**ASSET PURCHASE AGREEMENT**     This Asset Purchase Agreement (the “**Agreement**”) is entered into on December 21, 2009, by andbetween Amscan Holdings, Inc., a Delaware corporation (“**Buyer**”) and American Greetings Corporation,an Ohio corporation (“**Seller**”). Buyer and Seller are collectively referred to herein as the“Parties.”     **WHEREAS**, Seller has determined that it desires to sell and transfer certain assets andprocesses utilized by Seller in the manufacture and distribution of Party Goods (as hereinafterdefined) generally under the “DesignWare” label (the “**Business**”);     **WHEREAS**, Buyer desires to purchase and acquire from Seller such assets utilized in theBusiness; and     **WHEREAS,**subject to the terms and conditions contained in this Agreement, Seller hereby shallsell and transfer and Buyer hereby shall purchase and acquire certain of the assets of the Selleras more fully specified below.     **NOW, THEREFORE**, in consideration of the premises and the mutual promises herein made, and inconsideration of the representations, warranties, and covenants herein contained, the Parties agreeas follows.1. **DEFINITIONS; CERTAIN RULES OF CONSTRUCTION**.     As used herein, the following terms will have the following meanings:     **“Acquired Assets”**has the meaning set forth in §2.1.     **“Action”**means any claim, action, cause of action or suit (whether in contract or tort orotherwise), litigation (whether at law or in equity and whether civil or criminal), controversy,assessment, arbitration, investigation, hearing, charge, complaint, demand, notice or proceedingto, from, by or before any Governmental Authority.     **“Additional Standards”**has the meaning set forth in §3.6     **“Affiliate”**means, as to any specified Person at any time, each Person directly or indirectlycontrolling, controlled by or under direct or indirect common control with such specified Person atsuch time.     **“Agreement”**has the meaning set forth in the preamble.     **“Amscan”**means Amscan Inc., a New York corporation and a wholly-owned subsidiary of Buyer.     **“Bill of Sale”**has the meaning set forth in §2.7(a)(ii).     **“Business”**has the meaning set forth in the recitals.
 

 
     **“Business Day”**means any weekday other than a weekday on which banks in the State of New Yorkare authorized or required by Legal Requirement to be closed.     **“Buyer”**has the meaning set forth in the preamble.     **“Buyer Financial Statements**” has the meaning set forth in §4.8.     **“Buyer Indemnitiees”**has the meaning set forth in §6.2.     **“Buyer’s Knowledge”**means the actual (and not constructive or imputed) knowledge of thefollowing individuals: James M. Harrison, Mike Harrison, Bill Finch, Barry Morin and Eric Stollman.     **“Closing”**has the meaning set forth in §2.6.     **“Closing Date”**has the meaning set forth in §2.6.     **“Contractual Obligation”**means, with respect to any Person, any written contract, agreement,deed, mortgage, lease, license, commitment, undertaking, arrangement or understanding, or otherdocument or written instrument, including without limitation any document or written instrumentevidencing or otherwise relating to any Debt (but excluding the charter and by-laws (or similarcomparable organizational documents) of such Person), to which or by which such Person is a partyor otherwise subject or bound or to which or by which any property or right of such Person issubject or bound.     **“Debt”**of any Person means all obligations of such Person (i) for borrowed money, (ii)evidenced by notes, bonds, debentures or similar instruments, (iii) under capital leases or (iv) inthe nature of guarantees of the obligations described in clauses (i) through (iii) herein of anyother Person.     **“Enforceability Exception”**has the meaning set forth in §3.2.     **“Escrow Agent”**has the meaning set forth in §2.5.     **“Escrow Agreement”**has the meaning set forth in §2.5.     **“Escrow Account”**has the meaning set forth in §2.5.     **“Equipment”**has the meaning set forth in §2.1(a).     **“Equipment Exhibit”**has the meaning set forth in §2.1(a).     **“Excluded Assets”**has the meaning set forth in §2.2.     **“Facility**” has the meaning set forth in §2.8.     **“GAAP”**means United States generally accepted accounting principles.
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     **“Governmental Authority”**means any United States federal, state or local or any foreigngovernment, or political subdivision thereof, or any multinational organization or authority or anyauthority, agency or commission entitled to exercise any administrative, executive, judicial,legislative, police, regulatory or taxing authority or power, any court or tribunal (or anydepartment, bureau or division thereof), or any arbitrator or arbitral body.     “**Indemnified Party**” has the meaning set forth in §6.5.     “**Indemnifying Party**” has the meaning set forth in §6.5.     “**Indemnity Cap**” has the meaning set forth in §6.3(e).     “**Indemnity Threshold**” has the meaning set forth in §6.3(e).     “**Initial Inventory Exhibit**” has the meaning set forth in §2.1     “**Key Buyer Customers**” has the meaning set forth in §4.9.     “**Key Seller Customers**” has the meaning set forth in §3.13.     **“Legal Requirement”**means any United States federal, state, or local or any foreign law,statute, standard, ordinance, code, rule, regulation, resolution or promulgation, or any order,judgment or decree of any Governmental Authority.     **“Liability”**means any liability or obligation (whether known or unknown, whether asserted orunasserted, whether absolute or contingent, whether accrued or unaccrued, whether liquidated orunliquidated and whether due or to become due).     **“Lien”**means any mortgage, pledge, lien, security interest, charge, adverse or prior claim,encumbrance, restriction on transfer, conditional sale or other title retention device orarrangement (including without limitation a capital lease), transfer for the purpose of subjectionto the payment of any Debt or other obligation, or restriction on the creation of any of theforegoing, whether relating to any property or right or the income or profits therefrom; provided,however, that the term “Lien” shall not include (i) statutory liens for Taxes, special assessments,or other governmental charges to the extent that the payment thereof is not in arrears or otherwisedue or is being contested in good faith by appropriate proceedings, or for which adequate reserveshave been set aside in accordance with GAAP, (ii) imperfections in title or encumbrances in thenature of zoning restrictions, easements, rights or restrictions of record on the use of realproperty if the same do not impair its use in the operations of the Business as currentlyconducted, (iii) statutory or common law liens to secure landlords, lessors or renters under leasesor rental agreements confined to the premises or property rented to the extent that no payment orperformance under any such lease or rental agreement is in arrears or is otherwise due or for whichadequate reserves have been set aside in accordance with GAAP, (iv) deposits or pledges made inconnection with, or to secure payment of, worker’s compensation, unemployment insurance, old agepension programs mandated under applicable Legal Requirements or other social security, (v)statutory or common law liens in favor of carriers, warehousemen, mechanics and materialmen,statutory or common law liens to secure claims for labor, materials or supplies and other likeliens, which secure obligations to the extent that
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payment thereof is not in arrears or otherwise due or for which adequate reserves have beenset aside in accordance with GAAP, (vi) as to any leased assets or properties (including pursuantto financial or capital leases), rights of the lessors thereof, (vii) purchase money securityinterests, to the extent such lien attaches only to the asset so purchased, (ix) restrictions onthe transfer of securities arising under federal and state securities laws; (x) any lien arising orresulting from any action taken by Buyer, Amscan or any of their Affiliates, (xi) relating toimperfections or defects in title that do not materially adversely affect the value or use of theapplicable asset in the conduct of the Business as presently conducted, (xii) to which Buyerconsents in writing, and (xiii) liens resulting from the provisions of governing Legal Requirementsof general application.     **“Loss(es)”**has the meaning set forth in §6.1.     **“Material Adverse Effect”**means with respect to the Business, any change in, or effect on, theAcquired Assets that, when considered either singly or in the aggregate, would result in a materialadverse effect on the condition (financial or otherwise) or operations of the Business taken as awhole, other than any such changes or effects resulting from (i) this Agreement, compliance withthis Agreement, the transactions contemplated hereby or the announcement or pendency thereof,including any adverse effect resulting from the announcement of the contemplated transaction on anyrelationship of Seller with any supplier, distributor, customer, vendor, licensor or employee, (ii)to the extent that it does not have a substantially disproportionate effect on the Business,changes in general economic or political conditions or the securities markets in general, (iii)changes in (a) in Legal Requirements or (b) GAAP or its application, and (iv) any adverse change,effect, event, occurrence, state of facts or development arising from or relating to thecommencement, continuation or escalation of a war, armed hostilities or other international ornational calamity or act of terrorism directly or indirectly involving the United States ofAmerica.     **“Ordinary Course of Business”**means, with respect to the Business, the ordinary course ofbusiness consistent with past custom and practice of such Business.     **“Party”**and **“Parties”**have the meanings set forth in the preamble above.     “**Party Channel**” means (i) a retail store or chain of retail stores in which the majority ofsales are derived directly from the sale of Party Goods, (ii) retailers who do not operate aphysical retail store but sell exclusively via catalogues or the internet and where a majority ofsales are derived directly from the sale of Party Goods, and (iii) distributors and wholesalers forwhich the majority of sales are derived from sales to retailers described in clause (i) and (ii)herein.     **“Party Goods”**means all kinds of party goods, including, without limitation, paper and plastictableware, accessories, novelties and party favors, consistent with the type of party goodscurrently sold by such Party.     **“Person”**means an individual, a partnership, a corporation, an association, a joint stockcompany, a limited liability company, a trust, a joint stock or venture, an unincorporatedorganization, a Governmental Authority, an estate or other entity or organization.     **“Purchase Price”**has the meaning set forth in §2.5.
