Document:

exv4w4

EXECUTION

PLEDGE AND SECURITY AGREEMENT

     THIS PLEDGE AND SECURITY AGREEMENT (as it may be amended or modified from time to time, this
“Security Agreement”) is entered into as of August 13, 2010 by and among Amscan Inc., a New York
corporation (“Amscan Inc.”), Anagram International, Inc., a Minnesota corporation (“Anagram”),
Am-Source, LLC, a Rhode Island limited liability company (“Am-Source”), Factory Card Outlet of
America Ltd., an Illinois corporation (“Factory”), Gags and Games, Inc., a Michigan corporation
(“Gags”), PA Acquisition Corp., a Delaware corporation (“Acquisition”), Party City Corporation, a
Delaware corporation (“Party City”) and Party City Franchise Group, LLC, a Delaware limited
liability company (“PCFG” and together with Amscan Inc., Anagram, Am-Source, Factory, Gags,
Acquisition and Party City, each a “Borrower” and collectively, “Borrowers”), Amscan Holdings,
Inc., a Delaware corporation (the “Amscan”), AAH Holdings Corporation, a Delaware corporation
(“Holdings”),the Subsidiary Parties (as defined below) from time to time party hereto, Wells Fargo
Retail Finance, LLC, as administrative and collateral agent for the lenders party to the Credit
Agreement referred to below (in such capacity, the “Administrative Agent”).

PRELIMINARY STATEMENT

     The Loan Parties, the Administrative Agent and the Lenders are entering into a Credit
Agreement dated as of the date hereof (as amended, restated, supplemented or otherwise modified
from time to time, the “Credit Agreement”). The Grantors are entering into this Security Agreement
in order to induce the Lenders to enter into and extend credit to the Borrowers under the Credit
Agreement and to secure the Secured Obligations, including in the case of each Grantor that is a
Loan Guarantor, its obligations under the Loan Guaranty.

     ACCORDINGLY, the parties hereto agree as follows:

ARTICLE 1

DEFINITIONS

     Section 1.01. Terms Defined in Credit Agreement. All capitalized terms used herein
and not otherwise defined shall have the meanings assigned to such terms in the Credit Agreement.

     Section 1.02. Terms Defined in UCC. Terms defined in the UCC that are not otherwise
defined in this Security Agreement or the Credit Agreement are used herein as defined in the UCC.

     Section 1.03. Definitions of Certain Terms Used Herein. As used in this Security
Agreement, in addition to the terms defined in the preamble and Preliminary Statement above, the
following terms shall have the following meanings:

     “ABL Obligations” means (a) the due and punctual payment by the Borrowers of (i) the principal
of and interest (including interest accruing during the pendency of any

 

 

bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether
allowed or allowable in such proceeding) when and as due, whether at maturity, by acceleration,
upon one or more dates set for prepayment or otherwise, on the loans under the Credit Agreement and
(ii) all other monetary obligations of the Borrowers or any other Grantor to any of the Secured
Parties under the Credit Agreement and each of the Revolving Facility Security Documents, including
fees, costs, expenses and indemnities, whether primary, secondary, direct, contingent, fixed or
otherwise (including monetary obligations incurred during the pendency of any bankruptcy,
insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in
such proceeding) and (b) the due and punctual payment and performance of all other obligations of
any Borrower or any other Grantor to any of the Secured Parties under or pursuant to the Credit
Agreement and each of the Revolving Facility Security Documents.

     “Account” shall have the meaning set forth in Article 9 of the UCC.

     “Article” means a numbered article of this Security Agreement, unless another document is
specifically referenced.

     “Chattel Paper” shall have the meaning set forth in Article 9 of the UCC.

     “Collateral” shall have the meaning set forth in Article 2.

     “Collateral Access Agreement” means a landlord waiver or other agreement, substantially in the
form attached hereto as Exhibit F or such other form as shall be reasonably satisfactory to the
Administrative Agent, between the Administrative Agent and any third party (including any bailee,
consignee, customs broker, or other similar Person) in possession of any Collateral or any landlord
of any premises where any Collateral is located, as such landlord waiver or other agreement may be
amended, restated, or otherwise modified from time to time.

     “Collateral Report” means any certificate (including any Borrowing Base Certificate), report
or other document delivered by any Grantor to any Agent with respect to the Collateral pursuant to
any Loan Document.

     “Commercial Tort Claim” shall have the meaning set forth in Article 9 of the UCC.

     “Control” shall have the meaning set forth in Article 8 or, if applicable, in Section 9-104,
9-105, 9-106 or 9-107 of Article 9 of the UCC.

     “Copyrights” means, with respect to any Grantor, all of such Grantor’s right, title, and
interest in and to the following: (a) all copyrights, rights and interests in copyrights, works
protectable by copyright, copyright registrations, and copyright applications; (b) all renewals of
any of the foregoing; (c) all income, royalties, damages, and payments now or hereafter due and/or
payable under any of the foregoing, including, without limitation, damages or payments for past or
future infringements for any of the foregoing; (d) the right to sue for past, present, and future
infringements of any of the foregoing; and (e) all rights corresponding to any of the foregoing
throughout the world.

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     “Deposit Account” shall have the meaning set forth in Article 9 of the UCC.

     “Document” shall have the meaning set forth in Article 9 of the UCC.

     “Equipment” shall have the meaning set forth in Article 9 of the UCC.

     “Excluded Account” means any Deposit Account (i) for which all of the funds on deposit are
used solely to fund payroll, 401(k) and other retirement plans and employee benefits or health care
benefits and (ii) holding less at all times than $500,000 individually or $1,000,000 in the
aggregate, together with all such other Deposit Accounts excluded pursuant to this clause (ii).

     “Exhibit” refers to a specific exhibit to this Security Agreement, unless another document is
specifically referenced.

     “Fixture” shall have the meaning set forth in Article 9 of the UCC.

     “General Intangible” shall have the meaning set forth in Article 9 of the UCC.

     “Goods” shall have the meaning set forth in Article 9 of the UCC.

     “Grantors” means Holdings, Amscan, each Borrower and each of the Subsidiary Parties.

     “Instrument” shall have the meaning set forth in Article 9 of the UCC.

     “Intercreditor Agreement” means the Lien Subordination and Intercreditor Agreement dated as of
May 27, 2007, among Holdings, Amscan, the Borrowers, the Subsidiaries from time to time party
thereto, the Administrative Agent (as successor to Bank of America, N.A.) as agent for the
Revolving Facility Secured Parties referred to therein, and the Term Loan Agent, as amended,
restated, modified or supplemented from time to time.

     “Inventory” shall have the meaning set forth in Article 9 of the UCC.

     “Investment Property” shall have the meaning set forth in Article 9 of the UCC.

     “Letter-of-Credit Right” shall have the meaning set forth in Article 9 of the UCC.

     “Licenses” means, with respect to any Grantor, all of such Grantor’s right, title, and
interest in and to (a) any and all licensing agreements or similar arrangements in and to its owned
(1) Patents, (2) Copyrights, or (3) Trademarks, (b) all income, royalties, damages, claims, and
payments now or hereafter due or payable under and with respect thereto, including, without
limitation, damages and payments for past and future breaches thereof, and (c) all rights to sue
for past, present, and future breaches thereof.

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     “Patents” means, with respect to any Grantor, all of such Grantor’s right, title, and interest
in and to: (a) any and all patents and patent applications; (b) all inventions and improvements
described and claimed therein; (c) all reissues, divisions, continuations, renewals, extensions,
and continuations-in-part thereof; (d) all income, royalties, damages, claims, and payments now or
hereafter due or payable under and with respect thereto, including, without limitation, damages and
payments for past and future infringements thereof; (e) all rights to sue for past, present, and
future infringements thereof; and (f) all rights corresponding to any of the foregoing throughout
the world.

     “Perfection Certificate” means a certificate substantially in the form of Exhibit D completed
and supplemented with the schedules and attachments contemplated thereby, or any other form
approved by Administrative Agent, and duly executed by a Responsible Officer of the Borrowers.

     “Permitted Lien” means a Lien that is permitted to exist under Section 6.02 of the Credit
Agreement.

     “Pledged Collateral” means all Instruments, Securities and other Investment Property owned by
any Grantor, whether or not physically delivered to the Administrative Agent pursuant to this
Security Agreement, excluding any items specifically excluded from the definition of Collateral.

     “Receivables” means the Accounts, Chattel Paper, Documents, Investment Property, Instruments
and any other rights or claims to receive money that are General Intangibles or that are otherwise
included as Collateral, excluding any items specifically excluded from the definition of
Collateral.

     “Required Secured Parties” means (a) prior to an acceleration of the ABL Obligations under the
Credit Agreement, the Required Lenders, (b) after an acceleration of the ABL Obligations under the
Credit Agreement but prior to the date upon which the Credit Agreement has terminated by its terms
and all of the obligations thereunder have been paid in full, Lenders holding in the aggregate at
least a majority of the total Revolving Exposure of all the Lenders, and (c) after the Credit
Agreement has terminated by its terms and all of the ABL Obligations thereunder have been paid in
full (whether or not the ABL Obligations under the Credit Agreement were ever accelerated), Lenders
(or their Affiliates) holding in the aggregate at least a majority of the aggregate net Secured
Hedging Obligations then due and unpaid from the Grantors to the Lenders, Administrative Agent or
Affiliate thereof under Hedge Agreements.

     “Revolving Facility Mortgages” shall have the meaning set forth in the Intercreditor
Agreement.

     “Revolving Facility Security Documents” shall have the meaning set forth in the Intercreditor
Agreement.

     “Section” means a numbered section of this Security Agreement, unless another document is
specifically referenced.

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     “Secured Parties” means (a) the Lenders, (b) the Administrative Agent, (c) each counterparty
to any Hedge Agreement with a Loan Party the obligations under which constitute Secured Hedging
Obligations, (d) each holder of a Banking Services Obligation, (e) the beneficiaries of each
indemnification obligation undertaken by any Loan Party under any Loan Document and (f) the
successors and permitted assigns of each of the foregoing.

     “Security” shall have the meaning set forth in Article 8 of the UCC.

     “Stock Rights” means all dividends, instruments or other distributions and any other right or
property which any Grantor shall receive or shall become entitled to receive for any reason
whatsoever with respect to, in substitution for or in exchange for any Capital Stock constituting
Collateral, any right to receive an Capital Stock constituting Collateral and any right to receive
earnings, in which such Grantor now has or hereafter acquires any right, issued by an issuer of
such Capital Stock.

     “Subsidiary Parties” means (a) the Subsidiaries identified on Exhibit E hereto and (b) each
other Domestic Subsidiary that becomes a party to this Security Agreement as a Subsidiary Party
after the date hereof, in accordance with Section 7.12 herein and Section 5.12 of the Credit
Agreement.

     “Supporting Obligation” shall have the meaning set forth in Article 9 of the UCC.

     “Term Loan Agent” shall have the meaning set forth in the Intercreditor Agreement.

     “Term Loan Obligations” shall have the meaning set forth in the Intercreditor Agreement.

     “Term Loan First Lien Collateral Transition Date” shall have the meaning set forth in the
Intercreditor Agreement.

     “Term Loan Security Agreement” shall have the meaning set forth in the Intercreditor
Agreement.

     “Term Loan Security Documents” shall have the meaning set forth in the Intercreditor
Agreement.

     “Trademarks” means, with respect to any Grantor, all of such Grantor’s right, title, and
interest in and to the following: (a) all trademarks (including service marks), trade names, trade
dress, and trade styles and the registrations and applications for registration thereof and the
goodwill of the business symbolized by the foregoing; (b) all licenses of the foregoing, whether as
licensee or licensor; (c) all renewals of the foregoing; (d) all income, royalties, damages, and
payments now or hereafter due or payable with respect thereto, including, without limitation,
damages, claims, and payments for past and future infringements thereof; (e) all rights to sue for
past, present, and future infringements of the foregoing, including the right to settle suits
involving

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claims and demands for royalties owing; and (f) all rights corresponding to any of the
foregoing throughout the world.

     “UCC” means the Uniform Commercial Code as in effect from time to time in the State of New
York.

     The foregoing definitions shall be equally applicable to both the singular and plural forms of
the defined terms.

ARTICLE 2

GRANT OF SECURITY INTEREST

     Each Grantor hereby pledges, collaterally assigns, mortgages and grants to the Administrative
Agent, on behalf of and for the benefit of the Secured Parties, a security interest in all of its
right, title and interest in, to and under all personal property and other assets, whether now
owned by or owing to, or hereafter acquired by or arising in favor of such Grantor, and regardless
of where located (all of which are collectively referred to as the “Collateral”), including:

     (i) all Accounts;

     (ii) all Chattel Paper;

     (iii) all Copyrights, Patents and Trademarks;

     (iv) all Documents;

     (v) all Equipment;

     (vi) all Fixtures;

     (vii) all General Intangibles;

     (viii) all Goods;

     (ix) all Instruments;

     (x) all Inventory;

     (xi) all Investment Property;

     (xii) all cash and cash equivalents;

     (xiii) all letters of credit, Letter-of-Credit Rights and Supporting Obligations;

     (xiv) all Deposit Accounts (other than Excluded Accounts) with any bank or other financial
institution;

     (xv) all Commercial Tort Claims as specified from time to time in Exhibit B; and

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     (xvi) all accessions to, substitutions and replacements for, proceeds (including Stock
Rights), insurance proceeds and products of the foregoing, together with all books and records,
customer lists, credit files, computer files, programs, printouts and other computer materials and
records related thereto and any General Intangibles at any time evidencing or relating to any of
the foregoing;

to secure the prompt and complete payment and performance of the Secured Obligations.

     Notwithstanding the foregoing, the term “Collateral” shall not include:

          (a) any General Intangibles or other rights arising under any contracts, instruments, leases,
licenses, agreements or other documents as to which the grant of a security interest would (i)
constitute a violation of a restriction in favor of a third party on such grant or result in the
abandonment, invalidation or unenforceability of any right of such Grantor, unless and until any
required consents shall have been obtained, or (ii) result in a breach, termination or default
under such contract, instrument, lease, license, agreement or other document; provided, however,
such Collateral shall only be excluded, in each case under clauses (i) and (ii) above, to the
extent such violation or right to terminate would not be rendered ineffective pursuant to Sections
9-406, 9-407, 9-408 or 9-409 of the Uniform Commercial Code (or any successor provision or
provisions) of any relevant jurisdiction or any other applicable law or principles or equity; and
provided, further, that such Collateral shall not be excluded, and such security interest shall
attach immediately at such time as the condition causing such violation or right to terminate shall
no longer exist and to the extent severable, shall attach immediately to, any portion of such
General Intangible that does not result in any of the consequences specified in (i) or (ii) above,

          (b) Capital Stock of a Foreign Subsidiary of such Grantor, in excess of 65% of the voting
capital stock or 65% of the non-voting capital stock or any promissory note or Instrument that, for
U.S. federal income tax purposes constitutes equity, of each such Foreign Subsidiary,

          (c) the Capital Stock of any Immaterial Subsidiary,

          (d) motor vehicles,

          (e) any intent-to-use Trademark applications under applicable federal law,

          (f) any asset or property, the granting of a security interest in which would be illegal under
any applicable governmental law, rule or regulation,

          (g) any asset or property subject to a Permitted Lien (other than Liens in favor of the
Administrative Agent) to the extent that the grant of other Liens on such asset or property (i)
would result in a breach or violation of, or constitute a default under, the agreement or
instrument governing such Permitted Lien or (ii) would permit the holder of such Permitted Lien to
terminate the Grantor’s use, possession or leasing of such asset or property; provided that the
agreement or instrument governing such Permitted Lien is permitted under Section 6.04 of the Credit
Agreement to contain such restriction on the ability of the applicable Grantor to grant a Lien on
such asset or property in favor of the Administrative Agent.

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ARTICLE 3

REPRESENTATIONS AND WARRANTIES

     The Grantors, jointly and severally, represent and warrant to the Administrative Agent, for
the benefit of the Secured Parties, that:

     Section 3.01. Title, Perfection and Priority. Each Grantor has good and valid rights
in or the power to grant a security interest in the Collateral with respect to which it has
purported to grant a security interest hereunder, free and clear of all Liens except for Permitted
Liens, and has full power and authority to grant to the Administrative Agent the security interest
in such Collateral pursuant hereto. When financing statements have been filed in the appropriate
offices against such Grantor in the locations listed on the Perfection Certificate, the
Administrative Agent will have a fully perfected first priority security interest in that
Collateral in which a security interest may be perfected by filing a financing statement under the
Uniform Commercial Code in effect in the applicable jurisdiction, subject only to Permitted Liens
and to the terms of the Intercreditor Agreement.

