<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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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
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(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
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(Address of principal executive offices) (Zip Code)
(973) 983-0888
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(Registrant's telephone number, including area code)
Not Applicable
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(Former name or former address, if changed from last report)
<PAGE>
Item 5. Other Events.
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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.
<PAGE>
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
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EXHIBIT INDEX
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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.
<PAGE>
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.
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"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
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(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,
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<PAGE>
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
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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.
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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
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<PAGE>
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.
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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
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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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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.
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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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
CONSENT
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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
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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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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.
<PAGE>
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.
<PAGE>
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
<PAGE>
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
<PAGE>
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
