-----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, H846vIPhXgdOkosymWnbVVo3XQP/GEfiTcfe4+Pp6nbvmMOsLC7oHYm5H89TWO0k sIMrPybBbwec2dM5As/dnA== /in/edgar/work/0000913355-00-000191/0000913355-00-000191.txt : 20001115 0000913355-00-000191.hdr.sgml : 20001115 ACCESSION NUMBER: 0000913355-00-000191 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20000930 FILED AS OF DATE: 20001114 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMSCAN HOLDINGS INC CENTRAL INDEX KEY: 0001024729 STANDARD INDUSTRIAL CLASSIFICATION: [5110 ] IRS NUMBER: 133911462 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 333-14107 FILM NUMBER: 767436 BUSINESS ADDRESS: STREET 1: 80 GRASSLANDS ROAD CITY: ELMSFORD STATE: NY ZIP: 10523 BUSINESS PHONE: 9143452020 MAIL ADDRESS: STREET 1: 80 GRASSLANDS ROAD CITY: ELMSFORD STATE: NY ZIP: 10523 10-Q 1 0001.htm QUARTERLY REPORT FOR PERIOD ENDED SEPT. 30, 2000 Amscan 10Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

F O R M 10 - Q

[X]	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended September 30, 2000

[ ]	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 000-21827

AMSCAN HOLDINGS, INC.
(Exact name of registrant as specified in its charter)

	Delaware	13-3911462
	(State or other jurisdiction of incorporation	(I.R.S. Employer Identification
	or organization)	Number)

	80 Grasslands Road
	Elmsford, New York	10523
	(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code:

(914) 345-2020

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes X No

As of November 10, 2000, 1,132.54 shares of Registrants’ Common Stock, par value $0.10, were outstanding.

AMSCAN HOLDINGS, INC.
FORM 10-Q

September 30, 2000

                                   Part I                                    Page

Item 1     Financial Statements (Unaudited)

           Consolidated Balance Sheets at September 30, 2000
           and December 31, 1999...........................................    3

           Consolidated Statements of Income for the Three and
           Nine Months Ended September 30, 2000 and 1999...................    4

           Consolidated Statement of Stockholders' Deficit for
           the Nine Months Ended September 30, 2000........................    5

           Consolidated Statements of Cash Flows for the Nine
           Months Ended September 30, 2000 and 1999........................    6

           Notes to Consolidated Financial Statements......................    7

Item 2     Management's Discussion and Analysis of Financial Condition
           and Results of Operations.......................................   12

Item 3     Quantitative and Qualitative Disclosures About Market Risk .....   17


                                     Part II

Item 6     Exhibits and Reports on Form 8-K................................   18


Signature  ................................................................   19

AMSCAN HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)

                                                                                  September 30,     December 31,
                                                                                      2000              1999
                                                                                   -----------      ------------
                                                                                   (Unaudited)         (Note)

                                                        ASSETS
Current assets:
   Cash and cash equivalents ................................................       $     756        $     849
   Accounts receivable, net of allowances ...................................          65,255           56,896
   Inventories, net of allowances ...........................................          67,365           59,193
   Prepaid expenses and other current assets ................................          10,117           11,802
                                                                                    ---------        ---------
         Total current assets ...............................................         143,493          128,740
Property, plant and equipment, net ..........................................          62,392           61,709
Intangible assets, net ......................................................          60,220           63,331
Other assets, net ...........................................................           8,803            9,707
                                                                                    ---------        ---------

         Total assets .......................................................       $ 274,908        $ 263,487
                                                                                    =========        =========


                            LIABILITIES, REDEEMABLE COMMON STOCK AND STOCKHOLDERS' DEFICIT

Current liabilities:
   Short-term obligations ...................................................       $  10,354        $   4,688
   Accounts payable .........................................................          19,546           18,967
   Accrued expenses .........................................................          18,908           16,332
   Income taxes payable .....................................................           3,281            2,963
   Current portion of long-term obligations .................................           3,987            3,562
                                                                                    ---------        ---------
         Total current liabilities ..........................................          56,076           46,512
Long-term obligations, excluding current portion ............................         262,488          266,891
Deferred income tax liabilities .............................................          12,861           12,001
Other .......................................................................           2,476            3,030
                                                                                    ---------        ---------
         Total liabilities ..................................................         333,901          328,434

Redeemable Common Stock .....................................................          28,721           23,582

Stockholders' deficit:
   Common Stock .............................................................            --               --
   Additional paid-in capital ...............................................             233              225
   Unamortized restricted Common Stock award, net ...........................            (367)            (405)
   Notes receivable from stockholders .......................................            (524)            (664)
   Deficit ..................................................................         (84,770)         (86,797)
   Accumulated other comprehensive loss .....................................          (2,286)            (888)
                                                                                    ---------        ---------
         Total stockholders' deficit ........................................         (87,714)         (88,529)
                                                                                    ---------        ---------

         Total liabilities, redeemable Common Stock and stockholders' deficit       $ 274,908        $ 263,487
                                                                                    =========        =========

Note: The balance sheet at December 31, 1999 has been derived from the audited consolidated financial statements at that date.

See accompanying notes to consolidated financial statements.

AMSCAN HOLDINGS, INC.
CONSOLIDATED STATEMENT OF INCOME
(Dollars in thousands)
(Unaudited)

                                                         Three Months Ended           Nine Months Ended
                                                            September 30,               September 30,
                                                      -----------------------      -----------------------
                                                         2000          1999          2000          1999
                                                      ---------     ---------      ---------     ---------

Net sales .......................................     $  83,365     $  74,853      $ 239,500     $ 224,496
Cost of sales ...................................        53,022        47,648        150,698       142,899
                                                      ---------     ---------      ---------     ---------
         Gross profit ...........................        30,343        27,205         88,802        81,597

Operating expenses:
   Selling expenses .............................         7,981         6,321         22,037        18,018
   General and administrative expenses ..........         7,914         7,886         23,670        22,679
   Provision for (reduction of) doubtful accounts           444          (858)         4,817         6,263
   Art and development costs ....................         2,329         2,055          6,429         6,626
                                                      ---------     ---------      ---------     ---------
      Total operating expenses ..................        18,668        15,404         56,953        53,586
                                                      ---------     ---------      ---------     ---------
         Income from operations .................        11,675        11,801         31,849        28,011

Interest expense, net ...........................         6,595         6,637         19,768        19,675
Other expense (income), net .....................            85           (78)           158           (13)
                                                      ---------     ---------      ---------     ---------
         Income before income taxes and
             minority interests .................         4,995         5,242         11,923         8,349

Income tax expense ..............................         1,973         2,142          4,710         3,411
Minority interests ..............................            13            10             47             4
                                                      ---------     ---------      ---------     ---------
         Net income .............................     $   3,009     $   3,090      $   7,166     $   4,934
                                                      =========     =========      =========     =========

See accompanying notes to consolidated financial statements.

AMSCAN HOLDINGS, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ DEFICIT
Nine Months Ended September 30, 2000
(Dollars in thousands)
(Unaudited)

                                                            Restricted       Notes                    Accumulated
                                               Additional     Common       Receivable                     Other
                                    Common      Paid-in     Stock Award,      from                    Comprehensive
                                     Stock      Capital         Net       Stockholders    Deficit         Loss         Total
                                   --------     --------    -----------   ------------    -------     -------------    -----

Balance at December 31, 1999 .     $   --       $    225     $   (405)     $   (664)     $(86,797)     $   (888)     $(88,529)

   Net income ................         --           --           --            --           7,166          --           7,166
   Net change in cumulative
      translation adjustment .         --           --           --            --            --          (1,398)       (1,398)
                                                                                                                     --------
         Comprehensive income          --           --           --            --            --            --           5,768

   Accretion in Redeemable
      Common Stock and other .         --              8         --            --          (5,139)         --          (5,131)
   Payments received on notes
      receivable .............         --           --           --             140          --            --             140
   Amortization of restricted
      Common Stock award .....         --           --             38          --            --            --              38
                                   --------     --------     --------      --------      --------      --------      --------

Balance at September 30, 2000      $   --       $    233     $   (367)     $   (524)     $(84,770)     $ (2,286)     $(87,714)
                                   ========     ========     ========      ========      ========      ========      ========

See accompanying notes to consolidated financial statements.

AMSCAN HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)


                                                                               Nine Months Ended September 30,
                                                                               -------------------------------
                                                                                    2000            1999
                                                                               -------------   ---------------
Cash flows from operating activities:
    Net income ............................................................       $  7,166        $  4,934
    Adjustments to reconcile net income to net cash provided by
       operating activities:
       Depreciation and amortization ......................................         10,328           9,888
       Amortization of deferred financing costs ...........................            652             653
       Amortization of restricted Common Stock award ......................             38             128
       Provision for doubtful accounts ....................................          4,817           6,263
       Deferred income tax expense ........................................          1,051           1,845
       (Gain) loss on disposal of property and equipment ..................             (5)             69
       Changes in operating assets and liabilities:
           Increase in accounts receivable ................................        (13,513)        (18,244)
           Increase in inventories ........................................         (8,172)         (7,611)
           Decrease (increase) in prepaid expenses and other current assets          1,305          (1,050)
           Increase in accounts payable, accrued expenses and
             income taxes payable .........................................          3,494          12,120
       Other, net .........................................................             60          (2,972)
                                                                                  --------        --------
          Net cash provided by operating activities .......................          7,221           6,023

Cash flows from investing activities:
    Capital expenditures ..................................................         (8,282)         (9,068)
    Proceeds from sale of property and equipment ..........................             17             172
                                                                                  --------        --------
          Net cash used in investing activities ...........................         (8,265)         (8,896)

Cash flows from financing activities:
    Proceeds from short-term obligations ..................................          5,666           4,695
    Repayment of loans, notes payable and long-term obligations ...........         (3,978)         (2,935)
    Other .................................................................            127              39
                                                                                  --------        --------
          Net cash provided by financing activities .......................          1,815           1,799

Effect of exchange rate changes on cash and cash equivalents ..............           (864)            515
                                                                                  --------        --------
          Net decrease in cash and cash equivalents .......................            (93)           (559)
Cash and cash equivalents at beginning of period ..........................            849           1,117
                                                                                  --------        --------
Cash and cash equivalents at end of period ................................       $    756        $    558
                                                                                  ========        ========

Supplemental Disclosures:
               Interest paid ..............................................       $ 16,580        $ 15,748
               Income taxes paid, net of refunds ..........................       $  3,244        $    502

Supplemental information on noncash activities:

There were no capital lease obligations incurred during the nine months ended September 30, 2000. Capital lease obligations of $651 were incurred during the nine months ended September 30, 1999.

See accompanying notes to consolidated financial statements.

AMSCAN HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Note 1 - Organization and Description of Business

Amscan Holdings, Inc. (“Amscan Holdings” and, together with its subsidiaries, “AHI” or the “Company”) was incorporated on October 3, 1996 for the purpose of becoming the holding company for Amscan Inc. and certain affiliated entities. AHI designs, manufactures, contracts for manufacture and distributes party and novelty goods and gifts principally in North America, South America, Europe, Asia and Australia.

Note 2 - Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and nine months ended September 30, 2000 are not necessarily indicative of the results that may be expected for the year ending December 31, 2000. The results of operations may be affected by seasonal factors such as the timing of holidays or industry factors that may be specific to a particular period, such as movement in and the general level of raw material costs. For further information, see the consolidated financial statements and notes thereto included in the Amscan Holdings’ Annual Report on Form 10-K for the year ended December 31, 1999.

In connection with the preparation of the accompanying unaudited consolidated financial statements, the Company has reclassified certain amounts in prior periods to conform to the current year presentation.

Note 3 - Inventories

Inventories consisted of the following (dollars in thousands):

                                                               September 30,    December 31,
                                                                   2000            1999
                                                               -------------    ------------

 Finished goods ..........................................       $ 57,494        $ 50,278
 Raw materials ...........................................          7,861           6,706
 Work-in-process .........................................          4,334           4,238
                                                                 --------        --------
                                                                   69,689          61,222
 Less: reserve for slow moving and obsolete inventory.....         (2,324)         (2,029)
                                                                 --------        --------
                                                                 $ 67,365        $ 59,193
                                                                 ========        ========

Inventories are valued at the lower of cost, determined on a first-in, first-out basis, or market.

AMSCAN HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)

Note 4 - Income Taxes

The consolidated income tax expense for the three and nine months ended September 30, 2000 and 1999 was determined based upon estimates of the Company’s consolidated effective income tax rates for the years ending December 31, 2000 and 1999, respectively. The differences between the consolidated effective income tax rate and the U.S. Federal statutory rate are primarily attributable to state income taxes and the effects of foreign operations.

Note 5 - Comprehensive Income

Comprehensive income consisted of the following (dollars in thousands):

                                       Three Months Ended       Nine Months Ended
                                          September 30,            September 30,
                                      --------------------     --------------------
                                        2000        1999         2000         1999
                                      -------      -------     -------      -------

         Net income .............     $ 3,009      $ 3,090     $ 7,166      $ 4,934
         Net change in cumulative
           translation adjustment        (265)         428      (1,398)         459
                                      -------      -------     -------      -------
         Comprehensive income ...     $ 2,744      $ 3,518     $ 5,768      $ 5,393
                                      =======      =======     =======      =======

Accumulated other comprehensive loss at September 30, 2000 and December 31, 1999 consisted solely of the Company’s cumulative translation adjustment.

Note 6 - Capital Stock

At September 30, 2000 and December 31, 1999, the Company’s authorized capital stock consisted of 5,000,000 shares of preferred stock, $0.10 par value, of which no shares were issued or outstanding, and 3,000 shares of common stock, $0.10 par value, of which 1,132.54 and 1,132.41 shares, respectively, were issued and outstanding.

