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o		Preliminary Proxy Statement
o		Confidential, For Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
þ		Definitive Proxy Statement
o		Definitive Additional Materials
o		Soliciting Material Pursuant to §240.14a-12

o	No fee required.
o	Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

(1)	Title of each class of securities to which transaction applies: Common stock, par value $0.01 per share, of Party City Corporation (the “Party City common stock”)
(2)	Aggregate number of securities to which transaction applies: 17,319,386 shares of Party City common stock 3,092,516 options to purchase shares of Party City common stock with an exercise price of less than $17.50 29,230 shares of Party City common stock issuable pursuant to the employee stock purchase plan 5,420 shares of Party City common stock issuable pursuant to the management stock purchase plan 2,496,000 warrants to purchase shares of Party City common stock with an exercise price of less than $17.50.
(3)	Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): $17.50 per share of Party City common stock $17.50 minus weighted average price of $11.83 per share of outstanding options to purchase shares of Party City common stock with an exercise price of less than $17.50 $17.50 minus weighted average price of $11.98 per share of Party City common stock issuable pursuant to the employee stock purchase plan $17.50 minus weighted average price of $10.56 per share of Party City common stock issuable pursuant to the management stock purchase plan $17.50 minus weighted average price of $1.07 per share of outstanding warrants to purchase shares of Party City common stock with an exercise price of less than $17.50
(4)	Proposed maximum aggregate value of transaction: $361,794,450
(5)	Total fee paid: $42,583

þ	Fee paid previously with preliminary materials.
o	Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

(1)	Amount Previously Paid:

(2)	Form, Schedule or Registration Statement No.:

(3)	Filing Party:

(4)	Date Filed:

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	Sincerely,
	/s/ Ralph D. Dillon
	Ralph D. Dillon
	Non-Executive Chairman of the Board

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	1. To consider and vote on a proposal to adopt the Agreement and Plan of Merger, dated as of September 26, 2005, as amended, by and among Amscan Holdings, Inc., BWP Acquisition, Inc. and Party City Corporation, which provides for the merger of BWP Acquisition, Inc., a wholly-owned subsidiary of Amscan Holdings, Inc., with and into Party City Corporation, with Party City Corporation continuing as the surviving corporation in the merger, and the conversion of each outstanding share of common stock of Party City Corporation (other than shares held (i) as treasury shares or by any subsidiary of Party City Corporation or (ii) by Amscan Holdings, Inc., BWP Acquisition, Inc. or any subsidiary of BWP Acquisition, Inc.) into the right to receive $17.50 in cash, without interest;
	2. To approve the adjournment or postponement of the special meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes at the time of the meeting to adopt the merger agreement; and
	3. To transact such other business as may properly come before the special meeting or any adjournment or postponement thereof, including to consider any procedural matters incident to the conduct of the special meeting.

	By Order of the Board of Directors,
	/s/ Joseph J. Zepf

	By:	Joseph J. Zepf

	Secretary

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SUMMARY TERM SHEET
QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETING AND THE MERGER
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
THE SPECIAL MEETING OF PARTY CITY STOCKHOLDERS
Date, Time, Place and Purpose of the Special Meeting
Record Date; Quorum
Vote Required
Voting by Directors and Executive Officers
Voting
Revocability of Proxies
Solicitation of Proxies
Other Business
Adjournments and Postponements
Attending the Special Meeting
THE MERGER
Background of the Merger
Reasons for the Merger and Recommendation of the Special Committee and the Board of Directors
Opinion of Our Financial Advisor
Certain Effects of the Merger
Effects on Party City if the Merger is Not Completed
Delisting and Deregistration of Party City Common Stock
Financing
Interests of Certain Persons in the Merger
Fees and Expenses of the Merger
Certain Projections
Voting Agreement
REGULATORY MATTERS
MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES
THE MERGER AGREEMENT (PROPOSAL 1)
Form of the Merger
Structure
Effective Time
Certificate of Incorporation and Bylaws
Board of Directors and Officers of the Surviving Corporation
Consideration to be Received in the Merger
Payment Procedures
Stock Options and Warrants
Representations and Warranties
Covenants Relating to the Conduct of Our Business
Covenant Relating to the Conduct of Amscan Holdings, Inc.’s Business
No Solicitation
Stockholders Meeting
Indemnification and Insurance
Benefit Arrangements
Conditions to the Merger
Termination of the Merger Agreement
Termination Fees
Amendment
APPRAISAL RIGHTS
MARKET PRICE AND DIVIDEND DATA
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
TRANSACTIONS IN SHARES OF COMMON STOCK
Issuer Purchases of Equity Securities
Purchases by AAH Holdings, Amscan Holdings, Inc. and BWP Acquisition, Inc.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
DIRECTORS AND EXECUTIVE OFFICERS OF PARTY CITY
DESCRIPTION OF PARTY CITY CORPORATION
DESCRIPTION OF AMSCAN HOLDINGS, INC.
DESCRIPTION OF BWP ACQUISITION, INC.
ADJOURNMENT OR POSTPONEMENT OF THE SPECIAL MEETING (PROPOSAL 2)
FUTURE STOCKHOLDER PROPOSALS
HOUSEHOLDING OF SPECIAL MEETING MATERIALS
WHERE YOU CAN FIND MORE INFORMATION
Incorporation by Reference
Section 262 of the General Corporation Law of the State of Delaware

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SUMMARY TERM SHEET				1
QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETING AND THE MERGER				9
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS				14
THE SPECIAL MEETING OF PARTY CITY STOCKHOLDERS				15
	Date, Time, Place and Purpose of the Special Meeting			15
	Record Date; Quorum			15
	Vote Required			15
	Voting by Directors and Executive Officers			16
	Voting			16
	Revocability of Proxies			16
	Solicitation of Proxies			17
	Other Business			17
	Adjournments and Postponements			17
	Attending the Special Meeting			17
THE MERGER				18
	Background of the Merger			18
	Reasons for the Merger and Recommendation of the Special Committee and the Board of Directors			20
	Opinion of Our Financial Advisor			22
	Certain Effects of the Merger			27
	Effects on Party City if the Merger is Not Completed			28
	Delisting and Deregistration of Party City Common Stock			28
	Financing			29
	Interests of Certain Persons in the Merger			30
	Fees and Expenses of the Merger			32
	Certain Projections			32
	Voting Agreement			34
REGULATORY MATTERS				35
MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES				35
THE MERGER AGREEMENT (PROPOSAL 1)				38
	Form of the Merger			38
	Structure			38
	Effective Time			38
	Certificate of Incorporation and Bylaws			38
	Board of Directors and Officers of the Surviving Corporation			39
	Consideration to be Received in the Merger			39
	Payment Procedures			39
	Stock Options and Warrants			40
	Representations and Warranties			40
	Covenants Relating to the Conduct of Our Business			42
	Covenant Relating to the Conduct of Amscan Holdings, Inc.’s Business			44
	No Solicitation			44
	Stockholders Meeting			46
	Indemnification and Insurance			46
	Benefit Arrangements			47

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	Conditions to the Merger			47
	Termination of the Merger Agreement			49
	Termination Fees			50
	Amendment			51
APPRAISAL RIGHTS				51
MARKET PRICE AND DIVIDEND DATA				54
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT				55
TRANSACTIONS IN SHARES OF COMMON STOCK				57
	Issuer Purchases of Equity Securities			57
	Purchases by AAH Holdings, Amscan Holdings, Inc. and BWP Acquisition, Inc.			57
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS				58
DIRECTORS AND EXECUTIVE OFFICERS OF PARTY CITY				59
DESCRIPTION OF PARTY CITY CORPORATION				60
DESCRIPTION OF AMSCAN HOLDINGS, INC				60
DESCRIPTION OF BWP ACQUISITION, INC				61
ADJOURNMENT OR POSTPONEMENT OF THE SPECIAL MEETING (PROPOSAL 2)				61
FUTURE STOCKHOLDER PROPOSALS				61
HOUSEHOLDING OF SPECIAL MEETING MATERIALS				61
WHERE YOU CAN FIND MORE INFORMATION				62
	Incorporation by Reference			62
ANNEX A — Agreement and Plan of Merger, dated as of September 26, 2005, as amended on October 11, 2005, by and among Amscan Holdings, Inc., BWP Acquisition, Inc. and Party City Corporation				A-1
ANNEX B — Opinion of Credit Suisse First Boston LLC				B-1
ANNEX C — Section 262 of the General Corporation Law of the State of Delaware				C-1

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•	Parties Involved in the Proposed Transaction

	Party City Corporation
	400 Commons Way
	Rockaway, New Jersey 07866
	(973) 983-0888

	Amscan Holdings, Inc.
	80 Grasslands Road
	Elmsford, New York 10523
	(914) 345-2020

	BWP Acquisition, Inc.
	c/o Berkshire Partners LLC
	One Boston Place
	Boston, MA 02108
	(617) 227-0500

•	The Merger

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•	The Special Meeting

	Date, Time and Place (page 15)

	Matters to be Considered (page 15)

	Recommendation of Special Committee to Board of Directors (page 15)

	Record Date (page 15)

	Required Vote and Voting Agreement (page 15)

	Voting by Proxy (page 16)

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	Revocability of Proxy (page 16)

	•	submitting another properly completed proxy (including by telephone or over the internet) bearing a later date;
	•	giving written notice of revocation to any of the persons named as proxies or to the Secretary of Party City; or
	•	voting in person at the special meeting.

•	The Merger Agreement

	Structure of the Merger (page 36)

	What You Will Receive in the Merger (page 37)

	Party City Stock Options and Warrants (page 38)

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	Recommendation to Stockholders (page 20)

	Opinion of Our Financial Advisor (page 22)

	Financing (page 28)

	Voting Agreement (page 34)

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	Conditions to the Merger (page 46)

	•	the adoption of the merger agreement by our stockholders;
	•	the expiration or termination of the applicable waiting periods under the Hart-Scott Rodino Antitrust Improvements Act of 1976, as amended, which we refer to as the HSR Act;
	•	no statute, rule, regulation, order, decree, judgment, injunction or arbitration award or finding or other order or ruling of a governmental entity, court or arbitrator preventing or prohibiting the consummation of the merger;
	•	any consent or approval from each federal and material state and foreign governmental entity having been obtained where the failure to do so would constitute a material violation of law or subject any party to the merger agreement to any material fine or other materially adverse consequence, provided that this condition will not apply as a condition to a party’s obligation to close if such party’s failure to fulfill its obligations under the merger agreement is the cause of the failure to obtain such consent or approval;

	•	the representations and warranties of Amscan Holdings, Inc. and BWP Acquisition, Inc. in the merger agreement must be true and correct at the effective time of the merger (ignoring any materiality or similar qualifiers), except for failures of such representations and warranties to be so true and correct which, individually or in the aggregate, do not have a material adverse effect on the ability of Amscan Holdings, Inc. or BWP Acquisition, Inc. to perform their obligations under the merger agreement or that would not prevent or materially impede, interfere with, hinder or delay the consummation of the merger;
	•	Amscan Holdings, Inc. and BWP Acquisition, Inc. each having performed or complied in all material respects with all agreements and covenants required by the merger agreement to be performed or complied with by it on or prior to the effective time of the merger;

	•	certain of our representations and warranties in the merger agreement must be true and correct in all material respects at the effective time of the merger, certain of our representations and warranties in the merger agreement must be true and correct at the effective time of the merger (ignoring any materiality or similar qualifiers) except where the failure of such representations and warranties to be true and correct will not result in fees, costs, charges, losses, expenses or other amounts attributable to or payable by Amscan Holdings, Inc., BWP Acquisition, Inc. or the surviving corporation in excess of certain thresholds, and certain of our representations and warranties as must be true and correct at the effective time of the merger (ignoring any materiality or similar qualifiers) except for the failure of such representations and warranties to be true and correct which, individually or in the aggregate, do not result in, and could not reasonably be expected to result in, a material adverse effect on us;
	•	the receipt by the parties to the merger agreement of the proceeds of the debt financing pursuant to the commitment letters with respect to the debt financing, or alternate debt financing in the same amounts and on terms and conditions no less favorable to Amscan Holdings, Inc. and BWP Acquisition, Inc. than those included in such debt commitment letters;
	•	the absence of any material adverse effect on us since September 26, 2005; and
	•	Party City having performed or complied in all material respects with all agreements and covenants required by the merger agreement to be performed or complied with by it on or prior to the effective time of the merger.