     Section 3.02. Type and Jurisdiction of Organization, Organizational and Identification
Numbers. As of the Closing Date, the type of entity of each Grantor, its jurisdiction of
organization, the organizational number issued to it by its jurisdiction of organization and its
federal employer identification number are accurately set forth on the Perfection Certificate.

     Section 3.03. Principal Location. As of the Closing Date, each Grantor’s mailing
address and the location of its place of business (if it has only one) or its chief executive
office (if it has more than one place of business), is accurately disclosed on the Perfection
Certificate.

     Section 3.04. Collateral Locations. Each location where material Collateral is
located as of the Closing Date (except for Inventory in transit) is accurately listed on the
Perfection Certificate. All of said locations are owned by a Grantor except for locations (a) that
are leased by a Grantor as lessee and designated as such on the Perfection Certificate and (b) at
which Inventory is held in a public warehouse or is otherwise held by a bailee or on consignment as
designated on the Perfection Certificate.

     Section 3.05. Bailees, Warehousemen, Etc. The Perfection Certificate accurately sets
forth a list, as of the Closing Date, of each bailee, warehouseman and other third party in
possession or control of any material Inventory of any Grantor (except for Inventory in transit).

     Section 3.06. Exact Names. As of the Closing Date, the name in which each Grantor has
executed this Security Agreement is the exact name of such Grantor as it appears in such Grantor’s
organizational documents, as amended, as filed with such Grantor’s jurisdiction of organization.
No Grantor has, during the five years prior to the Closing Date, been known by or used any other
corporate or fictitious name or been a party to any merger or consolidation except as disclosed in
the Perfection Certificate.

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     Section 3.07. Letter-of-Credit Rights and Chattel Paper. As of the Closing Date,
Exhibit A lists all Letter-of-Credit Rights and Chattel Paper of each Grantor. All actions
reasonably necessary to protect and perfect the Administrative Agent’s Lien under the laws of the
United States, on each item listed on Exhibit A (including the delivery of all originals as
required hereunder) has been duly taken by each Grantor. The Administrative Agent will have a
fully perfected first priority security interest in the Collateral listed on Exhibit A, subject
only to Permitted Liens and to the terms of the Intercreditor Agreement.

     Section 3.08. Accounts and Chattel Paper. The names of the obligors, amounts owing,
due dates and other material information with respect to each Grantor’s Accounts and Chattel Paper
that are Collateral are and will be correctly stated in all material respects, at the time
furnished, in the records of such Grantor relating thereto and, to the extent they have been
created, in all invoices and each Collateral Report with respect thereto, to the extent that such
records and invoices are required to be furnished to Administrative Agent by such Grantor from time
to time.

     Section 3.09. Borrowing Base. Nothing has come to the attention of any Grantor that
the most recently delivered Borrowing Base Certificate is inaccurate in any material respect.

     Section 3.10. Intellectual Property. As of the Closing Date, no Grantor has any
interest in, or title to, any Patent, Trademark or Copyright except as set forth in the Perfection
Certificate. This Security Agreement is effective to create a valid and continuing Lien under the
UCC and the laws of the United States and, upon filing of appropriate financing statements in the
offices listed on the Perfection Certificate and the filing of this Security Agreement (or a fully
executed short form agreement in form and substance reasonably satisfactory to the Administrative
Agent) with the United States Copyright Office or the United States Patent and Trademark Office, as
applicable, fully perfected first priority security interests under the UCC and the laws of the
United States (subject to Permitted Liens and the terms of the Intercreditor Agreement) in favor of
the Administrative Agent for the benefit of the Secured Parties on the Patents, Trademarks and
Copyrights of the Grantors, such perfected security interests are enforceable as such as against
any and all creditors of and purchasers from the Grantors; and all action necessary or desirable
under the UCC and the laws of the United States to protect and perfect the Administrative Agent’s
Lien on the Patents, Trademarks or Copyrights of the Grantors shall have been duly taken.

     Section 3.11. No Financing Statements, Security Agreements. No authorized financing
statement or security agreement describing all or any portion of the Collateral that has not lapsed
or been terminated naming a Grantor as debtor has been filed or is of record in any jurisdiction
except (a) for financing statements or security agreements naming the Administrative Agent on
behalf of the Secured Parties as the secured party and (b) as permitted by Section 4.01(e) and
4.01(f).

     Section 3.12. Pledged Collateral.

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          (a) As of the Closing Date, the Perfection Certificate sets forth a complete and accurate list
of all of the Pledged Collateral and the percentage of the total issued and outstanding Capital
Stock of the issuer represented thereby. As of the Closing Date, each Grantor is the direct, sole
beneficial owner and sole holder of record of the Pledged Collateral listed on the Perfection
Certificate as being owned by it, free and clear of any Liens, except for the security interest
granted to the Administrative Agent for the benefit of the Secured Parties hereunder and Permitted
Liens. Each Grantor further represents and warrants that (i) all Pledged Collateral constituting
an Capital Stock has been (to the extent such concepts are relevant with respect to such Pledged
Collateral) duly authorized and validly issued by the issuer thereof and are fully paid and
non-assessable, (ii) with respect to any certificates delivered to the Administrative Agent (or
its bailee) representing an Capital Stock, either such certificates are Securities as defined in
Article 8 of the UCC as a result of actions by the issuer or otherwise, or, if such certificates
are not Securities, such Grantor has so informed the Administrative Agent so that the
Administrative Agent (or its bailee) may take steps to perfect its security interest therein as a
General Intangible, and (iii) it has used its commercially reasonable efforts to ensure that all
Pledged Collateral held by a securities intermediary is covered by a control agreement among the
applicable Grantor, the securities intermediary and the Administrative Agent (or its bailee)
pursuant to which the Administrative Agent (or its bailee) has Control.

          (b) (i) Except as permitted under the Credit Agreement, none of the Pledged Collateral is or
will be subject to any option, right of first refusal, shareholders agreement, charter or by-law
provisions or contractual restriction of any nature that reasonably could prohibit, impair, delay
or otherwise affect the pledge of such Pledged Collateral hereunder, the sale or disposition
thereof pursuant hereto or the exercise by the Administrative Agent of rights and remedies
hereunder, and (ii) no consent, approval, authorization, or other action by, and no giving of
notice or filing with, any governmental authority or any other Person is required for the pledge by
the Grantors of the Pledged Collateral pursuant to this Security Agreement or for the exercise by
the Administrative Agent of the voting or other rights with respect to the Pledged Collateral
provided for in this Security Agreement or for the remedies in respect of the Pledged Collateral
pursuant to this Security Agreement, except (x) those that have been made or obtained, (y) as may
be required in connection with such disposition by laws affecting the offering and sale of
securities generally or (z) as may be required by law in connection with an exercise of remedies.

     Section 3.13. Commercial Tort Claims. As of the Closing Date, no Grantor holds any
Commercial Tort Claims having a value in excess of $1,000,000 for which such Grantor has filed a
complaint in a court of competent jurisdiction, except as indicated on Exhibit B hereto.

     Section 3.14. Perfection Certificate. The Perfection Certificate has been duly
prepared, completed and executed and the information set forth therein is correct and complete in
all material respects as of the Closing Date.

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ARTICLE 4

COVENANTS

     From the date hereof, and thereafter until this Security Agreement is terminated, each Grantor
agrees that:

     Section 4.01. General.

          (a) Collateral Records. Each Grantor will maintain complete and accurate books and
records in all material respects with respect to the Collateral, and furnish to Administrative
Agent such information relating to the Collateral contained in such books and records that can be
obtained without unduly burdensome expense or effort or otherwise with such assistance as
Administrative Agent may arrange for such Grantor for such purpose, as Administrative Agent shall
from time to time reasonably request.

          (b) Authorization to File Financing Statements; Ratification. Each Grantor hereby
authorizes Administrative Agent to file, and if requested will deliver to the Administrative Agent,
all financing statements and other documents and take such other actions as may from time to time
be reasonably requested by Administrative Agent in order to maintain a first priority (subject to
Permitted Liens and the terms of the Intercreditor Agreement) perfected security interest in and,
if applicable and required hereunder, Control of, the Collateral. Any financing statement filed by
Administrative Agent may be filed in any filing office in any applicable Uniform Commercial Code
jurisdiction and may (i) indicate the Collateral (1) as all assets of the applicable Grantor or
words of similar effect, regardless of whether any particular asset comprised in the Collateral
falls within the scope of Article 9 of the Uniform Commercial Code of such jurisdiction, or (2) by
any other description which reasonably approximates the description contained in this Security
Agreement, and (ii) contain any other information required by part 5 of Article 9 of the UCC for
the sufficiency or filing office acceptance of any financing statement or amendment, including (A)
whether the Grantor is an organization, the type of organization and any organization
identification number issued to the Grantor and (B) in the case of a financing statement filed as a
fixture filing, a sufficient description of real property to which the Collateral relates. Each
Grantor also agrees to furnish any such information to Administrative Agent promptly upon request.

          (c) Further Assurances. Each Grantor agrees to take any and all actions necessary to
defend title to the Collateral against all persons (other than persons holding Permitted Liens on
such Collateral that have priority over the Administrative Agent’s Lien) and to defend the security
interest of the Administrative Agent in the Collateral and the priority thereof against any Lien
that is not a Permitted Lien.

          (d) Disposition of Collateral. No Grantor will sell, lease, transfer or otherwise
dispose of the Collateral except for sales, leases, transfers and other dispositions permitted
under Sections 6.07 and 6.08 of the Credit Agreement.

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          (e) Liens. No Grantor will create, incur, or suffer to exist any Lien on the
Collateral except (i) the security interest created by this Security Agreement and the Term Loan
Security Agreement and (ii) Permitted Liens.

          (f) Other Financing Statements. No Grantor will authorize the filing of any financing
statement naming it as debtor covering all or any portion of the Collateral, except to cover
security interests as permitted by Section 4.01(e).

          (g) Change of Name, Etc. Each Grantor agrees to furnish to each Administrative Agent
prompt written notice of any change in: (i) such Grantor’s name; (ii) the location of such
Grantor’s chief executive office or its principal place of business; (iii) such Grantor’s
organizational legal entity designation or jurisdiction of incorporation or formation; (iv) such
Grantor’s Federal Taxpayer Identification Number or organizational identification number assigned
to it by its jurisdiction of incorporation or formation; or (v) the acquisition by such Grantor of
any material property for which additional filings or recordings are necessary to perfect and
maintain the Administrative Agent’s security interest therein (to the extent perfection of the
security interest in such property is required by the terms hereof). Each Grantor agrees not to
effect or permit any change referred to in the preceding sentence unless all filings have been made
under the Uniform Commercial Code or other applicable law that are reasonably required in order for
the Administrative Agent to continue at all times following such change to have a valid, legal and
perfected, first priority security interest (subject to the terms of the Intercreditor Agreement
and to Permitted Liens) in the Collateral for its benefit and the benefit of the other Secured
Parties.

     Section 4.02. Receivables.

          (a) Certain Agreements on Receivables. As to Eligible Trade Receivables and Eligible
Credit Receivables, no Grantor will make or agree to make any discount, credit, rebate or other
reduction in the original amount owing on a Receivable or accept in satisfaction of a Receivable
less than the original amount thereof, except in the ordinary course of business consistent with
Grantor’s credit and rebate policies and agreements with customers and its usual business practice
as in effect from time to time.

          (b) Collection of Receivables. As to Eligible Trade Receivables and Eligible Credit
Receivables, except as otherwise provided in this Security Agreement, each Grantor will collect and
enforce, in accordance with its policies in effect from time to time and in the ordinary course of
business, all material amounts due or hereafter due to such Grantor under the Receivables; except
that, any Grantor may, with respect to a Receivable, allow in the ordinary course of business (i) a
refund or credit due as a result of ordinary course adjustments or returned or damaged or defective
merchandise, (ii) such extensions of time to pay amounts due in respect of Receivables and such
other modifications of payment terms or settlements in respect of Receivables as shall be
commercially reasonable in the circumstances, (iii) a credit, rebate or refund in accordance with
such Grantor’s credit, rebate and refund policies, as in effect from time to time, and (iv) a
credit or rebate in accordance with written credit and/or rebate agreements entered into with
specific customers prior to the incurrence of the Receivable,

12

 

all in accordance with such Grantor’s ordinary course of business consistent with its
collection practices as in effect from time to time.

          (c) Disclosure of Counterclaims on Receivables. As to Eligible Trade Receivables and
Eligible Credit Receivables, if (i) any Grantor allows any material discount or credit or enters
into any agreement to make a rebate or to otherwise reduce the amount owing on a material amount of
Eligible Trade Receivables or Eligible Credit Card Receivables (in each case, individually or in
the aggregate and other than discounts, credits, agreements or rebates that are in accordance with
the Grantors collection policies in effect from time to time), or (ii) if, to the knowledge of any
Grantor, any material dispute, setoff, claim, counterclaim or defense exists or has been asserted
or threatened with respect to a material amount of Eligible Trade Receivables or Eligible Credit
Card Receivables (in each case, individually or in the aggregate), the Grantors will promptly
disclose such fact to the Administrative Agent in writing.

          (d) Electronic Chattel Paper. If any Grantor at any time holds or acquires an
interest in any Electronic Chattel Paper or any “transferable record”, as that term is defined in
Section 201 of the Federal Electronic Signatures in Global and National Commerce Act, or in Section
16 of the Uniform Electronic Transactions Act as in effect in any relevant jurisdiction, such
Grantor shall promptly notify the Administrative Agent thereof and, at the request of the
Administrative Agent, shall take such action as the Administrative Agent may reasonably request to
vest in the Administrative Agent Control under UCC Section 9-105 of such Electronic Chattel Paper
or control (to the extent the meaning of “control” has not been clearly established under such
provisions, “control” in this paragraph (d) to have such meaning as the Administrative Agent shall
in good faith specify in writing after consultation with Amscan) under Section 201 of the Federal
Electronic Signatures in Global and National Commerce Act or, as the case may be, Section 16 of the
Uniform Electronic Transactions Act, as so in effect in such jurisdiction, of such transferable
record. The requirement in the preceding sentence shall not apply to the extent that such amount,
together with all amounts payable evidenced by Electronic Chattel Paper or any transferable record
in which the Administrative Agent has not been vested control within the meaning of the statutes
described in the immediately preceding sentence, does not exceed $1,000,000 in the aggregate for
all Grantors. The Administrative Agent agrees with such Grantor that the Administrative Agent will
arrange, pursuant to procedures reasonably satisfactory to the Administrative Agent and so long as
such procedures will not result in the Administrative Agent’s loss of Control or control, as
applicable, for the Grantor to make alterations to the Electronic Chattel Paper or transferable
record permitted under UCC Section 9-105 or, as the case may be, Section 201 of the Federal
Electronic Signatures in Global and National Commerce Act or Section 16 of the Uniform Electronic
Transactions Act for a party in Control to allow without loss of Control or control, as applicable,
unless an Event of Default has occurred and is continuing or would occur after taking into account
any action by such Grantor with respect to such Electronic Chattel Paper or transferable record.

     Section 4.03. Delivery of Instruments, Securities, Chattel Paper and Documents. Each
Grantor will (a) deliver to the Administrative Agent upon execution of this Security

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Agreement the originals of all Chattel Paper (if any then exist), certificated Securities and
Instruments having an outstanding balance in excess of $1,000,000 constituting Collateral owned by
such Grantor, (b) hold in trust for the Administrative Agent upon receipt and promptly thereafter
deliver to the Administrative Agent any Chattel Paper, certificated Securities and Instruments
having an outstanding balance in excess of $1,000,000 constituting Collateral received after the
date hereof, (c) upon the occurrence and during the continuance of a Cash Dominion Event and upon
the Administrative Agent’s request, deliver to the Administrative Agent, and thereafter hold in
trust for the Administrative Agent upon receipt and promptly deliver to the Administrative Agent
any Document evidencing or constituting Collateral and (d) upon the Administrative Agent’s request,
deliver to the Administrative Agent a duly executed amendment to this Security Agreement, in the
form of Exhibit C hereto (each, an “Amendment”), pursuant to which such Grantor will pledge any
additional Collateral. Each Grantor hereby authorizes the Administrative Agent to attach each
Amendment to this Security Agreement and agrees that all additional collateral set forth in such
Amendments shall be considered to be part of the Collateral.

