<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 2, 1996
REGISTRATION NO. 333-14107
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
AMSCAN HOLDINGS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 5110 13-3911462
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
80 GRASSLANDS ROAD
ELMSFORD, NEW YORK 10523
(914) 345-2020
(ADDRESS, INCLUDING ZIP CODE AND TELEPHONE NUMBER, INCLUDING
AREA CODE OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
JAMES M. HARRISON
CHIEF FINANCIAL OFFICER
AMSCAN HOLDINGS, INC.
80 GRASSLANDS ROAD
ELMSFORD, NEW YORK 10523
(914) 345-2020
(NAME, ADDRESS, INCLUDING ZIP CODE AND TELEPHONE NUMBER,
INCLUDING AREA CODE OF AGENT FOR SERVICE)
COPIES OF ALL COMMUNICATIONS, INCLUDING COMMUNICATIONS SENT
TO THE AGENT FOR SERVICE OF PROCESS, SHOULD BE SENT TO:
<TABLE>
<S> <C>
PAUL G. HUGHES, ESQ. ROBERT E. BUCKHOLZ, JR., ESQ.
CUMMINGS & LOCKWOOD SULLIVAN & CROMWELL
FOUR STAMFORD PLAZA, P.O. BOX 120 125 BROAD STREET
STAMFORD, CONNECTICUT 06904-0120 NEW YORK, NEW YORK 10004
(203) 327-1700 (212) 558-4000
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As
promptly as practicable after the effective date of this Registration Statement.
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED PER UNIT PRICE(1) REGISTRATION FEE(2)
- -----------------------------------------------------------------------------------------------------------
Common Stock, par value
$0.10 per share........... 6,152,500 shares $14 $86,135,000 $26,101.52
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(o) under the Securities Act of 1933.
(2) Of the total amount of the registration fee, the amount of $22,727.27 was
paid upon the filing of this Registration Statement with the Securities and
Exchange Commission on October 15, 1996.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
CROSS REFERENCE SHEET
SHOWING LOCATION IN PROSPECTUS OF INFORMATION REQUIRED BY
ITEMS OF FORM S-1
<TABLE>
<CAPTION>
REGISTRATION STATEMENT ITEM
NUMBER AND HEADING LOCATION IN PROSPECTUS
------------------------------------------ ------------------------------------------
<C> <S> <C>
1. Forepart of Registration Statement and
Outside Front Cover Page of
Prospectus.............................. Outside Front Cover Page
2. Inside Front and Outside Back Cover Pages
of Prospectus........................... Inside Front and Outside Back Cover Pages
of Prospectus
3. Summary Information, Risk Factors and
Ratio of Earnings to Fixed Charges...... Prospectus Summary; Risk Factors
4. Use of Proceeds........................... Use of Proceeds
5. Determination of Offering Price........... Underwriting
6. Dilution.................................. Risk Factors; Dilution
7. Selling Security Holders.................. Not applicable
8. Plan of Distribution...................... Outside Front Cover Page of Prospectus;
Underwriting
9. Description of Securities to be
Registered.............................. Description of the Company's Capital Stock
10. Interest of Named Experts and Counsel..... Validity of Common Stock; Experts
11. Information with Respect to the
Registrant.............................. Prospectus Summary; The Company;
Organization of the Company; Selected
Combined Financial Data; Management's
Discussion and Analysis of Financial
Condition and Results of Operations;
Supplemental Pro Forma Combined
Financial Statements (unaudited);
Business; Management of the Company;
Principal Stockholders; Financial
Statements
12. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities............................. Not applicable
</TABLE>
<PAGE> 3
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL
OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED DECEMBER 2, 1996
5,350,000 SHARES
LOGO
AMSCAN HOLDINGS, INC.
COMMON STOCK
(PAR VALUE $0.10 PER SHARE)
---------------------
The shares of Common Stock offered hereby are being sold by the Company. A
substantial portion of the net proceeds will be used by the Company to pay
subordinated indebtedness outstanding to the Company's principal stockholder.
See "Use of Proceeds."
Prior to this offering, there has been no public market for the Common
Stock of the Company. It is currently estimated that the initial public offering
price per share will be between $12 and $14. For factors to be considered in
determining the initial public offering price, see "Underwriting."
SEE "RISK FACTORS" ON PAGE 7 FOR CERTAIN CONSIDERATIONS RELEVANT TO AN
INVESTMENT IN THE COMMON STOCK.
Application has been made to have the Common Stock approved for quotation
on The Nasdaq Stock Market, Inc. under the symbol "AMSN."
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
---------------------
<TABLE>
<CAPTION>
INITIAL PUBLIC UNDERWRITING PROCEEDS TO
OFFERING PRICE DISCOUNT(1) COMPANY(2)
---------------------------------------------------------
<S> <C> <C> <C>
Per Share............................. $ $ $
Total(3).............................. $ $ $
</TABLE>
- ---------------
(1) The Company, certain of its operating subsidiaries and its principal
stockholder have agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933.
(2) Before deducting estimated expenses of $681,500 payable by the Company.
(3) The Company has granted the Underwriters an option for 30 days to purchase
up to an additional 802,500 shares at the initial public offering price per
share, less the underwriting discount, solely to cover over-allotments. If
such option is exercised in full, the total initial public offering price,
underwriting discount and proceeds to the Company will be $ ,
$ and $ , respectively. See "Underwriting."
---------------------
The shares offered hereby are offered severally by the Underwriters, as
specified herein, subject to receipt and acceptance by them and subject to their
right to reject any order in whole or in part. It is expected that certificates
for the shares will be ready for delivery in New York, New York on or about
, 1996, against payment therefor in immediately available funds.
GOLDMAN, SACHS & CO. ALEX. BROWN & SONS
INCORPORATED
---------------------
The date of this Prospectus is , 1996.
<PAGE> 4
[GRAPHIC MATERIAL: PHOTOGRAPHS OF THE COMPANY'S FACILITIES IN
LOUISVILLE, KY, HARRIMAN, NY, CHESTER, NY, ELMSFORD, NY,
TEMECULA, CA, CANADA AND EUROPE.]
The Company intends to furnish its stockholders with annual reports
containing audited financial statements and quarterly reports containing
unaudited financial statements for each of the first three quarters of each
year.
---------------------
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK
OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ STOCK MARKET, INC., IN
THE OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
2
<PAGE> 5
[GRAPHIC MATERIAL: PHOTOGRAPHS OF A SELECTION THE COMPANY'S
PRODUCTS AND THE COMPANY'S LOGO.]
<PAGE> 6
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and the combined financial statements (including the notes thereto)
appearing elsewhere in this Prospectus. Unless the context otherwise requires,
references herein to the "Company" refer to Amscan Holdings, Inc., a Delaware
corporation, and each of its subsidiaries, including those in which the Company
owns less than 100% of the capital stock, after the Organization (as defined
herein). Except as otherwise noted, the information contained in this Prospectus
assumes that the Underwriters' over-allotment option is not exercised. See
"Underwriting." The offering of shares of Common Stock described herein is
referred to as the "Offering." References herein to fiscal years are to the
fiscal years of the Company ended December 31 of the year specified.
THE COMPANY
The Company believes it is one of the leading designers, manufacturers and
distributors of seasonal and everyday party goods. With a product line
consisting of approximately 14,000 stock keeping units ("sku's"), the Company,
through its principal subsidiary, Amscan Inc. and affiliated companies, is a
complete source of paper and plastic party goods, including decorative tableware
such as plates, cups, napkins and tablecovers, accessories such as invitations
and balloons, and novelties such as games and favors. The Company's products are
sold in more than 20,000 retail outlets. The Company is a leading supplier to
the emerging party goods superstore distribution channel, where it has been able
to position itself as a responsive and comprehensive supplier of proprietary,
well designed and high quality products. The Company also distributes its
products to discount chains, mass merchandisers and specialty retailers. During
1995, the Company generated net sales, income from operations, net income and
pro forma net income of $167.4 million, $24.7 million, $17.4 million and $10.8
million, respectively. Net sales, income from operations, net income and pro
forma net income have grown at a compound annual rate of 21%, 26%, 29% and 28%,
respectively, from 1991 to 1995.
The Company strives to be an industry leader in the creation and design of
party goods. An in-house design staff of approximately 60 persons develops and
manages the Company's broad line of party goods for all occasions. The Company
currently offers approximately 200 coordinated product ensembles which enhance
the celebration of seasonal holidays, events such as birthdays and graduations
and general social gatherings, including theme-oriented celebrations such as
Hawaiian luaus and '50's parties. The Company's design staff keeps the Company's
product line contemporary and fresh by introducing new ensembles each year. For
example, in 1996 the Company introduced more than 50 new ensembles.
The Company is a vertically integrated manufacturer, which enables it to
control costs, manage inventory investment and respond quickly to customer
orders. The Company maintains state-of-the-art manufacturing facilities in New
York, Kentucky, Rhode Island and California which produce paper and plastic
plates, napkins and cups. These products account for approximately 50% of the
Company's net sales. Over the past five years, the Company has purchased or
leased new plant and equipment having an aggregate value of approximately $29
million. Products not manufactured directly by the Company are generally
supplied to the Company by independently-owned manufacturers located primarily
in China and elsewhere in the Far East. The Company believes that it has
developed a dependable group of manufacturers capable of producing products
which are consistent with the Company's high standards of quality.
The Company's sales and distribution capabilities are designed to provide a
high level of customer service. A direct employee sales force of approximately
62 sales professionals services over 5,000 retail accounts. In addition to this
seasoned sales team, the Company utilizes a select group of manufacturer
representatives to handle specific account situations. The principal sales and
marketing tool of the Company is its three separate annual catalogues, two for
seasonal products and one for everyday products. Products are distributed from
the Company's distribution centers
3
<PAGE> 7
located principally in New York and California using computer assisted systems
that permit the Company to receive and fill customer orders efficiently and
quickly.
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered by the Company.......... 5,350,000 shares
Common Stock to be outstanding after the
Offering................................... 22,000,000 shares(1)
Use of Proceeds.............................. To repay subordinated indebtedness
outstanding to the principal stockholder and
other stockholders of the Company and to
repay outstanding indebtedness to
unaffiliated lenders under the Company's
revolving credit agreement. See "Use of
Proceeds."
Proposed Nasdaq Stock Market Symbol.......... "AMSN"
</TABLE>
- ---------------
(1) Does not include 2,000,000 shares of Common Stock reserved for issuance upon
exercise of stock options granted or which may be granted under the
Company's stock option plan.
4
<PAGE> 8
SUMMARY HISTORICAL COMBINED FINANCIAL DATA
This table presents historical, pro forma and supplemental pro forma
combined financial information of Amscan Inc. and Affiliates. The summary
historical information presented below for the years ended December 31, 1991 and
1992 and for the nine months ended September 30, 1995 was derived from the
unaudited combined financial statements of Amscan Inc. and Affiliates as of such
dates. The summary historical financial information presented below for the
years ended December 31, 1993, 1994 and 1995 and for the nine months ended
September 30, 1996 were derived from the audited combined financial statements
of Amscan Inc. and Affiliates as of such dates. The summary historical financial
information should be read in conjunction with the "Selected Historical Combined
Financial Data" and related notes included elsewhere in this Prospectus. The pro
forma and supplemental pro forma data are unaudited and present the effect of
certain events that have occurred or will occur in connection with the
consummation of the Offering and the formation of the Company and should be read
in conjunction with "Selected Historical Combined Financial Data,"
"Capitalization," "Supplemental Pro Forma Combined Financial Statements" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
---------------------------------------------------------------------- -----------------------------------
SUPPLEMENTAL SUPPLEMENTAL
PRO FORMA PRO FORMA
1991 1992 1993 1994 1995 1995(3) 1995 1996 1996(3)
----------- ----------- -------- -------- -------- ------------ ----------- -------- ------------
($ IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT
DATA:
Net sales............ $77,263 $86,944 $108,934 $132,029 $167,403 $167,403 $ 128,314 $147,008 $147,008
Gross profit......... 27,086 30,379 36,278 45,281 58,749 58,749 46,595 54,147 54,147
Income from
operations(1)...... 9,639 9,892 11,716 14,516 24,669 27,000 21,962 24,372 27,484
Net income........... $ 6,303 $ 7,434 $ 8,455 $ 9,967 $ 17,434 $ 16,765 $ 18,095
======= ======= ======== ======== ======== ======== ========
Pro forma net
income(2).......... $ 4,047 $ 4,466 $ 5,237 $ 6,193 $ 10,762 $ 10,330 $ 10,974
======= ======= ======== ======== ======== ======== ========
Supplemental pro
forma net
income(3).......... $ 14,197 $ 14,678
======== ========
Supplemental pro
forma net income
per share.......... $ 0.65 $ 0.67
======== ========
Supplemental pro
forma weighted
average common
shares
outstanding(4)..... 22,000,000 22,000,000
========== ==========
</TABLE>
<TABLE>
<CAPTION>
AT SEPTEMBER 30, 1996
----------------------
AS
HISTORICAL ADJUSTED(6)
-------- ------------
<S> <C> <C>
BALANCE SHEET DATA:
Working capital.......................................................................................... $ 2,096 $ 64,774
======== ========
Total assets............................................................................................. $145,753 $156,331
======== ========
Short-term indebtedness(5)............................................................................... $ 86,173 $ 25,573
Long-term indebtedness(5)................................................................................ 12,412 12,412
-------- --------
Total indebtedness(5).................................................................................... $ 98,585 $ 37,985
======== ========
Stockholders' equity(6).................................................................................. $ 24,639 $ 89,227
======== ========
</TABLE>
5
<PAGE> 9
- ---------------
(1) In each of the five years ended December 31, 1995 and for the nine months
ended September 30, 1995 and 1996, special bonus arrangements totaling $0.1
million, $0.9 million, $1.1 million, $2.2 million, $2.6 million, and $2.4
million and $3.3 million, respectively, existed with certain members of
management. Upon consummation of the Offering, such special profit sharing
arrangements will be substantially modified and replaced by incentives tied
to the value of the Common Stock. See "Management of the Company --
Executive Compensation -- Employment Agreements" and " -- Stock Option
Plan."
(2) Prior to the consummation of the Offering, Amscan Inc. and affiliates
Am-Source, Inc., JCS Realty Corp. and SSY Realty Corp. elected to be taxed
as Subchapter S corporations under the Internal Revenue Code. The pro forma
net income amounts give effect to pro forma income taxes for each of the
periods at statutory rates (40.5%) assuming Amscan Inc., Am-Source, Inc.,
JCS Realty Corp. and SSY Realty Corp. had not elected Subchapter S
corporation status.
(3) Supplemental pro forma net income for 1995 and for the nine months ended
September 30, 1996 is higher than the pro forma net income shown for such
periods due to adjustments described in the notes to the Supplemental Pro
Forma Combined Statement of Operations. See "Supplemental Pro Forma Combined
Financial Statements."
(4) Represents shares expected to be issued and outstanding after the Offering.
See "Capitalization."
(5) Short-term indebtedness consists primarily of the Company's borrowings under
bank lines of credit, current installments of long-term debt and
subordinated debt due to Mr. Svenningsen and other stockholders. As of
September 30, 1996, subordinated debt due to Mr. Svenningsen amounted to
$34.2 million. Long-term indebtedness consists primarily of debt to
third-parties.
(6) As Adjusted balance sheet and stockholders' equity at September 30, 1996
give effect to certain adjustments as described in the notes to the
Supplemental Pro Forma Combined Balance Sheet. See "Supplemental Pro Forma
Combined Financial Statements."
6
<PAGE> 10
THE COMPANY
The Company believes it is one of the leading designers, manufacturers and
distributors of seasonal and everyday party goods. The business of the Company
was founded in 1947 to import and distribute party goods and novelty items.
Through internal growth and selective acquisitions, the Company has become a
fully integrated designer, manufacturer and multinational distributor of party
goods. The Company is a complete source of paper and plastic party goods,
including decorative tableware such as plates, cups, napkins and tablecovers,
accessories such as invitations and balloons, and novelties such as games and
favors. The Company's products are sold in more than 20,000 retail outlets. The
Company is a leading supplier to the emerging party goods superstore
distribution channel, where it has been able to position itself as a responsive
and comprehensive supplier of proprietary, well designed and high quality
products. The Company also distributes its products to discount chains, mass
merchandisers and specialty retailers.
The Company was incorporated on October 3, 1996 for the purpose of becoming
the holding company for Amscan Inc. and certain affiliated entities. See
"Organization of the Company." The Company's principal executive offices are
located at 80 Grasslands Road, Elmsford, New York 10523, and its telephone
number is (914) 345-2020.
RISK FACTORS
Prospective purchasers of shares of Common Stock of the Company being
offered hereby should consider carefully the following factors, as well as other
information set forth in the Prospectus, prior to making an investment in the
Common Stock.
IMPORTANCE OF CERTAIN CUSTOMERS
In recent years, there have been significant changes in the manner of
selling party goods at retail. An increasing percentage of party goods is being
sold through party goods superstores rather than through discount chains, mass
merchandisers and specialty retailers. The Company believes that the significant
role of party goods superstores in the sale of party goods will continue to
increase. This concentration of sales could adversely affect sales by the
Company to other party goods retailers such as specialty retailers.
Combined sales to the Company's two largest customers, Party City
Corporation and Party Stores Holdings, Inc., accounted in the aggregate for
approximately 7%, 10% and 17% of the Company's net sales in 1993, 1994 and 1995,
respectively. At December 31, 1995, these two party superstore retailers also
accounted for 12% of the Company's accounts receivable. Although the Company
believes its relationships with these customers to be very good, should either
of them significantly reduce their volume of purchases from the Company, the
Company's financial condition and results of operations could be adversely
affected.
CONCENTRATION OF CREDIT RISK
The concentration of sales of party goods into the party superstore channel
of distribution has resulted in a significant concentration of unsecured trade
receivables with such customers. These retailers are generally privately held
and in recent years have expanded rapidly. While the Company believes that
adequate provisions for bad debts have been made in its financial statements,
should it be unable to collect these receivables to any significant extent, the
Company's financial condition and results of operations would be adversely
affected.
DEPENDENCE ON KEY PERSONNEL
The Company's initial growth and development were largely attributable to
the vision of its Chairman of the Board and Chief Executive Officer, John A.
Svenningsen, and for the past six years have been dependent upon the services of
Gerald C. Rittenberg, President of the Company, and
7
<PAGE> 11
William S. Wilkey, Senior Vice President -- Sales of the Company. The loss of
the services of Messrs. Svenningsen, Rittenberg or Wilkey could have an adverse
effect on the Company's financial condition or results of operations. See
"Management of the Company." The Company does not maintain key-man life
insurance on any of these officers.
In the first quarter of 1996, Mr. Svenningsen was diagnosed with lymphoma.
Since that time, Mr. Svenningsen has been undergoing treatment.
CONTROL BY CERTAIN STOCKHOLDERS
Upon consummation of the Offering, Mr. Svenningsen will be the beneficial
owner of approximately 69% (or 66.6% if the Underwriters' over-allotment option
is exercised in full) of the outstanding shares of Common Stock. Until such
time, if ever, that there is a significant decrease in the percentage of
outstanding shares held by Mr. Svenningsen, Mr. Svenningsen will control the
Company through his ability to determine the outcome of votes of stockholders
regarding, among other things, election of directors and approval of significant
transactions. In addition, executive officers, directors and senior management
of the Company, including Mr. Svenningsen, will beneficially own an aggregate of
approximately 15,842,308 shares or 72.0% (or 69.5% if the Underwriters'
over-allotment option is exercised in full) of the Common Stock after the
Offering. See "Principal Stockholders."
IMPORTANCE OF IDENTIFYING DESIGN TRENDS AND CONSUMER PREFERENCES
In manufacturing and distributing party goods, the Company's success
depends in part on its ability to anticipate the tastes and preferences of party
goods retailers and consumers. The Company's strategy has depended to a
significant extent on the regular introduction of new designs which are
attractive and distinctive. The Company's failure to anticipate, identify or
react appropriately to changes in consumer tastes could, among other things,
lead to excess inventories and significant markdowns or to a shortage of
products, either of which could have an adverse effect on the Company's
financial condition or results of operations.
COMPETITION
The party goods industry is highly competitive. The Company competes with
many other companies, including smaller, independent specialty manufacturers as
well as divisions or subsidiaries of larger companies with greater financial and
other resources than those of the Company. Certain of these competitors control
licenses for widely-recognized images such as cartoon or motion picture
characters, which could provide them with a competitive advantage.
IMPACT OF CHANGING PAPER PRICES
The principal raw material used by the Company in its products is paper,
which accounts for approximately 35% of the cost of the production of the
Company's paper plates, cups and napkins. The price of paper is subject to
change due to numerous factors beyond the control of the Company. Any
significant increase in the cost of paper would adversely affect the Company's
raw material costs. Competitive conditions will determine how much of paper
price increases can be passed on by party goods retailers to the ultimate
consumers of the Company's products. If the Company is unable to pass future
paper price increases to the party goods retailers, the Company's financial
condition and results of operations would be adversely affected.
RISKS ASSOCIATED WITH FUTURE EXPANSION THROUGH ACQUISITIONS
The Company has, from time to time, expanded its product line as well as
further vertically integrated its operations, through strategic acquisitions.
The Company may pursue additional acquisitions of complementary businesses which
the Company believes may further these strategic objectives. There can be no
assurance that the Company will be able to locate suitable acquisition
8
<PAGE> 12
candidates, make such acquisitions on acceptable terms or effectively and
profitably integrate such acquisitions with its existing operations. Moreover,
to the extent Common Stock is issued to effect an acquisition, such issuance
could result in dilution to the Company's stockholders, and any additional
indebtedness incurred to pay for acquisition costs could adversely affect the
Company's liquidity and results of operation.
ABSENCE OF PUBLIC MARKET FOR THE COMMON STOCK; POSSIBLE VOLATILITY OF STOCK
PRICE
Prior to the Offering, there has been no public market for the Common
Stock. There can be no assurance that an active public market for the Common
Stock will develop or be sustained after the Offering. The initial public
offering price will be determined by negotiations between the Company and the
representatives of the Underwriters and may bear no relationship to the market
price of the Common Stock after the Offering. See "Underwriting." Subsequent to
the Offering, prices for the Common Stock will be determined by the market and
may be influenced by a number of factors, including the Company's operating
results, the depth and liquidity of the market for the Common Stock, investor
perceptions of the Company, the party goods industry in general and general
economic conditions.
ABSENCE OF DIVIDENDS
The Company does not intend to pay cash dividends on the Common Stock for
the foreseeable future. The Company is a holding company with no business
operations of its own. The Company therefore is dependent upon payments,
dividends and distributions from its subsidiaries for funds to pay its expenses
and to pay future cash dividends or distributions, if any, to holders of the
Common Stock. The Company currently intends to retain any earnings for working
capital, repayment of indebtedness, capital expenditures and general corporate
purposes. The revolving credit agreement to which the Company's principal
subsidiary is a party prohibits the payment by such subsidiary of any cash
dividends.
ANTI-TAKEOVER EFFECT OF CERTAIN CHARTER, CHANGE OF CONTROL AND STATUTORY
PROVISIONS
The Company's Certificate of Incorporation and By-Laws contain certain
provisions that may have the effect of substantially deterring a future takeover
of the Company. These provisions vest more power in the Company's Board of
Directors with respect to takeovers of the Company than applicable state
anti-takeover laws and are designed to encourage a potential acquiror to enter
into negotiations with the Company's Board of Directors. See "Description of the
Company's Capital Stock -- Certain Provisions of Delaware Law and the Company's
Certificate of Incorporation and By-Laws."
COMMON STOCK ELIGIBLE FOR FUTURE SALE
Upon consummation of the Offering, 22,000,000 shares of Common Stock will
be outstanding. Of these shares, the 5,350,000 shares sold in the Offering will
be freely transferable without restriction under the Securities Act of 1933, as
amended (the "Securities Act"), unless purchased by "affiliates" of the Company
as that term is defined in Rule 144 under the Securities Act. In addition,
approximately 230,769 shares of the shares of Common Stock (based on the
mid-point of the range of public offering prices set forth on the cover page of
this Prospectus) outstanding will be owned by the Company's Employee Stock
Ownership Plan (the "ESOP") or issued to domestic employees in connection with
stock bonuses. See "Shares Eligible for Future Sale." The remaining 16,419,231
outstanding shares of Common Stock held by existing stockholders, in addition to
the shares owned by the ESOP, will be "restricted securities" as that term is
defined in Rule 144, which are eligible for sale in the public market in
compliance with Rule 144 (including limits on the number of shares which may be
sold within specified periods). Three months after any such stockholder ceases
to be an "affiliate" of the Company, all of such shares held for more than three
years would then immediately become eligible for public sale without the
limitations of Rule 144. Subject to
9
<PAGE> 13
certain exceptions, the Company, John A. Svenningsen (who beneficially owns
15,182,308 shares of Common Stock) and the SSY Trusts (as defined below) have
agreed with the representatives of the Underwriters that they will not offer,
sell, contract to sell or otherwise dispose of any securities of the Company
including, but not limited to any securities that are exercisable or
exchangeable for, that represent the right to receive or that are convertible
into or whose exercise or settlement price is derivable from the price of, the
Common Stock or any substantially similar securities for a period of 180 days
after the date of this Prospectus without the prior written consent of the
representatives of the Underwriters. See "Principal Stockholders" and
"Underwriting." In addition, Mr. Rittenberg has agreed that he will not sell
shares of Common Stock received in the Organization for a period of 18 months
from the date of receipt of such shares except for transfers to Mr. Svenningsen
to repay certain indebtedness. The Company has granted certain stockholders a
one-time right to demand registration of the offer and sale of their Common
Stock under the Securities Act. Any such demand may not be exercised earlier
than one year from the date hereof. See "Shares Eligible for Future Sale."
No prediction can be made as to the effect, if any, that future sales of
shares of Common Stock or the availability of shares of Common Stock for future
sale would have on the market price of the Common Stock prevailing from time to
time. Sales of substantial amounts of Common Stock in the public market
following the Offering, or the perception that such sales could occur, could
have an adverse effect on prevailing market prices for the Common Stock.
DILUTION
Purchasers of Common Stock in the Offering will incur immediate and
substantial dilution of $9.29 (based on the mid-point of the range of public
offering prices set forth on the cover page of this Prospectus) in the net
tangible book value per share of the Common Stock from the initial public
offering price as compared to the increase in net tangible book value per share
that will accrue to existing stockholders. See "Dilution."
ORGANIZATION OF THE COMPANY
The Company was organized on October 3, 1996 for the purpose of becoming
the holding company for businesses previously conducted by the Company's
principal subsidiary Amscan Inc. and certain affiliated companies (Amscan Inc.,
together with such affiliated companies, the "Operating and Real Estate
Companies"). In connection with the Company's formation, John A. Svenningsen,
the Company's founder, purchased 1,000 shares of Common Stock from the Company
for $100 thereby becoming its sole stockholder. Mr. Svenningsen's purchase of
such shares was made solely to facilitate the organization of the Company.
The Operating and Real Estate Companies include companies previously owned
and independently controlled by Mr. Svenningsen, including Amscan Inc., Trisar,
Inc., which manufactures and distributes certain of the Company's products,
Amscan Distributors (Canada) Ltd. and Amscan Svenska AB, each of which is
engaged in the distribution of the Company's products, and JCS Realty Corp.
which is a holding company for certain real estate leased to the Company for use
in the operation of its business. The Operating and Real Estate Companies also
include companies in which Mr. Svenningsen owned less than 100% of the capital
stock, including, Am-Source, Inc., the Company's supplier of plastic plates,
cups and bowls, certain companies located in Great Britain, Australia, Germany
and Mexico engaged in the distribution of the Company's products and SSY Realty
Corp., which is a holding company for certain real estate leased to the Company.
The organization of the Company (the "Organization") encompasses consummation of
the transactions contemplated by three agreements to which the Company is a
party and which are summarized below.
The first of these agreements is among the Company, Mr. Svenningsen, Gerald
C. Rittenberg and certain trusts established for the benefit of Mr.
Svenningsen's children (the "SSY Trusts").
10
<PAGE> 14
Pursuant to this agreement, Mr. Svenningsen, Mr. Rittenberg and the SSY Trusts
exchanged all of the outstanding capital stock which they owned in the Operating
and Real Estate Companies including Amscan Inc. for shares of Common Stock of
the Company. For purposes of this exchange, the value of the Company as a whole
was based on the midpoint of the estimated range of the initial public offering
price, which was arrived at after discussions between Mr. Svenningsen and the
representatives of the Underwriters and reflects Mr. Svenningsen's and the
representatives' preliminary assessment of the factors set forth under
"Underwriting." The number of shares issued to Mr. Svenningsen took into account
the value of Am-Source, Inc. based on the arm's length negotiations with the
stockholders of Am-Source, Inc. other than Mr. Svenningsen, the shares issued to
Mr. Rittenberg pursuant to the agreement described below, the shares issued to
the SSY Trusts and the shares to be issued to the ESOP or in payment of stock
bonuses.
Based on the aggregate value of the Company as determined by Mr.
Svenningsen and the value of the shares of Common Stock issued in exchange
therefor being $13 per share (the mid-point of the range of the initial public
offering prices set forth on the cover page of this Prospectus), Mr. Svenningsen
received an aggregate of 15,053,736 shares of Common Stock of the Company (which
number includes the 1,000 shares of Common Stock issued to Mr. Svenningsen in
connection with the formation of the Company). An additional 230,769 shares of
Common Stock which otherwise would have been issued to Mr. Svenningsen in the
Organization will be issued to the ESOP or in payment of stock bonuses based on
an aggregate value of $3 million. 128,572 and 660,000 shares of Common Stock
were issued to the SSY Trusts and Mr. Rittenberg, respectively. The transactions
contemplated by this agreement among the Company, Mr. Svenningsen, Mr.
Rittenberg and the SSY Trusts described above were consummated immediately prior
to the date hereof.
The second of these agreements is between the Company and the stockholders
of Am-Source, Inc. other than Mr. Svenningsen pursuant to which such
stockholders exchanged all of the outstanding capital stock of Am-Source, Inc.
which they owned for shares of Common Stock. The number of shares of Common
Stock issued in this exchange was determined by dividing $7.5 million,
determined in an arm's-length negotiation among the parties to be the aggregate
value of such stockholders' shares of the capital stock of Am-Source, Inc., by
the initial public offering price of $13 (the mid-point of the range of the
initial public offering prices set forth on the cover page of this Prospectus)
for an aggregate of 576,923 shares of Common Stock. The exchange of shares of
the capital stock of Am-Source, Inc. by such stockholders occurred immediately
prior to the date hereof.
The third agreement is among Amscan Inc., John A. Svenningsen and Gerald C.
Rittenberg. Pursuant to this agreement, Mr. Rittenberg relinquished certain
rights under a previous employment agreement, dated November 27, 1991, entered
into between Amscan Inc. and Mr. Rittenberg including, the right to receive (a)
a bonus in an amount equal to 10% of the aggregate net profits of Amscan Inc.
and certain affiliates (as defined in the agreement), (b) 5% of the net selling
price upon the sale of Amscan Inc. or the sale by Mr. Svenningsen of
substantially all of his stock in Amscan Inc. and (c) in the event of an initial
public offering of the stock of Amscan Inc., shares of the stock of Amscan Inc.
equal to 5% of the shares of stock of Amscan Inc. issued and outstanding
immediately following the consummation of such initial public offering. In
exchange for the relinquishment of such rights, Mr. Rittenberg received a cash
payment of $3.4 million and a number of shares of stock of Amscan Inc., which
shares he exchanged for 660,000 shares of Common Stock, representing 3% of the
shares of Common Stock to be outstanding upon consummation of the Offering
(assuming no exercise of the Underwriters' over-allotment option) valued at
$8,580,000 based on an initial public offering price of $13 (the mid-point of
the range of the initial public offering prices set forth on the cover page of
this Prospectus). To the extent that the net proceeds from the Offering
(including any net proceeds of the exercise of the Underwriters' over-allotment
option) exceeds $69 million, Mr. Rittenberg will be entitled to an additional
cash payment equal to 5% of such excess. For a description of the terms of the
agreement relating to Mr. Rittenberg's continued
11
<PAGE> 15
employment by the Company, see "Management of the Company -- Executive
Compensation -- Employment Agreements."
The shares of Common Stock of the Company acquired by Mr. Svenningsen, the
SSY Trusts, the other stockholders of Am-Source, Inc. and Mr. Rittenberg
pursuant to these agreements constitute all of the issued and outstanding Common
Stock of the Company prior to consummation of the Offering.
Concurrently with the consummation of the transactions contemplated by the
agreements described above, the status of Amscan Inc., Am-Source, Inc., JCS
Realty Corp. and SSY Realty Corp., as Subchapter S corporations under the
Internal Revenue Code was terminated. Amscan Inc. has been treated for income
tax purposes as a Subchapter S corporation since 1986 and Am-Source, Inc., JCS
Realty Corp. and SSY Realty Corp. have been treated for income tax purposes as
Subchapter S corporations since incorporation. As a result, each of such
companies' stockholders prior to the Organization were required to pay taxes
based on the earnings of such companies, respectively, whether or not such
amounts had been distributed to such stockholders.
For a number of years and until the consummation of the Organization,
Amscan Inc., Am-Source, Inc., JCS Realty Corp. and SSY Realty Corp. made
periodic distributions to Mr. Svenningsen, as a stockholder of such companies,
in amounts approximately equal to Mr. Svenningsen's tax liabilities associated
with such companies' earnings, plus, in the case of Amscan Inc., Mr.
Svenningsen's living expenses. The portion of the earnings of Amscan Inc., Am-
Source, Inc., JCS Realty Corp. and SSY Realty Corp. owed to but not distributed
to Mr. Svenningsen were, with Mr. Svenningsen's consent, retained by Amscan
Inc., Am-Source, Inc., JCS Realty Corp. and SSY Realty Corp., respectively, as
working capital. Prior to the date hereof, all of such accumulated undistributed
earnings as well as dividends of accumulated earnings and capital contributions
were converted to subordinated debt owed to Mr. Svenningsen by the Company. Such
subordinated debt due to Mr. Svenningsen, in the amount of approximately $37
million, will be paid with a portion of the net proceeds of the Offering. See
"Use of Proceeds" and "Capitalization."
Am-Source, Inc. also made periodic distributions to each of the
stockholders of Am-Source, Inc. other than Mr. Svenningsen until the
consummation of the Organization, in amounts approximately equal to such
stockholder's tax liabilities associated with Am-Source, Inc.'s earnings. The
portion of Am-Source, Inc.'s accumulated earnings owed to but not distributed to
such Am-Source, Inc. stockholders were, with their consent, retained by
Am-Source, Inc. as working capital. Prior to the date hereof, all of such
accumulated undistributed earnings and undistributed earnings since September
30, 1996 were converted to subordinated debt owed to such previous stockholders
of Am-Source, Inc. by the Company. The subordinated debt owed to such
stockholders other than Mr. Svenningsen (approximately $2.0 million) will be
paid with a portion of the net proceeds of the Offering. See "Use of Proceeds"
and "Capitalization."
Upon the termination of the Subchapter S corporation status of Amscan Inc.,
Am-Source, Inc., JCS Realty Corp. and SSY Realty Corp., such companies became
subject to federal and state income taxes. The pro forma net income amounts and
the Supplemental Pro Forma Combined Statements of Operations set forth in this
Prospectus have been adjusted to include pro forma federal income tax provisions
as if Amscan Inc., Am-Source, Inc., JCS Realty Corp. and SSY Realty Corp. had
been Subchapter C corporations under the Internal Revenue Code during the
relevant periods.
12
<PAGE> 16
USE OF PROCEEDS
The net proceeds to be received by the Company from the sale of the shares
offered hereby are estimated to be $64,000,000 ($73,702,000 if the Underwriters'
over-allotment option is exercised in full), assuming a public offering price of
$13 per share (the mid-point of the range of the initial public offering prices
set forth on the cover page of this Prospectus) and after deducting estimated
underwriting discounts and other expenses of the Offering payable by the
Company.
Approximately $39 million of the net proceeds to the Company (representing
$35.9 million payable as of September 30, 1996 as reflected in Amscan Inc. and
Affiliates Combined Balance Sheet and $3.1 million of estimated distributable
earnings between September 30, 1996 and the consummation of the Offering), will
be used to repay certain subordinated indebtedness owed by the Company to Mr.
Svenningsen and the other stockholders of Am-Source, Inc. Such indebtedness
represents dividends and distributions declared but not paid by Amscan Inc.,
Am-Source, Inc., JCS Realty Corp. and SSY Realty Corp. to Mr. Svenningsen and by
Am-Source, Inc. to its other stockholders over a number of years while Amscan
Inc., Am-Source, Inc., JCS Realty Corp. and SSY Realty Corp. were Subchapter S
corporations. The balance of $25 million of the net proceeds will be used by the
Company to repay outstanding indebtedness to unaffiliated lenders under the
Company's revolving credit agreement, which indebtedness includes amounts
borrowed to make a one-time cash payment in the amount of $3.4 million to Mr.
Rittenberg under his employment agreement. See "Management of the
Company -- Executive Compensation -- Employment Agreements." The Company's
subordinated indebtedness to Mr. Svenningsen and the stockholders of Am-Source,
Inc. bears interest at prime (which at September 30, 1996 was 8.25%), plus 0.5%,
and has no fixed maturity. The Company's indebtedness to unaffiliated lenders
under its revolving credit agreement bears interest at an average rate of 6.8%
and matures in September 2000.
13
<PAGE> 17
CAPITALIZATION
The following table sets forth (i) the actual short-term indebtedness and
total capitalization of the Company at September 30, 1996, (ii) the adjustments
giving effect to the transactions described in "Organization of the Company" as
if they had been completed at that date and (iii) the pro forma short-term
indebtedness and total capitalization as adjusted to give effect to the Offering
at an assumed initial public offering price of $13 per share (the mid-point of
the range of initial public offering prices set forth on the cover page of this
Prospectus) and the application of the proceeds as set forth under "Use of
Proceeds."
<TABLE>
<CAPTION>
ADJUSTMENTS
PRIOR TO ADJUSTMENTS
THE ADJUSTED TO GIVE EFFECT AS
HISTORICAL OFFERING HISTORICAL TO THE OFFERING ADJUSTED
---------- ----------- -------- --------------- -----------
($ IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Short-term and long-term
indebtedness:
Loans payable.......... $ 47,955 $ 3,400(i) $ 51,355 $ (28,100)(vii) $ 23,255
Long-term indebtedness,
including current
portion............. 14,730 14,730 14,730
Subordinated and other
indebtedness to
stockholders........ 35,900 35,900 (35,900)(vii) --
-------- -------- --------
Total
indebtedness...... 98,585 101,985 37,985
-------- -------- --------
Stockholders' equity:
Common stock........... 393 (393)(ii) 1,665 535(viii) 2,200
1,518(ii)
66(i)
58(iii)
23(iv)
Additional paid-in
capital............. 1,490 (1,212)(ii) 19,211 63,465(viii) 82,676
8,514(i)
7,442(iii)
2,977(iv)
Retained earnings...... 23,490 (11,980)(i) 4,998 4,998
(1,000)(v)
(2,512)(vi)
(3,000)(iv)
Cumulative translation
adjustment.......... (647) (647) (647)
Treasury stock......... (87) 87(ii) -- --
-------- -------- --------
Total stockholders'
equity............ 24,639 25,227 89,227
-------- -------- --------
Total capitalization..... $ 123,224 $127,212 $ 127,212
======== ======== ========
</TABLE>
- ---------------
(i) Gives effect to the payments owed to Mr. Rittenberg in connection with the
termination of his prior employment agreement. See note (c) to the
Supplemental Pro Forma Combined Balance Sheet in the "Supplemental Pro
Forma Combined Financial Statements."
(ii) Gives effect to the issuance of shares of Common Stock to Mr. Svenningsen
and the SSY Trusts in connection with the Organization. See note (e) to
the Supplemental Pro Forma Combined Balance sheet in the "Supplemental Pro
Forma Combined Financial Statements."
14
<PAGE> 18
(iii) Gives effect to the issuance of shares of Common Stock for the
acquisition of an additional 50% of Am-Source, Inc. See note (b) to the
Supplemental Pro Forma Combined Balance Sheet in the "Supplemental Pro
Forma Combined Financial Statements."
(iv) Gives effect to the issuance of shares of Common Stock to establish the
ESOP and to pay stock bonuses. See note (f) to the Supplemental Pro Forma
Combined Balance Sheet in the "Supplemental Pro Forma Combined Financial
Statements."
(v) Gives effect to the accrual for obligations payable to certain executives
in connection with the termination of their prior employment agreements.
See note (d) to the Supplemental Pro Forma Combined Balance Sheet in the
"Supplemental Pro Forma Combined Financial Statements."
(vi) Gives effect to the net deferred tax liability as a result of timing
differences. See note (a) to the Supplemental Pro Forma Combined Balance
Sheet in the "Supplemental Pro Forma Combined Financial Statements."
(vii) Repayment of bank indebtedness and subordinated indebtedness to
stockholders. See note (g) to the Supplemental Pro Forma Combined Balance
Sheet in the "Supplemental Pro Forma Combined Financial Statements."
(viii) Net proceeds from the Offering. See note (h) to the Supplemental Pro
Forma Combined Balance Sheet in the "Supplemental Pro Forma Combined
Financial Statements."
15
<PAGE> 19
DILUTION
At September 30, 1996, the Company's net tangible book value was
approximately $24.6 million or $1.48 per share of Common Stock (based upon
16,650,000 shares representing the shares issued in the Organization). See
"Organization of the Company." Net tangible book value per share represents the
amount of total tangible assets of the Company reduced by the amount of total
liabilities, divided by the number of shares of Common Stock.
After giving effect to the Offering and the application of proceeds
therefrom, the net tangible book value at September 30, 1996 would have been
approximately $81.7 million or $3.71 per share, representing an immediate
increase in net tangible book value of $57.1 million or $2.59 per share and an
immediate dilution of $9.29 per share to new investors. The following table
illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share................... $13.00
Net tangible book value at September 30, 1996..................... $1.48
Increase attributable to price paid by investors in the
Offering........................................................ 2.23
-----
Adjusted net tangible book value per share after giving effect to
the Offering.................................................... 3.71
------
Dilution in net tangible book value per share to new investors in
the Offering.................................................... $ 9.29
======
</TABLE>
16
<PAGE> 20
SELECTED HISTORICAL COMBINED FINANCIAL DATA
The selected data presented below under the captions "Income Statement
Data" and "Balance Sheet Data" for, and as of the end of, each of the years in
the three-year period ended December 31, 1995 and as of and for the nine months
ended September 30, 1996, are derived from the combined financial statements of
Amscan Inc. and Affiliates which financial statements have been audited by KPMG
Peat Marwick LLP, independent certified public accountants. The combined
financial statements as of December 31, 1994 and 1995 and September 30, 1996,
and for each of the years in the three-year period ended December 31, 1995 and
for the nine months ended September 30, 1996, and the reports thereon, are
included elsewhere in this Prospectus. The selected data presented below under
the captions "Income Statement Data" and "Balance Sheet Data" for December 31,
1991 and December 31, 1992, and for each of the years then ended, and for the
nine-month period ended September 30, 1995, are derived from unaudited combined
financial statements of Amscan Inc. and Affiliates and include, in the opinion
of management, all adjustments (consisting only of normal recurring adjustments)
necessary to present fairly the combined financial position and results of
operations for such periods. The results of operations for the nine months ended
September 30, 1996 are not necessarily indicative of results to be expected for
the year ending December 31, 1996. The selected combined financial data should
be read in conjunction with Amscan Inc. and Affiliates' Combined Financial
Statements and the related notes thereto included elsewhere in this Prospectus,
and "Management's Discussion and Analysis of Financial Condition and Results of
Operations." The pro forma and supplemental pro forma data are unaudited and
intended to present the effect of certain events that have occurred or will
occur in connection with the consummation of the Offering and the Organization
and should be read in conjunction with "Supplemental Pro Forma Combined
Financial Statements" and notes thereto contained elsewhere in this Prospectus.
17
<PAGE> 21
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
---------------------------------------------------------- -------------------------
1991 1992 1993 1994 1995 1995 1996
----------- ----------- -------- -------- -------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
($ IN THOUSANDS, EXCEPT SHARE AMOUNTS)
INCOME STATEMENT DATA:
Net sales................... $77,263 $86,944 $108,934 $132,029 $167,403 $ 128,314 $ 147,008
Cost of sales............... 50,177 56,565 72,656 86,748 108,654 81,719 92,861
------- ------- -------- -------- -------- -------- --------
Gross profit................ 27,086 30,379 36,278 45,281 58,749 46,595 54,147
Selling expenses............ 6,967 8,770 9,780 11,309 12,241 8,893 8,691
General and administrative
expenses.................. 8,671 9,316 11,080 14,460 15,002 10,395 14,113
Art and development......... 1,709 1,551 2,596 2,796 4,256 2,936 3,671
Special bonuses(1).......... 100 850 1,106 2,200 2,581 2,409 3,300
------- ------- -------- -------- -------- -------- --------
Income from operations...... 9,639 9,892 11,716 14,516 24,669 21,962 24,372
Interest expense, net....... 2,787 2,092 2,304 3,843 5,772 4,386 4,569
Other (income)/expense,
net....................... (141) 16 308 82 (309) (409) (301)
------- ------- -------- -------- -------- -------- --------
Income before income taxes
and minority interests.... 6,993 7,784 9,104 10,591 19,206 17,985 20,104
Income taxes................ 617 297 348 464 731 498 767
Minority interests.......... 73 53 301 160 1,041 722 1,242
------- ------- -------- -------- -------- -------- --------
Net income.................. $ 6,303 $ 7,434 $ 8,455 $ 9,967 $ 17,434 $ 16,765 $ 18,095
======= ======= ======== ======== ======== ======== ========
PRO FORMA ADJUSTMENTS:
Net income, as above...... $ 6,303 $ 7,434 $ 8,455 $ 9,967 $ 17,434 $ 16,765 $ 18,095
Income taxes(2)........... 2,256 2,968 3,218 3,774 6,672 6,435 7,121
------- ------- -------- -------- -------- -------- --------
Pro forma net income(2)... $ 4,047 $ 4,466 $ 5,237 $ 6,193 $ 10,762 $ 10,330 $ 10,974
======= ======= ======== ======== ======== ======== ========
SUPPLEMENTAL PRO FORMA
DATA(3):
Income from operations.... $ 27,000 $ 27,484
Interest expense, net..... 3,086 2,467
Other (income), net....... (309) (301)
-------- --------
Income before income taxes
and minority
interests............... 24,223 25,318
Income taxes.............. 9,912 10,536
Minority interests........ 114 104
-------- --------
Net income................ $ 14,197 $ 14,678
======== ========
Supplemental pro forma net
income per share(3)....... $ 0.65 $ 0.67
======== ========
Pro forma weighted average
common shares
outstanding(4)............ 22,000,000 22,000,000
---------- ----------
---------- ----------
</TABLE>
<TABLE>
<CAPTION>
AT SEPTEMBER 30, 1996
AT DECEMBER 31, -------------------------
---------------------------------------------------------- AS
1991 1992 1993 1994 1995 HISTORICAL ADJUSTED(6)
----------- ----------- -------- -------- -------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital.......... $ 5,202 $ 7,765 $ 4,730 $ (438) $ 8,383 $ 2,096 $ 64,774
========= ========= ======== ======== ======== ========= =========
Total assets............. $56,978 $60,652 $ 80,090 $ 93,884 $114,601 $ 145,753 $ 156,331
========= ========= ======== ======== ======== ========= =========
Short-term
indebtedness(5)........ $22,070 $25,993 $ 37,271 $ 50,869 $ 58,541 $ 86,173 $ 25,573
Long-term
indebtedness(5)........ 11,728 11,116 11,852 8,800 12,284 12,412 12,412
----------- ----------- -------- -------- -------- ----------- -----------
Total indebtedness(5).... $33,798 $37,109 $ 49,123 $ 59,669 $ 70,825 $ 98,585 $ 37,985
========= ========= ======== ======== ======== ========= =========
Stockholders'
equity(6).............. $14,467 $15,550 $ 18,496 $ 20,820 $ 27,205 $ 24,639 $ 89,227
========= ========= ======== ======== ======== ========= =========
</TABLE>
18
<PAGE> 22
- ---------------
(1) In each of the five years ended December 31, 1995 and for the nine months
ended September 30, 1995 and 1996, special bonus arrangements existed with
certain members of management. Upon consummation of the Offering, such
special profit sharing arrangements will be substantially modified and
replaced by incentives tied to the value of the Common Stock. See
"Management of the Company -- Executive Compensation -- Employment
Agreements" and "-- Stock Option Plan."
(2) Prior to the consummation of the Offering, Amscan Inc., Am-Source, Inc., JCS
Realty Corp. and SSY Realty Corp. elected to be taxed as Subchapter S
corporations under the Internal Revenue Code. The pro forma net income
amounts give effect to pro forma income tax amounts for each of the periods
shown at statutory rates (40.5%) assuming Amscan Inc., Am-Source, Inc., JCS
Realty Corp. and SSY Realty Corp. had not elected Subchapter S corporation
status.
(3) Supplemental pro forma adjustments result in supplemental pro forma net
income for 1995 and for the nine months ended September 30, 1996 being
higher than the pro forma net income shown for such periods due to
adjustments described in the notes to the Supplemental Pro Forma Combined
Statement of Operations. See "Supplemental Pro Forma Combined Financial
Statements."
(4) Represents shares expected to be issued and outstanding after the Offering.
See "Capitalization."
(5) Short-term indebtedness consists primarily of the Company's borrowings under
bank lines of credit, current installments of long-term debt and
subordinated debt due to Mr. Svenningsen and other stockholders. As of
September 30, 1996, subordinated debt due to Mr. Svenningsen amounted to
$34.2 million. Long-term indebtedness consists primarily of debt to third
parties.
(6) As Adjusted balance sheet and stockholders' equity at September 30, 1996
give effect to certain adjustments as described in the notes to the
Supplemental Pro Forma Combined Balance Sheet. See "Supplemental Pro Forma
Combined Financial Statements."
19
<PAGE> 23
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
The party goods industry has experienced significant changes in both
distribution channels and product offering over the last several years. The
retail distribution of party goods has begun to shift from smaller independent
stores and designated departments within drug, discount or department store
chains to superstores dedicated to retailing party goods. In part due to the
success of the superstore channel, party goods manufacturers broadened their
product lines to support the celebration of a greater number of occasions. The
industry's growth has been directly affected by these changes.
The Company's revenues have increased from approximately $108.9 million in
1993 to $167.4 million in 1995, a compound annual growth rate of approximately
24%. The Company attributes this growth to its ability to create a broad range
of unique and innovative designs for its products and to work closely with its
customers to market and merchandise its products to consumers. In particular,
the Company experienced significant growth with its superstore customers.
Between 1993 and 1995, sales to party superstore customers increased from $27.7
million to $63.4 million, a 51% compound annual growth rate.
Revenues are generated from the sales of approximately 14,000 sku's
consisting of paper and plastic tableware, accessories and novelties for all
occasions. Tableware (plates, cups, napkins, tablecovers and cutlery) is the
Company's core product category, generating approximately 60% of revenues in
1995. Coordinated accessories (e.g., balloons and banners) and novelties (e.g.,
party favors) are offered to complement the Company's tableware products. To
serve its customers better, the Company has made significant additions to its
product line. Through increased spending on internal product development as well
as through acquisitions, the Company has had a net increase of approximately
6,300 sku's since 1991. Revenue growth primarily has been the result of
increased orders from its superstore customers (new stores and increased
same-store sales), increased international sales and price increases.
The Company's gross profit is influenced by its product mix and paper
costs. Products manufactured by the Company, primarily tableware, represented
approximately 50% of the Company's 1995 sales. The Company has made significant
additions to its manufacturing capacity which have allowed it to improve gross
margins. The Company believes that its manufacturing capabilities enable it to
lower product cost, ensure product quality and be more responsive to customer
demands. Paper represents approximately 35% of the cost of the Company's paper
tableware. The Company has historically been able to adjust its prices in
response to changes in paper prices.
FINANCIAL IMPACT OF ORGANIZATION OF THE COMPANY
In connection with the Offering and the Organization certain events have
occurred or will occur which will affect the financial position and results of
the Company. The following is a discussion of these events and the related
financial impact.
ORGANIZATION OF FOUNDER'S INTERESTS
The Company has been formed for the purpose of becoming the holding company
for the businesses previously conducted by Amscan Inc., certain affiliated
companies individually owned and independently controlled by Mr. Svenningsen,
and certain affiliated companies less than 100% owned by Mr. Svenningsen,
including Am-Source, Inc., the Company's supplier of plastic plates, cups and
bowls. The transfer of his ownership in these companies in exchange for shares
of Common Stock of the Company will be accounted for in a manner similar to a
pooling of interests and, as such, the historical cost basis of the accounts
will be carried over thereby not giving rise to any goodwill. See "Organization
of the Company."
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<PAGE> 24
During the periods presented, a business which was not material to the
combined business of the Company was acquired by Mr. Svenningsen and
subsequently disposed of. The associated balance sheet, statements of operations
and loss on disposition of the business are insignificant and have been excluded
from the accompanying combined financial statements.
ACQUISITION OF AM-SOURCE, INC.
The Company and the stockholders of Am-Source, Inc., other than Mr.
Svenningsen, have entered into an agreement pursuant to which such stockholders
have agreed to transfer their ownership in Am-Source, Inc. in exchange for
shares of Common Stock. The transaction will be accounted for as the purchase of
the 50% ownership of Am-Source, Inc. not currently owned and will give rise to
approximately $7.5 million of goodwill, which will be amortized over 30 years.
TERMINATION OF PRIOR EMPLOYMENT AGREEMENTS
Pursuant to an agreement between Amscan Inc. and Gerald C. Rittenberg, the
Company's President, Mr. Rittenberg has entered into a new employment agreement,
effective upon consummation of the Offering for a period of three years at a
base compensation of approximately $220,000 per year to be increased annually by
5%. Mr. Rittenberg has also agreed that his existing employment agreement will
terminate upon consummation of the Offering. The agreement which will be
terminated provided for Mr. Rittenberg to receive bonuses equal to approximately
10% of the aggregate net profits of Amscan Inc. and certain affiliates (as
defined in the agreement) in each of the next three years and an amount equal to
5% of the value of Amscan Inc. in the event of a change in control or an initial
public offering. In exchange for relinquishing these rights, Mr. Rittenberg will
receive a special one-time payment of approximately $3.4 million in cash and
shares of Common Stock of the Company equal to 3% of the total shares
outstanding (excluding any shares which might be issued upon exercise of the
Underwriters' over-allotment option) immediately following the Offering. The
aggregate value to be paid to Mr. Rittenberg in cash and stock is $12.0 million,
assuming an initial public offering price of $13 per share (the mid-point of the
range of the initial public offering prices set forth on the cover page of this
Prospectus). In addition, to the extent that the net proceeds of the Offering
(including any net proceeds of the exercise of the Underwriters' over-allotment
option) exceeds $69 million, Mr. Rittenberg will be entitled to an amount equal
to 5% of such excess. See "Management of the Company -- Executive
Compensation -- Employment Agreements."
During the periods presented, certain other executives also had employment
agreements which entitled them to receive a percentage of the pre-tax profits.
These arrangements for Mr. Rittenberg and such other executives between 1993 and
1995 ranged from 18% to 20% of pre-tax profits in the aggregate. In conjunction
with the Offering, these agreements have been substantially modified and these
bonus arrangements replaced by a combination of specific incentive plans and/or
cash payments and stock option grants. The aggregate of the special bonuses to
Mr. Rittenberg and the other executives and senior managers were $1.1 million,
$2.2 million and $2.6 million for the years ended December 31, 1993, 1994 and
1995, respectively. See "Management of the Company -- Executive
Compensation -- Employment Agreements."
ESTABLISHMENT OF AN EMPLOYEE STOCK OWNERSHIP PLAN AND PAYMENT OF STOCK BONUSES
In conjunction with the Offering, the Company will be establishing the ESOP
for the benefit of its domestic employees. At the Offering, there will be a
special one-time contribution of 230,769 shares of Common Stock of the Company
to the ESOP, subject to reduction as described in the next sentence, to be
allocated to participant accounts based upon a formula which is weighted based
upon both years of service and compensation. To the extent that application of
this formula would result in a contribution to the ESOP on behalf of a
participant which would exceed the maximum contribution permitted under
applicable law, the contribution to the ESOP for such participant will be
reduced to the maximum permitted and the balance determined under the formula
will be paid to
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<PAGE> 25
such participant in the form of a stock bonus. The Company does not contemplate
making any additional contributions to the ESOP until 1998, and any further
contributions will then be dependent upon a number of factors including Company
performance.
CHANGE IN CORPORATIONS FROM SUBCHAPTER S TO SUBCHAPTER C CORPORATIONS
Prior to the Offering, Amscan Inc., Am-Source, Inc., JCS Realty Corp. and
SSY Realty Corp. were operated as Subchapter S corporations for federal income
and, where available, for state income tax purposes. As a result, these
corporations did not record or pay any federal or state income tax expense.
Following the Offering, the Company will be taxed as a Subchapter C corporation.
It is anticipated that the Company will have statutory income tax rates of
approximately 40.5% following the Offering. The Company has presented pro forma
tax provisions and pro forma net income and per share data. These pro forma
amounts represent the income tax provision and the net income of the Company had
it been a Subchapter C corporation and thus subject to income tax for all
periods. See "Amscan Inc. and Affiliates Combined Financial Statements" and
"Supplemental Pro Forma Combined Financial Statements."
STOCKHOLDER DISTRIBUTIONS
As Subchapter S corporations, the accumulated profits of Amscan Inc.,
Am-Source, Inc., JCS Realty Corp. and SSY Realty Corp. will be distributed to
the stockholders through the effective date of the Offering. Net profits after
the consummation of the Offering will be added to retained earnings of the
Company and used to fund the capital requirements of the business. Additionally,
prior to the Offering, Amscan Inc. and certain affiliates will declare dividends
representing distributions of accumulated profits and a return of capital. These
amounts will be reflected as subordinated debt and will be repaid from the net
proceeds of the Offering. It is estimated that the total of these amounts,
including the pre-existing subordinated debt as of September 30, 1996, will be
approximately $39 million.
------------------
The impact of the termination of the prior employment agreements described
above and the establishment of the ESOP (or the payment of stock bonuses) will
result in a one-time charge to compensation expense of approximately $16.0
million. This expense, which will be recognized during the period that Amscan
Inc., Am-Source, Inc., JCS Realty Corp. and SSY Realty Corp. are Subchapter S
corporations, will be reflected in the Company's operations in the fiscal
quarter which includes the Offering.
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<PAGE> 26
RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
NINE MONTHS
ENDED SEPTEMBER
YEARS ENDED DECEMBER 31, 30,
------------------------- ---------------
1993 1994 1995 1995 1996
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Net sales............................... 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales........................... 66.7 65.7 64.9 63.7 63.2
------ ------ ------ ------ ------
Gross profit............................ 33.3 34.3 35.1 36.3 36.8
Operating expenses:
Selling................................. 9.0 8.5 7.4 6.9 6.0
General and administrative.............. 10.1 11.0 9.1 8.1 9.6
Art and development..................... 2.4 2.1 2.5 2.3 2.5
Special bonuses......................... 1.0 1.7 1.5 1.9 2.2
------ ------ ------ ------ ------
Total operating expenses................ 22.5 23.3 20.5 19.2 20.3
------ ------ ------ ------ ------
Income from operations.................. 10.8 11.0 14.6 17.1 16.5
Interest expense, net................... 2.1 2.9 3.4 3.4 3.1
Other expense (income), net............. 0.3 0.1 (0.2) (0.3) (0.2)
------ ------ ------ ------ ------
Income before income taxes and
minority interests.................... 8.4 8.0 11.4 14.0 13.6
Income taxes............................ 0.3 0.4 0.4 0.4 0.5
Minority interests...................... 0.3 0.1 0.6 0.5 0.9
------ ------ ------ ------ ------
Net income.............................. 7.8% 7.5% 10.4% 13.1% 12.2%
====== ====== ====== ====== ======
</TABLE>
NINE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
1995
NET SALES
Net sales for the nine months ended September 30, 1996 were $147.0 million,
an increase of 14.6% over the nine months ended September 30, 1995 for which net
sales were $128.3 million. Increased sales to national accounts, principally
superstores, accounted for approximately $15.7 million or 84% of this increase.
Also contributing to this sales increase was the impact of the Company's
marketing strategy of continually offering new products as well as new designs
and themes for existing products. In 1996, the Company's product line included
approximately 14,000 sku's compared with approximately 13,400 sku's in 1995.
Selling price increases related to core products (paper plates, napkins, cups
and tablecovers) in response to higher paper costs accounted for approximately 6
percentage points of the 14.6% increase in net sales between the periods.
Increased sales to international customers accounted for approximately $2.1
million of the increase in net sales.
GROSS PROFIT
Gross profit increased approximately $7.6 million for the nine months ended
September 30, 1996 compared to the same period in 1995, and improved as a
percentage of net sales from 36.3% to 36.8%. Higher selling prices in response
to prior period increases in paper costs as well as lower product costs
resulting from the Company's continued vertical integration of certain
manufacturing operations, offset in part by the cost of added distribution
facilities, were the primary reasons for this improvement in margins.
SELLING EXPENSES
Selling expenses were lower by approximately $0.2 million for the nine
months ended September 30, 1996 compared to the same period in 1995, and
declined as a percentage of net sales from
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<PAGE> 27
6.9% to 6.0%. The primary reason for the percentage decline was the Company's
ability to increase sales to its party superstore customers while not
significantly increasing its sales costs associated with these accounts.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses increased approximately $3.7 million
for the nine months ended September 30, 1996 compared to the same period in
1995. As a percentage of net sales, general and administrative expenses
increased from 8.1% to 9.6%. This increase is principally attributable to: an
increase in the provisions for bad debts relating to a significant increase in
the Company's accounts receivable; increased occupancy costs related to the
Company's new corporate offices as well as one-time costs associated with the
move to these offices; costs related to the development of a new business
management computer system and additional personnel costs including relocation
and recruitment.
ART AND DEVELOPMENT COSTS
Art and development costs increased approximately $0.7 million for the nine
months ended September 30, 1996 compared to the same period in 1995. As a
percentage of net sales, art and development costs increased from 2.3% to 2.5%.
The Company significantly expanded its creative and new product development
staff and internal development capabilities in the middle part of 1995 which
resulted in a substantial increase in art and development costs. The increase in
art and development expenditures reflects the Company's strategy to remain a
leader in product quality and development.
SPECIAL BONUSES
Special bonuses, which were based entirely upon the Company's pre-tax
income, increased by approximately $0.9 million for the nine months ended
September 30, 1996 compared to the same period in 1995. In connection with the
Offering, the employment agreements which gave rise to these bonuses have been
substantially modified to eliminate the special bonus payments. See "Management
of the Company -- Executive Compensation -- Employment Agreements."
INCOME FROM OPERATIONS
The factors discussed above contributed to the increase in income from
operations of 11.0% to $24.4 million for the nine months ended September 30,
1996 from $22.0 million in the corresponding period in 1995. As a percentage of
net sales, income from operations decreased from 17.1% for the nine months ended
September 30, 1995 to 16.5% for the same period in 1996.
INTEREST EXPENSE, NET
Interest expense, net increased by $0.2 million to $4.6 million for the
nine months ended September 30, 1996, reflecting slightly higher borrowings
associated with increased working capital (primarily for inventory and accounts
receivable) needed to support the increased volume of sales, offset in part by a
lower effective interest cost associated with the Company's revised revolving
credit agreement, which was entered into in September 1995.
INCOME TAXES
Amscan Inc., Am-Source, Inc., JCS Realty Corp. and SSY Realty Corp. elected
to be taxed as Subchapter S corporations for federal income tax and, where
available, for state income tax purposes. Accordingly, these entities have not
been subject to federal income taxes. In connection with the completion of the
Offering, Amscan Inc., Am-Source, Inc., JCS Realty Corp. and SSY Realty Corp.
will terminate their Subchapter S corporation status and, accordingly, will be
subject to federal
24
<PAGE> 28
and state income taxes. The amounts shown as income taxes consist principally of
foreign taxes. See "Amscan Inc. and Affiliates Combined Financial Statements."
MINORITY INTERESTS
Minority interests represent the portion of income attributable to equity
ownership not held by Mr. Svenningsen. In addition to the minority interests of
certain foreign entities, these amounts include the minority interest of
Am-Source, Inc., which will be acquired in conjunction with the Offering. See
"Organization of the Company."
YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994
NET SALES
Net sales for the year ended December 31, 1995 were $167.4 million, an
increase of 26.8% over 1994 when net sales were $132.0 million. Increased sales
to superstores accounted for $23.3 million or 66% of this increase. The number
of retail outlets represented by these accounts increased to 886 in 1995 from
720 in 1994. Also contributing to this net sales increase was the impact of the
Company's marketing strategy of continually offering new products as well as new
designs and themes for existing products. In 1995, the Company's product line
included over 13,400 sku's compared with approximately 11,000 sku's in 1994.
Selling price increases related to core products (paper plates, napkins,
tablecovers and cups) in response to higher paper costs, accounted for
approximately 5 percentage points of the 26.8% of the year-over-year increase in
net sales. Increased sales to international customers accounted for
approximately $4.3 million of the increase in net sales in 1995 compared to
1994.
GROSS PROFIT
Gross profit increased by approximately $13.5 million from 1994 to 1995,
and improved as a percentage of net sales from 34.3% to 35.1%. The gross profit
margin improvement resulted primarily from the increased vertical integration of
the Company's tableware manufacturing operations. During 1995, the Company added
several new pieces of equipment including two printing presses which enabled it
to expand its manufacturing capacity. In addition, gross margin improved as a
result of increased leveraging of existing distribution facilities and improved
purchasing of nonmanufactured products.
SELLING EXPENSES
Selling expenses increased by approximately $0.9 million from 1994 to 1995,
but declined as a percentage of net sales from 8.5% to 7.4%. The primary reason
for the percentage decline was the Company's ability to increase sales to its
superstore customers, while not significantly increasing its sales costs
associated with these accounts.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses increased by approximately $0.5 million
from 1994 to 1995, primarily as a result of modest wage increases partially
offset by decreased provisions for bad debts and write-offs. During 1994, the
Company sustained a larger amount of write-offs due to two large accounts which
filed for bankruptcy. As a percentage of net sales, general and administrative
expenses declined from 11.0% to 9.1%. The Company was able to leverage its
administrative resources while supporting the increased sales.
ART AND DEVELOPMENT COSTS
Art and development costs increased approximately $1.5 million from 1994 to
1995. As a percentage of net sales, art and development costs increased from
2.1% in 1994 to 2.5% in 1995.
25
<PAGE> 29
The Company significantly expanded its creative and new product development
staff and internal development capabilities in 1995, which resulted in a
substantial increase in art and development costs. The increase in such expenses
reflects the Company's strategy of remaining a leader in product quality and
development.
SPECIAL BONUSES
Special bonuses, which were based upon the Company's pre-tax income,
increased in 1995 over 1994. The special bonus in 1994 included special one-time
bonuses of approximately $0.8 million associated with the partial acquisition of
Am-Source, Inc. In connection with the Offering, the employment agreements which
gave rise to these bonuses have been substantially modified to eliminate the
special bonus payments. See "Management of the Company -- Executive
Compensation -- Employment Agreements."
INCOME FROM OPERATIONS
The factors discussed above contributed to the increase in income from
operations of 69.9% to $24.7 million in 1995 from $14.5 million in 1994. As a
percentage of net sales, income from operations increased from 11.0% in 1994 to
14.6% in 1995.
INTEREST EXPENSE, NET
Interest expense, net increased by $1.9 million to $5.8 million from 1994
to 1995, reflecting higher borrowings associated with increased working capital
(primarily for inventory and accounts receivable) needed to support the
increased volume of sales, as well as an increase in the Company's average
effective rate for borrowed money from 7.5% to 8.3%.
INCOME TAXES
Amscan Inc., Am-Source, Inc., JCS Realty Corp. and SSY Realty Corp. elected
to be taxed as Subchapter S corporations for federal income and, where
available, for state income tax purposes. Accordingly, these entities have not
been subject to federal income taxes. In connection with the consummation of the
Offering, Amscan Inc., Am-Source, Inc., JCS Realty Corp. and SSY Realty Corp.
will terminate their Subchapter S corporation status and, accordingly, will be
subject to federal and state income taxes. The amounts shown as income taxes
consist principally of foreign taxes. See "Amscan Inc. and Affiliates Combined
Financial Statements."
MINORITY INTERESTS
Minority interests represent the portion of income attributable to equity
ownership not held by Mr. Svenningsen. In addition to the minority interests of
certain foreign entities, these amounts include the minority interest of
Am-Source, Inc. which will be acquired in conjunction with the Offering. See
"Organization of the Company."
YEAR ENDED DECEMBER 31, 1994 COMPARED TO DECEMBER 31, 1993
NET SALES
Net sales for the year ended December 31, 1994 were $132.0 million, an
increase of 21.2% over 1993 when net sales were $108.9 million. Increased sales
to superstores accounted for $12.5 million or 54% of this increase. The number
of retail outlets represented by these accounts increased to 720 in 1994 from
591 in 1993. The number of items offered by the Company, which increased from
10,000 sku's in 1993 to 11,000 in 1994, also contributed to the improvement in
net sales. In addition, sales were favorably affected by the inclusion of a full
year of operating results for Am-Source, Inc. and Trisar, Inc. both of which
were acquired by the Company during 1993. Average selling prices for the
Company's core products (paper plates, napkins, cups and tablecovers) remained
relatively flat
26
<PAGE> 30
between 1993 and 1994. Increased sales to international customers accounted for
approximately $3.0 million of the sales increase.
GROSS PROFIT
Gross profit increased approximately $9.0 million from 1993 to 1994, and
improved as a percentage of net sales from 33.3% to 34.3%. Improved margins
resulted from the Company's manufacturing a greater portion of its tableware
requirements. In addition, gross margin improved as a result of increased
leveraging of existing distribution facilities and improved purchasing of non-
manufactured products.
SELLING EXPENSES
Selling expenses increased approximately $1.5 million between 1993 and
1994, but declined as a percentage of net sales from 9.0% to 8.5%. The primary
reason for the percentage decline was the Company's ability to increase sales to
its superstore customers while not significantly increasing its sales costs
associated with these accounts.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expense increased approximately $3.4 million
from 1993 to 1994 as a result of a number of factors including: the full year
impact of acquisitions made in 1993, increases in provisions for bad debts,
increased consulting and professional fees associated with systems development
and wage increases. As a percentage of net sales, general and administrative
expenses increased from 10.1% to 11.0% from 1993 to 1994.
ART AND DEVELOPMENT COSTS
Art and development costs increased approximately $0.2 million between 1993
and 1994. The increase was principally a result of the additional art and
development costs associated with the acquisition of Trisar, Inc. which was
consummated in 1993. As a percentage of net sales, art and development expenses
decreased from 2.4% in 1993 to 2.1% in 1994.
SPECIAL BONUSES
Special bonuses, which were based upon the Company's pre-tax income,
increased in 1994 over 1993. The special bonus in 1994 included special one-time
bonuses of approximately $0.8 million associated with the partial acquisition of
Am-Source, Inc. In connection with the Offering, the employment agreements which
gave rise to these bonuses have been substantially modified to eliminate the
special bonus payments. See "Management of the Company -- Executive Compensation
- -Employment Agreements."
INCOME FROM OPERATIONS
Due to the factors discussed above, income from operations increased 23.9%
to $14.5 million in 1994 from $11.7 million in 1993. As a percentage of net
sales, income from operations increased from 10.8% to 11.0% from 1993 to 1994.
INTEREST EXPENSE, NET
Interest expense, net in 1994 increased by $1.5 million to $3.8 million,
reflecting higher borrowings associated with increased working capital needed to
support the increased volume of sales, as well as an increase in the Company's
average effective interest rate from 6.9% to 7.5%.
27
<PAGE> 31
INCOME TAXES
Amscan Inc., Am-Source, Inc., JCS Realty Corp. and SSY Realty Corp. elected
to be taxed as Subchapter S corporations for federal income and, where
available, for state tax purposes. Accordingly, these entities have not been
subject to federal income taxes. In connection with the Offering, Amscan Inc.,
Am-Source, Inc., JCS Realty Corp. and SSY Realty Corp. will terminate their
Subchapter S corporation status and, accordingly, will be subject to federal and
state income taxes. The amounts shown as income taxes consist principally of
foreign taxes. See "Amscan Inc. and Affiliates Combined Financial Statements."
MINORITY INTERESTS
Minority interests represent the portion of income attributable to equity
ownership not held by Mr. Svenningsen. In addition to the minority interests of
certain foreign entities, these amounts include the minority interest of
Am-Source, Inc. which will be acquired in conjunction with the Offering. See
"Organization of the Company."
LIQUIDITY AND CAPITAL RESOURCES
The Company has financed its growth over the past three years principally
through cash flow generated from operations, the use of operating leases,
increases in its revolving line of credit borrowings and increases in long-term
debt, including subordinated debt owed to Mr. Svenningsen. The proceeds from
this Offering will be used to reduce indebtedness under the Company's line of
credit and to repay subordinated debt. Management believes that the Company's
working capital requirements will continue to be met by cash flow from
operations and borrowings under its line of credit.
On September 20, 1995, the Company amended its revolving line of credit
with several banks. This facility provided the Company with a $50.0 million
credit line based upon the eligible assets of the Company. The amount available
under this facility increased to $55.0 million on September 20, 1996, and will
increase to $60.0 million on September 20, 1997. The facility, which expires
September 20, 2000, had an outstanding balance as of September 30, 1996 of $45.8
million at an average interest rate of 6.96%. This rate includes the impact of
interest rate "swap" contracts which the Company has entered into to fix the
interest rate on $25.0 million of its obligation. (See Note (5) of the Notes to
Combined Financial Statements of Amscan Inc. and Affiliates.) The Company's
revolving line of credit imposes certain restrictions on the ability of the
Company and certain of its subsidiaries, including Amscan Inc., to incur
additional indebtedness, enter into guarantees or other similar agreements, make
loans to or investments in other persons and pay dividends. The Company and its
subsidiaries on a combined basis are also subject to financial covenants which
require them to maintain a certain threshold tangible net worth, limit capital
expenditures and require the Company and its subsidiaries on a combined basis to
maintain certain financial ratios pursuant to the credit agreement relating to
this facility. The Company may seek to enter into new arrangements to replace
this revolving credit facility.
Net cash used in operating activities decreased by approximately $9.6
million to $0.3 million in the September 1996 period from $9.9 million in the
September 1995 period as a result of increases in net earnings before
depreciation and amortization and an increase in accounts payable and accrued
liabilities, partially offset by an increase in deposits paid on purchased
equipment and a decrease in the rate of growth in inventories and other assets.
Net cash used in investing activities of $3.7 million remained nearly level with
spending for the nine months ended September 30, 1995. Net cash provided by
financing activities decreased by $9.1 million, to $5.0 million in the September
1996 period from $14.1 million in the September 1995 period as a result of net
decreases in loans, notes payable and long-term indebtedness.
Net cash provided by operating activities decreased by $1.0 million to $2.9
million in 1995 from $3.9 million in 1994. This decrease was primarily
attributable to increases in accounts receivable,
28
<PAGE> 32
inventories and other assets, offset by increases in accounts payable and
accrued expenses and net income before depreciation and amortization. Net cash
used in investing activities decreased $3.4 million from $6.1 million to $2.7
million due to reduced capital expenditures. Net cash provided from financing
activities decreased $2.6 million from $2.7 million to $0.1 million due to an
increase in stockholder distributions partially offset by an increase in loans,
notes payable and long-term indebtedness.
Net cash provided by operating activities decreased $4.8 million from $8.7
million in 1993 to $3.9 million in 1994 due to decreased growth in accounts
payable and accrued expenses and increased inventories and other assets,
partially offset by increased net income before depreciation and amortization
and decreased growth of accounts receivable. Net cash used in investing
activities increased $0.4 million from $5.6 million to $6.0 million in 1994. The
increase was attributable to payments made in 1993 for acquisitions, not made in
1994, offset by increases in capital expenditures in 1994 over 1993. Net cash
from financing activities increased $4.7 million from $1.9 million used in 1993
to $2.8 million provided by financing activities in 1994, due to an increase in
proceeds from loans, notes payable and long-term debt, offset by a decrease in
stockholder distributions.
Accounts receivable, net increased $19.5 million to $51.4 million on
September 30, 1996 from $31.9 million at December 31, 1995. This increase is due
principally to the seasonal nature of the business as well as increased sales.
Third quarter sales are generally the highest of the year primarily due to
initial shipments of seasonal holiday merchandise which has dated terms which
result in higher accounts receivable balances relative to year-end levels.
For the nine months ended September 30, 1996, the Company had income before
interest, taxes and depreciation and amortization of $27.0 million compared to
$24.8 million for the same period ended September 30, 1995. The measure, the
definition of which might vary from company to company, should not be construed
to be an alternative to operating income as an indicator of the Company's
performance. Additionally, the Company generated $8.2 million and $13.1 million
from third party financings for the nine months ended September 30, 1996 and
1995, respectively. Financings for the nine months ended September 30, 1996
consisted primarily of borrowings under credit facilities, while financings
through September 30, 1995 consisted primarily of long-term loans secured by
machinery and equipment and borrowings under the credit facilities. The Company
used $23.0 million of the cash for the nine months ended September 30, 1996 and
$30.4 million of the cash for the nine months ended September 30, 1995 to fund
its working capital needs, which consisted primarily of increases in accounts
receivable and inventory.
In 1995, the Company had income before interest, taxes and depreciation and
amortization of $28.3 million compared to $17.9 million in 1994. The measure,
the definition of which might vary from company to company, should not be
construed to be an alternative to operating income as an indicator of the
Company's performance. Additionally, the Company generated $10.0 million and
$3.9 million from third party financings and $1.2 million and $6.3 million from
financings with Mr. Svenningsen in 1995 and 1994, respectively. Financings in
1995 consisted primarily of long-term loans secured by machinery and equipment
and borrowings under revolving credit facilities, while financings in 1994
consisted primarily of bankers acceptances and borrowings under revolving credit
facilities. The Company used $20.5 million of the cash in 1995 and $12.5 million
of the cash in 1994 to fund its working capital needs, which consisted primarily
of increases in accounts receivable and inventory.
In 1995, the Company acquired $2.6 million of machinery and equipment,
which was financed by long-term debt and borrowings under the Company's
revolving credit facility, and entered into operating leases for additional
machinery and equipment worth $7.4 million. In 1994, the Company acquired $6.8
million of machinery and equipment which was financed primarily by borrowings
under the Company's revolving credit facilities and $4.0 million of which was
refinanced through long-term loans early in 1995. The Company is continuing to
add to manufacturing capacity and has entered
29
<PAGE> 33
into additional operating leases for machinery and equipment worth approximately
$10.4 million and has acquired machinery and equipment worth approximately $5.8
million to date in 1996. Management believes that these additions to plant and
equipment provide adequate capacity to support its operations for at least the
balance of the year ending December 31, 1996 and for the year ending December
31, 1997. As of September 30, 1996 the Company did not have material commitments
for capital expenditures other than for machinery and equipment which will be
leased under the aforementioned $10.4 million of operating leases.
In 1995, the Company distributed $11.0 million, compared to $7.5 million in
1994, to stockholders, of which $4.0 million in 1995 and $6.3 million in 1994
was reinvested in the Company as subordinated debt payable to stockholders. The
remainder of these distributions was used principally for the payment of their
taxes. See "Organization of the Company." The increase from 1994 to 1995 was due
to increased earnings of those corporations, taxable to the stockholders.
RECENTLY ISSUED ACCOUNTING STANDARDS
In October 1995, the Financial Accounting Standards Board (FASB) issued
Statement on Financial Accounting Standards (SFAS) No. 123 -- Accounting for
Stock-Based Compensation. As allowable by SFAS 123, the Company does not intend
to recognize compensation cost for stock-based employee compensation
arrangements, but rather, starting with fiscal 1996, will disclose the pro-forma
impact on net income and earnings per share as if the fair value stock-based
compensation had been recognized starting with fiscal 1995.
In March, 1995, the FASB issued SFAS 121 -- Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of. When adopted
in 1996, the Company does not believe that the impact of SFAS 121 will have a
significant impact on its financial position or results of operations.
Other pronouncements issued by the FASB or other authoritative accounting
standard groups with future effective dates are either not applicable or not
significant to the financial statements of the Company.
QUARTERLY RESULTS
As a result of the seasonal nature of certain of the Company's products,
the quarterly results of operations may not be indicative of those for a full
year. Third quarter sales are generally the highest of the year due to a
combination of increased sales to consumers of the Company's products during
summer months as well as initial shipments of seasonal holiday merchandise as
retailers build inventory. Conversely, fourth quarter sales are generally lower
as retailers sell through inventories purchased during the third quarter. The
overall growth rate of the Company's sales in recent years has offset, in part,
this sales variability. Promotional activities, including special dating and
pricing terms, particularly with respect to Halloween and Christmas products,
result in generally lower margins and profitability in the fourth quarter, as
well as higher accounts receivable balances and associated higher interest costs
to support these balances. The following table sets forth the historical net
sales and income from operations of the Company for 1995 and 1996 by quarter.
<TABLE>
<CAPTION>
1996 QUARTERS
1995 QUARTERS ----------------------------
---------------------------------------- MARCH
MARCH 31 JUNE 30 SEPT. 30 DEC. 31 31 JUNE 30 SEPT. 30
-------- ------- -------- -------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
($ IN THOUSANDS)
Net sales................ $ 39,376 $41,046 $ 47,892 $ 39,089 $47,258 $45,714 $ 54,036
Income from operations... $ 6,492 $ 6,350 $ 9,120 $ 2,707(a) $ 7,586 $ 7,564 $ 9,222
</TABLE>
- ---------------
(a) In addition to the seasonal variability described above, income from
operations for the fourth quarter of 1995 was adversely affected by the
impact of higher paper costs for which selling price adjustments were
implemented in the first quarter of 1996. Income from operations for this
quarter was also adversely affected by additional bad debt reserves
(approximately $0.5 million) and additional computer system expenses
(approximately $0.5 million).
30
<PAGE> 34
SUPPLEMENTAL PRO FORMA COMBINED FINANCIAL STATEMENTS
(UNAUDITED)
The following Supplemental Pro Forma Combined Financial Statements for the
year ended December 31, 1995 and as of and for the nine months ended September
30, 1996 reflect the combined results of operations of Amscan Inc. and
Affiliates after giving effect to certain events that have occurred or will
occur in conjunction with the Organization and the Offering including pro forma
adjustments intended to present the historical results as if Amscan Inc.,
Am-Source, Inc., JCS Realty Corp. and SSY Realty Corp. had not elected to be
treated as Subchapter S corporations for tax purposes.
The unaudited Supplemental Pro Forma Combined Financial Statements have
been prepared by management solely to facilitate period to period comparisons
and do not represent the actual financial position or results of operations for
the periods presented. The Supplemental Pro Forma Combined Balance Sheet and the
Supplemental Pro Forma Combined Statements of Operations do not purport to be
indicative of future results.
The Supplemental Pro Forma Combined Financial Statements should be read in
conjunction with the Combined Financial Statements of Amscan Inc. and Affiliates
and the notes thereto as of and at December 31, 1995 and the Combined Financial
Statements of Amscan Inc. and Affiliates and the notes thereto as of and at
September 30, 1996 contained elsewhere in this Prospectus.
31
<PAGE> 35
AMSCAN INC. AND AFFILIATES
SUPPLEMENTAL PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
($ IN THOUSANDS, EXCEPT SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA AND
SUPPLEMENTAL
PRO FORMA SUPPLEMENTAL
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ------------- ------------
<S> <C> <C> <C>
Net sales......................................... $ 167,403 $ 167,403
Cost of sales..................................... 108,654 108,654
-------- --------
Gross profit.................................... 58,749 58,749
Selling......................................... 12,241 12,241
General and administrative...................... 15,002 $ 250(a) 15,252
Art and development............................. 4,256 4,256
Special bonuses................................. 2,581 (2,581)(b) --
-------- --------
Income from operations....................... 24,669 27,000
Interest expense, net............................. 5,772 (2,686)(c) 3,086
Other income, net................................. (309) (309)
-------- --------
Income before income taxes and minority
interests.................................... 19,206 24,223
Income taxes...................................... 731 9,181(d) 9,912
Minority interests................................ 1,041 (927)(a) 114
-------- --------
Supplemental pro forma net income............... $ 17,434 $ 14,197(e)
======== ========
Supplemental pro forma net income per share..... $ 0.65
========
Supplemental pro forma weighted average common
shares outstanding........................... 22,000,000(f)
========
</TABLE>
Notes to Supplemental Pro Forma Combined Statement of Operations for the year
ended December 31, 1995 ($ in thousands):
(a) To reflect $250 amortization of goodwill of $7,500 over thirty years and
the elimination of $927 for minority interest related to the acquisition of
an additional 50% of Am-Source, Inc. as if it were acquired at the
beginning of the period presented;
(b) To reflect the elimination of special bonuses beyond performance-based
compensation that will not be recurring due to the termination of certain
employment agreements in connection with the Offering;
(c) To reflect reduced interest expense assuming a repayment of $20,000 of bank
loans at the actual rate in effect and an average balance of $13,300 of
loans from Mr. Svenningsen at the actual rate in effect;
(d) To provide for income taxes at statutory rates of 40.5% on earnings as if
Amscan Inc., Am-Source, Inc., JCS Realty Corp. and SSY Realty Corp. had not
been treated as Subchapter S corporations during the period presented
($6,672) and to give effect to the tax effect of these adjustments
($2,509);
(e) The above pro forma and supplemental pro forma adjustments do not include
anticipated non-recurring expenses of $15,980 relating to compensation
expense to be incurred at the consummation of the Offering in connection
with cash and stock of $11,980 to be paid to Mr. Rittenberg and $1,000 to
be paid to certain other executives in connection with the termination or
modification of prior employment agreements and $3,000 for the
establishment of the ESOP for the benefit of the Company's domestic
employees and the payment of stock bonuses to certain of such employees;
(f) Supplemental pro forma weighted average common shares outstanding is
calculated as if the shares issued in the Offering as well as those issued
in the Organization had been outstanding from the beginning of the period
presented.
32
<PAGE> 36
AMSCAN INC. AND AFFILIATES
SUPPLEMENTAL PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996
($ IN THOUSANDS, EXCEPT SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA AND
SUPPLEMENTAL
PRO FORMA SUPPLEMENTAL
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ------------- ------------
<S> <C> <C> <C>
Net sales.......................................... $ 147,008 $ 147,008
Cost of sales...................................... 92,861 92,861
-------- --------
Gross profit..................................... 54,147 54,147
Selling.......................................... 8,691 8,691
General and administrative....................... 14,113 $ 188(a) 14,301
Art and development.............................. 3,671 3,671
Special bonuses.................................. 3,300 (3,300)(b) --
-------- --------
Income from operations........................... 24,372 27,484
Interest expense, net.............................. 4,569 (2,102)(c) 2,467
Other income, net.................................. (301) (301)
-------- --------
Income before income taxes and minority
interests..................................... 20,104 25,318
Income taxes....................................... 767 9,769(d) 10,536
Minority interests................................. 1,242 (1,138)(a) 104
-------- --------
Supplemental pro forma net income................ $ 18,095 $ 14,678(e)
======== ========
Supplemental pro forma net income per share...... $ 0.67
========
Supplemental pro forma weighted average common
shares outstanding............................ 22,000,000(f)
========
</TABLE>
Notes to Supplemental Pro Forma Combined Statement of Operations for the nine
months ended September 30, 1996 ($ in thousands):
(a) To reflect $188 for amortization of goodwill of $7,500 over thirty years
and the elimination of $1,138 for minority interest related to the
acquisition of an additional 50% of Am-Source, Inc. as if it were acquired
at the beginning of the period presented;
(b) To reflect the elimination of special bonuses beyond the performance-based
compensation that will not be recurring due to the termination of certain
employment agreements in connection with the Offering;
(c) To reflect reduced interest expense assuming a repayment of $20,000 of bank
loans at the actual rate in effect and $16,000 of loans from Mr.
Svenningsen at the actual rate in effect;
(d) To provide for income taxes at statutory rates (40.5%) on earnings as if
Amscan Inc., Am-Source, Inc., JCS Realty Corp. and SSY Realty Corp. had not
been treated as Subchapter S corporations during the period presented
($7,121) and to give effect to the tax effect of these adjustments
($2,648);
(e) The above pro forma and supplemental pro forma adjustments do not include
anticipated non-recurring expenses of $15,980 relating to compensation
expense to be incurred at the consummation of the Offering in connection
with cash and stock of $11,980 to be paid to Mr. Rittenberg and $1,000 to
be paid to certain other executives in connection with the termination or
modification of prior employment agreements and $3,000 for the
establishment of the ESOP for the benefit of the Company's domestic
employees and the payment of stock bonuses to certain of such employees;
(f) Supplemental pro forma weighted average common shares outstanding is
calculated as if the shares issued in the Offering as well as those issued
in the Organization had been outstanding from the beginning of the period
presented.
33
<PAGE> 37
AMSCAN INC. AND AFFILIATES
SUPPLEMENTAL PRO FORMA COMBINED BALANCE SHEET
SEPTEMBER 30, 1996
($ IN THOUSANDS, EXCEPT SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
SUPPLEMENTAL
PRO FORMA
SUPPLEMENTAL ADJUSTMENTS
PRO FORMA HISTORICAL TO GIVE EFFECT TO SUPPLEMENTAL
HISTORICAL ADJUSTMENTS ADJUSTED THE OFFERING PRO FORMA
---------- ------------ -------- ----------------- ------------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents......... $ 3,530 $ 3,530 $ 3,530
Accounts receivable, net.......... 51,359 51,359 51,359
Inventories....................... 45,074 45,074 45,074
Deposits and other................ 10,146 $ 3,078(a) 13,224 13,224
-------- -------- --------
Total current assets........... 110,109 113,187 113,187
Property, plant and equipment,
net............................ 30,409 30,409 30,409
Other............................. 5,235 7,500(b) 12,735 12,735
-------- -------- --------
Total assets................. $ 145,753 $156,331 $156,331
======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Loans payable..................... $ 47,955 3,400(c) $ 51,355 $ (28,100)(g) $ 23,255
Subordinated and other
indebtedness to stockholders... 35,900 35,900 (35,900)(g) --
Accounts payable.................. 4,326 4,326 4,326
Accrued expenses.................. 17,514 1,000(d) 18,514 18,514
Current installments of long-term
indebtedness................... 2,318 2,318 2,318
-------- -------- --------
Total current liabilities.... 108,013 112,413 48,413
Long-term indebtedness, excluding
current installments........... 12,412 12,412 12,412
Other............................. 689 5,590(a) 6,279 6,279
-------- -------- --------
Total liabilities............ 121,114 131,104 67,104
-------- -------- --------
Stockholders' equity:
Preferred stock ($0.10 par value;
5,000,000 shares authorized;
none issued and outstanding)
Common stock ($0.10 par value;
50,000,000 shares authorized;
22,000,000 shares issued and
outstanding, as adjusted)...... 393 (393)(e) 1,665 535(h) 2,200
1,518(e)
66(c)
58(b)
23(f)
Additional paid-in capital........ 1,490 (1,212)(e) 19,211 63,465(h) 82,676
8,514(c)
7,442(b)
2,977(f)
Retained earnings................. 23,490 (11,980)(c) 4,998 4,998
(1,000)(d)
(2,512)(a)
(3,000)(f)
Cumulative translation
adjustment..................... (647) (647) (647)
Treasury stock.................... (87) 87(e) -- --
-------- -------- --------
Total stockholders' equity..... 24,639 25,227 89,227
-------- -------- --------
Total liabilities and
stockholders' equity.... $ 145,753 $156,331 $156,331
======== ======== ========
</TABLE>
34
<PAGE> 38
Notes to Supplemental Pro Forma Balance Sheet ($ in thousands, except share
amounts):
(a) Reflects a deferred income tax asset and liability of $3,078 and $5,590,
respectively, (net reduction of $2,512 to Retained Earnings) resulting from
accumulated timing differences as if Amscan Inc., Am-Source, Inc., JCS
Realty Corp., and SSY Realty Corp. had not been treated as Subchapter S
corporations for income tax purposes.
(b) Reflects goodwill of $7,500 related to the acquisition of an additional 50%
of Am-Source, Inc. In connection with the Organization, the Company entered
into an agreement with the stockholders of Am-Source, Inc., other than Mr.
Svenningsen, pursuant to which such stockholders exchanged all of their
outstanding capital stock of Am-Source, Inc. for shares of Common Stock.
The number of shares of Common Stock issued in this exchange was determined
by dividing the $7,500 purchase price by the assumed initial public
offering price of $13 per share for an aggregate of 576,923 shares of
Common Stock ($58 and $7,442, credited to Common Stock and additional
paid-in capital, respectively).
(c) Reflects the accrual for obligations of $3,400 to Mr. Rittenberg as partial
payment in connection with the termination of his prior agreement. In
connection with the Organization, Amscan Inc., Mr. Svenningsen and Mr.
Rittenberg entered into an agreement, whereby Mr. Rittenberg relinquished
certain rights under a previous employment agreement entered into between
Amscan Inc. and Mr. Rittenberg. In exchange for the relinquishment of such
rights, Mr. Rittenberg received a cash payment of $3,400 and a number of
shares of capital stock of Amscan Inc., which shares he exchanged for
660,000 shares of Common Stock at the assumed initial public offering price
of $13 per share. The 660,000 shares issued to Mr. Rittenberg have a fair
market value of $8,580 ($66 and $8,514, credited to Common Stock and
additional paid-in capital, respectively). Such amount has been reflected
as compensation expense thereby reducing retained earnings by $11,980. See
"Organization of the Company" and "Management of the Company -- Executive
Compensation -- Employment Agreements".
(d) Reflects the accrual for obligations payable of $1,000 to certain
executives other than Mr. Rittenberg in connection with the termination of
their prior employment agreements. Such amount has been reflected as
compensation expense thereby reducing retained earnings by $1,000.
(e) Gives effect to the issuance of 15,053,736 shares of Common Stock to Mr.
Svenningsen and 128,572 shares of Common Stock to the SSY Trusts in
connection with the Organization ($1,518 credited to Common Stock).
Pursuant to an agreement between the Company and Mr. Svenningsen, Mr.
Svenningsen exchanged all of the outstanding capital stock of Amscan Inc.
and Affiliates (other than the shares owned by Mr. Rittenberg pursuant to
the agreement described in (c) above) for shares of Common Stock of the
Company. The exchange resulted in the elimination of $393 in common stock,
a reduction of $1,212 in additional paid-in capital, and the retirement of
treasury stock of $87. See "Organization of the Company."
(f) Gives effect to the issuance of 230,769 shares of Common Stock ($23 and
$2,977 credited to Common Stock and additional paid-in capital,
respectively) to establish the ESOP for the benefit of the Company's
domestic employees and the payments of stock bonuses to certain of such
employees. The shares issued are reflected as compensation expense measured
at the assumed initial public offering price of $13, aggregating to $3,000
reduction in retained earnings.
(g) Repayment of bank indebtedness and subordinated indebtedness to
stockholders of $28,100 and $35,900, respectively, as of September 30, 1996
from net proceeds of the Offering. Excludes estimated earnings from
September 30, 1996 to the date of the Offering which will be distributed
and will result in an increase in subordinated indebtedness.
(h) Net proceeds from the Offering, calculated assuming 5,350,000 shares are
issued at the assumed initial public offering price of $13, aggregating to
a total of $64,000 ($535 and $63,465 credited to Common Stock and
additional paid-in capital, respectively).
35
<PAGE> 39
BUSINESS
The Company believes it is one of the leading designers, manufacturers and
distributors of seasonal and everyday party goods. With a product line
consisting of approximately 14,000 sku's, the Company is a complete source of
paper and plastic party goods, including decorative tableware such as plates,
cups, tablecovers and napkins, accessories such as invitations and balloons, and
novelties such as games and favors. The Company's products are sold in more than
20,000 retail outlets. The Company is a leading supplier to the emerging party
goods superstore distribution channel, where it has been able to position itself
as a responsive and comprehensive supplier of proprietary, well designed and
high quality products. The Company also distributes its products to discount
chains, mass merchandisers and specialty retailers. The Company's in-house
design staff produces and manages the broad spectrum of party goods for all
occasions.
Over the past five years, the Company has continued to grow sales and
market share and has increased profitability by offering a broad product line,
creating innovative and unique designs, enhancing its customer relationships
(particularly in the superstore channel) and using state-of-the-art
manufacturing and distribution technology. The Company has sought to further
vertically integrate its operations through strategic acquisitions including the
acquisition in 1993 of a 50% interest in Am-Source Inc., a manufacturer of
plastic plates, cups and bowls, and the acquisition in 1993 of Trisar, Inc., a
manufacturer of gift products. In addition, in 1993 the Company acquired a 48%
interest in Amscan de Mexico, S.A. de C.V., a distributor of the Company's
products in Mexico. All of such entities became subsidiaries of the Company upon
consummation of the Organization. See "Organization of the Company."
INDUSTRY OVERVIEW
According to PARTY AND PAPER RETAILER, a trade publication for the party
goods industry, the retail party supplies industry achieved total sales of
approximately $8.8 billion in 1995, which includes items such as cards and
stationery in addition to the products produced by the Company. Over the past
several years, according to the same publication, there has been a significant
shift of sales to party goods superstores.
The Company believes that several current industry trends offer
well-positioned manufacturers opportunities for significant growth including:
- The increasing breadth and availability of party merchandise in the
marketplace. Principal manufacturers such as the Company have broadened
their product offerings to include party goods to celebrate a greater
number of events, holidays and themes. At the same time, manufacturers
are expanding the number and types of products offered for each sort of
occasion to encourage add-on purchases by consumers planning parties.
- The recent emergence of the party goods superstore merchandising
concept. The retail party goods business has historically been
fragmented, with consumers purchasing party goods from independent stores
and designated departments within drug, discount or department store
chains. Over the past several years, the marketplace has begun to accept
a move toward the party goods superstore merchandising concept, similar
to earlier merchandising shifts in such product categories as food, toys,
office supplies, home furnishings and home improvement needs. These
superstores provide consumers with a one-stop source for all of their
party needs generally at discounted prices. By displaying an array of
integrated and related merchandise in an attractive format, they seek to
influence consumers to increase the number of items purchased for each
event or occasion.
- Consumers' desire to enhance the quality of their leisure time. Another
important dynamic in this industry is an increase in home entertaining,
as consumers seek to enhance the quality of their leisure time by
including party goods in their celebrations. The Company believes that
this consumer desire to optimize leisure time is an outgrowth, among
other things, of the
36
<PAGE> 40
increase in two wage-earner families. Party goods offer a convenient and
affordable way to make all types of occasions more festive.
BUSINESS STRATEGY
The Company's goal is to grow sales and market share and enhance
profitability by offering the industry's fullest product line produced using
state-of-the-art design processes and manufacturing technology. The key elements
in executing the Company's strategy include:
PROVIDE THE BROADEST PRODUCT LINE
The Company endeavors to provide party goods retailers with the most
extensive product line in the industry. Differentiating itself from its
competitors, the Company offers approximately 200 design ensembles, each
containing 30 to 150 items appealing to a variety of consumer preferences. In
total, the Company's product line includes approximately 14,000 sku's. The
Company believes that by offering such a full product line, it has created a
competitive advantage by becoming a single source for a large portion of the
retailers' requirements. In addition, the breadth of products gives the consumer
new ideas for making parties festive, colorful and interesting. In this way, the
Company seeks to increase the number of products sold per consumer for each
transaction and generate consumer loyalty and repeat business.
MAINTAIN PRODUCT DESIGN LEADERSHIP
The Company's product development process is design driven. The Company
believes it is a leader in the creation of innovative and unique designs for its
products. The Company looks to create designs which have a level of complexity
and style that is compelling to consumers and difficult for competitors to
replicate. Approximately 60 of the Company's employees are engaged in the design
process. From the large number of designs and concepts developed by these
artists, the Company selects those it believes best to replace approximately
one-third of its designed product ensembles each year. For example, in 1996 the
Company introduced over 50 new ensemble designs.
The Company targets a wide variety of events, holidays and themes in the
creation of its designs and frequently introduces new designs into the
marketplace. The goal of this approach is to heighten consumer awareness of
particular events, holidays and themes and to reinforce the concept that party
planning is appropriate and enjoyable throughout the year. For example, the
Company has introduced on a nationwide scale ensembles for Mardi Gras and
Hawaiian luaus, themes not traditionally part of home entertainment parties.
Almost all of the Company's designs are developed in-house by a creative and
highly skilled design staff using state-of-the-art technology. The Company does
not depend on licenses to any material degree.
WORK CLOSELY WITH CUSTOMERS
The Company strives to build strong relationships with its customer base
representing more than 20,000 retail outlets. Key elements of this strategy are
providing superior service and involving retailers in the Company's product
development and marketing process. In particular, the Company solicits input
from retailers on new product concepts and consumer design preferences in
determining the types of events, holidays and themes to target. The Company also
furnishes to party goods retailers customized planograms for the display of
products in their stores with the goal of maximizing sales to consumers. The
Company believes that effective display of its products at retail, including
coordinated accessories, results in add-on purchases by consumers seeking
further to enhance the festive nature of their celebrations. The Company's order
taking and fulfillment systems are designed to support its customers by
providing customers with high fill rates and short turn-around times.
37
<PAGE> 41
Over the past five years, much of the Company's growth has been
attributable to its ability to establish strong relationships with the emerging
party goods superstore channel of distribution. The Company has been able to
develop these relationships in large part due to its customer service efforts
while maintaining its market position with its traditional customer base of
independent card and party goods retailers.
USE STATE-OF-THE-ART MANUFACTURING AND DISTRIBUTION TECHNOLOGY
The Company uses state-of-the-art technological processes to design,
manufacture and distribute its products. The Company's highly skilled design
staff employs computer assisted design ("CAD") systems to develop designs which
the Company believes are unmatched in terms of complexity and style. Its
state-of-the-art manufacturing equipment includes highly automated printing,
forming, folding and packaging equipment. This vertically integrated
manufacturing capability, which covers most of its core products and accounted
for approximately 50% of 1995 sales, enables the Company to control its costs,
manage its inventory investment and respond quickly to customer orders. In order
to expedite the order-entry process, the Company has equipped its sales force
and certain of its customers with hand held computers. Through the use of
standard telephone lines, these devices interface directly with the Company's
automated distribution centers. The Company's distribution centers employ
computer-assisted systems to receive and fill customer orders efficiently and
quickly.
GROW THROUGH ACQUISITIONS
The Company has, from time to time, sought to expand its product line and
market share, as well as further vertically integrate its operations, through
strategic acquisitions. The Company may pursue additional acquisitions of
complementary businesses which the Company believes may further these strategic
objectives. The form of consideration which the Company might use in any
particular acquisition could be cash, securities or some combination and would
depend on the particular circumstances. Other than its agreement described
herein under "Organization of the Company" pursuant to which the Company
acquired the remaining 50% of Am-Source, Inc., which is the source of the
Company's plastic plates, cups and bowls, the Company does not currently have
any agreements with any parties with respect to acquisitions.
PRODUCTS AND SERVICES
The Company offers products in everyday and seasonal designs. Everyday
events and celebrations include birthdays, showers, weddings, christenings,
graduations, anniversaries, retirements, first communions, bar mitzvahs,
confirmations, summer picnics and barbecues and theme parties (such as Hawaiian
luaus, Mardi Gras and '50's parties). Seasonal celebrations and events include
New Years, Valentine's Day, St. Patrick's Day, Easter, Passover, Fourth of July,
Halloween, Thanksgiving, Hanukkah and Christmas.
The principal categories of products which the Company offers are
tableware, accessories and novelties. The percentages of net sales represented
by each product category for each of the past three calendar years are set forth
in the following table:
<TABLE>
<CAPTION>
1993 1994 1995
----- ----- -----
<S> <C> <C> <C>
Tableware........................................... 55% 58% 60%
Accessories......................................... 27% 26% 24%
Novelties........................................... 18% 16% 16%
</TABLE>
38
<PAGE> 42
The following table sets forth the principal products in each of the three
categories:
<TABLE>
<CAPTION>
TABLEWARE ACCESSORIES NOVELTIES
- --------------------------------- ----------------------- ---------------
<S> <C> <C>
Solid Color: Balloons Buttons
Paper and Plastic Cups Banners Candles
Paper and Plastic Plates Cascades Cocktail Picks
Paper and Plastic Tablecovers Confetti Games
Plastic Cutlery Crepe Mugs
Cutouts Noise Makers
Decorated: Decorative Tissues Party Favors
Paper Cups Flags Party Hats
Paper Napkins Gift Bags Pom Poms
Paper Plates Gift Wrap T-shirts
Paper Tablecovers Guest Towels
Honeycomb Centerpieces
Invitations and Notes
Ribbons and Bows
Signs
</TABLE>
TABLEWARE
The Company believes that tableware products are the initial focus of a
consumer in the planning of a party since these items are necessary in
connection with the consumption of food and beverages. To distinguish its
tableware from that of its competitors, the Company seeks to create a broad
range of unique designs for its products. In addition, the Company's tableware
products are priced competitively and affordably. The Company's paper plates,
cups, napkins, tablecovers and plastic cutlery are affordable, having suggested
retail prices (based upon quantity) ranging between $1.70 and $10.00.
ACCESSORIES AND NOVELTY ITEMS
The Company believes that a consumer also will choose the Company's
tableware over that of its competitors due to the breadth and array of accessory
and novelty items available to the consumer in designs coordinated with the
Company's tableware designs. By offering coordinated ensembles, the Company
seeks to appeal to consumers' imagination and tastes and therefore make the
purchase of the Company's ensembles more appealing than purchasing tableware
without accessories. The display of its accessory items in retail stores, in
unified displays which create a striking visual impact, are designed to
encourage the impulse buying of such accessories and novelty items by offering
consumers the opportunity to enhance the festive nature of their celebration.
The Company believes that the appeal of its full product line thereby increases
the number of products sold per customer for each transaction.
DESIGN AND PRODUCTION
The Company has an active design and new product development program
involving approximately 60 of its employees on a full-time basis. These
individuals perform a variety of functions, including product development,
product management, design layout, art production and catalogue production. The
Company looks to create designs which have a level of complexity and style which
is compelling to consumers and difficult for competitors to replicate. The
design process often begins more than a year in advance of actual commercial
production and is intended to keep pace with changing consumer preferences in
fashion and design. In addition, senior executives and members of the Company's
product development and design staffs regularly meet with customers and attend
trade shows and related events to ascertain market and design trends.
39
<PAGE> 43
Each year, the Company introduces new products as well as new designs and
themes for existing products. New products are introduced not only in its
existing lines but also as entirely new product concepts for the party event.
New products must meet the Company's quality and pricing criteria and be able to
be distributed through the Company's existing marketing and distribution system.
State-of-the-art printing, forming, folding and packaging equipment support
the Company's manufacturing operations. Company facilities in Kentucky, New
York, Rhode Island and California produce paper and plastic plates, napkins,
cups and other party and novelty items. This vertically integrated manufacturing
capability for many of its key products allows the Company the opportunity to
better control costs and improve product quality, manage inventory investment
and provide efficiency in order fulfillment.
In connection with its manufacturing operations, the principal raw
materials used by the Company in its products are paper and plastic. While the
Company currently purchases such raw materials from a relatively small number of
sources, such raw materials are available generally from a number of sources,
and the Company's current suppliers could be replaced by the Company without
adversely affecting the Company's operations in any material respect.
Over the past five years, the Company has purchased or leased new plant and
equipment having an aggregate value of approximately $29 million to expand the
manufacturing capabilities of the Company. As a result, approximately 50% of the
Company's sales in 1995 were of items manufactured by the Company. The Company
generally uses its manufacturing equipment on the basis of at least two shifts
per day in order to lower its production costs per item. In addition, the
Company manufactures products for third parties, the volume of which can be
adjusted by the Company over a relatively short period of time and helps the
Company maintain a satisfactory level of equipment utilization.
The Company sources the remainder of its products from contract
manufacturers, the majority of whom are located in China and elsewhere in the
Far East and with whom the Company has long-standing relationships. The two
largest such suppliers have exclusive supply arrangements with the Company and
represent relationships which have been in place for more than ten years. The
Company believes that the quality of craftsmanship and the ability to satisfy
the Company's pricing criteria provides a significant competitive advantage. The
Company's business, however, is not dependent upon any single source of supply
for products manufactured for the Company by third parties.
SALES AND MARKETING
The Company's practice of including party goods retailers in all facets of
the Company's product development is a key element of the Company's sales and
marketing efforts. The Company targets important consumer preferences by
integrating its own market research with the input of party goods retailers in
the creation of its designs and products. The sales organization assists
customers in the actual set-up and lay out of displays of the Company's
products. From time to time, the Company also provides customers with
promotional displays.