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	No Solicitation (page 43)

	•	solicit, initiate, propose or knowingly encourage or facilitate any takeover proposal;
	•	enter into any agreement or agreement in principle with respect to a takeover proposal; or
	•	initiate or participate in any way in negotiations or discussions regarding, or furnish or disclose to any third person any information with respect to or in connection with any takeover proposal.

	•	furnish information with respect to Party City to the third party who made the takeover proposal pursuant to a customary confidentiality agreement no less favorable to us than our confidentiality agreement with Amscan Holdings, Inc.; provided that all such information has previously been provided to Amscan Holdings, Inc. or is provided to Amscan Holdings, Inc. prior to, or concurrently with, the time it is provided to such third party; and
	•	participate in discussions and negotiations regarding such takeover proposal.

	Termination of the Merger Agreement (page 47)

	•	by mutual written consent of BWP Acquisition, Inc. and us;
	•	by either Amscan Holdings, Inc. or us if the effective time shall not have occurred on or before March 31, 2006, unless the failure to consummate the merger is the result of a breach of the merger agreement by the party seeking to terminate the merger agreement, and the conditions relating to the last termination right described under this section do not apply;
	•	by Amscan Holdings, Inc. if our board of directors or the special committee (1) withdraws, modifies or changes, in a manner adverse to Amscan Holdings, Inc., its recommendation concerning the merger, (2) approves, adopts or recommends a takeover proposal or superior proposal; (3) allows us to enter into any agreement constituting or relating to, or that is intended to or would be reasonably expected to result in a takeover proposal or (4) take a position contemplated by Rule 14e-2(a) of the Securities Exchange Act of 1934, as amended, other than recommending rejection of a takeover proposal. We refer to these events as an “adverse recommendation change”;
	•	by us if, prior to the special meeting of our stockholders to approve the merger agreement and the merger, solely in response to an unsolicited bona fide written takeover proposal from a third party, our board of directors or the special committee makes an adverse recommendation change under the following circumstances:

	—	our board of directors or the special committee is required do so in order to comply with its fiduciary duties to our stockholders under applicable law;
	—	our board of directors or the special committee determines in good faith (after consultation with its outside legal counsel and financial advisor) that such takeover proposal is a superior proposal;

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	—	we and our board of directors or the special committee are not otherwise in violation of the takeover proposal section of the merger agreement;
	—	Amscan Holdings, Inc. has been given three business days notice of our board of directors’ or the special committee’s intention to make such an adverse recommendation change and our board of directors or the special committee has considered in good faith any changes to the merger agreement proposed during such three business day period by Amscan Holdings, Inc. and our board of directors or the special committee shall not have determined that the third party’s takeover proposal would no longer constitute a superior proposal if Amscan Holdings, Inc.’s changes were to be given effect; and
	—	we pay Amscan Holdings, Inc. a termination fee of $15 million;

	•	by either Amscan Holdings, Inc. or us if the merger agreement fails to receive stockholder approval;
	•	by either Amscan Holdings, Inc., BWP Acquisition, Inc. or us if any court or governmental entity shall have issued an order, decree or ruling or taken any other action permanently enjoining, restraining or otherwise prohibiting the merger and such order, decree, ruling or other action shall have become final and nonappealable;
	•	by Amscan Holdings, Inc. if (1) any of our representations and warranties in the merger agreement are or become untrue or inaccurate, or (2) we breach any of our covenants or agreements in the merger agreement, and, in either such case, we cannot satisfy the applicable condition to close and such breach has not been, or cannot be, cured within the earlier of 30 days after notice to us or March 31, 2006;
	•	by us if (1) any of the representations and warranties of either Amscan Holdings, Inc. or BWP Acquisition, Inc. in the merger agreement are or become untrue or inaccurate, or (2) Amscan Holdings, Inc. or BWP Acquisition, Inc. breach any of their respective covenants or agreements in the merger agreement, and, in either such case, Amscan Holdings, Inc. or BWP Acquisition, Inc. cannot satisfy the applicable condition to close and such breach has not been, or cannot be, cured within the earlier of 30 days after notice to us or March 31, 2006;
	•	by us, if the commitment letters for the debt financing have been withdrawn or the lenders for such debt financing notify Amscan Holdings, Inc. that the conditions set forth in such commitment letters cannot or will not be satisfied, and Amscan Holdings, Inc. is unable to secure alternate commitments for the debt financing to the reasonable satisfaction of our board of directors within thirty calendar days; or
	•	by us or Amscan Holdings, Inc., if (1) the closing shall not have occurred on or before March 31, 2006, (2) we are not otherwise in breach of the merger agreement, (3) we have satisfied (or are immediately capable of satisfying) all of the conditions to closing that we have responsibility to fulfill and (4) the only condition to closing that cannot be satisfied is the condition for the consummation of the debt financing.

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Q:	Why am I receiving these materials?
A:	You are receiving this proxy statement and proxy card because you own shares of common stock, par value $0.01 per share, of Party City Corporation (“common stock”). Our board of directors is providing these materials to give you information for use in determining how to vote in connection with the special meeting of shareholders.
Q:	When and where is the special meeting?
A:	The special meeting of shareholders will be held at 1:00 p.m., local time, on December 7, 2005 at the Sheraton Parsippany, 199 Smith Road, Parsippany, NJ 07054.
Q:	Who is soliciting my proxy?
A:	This proxy is being solicited by our board of directors.
Q:	What matters will be voted on at the special meeting?
A:	You will be asked to vote on the following proposals:

	•	to adopt the merger agreement, which provides for the merger of BWP Acquisition, Inc. with and into Party City with Party City continuing as the surviving corporation in the merger, and the conversion of each outstanding share of common stock of Party City (other than shares held (i) as treasury shares or by any subsidiary of Party City, (ii) by Amscan Holdings, Inc., BWP Acquisition, Inc. or any subsidiary of BWP Acquisition, Inc. or (iii) by shareholders who are entitled to and who properly exercise dissenters’ rights in compliance with all of the required procedures under the Delaware General Corporation Law) into the right to receive $17.50 in cash, without interest;
	•	to approve the adjournment or postponement of the meeting, if necessary, to permit the further solicitation of proxies if there are not sufficient votes at the time of the meeting to adopt the merger agreement; and
	•	to act on other matters and transact such other business, as may properly come before the meeting.

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Q:	How do the special committee and Party City’s board of directors recommend that I vote on the proposals?
A:	The special committee and our board of directors each recommend that you vote:

	•	“FOR” the proposal to adopt the merger agreement; and
	•	“FOR” the adjournment or postponement of the meeting, if necessary, to permit the further solicitation of proxies.

Q:	What vote is required for Party City’s stockholders to adopt the merger agreement?
A:	To adopt the merger agreement, holders of a majority of the outstanding shares of our common stock must vote “FOR” adoption of the merger agreement. At the request of Amscan Holdings, Inc., Michael E. Tennenbaum, Tennenbaum Capital Partners, LLC, Tennenbaum & Co., LLC, Special Value Bond Fund, LLC, Special Value Absolute Return Fund, LLC and Special Value Bond Fund II, LLC and their affiliates who hold shares of Party City common stock have entered into a voting agreement pursuant to which they have agreed to vote their shares of Party City common stock “FOR” adoption of the merger agreement.
Q:	What vote is required for Party City’s stockholders to approve the proposal to adjourn or postpone the special meeting, if necessary, to permit the further solicitation of proxies?
A:	The proposal to adjourn or postpone the meeting, if necessary, to permit the further solicitation of proxies requires the affirmative vote of the holders of a majority of the shares of our common stock present or represented by proxy and voting on the matter.
Q:	Who is entitled to vote at the special meeting?
A:	Holders of record of our common stock as of the close of business on November 2, 2005, the record date for the special meeting, are entitled to receive notice of and to vote at the special meeting. On the record date, 19,796,956 shares of our common stock, held by approximately 361 holders of record, were outstanding and entitled to vote. You may vote all shares you owned as of the record date. You are entitled to one vote per share.
Q:	What should I do now?
A:	After carefully reading and considering the information contained in this proxy statement, please vote your shares by completing, signing, dating and returning the enclosed proxy card, or by telephone or over the internet. You can also attend the special meeting and vote in person. Do NOT enclose or return your stock certificate(s) with your proxy.
Q:	If my shares are held in “street name” by my broker, will my broker vote my shares for me?
A:	Your broker will only be permitted to vote your shares on the adoption of the merger agreement if you instruct your broker how to vote. You should follow the procedures provided by your broker regarding the voting of your shares. If you do not instruct your broker to vote your shares on the adoption of the merger agreement or the proposal to solicit additional proxies, if necessary, to adopt the merger agreement, your shares will not be voted.
Q:	How do I vote my shares of Party City common stock?
A:	Before you vote, you should carefully read and consider the information contained in or incorporated by reference in this proxy statement, including the appendices. You should also determine whether you hold your shares of Party City common stock directly in your name as a registered shareholder or through a broker or other nominee because this will determine the procedure that you must follow in order to vote. If you are a registered holder of Party City common stock (that is, if you hold your Party City common stock in certificate form), you may vote in any of the following ways:

	•	by mail — complete, sign and date the enclosed proxy card and return it in the enclosed postage-prepaid envelope as soon as possible;

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	•	by telephone or over the internet — follow the instructions included with your proxy card. The deadline for voting by telephone or over the internet is 11:59 p.m., New York City time on December 6, 2005; or
	•	in person at the special meeting.

	Even if you plan to attend the special meeting in person, however, we request that you complete, sign and date the enclosed proxy card and return it in the enclosed postage-prepaid envelope as soon as possible to be sure your shares will be represented at the special meeting if you are unable to attend. This action will not limit your right to vote in person if you attend the special meeting.

Q:	How are votes counted?
A:	For the proposal to adopt the merger agreement, you may vote FOR, AGAINST or ABSTAIN. Abstentions will not be counted as votes cast or shares voting on the proposal to adopt the merger agreement, but will count for the purpose of determining whether a quorum is present. If you abstain, it will have the same effect as if you vote against the adoption of the merger agreement. In addition, if your shares are held in the name of a broker or other nominee, your broker or other nominee will not be entitled to vote your shares in the absence of specific instructions. These non-voted shares, or broker non-votes, will be counted for purposes of determining a quorum, but will have the effect of a vote against the adoption of the merger agreement.

