-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, LCOt5uF9roAivkAwHEwD+iBMAAik/3ST0rd08341zZahuj8W0YY2OR/gzXzpqrmV SJniFaerdj7tJ1r6fX9m/g== 0000899140-99-000582.txt : 19991206 0000899140-99-000582.hdr.sgml : 19991206 ACCESSION NUMBER: 0000899140-99-000582 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19991124 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19991203 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PARTY CITY CORP CENTRAL INDEX KEY: 0001005972 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-MISCELLANEOUS SHOPPING GOODS STORES [5940] IRS NUMBER: 223033692 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 000-27826 FILM NUMBER: 99768820 BUSINESS ADDRESS: STREET 1: 450 COMMONS WAY CITY: ROCKAWAY STATE: NJ ZIP: 07860 BUSINESS PHONE: 9739830888 MAIL ADDRESS: STREET 1: 400 COMMONS WAY STREET 2: 400 COMMONS WAY CITY: ROCKAWAY STATE: NJ ZIP: 07866 8-K 1 CURRENT REPORT ON FORM 8-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ---------------------------------- FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): November 24, 1999 PARTY CITY CORPORATION - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware 0-27826 22-3033692 (State or other jurisdiction (Commission (IRS Employer of incorporation) File Number) Identification No.) 400 Commons Way, Bldg. C Rockaway, New Jersey 07866 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) (973) 983-0888 -------------- (Registrant's telephone number, including area code) Not Applicable -------------- (Former name or former address, if changed from last report) Item 5. Other Events. ------------- On November 29,1999, Party City Corporation (the "Company") announced that its vendors and lenders have agreed to waive certain existing defaults under various loan agreements to which the Company is a party. These defaults were caused by the Company's failure to make certain required payments to its vendors on November 15. In addition, certain of the Company's lenders have agreed not to exercise any of their rights arising from the Company's failure to comply with certain financial covenants until the earlier of January 15, 2000 or the date on which the Company refinances its existing bank debt. The foregoing description is qualified in its entirety by reference to the First Amendment to Vendor Forbearance Agreement, which is attached hereto as Exhibit 10.1 and is incorporated herein by reference, the Consent, which is attached hereto as Exhibit 10.2 and is incorporated herein by reference, and the Tolling Agreement, which is attached hereto as Exhibit 10.3 and is incorporated herein by reference. A copy of the press release announcing the foregoing transactions is attached hereto as Exhibit 99.1 and is incorporated herein by reference. Item 7. Financial Statements and Exhibits. (a) Financial statements of business acquired: None (b) Pro forma financial information: None (c) Exhibits: 10.1 First Amendment to Vendor Forbearance and Standstill Agreement, dated as of November 24, 1999, by and among Party City Corporation and each of the vendors on the signature pages thereto. 10.2 Consent, dated as of November 24, 1999, by and among Party City Corporation and each of the banks, vendors and investors on the signature pages thereto. 10.3 Tolling Agreement, dated as of November 24, 1999, by and among Party City Corporation and each of the investors on the signature pages thereto. 99.1 Press Release issued by Party City Corporation on November 29, 1999. SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. PARTY CITY CORPORATION By: ------------------------------ Name: Title: Date: December __, 1999 -3- EXHIBIT INDEX ------------- Exhibit Number Description - ------ ----------- 10.1 First Amendment to Vendor Forbearance and Standstill Agreement, dated as of November 24, 1999, by and among Party City Corporation and each of the vendors on the signature pages thereto. 10.2 Consent, dated as of November 24, 1999, by and among Party City Corporation and each of the banks, vendors and investors on the signature pages thereto. 10.3 Tolling Agreement, dated as of November 24, 1999, by and among Party City Corporation and each of the investors on the signature pages thereto. 99.1 Press Release issued by Party City Corporation on November 29, 1999. EX-10.1 2 FIRST AMENDMENT TO VENDOR FORBEARANCE FIRST AMENDMENT TO VENDOR FORBEARANCE AND STANDSTILL AGREEMENT ------------------------ This FIRST AMENDMENT TO VENDOR FORBEARANCE AND STANDSTILL AGREEMENT (this "Amendment") is entered into as of this 24th day of November, 1999, by and among Party City Corporation (the "Company") and each vendor that has executed a signature page hereto that has been accepted by the Company in accordance with the terms set forth in Section 11(a) below (each, a "Vendor," and collectively, the "Vendors"). RECITALS -------- A. The Company and the Vendors are parties to a Vendor Forbearance and Standstill Agreement dated August 16, 1999 (the "Agreement"). B. The Company has failed to make certain payments that were required to be made on November 15, 1999 pursuant to the Agreement and certain Trade Notes that were delivered to the Vendors pursuant to the Agreement. C. The Company and the Vendors have agreed to amend the Agreement and the Trade Notes, on the terms and conditions set forth herein. AGREEMENT --------- NOW, THEREFORE, for good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the Company and each of the Vendors, intending