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     **“Restricted Part(ies)”**has the meaning set forth in § 5.4.     **“Retained Liability”**has the meaning set forth in § 2.3.     **“Seller”**has the meaning set forth in the preamble.     **“Seller Disclosure Schedule”**has the meaning set forth in §3.     **“Seller Financial Statements”**has the meaning set forth in §3.12.     **“Seller Indemnitees”**has the meaning set forth in §6.1.     **“Seller’s Knowledge”**means the actual (and not constructive or imputed) knowledge of thefollowing individuals: Michael Goulder, Gary Kopechek, Chad Andersen, Sue Mackey, Michael Brown,Rick Buzby and Bob Kucinski.     **“Sold True-Up Inventory”**has the meaning set forth in §2.4(a)(ii).     **“Subsequent Closing Date”**means 12:01 am (Eastern) on March 1, 2010.     “**Target Inventory Value**” has the meaning set forth in §2.4(a)(i).     **“Tax”**or **“Taxes”**means any United States federal, state, or local or any foreign income, grossreceipts, license, payroll, employment, excise, severance, stamp, occupation, premium, windfallprofits, customs duties, capital stock, franchise, profits, withholding, social security (orsimilar, including FICA), unemployment, disability, real property, personal property, sales, use,transfer, registration, value added, alternative or add-on minimum, estimated, or other tax,including any interest, penalty, or addition thereto.     **“Territory”**has the meaning set forth in §5.4(a).     **“Transaction Documents”**means this Agreement and all documents entered into in connection withthis Agreement, including a Supply Agreement and a License Agreement entered into of even dateherewith between the Parties or their Affiliates, and all documents entered into pursuant to anydocument entered into pursuant to this Agreement.     “**Transition Period**” has the meaning set forth in §2.8.     “**True-Up Inventory**” has the meaning set forth in §2.1(b).     **“Third Party Claim”**has the meaning set forth in §6.5.     “**Valid Inventory Dispute**” has the meaning set forth in §2.9.2. **ACQUISITION OF ASSETS BY BUYER**.     2.1. Purchase and Sale of Assets. Seller agrees to sell and transfer to Buyer,and Buyer agrees to purchase and acquire from Seller, and subject to and upon the other termsand conditions contained herein, all of Seller’s right, title and interest in and to the
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following assets of Seller which are used in the conduct of the Business (the “**AcquiredAssets**”):     (a) The equipment owned by Seller and used in the conduct of the Business (the“**Equipment**”), each as set forth on the Equipment Exhibit attached hereto as Exhibit2.1(a) (the “**Equipment Exhibit**”), which Equipment Exhibit will include (if available inSeller’s books and records) a listing of each item of equipment and date of purchase;     (b) the Business, goodwill, and input and processes relating to the manufacture anddistribution of Party Goods associated with the Acquired Assets; and     (c) as determined pursuant to the terms of this Article 2, the True-Up Inventory.Set forth on Exhibit 2.1 is a listing of Party Goods inventory (the “**InitialInventory Exhibit**”), which includes Seller’s inventory number, quantity and the value foreach category of Party Goods inventory mutually agreed upon by the Parties. Pursuant to theterms of this Article 2, no later than five (5) business days prior to the Subsequent ClosingDate, Buyer shall confirm by delivery to Seller of one or more purchase orders the specificinventory on the Initial Inventory Exhibit which Buyer desires to purchase (collectively, the“**True-Up Inventory**”). The True-Up Inventory shall thereafter be delivered and the portion ofthe Purchase Price relating to the True-Up Inventory shall be released from escrow inaccordance with Section 2.4(a) hereof.     2.2. Excluded Assets. There shall be excluded from the Acquired Assets, and theSeller shall retain, all of Seller’s right, title and interest in and to all other assets,properties and rights of Seller and its Affiliates (collectively, the “**Excluded Assets**”)including:     (a) all rights of the Seller under the Transaction Documents; and     (b) any assets of Seller which are not Acquired Assets hereunder.     2.3. Liabilities Not Assumed. Buyer will not assume or perform any Liabilitiesof Seller (each, a “**Retained Liability**”).     2.4 Timing of Title Transfers. Seller agrees to sell and transfer to Buyer, andBuyer agrees to purchase and acquire from Seller, the Acquired Assets pursuant to the termsof this Agreement. Subject to the foregoing, Buyer and Seller agree as follows:     (a) Inventory.     (i) Subject to the terms of this Section 2.4 no later than five (5) BusinessDays prior to the Subsequent Closing Date, Buyer shall, pursuant to one or morepurchase orders, determine the True-Up Inventory; provided, however, that saidTrue-Up Inventory, in the aggregate, shall have a value based on the value set forthon the Initial Inventory Exhibit of at least Four Million Dollars ($4,000,000) (the“**Target Inventory Value**”); and
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     (ii) Subject to the terms of this Section 2.4, upon receipt of any purchaseorder(s) for True-Up Inventory and notwithstanding any terms therein, Seller shallarrange for shipment of the inventory contained on said purchase order FOBdestination. In the event Seller has sold or has commitments or forecasts to sellany of said True-Up Inventory between the Closing Date and receipt of said purchaseorder(s) (the “**Sold True-Up Inventory**”), Seller shall notify Buyer of the SoldTrue-Up Inventory promptly after receipt of Buyer’s purchase order containing suchSold True-Up Inventory and Buyer shall not be entitled to purchase said Sold True-UpInventory. At such time, Seller shall offer to Buyer substitute True-Up Inventory,if available, and if accepted by Buyer, Buyer shall modify said purchase orderaccordingly. As a condition to the shipment of any such True-Up Inventory, thefollowing (to the extent not previously provided) shall occur:(A) Seller shall provide evidence that any Lien on any of the True-UpInventory to be transferred has been, or on the delivery date will be,released or terminated;(B) Seller shall deliver to Buyer a Bill of Sale related to such True-UpInventory in the form attached hereto as Exhibit B; and(C) Seller and Buyer shall execute and deliver a joint release of theportion of the Purchase Price relating to the True-Up Inventory inaccordance with Section 2.5.     (b) Other Acquired Assets. Title to the Equipment set forth on the EquipmentExhibit, will be transferred to Buyer by Seller on the Closing Date but will remain at theFacility until the Subsequent Closing Date. During the Transition Period, Seller shall leasethe Equipment from Buyer for use by Seller on the terms set forth in Section 2.8 hereof.Title to the Acquired Assets described in Section 2.1(b), will be transferred to Buyer bySeller on the Closing Date.     2.5 Purchase Price. Buyer agrees to purchase the Acquired Assets for TwentyFour Million Eight Hundred and Eighty Thousand Dollars ($24,880,000) (as adjusted pursuant toSection 2.10 hereof, the “**Purchase Price**”). The Purchase Price will be payable by Buyer onthe Closing Date by wire transfer of immediately available funds to an interest bearingescrow account (the “**Escrow Account”)**with Key Bank National Association (the “**EscrowAgent**”), pursuant to the terms of an Escrow Agreement in the form attached hereto asExhibit A (the “**Escrow Agreement**”). All interest accrued on the Escrow Account willbe for the benefit of the Buyer. The Escrow Agreement shall provide for the release of thePurchase Price as follows:     (a) subject to the satisfaction or waiver of the deliveries described in Section 2.7hereof, the portion of the Purchase Price relating to the True-Up Inventory, shall bereleased on the Subsequent Closing Date; provided, however, if any purchase order for True-UpInventory has been submitted to Seller less than thirty (30) days prior to the SubsequentClosing Date, then that portion of the Escrow Account related to any such
