not exercised its option under the
terms of the Option or taken, sold or otherwise realized upon the same pursuant
to its rights hereunder. Immediately following the termination of the lien
created by this Agreement, Secured Party shall execute and deliver to Pledgor,
at Secured Party's expense, such documents as Pledgor may reasonably request to
release the Pledged Collateral from the lien of this Agreement and shall cause
any Pledged Collateral remaining in its possession to be transferred to Pledgor
or his nominee in accordance with Pledgor's instructions.
7. EVENT OF DEFAULT. The following event shall constitute an Event
of Default hereunder: a failure by Pledgor to perform his obligations under the
Option if such failure is coupled with an exercise of the Option including
payment of the exercise price by Secured Party or his permitted transferee
pursuant to the provisions of the Option.
8. REMEDIES UPON DEFAULT. Upon the occurrence of an Event of Default
Secured Party shall have (a) the right to recover from Seller all actual damages
arising as a result of such Event of Default, and (b) all of the rights of a
secured party under the Code, including without limitation, seizure of,
foreclosure upon and/or sale of the Pledged Collateral. The proceeds of any such
sale shall be the property of Secured Party. Notwithstanding the foregoing,
Pledgor irrevocably agrees that Secured Party may, in lieu of foreclosure upon
and sale of the Pledged Collateral, seize and retain the Pledged Collateral upon
the occurrence of an Event of Default.
9. TRANSFER AND ASSIGNMENT. Pledgor may not transfer its rights or
liabilities under this Pledge Agreement to any other person without the express
written consent of the Secured Party.
3
(Page 25 of 44)
<PAGE>
Secured Party may transfer its rights and obligations solely to the permitted
transferees as set forth in the Option, on written notice to Pledgor.
10. FURTHER ASSURANCES. Pledgor agrees that it will cooperate with
the Secured Party and will execute and deliver, or cause to be executed and
delivered, all such other stock powers, proxies, instruments and documents, and
will take all such other action, including, without limitation, the execution of
financing statements, as the Secured Party may reasonably request from time to
time in order to carry out the provisions and purposes of this Pledge Agreement.
11. MISCELLANEOUS.
(a) No Waivers. No action, failure to act, or knowledge of
Secured Party shall be deemed to constitute a waiver of any power, right, or
remedy hereunder, nor shall any single or partial exercise thereof preclude any
further exercise thereof or the exercise of any other power, right, or remedy.
The failure, or delay of Secured Party at any time or times to require
performance of, or to exercise its rights with respect to, any representation,
warranty, covenant, or other term or provision of this Pledge Agreement in no
manner shall affect its right at a later time to enforce any such provision. No
notice to or demand on a party in any case shall entitle such party to any other
or further notice or demand in the same, similar, or other circumstances.
(b) Amendment. This Pledge Agreement shall not be amended nor
shall any right hereunder be deemed waived except by a written agreement
expressly setting forth the amendment or waiver and signed by the party against
whom or which such amendment or waiver is sought to be charged.
(c) Counterparts. This Pledge Agreement may be executed by the
parties on any number of separate counterparts, and by each party on separate
counterparts; each counterpart shall be deemed an original instrument; and all
of the counterparts taken together shall be deemed to constitute one and the
same instrument.
(d) Choice of Law. This Pledge Agreement and any document or
instrument executed in connection herewith shall be governed by, and construed
and interpreted in accordance with, the internal laws of the State of New York.
(e) No Strict Construction. The language used in this Pledge
Agreement shall be deemed to be the language chosen by the parties hereto to
express their mutual intent, and no rule of strict construction will be applied
against any person.
IN WITNESS WHEREOF, Pledgor and Secured Party have executed this Pledge
Agreement as of the day and year first above written.
SECURED PARTY: PLEDGOR:
/S/ Jack Futterman /S/ Steven Mandell
- ------------------ ------------------
JACK FUTTERMAN STEVEN MANDELL
4
(Page 26 of 44)
<PAGE>
STOCK POWER
FOR VALUE RECEIVED, the undersigned does hereby sell, assign and
transfer to __________________________, [_________] shares of common stock, $.01
par value per share, of Party City Corporation, a Delaware corporation,
represented by Certificate No. [___] (the "Stock"), standing in the name of the
undersigned on the books of said corporation and does hereby irrevocably
constitute and appoint _________________________ as the undersigned's true and
lawful attorney, for him and in his name and stead, to sell, assign and transfer
all or any of the Stock, and for that purpose to make and execute all necessary
acts of assignment and transfer thereof; and to substitute one or more persons
with like full power, hereby ratifying and confirming all that said attorney or
substitute or substitutes shall lawfully do by virtue hereof.
Dated: _________________
----------------------------
STEVEN MANDELL
5
(Page 27 of 44)
EXHIBIT 3
EMPLOYMENT AGREEMENT
(Page 28 of 44)
<PAGE>
Party City Corporation
400 Common Way
Rockaway, New Jersey 078766
June 8, 1999
Mr. Jack Futterman
16315 Vintage Oaks Lane
Delray Beach, Florida 33484
Dear Mr. Futterman:
This letter (the "Agreement") sets forth the agreement between you and
Party City Corporation whereunder you are employed as the Chief Executive
Officer of Party City. (Party City Corporation together with all of its
subsidiaries are collectively hereinafter referred to as the "Company").