     Section 4.04. Uncertificated Pledged Collateral. The Grantors will permit the
Administrative Agent from time to time to cause (subject to the terms of the Intercreditor
Agreement) the appropriate issuers (and, if held with a securities intermediary, such securities
intermediary) of uncertificated securities which are Pledged Collateral with respect to which a
Grantor owns more than 50% of the Capital Stock of the issuer of such uncertificated securities to
mark their books and records with the numbers and face amounts of all such uncertificated
securities and all rollovers and replacements therefor to reflect the Lien of the Administrative
Agent granted pursuant to this Security Agreement. The Grantors will take any actions reasonably
necessary to cause (a) the issuers of uncertificated securities which are Pledged Collateral with
respect to which a Grantor owns more than 50% of the Capital Stock of the issuer of such Pledged
Collateral, and (b) any securities intermediary which is the holder of any Pledged Collateral, to
cause the Administrative Agent to have and retain Control over such Pledged Collateral (subject to
the terms of the Intercreditor Agreement). Without limiting the foregoing, each applicable Grantor
will use its commercially reasonable efforts to cause, with respect to Pledged Collateral held with
a securities intermediary in an account with an aggregate asset value of $1,000,000 or more, such
securities intermediary to enter into a control agreement with the Administrative Agent, in form
and substance reasonably satisfactory to the Administrative Agent, giving the Administrative Agent
Control (subject to the terms of the Intercreditor Agreement).

     Section 4.05. Pledged Collateral.

          (a) Registration in Nominee Name; Denominations. Subject to the terms of the
Intercreditor Agreement, the Administrative Agent, on behalf of the Secured Parties, shall hold
certificated Pledged Collateral in the name of the applicable Grantor, endorsed or assigned in
blank or in favor of the Administrative Agent, but following the occurrence and during the
continuance of an Event of Default shall have the right (in its sole and absolute discretion) to
hold the Pledged Collateral in its own name as pledgee, or in the name of its nominee (as pledgee
or as sub-agent). Subject to the terms of the

14

 

Intercreditor Agreement, following the occurrence and during the continuance of an Event of
Default, the Administrative Agent shall at all times have the right to exchange the certificates
representing Pledged Collateral for certificates of smaller or larger denominations for any purpose
consistent with this Security Agreement.

          (b) Any Indebtedness of any Foreign Subsidiary owing to Amscan or any Subsidiary that is a
Loan Party (other than intercompany current liabilities incurred in the ordinary course of business
in connection with the cash management operations of Amscan and the Subsidiaries) in excess of
$2,000,000 shall be or become evidenced by a promissory note or other instrument, and such note or
instrument shall be promptly pledged and delivered to the Administrative Agent, duly endorsed in a
manner satisfactory to the Administrative Agent, provided, however, if such Indebtedness is deemed
to be equity for U.S. federal income tax purposes, it shall be excluded from the requirements of
this Section 4.05(b).

          (c) Exercise of Rights in Pledged Collateral. Subject, in each case, to the
Intercreditor Agreement,

               (i) Without in any way limiting the foregoing and subject to clause (ii) below, each Grantor
shall have the right to exercise all voting rights or other rights relating to the Pledged
Collateral for all purposes not inconsistent with this Security Agreement, the Credit Agreement or
any other Loan Document.

               (ii) Each Grantor will permit the Administrative Agent or its nominee at any time after the
occurrence and during the continuance of an Event of Default and upon written notice from the
Administrative Agent to the Grantors stating its intent to exercise remedies under this Section
4.05(c)(ii), to exercise all voting rights or other rights relating to Pledged Collateral,
including, without limitation, exchange, subscription or any other rights, privileges, or options
pertaining to any Capital Stock or Investment Property constituting Pledged Collateral as if it
were the absolute owner thereof.

               (iii) Each Grantor shall be entitled to receive and retain any and all dividends, interest,
principal and other distributions paid on or distributed in respect of the Pledged Collateral to
the extent that such dividends, interest, principal and other distributions are permitted by, and
otherwise paid or distributed in accordance with, the terms and conditions of the Credit Agreement,
the other Loan Documents and applicable law; provided, however, that any non-cash dividends or
other distributions that would constitute Pledged Collateral, whether resulting from a subdivision,
combination or reclassification of the outstanding Capital Stock of the issuer of any Pledged
Collateral or received in exchange for Pledged Collateral or any part thereof, or in redemption
thereof, or as a result of any merger, consolidation, acquisition or other exchange of assets to
which such issuer may be a party or otherwise, shall be and become part of the Pledged Collateral,
and, if received by any Grantor, shall not be commingled by such Grantor with any of its other
funds or property but shall be held separate and apart therefrom, shall be held in trust for the
benefit of the Secured Parties and shall be forthwith delivered to the Administrative Agent in the
same form as so received (with any necessary

15

 

endorsement or instrument of assignment) to the extent required by the terms of this
Agreement. So long as no Default or Event of Default has occurred and is continuing, the
Administrative Agent shall promptly deliver to each Grantor any Pledged Collateral in its
possession if requested to be delivered to the issuer thereof in connection with any redemption or
exchange of such Pledged Collateral permitted by the Credit Agreement.

     Section 4.06. Intellectual Property.

          (a) Upon the occurrence and during the continuance of an Event of Default and upon the written
request of the Administrative Agent, each Grantor will use its commercially reasonable efforts to
obtain all consents and approvals necessary or appropriate for the assignment to or for the benefit
of the Administrative Agent of any License held by such Grantor to enable the Administrative Agent
to enforce the security interests granted hereunder.

          (b) Each Grantor shall notify the Administrative Agent promptly if it knows or reasonably
expects that any application or registration relating to any Patent, Trademark or Copyright (now or
hereafter existing) that in such Grantor’s reasonable judgment would result in a Material Adverse
Effect on the business of the Grantor’s, taken as a whole, may become abandoned or dedicated, or of
any determination or development (including the institution of, or any such determination or
development in, any proceeding in the United States Patent and Trademark Office, the United States
Copyright Office or any court) such Grantor’s ownership of any such Patent, Trademark or Copyright,
its right to register the same, or to keep and maintain the same, except, in each case, for
dispositions permitted under the Credit Agreement.

          (c) In the event that a Grantor files an application for the registration of any material
Patent, Trademark or Copyright with the United States Patent and Trademark Office, the United
States Copyright Office or any similar office or agency, it shall provide the Administrative Agent
with written notice thereof concurrently with the next set of financial statements that are due
pursuant to Section 5.01(c) of the Credit Agreement, and, upon request of the Administrative Agent,
such Grantor shall execute and deliver any and all security agreements or other instruments as the
Agent may reasonably request to evidence the Administrative Agent’s security interest in such
Patent, Trademark or Copyright, and the General Intangibles of such Grantor relating thereto or
represented thereby.

          (d) Each Grantor shall take all actions necessary or reasonably requested by the
Administrative Agent to maintain and pursue each material application, to obtain the relevant
registration and to maintain the registration of each of the Patents, Trademarks and Copyrights
(now or hereafter existing) where failure to do so, as reasonably determined by such Grantor, could
reasonably be expected to result in a Material Adverse Effect on the business of the Grantors,
taken as a whole, except as otherwise permitted under the Credit Agreement or in cases where, in
the ordinary course of business, such Grantor reasonably decides to abandon, allow to lapse or
expire any Patent, Trademark or Copyright, including the filing of applications for renewal,
affidavits of use, affidavits of noncontestability and, if consistent with good business

16

 

judgment, to initiate opposition and interference and cancellation proceedings against third
parties.

          (e) Each Grantor shall, unless it shall reasonably determine that a Patent, Trademark or
Copyright has a Material Adverse Effect on the conduct of the business of the Grantors, taken as a
whole, promptly notify the Administrative Agent and shall, if consistent with good business
judgment, promptly sue for infringement, misappropriation or dilution of such Patent, Trademark or
Copyright and to recover any and all damages for such infringement, misappropriation or dilution,
and shall take such other actions as are appropriate under the circumstances to protect such
Patent, Trademark or Copyright, unless otherwise permitted under the Credit Agreement,

     Section 4.07. Commercial Tort Claims. Each Grantor shall promptly notify the
Administrative Agent of any Commercial Tort Claim having a value in excess of $1,000,000 acquired
by it for which such Grantor has filed a complaint in a court of competent jurisdiction and, unless
the Administrative Agent otherwise consents, such Grantor shall update Exhibit B to this Security
Agreement, thereby granting to the Administrative Agent a first priority security interest in such
Commercial Tort Claim (subject to Permitted Liens and the terms of the Intercreditor Agreement).

     Section 4.08. Letter-of-Credit Rights. Subject to the Intercreditor Agreement, if any
Grantor is or becomes the beneficiary of a letter of credit having a face amount in excess of
$1,000,000, such Grantor shall promptly notify the Administrative Agent thereof and, at the request
of the Administrative Agent, cause the issuer and/or confirmation bank to (a) consent to the
assignment of any Letter-of-Credit Rights to the Administrative Agent and (b) agree to direct all
payments thereunder following the occurrence and during the continuance of an Event of Default or a
Liquidity Event (if requested by the Administrative Agent), to the Administrative Agent Account for
application to the Secured Obligations, in accordance with the provisions of the Credit Agreement,
all in form and substance reasonably satisfactory to the Administrative Agent.

     Section 4.09. No Interference. Each Grantor agrees that it will not interfere with
any right, power and remedy of the Administrative Agent provided for in this Security Agreement,
now or hereafter existing at law or in equity or by statute or otherwise, or the exercise or
beginning of the exercise by the Administrative Agent of any one or more of such rights, powers or
remedies (to the extent the exercise thereof is permitted under this Security Agreement).

     Section 4.10. Insurance.

          (a) In the event any Material Real Estate Asset is located in any area that has been
designated by the Federal Emergency Management Agency as a “Special Flood Hazard Area”, the
applicable Grantor shall purchase and maintain flood insurance on such Collateral (including any
personal property which is located on any real property leased by such Loan Party within a “Special
Flood Hazard Area”). The amount of all insurance required by this Section shall at a minimum
comply with applicable law,

17

 

including the Flood Disaster Protection Act of 1973, as amended. If any Grantor fails to
obtain any insurance as required by this Section, the Administrative Agent at the direction of the
Required Lenders may obtain such insurance at the Borrowers’ expense. By purchasing such
insurance, the Administrative Agent shall not be deemed to have waived any Default arising from the
Grantors’ failure to maintain such insurance or pay any premiums therefor.

          (b) All insurance policies required under Section 5.05 of the Credit Agreement shall name the
Administrative Agent (for the benefit of the Administrative Agent and the other Secured Parties) as
an additional insured or as loss payee, as applicable, and shall contain loss payable clauses or
mortgagee clauses, through endorsements in form and substance reasonably satisfactory to the
Administrative Agent.

     Section 4.11. Collateral Access Agreements. Each Grantor shall use commercially
reasonable efforts to obtain a Collateral Access Agreement, from the lessor of each of its material
leased properties (other than stores), any holder of indebtedness secured by any Grantor’s real
property and the bailee, warehouseman or other third party with respect to any warehouse or other
location, in each case where Inventory having a value in excess of $500,000 is stored or located
(other than with respect to locations where Inventory is stored or located on a temporary basis
(not to exceed 60 days) in connection with docking and stevedoring services related to such
Inventory).

ARTICLE 5

REMEDIES

     Section 5.01. Remedies.

          (a) Upon the occurrence and during the continuance of an Event of Default, the Administrative
Agent may exercise any or all of the following rights and remedies:

               (i) those rights and remedies provided in this Security Agreement, the Credit Agreement, or
any other Loan Document; provided that this Section 5.01(a) shall not be understood to limit any
rights available to the Administrative Agent and the Lenders prior to an Event of Default;

               (ii) those rights and remedies available to a secured party under the UCC (whether or not the
UCC applies to the affected Collateral) or under any other applicable law (including, without
limitation, any law governing the exercise of a bank’s right of setoff or bankers’ Lien) when a
debtor is in default under a security agreement;

               (iii) give notice of sole control or any other instruction under any DDA Notification, Blocked
Account Agreement, Collateral Access Agreement or any other control or similar agreement and take
any action permitted therein with respect to the applicable Collateral;

               (iv) without notice (except as specifically provided in Section 7.01 or elsewhere herein),
demand or advertisement of any kind to any Grantor or any

18

 

other Person, enter the premises of any Grantor where any Collateral is located (through
self-help and without judicial process) to collect, receive, assemble, process, appropriate, sell,
lease, assign, grant an option or options to purchase or otherwise dispose of, deliver, or realize
upon, the Collateral or any part thereof in one or more parcels at public or private sale or sales
(which sales may be adjourned or continued from time to time with or without notice and may take
place at such Grantor’s premises or elsewhere), for cash, on credit or for future delivery without
assumption of any credit risk, and upon such other terms as the Administrative Agent may deem
commercially reasonable; and

               (v) concurrently with written notice to the Grantors, transfer and register in its name or in
the name of its nominee the whole or any part of the Pledged Collateral, to exchange certificates
or instruments representing or evidencing Pledged Collateral for certificates or instruments of
smaller or larger denominations, and subject to the notice requirements of Section 4.05(c)(ii), to
exercise the voting and all other rights as a holder with respect thereto, to collect and receive
all cash dividends, interest, principal and other distributions made thereon and to otherwise act
with respect to the Pledged Collateral as though the Administrative Agent was the outright owner
thereof.

          (b) Each Grantor acknowledges and agrees that the compliance by the Administrative Agent, on
behalf of the Secured Parties, with any applicable state or federal law requirements in connection
with a disposition of the Collateral will not be considered to adversely affect the commercial
reasonableness of any sale of the Collateral.

          (c) The Administrative Agent shall have the right upon any public sale or sales and, to the
extent permitted by law, upon any private sale or sales, to purchase for the benefit of the
Administrative Agent and the Secured Parties, the whole or any part of the Collateral so sold, free
of any right of equity redemption, which equity redemption each Grantor hereby expressly releases.

          (d) Until the Administrative Agent is able to effect a sale, lease, transfer or other
disposition of Collateral, the Administrative Agent shall have the right to hold or use Collateral,
or any part thereof, to the extent that it deems appropriate for the purpose of preserving
Collateral or the value of the Collateral, or for any other purpose deemed appropriate by the
Administrative Agent. The Administrative Agent may, if it so elects, seek the appointment of a
receiver or keeper to take possession of Collateral and to enforce any of the Administrative
Agent’s remedies (for the benefit of the Administrative Agent and Secured Parties), with respect to
such appointment without prior notice or hearing as to such appointment.

          (e) If, after the Credit Agreement has terminated by its terms and all of the ABL Obligations
have been paid in full, there remain Secured Hedging Obligations outstanding, the Required Secured
Parties may exercise the remedies provided in this Section 5.01 upon the occurrence of any event
which would allow or require the termination or acceleration of such Secured Hedging Obligations
pursuant to the terms of

19

 

any relevant Hedge Agreement (it being understood that the Administrative Agent shall have no
obligation to take any such action).

          (f) Notwithstanding the foregoing, neither the Administrative Agent nor the Secured Parties
shall be required to (i) make any demand upon, or pursue or exhaust any of their rights or remedies
against, the Grantors, any other obligor, guarantor, pledgor or any other Person with respect to
the payment of the Secured Obligations or to pursue or exhaust any of their rights or remedies with
respect to any Collateral therefor or any direct or indirect guarantee thereof, (ii) marshal the
Collateral or any guarantee of the Secured Obligations or to resort to the Collateral or any such
guarantee in any particular order, or (iii) effect a public sale of any Collateral.

          (g) Each Grantor recognizes that the Administrative Agent may be unable to effect a public
sale of any or all the Pledged Collateral and may be compelled to resort to one or more private
sales thereof. Each Grantor also acknowledges that any private sale may result in prices and other
terms less favorable to the seller than if such sale were a public sale and, notwithstanding such
circumstances, agrees that any such private sale shall not be deemed to have been made in a
commercially unreasonable manner solely by virtue of such sale being private. The Administrative
Agent shall be under no obligation to delay a sale of any of the Pledged Collateral for the period
of time necessary to permit any Grantor or the issuer of the Pledged Collateral to register such
securities for public sale under the Securities Act of 1933, as amended, or under applicable state
securities laws, even if any Grantor and the issuer would agree to do so (it being acknowledged and
agreed that no Grantor shall have any obligation hereunder to do so).

          (h) Notwithstanding the foregoing, any rights and remedies provided in this Section 5.01 shall
be subject to the Intercreditor Agreement.