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purchase order(s) shall not be disbursed until thirty (30) days after delivery by Buyerof such purchase order;     (b) subject to the satisfaction or waiver of the deliveries described in Section 2.7hereof, the portion of the Purchase Price relating to the Equipment shall be released onSubsequent Closing Date; and     (c) subject to the satisfaction or waiver of the deliveries described in Section 2.7hereof, the balance of the Purchase Price shall be released on the Subsequent Closing Date.     2.6 The Closing and the Subsequent Closing. The Purchase Price for the AcquiredAssets shall be paid on the Closing Date by wire transfer of immediately available funds tothe Escrow Account, regardless of the timing of the transfer of title or release of fundsfrom the Escrow Account pursuant to this Agreement. Subject to the foregoing, title to theAcquired Assets described in Section 2.1(a) and (b) shall transfer, and the effective time ofthe closing of the transfer and sale of such Acquired Assets (the “**Closing**”) shall be 11:59p.m. (Eastern) on December 21, 2009 or such other date mutually agreeable to the Parties (the“**Closing Date**”) and title to the Acquired Assets described in Section 2.1(c) shall transferFOB destination pursuant to the applicable purchase order and the terms of this Agreement.The transfers and deliveries described in Section 2.7 with regard to transfers and deliverieson each of the Closing Date and the Subsequent Closing Date, as the case may be, hereof shallbe mutually interdependent and no transfer or delivery on each of said dates shall be deemedto have occurred until all of the transfers and deliveries provided for in Section 2.7 hereofwith regard to transfers and deliveries on each applicable date, shall also have occurred orhave been waived.     2.7 Deliveries by Seller and Buyer.(a) On the Closing Date, Seller will deliver to the Buyer:(i) The Escrow Agreement in the form attached hereto as ExhibitA, duly executed by Seller;(ii) The bill of sale for the Acquired Assets described in Section 2.1(a)and Section 2.1(b) in the form attached hereto as Exhibit B (the “**Billof Sale**”), duly executed by Seller;(iii) Evidence that any Lien on any of the Acquired Assets has been or onthe Closing Date will be released or terminated;(iv) Such other instruments of sale, transfer, conveyance and assignmentas the Buyer and its counsel have reasonably requested; and(v) The Initial Inventory Exhibit.(b) On the Closing Date, Buyer will deliver to Seller:
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(i) Evidence of the wire transfer of the Purchase Priceto the Escrow Agent;(ii) The Escrow Agreement in the form attached hereto asExhibit A, duly executed by Buyer and the Escrow Agent;(iii) The Bill of Sale for the Acquired Assets describedin Section 2.1(a) and Section 2.1(b) in the form attached hereto asExhibit B, duly executed by Buyer; and(iv) Such other instruments of sale, transfer,conveyance and assignment as Seller and its counsel have reasonablyrequested.     (c) Upon shipment of any True-Up Inventory if such occurs before the Subsequent ClosingDate, or on the Subsequent Closing Date, if no True-Up Inventory has been shipped prior tosuch date, Buyer and Seller shall make the deliveries described in Section 2.4(a)(ii).     (d) On or before the Subsequent Closing Date or such other date as mutually agreed uponby the Parties, the Seller shall have:          (i) Provided access to Buyer to the Facility for purposes of disassembling and shippingthe Equipment;(ii) Delivered the balance of any True-Up Inventory on Buyer’s purchaseorders delivered on or before five (5) Business Days prior to the SubsequentClosing Date which, subject to this Agreement, has not previously beenshipped; and(iii) Delivered a final joint release related to the Escrow Account.(e) On the Subsequent Closing Date, Buyer shall deliver:(i) A final joint release related to the Escrow Account.     2.8 Transition Period. From the Closing Date until the Subsequent Closing Date(the “**Transition Period**”), Seller shall continue to operate the Business in order towind-down the affairs thereof and transition the same to Buyer on a no more extensive orcostly basis as operated historically. It is the intent of the Parties that they will workduring the Transition Period with a goal to achieve an orderly transition of inventory andcustomer orders so that, to the extent practical, on the Subsequent Closing Date, thepurpose of this Agreement has been achieved. In connection therewith, Seller shall (i)lease the Equipment from Buyer for One Dollar ($1.00), and (ii) subject to Section 2.4, maysell any inventory related to the Business for its own account and for its own benefit inaccordance with its customary practice. During the Transition Period, Seller covenants andagrees to maintain the Equipment in good working condition, normal wear and tear exceptedand Seller further covenants and agrees to the provisions set forth in Section 5.5 hereof.Seller hereby grants to Buyer a non-exclusive right of access to the facility
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located in Kalamazoo, Michigan (the “**Facility**”) for the purpose of allowing Buyer andits Affiliates, officers, directors, shareholders, employees, agents and consultants tooperate and to transition the operation of the Business from the Facility to one or morefacilities owned or operated by Buyer. This Agreement shall not operate or be construed tocreate a landlord-tenant relationship between Seller and Buyer nor to grant an easement infavor of Buyer. Instead, this Agreement is solely intended to allow Buyer access to theFacility for the purposes described herein. Nothing in this Section 2.8 shall beinterpreted as a “sale-lease-back” of the Equipment. If not delivered previously pursuantto one or more purchase orders delivered by Buyer to Seller, on or promptly after theSubsequent Closing Date, the True-Up Inventory set forth on any unfulfilled purchase ordersshall be delivered to Buyer FOB destination, at a location directed by Buyer.     2.9 Inventory Valuation. The value of the inventory contained on the InitialInventory Exhibit and any purchase order(s) submitted by Buyer between the Closing Date andthe Subsequent Closing Date, as the case may be, shall be as set forth on the InitialInventory Exhibit. From and after shipment of any inventory transferred and sold to Buyerpursuant to the terms hereof, Buyer will have ten (10) Business Days days to review thecontents thereof and the inventory so delivered and to contest any portions thereof asfollows: Buyer and Seller agree that the only basis for disagreement by Buyer with regardto the True-Up Inventory transferred and sold hereunder shall be (i) incorrect quantities ofinventory, (ii) inventory that is not in compliance with Legal Requirements or AdditionalStandards (as defined in Section 3.6) or (iii) inventory that was not listed on Buyer’spurchase order (each, a “**Valid Inventory Dispute**”).     2.10 Adjustment to Purchase Price. In the event that on or before theSubsequent Closing Date, Buyer delivers to Seller purchase orders for True-Up Inventorywhich exceed, in the aggregate the Target Inventory Value, Buyer shall either (a) paySeller, within thirty (30) days of delivery of such additional True-Up Inventory, dollar fordollar, the amount that said True-Up Inventory exceeds the Target Inventory Value and saidamount shall be added to the Purchase Price, or (b) amend the purchase order(s) so thatpurchase orders for True-Up Inventory equal, in the aggregate, the Target Inventory Value.The Parties acknowledge and agree that the portion of the Purchase Price allocated to theTrue-Up Inventory shall not be less than the Target Inventory Value unless (a) there is aValid Inventory Dispute and Seller has no other inventory on-hand to transfer and sell toBuyer hereunder, or (b) Seller does not have inventory on-hand to satisfy the purchaseorders, in which case only, to the extent of any such deficiency in the True-Up Inventory,the Purchase Price shall be reduced accordingly.     2.11 Allocation of Purchase Price. Buyer and Seller agree that the PurchasePrice for the Acquired Assets shall be allocated among the Acquired Assets in accordancewith Schedule 2.11, which will be prepared by Buyer and Seller in accordance withSection 1060 of the United States Internal Revenue Code of 1986, as amended. Buyer andSeller shall use such allocation of the Purchase Price in all relevant Tax returns.