1. TERM. The term of this Agreement shall commence on June 8, 1999
(the "Effective Date") and shall continue until three years from the Effective
Date of this Agreement, unless sooner terminated as provided herein.
2. NATURE OF EMPLOYMENT. You shall serve as the Chairman of the
Board and Chief Executive Officer of Party City, and as such you shall be
responsible for oversight and management of all operations and activities of the
Company, and in such other executive positions at all times consistent with your
prior training, experience and competence as shall be determined by the
Company's Board of Directors. You shall report to the Board of Directors and to
such committees thereof as the Board shall direct. You shall perform such
executive duties consistent with his position as may be time-to-time specified
by the Board. Your position (including, without limitation, your status,
offices, titles and reporting requirements), authority, duties and
responsibilities shall be consistent with those of the Chief Executive Officer
and Chairman of the Board of a publicly traded corporation.
3. SCOPE OF YOUR EMPLOYMENT. Excluding periods of vacation, sick
leave and disability to which you are entitled, you agree to devote reasonable
attention and time during normal business hours to the business and affairs of
the Company and, to the extent necessary to discharge the duties and
responsibilities assigned to you hereunder, to use your reasonable best efforts
to perform faithfully and efficiently such duties and responsibilities. You may
engage in the activities identified in clause (i) and (ii) of this sentence so
long as such activities do not materially interfere with the performance of your
duties and responsibilities hereunder: (i) you or any person or entity with
which you are associated may own, directly or indirectly, up to two
1
(Page 29 of 44)
<PAGE>
(2%) percent of the issued and outstanding stock of a corporation if such stock
is regularly traded on a national securities exchange or in the over-the-counter
market and (ii) you may (A) make and manage your personal financial investments
so long as such investments do not require your active participation in any
person, firm or business; (B) engage in charitable and non-profit community
activities; and (C) serve as a director of any person, firm or entity that is
not in competition with the Company.
4. LOCATION. The duties to be performed by you hereunder shall be
performed primarily at the office of the Company located in Rockaway, New
Jersey, subject to reasonable travel requirements on behalf of the Company.
5. BASIC COMPENSATION.
a. General. In consideration of your obligations hereunder, the
Company shall pay you the Salary, Bonus and Other Benefits as such terms are
defined in and in accordance with and subject to the terms and conditions of
this Agreement.
b. Salary. Your "Salary" shall mean compensation at the annual
rate of $500,000 beginning on the Effective Date and ending June 8, 2000. The
Board of Directors or the Compensation Committee of the Board of Directors shall
review your Salary at least once during each Fiscal Year for the purpose of
determining whether your Salary should be increased at any time and any number
of times. Notwithstanding anything herein to the contrary, without your consent,
your Salary shall not be decreased.
Your Salary shall be payable at the annual rate during the term
hereof in equal installments not less frequently than bi-weekly and shall be
subject to all applicable withholding taxes.
6. BONUS.
Performance Bonus.
a. Amount. You will be entitled to receive a cash performance
bonus (a "Performance Bonus") for each Fiscal Year during the term hereof. For
the first Fiscal Year ending June 8, 2000, your bonus will be a guaranteed
minimum of $500,000, subject to increases as may be determined by the Board of
Directors. For the second and third Fiscal Years of the term of this Agreement,
the amount of your Performance Bonus shall be (i) no less than $250,000 per
Fiscal Year and (i) determined within the first 30 days of each calendar year
either as a formula based on the Company's performance or as a set minimum
dollar amount, and in either case affording you the opportunity to earn at least
an aggregate Performance Bonus of $500,000 per Fiscal Year.
2
(Page 30 of 44)
<PAGE>
b. Payment Schedule. Except as otherwise set forth in Paragraph
9, the performance Bonus shall be payable to you on or before August 15th
immediately following the end of the Fiscal Year to which such Performance Bonus
relates. The Performance Bonus shall be subject to applicable withholding taxes.
c. Fiscal Year. For purposes of this Agreement, the term
"Fiscal Year" shall mean each twelve month period ending June 8.
7. OTHER BENEFITS.
a. Benefit Plans. Except as otherwise set forth herein, you
shall be entitled to participate in all pension, insurance, medical, disability
and other employee benefit plans and programs generally provided by the Company
to its senior executives similarly situated from time to time. In addition, at
all times after you cease to be in the employ of the Company after you have been
in the Company's employ for three years, or if your employment is earlier
terminated other than (i) for Cause or (ii) on account of your resignation
without Good Reason (as hereinafter defined), the Company shall pay at its sole
cost and expense for your benefit and throughout the duration of your lifetime,
any and all premiums necessary for maintaining medical and dental insurance
coverage for you and your dependents comparable to the insurance coverage
required to be provided to you during the term of this Agreement.
b. Vacation. You shall be entitled to such vacation as you and
the Company shall mutually determine. You agree to take such vacation at times
that are convenient to you and the Company.
c. Business Expenses. The Company shall pay or reimburse you
for all reasonable expenses paid by you during the term of this Agreement in the
performance of your duties hereunder, upon presentation of expense statements or
vouchers or such other supporting information as the Company may reasonably
require. In addition, the Company shall reimburse you for all transportation,
including airfare, lodging, meals, and other reasonable expenses relating to
such travel and lodging incurred upon presentation of expense statements or
vouchers or such other supporting information as the Company customarily may
require of its officers. The Company acknowledges that you are a permanent
resident and domiciliary of Palm Beach County, Florida, and that you may travel
to and from Florida frequently, and may work from your Florida residence, from
time to time. Accordingly, the Company shall reimburse you for all travel
expenses between your Florida residence and the Company's principal office.
d. Other Benefits. In order to assist you in performing your
services hereunder, the Company shall provide you with an automobile and will
pay for the insurance and maintenance thereof or will reimburse you for expenses
you may incur in connection with leasing or financing the purchase thereof,
maintaining and insuring an automobile and the cost of maintaining a driver for
commuting between the office and your New Jersey and/or New York City
apartments.