	For the proposal to adjourn or postpone the meeting, if necessary, to permit the further solicitation of proxies, you may vote FOR, AGAINST or ABSTAIN. Although abstentions and broker non-votes will count for the purpose of determining whether a quorum is present, abstentions and broker non-votes will not count as votes cast or shares voting on the proposal to adjourn or postpone the meeting. As a result, abstentions and broker non-votes will have no effect on the vote to adjourn or postpone the meeting, which requires the vote of the holders of a majority of the shares present or represented by proxy and voting on the matter.
	If you sign your proxy card without indicating your vote, your shares will be voted “FOR” the adoption of the merger agreement and “FOR” adjournment or postponement of the meeting, if necessary, to permit the further solicitation of proxies, and in accordance with the recommendations of our board of directors on any other matters properly brought before the meeting for a vote.

Q:	When should I send in my proxy card?
A:	You should send in your proxy card as soon as possible so that your shares will be voted at the special meeting.
Q:	May I change my vote after I have mailed my signed proxy card?
A:	Yes. You may change your vote at any time before your proxy is voted at the special meeting. You can do this in one of three ways. First, you can send a written, dated notice to the Secretary of Party City stating that you would like to revoke your proxy. Second, you can complete, date and submit a new proxy card by mail, by telephone or over the internet. Third, you can attend the meeting and vote in person. Your attendance alone will not revoke your proxy. If you have instructed a broker to vote your shares, the procedures for changing your vote described above will not apply, and you must instead follow the directions received from your broker to change those instructions.
Q:	May I vote in person?
A:	Yes. You may attend the special meeting of stockholders and vote your shares of common stock in person. If you hold shares in “street name,” you must provide a legal proxy executed by your bank or broker in order to vote your shares at the meeting.

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Q:	What does it mean if I receive more than one set of materials?
A:	This means you own shares of Party City common stock that are registered under different names. For example, you may own some shares directly as a shareholder of record and other shares through a broker or you may own shares through more than one broker. In these situations, you will receive multiple sets of proxy materials. You must complete, sign, date and return all of the proxy cards or follow the instructions for any alternative voting procedure on each of the proxy cards that you receive in order to vote all of the shares you own. Each proxy card you receive comes with its own prepaid return envelope; if you vote by mail, make sure you return each proxy card in the return envelope that accompanies that proxy card.

Q:	What is the proposed transaction?
A:	The proposed transaction is the acquisition of Party City by Amscan Holdings, Inc., a Delaware corporation whose indirect owners currently consist of investment funds affiliated with Berkshire Partners LLC and Weston Presidio, pursuant to an agreement and plan of merger, dated as of September 26, 2005, as amended, among us, Amscan Holdings, Inc. and BWP Acquisition, Inc. Amscan Holdings, Inc. will acquire us by merging BWP Acquisition, Inc. with and into us. We will be the surviving corporation. If the proposed transaction is completed, we will cease to be a publicly traded company and will instead become a wholly owned subsidiary of Amscan Holdings, Inc.
Q:	If the merger is completed, what will I be entitled to receive for my shares of Party City common stock and when will I receive it?
A:	You will be entitled to receive $17.50 in cash, without interest and less any applicable withholding taxes, for each share of our common stock that you own.

	After the merger closes, we will arrange for a letter of transmittal to be sent to each of our stockholders. The merger consideration will be paid to each stockholder once that stockholder submits the letter of transmittal, properly endorsed stock certificates and any other required documentation.
	Prior to the effective time of the merger, the merger agreement provides that each unexpired and unexercised option, warrant, restricted stock unit or similar rights to purchase shares of Party City common stock, whether or not then exercisable or vested, shall become cancelled and the holder of any such cancelled option, warrant or restricted stock unit will be entitled to receive a cash payment (less any applicable withholding taxes) equal to the product of (1) the total number of shares of Party City common stock subject to the option, warrant, restricted stock unit or similar right multiplied by (2) the excess, if any, of $17.50 over the exercise price per share of Party City common stock under such option, warrant, restricted stock unit or similar right.

Q:	Am I entitled to appraisal rights?
A:	Under the General Corporation Law of the State of Delaware, holders of Party City common stock who do not vote in favor of adopting the merger agreement will have the right to seek appraisal of the fair value of their shares as determined by the Delaware Court of Chancery if the merger is completed, but only if they submit a written demand for an appraisal prior to the vote on the adoption of the merger agreement at the special meeting and they comply with the Delaware law procedures and requirements, which are summarized in this proxy statement. This appraisal amount could be more than, the same as, or less than the amount a stockholder would be entitled to receive under the terms of the merger agreement. For additional information about appraisal rights, see “Appraisal Rights” beginning on page 49 of this proxy statement.
Q:	Why are the special committee and the Party City board of directors recommending the merger?
A:	The special committee and our board of directors believe that the merger and the merger agreement and the voting agreement are advisable and in the best interests of Party City and its stockholders and unanimously recommend that you vote “FOR” the adoption of the merger agreement. To review their

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	reasons for recommending the merger, see the section entitled “The Merger — Reasons for the Merger and Recommendation of the Special Committee and the Board of Directors” on pages 20 through 22 of this proxy statement.
Q:	Why was a special committee established?
A:	A special committee of the board of directors was established by the Party City board of directors for the purpose of reviewing, evaluating and, as appropriate, negotiating a possible transaction relating a the sale of, or business combination involving Party City. The special committee is comprised of three independent and disinterested directors. A disinterested director was determined to be a director would have no interest in any sale transaction different than the interests of the unaffiliated Party City shareholders (except with respect to the acceleration of vesting of options to acquire Party City common stock received by all directors).
Q:	Is the merger subject to the satisfaction of any conditions?
A:	Yes. Before the completion of the transactions contemplated by the merger agreement, a number of closing conditions must be satisfied or waived. These conditions are described in this proxy statement under “The Merger Agreement (Proposal 1) — Conditions to the Merger” beginning on page 46. These conditions include, among others, obtaining all necessary regulatory approvals to complete the merger, obtaining shareholder and other necessary consents and approvals and Amscan Holdings, Inc.’s receipt of debt financing to complete the merger. If these conditions are not satisfied or waived, the merger will not be completed even if shareholders vote to approve the merger agreement.
Q:	Will the merger be a taxable transaction to me?
A:	Yes. The receipt of cash for shares of Party City common stock pursuant to the merger will be a taxable transaction for U.S. federal income tax purposes. In general, you will recognize gain or loss equal to the difference between the amount of cash you receive and the adjusted tax basis of your shares of our common stock. See the section entitled “Material U.S. Federal Income Tax Consequences” on pages 33 through 35 of this proxy statement for a more detailed explanation of the tax consequences of the merger. You should consult your tax advisor on how specific tax consequences of the merger apply to you.
Q:	When is the merger expected to be completed?
A:	We are working to complete the merger as quickly as possible. We currently expect to complete the merger promptly after the special meeting and after all the conditions to the merger are satisfied or waived, including stockholder adoption of the merger agreement at the special meeting and expiration or termination of the waiting period under U.S. antitrust law. We and Amscan Holdings, Inc. filed pre-merger notifications with the U.S. antitrust authorities pursuant to the HSR Act, effective October 7, 2005, and the waiting period will expire at 11:59 p.m. on November 7, 2005, unless lengthened.
Q:	Should I send in my Party City stock certificates now?
A:	No. After the merger is completed, the exchange agent will send you written instructions for exchanging your Party City stock certificates for cash. You must return your Party City stock certificates as described in the instructions. You will receive your cash payment as soon as practicable after our exchange agent receives your Party City stock certificates and any completed documents required in the instructions. PLEASE DO NOT SEND IN YOUR PARTY CITY STOCK CERTIFICATES NOW.
Q:	What should I do if I have questions?
A:	If you have more questions about the special meeting, the merger or this proxy statement, or would like additional copies of this proxy statement or the proxy card, you should contact D.F. King & Co., Inc., our proxy solicitor, toll-free at 1-888-628-1041.

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	•	our ability to satisfy the conditions to complete the merger;
	•	the ability to consummate the proposed transaction due to the failure to obtain stockholder approval;
	•	the failure to consummate the necessary financing arrangements set forth in a commitment letter received by Amscan Holdings, Inc. and BWP Acquisition, Inc. or the failure to satisfy other conditions to the closing of the proposed transaction;
	•	the actual terms of financing that must be obtained for completion of the merger;
	•	the ability to recognize the benefits of the transaction;
	•	intense competition in Party City’s industry;
	•	changes in government regulation;
	•	receipt of necessary approvals under applicable antitrust laws and other relevant regulatory authorities;
	•	the occurrence of any event, change or other circumstance that could give rise to the termination of the merger agreement;
	•	the outcome of any legal proceeding that has been or may be instituted against us and others following the announcement of the merger agreement;
	•	the amount of the costs, fees, expenses and charges related to the merger;
	•	general economic and market conditions, including changes in consumer spending patterns;
	•	the effect of war, political unrest, terrorism or catastrophic events;
	•	the effect of the announcement of the merger on our client relationships, operating results and business generally, including the ability to retain and attract key employees;
	•	the failure of the merger to close for any other reason;
	•	failure to manage the integration of acquired companies; and
	•	other factors described in Party City’s annual report on Form 10-K for the year ended July 2, 2005 filed with the Securities and Exchange Commission, which we refer to as the SEC.

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	•	to consider and vote on a proposal to adopt the Agreement and Plan of Merger, dated as of September 26, 2005, as amended, by and among Amscan Holdings, Inc., BWP Acquisition, Inc. and Party City Corporation, which provides for the merger of BWP Acquisition, Inc., a wholly-owned subsidiary of Amscan Holdings, Inc., with and into Party City Corporation, with Party City Corporation continuing as the surviving corporation in the merger, and the conversion of each outstanding share of common stock of Party City Corporation (other than shares held (i) as treasury shares or by any subsidiary of Party City Corporation or (ii) by Amscan Holdings, Inc., BWP Acquisition, Inc. or any subsidiary of BWP Acquisition, Inc.) into the right to receive $17.50 in cash, without interest;
	•	to approve the adjournment or postponement of the special meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes at the time of the meeting to adopt the merger agreement; and
	•	to transact such other business as may properly come before the special meeting or any adjournment or postponement thereof, including any procedural matters incident to the conduct of the special meeting.

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	•	submitting another properly completed proxy (including by telephone or over the internet) bearing a later date;

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	•	giving written notice of revocation to any of the persons named as proxies or to the Secretary of Party City; or
	•	voting in person at the special meeting.