Note 7 - Segment Information

Industry Segments
The Company principally operates in one operating segment which involves the design, manufacture, contract for manufacture and distribution of party and novelty goods and gifts.

Geographic Segments
The Company’s export sales, other than those intercompany sales reported below as sales between geographic areas, are not material. Sales between geographic areas primarily consist of sales of finished goods for distribution in foreign markets. No single foreign operation is significant to the Company’s consolidated operations. Sales between geographic areas are made at cost plus a share of operating profit.

AMSCAN HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)

The Company's geographic area data is as follows (dollars in thousands):

                                                    Domestic         Foreign        Eliminations    Contolidated
                                                    --------         -------        ------------    ------------
Three Months Ended September 30, 2000
Sales to unaffiliated customers ............       $  71,701        $  11,664                         $  83,365
Sales between geographic areas .............           5,504                         $  (5,504)            --
                                                   ---------        ---------        ---------        ---------
Net sales ..................................       $  77,205        $  11,664        $  (5,504)       $  83,365
                                                   =========        =========        =========        =========

Income from operations .....................       $  10,308        $   1,367                         $  11,675
                                                   =========        =========
Interest expense, net ......................                                                              6,595
Other expense, net .........................                                                                 85
                                                                                                      ---------
Income before income taxes and minority
        interests ..........................                                                          $   4,995
                                                                                                      =========

Long-lived assets, net at September 30, 2000       $ 124,558        $   6,857                         $ 131,415
                                                   =========        =========                         =========

Three Months Ended September 30, 1999
Sales to unaffiliated customers ............       $  61,548        $  13,305                         $  74,853
Sales between geographic areas .............           6,336                         $  (6,336)
                                                   ---------        ---------        ---------        ---------
Net sales ..................................       $  67,884        $  13,305        $  (6,336)       $  74,853
                                                   =========        =========        =========        =========

Income from operations .....................       $   9,876        $   1,925                         $  11,801
                                                   =========        =========
Interest expense, net ......................                                                              6,637
Other income, net ..........................                                                                (78)
                                                                                                      ---------
Income before income taxes and minority
        interests ..........................                                                          $   5,242
                                                                                                      =========

Long-lived assets, net at September 30, 1999       $ 128,309        $   7,940                         $ 136,249
                                                   =========        =========                         =========

Nine Months Ended September 30, 2000
Sales to unaffiliated customers ............       $ 206,995        $  32,505                         $ 239,500
Sales between geographic areas .............          14,230                         $ (14,230)            --
                                                   ---------        ---------        ---------        ---------
Net sales ..................................       $ 221,225        $  32,505        $ (14,230)       $ 239,500
                                                   =========        =========        =========        =========

Income from operations .....................       $  28,764        $   3,085                         $  31,849
                                                   =========        =========
Interest expense, net ......................                                                             19,768
Other expense, net .........................                                                                158
                                                                                                      ---------
Income before income taxes and minority
        interests ..........................                                                          $  11,923
                                                                                                      =========

AMSCAN HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)

                                                 Domestic         Foreign      Eliminations     Contolidated
                                                 --------         -------      ------------     ------------
Nine Months Ended September 30, 1999
Sales to unaffiliated customers .........       $ 191,351        $  33,145                        $ 224,496
Sales between geographic areas...........          16,462             --         $ (16,462)            --
                                                ---------        ---------       ---------        ---------
Net sales ...............................       $ 207,813        $  33,145       $ (16,462)       $ 224,496
                                                =========        =========       =========        =========

Income from operations ..................       $  26,011        $   2,000                        $  28,011
                                                =========        =========
Interest expense, net ...................                                                            19,675
Other income, net .......................                                                               (13)
                                                                                                  ---------
Income before income taxes and minority
        interests .......................                                                         $   8,349
                                                                                                  =========

Note 8 - Provision for (Reduction of) Doubtful Accounts

During the second quarter of 2000, two of the Company’s customers filed voluntary petitions for relief under Chapter 11 of the United States Bankruptcy Code. As a result, the Company charged $3.4 million to the provision for doubtful accounts during the second quarter of 2000 which substantially represented the combined accounts receivable balances due to the Company from these customers. On a combined basis, these two customers accounted for approximately 0.6% and 1.9% of the Company’s consolidated net sales for the three and nine months ended September 30, 2000, respectively. The Company does not believe the potential loss of these customers will have a material adverse effect on the Company’s future results of operations or its financial condition.

During the first quarter of 1999, the Company’s largest customer, Party City Corporation (“Party City”), announced that it would be in default of certain covenants of its credit facility and, as a result, the Company charged $6.0 million to the provision for doubtful accounts during the first quarter of 1999. As a result of the subsequent improvement in Party City’s financial condition, the provision was decreased by $1.9 million during the third quarter of 1999, partially offset by a $1.0 million provision for other doubtful accounts. The remainder of the provision of $4.1 million was reversed during the fourth quarter of 1999. Sales to Party City’s corporate stores accounted for approximately 16.5% and 13.7% of the Company’s consolidated net sales for the three and nine months ended September 30, 2000, respectively. Although the Company believes its relationships with Party City and its franchisees are good, if they were to significantly reduce their volume of purchases from the Company, the Company’s financial condition and future results of operations could be materially adversely affected.

Note 9 - Legal Proceedings

The Company is a party to certain claims and litigation in the ordinary course of business. The Company does not believe any of these proceedings will result, individually or in the aggregate, in a material adverse effect upon its financial condition or future results of operations.

AMSCAN HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)

Note 10 –Subsequent Event

In October of 2000, the Company purchased property for the construction of a new domestic distribution facility for $4.9 million. The purchase was financed by borrowings under the Company’s revolving credit facility. The Company also entered into a contract for the design and construction of the new distribution facility with an estimated cost, excluding capitalized interest, of $22.1 million. The Company intends to permanently finance both the purchase of property and the construction of the facility using additional contributed capital of $6 million, long term borrowings totaling $20 million and working capital of $1.0 million. The Company has obtained firm commitments totaling $20 million for the permanent financings from both the New York Job Development Authority and a financial institution. The Company has amended and restated its credit agreements to provide for, among other things, the additional borrowings and future capital expenditures for the construction of the new domestic distribution facility.

Note 11 – Recently Issued Accounting Standards

In June 1998, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standard (“SFAS”) No. 133, “Accounting for Derivative Instruments and Hedging Activities,” amended by SFAS 137 and 138, which establish standards for derivative instruments and hedging activities. They provide a comprehensive and consistent standard for the recognition and measurement of derivatives and hedging activities. These statements require all derivatives to be recognized on the balance sheet at fair value and establish standards for the recognition of changes in such fair value. These statements are effective for fiscal years beginning after June 15, 2000. The Company expects to adopt these statements effective January 1, 2001. Because of the Company’s limited use of derivatives, management does not anticipate the adoption of these statements will have a significant effect on earnings or the financial position of the Company.

In December 1999, the Securities and Exchange Commission issued Staff Accounting Bulletin (SAB) No. 101, Revenue Recognition in Financial Statements (“SAB 101”). SAB 101 summarizes certain of the SEC staff views in applying accounting principles generally accepted in the United States to revenue recognition in financial statements. SAB 101 is effective beginning in the fourth quarter of 2000. The Company does not expect the adoption of SAB 101 to have a material impact on its results of operations or financial position.

Item 2 . Management’s Discussion and Analysis of Financial Condition and Results of Operations

Three Months Ended September 30, 2000 Compared to Three Months Ended September 30, 1999

Results of OperationsPercentage
of Net Sales

                                                  Three Months Ended September 30,
                                                         2000         1999
                                                         -----        -----
 Net sales .......................................       100.0%       100.0%
 Cost of sales ...................................        63.6         63.7
                                                         -----        -----
      Gross profit ...............................        36.4         36.3
 Operating expenses:
     Selling expenses ............................         9.6          8.4
     General and administrative expenses .........         9.5         10.5
     Provision for (reduction of) doubtful
           accounts ..............................         0.5         (1.1)
     Art and development costs ...................         2.8          2.7
                                                         -----        -----
         Total operating expenses ................        22.4         20.5
                                                         -----        -----
         Income from operations ..................        14.0         15.8
 Interest expense, net ...........................         7.9          8.9
 Other expense (income), net .....................         0.1         (0.1)
                                                         -----        -----
          Income before income taxes
             and minority interests...............         6.0          7.0
 Income tax expense ..............................         2.4          2.9
 Minority interests ..............................          --           --
                                                         -----        -----
          Net income .............................         3.6%         4.1%
                                                         =====        =====

Net sales of $83.4 million for the third quarter of 2000 were $8.5 million higher than net sales for the third quarter of 1999. The increase in net sales reflects increased sales of party goods and gift items to independent party goods and specialty stores, as well as increased sales of solid color tableware and gift items to superstores, partially offset by decreased sales to international customers. Increased sales to independent party goods and specialty stores are attributable to a realignment of the Company’s independent sales force begun in the first quarter of 1999.

Gross profit for the third quarter of 2000 of 36.4% was comparable to the corresponding period in 1999 as incremental margin achieved as a result of increased sales was offset by lower margins attributable to product mix.

Selling expenses of $8.0 million for the three months ended September 30, 2000 were $1.7 million higher than those of the corresponding period in 1999 and increased to 9.6% of net sales from 8.4% of net sales. The increase in selling expenses reflects the continued development of a specialty sales force and increased marketing initiatives relating to new gift product lines.

General and administrative expenses for the three months ended September 30, 2000 of $7.9 million was comparable to that of the third quarter of 1999 but declined as a percent of sales by 1.0% to 9.5% due to the increased sales volume.

Provision for doubtful accounts for the third quarter of 2000 was $0.4 million. During the first quarter of 1999, the Company’s largest customer, Party City, announced that it would be in default of certain covenants of its credit facility and, as a result, the Company charged $6.0 million to the provision for doubtful accounts during the first quarter of 1999. As a result of the subsequent improvement in Party City’s financial condition, the provision was decreased by $1.9 million during the third quarter of 1999, partially offset by a $1.0 million provision for other doubtful accounts. The remainder of the provision of $4.1 million was reversed during the fourth quarter of 1999.

Art and development costs of $2.3 million for the third quarter of 2000, increased by $0.2 million compared to the corresponding period in 1999 due to the Company’s continued commitment to product quality and design. As a percentage of net sales, art and development costs were 2.8% for the third quarter of 2000 as compared to 2.7% for the corresponding period of 1999.

Interest expense of $6.6 million for the third quarter of 2000 was comparable to the corresponding period in 1999, and reflects a higher average interest rate on lower average borrowings as compared to 1999.

Income taxes for the third quarter of 2000 and 1999 were based upon estimated consolidated effective income tax rates of 39.5% and 40.85% for the years ending December 31, 2000 and 1999, respectively.

Nine Months Ended September 30, 2000 Compared to Nine Months Ended September 30, 1999

Results of Operations
Percentage of Net Sales

                                                       Nine Months Ended September 30,
                                                             2000         1999
                                                            -----        -----
Net sales ...........................................       100.0%       100.0%
Cost of sales .......................................        62.9         63.7
                                                            -----        -----
     Gross profit ...................................        37.1         36.3
Operating expenses:
   Selling expenses .................................         9.2          8.0
   General and administrative expenses...............         9.9         10.1
   Provision for doubtful accounts ..................         2.0          2.8
   Art and development costs ........................         2.7          2.9
                                                            -----        -----
      Total operating expenses ......................        23.8         23.8
                                                            -----        -----
      Income from operations ........................        13.3         12.5
Interest expense, net ...............................         8.2          8.8
Other expense, net ..................................         0.1           --
                                                            -----        -----
       Income before income taxes
           and minority interests ...................         5.0          3.7
Income tax expense ..................................         2.0          1.5
Minority interests ..................................          --           --
                                                            -----        -----
       Net income ...................................         3.0%         2.2%
                                                            =====        =====

Net sales of $239.5 million for the nine months ended September 30, 2000 were $15.0 million higher than net sales for the corresponding period in 1999. The increase in net sales reflects increased sales of party goods and gift items to independent party goods and specialty stores, as well as increased sales of solid color tableware and gift items to superstores, partially offset by both reduced sales of party goods to other distributors and international customers. Increased sales to independent party goods and specialty stores are attributable to a realignment of the Company’s independent sales force begun in the first quarter of 1999.

Gross profit for the nine months ended September 30, 2000 was 37.1% and was 0.8% higher than the corresponding period in 1999 principally as a result of both the realization of the full benefit from the closing of the Company’s Canadian warehouse during the first quarter of 1999 and incremental margins achieved as a result of higher sales partially offset by lower margins attributable to product mix.

Selling expenses of $22.0 million for the nine months ended September 30, 2000 were $4.0 million higher than those of the corresponding period in 1999 and increased to 9.2% of net sales from 8.0% of net sales. The increase in selling expenses reflects the continued development of a specialty sales force and increased marketing initiatives relating to new gift product lines.

General and administrative expenses of $23.7 million increased by $1.0 million for the nine months ended September 30, 2000 as compared to the corresponding period in 1999 principally due to depreciation and amortization on new data processing equipment and increased expenses associated with the development of e-commerce business opportunities. As a percentage of net sales, general and administrative expenses declined by 0.2% to 9.9% for the nine months ended September 30, 2000 as compared to the corresponding period of 1999 primarily due to increased sales partially offset by higher expenses.