to be bound, agree as follows: 1. Definitions. a. Capitalized terms used in this Amendment and not otherwise defined shall have the same meaning as in the Agreement. b. The following terms used in this Amendment shall have the following meanings: "Amendment Effective Date" shall have the meaning given to it in Section 7 below. "Extended Payment Date" shall mean the earliest to occur of (a) the Termination Date and (b) the Refinancing Date. "Intercreditor Agreement" shall mean that certain Intercreditor Agreement between and among the Bank Group, certain of the Vendors, the Vendor Agent and the other parties named therein dated as of July 1, 1999. "Interest Claim" shall mean, for any Vendor, the Vendor's claim for any interest accrued and unpaid on each Vendor's Trade Note. "Investors" shall have the same meaning as in the Intercreditor Agreement. "Net Vendor Claim" shall mean, for each Vendor, that portion of such Vendor's Vendor Claim that exceeds the principal amount of such Vendor's Trade Note as of the Amendment Effective Date, minus any rebates or offsets to which the Company is entitled. The Net Vendor Claim shall not include the Vendor's Interest Claim. "Refinancing" shall mean any transaction pursuant to which the Company refinances the Bank Debt. "Refinancing Date" shall mean the effective date of any Refinancing. "Remaining Principal" shall mean, for any Vendor, the Vendor's claim for that portion of each Vendor's Trade Note that is payable pursuant to Section 2(a)(ii) hereof. "Seasonal Purchases" shall have the same meaning as in the Seasonal Vendor Security Agreement. "Seasonal Trade Credit" shall have the same meaning as in the Seasonal Vendor Security Agreement. "Vendor Agent" shall mean Zahn Associates, Inc., in its capacity as agent under the Intercreditor Agreement. c. References to "Sections" and "subsections" shall be to Sections and subsections, respectively, of this Amendment unless otherwise specifically provided. Any of the terms defined in Section 1(b) may, unless the context otherwise requires, be used in the singular or the plural, depending on the reference. 2. Amendments to Repayment Terms of Trade Notes; Deferral of Additional Amount. a. Effective as of the Amendment Effective Date, each of the Vendors agrees that its Trade Note shall be deemed to have been amended to incorporate the following repayment terms: (i) Fifty percent (50%) of the principal amount of the Trade Note shall be due and payable on November 24, 1999; (ii) The remaining principal balance of the Trade Note shall be due and payable on the Extended Payment Date; and -2- (iii) The remaining balance of the Trade Note, consisting of all accrued interest (including interest accrued through November 24, 1999 at the rate of 10% per annum on the amount paid pursuant to subsection 2(a)(i)) shall be due and payable on the Termination Date. b. The principal balance of the Trade Note remaining outstanding as reduced by the payments made in accordance with Section 2(a)(i) shall bear interest commencing on November 15, 1999, at the rate of 14% per annum until paid in full; provided, however, that in the event the Company pays the outstanding balance of the Trade Note on or before the Extended Payment Date, the Vendors agree to waive their right to receive interest in excess of 10% per annum on the outstanding balance of the Trade Note. c. The Additional Amount shall be payable on the Extended Payment Date. 3. Conditional Waiver of Events of Default; Reservations of Rights. a. Provided that the Amendment Effective Date shall have occurred within the time period provided in Section 7, each Vendor hereby waives any Event of Default that occurred as a result of (i) the Company having failed to make the payments on the Trade Note and the payments of the Additional Amount that were previously required to have been made by November 15, 1999, or (ii) the Company having breached Section 12(l) of the Agreement prior to October 31, 1999. b. Except as expressly provided herein, the Agreement and the Trade Notes shall remain in full force and effect and nothing contained herein shall affect any Vendor's rights arising (i) under the Seasonal Vendor Security Agreement, (ii) with respect to any extension of credit made after the Effective Date, (iii) with respect to any payments received by the Vendor from the Company prior to the Amendment Effective Date, or (iv) with respect to its Net Vendor Claim. c. Except as provided in Section 4 or as otherwise agreed between the Company and any Vendor, no Vendor shall have any obligation to sell the Company Merchandise after the Amendment Effective Date. To the extent that any Vendor agrees to sell the Company Merchandise after the Amendment Effective Date, such Vendor agrees that (i) it will apply any payment received from the Company after the Amendment Effective Date and prior to the Termination Date (other than payments made (x) on the Trade Note pursuant to Section 2(a), or (y) on account of Seasonal Purchases) first to the oldest portion of its Net Vendor Claim and (ii) for Merchandise purchased in connection with the Seasonal Vendor Security Agreement, it will use commercially reasonable efforts to complete shipping of such Merchandise within (5) business days after such Vendor's receipt of appropriate notice and a payment equal to seventy percent (70%) of the purchase price for such Merchandise. Any credit extended by any Vendor after the Amendment Effective Date pursuant to clause (i) of the preceding sentence shall be referred to herein as "Discretionary Credit." For all Merchandise purchased on credit, -3- each Vendor agrees to use its reasonable best efforts to ship Merchandise in accordance with customary business practices. d. Subsection 2(f) of the Agreement is deleted in its entirety. 