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3. **REPRESENTATIONS AND WARRANTIES OF SELLER**. Seller represents and warrants to Buyer that,except as set forth in the disclosure schedule attached to this Agreement (the “**Seller DisclosureSchedule**”):     3.1. Organization and Qualification of the Seller. Seller is a corporation thatis duly organized, validly existing, and in good standing under the laws of the State of Ohioand has the requisite corporate power and authority to own and use its assets and carry onthe Business as it is now being conducted, except where failure to have the same would nothave a Material Adverse Effect. Seller is duly qualified to do business and is in goodstanding in each jurisdiction in which the properties owned, leased or operated by it or thenature of the business conducted by it makes such qualification necessary, except where thefailure to be so qualified and in good standing has not had, and is not reasonably likely tohave, a Material Adverse Effect.     3.2. Authorization of Transaction. Seller has all requisite corporate power toexecute and deliver the Transaction Documents and has taken all corporate action necessary toauthorize the consummation of the transactions contemplated by the Transaction Documents andthe performance of its obligations contemplated by the Transaction Documents. Each of theTransaction Documents has been duly executed and delivered by Seller and is enforceableagainst Seller in accordance with its terms, subject to applicable bankruptcy, insolvency,reorganization, moratorium or other Legal Requirements relating to or affecting the rightsand remedies of creditors generally and to general principles of equity (regardless ofwhether considered in a proceeding in equity or at law) (the “**Enforceability Exceptions**”).     3.3. Noncontravention. Except as disclosed on Section 3.3 of theSeller Disclosure Schedule, neither the execution and the delivery of this Agreement, nor theconsummation of the transactions contemplated hereby, will (i) violate any material LegalRequirement to which Seller is subject, (ii) result in a material breach or violation of, ordefault under, or constitute an event which would with the passage of time or the giving ofnotice or both constitute a default under, or give rise to a right to terminate, amend,modify, abandon or accelerate any material Contractual Obligation of Seller, (iii) requireany action by (including any authorization, consent or approval), or in respect of (includingnotice to), any Person under any material Contractual Obligation of Seller, or (iv) result ina breach or violation of, or default under, Seller’s articles of incorporation or code ofregulations.     3.4. Brokers’ Fees. Seller does not have any Liability or obligation to pay anyfees or commissions to any broker, finder, or agent with respect to the transactionscontemplated by the Transaction Documents for which Buyer could become liable or obligated.     3.5. Assets. Seller has good and valid title to and the power to sell ortransfer to Buyer, all of the Acquired Assets free and clear of any Liens except as describedin Section 3.5 of the Seller Disclosure Schedule. Subject to the terms of thisAgreement, the Equipment included in the Acquired Assets, on the Closing Date is, and on theSubsequent Closing Date will be (i) in good operating condition and repair, normal wear andtear
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excepted, and (ii) have been maintained in accordance with commercially reasonableindustry practice by Seller.     3.6. Inventory. Except as set forth in Section 3.6(a) of the SellerDisclosure Schedule, all inventory on the Initial Inventory Exhibit is, and all True-UpInventory delivered to Buyer shall be, inventory that, as of the Closing Date, is usable andsalable by Buyer in the Ordinary Course of Business, exists on Seller’s active line-lists anddoes not include any defective items or items of below-standard quality. All items includedin the Initial Inventory Exhibit, and delivered as True-Up Inventory (a) is the property ofSeller, free and clear of any Liens, (b) is not held by Seller on consignment from others,and (c) complies with all Legal Requirements, as well as the testing and other requirementsof Seller and its customers and licensors as set forth in **Annex A**of the Seller DisclosureSchedule (the “**Additional Standards**”).     3.7. Legal and Other Compliance. Seller is in compliance with all applicableLegal Requirements relating to the conduct of the Business and the Acquired Assets, theviolation of which would have a Material Adverse Effect, and no action has been filed orcommenced or, to Seller’s Knowledge, threatened against it alleging any failure so to comply.Without limiting the generality of the foregoing, Seller shall or does not have to complywith the provisions of any bulk transfer laws of any jurisdiction in connection with thetransactions contemplated by this Agreement.     3.8. Governmental Approvals. Except for the filings and approvals set forth inSection 3.8 of the Seller Disclosure Schedule and the filings and approvals which thefailure to obtain will not have a Material Adverse Effect, no action by or in respect of,declaration, filing or registration with, or notice to, or authorization, consent or approvalor permit of, any Governmental Authority is necessary or required for, or in connection with,the valid and lawful authorization, execution, delivery, and performance by Seller of eachTransaction Document to which Seller is a party or the consummation by Seller of thetransactions contemplated thereby.     3.9. Consents. Except for third-party notices and third-party consents,approvals and waivers which the failure to obtain would not have a Material Adverse Effect,Seller has given all of the third-party notices and procured all third-party consents,approvals, and waivers necessary to permit the consummation by Seller of the transactionscontemplated hereby as set forth on Section 3.9 of the Seller Disclosure Schedule,including obtaining a release of the Liens described in Section 3.5 of the SellerDisclosure Schedule.     3.10. Litigation. There are no Actions related to the Business or AcquiredAssets to which Seller is a party (either as plaintiff or defendant) pending or, to Seller’sKnowledge, threatened that, individually or collectively, would be reasonably likely toresult in a Material Adverse Effect, or that question the validity of the TransactionDocuments or of any action taken or to be taken pursuant to or in connection with theprovisions of this Agreement. There are no outstanding judgments, orders, decrees,citations, fines or penalties or written notices of violation against Seller affecting the
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Business or Acquired Assets under any Legal Requirement that, individually orcollectively, would be reasonably likely to result in a Material Adverse Effect.     3.11. Affiliated Transactions. Except as set forth on Section 3.11 ofthe Seller Disclosure Schedule, no Affiliate of Seller owns or otherwise has any rights to orinterests in any Acquired Asset.     3.12. Seller Financial Statements. All financial statements of Seller(including the notes to such financial statements) included in Seller’s Annual Report on Form10-K for the fiscal year ended February 28, 2009 and Seller’s Quarterly Report on Form 10-Qfor the quarter ended August 28, 2009 (collectively, the “**Seller Financial Statements**”) (i)are in accordance with the books and records of Seller in all material respects, (ii) presentfairly in all material respects the financial position, results of operations, changes instockholders’ equity and cash flow (as applicable) of Seller as of the respective dates andfor the respective periods indicated, and (iii) have been prepared in conformity with GAAPapplied in all material respects on a consistent basis through all the periods involved(subject, as to Seller’s Quarterly Report on Form 10-Q for the quarter ended August 28, 2009,any year end accruals). Except as set forth on Section 3.12 of the Seller DisclosureSchedule, Seller has no material Liabilities related to the Party Channel Business or theAcquired Assets which would be of the type required by GAAP to be disclosed in the SellerFinancial Statements, other than (i) those disclosed (or reserved against) in the SellerFinancial Statements or in Seller’s periodic reports, including any Form 10-Q since February28, 2009, or specifically reflected in the notes thereto, (ii) those arising in the OrdinaryCourse of Business since August 28, 2009, (iii) that are incurred under or as a result ofthis Agreement or the Transaction Documents, or (iv) are otherwise disclosed in the SellerDisclosure Schedule.     3.13. Customers. Section 3.13 of the Seller Disclosure Schedule liststhe ten largest Party Channel customers (based on net sales) for calendar 2009 until October31, 2009 (the “**Key Seller Customers**”). Since January 1, 2009, except as set forth onSection 3.13 of the Seller Disclosure Schedule, no Key Seller Customer set forth onthe Seller Disclosure Schedule, and no Party Channel customer or group of Party Channelcustomers, whose sales would have a Material Adverse Effect on the Business, has terminatedor materially and adversely altered its relationship with the Business, and Seller has notreceived any written notice from any Key Seller Customer, or material Party Channel customeror customers, of its intention to terminate or materially and adversely alter itsrelationship with the Business.     3.14. THE REPRESENTATIONS AND WARRANTIES SET FORTH IN THIS ARTICLE 3 ARE THE ONLYREPRESENTATIONS AND WARRANTIES BEING MADE BY SELLER AND ITS AFFILIATES IN THIS AGREEMENT.EXCEPT AS SET FORTH IN THIS ARTICLE 3 OR IN ANY OTHER TRANSACTION DOCUMENT, NONE OF THESELLER, ITS AFFILIATES OR ANY OF THEIR RESPECTIVE OFFICERS, DIRECTORS, EMPLOYEES ORREPRESENTATIVES MAKE OR HAVE MADE ANY OTHER REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED,AT LAW OR IN EQUITY, IN RESPECT OF THE BUSINESS OR ANY OF THE ACQUIRED ASSETS, INCLUDING WITHRESPECT TO
