-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Q4GYy3I2sNfV2ZepHzELYX2S2eadOp1HOtJwoBxtli/JAsR+PtB81s7oVcH6sS4j irePoSU7eIVt8ZuNDZAGHA== 0000940180-99-000688.txt : 19990615 0000940180-99-000688.hdr.sgml : 19990615 ACCESSION NUMBER: 0000940180-99-000688 CONFORMED SUBMISSION TYPE: SC 13D/A PUBLIC DOCUMENT COUNT: 3 FILED AS OF DATE: 19990611 GROUP MEMBERS: MANDELL FAMILY LIMITED PARTNERSHIP GROUP MEMBERS: MANDELL STEVEN 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: 1231 FILING VALUES: FORM TYPE: SC 13D/A SEC ACT: SEC FILE NUMBER: 005-48035 FILM NUMBER: 99645100 BUSINESS ADDRESS: STREET 1: 450 COMMONS WAY CITY: ROCKAWAY STATE: NJ ZIP: 07860 BUSINESS PHONE: 2019830888 MAIL ADDRESS: STREET 2: 400 COMMONS WAY CITY: ROCKAWAY STATE: NJ ZIP: 07866 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: MANDELL STEVEN CENTRAL INDEX KEY: 0001031490 STANDARD INDUSTRIAL CLASSIFICATION: [] FILING VALUES: FORM TYPE: SC 13D/A BUSINESS ADDRESS: STREET 1: 400 COMMONS WAY BLDG C CITY: ROCKAWAY STATE: NJ ZIP: 07886 BUSINESS PHONE: 2019830888 SC 13D/A 1 AMENDMENT NO. 2 TO SCHEDULE 13D CUSIP No. 702145103 Page 1 of 30 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 $0.01 per share - -------------------------------------------------------------------------------- (Title of Class of Securities) 702145103 - -------------------------------------------------------------------------------- (CUSIP Number) Steven Mandell, 400 Commons Way, Rockaway, New Jersey 07866 (973) 983-0888 - -------------------------------------------------------------------------------- (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) June 8, 1999 - -------------------------------------------------------------------------------- (Date of Event which Requires Filing of this Statement) 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 Rule 13d-1(b)(3) or (4), check the following box. ? Note: Six copies of this statement, including all exhibits, should be filed with the Commission. See Rule 13d-1(a) for other parties to whom copies are to be sent. *The remainder of this cover page shall be filled out for a person's initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page. The information required on the remainder of this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934 ("Act") or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes). CUSIP No. 702145103 Page 2 of 30 - -------------------------------------------------------------------------------- 1. Name of Reporting Person Steven Mandell - -------------------------------------------------------------------------------- 2. Check the Appropriate Box if a Member of a Group* (a) [X] - -------------------------------------------------------------------------------- (b) [ ] - -------------------------------------------------------------------------------- 3. SEC Use Only - -------------------------------------------------------------------------------- 4. Source of Funds* Not Applicable - -------------------------------------------------------------------------------- 5. Check if Disclosure of Legal Proceedings Is Required Pursuant to Items 2(d) or 2(e) Not applicable - -------------------------------------------------------------------------------- 6. Citizenship or Place of Organization U.S. Citizen - -------------------------------------------------------------------------------- Number of 7. Sole Voting Power Shares 2,457,500** Beneficially by Owned by 8. Shared Voting Power Each None Reporting Persons With 9. Sole Dispositive Power 2,457,500** 10. Shared Dispositive Power None - -------------------------------------------------------------------------------- 11. Aggregate Amount Beneficially Owned by Each Reporting Person 2,457,500** - -------------------------------------------------------------------------- 12. Check if the Aggregate Amount in Row (11) Excludes Certain Shares* Not applicable - -------------------------------------------------------------------------------- 13. Percent of Class Represented by Amount in Row (11) 19.7% - -------------------------------------------------------------------------------- 14. Type of Reporting Person* IN - -------------------------------------------------------------------------------- * SEE INSTRUCTIONS BEFORE FILLING OUT! ** This figure includes 750,000 shares owned by Mandell Family Limited Partnership, a limited partnership organized under the laws of New Jersey, wholly owned by Mr. Mandell. See also the disclosure provided in response to Item 5 hereof. 