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e. Professional Expenses. The Company shall also reimburse you
for (i) reasonable legal and accounting fees which you may incur in connection
with the preparation and periodic review of your estate plan, tax planning and
tax returns; and (ii)legal fees in connection with this Employment Agreement,
the related option agreements and other related agreements up to a maximum of $
25,000.
f. Reimbursement for State Taxes. If it is determined by the
State of New Jersey any of your income, other than that payable to you under the
terms of this Agreement, is subject to income tax by the State of New Jersey or
any interest or penalties with respect to such tax (such tax or taxes, together
with any such interest and penalties, are hereafter collectively referred to as
the "New Jersey Tax"), then you will be entitled to receive an additional
payment or payments up to a maximum of $30,000 in the aggregate per Fiscal Year
(a "Gross-Up Payment") in an amount such that, after payment by you of all taxes
(including any interest or penalties imposed with respect to such taxes),
including any New Jersey Tax, imposed upon the Gross-Up Payment, you retain an
amount of the Gross-Up Payment equal to the New Jersey Tax imposed upon the
Payments.
g. Registration Rights.
i. Piggy Back Registration. If at any one or more times
during the term of this Agreement and for a period of five (5) years after
termination of this Agreement (the "Registration Term") the Company intends to
register shares of Common Stock (either on its own behalf or on behalf of
others) on Form S-1, Form S-2 or Form S-3 or any corresponding form applicable
at the time under the Securities Act of 1933, as amended (the "Securities Act")
as then in effect (or any similar statute then in effect), the Company will give
written notice to you of its intention to do so, at least 15 days prior to the
time of the filing of any registration statement or qualification papers, and at
your written request given within 10 days after receipt of any such notice
(which request shall specify the number of your shares of Common Stock (the
"Shares") intended to be sold or disposed of by you and shall describe the
nature of any proposed sale or other disposition thereof which may include a
distribution over a reasonable period of time), the Company will use its
reasonable best efforts to cause such Shares to be registered or qualified to
the extent required (in the opinion of the Company's counsel) to permit the sale
or other disposition thereof.
ii. Requests for Registration. You may request registration
under the Securities Act of all of your Shares one time during the Registration
Term. The Company shall cause its management to cooperate fully and to use its
best efforts to support the registration of such Shares and the sale of such
Shares pursuant to such registration as promptly as is practicable. Such
cooperation shall include, but not be limited to, management's attendance and
reasonable presentations in respect of the Company at road shows with respect to
the offering of such Shares. The registration requested under this Paragraph
7(g)(ii) is referred to herein as a "Demand Registration."
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iii. All out-of-pocket expenses, disbursements and fees in
connection with any action to be taken under this Paragraph 7 (g) shall be borne
by the Company, including the reasonable fees and expenses of counsel for you.
iv. The registration rights provided in this Paragraph 7(g)
shall terminate at any time at which you can immediately sell all of your Shares
in a single sale pursuant to Rule 144 under the Securities Act.
h. Directors and Officers Insurance. The Company shall
maintain at all times during the term of this Agreement an insurance policy or
policies providing liability insurance for directors, officers, employees,
agents or fiduciaries of the Company or of any other corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise which you serve
at the request of the Company. You shall be covered by such policy or policies
in accordance with its or their terms to the maximum extent of the coverage
available for any such director, officer, employee, agent or fiduciary under
such policy or policies.
8. TERMINATION. Your employment shall terminate upon any of the
following circumstances:
a. Death or Disability. Your employment shall terminate
automatically upon your death, and the last day of the month in which your death
occurs shall be deemed to be the date your employment is terminated. The Company
may terminate your employment, after having established your Disability
(pursuant to the definition of "Disability" set forth below), by giving you
written notice of its intention to terminate your employment. If your employment
is terminated by reason of your Disability, the last day of the Disability
Period (as such term is defined below) shall be deemed to be the date your
employment is terminated.
i. Disability/Disability Period. For purpose of this
Agreement the term "Disability" shall mean your inability to perform your duties
hereunder which inability exists for 120 days during any period of 365
consecutive days, solely as a result of physical or mental incapacity or
infirmity, and the existence of which shall be determined by a reputable,
licensed physician selected by you and approved by the Company. For purposes of
this agreement the term "Disability Period" shall mean the period during which
you are unable to perform your duties hereunder as a result of your Disability.
b. "For Cause" or Without Cause. The Company may terminate
your employment "for Cause" or without "Cause."