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(I) MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE, (II) WARRANTY AGAINSTINFRINGEMENT, (III) THE OPERATION OF THE BUSINESS BY THE BUYER AFTER THE CLOSING OR (IV) THEPROBABLE SUCCESS OR PROFITABILITY OF THE BUSINESS AFTER THE CLOSING, ALL OF WHICH ARE HEREBYDISCLAIMED.4. **REPRESENTATIONS AND WARRANTIES OF BUYER**. Buyer represents and warrants to Seller that:     4.1. Organization and Qualification of Buyer and Amscan. Each of Buyer andAmscan is a corporation that is duly organized, validly existing, and in good standing underthe laws of its respective state of incorporation and each has the requisite corporate powerand authority to own and use its assets and carry on its business as it is now beingconducted, except where the failure to have one would not have a material adverse effect onthe Buyer, its Affiliates or the transactions described herein. Each of Buyer and Amscan isduly qualified to do business and is in good standing in each jurisdiction in which theproperties owned, leased or operated by it or the nature of the business conducted by itmakes such qualification necessary, except where the failure to be so qualified and in goodstanding has not had, and is not reasonably likely to have, a material adverse effect on theBuyer, its Affiliates or the consummation of the transaction described herein.     4.2. Authorization of Transaction. Each of Buyer and Amscan has all requisitecorporate power and authority to execute and deliver the Transaction Documents to which it isa party and has taken all corporate action necessary to authorize the consummation of thetransactions contemplated by the Transaction Documents to which it is a party and theperformance of its obligations contemplated thereby. Each of the Transaction Documents towhich it is a party has been duly executed and delivered by Buyer or Amscan and is or willbe, as applicable, enforceable against the Buyer and Amscan in accordance with their terms,subject to the Enforceability Exceptions.     4.3. Noncontravention. Neither the execution and the delivery of anyTransaction Document, nor the consummation of the transactions contemplated thereby, will (i)violate any material Legal Requirement to which Buyer or Amscan is subject, (ii) result in amaterial breach or violation of, or default under, any material Contractual Obligation ofBuyer or Amscan, (iii) require any action by (including any authorization, consent orapproval), or in respect of (including notice to), any Person under any material ContractualObligation of Buyer or Amscan, or (iv) result in a breach or violation of, or default under,Buyer’s or Amscan respective charter or bylaws.     4.4. Brokers’ Fees. Neither Buyer nor Amscan has any Liability or obligation topay any fees or commissions to any broker, finder, or agent with respect to the transactionscontemplated by the Transaction Documents for which Seller could become liable or obligated.
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     4.5. Consents. Buyer has given all of the third-party notices and procured thethird-party consents, approvals, and waivers necessary to permit the consummation by Buyerand Amscan of the transactions contemplated by the Transaction Documents.     4.6. Available Funds. As of the date hereof, Buyer and Amscan have readilyavailable funds sufficient to allow Buyer and Amscan to consummate the transactionscontemplated by the Transaction Documents.     4.7. Litigation. There are no Actions to which Buyer is a Party (either asplaintiff or defendant) or to which either of its assets are subject pending or, to Buyer’sKnowledge, threatened that question the validity of the Transaction Documents or of anyaction taken or to be taken pursuant to or in connection with the provisions of theTransaction Documents. No Action is pending or threatened wherein an unfavorable injunctionwould be reasonably likely to have a material adverse effect on the Buyer, its Affiliates orthe transactions described herein.     4.8. Financial Statements. All financial statements of Buyer (including thenotes to such financial statements) included in Buyer’s Annual Report on Form 10-K for thefiscal year ended December 31, 2008 and the Quarterly Report on Form 10-Q for the nine monthsended September 30, 2009 (collectively, the “**Buyer Financial Statements**”) (i) are inaccordance with the books and records of Buyer in all material respects, (ii) present fairlyin all material respects the financial position, results of operations, changes instockholders’ equity and cash flow (as applicable) of Buyer as of the respective dates andfor the respective periods indicated, and (iii) have been prepared in conformity with GAAPapplied in all material respects on a consistent basis through all the periods involved(except as to the quarterly statements, for normal year end accruals). Buyer has no materialLiabilities which would be of the type required to be disclosed by GAAP in the BuyerFinancial Statements or in Buyer’s periodic reports, including any Form 10-Q since December31, 2008, other than (i) those disclosed in the Buyer Financial Statements or in Buyer’speriodic reports, including any Form 10-Q since December 31, 2008, (ii) those arising in theordinary course of business since September 30, 2009, or (iii) that are incurred under or asa result of the Transaction Documents.     4.9. Customers. With regard to each of CVS Caremark Corporation, Bashas’ Inc.and Wegmans Food Markets, Inc. (the “**Key Buyer Customers**”), since January 1, 2009, no KeyBuyer Customer has terminated or materially and adversely altered its relationship as itrelates to the purchase of Party Goods with the Buyer and Buyer has not received any writtennotice from any Key Buyer Customer of its intention to terminate or materially and adverselyalter its relationship with the Buyer as it relates to the purchase of Party Goods.5. **POST CLOSING COVENANTS**.     5.1. Employees. The Parties acknowledge and agree that Buyer is not hiring anyemployees of Seller or the Business in connection with the transactions contemplated by thisAgreement or the Transaction Documents. Following the Closing, Seller shall remain and shallbe solely responsible for all payments and obligations to all employees
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employed in the Business, including, without limitation, any severance and other costsand expenses incurred in connection with termination of such employees, as applicable andSeller shall comply with all applicable Legal Requirements in connection therewith.     5.2. Further Assurances. At any time and from time to time after the Closing,at the request of either Party and without further consideration, each Party will execute anddeliver to the other Party such additional instruments of sale, transfer, conveyance,assignment and confirmation, and take such action, as the requesting Party may reasonablydetermine is necessary to effectuate the provisions and purposes of this Agreement.     5.3 Third Party License Agreements. From and after the Closing Date, Buyercovenants and agrees that in the event Seller becomes obligated to pay any royalty,commission or other payment to a third-party licensor of intellectual property related toParty Goods inventory purchased from Seller hereunder because such third-party licensor,Buyer and Seller, as the case may be, are not able to come to an agreement as contemplatedby the Joint License Agreement that provides that Buyer shall pay such amounts directly tothe applicable licensor for the subsequent resale of such Party Goods inventory by Buyer orotherwise, Buyer agrees that it shall be responsible for such payment and agrees to paySeller such amount within thirty (30) days of Seller’s invoicing of the same to Buyerfollowing sale of such inventory by Buyer.     5.4 Non-Compete.     (a) Neither Seller, nor any of its Affiliates, nor their respective subsidiaries,assigns and successors (collectively, the “**Restricted Parties**” and each a “**RestrictedParty**”), shall, directly or indirectly, at any time during the term of the Supply Agreemententered into of even date herewith between the Parties or their Affiliates engage in themanufacture of Party Goods anywhere in the United States (and its territories andpossessions), Canada or Mexico (the “**Territory**”). Notwithstanding the foregoing, nothingherein shall prevent any Restricted Party from (A) acquiring a twenty-five percent (25%) orless interest of an entity whose then-existing business is in violation of this Section 5.4so long as less than twenty-five percent (25%) of the annual revenues from such acquiredentity’s business is from the manufacture of Party Goods, (B) engaging in the activitiesrestricted hereby if Seller terminates the Supply Agreement entered into of even dateherewith between the Parties or their Affiliates in accordance with Section 10 thereof, or(C) acquiring (through merger, stock purchase or sale of all or substantially all of theassets or otherwise) ownership of more than twenty-five percent (25%) of an equity interestin any Person with a Party Goods business in violation of this Section 5.4 unless theapplicable Restricted Party consummates the divestiture of the competing business withintwelve (12) months of the closing of such acquisition or such competing business otherwiseagrees to be bound by the terms hereof. Notwithstanding the foregoing, nothing in thisAgreement shall limit or restrict in any way the ability of Seller’s foreign subsidiaries andAffiliates from manufacturing or purchasing Party Goods from any Person for sale outside theTerritory.     (b) Seller acknowledges that (i) this Section 5.4 and the restrictions set forth hereinis a material inducement to Buyer entering into this Agreement, (ii) it would impair