1,000,000 shares owned individually by Mr. Mandell are subject to an Option Agreement described in Item 4 and attached hereto as Exhibit I. - -------------------------------------------------------------------------------- CUSIP No. 702145103 Page 3 of 30 - -------------------------------------------------------------------------------- 1. Name of Reporting Person Mandell Family Limited Partnership I.R.S Identification Nos. of above persons (entities only) - -------------------------------------------------------------------------------- 2. Check the Appropriate Box if a Member of a Group* (a) [X] - -------------------------------------------------------------------------------- (b) [ ] - -------------------------------------------------------------------------------- 3. SEC Use Only - -------------------------------------------------------------------------------- 4. Source of Funds* Not Applicable - -------------------------------------------------------------------------------- 5. Check if Disclosure of Legal Proceedings Is Required Pursuant to Items 2(d) or 2(e) Not applicable - -------------------------------------------------------------------------------- 6. Citizenship or Place of Organization New Jersey - -------------------------------------------------------------------------------- Number of 7. Sole Voting Power Shares 750,000 Beneficially by Owned by 8. Shared Voting Power Each None Reporting Persons With 9. Sole Dispositive Power 750,000 10. Shared Dispositive Power None - -------------------------------------------------------------------------------- 11. Aggregate Amount Beneficially Owned by Each Reporting Person 750,000 - -------------------------------------------------------------------------- 12. Check if the Aggregate Amount in Row (11) Excludes Certain Shares* Not applicable - -------------------------------------------------------------------------------- 13. Percent of Class Represented by Amount in Row (11) 6% - -------------------------------------------------------------------------------- 14. Type of Reporting Person* PN - -------------------------------------------------------------------------------- * SEE INSTRUCTIONS BEFORE FILLING OUT! - ------------------------------------------------------------------------------- CUSIP No. 702145103 Page 4 of 30 Item 1. Security and Issuer. Item I of the Schedule 13D (as defined below) is hereby deleted in its entirety and the following is inserted in lieu thereof: "This Amendment No. 2 amends and supplements the Schedule 13D filed by Mr. Steven Mandell ("Mr. Mandell") and the Mandell Family Limited Partnership, a New Jersey limited partnership (the "Partnership", together with Mandell, the "Reporting Persons") with the Securities and Exchange Commission on March 10, 1997 as amended by Amendment No. 1 thereto (as amended, the "Schedule 13D") relating to the common stock, par value $0.01 per share ("Common Stock") of Party City Corporation (the "Issuer"), having its principal offices at 400 Commons Way, Rockaway, New Jersey 07866." The Reporting Persons have entered into a Joint Filing Agreement, dated June 11, 1999, attached hereto as Schedule I." Item 2. Identity and Background Paragraph 1(c) of Item 2 of the Schedule 13D is hereby amended and restated to read as follows: "(c) Mr. Mandell is a businessman and currently serves as a consultant to and a member of the Board of Directors of the Issuer." Item 3. Source and Amount of Funds and Other Consideration. Item 3 of the Schedule 13D is hereby deleted in its entirety and replaced by the following: "1. Mr. Mandell Of the 2,457,500 shares of the Issuer reported as beneficially owned by Mr. Mandell hereunder, 1,707,500 shares are owned individually by Mr. Mandell and 750,000 are owned by the Partnership. All of these shares of Common Stock beneficially owned by Mr. Mandell were either (i) purchased by Mr. Mandell with personal funds or (ii) issued to Mr. Mandell by the Issuer in January of 1998 as part of a stock dividend. As described in more detail in Item 4, Mr. Mandell has placed 1,000,000 of the shares individually owned by himself under an Option (as defined in Item 4) in favor of Mr. Jack Futterman in connection with Mr. Futterman's assumption of the position of Chief Executive Officer of the Issuer. 2. The Partnership The 750,000 shares of Common Stock of the Issuer owned by the Partnership were received from Mr. Mandell." Item 4. Purpose of Transaction. Item 4 of the Schedule 13D is hereby amended by inserting a new paragraph 3 immediately after paragraph 2 thereof which shall read in full as follows: "On June 8, 1999, Mr. Mandell entered into an option agreement (the "Option Agreement") pursuant to which he granted Mr. Jack Futterman an option (the "Option") to purchase up to 1,000,000 of his individually owned shares of Common Stock (the "Option Shares") at an exercise price of $3.00 per share. The Option is exercisable at any time within a five year period beginning on June 8, 1999 and ending on the fifth anniversary CUSIP No. 702145103 Page 5 of 30 thereof. Mr. Mandell pledged the Option Shares to Mr. Futterman as security for the Option pursuant to an Stock Pledge Agreement dated June 8, 1999 between Mr. Mandell and Mr. Futterman (the "Stock Pledge"). Prior to any exercise of the Option or a related default under the Stock Pledge, Mr. Mandell shall maintain the sole power to vote the Option Shares. Upon Mr. Futterman's exercise of the option, Mr. Futterman will obtain sole voting and dispositive control over the Option Shares purchased pursuant to any such exercise. In connection with entering into the Option Agreement and the Stock Pledge, Mr. Mandell has resigned from his previous position as Chief Executive Officer and Chairman of the Board of Directors and Mr. Futterman has been