0000899140-01-500332.txt : 20011018 0000899140-01-500332.hdr.sgml : 20011018 ACCESSION NUMBER: 0000899140-01-500332 CONFORMED SUBMISSION TYPE: SC 13D/A PUBLIC DOCUMENT COUNT: 6 FILED AS OF DATE: 20011010 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: PARTY CITY CORP CENTRAL INDEX KEY: 0001005972 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-MISCELLANEOUS SHOPPING GOODS STORES [5940] IRS NUMBER: 223033692 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: SC 13D/A SEC ACT: 1934 Act SEC FILE NUMBER: 005-48035 FILM NUMBER: 1756135 BUSINESS ADDRESS: STREET 1: 450 COMMONS WAY STREET 2: BLDG C CITY: ROCKAWAY STATE: NJ ZIP: 07860 BUSINESS PHONE: 9739830888 MAIL ADDRESS: STREET 1: 400 COMMONS WAY CITY: ROCKAWAY STATE: NJ ZIP: 07866 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: FUTTERMAN JACK CENTRAL INDEX KEY: 0001047993 STANDARD INDUSTRIAL CLASSIFICATION: [] FILING VALUES: FORM TYPE: SC 13D/A BUSINESS ADDRESS: STREET 1: 16315 VINTAGE OAK LANE CITY: DELRAY BEACH STATE: FL ZIP: 33484 BUSINESS PHONE: 5616379967 MAIL ADDRESS: STREET 1: 16315 VINTAGE OAK LANE CITY: DELRAY BEACH STATE: FL ZIP: 33484 SC 13D/A 1 jf952834.txt AMENDMENT NO. 2 TO SCHEDULE 13D UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 SCHEDULE 13D Under the Securities Exchange Act of 1934 (Amendment No. 2) PARTY CITY CORPORATION -------------------------------------------------------------------------------- (Name of Issuer) Common Stock, par value $.01 per share -------------------------------------------------------------------------------- (Title of Class of Securities) 702145103 -------------------------------------------------------------------------------- (CUSIP Number of Class of Securities) Jack Futterman c/o Party City Corporation 400 Commons Way Rockaway, NJ 07886 (973) 983-0888 -------------------------------------------------------------------------------- (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) Copies to: Lawrence E. Rouslin, Esq. Wolf, Block, Schorr and Solis-Cohen LLP 250 Park Avenue New York, NY 10177 (212) 986-1116 September 19, 2001 -------------------------------------------------------------------------------- (Date of Event which Requires Filing of this Schedule) If the filing person has previously filed a statement on Schedule 13G to report the acquisition which is the subject of this Schedule 13D, and is filing this schedule because of ss.ss. 240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check the following box: [ ] SCHEDULE 13D ------------------- ------------------ CUSIP No. 702145103 Page 2 of 15 Pages ------------------- ------------------ ----------- -------------------------------------------------------------------- 1 NAME OF REPORT PERSON S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON Jack Futterman ----------- -------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ] (b) [ ] ----------- -------------------------------------------------------------------- 3 SEC USE ONLY ----------- -------------------------------------------------------------------- 4 SOURCE OF FUNDS* AF ----------- -------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDING IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) [ ] ----------- -------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION United States --------------------- --------- ------------------------------------------------ 7 SOLE VOTING POWER 337,500 --------- ------------------------------------------------ NUMBER OF 8 SHARED VOTING POWER SHARES BENEFICIALLY OWNED BY --------- ------------------------------------------------ EACH 9 SOLE DISPOSITIVE POWER REPORTING PERSON WITH 337,500 --------- ------------------------------------------------ 10 SHARED DISPOSITIVE POWER ----------- -------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH PERSON 1,037,500 (See Item 5) ----------- -------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [ ] ----------- -------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 7.6% ----------- -------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON* IN ----------- -------------------------------------------------------------------- *SEE INSTRUCTIONS BEFORE FILLING OUT! INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7 (INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION This Amendment No. 2 to Schedule 13D (this "Amendment") is being filed on behalf of Jack Futterman (the "Reporting Person") to amend the Schedule 13D filed with the Securities and Exchange Commission (the "SEC") on June 17, 1999 (the "Original Schedule 13D" and, collectively with this Amendment, the "Schedule 13D").(1) This Schedule 13D relates to the common stock, par value $.01 per share (the "Company Common Stock"), of Party City Corporation, a Delaware corporation (the "Company"). Item 1. Security and Issuer. The information in Item 1 of the Original Schedule 13D is hereby amended and restated in its entirety as follows: This Schedule 13D relates to the Company Common Stock and is being filed pursuant to Rule 13d-1 under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). The address of the principal executive offices of the Company is 400 Commons Way, Rockaway, New Jersey 07886. Item 2. Identity and Background. The information in Item 2 of the Original Schedule 13D is hereby amended and restated in its entirety as follows: (a) This Schedule 13D is filed by the Reporting Person. ---------- (1) The Original Schedule 13D, which was filed on June 17, 1999, was mistakenly labeled as "Amendment No. 1." In order to avoid confusion with the Original Schedule 13D, this Amendment, which in effect is the first amendment to the original filing made on June 17, 1999, is being labeled as "Amendment No. 2." -3- (b) The address of the residence of the Reporting Person is 16315 Vintage Oaks Lane, Delray Beach, Florida 33484. (c) The Reporting Person is retired and has no principal occupation or employment. (d) During the last five years, the Reporting Person has not been convicted in a criminal proceeding (excluding traffic violations or similar infractions or misdemeanors). (e) During the last five years, the Reporting Person has not been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violation with respect to such laws. (f) The Reporting Person is a citizen of the United States. Item 3. Source and Amount of Funds or Other Consideration. The information in Item 3 of the Original Schedule 13D is hereby amended and restated in its entirety as follows: On September 19, 2001, the Reporting Person paid $900,000 to Steven Mandell, the Company's former Chief Executive Officer, as the aggregate exercise price with respect to an option to acquire 300,000 shares of Company Common Stock pursuant to an Option Agreement, dated June 8, 1999 (the "Mandell Option Agreement"), between Mr. Mandell and the Reporting Person, under which Mr. Mandell granted to the Reporting -4- Person an option (the "Mandell Option") to purchase, in whole or in part, 1,000,000 shares of Company Common Stock owned by Mr. Mandell at an exercise price of $3.00 per share. (See Item 4 for a description of the Mandell Option Agreement and the Mandell Option.) The $900,000 paid to Mr. Mandell in connection with the Reporting Person's acquisition of the 300,000 shares of Company Common Stock pursuant to the partial exercise of the Mandell Option was provided by the Jack Futterman Trust (the "Futterman Trust"), a Delaware asset protection trust. By virtue of the Reporting Person's position as the investment advisor of the Futterman Trust, the Futterman Trust is an affiliate of the Reporting Person. The Reporting Person used personal funds to acquire all other shares of Company Common Stock beneficially owned by him, other than (a) the remaining 700,000 shares of Company Common Stock subject to the Mandell Option and (b) options issued to the Reporting Person by the Company, for which no funds have been expended by the Reporting Person. Item 4. Purpose of Transaction. The information in Item 4 of the Original Schedule 13D is hereby amended and restated in its entirety as follows: From June 8, 1999 to December 10, 1999, the Reporting Person was the Chief Executive Officer and Chairman of the Board of Directors of the Company. As an incentive for the Reporting Person to assume his position as Chief Executive Officer, and to more fully align the Reporting Person's interest with the shareholders' interest, Mr. Mandell, the Chief Executive Officer of the Company prior to the Reporting Person's appointment to such position, and the Reporting Person entered into the Mandell Option Agreement. A copy of the Mandell Option Agreement is attached as Exhibit 1 to the -5- Original Schedule 13D. Under the Mandell Option Agreement, Mr. Mandell granted the Mandell Option to the Reporting Person. The Mandell Option expires on June 8, 2004. The number of shares and the exercise price of the Company Common Stock subject