The principal sales and marketing tool of the Company is its three separate
annual catalogues, two for seasonal products and one for everyday products. In
1995, the Company spent $1.1 million on the production of its sales catalogues.
The Company's domestic sales force is comprised of 54 seasoned sales
professionals who have, on average, been affiliated with the Company for over 5
years. International customers are serviced by experienced individuals who are
generally employees of the Company's foreign subsidiaries. This experience
provides the Company with individuals who possess thorough knowledge of the
industry and the ability to maximize the positioning of the Company's broad
product line with respect to the merchandising needs of the retailers.
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<PAGE> 44
DISTRIBUTION AND SYSTEMS
The Company ships its products from distribution warehouses which employ
computer assisted systems. Everyday products are shipped either from California
or New York in order to achieve the most economical freight costs while
providing fast delivery of goods to the party goods retailer. In order to
control inventory investment, seasonal products are shipped out of a central
warehouse located in New York. Products for foreign markets are shipped from the
Company's distribution warehouses in Canada, Mexico, England and Australia.
Many of the Company's sales orders are generated electronically through
hand held units with which the sales force as well as many customers are
equipped. Specifically, orders are entered into the hand held units and then
transmitted over telephone lines to the Company's mainframe computer where they
are processed for shipment. This electronic order entry expedites the order
processing which in turn improves the Company's ability to fill customer
merchandise needs accurately and quickly.
COMPETITION
The Company competes on the basis of diversity and quality of its product
designs, breadth of product line, product availability, price, reputation and
customer service. The Company has many competitors with respect to one or more
of its products, including smaller independent specialty manufacturers and other
companies, some of which have financial resources which are greater than those
of the Company. Certain of these competitors control licenses for widely
recognized images, such as cartoon or motion picture characters, which could
provide them from time to time with a competitive advantage. The Company
believes, however, that there are few competitors which manufacture and
distribute products with the complexity of design and breadth of product
offerings that the Company does. In addition, the Company knows of no competitor
who utilizes design styles across product categories to provide consumers with
coordinated products in the variety that the Company offers. Furthermore, the
Company believes that its state-of-the-art design and manufacturing processes
create an efficiency in manufacturing that few of its competitors achieve in the
production of numerous coordinated products in multiple design types.
CUSTOMERS
The Company's customers are principally party goods superstores, large
discount chains, mass merchandisers and independent card and party retailers.
Among this group, the Company's primary customers are party goods superstores.
Based on information provided to the Company by party goods superstores or
gathered by its sales force, the Company supplies on average between 20% and 40%
of the merchandise generally stocked in such stores.
During 1995 and the first nine months of 1996, sales by the Company to its
largest customer, Party City Corporation, were 11% and 14% respectively, of the
Company's combined net sales for such periods. Although the Company believes its
relationship with Party City Corporation to be good, should such relationship be
terminated, the Company's financial condition and results of operations could be
adversely affected.
PATENTS, TRADEMARKS, COPYRIGHTS, LICENSES
The Company owns copyrights on the designs created by the Company and used
on its products. The Company owns trademarks in the words and designs used on or
in connection with its products. It is the practice of the Company to register
its copyrights with the United States Copyright Office to the extent it deems
reasonable. The Company does not believe that the loss of copyrights or
trademarks with respect to any particular product or products would have a
material adverse effect on the business of the Company.
The Company does not depend on licenses to any material degree in its
business and, therefore, does not incur any material licensing expenses. In
1995, sales of licensed products were $8.1 million or 4.9% of 1995 total net
sales.
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<PAGE> 45
EMPLOYEES
As of September 30, 1996, the Company had approximately 1,100 employees,
none of whom is represented by a labor union. The Company considers its
relationship with its employees to be good.
FACILITIES
The Company maintains its corporate headquarters in Elmsford, New York and
conducts its principal design, manufacturing and distribution operations at the
following facilities:
<TABLE>
<CAPTION>
OWNED OR LEASED (WITH
LOCATION PRINCIPAL ACTIVITY SQUARE FEET EXPIRATION DATE)
- ------------------------- --------------------- -------------------- -------------------------
<S> <C> <C> <C>
Elmsford, New York(1) Executive Offices; 45,000 square feet Leased (expiration date:
design and art February 28, 2001)
production of paper
party products and
decorations
Harriman, New York Manufacture of paper 75,000 square feet Leased (expiration date:
napkins and cups March 31, 1999)
Providence, Rhode Island Manufacture and 51,000 square feet Leased (expiration date:
distribution of June 30, 2008)
plastic plates, cups
and bowls
</TABLE>
<TABLE>
<S> <C> <C> <C>
Louisville, Kentucky Manufacture and 183,000 square feet Leased (expiration date:
distribution of paper March 31, 1997)
plates
Anaheim, California Manufacture of 25,000 square feet Leased (expiration date:
novelty items February 28, 1999)
Temecula, California(2) Distribution of party 212,000 square feet Leased (expiration date:
products and February 28, 2000)
decorations
Goshen, New York Distribution of party 130,000 square feet Leased (expiration date:
products and December 31, 1998)
decorations
Chester, New York(3) Distribution of party 287,000 square feet Owned
products and
decorations
Montreal, Canada(4) Distribution of party 124,000 square feet Owned
products and
decorations
Milton Keynes, England Distribution of party 30,000 square feet Leased (expiration date:
products and March 31, 2016)
decorations
throughout United
Kingdom and Europe
Melbourne, Australia Distribution of party 10,000 square feet Owned
products and
decorations in
Australia and Asia
</TABLE>
- ---------------
(1) Property leased by the Company from a limited liability company which is
79%-owned by a trust established for the benefit of John A. Svenningsen's
children, 20%-owned by a trust established for the benefit of Mr.
Svenningsen's sister's children and 1%-owned by a corporation owned by Mr.
Svenningsen. See "Certain Related Transactions."
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<PAGE> 46
(2) Property leased by the Company from John A. Svenningsen. See "Certain
Related Transactions."
(3) Property subject to a ten-year mortgage made by the Company securing a loan
in the original principal amount of $5,925,000 bearing interest at a rate
of 8.51%. Such mortgage commenced on September 14, 1994.
(4) Property subject to a mortgage made by the Company securing a loan in the
original principal amount of $2,088,000. Such mortgage bears an interest
rate at the lower of Hong Kong Bank of Canada's Cost of Funds plus 1.6% or
Canadian Prime plus 0.5%.
The Company believes that its properties have been adequately maintained,
are in generally good condition and are suitable for the Company's business as
presently conducted. The Company believes its existing facilities provide
sufficient production capacity for its present needs and for its anticipated
needs in the foreseeable future. To the extent such capacity is not needed for
the manufacture of the Company's products, the Company generally uses such
capacity for the manufacture of products for others pursuant to terminable
contracts. All properties generally are used on a basis of two shifts per day.
The Company also believes that upon the expiration of its current leases, it
either will be able to secure renewal terms or enter into leases for alternative
locations at market terms.
LEGAL PROCEEDINGS
Neither the Company nor any of its subsidiaries is a party to any material
pending legal proceedings.
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<PAGE> 47
MANAGEMENT OF THE COMPANY
DIRECTORS AND EXECUTIVE OFFICERS
The directors and executive officers of the Company and their respective
ages and principal positions with the Company are set forth below. Each director
and executive officer has held such positions with the Company set forth below
since October, 1996, the month during which the Company was incorporated.
<TABLE>
<CAPTION>
YEAR OF EXPIRATION
NAME AGE POSITION OF TERM AS DIRECTOR
- ------------------------- --- ------------------------------------ -------------------
<S> <C> <C> <C>
John A. Svenningsen...... 65 Chairman of the Board of Directors, 1999
Chief Executive Officer and
Secretary
Gerald C. Rittenberg..... 44 Director and President 1998
Christine Svenningsen.... 39 Director 1997
William S. Wilkey........ 40 Senior Vice President -- Sales and --
Marketing
James M. Harrison........ 44 Chief Financial Officer and --
Assistant Secretary
</TABLE>
JOHN A. SVENNINGSEN is the Chairman of the Board of Directors and Chief
Executive Officer of Amscan Inc. He has served as Chief Executive Officer of
Amscan Inc. since 1958 and served as President from 1958 to April 1996.
GERALD C. RITTENBERG has served as the President of Amscan Inc. since April
1996. From 1991 to April 1996, he was Executive Vice President -- Product
Development of Amscan Inc. and from 1990 to 1991 he was Vice
President -- Product Development of Amscan Inc. From 1988 to 1989, Mr.
Rittenberg was Senior Vice President of Different Looks, a division of Berwick
Industries which manufactures and distributes gift wrap and related products.
Prior thereto, Mr. Rittenberg was the Director of Operations for the packaging
division of Philip Morris Companies Inc.
CHRISTINE SVENNINGSEN served as product manager in charge of product
development of Amscan Inc. from July 1980 to February 1991. It is expected that
Mrs. Svenningsen will resign her position as a director of the Company prior to
the consummation of the Offering. Mrs. Svenningsen is the wife of John A.
Svenningsen.
WILLIAM S. WILKEY has served as the Senior Vice President -- Sales of
Amscan Inc. since 1992 and as Vice President -- Marketing and Field Sales from
1990 to 1992. From 1988 to 1990, Mr. Wilkey was employed by Paper Art, a
manufacturer and distributor of party goods (currently called Creative
Expressions Group), where he served as National Sales Manager.
JAMES M. HARRISON has served as the Chief Financial Officer of Amscan Inc.
since August 1996. From 1993 to 1995, Mr. Harrison was the Executive Vice
President and Chief Operating Officer, Secretary and Treasurer and a member of
the Board of Directors of The C.R. Gibson Company, a manufacturer and
distributor of paper gift products. From 1988 to 1993, Mr. Harrison was the
Chief Financial Officer of The C.R. Gibson Company.
COMMITTEES OF THE BOARD OF DIRECTORS
The Company intends to establish a Compensation Committee and an Audit
Committee and has established a Stock Option Committee. The Compensation
Committee will be composed of at least two directors, at least a majority of
whom will not be officers or employees of the Company. It will approve and
recommend to the Board of Directors the compensation arrangements for key
management personnel of the Company and its subsidiaries and will be responsible
for making recommendations to the Board of Directors regarding the adoption of
compensation plans for the benefit of directors, officers and other key
employees of the Company and its subsidiaries.
The Audit Committee will be composed of at least two directors who are not
officers or employees of the Company and will be responsible for recommending to
the Board of Directors the
44
<PAGE> 48
selection of independent auditors, consulting with the auditors on the plan of
audit, reviewing with the auditors the proposed audited financial statements of
the Company and reviewing and consulting on the adequacy of the Company's
internal controls.
The Stock Option Committee is responsible for administering the Company's
1996 Stock Option Plan for Key Employees (the "Stock Option Plan") as more fully
described under " -- Stock Option Plan -- Description of Plan." The Stock Option
Committee currently consists of Mr. Svenningsen, but, after consummation of the
Offering, its membership will be comprised of non-employee directors.
EXECUTIVE COMPENSATION
The following table sets forth information concerning the compensation
earned for the year ended December 31, 1995 for the Chief Executive Officer and
each of the other executive officers of the Company as of December 31, 1995,
whose aggregate salary and bonus exceeded $100,000. The amounts shown include
compensation for services in all capacities that were provided to the Company or
its subsidiaries. The amounts set forth in the table include payments under
arrangements which will terminate prior to the Offering. Mr. Harrison is not
listed, since his employment agreement commenced August 1, 1996. In addition,
the executive officers of the Company will participate in the ESOP and the
special one-time contribution to the ESOP. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Financial Impact of
Organization of the Company -- Establishment of an Employee Stock Ownership Plan
and Payment of Stock Bonuses."
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION ALL OTHER
------------------------- COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) ($)(1)
- -------------------------------------------- ---- ---------- ---------- ------------
<S> <C> <C> <C> <C>
John A. Svenningsen......................... 1995 289,399 10,000,000(2) 10,614
Chief Executive Officer
Gerald C. Rittenberg........................ 1995 200,269 1,682,000(3) 4,317
Executive Vice President
William S. Wilkey........................... 1995 172,500 757,000(4) 4,317
Senior Vice President -- Sales
</TABLE>
- ---------------
(1) Represents contributions by the Company in respect of the named officer
under the Profit Sharing and Savings Plan maintained by the Company's
principal subsidiary, Amscan Inc., as well as insurance premiums paid by the
Company with respect to term life insurance for the benefit of the named
executive officer.
(2) Prior to the Offering, certain entities which are now subsidiaries of the
Company elected to be taxed as Subchapter S corporations under the Internal
Revenue Code. This amount represents a distribution to Mr. Svenningsen to
enable him to pay personal income taxes on the earnings of those entities
and amounts lent back to the Company as subordinated indebtedness.
(3) Represents bonuses paid to Mr. Rittenberg pursuant to his prior employment
agreement with Amscan Inc. which will terminate upon consummation of the
Offering. See " -- Employment Agreements."
(4) Represents bonuses paid to Mr. Wilkey pursuant to an employment agreement
with Amscan Inc. which will expire on December 31, 1996.
EMPLOYMENT AGREEMENTS
Set forth below are descriptions of the Company's employment agreements
with John A. Svenningsen, Gerald C. Rittenberg, William S. Wilkey and James M.
Harrison.
45
<PAGE> 49
JOHN A. SVENNINGSEN. In conjunction with the Offering, Mr. Svenningsen has
entered into an employment agreement with the Company for a term of three years
commencing upon consummation of the Offering. Pursuant to the terms of this
Agreement, Mr. Svenningsen will serve as Chief Executive Officer and Chairman of
the Board of Directors of the Company. The agreement provides for a base annual
salary of $300,000, which will be increased by 5% each successive year during
the term of the agreement. The Company may terminate Mr. Svenningsen's
employment upon Mr. Svenningsen's death or for "cause." Upon termination of
employment, Mr. Svenningsen may not, for a period of three years, be employed by
or associated in any manner with any other business which is competitive with
the Company.
GERALD C. RITTENBERG. Mr. Rittenberg has entered into a new employment
agreement with the Company in connection with the Offering, for a term of three
years commencing upon consummation of the Offering. Under the terms of this
agreement Mr. Rittenberg is employed as President of the Company at a base
annual salary of $220,000. Mr. Rittenberg's salary shall be increased by 5% each
successive year during the term of the agreement. This agreement may be
terminated by the Company upon the death of Mr. Rittenberg or for "cause." The
agreement also provides that upon termination of employment, Mr. Rittenberg may
not be employed by or be associated in any manner with any other business which
is competitive with the Company for a period of three years.
This agreement was made in conjunction with an agreement among Amscan Inc.,
Mr. Svenningsen and Mr. Rittenberg whereby Mr. Rittenberg agreed to terminate
his prior employment agreement which provided for Mr. Rittenberg to receive (a)
a bonus in an amount equal to 10% of the aggregate net profits of Amscan Inc.
and certain affiliates (as defined in the agreement), (b) 5% of the net selling
price upon the sale of Amscan Inc. or the sale by Mr. Svenningsen of
substantially all of his stock in Amscan Inc. and (c) in the event of an initial
public offering of the stock of Amscan Inc., shares of the stock of Amscan Inc.
equal to 5% of the shares of stock of Amscan Inc. issued and outstanding
immediately following the consummation of the initial public offering. In
exchange for the relinquishment of such rights, Mr. Rittenberg received a cash
payment of $3.4 million and a number of shares of stock of Amscan Inc., which
shares he exchanged for 660,000 shares of Common Stock representing 3% of the
Common Stock to be outstanding upon consummation of the Offering (assuming the
Underwriters' over-allotment option is not exercised). To the extent that the
net proceeds from the Offering (including any net proceeds of the exercise of
the Underwriters' over-allotment option) exceeds $69 million, Mr. Rittenberg
will be entitled to an additional cash payment equal to 5% of such excess. The
Company has granted Mr. Rittenberg certain rights to require the Company to
register the offer and sale of Mr. Rittenberg's Common Stock under the
Securities Act. See "Shares Eligible for Future Sale." It is estimated that Mr.
Rittenberg's salary and bonus for 1996 under his prior employment agreement will
be $211,000 and $2,800,000, respectively.
WILLIAM S. WILKEY. Mr. Wilkey has entered into an employment agreement
dated October 3, 1996, which will commence on January 1, 1997. Under the terms
of this agreement Mr. Wilkey will be employed as Senior Vice President -- Sales
and Marketing of the Company for a period of five years. Mr. Wilkey will receive
an initial base salary of $200,000 for 1997, which will be increased by 5% each
successive year during the term of the agreement. In addition, Mr. Wilkey is
entitled to receive an annual bonus which will be determined by a formula which
takes into account the amount by which sales and profits are increased on a year
to year basis. Mr. Wilkey also will receive in conjunction with the Offering an
initial grant of stock options in respect of 100,000 shares of Common Stock
under the Stock Option Plan. See "-- Stock Option Plan." Mr. Wilkey's agreement
also provides that upon termination of employment he may not for a period of
three years be employed by or associated in any manner with any business which
is competitive with the Company. This agreement may be terminated by the Company
upon the death or permanent disability of Mr. Wilkey or for "cause." Mr.
Wilkey's current agreement, which expires on December 31, 1996, provides that in
addition to a base salary, he is entitled to receive an amount equal to 5% of
the aggregate net profits of Amscan Inc. and certain affiliates. It is estimated
that Mr. Wilkey's salary
46
<PAGE> 50
and bonus for 1996 under the agreement which will expire December 31, 1996 will
be $181,000 and $1,400,000, respectively.
JAMES M. HARRISON. Mr. Harrison has entered into an agreement with Amscan
Inc. whereby he is employed as the Chief Financial Officer of Amscan Inc. The
agreement, which commenced August 1, 1996, provides for a base salary of
$150,000 and a guaranteed bonus for the first year of $50,000. The agreement has
a term of one year to be automatically renewed for successive one year periods
in the absence of the termination of the agreement by either of the parties
thereto in accordance with its terms. The agreement, which may be terminated by
Amscan Inc. at any time upon the payment of one year's salary, provides for
termination without any additional compensation upon the death or permanent
disability of Mr. Harrison or for "cause." Under the terms of the agreement,
upon termination of employment, Mr. Harrison may not, for a period of one year,
be employed by or associated in any manner with any business which is
competitive with Amscan Inc. Prior to consummation of the Offering, Mr. Harrison
will be granted an option to purchase 50,000 shares of Common Stock under the
Stock Option Plan. See " -- Stock Option Plan."
COMPENSATION OF DIRECTORS
Employee directors receive no additional compensation for serving on the
Board of Directors or its committees. The Company anticipates that it will
compensate directors who are not employees of the Company pursuant to
arrangements established once such directors are elected. All directors will be
reimbursed for expenses incurred in attending Board of Directors and committee
meetings.
STOCK OPTION PLAN
DESCRIPTION OF PLAN
The Stock Option Plan is administered by the Stock Option Committee (the
"Stock Option Committee") of the Board of Directors of the Company, a committee
which, following consummation of the Offering, will be composed of at least two
members appointed by the Board of Directors from among those directors who are
Non-Employee Directors (as defined). Prior to consummation of the Offering, the
Stock Option Committee was composed of a single director, John A. Svenningsen.
None of the members of the Stock Option Committee receives any additional
compensation for the administration of the Stock Option Plan.
The Stock Option Committee has plenary authority in its discretion, but
subject to the express provisions of the Stock Option Plan, to determine the
employees to whom, and the time or times at which, stock options are granted, as
well as the terms and provisions governing each such option. The Stock Option
Committee has further plenary authority at its discretion to interpret the Stock
Option Plan, and to prescribe, amend and rescind rules and regulations relating
to it. Additionally, the Stock Option Committee is generally responsible for the
administration of the Stock Option Plan. The Stock Option Committee's
determinations as to the foregoing matters are conclusive.
Two million shares of the authorized but unissued Common Stock have been
reserved for issuance under the Stock Option Plan. In lieu of such unissued
shares, the Company may, in its discretion, transfer to an optionee, upon the
exercise of options, reacquired shares or shares bought in the market for the
purposes of the Stock Option Plan, provided that (subject to adjustments upon
changes in capitalization) the total number of options which may be granted and
the number of shares which may be sold pursuant to options granted under the
Stock Option Plan shall not exceed 2,000,000. If any options granted under the
Stock Option Plan terminate or expire for any reason without having been
exercised or vested in full, the Common Stock not delivered under such options
will be available again for purposes of the Stock Option Plan. Based on an
initial public offering price of $13 (the mid-point of the range of public
offering prices set forth on the cover page of this Prospectus), the fair market
value of 2,000,000 shares of Common Stock is $26,000,000. No stock options may
be granted under the Stock Option Plan after November 27, 2006.
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<PAGE> 51
Under the Stock Option Plan, stock options may be granted only to regular,
salaried employees (including officers and directors) of the Company or its
subsidiaries whom the Stock Option Committee considers key employees. In
determining the employees to whom such options are to be granted, as well as
their terms and conditions, the Stock Option Committee takes into account the
duties of the respective employees, their present and potential contributions to
the success of the Company, and such other factors as the Stock Option Committee
deems relevant in connection with accomplishing the purpose of the Stock Option
Plan. An existing optionee may be granted and hold an additional option or
options if the Stock Option Committee shall so determine. All of the foregoing
determinations are within the discretion of the Stock Option Committee.
Under the Stock Option Plan, both incentive stock options and non-qualified
options may be granted to employees of the Company. The Stock Option Plan
requires that the purchase price of the Common Stock covered by stock options
granted thereunder be not less than 100% (or pursuant to Section 422 of the
Internal Revenue Code, 110% in the case of an incentive stock option granted to
a 10% shareholder) of the fair market value of the Common Stock on the date of
the grant.
The term of each option is for such period as the Stock Option Committee
determines but, notwithstanding the foregoing, the term of no option may be more
than ten years from the date of grant thereof (or 5 years from the date of grant
of the option in the case of an incentive stock option granted to a 10%
shareholder).
Unless otherwise determined by the Stock Option Committee, one-quarter
(25%) of the total number of shares of Common Stock covered by an option granted
to an employee of the Company or its subsidiaries becomes exercisable upon such
employee's completion of one year of continuous service with the Company or its
subsidiary after the grant of the option; thereafter, an additional one-quarter
(25%) of the total number of shares of Common Stock covered by the option
becomes exercisable upon such employee's completion of two, three and four years
of continuous service with the Company or its subsidiaries, respectively. Once
an option or part thereof becomes exercisable, it will remain exercisable until
expiration of the option, unless otherwise specified by the Stock Option
Committee. An option may be exercised during the lifetime of an optionee only by
such optionee, and an option granted under the Stock Option Plan is not
transferable other than by will or pursuant to the laws of descent and
distribution or pursuant to a qualified domestic relations order. No option may
be exercised at any time except by an optionee who is then a regular employee of
the Company, except as provided in the Stock Option Plan. The holder of an
option has none of the rights of a stockholder with respect to the shares
subject to option until such shares are registered upon the exercise of the
option on the transfer books of the Company in the name of the holder.
Unless otherwise provided in an option agreement, a holder of an option may
purchase all, or from time to time any part of, the shares which the optionee
has become entitled to purchase. An option may not, however, be exercised as to
fewer than 50 shares, or the remaining shares covered by the option if fewer
than 50, at any one time. The purchase price of the shares as to which an option
is exercised must be paid in full at the time of exercise at the election of the
holder of an option (a) in cash or currency of the United States of America, (b)
by tendering to the Company shares of the Company's Common Stock then owned by
the holder, having a fair market value equal to the cash exercise price
applicable to the purchase price of the shares as to which the option is being
exercised or (c) partly in cash and partly in shares of the Company's Common
Stock valued at fair market value. Fractional shares of Common Stock will not be
issued. Notwithstanding the foregoing, the Stock Option Committee has the right
to modify, amend or cancel the right to pay the option price other than in full
in cash by giving prior notice to each holder of an option. Neither the Company,
any company with which it is affiliated, nor any of its subsidiaries may
directly or indirectly lend money to any person for the purpose of assisting
said person to acquire or carry shares of Common Stock issued by the exercise of
options.
Any outstanding option granted under the Stock Option Plan becomes fully
and immediately exercisable upon the occurrence of a tender offer or exchange
offer made by any "person" within
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the meaning of Section 14(d) of the Securities Exchange Act of 1934 or a "change
in control" (as such term is defined in the Stock Option Plan); provided,
however, that if in the opinion of counsel to the Company the immediate
exercisability of an option, when taken into consideration with all other
"parachute payments," as defined in Section 280G(b) of the Internal Revenue
Code, would result in "excess parachute payments," as defined in such Section,
an option will not become immediately exercisable, except as and to the extent
the Stock Option Committee in its discretion otherwise determines. The Stock
Option Committee may provide for the acceleration of vesting of options under
such other circumstances as the Stock Option Committee may determine in its sole
discretion. The Stock Option Committee may adopt such procedures as to notice
and exercise as may be necessary to effectuate the acceleration of the
exercisability of options as described above.
If an optionee's employment is terminated (other than by retirement,
disability or death), options held by the optionee are, subject to certain
conditions contained in the Stock Option Plan, exercisable (to the extent that
the optionee would be entitled to do so at the termination of his employment)
for 30 days after such termination (or for such other period as may be specified
by the Committee), but not later than the expiration of the term of the option.
Notwithstanding the foregoing, in the event an optionee is discharged for cause
(as such term is defined in the Stock Option Plan), the unexercised portion of
an option terminates immediately, except as otherwise provided by the Committee.
If the optionee has exercised all or part of an option within 15 days of notice
of discharge for cause and the Company has not yet delivered Common Stock
pursuant to such exercise, such exercise will be deemed invalid and any purchase
price tendered by the optionee for Common Stock will be refused or, if
previously paid, will be returned to the optionee.
If an employee to whom an option has been granted under the Stock Option
Plan retires from the Company or its subsidiaries at normal retirement date
pursuant to any pension plan provided by the Company or its subsidiaries, or
retires earlier than the employee's normal retirement date with the prior
consent of the Company, such option may be fully exercised without regard to the
period of continuous employment after the option was granted, at any time within
90 days after such retirement (or for such other period as may be specified by
the Committee), but in no event after the expiration of the term of the option.
If the employment of anyone to whom an option has been granted under the
Stock Option Plan terminates by reason of that employee's disability (within the
meaning of Section 22(e)(3) of the Internal Revenue Code) and while such
employee is entitled to exercise such option as herein provided, such employee
shall have the right to exercise such option at any time within 90 days after
the date of such termination (or for such other period as may be specified by
the Committee) but in no event after the expiration of the term of the option.
If an employee to whom an option has been granted under the Stock Option
Plan dies while he is employed by the Company or its subsidiaries, or during
either the 90-day period following normal retirement or the 90-day period
following disability retirement, such option may be exercised to the extent the
optionee was entitled to do so at the date of death, by his executor or
administrator or other person at the time entitled by law to the employee's
rights under the option, at any time within such period (not exceeding one year
after death or for such other period as may be specified by the Committee) as is
prescribed in the option agreement, but in no event after the expiration of the
term of the option.
In the event of any change in the outstanding shares of Common Stock
through merger, consolidation, reorganization, recapitalization, stock dividend,
stock split, split-off, spin-off, combination or exchange of shares, or other
like change in the capital structure of the Company, an adjustment shall be made
to each outstanding option such that each such option shall thereafter be
exercisable in respect of the shares of Common Stock subject to such option had
such option been exercised in full immediately prior to such change. The Stock
Option Committee shall also, in the event of such change, make any further
appropriate adjustments to the maximum number of shares of Common Stock which
may be acquired under the Plan pursuant to the exercise of Options and
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the number of shares of Common Stock and price per share subject to outstanding
options as shall be equitable to prevent dilution or enlargement of rights under
such options.
In connection with any stock option, the Stock Option Committee may, in its
discretion, permit an employee to satisfy any withholding tax obligation which
may arise in connection with an option by electing to have the Company withhold
Common Stock having a fair market value (calculated as of the date the amount of
withholding tax is determined) equal to the amount of the withholding tax.
Stock options are not affected by changes of duties or position so long as
the optionee continues to be an employee of the Company or one of its
subsidiaries. Nothing in the Stock Option Plan or in any option agreement
confers upon any employee any right to continue in the employ of the Company or
one of its subsidiaries or interferes in any way with any right the Company or
its subsidiaries may have to terminate his employment at any time.
The Stock Option Plan provides that the Board of Directors may amend or
terminate the Stock Option Plan in any respect; provided, however, that except
with respect to adjustments upon changes in capitalization, without further
approval of the holders of Common Stock, the Board of Directors may not increase
the maximum number of shares for which stock options may be granted under the
Stock Option Plan, change the manner of determining the minimum option prices,
extend the period during which an option may be granted or an option may be
exercised, or amend the provisions of the Stock Option Plan as to the class of
employees eligible to receive options. No termination, modification or amendment
of the Stock Option Plan may, without the consent of the optionee, adversely
affect the rights of such optionee.
Pursuant to the Stock Option Plan, options will be granted in conjunction
with the Offering to Mr. Wilkey and Mr. Harrison for 100,000 and 50,000 shares
of Common Stock, respectively. Such
options will have an exercise price per share equal to the initial public
offering price set forth on the cover page of this Prospectus and a term of 10
years from the date of grant. Options to purchase an additional 250,000 shares
of Common Stock will be granted in conjunction with the Offering to employees of
the Company or its subsidiaries who are not executive officers of the Company.
Such additional options will also have an exercise price per share equal to the
initial public offering price set forth on the cover page of this Prospectus and
a term of 10 years from the date of grant. (Such options will in no event become
exercisable prior to one year after the grant thereof.) To the extent permitted
under the Internal Revenue Code, such options will be incentive stock options,
and the balance, if any, will be non-qualified stock options. There is no other
current agreement to grant additional options pursuant to the Stock Option Plan.
FEDERAL TAX CONSEQUENCES OF PLAN
Counsel for the Company has advised that the federal income tax
consequences of stock options granted under the Stock Option Plan are as
follows:
INCENTIVE STOCK OPTIONS. Neither the grant nor exercise of an incentive stock
option will generally have any federal income tax consequences for an optionee.
The amount by which the fair market value of the shares acquired upon the
exercise of any incentive stock option exceeds the option price as of the date
of exercise, however, is an item of "tax preference" for purposes of computing
the alternative minimum tax on individuals.
If an optionee has held the shares acquired on the exercise of an incentive
stock option for at least two years from the date of the grant of the option and
at least one year from the date of exercise, the optionee will recognize taxable
long-term capital gain or loss upon a subsequent disposition of the shares. In
such circumstances, no deduction would be allowed to the Company for federal
income tax purposes in connection with the grant or exercise of the option or
the transfer of shares acquired upon such exercise.
If, however, the employee disposes of his shares within the holding periods
described above, which would include the use of such shares to exercise a second
stock option, (i) the employee will
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recognize ordinary income in an amount equal to the difference between the fair
market value of such shares on the date of exercise (or such later time as the
shares become nontransferable or not subject to a substantial risk of
forfeiture) and the option price, provided that, if the disposition is a sale or
exchange with respect to which a loss (if sustained) would be recognized by the
employee and the amount realized from such sale or exchange is less than the
fair market value on the exercise date, then the ordinary income will be limited
to the excess of the amount realized upon the sale or exchange of the shares
over the option price; (ii) the Company will be entitled to a deduction for such
year in the amount of the ordinary income so recognized; (iii) the employee will
recognize capital gain or loss, short-term or long-term, as the case may be, in
an amount equal to the difference between the amount realized upon such sale or
exchange of the shares and the sum of the option price plus the amount of
ordinary income, if any, recognized upon such disposition. Any such capital gain
or loss will be long-term gain or loss if the shares with respect to which such
gain or loss is recognized have been held for more than one year.
NON-QUALIFIED STOCK OPTIONS. The grant of a non-qualified stock option
would have no federal income tax consequences to the Company or to the employee.
An optionee would recognize taxable ordinary income at the time of exercise of
the option (or at such later time as the shares become nontransferable or not
subject to a substantial risk of forfeiture) in an amount equal to the excess of
the fair market value of the shares acquired at the time of exercise (or such
later time) over the option price, and the Company would be entitled to a
deduction in such amount, provided that such compensation is reasonable and the
Company withholds any applicable federal income tax. The optionee may be
required upon the exercise of a non-qualified option to deposit with the Company
an amount equal to the federal income tax required to be withheld.
Alternatively, the Company may elect to withhold a number of shares otherwise
transferable upon exercise of the option having a fair market value equal to the
amount required to be withheld. Any amounts so deposited will be remitted by the
Company to the Internal Revenue Service.
The holder of shares acquired upon exercise of a non-qualified option will
upon a subsequent disposition of such shares generally recognize a short-term or
long-term capital gain or loss, depending upon the holding period of the shares,
equal to the difference between the amount realized on the sale and the basis in
such shares (the sum of the option price and the amount taxed as ordinary income
at the time of exercise).
ALL OPTIONS. A number of special rules apply to the use of previously
acquired stock to exercise incentive or non-qualified stock options or to
satisfy any attendant federal income tax withholding obligation.
It should be noted that, under the Internal Revenue Code, to the extent
that option exercise is accelerated on account of a change in control of the
Company, the value of the acceleration of vesting would be treated as a
"parachute payment," which may subject the employee to an excise tax and be
nondeductible by the employer. Such consequences would only follow, however, if
the total "parachute payments" (including the value of the acceleration) were of
sufficient magnitude to constitute "excess parachute payments" under the
Internal Revenue Code. Furthermore, amounts constituting "reasonable
compensation" are not subject to the rules relating to "excess parachute
payments," and the Committee Report to the Tax Reform Act of 1984 indicates that
the benefit of acceleration of exercise of stock options issued as part of a
normal compensation package granted more than one year before the change in
control presumptively constitutes reasonable compensation.
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PRINCIPAL STOCKHOLDERS
The following table sets forth information regarding the beneficial
ownership of Common Stock as of the day prior to the date hereof and after the
consummation of the Offering, respectively, by (i) each director and named
executive officer and (ii) all directors and executive officers as a group.
Unless otherwise indicated, each person or entity has sole voting power and
investment power with respect to the shares attributed to such person or entity.
No person other than Mr. Svenningsen owns more than 5% of the outstanding shares
of Common Stock.
<TABLE>
<CAPTION>
PRIOR TO THE DATE HEREOF AFTER THE OFFERING
-------------------------------- --------------------------------
SHARES BENEFICIALLY PERCENT OF SHARES BENEFICIALLY PERCENT OF
NAME OWNED CLASS OWNED CLASS(4)
------------------------- ------------------- ---------- ------------------- ----------
<S> <C> <C> <C> <C>
John A. Svenningsen...... 15,182,308(1) 92.5% 15,182,308(1) 69.0%
Gerald C. Rittenberg..... 660,000(2) 4.0% 660,000(2) 3.0%
William S. Wilkey........ 0 -- 0 --
Christine Svenningsen.... 0(3) -- 0(3) --
All directors and
executive officers
as a group............. 15,842,308 96.5% 15,842,308 72.0%
</TABLE>
- ---------------
(1) Includes 128,572 shares owned in the aggregate by the SSY Trusts for which
Mr. Svenningsen is a co-trustee.
(2) Mr. Svenningsen and Mr. Rittenberg have entered into an agreement pursuant
to which Mr. Svenningsen has agreed to lend Mr. Rittenberg up to $4 million
to enable Mr. Rittenberg to pay taxes on the shares of Common Stock received
by Mr. Rittenberg in the Organization. Such loan, if made, would have a term
of 30 months and bear interest at the 90-day LIBOR rate plus 0.125%. Mr.
Rittenberg would have the right to pay all or any portion of the loan by
delivering shares of Common Stock to Mr. Svenningsen based on the fair
market value of the Common Stock on the date of repayment. If Mr. Rittenberg
were to borrow the money from Mr. Svenningsen and repay it by delivering
shares of Common Stock, the number of shares of Common Stock beneficially
owned by Mr. Rittenberg would be reduced and the number owned by Mr.
Svenningsen would be correspondingly increased. Mr. Svenningsen and Mr.
Rittenberg have also entered into an agreement pursuant to which Mr.
Rittenberg would be entitled to receive 5% of the net proceeds from any sale
of Common Stock by Mr. Svenningsen, his wife, his issue or his estate, which
occurs at any time during a period not exceeding six years commencing upon
the consummation of the Offering.
(3) Christine Svenningsen is the wife of John A. Svenningsen. As the wife of Mr.
Svenningsen, Christine Svenningsen may be deemed to own the shares of Common
Stock beneficially owned by Mr. Svenningsen.
(4) The percentages are calculated on the basis of the number of shares of
Common Stock issued in the Organization and the shares offered hereby
(assuming no exercise of the Underwriters' over-allotment option) and
assuming issuance of shares in connection with the ESOP and the employee
stock bonuses.
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CERTAIN RELATED TRANSACTIONS
The Company leases certain of its facilities from Mr. Svenningsen or from
entities that Mr. Svenningsen either owns directly or in which he has a direct
or indirect beneficial interest. The Company pays rent and expenses for those
facilities on terms which it believes are at least as favorable to the Company
as the terms which would have been available for leases negotiated with
unaffiliated persons at the inception of each lease. Mr. Svenningsen has
indicated that he will recuse himself from any decision of the Board of
Directors of the Company relating to the terms and conditions of any such
leases, or any renewals thereof.
In March, 1996, the Company began leasing approximately 45,000 square feet
for the Company's administrative headquarters in an office building of
approximately 90,000 square feet in Elmsford, New York. The building is owned by
a limited liability company which is 79%-owned by a trust established for the
benefit of Mr. Svenningsen's children, 20%-owned by a trust established for the
benefit of Mr. Svenningsen's sister's children and 1%-owned by a corporation
owned by Mr. Svenningsen. Rent expense relating to this lease was $502,000 for
the nine months ended September 30, 1996. This lease, as amended, provides for
annual rent of $1,003,000 and has a term which expires on February 28, 2000. In
addition, the Company has options to renew for three five-year periods at market
rental. Prior to this, the Company's headquarters had been in a facility owned
by Mr. Svenningsen. Rent expense related to that facility was $411,000,
$432,000, $453,000 and $196,000 for the years ended December 31, 1993, 1994,
1995, and the nine months ended September 30, 1996, respectively.
The Company leases a 212,000 square foot warehouse in Temecula, California
from Mr. Svenningsen. Rent expense related to this warehouse was $439,000,
$462,000 $483,000 and $889,000 for the years ended December 31, 1993, 1994,
1995, and the nine months ended September 30, 1996, respectively. The expiration
date of this lease, as amended, is February 28, 2000; however, the Company has
options to renew at market rental for two additional five-year periods.
The Company and Mr. Svenningsen have entered into an agreement pursuant to
which Mr. Svenningsen may seek reimbursement from the Company for any income tax
obligation attributable to any period prior to the Organization (including any
gross-up for additional taxes), but only to the extent that such tax is
attributable to income that was not distributed to Mr. Svenningsen.
Alternatively, in the event that the status of Amscan Inc., Am-Source, Inc., JCS
Realty Corp. or SSY Realty Corp. as a Subchapter S corporation is not respected,
the Company may seek reimbursement from Mr. Svenningsen, but only to the extent
that Mr. Svenningsen is entitled to a tax refund attributable to amounts he
previously included in income in his capacity as a shareholder of such
corporations.
Ya Otta Pinata, a California corporation which is 50% owned by Mr.
Svenningsen ("Ya Otta"), manufactures pinatas which historically have been sold
by the Company's sales force with no commissions charged to Ya Otta. Mr.
Svenningsen will retain his ownership in Ya Otta and Ya Otta will not be part of
the Organization. After the Organization, the Company's sales force will
continue to sell pinatas manufactured by Ya Otta. On any sales after the
Organization, the Company will receive a sales commission in the range of 7% to
10%. For the year ended December 31, 1995, sales by Ya Otta were approximately
$2.2 million.
The Company has agreed to indemnify each director pursuant to an
Indemnification Agreement with such director from and against any and all
expenses, losses, claims, damages and liabilities incurred by such director for
or as a result of actions taken or not taken while such director was acting in
his or her capacity as a director of the Company.
See also, "Organization of the Company" and "Management of the
Company -- Executive Compensation -- Employment Agreements."
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DESCRIPTION OF THE COMPANY'S CAPITAL STOCK
GENERAL
The Company's authorized capital stock consists of 5,000,000 shares of
Preferred Stock, $0.10 par value, of which no shares are issued and outstanding,
and 50,000,000 shares of Common Stock, $0.10 par value, of which 22,000,000
shares will be issued and outstanding upon completion of the Offering (or
22,802,500 shares if the Underwriters' over-allotment option is exercised in
full). The following description of the Preferred Stock and Common Stock is
qualified in its entirety by reference to the Company's Certificate of
Incorporation and By-Laws, copies of which have been filed as exhibits to the
Registration Statement of which this Prospectus is a part.
PREFERRED STOCK
Pursuant to the Company's Certificate of Incorporation, the Company's Board
of Directors may, without further action by the Company's stockholders, from
time to time issue shares of Preferred Stock and determine the rights,
preferences and limitations of such stock, and may issue such Preferred Stock in
series having differing rights, preferences and limitations. The rights,
preferences and limitations of any Preferred Stock which might be issued could
materially reduce the Company's ability to pay dividends on its shares of Common
Stock, the assets available to common stockholders upon any dissolution and
liquidation of the Company and the voting power of holders of the Common Stock.
Shares of Preferred Stock or rights to purchase such shares could be issued
to create voting impediments or otherwise frustrate persons seeking to effect a
takeover of the Company. Thus, the potential to issue the Preferred Stock could
discourage an attempt by a person to acquire control of the Company by tender
offer or other means and could, therefore, deprive stockholders of benefits that
could result from such an attempt, such as the realization of a premium over the
market price of the shares in a tender offer or the temporary increase in market
price that such an attempt could cause. The issuance of shares of voting
Preferred Stock to persons friendly to the Board of Directors could make it more
difficult to remove incumbent management and directors from office, even if such
removal would be beneficial to stockholders generally.
The Board of Directors believes that the financial flexibility offered by
authorized but unissued Preferred Stock outweighs any of its potential
disadvantages. To the extent it may have anti-takeover effects, the existence of
the Preferred Stock may encourage persons seeking to acquire the Company to
negotiate directly with the Board of Directors, enabling the Board of Directors
to consider the proposed transaction in a non-disruptive atmosphere, and to
discharge effectively its obligation to act on a proposed transaction in a
manner that best serves the stockholders' interests.
COMMON STOCK
Holders of Common Stock are entitled to one vote per share in the election
of directors and on all other matters on which stockholders are entitled or
permitted to vote. Holders of Common Stock are not entitled to vote cumulatively
for the election of directors. Holders of Common Stock have no redemption,
preference, exchange, conversion, preemptive or other subscription rights. There
are no sinking fund provisions relating to the Common Stock. In the event of the
liquidation, dissolution or winding up of the Company, holders of Common Stock
are entitled to share ratably in all of the assets of the Company, if any,
remaining after satisfaction of the debts and liabilities of the Company and the
preferential amounts payable to the holders of the Company's Preferred Stock, if
any. The outstanding shares of Common Stock are, and the shares of Common Stock
offered hereby will be, upon payment therefor as contemplated herein, validly
issued, fully paid and nonassessable.
Holders of Common Stock are entitled to receive dividends when and as
declared by the Board of Directors of the Company out of funds legally available
therefor, subject to the rights of the
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<PAGE> 58
holders of the Company's Preferred Stock, if any. The Company does not
anticipate paying cash dividends on the Common Stock in the foreseeable future.
As a holding company, the Company's ability to declare and pay cash dividends on
the Common Stock will be substantially dependent on the receipt by the Company
of cash dividends from its subsidiaries. The revolving credit agreement to which
the Company's principal subsidiary is a party prohibits the payment by such
subsidiary of any cash dividends.
CERTAIN PROVISIONS OF DELAWARE LAW AND THE COMPANY'S CERTIFICATE OF
INCORPORATION AND BY-LAWS
The Company is subject to Section 203 of the Delaware General Corporation
Law (the "DGCL"), which restricts certain transactions and "Business
Combinations" (as defined below) between a Delaware corporation and an
"Interested Stockholder" (as defined below). Subject to certain limitations,
such section restricts a Delaware corporation from engaging in various Business
Combination transactions with any Interested Stockholder for a period of three
years after the time of the transaction in which the person became an Interested
Stockholder, unless (i) the transaction is approved by the Board of Directors
prior to the time the Interested Stockholder obtained such status, (ii) upon
consummation of the transaction which resulted in the stockholder becoming an
Interested Stockholder, the Interested Stockholder owned at least 85% of the
voting stock of the corporation outstanding at the time the transaction
commenced (excluding for the purposes of determining the number of shares
outstanding those shares owned by (a) persons who are directors and also
officers and (b) employee stock plans in which employee participants do not have
the right to determine confidentially whether shares held subject to the plan
will be tendered in a tender or exchange offer), or (iii) at or subsequent to
such time the Business Combination is approved by the board of directors and
authorized at an annual or special meeting of stockholders, and not by written
consent, by the affirmative vote of at least two-thirds of the outstanding
voting stock which is not owned by the Interested Stockholder. A Business
Combination includes mergers, asset dispositions, stock transfers and other
transactions resulting in financial benefit to a stockholder. An Interested
Stockholder is a person who (a) owns 15 percent or more of a corporation's
voting stock, or (b) is an affiliate or associate of a corporation, as defined
in the statute, and owned 15 percent or more of a corporation's voting stock
within the preceding three years. Section 203 could prohibit or delay mergers or
other takeover or change in control attempts with respect to the Company and,
accordingly, may discourage attempts to acquire the Company.
The Company's Certificate of Incorporation and By-Laws contain certain
provisions which may be deemed to have an anti-takeover effect that could delay
or prevent a tender offer or takeover attempt that a stockholder might consider
in its best interest, including those attempts that might result in a premium
over the market price for the shares of Common Stock held by stockholders. These
provisions are intended by the Board of Directors to help assure fair and
equitable treatment of the Company's stockholders if a person or group should
seek to gain control of the Company in the future.
CLASSIFIED BOARD OF DIRECTORS
The Certificate of Incorporation provides for the Board of Directors to be
divided into three classes of directors serving staggered three-year terms at
such time as there are three or more directors. As a result, approximately
one-third of the Board of Directors will be elected each year. Moreover, under
the DGCL, in the case of a corporation having a classified board, stockholders
may remove a director only for cause. This provision, when coupled with the
provision of the By-Laws authorizing only the Board of Directors to fill vacant
directorships, will preclude a stockholder from removing incumbent directors
without cause and simultaneously gaining control of the Board of Directors by
filling the vacancies created by such removal with its own nominees, and will
make more difficult, and therefore may discourage, a proxy contest to change
control of the Company.
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SPECIAL MEETINGS OF STOCKHOLDERS
The By-Laws provide that special meetings of stockholders of the Company
may be called only by the Board of Directors, the Chairman of the Board or the
Chief Executive Officer. This provision will make it more difficult for
stockholders to take actions opposed by the Board of Directors.
STOCKHOLDER ACTION BY WRITTEN CONSENT
The Certificate of Incorporation provides that no action required or
permitted to be taken at any annual or special meeting of the stockholders of
the Company may be taken without a meeting, and the power of stockholders of the
Company to consent in writing, without a meeting, to the taking of any action is
specifically denied.
ADVANCE NOTICE REQUIREMENT FOR STOCKHOLDER PROPOSALS AND DIRECTOR NOMINATIONS
The By-Laws provide that stockholders seeking to bring business before an
annual meeting of stockholders, or to nominate candidates for election as
directors at an annual or special meeting of stockholders, must provide timely
notice thereof, as set forth in the By-Laws, in writing. These notice provisions
are in addition to any other notice requirements provided by applicable law or
regulation. These provisions may preclude some stockholders from bringing
matters before the stockholders at an annual or special meeting or from making
nominations for directors at an annual or special meeting.
The Company's Certificate of Incorporation contains certain provisions
permitted under the DGCL relating to the liability of directors. The Certificate
of Incorporation provides that, to the fullest extent permitted by the DGCL, no
director of the Company will be liable to the Company or its stockholders for
monetary damages for breach of fiduciary duty as a director. The By-Laws provide
that, subject to applicable law, the Company shall (i) indemnify each person who
is or was involved in any legal proceeding because such person is or was a
director, officer, employee or agent of the Company (or is or was serving at the
request of the Company as a director, officer, employee or agent of another
entity) against all expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by him in connection
therewith, and (ii) pay the expenses incurred in defending such proceeding in
advance of its final disposition upon receipt of an undertaking by such person
to repay such expenses in the event it shall be determined that such person is
not entitled to indemnification by the Company. In addition, the By-Laws provide
that (i) the rights to indemnification and payment of expenses so provided are
not exclusive of any other similar right that any person may have or acquire
under any statute or otherwise and (ii) the Company may maintain insurance to
protect itself or its directors, officers, employees or agents against any
liability, whether or not it would have the power to indemnify such person
against such liability pursuant to Delaware law. See also, "Certain Related
Transactions."
In addition to the potential anti-takeover effect, Section 203 and the
provisions of the Company's Certificate of Incorporation and By-Laws described
above could have the effect of inhibiting attempts to change the membership of
the Board of Directors of the Company. In addition, the limitation of liability
provisions in the Certificate of Incorporation and the indemnification
provisions in the Certificate of Incorporation and By-Laws may discourage
stockholders from bringing a lawsuit against directors for breach of their
fiduciary duty (including breaches resulting from grossly negligent conduct) and
may have the effect of reducing the likelihood of derivative litigation against
directors and officers, even though such an action, if successful, might
otherwise have benefited the Company and its stockholders. Furthermore, a
stockholder's investment in the Company may be adversely affected to the extent
the Company pays the costs of settlement and damage awards against directors and
officers of the Company pursuant to the indemnification provisions in the
Company's By-Laws. The limitation of liability provisions in the Certificate of
Incorporation will not limit the liability of directors under federal securities
laws.
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SHARES RESERVED FOR ISSUANCE
The Company has 2,000,000 shares of Common Stock reserved for issuance upon
the exercise of options granted or to be granted under the Stock Option Plan.
TRANSFER AGENT
The transfer agent and registrar for the Common Stock is ChaseMellon
Shareholder Services L.L.C.
LISTING
Application has been made to have the Common Stock approved for quotation
on The Nasdaq Stock Market, Inc. under the symbol "AMSN."
SHARES ELIGIBLE FOR FUTURE SALE
Upon consummation of the Offering, the Company will have outstanding a
total of 22,000,000 shares of Common Stock, including the 5,350,000 shares
offered in the Offering (or 22,802,500 shares if the Underwriters'
over-allotment option is exercised in full). The Common Stock sold in the
Offering will be transferable without restriction or further registration under
the Securities Act, except for any shares acquired by an "affiliate" of the
Company that will be subject to the resale limitations of Rule 144 promulgated
under the Securities Act. Of the remaining shares of Common Stock outstanding,
230,769 shares will be owned by the ESOP, which the Company intends to establish
for the benefit of its domestic employees in connection with the consummation of
the Offering, or issued to certain of such employees in connection with stock
bonuses. Upon such consummation, the Company will make a special one-time
contribution to the ESOP of 230,769 shares of Common Stock, subject to reduction
as described in the next sentence, to be allocated to participants' accounts in
accordance with a formula based on compensation and years of service. To the
extent that application of this formula would result in a contribution to the
ESOP on behalf of a participant which would exceed the maximum contribution
permitted under applicable law, the contribution to the ESOP for such
participant will be reduced to the maximum permitted and the balance determined
under the formula will be paid to such participant in the form of a stock bonus.
No additional contributions to the ESOP will be made until 1998 and will then be
dependent upon a number of factors including the Company's performance. See
"Capitalization" and "Dilution." All of the remaining shares outstanding and not
issued in the Offering or owned by the ESOP or certain employees upon payment of
stock bonuses will be owned respectively by Mr. Svenningsen, the SSY Trusts, Mr.
Rittenberg and the other three stockholders of Am-Source, Inc. Such shares, in
addition to the shares owned by the ESOP, will be "restricted" securities within
the meaning of Rule 144 and may not be sold in the absence of registration other
than through Rule 144 described below or another exemption from registration
under the Securities Act.
In general, under Rule 144, as currently in effect, a stockholder who
(together with predecessor holders who were not affiliates of the Company (as
such term is defined in Rule 144 under the Securities Act, "Affiliates")) has
beneficially owned shares of Common Stock which are treated as "restricted
securities" (as defined in Rule 144) for at least two years from the date such
restricted securities were acquired from the Company or an Affiliate, is
entitled to sell, within any three-month period, a number of shares that does
not exceed the greater of 1% of the shares of Common Stock then outstanding or
the average weekly trading volume in the Common Stock during the four calendar
weeks preceding the date on which notice of such sale was filed under Rule 144.
Sales under Rule 144 are also subject to certain provisions relating to the
manner and notice of sale and availability of current public information about
the Company. In addition, Affiliates of the Company must comply with the
restrictions and requirements of Rule 144 (other than the two-year holding
period requirements) in order to sell shares of Common Stock that are not
restricted securities. Furthermore, if a period of at least three years has
elapsed from the date restricted securities were
57
<PAGE> 61
acquired from the Company or an Affiliate, a holder of such restricted
securities who is not an Affiliate at the time of the sale and has not been an
Affiliate for at least three months prior to such sale would be entitled to sell
the shares immediately without regard to the volume limitations and other
conditions described above.
The 15,053,736 shares of Common Stock held by Mr. Svenningsen may be
eligible (subject to the 180-day lock-up arrangement described below) for sale
after the Offering in the public market pursuant to, and in accordance with the
volume, manner of sale and other conditions of, Rule 144 described above.
The Company, Mr. Svenningsen and the SSY Trusts have agreed that for 180
days from the date of this Prospectus they will not offer, sell, contract to
sell or otherwise dispose of any securities of the Company including, but not
limited to, any securities that are exercisable or exchangeable for, that
represent the right to receive or that are convertible into or whose exercise or
settlement price is derivable from the price of Common Stock or other
substantially similar securities without the prior written consent of the
representatives of the Underwriters. See "Underwriting." As part of the
agreement pursuant to which Mr. Rittenberg exchanged his shares of Amscan Inc.
for shares of Common Stock, Mr. Rittenberg agreed not to resell any of such
shares of Common Stock for a period of 18 months from the date of such exchange,
except for transfers to Mr. Svenningsen to repay indebtedness which Mr.
Rittenberg might incur to enable him to pay taxes on the shares of Common Stock
received by him in the Organization pursuant to the agreement described in note
(2) under "Principal Stockholders."
The Company has entered into agreements with two of the three individuals
who held 50% of the capital stock of Am-Source, Inc. (see "Organization of the
Company") and with Gerald C. Rittenberg. Pursuant to these agreements, such
persons have each been granted a one-time right to demand registration of the
offer and sale of Common Stock under the Securities Act and the Company has
agreed to keep any such registration statement effective for a period as is
reasonably necessary to permit the sale of such Common Stock. The Company must
pay registration expenses in connection with the demand registration but in no
event is the Company responsible for the payment of underwriting discounts and
commissions. No such demand may be exercised earlier than one year from
consummation of the Offering.
The Company intends to file a registration statement on Form S-8 covering
the 2,000,000 shares of Common Stock reserved under the Stock Option Plan. Any
shares which become outstanding upon exercise of options under the Stock Option
Plan, other than shares delivered to Affiliates, will be eligible for sale in
the public market beginning on the date of delivery thereof.
Prior to consummation of the Offering, there has been no public market for
the Common Stock, and no prediction can be made as to the effect, if any, that
future sales of shares of Common Stock under Rule 144 or following the exercise
of registration rights, or the availability of such shares for future sale, will
have on the market price of the Common Stock prevailing from time to time.
Nevertheless, sales of a substantial amount of such shares in the public market,
or the perception that such sales could occur, could adversely affect the
prevailing market prices for the Common Stock and could impair the Company's
future ability to raise capital through an offering of its equity securities.
58
<PAGE> 62
VALIDITY OF COMMON STOCK
The validity of the Common Stock will be passed upon for the Company by
Cummings & Lockwood, Stamford, Connecticut, counsel for the Company, and for the
Underwriters by Sullivan & Cromwell, New York, New York, counsel for the
Underwriters.
EXPERTS
The special purpose combined financial statements and schedule of Amscan
Inc. and Affiliates as of December 31, 1994 and 1995, and as of September 30,
1996, and for each of the years in the three-year period ended December 31,
1995, and for the nine-month period ended September 30, 1996, have been included
herein and in the registration statement in reliance upon the reports of KPMG
Peat Marwick LLP, independent certified public accountants, appearing elsewhere
herein and in the registration statement, and upon the authority of said firm as
experts in accounting and auditing.
OTHER INFORMATION
The Company has filed with the Securities and Exchange Commission in
Washington, D.C. a Registration Statement under the Securities Act with respect
to the Common Stock offered by this Prospectus. This Prospectus does not contain
all the information set forth in the Registration Statement and the exhibits and
schedules thereto. For further information with respect to the Company and the
Common Stock, reference is made to the Registration Statement and to the
exhibits and schedules filed therewith. The Registration Statement and the
exhibits and schedules forming a part thereof may be inspected without charge at
the public reference facilities maintained by the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549 and at the Commission's Regional Offices in
New York (7 World Trade Center, 13th Floor, New York, New York 10048) and
Chicago (Northwestern Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661) and copies of such materials can be obtained from the
Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. In addition, the Commission
maintains a Web site that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the
Commission at the following address: http://www.sec.gov.
Statements made in this Prospectus as to the contents of any contract,
agreement or other document referred to are not necessarily complete. With
respect to each such contract, agreement or other document filed as an exhibit
to the Registration Statement, reference is made to the exhibit for a more
complete description of the matter involved, and each such statement shall be
deemed qualified in its entirety by such reference.
59
<PAGE> 63
AMSCAN INC. AND AFFILIATES
INDEX TO COMBINED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Combined Financial Statements as of December 31, 1994 and 1995 and for each of the
years in the three-year period ended December 31, 1995:
Independent Auditors' Report....................................................... F-2
Combined Balance Sheets............................................................ F-3
Combined Statements of Operations.................................................. F-4
Combined Statements of Stockholders' Equity........................................ F-5
Combined Statements of Cash Flows.................................................. F-6
Notes to Combined Financial Statements............................................. F-7
Combined Financial Statements as of September 30, 1996 and for the nine month periods
ended September 30, 1995 (unaudited) and 1996:
Independent Auditors' Report....................................................... F-20
Combined Balance Sheet............................................................. F-21
Combined Statements of Operations.................................................. F-22
Combined Statements of Stockholders' Equity........................................ F-23
Combined Statements of Cash Flows.................................................. F-24
Notes to Combined Financial Statements............................................. F-25
</TABLE>
F-1
<PAGE> 64
INDEPENDENT AUDITORS' REPORT
To the Stockholders of Amscan Inc.
and Affiliates:
We have audited the accompanying special purpose combined balance sheets of
Amscan Inc. and Affiliates as of December 31, 1994 and 1995 and the related
special purpose combined statements of operations, stockholders' equity and cash
flows for each of the years in the three-year period ended December 31, 1995.
These special purpose combined financial statements are the responsibility of
the Companies' management. Our responsibility is to express an opinion on these
special purpose combined financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
The accompanying special purpose combined financial statements include the
accounts of Amscan Inc. and Affiliates, as defined in note (1). These financial
statements present the combined accounts of entities owned by the Principal
Stockholder engaged in the design, manufacture, contract for manufacture or
distribution of party and novelty goods.
In our opinion, the special purpose combined financial statements referred
to above present fairly, in all material respects, the combined financial
position of Amscan Inc. and Affiliates as of December 31, 1994 and 1995, and the
combined results of their operations and their cash flows for each of the years
in the three-year period ended December 31, 1995, in conformity with generally
accepted accounting principles.
KPMG Peat Marwick LLP
Stamford, Connecticut
April 5, 1996, except as to note (16),
which is as of July 31, 1996, and note (7)
which is as of September 30, 1996
F-2
<PAGE> 65
AMSCAN INC. AND AFFILIATES
COMBINED BALANCE SHEETS
($ IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1994 1995
------- --------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................................. $ 2,229 $ 2,492
Accounts receivable, net of allowances of $1,925 and $2,505, 23,847
respectively....................................................... 31,880
Inventories........................................................... 34,465 45,013
Deposits and other.................................................... 2,457 2,920
------- --------
Total current assets............................................... 62,998 82,305
Property, plant and equipment, net...................................... 26,925 26,848
Other assets............................................................ 3,961 5,448
------- --------
Total assets....................................................... $93,884 $114,601
======= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Loans and notes payable............................................... $28,665 $ 37,849
Subordinated debt to Principal Stockholder............................ 12,000 16,000
Accounts payable...................................................... 4,849 10,116
Accrued expenses...................................................... 7,718 5,265
Loans and notes payable to Principal Stockholder...................... 5,295 2,453
Current installments of long-term indebtedness........................ 4,909 2,239
------- --------
Total current liabilities.......................................... 63,436 73,922
Long-term indebtedness, excluding current installments.................. 8,800 12,284
Other................................................................... 828 1,190
------- --------
Total liabilities.................................................. 73,064 87,396
------- --------
Stockholders' equity:
Common stock.......................................................... 393 393
Additional paid-in capital............................................ 9,090 9,090
Retained earnings..................................................... 12,037 18,462
Cumulative translation adjustment..................................... (613) (653)
Treasury stock, at cost............................................... (87) (87)
------- --------
Total stockholders' equity......................................... 20,820 27,205
------- --------
Total liabilities and stockholders' equity......................... $93,884 $114,601
======= ========
</TABLE>
See accompanying notes to combined financial statements.
F-3
<PAGE> 66
AMSCAN INC. AND AFFILIATES
COMBINED STATEMENTS OF OPERATIONS
($ IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
-----------------------------------
1993 1994 1995
-------- -------- -----------
<S> <C> <C> <C>
Net sales................................................ $108,934 $132,029 $ 167,403
Cost of sales............................................ 72,656 86,748 108,654
-------- -------- ------------
Gross profit........................................ 36,278 45,281 58,749
-------- -------- ------------
Operating expenses:
Selling................................................ 9,780 11,309 12,241
General and administrative............................. 11,080 14,460 15,002
Art and development.................................... 2,596 2,796 4,256
Special bonuses........................................ 1,106 2,200 2,581
-------- -------- ------------
Total operating expenses............................ 24,562 30,765 34,080
-------- -------- ------------
Income from operations.............................. 11,716 14,516 24,669
Interest expense, net.................................... 2,304 3,843 5,772
Other expense (income), net.............................. 308 82 (309)
-------- -------- ------------
Income before income taxes and minority interests........ 9,104 10,591 19,206
Income taxes............................................. 348 464 731
Minority interests....................................... 301 160 1,041
-------- -------- ------------
Net income.......................................... $ 8,455 $ 9,967 $ 17,434
======== ======== ============
Pro forma data (unaudited) (note (15)):
Net income before pro forma taxes................... $ 8,455 $ 9,967 $ 17,434
Pro forma additional income tax expense............. 3,218 3,774 6,672
-------- -------- ------------
Pro forma net income.............................. $ 5,237 $ 6,193 $ 10,762
======== ======== ============
Supplemental pro forma data (unaudited) (note (15)):
Supplemental pro forma net income................... $ 14,197
============
Supplemental pro forma net income per share......... $ 0.65
============
Supplemental pro forma weighted average shares
outstanding....................................... 22,000,000
============
</TABLE>
See accompanying notes to combined financial statements.
F-4
<PAGE> 67
AMSCAN INC. AND AFFILIATES
COMBINED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
($ IN THOUSANDS)
<TABLE>
<CAPTION>
ADDITIONAL CUMULATIVE
COMMON PAID-IN RETAINED TRANSLATION TREASURY
STOCK CAPITAL EARNINGS ADJUSTMENT STOCK TOTAL
------ ---------- --------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1992....... $192 $5,758 $ 9,584 $ 103 $(87) $ 15,550
Capital related to
acquisitions................... 201 1,482 -- -- -- 1,683
Net income....................... -- -- 8,455 -- -- 8,455
Subchapter S and other
distributions.................. -- -- (8,519) -- -- (8,519)
Capital contributions............ -- 1,850 -- -- -- 1,850
Net change in cumulative
translation adjustment......... -- -- -- (523) -- (523)
---- ------ ------- ------ ----- ---------
Balance, December 31, 1993....... 393 9,090 9,520 (420) (87) 18,496
Net income....................... -- -- 9,967 -- -- 9,967
Subchapter S and other
distributions.................. -- -- (7,450) -- -- (7,450)
Net change in cumulative
translation adjustment......... -- -- -- (193) -- (193)
---- ------ ------- ------ ----- ---------
Balance, December 31, 1994....... 393 9,090 12,037 (613) (87) 20,820
Net income....................... -- -- 17,434 -- -- 17,434
Subchapter S and other
distributions.................. -- -- (11,009) -- -- (11,009)
Net change in cumulative
translation adjustment......... -- -- -- (40) -- (40)
---- ------ ------- ------ ----- ---------
Balance, December 31, 1995....... $393 $9,090 $ 18,462 $ (653) $(87) $ 27,205
==== ====== ======= ====== ===== =========
</TABLE>
See accompanying notes to combined financial statements.
F-5
<PAGE> 68
AMSCAN INC. AND AFFILIATES
COMBINED STATEMENTS OF CASH FLOWS
($ IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER
31,
-------------------------------
1993 1994 1995
-------- ------- --------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income................................................. $ 8,455 $ 9,967 $ 17,434
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization........................... 2,628 3,672 4,332
Loss (gain) on disposal of property and equipment....... 405 35 (5)
Provision for doubtful accounts......................... 2,339 2,676 1,581
Changes in operating assets and liabilities, net of
acquisitions:
Accounts receivable................................... (7,439) (5,041) (9,614)
Inventories........................................... (3,450) (5,682) (10,548)
Deposits and other.................................... 1,530 (444) (463)
Other assets.......................................... (1,413) (2,497) (3,032)
Accounts payable and accrued expenses................. 5,294 912 2,814
Other................................................. 351 289 362
--------- -------- ---------
Net cash provided by operating activities.......... 8,700 3,887 2,861
--------- -------- ---------
Cash flows from investing activities:
Cash paid for acquisitions................................. (2,139) -- --
Capital expenditures....................................... (3,511) (6,160) (2,662)
Proceeds from disposal of property and equipment........... 14 98 9
--------- -------- ---------
Net cash used in investing activities.............. (5,636) (6,062) (2,653)
--------- -------- ---------
Cash flows from financing activities:
Proceeds from loans, notes payable and long-term
indebtedness............................................ 39,942 6,324 42,311
Repayment of loans, notes payable and long-term
indebtedness............................................ (38,291) (2,434) (32,313)
Proceeds from loans, notes payable and subordinated
indebtedness to Principal Stockholder................... 4,979 6,316 4,000
Repayment of loans, notes payable and subordinated
indebtedness to Principal Stockholder................... -- -- (2,842)
Subchapter S and other distributions....................... (8,519) (7,450) (11,009)
--------- -------- ---------
Net cash (used in) provided by financing activities..... (1,889) 2,756 147
--------- -------- ---------
Effect of exchange rate changes on cash.................... (279) 270 (92)
--------- -------- ---------
Net increase in cash and cash equivalents............... 896 851 263
Cash and cash equivalents at beginning of year............... 482 1,378 2,229
--------- -------- ---------
Cash and cash equivalents at end of year..................... $ 1,378 $ 2,229 $ 2,492
========= ======== =========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest................................................ $ 3,168 $ 4,025 $ 4,486
Taxes................................................... $ 152 $ 112 $ 601
Supplemental information on noncash investing activities:
</TABLE>
Capital lease obligations of $648 were incurred in 1994. There were no capital
lease obligations incurred in 1993 or 1995.
See accompanying notes to combined financial statements.
F-6
<PAGE> 69
AMSCAN INC. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1995
(1) DESCRIPTION OF BUSINESS
The accompanying special purpose combined financial statements include the
accounts of Amscan Inc. and certain of its affiliates (the "Companies"). The
Companies design, manufacture, contract for manufacture and distribute party and
novelty goods to retailers and wholesale distributors principally in the United
States, Canada and Europe.
BASIS OF COMBINATION
These combined financial statements present the Companies on a combined
basis because of their common ownership by Mr. John A. Svenningsen (the
"Principal Stockholder"). The name, the Principal Stockholder's ownership and a
brief description of each of the combined entity's principal business activity
is presented below.
<TABLE>
<CAPTION>
PRINCIPAL
STOCKHOLDER'S
ENTITY OWNERSHIP PRINCIPAL ACTIVITY
----------------------------------- ------------- -----------------------------------
<S> <C> <C>
Amscan Inc......................... 100% Manufacturer -- paper tableware;
and distributor -- worldwide
Am-Source, Inc..................... 50% Manufacturer -- plastic products
Trisar, Inc........................ 100% Manufacturer -- gift products
Amscan Distributors (Canada) Ltd... 100% Distributor -- Canada
Amscan Holdings Limited............ 75% Distributor -- United Kingdom
Amscan (Asia Pacific) Pty. Ltd..... 85% Distributor -- Australia and Asia
Amscan Partyartikel GmbH........... 95% Distributor -- Germany
Amscan Svenska AB.................. 100% Distributor -- Sweden
Amscan de Mexico, S.A. de C.V...... 48% Distributor -- Mexico
JCS Realty Corp.................... 100% Real estate -- Canada
SSY Realty Corp.................... 100% Real estate -- United States
</TABLE>
The less than majority-owned entities are combined in the accompanying
financial statements because the Principal Stockholder effectively controls the
day-to-day operations. All material intercompany balances and transactions have
been eliminated in combination.
ACQUISITIONS AND DISPOSITIONS
On May 24, 1993, the Principal Stockholder acquired 50% of the stock of
Am-Source, Inc. Simultaneously, Am-Source, Inc. acquired for $456,000 all of the
assets and assumed certain liabilities of Multi-Source, Inc. Both transactions
were accounted for as a purchase and the fair value of the assets acquired
approximated the fair value of the liabilities assumed.
On November 13, 1993, the Principal Stockholder acquired 100% of the stock
of Trisar, Inc. for approximately $1,500,000 in cash and notes. The acquisition
has been accounted for as a purchase and the excess purchase price over the fair
value of the net assets acquired of $1,057,000 is being amortized on a
straight-line basis over three years.
On September 3, 1993, the Principal Stockholder acquired 48% of the stock
of Amscan de Mexico, S.A. de C.V. for $201,000 in cash, which approximated 48%
of the fair value of its net assets.
The results of operations for each of the above entities are included in
the accompanying combined financial statements from their respective dates of
acquisition. The individual and
F-7
<PAGE> 70
AMSCAN INC. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1995
collective results of operations of the entities for the year ended December 31,
1993 had each of the acquisitions occurred at the beginning of 1993, are not
significant.
During the periods presented, a business, which was not material to the
combined business of the Companies, was acquired by the Principal Stockholder
and subsequently disposed of. The associated balance sheet, statements of
operation and loss on disposition of the business are insignificant and have
been excluded from the accompanying combined financial statements.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CASH EQUIVALENTS
Highly liquid investments with a maturity of three months or less when
purchased are considered to be cash equivalents.
INVENTORIES
Substantially all inventories of the Companies are valued at the lower of
cost or market (principally on the first-in, first-out method).
PROPERTY, PLANT, AND EQUIPMENT
Property, plant and equipment are stated at cost. Machinery and equipment
under capital leases are stated at the present value of the minimum lease
payments at the inception of the lease.
Depreciation is calculated principally on the straight-line method over the
estimated useful lives of the assets. Machinery and equipment held under capital
leases and leasehold improvements are amortized straight-line over the shorter
of the lease term or estimated useful life of the asset.
OTHER ASSETS
Included in other assets are capitalized costs which represent third party
costs incurred to manufacture and commercialize designs for production,
including the acquisition of printing plates. Accordingly these costs are
amortized on a straight line basis over their estimated useful lives of three
years. The amortization of such costs is included in cost of sales and was
$862,000, $953,000 and $1,195,000, respectively, for the three years ended
December 31, 1993, 1994 and 1995.
REVENUE RECOGNITION
The Companies recognize revenue from product sales when the goods are
shipped to the customers.
CATALOGUE COSTS
The Companies expense costs associated with the production of annual
catalogues when incurred.
ART AND DEVELOPMENT COSTS
Art and development costs are primarily internal costs that are not easily
associated with specific designs which may reach commercial production.
Accordingly, the Companies expense these costs as incurred.
F-8
<PAGE> 71
AMSCAN INC. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1995
INCOME TAXES
Certain of the affiliates have elected Subchapter S corporation status for
U.S. federal and state income tax purposes. Income taxes, therefore, are
principally the responsibility of the stockholders. Income taxes for all other
entities, including foreign distributors, are computed in accordance with the
tax laws in the jurisdictions in which the entities operate.
FOREIGN CURRENCY TRANSACTIONS AND TRANSLATION
Realized foreign currency exchange gains or losses, which result from the
settlement of receivables or payables in currencies other than U.S. dollars, are
credited or charged to operations. Unrealized gains or losses on foreign
currency exchanges are insignificant.
The balance sheets of foreign affiliates are translated into U.S. dollars
at the exchange rates in effect on the balance sheet date. The results of
operations of foreign affiliates are translated into U.S. dollars at the average
exchange rates effective for the periods presented. The differences from
historical exchange rates are reflected as a separate component of stockholders'
equity.
CONCENTRATION OF CREDIT RISK
While the Companies' customers are geographically disbursed throughout
North America, South America, Europe, Asia and Australia, there is a
concentration of sales made to and accounts receivable from the stores which
operate in the party superstore channel of distribution. At December 31, 1994
and 1995, the Companies' two largest customers, with approximately 185 stores,
accounted for 8% and 12%, respectively, of combined accounts receivable. For the
years ended December 31, 1993, 1994 and 1995, sales to the Companies' two
largest customers represented 7%, 10%, and 17%, respectively, of combined net
sales. Of such amount, sales to the Companies' largest customer represented 5%,
8% and 11%, respectively. No other group or combination of customers subjected
the Companies to a concentration of credit risk.
USE OF ESTIMATES
Management has made estimates and assumptions relating to the reporting of
assets and liabilities to prepare these financial statements in conformity with
generally accepted accounting principles. Actual results could differ from those
estimates.
RECENTLY ISSUED ACCOUNTING STANDARDS
In October 1995, the Financial Accounting Standards Board (FASB) issued
Statement on Financial Accounting Standards (SFAS) No. 123 -- Accounting for
Stock-Based Compensation. As allowable by SFAS 123, the Companies do not intend
to recognize compensation cost for stock-based employee compensation
arrangements, but rather, starting with fiscal 1996, will disclose the pro-forma
impact on net income and earnings per share as if the fair value stock-based
compensation had been recognized starting with fiscal 1995.
In March 1995, the FASB issued SFAS 121 -- Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of. When adopted in
1996, the Companies do not believe that the impact of SFAS 121 will have a
significant impact on their financial position or results of operations.
F-9
<PAGE> 72
AMSCAN INC. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1995
Other pronouncements issued by the FASB or other authoritative accounting
standard groups with future effective dates are either not applicable or not
significant to the financial statements of the Companies.
(3) INVENTORIES
Inventories at December 31, 1994 and 1995 consisted of the following ($ in
thousands):
<TABLE>
<CAPTION>
1994 1995
------- -------
<S> <C> <C>
Finished goods................................................. $31,984 $42,125
Raw materials.................................................. 2,957 2,277
Work-in-process................................................ 358 1,839
------- -------
35,299 46,241
Less: Reserve for slow moving and obsolete inventory........... (834) (1,228)
------- -------
$34,465 $45,013
======= =======
</TABLE>
(4) PROPERTY, PLANT AND EQUIPMENT
Major classifications of property, plant and equipment at December 31, 1994
and 1995 consisted of the following ($ in thousands):
<TABLE>
<CAPTION>
ESTIMSTED
1994 1995 USEFUL LIVES
-------- -------- ------------
<S> <C> <C> <C>
Machinery and equipment........................ $ 15,849 $ 18,879 5-15
Data processing equipment...................... 5,536 6,123 5
Leasehold improvements......................... 4,581 4,784 25
Furniture and fixtures......................... 3,929 2,370 10
Buildings...................................... 9,162 9,524 31-40
Land........................................... 1,881 1,917 --
--------- ---------
40,938 43,597
Less: accumulated depreciation and
amortization................................. (14,013) (16,749)
--------- ---------
$ 26,925 $ 26,848
========= =========
</TABLE>
Depreciation and amortization expense was $1,766,000, $2,367,000 and
$2,785,000 for the years ended December 31, 1993, 1994 and 1995, respectively.
(5) LOANS AND NOTES PAYABLE
During 1995, certain of the Companies entered into a revolving credit
agreement with several banks which expires on September 20, 2000. Amounts
available for borrowing under this agreement, subject to asset availability and
other restrictions, are as follows:
<TABLE>
<S> <C>
September 20, 1995 -- September 19, 1996.............................. $50,000,000
September 20, 1996 -- September 19, 1997.............................. $55,000,000
September 20, 1997 -- September 20, 2000.............................. $60,000,000
</TABLE>
Such revolving credit agreement is collateralized by a first lien on
certain of the assets of the Companies. The revolving credit agreement provides
for interest on the borrowings to be based on either a prime borrowing rate or
LIBOR plus 0.875%, whichever is lower. Additionally, the revolving credit
agreement requires the Companies to comply with certain covenants including the
mainte-
F-10
<PAGE> 73
AMSCAN INC. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1995
nance of financial ratios, as defined. At December 31, 1995, the Companies were
in compliance with all such covenants.
Loans and notes payable outstanding at December 31, 1994 and 1995 consisted
of the following ($ in thousands):
<TABLE>
<CAPTION>
1994 1995
------- -------
<S> <C> <C>
Revolving credit line with interest at LIBOR plus 0.875% (6.41%
at December 31, 1995).......................................... $ -- $35,000
Revolving credit line with interest at the prime rate (8.5% at
December 31, 1995) and the prime rate plus 0.25% (8.75% at
December 31, 1994)............................................. 16,165 2,060
Bankers acceptances payable at various dates through June 26,
1995 with interest at rates ranging from 6.43% to 8.10%........ 12,500 --
Revolving credit line denominated in British Pounds Sterling with
interest at the U.K. Base rate plus 2% (8.5% at December 31,
1995).......................................................... -- 789
------- -------
$28,665 $37,849
======= =======
</TABLE>
The weighted average interest rates on loans and notes payable outstanding
at December 31, 1994 and 1995 were 8.08% and 6.57%, respectively.
The Companies are currently involved in three interest rate swap
transactions covering $25,000,000 of its outstanding obligation under the
revolving credit agreement. The transactions fix the interest rates as indicated
below and entitle the Companies to settle with the counterparty on a quarterly
basis, the product of the notional amount times the amount, if any, by which the
ninety day LIBOR exceeds the fixed rate. Net payments to the counterparty under
the swap agreements for the years ended December 31, 1994 and 1995, which have
been recorded as additional interest expense, have been computed as follows ($
in thousands):
<TABLE>
<CAPTION>
ADDITIONAL
INTEREST
EXPENSE
NOTIONAL -------------
DATE OF CONTRACT AMOUNT TERM FIXED RATE 1994 1995
---------------------------------- ------- -------- ---------- ---- ----
<S> <C> <C> <C> <C> <C>
September 28, 1994................ $ 5,000 10 years 7.945% $34 $ 94
May 12, 1995...................... $10,000 5 years 6.590% -- 42
July 20, 1995..................... $10,000 10 years 6.750% -- 38
--- ----
$34 $174
=== ====
</TABLE>
F-11
<PAGE> 74
AMSCAN INC. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1995
(6) LONG-TERM INDEBTEDNESS
Long-term indebtedness at December 31, 1994 and 1995 consisted of the
following ($ in thousands):
<TABLE>
<CAPTION>
1994 1995
------- -------
<S> <C> <C>
Mortgage obligations (a)....................................... $ 7,815 $ 6,956
Term loans (b)................................................. 3,189 5,152
Capital lease obligations (c).................................. 2,705 2,415
------- -------
Total long-term indebtedness......................... 13,709 14,523
Less: current installments..................................... (4,909) (2,239)
------- -------
Long-term indebtedness, excluding current installments......... $ 8,800 $12,284
======= =======
</TABLE>
- ---------------
(a) Certain of the Companies have mortgage obligations payable to financial
institutions relating to distribution facilities due through September 13,
2004. The mortgages are collateralized by specific real estate assets of the
Companies and carry interest rates ranging from the Canadian prime rate plus
0.5% (8.5% and 8.0% as of December 31, 1994 and 1995, respectively) to
8.51%. At December 31, 1994 and 1995, $2,000,000 and $1,800,000 of mortgage
obligations, respectively, are denominated in Canadian dollars.
(b) Certain of the Companies have various term loans payable to financial
institutions due through April 1, 2002. The loans are collateralized by
specific assets of the Companies and carry interest rates which range from
8.01% to 9.5%.
(c) Certain of the Companies have entered into various capital leases for
machinery and equipment with implicit interest rates ranging from 6.5% to
23.0% and which extend to 2001.
At December 31, 1995, principal maturities of long-term indebtedness
consisted of the following ($ in thousands):
<TABLE>
<CAPTION>
CAPITAL
INDEBTEDNESS LEASE OBLIGATIONS TOTAL
------------ ----------------- -------
<S> <C> <C> <C>
1996...................................... $ 1,951 $ 472 $ 2,423
1997...................................... 1,583 466 2,049
1998...................................... 1,290 464 1,754
1999...................................... 1,264 448 1,712
2000...................................... 1,194 442 1,636
Thereafter................................ 4,826 806 5,632
------- ------ -------
12,108 3,098 15,206
Amount representing interest.............. -- (683) (683)
------- ------ -------
Long-term indebtedness.................... $ 12,108 $ 2,415 $14,523
======= ====== =======
</TABLE>
(7) DUE TO PRINCIPAL STOCKHOLDER
Certain of the Companies owed $12,000,000 and $16,000,000 to the Principal
Stockholder as of December 31, 1994 and 1995, respectively, under a subordinated
note with interest payable monthly. This note is subject to a subordination
agreement among the Principal Stockholder, Amscan Inc., and the lenders involved
with the revolving credit agreement as discussed in note (5). Under the terms of
the subordination agreement, the payment of any principal evidenced by the
F-12
<PAGE> 75
AMSCAN INC. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1995
subordinated note is generally prohibited. Interest is at the prime rate plus
0.5% (9.0% at both December 31, 1994 and 1995).
Further, certain of the Companies had unsecured current loans payable to
the Principal Stockholder aggregating $5,295,000 and $2,453,000, respectively,
at December 31, 1994 and 1995, at interest rates ranging from 7% to 12%. The
loans have different forms of collateral but are generally subordinated to the
credit facility discussed in note (5) and are due at various dates through 2003.
During 1993, $1,200,000 of notes payable to the Principal Stockholder were
converted to subordinated indebtedness and additional paid-in capital in the
amounts of $1,000,000 and $200,000, respectively. In addition, $3,000,000 of
accrued expenses due to the Principal Stockholder were converted to subordinated
indebtedness and additional paid-in capital in the amount of $1,350,000 and
$1,650,000, respectively.
During 1994 and 1995, $3,650,000 and $4,000,000 of notes payable to the
Principal Stockholder were converted to subordinated indebtedness, respectively.
In September 1996, certain of the Companies declared the distribution of
$7,600,000 of previously provided capital and $13,067,000 of undistributed
earnings. It is contemplated that such payment will be made in connection with
the Offering (see note (15)).
(8) EMPLOYEE BENEFIT PLANS
Certain of the Companies maintain a profit-sharing plan for all eligible
employees providing for annual discretionary contributions to a trust. As of
January 1, 1995, the plan required the Companies to match 25% of the first 6% of
an employee's contribution to the plan. Benefit expense for the years ended
December 31, 1993, 1994 and 1995 totaled $590,000, $548,000 and $558,000,
respectively.
(9) SPECIAL BONUS ARRANGEMENTS
During the periods presented, Amscan Inc. had employment agreements with
certain key executives and senior managers which provided for these individuals
to receive annual bonuses based upon the pre-tax income of Amscan Inc. and
certain of its affiliates. These bonuses which amounted to approximately 18% to
20% of pre-tax income are reflected in the Combined Statements of Operations in
the caption "Special Bonuses." At December 31, 1994 and 1995, respectively,
$1,805,000 and $2,581,000 were accrued for such bonuses and included in accrued
expenses.
(10) INCOME TAXES
The entities Amscan Inc., Am-Source, Inc., JCS Realty Corp. and SSY Realty
Corp. have elected Subchapter S corporation status. Accordingly, these entities
are generally not subject to federal and state income taxes, to the extent that
states recognize Subchapter S corporation status.
Current income tax expense and deferred taxes generally arise from taxes on
income generated by foreign affiliates at the effective rate in effect in each
of the taxing jurisdictions. Deferred taxes arising from timing differences are
not significant.
A summary of the domestic and foreign pre-tax income (loss) for the years
ended December 31, 1993, 1994 and 1995 are as follows:
<TABLE>
<CAPTION>
1993 1994 1995
---------- ----------- -----------
<S> <C> <C> <C>
Domestic................................. $9,368,000 $10,009,000 $17,750,000
Foreign.................................. $ (264,000) $ 582,000 $ 1,456,000
</TABLE>
F-13
<PAGE> 76
AMSCAN INC. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1995
A summary of the operations subject to tax, their reported tax expense and
effective tax rates for the years ended December 31, 1993, 1994 and 1995 are as
follows ($ in thousands):
<TABLE>
<CAPTION>
1993 1994 1995
------------------- ------------------- -------------------
TAX EFFECTIVE TAX EFFECTIVE TAX EFFECTIVE
EXPENSE RATE EXPENSE RATE EXPENSE RATE
------- --------- ------- --------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
Amscan Distributors (Canada) Ltd...... $ 150 38% $ 190 39% $ 283 39%
Amscan Holdings Limited............... 96 53% 118 34% 263 39%
Amscan (Asia Pacific) Pty. Ltd........ 67 34% 83 32% 103 32%
Other................................. 35 4% 73 6% 82 8%
---- ---- ----
$ 348 $ 464 $ 731
==== ==== ====
</TABLE>
(11) COMMON STOCK
Common Stock for each of the combined entities is as follows:
Amscan Inc.:
No par value; 1,000 shares authorized, 990 shares issued and
outstanding (including 330 shares of treasury stock).
Am-Source, Inc.:
No par value; 1,000 shares authorized, 120 shares issued and
outstanding.
Trisar, Inc.
No par value; 10,000 shares authorized, 267 shares issued and
outstanding.
Amscan Distributors (Canada) Ltd.:
$1 (Canadian) par value; 10,000 shares authorized, 3,000
shares issued and outstanding.
Amscan Holdings Limited:
One British Pound Sterling par value; 60,000 shares
authorized, issued and outstanding.
Amscan (Asia Pacific) Pty. Ltd.:
Aus. $1 par value; 10,000 shares authorized, 800 shares issued
and outstanding.
Amscan Partyartikel GmbH:
No par value; 50,000 shares authorized, issued and
outstanding.
Amscan Svenska AB:
No par value; 1,500 shares authorized, issued and outstanding.
Amscan de Mexico, S.A. de C.V.:
Class B Shares:
No stated value, minimum capital; 6,060 shares authorized,
issued and outstanding.
Class B-1 Shares:
No stated value, variable capital; 1,200 shares authorized,
issued and outstanding.
JCS Realty Corp.:
No par value; 200 shares authorized, one share issued and
outstanding.
SSY Realty Corp.:
No par value; 200 shares authorized issued and outstanding.
F-14
<PAGE> 77
AMSCAN INC. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1995
(12) COMMITMENTS AND CONTINGENCIES
LEASES
The Companies are obligated under various capital leases for certain
machinery and equipment which expire on various dates through June 1, 2001 (see
also note (6)). At December 31, 1994 and 1995, the amount of machinery and
equipment and related accumulated amortization recorded under capital leases is
included with property, plant and equipment and consisted of the following ($ in
thousands):
<TABLE>
<CAPTION>
1994 1995
------ ------
<S> <C> <C>
Machinery and equipment.......................................... $3,122 $3,174
Less: accumulated amortization................................... (244) (564)
------
$2,878 $2,610
======
</TABLE>
Amortization of assets held under capitalized leases is included with
depreciation expense.
The Companies have several noncancelable operating leases with unaffiliated
third parties, primarily for office and manufacturing space, showrooms, and
warehouse equipment that expire over the next eight years. These leases
generally contain renewal options and require the Companies to pay real estate
taxes, utilities and related insurance.
At December 31, 1995, certain of the Companies also had noncancelable
operating leases with the Principal Stockholder and real estate entities owned
either directly or indirectly by the Principal Stockholder ("Uncombined
Affiliates") for warehouse and office space that expire over the next sixteen
years. Rent due to Uncombined Affiliates represents future commitments
associated with property leased by the Companies from the Principal Stockholder
or such entities owned directly or indirectly by the Principal Stockholder.
Subsequent to December 31, 1995, the terms of the leases have been amended (see
note (16)).
At December 31, 1995 future minimum lease payments under all operating
leases consisted of the following ($ in thousands):
<TABLE>
<CAPTION>
UNCOMBINED
THIRD PARTIES AFFILIATES TOTAL
------------- ---------- -------
<S> <C> <C> <C>
1996........................................... $ 3,132 $ 2,132 $ 5,264
1997........................................... 2,538 2,246 4,784
1998........................................... 1,989 2,309 4,298
1999........................................... 1,274 2,374 3,648
2000........................................... 1,043 2,442 3,485
Thereafter..................................... 3,209 29,862 33,071
------- ------- -------
$13,185 $ 41,365 $54,550
======= ======= =======
</TABLE>
Rent expense for the years ended December 31, 1993, 1994 and 1995 was
$3,414,000, $4,300,000 and $4,705,000, respectively, of which $2,242,000,
$2,468,000 and $2,526,000, respectively, related to leases with Uncombined
Affiliates.
F-15
<PAGE> 78
AMSCAN INC. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1995
(13) SEGMENT INFORMATION
INDUSTRY SEGMENTS
The Companies operate in primarily one industry segment which involves the
design, manufacture, contract for manufacture and distribution of party and
novelty goods to retailers and wholesale distributors.
GEOGRAPHIC SEGMENTS
The Companies' export sales, other than those intercompany sales reported
below as sales between geographic areas, are not material. Sales between
geographic areas primarily consist of sales of finished goods for distribution
in the foreign markets.
The Companies' geographic area data for each of the three fiscal years
ended December 31, 1993, 1994 and 1995 are as follows ($ in thousands):
<TABLE>
<CAPTION>
DOMESTIC FOREIGN ELIMINATIONS COMBINED
-------- ------- ------------ --------
<S> <C> <C> <C> <C>
1993
Sales to unaffiliated customers............. $ 95,021 $13,913 $108,934
Sales between geographic areas.............. 4,753 19 $ (4,772) --
-------- ------- ------- --------
Net sales................................... $ 99,774 $13,932 $ (4,772) $108,934
======== ======= ======= ========
Income from operations...................... $ 11,562 $ 154 $ 11,716
======== =======
Interest expense, net....................... 2,304
Other expense, net.......................... 308
--------
Income before income taxes and minority
interests................................. $ 9,104
========
Identifiable assets......................... $ 68,390 $11,700 $ 80,090
======== ======= ========
</TABLE>
<TABLE>
<CAPTION>
DOMESTIC FOREIGN ELIMINATIONS COMBINED
-------- ------- ------------ --------
<S> <C> <C> <C> <C>
1994
Sales to unaffiliated customers............. $115,196 $16,833 $132,029
Sales between geographic areas.............. 5,645 89 $ (5,734) --
-------- ------- ------------ --------
Net sales................................... $120,841 $16,922 $ (5,734) $132,029
========= ======== ========== =========
Income from operations...................... $ 13,468 $ 1,048 14,516
========= ========
Interest expense, net....................... 3,843
Other expense, net.......................... 82
--------
Income before income taxes and minority
interests................................. $ 10,591
=========
Identifiable assets......................... $ 80,117 $13,767 $ 93,884
========= ======== =========
</TABLE>
F-16
<PAGE> 79
AMSCAN INC. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1995
<TABLE>
<CAPTION>
DOMESTIC FOREIGN ELIMINATIONS COMBINED
-------- ------- ------------ --------
<S> <C> <C> <C> <C>
1995
Sales to unaffiliated customers............. $146,198 $21,205 $167,403
Sales between geographic areas.............. 8,508 60 $ (8,568) --
-------- ------- ------------ --------
Net sales................................... $154,706 $21,265 $ (8,568) $167,403
========= ======== ========== =========
Income from operations...................... $ 22,782 $ 1,887 $ 24,669
========= ========
Interest expense, net....................... 5,772
Other income, net........................... (309)
--------
Income before income taxes and minority
interests................................. $ 19,206
=========
Identifiable assets......................... $ 99,123 $15,478 $114,601
========= ======== =========
</TABLE>
(14) FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts for cash and cash equivalents, accounts receivables,
deposits and other current assets, loans and notes payable, accounts payable,
accrued expenses (non derivatives) and other current liabilities approximates
fair value at December 31, 1995 because of the short term maturity of those
instruments or their variable rate of interest.
The carrying amounts for long term debt approximates fair value at December
31, 1995. Fair value has been estimated by discounting the future cash flow of
each instrument at rates currently offered for similar debt instruments of
comparable maturity.
Fair value amounts for loans and notes payable to Principal Stockholder are
not presented due to the related party nature of the indebtedness and the
ability of the Principal Stockholder to amend the features of the debt
instruments.
The fair value of interest rate swaps is the estimated amount that the Bank
would receive or pay to terminate the swap agreements at the reporting date,
taking into account current interest rates and the current creditworthiness of
the swap counterparties. Termination of the swap agreements at December 31, 1995
would require certain of the Companies to pay the Bank $1,857,000.
(15) PRO FORMA DATA AND SUPPLEMENTAL PRO FORMA DATA (UNAUDITED)
In connection with a proposed initial public offering of its common stock
(the "Offering") Amscan Holdings, Inc. was formed on October 3, 1996 for the
purpose of becoming the holding company for the business conducted by the
Companies. Such transfer of ownership will be accounted for in a manner similar
to a pooling of interests and will result in Amscan Inc., Am-Source, Inc., JCS
Realty Corp. and SSY Realty Corp. being taxed as Subchapter C corporations under
federal and certain state income tax requirements.
Pro forma net income for the years ended December 31, 1993, 1994 and 1995
give effect to pro forma income tax provisions at statutory rates (40.5%)
assuming Amscan Inc., Am-Source, Inc., JCS Realty Corp. and SSY Realty Corp. had
not elected Subchapter S corporation status for those periods.
In addition to the pro forma additional income tax expense, there are other
events contemplated in connection with the Offering that have been reflected in
the supplemental pro forma net income
F-17
<PAGE> 80
AMSCAN INC. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1995
for the year ended December 31, 1995 which causes such amount to be higher than
the pro forma net income amount.
The supplemental pro forma net income for the year ended December 31, 1995
gives effect to (i) reduction in compensation paid to certain employees to the
extent such compensation exceeded the compensation payable to such individuals
under certain prospective compensation agreements ($2,581,000), (ii) to reflect
amortization of goodwill ($250,000) and elimination of minority interest related
to the 50% acquisition of Am-Source, Inc. as if it were acquired at the
beginning of the period presented ($927,000), (iii) to reflect the reduction of
interest expense ($2,686,000) related to the repayment of bank indebtedness and
subordinated indebtedness due to the Principal Stockholder from proceeds of the
proposed Offering, as if it occurred at the beginning of the period presented,
and (iv) to give effect to the tax effects of these adjustments at statutory
rates (40.5%) assuming Amscan Inc., Am-Source, Inc., JCS Realty Corp. and SSY
Realty Corp. had not elected Subchapter S corporation status ($9,181,000).
The supplemental pro forma weighted average shares outstanding represent
the contemplated number of shares expected to be outstanding immediately after
the Offering.
(16) SUBSEQUENT EVENTS
(a) On April 5, 1996, certain of the Companies entered into an operating
lease agreement with a third party whereby the Companies may lease up
to $11,000,000 of machinery and equipment. The agreement provides for
equal monthly payments over 12 years, including renewal options. The
agreement will be classified as an operating lease for financial
statement purposes, and accordingly, the related assets and liabilities
will not be reflected in the Companies' financial statements.
In connection with this agreement, certain of the Companies have
entered into commitments for equipment with a fair value of
approximately $10,400,000.
Assuming the entire lease facility is utilized, future minimum lease
payments under the lease will be as follows ($ in thousands):
<TABLE>
<S> <C>
1997.............................................................. $ 1,305
1998.............................................................. 1,305
1999.............................................................. 1,305
2000.............................................................. 1,305
2001.............................................................. 1,305
Thereafter........................................................ 9,135
-------
$15,660
=======
</TABLE>
F-18
<PAGE> 81
AMSCAN INC. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1995
(b) In July 1996, certain operating leases with Uncombined Affiliates which
previously had remaining terms of up to sixteen years have been amended to terms
of up to six years. As a result of these reduced lease terms, future minimum
lease payments under all operating leases with Uncombined Affiliates, at
December 31, 1995 consisted of the following ($ in thousands):
<TABLE>
<S> <C>
1996.............................................................. $ 2,132
1997.............................................................. 2,246
1998.............................................................. 2,309
1999.............................................................. 2,374
2000.............................................................. 1,239
Thereafter........................................................ 167
-------
$10,467
=======
</TABLE>
F-19
<PAGE> 82
INDEPENDENT AUDITORS' REPORT
To the Stockholders of Amscan Inc.
and Affiliates:
We have audited the accompanying special purpose combined balance sheet of
Amscan Inc. and Affiliates as of September 30, 1996 and the related special
purpose combined statements of operations, stockholders' equity and cash flows
for the nine month period ended September 30, 1996. These special purpose
combined financial statements are the responsibility of the Companies'
management. Our responsibility is to express an opinion on these special purpose
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the balance sheet is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
The accompanying special purpose combined financial statements include the
accounts of Amscan Inc. and Affiliates, as defined in note (1). These financial
statements present the combined accounts of entities owned by the Principal
Stockholder engaged in the design, manufacture, contract for manufacture or
distribution of party and novelty goods.
In our opinion, the special purpose combined financial statements referred
to above present fairly, in all material respects, the combined financial
position of Amscan Inc. and Affiliates as of September 30, 1996, and the
combined results of their operations and their cash flows for the nine month
period ended September 30, 1996, in conformity with generally accepted
accounting principles.
KPMG Peat Marwick LLP
Stamford, Connecticut
November 22, 1996
F-20
<PAGE> 83
AMSCAN INC. AND AFFILIATES
COMBINED BALANCE SHEET
($ IN THOUSANDS)
<TABLE>
<CAPTION>
SEPTEMBER 30,
1996
-------------
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents.................................................... $ 3,530
Accounts receivable, net of allowance of $3,161.............................. 51,359
Inventories.................................................................. 45,074
Deposits and other........................................................... 10,146
--------
Total current assets................................................. 110,109
Property, plant and equipment, net............................................. 30,409
Other assets................................................................... 5,235
--------
Total assets......................................................... $ 145,753
========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Loans payable................................................................ $ 47,955
Subordinated and other indebtedness to stockholders.......................... 35,900
Accounts payable............................................................. 4,326
Accrued expenses............................................................. 17,514
Current installments of long-term indebtedness............................... 2,318
--------
Total current liabilities............................................ 108,013
Long-term indebtedness, less current installments.............................. 12,412
Other.......................................................................... 689
--------
Total liabilities.................................................... 121,114
--------
Stockholders' equity:
Common stock................................................................. 393
Additional paid-in capital................................................... 1,490
Retained earnings............................................................ 23,490
Cumulative translation adjustment............................................ (647)
Treasury stock, at cost...................................................... (87)
--------
Total stockholders' equity........................................... 24,639
--------
Total liabilities and stockholders' equity........................... $ 145,753
========
</TABLE>
See accompanying notes to combined financial statements.
F-21
<PAGE> 84
AMSCAN INC. AND AFFILIATES
COMBINED STATEMENTS OF OPERATIONS
($ IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
FOR THE NINE MONTHS
ENDED
SEPTEMBER 30,
------------------------
1996
1995 -----------
--------
(UNAUDITED)
<S> <C> <C>
Net sales......................................................... $128,314 $ 147,008
Cost of sales..................................................... 81,719 92,861
-------- -----------
Gross profit.................................................... 46,595 54,147
-------- -----------
Operating Expenses:
Selling......................................................... 8,893 8,691
General and administrative...................................... 10,395 14,113
Art and development............................................. 2,936 3,671
Special bonuses................................................. 2,409 3,300
-------- -----------
Total operating expenses..................................... 24,633 29,775
-------- -----------
Income from operations....................................... 21,962 24,372
Interest expense, net............................................. 4,386 4,569
Other income, net................................................. (409) (301)
-------- -----------
Income before income taxes and minority interests................. 17,985 20,104
Income taxes...................................................... 498 767
Minority interests................................................ 722 1,242
-------- -----------
Net income................................................... $ 16,765 $ 18,095
======== ===========
Pro forma data (note (15)):
Net income before pro forma income taxes..................... $ 16,765 $ 18,095
Pro forma additional income tax expense...................... 6,435 7,121
-------- -----------
Pro forma net income......................................... $ 10,330 $ 10,974
======== ===========
Supplemental pro forma data (unaudited) (note (15)):
Supplemental pro forma net income............................ $ 14,678
===========
Supplemental pro forma net income per share.................. $ 0.67
===========
Supplemental pro forma weighted average shares outstanding... 22,000,000
===========
</TABLE>
See accompanying notes to combined financial statements.
F-22
<PAGE> 85
AMSCAN INC. AND AFFILIATES
COMBINED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1996
($ IN THOUSANDS)
<TABLE>
<CAPTION>
ADDITIONAL CUMULATIVE
COMMON PAID-IN RETAINED TRANSLATION TREASURY
STOCK CAPITAL EARNINGS ADJUSTMENT STOCK TOTAL
------ ---------- -------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1994.............. $393 $ 9,090 $ 12,037 $ (613) $(87) $ 20,820
Net income for the nine months ended
September 30, 1995 (unaudited)........ -- -- 16,765 -- -- 16,765
Subchapter S and other distributions
(unaudited)........................... -- -- (377) -- -- (377)
Net change in cumulative translation
adjustment (unaudited)................ -- -- -- (134) -- (134)
---- ------ ------- ----- ---- -------
Balance, September 30, 1995
(unaudited)........................... $393 $ 9,090 $ 28,425 $ (747) $(87) $ 37,074
==== ====== ======= ===== ==== =======
Balance, December 31, 1995.............. $393 $ 9,090 $ 18,462 $ (653) $(87) $ 27,205
Net income for the nine months ended
September 30, 1996.................... -- -- 18,095 -- -- 18,095
Subchapter S and other distributions.... -- (7,600) (13,067) -- -- (20,667)
Net change in cumulative translation
adjustment............................ -- -- -- 6 -- 6
---- ------ ------- ----- ---- -------
Balance, September 30, 1996............. $393 $ 1,490 $ 23,490 $ (647) $(87) $ 24,639
==== ====== ======= ===== ==== =======
</TABLE>
See accompanying notes to combined financial statements.
F-23
<PAGE> 86
AMSCAN INC. AND AFFILIATES
COMBINED STATEMENTS OF CASH FLOWS
($ IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE NINE MONTHS
ENDED SEPTEMBER 30,
--------------------
1996
1995 --------
-------
(UNAUDITED)
<S> <C> <C>
Cash flows from operating activities:
Net income.......................................................... $16,765 $ 18,095
Adjustments to reconcile net income to net cash used in operating
activities:
Depreciation and amortization.................................... 3,156 3,579
Provision for doubtful accounts.................................. 585 963
Changes in operating assets and liabilities:
Accounts receivable............................................ (20,098) (20,442)
Inventories.................................................... (5,858) (61)
Deposits and other............................................. (2,990) (7,226)
Other assets................................................... (2,776) (1,177)
Accounts payable and accrued expenses.......................... 672 6,459
Other.......................................................... 631 (511)
-------- --------
Net cash used in operating activities.......................... (9,913) (321)
-------- --------
Cash flows from investing activities:
Capital expenditures................................................ (3,773) (3,691)
-------- --------
Net cash used in investing activities............................ (3,773) (3,691)
-------- --------
Cash flows from financing activities:
Proceeds from loans payable and long term indebtedness........... 15,382 10,242
Repayment of loans payable and long term indebtedness............ (2,289) (2,003)
Proceeds from loans, notes payable and subordinated indebtedness
from Principal Stockholder...................................... 1,408 --
Repayment of loans and notes payable to Principal Stockholder.... -- (3,220)
Subchapter S and other distributions............................. (377) --
-------- --------
Net cash provided by financing activities...................... 14,124 5,019
-------- --------
Effect of exchange rate changes on cash.......................... (151) 31
-------- --------
Net increase in cash and cash equivalents...................... 287 1,038
Cash and cash equivalents at beginning of period...................... 2,229 2,492
-------- --------
Cash and cash equivalents at end of period............................ $ 2,516 $ 3,530
======== ========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest....................................................... $ 3,214 $ 4,970
Taxes.......................................................... $ 402 $ 546
</TABLE>
Supplemental information on non-cash investing and financing activities:
Capital lease obligations of $2,074 were incurred for the nine months ended
September 30, 1996. There were no capital lease obligations incurred for the
nine months ended September 30, 1995.
During September 1996, certain of the Companies declared the distribution of
$7,600,000 of previously provided capital and $13,067,000 of previously
undistributed earnings. Such amounts are included in subordinated and other
indebtedness to stockholders.
See accompanying notes to combined financial statements.
F-24
<PAGE> 87
AMSCAN INC. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
(1) DESCRIPTION OF BUSINESS
The accompanying special purpose combined financial statements include the
accounts of Amscan Inc. and certain of its affiliates (the "Companies"). The
Companies design, manufacture, contract for manufacture and distribute party and
novelty goods to retailers and wholesale distributors principally in the United
States, Canada and Europe.
BASIS OF COMBINATION
These combined financial statements present the Companies on a combined
basis because of their common ownership by Mr. John A. Svenningsen (the
"Principal Stockholder"). The name, the Principal Stockholder's ownership and a
brief description of each of the combined entity's principal business activity
is presented below.
<TABLE>
<CAPTION>
PRINCIPAL
STOCKHOLDER'S
ENTITY OWNERSHIP PRINCIPAL ACTIVITY
------------------------------------ ------------- --------------------------------
<S> <C> <C>
Manufacturer -- paper tableware;
Amscan Inc.......................... 100% and distributor -- worldwide
Am-Source, Inc...................... 50% Manufacturer -- plastic products
Trisar, Inc......................... 100% Manufacturer -- gift products
Amscan Distributors (Canada) Ltd.... 100% Distributor -- Canada
Amscan Holdings Limited............. 75% Distributor -- United Kingdom
Distributor -- Australia and
Amscan (Asia Pacific) Pty. Ltd...... 85% Asia
Amscan Partyartikel GmbH............ 95% Distributor -- Germany
Amscan Svenska AB................... 100% Distributor -- Sweden
Amscan de Mexico, S.A. de C.V....... 48% Distributor -- Mexico
JCS Realty Corp..................... 100% Real estate -- Canada
SSY Realty Corp..................... 100% Real estate -- United States
</TABLE>
The less than majority owned entities are combined in the accompanying
financial statements because the Principal Stockholder effectively controls the
day-to-day operations. All material intercompany balances and transactions have
been eliminated in combination.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CASH EQUIVALENTS
Highly liquid investments with a maturity of three months or less when
purchased are considered to be cash equivalents.
INVENTORIES
Substantially all inventories of the Companies are valued at the lower of
cost or market (principally on the first-in, first-out method).
PROPERTY, PLANT, AND EQUIPMENT
Property, plant and equipment are stated at cost. Machinery and equipment
under capital leases are stated at the present value of the minimum lease
payments at the inception of the lease.
F-25
<PAGE> 88
AMSCAN INC. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
SEPTEMBER 30, 1996
Depreciation is calculated principally on the straight-line method over the
estimated useful lives of the assets. Machinery and equipment held under capital
leases and leasehold improvements are amortized straight-line over the shorter
of the lease term or estimated useful life of the asset.
OTHER ASSETS
Included in other assets are capitalized costs which represent third party
costs incurred to manufacture and commercialize designs for production,
including the acquisition of printing plates. Accordingly these costs are
amortized on a straight line basis over their estimated useful lives of three
years. The amortization of such costs is included in cost of sales and was
$864,000 (unaudited) and $1,127,000, respectively, for the nine months ended
September 30, 1995 and 1996.
REVENUE RECOGNITION
The Companies recognize revenue from product sales when the goods are
shipped to the customer.
CATALOGUE COSTS
The Companies expense costs associated with the production of annual
catalogues when incurred.
ART AND DEVELOPMENT COSTS
Art and development costs are primarily internal costs that are not easily
associated with specific designs which may reach commercial production.
Accordingly, the Companies expense these costs as incurred.
INCOME TAXES
Certain of the affiliates have elected Subchapter S corporation status for
U.S. federal and state income tax purposes. Income taxes, therefore, are
principally the responsibility of the stockholders. Income taxes for all other
entities, including foreign distributors, are computed in accordance with the
tax laws in the jurisdictions in which the entities operate.