appointed to those positions." Item 5. Interest In Securities of the Issuer. Item 5 of the Schedule 13D is hereby deleted in its entirety and replaced by the following: "(a) The table below sets forth the aggregate number of shares and percentage of Common Stock owned by each of the Reporting Persons. The information herein pertaining to the Issuer's issued and outstanding Common Stock is as of June 8, 1999, at which time there were issued and outstanding 12,455,538 shares of the Issuer's Common Stock. Aggregate Amount of Reporting Person Title of Class Beneficial Ownership - ---------------- -------------- -------------------- Mr. Mandell Common Stock 2,457,500(1) The Partnership Common Stock 750,000 (1) This figure consists of (i) 1,707,500 shares held by Mr. Mandell individually and (ii) 750,000 shares held by the Partnership of which Mr. Mandell is the sole General Partner. 1,000,000 of these shares individually beneficially owned by Mr. Mandell are subject to the Option and are also pledged, subject to the Stock Pledge, to Mr. Futterman to secure the Option. (b) (i) Sole Voting Power. Mr. Mandell has sole voting power with respect to 2,457,500 shares of Common Stock. (ii) Shared Voting Power: 0 (iii) Sole Dispositive Power. Mr. Mandell has sole dispositive power with respect to 2,457,500 shares of Common Stock. (iv) Shared Dispositive Power: 0 (c) Except as disclosed in Item 4, no Reporting Person owns any shares of Common Stock or has effected any transaction in shares of Common Stock during the preceding 60 days." Item 7. Material to Be Filed as Exhibits. Item 7 of the Schedule 13D is hereby deleted in its entirety and the following is inserted in lieu thereof: "Exhibit I Option Agreement, dated June 8, 1999, between Mr. Mandell and Jack Futterman. Exhibit II Stock Pledge Agreement, dated as of June 8, 1999, between Mr. Mandell and Jack Futterman. CUSIP No. 702145103 Page 6 of 30 Signature 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. /s/ Steven Mandell ------------------ Name: Steven Mandell General Partner Dated: June 11, 1999 CUSIP No. 702145103 Page 7 of 30 Signature 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. MANDELL FAMILY LIMITED PARTNERSHIP By: /s/ Steven Mandell -------------------------- Name: Steven Mandell General Partner Dated: June 11, 1999 CUSIP No. 702145103 Page 8 of 30 Schedule 1 JOINT FILING AGREEMENT The undersigned parties hereby agree that the Schedule 13D filed herewith (and any amendments thereto) relating to the Stock of Party City Corporation is being filed jointly with the Securities and Exchange Commission pursuant to Rule 13d-1(k) on behalf of each such person. Dated: June 11, 1999 /s/ Steven Mandell ------------------ Steven Mandell MANDELL FAMILY LIMITED PARTNERSHIP By: /s/ Steven Mandell ---------------------- Name: Steven Mandell Its: Sole General Partner CUSIP No. 702145103 Page 9 of 30 List of Exhibits: Exhibit I Option Agreement, dated June 8, 1999, between Steven Mandell and Jack Futterman. Exhibit II Stock Pledge Agreement, dated as of June 8, 1999, between Steven Mandell and Jack Futterman. EX-99.(I) 2 OPTION AGREEMENT, DATED JUNE 8, 1999 CUSIP No. 702145103 Page 10 of 30 Exhibit 1 OPTION AGREEMENT AGREEMENT, dated June 8, 1999, between Steven Mandell, having an address at P.O. Box 85, New Vernon, New Jersey 07976 ("Seller") and Jack Futterman, residing at 16315 Vintage Oaks Lane, Delray Beach, Florida 33484 ("Purchaser"). WHEREAS, the Seller is presently the Chief Executive Officer of Party City Corporation, a Delaware corporation (the "Company"), and is the beneficial owner of 2,457,500 shares of the Company's common stock, par value $.01 per share (the "Common Stock"), and the record owner of at least 1,000,000 of such shares; and WHEREAS, the Purchaser is becoming the Chief Executive Officer of the Company on the date hereof; and WHEREAS, the Seller wishes to grant to Purchaser an option to purchase certain of his shares of Common Stock on the terms set forth herein, as an inducement for Purchaser to take on the responsibility of Chief Executive Officer of the Company; and WHEREAS, Seller's inducement to grant this option is that by virtue of Purchaser's new position as Chief Executive Officer, the value of Sellers's shares that are not subject to the option may increase in value. NOW, THEREFORE, in consideration of the foregoing and the mutual agreements set forth herein, and for other good and valuable consideration, receipt of which is hereby acknowledged, the parties hereto agree as follows: I. OPTION. 1.01. Grant of the Option; Term. Subject to the terms of this Agreement, in reliance on the representations, warranties and agreements of the Purchaser contained herein, the Seller hereby grants to the Purchaser an option to purchase, in whole or in part, 1,000,000 shares of Common Stock at any time during the period commencing on the date hereof and ending on the fifth anniversary of the date hereof, at the exercise price per share of $3.00 (the "Purchase Price"). The option shall be evidenced by one or more option certificates substantially in the form attached hereto as Exhibit A (the "Option"). 