Provision for doubtful accounts for the nine months ended September 30, 2000 was $4.8 million. During the second quarter of 2000, two of the Company’s customers filed voluntary petitions for relief under Chapter 11 of the United States Bankruptcy Code. As a result of the filings, the Company charged $3.4 million to the provision for doubtful accounts during the second quarter of 2000 which substantially represented the combined accounts receivable balances due to the Company from these customers. On a combined basis, these two customers accounted for approximately 1.9% of the Company’s consolidated net sales for the nine months ended September 30, 2000. The Company does not believe the potential loss of these customers will have a material adverse effect on the Company’s future results of operations or its financial condition. During the first quarter of 1999, the Company’s largest customer, Party City, announced that it would be in default of certain covenants of its credit facility and, as a result, the Company charged $6.0 million to the provision for doubtful accounts during the first quarter of 1999. As a result of the subsequent improvement in Party City’s financial condition, the provision was decreased by $1.9 million during the third quarter of 1999, partially offset by a $1.0 million provision for other doubtful accounts. The remainder of the provision of $4.1 million was reversed during the fourth quarter of 1999.

Art and development costs of $6.4 million for the nine months ended September 30, 2000, decreased by $0.2 million compared to the corresponding period in 1999. The higher art and development costs for the nine months ended September 30, 1999 included certain start-up costs associated with the development of new product lines. As a percentage of net sales, art and development costs were 2.7% for the nine months ended September 30, 2000 as compared to 2.9% for the corresponding period of 1999.

Interest expense of $19.8 million for the nine months ended September 30, 2000 increased by $0.1 million as compared to the corresponding period in 1999, principally as a result of a higher average interest rate, partially offset by the impact of lower average borrowings.

Income taxes for the nine months ended September 30, 2000 and 1999 were based upon estimated consolidated effective income tax rates of 39.5% and 40.85% for the years ending December 31, 2000 and 1999, respectively.

Liquidity and Capital Resources

At September 30, 2000, the Company had outstanding a senior term loan of $151.6 million (the “Term Loan”) provided under a bank credit agreement (the “Bank Credit Facilities”), together with senior subordinated notes of $110.0 million (the “ Notes”) (collectively, the “ Financings”). The Term Loan matures in December 2004 and provides for amortization (in quarterly installments) of one percent of the principal amount thereof per year for the first five years and 32.3% and 62.7% of the principal amount thereof in the sixth and seventh years, respectively. The Term Loan bears interest, at the option of the Company, at the lenders’ customary base rate plus 1.625% per annum or at the lenders’ customary reserve adjusted Eurodollar rate plus 2.625% per annum. At September 30, 2000, the floating interest rate on the Term Loan was 9.09%. The Notes bear interest at a rate of 9 7/8% per annum and mature in December 2007. The Company is required to make prepayments on the Bank Credit Facilities under certain circumstances, including upon certain asset sales and issuance of debt or equity securities and based on cash flows, as defined. A prepayment of $1.3 million on the Term Loan was made by the Company during the first quarter of 2000 as required based on its cash flows.

In addition to the Term Loan, the Bank Credit Facilities provide for revolving loan borrowings of up to $50 million (the “Revolving Credit Facility”). The Revolving Credit Facility, expiring on December 31, 2002, bears interest, at the option of the Company, at the lenders’ customary base rate plus, based on certain terms, a range of 1.00% to 1.50% per annum or at the lenders’ customary reserve adjusted Eurodollar rate plus, based on certain terms, a range of 2.00 % to 2.50% per annum. Interest on balances outstanding under the Revolving Credit Facility are subject to adjustment in the future based on the Company’s performance. At September 30, 2000, the Company had borrowing capacity of approximately $34.8 million under the Revolving Credit Facility.

At September 30, 2000, the Company had three interest rate swap contracts outstanding with a financial institution and Goldman Sachs Capital Markets, L.P. covering $123.5 million of its Term Loan at effective interest rates ranging from 7.18% to 8.80%.

Based upon the current level of operations and anticipated growth, the Company anticipates that its operating cash flow, together with available borrowings under the Revolving Credit Facility, will be adequate to meet its anticipated future requirements for working capital and operating expenses and to service its debt requirements as they become due. However, the Company’s ability to make scheduled payments of principal of, or to pay interest on, or to refinance its indebtedness and to satisfy its other obligations will depend upon its future performance, which, to a certain extent, will be subject to general economic, financial, competitive, business and other factors beyond its control.

The Financings and the Company’s credit agreements may affect the Company’s ability to make future capital expenditures and potential acquisitions. However, management believes that current asset levels provide adequate capacity to support its operations for at least the next 12 months. As of September 30, 2000, the Company did not have material commitments for capital expenditures other than for the construction of a new domestic distribution facility and the purchase of the related property.

Cash Flow Data – Nine Months Ended September 30, 2000 Compared to Nine Months Ended September 30, 1999

During the nine months ended September 30, 2000, net cash provided by operating activities totaled $7.2 million, an increase of $1.2 million as compared to the corresponding period in 1999. Net cash flow provided by operating activities before changes in other operating assets and liabilities for the nine months ended September 30, 2000 and 1999, was $24.0 million and $23.8 million, respectively. Net cash used as a result of changes in other operating assets and liabilities for the nine months ended September 30, 2000 and 1999, was $16.8 million and $17.8 million, respectively.

Net cash used in investing activities during the nine months ended September 30, 2000 of $8.3 million decreased by $0.6 million from the same period in 1999 primarily due to the purchase of new data processing equipment during 1999.

During the nine months ended September 30, 2000, net cash provided by financing activities was $1.8 million and primarily consisted of proceeds from short-term working capital borrowings, partially offset by the

repayment of a portion of the Term Loan, including the $1.3 million prepayment noted above, and repayment of other long-term obligations. During the comparable period in 1999, net cash provided by financing activities of $1.8 million principally consisted of the proceeds from short-term working capital borrowings, partially offset by the scheduled maturity of the Term Loan and the repayment of other long-term obligations.

Legal Proceedings

Recently Issued Accounting Standards

Other pronouncements issued by the FASB or other authoritative accounting standards groups with future effective dates are either not applicable or not significant to the financial statements of the Company.

“Safe Harbor” Statement under Private Securities Litigation Reform Act of 1995

This report includes “forward-looking statements” within the meaning of various provisions of the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical facts, included in this report that address activities, events or developments that the Company expects or anticipates will or may occur in the future, future capital expenditures (including the amount and nature thereof), business strategy and measures to implement strategy, including any changes to operations, goals, expansion and growth of the Company’s business and operations, plans, references to future success and other such matters are forward-looking statements. These statements are based on certain assumptions and analyses made by the Company in light of its experience and its perception of historical trends, current conditions and expected future developments as well as other factors it believes are appropriate in the circumstances. Actual results may differ materially from those discussed. Whether actual results and developments will conform with the Company’s expectations and predictions is subject to a number of risks and uncertainties, including, but not limited to (1) the concentration of sales by the Company to party goods superstores where the reduction of purchases by a small number of customers could materially reduce the Company’s sales and profitability, (2) the concentration of the Company’s credit risk in party goods superstores, several of which are privately held and have expanded rapidly in recent years, (3) the failure by the Company to anticipate changes in tastes and preferences of party goods retailers and consumers, (4) introduction of new product

lines by the Company, (5) the introduction of new products by the Company’s competitors, (6) the inability of the Company to increase prices to recover fully future increases in raw material prices, especially increases in paper prices, (7) the loss of key employees, (8) changes in general business conditions, (9) other factors which might be described from time to time in the Company’s filings with the Commission, and (10) other factors which are beyond the control of the Company. Consequently, all of the forward-looking statements made in this report are qualified by these cautionary statements, and the actual results or developments anticipated by the Company may not be realized or, even if substantially realized, may not have the expected consequences to or effects on the Company or its business or operations. Although the Company believes that it has the product offerings and resources needed for continued growth in revenues and margins, future revenue and margin trends cannot be reliably predicted. Changes in such trends may cause the Company to adjust its operations in the future. Because of the foregoing and other factors, recent trends should not be considered reliable indicators of future financial results. In addition, the highly leveraged nature of the Company may impair its ability to finance its future operations and capital needs and its flexibility to respond to changing business and economic conditions and business opportunities.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

The Company’s earnings are affected by changes in interest rates as a result of its issuance of variable rate indebtedness. However, the Company utilizes interest rate swap agreements to manage the market risk associated with fluctuations in interest rates. If market interest rates for the Company’s variable rate indebtedness averaged 2% more than the interest rate actually paid for the three months ended September 30, 2000 and 1999, the Company’s interest expense, after considering the effects of its interest rate swap agreements, would have increased, and income before income taxes and minority interests would have decreased, by $0.2 million and $0.4 million, respectively. If market interest rates for the Company’s variable rate indebtedness averaged 2% more than the interest rate actually paid for the nine months ended September 30, 2000 and 1999, the Company’s interest expense, after considering the effects of its interest rate swap agreements, would have increased, and income before income taxes and minority interests would have decreased, by $0.6 million and $1.1 million, respectively. These amounts are determined by considering the impact of the hypothetical interest rates on the Company’s borrowing cost, short-term investment balances, and interest rate swap agreements. This analysis does not consider the effects of the reduced level of overall economic activity that could exist in such an environment. Further, in the event of a change of such magnitude, management would likely take actions to further mitigate its exposure to the change. However, due to the uncertainty of the specific actions that would be taken and their possible effects, the sensitivity analysis assumes no changes in the Company’s financial structure.

The Company’s earnings are also affected by fluctuations in the value of the U.S. dollar as compared to foreign currencies, predominately in European countries, as a result of the sales of its products in foreign markets. Foreign currency forward contracts are used periodically to hedge against the earnings effects of such fluctuations. A uniform 10% strengthening in the value of the dollar relative to the currencies in which the Company’s foreign sales are denominated would have resulted in a decrease in gross profit of $0.4 million and $0.6 million for the three months ended September 30, 2000 and 1999, respectively. A uniform 10% strengthening in the value of the dollar relative to the currencies in which the Company’s foreign sales are denominated would have resulted in a decrease in gross profit of $1.2 million and $1.1 million for the nine months ended September 30, 2000 and 1999, respectively. These calculations assume that each exchange rate would change in the same direction relative to the U.S. dollar. In addition to the direct effects of changes in exchange rates, which could change the U.S. dollar value of the resulting sales, changes in exchange rates also affect the volume of sales or the foreign currency sales price as competitors’ products become more or less attractive. The Company’s sensitivity analysis of the effects of changes in foreign currency exchange rates does not factor in a potential change in sales levels or local currency prices.

Part II

Item 6. Exhibits and Reports on Form 8-K

(a)

Exhibits

Exhibit
Number

Description

4(a)

Second Amendment and Limited Waiver to Amended and Restated Revolving Loan Credit Agreement, dated as of September 19, 2000, by and among the Registrant, the financial institutions parties thereto, Goldman, Sachs Credit Partners L.P., as arranger and syndication agent, and Fleet National Bank, as administrative agent.

4(b)

First Amendment and Limited Waiver to Amended and Restated AXEL Credit Agreement, dated as of September 19, 2000, by and among the Registrant, the financial institutions parties thereto, Goldman, Sachs Credit Partners L.P., as arranger and syndication agent, and Fleet National Bank, as administrative agent.

Agreement dated as of September 14, 2000 between Amscan, Inc. and CLAYCO Construction Company, Inc.

Financial Data Schedule

(b)

Reports on Form 8 - K

None.

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 thereunto duly authorized.

AMSCAN HOLDINGS, INC.

By:

/s/ Michael A. Correale

Date: November 14, 2000

Michael A. Correale
Controller
(on behalf of the registrant and as principal accounting officer)

EXHIBIT INDEX

Exhibit
Number

Description

4(a)

4(b)

Agreement dated as of September 14, 2000 between Amscan, Inc. and CLAYCO Construction Company, Inc.

Financial Data Schedule

EX-4.A 2 0002.htm SECOND AMENDMENT TO REVOLVING LOAN AGREEMENT Second Amendment to Revolving Loan Agreement

AMSCAN HOLDINGS, INC.

SECOND AMENDMENT
AND LIMITED WAIVER
TO AMENDED AND RESTATED REVOLVING LOAN CREDIT AGREEMENT

This SECOND AMENDMENT TO AMENDED AND RESTATED REVOLVING LOAN CREDIT AGREEMENT (this “Amendment”) is dated as of September 19, 2000 and entered into by and among AMSCAN HOLDINGS, INC., a Delaware corporation (“Company”), the financial institutions listed on the signature pages hereof (“Lenders”), GOLDMAN SACHS CREDIT PARTNERS L.P., as arranger and syndication agent for Lenders (“Arranger”), and FLEET NATIONAL BANK, as administrative agent for Lenders (“Administrative Agent”), and is made with reference to that certain Amended and Restated Revolving Loan Credit Agreement dated as of September 17, 1998, as amended to the date hereof (as so amended, the “Credit Agreement”) by and among Company, Lenders, Arranger and Administrative Agent. Capitalized terms used herein without definition shall have the same meanings herein as set forth in the Credit Agreement.

RECITALS

WHEREAS, Company and Lenders desire to amend certain provisions of the Credit Agreement and to waive certain other provisions of the credit agreement in connection with Company's proposed development, construction and financing of the New Chester Distribution Center (as hereinafter defined on the terms and conditions set forth herein):

NOW, THEREFORE, in consideration of the premises and the agreements, provisions and covenants herein contained, the parties hereto agree as follows:

Section 1. AMENDMENTS TO THE CREDIT AGREEMENT

1.1

Amendments to Section 1: Provisions Relating to Defined Terms

A. Subsection 1.1 of the Credit Agreement is hereby amended by adding thereto the following definitions, which shall be inserted in proper alphabetical order:

“Disbursement Letter” means the Letter Agreement regarding Chester Distribution Center dated as of September 19, 2000, entered into by the Company for the benefit of the Agents and Lenders and attached hereto as Exhibit A.

