This
VOTING AGREEMENT (the “ Agreement ”), dated as
of September 26, 2005, is made by and among Michael E.
Tennenbaum, Tennenbaum Capital Partners, LLC, Tennenbaum & Co.,
LLC, Special Value Bond Fund, LLC, Special Value Absolute Return
Fund, LLC and Special Value Bond Fund II, LLC (individually, a
“ Stockholder ” and, collectively, the “
Stockholders ”), and Amscan Holdings, Inc., a Delaware
corporation (“ Parent ”). Capitalized terms used
herein but not otherwise defined herein shall have the meanings
ascribed to such terms in the Merger Agreement (as defined
below).
WHEREAS,
concurrently herewith, Parent, Amscan Holdings, Inc., a Delaware
corporation and wholly owned subsidiary of Parent (“
Merger Sub ”), and Party City Corporation, a Delaware
corporation (the “ Company ”), are entering into
an Agreement and Plan of Merger (the “ Merger
Agreement ”), providing for the merger of Merger Sub with
and into the Company with the Company as the surviving corporation
(the “ Merger ”), upon the terms and subject to
the conditions set forth in the Merger Agreement;
WHEREAS,
as of the date hereof, each of the Stockholders beneficially owns,
or has complete investment authority over, and has (or upon
exercise or exchange of a convertible security will have) the power
to vote and dispose of the number of shares of common stock, par
value $0.01 per share, of the Company (the “ Common
Stock ”) set forth opposite such Stockholder’s name
on Schedule A attached hereto (the “ Owned
Shares ” and, together with any securities issued or
exchanged with respect to such shares of Common Stock upon any
recapitalization, reclassification, merger, consolidation,
spin-off, partial or complete liquidation, stock dividend, split-up
or combination of the securities of the Company or any other change
in the Company’s capital structure or securities of which
such Stockholder acquires beneficial ownership after the date
hereof and prior to the termination hereof, whether by purchase,
acquisition or upon exercise of options, warrants, conversion of
other convertible securities or otherwise, collectively referred to
herein as, the “ Covered Shares ”);
and
WHEREAS,
as a condition to the willingness of Parent and Merger Sub to enter
into the Merger Agreement, each of Parent and Merger Sub has
required that the Stockholders agree, and in order to induce Parent
and Merger Sub to enter into the Merger Agreement, the Stockholders
have agreed, to enter into this Agreement with respect to
(a) the Covered Shares and (b) certain other matters as
set forth herein.
NOW,
THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements contained herein, and intending co be
legally bound hereby, the parties hereto hereby agree as
follows:
ARTICLE I.
VOTING AGREEMENT
Section 1.1
Voting Agreement . The Stockholders hereby agree that during
the Voting Period, at any meeting of the stockholders of the
Company, however called, or at any adjournment thereof or in any
other circumstances upon which a vote, consent or other approval
(including by written consent) is sought, the Stockholders shall
(i) when a meeting is held,
appear at such
meeting or otherwise cause the Covered Shares to be counted as
present thereat for the purpose of establishing a quorum and
(ii) vote (or cause to be voted) in person or by proxy the
Covered Shares in favor of the Merger, the Merger Agreement and the
transactions contemplated by the Merger Agreement and (iii) vote
(or cause to be voted) the Covered Shares against any extraordinary
corporate transaction (other than the Merger), such as a merger,
consolidation, business combination, tender or exchange offer,
reorganization, recapitalization, liquidation, sale or transfer of
a material amount of the assets or securities of the Company or any
of its subsidiaries (other than pursuant to the Merger) or any
other Takeover Proposal. For the purposes of this Agreement,
“ Voting Period ” shall mean the period
commencing on the date hereof and ending immediately prior to any
termination of this Agreement pursuant to Section 5.1
hereof.