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	•	the value of the consideration to be received by our stockholders pursuant to the merger agreement, including the fact that stockholders will receive the consideration in cash, which provides certainty of value to our stockholders;
	•	the $17.50 per share to be paid as the consideration in the merger represents premiums of approximately 32.7% to the average closing price of our common stock for the 90 trading days prior to the announcement of the transaction, approximately 29.6% to the average closing price of our common stock for the 60 trading days prior to announcement, approximately 32.2% to the average closing price

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		of our common stock for the 30 trading days prior to announcement, and approximately 42.5% to the closing price of our common stock on the day immediately prior to announcement;
	•	the merger is the result of an active solicitation process in which approximately 71 private equity firms and strategic buyers were contacted to solicit indications of interest for a possible transaction with us;
	•	the fact that, subject to compliance with the terms and conditions of the merger agreement, we are permitted to terminate the merger agreement, prior to the adoption of the merger agreement by the stockholders at the meeting, in order to approve an alternative transaction proposed by a third party that is a “superior proposal” as defined in the merger agreement;
	•	the cash merger price of $17.50 per share represents a premium of approximately 92.9% over the highest purchase price of $9.07 that we paid in purchases of our common stock during the past three years, as described under “Transactions in Shares of Common Stock”;
	•	the historical market prices and volatility in trading information with respect to our common stock, including the possibility that if we remain as a publicly owned corporation, in the event of a decline in the market price of our common stock or the stock market in general, the price that might be received by holders of our common stock in the open market or in a future transaction might be less than the $17.50 per share cash price to be paid in the merger;
	•	historical and current information concerning our business, financial performance and condition, operations, management and competitive position, and current industry, economic and market conditions, including our prospects if we were to remain an independent company;
	•	the efforts made by the special committee and our board of directors and our advisors to negotiate and execute a merger agreement favorable to us;
	•	the financial presentation of Credit Suisse First Boston, including its opinion (attached as Annex B hereto), dated September 26, 2005, to the Party City board as to the fairness, from a financial point of view and as of the date of its opinion, of the merger consideration, as more fully described below under the caption “— Opinion of Our Financial Advisor”;
	•	the terms of the equity financing and debt financing commitment letters obtained by Amscan Holdings, Inc. and BWP Acquisition, Inc.;
	•	the fact that we would be entitled to a termination fee, paid annually for three years in an amount equal to 5% of our and our affiliates’ and franchisees’ total cash expenditures for goods or services supplied by Amscan Holdings, Inc., Amscan, Inc. or any of its subsidiaries to us or our subsidiaries, in the event we terminated the merger agreement because of a breach of the agreement by Amscan Holdings, Inc. or BWP Acquisition, Inc. (assuming we were not in material breach of any representation, warranty, covenant or agreement); and
	•	the fact that under Delaware law, our stockholders have the right to demand appraisal of their shares.

	•	the fact that the obligation of Amscan Holdings, Inc. and BWP Acquisition, Inc. to complete the merger is conditioned upon the receipt of proceeds of the debt financing on the terms set forth in the debt commitment letter and that Amscan Holdings, Inc. and BWP Acquisition, Inc. may not be able to secure financing for a variety of reasons, including reasons beyond the control of Amscan Holdings, Inc. and BWP Acquisition, Inc.;
	•	the risks and costs to us if the merger does not close, including the diversion of management and employee attention, employee attrition and the effect on our business relationships and clients;

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	•	the restrictions that the merger agreement imposes on actively soliciting competing bids, and the fact that we would be obligated to pay the $15 million termination fee to Amscan Holdings, Inc. under certain circumstances;
	•	the fact that we would no longer exist as an independent, publicly traded company and our stockholders would no longer participate in any of the future earnings or growth of Party City and would not benefit from any appreciation in value of Party City;
	•	the possibility that, although the merger provides our shareholders the opportunity to realize a premium over the price at which our common stock traded prior to public announcement of the merger, the price of our common stock might increase in the future to a price greater than $17.50 per share;
	•	the fact that gains from an all-cash transaction would be taxable to our stockholders for U.S. federal income tax purposes;
	•	the restrictions on the conduct of our business prior to the completion of the merger, which may delay or prevent us from undertaking business opportunities that may arise pending completion of the merger; and
	•	the interests of our directors and officers in the merger described below under “— Interests of Certain Persons in the Merger”.

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	Selected Companies Analysis

	•	Celebrate Express, Inc.
	•	Factory Card & Party Outlet Corp.
	•	Big Lots, Inc.
	•	Claire’s Stores, Inc.
	•	Dollar Tree Stores, Inc.

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	Selected Acquisitions Analysis

•	GameStop Corp.
•	OSIM International/JW Childs Associates,L.P./Temasek Holdings (Private) Limited
•	Bain Capital Partners LLC/Kohlberg Kravis Roberts & Co./Vornado Realty Trust
•	Movie Gallery, Inc.
•	Dick’s Sporting Goods, Inc.
•	Circuit City Stores, Inc.
•	CompUSA Inc.
•	Boise Cascade Corporation
•	Gart Sports Company
•	Advance Auto Parts, Inc.
•	Tweeter Home Entertainment Group, Inc.
•	Gart Sports Company
•	Luxottica Group S.p.A.
•	Bain Capital Partners LLC
•	Leonard Green & Partners, L.P./ Texas Pacific Group
•	May Department Stores Company
•	Barnes & Noble, Inc.
•	Grupo Sanborns, S.A. de C.V.
•	Barnes & Noble, Inc.
•	Freeman Spogli & Co.
•	Lowe’s Companies, Inc.
•	Toys “R” Us, Inc.
•	Staples, Inc.
•	Sears, Roebuck and Co.

•	Electronics Boutique Holdings Corp.
•	Brookstone, Inc.
•	Toys “R” Us, Inc.
•	Hollywood Entertainment Corporation
•	Galyan’s Trading Company, Inc.
•	InterTAN, Inc.
•	Good Guys, Inc.
•	OfficeMax, Inc.
•	The Sports Authority, Inc.
•	Discount Auto Parts, Inc.
•	Sound Advice, Inc.
•	Oshman Sporting Goods, Inc.
•	Sunglass Hut International, Inc.
•	KB Toys, Inc.
•	Petco Animal Supplies, Inc.
•	David’s Bridal, Inc.
•	Funco, Inc.
•	CompUSA Inc.
•	Babbage’s Etc. LLC
•	Galyan’s Trading Company, Inc.
•	Eagle Hardware & Garden, Inc.
•	Baby Superstore, Inc.
•	Office Depot, Inc.
•	Orchard Supply Hardware Stores Corporation

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	Discounted Cash Flow Analysis

	Other Factors

	•	theoretical purchase prices that could be paid by a hypothetical financial buyer in a leveraged buyout of Party City;
	•	the premiums paid in acquisitions of domestic companies with transaction values of $200 million to $500 million announced between September 26, 2002 and September 25, 2005, and the per share prices implied for Party City based on a selected range of premiums derived from such acquisitions;
	•	historical trading prices and trading volumes of Party City common stock over the two-year period ended September 23, 2005; and
	•	publicly available research analysts’ reports for Party City.

	Miscellaneous

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	Failure to complete the merger could negatively impact the market price of Party City common stock.

	•	the market price of Party City’s common stock may decline to the extent that the current market price of its shares reflects a market assumption that the merger will be completed;
	•	costs relating to the merger, such as legal, accounting and financial advisory fees, and, in specified circumstances, a termination fee of $15 million, must be paid even though the merger has not completed, and will be expensed in the fiscal period in which termination occurs; and
	•	the diversion of management’s attention from the day to day business of Party City and the potential disruption to its employees and its relationships with suppliers during the period before the termination of the merger may make it difficult for Party City to regain its financial and market positions after such a termination.

	Until the merger is completed or the merger agreement is terminated, Party City may not be able to enter into a merger or business combination with another party at a favorable price because of restrictions in the merger agreement.

	Uncertainties associated with the merger may cause Party City to lose key personnel.

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	Equity Financing

	Debt Financing

	•	up to $400.0 million of term loans under a first lien facility with a maturity of seven years;
	•	up to $75.0 million of revolving loan commitments under a first lien facility with a maturity of six years; and
	•	up to $65 million of loans under a second lien facility with a maturity of eight years.

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	Party City Stockholdings and Stock Options

	•	the number of shares of our common stock currently held and the amount of cash that will be paid in respect of such shares upon consummation of the merger;
	•	the number of shares subject to options and restricted stock units, whether vested or not vested, and the amount of cash that will be paid in consideration for the cancellation of such options and units upon consummation of the merger;
	•	the number of shares subject to unexpired and unexercised warrants and the amount of cash that will be paid in consideration for the cancellation of such warrants upon consummation of the merger; and
	•	the total amount of cash that will be received by such person in respect of such shares, options and warrants upon consummation of the merger.

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																		Options that will
																		Vest as a Result
		Common Stock								Options Vested								of the Merger								Warrants(a)
Name		Shares				Consideration				Shares				Value				Shares				Value				Shares				Value				Shares				Total Value
Non-Employee Directors:
Ralph D. Dillon			195,000			$	3,412,500				562,940			$	4,428,743				—			$	—				—			$	—				757,940			$	7,841,243
Michael E. Tennenbaum			5,537,872			$	96,912,760	(a)			58,000			$	456,823				—			$	—				—				—				5,595,872			$	97,369,583
L.R. Jalenak, Jr.			65,965			$	1,154,388				58,000			$	508,623				—			$	—				—			$	—				123,965			$	1,663,011
Franklin R. Johnson			—			$	—				33,333			$	152,954				6,667			$	42,002				—			$	—				40,000			$	194,956
Howard Levkowitz			13,527			$	236,723				58,000			$	488,823				—			$	—							$	—				71,527			$	725,546
Walter Salmon			4,000			$	70,000				55,000			$	360,523				—			$	—				—			$	—				59,000			$	430,523
Executive Officers:
Richard H. Griner			—			$	—				90,000			$	389,393				137,300			$	673,406				—			$	—				227,300			$	1,062,799
Lisa Laube			—			$	—				30,000			$	15,000				125,000			$	192,700				—			$	—				155,000			$	207,700
Gregg A. Melnick			—			$	—				15,000			$	52,500				45,000			$	157,500				—			$	—				60,000			$	210,000
Steven Skiba			—			$	—				18,943			$	79,871				65,229			$	291,784				—			$	—				84,172			$	371,655
Nancy Pedot(b)			4,697			$	82,198				302,055			$	1,803,136				—			$	—				—			$	—				306,752			$	1,885,334
All directors and executive officers as a group (11 persons)			5,821,061			$	101,868,569				1,281,271			$	8,736,389				379,196			$	1,357,392				—			$	—				7,481,528			$	111,962,350

(a)	Warrants held of record by Special Value Bond Fund, LLC and beneficially held by Michael Tennenbaum were exercised pursuant to the net exercise provisions of the warrant for 2,332,952 shares of common stock on November 2, 2005.
(b)	Nancy Pedot resigned as chief executive officer as of March 30, 2005.

	Compensation of Special Committee

	Equity in AAH Holdings

	Indemnification and Insurance

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	Employment Agreements

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		Projections
($ in millions)		FY2005				FY2006				FY2007				FY2008				FY2009
Total revenues		$	503.7			$	566.2			$	647.6			$	754.4			$	871.6
EBIT		$	8.3			$	18.2			$	29.0			$	47.1			$	61.2
Net income		$	4.9			$	11.0			$	17.4			$	28.0			$	36.5
EBITDA		$	25.4			$	35.8			$	49.1			$	69.4			$	87.2

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	•	a citizen or individual resident of the U.S. for U.S. federal income tax purposes;
	•	a corporation, or other entity taxable as a corporation for U.S. federal income tax purposes, created or organized in or under the laws of the U.S. or any state or the District of Columbia;
	•	a trust if it (1) is subject to the primary supervision of a court within the U.S. and one or more U.S. persons have the authority to control all substantial decisions of the trust or (2) has a valid election in effect under applicable U.S. Treasury regulations to be treated as a U.S. person; or
	•	an estate that is subject to U.S. federal income tax on all of its income regardless of source.