     Section 5.02. Grantor’s Obligations Upon Default. Upon the request of the
Administrative Agent after the occurrence and during the continuance of an Event of Default, each
Grantor will:

          (a) assemble and make available to the Administrative Agent the Collateral and all books and
records relating thereto at any place or places reasonably specified by the Administrative Agent,
whether at such Grantor’s premises or elsewhere;

          (b) permit the Administrative Agent, by the Administrative Agent’s representatives and agents,
to enter, occupy and use any premises where all or any part of the Collateral, or the books and
records relating thereto, or both, are located, to take possession of all or any part of the
Collateral or the books and records relating thereto, or both, to remove all or any part of the
Collateral or the books and records relating thereto, or both, and to conduct sales of the
Collateral, without any obligation to pay any Grantor for such use and occupancy.

     Section 5.03. Grant of Intellectual Property License. For the purpose of enabling the
Administrative Agent to exercise the rights and remedies under this Article 5 at such

20

 

time as the Administrative Agent shall be lawfully entitled to exercise such rights and
remedies, each Grantor hereby (a) grants to the Administrative Agent, for the benefit of the
Administrative Agent and the Secured Parties, an irrevocable, nonexclusive license (exercisable
only during the continuance of an Event of Default and without payment of royalty or other
compensation to such Grantor) to use, license or sublicense any intellectual property rights now
owned or hereafter acquired by such Grantor, wherever the same may be located, and including in
such license access to all media in which any of the licensed items may be recorded or stored and
to all computer software and programs used for the compilation or printout thereof and (b)
irrevocably agrees that, at any time and from time to time following the occurrence and during the
continuance of an Event of Default, the Administrative Agent may sell any Grantor’s Inventory
directly to any Person, including without limitation Persons who have previously purchased any
Grantor’s Inventory from such Grantor and in connection with any such sale or other enforcement of
the Administrative Agent’s rights under this Security Agreement, may (subject to any restrictions
contained in applicable third party licenses entered into by a Grantor) sell Inventory which bears
any Trademark owned by or licensed to any Grantor and any Inventory that is covered by any
Copyright owned by or licensed to such Grantor and the Administrative Agent may finish any work in
process and affix any relevant Trademark owned by or licensed to any Grantor and sell such
Inventory as provided herein. The use of the license granted pursuant to clause (a) of the
preceding sentence by the Administrative Agent may be exercised, at the option of the
Administrative Agent, only upon the occurrence and during the continuance of an Event of Default;
provided, however, that any license, sublicense or other transaction entered into by the
Administrative Agent in accordance herewith shall be binding upon each Grantor notwithstanding any
subsequent cure of an Event of Default. In the event the license set forth in this Section 5.03 is
exercised with regard to any Trademarks, then the following shall apply: (i) all goodwill arising
from any licensed or sublicensed use of any Trademark shall inure to the Grantor; (ii) the licensed
or sublicensed Trademarks shall only be used in association with goods or services of a quality and
nature consistent with the quality and reputation with which such Trademarks were associated when
used by Grantor prior to the exercise of the license rights set forth herein; and (iii) at the
Grantor’s request and expense, licensees and sublicensees shall provide reasonable cooperation in
any effort by the Grantor to maintain the registration or otherwise secure the ongoing validity and
effectiveness of such licensed Trademarks.

     Section 5.04. Application of Proceeds.

          (a) Subject to the Intercreditor Agreement, the Administrative Agent shall apply the proceeds
of any collection, sale, foreclosure or other realization upon any Collateral, as well as any
Collateral consisting of cash, as set forth in Section 2.18(b) of the Credit Agreement.

          (b) Except as otherwise provided herein or in the other Loan Documents, the Administrative
Agent shall have absolute discretion as to the time of application of any such proceeds, moneys or
balances in accordance with this Security Agreement. Upon any sale of Collateral by the
Administrative Agent (including pursuant to a power of sale granted by statute or under a judicial
proceeding), the receipt of the

21

 

Administrative Agent or of the officer making the sale shall be a sufficient discharge to the
purchaser or purchasers of the Collateral so sold and such purchaser or purchasers shall not be
obligated to see to the application of any part of the purchase money paid over to the
Administrative Agent or such officer or be answerable in any way for the misapplication thereof.

ARTICLE 6

ACCOUNT VERIFICATION; ATTORNEY IN FACT; PROXY

     Section 6.01. Account Verification. The Administrative Agent may, no more than two
times in any calendar year so long as no Event of Default has occurred and is continuing, and at
any time and from time to time following the occurrence and during the continuance of an Event of
Default, in the Administrative Agent’s own name, in the name of a nominee of the Administrative
Agent, or in the name of any Grantor communicate (by mail, telephone (during which a representative
of Borrower Agent may be present), facsimile or otherwise) with the Account Debtors of such
Grantor, parties to contracts with such Grantor and obligors in respect of Instruments of such
Grantor, to verify with such Persons, to the Administrative Agent’s reasonable satisfaction, the
existence, amount, terms of, and any other matter relating to, Accounts, Instruments, Chattel
Paper, payment intangibles and/or other Receivables that are Collateral. Notwithstanding the
foregoing, so long as no Event of Default has occurred and is continuing, all written communication
described in the prior sentence shall only be sent by the Borrowers on the letterhead of the
Borrowers on behalf of the Administrative Agent and a representative of the Borrower Agent must be
present for any such telephone calls; provided that the Borrower Agent shall send such forms,
letters and other correspondence that Administrative Agent may reasonably request to conduct its
account verifications in respect of the Accounts of the Borrowers, and that such forms, letters and
other correspondence may require that the Account Debtors respond in writing directly to the
Administrative Agent.

     Section 6.02. Authorization for Secured Party to Take Certain Action.

          (a) Each Grantor irrevocably authorizes the Administrative Agent and appoints the
Administrative Agent as its attorney in fact (i) at any time and from time to time in the sole
discretion of the Administrative Agent (A) to execute on behalf of such Grantor as debtor and to
file financing statements necessary or desirable in the Administrative Agent’s reasonable
discretion to perfect and to maintain the perfection and priority of the Administrative Agent’s
security interest in the Collateral, (B) to file a carbon, photographic or other reproduction of
this Security Agreement or any financing statement with respect to the Collateral as a financing
statement and to file any other financing statement or amendment of a financing statement (which
would not add new collateral or add a debtor, except as otherwise provided for herein or in any
other Loan Document) in such offices as the Administrative Agent in its reasonable discretion deems
necessary or desirable to perfect and to maintain the perfection and priority of the Administrative
Agent’s security interest in the Collateral, and (C) to contact and enter into one or more
agreements with the issuers of uncertificated securities which are Pledged Collateral or with
securities intermediaries holding Pledged Collateral as may be

22

 

necessary or advisable to give the Administrative Agent Control over such Pledged Collateral
(subject to the terms of the Intercreditor Agreement); (ii) at any time following the occurrence
and during the continuance of a Cash Dominion Event, to endorse and collect any cash proceeds of
the Collateral and to apply the proceeds of any Collateral received by the Administrative Agent to
the Secured Obligations as provided herein or in the Credit Agreement or any other Loan Document,
subject to the terms of the Intercreditor Agreement, (iii) at any time following the occurrence and
during the continuance of an Event of Default, (A) to demand payment or enforce payment of the
Receivables in the name of the Administrative Agent or any Grantor and to endorse any and all
checks, drafts, and other instruments for the payment of money relating to the Receivables, (B) to
sign any Grantor’s name on any invoice or bill of lading relating to the Receivables, drafts
against any Account Debtor of such Grantor, assignments and verifications of Receivables, (C) to
exercise all of any Grantor’s rights and remedies with respect to the collection of the Receivables
and any other Collateral, (D) to settle, adjust, compromise, extend or renew the Receivables, (E)
to settle, adjust or compromise any legal proceedings brought to collect Receivables, (F) to
prepare, file and sign any Grantor’s name on a proof of claim in bankruptcy or similar document
against any Account Debtor of such Grantor, (G) to prepare, file and sign any Grantor’s name on any
notice of Lien, assignment or satisfaction of Lien or similar document in connection with the
Receivables, (H) to change the address for delivery of mail addressed to any Grantor to such
address as the Administrative Agent may designate and to receive, open and dispose of all mail
addressed to such Grantor (provided copies of such mail is provided to such Grantor) and (I) to
discharge past due taxes, assessments, charges, fees or Liens on the Collateral (except for
Permitted Liens); and (iv) to do all other acts and things necessary (pursuant to this Security
Agreement and the other Loan Documents and in accordance with applicable law) to carry out the
terms of this Security Agreement; and each Grantor agrees to reimburse the Administrative Agent on
demand for any reasonable payment made or any reasonable documented out-of-pocket expense incurred
by the Administrative Agent in connection with any of the foregoing; provided that, this
authorization shall not relieve any Grantor of any of its obligations under this Security Agreement
or under the Credit Agreement.

          (b) All acts of said attorney or designee are hereby ratified and approved by the Grantors.
The powers conferred on the Administrative Agent, for the benefit of the Administrative Agent and
Secured Parties, under this Section 6.02 are solely to protect the Administrative Agent’s interests
in the Collateral and shall not impose any duty upon the Administrative Agent or any Secured Party
to exercise any such powers.

     Section 6.03. PROXY. EACH GRANTOR HEREBY IRREVOCABLY CONSTITUTES AND APPOINTS THE
ADMINISTRATIVE AGENT AS ITS PROXY AND ATTORNEY-IN-FACT (AS SET FORTH IN SECTION 6.02 ABOVE) WITH
RESPECT TO THE PLEDGED COLLATERAL, INCLUDING THE RIGHT TO VOTE SUCH PLEDGED COLLATERAL, WITH FULL
POWER OF SUBSTITUTION TO DO SO. IN ADDITION TO THE RIGHT TO VOTE ANY SUCH PLEDGED COLLATERAL, THE
APPOINTMENT OF THE ADMINISTRATIVE AGENT AS PROXY AND ATTORNEY-IN-FACT SHALL INCLUDE THE RIGHT TO
EXERCISE

23

 

ALL OTHER RIGHTS, POWERS, PRIVILEGES AND REMEDIES TO WHICH A HOLDER OF SUCH PLEDGED COLLATERAL
WOULD BE ENTITLED (INCLUDING GIVING OR WITHHOLDING WRITTEN CONSENTS OF SHAREHOLDERS, CALLING
SPECIAL MEETINGS OF SHAREHOLDERS AND VOTING AT SUCH MEETINGS). SUCH PROXY SHALL BE EFFECTIVE,
AUTOMATICALLY AND WITHOUT THE NECESSITY OF ANY ACTION (INCLUDING ANY TRANSFER OF ANY SUCH PLEDGED
COLLATERAL ON THE RECORD BOOKS OF THE ISSUER THEREOF) BY ANY PERSON (INCLUDING THE ISSUER OF SUCH
PLEDGED COLLATERAL OR ANY OFFICER OR AGENT THEREOF), ONLY UPON THE OCCURRENCE AND DURING THE
CONTINUANCE OF AN EVENT OF DEFAULT AND UPON PRIOR WRITTEN NOTICE TO THE GRANTORS.

     Section 6.04. NATURE OF APPOINTMENT; LIMITATION OF DUTY. THE APPOINTMENT OF THE
ADMINISTRATIVE AGENT AS PROXY AND ATTORNEY-IN-FACT IN THIS ARTICLE 6 IS COUPLED WITH AN INTEREST
AND SHALL BE IRREVOCABLE UNTIL THE DATE ON WHICH THIS SECURITY AGREEMENT IS TERMINATED IN
ACCORDANCE WITH SECTION 7.14. NOTWITHSTANDING ANYTHING CONTAINED HEREIN, NEITHER THE
ADMINISTRATIVE AGENT, NOR ANY SECURED PARTY, NOR ANY OF THEIR RESPECTIVE AFFILIATES, OFFICERS,
DIRECTORS, EMPLOYEES, AGENTS OR REPRESENTATIVES SHALL HAVE ANY DUTY TO EXERCISE ANY RIGHT OR POWER
GRANTED HEREUNDER OR OTHERWISE OR TO PRESERVE THE SAME AND SHALL NOT BE LIABLE FOR ANY FAILURE TO
DO SO OR FOR ANY DELAY IN DOING SO, EXCEPT TO THE EXTENT SUCH DAMAGES ARE ATTRIBUTABLE TO THEIR OWN
GROSS NEGLIGENCE OR WILLFUL MISCONDUCT AS FINALLY DETERMINED BY A COURT OF COMPETENT JURISDICTION;
PROVIDED THAT, IN NO EVENT SHALL THEY BE LIABLE FOR ANY PUNITIVE, EXEMPLARY, INDIRECT OR
CONSEQUENTIAL DAMAGES; PROVIDED FURTHER, THAT THE FOREGOING EXCEPTION SHALL NOT BE CONSTRUED TO
OBLIGATE THE ADMINISTRATIVE AGENT TO TAKE OR REFRAIN FROM TAKING ANY ACTION WITH RESPECT TO THE
COLLATERAL.

ARTICLE 7

GENERAL PROVISIONS

     Section 7.01. Waivers. To the maximum extent permitted by applicable law, each
Grantor hereby waives notice of the time and place of any public sale or the time after which any
private sale or other disposition of all or any part of the Collateral may be made. To the extent
such notice may not be waived under applicable law, any notice made shall be deemed reasonable if
sent to the Grantors, addressed as set forth in Article 8, at least ten days prior to (a) the date
of any such public sale or (b) the time after which any such private sale or other disposition may
be made. To the maximum extent permitted by applicable law, each Grantor waives all claims,
damages, and demands against the Administrative Agent or any Secured Party arising out of the
repossession, retention or sale of the Collateral, except such as arise out of the gross negligence
or

24

 

willful misconduct of the Administrative Agent or such Secured Party as finally determined by
a court of competent jurisdiction. To the extent it may lawfully do so, each Grantor absolutely
and irrevocably waives and relinquishes the benefit and advantage of, and covenants not to assert
against the Administrative Agent or any Secured Party, any valuation, stay, appraisal, extension,
moratorium, redemption or similar laws and any and all rights or defenses it may have as a surety
now or hereafter existing which, but for this provision, might be applicable to the sale of any
Collateral made under the judgment, order or decree of any court, or privately under the power of
sale conferred by this Security Agreement, or otherwise. Except as otherwise specifically provided
herein, each Grantor hereby waives presentment, demand, protest or any notice (to the maximum
extent permitted by applicable law) of any kind in connection with this Security Agreement or any
Collateral.

     Section 7.02. Limitation on Administrative Agent’s and Secured Party’s Duty with Respect
to the Collateral. The Administrative Agent shall have no obligation to clean-up or otherwise
prepare the Collateral for sale. The Administrative Agent and each Secured Party shall use
reasonable care with respect to the Collateral in its possession or under its control. Neither the
Administrative Agent nor any Secured Party shall have any other duty as to any Collateral in its
possession or control or in the possession or control of any agent or nominee of the Administrative
Agent or such Secured Party, or any income thereon or as to the preservation of rights against
prior parties or any other rights pertaining thereto. To the extent that applicable law imposes
duties on the Administrative Agent to exercise remedies in a commercially reasonable manner, each
Grantor acknowledges and agrees that it would be commercially reasonable for the Administrative
Agent (a) to fail to incur expenses deemed significant by the Administrative Agent to prepare
Collateral for disposition or otherwise to transform raw material or work in process into finished
goods or other finished products for disposition, (b) to fail to obtain third party consents for
access to Collateral to be disposed of, or to obtain or, if not required by other law, to fail to
obtain governmental or third party consents for the collection or disposition of Collateral to be
collected or disposed of, (c) to fail to exercise collection remedies against Account Debtors or
other Persons obligated on Collateral or to remove Liens on or any adverse claims against
Collateral, (d) to exercise collection remedies against Account Debtors and other Persons obligated
on Collateral directly or through the use of collection agencies and other collection specialists,
(e) to advertise dispositions of Collateral through publications or media of general circulation,
whether or not the Collateral is of a specialized nature, (f) to contact other Persons, whether or
not in the same business as the Grantor, for expressions of interest in acquiring all or any
portion of such Collateral, (g) to hire one or more professional auctioneers to assist in the
disposition of Collateral, whether or not the Collateral is of a specialized nature, (h) to dispose
of Collateral by utilizing internet sites that provide for the auction of assets of the types
included in the Collateral or that have the reasonable capacity of doing so, or that match buyers
and sellers of assets, (i) to dispose of assets in wholesale rather than retail markets, (j) to
disclaim disposition warranties, such as title, possession or quiet enjoyment, (k) to purchase
insurance or credit enhancements to insure the Administrative Agent against risks of loss,
collection or disposition of Collateral or to provide to the Administrative Agent a guaranteed
return from the collection or disposition of Collateral, or (1) to the extent deemed appropriate by

25

 

the Administrative Agent, to obtain the services of other brokers, investment bankers,
consultants and other professionals to assist the Administrative Agent in the collection or
disposition of any of the Collateral. Each Grantor acknowledges that the purpose of this Section
7.02 is to provide non- exhaustive indications of what actions or omissions by the Administrative
Agent would be commercially reasonable in the Administrative Agent’s exercise of remedies against
the Collateral and that other actions or omissions by the Administrative Agent shall not be deemed
commercially unreasonable solely on account of not being indicated in this Section 7.02. Without
limitation upon the foregoing, nothing contained in this Section 7.02 shall be construed to grant
any rights to any Grantor or to impose any duties on the Administrative Agent that would not have
been granted or imposed by this Security Agreement or by applicable law in the absence of this
Section 7.02.