FOREIGN CURRENCY TRANSACTIONS AND TRANSLATION
Realized foreign currency exchange gains or losses, which result from the
settlement of receivables or payables in currencies other than U.S. dollars, are
credited or charged to operations. Unrealized gains or losses on foreign
currency exchanges are insignificant.
The balance sheets of foreign affiliates are translated into U.S. dollars
at the exchange rates in effect on the balance sheet date. The results of
operations of foreign affiliates are translated into U.S. dollars at the average
exchange rates effective for the periods presented. The differences from
historical exchange rates are reflected as a separate component of stockholders'
equity.
CONCENTRATION OF CREDIT RISK
While the Companies' customers are geographically disbursed throughout
North America, South America, Europe, Asia and Australia, there is a
concentration of sales made to and accounts receivable from the stores which
operate in the party superstore channel of distribution. At September 30, 1996,
the Companies' two largest customers, with approximately 185 stores,
F-26
<PAGE> 89
AMSCAN INC. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
SEPTEMBER 30, 1996
accounted for 14% of combined accounts receivable. For the nine months ended
September 30, 1995 and 1996, sales to the Companies' two largest customers
represented 16% (unaudited), and 21%, respectively, of combined net sales. Of
such amount, sales to the Companies' largest customer represented 11%
(unaudited) and 14%, respectively. No other group or combination of customers
subjected the Companies to a concentration of credit risk.
USE OF ESTIMATES
Management has made estimates and assumptions relating to the reporting of
assets and liabilities to prepare these financial statements in conformity with
generally accepted accounting principles. Actual results could differ from those
estimates.
RECENTLY ISSUED ACCOUNTING STANDARDS
In October 1995, the Financial Accounting Standards Board (FASB) issued
Statement on Financial Accounting Standards (SFAS) No. 123 -- Accounting for
Stock-Based Compensation. As allowable by SFAS 123, the Companies do not intend
to recognize compensation cost for stock-based employee compensation
arrangements, but rather, starting with fiscal 1996, will disclose the pro-forma
impact on net income and earnings per share as if the fair value stock-based
compensation had been recognized starting with fiscal 1995.
In March 1995, the FASB issued SFAS 121 -- Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of. SFAS 121 did not
have a significant impact on the financial position or results of operations of
the Companies.
Other pronouncements issued by the FASB or other authoritative accounting
standard groups with future effective dates are either not applicable or not
significant to the financial statements of the Companies.
(3) INVENTORIES
Inventories at September 30, 1996 consisted of the following ($ in
thousands):
<TABLE>
<S> <C>
Finished goods............................................................ $41,210
Raw materials............................................................. 2,977
Work-in-process........................................................... 2,116
-------
46,303
Less: Reserve for slow moving and obsolete inventory...................... (1,229)
-------
$45,074
=======
</TABLE>
F-27
<PAGE> 90
AMSCAN INC. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
SEPTEMBER 30, 1996
(4) PROPERTY, PLANT AND EQUIPMENT
Major classifications of property, plant and equipment at September 30,
1996 consisted of the following ($ in thousands):
<TABLE>
<CAPTION>
ESTIMATED
USEFUL LIVES
------------
<S> <C> <C>
Machinery and equipment...................................... $ 21,557 5-15
Data processing equipment.................................... 7,762 5
Leasehold improvements....................................... 5,000 25
Furniture and fixtures....................................... 2,756 10
Buildings.................................................... 10,268 31-40
Land......................................................... 1,920 --
-------
49,263
Less: accumulated depreciation and amortization.............. (18,854)
-------
$ 30,409
=======
</TABLE>
Depreciation and amortization expense was $2,029,000 (unaudited) and
$2,189,000 for the nine months ended September 30, 1995 and 1996, respectively.
(5) LOANS PAYABLE
In 1995, certain of the Companies, entered into a revolving credit
agreement with several banks which expires on September 20, 2000. Amounts
available for borrowing under this agreement, subject to asset availability and
other restrictions, are as follows:
<TABLE>
<S> <C>
September 20, 1996 -- September 19, 1997.............................. $55,000,000
September 20, 1997 -- September 20, 2000.............................. $60,000,000
</TABLE>
Such revolving credit agreement is collateralized by a first lien on
certain of the assets of the Companies. The revolving credit agreement provides
for interest on the borrowings to be based on either a prime borrowing rate or
LIBOR plus 0.875%, whichever is lower. Additionally, the revolving credit
agreement requires the Companies to comply with certain covenants including the
maintenance of financial ratios, as defined. At September 30, 1996, the
Companies were in compliance with all such covenants.
Loans payable outstanding at September 30, 1996 consisted of the following
($ in thousands):
<TABLE>
<S> <C>
Revolving credit line with interest at LIBOR plus 0.875% (6.59% at
September 30, 1996)..................................................... $40,000
Revolving credit line with interest at the prime rate (8.25% at September
30, 1996)............................................................... 5,830
Revolving credit line denominated in Canadian dollars with interest at the
Canadian prime rate (5.75% at September 30, 1996)....................... 1,455
Revolving credit line denominated in British Pounds Sterling with interest
at the U.K. Base rate plus 2% (7.75% at September 30, 1996)............. 670
-------
$47,955
=======
</TABLE>
The weighted average interest rate on loans payable outstanding at
September 30, 1996 was 6.78%.
F-28
<PAGE> 91
AMSCAN INC. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
SEPTEMBER 30, 1996
The Companies are currently involved in three interest rate swap
transactions covering $25,000,000 of the outstanding obligation under the
revolving credit agreement. The transactions fix the interest rates as indicated
below and entitle the Companies to settle with the counterparty on a quarterly
basis, the product of the notional amount times the amount, if any, by which the
ninety day LIBOR exceeds the fixed rate. Net payments to the counterparty under
the swap agreements for the nine months ended September 30, 1995 and 1996, which
have been recorded as additional interest expense, consisted of the following ($
in thousands):
<TABLE>
<CAPTION>
ADDITIONAL INTEREST
EXPENSE
NOTIONAL --------------------
DATE OF CONTRACT AMOUNT TERM FIXED RATE 1995 1996
----------------------------- -------- -------- ---------- ----------- ----
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
September 28, 1994........... $ 5,000 10 years 7.945% $ 68 $ 92
May 12, 1995................. $ 10,000 5 years 6.590% 24 79
July 20, 1995................ $ 10,000 10 years 6.750% 16 91
---- ----
$ 108 $262
==== ====
</TABLE>
(6) LONG-TERM INDEBTEDNESS
Long-term indebtedness at September 30, 1996 consisted of the following ($
in thousands):
<TABLE>
<S> <C>
Mortgage obligations(a)................................................... $ 6,422
Term loans(b)............................................................. 4,174
Capital lease obligations(c).............................................. 4,134
-------
Total long-term indebtedness............................................ 14,730
Less: current installments................................................ (2,318)
-------
Long-term indebtedness, excluding current installments.................... $12,412
=======
</TABLE>
- ---------------
(a) Certain of the Companies have mortgage obligations payable to financial
institutions relating to distribution facilities due through September 13,
2004. The mortgages are collateralized by specific real estate assets of
the Companies and carry interest rates ranging from the Canadian prime rate
plus 0.5% (6.25% as of September 30, 1996) to 8.51%. At September 30, 1996,
$1,700,000 of mortgage obligations are denominated in Canadian dollars.
(b) Certain of the Companies have various term loans payable to financial
institutions due through April 1, 2002. The loans are collateralized by
specific assets of the Companies and carry interest rates which range from
8.01% to 9.5%.
(c) Certain of the Companies have entered into various capital leases for
machinery and equipment with implicit interest rates ranging from 6.5% to
23.0% and extend to 2001.
F-29
<PAGE> 92
AMSCAN INC. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
SEPTEMBER 30, 1996
At September 30, 1996, principal maturities of long-term indebtedness
consisted of the following ($ in thousands):
<TABLE>
<CAPTION>
CAPITAL
AT SEPTEMBER 30, INDEBTEDNESS LEASE OBLIGATIONS TOTAL
------------------------------------- ------------ ----------------- -------
<S> <C> <C> <C>
1997................................. $ 1,649 $ 907 $ 2,556
1998................................. 1,339 942 2,281
1999................................. 1,263 902 2,165
2000................................. 1,216 834 2,050
2001................................. 1,173 1,235 2,408
Thereafter........................... 3,955 150 4,105
------- ------ -------
10,595 4,970 15,565
Amount representing interest......... -- (835) (835)
------- ------ -------
Long-term indebtedness............... $ 10,595 $ 4,135 $14,730
======= ====== =======
</TABLE>
(7) DUE TO PRINCIPAL STOCKHOLDER
Certain of the Companies owe $34,150,000 to the Principal Stockholder as of
September 30, 1996 under a subordinated note with interest payable monthly. This
note is subject to a subordination agreement among the Principal Stockholder,
Amscan Inc., and the lenders involved with the revolving credit agreement as
discussed in note (5). Under the terms of the subordination agreement, the
payment of any principal evidenced by the subordinated note is prohibited.
Interest is at the prime rate plus 0.5% (8.75% at September 30, 1996).
(8) EMPLOYEE BENEFIT PLANS
Certain of the Companies maintain a profit-sharing plan for all eligible
employees providing for annual discretionary contributions to a trust. As of
January 1, 1995, the plan required the Companies to match 25% of the first 6% of
an employee's contribution to the plan. Benefit expense for the nine months
ended September 30, 1995 and 1996 totaled $459,000 (unaudited) and $466,000,
respectively.
(9) SPECIAL BONUS ARRANGEMENTS
During the periods presented, Amscan Inc. had employment agreements with
certain key executives and senior managers which provided for these individuals
to receive annual bonuses based upon the pre-tax income of Amscan Inc. and
certain of its affiliates. These bonuses which amounted to approximately 18% to
20% of pre-tax income are reflected in the Combined Statements of Operations in
the caption "Special Bonuses." At September 30, 1996, $3,300,000 was accrued for
such bonuses and included in accrued expenses.
(10) INCOME TAXES
The entities Amscan Inc., Am-Source, Inc., JCS Realty Corp. and SSY Realty
Corp. have elected Subchapter S corporation status. Accordingly, these entities
are generally not subject to federal and state income taxes, to the extent that
states recognize Subchapter S corporation status.
Current income tax expense and deferred taxes generally arise from taxes on
income generated by foreign affiliates at the effective rate in effect in each
of the taxing jurisdictions. Deferred taxes arising from timing differences are
not significant.
Domestic and foreign pre-tax income is $16,358,000 (unaudited) and
$1,627,000 (unaudited), and $18,485,000 and $1,619,000, in each of the nine
months ended September 30, 1995 and 1996, respectively.
F-30
<PAGE> 93
AMSCAN INC. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
SEPTEMBER 30, 1996
A summary of the operations subject to tax, their reported tax expense and
effective tax rates for the nine months ended September 30, 1995 and 1996,
consisted of the following ($ in thousands):
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
-----------------------------------------------
1995 1996
--------------------- ---------------------
TAX EFFECTIVE TAX EFFECTIVE
EXPENSE RATE EXPENSE RATE
------- --------- ------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C>
Amscan Distributors (Canada) Ltd........... $ 294 36% $ 204 38%
Amscan Holdings Limited.................... 174 33% 194 34%
Amscan (Asia Pacific) Pty. Ltd............. 30 33% 101 34%
Other...................................... -- --% 268 1%
--- ---
$ 498 $ 767
=== ===
</TABLE>
(11) COMMON STOCK
Common Stock for each of the combined entities is as follows:
Amscan Inc.:
No par value; 1,000 shares authorized, 990 shares issued and
outstanding (including 330 shares of treasury stock).
Am-Source, Inc.:
No par value; 1,000 shares authorized, 120 shares issued and
outstanding.
Trisar, Inc.
No par value; 10,000 shares authorized, 267 shares issued and
outstanding.
Amscan Distributors (Canada) Ltd.:
$1 (Canadian) par value; 10,000 shares authorized, 3,000 shares issued
and outstanding.
Amscan Holdings Limited:
One British Pound Sterling par value; 60,000 shares authorized, issued
and outstanding.
Amscan (Asia Pacific) Pty. Ltd.:
Aus. $1 par value; 10,000 shares authorized, 800 shares issued and
outstanding.
Amscan Partyartikel GmbH:
No par value; 50,000 shares authorized, issued and outstanding.
Amscan Svenska AB:
No par value; 1,500 shares authorized, issued and outstanding.
Amscan de Mexico, S.A. de C.V.:
Class B Shares:
No stated value, minimum capital; 6,060 shares authorized, issued
and outstanding.
Class B-1 Shares:
No stated value, variable capital; 1,200 shares authorized, issued
and outstanding.
JCS Realty Corp.:
No par value; 200 shares authorized, one share issued and outstanding.
SSY Realty Corp.:
No par value; 200 shares authorized issued and outstanding.
F-31
<PAGE> 94
AMSCAN INC. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
SEPTEMBER 30, 1996
(12) COMMITMENTS AND CONTINGENCIES
LEASES
The Companies are obligated under various capital leases for certain
machinery and equipment which expire on various dates through June 1, 2001 (see
also note (6)). At September 30, 1996, the amount of machinery and equipment and
related accumulated amortization recorded under capital leases is included with
property, plant and equipment and consisted of the following ($ in thousands):
<TABLE>
<S> <C>
Machinery and equipment..................................................... $5,146
Less: accumulated amortization.............................................. (767)
------
$4,379
======
</TABLE>
Amortization of assets held under capitalized leases is included with
depreciation expense.
The Companies have several noncancelable operating leases with unaffiliated
third parties, primarily for office and manufacturing space, showrooms, and
warehouse equipment that expire over the next eight years. These leases
generally contain renewal options and require the Companies to pay real estate
taxes, utilities and related insurance.
At September 30, 1996, certain of the Companies also had noncancelable
operating leases with the Principal Stockholder and real estate entities owned
either directly or indirectly by the Principal Stockholder ("Uncombined
Affiliates") for warehouse and office space that expire over the next five
years. Rent due to Uncombined Affiliates represents future commitments
associated with property leased by the Companies from the Principal Stockholder
or such entities owned directly or indirectly by the Principal Stockholder.
At September 30, 1996 future minimum lease payments under all operating
leases consisted of the following ($ in thousands):
<TABLE>
<CAPTION>
FOR THE TWELVE
MONTHS ENDED UNCOMBINED
SEPTEMBER 30, THIRD PARTIES AFFILIATES TOTAL
------------------------------- ------------- ---------- -------
<S> <C> <C> <C>
1997........................... $ 3,068 $2,231 $ 5,299
1998........................... 2,653 2,293 4,946
1999........................... 1,709 2,357 4,066
2000........................... 1,061 1,585 2,646
2001........................... 1,043 418 1,461
Thereafter..................... 2,426 -- 2,426
------- ------ -------
$11,960 $8,884 $20,844
======= ====== =======
</TABLE>
Rent expense for the nine months ended September 30, 1995 and 1996 was
$1,781,000 (unaudited) and $3,878,000, respectively, of which $698,000
(unaudited) and $1,586,000, respectively, related to leases with Uncombined
Affiliates.
(13) SEGMENT INFORMATION
INDUSTRY SEGMENTS
The Companies operate in primarily one industry segment which involves the
design, manufacture, contract for manufacture and distribution of party and
novelty goods to retailers and wholesale distributors.
F-32
<PAGE> 95
AMSCAN INC. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
SEPTEMBER 30, 1996
GEOGRAPHIC SEGMENTS
The Companies' export sales, other than those intercompany sales reported
below as sales between geographic areas, are not material. Sales between
geographic areas primarily consist of sales of finished goods for distribution
in the foreign markets.
The Companies' geographic area data for the nine months ended September 30,
1995 and 1996 consisted of the following ($ in thousands):
<TABLE>
<CAPTION>
DOMESTIC FOREIGN ELIMINATIONS COMBINED
-------- ------- ------------ --------
<S> <C> <C> <C> <C>
NINE MONTHS ENDED SEPTEMBER 30, 1995
(UNAUDITED)
Sales to unaffiliated customers............. $113,102 $15,212 $128,314
Sales between geographic areas.............. 5,629 -- $ (5,629) --
-------- ------- ------- --------
Net sales................................... $118,731 $15,212 $ (5,629) $128,314
======== ======= ======= ========
Income from operations...................... $ 20,569 $ 1,393 $ 21,962
======== =======
Interest expense, net....................... 4,386
Other income, net........................... (409)
--------
Income before income taxes and minority
interests................................. $ 17,985
========
Identifiable assets......................... $111,328 $14,613 $125,941
======== ======= ========
<CAPTION>
DOMESTIC FOREIGN ELIMINATIONS COMBINED
-------- ------- ------- --------
<S> <C> <C> <C> <C>
NINE MONTHS ENDED SEPTEMBER 30, 1996
Sales to unaffiliated customers............. $129,810 $17,198 $147,008
Sales between geographic areas.............. 7,006 72 $(7,078) --
-------- ------- ------- --------
Net sales................................... $136,816 $17,270 $(7,078) $147,008
======== ======= ======= ========
Income from operations...................... $23,083 $1,289 $24,372
======== =======
Interest expense, net....................... 4,569
Other income, net........................... (301)
--------
Income before income taxes and minority
interests................................. $20,104
========
Identifiable assets......................... $132,834 $12,919 $145,753
======== ======= ========
</TABLE>
(14) FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts for cash and cash equivalents, accounts receivables,
deposits and other current assets, loans and notes payable, accounts payable,
accrued expenses (non derivatives) and other current liabilities approximates
fair value at September 30, 1996 because of the short term maturity of those
instruments or their variable rate of interest.
The carrying amounts for long term debt approximates fair value at
September 30, 1996. Fair value has been estimated by discounting the future cash
flow of each instrument at rates currently offered for similar debt instruments
of comparable maturity.
Fair value amounts for loans and notes payable to Principal Stockholder are
not presented due to the related party nature of the indebtedness and the
ability of the Principal Stockholder to amend the features of the debt
instruments.
F-33
<PAGE> 96
AMSCAN INC. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
SEPTEMBER 30, 1996
The fair value of interest rate swaps is the estimated amount that the Bank
would receive or pay to terminate the swap agreements at the reporting date,
taking into account current interest rates and the current creditworthiness of
the swap counterparties. Termination of the swap agreements at September 30,
1996 would require certain of the Companies to pay the Bank $358,000.
(15) PRO FORMA DATA AND SUPPLEMENTAL PRO FORMA DATA (UNAUDITED)
In connection with a proposed initial public offering of its common stock
(the "Offering") Amscan Holdings, Inc. was formed on October 3, 1996 for the
purpose of becoming the holding company for the business conducted by the
Companies. Such transfer of ownership will be accounted for in a manner similar
to a pooling of interests and will result in Amscan Inc., Am-Source, Inc., JCS
Realty Corp. and SSY Realty Corp. being taxed as Subchapter C corporations under
federal and certain state income tax requirements.
Pro forma net income for the nine months ended September 30, 1995
(unaudited) and 1996 give effect to pro forma income tax provisions at statutory
rates (40.5%) assuming Amscan Inc., Am-Source, Inc., JCS Realty Corp. and SSY
Realty Corp. had not elected Subchapter S corporation status for those periods.
In addition to the pro forma additional income tax expense, there are other
events contemplated in connection with the Offering that have been reflected in
the supplemental pro forma net income for the nine months ended September 30,
1996 which causes such amount to be higher than the pro forma net income amount.
The supplemental pro forma net income for the nine months ended September
30, 1996 gives effect to (i) reduction in compensation paid to certain employees
to the extent such compensation exceeded the compensation payable to such
individuals under certain prospective compensation agreements ($3,300,000), (ii)
to reflect amortization of goodwill ($188,000) and elimination of minority
interest related to the 50% acquisition of Am-Source, Inc. as if it were
acquired at the beginning of the period presented ($1,138,000), (iii) to reflect
the reduction of interest expense ($2,102,000) related to the repayment of bank
indebtedness and subordinated indebtedness due to the Principal Stockholder from
proceeds of the proposed Offering, as if it occurred at the beginning of the
period presented, and (iv) to give effect to the tax effects of these
adjustments at statutory rates (40.5%) assuming Amscan Inc., Am-Source, Inc.,
JCS Realty Corp. and SSY Realty Corp. had not elected Subchapter S corporation
status ($9,769,000).
The above pro forma and supplemental pro forma adjustments do not include
anticipated non-recurring expenses of $12,980,000 and $3,000,000 relating to
compensation expense to be incurred at the consummation of the Offering in
connection with cash and stock to be paid to certain executives and employees,
and the establishment of an ESOP and bonuses payable in shares of Common Stock
for the benefit of the Company's domestic employees.
The supplemental pro forma weighted average shares outstanding represent
the contemplated number of shares expected to be outstanding immediately after
the Offering.
F-34
<PAGE> 97
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, the
Company has agreed to sell to each of the Underwriters named below, and each of
such Underwriters, for whom Goldman, Sachs & Co. and Alex. Brown & Sons
Incorporated are acting as representatives, has severally agreed to purchase
from the Company, the respective number of shares of Common Stock set forth
opposite its name below:
<TABLE>
<CAPTION>
NUMBER OF
SHARES OF
UNDERWRITER COMMON STOCK
---------------------------------------------------------------------- ------------
<S> <C>
Goldman, Sachs & Co...................................................
Alex. Brown & Sons Incorporated.......................................
-------
Total....................................................... 5,350,000
=======
</TABLE>
Under the terms and conditions of the Underwriting Agreement, the
Underwriters are committed to take and pay for all of the shares offered hereby,
if any are taken.
The Underwriters propose to offer the shares of Common Stock in part
directly to the public at the initial public offering price set forth on the
cover page of this Prospectus and in part to certain securities dealers at such
price less a concession of $ per share. The Underwriters may allow, and
such dealers may reallow, a concession not in excess of $ per share to
certain brokers and dealers. After the shares of Common Stock are released for
sale to the public, the offering price and other selling terms may from time to
time be varied by the representatives.
The Company has granted the Underwriters an option exercisable for 30 days
after the date of this Prospectus to purchase up to an aggregate of 802,500
additional shares of Common Stock to cover over-allotments, if any. If the
Underwriters exercise their over-allotment option, the Underwriters have
severally agreed, subject to certain conditions, to purchase approximately the
same percentage thereof that the number of shares to be purchased by each of
them, as shown in the foregoing table, bears to the 5,350,000 shares of Common
Stock offered.
The Company, John A. Svenningsen and the SSY Trusts have agreed that,
during the period beginning from the date of this Prospectus and continuing to
and including the date 180 days after the date of the Prospectus, they will not
offer, sell, contract to sell or otherwise dispose of any securities of the
Company including, but not limited to any securities that are exercisable or
exchangeable for, that represent the right to receive or that are convertible
into or whose exercise or settlement price is derivable from the price of the
Common Stock or any substantially similar securities without the prior written
consent of the representatives of the Underwriters, except for the shares of
Common Stock offered in connection with the Offering.
The representatives of the Underwriters have informed the Company that they
do not expect sales to accounts over which the Underwriters exercise
discretionary authority to exceed five percent of the total number of shares of
Common Stock offered by them.
Prior to this Offering, there has been no public market for the shares. The
initial public offering price will be negotiated among the Company and the
representatives. Among the factors to be considered in determining the initial
public offering price of the Common Stock, in addition to prevailing market
conditions, will be the Company's historical performance, estimates of the
business potential and earnings prospects of the Company, an assessment of the
Company's
U-1
<PAGE> 98
management and the consideration of the above factors in relation to market
valuation of companies in related businesses.
Application has been made to have the Common Stock approved for quotation
on The Nasdaq Stock Market, Inc. under the symbol "AMSN."
The Company, certain of its operating subsidiaries and John A. Svenningsen
have agreed to indemnify the several Underwriters against certain liabilities,
including liabilities under the Securities Act of 1933.
U-2
<PAGE> 99
[GRAPHIC MATERIAL PHOTOGRAPHS OF CERTAIN OF THE COMPANY'S
MANUFACTURING EQUIPMENT]
<PAGE> 100
- ------------------------------------------------------------
- ------------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO
WHICH IT RELATES OR AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY SUCH
SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary......................... 3
The Company................................ 7
Risk Factors............................... 7
Organization of the Company................ 10
Use of Proceeds............................ 13
Capitalization............................. 14
Dilution................................... 16
Selected Historical Combined
Financial Data........................... 17
Management's Discussion and Analysis of
Financial Condition and Results of
Operations............................... 20
Supplemental Pro Forma Combined Financial
Statements (unaudited)................... 31
Business................................... 36
Management of the Company.................. 44
Principal Stockholders..................... 52
Certain Related Transactions............... 53
Description of the Company's Capital
Stock.................................... 54
Shares Eligible for Future Sale............ 57
Validity of Common Stock................... 59
Experts.................................... 59
Other Information.......................... 59
Index to Combined Financial Statements..... F-1
Underwriting............................... U-1
</TABLE>
THROUGH AND INCLUDING , 1997 (THE 25TH DAY AFTER THE DATE OF
THIS PROSPECTUS), ALL DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK,
WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A
PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A
PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
- ------------------------------------------------------------
- ------------------------------------------------------------
- ------------------------------------------------------------
- ------------------------------------------------------------
5,350,000 SHARES
AMSCAN HOLDINGS, INC.
COMMON STOCK
(PAR VALUE $0.10 PER SHARE)
------------------------
LOGO
------------------------
GOLDMAN, SACHS & CO.
ALEX. BROWN & SONS
INCORPORATED
REPRESENTATIVES OF THE UNDERWRITERS
- ------------------------------------------------------------
- ------------------------------------------------------------
<PAGE> 101
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth an itemization of all estimated expenses in
connection with the issuance and distribution of the securities being
registered:
<TABLE>
<S> <C>
Registration Statement Filing Fee....................................... $26,101.52
NASD Filing Fee......................................................... 9,729.00
Legal Fees and Expenses................................................. 200,000
Accounting Fees and Expenses............................................ 325,000
Printing Costs.......................................................... 90,000
Fees and Expenses (including legal fees) for qualifications under State
Securities laws....................................................... 20,000
Transfer Agent's Fees and Expenses...................................... 7,500
Miscellaneous........................................................... 3,169.48
----------
Total......................................................... $ 681,500
==========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Registrant's By-Laws provide for indemnification by the Registrant of
its directors and officers to the full extent permitted by the Delaware General
Corporation Law (the "DGCL"). The Registrant is empowered by Section 145 of the
DGCL, subject to the procedures and limitations stated therein, to indemnify any
person against expenses (including attorneys' fees), judgments, fines, and
amounts paid in settlement actually and reasonably incurred by him in connection
with any threatened, pending or completed action, suit or proceeding in which
such person was or is made a party by reason of his being or having been a
director, officer, employee or agent of the Registrant, if he acted in good
faith and in a manner he reasonably believed to be in or not opposed to the best
interests of the Registrant, and, with respect to any criminal action or
proceeding, if he had no reasonable cause to believe his conduct was unlawful.
The statute provides that indemnification pursuant to its provisions is not
exclusive of other rights of indemnification to which a person may be entitled
under any By-Law, agreement, vote of stockholders or disinterested directors, or
otherwise. The Registrant has also agreed to indemnify each director pursuant to
an Indemnification Agreement with such director from and against any and all
expenses, losses, claims, damages and liabilities incurred by such director for
or as a result of action taken or not taken while such director was acting in
his capacity as a director, officer, employee or agent of the Registrant.
[The Registrant maintains a liability and indemnification insurance policy
in the amount of $ for a period extending from through
issued by covering all officers and directors of the
Registrant, at an annual expense of approximately $ .]
Reference is made to Section of the Underwriting Agreement filed as
Exhibit hereto for provisions relating to indemnification of officers and
directors of the Company by the Underwriters.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
In connection with the formation of the Registrant, the Registrant sold
1,000 shares of Common Stock to John A. Svenningsen for $100 in cash. Such
shares were sold to Mr. Svenningsen for the purpose of facilitating the
Organization and the Offering (as those terms are defined in the Prospectus
constituting a part of this Registration Statement (the "Prospectus") by
establishing a corporate structure including a stockholder and board of
directors necessary for the Registrant to implement the Offering. Additional
shares of Common Stock will be issued prior to completion of the Offering in
connection with effecting the Organization. See "Organization of the Company" in
the Prospectus. All of such shares were or will be issued and sold by the
Registrant in reliance on the exemption contained in Section 4(2) of the
Securities Act of 1933.
II-1
<PAGE> 102
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
<TABLE>
<C> <S> <C> <C>
*** Exhibit 1 -- Form of Underwriting Agreement
*** Exhibit 2(a) -- Form of Share Exchange Agreement among the Company and John A.
Svenningsen and Gerald C. Rittenberg, dated as of December , 1996
** Exhibit 2(b) -- Capital Contribution Agreement between the Company and Messrs. Allen J.
Kaufman, Arthur J. Kaufman and Michael F. Hodges, dated as of October
9, 1996, as supplemented
* Exhibit 3(a) -- Certificate of Incorporation of the Registrant, dated October 3, 1996
* Exhibit 3(b) -- By-Laws of the Registrant
** Exhibit 4(a) -- Credit Agreement among Amscan Inc., Kookaburra USA Ltd., Deco Paper
Products, Inc., Trisar, Inc., the Banks Signatory thereto and The Chase
Manhattan Bank N.A., dated as of September 20, 1995
*** Exhibit 4(b) -- Amendment No. 1 to Credit Agreement among Amscan Inc., Kookaburra USA
Ltd., Deco Paper Products, Inc., Trisar, Inc., the Banks Signatory
thereto and The Chase Manhattan Bank N.A., dated as of , 1996
*** Exhibit 4(c) -- Amendment No. 2 to Credit Agreement among Amscan Inc., Kookaburra USA
Ltd., Deco Paper Products, Inc., Trisar, Inc., the Banks Signatory
thereto and The Chase Manhattan Bank N.A., dated as of , 1996
*** Exhibit 5 -- Opinion of Cummings & Lockwood
** Exhibit 10(a) -- Employment Agreement by and between Amscan Holdings, Inc. and John A.
Svenningsen, dated November 1, 1996
** Exhibit 10(b) -- Employment Agreement by and between the Company and Gerald C.
Rittenberg, dated October 9, 1996
** Exhibit 10(c) -- Stock Agreement among Gerald C. Rittenberg, John Svenningsen and Amscan
Inc., dated October 9, 1996
** Exhibit 10(d) -- Employment Agreement between Amscan Inc. and Gerald C. Rittenberg,
dated November 27, 1991
** Exhibit 10(e) -- Employment Agreement by and between Amscan Inc. or the Company and
William Wilkey, dated as of October 4, 1996
** Exhibit 10(f) -- Employment Agreement between Amscan Inc. and William Wilkey, dated as
of December 29, 1992
** Exhibit 10(g) -- Employment Agreement between Amscan Inc. and James M. Harrison, dated
as of June 11, 1996
*** Exhibit 10(h) -- 1996 Stock Option Plan for Key Employees
** Exhibit 10(i) -- Lease between ACP East LLC and Amscan Inc. dated as of December 1,
1995, as amended
** Exhibit 10(j) -- Lease between John Anders Svenningsen and Amscan Inc., dated March 1,
1995, as modified and amended
** Exhibit 10(k) -- Lease between John Anders Svenningsen and Amscan Inc., dated November
9, 1995, as amended
*** Exhibit 10(l) -- Form of Tax Indemnification Agreement between Amscan Holdings Inc. and
John A. Svenningsen, dated as of December , 1996
** Exhibit 10(m) -- Loan Agreement by and between John A. Svenningsen, Gerald C. Rittenberg
and Kurzman & Eisenberg, LLP, as Escrow Agent, dated October 9, 1996
</TABLE>
II-2
<PAGE> 103
<TABLE>
<C> <S> <C> <C>
*** Exhibit 10(n) -- The Metlife Capital Corporation Master Lease Purchase Agreement between
Metlife Capital Corporation and Amscan Inc., Deco Paper Products, Inc.,
Kookaburra USA Ltd., and Trisar, Inc., dated November 21, 1995, as
amended.
** Exhibit 21 -- Subsidiaries of the Registrant
** Exhibit 23(a) -- Consent of KPMG Peat Marwick LLP
*** Exhibit 23(b) -- Consent of Cummings & Lockwood (to be included as part of Exhibit 5)
** Exhibit 24 -- Powers of Attorney
** Exhibit 27 -- Financial Data Schedule
</TABLE>
- ---------------
* Previously filed.
** Filed herewith.
*** To be filed by amendment.
(b) Financial Statement Schedule.
Schedule 2 -- Valuation and Qualifying Accounts
II-3
<PAGE> 104
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this amendment to its Registration Statement to be signed on its
behalf by the undersigned thereunto duly authorized, in the Town of Elmsford,
State of New York, on December 2, 1996.
AMSCAN HOLDINGS, INC.
By /s/ James M. Harrison
------------------------------------
James M. Harrison
Chief Financial Officer
and Assistant Secretary
Pursuant to the requirements of the Securities Act of 1933, this amendment
to the Registration Statement has been signed below by the following persons in
the capacities and on the date indicated.
<TABLE>
<CAPTION>
NAME TITLE
- ------------------------------------- -----------------------
<C> <S> <C>
JOHN A. SVENNINGSEN Chairman of the Board
of Directors and Chief
Executive Officer
(principal executive
officer)
GERALD C. RITTENBERG Director and President
CHRISTINE SVENNINGSEN Director
JAMES M. HARRISON Chief Financial Officer
and Assistant Secretary
(principal accounting
officer)
</TABLE>
By /s/ James M. Harrison
-----------------------
James M. Harrison
As Attorney-in-Fact
December 2, 1996
II-4
<PAGE> 105
SCHEDULE 2
AMSCAN INC. AND AFFILIATES
VALUATION AND QUALIFYING ACCOUNTS
($ IN THOUSANDS)
<TABLE>
<CAPTION>
BEGINNING ENDING
BALANCE WRITE-OFFS ADDITIONS BALANCE
----------- ----------- ----------- ---------
<S> <C> <C> <C> <C>
Allowance for Doubtful Accounts:
For the year ended:
December 31, 1993................................ $ 258 $1,493 $ 2,339 $ 1,104
December 31, 1994................................ 1,104 1,855 2,676 1,925
December 31, 1995................................ 1,925 1,001 1,581 2,505
</TABLE>
<TABLE>
<CAPTION>
BEGINNING ENDING
BALANCE WRITE-OFFS ADDITIONS BALANCE
--------- ---------- --------- -------
<S> <C> <C> <C> <C>
Inventory Reserves:
For the year ended:
December 31, 1993................................ $ 450 $ 141 $ 300 $ 609
December 31, 1994................................ 609 375 600 834
December 31, 1995................................ 834 406 800 1,228
</TABLE>
S-1
<PAGE> 106
EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION PAGE
-------------- ------------------------------------------------------------------ ----
<C> <S> <C> <C> <C>
*** Exhibit 1 -- Form of Underwriting Agreement....................................
*** Exhibit 2(a) -- Form of Share Exchange Agreement among the Company and John A.
Svenningsen and Gerald C. Rittenberg, dated as of December ,
1996..............................................................
** Exhibit 2(b) -- Capital Contribution Agreement between the Company and Messrs.
Allen J. Kaufman, Arthur J. Kaufman and Michael F. Hodges, dated
as of October 9, 1996, as supplemented............................
* Exhibit 3(a) -- Certificate of Incorporation of the Registrant, dated October 3,
1996..............................................................
* Exhibit 3(b) -- By-Laws of the Registrant.........................................
** Exhibit 4(a) -- Credit Agreement among Amscan Inc., Kookaburra USA Ltd., Deco
Paper Products, Inc., Trisar, Inc., the Banks Signatory thereto
and The Chase Manhattan Bank N.A., dated as of September 20,
1995..............................................................
*** Exhibit 4(b) -- Amendment No. 1 to Credit Agreement among Amscan Inc., Kookaburra
USA Ltd., Deco Paper Products, Inc., Trisar, Inc., the Banks
Signatory thereto and The Chase Manhattan Bank N.A., dated as of
, 1996..................................................
*** Exhibit 4(c) -- Amendment No. 2 to Credit Agreement among Amscan Inc., Kookaburra
USA Ltd., Deco Paper Products, Inc., Trisar, Inc., the Banks
Signatory thereto and The Chase Manhattan Bank N.A., dated as of
, 1996..................................................
*** Exhibit 5 -- Opinion of Cummings & Lockwood....................................
** Exhibit 10(a) -- Employment Agreement by and between Amscan Holdings, Inc. and John
A. Svenningsen, dated November 1, 1996............................
** Exhibit 10(b) -- Employment Agreement by and between the Company and Gerald C.
Rittenberg, dated October 9, 1996.................................
** Exhibit 10(c) -- Stock Agreement among Gerald C. Rittenberg, John Svenningsen and
Amscan Inc., dated October 9, 1996................................
** Exhibit 10(d) -- Employment Agreement between Amscan Inc. and Gerald C. Rittenberg,
dated November 27, 1991...........................................
** Exhibit 10(e) -- Employment Agreement by and between Amscan Inc. or the Company and
William Wilkey, dated as of October 4, 1996.......................
** Exhibit 10(f) -- Employment Agreement between Amscan Inc. and William Wilkey, dated
as of December 29, 1992...........................................
** Exhibit 10(g) -- Employment Agreement between Amscan Inc. and James M. Harrison,
dated as of June 11, 1996.........................................
*** Exhibit 10(h) -- 1996 Stock Option Plan for Key Employees..........................
** Exhibit 10(i) -- Lease between ACP East LLC and Amscan Inc. dated as of December 1,
1995, as amended..................................................
** Exhibit 10(j) -- Lease between John Anders Svenningsen and Amscan Inc., dated March
1, 1995, as modified and amended..................................
** Exhibit 10(k) -- Lease between John Anders Svenningsen and Amscan Inc., dated
November 9, 1995, as amended......................................
*** Exhibit 10(l) -- Form of Tax Indemnification Agreement between Amscan Holdings Inc.
and John A. Svenningsen, dated as of December , 1996............
</TABLE>
<PAGE> 107
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION PAGE
-------------- ------------------------------------------------------------------ ----
<C> <S> <C> <C> <C>
** Exhibit 10(m) -- Loan Agreement by and between John A. Svenningsen, Gerald C.
Rittenberg and Kurzman & Eisenberg, LLP, as Escrow Agent, dated
October 9, 1996...................................................
*** Exhibit 10(n) -- The Metlife Capital Corporation Master Lease Purchase Agreement
between Metlife Capital Corporation and Amscan Inc., Deco Paper
Products, Inc., Kookaburra USA Ltd., and Trisar, Inc., dated
November 21, 1995, as amended.....................................
** Exhibit 21 -- Subsidiaries of the Registrant....................................
** Exhibit 23(a) -- Consent of KPMG Peat Marwick LLP..................................
*** Exhibit 23(b) -- Consent of Cummings & Lockwood (to be included as part of Exhibit
5)................................................................
** Exhibit 24 -- Powers of Attorney................................................
** Exhibit 27 -- Financial Data Schedule...........................................
</TABLE>
- ---------------
* Previously filed.
** Filed herewith.
*** To be filed by amendment.
<PAGE> 1
Exhibit 2(b)
CAPITAL CONTRIBUTION AGREEMENT
AGREEMENT dated as of October 9, 1996 between AMSCAN HOLDINGS, INC. a
Delaware corporation ("Amscan")and MESSRS. ALLAN J. KAUFMAN, ARTHUR J. KAUFMAN
and MICHAEL F. HODGES (collectively referred to herein as the "AM-SOURCE
SHAREHOLDERS" and MESSRS. ARTHUR J. KAUFMAN and MICHAEL F. HODGES referred to
herein as the "OPERATING SHAREHOLDERS") being the owners of record of fifty
(50%) percent of the issued and outstanding stock of AM-SOURCE, INC., a Rhode
Island corporation ("Am-Source").
WHEREAS, AMSCAN wishes to acquire and the AM-SOURCE SHAREHOLDERS wish
to transfer all of the issued and outstanding stock of AM-SOURCE owned by them
in a transaction which with certain other simultaneous transfers is intended to
result in the tax-free incorporation of AMSCAN within the meaning of IRC
Section 351, as amended; and
NOW, THEREFORE, AMSCAN and the AM-SOURCE SHAREHOLDERS agree as follows:
SECTION 1 - EXCHANGE OF STOCK
1.1 ESCROW. On the date this Agreement is executed by the parties, each
of the AM-SOURCE SHAREHOLDERS shall surrender to the Escrow Agent the
certificate or certificates theretofore representing all of the outstanding
shares of AM-SOURCE common stock owned by them endorsed in blank or accompanied
by stock powers executed in blank, with all signatures guaranteed by a national
bank and with all necessary transfer tax and other revenue stamps affixed. The
AM-SOURCE SHAREHOLDERS hereby irrevocably instruct the Escrow Agent to deliver
the shares of AM-SOURCE held in escrow to AMSCAN on the Closing Date whereupon
such shares will be converted by AMSCAN into that number of shares of AMSCAN
determined by dividing the price at which the AMSCAN shares will be issued to
the public pursuant to the Underwriting Agreement (described below) into Seven
Million Five Hundred Thousand and N0/100 ($7,500,000.00) Dollars. For example,
if the price at which AMSCAN shares will be offered to the public pursuant to
the Underwriting Agreement equals Fifteen and N0/100 ($15.00) Dollars per share,
then AMSCAN will on the Closing Date issue Five Hundred Thousand (500,000)
shares of AMSCAN stock to the AM-SOURCE SHAREHOLDERS to be divided among such
shareholders in proportion to the number of shares of AM-
<PAGE> 2
SOURCE delivered by each shareholder to the Escrow Agent as specified in Exhibit
A annexed hereto and made a part hereof. Notwithstanding such escrow, the
AM-SOURCE SHAREHOLDERS shall retain all voting rights and all rights to all
dividends and other distributions with respect to the escrow shares of AM-
SOURCE. The parties hereto designate the law firm of Kurzman & Eisenberg to be
the Escrow Agent.
1.2 CLOSING DATE. The "Closing Date" or the "Closing" shall occur
immediately before the Underwriting Agreement between Goldman Sachs & Co. and
Alex. Brown & Sons (the "Underwriters") and AMSCAN to offer shares of AMSCAN in
the public market (the "Underwriting Agreement") is executed and becomes
effective.
1.3 FRACTIONAL SHARES. No fractional shares of AMSCAN common stock
shall be issued to any shareholder of AM-SOURCE hereunder, and any fractional
share to which any shareholder would otherwise be entitled shall be rounded off
to the nearest whole share.
1.4 FINAL TERMINATION. In the event that the escrow created by this
Agreement is not otherwise terminated on or before two hundred seventy (270)
days following the date this Agreement is executed, it shall terminate on the
two hundred seventy-first (271st) date after the date this Agreement is executed
and the escrow shares shall be released from escrow and distributed to the
AM-SOURCE SHAREHOLDERS.
1.5 RULES APPLICABLE TO ESCROW.
(A) The Escrow Agent shall have the right at any time to place
the AM-SOURCE shares with the Clerk of a Court of competent jurisdiction and
shall give Notice of such placement to the parties. Upon such placement or other
disbursement in accordance with the terms of this Agreement, the Escrow Agent
shall be relieved and discharged of all further obligations and responsibilities
hereunder.
(B) The parties acknowledge that the Escrow Agent is acting
solely as a stakeholder at their request and for their convenience and that the
Escrow Agent shall not be liable to either party for any act or omission on its
part unless taken or suffered in bad faith or in willful disregard of this
Agreement or involving gross negligence on the part of the Escrow Agent. AMSCAN
and the AM-SOURCE SHAREHOLDERS jointly and severally agree to defend, indemnify
and hold the Escrow Agent harmless from and against all costs, claims and
expenses (including reasonable attorneys' fees) incurred in connection with the
performance of the Escrow Agent's duties hereunder, except with respect to
2
<PAGE> 3
actions or omissions taken or suffered by the Escrow Agent in bad faith or in
willful disregard of this Agreement or involving gross negligence on the part of
the Escrow Agent.
(C) The Escrow Agent may act or refrain from acting in respect
of any matter referred to herein in full reliance upon and with the advice of
counsel, which may be selected by it (including any member of its firm) and
shall be fully protected in so acting or refraining from action upon the advice
of such counsel.
(D) The Escrow Agent acknowledges receipt of the AM- SOURCE
shares and the Escrow Agent's agreement to the provisions of this Paragraph by
signing in the place indicated on the signature page of this Agreement.
(E) The Escrow Agent or any member of its firm shall be
permitted to act as counsel for AMSCAN in any dispute between the parties
provided the Escrow Agent places the AM-SOURCE shares with the clerk of a court
of competent jurisdiction as provided in subparagraph (A) of this Paragraph 1.5.
SECTION 2 - REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS
The Operating Shareholders represent and warrant that:
2.1 CORPORATE STATUS. AM-SOURCE is a corporation duly organized,
validly existing, and in good standing under the laws of the State of Rhode
Island and is licensed or qualified as a foreign corporation in all states in
which the nature of its business or the character or ownership of its properties
makes such licensing or qualification necessary.
2.2 CAPITALIZATION. The authorized capital stock of AM- SOURCE consists
of 1,000 shares of no par value common stock, of which 120 shares are issued and
outstanding, all fully paid and nonassessable owned by the shareholders listed
in Exhibit A..
2.3 SUBSIDIARIES. AM-SOURCE has no subsidiaries.
2.4 FINANCIAL STATEMENTS. AM-SOURCE'S balance sheets as of December
1993, 1994 and 1995, and the related statements of income and retained earnings
for the years then ended, all certified by Sparrow, Johnson & Ursillo, Inc., and
the unaudited balance sheet and related statement of income and retained
earnings for the period ended June 30, 1996, copies of which have been delivered
by AM-SOURCE to AMSCAN, fairly present the financial condition of AM-SOURCE as
of said dates and the results of its operations for the periods then ended, in
conformity with generally accepted accounting principles consistently applied
for the periods covered.
3
<PAGE> 4
2.5 ABSENCE OF UNDISCLOSED LIABILITIES. Except to the extent reflected
or reserved against in AM-SOURCE'S balance sheet as of June 30, 1996, AM-SOURCE
did not have at that date any liabilities or obligations (secured, unsecured,
contingent, or otherwise).
2.6 ABSENCE OF CERTAIN CHANGES. Except as heretofore disclosed in
writing by AM-SOURCE to AMSCAN there has been no material adverse change in the
business, properties, or financial condition of AM-SOURCE since June 30, 1996.
2.7 LITIGATION, AND SO FORTH. Except as heretofore disclosed in writing
by AM-SOURCE to AMSCAN, there is no litigation, proceeding, or investigation
pending or, to the knowledge of AM-SOURCE, threatened against AM-SOURCE.
2.8 CONTRACTS. Except as heretofore disclosed in writing by AM-SOURCE
to AMSCAN, AM-SOURCE is not a party to any material contract not in the ordinary
course of business that is to be performed in whole or in part at or after the
date of this Agreement.
2.9 TITLE. AM-SOURCE has good and marketable title to all assets
included in the balance sheet of AM-SOURCE as of June 30, 1996, other than
property disposed of in the ordinary course of business, after said date. Except
as heretofore disclosed in writing by AM-SOURCE to AMSCAN, the properties of
AM-SOURCE are not subject to any mortgage, encumbrance, or lien of any kind
except minor encumbrances that do not materially interfere with the use of the
property in the conduct of the business of AM-SOURCE.
2.10 TAX RETURNS. The provisions for federal and state taxes reflected
in the financial statements referred to in Section 8.4 hereof are adequate to
cover any such taxes that may be assessed against AM-SOURCE in respect of its
business and its operations during the periods covered by said financial
statements and all prior periods. AM-SOURCE has filed all required federal,
state or local tax returns of any kind or nature by the due date of any
applicable tax return except to the extent it has obtained extensions of time
for filing authorized by law. There are no pending audits of any of AM-SOURCE'S
tax returns and except as heretofore disclosed in writing, there are no
outstanding liabilities for taxes of any kind for which the due date of payment
has passed.
2.11 NO VIOLATION. Consummation of the merger will not constitute or
result in a breach or default under any provision of any charter, bylaw,
indenture, mortgage, lease or agreement, or any order, judgment, decree, law, or
regulation to which any
4
<PAGE> 5
property of AM-SOURCE is subject or by which AM-SOURCE is bound, except for
breaches or defaults that in the aggregate would not have a materially adverse
effect on AM-SOURCE'S properties, business operations, or financial condition.
2.12 EMPLOYEE PLANS. AM-SOURCE does not maintain for the benefit of its
employees any "employee benefit plans" as defined in Section3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA") or other profit
sharing, deferred compensation, bonus, stock option, stock purchase, or employee
benefit plans or arrangements, except for a 401(k) and profit sharing plan (the
"Am-Source 401(k) Plan"). AM-SOURCE will make available to AMSCAN a true and
complete copy of the Am-Source 401(k) Plan and any related funding agreements,
including all amendments, supplements and modifications thereto all of which are
legally valid and binding and in full force and effect and not in default in any
respect. AM-SOURCE will also make available to AMSCAN a true and complete copy
of the most recent annual report for the Am-Source 401(k) Plan and the I.R.S.
determination letter, if any, for the Am-Source 410(k) Plan and each amendment
thereto. All contributions required to be made to the Am-Source 401(k) Plan
under the terms of that Plan by ERISA or other applicable law have been timely
made. The Am-Source 401(k) Plan complies currently and has complied in the past,
in form and in operation with the applicable provisions of ERISA, the Internal
Revenue Code of 1986 (the "Code"), and other applicable law in all material
respects. AM-SOURCE will make any amendments required to be made to the
Am-Source 401(k) Plan to comply with applicable legislation prior to the
Effective Date. There have been no "prohibited transactions" (as defined in Code
Section 4975(c)(1) that would subject the Am-Source 401(k) Plan, any fiduciary
thereof or any party dealing with the Am-Source 401(k) Plan to the tax on
prohibited transactions imposed by Code Section 4975 or to a civil penalty
imposed by Section 502 of ERISA. No event that constitutes a "Reportable Event"
as defined in Section 4043 of ERISA has occurred with respect to the Am-Source
401(k) Plan or any plan maintained by AM-SOURCE. There are no issues or disputes
with respect to any AM-SOURCE benefit plan or the administration thereof
currently existing between any trustee or other fiduciary thereunder, AMSCAN and
any governmental agency, employee, former employee or beneficiary of any
employee or former employee of AM-SOURCE.
2.13 ENVIRONMENTAL MATTERS. Except as heretofore disclosed by AM-SOURCE
to AMSCAN in writing, to the best of our knowledge there are no hazardous
materials (as defined by federal, state or local law) on the premises occupied
by AM-SOURCE, except those in compliance with all applicable federal, state or
local laws, ordinances, rules and regulations, and neither AM-SOURCE nor any of
the AM-SOURCE SHAREHOLDERS has received any notice or advice from any
governmental agency or any source whatsoever with respect to Hazardous Materials
on, from or affecting the premises occupied by AM-SOURCE.
5
<PAGE> 6
2.14 LEASE. The lease dated July 1, 1993 between K.K.H.L.L.C.(formerly
K.K.H.Z. Real Estate Corporation) and Am-Source, Inc. with respect to the
premises described on Exhibit B attached hereto (the "Lease") is in full force
and effect and no event of default has occurred or is continuing with respect to
the Lease.
SECTION 3 - REPRESENTATIONS AND WARRANTIES OF AMSCAN
AMSCAN represents and warrants that:
3.1 CORPORATE ORGANIZATION AND GOOD STANDING. AMSCAN is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware.
3.2 NO VIOLATION. Consummation of the exchanges contemplated by this
Agreement will not constitute or result in breach or default under any provision
of any charter, bylaw, indenture, mortgage, lease or agreement or any order,
judgment, decree, law or regulation to which any property of AMSCAN is subject
or by which AMSCAN is bound, except for breaches or defaults that in the
aggregate would not have a materially adverse effect on AMSCAN'S properties,
business operations or financial condition.
3.3 INVESTMENT INTENT. AMSCAN is acquiring the AM-SOURCE shares to be
transferred to and under this Agreement for investment and not with a view to
the sale or distribution thereof, and AMSCAN has no commitment or present
intention to liquidate AM-SOURCE or to sell or otherwise dispose of its stock.
SECTION 4 - CONDUCT OF AM-SOURCE PENDING
EXCHANGE OF STOCK
The Operating Shareholders covenant that between the date of this
Agreement and the Closing Date:
4.1 CERTIFICATE OF INCORPORATION AND BYLAWS. No change will be made in
AM-SOURCE'S certificate of incorporation or bylaws.
4.2 CAPITALIZATION AND SO FORTH. AM-SOURCE will not make any change in
its authorized or issued capital stock, declare or pay any dividend or other
distribution (other than distributions of any and all previously undistributed S
corporation income from AM-SOURCE'S inception through and including the Closing
Date provided any such distribution does not violate the terms of any agreement
to which AM-SOURCE is a party) or issue, encumber, purchase, or otherwise
acquire any of its capital stock.
6
<PAGE> 7
4.3 CONDUCT OF BUSINESS. AM-SOURCE will use its best efforts to
maintain and preserve its business organization, employee relationships, and
goodwill intact, and will not, without the written consent of AMSCAN, enter into
any material commitment except in the ordinary course of business or increase,
directly or indirectly, the compensation of any officer or employee whose annual
rate of compensation after the increase will exceed Fifty Thousand and N0/100
($50,000.00) Dollars.
SECTION 5 - CONDUCT OF AMSCAN PENDING EXCHANGE OF STOCK
AMSCAN agrees that it will conduct itself in the following manner
pending the closing.
5.1 CERTIFICATE OF INCORPORATION AND BYLAWS. No change will be made in
AMSCAN'S certificate of incorporation or bylaws.
SECTION 6 - CONDITIONS PRECEDENT TO OBLIGATIONS OF AMSCAN
All obligations of AMSCAN under this Agreement are subject, at AMSCAN'S
option, to the fulfillment, before or at the Closing Date, of each of the
following conditions:
6.1 REPRESENTATIONS AND WARRANTIES. The Operating Shareholder's
representations and warranties contained in this Agreement shall be deemed to
have been made again at and as of the Closing Date and shall then be true in all
material respects and shall survive after the Effective Date.
6.2 DUE PERFORMANCE. The AM-SOURCE SHAREHOLDERS shall have performed
and complied with all the terms and conditions required by this Agreement to be
performed or complied with by them before the Closing Date.
6.3 OPINION OF COUNSEL. The AM-SOURCE SHAREHOLDERS shall have delivered
to AMSCAN an opinion of AM-SOURCE'S counsel, Peabody & Brown, dated as of the
Closing, to the effect that (1) the representations in Sections 2.1 and 2.2 are
correct; (2) except as specified in the opinion, counsel knows of no inaccuracy
in the representations of Sections 2.5, 2.6, 2.7 or 2.13; and (3) the stock
certificates, stock powers, and other instruments delivered to the Escrow Agent
as provided in Section 1.1 hereof are proper in form and substance and will vest
in AMSCAN good title to all of the AM-SOURCE Shareholder's shares of capital
stock of AM-SOURCE, free and clear of all liens, charges, and encumbrances, and
not subject to any adverse claims.
6.4 BOOKS AND RECORDS. The AM-SOURCE SHAREHOLDERS shall have caused
AM-SOURCE to make available to AMSCAN all books and records of AM-SOURCE,
including minute books and stock transfer records.
7
<PAGE> 8
6.5 REVOCATION OF PRIOR AUTHORIZATIONS. The AM-SOURCE Shareholders
hereby revoke as of the Closing Date all shareholders' agreements, prior
authorizations, powers of attorney, employment agreements, consulting
agreements, designations, and appointments relating to the signing of checks,
borrowing of funds, access to corporate safe-deposit boxes and other similar
matters, to the extent requested by AMSCAN. In addition, the AM-SOURCE
Shareholders hereby agree to terminate as of the Closing, the Pledge Agreement
dated July 1, 1993 between Arthur J. Kaufman, Allan J. Kaufman, Mike F. Hodges
and John Svenningsen.
6.6 EMPLOYMENT AGREEMENTS. The Operating Shareholders shall have each
executed Employment Agreements in the form set forth in Exhibits B and C annexed
hereto.
SECTION 7 - CONDITIONS PRECEDENT TO OBLIGATIONS
OF THE AM-SOURCE SHAREHOLDERS
All obligations of the AM-SOURCE SHAREHOLDERS under this Agreement are
subject, at their option, to the fulfillment, before or at the Closing Date, of
each of the following conditions:
7.1 REPRESENTATIONS AND WARRANTIES TRUE AT CLOSING. The representations
and warranties of AMSCAN contained in this Agreement shall be deemed to have
been made again at and as of the Closing Date and shall then be true in all
material respects.
7.2 DUE PERFORMANCE. AMSCAN shall have performed and complied with all
the terms and conditions required by this Agreement to be performed or complied
with by it before the Effective Date.
7.3 OPINION OF AMSCAN'S COUNSEL. The AM-SOURCE SHAREHOLDERS shall have
received an opinion of Kurzman & Eisenberg Counsel for AMSCAN, dated as of the
Closing Date, to the effect that (1) the representations of AMSCAN are correct;
(2) except as specified in the opinion, counsel knows of no inaccuracy in the
representations in AMSCAN, and (3) the shares of AMSCAN to be issued to the
AM-SOURCE SHAREHOLDERS under this Agreement will, when so issued, be validly
issued, fully paid and nonassessable.
7.4 TRANSFER OF SHARES. All of the shares of common stock of AM-SOURCE,
INC. owned by any person or persons other than the AM-SOURCE SHAREHOLDERS shall
be transferred to AMSCAN on or before the Closing Date.
8
<PAGE> 9
SECTION 8 - INDEMNIFICATION
8.1 INDEMNIFICATION OF AMSCAN.
(a) The Operating Shareholders severally (and not jointly) do
hereby indemnify and agree to keep indemnified, AMSCAN against any loss, damage,
or expense (including reasonable attorneys' fees) suffered by AMSCAN from (a)
any breach by AM- SOURCE of this Agreement or (2) any inaccuracy in or breach of
any of the representations, warranties, or covenants by the Operating
Shareholders or AM-SOURCE herein; provided, however, that AMSCAN shall be
entitled to assert rights of indemnification hereunder only if and to the extent
that it suffers loss, damages, and expenses (including reasonable attorney fees)
exceeding Twenty Thousand and N0/100 ($20,000.00) Dollars in the aggregate.
Subject to the limitations set forth in the preceding sentence, if any one of
the AM-SOURCE SHAREHOLDERS takes any action, individually, which will have a
material adverse effect on the transactions contemplated by this Agreement, such
shareholder shall be solely responsible to indemnify AMSCAN and its other
shareholders against any loss, damage or expense (including reasonable
attorneys' fees) suffered by AMSCAN and its other shareholders on account of
such action. No loss, damage, or expense shall be deemed to have been sustained
by AMSCAN to the extent of insurance proceeds paid to, or tax benefits
realizable by AMSCAN as a result of the event giving rise to such right to
indemnification.
8.2 INDEMNIFICATION OF AM-SOURCE SHAREHOLDERS. AMSCAN agrees to
indemnify the AM-SOURCE SHAREHOLDERS against any loss, damage, or expense
(including reasonable attorney fees) suffered by any of the AM-SOURCE
SHAREHOLDERS from (1) any breach by AMSCAN of this Agreement or (2) any
inaccuracy in or breach of any of AMSCAN'S representations, warranties, or
covenants herein.
8.3 DEFENSE OF CLAIMS. Upon obtaining knowledge thereof, the
indemnified party shall promptly notify the indemnifying party of any claim
which has given or could give rise to a right of indemnification under this
Agreement. If the right of indemnification relates to a claim asserted by a
third party against the indemnified party, the indemnifying party shall have the
right to employ counsel acceptable to the indemnified party to cooperate in the
defense of any such claim. As long as the indemnifying party is defending any
such claim in good faith, the indemnified party will not settle such claim. If
the indemnifying party does not elect to defend any such claim, the indemnified
party shall have no obligation to do so.
9
<PAGE> 10
SECTION 9 - LEASE CONTINUATION
(a) At the same time that this agreement is executed by the parties
hereto, K.K.H.L.L.C., the Landlord under the Lease shall deliver a letter (the
"Landlord's Letter") to Amscan containing certain warranties, representations
and covenants. A copy of the Landlord's Letter is annexed to this agreement as
Exhibit C.
(b) The Operating Shareholders recognize and acknowledge that Amscan is
relying upon the warranties, representations and covenants contained in the
Landlord's Letter, and Am-Source and the Operating Shareholders agree that any
material breach of any of the warranties, representations or covenants contained
in the Landlord's Letter will constitute a default under this Agreement subject
to the indemnification provisions of this Agreement.
SECTION 10 - TERMINATION
This Agreement may be terminated (1) by mutual consent in writing; or
(2) by either the AM-SOURCE SHAREHOLDERS or AMSCAN if there has been a material
misrepresentation or material breach of any warranty or covenant by the other
party; or (3) by any party, acting alone or in unison with another party, if the
Underwriting Agreement has not been executed or the Closing shall not have taken
place, unless adjourned to a later date by mutual consent in writing, within two
hundred seventy (270) days of the date this Agreement is executed.
SECTION 11 - GENERAL PROVISIONS
11.1 FURTHER ASSURANCES. At any time, and from time, after the
Effective Date, each party will execute such additional instruments and take
such action as may be reasonably requested by any other party to confirm or
perfect title to any property transferred hereunder or otherwise to carry out
the intent and purposes of this Agreement.
11.2 WAIVER. Any failure on the part of any party hereto to comply with
any of its obligations, agreements, or conditions hereunder may be waived in
writing by the party to whom such compliance is owed.
11.3 BROKERS. Except as heretofore disclosed in writing by Am-Source to
Amscan, each party represents to the other parties that no broker or finder has
acted for it in connection with this Agreement, and agrees to indemnify and hold
harmless the other parties against any fee, loss, or expense arising out of
claims by brokers or finders employed or alleged to have been employed by it.
10
<PAGE> 11
11.4 NOTICES. All notices and other communications hereunder shall be
in writing and shall be deemed to have been given if delivered in person or sent
by prepaid first-class registered or certified mail, return receipt requested,
as follows:
IF TO AMSCAN: Amscan Holdings, Inc.
80 Grasslands Road
Elmsford, New York 10523
Fax: (914) 345-8145
Attention: John P. Jordan
WITH A COPY TO: Kurzman & Eisenberg
One North Broadway
White Plains, N.Y. 10601
Attn: Sam Eisenberg, Esq.
IF TO AM-SOURCE: Am-Source, Inc.
261 Narragansett Park
Drive
East Providence, Rhode
Island 02916
Attn: John Madden
Comptroller
IF TO ARTHUR J. KAUFMAN
ALLAN J. KAUFMAN OR
MICHAEL F. HODGES: Am-Source, Inc.
261 Narragansett Park
Drive
East Providence, Rhode
Island 02916
Attn: Arthur J. Kaufman
WITH A COPY TO: Peabody & Brown
1 Citizens Plaza
Providence, Rhode Island
02903
Attn: Peter Furness,
Esq.
11.5 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
among the parties and supersedes and cancels any other agreements,
representations, or communication, whether oral or written, among the parties
hereto relating to the transactions contemplated herein or the subject matter
hereof.
11.6 HEADINGS. The section and subsection headings in this Agreement
are inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
11
<PAGE> 12
11.7 ASSIGNMENT. This Agreement shall inure to the benefit of, and be
binding upon, the parties hereto and their successors, heirs and assigns;
provided, however, that any assignment by any party of its rights under this
Agreement without the written consent of the other parties shall be void.
11.8 COUNTERPARTS. This Agreement may be executed simultaneously in two
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
Escrow Agent AMSCAN HOLDINGS, INC.
By: /S/ JOEL LEVER By: /S/ JOHN SVENNINGSEN
------------------------ ----------------------------------
Kurzman & Eisenberg
/S/ ARTHUR J. KAUFMAN
----------------------------------
ARTHUR J. KAUFMAN
/S/ MICHAEL F. HODGES
----------------------------------
MICHAEL F. HODGES
/S/ ALLAN J. KAUFMAN
----------------------------------
ALLAN J. KAUFMAN
12
<PAGE> 13
ACKNOWLEDGEMENTS
STATE OF NEW YORK ]
COUNTY OF WESTCHESTER ] ss.:
On the 9th day of October, 1996 before me personally came John
Svenningsen to me known, who, being by me duly sworn, did depose and say that he
resides at No.3 Frederick Ct., Harrison, New York 10528
that he is the President of AMSCAN HOLDINGS, INC., the corporation described in
and which executed the foregoing instrument, and that he signed his name thereto
by order of the board of directors of said corporation.
/S/ DOROTHY IAMICELI
----------------------------
Notary Public
STATE OF RHODE ISLAND)
)ss.:
COUNTY OF PROVIDENCE )
On the 9th day of October, 1996, before me personally came ARTHUR J.
KAUFMAN to me known to be the individual described in and who executed the
foregoing instrument, and acknowledged that he executed the same.
/S/ NORMAN J. MCCARTER
--------------------------
Notary Public
13
<PAGE> 14
STATE OF RHODE ISLAND)
)ss.:
COUNTY OF PROVIDENCE )
On the 9th day of October, 1996, before me personally came MICHAEL F.
HODGES to me known to be the individual described in and who executed the
foregoing instrument, and acknowledged that he executed the same.
/s/ NORMAN J. MCCARTER
--------------------------
Notary Public
STATE OF RHODE ISLAND)
)ss.:
COUNTY OF PROVIDENCE )
On the 9th day of October, 1996, before me personally came ALLAN J.
KAUFMAN to me known to be the individual described in and who executed the
foregoing instrument, and acknowledged that he executed the same.
/s/ Norman J. McCarter
--------------------------
Notary Public
14
<PAGE> 15
EXHIBIT A
Shares of AM-SOURCE, INC. held by AM-SOURCE SHAREHOLDERS and
Delivered to Escrow Agent:
Allan J. Kaufman 19
Arthur J. Kaufman 22
Michael F. Hodges 19
---
TOTAL 60
===
15
<PAGE> 1
Exhibit 4(a)
CREDIT AGREEMENT
dated as of September 20, 1995
among
AMSCAN INC.
KOOKABURRA USA, LTD.
DECO PAPER PRODUCTS, INC.
TRISAR, INC.
the Banks signatory hereto
and
THE CHASE MANHATTAN BANK, N.A.
as Agent
<PAGE> 2
Table of Contents
ARTICLE 1 DEFINITIONS; ACCOUNTING TERMS.
Section 1.1 Definitions
Section 1.2 Accounting Terms
Section 1.3 Rules of Interpretation
ARTICLE 2 THE CREDIT.
Section 2.1 Loans; Letters of Credit
Section 2.2 The Notes
Section 2.3 Purpose
Section 2.4 Borrowing Procedures
Section 2.5 Prepayments and Conversions
Section 2.6 Interest Periods; Renewals
Section 2.7 Lockbox, Cash Collateral Account
Section 2.8 Changes of Commitment
Section 2.9 Certain Notices
Section 2.10 Minimum Amounts
Section 2.11 Interest
Section 2.12 Fees
Section 2.13 Payments Generally
Section 2.14 Margin
Section 2.15 Interest Rate Protection
Section 2.16 Payment of Reimbursement Obligations
ARTICLE 3 YIELD PROTECTION; ILLEGALITY; ETC.
Section 3.1 Additional Costs
Section 3.2 Limitation on Types of Loans
Section 3.3 Illegality
Section 3.4 Certain Conversions
Section 3.5 Certain Compensation
ARTICLE 4 CONDITIONS PRECEDENT.
Section 4.1 Documentary Conditions Precedent
Section 4.2 Satisfactory Review
Section 4.3 Additional Conditions Precedent
Section 4.4 Deemed Representations
<PAGE> 3
ARTICLE 5 REPRESENTATIONS AND WARRANTIES.
Section 5.1 Incorporation, Good Standing and Due Qualification
Section 5.2 Corporate Power and Authority; No Conflicts
Section 5.3 Legally Enforceable Agreements
Section 5.4 Litigation
Section 5.5 Financial Statements
Section 5.6 Ownership and Liens
Section 5.7 Taxes
Section 5.8 ERISA
Section 5.9 Subsidiaries and Affiliates and Ownership of Stock
Section 5.10 Credit Arrangements
Section 5.11 Operation of Business
Section 5.12 Hazardous Materials
Section 5.13 No Default on Outstanding Judgments or Orders
Section 5.14 No Defaults on Other Agreements
Section 5.15 Labor Disputes and Acts of God
Section 5.16 Governmental Regulation
Section 5.17 Partnerships
Section 5.18 No Forfeiture
Section 5.19 Solvency
Section 5.20 Subordinated Debt
Section 5.21 Material Contracts
ARTICLE 6 AFFIRMATIVE COVENANTS.
Section 6.1 Maintenance of Existence
Section 6.2 Conduct of Business
Section 6.3 Maintenance of Properties
Section 6.4 Maintenance of Records
Section 6.5 Maintenance of Insurance
Section 6.6 Compliance with Laws
Section 6.7 Right of Inspection
Section 6.8 Reporting Requirements
Section 6.9 Establishment and Maintenance of Estate Plan
Section 6.10 Additional Guarantors
Section 6.11 Additional Pledged Shares
ARTICLE 7 NEGATIVE COVENANTS.
Section 7.1 Debt
Section 7.2 Guaranties, Etc.
Section 7.3 Liens
Section 7.4 Leases
ii
<PAGE> 4
Section 7.5 Investments
Section 7.6 Dividends
Section 7.7 Sale of Assets
Section 7.8 Stock of Subsidiaries, Etc.
Section 7.9 Transactions with Affiliates
Section 7.10 Mergers, Etc.
Section 7.11 Acquisitions
Section 7.12 No Activities Leading to Forfeiture
ARTICLE 8 FINANCIAL COVENANTS.
Section 8.1 Minimum Adjusted Tangible Net Worth
Section 8.2 Capital Expenditures
Section 8.3 Adjusted Leverage Ratio
Section 8.4 Fixed Charge Coverage Ratio
ARTICLE 9 EVENTS OF DEFAULT.
Section 9.1 Events of Default
Section 9.2 Remedies
ARTICLE 10 THE AGENT; RELATIONS AMONG BANKS AND BORROWERS.
Section 10.1 Appointment, Powers and Immunities of Agent
Section 10.2 Reliance by Agent
Section 10.3 Defaults
Section 10.4 Rights of Agent as a Bank
Section 10.5 Indemnification of Agent
Section 10.6 Documents
Section 10.7 Non-Reliance on Agent and Other Banks
Section 10.8 Failure of Agent to Act
Section 10.9 Resignation or Removal of Agent
Section 10.10 Amendments Concerning Agency Function
Section 10.11 Liability of Agent
Section 10.12 Transfer of Agency Function
Section 10.13 Non-Receipt of Funds by the Agent
Section 10.14 Withholding Taxes
Section 10.15 Several Obligations and Rights of Banks
Section 10.16 Pro Rata Treatment of Loans, Etc.
Section 10.17 Sharing of Payments Among Banks
Section 10.18 Duties of Issuing Bank
iii
<PAGE> 5
ARTICLE 11 MISCELLANEOUS
Section 11.1 Amendments and Waivers
Section 11.2 Usury
Section 11.3 Expenses
Section 11.4 Survival
Section 11.5 Assignment; Participations
Section 11.6 Notices
Section 11.7 Setoff
Section 11.8 Indemnification; Exoneration
Section 11.9 Jurisdiction; Immunities
Section 11.10 Table of Contents; Headings
Section 11.11 Severability
Section 11.12 Counterparts
Section 11.13 Integration
Section 11.14 Governing Law
Section 11.15 Confidentiality
Section 11.16 Treatment of Certain Information
Section 11.17 Independence of Covenants
Section 11.18 Multiple Borrowers
Section 11.19 Time of the Essence
EXHIBITS
Exhibit A Promissory Note
Exhibit B Authorization Letter
Exhibit C Environmental Indemnification
Exhibit D Guaranty
Exhibit E-1 Borrower Pledge Agreement
Exhibit E-2 Stockholder Pledge Agreement
Exhibit F Security Agreement
Exhibit G Opinion of Counsel for Borrowers, Stockholder and
Guarantors
Exhibit H Notice of Borrowing
Exhibit I Financial Covenants Compliance Report
Exhibit J Confidentiality Agreement
Exhibit K Subordination Agreement
Exhibit L Borrowing Base Certificate
Exhibit M Collateral Assignment of Leases
Exhibit N Cash Collateral Account Agreement
Exhibit O Commercial Letter of Credit Application
Exhibit P Standby Letter of Credit Application
Exhibit Q Assignment of Deposit Accounts
iv
<PAGE> 6
SCHEDULES
Schedule 5.6 Liens
Schedule 5.9 Subsidiaries and Affiliates of Borrowers
Schedule 5.10 Credit Arrangements
Schedule 5.12 Hazardous Materials
Schedule 5.21 Material Contracts
Schedule 7.4 Leases
v
<PAGE> 7
CREDIT AGREEMENT dated as of September 20, 1995 among AMSCAN,
INC., a corporation organized under the laws of the State of New York,
KOOKABURRA USA, LTD., a corporation organized under the laws of the State of New
York, DECO PAPER PRODUCTS, INC. a corporation organized under the laws of the
State of Kentucky and TRISAR, INC., a corporation organized under the laws of
the State of California (collectively, all such corporations being the
"Borrowers" and each, individually, a "Borrower"), each of the banks which is a
signatory hereto (individually a "Bank" and collectively the "Banks") and THE
CHASE MANHATTAN BANK, N.A., a national banking association organized under the
laws of the United States of America, as agent for the Banks (in such capacity,
together with its successors in such capacity, the "Agent").
The Borrowers desire that the Banks extend credit as provided
herein and the Banks are prepared to extend such credit. Accordingly, the
Borrowers, the Banks and the Agent agree as follows:
ARTICLE 1. DEFINITIONS; ACCOUNTING TERMS.
Section 1.1. Definitions. As used in this Agreement the
following terms have the following meanings (terms defined in the singular to
have a correlative meaning when used in the plural and vice versa):
"Acceptable Acquisition" means an Acquisition in which the
Total Consideration expended in the aggregate by the Borrowers is within the
Restricted Payment Allowance and so long as the following conditions are
satisfied:
(a) no Default or Event of Default exists or would result from
such Acquisition;
(b) the company or assets acquired involve substantially the
same or similar line of business as the Borrowers;
(c) the Agent, for the benefit of the Banks, obtains a first
priority security interest in the acquired assets or the assets of the acquired
company; and
(d) the Borrowers demonstrate that, on a combined basis with
the acquired assets and/or company, in accordance with GAAP, they would have
been in compliance with the financial covenants contained in Article 8 on a
trailing four quarters pro forma basis as of the end of the immediately
preceding fiscal quarter; and
(e) a Borrower remains as the surviving entity;
provided, however, that in every case, 100% Bank approval will be required for
any hostile Acquisition.
<PAGE> 8
"Acquisition" means any transaction pursuant to which any
Borrower or any of its Subsidiaries (a) acquires equity securities (or warrants,
options or other rights to acquire such securities) of any corporation other
than such Borrower or any corporation which is not then a Subsidiary of such
Borrower, pursuant to a solicitation of tenders therefor, or in one or more
negotiated block, market or other transactions not involving a tender offer, or
a combination of any of the foregoing, or (b) makes any corporation a Subsidiary
of such Borrower, or causes any such corporation to be merged into such Borrower
or any of its Subsidiaries, in any case pursuant to a merger, purchase of assets
or any reorganization providing for the delivery or issuance to the holders of
such corporation's then outstanding securities, in exchange for such securities,
of cash or securities of such Borrower or any of its Subsidiaries, or a
combination thereof, or (c) purchases all or substantially all of the business
or assets of any corporation.
"Adjusted Leverage Ratio" means, for any Person as at any
date, on a combined basis in accordance with GAAP, the ratio of (a) Combined
Adjusted Senior Debt of such Person to (b) EBIT of such Person, calculated as of
the end of each fiscal quarter for the twelve month period then ended (a rolling
twelve month calculation measured as of the end of each fiscal quarter.
"Adjusted Subordinated Debt" means all Subordinated Debt owed
by Amscan, Inc. after subtracting therefrom the aggregate amount of payments
that Amscan is permitted (assuming no Event of Default has occurred) to make to
the Stockholder under Clause (ii) of Section 1.2 of the Subordination Agreement.
"Adjusted Tangible Net Worth" of a Person means such Person's
Tangible Net Worth plus Adjusted Subordinated Debt.
"Affiliate" means any Person: (a) which directly or indirectly
controls, or is controlled by, or is under common control with, the Stockholder,
any Borrower or any of its Subsidiaries; (b) which directly or indirectly
beneficially owns or holds 5% or more of any class of voting stock of any
Borrower or any such Subsidiary; (c) 25% or more of the voting stock of which is
directly or indirectly beneficially owned or held by the Stockholder, any
Borrower or such Subsidiary; or (d) which is a partnership in which the
Stockholder, any Borrower or any of its Subsidiaries is a general partner. The
term "control" means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of a Person,
whether through the ownership of voting securities, by contract, or otherwise.
"Agreement" means this Credit Agreement, as amended or
supplemented from time to time. References to Articles, Sections, Exhibits,
Schedules and the like refer to the Articles, Sections, Exhibits, Schedules and
the like of this Agreement unless otherwise indicated.
-2-
<PAGE> 9
"Assignment of Deposit Accounts" means the assignment from the
Borrowers to the Agent, for the ratable benefit of the Banks, consented to by
the financial institution, substantially in the form of Exhibit Q.
"Authorization Letter" means the letter agreement executed by
the Borrowers in the form of Exhibit B.
"Banking Day" means any day on which commercial banks are not
authorized or required to close in New York, New York and whenever such day
relates to a Fixed Rate Loan or notice with respect to any Fixed Rate Loan, a
day on which dealings in Dollar deposits are also carried out in the London
interbank market.
"Borrowing Base" means, as of any date of determination
thereof, an amount equal to the sum of (a) 85% of Eligible Receivables, except
as otherwise provided by the last two sentences of this definition, and (b) 60%
of Eligible Inventory. Unless the Agent shall otherwise reasonably determine,
the Borrowing Base as of any date shall be the Borrowing Base set forth on the
most current Borrowing Base Certificate certified and delivered by the Borrowers
pursuant to either Section 6.8 or Section 4.2. If, at any time, the Borrowing
Base shall exceed the aggregate of all of the Commitments of the Banks, for
purposes of this Agreement, the Borrowing Base shall be deemed to be equal to
such Commitments. With respect to an Eligible Receivable to which Party
Experience or an affiliate thereof is the account debtor, the advance rate of
85% will apply to such receivable for so long as Party Experience has made, in
the aggregate, at least 90% of each required monthly payment set forth by the
Party Experience Agreement. If Party Experience has failed to make, in the
aggregate, at least 90% of any monthly payment, then the advance rate for each
Eligible Receivable for which Party Experience or an affiliate is the account
debtor shall be reduced to 50% for so long as Party Experience has not made, in
the aggregate, 90% of each required monthly payment.
"Borrowing Base Certificate" means a certificate substantially
in the form of Exhibit L hereto or such other form agreed to in writing by the
Banks and the Borrowers.
"Capital Expenditures" means for any period, for any Person,
the Dollar amount of gross expenditures (including obligations under Capital
Leases) made for fixed assets, real property, plant and equipment, and all
renewals, improvements and replacements thereto (but not repairs thereof)
incurred during such period.
"Capital Lease" means any lease which has been or should be
capitalized on the books of the lessee in accordance with GAAP.
"Cash Collateral Account" means Account #4521-037-210 (or any
subsequent account) of the Borrowers maintained at the Agent as a cash
collateral account pursuant to and under the Cash Collateral Account Agreement.
-3-
<PAGE> 10
"Cash Collateral Account Agreement" means the Cash Collateral
Account Agreement, in the form of Exhibit N, between the Borrowers and the Agent
to be delivered under the terms of this Agreement.
"Change of Ownership" means a conveyance of or Lien upon
(other than in favor of the Agent for the ratable benefit of the Banks), by
operation of law or otherwise, the stock issued by any Borrower following which
conveyance or Lien the Stockholder no longer owns an unencumbered interest in
60% or more of each class of capital stock outstanding of such Borrower.
"Closing Date" means the date this Agreement has been executed
by the Borrowers, the Banks and the Agent.
"Code" means the Internal Revenue Code of 1986, as amended
from time to time.
"Collateral Assignment of Leases" means the collateral
assignment of leases executed by the Borrowers, substantially in the form of
Exhibit M.
"Combined Adjusted Senior Debt" means the sum of (i) Combined
Senior Debt, plus (ii) 70% of all Debt guaranteed by one or more Borrowers which
is secured by real property, plus (iii) 100% of all other Debt guaranteed by one
or more Borrowers.
"Combined Adjusted Tangible Net Worth" means Adjusted Tangible
Net Worth of the Borrowers and their Consolidated Subsidiaries, as determined on
a combined basis in accordance with GAAP.
"Combined Capital Expenditures" means Capital Expenditures of
the Borrowers and their Consolidated Subsidiaries, as determined on a combined
basis in accordance with GAAP.
"Combined Senior Debt" means Loans and Debt of the Borrowers
and their Consolidated Subsidiaries, as determined on a combined basis in
accordance with GAAP, other than Subordinated Debt and guarantees made by the
Borrowers.
"Commitment" means, with respect to each Bank, the obligation
of such Bank to make its Loans and participate in Letters of Credit under this
Agreement in the aggregate principal amount following, as such amount may be
reduced or otherwise modified from time to time as provided herein:
For the period through and including the first anniversary of the Closing Date:
<TABLE>
<S> <C>
The Chase Manhattan Bank, N.A.: $18,750,000;
NatWest Bank N.A.: $10,416,667;
</TABLE>
-4-
<PAGE> 11
<TABLE>
<S> <C>
First Fidelity Bank, N.A.: $10,416,667;
Fleet Bank: $10,416,666;
TOTAL: $50,000,000;
</TABLE>
For the period from the day following the first anniversary of the Closing Date
to and including the second anniversary of the Closing Date:
<TABLE>
<S> <C>
The Chase Manhattan Bank, N.A.: $20,625,000;
NatWest Bank N.A.: $11,458,333;
First Fidelity Bank, N.A.: $11,458,333;
Fleet Bank: $11,458,334;
TOTAL: $55,000,000;
</TABLE>
For the period from the day following the second anniversary of the Closing Date
through the Termination Date:
<TABLE>
<S> <C>
The Chase Manhattan Bank, N.A.: $22,500,000;
NatWest Bank N.A.: $12,500,000;
First Fidelity Bank, N.A.: $12,500,000;
Fleet Bank: $12,500,000;
TOTAL: $60,000,000;
</TABLE>
"Commitment Percentage" means, as to any Bank, the percentage
equivalent of a fraction, the numerator of which is the Commitment of such Bank
and the denominator of which is the aggregate Commitments of all Banks.
"Consolidated Subsidiary" means any Subsidiary of a Person
whose accounts are or are required to be consolidated with the accounts of such
Person in accordance with GAAP.
"Debt" means, with respect to any Person: (a) indebtedness of
such Person for borrowed money; (b) indebtedness for the deferred purchase price
of property or services (except trade payables in the ordinary course of
business); (c) Unfunded Benefit Liabilities of such Person; (d) the face amount
of any outstanding letters of credit issued for the account of such Person; (e)
obligations arising under acceptance facilities; (f) guaranties, endorsements
(other than for collection in the ordinary course of business) and other
contingent obligations to purchase, to provide funds for payment, to supply
funds to invest in any Person, or otherwise to assure a creditor against loss,
including any contingent obligations under swaps, derivatives, currency
exchanges and similar transactions; (g) obligations secured by any Lien on
property of such Person; and (h) obligations of such Person as lessee under
Capital Leases.
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<PAGE> 12
"Default" means any event which with the giving of notice or
lapse of time, or both, would become an Event of Default.
"Default Rate" means, with respect to the principal of any
Loan and, to the extent permitted by law, any other amount payable by any
Borrower under this Agreement or any Note that is not paid when due (whether at
stated maturity, by acceleration or otherwise), a rate per annum during the
period from and including the due date, to, but excluding the date on which such
amount is paid in full equal to 3% above the Variable Rate as in effect from
time to time plus the Margin (if any) (provided that, if the amount so in
default is principal of a Fixed Rate Loan and the due date thereof is a day
other than the last day of the Interest Period therefor, the "Default Rate" for
such principal shall be, for the period from and including the due date and to
but excluding the last day of the Interest Period therefor, 3% above the
interest rate for such Loan as provided in Section 2.10 hereof and, thereafter,
the rate provided for above in this definition).
"Dollars" and the sign "$" mean lawful money of the United
States of America.
"EBIT" means, for any Person, for any period, (i) operating
earnings before Interest Expense, taxes and extraordinary items for such Person,
plus (ii) administrative fee income received from Amscan Distributors Canada
Ltd., less (iii) such Person's Monthly Accruals, determined in accordance with
GAAP.
"EBITDA" means, for any Person, for any period, (i) operating
earnings before Interest Expense, taxes, depreciation, amortization and
extraordinary items for such Person, plus (ii) administrative fee income
received from Amscan Distributors Canada Ltd., less (iii) such Person's Monthly
Accruals, determined in accordance with GAAP.
"Eligible Inventory" means, as of any date of determination
thereof, all Inventory (valued at the lower of the cost or fair market value on
a first-in-first-out basis), but excluding (a) the greater of (i) the market
reserve against Inventory established by the Borrowers from time to time and
(ii) the market reserve approved by the Borrowers' independent auditors as of
the end of the prior fiscal year, (b) all Inventory in which the Agent (on
behalf of the Banks) does not have a first perfected security interest, subject
to no other Lien prior to or on a parity with such security interest, (c)
packaging material, (d) work-in-process and (e) all other Inventory deemed
ineligible by the Agent because of any circumstance that could, in the Agent's
reasonable judgment, adversely affect the quality of such Inventory as
collateral security. Notwithstanding the preceding sentence, "Eligible
Inventory" shall not include any Inventory not located at premises owned by or
leased to a Borrower unless such Inventory is in transit (and insured).
"Eligible Receivable" means, as of any date of determination
thereof, all Receivables net of the Borrowers' customary reserves (to the extent
that such reserves are
-6-
<PAGE> 13
not otherwise duplicative of the exclusions listed below), unearned customer
deposits, taxes, trade or other documents, discounts, claims, credits, returns,
rebates, allowances or set-offs, excluding the following:
(i) any Receivable unpaid for more than 60 days from the due
date set forth in the original invoice;
(ii) any Receivable where the due date set forth in the
invoice therefor is greater than 190 days of the date the goods were sold or the
services rendered with respect to such Receivable;
(iii) any goods the sale of which gave rise to such Receivable
not shipped or delivered to the account debtor on an absolute sale basis or
goods shipped on a bill and hold sale basis, a consignment sale basis, a
guaranteed sale basis, a sale or return basis, or on the basis of any other
similar understanding, or any part of such goods has been returned or rejected;
(iv) any Receivable evidenced by chattel paper or an
instrument of any kind;
(v) any Receivable which is owed by an account debtor which
(A) is insolvent or the subject of any bankruptcy or insolvency proceedings of
any kind or of any other pending proceeding or action which might have an
adverse effect on the business of such account debtor or (B) is, in the sole
discretion of the Agent, deemed ineligible for credit or other reasons;
(vi) all Receivables deemed uncollectable by the Borrowers or
turned over to collection agencies or attorneys;
(vii) any Receivable arising from the shipment of goods or the
performance of services, such shipment or performance having not been fully
completed or rendered;
(viii) any Receivable which is not a valid, legally
enforceable obligation of the account debtor or is subject to any present or
contingent, or any fact exists which is the basis for any future, offset or
counterclaim or other defense on the part of such account debtor;
(ix) any Receivable not evidenced by an invoice or other
documentation in form acceptable to the Agent;
(x) any Receivable which arises out of any transaction between
(A) a Borrower and (B) any other Borrower or a Subsidiary of any other Borrower
or any Affiliate;
-7-
<PAGE> 14
(xi) any Receivable which is subject to any provision
prohibiting its assignment or requiring notice of or consent to such assignment;
(xii) all Receivables from customers having their place of
business outside of the United States of America, except for such Receivables
backed by either (A) letters of credit denominated in Dollars issued to a
Borrower by banks acceptable to the Agent or (B) credit insurance policies
acceptable to the Agent;
(xiii) all Receivables from a Governmental Authority;
(xiv) all Receivables arising out of or in connection with
advance billings of a customer's requirements of supplies over a period of time;
(xv) all Receivables that do not conform to the
representations and warranties contained in Article 2 of the Security Agreement;
(xvi) all Receivables in which the Agent does not have a first
perfected security interest, subject to no other Lien prior to or on a parity
with such security interest;
(xvii) all Receivables not denominated in Dollars;
(xviii) all Receivables from an account debtor if more than
50% of the aggregate Dollar amount of invoices billed with respect to such
account debtor is more than 60 days past due according to the original terms of
payment and such Receivables exceed, in the aggregate, $20,000;
(xix) any Receivable which is owed by an account debtor who
has disputed liability or made any claim with respect to any other account due
from such account debtor to a Borrower, except the foregoing exclusion shall not
apply to any account debtor unless and until such disputed amounts equal or
exceed twenty percent (20%) of the aggregate Dollar amount of accounts due from
such account debtor; and
(xx) any Receivable which is determined by the Agent to be
ineligible for any other reason generally accepted in the commercial finance
business as a reason for ineligibility.
"Environmental Indemnification" means the environmental
indemnification agreement of the Borrowers in the form of Exhibit C hereto.
"Environmental Laws" means any and all federal, state, local
and foreign statutes, laws, regulations, ordinances, rules, judgments, orders,
decrees, permits, concessions, grants, franchises, licenses, agreements or other
restrictions of any Governmental
-8-
<PAGE> 15
Authority relating to the environment or to emissions, discharges, releases or
threatened releases of pollutants, contaminants, chemicals, or industrial, toxic
or hazardous substances or wastes into the environment including, without
limitation, ambient air, surface water, ground water, or land, or otherwise
relating to the manufacture, processing distribution, use, treatment, storage,
disposal, transport, or handling of pollutants, contaminants, chemicals, or
industrial, toxic or hazardous substances or wastes.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time, including any rules and regulations
promulgated thereunder.
"ERISA Affiliate" means any corporation or trade or business
which is a member of any group of organizations (i) described in Section 414(b)
or (c) of the Code of which a Borrower is a member, or (ii) solely for purposes
of potential liability under Section 302(c)(11) of ERISA and Section 412(c)(11)
of the Code and the lien created under Section 302(f) of ERISA and Section
412(n) of the Code, described in Section 414(m) or (o) of the Code of which a
Borrower is a member.
"Event of Default" has the meaning given such term in Section
9.1.
"Facility Documents" means this Agreement, the Notes, the
Authorization Letter, the L/C Documents, the Environmental Indemnification
Agreement, the Subordination Agreement, the Guaranty, the Pledge Agreements, the
Security Agreement, the Collateral Assignment of Leases, the Cash Collateral
Account Agreement, the Assignment of Deposit Accounts, any lockbox agreement in
favor of any Bank or the Agent and each of the documents, certificates or other
instruments referred to in Article 4 hereof as well as any other documents,
instrument or certificate to be delivered by any Borrower, any Guarantor or the
Stockholder in connection with this Agreement or in connection with the
documents, certificates or instruments referred to in Article 4, including
documents delivered in connection with any borrowing or issuance of any Letter
of Credit.
"Federal Funds Rate" means, for any day, the rate per annum
(expressed on a 360 day basis of calculation, if the rate on Variable Rate Loans
is so calculated) equal to the weighted average of the rates on overnight
federal funds transactions as published by the Federal Reserve Bank of New York
for such day (or for any day that is not a Banking Day, for the immediately
preceding Banking Day).
"Fixed Base Rate" means, with respect to any Interest Period
for a Fixed Rate Loan, the arithmetic mean, as calculated by the Agent, of the
respective rates per annum (rounded upwards, if necessary, to the nearest 1/16
of 1%) quoted at approximately 11:00 a.m. London time by the principal London
branch of the Reference Bank two Banking Days prior to the first day of such
Interest Period for the offering to leading banks in the London interbank market
of Dollar deposits in immediately available funds, for a period, and in an
amount, comparable to the Interest Period and principal amount of the Fixed Rate
Loan which shall be made by the Reference Bank and outstanding during such
Interest Period.
-9-
<PAGE> 16
"Fixed Charge Coverage Ratio" means, for any Person as at any
date, on a combined basis, the ratio of (a) the sum of (i) EBIT, plus (ii) Rent
to (b) the sum of (i) Interest Expense, plus (ii) Rent.
"Fixed Rate Loan" means any Loan when and to the extent the
interest rate therefor is determined on the basis of the definition "Fixed Base
Rate."
"Forfeiture Proceeding" means any action, proceeding or
investigation affecting any Borrower or any of its Subsidiaries or domestic
Affiliates before any Governmental Authority, or the receipt of notice by any
such party that any of them is a suspect in or a target of any governmental
inquiry or investigation, which may reasonably result in an indictment of any of
them or the seizure or forfeiture of any of their property having a value in
excess of $250,000.
"GAAP" means generally accepted accounting principles in the
United States of America as in effect from time to time, applied on a basis
consistent with those used in the preparation of the financial statements
referred to in Section 5.5 (except for changes concurred with by the Borrowers'
independent public accountants).
"Governmental Authority" means any nation or government, any
state or other political subdivision thereof, any agency, court or body of any
nation or government, or any state or other political subdivision thereof, or
any quasi-governmental agency or authority exercising executive, legislative,
judicial, regulatory or administrative functions.
"Guarantors" means each current and future Person incorporated
or doing business in the United States of America, of which 75% or more of the
outstanding capital stock is owned by the Stockholder and/or one or more
Borrowers; excluding, however, any such Person: (a) whose business is not
substantially the same or similar line of business as that carried out by any
Borrower or (b) whose products and services are not intended for use by
substantially the same or similar marketplace as those products and services of
any Borrower, and any other entity that delivers a Guaranty pursuant to Section
6.10.
"Guaranty" means the guaranty substantially in the form of
Exhibit D be delivered by the Guarantors under the terms of this Agreement.
"Interest Expense" means, with respect to any Person, for any
period, the sum, for such Person in accordance with GAAP, of (a) all interest on
Debt that is accrued as an expense during such period (including, without
limitation, imputed interest on Capital Lease obligations), plus (b) all amounts
paid, accrued or amortized as an expense during such period in respect of
interest rate protection agreements, minus (c) all amounts received or accrued
as income during such period in respect of interest rate protection agreements.
-10-
<PAGE> 17
"Interest Period" means, with respect to any Fixed Rate Loan,
the period commencing on the date such Loan is made, converted from another type
of Loan or renewed, as the case may be, and ending on the numerically
corresponding day in the first, second, third or (as available) sixth calendar
month thereafter, provided that each such Interest Period which commences on the
last Banking Day of a calendar month (or on any day for which there is no
numerically corresponding day in the appropriate subsequent calendar month)
shall end on the last Banking Day of the appropriate calendar month.
"Interest Rate Protection Agreement" means any interest rate
protection agreement heretofore or hereafter entered into with any Bank whereby
any Borrower obtains a hedge or cap for the interest rate that will be payable
by such Borrower on the Loans under this Agreement.
"Issuing Bank" means The Chase Manhattan Bank, N.A.
"Inventory" means all inventory, now or hereafter owned and
wherever located, of the Borrowers, including (without limitation) raw
materials, work-in-process, finished goods, supplies and packaging materials.
"L/C Credit" means, at any date of determination, the
aggregate undrawn balance of all outstanding Letters of Credit plus the
aggregate amount of each payment or disbursement made by the Issuing Bank under
a Letter of Credit honoring any drawing under a Letter of Credit to the extent
not reimbursed by the Borrowers.
"L/C Documents" means any application and agreement or other
documents or other instruments executed or delivered by any Borrower in
connection with Letters of Credit.
"Lending Office" means, for each Bank and for each type of
Loan, the lending office of such Bank (or of an affiliate of such Bank)
designated as such for such type of Loan on its signature page hereof or such
other office of such Bank (or of an affiliate of such Bank) as such Bank may
from time to time specify to the Agent and the Borrowers as the office by which
its Loans of such type are to be made and maintained.
"Letter of Credit Payment" shall have the meaning given such
term in Section 10.16.
"Letters of Credit" means one or more commercial letters of
credit, each with an expiration date of up to six (6) months from the date of
issue, or one or more standby letters of credit, each with an expiration date of
up to twelve (12) months from the date of issue, issued by the Issuing Bank for
the account of any Borrower as more particularly set forth in Section 2.1(b)
hereof.
-11-
<PAGE> 18
"Leverage Ratio" means, for any Person, as at any date, a
ratio on a combined basis in accordance with GAAP, of (a) Combined Senior Debt
of such Person to (b) EBIT of such Person, calculated as of the end of each
fiscal quarter for the twelve month period then ended (a rolling twelve month
calculation measured as of the end of each fiscal quarter.)
"Lien" means any lien (statutory or otherwise), security
interest, mortgage, deed of trust, priority, pledge, negative pledge, charge,
conditional sale, title retention agreement, financing lease or other
encumbrance or similar right of others, or any agreement to give or refrain from
giving any of the foregoing.
"Loan" means any loan made by a Bank pursuant to Section 2.1.
"Margin" means, for any Loan, the Margin for such type of Loan
that would apply under Section 2.14.
"Monthly Accruals" means, for any period, the sum of (i) a
Person's monthly accruals for contractual bonuses payable by such Person (as
determined by taking the greater of (x) the actual monthly accruals set forth on
such Person's books or (y) the amount obtained by dividing actual contractual
bonuses paid in the previous fiscal year by twelve), plus (ii) a Person's
monthly accruals for base salaries.
"Multiemployer Plan" means a Plan defined as such in Section
3(37) of ERISA to which contributions have been made by any Borrower or any
ERISA Affiliate and which is covered by Title IV of ERISA.
"Note" means a promissory note of the Borrowers substantially
in the form of Exhibit A hereto evidencing the Loans made by a Bank hereunder.
"Notice of Borrowing" shall mean the notice of each borrowing
required by Section 4.3.
"PBGC" means the Pension Benefit Guaranty Corporation and any
entity succeeding to any or all of its functions under ERISA.
"Party Experience Agreement" means the understanding between
Amscan, Inc. and Party Experience, Inc. providing for payments by Party
Experience to Amscan, Inc. of (i) $700,000 on September 30, 1995, (ii) $800,000
on October 31, 1995, (iii) $600,000 on November 30, 1995 and (iv) $900,000 on
December 31, 1995.
"Person" means an individual, partnership, corporation,
limited liability company, business trust, joint stock company, trust,
unincorporated association, joint venture, Governmental Authority or other
entity of whatever nature.
-12-
<PAGE> 19
"Plan" means any employee benefit or other plan established or
maintained, or to which contributions have been made, by any Borrower or any
ERISA Affiliate and which is covered by Title IV of ERISA, other than a
Multiemployer Plan.
"Pledge Agreements" means the pledge agreements in the form of
Exhibit E-1 and E-2 to be delivered, respectively, by the Borrowers named
therein and the Stockholder under the terms of this Agreement.
"Prime Rate" means that rate of interest from time to time
announced by the Reference Bank at its principal office as its prime commercial
lending rate. The Borrowers hereby acknowledge that the Prime Rate is not
necessarily the lowest rate of interest charged by the Reference Bank or any
Bank to its most preferred customers.
"Principal Office" means the principal office of the Agent,
presently located at One Chase Manhattan Plaza, New York, New York 10082.
"Receivable" means all accounts owing to any Borrower arising
out of or in connection with the bona fide sale or lease of goods or services in
the ordinary course of business.
"Reference Bank" means The Chase Manhattan Bank, N.A.
"Reference Period" shall have the meaning given such term in
Section 7.4.
"Regulation D" means Regulation D of the Board of Governors of
the Federal Reserve System as the same may be amended or supplemented from time
to time.
"Regulation U" means Regulation U of the Board of Governors of
the Federal Reserve System as the same may be amended or supplemented from time
to time.
"Regulatory Change" means, with respect to any Bank, any
change after the date of this Agreement in United States federal, state,
municipal or foreign laws or regulations (including without limitation
Regulation D) or the adoption or making after such date of any interpretations,
directives or requests applying to a class of banks including such Bank of or
under any United States, federal, state, municipal or foreign laws or
regulations (whether or not having the force of law) by any court or
Governmental Authority or monetary authority charged with the interpretation or
administration thereof.
"Rent" means all payments that any Borrower is contractually
obligated to make on operating leases, whether for real property or personal
property.
"Required Banks" means, at any time while no Loans are
outstanding and no L/C Credits exist, Banks having at least 66 2/3% of the
aggregate amount of the Commitments and, at any time while Loans are outstanding
and L/C Credits exist, Banks
-13-
<PAGE> 20
holding at least 66 2/3% of the aggregate principal amount of the Loans and
(directly or by participation) the L/C Credits.
"Restricted Payment Allowance" means, at any date of
determination thereof, for the Borrowers, on a combined basis in accordance with
GAAP, (a) 50% of net profit for the immediately preceding fiscal year of the
Borrowers, reduced by an amount equal to federal and state income taxes
utilizing the highest marginal tax rates for individuals, plus (b) provided that
the Borrowers have not incurred a loss on a combined basis in the immediately
preceding four fiscal quarters, the unused amount of the Restricted Payment
Allowance for the immediately preceding fiscal year (calculated without giving
effect to carryovers from fiscal years prior to the immediately prior fiscal
year), minus (c) dividends already paid in such fiscal year by the Borrowers
pursuant to Section 7.6, minus (d) the cost of any stock repurchases already
made in such fiscal year by the Borrowers pursuant to Section 7.6, minus (e)
monies already paid in such fiscal year by the Borrowers for investments
pursuant to subsection (h) of Section 7.5, minus (f) Total Consideration already
paid by the Borrowers in such fiscal year on account of any Acceptable
Acquisition pursuant to Section 7.11.
"Security Agreement" means the security agreement in the form
of Exhibit F to be delivered by the Borrowers under the terms of this Agreement.
"Shareholder Payments" shall have the meaning given to such
term in Section 7.6.
"Stockholder" means John Svenningsen, an individual.
"Subordinated Debt" means Debt of the Borrowers to the
Stockholder now or hereafter incurred and subordinated under the Subordination
Agreement to the Borrowers' obligations under this Agreement and the Notes.
"Subordination Agreement" shall mean the subordination
agreement in the form of Exhibit K to be delivered by the holders of the
Subordinated Debt and the Borrowers.
"Subsidiary" means, with respect to any Person, any
corporation or other entity of which at least a majority of the securities or
other ownership interests having ordinary voting power (absolutely or
contingently) for the election of directors or other persons performing similar
functions are at the time owned directly or indirectly by such Person.
"Tangible Net Worth" means, at any date of determination
thereof, the excess of total assets of a Person over total liabilities of such
Person, excluding, however, from the determination of total assets: goodwill,
trademarks, patents, organizational costs and other like intangible assets as
defined by GAAP.
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"Termination Date" means (a) September 30, 2000; provided that
if such date is not a Banking Day, the Termination Date shall be the next
succeeding Banking Day (or, if such next succeeding Banking Day falls in the
next calendar month, the next preceding Banking Day) or (b) the earlier date of
the termination in whole of the Commitments pursuant to Section 9.2 or
otherwise.
"Total Consideration" means the total consideration expended
to acquire any Person or any assets (including, but not limited to, liabilities
assumed, future payments (contingent or otherwise) and other cash
consideration); provided, however, that for purposes of calculating liabilities
assumed in connection with any determination of Total Consideration, the sum of
acquired (i) trade accounts payable, plus (ii) accrued liabilities, plus (iii)
customer billings in excess of revenues earned, shall only be included in the
amount (if any) by which such sum exceeds acquired trade accounts receivable net
of reserves.
"Unfunded Benefit Liabilities" means, with respect to any
Plan, the amount (if any) by which the present value of all benefit liabilities
(within the meaning of Section 4001(a)(16) of ERISA) under the Plan exceeds the
fair market value of all Plan assets allocable to such benefit liabilities, as
determined on the most recent valuation date of the Plan and in accordance with
the provisions of ERISA for calculating the potential liability of any Borrower
or any ERISA Affiliate under Title IV of ERISA.
"Variable Rate" means, for any day, the higher of (a) the
Federal Funds Rate for such day plus 1/2 of 1% and (b) the Prime Rate for such
day.
"Variable Rate Loan" means any Loan when and to the extent the
interest rate for such Loan is determined in relation to the Variable Rate.
Section 1.2. Accounting Terms. All accounting terms not
specifically defined herein shall be construed in accordance with GAAP, and all
financial data required to be delivered hereunder shall be prepared in
accordance with GAAP.
Section 1.3. Rules of Interpretation.
(a) A reference to any document or agreement shall
include such document or agreement as amended, modified or supplemented from
time to time in accordance with its terms and the terms of this Agreement.
(b) The singular includes the plural and the plural
includes the singular.
(c) A reference to any law includes any amendment or
modification to such law.
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(d) A reference to any Person includes its permitted
successors and permitted assigns.
(e) The words "include", "includes" and "including"
are not limiting.
(f) All terms not specifically defined herein or by
GAAP, which terms are defined in the Uniform Commercial Code as in effect in the
State of New York, have the meanings assigned to them therein.
(g) Reference to a particular "Section " refers to
that section of this Agreement unless otherwise indicated.
(h) The words "herein", "hereof", "hereunder" and
words of like import shall refer to this Agreement as a whole and not to any
particular section or subdivision of this Agreement.
ARTICLE 2. THE CREDIT.
Section 2.1. Loans; Letters of Credit.
(a) Subject to the terms and conditions of this
Agreement, each of the Banks severally agrees to make loans (the "Loans") to the
Borrowers from time to time from and including the date hereof to and including
the Banking Day immediately prior to the Termination Date, up to but not
exceeding in the aggregate principal amount at any one time outstanding, the
amount obtained by multiplying its Commitment Percentage by the amount by which
(i) the Borrowing Base exceeds (ii) the aggregate amount of L/C Credits. The
Loans may be outstanding as Variable Rate Loans or Fixed Rate Loans (each a
"type" of Loans). Each type of Loans of each Bank shall be made and maintained
at such Bank's Lending Office for such type of Loans. The Loans shall be due and
payable on the Termination Date.
(b) Subject to the terms and conditions of this
Agreement, the Issuing Bank, on behalf of the Banks, agrees for the account of
any Borrower from time to time during the period from the date hereof until the
Termination Date, to issue Letters of Credit, provided, however, that the
aggregate amount of all L/C Credits may not exceed at any time the lesser of (i)
$10,000,000 (only $3,000,000 of which may be standby letters of credit) or (ii)
the amount by which the Borrowing Base exceeds the aggregate principal amount of
all outstanding Loans. The Banks shall participate in each such issuance
consistent with Section 10.16. All payments in respect of a Letter of Credit
issued by the Issuing Bank will be due and payable in accordance with the terms
of this Agreement and the L/C Documents relating to such issuance.
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Notwithstanding anything to the contrary herein, no
Letter of Credit shall have an expiry date later than five (5) days prior to the
Termination Date.
Section 2.2. The Notes. The Loans of each Bank shall be
evidenced by a single promissory note in favor of such Bank substantially in the
form of Exhibit A, dated the date of this Agreement, duly completed and executed
by the Borrowers.
Section 2.3. Purpose. The Borrowers shall use the proceeds of
the Loans to repay all amounts outstanding under that certain Amended and
Restated Credit Agreement and Guaranty dated as of April 30, 1992, as amended,
by and between the Borrowers and The Chase Manhattan Bank, N.A., to finance
projected seasonal and incremental working capital requirements, to finance the
purchase of equipment, fixtures and vehicles for their own account and for
general corporate purposes. The Borrowers shall use the Letters of Credit in
connection with the importation of goods, the purchase of equipment for their
own account and for general corporate purposes. Such proceeds shall not be used
for the purpose, whether immediate, incidental or ultimate, of buying or
carrying "margin stock" within the meaning of Regulation U.
Section 2.4. Borrowing Procedures. The Borrowers shall give
the Agent notice of each Loan to be made or each Letter of Credit to be issued
hereunder as provided in Section 2.9. Not later than 1:00 p.m. New York City
time on the date of such Loan, each Bank shall, through its Lending Office and
subject to the conditions of this Agreement, make the amount of the Loan to be
made by it on such day available to the Agent at the Principal Office and in
immediately available funds for the account of the Borrowers. The amount so
received by the Agent shall, subject to the conditions of this Agreement, be
made available to the Borrowers, in immediately available funds, by the Agent
crediting an account of the Borrowers designated by the Borrowers and maintained
with the Agent at the Principal Office. Each Letter of Credit shall be issued by
the Issuing Bank upon completion of an application and agreement substantially
in the form of Exhibit O for commercial Letters of Credit and Exhibit P for
standby Letters of Credit, together with any additional documentation necessary
or desirable to the Issuing Bank, on the third Business Day after the completion
and receipt by the Issuing Bank of such documentation. Each Letter of Credit
shall be in a form approved by the Issuing Bank. To the extent the provisions of
this Agreement are inconsistent with any of the provisions contained in any such
Letter of Credit application and agreement or such additional documentation, the
provisions of this Agreement shall govern the relationship between the Borrowers
and the Issuing Bank.
