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EXHIBIT 10(m)
LOAN AGREEMENT made this 9th day of October, 1996, by and between XXXX
X. XXXXXXXXXXX, whose principal place of business is c/o Amscan Inc., 00
Xxxxxxxxxx Xxxx, Xxxxxxxx, Xxx Xxxx 00000 ("Xxxxxxxxxxx"); XXXXXX X. XXXXXXXXXX,
now residing at 00 Xxxxx Xxxxx, Xxxxxxx, Xxx Xxxx 00000 ("Xxxxxxxxxx"); and
XXXXXXX & XXXXXXXXX, LLP with a principal place of business at 0 Xxxxx Xxxxxxxx,
Xxxxx Xxxxxx, X.X. 00000 ("Escrow Agent").
R E C I T A L S
1. Xxxxxxxxxx wishes to borrow monies from Xxxxxxxxxxx in amounts as
hereinafter set forth in this Agreement ("Loan Agreement") and Xxxxxxxxxxx has
agreed to loan such monies to Xxxxxxxxxx.
2. In order to induce Xxxxxxxxxxx to make the loans to Xxxxxxxxxx as
herein contemplated (which loans are hereinafter referred to as the "Loan"),
Xxxxxxxxxx proposes to pledge to Xxxxxxxxxxx two thirds (2/3) of all shares of
common stock to be issued to Xxxxxxxxxx upon a contemplated public offering
("IPO") of the shares of Amscan described in Paragraph 2 of the Stock Agreement
between Xxxxxxxxxx, Xxxxxxxxxxx and Amscan. The Shares so pledged are herein
referred to as the "Shares".
3. The parties wish to set forth the terms under which such Loan is to
be made and secured.
NOW, THEREFORE, IT IS MUTUALLY AGREED AS FOLLOWS:
1. Loan.
Xxxxxxxxxxx covenants and agrees to loan to Xxxxxxxxxx an
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aggregate amount which shall be no greater than 4/9ths of the value of all
shares issued to Xxxxxxxxxx under Paragraph 2 of the Stock Agreement, based on
the offering price for shares of Amscan set forth in the final prospectus
("Maximum Amount of the Loan"). Such Loan may be made either in one or two
advances but only on the following dates and only upon ten (10) days advanced
written notice to Xxxxxxxxxxx and Escrow Agent: (1) on the date of the initial
public offering of Amscan shares of stock; and (2) on April 1, 1997 if the IPO
occurs before December 31, 1996 or April 1, 1998 if the IPO occurs after
December 31, 1996 (collectively the "Loan Advancement Dates"). (DELETED)
2. EVIDENCE OF THE ADVANCES.
Each advance to be made by Xxxxxxxxxxx to Xxxxxxxxxx with respect to
the Loan hereunder shall be evidenced and acknowledged by a receipt and
acknowledgement from Xxxxxxxxxx in the form annexed hereto ("Receipt and
Acknowledgment").
3. TERMS OF THE LOAN.
The advances made hereunder shall be repaid with interest per annum at
the ninety (90) day Libor rate, plus one-eighth of 1%, in effect on the date of
the first advance or on the date of the single advance if there is only one
advance ("Single Advance"), as the case may be, adjusted every ninety (90) days
thereafter during the term of the Loan, compounded annually. Interest shall be
paid annually commencing one year from the date of the first advance or the
Single Advance, and on the anniversary date thereafter of the
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first or Single Advance, as the case may be, except that the final interest
payment shall be made on the due date of the principal of this Loan. The
principal amount of the Loan shall be due and paid thirty (30) months after the
date of the first or Single Advance, as the case may be, with accrued interest
to the date of such payment, unless sooner paid. Xxxxxxxxxx may make payment of
any portion or of all of the indebtedness hereunder, either in cash or by the
transfer to Xxxxxxxxxxx of so many of the Shares pledged hereunder as shall be
equal in value to the amount of the payment to be made; such value to be
computed at the average closing market price of the Shares for the seven (7)
trading days prior to the payment ("Average Closing Market Price").