to the Mandell Option shall be adjusted accordingly in the event that the Company effects a corporate reorganization, recapitalization, stock split, stock dividend, stock combination or any other similar transaction. On September 19, 2001, the Reporting Person exercised the Mandell Option in part and acquired 300,000 shares of Company Common Stock from Mr. Mandell for investment purposes. The Reporting Person also (i) holds options (the "Company Options" and, collectively with the Mandell Option, the "Outstanding Options") to purchase 36,000 shares of Company Common Stock granted by the Company at various times under its Amended and Restated 1994 Stock Option Plan and 1999 Stock Incentive Plan which are exercisable within sixty (60) days after the date of this Schedule 13D and (ii) beneficially owns 1,500 shares of Company Common Stock which are held by the Futterman Trust, of which the Reporting Person is the investment advisor. Except as set forth above in this Schedule 13D, the Reporting Person has no plans or proposals which relate to or would result in: (a) the acquisition by any person of additional securities of the Company, or the disposition of securities of the Company; (b) an extraordinary corporate transaction, such as a merger, reorganization or liquidation, involving the Company or any of its subsidiaries; (c) a sale or transfer of a material amount of assets of the Company or any of its subsidiaries; (d) any change in the present Board of Directors or management of the Company, including any plans or proposals to change the number or term of directors or to fill any existing vacancies on the board; (e) -6- any material change in the present capitalization or dividend policy of the Company; (f) any other material change in the Company's business or corporate structure; (g) changes in the Company's charter, By-laws or instruments corresponding thereto or other actions which may impede the acquisition of control of the Company by any person; (h) causing a class of securities of the Company to be de-listed from a national securities exchange or to cease to be authorized to be quoted in an inter-dealer quotation system of a registered national securities association; (i) a class of equity securities of the Company becoming eligible for termination of registration pursuant to Section 12(g)(4) of the Exchange Act; or (j) any action similar to any of those enumerated above. Item 5. Interest in Securities of the Issuer. The information in Item 5 of the Original Schedule 13D is hereby amended and restated in its entirety as follows: (a) The Reporting Person beneficially owns 1,037,500 shares of Company Common Stock, of which 300,000 shares of Company Common Stock are owned by the Reporting Person outright, 700,000 shares of Company Common Stock are owned by Mr. Mandell and subject to the Mandell Option (which is exercisable within sixty (60) days after the date of this Schedule 13D) and 36,000 shares of Company Common Stock are subject to the Company Options (which are exercisable within sixty (60) days after the date of this Schedule 13D), representing, in the aggregate (assuming the full exercise of the Outstanding Options), 7.6% of the total outstanding class of Company Common Stock. -7- This percentage of the outstanding class of Company Common Stock was calculated by: (i) adding the total number of shares of Company Common Stock that the Reporting Person owns outright (300,000) and the Reporting Person beneficially owns by virtue of the Reporting Person's relationship to the Futterman Trust (1,500) to the total number of shares of Company Common Stock that the Reporting Person has the right to acquire within sixty (60) days after the date of this Schedule 13D pursuant to the Outstanding Options (736,000) (the "Total Adjusted Owned Shares"); (ii) adding the total number of shares of Company Common Stock that are not currently outstanding which the Reporting Person has the right to acquire within sixty (60) days after the date of this Schedule 13D pursuant to the Company Options (36,000) to 13,002,017 (the total number of shares of Company Common Stock outstanding as of October 5, 2001, as represented to the Reporting Person by the Company) (the "Total Adjusted Outstanding Shares"); and then (iii) dividing the Total Adjusted Shares Owned by the Total Adjusted Outstanding Shares (the "Ownership Quotient"); and then (iv) expressing the Ownership Quotient in terms of a percentage (i.e., 7.6%). (b) The Reporting Person has the sole power to vote and dispose of only 337,500 shares of the 1,037,500 shares of Company Common Stock that are reported as beneficially owned by the Reporting Person in this Schedule 13D. Mr. Mandell has the power to vote and dispose of the remaining 700,000 shares of Company Common Stock (which are subject to the Mandell Option) that are reported as beneficially owned by the Reporting Person in this Schedule 13D. (c) On September 26, 2001, the Company granted to the Reporting Person an option to purchase 3,000 shares of Company Common Stock at an exercise price of $6.55 -8- per share. Except for the transactions described in Items 3 and 4 and this Item 5 of this Schedule 13D, during the last sixty (60) days there were no transactions effected by the Reporting Person with respect to the Company Common Stock. (d) Unless and until the Reporting Person exercises the Mandell Option with respect to the remaining 700,000 shares of Company Common Stock subject to such Mandell Option, Mr. Mandell has the right to receive all dividends with respect to such 700,000 shares of Company Common Stock. Except as set forth in this Item 5, no person other than each respective record owner referred to in this Schedule 13D of securities is known to have the right to receive or the power to direct the receipt of dividends from, or the proceeds from the sale of, such securities. (e) Not applicable. Item 6. Contracts, Arrangements, Understandings or Relationships With Respect to Securities of the Issuer. The information in Item 6 of the Original Schedule 13D is hereby amended and restated in its entirety as follows: Pursuant to the terms of the Mandell Option Agreement, Mr. Mandell, among other things, granted the Mandell Option to the Reporting Person. The foregoing summary is qualified in its entirety by reference to the Mandell Option Agreement, a copy of which is filed as Exhibit 1 to the Original Schedule 13D and incorporated in this Schedule 13D by reference. Pursuant to the terms of a Stock Pledge Agreement, dated as of June 8, 1999 (the "Pledge Agreement"), by and between Mr. Mandell and the Reporting Person, Mr. Mandell, among other things, pledged the 1,000,000 shares of Company Common Stock -9- subject to the Mandell Option to the Reporting Person to secure Mr. Mandell's obligations under the Mandell Option. The number of shares of Company Common Stock subject to the Pledge Agreement is subject to appropriate adjustments in connection with any partial exercise of the Mandell Option. The foregoing summary is qualified in its entirety by reference to the Pledge Agreement, a copy of which is filed as Exhibit 2 to the Original Schedule 13D and incorporated in this Schedule 13D by reference. Pursuant to the terms of an Employment Agreement, dated June 8, 1999 (the "Employment Agreement"), between the Company and the Reporting Person, the Company, among other things, granted the Reporting Person certain demand and piggy-back registration rights with respect to any shares of Company Common Stock held by the Reporting Person which are not registered with the SEC pursuant to the Securities Act of 1933, as amended (the "Act"). The foregoing summary is qualified in its entirety by reference to the Employment Agreement, a copy of which is filed as Exhibit 3 to the Original Schedule 13D and incorporated in this Schedule 13D by reference. Pursuant to the terms of an Incentive Stock Option Agreement, dated September 8, 1997 (the "1997 Option Agreement"), between the Company and the Reporting Person, the Company, among other things, granted to the Reporting Person an option to purchase 15,000 shares of Company Common Stock at an exercise price of $24.00 per share. The foregoing summary is qualified in its entirety by reference to the 1997 Option Agreement, a copy of which is filed as Exhibit 4 to this Schedule 13D and incorporated in this Schedule 13D by reference. -10- Pursuant to the terms of an Incentive Stock Option Agreement, dated December 9, 1998 (the "December 1998 Option Agreement"), between the Company and the Reporting Person, the Company, among other things, granted to the Reporting Person an option to purchase 5,000 shares of Company Common Stock at an exercise price of $15.00 per share. The foregoing summary is qualified in its entirety by reference to the December 1998 Option Agreement, a copy of which is filed as Exhibit 5 to this Schedule 13D and incorporated in this Schedule 