Section 2.5. Prepayments and Conversions.
(a) Optional Prepayments. The Borrowers shall have
the right to make prepayments of principal, together with accrued interest to
the date of such prepayment on the principal amount prepaid, or to convert one
type of Loans into another type of Loans, at any time or from time to time;
provided that: (a) the Borrowers shall give the Agent notice of each such
prepayment or conversion as provided in Section 2.9 and (b)
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<PAGE> 24
Fixed Rate Loans may be prepaid or converted only on the last day of an Interest
Period for such Loans.
(a) Mandatory Prepayments.
(i) The Borrowers must prepay no later than
one Banking Day after delivery of any Borrowing Base Certificate an amount by
which the aggregate principal amount of all outstanding Loans and L/C Credits
exceeds the Borrowing Base, together with accrued interest to the date of such
prepayment on the principal amount prepaid. Furthermore, if the Borrowers become
aware at any other time that the aggregate principal amount of all outstanding
Loans and L/C Credits exceeds the Borrowing Base, the Borrowers must make a
prepayment in such an amount together with accrued interest to the date of such
prepayment on the principal amount prepaid, no later than one Banking Day after
they have become aware of such facts. Similarly, if, at any time, the Agent
reasonably determines that the sum of the aggregate principal amount of
outstanding Loans and L/C Credits exceeds the Borrowing Base, the Borrowers
shall, upon demand, immediately prepay an amount equal to such excess, together
with accrued interest to the date of such prepayment on the principal amount
prepaid.
(ii) Each such prepayment in accordance with
paragraph (i) above shall be applied first to any interest due on the amount
prepaid, and second to the outstanding principal amount of the Loans prepaid, in
each case in such manner as the Agent in its discretion shall determine. If any
such mandatory prepayment is made in respect of a Fixed Rate Loan, and such
prepayment is made on other than the last day of an Interest Period, the
Borrowers shall compensate the Banks in accordance with Section 3.5.
Section 2.6. Interest Periods; Renewals.
(a) In the case of each Fixed Rate Loan, the
Borrowers shall select an Interest Period of any duration in accordance with the
definition of Interest Period in Section 1.1, subject to the following
limitations: (i) no Interest Period may extend beyond the Termination Date; (ii)
notwithstanding clause (i) above, no Interest Period shall have a duration less
than one month, and if any such proposed Interest Period would otherwise be for
a shorter period, such Interest Period shall not be available; (iii) if an
Interest Period would end on a day which is not a Banking Day, such Interest
Period shall be extended to the next Banking Day, unless such Banking Day would
fall in the next calendar month in which event such Interest Period shall end on
the immediately preceding Banking Day; (iv) no more than five Fixed Rate Loans
with each Bank may be outstanding at any one time.
(b) Upon notice to the Agent as provided in Section
2.9, the Borrowers may renew any Fixed Rate Loan on the last day of the Interest
Period therefor as the same type of Loans with an Interest Period of the same or
different duration in accordance with the limitations provided above. If the
Borrowers shall fail to give notice to
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the Agent of such a renewal, such Fixed Rate Loan shall automatically be
converted to a Variable Rate Loan on the last day of the current Interest
Period.
Section 2.7. Lockbox; Cash Collateral Account.
(a) Maintenance of Lockbox and Cash Collateral
Accounts. The Borrowers shall maintain the lockbox and lockbox account presently
maintained at Harris Bank and Trust and shall maintain the Cash Collateral
Account with the Agent pursuant to the terms of this Agreement and the Cash
Collateral Account Agreement. If the lockbox and lockbox account presently
maintained at Harris Bank and Trust shall for any reason cease to be in
existence, then such lockbox and lockbox account shall be transferred to the
Agent. The Borrowers shall perform all such actions that are necessary to ensure
that the proceeds of all Receivables are sent by the account debtors directly to
the lockbox and such proceeds shall continue to be sent to the lockbox at all
times during the term of this Agreement.
(b) Transfers from Lockbox Account to Cash Collateral
Account. The Agent (for the benefit of the Banks) shall maintain a first
priority Lien on all Receivables and proceeds therefrom, whether or not the
proceeds of such Receivable are sent to the lockbox presently maintained at
Harris Bank and Trust. The financial institution maintaining such lockbox and
any accounts related thereto shall be required to hold such Receivables and the
proceeds therefrom as an agent for the Agent and to transfer the proceeds of
such Receivables to the Cash Collateral Account, all pursuant to such financial
institution's consent to the Assignment of Deposit Accounts. In the event that
the lockbox and lockbox account presently maintained at Harris Bank and Trust is
transferred to the Agent and replaced by a lockbox and lockbox account with the
Agent, the monies deposited shall be credited to the Cash Collateral Account.
Section 2.8. Changes of Commitments.
(a) The Borrowers shall have the right to reduce or
terminate the amount of unused Commitments at any time or from time to time,
provided that: (i) the Borrowers shall give notice of each such reduction or
termination to the Agent as provided in Section 2.9; and (ii) each partial
reduction shall be in integral multiples of $100,000 and an aggregate amount at
least equal to $500,000. The Commitments once reduced or terminated may not be
reinstated.
(b) At any time the Commitments are reduced or
terminated pursuant to subsection (a) of this Section 2.8, by Section 9.2, or
otherwise, the Borrowers shall furnish the Agent for deposit in the Cash
Collateral Account adequate cash reserves for the benefit of the Banks on the
reduction date or the Termination Date, as the case may be, (i) with regard to
termination in whole, in the amount of any Letters of Credit then outstanding
which have a tenor which
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extends beyond the Termination Date, and (ii) with regard to reductions pursuant
to subsection (a) of this Section 2.8, in the amount by which (A) the aggregate
amount of Letters of Credit then outstanding which have a tenor which extends
beyond such reduction date exceeds (B) the aggregate amount of the Commitments
after giving effect to such reduction or, in either case, must otherwise provide
for a financial institution acceptable to the Banks to (x) issue a letter of
credit in form and substance satisfactory to the Banks naming the Banks as
"beneficiary" therein, or, at the option of the Banks, (y) otherwise indemnify
the Banks against loss in connection with outstanding Letters of Credit,
pursuant to indemnification documentation in form and substance satisfactory to
the Banks.
Section 2.9. Certain Notices. Notices by the Borrowers to the
Agent of each Loan or issuance of a Letter of Credit pursuant to Section 2.4,
and each prepayment or conversion pursuant to Section 2.5 and each renewal
pursuant to Section 2.6(b), and each reduction or termination of the Commitments
pursuant to Section 2.8 shall be irrevocable and shall be effective only if
received by the Agent not later than 11:00 A.M. New York, New York time, and (a)
in the case of borrowings and prepayments of and conversions into Variable Rate
Loans, given the same Banking Day; (b) in the case of borrowings and prepayments
of, conversions into and renewals of Fixed Rate Loans, given three Banking Days
prior thereto; or (c) in the case of reductions or termination of the
Commitments, given three Banking Days prior thereto. Each such notice shall
specify the Loans to be borrowed, prepaid, converted or renewed and the amount
(subject to Section 2.10) and type of the Loans to be borrowed, or converted, or
prepaid or renewed (and, in the case of a conversion, the type of Loans to
result from such conversion and, in the case of a Fixed Rate Loan, the Interest
Period therefor) and the date of the borrowing or prepayment, or conversion or
renewal (which shall be a Banking Day). Each such notice of reduction or
termination shall specify the amount of the Commitments to be reduced or
terminated. The Agent shall promptly notify the Banks of the contents of each
such notice.
Section 2.10. Minimum Amounts. Except for borrowings which
exhaust the full remaining amount of the Commitments, prepayments or conversions
which result in the prepayment or conversion of all Loans of a particular type
or conversions made pursuant to Section 3.4, each borrowing, prepayment,
conversion and renewal of principal of Loans of a particular type shall be in an
amount at least equal to $200,000 in the aggregate for all Banks (borrowings,
prepayments, conversions or renewals of or into Loans of different types or, in
the case of Fixed Rate Loans, having different Interest Periods at the same time
hereunder to be deemed separate borrowings, prepayments, conversions and
renewals for the purposes of the foregoing, one for each type of Interest
Period). Anything in this Agreement to the contrary notwithstanding, the
aggregate principal amount of Fixed Rate Loans having concurrent Interest
Periods shall be at least equal to $2,500,000 in the aggregate.
Section 2.11. Interest.
(a) Interest shall accrue on the outstanding and
unpaid principal amount of each Loan for the period from and including the date
of such Loan to but excluding the date such Loan is due at the following rates
per annum: (i) for a Variable Rate
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Loan, at a variable rate per annum equal to the Variable Rate plus any Margin
and (ii) for a Fixed Rate Loan, at a fixed rate equal to the Fixed Rate plus the
Margin. If the principal amount of any Loan and any other amount payable by the
Borrowers hereunder or under any Note shall not be paid when due (at stated
maturity, by acceleration or otherwise), interest shall accrue on such amount
from and including such due date to but excluding the date such amount is paid
in full at the Default Rate.
(b) The interest rate on each Variable Rate Loan
shall change when the Variable Rate changes and interest on each such Loan shall
be calculated on the basis of a year of 360 days for the actual number of days
elapsed. Interest on each Fixed Rate Loan shall be calculated on the basis of a
year of 360 days for the actual number of days elapsed. Promptly after the
determination of any interest rate provided for herein or any change therein,
the Agent shall notify the Borrowers and the Banks.
(c) Accrued interest shall be due and payable in
arrears upon any payment of principal or conversion and (i) for each Variable
Rate Loan, on the last day of each March, June, September and December,
commencing the first such date after such Loan; (ii) for each Fixed Rate Loan,
on the last day of the Interest Period with respect thereto and, in the case of
an Interest Period greater than three months, at three-month intervals after the
first day of such Interest Period; provided that interest accruing at the
Default Rate shall be due and payable from time to time on demand of the Agent.
Section 2.12. Fees.
(a) Commitment Fee. The Borrowers shall pay to the
Agent for the account of each Bank a commitment fee on the daily average unused
Commitment of such Bank for the period from and including the date hereof to the
earlier of the date the Commitments are terminated or the Termination Date at a
rate per annum equal to 1/4 of 1% (the "Commitment Fee"), calculated on the
basis of a year of 360 days for the actual number of days elapsed; provided,
however, that if the Leverage Ratio as of the end of the most recent fiscal
quarter is 3.75 or greater, the Commitment Fee shall increase to 3/8 of 1%
effective with the fiscal quarter succeeding the quarter in which such Leverage
Ratio is attained; provided, further, that if the Leverage Ratio, having been
3.75 or greater, falls below 3.75 as of the end of any subsequent fiscal
quarter, the Commitment Fee shall revert to 1/4 of 1% thereafter. The accrued
commitment fee shall be due and payable in arrears upon any termination of the
Commitments and on the last day of each March, June, September and December,
commencing on the first such date after the Closing Date.
(b) Letters of Credit. For each Letter of Credit, the
Borrowers shall: (i) pay to the Issuing Bank for the account of the Issuing Bank
a fronting fee in respect of each Letter of Credit in an amount equal to 1/4 of
1% per annum (based upon a year of three hundred sixty (360) days elapsed) of
the daily average undrawn face amount of each Letter of Credit for the period
from and including the date of issuance, to be paid quarterly in arrears; (ii)
pay to the Agent for the account of the Banks for (x) Commercial Letters of
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Credit, an amount equal to 1/4 of 1% based upon the amount of each payment made
against documents, such amount to be no less than $100 for each payment and (y)
Standby Letters of Credit, an amount equal to 1% per annum (based upon a year of
three hundred sixty (360) days elapsed) based upon the maximum aggregate amount
available to be drawn, to be paid quarterly in arrears. The Borrowers will
further pay to the Issuing Bank, on demand, all other charges, costs and
expenses paid or incurred by the Issuing Bank in connection with any Letter of
Credit, and interest where chargeable, including fees and charges of counsel and
costs allocated by the Issuing Bank's internal legal department in connection
with the preparation, performance or enforcement of any Letter of Credit. The
Borrowers hereby acknowledge that any payments due the Issuing Bank, for its own
account, or to the Agent for the account of the Banks, shall be the joint and
several obligations of the Borrowers, even if such payments are in respect of a
Letter of Credit issued for the benefit of fewer than all of the Borrowers and
even if the L/C Documents executed in connection with such Letter of Credit are
executed by fewer than all of the Borrowers.
Section 2.13. Payments Generally. All payments under this
Agreement or the Notes shall be made in Dollars in immediately available funds
not later than 1:00 p.m. New York, New York time on the relevant dates specified
above (each such payment made after such time on such due date to be deemed to
have been made on the next succeeding Banking Day) to the Agent's account number
900-9-000002 maintained at the Principal Office of the Agent for the account of
the applicable Lending Office of each Bank. The Agent, or any Bank for whose
account any such payment is to be made, may (but shall not be obligated to)
debit the amount of any such payment which is not made by such time to any
ordinary deposit account of any Borrower with the Agent or such Bank, as the
case may be, and any Bank so doing shall promptly notify the Agent. The
Borrowers shall, at the time of making each payment under this Agreement or the
Notes, specify to the Agent the principal or other amount payable by the
Borrowers under this Agreement or the Notes to which such payment is to be
applied (and in the event that it fails to so specify, or if a Default or Event
of Default has occurred and is continuing, the Agent may apply such payment as
it may elect in its sole discretion (subject to Section 10.16)). If the due date
of any payment under this Agreement or the Notes would otherwise fall on a day
which is not a Banking Day, such date shall be extended to the next succeeding
Banking Day and interest shall be payable for any principal so extended for the
period of such extension. Each payment received by the Agent hereunder or under
any Note for the account of a Bank shall be paid promptly to such Bank, in
immediately available funds, for the account of such Bank's Lending Office.
Section 2.14. Margin. The Margin that will apply to each type
of Loan is set forth below and is based upon the Borrowers' Leverage Ratio as at
the end of the Borrowers' most recent fiscal quarter:
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<TABLE>
<CAPTION>
Margin Margin
Fixed Rate Loans Variable Rate Loans
Leverage Ratio (Percentage Points) (Percentage Points)
<S> <C> <C>
Greater than or equal to 3.75 1.50 0.50
Greater than or equal to 3.50, but less than 3.75 1.25 0.25
Greater than or equal to 3.00, but less than 3.50 1.00 0.00
Less than 3.00 0.875 0.00
</TABLE>
Margin adjustments resulting from such calculations will
become effective on the date such calculations are accepted by the Agent, except
for Fixed Rate Loans then outstanding, which will be effective on the date of
the next payment of interest pursuant to Section 2.11. Promptly after the
determination of any margin adjustment provided for herein, the Agent shall
notify the Borrowers and the Banks.
Section 2.15. Interest Rate Protection.
(a) Existing Agreements. The Agent and the Banks
hereby acknowledge the existence of the Interest Rate Protection Agreements set
forth on Schedule 5.10. The Agent and the Banks further agree that the
obligations of the Borrowers under such Interest Rate Protection Agreements as
set forth on Schedule 5.10 shall constitute obligations of the Borrower under
this Agreement and are secured by every Lien granted under the Facility
Documents pari passu with the other obligations of the Borrowers under this
Agreement. The obligations of any bank or other financial institution (including
any "Bank" hereunder) to the Borrowers under such Interest Rate Protection
Agreements shall automatically constitute "Collateral" under the Borrowers'
Security Agreement, subject to the Agent's Lien, for the ratable benefit of the
Banks, and each Bank that has entered into an Interest Rate Protection Agreement
with the Borrowers hereby consents to such Lien.
(b) Future Agreements. The Borrowers may enter into
Interest Rate Protection Agreements so long as no Default or Event of Default
would result therefrom, including any violation of any of the covenants
contained in Article 8 on a pro forma basis based upon the most recent
calculations delivered to the Agent and the Banks in accordance with Article
6.8. The Borrowers will provide the Banks with certified photocopies of the
documents evidencing any Interest Rate Protection Agreement entered into by the
Borrowers promptly following their execution. The obligations of the Borrowers
to a Bank (but not to any other bank or financial institution that is not a
"Bank" hereunder) under such Interest Rate Protection Agreements will
automatically constitute obligations of the Borrower under this Agreement and
will be secured by any Lien granted under the Facility Documents pari passu with
the other obligations of the Borrowers under this Agreement. The obligations of
any bank or other financial institution (including any "Bank" hereunder) to the
Borrowers under such Interest Rate Protection Agreements shall automatically
constitute "Collateral" under the Borrowers' Security Agreement, subject to
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the Agent's Lien, for the ratable benefit of the Banks, and each Bank that
enters into an Interest Rate Protection Agreement with the Borrowers hereby
consents to such Lien.
Section 2.16. Payment of Reimbursement Obligations. The
Borrowers' obligations to pay to the Issuing Bank the amount of all
reimbursement obligations, interest and other amounts payable to the Issuing
Bank under this Agreement or any L/C Document in connection with any Letter of
Credit issued on behalf of one or more Borrowers shall be absolute and
unconditional under any and all circumstances and not subject to any
counterclaim, claim, qualification, set-off, defense or other right which any
Borrower may have at any time against the Issuing Bank, any Bank or any other
Person and shall be made in accordance with the terms and conditions of this
Agreement under all circumstances and irrespective of whether or not any
Borrower may assert or have any claim for any lack of validity or
unenforceability of this Agreement or any of the other Facility Documents; the
existence of any Default or Event of Default; any draft, certificate or other
document presented under a Letter of Credit having been determined to be forged,
fraudulent, invalid or insufficient in any respect or any statement therein
being untrue or inaccurate in any respect; or the existence of any setoff or
defense any Borrower, the Stockholder or any Guarantor may have with respect to
any Loan, any Letter of Credit or any other advance, debt, liability,
obligation, covenant or duty.
ARTICLE 3. YIELD PROTECTION; ILLEGALITY; ETC.
Section 3.1. Additional Costs.
(a) The Borrowers shall pay directly to each Bank
from time to time on demand such amounts as such Bank may determine to be
necessary to compensate it for any costs which such Bank determines are
attributable to its making or maintaining any Fixed Rate Loans under this
Agreement or its Note or its obligation to make any such Loans hereunder, or any
reduction in any amount receivable by such Bank hereunder in respect of any such
Loans or such obligation (such increases in costs and reductions in amounts
receivable being herein called "Additional Costs"), resulting from any
Regulatory Change which: (i) changes the basis of taxation of any amounts
payable to such Bank under this Agreement or its Note in respect of any of such
Loans (other than taxes imposed on the overall net income of such Bank or of its
Lending Office for any of such Loans by the jurisdiction in which such Bank has
its principal office or such Lending Office); or (ii) imposes or modifies any
reserve, special deposit, deposit insurance or assessment, minimum capital,
capital ratio or similar requirements relating to any extensions of credit or
other assets of, or any deposits with or other liabilities of, such Bank
(including any of such Loans or any deposits referred to in the definition of
"Fixed Base Rate" in Section 1.1); or (iii) imposes any other condition
affecting this Agreement or its Note (or any of such extensions of credit or
liabilities). Each Bank will notify the Borrowers of any event occurring after
the date of this Agreement which will entitle such Bank to compensation pursuant
to this Section 3.1(a) as promptly as practicable after it obtains knowledge
thereof and determines to request such compensation. If any Bank requests
compensation from the
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Borrowers under this Section 3.1(a), or under Section 3.1(c), the Borrowers may,
by notice to such Bank (with a copy to the Agent), require that such Bank's
Loans of the type with respect to which such compensation is requested be
converted in accordance with Section 3.4.
(b) Without limiting the effect of the foregoing
provisions of this Section 3.1, in the event that, by reason of any Regulatory
Change, any Bank either (i) incurs Additional Costs based on or measured by the
excess above a specified level of the amount of a category of deposits or other
liabilities of such Bank which includes deposits by reference to which the
interest rate on Fixed Rate Loans is determined as provided in this Agreement or
a category of extensions of credit or other assets of such Bank which includes
Fixed Rate Loans or (ii) becomes subject to restrictions on the amount of such a
category of liabilities or assets which it may hold, then, if such Bank so
elects by notice to the Borrowers (with a copy to the Agent), the obligation of
such Bank to make or renew, and to convert Loans of any other type into, Loans
of such type hereunder shall be suspended until the date such Regulatory Change
ceases to be in effect (and all Loans of such type held by such Bank then
outstanding shall be converted in accordance with Section 3.4).
(c) Without limiting the effect of the foregoing
provisions of this Section 3.1 (but without duplication), the Borrowers shall
pay directly to each Bank from time to time on request such amounts as such Bank
may determine to be necessary to compensate such Bank for any costs which it
determines are attributable to the maintenance by it or any of its affiliates
pursuant to any law or regulation of any jurisdiction or any interpretation,
directive or request (whether or not having the force of law and whether in
effect on the date of this Agreement or thereafter) of any court or Governmental
Authority or monetary authority of capital in respect of its Loans hereunder or
its obligation to make Loans hereunder (such compensation to include, without
limitation, an amount equal to any reduction in return on assets or equity of
such Bank to a level below that which it could have achieved but for such law,
regulation, interpretation, directive or request). Each Bank will notify the
Borrowers if it is entitled to compensation pursuant to this Section 3.1(c) as
promptly as practicable after it determines to request such compensation.
(d) Determinations and allocations by a Bank for
purposes of this Section 3.1 of the effect of any Regulatory Change pursuant to
subsections (a) or (b), or of the effect of capital maintained pursuant to
subsection (c), on its costs of making or maintaining Loans or its obligation to
make Loans, or on amounts receivable by, or the rate of return to, it in respect
of Loans or such obligation, and of the additional amounts required to
compensate such Bank under this Section 3.1, shall be conclusive, provided that
such determinations and allocations are made on a reasonable basis.
Section 3.2. Limitation on Types of Loans. Anything herein to
the contrary notwithstanding, if:
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(a) the Agent determines (which determination shall
be conclusive) that quotations of interest rates for the relevant deposits
referred to in the definition of "Fixed Base Rate" in Section 1.1 are not being
provided in the relevant amounts or for the relevant maturities for purposes of
determining the rate of interest for any type of Fixed Rate Loans as provided in
this Agreement; or
(b) the Required Banks determine (which determination
shall be conclusive) and notify the Agent that the relevant rates of interest
referred to in the definition of "Fixed Base Rate" in Section 1.1 upon the basis
of which the rate of interest for any type of Fixed Rate Loans is to be
determined do not adequately cover the cost to the Banks of making or
maintaining such Loans;
then the Agent shall give the Borrowers and each Bank prompt notice thereof, and
so long as such condition remains in effect, the Banks shall be under no
obligation to make or renew Loans of such type or to convert Loans of any other
type into Loans of such type and the Borrowers shall, on the last day(s) of the
then current Interest Period(s) for the outstanding Loans of the affected type,
either prepay such Loans or convert such Loans into another type of Loans in
accordance with Section 2.5.
Section 3.3. Illegality. Notwithstanding any other provision
in this Agreement, in the event that it becomes unlawful for any Bank or its
Lending Office to (a) honor its obligation to make or renew Fixed Rate Loans
hereunder or convert Loans of any type into Loans of such type, or (b) maintain
Fixed Rate Loans hereunder, then such Bank shall promptly notify the Borrowers
thereof (with a copy to the Agent) and such Bank's obligation to make or renew
Fixed Rate Loans and to convert other types of Loans into Loans of such type
hereunder shall be suspended until such time as such Bank may again make, renew,
or convert and maintain such affected Loans and such Bank's outstanding Fixed
Rate Loans, as the case may be, shall be converted in accordance with Section
3.4.
Section 3.4. Certain Conversions pursuant to Sections 3.1 and
3.3. If the Loans of any Bank of a particular type (Loans of such type being
herein called "Affected Loans" and such type being herein called the "Affected
Type") are to be converted pursuant to Section 3.1 or 3.3, such Bank's Affected
Loans shall be automatically converted into Variable Rate Loans on the last
day(s) of the then current Interest Period(s) for the Affected Loans (or, in the
case of a conversion required by Section 3.1(b) or 3.3, on such earlier date as
such Bank may specify to the Borrowers with a copy to the Agent) and, unless and
until such Bank gives notice as provided below that the circumstances specified
in Section 3.1 or 3.3 which gave rise to such conversion no longer exist:
(a) to the extent that such Bank's Affected Loans
have been so converted, all payments and prepayments of principal which would
otherwise be applied to such Bank's Affected Loans shall be applied instead to
its Variable Rate Loans; and
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(b) all Loans which would otherwise be made or
renewed by such Bank as Loans of the Affected Type shall be made instead as
Variable Rate Loans and all Loans of such Bank which would otherwise be
converted into Loans of the Affected Type shall be converted instead into (or
shall remain as) Variable Rate Loans.
Notwithstanding any conversion pursuant to this Section 3.4,
the Borrowers shall nevertheless be liable to pay any Bank the compensation it
requests under Section 3.1 for any costs incurred up to the date of conversion.
If such Bank gives notice to the Borrowers (with a copy to the
Agent) that the circumstances specified in Section 3.1 or 3.3 which gave rise to
the conversion of such Bank's Affected Loans pursuant to this Section 3.4 no
longer exist (which such Bank agrees to do promptly upon such circumstances
ceasing to exist) at a time when Loans of the Affected Type are outstanding,
such Bank's Variable Rate Loans shall be automatically converted, on the first
day(s) of the next succeeding Interest Period(s) for such outstanding Loans of
the Affected Type to the extent necessary so that, after giving effect thereto,
all Loans held by the Banks holding Loans of the Affected Type and by such Bank
are held pro rata (as to principal amounts, types and Interest Periods) in
accordance with their respective Commitments.
Section 3.5. Certain Compensation. The Borrowers shall pay to
the Agent for the account of each Bank, upon the request of such Bank through
the Agent, such amount or amounts as shall be sufficient (in the reasonable
opinion of such Bank) to compensate it for any loss, cost or expense which such
Bank determines is attributable to:
(a) any payment, prepayment, conversion or renewal of
a Fixed Rate Loan made by such Bank on a date other than the last day of an
Interest Period for such Loan (whether by reason of acceleration or otherwise);
or
(b) any failure by the Borrowers to borrow, convert
into or renew a Fixed Rate Loan to be made, converted into or renewed by such
Bank on the date specified therefor in the relevant notice under Section 2.4,
2.5 or 2.6, as the case may be.
Without limiting the foregoing, such compensation shall
include an amount equal to the excess, if any, of: (i) the amount of interest
which otherwise would have accrued on the principal amount so paid, prepaid,
converted or renewed or not borrowed, converted or renewed for the period from
and including the date of such payment, prepayment or conversion or failure to
borrow, convert or renew to but excluding the last day of the then current
Interest Period for such Loan (or, in the case of a failure to borrow, convert
or renew, to but excluding the last day of the Interest Period for such Loan
which would have commenced on the date specified therefor in the relevant
notice) at the applicable rate of interest for such Loan provided for herein;
over (ii) the amount of interest (as reasonably determined by such Bank) such
Bank would have bid in the London interbank market for Dollar deposits for
amounts comparable to such principal amount and
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maturities comparable to such period. A determination of any Bank as to the
amounts payable pursuant to this Section 3.5 shall be conclusive absent manifest
error.
ARTICLE 4. CONDITIONS PRECEDENT.
Section 4.1. Documentary Conditions Precedent. The obligations
of the Banks to make the Loans or the obligation of the Issuing Bank to issue
any Letter of Credit constituting the initial borrowing are subject to the
condition precedent that the Agent shall have received on or before the date of
such Loans or such issuance of any Letter of Credit each of the following, in
form and substance satisfactory to the Agent and its counsel:
(a) the Notes duly executed by the Borrowers;
(b) the Authorization Letter duly executed by the
Borrowers;
(c) the Guaranty duly executed by the Guarantors;
(d) the Security Agreement duly executed by each
Borrower, together with (i) financing statements (UCC-1) duly executed and in
proper form for filing under the Uniform Commercial Code of all jurisdictions
necessary or, in the opinion of the Agent or any Bank, desirable, to perfect the
security interests created by the Security Agreement; and (ii) certified copies
of requests for information identifying all of the financing statements on file
with respect to the debtors in all jurisdictions referred to under (i),
indicating that no party claims an interest in any of the Collateral (as defined
in the Security Agreement);
(e) the Pledge Agreements duly executed by the
Borrowers named therein and the Stockholder together with certificates
representing the Pledged Shares referred to therein accompanied by undated stock
powers executed in blank and the original notes or other evidences of
indebtedness with respect to the Pledged Debt referred to therein, endorsed in
blank;
(f) evidence of the continued existence and
maintenance of the lockbox maintained at Harris Bank and Trust and satisfactory
review and approval of the agreements delivered in connection with such lockbox;
(g) the Assignment of Deposit Accounts, duly executed
by the Borrowers and consented to by the financial institution;
(h) the Cash Collateral Account Agreement duly
executed by the Borrowers;
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(i) a favorable opinion of counsel for the Borrowers,
the Stockholder and Guarantors, dated the Closing Date, in substantially the
form of Exhibit G and as to such other matters as the Agent or any Bank may
reasonably request;
(j) a certificate of the Secretary or Assistant
Secretary of each of the Borrowers and the Guarantors, dated the Closing Date,
attesting to all corporate action taken by each of the Borrowers and the
Guarantors, including resolutions of its Board of Directors authorizing the
execution, delivery and performance of the Facility Documents to which it is a
party and each other document to be delivered pursuant to this Agreement and
certifying true copies of the articles of incorporation, by-laws and other
organizational documents of each of the Borrowers and the Guarantors;
(k) a certificate of the Secretary or Assistant
Secretary of each of the Borrowers and the Guarantors, dated the Closing Date,
certifying the names and true signatures of the officers of each of the
Borrowers and the Guarantors authorized to sign the Facility Documents to which
it is a party and the other documents to be delivered by each of the Borrowers
and the Guarantors under this Agreement;
(l) a certificate of good standing dated within 10
days of the closing date for each of the Borrowers and the Guarantors from the
Secretary of State of its jurisdiction of incorporation and each jurisdiction in
which it is qualified to do business;
(m) a certificate of a duly authorized officer of
each of the Borrowers and each Guarantor, dated the Closing Date, stating that
the representations and warranties in the Facility Documents to which it is a
party are true and correct on such date as though made on and as of such date
and that no event has occurred and is continuing which constitutes a Default or
Event of Default;
(n) a certificate of the Stockholder, dated the
Closing Date, stating that the representations and warranties in the Facility
Documents to which he is a party are true and correct on such date as though
made on and as of such date and that no event has occurred and is continuing
which constitutes a Default or Event of Default;
(o) the Environmental Indemnification duly signed by
the Borrowers;
(p) Federal Reserve Form U-1 provided for in
Regulation U issued by the Board of Governors of the Federal Reserve System, the
statements made in which shall be such, in the opinion of the Agent, as to
permit the transactions contemplated hereby in accordance with said Regulation
U;
(q) payment by the Borrowers to the Agent of all fees
owing to the Agent and other expenses and fees incurred by the Agent;
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(r) a completed Borrowing Base Certificate;
(s) the Subordination Agreement duly executed by the
Borrowers and the holders of the Subordinated Debt;
(t) a schedule setting forth the amount of the
Restricted Payment Allowance and the basis of the calculation thereof for the
current calendar year, as if such Restricted Payment Allowance was in effect for
such period of time;
(u) landlord waivers and consents duly executed by
Stockholder and his Affiliates as so required;
(v) the Collateral Assignment of Leases, duly
executed as so required;
(w) a payoff letter and releases from The Chase
Manhattan Bank, N.A. in form and substance satisfactory to the Agent and the
Banks; and
(x) evidence of the absence of any change in market
conditions which, in the Agent's opinion, would materially impair a financial
institution's ability to fund Loans of this type.
Section 4.2. Satisfactory Review. The obligations of the Banks
to make the Loans or the Issuing Bank to issue the Letters of Credit
constituting the initial borrowing are further subject to the condition
precedent that the Agent and the Banks shall have, in the sole discretion of the
Banks, the Agent, and their counsel, completed a satisfactory review of each of
the following:
(a) the status of any litigation affecting any of the
Borrowers or their Affiliates;
(b) the insurance program of the Borrowers;
(c) all necessary (in the opinion of the Borrowers,
the Agent or their counsel) governmental and third party approvals;
(d) all material leases, supply contracts, employment
agreements and other material contracts of the Borrowers and their domestic
Affiliates; and
(e) any other information or documentation as the
Agent or the Banks may, in their sole discretion, consider material to their
interests under this Agreement.
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Section 4.3. Additional Conditions Precedent. The obligations
of the Banks to make any Loans and the obligations of the Issuing Bank to issue
Letters of Credit which increases the amount outstanding hereunder (including
the initial borrowing) shall be subject to the further conditions precedent that
on the date of such Loans or the issuance of such Letters of Credit:
(a) the following statements shall be true:
(i) the representations and warranties
contained in Article 5 herein, and in Article 2 of the Security Agreement,
Section 7 of the Guaranty, and in each other Facility Document, are true and
correct on and as of the date of such Loan or such issuance of a Letter of
Credit as though made on and as of such date; and
(ii) no Default or Event of Default has
occurred and is continuing, or would result from such Loan or issuance of Letter
of Credit; and
(iii) there has been no material adverse
change in the business, management, operations, properties, prospects or
condition (financial or otherwise) of the Stockholder or the Borrowers, the
Guarantors or any of their respective Subsidiaries since the Closing Date;
(b) the Borrowers shall be current in the delivery of
the most recent Borrowing Base Certificate required to be delivered pursuant to
this Agreement;
(c) the Borrowers shall have delivered to the Agent a
Notice of Borrowing in substantially the form of Exhibit H;
(d) the Agent shall have received such approvals,
opinions or documents as the Agent or any Bank may reasonably request; and
(e) in the case of the issuance of a Letter of
Credit, as of the date of issuance of such Letter of Credit, no order, judgment
or decree of any court, arbitrator or Governmental Authority shall purport by
its terms to restrain the Issuing Bank from issuing such Letter of Credit and no
law, rule or regulation applicable to the Issuing Bank and no request or
directive (whether or not having the force of law and whether or not the failure
to comply therewith would be unlawful) from any Governmental Authority with
jurisdiction over the Issuing Bank shall prohibit or request the Issuing Bank to
refrain from the issuance of letters of credit generally or the issuance of such
Letter of Credit.
Section 4.4. Deemed Representations. Each Notice of Borrowing
hereunder and acceptance by the Borrowers of the proceeds of such borrowing
shall constitute a representation and warranty that the statements contained in
Section 4.3(a) are true and correct both on the date of such notice and, unless
the Borrowers otherwise notify the Agent prior to such borrowing, as of the date
of such borrowing.
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ARTICLE 5. REPRESENTATIONS AND WARRANTIES.
Each Borrower hereby represents and warrants that:
Section 5.1. Incorporation, Good Standing and Due
Qualification. Each of the Borrowers and their respective Subsidiaries is duly
incorporated, validly existing and in good standing under the laws of the
jurisdiction of its incorporation, has the corporate power and authority to own
its assets and to transact the business in which it is now engaged or proposed
to be engaged, and is duly qualified as a foreign corporation and in good
standing under the laws of each other jurisdiction in which such qualification
is required.
Section 5.2. Corporate Power and Authority; No Conflicts. The
execution, delivery and performance by each of the Borrowers of the Facility
Documents to which it is a party have been duly authorized by all necessary
corporate action and do not and will not: (a) require any consent or approval of
its stockholders; (b) contravene its charter or by-laws; (c) violate any
provision of, or require any filing (other than the filing of the financing
statements contemplated by the Security Agreement), registration, consent or
approval under, any law, rule, regulation (including, without limitation,
Regulation U), order, writ, judgment, injunction, decree, determination or award
presently in effect having applicability to the Borrowers or any of their
respective Subsidiaries or Affiliates; (d) result in a breach of or constitute a
default or require any consent under any indenture or loan or credit agreement
or any other agreement, lease or instrument to which any Borrower is a party or
by which it or its properties may be bound or affected; (e) result in, or
require, the creation or imposition of any Lien (other than as created under the
Security Agreement and the Collateral Assignment of Leases), upon or with
respect to any of the properties now owned or hereafter acquired by any
Borrower; or (f) cause any Borrower (or any Subsidiary or Affiliate, as the case
may be) to be in default under any such law, rule, regulation, order, writ,
judgment, injunction, decree, determination or award or any such indenture,
agreement, lease or instrument.
Section 5.3. Legally Enforceable Agreements. Each Facility
Document to which any Borrower is a party is, or when delivered under this
Agreement will be, a legal, valid and binding obligation of such Borrower
enforceable against such Borrower in accordance with its terms, except to the
extent that such enforcement may be limited by applicable bankruptcy, insolvency
and other similar laws affecting creditors' rights generally.
Section 5.4. Litigation. There are no actions, suits or
proceedings pending or, to the knowledge of any Borrower, threatened, against or
affecting any Borrower or any of their respective Subsidiaries before any
Governmental Authority or arbitrator, which may, in any one case or in the
aggregate, materially adversely affect the financial condition, operations,
properties or business of any such Borrower or any such
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Subsidiary or of the ability of such Borrower to perform its obligations under
the Facility Documents to which it is a party.
Section 5.5. Financial Statements. The combined and combining
balance sheet of the Borrowers as at December 31, 1994, and the related combined
and combining income statement and statements of cash flows and changes in
stockholders' equity of the Borrowers for the fiscal year then ended, and the
accompanying footnotes, together with the opinion thereon, of KPMG Peat Marwick,
independent certified public accountants, and the interim combined and combining
balance sheet of the Borrowers as at June 30, 1995, and the related combined and
combining income statement and statements of cash flows and changes in
stockholders' equity for the six month period then ended, copies of which have
been furnished to each of the Banks, are complete and correct and fairly present
the financial condition of the Borrowers as at such dates and the results of the
operations of the Borrowers for the periods covered by such statements, all in
accordance with GAAP consistently applied (subject to year end adjustments in
the case of the interim financial statements). Except as set forth on Schedule
5.10, there are no liabilities of any Borrower, fixed or contingent, which are
material but are not reflected in the financial statements or in the notes
thereto, other than liabilities arising in the ordinary course of business since
December 31, 1994. No information, exhibit or report furnished by any Borrower
to the Banks in connection with the negotiation of this Agreement contained any
material misstatement of fact or omitted to state a material fact or any fact
necessary to make the statements contained therein not materially misleading.
Since December 31, 1994, there has been no material adverse change in the
condition (financial or otherwise), business, operations or prospects of any
Borrower.
Section 5.6. Ownership and Liens. Except as set forth on
Schedules 5.6 and 5.10, each of the Borrowers and their Consolidated
Subsidiaries has title to, or valid leasehold interests in, all of its
properties and assets, real and personal, including the properties and assets,
and leasehold interests reflected in the financial statements referred to in
Section 5.5 (other than any properties or assets disposed of in the ordinary
course of business), and none of the properties and assets owned by any Borrower
or any of its Subsidiaries and none of its leasehold interests is subject to any
Lien, except as disclosed in such financial statements or as may be permitted
hereunder and except for the Lien created by the Security Agreements and the
Collateral Assignment of Leases.
Section 5.7. Taxes. Each of the Borrowers and their respective
Subsidiaries has filed all tax returns (federal, state and local) required to be
filed and has paid all taxes, assessments and governmental charges and levies
thereon to be due, including interest and penalties.
Section 5.8. ERISA. Each Plan, and, to the best knowledge of
any Borrower, each Multiemployer Plan, is in compliance in all material respects
with, and has been administered in all material respects in compliance with, the
applicable provisions of ERISA, the Code and any other applicable Federal or
state law, and no event or condition
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is occurring or exists concerning which any Borrower would be under an
obligation to furnish a report to the Banks in accordance with Section 6.8(h)
hereof. As of the most recent valuation date for each Plan, each Plan was "fully
funded", which for purposes of this Section 5.8 shall mean that the fair market
value of the assets of the Plan is not less than the present value of the
accrued benefits of all participants in the Plan, computed on a Plan termination
basis. To the best knowledge of any Borrower, no Plan has ceased being fully
funded as of the date these representations are made with respect to any Loan or
issuance of Letter of Credit under this Agreement.
Section 5.9. Subsidiaries and Affiliates and Ownership of
Stock. Schedule 5.9 is a complete and accurate list of the Subsidiaries and
Affiliates of each Borrower, showing the jurisdiction of incorporation or
organization of each Subsidiary or Affiliate and showing the percentage of such
Borrower's ownership of the outstanding stock or other interest of each such
Subsidiary and Affiliate. All of the outstanding capital stock or other interest
of each such Subsidiary or Affiliate has been validly issued, is fully paid and
nonassessable and is owned by such Borrower free and clear of all Liens.
Section 5.10. Credit Arrangements. Schedule 5.10 is a complete
and correct list of all credit agreements, indentures, purchase agreements,
guaranties, Capital Leases and other investments, agreements and arrangements
presently in effect providing for or relating to extensions of credit (including
agreements and arrangements for the issuance of letters of credit or for
acceptance financing) in respect of which any Borrower or any of its
Subsidiaries is in any manner directly or contingently obligated; and the
maximum principal or face amounts of the credit in question, outstanding and
which can be outstanding, are correctly stated, and all Liens of any nature
given or agreed to be given as security therefor are correctly described or
indicated in such Schedule.
Section 5.11. Operation of Business. Each of the Borrowers and
their respective Subsidiaries possesses all licenses, permits, franchises,
patents, copyrights, trademarks and trade names, or rights thereto, to conduct
its business substantially as now conducted and as presently proposed to be
conducted, and none of the Borrowers or their respective Subsidiaries is in
violation of any valid rights of others with respect to any of the foregoing.
Section 5.12. Hazardous Materials. The Borrowers and each of
their respective Subsidiaries have obtained all permits, licenses and other
authorizations which are required under all Environmental Laws, except to the
extent failure to have any such permit, license or authorization would not have
a material adverse effect on the consolidated financial condition, operations,
business or prospects of any Borrower or its Consolidated Subsidiaries. The
Borrowers and each of their respective Subsidiaries are, to the best of each
Borrower's or each Subsidiaries' knowledge, after due inquiry, in compliance
with the terms and conditions of all such permits, licenses and authorizations,
and are also in compliance with all other limitations, restrictions, conditions,
standards, prohibitions, requirements, obligations schedules and timetables
contained in any
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applicable Environmental Law or in any regulation, code, plan, order, decree,
judgment, injunction, notice or demand letter issued, entered, promulgated or
approved thereunder, except to the extent failure to comply would not have a
material adverse effect on the consolidated financial condition, operations,
business or prospects of any Borrower and its Consolidated Subsidiaries.
In addition, except as set forth in Schedule 5.12 hereto, to
the best of each Borrower's knowledge, after due inquiry:
(a) No notice, notification, demand, request for
information, citation, summons or order has been issued, no complaint has been
filed, no penalty has been assessed and no investigation or review is pending or
threatened by any Governmental Authority or other entity with respect to any
alleged failure by any Borrower or any of its Subsidiaries to have any permit,
license or authorization required in connection with the conduct of the business
of such Borrower or any of its Subsidiaries or with respect to any generation,
treatment, storage, recycling, transportation, release or disposal, or any
release as defined in 42 U.S.C. 9601(22) ("Release"), of any substance regulated
under Environmental Laws ("Hazardous Materials") generated by such Borrower or
any of its Subsidiaries.
(b) None of the Borrowers nor any of their respective
Subsidiaries has handled any Hazardous Material, other than as a generator, on
any property now or previously owned or leased by the Borrowers or any of their
respective Subsidiaries to an extent that it has, or may reasonably be expected
to have, a material adverse effect on the consolidated financial condition,
operations, business or prospects taken as a whole of any Borrower and its
Consolidated Subsidiaries; and
(i) no PCB is or has been present at any
property now or previously owned or leased by any Borrower of any of its
Subsidiaries;
(ii) no asbestos is or has been present at
any property now or previously owned or leased by any Borrower or any of its
Subsidiaries;
(iii) there are no underground storage tanks
for Hazardous Materials, active or abandoned, at any property now or previously
owned or leased by any Borrower of any of its Subsidiaries;
(iv) no Hazardous Materials have been
Released, in a reportable quantity, where such a quantity has been established
by statute, ordinance, rule, regulation or order, at, on or under any property
now or previously owned by the Borrower or any of its Subsidiaries.
(c) None of the Borrowers nor any of their respective
Subsidiaries has transported or arranged for the transportation of any Hazardous
Material to any location which is listed on the National Priorities List under
the Comprehensive
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Environmental Response, Compensation and Liability Act of 1980, as amended
("CERCLA"), listed for possible inclusion on the National Priorities List by the
Environmental Protection Agency in the Comprehensive Environmental Response and
Liability Information System as provided by 40 C.F.R. 300.5 ("CERCLIS") or on
any similar state list or which is the subject of federal, state or local
enforcement actions or other investigations which may lead to claims against any
Borrower or any of its Subsidiaries for clean-up costs, remedial work, damages
to natural resources or for personal injury claims, including, but not limited
to, claims under CERCLA.
(d) No Hazardous Material generated by any Borrower
or any of its Subsidiaries has been recycled, treated, stored, disposed of or
Released by such Borrower or any of its Subsidiaries at any location other than
those listed in Schedule 5.12 hereto.
(e) No oral or written notification of a Release of a
Hazardous material has been filed by or on behalf of any Borrower or any of its
Subsidiaries and no property now or previously owned or leased by such Borrower
or any of its Subsidiaries is listed or proposed for listing on the National
Priorities List promulgated pursuant to CERCLA, on CERCLIS or on any similar
state list of sites requiring investigation or clean-up.
(f) There are no Liens arising under or pursuant to
any Environmental Laws on any of the real property or properties owned or leased
by any Borrower or any of its Subsidiaries, and no governmental actions have
been taken or are in process which could subject any of such properties to such
Liens and neither such Borrower nor any of its Subsidiaries would be required to
place any notice or restriction relating to the presence of Hazardous Materials
at any property owned by it in any deed to such property.
(g) There have been no environmental investigations,
studies, audits, test, reviews or other analyses conducted by or which are in
the possession of any Borrower or any of its Subsidiaries in relation to any
property or facility now or previously owned or leased by such Borrower or any
of its Subsidiaries which have not been made available to the Banks.
Section 5.13. No Default on Outstanding Judgments or Orders.
Each of the Borrowers and their respective Subsidiaries has satisfied all
judgments and neither such Borrower nor any of its Subsidiaries is in default
with respect to any judgment, writ, injunction, decree, rule or regulation of
any Governmental Authority.
Section 5.14. No Defaults on Other Agreements. None of the
Borrowers or their respective Subsidiaries is a party to any indenture, loan or
credit agreement or any lease or other agreement or instrument or subject to any
charter or corporate restriction which could have a material adverse effect on
the business, properties, assets, operations or
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conditions, financial or otherwise, of any Borrower or any of its Subsidiaries,
or the ability of any Borrower to carry out its obligations under the Facility
Documents to which it is a party. None of the Borrowers or any of their
respective Subsidiaries is in default in any material respect in the
performance, observance or fulfillment of any of the obligations, covenants or
conditions contained in any agreement or instrument material to its business to
which it is a party.
Section 5.15. Labor Disputes and Acts of God. Neither the
business nor the properties of any Borrower or its Subsidiaries are affected by
any fire, explosion, accident, strike, lockout or other labor dispute, drought,
storm, hail, earthquake, embargo, act of God or of the public enemy or other
casualty (whether or not covered by insurance), materially and adversely
affecting such business or properties or the operation of such Borrower or such
Subsidiary.
Section 5.16. Governmental Regulation. None of the Borrowers
nor any of their respective Subsidiaries is subject to regulation under the
Public Utility Holding Company Act of 1935, the Investment Company Act of 1940,
the Interstate Commerce Act, the Federal Power Act or any statute or regulation
limiting its ability to incur indebtedness for money borrowed as contemplated
hereby.
Section 5.17. Partnerships. None of the Borrowers or their
respective Subsidiaries is a partner in any partnership.
Section 5.18. No Forfeiture. None of the Borrowers or their
respective Subsidiaries or domestic Affiliates is engaged in or proposes to be
engaged in the conduct of any business or activity which could result in a
Forfeiture Proceeding and no Forfeiture Proceeding against any of them is
pending or, to their knowledge, threatened.
Section 5.19. Solvency.
(a) The present fair saleable value of the assets of
such Borrower after giving effect to all the transactions contemplated by the
Facility Documents and the funding of all Commitments hereunder exceeds the
amount that will be required to be paid on or in respect of the existing debts
and other liabilities (including contingent liabilities) of such Borrower and
its Subsidiaries as they mature.
(b) The property of such Borrower does not constitute
unreasonably small capital for such Borrower to carry out its business as now
conducted and as proposed to be conducted including the capital needs of such
Borrower.
(c) Such Borrower does not intend to, nor does it
believe that it will, incur debts beyond its ability to pay such debts as they
mature (taking into account the timing and amounts of cash to be received by
such Borrower, and of amounts to be payable on or in respect of debt of such
Borrower). The cash available to such Borrower
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after taking into account all other anticipated uses of the cash of such
Borrower, is anticipated to be sufficient to pay all such amounts on or in
respect of debt of such Borrower when such amounts are required to be paid.
(d) Such Borrower does not believe that final
judgments against it in actions for money damages will be rendered at a time
when, or in an amount such that, such Borrower will be unable to satisfy any
such judgments promptly in accordance with their terms (taking into account the
maximum reasonable amount of such judgments in any such actions and the earliest
reasonable time at which such judgments might be rendered). The cash available
to such Borrower after taking into account all other anticipated uses of the
cash of such Borrower (including the payments on or in respect of debt referred
to in paragraph (c) of this Section 5.19), is anticipated to be sufficient to
pay all such judgments promptly in accordance with their terms.
Section 5.20 Subordinated Debt. The Subordinated Debt of the
Borrowers now outstanding, true and complete copies of instruments evidencing
which have been furnished to the Agent, has been duly authorized by each
Borrower, has not been amended or otherwise modified, and constitutes the legal,
valid and binding obligation of the Borrowers enforceable against the Borrowers
in accordance with its terms. There exists no default in respect of any such
Subordinated Debt.
Section 5.21 Material Contracts. Schedule 5.21 contains a list
of all contracts with executives of one or more of the Borrowers, joint venture
and other investment agreements and all other contracts exceeding $250,000 in
cost or value to which any Borrower is a party as of the Closing Date. Correct
and complete copies of each contract requested by the Agent, with all
amendments, modifications and supplements thereto, has been or will be provided
to the Agent. As of the Closing Date, with respect to the material contracts in
existence on the Closing Date:
(a) each of such material contracts is valid,
subsisting and in full force and effect; no Borrower is in breach or violation
of any of the terms, conditions or provisions of any such material contracts;
(b) to the best knowledge of the Borrowers, no third
party to any of the material contracts is in breach or violation of any of the
terms, conditions or provisions thereof.
ARTICLE 6. AFFIRMATIVE COVENANTS.
So long as any of the Notes shall remain unpaid or any Bank
shall have any Commitment under this Agreement, each Borrower shall:
Section 6.1. Maintenance of Existence. Preserve and maintain,
and cause each of its Subsidiaries to preserve and maintain, its corporate
existence and good standing
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in the jurisdiction of its incorporation, and qualify and remain qualified, and
cause each of its Subsidiaries to qualify and remain qualified, as a foreign
corporation in each jurisdiction in which such qualification is required.
Section 6.2. Conduct of Business. Continue, and cause each of
its Subsidiaries to continue, to engage in an efficient and economical manner in
a business of the same general type as conducted by it on the date of this
Agreement.
Section 6.3. Maintenance of Properties. Maintain, keep and
preserve, and cause each of its Subsidiaries to maintain, keep and preserve, all
of its properties (tangible and intangible) necessary or useful in the proper
conduct of its business in good working order and condition, ordinary wear and
tear excepted.
Section 6.4. Maintenance of Records. Keep, and cause each of
its Subsidiaries to keep, adequate records and books of account, in which
complete entries will be made in accordance with GAAP, reflecting all financial
transactions of the Borrower and its Subsidiaries.
Section 6.5. Maintenance of Insurance. Maintain, and cause
each of its Subsidiaries to maintain, insurance naming the Agent as beneficiary
with insurance companies or associations with a rating of at least "A" by
Standard & Poor's Corporation or Moody's Investment Service in such amounts and
covering such risks as are usually carried by companies engaged in the same or a
similar business and similarly situated, which insurance may provide for
reasonable deductibility from coverage thereof.
Section 6.6. Compliance with Laws. Comply, and cause each of
its Subsidiaries to comply, in all respects with all applicable laws, rules,
regulations and orders, such compliance to include, without limitation, paying
before the same become delinquent all taxes, assessments and governmental
charges imposed upon it or upon its property.
Section 6.7. Right of Inspection. At any reasonable time and
from time to time, permit the Agent or any Bank or any agent or representative
thereof, to examine and make copies and abstracts from the records and books of
account of, and visit the properties of, such Borrower and any of its
Subsidiaries, and to discuss the affairs, finances and accounts of such Borrower
and any such Subsidiary with any of their respective officers and directors and
such Borrower's independent accountants, and to conduct an audit of such
Borrower. At least annually, the Agent shall perform a field audit of the
Borrowers at the Borrowers' expense; provided, however, that, so long as no
Event of Default has occurred or is continuing, the Borrowers shall have no
obligation to bear the expense of more than one field audit per year.
Section 6.8. Reporting Requirements. Furnish directly to each
of the Banks:
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(a) as soon as available and in any event within 120
days after the end of each fiscal year of the Borrowers, a combined and
combining balance sheet of the Borrowers and their Consolidated Subsidiaries as
of the end of such fiscal year and a combined and combining income statement and
statements of cash flows and changes in stockholders' equity of the Borrowers
and their Consolidated Subsidiaries for such fiscal year, all in reasonable
detail and stating in comparative form the respective combined and combining
figures for the corresponding date and period in the prior fiscal year and all
prepared in accordance with GAAP and as to the combined statements accompanied
by an opinion thereon acceptable to the Agent and each of the Banks by KPMG Peat
Marwick or other independent accountants of national standing selected by the
Borrowers;
(b) as soon as available and in any event, (i) within
60 days of the end of each of the first three quarters of each fiscal year of
the Borrowers for each fiscal quarter through September 30, 1996 and (ii) within
45 days after the end of each of the first three quarters of each fiscal year of
the Borrowers thereafter, a combined and combining balance sheet of the
Borrowers and their Consolidated Subsidiaries as of the end of such quarter and
a combined and combining income statement and statements of cash flows and
changes in stockholders' equity, of the Borrowers and their Consolidated
Subsidiaries for the period commencing at the end of the previous fiscal year
and ending with the end of such quarter, all in reasonable detail and stating in
comparative form the respective combined and combining figures for the
corresponding date and period in the previous fiscal year and all prepared in
accordance with GAAP and certified by the President, Treasurer or Chief
Financial Officer of the Borrowers (subject to year-end adjustments);
(c) promptly upon receipt thereof, copies of any
reports, inclusive of any management letters, submitted to any Borrower or any
of its Subsidiaries by independent certified public accountants in connection
with examination of the financial statements of any such Borrower or any such
Subsidiary made by such accountants;
(d) simultaneously with the delivery of the financial
statements referred to in Sections 6.8(a) and (b), a certificate substantially
in the form of Exhibit I of the President, Treasurer or Chief Financial Officer
of each Borrower (i) certifying that to the best of his knowledge no Default or
Event of Default has occurred and is continuing or, if a Default or Event of
Default has occurred and is continuing, a statement as to the nature thereof and
the action which is proposed to be taken with respect thereto, and (ii) with
computations demonstrating compliance with the covenants contained in Articles 7
and 8;
(e) simultaneously with the delivery of the annual
financial statements referred to in Section 6.8(a), a certificate of the
independent public accountants who audited such statements to the effect that,
in making the examination necessary for the audit of such statements, they have
obtained no knowledge of any condition or event which
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constitutes a Default or Event of Default, or if such accountants shall have
obtained knowledge of any such condition or event, specifying in such
certificate each such condition or event of which they have knowledge and the
nature and status thereof;
(f) promptly after the commencement thereof, notice
of all actions, suits, and proceedings before any Governmental Authority,
domestic or foreign, affecting the Borrowers or any of their respective
Subsidiaries which, if determined adversely to such Borrower or such Subsidiary,
could have a material adverse effect on the financial condition, properties, or
operations of such Borrower or such Subsidiary;
(g) as soon as possible and in any event within 10
days after any Borrower knows or has reason to know of the occurrence of each
Default or Event of Default a written notice setting forth the details of such
Default or Event of Default and the action which is proposed to be taken by the
Borrower with respect thereto;
(h) as soon as possible, and in any event within ten
days after any Borrower knows or has reason to know that any of the events or
conditions specified below with respect to any Plan or Multiemployer Plan have
occurred or exist, a statement signed by a senior financial officer of such
Borrower setting forth details respecting such event or condition and the
action, if any, which such Borrower or its ERISA Affiliate proposes to take with
respect thereto (and a copy of any report or notice required to be filed with or
given to PBGC by such Borrower or an ERISA Affiliate with respect to such event
or condition):
(i) any reportable event, as defined in
Section 4043(b) of ERISA, with respect to a Plan, as to which PBGC has not by
regulation waived the requirement of Section 4043(a) of ERISA that it be
notified within 30 days of the occurrence of such event (provided that a failure
to meet the minimum funding standard of Section 412 of the Code or Section 302
of ERISA including, without limitation, the failure to make on or before its due
date a required installment under Section 412(m) of the Code or Section 302(e)
of ERISA, shall be a reportable event regardless of the issuance of any waivers
in accordance with Section 412(d) of the Code) and any request for a waiver
under Section 412(d) of the Code for any Plan;
(ii) the distribution under Section 4041 of
ERISA of a notice of intent to terminate any Plan or any action taken by any
Borrower or an ERISA Affiliate to terminate any Plan;
(iii) the institution by PBGC of proceedings
under Section 4042 of ERISA for the termination of, or the appointment of a
trustee to administer, any Plan, or the receipt by any Borrower or any ERISA
Affiliate of a notice from a Multiemployer Plan that such action has been taken
by PBGC with respect to such Multiemployer Plan;
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(iv) the complete or partial withdrawal from
a Multiemployer Plan by any Borrower or any ERISA Affiliate that results in
liability under Section 4201 or 4204 of ERISA (including the obligation to
satisfy secondary liability as a result of a purchaser default) or the receipt
of any Borrower or any ERISA Affiliate of notice from a Multiemployer Plan that
it is in reorganization or insolvency pursuant to Section 4241 or 4245 of ERISA
or that it intends to terminate or has terminated under Section 4041A of ERISA;
(v) the institution of a proceeding by a
fiduciary or any Multiemployer Plan against any Borrower or any ERISA Affiliate
to enforce Section 515 of ERISA, which proceeding is not dismissed within 30
days;
(vi) the adoption of an amendment to any
Plan that pursuant to Section 401(a)(29) of the Code or Section 307 of ERISA
would result in the loss of tax-exempt status of the trust of which such Plan is
a part if any Borrower or an ERISA Affiliate fails to timely provide security to
the Plan in accordance with the provisions of said Sections;
(vii) any event or circumstance exists which
may reasonably be expected to constitute grounds for any Borrower or any ERISA
Affiliate to incur liability under Title IV of ERISA or under Sections
412(c)(11) or 412(n) of the Code with respect to any Plan; and
(viii) the Unfunded Benefit Liabilities of
one or more Plans increase after the date of this Agreement in an amount which
is material in relation to the financial condition of any Borrower.
(i) promptly after the request of any Bank, copies of
each annual report filed pursuant to Section 104 of ERISA with respect to each
Plan (including, to the extent required by Section 104 of ERISA, the related
financial and actuarial statements and opinions and other supporting statements,
certifications, schedules and information referred to in Section 103) and each
annual report filed with respect to each Plan under Section 4065 of ERISA;
provided, however, that in the case of a Multiemployer Plan, such annual reports
shall be furnished only if they are available to any Borrower or an ERISA
Affiliate;
(j) promptly after the furnishing thereof, copies of
any statement or report furnished to any other party pursuant to the terms of
any Interest Rate Protection Agreement or any indenture, loan or credit or
similar agreement and not otherwise required to be furnished to the Banks
pursuant to any other clause of this Section 6.8;
(k) promptly after the sending or filing thereof,
copies of all proxy statements, financial statements and reports which any
Borrower or any of its Subsidiaries sends to its stockholders, and copies of all
regular, periodic and special
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reports, and all registration statements, which any Borrower or any such
Subsidiary files with the Securities and Exchange Commission or any governmental
authority which may be substituted therefor, or with any national securities
exchange;
(l) as soon as available, and in any event within 10
days of the end of each calendar month, a Borrowing Base Certificate and an
aging schedule with respect to Receivables with names of all account debtors,
each as of the end of such calendar month and each certified by the President,
Treasurer or Chief Financial Officer of each Borrower;
(m) promptly after the commencement thereof or
promptly after any Borrower knows of the commencement or threat thereof, notice
of any Forfeiture Proceeding;
(n) promptly after the preparation thereof, but no
later than April 30th of each year, copies of any budgets and other financial
forecasts prepared by the President, Treasurer or Chief Financial Officer of the
Borrowers for the current and subsequent fiscal years;
(o) as soon as possible, and in any event within 10
days after any Borrower knows or has reason to know that there has been any
noncompliance with the terms of the Party Experience Agreement; and
(p) promptly after the request of the Agent or any
Bank, such other information respecting the condition or operations, financial
or otherwise, of any Borrower or any of its respective Subsidiaries.
Section 6.9. Establishment and Maintenance of Estate Plan. To
the satisfaction of the Agent, by December 31, 1996, establish an estate plan
for the Stockholder and a management succession plan for the Borrowers.
Thereafter, each Borrower shall take all actions necessary to carry out such
estate and management succession plans.
Section 6.10. Additional Guarantors. With respect to each
Guarantor coming into existence after the Closing Date, immediately deliver to
the Agent the following:
(a) a guaranty from such Guarantor substantially in
the form of the guaranty attached hereto as Exhibit D;
(b) security agreements from such Guarantor
substantially in the form of the Security Agreement and the Collateral
Assignment of Leases, together with all other items customarily delivered in
connection with such a security agreement, as
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described in Sections 4.1 (d), (e) and (v), and such other documents that were
delivered by the Guarantors hereunder;
(c) an opinion of counsel to the Borrowers and such
Guarantor, addressed to the Agent, in form and substance satisfactory to the
Agent, as to such matters as the Agent may require, including, without
limitation, the creation and perfection of the Agent's security interests; and
(d) such other approvals, opinions or documents as
the Agent may reasonably request.
Section 6.11. Additional Pledged Shares. With respect to
Affiliates incorporated or doing business in the United States of America owned
or controlled 75% or more by the Stockholder or any Borrower: (a) having annual
sales of more than $1,000,000; (b) whose business is substantially the same or a
similar line of business as that carried out by any Borrower; and (c) whose
marketplace served is substantially the same or a similar marketplace served by
any Borrower, immediately deliver to the Agent the following:
(a) a pledge to the Agent of the shares of stock of
such Affiliate owned by the Stockholder by executing an amendment to the
Stockholder's Pledge Agreement adding such shares as "Pledged Shares"
thereunder, together with certificate(s) representing such additional "Pledged
Shares" accompanied by undated stock powers executed in blank;
(b) an opinion of counsel to the Stockholder,
addressed to the Agent, in form and substance satisfactory to the Agent, as to
such matters as the Agent may require, including, without limitation, the
creation and perfection of the Agent's security interests; and
(c) such other approvals, opinions or documents as
the Agent may reasonably request.
ARTICLE 7. NEGATIVE COVENANTS.
So long as any of the Notes shall remain unpaid or any Bank
shall have any Commitment under this Agreement, each Borrower shall not:
Section 7.1. Debt. Create, incur, assume or suffer to exist,
or permit any of its Subsidiaries to create, incur, assume or suffer to exist
any Debt, except:
(a) Debt of such Borrower under this Agreement or the
Notes;
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(b) Debt described in Schedule 5.10, including
renewals, extensions or refinancings thereof, provided that the principal amount
thereof does not increase;
(c) Debt of such Borrower subordinated on terms
satisfactory to the Banks to such Borrower's obligations under this Agreement
and the Notes;
(d) Debt of such Borrower to any other Borrower;
(e) Debt of such Borrower to the Stockholder,
provided such Debt shall be formally subordinated to the Debt of such Borrower
under this Agreement and the Notes pursuant to the Subordination Agreement;
(f) Debt of the Borrower or any such Subsidiary
secured by purchase money Liens permitted by Section 7.3; and
(g) Debt of the Borrowers pursuant to Interest Rate
Protection Agreements not to exceed the notational amount of $50,000,000.
Section 7.2. Guaranties, Etc. Except as set forth on Schedule
5.10, assume, guarantee, endorse or otherwise be or become directly or
contingently responsible or liable, or permit any of its Subsidiaries to assume,
guarantee, endorse or otherwise be or become directly or indirectly responsible
or liable (including, but not limited to, an agreement to purchase any
obligation, stock, assets, goods or services or to supply or advance any funds,
asset, goods or services, or an agreement to maintain or cause such Person to
maintain a minimum working capital or net worth or otherwise to assure the
creditors of any Person against loss) for the obligations of any Person, except
guaranties by endorsement of negotiable instruments for deposit or collection or
similar transactions in the ordinary course of business.
Section 7.3. Liens. Create, incur, assume or suffer to exist,
or permit any of its Subsidiaries to create, incur, assume or suffer to exist,
any Lien, upon or with respect to any of its properties, now owned or hereafter
acquired, except:
(a) Liens in favor of the Agent on behalf of the
Banks securing the Loans or L/C Credits hereunder and Liens in favor of the
Agent on behalf of one or more Banks securing the Borrowers' obligations under
Interest Rate Protection Agreements permitted by Section 2.15;
(b) Liens for taxes or assessments or other
government charges or levies if not yet due and payable or if due and payable if
they are being contested in good faith by appropriate proceedings and for which
appropriate reserves are maintained;
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(c) Liens imposed by law, such as mechanic's,
materialmen's, landlord's, warehousemen's and carrier's Liens, and other similar
Liens, securing obligations incurred in the ordinary course of business which
are not past due for more than 30 days, or which are being contested in good
faith by appropriate proceedings and for which appropriate reserves have been
established;
(d) Liens under workmen's compensation, unemployment
insurance, social security or similar legislation (other than ERISA);
(e) judgment and other similar Liens arising in
connection with court proceedings; provided that in the case of such Liens in an
amount greater than $50,000, the execution or other enforcement of such Liens is
effectively stayed and the claims secured thereby are being actively contested
in good faith and by appropriate proceedings;
(f) easements, rights-of-way, restrictions and other
similar encumbrances which, in the aggregate, do not materially interfere with
the occupation, use and enjoyment by such Borrower or any such Subsidiary of the
property or assets encumbered thereby in the normal course of its business or
materially impair the value of the property subject thereto;
(g) Liens securing obligations of such a Subsidiary
to such Borrower or another such Subsidiary;
(h) purchase money Liens on any property hereafter
acquired or the assumption of any Lien on property existing at the time of such
acquisition, or a Lien incurred in connection with any conditional sale or other
title retention agreement or a Capital Lease; provided that:
(i) any property subject to any of the
foregoing is acquired by such Borrower or any such Subsidiary in the ordinary
course of its business and the Lien on any such property is created within six
(6) months of such acquisition;
(ii) the obligation secured by any Lien so
created, assumed or existing shall not exceed 100% of the lesser of cost or fair
market value as of the time of acquisition of the property covered thereby to
such Borrower or such Subsidiary acquiring the same;
(iii) each such Lien shall attach only to
the property so acquired and fixed improvements thereon;
(iv) the Debt secured by all such Liens
shall not exceed $15,000,000 at any time outstanding in the aggregate;
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(v) the obligations secured by such Lien are
permitted by the provisions of Section 7.1 and the related expenditure is
permitted under Section 8.3; and
(i) Liens described on Schedules 5.6 and 5.10 and any
replacement Liens on such property to secure the corresponding Debt described on
such Schedules, including renewals, extensions or refinancings thereof, provided
that the principal amount thereof does not increase.
Section 7.4. Leases. Create, incur, assume or suffer to exist,
or permit any of its Subsidiaries to create, incur, assume or suffer to exist,
any obligation as lessee for the rental or hire of any real or personal
property, except: (a) leases existing on the date of this Agreement set forth on
Schedule 7.4 and any extensions or renewals thereof; (b) leases (other than
Capital Leases) which do not result in a violation of the Fixed Charge Coverage
Ratio established by Section 8.4, measured as set forth below, provided that, in
each case where a lease involves annual payments in excess of $50,000, the bases
of each such calculation shall have been provided to the Agent and the Agent
shall have issued its written consent to each such lease; (c) leases between
such Borrower and any such Subsidiary or between any such Subsidiaries; (d)
Capital Leases permitted by Section 7.3. In making any calculation pursuant to
Section 7.4(b), (i) the Fixed Charge Coverage Ratio shall be measured, on a
combined basis, for the immediately preceding four fiscal quarters (the
"Reference Period") and (ii) pro forma effect shall be given to such lease, as
if such lease had been incurred on the first day of the Reference Period.
Section 7.5. Investments. Make, or permit any of its
Subsidiaries to make, any loan or advance to any Person or purchase or otherwise
acquire, or permit any such Subsidiary to purchase or otherwise acquire, any
capital stock, assets, obligations or other securities of, make any capital
contribution to, or otherwise invest in, or acquire any interest in, any Person,
except: (a) direct obligations of the United States of America or any agency
thereof with maturities of one year or less from the date of acquisition; (b)
commercial paper of a domestic issuer rated at least "A-1" by Standard & Poor's
Corporation or "P-1" by Moody's Investors Service, Inc.; (c) certificates of
deposit with maturities of one year or less from the date of acquisition issued
by any commercial bank operating within the United States of America with a
short-term credit rating of at least "A" by Standard & Poor's Corporation or
Moody's Investors Service, Inc.; (d) for stock, obligations or securities
received in settlement of debts (created in the ordinary course of business)
owing to such Borrower or any such Subsidiary; (e) loans to its officers and
employees not to exceed $200,000 in the aggregate at any one time; (f) any
Acceptable Acquisition permitted by Section 7.11; (g) Interest Rate Protection
Agreements permitted by Section 2.15; and (h) other investments not to exceed
the Restricted Payment Allowance, provided that the Borrowers have provided the
Agent, at least seven (7) days prior to making such an investment, with their
calculation (in form and substance satisfactory to the Agent) showing that the
proposed investment does not exceed the Restricted Payment Allowance.
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Section 7.6. Dividends. Declare or pay any dividends,
purchase, redeem, retire or otherwise acquire for value any of its capital stock
now or hereafter outstanding, or make any distribution of assets to its
stockholders as such whether in cash, assets or in obligations of such Borrower,
or allocate or otherwise set apart any sum for the payment of any dividend or
distribution on, or for the purchase, redemption or retirement of any shares of
its capital stock, or make any other distribution by reduction of capital or
otherwise in respect of any shares of its capital stock; or permit any of its
Subsidiaries to purchase or otherwise acquire for value any stock of such
Borrower or another such Subsidiary, except that:
(a) if any Borrower is qualified as an S Corporation
for Federal and/or state tax purposes, such Borrower may, upon 7 days' advance
written notice to the Agent accompanied by the calculations showing compliance
(in form and substance satisfactory to the Agent) with the following conditions,
declare and pay dividends, make distributions to stockholders of cash or other
assets or pay to stockholders directors' fees and bonuses, provided that the
following conditions and requirements are met:
(i) The aggregate amount of the Shareholder
Payments (as defined below) in any fiscal year shall not exceed the sum of the
Federal and State estimated income taxes payable by each stockholder during such
fiscal year on account of income attributable to him as a stockholder of such
Borrower plus any actual taxes payable by each stockholder with any tax return
due during such fiscal year on account of income attributable to him as a
stockholder of such Borrower for the prior fiscal year, to the extent such
actual taxes have not been the basis of earlier Shareholder Payments. The term
"Shareholder Payments" shall mean the sum of the amounts of dividends,
distributions, directors' fees and bonuses paid or made to stockholders in
respect of Federal and State estimated income taxes;
(ii) For purposes of subparagraph (i), any
refunds paid to a stockholder as a result of income attributable to him as a
stockholder of such Borrower shall be applied to reduce his future estimated
taxes payable.
(iii) Before making Shareholder Payments,
such Borrower will require each stockholder to provide to such Borrower a
written statement of the amount of estimated income taxes or actual taxes
payable by such stockholder on account of income attributable to him as a
stockholder of such Borrower; and
(iv) such Borrower will furnish to Bank
within 120 days after the close of its fiscal year written report of Shareholder
Payments made by such Borrower and copies of stockholders' written statements of
taxes payable during such fiscal year.
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(b) such Borrower may declare and deliver dividends
and make distributions payable solely in common stock of such Borrower;
(c) such Borrower may purchase or otherwise acquire
shares of its capital stock by exchange for or out of the proceeds received from
a substantially concurrent issue of new shares of its capital stock;
(d) such Borrower may pay other dividends not to
exceed the Restricted Payment Allowance, provided that the Borrowers have
provided the Agent, at least seven (7) days prior to declaring such a dividend,
with their calculation (in form and substance satisfactory to the Agent) showing
that the proposed dividend does not exceed the Restricted Payment Allowance.
(e) Such Borrower may bonus compensation to
Stockholder in any fiscal year not to exceed such Borrower's net income for such
year reduced by any amounts actually paid to stockholders under Subsection
7.6(a) and (d), provided such bonus is not actually paid to Stockholder and is
merely reflected as a non-cash entry on such Borrower's financial statements as
an amount due to Stockholder and provided further that said amount is evidenced
by a promissory note subordinated pursuant to the Subordination Agreement.
Section 7.7. Sale of Assets. Sell, lease, assign, transfer or
otherwise dispose of, or permit any of its Subsidiaries to sell, lease, assign,
transfer or otherwise dispose of, any of its now owned or hereafter acquired
assets (including, without limitation, shares of stock and indebtedness of such
Subsidiaries, receivables and leasehold interests); except: (a) for inventory
disposed of in the ordinary course of business; (b) the sale or other
disposition of assets no longer used or useful in the conduct of its business;
and (c) that any such Subsidiary may sell, lease, assign, or otherwise transfer
its assets to such Borrower.
Section 7.8. Stock of Subsidiaries, Etc. Sell or otherwise
dispose of any shares of capital stock of any of its Subsidiaries, except in
connection with a transaction permitted under Section 7.10, or permit any such
Subsidiary to issue any additional shares of its capital stock, except
directors' qualifying shares.
Section 7.9. Transactions with Affiliates. Enter into any
transaction, including, without limitation, the purchase, sale or exchange of
property or the rendering of any service, with any Affiliate or permit any of
its Subsidiaries to enter into any transaction, including, without limitation,
the purchase, sale or exchange of property or the rendering of any service, with
any Affiliate, except in the ordinary course of and pursuant to the reasonable
requirements of such Borrower's or such Subsidiary's business and upon fair and
reasonable terms no less favorable to such Borrower or such Subsidiary than
would it obtain in a comparable arm's length transaction with a Person not an
Affiliate.
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Section 7.10. Mergers, Etc. Merge or consolidate with, or
sell, assign, lease or otherwise dispose of (whether in one transaction or in a
series of transactions) all or substantially all of its assets (whether now
owned or hereafter acquired) to, any Person, or acquire all or substantially all
of the assets or the business of any Person (or enter into any agreement to do
any of the foregoing), or permit any of its Subsidiaries to do so, except that:
(a) any such Subsidiary may merge into or transfer assets to such Borrower; (b)
any Subsidiary may merge into or consolidate with or transfer assets to any
other Subsidiary; (c) to the extent of the Restricted Payment Allowance, such
Borrower may effect any Acceptable Acquisition permitted by Section 7.11.
Section 7.11. Acquisitions. Make any Acquisition other than an
Acceptable Acquisition.
Section 7.12. No Activities Leading to Forfeiture. Neither
such Borrower nor any of its Subsidiaries or domestic Affiliates shall engage in
or propose to be engaged in the conduct of any business or activity which could
result in a Forfeiture Proceeding.
ARTICLE 8. FINANCIAL COVENANTS.
So long as any of the Notes shall remain unpaid or any Bank
shall have any Commitment under this Agreement:
Section 8.1. Minimum Adjusted Tangible Net Worth. The
Borrowers shall maintain at all times, as measured at the end of each fiscal
quarter, a Combined Adjusted Tangible Net Worth of not less than the following
amounts for fiscal quarters ending during the following periods:
<TABLE>
<CAPTION>
Time Period Amount
----------- ------
<S> <C>
Through 12/31/95 $24,000,000
12/31/95 - 06/29/96 $25,500,000
06/30/96 - 12/30/96 $28,000,000
12/31/96 - 06/29/97 $31,000,000
06/30/97 - 12/30/97 $33,500,000
12/31/97 - 06/29/98 $36,500,000
06/30/98 - 12/30/98 $39,000,000
12/31/98 - 06/29/99 $42,000,000
06/30/99 - 12/30/99 $44,500,000
12/31/99 -
Termination Date $47,500,000
</TABLE>
Section 8.2. Capital Expenditures. The Borrowers shall not
make or permit to be made Combined Capital Expenditures during any fiscal year
of the Borrowers to exceed the following amounts in the aggregate:
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<TABLE>
<CAPTION>
Fiscal Year Combined Capital
----------- ----------------
Expenditures
------------
<S> <C>
1995 $10,000,000
1996 $10,000,000
1997 and thereafter 25% of EBITDA, not to
exceed $10,000,000 annually
</TABLE>
Section 8.3. Adjusted Leverage Ratio. The Borrowers shall
maintain at all times an Adjusted Leverage Ratio of less than 4.00 to 1.0.
Section 8.4. Fixed Charge Coverage Ratio. The Borrowers shall
maintain at all times a Fixed Charge Coverage Ratio, calculated as of the end of
each fiscal quarter for the twelve month period then ended (a rolling twelve
month calculation measured as of the end of each successive fiscal quarter), of
not less than 2.00 to 1.0.
ARTICLE 9. EVENTS OF DEFAULT.
Section 9.1. Events of Default. Any of the following events
shall be an "Event of Default":
(a) the Borrowers shall: (i) fail to pay the
principal of any Note as and when due and payable; or (ii) fail to pay interest
on any Note or any fee or other amount due hereunder as and when due and payable
and such failure shall continue for two (2) days;
(b) any representation or warranty made or deemed
made by any Borrower in this Agreement or in any other Facility Document or by
the Stockholder or any Guarantor in any Facility Document to which it is a party
or which is contained in any certificate, document, opinion, financial or other
statement furnished at any time under or in connection with any Facility
Document shall prove to have been incorrect in any material respect on or as of
the date made or deemed made;
(c) any Borrower, the Stockholder or any Guarantor
shall: (i) fail to perform or observe any term, covenant or agreement contained
in Sections 2.3, 6.8 or 6.10 or Articles 7 or 8; or (ii) fail to perform or
observe any term, covenant or agreement on its part to be performed or observed
(other than the obligations specifically referred to in clause (i) or elsewhere
in this Section 9.1) in any Facility Document and such failure shall continue
for 30 consecutive days;
(d) the Stockholder or any Borrower, any Guarantor or
any of their respective Subsidiaries shall: (i) fail to pay (after giving effect
to any applicable
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grace period or notice requirements) any indebtedness under any Interest Rate
Protection Agreement or other indebtedness in excess of $500,000, including but
not limited to indebtedness for borrowed money (other than the payment
obligations described in (a) above), of the Stockholder, such Borrower, such
Guarantor or such Subsidiary, as the case may be, or any interest or premium
thereon, when due (whether by scheduled maturity, required prepayment,
acceleration, demand or otherwise); or (ii) fail to perform or observe any term,
covenant or condition on its part to be performed or observed under any
agreement or instrument relating to any such Interest Rate Protection Agreement
or other indebtedness, when required to be performed or observed, if the effect
of such failure to perform or observe is to accelerate, or to permit the
acceleration of, after the giving of notice or passage of time, or both, the
maturity of such indebtedness; or any such indebtedness shall be declared to be
due and payable, or required to be prepaid (other than by a regularly scheduled
required prepayment), prior to the stated maturity thereof;
(e) the Stockholder or any Borrower, any Guarantor or
any of their respective Subsidiaries: (i) shall generally not, or be unable to,
or shall admit in writing its inability to, pay its debts as such debts become
due; or (ii) shall make an assignment for the benefit of creditors, petition or
apply to any tribunal for the appointment of a custodian, receiver or trustee
for it or a substantial part of its assets; or (iii) shall commence any
proceeding under any bankruptcy, reorganization, arrangement, readjustment of
debt, dissolution or liquidation law or statute of any jurisdiction, whether now
or hereafter in effect; or (iv) shall have had any such petition or application
filed or any such proceeding shall have been commenced, against it, in which an
adjudication or appointment is made or order for relief is entered, or which
petition, application or proceeding remains undismissed for a period of 60 days
or more; or (v) by any act or omission shall indicate its consent to, approval
of or acquiescence in any such petition, application or proceeding or order for
relief or the appointment of a custodian, receiver or trustee for all or any
substantial part of its property; or (vi) shall suffer any such custodianship,
receivership or trusteeship to continue undischarged for a period of 60 days or
more;
(f) one or more judgments, decrees or orders for the
payment of money in excess of $50,000 in the aggregate shall be rendered against
the Stockholder or any Borrower, any Guarantor or any of their respective
Subsidiaries and such judgments, decrees or orders shall continue unsatisfied
and in effect for a period of 30 consecutive days without being vacated,
discharged, satisfied or stayed or bonded pending appeal;
(g) any event or condition shall occur or exist with
respect to any Plan or Multiemployer Plan concerning which any Borrower is under
an obligation to furnish a report to the Banks in accordance with Section 6.8(h)
hereof and as a result of such event or condition, together with all other such
events or conditions, any Borrower or any ERISA Affiliate has incurred or in the
opinion of any Bank is reasonably likely to incur a liability to a Plan, a
Multiemployer Plan, the PBGC, or a Section 4042 Trustee (or
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any combination of the foregoing) which is material in relation to the financial
position of any Borrower;
(h) the Unfunded Benefit Liabilities of one or more
Plans have increased after the date of this Agreement in an amount which is
material (as specified in Section 9.1(g) hereof);
(i) any Forfeiture Proceeding shall have been
commenced or any Borrower shall have given any Bank written notice of the
commencement of any Forfeiture Proceeding as provided in Section 6.8(l);
(j) any Guaranty shall at any time after its
execution and delivery and for any reason cease to be in full force and effect
or shall be declared null and void, or the validity or enforceability thereof
shall be contested by any Guarantor or any Guarantor shall deny it has any
further liability or obligation thereunder or shall fail to perform its
obligations thereunder;
(k) the Security Agreement, the Cash Collateral
Account Agreement, the Assignment of Deposit Accounts or the Collateral
Assignment of Leases shall at any time after its execution and delivery and for
any reason cease: (A) to create a valid and perfected first priority security
interest in and to the property purported to be subject to such Agreement; or
(B) to be in full force and effect or shall be declared null and void, or the
validity or enforceability thereof shall be contested by any Borrower or
Guarantor or any Borrower or Guarantor shall deny it has any further liability
or obligation under the such agreement or any Borrower or Guarantor shall fail
to perform any of its obligations thereunder;
(l) there shall be, in the judgment of the Agent, any
material adverse change in the condition (financial or otherwise), business,
management, operations, properties or prospects of the Borrowers and their
respective Subsidiaries since the Closing Date;
(m) the lockbox agreement or the consent to the
Assignment of Deposit Accounts described in Section 2.7 shall at any time after
its execution and delivery and for any reason cease to be in full force and
effect or shall be declared null and void, or the validity or enforceability
shall be contested by any party thereto, or any party thereto shall deny that it
has any further liability thereunder or shall fail to perform its obligations
thereunder; or
(n) the Subordination Agreement shall at any time
after its execution and delivery and for any reason cease to be in full force
and effect or shall be declared null and void, or the validity or enforceability
thereof shall be contested by any party thereto or any party thereto shall deny
it has any further liability or obligation thereunder or shall fail to perform
its obligations thereunder;
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(o) the Environmental Indemnification Agreement shall
at any time after its execution and delivery and for any reason cease to be in
full force and effect or shall be declared null and void, or the validity or
enforceability thereof shall be contested by any party thereto or any party
thereto shall deny it has any further liability or obligation thereunder or
shall fail to perform its obligations thereunder;
(p) any L/C Document executed by any Borrower shall
at any time after its execution and delivery and for any reason cease to be in
full force and effect or shall be declared null and void, or the validity or
enforceability thereof shall be contested by any party thereto or any party
thereto shall deny it has any further liability or obligation thereunder or
shall fail to perform its obligations thereunder;
(q) any Pledge Agreement shall at any time after its
execution and delivery and for any reason cease: (A) to create a valid and
perfected first priority security interest in and to the property purported to
be subject to such agreement; or (B) to be in full force and effect or shall be
declared null and void, or the validity or enforceability thereof shall be
contested by any party thereto, or such party shall deny it has further
liability or obligation thereunder or such party shall fail to perform any of
its obligations thereunder;
(r) there shall be a Change of Ownership of any of
the Borrowers; or
(s) if the Stockholder shall no longer be employed
full-time by the Borrowers in a key management position and actively participate
in key management decisions affecting the Borrowers and in the day-to-day
affairs of the Borrowers.
Section 9.2. Remedies. If any Event of Default shall occur and
be continuing, the Agent shall, upon request of the Required Banks, by notice to
the Borrowers, (a) declare the Commitments to be terminated, whereupon the same
shall forthwith terminate, and (b) declare the outstanding principal of the
Notes, all interest thereon and all other amounts payable under this Agreement
and the Notes to be forthwith due and payable, whereupon the Notes, all such
interest and all such amounts shall become and be forthwith due and payable,
without presentment, demand, protest or further notice of any kind, all of which
are hereby expressly waived by the Borrowers; provided that, in the case of an
Event of Default referred to in Section 9.1(e) or Section 9.1(k)(A) above, the
Commitments shall be immediately terminated, and the Notes, all interest thereon
and all other amounts payable under this Agreement shall be immediately due and
payable without notice, presentment, demand, protest or other formalities of any
kind, all of which are hereby expressly waived by the Borrowers.
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ARTICLE 10. THE AGENT; RELATIONS AMONG BANKS AND BORROWERS.
Section 10.1. Appointment, Powers and Immunities of Agent.
Each Bank hereby irrevocably (but subject to removal by the Required Banks
pursuant to Section 10.9) appoints and authorizes the Agent to act as its agent
hereunder and under any other Facility Document with such powers as are
specifically delegated to the Agent by the terms of this Agreement and any other
Facility Document, together with such other powers as are reasonably incidental
thereto. The Agent shall have no duties or responsibilities except those
expressly set forth in this Agreement and any other Facility Document, and shall
not by reason of this Agreement be a trustee for any Bank. The Agent shall not
be responsible to the Banks for any recitals, statements, representations or
warranties made by the Borrowers or any officer or official of the Borrowers or
any other Person contained in this Agreement or any other Facility Document, or
in any certificate or other document or instrument referred to or provided for
in, or received by any of them under, this Agreement or any other Facility
Document, or for the value, legality, validity, effectiveness, genuineness,
enforceability or sufficiency of this Agreement or any other Facility Document
or any other document or instrument referred to or provided for herein or
therein, for the perfection or priority of any collateral security for the Loans
or the L/C Credits or for any failure by the Borrowers to perform any of its
obligations hereunder or thereunder. The Agent may employ agents and
attorneys-in-fact and shall not be responsible, except as to money or securities
received by it or its authorized agents, for the negligence or misconduct of any
such agents or attorneys-in-fact selected by it with reasonable care. Neither
the Agent nor any of its directors, officers, employees or agents shall be
liable or responsible for any action taken or omitted to be taken by it or them
hereunder or under any other Facility Document or in connection herewith or
therewith, except for its or their own gross negligence or willful misconduct.
The Borrowers shall pay any fee agreed to by the Borrowers and the Agent with
respect to the Agent's services hereunder.
Section 10.2. Reliance by Agent. The Agent shall be entitled
to rely upon any certification, notice or other communication (including any
thereof by telephone, telex, telegram or cable) believed by it to be genuine and
correct and to have been signed or sent by or on behalf of the proper Person or
Persons, and upon advice and statements of legal counsel, independent
accountants and other experts selected by the Agent. The Agent may deem and
treat each Bank as the holder of the Loans made by it for all purposes hereof
unless and until a notice of the assignment or transfer thereof satisfactory to
the Agent signed by such Bank shall have been furnished to the Agent but the
Agent shall not be required to deal with any Person who has acquired a
participation in any Loan from a Bank. As to any matters not expressly provided
for by this Agreement or any other Facility Document, the Agent shall in all
cases be fully protected in acting, or in refraining from acting, hereunder in
accordance with instructions signed by the Required Banks, and such instructions
of the Required Banks and any action taken or failure to act pursuant thereto
shall be binding on all of the Banks and any other holder of all or any portion
of any Loan.
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Section 10.3. Defaults. The Agent shall not be deemed to have
knowledge of the occurrence of a Default or Event of Default (other than the
non-payment of principal of or interest on the Loans to the extent the same is
required to be paid to the Agent for the account of the Banks) unless the Agent
has received notice from a Bank or the Borrowers specifying such Default or
Event of Default and stating that such notice is a "Notice of Default." In the
event that the Agent receives such a notice of the occurrence of a Default or
Event of Default, the Agent shall give prompt notice thereof to the Banks (and
shall give each Bank prompt notice of each such non-payment). The Agent shall
(subject to Section 10.8) take such action with respect to such Default or Event
of Default which is continuing as shall be directed by the Required Banks;
provided that, unless and until the Agent shall have received such directions,
the Agent may take such action, or refrain from taking such action, with respect
to such Default or Event of Default as it shall deem advisable in the best
interest of the Banks; and provided further that the Agent shall not be required
to take any such action which it determines to be contrary to law.
Section 10.4. Rights of Agent as a Bank. With respect to its
Commitment and the Loans made by it, the Agent in its capacity as a Bank
hereunder shall have the same rights and powers hereunder as any other Bank and
may exercise the same as though it were not acting as the Agent, and the term
"Bank" or "Banks" shall, unless the context otherwise indicates, include the
Agent in its capacity as a Bank. The Agent and its affiliates may (without
having to account therefor to any Bank) accept deposits from, lend money to (on
a secured or unsecured basis), and generally engage in any kind of banking,
trust or other business with, the Borrowers (and any of their respective
affiliates) as if it were not acting as the Agent, and the Agent may accept fees
and other consideration from the Borrowers for services in connection with this
Agreement or otherwise without having to account for the same to the Banks.
Although the Agent and its affiliates may in the course of such relationships
and relationships with other Persons acquire information about the Borrower, its
Affiliates and such other Persons, the Agent shall have no duty to disclose such
information to the Banks.
Section 10.5. Indemnification of Agent. The Banks agree to
indemnify the Agent (to the extent not reimbursed under Section 11.3 or under
the applicable provisions of any other Facility Document, but without limiting
the obligations of the Borrowers under Section 11.3 or such provisions), ratably
in accordance with the aggregate unpaid principal amount of the Loans made by
the Banks (without giving effect to any participations, in all or any portion of
such Loans, sold by them to any other Person) (or, if no Loans are at the time
outstanding, ratably in accordance with their respective Commitments), for any
and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind and nature
whatsoever which may be imposed on, incurred by or asserted against the Agent in
any way relating to or arising out of this Agreement, any other Facility
Document or any other documents contemplated by or referred to herein or the
transactions contemplated hereby or thereby (including, without limitation, the
costs and expenses which the Borrowers are obligated to pay under Section 11.3
or under the applicable provisions of any other Facility Document but excluding,
unless a Default or
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Event of Default has occurred, normal administrative costs and expenses incident
to the performance of its agency duties hereunder) or the enforcement of any of
the terms hereof or thereof or of any such other documents or instruments;
provided that no Bank shall be liable for any of the foregoing to the extent
they arise from the gross negligence or willful misconduct of the party to be
indemnified.
Section 10.6. Documents. The Agent will forward to each Bank,
promptly after the Agent's receipt thereof, a copy of each report, notice or
other document required by this Agreement or any other Facility Document to be
delivered to the Agent for such Bank.
Section 10.7. Non-Reliance on Agent and Other Banks. Each Bank
agrees that it has, independently and without reliance on the Agent or any other
Bank, and based on such documents and information as it has deemed appropriate,
made its own credit analysis of the Borrowers and their respective Subsidiaries
and decision to enter into this Agreement and that it will, independently and
without reliance upon the Agent or any other Bank, and based on such documents
and information as it shall deem appropriate at the time, continue to make its
own analysis and decisions in taking or not taking action under this Agreement
or any other Facility Document. The Agent shall not be required to keep itself
informed as to the performance or observance by the Borrowers of this Agreement
or any other Facility Document or any other document referred to or provided for
herein or therein or to inspect the properties or books of the Borrowers or any
of their respective Subsidiaries. Except for notices, reports and other
documents and information expressly required to be furnished to the Banks by the
Agent hereunder, the Agent shall not have any duty or responsibility to provide
any Bank with any credit or other information concerning the affairs, financial
condition or business of the Borrowers or any of their respective Subsidiaries
(or any of their Affiliates) which may come into the possession of the Agent or
any of its affiliates. Each Bank may inform the Agent if it has good reason to
believe that any Borrower is not in compliance with the terms of this Agreement
or wishes to advise the Agent as to facts which come to its knowledge relating
to the business or affairs of the Borrowers. The Agent shall not be required to
file this Agreement, any other Facility Document or any document or instrument
referred to herein or therein, for record or give notice of this Agreement, any
other Facility Document or any document or instrument referred to herein or
therein, to anyone.
Section 10.8. Failure of Agent to Act. Except for action
expressly required of the Agent hereunder, the Agent shall in all cases be fully
justified in failing or refusing to act hereunder unless it shall have received
further assurances (which may include cash collateral) of the indemnification
obligations of the Banks under Section 10.5 in respect of any and all liability
and expense which may be incurred by it by reason of taking or continuing to
take any such action.
Section 10.9. Resignation or Removal of Agent. Subject to the
appointment and acceptance of a successor Agent as provided below, the Agent may
resign at any time by giving written notice thereof to the Banks and the
Borrowers, and the Agent may be
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removed at any time with or without cause by the Required Banks; provided that
the Borrowers and the other Banks shall be promptly notified thereof. Upon any
such resignation or removal, the Required Banks shall have the right to appoint
a successor Agent which shall be a Bank. If no successor Agent shall have been
so appointed by the Required Banks and shall have accepted such appointment
within 30 days after the retiring Agent's giving of notice of resignation or the
Required Banks' removal of the retiring Agent, then the retiring Agent may, on
behalf of the Banks, appoint a successor Agent, which shall be a Bank which has
an office in New York, New York. The Required Banks or the retiring Agent, as
the case may be, shall upon the appointment of a successor Agent promptly so
notify the Borrowers and the other Banks. Upon the acceptance of any appointment
as Agent hereunder by a successor Agent, such successor Agent shall thereupon
succeed to and become vested with all the rights, powers, privileges and duties
of the retiring Agent, and the retiring Agent shall be discharged from its
duties and obligations hereunder. After any retiring Agent's resignation or
removal hereunder as Agent, the provisions of this Article 10 shall continue in
effect for its benefit in respect of any actions taken or omitted to be taken by
it while it was acting as the Agent.
Section 10.10. Amendments Concerning Agency Function. The
Agent shall not be bound by any waiver, amendment, supplement or modification of
this Agreement or any other Facility Document which affects its duties hereunder
or thereunder unless it shall have given its prior consent thereto.
Section 10.11. Liability of Agent. The Agent shall not have
any liabilities or responsibilities to the Borrowers on account of the failure
of any Bank to perform its obligations hereunder or to any Bank on account of
the failure of the Borrower to perform its obligations hereunder or under any
other Facility Document.
Section 10.12. Transfer of Agency Function. Without the
consent of the Borrowers or any Bank, the Agent may at any time or from time to
time transfer its functions as Agent hereunder to any of its offices located in
the continental United States, provided that the Agent shall promptly notify the
Borrowers and the Banks thereof.
Section 10.13. Non-Receipt of Funds by the Agent. Unless the
Agent shall have been notified by a Bank or the Borrowers (either one as
appropriate being the "Payor") prior to the date on which such Bank is to make
payment hereunder to the Agent of the proceeds of a Loan or the Borrowers are to
make payment to the Agent, as the case may be (either such payment being a
"Required Payment"), which notice shall be effective upon receipt, that the
Payor does not intend to make the Required Payment to the Agent, the Agent may
assume that the Required Payment has been made and may, in reliance upon such
assumption (but shall not be required to), make the amount thereof available to
the intended recipient on such date and, if the Payor has not in fact made the
Required Payment to the Agent, the recipient of such payment (and, if such
recipient is the Borrower and the Payor Bank fails to pay the amount thereof to
the Agent forthwith upon demand, the Borrower) shall, on demand, repay to the
Agent the amount made available to it together
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with interest thereon for the period from the date such amount was so made
available by the Agent until the date the Agent recovers such amount at a rate
per annum equal to the average daily Federal Funds Rate for such period.
Section 10.14. Withholding Taxes. Each Bank represents that it
is entitled to receive any payments to be made to it hereunder without the
withholding of any tax and will furnish to the Agent such forms, certifications,
statements and other documents as the Agent may request from time to time to
evidence such Bank's exemption from the withholding of any tax imposed by any
jurisdiction or to enable the Agent to comply with any applicable laws or
regulations relating thereto. Without limiting the effect of the foregoing, if
any Bank is not created or organized under the laws of the United States of
America or any state thereof, in the event that the payment of interest by the
Borrower is treated for U.S. income tax purposes as derived in whole or in part
from sources from within the U.S., such Bank will furnish to the Agent Form 4224
or Form 1001 of the Internal Revenue Service, or such other forms,
certifications, statements or documents, duly executed and completed by such
Bank as evidence of such Bank's exemption from the withholding of U.S. tax with
respect thereto. The Agent shall not be obligated to make any payments hereunder
to such Bank in respect of any Loan or L/C Credit until such Bank shall have
furnished to the Agent the requested form, certification, statement or document.
Section 10.15. Several Obligations and Rights of Banks. The
failure of any Bank to make any Loan to be made by it on the date specified
therefor shall not relieve any other Bank of its obligation to make its Loan on
such date, but no Bank shall be responsible for the failure of any other Bank to
make a Loan to be made by such other Bank. The amounts payable at any time
hereunder to each Bank shall be a separate and independent debt, and each Bank
shall be entitled to protect and enforce its rights arising out of this
Agreement, and it shall not be necessary for any other Bank to be joined as an
additional party in any proceeding for such purpose.
Section 10.16. Pro Rata Treatment of Loans, Etc.
(a) Except to the extent otherwise provided: (a) each
borrowing under Section 2.4 shall be made from the Banks, each reduction or
termination of the amount of the Commitments under Section 2.7 shall be applied
to the Commitments of the Banks, and each payment of commitment fee accruing
under Section 2.11 shall be made for the account of the Banks, pro rata
according to the amounts of their respective unused Commitments; (b) each
conversion under Section 2.5 of Loans of a particular type (but not conversions
provided for by Section 3.4), shall be made pro rata among the Banks holding
Loans of such type according to the respective principal amounts of such Loans
by such Banks; (c) each prepayment and payment of principal of or interest on
Loans of a particular type and a particular Interest Period shall be made to the
Agent for the account of the Banks holding Loans of such type and Interest
Period pro rata in accordance with the respective unpaid principal amounts of
such Loans of such Interest Period held by such Banks.
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(b) (i) Immediately upon the issuance by the
Issuing Bank of any Letter of Credit, each Bank shall be deemed to have
irrevocably and unconditionally purchased and received from the Issuing Bank,
without recourse or warranty, an undivided interest and participation equal to
its Commitment Percentage arising in connection with such Letter of Credit and
any security therefor or guaranty pertaining thereto.
(ii) If the Issuing Bank makes any payment
in respect of any Letter of Credit and the Borrowers do not repay or cause to be
repaid the amount of such payment on the date on which the Borrowers are
required to make such repayment, the Issuing Bank shall notify the Banks of such
payment each Bank shall promptly and unconditionally pay to the Issuing Bank in
immediately available funds the amount equal to the Bank's Commitment Percentage
multiplied by the amount of such payment by the Issuing Bank (the "Letter of
Credit Payment"). If a Bank does not make its Letter of Credit Payment available
to the Issuing Bank, such defaulting Bank agrees to pay to the Issuing Bank,
forthwith on demand, such amount together with (i) for the first two days for
which such amount is outstanding, interest thereon on the Federal Funds Rate and
(ii) for each day thereafter, interest thereon at the Variable Rate. The failure
of any Bank to make available to the Issuing Bank its Letter of Credit Payment
shall not relieve any other Bank of its obligation hereunder to make available
to the Issuing Bank its Letter of Credit Payment, but no Bank shall be
responsible for the failure of any other Bank to make available to the Issuing
Bank its Letter of Credit Payment on the date such payment is made.
(iii) Whenever the Issuing Bank receives a
payment in respect of the Borrowers' reimbursement obligation under any Letter
of Credit, including any interest thereon, the Issuing Bank shall promptly pay
to each Bank which has fully funded its participating interest therein, in
immediately available funds, an amount equal to such Bank's Commitment
Percentage multiplied by the payment so received.
(iv) The obligations of each Bank to make
payments to the Issuing Bank in connection with the Issuing Bank's payment in
respect of any Letter of Credit shall be absolute, unconditional and
irrevocable, not subject to any counterclaim, setoff, qualification or exception
whatsoever (other than for the Issuing Bank's gross negligence or willful
misconduct), and shall be made in accordance with the terms and conditions of
this Agreement under all circumstances and irrespective of whether or not any
Borrower may assert or have any claim for any lack of validity or
unenforceability of this Agreement or any of the other Facility Documents; the
existence of any Default or Event of Default; any draft, certificate or other
document presented under a Letter of Credit having been determined to be forged,
fraudulent, invalid or insufficient in any respect or any statement therein
being untrue or inaccurate in any respect; or the existence of any setoff or
defense any Borrower, the Stockholder or any Guarantor may have with respect to
any Loan, any Letter of Credit or any other advance, debt, liability,
obligation, covenant or duty.
Section 10.17. Sharing of Payments Among Banks. If a Bank
shall obtain payment of any principal of or interest on any Loan, or any payment
in respect of any
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participation purchased in a Letter of Credit from the Issuing Bank, made by it
through the exercise of any right of setoff, banker's lien, counterclaim, or by
any other means (including any payment obtained from or charged against any
Guarantor), it shall promptly purchase from the other Banks participations in
(or, if and to the extent specified by such Bank, direct interests in) the Loans
or L/C Credits (as the case may be) made by the other Banks in such amounts, and
make such other adjustments from time to time as shall be equitable to the end
that all the Banks shall share the benefit of such payment (net of any expenses
which may be incurred by such Bank in obtaining or preserving such benefit) pro
rata in accordance with the unpaid principal and interest on the Loans and L/C
Credits (as the case may be) held by each of them. To such end the Banks shall
make appropriate adjustments among themselves (by the resale of participations
sold or otherwise) if such payment is rescinded or must otherwise be restored.
The Borrowers agree that any Bank so purchasing a participation (or direct
interest) in the Loans or L/C Credits made by other Banks may exercise all
rights of setoff, banker's lien, counterclaim or similar rights with respect to
such participation (or direct interest). Nothing contained herein shall require
any Bank to exercise any such right or shall affect the right of any Bank to
exercise, and retain the benefits of exercising, any such right with respect to
any other indebtedness of the Borrowers.
Section 10.18. Duties of Issuing Bank. No action taken or
omitted to be taken by the Issuing Bank under or in connection with the any
Letter of Credit shall put the Issuing Bank under any resulting liability to any
Bank or relieve such Bank of its obligations hereunder to the Issuing Bank. In
the event this Agreement and any Letter of Credit application and agreement are
inconsistent, the terms of this Agreement shall prevail. In determining whether
to issue any Letter of Credit, the Issuing Bank shall have no obligation to the
Banks to make any inquiry into the transaction secured by the Letter of Credit.
In determining whether to pay under any Letter of Credit, the Issuing Bank shall
have no obligation to the Banks other than to confirm that any documents
required to be delivered under such Letter of Credit appear to have been
delivered and that they appear on their face to comply with the requirements of
such Letter of Credit or, in the event there are any discrepancies in such
documents, that the Borrowers have waived such discrepancies.
ARTICLE 11. MISCELLANEOUS.
Section 11.1. Amendments and Waivers. Except as otherwise
expressly provided in this Agreement, any provision of this Agreement may be
amended or modified only by an instrument in writing signed by the Borrowers,
the Agent and the Required Banks, or by the Borrowers and the Agent acting with
the consent of the Required Banks and any provision of this Agreement may be
waived by the Required Banks or by the Agent acting with the consent of the
Required Banks; provided that no amendment, modification or waiver shall, unless
by an instrument signed by all of the Banks or by the Agent acting with the
consent of all of the Banks: (a) increase or extend the term, or extend the time
or waive any requirement for the reduction or termination, of the Commitments,
(b) extend the date fixed for the payment of principal of or interest on any
Loan or any reimbursement obligation or interest under any L/C Document, (c)
reduce the amount of any payment of
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principal thereof or the rate at which interest is payable thereon or any fee
payable hereunder, (d) allow the issuance of one or more Letters of Credit with
any expiry date later than five (5) days prior to the Termination Date, (e)
release any guarantor from its obligations under any guaranty pertaining to the
obligations of the Borrowers under this Agreement, the Notes or any other
Facility Document, (f) release any material collateral securing the obligations
under this Agreement or any other Facility Document, (g) alter the terms of this
Section 11.1, (h) amend the definition of the term "Required Banks" or (i) waive
any of the conditions precedent set forth in Article 4 hereof and provided,
further, that any amendment of Article 10 hereof or any amendment which
increases the obligations of the Agent hereunder shall require the consent of
the Agent. No failure on the part of the Agent or any Bank to exercise, and no
delay in exercising, any right hereunder shall operate as a waiver thereof or
preclude any other or further exercise thereof or the exercise of any other
right. The remedies herein provided are cumulative and not exclusive of any
remedies provided by law.
Section 11.2. Usury. Anything herein to the contrary
notwithstanding, the obligations of the Borrowers under this Agreement and the
Notes shall be subject to the limitation that payments of interest shall not be
required to the extent that receipt thereof would be contrary to provisions of
law applicable to a Bank limiting rates of interest which may be charged or
collected by such Bank.
Section 11.3. Expenses. Subject to the last sentence of this
Section 11.3, the Borrowers shall reimburse the Agent and the Banks on demand
for all costs, expenses, and charges (including, without limitation, fees and
charges of external legal counsel for the Agent and each Bank and costs
allocated by their respective internal legal departments) incurred by the Agent
or the Banks in connection with the preparation, performance, or enforcement
(whether through negotiations, legal proceedings or otherwise) of this Agreement
or the Notes, provided that in the Borrowers shall not be liable for costs,
expenses and charges incurred by the Agent or the Banks as a direct result of a
dispute involving solely one or more of the Agent and the Banks and not
involving any Borrower, any Guarantor, the Stockholder, or any other party to
any one or more Facility Documents. The obligation of the Borrowers to reimburse
(or make direct payment) the Agent for legal fees in connection with the
preparation of this Agreement and related documents through the date hereof
shall be limited to $55,000 in the aggregate, exclusive of disbursements;
provided, that the Borrowers shall not be obligated to pay the legal costs of
the Banks in connection with the preparation and review of this Agreement and
related documents through the date hereof.
Section 11.4. Survival. The obligations of the Borrowers under
Sections 3.1, 3.5 and 11.3 shall survive the repayment of the Loans, the
satisfaction of reimbursement obligations under any L/C Documents and the
termination of the Commitments.
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Section 11.5. Assignment; Participations.