1.02. Exercise of the Option and Purchase of the Shares. The Option shall be exercised upon receipt by the Seller of a duly executed and completed facsimile of the form for such purpose attached hereto as Exhibit A, accompanied by a bank or certified check issued by any domestic office of a bank organized under the laws of the United States of America or any state thereof, which has net assets of not less than $100 million, in the amount of the Purchase Price for the number of shares being purchased in accordance with the terms set forth below. Notwithstanding the foregoing the Option may not be exercised at any time for less than 100,000 Option Shares (as hereinafter defined and as the same may be adjusted under Section 1.04 hereof), and the Option shall not be exercised more than six times over the course of the five-year term, unless the same shall be waived in writing by Seller. CUSIP No. 702145103 Page 11 of 30 1.03. Delivery by the Seller of the Option Shares. As promptly as practicable after any exercise of the Option, the Seller shall do all things necessary or appropriate and execute and deliver all documents and instruments necessary or appropriate, including without limitation, duly executed stock powers, to cause certificate(s) registered in the name of the Purchaser to be delivered to Purchaser, or his permitted transferees, for the shares of Common Stock so purchased. 1.04. Adjustment. The price and number of shares subject to the Option shall be appropriately adjusted in the event of a reorganization, recapitalization, stock split, stock dividend, combination of shares or similar change in the Company's shares. Upon the subdivision or combination of the outstanding shares of Common Stock or the issuance of a stock dividend, payable in shares, to holders of Common Stock, the Purchase Price shall be adjusted by multiplying the Purchase Price by a fraction, the numerator of which is equal to the number of issued and outstanding shares of Common Stock immediately prior to such subdivision, combination or stock dividend, and the denominator of which is equal to the number of issued and outstanding shares of Common Stock immediately following such subdivision, combination or stock dividend. If the Company shall be reorganized, consolidated, or merged with another corporation, or if all or substantially all of the assets of the Company shall be sold or exchanged, or if there is a recapitalization, stock split, stock dividend, combination of shares or similar change in the Company's shares, the Purchaser shall at the time of issuance of the stock under such corporate event be entitled to receive, upon the exercise of his Option, the same number and kind of shares of stock or the same amount of property, cash or securities as the Purchaser would have been entitled to receive upon the occurrence of any such corporate event as if the Purchaser had been, immediately prior to such event, the holder of the number of shares covered by his Option so exercised. 1.05. Pledge of Shares. The Option evidenced hereby shall be secured by Seller's pledge of 1,000,000 shares of Common Stock to Purchaser, upon the terms and subject to the conditions contained in a Stock Pledge Agreement (the "Stock Pledge Agreement") mutually agreed to by the parties. As and when the option is exercised, the Option Shares, deliverable upon such exercise shall be released from the pledge. II. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER. The Purchaser hereby represents and warrants to the Seller as follows: 2.01. Authority. The Purchaser has the power and authority to enter into and perform his obligations under this Agreement and the Option and to consummate the transactions contemplated hereby and thereby. This Agreement has been duly executed and delivered by the Purchaser. 2.02. Valid and Binding Obligations. This Agreement and the Option constitute the valid and binding obligations of the Purchaser enforceable against the Purchaser in accordance with their respective terms, except that the remedy of specific performance and other forms of CUSIP No. 702145103 Page 12 of 30 equitable relief may be subject to equitable defenses and to the discretion of the court before which any proceeding therefor may be brought. 2.03. Investment Intent. The Purchaser represents, warrants and agrees that he is acquiring the Option and upon the exercise of the Option, he will acquire the shares of common stock issued pursuant thereto (the "Option Shares") for his own account and not with a view to the sale or distribution thereof other than in accordance with the Securities Act of 1933, as amended, (the "Securities Act") or pursuant to this Agreement and that there will be placed on the certificate or certificates representing the Option, and/or the Option Shares or any certificates delivered in substitution for any of the foregoing, a legend stating in substance: "This option and the securities issuable upon exercise of this option are restricted securities, as defined in Rule 144 promulgated under the Securities Act of 1933, as amended, and have not been registered under such Act. Accordingly, in the absence of such registration, these securities may only be sold or transferred pursuant to that rule or under another exemption from registration under said Act." 2.04. No Violation. The execution and delivery of this Agreement by the Purchaser and the consummation by the Purchaser of the transactions contemplated hereby will not violate or conflict with the terms, conditions or provisions of any agreement or obligation or any order, arbitration award, judgment or decree or (to the knowledge of Purchaser) any law, rule or regulation to which the Purchaser is subject, or by which his assets may be bound, which would prohibit the Purchaser from consummating the transactions contemplated hereby. 