“New Chester Distribution Center” means the new distribution center to be built by Company or one of its Subsidiaries in Chester, New York on land acquired after the date hereof.

“New Chester Distribution Center Collateral” means the land and improvements comprising the New Chester Distribution Center.

AMENDED AND RESTATED
REVOLVING LOAN CREDIT AGREEMENT

EXECUTION

“New Chester Distribution Center Permanent Financing” means Indebtedness, including Indebtedness to the New York Jobs Development Authority d/b/a Empire State Development Corporation and Fleet Bank or another institutional lender, the proceeds of which are used to repay Indebtedness (including Revolving Loans) incurred to finance a portion of the construction and development of the New Chester Distribution Center, provided that (i) such Indebtedness is secured only by liens permitted under subsection 7.2(A)(vi), (ii) the aggregate amount of such Indebtedness does not exceed $21,000,000 at any time (reduced by any principal payments thereon), (iii) the proceeds thereof are applied to repay Revolving Loans dollar for dollar to the extent there are Revolving Loans outstanding and (iv) the other terms thereof are reasonably acceptable to Administrative Agent and Arranger.

B. Subsection 1.1 of the Credit Agreement is hereby further amended by restating the following definitions contained therein, in their entirety, as follows:

“Applicable Revolving Base Rate Margin” means, as at any date of determination, a rate per annum equal to the percentage set forth below opposite the Applicable Leverage Ratio in effect as of such date of determination with any change in the Applicable Revolving Base Rate Margin to be effective on the date of any corresponding change in the Applicable Leverage Ratio.

Applicable Leverage Ratio	Applicable Revolving Base Rate Margin
5.25:1.00 or greater	1.50%
4.75:1.00 or greater, but less than 5.25:1.00	1.25%
4.25:1.00 or greater, but less than 4.75:1.00	1.00%
3.75:1.00 or greater, but less than 4.75:1.00	0.75%
3.25:1.00 or greater, but less than 4.25:1.00	0.50%
less than 3.25:1.00	0.25%

AMENDED AND RESTATED
REVOLVING LOAN CREDIT AGREEMENT

EXECUTION

“Applicable Revolving Eurodollar Rate Margin” means, as at any date of determination, with respect to any Eurodollar Rate Loans a rate per annum equal to the percentage set forth below opposite the Applicable Leverage Ratio in effect as of the first day of the Interest Period for such Eurodollar Rate Loans:

Applicable Leverage Ratio	Applicable Revolving Eurodollar Rate Margin
5.25:1.00 or greater	2.50%
4.75:1.00 or greater, but less than 5.25: 1.00	2.50%
4.25:1.00 or greater, but less than 4.75:1.00	2.00%
3.75:1.00 or greater, but less than 4.25:1.00	1.75%
3.25:1.00 or greater, but less than 3.75:1.00	1.125%
less than 2.75:1.00	0.875%

“Consolidated Fixed Charges” means, for any period, the sum (without duplication) of the amounts for such period of (i) Consolidated Cash Interest Expense, (ii) provisions for taxes based on income, (iii) scheduled repayments of principal on the Loans and other Indebtedness, and (iv) Consolidated Capital Expenditures (other than Consolidated Capital Expenditures permitted under clause (ii) of the last paragraph of subsection 7.8 for the acquisition of land for, and the development and construction of, the New Chester Distribution Center and capitalized interest in respect thereof) to the extent paid for in cash, all of the foregoing as determined on a consolidated basis for Company and its Subsidiaries in conformity with GAAP.

1.2

Amendments to Section 2: Amount and Terms of Commitments and Loans

Subsection 2.4A(iii) of the Credit Agreement is hereby amended by adding a new clause (g) to read in its entirety as follows:

“(g) Permanent Financing.

Upon the incurrence of any New Chester Distribution Center Permanent Financing, Company shall apply all proceeds of such New Chester Distribution

AMENDED AND RESTATED
REVOLVING LOAN CREDIT AGREEMENT

EXECUTION

Center Permanent Financing (net of fees and expenses incurred in connection with such financing) to repay the Revolving Loans then outstanding.”

1.3

Amendments to Section 4: Conditions to Effectiveness; Conditions to Loans and Letters of Credit

Section 4 of the Credit Agreement is hereby amended by adding a new subsection 4.4 to read in its entirety as follows:

“4.4

New Chester Development Facility Revolving Loans

In addition to the conditions to all Revolving Loans set forth in subsection 4.2, above, the obligations of Lenders to make Revolving Loans with respect to the acquisition, construction or development of the New Chester Distribution Center shall be subject to compliance with the terms of the Disbursement Letter.”

1.4

Amendments to Section 6: Company’s Affirmative Covenants

Section 6 of the Credit Agreement is hereby amended by adding a new subsections 6.14 to read in their entirety as follows:

“6.14

New Chester Permanent Financing

Company shall use its best efforts to consummate the New Chester Distribution Center Permanent Financing by August 30, 2001; provided, that such date may be extended by Company by written notice to Administrative Agent and Arranger, to a date not later than December 31, 2001, to the extent the commitments for the New Chester Distribution Center Permanent Financing have been extended to such later date.”

1.5

Amendments to Section 7: Company’s Negative Covenants

Subsection 7.1 – Indebtedness and Issuance of Disqualified Stock

Subsection 7.1 of the Credit Agreement is hereby amended by adding a new clause (xii) to read in its entirety as follows:

“(xii) Company and any of its Subsidiaries may become liable for the New Chester Distribution Center Permanent Financing.”

Subsection 7.2 – Liens and Related Matters

Subsection 7.2A of the Credit Agreement is amended by adding a new clause (vi) to read in its entirety as follows:

“(vi) Liens on the New Chester Distribution Center Collateral securing the New Chester Distribution Center Permanent Financing, provided that such Liens attach only to the New Chester Distribution Center Collateral.”

AMENDED AND RESTATED
REVOLVING LOAN CREDIT AGREEMENT

EXECUTION

Subsection 7.6 - Financial Covenants

1. Subsection 7.6A of the Credit Agreement is hereby amended by restating it in its entirety as follows:

“A. Minimum Fixed Charge Coverage Ratio. Company shall not permit the ratio of (i) Consolidated Adjusted EBITDA to (ii) Consolidated Fixed Charges for any four-Fiscal Quarter period ending on any of the dates set forth below to be less than the correlative ratio indicated:”

Period Ending	Minimum Fixed Charge Coverage Ratio
September 30, 1998	1.00:1.00
December 31, 1998	1.00:1.00
March 31, 1999	1.00:1.00
June 30, 1999	1.00:1.00
September 30, 1999	1.00:1.00
December 31, 1999	1.00:1.00
March 31, 2000	1.10:1.00
June 30, 2000	1.10:1.00
September 30, 2000	1.10:1.00
December 31, 2000	1.10:1.00
March 31, 2001	1.10:1.00
June 30, 2001	1.10:1.00
September 30, 2001	1.10:1.00
December 31, 2001	1.10:1.00
March 31, 2002	1.10:1.00
June 30, 2002	1.10:1.00
September 30, 2002	1.10:1.00
December 31, 2002	1.15:1.00

2. Subsection 7.6B of the Credit Agreement is hereby amended by restating it in its entirety as follows:

AMENDED AND RESTATED
REVOLVING LOAN CREDIT AGREEMENT

EXECUTION

“B. Minimum Consolidated Adjusted EBITDA. Company shall not permit Consolidated Adjusted EBITDA for any four Fiscal Quarter period ending on the dates set forth below to be less than the correlative amount indicated:”

Period Ending	Minimum Consolidated Adjusted EBITDA
September 30, 1998	41,735,000
December 31, 1998	45,560,000
March 31, 1999	46,750,000
June 30, 1999	47,090,000
September 30, 1999	49,300,000
December 31, 1999	52,360,000
March 31, 2000	53,520,000
June 30, 2000	54,680,000
September 30, 2000	55,840,000
December 31, 2000	53,000,000
March 31, 2001	53,250,000
June 30, 2001	54,000,000
September 30, 2001	55,500,000
December 31, 2001	57,000,000
March 31, 2002	57,500,000
June 30, 2002	58,500,000
September 30, 2002	59,500,000
December 31, 2002	60,000,000

3. Subsection 7.6C of the Credit Agreement is hereby amended by restating it in its entirety as follows:

“C. Consolidated Leverage Ratio. Company shall not permit the Consolidated Leverage Ratio as of the last day of any four Fiscal Quarter period

AMENDED AND RESTATED
REVOLVING LOAN CREDIT AGREEMENT

EXECUTION

Ending on any of the dates set forth below to exceed the correlative ratio indicated:”

Period Ending	Minimum Debt to EBITDA Ratio
September 30, 1998	6.60:1.00
December 31, 1998	6.40:1.00
March 31, 1999	6.20:1.00
June 30, 1999	6.00:1.00
September 30, 1999	5.80:1.00
December 31, 1999	5.50:1.00
March 31, 2000	5.40:1.00
June 30, 2000	5.25:1.00
September 30, 2000	5.10:1.00
December 31, 2000	5.30:1.00
March 31, 2001	5.30:1.00
June 30, 2001	5.25:1.00
September 30, 2001	5.20:1.00
December 31, 2001	5.00:1.00
March 31, 2002	4.90:1.00
June 30, 2002	4.80:1.00
September 30, 2002	4.70:1.00
December 31, 2002	4.45:1.00

Subsection 7.8 - Consolidated Capital Expenditures

The last paragraph of subsection 7.8 of the Credit Agreement is hereby amended by restating it in its entirety as follows:

“Notwithstanding the foregoing, Company and its Subsidiaries may fund Consolidated Capital Expenditures in excess of the foregoing limits (i) from any proceeds of an additional issuance of Company Common Stock in a private

AMENDED AND RESTATED
REVOLVING LOAN CREDIT AGREEMENT

EXECUTION

issuance after the Restatement Effective Date and (ii) in an amount not to exceed $27,000,000 (exclusive of capitalized interest) to purchase a fee simple interest in the land for the New Chester Distribution Center and for the development and construction of improvements thereon, provided that $6,000,000 of such expenditures shall be funded from the issuance of additional Company common stock in a private issuance after the date hereof.”

Section 2. LIMITED WAIVER

A. In order to facilitate the take-out financing for the Revolving Loans used to develop and construct the New Chester Distribution Center, subject to the terms and conditions hereof, Requisite Lenders hereby waive compliance with Section 6.9 of the Credit Agreement to the extent, but only to the extent necessary, to permit Collateral Agent to release all of its Liens on the New Chester Distribution Center Collateral upon the incurrence of the New Chester Distribution Center Permanent Financing provided no Event of Default or Potential Event of Default shall then exist and be continuing or would result from such financing. Requisite Lenders further consent to Collateral Agent entering into any documents reasonably required upon the incurrence of the New Chester Distribution Center Permanent Financing, to release the lien of Collateral Agent on behalf of Lenders on the New Chester Distribution Center Collateral to the extent provided for in the immediately proceeding sentence.

B. Without limiting the generality of Section 10.6 of the Credit Agreement, the waiver set forth in this Section 2 shall be limited precisely as written and relates solely to the non-compliance by Company and its Subsidiaries with the provisions of subsection 6.9 of the Credit Agreement in the manner and to the extent set forth above and nothing herein shall be deemed to constitute a waiver of compliance with respect to subsection 6.9 except to the extent expressly set forth in this Section or in any other instance or to constitute a waiver of any other provision of the Credit Agreement or any other instrument or agreement referred to therein.

Section 3. CONDITIONS TO EFFECTIVENESS

Sections 1 and 2 of this Amendment shall become effective only upon the satisfaction of all of the following conditions precedent (the date of satisfaction of such conditions being referred to herein as the “Second Amendment Effective Date”):

A. On or before the Second Amendment Effective Date, Company shall deliver to Lenders (or to Administrative Agent for Lenders with sufficient originally executed copies, where appropriate, for each Lender and its counsel) the following, each, unless otherwise noted, dated the Second Amendment Effective Date:

1. A certificate of the corporate secretary of Company certifying as of the Second Amendment Effective Date that its Certificate of Incorporation delivered on the Restatement Effective Date pursuant to subsection 4.1 of the Credit Agreement is in full force and effect without modification or amendment, together with a good standing certificate from the Secretary of State of the State of Delaware dated a recent date prior to the Second Amendment Effective Date;

AMENDED AND RESTATED
REVOLVING LOAN CREDIT AGREEMENT

EXECUTION

2. A certificate of the corporate secretary of Company certifying as of the Second Amendment Effective Date that its Bylaws delivered on the Restatement Effective Date pursuant to subsection 4.1 of the Credit Agreement are in full force and effect without modification or amendment;

3. Resolutions of its Board of Directors approving and authorizing the execution, delivery, and performance of this Amendment, certified as of the Second Amendment Effective Date by its corporate secretary or an assistant secretary as being in full force and effect without modification or amendment;

4. Signature and incumbency certificates of its officers executing this Amendment; and

5. Executed copies of this Amendment.

B. On or before the Second Amendment Effective Date, all corporate and other proceedings taken or to be taken in connection with the transactions contemplated hereby and all documents incidental thereto not previously found acceptable by Administrative Agent, acting on behalf of Lenders, and by Arranger and its counsel shall be satisfactory in form and substance to Administrative Agent and to Arranger and its counsel, and Administrative Agent and Arranger and its counsel shall have received all such counterpart originals or certified copies of such documents as Administrative Agent and Arranger may reasonably request.