4. PREPAYMENT OF THE LOAN.
The entire Loan hereunder may be prepaid in full, at any time,
without penalty, with interest to the date of payment. Xxxxxxxxxx may make no
more than seven (7) partial prepayments in no less than $250,000.00 in either
Shares or Cash or a combination thereof, each with interest to the date of each
prepayment.
It is the intent of the parties that so long as the indebtedness
hereunder shall remain unpaid, Xxxxxxxxxxx may retain as security so many of the
pledged Shares as shall have a cumulative value of at least one and one-half
times the unpaid principal indebtedness, but in no event more than the number of
Shares initially deposited in the Escrow Agent. Upon making a payment of the
principal portion of the indebtedness, the Escrow
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Agent shall promptly, upon Xxxxxxxxxx'x request, release and transfer to
Xxxxxxxxxx so many of the remaining pledged Shares held by him equal to fifty
(50%) percent of the number of Shares used by Xxxxxxxxxx to repay the principal
indebtedness or if cash or a check is used to pay the principal indebtedness
("Cash Payment") then the Cash Payment shall be divided by the Average Closing
Market Price of Amscan shares and the product of such division shall be
multiplied by one hundred fifty (150%) percent.
Notwithstanding anything to the contrary contained in this Loan
Agreement, if any Shares are registered pursuant to the provisions of Paragraph
3(b) of the Stock Agreement, then, from and after the registration of such
Shares, any pledged Shares transferred to Xxxxxxxxxxx in payment of any
principal or interest due under the Loan shall be unregistered Shares to the
extent available, before any registered Shares are used for that purpose. In
addition, any pledged Shares released to Xxxxxxxxxx pursuant to the preceding
paragraph upon payment of principal under the Loan shall be registered Shares to
the extent available, before unregistered Shares are used for that purpose.
5. PLEDGE OF SHARES.
In consideration of the loan to be made hereunder by Xxxxxxxxxxx to
Xxxxxxxxxx, Xxxxxxxxxx grants a security interest to Xxxxxxxxxxx in all the
Shares. Upon receipt by Xxxxxxxxxx of the certificates representing the Shares,
Xxxxxxxxxx shall deliver all of such certificates to the Escrow Agent, duly
endorsed in blank,
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to be held by the Escrow Agent as provided in this Agreement.
Xxxxxxxxxx shall have the right at any time to substitute with the
Escrow Agent unregistered Amscan shares, duly endorsed in blank, that are not
pledged for registered Shares, with one registered Share released from escrow
for every unregistered Amscan share delivered to the Escrow Agent.
6. LOAN MADE WITHOUT RECOURSE.
The liability of Xxxxxxxxxx to repay principal or interest on the
Loan and the advances made hereunder is limited to the Shares pledged by
Xxxxxxxxxx to Xxxxxxxxxxx as security for the payment of the Loan hereunder and
in no event shall Xxxxxxxxxx be personally liable for any deficiency resulting
from the sale of the Shares nor shall any action or proceeding be brought
against Xxxxxxxxxx to recover judgment against Xxxxxxxxxx upon any unpaid
balance of principal or interest on the Loan made hereunder.
7. DIVIDENDS.
During the term of the pledge of the Shares hereunder and so long as
there is no default with respect to the Loan, all cash dividends paid on account
of the Shares shall be the property of Xxxxxxxxxx.
8. VOTING RIGHTS.
During the term of this pledge of the Shares hereunder and so long
as there is no default with respect to the Loan, Xxxxxxxxxx may vote the Shares
on all corporate questions.
9. REPRESENTATIONS BY XXXXXXXXXX.
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Xxxxxxxxxx warrants and represents in order to induce Xxxxxxxxxxx to
make the Loan hereunder and to accept the Shares herein pledged as security,
that there are no restrictions upon the right of Xxxxxxxxxx to make the pledge
of such Shares herein provided.
10. ADJUSTMENTS.
If, during the term of the pledge hereunder any reclassification,
readjustment, or other change is declared in the Shares or made in the capital
structure of the Corporation which has issued the pledged Shares, all new,
substituted and additional Shares, or other securities, issued by reason of any
such change shall be held by the Escrow Agent under the terms of this Agreement
in the same manner as the Shares originally pledged hereunder.