i. "For Cause". For the purposes of this Agreement, the
following actions or events shall be the exclusive grounds for termination of
your employment "for Cause": (i) your refusal to perform your duties hereunder
(other than a refusal resulting from your
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incapacity due to physical and/or mental illness not caused by chronic
alcoholism or drug addiction) which continues for a period of more than thirty
days after written notice by the Company to you of the acts constituting such
refusal; (ii) your willful engaging in gross misconduct intended to harm the
Company which continues for a period of more than ten days after written notice
by the Company to you of the act(s) that have resulted in material harm to the
Company; (iii) your acts of theft, misappropriation, embezzlement or fraud of
the Company's funds; or (iv) your inability to perform your duties hereunder as
a result of chronic alcoholism or drug addiction.
c. With or Without Good Reason. Your employment may be
terminated by you with or without Good Reason. For purposes of this Agreement,
"Good Reason" means:
i. With Good Reason. For purposes of this Agreement, "Good
Reason" means:
(i) without your express consent, any change in your duties
or responsibilities (including reporting responsibilities) that is inconsistent
in any material and adverse respect with your position(s), duties,
responsibilities or status as Chief Executive Officer and Chairman of the Board
immediately prior to such change (including any material and adverse diminution
of such duties or responsibilities);
(ii) any failure by the Company to comply in any material
respect with any of the provisions of Paragraphs 5 , 6 , 7(f) or 7(g) of this
Agreement; or
(iii) the Company's requiring you to perform your services
regularly other than at the executive offices of the Company or requiring you to
travel in the performance of your duties significantly more extensively than
your customary travel requirements prior to the date hereof;
provided that a termination by you with Good Reason shall be effective only if,
within 30 days following the delivery of a Notice of Termination for Good Reason
by you to the Company, the Company has failed to cure the circumstances giving
rise to Good Reason to your reasonable satisfaction.
d. Change of Control. Your employment may be terminated by you
within three (3) months after the occurrence of a Change of Control.
i. a Change of Control shall be deemed to have occurred if:
(i) individuals who, on the date hereof, constitute the
Board (the "Incumbent Directors") cease for any reason to constitute at least a
majority of the Board, provided that any person becoming a director subsequent
to the date hereof, whose election or nomination for election was approved by a
vote of at least two-thirds of the Incumbent Directors
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then on the Board (either by a specific vote or by approval of the proxy
statement of the Company in which such person is named as a nominee for
director, without written objection to such nomination) shall be an Incumbent
Director; provided, however, that no individual initially elected or nominated
as a director of the Company as a result of an actual or threatened election
contest with respect to directors or as a result of any other actual or
threatened solicitation of proxies or consents by or on behalf of any person
other than the Board shall be deemed to be an Incumbent Director;
(ii) any "Person" including a "Group" (as such term is
defined in Section 3(a)(9) of the Securities Exchange Act of 1934 (the "Exchange
Act") and as used in Sections 13(d)(3) and 14(d)(2) of the Exchange Act) is or
becomes a "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, in a single transaction or group of related transactions
of securities of the Company representing 20% or more of the combined voting
power of the Company's then outstanding securities eligible to vote for the
election of the Board (the "Voting Securities"); provided, however, that the
event described in this Paragraph 8(d)(ii) shall not be deemed to be a Change in
Control by virtue of any of the following acquisitions: (i) by the Company or
any subsidiary of the Company in which the Company owns more than 50% of the
combined voting power of such entity (a "Subsidiary"), (ii) by any employee
benefit plan (or related trust) sponsored or maintained by the Company or any
Subsidiary, (iii) by any underwriter temporarily holding the Company's Voting
Securities pursuant to an offering of such Voting Securities, (iv) pursuant to a
Non-Qualifying Transaction (as defined in Paragraph 8(d)(iii)), or (v) pursuant
to any acquisition by you or any person or group of persons including you (or
any entity controlled by you or any group of persons including you or any Person
or Group with whom you have any management, investment or other relationship);
(iii) the date on which there is a consummation of a merger,
consolidation, statutory share exchange or similar form of corporate transaction
involving the Company or any of its Subsidiaries that requires the approval of
the Company's shareholders, (a "Business Combination"), unless immediately
following such Business Combination any of the following is applicable: (i) more
than 50% of the total voting power of (A) the corporation resulting from such
Business Combination (the "Surviving Corporation"), or (B) if applicable, the
ultimate parent corporation that directly or indirectly has beneficial ownership
of 100% of the voting securities eligible to elect directors of the Surviving
Corporation (the "Parent Corporation"), is represented by the Company's Voting
Securities that were outstanding immediately prior to such Business Combination
(or, if applicable, is represented by shares into which the Company's Voting
Securities were converted pursuant to such Business Combination), and such
voting power among the holders thereof is in substantially the same proportion
as the voting power of the Company's Voting Securities among the holders thereof
immediately prior to the Business Combination; and (ii) no person (other than
any person engaged in a transaction described in clauses (i) through (v) in
Paragraph 8(d)(ii) above), is or becomes the beneficial owner, directly or
indirectly, of 20% or more of the total voting power of the outstanding voting
securities eligible to elect directors of the Parent Corporation (or, if there
is no Parent
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Corporation, the Surviving Corporation); or (iii) at least a majority of the
members of the board of directors of the Parent Corporation (or, if there is no
Parent Corporation, the Surviving Corporation) following the consummation of the
Business Combination were Incumbent Directors at the time of the Board's
approval of the execution of the initial agreement providing for such Business
Combination (any Business Combination in which any of the criteria specified in
(i), (ii) or (iii) of this Paragraph 8(d)(iii) is applicable shall be deemed to
be a "Non-Qualifying Transaction);
(iv) the closing for a sale of all or substantially all of
the Company's assets;
(v) such other events as the Board may designate.