(a) This Agreement shall be binding upon, and shall
inure to the benefit of, the Borrowers, the Agent, the Banks and their
respective successors and assigns, except that the Borrowers may not assign or
transfer its rights or obligations hereunder. Each Bank may, with the prior
written consent of the Agent and, except while a Default exists and is
continuing, the Borrowers (which consent of the Borrowers may not be
unreasonably be withheld) assign, or sell participations in, all or any part of
any Loan or Commitment to another bank or other entity, in which event (i) in
the case of an assignment, upon notice thereof by the Bank to the Borrowers with
a copy to the Agent, the assignee shall have, to the extent of such assignment
(unless otherwise provided therein), the same rights, benefits and obligations
as it would have if it were a Bank hereunder; and (ii) in the case of a
participation, the participant shall have no rights under the Facility Documents
and all amounts payable by the Borrowers under Article 3 shall be determined as
if such Bank had not sold such participation. Any assignment pursuant to this
Section 11.5 shall be in an amount not less than $5,000,000 and shall leave any
assigning Bank that remains a "Bank" hereunder with a Commitment of at least
$2,000,000, except that (i) no such minimum amount will be required to be
transferred or retained if such assignment is necessary or prudent for
regulatory purposes, and (ii) no such minimum amount will be required to be
transferred if the transferee is already a "Bank" hereunder. The agreement
executed by such Bank in favor of the participant shall not give the participant
the right to require such Bank to take or omit to take any action hereunder
except action directly relating to (i) the extension of a payment date with
respect to any portion of the principal of or interest on any amount outstanding
hereunder allocated to such participant, (ii) the reduction of the principal
amount outstanding hereunder or (iii) the reduction of the rate of interest
payable on such amount or any amount of fees payable hereunder to a rate or
amount, as the case may be, below that which the participant is entitled to
receive under its agreement with such Bank. Such Bank may furnish any
information concerning the Borrowers in the possession of such Bank from time to
time to assignees and participants (including prospective assignees and
participants); provided that such Bank shall require any such prospective
assignee or such participant (prospective or otherwise) to agree in writing to
maintain the confidentiality of such information. Notwithstanding any provision
of this Section 11.5 to the contrary, in no event shall any participant have
greater rights with respect to any or all of the Borrowers than those held by
the Bank from which it obtained its participating interest. In connection with
any assignment pursuant to this paragraph (a), the assigning Bank shall pay the
Agent an administrative fee for processing such assignment in the amount of
$2,500.
(b) In addition to the assignments and participations
permitted under paragraph (a) above, any Bank may assign and pledge all or any
portion of its Loans and Note to (i) any affiliate of such Bank or (ii) any
Federal Reserve Bank as collateral security pursuant to Regulation A of the
Board of Governors of the Federal Reserve System and any Operating Circular
issued by such Federal Reserve Bank. No such assignment shall release the
assigning Bank from its obligations hereunder.
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Section 11.6. Notices. Unless the party to be notified
otherwise notifies the other party in writing as provided in this Section, and
except as otherwise provided in this Agreement, notices shall be delivered in
person or sent by overnight courier, facsimile, ordinary mail, cable or telex
addressed to such party at its "Address for Notices" on the signature page of
this Agreement. Notices shall be effective: (a) on the day on which delivered to
such party in person, (b) on the first Banking Day after the day on which sent
to such party by overnight courier, (c) if given by mail, upon receipt, and (d)
if given by facsimile, cable or telex, when the facsimile, cable or telex is
transmitted to the facsimile, cable or telex number as aforesaid; provided that
notices to the Agent and the Banks shall be effective upon receipt.
Section 11.7. Setoff. The Borrowers agree that, in addition to
(and without limitation of) any right of setoff, banker's lien or counterclaim a
Bank may otherwise have, each Bank shall be entitled, at its option, to offset
balances (general or special, time or demand, provisional or final) held by it
for the account of the Borrowers at any of such Bank's offices, in Dollars or in
any other currency, against any amount payable by the Borrowers to such Bank
under this Agreement or such Bank's Note which is not paid when due (regardless
of whether such balances are then due to the Borrowers), in which case it shall
promptly notify the Borrowers and the Agent thereof; provided that such Bank's
failure to give such notice shall not affect the validity thereof. Payments by
the Borrowers hereunder shall be made without setoff or counterclaim.
Section 11.8. Indemnification; Exoneration.
(a) In consideration of the execution and delivery of
this Agreement by the Agent and the Banks, the Borrowers jointly and severally
will defend, indemnify, exonerate and hold harmless each Bank (whether acting as
a Bank or in any other capacity), the Agent and their Affiliates and each of
their respective officers, directors, stockholders, affiliates, trustees,
employee and agents, and each other Person, if any, controlling such Bank or any
of its Affiliates (herein collectively called the "Indemnitees") from and
against any and all actions, causes of action, suits, losses, liabilities and
damages, and expenses in connection therewith, including without limitation
reasonable counsel fees and disbursements incurred in the investigation and
defense of claims and actions (herein collectively called the "Indemnified
Liabilities"), incurred by the Indemnitees or any of them as a result of, or
arising out of or relating to the execution, delivery, performance or
enforcement of this Agreement, the Notes, or any other Facility Document, or any
instrument or document contemplated hereby or thereby by any of the Indemnitees,
or by any act, event or transaction related or attendant thereto or contemplated
hereby or thereby, or any action or inaction by any Indemnitee under or in
connection therewith, or the falseness of any representation or warranty made by
or on behalf of the Borrowers or the Stockholder, except for any Indemnified
Liabilities that are finally judicially determined to have resulted from the any
Indemnitee's gross negligence or willful misconduct, and if and to the extent
that the foregoing may be unenforceable for any reason, the Borrowers hereby
agree to make the maximum contribution to the payment and satisfaction of each
of the
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Indemnified Liabilities that is permissible under applicable law. The
obligations of the Borrowers under this Section 11.8 shall be in addition to any
liability that the Borrowers may otherwise have and shall survive the payment or
prepayment in full or transfer of any Note, the termination of the Bank's
obligations hereunder and the enforcement of any provision hereof or thereof.
(b) (i) In addition to amounts payable as elsewhere
provided in this Agreement, the Borrowers hereby agree to jointly and severally
protect, indemnify, pay and save the Issuing Bank and each Bank harmless from
and against any and all liabilities, claims, losses, damages, costs and expenses
which the Issuing Bank or any Bank may incur or be subject to as a consequence,
direct or indirect, of (A) the issuance of any Letter of Credit other than, in
the case of the Issuing Bank, as a result of its gross negligence or willful
misconduct as determined by a final judgment of a court of competent
jurisdiction or (B) the failure of the Issuing Bank to honor a drawing under
such Letter of Credit as a result of any act or omission, whether rightful or
wrongful, of any present or future de jure or de facto Governmental Authority.
(ii) As between the Borrowers, the Banks and the
Issuing Bank, the Borrowers assume all risks of the acts and omissions of, or
misuse of such Letter of Credit by, the beneficiary of such Letter of Credit. In
furtherance and not in limitation of the foregoing, subject to the provisions of
the Letter of Credit application and agreements, the Issuing Bank and the Banks
shall not be responsible: (A) for the form, validity, sufficiency, accuracy,
genuineness or legal effect of any document submitted to any party in connection
with any party in connection with the application for and issuance of the
Letters of Credit, even if it should prove to be in any or all respects invalid,
insufficient, inaccurate, fraudulent or forged; (B) for the validity or
sufficiency of any instrument transferring or assigning or purporting to
transfer or assign a Letter of Credit or the rights or benefits thereunder or
proceeds thereof, in whole or in part; (C) for failure of the beneficiary of a
Letter of Credit to comply duly with conditions required in order to draw upon
such Letter of Credit (other than conditions expressly stated in such Letter of
Credit); (D) for errors, omissions, interruptions or delays in transmission or
delivery of any message by mail, cable, telegraph, telex, or other similar form
of teletransmission or otherwise, whether or not they be in cipher; (E) for
errors in interpretation of technical terms; (F) for any loss or delay in the
transmission or otherwise of any document required in order to make a drawing
under any Letter of Credit or in the proceeds thereof; (G) for the
misapplication by the beneficiary of any Letter of Credit; and (H) for any
consequence arising from any cause beyond the control of the Issuing Bank and
the Banks, including, without limitation, any act by a Governmental Authority.
None of the above shall affect, impair, or prevent the vesting of any of the
Issuing Bank's rights or powers under this Agreement.
SECTION 11.9. JURISDICTION; IMMUNITIES.
(a) EACH BORROWER HEREBY IRREVOCABLY SUBMITS TO THE
JURISDICTION OF ANY NEW YORK STATE OR UNITED STATES
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FEDERAL COURT SITTING IN NEW YORK COUNTY OVER ANY ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE NOTES, AND THE BORROWERS
HEREBY IRREVOCABLY AGREE THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING
MAY BE HEARD AND DETERMINED IN SUCH NEW YORK STATE OR FEDERAL COURT. THE
BORROWERS IRREVOCABLY CONSENT TO THE SERVICE OF ANY AND ALL PROCESS IN ANY SUCH
ACTION OR PROCEEDING BY THE MAILING OF COPIES OF SUCH PROCESS TO THE BORROWERS
AT THEIR ADDRESS SPECIFIED IN SECTION 11.6. THE BORROWERS AGREE THAT A FINAL
JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE
ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER
PROVIDED BY LAW. THE BORROWERS FURTHER WAIVE ANY OBJECTION TO VENUE IN SUCH
STATE AND ANY OBJECTION TO AN ACTION OR PROCEEDING IN SUCH STATE ON THE BASIS OF
FORUM NON CONVENIENS. THE BORROWERS FURTHER AGREE THAT ANY ACTION OR PROCEEDING
BROUGHT AGAINST THE AGENT SHALL BE BROUGHT ONLY IN NEW YORK STATE OR UNITED
STATES FEDERAL COURT SITTING IN NEW YORK COUNTY. EACH BORROWER, THE AGENT AND
EACH BANK EACH WAIVES ANY RIGHT IT MAY HAVE TO JURY TRIAL.
(b) Nothing in this Section 11.9 shall affect the
right of the Agent or any Bank to serve legal process in any other manner
permitted by law or affect the right of the Agent or any Bank to bring any
action or proceeding against the Borrowers or their property in the courts of
any other jurisdictions.
(c) To the extent that the Borrowers have or
hereafter may acquire any immunity from jurisdiction of any court or from any
legal process (whether from service or notice, attachment prior to judgment,
attachment in aid of execution, execution or otherwise) with respect to itself
or its property, the Borrowers hereby irrevocably waive such immunity in respect
of its obligations under this Agreement and the Notes.
Section 11.10. Table of Contents; Headings. Any table of
contents and the headings and captions hereunder are for convenience only and
shall not affect the interpretation or construction of this Agreement.
Section 11.11. Severability. The provisions of this Agreement
are intended to be severable. If for any reason any provision of this Agreement
shall be held invalid or unenforceable in whole or in part in any jurisdiction,
such provision shall, as to such jurisdiction, be ineffective to the extent of
such invalidity or unenforceability without in any manner affecting the validity
or enforceability thereof in any other jurisdiction or the remaining provisions
hereof in any jurisdiction.
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Section 11.12. Counterparts. This Agreement may be executed in
any number of counterparts, all of which taken together shall constitute one and
the same instrument, and any party hereto may execute this Agreement by signing
any such counterpart.
Section 11.13. Integration. The Facility Documents set forth
the entire agreement among the parties hereto relating to the transactions
contemplated thereby and supersede any prior oral or written statements or
agreements with respect to such transactions.
SECTION 11.14. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED
BY, AND INTERPRETED AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF
NEW YORK.
Section 11.15. Confidentiality. Each Bank and the Agent agrees
(on behalf of itself and each of its affiliates, directors, officers, employees
and representatives) to use reasonable precautions to keep confidential, in
accordance with safe and sound banking practices, any non-public information
supplied to it by the Borrowers pursuant to this Agreement which is identified
by the Borrowers as being confidential at the time the same is delivered to the
Banks or the Agent, provided that nothing herein shall limit the disclosure of
any such information (i) to the extent required by statute, rule, regulation or
judicial process, (ii) to counsel for any of the Banks or the Agent, (iii) to
bank examiners, auditors or accountants, (iv) in connection with any litigation
to which any one or more of the Banks is a party or (v) to any assignee or
participant (or prospective assignee or participant) so long as such assignee or
participant (or prospective assignee or participant) first executes and delivers
to the respective Bank a Confidentiality Agreement in substantially the form of
Exhibit J hereto; and provided finally that in no event shall any Bank or the
Agent be obligated or required to return any materials furnished by the
Borrowers.
Section 11.16. Treatment of Certain Information. Each Borrower
(a) acknowledges that services may be offered or provided to it (in connection
with this Agreement or otherwise) by each Bank or by one or more of their
respective subsidiaries or affiliates and (b) acknowledges that information
delivered to each Bank by the Borrowers may be provided to each such subsidiary
and affiliate.
Section 11.17. Independence of Covenants. All covenants
hereunder shall be given independent effect so that if a particular action or
condition is not permitted by any of such covenants, the fact that it would be
permitted by an exception to, or be otherwise within the limitations of, another
covenant shall not avoid the occurrence of a Default or Event of Default if such
action is taken or condition exists.
Section 11.18. Multiple Borrowers.
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(a) It is understood and agreed by each Borrower that
the handling of this credit facility on a joint borrowing basis as set forth in
this Agreement is solely as an accommodation to the Borrowers and at their
request, and that neither the Agent nor any Bank shall incur liability to the
Borrowers as a result thereof. To induce the Agent and the Banks to do so and in
consideration thereof, each Borrower hereby agrees to jointly and severally
indemnify the Agent and the Banks and to hold the Agent and the Banks harmless
from and against any and all liabilities, expenses, losses, damages and claims
of damage or injury asserted against the Agent or the Banks by any Borrower or
by any other Person arising from or incurred by reason of the Agent or any
Banks' handling of the financing arrangements of the Borrowers as provided
herein, reliance by the Agent or the Banks on any request or instruction from
Amscan Inc. or any other Borrower or any other action taken by the Agent or the
Banks with respect to this Section 11.18, except for any liabilities, expenses,
losses, damages and claims of damage or injury that are finally judicially
determined to have resulted from the Agent or any Bank's gross negligence or
willful misconduct, and if and to the extent that the foregoing may be
unenforceable for any reason, the Borrowers hereby agree to make the maximum
contribution to the payment and satisfaction of each of the liabilities,
expenses, losses, damages and claims of damage or injury that is permissible
under applicable law.
(b) Each Borrower represents and warrants to the
Agent and the Banks that the request for joint handling of the Loans to be made
by the Banks hereunder and the Letters of Credit to be issued by the Issuing
Bank was made because the Borrowers are engaged in an integrated operation which
required financing on a basis permitting the availability of credit from time to
time to each Borrower as required for the continued successful operation of each
Borrower of the integrated operation of the Borrowers. Each Borrower expects to
derive benefit, directly or indirectly, from such availability because the
successful operation of the Borrowers is dependent on the continued successful
performance of the functions of the integrated group.
(c) Each Borrower hereby irrevocably designates
Amscan Inc. as its attorney to borrow, sign and endorse notes, and execute and
deliver all instruments, documents, writings and further assurances now or
hereafter required hereunder, on behalf of each Borrower, and does hereby
authorize the Agent or the Banks to pay over or credit all Loan proceeds
hereunder to Amscan Inc. as the Borrowers' attorney in fact, recognizing,
however, that the Agent and the Banks are not bound by such authorization and
may elect either to disburse loan proceeds to each Borrower directly for its
use, to Amscan Inc. as attorney for any Borrower or to Amscan Inc. for its own
account, in which case Amscan Inc. may advance or lend such proceeds to the
other Borrowers. Each Borrower further agrees that all obligations hereunder or
referred to herein or under any other Facility Document shall be joint and
several, and that each Borrower shall make payment upon any notes issued
pursuant hereto and any and all other obligations hereunder or referred to
herein or under any other Facility Document upon their maturity by acceleration
or otherwise, and that such obligation and liability on the part of each
Borrower shall in no way be affected by any extensions, renewals and
forbearances granted by the Agent or the Banks to any Borrower,
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failure of the Agent or the Banks to give any Borrower notice of borrowing or
any other notice, any failure of the Agent or the Banks to pursue or preserve
its rights against any other Borrower, the release by the Agent or the Banks of
any collateral now or hereafter acquired from any Borrower, failure of the Agent
or the Banks to realize upon such collateral in a commercially reasonable
manner, and that such agreement by each Borrower to pay upon any notice issued
pursuant hereto is unconditional and unaffected by prior recourse by the Agent
or the Banks to the other Borrowers or any collateral for such Borrowers'
obligations or the lack thereof. Each Borrower further agrees that its
obligations under this Section 11.18 include, without limitation, the joint and
several obligation to repay L/C Credits, even if the Letters of Credit issued in
connection with such L/C Credits are issued on account of fewer than all of the
Borrowers.
(d) Each Borrower hereby grants a right of
contribution to each other Borrower for any amount paid by such other Borrower
in satisfaction of any obligations under this Agreement, any Note or any other
Facility Document; provided, however, that the aggregate of the rights of
contribution against any Borrower hereunder shall not exceed such Borrower's net
worth, as measured on a fair value balance sheet basis. In calculating the net
worth of any Borrower for purposes of this paragraph, such Borrower's
obligations under the Facility Documents will not be included in its liabilities
and such Borrower's rights of contribution against other Borrowers for amounts
paid under the Facility Documents will not be included in its assets.
(e) All notices to, or other communications with, the
Borrowers or any one of them shall be sufficient if given to any of the
Borrowers. Although the Agent and the Banks may require that all of the
Borrowers or a particular Borrower execute any document (including any Notice of
Borrowing) in any matter pertaining to this Agreement or any of the other
Facility Documents, any one of the Borrowers may bind all of the Borrowers and
any document (including any Notice of Borrowing) signed by any Borrower, and any
and all action taken by any Borrower, is sufficient to represent all of the
Borrowers. Without limiting the foregoing, any single Borrower may make
representations and warranties on behalf of all the Borrowers or any other
Borrower, and such representations and warranties shall be of the same force and
effect as if made directly by such other Borrowers.
Section 11.19 Time of the Essence. Time and punctuality shall
be of the essence with respect to this instrument, but no delay or failure of
the Agent or any Bank to enforce any of the provisions herein contained and no
conduct or statement of the Agent or any Bank shall waive or affect any of the
Agent's or any Bank's rights hereunder.
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the day and year first above written.
AMSCAN INC.
By /s/ John A. Svenningsen
------------------------
John A. Svenningsen
President
KOOKABURRA USA, LTD.
By /s/ John A. Svenningsen
------------------------
John A. Svenningsen
President
DECO PAPER PRODUCTS, INC.
By /s/ John A. Svenningsen
------------------------
John A. Svenningsen
President
TRISAR, INC.
By /s/ John A. Svenningsen
------------------------
John A. Svenningsen
President
Address for Notices for Each Borrower:
2 Macy Road
Harrison, New York 10528
Facsimile No.: (914) 835-4239
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AGENT:
THE CHASE MANHATTAN BANK, N.A.
By /s/ Carol A. Kornbluth
----------------------
Carol A. Kornbluth
Vice President
Address for Notices:
31 Mamaroneck Avenue
White Plains, New York 10601
Attn: Carol A. Kornbluth
Facsimile No.: (914) 328-8373
BANKS:
THE CHASE MANHATTAN BANK, N.A.
By /s/ Carol A. Kornbluth
----------------------
Carol A. Kornbluth
Vice President
Address for Notices:
31 Mamaroneck Avenue
White Plains, New York 10601
Attn: Carol A. Kornbluth
Facsimile No.: (914) 328-8373
-71-
<PAGE> 78
NATWEST BANK N.A.
By /s/ Charles F. Houghton, Jr.
----------------------------
Name: Charles F. Houghton, Jr.
Title: Vice President
Address for Notices:
244 Westchester Avenue
White Plains, NY 10604
FAX: (914) 681-5045
Facsimile No.:
------------
FIRST FIDELITY BANK, N.A.
By /s/ Toby A. Brandon
-----------------------------
Name: Toby A. Brandon
Title: Vice President
Address for Notices:
3 Skyline Drive
Hawthorne, NY 10532
Facsimile No.: 914-247-5274
-72-
<PAGE> 79
FLEET BANK
By /s/ Michael J. DiSalvo
-----------------------------
Name: Michael J. DiSalvo
Title: Vice President
Address for Notices:
FLEET BANK
1051 Union Ave. NY/NB/0200
P.O. Box 911
Newburgh, NY 12550
Facsimile No.: (914) 567-5034
-73-
<PAGE> 80
EXHIBIT A
PROMISSORY NOTE
$[Commitment of Bank X]
September 20, 1995
AMSCAN INC., a corporation organized under the laws of the
State of New York, KOOKABURRA USA, LTD., a corporation organized under the laws
of the State of New York, DECO PAPER PRODUCTS, INC., a corporation organized
under the laws of the State of Kentucky and TRISAR, INC., a corporation
organized under the laws of the State of California (collectively, the
"Borrowers"), for value received, hereby jointly and severally promises to pay
to the order of [BANK X] (the "Bank") at the principal office of THE CHASE
MANHATTAN BANK, N.A. at One Chase Manhattan Plaza, New York, New York 10082 (the
"Agent"), for the account of the appropriate Lending Office of the Bank, the
principal sum of [Commitment of Bank X] ($[Commitment of Bank X]) or, if less,
the amount loaned by the Bank to the Borrower pursuant to the Credit Agreement
referred to below, in lawful money of the United States of America and in
immediately available funds, on the date(s) and in the manner provided in said
Credit Agreement. The Borrower also promises to pay interest on the unpaid
principal balance hereof, for the period such balance is outstanding, at said
principal office for the account of said Lending Office, in like money, at the
rates of interest as provided in the Credit Agreement described below, on the
date(s) and in the manner provided in said Credit Agreement.
The date and amount of each type of Loan made by the Bank to
the Borrower under the Credit Agreement referred below, and each payment of
principal thereof, shall be recorded by the Bank on its books and, prior to any
transfer of this Note (or, at the discretion of the Bank, at any other time),
endorsed by the Bank on the schedule attached hereto or any continuation
thereof.
This is one of the Notes referred to in, and is entitled to
the benefits of, that certain Credit Agreement (as amended from time to time the
"Credit Agreement") dated as of September 20, 1995 among the Borrower, the Banks
named therein (including the Bank) and the Agent and evidences the Loans made by
the Bank thereunder. All terms not defined herein shall have the meanings given
to them in the Credit Agreement.
The Credit Agreement provides for the acceleration of the
maturity of principal upon the occurrence of certain Events of Default and for
prepayments on the terms and conditions specified therein.
<PAGE> 81
The Borrower waives presentment, notice of dishonor, protest
and any other notice or formality with respect to this Note.
This Note shall be governed by, and interpreted and construed
in accordance with, the laws of the State of New York.
AMSCAN INC.
By__________________________________________
John A. Svenningsen
President
KOOKABURRA USA, LTD.
By__________________________________________
John A. Svenningsen
President
DECO PAPER PRODUCTS, INC.
By__________________________________________
John A. Svenningsen
President
TRISAR, INC.
By__________________________________________
John A. Svenningsen
President
-2-
<PAGE> 82
AMOUNT OF AMOUNT OF BALANCE
DATE LOAN PAYMENT OUTSTANDING NOTATION BY
-3-
<PAGE> 83
EXHIBIT B
__________________, 19__
[Name and Address
of Agent]
Attn: [_______________]
Re: Credit Agreement dated as of September 20, 1995 (the "Credit
Agreement") among Amscan Inc., Kookaburra USA, Ltd., Deco Paper
Products, Inc. and Trisar, Inc., the Banks named therein, and The Chase
Manhattan Bank, N.A., as Agent for said Banks
Ladies and Gentlemen:
In connection with the captioned Credit Agreement, we hereby
designate any one of the following persons to give to you instructions,
including notices required pursuant to the Agreement, orally or by telephone or
teleprocess:
NAME (Typewritten) SIGNATURE
__________________________ __________________________
__________________________ __________________________
__________________________ __________________________
__________________________ __________________________
__________________________ __________________________
Instructions may be honored on the oral, telephonic or
teleprocess instructions of anyone purporting to be any one of the above
designated persons (even if the instructions are for the benefit of the person
delivering them). We will furnish you with confirmation of each such instruction
either by telex (whether tested or untested) or in writing signed by any person
designated above (including any facsimile which appears to bear the signature of
any person designated above) on the same day that the instruction is provided to
you but your responsibility with respect to any instruction shall not be
affected by your failure to receive such confirmation or by its contents.
You shall be fully protected in, and shall incur no liability
to us for, acting upon any instructions which you in good faith believe to have
been given by any person designated above, and in no event shall you be liable
for special, consequential or punitive damages. In addition, we agree to hold
you and your agents harmless from any and all liability, loss and expense
arising directly or indirectly out of instructions that we provide
<PAGE> 84
to you in connection with the Credit Agreement except for liability, loss or
expense occasioned by the gross negligence or willful misconduct of you or your
agents.
Upon notice to us, you may, at your option, refuse to execute
any instruction, or part thereof, without incurring any responsibility for any
loss, liability or expense arising out of such refusal if you in good faith
believe that the person delivering the instruction is not one of the persons
designated above or if the instruction is not accompanied by an authentication
method that we have agreed to in writing.
We will promptly notify you in writing of any change in the
persons designated above and, until you have actually received such written
notice and have had a reasonable opportunity to act upon it, you are authorized
to act upon instructions, even though the person delivering them may no longer
be authorized.
Very truly yours,
AMSCAN INC.
By__________________________________________
Name:
Title:
By__________________________________________
Name:
Title:
-2-
<PAGE> 85
EXHIBIT C
ENVIRONMENTAL INDEMNIFICATION AGREEMENT
ENVIRONMENTAL INDEMNIFICATION AGREEMENT, made as of this 20th
day of September, 1995, by AMSCAN INC., KOOKABURRA USA, LTD., DECO PAPER
PRODUCTS, INC. and TRISAR, INC., corporations having an address at 2 Macy Road,
Harrison, New York 10528, (collectively, the "Borrowers"), in favor of THE CHASE
MANHATTAN BANK, N.A., a national banking association having an address at 31
Marmaroneck Avenue, White Plains, New York 10606, as Agent (the "Agent") for the
banks (the "Banks") parties to the Credit Agreement (as hereinafter defined).
WHEREAS, the Banks and the Agent have entered into a Credit
Agreement dated as of September 20, 1995 (said Agreement, as it may hereafter be
amended or otherwise modified from time to time being the "Credit Agreement,"
the terms defined therein and not otherwise defined herein being used herein as
therein defined) with the Borrowers; and
WHEREAS, it is a condition precedent to the making of loans by
the Banks under the Credit Agreement (the "Loans") that the Borrowers shall have
executed and delivered this Agreement.
NOW, THEREFORE, in consideration of the premises and in order
to induce the Banks to make the Loans under the Credit Agreement, the Borrowers
hereby agree, as follows:
1. The Borrowers shall comply in all material respects with
present and future Environmental Laws applicable to the business and properties
of the Borrowers and the Borrowers shall not handle, use, store, treat,
transport or dispose of, at, upon, within or under any property or facility used
or to be used by any Borrower any Hazardous Materials, other than in compliance
with all Environmental Laws.
2. The Borrowers shall defend and indemnify the Bank and hold
the Agent and the Banks harmless from and against all loss, liability, damage,
costs and expenses (including, without limitation, reasonable attorneys' fees
and costs incurred in the investigation, defense and settlement of claims) that
the Agent or any Bank may suffer, incur, be put to, pay or lay out as a result
of or in connection with (a) the proving false of any representation of any
Borrower concerning Environmental Laws or Hazardous Materials, including the
representations set forth in Section 5.12 of the Credit Agreement, (b)
non-compliance by any Borrower with the Environmental Laws, and (c) the presence
of any discharge, spillage, uncontrolled loss or seepage of, or any Borrower's
disposal of or arrangement for disposal of, any Hazardous Materials at, upon,
under, within or from any property or facility now or hereafter owned or used by
any Borrower or for third party claims for injuries resulting from the onsite or
offsite migration of such discharge, spillage,
<PAGE> 86
uncontrolled loss or seepage of any Hazardous Materials. The obligations the
Borrowers hereunder or referred to herein shall be joint and several.
3. The terms of Section 2 of this Agreement shall survive the
payment in full of all obligations of the Borrower under the terms of the Credit
Agreement and the other Facility Documents.
4. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of New York.
IN WITNESS WHEREOF, the foregoing instrument was executed as
of the day and year first above written.
AMSCAN INC.
By _________________________________________
Sheryl B. Mellin
Treasurer
KOOKABURRA USA, LTD.
By _________________________________________
Sheryl B. Mellin
Treasurer
DECO PAPER PRODUCTS, INC.
By _________________________________________
Sheryl B. Mellin
Treasurer
TRISAR, INC.
By _________________________________________
Sheryl B. Mellin
Treasurer
-2-
<PAGE> 87
EXHIBIT D
GUARANTY
GUARANTY dated as of ____________, 19__ made by the
undersigned (the "Guarantor"), in favor of the banks (the "Banks") parties to
the Credit Agreement (as defined below) and The Chase Manhattan Bank, N.A., as
agent (the "Agent") for the Banks.
PRELIMINARY STATEMENTS: Amscan, Inc., Kookaburra USA, Ltd.,
Deco Paper Products, Inc. and Trisar, Inc. (collectively, the "Borrowers"), the
Banks and the Agent have entered into a Credit Agreement dated as of September
20, 1995 (said Credit Agreement being hereinafter referred to as the "Credit
Agreement"; the terms defined therein being used herein as therein defined
unless otherwise defined herein), regarding a credit facility in the original
principal amount of $50,000,000, increasing to $55,000,000 in its second year
and $60,000,000 in its third (the "Facility"). The Guarantor is an affiliated
company of the Borrowers and is financially interested in its affairs. Pursuant
to Section 6.10 of the Credit Agreement, the Borrowers have agreed to deliver to
the Agent the guaranty of the Guarantor in the form of this Guaranty. It is a
condition precedent to the making of additional Loans by the Banks under the
Credit Agreement that the Guarantor shall have executed and delivered this
Guaranty.
THEREFORE, in consideration of this Guaranty and in order to
induce the Banks to make Loans under the Credit Agreement, the Guarantor agrees
as follows:
Section 1. Guaranty of Payment.
(a) The Guarantor unconditionally and irrevocably
guarantees to the Agent and the Banks the punctual payment of all sums now owing
or which may in the future be owing by the Borrowers under the Facility, when
the same are due and payable, whether on demand, at stated maturity, by
acceleration or otherwise, and whether for principal, interest, fees, expenses,
indemnification or otherwise (all of the foregoing sums being the
"Liabilities"). The Liabilities include, without limitation, interest accruing
after the commencement of a proceeding under bankruptcy, insolvency or similar
laws of any jurisdiction at the rate or rates provided in the Facility
Documents. This Guaranty is a guaranty of payment and not of collection only.
Neither the Agent nor any Bank shall be required to exhaust any right or remedy
or take any action against the Borrower or any other person or entity or any
collateral. The Guarantor agrees that, as between the Guarantor and the Agent
and the Banks, the Liabilities may be declared to be due and payable for the
purposes of this Guaranty notwithstanding any stay, injunction or other
prohibition which may prevent, delay or vitiate any declaration as regards the
Borrowers and that, in the event of a declaration or attempted declaration, the
Liabilities shall immediately become due and payable by the Guarantor for the
purposes of this Guaranty.
<PAGE> 88
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(b) The maximum liability of the Guarantor under this
Guaranty and the other Facility Documents shall not exceed an amount which would
render the Guarantor insolvent under applicable federal and state laws.
Section 2. Guaranty Absolute. The Guarantor guarantees that
the Liabilities shall be paid strictly in accordance with the terms of the
Credit Agreement, the Notes and the other Facility Documents. The liability of
the Guarantor under this Guaranty is absolute and unconditional irrespective of:
(a) any change in the time, manner or place of payment of, or in any other term
of, all or any of the Facility Documents or Liabilities, or any other amendment
or waiver of or any consent to departure from any of the terms of any Facility
Document or Liability; (b) any release or amendment or waiver of, or consent to
departure from, any other guaranty or support document, or any exchange, release
or non-perfection of any collateral, for all or any of the Facility Documents or
Liabilities; (c) any present or future law, regulation or order of any
jurisdiction (whether of right or in fact) or of any agency thereof purporting
to reduce, amend, restructure or otherwise affect any term of any Facility
Document or Liability; (d) without being limited by the foregoing, any lack of
validity or enforceability of any Facility Document or Liability; (e) any other
defense whatsoever which might constitute a defense available to, or discharge
of, the Borrowers or a guarantor.
Section 3. Guaranty Irrevocable. This Guaranty is a continuing
guaranty and shall remain in full force and effect until the indefeasible
payment in full of all Liabilities and other amounts payable under this Guaranty
and until the Facility is no longer in effect.
Section 4. Reinstatement. This Guaranty shall continue to be
effective or be reinstated, as the case may be, if at any time any payment of
any of the Liabilities is rescinded or must otherwise be returned by the Agent
or any Bank on the insolvency, bankruptcy or reorganization of any Borrower or
otherwise, all as though the payment had not been made.
Section 5. Subrogation. The Guarantor shall not exercise any
rights which it may acquire by way of subrogation, by any payment made under
this Guaranty or otherwise, until all the Liabilities have been paid in full and
the Facility is no longer in effect. If any amount is paid to the Guarantor on
account of subrogation rights under this Guaranty at any time when all the
Liabilities have not been paid in full, the amount shall be held in trust for
the benefit of the Agent and the Banks and shall be promptly paid to the Agent
and the Banks to be credited and applied to the Liabilities, whether matured or
unmatured or absolute or contingent, in accordance with the terms of the Credit
Agreement. If the Guarantor makes payment to the Agent and the Banks of all or
any part of the Liabilities and all the Liabilities are paid in full and the
Facility is no longer in effect, the Agent and the Banks shall, at the
Guarantor's request, execute and deliver to the Guarantor appropriate documents,
without recourse and without representation or warranty, necessary to evidence
the transfer by subrogation to the Guarantor of any interest in the Liabilities
resulting from the payment.
<PAGE> 89
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Section 6. Subordination. Without limiting the Agent's or any
Bank's rights under any other agreement, any liabilities owed by any Borrower to
the Guarantor in connection with any extension of credit or financial
accommodation by the Guarantor to or for the account of such Borrower, including
but not limited to interest accruing at the agreed contract rate after the
commencement of a bankruptcy or similar proceeding, are hereby subordinated to
the Liabilities, and such liabilities of any Borrower to the Guarantor, if the
Agent so requests, shall be collected, enforced and received by the Guarantor as
trustee for the Agent and the Banks and shall be paid over to the Agent and the
Banks on account of the Liabilities but without reducing or affecting in any
manner the liability of the Guarantor under the other provisions of this
Guaranty.
Section 7. Representations and Warranties. The Guarantor
hereby represents and warrants that:
(a) Incorporation, Good Standing and Due
Qualification. The Guarantor and each of its Subsidiaries is duly incorporated,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation, has the corporate power and authority to own its assets and to
transact the business in which it is now engaged or proposed to be engaged, and
is duly qualified as a foreign corporation and in good standing under the laws
of each other jurisdiction in which such qualification is required.
(b) Corporate Power and Authority; No Conflicts. The
execution, delivery and performance by the Guarantor of the Facility Documents
to which it is a party have been duly authorized by all necessary corporate
action and do not and will not: (i) require any consent or approval of its
stockholders; (ii) contravene its charter or by-laws; (iii) violate any
provision of, or require any filing (other than the filing of the financing
statements contemplated by the Security Agreement), registration, consent or
approval under, any law, rule, regulation (including, without limitation,
Regulation U), order, writ, judgment, injunction, decree, determination or award
presently in effect having applicability to the Guarantor or any of its
Subsidiaries; (iv) result in a breach of or constitute a default or require any
consent under any indenture or loan or credit agreement or any other agreement,
lease or instrument to which the Guarantor is a party or by which it or its
properties may be bound or affected; (v) result in, or require, the creation or
imposition of any Lien (other than as created under the Security Agreement),
upon or with respect to any of the properties now owned or hereafter acquired by
the Guarantor; or (vi) cause the Guarantor or any Subsidiary to be in default
under any such law, rule, regulation, order, writ, judgment, injunction, decree,
determination or award or any such indenture, agreement, lease or instrument.
(c) Legally Enforceable Agreements. Each Facility
Document to which the Guarantor is a party is, or when delivered under this
Agreement will be, a legal, valid and binding obligation of the Guarantor
enforceable against the Guarantor in accordance with its terms, except to the
extent that such enforcement may be limited by applicable bankruptcy, insolvency
and other similar laws affecting creditors' rights generally and by equitable
principles relating to availability of equitable remedies.
<PAGE> 90
-4-
(d) Litigation. There are no actions, suits or
proceedings pending or, to the knowledge of the Guarantor, threatened, against
or affecting the Guarantor or any of its Subsidiaries before any court,
governmental agency or arbitrator, which may, in any one case or in the
aggregate, materially adversely affect the financial condition, operations,
properties or business of the Guarantor or any such Subsidiary or of the ability
of the Guarantor to perform its obligations under the Facility Documents to
which it is a party.
(e) Solvency.
(i) The present fair saleable value of the
assets of the Guarantor, before giving effect to all the transactions
contemplated by the Facility Documents and the funding of all Commitments under
the Credit Agreement, exceeds the amount that will be required to be paid on or
in respect of the existing debts and other liabilities (including contingent
liabilities) of the Guarantor as they mature.
(ii) The property of the Guarantor does not
constitute unreasonably small capital for the Guarantor to carry out its
business as now conducted and as proposed to be conducted, including the capital
needs of the Guarantor.
(iii) The Guarantor does not intend to, nor
does it believe that it will, incur debts beyond its ability to pay such debts
as they mature (taking into account the timing and amounts of cash to be
received by the Guarantor, and of amounts to be payable on or in respect of debt
of the Guarantor).
(f) Taxes. The Guarantor has filed all tax returns
(federal, state and local) required to be filed and has paid all taxes,
assessments and governmental charges and levies thereon to be due, including
interest and penalties.
(g) No Default. The Guarantor has satisfied all
judgments and is not in default with respect to any judgment, writ, injunction,
decree, rule or regulation of any court, arbitrator or federal, state, municipal
or other governmental authority, commission, board, bureau, agency or
instrumentality, domestic or foreign.
Section 8. Remedies Generally. The remedies provided in this
Guaranty are cumulative and not exclusive of any remedies provided by law.
Section 9. Setoff. The Guarantor agrees that, in addition to
(and without limitation of) any right of setoff, banker's lien or counterclaim
the Agent or any Bank may otherwise have, the Agent and any Bank shall be
entitled, at their option, to offset balances (general or special, time or
demand, provisional or final) held by them for the account of the Guarantor at
any of the Agent's or such Bank's offices, in U.S. dollars or in any other
currency, against any amount payable by the Guarantor under this Guaranty which
is not paid when due following any applicable notice and cure periods
(regardless of whether such balances are then due to the Guarantor), in which
case it shall promptly
<PAGE> 91
-5-
notify the Guarantor thereof; provided that the Agent's or any Bank's failure to
give such notice shall not affect the validity thereof.
Section 10. Formalities. The Guarantor waives presentment,
notice of dishonor, protest, notice of acceptance of this Guaranty or incurrence
of any Liability and any other formality with respect to any of the Liabilities
or this Guaranty.
Section 11. Amendments and Waivers. No amendment or waiver of
any provision of this Guaranty, nor consent to any departure by the Guarantor
therefrom, shall be effective unless it is in writing and signed by the Agent
and the Banks, and then the waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given. No failure on
the part of the Agent or any Bank to exercise, and no delay in exercising, any
right under this Guaranty shall operate as a waiver or preclude any other or
further exercise thereof or the exercise of any other right.
Section 12. Expenses. The Guarantor shall reimburse the Agent
and the Banks on demand for all costs, expenses and charges (including without
limitation fees and charges of external legal counsel for the Agent and the
Banks and costs allocated by their internal legal departments) incurred by the
Agent and the Banks in connection with the preparation, performance or
enforcement of this Guaranty. The obligations of the Guarantor under this
Section shall survive the termination of this Guaranty.
Section 13. Assignment. This Guaranty shall be binding on, and
shall inure to the benefit of, the Guarantor, the Agent, the Banks and their
respective successors and assigns; provided that the Guarantor may not assign or
transfer its obligations under this Guaranty. Without limiting the generality of
the foregoing: (a) the obligations of the Guarantor under this Guaranty shall
continue in full force and effect and shall be binding on: (i) the estate of the
Guarantor if the Guarantor is an individual; and (ii) any successor partnership
and on previous partners and their respective estates if the Guarantor is a
partnership, regardless of any change in the partnership as a result of death,
retirement or otherwise; and (b) the Agent and any Bank may assign, sell
participations in or otherwise transfer their rights under the Facility to any
other person or entity, and the other person or entity shall then become vested
with all the rights granted to the Agent or such Bank in this Guaranty or
otherwise.
Section 14. Captions. The headings and captions in this
Guaranty are for convenience only and shall not affect the interpretation or
construction of this Guaranty.
Section 15. Governing Law, Etc. THIS GUARANTY SHALL BE
GOVERNED BY THE LAW OF THE STATE OF NEW YORK. THE GUARANTOR CONSENTS TO THE
NON-EXCLUSIVE JURISDICTION AND VENUE OF THE STATE OR FEDERAL COURTS LOCATED IN
THE STATE OF NEW YORK. SERVICE OF PROCESS BY THE AGENT OR ANY BANK IN CONNECTION
WITH ANY SUCH DISPUTE SHALL BE BINDING ON THE GUARANTOR IF SENT TO THE GUARANTOR
BY REGISTERED MAIL AT THE ADDRESS SPECIFIED BELOW OR AS OTHERWISE SPECIFIED BY
THE GUARANTOR FROM TIME TO
<PAGE> 92
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TIME. THE GUARANTOR WAIVES ANY RIGHT THE GUARANTOR MAY HAVE TO JURY TRIAL. TO
THE EXTENT THAT THE GUARANTOR HAS OR HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM
JURISDICTION OF ANY COURT OR FROM ANY LEGAL PROCESS (WHETHER FROM SERVICE OR
NOTICE, ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID OF EXECUTION OF A
JUDGMENT, EXECUTION OR OTHERWISE), THE GUARANTOR HEREBY IRREVOCABLY WAIVES SUCH
IMMUNITY IN RESPECT OF ITS OBLIGATIONS UNDER THIS GUARANTY.
IN WITNESS WHEREOF, the Guarantor has duly executed and
delivered this Guaranty.
[NAME OF GUARANTOR]
___________________________________
By:
Its:
Address:
<PAGE> 93
EXHIBIT E-1
PLEDGE AGREEMENT
---------
PLEDGE AGREEMENT dated September 20, 1995, made
by , a corporation (the "Pledgor"), in favor of
------------ ---------
The Chase Manhattan Bank, N.A., as agent (the "Agent") for the banks
(the "Banks") parties to the Credit Agreement (as hereinafter defined).
PRELIMINARY STATEMENTS:
(1) The Banks and the Agent have entered into a Credit
Agreement dated as of September 20, 1995 (said Agreement, as it may hereafter be
amended or otherwise modified from time to time, being the "Credit Agreement,"
the terms defined therein and not otherwise defined herein being used herein as
therein defined) with the Pledgor, ,
--------------------- -------------------
and (collectively, the "Borrowers"). The Pledgor will receive
------------
a portion of the proceeds of the Loans under the Credit Agreement and will
derive substantial direct and indirect benefit from the transactions
contemplated by the Credit Agreement.
(2) The Pledgor is the owner of the indebtedness (the "Pledged
Debt") described in Schedule I hereto and issued by the obligors named therein.
(3) It is a condition precedent to the making of Loans by the
Banks, and issuance of Letters of Credit, under the Credit Agreement that the
Pledgor shall have made the pledge contemplated by this Agreement.
NOW, THEREFORE, in consideration of the premises and in order
to induce the Banks to make Loans under the Credit Agreement, the Pledgor hereby
agrees with the Agent for its benefit and the ratable benefit of the Banks as
follows:
SECTION 1. Pledge. The Pledgor hereby pledges to the Agent for
its benefit and the ratable benefit of the Banks, and grants to the Agent for
its benefit and the ratable benefit of the Banks a security interest in, the
following (the "Pledged Collateral"):
(a) the Pledged Debt and the instruments evidencing
the Pledged Debt, and all interest, cash, instruments and other property from
time to time received, receivable or otherwise distributed in respect of or in
exchange for any or all of the Pledged Debt; and
(b) all additional indebtedness from time to time
owed to the Pledgor by any obligor of the Pledged Debt or by any other Borrower
or Affiliate and the
<PAGE> 94
2
instruments evidencing such indebtedness, and all interest, cash, instruments
and other property from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all of such indebtedness;
and
(c) all proceeds of any and all of the foregoing
Collateral (including, without limitation, proceeds that constitute property of
the types described above).
SECTION 2. Security for Obligations. This Agreement secures
the payment of all obligations of the Borrowers now or hereafter existing under
the Credit Agreement, the Notes and the other Facility Documents, whether for
principal, interest, fees, expenses or otherwise, and all obligations of the
Pledgor now or hereafter existing under this Agreement (all such obligations of
the Borrowers and the Pledgor being the "Obligations"). Without limiting the
generality of the foregoing, this Agreement secures the payment of all amounts
which constitute part of the Obligations and would be owed by the Borrowers to
the Agent or the Banks under the Credit Agreement, the Notes and the other
Facility Documents but for the fact that they are unenforceable or not allowable
due to the existence of a bankruptcy, reorganization or similar proceeding
involving one or more of the Borrowers.
SECTION 3. Delivery of Pledged Collateral. All instruments
representing or evidencing the Pledged Collateral shall be delivered to and held
by or on behalf of the Agent pursuant hereto and shall be in suitable form for
transfer by delivery, or shall be accompanied by duly executed instruments of
transfer or assignment in blank, all in form and substance satisfactory to the
Agent. The Agent shall have the right, at any time in its discretion and without
notice to the Pledgor, to transfer to or to register in the name of the Agent or
any of its nominees any or all of the Pledged Collateral, subject only to the
revocable rights specified in Section 6(a). In addition, the Agent shall have
the right at any time to exchange instruments representing or evidencing Pledged
Collateral for instruments of smaller or larger denominations.
SECTION 4. Representations and Warranties. The Pledgor
represents and warrants as follows:
(a) The Pledged Debt has been duly authorized,
authenticated or issued and delivered, and is the legal, valid and binding
obligation of the issuers thereof, and is not in default.
(b) The Pledgor is the legal and beneficial owner of
the Pledged Collateral free and clear of any lien, security interest, option or
other charge or encumbrance except for the security interest created by this
Agreement.
<PAGE> 95
3
(c) The pledge of the Pledged Debt pursuant to this
Agreement creates a valid and perfected first priority security interest in the
Pledged Collateral, securing the payment of the Obligations.
(d) No consent of any other person or entity and no
authorization, approval, or other action by, and no notice to or filing with,
any governmental authority or regulatory body is required (i) for the pledge by
the Pledgor of the Pledged Collateral pursuant to this Agreement or for the
execution, delivery or performance of this Agreement by the Pledgor, (ii) for
the perfection or maintenance of the security interest created hereby (including
the first priority nature of such security interest) or (iii) for the exercise
by the Agent of the voting or other rights provided for in this Agreement or the
remedies in respect of the Pledged Collateral pursuant to this Agreement (except
as may be required in connection with any disposition of any portion of the
Pledged Collateral by laws affecting the offering and sale of securities
generally).
(e) The Pledged Debt is outstanding in the principal
amount indicated on Schedule I.
(f) There are no conditions precedent to the
effectiveness of this Agreement that have not been satisfied or waived.
(g) The Pledgor has, independently and without
reliance upon the Agent or any Bank and based on such documents and information
as it has deemed appropriate, made its own credit analysis and decision to enter
into this Agreement.
SECTION 5. Further Assurances. The Pledgor agrees that at any
time and from time to time, at the expense of the Pledgor, the Pledgor will
promptly execute and deliver all further instruments and documents, and take all
further action, that may be necessary or desirable, or that the Agent may
reasonably request, in order to perfect and protect any security interest
granted or purported to be granted hereby or to enable the Agent to exercise and
enforce its rights and remedies hereunder with respect to any Pledged
Collateral.
SECTION 6. Voting Rights; Dividends; Etc.
(a) So long as no Event of Default or event which,
with the giving of notice or the lapse of time, or both, would become an Event
of Default shall have occurred and be continuing:
(i) The Pledgor shall be entitled to
exercise or refrain from exercising any and all
voting and other consensual rights pertaining to the
Pledged Collateral or any part thereof for any
purpose not inconsistent with the terms of this
Agreement or the Credit Agreement; provided, however,
that the Pledgor shall not
<PAGE> 96
4
exercise or refrain from exercising any such right
if, in the Agent's reasonable judgment, such action
would have a material adverse effect on the value of
the Pledged Collateral or any part thereof, and,
provided, further, that, except with respect to the
election of directors, the Pledgor shall give the
Agent at least five days' written notice of the
manner in which it intends to exercise, or the
reasons for refraining from exercising, any such
right.
(ii) The Pledgor shall be entitled to
receive and retain any and all interest paid in
respect of the Pledged Collateral, provided, however,
that any and all
(A) interest paid or payable other
than in cash in respect of, and instruments
and other property received, receivable or
otherwise distributed in respect of, or in
exchange for, any Pledged Collateral,
(B) distributions paid or payable in
cash in respect of any Pledged Collateral in
connection with a partial or total
liquidation or dissolution or in connection
with a reduction of capital, capital surplus
or paid-in-surplus, and
(C) cash paid, payable or otherwise
distributed in respect of principal of, or
in redemption of, or in exchange for, any
Pledged Collateral,
shall be, and shall be forthwith delivered to the
Agent to hold as, Pledged Collateral and shall, if
received by the Pledgor, be received in trust for the
benefit of the Agent, be segregated from the other
property or funds of the Pledgor, and be forthwith
delivered to the Agent as Pledged Collateral in the
same form as so received (with any necessary
endorsement or assignment).
(iii) The Agent shall execute and deliver
(or cause to be executed and delivered) to the
Pledgor all such proxies and other instruments as the
Pledgor may reasonably request for the purpose of
enabling the Pledgor to exercise the voting and other
rights which it is entitled to exercise pursuant to
paragraph (i) above and to receive the interest
payments which it is authorized to receive and retain
pursuant to paragraph (ii) above.
<PAGE> 97
5
(b) Upon the occurrence and during the continuance of
an Event of Default or an event which, with the giving of notice or the lapse of
time, or both, would become an Event of Default:
(i) All rights of the Pledgor to exercise or
refrain from exercising the voting and other
consensual rights which it would otherwise be
entitled to exercise pursuant to Section 6(a)(i) and
to receive the interest payments which it would
otherwise be authorized to receive and retain
pursuant to Section 6(a)(ii) shall cease, and all
such rights shall thereupon become vested in the
Agent who shall thereupon have the sole right to
exercise or refrain from exercising such voting and
other consensual rights and to receive and hold as
Pledged Collateral such dividends and interest
payments.
(ii) All interest payments which are
received by the Pledgor contrary to the provisions of
paragraph (i) of this Section 6(b) shall be received
in trust for the benefit of the Agent, shall be
segregated from other funds of the Pledgor and shall
be forthwith paid over to the Agent as Pledged
Collateral in the same form as so received (with any
necessary endorsement).
SECTION 7. Transfers and Other Liens. The Pledgor agrees that
it will not (i) sell, assign (by operation of law or otherwise) or otherwise
dispose of, or grant any option with respect to, any of the Pledged Collateral,
or (ii) create or permit to exist any lien, security interest, option or other
charge or encumbrance upon or with respect to any of the Pledged Collateral,
except for the security interest under this Agreement.
SECTION 8. Future Indebtedness. The Pledgor hereby agrees that
it will not advance funds or otherwise permit the creation of indebtedness owing
by any Affiliate to the Pledgor unless (i) such indebtedness is expressly
permitted by the Credit Agreement, (ii) such indebtedness is evidenced by a
promissory note, (iii) such promissory note is endorsed by the Pledgor to the
Agent for the ratable benefit of the Banks and (iv) such indebtedness is
subjected to the terms of this Agreement through an Amendment to this Agreement.
SECTION 9. Agent Appointed Attorney-in-Fact. The Pledgor
hereby appoints the Agent the Pledgor's attorney-in-fact, with full authority in
the place and stead of the Pledgor and in the name of the Pledgor or otherwise,
from time to time in the Agent's discretion to take any action and to execute
any instrument which the Agent may deem necessary or advisable to accomplish the
purposes of this Agreement (subject to the rights of the Pledgor under Section
6), including, without limitation, to receive, endorse and collect all
instruments made payable to the Pledgor representing any interest payment
<PAGE> 98
6
or other distribution in respect of the Pledged Collateral or any part thereof
and to give full discharge for the same.
SECTION 10. Agent May Perform. If the Pledgor fails to perform
any agreement contained herein, the Agent may itself perform, or cause
performance of, such agreement, and the expenses of the Agent incurred in
connection therewith shall be payable by the Pledgor under Section 13.
SECTION 11. The Agent's Duties. The powers conferred on the
Agent hereunder are solely to protect its interest in the Pledged Collateral and
shall not impose any duty upon it to exercise any such powers. Except for the
safe custody of any Pledged Collateral in its possession and the accounting for
moneys actually received by it hereunder, the Agent shall have no duty as to any
Pledged Collateral, as to ascertaining or taking action with respect to calls,
conversions, exchanges, maturities, tenders or other matters relative to any
Pledged Collateral, whether or not the Agent or any Bank has or is deemed to
have knowledge of such matters, or as to the taking of any necessary steps to
preserve rights against any parties or any other rights pertaining to any
Pledged Collateral. The Agent shall be deemed to have exercised reasonable care
in the custody and preservation of the Pledged Collateral in its possession if
the Pledged Collateral is accorded treatment substantially equal to that which
the Agent accords its own property.
SECTION 12. Remedies upon Default. If any Event of Default
shall have occurred and be continuing:
(a) The Agent may exercise in respect of the Pledged
Collateral, in addition to other rights and remedies provided for herein or
otherwise available to it, all the rights and remedies of a secured party in
default under the Uniform Commercial Code in effect in the State of New York at
that time (the "Code") (whether or not the Code applies to the affected
Collateral), and may also, without notice except as specified below, sell the
Pledged Collateral or any part thereof in one or more parcels at public or
private sale, at any exchange, broker's board or at any of the Agent's offices
or elsewhere, for cash, on credit or for future delivery, and upon such other
terms as the Agent may deem commercially reasonable. The Pledgor agrees that, to
the extent notice of sale shall be required by law, at least ten days' notice to
the Pledgor of the time and place of any public sale or the time after which any
private sale is to be made shall constitute reasonable notification. The Agent
shall not be obligated to make any sale of Pledged Collateral regardless of
notice of sale having been given. The Agent may adjourn any public or private
sale from time to time by announcement at the time and place fixed therefor, and
such sale may, without further notice, be made at the time and place to which it
was so adjourned.
(b) Any cash held by the Agent as Pledged Collateral
and all cash proceeds received by the Agent in respect of any sale of,
collection from, or other
<PAGE> 99
7
realization upon all or any part of the Pledged Collateral may, in the
discretion of the Agent, be held by the Agent as collateral for, and/or then or
at any time thereafter be applied (after payment of any amounts payable to the
Agent pursuant to Section 13) in whole or in part by the Agent for the ratable
benefit of the Banks against, all or any part of the Obligations in such order
as the Agent shall elect. Any surplus of such cash or cash proceeds held by the
Agent and remaining after payment in full of all the Obligations shall be paid
over to the Pledgor or to whomsoever may be lawfully entitled to receive such
surplus.
SECTION 13. Expenses. The Pledgor will upon demand pay to the
Agent the amount of any and all reasonable expenses, including the reasonable
fees and expenses of its counsel and of any experts and agents, which the Agent
may incur in connection with (i) the administration of this Agreement, (ii) the
custody or preservation of, or the sale of, collection from, or other
realization upon, any of the Pledged Collateral, (iii) the exercise or
enforcement of any of the rights of the Agent or the Banks hereunder or (iv) the
failure by the Pledgor to perform or observe any of the provisions hereof.
SECTION 14. Amendments, Etc. No amendment or waiver of any
provision of this Agreement, and no consent to any departure by the Pledgor
herefrom, shall in any event be effective unless the same shall be in writing
and signed by the Agent, and then such waiver or consent shall be effective only
in the specific instance and for the specific purpose for which given.
SECTION 15. Addresses for Notices. Unless the party to be
notified otherwise notifies the other party in writing as provided in this
Section, and except as otherwise provided in this Agreement, notices shall be
delivered in person or sent by overnight courier, facsimile, ordinary mail,
cable or telex addressed to such party at its address specified in the Credit
Agreement. Notices shall be effective: (a) on the day on which delivered to such
party in person, (b) on the first Banking Day after the day on which sent to
such party by overnight courier, (c) if given by mail, upon receipt, and (d) if
given by facsimile, cable or telex, when the facsimile, cable or telex is
transmitted to the facsimile, cable or telex number as aforesaid; provided that
notices to the Agent and the Banks shall be effective upon receipt.
SECTION 16. Continuing Security Interest; Assignments under
Credit Agreement. This Agreement shall create a continuing security interest in
the Pledged Collateral and shall (i) remain in full force and effect until the
later of (x) the payment in full of the Obligations and all other amounts
payable under this Agreement and (y) the expiration or termination of the
Commitments, (ii) be binding upon the Pledgor, its successors and assigns, and
(iii) inure, together with the rights and remedies of the Agent hereunder, to
the benefit of, and be enforceable by, the Agent, the Banks and their respective
successors, transferees and assigns. Without limiting the generality of the
foregoing clause (iii), any Bank may assign or otherwise transfer all or any
portion of its
<PAGE> 100
8
rights and obligations under the Credit Agreement (including, without
limitation, all or any portion of its Commitment, the Loans owing to it, its
interest in any Letter of Credit and any Note held by it) to any other person or
entity, and such other person or entity shall thereupon become vested with all
the benefits in respect thereof granted to such Bank herein or otherwise,
subject, however, to the provisions of Article X (concerning the Agent) of the
Credit Agreement. Upon the later of payment in full of the Obligations and all
other amounts payable under this Agreement and the expiration or termination of
the Commitments, the security interest granted hereby shall terminate and all
rights to the Pledged Collateral shall revert to the Pledgor. Upon any such
termination, the Agent will, at the Pledgor's expense, return to the Pledgor
such of the Pledged Collateral as shall not have been sold or otherwise applied
pursuant to the terms hereof and execute and deliver to the Pledgor such
documents as the Pledgor shall reasonably request to evidence such termination.
SECTION 17. Governing Law; Terms. This Agreement shall be
governed by, and construed in accordance with, the laws of the State of New
York, except as required by mandatory provisions of law and except to the extent
that the validity or perfection of the security interest hereunder, or remedies
hereunder, in respect of any particular Pledged Collateral are governed by the
laws of a jurisdiction other than the State of New York. Unless otherwise
defined herein or in the Credit Agreement, terms defined in Article 9 of the
Code are used herein as therein defined.
IN WITNESS WHEREOF, the Pledgor has caused this Agreement to
be duly executed and delivered by its officer thereunto duly authorized as of
the date first above written.
AMSCAN INC.
By ____________________________
Sheryl B. Mellin
Treasurer
<PAGE> 101
SCHEDULE I
Attached to and forming a part of that certain Pledge
Agreement dated September 20, 1995, by
, as Pledgor,
--------------
to The Chase Manhattan Bank, N.A., as Agent
<TABLE>
<CAPTION>
Debt Original
Debt Description Certificate Final Principal
Issuer of Debt No(s). Maturity Amount
------ ----------- ----------- -------- ---------
<S> <C> <C> <C> <C>
</TABLE>
<PAGE> 102
EXHIBIT E-2
STOCKHOLDER PLEDGE AGREEMENT
PLEDGE AGREEMENT dated September 20, 1995, made by John A.
Svenningsen, an individual residing at 3 Frederick Court, Harrison, New York
10528 (the "Pledgor"), to The Chase Manhattan Bank, N.A. as agent (the "Agent")
for the banks (the "Banks") parties to the Credit Agreement (as hereinafter
defined):
PRELIMINARY STATEMENTS:
(1) The Banks and the Agent have entered into a Credit
Agreement dated as of even date herewith (said Agreement, as it may hereafter be
amended or otherwise modified from time to time, being the "Credit Agreement,"
the terms defined therein and not otherwise defined herein being used herein as
therein defined) with Amscan Inc., Kookaburra USA, Ltd., Deco Paper Products,
Inc. and Trisar, Inc. (collectively, the "Borrowers"), corporations wholly owned
by the Pledgor.
(2) The Pledgor is the owner of the shares (the "Pledged
Shares") of stock described in Schedule I hereto and issued by the corporations
named therein.
(3) It is a condition precedent to the making of Loans by the
Banks, and the issuance of Letters of Credit, under the Credit Agreement that
the Pledgor shall have made the pledge contemplated by this Agreement.
NOW, THEREFORE, in consideration of the premises and in order
to induce the Banks to make Loans under the Credit Agreement, the Pledgor hereby
agrees with the Agent for its benefit and the ratable benefit of the Banks as
follows:
SECTION 1. Pledge. The Pledgor hereby pledges to the Agent for
its benefit and the ratable benefit of the Banks, and grants to the Agent for
its benefit and the ratable benefit of the Banks a security interest in, the
following (the "Pledged Collateral"):
(a) the Pledged Shares and the certificates
representing the Pledged Shares, and all dividends, cash, instruments and other
property from time to time received, receivable or otherwise distributed in
respect of or in exchange for any or all of the Pledged Shares;
(b) all additional shares of stock of any issuer of
the Pledged Shares from time to time acquired by the Pledgor in any manner, and
the certificates representing such additional shares, and all dividends, cash,
instruments and other property
<PAGE> 103
2
from time to time received, receivable or otherwise distributed in respect of or
in exchange for any or all of such shares; and
(c) all proceeds of any and all of the foregoing
Collateral (including, without limitation, proceeds that constitute property of
the types described above).
SECTION 2. Security for Obligations. The pledge of the Pledged
Shares under this Agreement is given by the Pledgor as security for the payment
of all obligations of the Borrowers now or hereafter existing under the Credit
Agreement, the Notes and the other Facility Documents, whether for principal,
interest, fees, expenses or otherwise, and all obligations of the Pledgor now or
hereafter existing under this Agreement (all such obligations of the Pledgor and
the Borrowers being the "Obligations"). Without limiting the generality of the
foregoing, this Agreement secures the payment of all amounts which constitute
part of the Obligations and would be owed by the Borrowers to the Agent or the
Banks under the Credit Agreement, the Notes and the other Facility Documents but
for the fact that they are unenforceable or not allowable due to the existence
of a bankruptcy, reorganization or similar proceeding involving one or more of
the Borrowers.
SECTION 3. Delivery of Pledged Collateral. All certificates or
instruments representing or evidencing the Pledged Collateral shall be delivered
to and held by or on behalf of the Agent pursuant hereto and shall be in
suitable form for transfer by delivery, or shall be accompanied by duly executed
instruments of transfer or assignment in blank, all in form and substance
satisfactory to the Agent. The Pledgor hereby agrees that, on the earlier of (i)
the termination of that certain Stock Pledge Agreement dated as of November 13,
1993 by and between the Pledgor, E. Allan Shook, L. Randall Harris and Higham,
McConnell & Dunning (the "Trisar Pledge") and (ii) November 14, 1996, the
Pledgor will (x) cause those Pledged Shares representing the Pledgor's interest
in Trisar, Inc. (the "Trisar Shares") to be subject to no pledge or security
interest other than that created under this Agreement and (y) deliver the
certificate representing the Trisar Shares to the Agent to be held by the Agent
for the ratable benefit of the Banks pursuant to this Agreement. The Agent shall
have the right, at any time in its discretion and without notice to the Pledgor,
to transfer to or to register in the name of the Agent or any of its nominees
any or all of the Pledged Collateral, subject only to the revocable rights
specified in Section 6(a). In addition, the Agent shall have the right at any
time to exchange certificates or instruments representing or evidencing Pledged
Collateral for certificates or instruments of smaller or larger denominations.
SECTION 4. Representations and Warranties. The Pledgor
represents and warrants as follows:
(a) The Pledged Shares have been duly authorized and
validly issued and are fully paid and non-assessable.
<PAGE> 104
3
(b) The Pledgor is the legal and beneficial owner of
the Pledged Collateral free and clear of any lien, security interest, option or
other charge or encumbrance except for the security interest created by this
Agreement and the Trisar Pledge.
(c) Except as to the Trisar Shares, the pledge of the
Pledged Shares pursuant to this Agreement creates a valid and perfected first
priority security interest in the Pledged Collateral, securing the payment of
the Obligations. The pledge of the Trisar Shares creates a valid and perfected
second priority security interest in the Trisar Shares.
(d) No consent of any other person or entity and no
authorization, approval, or other action by, and no notice to or filing with,
any governmental authority or regulatory body is required (i) for the pledge by
the Pledgor of the Pledged Collateral pursuant to this Agreement or for the
execution, delivery or performance of this Agreement by the Pledgor, (ii) for
the perfection or maintenance of the security interest created hereby (including
the first priority or, with respect to the Trisar Shares, the second priority,
nature of such security interest) or (iii) for the exercise by the Agent of the
voting or other rights provided for in this Agreement or the remedies in respect
of the Pledged Collateral pursuant to this Agreement (except as may be required
in connection with any disposition of any portion of the Pledged Collateral by
laws affecting the offering and sale of securities generally).
(e) The Pledged Shares constitute the percentage of
the issued and outstanding shares of stock of the respective issuers thereof
indicated on Schedule I.
(f) There are no conditions precedent to the
effectiveness of this Agreement that have not been satisfied or waived.
(g) There are no actions, suits or proceedings
pending or, to the knowledge of the Pledgor, threatened, against or affecting
the Pledgor or any Borrower before any court, governmental agency or arbitrator,
which may, in any one case or in the aggregate, materially adversely affect the
financial condition, operations, properties or business of the Pledgor or any
such Borrower or the ability of the Pledgor or such Borrower to perform his/its
obligations under this Agreement, the Credit Agreement or any other related
document.
(h) The Pledgor has filed all tax returns (federal,
state and local) required to be filed and has paid all taxes, assessments and
governmental charges and levies thereon to be due, including interest and
penalties.
(i) The Pledgor has satisfied all judgments and is
not in default with respect to any judgment, writ, injunction, decree, rule or
regulation of any court,
<PAGE> 105
4
arbitrator or federal, state, municipal or other governmental authority,
commission, board, bureau, agency or instrumentality, domestic or foreign.
(j) The Pledgor has, independently and without
reliance upon the Agent or any Bank and based on such documents and information
as he has deemed appropriate, made his own credit analysis and decision to enter
into this Agreement.
SECTION 5. Further Assurances. The Pledgor agrees that at any
time and from time to time, at the expense of the Pledgor, the Pledgor will
promptly execute and deliver all further instruments and documents, and take all
further action, that may be necessary or desirable, or that the Agent may
reasonably request, in order to perfect and protect any security interest
granted or purported to be granted hereby or to enable the Agent to exercise and
enforce its rights and remedies hereunder with respect to any Pledged
Collateral.
SECTION 6. Voting Rights; Dividends; Etc
(a) So long as no Default or Event of Default shall
have occurred and be continuing:
(i) The Pledgor shall be entitled to
exercise or refrain from exercising any and all
voting and other consensual rights pertaining to the
Pledged Collateral or any part thereof for any
purpose not inconsistent with the terms of this
Agreement or the Credit Agreement; provided, however,
that the Pledgor shall not exercise or refrain from
exercising any such right if, in the Agent's
reasonable judgment, such action would have a
material adverse effect on the value of the Pledged
Collateral or any part thereof, and, provided,
further, that, except with respect to the election of
directors, the Pledgor shall give the Agent at least
five days' written notice of the manner in which he
intends to exercise, or the reasons for refraining
from exercising, any such right.
(ii) The Pledgor shall be entitled to
receive and retain any and all dividends paid in
respect of the Pledged Collateral, provided, however,
that any and all
(A) dividends paid or payable other
than in cash in respect of, and instruments
and other property received, receivable or
otherwise distributed in respect of, or in
exchange for, any Pledged Collateral,
(B) dividends and other
distributions paid or payable in cash in
respect of any Pledged Collateral in
<PAGE> 106
5
connection with a partial or total
liquidation or dissolution or in connection
with a reduction of capital, capital surplus
or paid-in-surplus, and
(C) cash paid, payable or otherwise
distributed in respect of principal of, or
in redemption of, or in exchange for, any
Pledged Collateral,
shall be, and shall be forthwith delivered to the
Agent to hold as, Pledged Collateral and shall, if
received by the Pledgor, be received in trust for the
benefit of the Agent, be segregated from the other
property or funds of the Pledgor, and be forthwith
delivered to the Agent as Pledged Collateral in the
same form as so received (with any necessary
endorsement or assignment).
(iii) The Agent shall execute and deliver
(or cause to be executed and delivered) to the
Pledgor all such proxies and other instruments as the
Pledgor may reasonably request for the purpose of
enabling the Pledgor to exercise the voting and other
rights which he is entitled to exercise pursuant to
paragraph (i) above and to receive the dividends
which he is authorized to receive and retain pursuant
to paragraph (ii) above.
(b) Upon the occurrence and during the continuance of
a Default or an Event of Default:
(i) All rights of the Pledgor to exercise or
refrain from exercising the voting and other
consensual rights which he would otherwise be
entitled to exercise pursuant to Section 6(a)(i) and
to receive the dividends which he would otherwise be
authorized to receive and retain pursuant to Section
6(a)(ii) shall cease, and all such rights shall
thereupon become vested in the Agent who shall
thereupon have the sole right to exercise or refrain
from exercising such voting and other consensual
rights and to receive and hold as Pledged Collateral
such dividends.
(ii) All dividends which are received by the
Pledgor contrary to the provisions of paragraph (i)
of this Section 6(b) shall be received in trust for
the benefit of the Agent, shall be segregated from
other funds of the Pledgor and shall be forthwith
paid over to the Agent as Pledged Collateral in the
same form as so received (with any necessary
endorsement).
<PAGE> 107
6
SECTION 7. Transfers and Other Liens; Additional Shares.
(a) The Pledgor agrees that he will not (i) sell,
assign (by operation of law or otherwise) or otherwise dispose of, or grant any
option with respect to, any of the Pledged Collateral, or (ii) create or permit
to exist any lien, security interest, option or other charge or encumbrance upon
or with respect to any of the Pledged Collateral, except for the security
interest under this Agreement and the security interest under the Trisar Pledge,
but no modification, extension or renewal thereof.
(b) The Pledgor agrees that he will (i) cause each
issuer of the Pledged Shares not to issue any stock or other securities in
addition to or in substitution for the Pledged Shares issued by such issuer,
except to the Pledgor and (ii) pledge hereunder, immediately upon his
acquisition (directly or indirectly) thereof, any and all additional shares of
stock or other securities of each issuer of the Pledged Shares.
SECTION 8. Agent Appointed Attorney-in-Fact. The Pledgor
hereby appoints the Agent the Pledgor's attorney-in-fact, with full authority in
the place and stead of the Pledgor and in the name of the Pledgor or otherwise,
from time to time in the Agent's discretion to take any action and to execute
any instrument which the Agent may deem necessary or advisable to accomplish the
purposes of this Agreement (subject to the rights of the Pledgor under Section
6), including, without limitation, to receive, endorse and collect all
instruments made payable to the Pledgor representing any dividend or other
distribution in respect of the Pledged Collateral or any part thereof and to
give full discharge for the same.
SECTION 9. Agent May Perform. If the Pledgor fails to perform
any agreement contained herein, the Agent may itself perform, or cause
performance of, such agreement, and the expenses of the Agent incurred in
connection therewith shall be payable by the Pledgor under Section 13.
SECTION 10. The Agent's Duties. The powers conferred on the
Agent hereunder are solely to protect its interest in the Pledged Collateral and
shall not impose any duty upon it to exercise any such powers. Except for the
safe custody of any Pledged Collateral in its possession and the accounting for
moneys actually received by it hereunder, the Agent shall have no duty as to any
Pledged Collateral, as to ascertaining or taking action with respect to calls,
conversions, exchanges, maturities, tenders or other matters relative to any
Pledged Collateral, whether or not the Agent or any Bank has or is deemed to
have knowledge of such matters, or as to the taking of any necessary steps to
preserve rights against any parties or any other rights pertaining to any
Pledged Collateral. The Agent shall be deemed to have exercised reasonable care
in the custody and preservation of the Pledged Collateral in its possession if
the Pledged Collateral is accorded treatment substantially equal to that which
the Agent accords its own property.
<PAGE> 108
7
SECTION 11. Remedies upon Default. If any Event of Default
shall have occurred and be continuing:
(a) The Agent may exercise in respect of the Pledged
Collateral, in addition to other rights and remedies provided
for herein or otherwise available to it, all the rights and
remedies of a secured party in default under the Uniform
Commercial Code in effect in the State of New York at that
time (the "Code") (whether or not the Code applies to the
affected Collateral), and may also, without notice except as
specified below, sell the Pledged Collateral or any part
thereof in one or more parcels at public or private sale, at
any exchange, broker's board or at any of the Agent's offices
or elsewhere, for cash, on credit or for future delivery, and
upon such other terms as the Agent may deem commercially
reasonable. The Pledgor agrees that, to the extent notice of
sale shall be required by law, at least ten days' notice to
the Pledgor of the time and place of any public sale or the
time after which any private sale is to be made shall
constitute reasonable notification. The Agent shall not be
obligated to make any sale of Pledged Collateral regardless of
notice of sale having been given. The Agent may adjourn any
public or private sale from time to time by announcement at
the time and place fixed therefor, and such sale may, without
further notice, be made at the time and place to which it was
so adjourned.
(b) Any cash held by the Agent as Pledged Collateral
and all cash proceeds received by the Agent in respect of any
sale of, collection from, or other realization upon all or any
part of the Pledged Collateral may, in the discretion of the
Agent, be held by the Agent as collateral for, and/or then or
at any time thereafter be applied (after payment of any
amounts payable to the Agent pursuant to Section 13) in whole
or in part by the Agent for the ratable benefit of the Banks
against, all or any part of the Obligations in such order as
the Agent shall elect. Any surplus of such cash or cash
proceeds held by the Agent and remaining after payment in full
of all the Obligations shall be paid over to the Pledgor or to
whomsoever may be lawfully entitled to receive such surplus.
SECTION 12. Registration Rights. If the Agent shall determine
to exercise its right to sell all or any of the Pledged Collateral pursuant to
Section 11, the Pledgor agrees that, upon request of the Agent, the Pledgor
will, at his own expense:
(a) execute and deliver, and cause each issuer of the
Pledged Collateral contemplated to be sold and the directors
and officers thereof to execute and deliver, all such
instruments and documents, and do or cause to be done all such
other acts and things, as may be necessary or, in the opinion
of the Agent, advisable to register such Pledged Collateral
under the
<PAGE> 109
8
provisions of the Securities Act of 1933, as from time to time
amended (the "Securities Act"), and to cause the registration
statement relating thereto to become effective and to remain
effective for such period as prospectuses are required by law
to be furnished, and to make all amendments and supplements
thereto and to the related prospectus which, in the opinion of
the Agent, are necessary or advisable, all in conformity with
the requirements of the Securities Act and the rules and
regulations of the Securities and Exchange Commission
applicable thereto;
(b) use his best efforts to qualify the Pledged
Collateral under the state securities or "Blue Sky" laws and
to obtain all necessary governmental approvals for the sale of
the Pledged Collateral, as requested by the Agent;
(c) cause each such issuer to make available to its
security holders, as soon as practicable, an earning statement
which will satisfy the provisions of Section 11(a) of the
Securities Act; and
(d) do or cause to be done all such other acts and
things as may be necessary to make such sale of the Pledged
Collateral or any part thereof valid and binding and in
compliance with applicable law.
The Pledgor further acknowledges the impossibility of ascertaining the amount of
damages which would be suffered by the Agent or the Banks by reason of the
failure by the Pledgor to perform any of the covenants contained in this Section
and, consequently, agrees that, if the Pledgor shall fail to perform any of such
covenants, he shall pay, as liquidated damages and not as a penalty, an amount
equal to the value of the Pledged Collateral on the date the Agent shall demand
compliance with this Section.
SECTION 13. Expenses. The Pledgor will upon demand pay to the
Agent the amount of any and all reasonable expenses, including the reasonable
fees and expenses of its counsel and of any experts and agents, which the Agent
may incur in connection with (i) the administration of this Agreement, (ii) the
custody or preservation of, or the sale of, collection from, or other
realization upon, any of the Pledged Collateral, (iii) the exercise or
enforcement of any of the rights of the Agent or the Banks hereunder or (iv) the
failure by the Pledgor to perform or observe any of the provisions hereof.
SECTION 14. Security Interest Absolute. The obligations of the
Pledgor under this Agreement are independent of the Obligations, and a separate
action or actions may be brought and prosecuted against the Pledgor to enforce
this Agreement, irrespective of whether any action is brought against one or
more Borrowers or whether such Borrower(s) is/are joined in any such action or
actions. All rights of the Agent and security
<PAGE> 110
9
interests hereunder, and all obligations of the Pledgor hereunder, shall be
absolute and unconditional irrespective of:
(i) any lack of validity or enforceability
of the Credit Agreement, the Notes, any other
Facility Documents or any other agreement or
instrument relating thereto;
(ii) any change in the time, manner or place
of payment of, or in any other term of, all or any of
the Obligations, or any other amendment or waiver of
or any consent to any departure from the Credit
Agreement, the Notes or any other Facility Documents
including, without limitation, any increase in the
Obligations resulting from the extension of
additional credit to the Borrowers or any of their
respective subsidiaries or otherwise;
(iii) any taking, exchange, release or
non-perfection of any other collateral, or any
taking, release or amendment or waiver of or consent
to departure from any guaranty, for all or any of the
Obligations;
(iv) any manner of application of
collateral, or proceeds thereof, to all or any of the
Obligations, or any manner of sale or other
disposition of any collateral for all or any part of
the Obligations or any other assets of the Borrowers
or any of their respective subsidiaries;
(v) any change, restructuring or termination
of the corporate structure or existence of the
Borrowers or any of their respective subsidiaries; or
(vi) any other circumstance which might
otherwise constitute a defense available to, or a
discharge of, the Borrowers or a third party pledgor.
SECTION 15. Amendments, Etc. No amendment or waiver of any
provision of this Agreement, and no consent to any departure by the Pledgor
herefrom, shall in any event be effective unless the same shall be in writing
and signed by the Agent, and then such waiver or consent shall be effective only
in the specific instance and for the specific purpose for which given.
SECTION 16. Addresses for Notices. All notices and other
communications provided for hereunder shall be sent in the manner set forth in
the Credit Agreement and, if to the Pledgor, to his address set forth above, and
if to any other party, to its address set forth in the Credit Agreement.
<PAGE> 111
10
SECTION 17. Continuing Security Interest; Assignments under
Credit Agreement. This Agreement shall create a continuing security interest in
the Pledged Collateral and shall (i) remain in full force and effect until the
payment in full of the Obligations and all other amounts payable under this
Agreement and the termination of the Commitments, (ii) be binding upon the
Pledgor, his successors and assigns, and (iii) inure, together with the rights
and remedies of the Agent hereunder, to the benefit of, and be enforceable by,
the Agent, the Banks and their respective successors, transferees and assigns.
Without limiting the generality of the foregoing clause (iii), any Bank may
assign or otherwise transfer all or any portion of its rights and obligations
under the Credit Agreement (including, without limitation, all or any portion of
the Loans owing to it, its interest in any Letter of Credit and any Note held by
it) to any other person or entity, and such other person or entity shall
thereupon become vested with all the benefits in respect thereof granted to such
Bank herein or otherwise, subject, however, to the provisions of Article 10
(concerning the Agent) of the Credit Agreement. Upon the later of payment in
full of the Obligations and all other amounts payable under this Agreement and
the termination of the Commitments, the security interest granted hereby shall
terminate and all rights to the Pledged Collateral shall revert to the Pledgor.
Upon any such termination, the Agent will, at the Pledgor's expense, return to
the Pledgor such of the Pledged Collateral as shall not have been sold or
otherwise applied pursuant to the terms hereof and execute and deliver to the
Pledgor such documents as the Pledgor shall reasonably request to evidence such
termination.
SECTION 18. Governing Law; Terms. This Agreement shall be
governed by, and construed in accordance with, the laws of the State of New
York, except as required by mandatory provisions of law and except to the extent
that the validity or perfection of the security interest hereunder, or remedies
hereunder, in respect of any particular Pledged Collateral are governed by the
laws of a jurisdiction other than the State of New York. Unless otherwise
defined herein or in the Credit Agreement, terms defined in Article 9 of the
Code are used herein as therein defined.
IN WITNESS WHEREOF, the Pledgor has duly executed and
delivered this Agreement as of the date first above written.
___________________________________
John A. Svenningsen
<PAGE> 112
SCHEDULE I
ATTACHED TO AND FORMING A PART OF THAT CERTAIN PLEDGE
AGREEMENT DATED SEPTEMBER 20, 1995, BY
JOHN A. SVENNINGSEN, AS PLEDGOR,
TO THE CHASE MANHATTAN BANK, N.A., AS AGENT
<TABLE>
<CAPTION>
PERCENTAGE OF
STOCK OUTSTANDING
STOCK CLASS OF CERTIFICATE NUMBER OF SHARES
ISSUER STOCK NO(S). PAR VALUE SHARES
<S> <C> <C> <C> <C> <C>
Amscan Inc. 100%
Kookaburra USA,
Ltd. 100%
Deco Paper
Products, Inc. 100%
Trisar, Inc. 100%
</TABLE>
<PAGE> 113
EXHIBIT F
SECURITY AGREEMENT
SECURITY AGREEMENT dated as of September 20, 1995, made by
AMSCAN INC., a corporation organized under the laws of the State of New York,
KOOKABURRA USA, LTD., a corporation organized under the laws of the State of New
York, DECO PAPER PRODUCTS, INC. a corporation organized under the laws of the
State of Kentucky, and TRISAR, INC., a corporation organized under the laws of
the State of California (collectively, the "Grantors" and each, individually, a
"Grantor"), to THE CHASE MANHATTAN BANK, N.A., a national banking association
organized under the laws of the United States of America, as Agent (the "Agent")
for the banks (the "Banks") parties to the Credit Agreement (as hereinafter
defined).
PRELIMINARY STATEMENT. The Banks and the Agent have entered
into a Credit Agreement dated as of even date herewith (said Credit Agreement,
as it may hereafter be amended or otherwise modified from time to time, being
the "Credit Agreement," the terms defined therein and not otherwise defined
herein being used herein as therein defined) with the Grantors. It is a
condition precedent to the making of Loans by the Banks under the Credit
Agreement that the Grantors shall have granted the security interest
contemplated by this Security Agreement.
NOW, THEREFORE, in consideration of the premises and in
order to induce the Banks to make Loans under the Credit Agreement, the Grantors
hereby agree with the Agent for its benefit and the ratable benefit of the Banks
as follows:
ARTICLE 1. THE COLLATERAL
Section 1.1. Grant of Security. As security for the
Obligations (as defined in Section 1.2 hereof), the Grantors hereby assign and
pledge to the Agent for its benefit and the ratable benefit of the Banks and
hereby grant to the Agent for its benefit and the ratable benefit of the Banks a
security interest in, general lien upon and/or right of setoff of all of the
Grantors' right, title and interest in and to all of their property and assets
(the "Collateral"), including the following:
(a) All equipment in all of its forms, wherever
located, now or hereafter existing (including, but not limited to, any items or
types of equipment maintained at the locations set forth in the Schedule
hereto), and all parts thereof and all accessions thereto (any and all such
equipment, parts and accessions being the "Equipment");
<PAGE> 114
2
(b) All inventory in all of its forms, wherever
located, now or hereafter existing (including, but not limited to (i) any items
or types of inventory maintained at the locations set forth in the Schedule
hereto and raw materials and work in process therefor, finished goods thereof,
and materials used or consumed in the manufacture or production thereof, (ii)
goods in which a Grantor has an interest in mass or a joint or other interest or
right of any kind and (iii) goods which are returned to or repossessed by a
Grantor), and all accessions thereto and products thereof (any and all such
inventory, accessions and products being the "Inventory");
(c) All accounts, contract rights, chattel paper,
instruments, general intangibles and other obligations of any kind now or
hereafter existing arising out of or in connection with the sale or lease of
goods or the rendering of services, and all rights now or hereafter existing in
and to all security agreements, leases and other contracts securing or otherwise
relating to any such accounts, contract rights, chattel paper, instruments,
general intangibles or obligations (any and all such accounts, contract rights,
chattel paper, instruments, general intangibles and obligations being the
"Receivables," and any and all such leases, security agreements and other
contracts being the "Related Contracts");
(d)
(i) all United States or other patents and
applications for patents, including without limitation those listed on Exhibit A
to this Agreement and all licenses thereof (collectively, the "Patents");
(ii) all United States or other trademarks,
service marks, trade names, logos, registrations and applications for trademarks
and service marks, filed and unfiled, including without limitation those listed
on Exhibit B to this Agreement, together with the goodwill of the business
connected with the use of, and symbolized by, all such trademarks, service
marks, trade names, logos, registrations and applications and all licenses of
United States or other trademarks and service marks, including without
limitation those listed on said Exhibit B (collectively, the "Trademarks");
(iii) all United States or other copyrights
(including without limitation those listed as Exhibit C to this Agreement),
registered and unregistered, published and unpublished, under or pursuant to the
domestic law of all countries and any applicable convention or treaty, including
all rights of reproduction, publication, modification, derivation and the like
owned or used by a Grantor (collectively, the "Copyrights"), and good will
relating to the same;
<PAGE> 115
3
(iv) all reissues, divisions, continuations,
renewals, extensions and continuations-in-part of the items referred to in the
preceding clauses (i), (ii) and (iii);
(v) all licenses, sublicenses or other
agreements granted to a Grantor with respect to any of the items referred to in
the preceding clauses (i), (ii), (iii) and (iv);
(vi) the right to sue for past, present and
future infringements and dilutions of the foregoing; and
(vii) all rights corresponding to all of the
foregoing throughout the world, including utility models, utility patents,
patents of addition, confirmation patents, registration patents, petty patents,
registered designs, and all priority and convention rights in connection with
any of the foregoing;
(e) all inventions, processes, production methods,
proprietary information, know-how and trade secrets used or useful in the
business of a Grantor, all rights in and to any improvements or modifications
thereof, and all licenses, sublicenses or other agreements granted to a Grantor
with respect to any of the foregoing, in each case whether now or hereafter
owned, used, or granted, by any party; all information, customer lists,
identification of suppliers, data, plans, blueprints, specifications, designs,
drawings, recorded knowledge, surveys, engineering reports, test reports,
manuals, materials standards, processing standards, performance standards,
catalogues, computer and automatic machinery software and programs, and the like
pertaining to present or future operations by a Grantor in, on or about any of
its plants, facilities or warehouses; all field repair data, sales data and
other information relating to sales or service of products now or hereafter
manufactured on or about any of its plants or facilities; and all accounting
information pertaining to operations in, on or about any of its plants or
facilities and all media in which or on which is now or hereafter recorded or
stored any of the foregoing information, knowledge, records or data and all
computer programs used for the compilation or printout of such information,
knowledge, records or data;
(f) all licenses and sublicenses given, granted or
conveyed by a Grantor, to the full extent of and subject to such Grantor's
rights therein; and
(g) all products and proceeds of any and all of the
foregoing Collateral (including, without limitation, proceeds which constitute
property of the types described in clauses (a)-(f) of this Section 1.1 and
proceeds of infringement suits) and, to the extent not otherwise included, all
(i) payments under insurance (whether or not the Agent is the loss payee
thereof), or any indemnity, warranty or guaranty, payable by reason
<PAGE> 116
4
of loss or damage to or otherwise with respect to any of the foregoing
Collateral, (ii) license royalties and (iii) cash.
Section 1.2. Security for Obligations. This Agreement secures
the payment of all obligations of the Grantors now or hereafter existing under
the Facility Documents, whether for principal, interest, fees, expenses or
otherwise (all such obligations being the "Obligations").
Section 1.3. Grantors Remain Liable. Anything herein to the
contrary notwithstanding, (a) the Grantors shall remain liable under the
contracts and agreements included in the Collateral to the extent set forth
therein to perform all of its duties and obligations thereunder to the same
extent as if this Agreement had not been executed, (b) the exercise by the Agent
of any of the rights hereunder shall not release the Grantors from any of their
duties or obligations under the contracts and agreements included in the
Collateral, and (c) neither the Agent nor any Bank shall have any obligation or
liability under the contracts and agreements included in the Collateral by
reason of this Agreement, nor shall the Agent or any Bank be obligated to
perform any of the obligations or duties of any Grantor thereunder or to take
any action to collect or enforce any claim for payment assigned hereunder.
Section 1.4. Continuing Agreement. This Agreement shall create
a continuing security interest in the Collateral and shall remain in full force
and effect until the indefeasible payment in full of the Obligations and until
the Commitments shall no longer be in effect. Upon the indefeasible payment in
full of the Obligations and when the Commitments shall no longer be in effect,
the security interest granted hereby shall terminate and all rights to the
Collateral shall revert to the Grantor. Upon any such termination, the Agent
shall, at the Grantors' expense, execute and deliver to the Grantors such
documents as the Grantors shall reasonably request to evidence such termination.
Section 1.5. Security Interest Absolute. All rights of the
Agent and the Banks and their security interests hereunder, and all obligations
of the Grantors hereunder, shall be absolute and unconditional, irrespective of
any defenses whatsoever available to the Grantors, including but not limited to
the following:
(a) any extension of credit by the Agent or any Bank
to or for the account of a Grantor other than under the Credit Agreement and
Notes;
(b) any lack of validity or enforceability of any
Facility Document;
<PAGE> 117
5
(c) any change in the time, manner or place of
payment of, or in any other term of, all or any of the Obligations, or any other
amendment or waiver of or any consent to any departure from any Facility
Document;
(d) any exchange, release or non-perfection of any
other collateral, or any release or amendment or waiver of or consent to
departure from any guaranty, for all or any of the Obligations; or
(e) any law, regulation or order of any jurisdiction
affecting or purporting to affect any term of any Obligation or any Facility
Document or the Agent or any Bank's rights with respect thereto.
ARTICLE 2. REPRESENTATIONS AND WARRANTIES
The Grantors represent and warrant as follows:
Section 2.1. Location of Collateral. All of the Equipment and
Inventory are located at the places specified in the Schedule hereto. The chief
place of business and chief executive office of the Grantors and the office
where the Grantors keep their records concerning the Receivables, and all
originals of all chattel paper which evidence Receivables, are located at the
address specified for the Grantors in Section 6.3. None of the Receivables is
evidenced by a promissory note or other instrument.
Section 2.2. Ownership and Liens. The Grantors own the
Collateral free and clear of any Lien, except for the security interest created
by this Agreement and except for the security interests set forth on Schedule
5.6 of the Credit Agreement. No effective financing statement or other
instrument similar in effect covering all or any part of the Collateral is on
file in any recording office, except such as may have been filed in favor of the
Agent relating to this Agreement.
Section 2.3. Perfection. This Agreement will create, upon the
filing of UCC-1 financing statements in the jurisdictions set forth on the
Schedule hereto, a valid and perfected first priority security interest in the
Collateral, securing the payment of the Obligations, and all filings and other
actions necessary or desirable to perfect and protect such security interest
will be duly taken after the execution hereof.
Section 2.4. No Authorization Required. No authorization,
approval or other action by, and no notice to or filing with, any governmental
authority or regulatory body is required either (a) for the grant by the
Grantors of the security interest granted hereby or for the execution, delivery
or performance of this Agreement by the Grantors or (b) for the perfection of or
the exercise by the Agent of its rights and remedies hereunder.
<PAGE> 118
6
Section 2.5. Solvency of Account Debtors. Each account debtor,
to the best of the Grantors' knowledge, as of the date each Receivable is
created, is and will be solvent and able to pay all Receivables on which the
account debtor is obligated in full when due or, with respect to such account
debtors of the Grantors who are not solvent, the Grantors have set up on their
books and financial records bad debt reserves adequate to cover such
Receivables.
Section 2.6. Nature of Receivables. Each of the Receivables
shall be a bona fide and valid account representing a bona fide indebtedness
incurred by the account debtor therein named, for a fixed sum as set forth in
the invoice relating thereto (provided immaterial or unintentional invoice
errors shall not be deemed to be a breach hereof) with respect to an absolute
sale or lease and delivery of goods upon stated terms of a Grantor, or work,
labor and/or services theretofore rendered by a Grantor and as of the date each
Receivable is created, shall be due and owing in accordance with a Grantor's
standard terms of sale without dispute, setoff or counterclaim except as may be
stated on the accounts receivable schedules delivered by such Grantor to the
Agent.
ARTICLE 3. COVENANTS
Section 3.1. Further Assurances.
(a) The Grantors agree that from time to time, at the
expense of the Grantors, the Grantors shall promptly execute and deliver all
further instruments and documents, and take all further action, that may be
necessary or desirable, or that the Agent may reasonably request, in order to
perfect and protect any security interest granted or purported to be granted
hereby or to enable the Agent to exercise and enforce its rights and remedies
hereunder with respect to any Collateral. Without limiting the generality of the
foregoing, the Grantors shall: (i) mark conspicuously each item of chattel paper
included in the Receivables and each Related Contract and, at the request of the
Agent, each of their recordings pertaining to the Collateral with a legend, in
form and substance satisfactory to the Agent, indicating that such chattel
paper, Related Contract or Collateral is subject to the security interest
granted hereby; (ii) if any Receivable shall be evidenced by a promissory note
or other instrument or chattel paper, deliver and pledge to the Agent hereunder
such note, instrument or chattel paper duly endorsed and accompanied by duly
executed instruments of transfer or assignment, all in form and substance
satisfactory to the Agent; and (iii) execute and file such financing or
continuation statements, or amendments thereto, and such other instruments or
notices, as may be necessary or desirable, or as the Agent may request, in order
to perfect and preserve the security interests granted or purported to be
granted hereby.
<PAGE> 119
7
(b) Each Grantor hereby authorizes the Agent to file
one or more financing or continuation statements, and amendments thereto,
relative to all or any part of the Collateral without the signature of such
Grantor where permitted by law.
(c) The Grantors shall furnish to the Agent from time
to time statements and schedules further identifying and describing the
Collateral and such other reports in connection with the Collateral as the Agent
may reasonably request, all in reasonable detail.
Section 3.2. As to Equipment and Inventory. The Grantors
shall:
(a) Keep the Equipment and Inventory (other than
Inventory sold in the ordinary course of business) at the places therefore
specified in Section 2.1 or, upon 30 days' prior written notice to the Agent, at
such other places in jurisdictions where all action required by Section 3.1
shall have been taken with respect to the Equipment and Inventory.
(b) Cause the Equipment to be maintained and
preserved in the same condition, repair and working order as when new, ordinary
wear and tear excepted, and in accordance with any manufacturer's manual and
shall forthwith, or in the case of any loss or damage to any of the Equipment as
quickly as practicable after the occurrence thereof, make or cause to be made
all repairs, replacements and other improvements in connection therewith which
are necessary or desirable to such end. The Grantors shall promptly furnish to
the Agent a statement respecting any loss or damage to any of the Equipment.
(c) Pay promptly when due all property and other
taxes, assessments and governmental charges or levies imposed upon, and all
claims (including claims for labor, materials and supplies) against, the
Equipment and Inventory except to the extent the validity thereof is being
contested in good faith.
Section 3.3. Insurance.
(a) The Grantors shall, at their own expense,
maintain insurance with respect to the Equipment and Inventory to such amounts
against such risks, in such form and with such insurers as shall be satisfactory
to the Agent from time to time. Each policy for (i) liability insurance shall
provide for all losses to be paid to the Agent and the Grantors as their
respective interests may appear and (ii) property damage insurance shall provide
for all losses (except for losses of less than $100,000 per occurrence) to be
paid directly to the Agent. Each such policy shall in addition (i) name the
Grantors and the Agent as insured parties thereunder (without any representation
or warranty by or obligation upon the Agent) as their interests may appear, (ii)
contain the agreement by the
<PAGE> 120
8
insurer that any loss thereunder shall be payable to the Agent notwithstanding
any action, inaction or breach of representation or warranty by a Grantor, (iii)
provide that there shall be no recourse against the Agent for payment of
premiums or other amounts with respect thereto and (iv) provide that at least
thirty days' prior written notice of cancellation or of lapse shall be given to
the Agent by the insurer. The Grantors shall, if so requested by the Agent,
deliver to the Agent original or duplicate policies of such insurance and, as
often as the Agent may reasonably request, a report of a reputable insurance
broker with respect to such insurance. Further, the Grantors shall, at the
request of the Agent, duly execute and deliver instruments of assignment of such
insurance policies to comply with the requirements of Section 3.1 and cause the
respective insurers to acknowledge notice of such assignment.
(b) Reimbursement under any liability insurance
maintained by a Grantor pursuant to this Section 3.3 may be paid directly to the
person who shall have incurred liability covered by such insurance. In case of
any loss involving damage to Equipment or Inventory when subsection (c) of this
Section 3.3 is not applicable, the Grantors shall make or cause to be made the
necessary repairs to or replacements of such Equipment or Inventory, and any
proceeds of insurance maintained by the Grantors pursuant to this Section 3.3
shall be paid to the Grantors as reimbursement for the costs of such repairs or
replacements.
(c) Upon the occurrence and during the continuance of
any Default, all insurance payments shall be paid to and applied by the Agent as
specified in Section 5.1.
Section 3.4. As to Receivables.
(a) The Grantors shall keep their chief place of
business and chief executive office and the office where they keep their records
concerning the Receivables, and all originals of all chattel paper which
evidence Receivables, at the location therefor specified in Section 2.1 or, upon
30 days' prior written notice to the Agent, at such other locations in a
jurisdiction where all action required by Section 3.1 shall have been taken with
respect to the Receivables. The Grantors shall hold and preserve such records
and chattel paper and shall permit representatives of the Agent at any time
during normal business hours to inspect and make abstracts from such records and
chattel paper.
(b) Except as otherwise provided in this subsection
(b), the Grantors shall continue to collect, at their own expense, all amounts
due or to become due the Grantors under the Receivables. In connection with such
collections, the Grantors may take (and, at the Agent's direction, shall take)
such action as the Grantors or the Agent may reasonably deem necessary or
advisable to enforce collection of the Receivables; provided,
<PAGE> 121
9
however, that the Agent shall have the right at any time upon the occurrence and
during the continuance of an Event of Default and upon written notice to the
Grantors of its intention to do so, to notify the account debtors or obligors
under any Receivables of the assignment of such Receivables to the Agent and to
direct such account debtors or obligors to make payment of all amounts due or to
become due to a Grantor thereunder directly to the Agent and, upon such
notification and at the expense of the Grantors, to enforce collection of any
such Receivables, and to adjust, settle or compromise the amount or payment
thereof, in the same manner and to the same extent as a Grantor might have done.
After receipt by the Grantors of the notice from the Agent referred to in the
proviso to the preceding sentence, (i) all amounts and proceeds (including
instruments) received by a Grantor in respect of the Receivables shall be
received in trust for the benefit of the Agent hereunder, shall be segregated
from other funds of such Grantor and shall be forthwith paid over to the Agent
in the same form as so received (with any necessary endorsement) to be held as
cash collateral and either (A) released to the Grantors so long as no Event of
Default shall have occurred and be continuing or (B) if any Event of Default
shall have occurred and be continuing, applied as provided by Section 5.1(b),
and (ii) no Grantor shall adjust, settle or compromise the amount or payment of
any Receivable, or release wholly or partly any account debtor or obligor
thereof, or allow any credit or discount thereon.
(c) The Grantors shall take all steps necessary to
protect the Agent's interest in the Collateral under the Federal Assignment of
Claims Act, the Social Security Act, or other applicable federal, state, or
local statutes, ordinances or regulations and deliver to the Agent appropriately
endorsed, any instrument or chattel paper connected with any Receivable, arising
out of contracts between any Grantor and the United States, any state or any
department, agency or instrumentality of any of them.
Section 3.5. Transfers and Other Liens. The Grantors shall
not:
(a) Sell, assign (by operation of law or otherwise)
or otherwise dispose of any of the Collateral, except Inventory in the ordinary
course of business or Equipment no longer useful to the Grantors in its
operations for its intended purpose.
(b) Create or suffer to exist any Lien upon or with
respect to any of the Collateral to secure Debt of any Person, except for the
security interest created by this Agreement or expressly permitted by Section
7.3 of the Credit Agreement.
ARTICLE IV. THE AGENT
Section 4.1. Agent Appointed Attorney-in-Fact. Each Grantor
hereby irrevocably appoints the Agent such Grantor's attorney-in-fact, with full
authority in the place and stead of such Grantor and in the name of such Grantor
or otherwise, from time to time in the Agent's discretion, to take any action
and to execute any instrument which the
<PAGE> 122
10
Agent may reasonably deem necessary or advisable to accomplish the purposes of
this Agreement (subject to the rights of such Grantor under Section 3.4),
including without limitation:
(a) to obtain and adjust insurance required to be
paid to the Agent pursuant to Section 3.3,
(b) to ask, demand, collect, sue for, recover,
compound, receive and give acquittance and receipts for moneys due and to become
due under or in respect of any of the Collateral,
(c) to receive, endorse and collect any drafts or
other instruments, documents and chattel paper, in connection with clause (a) or
(b) above, and
(d) to file any claims or take any action or
institute any proceedings which the Agent may deem necessary or desirable for
the collection of any of the Collateral or otherwise to enforce the rights of
the Agent with respect to any of the Collateral.
Section 4.2. Agent May Perform. If a Grantor fails to perform
any agreement contained herein, the Agent may itself perform, or cause
performance of, such agreement and the expenses of the Agent incurred in
connection therewith shall be payable by the Grantors under Section 6.2.
Section 4.3. The Agent's Duties. The powers conferred on the
Agent hereunder are solely to protect the Agent's interest in the Collateral and
shall not impose any duty upon it to exercise any such powers. Except for the
safe custody of any Collateral in its possession and the accounting for moneys
actually received by it hereunder, the Agent shall have no duty as to any
Collateral or as to the taking of any necessary steps to preserve rights against
prior parties or any other rights pertaining to any Collateral.
ARTICLE V. DEFAULT
Section 5.1. Remedies. If any Event of Default shall have
occurred and be continuing:
(a) The Agent may exercise in respect of the
Collateral, in addition to other rights and remedies provided for herein or
otherwise available to it, all the rights and remedies of a secured party on
default under the Uniform Commercial Code (the "UCC") (whether or not the UCC
applies to the affected Collateral) and also may (i) require any Grantor to, and
each Grantor hereby agrees that it shall at its expense and upon request of the
Agent forthwith, assemble all or part of the Collateral as directed by the
<PAGE> 123
11
Agent and make it available to the Agent at a place to be designated by the
Agent which is reasonably convenient to both parties and (ii) without notice
except as specified below, sell the Collateral or any part thereof in one or
more parcels at public or private sale, at any of the Agent's offices or
elsewhere, for cash, on credit or for future delivery, and at such price or
prices and upon such other terms as the Agent may reasonably deem commercially
reasonable. Each Grantor agrees that, to the extent notice of sale shall be
required by law, at least ten days' notice to such Grantor of the time and place
of any public sale or the time after which any private sale is to be made shall
constitute reasonable notification. The Agent shall not be obligated to make any
sale of Collateral regardless of notice of sale having been given. The Agent may
adjourn any public or private sale from time to time by announcement at the time
and place fixed therefor, and such sale may, without further notice, be made at
the time and place to which it was so adjourned.
(b) All cash proceeds received by the Agent in
respect of any sale of, collection from or other realization upon all or any
part of the Collateral may, in the discretion of the Agent, be held by the Agent
as collateral for, and/or then or at any time thereafter applied (after payment
of any amounts payable to the Agent pursuant to Section 6.2) in whole or in part
by the Agent against, all or any part of the Obligations in such order as the
Agent shall elect. Any surplus of such cash or cash proceeds held by the Agent
and remaining after payment in full of all the Obligations shall be paid over to
the Grantors or to whomsoever may be lawfully entitled to receive such surplus.
ARTICLE VI. MISCELLANEOUS
Section 6.1. Amendments; Etc. No amendment or waiver of any
provision of this Agreement, nor consent to any departure by any Grantor
herefrom, shall in any event be effective unless the same shall be in writing
and signed by the Agent.
Section 6.2. Expenses; Etc. The Grantors shall reimburse the
Agent on demand for all costs, expenses and charges (including, without
limitation, reasonable fees and charges of external legal counsel for the Agent
and reasonable costs allocated by its internal legal department) incurred by the
Agent in connection with the preparation, performance or enforcement of this
Agreement. The Grantors agree to indemnify the Agent from and against any and
all claims, losses and liabilities growing out of or resulting from this
Agreement (including, without limitation, enforcement of this Agreement), except
claims, losses or liabilities resulting from the Agent's gross negligence or
willful misconduct. The obligations of the Grantors under this Section are joint
and several and shall survive the termination of this Agreement.
Section 6.3. Notices. Unless the party to be notified
otherwise notifies the other party in writing as provided in this Section, and
except as otherwise provided in this Agreement, notices shall be delivered in
person or sent by overnight courier, facsimile,
<PAGE> 124
12
ordinary mail, cable or telex addressed to such party at its "Address for
Notices" on the signature page of this Agreement. Notices shall be effective:
(a) on the day on which delivered to such party in person, (b) on the first
Banking Day after the day on which sent to such party by overnight courier, (c)
if given by mail, upon receipt, and (d) if given by facsimile, cable or telex,
when the facsimile, cable or telex is transmitted to the facsimile, cable or
telex number as aforesaid; provided that notices to the Agent and the Banks
shall be effective upon receipt.
Section 6.4. Transfer of Facility Documents. This Agreement
shall (a) be binding upon the Grantors, their respective successors and assigns
and (b) inure together with the rights and remedies of the Agent hereunder, to
the benefit of the Agent, the Banks and their respective successors, transferees
and assigns. Without limiting the generality of the foregoing clause (b), any
Bank may assign or otherwise transfer the Facility Documents held by it, or
grant participations therein, to any other person or entity, and such other
person or entity shall thereupon become vested with all the benefits in respect
thereof granted to such Bank herein or otherwise.
Section 6.5. Governing Law; Terms. This Agreement shall be
governed by and construed in accordance with the laws of the State of New York.
Unless otherwise defined herein or in the Agreement, terms used in Article 9 of
the Uniform Commercial Code in the State of New York are used herein as therein
defined.
ARTICLE VII. INTELLECTUAL PROPERTY
Section 7.1. Special Provisions Concerning Trademarks.
(a) Additional Representations and Warranties. The
Grantors represent and warrant that they are the true and lawful exclusive
owners of the Trademarks listed in Exhibit B attached hereto and that said
listed Trademarks constitute all the trademarks registered in the United States
Patent and Trademark Office that the Grantors now own or use in connection with
their business. Each Grantor represents and warrants that it owns or is licensed
to use all Trademarks that it uses. Each Grantor further warrants that it is
aware of no third-party claim that any aspect of such Grantor's present or
contemplated business operations infringes or will infringe any Trademark.
(b) Licenses and Assignments. Each Grantor hereby
agrees not to divest itself of any right under a Trademark absent prior written
approval of the Agent, which shall not be unreasonably withheld.
(c) Infringements. Each Grantor agrees, promptly upon
learning thereof, to notify the Agent in writing of the name and address of, and
to furnish such pertinent information that may be available with respect to, any
party who may be
<PAGE> 125
13
infringing or otherwise violating any of such Grantor's rights in and to any
significant Trademark, or with respect to any party claiming that such Grantor's
use of any significant Trademark violates any property right of that party.
(d) Preservation of Trademarks. To the extent such
Trademarks are material to its business, each Grantor agrees to use its
significant Trademarks in interstate commerce during the time in which this
Agreement is in effect, sufficiently to preserve such Trademarks as trademarks
or service marks registered under the laws of the United States.
(e) Maintenance of Registration. To the extent such
Trademarks are material to its business, each Grantor shall, at its expense,
diligently process all documents required by the Trademark Act of 1946, 15
U.S.C. Sections 1051 et seq., to maintain trademark registration,
including but not limited to affidavits of use and applications for renewals of
registration in the United States Patent and Trademark Office for all of its
Trademarks pursuant to 15 U.S.C. Sections 1058(a), 1059 and 1065, and
shall pay all fees and disbursements in connection therewith, and shall not
abandon any such filing of affidavit of use or any such application of renewal
prior to the exhaustion of all administrative and judicial remedies without
prior written consent of the Agent which shall not be unreasonably withheld.
Each Grantor agrees to notify the Agent six (6) months prior to the dates on
which the affidavits of use or the applications for renewal registration are due
that the affidavit of use or the renewal is being processed.
(f) Future Registered Trademarks. If any trademark
registration issues hereafter to a Grantor as a result of any application now or
hereafter pending before the United States Patent and Trademark Office, within
thirty (30) days of receipt of such certificate such Grantor shall deliver a
copy of such certificate and an updated Exhibit B to Annex I and, if Annex I has
previously been filed, an agreement in proper form for filing, modifying Annex I
to include such Trademark.