13D by reference. Pursuant to the terms of a Stock Option Grant Agreement, dated July 30, 1998 (the "July 1998 Option Agreement"), between the Company and the Reporting Person, the Company, among other things, granted to the Reporting Person an option to purchase 2,500 shares of Company Common Stock at an exercise price of $23.1875 per share. The foregoing summary is qualified in its entirety by reference to the July 1998 Option Agreement, a copy of which is filed as Exhibit 6 to this Schedule 13D and incorporated in this Schedule 13D by reference. Pursuant to the terms of an Investor Rights Agreement, dated as of August 16, 1999 (the "Investor Rights Agreement"), by and among the Company, Tennenbaum & Co., LLC, TCO/Party City, LLC, Goldman, Sachs & Co., Goldman Sachs Credit Partners, L.P., Enhanced Retail Funding, LLC, Richmond Associates, L.P. (collectively, as substituted or otherwise replaced as parties to the Investor Rights Agreement, the "Investors") and the Reporting Person, as amended pursuant to the First Amendment to Investor Rights Agreement, dated as of October 11, 2000 (the "First Amendment"), as further amended pursuant to the Second Amendment to Investor Rights Agreement, dated as of November 20, 2000 (the "Second Amendment"), the Company, among other things, -11- granted the Investors and the Reporting Person certain demand and piggy-back registration rights with respect to any shares of Company Common Stock held by the Investors and the Reporting Person which are not registered with the SEC pursuant to the Securities Act. The foregoing summary is qualified in its entirety by reference to the Investor Rights Agreement, the First Amendment and the Second Amendment, a copy of each of which is filed as Exhibits 7, 8 and 9, respectively, to this Schedule 13D and incorporated in this Schedule 13D by reference. Pursuant to the terms of a Stock Option Agreement, dated as of September 26, 2000 (the "2000 Option Agreement"), by and between the Company and the Reporting Person, the Company, among other things, granted to the Reporting Person an option to purchase 3,000 shares of Company Common Stock at an exercise price of $3.40 per share. The foregoing summary is qualified in its entirety by reference to the 2000 Option Agreement, a copy of which is filed as Exhibit 10 to this Schedule 13D and incorporated in this Schedule 13D by reference. Pursuant to the terms of a Stock Option Agreement, dated as of September 26, 2001 (the "2001 Option Agreement"), by and between the Company and the Reporting Person, the Company, among other things, granted to the Reporting Person an option to purchase 3,000 shares of Company Common Stock at an exercise price of $6.55 per share. The foregoing summary is qualified in its entirety by reference to the 2001 Option Agreement, a copy of which is filed as Exhibit 11 to this Schedule 13D and incorporated in this Schedule 13D by reference. -12- Except as referred to above, there are no contracts, arrangements, understandings or relationships (legal or otherwise) among the person named in Item 2 and any other person with respect to any securities of the Company. Item 7. Material to be Filed as Exhibits. The information in Item 7 of the Original Schedule 13D is hereby amended and restated in its entirety as follows: 1. Option Agreement, dated June 8, 1999, between Steven Mandell and the Reporting Person (incorporated by reference to Exhibit 1 to the Original Schedule 13D of Jack Futterman filed with the SEC on June 17, 1999). 2. Stock Pledge Agreement, dated as of June 8, 1999, by and between Steven Mandell and the Reporting Person (incorporated by reference to Exhibit 1 to the Original Schedule 13D of Jack Futterman filed with the SEC on June 17, 1999). 3. Employment Agreement, dated June 8, 1999, between the Company and the Reporting Person (incorporated by reference to Exhibit 1 to the Original Schedule 13D of Jack Futterman filed with the SEC on June 17, 1999). 4. Incentive Stock Option Agreement, dated September 8, 1997, between the Company and the Reporting Person. 5. Incentive Stock Option Agreement, dated December 9, 1998, between the Company and the Reporting Person. 6. Stock Option Grant Agreement, dated July 30, 1998, between the Company and the Reporting Person. -13- 7. Investor Rights Agreement, dated as of August 16, 1999, by and among the Company, the Investors and the Reporting Person (incorporated by reference to Exhibit 10.6 to the Company's Current Report on Form 8-K filed with the SEC on August 25, 1999). 8. First Amendment to Investor Rights Agreement, dated as of October 11, 2000, by and among the Company, the Investors and the Reporting Person (incorporated by reference to Exhibit 10.9 to the Company's Quarterly Report on Form 10-Q filed with the SEC on May 15, 2001). 9. Second Amendment to Investor Rights Agreement, dated as of November 20, 2000, by and among the Company, the Investors and the Reporting Person (incorporated by reference to Exhibit 10.10 to the Company's Quarterly Report on Form 10-Q filed with the SEC on May 15, 2001). 10. Stock Option Agreement, dated as of September 26, 2000, by and between the Company and the Reporting Person. 11. Stock Option Agreement, dated as of September 26, 2001, by and between the Company and the Reporting Person. -14- SIGNATURES After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. Dated: October 10, 2001 JACK FUTTERMAN By: /s/ Jack Futterman ------------------------------ Name: Jack Futterman -15- EX-4 4 jf956536.txt INCENTIVE STOCK OPTION AGREEMENT PARTY CITY CORPORATION INCENTIVE STOCK OPTION AGREEMENT PARTY CITY CORPORATION, a Delaware corporation (the "Company"), has granted to Jack Futterman (the "Optionee"), an Option to purchase a total of fifteen thousand (15,000) shares (the "Shares") of the Company's common stock, $.01 par value per share ("Common Stock"), at the price set forth in Paragraph 2 hereof, and in all respects subject to the terms, definitions and provisions of the Company's Amended and Restated 1994 Stock Option Plan (the "Plan"), which is incorporated herein by reference. The terms defined in the Plan shall have the same defined meanings herein. 1. NATURE OF THE OPTION. This Option is intended to qualify as an Incentive Stock Option as defined in Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"). 2. EXERCISE PRICE. The exercise price is equal to $24.00 per share of Common Stock subject to this Option. 3. EXERCISE OF OPTION. This Option shall be exercisable during its term as follows: (a) Rights to Exercise. (i) This option shall be exercisable as follows: (a) five thousand (5,000) shares shall vest and be exercisable on the first anniversary date of the date hereof; and (b) an additional five thousand (5,000) shares shall vest and be exercisable on the second anniversary date of the date hereof; and (c) an additional five thousand (5,000) shares shall vest and be exercisable on the third anniversary date of the date hereof. (ii) This Option may not be exercised for a fraction of a share. (iii) In the event of Optionee's other termination of employment, disability or death, the exercisability of the Option is governed by Section 9 of the Plan. (b) Method of Exercise. This Option shall be exercisable by written notice which shall state the election to exercise the Option, the number of Shares in respect of which the Option is being exercised, and such other representations and agreements as to the holder's investment intent with respect to such shares of Common Stock as may be required by the Company pursuant to the provisions of the Plan. Such written notice shall be signed by the Optionee and shall be delivered in person or by certified mail to the Secretary of the Company. The written notice shall be accompanied by payment of the exercise price. No Shares will be issued pursuant to the exercise of an Option unless such issuance and such exercise shall comply with all relevant provisions of law and the requirements of any stock exchange upon which the Shares may then be listed. 4. METHOD OF PAYMENT. Payment of the exercise price shall be by cash, check, promissory note (if approved by the Company as an accepted method of payment) or Shares of the Company's Common Stock having a fair market value on the date of surrender equal to the aggregate exercise price of the Shares as to which the Option shall be exercised, or any combination of such payment methods. 5. RESTRICTIONS ON EXERCISE. This Option may not be exercised if the issuance of such Shares upon such exercise or the method of payment of consideration for such Shares would constitute a violation of any applicable federal or state securities or other law or regulation, including any rule under Part 207 of Title 12 of the Code of Federal Regulations ("Regulation G") as promulgated by the Federal Reserve Board. As a condition to the exercise of this Option, the Company may require Optionee to make any representation and warranty to the Company as may be required by any applicable law or regulation. 