C. On or before the Second Amendment Effective Date AXEL Lenders shall have entered into an amendment and waiver of the AXEL Credit Agreement in the form of Exhibit A hereto and such amendment shall have become effective.

D. On or before the Second Amendment Effective Date, Company shall have delivered to Administrative Agent and Arranger commitment letters for the New Chester Distribution Center Permanent Financing in an amount equal to $20,000,000 and otherwise in form and substance satisfactory to Administrative Agent and Arranger. Approval of any such commitment letters for purposes of this condition shall not be deemed to be approval of the terms of any Indebtedness described therein which shall remain subject to approval under the terms of the definition of New Chester Distribution Center Permanent Financing.

E. On or before the Second Amendment Effective Date, Company shall have paid to each Lender which has delivered to Administrative Agent an executed counterpart of the Amendment on or before such date an amendment fee of 0.25% of the amount of such Lender's outstanding Revolving Loan Commitment.

F. On or before the Second Amendment Effective Date, Lenders shall have received originally executed copies of one or more favorable written opinions of counsel reasonably acceptable to Agents, dated the Second Amendment Effective Date, regarding the (i) due incorporation and good standing of Borrower (ii) due authorization, execution and delivery of this Amendment, (iii) enforceability of this Amendment and the Amended Agreement (as defined in Section 4.A below) under New York law and (iv) the absence of any violation or conflicts with New York law, any charter documents or bylaws or any injunction, order or

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decrees, resulting from the execution, delivery or performance of this Amendment or the Amended Agreement, and otherwise in form and substance reasonably satisfactory to Agents.

Section 4. COMPANY'S REPRESENTATIONS AND WARRANTIES

In order to induce Lenders to enter into this Amendment and to amend the Credit Agreement and provide waivers thereunder in the manner provided herein, Company represents and warrants to each Lender that the following statements are true, correct and complete:

A. Corporate Power and Authority. Company has all requisite corporate power and authority to enter into this Amendment and to carry out the transactions contemplated by, and perform its obligations under, the Credit Agreement as amended by this Amendment (the “Amended Agreement”).

B. Authorization of Agreements. The execution and delivery of this Amendment and the performance of the Amended Agreement have been duly authorized by all necessary corporate action on the part of Company.

C. No Conflict. The execution and delivery by Company of this Amendment and the performance by Company of the Amended Agreement do not and will not (i) violate any provision of any law or any governmental rule or regulation applicable to Company or any of its Subsidiaries, the Certificate or Articles of Incorporation or Bylaws of Company or any of its Subsidiaries or any order, judgment or decree of any court or other agency of government binding on Company or any of its Subsidiaries, (ii) conflict with, result in a breach of or constitute (with due notice or lapse of time or both) a default under any Contractual Obligation of Company or any of its Subsidiaries, except for any breach or default which could not reasonably be expected to have a Material Adverse Effect, (iii) result in or require the creation or imposition of any Lien upon any of the properties or assets of Company or any of its Subsidiaries (other than Liens created under any of the Loan Documents in favor of Administrative Agent on behalf of Lenders), or (iv) require any approval of stockholders or any approval or consent of any Person under any Contractual Obligation of Company or any of its Subsidiaries, except for such approvals or consents which have been obtained on or before the Second Amendment Effective Date and disclosed in writing to Lenders and such consents the failure of which to receive could not reasonably be expected to have a Material Adverse Effect.

D. Governmental Consents. The execution and delivery by Company of this Amendment and the performance by Company of the Amended Agreement do not and will not require any registration with, consent or approval of, or notice to, or other action to, with or by, any federal, state or other governmental authority or regulatory body the failure of which to receive could not reasonably be expected to cause a Material Adverse Effect.

E. Binding Obligation. This Amendment and the Amended Agreement have been duly executed and delivered by Company and are the legally valid and binding obligations of Company, enforceable against Company in accordance with their respective terms, except as may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws

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relating to or limiting creditors' rights generally or by equitable principles relating to enforceability.

F. Incorporation of Representations and Warranties From Credit Agreement. The representations and warranties contained in Section 4 of the Credit Agreement are and will be true, correct and complete in all material respects on and as of the Second Amendment Effective Date to the same extent as though made on and as of that date, except to the extent such representations and warranties specifically relate to an earlier date, in which case they were true, correct and complete in all material respects on and as of such earlier date.

G. Absence of Default. No event has occurred and is continuing or will result from the consummation of the transactions contemplated by this Amendment that would constitute an Event of Default or a Potential Event of Default.

Section 5. ACKNOWLEDGEMENT AND CONSENT

Company is a party to the Company Pledge Agreement, Company Security Agreement and the Auxiliary Pledge Agreements, in each case as amended through the Second Amendment Effective Date, pursuant to which Company has created Liens in favor of Administrative Agent on certain Collateral to secure the Obligations. Each Subsidiary Guarantor is a party to Subsidiary Guaranty, Subsidiary Pledge Agreement, Subsidiary Security Agreement and Subsidiary Patent and Trademark Security Agreement, in each case as amended through the Second Amendment Effective Date, pursuant to which such Subsidiary Guarantor has (i) guarantied the Obligations and (ii) created Liens in favor of Administrative Agent on certain Collateral to secure the obligations of such Subsidiary Guarantor under the Subsidiary Guaranty. Company and Subsidiary Guarantors are collectively referred to herein as the “Credit Support Parties”, and the Collateral Documents referred to above are collectively referred to herein as the “Credit Support Documents”.

Each Credit Support Party hereby acknowledges that it has reviewed the terms and provisions of the Credit Agreement and this Amendment and consents to the amendment of the Credit Agreement effected pursuant to this Amendment. Each Credit Support Party hereby confirms that each Credit Support Document to which it is a party or otherwise bound and all Collateral encumbered thereby will continue to guaranty or secure, as the case may be, to the fullest extent possible the payment and performance of all “Guarantied Obligations” and “Secured Obligations,” as the case may be (in each case as such terms are defined in the applicable Credit Support Document), including without limitation the payment and performance of all such “Guarantied Obligations” or “Secured Obligations,” as the case may be, in respect of the Obligations of Company now or hereafter existing under or in respect of the Amended Agreement.

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correct and complete in all material respects on and as of the Second Amendment Effective Date to the same extent as though made on and as of that date, except to the extent such representations and warranties specifically relate to an earlier date, in which case they were true, correct and complete in all material respects on and as of such earlier date.

Each Credit Support Party acknowledges and agrees that (i) notwithstanding the conditions to effectiveness set forth in this Amendment, such Credit Support Party is not required by the terms of the Credit Agreement or any other Loan Document to consent to the amendments to the Credit Agreement effected pursuant to this Amendment and (ii) nothing in the Credit Agreement, this Amendment or any other Loan Document shall be deemed to require the consent of such Credit Support Party to any future amendments to the Credit Agreement.

Section 6. MISCELLANEOUS

A. Reference to and Effect on the Credit Agreement and the Other Loan Documents.

(i) On and after the Second Amendment Effective Date, each reference in the Credit Agreement to “this Agreement”, “hereunder”, “hereof”, “herein” or words of like import referring to the Credit Agreement, and each reference in the other Loan Documents to the “Credit Agreement”, “thereunder”, “thereof” or words of like import referring to the Credit Agreement shall mean and be a reference to the Amended Agreement.

(ii) Except as specifically amended by this Amendment, the Credit Agreement and the other Loan Documents shall remain in full force and effect and are hereby ratified and confirmed.

(iii) The execution, delivery and performance of this Amendment shall not, except as expressly provided herein, constitute a waiver of any provision of, or operate as a waiver of any right, power or remedy of Administrative Agent or any Lender under, the Credit Agreement or any of the other Loan Documents.

B. Fees and Expenses. Company acknowledges that all costs, fees and expenses as described in subsection 10.2 of the Credit Agreement incurred by Administrative Agent, Arranger and their counsel with respect to this Amendment and the documents and transactions contemplated hereby shall be for the account of Company.

C. Headings. Section and subsection headings in this Amendment are included herein for convenience of reference only and shall not constitute a part of this Amendment for any other purpose or be given any substantive effect.

D. Applicable Law. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING WITHOUT LIMITATION SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.

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E. Counterparts; Effectiveness. This Amendment may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed an original, but all such counterparts together shall constitute but one and the same instrument; signature pages may be detached from multiple separate counterparts and attached to a single counterpart so that all signature pages are physically attached to the same document. This Amendment shall become effective upon the execution of a counterpart hereof by Company, Requisite Lenders and each of the Credit Support Parties and receipt by Company and Administrative Agent of written or telephonic notification of such execution and authorization of delivery thereof.

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AMENDED AND RESTATED
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IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered by their respective officers thereunto duly authorized as of the date first written above.

AMSCAN HOLDINGS, INC.

	By:	/S/ JAMES M. HARRISON
		James M. Harrison, President

AMSCAN INC., (for purposes of Section 4 only) as a Credit Support Party

	By:	/S/ JAMES M. HARRISON
		James M. Harrison,Executive Vice President

AM-SOURCE, INC., (for purposes of Section 4 only) as a Credit Support Party

	By:	/S/ GERALD C. RITTENBERG
		Gerald C. Rittenberg, President

TRISAR, INC., (for purposes of Section 4 only) as a Credit Support Party

	By:	/S/ GERALD C. RITTENBERG
		Gerald C. Rittenberg, President

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JCS REALTY CORP., (for purposes of Section 4 only) as a Credit Support Party

	By:	/S/ GERALD C. RITTENBERG
		Title: Gerald C. Rittenberg, President

SSY REALTY CORP., (for purposes of Section 4 only) as a Credit Support Party

	By:	/S/ GERALD C. RITTENBERG
		Gerald C. Rittenberg, President

ANAGRAM INTERNATIONAL, INC.,, (for purposes of Section 4 only) as a Credit Support Party

	By:	/S/ JAMES M. HARRISON
		James M. Harrison, Senior Vice President

ANAGRAM INTERNATIONAL HOLDINGS, INC., (for purposes of Section 4 only) as a Credit Support Party

	By:	/S/ JAMES M. HARRISON
		James M. Harrison, Senior Vice President

AMENDED AND RESTATED
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ANAGRAM INTERNATIONAL, LLC, (for purposes of Section 4 only) as a Credit Support Party

By:

Anagram International, Inc., Member

	By:	/S/ JAMES M. HARRISON
		James M. Harrison, Senior Vice President

And

By:

Anagram International Holdings, Inc., Member

	By:	/S/ JAMES M. HARRISON
		James M. Harrison, Senior Vice President

ANAGRAM EDEN PRAIRIE PROPERTY HOLDINGS LLC, (for purposes of Section 4 only) as a Credit Support Party

By:

Anagram International Holdings, Inc., Sole Member

	By:	/S/ JAMES M. HARRISON
		James M. Harrison, Senior Vice President

GOLDMAN SACHS CREDIT PARTNERS L.P., individually and as Arranger and Syndication Agent

	By:	/S/ ELIZABETH FISCHER
		Title: Authorized Signatory

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REVOLVING LOAN CREDIT AGREEMENT

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FLEET NATIONAL BANK, individually and as Administrative Agent

	By:	/S/ STEPHEN M. CURRAN
		Stephen M. Curran, Vice President

GENERAL ELECTRIC CAPITAL CORPORATION, as a Lender

	By:	/S/ THOMAS E. JOHNSONSTONE
		Thomas E. Johnstone, Duly Authorized Signatory

SOUTHERN PACIFIC BANK, as a Lender

	By:	/S/ CHERYL A. WASILEWSKI
		Cheryl A. Wasilewski, Senior Vice President

TRANSAMERICA BUSINESS CREDIT CORPORATION, as a Lender

	By:	/S/ PEG VARONLES
		V-P

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REVOLVING LOAN CREDIT AGREEMENT

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EX-4.B 3 0003.htm FIRST AMENDMENT TO RESTATED AXEL CREDIT AGREEMENT AMSCAN 10Q

AMSCAN HOLDINGS, INC.

FIRST AMENDMENT
AND LIMITED WAIVER
TO AMENDED AND RESTATED AXEL CREDIT AGREEMENT

This FIRST AMENDMENT TO AMENDED AND RESTATED AXEL CREDIT AGREEMENT (this “Amendment”) is dated as of September 19, 2000 and entered into by and among AMSCAN HOLDINGS, INC., a Delaware corporation (“Company”), the financial institutions listed on the signature pages hereof (“Lenders”), GOLDMAN SACHS CREDIT PARTNERS L.P., as arranger and syndication agent for Lenders (“Arranger”), and FLEET NATIONAL BANK, as administrative agent for Lenders (“Administrative Agent”), and is made with reference to that certain Amended and Restated Axel Credit Agreement dated as of September 17, 1998, as amended to the date hereof (as so amended, the “Credit Agreement”) by and among Company, Lenders, Arranger and Administrative Agent. Capitalized terms used herein without definition shall have the same meanings herein as set forth in the Credit Agreement.

RECITALS

WHEREAS, Company and Lenders desire to amend certain provisions of the Credit Agreement and to waive certain other provisions of the credit agreement in connection with Company's proposed development, construction and financing of the New Chester Distribution Center (as hereinafter defined on the terms and conditions set forth herein):

NOW, THEREFORE, in consideration of the premises and the agreements, provisions and covenants herein contained, the parties hereto agree as follows:

Section 1. AMENDMENTS TO THE CREDIT AGREEMENT

1.1 Amendments to Section 1: Provisions Relating to Defined Terms

Subsection 1.1 of the Credit Agreement is hereby amended by adding thereto the following definitions, which shall be inserted in proper alphabetical order:

“New Chester Distribution Center” means the new distribution center to be built by Company or one of its Subsidiaries in Chester, New York on land acquired after the date hereof.