(g) Remedies. If an Event of Default shall occur and
be continuing, the Agent may, by written notice to any Grantor, take any or all
of the following actions: (i) declare the entire right, title and interest of
such Grantor in and to each of the Trademarks, together with all trademark
rights and rights of protection to the same, vested, in which event such rights,
title and interest shall immediately vest, in the Agent, in which case such
Grantor agrees to execute an assignment in form and substance satisfactory to
the Agent, of all its rights, title and interest in and to the Trademarks to the
Agent; (ii) take and use or sell the Trademarks and the goodwill of such
Grantor's business symbolized by the Trademarks and the right to carry on the
business and use the assets of such Grantor in connection with which the
Trademarks have been used; and (iii) direct such Grantor to refrain, in which
event such Grantor shall refrain, from using the Trademarks in any manner
whatsoever, directly or indirectly, and, if requested by the
<PAGE> 126
14
Agent, change such Grantor's corporate name to eliminate therefrom any use of
any Trademark and execute such other and further documents that the Agent may
request to further confirm this and to transfer ownership of the Trademarks and
registrations and any pending trademark application in the United States Patent
and Trademark Office to the Agent.
Section 7.2. Special Provisions Concerning Patents and
Copyrights.
(a) Additional Representations and Warranties. The
Grantors represents and warrants that they are the true and lawful exclusive
owner or licensee of all rights in the Patents listed in Exhibit A attached
hereto and in the Copyrights listed in Exhibit C attached hereto, that said
Patents constitute all the United States patents and applications for United
States patents that the Grantors now own and that said Copyrights constitute all
the United States copyrights that the Grantors now own. Each Grantor represents
and warrants that it owns or is licensed to practice under all Patents and
Copyrights that it now owns, uses or practices under. Each Grantor further
warrants that it is aware of no third-party claim that any aspect of such
Grantor's present or contemplated business operations infringes or will infringe
any Patent or any Copyright.
(b) Licenses and Assignments. Each Grantor hereby
agrees not to divest itself of any right under a Patent or Copyright absent
prior written approval of the Agent, which shall not be unreasonably withheld.
(c) Infringements. Each Grantor agrees, promptly upon
learning thereof, to furnish the Agent in writing with all pertinent information
available to such Grantor with respect to any infringement or other violation of
such Grantor's rights in any significant Patent or Copyright, or with respect to
any claim that practice of any significant Patent or Copyright violates any
property right of that party. Each Grantor further agrees, absent direction of
the Agent to the contrary, diligently to prosecute any person infringing any
significant Patent or Copyright.
(d) Maintenance of Patents. At its own expense, to
the extent such Patents are material to its business, the Grantors shall make
timely payment of all post-issuance fees required pursuant to 35 U.S.C. Section
41 to maintain in force rights under each Patent.
(e) Prosecution of Patent Application. At its own
expense, to the extent such Patents are material to its business, each Grantor
shall diligently prosecute all applications for United States patents listed on
Exhibit A hereto, and shall not abandon any such application prior to exhaustion
of all administrative and judicial remedies, absent written consent of the
Agent.
<PAGE> 127
15
(f) Other Patents and Copyrights. Within thirty (30)
days of acquisition of a United States Patent or Copyright, or of filing of an
application for a United States Patent or Copyright, each Grantor shall deliver
to the Agent a copy of said Patent or Copyright, as the case may be, and an
updated Exhibit A or Exhibit C to Annex I and, if Annex I has previously been
filed, an agreement in proper form for filing, modifying Annex I to include such
Patent or Copyright, as the case may be.
(g) Remedies. If an Event of Default shall occur and
be continuing, the Agent may by written notice to any Grantor take any of all of
the following actions: (i) declare the entire right, title and interest of such
Grantor in each of the Patents and Copyrights vested, in which event such right,
title and interest shall immediately vest in the Agent, in which case such
Grantor agrees to execute an assignment in form and substance satisfactory to
the Agent of all its right, title and interest to such Patents and Copyrights to
the Agent; (ii) take and practice or sell the Patents and Copyrights; (iii)
direct such Grantor to refrain, in which event such Grantor shall refrain, from
practicing the Patents and Copyrights directly or indirectly, and such Grantor
shall execute such other and further documents as the Agent may request further
to confirm this and to transfer ownership of the Patents and Copyrights to the
Agent.
<PAGE> 128
16
IN WITNESS WHEREOF, the Grantors have caused this Agreement to
be duly executed and delivered by its officer thereunto duly authorized as of
the date first above written.
AMSCAN INC.
By__________________________________
Sheryl B. Mellin
Treasurer
KOOKABURRA USA, LTD.
By__________________________________
Sheryl B. Mellin
Treasurer
DECO PAPER PRODUCTS, INC.
By__________________________________
Sheryl B. Mellin
Treasurer
TRISAR, INC.
By__________________________________
Sheryl B. Mellin
Treasurer
<PAGE> 129
SCHEDULE TO SECURITY AGREEMENT
GRANTOR LOCATIONS OF EQUIPMENT LOCATIONS OF INVENTORY
<PAGE> 130
EXHIBIT A
PATENTS
NAME OF GRANTOR PATENT NO. ITEM REGISTRATION
DATE
<PAGE> 131
EXHIBIT B
TRADEMARKS AND TRADENAMES
NAME OF JURISDICTION OF TRADEMARK TRADEMARK REGISTRATION
GRANTOR REGISTRATION NUMBERS
<PAGE> 132
EXHIBIT C
COPYRIGHTS
NAME OF GRANTOR JURISDICTION OF COPYRIGHT COPYRIGHT REGISTRATION
REGISTRATION NUMBERS
<PAGE> 133
ANNEX I
PATENT, TRADEMARK, COPYRIGHT AND OTHER INTELLECTUAL
PROPERTY SECURITY INTEREST
WHEREAS, AMSCAN INC., a corporation organized under the laws of
the State of New York, KOOKABURRA USA, LTD., a corporation organized under the
laws of the State of New York, DECO PAPER PRODUCTS, INC. a corporation organized
under the laws of the State of Kentucky, and TRISAR, INC., a corporation
organized under the laws of the State of California, (each, a "Borrower" and
collectively, the "Borrowers"), having their principal office at 2 Macy Road,
Harrison, New York 10528, are the owners of the United States and foreign
patents and patent registrations and applications for patents and patent
registrations, and all renewals and extensions thereof, including, without
limitation, those set forth on Exhibit A attached hereto, and of United States
and foreign trademarks and associated United States and foreign trademark
registrations and applications for trademark registrations, and all renewals and
extensions thereof, including, without limitation, those set forth in Exhibit B
attached hereto and is a party to certain trademark and patent licenses of
United States and foreign trade names, trade name registrations and applications
for trade name registrations, including, without limitation, those set forth in
Exhibit B attached hereto, and of United States and foreign copyrights,
copyright registrations, applications for copyright registrations, and all
renewals and extensions thereof, including without limitation, those set forth
on Exhibit C attached hereto; and
WHEREAS, THE CHASE MANHATTAN BANK, N.A., having an office at One
Chase Manhattan Plaza, New York, New York 10082, as agent (the "Agent") for the
banks (the "Banks") named therein is a party to the Credit Agreement dated as of
September 20, 1995 among the Agent, the Banks and the Borrowers, and the Agent
desires to acquire a security interest in, and lien on, said patents, patent
registrations, trademarks, trademark registrations, copyrights, license
agreements, said applications for patent and trademark registrations, the
goodwill of the business symbolized by said trademarks, trademark applications
and trademark and copyright registrations and all products and proceeds of the
foregoing; and
WHEREAS, the Borrowers are agreeable to granting the security
interests in the patents, patent registrations, trademarks, trademark
registrations, trade names, copyrights, copyright registrations, licenses,
applications and all products and proceeds thereof described above and as
specifically set forth in Exhibits A, B and C hereto, but not limited thereto;
<PAGE> 134
2
NOW, THEREFORE, for good and valuable consideration, the receipt
of which is hereby acknowledged, and subject to the terms and conditions of the
Security Agreement dated as of September 20, 1995 made by the Borrowers in favor
of the Agent (as the same may be from time to time further amended and in
effect), the terms and conditions of which are incorporated by reference herein,
the Borrowers hereby give, grant, assign and transfer a security interest in
said patents, trademarks, trade names, copyrights and license agreements, and
said patent, trademark and copyright registrations, said applications for
patents and trademarks, the goodwill of the business symbolized by said
trademarks, trademark applications and trademark registrations and trade names
and all products and proceeds thereof, to the Agent for its benefit and the
ratable benefit of the Banks, in each case, now existing or hereafter acquired.
The Borrowers hereby acknowledge the sufficiency and completeness
of this document to create the security interest in the identified property and
to grant the same to the Agent for its benefit and the ratable benefit of the
Banks and the Borrowers hereby request the appropriate filing and recording
offices, including, but not limited to, the U.S. Patent and Trademark Office and
the U.S. Copyright Office, to file and record the same together with the annexed
Exhibits A, B and C.
<PAGE> 135
3
Executed at Stamford, Connecticut, the 20th day of September,
1995.
AMSCAN INC.
By_____________________________________
Sheryl B. Mellin
Treasurer
KOOKABURRA USA, LTD.
By______________________________________
Sheryl B. Mellin
Treasurer
DECO PAPER PRODUCTS, INC.
By______________________________________
Sheryl B. Mellin
Treasurer
TRISAR, INC.
By______________________________________
Sheryl B. Mellin
Treasurer
<PAGE> 136
EXHIBIT H
[Date]
[name of Agent]
[address]
ATTN: [name]
Ladies and Gentlemen:
The undersigned, a duly authorized officer of Amscan Inc.,
refers to the Credit Agreement dated as of September 20, 1995 (the "Credit
Agreement," the terms defined therein being used herein as therein defined),
among Amscan Inc., Kookaburra USA, Ltd., Deco Paper Products, Inc., and Trisar,
Inc., the banks named therein and The Chase Manhattan Bank, N.A., as Agent, and
hereby gives you notice pursuant to Section 2.4 of the Credit Agreement that the
undersigned hereby requests a Loan, and in that connection sets forth below the
information relating to such Loan (the "Proposed Borrowing") as required by the
Credit Agreement:
(i) The Business Day of the Proposed Borrowing is
____________, 199_.
(ii) The aggregate amount of the Proposed Borrowing is
$___________________.
(iii) The interest rate for the Proposed Borrowing
is (check one):
_____ Variable Rate
_____ Fixed Rate (Eurodollar)
(Complete Section iv)
(iv) (Eurodollar Loans Only) The initial Interest
Period for the Proposed Borrowing is (check one):
_____ one (1) month
_____ two (2) months
_____ three (3) months
_____ six (6) months (if available)
<PAGE> 137
2
(v) The undersigned hereby certifies and warrants that the
Leverage Ratio as at the end of the Borrowers' most recent fiscal quarter was:
- ------------------.
In accordance with Section 4.3 of the Credit Agreement, the undersigned
hereby certifies that all representations and warranties of the Borrowers
contained in each Facility Document, including, without limitation, Article 5 of
the Credit Agreement, Article 2 of the Security Agreement and Section 4 of the
Pledge Agreements, are true and correct on the date hereof, and unless we
otherwise notify you in writing, you may rely on the fact that such statements
are true and correct on the day of the Proposed Borrowing before and after
giving effect to such Proposed Borrowing and the application of the proceeds
thereof, as though made on and as of such date. The undersigned also certifies
that there has been no material adverse change in the business, management
operations, properties, prospects or condition (financial or otherwise) of any
Borrower since the Closing Date. The undersigned further certifies and warrants
that both before and after giving effect to such Proposed Borrowing, the
aggregate principal amount of all outstanding Loans and L/C Credits is equal to
or less than the Borrowing Base as calculated [fill in date which is (i) August
31, 1995 for borrowing occurring prior to October 10, 1995 or (ii) the date of
the most recent Borrowing Base Certificate submitted pursuant to Section 6.8 of
the Credit Agreement, for borrowing occurring on or subsequent to October 10,
1995], and that, to the best of the undersigned's knowledge, were such
calculation to be done as of the date hereof, both before and after giving
effect to such Proposed Borrowing, the aggregate principal amount of all
outstanding Loans and L/C Credits would be equal to or less than the Borrowing
Base.
The undersigned further certifies and warrants that no Default or Event
of Default is existing as of the date of this Certificate and, unless we notify
you in writing, as of the day of the Proposed Borrowing.
Very truly yours,
AMSCAN INC.
By
--------------------------------
Name:
Title:
<PAGE> 138
EXHIBIT I
[Borrowers' Letterhead]
[Date]
To each of the Banks parties to the Credit
Agreement dated as of September __, 1995
among Amscan Inc., Kookaburra USA, Ltd.,
Deco Paper Products, Inc. and Trisar, Inc.,
said Banks, and The Chase Manhattan Bank,
N.A., as Agent for such Banks
Pursuant to the terms and conditions of the Credit Agreement,
dated as of September __, 1995 among Amscan Inc., Kookaburra USA, Ltd., Deco
Paper Products, Inc. and Trisar, Inc., the Banks parties thereto and The Chase
Manhattan Bank, N.A., as Agent for said Banks (the "Credit Agreement") please be
advised that:
1. The financial statements for the period ending
___________________ as required by Section 6.8 of the Credit Agreement are
enclosed.
2. To the best of the undersigned officer's knowledge, no
event has occurred and is continuing which constitutes a Default or an Event of
Default.
3. The undersigned certifies that, to the best of the
undersigned officer's knowledge, as of [date of end of fiscal period for such
financial statements], the following information is true:
<TABLE>
<CAPTION>
Section Permitted/Required Actual
- ------- ------------------ ------
<C> <S> <C> <C>
7.1(g) Debt Pursuant to Interest Rate $50,000,000
Protection Agreements
7.3(h) Permitted Purchase Money $15,000,000
Indebtedness
7.5(e) Permitted Loans to Officers $200,000
and Employees
7.5(h), 7.6(d), Restricted Payment
7.10(c) Allowance
7.6(a) Shareholder Payments
</TABLE>
<PAGE> 139
2
<TABLE>
<CAPTION>
Section Permitted/Required Actual
- ------- ------------------ ------
<C> <S> <C> <C>
8.1 Minimum Adjusted Tangible
Net Worth
8.2 Capital Expenditures
8.3 Adjusted Leverage Ratio 4.00 to 1.0
8.4 Fixed Charge Coverage Ratio 2.00 to 1.0
</TABLE>
[show computations]
Very truly yours,
AMSCAN INC.
By
--------------------------------------
Name:
Title: [President, Treasurer or CFO]
KOOKABURRA USA, LTD.
By
--------------------------------------
Name:
Title: [President, Treasurer or CFO]
DECO PAPER PRODUCTS, INC.
By
--------------------------------------
Name:
Title: [President, Treasurer or CFO]
TRISAR, INC.
By
--------------------------------------
Name:
Title: [President, Treasurer or CFO]
<PAGE> 140
EXHIBIT J
CONFIDENTIALITY AGREEMENT
[Date]
[Insert Name and
Address of Prospective
Participant or Assignee]
Re: Credit Agreement dated as of September 20, 1995
between Amscan Inc., Kookaburra USA, Ltd., Deco Paper
Products, Inc. and Trisar, Inc., the banks party
thereto, and The Chase Manhattan Bank, N.A., as
Agent.
Dear _______________:
As a Bank, party to the above-referenced Credit Agreement (the
"Credit Agreement"), we have agreed with Amscan Inc., Kookaburra USA, Ltd., Deco
Paper Products, Inc. and Trisar, Inc. (collectively, the "Borrowers") pursuant
to Section 11.15 of the Credit Agreement to use reasonable precautions to keep
confidential, except as otherwise provided therein, all non-public information
identified by the Borrowers as being confidential at the time the same is
delivered to us pursuant to the Credit Agreement.
As provided in said Section 11.15, we are permitted to provide
you, as a prospective [holder of a participation in the Loans (as defined in the
Credit Agreement)] [assignee Bank], with certain of such non-public information
subject to the execution and delivery by you, prior to receiving such non-public
information, of a Confidentiality Agreement in this form. Such information will
not be made available to you until your execution and return to us of this
Confidentiality Agreement.
Accordingly, in consideration of the foregoing, you agree (on
behalf of yourself and each of your affiliates, directors, officers, employees
and representatives) that (A) such information will not be used by you except in
connection with the proposed [participation] [assignment] mentioned above and
(B) you shall use reasonable precautions, in accordance with your customary
procedures for handling confidential information and in accordance with safe and
sound banking practices, to keep such information confidential, provided that
nothing herein shall limit the disclosure of any such information (i) to the
extent required by statute, rule, regulation or judicial process, (ii) to your
counsel or to counsel for any of the Banks or the Agent, (iii) to bank
examiners, auditors or accountants, (iv) in connection with any litigation to
which you or any one or more of the Banks is a
<PAGE> 141
party; and provided finally that in no event shall you be obligated to return
any materials furnished to you pursuant to this Confidentiality Agreement.
Would you please indicate your agreement to the foregoing by
signing at the place provided below the enclosed copy of this Confidentiality
Agreement.
Very truly yours,
[Insert Name of Bank]
By:
--------------------------------
The foregoing is agreed to
as of the date of this letter.
[Insert name of prospective
participant or assignee]
By:
--------------------------------------
-2-
<PAGE> 142
EXHIBIT K
SUBORDINATION AGREEMENT
SUBORDINATION AGREEMENT, dated September 20, 1995, by and
among JOHN A. SVENNINGSEN, an individual having a principal residence at 3
Frederick Court, Harrison, New York 10528 (the "Subordinated Creditor") and
AMSCAN INC., KOOKABURRA USA, LTD., DECO PAPER PRODUCTS, INC. AND TRISAR, INC.,
corporations having an address at 2 Macy Road, Harrison, New York 10528
(collectively, the "Borrowers"), in favor of THE CHASE MANHATTAN BANK, N.A., a
national banking association having an address at 31 Marmaroneck Avenue, White
Plains, New York 10606, as Agent (the "Agent") for the banks (the "Banks")
parties to the Credit Agreement (as hereinafter defined).
PRELIMINARY STATEMENTS:
(1) The Agent and the Banks have entered into a Credit
Agreement dated as of September 20, 1995 with the Borrowers (said Agreement, as
it may hereafter be amended or otherwise modified from time to time, being the
"Credit Agreement," the terms defined therein and not otherwise defined herein
being used herein as therein defined).
(2) The Borrowers are now indebted to the Subordinated
Creditor in the aggregate principal amount of $16,000,000.00, evidenced by the
promissory notes identified, together with the name of the maker and the dollar
amount of principal outstanding, on Exhibit A, copies of which have previously
been provided to the Agent, and may hereafter from time to time become indebted
or otherwise obligated to the Subordinated Creditor in further amounts (all such
indebtedness and other obligations now or hereafter existing, whether created
directly or acquired by assignment or otherwise, and interest and premiums, if
any, thereon and other amounts payable in respect thereof, are hereinafter
referred to as the "Subordinated Debt").
(3) It is a condition precedent to the making of Loans by the
Banks, and the issuance of Letters of Credit, under the Credit Agreement that
the Subordinated Creditor, as owner of all of the outstanding capital of stock
of each of the Borrowers, shall have executed and delivered this Agreement.
NOW, THEREFORE, in consideration of the premises and in order
to induce the Banks to make Loans under the Credit Agreement, the Subordinated
Creditor and each Borrower hereby agree as follows:
<PAGE> 143
2
ARTICLE I. THE SUBORDINATION
Section 1.1. Agreement to Subordinate. The Subordinated Creditor and
each Borrower agree that the Subordinated Debt is and shall be subordinate, to
the extent and in the manner hereinafter set forth, in right of payment to the
prior payment in full of all indebtedness of the Borrowers now or hereafter
existing under the Credit Agreement, the Notes and any other Facility Document
(including any indebtedness resulting from a modification, extension or
restatement of, or any increase in the principal amount of, the Credit
Agreement, the Notes or any other Facility Document) or any indebtedness
resulting from any renewal of any such indebtedness, whether for principal,
interest (including, without limitation, interest accruing after the filing of a
petition initiating any proceeding referred to in Section 1.3 (a)), fees,
expenses or otherwise (such indebtedness being the "Senior Debt").
Section 1.2. No Payment of the Subordinated Debt. The Subordinated
Creditor agrees not to ask, demand, sue for, take or receive from any Borrower,
directly or indirectly, in cash or other property or by setoff or in any other
manner (including, without limitation, from or by way of collateral), payment of
all or any of the Subordinated Debt unless and until the Senior Debt shall have
been paid in full; provided, however, that (i) such Borrower may pay and the
Subordinated Creditor may keep and maintain payments of interest on the
Subordinated Debt on the stated dates of payment thereof and (ii) Amscan may pay
to the Subordinated Creditor any amount reflected on Amscan's balance sheet as
due to Subordinated Creditor as compensation so long as such payment is
permitted under SubSections 7.6(a) and (d) of the Credit Agreement, unless (x)
at the time of making such payment referred to in either clause (i) or (ii), and
immediately after giving effect thereto, a Default or Event of Default shall
have occurred and be continuing or (y) within 91 days after receipt by the
Subordinated Creditor of such payment, the Subordinated Creditor receives notice
in the form required by Section 3.4 from the Agent, any Bank or any Borrower to
the effect that such payment was made in violation of this Agreement. For the
purposes of this Agreement, the Senior Debt shall not be deemed to have been
paid in full until the Agent, for the ratable benefit of the Banks, shall have
received the indefeasible payment of the Senior Debt in full in cash and the
Commitments shall have been terminated.
Section 1.3. In Furtherance of Subordination. The Subordinated Creditor
agrees as follows:
(a) Upon any distribution of all or any of the assets of one
or more Borrowers to creditors of such Borrower(s) upon the dissolution, winding
up, liquidation, arrangement, reorganization, adjustment, protection, relief or
composition of such Borrower(s) or its/their debts, whether in any bankruptcy,
insolvency, arrangement, reorganization, receivership, relief or similar
proceedings or upon an assignment for the benefit of creditors or any other
marshalling of the assets and liabilities of such
<PAGE> 144
3
Borrower(s) or otherwise, any payment or distribution of any kind (whether in
cash, property or securities) which otherwise would be payable or deliverable
upon or with respect to the Subordinated Debt shall be paid or delivered
directly to the Agent for the account of the Banks for application (in the case
of cash) to or as collateral (in the case of noncash property or securities) for
the payment or prepayment of the Senior Debt until the Senior Debt shall have
been paid in full.
(b) If any proceeding referred to in subsection (a) above is
commenced by or against any Borrower,
(i) the Agent is hereby irrevocably authorized and
empowered (in its own name or in the name of the Subordinated Creditor or
otherwise), but shall have no obligation, to demand, sue for, collect and
receive every payment or distribution referred to in subsection (a) above and
give acquittance therefor and to file claims and proofs of claim and take such
other action (including, without limitation, voting the Subordinated Debt or
enforcing any security interest or other lien securing payment of the
Subordinated Debt) as it may deem necessary or advisable for the exercise or
enforcement of any of the rights or interests of the Agent or the Banks
hereunder; and
(ii) the Subordinated Creditor shall duly and
promptly take such action as the Agent may request (A) to collect the
Subordinated Debt for account of the Banks and to file appropriate claims or
proofs of claim in respect of the Subordinated Debt, (B) to execute and deliver
to the Agent such powers of attorney, assignments or other instruments as it may
request in order to enable it to enforce any and all claims with respect to, and
any security interests and other liens securing payment of, the Subordinated
Debt, and (C) to collect and receive any and all payments or distributions which
may be payable or deliverable upon or with respect to the Subordinated Debt.
(c) All payments or distributions upon or with respect to the
Subordinated Debt which are received by the Subordinated Creditor contrary to
the provisions of this Agreement shall be received in trust for the benefit of
the Banks, shall be segregated from other funds and property held by the
Subordinated Creditor and shall be forthwith paid over to the Agent for the
account of the Banks in the same form as received (with any necessary
endorsement) to be applied (in the case of cash) to or held as collateral (in
the case of noncash property or securities) for the payment or prepayment of the
Senior Debt in accordance with the terms of the Senior Debt.
(d) The Agent is hereby authorized to demand specific
performance of this Agreement, whether or not the Borrowers shall have complied
with any of the provisions hereof applicable to it, at any time when the
Subordinated Creditor shall have failed to comply with any of the provisions of
this Agreement applicable to it. The Subordinated Creditor hereby irrevocably
waives any defense based on the adequacy
<PAGE> 145
4
of a remedy at law, which might be asserted as a bar to such remedy of specific
performance.
Section 1.4. No Commencement of Any Proceeding. The Subordinated
Creditor agrees that, so long as any of the Senior Debt shall remain unpaid, it
will not commence, or join with any creditor other than the Agent and the Banks
in commencing, any proceeding referred to in Section 1.3(a).
Section 1.5. Rights of Subrogation. The Subordinated Creditor agrees
that no payment or distribution to the Agent or the Banks pursuant to the
provisions of this Agreement shall entitle the Subordinated Creditor to exercise
any rights of subrogation in respect thereof until the Senior Debt shall have
been paid in full and the Commitments shall have been terminated. If any amount
is paid to the Subordinated Creditor on account of subrogation rights under this
Agreement at any time when all the Senior Debt has not been paid in full and the
Commitments have not been terminated, the amount shall be held in trust for the
Agent for the ratable benefit of the Banks and shall be promptly paid to the
Agent for the benefit of the Banks to be credited and applied to the Senior
Debt, whether matured or unmatured or absolute or contingent, in accordance with
the terms of the Credit Agreement.
Section 1.6. Subordination Legend; Further Assurances. The Subordinated
Creditor and the Borrowers will cause each instrument evidencing Subordinated
Debt to be endorsed with the following legend:
The indebtedness evidenced by this instrument is
subordinated to the prior payment in full of the Senior Debt
(as defined in the Subordination Agreement referred to
below) pursuant to, and to the extent provided in, the
Subordination Agreement dated September 20, 1995 by and
among Amscan Inc. Kookaburra USA, Ltd., Deco Paper
Products, Inc. and Trisar, Inc. and John A. Svenningsen in
favor of The Chase Manhattan Bank, N.A., as Agent.
The Subordinated Creditor and each Borrower will further mark its books of
account in such a manner as shall be effective to give proper notice of the
effect of this Agreement and will, in the case of any Subordinated Debt which is
not evidenced by any instrument, upon the Agent's request cause such
Subordinated Debt to be evidenced by an appropriate instrument or instruments
endorsed with the above legend. The Subordinated Creditor and each Borrower
will, at its own expense and at any time and from time to time, promptly execute
and deliver all further instruments and documents, and take all further action,
that may be necessary or desirable, or that the Agent may request, in order to
protect any right or interest granted or purported to be granted hereby or to
enable the Agent to exercise and enforce its rights and remedies hereunder.
<PAGE> 146
5
Section 1.7. No Change in or Disposition of Subordinated Debt. The
Subordinated Creditor will not:
(a) Cancel or otherwise discharge any of the Subordinated Debt
(except upon payment in full thereof paid to the Bank as contemplated by Section
1.3(c)) or subordinate any of the Subordinated Debt to any indebtedness of the
Borrowers other than the Senior Debt;
(b) Sell, assign, pledge, encumber or otherwise dispose of any
of the Subordinated Debt unless such sale, assignment, pledge, encumbrance or
disposition is made expressly subject to this Agreement; or
(c) Permit the terms of any of the Subordinated Debt to be
changed in such a manner as to have an adverse effect upon the rights or
interests of the Agent or any Bank hereunder.
Section 1.8. Agreement by the Borrowers. Each Borrower agrees that it
will not make any payment of any of the Subordinated Debt, or take any other
action, in contravention of the provisions of this Agreement.
Section 1.9. Obligations Hereunder Not Affected. All rights and
interests of the Banks hereunder, and all agreements and obligations of the
Subordinated Creditor and the Borrowers under this Agreement, shall remain in
full force and effect irrespective of:
(a) any lack of validity or enforceability of the
Credit Agreement or any other Facility Document or any other agreement or
instrument relating thereto;
(b) any change in the time, manner or place of
payment of, or in any other term of, all or any of the Senior Debt, or any other
amendment or waiver of or any consent to departure from the Credit Agreement or
any other Facility Document;
(c) any exchange, release or non-perfection of any
collateral, or any release or amendment or waiver of or consent to departure
from any guaranty, for all or any of the Senior Debt; or
(d) any other circumstance which might otherwise
constitute a defense available to, or a discharge of, a Borrower or a
subordinated creditor.
This Agreement shall continue to be effective or be reinstated, as the case may
be, if at any time any payment of any of the Senior Debt is rescinded or must
otherwise be returned by the Agent or any Bank upon the insolvency, bankruptcy
or reorganization of any Borrower or otherwise, all as though such payment had
not been made.
<PAGE> 147
6
ARTICLE II. REPRESENTATIONS AND WARRANTIES
Section 2.1. Subordinated Debt. The Subordinated Creditor and
each Borrower hereby represents and warrants as follows:
(a) The Subordinated Debt now outstanding, true and
complete copies of instruments evidencing which have been furnished to the
Agent, has been duly authorized by the Borrowers, has not been amended or
otherwise modified, and constitutes the legal, valid and binding obligation of
the Borrowers enforceable against the Borrowers in accordance with its terms.
There exists no default in respect of any of the Subordinated Debt.
(b) The Subordinated Creditor owns the Subordinated
Debt now outstanding free and clear of any lien, security interest, charge or
encumbrance or any rights of others (including the rights of any other
subordinated creditor).
(c) There are no conditions precedent to the
effectiveness of this Agreement that have not been satisfied or waived.
ARTICLE III. MISCELLANEOUS
Section 3.1. Amendments, Etc. No amendment or waiver of any provision
of this Agreement nor consent to any departure by the Subordinated Creditor or
any Borrower therefrom shall in any event be effective unless the same shall be
in writing and signed by the Agent and the Banks, and then such waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which given. No failure on the part of the Agent or any Bank to
exercise, and no delay in exercising, any right hereunder shall operate as a
waiver thereof; nor shall any single or partial exercise of any right hereunder
preclude any other or further exercise thereof or the exercise of any other
right. The remedies herein provided are cumulative and not exclusive of any
remedies provided by law.
Section 3.2. Formalities. The Subordinated Creditor and each Borrower
hereby waives promptness, diligence, notice of acceptance and any other notice
with respect to any of the Senior Debt and this Agreement and any requirement
that the Agent or any Bank protect, secure, perfect or insure any security
interest or lien or any property subject thereto or exhaust any right or take
any action against any Borrower or any other person or entity or any collateral.
Section 3.3. Expenses. The Subordinated Creditor and the Borrowers
jointly and severally agree to pay, upon demand, to the Bank the amount of any
and all
<PAGE> 148
7
reasonable expenses, including the reasonable fees and expenses of its
counsel, which the Agent or any Bank may incur in connection with the exercise
or enforcement of any of its rights or interests hereunder.
Section 3.4. Notices. Unless the party to be notified otherwise
notifies the other party in writing as provided in this Section , and except as
otherwise provided in this Agreement, notices shall be delivered in person or
sent by overnight courier, facsimile, ordinary mail, cable or telex addressed to
such party at its address set forth on the first page of this Agreement. Notices
shall be effective: (a) on the day on which delivered to such party in person,
(b) on the first Banking Day after the day on which sent to such party by
overnight courier, (c) if given by mail, upon receipt, and (d) if given by
facsimile, cable or telex, when the facsimile, cable or telex is transmitted to
the facsimile, cable or telex number as aforesaid; provided that notices to the
Agent and the Banks shall be effective upon receipt.
Section 3.5. Continuing Agreement. This Agreement is a continuing
agreement and shall (i) remain in full force and effect until the Senior Debt
shall have been paid in full and the Commitments shall have been terminated,
(ii) be binding upon the Subordinated Creditor, the Borrowers and their
respective successors and assigns, and (iii) inure to the benefit of and be
enforceable by the Agent, the Banks and their respective successors, transferees
and assigns. Without limiting the generality of the foregoing clause (iii), any
Bank may assign or otherwise transfer all or any portion of its rights or
obligations under the Credit Agreement or any other Facility Document or
Facility Documents to any other person or entity, and such other person or
entity shall thereupon become vested with all the rights in respect thereof
granted to such Bank herein or otherwise.
Section 3.6. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York .
<PAGE> 149
8
IN WITNESS WHEREOF, the Subordinated Creditor and each Borrower has caused
this Agreement to be duly executed and delivered as of the date first above
written.
-----------------------------
John A. Svenningsen
AMSCAN INC.
By_____________________________
Sheryl B. Mellin
Treasurer
KOOKABURRA USA, LTD,
By_____________________________
Sheryl B. Mellin
Treasurer
DECO PAPER PRODUCTS, INC.
By_____________________________
Sheryl B. Mellin
Treasurer
TRISAR, INC.
By_____________________________
Sheryl B. Mellin
Treasurer
<PAGE> 150
Exhibit A
Promissory Notes
<TABLE>
<CAPTION>
Maker Date Principal Amount Maturity Date
- ----- ---- ---------------- -------------
<S> <C> <C> <C>
Amscan 1/24/91 $2,250,000 Demand
Amscan 5/31/91 $1,500,000 Demand
Amscan 12/31/91 $2,250,000 Demand
Amscan 1/31/93 $2,350,000 Demand
Amscan 1/31/94 $3,650,000 Demand
Amscan 9/20/95 $4,000,000 Demand
</TABLE>
<PAGE> 151
EXHIBIT L
BORROWING BASE CERTIFICATE
Date ___________________
The Chase Manhattan Bank, N.A., as Agent
31 Mamaroneck Avenue
White Plains, New York 10601
ATTN: Carol A. Kornbluth
Ladies and Gentlemen:
The undersigned hereby certifies that the following
computations of the Borrowing Base, as defined in the Credit Agreement, dated as
of September 20, 1995, between the undersigned, Kookaburra USA, Ltd., Deco Paper
Products, Inc. and Trisar, Inc., the banks named therein, and The Chase
Manhattan Bank, N.A., as Agent, are true and correct as of _____________, 19___.
<TABLE>
<S> <C>
TOTAL RECEIVABLES $_________
LESS:
Discounts, Claims, Returns, Rebates, Allowances or
Setoffs ($_________)
Unpaid more than 60 days ($_________)
Due Date more than 190 days from sale ($_________)
Ineligible Account Debtor ($_________)
From a Borrower or Affiliate ($_________)
Foreign on Not Denominated in Dollars ($_________)
Advance Billings ($_________)
Not a First Perfected Security Interest ($_________)
Account Debtor Has Disputed Liability ($_________)
Other Ineligible (detailed description to be provided ($_________)
if requested by the Agent)
TOTAL Ineligible Receivables ($_________)
TOTAL Eligible Receivables $_________ A
TOTAL INVENTORY $_________
</TABLE>
<PAGE> 152
2
<TABLE>
LESS:
<S> <C>
Greater of Market Reserve Against Inventory and
Market Reserve Approved by Independent Auditors ($_________)
Packaging Materials ($_________)
Work-in-Process ($_________)
Other Ineligible ($_________)
Not a First Perfected Security Interest ($_________)
TOTAL Ineligible Inventory ($_________)
TOTAL Eligible Inventory $_________ B
TOTAL BORROWING BASE
[A x 85%] plus [B x 60%] $_________ C
TOTAL Commitment $_________ D
Lesser of Borrowing Base (C) and Commitment (D) $_________ E
Less:
Loans Outstanding under Credit Agreement ($_________)F
Aggregate Amount of L/C Credits ($_________)G
TOTAL Unused portion of Borrowing Base as of $_________
_____________ (E minus F minus G)
</TABLE>
The undersigned further certifies and warrants that no Default
or Event of Default is existing as of the date of this Certificate.
AMSCAN INC.
By
---------------------------------
Name:
Title:
<PAGE> 153
EXHIBIT M
COLLATERAL ASSIGNMENT OF LEASES
COLLATERAL ASSIGNMENT OF LEASES, dated as of September 20,
1995 by and between AMSCAN INC., a New York corporation, KOOKABURRA USA, LTD., a
New York corporation, DECO PAPER PRODUCTS, INC., a Kentucky corporation, and
TRISAR, INC., a California corporation, each having a primary business address
at 2 Macy Road, Harrison, New York 10528 (collectively referred to herein as
"Assignor") and THE CHASE MANHATTAN BANK, N.A., a national banking association
organized under the laws of the United States, as agent (the "Agent") for the
banks (the "Banks") party to the Credit Agreement (as hereinafter defined),
having an address at 31 Mamaroneck Avenue, White Plains, New York 10601.
PRELIMINARY STATEMENTS:
(1) The Banks and the Agent have entered into a Credit
Agreement dated as of September 20, 1995 (said Agreement, as it may hereafter be
amended or otherwise modified from time to time, being the "Credit Agreement,"
the terms defined therein and not otherwise defined herein being used herein as
therein defined) with the Assignor. The Assignor will receive the proceeds of
the Loans under the Credit Agreement and will derive substantial direct and
indirect benefit from the transactions contemplated by the Credit Agreement.
(2) The Assignor is party to the leases described in Schedule
A hereto.
(3) It is a condition precedent to the making of Loans by the
Banks under the Credit Agreement that the Assignor shall have made this
Collateral Assignment of Leases.
NOW, THEREFORE, in consideration of the premises, the sum of
Ten and 00/100 Dollars ($10.00) and in order to induce the Banks to make Loans
under the Credit Agreement, the Assignor agrees as follows:
1. Subject to the provisions of paragraph 11 hereof, the
Assignor hereby assigns, transfers and sets over unto the Agent for its benefit
and the ratable benefit of the Banks, as collateral security for the Obligations
(as hereinafter defined), all of the Assignor's right, title and interest,
powers, privileges and other benefits under leases of real property to which the
Assignor is now or hereafter a party, including, without limitation, those
leases described on Schedule A attached hereto and incorporated herein and any
and all renewals, extensions, amendments, modifications, substitutions and
replacements
<PAGE> 154
2
therefor (collectively, the "Leases"). This assignment includes, without
limitation, all of the Assignor's rights to the use and occupancy of the
properties subject to each and every Lease. In furtherance of the foregoing
assignment, the Assignor hereby irrevocably authorizes and empowers the Agent in
its own name, or in the name of its nominee, or in the name of, or as
attorney-in-fact for, the Assignor, to ask, demand, sue for, collect and receive
any and all payments to which the Assignor is or may become entitled under any
of the Leases, and to enforce compliance by each and every party, or any one or
more of them, with each and every Lease, and with all or any of the terms and
provisions thereof.
2. This Assignment is executed only as security for the
Obligations (as hereinafter defined), and, therefore, the execution and delivery
of this Assignment shall not subject the Agent to, or transfer or pass to the
Agent, or in any way affect or modify, the liability of the Assignor under any
or all of the Leases, it being understood and agreed that notwithstanding this
Assignment or any subsequent assignment, all of the obligations of Assignor to
each and every other party under each and every one of the Leases shall be and
remain enforceable by such other party, its successors and assigns, only against
Assignor or persons other than the Agent and its respective successors and
assigns, and that the Agent has not assumed any of the obligations or duties of
Assignor under or with respect to the Leases.
3. This Assignment secures the payment of all obligations of
the Assignor now or hereafter existing under the Credit Agreement, the Notes and
the other Facility Documents, whether for principal, interest, fees, expenses or
otherwise, and all obligations of the Assignor now or hereafter existing under
this Assignment (all such obligations of the Assignor being the "Obligations").
Without limiting the generality of the foregoing, this Assignment secures the
payment of all amounts which constitute part of the Obligations and would be
owed by the Assignor to the Agent or the Banks under the Credit Agreement, the
Notes and the other Facility Documents but for the facts that they are
unenforceable or not allowable due to the existence of a bankruptcy,
reorganization or similar proceeding involving the Assignor.
4. To protect the security afforded by this Assignment, the
Assignor represents, warrants and agrees as follows:
(a) the Assignor will faithfully abide by, perform
and discharge each and every obligation, covenant, condition, duty and agreement
which each or any of the Leases provides are to be kept, observed or performed
by the Assignor, and will promptly notify the Agent in writing of all defaults
and events of default under any of the Leases;
(b) the Assignor will take all action which might
reasonably be required to keep the Leases in full force and effect and to keep
them from expiring prior to
<PAGE> 155
3
the end of their respective terms or being cancelled, rescinded or terminated;
(c) without the prior written consent of the Agent,
which shall not be unreasonably withheld, the Assignor will not amend, cancel,
rescind, abridge, modify or terminate any Lease or waive, release, discharge or
consent to the release of any other party to any Lease of or from any
obligation, covenant, condition or agreement to be kept, observed or performed
by such other party;
(d) without the prior written consent of the Agent,
which shall not be unreasonably withheld, the Assignor will not take any action
(including, without limitation, the exercise of any right or option) which would
permit, or give rise to a right permitting, any other party to any Lease, or any
other person or entity whatsoever, to cancel, rescind or terminate any Lease;
(e) at the Assignor's sole cost and expense, the
Assignor will appear in and defend any action or proceeding arising under,
growing out of or in any manner connected with the obligations, covenants,
conditions, duties and agreements or liabilities of the Assignor under any of
the Leases;
(f) should the Assignor fail to make any payment, do
any act which this Assignment prohibits or refrain from any act which this
Assignment requires, then the Agent may, but shall have no obligation to (and
shall not thereby release the Assignor from any obligation hereunder), make such
payment or do or prevent such act in such manner and to such extent provided
hereby, which rights of the Agent shall specifically include, without limiting
the Agent's general powers herein granted, the right to appear in and defend any
action or proceeding purporting to affect the security hereof and the rights or
powers of the Agent hereunder (or any of them), and also the right to perform
and discharge each and every one, or any one or more, of the obligations,
covenants, conditions, duties and agreements of the Assignor contained in any
one or more of the Leases; and in exercising such powers, the Agent may pay
necessary or advisable costs and expenses and incur and pay reasonable
attorneys' fees, and the Assignor will reimburse the Agent for such costs,
expenses and fees;
(g) the Assignor's interests in none of the Leases
has been previously mortgaged, pledged, hypothecated or assigned, by operation
of law or otherwise, whether absolutely, conditionally, collaterally or
otherwise, and, so long as this Assignment is in effect, the Assignor shall not
further assign, transfer or otherwise encumber its interest in any of the
Leases;
(h) each of the Leases is legal, valid, binding and
enforceable in accordance with its terms; no party under any of the Leases is,
or with the giving of notice or the passage of time, or both, would be, in
default thereunder; and all obligations,
<PAGE> 156
4
covenants, conditions, duties and agreements have been kept, observed and
performed as required thereunder.
5. Subject to the provisions of paragraph 11 hereof, the
Assignor does hereby constitute the Agent the Assignor's true and lawful
attorney-in-fact, irrevocably, with full power (in the name of the Assignor or
otherwise), to: ask, require, demand, sue for, collect, receive, compound and
give acquittance for each and every payment due or to become due, under or
arising out of any of the Leases to which the Assignor is or may become
entitled; enforce compliance by any other party with any term or provision of
any one or more of the Leases; endorse each and every check or other instrument
or order in connection therewith; make any payments required to be made under
any of the Leases, on behalf of or for the account of the Assignor; and file any
claim or claims, take any action or actions or institute any proceeding or
proceedings which the Agent may deem to be necessary or advisable in connection
with the Leases. In exercising such powers, the Agent may pay necessary or
advisable costs and expenses (including attorneys' fees), and the Assignor shall
reimburse the Agent, upon demand, for such costs and expenses.
6. Upon the full discharge and satisfaction of the Obligations
and the termination of the Commitments, this Assignment and all rights herein
assigned to the Agent will terminate, and all estate, right, title and interest
of the Agent in and to each and every one of the Leases shall revert to the
Assignor.
7. The Assignor will, from time to time, do and perform any
other act or acts, will execute, acknowledge, deliver and file, register, record
and deposit (and will refile, reregister and redeposit whenever required) any
and all further instruments required by law or requested by the Agent in order
to confirm, or further assure, the interests of the Agent hereunder, and will
take such actions and execute such instruments and documents as the Agent may
request to facilitate the Agent's exercise of the Assignor's rights, obligations
and duties under the Leases, provided that the Assignor is not prohibited from
doing so under the applicable Lease.
8. The Agent may assign all or any of the rights assigned to
it hereby, or arising out of the Leases, including, without limitation, the
right to receive any or all payments due or to become due. In the event of any
such assignment such successor or assign of the Agent shall enjoy all rights and
privileges and be subject to all obligations of the Agent hereunder. The Agent
will give written notice to the Assignor of any such assignment.
9. This Assignment shall be governed by, and construed and
enforced in accordance with, the laws of the State of New York.
10. The Assignor shall cause a copy of each and every notice
or
<PAGE> 157
5
communication received from any one or more of the other parties to any one or
more of the Leases, which notice or communication shall notify the Assignor of
any default, event of default, breach or other violation, on the part of the
Assignor, under one or more of the Leases, to be promptly delivered to the Agent
in the manner and at the place provided for in the Credit Agreement for the
giving of notices and communications thereunder, or at such other address or in
such other manner as the Agent may designate. The Assignor shall furnish to the
Agent, within five (5) days after any request by the Agent, true and complete
copies of all Leases then in effect.
11. By its acceptance of this Assignment, the Agent hereby
agrees with the Assignor that, so long as an Event of Default (as defined in the
Credit Agreement) has not occurred, the Agent will not exercise or enforce, or
seek to exercise or enforce, or avail itself of, any of the rights, powers,
privileges, authorizations or benefits assigned and transferred to the Agent
pursuant to this Assignment, and the Assignor may exercise and enforce, or seek
to exercise and enforce, such rights, powers, privileges, authorizations or
benefits.
12. The Assignor shall indemnify and hold the Agent harmless
from and against any and all claims, demands, liabilities, losses, lawsuits,
judgments and expenses (including, without limitation, attorney's fees) to which
the Agent may become exposed, or which the Agent may incur, in exercising any of
its rights under this Assignment or due to the execution of this Assignment,
except for any such claims, demands, liabilities, losses, lawsuits, judgments
and expenses that are finally judicially determined to have resulted from the
Agent's gross negligence or willful misconduct.
13. This Assignment is not intended to create any partnership
or joint venture between the Assignor and the Agent and/or the Banks.
14. No delay, omission or failure of the Agent to exercise its
rights under this Assignment upon the occurrence of any Event of Default, and no
waiver of any Event of Default, shall be deemed to waive, exhaust or impair the
Agent's ability or right to exercise such rights at a later time with respect to
such Event of Default (if the same shall not have been cured or corrected) or
with respect to any other Event of Default, as the case may be.
15. Subject to the aforesaid limitations on assignment, this
Assignment shall bind and inure to the benefit of the heirs, executors,
administrators, personal representatives, successors and assigns of the Assignor
and the Agent. Without limiting the generality of the foregoing, any Bank may
assign or otherwise transfer all or any portion of its rights and obligations
under the Credit Agreement (including, without limitation, all or any portion of
its Commitment, the Advances owing to it and any Note held by it) to any other
person or entity, and such other person or entity shall thereupon
<PAGE> 158
6
become vested with all the benefits in respect thereof granted to such Bank
herein or otherwise, subject, however, to the provisions of Article VI
(concerning the Agent) of the Credit Agreement. The provisions hereof shall
constitute covenants running with the land.
16. As to any Lease under which the Stockholder or an
Affiliate is not the landlord, this Assignment is made subject to the prior
written consent, where required under the terms of such Lease, of the applicable
landlord or lessor thereto. The Assignor covenants to use all reasonable efforts
to procure any required landlord consents to this Assignment. In the event that,
despite such reasonable efforts, (i) the consent of the landlord under one or
more Lease or Leases subject to this Assignment cannot be obtained and (ii) the
failure to obtain such consent would result in an event of default under such
Lease or Leases, then with respect to such Lease or Leases, this Assignment
shall be deemed to be null and void, ab initio, and this Assignment shall remain
effective as to all other Leases.
IN WITNESS WHEREOF, the Assignor has caused this instrument to
be executed by persons duly authorized, all as of the date first above written.
Signed, Sealed and Delivered
in Presence of:
"ASSIGNOR"
AMSCAN INC.
_____________________________ By:___________________________
Sheryl B. Mellin
_____________________________ Treasurer
KOOKABURRA USA, LTD.
_____________________________ By:___________________________
Sheryl B. Mellin
_____________________________ Treasurer
<PAGE> 159
7
DECO PAPER PRODUCTS, INC.
_____________________________ By:___________________________
Sheryl B. Mellin
_____________________________ Treasurer
TRISAR, INC.
_____________________________ By:___________________________
Sheryl B. Mellin
_____________________________ Treasurer
"AGENT"
THE CHASE MANHATTAN BANK,
N.A.
- -----------------------------
By:___________________________
_____________________________ Carol A. Kornbluth
Vice President
<PAGE> 160
8
ACKNOWLEDGMENT
STATE OF Connecticut )
) ss.:
COUNTY OF Fairfield )
I certify that on September 20, 1995, Sheryl B. Mellin
personally came before me and acknowledged under oath, to my satisfaction, that
she is the Treasurer of AMSCAN INC. and that she signed this document on such
behalf of AMSCAN INC. as her voluntary act duly authorized by AMSCAN INC.
--------------------------------
Commissioner of Superior Court
ACKNOWLEDGMENT
STATE OF Connecticut )
) ss.:
COUNTY OF Fairfield )
I certify that on September 20, 1995, Sheryl B. Mellin
personally came before me and acknowledged under oath, to my satisfaction, that
she is the Treasurer of KOOKABURRA USA, LTD. and that she signed this document
on such behalf of KOOKABURRA USA, LTD. as her voluntary act duly authorized by
KOOKABURRA USA, LTD.
--------------------------------
Commissioner of Superior Court
<PAGE> 161
9
ACKNOWLEDGMENT
STATE OF Connecticut )
) ss.:
COUNTY OF Fairfield )
I certify that on September 20, 1995, Sheryl B. Mellin
personally came before me and acknowledged under oath, to my satisfaction, that
she is the Treasurer of DECO PAPER PRODUCTS, INC., and that she signed this
document on such behalf of DECO PAPER PRODUCTS, INC., as her voluntary act duly
authorized by DECO PAPER PRODUCTS, INC.
--------------------------------
Commissioner of Superior Court
ACKNOWLEDGMENT
STATE OF Connecticut )
) ss.:
COUNTY OF Fairfield )
I certify that on September 20, 1995, Sheryl B. Mellin
personally came before me and acknowledged under oath, to my satisfaction, that
she is the Treasurer of TRISAR, INC., and that she signed this document on such
behalf of TRISAR, INC., as her voluntary act duly authorized by TRISAR, INC.
--------------------------------
Commissioner of Superior Court
<PAGE> 162
10
ACKNOWLEDGMENT
STATE OF Connecticut )
) ss.:
COUNTY OF Fairfield )
I certify that on September 20, 1995, Carol A. Kornbluth
personally came before me and acknowledged under oath, to my satisfaction, that
she is the Vice President of THE CHASE MANHATTAN BANK, N.A. and that she signed
this document on such behalf of THE CHASE MANHATTAN BANK, N.A. as her voluntary
act duly authorized by THE CHASE MANHATTAN BANK, N.A.
--------------------------------
Commissioner of Superior Court
<PAGE> 163
Schedule A
Leases
<PAGE> 164
EXHIBIT N
CASH COLLATERAL ACCOUNT AGREEMENT
CASH COLLATERAL ACCOUNT AGREEMENT, dated September 20, 1995,
made by AMSCAN INC., a New York corporation, KOOKABURRA USA, LTD., a New York
corporation, DECO PAPER PRODUCTS, INC., a Kentucky corporation, and TRISAR,
INC., a California corporation (each a "Pledgor" and, collectively, the
"Pledgors"), to THE CHASE MANHATTAN BANK, N.A. ("Chase"), as agent (the "Agent")
for the banks (the "Banks") parties to the Credit Agreement (as hereinafter
defined).
PRELIMINARY STATEMENTS:
(1) The Pledgors have opened a cash collateral account (the
"Account") with the Agent at its office at 31 Mamaroneck Avenue, White Plains,
New York 10601, Account No. 4521-037-210, in the name of the Pledgors but
subject to the terms of this Agreement.
(2) The Banks and the Agent have entered into a Credit
Agreement dated as of September 20, 1995 (said Agreement, as it may hereafter be
amended or otherwise modified from time to time, being the "Credit Agreement,"
the terms defined therein and not otherwise defined herein being used herein as
therein defined) with the Pledgors. It is a condition precedent to the making of
Loans by the Banks under the Credit Agreement that the Pledgors shall have made
the pledge and assignment contemplated by this Agreement.
NOW, THEREFORE, in consideration of the premises and in order
to induce the Banks to make Loans under the Credit Agreement, each Pledgor
hereby agrees as follows:
SECTION 1. Pledge and Assignment. Each Pledgor hereby pledges
and assigns to the Agent, and grants to the Agent a security interest in, the
following collateral (the "Collateral"):
(a) the Account and all certificates and instruments,
if any, from time to time representing or evidencing the Account;
(b) all cash and amounts from time to time deposited
in the Account;
(c) all notes, certificates of deposit and other
instruments from time to time hereafter delivered to or otherwise possessed by
the Agent for or on behalf of such Pledgor in substitution for or in addition to
any or all of the then existing Collateral;
<PAGE> 165
2
(d) all interest, dividends, cash, instruments and
other property from time to time received, receivable or otherwise distributed
in respect of or in exchange for any or all of the then existing Collateral; and
(e) all proceeds of any or all of the foregoing
Collateral.
SECTION 2. Security for Obligations. This Agreement secures the payment
of all obligations of the Pledgors now or hereafter existing under the Credit
Agreement, the Notes and the other Facility Documents, whether for principal,
interest, fees, expenses or otherwise, and all obligations of the Pledgors now
or hereafter existing under this Agreement (all such obligations of the Pledgors
being the "Obligations"). Without limiting the generality of the foregoing, this
Agreement secures the payment of all amounts which constitute part of the
Obligations and would be owed by any Pledgor to the Agent or the Banks under the
Credit Agreement, the Notes and the other Facility Documents but for the fact
that they are unenforceable or not allowable due to the existence of a
bankruptcy, reorganization or similar proceeding involving any Pledgor.
SECTION 3. Delivery of Collateral. All certificates or instruments, if
any, representing or evidencing the Collateral shall be delivered to and held by
or on behalf of the Agent pursuant hereto and shall be in suitable form for
transfer by delivery, or shall be accompanied by duly executed instruments of
transfer or assignment in blank, all in form and substance satisfactory to the
Agent. The Agent shall have the right, if an Event of Default shall have
occurred or be continuing, without notice to any Pledgor, to transfer to or to
register in the name of the Agent or any of its nominees any or all of the
Collateral. In addition, the Agent shall have the right at any time to exchange
certificates or instruments representing or evidencing Collateral for
certificates or instruments of smaller or larger denominations.
SECTION 4. Maintaining the Account. So long as any Bank has any
Commitment or any Note or 4c Credit shall remain unpaid, the Pledgors will
maintain the Account with the Agent. The Account shall be subject to such
applicable laws, and such applicable regulations of the Board of Governors of
the Federal Reserve System and of any other appropriate banking or governmental
authority, as may now or hereafter be in effect.
SECTION 5. Representations and Warranties. Each Pledgor represents and
warrants as follows:
(a) The Pledgors are the legal and beneficial owner of the
Collateral free and clear of any lien, security interest, or other charge or
encumbrance except for the security interest created by this Agreement.
(b) The pledge and assignment of the Collateral pursuant to
this Agreement creates a valid and perfected first-priority security interest in
the Collateral, securing the payment of the Obligations.
<PAGE> 166
3
SECTION 6. Further Assurances. Each Pledgor agrees that at any time and
from time to time, at the expense of such Pledgor, such Pledgor will promptly
execute and deliver all further instruments and documents, and take all further
action, that may be necessary or desirable, or that the Agent may reasonably
request, in order to perfect and protect any security interest granted or
purported to be granted hereby or to enable the Agent to exercise and enforce
its rights and remedies hereunder with respect to any Collateral.
SECTION 7. Transfers and Other Liens. Each Pledgor agrees that it will
not (a) sell or otherwise dispose of any of the Collateral; provided that, so
long as no Event of Default shall have occurred and be continuing, such Pledgor
may do so in the ordinary course of business, or (b) create or permit to exist
any Lien, security interest, or other charge or encumbrance upon or with respect
to any of the Collateral, except for the security interest under this Agreement.
SECTION 8. Agent Appointed Attorney-in-Fact. Each Pledgor hereby
appoints the Agent such Pledgor's attorney-in-fact, with full authority in the
place and stead of such Pledgor and in the name of such Pledgor or otherwise,
from time to time in the Agent's discretion to take any action and to execute
any instrument which the Agent may deem necessary or advisable to accomplish the
purposes of this Agreement, including, without limitation, to receive, endorse
and collect all instruments made payable to such Pledgor representing any
interest payment, dividend, or other distribution in respect of the Pledged
Collateral or any part thereof and to give full discharge for the same.
SECTION 9. Agent May Perform. If any Pledgor fails to perform any
agreement contained herein, the Agent may itself perform, or cause performance
of, such agreement, and the expenses of the Agent incurred in connection
therewith shall be payable by the Pledgors under Section 12.
SECTION 10. Reasonable Care. The Agent shall be deemed to have
exercised reasonable care in the custody and preservation of the Collateral in
its possession if the Collateral is accorded treatment substantially equal to
that which Chase accords its own property, it being understood that the Agent
shall not have any responsibility for (a) ascertaining or taking action with
respect to calls, conversions, exchanges, maturities, tenders or other matters
relative to any Collateral, whether or not the Agent has or is deemed to have
knowledge of such matters, or (b) taking any necessary steps to preserve rights
against any parties with respect to any Collateral.
SECTION 11. Remedies upon Default. If any Event of Default shall have
occurred and be continuing:
(a) The Agent may, without notice to the Pledgors except as
required by law and at any time or from time to time, charge, set off and
otherwise apply
<PAGE> 167
4
all or any part of the Obligations against the Account or any part thereof.
(b) The Agent may also exercise in respect of the Collateral,
in addition to other rights and remedies provided for herein or otherwise
available to it, all the rights and remedies of a secured party on default under
the Uniform Commercial Code (the "Code") in effect in the State of New York at
that time, and the Agent may, without notice except as specified below, sell the
Collateral or any part thereof in one or more parcels at public or private sale,
at any of the Agent's offices or elsewhere, for cash, on credit or for future
delivery, and upon such other terms as the Agent may deem commercially
reasonable. Each Pledgor agrees that, to the extent notice of sale shall be
required by law, at least ten days' notice to such Pledgor of the time and place
of any public sale or the time after which any private sale is to be made shall
constitute reasonable notification. The Agent shall not be obligated to make any
sale of Pledged Collateral regardless of notice of sale having been given. The
Agent may adjourn any public or private sale from time to time by announcement
at the time and place fixed therefor, and such sale may, without further notice,
be made at the time and place to which it was so adjourned.
(c) Any cash held by the Agent as Collateral and all cash
proceeds received by the Agent in respect of any sale of, collection from, or
other realization upon all or any part of the Collateral may, in the discretion
of the Agent, then or at any time thereafter be applied (after payment of any
amounts payable to the Agent pursuant to Section 12) in whole or in part by the
Agent against all or any part of the Obligations in such order as the Agent
shall elect. Any surplus of such cash or cash proceeds held by the Agent and
remaining after payment in full of all the Obligations shall be paid over to the
Pledgors or to whomsoever may be lawfully entitled to receive such surplus.
SECTION 12. Expenses. Each Pledgor will upon demand pay to the Agent
the amount of any and all reasonable expenses, including the reasonable fees and
expenses of its counsel and of any experts and agents, which the Agent may incur
in connection with (i) the administration of this Agreement, (ii) the custody or
preservation of, or the sale of, collection from, or other realization upon, any
of the Pledged Collateral, (iii) the exercise or enforcement of any of the
rights of the Agent or the Banks hereunder or (iv) the failure by any Pledgor to
perform or observe any of the provisions hereof.
SECTION 13. Security Interest Absolute. The obligations of each Pledgor
under this Agreement are independent of the Obligations, and a separate action
or actions may be brought and prosecuted against each Pledgor to enforce this
Agreement, irrespective of whether any action is brought against any other
Pledgor or whether any other Pledgor is joined in any such action or actions.
All rights of the Agent and security interests hereunder, and all obligations of
each Pledgor hereunder, shall be absolute and unconditional irrespective of:
(i) any lack of validity or enforceability of the Credit
<PAGE> 168
5
Agreement, the Note or any other agreement or instrument
relating thereto;
(ii) any change in the time, manner or place of
payment of, or in any other term of, all or any of the
Obligations, or any other amendment or waiver of or any
consent to any departure from the Credit Agreement or the
Note, including, without limitation, any increase in the
Obligations resulting from the extension of additional credit
to any Pledgor or any of its Subsidiaries or otherwise;
(iii) any taking, exchange, release or non-perfection
of any other collateral, or any taking, release or amendment
or waiver of or consent to departure from any guaranty, for
all or any of the Obligations;
(iv) any manner of application of collateral, or
proceeds thereof, to all or any of the Obligations, or any
manner of sale or other disposition of any collateral for all
or any part of the Obligations or any other assets of any
Pledgor or any of its Subsidiaries;
(v) any change, restructuring or termination of the
corporate structure or existence of any Pledgor or any of its
Subsidiaries; or
(vi) any other circumstance which might otherwise
constitute a defense available to, or a discharge of, any
Pledgor or a third party pledgor.
SECTION 14. Amendments, Etc. No amendment or waiver of any provision of
this Agreement, and no consent to any departure by any Pledgor herefrom, shall
in any event be effective unless the same shall be in writing and signed by the
Agent, and then such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given.
SECTION 15. Notices. Unless the party to be notified otherwise notifies
the other party in writing, notices shall be given by ordinary mail or telex,
addressed to such party at its address on the signature page of the Credit
Agreement.
SECTION 16. Continuing Security Interest; Assignments under Credit
Agreement. This Agreement shall create a continuing security interest in the
Pledged Collateral and shall (i) remain in full force and effect until the later
of (x) the payment in full of the Obligations and all other amounts payable
under this Agreement and (y) the expiration or termination of the Commitments,
(ii) be binding upon each Pledgor, its successors and assigns, and (iii) inure,
together with the rights and remedies of the Agent hereunder, to the benefit of,
and be enforceable by, the Agent, the Banks and their respective successors,
transferees and assigns. Without limiting the generality of the foregoing clause
(iii), any Bank may assign or otherwise transfer all or any portion of its
rights and obligations under the Credit Agreement (including, without
limitation, all or any
<PAGE> 169
6
portion of its Commitment, the Loans owing to it, its interest in any Letter of
Credit and any Note held by it) to any other person or entity, and such other
person or entity shall thereupon become vested with all the benefits in respect
thereof granted to such Bank herein or otherwise, subject, however, to the
provisions of Article 10 (concerning the Agent) of the Credit Agreement. Upon
the later of payment in full of the Obligations and all other amounts payable
under this Agreement and the expiration or termination of the Commitments, the
security interest granted hereby shall terminate and all rights to the Pledged
Collateral shall revert to the Pledgors. Upon any such termination, the Agent
will, at the Pledgors' expense, return to the Pledgors such of the Pledged
Collateral as shall not have been sold or otherwise applied pursuant to the
terms hereof and execute and deliver to the Pledgors such documents as the
Pledgors shall reasonably request to evidence such termination.
SECTION 17. Governing Law; Terms. This Agreement shall be governed by,
and construed in accordance with, the laws of the State of New York. Unless
otherwise defined herein or in the Credit Agreement, terms defined in Article 9
of the Code are used herein as therein defined.
IN WITNESS WHEREOF, each Pledgor has caused this Agreement to
be duly executed and delivered by its officer thereunto duly authorized as of
the date first above written.
AMSCAN INC.
By________________________________
Sheryl B. Mellin
Treasurer
KOOKABURRA USA, LTD.
By________________________________
Sheryl B. Mellin
Treasurer
DECO PAPER PRODUCTS, INC.
<PAGE> 170
7
By________________________________
Sheryl B. Mellin
Treasurer
TRISAR, INC.
By________________________________
Sheryl B. Mellin
Treasurer
ACCEPTED AND AGREED:
THE CHASE MANHATTAN BANK, N.A.
By________________________________
Carol Kornbluth
Vice President
<PAGE> 171
EXHIBIT Q
ASSIGNMENT OF DEPOSIT ACCOUNTS
For value received, and in connection with a Credit Agreement dated as
of September 20, 1995 (said Agreement, as it may hereafter be amended or
otherwise modified from time to time, being the "Credit Agreement," the terms
defined therein and not otherwise defined herein being used herein being used
herein as therein defined), among THE CHASE MANHATTAN BANK, N.A. (the "Agent"),
the banks named therein (the "Banks"), and the undersigned, the undersigned
hereby grants a security interest in and right of set-off to, and assigns,
transfers, and pledges to the Agent, its successors and assigns, as security for
the Indebtedness (as defined below), all of the undersigned's right, title and
interest in and to the commercial demand deposit accounts, account numbers [ ],
in each case, maintained with Harris Trust and Savings Bank by one or more of
the Obligors (as hereinafter defined) (the "Deposit(s)"), together with all
monies, proceeds or sums due or to become due thereon or therefrom and all
certificates, receipts or other instruments evidencing such Deposit(s). The
undersigned agrees to deliver promptly to the Agent the originals of all
certificates, receipts or other instruments evidencing the Deposit(s).
This Assignment is given to the Agent as security for all indebtedness,
obligations or liabilities of any kind of Amscan Inc., a New York corporation,
Kookaburra USA, Ltd., a New York corporation, Deco Paper Products, Inc., a
Kentucky corporation, or Trisar Inc., a California corporation (each an
"Obligor" and collectively, the "Obligors") to the Banks, now or hereafter
existing, under the Credit Agreement, the Notes and the other Facility Documents
(as such may be amended from time to time), whether for principal, interest,
fees, expenses, or otherwise, and all obligations of the Obligors now or
hereafter existing under this Assignment (collectively, the "Indebtedness"). The
rights, powers and remedies granted to the Agent and the Banks herein shall be
cumulative and in addition to any rights, powers and remedies to which the Agent
or the Banks may be entitled either by operation of law or pursuant to any other
document or instrument delivered or from time to time to be delivered to the
Agent or any Bank in connection with any Indebtedness.
The undersigned represents and warrants that: (i) the Obligors are the
sole owners of the Deposit(s); (ii) the Deposit(s) is/are free of all liens,
security interests, and encumbrances and the undersigned has not made any prior
assignment or transfer of any kind of said Deposit(s), the proceeds thereof or
interest(s) thereon or therein, except such as may have been created in favor of
the Bank; (iii) the undersigned has not withdrawn, cancelled, been repaid or
redeemed all or any part of said Deposit(s); (iv) there is no pending
application for the withdrawal, cancellation, repayment or redemption of said
Deposit(s); and (v) this Assignment does not violate, or require any consent,
approval or other action by any governmental official or body or any other
person or entity, under any
<PAGE> 172
law, regulation, decree or order of any agreement binding upon the undersigned
or the property of the undersigned.
This Assignment has been given for value and is hereby declared to be
irrevocable.
So long as any Event of Default shall have occurred or be continuing,
the undersigned hereby irrevocably authorizes and empowers the Agent at its
option, at any time, and from time to time, for its own use and benefit, either
in its own name or in the name of the undersigned: (i) to execute any and all
instruments required for the withdrawal or repayment of the Deposit(s), or any
part thereof; (ii) to complete in any respect any instrument for the withdrawal
of funds; and (iii) to in all respects deal with said Deposit(s) as the owner
thereof, and the undersigned hereby irrevocably constitutes and appoints the
Bank as its attorney-in-fact to do any and all of the aforesaid. The undersigned
waives any presentation, demand of payment, protest and notice of non-payment or
protest. Notwithstanding the foregoing, the Agent shall not under any
circumstances be deemed to assume any responsibility for or obligation or duty
with respect to the Deposit(s) or any proceeds thereof, and shall not be
required to take any action of any kind to collect, preserve or protect its or
the undersigned's rights in the Deposit(s). The undersigned releases the Agent
and the Banks from any claims, causes of action and demands at any time arising
out of or with respect to this Assignment, the use or disposition of the
Deposit(s) or any action taken or omitted to be taken by the Agent or any Bank
with respect thereto, and the undersigned hereby agrees to hold the Agent and
the Banks harmless from and with respect to any and all claims, causes of action
and demands, other than claims, causes of action and demands that are finally
judicially determined to have resulted from the gross negligence or willful
misconduct of a Bank or the Agent.
The obligations of the undersigned under this Assignment shall be
absolute and unconditional irrespective of: (i) any lack of validity or
enforceability of the Indebtedness or any agreement or instrument relating
thereto; (ii) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Indebtedness, or any other amendment or waiver
of or any consent to departure from any agreement or instrument relating to the
Indebtedness; (iii) any exchange, release or non-perfection of any collateral,
or any release or amendment or waiver of or consent to departure from any
guaranty, subordination or other credit support for all or any of the
Indebtedness; (iv) any other circumstance which might otherwise constitute a
defense available to, or a discharge of any Obligor or a guarantor of the
Indebtedness or a party agreeing to subordinate its claim to the Indebtedness;
or (v) any law, regulation or order now or hereafter in effect in any
jurisdiction affecting any of the terms or the rights of the Agent or any Bank
with respect to the Indebtedness or any agreement or instrument relating to the
Indebtedness.
This Assignment shall continue to be effective or be reinstated, as the
case may be, if at any time any payment of any of the Indebtedness is rescinded
or must otherwise be
-2-
<PAGE> 173
returned by the Banks upon the insolvency, bankruptcy or reorganization of any
Obligor or otherwise, all as though such payment had not been made.
Upon any default in the payment or performance of any obligation in
respect of any of the Indebtedness, the Agent may, without regard to any premium
or penalty which may result from liquidation of any Deposit(s) prior to
maturity; (i) hold any and all monies or proceeds representing the Deposit(s) in
a cash collateral account or invest such monies or proceeds as the Agent may
deem appropriate on behalf of the undersigned; or (ii) apply all or any portion
of the Deposit(s), in its sole discretion, first, to all costs and expenses of
the Agent in enforcing its rights and pursuing its remedies hereunder, second,
to the payment of interest on the Indebtedness, whether due or not, and any fees
or commissions to which the Agent may be entitled; third, to the payment of
principal of the Indebtedness; and fourth, to the undersigned or whosoever may
be entitled thereto.
The undersigned agrees that if the security assigned hereby includes
now or hereafter an International Banking Facility Time Deposit (as defined in
Regulation D of the Board of Governors of the Federal Reserve System), any
extensions of credit made in reliance upon this Assignment and upon said
security shall be used to support only non-U.S. activities of any Obligor or its
foreign affiliates.
This Assignment shall create a continuing security interest in the
Deposit(s) and shall remain in full force and effect until the indefeasible
payment in full of the Indebtedness and until the Commitments shall no longer be
in effect. Upon the indefeasible payment in full of the Indebtedness and when
the Commitments shall no longer be in effect, the security interest granted
hereby shall terminate and all rights to the Deposit(s) shall revert to the
Grantor.
This Assignment shall be governed by and construed in accordance with
the laws of the State of New York. The undersigned hereby consents to the
non-exclusive jurisdiction of the state and federal courts sitting in New York
County, New York, and agrees that in the event of dispute hereunder, suit may be
brought against the undersigned in such courts or in any other jurisdiction
where the undersigned or any of its assets may be found, and the undersigned
hereby irrevocably submits to the jurisdiction of such courts. The undersigned
irrevocably consents to the service of any and all process in any such action or
proceeding by the mailing of copies of such process to the undersigned at its
address specified below.
The undersigned hereby waives any and every right to a trial by jury in
any action or on related to this Assignment, the Indebtedness or the enforcement
of either or all of the same, and does further expressly waive any and every
right to interpose any counterclaim in any such action or proceeding.
-3-
<PAGE> 174
As used in this Assignment, the term "undersigned" shall be deemed to
include all signatories hereto, if more than one, and notwithstanding that it is
used in the singular, the obligations and representations of the undersigned
herein shall be considered to be joint and several in the case of multiple
parties hereto.
IN WITNESS WHEREOF, the undersigned has executed this Assignment this
20th day of September, 1995.
AMSCAN INC. KOOKABURRA USA, LTD.
- ------------------------------ ------------------------------
Sheryl B. Mellin Sheryl B. Mellin
Treasurer Treasurer
DECO PAPER PRODUCTS, INC. TRISAR, INC.
- ------------------------------ ------------------------------
Sheryl B. Mellin Sheryl B. Mellin
Treasurer Treasurer
Address for each of the undersigned:
2 Macy Road
Harrison, New York 10528
-4-
<PAGE> 1
Exhibit 10(a)
EMPLOYMENT AGREEMENT
AGREEMENT, dated as of November 1, 1996 (the "EMPLOYMENT AGREEMENT"),
by and between AMSCAN HOLDINGS INC. a Delaware corporation (collectively the
"EMPLOYER" or "COMPANY") and John A. Svenningsen (the "EMPLOYEE").
WHEREAS, the Employer is presently planning a public offering of its
securities, and wishes to retain the services of the Employee following the
consummation of such offering;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein, the parties agree, effective at and only upon the closing of
the proposed initial public offering of common stock of the Employer (the date
of such closing being referred to herein as the "EFFECTIVE DATE"), as follows:
1. EMPLOYMENT.
(a) The Company hereby employs the Employee, and Employee
hereby agrees to serve, as Chief Executive Officer, Chairman of its Board of
Directors and President of the Company, for the term and upon the conditions and
provisions of this Employment Agreement.
(b) Upon the commencement of this Employment Agreement, as
provided in paragraph 3(a), all other employment arrangements in connection with
the Employee's employment by Amscan Inc. shall be terminated except that
Amscan Inc. shall remain liable to the Employee for all obligations owing by the
Company to the Employee on the Effective Date which have not been discharged.
2. EMPLOYEE'S DUTIES.
(a) During the term of this Employment Agreement, the Employer
will employ the Employee as President, Chief Executive Officer, Chairman of its
Board of Directors and the President of the Company. The Employee shall as its
chief executive, supervise, manage and administer the business of the Company,
and perform such executive duties as are consistent with his office and position
and as may be assigned to him from time to time by the Board of Directors.
(b) The Employee shall serve without additional remuneration
as (i) a director of the Employer, if elected by Employer's stockholders; (ii) a
member of any committee of the Board of the Employer, as determined by the
Board; and (iii) a director and/or officer of one or more of the Employer's
subsidiaries, if appointed to such position by the Employer or the applicable
board of directors.
(c) During the term of this Employment Agreement, Employee
shall devote his full business time, skill and efforts to the affairs of the
Employer as reasonably necessary to permit the faithful and diligent performance
of his duties hereunder. But, nothing contained herein is intended to preclude
the Employee from managing his private assets, including his real
<PAGE> 2
estate holdings (in particular those real estate holdings which may be leased to
the Company or any of its affiliates or subsidiaries) provided that such
activities do not interfere with nor diminish the diligent performance by the
Employee of his duties on behalf of the Company.
3. TERM.
(a) This Employment Agreement shall commence on the day
following the Effective Date and continue for a period of three (3) years
thereafter (the "TERM"), unless terminated earlier in accordance with the
provisions of this Employment Agreement. Notwithstanding the foregoing, the
Employee's employment hereunder shall terminate upon the occurrence of any of
the following events:
1. the mutual agreement, in writing, at any time, by the
Employer and Employee to terminate such employment;
2. the death of the Employee;
3. the termination of the Employee's employment by the
Employer, for "CAUSE" as defined hereinafter;
4. the unilateral cessation or discontinuance by the
Employee of his working for or employment by the
Employer.
(b) For the purposes of this Employment Agreement, "CAUSE"
shall mean (i) the commission by the Employee of any crime or an intentional act
of fraud against the Employer; (ii) any act of gross negligence or wilful
misconduct on the part of the Employee with respect to his duties under this
Employment Agreement; (iii) any act of wilful disobedience on the part of the
Employee in violation of specific and reasonable directions of the Board. A
violation under any Motor Vehicle Law or Code shall not be included in the
definition of "Cause".
(c) Upon termination of the Employee's employment hereunder,
whether at the end of the Term or any extended term or in the event of earlier
termination as provided herein, the Employee shall have no further rights under
this Employment Agreement, except as expressly herein set forth. Nothing
contained herein shall be deemed to preclude the Employer from enforcing any
remedies available to it at law or equity in consequence of a breach by the
Employee of his obligations to the Employer or available to the Employer under
the provisions of this Employment Agreement, including without limitation the
enforcement of any restrictive covenants hereunder to the extent herein
provided.
4. COMPENSATION.
(a) During the Term, the Employer agrees to pay to the
Employee the following base yearly salaries:
-2-
<PAGE> 3
(i) The base yearly salary shall be Three Hundred
Thousand ($300,000.00) Dollars until the end of the
first contract year.
(ii) For each full contract year starting with the second
contract year, the base yearly salary will be
increased by five (5%) percent of the base yearly
salary of the preceding contract year.
For the purposes hereof, "contract year' shall mean each successive
twelve month period commencing on the Effective Date and on each anniversary
thereof during the Term.
(b) Employee's base yearly salary shall be payable in regular
intervals in accordance with the Company's customary payroll practices in effect
during the Term.
(c) All compensation shall be subject to such withholding of
any federal, state or local taxes as may be required by law with respect to
these payments.
(d) In the event of the termination of the Employee's
employment before the end of a contract year, the base yearly salary for the
year of termination shall be pro-rated to the date of termination.
(e) Bonuses may be paid by the Company to the Employee in such
amounts and in such manner as the Company's Board of Directors may, in its sole
discretion, determine.
5. FRINGE BENEFITS.
As additional consideration for the services of the Employee
under this Employment Agreement, the Employer shall provide to the Employee all
fringe benefits provided by the Employer to its other executives, including
automobile allowance, paid vacation, holiday and sick leave, medical insurance
for the Employee, with spouse and dependent children fully paid for by the
Employer, and group life insurance, and participation in pension and/or profit
sharing plans, in the same manner and to the same extent as such fringe benefits
shall be available to such other executives of the Employer or as the Board of
Directors of the Company may otherwise determine.
6. BUSINESS EXPENSES.
The Employer acknowledges that the Employee may necessarily
incur, for the benefit of the Company and in furtherance of the Company's
business, various expenses including, but not limited to, travel, entertainment
and promotion expenses. The Employer, at its options, shall either pay such
necessary expenses directly, advance sums to be used for payment of such
necessary expenses or on submission by the Employee of receipts and an itemized
account of such expenditures, reimburse the Employee for such necessary expenses
actually incurred by him.
-3-
<PAGE> 4
7. RESTRICTIVE COVENANTS.
The Employee acknowledges that his employment with Employer
has brought and will bring him into close contact with trade secrets,
proprietary information and other confidential material and assets of the
Employer and other information not readily available to the public, the
disclosure of which to third parties would have a material adverse effect on the
Employer's business operations. In recognition of the foregoing, the Employee
covenants and agrees that:
(a) During the Term and during any extended term, whether or
not the Employee's employment is terminated before the end of the particular
term, and upon termination of the Employee's employment for a period of three
(3) years following such termination, he will not, directly or indirectly, as
proprietor, partner, shareholder (other than as a less than five percent
shareholder in a publicly held company), officer, director, employee or
consultant, or in any other capacity, for his own benefit or for or with any
other person or entity, engage in or perform services in any business or
activity involved in or related to the business in which the Employer or any of
its Affiliates, as herein defined, is now engaged or any other business in which
the Employer or any of its Affiliates may hereafter become engaged during the
Term in any trading area in which the Employer may be engaged in business or
trade. The Employee acknowledges that the Employer now carries on its business
in many trading areas throughout the world.
(b) Employee will not, at any time, without the prior written
consent of the Employer, furnish or disclose to any person who is not then an
officer, employee or agent of the Employer, (i) any trade secret of the
Employer, or (ii) any documents, records, plans, models, customer lists or other
tangible property of the Employer, regardless of its form, which may come into
his possession, custody or control in consequence of his employment.
(c) In addition to a right to accounting by the Employer
and/or damages and/or any other relief to which the Employer may be entitled as
a result of the Employee's breach hereof the Employer will be entitled to
injunctive relief restraining any such breach or threatened breach, or the
continuation of such breach, by the Employee, provided however, that if a court
of competent jurisdiction shall determine that this covenant shall be
enforceable only if limited to a shorter period of time or to a smaller
geographical area than is herein expressly provided, or otherwise limited, then
and in such event, this covenant shall be deemed to be limited to the extent so
determined to be enforceable, in the same manner and to the same extent as if
such limited were expressly provided herein.
(d) The rights hereunder of the Employer against the Employee
may be assigned by the Employer and may be enforced by any successors or assigns
of the Employer.
"AFFILIATES" shall mean any entity controlling, controlled by
or under common control with the Company or the entity controlling the Company.
-4-
<PAGE> 5
9. ENFORCEMENT.
In the event of any litigation arising out of or related to
the Employment Agreement, in addition to any other relief to which it is
entitled, the prevailing party shall be entitled to receive reimbursement from
the losing party for the prevailing party's legal fees and expenses in
connection with such litigation.
10. NOTICES.
Any notices, requests, consents and other communications,
required or permitted to be given hereunder, shall be in writing, and shall be
deemed to have been duly given if delivered personally or sent by certified
mail, return receipt requested, to the party to be notified at his or its
address set forth below or at such other address as the party to be notified may
have otherwise designated, by notice in writing, with copies to their respective
attorneys as set forth below:
To Employer: Amscan Inc.
80 Grasslands Road
Elmsford, NY 10523
Attn: Board of Directors
with a copy to: Kurzman & Eisenberg, LLP
Attn: Sam Eisenberg, Esq.
or Joel S. Lever, Esq.
One North Broadway
White Plains, NY 10601
To Employee: Mr. John A. Svenningsen
c/o Amscan Inc.
80 Grasslands Road
Elmsford, NY 10523
Attn: Board of Directors
with a copy to: Kurzman & Eisenberg, LLP
Attn: Sam Eisenberg, Esq.
or Joel S. Lever, Esq.
One North Broadway
White Plains, NY 10601
11. AMENDMENTS.
No amendments or additions to this Employment Agreement shall
be binding unless in writing and signed by both parties, except as herein
otherwise provided.
-5-
<PAGE> 6
12. GOVERNING LAW.
This Employment Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of New York.
13. PARAGRAPH HEADINGS.
The paragraph headings used in this Employment Agreement are
included solely for convenience and shall not affect or be used in connection
with the interpretation of this Employment Agreement.
14. ENTIRE AGREEMENT.
This Employment Agreement including any Exhibits attached
hereto sets forth the entire agreement and understanding of the parties relating
to the subject matter hereof, and supersedes all prior agreements, arrangements
and understandings, written or oral, between the parties, except as specifically
provided herein.
15. SUCCESSORS AND ASSIGNS.
This Employment Agreement, and the Employee's rights and
obligations hereunder, may not be assigned by the Employee. This Employment
Agreement shall be binding on any successor to the Employer, whether by merger,
acquisition of substantially all of the Employer's assets or otherwise, as fully
as if such successor were a signatory hereto, and the Employer shall cause such
successor to, and such successor shall, expressly assume the Employer's
obligations hereunder. The term "EMPLOYER" as used in this Employment Agreement,
shall include all such successors.
IN WITNESS WHEREOF, the parties have duly executed this Employment
Agreement as of the day and year first above written.
/S/ JOHN SVENNINGSEN
------------------------------
(Employer)
/S/ JOHN SVENNINGSEN
------------------------------
John Svenningsen (Employee)
-6-
<PAGE> 1
Exhibit 10(b)
EMPLOYMENT AGREEMENT
AGREEMENT, dated the 9th day of October, 1996 (the "EMPLOYMENT
AGREEMENT"), by and between AMSCAN HOLDINGS, INC. a Delaware corporation (the
"EMPLOYER" or "COMPANY") and Gerald C. Rittenberg (the "EMPLOYEE").
WHEREAS, the Employee has been employed by Amscan, Inc. ("Amscan") a
New York corporation prior to the Effective Date of this Agreement, pursuant to
an Agreement dated November 27, 1991, by and between the Employee and Amscan, as
supplemented and amended to the date hereof (the "PRIOR AGREEMENT"); and
WHEREAS, the Employer is presently planning a public offering of its
securities, and wishes to retain the services of the Employee following the
consummation of such offering;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein, the parties agree, effective at and only upon the closing of
the proposed initial public offering of common stock of the Employer ("IPO") on
or before June 30, 1997 (the date of such closing being referred to herein as
the "EFFECTIVE DATE"), as follows:
I. Employment.
A. The Company hereby employs the Employee, and Employee hereby agrees
to serve, as President of the Company, for the term and upon the conditions and
provisions of this Employment Agreement.
B. Upon the commencement of this Employment Agreement, as provided in
paragraph III A, the Prior Agreement and all other employment arrangements in
connection with the Employee's employment by Amscan shall be terminated, except
that Employee shall receive the unpaid bonus due Employee pursuant to Section 5
of the Prior Agreement through the Effective Date, (which unpaid bonus will be
either (i) the pro-rata bonus for 1996 if the Effective Date is in 1996 or (ii)
the full bonus for 1996 plus the pro-rata bonus for 1997 if the Effective Date
is in 1997). The said unpaid bonus shall be paid to the Employee on the day
before the Underwriting Agreement for the IPO is executed by the Underwriters,
and the bonus shall be estimated and paid if the amount has not been finally
determined. The Employee shall have no obligations to refund the amount so paid.
If the estimated amount of said bonus shall be less than the amount of said
bonus, as finally determined, the Company shall pay Employee the difference
between the finally
<PAGE> 2
determined bonus and the estimated bonus within ninety days of the Effective
Date.
II. Employee's Duties.
A. During the term of this Employment Agreement, the Employer will
employ the Employee as President of the Company. The Employee shall supervise
and administer the general business of the Company and its subsidiaries,
including, but not limited to, marketing, sales, manufacturing and other
executive functions and to perform such other executive duties as may be
assigned to him from time to time by the Board of Directors of the Company or
its Chairman of its Board.
B. The Employee shall serve without additional remuneration as (i) a
director of the Employer, if elected by Employer's stockholders; (ii) a member
of any committee of the Board of the Employer, as determined by the Board; and
(iii) a director and/or officer of one or more of the Employer's subsidiaries,
if appointed to such position by the Employer or the applicable board of
directors.
C. During the term of this Employment Agreement, Employee shall devote
the time, skill and efforts to the affairs of the Employer and its subsidiaries
as reasonably necessary to permit the faithful and diligent performance of his
duties hereunder, as President of the Employer.
III. Term.
A. This Employment Agreement shall commence on the day following the
Effective Date and continue for a period of three (3) years thereafter (the
"TERM"), unless terminated earlier in accordance with the provisions of this
Employment Agreement. Notwithstanding the foregoing, the Employee's employment
hereunder shall terminate upon the occurrence of any of the following events:
1. the mutual agreement, in writing, at any time, by the
Employer and Employee to terminate such employment;
2. the death of the Employee;
3. the termination of the Employee's employment by the
Employer, for "CAUSE" as defined hereinafter;
4. the unilateral cessation or discontinuance by the
Employee of his working for or employment by the
Employer.
<PAGE> 3
B. For the purposes of this Employment Agreement, "CAUSE" shall mean
(i) the commission by the Employee of any crime or an intentional act of fraud
against the Employer; (ii) any act of gross negligence or willful misconduct on
the part of the Employee with respect to his duties under this Employment
Agreement; (iii) any act of willful disobedience on the part of the Employee in
violation of specific and reasonable directions of the Board. A violation under
any Motor Vehicle Law or Code shall not be included in the definition of Cause.
C. Upon termination of the Employee's employment hereunder, whether at
the end of the Term or any extended term or in the event of earlier termination
as provided herein, the Employee shall have no further rights under this
Employment Agreement, except as expressly herein set forth. Nothing contained
herein shall be deemed to preclude the Employer from enforcing any remedies
available to it at law or equity in consequence of a breach by the Employee of
his obligations to the Employer or available to the Employer under the
provisions of this Employment Agreement, including without limitation the
enforcement of any restrictive covenants hereunder to the extent herein
provided.
IV. Compensation.
A. During the Term, the Employer agrees to pay to the Employee the
following base yearly salaries:
1. The base yearly salary shall be $210,282 for the 1996
calendar year and $220,796 for the 1997 calendar
year.
2. For each full calendar year, commencing January 1,
1998 the base yearly salary will be increased by 5%
of the base yearly salary of the preceding calendar
year.
B. Employee's base yearly salary shall be payable in regular
intervals in accordance with the Company's customary payroll practices in
effect during the Term.
C. All compensation shall be subject to such withholding of any
federal, state or local taxes as may be required by law with respect to
these payments.
D. In the event of the termination of the Employee's employment
before the end of a calendar year, the base yearly salary for the year of
termination shall be pro-rated to the date of termination.
E. Bonuses may be paid by the Company to the Employee in such
amounts and in such manner as the Company's Board of Directors may, in its
sole discretion, determine.
<PAGE> 4
V. Fringe Benefits.
As additional consideration for the services of the Employee under this
Employment Agreement, the Employer shall provide to the Employee all fringe
benefits provided by the Employer to its other executives, including automobile
allowance, paid vacation, holiday and sick leave, medical insurance for the
Employee, with spouse and dependent children fully paid for by the Employer, and
group life insurance, and participation in pension and/or profit sharing plans,
in the same manner and to the same extent as such fringe benefits shall be
available to such other executives of the Employer.
VI. Business Expenses.
The Employer acknowledges that the Employee may necessarily incur, for
the benefit of the Company and in furtherance of the Company's business, various
expenses including, but not limited to, travel, entertainment and promotion
expenses. The Employer, at its options, shall either pay such necessary expenses
directly, advance sums to be used for payment of such necessary expenses or on
submission by the Employee of receipts and an itemized account of such
expenditures, reimburse the Employee for such necessary expenses actually
incurred by him.
VII. Stock-Options.
Employer currently intends to adopt a stock option plan for the benefit
of its employees (such plan, whether adopted by Employer is referred to herein
as the "OPTION PLAN"). Following adoption of the Option Plan, Employee will be
entitled to participate on the same basis and at the same time as other
executive officers and key senior management personnel of the Employer in any
options awarded to such personnel as a group, provided, however, that the
foregoing provision shall not apply with respect to any grants of options
pursuant to the Option Plan which are made prior to or within 30 days following
the closing of the initial public offering of common stock of the Employer. Such
stock option plan shall include a provision for the pro-rata vesting within no
more than five (5) years.
VIII. Restrictive Covenants.
The Employee acknowledges that his employment with Employer has
brought and will bring him into close contact with trade secrets, proprietary
information and other confidential material and assets of the Employer and other
information not readily available to the public, the disclosure of which to
third parties would have a material adverse effect on the Employer's business
<PAGE> 5
operations. In recognition of the foregoing, the Employee covenants and agrees
that:
A. During the Term and during any extended term, whether or not the
Employee's employment is terminated before the end of the particular term, and
upon termination of the Employee's employment for a period of three (3) years
following such termination, he will not, directly or indirectly, as proprietor,
partner, shareholder (other than as a less than five percent shareholder in a
publicly held company), officer, director, employee or consultant, or in any
other capacity, for his own benefit or for or with any other person or entity,
engage in or perform services in any business or activity involved in or related
to the business in which the Employer or any of its Affiliates, as herein
defined, is now engaged or any other business in which the Employer or any of
its Affiliates may hereafter become engaged during the Term in any trading area
in which the Employer may be engaged in business or trade. The Employee
acknowledges that the Employer now carries on its business in many trading areas
throughout the world.
B. Employee will not, at any time, without the prior written consent of
the Employer, furnish or disclose to any person who is not then an officer,
employee or agent of the Employer, (i) any trade secret of the Employer, or (ii)
any documents, records, plans, models, customer lists or other tangible property
of the Employer, regardless of its form, which may come into his possession,
custody or control in consequence of his employment.
C. In addition to a right to accounting by the Employer and/or damages
and/or any other relief to which the Employer may be entitled as a result of the
Employee's breach hereof the Employer will be entitled to injunctive relief
restraining any such breach or threatened breach, or the continuation of such
breach, by the Employee, provided however, that if a court of competent
jurisdiction shall determine that this covenant shall be enforceable only if
limited to a shorter period of time or to a smaller geographical area than is
herein expressly provided, or otherwise limited, then and in such event, this
covenant shall be deemed to be limited to the extent so determined to be
enforceable, in the same manner and to the same extent as if such limitation
were expressly provided herein.
D. The rights hereunder of the Employer against the Employee
may be assigned by the Employer and may be enforced by any successors or assigns
of the Employer.
"AFFILIATES" shall mean any entity controlling, controlled by or under
common control with the Company, including, without limitation, Amscan, Inc. J
Twist USA, Amscan Canada, Amscan Sweden, Amscan England, Amscan Australia,
Amscan Germany, Deco Manufacturing and the Perfect Party.
<PAGE> 6
IX. Enforcement.
In the event of any litigation arising out of or related to the
Employment Agreement, in addition to any other relief to which it is entitled,
the prevailing party shall be entitled to receive reimbursement from the losing
party for the prevailing party's legal fees and expenses in connection with such
litigation.
X. Notices.
Any notices, requests, consents and other communications, required or
permitted to be given hereunder, shall be in writing, and shall be deemed to
have been duly given if delivered personally or sent by certified mail, return
receipt requested, to the party to be notified at his or its address set forth
below or at such other address as the party to be notified may have otherwise
designated, by notice in writing, with copies to their respective attorneys as
set forth below:
To Employer: Amscan Holdings, Inc.
80 Grasslands Road
Elmsford, NY 10523
Attn: Board of Directors
with a copy to: Kurzman & Eisenberg, LLP
Attn: Sam Eisenberg, Esq.
One North Broadway
White Plains, NY 10601
To Employee: Mr. Gerald C. Rittenberg
18 Carey Drive
Bedford, NY 10506
with a copy to: Orloff, Lowenbach, Stifelman &
Siegel, P.A.
Att: Susan M. Holzman, Esq.
101 Eisenhower Parkway
Roseland, New Jersey 07068
XI. Amendments.
No amendments or additions to this Employment Agreement shall be
binding unless in writing and signed by both parties.
XII. Governing Law.
This Employment Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of
<PAGE> 7
New York.
XIII. Paragraph Headings.
The paragraph headings used in this Employment Agreement are
included solely for convenience and shall not affect or be used in connection
with the interpretation of this Employment Agreement.
XIV. Entire Agreement.
This Employment Agreement sets forth the entire agreement and
understanding of the parties relating to the subject matter hereof, and
supersedes all prior agreements, arrangements and understandings, written or
oral, between the parties, except as specifically provided herein.
XV. Successors and Assigns.
This Employment Agreement, and the Employee's rights and
obligations hereunder, may not be assigned by the Employee. This Employment
Agreement shall be binding on any successor to the Employer, whether by merger,
acquisition of substantially all of the Employer's assets or otherwise, as fully
as if such successor were a signatory hereto, and the Employer shall cause such
successor to, and such successor shall, expressly assume the Employer's
obligations hereunder. The term "EMPLOYER" as used in this Employment Agreement,
shall include all such successors.
IN WITNESS WHEREOF, the parties have duly executed this Employment
Agreement as of the day and year first above written.
Amscan Holdings, Inc. (Employer)
By: /s/ JOHN SVENNINGSEN
-----------------------------------
John Svenningsen,
President
/s/ GERALD C. RITTENBERG
-----------------------------------
Gerald C. Rittenberg (Employee)
<PAGE> 1
Exhibit 10(c)
STOCK AGREEMENT
AGREEMENT, dated the 9th day of October, 1996, among Gerald C.
Rittenberg ("EMPLOYEE")', John Svenningsen ("SVENNINGSEN") and Amscan, Inc., a
New York corporation ("AMSCAN").
WHEREAS, Employee and Amscan are parties to an Employment Agreement,
dated as of November 27, 1991, as supplemented and amended (as so supplemented
and amended, the "EMPLOYMENT AGREEMENT"). Pursuant to the terms of the
Employment Agreement, among other provisions, the Employee is entitled to
receive certain bonus payments based upon the profits of the Amscan and certain
other payments and benefits in addition to his base compensation and fringe
benefits. Svenningsen is the sole shareholder of Amscan.
NOW, THEREFORE, in consideration of services rendered by Employee to
Amscan, and in order to induce Employee to terminate the Employment Agreement
and to enter into a new employment agreement which does not provide for the
bonus and certain other payments and benefits provided for in the Employment
Agreement which would otherwise create significant additional financial
obligaion to Amscan, and in consideration of the mutual covenants and agreements
contained herein, the parties agree, effective at and only upon the closing of
the proposed initial public offering of common stock of Amscan (or any security
issued to Amscan's shareholders in exchange for Amscan stock) (the "IPO") (the
date of such closing being referred to herein as the "EFFECTIVE Date"), as
follows:
1. Payments by Amscan.
a. In anticipation of a closing of the IPO for any amount,
Amscan will pay Employee $3,450,000 on the day prior to the date that the
underwriters of the IPO sign the Underwriters Agreement, ("Underwriting Date"),
without any responsibility by the Employee to refund any of such amount. Within
60 days of the closing of the IPO, Amscan will pay Employee an amount equal to
five percent (5%) of the "Net Proceeds of the IPO" (as defined below), less the
amount of any dividends or other distributions paid to Employee in respect of
the Shares prior to the Underwriting Date, and less the sum of $3,450,000
previously paid on account.
b. For purposes of this Paragraph 1, "Net Proceeds of the
IPO" shall mean the gross proceeds from the sale of all primary and secondary
shares in the IPO, including shares sold through the exercise of the rights
granted the underwriters ("Greenshoe"), reduced by the amount of all
underwriting discounts in connection with the IPO and reduced further by the
amount of all other expenses payable in connection with the IPO in the expense
<PAGE> 2
categories identified in the IPO registration statement.
2. Transfer of Shares. On the day prior to the Underwriting
Date, Amscan will transfer to Employee Amscan shares which when exchanged on a
tax free basis on the Underwriting Date for shares of Amscan Holdings, Inc. will
be equal to three (3%) percent of Amscan Holdings, Inc. shares to be issued and
outstanding after IPO excluding the shares issued pursuant to any Greenshoe.
(All of the shares to be issued to the Employee pursuant to this Paragraph 2 are
referred to herein as the "RESTRICTED SHARES").
3. Sale of Shares by Employee: Restrictions.
a. The Employee agrees that one-half of the Restricted Shares
which are received under Paragraph 2 will not be sold for a period of 18 months
following their transfer to Employee. Notwithstanding the foregoing Employee
shall be entitled to sell Restricted Shares prior to the end of the 18 months
(subject to the provisions of Paragraph 3b) with a fair market value equal to
two hundred (200%) percent of the amount of capital gains taxes incurred by the
Employee as a result of using Shares to pay off the principal indebtedness or
interest under the Loan Agreement between Svenningsen and Employee ("Loan
Agreement"). The remaining one-half of the Restricted Shares may be sold after
the third anniversary of the transfer of the Restricted Shares to Employee. In
order to assure compliance with the foregoing restrictions, the Restricted
Shares will bear a restrictive legend and appropriate stop transfer orders will
be given to Amscan's transfer agent.
b. If the Employee wishes to sell up to one-half of the
Restricted Shares to the extent permitted under the preceding paragraph, during
the period commencing 12 months after the issuance of the Restricted Shares to
him, and ending on the second anniversary of the issuance of such Restricted
Shares to him, Amscan will, on one occasion, prepare and file a registration
statement for the sale of one-half of the Restricted Shares, provided that (i)
such Restricted Shares, in the opinion of counsel to Amscan, may not otherwise
be sold by the Employee to the public due to the restrictions imposed by Rule
144 under the Securities Act of 1933, (ii) Amscan may register such Restricted
Shares on Form S-3 or any other appropriate registration statement, and (iii)
the Employee has given Amscan at least 90 days' prior notice no later than March
1, 1998, of his desire to have such Restricted Shares registered. In connection
with any such registration, Amscan will use its best efforts to cause a
registration to be timely filed, to become effective and maintained in effect
for such period of time as is reasonably necessary to permit the sale thereof.
The Employer will pay all expenses incident to such registration. The Employee
will pay any underwriting commissions or discounts, if the Employee decides to
sell such Restricted
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Shares through an underwriter. The Employer and the Employee shall enter into
the usual indemnification agreements with respect to information furnished by
the indemnitor which is included in the registration statement.
c. Any shares transferred by Employee to Svenningsen pursuant
to the terms of the Loan Agreement shall not be deemed to be a sale of the
Restricted Shares.
d. Employee shall be entitled to make gifts of the Restricted
Shares, which gifts shall not be deemed to be sales of the Restricted Shares.
Employee personally agrees and agrees on behalf of the donees of the Restricted
Shares that none of the donees of his gifts will sell the Restricted Shares
prior to the third anniversary of the transfer of the Restricted shares to him.
The parties agree that none of the Restricted Shares that were gifted shall be
registered pursuant to Paragraph 3b.
4. Future Payments by Svenningsen.
a. In the event that Svenningsen, his wife, his issue, or his
estate (collectively "Svenningsen") should sell any of his shares of Amscan
stock in any public or private sale (other than in the IPO) during the period
commencing on the Effective Date and continuing as long as Employee is employed
during the initial three (3) year Term of his new employment agreement with
Amscan Holdings, Inc. ("New Employment Agreement") and further continuing during
the three (3) year or shorter period during which the Restrictive Covenant is
enforceable under the New Employment Agreement, Svenningsen will pay to the
Employee an amount equal to five percent (5%) of the Net Proceeds of such sale.
b. For purposes of this Paragraph 4. "NET PROCEEDS" of such
sale shall mean the gross proceeds from the sale of Svenningsen's shares, less
all expenses (including any underwriting discounts or commissions and any
transfer taxes) payable by Svenningsen in connection with such sale.
c. The payment to be made to Employee pursuant to this
Paragraph 4 shall be made in cash within 30 days following the closing of the
sale of shares by Svenningsen.
d. The issuance of Shares by Amscan to make acquisitions or
to effect any mergers shall not be sales of Amscan stock by Svenningsen.
5. Corporation Taxes. In the event that Employee is liable for
the payment of any taxes based upon the net income of Amscan for that portion of
Amscan 1996-97 fiscal year or 1997-1998 fiscal year, as the case may be, during
which it is a Subchapter S corporation, Svenningsen agrees that he shall pay to
Employee an
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amount sufficient to pay such tax liability of Employee including interest and
penalties and any tax liability resulting from the undertaking hereby by
Svenningsen to pay such tax liability.
6. Svenningsen Loan. Svenningsen agrees to loan the Employee the
amounts requested by Employee, in accordance with the Loan Agreement.
7. Miscellaneous.
a. No portion of the payment to be made to the Employee as
provided in Paragraph 1 hereof and no portion of the value of the shares to be
transferred to Employee under Paragraph 2 hereof shall be deducted from the
profits of Amscan for the purpose of computing the bonuses payable to Employee
under the Employment Agreement.
b. In the event that the shareholders of Amscan receive
securities in exchange for their Amscan common stock, whether as a result of the
formation of a holding company for Amscan, a merger or other transaction, the
obligations of Amscan hereunder shall he binding on the issuer of the securities
exchanged for Amscan common stock. Following such exchange, all references
herein to Amscan or Amscan securities shall be deemed to be references to such
issuer or its securities.
c. This Agreement shall be binding upon and shall inure to
the benefit of the parties hereto and their respective successors, assigns,
heirs, administrators and legal representatives.
d. This Agreement will be governed by and interpreted and
enforced in accordance with the laws of the State of New York.
e. This Agreement may be executed in counterparts, each of
which shall constitute an original, but all of which shall constitute a single
agreement.
f. This Agreement represents the entire agreement of the
parties hereto with respect to the subject matter hereof. This Agreement may not
be modified or amended except in a writing
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signed by the party or parties to be bound by such modification or amendment.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
/S/ GERALD C. RITTENBERG AMSCAN, INC.
- ---------------------------
Gerald C. Rittenberg
/S/ JOHN SVENNINGSEN By: /S/ JOHN SVENNINGSEN
- --------------------------- --------------------
John Svenningsen Name:
Title:
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<PAGE> 1
Exhibit 10(d)
EMPLOYMENT AGREEMENT
AGREEMENT, made this 27th day of November, 1991, between Amscan, Inc.,
a New York corporation (the "Employer" or "Company") and Gerald C. Rittenberg
(the "Employee").
W I T N E S S E T H:
WHEREAS, Employee is now and has been employed for some time as an
employee of the Employer;
WHEREAS, the Employer desires to continue to employ the Employee during
the term of this Agreement and the Employee desires to continue in the employ of
the Employer and the parties wish to set forth the terms and conditions of such
employment;
NOW, THEREFORE, in consideration of the foregoing and of the covenants
and promises contained herein, the parties agree as follows:
1. Prior Contract Superseded.
This employment agreement supersedes the current employment agreement
between the Employer and the Employee dated February 28, 1990, and the
provisions hereof shall govern the employment of the Employee, except that the
following provisions of the prior agreement continue in force and effect:
(a) The base yearly salary of $150,000. shall remain in effect until
February 28, 1992 and shall thereafter be adjusted and increased as set forth in
paragraph 4. hereof.
<PAGE> 2
(b) The bonuses referred to in the third paragraph of the
agreement of February 28, 1990, shall be paid by the Employer to the Employee,
to the extent, if any, that any portion thereof is still unpaid.
(c) The bonus equal to one percent (l%) of the increase of the
net sales of Amscan USA and Amscan Canada referred to in the fourth paragraph of
the agreement of February 28, 1990, will be paid by the Employer to the
Employee, but any such payment shall be credited to the Employer in reduction of
the share of the Aggregate Net Profits, if any, computed for the calendar year
1992 as set forth in paragraph 4. hereof.
2. Duties.
During the term of this Agreement, the Employer will employ
the Employee to supervise and administer the general business of the Company,
including but not limited to marketing, sales, manufacturing and other executive
functions and to perform such other executive duties as may be assigned to him
from time to time, by the Board of Directors of the Company or its President or
Chairman of its Board.
(a) The Employee shall devote his entire time and attention to
the Employer's business. During the term of this agreement, the Employee shall
not engage in any other business activity, regardless of whether it is or is not
pursued for gain or profit.
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<PAGE> 3
(b) The Employee is designated as the Executive Vice
President of the Company. The Board of Directors may designate the Employee as
an officer and director of the Company other than or in addition to his
designation as Executive Vice President and the Employee shall during the term
of this Agreement serve as such. No additional compensation shall be payable to
the Employee for his services as an officer or director of the Company.
3. Term of Employment and Effective Date Thereof.
(a) This agreement and the employment of the Employee
hereunder shall start and be effective on the date hereof and except as earlier
terminated, as herein provided, shall end December 31, 1996.
(b) Notwithstanding the foregoing, the Employee's employment
hereunder shall terminate upon the occurrence of any of the following events:
(i) the mutual agreement, in writing, at any time, by
the Employer and Employee to terminate such employment;
(ii) the death of the Employee;
(iii) the termination of the Employee's employment by
the Employer, for "Cause" as defined hereinafter.
(iv) the unilateral cessation or discontinuance by
the Employee of his working for or employment by the Employer;
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<PAGE> 4
(v) the sale of the business of the Employer or of
substantially all of its shares of stock and the termination of the
Employee's employment as provided by paragraph 8.(c) hereof.
(vi) the election by the Employer to terminate the Employee's
employment at any time and for any reason prior to the end of the initial term
or any extended term, under the provisions of paragraph 12 hereof.
(c) For the purposes of this Agreement, "Cause" shall mean the
commission by the Employee of any crime or an intentional act of fraud against
the Employer. A violation under any Motor Vehicle Law or Code shall not be
included in the definition of "Cause".
(d) Upon termination of the Employee's employment hereunder,
whether at the end of the term hereof or any extended term or in the event of
earlier termination, the Employee shall have no further rights under this
Agreement, except as expressly herein set forth. But nothing contained herein
shall be deemed to preclude the Employer from enforcing any remedies available
to it by law in consequence of a breach by the Employee of his obligations to
the Employer or available to the Employer under the provisions of this
agreement, including without limitation the enforcement of any restrictive
covenants hereunder to the extent herein provided.
4. Compensation.
(a) For his services hereunder, the Employer agrees to pay to
the Employee during the term of this agreement, the
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<PAGE> 5
following base year salaries:
(i) The base yearly salary shall be $150,000 until February
28, 1992.
(ii) Commencing March 1, 1992, the base yearly salary shall be
increased to $173,000. The base yearly salary of $173,000.
payable for less than a full calendar year shall be pro-rated
to the end of such calendar year.
(iii) For each full calendar year (including the final
calendar year of 1996 for the initial term of employment
hereunder) starting with the calendar year 1993, the base
yearly salary shall be increased by 5% of the base yearly
salary of the preceding year. The increase for 1993 shall be
5% of $173,000.
(b) Employee's base yearly salary shall be payable in regular
intervals in accordance with the Company's payroll practices, in effect, during
the term of this Agreement.
(c) All compensation shall be subject to such withholding of
any federal, state or local taxes as may be required by law with respect to
these payments.
(d) In the event of the termination of the Employee's
employment before the end of a calendar year, the base yearly salary for the
year of termination shall be pro-rated to the date of termination, except as
provided in paragraph l2. hereof.