4. Vendor's Agreement to Extend Additional Trade Credit. a. Each Vendor agrees to extend additional trade credit ("Future Trade Credit") to the Company in an amount equal to the amount of its Net Vendor Claim as of the Amendment Effective Date for purchases of new Merchandise through December 31, 2000 with terms of 105 days for purchase orders placed for immediate delivery prior to July 1, 2000, and terms of 90 days thereafter, subject to the following conditions: (i) All payments due on such Vendor's Trade Note shall have been timely made; (ii) The Company shall not have breached any of its obligations to such Vendor with respect to any Seasonal Trade Credit, Discretionary Credit, or Future Trade Credit owed to such Vendor. (iii) No event shall have occurred that would constitute an Event of Default under Section 10(h) of the Agreement if such event were to have occurred prior to the Termination Date; and (iv) The aggregate amount of the Company's indebtedness to the Vendor (exclusive of Seasonal Trade Credit, but including any Future Trade Credit, Discretionary Credit, and any Existing Trade Debt owed to the Vendor) shall not exceed (x) prior to the Extended Payment Date, the aggregate amount of the Vendor's Net Vendor Claim and Remaining Principal, and (y) after the Extended Payment Date, the amount of the Vendor's Net Vendor Claim. (v) Nothing in the Agreement or this Amendment, and no course of dealing established for so long as the Agreement or this Amendment are in effect, shall obligate any Vendor to extend credit to the Company after December 31, 2000. 5. Conditions Precedent to Each Vendor's Obligations. The Amendment Effective Date shall not occur and this Agreement shall not become effective until satisfaction or express waiver of the following conditions: a. The Company shall have timely made the payment in good funds to each Vendor as provided in Section 2(a)(i). b. The Company, the Bank Group, the Vendors, and the Investors shall have entered into a consent with respect to the Intercreditor Agreement and the Seasonal Vendor Security Agreement to (i) acknowledge and approve the terms of this -4- Amendment, (ii) address any deferred or disputed portions of outstanding Seasonal Trade Credit, and (iii) provide for the continuation of the protections for Seasonal Trade Credit that are provided for in the Seasonal Vendor Security Agreement and the Intercreditor Agreement. c. The Company shall have provided a retainer of at least $25,000 to the counsel for the Vendor Agent. d. After giving effect to the transactions contemplated by this Agreement, no Event of Default shall exist under the Agreement. e. The Company shall have accepted the signature page of each Vendor that is a member of the Vendor Group as set forth in Section 11(a). 6. Conditions Precedent to the Company's Obligations. The Amendment Effective Date shall not occur and this Agreement shall not become effective until satisfaction or express waiver of the following conditions: a. Each of the Vendors that signed the Agreement shall have executed and delivered an original counterpart of this Agreement to the Company. 7. The Amendment Effective Date. This Amendment shall become effective on the date (the "Amendment Effective Date") on which all of the conditions set forth in Sections 5 and 6 have been satisfied or waived by the party(ies) for whose benefit they are intended; provided that, if the Amendment Effective Date does not occur on or prior to November 24, 1999 (as such date may be extended in writing by the mutual agreement of the parties hereto), this Amendment shall be deemed null and void and neither the Company nor any of the Vendors shall be deemed to be obligated hereunder. 8. Representations and Warranties of the Company. As a material inducement to the Vendors to enter into the transactions contemplated hereby, the Company represents and warrants to each of the Vendors as follows: a. This Amendment has been duly authorized, executed and delivered by the Company, is a legally valid and binding agreement and is enforceable against the Company in accordance with its terms, except to the extent that such enforcement may be limited by applicable bankruptcy, insolvency and other similar laws affecting creditors' rights generally. b. The execution, delivery and performance by the Company of this Amendment do not and will not (i) violate any provisions of any law or any governmental rule or regulation applicable to the Company, the Company's governing documents or any order, judgment or decree of any court or other agency of government binding on the Company, (ii) conflict with, result in a material breach of or constitute (with due notice or lapse of time or both) a default under any material agreement or contract of the Company, or (iii) result in or require the creation or imposition of any lien upon any of the properties or assets of the Company except as expressly contemplated hereby. -5- 9. Representations and Warranties of the Vendors. As a material inducement to the Company to enter into the transactions contemplated hereby, each of the Vendors