Notwithstanding the foregoing, a Change in Control of the Company
shall not be deemed to occur solely because any person acquires beneficial
ownership of more than 20% of the Company's Voting Securities as a result of the
acquisition of the Company's Voting Securities by the Company which reduces the
number of the Company's Voting Securities outstanding; provided, that if after
such acquisition by the Company such person becomes the beneficial owner of
additional Company Voting Securities that increases the percentage of
outstanding Company Voting Securities beneficially owned by such person by more
than 3%, a Change in Control of the Company shall then become effective unless
otherwise exempt under clauses (i) through (v) of Paragraph 8(d)(ii) above or
because it constitutes a Non-Qualifying Transaction.
9. PAYMENTS UPON TERMINATION.
a. By the Company "for Cause". If the Company terminates your
employment "for Cause" you will be entitled to receive: (i) your accrued Salary
for the period ending on the effective date of the termination of your
employment, (ii) no Performance Bonus for the Fiscal Year in which your
employment is terminated (but you shall be entitled to the Performance Bonus for
the preceding Fiscal Year if such bonus has not yet been paid to you); and (iii)
any other compensation or benefit under any plan maintained by the Company for
its executive officers, and in which you were participating at the time your
employment was terminated, but only in accordance with the terms of such plans.
b. Death. If you die during the term of your employment
hereunder, the Company will pay the personal representatives of your estate (i)
your accrued Salary for the period ending on the last day of the month in which
you shall have died; (ii) a Performance Bonus for the Fiscal Year in which your
employment is terminated (you shall not be entitled to a bonus for any
succeeding a Fiscal year, but you shall be entitled to the Performance Bonus
payable for the preceding Fiscal Year if such bonus has not yet been paid); and
(iii) any other compensation or benefit under any plan maintained by the Company
for its executive officers
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and in which you were participating at the time of your death, but only in
accordance with the terms of such plans.
c. Disability During the Disability Period, the Company shall
continue to pay you your Salary. If your employment is terminated hereunder by
the Company as result of your Disability, you will be entitled to receive: (i)
your accrued Salary for the period ending on the effective date of the
termination of your employment; (ii) a Performance Bonus for the Fiscal Year in
which your employment is terminated (you shall not be entitled to a bonus for
any succeeding Fiscal year, but you shall be entitled to the Performance Bonus
payable for the preceding Fiscal Year if such bonus has not yet been paid); and
(iii) any other compensation or benefit under any plan maintained by the Company
for its executive officers and in which you are participating, and (iv)
comparable medical and dental insurance coverage for you and your dependents
paid for and maintained by the Company for the duration of your lifetime.
d. Voluntary Termination By You Without Good Reason. If you
voluntarily terminate your employment with the Company without Good Reason and
not within three months after a Change of Control you shall be entitled to
receive: (i) your accrued Salary for the period ending on the effective date of
the termination of your employment; (ii) no Performance Bonus for the Fiscal
Year in which your employment is terminated (but you shall be entitled to the
Performance Bonus for the preceding Fiscal Year if such bonus has not yet been
paid to you); and (iii) any other compensation or benefit under any plan
maintained by the Company for its executive officers, and in which you are
participating, but only in accordance with the terms of such plans. If you
voluntary terminate your employment with the Company for good reason or within
three months after a Change of Control you shall be entitled to the benefits
under Paragraphs 9(e) and 9(f), respectively.
e. By Company for Any Reason Other Than Disability or "for
Cause" or By You for Good Reason If the Company terminates your employment for
any reason other than "for Cause" or your Disability, or if you voluntarily
terminate your employment with the Company for Good Reason you shall be entitled
to receive: (i) your accrued Salary for the period ending on the effective date
of the termination of your employment; (ii) the Salary to which you would have
been entitled had your employment continued through the later of (A) the last
day of the then current term or (B) the first anniversary of the termination of
your employment hereunder (the "Anniversary Date"), which amount shall be
payable in equal bi-weekly installments over the period commencing on the
effective date of the termination of your employment hereunder and ending on the
later of (x) the last day of the then current term or (y) the Anniversary Date;
and (iii) any other compensation or benefits under any plan maintained by the
Company for its executive officers, and in which you were participating at the
time your employment was terminated, and (iv) comparable medical and dental
insurance coverage for you and your dependents, paid for and maintained by the
Company after termination of your employment for the duration of your lifetime.