6. TERMINATION OF STATUS AS AN EMPLOYEE. If Optionee ceases to serve as an Employee, he may, but only within thirty (30) days after the date he ceased to be an Employee of the Company, exercise this Option to the extent that he was entitled to exercise it at the date of such termination. To the extent that he was not entitled to exercise this Option at the date of such termination, or if he does not exercise this Option within the time specified herein, the Option shall terminate. 7. DISABILITY OF OPTIONEE. Notwithstanding the provisions of Section 6 above, if Optionee is unable to continue his employment with the Company as a result of his total and permanent disability (within the meaning of Section 22(e)(3) of the Code), he may, but only within twelve (12) months from the date of termination of employment, exercise his Option to the extent he was entitled to exercise it at the date of such termination, or if he does not exercise such Option (which he was entitled to exercise) within the time specified herein, the Option shall terminate. 8. DEATH OF OPTIONEE. In the event of the death of Optionee: (a) during the term of this Option and while an Employee of the Company and having been in Continuous Status as an Employee since the date of grant of the Option, the Option may be exercised, at any time within twelve (12) months followed the date of death, by Optionee's estate or by a person who acquired the right to exercise the Option by bequest or inheritance, but only to the extent of the right to exercise that would have accrued had Optionee continued living one (1) month after the date of death; or (b) within thirty (30) days after the termination of Optionee's Continuous Status as an Employee, the Option may be exercised, at any time within three (3) months following the date of death, by Optionee's estate or by a person who acquired the right to exercise the Option by bequest or inheritance, but only to the extent of the right to exercise that had accrued at the date of termination. 9. NON-TRANSFERABILITY OF OPTION. This Option may not be sold, pledged, assigned, hypothecated, or otherwise transferred in any manner otherwise than by will or by the laws of descent or distribution and may be exercised during the lifetime of Optionee only by Optionee. The terms of this Option shall be binding upon the executors, administrators, heirs, successors and assigns of the Optionee. 10. TERM OF OPTION. This Option may not be exercised more than ten (10) years from the date of grant of this Option, and may be exercised during such term only in accordance with the Plan and the terms of this Option. 11. EARLY DISPOSITION OF STOCK. Optionee understands that if he disposes of any Shares received under this Option within two (2) years after the date of this Agreement or within one (1) year after such Shares were transferred to him/her, he/she will be treated for federal income tax purposes as having received ordinary income at the time of such disposition in an amount equal to the positive difference between the exercise price for the Shares and the lower of the fair market value of the Shares at the date of option exercise and the sales price of the Shares. Optionee hereby agrees to notify the Company in writing within thirty (30) days after the date of any such disposition. Optionee understands that if he disposes of such Shares at any time after the expiration of such two-year and one-year holding periods, any gain on such sale will be taxed at capital gain rates. DATE OF GRANT: September 8, 1997 PARTY CITY CORPORATION A Delaware corporation BY: /s/ Steven Mandell ----------------------------- Steven Mandell President Optionee acknowledges receipt of a copy of the Plan, a copy of which is annexed hereto, and represents that he is familiar with the terms and provisions thereof, and hereby accepts this Option subject to all of the terms and provisions thereof. Optionee hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Board upon any questions arising under the Plan. Dated: 10/20/97 /s/ Jack Futterman Jack Futterman EX-5 5 jf956519.txt INCENTIVE STOCK OPTION AGREEMENT PARTY CITY CORPORATION INCENTIVE STOCK OPTION AGREEMENT PARTY CITY CORPORATION, a Delaware corporation (the "Company"), has granted to Jack Futterman (the "Optionee"), an Option to purchase a total of Five Thousand (5,000) shares (the "Shares") of the Company's common stock, $.01 par value per share ("Common Stock"), at the price set forth in Paragraph 2 hereof, and in all respects subject to the terms, definitions and provisions of the Company's Amended and Restated 1994 Stock Option Plan (the "Plan"), which is incorporated herein by reference. The terms defined in the Plan shall have the same defined meanings herein. 1. NATURE OF OPTION. This Option is intended to qualify as an Incentive Stock Option as defined in Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"). 2. EXERCISE PRICE. The exercise price is equal to $15.00 per share of Common Stock subject to this Option. 3. EXERCISE OF OPTION. This Option shall be exercisable during its term as follows: (a) Right to Exercise. (i) This Option shall be exercisable as follows: (a) Two Thousand Five Hundred (2,500) of the Shares shall vest and be exercisable on June 15, 2001; and (b) an additional Two Thousand Five Hundred (2,500) of the Shares shall vest and be exercisable on June 15, 2001. (ii) This Option may not be exercised for a fraction of a share. (iii) In the event of the Optionee's termination of employment due to disability, death or as otherwise provided for in Section 9 of the Plan, the exercisability of this Option is governed by Section 9 of the Plan. (b) Method of Exercise. This Option shall be exercisable by written notice which shall state the election to exercise this Option, the number of Shares in respect of which the Option is being exercised, and such other representations and agreements as to the holder's investment intent with respect to such Shares of Common Stock as may be required by the Company pursuant to the provisions of the Plan. Such written notice shall be signed by the Optionee and shall be delivered in person or by certified mail to the Secretary of the Company. The written notice shall be accompanied by payment of the Exercise Price. No shares will be issued pursuant to the exercise of an Option unless such issuance and such exercise shall comply with all relevant provisions of law and the requirements of any stock exchange upon which the Shares may then be listed. 4. METHOD OF PAYMENT. Payment of the Exercise Price shall be by cash, check, promissory note (if approved by the Company as an accepted method of payment) or Shares of the Company's Common Stock having a Fair Market Value on the date of surrender equal to the aggregate exercise price of the Shares as to which the Option shall be exercised, or any combination of such payment methods. 5. RESTRICTIONS ON EXERCISE. This Option may not be exercised if the issuance of such Shares upon such exercise or the method of payment of consideration for such Shares would constitute a violation of any applicable federal or state securities or other law or regulation, including any rule under Part 207 of Title 12 of the Code of Federal Regulations ("Regulation G") as promulgated by the Federal Reserve Board. As a condition to the exercise of this Option, the Company may require the Optionee to make any representation and warranty to the Company as may be required by any applicable law or regulation. 6. TERMINATION OF STATUS AS AN EMPLOYEE. If the Optionee ceases to serve as an Employee, he may, but only within thirty (30) days after the date he ceased to be an Employee of the Company, exercise this Option to the extent that he was entitled to exercise it at the date of such termination. To the extent that he was not entitled to exercise this Option at the date of such termination, or if he does not exercise this Option within the time specified herein, this Option shall terminate. 7. DISABILITY OF OPTIONEE. Notwithstanding the provisions of Section 6 above, if the Optionee is unable to continue his employment with the Company as a result of his total and permanent disability (within the meaning of Section 22(e)(3) of the Code), he may, but only within twelve (12) months from the date of termination of employment due to such disability, exercise this Option to the extent he was entitled to exercise it at the date of such termination, or if he does not exercise this Option (which he was entitled to exercise) within the time specified herein, this Option shall terminate. 