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	•	the gain is effectively connected with a U.S. trade or business (and, if an applicable income tax treaty so provides, is attributable to a permanent establishment or a fixed base maintained by such non-U.S. holder), in which case the non-U.S. holder generally will be taxed like a U.S. holder (as discussed above under “U.S. Holders”). In addition, if the non-U.S. holder is a foreign corporation, the branch profits tax (which is imposed at a 30% rate or such lower rate as may be specified by an applicable income tax treaty) may apply;
	•	the non-U.S. holder is a nonresident alien individual who is present in the U.S. for 183 days or more in the taxable year of the merger and certain other conditions are met, in which case the non-U.S. holder may be subject to a 30% tax on the non-U.S. holder’s net gain realized in the merger, which may be offset by U.S. source capital losses of the non-U.S. holder, if any; or
	•	we are or have been a “United States real property holding corporation” for U.S. federal income tax purposes and the non-U.S. holder owned more than 5% of our common stock at any time during the five years preceding the merger, in which case the purchaser of our stock may withhold 10% of the cash payable to the non-U.S. holder in connection with the merger and the non-U.S. holder generally will be taxed like a U.S. holder (as discussed above under “U.S. Holders”). We do not believe that we are or have been a “United States real property holding corporation” for U.S. federal income tax purposes.

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	•	owned by us in our treasury immediately prior to the effective time of the merger, all of which will be cancelled without any payment;
	•	owned by any of our direct or indirect subsidiaries immediately prior to the effective time of the merger, all of which will be cancelled without any payment;
	•	owned by Amscan Holdings, Inc., BWP Acquisition, Inc. or any other wholly owned subsidiary of Amscan Holdings, Inc. or BWP Acquisition, Inc. immediately prior to the effective time of the merger, all of which will be cancelled without any payment; and
	•	held by a stockholder who is entitled to demand and has made a proper demand for appraisal of such shares in accordance with the General Corporation Law of the State of Delaware and has not voted in favor of or consented to the merger, until such time as such holder fails to perfect, effectively waives, withdraws, or otherwise loses such holder’s appraisal rights under the General Corporation Laws of the State of Delaware.

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	•	corporate matters, including due organization, power and qualification;
	•	our certificate of incorporation and bylaws;
	•	our capitalization and related matters;

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	•	authorization, execution, delivery and performance and the enforceability of the merger agreement and related matters;
	•	accordance with our books and records, fair presentation of our financial information filed with the SEC and conformity with generally accepted accounting principles of all financial statements;
	•	absence of material adverse changes, material adverse effects on us or certain other significant changes or events, each from July 2, 2005;
	•	filing of all required documents with the SEC, the compliance (at the time of filing) of our filings with the SEC with applicable federal securities law requirements, the accuracy (at the time of filing) of information contained in documents that we have filed with the SEC, our timely response to letters of the SEC staff, and the absence to our knowledge of SEC review of, or outstanding comments with respect to, such filings;
	•	the presence of effective disclosure controls and procedures;
	•	identification and disclosure to our auditors and the audit committee of our board of directors and to Amscan Holdings, Inc. of any significant deficiencies and material weaknesses in our internal controls and any fraud involving management or employees having a significant role in our internal controls over financial reporting;
	•	absence of outstanding loans to any of our directors or executive officers;
	•	identification of governmental or other filings and consents required in connection with the merger;
	•	absence of conflicts with, or violations of, organizational documents, laws, judgments, decrees or orders of governmental entities, or other obligations as a result of the entry into the merger agreement and the consummation of the transactions contemplated by the merger agreement;
	•	litigation matters;
	•	employment and labor matters;
	•	possession of permits and compliance with law;
	•	brokers’ fees;
	•	tax matters;
	•	employee benefits;
	•	intellectual property;
	•	environmental matters;
	•	requisite corporate approvals;
	•	state takeover statutes;
	•	our material contracts;
	•	accuracy of information in our definitive proxy statement;
	•	owned and leased property;
	•	receipt of an opinion from our financial advisor;
	•	except as set forth in our filings with the SEC or contemplated by the merger agreement, absence of material transactions with executive officers, directors, subsidiaries or owners of 5% or more of our common stock;
	•	insurance;

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	•	commercial relationships; and
	•	transaction fees and expenses.

	•	corporate matters, including due organization, power and qualification;
	•	authorization, execution, delivery and performance and the enforceability of the merger agreement and related matters;
	•	capitalization of BWP Acquisition, Inc.;
	•	absence of conflicts with, or violations of, organizational documents, laws, judgments, decrees or orders of governmental entities, or other obligations as a result of the entry into the merger agreement and the consummation of the transactions contemplated by the merger agreement;
	•	any required governmental or other filings or consents;
	•	accuracy of information provided by them for inclusion in our definitive proxy statement;
	•	that the debt and equity commitment letters received by Amscan Holdings, Inc. are in full force and effect;
	•	brokers’ fees;
	•	prior operations of BWP Acquisition, Inc.; and
	•	litigation matters.

	•	any adverse change, effect, event, occurrence, state of facts or development attributable to the announcement or pendency of the merger or merger agreement, the identity of Amscan Holdings, Inc. or BWP Acquisition, Inc., actions taken in compliance with the merger agreement or with Amscan Holdings, Inc.’s consent, including, without limitation, the impact on our relationships with certain third parties;
	•	any adverse change, effect, event, occurrence, state of facts or development attributable to conditions generally affecting (I) the retail party supply industry or (II) the United States or world economy, except in each case, any adverse change, effect, event, occurrence, state of facts or development that has a disproportionate effect on us; or
	•	any adverse change, effect, event, occurrence, state of facts or development arising from or relating to any change in generally acceptable accounting principles GAAP or change in applicable laws.

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	•	amend our certificate of incorporation or bylaws;
	•	increase the number of directors or elect, appoint or hire new directors or officers;
	•	declare or pay any dividend or other distribution;
	•	issue or otherwise dispose of or encumber, or agree to issue or otherwise dispose of or encumber, (A) any shares of our capital stock or other securities or rights to acquire any shares of our capital stock or other securities, other than the issuance of shares of common stock pursuant to the exercise of outstanding options and warrants and other than the award of new employee options to purchase not more than 50,000 shares of common stock to new employees in the ordinary course of business and consistent with past practice or (B) any of our material assets;
	•	change the number of shares of capital stock, other than in connection with outstanding options and warrants, or grant or accelerate the exercisability of any option, warrant or other right to purchase capital stock, other than acceleration in connection with the merger pursuant to the terms of such options;
	•	repurchase, repay, cancel or incur any indebtedness except as in the ordinary course of business in accordance with past practice or incurred under existing indebtedness agreements;
	•	make any material tax elections, amend any tax returns, settle any material tax liability, change any material method of tax accounting or waive any statute of limitations in respect of a material amount of taxes or agree to any extension of time with respect to an assessment or deficiency for a material amount of Taxes other than pursuant to extensions of time to file tax returns in the ordinary course of business;
	•	make any material change in accounting method;
	•	split, combine, subdivide or reclassify any capital stock, issue any other security in respect of such shares, or redeem, purchase, or otherwise acquire any of our or our subsidiaries security interests;
	•	acquire, agree to acquire or enter into any other arrangement to acquire (including by merger, consolidation, or acquisition of stock or assets or any other manner) any corporation or business organization or any division thereof;
	•	adopt or amend any bonus, profit sharing, compensation, stock option or other employee benefit plan or other arrangement for the benefit of any employee, director or former director or employee;
	•	increase the compensation or fringe benefits of any director, officer, employee or former director, officer or employee;
	•	pay any benefit not required by any existing arrangement, other than increases in compensation (other than directors and officers) and arrangements for new employees (other than officers) in the ordinary course of business consistent with past practice;
	•	grant to employees any new or modified severance (other than under the severance or termination policies in effect on the date of the merger agreement) or increase or accelerate any benefits payable under severance or termination policies in effect on the date of the merger agreement;
	•	authorize, or make any commitment with respect to, any capital expenditure or acquire any property or asset which is in excess of $250,000 individually, or $1,000,000 in the aggregate, except as reflected in our 2006 capital expenditures budget previously provided to Amscan Holdings, Inc.;
	•	enter into any new line of business;
	•	make investments in persons other than wholly owned subsidiaries;

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	•	sell, transfer, mortgage, pledge, lease, license or otherwise encumber any material intellectual property, except for non-exclusive and non-transferable licenses granted in the ordinary course of business consistent with past practice in connection with advertising or marketing;
	•	fail to pay any fee, take any action or make any filing reasonably necessary to maintain our ownership of the material intellectual property owned by us;
	•	adopt a plan of liquidation, dissolution, restructuring, recapitalization or reorganization;
	•	modify, amend or terminate, or waive, release or assign any material rights or claims with respect to any confidentiality or standstill agreement relating to a business combination involving us or our subsidiaries other than to the extent necessary to permit the submission of a written takeover proposal made in accordance with the merger agreement;
	•	pay, discharge, waive, settle or satisfy any claim, liability or obligation, other than in the ordinary course of business consistent with past practice which does not exceed $200,000;
	•	except as permitted in the immediately preceding bullet point, pay, discharge, waive, release, assign, settle or compromise any pending or threatened action, suit, arbitration or other legal, administrative or other governmental investigation or proceeding (i) in respect of any matter requiring payment by us or our subsidiaries in excess of $200,000 individually or $500,000 in the aggregate or entailing any admission of liability by us or our subsidiaries or any material non-monetary relief or (ii) that is brought by any holder of our securities;
	•	enter into, amend, modify, cancel or consent to the termination of any material contract or amend, waive, modify, cancel or consent to the termination of our or our subsidiaries’ rights thereunder;
	•	amend, modify or waive any of our existing takeover defenses or take any action to render any state takeover statutes inapplicable to any other transaction other than the merger;
	•	enter into, amend, modify, cancel or terminate any lease, sublease, license to use or occupy real property, any contract for information technology, any distribution agreement, any franchise agreement or store development agreement, or close or relocate any franchised store, subject to certain thresholds;
	•	open any stores other than as included in our 2006 capital expenditure budget and otherwise in accordance with the merger agreement;
	•	take certain other actions listed or described in the disclosure schedules to the merger agreement; or
	•	authorize or agree to do any of the things described above or anything that would make any our representations or warranties untrue or incorrect in any material respect.

	•	solicit, initiate, propose or knowingly encourage or facilitate any takeover proposal;
	•	enter into any agreement or agreement in principle with respect to a takeover proposal; or

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	•	initiate or participate in any way in any negotiations or discussions regarding, or furnish or disclose to any person any information with respect to or in connection with any takeover proposal.

	•	furnish information with respect to Party City to the third party who made the takeover proposal pursuant to a customary confidentiality agreement no less favorable to us than our confidentiality agreement with Amscan Holdings, Inc.; provided that all such information has previously been provided to Amscan Holdings, Inc. or is provided to Amscan Holdings, Inc. prior to, or concurrently with, the time it is provided to such third party; and
	•	participate in discussions and negotiations regarding such takeover proposal.