You shall also be entitled to receive (I) your Performance Bonus for the Fiscal
Year preceding the Fiscal Year in which your employment is terminated, if such
Bonus has not yet been paid to you and (II) a Performance Bonus in an
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amount equal to $500,000 per year for each Fiscal Year remaining had your
employment continued through the later of (i) the last day of the term hereof or
(ii) the Anniversary Date.
f. By You After a Change of Control. If you voluntarily
terminate your employment with the Company within three (3) months after the
occurrence of a Change of Control you shall be entitled to receive: (i) your
accrued Salary for the period ending on the effective date of the termination of
your employment; (ii) the Salary to which you would have been entitled had your
employment continued through the Anniversary Date, which amount shall be payable
in a lump sum payment within thirty days of the effective date of the
termination of your employment, (iii) any other compensation or benefits under
any plan maintained by the Company for its executive officers, and in which you
were participating at the time your employment was terminated, and (iv)
comparable medical and dental insurance coverage for you and your dependents,
paid for and maintained by the Company after termination of your employment for
the duration of your lifetime. You shall also be entitled to receive (I) your
Performance Bonus for the Fiscal Year preceding the Fiscal Year in which your
employment is terminated, if such Bonus has not yet been paid to you and (II) a
Performance Bonus in an amount equal to $500,000 per year for each Fiscal Year
remaining had your employment continued through the Anniversary Date, payable in
a lump sum within 30 days after the effective date of the termination of your
employment.
If the Performance Bonus under Paragraphs 9(e) and 9(f) is
calculated with reference to Anniversary Date and if such date is other than
June 8, then you shall be entitled to the pro rata share of your Performance
Bonus for the Fiscal Year in which the Anniversary Date occurs based upon the
number of days in such Fiscal Year that will elapse through the Anniversary Date
and assuming a 365 day Fiscal Year.
10. ADDITIONAL PROVISIONS APPLICABLE TO TERMINATION.
a. Resignation of Other Positions. If, as and when your
employment is terminated hereunder, you shall be deemed to have resigned from
any and all positions with the Company that you may otherwise hold, including as
an officer or director of the Company or any of its subsidiaries or affiliates.
b. Notice. Except in the case of termination "for Cause" which
shall be effective immediately upon written notice thereof which notification
shall state the reasons for such termination, the party desiring to terminate
your employment hereunder shall notify the other party hereto in writing at
least 30 days before the effective date of the termination of your employment
hereunder, which notification shall state the reasons for such termination and
the effective date of the termination of your employment.
c. Mitigation. Nothing in this Agreement nor under any
applicable law shall be construed to require you to seek or accept employment to
reduce the Company's obligations under Paragraph 9. The Company shall not be
entitled to offset from any amounts owed to you
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under Paragraph 9 any amounts received by you as compensation from any person
after your employment with the Company terminates.
11. CONFIDENTIAL INFORMATION AND RESTRICTIVE COVENANTS.
a. Confidentiality. You acknowledge that your relationship
with the Company brings you into close contact with the confidential affairs of
the Company, its subsidiaries and affiliates. You acknowledge that the covenants
set forth in this Paragraph 11(a) are specific inducements made by you to the
Company in connection with the execution of this Agreement.
i. Obligation to Keep Information Confidential. During the
term hereof and for one year thereafter, you shall preserve the confidential
nature of, and will not disclose or make accessible to anyone other than the
Company's officers, directors, employees, consultants or agents, and otherwise
than within the scope of your employment duties and responsibilities hereunder,
any and all information, knowledge or data of or pertaining to the Company, its
subsidiaries or affiliates or their respective businesses which information,
knowledge or data is not in the public domain, including trade secrets, names
and lists of licensors, licensees, manufacturers, suppliers and customers,
manufacturing and production methods, processes, and techniques, pricing
policies, marketing strategies, or any other similar matters acquired by you in
connection with your relationship with the Company (hereinafter referred to as
"Confidential Information") by the Company. In addition, during the term hereof
and thereafter you will not make use of Confidential Information for your own
personal gain. The restrictions on the disclosure of Confidential Information
imposed by this subparagraph (i) shall not apply to any Confidential Information
that was part of the public domain at the time of its receipt by you or becomes
part of the public domain in any manner and for any reason other than an act by
you, unless you are legally compelled (by deposition, interrogatory, request for
documents, subpoena, civil investigative demand or similar process) to disclose
such Confidential Information, in which event you shall provide the Company with
prompt notice of such requirement so that the Company may seek a protective
order or other appropriate remedy.
ii. Return of Confidential Information and Other Data.
Upon the termination of your employment hereunder or at any time the Company may
reasonably request, you promptly will deliver to the Company all Confidential
Information and any other memoranda, notes, records, reports, sketches,
specifications, designs, and other documents (and all copies thereof) relating
to the Company's business, which you may then possess or have under your
control.
b. Agreement Not to Solicit. You covenant and agree not to,
directly or indirectly, during the term hereof and during the Restrictive
Period, (A) induce or attempt to influence any employee of the Company or any of
its subsidiaries or affiliates to leave its employ, or (B) aid any person,
business, or firm, including a supplier to, a company engaged in competition
with the Company, a licensor, licensee or customer of or a manufacturer for the
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Company, in any attempt to hire any person who shall have been an employee of
the Company or any of its subsidiaries or affiliates at any time within six
months after you cease to be employed by the Company and within the period of
six months prior to the date of any such requested aid. Notwithstanding the
foregoing, if requested by another employer, you may serve as a reference for
any person who, at the time of the request, is not an employee of the Company or
any of its subsidiaries or affiliates. If the restrictions contained in this
Paragraph 11(b) shall be found to be unenforceable by reason of the extent,
duration or scope thereof, or otherwise, then the court or arbitrator, as the
case may be, making such determination shall have the right to reduce such
extent, duration, scope or other provisions hereof, and in their reduced form,
such restrictions shall then be enforceable in the manner contemplated hereby.