8. DEATH OF OPTIONEE. In the event of the death of the Optionee: (a) during the term of this Option and while an Employee of the Company and having been in Continuous Status as an Employee since the date of grant of this Option, this Option may be exercised, at any time within twelve (12) months following the date of death, by the Optionee's estate or by a person who acquired the right to exercise this Option by bequest or inheritance, but only to the extent of the right to exercise that would have accrued had the Optionee continued living until one (1) month after the date of death; or (b) within thirty (30) days after the termination of the Optionee's Continuous Status as an Employee, this Option may be exercised, at any time within three (3) months following the date of death, by the Optionee's estate or by a person who acquired the right to exercise this Option by bequest or inheritance, but only to the extent of the right to exercise that had accrued at the date of termination. 9. NON-TRANSFERABILITY OF OPTION. This Option may not be sold, pledged, assigned hypothecated, or otherwise transferred in any manner otherwise than by will or by the laws of descent or distribution and may be exercised during the lifetime of the Optionee only by the Optionee. The terms of this Option shall be binding upon the executors, administrators, heirs, successors and assigns of the Optionee. 10. TERM OF OPTION. This Option may not be exercised more than ten (10) years from the date of grant of this Option, and may be exercised during such term only in accordance with the Plan and the terms of this Option. 11. EARLY DISPOSITION OF SHARES. The Optionee understands that if he disposes of any Shares received under this Option within two (2) years after the date of this Agreement or within one (1) year after such Shares were transferred to him, he will be treated for federal income tax purposes as having received ordinary income at the time of such disposition in an amount equal to the positive difference between the exercise price for the Shares and the lower of the Fair Market Value of the Shares at the date of exercise of this Option and the sales price of the Shares. The Optionee hereby agrees to notify the Company in writing within thirty (30) days after the date of any such disposition. The Optionee understands that if he disposes of such Shares at any time after the expiration of such two-year and one-year periods, any gain on such sale will be taxed at applicable capital gain rates. 12. NO RIGHTS AS SHAREHOLDER. The Optionee shall have no rights as a shareholder with respect to any Shares covered by this Option until the date of the issuance of a stock certificate to him for such Shares. 13. NO OBLIGATION TO EXERCISE OPTION. The granting of this Option shall impose no obligation upon the Optionee to exercise such Option. 14. VARIATIONS IN PRONOUNS. All pronouns and any variations thereof used herein refer to the masculine, feminine or neuter, singular or plural, as the identity of the person or persons may require. 15. HEADINGS. The headings in this Agreement are for reference purposes only and shall not in any way affect the meaning or interpretation of this Agreement. 16. GOVERNING LAW. This Option shall be governed by and construed in accordance with the laws of the State of Delaware, except to the extent pre-empted by federal law. DATE OF GRANT: December 9, 1998 PARTY CITY CORPORATION By: /s/David E. Lauber --------------------------- Name: David E. Lauber ------------------------ Title: Executive Vice President ------------------------ Acknowledgment and Acceptance of Optionee ----------------------------------------- The Optionee acknowledges receipt of a copy of the Plan, a copy of which is annexed hereto, and represents that he is familiar with the terms and provisions thereof, and hereby accepts this Option subject to all of the terms and provisions thereof. The Optionee hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Board upon any questions arising under the Plan. Dated: 1/25/99 /s/Jack Futterman ----------------- Jack Futterman EX-6 6 jf956525.txt STOCK OPTION GRANT AGREEMENT PARTY CITY CORPORATION STOCK OPTION GRANT PARTY CITY CORPORATION, a Delaware corporation (the "Company"), has granted to Jack Futterman (the "Optionee"), an Option to purchase a total of Two Thousand Five Hundred (2500) shares (the "Shares") of the Company's common stock, $.01 par value per share ("Common Stock"), at the price set forth in Paragraph 2 hereof, and in all respects subject to the terms, definitions and provisions of the Company's Amended and Restated 1994 Stock Option Plan (the "Plan"), which is incorporated herein by reference. The terms defined in the Plan shall have the same defined meanings herein. 1. NATURE OF OPTION. This Option is intended to qualify as an Incentive Stock Option as defined in Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"). 2. EXERCISE PRICE. The exercise price is equal to $23.1875 per share of Common Stock subject to this Option. 3. EXERCISE OF OPTION. This Option shall be exercisable during its term as follows: (a) Right to Exercise. (i) This Option shall be exercisable as follows: (a) Full amount of shares shall vest and be exercisable at one year anniversary of June 22, 1998 Annual Shareholders Meeting. (ii) This Option may not be exercised for a fraction of a share. (iii) In the event of the Optionee's termination of service as a Director due to disability, death or as otherwise provided in Section 9 of the Plan, the exercisability of this Option is governed by Section 9 of the Plan. (b) Method of Exercise. This Option shall be exercisable by written notice which shall state the election to exercise this Option, the number of Shares in respect of which the Option is being exercised, and such other representations and agreements as to the holder's investment intent with respect to such Shares of Common Stock as may be required by the Company pursuant to the provisions of the Plan. Such written notice shall be signed by the Optionee and shall be delivered in person or by certified mail to the Secretary of the Company. The written notice shall be accompanied by payment of the Exercise Price. No Shares will be issued pursuant to the exercise of an Option unless such issuance and such exercise shall comply with all relevant provisions of law and the requirements of any stock exchange upon which the Shares may then be listed. 4. METHOD OF PAYMENT. Payment of the Exercise Price shall be by cash, check, promissory note (if approved by the Company as an accepted method of payment) or Shares of the Company's Common Stock having a Fair Market Value on the date of surrender equal to the aggregate exercise price of the Shares as to which the Option shall be exercised, or any combination of such payment methods. 5. RESTRICTIONS ON EXERCISE. This Option may be exercised if the issuance of such Shares upon such exercise or the method of payment of consideration for such Shares would constitute a violation of any applicable federal or state securities or other law regulation, including any rule under Part 207 of Title 12 of the Code of Federal Regulations ("Regulation G") as promulgated by the Federal Reserve Board. As a condition to the exercise of this Option, the Company may require the Optionee to make any representation and warranty to the Company as may be required by any applicable law or regulation. 6. TERMINATION OF STATUS AS A DIRECTOR. If the Opionee ceases to serve as a Director, he may, but only within thirty (30) days after the date he ceased to be a Director of the Company, exercise this Option to the extent that he was entitled to exercise it at the date of such termination. To the extent that he was not entitled to exercise this Option at the date of such termination, or if he does not exercise this Option within the time specified herein, this Option shall terminate. 7. DISABILITY OF OPTIONEE. Notwithstanding the provisions of Section 6 above, if the Optionee is unable to continue his service with the Company as a result of his total and permanent disability (within the meaning of Section 22(e)(3) of the Code), he may, but only within twelve (12) months from the date of termination of service due to such disability, exercise this Option to the extent he was entitled to exercise it as the date of such termination, of if he does not exercise this Option (which he was entitled to exercise) within the time specified herein, this Option shall terminate. 8. DEATH OF OPTIONEE. In the event of the death of the Optionee: (a) during the term of this Option and while a Director of the Company and having been in Continuous Status as a Director since the date of grant of this Option, this Option may be exercised, at any time within twelve (12) months following the date of death, by the Optionee's estate or by a person who acquired the right to exercise this Option by bequest of inheritance, but only to the extent of the right to exercise that would have accrued had the Optionee continued living until one (1) month after the date of death; or (b) within thirty (30) days after the termination of the Optinee's Continuous Status as a Director, this Option may be exercised, at any time within three (3) months following the date of death, by the Optionee's estate or by a person who acquired the right to exercise this Option by bequest or inheritance, but only to the extent of the right to exercise that had accrued at the date of termination. 