2.05. No Consents. No approval, consent, order, authorization of or exemption by any governmental authority or any person not a party to this Agreement is required by or with respect to the Purchaser in connection with the execution, delivery and performance of this Agreement by the Purchaser or the consummation by the Purchaser of the transactions contemplated hereby. 2.06. No Brokers or Finders. The Purchaser has not engaged or agreed to pay any commission, fee or like remuneration to any finder, broker or agent in connection with this Agreement, or the performance by the parties of any of their obligations under this Agreement which could result in any obligation of the Seller or the Company. 2.07. No Reliance on Seller. Purchaser represents and warrants that he has made his own independent evaluation of the Company before entering into this Agreement and has not and is not relying on any representations or warranties made by the Seller relating to the Company. In no event shall Purchaser be entitled to assert any claim against Seller, except for any breach by Seller of any of his express representations and warranties contained in this Agreement. III. REPRESENTATIONS AND WARRANTIES OF THE SELLER. The Seller hereby represents and warrants to the Purchaser as follows: CUSIP No. 702145103 Page 13 of 30 3.01. Authority of the Seller. The Seller has the power and authority to enter into and perform his obligations under this Agreement and the Option and to consummate the transactions contemplated hereby and thereby. This Agreement has been duly executed and delivered by the Seller. 3.02. Option Valid and Binding Obligations. This Agreement and the Option constitute the valid and binding obligations of the Seller enforceable against the Seller in accordance with their respective terms, except that the remedy of specific performance and other forms of equitable relief may be subject to equitable defenses and to the discretion of the court before which any proceeding therefor may be brought. 3.03. Option Shares. The Option Shares owned by the Seller are fully paid and non-assessable to the Seller, and are free and clear of any lien, encumbrance or claim whatsoever, other than those created in favor of Purchaser pursuant to the Stock Pledge Agreement. There is no outstanding agreement, option, warrant or right to purchase or otherwise acquire by or from the Seller any shares or securities of the Company or any calls thereon or commitments relating thereto. 3.04. No Violation. The execution and delivery of this Agreement and the Option by the Seller and the consummation by the Seller of the transactions contemplated hereby and thereby will not violate the terms, conditions or provisions of any agreement or obligation or any order, arbitration award, judgment or decree or (to the knowledge of the Seller) any law, rule or regulation to which the Seller is subject, or by which any of his assets may be bound, which would prohibit the Seller from consummating the transactions contemplated hereby and thereby. 3.05. No Consents. No approval, consent, order, authorization of or exemption by any governmental authority or any person not a party to this Agreement or the Option is required by or with respect to the Seller in connection with the execution, delivery and performance of this Agreement or the Option by the Seller or the consummation by the Seller of the transactions contemplated hereby or thereby except for filings required under Federal securities laws or state securities or "blue sky" laws which have been made or which, according to such applicable law, may be made following the date hereof and which the Seller has committed to make within the prescribed time period. 3.06. Solvency. As of the date hereof and after giving effect to the transactions contemplated by this Agreement and the Seller is able to pay his debts as they become due and the value of the Seller's assets valued at fair market value exceeds his liabilities excluding any contingent liabilities on account of pending shareholder suits, copies of which have been supplied to Seller. 3.07. No Brokers or Finders. The Seller has not engaged or agreed to pay any commission, fee or like remuneration to any finder, broker or agent in connection with this Agreement or the Option or the performance by the parties of any of their obligations under this Agreement or the Option which could result in any obligation of the Purchaser. CUSIP No. 702145103 Page 14 of 30 3.08. Seller's Consideration. The Seller acknowledges that he has made the business decision to enter into this Option for the consideration set forth in the recitals. IV. COVENANTS OF THE PARTIES. 