(a) EACH
STOCKHOLDER HEREBY GRANTS TO, AND APPOINTS, PARENT, THE PRESIDENT
OF PARENT AND THE SECRETARY OF PARENT, IN THEIR RESPECTIVE
CAPACITIES AS OFFICERS OF PARENT, AND ANY OTHER DESIGNEE OF PARENT,
EACH OF THEM INDIVIDUALLY, SUCH STOCKHOLDER’S IRREVOCABLE
(UNTIL THE TERMINATION DATE (AS DEFINED BELOW)) PROXY AND
ATTORNEY-IN-FACT (WITH FULL POWER OF SUBSTITUTION) TO VOTE THE
COVERED SHARES IN ACCORDANCE WITH SECTION 1.1. EACH STOCKHOLDER
INTENDS THIS PROXY TO BE IRREVOCABLE (UNTIL THE TERMINATION DATE)
AND COUPLED WITH AN INTEREST AND WILL TAKE SUCH FURTHER ACTION OR
EXECUTE SUCH OTHER INSTRUMENTS AS MAY BE NECESSARY TO EFFECTUATE
THE INTENT OF THIS PROXY AND HEREBY REVOKES ANY PROXY PREVIOUSLY
GRANTED BY SUCH STOCKHOLDER WITH RESPECT TO THE COVERED
SHARES.
(b) The
parties acknowledge and agree that neither Parent, nor
Parent’s successors, assigns, subsidiaries, divisions,
employees, officers, directors, shareholders, agents and
affiliates, shall owe any duty to, whether in law or otherwise, or
incur any liability of any kind whatsoever, including without
limitation, with respect to any and all claims, losses, demands,
causes of action, costs, expenses (including reasonable
attorney’s fees) and compensation of any kind or nature
whatsoever to the Stockholder in connection with, as a result of or
otherwise relating to any vote (or refrain from voting) by Parent
of the Covered Shares subject to the irrevocable proxy hereby
granted to Parent at any annual, special or other meeting or action
or the execution of any consent of the Stockholders of the Company.
The parties acknowledge that, pursuant to the authority hereby
granted under the irrevocable proxy, Parent may vote the Covered
Shares pursuant to Section 1.1 in furtherance of its own
interests, and Parent is not acting as a fiduciary for the
Stockholder.
(c) Except
pursuant to Section 5.1 of this Agreement, this irrevocable
proxy shall not be terminated by any act of the Stockholder or by
operation of law, whether by the death or incapacity of the
Stockholder or by the occurrence of any other event or events
(including, without limiting the foregoing, the termination of any
trust or estate for which the Stockholder is acting as a fiduciary
or fiduciaries or the dissolution or liquidation of any corporation
or partnership). If after the execution hereof the Stockholder
should die or become incapacitated, or if any trust or estate
should be terminated, or if any corporation or
partnership
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should be
dissolved or liquidated, or if any other such event or events shall
occur before the Termination Date, certificates representing the
Covered Shares shall be delivered by or on behalf of the
Stockholder in accordance with the terms and conditions of the
Merger Agreement and this Agreement, and actions taken by the
Parent hereunder shall be as valid as if such death, incapacity,
termination, dissolution, liquidation or other event or events had
not occurred, regardless of whether or not the Parent has received
notice of such death, incapacity, termination, dissolution,
liquidation or other event.
Section 1.3
Warrant . At the request of Parent made at any time after
the date hereof and prior to the record date set by the Board of
Directors of the Company in connection with the meeting of
stockholders of the Company to vote on and approve the Merger (the
“ Record Date ”), Special Value Bond Fund, LLC
(“ SVBF ”) shall, pursuant to its Warrant to
Purchase Common Stock of the Company dated August 16, 1999
representing the right to purchase 2,496,000 shares of Common Stock
(the “ Warrant ”), exercise the Warrant in full
immediately prior to the Record Date either pursuant to
Section 1.1(a) or 1.2 of the Warrant. In the event that
(a) SVBF shall exercise the Warrant in a cashless exercise in
accordance with Section 1.2 of the Warrant, and (b) the
Merger is consummated pursuant to the Merger Agreement, promptly
after the Effective Time, Parent shall pay to SVBF in immediately
available funds, as directed by SVBF in writing, an amount equal to
the product of (I) the Cash Merger Consideration per share of
Common Stock, times (II) the difference of (x) the number
of shares of Common Stock that would have been issued upon exercise
of the Warrant if the Current Market Price (as defined in the
Warrant) was equal to the per share Cash Merger Consideration for
purposes of consummating the cashless exercise in accordance with
Section 1.2 of the Warrant, and (y) the number of shares
of Common Stock actually issued upon exercise of the Warrant in
accordance with Section 1.2 of the Warrant. An example of such
payment mechanic is set forth on Schedule B hereto. In no
event shall any such payment be made if either the Merger is not
consummated pursuant to the Merger Agreement, or the Warrant is not
exercised pursuant to Section 1.2 of the Warrant.