9. NON-TRANSFERABILITY OF OPTION. This Option may not be sold, pledged, assigned, hypothecated, or otherwise transferred in any manner otherwise than by will or by the laws of descent or distribution and may be exercised during the lifetime of the Optionee only by the Optionee. The terms of this Option shall be binding upon the executors, administrators, heirs, successors and assigns of the Optionee. 10. TERM OF OPTION. This Option may not be exercised more than ten (10) years from the date of grant of this Option, any may be exercised during such term only in accordance with the Plan and the terms of this Option. 11. EARLY DISPOSITION OF SHARES. The Optionee understands that if he disposes of any Shares received under this Option within two (2) years after the date of this Agreement or within one (1) year after such Shares were transferred to him, he will be treated for federal income tax purposes as having received ordinary income at the time of such disposition in an amount equal to the positive difference between the exercise price for the Shares and the lower of the Fair Market Value of the Shares at the date of exercise of this Option and the sales price of the Shares. The Optionee hereby agrees to notify the Company in writing within thirty (30) days after the date of any such disposition. The Optionee understands that if he disposes of such Shares at any time after the expiration of such two-year and one-year periods, any gain on such sale will be taxed at applicable capital gain rates. 12. NO RIGHTS AS SHAREHOLDER. The Optionee shall have no rights as a shareholder with respect to any Shares covered by this Option until the date of the issuance of a stock certificate to him for such Shares. 13. NO OBLIGATION TO EXERCISE OPTION. The granting of this Option shall impose no obligation upon the Optionee to exercise such Option. 14. VARIATIONS IN PRONOUNS. All pronouns and any variations thereof used herein refer to the masculine, feminine or neuter, singular or plural, as the identity of the person or persons may require. 15. HEADINGS. The headings in this Agreement are for reference purposes only and shall not in any way affect the meaning or interpretation of this Agreement. 16. GOVERNING LAW. This Option shall be governed by and construed in accordance with the laws of the State of Delaware, except to the extent pre-empted by federal law. DATE OF GRANT: July 30, 1998 PARTY CITY CORPORATION By: /s/ David E. Lauber --------------------------- Name: David E. Lauber ------------------------ Title: Executive Vice President ------------------------ Acknowledgment and Acceptance of Optionee The Optionee acknowledges receipt of a copy of the Plan, a copy of which is annexed hereto, and represents that he is familiar with the terms and provisions thereof, and hereby accepts this Option subject to all of the terms and provisions thereof. The Optionee hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Board upon any questions arising under the Plan. Dated: 10/27/98 /s/Jack Futterman ----------------- Jack Futterman EX-10 7 jf956580.txt STOCK OPTION AGREEMENT DIRECTOR STOCK OPTION AGREEMENT UNDER THE PARTY CITY CORPORATION 1999 STOCK INCENTIVE PLAN THIS AGREEMENT, made as of the 26th of September, 2000, by and between Party City Corporation, a Delaware corporation (the "Company"), and Jack Futterman (the "Optionee"). WHEREAS, the Optionee serves as a member of the Company's Board of Directors (the "Board"), and the Company desires to afford the Optionee the opportunity to acquire, or enlarge, Optionee's ownership of the Company's Common Stock, par value $.01 per share (the "Common Stock"), so that Optionee may have a direct proprietary interest in the Company's success; WHEREAS, all capitalized terms not otherwise defined herein shall have the same meaning as set forth in Company's 1999 Stock Incentive Plan (the "Plan"); NOW, THEREFORE, in consideration of the covenants and agreements herein contained, the parties hereto hereby agree as follows: W I T N E S S E T H: ------------------- 1. Grant of Option. Subject to the terms and conditions set forth herein and in the Plan, the Company hereby grants to the Optionee, during the period commencing on the date of this Agreement and ending on the date that is ten years from the date hereof (the "Option Period"), the right and option (the right to purchase any one share of Common Stock hereunder being an "Option") to purchase from the Company, at a purchase price equal to $3.40 (U.S. Three Dollars and Forty Cents) per share (the "Option Price") (the Fair Market Value of one share of Common Stock on the date hereof), an aggregate of 3,000 (Three Thousand) shares of Common Stock. The Options are not intended to be "incentive stock options", as defined in Section 422 of the Internal Revenue Code of 1986, as amended. 2. Exercise of Option. The Options shall be immediately vested and exercisable and, except as otherwise stated in this agreement, the Options shall expire on the tenth anniversary of the date hereof. 3. Termination of Status as a Director. (a) If prior to the end of the Option Period, the Optionee shall terminate status as a director for any reason, all outstanding Options that have not vested and become exercisable as of the date of such termination shall immediately expire and all outstanding Options vested and exercisable at the time of such termination shall remain exercisable by the Optionee until their expiration as set forth below. (b) In the event the Optionee's status as a director terminates on account of a Normal Termination, all outstanding vested and exercisable Options as of the date of such termination may be exercised at any time within the three (3) months immediately following the date of such termination. (c) In the event of the death of the Optionee during the Optionee's term as a director or within there months after the Optionee's termination of service as a director on account of a Normal Termination, all outstanding vested and exercisable Options as of the date of the Optionee's death may be exercised, at any time within the twelve (12) months immediately following the date of death, by the Optionee's estate or by any person who acquired the right to exercise the Option by bequest or inheritance; or (d) In the event the Optionee's status as a director terminates for any reason other than death or on account of a Normal Termination, all outstanding vested and exercisable Options as of the date of such termination shall immediately expire. (e) Notwithstanding anything herein to the contrary, no Option may be exercised beyond the date that is the tenth anniversary of the date hereof. (f) After the expiration of any exercise period described in this paragraph 3, all unexercised Options shall expire together with all of the Optionee's rights hereunder. (g) For purposes of this Agreement, "Normal Termination" means termination of service as a director of the Company: (i) If applicable, upon retirement pursuant to the retirement plan of the Company; (ii) On account of Disability; (iii) With the written approval of the Committee; or (iv) By the stockholders of the Company without Cause, including on account of the Optionee's failure to be reelected to the Board. 4. Method of Exercising Option. (a) Options which have become exercisable may be exercised by delivery of a written notice of exercise to the Committee accompanied by payment of the Option Price. The Option Price may be payable (i) in cash, (ii) by bank check acceptable to the Committee, and/or (iii) by delivery of Mature Shares (valued at the Fair Market Value at the time the Option is exercised), having in the aggregate a value equal to the aggregate Option Price, or any combination of such methods of payment. In addition, at the discretion of the Committee, the Option Price may be payable by delivering to the Committee a copy of irrevocable instructions to a stockholder to deliver promptly to the Company an amount of sale or loan proceeds sufficient to pay the aggregate Option Price. For purposes of this paragraph, the term "Mature Shares" shall mean shares of Common Stock for which the Optionee has good title, free and clear of all liens and encumbrances, and which the Optionee either (i) has held for at least six months or (ii) has purchased on the open market. (b) At the time of exercise, (i) the Company shall have the right to withhold from the number of shares of Stock to be issued upon exercise or (ii) at the discretion of the Committee, the Optionee shall be obligated to pay to the Company such amount, as the Company deems necessary to satisfy its obligation, if any, to withhold Federal, state and local income or other taxes incurred by reason of the exercise or the transfer of shares thereupon. 