severally represents and warrants to the Company as follows: a. This Amendment has been duly authorized, executed and delivered by such Vendor, is a legally valid and binding agreement and is enforceable against such Vendor in accordance with its terms, except to the extent that such enforcement may be limited by applicable bankruptcy, insolvency and other similar laws affecting creditors' rights generally. b. The execution, delivery and performance by such Vendor of this Amendment do not and will not (i) violate any provisions of any law or any governmental rule or regulation applicable to such Vendor, such Vendor's governing documents or any order, judgment or decree of any court or other agency of government binding on such Vendor, or (ii) conflict with, result in a material breach of or constitute (with due notice or lapse of time or both) a default under any material agreement or contract of such Vendor. 10. Covenants of the Company. The Company covenants and agrees as follows: a. The Company shall simultaneously provide Latham & Watkins and E&Y Restructuring LLC ("EYR"), the Vendor Group's advisors, with periodic reports on efforts to effectuate a Refinancing. b. The Company shall provide EYR with access on a reasonable, confidential basis to information that the Company makes available to any prospective sources of a Refinancing. c. The Company shall provide notice to each Vendor of the occurrence of an Event of Default as to any Vendor or Vendors promptly after becoming aware thereof. 11. Miscellaneous Provisions. a. This Amendment shall not become binding as to any Vendor unless and until (i) such Vendor has completed, executed and delivered to the Company a signature page to this Agreement and (ii) the Company has manifested its acceptance of such signature page by executing in the space provided thereon and returning an original executed counterpart thereof to such Vendor. Simultaneously with returning an accepted signature page to any Vendor, the Company shall forward a copy of such signature page to EYR and Latham & Watkins at the addresses set forth in the Agreement, provided that the name and address for EYR is hereby amended as follows: E & Y Restructuring LLC 1133 Avenue of the Americas New York, New York 10036 -6- Upon request from any Vendor, the Company shall provide such Vendor with a list of all Vendors who are party hereto; provided, however, that the Company will keep confidential the amount of each individual Vendor Claim. b. The Company hereby acknowledges that it has been represented by counsel of its choice in negotiating, executing and delivering this Amendment and the Trade Notes. The Vendors acknowledge that Latham & Watkins has acted as counsel and EYR has acted as financial advisor to the Vendor Group but neither Latham & Watkins nor EYR has represented any individual Vendor in connection with the negotiation, execution and delivery of this Amendment. Each Vendor acknowledges that it has had the opportunity to obtain independent legal advice from counsel of its choice. c. All references in the Agreement to Ernst & Young shall hereafter be deemed to be references to EYR. d. The second sentence of Section 12.b of the Agreement is deleted in its entirety and the following sentence is inserted in lieu thereof: "The Company further agrees to pay on demand all reasonable fees and expenses of Latham & Watkins, counsel to the Vendor Group, and EYR, financial advisor to the Vendor Group, from the Effective Date through the Termination Date." e. This Amendment may be executed in any number of counterparts with the same effect as if all parties hereto had signed the same document. All such counterparts shall be construed together and shall constitute one instrument, but in making proof hereof it shall only be necessary to produce one such counterpart. Delivery of an executed signature page of this Amendment by facsimile transmission shall be effective as delivery of a manually executed counterpart thereof. f. Time is of the essence of this Amendment and all of the terms, provisions, covenants and conditions hereof. g. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK. -7- IN WITNESS WHEREOF, the undersigned have caused this First Amendment to Vendor Forbearance and Standstill Agreement to be duly executed and delivered by their proper and duly authorized officers. Date: November ___, 1999 AMSCAN INC. By: /s/ James M. Harrison ------------------------------ Name: James M. Harrison Title: President Agreed to and Accepted. Date: November 29, 1999 PARTY CITY CORPORATION By: /s/ Thomas E. Larson ------------------------------ Name: Thomas E. Larson Title: Chief Financial Officer IN WITNESS WHEREOF, the undersigned have caused this First Amendment to Vendor Forbearance and Standstill Agreement to be duly executed and delivered by their proper and duly authorized officers. Date: November 22, 1999 BUNZL DISTRIBUTION USA, INC. By: /s/ Jeff A. Earnhart ------------------------------ Name: Jeff A. Earnhart Title: EVP Notice Address: 701 Emerson Road, Suite 500 St. Louis, MO 63191 Attn: Daniel J. Lett, Esq. Facsimile: (319) 817-1548 Agreed to and Accepted. Date: November 29, 1999 PARTY CITY CORPORATION By: /s/ Thomas E. Larson ------------------------------ Name: Thomas E. Larson Title: Chief Financial Officer IN WITNESS WHEREOF, the undersigned have caused this First Amendment to Vendor Forbearance and Standstill Agreement to be duly executed and delivered