ACCOUNTING PRINCIPLES, CONSISTENTLY APPLIED FOR THE PERIODS COVERED THEREBY, IS
CLASSIFIED AS A CAPITAL LEASE, (VII) ALL INDEBTEDNESS REFERRED TO IN CLAUSES (I)
THROUGH (VI) ABOVE SECURED BY (OR FOR WHICH THE HOLDER OF SUCH INDEBTEDNESS HAS
AN EXISTING RIGHT, CONTINGENT OR OTHERWISE, TO BE SECURED BY) ANY MORTGAGE,
LIEN, PLEDGE, CHARGE, SECURITY INTEREST OR OTHER ENCUMBRANCE UPON OR IN ANY
PROPERTY OR ASSETS (INCLUDING ACCOUNTS AND CONTRACT RIGHTS) OWNED BY ANY PERSON,
EVEN THOUGH THE PERSON WHICH OWNS SUCH ASSETS OR PROPERTY HAS NOT ASSUMED OR
BECOME LIABLE FOR THE PAYMENT OF SUCH INDEBTEDNESS, AND (VIII) ALL CONTINGENT
OBLIGATIONS IN RESPECT OF INDEBTEDNESS OR OBLIGATIONS OF OTHERS OF THE KINDS
REFERRED TO IN CLAUSES (I) THROUGH (VII) ABOVE.
(M)
"INTEREST RATE" MEANS THE PRIME RATE AS OF THE FIRST (1ST) BUSINESS DAY
OF EACH CALENDAR QUARTER PLUS ONE PERCENT (1.0%).
(N)
"OUTSTANDING AMOUNT" MEANS THE SUM OF (A) THE PORTION OF THE PRINCIPAL
TO BE REDEEMED OR OTHERWISE WITH RESPECT TO WHICH THIS DETERMINATION IS BEING
MADE, (B) ACCRUED AND UNPAID INTEREST WITH RESPECT TO SUCH PRINCIPAL AND (C)
ACCRUED AND UNPAID LATE CHARGES WITH RESPECT TO SUCH PRINCIPAL AND INTEREST.
(O)
"PARENT ENTITY" OF A PERSON MEANS AN ENTITY THAT, DIRECTLY OR
INDIRECTLY, CONTROLS THE APPLICABLE PERSON AND WHOSE COMMON STOCK OR EQUIVALENT
EQUITY SECURITY IS QUOTED OR LISTED ON AN ELIGIBLE MARKET, OR, IF THERE IS MORE
THAN ONE SUCH PERSON OR PARENT ENTITY, THE PERSON OR PARENT ENTITY WITH THE
LARGEST PUBLIC MARKET CAPITALIZATION AS OF THE DATE OF CONSUMMATION OF THE
FUNDAMENTAL TRANSACTION.
(P)
"PARTY CITY SUBORDINATION AGREEMENT" SHALL MEAN THAT CERTAIN
SUBORDINATION AGREEMENT, DATED AS OF THE ISSUANCE DATE, AMONG PARTY CITY
CORPORATION, THE
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HOLDER AND THE COMPANY WITH RESPECT TO CERTAIN INDEBTEDNESS OF THE COMPANY TO
PARTY CITY CORPORATION.
(Q)
"PERMITTED INDEBTEDNESS" MEANS (A) THE SENIOR INDEBTEDNESS, (B)
INDEBTEDNESS INCURRED BY THE COMPANY THAT IS MADE EXPRESSLY SUBORDINATE IN RIGHT
OF PAYMENT TO THE INDEBTEDNESS EVIDENCED BY THIS NOTE, AS REFLECTED IN A WRITTEN
AGREEMENT ACCEPTABLE TO THE HOLDER AND APPROVED BY THE HOLDER IN WRITING, AND
WHICH INDEBTEDNESS DOES NOT PROVIDE AT ANY TIME FOR (1) THE PAYMENT, PREPAYMENT,
REPAYMENT, REPURCHASE OR DEFEASANCE, DIRECTLY OR INDIRECTLY, OF ANY PRINCIPAL OR
PREMIUM, IF ANY, THEREON UNTIL NINETY-ONE (91) DAYS AFTER THE MATURITY DATE OR
LATER AND (2) TOTAL INTEREST AND FEES AT A RATE IN EXCESS OF THE INTEREST RATE
HEREUNDER (C) INDEBTEDNESS SECURED BY PERMITTED LIENS, (D) CAPITALIZED LEASE
OBLIGATIONS, (E) PURCHASE MONEY INDEBTEDNESS, (F) INDEBTEDNESS TO TRADE
CREDITORS INCURRED IN THE ORDINARY COURSE OF BUSINESS, (G) INDEBTEDNESS OF THE
COMPANY TO AMSCAN, INC. AND PARTY CITY CORPORATION, WHICH IS COVERED BY THE
TERMS OF THE AMSCAN SUBORDINATION AGREEMENT AND THE PARTY CITY SUBORDINATION
AGREEMENT, RESPECTIVELY, AND (H) EXTENSIONS, REFINANCINGS AND RENEWALS OF ANY
ITEMS OF PERMITTED INDEBTEDNESS, PROVIDED THAT THE PRINCIPAL AMOUNT IS NOT
INCREASED OR THE TERMS MODIFIED TO IMPOSE MORE BURDENSOME TERMS UPON THE COMPANY
OR ITS SUBSIDIARY, AS THE CASE MAY BE.
(R)
"PERMITTED LIENS" MEANS