5. Issuance of Shares. As promptly as practical after receipt of such written notification and full payment of such aggregate Option Price and any required income tax withholding amount, the Company shall issue or transfer to the Optionee the number of shares with respect to which Options have been so exercised, and shall deliver to the Optionee a certificate or certificates therefor, registered in the Optionee's name. 6. Non-Transferability. Except as otherwise determined by the Committee in its sole discretion, the Options are not transferable by the Optionee otherwise than by will or the laws of descent and distribution and are exercisable during the Optionee's lifetime only by Optionee. Unless such assignment or transfer is consented to by the Committee, no assignment or transfer of the Options, or of the rights represented hereby, whether voluntary or involuntary, by operation of law or otherwise (except by will or the laws of descent and distribution), shall vest in the assignee or transferee any interest or right herein whatsoever, but immediately upon such assignment or transfer the Options shall terminate and become of no further effect. 7. Rights as Stockholder. The Optionee or a transferee of the Options shall have no rights as a stockholder with respect to any share covered by the Options until Optionee shall have become the holder of record of such share, and no adjustment shall be made for dividends or distributions or other rights in respect of such share for which the record date is prior to the date upon which Optionee shall become the holder or record thereof. 8. Changes in Capital Structure. (a) The Options granted under this Agreement shall be subject to adjustment or substitution, as determined by the Committee in its sole discretion, as to the number, price of kind of a share of Common Stock or other consideration subject to such Options or as otherwise determined by the Committee to be equitable (i) in the event of changes in the outstanding Common Stock or in the capital structure of the Company by reason of stock dividends, stock splits, reverse stock splits, recapitalizations, reorganizations, mergers, consolidations, combinations, exchanges, or other relevant changes in capitalization occurring after the date hereof, (ii) in the event of any change in applicable laws or any change in circumstances which results in or would result in any substantial dilution or enlargement of the rights granted to, or available for, participants in the Plan or (iii) upon the occurrence of any other event which otherwise warrants equitable adjustment because it interferes with the intended operation of the Plan. (b) Notwithstanding the above, in the event of (i) a merger or consolidation such that after such merger or consolidation the Company is not the surviving entity or the ultimate parent of the surviving entity, (ii) the sale of all or substantially all of the assets of the Company, or (iii) the reorganization or liquidation of the Company, the Committee may, in its sole discretion and upon at least 10 days advance notice to the Optionee, cancel any outstanding Options and pay to the Optionee, in cash or Stock, the value of such Options based upon the price per share of Stock received or to be received by other shareholders of the Company in the event. 9. Compliance with Law. Notwithstanding any of the provisions hereof, the Optionee hereby agrees that Optionee will not exercise the Options, and that the Company will not be obligated to issue or transfer any shares to the Optionee hereunder, if the exercise hereof or the issuance or transfer of such shares shall constitute a violation by the Optionee or the Company of any provisions of any law or regulation of any governmental authority. Any determination in this connection by the Committee shall be final, binding and conclusive. The Company shall in no event be obliged to register any securities pursuant to the Securities Act of 1933 (as now in effect or as hereafter amended) or to take any other affirmative action in order to cause the exercise of the Options or the issuance or transfer of shares pursuant thereto to comply with any law or regulation of any governmental agency. 10. Notice. Every notice or other communication relating to this Agreement shall be in writing, and shall be mailed to or delivered to the party for whom it is intended at such address as may from time to time be designated by it in a notice mailed or delivered to the other party as herein provided, provided that, unless and until some other address be so designated, all notices or communications by the Optionee to the Company shall be mailed or delivered to the Company at its principal executive office, and all notices or communications by the Company to the Optionee may be given to the Optionee personally or may be mailed to Optionee at the Optionee's last known address, as reflected in the Company's records. 11. Binding Effect. Subject to Section 6 hereof, this Agreement shall be binding upon the heirs, executors, administrators and successors of the parties hereto. 12. Governing Law. This Agreement shall be construed and interpreted in accordance with the laws of the State of Delaware, without regard to the principles of conflicts of law thereof. 13. Plan. The terms and provisions of the Plan are incorporated herein by reference. Capitalized terms used herein which are not defined herein shall have the meanings attributable thereto in the Plan. In the event of a conflict or inconsistency between discretionary terms and provisions of the Plan and the express provisions of this Agreement, this Agreement shall govern and control. In all other instances of conflicts or inconsistencies or omissions, the terms and provisions of the Plan shall govern and control. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written. PARTY CITY CORPORATION By: /s/ Thomas E. Larson ------------------------------ Name: Thomas E. Larson Title: C.F.O. /s/ Jack Futterman ------------------------------------- Jack Futterman EX-11 8 jf956516.txt STOCK OPTION AGREEMENT DIRECTOR STOCK OPTION AGREEMENT UNDER THE PARTY CITY CORPORATION 1999 STOCK INCENTIVE PLAN THIS AGREEMENT, made as of the 26th of September 2001, by and between Party City Corporation, a Delaware corporation (the "Company"), and Jack Futterman (the "Optionee"). WHEREAS, the Optionee serves as a member of the Company's Board of Directors, and the Company desires to afford the Optionee the opportunity to acquire, or enlarge, Optionee's ownership of the Company's Common Stock, par value $.01 per share (the "Common Stock"), so that Optionee may have a direct proprietary interest in the Company's success; WHEREAS, all capitalized terms not otherwise defined herein shall have the same meaning as set forth in the Company's 1999 Stock Incentive Plan (as amended from time to time) (the "Plan"); NOW, THEREFORE, in consideration of the covenants and agreements herein contained, the parties hereto hereby agree as follows: W I T N E S S E T H: ------------------- 1. Grant of Option. Subject to the terms and conditions set forth herein and in the Plan, the Company hereby grants to the Optionee, during the period commencing on the date of this Agreement and ending on the date that is ten years from the date hereof (the "Option Period"), the right and option (the right to purchase any one share of Common Stock hereunder being an "Option") to purchase from the Company, at a purchase price equal to $6.55 per share (the "Option Price") (the Fair Market Value of one share of Common Stock on the date hereof), an aggregate of 3,000 shares of Common Stock. The Options are not intended to be "incentive stock options", as defined in Section 422 of the Internal Revenue Code of 1986, as amended. 2. Limitations on Exercise of Option. (a) Subject to the terms and conditions set forth herein, the Options shall vest immediately and become exercisable immediately. (b) Except as otherwise stated in this agreement, the Options shall expire on the tenth anniversary of the date hereof. 