by their proper and duly authorized officers. Date: November 19, 1999 CREATIVE EXPRESSIONS GROUP, INC. By: /s/ Jon M. McLain ------------------------------ Name: Jon M. McLain Title: VP and GM Notice Address: Creative Expressions Group, Inc. 7240 Shadeland Station #300 Indianapolis, IN 46256 Attn: Jon M. McLain Facsimile: (317) 841-2608 Agreed to and Accepted. Date: November 29, 1999 PARTY CITY CORPORATION By: /s/ Thomas E. Larson ------------------------------ Name: Thomas E. Larson Title: Chief Financial Officer IN WITNESS WHEREOF, the undersigned have caused this First Amendment to Vendor Forbearance and Standstill Agreement to be duly executed and delivered by their proper and duly authorized officers. Date: November 19, 1999 EASTER UNLIMITED, INC. AND FUNWORLD DIVISION OF EASTER UNLIMITED, INC. By: /s/ Stanley Geller ------------------------------ Name: Stanley Geller Title: President Notice Address: 80 Voice Road Carle Place, NY 11514 Attn: Stanley Geller Facsimile: (516) 873-9005 Agreed to and Accepted. Date: November 29, 1999 PARTY CITY CORPORATION By: /s/ Thomas E. Larson ------------------------------ Name: Thomas E. Larson Title: Chief Financial Officer IN WITNESS WHEREOF, the undersigned have caused this First Amendment to Vendor Forbearance and Standstill Agreement to be duly executed and delivered by their proper and duly authorized officers. Date: November 19, 1999 MARYLAND PLASTICS, INC. By: /s/ John A. Sofer, Jr. ------------------------------ Name: John A. Sofer, Jr. Title: Controller Agreed to and Accepted. Date: November 29, 1999 PARTY CITY CORPORATION By: /s/ Thomas E. Larson ------------------------------ Name: Thomas E. Larson Title: Chief Financial Officer IN WITNESS WHEREOF, the undersigned have caused this First Amendment to Vendor Forbearance and Standstill Agreement to be duly executed and delivered by their proper and duly authorized officers. Date: November 22, 1999 PLASTICS, INC. By: /s/ Frank Biller ------------------------------ Name: Frank Biller Title: President and General Manager Notice Address: 900 Apollo Road Eagan, MN 55121 Attn: Controller Facsimile: (651) 229-5470 Agreed to and Accepted. Date: November 29, 1999 PARTY CITY CORPORATION By: /s/ Thomas E. Larson ------------------------------ Name: Thomas E. Larson Title: Chief Financial Officer IN WITNESS WHEREOF, the undersigned have caused this First Amendment to Vendor Forbearance and Standstill Agreement to be duly executed and delivered by their proper and duly authorized officers. Date: November 19, 1999 RUBIE'S COSTUME CO., INC. By: /s/ Marc P. Beige ------------------------------ Name: Marc P. Beige Title: President Notice Address: One Rubie Plaza Richmond Hill, NY 11418 Attn: Marc P. Beige Facsimile: (718) 441-1415 or (718) 846-0716 Agreed to and Accepted. Date: November 29, 1999 PARTY CITY CORPORATION By: /s/ Thomas E. Larson ------------------------------ Name: Thomas E. Larson Title: Chief Financial Officer IN WITNESS WHEREOF, the undersigned have caused this First Amendment to Vendor Forbearance and Standstill Agreement to be duly executed and delivered by their proper and duly authorized officers. Date: November 22, 1999 THE BEISTLE COMPANY By: /s/ Patricia D. Lacy ------------------------------ Name: Patricia D. Lacy Title: Vice President Notice Address: 1 Beistle Plaza, PO Box 10 Shippensburg, PA 17257 Attn: Patricia Lacy Facsimile: (717) 552-7299 Agreed to and Accepted. Date: November 29, 1999 PARTY CITY CORPORATION By: /s/ Thomas E. Larson ------------------------------ Name: Thomas E. Larson Title: Chief Financial Officer IN WITNESS WHEREOF, the undersigned have caused this First Amendment to Vendor Forbearance and Standstill Agreement to be duly executed and delivered by their proper and duly authorized officers. Date: November 22, 1999 TURN UP THE MUSIC, INC. By: /s/ Sheldon J. Isaacs ------------------------------ Name: Sheldon J. Isaacs Title: Exec. VP-COO Notice Address: 708 Colfax Ave. Kenilworth, NJ 07033 Attn: Sheldon J. Isaacs Facsimile: (908) 620-0934 Agreed to and Accepted. Date: November 29, 1999 PARTY CITY CORPORATION By: /s/ Thomas E. Larson ------------------------------ Name: Thomas E. Larson Title: Chief Financial Officer IN WITNESS WHEREOF, the undersigned have caused this First Amendment to Vendor Forbearance and Standstill Agreement to be duly executed and delivered by their proper and duly authorized officers. Date: November 22, 1999 U.S. BALLOON MFG. CO., INC. By: /s/ Michael Isaacs ------------------------------ Name: Michael Isaacs Title: Pres. Notice Address: 140 58 St. Bklyn, NY 11220 Attn: M. Isaacs Facsimile: (718) 492-9566 Agreed to and Accepted. Date: November 29, 1999 PARTY CITY CORPORATION By: /s/ Thomas E. Larson ------------------------------ Name: Thomas E. Larson Title: Chief Financial Officer IN WITNESS WHEREOF, the undersigned have caused this First Amendment to Vendor Forbearance and Standstill Agreement to be duly executed and delivered by their proper and duly authorized officers. Date: November ___, 1999 UNIQUE INDUSTRIES, INC. By: /s/ Everett Novak ------------------------------ Name: E. Novak Title: Chief Executive Officer Notice Address: 2400 S. Weccacoe Avenue Philadelphia, PA 19148 Attn: Facsimile: (215) 336-2006 Agreed to and Accepted. Date: November 29, 1999 PARTY CITY CORPORATION By: /s/ Thomas E. Larson ------------------------------ Name: Thomas E. Larson Title: Chief Financial Officer EX-10.2 3 CONSENT CONSENT ------- This Consent (this "Consent") is made as of November 24, 1999, by and among PNC Bank, National Association ("PNC"), The Chase Manhattan Bank ("Chase"), National City Bank of Pennsylvania ("National City"), Fleet Bank, N.A. ("Fleet") and LaSalle Bank ("LaSalle"; and collectively with PNC, Chase, National City and Fleet, the "Banks"), PNC Bank, National Association, in its capacity as agent for the Banks under the Intercreditor Agreement (as defined below) (the "Bank Agent"), the Seasonal Trade Creditors (as defined below), Zahn Associates, Inc., in its capacity as agent for the Seasonal Trade Creditors under the Intercreditor Agreement (the "Vendor Agent"), Special Value Bond Fund, LLC ("SVBF"), TCO/Party City, LLC ("TCO/PC"), Enhanced Retail Funding, LLC ("ERF"), Goldman, Sachs & Co. ("Goldman"), Goldman Sachs Credit Partners, L.P. ("Partners"), and Richmond Associates, L.P. ("Richmond"; and collectively with SVBF, TCO/PC, ERF, Goldman and Partners, the "Investors") and Enhanced Retail Funding, LLC, in its capacity as agent for the Investors under the Intercreditor Agreement (the "Investor Agent"). WITNESSETH: WHEREAS, the Banks, the Bank Agent, those certain vendors that executed signature pages thereto (the "Seasonal Vendors"), the Vendor Agent, the Investors and the Investor Agent are parties to that certain Intercreditor Agreement, dated July 1, 1999 (the "Intercreditor Agreement") (undefined capitalized terms used herein shall have the definitions given to them in the Intercreditor Agreement); and WHEREAS, the Company has defaulted under the Trade Agreement by failing to pay certain amounts due and owing thereunder as of November 15, 1999 (the "Defaults"); and WHEREAS, the Defaults are also events of default under the Seasonal Vendor Security Agreement; and WHEREAS, the Company and certain of its vendors, including the Seasonal Vendors, are prepared to enter into that certain First Amendment to Vendor Forbearance and Standstill Agreement (the "First Amendment") pursuant to which such vendors will agree to waive the Defaults on the terms and conditions set forth therein; and WHEREAS, it is a condition precedent to the effectiveness of the First Amendment that the parties hereto enter into this Consent; and WHEREAS, in addition to the foregoing, the Company has requested that certain of the Seasonal Trade Creditors (the "Deferring Seasonal Trade Creditors") permit the Company to defer certain payments owed to the Deferring Seasonal Trade Creditors pursuant to the Seasonal Vendor Security Agreement and the Trade Agreement on account of New Trade Credit (the "Deferral Arrangements"); and 1 WHEREAS, the Deferring Seasonal Trade Creditors are willing to enter into the Deferral Arrangements provided that the parties hereto enter into this Consent; and WHEREAS, on or about November 18, 1999, the Vendor Agent, on behalf of the Seasonal Vendors, gave notice (the "Default Notice") to the Company, the Bank Agent, the Investor Agent and their respective counsel that the Defaults had occurred under the Trade Agreement and the Seasonal Vendor Security Agreement; and WHEREAS, the Vendor Agent and the Seasonal Vendors are prepared to withdraw the Default Notice provided that (i) the parties hereto enter into this Consent, (ii) the First Amendment is executed and delivered by each of the parties thereto, and (iii) all conditions precedent to the Amendment Effective Date (as defined in the First Amendment) has occurred, AGREEMENT NOW THEREFORE, for and in consideration of the foregoing recitals, the mutual covenants and agreements contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, it is hereby agreed as follows: 1. The parties hereto consent to the First Amendment and acknowledge the terms thereof. The parties hereto agree that, notwithstanding anything in the Intercreditor Agreement to the contrary, upon the effectiveness of the First Amendment, the Defaults shall not trigger a Termination Event and the rights of the Seasonal Trade Creditors under the Intercreditor Agreement (including, without limitation, their rights under the Shared Liens as they existed prior to November 15, 1999) shall not be terminated, modified, abridged, limited or otherwise altered on account of the Defaults or the execution of the First Amendment (except as set forth in the First Amendment). 2. The parties hereto further consent to the Deferral Arrangements. The parties hereto further agree that, notwithstanding anything in the Intercreditor Agreement to the contrary, the rights of the Deferring Seasonal Trade Creditors under the Intercreditor Agreement (including, without limitation, their rights under the Shared Liens as they existed prior to November 15, 1999) shall not be terminated, modified, abridged, limited or otherwise altered on account of the Deferral Arrangements. The Deferral Arrangements shall not terminate, modify abridge, limit or otherwise alter the rights under the Intercreditor Agreement of any Seasonal Trade Creditors which are not Deferring Seasonal Trade Creditors. 3. Upon execution of this Agreement by all or the parties hereto and the Amendment Effective Date (as defined in the Amendment), the Vendor Agent and the Vendors shall be deemed to have withdrawn the Default Notice. 4. The parties hereto waive any rights they had, have, or may have had, to further notice of the Defaults or the entry into the First Amendment or the Deferral Arrangements under the Intercreditor Agreement. 