“New Chester Distribution Center Collateral” means the land and improvements comprising the New Chester Distribution Center.

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development of the New Chester Distribution Center, provided that (i) such Indebtedness is secured only by liens permitted under subsection 6.2(iv), (ii) the aggregate amount of such Indebtedness does not exceed $21,000,000 at any time (reduced by any principal payments thereon) and (iii) the proceeds thereof are applied to repay Revolving Loans dollar for dollar to the extent there are Revolving Loans outstanding and (iv) the other terms thereof are reasonably acceptable to Administrative Agent and Arranger.

1.2 Amendment to Subsection 2.2: Interest on the Loans

The last sentence of Subsection 2.2A of the Credit Agreement is hereby amended by restating it in its entirety as follows:

“Subject to the provisions of subsections 2.2E and 2.7, the AXELs shall bear interest through maturity as follows:

(i) if a Base Rate AXEL, then at the sum of the Base Rate plus 1-5/8% per annum; or

(ii) if a Eurodollar Rate AXEL, then at the sum of the Adjusted Eurodollar Rate plus 2-5/8% per annum.”

1.3 Amendments to Section 6: Company's Negative Covenants

A. Subsection 6.1 – Indebtedness and Issuance of Disqualified Stock

Subsection 6.1 of the Credit Agreement is hereby amended by adding a new clause (xiii) to read in its entirety as follows:

“(xiii) Company and any of its Subsidiaries may become liable for the New Chester Distribution Center Permanent Financing.”

B. Subsection 6.2 – Liens and Related Matters

Subsection 6.2A of the Credit Agreement is amended by adding a new clause (iv) to read in its entirety as follows:

“and (iv) Liens on the New Chester Distribution Center Collateral securing the New Chester Distribution Center Permanent Financing, provided that such Liens attach only to the New Chester Distribution Center Collateral.”

Section 2. LIMITED WAIVER

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the New Chester Distribution Center Permanent Financing provided no Event of Default or Potential Event of Default shall then exist and be continuing or would result from such financing. Requisite AXEL Lenders further consent to Collateral Agent entering into any documents reasonably required upon the incurrence of the New Chester Distribution Center Permanent Financing, to release the lien of Collateral Agent on behalf of AXEL Lenders on the New Chester Distribution Center Collateral to the extent provided for in the immediately proceeding sentence.

B. Without limiting the generality of Section 9.6 of the Credit Agreement, the waiver set forth in this Section 2 shall be limited precisely as written and relates solely to the non-compliance by Company and its Subsidiaries with the provisions of subsection 5.9 of the Credit Agreement in the manner and to the extent set forth above and nothing herein shall be deemed to constitute a waiver of compliance with respect to subsection 5.9 in any other instance of to constitute a waiver of any other provision of the Credit Agreement or any other instrument or agreement referred to therein.

Section 3. CONDITIONS TO EFFECTIVENESS

A. On or before the First Amendment Effective Date, Company shall deliver to Lenders (or to Administrative Agent for Lenders with sufficient originally executed copies, where appropriate, for each Lender and its counsel) the following, each, unless otherwise noted, dated the First Amendment Effective Date:

1. A certificate of the corporate secretary of Company certifying as of the First Amendment Effective Date that its Certificate of Incorporation delivered on the Restatement Effective Date pursuant to subsection 4.1 of the Credit Agreement is in full force and effect without modification or amendment, together with a good standing certificate from the Secretary of State of the State of Delaware dated a recent date prior to the First Amendment Effective Date;

2. A certificate of the corporate secretary of Company certifying as of the First Amendment Effective Date that its Bylaws delivered on the Restatement Effective Date pursuant to subsection 4.1 of the Credit Agreement are in full force and effect without modification or amendment;

3. Resolutions of its Board of Directors approving and authorizing the execution, delivery, and performance of this Amendment, certified as of the First Amendment Effective Date by its corporate secretary or an assistant secretary as being in full force and effect without modification or amendment;

4. Signature and incumbency certificates of its officers executing this Amendment; and 4. Signature and incumbency certificates of its officers executing this Amendment; and4. Signature and incumbency certificates of its officers executing this Amendment; and

5. Executed copies of this Amendment.

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B. On or before the First Amendment Effective Date, all corporate and other proceedings taken or to be taken in connection with the transactions contemplated hereby and all documents incidental thereto not previously found acceptable by Administrative Agent, acting on behalf of Lenders, and by Arranger and its counsel shall be satisfactory in form and substance to Administrative Agent and to Arranger and its counsel, and Administrative Agent and Arranger and its counsel shall have received all such counterpart originals or certified copies of such documents as Administrative Agent and Arranger may reasonably request.

C. On or before the First Amendment Effective Date, Company shall have paid to each Lender which has delivered to Administrative Agent an executed counterpart of the Amendment on or before such date an amendment fee of 0.05% of such Lender’s AXELs then outstanding.

D. On or before the First Amendment Effective Date, Lenders shall have received originally executed copies of one or more favorable written opinions of counsel reasonably acceptable to Agents, dated the First Amendment Effective Date, regarding the (i) due incorporation and good standing of Borrower (ii) due authorization, execution and delivery of this Amendment, (iii) enforceability of this Amendment and the Amended Agreement (as defined in Section 4.A below) under New York law and (iv) the absence of any violation or conflict with New York law, any charter documents or bylaws or any injunction, order or decrees, resulting from the execution, delivery or performance of this Amendment or the Amended Agreement, and otherwise in form and substance reasonably satisfactory to Agents.

Section 4. COMPANY’S REPRESENTATIONS AND WARRANTIES

A. Corporate Power and Authority. Company has all requisite corporate power and authority to enter into this Amendment and to carry out the transactions contemplated by, and perform its obligations under, the Credit Agreement as amended by this Amendment (the “Amended Agreement”).

B. Authorization of Agreements. The execution and delivery of this Amendment and the performance of the Amended Agreement have been duly authorized by all necessary corporate action on the part of Company.

C. No Conflict. The execution and delivery by Company of this Amendment and the performance by Company of the Amended Agreement do not and will not (i) violate any provision of any law or any governmental rule or regulation applicable to Company or any of its Subsidiaries, the Certificate or Articles of Incorporation or Bylaws of Company or any of its Subsidiaries or any order, judgment or decree of any court or other agency of government binding on Company or any of its Subsidiaries, (ii) conflict with, result in a breach of or constitute (with due notice or lapse of time or both) a default under any Contractual Obligation of Company or any of its Subsidiaries, except for any breach or default which could not reasonably be expected to have a Material Adverse Effect, (iii) result in or require the creation or

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imposition of any Lien upon any of the properties or assets of Company or any of its Subsidiaries (other than Liens created under any of the Loan Documents in favor of Administrative Agent on behalf of Lenders), or (iv) require any approval of stockholders or any approval or consent of any Person under any Contractual Obligation of Company or any of its Subsidiaries, except for such approvals or consents which have been obtained on or before the First Amendment Effective Date and disclosed in writing to Lenders and such consents the failure of which to receive could not reasonably be expected to have a Material Adverse Effect.

D. Governmental Consents. The execution and delivery by Company of this Amendment and the performance by Company of the Amended Agreement do not and will not require any registration with, consent or approval of, or notice to, or other action to, with or by, any federal, state or other governmental authority or regulatory body the failure of which to receive could not reasonably be expected to cause a Material Adverse Effect.

E. Binding Obligation. This Amendment and the Amended Agreement have been duly executed and delivered by Company and are the legally valid and binding obligations of Company, enforceable against Company in accordance with their respective terms, except as may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or limiting creditors' rights generally or by equitable principles relating to enforceability.

F. Incorporation of Representations and Warranties From Credit Agreement. The representations and warranties contained in Section 4 of the Credit Agreement are and will be true, correct and complete in all material respects on and as of the First Amendment Effective Date to the same extent as though made on and as of that date, except to the extent such representations and warranties specifically relate to an earlier date, in which case they were true, correct and complete in all material respects on and as of such earlier date.

G. Absence of Default. No event has occurred and is continuing or will result from the consummation of the transactions contemplated by this Amendment that would constitute an Event of Default or a Potential Event of Default.

Section 5. ACKNOWLEDGEMENT AND CONSENT

Company is a party to the Company Pledge Agreement, Company Security Agreement and the Auxiliary Pledge Agreements, in each case as amended through the First Amendment Effective Date, pursuant to which Company has created Liens in favor of Administrative Agent on certain Collateral to secure the Obligations. Each Subsidiary Guarantor is a party to Subsidiary Guaranty, Subsidiary Pledge Agreement, Subsidiary Security Agreement and Subsidiary Patent and Trademark Security Agreement, in each case as amended through the First Amendment Effective Date, pursuant to which such Subsidiary Guarantor has (i) guarantied the Obligations and (ii) created Liens in favor of Administrative Agent on certain Collateral to secure the obligations of such Subsidiary Guarantor under the Subsidiary Guaranty. Company and Subsidiary Guarantors are collectively referred to herein as the “Credit Support Parties”, and the Collateral Documents referred to above are collectively referred to herein as the “Credit Support Documents”.

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Each Credit Support Party acknowledges and agrees that any of the Credit Support Documents to which it is a party or otherwise bound shall continue in full force and effect and that all of its obligations thereunder shall be valid and enforceable and shall not be impaired or limited by the execution or effectiveness of this Amendment. Each Credit Support Party represents and warrants that all representations and warranties contained in the Amended Agreement and the Credit Support Documents to which it is a party or otherwise bound are true, correct and complete in all material respects on and as of the First Amendment Effective Date to the same extent as though made on and as of that date, except to the extent such representations and warranties specifically relate to an earlier date, in which case they were true, correct and complete in all material respects on and as of such earlier date.

Section 6. MISCELLANEOUS

A. Reference to and Effect on the Credit Agreement and the Other Loan Documents.

(i) On and after the First Amendment Effective Date, each reference in the Credit Agreement to “this Agreement”, “hereunder”, “hereof”, “herein” or words of like import referring to the Credit Agreement, and each reference in the other Loan Documents to the “Credit Agreement”, “thereunder”, “thereof” or words of like import referring to the Credit Agreement shall mean and be a reference to the Amended Agreement.

(ii) Except as specifically amended by this Amendment, the Credit Agreement and the other Loan Documents shall remain in full force and effect and are hereby ratified and confirmed.

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B. Fees and Expenses. Company acknowledges that all costs, fees and expenses as described in subsection 9.2 of the Credit Agreement incurred by Administrative Agent, Arranger and their counsel with respect to this Amendment and the documents and transactions contemplated hereby shall be for the account of Company.

C. Headings. Section and subsection headings in this Amendment are included herein for convenience of reference only and shall not constitute a part of this Amendment for any other purpose or be given any substantive effect.

D. Applicable Law. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING WITHOUT LIMITATION SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.

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IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered by their respective officers thereunto duly authorized as of the date first written above.

AMSCAN HOLDINGS, INC.

	By:	/S/ JAMES M. HARRISON
		James M. Harrison, President

AMENDED AND RESTATED
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AMSCAN INC., (for purposes of Section 4 only) as a Credit Support Party

	By:	/S/ JAMES M. HARRISON
		James M. Harrison,Executive Vice President

AMENDED AND RESTATED
AXEL CREDIT AGREEMENT

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AM-SOURCE, INC., (for purposes of Section 4 only) as a Credit Support Party

	By:	/S/ GERALD C. RITTENBERG
		Gerald C. Rittenberg, President

AMENDED AND RESTATED
AXEL CREDIT AGREEMENT

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TRISAR, INC., (for purposes of Section 4 only) as a Credit Support Party

	By:	/S/ GERALD C. RITTENBERG
		Gerald C. Rittenberg, President

AMENDED AND RESTATED
AXEL CREDIT AGREEMENT

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EXECUTION

JCS REALTY CORP., (for purposes of Section 4 only) as a Credit Support Party

	By:	/s/ GERALD C. RITTENBERG
		Gerald C. Rittenberg, President

AMENDED AND RESTATED
AXEL CREDIT AGREEMENT

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EXECUTION

SSY REALTY CORP., (for purposes of Section 4 only) as a Credit Support Party

	By:	/S/ GERALD C. RITTENBERG
		Gerald C. Rittenberg, President

AMENDED AND RESTATED
AXEL CREDIT AGREEMENT

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EXECUTION

ANAGRAM INTERNATIONAL, INC.,, (for purposes of Section 4 only) as a Credit Support Party

	By:	/S/ JAMES M. HARRISON
		James M. Harrison, Senior Vice President

AMENDED AND RESTATED
AXEL CREDIT AGREEMENT

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EXECUTION

ANAGRAM INTERNATIONAL HOLDINGS, INC., (for purposes of Section 4 only) as a Credit Support Party

	By:	/S/ JAMES M. HARRISON
		James M. Harrison, Senior Vice President

AMENDED AND RESTATED
AXEL CREDIT AGREEMENT

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EXECUTION

ANAGRAM INTERNATIONAL, LLC, (for purposes of Section 4 only) as a Credit Support Party

By:

Anagram International, Inc., Member

	By:	/S/ JAMES M. HARRISON
		James M. Harrison, Senior Vice President

And

By:

Anagram International Holdings, Inc., Member

	By:	/S/ JAMES M. HARRISON
		James M. Harrison, Senior Vice President

AMENDED AND RESTATED
AXEL CREDIT AGREEMENT

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ANAGRAM EDEN PRAIRIE PROPERTY HOLDINGS LLC, (for purposes of Section 4 only) as a Credit Support Party

By:

Anagram International Holdings, Inc., Sole Member

	By:	/S/ JAMES M. HARRISON
		James M. Harrison, Senior Vice President

AMENDED AND RESTATED
AXEL CREDIT AGREEMENT

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GOLDMAN SACHS CREDIT PARTNERS L.P., individually and as Arranger and Syndication Agent

	By:	/S/ ELIZABETH FISCHER
		Elizabeth Fischer, Authorized Signatory

AMENDED AND RESTATED
AXEL CREDIT AGREEMENT

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FLEET NATIONAL BANK, individually and as Administrative Agent

	By:	/S/ STEPHEN M. CURRAN
		Stephen M. Curran, Vice President

AMENDED AND RESTATED
AXEL CREDIT AGREEMENT

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GENERAL ELECTRIC CAPITAL CORPORATION, as a Lender

	By:	/S/ THOMAS E. JOHNSONSTONE
		Thomas E. Johnstone, Duly Authorized Signatory

AMENDED AND RESTATED
AXEL CREDIT AGREEMENT

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SOUTHERN PACIFIC BANK, as a Lender

	By:	/S/ CHERYL A. WASILEWSKI
		Cheryl A. Wasilewski, Senior Vice President

AMENDED AND RESTATED
AXEL CREDIT AGREEMENT

S-14

EXECUTION

TRANSAMERICA BUSINESS CREDIT CORPORATION, as a Lender

	By:	/S/ PEG VARONLES
		SVP

AMENDED AND RESTATED
AXEL CREDIT AGREEMENT

S-15

EXECUTION

MORGAN STANLEY DEAN WITTER PRIME INCOME TRUST, as a Lender

	By:	/S/ SHEILA A. FINNERTY
		Sheila A. Finnerty, Senior Vice President

AMENDED AND RESTATED
AXEL CREDIT AGREEMENT

S-16

EXECUTION

MERRILL LYNCH SENIOR FLOATING RATE FUND, INC., as a Lender

	By:
		Title:

AMENDED AND RESTATED
AXEL CREDIT AGREEMENT

S-17

EXECUTION

CRESCENT/MACH I PARTNERS, L.P., as a Lender

By:

TCW Asset Management Company, Its Investment Manager

	By:
		Title:

AMENDED AND RESTATED
AXEL CREDIT AGREEMENT

S-18

EXECUTION

SENIOR DEBT PORTFOLIO, as a Lender

By:

Boston Management and Research, as Investment Advisor

	By:
		Title:

AMENDED AND RESTATED
AXEL CREDIT AGREEMENT

S-19

EXECUTION

CYPRESS TREE INVESTMENT PARTNERS I LTD., as a Lender

By: /s/

Cypress Tree Investment Management Company, Inc., as Portfolio Manager

	By:
		Title: PRINCIPAL

AMENDED AND RESTATED
AXEL CREDIT AGREEMENT

S-20

EXECUTION

KZH ING-2 L.L.C., as a Lender

	By:
		Title:

AMENDED AND RESTATED
AXEL CREDIT AGREEMENT

S-21

EXECUTION

NORTHERN LIFE INSURANCE COMPANY, as a Lender

By:

ING Capital Advisors, LLC as Investment Advisors

	By:
		Title:

AMENDED AND RESTATED
AXEL CREDIT AGREEMENT

S-22

EXECUTION

KZH CRESCENT-2 LLC, as a Lender

	By:	/S/ SHARI GOLDSTEIN
		Title: Shari Goldstein, Authorized Agent

AMENDED AND RESTATED
AXEL CREDIT AGREEMENT

S-23

EXECUTION

INDOSUEZ CAPITAL FUNDING IV, L.P., as a Lender

	By:
		Title:

AMENDED AND RESTATED
AXEL CREDIT AGREEMENT

S-24

EXECUTION

KZH CYPRESS TREE I LLC, as a Lender

	By:	/S/ SHARI GOLDSTEIN
		Title: Shari Goldstein, Authorized Agent

AMENDED AND RESTATED
AXEL CREDIT AGREEMENT

S-25

EXECUTION

WADDELL & REED FINANCIAL, INC., as a Lender

	By:	/S/ JOHN E. SUNDER, JR. 8/3/00
		Title: Sr. Vice President

AMENDED AND RESTATED
AXEL CREDIT AGREEMENT

S-26

EXECUTION

THE TORONTO DOMINION BANK, as a Lender

	By:	/S/ DAVID G. PARKER
		David G. Parker, Vice President

AMENDED AND RESTATED
AXEL CREDIT AGREEMENT

S-27

EXECUTION

CYPRESS TREE INSTITUTIONAL FUND, LLC, as a Lender

By:

Cypress Tree Investment Management Company, Inc., Its Managing Member

	By:	/S/
		Title: PRINCIPAL

AMENDED AND RESTATED
AXEL CREDIT AGREEMENT

S-28

EXECUTION

CYPRESS TREE SENIOR FLOATING RATE FUND, as a Lender

By:

Cypress Tree Investment Management Company, Inc., as Portfolio Manager

	By:	/S/
		Title: PRINCIPAL

AMENDED AND RESTATED
AXEL CREDIT AGREEMENT

S-29

EXECUTION

KZH CRESCENT 3 LLC, as a Lender

	By:	/S/ SHARI GOLDSTEIN
		Title: Shari Goldstein, Authorized Agent

AMENDED AND RESTATED
AXEL CREDIT AGREEMENT

S-30

EXECUTION

KZH ING 3 LLC, as a Lender

	By:
		Title:

AMENDED AND RESTATED
AXEL CREDIT AGREEMENT

S-31

EXECUTION

PILGRIM PRIME RATE TRUST, as a Lender

By:

Pilgrim Investments, Inc. as its investment manager

	By:	/s/ JASON GROOM
		Title: Jason Groom Vice President

AMENDED AND RESTATED
AXEL CREDIT AGREEMENT

S-32

EXECUTION

TCW LEVERAGE INCOME TRUST II, L.P., as a Lender

By:

TCW Advisers (Bermuda), Ltd., as General Partner

	By:
		Name: Mark L. Gold Title: Managing Director

By:

TCW Investment Management Company, as Investment Adviser

	By:
		Title:

AMENDED AND RESTATED
AXEL CREDIT AGREEMENT

S-33

EXECUTION

PILGRIM AMERICA HIGH INCOME INVESTMENT LTD., as a Lender

By:

Pilgrim Investments, Inc. as its investment manager

	By:	/s/ JASON GROOM
		Title: Jason Groom Vice President

AMENDED AND RESTATED
AXEL CREDIT AGREEMENT

S-34

EXECUTION

ARCHIMEDES FUNDING II LTD., as a
Lender

	By:
		Title:

AMENDED AND RESTATED
AXEL CREDIT AGREEMENT

S-35

EXECUTION

CYPRESS TREE INVESTMENT
PARTNERS II LTD., as a Lender

By:

Cypress Tree Investment Management Company, Inc., as Portfolio Manager

	By:
		Title: PRINCIPAL

AMENDED AND RESTATED
AXEL CREDIT AGREEMENT

S-36

EXECUTION

MERRILL LYNCH PRIME RATE
PORTFOLIO, as a Lender

By:

Merrill Lynch Asset Management L.P., as Investment Adviser;

	By:
		Title:

AMENDED AND RESTATED
AXEL CREDIT AGREEMENT

S-37

EXECUTION

HARCH CLO I LTD., as a Lender

	By:	/S/ MICHAEL E. LEWITT
		Michael E. Lewitt, Authorized Signatory

AMENDED AND RESTATED
AXEL CREDIT AGREEMENT

S-38

EXECUTION

EX-10 4 0004.htm AGREEMENT BETWEEN OWNER AND CONTRACTOR Amscan 10-Q

Standard Form of Agreement Between Owner and
Contractor where the basis of payment is a STIPULATED SUM

THIS DOCUMENT HAS IMPORTANT LEGAL CONSEQUENCES. CONSULTATION WITH AN ATTORNEY IS ENCOURAGED WITH RESPECT TO ITS COMPLETION OR MODIFICATION. AUTHENTICATION OF THIS ELECTRONICALLY DRAFTED AIA DOCUMENT MAY BE MADE BY USING AIA DOCUMENT D401.

AIA Document A201-1997, General Conditions of the Contract for Construction, is adopted in this document by reference. Do not use with other general conditions unless this document is modified.

This document has been approved and endorsed by The Associated General Contractors of America.

Copyright 1915, 1918, 1925, 1937, 1951, 1958, 1961, 1963, 1967, 1974, 1977, 1987,© 1997 by The American Institute of Architects. Reproduction of the material herein or substantial quotation of its provisions without written permission of the AIA violates the copyright laws of the United States and will subject the violator to legal prosecution.

AGREEMENT made as of the 14th day of September in the year of 2000.
(In words, indicate day, month and year)

BETWEEN the Owner:
(Name, address and other information)
AMSCAN, INC.
32 Leone Lane
Chester, N.Y. 10918

and the Contractor
(Name, address and other information)
CLAYCO CONSTRUCTION COMPANY, INC.
2199 Innerbelt Business Center Drive St.
Louis, Missouri 63114

The Project is:
(Name and location)
Design and construction of an office warehouse/distribution center, consisting of an approximately 526,566 square feet on approximately 50 acres of land located at 47 Elizabeth Drive, Chester, New York (the “Site”).

AIA DOCUMENT Al01 -OWNER - CONTRACTOR AGREEMENT - 1997 EDITION - AIA - COPYRIGHT 1997 - THE AMERICAN INSTITUTE OF ARCHITECTS, 1735 NEW YORK AVENUE N.W., WASHINGTON, D.C. 20006-5292. WARNING: Unlicensed photocopying violates U.S. copyright laws and will subject the violator to legal prosecution. This document was electronically produced with permission of the AIA and can be reproduced without violation until the date of expiration as noted below.

Electronic Format A101-1997
User Document: AMSCAN -- 10/10/2000. AIA License Number 105838, which expires on 9/7/2001 -- Page # 1.

Printed in cooperation with The American Institute of Architects by Amscan Holdings, Inc. Amscan Holdings, Inc. vouches that the language in this document conforms exactly to the language used in AIA Document A101-1997.

The Architect is:
(Name, address and other information)
Mitchell and Hugeback Architects

The Owner and Contractor agree as follows.

ARTICLE 1 THE CONTRACT DOCUMENTS

The Contract Documents consist of this Agreement, Conditions of the Contract (General, Supplementary and other Conditions), Drawings, Specifications, Addenda issued prior to execution of this Agreement, other documents listed in this Agreement and Modifications issued after execution of this Agreement; these form the Contract, and are as fully a part of the Contract as if attached to this Agreement or repeated herein. The Contract represents the entire and integrated agreement between the parties hereto and supersedes prior negotiations, representations or agreements, either written or oral. An enumeration of the Contract Documents, other than Modifications, appears in Article 8.

ARTICLE 2 THE WORK OF THIS CONTRACT

The Contractor shall fully execute the Work described in the Contract Documents, except to the extent specifically indicated in the Contract Documents to be the responsibility of others.

ARTICLE 3 DATE OF COMMENCEMENT AND SUBSTANTIAL COMPLETION

3.1   The date of commencement of the Work shall be the date of this Agreement unless a different date is stated below or provision is made for the date to be fixed in a notice to proceed issued by the Owner.
(Insert sert the date of commencement if it differs from the date of this Agreement or, if applicable, state that the date will be fixed in a notice to proceed.)

October or the date of Contractor’s receipt of a fully exectued original of this Agreement, whichever occurs later.

If, prior to the commencement of the Work, the Owner requires time to file mortgages, mechanic’s liens and other security interests, the Owner’s time requirement shall be as follows:

3.2   The Contract Time shall be measured from the date of commencement.

3.3   The Contractor shall achieve Substantial Completion of the entire Work not later than ten (10) months~~days~~ from the date of commencement, ~~or as follows:~~
(Insert number of calendar days. Alternatively, a calendar date may be used when coordinated with the date of commencement. Unless stated elsewhere in the Contract Documents, insert any requirements for earlier Substantial Completion of certain portions of the Work.)
subject to any delays contemplated in paragraph 8.3.1 of the General Conditions (AIA Document No. A201) attached hereto, such completion date being the “Contract Time”

~~, subject to adjustments of this Contract Time as provided in the Contract Documents.~~
(Insert provisions, if any, for liquidated damages relating to failure to complete on time or for bonus payments for early completion of the Work.)
See Insert 3.3

ARTICLE 4 CONTRACT SUM
4.1 The Owner shall pay the Contractor the Contract Sum in current funds for the Contractor’s performance of the Contract. The Contract Sum shall be Nineteen Million Three Hundred Forty Thousand Five Hundred Four and NO/100 Dollars ($19,340,504.00), subject to additions additions and deductions as provided in the Contract Documents, subject to an increase of five and one half percent (5.5%) on all Change Orders, as defined in Paragraph 7.9 herein below, increasing the cost of the Work, and subject to a decrease of five and one half percent (5.5%) on all Change Orders decreasing the cost of the Work.

4.2 The Contract Sum is based upon the following alternates, if any, which are described in the Contract Documents and are hereby accepted by the Owner:
(State tate the numbers or other identification of accepted alternates. If decisions on other alternates are to be made by the Owner subsequent to the execution of this Agreement, attach a schedule of such other alternates showing the amount for each and the date when that amount expires)
Outline Specifications dated September 11, 2000, and consisting of twenty-two (22) pages attached hereto as Exhibit A (“Outline Specs”).

Electronic Format A101-1997
User Document: AMSCAN -- 10/10/2000. AIA License Number 105838, which expires on 9/7/2001 -- Page # 2.