5. Bonus.
In addition to the base yearly salary set forth in paragraph 4
hereof and any other compensation payable to the Employee as herein set forth,
the Employer agrees to pay to the Employee a bonus or bonuses as and upon the
terms and conditions hereinafter set forth:
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<PAGE> 6
(a) For each calendar year that the Employee shall be employed
by the Employer, whether during the initial term or any extended term, the
Employer shall pay to the Employee a bonus of ten (10%) percent of the Aggregate
Net Profits (as hereinafter defined and calculated) of the Employer and its
Affiliates (as hereinafter described and defined) for the said calendar year.
(b) If the Employee's employment shall be terminated before
the end of a calendar year, then the bonus for the period of time that the
Employee shall be employed during such calendar year shall be ten (10%) percent
of the Aggregate Net Profits for the period from the commencement of such year
to the date of termination of employment within such year.
(c) For the year of termination of employment, no bonus shall
be payable by the Employer to the Employee under this provision of this
agreement if the Employee's employment has been terminated for "Cause" as set
forth in Paragraph 3 hereof or if it has been terminated by reason of the
unilateral cessation or discontinuance by the Employee of working for the
Employer as set forth in Paragraph 3.(a)(iv) of this agreement.
(d) The parties acknowledge that the Company's business is now
related to and associated with the following business entities, identified
herein for the purposes of this agreement as Amscan U.S.A., Amscan Canada,
Amscan Sweden, Amscan England, Amscan Australia, Amscan Germany, Deco
Manufacturing, Kookabura Manufacturing, Perfect Party and Cake Tops, and may
hereafter become related to business entities which will be
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<PAGE> 7
engaged in businesses similar to those of the Company or related thereto or who
will serve the same outlets as does the Company, all of which entities are
referred to collectively for the purpose of this Agreement as "Affiliates".
While these other business entities are referred to herein as "Affiliates", it
is recognized and acknowledged that none of the current or future Affiliates are
or will be subsidiaries or have any other relationship to the Company which
would be violative of its status as a Sub-Chapter S Corporation under the United
States Internal Revenue Code.
The Employer may in its sole discretion, from time to time, in the
conduct and furtherance of its business, affiliate with such additional business
entities as described above. The proprietary ownership of and interests in such
Affiliates may be determined by the Employer, in its sole discretion. Such
additional business entities shall be regarded as "Affiliates" of the Employer
for the purpose of computing Aggregate Net Profits hereunder and the net profits
or losses of such additional Affiliates shall be included in the computation of
the Aggregate Net Profits, if any, hereunder, as if such other business entities
were originally named herein as Affiliates.
(e) The Employer may take such steps in the operation of its
business as its President or Board of Directors or shareholders may, in their
sole discretion, determine, including, without limitation, modification or
discontinuance of
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<PAGE> 8
any of its present operations or addition of new operations, without regard to
the effect on the calculation of the Aggregate Net Profits hereunder. Similarly,
any Affiliate may conduct its business as it sees fit without regard to the
effect on the Aggregate Net Profits hereunder. If any action taken by the
Employer or its officers or Board of Directors or if any action taken by any of
the Affiliates, adversely affects the Aggregate Net Profits as defined herein,
the Employee shall not be entitled to any claim or recourse of any kind or
nature by reason thereof.
(f) The Aggregate Net Profits hereunder shall be calculated by
adding the net profits of the Employer and of all of the Affiliates and
deducting therefrom the net losses of the Employer and of all of the Affiliates
for each calendar year or any lesser period within a calendar year if the
Employee's employment shall be terminated before the end of a calendar year. The
Employer's fiscal period is the calendar year. However, various of the
Affiliates may have fiscal periods which do not coincide with the calendar year.
Nevertheless, in computing the Aggregate Net Profits, if any, for any calendar
year, the net profits or losses of the respective Affiliates for any full
calendar year shall be taken as the amounts calculated as at the end of their
respective fiscal periods occurring during the calendar year involved.
(g) For the purposes hereof, the Net Profits of the Employer
and the Affiliates, if any, shall be computed before
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<PAGE> 9
the payment of any federal, state or local taxes by the Employer and those
Affiliates located in the United States and before the payment of comparable
taxes payable by any of the Affiliates located outside of the United States.
(h) For the purpose of computing the Aggregate Net Profits
hereunder during the initial term of this agreement and during the extended
term, if the option to extend is exercised as provided by paragraph 13. hereof,
the deduction by the Employer for the base salary of the President of the
Employer (now, John Svenningsen) shall not exceed the base sum of $250,000. for
the calendar year 1992 with successive increases thereafter, of 5% over the base
salary for each of the four (4) calendar years of the initial term and if this
agreement is extended, then for each of the three years of the extended term.
Nothing contained herein shall limit the amount of salary which may be payable
by the Employer or any of the current or future Affiliates, as herein described
and defined to its President; the foregoing limitation being only for the
purpose of computing Aggregate Net Profits.
(i) The Employee may examine the financial and other books and
records of the Company relating to the profits and losses of the Company and its
affiliates. For the purposes hereof, the Aggregate Net Profits shall be
calculated and determined by outside accountants regularly employed by the
Employer and the respective Affiliates to prepare their financial statements and
such calculations shall be made in
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<PAGE> 10
accordance with generally accepted accounting principles consistently applied.
The Employee and Employer shall be bound by the calculation of the said
accountants as to the amount of the Aggregate Net Profits and Losses.
The Employee's share of the Aggregate Net Profits, if any, shall be
paid to him as follows:
The Aggregate Net Profits shall be computed by the aforesaid
accountants in a timely manner at the end of each calendar year or at the time
of termination of the Employee's employment within a calendar year, in the event
of early termination and the Employee's share of the Aggregate Net Profits shall
be paid to him as follows:
(i) One-third thereof shall be paid to the Employee within 90
days after the end of the calendar year involved or within 90 days after early
termination of Employee's employment within a calendar year, as the case may be.
(ii) The remaining two-thirds of the Employee's share of said
Aggregate Net Profits shall be loaned by the Employee to the Company to be
repaid to the Employee with interest at prime rate chargeable by the Company's
bank as follows: Interest only shall be paid at the end of the first year of
such loan and the remaining principal plus interest shall be paid at the end of
the second year of such loan. The loan shall be deemed to have been made on the
first day following the period covered by the accounting involved.
(j) Nothing contained herein is intended to imply that
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<PAGE> 11
the Employee is obliged to reimburse the Employer for any losses
sustained by the Employer.
6. Fringe Benefits.
As additional consideration for the services of the Employee
under this Agreement, the Employer shall provide to the Employee all fringe
benefits provided by the Employer to its other executives, including automobile
allowance, paid vacation, holiday and sick leave, medical insurance for the
Employee, spouse and dependent children fully paid for by the Employer and group
life insurance, and participation in pension and/or profit-sharing plans, in the
same manner and to the same extent as such fringe benefits shall be available to
such other executives of the Employer.
7. Business Expenses.
The Employer acknowledges that the Employee may necessarily
incur, for the benefit of the Company and in furtherance of the Company's
business, various expenses included but not limited to travel, entertainment and
promotion expenses. The Employer, at its option, shall either pay such necessary
expenses directly, advance sums to be used for payment of such necessary
expenses or on submission by the Employee of proper vouchers therefor, reimburse
the Employee for such necessary expenses actually incurred by him.
8. Additional Compensation Upon Sale of Business.
(a) As additional compensation to the Employee for the
covenants and obligations of the Employee under this Agreement
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<PAGE> 12
and as an incentive to remain employed by the Employer, the Employer agrees that
in the event the Employer shall sell its business, including substantially all
of its assets or if the shareholders of the Employee shall sell substantially
all of their stock in the Company to another person or entity while the Employee
is still employed by the Employer, then the Employer (in the event of a sale by
the Employer) or the shareholders (in the event of a sale of stock by the
shareholder) shall pay to the Employee a sum of money equal to five percent (5%)
of the "Net Selling Price", as defined hereinafter. "Net Selling Price" shall
mean the total consideration actually paid by the purchaser for all of the stock
or substantially all of the assets of the Company (including liabilities assumed
by the purchaser) less any liabilities required to be satisfied or paid by the
Employer or the shareholders out of the proceeds of the sale, and less any and
all selling expenses of the Employer, including, without limitation, legal fees,
brokerage commissions, sales taxes (if paid by the Employer) and other selling
expenses whether similar or dissimilar to the foregoing. If payment of such
consideration by the purchaser shall be deferred in whole or in part, the
Employee will be entitled to his additional compensation hereunder only if and
when and to the extent that payments thereof shall actually be collected by the
Employer or shareholder(s), and will be subject to deduction for the Employee's
pro rata share of collection expenses, including legal fees.
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<PAGE> 13
(b) Nothing contained herein is intended to limit or preclude
the sale by the current shareholder(s) of the Employer of any portion of
their shares provided that the current shareholder(s) shall retain ownership
of more than Fifty (50%) percent of the shares of the Company and control
thereof and provided further that any purchasers of such shares shall upon
the purchase of such shares covenant and agree to be bound by this portion
of the agreement relating to additional compensation upon the sale of the
business of the Company. No portion of the consideration received upon such
sale shall be payable to the Employee.
(c) If the Employer shall sell its business including
substantially all of its assets or if the shareholder(s) of Employer shall sell
substantially all of their shares of stock in the Company, then at the
discretion of the purchaser of said business of said shares of stock, as the
case may be, the Employer at the request of the purchaser, may terminate this
Agreement. Thereupon, the Employee shall be entitled to receive all sums payable
to him in the manner and as provided by sub- paragraph (a) of this paragraph 8.
In the event of such termination, the bonus provided in Paragraph 5 shall be
based on the Aggregate Net Profits for the portion of the Company's year through
the date of such termination.
(d) Nothing contained in this paragraph or elsewhere in this
agreement or otherwise is intended to imply that a merger or consolidation of
the Company with any other company or
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<PAGE> 14
business entity shall constitute a sale of the business hereunder or of the
shares of stock of the Company, whereby additional compensation shall be paid to
the Employee under this paragraph 8. and such consolidation or merger shall not
constitute any such sale.
(e) John Svenningsen, as sole shareholder of the Company has
signed the last page of this agreement to acknowledge his obligation under this
paragraph of this agreement as the sole shareholder of the Company.
9. Additional Compensation Upon Initial Public Offering.
(a) As additional consideration for the covenants and
obligations of the Employee under this Agreement and as incentive to remain
employed by the Employer, the Employer agrees that in the event the Company
files a registration statement with the Securities and Exchange Commission in
connection with an "Initial Public Offering," as defined hereinafter, during the
term of this Agreement and the registration statement is effective and stock of
the Company is sold pursuant to the Initial Public Offering, the Company shall
issue to the Employee shares of Company Stock (the "Shares") equal to five (5%)
percent of the shares of Company Stock issued and outstanding immediately
following the closing of the Initial Public Offering.
(b) "Initial Public Offering" shall mean the registration of
the Company's stock with the Securities and Exchange Commission under the
Securities Act of 1933, as
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<PAGE> 15
amended. "Company Stock" shall mean the common stock, no par
value, of the Company.
(c) It is understood that the Shares received by the Employee
pursuant to this paragraph 9 shall be "restricted stock" as that term is defined
in Rule 144 promulgated under the Securities Act of 1933, as amended. Further
the Employee agrees that each certificate representing the Shares will bear on
its face a legend substantially in the following form:
"This certificate and the shares of stock represented
hereby have not been registered with the Securities
Act of 1933. They have been acquired for investment
purposes only and not with the view to the
distribution thereof within the meaning of the
Securities Act of 1933, and the rules and regulations
thereunder. They may not be transferred in the
absence of an effective registration statement except
in compliance with any provision of law."
The Employee further agrees that the Company may place a stop order on the
certificate(s) evidencing the Shares, restricting their transfer in accordance
with their restricted nature.
10. Restrictive Covenant.
The Employee in consideration of his special and unique
services and his position, which by its nature exposes him to trade secrets,
proprietary information and other confidential material and assets of the
Employer, covenants and agrees as follows with the Employer:
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<PAGE> 16
(a) During the term of this Agreement and during any extended term,
whether or not the Employee's employment hereunder is terminated before the
end of the particular term, and for the additional periods thereafter, set
forth below, the Employee covenants and agrees with the Employer that he
shall not, directly or indirectly, as proprietor, partner, shareholder
(other than as a less than five percent shareholder in a publicly held
company), officer, director, employee or consultant, or in any other
capacity, for his own benefit or for or with any other person or entity,
engage in or perform services in any business or activity involved in or
related to the business in which the Employer or any of its Affiliates, as
herein defined, is now engaged or any other business in which the Employer
or any of its Affiliates may hereafter become engaged in any trading area
in which the Employer or any of its Affiliates may be engaged in business
or trade. The Employee acknowledges that the Employer and its Affiliates
now carry on their business in many trading areas throughout the world.
(i) If the Employee's employment is terminated for Cause
as defined by paragraph 3.(c) hereof, then the restrictive
covenant shall extend for three (3) years after such
termination.
(ii) If the Employer fails to exercise its option
to extend as provided by paragraph 13. hereof, then the
restrictive covenant shall extend for one (1) year
after the end of the initial term.
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<PAGE> 17
(iii) If the Employer does exercise its option to
extend as provided by paragraph 13. hereof, then the
restrictive covenant shall extend for three (3) years after
the end of the extended term.
(iv) But, if the Employer exercises its option to
terminate this Agreement as provided by paragraph 12. hereof,
then there shall be no restrictive covenant, binding upon the
Employee after such termination.
(b) The Employee further covenants that he will not, at any time,
without the prior written consent of the Employer furnish or disclose to any
person who is not then an officer, employee or agent of the Employer, (i) any
trade secret of the Employer or of any Affiliate, or (ii) any documents,
records, plans, models, customer lists or other tangible property of the
Employer or any Affiliate, regardless of its form, which may come into his
possession, custody or control in consequence of his employment.
(c) In addition to a right to accounting by the Employer and/or
damages and/or any other relief to which the Employer may be entitled as a
result of the Employee's breach hereof, the Employer or the Affiliates will be
entitled to injunctive relief restraining any such breach or threatened breach,
or the continuation of such breach, by the Employee, provided, however that if a
court of competent jurisdiction shall determine that this covenant shall be
enforceable only if limited to a shorter period of time or to a small
geographical
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<PAGE> 18
area than is herein expressly provided, or otherwise limited, then and in such
event, this covenant shall be deemed to be limited to the extent so determined
to be enforceable, in the same manner and to the same extent as of such limits
were expressly provided herein.
(d) The rights hereunder by the Employer against the Employee
may be assigned by the Employer and may be enforced by any successors or assigns
of the Employer.
(e) The provisions of this paragraph are subject to the
provisions of paragraph 8 hereof, related to sale of the business of the
Employer or the shares of its stock.
11. Relationship of John Svenningsen.
Nothing contained in this Agreement or elsewhere shall
preclude or prevent John Svenningsen from engaging in any business or businesses
or any activities as he may wish separate and apart from the business of the
Employer or its Affiliates. Such other unrelated businesses and activities shall
not be considered in determining any rights of the Employee hereunder
particularly and, without limitation, as to a share of the Aggregate Net Profits
or additional compensation upon the sale of any business or any shares of stock
or upon any public offering of shares of stock. The Employee recognizes and
acknowledges that John Svenningsen has considerable other business interests
which are not related to the operation of business of the Company or of any of
its Affiliates. None of these are to be considered in determining any rights of
the
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Employee hereunder. John Svenningsen has a proprietary interest in various real
properties which are being used in the business of the Company or of Affiliates.
None of these are or are to be regarded as assets of the Employer or Company for
any purposes under this agreement or otherwise, including without limitation,
calculation of Aggregate Net Profits or additional compensation to the Employee
upon the sale of the Company's business, or its shares of stock or upon any
public offering of shares of stock.
12. Early Termination of Agreement at Employer's Option.
Notwithstanding anything to the contrary contained in this
agreement or elsewhere, the Employer may terminate this agreement at any time
and for any reason, prior to its regular termination date.
(a) In the event of such termination, the Employer shall pay
to the Employee the following:
(i) The base yearly salary at the rates set forth in
paragraph 4(a) of this agreement to the end of the current term of the
Employee's employment; such payments to be made at the same intervals as the
base yearly salary would have been paid had this agreement not been terminated.
(ii) 10% of the Aggregate Net Profits, if any, of the
Employer and the Affiliates for the period from the commencement of the then
current full term to the date of termination, as set forth in paragraph 5.(c)
hereof, computed and payable as set forth in paragraph 5. hereof.
(b) All loans payable by the Employer to the Employee shall be
paid to the Employee within 90 days of the termination
- 19 -
<PAGE> 20
hereunder with interest to the date of payment.
(c) All fringe benefits provided to the Employee under this
agreement shall terminate upon the termination of this agreement and shall be
disposed of and adjusted as follows:
(i) Any motor vehicle which the Employee may have been
assigned for the performance of his duties shall be turned back to the Employer.
(ii) Vacation pay shall be pro-rated to the date of
termination.
(iii)Employee may maintain medical insurance for himself and
his insured dependents in compliance with the provisions of COBRA or any other
applicable law or regulation but the premiums for the first 90 days following
termination of the Employee's employment shall be paid by the Employer.
(d) The additional compensation payable to the Employee, upon the
sale of the business of the Employer or upon a public offering of the shares of
stock of the Employer's corporation as provided by paragraphs 8. and 9. hereof
shall be paid to the Employee, if such sale or public offering shall be made
within one (1) year after the termination of this agreement under this paragraph
12., but if said sale or public offering shall be made after one (1) year after
said termination, then the Employee shall have no rights to additional
compensation under said paragraphs 8. and 9.
(e) The provisions of Article l0(a) hereof relating to
restrictions on Employee's employment after termination of the original term of
this agreement or any extended term shall have
- 20 -
<PAGE> 21
no application to a termination under this Paragraph and shall not be binding
upon the Employee in the event of a termination of his employment under this
Paragraph, it being understood that if the Employee's employment is terminated
under this Paragraph at the sole discretion of the Employer, then the Employee
is free to seek employment in any manner that he may wish.
13. Option to Extend.
The Employer is granted an option to extend this agreement and
the employment of the Employee for an additional period of three (3) years
during the calendar years 1997, l998, and 1999, upon the following terms and
conditions:
(a) The option shall be exercised by notice to the Employee by
the Employer, no later than July 1, 1996.
(b) Notice of the exercise of such option shall be in
conformity with the provisions of paragraph 14. hereof
(c) The employment of the Employee during such extended three
(3) year term shall be upon the same terms and conditions as are set forth in
this agreement and the base yearly salary shall be increased from year to year
in the manner provided by Paragraph 4.(a)(iii) hereof.
14. Notices.
Any notice hereunder shall be sufficient if sent by Certified
Mail, Return Receipt Requested, to the party to be notified at his or its
address set forth below or at such other address as the party to be notified may
have otherwise designated, by notice in writing, with copies to their respective
attorneys as set forth below:
- 21 -
<PAGE> 22
To Amscan or any of
its Affiliates at: Amscan, Inc.
P.O. Box 587
South Road
Harrison, N.Y. 10528
with a copy to: Kurzman & Eisenberg
Sam Eisenberg, Esq.
One North Broadway
White Plains, N.Y. l060l
To Gerald C. Rittenberg
at: Mr. Gerald C. Rittenberg
25 Tulip Tree Lane
Mamaroneck, N.Y. 10543
with a copy to: Norris, McGlaughlin & Marcus
Kenneth D. Meskin, Esq.
P.O. Box 1018
Somerville, N.J. 08876
15. Amendments.
No amendments or additions to this Agreement shall be binding
unless in writing and signed by both parties, except as herein otherwise
provided.
16. Governing Law.
This Agreement shall be governed in all respects by the laws
of the State of New York.
- 22 -
<PAGE> 23
17 . Paragraph Headings.
The paragraph headings used in this Agreement are included
solely for convenience and shall not affect or be used in connection with the
interpretation of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
AMSCAN, INC. (Employer)
By:/s/ JOHN SVENNINGSEN
-------------------------------
John Svenningsen,
President
WITNESS:
/s/ EDYTHE BERKOWITZ /s/ GERALD C. RITTENBERG
- ---------------------------- -------------------------------
Gerald C. Rittenberg (Employee)
The undersigned has placed his signature below as the sole shareholder of the
Employer to acknowledge his obligations under paragraph 8. hereof.
/s/ JOHN SVENNINGSEN
- ----------------------------
John Svenningsen
- 23 -
<PAGE> 24
SUPPLEMENT TO AGREEMENT made the 27 day of November, 1991, between
Amscan, Inc., a New York corporation (the "Employer" or "Company") and Gerald C.
Rittenberg (the "Employee") (hereinafter referred to as the "Employment
Agreement").
WHEREIN, IT IS MUTUALLY AGREED AS FOLLOWS:
Paragraph 5.(f) of the Employment Agreement is amended to add the
following:
"For the purpose of calculating the Aggregate Net Profits hereunder,
all contributions by John Svenningsen to the capital of the Employer or
any of its affiliates shall be treated as if such capital contributions
were loans to the Employer or any of its affiliates, as the case may
be, and an amount equal to the "interest" (computed as hereinafter set
forth) which would have been paid on such capital contributions had
they been loans shall be deducted as an operating expense. For the
purpose of such calculation, the amount of "interest" shall be the
"prime" rate chargeable by the Employer's primary bank as it may be
determined from time to time by said bank plus one (1%) percent."
IN WITNESS WHEREOF, the parties have executed this Agreement the
28 day of December, 1992.
AMSCAN, INC. (Employer)
By:/s/ JOHN SVENNINGSEN
-----------------------------------
John Svenningsen, President
/s/ GERALD C. RITTENBERG
-----------------------------------
GERALD C. RITTENBERG, Employee
/s/ EDYTHE BERKOWITZ
- -----------------------------------
Witness
<PAGE> 1
Exhibit 10(e)
EMPLOYMENT AGREEMENT
AGREEMENT dated as of October 4, 1996 (the "Employment
Agreement") by and between AMSCAN INC., a New York corporation or AMSCAN
HOLDINGS, INC., a Delaware corporation, upon a public offering being made of its
shares of stock and AMSCAN INC. becomes a subsidiary thereof, as the case may be
(the "Employer" or "Company") and WILLIAM WILKEY (the "Employee").
R E C I T A L S
The Employer is presently planning a public offering of its
securities and wishes to employ the Employee following the consummation of such
offering.
The parties wish to set forth the terms and conditions of such
employment:
NOW, THEREFORE, in consideration of the foregoing and of the
covenants and promises contained herein, the parties agree as follows:
1. EFFECTIVENESS OF THIS AGREEMENT AND NAME OF EMPLOYER:
This agreement shall become effective on January 1,
1997. The existing employment agreement between Employer and Employee is not
being modified hereby and continues in full force and effect until its
termination on December 31, 1996.
2. EMPLOYMENT OF THE EMPLOYEE.
The Employer employs the Employee to serve as the
Company's sales and marketing manager and as its Senior Vice President in charge
of Sales and Marketing and to perform such other duties as may be assigned to
him from time to time, by the Company.
3. EMPLOYEE'S DUTIES.
(a) During the term of this Employment Agreement,
Employee shall devote his full business time, skill and efforts to the affairs
of the Employer as reasonably
<PAGE> 2
necessary to permit the faithful and diligent performance of his duties
hereunder. Employee shall not accept other employment nor permit such personal
interests as he may have to interfere with the performance of his duties
hereunder. The parties hereto understand and agree that Employee may participate
in charitable and similar activities and may have business investments which
may, from time to time, require portions of his time, but which Employee agrees
shall not interfere with the performance of his duties hereunder and shall not
adversely reflect upon the Employer or its operations.
(b) The Employee shall serve without additional
remuneration as (i) a director of the Employer, if elected by Employer's
stockholders; (ii) a member of any committee of the Board of the Employer, as
determined by the Board; and (iii) a director and/or officer of one or more of
the Employer's subsidiaries, if appointed to such position by the Employer or
the applicable board of directors.
4. TERM.
(a) The Employee's term of employment shall commence
on the 1st day of January 1997 and shall continue for a period of five (5) years
thereafter (the "Term"), unless terminated earlier in accordance with the
provisions of this Employment Agreement. Notwithstanding the foregoing, the
Employee's employment hereunder shall terminate upon the occurrence of any of
the following events:
(i) the mutual agreement, in writing, at any
time, by the Employer and Employee to
terminate such employment;
(ii) the death of the Employee;
(iii) the unilateral cessation or discontinuance
by the Employee of his working for or
employment by the Employer;
-2-
<PAGE> 3
(iv) the termination of the Employee's employment
by the Employer, for "Cause" as defined
hereinafter.
(b) For the purposes of this Employment Agreement, "Cause"
shall mean any one of the following (i) the commission by the Employee of any
crime or an intentional act of fraud against the Employer; (ii) any act of gross
negligence or wilful misconduct on the part of the Employee with respect to his
duties under this Employment Agreement; (iii) any act of wilful disobedience on
the part of the Employee in violation of specific and reasonable directions of
the Employer; (iv) any other material breach of this Employment Agreement which
is not cured by the Employee within a reasonable time fixed by the Employer; (v)
any conduct on the part of the Employee which has a materially adverse effect
upon the performance by the Employee of his duties in connection with the
business of the Employer, or a materially adverse effect upon the relationship
of customers or potential customers or employees of the Employer with the
Employer.
(c) Upon termination of the Employee's employment hereunder,
whether at the end of the term hereof or in the event of earlier termination,
the Employee shall have no further rights under this Employment Agreement,
except as expressly herein set forth. Nothing contained herein shall be deemed
to preclude the Employer from enforcing any remedies available to it at law or
equity in consequence of a breach by the Employee of his obligations to the
Employer or available to the Employer under the provisions of this Employment
Agreement, including without limitation the enforcement of any restrictive
covenants hereunder to the extent herein provided.
5. COMPENSATION.
During the Term, the Employer agrees to pay to the
Employee the
-3-
<PAGE> 4
following base yearly salaries:
(a) The base yearly salary shall be $200,000.00 for
the calendar year 1997.
(b) For each full calendar year after the first the
base yearly salary will be increased by 5% of the base yearly salary of the
preceding calendar year.
(c) Employee's base yearly salary shall be payable in
regular intervals in accordance with the Company's customary payroll practices
in effect during the Term.
(d) All compensation shall be subject to such
withholding of any federal, state or local taxes as may be required by law with
respect to these payments.
(e) In the event of the termination of the Employee's
employment before the end of a calendar year, the base yearly salary for the
year of termination shall be pro-rated to the date of termination.
6. BONUS.
In addition to the base yearly salary set forth in
Paragraph 5. hereof and any other compensation payable to the Employee as herein
set forth, the Employer agrees to pay to the Employee a bonus or bonuses in the
amounts and as and upon the terms and conditions herein set forth:
(a) The Employer shall pay to the Employee for each calendar
year of his employment hereunder a bonus based upon both the annual increase in
sales in the United States and Canada and the annual increase in gross profit
with respect to such sales. Annexed hereto as Schedule A is a schedule of the
sales increases and the gross profit increases necessary to be achieved to
result in the grant of an annual bonus hereunder. For the purpose of computing
-4-
<PAGE> 5
bonuses, appropriate interpolations shall be made with respect to both the Sales
Growth and the Percent Increase in Gross Profit Dollar percentages intermediate
to those shown on Schedule A: (Example: Assume Sales Growth to be 4% and Percent
Increase in Gross Profit Dollars to be 7% then the bonus shall be $145,000.
computed as follows: 4% Sales Growth shall be interpolated as $125,000. and at
7% Percent Increase in Gross Profit Dollars the bonus shall be interpolated as
$145,000.)
(b) The bonus, if any, payable hereunder shall be computed on
the aggregate gross sales and profits within the United States and Canada by
Amscan Inc. which includes Deco, Kookaburra, Trisar and Amscan Canada, after
intercompany eliminations and before warehouse expenses.
(c) All bonuses shall be computed by the Employer's
accountants and such computations shall be binding upon the parties except if
made fraudulently or in a grossly negligent manner. Employee, upon request, will
receive the documents, reports and statements necessary to review and confirm
the computations made pursuant to this provision.
(d) All bonuses shall be paid within ninety (90) days
following the year end.
7. STOCK OPTION.
As additional compensation to the Employee, if Amscan
Holdings Inc. makes an initial public offering, then the Employer grants to the
Employee a stock option to purchase one hundred thousand (100,000) shares of the
Company's common stock at the option price or prices and upon the terms and
conditions set forth in the "Stock Option Plan" adopted by the Company; a copy
of which has been delivered to the Employee.
-5-
<PAGE> 6
8. ADDITIONAL STOCK OPTIONS.
In addition to the grant referenced in paragraph 7.
above, if Amscan Holdings, Inc. makes an initial public offering, it intends to
adopt a stock option plan for the benefit of its employees (such plan, whether
adopted by Employer or any parent corporation of Employer, is referred to herein
as the "OPTION PLAN"). Following adoption of the Option Plan, Employee will be
entitled to participate on the same basis and at the same time as other
executive officers and key senior management personnel of the Employer in any
options awarded to such personnel as a group, provided, however, that the
foregoing provision shall not apply with respect to any grants of options
pursuant to the Option Plan which are made prior to or within 30 days following
the closing of the initial public offering of common stock of the Employer or
its parent corporation, if any. Such stock option plan shall include a provision
for the pro-rata vesting within no more than five (5) years.
9. FRINGE BENEFITS.
As additional consideration for the services of the
Employee under this Employment Agreement, the Employer shall provide to the
Employee all fringe benefits provided by the Employer to its other executives,
including automobile allowance, paid vacation, holiday and sick leave, medical
insurance for the Employee, with spouse and dependent children fully paid for by
the Employer and group life insurance, and participation in pension and/or
profit sharing plans, in the same manner and to the same extent as such fringe
benefits shall be available to such other executives of the Employer.
10. BUSINESS EXPENSES.
The Employer acknowledges that the Employee may
necessarily incur, for
-6-
<PAGE> 7
the benefit of the Company and in furtherance of the Company's business, various
expenses included but not limited to travel, entertainment and promotion
expenses. The Employer, at its option, shall either pay such necessary expenses
directly, advance sums to be used for payment of such necessary expenses or on
submission by the Employee of receipts and an itemized account of such
expenditures, reimburse the Employee for such necessary expenses actually
incurred by him.
11. RESTRICTIVE COVENANT.
The Employee acknowledges that his employment with
the Employer has brought and will bring him into close contact with trade
secrets, proprietary information and other confidential material and assets of
the Employer and other information not readily available to the public, the
disclosure of which to third parties would have a material adverse effect on the
Employer's business operations. In recognition of the foregoing, the Employee
covenants and agrees that:
(a) During the Term and during any extended term,
whether or not the Employee's employment is terminated before the end of the
particular term, and upon termination of the Employee's employment for a period
of three (3) years following such termination, he will not, directly or
indirectly, as proprietor, partner, shareholder (other than as a less than five
percent shareholder in a publicly held company), officer, director, employee or
consultant, or in any other capacity, for his own benefit or for or with any
other person or entity, engage in or perform services in any business or
activity involved in or related to the business in which the Employer or any of
its Affiliates may hereafter become engaged in the United States and Canada. The
Employee acknowledges that the Employer now carries on its
-7-
<PAGE> 8
business in many trading areas throughout the world and in particular in the
United States and Canada.
(b) Employee will not, at any time, without the prior
written consent of the Employer, furnish or disclose to any person who is not
then an officer, employee or agent of the Employer, (i) any trade secret of the
Employer, or (ii) any documents, records, plans, models, customer lists or other
tangible property of the Employer, regardless of its form, which may come into
his possession, custody or control on consequence of his employment.
(c) In addition to a right to accounting by the
Employer and/or damages and/or any other relief to which the Employer may be
entitled as a result of the Employee's breach hereof, the Employer will be
entitled to injunctive relief restraining any such breach or threatened breach,
or the continuation of such breach, by the Employee, provided however, that if a
court of competent jurisdiction shall determine that this covenant shall be
enforceable only if limited to a shorter period of time or to a smaller
geographical area than is herein expressly provided, or otherwise limited, than
and in such event, this covenant shall be deemed to be limited to the extent so
determined to be enforceable, in the same manner and to the same extent as if
such limited were expressly provided herein.
(d) The rights hereunder of the Employer against the
Employee may be assigned by the Employer and may be enforced by any successors
or assigns of the Employer.
12. NOTICES.
Any notices, requests, consents and other communications,
required or permitted to be given hereunder, shall be in writing, and shall be
deemed to have been duly given if delivered personally or sent by certified
mail, return receipt requested, to the party to be notified
-8-
<PAGE> 9
at his or its address set forth below or at such other address as the party to
be notified may have otherwise designated, by notice in writing, with copies to
their respective attorneys as set forth below:
To Employer: Amscan Inc.
80 Grasslands Road
Elmsford, NY 10523
Att: Board of Directors
with a copy to: Kurzman & Eisenberg
Sam Eisenberg, Esq.
One North Broadway
White Plains, NY 10601
To Employee: Mr. William Wilkey
123 Harbor Drive
Unit 212
Stamford, CT 06902
with a copy to: The Wirth Law Firm P.C.
Att: John C. Wirth, Jr., Esq.
11 Martine Avenue
White Plains, New York 10606
13. AMENDMENTS.
No amendments or additions to this Agreement shall be binding
unless in writing and signed by both parties, except as herein otherwise
provided.
14. GOVERNING LAW.
This Employment Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of New York.
15. PARAGRAPH HEADINGS.
The paragraph headings used in this Employment Agreement are
included solely for convenience and shall not affect or be used in connection
with the interpretation of this
-9-
<PAGE> 10
Employment Agreement.
16. ENTIRE AGREEMENT.
This Employment Agreement including any Exhibits attached
hereto sets forth the entire agreement and understanding of the parties relating
to the subject matter hereof, and supersedes all prior agreements, arrangements
and understandings, written or oral, between the parties, except as specifically
provided herein.
17. SUCCESSORS AND ASSIGNS.
This Employment Agreement, and the Employee's rights and
obligations hereunder, may not be assigned by the Employee. This Employment
Agreement shall be binding on any successor to the Employer, whether by merger,
acquisition of substantially all of the Employer's assets or otherwise, as fully
as if such successor were a signatory hereto. The term "Employer" as used in
this Employment Agreement, shall include all such successors.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
AMSCAN INC. (Employer)
By: /s/ JOHN SVENNINGSEN /s/ WILLIAM WILKEY
------------------------- -------------------------
John Svenningsen, William Wilkey, (Employee)
President
-10-
<PAGE> 11
SCHEDULE A
BONUS PER PARA 6.
PERCENT INCREASE IN GROSS PROFIT DOLLARS*
<TABLE>
<CAPTION>
SALES 5% 10% 15% 20% 25% 30% 35% 40%
GROWTH
<S> <C> <C> <C> <C> <C> <C> <C> <C>
3% 100,000 150,000 200,000 250,000 300,000 350,000 400,000 450,000
5% 150,000 200,000 250,000 300,000 350,000 400,000 450,000 500,000
10% 200,000 250,000 300,000 350,000 400,000 450,000 500,000 550,000
15% 250,000 300,000 350,000 400,000 450,000 500,000 550,000 600,000
20% 300,000 350,000 400,000 450,000 500,000 550,000 600,000 650,000
25% 350,000 400,000 450,000 500,000 550,000 600,000 650,000 700,000
30% 400,000 450,000 500,000 550,000 600,000 650,000 700,000 750,000
35% 450,000 500,000 550,000 600,000 650,000 700,000 750,000 800,000
40% 500,000 550,000 600,000 650,000 700,000 750,000 800,000 850,000
</TABLE>
<PAGE> 1
Exhibit 10(f)
EMPLOYMENT AGREEMENT, made this day of , 1992, between
Amscan, Inc., a New York corporation, with offices at South Road, Harrison, New
York 10528 (the "Employer" or "Company") and William Wilkey, residing at
_____________________________________________ (the "Employee").
1. Employment of the Employee.
The Employer employs the Employee to serve as the Company's
sales and marketing manager and to perform such other duties as may be assigned
to him from time to time by the Company.
(a) The Employee shall devote his entire time and attention to
the Employer's business. During the term of this agreement, the Employee shall
not engage in any other business activity, whether or not it is pursued for gain
or profit.
(b) The Employee is designated as Vice President in charge of
Sales and Marketing. The Board of Directors may at its will change such
designation. No additional compensation shall be payable to the Employee for his
services as an officer or director of the Company.
2. Term of Employment and Effective Date Thereof.
(a) The initial term of employment of the Employee hereunder
shall start as of January 1, 1992 and except as earlier terminated, as herein
provided, shall end December 31, 1996.
(b) Notwithstanding the foregoing, the Employee's employment
hereunder shall terminate upon the occurrence of any of the following events:
(i) the mutual agreement of the parties;
(ii) the death of the Employee;
(iii) the termination of the Employee's employment
by the Employer, for "Cause" as defined hereinafter;
(iv) the unilateral cessation or discontinuance
by the Employee of his working for or employment by the Employer.
<PAGE> 2
(c) For the purposes of this agreement, "cause" shall mean the
commission by the Employee of any crime or an intentional act of fraud against
the Employer or any flagrant act of gross negligence or gross misconduct on the
part of the Employee with respect to his duties under this agreement; or any
flagrant act on the part of the Employee in violation of specific and reasonable
directions of the Board of Directors.
(d) Upon termination of the Employee's employment hereunder,
whether at the end of the initial term hereof or any extended term or in the
event of earlier termination, the Employee shall have no further rights under
this Agreement, except as expressly herein set forth. But such termination shall
not preclude the Employer from enforcing any remedies available to it by law in
consequence of a breach by the Employee of his obligations hereunder, including
without limitation the enforcement of any restrictive covenants hereunder.
3. Base Compensation.
(a) For his services hereunder, the Employer shall pay to the
Employee during the term of this agreement, the following base annual salaries:
(i) The base annual salary for the calendar year, 1992 shall
be $150,000..
(ii) For each full calendar year of the term of this
agreement, starting with the calendar year 1993, the base
annual salary shall be increased by $7,500.00 over the base
yearly salary of the preceding year.
(b) Employee's base annual salary shall be payable in regular
intervals in accordance with the Company's payroll practices.
(c) All compensation shall be subject to such withholding of
any federal, state or local taxes as may be required by law with respect to
these payments.
(d) In the event of the termination of the Employee's
employment before the end of a calendar year, the base yearly salary for the
year of termination shall be pro-rated to the date of termination.
4. Bonuses.
In addition to the base yearly salary set forth in Paragraph 3
hereof and any other compensation payable to the Employee as herein set forth,
the Employer agrees to pay to the Employee a bonus or bonuses as and upon the
terms and conditions hereinafter set forth:
- 2 -
<PAGE> 3
(a) For each calendar year that the Employee shall be employed
by the Employer, whether during the initial term or any extended term, the
Employer shall pay to the Employee a bonus of the following percentages of the
Aggregate Net Profits (as hereinafter defined and calculated) of Amscan (USA),
Amscan (Canada) and Deco Manufacturing, Inc. (hereinafter referred to as the
Bonus Companies) for the following calendar years:
For the year 1992, two (2%) percent;
For the year 1993, three (3%) percent;
For the year 1994, four (4%) percent; and
For the year 1995 and each calendar year thereafter, five
(5%) percent.
(b) If the Employee's employment shall be terminated before
the end of a calendar year, then the bonus for the period of time that the
Employee shall be employed during such calendar year shall be prorated for the
period from the commencement of such year to the date of termination of
employment within such year.
(c) If the Employee's employment has been terminated for
"cause" as set forth in paragraph 2.(b)(iii) hereof or by reason of the
unilateral cessation or discontinuance by the Employee of working for the
Employer as set forth in paragraph 2.(b)(iv) of this agreement, no bonus shall
be payable by the Employer to the Employee under this provision of this
agreement for the year of termination.
(e) Each Bonus Company may take such steps in the operation of
its business as its officers, directors or shareholders may, in their sole
discretion, determine, including, without limitation, modification or
discontinuance of any of its present operations or addition of new operations,
without regard to the effect on the calculation of the Aggregate Net Profits
hereunder. If any action taken by any of the Bonus Companies adversely affects
the Aggregate Net Profits as defined herein, the Employee shall not be entitled
to any claim or recourse of any kind or nature by reason thereof against any of
the Bonus Companies.
(f) The Aggregate Net Profits hereunder shall be calculated by
adding the net profits of the three Bonus Companies and deducting therefrom the
net losses of the three Bonus Companies for each calendar year or any lesser
period within a calendar year if the Employee's employment shall be terminated
before the end of a calendar year. If any of the three Bonus Companies may have
a fiscal period which does not coincide with the calendar year, in computing the
Aggregate Net
- 3 -
<PAGE> 4
Profits, if any, for any calendar year, the net profits or losses of the three
Bonus Companies for any full calendar year shall be taken as the amounts
calculated as at the end of their respective fiscal periods occurring during the
calendar year involved.
(g) For the purposes hereof, the Net Profits, if any, of the
three Bonus Companies shall be computed before the payment of any federal, state
or local taxes by the Bonus Companies located in the United States and before
the payment of comparable taxes payable by any of the Bonus Companies located
outside of the United States.
(h) For the purpose of computing the Aggregate Net Profits
hereunder, the deduction by the Employer for the base salary of the President of
the Employer (now, John Svenningsen) shall not exceed the base sum of $250,000.
for the calendar year 1992 with successive increases thereafter, of 5% over the
base salary for each of the four (4) additional calendar years of the initial
term and for any extended term. Nothing contained herein shall limit the amount
of salary which may be payable by the Employer or any of the Bonus Companies or
any current or future Affiliates, (as hereinafter described and defined) to its
President; the foregoing limitation being only for the purpose of computing
Aggregate Net Profits.
(i) For the purposes hereof, the Aggregate Net Profits shall
be calculated and determined by outside accountants regularly employed by the
Employer and the respective Bonus Companies and Affiliates to prepare their
financial statements and such calculations shall be made in accordance with
generally accepted accounting principles consistently applied. The Employee and
Employer shall be bound by the calculation of the said accountants as to the
amount of the Aggregate Net Profits and Losses.
The Employee's share of the Aggregate Net Profits, if any,
shall be paid to him as follows:
The Aggregate Net Profits shall be computed by the aforesaid
accountants in a timely manner at the end of each calendar year or at the time
of termination of the Employee's employment within a calendar year, in the event
of early termination and the Employee's share of the Aggregate Net Profits shall
be paid to him as follows:
(i) One-third thereof shall be paid to the Employee
within 90 days after the end of the calendar year involved or within 90 days
after early termination of Employee's employment within a calendar year, as the
case may be.
- 4 -
<PAGE> 5
(ii) The remaining two-thirds of the Employee's share
of said Aggregate Net Profits shall be loaned by the Employee to the Company to
be repaid to the Employee with interest at prime rate chargeable by the
Company's bank as follows: Interest only shall be paid at the end of the first
year of such loan and the remaining principal plus interest shall be paid at the
end of the second year of such loan. The loan shall be deemed to have been made
on the first day following the period covered by the accounting involved.
5. Fringe Benefits.
As additional consideration for the services of the Employee
under this Agreement, the Employer shall provide to the Employee all fringe
benefits provided by the Employer to its other executives, including automobile
allowance, paid vacation, holiday and sick leave, medical insurance for the
Employee, spouse and dependent children fully paid for by the Employer and group
life insurance, and participation in pension and/or profit-sharing plans, in the
same manner and to the same extent as such fringe benefits shall be available to
such other executives of the Employer.
6. Business Expenses.
The Employee may incur, for the benefit of the Company and in
furtherance of the Company's business, various expenses included but not limited
to travel, entertainment and promotion expenses. The Employer, at its option,
shall either pay such necessary expenses to the Employee directly, advance sums
to be used for payment of such necessary expenses or on submission by the
Employee of proper vouchers therefor, reimburse the Employee for such necessary
expenses actually incurred by him.
- 5 -
<PAGE> 6
8. Restrictive Covenant.
In consideration of his special and unique services and his
position, which by its nature exposes him to trade secrets, proprietary
information and other confidential material and assets of the Employer, the
Employer covenants and agrees as follows with the Employer:
(a) Except as herein provided, the Employee covenants and
agrees with the Employer that for a period of three (3) years after the
termination of his employment hereunder, whether at the end of the initial or
any extended term hereunder or earlier termination the Employee will not,
directly or indirectly, as proprietor, partner, shareholder (other than as a
less than five percent shareholder in a publicly held company), officer,
director, employee or consultant, or in any other capacity, for his own benefit
or for or with any other person or entity, engage in or perform services in any
business or activity involved in or related to the business in which the
Employer or any of its Affiliates (as defined in sub-paragraph (b) of this
paragraph) are now engaged or may hereafter become engaged, in any trading area
in which the Employer or any of its Affiliates may be engaged in business or
trade.
(b) The parties acknowledge that the Employer is associated
with other companies either as an owner, shareholder, co-venturer or otherwise,
which are engaged in businesses similar to or related to the business of the
Employer. These businesses and any other businesses with which the Employer may
hereafter become associated which will conduct business similar to or related to
the business of the Employer are referred to for the purposes of this paragraph
8. and the restrictive covenant herein contained as Affiliates of the Employer.
These include at the present time Amscan U.S.A., Amscan Canada, Amscan Sweden,
Amscan England, Amscan Australia, Amscan Germany, Deco Manufacturing, Kookabura
Manufacturing, Perfect Party and Cake Tops and may hereafter include other
companies.
(c) The provisions of paragraph 8.(a) hereof relating to
restrictions on Employee's employment upon termination of the
- 6 -
<PAGE> 7
initial term of this agreement or any extended term or earlier termination shall
have no application and shall not be binding upon the Employee in the event of a
termination of the Employee's employment, at the will of the Employer, under
paragraph 2.(b)(v) hereof.
(d) The Employee further covenants that he will not, at any
time, without the prior written consent of the Employer furnish or disclose to
any person who is not then an officer, employee or agent of the Employer, (i)
any trade secret of the Employer or of any Affiliate, or (ii) any documents,
records, plans, models, customer lists or other tangible property of the
Employer or any Affiliate, regardless of its form, which may come into his
possession, custody or control in consequence of his employment.
(e) In addition, to a right to accounting by the Employer
and/or damages and/or any other relief to which the Employer may be entitled as
a result of the Employee's breach of the provisions of this paragraph, the
Employer or the Affiliates will be entitled to injunctive relief restraining any
such breach or threatened breach, or the continuation of such breach, by the
Employee, provided, however that if a court of competent jurisdiction shall
determine that this covenant shall be enforceable only if limited to a shorter
period of time or to a smaller geographical area than is herein expressly
provided, or otherwise limited, then and in such event, this covenant shall be
deemed to be limited to the extent so determined to be enforceable, in the same
manner and to the same extent as of such limits were expressly provided herein.
(f) The rights hereunder by the Employer against the Employee
may be assigned by the Employer and may be enforced by any successors or assigns
of the Employer or any Affiliate as herein defined.
11. Option to Extend.
The Employer is granted an option to extend this agreement and
the employment of the Employee for an additional period of three (3) years
during the calendar years 1997, 1998, and 1999, upon the following terms and
conditions:
(a) The option shall be exercised by notice to the Employee by
the Employer, no later than July l, 1996.
(b) Notice of the exercise of such option shall be in
conformity with the provisions of paragraph 12. hereof.
(c) The employment of the Employee during such extended three
(3) year term shall be upon the same terms and conditions as are set forth in
this Agreement modified as follows: (i) Base yearly salary shall be increased
from year
- 7 -
<PAGE> 8
to year in the manner provided by paragraph 3.(a)(ii) hereof; (ii) bonuses shall
be paid as provided by paragraph (4) hereof; (iii) in the event of early
termination under paragraph 2.(b)(v) hereof, the Employer shall, in addition,
pay the following amount: ______________________________________________________
________________________________________________________________________________
12. Notices.
Any notice hereunder shall be sufficient if sent by Certified
Mail, Return Receipt Requested, to the party to be notified at his or its
address set forth below or at such other address as the party to be notified may
have otherwise designated, by notice in writing, with copies to their respective
attorneys as set forth below:
To Amscan or any of its Affiliates at: Amscan, Inc., P.O. Box 587, South Road,
Harrison, N.Y. 10528, with a copy to: Kurzman & Eisenberg, Sam Eisenberg, Esq.
One North Broadway, White Plains, N.Y. 10601.
To William Wilkey at: __________________________________________________________
with a copy to: _______________________________________________________________
13. Amendments.
No amendments or additions to this Agreement shall be binding
unless in writing and signed by both parties, except as herein otherwise
provided.
14. Governing Law.
This Agreement shall be governed in all respects by the laws
of the State of New York.
15. Paragraph Headings.
The paragraph headings used in this Agreement are included
solely for convenience and shall not affect or be used in connection with the
interpretation of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
AMSCAN, INC. (Employer)
By: /s/ JOHN SVENNINGSEN
--------------------------
John Svenningsen,
President
/s/ WILLIAM WILKEY
--------------------------
William Wilkey, (Employee)
- 8 -
<PAGE> 9
SUPPLEMENT TO EMPLOYMENT AGREEMENT made the 29 day of
December, 1992, between Amscan, Inc., a New York corporation (the "Employer" or
"Company") and William Wilkey ("the Employee") (hereinafter referred to as the
"Employment Agreement").
WHEREIN, IT IS MUTUALLY AGREED AS FOLLOWS:
Paragraph 4.(f) of the Employment Agreement is amended to add the
following:
"For the purpose of calculating the Aggregate Net Profits hereunder,
all contributions by John Svenningsen to the capital of the Bonus
Companies or any of them, shall be treated as if such capital
contributions were loans to the Bonus Companies or any of them, and an
amount equal to the "interest", (computed as hereinafter set forth)
which would have been paid on such capital contributions had they been
loans shall be deducted as an operating expense. For the purpose of
such calculation, the amount of "interest" shall be the "prime" rate
chargeable by the Employer's primary bank as it may be determined from
time to time by said bank plus one (1%) percent."
IN WITNESS WHEREOF, the parties have executed this agreement the 29 day
of December, 1992
AMSCAN INC. (Employer)
By: /s/ JOHN SVENNINGSEN
---------------------------------
John Svenningsen, President
/s/ WILLIAM WILKEY
---------------------------------
WILLIAM WILKEY, Employee
<PAGE> 1
Exhibit 10(g)
EMPLOYMENT AGREEMENT made this 11th day of June, 1996, between Amscan
Inc., a New York corporation with offices at 80 Grasslands Road, Elmsford, New
York 10523 (the "Employer" or "Company" and James M. Harrison, residing at 16
High Street, East Williston, New York 11596 (the "Employee").
1. Employment of the Employee.
The Employer employs the Employee to serve as: Chief Financial
Officer and to perform such other duties as may be assigned to him from time to
time, by the Company.
(a) The Employee shall devote his entire working time and
attention to the Employer's business. During the term of this agreement, the
Employee shall not engage in any other business activity, whether or not it is
pursued for gain or profit.
(b) Company may designate Employee as an officer or director without
additional compensation. The Board of Directors may at its will change such
designation.
(c) Employee's responsibilities will be determined by the Company and
may include but not be limited to:
(i) supervision, administration and management of the day
to day financial operations of the Company;
(ii) banking relations and financing as required;
(iii) implementation of investment decisions;
(iv) the orderly and efficient maintenance of the
Company's business records, meeting legal and tax
compliance;
(v) measuring and reporting the Company's financial
results to the Board, as may be requested;
(vi) conducting the financial operations of the Company so
as to meet all current operating expenses, provide
for debt retirement, purchase of new equipment and
the maintenance of the Company's facilities; and
(vii) other services as Employer may require, consistent
with Employee's position as an executive of the
Company.
<PAGE> 2
2. Term of Employment and Effective Date Thereof.
(a) The initial term of employment of the Employee hereunder
shall start as of January 1, 1997 or earlier upon written mutual consent of the
Company and Employee (the "Commencement Date") and shall continue until
terminated as provided herein.
(b) The Employee's employment hereunder shall terminate upon
the occurrence of any of the following events:
(i) the mutual agreement of the parties;
(ii) the death of the Employee or disability which
shall mean for the purposes of this agreement the mental or physical illness or
disability of the Employee which continues for ninety (90) or more consecutive
days and which prevents him from performing his obligations hereunder as
determined exclusively but in good faith by the Company;
(iii) the termination of the Employee's employment by
the Employer, for "Cause" as defined hereinafter.
(iv) upon thirty (30) days' prior notice the
unilateral cessation or discontinuance by the Employee of his working for or
employment by the Employer;
(v) the election by the Employer to terminate the
Employee's employment at any time and for any reason other than the reasons set
forth in the preceding sub-paragraphs (i), (ii), (iii) and (iv) subject to the
provisions of paragraph 7. hereof.
(c) For the purposes of this agreement, "Cause" shall mean:
(i) the commission by the Employee of any crime
or an intentional act of fraud against the
Employer or;
(ii) any act of gross negligence or willful
misconduct on the part of the Employee with
respect to his duties under this agreement
or;
(iii) any act of willful disobedience on the part
of the Employee in violation of specific and
reasonable directions of the Board of
Directors or;
(iv) a failure of any representation or warranty
made by Employee pursuant to this agreement
to be true when made;
(d) Upon termination of the Employee's employment hereunder,
the Employee shall have no further rights under this Agreement, except as
expressly herein set forth. But such termination shall not preclude the Employer
from enforcing any remedies available to it by law in consequence of a breach by
the
2
<PAGE> 3
Employee of his obligations hereunder, including without limitation the
enforcement of any restrictive covenants hereunder.
3. Base Compensation.
(a) For his services hereunder, the Employer shall pay to the
Employee during the term of this agreement, the following base annual salary:
One Hundred and Fifty Thousand ($150,000.00) Dollars. The parties agree that
said base compensation may be modified by their mutual consent.
(b) Employee's base annual salary shall be payable in regular
intervals in accordance with the Company's payroll practices.
(c) All compensation shall be subject to such withholding of
any federal, state or local taxes as may be required by law with respect to
these payments.
(d) In the event of the termination of the Employee's
employment before the end of a Contract Year (any period equaling twelve (12)
months in the aggregate from the Commencement Date), the base yearly salary for
the year of termination shall be prorated to the date of termination.
4. Bonus.
Employee shall receive a bonus of Fifty Thousand ($50,000.00)
Dollars due and payable only upon the Employee being employed by Employer at the
completion of the initial Contract Year. Payment of said bonus shall be subject
to such withholding of any federal, state or local tax as may be required by law
with respect to such payment and payment thereof shall be made within thirty
(30) days after the end of the Contract Year.
5. Fringe Benefits.
As additional consideration for the services of the Employee
under this Agreement, the Employer shall provide to the Employee so long as he
is employed by the Company, the following fringe benefits if said benefits are
generally provided by the Employer to its other executive employees, including:
group insurance life, accidental death and dismemberment, hospitalization, major
medical and dental, long-term disability, profit-sharing and/or 401(k).
3
<PAGE> 4
6. Business Expenses.
The Employee may incur, for the benefit of the Company and in
furtherance of the Company's business, various expenses included but not limited
to travel, entertainment and promotion expenses. The Employer, at its option,
shall either pay such necessary expenses to the Employee directly, advance sums
to be used for payment of such necessary expenses or on submission by the
Employee of proper vouchers therefor, reimburse the Employee for such necessary
expenses actually incurred by him.
7. Termination of Agreement at Employer's Option.
A. In the event of termination of the Employee's employment at
any time after the Commencement Date, the Employer shall make the following
payments to the Employee:
(i) The balance of base yearly salary (but not the
bonus) payable to the Employee in accordance with
paragraph 3. hereof, pro-rated to the date of
termination.
B. In addition to the foregoing in the event of termination
pursuant to paragraph 2.(b)(v), the Employer shall pay to the Employee the
following amount: One Hundred and Fifty Thousand ($150,000.00) Dollars payable
within thirty (30) days following termination of Employee's employment.
8. Special Circumstances.
A. If as provided herein in paragraph 2.(a) the parties
mutually agree to an early Commencement Date, the Employer hereby reserves the
right if C.R. Gibson Co. commences any action or proceeding or threatens to
bring any action or proceeding claiming breach of any non-competition covenant
by which the Employee may be bound, to suspend this contract and the employment
of Employee hereunder with the following effect:
(i) During such period of suspension the Employee
shall not be entitled to any monies or payments other
than those referenced in paragraph 7.A.(i).
(ii) During said period of suspension the Employee
shall not receive any of the benefits as specified in
paragraph 5.
(iii) During the period of suspension, all other
terms and provisions of this agreement shall remain
in full force and effect including the restrictive
covenant provisions contained in paragraph 9. hereof;
provided that nothing herein contained is
4
<PAGE> 5
intended to prohibit Employee from being employed as
long as said employment is not in conflict with the
provisions of paragraph 9.
B. If on or before January 31, 1997, any proceeding, action or
claim by C.R. Gibson Co. as provided in the preceding paragraph 8.A. shall have
been resolved, then Employer agrees to annul the suspension and to restore his
employment pursuant to the terms and provisions of this agreement. For the
purposes of this agreement, the matter shall be deemed to have been resolved if
the claim by C.R. Gibson shall be fully and completely withdrawn or
alternatively, if an action or proceeding shall have been commenced, such action
and proceeding shall have been fully determined permitting the employment of
Employee by the Company without any further right of appeal.
9. Restrictive Covenant.
In consideration of his special and unique services and his
position, which by its nature exposes him to trade secrets, proprietary
information and other confidential material related to the Company and with full
recognition by the Employee that this restrictive covenant is essential to
protect the business of the Company, developed by it at great expense and with
great effort, the Employee covenants and agrees as follows with the Employer:
(a) Except as herein provided, the Employee covenants and
agrees with the Employer that for a period of one (1) year after the termination
of his employment hereunder or the suspension of the Employee's employment
pursuant to paragraph 8. above without the annulment of such suspension and the
restoration of the Employee's employment, the Employee will not, directly or
indirectly, as proprietor, partner, shareholder, officer, director, employee or
consultant, or in any other capacity for his own benefit or for or with any
other person or entity, engage in or perform services in any business or
activity involved in or related to the business in which the Employer or any of
its Affiliates, (as defined in sub-paragraph (b) of this paragraph) are now
engaged or may hereafter become engaged, in any trading area in which the
Employer or any of its Affiliates may be engaged in business or trade; provided
however that the ownership by the Employee of less than 5% of the issued and
outstanding capital stock of a publicly traded corporation shall not be deemed
to be in violation of this provision.
(b) The parties acknowledge that the Employer is associated
with other companies either as an owner, shareholder, co-venturer or otherwise,
which are engaged in businesses similar to or related to the business of the
Employer. These businesses and any other businesses with which the Employer may
hereafter become associated which will conduct business similar to or related
5
<PAGE> 6
to the business of the Employer are referred to for the purposes of this
paragraph 9. and the restrictive covenant herein as Affiliates of the Employer.
(c) The Employee further covenants that he will not, at any
time outside the scope of his responsibilities as an Employee, without the prior
written consent of the Employer furnish or disclose to any person who is not
then an officer, employee or agent of the Employer, (i) any trade secret of the
Employer or of any Affiliate, or (ii) any documents, records, plans, models,
customer lists or other tangible property of the Employer or any Affiliate,
regardless of its form, which may come into his possession, custody or control
in consequence of his employment.
(d) In addition to a right to accounting by the Employer
and/or damages and/or any other relief to which the Employer may be entitled as
a result of the Employee's breach of the provisions of this paragraph, the
Employer or the Affiliates will be entitled to injunctive relief restraining any
such breach or threatened breach, or the continuation of such breach, by the
Employee, provided however, that if a court of competent jurisdiction shall
determine that this covenant shall be enforceable only if limited to a shorter
period of time or to a smaller geographical area than is herein expressly
provided, or otherwise limited, then and in such event, this covenant shall be
deemed to be limited to the extent so determined to be enforceable, in the same
manner and to the same extent as if such limits were expressly provided herein.
(e) The rights hereunder by the Employer against the Employee
may be assigned by the Employer and may be enforced by any successors or assigns
of the Employer or any Affiliate as herein defined.
10. Warranties.
Employee warrants and represents that upon the Commencement
Date of this agreement:
(i) Other than his employment contract with C. R.
Gibson Co., there is no agreement written or oral
with any person or entity which shall affect in any
way Employee's right or authority to enter into this
agreement;
(ii) He is not in breach of any provision of the
aforementioned employment agreement with C. R. Gibson
Co. including but not limited to any noncompetition
or restrictive covenant contained therein;
(iii) He does not know of any intention on the part
6
<PAGE> 7
of any Company or person to commence any action or
proceeding against him to restrict his employment by
the Company as herein provided nor has any such
action or proceeding been threatened.
11. Notices.
Any notice hereunder shall be sufficient if sent by Certified
Mail, Return Receipt Requested, to the party to be notified at his or its
address set forth below or at such other address as the party to be notified may
have otherwise designated, by notice in writing, with copies to their respective
attorneys as set forth below:
TO AMSCAN OR ANY OF AMSCAN, INC.
ITS AFFILIATES AT: 80 GRASSLANDS ROAD
ELMSFORD, N.Y. 10523
WITH A COPY TO: KURZMAN & EISENBERG, LLP
SAM EISENBERG, ESQ.
ONE NORTH BROADWAY
WHITE PLAINS, N.Y. 10601
TO EMPLOYEE: JAMES M. HARRISON
16 HIGH STREET
EAST WILLISTON, N.Y. 11596
12. Amendments.
No amendments or additions to this Agreement shall be binding
unless in writing and signed by both parties, except as herein otherwise
provided.
13. Governing Law.
This Agreement shall be governed in all respects by the laws
of the State of New York.
14. Assignment.
This contract and the rights hereunder may be assigned by the
Company subject to its obligations hereunder.
15. Paragraph Headings.
The paragraph headings used in this Agreement are included
solely for convenience and shall not affect or be used in connection with the
interpretation of this Agreement.
7
<PAGE> 8
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
AMSCAN INC. (Employer)
By:/s/JOHN SVENNINGSEN
---------------------------
John Svenningsen
President
/s/JAMES M. HARRISON
---------------------------
James M. Harrison
(Employee)
8
<PAGE> 1
EXHIBIT 10(i)
LEASE BETWEEN
ACP EAST LLC - LANDLORD
AND
AMSCAN INC. - TENANT
80 GRASSLANDS ROAD
GREENBURGH, NEW YORK
DECEMBER 1995
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PARAGRAPH NO. PAGE NO.
- ------------- --------
<S> <C>
1. Premises......................................................................................... 1
2. Term............................................................................................. 1
3. Use of Premises.................................................................................. 1
4. Rental........................................................................................... 2
5. Electricity...................................................................................... 3
6. Taxes............................................................................................ 3
7. Operating Expense................................................................................ 5
8. Tenant's Improvement and Alterations............................................................. 10
9. Compliance with Insurance Requirements........................................................... 12
10. Compliance with Law.............................................................................. 12
11. Services......................................................................................... 12
12. Liability Insurance.............................................................................. 14
13. Liability of Landlord............................................................................ 14
14. Repairs.......................................................................................... 15
15. Destruction, Fire or Other Causes................................................................ 15
16. Eminent Domain................................................................................... 16
17. Assignment, Sublet................................................................................ 17
18. Default.......................................................................................... 18
19. Remedies of Landlord............................................................................. 20
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
20. Rules and Regulations............................................................................ 21
21. No Representations by Landlord................................................................... 21
22. Quiet Enjoyment.................................................................................. 21
23. Right to Exhibit Premises........................................................................ 22
24. Subordination.................................................................................... 22
25. Surrender of Premises............................................................................ 23
26. Brokerage........................................................................................ 23
27. Force Majeure.................................................................................... 23
28. Lease Status..................................................................................... 23
29. Holdover......................................................................................... 24
30. Notices.......................................................................................... 24
31. Attornment....................................................................................... 24
32. Entire Agreement, etc............................................................................ 25
33. Assigns.......................................................................................... 25
34. Definitions...................................................................................... 25
35. Waiver of Trial by Jury.......................................................................... 25
36. Late Payments.................................................................................... 25
37. Effects of Waivers of Default.................................................................... 26
38. Landlord's Right to Cure Defaults................................................................ 26
39. Legal Proceedings................................................................................ 26
40. Option to Extend................................................................................. 26
</TABLE>
<PAGE> 4
EXHIBITS:
A Demised Premises
B Description
C Landlord Improvements
<PAGE> 5
OFFICE LEASE
This Lease, dated as of the first day of December, 1995, by and between ACP East
LLC, having a place of business, PO Box 587, Harrison, New York 10528
(hereinafter called "Landlord"), and Amscan Inc, having a business address at 2
Macy Road, PO Box 587, Harrison, New York 10528 (hereinafter called "Tenant").
W I T N E S S E T H:
PARAGRAPH I - PREMISES.
The Landlord does hereby lease and demise to Tenant and Tenant hereby
hires and takes from Landlord, for the term and upon the terms, conditions and
rentals hereinafter specified, the entire third floor and the "South wing" of
the 2nd floor as outlined on a certain plan attached hereto and made a part
hereof as Exhibit A, said space being 46,714 rentable square feet as measured
and determined by Landlord. Said Exhibit A sets forth the premises herein
demised (hereinafter called the "DEMISED PREMISES OR PREMISES") in the building
("Building") commonly known as 80 Grasslands Road, Greenburgh, New York,
situated on a portion of the land described in Exhibit B attached hereto and
made a part hereof (hereinafter called the "Land"). The Land (including all
parking areas) and Building are hereinafter collectively referred to as
"Landlord's Building or Building".
Tenant agrees to accept the Demised Premises in an "as is" condition
with the exception that Landlord agrees to deliver the Demised Premises
consistent with the provisions contained within Exhibit C annexed hereto and
made a part hereof.
PARAGRAPH 2 - TERM.
Tenant shall have and hold the Demised Premises for a term commencing
on October 1, 1995 ("Commencement Date"), and expiring on February 28, 2011,
which is fifteen (15) years after the date on which Tenant commences the payment
of rent. (the period between the Commencement Date and the Expiration Date
hereinafter defined as the "Term"). Except as provided in Paragraph 4, and
notwithstanding anything else in this Lease to the contrary, Tenant will begin
payment of rent March 1, 1996.
PARAGRAPH 3 - USE OF PREMISES.
Tenant shall only use the Demised Premises for general office use and
uses ancillary thereto. No signs of any kind shall be installed or maintained on
the exterior of the Building in which the Demised Premises is located, including
the windows thereof, unless Landlord, in the exercise of its absolute
discretion, shall give Tenant prior written consent to such installation or
maintenance and determines that same are consistent with the building standards.
Landlord represents that the floor space at the Demised Premises will carry 50
pounds per square foot of floor space live load uniformly
1
<PAGE> 6
distributed. Tenant shall not place a load upon any floor of the Building which
exceeds 50 pounds floor load per square foot which such floor was designed to
carry. If Tenant shall desire a floor load in excess of 50 pounds floor load per
square foot for which the floor or any portion of the Building is designed, upon
submission to Landlord of plans showing the location of and the desired floor
live load for the area in question, Landlord shall strengthen and reinforce the
same, at Tenant's sole expense, so as to carry the live load desired. Business
machines and mechanical equipment used by Tenant which cause vibration or noise
that may be transmitted to the Building to any leased space to such a degree as
to be reasonably objectionable to Landlord or to any tenants in the Building
shall be placed and maintained by Tenant, at its expense, in settings of cork,
rubber or spring-type or other vibration eliminators sufficient to reduce such
vibration or noise to a reasonable degree. Tenant shall be entitled to a listing
in the Building directory located in the lobby thereof and one listing on the
second floor.
Landlord represents and warrants that the use and occupancy of the
Demised Premises for the transaction of Tenant's business does not violate any
existing laws, orders, rules or regulations of any state, federal, municipal or
local government, department or agency. Landlord further represents and warrants
that a permanent Certificate of Occupancy for the Building and the Demised
Premises is, or prior to the Occupancy Date will be, in force and will not be
violated by Tenant's proposed use and occupancy of the Demised Premises, and
that all other licenses or permits required for the Tenant's use and occupancy
of the Demised Premises (other than any license or permit required for the
conduct of Tenant's business) is, or prior to the Commencement Date will be, in
force.
PARAGRAPH 4 - RENTAL.
Tenant agrees to pay to Landlord as rent for the Demised Premises
during the Term hereof, excluding any portion of the term occurring prior to the
rent commencement date, as hereinafter defined, a minimum annual rent ("Minimum
Rent") of Eight Hundred Seventeen Thousand, Four Hundred Ninety Five
($817,495.00) Dollars, payable in monthly installments of Sixty Eight Thousand
One Hundred Twenty Four and 58/100 Dollars ($68,124.58). Said Minimum Rent shall
be payable in successive periods commencing March 1, 1995.
Except as otherwise provided herein to the contrary, installments of
Minimum Rent shall he paid in advance commencing on the Rent Commencement Date
and on the first day of each successive calendar month during the term of this
Lease at the office of Landlord, or such other place as Landlord may designate
in writing from time to time, with payment in advance of appropriate fractions
of a monthly payment for any portion of a month at the expiration or prior
termination of the term hereof. Tenant shall pay, however, Minimum Rent for the
first full month of the term of this Lease upon the execution of this Lease. In
addition to Minimum Rent, Tenant agrees to pay Landlord such additional rent
("ADDITIONAL RENT"), if any, as provided elsewhere in this Lease, including, but
not limited to, the items of Additional Rent set forth in Paragraphs 5, 6 and 7.
Each installment of Minimum or Additional Rent is due at the office of
the Landlord on the first day of the month. If a payment is not received within
ten (10) days of its due date, Tenant shall pay, in addition to the payment due,
an amount equal to Five (5%) Percent of the amount due. Such charge shall
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not authorize payment of any installment of Rent or Additional Rent after its
due date and same shall be payment in addition to any such other rights and
remedies of the Landlord provided for herein or by law for nonpayment of rent.
During the initial term, the minimum rent shall be increased on each
five year anniversary (March 1, 2001 and March 1, 2006) by 15% for the five year
period beginning March 1, 2001. The minimum rent shall be Nine Hundred Forty
Thousand, One Hundred Nineteen Dollars and 12/100 ($940,119.12) payable in
monthly installments of Seventy Eight Thousand, Three Hundred Forty Three
Dollars and 26/100 ($78,343.26). For the five year period beginning March 1,
2006, the minimum rent shall be One Million, Eighty One Thousand, One Hundred
Thirty Six Dollars and 88/100 ($1,081,136.88), payable in monthly installments
of Ninety Thousand Ninety Four Dollars and 74/100 ($90,094.74).
PARAGRAPH 5 - ELECTRICITY
Landlord shall have installed a separate electric meter or meters for
Tenant's Premises. Tenant shall arrange to obtain electricity from the public
utility company furnishing electric service to the Building. Such electricity
may be furnished to Tenant by means of the then existing Building system
feeders, risers and wiring to the Demised Premises to the extent that the same
are, in Landlord's sole judgment, available, suitable and safe for such
purposes. All meters and additional panel boards, feeders, risers, wiring and
other conductors and equipment which may be required to obtain electricity
directly from such public utility company shall be installed by Landlord, at the
sole cost and expense of Landlord.
Tenant agrees to pay any bills for said electric usage and other
services by the electric utility company upon the terms of those bills when
rendered and agrees to hold Landlord harmless for Tenant's liabilities arising
out of said usage or service.
PARAGRAPH 6 - TAXES.
A. For the purposes of this Article 6:
(1) "Taxes" shall mean (i) all real estate taxes and
assessments (special or otherwise) whether federal, state, local or municipal,
and any other governmental imposition or charge of a similar or dissimilar
nature, whether general, special, ordinary, extraordinary, foreseen or
unforeseen, which may be assessed, levied or imposed upon all or any part of
Landlord's Building, whether or not the same constitute one or more tax lots,
and (ii) any normal and reasonable expenses incurred by Landlord in contesting
any of the foregoing or the assessed valuation of all or any part of Landlord's
Building. If, however, by law, any assessment may be divided and paid in annual
installments, then, provided the same is not prohibited under the terms of any
superior lease or superior mortgage, for the purposes of this Paragraph 6, (a)
such assessment shall be deemed to have been so divided and to be payable in the
maximum number of annual installments permitted by law, and (b) there shall be
deemed included in
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Taxes for each Tax Year the annual installment of such assessment becoming
payable during such Tax Year, together with interest payable during such Tax
Year on such annual installment and on all installments thereafter becoming due
as provided by law, all as if such assessment had been so divided. If at any
time during the term of this Lease the methods of taxation prevailing at the
Commencement Date shall be altered so that in lieu of or as an addition to or as
a substitute for the whole or any part of the taxes, assessments, levies,
impositions or charges now levied on real estate and the improvements thereon,
there shall be levied, assessed or imposed (i) a tax, assessment, levy,
imposition or charge wholly or partially as capital levy or otherwise on the
rents received therefrom, or (ii) a tax, assessment, levy, imposition or charge
measured by or based in whole or in part upon the Demised Premises and imposed
upon Landlord, or (iii) a license fee measured by the rents payable by Tenant to
Landlord, or (v) any other tax, assessment, levy, imposition, charge or
licensing fee, however described or imposed, then all such taxes, assessments,
levies, impositions, charges, or fees, or the part thereof so measured or based,
shall be deemed to be included within the term "Taxes" for the purposes hereof.
Taxes shall not include any interest, penalties or late charges.
(2) "Base Tax Amount" shall mean Taxes for the fiscal period
from July 1, 1995, through June 30, 1996, as same may be reduced pursuant to any
application or proceeding brought by or on behalf of Landlord for reduction in
the assessed valuation of the Building.
(3) "Tax Year" shall mean the twelve (12) month period
commencing July 1st of each year.
(4) "Tenant's Proportionate Tax Share" shall mean 52%.
B. (1) Commencing March 1, 1997, Tenant shall pay as Additional Rent
for each Tax Year, all or any portion of which shall be within the term of the
Lease, a sum ("Tax Payment") equal to the product obtained by multiplying (i)
Tenant's Proportionate Tax Share by (ii) the amount by which Taxes for such Tax
Year exceed the Base Tax Amount.
(2) Before or after the start of each Tax Year during the
Term, Landlord shall furnish to Tenant a written statement ("Tax statement")
setting forth (i) the Taxes, for such Tax Year, and (ii) a computation showing
the Tax Payment due by Tenant on account of such Tax Year. Commencing with the
delivery of a Tax Statement for the applicable Tax Year and on the first day of
each succeeding month, until the delivery of a new or revised Tax Statement,
Tenant shall pay to Landlord, as Additional Rent, together with Tenant's payment
of Minimum Rent, an amount equal to one-twelfth (1/12th) of Tenant's Tax Payment
as shown on the Tax Statement and the unpaid tax payment for the Tax Year as
specified in the next sentence. Promptly after a Tax Statement is furnished to
Tenant, or together therewith, Landlord shall notify Tenant if the installments
of Tenant's Tax Payments previously paid, if any, on account of the Tax Year
which is the subject of the Tax Statement, were greater or less than the
installments of Tenant's Tax Payment which Tenant was required to pay on account
of such Tax Year, and (A) if there shall be a deficiency, Tenant shall pay the
amount thereof within ten (10) days after demand therefor, or (B) if there shall
have been an overpayment, Landlord shall credit the amount thereof against any
subsequent payment(s) payable by Tenant under this subsection (2), (or if after
the
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expiration or termination of this Lease, refund the amount thereof to Tenant)
and (iii) on the first day of the month following the month in which the Tax
Statement is furnished to Tenant and monthly thereafter, until Tenant's receipt
of a subsequent Tax Statement from Landlord, Tenant shall pay to Landlord an
amount equal to one-twelfth (1/12th) of Tenant's Tax Payment as shown on such
Tax Statement.
If there shall be any change in Taxes for any Tax Year, Landlord may
furnish a revised Tax Statement for such Tax Year, and Tenant's Tax Payment for
such Tax Year shall be adjusted in the same manner as provided in the preceding
sentence.
(3) Tenant shall also pay to Landlord upon demand, as
Additional Rent, the full amount of any occupancy tax or rent tax now in effect
or hereafter enacted, if payable by Landlord in the first instance or hereafter
required to be paid by Landlord.
C. Each Tax Statement furnished by Landlord shall be accompanied by a
copy of the tax bill upon which same is based, and shall be conclusive and
binding upon Tenant unless (i) within thirty (30) days after receipt of such Tax
Statement, Tenant shall pay the amount shown on such Tax Statement and (ii)
within thirty (30) days after the receipt of such Tax Statement, Tenant shall
notify Landlord that it disputes the correctness of the Tax Statement,
specifying the particular respects in which the Tax Statement is claimed to be
incorrect. If the dispute shall be determined in Tenant's favor, the amount of
Tenant's overpayment of Additional Rent resulting from compliance with the Tax
Statement shall be credited by Landlord against the next succeeding installments
of Additional Rent payable by Tenant pursuant to this Paragraph 6 (or, if after
the expiration or termination of this Lease, shall be refunded to Tenant).
D. If the Commencement Date of the term of this Lease is not the first
day of a Tax Year, or if the date of any expiration or termination of this Lease
(except for a termination due to Tenant's default), whether or not same is the
Expiration Date or another date prior or subsequent thereto, is not the last day
of a Tax Year, the Tax Payments shall be pro-rated upon the number of days of
the term within the applicable Tax Year.
E. If as a result of any application or proceeding brought by or on
behalf of Landlord for reduction in the assessed valuation of the Building
affecting any Tax Year there shall be a decrease in Taxes for the Tax Year,
Landlord's statement next following such decrease shall include an adjustment
for such Tax Year reflecting Tenant's proportionate share of such decrease in
Taxes incurred by Landlord in connection with the application or proceeding to
reduce the taxes.
PARAGRAPH 7 - OPERATING EXPENSE ("OE").
A. For the purposes of this Article 7:
The term "Operating Expenses" ("OE") shall mean all costs and expenses
(and taxes thereon, if any) paid or incurred by Landlord or on behalf of
Landlord for 80 Grasslands Road, Greenburgh, New
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York 10523 (the "Building") with respect to the operation, repair, safety,
cleaning, management, security and maintenance of the Building, the land on
which the Building is located, building equipment, sidewalks, plazas, curbs and
other areas adjacent to the Building and with respect to the services provided
tenants, including without limitation; (i) salaries, wages and bonuses paid to,
and the cost of any hospitalization, medical, surgical, union and general
welfare benefits (including group life insurance), any pension, retirement or
life insurance plan and other benefit or similar expense relating to employees
of Landlord engaged in the operation, repair, safety, management, security or
maintenance of the Real Property and the building equipment or in providing
services to tenants (ii) social security, unemployment and other payroll taxes,
the cost of providing disability and workmen's compensation coverage imposed by
any legal requirements, union contract or otherwise with respect to said
employees; (iii) the cost of electricity, gas, oil, steam, water, air
conditioning and other fuel and utilities; (iv) the cost of casualty, rent,
liability, fidelity, plate glass and any other insurance; (v) the cost of
painting public areas of the Building and of all building supplies, tools,
materials and equipment; (vi) the cost or rental of all building supplies,
tools, materials and equipment; (vii) the cost of uniforms, work clothes and dry
cleaning; (viii) guard, watchman or other security personnel, service or system,
if any; (ix) reasonable management fees, or if no managing agent is employed by
Landlord, a sum in lieu thereof; (x) reasonable charges of independent
contractors performing work included within this definition of Operating
Expenses; (xi) telephone and stationery; (xii) reasonable legal, accounting and
other professional fees and disbursements incurred in connection with the
operation and management of the Building, including real estate tax counsel;
(xiii) reasonable association fees and dues; (xiv) decorations; (xv)
depreciation of hand tools and other movable equipment used in the operation,
repair, safety, management, security or maintenance of the Buildings; and (xvi)
landscaping; provided, however, that the foregoing costs and expenses shall
exclude or have deducted from them, as the case may be:
(a) expenditures for capital improvements, additions or alterations
other than those which under generally applied real estate practice are expenses
or regarded as deferred expenses and other than capital expenditures made by
reason of legal requirements or insurance requirements, (provided that if
Landlord is a self-insurer with respect to the area of capital improvement at
issue, then the insurance requirements shall be those that commonly and usually
are applied by other insurance companies with respect to buildings of like
kind), in any of which cases the cost thereof shall be included in Operating
Expenses for the calendar year in which the costs are incurred and subsequent
calendar years (provided Landlord shall have included similar costs incurred
during or prior to Landlord's Base Operating Year in calculating the Operating
Expense for Landlord's Base Operating Year), on a straight-line basis, amortized
over an appropriate period, with an interest factor equal to the Prime Interest
Rate, at the time of Landlord's having made said expenditure, to the extent that
the said capital cost, on an amortized basis, plus said interest exceeds the
depreciation and interest available to Landlord for the said capital improvement
on Landlord's tax returns.
(b) amounts received by Landlord through proceeds of insurance;
(c) cost of repairs or replacements incurred by reason of fire or other
casualty or condemnation to the extent Landlord is compensated therefor;
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(d) advertising and promotional expenditures and tenant inducement
costs;
(e) costs incurred in performing work or furnishing services for any
tenant (including Tenant), whether at such Tenant's or Landlord's expense, to
the extent that such work or service is in excess of any work or service that
Landlord is obligated to furnish at Landlord's expense;
(f) depreciation, except as provided above;
(g) brokerage commissions;
(h) Taxes;
(i) the cost of electricity (for other than general building purposes)
furnished to the Demised Premises or any other space leased to tenants, as
reasonably estimated by Landlord.
(j) refinancing costs, and mortgage interest and amortization payments.
(k) costs incurred in performing work or furnishing services for any
tenant to the extent that Landlord has received compensation therefor from the
benefiting tenant.
(l) any and all costs arising from the presence of hazardous substances
or waste in or about the Building or Land, including, without limitation,
asbestos-containing material, hydrochlorofluororcarbons and chlorofluorocarbons,
and hazardous substances or waste in the ground water or soil, so long as not
placed in the Demised Premises or on the Land by Tenant.
(m) costs (including, without limitation, attorneys fees and costs of
settlement, judgements and payments in lieu thereof) arising from actual or
potential claims, disputes or litigation (including with tenants) relating to
Landlord and/or the Building and not in connection with the operation and
management of the Building.
(n) any costs for goods and/or services representing an amount paid to
any person, firm, corporation or other entity related to Landlord which is in
excess of the fair market value of such goods and/or services.
(o) bad debt expenses.
(p) fines, penalties, late payment charges, interest and any other
costs due to the violation by Landlord or any other tenant of the terms and
conditions of any lease of space in the Building.
(q) costs necessitated by or resulting from the gross negligence or
willful misconduct of Landlord, its vendors, agents, employees and/or
independent contractors.
(r) Landlord's general corporate overhead and general administrative
expenses.
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(s) any ground lease rental.
OE shall be "net" only, and for that purpose shall be reduced by the
amounts of any cash reimbursements, refunds or credits received by Landlord (net
of the reasonable OE of obtaining the same, if any) with respect to any item of
cost that is included in OE, other than reimbursements by other tenants similar
to those required of Tenant. No item of expense shall be included in or deducted
from OE more than once under any circumstances. Landlord shall prorate all bills
for services rendered to the Building and to any other property owned by
Landlord.
If Landlord shall purchase any item of capital equipment or make any
capital expenditure, improvements, additions or alterations which have the
effect of reducing the expenses which would otherwise be included in operating
Expenses, then the costs of such capital equipment or capital expenditure are to
be included in Operating Expenses for the calendar year in which the costs are
incurred and subsequent calendar years, on a straight-line basis, to the extent
that such items are amortized over such period of time as Landlord reasonably
estimates such savings or reductions in operating Expenses are expected to equal
Landlord's costs for such capital equipment or capital expenditure, with an
interest factor equal to the Prime Interest Rate at the time of Landlord's
having made said expenditure, to the extent that the said capital cost, on an
amortized basis, plus said interest, exceeds the depreciation and interest
available to Landlord for said capital equipment or expenditure on Landlord's
tax returns. If Landlord shall lease any items of capital equipment designed to
result in savings or reductions in expenses which would otherwise be included in
operating Expenses, then the rentals and other costs paid pursuant to such
leasing shall be included in Operating Expenses for the calendar year in which
they were incurred.
If during the period for which OE or Base OE Charges are being
computed, Landlord is not for all or any part of such period furnishing any
particular work or service (the cost of which if performed by Landlord would be
included in OE or Base OE Charge) with respect to a portion of the Building
occupied, or intended for occupancy by a tenant because (i) such portion is not
occupied by a tenant or (ii) Landlord is not obligated to perform such work or
service in such portion, then the amount of OE or Base OE Charge, as the case
may be, for such period shall be deemed, for the purposes of this Paragraph 7,
to be increased by an amount equal to the additional OE or Base OE Charge, as
the case may be, which would reasonably have been incurred during such period by
Landlord if Landlord had at its own expense furnished such work or service to
the greater of (a) 95% of the number of square feet of rentable area in the
Building or (b) the number of square feet of rentable area occupied by tenants
in the Building during such period provided, that in no event shall Landlord
collect for any OE Year, in total, from Tenant and other tenants of the
Building, an amount greater than 100% of the actual OE for such OE Year.
(2) "Base OE Charge" shall mean OE charges for the fiscal period from
March 1, 1996 through March 1, 1997.
(3) "OE Year" shall mean the twelve (12) month period commencing March
1st of each year, except that with respect to 1995, October 1, 1995 - February
28, 1996 shall
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represent the OE Year.
(4) "Tenant's Proportionate OE Share" shall mean 52%.
B. (1) Commencing March l, 1997 Tenant shall pay as Additional
Rent for each OE Year, all or any portion of which shall be within the term of
this Lease, a sum ("OE Payment") equal to the product obtained by multiplying
(i) Tenant's Proportionate OE Share by (ii) the amount by which OE for such OE
Year exceeds the Base OE Charge.
(2) Before or after the start of each OE Year during the Term,
Landlord shall furnish to Tenant a written statement ("OE STATEMENT") setting
forth (i) the OE for such OE Year, and (ii) a computation showing the OE Payment
due by Tenant on account of such OE Year. Commencing with the delivery of an OE
Statement for the applicable OE Year and on the first day of each succeeding
month, until the delivery of a new or revised OE Statement, Tenant shall pay to
Landlord, as Additional Rent, together with Tenant's payment of Minimum Rent, an
amount equal to one-twelfth (1/12th) of Tenant's OE Payment as shown on the OE
Statement. Promptly after an OE Statement is furnished to Tenant, or together
therewith, Landlord shall notify Tenant if the installments of Tenant's OE
Payments previously paid on account of the OE Year which is the subject of the
OE Statement, were greater or less than the installments of Tenant's OE Payment
which Tenant was required to pay on account of such OE Year, and (A) if there
shall be a deficiency, Tenant shall pay the amount thereof within ten (10) days
after demand therefor, or (B) if there shall have been an overpayment, Landlord
shall credit the amount thereof against any subsequent payment(s) payable by
Tenant under this subsection (2) (or, if after the expiration or termination of
this Lease, refund the amount thereof to Tenant), and (iii) on the first day of
the month following the month in which the OE Statement is furnished to Tenant
and monthly thereafter, until Tenant's receipt of a subsequent OE Statement from
Landlord, Tenant shall pay to Landlord an amount equal to one twelfth (1/12th)
of Tenant's OE Payment as shown on such OE Statement.
If there shall be any change in OE for any OE Year, Landlord may
furnish a revised OE Statement for such OE Year, and Tenant's OE Payment for
such OE Year shall be adjusted in the same manner as provided in the preceding
sentence.
C. Each OE Statement furnished by Landlord shall be accompanied by a
copy of the OE bills upon which same is based, and shall be conclusive and
binding upon Tenant unless (i) within thirty (30) days after receipt of such OE
Statement, Tenant shall pay the amount shown on such OE Statement and (ii)
within sixty (60) days after the receipt of such OE Statement, Tenant shall
notify Landlord that it disputes the correctness of the OE Statement, specifying
the particular respects in which the OE Statement is claimed to be incorrect. If
the dispute shall be determined in Tenant's favor, the amount of Tenant's
overpayment of Additional Rent resulting from compliance with the OE Statement
shall be credited by Landlord against the next succeeding installments of
Additional Rent payable by Tenant pursuant to this Paragraph 7 (or, if after the
expiration or termination of this Lease, shall be refunded to Tenant).
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D. If the date of any expiration or termination of this Lease (except
for a termination due to Tenant's default), whether or not same is the
Expiration Date or another date prior or subsequent thereto, is not the last day
of an OE Year, the OE Payments shall be pro-rated upon the number of days of the
term within the applicable OE Year.
PARAGRAPH 8 - TENANT'S IMPROVEMENT AND ALTERATIONS.
A. Tenant shall not make any Tenant's Improvements (as hereinafter
defined) to the Demised Premises without Landlord's prior written consent, which
consent shall not be unreasonably withheld or delayed (except as may otherwise
be provided below). As used herein, "TENANT'S IMPROVEMENTS" shall include all
work required to be done in preparing the Demised Premises so that it may be
operated for business with the public (other than Landlord's work as specified
in Exhibit C), as well as all alterations, decorations, installations, additions
or improvements to the Demised Premises occurring after the Commencement Date of
this Lease. All such Tenant's Improvements shall be done pursuant to plans and
specifications approved by Landlord (which approval shall not be unreasonably
withheld or delayed), shall be completed at Tenant's full cost and expense,
shall comply with all applicable governmental rules and regulations, shall be
done only by contractors, sub-contractors and mechanics approved by Landlord,
which approval shall not be unreasonably withheld or delayed; shall be done in a
first class manner to Landlord's reasonable satisfaction and shall be done in a
manner which will assure labor harmony at the site. As a condition precedent to
Landlord's consent to the making by Tenant of such Tenant's Improvements to the
Demised Premises, Tenant agrees to obtain and deliver to Landlord written and
unconditional waivers of mechanics' liens upon the real property in which the
Demised Premises are located, for all work, labor and services to be performed
and materials to be furnished in connection with such work, signed by all
contractors, materialmen and laborers to become involved in such work.
Notwithstanding the foregoing, if any mechanics' lien is filed against the
Demised Premises or Landlord's Building for work claimed to have been done for,
or materials claimed to have been furnished to, Tenant, it shall be discharged
by Tenant within thirty (30) days thereafter, at Tenant's expense, by filing the
bond required by law, or payment or otherwise. If Tenant shall fail to so
discharge any such lien within such thirty (30) day period, Tenant shall be in
default hereunder and Landlord shall have the right, but not the obligation, to
discharge such lien, by payment, bond or otherwise, and the actual cost thereof
shall be charged to Tenant, and such sum due Landlord shall be deemed Additional
Rent automatically upon the payment or the posting of a bond or otherwise by
Landlord and shall be paid by Tenant promptly upon being billed therefor.
Landlord shall not be liable for any failure of any building facilities or
services caused by alterations, installations, and/or additions by Tenant, and
Tenant shall promptly correct any such failure. In the event Tenant shall not
promptly correct same after notice and the lapse of ten (10) days, Landlord may
make such correction and charge Tenant for the reasonable cost thereof. Such sum
due Landlord shall be deemed Additional Rent and shall be paid by Tenant
promptly upon being billed therefor.
B. Prior to commencing any work pursuant to the provisions of Paragraph
8, Tenant will furnished Landlord:
(1) copies of all governmental permits and authorizations
which are required in
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connection with such work;
(2) final plans and specifications for all such work, which
plans, and specifications shall be subject to Landlords written approval, and
which approval shall not be unreasonably withheld or delayed;
(3) a certificate evidencing that Tenant (or Tenant's
contractors) has (have) procured workmen's compensation insurance covering all
persons employed in connection with the work who might assert claims for death
or bodily injury against Landlord, Tenant or Landlord's Building; and
(4) such additional personal injury and property damage
insurance as Landlord may reasonably require because of the nature of the work
to be done by Tenant.
C. In the event that Tenant engages in the preparation of food or baked
goods or engages in the use or storing of inflammable or combustible material,
Tenant shall install chemical extinguishing devices (such as ansul) which would
be required and approved by the fire insurance rating organization and shall
keep these devices under service as required by the fire insurance rating
organization; and Tenant shall also install a gas cutoff, if gas is used in the
Demised Premises. If Tenant fails to install said installations and subscribe to
the servicing of such installations after notice and the lapse of ten (10) days,
Landlord shall have the right to enter the Demised Premises to make necessary
installations and charge the reasonable cost of such installations to Tenant as
Additional Rent.
D. All Tenant's Improvements upon the Demised Premises and any
replacements therefor made by either party, including all paneling, decorations,
partitions, railing, mezzanine floors, galleries and the like, affixed to the
realty so that such items cannot be removed without injury to the Building
shall, unless Landlord elects otherwise (which election shall be made by giving
written notice to Tenant), at the time Landlord approves such Tenant
Improvements become the property of Landlord and shall remain upon, and be
surrendered with the Demised Premises as a part thereof at the termination of
this Lease, without compensation to the Tenant. In the event such Tenant
Improvements may be removed by Tenant, Tenant shall repair and restore, and save
Landlord harmless from, all damages to the Demised Premises caused by such
removal. Any such Tenant Improvements not so removed by Tenant shall be deemed
abandoned by Tenant and shall become the property of Landlord and shall remain
upon and be surrendered with the Demised Premises as a part thereof at the
termination of this Lease, without compensation to Tenant.
E. Where furnished by or at the expense of Tenant, all movable
property, furniture, furnishings and trade fixtures including those affixed to
the realty (including any vault) shall remain the property of Tenant and shall
be removed by Tenant at its expense at or any time before the expiration of the
term of this Lease and in case of damage by such removal, Tenant shall repair
such damage.
F. Tenant shall not make structural repairs or changes to the Demised
Premises without first
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obtaining Landlord's prior written consent.
PARAGRAPH 9 - COMPLIANCE WITH INSURANCE REQUIREMENTS.
Tenant shall not do or permit to be done any act or thing upon the
Demised Premises which will invalidate or be in conflict with fire, public
liability or other insurance policies, the notice of which regulations or
ordinance has been given to Tenant, covering Landlord's Building.
Tenant at its sole expense shall comply with all rules, orders,
regulations and requirements of the boards of fire underwriters or other similar
body or authority having jurisdiction to the extent arising from Tenant's
particular use of the Demised Premises, and shall not do or permit anything to
be done, in or upon the Demised Premises, or bring or keep anything therein,
which is prohibited by the fire department or any such boards of fire
underwriters or other body or authority which would increase the rate of fire
insurance applicable to Landlord's Building over that in effect on the
Commencement Date of this Lease. If by reason of failure to comply with the
provisions of this Paragraph 9 the fire insurance rate shall on the Commencement
Date of this Lease or at any time thereafter be higher than it otherwise would
be when occupied for the use permitted by this Lease, then Tenant, upon demand
of Landlord, shall reimburse Landlord, as Additional Rent under this Lease, for
that part of all fire insurance premiums thereafter paid by Landlord which shall
have been charged because of such failure by Tenant.
PARAGRAPH 10 - COMPLIANCE WITH LAW.
Tenant at its sole cost and expense shall provide safe and healthful
working conditions for the employees of Tenant, and Tenant shall comply with all
laws, orders and regulations of Federal, State, County and Municipal Authorities
and with any direction of any duly authorized public officer or officers having
jurisdiction pursuant to law which shall impose any violation, order or duty
upon Landlord or Tenant with respect to the Demised Premises arising from
Tenant's particular use or occupancy thereof. Landlord shall comply with all
other laws, orders and regulations, and shall rectify all conditions due to
hazardous or toxic substances.
PARAGRAPH 11 - SERVICES.
As long as this Lease is in effect:
A. The Demised Premises will be serviced by at least one elevator at
all times. The elevators shall be operated by automatic control or by manual
control, at Landlord's option, or by a combination of both such methods.
B. Landlord shall, through the air conditioning system of the Building,
furnish to the Demised Premises on business days from 8:00 a.m. to 6:00 p.m. air
cooling, ventilation and/or heating, in accordance with applicable law and
normal standards for first class office buildings in Greenburgh, New York.
Sundays and such other state or national holidays (herein called "Holidays")
listed on the Rules and Regulations of the Building, as they may be reasonably
revised by Landlord from time to
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time, shall not be deemed business days for the purposes of this sub-paragraph,
but to the extent Tenant requires air cooling, ventilation and/or heating on
those days, Landlord shall provide it as required, in accordance with
subparagraph D, below.
C. Landlord will maintain the air conditioning, heating, ventilating,
electrical, plumbing, mechanical and other building systems in a manner
befitting a first-class building and will use all reasonable care to keep the
same in proper and efficient operating condition.
D. Landlord will provide after-hour heating and air conditioning and
the other services specified herein (including access) so long as Tenant makes
requests therefor as provided herein. Tenant shall give not less than twelve
(12) hours advance notice to Landlord of Tenant's need for after-hours heating
or air conditioning.
E. In the event that Tenant requires water to be furnished in addition
to the hot and cold water to be supplied by Landlord for ordinary lavatory,
cleaning and drinking purposes, Landlord shall supply the same and Tenant shall
pay the cost thereof as measured by a meter or meters installed at Tenant's
expense.
F. Landlord agrees to provide, except on Saturday, Sundays and
Holidays, in the Demised Premises, all other services set forth in this Lease
and to keep the areas owned by Landlord adjacent to the Building free from snow,
ice and rubbish. Landlord also agrees to provide cleaning and janitorial
services consistent with services offered in similar office buildings located in
Greenburgh, New York.
G. Landlord shall make available to Tenant, at no additional cost to
Tenant, not less than 150 unassigned parking spaces in the Landlord's parking
area, 13 of which shall be in the Building's garage. Landlord reserves the right
to reasonably change from time to time the location of such parking areas and
the rules and regulations applicable thereto.
H. Landlord shall not be liable to anyone for the cessation of any
electric service rendered to the Demised Premises or to Landlord's Building as
agreed to by the terms of this Lease including any consequential damages to
Tenant, due to any cause beyond Landlord's reasonable control.
I. (a) Notwithstanding any provision of this Lease to the contrary, if
Tenant shall not be provided any Essential Service (as defined in this
Paragraph) for a period of five (5) consecutive business days and, as a result
thereof, Tenant is unable to use all or substantially all of the Demised
Premises for the conduct of business, then the rent shall abate as of the
commencement of such five (5) day period through the day preceding the day on
which the service is substantially restored. If Tenant shall not be provided any
Essential Service for a period of forty-five (45) consecutive days and, as a
result thereof, Tenant is unable to use all or substantially all of the Demised
Premises for the conduct of business, then Tenant may, at Tenant's option,
terminate the Lease, upon ten (10) days written notice to Landlord.
(b) "Essential Service" shall be deemed to mean and be limited
to reasonable toilet
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facilities, heating and air conditioning (as the season may then require),
electric power for the service of at least one passenger elevator, to the extent
such services are required to be furnished by Landlord under this Lease.
PARAGRAPH 12 - LIABILITY INSURANCE.
Tenant shall, at Tenant's own cost and expense, secure and maintain
General Liability Insurance written on a so-called "Comprehensive" General
Liability Form (or on a combination of a basic policy and umbrella which provide
the same coverage) with bodily injury limits of not less than $2,000,000
per/person, $4,000,000 per/occurrence, and for a property damage limit of not
less than $1,000,000 per/occurrence with Landlord as a named insured and Tenant
shall furnish to Landlord a certificate of the liability insurance carrier of
Tenant evidencing coverage of Tenant contractual obligation to indemnify
Landlord under Paragraph 13 of this Lease. Tenant shall deliver or cause to be
delivered to Landlord a certificate or certificates of General Liability
Insurance effected by Tenant under the terms hereof. Such certificates shall
provide that in the event of termination or material change in coverage,
Landlord shall be given thirty (30) days' advance notice in writing, sent by
mail to the address of Landlord. All insurance shall be with companies licensed
to do business in the State of New York and subject to the reasonable approval
of Landlord.
PARAGRAPH 13 - LIABILITY OF LANDLORD.
Landlord and its agents shall not be liable for any damage to property
of Tenant or of others entrusted to employees of Landlord's Building, nor for
the loss or damage to any property of Tenant by theft or otherwise. Landlord and
its agents shall not be liable for any injury or damage, consequential or
otherwise, to persons or property resulting from fire, explosion, falling
plaster, steam, gas, electricity, water, rain or snow or leak from any part of
Landlord's building or from the pipes, appliances or plumbing works or from the
roof, street or sub-surface or from any other place or by dampness or by any
other cause of whatsoever nature, unless caused by or due to the gross
negligence or willful misconduct of Landlord, its agents, contractors, servants
or employees.
Tenant shall give immediate notice to Landlord in case of accidents in
the Demised Premises or in Landlord's Building or of defects therein or in any
fixtures or equipment. Tenant shall indemnify and save harmless Landlord from
and against any and all liability and damages, and from and against any and all
suits, claims, and demands of every kind and nature, including, but not limited
to, reasonable counsel fees and expenses by or on behalf of any person, firm,
association or corporation, arising out of or based upon an accident, injury or
damage, however occurring, which shall or may happen during the period between
the date upon which the Demised Premises are made available to Tenant for the
making of Tenant's Improvements and the expiration of the term hereof, on or
about the Demised Premises, and from and against any matter or thing growing out
of the condition, maintenance, repair, alteration, use, occupation or operation
of the Demised Premises by Tenant, unless caused by or due to the gross
negligence or willful misconduct or breach of Lease by Landlord.
Anything to the contrary herein notwithstanding, there shall be
absolutely no personal liability
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on the part of the Landlord (or any partner, trustee, shareholder, officer or
any individual or entity in any capacity associated with, employed by or under
the supervision of Landlord) to the Tenant with respect to any of the terms,
covenants and conditions of this Lease and Tenant shall look solely to the
equity of the Landlord or any successor in interest to the Landlord in the fee
or leasehold estate of the Landlord, as the case may be, for the satisfaction of
each and every remedy of the Tenant in the event of any breach by the Landlord
or by any successor in interest to the Landlord of any of the terms, covenants
and conditions of this Lease to be performed by the Landlord. Such exculpation
of personal liability is and shall be absolute and without any exception
whatsoever.
PARAGRAPH 14 - REPAIRS.
A. Tenant shall take good care of the interior of the Demised Premises
and the fixtures and appurtenances therein, including damage to plate or window
glass and at its sole cost and expense make promptly, as and when needed, all
nonstructural repairs and replacement thereof to preserve them in good condition
and working order, except to the extent same is caused by the negligence and/or
willful act of Landlord, its employees, servants, agents or contractors or by
the failure of Landlord to comply with its responsibilities hereunder.
B. Landlord shall make all structural repairs and replacements to the
Demised Premises and Landlord's Building and all repairs and replacements,
structural and otherwise, necessary to keep in good order and repair the common
areas (including the public halls and stairways) and the exterior of Landlord's
Building (including all parts of the heating, plumbing, electrical and air
conditioning systems of the Building), except those installed by Tenant within
the Demised Premises. Landlord reserves the right to enter the Demised Premises
by itself or its authorized agents, servants or employees at reasonable times,
upon reasonable notice, for the purpose of repairing, at Landlord's sole cost
and expense, any utility equipment of any kind in or upon the Demised Premises
which services other portions of the Landlord's Building; provided that such
repairs shall be made in a manner which minimizes interference with Tenant and
its use of the Demised Premises and as long as same does not result in any
additional costs and expenses to the Landlord. Any repairs and replacements
required to be made to the structural, exterior and public portions of the
Building which may be necessitated as a result of the negligence of Tenant, its
agents or employees shall be made by Landlord at the sole cost and expense of
Tenant.
C. All repairs, restorations or replacements by either party shall be
of a first class quality and done in a good workmanlike manner.
PARAGRAPH 15 - DESTRUCTION, FIRE OR OTHER CAUSES.
A. If Landlord's Building is totally damaged or is rendered wholly
untenantable by fire or other cause, and cannot reasonably be repaired by
Landlord within one hundred eighty (180) days of work, during normal working
hours, or if the Building shall be so damaged that Landlord cannot reasonably
restore the same, but must demolish it or rebuild it, which Landlord may in its
sole discretion
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determine, then Landlord or Tenant may, within sixty (60) days after such
casualty, give to the other party notice in writing of its intention to
terminate this Lease, and thereupon the term of this Lease shall expire by lapse
of time upon the tenth (10th) day after such notice is given, and Tenant shall
vacate the Demised Premises and surrender the same to Landlord. Upon termination
of this Lease under this Paragraph 15, Tenant's liability for rent shall cease
as of the day following the casualty or when Tenant ceases to do business in the
Demised Premises, whichever date is later. If neither party terminates this
Lease pursuant to this Paragraph, Landlord shall repair or rebuild the Demised
Premises with reasonable diligence.
B. If the Demised Premises or Landlord's Building shall be partially
damaged by fire or other casualty, the damages to Landlord's Building and to the
Demised Premises shall, to the extent that they were originally constructed and
furnished by the Landlord, be promptly repaired by and at Landlord's expense and
the damage to all of Tenant's fixtures and other improvements installed by
Tenant shall be promptly repaired by and at the expense of Tenant and the rent
until such repairs shall be made, shall be apportioned according to the part of
the Demised Premises which is tenantable by Tenant until the Landlord has made
the repairs required of Landlord, provided, however, that if such repairs cannot
be made within 180 days, Tenant shall have the right to terminate this Lease in
accordance with the procedures specified in Paragraph A above.
C. Each of Landlord and Tenant hereby releases the other from any and
all liability or responsibility (to the releasor or anyone claiming through or
under the releasor by way of subrogation or otherwise) for any loss or damage to
property of the releasor or any claiming through or under the releasor, to the
extent covered by fire or any of the extended coverage insurance, additional
extended coverage insurance or supplementary contract casualties, even if such
fire or other casualty shall have been caused by the fault or negligence of the
other party, or anyone for whom such party may be responsible. The provisions of
this subparagraph shall not apply if the application hereof is not permitted
under the terms of the releasing party's casualty insurance policy.
D. Tenant agrees that Landlord shall not be liable for any damage to
personal property in the Demised Premises or to Tenant arising from any act or
neglect of any other tenant or occupant in Landlord's Building, from rain or
snow or from the bursting, overflowing or leakage of water, steam or gas pipes
or defect in the lighting system or from any act of neglect of any other tenant
or occupant in Landlord's Building.
PARAGRAPH 16 - EMINENT DOMAIN.
In the event the whole of the Demised Premises shall be acquired or
condemned by eminent domain for any public or quasipublic use or purpose, then
and in that event, the term of this Lease shall cease and terminate from the
date of title vesting in such proceeding or the termination of the right to
possession, whichever is earlier. In the event any substantial part thereof or
of Landlord's Building or of the structure of which Landlord's's Building is a
part is so acquired or condemned as to render the Demised Premises untenantable
or to materially and adversely effect Tenant's use thereof, or in the event that
a part of Landlord's Building, other than the Demised Promises, shall be so
condemned or taken and
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if in the opinion of the Landlord, the Building should be restored in such way
as to alter the Demised Premises materially, the Landlord or Tenant may
terminate this Lease and the term and the estate hereby granted by notifying the
other party in writing of such termination and this Lease and the term and
estate, hereby granted shall expire on the date specified in the notice of
termination not less than thirty (30) days after the giving of such notice, as
fully and completely as if such date were the date hereinbefore set forth for
the expiration of the term of this Lease, and the rent hereunder shall be
apportioned as of said date. Tenant shall have no claim against Landlord for the
value of the unexpired term of said Landlord, nor a claim to any part of an
award in such proceeding and rent shall be adjusted and paid to the date of such
termination. Nothing herein contained shall be deemed to affect or be in
derogation of any right or rights of Tenant against the condemning authority to
claim and recover damages, if any, to or for the taking of its movable fixtures
and equipment and improvements which are not affixed to Landlord's Building or
expenses or removal or relocation provided that any such damages awarded to
Tenant shall not reduce the award payable to Landlord.
PARAGRAPH 17 - ASSIGNMENT - SUBLET.
Tenant covenants and agrees that neither this Lease nor the term or
estate hereby granted nor any part hereof or thereof will be assigned,,
mortgaged, pledged, encumbered, nor sublet or otherwise transferred (herein
referred to as "Transfer") and that neither the Demised Premises, nor any part
hereof, will be encumbered in any manner without the prior written consent of
the Landlord, which consent shall not be unreasonably withheld or delayed. The
proposed transferee shall promptly execute, acknowledge and deliver to the
Landlord an agreement (in form and substance reasonably satisfactory to the
Landlord) whereby transferee shall assume and agree to perform and be bound by
all the covenants, agreements, terms and conditions set forth in this Lease on
the part of the Tenant to be performed. Tenant and Guarantor, if any, covenants
and agrees that notwithstanding such Transfer or acceptance of rent or
additional rent by Landlord from any transferee, Tenant and Guarantor shall
remain fully liable for the payment of the fixed rent and additional rent due
and to become due hereunder and for the performance of all the covenants,
agreements, terms and provisions contained in this Lease on the part of the
Tenant to be performed, and such Transfer shall expressly so indicate.
If this Lease be transferred, Landlord may, after default by Tenant,
collect rent from the transferee and apply the net amount collected to the rent
herein reserved, but no such Transfer or collection shall be deemed a waiver by
Landlord of any of Tenant's covenants contained in this paragraph or the
acceptance of the transferee as Tenant, or a release of Tenant from further
performance by Tenant of the covenants on the part of the Tenant herein
contained. Notwithstanding anything hereinbefore contained, in the event that
Tenant desires Landlord's consent to a Transfer of the Demised Premises, Tenant,
by notice in writing, shall notify Landlord of the name of the proposed
transferee, such information as to the proposed transferee's financial
responsibility and standing in the community as Landlord may reasonably require
and of the covenants, agreements, terms and conditions contained in the proposed
Transfer.