	•	withdraw, modify or change in a manner adverse to Amscan Holdings, Inc. (or fail within seven days of the merger agreement to publicly make) the recommendation that our stockholders approve the merger agreement and the merger;
	•	approve, adopt or recommend a takeover proposal or superior proposal;
	•	allow us or any of our subsidiaries to enter into any letter of intent, memorandum of understanding, agreement in principle, option agreement, joint venture agreement, acquisition agreement or similar agreement constituting or relating to, or that is intended to or would be reasonably expected to result in a takeover proposal; or
	•	take a position that recommends a bidder’s tender offer or remains neutral toward a bidder’s tender offer under Rule 14e-2(a) of the Exchange Act

	•	it is required to do so in order to comply with its fiduciary duties to our stockholders under applicable law;
	•	it determines in good faith (after consultation with it its outside legal counsel and financial advisor) that such takeover proposal is a superior proposal; and

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	•	we or it is not otherwise in violation of the takeover proposal section of the merger agreement; provided, that our board of directors or special committee will not make an adverse recommendation change unless:
	•	(1) we have given Amscan Holdings, Inc. three business days prior written notice of our intention to take such action and (2)(a) our board of directors or special committee shall have considered in good faith any proposed changes to the merger agreement proposed in writing by Amscan Holdings, Inc. during such three business day business period and not have determined that the superior proposal would no longer constitute a superior proposal if such changes were to be given effect, (b) we have complied in all material respects with our obligations under the takeover proposal section of the merger agreement and (c) we have terminated the merger agreement in accordance with the relevant provision of the merger agreement in accordance with the relevant sections of the merger agreement and will pay Amscan Holdings, Inc. the $15 million termination fee discussed below under “— Termination Fees”.

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	•	our stockholders must have approved the merger and the merger agreement;
	•	no governmental entity nor any federal or state court or arbitrator shall have enacted, issued, promulgated, enforced or entered any statute, rule, regulation, executive order, decree, judgment, injunction or arbitration award or finding or other order that is in effect and prevents or prohibits consummation of the merger or other transactions contemplated by the merger agreement;

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	•	receipt of satisfactory evidence of consent or approval from each federal and material state and foreign governmental entity required to give such consent or approval in connection with the merger agreement or transactions contemplated thereby, where failure to obtain such consent or approval would constitute a material violation of law or subject any party to the merger agreement to any material fine or other material adverse consequence, provided that this condition will not apply as a condition to a party’s obligation to close if such party’s failure to fulfill its obligations under the merger agreement is the cause of the failure to obtain such consent or approval; and
	•	the applicable waiting periods under the HSR Act must have expired or been terminated;

	•	the representations and warranties of Amscan Holdings, Inc. and BWP Acquisition, Inc. set forth in the merger agreement must be true and correct at the effective time of the merger (ignoring any materiality or similar qualifiers) as though made on and as of such date and time (except to the extent that any such representation and warranty expressly speaks as of an earlier date, in which case such representation and warranty shall be true and correct as of such earlier date), except for failures of such representations and warranties to be so true and correct which, individually or in the aggregate, do not have a material adverse effect on the ability of Amscan Holdings, Inc. or BWP Acquisition, Inc. to perform their obligations under the merger agreement or that would not prevent or materially impede, interfere with, hinder or delay the consummation of the merger; and
	•	Amscan Holdings, Inc. and BWP Acquisition, Inc. must have performed or complied in all material respects with all agreements and covenants required to be performed by them under the merger agreement prior to the effective time of the merger.

	•	our representations and warranties in the merger agreement as to corporate authorization relative to the merger agreement, the binding nature of the merger agreement and state takeover statutes not restricting the merger must be true and correct in all material respects at the effective time of the merger as though made on and as of such date and time (except to the extent that any such representation and warranty expressly speaks as of an earlier date, in which case such representation and warranty shall be true and correct as of such earlier date);
	•	our other representations and warranties in the merger agreement must be true and correct at the effective time of the merger (ignoring any materiality or similar qualifiers) as though made on and as of such date and time (except to the extent that any such representation and warranty expressly speaks as of an earlier date, in which case such representation and warranty shall be true and correct as of such earlier date), except:

	—	with respect to our representations and warranties as to our capitalization, where the failure of such representations and warranties to be true and correct will not result in fees, costs, charges, losses, expenses or other amounts attributable to or payable by Amscan Holdings, Inc., BWP Acquisition, Inc. or the surviving corporation in excess of $100,000;
	—	with respect to our representations and warranties as to affiliate transactions, where the failure of such representations and warranties to be true and correct will not result in fees, costs, charges, losses, expenses or other amounts attributable to or payable by Amscan Holdings Inc., BWP Acquisition, Inc. or the surviving corporation in excess of $50,000; and
	—	with respect to our other representations and warranties, for the failure of such representations and warranties to be true and correct which, individually or in the aggregate, do not result in, and could not reasonably be expected to result in, a material adverse effect on us.

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	•	we must have performed, in all material respects, all agreements and covenants required to be performed by us under the merger agreement prior to the effective time of the merger;
	•	the debt financing pursuant to the commitment letters shall have been consummated, or Amscan Holdings, Inc. shall have received the proceeds of alternate debt financing in the same amount and on terms and conditions no less favorable to Amscan Holdings, Inc. and BWP Acquisition, Inc. than those contained in such commitment letters; and
	•	there must not have occurred any material adverse effect on us since September 26, 2005.

	•	by mutual written consent of BWP Acquisition, Inc. and us;
	•	by either Amscan Holdings, Inc. or us if the effective time shall not have occurred on or before March 31, 2006, unless the failure to consummate the merger is the result of a breach of the merger agreement by the party seeking to terminate the merger agreement, and the conditions relating to the last termination right described under this section do not apply;
	•	by Amscan Holdings, Inc. if our board of directors or the special committee (1) withdraws, modifies or changes, in a manner adverse to Amscan Holdings, Inc., its recommendation concerning the merger, (2) approves, adopts or recommends a takeover proposal or superior proposal; (3) allows us to enter into any agreement constituting or relating to, or that is intended to or would be reasonably expected to result in a takeover proposal or (4) take a position contemplated by Rule 14e–2(a) of the Securities Exchange Act of 1934, as amended, other than recommending rejection of a takeover proposal. We refer to these events as an “adverse recommendation change”;
	•	by us if, prior to the special meeting of our stockholders to approve the merger agreement and the merger, solely in response to an unsolicited bona fide written takeover proposal from a third party, our board of directors or the special committee makes an adverse recommendation change under the following circumstances:

	—	our board of directors or the special committee is required do so in order to comply with its fiduciary duties to our stockholders under applicable law;
	—	our board of directors or the special committee determines in good faith (after consultation with its outside legal counsel and financial advisor) that such takeover proposal is a superior proposal;
	—	we and our board of directors or the special committee are not otherwise in violation of the takeover proposal section of the merger agreement;
	—	Amscan Holdings, Inc. has been given three business days notice of our board of directors’ or the special committee’s intention to make such an adverse recommendation change and our board of directors or the special committee has considered in good faith any changes to the merger agreement proposed during such three business day period by Amscan Holdings, Inc. and our board of directors or the special committee shall not have determined that the third party’s takeover proposal would no longer constitute a superior proposal if Amscan Holdings, Inc.’s changes were to be given effect; and
	—	we pay Amscan Holdings, Inc. a termination fee of $15 million;

	•	by either Amscan Holdings, Inc. or us if the merger agreement fails to receive stockholder approval;
	•	by either Amscan Holdings, Inc., BWP Acquisition, Inc. or us if any court or governmental entity shall have issued an order, decree or ruling or taken any other action permanently enjoining, restraining or

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		otherwise prohibiting the merger and such order, decree, ruling or other action shall have become final and nonappealable;
	•	by Amscan Holdings, Inc. if (1) any of our representations and warranties in the merger agreement are or become untrue or inaccurate, or (2) we breach any of our covenants or agreements in the merger agreement, and, in either such case, we cannot satisfy the applicable condition to close and such breach has not been, or cannot be, cured within the earlier of 30 days after notice to us or March 31, 2006;
	•	by us if (1) any of the representations and warranties of either Amscan Holdings, Inc. or BWP Acquisition, Inc. in the merger agreement are or become untrue or inaccurate, or (2) Amscan Holdings, Inc. or BWP Acquisition, Inc. breach any of their respective covenants or agreements in the merger agreement, and, in either such case, Amscan Holdings, Inc. or BWP Acquisition, Inc. cannot satisfy the applicable condition to close and such breach has not been, or cannot be, cured within the earlier of 30 days after notice to us or March 31, 2006;
	•	by us, if the commitment letters for the debt financing have been withdrawn or the lenders for such debt financing notify Amscan Holdings, Inc. that the conditions set forth in such commitment letters cannot or will not be satisfied, and Amscan Holdings, Inc. is unable to secure alternate commitments for the debt financing to the reasonable satisfaction of our board of directors within thirty calendar days; or
	•	by us or Amscan Holdings, Inc., if (1) the closing shall not have occurred on or before March 31, 2006, (2) we are not otherwise in breach of the merger agreement, (3) we have satisfied (or are immediately capable of satisfying) all of the conditions to closing that we have responsibility to fulfill and (4) the only condition to closing that cannot be satisfied is the condition for the consummation of the debt financing.

	•	the merger agreement is terminated:

	—	by us or Amscan Holdings, Inc. because the closing has not occurred prior to March 31, 2006 (other than by reason of a breach of the merger agreement by the party seeking to terminate the merger agreement or under the circumstances detailed in last termination right described under the section entitled “— Termination of the Merger Agreement”), or because the merger agreement fails to receive stockholder approval at the special meeting, or
	—	by Amscan Holdings, Inc. because (1) any of our representations and warranties in the merger agreement are or become untrue or inaccurate, or (2) we breach any of our covenants or agreements in the merger agreement, and, in either such case, we cannot satisfy the applicable condition to close and such breach has not been, or cannot be, cured within the earlier of 30 days after notice to us or March 31, 2006,

in each case, only if (A) at or prior to the date of termination, a takeover proposal shall have been commenced or publicly proposed or disclosed to our board of directors or the special committee, and (B) within 12 months after such termination, we enter into a definitive agreement with respect to or consummate a takeover proposal (provided that, for this purpose, the reference in the definition of takeover proposal to 25% will be replaced by 50%). However, we will not be required to pay the termination fee as a result of the termination by us or Amscan Holdings, Inc. because of the failure to consummate the merger by March 31, 2006 under the circumstances described in the foregoing sentence if we or Amscan Holdings, Inc. could have terminated the merger agreement under the circumstances described in the last termination right described under the section entitled “— Termination of the Merger Agreement.”

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	•	Amscan Holdings, Inc. terminates the merger agreement as a result of our board of directors or the special committee making an adverse recommendation change;
	•	we terminate the merger agreement, because our board of directors or the special committee makes an adverse recommendation change in accordance with the provisions discussed in “Termination of the Merger Agreement”.