11. WARRANTS AND RIGHTS.
If, during the term of the pledge hereunder, subscription warrants
or any other rights or options are issued in connection with the pledged Shares,
Xxxxxxxxxx shall immediately pledge such warrants, rights, or options to
Xxxxxxxxxxx, and shall deliver any evidence thereof, duly endorsed in blank, to
the Escrow Agent, to be held as additional collateral security for the Loan. If
exercised by Xxxxxxxxxx, all new Shares or other securities so acquired by
Xxxxxxxxxx shall be immediately assigned to the Escrow Agent, duly endorsed in
blank, as collateral for the Loan, to be held by the Escrow Agent under the
terms of this Agreement in the same manner as the Shares originally pledged
herein.
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12. CASH ESCROW.
Xxxxxxxxxxx acknowledges that the purpose of the Loan is to enable
Xxxxxxxxxx to pay the income taxes due on the Shares to be issued to Xxxxxxxxxx
pursuant to the Stock Agreement. In order to insure that the funds for the Loan
will be available to Xxxxxxxxxx on the Loan Advancement Dates, Xxxxxxxxxxx
agrees to deposit with the Escrow Agent within five (5) business days after the
closing of the IPO, a sum (the "Fund") equal to the Maximum Amount of the Loan,
which sum shall be held, invested and disbursed by the Escrow Agent as provided
in this Agreement.
13. INVESTMENT OF FUND.
The Escrow Agent shall invest the Fund in United States Treasury
obligations with maturities of not more than six (6) months from the date of the
investment and will invest the Fund in a way to insure that the money is
available on the Loan Advancement Dates. The Escrow Agent shall not be
responsible for earning any specified rate of interest or rate of return on the
Fund.
13.1 FINANCIAL SERVICES. The Escrow Agent shall be entitled to
utilize the services of banks, brokerage houses or other investment or financial
intermediaries to effectuate the investment of the Fund. All commission charges
and service and other fees shall be paid out of the Fund.
13.2 ATTRIBUTION OF INVESTMENT INCOME. All interest and other
earnings from the investment of the Fund shall accrue for the account of and
shall be taxable to Xxxxxxxxxxx. Xxxxxxxxxxx shall
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be designated to receive any 1099-INT or comparable statements and shall be
responsible for paying any applicable income taxes in respect of any investment
earnings from the Fund.
13.3 DISBURSEMENT OF THE FUND. On the Loan Advancement Dates,
Xxxxxxxxxx shall deliver to the Escrow Agent an executed Receipt and
Acknowledgment for the amount of the requested advance on the Loan, upon receipt
of which the Escrow Agent shall disburse the requested advance on the Loan to
Xxxxxxxxxx. If the requested advance by Xxxxxxxxxx is for the Maximum Amount of
the Loan, on the date such advance is paid to Xxxxxxxxxx, or on April 1, 1998,
whichever shall occur first, then the Escrow Agent shall disburse the balance of
the Fund to Xxxxxxxxxxx.
14. PAYMENT OF LOAN.
Upon payment at maturity of the principal and interest of the Loan,
less amounts theretofore received and applied by Xxxxxxxxxxx in reduction
thereof, the Escrow Agent shall promptly transfer and deliver to Xxxxxxxxxx all
the pledged Shares and all rights and other property received and being held by
the Escrow Agent (collectively "Escrow Property").
15. DEFAULT.
If Xxxxxxxxxx defaults in the payment, at maturity, of the principal
or interest of the Loan, or any part thereof, such default, continuing for a
period of fifteen (15) days after notice to Xxxxxxxxxx as herein provided,
Xxxxxxxxxxx shall notify the Escrow Agent and the Escrow Agent shall transfer to
Xxxxxxxxxxx all
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the Escrow Property. Xxxxxxxxxxx shall have the rights and remedies provided in
the Uniform Commercial Code in force in the State of New York at the date of
this agreement. In addition to and in conjunction with such rights and remedies,
Xxxxxxxxxxx may, by giving fifteen (15) days notice to Xxxxxxxxxx by certified
mail, and without liability for any diminution in price that may have occurred,
sell all the pledged Shares (subject to the securities restrictions on the
Shares) in any manner and for any price Xxxxxxxxxxx determines. At any bona fide
public sale, Xxxxxxxxxxx may purchase all or any part of the pledged shares.