     Section 7.03. Compromises and Collection of Collateral. Each Grantor and the
Administrative Agent recognize that setoffs, counterclaims, defenses and other claims may be
asserted by obligors with respect to certain of the Receivables, that certain of the Receivables
may be or become uncollectible in whole or in part and that the expense and probability of success
in litigating a disputed Receivable may exceed the amount that reasonably may be expected to be
recovered with respect to a Receivable. In view of the foregoing, each Grantor agrees that the
Administrative Agent may at any time and from time to time, if an Event of Default has occurred and
is continuing, compromise with the obligor on any Receivable, accept in full payment of any
Receivable such amount as the Administrative Agent in its sole discretion shall determine or
abandon any Receivable, and any such action by the Administrative Agent shall be commercially
reasonable so long as the Administrative Agent acts in good faith based on information known to it
at the time it takes any such action.

     Section 7.04. Secured Party Performance of Debtor Obligations. Without having any
obligation to do so, the Administrative Agent may, during the continuance of an Event of Default,
perform or pay any obligation which any Grantor has agreed to perform or pay under this Security
Agreement and the Grantor shall reimburse the Administrative Agent for any amounts paid by the
Administrative Agent pursuant to this Section 7.04. Each Grantor’s obligation to reimburse the
Administrative Agent pursuant to the preceding sentence shall be a Secured Obligation payable on
demand.

     Section 7.05. Specific Performance of Certain Covenants. The Grantor acknowledges and
agrees that a breach of any of the covenants contained in Sections 4.01(d), 4.01(e), 4.04, 4.05,
4.06, 4.07, 4.08, 4.09, 4.11, or 5.02, will cause irreparable injury to the Administrative Agent
and the Secured Parties, that the Administrative Agent and the Secured Parties have no adequate
remedy at law in respect of such breaches and therefore agrees, without limiting the right of the
Administrative Agent or the Secured Parties to seek and obtain specific performance of other
obligations of any Grantor contained in this Security Agreement, that the covenants of such Grantor
contained in the Sections referred to in this Section 7.05 shall be specifically enforceable
against such Grantor.

26

 

     Section 7.06. Dispositions Not Authorized. No Grantor is authorized to sell or
otherwise dispose of the Collateral except as permitted under the Credit Agreement and
notwithstanding any course of dealing between any Grantor and the Administrative Agent or other
conduct of the Administrative Agent, no authorization to sell, lease or transfer or otherwise
dispose of the Collateral (except as set forth in Section 4.01(d) or as otherwise contemplated by
the Credit Agreement) shall be binding upon the Administrative Agent or the Secured Parties unless
such authorization is in writing signed by the Administrative Agent with the consent or at the
direction of the Required Secured Parties.

     Section 7.07. No Waiver; Amendments; Cumulative Remedies. No delay or omission of the
Administrative Agent or any Secured Party to exercise any right or remedy granted under this
Security Agreement shall impair such right or remedy or be construed to be a waiver of any Default
or an acquiescence therein, and any single or partial exercise of any such right or remedy shall
not preclude any other or further exercise thereof or the exercise of any other right or remedy.
No waiver, amendment or other variation of the terms, conditions or provisions of this Security
Agreement whatsoever shall be valid unless in writing signed by the Grantors and the Administrative
Agent with the concurrence or at the direction of the Lenders required under Section 9.02 of the
Credit Agreement and then only to the extent in such writing specifically set forth. All rights
and remedies contained in this Security Agreement or by law afforded shall be cumulative and all
shall be available to the Administrative Agent and the Secured Parties until the Secured
Obligations have been paid in full (other than contingent indemnification obligations for which no
claim has been made).

     Section 7.08. Limitation by Law; Severability of Provisions. All rights, remedies and
powers provided in this Security Agreement may be exercised only to the extent that the exercise
thereof does not violate any applicable provision of law, and all the provisions of this Security
Agreement are intended to be subject to all applicable mandatory provisions of law that may be
controlling and to be limited to the extent necessary so that they shall not render this Security
Agreement invalid, unenforceable or not entitled to be recorded or registered, in whole or in part.
To the extent permitted by law, any provision of this Security Agreement held to be invalid,
illegal or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the
extent of such invalidity, illegality or unenforceability without affecting the validity, legality
and enforceability of the remaining provisions of this Security Agreement; and the invalidity of a
particular provision in a particular jurisdiction shall not invalidate such provision in any other
jurisdiction.

     Section 7.09. Security Interest Absolute. All rights of the Administrative Agent
hereunder, the security interests granted hereunder and all obligations of each Grantor hereunder
shall be absolute and unconditional irrespective of (a) any lack of validity or enforceability of
the Credit Agreement, any other Loan Document, any agreement with respect to any of the ABL
Obligations or any other agreement or instrument relating to any of the foregoing, (b) any change
in the time, manner or place of payment of, or in any other term of, all or any of the ABL
Obligations, or any other amendment or waiver of or any consent to any departure from the Credit
Agreement, any other Loan Document or

27

 

any other agreement or instrument relating to the foregoing, (c) any exchange, release or
nonperfection of any Lien on other collateral, or any release or amendment or waiver of or consent
under or departure from any guarantee, securing or guaranteeing all or any of the ABL Obligations,
or (d) any other circumstance that might otherwise constitute a defense available to, or a
discharge of, any Grantor in respect of the ABL Obligations or this Agreement.

     Section 7.10. Benefit of Agreement. The terms and provisions of this Security
Agreement shall be binding upon and inure to the benefit of each Grantor, the Administrative Agent
and the Secured Parties and their respective successors and permitted assigns (including all
Persons who become bound as a debtor to this Security Agreement), except that no Grantor shall have
the right to assign its rights or delegate its obligations under this Security Agreement or any
interest herein, without the prior written consent of the Administrative Agent. No sales of
participations, assignments, transfers, or other dispositions of any agreement governing the
Secured Obligations or any portion thereof or interest therein shall in any manner impair the Lien
granted to the Administrative Agent, for the benefit of the Administrative Agent and the Secured
Parties, hereunder.

     Section 7.11. Survival of Representations. All representations and warranties of each
Grantor contained in this Security Agreement shall survive the execution and delivery of this
Security Agreement.

     Section 7.12. Additional Subsidiaries. Pursuant to and in accordance with Section
5.12 of the Credit Agreement, each Domestic Subsidiary of Amscan that was not in existence or not a
Subsidiary on the date of the Credit Agreement is required to enter in this Security Agreement as a
Subsidiary Party promptly upon becoming a Subsidiary. Upon execution and delivery by the
Administrative Agent and a Subsidiary of an instrument in the form of Exhibit G hereto, such
Subsidiary shall become a Subsidiary Party hereunder with the same force and effect as if
originally named as a Subsidiary Party herein. The execution and delivery of any such instrument
shall not require the consent of any other Loan Party hereunder. The rights and obligations of
each Loan Party hereunder shall remain in full force and effect notwithstanding the addition of any
new Loan Party as a party to this Security Agreement.

     Section 7.13. Headings. The title of and section headings in this Security Agreement
are for convenience of reference only, and shall not govern the interpretation of any of the terms
and provisions of this Security Agreement.

     Section 7.14. Termination or Release.

          (a) This Security Agreement shall continue in effect until (i) the Credit Agreement has
terminated and (ii) all of the Secured Obligations (other than contingent indemnification
obligations for which no claim has been made) have been paid and performed in full (or with respect
to any outstanding Letters of Credit, have been collateralized as required by the Credit Agreement)
and no commitments of any Agent or the Lenders which would give rise to any Secured Obligations are
outstanding.

28

 

          (b) A Subsidiary Party shall automatically be released from its obligations hereunder and the
security interests created hereunder in the Collateral of such Subsidiary Party shall be
automatically released upon the consummation of any transaction permitted pursuant to the Credit
Agreement as a result of which such Subsidiary Party ceases to be a Subsidiary.

          (c) Upon any sale, lease, transfer or other disposition by any Grantor of any Collateral that
is permitted under Section 4.01(d) to any Person that is not another Grantor or, upon the
effectiveness of any written consent to the release of the security interest granted hereby in any
Collateral pursuant to Section 9.02 of the Credit Agreement, the security interest in such
Collateral shall be automatically released.

          (d) In connection with any termination or release pursuant to paragraph (a), (b) or (c) above,
the Administrative Agent shall promptly execute and deliver to any Grantor, at such Grantor’s
expense, all UCC termination statements and similar documents that such Grantor shall reasonably
request to evidence such termination or release. Any execution and delivery of documents pursuant
to this Section 7.14 shall be without recourse to or representation or warranty by the
Administrative Agent or any Secured Party. The Borrowers shall reimburse the Administrative Agent
upon demand for all reasonable and documented out-of-pocket costs and out-of-pocket expenses,
including the fees, charges and expenses of counsel, incurred by it in connection with any action
contemplated by this Section 7.14.

     Section 7.15. Entire Agreement. This Security Agreement, together with the other Loan
Documents, embodies the entire agreement and understanding between each Grantor and the
Administrative Agent relating to the Collateral and supersedes all prior agreements and
understandings between any Grantor and the Administrative Agent relating to the Collateral.

     Section 7.16. CHOICE OF LAW. THIS SECURITY AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE
WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.

     Section 7.17. CONSENT TO JURISDICTION. EACH PARTY HERETO HEREBY IRREVOCABLY AND
UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE EXCLUSIVE JURISDICTION OF ANY U.S.
FEDERAL OR NEW YORK STATE COURT SITTING IN THE BOROUGH OF MANHATTAN, NEW YORK, NEW YORK IN ANY
ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS SECURITY AGREEMENT OR ANY OTHER LOAN
DOCUMENT, OR FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT, AND EACH OF THE PARTIES HERETO HEREBY
IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING
MAY BE HEARD AND DETERMINED IN SUCH NEW YORK STATE OR, TO THE EXTENT PERMITTED BY LAW, IN SUCH
FEDERAL COURT. EACH OF THE PARTIES HERETO AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR
PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS

29

 

BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW. EACH PARTY HERETO HEREBY
IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT IT MAY LEGALLY AND EFFECTIVELY DO SO,
ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUIT, ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS SECURITY AGREEMENT IN ANY COURT REFERRED TO IN
PARAGRAPH (B) OF THIS SECTION. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY LAW, THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH
ACTION OR PROCEEDING IN ANY SUCH COURT.

     Section 7.18. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST
EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL
PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS SECURITY AGREEMENT, ANY OTHER
LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY
OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY
OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT
OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER
PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL
WAIVERS AND CERTIFICATIONS IN THIS SECTION.

     Section 7.19. Indemnity. Each Grantor hereby agrees to indemnify the Administrative
Agent and the Secured Parties, and their respective successors, assigns, agents and employees, as
set forth in Section 9.03 of the Credit Agreement.

     Section 7.20. Counterparts. This Security Agreement may be executed in counterparts
(and by different parties hereto on different counterparts), each of which shall constitute an
original, but all of which when taken together shall constitute a single contract. Delivery of an
executed counterpart of a signature page of this Security Agreement by facsimile shall be effective
as delivery of a manually executed counterpart of this Security Agreement.

     Section 7.21. INTERCREDITOR AGREEMENT GOVERNS. NOTWITHSTANDING ANYTHING HEREIN TO THE
CONTRARY, THE LIEN AND SECURITY INTEREST GRANTED TO THE ADMINISTRATIVE AGENT, FOR THE BENEFIT OF
THE SECURED PARTIES, PURSUANT TO THIS SECURITY AGREEMENT AND THE EXERCISE OF ANY RIGHT OR REMEDY BY
THE ADMINISTRATIVE AGENT AND THE OTHER SECURED PARTIES HEREUNDER ARE SUBJECT TO THE PROVISIONS OF
THE INTERCREDITOR AGREEMENT. IN THE EVENT OF ANY CONFLICT OR INCONSISTENCY BETWEEN THE PROVISIONS
OF THE INTERCREDITOR AGREEMENT AND THIS SECURITY

30

 

AGREEMENT, THE PROVISIONS OF THE INTERCREDITOR AGREEMENT SHALL CONTROL.

     Section 7.22. Delivery of Collateral. Prior to the Term Loan First Lien Collateral
Transition Date, to the extent any Grantor is required hereunder to deliver Collateral to the
Administrative Agent for purposes of possession and control and is unable to do so as a result of
having previously delivered such Collateral to the Term Loan Agent in accordance with the terms of
the Term Loan Security Documents, such Grantor’s obligations hereunder with respect to such
delivery shall be deemed satisfied by the delivery to the Term Loan Agent, acting as a gratuitous
bailee of the Administrative Agent.

     Section 7.23. Mortgages. In the case of a conflict between this Security Agreement
and any Mortgages with respect to Material Real Estate Asset that is also subject to a valid and
enforceable Lien under the terms of the Mortgage (including Fixtures), the Mortgages shall govern.
In all other conflicts between this Security Agreement and the Mortgages, this Security Agreement
shall govern.

ARTICLE 8

NOTICES

     Section 8.01. Sending Notices. Any notice required or permitted to be given under
this Security Agreement (a) sent by hand or overnight courier service, or mailed by certified or
registered mail, shall be deemed to have been given when received or (b) sent by facsimile shall be
deemed to have been given when sent and when receipt has been confirmed by telephone (provided that
if not given during normal business hours for the recipient, shall be deemed to have been given at
the opening of business on the next Business Day for the recipient), in each case addressed to the
Borrowers at the address set forth in Section 9.01 of the Credit Agreement, and to the
Administrative Agent and the Lenders at the addresses set forth in accordance with Section 9.01 of
the Credit Agreement.

     Section 8.02. Change in Address for Notices. Each of the Grantors, the Administrative
Agent and the Lenders may change the address or facsimile number for service of notice upon it by a
notice in writing to the other parties hereto.

31

 

ARTICLE 9 THE ADMINISTRATIVE AGENT

Wells Fargo Retail Finance, LLC has been appointed Administrative Agent for the Lenders hereunder
pursuant to Article 8 of the Credit Agreement. It is expressly understood and agreed by the
parties to this Security Agreement that any authority conferred upon the Administrative Agent
hereunder is subject to the terms of the delegation of authority made by the Lenders to the
Administrative Agent pursuant to the Credit Agreement, and that the Administrative Agent has agreed
to act (and any successor Administrative Agent shall act) as such hereunder only on the express
conditions contained in such Article 8. Any successor Administrative Agent appointed
pursuant to Article 8 of the Credit Agreement shall be entitled to all the rights, interests and
benefits of the Administrative Agent hereunder.

[SIGNATURE PAGE FOLLOWS]

32

 

     IN WITNESS WHEREOF, each Grantor and Administrative Agent have executed this Security
Agreement as of the date first above written.

	 	 	 	 	 
	 	AMSCAN HOLDINGS, INC.

 	 
	 	By:  	 	 
	 	 	Name:  	Michael A. Correale 	 
	 	 	Title:  	Chief Financial Officer 	 
	 

	 	 	 	 	 
	 	AAH HOLDINGS CORPORATION

FACTORY CARD & PARTY OUTLET
CORP.

 	 
	 	By:  	 	 
	 	 	Name:  	Michael A. Correale 	 
	 	 	Title:  	Chief Financial Officer 	 
	 

	 	 	 	 	 
	 	AMSCAN INC.

GAGS AND GAMES, INC.

PA ACQUISITION CORP.

PARTY AMERICA FRANCHISING, INC.

PARTY CITY CORPORATION

 	 
	 	By:  	 	 
	 	 	Name:  	Michael A. Correale 	 
	 	 	Title:  	Vice President and Treasurer 	 
	 

	 	 	 	 	 
	 	ANAGRAM INTERNATIONAL
HOLDINGS, INC.

ANAGRAM INTERNATIONAL, INC.

JCS PACKAGING, INC.

M&D INDUSTRIES, INC.

SSY REALTY CORP.

TRISAR, INC.