Anything herein contained to the contrary notwithstanding, Landlord
may, as a condition to its consent to any transfer, require that the proposed
transferee pay to Landlord reasonable expenses, legal
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fees and disbursements.
Notwithstanding anything to the contrary contained herein, and after
compliance with the previous requirements stated in this Paragraph 17, if Tenant
wishes to transfer the Premises, Tenant shall give Landlord written notice of
its intention as aforesaid, including any specific information regarding the
proposed transferee and Landlord shall have the right upon receipt of such
notice to terminate this Lease within thirty (30) days after Landlord's receipt
of Tenant's notice. Landlord shall give notice to Tenant of Landlord's election
to terminate this Lease, which termination shall become effective upon the date
the proposed assignment or sublease would have been effective; and, upon such
termination, all of the liabilities of the parties, each to the other, shall
cease and terminate except as to covenants, which survive the termination of
this Lease. Nothing contained herein shall prohibit Landlord from negotiating
directly with the proposed transferee and completing a direct lease therewith.
Upon any such event, Tenant shall be responsible for any brokerage commission
due for such leasing transaction, if Tenant would have been responsible for
brokerage commission pursuant to the proposed sublease.
Tenant is hereby prohibited from subletting the Premises or assigning
this Lease or any part thereof to any existing tenant in the building or tenant
who is in negotiations with Landlord for any space within the building. Landlord
agrees to notify Tenant of any such conflict within five (5) days of its receipt
of Tenant's notice of its intention to sublet or assign pursuant to this
Paragraph 17. Notwithstanding anything to the contrary contained herein, the use
of the Demised Premises pursuant to any transfer shall be limited to general
office use and uses ancillary thereto, but specifically excluding employment
agencies, travel agencies, or any other business that Landlord shall reasonably
determined to be a high traffic use inappropriate for a first class building.
PARAGRAPH 18 - DEFAULT.
A. To the extent permitted by applicable law, this Lease and the term
and estate hereby granted are subject to the limitation that whenever Tenant
shall make an assignment of the property of Tenant for the benefit of creditors,
or any voluntary or involuntary petition for relief shall be filed by or against
Tenant under any chapter of the Federal Bankruptcy Code, any bankruptcy or
insolvency law, or under the provisions of any law of like import, or whenever a
permanent receiver of Tenant or of or for the property of Tenant shall be
appointed, then Landlord (a) at any time after receipt of notice of the
occurrence of any such event, or (b) if such event occurs without the
acquiescence of Tenant, at any time after the event continues for ninety (90)
days, may give Tenant a notice of Landlord's intention to end the term of this
Lease at the expiration of five (5) days from the date of service of such notice
of intention, and upon the expiration of said five (5) day period, this Lease
and the term and estate hereby granted, whether or not the term shall
theretofore have commenced, shall terminate with the same effect as if that day
were the Expiration Date, but Tenant shall remain liable for damages as provided
in Paragraph 18.
If, at any time (a) Tenant shall be comprised of two or more persons,
or (b) Tenant's obligations under this Lease shall have been guaranteed by any
person, or (c) Tenant's interest in this Lease shall have been assigned, the
word "Tenant" as used in this Section shall mean any one or more of the person
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primarily or secondarily liable for Tenant's obligations under this Lease.
If this Lease shall be assumed or assigned by a trustee pursuant to the
provisions of Title 11 of the United States Code ("Bankruptcy Code"), the
trustee shall cure any default under this Lease and shall provide such adequate
assurance of future performance of this Lease as are provided in Section
365(b)(3) of the Bankruptcy Code. If the trustee does not cure said defaults and
provide Adequate Assurances within sixty (60) days after there has been an order
for relief pursuant to the Bankruptcy code, this Lease shall be deemed rejected
and Landlord shall have no further liability hereunder to Tenant or any person
claiming through or under Tenant, and if Tenant or any such person is in
possession, Tenant or any such person shall forthwith quit and surrender the
Demised Premises to Landlord. If this Lease shall be so canceled or terminated,
Landlord, in addition to the other rights and remedies of Landlord under any
provision of this Lease or under any statute or rule of law, may retain as
liquidated damages any Minimum Rent, Additional Rent or monies received by
Landlord from Tenant or others on behalf of Tenant.
B. If any one or more of the following events (herein sometimes called
"events of default") shall happen:
(1) if default shall be made in the due and punctual payment
of any minimum Rent, or Additional Rent payable under this Lease or any part
thereof, when and as the same shall become due and payable, and said default
shall continue for ten (10) days after notice from Landlord (2) if default shall
be made by Tenant in the performance or compliance with any of the agreements,
terms, covenants or conditions in this Lease provided other than those referred
to in the foregoing subparagraph B(1) for a period of thirty (30) days after
notice from Landlord to Tenant specifying the items in default, or in the case
of a default or a contingency which cannot with due diligence be cured within
said twenty (20) day period, Tenant fails to proceed within said thirty (30) day
period to cure the same and thereafter to prosecute the curing of such default
with due diligence (it being intended in connection with a default not
susceptible of being cured with due diligence within said thirty (30) day period
that the time of Tenant within which to cure the same shall be extended for such
period as may be necessary to complete the same with all due diligence); then
and in either such event Landlord at any time thereafter, and while any such
event of default is continuing, may give written notice to Tenant specifying
such event of default or events of default and stating that this Lease and the
term hereby demised shall expire and terminate on the date specified in such
notice, which shall be at least five (5) days after the giving of such notice,
and upon the date specified in such notice this Lease and the term hereby
demised and all rights of Tenant under this Lease, including any renewal
privileges whether or not exercised, shall expire and terminate, and Tenant
shall remain liable as hereinafter provided.
C. Upon any such expiration or termination of this Lease, Tenant shall
quit and surrender the Demised Premises to Landlord, and Landlord, upon or at
any such expiration or termination, may without further notice enter upon and
reenter the Demised Premises and possess and repossess itself thereof, by force,
summary proceeding, ejectment or otherwise, and may dispossess Tenant and remove
Tenant and all other persons and property from the Demised Premises and may
have, hold and enjoy the Demised Premises and the right to receive all rental
income of and from the same.
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D. If this Lease shall be terminated pursuant to this Paragraph 12, or
by summary proceedings or otherwise, or if the Demised Premises or any part
thereof shall be abandoned by the Tenant, Landlord may in its own name, but as
agent for Tenant if this Lease not be terminated, or if this Lease be
terminated, in its own behalf, relet the Demised Premises or any part hereof, or
said premises, with additional premises for such term or terms (which may be
greater or less than the period which would otherwise have constituted the
balance of the term of this Lease) and on such conditions (which may include
concessions or free rent and alterations of the Demised Premises) as Landlord,
in its uncontrolled discretion, may determine and may collect and receive the
rents therefor. Landlord shall in no way be responsible or liable for any
failure to relet the Demised Premises or any part thereof, or of any failure to
collect any rent due upon such reletting.
PARAGRAPH 19 - REMEDIES OF LANDLORD.
In case of any such default, reentry, expiration and/or
dispossess by summary proceedings or otherwise, provided in Paragraph 18 of this
Lease:
(a) the Minimum Rent and Additional Rent shall become due
thereupon and be paid up to the time of such reentry, dispossess and/or
expiration, together with such reasonable expenses as Landlord may incur for
legal expenses, attorney's fees, brokerage and/or putting the Demised Premises
in good order, or for preparing the same for re-rental;
(b) Landlord may re-let the Demised Premises or any part or
parts thereof, either in the name of Landlord or otherwise, for a term or terms,
which may at Landlord's option be less than or exceed the period which would
otherwise have constituted the balance of the term of this Lease and may grant
concessions or free rent; and/or
(c) Tenant or the legal representative of Tenant shall also
pay Landlord as liquidated damages for the failure of Tenant to observe and
perform said tenant's covenants herein contained, any minimum deficiency
between;
(i) the rent reserved and/or covenanted to be paid
herein; and
(ii) the net amount, if any, of the rents collected
on account of the lease or leases of the Demised Premises for each month of the
period which would otherwise have constituted the balance of the term of this
Lease.
In computing such liquidated damages, there shall be added to the said
deficiency such reasonable expenses as Landlord may incur in connection with the
re-letting, such as legal expenses, attorneys fees, brokerage and for keeping
the Demised Premises in good order or for preparing the same for reletting and
interest on any payments made after the due date computed at fifteen (15%) per
annum (but in no event in excess of the maximum rate permitted by law). Any such
liquidated damages shall be paid in monthly installments by Tenant on the rent
day specified in this Lease and any suit brought to collect the amount of the
deficiency for any month shall not prejudice in any way the rights of
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Landlord to collect the deficiency for any subsequent month by a similar
proceeding. Landlord at its option may make such reasonable alterations,
repairs, replacement and/or decorations in the Demised Premises as Landlord
considers advisable and necessary for the purpose of re-letting the Demised
Premises; and the making of such alterations shall not operate or be considered
to release Tenant from liability hereunder as aforesaid. The inability of
Landlord to re-let the Demised Premises or any part hereof shall not release or
affect Tenant's liability for damages hereunder nor shall Landlord in any event
be liable whatsoever for inability to re-let the Demised Premises. In the event
of a breach or threatened breach by Tenant of any of the covenants or provisions
hereof, Landlord shall have the right of injunction and the right to invoke any
remedy allowed at law or in equity as if re-entry, summary proceedings and other
remedies were not herein provided for. No such expiration or termination of this
Lease shall relieve Tenant of its liability and obligations under this Lease.
Mention in this Lease of any particular remedy shall not preclude Landlord from
any other remedy, at law or in equity.
Notwithstanding anything to the contrary contained within this
Paragraph 19, the damages specified within this provision shall not exceed the
rent and additional rent otherwise payable through to the earliest cancellation
date as specified in the cancellation provision contained in Paragraph 43, plus
Fifty Thousand ($50,000.00) Dollars.
PARAGRAPH 20 - RULES AND REGULATIONS.
To the extent not inconsistent with this Lease, Tenant and Tenant's
servants, employees, agents, visitors and licensees shall observe faithfully,
and comply strictly with, such reasonable Rules and Regulations as Landlord and
its agents, may, from time to time, adopt that are generally applicable to all
tenants. Notice of any rules or regulations shall be given in writing. Nothing
in this Lease contained shall be construed to impose upon Landlord any duty or
obligation to enforce the Rules and Regulations or terms, covenants or
conditions in any other lease, as against any other tenant but Landlord shall
not be discriminatory in the enforcement of said Rules and Regulations. Landlord
shall not be liable to Tenant for violation of the Rules and Regulations by any
other tenant, its servants, employees, agents, visitors or licensees-
PARAGRAPH 21 - NO REPRESENTATIONS BY LANDLORD.
Landlord or Landlord's agents have made no representations or promises
with respect to Landlord's Building or the Demised Premises except as herein
expressly set forth. Landlord represents that as of the date of execution of
this Lease, (i) it has no knowledge of the existence of hazardous or toxic
substances stored or maintained at the Building and (ii) the Building does not
contain any asbestos.
PARAGRAPH 22 - QUIET ENJOYMENT.
Landlord represents and covenants that Landlord has full right, power
and authority to enter this Lease for the term herein granted and Landlord
covenants and agrees with Tenant that upon the Tenant paying the Minimum Rent
and Additional Rent and observing and performing all the terms, covenants and
conditions on Tenant's part to be observed and performed, Tenant may peaceably
and quietly enjoy
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the Demised Premises, free from any interference, molestation or acts of
Landlord or of anyone claiming by, through or under Landlord or anyone else,
subject, nevertheless, to the terms and conditions of this Lease and to any
ground lease, underlying leases and mortgages, as of record appears, and all
modifications thereof.
PARAGRAPH 23 - RIGHT TO EXHIBIT PROMISES.
Landlord reserves the right to enter the Demised Premises and exhibit
same at any reasonable time upon reasonable prior notice to Tenant:
(a) to prospective mortgagees, purchasers and ground lessees; and
(b) to prospective tenants at any reasonable time within one hundred
eighty (180) days before expiration of the terms of this Lease.
PARAGRAPH 24 - SUBORDINATION.
A. This Lease is subject and subordinate to all ground or underlying
leases and to all mortgages which may now or hereafter affect such leases of the
real property of which the Demised Premises form a part, and to all renewals,
modifications, consolidations, replacements and extensions thereof. This clause
shall be self-operative and no further instrument of subordination shall be
required by any mortgagee. In confirmation of such subordination, Tenant shall
execute promptly any reasonable certificate that Landlord may request.
B. Tenant agrees that neither the termination of any ground or
underlying lease nor the foreclosure of Landlord's leasehold interest in the
Land and Building of which the Demised Premises are a part, or the institution
of any suit or proceedings by the Landlord under such ground or underlying lease
or by the holder of any such mortgage, shall by operation of law or otherwise
result in the cancellation or termination of this Lease or the obligations of
Tenant hereunder, and Tenant agrees to attorn and to recognize the landlord
under such ground or underlying lease, or the holder of any such mortgage, as
the case may be, as Tenant's landlord hereunder in the event that such party
shall succeed to Landlord's interest in the Demised Premises provided, however,
that said successor in interest shall not be bound by (i) any payment of rent or
additional rent for more than one month in advance, except prepayments in the
nature of security for the performance by Tenant of Tenant's obligations under
this Lease, or (ii) any amendment or modification of this Lease made without the
consent of the holder of any such mortgage or such successor in interest.
No surrender of such ground lease nor merger of all or any part of the
fee title of Landlord's Building shall result by operation of law or otherwise
in the cancellation or termination of this Lease or the obligations of the
Tenant under this Lease, and Tenant covenants and agrees to attorn to the owner
from time to time of all or any part of the fee title of Landlord's Building
after such surrender or merger.
22
<PAGE> 27
PARAGRAPH 25 - SURRENDER OF THE PREMISES.
Except as otherwise herein provided, at the expiration of the term,
Tenant will peacefully yield up to Landlord the Demised Premises, broom clean,
in as good order and repair as when delivered to Tenant, damage by fire,
casualty, war or insurrection or act upon the part of any governmental
authority, ordinary wear and tear, and damage by the elements and repairs that
are Landlord's obligation excepted. Except as otherwise provided in this Lease,
any property left by Tenant in the Demised Premises shall be deemed abandoned by
Tenant and Landlord at Landlords sole option may keep said property or require
Tenant at Tenant's expense to promptly remove the same from the Demised
Premises.
PARAGRAPH 26 - BROKERAGE
Landlord and Tenant warrant and represent to each other that they have
not dealt with any realtor, broker or agent in connection with the negotiation
of this Lease and agree to indemnify and hold each other harmless from and
against any cost, expense or liability (including, but not limited to, costs of
suit and reasonable attorney's fees) for any compensation, commission or charges
claimed by any other broker with respect to this Lease and the negotiation
thereof.
PARAGRAPH 27 - FORCE MAJEURE.
Landlord and Tenant, respectively, shall not be in default hereunder,
if Landlord, or as the case may be, Tenant, is unable to fulfill or is delayed
in fulfilling any of its obligations hereunder, including, without limitation,
any obligations to supply any service hereunder, if Landlord, or as the case may
be, Tenant, is prevented from fulfilling or is delayed in fulfilling such
obligations by reason of fire or other casualty, strikes or labor troubles,
governmental preemption in connection with a national emergency, shortage of
supplies or materials, or by reason of any rules, or regulation of any
governmental authority, or by reason of the condition of supply and demand
affected by war or other emergency, of any other cause beyond its reasonable
control. Such inability or delay by Landlord or Tenant in fulfilling any of
their respective obligations hereunder shall not affect, impair or excuse the
other party hereto from the performance of any of the terms, covenants,
conditions, limitations, provisions or agreements hereunder on its part to be
performed, nor result in any abatement of Minimum Rent or Additional Rent
payable hereunder.
PARAGRAPH 28 - LEASE STATUS.
Upon request of Landlord, Tenant, within ten (10) days of such request,
will execute and deliver to Landlord an instrument prepared by Landlord stating,
if the same be true, that this Lease is a true and exact copy of the Lease
between the parties hereto, that there are no amendments hereof (or stating what
amendments there may be), that the same is then in full force and effect and
that, to the best of Tenant's knowledge, there are then no offsets, defenses or
counterclaims with respect to the payment of rent reserved hereunder or in the
performance of the other terms, covenants and conditions hereof on the part of
the Tenant to be performed, and that as of such date no default has been
declared hereunder by either party hereto and that the Tenant at the time has no
knowledge of any facts or circumstances which it
23
<PAGE> 28
might reasonably believe would give rise to a default by either party.
PARAGRAPH 29 - HOLDOVER.
After the expiration of the term of this Lease, if Tenant shall
continue in possession thereafter, such possession shall be on a month-to-month
basis upon the same terms of this Lease at the same rental paid during the
preceding expired term until terminated at the end of a month by either party
upon thirty (30) days' advance written notice to the other party.
PARAGRAPH 30 - NOTICES.
All notices, demands and requests under this Lease shall be in writing
and shall be sent by personal delivery or recognized overnight carrier, postage
prepaid, receipt requested, and addressed as follows:
To Tenant: Amscan Inc.
2 Macy Road PO Box 587
Harrison, NY 10528
Attn: John P. Jordan
To Landlord: ACP East LLC
2 Macy Road PO Box 587
Harrison, NY 10528
Attn: John P. Jordan
Either party may, by notice given to the other party, designate a new address to
which notices, demands and requests shall be sent and, thereafter, any of the
foregoing shall be sent to the address most recently designated by such party.
Notices, demands and requests which shall be served upon Landlord or Tenant in
the manner aforesaid shall be deemed to have been served or given for all
purposes under this Lease at the time such notice, demand or request shall be
personally delivered or one (1) business day after delivery to overnight
carrier.
PARAGRAPH 31 - ATTORNMENT.
Tenant shall, if requested by either: (a) a fee or leasehold mortgagee
of the Demised Premises; or (b) the landlord under any ground or underlying
leases which may nor or hereafter affect the Demised Premises at any time, or in
the event any proceedings are brought for the foreclosure or, in the event of
exercising of the power of sale under any mortgage made by the Landlord covering
the Demised Premises, attorn to the purchaser upon any such foreclosure or sale
and recognize such purchaser as the landlord under this Lease.
24
<PAGE> 29
PARAGRAPH 32 - ENTIRE AGREEMENT, ETC.
This Lease and the Riders, if any, and Exhibits attached hereto set
forth the entire agreement between the parties. Any prior conversations or
writings are merged herein and extinguished. No subsequent amendment to this
Lease shall be binding upon Landlord or Tenant, unless same is in writing and
signed by both parties. Submission of this Lease for examination does not
constitute an option for the Demised Premises and becomes effective as a lease
only upon execution and delivery thereof by Landlord and Tenant.
PARAGRAPH 33 - ASSIGNS.
The covenants, conditions, and agreements contained in this Lease shall
bind and inure to the benefit of Landlord and Tenant and their respective heirs,
distributees, executors, administrators, successors and, except as otherwise
provided in this Lease, their assigns.
PARAGRAPH 34 - DEFINITIONS.
The word Landlord as used in this Lease means only the owner for the
time being of Landlord's interest in this Lease. In the event of any assignment
of Landlord's interest in this Lease, the assignor in each such case shall no
longer be liable for the performance or observance of any agreements or
conditions on the part of the Landlord to be performed or observed after the
date of such assignment.
PARAGRAPH 35 - WAIVER OF TRIAL BY JURY.
Landlord and Tenant shall and hereby do waive trial by jury in any
action, proceeding or counterclaim brought by either of the parties hereto
against the other in any matter arising out of or in any way connected with this
Lease, the relationship of Landlord and Tenant, Tenant's use or occupancy of the
Demised Premises, any claim of injury or damage and any emergency or any other
statutory remedy. Tenant shall not interpose any counterclaim or counterclaims
in a summary proceeding or in any action based on non-payment of Minimum Rent or
Additional Rent, unless such claim will otherwise be lost to Tenant.
PARAGRAPH 36 - LATE PAYMENTS.
If Tenant shall fail to pay within ten days any installment or payment
of Minimum Rent or Additional Rent required to be paid hereunder, Tenant shall
pay interest thereon at the lesser of fifteen (15) percent per annum, or the
maximum legal rate then prevailing (taking into account any and all amounts paid
for late payments pursuant to this Lease) from the date on which such
installment or payment is due to the date of payment thereof, and such interest
shall be deemed to be Additional Rent which shall be paid by Tenant promptly
upon being billed therefor.
25
<PAGE> 30
PARAGRAPH 37 - EFFECTS OF WAIVERS OF DEFAULT.
No consent or waiver, express or implied, by Landlord to or of any
breach of any term, covenant or condition of this Lease on the part of Tenant
shall be construed as a consent or waiver to or of any other breach of the same
or any other term, covenant or condition, unless in writing signed by Landlord.
The failure of Landlord to insist in any one or more instances upon the strict
performance of any one or more of the agreements, terms, covenants, conditions
or obligations of this Lease, or to exercise any right, remedy or election
herein contained shall not be construed as a waiver or relinquishment for the
future performance of such one or more obligations of this Lease or of the right
to exercise such election, but the same shall continue and remain in full force
and effect with respect to any subsequent breach, act or omission whether of a
similar nature or otherwise.
PARAGRAPH 38 - LANDLORD'S RIGHT TO CURE DEFAULTS.
Landlord may, but shall not be obligated to cure, at any time, upon ten
(10) days' notice to Tenant, or in the event of an emergency, without notice to
Tenant, any default by Tenant under this Leasee and whenever Landlord so elects,
all costs and expenses incurred by Landlord in curing a default, including,
without limitation, reasonable attorneys' fees and disbursements, shall be paid
by Tenant to Landlord on demand, and shall be recoverable as Additional Rent.
PARAGRAPH 39 - LEGAL PROCEEDINGS.
Tenant and Landlord hereby agree that any legal proceeding with respect
to this Lease may be brought in the State of New York or in the United States
District Court for the district in which the property is located as Tenant or
Landlord may elect. The parties further agree that the Law of the State of New
York will be the prevailing law to be applied with respect to this Lease.
Nothing in this paragraph shall affect Landlord's right to commence legal
proceedings in other jurisdictions in which assets of Tenant are located for the
purpose of enforcing any judgment obtained in any proceeding brought pursuant to
this Lease.
Tenant hereby appoints and authorizes Mr. John P. Jordan, 2 Macy Road,
Harrison, NY 10528 for the purpose of accepting service process for any action
or proceedings commenced pursuant to the terms of this Lease. Service upon such
individual or the Tenant shall be deemed service upon Tenant as if such process
was personally served upon the Tenant.
PARAGRAPH 40 - OPTION TO EXTEND
A. Provided the lease is still in effect, Tenant shall have and is
hereby granted the right and option to extend the term of this lease for an
additional five year term at a minimum rent of One Million, Two Hundred Forty
Three Thousand, Three Hundred Seven Dollars and 40/100 ($1,243,307.40) payable
in monthly installments of One Hundred Three Thousand, Six Hundred Eight Dollars
and 95/100 ($103,680.95), and for an additional five year term at a minimum rent
of One Million, Four Hundred Twenty Nine Thousand, Eight Hundred Three Dollars
and 48/100 ($1,429,803.48), payable in monthly
26
<PAGE> 31
installments of One Hundred Nineteen Thousand, One Hundred Fifty Dollars and
29/100 ($119,150.29).
B. Notice by Tenant of the exercise of its option must be received by
Landlord not later than one hundred twenty ( 120) days prior to the expiration
of the then current term or period.
27
<PAGE> 32
IN WITNESS WHEREOF, the parties hereto have hereunder set their hands and seals
the day and year first above written.
Signed, sealed and delivered in the presence of:
ACP EAST, LLC
/s/ JOHN ANDERS SVENNINGSEN, PRESIDENT
- -----------------------------------------
As to Landlord
AMSCAN INC.
/s/ JOHN ANDERS SVENNINGSEN, PRESIDENT
- -----------------------------------------
As to Tenant
28
<PAGE> 33
AMSCAN TURNER CONSTRUCTION COMPANY
80 GRASSLANDS ROAD JOB #SPD-0189
GREENBURGH, NY 20-DEC-95
DOCUMENT LIST
<TABLE>
<CAPTION>
Document Description Revision Date
<S> <C>
DRAWINGS:
ARCHITECHURAL DRAWINGS
COVER SHEET
A-00 GENERAL CONDITIONS AND NOTES 4-Dec-95
A-01 2ND FLOOR - PARTITION PLAN 4-Dec-95
A-02 2ND FLOOR - REFLECTED CEILING PLAN 4-Dec-95
A-03 2ND FLOOR - POWER/SIGNAL PLAN 4-Dec-95
A-04 2ND FLOOR - FINISH PLAN 4-Dec-95
A-05 3RD FLOOR - PARTITION PLAN 4-Dec-95
A-06 3RD FLOOR - REFLECTED CEILING PLAN 4-Dec-95
A-07 3RD FLOOR - POWER/SIGNAL PLAN 4-Dec-95
A-08 3RD FLOOR - FINISH PLAN 4-Dec-95
A-09 DOOR & HARDWARE SCHEDULES 4-Dec-95
A-10 ELEVATIONS 4-Dec-95
A-11 ELEVATIONS 4-Dec-95
A-12 ELEVATIONS 4-Dec-95
A-13 DETAILS 4-Dec-95
F-01 2ND FLOOR - FURNITURE PLAN 4-Dec-95
F-02 3RD FLOOR - FURNITURE PLAN 4-Dec-95
PLUMBING
P-01 SECOND FLOOR- PLUMBING PLAN 12-Dec-95
P-02 THIRD FLOOR - PLUMBING PLAN 12-Dec-95
FIRE PROTECTION
FP-1 SECOND FLOOR - FIRE PROTECTION PLAN 12-Dec-95
FP-2 THIRD FLOOR - FIRE PROTECTION PLAN 12-Dec-95
MECHANICAL
M-01 SECOND FLOOR- HVAC PLAN 12-Dec-95
M-02 THIRD FLOOR - HVAC PLAN 12-Dec-95
M-03 DETAILS, SCHEDULES and SYMBOL LIST 12-Dec-95
ELECTRICAL
E-01 SECOND FLOOR - REFLECTED CEILING PLAN 12-Dec-95
E-02 SECOND FLOOR - POWER/SIGNAL PLAN 12-Dec-95
E-03 THIRD FLOOR - REFLECTED CEILING PLAN 12-Dec-95
E-04 THIRD FLOOR - POWER/SIGNAL PLAN 12-Dec-95
E-05 ONE LINE RISER and SCHEDULES 12-Dec-95
E-06 SECOND FLOOR - FIRE ALARM SYSTEM PLAN 12-Dec-95
E-07 THIRD FLOOR - FIRE ALARM SYSTEM PLAN 12-Dec-95
E-08 RISER DIAGRAMS 12-Dec-95
</TABLE>
<PAGE> 34
DOCUMENT LIST
<TABLE>
<CAPTION>
Document Description Revision Date
<S> <C> <C>
DRAWINGS:
SPECIFICATIONS: Pages
ARCHITECTURAL SPECIFICATIONS ARE ON THE DRAWINGS
SUPPLEMENTARY GENERAL CONDITIONS 21
15000 PLUMBING - GENERAL PROVISIONS 2
15100 PLUMBING - PIPING 4
15200 PLUMBING - INSULATION 1
15300 SPRINKLER SYSTEM 3
15500 HVAC - GENERAL PROVISIONS 3
15600 HVAC - PIPING SYSTEMS 5
15650 HVAC-AIR DISTRIBUTION 14
15700 HVAC - INSULATION and NOISE CONTROL 2
15750 HVAC - TERMINAL UNITS 2
15800 HVAC - AUTOMATIC TEMPERATURE CONTROLS 8
16000 ELECTRICAL - GENERAL PROVISIONS 7
16001 ELECTRICAL 12
16111 RACEWAYS 9
16120 WIRE & CABLE 4
16140 DEVICES 4
16150 METER WIRING and CONTROLS 4
16160 MOTOR STARTERS 2
16200 FIRE DETECTION and ALARM SYSTEM 9
16400 BUILDING POWER DISTRIBUTION SYSTEM 7
16501 LIGHTING EQUIPMENT 11
16740 TELEPHONE/DATA (EMPTY CONDUIT SYSTEM) 3
16750 UNINTERRUPTIBLE POWER SYSTEM 14
OTHER DOCUMENTS:
ADDENDUMS
1 PERILLO ASSOC'S ELECTRICAL ADDENDUM NO. 1 4 pages 18-Dec-95
ARCHITECTURAL SKETCHES
1 TYPICAL OFFICE DOOR & GLASS FRAME 18-Dec-95
2 SECTION @ GLASS CONFERENCE ROOM WALL 18-Dec-95
3 SCHEMATIC OF ETCHED GLASS 18-Dec-95
4 FIN TUBE SKETCH 13-Dec-95
CPG MEMOS/CORRESPONDENCE
1 ANSWERS & COMMENTS TO MILLWORK QUESTIONS 18-Dec-95
MANUFACTURER'S CATALOG CUTS
1 SKYLIGHT
2 FUME HOOD 13-Dec-95
13-Dec-95
</TABLE>
<PAGE> 35
AMENDMENT TO LEASE
WHEREAS: ACP EAST LLC and AMSCAN INC. are the LANDLORD and TENANT, respectively,
in a lease (the "LEASE") for the rental of property at 80 GRASSLANDS ROAD,
ELMSFORD, NEW YORK 10523, DATED DECEMBER 1, 1995;
WHEREAS: The TERM of the Lease is 15 YEARS, terminating on February 28, 201l
with an OPTION TO RENEW until February 28, 2016;
WHEREAS: The parties desire to AMEND THE TERM AND OPTION FOR RENEWAL of the
Lease;
NOW THEREFORE: For good and valuable consideration, the sufficiency and receipt
of which are hereby acknowledged, the undersigned, by their signatures below,
agree that THE LEASE IS HEREBY AMENDED AS FOLLOWS:
The TERM of the Lease is changed to FIVE YEARS.
The EXPIRATION DATE is changed to FEBRUARY 28, 2001.
The OPTION TO RENEW is changed to FIVE YEARS AT MARKET RENTAL, with
ADDITIONAL OPTIONS TO RENEW AT MARKET RENTAL FOR TWO PERIODS OF FIVE
YEARS EACH.
<TABLE>
<CAPTION>
LANDLORD: TENANT:
<S> <C>
ACP EAST LLC AMSCAN INC.
/s/ JOHN P. JORDAN
- ---------------------------------- ----------------------------------
John A. Svenningsen, its President John P. Jordan, its Vice President
</TABLE>
<PAGE> 1
Exhibit 10(j)
MODIFICATION OF LEASE
AGREEMENT made this 1st day of March, 1995 by and between JOHN ANDERS
SVENNINGSEN (hereafter referred to as "Landlord") and AMSCAN, INC. a New York
Corporation (hereinafter referred to as "Tenant").
W I T N E S S E T H:
WHEREAS, Landlord and Tenant are signatories to a lease agreement dated
December 7, 1984 for premises described on Schedule "A" hereto (hereinafter
referred to as the "Lease"); and
WHEREAS, Tenant has approached Landlord and has requested an extension
of the Lease term; and
WHEREAS, Landlord agrees to the extension as requested by Tenant
subject to the terms and conditions specified herein.
NOW, IN CONSIDERATION OF THE PREMISES AND PROMISES CONTAINED HEREIN, IT
IS MUTUALLY AGREED BETWEEN THE PARTIES AS FOLLOWS:
1. The Second Paragraph of the Lease is deleted and replaced
by the following:
"Term: The term shall be fifteen (15) years, commencing on
March 1, 1995."
2.Except as herein modified, all other terms, provisions and
conditions contained within this Lease, shall remain as stated in the Lease.
LANDLORD: JOHN ANDERS SVENNINGSEN
/s/ JOHN ANDERS SVENNINGSEN
-----------------------------------
JOHN ANDERS SVENNINGSEN
TENANT: AMSCAN, INC.
By:/S/ STEPHEN J. STEIN
--------------------------------
Name: Stephen J. Stein
Title: Secretary
<PAGE> 2
DESCRIPTION OF PREMISES
The premises commonly known as 28401 Rancho California Road, Rancho California,
California 92390, and more particularly described as Parcels 17, 18 and 19,
inclusive, and Parcel 22 of Parcel Map No. 12549, as shown by Parcel Map on file
in Book 74, Pages 84 through 89, inclusive, of Parcel Maps, Records of Riverside
County, California.
EXHIBIT "A"
<PAGE> 3
LEASE
This Lease is made December 7, 1984, between JOHN ANDERS SVENNINGSEN,
referred to hereafter as "LANDLORD", and AMSCAN, INC., a New York corporation,
referred to hereafter as "TENANT".
R E C I T A L S
This Lease is made with reference to the following facts and
objectives:
A. Landlord is the owner of that certain Real Property
described in Exhibit "A", and is currently in the process of constructing
certain improvements thereon pursuant to the terms of that certain Construction
Agreement dated September 26, 1984 between HUNTLEY PROPERTIES CONSTRUCTION, as
General Contractor, and LANDLORD, as Owner. The Real Property and improvements
being constructed thereon are hereinafter referred to as the "Premises."
B. TENANT desires to lease from LANDLORD and LANDLORD desires
to lease to TENANT the Premises.
WHEREFORE, the parties hereto hereby covenant and agree as
follows:
1. Demise. LANDLORD leases to TENANT and TENANT leases from
LANDLORD the Premises.
2. Term. The term shall be ten (10) years, commencing on the
earlier of: (a) the first day of the month following the month in which a
Certificate of Occupancy with respect to the entirety of the Premises is issued,
(b) July 1, 1985
<PAGE> 4
(c) the date on which Tenant first occupies any portion of the Premises. The
parties shall execute an amendment to this Lease stating the exact commencement
date when the same has been ascertained.
3. Possession Prior to the Commencement of the Term. LANDLORD shall
notify TENANT of the expected date for substantial completion of the Premises at
least sixty (60) days before said date. Following such notification, TENANT
shall be entitled to enter upon the Premises for purposes of equipping and
fixturing the Premises so long as such entry does not interfere with LANDLORD or
Landlord's Contractor. If TENANT enters the Premises as provided in this
paragraph, all of the provisions of the Lease shall be in full force and effect
except the Rent Provision.
4. Monthly Rental.
(a) During the initial year of the term, TENANT shall pay to
LANDLORD as monthly rent, without deduction, setoff, prior notice, or demand,
the sum of Twenty-five Thousand Dollars ($25,000.00) per month in advance on the
first (1st) day of each month. Such rental shall be prorated for any partial
month which may exist at the commencement of the term.
(b) Beginning one (1) year following commencement of the term,
and continuing on each succeeding anniversary of the commencement of the term,
the monthly rental paid by TENANT shall be increased by Five (5%) percent over
the
- 2 -
<PAGE> 5
monthly rental paid by TENANT during the immediately preceding year of the term.
5. Personal Property Taxes. TENANT shall pay before delinquency all
taxes, assessments, license fees, and other charges (taxes) that are levied and
assessed against TENANT's personal property installed or located in or on the
Premises, and that become payable during the term. TENANT shall furnish LANDLORD
with satisfactory evidence of these payments.
6. Real Property Taxes. TENANT shall pay all real property taxes and
general and special assessments (real property taxes) levied and assessed
against the Premises. TENANT shall pay the real property taxes not later than
ten (10) days before the taxing authority's delinquency date and shall furnish
LANDLORD with satisfactory confirmation of such payment. TENANT's obligations to
pay real property taxes shall be prorated on the basis of a 365-day year to
account for any fractional portion of a fiscal tax year included in the term at
its commencement and expiration.
7. Substitute Taxes. If at any time during the term of the Lease the
laws concerning the methods of real property taxation prevailing at the
commencement of the term are changed so that a tax or excise on rents or any
other such tax, however described, is levied or assessed against LANDLORD as a
direct substitution in whole or in part for any real property taxes, TENANT
shall pay before delinquency (but only to the extent that it can be ascertained
that there has been a substitution and that as a result TENANT
- 3 -
<PAGE> 6
has been relieved from the payment of real property taxes it would otherwise
have been obliged to pay) the substitute tax or excise on rents. TENANT's share
of any tax or excise on rent shall be substantially the same as, and a
substitute for, the payment of such real property taxes as provided in this
Lease.
8. Use.
(a) TENANT shall use the Premises for purposes of operating a
paper products manufacturing and warehousing facility, and related purposes, and
for no other use without LANDLORD'S express written consent, which shall not be
unreasonable denied.
(b) TENANT shall not do, bring or keep anything on or about
the Premises that will cause a cancellation of any insurance covering the
Premises, or any portion thereof.
(c) TENANT shall comply with all laws, rules, regulations, and
ordinances adopted by any governmental or quasi-governmental entity having
jurisdiction concerning the premises or TENANT's use of the Premises.
9. Maintenance. TENANT, at its sole cost and expense, shall be
responsible for maintaining all portions of the Premises. TENANT expressly
waives the provisions of sections 1941 and 1942 of the Civil Code.
10. Alterations. TENANT shall not make any alterations to the Premises
without LANDLORD's consent, which shall not be unreasonably denied. Any
alterations made shall remain
- 4 -
<PAGE> 7
in and be surrendered with the Premises on expiration or termination of the
term. If TENANT makes any alterations to the Premises as provided above, the
alteration shall not be commenced until fifteen (15) days after LANDLORD has
received notice from TENANT stating the date that the installation of the
alteration is to commence so that LANDLORD can post and record an appropriate
Notice of Nonresponsibility.
11. Mechanic's Liens. TENANT shall pay all costs for construction done
by it or caused to be done by it on the Premises. TENANT shall keep the Premises
free and clear of all mechanic's liens resulting from construction done by or
for TENANT.
12. Utilities and Services. TENANT shall make all arrangements for and
pay for all utilities and services furnished to or used by it, including without
limitation, gas, electricity, water, telephone service, and trash collection,
and for all connection charges.
13. Indemnity and Exculpation; Insurance.
(a) LANDLORD shall not be liable to TENANT for any damage to
TENANT or TENANT's property from any cause. TENANT waives all claims against
LANDLORD for damage to person or property arising for any reason.
(b) TENANT shall defend, indemnify and hold LANDLORD harmless
from any and all costs or expenses, including reasonable attorneys' fees,
arising out of any
- 5 -
<PAGE> 8
damage to any person or property occurring in, on or about the Premises.
(c) TENANT, at TENANT's sole cost, shall maintain on all of
TENANT's personal property, TENANT's improvements and alterations in, on or
about the Premises, a policy of standard fire, flood and extended coverage
insurance with vandalism and malicious mischief endorsement to the extent of at
least One Hundred Percent (100%) of full replacement value. The proceeds from
any such policy shall be used by TENANT for the replacement of personal property
or the restoration of TENANT's improvements or alterations. Evidence of such
insurance shall be supplied to LANDLORD.
(d) TENANT, at TENANT's sole cost, shall maintain on the
Premises a policy of standard fire, flood and extended coverage insurance, with
vandalism and malicious mischief endorsements, to the extent of at least One
Hundred Percent (100%) of full replacement value. The insurance policy shall be
issued in the names of LANDLORD, LANDLORD's Lender and TENANT, as their
interests appear. The proceeds from any such policy shall be paid to and shall
belong to LANDLORD, but shall be made available to TENANT for utilization
pursuant to the terms of Paragraph 14 hereof. In case this Lease is terminated,
the insurance policy and all rights under it or the insurance proceeds shall be
assigned to LANDLORD at LANDLORD's election. Evidence of such insurance shall be
supplied to LANDLORD. The "Full Replace-
- 6 -
<PAGE> 9
ment Value" of the Premises shall be determined by the company issuing the fire
insurance policy at the time the policy is initially obtained. Not more
frequently than annually, either party shall have the right to notify the other
party that it elects to have the replacement value redetermined. Any such
redetermination shall be made promptly by the insurance company insuring the
Premises in accordance with the Rules and Practices of the Board of Fire
Underwriters, or a like board recognized and generally accepted by the insurance
company, and each party shall be promptly notified of the results by the
company. The fire insurance policy shall be adjusted according to the
redetermination made by the insurance company.
(e) TENANT, at its cost, shall maintain insurance insuring
that the monthly rent payable hereunder will be paid to LANDLORD for a period of
up to six (6) months in the event that the premises are destroyed or rendered
inaccessible by a risk insured against by policy of standard fire, flood and
extended coverage insurance, with vandalism and malicious mischief endorsements.
(f) TENANT, at TENANT's sole cost, shall maintain public
liability insurance insuring LANDLORD against damage for injuries occurring in
connection with the use of the premises in the amount of Five Million Dollars
($5,000,000.00) single limit coverage. Evidence of such insurance shall be
supplied to LANDLORD.
(g) All policies of insurance described herein shall:
- 7 -
<PAGE> 10
i. be issued by insurance companies auth-
orized to do business in the State of California,
with a financial rating of at least an A+ 4A Status
as rated in the most recent edition of Best's
Insurance Reports;
ii. be issued as a primary policy;
iii. contain an endorsement requiring not less than
thirty (30) days written notice from the insurance
company to LANDLORD before any cancellation,
expiration or modification in the coverage, scope or
amount of any policy.
14. Destruction.
(a) If, during the term hereof, the Premises or any part
thereof are totally or partially destroyed from any cause whatsoever, whether or
not covered by insurance carried pursuant to this Lease, rendering the Premises
totally or partially inaccessible or unusable, TENANT shall restore the Premises
to substantially the same condition as they were in immediately before
destruction within six (6) months from the date of such destruction. Such
destruction shall not terminate this Lease. Tenant shall be entitled to utilize
the proceeds of any insurance carried pursuant to the terms of this Lease for
such purposes.
(b) TENANT waives the provisions of Civil Code Section
1932(2), and Civil Code Section 1933(4), with respect to any destruction of the
Premises.
- 8 -
<PAGE> 11
15. Condemnation.
(a) Definitions.
i. "Condemnation" means (a) the exercise of any governmental
power whether by legal proceedings or otherwise by a condemnor
or (b) a voluntary sale or transfer by LANDLORD to a condemnor
while any proceedings for condemnation are pending.
ii. "Date of Taking" means the date the condemnor has the
right to possession of the property being condemned.
iii. "Award" means all compensation, sums or anything of value
awarded, paid or received on a total or partial condemnation.
iv. "Condemnor" means any public or quasi-public authority or
private corporation or individual having the power of
condemnation.
(b) If, during the term hereof, there is any taking of all or
any part of the building, other improvements or land constituting the Premises
or any interest in this Lease, by condemnation, the rights and obligations of
the parties shall be determined as provided herein.
(c) If the Premises are totally taken by condemnation, this
Lease shall terminate on the date of taking.
(d) If any portion of the Premises is taken by condemnation,
this Lease shall remain in effect, except that TENANT may elect to terminate
this Lease if Fifty Percent (50%) or more of the total number of square feet in
the Premises are taken. If TENANT elects to terminate this Lease, TENANT must
exercise TENANT's right to terminate pursuant to this paragraph by giving
written notice to
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<PAGE> 12
LANDLORD within thirty (30) days after the nature and the extent of the taking
have been finally determined. TENANT shall also notify LANDLORD of the date of
termination, which date shall not be earlier than thirty (30) days nor more than
ninety (90) days after the date that TENANT has notified LANDLORD of TENANT's
election to terminate; except that this Lease shall terminate on the date of
taking if the date of taking falls on a date before the date of termination as
designated by TENANT. If TENANT does not terminate this Lease within the
aforesaid period, this Lease shall continue in full force and effect.
(e) If any portion of the Premises is taken by condemnation
and this Lease remains in full force and effect, then on the date of taking, the
rental shall be reduced by an amount that is in the same ratio to the unreduced
rental as the total number of gross square feet in the building area of the
Premises taken bears to the total number of gross square feet in the building
area of the Premises immediately before the date of taking.
(f) If there is a partial taking of the Premises and this
Lease remains in full force and effect, LANDLORD, at LANDLORD's option, may
restore the Premises. In the event that LANDLORD elects to restore the Premises,
the reduction in rental provided under subparagraph (e.) hereof shall terminate
as of the date of completion of restoration.
(g) The award shall belong to and be paid
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<PAGE> 13
entirely to LANDLORD, except that TENANT shall receive from the award any sum
attributable by the award to the taking of personal property located on the
Premises and belonging to TENANT.
16. Assignment. TENANT shall not assign or encumber TENANT's
interest in this Lease or in the Premises, or sublease all or any part of the
Premises, or allow any other person or entity (except TENANT's authorized
representatives) to occupy or use all or any part of the Premises, without
obtaining LANDLORD's express written consent. Any assignment, encumbrance or
sublease without LANDLORD's consent shall be voidable and, at LANDLORD's
election, shall constitute a default. No consent to any assignment, encumbrance
or sublease shall constitute a further waiver of the provisions of this
paragraph.
17. Default.
(a) The occurrence of any one of the following shall
constitute a default by TENANT:
(i) Failure to pay rent when due;
(ii) Failure to perform any other provisions of this
Lease if the failure to perform is not cured within ten (10)
days after notice has been given to TENANT. If the default
cannot reasonably be cured within ten (10) days, TENANT
shall not be in default of this Lease if TENANT commences to
cure the default within the ten (10) day period and
diligently and in good faith continues to cure the default
until cure is accomplished.
(iii) The Levy of a Writ of Attachment or execution
on this Lease, the Premises or any portion thereof which is
not released (by bond or otherwise) within fifteen (15) days.
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<PAGE> 14
(iv) The appointment of a receiver with authority to
take possession of the Premises or any part thereof, in a
proceeding or action to which TENANT is a party.
Notices given under this paragraph shall specify the alleged default
and the applicable Lease provisions and shall demand that TENANT perform the
provisions of this Lease or pay the rent that is in arrears, as the case may be,
within the applicable period of time, or quit the Premises. No such notice shall
be deemed a forfeiture or a termination of this Lease unless LANDLORD so elects
in the notice.
(b) In the event that TENANT defaults under this Lease,
LANDLORD shall have all rights and remedies available to LANDLORD under law and
the exercise by LANDLORD of one right or remedy shall not preclude the exercise
by LANDLORD of any other right or remedy.
(c) In the event of any default by TENANT, then LANDLORD, in
addition to any other rights or remedies he may have, shall have the immediate
right of re-entry and may remove all persons and property from the Premises.
(d) If TENANT defaults and abandons the Premises before the
end of the term, or if TENANT's right to possession is terminated by LANDLORD
because of a default, then in either such case, LANDLORD may recover from TENANT
all damages suffered by LANDLORD as the result of TENANT's failure to perform
TENANT's obligations hereunder, including but not restricted to, the worth at
the time of the award of the amount by which the rent then unpaid hereunder
- 12 -
<PAGE> 15
for the balance of the Lease term exceeds the amount of such rental loss for the
same period which TENANT proves could be reasonably avoided by LANDLORD.
18. LANDLORD's Entry on Premises. LANDLORD, or LANDLORD's authorized
representatives, shall have the right to enter the Premises at all reasonable
times for any reasonable purpose.
19. Subordination. This Lease is and shall be subordinate to any
encumbrance now of record or recorded after the date of this Lease affecting the
building, other improvements, and land constituting the Premises. Such
subordination is effective without any further act of TENANT. TENANT shall from
time to time, upon request from LANDLORD, execute and deliver any documents or
instruments that may be required by lender to effect any subordination. If
TENANT fails to execute and deliver any such documents or instruments, TENANT
irrevocably constitutes and appoints LANDLORD as TENANT's special
attorney-in-fact to execute and deliver any such documents or instruments.
20. Notice. Any notice, demand, request, consent, approval or
communication that either party desires or is required to give to the other
party, or any other person, shall be in writing and either served personally or
sent by prepaid first-class mail. Any such notice, demand, request, consent,
approval or communication shall be addressed to the other party at the address
set forth below. Either party may change its address by notifying the other
party of the
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<PAGE> 16
change of address. Notice shall be deemed communicated within forty-eight (48)
hours from the time of mailing if mailed as provided in this paragraph.
LANDLORD: TENANT:
-------- -------
JOHN ANDERS SVENNINGSEN AMSCAN, INC.
c/o AMSCAN, INC. P.O. Box 587
P.O. Box 587 South Road
South Road Harrison, New York 10528
Harrison, New York 10528
21. Waiver. No delay or omission in the exercise of any right or remedy
of LANDLORD with respect to any default by TENANT shall impair such a right or
remedy or be construed as a waiver. The receipt and acceptance by LANDLORD of
delinquent rent shall not constitute a waiver of any other default, but shall
constitute only a waiver of timely payment for the particular rent payment
accepted. LANDLORD's consent to or approval of any act by TENANT requiring
LANDLORD's consent to or approval shall not constitute payment to or approval of
any subsequent act of TENANT. Any waiver by LANDLORD of any default must be in
writing and shall not be a waiver of any other default concerning the same or
any other provision of the Lease.
22. Attorneys' Fees. If either party becomes a party to any litigation
concerning this Lease, the Premises, the building or other improvements on the
Premises or the land constituting a part of the Premises, by reason of any act
or omission of the other party or its authorized representatives, and not by any
act or omission of the party that becomes a party to that litigation or any act
or omission of its
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<PAGE> 17
authorized representatives, then the party that causes the other party to become
involved in the litigation shall be liable to that party for reasonable
attorneys' fees and costs incurred by it in litigation.
If either party commences an action against the other party arising out
of or in connection with this Lease, the prevailing party shall be entitled to
have and recover from the losing party reasonable attorneys' fees and costs of
suit.
23. Surrender of Premises. On expiration of this Lease, TENANT shall
surrender to LANDLORD the Premises and all TENANT's improvements and alterations
in good condition, reasonable wear and tear excepted. If TENANT fails to
surrender the Premises to LANDLORD as aforesaid, TENANT shall hold LANDLORD
harmless from all damages resulting from TENANT's failure to surrender the
Premises, including without limitation, claims made by a succeeding tenant
resulting from TENANT's failure to surrender the Premises.
24. Time of Essence. Time is of the essence of each provision of this
Lease; all provisions relating to time shall be strictly construed.
25. Successors. This Lease shall be binding on and inure to the benefit
of the parties and their successors; provided, however, that this provision is
expressly subject to the prohibition against assignment and subleasing contained
herein.
- 15 -
<PAGE> 18
26. Integration. This Lease contains all of the agreements of the
parties. No party has entered into this Lease in reliance upon any
representation not contained herein.
27. Captions. The captions of this Lease shall have no effect on its
interpretation.
28. Joint and Several Obligations. "Party" shall mean LANDLORD or
TENANT. If more than one person or entity is LANDLORD or TENANT, the obligations
imposed on that party shall be joint and several.
29. Industrial Development Bond. Tenant understands that the Premises
have been constructed by means of a loan ("Loan") funded pursuant to the sale by
the Riverside County Industrial Development Authority ("Authority") of its
Industrial Development Bond, Issue A of 1984 (Amscan, Inc. Project) ("Bond") and
that such Bond is secured by a mortgage to the Authority which has been assigned
to The Chase Manhattan Bank, N.A. ("Bank"). TENANT agrees to perform the
following throughout the life of the Loan:
(a) It shall not assign or sublet or transfer the whole or any
part of the Premises or abandon the same or lease, surrender or otherwise
dispose of any other use or possessory interest in the whole or part of the
Premises to any person, firm or corporation without the prior written consent of
the Authority, the Bank and the Lessor.
(b) It shall be the principal user of the Premises,
- 16 -
<PAGE> 19
and shall not suffer or permit any other person to constitute a principal user
of the Premises without the prior written consent of the Authority and the Bank.
(c) It shall take no action which will cause the interest on
the Bond to become subject to federal and California personal income taxation.
(d) As of the date of the issue of the Bond, it shall furnish
the Lessor and the Authority with a schedule listing any and all "capital
expenditures" with respect to the Premises paid or incurred during the three
year period before the date of issue of the Bond. Additionally, it shall furnish
the Lessor and the Authority with such a schedule for each three successive
twelve month period after such date of issue.
(e) It shall cause to be filed any and all reports or returns
as required by the Treasury regulations governing the issuance of industrial
development bonds.
(f) For the six year period commencing December 11, 1981 and
terminating December 11, 1987, it, or any party related to it, has not and shall
not incur any capital expenditures made by the Lessor, and any related party
thereto in the County of Riverside causes the total amount of the combined
capital expenditures of all said parties to exceed $10,000,000.
(g) It shall advise Lessor of any other lease it
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<PAGE> 20
enters into for premises located in the County of Riverside.
EXECUTED the day and year first above written at Westchester, New York.
<TABLE>
<CAPTION>
LANDLORD: TENANT:
<S> <C>
AMSCAN, INC., A
New York
Corporation.
/s/ JOHN ANDERS SVENNINGSEN By:/s/ ELVERA SVENNINGSEN
- ---------------------------- ----------------------------
JOHN ANDERS SVENNINGSEN Its Secretary
</TABLE>
<PAGE> 21
DESCRIPTION OF PREMISES
The premises commonly known as 28401 Rancho California Road, Rancho California,
California 92390, and more particularly described as Parcels 17, 18 and 19,
inclusive, and Parcel 22 of Parcel Map No. 12549, as shown by Parcel Map on file
in Book 74, Pages 84 through 89, inclusive, of Parcel Maps , Records of
Riverside County, California.
EXHIBIT "A"
<PAGE> 22
RECORDING REQUESTED BY
AND WHEN RECORDED MAIL
TO:
MEMORANDUM OF LEASE
This Memorandum of Lease is made and entered into by and between JOHN
ANDERS SVENNINGSEN, hereinafter referred to as "LANDLORD", and AMSCAN, INC., a
New York corporation, hereinafter referred to as "TENANT", to witness that:
LANDLORD hereby leases to TENANT for a term of ten (10) years,
commencing on the earlier of: (a) the first day of the month following the month
in which a Certificate of Occupancy with respect to the entirety of the Premises
is issued, (b) July 1, 1985, or (c) the date on which TENANT first occupies any
portion of the Premises, on the terms and conditions set forth in that certain
Lease by and between the parties hereto dated December 7, 1984, all the terms
and conditions of which Lease are made a part hereof as though fully set forth
herein, all those certain premises in the County of Riverside, State of
California, described in Exhibit "A" which is attached hereto and incorporated
herein by this reference, including any improvements to be constructed thereon.
EXECUTED on the 7 day of December, 1984 at Westchester, New York.
LANDLORD:
/s/ JOHN ANDERS SVENNINGSEN
-----------------------------
JOHN ANDERS SVENNINGSEN
TENANT: AMSCAN, INC., a New York corporation,
By /s/ ELVERA SVENNINGSEN
--------------------------
Its Secretary
<PAGE> 23
STATE OF NEW YORK )
) ss.
COUNTY OF WESTCHESTER )
On December 7, 1984, before me, the undersigned, a Notary Public in and
for said State, personally appeared JOHN ANDERS SVENNINGSEN known to me to be
the person whose name is subscribed to the within instrument, and acknowledged
to me that he executed the same.
WITNESS my hand and official seal.
/s/ JOEL S. LEVER
---------------------------------
Notary Public in and for said
State.
STATE OF NEW YORK )
) ss
COUNTY OF Westchester )
On December 7, 1984, before me, the undersigned, a Notary Public in and
for said State, personally appeared ELVERA SVENNINGSEN, known to me to be the
Secretary of AMSCAN, INC., a New York corporation, the corporation that executed
the within instrument, known to me to be the person who executed the within
instrument, on behalf of the corporation therein named, and acknowledged to me
that such corporation executed the same.
WITNESS my hand and official seal.
/s/ JOEL S. LEVER
--------------------------------
Notary Public in and for said
State.
-2-
<PAGE> 24
DESCRIPTION OF PREMISES
The premises commonly known as 28401 Rancho California Road, Rancho California,
California 92390, and more particularly described as Parcels 17, 18 and 19,
inclusive, and Parcel 22 of Parcel Map No. 12549, as shown by Parcel Map on file
in Book 74, Pages 84 through 89, inclusive, of Parcel Maps, Records of Riverside
County, California.
EXHIBIT "A"
<PAGE> 25
AMENDMENT TO LEASE
Whereas: John Anders Svenningsen and Amscan Inc. are the Landlord and Tenant,
respectively, in a lease (the "Lease") for the rental of property at 28401
Rancho California Road, Temecula, California 92590, dated December 7, 1984, and
extended by modification dated March 1, 1995;
Whereas: The Term of the Lease is 15 years, terminating on February 28, 2010;
Whereas: The parties desire to amend the Term of the Lease;
Now Therefore: For good and valuable consideration, the sufficiency and receipt
of which are hereby acknowledged, the undersigned, by their signatures below,
agree that the Lease is hereby amended as follows:
The Term of the Lease is changed to Five Years. The Expiration Date is
changed to February 28, 2000.
Tenant is granted an Option to Renew for Five Years at Market Rental,
with additional options to renew at market rental for one period of five years.
Landlord: Tenant:
John Anders Svenningsen Amscan, Inc.
/s/ JOHN P. JORDAN
- ------------------------- -------------------------------------
John P. Jordan, its Vice President
<PAGE> 1
Exhibit 10(k)
L E A S E
This Lease is made November 9, 1995, between JOHN ANDERS SVENNINGSEN referred to
hereafter as "LANDLORD", and AMSCAN INC., a New York corporation, referred to
hereafter as "TENANT".
R E C I T A L S
This Lease is made with reference to the following facts and objectives:
A. Landlord is the owner of that certain Real Property described in Exhibit "A",
and is currently in the process of constructing certain additional improvements
thereon pursuant to the terms of that certain Construction Agreement dated May
25, 1995 between HEDLEY BROTHERS CONSTRUCTION CO., as General Contractor, and
LANDLORD, as Owner. The Real Property and improvements previously constructed
thereon are subject to a lease between LANDLORD and TENANT dated December 7,
1984, and extended by modification dated March 1, 1995. The additional
improvements being constructed, consisting of a 98,680 more or less square foot
additional warehouse at 28381 Vincent Moraga and more fully described in Exhibit
"A" hereto, are hereinafter referred to as the "Premises."
B. TENANT desires to lease from LANDLORD and LANDLORD desires to lease to TENANT
the Premises. WHEREFORE, the parties hereto hereby covenant and agree as
follows:
1. Demise. LANDLORD leases to TENANT and TENANT leases from LANDLORD the
Premises.
2. Term. The term shall be coterminous with the December 7, 1984 lease -
approximately fourteen years, two months, commencing on the earlier of: (a) the
first day of the month following
1
<PAGE> 2
the month in which a Certificate of Occupancy with respect to the entirety of
the Premises is issued, (b) January 1, 1996 or (c) the date on which Tenant
first occupies any portion of the Premises. The parties shall execute an
amendment to this Lease stating the exact commencement date when the same has
been ascertained.
3. Possession Prior to the Commencement of the Term. LANDLORD shall notify
TENANT of the expected date for substantial completion of the Premises at least
sixty (60) days before said date. Following such notification, TENANT shall be
entitled to enter upon the Premises for purposes of equipping and fixturing the
Premises so long as such entry does not interfere with LANDLORD or Landlord's
Contractor. If TENANT enters the Premises as provided in this paragraph, all of
the provisions of the Lease shall be in full force and effect except the Rent
Provision.
4. Monthly Rental.
(a) During the initial year of the term, TENANT shall pay to LANDLORD as
monthly rent, without deduction, setoff, prior notice, or demand, the sum of
Fifty-Six Thousand, Two Hundred Forty-Seven Dollars and Sixty Cents ($56,247.60)
per month in advance on the first (1st) day of each month. Such rental shall be
prorated for any partial month which may exist at the commencement of the term.
(b) Beginning one (1) year following commencement of the term, and continuing
on each succeeding anniversary of the commencement of the term, the monthly
rental paid by TENANT shall be increased by Five (5%) percent over the monthly
rental paid by TENANT during the immediately preceding year of the term.
5. Personal Property Taxes. TENANT shall pay before delinquency all taxes,
assessments, license fees, and other charges (taxes) that are levied and
assessed against TENANT's personal property installed or located in or on the
Premises, and that become payable during the term. TENANT shall furnish LANDLORD
with satisfactory evidence of these payments.
2
<PAGE> 3
6. Real Property Taxes. TENANT shall pay all real property taxes and general and
special assessments (real property taxes) levied and assessed against the
Premises. TENANT shall pay the real property taxes not later than ten (10) days
before the taxing authority's delinquency date and shall furnish LANDLORD with
satisfactory confirmation of such payment. TENANT's obligations to pay real
property taxes shall be prorated on the basis of a 365-day year to account for
any fractional portion of a fiscal tax year included in the term at its
commencement and expiration.
7. Substitute Taxes. If at any time during the term of the Lease the laws
concerning the methods of real property taxation prevailing at the commencement
of the term are changed so that a tax or excise on rents or any other such tax,
however described, is levied or assessed against LANDLORD as a direct
substitution in whole or in part for any real property taxes, TENANT shall pay
before delinquency (but only to the extent that it can be ascertained that there
has been a substitution and that as a result TENANT has been relieved from the
payment of real property taxes it would otherwise have been obligated to pay)
the substitute tax or excise on rents. TENANT's share of any tax or excise on
rent shall be substantially the same as, and a substitute for, the payment of
such real property taxes as provided in this Lease.
8. Use.
(a) TENANT shall use the Premises for purposes of operating a paper products
manufacturing and warehousing facility, and related purposes, and for no other
use without LANDLORD's express written consent, which shall not be unreasonably
denied.
(b) TENANT shall not do, bring or keep anything in or about the Premises that
will cause a cancellation of any insurance covering the Premises, or any portion
thereof.
(c) TENANT shall comply with all laws, rules, regulations, and ordinances
adopted by any governmental or quasigovernmental entity having jurisdiction
concerning the Premises or
3
<PAGE> 4
TENANT'S use of the Premises.
9. Maintenance. TENANT, at its sole cost and expense, shall be responsible for
maintaining all portions of the Premises. TENANT expressly waives the provisions
of Sections 1941 and 1942 of the Civil Code.
10. Alterations. TENANT shall not make any alterations to the Premises without
LANDLORD's consent, which shall not be unreasonably denied. Any alterations made
shall remain on and be surrendered with the Premises on expiration or
termination of the term. If TENANT makes any alterations to the Premises as
provided above, the alteration shall not be commenced until fifteen (15) days
after LANDLORD has received notice from TENANT stating the date that the
installation of the alteration is to commence so that LANDLORD can post and
record an appropriate Notice of Nonresponsibility.
11. Mechanic's Liens. TENANT shall pay all costs for construction done by it or
caused to be done by it on the Premises. TENANT shall keep the Premises free and
clear of all mechanic's liens resulting from construction done by or for TENANT.
12. Utilities and Services. TENANT shall make all arrangements for and pay for
all utilities and services furnished to or used by it and connection charges
related to such utilities and services, including without limitation, gas,
electricity, water, telephone service, and trash collection.
13. Indemnity and Exculpation; Insurance.
(a) LANDLORD shall not be liable to TENANT for any damage to TENANT or
TENANT's property from any cause. TENANT waives all claims against LANDLORD for
damage to person or property arising for any reason.
(b) TENANT shall defend, indemnify and hold LANDLORD harmless from any and
all costs or expenses, including reasonable attorneys' fees, arising out of any
damage to any
4
<PAGE> 5
person or property occurring in, on or about the Premises.
(c) TENANT, at TENANT's sole cost, shall maintain on all of TENANT's personal
property, TENANT's improvements and alterations in, on or about the Premises, a
policy of standard fire, flood and extended coverage insurance with vandalism
and malicious mischief endorsement to the extent of at least One Hundred Percent
(100%) of full replacement value. The proceeds from any such policy shall be
used by TENANT for the replacement of personal property or the restoration of
TENANT's improvements or alterations. Evidence of such insurance shall be
supplied to LANDLORD.
(d) TENANT, at TENANT's sole cost, shall maintain on the Premises a policy of
standard fire, flood and extended coverage insurance, with vandalism and
malicious mischief endorsements, to the extent of at least One Hundred Percent
(100%) of full replacement value. The insurance policy shall be issued in the
names of LANDLORD, LANDLORD's Lender and TENANT, as their interests appear. The
proceeds from any such policy shall be paid to and shall belong to LANDLORD, but
shall be made available to TENANT for utilization pursuant to the terms of
Paragraph 14 hereof. In case this Lease is terminated, the insurance policy and
all rights under it or the insurance proceeds shall be assigned to LANDLORD at
LANDLORD's election. Evidence of such insurance shall be supplied to LANDLORD.
The "Full Replacement Value" of the Premises shall be determined by the company
issuing the fire insurance policy at the time the policy is initially obtained.
Not more frequently than annually, either party shall have the right to notify
the other party that it elects to have the replacement value redetermined. Any
such redetermination shall be made promptly by the insurance company insuring
the Premises in accordance with the Rules and Practices of the Board of Fire
Underwriters, or a like board recognized and generally accepted by the insurance
company, and each party shall be promptly notified of the results by the
company. The fire insurance policy shall be adjusted according to the
redetermination made by the insurance company.
(e) TENANT, at its cost, shall maintain insurance insuring that the monthly
rent
5
<PAGE> 6
payable hereunder will be paid to LANDLORD for a period of up to six (6)
months in the event that the premises are destroyed or rendered inaccessible by
a risk insured against by policy of standard fire, flood and extended coverage
insurance, with vandalism and malicious mischief endorsements.
(f) TENANT, at TENANT's sole cost, shall maintain public liability insurance
insuring LANDLORD against damage for injuries occurring in connection with the
use of the Premises in the amount of Five Million Dollars ($5,000,000.00) single
limit coverage. Evidence of such insurance shall be supplied to LANDLORD.
(g) All policies of insurance described herein shall:
i. be issued by insurance companies authorized to do
business in the State of California, with a financial
rating of at least an A Status as rated in the most
recent edition of Best's Insurance Reports;
ii. be issued as a primary policy;
iii. contain an endorsement requiring not less than thirty
(30) day written notice from the insurance company to
LANDLORD before any cancellation, expiration or
modification in the coverage, scope or amount of any
policy.
14. Destruction.
(a) If, during the term hereof, the Premises or any part thereof are
totally or partially destroyed from any cause whatsoever, whether or not covered
by insurance carried pursuant to this Lease, rendering the Premises totally or
partially inaccessible or unusable, TENANT shall restore the Premises to
substantially the same condition as they were in immediately before destruction
within six (6) months from the date of such destruction. Such destruction shall
not terminate this Lease. Tenant shall be entitled to utilize the proceeds of
any insurance carried pursuant to the terms of this Lease for such purposes.
6
<PAGE> 7
(b) TENANT waives the provisions of Civil Code Section 1932(2), and
Civil Code Section 1933(4), with respect to any destruction of the Premises.
15. Condemnation.
(a) Definitions.
i. "Condemnation" means (a) the exercise of any governmental
power whether by legal proceeding or otherwise by a condemnor or (b) a voluntary
sale or transfer by LANDLORD to a condemnor while any proceedings for
condemnation are pending.
ii. "Date of Taking" means the date the condemnor has the
right to possession of the property being condemned.
iii. "Award" means all compensation, sums or anything of value
awarded, paid or received on a total or partial
condemnation.
iv. "Condemnor" means any public or quasipublic authority or
private corporation or individual having the power of
condemnation.
(b) If, during the term hereof, there is any taking of all or any part
of the building, other improvements or land constituting the Premises or any
interest in this Lease, by condemnation, the rights and obligations of the
parties shall be determined as provided herein.
(c) If the Premises are totally taken by condemnation, this Lease shall
terminate on the date of taking.
(d) If any portion of the Premises is taken by condemnation, this Lease
shall remain in effect, except that TENANT may elect to terminate this Lease if
Fifty Percent (50%) or more of the total number of square feet in the Premises
are taken. It TENANT elects to terminate this Lease, TENANT must exercise
TENANT's right to terminate pursuant to this paragraph by giving
7
<PAGE> 8
written notice to LANDLORD within thirty (30) days after the nature and the
extent of the taking have been finally determined. TENANT shall also notify
LANDLORD of the date of termination, which date shall not be earlier than thirty
(30) days nor more than ninety (90) days after the date that TENANT has notified
LANDLORD of TENANT's election to terminate; except that this Lease shall
terminate on the date of taking if the date of taking falls on a date before the
date of termination as designated by TENANT. If TENANT does not terminate this
Lease within the aforesaid period, this Lease shall continue in full force and
effect.
(e) If any portion of the Premises is taken by condemnation and this
Lease remains in full force and effect, then on the date of taking, the rental
shall be reduced by an amount that is in the same ratio to the unreduced rental
as the total number of gross square feet in the building area of the Premises
taken bears to the total number of gross square feet in the building area of the
Premises immediately before the date of taking.
(f) If there is a partial taking of the Premises and this Lease remains
in full force and effect, LANDLORD, at LANDLORD's option, may restore the
Premises. In the event that LANDLORD elects to restore the Premises, the
reduction in rental provided under sub-paragraph (e.) hereof shall terminate as
of the date of completion of restoration.
(g) The award shall belong to and be paid entirely to LANDLORD, except
that TENANT shall receive from the award any sum attributable by the award to
the taking of personal property located on the Premises and belonging to TENANT.
16. Assignment. TENANT shall not assign or encumber TENANT's interest in this
Lease or in the Premises, or sublease all or any part of the Premises, or allow
any other person or entity (except TENANT's authorized representatives) to
occupy or use all or any part of the Premises, without obtaining LANDLORD's
express written consent. Any assignment, encumbrance or sublease without
LANDLORD's consent shall be voidable and, at LANDLORD's election, shall
constitute a
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<PAGE> 9
further waiver of the provisions of this paragraph.
17. Default.
(a) The occurrence of any one of the following shall constitute a
default by TENANT:
(i) Failure to pay rent when due;
(ii) Failure to perform any other provisions of this Lease
if the failure to perform is not cured within ten
(10) days after notice has been given to TENANT. If
the default cannot reasonably be cured within ten
(10) days, TENANT shall not be in default of this
Lease if TENANT commences to cure the default within
the ten (10) day period and diligently and in good
faith continues to cure the default until cure is
accomplished.
(iii) The Levy of a Writ of Attachment or execution on this
Lease, the Premises or any portion thereof which is
not released (by bond or otherwise) within fifteen
(15) days.
(iv) The appointment of a receiver with authority to take
possession of the Premises or any part thereof, in a
proceeding or action to which TENANT is a party.
Notices given under this paragraph shall specify the alleged default and the
applicable Lease provisions and shall demand that TENANT perform the provisions
of this Lease or pay the rent that is in arrears, as the case may be, within the
applicable period of time, or quit the Premises. No such notice shall be deemed
a forfeiture or a termination of this Lease unless LANDLORD so elects in the
notice.
(b) In the event that TENANT defaults under this Lease, LANDLORD shall
have all rights and remedies available to LANDLORD under law and the exercise by
LANDLORD of one right or remedy shall not preclude the exercise by LANDLORD of
any other right or remedy.
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<PAGE> 10
(c) In the event of any default by TENANT, then LANDLORD, in addition
to any other rights or remedies he may have, shall have the immediate right of
re-entry and may remove all persons and property from the Premises.
(d) If TENANT defaults and abandons the Premises before the end of the
term, or if TENANT's right to possession is terminated by LANDLORD because of a
default, then in either such case, LANDLORD may recover from TENANT all damages
suffered by LANDLORD as the result of TENANT's failure to perform TENANT's
obligations hereunder, including, but not restricted to, the worth at the time,
of the award of the amount by which the rent then unpaid hereunder for the
balance of the Lease term exceeds the amount of such rental loss for the same
period which TENANT proves could be reasonably avoided by LANDLORD.
18. LANDLORD's Entry on Premises. LANDLORD, or LANDLORD's authorized
representatives, shall have the right to enter the Premises at all reasonable
times for any reasonable purpose.
19. Subordination. This Lease is and shall be subordinate to any encumbrance now
of record or recorded after the date of this Lease affecting the building, other
improvements, and land constituting the Premises. Such subordination is
effective without any further act of TENANT. TENANT shall from time to time,
upon request from LANDLORD, execute and deliver any documents or instruments
that may be required by lender to effect any subordination. If TENANT fails to
execute and deliver any such documents or instruments, TENANT irrevocably
constitutes and appoints LANDLORD as TENANT's special attorney-in-fact to
execute and deliver any such documents or instruments.
20. Notice. Any notice, demand, request, consent, approval or communication that
either party desires or is required to give to the other party, or any other
shall be in writing-and either served personally or sent by prepaid first-class
mail. Any such notice, demand, request, consent, approval or communication shall
be addressed to the other party at the address set forth below. Either party
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<PAGE> 11
may change its address by notifying the other party of the change of address.
Notice shall be deemed communicated within forty-eight (48) hours from the time
of mailing if mailed as provided in this paragraph.
LANDLORD: TENANT:
- --------- -------
JOHN ANDERS SVENNINGSEN AMSCAN INC
C/O AMSCAN INC. 2 Macy Road
2 Macy Road PO Box 587
PO Box 587 Harrison, New York 10528
Harrison, New York 10528
21. Waiver. No delay or omission in the exercise of any right or remedy of
LANDLORD with respect to any default by TENANT shall impair such a right or
remedy or be construed as a waiver. The receipt and acceptance by LANDLORD of
delinquent rent shall not constitute a waiver of any other default, but shall
constitute only a waiver of timely payment for the particular rent payment
accepted. LANDLORD's consent to or approval of any act by TENANT requiring
LANDLORD's consent to or approval shall not constitute consent to or approval of
any subsequent act of TENANT. Any waiver by LANDLORD of any default must be in
writing and shall not be a waiver of any other default concerning the same or
any other provision of the Lease.
22. Attorneys' Fees. If either party becomes a party to any litigation
concerning this Lease, the Premises, the building or other improvements on the
Premises or the land constituting a part of the Premises, by reason of any act
or omission of the other party or its authorized representatives, and not by any
act or omission of the party that becomes a party to that litigation or any act
or omission of its authorized representatives, then the party that causes the
other party to become involved in the litigation shall be liable to that party
for reasonable attorneys' fees and costs incurred by it in litigation.
If either party commences an action against the other party arising out
of or in connection
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with this Lease, the prevailing party shall be entitled to have and recover from
the losing party reasonable attorneys' fees and costs of suit.
23. Surrender of Premises. On expiration of this Lease, TENANT shall surrender
to LANDLORD the Premises and all TENANT's improvements and alterations in good
condition, reasonable wear and tear excepted. If TENANT fails to surrender the
Premises to LANDLORD as aforesaid, TENANT shall hold LANDLORD harmless from all
damages resulting from TENANT's failure to surrender the Premises, including
without limitation, claims made by a succeeding tenant resulting from TENANT's
failure to surrender the Premises.
24. Time of Essence. Time is of the essence of each provision of this Lease; all
provisions relating to time shall be strictly construed.
25. Successors. This Lease shall be binding on and inure to the benefit of the
parties and their successors; provided, however, that this provision is
expressly subject to the prohibition against assignment and subleasing contained
herein.
26. Integration. This Lease contains all of the agreements of the parties. No
party has entered into this Lease in reliance upon any representation not
contained herein.
27. Captions. The captions of this Lease shall have no effect on its
interpretation.
28. Joint and Several Obligations. "Party" shall mean LANDLORD or TENANT. If
more than one person or entity is LANDLORD or TENANT, the obligations imposed on
that party shall be joint and several.
EXECUTED the day and year first above written at Harrison, New York.
- ---------------------------------- -----------------------------------
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<PAGE> 13
LANDLORD: TENANT:
- --------- -------
AMSCAN INC., A New York Corporation
/s/JOHN ANDERS SVENNINGSEN
- --------------------------
JOHN ANDERS SVENNINGSEN
By: /s/JOHN JORDAN
------------------------------------
Its Vice President
------------------------------------
13
<PAGE> 14
DESCRIPTION OF PREMISES
The premises commonly known as, Temecula, California, and more particularly
described as Parcels 17, 18 and 19, inclusive, and Parcel 22 of Parcel Map No.
12549, as shown by Parcel Map on file in Book 74, Pages 84 through 89,
inclusive, of Parcel Maps, Records of Riverside County, California.
EXHIBIT "A"
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<PAGE> 15
RECORDING REQUESTED BY
AND WHEN RECORDED MAIL
TO:
MEMORANDUM OF LEASE
This Memorandum of Lease is made and entered into by and
between JOHN ANDERS SVENNINGSEN, hereinafter referred to as "LANDLORD", and
AMSCAN INC., a New York corporation, hereinafter referred to as "TENANT", to
witness that:
LANDLORD hereby leases to TENANT for a term of ten (10) years,
commencing on the earlier of: (a) The first day of the month following-the month
in which a Certificate of Occupancy with respect to the entirety of the Premises
is issued, (b) July 1, 1985, or (c) the date on which TENANT first occupies any
portion of the Premises, on the terms and conditions set forth in that certain
case by and between the parties hereto dated 12/07/84 all the terms and
conditions of which Lease are made a part hereof as though fully set forth
herein, all those certain Premises in the County of Riverside, State of
California, described in Exhibit "A" which is attached hereto and incorporated
herein by this reference, including any improvements to be constructed thereon.
EXECUTED on the 7 day of December, 1984 at Westchester, New
York.
LANDLORD:
---------
------------------------------------
JOHN ANDERS SVENNINGSEN
TENANT: AMSCAN, INC., A New York Corporation,
By:
---------------------------------
Its
---------------------------------
15
<PAGE> 16
STATE OF NEW YORK
COUNTY OF WESTCHESTER
On before me, the undersigned, a Notary Public in and for said
State, personally appeared JOHN ANDERS SVENNINGSEN known to me to be the person
whose name is subscribed to the within instrument, and acknowledged to me that
he executed the same.
WITNESS my hand and official seal.
-----------------------------------
Notary Public in and for said State
STATE OF NEW YORK
COUNTY OF WESTCHESTER
On , before me, the undersigned, a Notary Public in and for
said State, personally appeared Elvira Svenningsen, known to me to be the
secretary of AMSCAN, INC., a New York corporation, the corporation that executed
the within instrument, known to me to be the person who executed the within
instrument, on behalf of the corporation therein named, and acknowledged to me
that such corporation executed the same. WITNESS my hand and official seal.
-----------------------------------
16
<PAGE> 17
DESCRIPTION OF PREMISES
The premises commonly known as 28401 Rancho California Road,
Rancho California, California 92390, and more particularly described as Parcels
17, 18 and 19, inclusive, and Parcel 22 of Parcel I-lap No. 12549, as shown by
Parcel Map on file in Book 74, Pages 84 through 89, inclusive, of Parcel Maps,
Records of Riverside County, California.
EXHIBIT "A"
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<PAGE> 18
AMENDMENT TO LEASE
WHEREAS: JOHN ANDERS SVENNINGSEN and AMSCAN INC. are the LANDLORD and TENANT,
respectively, in a lease (the "LEASE") for the rental of property at 28381
VINCENT MORAGA BOULEVARD, TEMECULA, CALIFORNIA 92590, dated November 9, 1995;
WHEREAS: The TERM of the Lease is 14 YEARS, TWO MONTHS, terminating on February
28, 2010;
WHEREAS: The parties desire to AMEND THE TERM of the Lease;
NOW THEREFORE: For good and valuable consideration, the sufficiency and receipt
of which are hereby acknowledged, the undersigned, by their signatures below,
agree that THE LEASE IS HEREBY AMENDED AS FOLLOWS:
The TERM of the Lease is changed to FOUR YEARS AND TWO MONTHS.
The EXPIRATION DATE is changed to FEBRUARY 28, 2000.
Tenant is granted an OPTION TO RENEW for FIVE YEARS AT MARKET
RENTAL, with an ADDITIONAL OPTION TO RENEW AT MARKET RENTAL
FOR ONE PERIOD OF FIVE YEARS.
LANDLORD: TENANT:
JOHN ANDERS SVENNINGSEN AMSCAN INC.
_____________________________ /s/JOHN P. JORDAN
JOHN P. JORDAN, ITS VICE PRESIDENT
18
<PAGE> 1
EXHIBIT 10(m)
LOAN AGREEMENT made this 9th day of October, 1996, by and between JOHN
A. SVENNINGSEN, whose principal place of business is c/o Amscan Inc., 80
Grasslands Road, Elmsford, New York 10523 ("Svenningsen"); GERALD C. RITTENBERG,
now residing at 18 Carey Drive, Bedford, New York 10506 ("Rittenberg"); and
KURZMAN & EISENBERG, LLP with a principal place of business at 1 North Broadway,
White Plains, N.Y. 10601 ("Escrow Agent").
R E C I T A L S
1. Rittenberg wishes to borrow monies from Svenningsen in amounts as
hereinafter set forth in this Agreement ("Loan Agreement") and Svenningsen has
agreed to loan such monies to Rittenberg.
2. In order to induce Svenningsen to make the loans to Rittenberg as
herein contemplated (which loans are hereinafter referred to as the "Loan"),
Rittenberg proposes to pledge to Svenningsen two thirds (2/3) of all shares of
common stock to be issued to Rittenberg upon a contemplated public offering
("IPO") of the shares of Amscan described in Paragraph 2 of the Stock Agreement
between Rittenberg, Svenningsen and Amscan. The Shares so pledged are herein
referred to as the "Shares".
3. The parties wish to set forth the terms under which such Loan is to
be made and secured.
NOW, THEREFORE, IT IS MUTUALLY AGREED AS FOLLOWS:
1. Loan.
Svenningsen covenants and agrees to loan to Rittenberg an
<PAGE> 2
aggregate amount which shall be no greater than 4/9ths of the value of all
shares issued to Rittenberg under Paragraph 2 of the Stock Agreement, based on
the offering price for shares of Amscan set forth in the final prospectus
("Maximum Amount of the Loan"). Such Loan may be made either in one or two
advances but only on the following dates and only upon ten (10) days advanced
written notice to Svenningsen and Escrow Agent: (1) on the date of the initial
public offering of Amscan shares of stock; and (2) on April 1, 1997 if the IPO
occurs before December 31, 1996 or April 1, 1998 if the IPO occurs after
December 31, 1996 (collectively the "Loan Advancement Dates"). (DELETED)
2. EVIDENCE OF THE ADVANCES.
Each advance to be made by Svenningsen to Rittenberg with respect to
the Loan hereunder shall be evidenced and acknowledged by a receipt and
acknowledgement from Rittenberg in the form annexed hereto ("Receipt and
Acknowledgment").
3. TERMS OF THE LOAN.
The advances made hereunder shall be repaid with interest per annum at
the ninety (90) day Libor rate, plus one-eighth of 1%, in effect on the date of
the first advance or on the date of the single advance if there is only one
advance ("Single Advance"), as the case may be, adjusted every ninety (90) days
thereafter during the term of the Loan, compounded annually. Interest shall be
paid annually commencing one year from the date of the first advance or the
Single Advance, and on the anniversary date thereafter of the
2
<PAGE> 3
first or Single Advance, as the case may be, except that the final interest
payment shall be made on the due date of the principal of this Loan. The
principal amount of the Loan shall be due and paid thirty (30) months after the
date of the first or Single Advance, as the case may be, with accrued interest
to the date of such payment, unless sooner paid. Rittenberg may make payment of
any portion or of all of the indebtedness hereunder, either in cash or by the
transfer to Svenningsen of so many of the Shares pledged hereunder as shall be
equal in value to the amount of the payment to be made; such value to be
computed at the average closing market price of the Shares for the seven (7)
trading days prior to the payment ("Average Closing Market Price").
4. PREPAYMENT OF THE LOAN.
The entire Loan hereunder may be prepaid in full, at any time,
without penalty, with interest to the date of payment. Rittenberg may make no
more than seven (7) partial prepayments in no less than $250,000.00 in either
Shares or Cash or a combination thereof, each with interest to the date of each
prepayment.
It is the intent of the parties that so long as the indebtedness
hereunder shall remain unpaid, Svenningsen may retain as security so many of the
pledged Shares as shall have a cumulative value of at least one and one-half
times the unpaid principal indebtedness, but in no event more than the number of
Shares initially deposited in the Escrow Agent. Upon making a payment of the
principal portion of the indebtedness, the Escrow
3
<PAGE> 4
Agent shall promptly, upon Rittenberg's request, release and transfer to
Rittenberg so many of the remaining pledged Shares held by him equal to fifty
(50%) percent of the number of Shares used by Rittenberg to repay the principal
indebtedness or if cash or a check is used to pay the principal indebtedness
("Cash Payment") then the Cash Payment shall be divided by the Average Closing
Market Price of Amscan shares and the product of such division shall be
multiplied by one hundred fifty (150%) percent.
Notwithstanding anything to the contrary contained in this Loan
Agreement, if any Shares are registered pursuant to the provisions of Paragraph
3(b) of the Stock Agreement, then, from and after the registration of such
Shares, any pledged Shares transferred to Svenningsen in payment of any
principal or interest due under the Loan shall be unregistered Shares to the
extent available, before any registered Shares are used for that purpose. In
addition, any pledged Shares released to Rittenberg pursuant to the preceding
paragraph upon payment of principal under the Loan shall be registered Shares to
the extent available, before unregistered Shares are used for that purpose.
5. PLEDGE OF SHARES.
In consideration of the loan to be made hereunder by Svenningsen to
Rittenberg, Rittenberg grants a security interest to Svenningsen in all the
Shares. Upon receipt by Rittenberg of the certificates representing the Shares,
Rittenberg shall deliver all of such certificates to the Escrow Agent, duly
endorsed in blank,
4
<PAGE> 5
to be held by the Escrow Agent as provided in this Agreement.
Rittenberg shall have the right at any time to substitute with the
Escrow Agent unregistered Amscan shares, duly endorsed in blank, that are not
pledged for registered Shares, with one registered Share released from escrow
for every unregistered Amscan share delivered to the Escrow Agent.
6. LOAN MADE WITHOUT RECOURSE.
The liability of Rittenberg to repay principal or interest on the
Loan and the advances made hereunder is limited to the Shares pledged by
Rittenberg to Svenningsen as security for the payment of the Loan hereunder and
in no event shall Rittenberg be personally liable for any deficiency resulting
from the sale of the Shares nor shall any action or proceeding be brought
against Rittenberg to recover judgment against Rittenberg upon any unpaid
balance of principal or interest on the Loan made hereunder.
7. DIVIDENDS.
During the term of the pledge of the Shares hereunder and so long as
there is no default with respect to the Loan, all cash dividends paid on account
of the Shares shall be the property of Rittenberg.
8. VOTING RIGHTS.
During the term of this pledge of the Shares hereunder and so long
as there is no default with respect to the Loan, Rittenberg may vote the Shares
on all corporate questions.
9. REPRESENTATIONS BY RITTENBERG.
5
<PAGE> 6
Rittenberg warrants and represents in order to induce Svenningsen to
make the Loan hereunder and to accept the Shares herein pledged as security,
that there are no restrictions upon the right of Rittenberg to make the pledge
of such Shares herein provided.
10. ADJUSTMENTS.
If, during the term of the pledge hereunder any reclassification,
readjustment, or other change is declared in the Shares or made in the capital
structure of the Corporation which has issued the pledged Shares, all new,
substituted and additional Shares, or other securities, issued by reason of any
such change shall be held by the Escrow Agent under the terms of this Agreement
in the same manner as the Shares originally pledged hereunder.
11. WARRANTS AND RIGHTS.
If, during the term of the pledge hereunder, subscription warrants
or any other rights or options are issued in connection with the pledged Shares,
Rittenberg shall immediately pledge such warrants, rights, or options to
Svenningsen, and shall deliver any evidence thereof, duly endorsed in blank, to
the Escrow Agent, to be held as additional collateral security for the Loan. If
exercised by Rittenberg, all new Shares or other securities so acquired by
Rittenberg shall be immediately assigned to the Escrow Agent, duly endorsed in
blank, as collateral for the Loan, to be held by the Escrow Agent under the
terms of this Agreement in the same manner as the Shares originally pledged
herein.
6
<PAGE> 7
12. CASH ESCROW.
Svenningsen acknowledges that the purpose of the Loan is to enable
Rittenberg to pay the income taxes due on the Shares to be issued to Rittenberg
pursuant to the Stock Agreement. In order to insure that the funds for the Loan
will be available to Rittenberg on the Loan Advancement Dates, Svenningsen
agrees to deposit with the Escrow Agent within five (5) business days after the
closing of the IPO, a sum (the "Fund") equal to the Maximum Amount of the Loan,
which sum shall be held, invested and disbursed by the Escrow Agent as provided
in this Agreement.
13. INVESTMENT OF FUND.
The Escrow Agent shall invest the Fund in United States Treasury
obligations with maturities of not more than six (6) months from the date of the
investment and will invest the Fund in a way to insure that the money is
available on the Loan Advancement Dates. The Escrow Agent shall not be
responsible for earning any specified rate of interest or rate of return on the
Fund.
13.1 FINANCIAL SERVICES. The Escrow Agent shall be entitled to
utilize the services of banks, brokerage houses or other investment or financial
intermediaries to effectuate the investment of the Fund. All commission charges
and service and other fees shall be paid out of the Fund.
13.2 ATTRIBUTION OF INVESTMENT INCOME. All interest and other
earnings from the investment of the Fund shall accrue for the account of and
shall be taxable to Svenningsen. Svenningsen shall
7
<PAGE> 8
be designated to receive any 1099-INT or comparable statements and shall be
responsible for paying any applicable income taxes in respect of any investment
earnings from the Fund.
13.3 DISBURSEMENT OF THE FUND. On the Loan Advancement Dates,
Rittenberg shall deliver to the Escrow Agent an executed Receipt and
Acknowledgment for the amount of the requested advance on the Loan, upon receipt
of which the Escrow Agent shall disburse the requested advance on the Loan to
Rittenberg. If the requested advance by Rittenberg is for the Maximum Amount of
the Loan, on the date such advance is paid to Rittenberg, or on April 1, 1998,
whichever shall occur first, then the Escrow Agent shall disburse the balance of
the Fund to Svenningsen.
14. PAYMENT OF LOAN.
Upon payment at maturity of the principal and interest of the Loan,
less amounts theretofore received and applied by Svenningsen in reduction
thereof, the Escrow Agent shall promptly transfer and deliver to Rittenberg all
the pledged Shares and all rights and other property received and being held by
the Escrow Agent (collectively "Escrow Property").
15. DEFAULT.
If Rittenberg defaults in the payment, at maturity, of the principal
or interest of the Loan, or any part thereof, such default, continuing for a
period of fifteen (15) days after notice to Rittenberg as herein provided,
Svenningsen shall notify the Escrow Agent and the Escrow Agent shall transfer to
Svenningsen all
8
<PAGE> 9
the Escrow Property. Svenningsen shall have the rights and remedies provided in
the Uniform Commercial Code in force in the State of New York at the date of
this agreement. In addition to and in conjunction with such rights and remedies,
Svenningsen may, by giving fifteen (15) days notice to Rittenberg by certified
mail, and without liability for any diminution in price that may have occurred,
sell all the pledged Shares (subject to the securities restrictions on the
Shares) in any manner and for any price Svenningsen determines. At any bona fide
public sale, Svenningsen may purchase all or any part of the pledged shares.
Svenningsen may retain out of the proceeds of any sale an amount equal to the
principal and interest then due on the Loan, plus the expenses of the sale, and
shall pay any balance of the proceeds to Rittenberg. As heretofore stated,
Rittenberg shall not be liable for any deficiency.
16. EXCULPATION AND INDEMNIFICATION OF ESCROW AGENT.
Svenningsen and Rittenberg acknowledge and agree that:
Kurzman & Eisenberg shall be the Escrow Agent and the Escrow Agent
shall be protected in acting upon any written notice, request, waiver, consent,
certificate, receipt, authorization, power of attorney or other paper or
document which the Escrow Agent in good faith believes to be genuine and what it
purports to be, and shall have no duty or responsibility to investigate or
inquire into the accuracy, authenticity or legal sufficiency of any such item.
The Escrow Agent may consult with outside counsel in the
9
<PAGE> 10
event a dispute or question arises as to the construction of any of the
provisions of this Agreement or the duties of the Escrow Agent, and the Escrow
Agent shall incur no liability and shall be fully protected by acting in good
faith in accordance with the opinion and instructions of its counsel.
The Escrow Agent shall not be liable for any error of judgment or
any mistake of fact or law, or for anything else which the Escrow Agent may do
or refrain from doing in connection with this Agreement, except for gross
negligence or willful misconduct.
In the event of a disagreement or dispute between Svenningsen and
Rittenberg which results in adverse claims or demands being made on the Escrow
Agent, or in the event the Escrow Agent has a good faith doubt as to what action
should be taken under this Agreement, the Escrow Agent may, at its option,
refuse to comply with the conflicting claims or demands or to take other action
so long as the disagreement or dispute or good faith doubt continues or
persists, and may by way of interpleader deposit the entire amount of the Escrow
Property (as defined in Paragraph 14) with any New York court of competent
jurisdiction.
The Escrow Agent may resign as such by giving no less than ten (10)
days' advance written notice of intention to resign to Svenningsen and
Rittenberg. Any such resignation shall take effect on the later of the effective
date of resignation specified in the notice, or ten (10) days after the date the
notice of resignation is received by Svenningsen and Rittenberg. The
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<PAGE> 11
resigning Escrow Agent's duties under this Agreement shall terminate on the
effective date of resignation, and the Escrow Agent shall thereupon deliver the
assets held by such Escrow Agent to any successor escrow agent which shall be
designated in a joint written notice signed by Svenningsen and Rittenberg. If
Svenningsen and Rittenberg fail to designate a successor before the effective
date of the Escrow Agent's resignation, the Escrow Agent may petition any New
York court of competent jurisdiction for appointment of a successor escrow agent
and, pending such appointment, may deposit the Escrow Property with the court.
The Escrow Agent has served as counsel to Svenningsen in connection
with this Agreement and related transactions. Svenningsen and Rittenberg agree
that the Escrow Agent, while serving as such, shall continue to have the right
to represent its client as aforesaid, in any conflict, claim, dispute,
litigation or other proceeding arising out of or in connection with this
Agreement and all related matters, and waive any conflict of interest on the
part of the Escrow Agent.
In the event that the Escrow Agent becomes involved in litigation in
connection with or arising out of its service as Escrow Agent under this
Agreement, except by reason of such Escrow Agent's own willful misconduct or
gross negligence, Svenningsen and Rittenberg shall jointly and severally
indemnify and hold such Escrow Agent harmless against any loss, damages, costs
and expenses (including reasonable attorneys' fees) incurred by such Escrow
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<PAGE> 12
Agent in connection with such litigation.
17. Notices.
Any notices and other communications, required or permitted to be
given hereunder, shall be in writing, and shall be deemed to have been duly
given if delivered personally or sent by certified mail, return receipt
requested, to the party to be notified at his or its address set forth below or
at such other address as the party to be notified may have otherwise designated,
by notice in writing, with copies to their respective attorneys as set forth
below:
To Svenningsen: John Svenningsen
c/o Amscan, Inc.
80 Grasslands Road
Elmsford, NY 10523
with a copy to: Kurzman & Eisenberg, LLP
Attn: Sam Eisenberg, Esq.
One North Broadway
White Plains, NY 10601
To Rittenberg: Mr. Gerald C. Rittenberg
18 Carey Drive
Bedford, NY 10506
with a copy to: Orloff, Lowenbach, Stifelman &
Siegel, P.A.
Attn: Susan M. Holzman, Esq.
101 Eisenhower Parkway
Roseland, New Jersey 07068
To Escrow Agent: Kurzman & Eisenberg, LLP
Attn: Sam Eisenberg, Esq.
One North Broadway
White Plains, NY 10601
18. ADDITIONAL DOCUMENTS.
12
<PAGE> 13
The parties agree to execute such other documents and instruments as
shall be reasonably necessary to effectuate the provisions and intent of this
Loan Agreement.
19. CONDITION OF THIS AGREEMENT.
It is expressly understood and agreed that this Loan Agreement and
the contemplated Loan is conditioned upon a public offering of the shares of
stock of Amscan on or before June 30, 1997 and the issuance of Shares to
Rittenberg, at the time of such public offering, having a value of at least one
and one-half times the maximum amount of the Loan to be made hereunder and if
either of these conditions is not met, this agreement shall be null and void and
of no force and effect.
20. BINDING EFFECT.
This agreement shall be binding upon and shall inure to the benefit
of the parties hereto and each of their respective heirs, successors and
assigns.
IN WITNESS WHEREOF, the parties have executed this agreement.
/s/ JOHN A. SVENNINGSEN
--------------------------------
JOHN A. SVENNINGSEN
/s/ GERALD C. RITTENBERG
--------------------------------
GERALD C. RITTENBERG
KURZMAN & EISENBERG, LLP, ESCROW AGENT
By /s/ JOEL S. LEVER
------------------------------------
Joel S. Lever, Member/Manager
13
<PAGE> 14
RECEIPT AND ACKNOWLEDGMENT
Amount: $__________________ Dated:________________
The undersigned, GERALD C. RITTENBERG, acknowledges the receipt this
day from John A. Svenningsen of the sum of _________ ________________________
($_________) Dollars as and for an advance under a Loan Agreement made between
the parties dated October , 1996, and agrees to repay such advance and the loan
represented thereby in accordance with the terms and provisions of said Loan
Agreement and acknowledges that such advance and the loan represented thereby is
secured by the pledge of shares of stock as set forth in said Loan Agreement.
The provisions of such Loan Agreement are made a part of this Receipt
and Acknowledgement as if fully set forth herein, at length.
_____________________________
GERALD C. RITTENBERG
<PAGE> 15
NOTE
$_________________ DATED:________________
FOR VALUE RECEIVED, GERALD C. RITTENBERG, NOW RESIDING AT 18 CAREY
DRIVE, BEDFORD, NEW YORK 10506, PROMISES TO PAY TO THE ORDER OF JOHN A.
SVENNINGSEN, WHOSE PLACE OF BUSINESS IS NOW AMSCAN INC., 80 GRASSLANDS ROAD,
ELMSFORD, NEW YORK 10523, THE SUM OF FOUR MILLION ($4,000,000.00) DOLLARS OR SO
MUCH THEREOF AS MAY BE ADVANCED AND LOANED BY SVENNINGSEN TO RITTENBERG UNDER
THE TERMS OF THE LOAN AGREEMENT HEREINAFTER REFERRED TO TOGETHER WITH INTEREST
FROM THE DATE HEREOF AT THE RATE OF ____% PERCENT PER ANNUM ON THE UNPAID
PORTION OF THIS NOTE.
INTEREST SHALL BE PAID QUARTER-ANNUALLY. PRINCIPAL AND INTEREST OF THIS
NOTE SHALL BE PAID NO LATER THAN THIRTY (30) MONTHS FROM THE DATE HEREOF. THIS
NOTE MAY BE PREPAID AT RITTENBERG'S OPTION, IN INSTALLMENTS OF NO LESS THAN TWO
HUNDRED AND FIFTY THOUSAND ($250,000.00) DOLLARS, EACH AND NO MORE THAN
ONE-SEVENTH (1/7TH) OF THE PRINCIPAL OF THIS NOTE, TOGETHER WITH INTEREST TO THE
DATE OF EACH PAYMENT.
TO SECURE THE PAYMENT OF THIS NOTE AND THE INDEBTEDNESS EVIDENCED
HEREBY, RITTENBERG HAS PLEDGED CERTIFICATES REPRESENTING _________ OF THE COMMON
SHARES OF AMSCAN HOLDINGS, A DELAWARE CORPORATION, WHOSE PRINCIPAL OFFICE IS AT
80 GRASSLANDS ROAD, ELMSFORD, NEW YORK 10523, WHICH SHARES ARE HELD AS SECURITY
FOR THIS NOTE PURSUANT TO THE TERMS OF AN AGREEMENT OF LOAN BY AND BETWEEN THE
PARTIES HERETO DATED ___________________.
THE LIABILITY OF RITTENBERG TO PAY THIS NOTE IS LIMITED TO THE SHARES
OF STOCK HELD IN ESCROW AS SECURITY FOR PAYMENT OF THIS NOTE, AND IN NO EVENT
SHALL RITTENBERG BE LIABLE FOR ANY DEFICIENCY RESULTING FROM THE SALE OF SUCH
SHARES, NOR SHALL ANY ACTION OR PROCEEDING BE BROUGHT AGAINST RITTENBERG TO
RECOVER JUDGMENT AGAINST RITTENBERG UPON ANY UNPAID BALANCE OF THIS NOTE.
SVENNINGSEN, HIS HEIRS, REPRESENTATIVES, SUCCESSORS AND ASSIGNS MAY
DECLARE THE ENTIRE UNPAID PRINCIPAL AMOUNT OF THIS NOTE AND ACCRUED INTEREST
THEREON IMMEDIATELY DUE AND PAYABLE UPON THE OCCURRENCE OF ANY OF THE FOLLOWING
EVENTS: DEFAULT IN THE PAYMENT OF PRINCIPAL OR INTEREST UNDER THE NOTE, SUCH
DEFAULT REMAINING UNCURED FOR TEN (10) DAYS AFTER WRITTEN NOTICE THEREOF TO
RITTENBERG IN ACCORDANCE WITH THE NOTICE PROVISIONS CONTAINED IN PARAGRAPH ___
OF THE AGREEMENT; VOLUNTARY WITHDRAWAL BY RITTENBERG AS AN EMPLOYEE OF AMSCAN
HOLDINGS; THE FILING BY RITTENBERG OF A PETITION UNDER ANY OF THE PROVISIONS OF
THE BANKRUPTCY ACT; THE FILING OF A PETITION IN BANKRUPTCY AGAINST RITTENBERG,
THE SAME NOT BEING DISMISSED OR WITHDRAWN WITHIN TWENTY (20) DAYS AFTER THE
FILING THEREOF; THE MAKING BY RITTENBERG OF AN ASSIGNMENT FOR THE BENEFIT OF HIS
CREDITORS; OR THE APPOINTMENT OF A RECEIVER OR GUARDIAN OF HIS PROPERTY.
__________________________
GERALD C. RITTENBERG
<PAGE> 1
EXHIBIT 21
AMSCAN INC. AND AFFILIATES
SUBSIDIARIES OF THE REGISTRANT
JURISDICTION OF
SUBSIDIARIES INCORPORATION/ORGANIZATION
------------ --------------------------
Amscan (Asia Pacific) Pty. Limited Australia
Amscan de Mexico, S.A. de C.V. Mexico
Amscan Distributors (Canada) Ltd. Canada
Amscan Holdings Limited United Kingdom
Amscan Inc. New York
Amscan Partyartikel GmbH Germany
Amscan Svenska AB Sweden
Am-Source, Inc. Rhode Island
JCS Realty Corp. New York
SSY Realty Corp. New York
Trisar, Inc. California
<PAGE> 1
EXHIBIT 23(a)
INDEPENDENT AUDITORS' CONSENT
To the Stockholders of Amscan Inc.
and Affiliates:
The audits referred to in our report dated April 5, 1996, except as to note 16,
which is as of July 31, 1996 and note 7, which is as of September 30, 1996,
included the related special purpose combined financial statement schedule as of
December 31, 1994 and 1995, and for each of the years in the three-year period
ended December 31, 1995, included in the registration statement. This special
purpose combined financial statement schedule is the responsibility of the
Companies' management. Our responsibility is to express an opinion on this
special purpose combined financial statement schedule based on our audits. In
our opinion, such special purpose combined financial statement schedule, when
considered in relation to the basic special purpose combined financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.
We consent to the use of our reports included herein and to the reference to our
firm under the heading "Experts" in the prospectus.
KPMG Peat Marwick LLP
Stamford, Connecticut
November 27, 1996
<PAGE> 1
Exhibit 24
POWER OF ATTORNEY
The undersigned officer and/or director of Amscan Holdings, Inc., a
Delaware corporation (the "Company"), hereby severally constitutes Gerald C.
Rittenberg and James M. Harrison, and each of them singly, as my true and
lawful attorney-in-fact with full power to them, and each of them singly, to
sign for me and in my name and in my capacity as officer and/or director of the
Company, any and all amendments to the Registration Statement on Form S-1
(Registration No. 333-14107) relating to the offer and sale of shares of the
Company's Common Stock, $0.10 par value, which amendments may be filed pursuant
to the Securities Act of 1933, as amended, and, in general, to do all such
things in my name and behalf and in my capacity as officer and/or director of
the Company to enable the Company to comply with the provisions of the
Securities Act of 1933, as amended, and all requirements of the Securities and
Exchange Commission, including the signing and filing of such amendments, with
exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming my
signature as it may be signed by my said attorneys, and all that my said
attorneys may do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set her hand this
26th day of November, 1996.
/s/ Christine Svenningsen
-------------------------
Christine Svenningsen
<PAGE> 2
Exhibit 24
POWER OF ATTORNEY
The undersigned officer and/or director of Amscan Holdings, Inc., a
Delaware corporation (the "Company"), hereby severally constitutes Gerald C.
Rittenberg and James M. Harrison, and each of them singly, as my true and
lawful attorney-in-fact with full power to them, and each of them singly, to
sign for me and in my name and in my capacity as officer and/or director of the
Company, any and all amendments to the Registration Statement on Form S-1
(Registration No. 333-14107) relating to the offer and sale of shares of the
Company's Common Stock, $0.10 par value, which amendments may be filed pursuant
to the Securities Act of 1933, as amended, and, in general, to do all such
things in my name and behalf and in my capacity as officer and/or director of
the Company to enable the Company to comply with the provisions of the
Securities Act of 1933, as amended, and all requirements of the Securities and
Exchange Commission, including the signing and filing of such amendments, with
exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming my
signature as it may be signed by my said attorneys, and all that my said
attorneys may do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this
26th day of November, 1996.
/s/ James M. Harrison
-------------------------
James M. Harrison
<PAGE> 3
Exhibit 24
POWER OF ATTORNEY
The undersigned officer and director of Amscan Holdings, Inc., a
Delaware corporation (the "Company"), hereby severally constitutes Gerald C.
Rittenberg and James M. Harrison, and each of them singly, as my true and lawful
attorney-in-fact with full power to them, and each of them singly, to sign for
me and in my name and in my capacity as director and/or officer of the Company,
any and all amendments to the Registration Statement on Form S-1 (Registration
No. 333-14107) relating to the offer and sale of shares of the Company's Common
Stock, $0.10 par value, which amendments may be filed pursuant to the Securities
Act of 1933, as amended, and, in general, to do all such things in my name and
behalf and in my capacity as officer and/or director of the Company to enable
the Company to comply with the provisions of the Securities Act of 1933, as
amended, and all requirements of the Securities and Exchange Commission,
including the signing and filing of such amendments, with exhibits thereto and
other documents in connection therewith, with the Securities and Exchange
Commission, hereby ratifying and confirming my signature as it may be signed by
my said attorneys, and all that my said attorneys may do or cause to be done by
virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this
29th day of Oct., 1996.
/s/ John A. Svenningsen
-------------------------
John A. Svenningsen
<PAGE> 4
Exhibit 24
POWER OF ATTORNEY
The undersigned officer and/or director of Amscan Holdings, Inc., a
Delaware corporation (the "Company"), hereby severally constitutes Gerald C.
Rittenberg and James M. Harrison, and each of them singly, as my true and
lawful attorney-in-fact with full power to them, and each of them singly, to
sign for me and in my name and in my capacity as officer and/or director of the
Company, any and all amendments to the Registration Statement on Form S-1
(Registration No. 333-14107) relating to the offer and sale of shares of the
Company's Common Stock, $0.10 par value, which amendments may be filed pursuant
to the Securities Act of 1933, as amended, and, in general, to do all such
things in my name and behalf and in my capacity as officer and/or director of
the Company to enable the Company to comply with the provisions of the
Securities Act of 1933, as amended, and all requirements of the Securities and
Exchange Commission, including the signing and filing of such amendments, with
exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming my
signature as it may be signed by my said attorneys, and all that my said
attorneys may do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this
26th day of November, 1996.
/s/ Gerald C. Rittenberg
-------------------------
Gerald C. Rittenberg
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 3,530
<SECURITIES> 0
<RECEIVABLES> 54,520
<ALLOWANCES> 3,161
<INVENTORY> 46,303
<CURRENT-ASSETS> 110,109
<PP&E> 49,263
<DEPRECIATION> 18,854
<TOTAL-ASSETS> 145,753
<CURRENT-LIABILITIES> 108,013
<BONDS> 0
0
0
<COMMON> 393
<OTHER-SE> 24,246
<TOTAL-LIABILITY-AND-EQUITY> 145,753
<SALES> 147,008
<TOTAL-REVENUES> 147,008
<CGS> 92,861
<TOTAL-COSTS> 92,861
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 963
<INTEREST-EXPENSE> 4,569
<INCOME-PRETAX> 20,104
<INCOME-TAX> 767
<INCOME-CONTINUING> 18,095
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 18,095
<EPS-PRIMARY> 0<F1>
<EPS-DILUTED> 0<F1>
<FN>
<F1> Amscan Holdings, Inc. is a corporation which was formed in October 1996
for the purpose of becoming a holding company for certain operating and certain
real estate companies. Amscan Holdings, Inc., therefore, had no shares
outstanding as of the end of any of the periods presented.
</FN>
</TABLE>