c. Agreement Not to Compete. You hereby covenant and agree
that, during the term of this Agreement and for the Restrictive Period, you
shall not, without the prior written consent of the Company, engage in
Competition (as defined below) with the Company. For purposes of this Agreement,
if you take any of the following actions you shall be engaged in "Competition":
engaging in or carrying on, directly or indirectly, any enterprise, whether as
an advisor, principal, agent, lender, investor, partner, officer, director,
employee, stockholder, associate or consultant to any person, partnership,
corporation or any other business entity, that is engaged in any business
operating within the United States of America, which is involved in business
activities which are the same as, similar to or in competition with business
activities carried on by the Company, or actually known by the you as being
definitely planned by the Company, at or about the time of the termination of
your employment; provided, however, that "Competition" shall not include (i) the
passive ownership of securities in any public enterprise and exercise of rights
appurtenant thereto, so long as such securities (other than securities obtained
by reason of a merger of the Company) represent no more than two percent of the
voting power of all securities of such enterprise or (ii) the indirect ownership
of securities through ownership of shares in a registered investment company.
d. Restrictive Period. For purposes of this Agreement the term
"Restrictive Period" shall mean the period commencing on the effective date of
the termination of your employment hereunder and ending on the last day of the
third month thereafter.
e. Injunctive Relief. You acknowledge and agree that in the
event of a violation or threatened violation of any of the foregoing provisions
of this Paragraph 11, the Company shall have no adequate remedy at law and shall
therefore be entitled to enforce each such provision of this Paragraph 11 by
temporary or permanent injunctive or mandatory relief obtained in any court of
competent jurisdiction without the necessity of proving damage, posting any bond
or other security, and without prejudice to any other remedies which may be
available at law or in equity. You and the Company agree that the U.S. District
Court for the District of New Jersey is a court of competent jurisdiction, and
you and the Company each consent to the personal jurisdiction of that Court for
purposes of such an action or proceeding instituted to obtain equitable relief
relating to the provisions of this Paragraph 11; and in connection therewith you
agree that process in any action may be served upon you and shall be deemed to
be complete
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when the same is delivered to your residence address as set forth in Paragraph
13. Each of the parties hereto waives any objection based upon forum non
conveniens and any objection to venue of any action instituted hereunder.
12. INDEMNIFICATION.
a. The Company shall indemnify and advance Expenses to you to
the fullest extent permitted by applicable law in effect on the date hereof and
to such greater extent as applicable law may thereafter from time to time
permit. The Company shall advance all Expenses incurred by you or on your behalf
in connection with any Proceeding within twenty (20) days after the receipt by
the Company of a statement or statements from you requesting such advance or
advances from time to time, whether prior to or after final disposition of such
Proceeding. Such statement or statements shall reasonably evidence the Expenses
incurred by you and shall include or be preceded or accompanied by an
undertaking by you or on your behalf to repay any Expenses advanced if it shall
ultimately and finally be determined by a court of competent jurisdiction that
you are not entitled to be indemnified against such Expenses. The Company shall
not be liable under this Agreement to make any payment of amounts otherwise
indemnifiable hereunder if and to the extent that you have otherwise actually
received such payment under any insurance policy, contract, agreement or
otherwise.
b. For purposes of this Section 12, "Expenses" means all
reasonable attorneys' fees, retainers, court costs, transcript costs, fees,
travel expenses, duplicating costs, printing and binding costs, telephone
charges, postage, delivery service fees, and all other disbursements or expenses
of the types customarily incurred in connection with prosecuting, defending,
preparing to prosecute or defend, investigating, or being or preparing to be a
witness in a Proceeding. "Proceeding" means any action, suit, arbitration,
alternate dispute resolution mechanism, investigation, administrative hearing or
any other proceeding, whether civil, criminal, administrative or investigative.
c. This provision shall continue to be in effect until the
later of six (6) years after the date you cease to serve as a director, officer,
employee, agent or fiduciary of the Company or the final termination of all
pending Proceedings in respect of which you are granted rights of
indemnification hereunder.
13. ADDITIONAL PROVISIONS.
a. Governing Law. This Agreement and all of the provisions
hereof will be construed and enforced in accordance with the laws of the State
of New Jersey as an agreement made and to be performed entirely within such
state.
b. Arbitration. Subject to Paragraph 11(e) hereof, any dispute
or controversy arising out of or relating to this Agreement, any document or
instrument delivered pursuant to, in connection with, or simultaneously with
this Agreement, or any breach of this Agreement or any
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such document or instrument shall be settled by arbitration to be held in Essex
County, New Jersey, in accordance with the rules then in effect of the American
Arbitration Association or any successor thereto. The arbitrator may grant
injunction or other relief in such dispute or controversy and may, if requested
by either of the parties, determine which or both of the parties shall bear the
costs of the arbitration (other than the costs of each party's legal fees which
costs shall be borne by the party incurring same) and, if both parties shall
bear the costs, then the allocation of such costs between them. The decision of
the arbitrator shall be final, conclusive, and binding on the parties to the
arbitration. Judgment may be entered on the arbitrator's decision in any court
having jurisdiction, and the parties irrevocably consent to the jurisdiction of
the U.S. District Court for the District of New Jersey for this purpose. In any
such arbitration, the parties waive personal service of any process or other
papers and agree that service thereof may be made in accordance with Paragraph
13(c).