Xxxxxxxxxxx may retain out of the proceeds of any sale an amount equal to the
principal and interest then due on the Loan, plus the expenses of the sale, and
shall pay any balance of the proceeds to Xxxxxxxxxx. As heretofore stated,
Xxxxxxxxxx shall not be liable for any deficiency.
16. EXCULPATION AND INDEMNIFICATION OF ESCROW AGENT.
Xxxxxxxxxxx and Xxxxxxxxxx acknowledge and agree that:
Xxxxxxx & Xxxxxxxxx shall be the Escrow Agent and the Escrow Agent
shall be protected in acting upon any written notice, request, waiver, consent,
certificate, receipt, authorization, power of attorney or other paper or
document which the Escrow Agent in good faith believes to be genuine and what it
purports to be, and shall have no duty or responsibility to investigate or
inquire into the accuracy, authenticity or legal sufficiency of any such item.
The Escrow Agent may consult with outside counsel in the
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event a dispute or question arises as to the construction of any of the
provisions of this Agreement or the duties of the Escrow Agent, and the Escrow
Agent shall incur no liability and shall be fully protected by acting in good
faith in accordance with the opinion and instructions of its counsel.
The Escrow Agent shall not be liable for any error of judgment or
any mistake of fact or law, or for anything else which the Escrow Agent may do
or refrain from doing in connection with this Agreement, except for gross
negligence or willful misconduct.
In the event of a disagreement or dispute between Xxxxxxxxxxx and
Xxxxxxxxxx which results in adverse claims or demands being made on the Escrow
Agent, or in the event the Escrow Agent has a good faith doubt as to what action
should be taken under this Agreement, the Escrow Agent may, at its option,
refuse to comply with the conflicting claims or demands or to take other action
so long as the disagreement or dispute or good faith doubt continues or
persists, and may by way of interpleader deposit the entire amount of the Escrow
Property (as defined in Paragraph 14) with any New York court of competent
jurisdiction.
The Escrow Agent may resign as such by giving no less than ten (10)
days' advance written notice of intention to resign to Xxxxxxxxxxx and
Xxxxxxxxxx. Any such resignation shall take effect on the later of the effective
date of resignation specified in the notice, or ten (10) days after the date the
notice of resignation is received by Xxxxxxxxxxx and Xxxxxxxxxx. The
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resigning Escrow Agent's duties under this Agreement shall terminate on the
effective date of resignation, and the Escrow Agent shall thereupon deliver the
assets held by such Escrow Agent to any successor escrow agent which shall be
designated in a joint written notice signed by Xxxxxxxxxxx and Xxxxxxxxxx. If
Xxxxxxxxxxx and Xxxxxxxxxx fail to designate a successor before the effective
date of the Escrow Agent's resignation, the Escrow Agent may petition any New
York court of competent jurisdiction for appointment of a successor escrow agent
and, pending such appointment, may deposit the Escrow Property with the court.
The Escrow Agent has served as counsel to Xxxxxxxxxxx in connection
with this Agreement and related transactions. Xxxxxxxxxxx and Xxxxxxxxxx agree
that the Escrow Agent, while serving as such, shall continue to have the right
to represent its client as aforesaid, in any conflict, claim, dispute,
litigation or other proceeding arising out of or in connection with this
Agreement and all related matters, and waive any conflict of interest on the
part of the Escrow Agent.
In the event that the Escrow Agent becomes involved in litigation in
connection with or arising out of its service as Escrow Agent under this
Agreement, except by reason of such Escrow Agent's own willful misconduct or
gross negligence, Xxxxxxxxxxx and Xxxxxxxxxx shall jointly and severally
indemnify and hold such Escrow Agent harmless against any loss, damages, costs
and expenses (including reasonable attorneys' fees) incurred by such Escrow
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Agent in connection with such litigation.