 	 
	 	By:  	 	 
	 	 	Name:  	Michael A. Correale 	 
	 	 	Title:  	Assistant Treasurer 	 
	 

[SIGNATURES CONTINUE ON FOLLOWING PAGE]

 

 

[SIGNATURES CONTINUED FROM PREVIOUS PAGE]

	 	 	 

	 

	 	AM-SOURCE, LLC
	 

	 	ANAGRAM EDEN PRAIRIE PROPERTY HOLDINGS LLC
	 
	 	 
	 

	 	By: Amscan Holdings, Inc., sole Member

	 	 	 	 	 
	 	 	 
	 	By:  	
 	 
	 	 	Name:  	Michael A. Correale 	 
	 	 	Title:  	Chief Financial Officer 	 
	 
	 	ANAGRAM INTERNATIONAL, LLC

 	 
	 	By:  	 	 
	 	 	Name:  	Michael A. Correale 	 
	 	 	Title:  	Manager 	 
	 
	 	FACTORY CARD OUTLET OF AMERICA LTD.

 	 
	 	By:  	 	 
	 	 	Name:  	Gary W. Rada 	 
	 	 	Title:  	President 	 
	 
	 	PARTY CITY FRANCHISE GROUP HOLDINGS, LLC

PARTY CITY FRANCHISE GROUP, LLC

 	 
	 	By:  	 	 
	 	 	Name:  	Mark Tobin 	 
	 	 	Title:  	Treasurer 	 
	 

[SIGNATURES CONTINUE ON FOLLOWING PAGE]

34

 

[SIGNATURES CONTINUED FROM PREVIOUS PAGE]

	 	 	 	 	 	 	 

	 	 	WELLS FARGO RETAIL
FINANCE, LLC, as
 Administrative Agent
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	Name:	 

	 	 
	 

	 	 	Title:
	 

	 	 
	 

	 	 	 	 

	 	 

35

 

EXHIBIT A

(See Section 3.07 of Security Agreement)

LETTER OF CREDIT RIGHTS

None.

CHATTEL PAPER

None.

36

 

EXHIBIT B

(See Article 2)

COMMERCIAL TORT CLAIMS

None.

 

 

EXHIBIT C

(See Section 4.03 of Security Agreement)

AMENDMENT

     This Amendment, dated                      is delivered pursuant to
Section 4.03 of the Security Agreement as defined below. All defined terms herein shall have the
meanings ascribed thereto or incorporated by reference in the Security Agreement. The undersigned
hereby certifies that the representations and warranties in Article 3 of the Security Agreement are
and continue to be true and correct. The undersigned further agrees that this Amendment may be
attached to that certain Pledge and Security Agreement, dated August 13, 2010, among the
undersigned, the other Grantors, Wells Fargo Retail Finance, LLC, as the Administrative Agent (the
“Security Agreement”) and that the Collateral listed on Schedule I to this Amendment shall be and
become a part of the Collateral referred to in said Security Agreement and shall secure all Secured
Obligations referred to in said Security Agreement.

	 	 	 	 	 	 	 

	 	 	[NAME OF ADDITIONAL GRANTOR]
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 
	 

	 	 	Name:
	 	 

	 	 
	 

	 	 	Title:
	 	 

	 	 
	 

	 	 	 	 
	 	 

 

 

SCHEDULE I TO AMENDMENT

STOCKS

	 	 	 	 	 	 	 	 	 	 	 

	 
	 	 	 	Certificate
	 	Number of
	 	 	 	Percentage of
	Holder
	 	Issuer
	 	Number(s)
	 	Shares
	 	Class of Stock
	 	Outstanding Shares
	 
	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 
	 

BONDS

	 	 	 	 	 	 	 	 	 	 	 

	 
	 	 	 	 	 	Face	 	 	 	 
	Holder
	 	Issuer
	 	Number
	 	Amount
	 	Coupon Rate
	 	Maturity
	 
	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 
	 

GOVERNMENT SECURITIES

	 	 	 	 	 	 	 	 	 	 	 	 	 

	 
	 	 	 	 	 	 	 	Face
	 	Coupon	 	 
	Holder
	 	Issuer
	 	Number
	 	Type
	 	Amount
	 	Rate
	 	Maturity
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	 

OTHER SECURITIES OR OTHER INVESTMENT PROPERTY

(CERTIFICATED AND UNCERTIFICATED)

	 	 	 	 	 	 	 

	 
	 	 	 	Description of
	 	Percentage
	Holder
	 	Issuer
	 	Collateral
	 	Ownership Interest
	 
	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 
	 

COMMERCIAL TORT CLAIMS

	 	 	 	 	 

	 
	 	 	 	Case Number: Name of
	Description of Claim
	 	Parties
	 	Court where Case was Filed
	 
	 	 	 	 	 
	 
	 	 	 	 	 
	 

 

 

EXHIBIT D

Form of Perfection Certificate

     Reference is hereby made to (i) that certain Security Agreement dated as of [•] (the “ABL
Security Agreement”), among Amscan Holdings, Inc., a Delaware corporation (“Amscan”),
AAH Holdings Corporation, a Delaware corporation (“Holdings”), the subsidiaries of Amscan
from time to time party thereto and Wells Fargo Retail Finance, LLC, as administrative and
collateral agent (“ABL Administrative Agent”) and (ii) that certain Credit Agreement dated
as of [•] (the “ABL Credit Agreement”), among Amscan, Holdings, the subsidiaries of Amscan
party thereto, the Lenders party thereto, and the ABL Administrative Agent. Capitalized terms used
but not defined herein have the meanings assigned in the ABL Credit Agreement.

     As used herein, the term “Companies” means Amscan, Holdings and each of its U.S.
Subsidiaries.

     The undersigned hereby certify to the Collateral Agents as follows:

     1. Names. (a) The exact legal name of each Company, as such name appears in its
respective certificate of incorporation or any other organizational document, is set forth in
Schedule 1(a). Each Company is (i) the type of entity disclosed next to its name in
Schedule 1(a) and (ii) a registered organization except to the extent disclosed in
Schedule 1(a). Also set forth in Schedule 1(a) is the organizational
identification number, if any, of each Company that is a registered organization, the Federal
Taxpayer Identification Number of each Company and the jurisdiction of formation of each Company.

          (b) Set forth in Schedule 1(b) hereto is any other corporate or organizational names
each Company has had in the past five years, together with the date of the relevant change.

          (c) Set forth in Schedule 1(c) is a list of all other names (including trade names or
similar appellations) used by each Company, or any other business or organization to which each
Company became the successor by merger, consolidation, acquisition, change in form, nature or
jurisdiction of organization or otherwise, at any time between [•] and the date hereof. Also set
forth in Schedule 1(c) is the information required by Section 1 of this certificate for any
other business or organization to which each Company became the successor by merger, consolidation,
acquisition, change in form, nature or jurisdiction of organization or otherwise, at any time
between [•] and the date hereof. Except as set forth in Schedule 1(c), no Company has
changed its jurisdiction of organization at any time during the past four months.

     2. Current Locations. (a) The chief executive office of each Company is located at
the address set forth in Schedule 2(a) hereto.

     (b) Set forth in Schedule 2(b) are all locations where each Company maintains any
books or records relating to any Collateral.

     (c) Set forth in Schedule 2(c) hereto are all the other places of business of each
Company.

 

 

     (d) Set forth in Schedule 2(d) hereto are all other locations where each Company
maintains any of the Collateral consisting of inventory or equipment not identified above.

     (e) Set forth in Schedule 2(e) hereto are the names and addresses of all persons or
entities other than each Company, such as lessees, consignees, warehousemen or purchasers of
chattel paper, which have possession or are intended to have possession of any of the Collateral
consisting of instruments, chattel paper, inventory or equipment.

     3. Prior Locations. (a) Set forth in Schedule 3(a) is the information
required by Schedule 2(a), Schedule 2(b) or Schedule 2(c) with respect to
each location or place of business previously maintained by each Company at any time during the
past four months.

     (b) Set forth in Schedule 3(b) is the information required by Schedule 2(d) or
Schedule 2(e) with respect to each other location at which, or other person or entity with
which, any of the Collateral consisting of inventory or equipment has been previously held at any
time during the past twelve months.

     4. Extraordinary Transactions. Except for those purchases, acquisitions and other
transactions described on Schedule 4 attached hereto, all of the Collateral has been
originated by each Company in the ordinary course of business or consists of goods which have been
acquired by such Company within the past five years in the ordinary course of business from a
person in the business of selling goods of that kind.

     5. File Search Reports. Attached hereto as Schedule 5 is a true and accurate
summary of file search reports from (A) the Uniform Commercial Code filing offices (i) in each
jurisdiction identified in Section 1(a), Section 2 or Section 3 with respect to each legal name set
forth in Section 1. A true copy of each financing statement, including judgment and tax liens,
bankruptcy and pending lawsuits or other filing identified in such file search reports has been
delivered to the Collateral Agents.

     6. UCC Filings. The financing statements (duly authorized by each Company
constituting the debtor therein), including the indications of the collateral, attached as
Schedule 6 relating to the Security Agreements or the applicable Mortgage, are in the
appropriate forms for filing in the filing offices in the jurisdictions identified in Schedule
7 hereof.

     7. Schedule of Filings. Attached hereto as Schedule 7 is a schedule of (i)
the appropriate filing offices for the financing statements attached hereto as Schedule 6
and (ii) the appropriate filing offices for the filings described in Schedule 12(c) and
(iii) any other actions required to create, preserve, protect and perfect the security interests in
the Pledged Collateral that may be perfected by filing (as defined in the Security Agreements)
granted to the Collateral Agents pursuant to the Collateral Documents. No other filings or actions
are required to create, preserve, protect and perfect the security interests in the Pledged
Collateral that may be perfected by filing granted to the Collateral Agents pursuant to the
Collateral Documents.

     8. Real Property. Attached hereto (a) as Schedule 8(a) is a list of all real
property owned or leased by each Company noting Mortgaged Property as of the Closing Date and
filing offices for Mortgages as of the Closing Date and (b) as Schedule 8(b) is a list of
all leases, subleases, tenancies, franchise agreements, licenses or other occupancy arrangements to
which any Company is party as owner, lessor, sublessor, licensor, franchisor or grantor with
respect to any of the real property described on Schedule 8(a).

 

 

     9. Termination Statements. Attached hereto as Schedule 9(a) are the duly
authorized termination statements in the appropriate form for filing in each applicable
jurisdiction identified in Schedule 9(b) hereto with respect to each Lien described
therein.

     10. Stock Ownership and Other Equity Interests. Attached hereto as Schedule
10(a) is a true and correct list of each of all of the authorized, and the issued and
outstanding, stock, partnership interests, limited liability company membership interests or other
equity interest of each Company and its Subsidiaries and the record and beneficial owners of such
stock, partnership interests, membership interests or other equity interests. Also set forth on
Schedule 10(b) is each equity investment of each Company that represents 50% or less of the
equity of the entity in which such investment was made.

     11. Instruments and Tangible Chattel Paper. Attached hereto as Schedule 11
is a true and correct list of all promissory notes, instruments (other than checks to be deposited
in the ordinary course of business), tangible chattel paper, electronic chattel paper and other
evidence of indebtedness held by each Company as of the closing date, including all intercompany
notes between or among any two or more Companies.

     12. Intellectual Property. (a) Attached hereto as Schedule 12(a) is a
schedule setting forth all of each Company’s Patents, Patent Licenses, Trademarks and Trademark
Licenses (each as defined in the Security Agreement) registered with the United States Patent and
Trademark Office, and all other Patents, Patent Licenses, Trademarks and Trademark Licenses,
including the name of the registered owner and the registration number of each Patent, Patent
License, Trademark and Trademark License owned by each Company. Attached hereto as Schedule
12(b) is a schedule setting forth all of each Company’s United States Copyrights and Copyright
Licenses (each as defined in the Security Agreements), and all other Copyrights and Copyright
Licenses, including the name of the registered owner and the registration number of each Copyright
or Copyright License owned by each Company.

     (b) Attached hereto as Schedule 12(c) in proper form for filing with the United States
Patent and Trademark Office and United States Copyright Office are the filings necessary to
preserve, protect and perfect the security interests in the United States Trademarks, Trademark
Licenses, Patents, Patent Licenses, Copyrights and Copyright Licenses set forth on Schedule
12(a) and Schedule 12(b), including duly signed copies of each of the Patent Security
Agreement, Trademark Security Agreement and the Copyright Security Agreement, as applicable.

     13. Commercial Tort Claims. Attached hereto as Schedule 13 is a true and
correct list of all Commercial Tort Claims (as defined in the Security Agreement) held by each
Company, including a brief description thereof.

     14. Deposit Accounts, Securities Accounts and Commodity Accounts. Attached hereto as
Schedule 14 is a true and complete list of all Deposit Accounts, Securities Accounts and
Commodity Accounts (each as defined in the Security Agreements) maintained by each Company,
including the name of each institution where each such account is held, the name of each such
account and the name of each entity that holds each account.

     15. Letter-of-Credit Rights. Attached hereto as Schedule 15 is a true and
correct list of all Letters of Credit issued in favor of each Company, as beneficiary thereunder.

 

 

     16. Motor Vehicles. Attached hereto as Schedule 16 is a true and correct list
of all motor vehicles (covered by certificates of title or ownership) valued at over $50,000 and
owned by each Company, and the owner and approximate value of such motor vehicles.

 

 

     IN WITNESS WHEREOF, we have hereunto signed this Perfection Certificate as of this                     day of                    .

	 	 	 	 	 
	 	AMSCAN HOLDINGS, INC.

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 

	 	 	 

	 

	 	AAH HOLDINGS CORPORATION
	 

	 	FACTORY CARD & PARTY OUTLET CORP.
	 

	 	FACTORY CARD OUTLET OF AMERICA, LTD.
	 

	 	AMSCAN INC.
	 

	 	PA ACQUISITION CORP.
	 

	 	PARTY AMERICA FRANCHISING, INC.
	 

	 	PARTY CITY CORPORATION
	 

	 	M&D INDUSTRIES, INC.
	 

	 	ANAGRAM INTERNATIONAL HOLDINGS, INC.
	 

	 	ANAGRAM INTERNATIONAL, INC.
	 

	 	GAGS AND GAMES, INC.
	 

	 	JCS PACKAGING, INC.
	 

	 	SSY REALTY CORP.
	 

	 	TRISAR, INC.

	 	 	 	 	 
	 	 	 
	 	By:  	
 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 

	 	 	 	 	 	 	 

	 	 	AM-SOURCE, LLC
	 	 	ANAGRAM EDEN PRAIRIE
	 	 	 	 	PROPERTY HOLDINGS, LLC
	 
	 

	 	 	 	By:
	 	Amscan Holdings, Inc.,
	 

	 	 	 	 	 	Its Sole Member

	 	 	 	 	 
	 	 	 
	 	By:  	
 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 

 

 

	 	 	 	 	 
	 	ANAGRAM INTERNATIONAL, LLC

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 

	 	 	 	 	 
	 	PARTY CITY FRANCHISE GROUP

     HOLDINGS, LLC

PARTY CITY FRANCHISE GROUP, LLC

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 

 

 

EXHIBIT E

Subsidiary Parties

Party America Franchising, Inc.

M&D Industries, Inc.

JCS Packaging, Inc.

SSY Realty Corp.

Trisar, Inc.

Anagram Eden Prairie Property Holdings LLC

Anagram International, LLC

Anagram International Holdings, Inc.

Factory Card & Party Outlet Corp.

Party City Franchise Group Holdings, LLC

 

 

EXHIBIT F

Form of Collateral Access Agreements

 

 

BAILEE NOTIFICATION

AND

ACKNOWLEDGMENT OF SECURITY INTEREST

                          , 2010

	 	 	 

	 

	 	 
	 
	 	 
	 

	 	 
	 
	 	 
	 

	 	 

Ladies and Gentlemen:

     Please be advised that we and certain of our affiliates (collectively the “Company”) have
entered or are about to enter into financing arrangements with Wells Fargo Retail Finance, LLC, in
its capacity as administrative agent and collateral agent pursuant to the Revolving Facility Credit
Agreement (as hereinafter defined) acting for and on behalf of the parties thereto as lenders (in
such capacity, together with its successors and assigns, “Revolving Facility Agent”) and the
parties from time to time to the Revolving Facility Credit Agreement as lenders (collectively,
together with their respective successors and assigns, “Revolving Facility Lenders”) and Credit
Suisse AG, Cayman Islands Branch, in its capacity as administrative and collateral agent pursuant
to the Term Loan Agreement (as hereinafter defined) acting for and on behalf of the parties thereto
as lenders (in such capacity, together with its successors and assigns, “Term Loan Agent” and,
together with Revolving Facility Agent, collectively, “Agents” and, individually, each an “Agent”)
and the parties from time to time to the Term Loan Agreement as lenders (collectively, together
with their respective successors and assigns, the “Term Loan Lenders” and together with Revolving
Facility Lenders individually each a “Lender” and, collectively, “Lenders”), pursuant to which the
Company has granted or will grant to each Agent a security interest in, among other collateral, all
of the Company’s existing and future inventory and other goods, which may at any time now or
hereafter be in your possession or control and all of the Company’s inventory and other goods which
may at any time now or hereafter be located on or in real property or buildings owned, leased or
otherwise in your possession or control, and/or received or delivered to you for shipment,
distribution, storage or otherwise, whether pursuant to any agreement or otherwise (collectively,
“Collateral”).