4.01. Restrictions on Transferability.(a)The Purchaser covenants and agrees that so long as the Purchaser is the record or beneficial owner of the Option, any Option Shares or any other securities of the Company which are entitled to vote or which are convertible into securities of the Company which are entitled to vote ("Voting Securities") (collectively the Option, upon exercise, the Option Shares and Voting Securities are referred to as the "Securities"), the Purchaser shall not, directly or indirectly (by operation of law or otherwise) sell, assign, mortgage, hypothecate, transfer, pledge, create a security interest in or lien upon, encumber, give or otherwise dispose of any of such Securities (a "Transfer") except: (i) Purchaser's Transfer of all or a portion of the Securities following Purchaser's death by will or intestacy to Purchaser's legal representative, heir or legatee; (ii) Purchaser's Transfer of any or all of the Securities owned by Purchaser as a gift or gifts during Purchaser's lifetime to Purchaser's spouse, children (including stepchildren), grandchildren or a trust or other legal entity for the benefit of Purchaser or any of the foregoing; (iii) sales of Securities pursuant to a distribution to the public, registered under the Securities Act; (iv) sales of Securities pursuant to Rule 144 of the General Rules and Regulations under the Securities Act; (v) sales of any Securities to the Company or the Seller or to any person, corporation, entity or group designated by the Seller; (vi) sales of Securities pursuant to a private placement in accordance with the provisions of Regulation D under the Securities Act in which each of the proposed purchasers agrees in advance in writing to be bound by the provisions of this Agreement as if such person were the Purchaser; or (vii) sales of Securities pursuant to an exemption from registration under the Securities Act. The Purchaser shall notify the Seller, for his records, of all Transfers of all or a portion of the Option as and when the Transfers are effected. Promptly upon Purchaser's written request, Seller shall execute one or more option certificates in the name of one or more of Purchaser's permitted transferees, in such amounts as shall be requested by Purchaser (so long as in the aggregate all of the Option Shares represented by all outstanding option certificates plus all shares purchased upon exercise of option certificates do not exceed 1,000,000 Option Shares, as the same may be adjusted under the terms of this Agreement). CUSIP No. 702145103 Page 15 of 30 4.02. Transferee's Rights. Any transferee of any of Purchaser's rights in the Option or this Agreement shall be deemed to have agreed to be bound by and be subject to all of the provisions of this Agreement (including but not limited to Section 2.07). V. INDEMNITY. 5.01. Indemnification by Seller. Seller shall indemnify Purchaser, his successors and assigns and permitted transferees and hold Purchaser and the foregoing named persons harmless from any charges, claims, damages, settlements, costs, judgments, decrees, expenses (including reasonable counsel fees and expenses), penalties and liabilities of any kind or nature whatsoever which may be sustained or suffered by or secured against Purchaser and/or any of the foregoing named persons, arising out of or as a result of any breach by Seller of any of his covenants, agreements, representations or warranties under any of the provisions of this Agreement. 5.02. Indemnification by Purchaser. Purchaser shall indemnify Seller, his successors and assigns, and hold Seller and the foregoing named persons harmless from any charges, claims, damages, settlements, costs, judgments, decrees, expenses (including reasonable counsel fees and expenses), penalties and liabilities of any kind or nature whatsoever which may be sustained or suffered by or secured against Seller and/or any of the foregoing named persons, arising out of or as a result of any breach by Purchaser of any of his covenants, agreements, representations or warranties under any of the provisions of this Agreement. VI. MISCELLANEOUS. 6.01. Assignment. This Agreement and the Option granted hereby is assignable, in whole or in part, by the Purchaser to the permitted transferees only to the extent permitted in Section 4.01(a). 6.02. Parties in Interest. All of the terms and provisions of this Agreement shall be binding upon, shall inure to the benefit of, and shall be enforceable by and against the respective heirs, devisees, legal representatives, successors, permitted assigns and other permitted transferees of the parties hereto, including without limitation, the Stock Pledge Agreement. 6.03. Survival of Representations. All representations, warranties and agreements made by the Seller and Purchaser in this Agreement shall survive the exercise of the Option. 