17. Notices.
Any notices and other communications, required or permitted to be
given hereunder, shall be in writing, and shall be deemed to have been duly
given if delivered personally or sent by certified mail, return receipt
requested, to the party to be notified at his or its address set forth below or
at such other address as the party to be notified may have otherwise designated,
by notice in writing, with copies to their respective attorneys as set forth
below:
To Xxxxxxxxxxx: Xxxx Xxxxxxxxxxx
c/o Amscan, Inc.
00 Xxxxxxxxxx Xxxx
Xxxxxxxx, XX 00000
with a copy to: Xxxxxxx & Xxxxxxxxx, LLP
Attn: Xxx Xxxxxxxxx, Esq.
Xxx Xxxxx Xxxxxxxx
Xxxxx Xxxxxx, XX 00000
To Xxxxxxxxxx: Xx. Xxxxxx X. Xxxxxxxxxx
00 Xxxxx Xxxxx
Xxxxxxx, XX 00000
with a copy to: Orloff, Lowenbach, Xxxxxxxxx &
Xxxxxx, P.A.
Attn: Xxxxx X. Xxxxxxx, Esq.
000 Xxxxxxxxxx Xxxxxxx
Xxxxxxxx, Xxx Xxxxxx 00000
To Escrow Agent: Xxxxxxx & Xxxxxxxxx, LLP
Attn: Xxx Xxxxxxxxx, Esq.
Xxx Xxxxx Xxxxxxxx
Xxxxx Xxxxxx, XX 00000
18. ADDITIONAL DOCUMENTS.
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The parties agree to execute such other documents and instruments as
shall be reasonably necessary to effectuate the provisions and intent of this
Loan Agreement.
19. CONDITION OF THIS AGREEMENT.
It is expressly understood and agreed that this Loan Agreement and
the contemplated Loan is conditioned upon a public offering of the shares of
stock of Amscan on or before June 30, 1997 and the issuance of Shares to
Xxxxxxxxxx, at the time of such public offering, having a value of at least one
and one-half times the maximum amount of the Loan to be made hereunder and if
either of these conditions is not met, this agreement shall be null and void and
of no force and effect.
20. BINDING EFFECT.
This agreement shall be binding upon and shall inure to the benefit
of the parties hereto and each of their respective heirs, successors and
assigns.
IN WITNESS WHEREOF, the parties have executed this agreement.
/s/ XXXX X. XXXXXXXXXXX
--------------------------------
XXXX X. XXXXXXXXXXX
/s/ XXXXXX X. XXXXXXXXXX
--------------------------------
XXXXXX X. XXXXXXXXXX
XXXXXXX & XXXXXXXXX, LLP, ESCROW AGENT
By /s/ XXXX X. LEVER
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Xxxx X. Lever, Member/Manager
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RECEIPT AND ACKNOWLEDGMENT
Amount: $__________________ Dated:________________
The undersigned, XXXXXX X. XXXXXXXXXX, acknowledges the receipt this
day from Xxxx X. Xxxxxxxxxxx of the sum of _________ ________________________
($_________) Dollars as and for an advance under a Loan Agreement made between
the parties dated October , 1996, and agrees to repay such advance and the loan
represented thereby in accordance with the terms and provisions of said Loan
Agreement and acknowledges that such advance and the loan represented thereby is
secured by the pledge of shares of stock as set forth in said Loan Agreement.
The provisions of such Loan Agreement are made a part of this Receipt
and Acknowledgement as if fully set forth herein, at length.
_____________________________
XXXXXX X. XXXXXXXXXX
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NOTE
$_________________ DATED:________________
FOR VALUE RECEIVED, XXXXXX X. XXXXXXXXXX, NOW RESIDING AT 00 XXXXX
XXXXX, XXXXXXX, XXX XXXX 00000, PROMISES TO PAY TO THE ORDER OF XXXX X.
XXXXXXXXXXX, WHOSE PLACE OF BUSINESS IS NOW AMSCAN INC., 00 XXXXXXXXXX XXXX,
XXXXXXXX, XXX XXXX 00000, THE SUM OF FOUR MILLION ($4,000,000.00) DOLLARS OR SO
MUCH THEREOF AS MAY BE ADVANCED AND LOANED BY XXXXXXXXXXX TO XXXXXXXXXX UNDER
THE TERMS OF THE LOAN AGREEMENT HEREINAFTER REFERRED TO TOGETHER WITH INTEREST
FROM THE DATE HEREOF AT THE RATE OF ____% PERCENT PER ANNUM ON THE UNPAID
PORTION OF THIS NOTE.