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the goodwill acquired by Buyer and reduce the value of the Acquired Assets obtained byBuyer through the transactions contemplated hereby if any Restricted Party were to violate ofthe obligations contained herein, and (iii) the foregoing restrictions on competition arefair and reasonable in the type of prohibited activity and both geographic and temporalscope.     (c) Seller acknowledges that irreparable injury will result to Buyer in the event of abreach or threatened breach of any of the covenants contained in this Section 5.4, the exactamount of which will be difficult to ascertain and that remedies at law for any such breachwould be inadequate, and that therefore, Seller agrees that in the event of any such breachor threatened breach of any of the provisions set forth herein, Buyer shall be entitled, inaddition to any other remedies available to it (including, without limitation, monetarydamages), to equitable relief without posting any bond or other undertaking in the form of aninjunction or otherwise to restrain any such breach hereof by Seller or any other RestrictedParty.     (d) If any of the covenants contained in this Section 5.4 is found by a court ofcompetent jurisdiction to be invalid or unenforceable as against public policy or for anyother reason, such court is directed to exercise its discretion to reform such covenant tothe end that the Restricted Parties shall be subject to noncompetition covenants that arereasonable under the circumstances and are enforceable by Buyer.     5.5 Insurance of Equipment.     (a) Seller acknowledges and agrees that during the Transition Period, Seller shallmaintain insurance against property damage and injury relating to the Equipment in accordancewith its current practice, and, subject to the terms of this Agreement, shall indemnify Buyerfor all Losses resulting from damage to the Equipment or personal injury due to the operationof said Equipment occurring while Seller remains in possession of the Equipment during theTransition Period.6. **INDEMNIFICATION**.     6.1. Buyer’s Indemnification. Subject to the limitations set forth in thisArticle 6, Buyer shall indemnify and hold harmless, Seller, and its stockholders, members,managers, officers, directors, employees, agents and Affiliates (collectively, the “**SellerIndemnitees**”) from, against and in respect of losses, claims, actions, damages, liabilities,obligations, fines, proceedings, deficiencies, and out-of-pocket costs and expenses,including reasonable attorneys’ fees and disbursements (collectively, “**Losses**”) arising fromor related to any of the following:     (a) any breach or default in performance by Buyer of any covenant or agreement of Buyercontained in this Agreement or any Transaction Document; and     (b) any breach of, or inaccuracy in, any representation or warranty made by Buyer inthis Agreement or any Transaction Document.
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     6.2. Seller’s Indemnification. Subject to the limitations set forth in thisArticle 6, Seller shall indemnify and hold harmless, Buyer, and its stockholders, members,managers, officers, directors, employees, agents and Affiliates (collectively, the “**BuyerIndemnitees**”) from, against and in respect of Losses arising from or related to any of thefollowing:     (a) any breach or default in performance by Seller of any covenant or agreement ofSeller contained in this Agreement or any Transaction Document;     (b) any breach of, or inaccuracy in, any representation or warranty made by Seller inthis Agreement or any Transaction Document; or     (c) The imposition by a third Party of any Retained Liability on Buyer.     6.3. Time Limitations; Indemnity Baskets and Ceilings.     (a) No claim may be made or suit instituted under Section 6.1(b) or Section 6.2(b) orwith regard to a representation and warranty in a Transaction Document after the close ofbusiness on the date that is (i) with regard to a claim made or suit instituted underSection 6.1(b) or Section 6.2(b), eighteen (18) months after the Closing Date, and (ii) withregard to a claim made or suit instituted under a Transaction Document other than thisAgreement, eighteen (18) months after the termination of the applicable TransactionDocument. Notwithstanding the foregoing, the eighteen (18) month time limitation describedherein shall not apply to Third Party Claims arising in connection with this Agreement orany Transaction Document, which Third Party Claims shall survive until the expiration of theapplicable statute of limitations, and such Third Party Claims shall be handled as set forthin Section 6.5.     (b) Claims may be made or suits instituted at any time if such claims or suits arebased upon fraud or intentional misrepresentation or are under Section 6.1(a), Section6.2(a) or Section 6.2(c) (subject to any applicable statutes of limitation or express timelimitation set forth herein or in any Transaction Document).     (c) For purposes of this Article 6, any claim for indemnification not involving a ThirdParty Claim (which shall be handled as set forth in Section 6.5 hereof) shall be duly madeby delivering written notice of such claim describing with reasonable specificity (in lightof the facts then known) the amount and basis of such claim to Buyer or Seller, asapplicable, prior to the applicable limitation date specified in this Section 6.3.     (d) Notwithstanding the limitation dates set forth in this Section 6.3, obligations toindemnify shall not terminate with respect to any claim as to which the Indemnified Partyshall have, before the expiration of the applicable time limitation and any applicablestatute of limitation, made a bona fide claim by delivering notice in accordance with thisArticle 6.     (e) Except with regard to fraud or intentional misrepresentation (and as furtherlimited by Section 6.4 hereof) and except with regard to additional indemnification rightsset forth in any applicable Transaction Document with regard to a
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breach of such Transaction Document, Seller shall have no liability under this Article6 to indemnify any Buyer Indemnitees for any one or more Losses unless and solely to theextent that the aggregate of all such Losses exceeds $120,000.00 (the “**IndemnityThreshold**”), in which event Buyer Indemnitees shall be entitled to indemnification for allLosses from the first dollar of Losses. The foregoing limitations do not apply to claimsfor indemnification under the representations and warranties set forth in Section 3.6 orclaims based on fraud or intentional misrepresentation. For clarification purposes only (i)all claims that are subject to the Indemnity Threshold, whether pursuant to this Agreementor one or more Transaction Documents, shall be aggregated to satisfy the Indemnity Threshold(i.e., there is not a separate Indemnity Threshold for this Agreement and each TransactionDocument), and (ii) where a particular Transaction Document provides a remedy that is inaddition to the indemnification provisions set forth herein, such remedy will not be subjectto the Indemnity Threshold. In addition, the maximum amount that the Buyer Indemnitees mayrecover, in the aggregate from Seller under this Article 6 shall not exceed Forty-FiveMillion, Eight Hundred and Eighty Thousand ($45,880,000) (the “**Indemnity Cap**”). Forclarification purposes only (i) all claims that are subject to the Indemnity Cap, whetherpursuant to this Agreement or one or more Transaction Documents, shall be aggregated tosatisfy the Indemnity Cap (i.e., there is not a separate Indemnity Cap for this Agreementand each Transaction Document), and (ii) where a particular Transaction Document provides aremedy that is in addition to the indemnification provisions set forth herein, such remedywill be subject to the Indemnity Cap.     (f) Notwithstanding anything in this Article 6 to the contrary, Buyer shall have noliability under Section 6.1(b) to indemnify any Seller Indemnitees for any one or moreLosses unless and solely to the extent that the aggregate of all such Losses exceeds theIndemnity Threshold, in which event Seller Indemnitees shall be entitled to indemnificationfor all Losses from the first dollar of Losses. For clarification purposes only (i) allclaims that are subject to the Indemnity Threshold, whether pursuant to this Agreement orone or more Transaction Documents, shall be aggregated to satisfy the Indemnity Threshold(i.e., there is not a separate Indemnity Threshold for this Agreement and each TransactionDocument), and (ii) where a particular Transaction Document provides a remedy that is inaddition to the indemnification provisions set forth herein, such remedy will not be subjectto the Indemnity Threshold. In addition, the maximum amount that the Seller Indemnitees mayrecover, in the aggregate from Buyer under this Article 6 shall not exceed the IndemnityCap. For clarification purposes only (i) all claims that are subject to the Indemnity Cap,whether pursuant to this Agreement or one or more Transaction Documents, shall be aggregatedto satisfy the Indemnity Cap (i.e., there is not a separate Indemnity Cap for this Agreementand each Transaction Document), and (ii) where a particular Transaction Document provides aremedy that is in addition to the indemnification provisions set forth herein, such remedywill be subject to the Indemnity Cap. The foregoing limitations do not apply to claims forindemnification based on fraud or intentional misrepresentation, are further limited bySection 6.4 hereof and shall not apply to the extent otherwise set forth in any applicableTransaction Document with regard to a breach of such Transaction Document.