5. Except as expressly set forth herein, this Consent shall not be deemed a waiver under the Intercreditor Agreement or any other agreement of any rights or remedies of any 2 of the parties thereto arising from, or on account of, any defaults, including future defaults, under the Trade Agreement (as amended by the First Amendment), the Seasonal Vendor Security Agreement, the Standstill and Forbearance Agreement with the Banks, dated as of July 1, 1999, the Securities Purchase Agreement, dated as of August 16, 1999, or any other document or agreement. 6. The Intercreditor Agreement, as modified and amended herein, is hereby ratified and reaffirmed. 7. This Consent shall be deemed to be effective as of November 24, 1999. 8. This Consent may be executed in any number of counterparts each of which, when so executed and delivered, shall be an original, and all such counterparts shall together constitute one and the same instrument. This Consent may be executed and transmitted by facsimile signature and shall be effective and binding upon execution and transmission of same. [Signature pages to follow] 3 IN WITNESS WHEREOF, the parties hereto have executed this Intercreditor Agreement on the date first indicated above. PNC BANK, NATIONAL ASSOCIATION, for itself and as Bank Agent By: /s/ Donald Irwin ------------------------------ Name: Donald Irwin Title: Vice President THE CHASE MANHATTAN BANK By: /s/ Eileen F. Higgins ------------------------------ Name: Eileen F. Higgins Title: Vice President NATIONAL CITY BANK OF PENNSYLVANIA By: /s/ William F. Nicholson ------------------------------ Name: William F. Nicholson Title: Vice President FLEET BANK, N.A. By: /s/ Stephen M. Spencer ------------------------------ Name: Stephen M. Spencer Title: Banking Officer LASALLE BANK By: /s/ James Thompson ------------------------------ Name: James Thompson Title: Group Senior Vice President S-1 ENHANCED RETAIL FUNDING, LLC, for itself and as Investor Agent By: /s/ Alan R. Goldstein ------------------------------ Name: Alan R. Goldstein Title: CFO & VP SPECIAL VALUE BOND FUND, LLC By: SVIM/MSM, LLC, as Manager By: Tennenbaum & Co., LLC, as Managing Member By: /s/ Michael E. Tennenbaum ------------------------------ Name: Michael E. Tennenbaum Title: Managing Member TCO/PARTY CITY, LLC By: /s/ Michael E. Tennenbaum ------------------------------ Name: Michael E. Tennenbaum Title: Managing Member GOLDMAN SACHS & CO. By: /s/ John Urban ------------------------------ Name: John Urban Title: Authorized Signer GOLDMAN SACHS CREDIT PARTNERS, L.P. By: /s/ John Urban ------------------------------ Name: John Urban Title: Authorized Signer RICHMOND & ASSOCIATES, L.P. By: MHM Management, Inc. By: /s/ MHM Management, Inc. ------------------------------ Name: Richard J. Roche for Marc Beige Title: S-2 CLYDE STREET INVESTMENTS, LLC By: /s/ Ralph Dillon ------------------------------ Name: Ralph Dillon Title: Manager ZAHN ASSOCIATES, INC., in its capacity as Vendor Agent By: /s/ Arnold Zahn ------------------------------ Name: Arnold Zahn, its President Title: President AMSCAN HOLDINGS, INC. By: /s/ James M. Harrison ------------------------------ Name: James M. Harrison Title: President CREATIVE EXPRESSIONS By: /s/ Jon M. McLain ------------------------------ Name: Jon M. McLain Title: VP & GM S-3 DISGUISE INC. By: /s/ Benoit Pousset ------------------------------ Name: Benoit Pousset Title: President EASTER UNLIMITED, INC. AND FUND WORLD DIVISION OF EASTER UNLIMITED, INC. By: /s/ Stanley Geller ------------------------------ Name: Stanley Geller Title: President MARYLAND PLASTICS INC. By: /s/ Jon A. Sofer, Jr. ------------------------------ Name: Jon A. Sofer, Jr. Title: Controller PLASTICS, INC. By: /s/ Frank J. Biller ------------------------------ Name: Frank J. Biller Title: President & General Manager S-4 RUBIE'S COSTUME CO. INC. By: /s/ Marc P. Beige ------------------------------ Name: Marc P. Beige Title: President THE BEISTLE COMPANY By: /s/ Patricia D. Lacy ------------------------------ Name: Patricia D. Lacy Title: Vice President TURN UP THE MUSIC, INC. By: /s/ Sheldon J. Isaacs ------------------------------ Name: Sheldon J. Isaacs Title: Exec. VP--COO U.S. BALLOON MFG. CO., INC. By: /s/ Michael Isaacs ------------------------------ Name: Michael Isaacs Title: Pres. UNIQUE INDUSTRIES, INC. By: /s/ Everett Novak ------------------------------ Name: E. Novak Title: Chief Executive Officer S-5 The undersigned hereby acknowledges and consents to the foregoing Consent as of the date first indicated above. PARTY CITY CORPORATION By: /s/ Thomas E. Larson ------------------------------ Name: Thomas E. Larson Title: CFO S-6 EX-10.3 4 TOLLING AGREEMENT TOLLING AGREEMENT This Tolling Agreement (the "Tolling Agreement") is made as of the 24th day of November 1999 by and among Party City Corporation, a Delaware corporation (the "Company") and each of the investors listed on the signature pages hereto (the "Investors"). Capitalized terms used herein and not otherwise defined shall have the meanings ascribed thereto in the Securities Purchase Agreement dated as of August 16, 1999 (the "Purchase Agreement") by and among the Company and the Investors. 