INTEREST SHALL BE PAID QUARTER-ANNUALLY. PRINCIPAL AND INTEREST OF THIS
NOTE SHALL BE PAID NO LATER THAN THIRTY (30) MONTHS FROM THE DATE HEREOF. THIS
NOTE MAY BE PREPAID AT XXXXXXXXXX'X OPTION, IN INSTALLMENTS OF NO LESS THAN TWO
HUNDRED AND FIFTY THOUSAND ($250,000.00) DOLLARS, EACH AND NO MORE THAN
ONE-SEVENTH (1/7TH) OF THE PRINCIPAL OF THIS NOTE, TOGETHER WITH INTEREST TO THE
DATE OF EACH PAYMENT.
TO SECURE THE PAYMENT OF THIS NOTE AND THE INDEBTEDNESS EVIDENCED
HEREBY, XXXXXXXXXX HAS PLEDGED CERTIFICATES REPRESENTING _________ OF THE COMMON
SHARES OF AMSCAN HOLDINGS, A DELAWARE CORPORATION, WHOSE PRINCIPAL OFFICE IS AT
00 XXXXXXXXXX XXXX, XXXXXXXX, XXX XXXX 00000, WHICH SHARES ARE HELD AS SECURITY
FOR THIS NOTE PURSUANT TO THE TERMS OF AN AGREEMENT OF LOAN BY AND BETWEEN THE
PARTIES HERETO DATED ___________________.
THE LIABILITY OF XXXXXXXXXX TO PAY THIS NOTE IS LIMITED TO THE SHARES
OF STOCK HELD IN ESCROW AS SECURITY FOR PAYMENT OF THIS NOTE, AND IN NO EVENT
SHALL XXXXXXXXXX BE LIABLE FOR ANY DEFICIENCY RESULTING FROM THE SALE OF SUCH
SHARES, NOR SHALL ANY ACTION OR PROCEEDING BE BROUGHT AGAINST XXXXXXXXXX TO
RECOVER JUDGMENT AGAINST XXXXXXXXXX UPON ANY UNPAID BALANCE OF THIS NOTE.
XXXXXXXXXXX, HIS HEIRS, REPRESENTATIVES, SUCCESSORS AND ASSIGNS MAY
DECLARE THE ENTIRE UNPAID PRINCIPAL AMOUNT OF THIS NOTE AND ACCRUED INTEREST
THEREON IMMEDIATELY DUE AND PAYABLE UPON THE OCCURRENCE OF ANY OF THE FOLLOWING
EVENTS: DEFAULT IN THE PAYMENT OF PRINCIPAL OR INTEREST UNDER THE NOTE, SUCH
DEFAULT REMAINING UNCURED FOR TEN (10) DAYS AFTER WRITTEN NOTICE THEREOF TO
XXXXXXXXXX IN ACCORDANCE WITH THE NOTICE PROVISIONS CONTAINED IN PARAGRAPH ___
OF THE AGREEMENT; VOLUNTARY WITHDRAWAL BY XXXXXXXXXX AS AN EMPLOYEE OF AMSCAN
HOLDINGS; THE FILING BY XXXXXXXXXX OF A PETITION UNDER ANY OF THE PROVISIONS OF
THE BANKRUPTCY ACT; THE FILING OF A PETITION IN BANKRUPTCY AGAINST XXXXXXXXXX,
THE SAME NOT BEING DISMISSED OR WITHDRAWN WITHIN TWENTY (20) DAYS AFTER THE
FILING THEREOF; THE MAKING BY XXXXXXXXXX OF AN ASSIGNMENT FOR THE BENEFIT OF HIS
CREDITORS; OR THE APPOINTMENT OF A RECEIVER OR GUARDIAN OF HIS PROPERTY.
__________________________
XXXXXX X. XXXXXXXXXX