     For purposes of this agreement, the term “Revolving Facility Credit Agreement” as used herein
shall mean the ABL Credit Agreement by and among us, certain of our affiliates, Revolving Facility
Agent and Revolving Facility Lenders, and the term “Term Loan Agreement” as used herein shall mean
the Term Loan Credit Agreement by and among us, certain of our affiliates, Term Loan Agent and Term
Loan Lenders, in each case, as the same now exists or may hereafter be amended, modified,
supplemented, extended, renewed, restated or replaced. The term “Lender Representative” as used
herein shall mean Revolving Facility Agent until such time as Revolving Facility Agent notifies you
in writing (at your address below) that the Lender Representative shall be

 

 

Term Loan Agent, and on and after delivery of such notice to the undersigned, the term “Lender
Representative” shall mean Term Loan Agent.

     By your signature below, you acknowledge receipt of the above notice of each Agent’s security
interest and agree to follow all instructions that Lender Representative may from time to time
hereafter give to you with respect to Collateral in your possession or control or located on or in
any of your premises, and/or received or delivered to you by or for our account for distribution,
storage or otherwise. For the present, each Agent consents to you continuing to release Collateral
pursuant to the instructions given to you by the Company, or any of the Company’s authorized
agents, but this consent may be terminated or changed at any time by notice to you from Lender
Representative. Upon being so notified by Lender Representative, you are to abide solely by Lender
Representative’s instructions with respect to any of such goods or other Collateral and you are not
to release any Collateral to the Company or to anyone else except according to written instructions
which may be given to you from time to time by Lender Representative. If so instructed by Lender
Representative, you agree to return to Lender Representative all of the Company’s goods and other
Collateral in your custody, control or possession. You hereby acknowledge and agree that you hold
and will have possession of such goods or other Collateral and proceeds for the benefit of Agents
and Lenders and you shall not take any action purporting to encumber or transfer any interest in
such goods or other Collateral or the proceeds thereof.

     You agree and acknowledge that you do not have and in no event will you assert, as against
Lender Representative, any Agent or any Lender, any lien, right of distraint or levy, right of
offset, claim, deduction, counterclaim, security or other interest in any Collateral now or
hereafter located on any of your premises or in your custody, possession or control, including any
of the foregoing which might otherwise arise or exist in your favor pursuant to any agreement,
common law, statute (including the U.S. Bankruptcy Code or any state insolvency law) or otherwise.
You certify that you do not know of any security interest or other claim with respect to any of the
Collateral, other than the security interest which is the subject of this agreement. You agree and
acknowledge that no negotiable or non-negotiable warehouse receipts, documents of title or similar
instruments have been or will be issued by you with respect to any of the Company’s goods, except
for non-negotiable receipts naming Lender Representative or the Company as consignee. You shall
not take any action purporting to encumber or transfer any interest in such inventory or other
goods or other Collateral. You are holding the Collateral as bailee for Agents and Lenders for the
purpose of perfecting the security interest and lien of Agents in the Collateral.

     You further agree to (a) allow Lender Representative or its agents to enter upon your premises
during business hours for the purpose of examining, removing, taking possession of or otherwise
dealing with any of the Collateral at any time in your possession or copies of any books and
records related thereto and (b) provide the Lender Representative with detailed inventory reporting
on a per location basis upon written request from the Lender Representative.

     Agents and Lenders are relying upon this acknowledgment in connection with their financing
arrangements with the Company. This agreement may not be changed or

 

 

terminated orally or by course of conduct. Any change to the terms of this agreement must be
in writing and signed by Agents. This agreement shall be binding upon you and your successors and
assigns and shall be enforceable by and inure to the benefit of Lender Representative, Agents,
Lenders and their respective successors and assigns.

     This agreement constitutes our acknowledgment that Lender Representative, any Agent or any
Lender may assert any of the rights set forth or referred to herein, without objection by us. We
also agree to reimburse you for all reasonable costs and expenses incurred by you as a direct
result of compliance with the instructions of Lender Representative as to the disposition of any of
the Collateral.

[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

 

 

     Please acknowledge your agreement to the foregoing by signing in the space provided below.

	 	 	 	 	 	 	 

	 	 	Very truly yours,
	 
	 	 	 	 	 	 
	 	 	[APPROPRIATE AMSCAN ENTITY]
	 

	 	By:	 	 	 	 
	 

	 	Title:
	 	 

	 	 
	 

	 	 	 	 

	 	 

	 	 	 	 	 

	ACKNOWLEDGED AND AGREED:	 	 
	[	 	 	] 	 
	 	 	 
	By:
	 	 	 	 
	Title:

	 	 

	 	 
	 

	 	 

 
 
 
 
 
 
 
 
(Bailee)
	 	 

 

 

LANDLORD AGREEMENT

     Wells Fargo Retail Finance, LLC, in its capacity as administrative agent and collateral agent
pursuant to the Revolving Facility Credit Agreement (as hereinafter defined) acting for and on
behalf of the parties thereto as lenders (in such capacity, together with its successors and
assigns, “Revolving Facility Agent”) and the parties from time to time to the Revolving Facility
Credit Agreement as lenders (collectively, together with their respective successors and assigns,
“Revolving Facility Lenders”) and Credit Suisse AG, Cayman Islands Branch, in its capacity as
administrative and collateral agent pursuant to the Term Loan Agreement (as hereinafter defined)
acting for and on behalf of the parties thereto as lenders (in such capacity, together with its
successors and assigns, “Term Loan Agent” and, together with Revolving Facility Agent,
collectively, “Agents” and, individually, each an “Agent”) and the parties from time to time to the
Term Loan Agreement as lenders (collectively, together with their respective successors and
assigns, the “Term Loan Lenders” and together with Revolving Facility Lenders individually each a
“Lender” and, collectively, “Lenders”) have entered or are about to enter into financing
arrangements with [________________________] (“Debtor”) pursuant to which each Agent has been or
may be granted a security interest in any or all of Debtor’s or its affiliates’ personal property,
including, but not limited to, “inventory” and “equipment” (as such terms are defined in Article 9
of the Uniform Commercial Code as in effect from time to time in the state in which the Premises
are located, hereinafter “Personal Property”). For purposes of this Agreement, the term “Personal
Property” does not include plumbing and electrical fixtures, heating, ventilation and air
conditioning, wall and floor coverings, walls or ceilings and other fixtures not constituting trade
fixtures. Some of the Personal Property has or may from time to time become affixed to or be
located on, wholly or in part, the real property leased by Debtor or its affiliates located at
[insert Street Address, City, State ZIP Code] (the “Premises”). The undersigned is the owner or
lessor of the Premises which is leased to Debtor pursuant to the terms of the [Lease Agreement],
dated as of ______________(together with all amendments thereto, the “Lease”).

     For purposes of this Letter Agreement, the term “Revolving Facility Credit Agreement” as used
herein shall mean the ABL Credit Agreement by and among Debtor, certain of its affiliates,
Revolving Facility Agent and Revolving Facility Lenders, and the term “Term Loan Agreement” as used
herein shall mean the Term Loan Credit Agreement by and among Debtor, certain of its affiliates,
Term Loan Agent and Term Loan Lenders, in each case, as the same now exists or may hereafter be
amended, modified, supplemented, extended, renewed, restated or replaced. The term “Lender
Representative” as used herein shall mean Revolving Facility Agent until such time as Revolving
Facility Agent notifies the undersigned in writing (at the undersigned’s address below) that the
Lender Representative shall be Term Loan Agent, and on and after delivery of such notice to the
undersigned, the term “Lender Representative” shall mean Term Loan Agent.

 

 

     In order for Agents and Lenders to consider making loans or providing other financial
accommodations to Debtor or its affiliates in reliance upon the Personal Property as collateral,
the undersigned agrees as follows:

     1. The undersigned waives and relinquishes any landlord’s lien, rights of levy or distraint,
claim, security interest or other interest the undersigned may now or hereafter have in or with
respect to any of the Personal Property, whether for rent or otherwise.

     2. The Personal Property may be installed in or located on the Premises and is not and shall
not be deemed a fixture or part of the real property but shall at all times be considered personal
property.

     3. Agents (and/or their designee), at their option, may enter and use the Premises for the
purpose of repossessing, removing, selling or otherwise dealing with any of the Personal Property,
and such license shall be irrevocable and shall continue from the date Agents (and/or their
designee) enter the Premises pursuant to the rights granted to it herein for a period not to exceed
one hundred twenty (120) days or if later, until the receipt by Lender Representative (and/or its
designee) of written notice from the undersigned directing removal of the Personal Property;
provided, that, (a) for each day that an Agent (or its designee) uses the Premises
pursuant to the rights granted to it herein, unless the undersigned has otherwise been paid rent in
respect of any of such period, such Agent (and/or its designee) shall pay the regularly scheduled
rent provided under the Lease relating to the Premises between the undersigned and Debtor, prorated
on a per diem basis to be determined on a thirty (30) day month, without any Agent thereby assuming
the Lease or incurring any other obligations of Debtor and (b) any damage to the Premises caused by
an Agent (and/or its designee) or its representatives will be repaired by such Agent (and/or its
designee) (for the account of Debtor). To the extent that either or both Agents are prohibited by
any process or injunction issued by any court, or by reason of any bankruptcy or insolvency
proceeding involving Debtor, from enforcing its security interest in the Personal Property, such
one hundred twenty (120) day period shall commence on the termination of such prohibition.

     4. The undersigned agrees to simultaneously send notice in writing of any default under the
Lease to Debtor and Lender Representative at:

Wells Fargo Retail Finance, LLC, as Revolving Facility Agent

One Boston Place, Suite 1800

Boston, Massachusetts 02108

Attention: Adam Davis

Fax: (617) 523-4032

Credit Suisse AG, Cayman Islands Branch, as Term Loan Agent

Eleven Madison Avenue

New York, New York 10010

Attention: Agency Group

Fax: (212) 325-8304

 

 

Upon receipt of such notice, each Agent shall have the right, but not the obligation, to cure such
default. Any payment made or act done by any Agent to cure any such default shall not constitute
an assumption by such Agent of the Lease or any obligations of Debtor.

     This waiver may not be changed or terminated orally or by course of conduct and is binding
upon the undersigned and the heirs, personal representatives, successors and assigns of the
undersigned and inures to the benefit of each Agent, Lenders, Lender Representative and their
respective successors and assigns.

     Dated this ____ day of __________, 2010

	 	 	 	 	 
	 	[NAME OF LANDLORD]

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 

 

 

ACKNOWLEDGMENT TO BE MADE BY LANDLORD

(INDIVIDUAL)

STATE OF

                       ss:

COUNTY OF:

     I,                                                    
          , a Notary Public within and for said County, in the State aforesaid, duly commissioned
and acting, do hereby certify that on this                     day of                     , 2010 personally appeared before me                                             , the
Landlord named in the foregoing Landlord Agreement, to me personally known to be the person who
signed said Landlord Agreement, who, being by me duly sworn and being informed of the contents of
said Landlord Agreement, stated and acknowledged under oath that he signed, executed, sealed and
delivered same as his free and voluntary act and deed, for the uses, purposes and considerations
therein mentioned and set forth.

     WITNESS my hand and seal as such Notary Public the day and year in this certificate above
written.

	 	 	 	 	 

	 
	 

	 	 

Notary Public
	 	 

 

 

LANDLORD ACKNOWLEDGMENT

(PARTNERSHIP)

STATE OF

                                           ss:

COUNTY OF:

     I,       
                     
                     
                     
 , a Notary Public within and for said County, in the State aforesaid, duly commissioned and
acting, do hereby certify that on this                      day of
                    , 2010 personally appeared before me                                         and                                                             , the
Landlord named in the foregoing Landlord Agreement, to me personally known to be the person who
signed said Landlord Agreement, stated and acknowledged under oath that they are Partners of the
Partnership named in and which executed the said Landlord Agreement, and that they signed,
executed, sealed and delivered same individually and on behalf of the said Partnership, with
authority, as their and its free and voluntary act and deed for the uses, purposes and
considerations therein mentioned and set forth.

     WITNESS my hand and seal as such Notary Public the day and year in this certificate above
written.

	 	 	 	 	 

	 
	 

	 	 

Notary Public
	 	 

 

 

LANDLORD ACKNOWLEDGMENT

(CORPORATION)

STATE OF

                                           ss:

COUNTY OF:

     I,       
                      
                      
                 , a Notary Public within and for
said County, in the State aforesaid, duly commissioned and acting, do hereby certify that on this  
                   day of                    , 2010 personally appeared before me                           
                                  (Name of
Signer for Landlord) to me personally known to be the person who signed the foregoing Landlord
Agreement, and who, being by me duly sworn and being informed of the contents of said Landlord
Agreement, stated and acknowledged to me under oath that he is                                          (Title) of                                                              the Corporation
named in and which executed the said Landlord Agreement, and that same was signed, sealed, executed
and delivered by him in the name of and on behalf of the said Corporation by authority of its Board
of Directors and that the execution of said Landlord Agreement was his free and voluntary act and
deed in his said capacity and acknowledged to me that said Corporation executed the same as its
voluntary and was by him voluntarily executed, on behalf of said Corporation for the uses, purposes
and consideration therein mentioned and set forth.

     WITNESS my hand and seal as such Notary Public the day and year in this certificate above
written.

	 	 	 	 	 

	 
	 

	 	 

Notary Public
	 	 

 

 

EXHIBIT G

     SUPPLEMENT NO. [•] dated as of [•] (this “Supplement”), to the Pledge and Security Agreement
dated as of August 13, 2010 (the “Security Agreement”), among AAH Holdings Corporation, a Delaware
corporation (“Holdings”), Amscan Holdings, Inc., a Delaware corporation (the “Amscan”), Amscan
Inc., a New York corporation (“Amscan Inc.”), Anagram International, Inc., a Minnesota corporation
(“Anagram”), Am-Source, LLC, a Rhode Island limited liability company (“Am-Source”), Factory Card
Outlet of America Ltd., an Illinois corporation (“Factory”), Gags and Games, Inc., a Michigan
corporation (“Gags”), PA Acquisition Corp., a Delaware corporation (“Acquisition”), Party City
Corporation, a Delaware corporation (“Party City”) and Party City Franchise Group, LLC, a Delaware
limited liability company (“PCFG” and together with Amscan Inc., Anagram, Am-Source, Factory, Gags,
Acquisition and Party City, each a “Borrower” and collectively, “Borrowers”), each Subsidiary of
Amscan party from time to time thereto (each such Subsidiary individually a “Subsidiary Party” and
collectively, the “Subsidiary Parties”; the Subsidiary Parties, Holdings, Amscan and the Borrowers
are referred to collectively herein as the “Grantors”) and Wells Fargo Retail Finance, LLC, as
administrative and collateral agent (in such capacity, the “Administrative Agent”).

     A. Reference is made to the ABL Credit Agreement dated as of August 13, 2010 (as amended,
supplemented or otherwise modified from time to time, the “Credit Agreement”), among Holdings,
Amscan, the Borrowers, the Subsidiary Parties, the lenders from time to time party thereto and the
Administrative Agent.

     B. Capitalized terms used herein and not otherwise defined herein shall have the meanings
assigned to such terms in the Credit Agreement and the Security Agreement referred to therein.

     C. The Grantors have entered into the Security Agreement in order to induce the Lenders to
make Loans. Section 7.12 of Security Agreement and Section 5.12 of the Credit Agreement provide
that additional Domestic Subsidiaries of Amscan may become Subsidiary Parties under the Security
Agreement by execution and delivery of an instrument in the form of this Supplement. The
undersigned Subsidiary (the “New Subsidiary”) is executing this Supplement in accordance with the
requirements of the Credit Agreement to become a Subsidiary Party under the Security Agreement in
order to induce the Lenders to make additional Loans and as consideration for Loans previously
made.