	•	(a) any of the representations and warranties of either Amscan Holdings, Inc. or BWP Acquisition, Inc. in the merger agreement are or become untrue or inaccurate, or (b) Amscan Holdings, Inc. or BWP Acquisition, Inc. breaches any of their respective covenants or agreements in the merger agreement, and, in either such case, Amscan Holdings, Inc. or BWP Acquisition, Inc. cannot satisfy the applicable condition to close and such breach has not been, or cannot be, cured within the earlier of 30 days after notice to us of such breach or March 31, 2006;
	•	the commitment letters for the debt financing have been withdrawn or the lenders for such debt financing notify Amscan Holdings, Inc. that the conditions set forth in such commitment letters cannot or will not be satisfied, and Amscan Holdings, Inc. is unable to secure alternate commitments for the debt financing to the reasonable satisfaction of our board of directors within thirty calendar days; or
	•	(1) the closing shall not have occurred on or before March 31, 2006, (2) we are not otherwise in breach of the merger agreement, (3) we have satisfied (or are immediately capable of satisfying) all of the conditions to closing that we have responsibility to fulfill and (4) the only condition to closing that cannot be satisfied is the condition for the consummation of the debt financing.

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	•	be a holder of record of shares of our common stock on the date that the written demand for appraisal is made, and you must continue to hold the shares of record through the effective date of the merger;
	•	deliver to us a written demand for appraisal of your shares of Party City common stock before the vote of stockholders with respect to the adoption of the merger agreement is taken; and
	•	not vote in favor of the adoption of the merger agreement.

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		High				Low
Fiscal year ended July 3, 2004:
First Quarter		$	12.18			$	9.56
Second Quarter			15.00				11.83
Third Quarter			15.47				11.31
Fourth Quarter			17.32				11.25
Fiscal year ended July 2, 2005:
First Quarter		$	15.25			$	11.25
Second Quarter			15.63				12.15
Third Quarter			16.39				11.33
Fourth Quarter			14.67				11.39
Fiscal year ending July 1, 2006:
First Quarter		$	17.01			$	12.08

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		Shares Beneficially Owned
Name of Beneficial Owner		Number				Percent
Michael E. Tennenbaum, Amscan Holdings, Inc., et al			5,595,872	(1)(2)			28.2	%
Tennenbaum Capital Partners, LLC and Tennenbaum & Co., LLC			5,537,872	(1)			28.0	%
Reid S. Walker and G. Stacy Smith			2,135,780	(3)			10.8	%
UBS AG, et al			1,253,491	(4)			6.3	%
Sidney and Jenny Craig			1,219,202	(5)			6.2	%
Bank of America Corporation, et al			1,062,300	(6)			5.4	%
Ralph D. Dillon			757,940	(7)			3.7	%
L.R. Jalenak, Jr.			123,965	(8)			*
Franklin R. Johnson			33,333	(9)			*
Howard Levkowitz			71,527	(10)			*
Walter Salmon			59,000	(11)			*
Richard H. Griner			90,000	(12)			*
Lisa Laube			30,000	(13)			*
Gregg A. Melnick			15,000	(14)			*
Steven Skiba			31,393	(15)			*
All directors and executive officers as a group (10 persons)							32.7	%

	*	Less than 1%

	(1)	The shares of common stock are owned by Tennenbaum Capital Partners, LLC (“TCP”, formerly known as Special Value Investment Management, LLC) and Tennenbaum & Co., LLC (“TCO”) as follows: 2,332,952 shares are owned of record by Special Value Bond Fund, LLC (“SVBF”); 2,813,420 shares of common stock are owned of record by Special Value Absolute Return Fund, LLC (“SVAR”); 318,000 shares of common stock are owned of record by Special Value Bond Fund II, LLC (“SVBF II”); 25,000 shares of common stock are owned of record by a separate account managed by TCP; and 48,500 shares of common stock are owned of record by TCO. For purposes of the table above, we have attributed the 48,500 shares of common stock owned by TCO to be beneficially owned by TCP.

		The managing member of SVBF is SVIM/ MSM, LLC (“SVIM/ MSM”) and the managing member of SVBF II is SVIM/ MSM II, LLC (“SVIM/ MSM II”). The managing member of both SVIM/ MSM and SVIM/ MSM II is TCO. The managing member of SVAR is SVAR/ MM, LLC (“SVAR/ MM”), and the managing member of SVAR/ MM is TCP. The managing member of TCP is TCO. The managing member of TCO is Michael E. Tennenbaum. See Amendment No. 8 to Schedule 13D, filed with the SEC on September 28, 2005, for a description of each entity’s voting and investment power. Following the date of such Amendment No. 8 to Schedule 13D, (i) SVBF exercised its warrant pursuant to the net exercise provisions, resulting in the issuance of 2,332,952 shares rather than 2,496,000 shares and (ii) Tennenbaum & Co., LLC disposed of 65,561 shares. The principal business address for TCP and TCO is 2951 28th St., Suite 1000, Santa Monica, CA 90405.

	(2)	As the managing member of TCO, Mr. Tennenbaum shares voting and investment power for all of the shares of common stock owned of record by the TCP and TCO (see also footnote 1). The table also includes 58,000 shares of common stock subject to outstanding options that are owned by Mr. Tennenbaum.

		On September 26, 2005, Mr. Tennenbaum, TCP, TCO, SVBF, SVAR and SVBF II entered into a Voting Agreement with Amscan Holdings, Inc. (“AHI”) in connection with an Agreement and Plan of Merger as of the same date thereof. By reason of the Voting Agreement, AHI may be deemed to have acquired beneficial ownership of all of shares of common stock beneficially owned by Mr. Tennenbaum and such entities. In addition, by virtue of their direct and indirect ownership of AHI’s capital stock, AAH Holdings, Berkshire Fund V, Limited Partnership (“Fund V”), Berkshire Fund VI, Limited Partnership (“Fund VI”) and Berkshire Investors LLC (“BI LLC”) may be deemed to have acquired

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		beneficial ownership of such shares as well. The principal business address of AHI and AAH Holdings is 80 Grasslands Road, Elmsford, NY 10523. The principal business address of Fund V, Fund VI and BI LLC is One Boston Place, Suite 3300, Boston, Massachusetts 02108.

	(3)	As reported by Reid S. Walker and G. Stacy Smith in the Second Amendment to the Schedule 13D filed with the SEC on September 16, 2005. For purposes of the table above, we have attributed the 1,000 shares of common stock directly owned by Reid S. Walker to be beneficially owned by G. Stacy Smith. The principal business address for Reid S. Walker and G. Stacy Smith is 300 Crescent Court, Suite 880 Dallas, Texas 75201.
	(4)	As reported by UBS AG, UBS Americas Inc. and UBS Global Asset Management (Americas) Inc. in the Schedule 13G filed with the SEC on February 17, 2005. The principal business for (i) UBS AG is Bahnhofstrasse 45, P.O. Box CH-8021, Zurich, Switzerland, (ii) UBS Americas Inc. is 677 Washington Blvd, Stamford, Connecticut 06901, and (iii) UBS Global Asset Management (Americas) Inc. is One North Wacker, Chicago, Illinois 60606.
	(5)	As reported by Sidney and Jenny Craig in the Second Amendment to the Schedule 13G filed with the SEC on August 7, 2003. The principal business address for Sidney and Jenny Craig is 16092 San Dieguito, P.O. Box 675532, Rancho Santa Fe, CA 92067.
	(6)	As reported by Bank of America Corporation, Fleet National Bank, Columbia Management Group, Inc. and Columbia Management Advisors, Inc. in the Schedule 13G filed with the SEC on February 11, 2005. The principal business address for each of the entities is 100 North Tryon Street, Floor 25, Bank of America Corporate Center, Charlotte, NC 28255.
	(7)	Includes 562,940 shares of common stock subject to outstanding options.
	(8)	Includes 58,000 shares of common stock subject to outstanding options.
	(9)	Includes 33,333 shares of common stock subject to outstanding options.

(10)	Includes 58,000 shares of common stock subject to outstanding options.
(11)	Includes 55,000 shares of common stock subject to outstanding options.
(12)	Includes 90,000 shares of common stock subject to outstanding options.
(13)	Includes 30,000 shares of common stock subject to outstanding options.
(14)	Includes 15,000 shares of common stock subject to outstanding options.
(15)	Includes 31,393 shares of common stock subject to outstanding options.

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	•	Our Annual Report on Form 10-K for our fiscal year ended July 2, 2005; and
	•	Our Current Reports on Form 8-K filed on July 5, 2005, July 19, 2005, August 1, 2005, August 15, 2005, as amended September 1, 2005, September 27, 2005 and October 11, 2005.

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			Page
ARTICLE 1.  Definitions and Interpretation				A-2
	Section 1.1  Definitions			A-2
	Section 1.2  Interpretation			A-9
ARTICLE 2.  Merger and Organization				A-10
	Section 2.1  The Merger			A-10
	Section 2.2  Effective Time			A-10
	Section 2.3  Effect of Merger			A-11
	Section 2.4  Certificate of Incorporation; By-laws			A-11
	Section 2.5  Directors and Officers			A-11
ARTICLE 3.  Conversion of Securities; Exchange of Certificates				A-11
	Section 3.1  Conversion of Securities			A-11
	Section 3.2  Payment of Cash for Company Common Stock			A-12
	Section 3.3  Exchange of Merger Sub Common Stock Certificate			A-14
	Section 3.4  Stock Transfer Books			A-15
	Section 3.5  Stock Options			A-15
	Section 3.6  Warrants			A-16
ARTICLE 4.  Additional Agreements in Connection with the Merger				A-16
	Section 4.1   Stockholders’ Approval			A-16
	Section 4.2   Proxy Materials			A-16
	Section 4.3   Commercially Reasonable Efforts; Consents; Other Filings			A-18
	Section 4.4   Financing			A-19
	Section 4.5   Conduct of Business by Company Pending the Merger			A-20
	Section 4.6   Access to Company’s Books and Records			A-24
	Section 4.7   Takeover Proposals			A-24
	Section 4.8   Director and Officer Protection			A-26
	Section 4.9   Payment of Expenses			A-27
	Section 4.10  Employee Benefits			A-27
	Section 4.11  Public Announcements			A-28
	Section 4.12  Certain Actions and Proceedings			A-28
	Section 4.13  Director Resignations			A-28
	Section 4.14  Conduct of Business by Parent			A-28
ARTICLE 5.  Representations and Warranties of Company				A-29
	Section 5.1   Organization and Good Standing			A-29
	Section 5.2   Subsidiaries and Investments			A-29