3. Termination of Shares as a Director. (a) If prior to the end of the Option Period, the Optionee shall terminate status as a director for any reason, all outstanding Options that have not vested and become exercisable as of the date of such termination shall immediately expire and all outstanding Options vested and exercisable at the time of each termination shall remain exercisable by the Optionee until their expiration as set forth below. (b) In the event the Optionee's status as a director terminates on account of a Normal Termination, all outstanding vested and exercisable Options as of the date of such termination may be exercised at any time within the three (3) months immediately following the date of such termination. (c) In the event of the death of the Optionee during the Optionee's term as a director or within three months after the Optionee's termination of service as a director on account of a Normal Termination, all outstanding vested and exercisable Options as of the date of the Optionee's death may be exercised, at any time within the twelve (12) months immediately following the date of death, by the Optionee's estate or by any person who acquired the right to exercise the Option by bequest or inheritance; or (d) In the event the Optionee's status as a director terminates for any reason other than death or on account of a Normal Termination, all outstanding vested and exercisable Options as of the date of such termination shall immediately expire. (e) Notwithstanding anything herein to the contrary, no Option may be exercised beyond the date that is the tenth anniversary of the date hereof. (f) After the expiration of any exercise period described in this paragraph 3, all unexercised Options shall expire together with all of the Optionee's rights hereunder. (g) For purposes of this agreement, "Normal Termination" means termination of service with the Company: (i) Upon retirement pursuant to the retirement plan of the Company; (ii) On account of Disability; (iii) With the written approval of the Committee; or (iv) By the Company or a Subsidiary without Cause. 4. Method of Exercising Option. (a) Options which have become exercisable may be exercised by delivery of a written notice of exercise to the Committee accompanied by payment of the Option Price. The Option Price may be payable (i) in cash, (ii) by bank check acceptable to the Committee, and/or (iii) by delivery of Mature Shares (valued at the Fair Market Value at the time the Option is exercised), having in the aggregate a value equal to the aggregate Option Price, or any combination of such methods of payment. In addition, at the discretion of the Committee, the Option Price may be payable by delivering to the Committee a copy of irrevocable instructions to a stockbroker to deliver promptly to the Company an amount of sale or loan proceeds sufficient to pay the aggregate Option Price. For purposes of this paragraph, the term "Mature Shares" shall mean shares of Common Stock for which the Optionee has good title, free and clear of all liens and encumbrances, and which the Optionee either (i) has held for at least six months or (ii) has purchased on the open market. (b) At the time of exercise, (i) the Company shall have the right to withhold from the number of shares of Stock to be issued upon exercise or (ii) at the discretion of the Committee, the Optionee shall be obligated to pay to the Company such amount, as the Company deems necessary to satisfy its obligation to withhold Federal, state and local income or other taxes incurred by reason of the exercise or the transfer of shares thereupon. 5. Issuance of Shares. As promptly as practical after receipt of such written notification and full payment of such aggregate Option Price and any required income tax withholding amount, the Company shall issue or transfer to the Optionee the number of shares with respect to which Options have been so exercised, and shall deliver to the Optionee a certificate or certificates therefor, registered in the Optionee's name. 6. Non-Transferability. Except as otherwise determined by the Committee in its sole discretion, the Options are not transferable by the Optionee otherwise than by will or the laws of descent and distribution and are exercisable during the Optionee's lifetime only by Optionee. No assignment or transfer of the Options, or of the rights represented thereby, whether voluntary or involuntary, by operation of law or otherwise (except by will or the laws of descent and distribution), shall vest in the assignee or transferee any interest or right herein whatsoever, but immediately upon such assignment or transfer the Options shall terminate and become of no further effect. 7. Rights as Stockholder. The Optionee or a transferee of the Options shall have no rights as a stockholder with respect to any share covered by the Options until Optionee shall have become the holder of record of such share, and no adjustment shall be made for dividends or distributions or other rights in respect of such share for which the record date is prior to the date upon which Optionee shall become the holder or record thereof. 8. Changes in Capital Structure. (a) The Options granted under this Agreement shall be subject to adjustment or substitution, as determined by the Committee in its sole discretion, as to the number, price or kind of a share of Common Stock or other consideration subject to such Options or as otherwise determined by its Committee to be equitable (i) in the event of changes in the outstanding Common Stock or in the capital structure of the Company by reason of stock dividends, stock splits, reverse stock splits, recapitalizations, reorganizations, mergers, consoldiations, combinations, exchanges, or other relevant changes in capitalization occurring after the date hereof, (ii) in the event of any change in applicable laws or any change in circumstances which results in or would result in any substantial dilution or enlargement of the rights granted to, or available for, participants in the Plan or (iii) upon the occurrence of any other event which otherwise warrants equitable adjustment because it interferes with the intended operation of the Plan. (b) Notwithstanding the above, in the event of (i) a merger or consolidation such that after such merger or consolidation the Company is not the surviving entity or the ultimate parent of the surviving entity, (ii) the sale of all or substantially all of the assets of the Company, or (iii) the reorganization or liquidation of the Company, the Committee may, in its discretion and upon at least 10 days advance notice to the Optionee, cancel any outstanding Options and pay to the Optionee, in cash or Stock, the value of such Options based upon the price per share of Stock received or to be received by other shareholders of the Company in the event. 9. Compliance with Law. Notwithstanding any of the provisions hereof, the Optionee hereby agrees that Optionee will not exercise the Options, and that the Company will not be obligated to issue or transfer any shares to the Optionee hereunder, if the exercise hereof or the issuance or transfer of such shares hall constitute a violation by the Optionee or the Company of any provisions of any law or regulation of any governmental authority. Any determination in this connection by the Committee shall be final, binding and conclusive. The Company shall in no event be obliged to register any securities pursuant to the Securities Act of 1933 (as now in effect or as hereafter amended) or to take any other affirmative action in order to cause the exercise of the Options or the issuance or transfer of shares pursuant thereto to comply with any law or regulation of any governmental authority. 10. Notice. Every notice or other communication relating to this Agreement shall be in writing, and shall be mailed to or delivered to the party for whom it is intended at such address as may from time to time be designated by it in a notice mailed or delivered to the other party as herein provided, provided that, unless and until some other address be so designated, all notices or communications by the Optionee to the Company shall be mailed or delivered to the Company at its principal executive office, and all notices or communications by the Company to the Optionee may be given to the Optionee personally or may be mailed to Optionee at the Optionee's last known address, as reflected in the Company's records. 11. Binding Effect. Subject to Section 6 hereof, this Agreement shall be binding upon the heirs, executors, administrators and successors of the parties hereto. 12. Governing Law. This Agreement shall be construed and interpreted in accordance with the laws of the State of Delaware, without regard to the principles of conflicts of law thereof. 13. Plan. The terms and provisions of the Plan are incorporated herein by reference. Capitalized terms used herein which are not defined herein shall have the meanings attributable thereto in the Plan. In the event of a conflict or inconsistency between discretionary terms and provisions of the Plan and the express provisions of this Agreement, this Agreement shall govern and control. In all other instances of confli-+cts or inconsistencies or omissions, the terms and provisions of the Plan shall govern and control. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written. PARTY CITY CORPORATION By: /s/ Thomas E. Larson ------------------------------------ Name: Thomas E. Larson Title: Senior Vice President and CEO /s/ Jack Futterman ----------------------------------------- Jack Futterman