1. By letter (the "Letter") dated November 23, 1999 (a copy being attached hereto), the Investor Agent notified the Company of certain Events of Default pursuant to the Purchase Agreement (the "Specified Defaults"). The Company acknowledges and confirms that all Events of Default specifically noticed in the Letter constitute Events of Default and acknowledges that the Investors and the Investor Agent could rightfully exercise all rights remedies and privileges of enforcement against the Company by virtue of such specified defaults. 2. The Investors are also, on or about this date entering into a consent agreement (the "Consent"), whereby the Investors are consenting (subject to the terms and conditions of the Consent) to the terms of a First Amendment to Vendor Forbearance and Standstill Agreement (the "Vendor Agreement") by and between the Company and its Vendors (as that term is defined in the Vendor Agreement). 3. The existence of the Specified Defaults could lead to the occurrence of a new Credit Termination Date (as that term is defined in the Intercreditor Agreement dated as of July 1, 1999), which would be contrary to the intention of the Investors in entering into the Consent. 4. To avoid that result, the Investors, by their agreement hereto, agree to delay the effectiveness of the Specified Defaults (the "Effective Date") until the earlier of January 15, 2000, or the Refinancing Date (as the term is defined in the Vendor Agreement). 5. The delay specified in paragraph 4 hereof shall not constitute a waiver of any Specified Default but shall merely delay the effectiveness of such Specified Default. On the Effective Date the Specified Default shall be in full force and effect and the Investors and the Investor Agent shall be entitled to exercise all rights and remedies by virtue of such Specified Default. 6. Nothing in this Tolling Agreement shall constitute a waiver or delay of any other defaults, events of default or Termination Events (as that term is defined in the Intercreditor Agreement) whether now existing or hereafter arising, the reoccurrence of a Specified Default after the date hereof, or any other rights and remedies the Investors or the Investor Agent may at any time have. 7. This Tolling Agreement shall be subject to the execution of the Vendor Agreement and the Consent by all parties, the satisfaction of all conditions to the effectiveness of the Vendor Agreement and the Consent, and the waiver of any presently existing defaults and events of default and Termination Events by the parties to the Intercreditor Agreement, other than the Investors, and the Investor Agent. 8. This Agreement shall be governed by the law of the State of New York. 9. This Agreement may be executed in any number of counterparts, each of which shall be an original, but all of which together shall constitute the Agreement. PARTY CITY CORPORATION By: /s/ Thomas E. Larson ------------------------------ Name: Thomas E. Larson Title: CFO INVESTORS: ENHANCED RETAIL FUNDING, LLC, for itself and as Investor Agent By: /s/ Alan R. Goldstein ----------------------------- Name: Alan R. Goldstein Title: CFO & Mgr. SPECIAL VALUE BOND FUND, LLC By: SVIM/MSM, LLC, as Manager By: Tennenbaum & Co., LLC, as Managing Member By: /s/ Michael E. Tennenbaum ------------------------------ Name: Michael E. Tennenbaum Title: as Managing Member TCO/PARTY CITY, LLC By Tennenbaum & Co., LLC By: /s/ Michael E. Tennenbaum ------------------------------ Name: Michael E. Tennenbaum Title: Managing Member GOLDMAN SACHS & CO. By: /s/ John Urban ------------------------------ Name: John Urban Title: Authorized Signer GOLDMAN SACHS CREDIT PARTNERS, L.P. By: /s/ John Urban ------------------------------ Name: John Urban Title: Authorized Signer RICHMOND ASSOCIATES, L.P. By: /s/ MHM Management Inc. ------------------------------ Name: Richard J. Roche for Marc P. Beige Title: CLYDE STREET INVESTMENTS By: /s/ Ralph Dillon ------------------------------ Name: Ralph Dillon Title: Manager EX-99.1 5 PRESS RELEASE FOR IMMEDIATE RELEASE PARTY CITY ANNOUNCES AGREEMENTS WITH VENDORS AND LENDERS Rockaway, New Jersey, November 29, 1999 - Party City Corporation today announced that its vendors and lenders have agreed to waive certain existing defaults under various loan agreements to which Party City is a party. These defaults were caused by Party City's failure to make certain required payments to its vendors on November 15. Effective immediately, certain vendors also have agreed to extend credit to Party City subject to certain limitations. In addition, certain of Party City's lenders have agreed not to exercise any of their rights arising from Party City's failure to comply with certain financial covenants until the earlier of January 15, 2000 or the date on which Party City refinances its existing bank debt. Party City is a specialty retailer of party supplies through its national network of discount super stores. Except for historical information contained herein, the statements in this release are forward-looking and made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve known and unknown risks and uncertainties, which may cause the Company's actual results in future periods to differ materially from forecasted results. Those risks include, among other things, the competitive environment in the party goods industry in general and in the Company's specific market areas, inflation, changes in costs of goods and services and economic conditions in general. Those and other risks are more fully described in the Company's filings with the Securities and Exchange Commission. Contact: Gordon Keil Senior Vice President (973) 983-0888 Ext. 244 -----END PRIVACY-ENHANCED MESSAGE-----