4.3 Unit prices, if any, are as follows:
See Insert 4.4

ARTICLE 5 PAYMENTS

	5.1 PROGRESS PAYMENTS
	5.1.1 Based upon Applications for Payment submitted to the Owner ~~Architect~~ by the Contractor and ~~Certificates for Payment issued by the Architect~~, the Owner shall make progress payments on account of the Contract Sum to the Contractor as provided below and elsewhere in the Contract Documents.

5.1.2 The period covered by each Application for Payment shall be one calendar month ending on the last day of the month, or as follows:

5.1.3 Provided that an Application for Payment is received by the Owner ~~Architect~~ not later than the first day of a month, the Owner shall make payment to the Contractor not later than the twentieth (20th) day of the same month. If an Application for Payment is received by the Owner ~~Architect~~ after the application date fixed above, payment shall be made by the Owner not later than twenty (20) days after the Owner ~~Architect~~ receives the Application for Payment.

5.1.4 Each Application for Payment shall be based on the attached ~~most recent~~ schedule of values (as the same may be changed by Change Orders) submitted by the Contractor in accordance with the Contract Documents. The schedule of values shall allocate the entire Contract Sum among the various portions of the Work. The schedule of values shall be prepared in such form and supported by such data to substantiate its accuracy as the Owner ~~Architect~~ may require and shall be attached to this Contract. This schedule~~, unless objected to by the Architect,~~ shall be used as a basis for reviewing the Contractor’s Applications for Payment.

5.1.5 Applications for Payment shall indicate the percentage of completion of each portion of the Work as of the end of the period covered by the Application for Payment.

5.1.6 Subject to other provisions of the Contract Documents, the amount of each progress payment shall be computed as follows:

Take that portion of the Contract Sum properly allocable to completed Work as determined by multiplying the percentage completion of each portion of the Work by the share of the Contract Sum allocated to that portion of the Work Work in the schedule of values, less retainage of five percent (5%). ~~Pending final determination of cost to the Owner of charges in the Work, amounts not in dispute shall be included as provided in Subparagraph 7.3.8 of AIA Document A201 1997~~;

Add that portion of the Contract Sum properly allocable to materials and equipment delivered and suitably stored at the site for subsequent incorporation in the completed construction (or, if approved in advance by the Owner, suitably suitably stored off the site at a location agreed upon in writing), as provided in Paragraph 9.3.2 of AIA Document A201-1997, less retainage of five percent (5%);

Subtract the aggregate of previous payments made by the Owner; and

Subtract amounts, if any, for which the Owner~~Architect~~ has withheld all or a portion of a progress ~~or nullified a~~ ~~Certificate for Payment~~payment as provided in Paragraph 9.5 of AIA Document A201-1997.

5.1.7 The progress payment amount determined in accordance with Subparagraph 5.1.6 shall be further modified under the following circumstances:

Add, upon Substantial Completion of the Work, a sum sufficient to increase the total payments to the full amount of the the Contract Sum, less such amounts ~~as the Architect shall determine~~ for incomplete Work determined pursuant to Paragraph 9.8.4 of the AIA Document A201-1997, retainage applicable to such work and unsettled claims; and

Electronic Format A101-1997
User Document: AMSCAN -- 10/10/2000. AIA License Number 105838, which expires on 9/7/2001 -- Page # 3.

(Subparagraph 9.8.5 of AIA Document A201-1997 requires release of applicable retainage upon Substantial Completion of Work with consent of surety, if any.)

Add, if final completion of the Work is thereafter materially delayed through no fault of the Contractor, any additional amounts payable in accordance with Subparagraph 9.10.3 of AIA Document A201-1997.

5.1.8 Reduction or limitation of retainage, if any, shall be as follows:

(If it is intended, prior to Substantial Completion of the entire Work, to reduce or limit the retainage resulting from the percentages inserted in Clauses 5.1.6.1 and 5.1.6.2 above, and this is not explained elsewhere in the Contract Documents, insert here provisions for such reduction or limitation.)

If any Subcontractor performing sitework, tilt-up concrete work, structure steel worrk or flatwork fully performs all of its obligations under its Subcontract and the Contractor has approved such work, then upon request of the Contractor, the Owner shall release the full amount of the retainage for such Subcontractor to the Contractor for payment to the Subcontractor.

5.1.9 Except with the Owner’s prior approval, the Contractor shall not make advance payments to suppliers for materials or equipment which have not been delivered and stored at the site.

	5.2 FINAL PAYMENT
	5.2.1 Final payment, constituting the entire unpaid balance of the Contract Sum, shall be made by the Owner to the Contractor when:

the Contractor has fully performed the Contract except for the Contractor’s responsibility to correct Work as provided in Subparagraph 12.2.2 of AIA Document A201-1997, and to satisfy other requirements, if any, which extend beyond final payment; and

~~a final Certificate for Payment has been issued by the Architect~~Paragraph 9.10 of AIA Document A201-1997 has been satisfied.

5.1.8 The Owner’s final payment to the Contractor shall be made no later than 30 days after the conditions of paragraph 9.10 Document A201-1997 have been satisfied. ~~issuance of the Architect’s final Certificate for Payment, or as follows:~~

ARTICLE 6 TERMINATION OR SUSPENSION

6.1 The Contract may be terminated by the Owner or the Contractor as provided in Article 14 of AIA Document A201-1997.

6.2 The Work may be suspended by the Owner as provided in Article 14 of AIA Document A201-1997.

ARTICLE 7 MISCELLANEOUS PROVISIONS

7.1 Where reference is made in this Agreement to a provision of AIA Document A201-1997 or another Contract Document, the reference refers to that provision as amended or supplemented by other provisions of the Contract Documents.

7.2 Payments due and unpaid under the Contract shall bear interest from the date payment is due at the rate stated below, or in the absence thereof, at the legal rate prevailing from time to time at the place where the Project is located.
(Insert rate of interest agreed upon, if any.)
One percent over the "prime rate" as reported by The Wall Street Journal.

(Usury laws and requirements under the Federal Truth in Lending Act, similar state and local consumer credit laws and other regulations at the Owner’s and Contractor’s principal places of business, the location of the Project and elsewhere may affect the validity of this provision. Legal advice should be obtained with respect to deletions or modifications, and also regarding requirements such as written disclosures or waivers.)

7.3 The Owner's representative is:
(Name, address and other information)
Willard Finch
AMSCAN, INC.
32 Leone Lane
Chester, N.Y. 10918

Electronic Format A101-1997
User Document: AMSCAN -- 10/10/2000. AIA License Number 105838, which expires on 9/7/2001 -- Page # 4.

7.4 The Contractor's representative is:
(Name, address and other information)
Darrell E. Smith
Clayco Construction Company, Inc.
2199 Innerbelt Business Center Drive
St. Louis, MO 63114

7.5 Neither the Owner’s nor the Contractor’s representative shall be changed without ten days written notice to the other party.

7.6 Other provisions:
The Contractor will enter into a direct contractual relationship with the Architect, engineers, and other design professionals to provide the design of the Project. The Owner acknowledges and agrees that the Contractor is not a licensed architect or engineer and is not agreeing to perform services which require such a license in the State in which the Project is located. Such services will be performed by licensed architects, engineers and design build subcontractors under separate agreements. The fees and expenses of those design professionals contracted and paid for by the Contractor shall be included as part of the Contract Sum.

.1         If there is any conflict among the Contract Documents then the following priority shall be given to the same: first, the provisions of this Agreement (A101) shall govern, second, the provisions of the General Conditions (A201) shall govern, third, the Outline Specs shall govern (provided that as to design matters, the Outline Specs shall govern over A101 or A201), and fourth, the most recent version of any drawings approved by Owner and Contractor in writing shall govern.
.2         The Owner represents that it is the owner of fee simple title to the land on which the Project will be constructed. Attached to this Contract is a true copy of the deed to the land by which the Owner received title to the same.
          7.8
If the Owner requests a change in the Work by giving the Contractor a written change order request (a “CO Request”), setting forth in detail the nature of the requested change, then the Contractor shall furnish to the Owner a written offer to make the requested change, which offer shall include the Contractor’s determination of the changes, if any, to the (i) Contract Sum, (ii) the schedule of values or (iii) the Contract Time. If the Owner accepts such offer in writing and without revision, then such offer and acceptance, together, shall constitute a “Change Order” which shall operate to amend this Contract as provided herein. If the Owner accepts such offer subject to revisions not previously agreed to be the Contractor in writing, then such “acceptance” shall constitute a counteroffer by the Owner to the Contractor which the Contractor may either accept in writing or reject. If the Contractor accents such counteroffer in writing, the same shall constitute a Change Order. The Contractor shall have no obligation to perform any changes in the Work except pursuant to a Change Order made as provided herein.

ARTICLE 8 ENUMERATION OF CONTRACT DOCUMENTS

8.1 The Contract Documents, except for Modifications issued after execution of this Agreement, are enumerated as follows:

8.1.1 The Agreement is this executed 1997 edition of the Standard Form of Agreement Between Owner and Contractor, AIA Document A101-1997.

8.1.2 The General Conditions are the 1997 edition of the General Conditions of the Contract for Construction, AIA Document A201-1997, as modified in the form attached to this Contract.

8.1.3 ~~The Supplementary and other Conditions of the Contract are those contained in the Project Manual dated , and are as follows:~~

Document

Title

Pages

8.1.4 The Specifications are ~~those contained in the Project Manual dated as in Subparagraph 8.1.3, and are~~ as follows: (Either ther list the Specifications here or refer to an exhibit attached to this Agreement.)

Section

Title

Pages

See the Outline Specs.

8.1.5 The Drawings are as follows, and are dated unless a different date is shown below:

Electronic Format A101-1997
User Document: AMSCAN -- 10/10/2000. AIA License Number 105838, which expires on 9/7/2001 -- Page # 5.

(Either list the Drawings here or refer to an exhibit attached to this Agreement.)

Number

Title

Date

8.1.6 The Addenda, if any, are as follows:

Number

Title

Pages

Portions of Addenda relating to bidding requirements are not part of the Contract Documents unless the bidding requirements are also enumerated in this Article 8.

8.1.7 Other documents, if any, forming part of the Contract Documents are as follows:
(List here any additional documents that are intended to form part of the Contract Documents. AIA Document A201-1997 provides that bidding requirements such as advertisement or invitation to bid, Instructions to Bidders, sample forms and the Contractor’s bid are not part of the Contract Documents until enumerated in this Agreement. They should be listed here only if intended to be part of the Contract Documents.)
Schedule of Inserts to Clayco Construction AIA Document A101-1997 and AIA Document A201-1997 (attached hereto and consisting of 17 pages). All references in this AIA Document A101-1997 or in the AIA Document A201-1997 to “Insert” shall mean such attached Schedule of Inserts.

This Agreement is entered into as of the day and year first written above and is executed in at least three original copies, of which one is to be delivered to the Contractor, one to the Architect for use in the administration of the Contract, and the remainder to the Owner.

		/s/ Michael Murphy
OWNER (Signature)		CONTRACTOR (Signature)
AMSCAN, INC.		CLAYCO CONSTRUCTION COMPANY, INC.
By: /s/ James M. Harrison, Exec. V.P.		By: MICHAEL MURPHY
(Printed name and title) James M. Harrison, Exec. V.P.		(Printed name and title) Senior V.P. & CFO

Insert A: THIS AGREEMENT CONTAINS A BINDING ARBITRATION PROVISION WHICH MAY BE ENFORCED BY

THE PARTIES

Electronic Format A101-1997
User Document: AMSCAN -- 10/10/2000. AIA License Number 105838, which expires on 9/7/2001 -- Page # 6.

EX-27 5 0005.txt FINANCIAL DATA SCHEDULE
5 This Schedule contains summary financial data extracted from the consolidated financial statements of Amscan Holdings, Inc. as of September 30, 2000 and for the nine months then ended and is qualified in its entirety by reference to such statements. 0001024729 Amscan Holdings, Inc. 1,000 9-MOS DEC-31-2000 JAN-01-2000 SEP-30-2000 756 0 71,199 (5,944) 67,365 143,493 112,800 (50,408) 274,908 56,076 262,488 0 0 0 (87,714) 274,908 239,500 239,500 150,698 150,698 56,953 4,817 19,768 11,923 4,710 7,166 0 0 0 7,166 0 0

~~-----END PRIVACY-ENHANCED MESSAGE-----~~

F O R M 10 - Q

September 30, 2000

Table of Contents

Note 1 - Organization and Description of Business

Note 2 - Basis of Presentation

Note 3 - Inventories

Note 4 - Income Taxes

Note 5 - Comprehensive Income

Note 6 - Capital Stock

Note 7 - Segment Information

Note 8 - Provision for (Reduction of) Doubtful Accounts

Note 9 - Legal Proceedings

Note 10 –Subsequent Event

Note 11 – Recently Issued Accounting Standards

Results of OperationsPercentage of Net Sales

Results of OperationsPercentage of Net Sales

Liquidity and Capital Resources

Cash Flow Data – Nine Months Ended September 30, 2000 Compared to Nine Months Ended September 30, 1999

Legal Proceedings

Recently Issued Accounting Standards

“Safe Harbor” Statement under Private Securities Litigation Reform Act of 1995

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Part II

Item 6. Exhibits and Reports on Form 8-K

SIGNATURE

AMSCAN HOLDINGS, INC.

FIRST AMENDMENT AND LIMITED WAIVER TO AMENDED AND RESTATED AXEL CREDIT AGREEMENT

Results of OperationsPercentage
of Net Sales

Results of Operations
Percentage of Net Sales

FIRST AMENDMENT
AND LIMITED WAIVER
TO AMENDED AND RESTATED AXEL CREDIT AGREEMENT