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			Page
	Section 5.3   Authorization; Binding Agreement			A-30
	Section 5.4   Capitalization			A-30
	Section 5.5   Financial Statements			A-31
	Section 5.6   Absence of Certain Changes or Events			A-32
	Section 5.7   Company SEC Documents			A-32
	Section 5.8   Governmental and Other Consents and Approvals			A-33
	Section 5.9   No Violation			A-33
	Section 5.10  Litigation			A-34
	Section 5.11  Employment and Labor Matters			A-34
	Section 5.12  Governmental Approvals; Compliance with Law			A-34
	Section 5.13  Brokers and Finders			A-34
	Section 5.14  Taxes			A-35
	Section 5.15  Employee Benefits			A-36
	Section 5.16  Intellectual Property			A-38
	Section 5.17  Environmental Matters			A-39
	Section 5.18  Required Vote			A-40
	Section 5.19  State Takeover Statutes			A-40
	Section 5.20  Material Contracts			A-40
	Section 5.21  Information in Proxy Statement			A-41
	Section 5.22  Properties			A-41
	Section 5.23  Opinion of Financial Advisor			A-42
	Section 5.24  Affiliate Transactions			A-42
	Section 5.25  Insurance			A-42
	Section 5.26  Commercial Relationships			A-42
	Section 5.27  Fees and Expenses			A-43
ARTICLE 6.  Representations and Warranties of Merger Sub and Parent				A-43
	Section 6.1   Organization and Good Standing			A-43
	Section 6.2   Authorization; Binding Agreement			A-43
	Section 6.3   Capitalization			A-44
	Section 6.4   No Violation			A-44
	Section 6.5   Governmental and Other Consents and Approvals			A-45
	Section 6.6   Proxy			A-45
	Section 6.7   Financing			A-45
	Section 6.8   Brokers and Finders			A-46
	Section 6.9   No Prior Activities			A-46
	Section 6.10  Litigation			A-46
ARTICLE 7.  Conditions				A-46
	Section 7.1  Conditions to Each Party’s Obligation to Effect the Merger			A-46
	Section 7.2  Conditions to Obligation of the Company to Effect the Merger			A-47
	Section 7.3  Conditions to Obligations of Parent and Merger Sub to Effect the Merger			A-47

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ARTICLE 8.  Termination; Non-survival of Representations, Warranties and Covenants; Waiver and Amendment				A-49
	Section 8.1  Termination			A-49
	Section 8.2  Non-Survival of Representations, Warranties and Covenants			A-50
	Section 8.3  Amendment			A-50
	Section 8.4  Waiver			A-51
	Section 8.5  Effect of Termination			A-51
	Section 8.6  Certain Payments			A-51
ARTICLE 9.  General Agreements				A-52
	Section 9.1   Notice			A-52
	Section 9.2   Entire Agreement			A-54
	Section 9.3   Parties in Interest			A-54
	Section 9.4   Headings			A-54
	Section 9.5   Severability			A-54
	Section 9.6   Successors and Assigns			A-54
	Section 9.7   Governing Law			A-55
	Section 9.8   Costs and Expenses			A-55
	Section 9.9   Counterparts			A-55
	Section 9.10  Specific Performance			A-55
	Section 9.11  Assignments			A-55
	Section 9.12  Jurisdiction			A-55
	Section 9.13  Waiver of Jury Trial			A-56

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	(a)	violate any provision of the Company Charter, the Company By-laws or the comparable charter or organizational documents of any Subsidiary of the Company;
	(b)	cause the Company or any of its Subsidiaries to violate in any material respect (i) any Law or any judgment, decree, or order of any Governmental Entity applicable to the Company or any of its properties or (ii) the award of any arbitrator or panel of arbitrators; or
	(c)	with or without notice or lapse of time, or both, violate, or be in conflict with, or constitute a material default under, or permit the termination of, or give rise to a right of termination, cancellation or acceleration of or “put” right with respect to any obligation or to loss of a material benefit under, or, except as contemplated by this Agreement, require the consent of any Person under, or result in the creation of any material lien upon any property of the Company under, any agreement, indenture, lease, instrument, permit, concession, franchise, or license applicable to the Company or to which the Company is a party or by which the Company

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	(a)	If to Parent or Merger Sub:

	Amscan Holdings, Inc.
	80 Grasslands Road
	Elmsford, New York 10523
	Tel: 617-227-0050
	Facsimile: 617-227-6105

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	(b)	Attn: Robert J. Small, Chairman

	with copies to:
	Ropes & Gray LLP
	One International Place
	Boston, Massachusetts 02110
	Tel: (617) 951-7000
	Facsimile: (617) 951-7050
	Attn: David C. Chapin, Esq.
	Shari H. Wolkon, Esq.
	(b) If to the Company, to:
	Party City Corporation
	400 Commons Way
	Rockaway, NJ 07866
	Tel: (973) 453-8780
	Facsimile: (973) 983-4677
	Attention: Gregg A. Melnick
	with copies to:
	Latham & Watkins LLP
	885 Third Avenue
	Suite 1000
	New York, New York 10022
	Tel: (212) 906-1200
	Facsimile: (212) 751-4864
	Attn: Raymond Y. Lin, Esq.
	and to:

	Party City Corporation
	400 Commons Way
	Rockaway, NJ 07866
	Tel: (973) 983-0888
	Facsimile: (973) 983-4776
	Attention: Walter Salmon

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	PARTY CITY CORPORATION,
	a Delaware corporation

	By:	/s/ Gregg A. Melnick

	Name: Gregg A. Melnick
	Title:   Chief Financial Officer
	AMSCAN HOLDINGS, INC.,
	a Delaware corporation

	By:	/s/ Robert J. Small

	Name: Robert J. Small
	Title:   Chairman of the Board
	BWP ACQUISITION, INC.,
	a Delaware corporation

	By:	/s/ Robert J. Small

	Name: Robert J. Small
	Title:   President

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	First: That the name and state of incorporation of each of the constituent corporations in the merger is as follows:

Name		State of Incorporation
BWP Acquisition, Inc.			Delaware
Party City Corporation			Delaware

	Second: That an Agreement and Plan of Merger between the parties to the merger has been approved, adopted, certified, executed and acknowledged by each of the constituent corporations in accordance with the requirements of Section 251 of the Delaware General Corporation Law.
	Third: That Party City Corporation shall be the surviving corporation of the merger.
	Fourth: That upon the effective time of the merger, the Certificate of Incorporation of Party City Corporation, being the surviving corporation, shall be amended and restated in the form attached hereto as Exhibit A.
	Fifth: That the executed Agreement and Plan of Merger is on file at an office of the surviving corporation. The address of such office is 400 Commons Way, Rockaway, New Jersey 07866.
	Sixth: That a copy of the Agreement and Plan of Merger will be furnished by the surviving corporation, on request and without cost, to any stockholder of any constituent corporation.

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	Seventh: That this Certificate of Merger (“Certificate”) shall be effective at such time as this Certificate is filed with the Secretary of State of the State of Delaware in accordance with the provisions of Sections 103 and 251(c) of the DGCL.

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	PARTY CITY CORPORATION

	By:

	Name:
	Title:

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	Very truly yours,
	CREDIT SUISSE FIRST BOSTON LLC

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	(1) Provided, however, that no appraisal rights under this section shall be available for the shares of any class or series of stock, which stock, or depository receipts in respect thereof, at the record date fixed to determine the stockholders entitled to receive notice of and to vote at the meeting of stockholders to act upon the agreement of merger or consolidation, were either (i) listed on a national securities exchange or designated as a national market system security on an interdealer quotation system by the National Association of Securities Dealers, Inc. or (ii) held of record by more than 2,000 holders; and further provided that no appraisal rights shall be available for any shares of stock of the constituent corporation surviving a merger if the merger did not require for its approval the vote of the stockholders of the surviving corporation as provided in subsection (f) of § 251 of this title.
	(2) Notwithstanding paragraph (1) of this subsection, appraisal rights under this section shall be available for the shares of any class or series of stock of a constituent corporation if the holders thereof are required by the terms of an agreement of merger or consolidation pursuant to §§ 251, 252, 254, 257, 258, 263 and 264 of this title to accept for such stock anything except:

	a. Shares of stock of the corporation surviving or resulting from such merger or consolidation, or depository receipts in respect thereof;
	b. Shares of stock of any other corporation, or depository receipts in respect thereof, which shares of stock (or depository receipts in respect thereof) or depository receipts at the effective date of the merger or consolidation will be either listed on a national securities exchange or designated as a national market system security on an interdealer quotation system by the National Association of Securities Dealers, Inc. or held of record by more than 2,000 holders;
	c. Cash in lieu of fractional shares or fractional depository receipts described in the foregoing subparagraphs a. and b. of this paragraph; or
	d. Any combination of the shares of stock, depository receipts and cash in lieu of fractional shares or fractional depository receipts described in the foregoing subparagraphs a., b. and c. of this paragraph.

	(3) In the event all of the stock of a subsidiary Delaware corporation party to a merger effected under § 253 of this title is not owned by the parent corporation immediately prior to the merger, appraisal rights shall be available for the shares of the subsidiary Delaware corporation.

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	(1) If a proposed merger or consolidation for which appraisal rights are provided under this section is to be submitted for approval at a meeting of stockholders, the corporation, not less than 20 days prior to the meeting, shall notify each of its stockholders who was such on the record date for such meeting with respect to shares for which appraisal rights are available pursuant to subsection (b) or (c) hereof that appraisal rights are available for any or all of the shares of the constituent corporations, and shall include in such notice a copy of this section. Each stockholder electing to demand the appraisal of such stockholder’s shares shall deliver to the corporation, before the taking of the vote on the merger or consolidation, a written demand for appraisal of such stockholder’s shares. Such demand will be sufficient if it reasonably informs the corporation of the identity of the stockholder and that the stockholder intends thereby to demand the appraisal of such stockholder’s shares. A proxy or vote against the merger or consolidation shall not constitute such a demand. A stockholder electing to take such action must do so by a separate written demand as herein provided. Within 10 days after the effective date of such merger or consolidation, the surviving or resulting corporation shall notify each stockholder of each constituent corporation who has complied with this subsection and has not voted in favor of or consented to the merger or consolidation of the date that the merger or consolidation has become effective; or
	(2) If the merger or consolidation was approved pursuant to § 228 or § 253 of this title, then either a constituent corporation before the effective date of the merger or consolidation or the surviving or resulting corporation within 10 days thereafter shall notify each of the holders of any class or series of stock of such constituent corporation who are entitled to appraisal rights of the approval of the merger or consolidation and that appraisal rights are available for any or all shares of such class or series of stock of such constituent corporation, and shall include in such notice a copy of this section. Such notice may, and, if given on or after the effective date of the merger or consolidation, shall, also notify such stockholders of the effective date of the merger or consolidation. Any stockholder entitled to appraisal rights may, within 20 days after the date of mailing of such notice, demand in writing from the surviving or resulting corporation the appraisal of such holder’s shares. Such demand will be sufficient if it reasonably informs the corporation of the identity of the stockholder and that the stockholder intends thereby to demand the appraisal of such holder’s shares. If such notice did not notify stockholders of the effective date of the merger or consolidation, either (i) each such constituent corporation shall send a second notice before the effective date of the merger or consolidation notifying each of the holders of any class or series of stock of such constituent corporation that are entitled to appraisal rights of the effective date of the merger or consolidation or (ii) the surviving or resulting corporation shall send such a second notice to all such holders on or within 10 days after such effective date; provided, however, that if such second notice is sent more than 20 days following the sending of the first notice, such second notice need only be sent to each stockholder who is entitled to appraisal rights and who has demanded appraisal of such holder’s shares in accordance with this subsection. An affidavit of the secretary or assistant secretary or of the transfer agent of the corporation that is required to give either notice that such notice has been given shall, in the absence of fraud, be prima facie evidence of the facts stated therein. For purposes of determining the stockholders entitled to receive either notice, each constituent corporation may fix, in advance, a record date that shall be not more than 10 days prior to the date the notice is given, provided, that if the notice is given on or after the effective date of the merger or consolidation, the record date shall be such effective date. If no record date is fixed and the notice is given prior to the effective date, the record date shall be the close of business on the day next preceding the day on which the notice is given.

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