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     (g) Notwithstanding the foregoing, Seller’s limitation of liability for defectiveInitial Inventory and/or True-Up Inventory shall be the return of the purchase price of suchgoods, including shipping paid by Buyer, and under no circumstances will Seller be liable toBuyer for any consequential damages or lost profits (except in each case as it relates to aThird Party Claim, claims arising out of fraud or intentional misrepresentation, or anyadditional rights provided elsewhere herein).     6.4. Certain Other Indemnity Matters, Further Limitations. Except with respectto claims relating to fraud or intentional misrepresentation, as specifically set forth inSection 5.4, or any other additional indemnity or other rights set forth in any otherTransaction Document, from and after the Closing, the sole and exclusive remedies of eachSeller Indemnitee and each Buyer Indemnitee as against Buyer or Seller respectively withrespect to any and all claims of any kind whatsoever relating to the subject matter of thisAgreement and the Transaction Documents shall be pursuant to the indemnification provisionsset forth in this Article 6. In furtherance of and subject to the foregoing, the Seller andBuyer hereby waive, to the fullest extent permitted under applicable Legal Requirement, andagree not to assert and to cause each of the other Seller Indemnitees and Buyer Indemniteesnot to assert in any Action of any kind, any and all rights, claims and causes of action itmay now or hereafter have against any Party and any of their respective Affiliates and theirrespective stockholders, officers, directors, employees, agents and representatives and theirrespective Affiliates relating to the subject matter of this Agreement and any TransactionDocument, other than claims for indemnification asserted as permitted by and in accordancewith the provisions set forth in this Article 6 (including any such rights, claims or causesof action arising under or based upon common law or other Legal Requirements). Upon makingany payment to an Indemnified Party for any indemnification claim pursuant to this Article 6,the Indemnifying Party shall be subrogated, to the extent of such payment, to any rightswhich the Indemnified Party may have against other Persons with respect to the subject matterunderlying such indemnification claim. Any Loss pursuant to this Article 6 shall be net ofinsurance proceeds and Tax benefits actually received by a Buyer Indemnified Party or Sellerand the Indemnifying Party (a) irrevocably acknowledges in writing full responsibility forand agrees to fully indemnify the Indemnified Party, and (b) furnishes satisfactory evidenceof the financial ability to indemnify the Indemnified Party. For purposes of calculating anyLoss hereunder, any materiality or Material Adverse Effect qualifications in anyrepresentations and warranties shall be disregarded. To the extent permitted underapplicable Legal Requirements, any and all payments pursuant to this Article 6 under thisAgreement shall be deemed for Tax purposes to be adjustments to the Purchase Price. TheParties shall take all reasonable steps to mitigate all such Losses upon and after becomingaware of any event which could reasonably be expected to give rise to any Losses with respectto which indemnification may be requested hereunder or under any Transaction Document.     6.5. Third Party Claims. Promptly after the receipt by any Person entitled toindemnification pursuant to this Article 6 (the “**Indemnified Party**”) of notice of theassertion of a claim or the commencement of any Action against such Indemnified Party by athird party (a “**Third Party Claim**”), such Indemnified Party shall, if a claim with respectthereto is to be made against any party obligated to provide indemnification
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pursuant to this Article 6 (the “**Indemnifying Party**”), give such Indemnifying Partywritten notice thereof in reasonable detail in light of the circumstances then known to suchIndemnified Party. The failure to give such notice shall not relieve any Indemnifying Partyfrom any obligation hereunder except where, and then solely to the extent that, such failureactually and materially prejudices the rights of such Indemnifying Party. Such IndemnifyingParty shall have the right, at its option, to defend such claim, at such Indemnifying Party’sexpense and with counsel of its choice reasonably satisfactory to the Indemnified Party,provided that the Indemnifying Party conducts the defense of such claim actively anddiligently. If the Indemnifying Party assumes the defense of such claim, the IndemnifiedParty agrees to reasonably cooperate in such defense so long as the Indemnified Party is notmaterially prejudiced thereby and the Indemnifying Party (a) irrevocably acknowledges inwriting full responsibility for and agrees to fully indemnify the Indemnified Party, and (b)furnishes satisfactory evidence of the financial ability to indemnify the Indemnified Party.The Indemnified Party may retain separate co-counsel at its sole cost and expense and mayparticipate in the defense of such claim. No Indemnifying Party will consent to the entry ofany judgment or enter into any settlement with respect to a Third Party Claim without theprior written consent of the Indemnified Party, which consent will not be unreasonablywithheld, provided that such consent shall be granted in connection with any settlement (i)containing a full release of the Indemnified Party and (ii) in the case of a consent from anIndemnified Party, involves only monetary damages. In the event the Indemnifying Party doesnot defend or ceases to conduct the defense of such Third Party Claim, (x) the IndemnifiedParty may defend against, and, consent to the entry of any judgment or enter into anysettlement with respect to, such Third Party Claim, (y) the Indemnifying Party will reimbursethe Indemnified Party promptly and periodically for the costs of defending against such ThirdParty Claim, including reasonable attorneys’ fees and expenses and (z) the Indemnifying Partywill remain responsible for any Losses the Indemnified Party may suffer as a result of suchThird Party Claim to the full extent provided in this Article 6.     6.6. Information. Each Party hereby agrees to provide to the other Party onrequest all information and documentation in its possession or control that is not protectedby attorney-client privilege, attorney work-product or otherwise protected and that isreasonably necessary to support and verify any Losses which give rise to a claim forindemnification pursuant to this Article 6 and to provide reasonable access to all books,records and personnel in their possession or under their control which would have a bearingon such claim.7. **MISCELLANEOUS**.     7.1. Press Releases and Public Announcements. Subject to this Section 7.1, nopress release, publicity or other form of public written disclosure related to this Agreementshall be permitted by either party to be published or otherwise disclosed unless the otherparty has indicated its consent to the form of release in writing, except for any disclosureas is deemed necessary or advisable, in the reasonable judgment of the responsible party, tocomply with national, federal or state laws or regulations with respect to regulatoryreporting or disclosure obligations, including without limitation, under securities laws and