6.04. Further Assurances. The parties hereto will execute and deliver any and all documents and will take any and all actions in addition to those provided for herein that may be appropriate or necessary to effectuate the provisions of this Agreement, whether at or after the Closing. 6.05. Entire Agreement; Amendments. This Agreement and the other agreements delivered simultaneously herewith, including, without limitation, the Stock Pledge Agreement, contain the entire understanding of the parties with respect to its subject matter. There are no restrictions, agreements, promises, warranties, covenants or undertakings other than those CUSIP No. 702145103 Page 16 of 30 expressly set forth herein. This Agreement may be amended only by a written instrument duly executed by the parties or their respective successors or assigns. 6.06. Headings. The Article and Section headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. 6.07. Notices. All notices and other communications hereunder shall be in writing and shall be deemed given on the date of delivery, if by personal delivery, or on the next day if delivered by overnight mail by a nationally recognized courier service, or on the third business day after mailing if sent by mail (registered or certified mail, postage prepaid, return receipt requested) to the respective parties as follows: to the Seller: Steven Mandell P.O. Box 85 New Vernon, New Jersey 07976 With a copy to Dewey Ballantine LLP 1301 Avenue of the Americas New York, NY 10019 Attention: Stuart Hirshfield, Esq. If to the Purchaser: Jack Futterman 16315 Vintage Oaks Lane Delray Beach, FL 33484 With a copy to Prior to 7/4/99 After 7/4/99 Wolf, Block, Schorr & Solis-Cohen LLP Wolf, Block, Schorr & Solis-Cohen LLP 12th Floor, Packard Building 1650 Arch Street Philadelphia, PA 19102 Philadelphia, PA 19103 Attention: Matthew H. Kamens, Esq. Attention: Matthew H. Kamens, Esq. or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notices of change of address shall be effective only upon receipt. CUSIP No. 702145103 Page 17 of 30 6.08. Arbitration. Any dispute or controversy arising out of or relating to this Agreement, any document or instrument delivered pursuant to, in connection with, or simultaneously with this Agreement, including without limitation, the Stock Pledge Agreement, or any breach of this Agreement or any such document or instrument shall be settled by arbitration to be held in Essex County in New Jersey in accordance with the rules then in effect of the American Arbitration Association or any successor thereto. The arbitrator may grant injunction or other relief in such dispute or controversy and may, if requested by either of the parties, determine which or both of the parties shall bear the costs of the arbitration (other than the costs of each party's legal fees which costs shall be borne by the party incurring same) and, if both parties shall bear the costs, then the allocation of such costs between them. The decision of the arbitrator shall be final, conclusive, and binding on the parties to the arbitration. Judgment may be entered on the arbitrator's decision in any court having jurisdiction, and the parties irrevocably consent to the jurisdiction of the United States District Court for the District of New Jersey for this purpose. In any such arbitration, the parties waive personal service of any process or other papers and agree that service thereof may be made in accordance with Paragraph 6.07. 6.09. Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be an original, but all of which together shall constitute one and the same Agreement. 6.10. Governing Law. This Agreement shall be and construed in accordance with the laws of the State of New York. IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by the parties hereto through duly authorized officers on the day and year first above written. /s/ Steven Mandell ------------------ STEVEN MANDELL /s/ Jack Futterman ------------------ JACK FUTTERMAN CUSIP No. 702145103 Page 18 of 30 EXHIBITS Exhibit A: Option Certificate CUSIP No. 702145103 Page 19 of 30 SCHEDULE A List of share certificates to be pledged: 1. Certificate No. ____ evidencing 500,000 shares 2. Certificate No. ____ evidencing 100,000 shares 3. Certificate No. ____ evidencing 100,000 shares 4. Certificate No. ____ evidencing 100,000 shares 5. Certificate No. ____ evidencing 100,000 shares 6. Certificate No. ____ evidencing 100,000 shares CUSIP No. 702145103 Page 20 of 30 EXHIBIT A THE SECURITIES REPRESENTED HEREBY AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THESE OPTIONS ARE RESTRICTED SECURITIES, AS DEFINED IN RULE 144 PROMULGATED UNDER THE SECURITIES ACT OF 1933 AND HAVE NOT BEEN REGISTERED UNDER SUCH ACT. ACCORDINGLY, IN THE ABSENCE OF SUCH REGISTRATION, THESE SECURITIES MAY ONLY BE SOLD OR TRANSFERRED PURSUANT TO THAT RULE OR UNDER ANOTHER EXEMPTION FROM REGISTRATION UNDER SAID ACT. THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO, AND MAY BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF ONLY UPON COMPLIANCE WITH THE TERMS AND PROVISIONS OF THAT CERTAIN OPTION AGREEMENT DATED JUNE 8, 1999, BY AND BETWEEN STEVEN MANDELL AND JACK FUTTERMAN, A COPY OF WHICH IS ON FILE AT THE OFFICE OF THE SECRETARY OF PARTY