c. Jurisdiction. For purposes of enforcing the decisions of
the arbitrator under Paragraph 13(b), each of the parties hereto irrevocably
submits to the exclusive jurisdiction (both subject matter and personal) of the
courts of the State of New Jersey in and for the County of Essex and the United
States District Court for the District of New Jersey in any legal action or
proceeding arising out of or relating to this Agreement. Each of the parties
hereto expressly submits and consents in advance to such jurisdiction in any
action or proceedings commenced in such courts, hereby waiving personal service
of the summons and complaint, or other process or papers issued thereon, and
agreeing that service of such summons and complaint, or other process or papers
may be made in accordance with Paragraph 13(e). Should any party hereto fail to
appear or answer any summons, complaint, process or paper so served within 30
days after the delivery thereof in accordance with Paragraph 13, such party
shall be deemed in default and an order and/or judgment may be entered against
such person or demanded or prayed for in such summons, complaint, process or
papers. The choice of forum set forth in this Paragraph 13(c) shall not be
deemed to preclude the enforcement of any judgment obtained in such forum or the
taking of any action under this Agreement to enforce same in any appropriate
jurisdiction. Each of the parties hereto waives any objection based upon forum
non conveniens and any objection to venue of any action instituted hereunder.
d. Successors and Assigns. This Agreement may be assigned by
the Company without your consent only to any entity that acquires all or a
substantial part of the Company's business or assets and shall be binding upon
the Company and such assigns. This agreement is personal to and may not be
assigned by you but shall be binding upon and inure to the benefit of you and
your legal representatives, heirs and assigns.
The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise, and any amended or
successor agreement thereto or whether or not there has been a Change in Control
as defined herein) to all or substantially all of the business and/or assets of
the Company to expressly assume and agree to perform this Agreement in the same
manner and to the same extent that the Company would be required to perform as
if no such succession had taken place. As used in this Agreement, "Company"
shall
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<PAGE>
mean the Company as hereinbefore defined and any successor to its business
and/or assets as aforesaid which assumes and agrees to perform this Agreement by
operation of law, or otherwise.
e. Notices. All notices, requests, demands and communications
under or in respect hereof shall be deemed to have been duly given and made if
in writing if (i) delivered by hand or (ii) posted by pre-paid registered or
certified mail, or (iii) left at or delivered pre-paid to a nationally
recognized courier service, in each case addressed to the party concerned at its
address set forth below (or at such other address for a party as shall be
specified in a notice given in accordance with this Paragraph 13(e).
If to the Company, to
Party City Corporation
400 Commons Way
Rockaway, NJ 07866
Attention: Chief Financial Officer
With a copy to:
St. John & Wayne, L.L.C.
Two Penn Plaza East
Newark, New Jersey 07105-2249
Attention: William P. Oberdorf, Esq.
If to you to:
Mr. Jack Futterman
16315 Vintage Oaks Lane
Delray Beach, FL 33484
With a copy to:
Prior to 7/4/99 After 7/4/99
------------------------------------- -------------------------------------
Wolf, Block, Schorr & Solis-Cohen LLP Wolf, Block, Schorr & Solis-Cohen LLP
12th Floor, Packard Building 1650 Arch Street
Philadelphia, PA 19102 Philadelphia, PA 19103
Attention: Matthew H. Kamens, Esq. Attention: Matthew H. Kamens, Esq
Service shall be deemed to be effective so far as delivery (i) by hand is
concerned when handed to the recipient or left at the recipient's address (ii)
by registered or certified mail, three days after posting, or (iii) one business
day after delivery to a nationally recognized courier service if marked for next
business day delivery.
15
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<PAGE>
f. Amendments. This Agreement may not be changed, amended,
terminated or superseded orally, but only by an agreement in writing, nor may
any of the provisions hereof be waived orally, but only by an instrument in
writing, in any such case signed by the party against whom enforcement of any
change, amendment, termination, waiver, modification, extension or discharge is
sought.
g. Headings. All descriptive headings of the several Paragraphs
or subclauses of this Agreement are inserted for convenience only and shall be
given no effect in the construction of this Agreement.
h. Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and same instrument.
i. Severability. If any provision of this Agreement, or part
thereof, is held to be unenforceable, the remainder of this Agreement and
provision, as the case may be, shall nevertheless remain in full force and
effect.
j. Cooperation. Each of the parties hereto shall, at any time
and from time to time hereafter, upon the reasonable request of the other, take
such further action and execute, acknowledge and deliver all such instruments of
further assurance as necessary to carry out the provisions of this Agreement.
k. Survival of Certain Obligations and Termination Certificate.
The provisions of Paragraphs 5, 6, 7(a), 7(c) and 7(e) through 7(g), 9, 10, 11,
12 and 13 shall survive any termination of your employment hereunder, whether by
reason of the Company's termination of your employment, your resignation or the
expiration of the Term or any renewal term.
l. Entire Agreement. This Agreement contains the entire
agreement and understanding between Company and you with respect to the subject
matter hereof.
If the foregoing is acceptable to you, kindly execute a copy of
this letter and return it to the Company, whereupon it shall become binding upon
you and the Company.
Very truly yours,
PARTY CITY CORPORATION
By: /s/ Party City Corporation
----------------------------
AGREED TO:
/s/ Jack Futterman
- --------------------
JACK FUTTERMAN
16
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