Section 1.4
Other Matters . Except as set forth in Section 1.1,
each Stockholder shall not be restricted from voting in favor of,
against or abstaining with respect to any matter presented to the
stockholders of the Company. In addition, nothing in this Agreement
shall give Parent or any of its officers or designees the right to
vote any Covered Shares in connection with the election of
directors.
ARTICLE II.
REPRESENTATIONS AND WARRANTIES OF PARENT
Parent
hereby represents and warrants to each Stockholder as
follows:
Section 2.1
Valid Existence . Parent is a corporation duly organized,
validly existing and in good standing under the laws of the State
of Delaware and has the requisite corporate power and authority to
carry on its business as it is now being conducted.
Section 2.2
Authority Relative to This Agreement . Parent has all
necessary corporate power and authority to execute and deliver this
Agreement, to perform its obligations hereunder and to consummate
the transactions contemplated hereby. This Agreement has
been
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duly and
validly authorized, executed and delivered by Parent and, assuming
the due authorization, execution and delivery by the other parties
hereto, constitutes a legal, valid and binding obligations of
Parent, enforceable against Parent in accordance with its terms,
except as enforcement may be limited by bankruptcy, insolvency,
moratorium or other similar laws relating to creditors rights
generally and by general equitable principles (regardless of
whether such enforceability is considered in a proceeding in equity
or at law).
Section 2.3
No Conflicts . Except for the applicable requirements of the
Securities Exchange Act of 1934, as amended, no filing with, and no
permit, authorization, consent or approval of, any Governmental
Entity is necessary on the part of Parent for the execution and
delivery of this Agreement by Parent and the consummation by Parent
of the transaction contemplated hereby.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
OF THE STOCKHOLDERS
Each
Stockholder hereby represents and warrants to Parent as
follows:
Section 3.1
Valid Existence . Such Stockholder is duly organized, formed
or created, validly existing and in good standing under the laws of
the jurisdiction of its organization.
Section 3.2
Authority Relative To This Agreement . Such Stockholder has
all necessary power and authority to execute and deliver this
Agreement, to perform its obligations hereunder and to consummate
the transactions contemplated hereby. This Agreement has been duly
and validly authorized, executed and delivered by such Stockholder
and, assuming the due authorization, execution and delivery by the
other parties hereto, constitutes a legal, valid and binding
obligation of such Stockholder, enforceable against such
Stockholder in accordance with its terms, except as enforcement may
be limited by bankruptcy, insolvency, moratorium or other similar
laws relating to creditors rights generally and by general
equitable principles (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
Section 3.3
No Conflict .
(a) The
execution and delivery of this Agreement by such Stockholder do
not, and the performance of its obligations under this Agreement by
such Stockholder and the consummation by such Stockholder of the
transactions contemplated hereby will not, (i) conflict with
or violate any law, rule, regulation, order, judgment or decree
applicable to such Stockholder or (ii) result in any breach of
or constitute a default (or an event that with notice or lapse of
time or both would become a default) under contract to which such
Stockholder is a party; except for violations, breaches or defaults
that would not materially impair the ability of such Stockholder to
perform its obligations hereunder.
(b) The
execution and delivery of this Agreement by such Stockholder do
not, and the performance of its obligations under this Agreement
will not, require any consent, approval, authorization or permit
of, or filing with or notification to, any court or arbitrator or
any governmental entity, agency or official except for applicable
requirements, if any, of the
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Securities and
Exchange Act of 1934, as amended, and except where the failure to
obtain such consents, approvals, authorizations or permits, or to
make such filings or notifications, would not materially impair the
ability of such Stockholder to perform its obligations
hereunder.
Section 3.4
Ownership Of Shares . As of the date hereof, (i) such
Stockholder (other than Tennenbaum Capital Partners, LLC) has good
and marke
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