     Accordingly, the Administrative Agent and the New Subsidiary agree as follows:

     SECTION 1. In accordance with Section 7.12 of the Security Agreement, the New Subsidiary by
its signature below becomes a Subsidiary Party and a Grantor under the Security Agreement with the
same force and effect as if originally named therein as a Subsidiary Party and the New Subsidiary
hereby (a) agrees to all the terms and provisions of the Security Agreement applicable to it as a
Subsidiary Party and Grantor thereunder and (b) represents and warrants that the representations
and warranties made by it as a Grantor thereunder are true and correct in all material respects on
and as of the date hereof. In furtherance of the foregoing, the New Subsidiary, as security for
the payment and performance in full of the Secured Obligations, does hereby create and grant to
the

 

 

Administrative Agent, its successors and assigns, for the benefit of the Secured Parties,
their successors and assigns, a security interest in and Lien on all of the New Subsidiary’s right,
title and interest in and to the Collateral of the New Subsidiary. Each reference to a “Grantor”
in the Security Agreement shall be deemed to include the New Subsidiary. The Security Agreement is
hereby incorporated herein by reference.

     SECTION 2. The New Subsidiary represents and warrants to the Administrative Agent and the
other Secured Parties that this Supplement has been duly authorized, executed and delivered by it
and constitutes its legal, valid and binding obligation, enforceable against it in accordance with
its terms, except as enforcement may be limited by bankruptcy, insolvency or similar laws and
except insofar as enforcement thereof is subject to general principles of equity.

     SECTION 3. This Supplement may be executed in counterparts (and by different parties hereto on
different counterparts), each of which shall constitute an original, but all of which when taken
together shall constitute a single contract. This Supplement shall become effective when the
Administrative Agent shall have received a counterpart of this Supplement that bears the signature
of the New Subsidiary and the Administrative Agent has executed a counterpart hereof. Delivery of
an executed signature page to this Supplement by facsimile transmission shall be as effective as
delivery of a manually signed counterpart of this Supplement.

     SECTION 4. The New Subsidiary hereby represents and warrants that (a) set forth on Schedule I
attached hereto is a true and correct schedule of the location of any and all material Collateral
of the New Subsidiary (other than in- transit inventory), (b) set forth on Schedule II attached
hereto is a true and correct schedule of all the Pledged Collateral of the New Subsidiary, (c) set
forth on Schedule III attached hereto is a true and correct schedule of all Patents, Trademarks and
Copyrights of the New Subsidiary and (d) set forth under its signature hereto, is the true and
correct legal name of the New Subsidiary, its jurisdiction of formation and the location of its
chief executive office.

     SECTION 5. Except as expressly supplemented hereby, the Security Agreement shall remain in
full force and effect.

     SECTION 6. THIS SUPPLEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF
THE STATE OF NEW YORK.

     SECTION 7. In case any one or more of the provisions contained in this Supplement should be
held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of
the remaining provisions contained herein and in the Security Agreement shall not in any way be
affected or impaired thereby (it being understood that the invalidity of a particular provision in
a particular jurisdiction shall not in and of itself affect the validity of such provision in any
other jurisdiction). The parties hereto shall endeavor in good-faith negotiations to replace the
invalid, illegal or unenforceable provisions with valid provisions the economic effect of which
comes as close as possible to that of the invalid, illegal or unenforceable provisions.

     SECTION 8. All communications and notices hereunder shall be in writing and given as provided
in Section 7.01 of the Security Agreement.

 

 

     SECTION 9. The New Subsidiary agrees to reimburse the Administrative Agent for its reasonable
out-of-pocket expenses in connection with this Supplement, including the reasonable fees, other
charges and disbursements of counsel.

 

 

     IN WITNESS WHEREOF, the New Subsidiary and the Administrative Agent have duly executed this
Supplement to the Pledge and Security Agreement as of the day and year first above written.

	 	 	 	 	 
	 	[NAME OF NEW SUBSIDIARY]

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	 	 	Legal Name:

Jurisdiction of Formation:

Location of Chief Executive office:

	 
	 	 	

WELLS FARGO RETAIL FINANCE, LLC, as Administrative Agent

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 

 

 

Schedule I

to Supplement No __ to the

Pledge and Security Agreement

LOCATION OF COLLATERAL

	 	 	 

	Description
	 	Location
	 

 

 

Schedule II

to Supplement No __ to the

Pledge and Security Agreement

LIST OF PLEDGED COLLATERAL, SECURITIES AND OTHER

INVESTMENT PROPERTY

STOCKS

	 	 	 	 	 	 	 	 	 	 	 

	 
	 	 	 	 	 	 	 	 	 	Percentage of
	 
	 	 	 	Certificate
	 	Number of
	 	 	 	Outstanding
	Holder
	 	Issuer
	 	Number(s)
	 	Shares
	 	Class of Stock
	 	Shares
	 
	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 
	 

BONDS

	 	 	 	 	 	 	 	 	 	 	 

	 
	 	 	 	 	 	Face	 	 	 	 
	Holder
	 	Issuer
	 	Number
	 	Amount
	 	Coupon Rate
	 	Maturity
	 
	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 
	 

GOVERNMENT SECURITIES

	 	 	 	 	 	 	 	 	 	 	 	 	 

	 
	 	 	 	 	 	 	 	Face
	 	Coupon	 	 
	Holder
	 	Issuer
	 	Number
	 	Type
	 	Amount
	 	Rate
	 	Maturity
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	 

OTHER SECURITIES OR OTHER INVESTMENT PROPERTY

(CERTIFICATED AND UNCERTIFICATED)

	 	 	 	 	 	 	 

	 
	 	 	 	Description of
	 	Percentage
	Holder
	 	Issuer
	 	Collateral
	 	Ownership Interest
	 
	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 
	 

[Add description of custody accounts or arrangements with securities intermediary, if necessary]

 

 

Schedule III

to Supplement No __ to the

Pledge and Security Agreement

INTELLECTUAL PROPERTY RIGHTS

PATENT REGISTRATIONS

	 	 	 	 	 

	Patent Description
	 	Patent Number
	 	Issue Date
	 
	 	 	 	 	 
	 
	 	 	 	 	 
	 
	 	 	 	 	 
	 

PATENT APPLICATIONS

	 	 	 	 	 

	Patent Description
	 	Application Filing Date
	 	Application Serial Number
	 
	 	 	 	 	 
	 
	 	 	 	 	 
	 
	 	 	 	 	 
	 

TRADEMARK REGISTRATIONS

	 	 	 	 	 

	Trademark
	 	Registration Date
	 	Registration Number
	 
	 	 	 	 	 
	 
	 	 	 	 	 
	 
	 	 	 	 	 
	 

TRADEMARK APPLICATIONS

	 	 	 	 	 

	Trademark Application
	 	Application Filing Date
	 	Application Serial Number
	 
	 	 	 	 	 
	 
	 	 	 	 	 
	 
	 	 	 	 	 
	 

COPYRIGHT REGISTRATIONS

	 	 	 	 	 

	Copyright
	 	Registration Date
	 	Registration Number
	 
	 	 	 	 	 
	 
	 	 	 	 	 
	 
	 	 	 	 	 
	 

COPYRIGHT APPLICATIONS

	 	 	 	 	 

	Copyright Application
	 	Application Filing Date
	 	Application Serial Numberexv10w1

Exhibit 10.1

SECOND LOAN DOCUMENTS MODIFICATION AGREEMENT

     THIS SECOND LOAN DOCUMENTS MODIFICATION AGREEMENT (this “Amendment”) is made and
entered into as of the 30th day of September, 2010, by and among PRGX GLOBAL, INC., a
Georgia corporation formerly known as PRG-Schultz International, Inc. (“PRGX”), PRGX USA,
INC., a Georgia corporation formerly known as PRG-Schultz USA, Inc. (“PRG-USA”) (PRGX and
PRG-USA are each individually, a “Borrower”, and collectively, the “Borrowers”),
and SUNTUST BANK, as Administrative Agent, the sole Lender and Issuing Bank.

BACKGROUND STATEMENT

     WHEREAS, Borrowers have entered into that certain Revolving Credit and Term Loan Agreement,
dated as of January 19, 2010 (as may be subsequently amended, restated, supplemented or otherwise
modified from time-to-time, the “Credit Agreement”; all capitalized terms used but not
otherwise defined herein shall have the meanings ascribed to them in the Credit Agreement), with
the Administrative Agent, the issuing bank thereunder and the lenders from time to time party
thereto (the “Lenders”); and

     WHEREAS, Borrowers, Administrative Agent, the sole Lender and Issuing Bank have agreed to
amend the Credit Agreement and the other Loan Documents.

     NOW, THEREFORE, for and in consideration of the above premises and other good and valuable
consideration, the receipt and sufficiency of which hereby is acknowledged by the parties hereto,
Borrowers, Administrative Agent, the sole Lender and Issuing Bank agree as follows:

     1. Modification of Credit Agreement and Loan Documents. The Credit Agreement is
hereby amended, effective as of the date hereof, as follows:

A. By deleting Section 6.2 in its entirety and replacing it with the following:

“Section 6.2 Fixed Charge Coverage Ratio. (a) The Borrowers will maintain,
as of the end of each Fiscal Quarter, commencing with the Fiscal Quarter ending
September 30, 2010, a Fixed Charge Coverage Ratio of not less than 1.25 : 1.00, and
(b) the Borrowers will maintain, as of the end of each Fiscal Quarter, commencing
with the Fiscal Quarter ending March 31, 2011, a Fixed Charge Coverage Ratio of not
less than 1.50 : 1.00.”

B. By deleting Section 6.3 in its entirety and replacing it with the following:

“Section 6.3 Minimum Consolidated Adjusted EBITDA. (a) The Borrowers will
maintain, as of the last day of each Fiscal Quarter, commencing with the Fiscal
Quarter ending September 30, 2010, Consolidated Adjusted EBITDA for the four Fiscal
Quarters then ended of not less than $20,900,000, and (b) the Borrowers will
maintain, as of the last day of each Fiscal Quarter, commencing with the Fiscal
Quarter ending March 31, 2011, Consolidated Adjusted EBITDA for the four Fiscal
Quarters then ended of not less than $22,500,000.”

Without limiting the generality of clause (i) of the sixth sentence of Section 1.4 of the Credit
Agreement (or any corresponding provision of any other Loan Document), the terms of the Loan
Documents are hereby amended, effective as of the date hereof, so that all references therein to
the Credit Agreement shall refer to Credit Agreement as amended herein.

 

 

     2. Ratification and Reaffirmation. Except as herein expressly modified or amended,
all the terms and conditions of the Credit Agreement and the other Loan Documents are hereby
ratified, affirmed, and approved. As of the date hereof, Borrowers hereby reaffirm and restate
each and every warranty and representation set forth in any Loan Document, in each case except to
the extent such warranty or representation expressly relates to an earlier date. In consideration
of Administrative Agent agreeing to the transactions contemplated by this Amendment, Borrowers
agree to pay to Administrative Agent an amendment fee in the amount of $42,750.00, plus all
reasonable, out-of-pocket costs and expenses of the Administrative Agent incurred in connection
with the preparation and execution of this Amendment and consummation of the transactions
contemplated hereby.

     3. No Novation. The parties hereto hereby acknowledge and agree that this Amendment
shall not constitute a novation of the indebtedness evidenced by any of the Loan Documents, and
further that the terms and provisions of the Loan Documents shall remain valid and in full force
and effect except as be herein modified and amended.

     4. No Defenses; Release. For purposes of this Paragraph 4, the term “Borrower
Parties” shall mean Borrowers collectively and the term “Lender Parties” shall mean
Administrative Agent, Lenders and Issuing Bank, and shall include each of their respective
predecessors, successors and assigns, and each past and present, direct and indirect, parent,
subsidiary and affiliated entity of each of the foregoing, and each past and present employee,
agent, attorney-in-fact, attorney-at-law, representative, officer, director, shareholder, partner
and joint venturer of each of the foregoing, and each heir, executor, administrator, successor and
assign of each of the foregoing; references in this paragraph to “any” of such parties shall be
deemed to mean “any one or more” of such parties; and references in this sentence to “each of the
foregoing” shall mean and refer cumulatively to each party referred to in this sentence up to the
point of such reference. Each Borrower hereby acknowledges, represents and agrees: that, as of the
date hereof, Borrowers have no defenses, setoffs, claims, counterclaims or causes of action of any
kind or nature whatsoever with respect to the Credit Agreement, the other Loan Documents or the
Obligations, or with respect to any other documents or instruments now or heretofore evidencing,
securing or in any way relating to the Obligations (all of said defenses, setoffs, claims,
counterclaims or causes of action being hereinafter referred to as “Loan Related Claims”);
that, to the extent that Borrowers may be deemed to have any Loan Related Claims as of the date
hereof, Borrowers do hereby expressly waive, release and relinquish any and all such Loan Related
Claims, whether or not known to or suspected by Borrowers; that Borrowers shall not institute or
cause to be instituted any legal action or proceeding of any kind based upon any Loan Related
Claims; and that Borrowers shall indemnify, hold harmless and defend all Lender Parties from and
against any and all Loan Related Claims and any and all losses, damages, liabilities and related
reasonable expenses (including reasonable fees, charges and disbursements of any counsel for any
Lender Parties) suffered or incurred by any Lender Parties as a result of any assertion or
allegation by any Borrower Parties of any Loan Related Claims or as a result of any legal action
related thereto, provided that such indemnity shall not , as to any Lender Parties, be
available to the extent that such losses, claims, damages, liabilities or related expenses are
determined by a court of competent jurisdiction by final and nonappealable judgment to have
resulted from (i) the gross negligence or willful misconduct of such Lender Parties or (ii) a claim
brought by any Borrower against any Lender Parties for breach in bad faith of such Lender Parties’
obligations under any Loan Document. Notwithstanding the foregoing provisions of this Paragraph 4,
Borrowers make no such releases, representations, warranties, standstills or agreements with
respect to any future Loan Related Claims.

     5. No Waiver or Implication. Borrowers hereby agree that nothing herein shall
constitute a waiver by Administrative Agent or any Lender of any default, whether known or unknown,
which may now exist under the Credit Agreement or any other Loan Document. Borrowers hereby
further agree that no action, inaction or agreement by Administrative Agent or any Lender,
including, without limitation, any extension, indulgence, waiver, consent or agreement of
modification which may have occurred or

2

 

have been granted or entered into (or which is now occurring or is being granted or entered
into hereunder or otherwise) with respect to nonpayment of the Loans or any portion thereof, or
with respect to matters involving security for the Loans, or with respect to any other matter
relating to the Loans, shall require or imply any future extension, indulgence, waiver, consent or
agreement by Administrative Agent or any Lender. Borrowers hereby acknowledge and agree that
Administrative Agent has made no agreement, and is in no way obligated, to grant any future
extension, indulgence, waiver or consent with respect to the Loans or any matter relating to the
Loans.

     6. No Release of Collateral. Borrowers further acknowledge and agree that this
Amendment shall in no way occasion a release of any collateral held by Administrative Agent as
security to or for the Loans, and that all collateral held by Administrative Agent as security to
or for the Loans shall continue to secure the Loans.

     7. Counterparts. This Amendment may be executed in one or more counterparts, each of
which shall be deemed an original hereof and submissible into evidence and all of which together
shall constitute one instrument.

     8. Headings. The headings of the paragraphs and other provisions hereof are provided
for convenience only and shall not in any way affect the meaning or construction of any provision
of this Amendment.

     9. Successors and Assigns. This Amendment shall be binding upon and inure to the
benefit of Borrowers, Administrative Agent, Lenders, Issuing Bank and their respective heirs,
successors and assigns, whether voluntary by act of the parties or involuntary by operation of law.

(Signatures on following page)

3

 

     IN WITNESS WHEREOF, this Amendment has been duly executed by the parties hereto as of the day
and year first above written.

	 	 	 	 	 
	 	PRGX GLOBAL, INC., a Georgia corporation, formerly

known as PRG-Schultz International, Inc.

 	 
	 	By:  	/s/ Robert B. Lee 	 
	 	 	Name:  	Robert B. Lee 	 
	 	 	Title:  	Chief Financial Officer 	 
	 
	 	 	  	[CORPORATE SEAL] 	 
	 
	 	PRGX USA, INC., a Georgia corporation, formerly known

as PRG-Schultz USA, Inc.

 	 
	 	By:  	/s/ Robert B. Lee 	 
	 	 	Name:  	Robert B. Lee 	 
	 	 	Title:  	Chief Financial Officer  	 
	 
	 	 	  	[CORPORATE SEAL] 	 
	 

	 	 	 	 	 
	 	SUNTRUST BANK, as Administrative Agent, the sole

Lender and Issuing Bank

 	 
	 	By:  	/s/ D. Scott Cathcart 	 
	 	 	Name:  	D. Scott Cathcart 	 
	 	 	Title:  	FVP

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