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stock exchange rules and regulations and further including without limitation, infilings on Form 8-K or 10-Q as the case may be.     7.2. Entire Agreement. This Agreement, including the Seller DisclosureSchedules and the other Transaction Documents, constitutes the entire agreement among theParties hereto with respect to the subject matter hereof and supersedes any and all priordiscussions, negotiations, proposals, undertakings, understandings and agreements, whetherwritten or oral, with respect thereto. In the event of any conflict between the terms ofthis Agreement and any agreement or document entered into or delivered in accordanceherewith, including any purchase order, terms and conditions of supply or any other documentdelivered in accordance herewith, the terms of this Agreement shall prevail.     7.3. Succession and Assignment; No Third-Party Beneficiary. This Agreement andthe rights of the Parties hereunder may not be assigned by operation of law or otherwise.This Agreement shall be binding upon and shall inure to the benefit of the Parties hereto andthe successors and permitted assigns thereof. This Agreement is for the sole benefit of theParties and their successors and permitted assignees and nothing herein expressed or impliedwill give or be construed to give any Person, other than the Parties and such successors andpermitted assignees, any legal or equitable rights hereunder (other than the provision ofArticle 6 relating to indemnified parties).     7.4. Counterparts. This Agreement may be executed in any number ofcounterparts, (including by facsimile transmission or by electronic mail with scan orattachment signature) each of which will be deemed an original, but all of which togetherwill constitute but one and the same instrument.     7.5. Headings. The headings contained in this Agreement are for conveniencepurposes only and will not in any way affect the meaning or interpretation hereof.     7.6. Notices. Any and all notices required hereunder shall be in writing andshall be (a) sent by certified, first-class mail, postage prepaid, (b) sent by nationalovernight courier or (c) delivered by facsimile (with the original promptly sent by any ofthe foregoing manners), to the addresses or facsimile numbers of the other Party as set forthbelow. The effective date of any notice hereunder shall be the date of receipt by thereceiving Party:   If to Buyer: Amscan Inc.  80 Grasslands Road  Elmsford, New York 10523  Facsimile: (914) 345-2056  Attention: James M. Harrison, President   And  Kurzman Eisenberg Corbin & Lever, LLP  One North Broadway  White Plains, New York 10601  (914) 285-9855  Attention: Joel S. Lever, Esq.
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   If to Seller: American Greetings Corporation  One American Road  Cleveland, Ohio 44144  Phone: (216) 252-7300  Fax: (216) 252-6741  Attention: Zev Weiss, Chief Executive Officer  Catherine Kilbane, Esq., General Counsel     7.7. Governing Law. This Agreement shall be governed by and construed inaccordance with the internal laws of the State of Delaware.     7.8. Amendments and Waivers. No alternation, waiver, cancellation, or any otherchange or modification in any term or condition of this Agreement, or any agreementcontemplated to be negotiated or reached pursuant to the terms of this Agreement, shall bevalid or binding on either party unless made in writing and signed by duly authorizedrepresentatives of both Parties. Any waiver of breach or default pursuant to this Agreementshall not be a waiver of any other subsequent default. Failure or delay by either party toenforce any term or condition of this Agreement shall not constitute a waiver of such term orcondition.     7.9. Severability. To the extent any provision of this Agreement is found by acourt of competent jurisdiction to be invalid or unenforceable, that provisionnotwithstanding, the remaining provisions of this Agreement shall remain in full force andeffect and such invalid or unenforceable provision shall be deleted.     7.10. Expenses. Each of Buyer, Amscan, and Seller will bear its own costs andexpenses (including legal and accounting fees and expenses) incurred in connection with thisAgreement, the Transaction Documents and the transactions contemplated hereby. Buyer shallpay any sales, use, excise, transfer or other similar Tax imposed with respect to thetransactions contemplated by this Agreement.     7.11. Construction. This Agreement is the result of negotiation between theParties and their respective counsel. This Agreement will be interpreted fairly in accordancewith its terms and conditions and without any strict construction in favor of either Party.Any ambiguity shall not be interpreted against the drafting Party.     7.12. Incorporation of Schedules. The Schedules identified in this Agreementare incorporated herein by reference and made a part hereof.     7.13. Arbitration. Except as expressly set forth in this Agreement, alldisagreements, disputes, controversies and claims arising out of this Agreement, shall besubmitted to and resolved by arbitration in New Castle County, Delaware before a commercialpanel of three arbitrators in accordance with and pursuant to the Commercial ArbitrationRules of the American Arbitration Association, as then in effect. The
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arbitrators shall be selected by mutual agreement of the Parties, or if no agreement canbe reached, the arbitrators shall be selected by the American Arbitration Association. Eachof the arbitrators shall be licensed attorneys with at least fifteen (15) years experience inthe negotiation and performance of commercial contracts. The discovery period shall last nomore than thirty (30) days after the arbitrators shall declare the discovery periodcommenced, and each Party may conduct no more than five (5) depositions. The arbitratorsshall issue a reasoned opinion in support of their award. The determination of any suchpanel of arbitrators shall be final and binding on the Parties. The service of any notice,process, motion or other document in connection with an arbitration proceeding or for theenforcement of any arbitration award may be made as set forth in this Agreement (other thanby telecopier). The provisions of this section shall not be deemed to preclude any Partyhereto from seeking preliminary injunctive or other equitable relief to protect or enforceits rights hereunder pending arbitration, or to prohibit any court from making preliminaryfindings of fact in connection with granting or denying such preliminary injunctive reliefpending arbitration, or to preclude any Party hereto from seeking permanent injunctive orother equitable relief after and in accordance with the decision of the arbitrators. Nothingherein shall be construed to mean that any decision of the arbitrator is subject to judicialreview or appeal, and the Parties hereto hereby waive any and all rights of judicial appealor review, on any ground whatsoever. Each Party shall bear its own costs and expenses in theevent of any dispute hereunder.     7.14. Waiver of Jury Trial. **TO THE EXTENT NOT PROHIBITED BY APPLICABLE LAW THATCANNOT BE WAIVED, THE PARTIES HEREBY WAIVE, AND COVENANT THAT THEY WILL NOT ASSERT (WHETHERAS PLAINTIFF, DEFENDANT OR OTHERWISE), ANY RIGHT TO TRIAL BY JURY IN ANY ACTION ARISING INWHOLE OR IN PART UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE CONTEMPLATEDTRANSACTIONS, WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT,TORT OR OTHERWISE. THE PARTIES AGREE THAT ANY OF THEM MAY FILE A COPY OF THIS PARAGRAPH WITHANY COURT AS WRITTEN EVIDENCE OF THE KNOWING, VOLUNTARY AND BARGAINED-FOR AGREEMENT AMONG THEPARTIES IRREVOCABLY TO WAIVE ITS RIGHT TO TRIAL BY JURY IN ANY PROCEEDING WHATSOEVER BETWEENTHEM RELATING TO THIS AGREEMENT OR ANY OF THE CONTEMPLATED TRANSACTIONS WILL INSTEAD BE TRIEDIN A COURT OF COMPETENT JURISDICTION BY A JUDGE SITTING WITHOUT A JURY.***[The remainder of this page is intentionally left blank.]*
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Asset Purchase Agreement     IN WITNESS WHEREOF, each of the undersigned has executed this Agreement as of the datefirst above written.      Buyer: **AMSCAN HOLDINGS, INC.**         By: /s/ James M. Harrison      Name: James M. Harrison     Title: President       Seller: **AMERICAN GREETINGS CORPORATION**         By: /s/ Jeffrey Weiss      Name: Jeffrey Weiss     Title: President and Chief Operating Officer The Registrant will furnish supplementally to the Commission copies of any omittedSchedule or Exhibit to this Agreement upon the Commission’s request.