CITY CORPORATION. OPTION CERTIFICATE 1,000,000 SHARES OF COMMON STOCK STEVEN MANDELL, having an address at P.O. Box 85, New Vernon, New Jersey 07976, hereby certifies that, for value received, Jack Futterman, with a residence at 16315 Vintage Oaks Lane, Delray Beach, Florida 33484, and/or any of his permitted transferees (the "Option Holder"), is entitled, subject to the terms of this Option Certificate, to purchase from Steven Mandell, in whole or in part, at any time during the five-year period commencing on the date hereof (the "Commencement Date") and ending on the fifth anniversary from the Commencement Date, 1,000,000 shares of the common stock, par value $.01 per share (the "Common Stock") of Party City Corporation (the "Company"), at a purchase price per share equal to $3.00 per share (the "Purchase Price"). The number of shares of Common Stock that may be purchased upon the exercise of the Option (the "Option Shares") and payment of the Purchase Price, as set forth in the preceding sentence, are subject to adjustment as provided in this Option Certificate. 1. Exercise of Option. This Option Certificate may be exercised at any time or from time to time, in whole or in part, during the period commencing on the Commencement Date and ending at 5:00 p.m. on the fifth anniversary of the Commencement Date by delivery of this Option Certificate to Steven Mandell at the address listed above (or such other address as Steven Mandell may designate in writing to the Option Holder in accordance with Section 8), together with an Exercise Form in the form attached hereto and payment in an amount equal to the Purchase Price multiplied by the number of shares being acquired (the "Aggregate Purchase Price"). Notwithstanding the foregoing, the Option Holder may not exercise the Option evidenced hereby at any time for less than 100,000 Option Shares (as the same may be adjusted CUSIP No. 702145103 Page 21 of 30 under the terms of Section 4 hereof) and the Option Holder, together with any and all other Option Holders, may not exercise the Option evidenced by this Option Certificate and by any other Option Certificate issued pursuant to the Option Agreement dated June 8, 1999, between Steven Mandell and Jack Futterman, in the aggregate, more than six (6) times over the course of the five-year term, unless the same shall be waived in writing by Steven Mandell. Payment shall be made by delivery to Steven Mandell of a certified check or bank check issued by any domestic office of a bank organized under the laws of the United States of America or any state thereof, which has net assets of not less than $100 million, payable to the order of Steven Mandell in an amount equal to the Aggregate Purchase Price. As promptly as practicable after any exercise of the Option evidenced by this Option Certificate, Steven Mandell shall do all things necessary or appropriate and execute and deliver all documents and instruments necessary or appropriate, including without limitation, stock powers duly executed, to cause a certificate or certificates registered in the name of the Option Holder for the shares of Common Stock so purchased to be delivered to the Option Holder. If the Option Holder exercises the Option to purchase fewer than all the Option Shares subject to this Option Certificate, Steven Mandell shall, on the date of delivery of the certificate representing the Option Shares so purchased, deliver to the Option Holder a new Option Certificate evidencing an option to purchase the number of Option Shares resulting from the subtraction of the number of Option Shares purchased from the number of Option Shares evidenced by this Option Certificate immediately prior to the exercise. 2. Fractional Shares and Options. The Option Holder may not exercise the option to purchase a fraction of an Option Share, but may purchase only an integral number of Option Shares. If, at the time of exercise of the Options evidenced by this Option Certificate, a fractional share of the Common Stock would be deliverable to the Option Holder, Steven Mandell, at his option, may pay the Option Holder an amount equal to the current market price of the Common Stock on the date of exercise multiplied by the same fraction. 3. Transferability. By acceptance of this Option, (a) the Option Holder confirms his representations and agreements set forth in the Option Agreement of even date herewith between Steven Mandell and the Option Holder relating to the Option Holder's investment intent and restrictions on transferability of the Options and the Option Shares and (b) any transferee of this Option agrees to be subject to the Option Agreement as if he or it were the Purchaser thereunder. 4. Adjustment in Number of Shares and Purchase Price. If the total number of outstanding shares of Common Stock of the Company is hereafter changed by reason of any stock dividend, stock split, combination, subdivision or recapitalization, an appropriate adjustment will be made in the number of shares that can be purchased hereunder and the exercise price. Upon the subdivision or combination of the outstanding shares of Common Stock or the issuance of a stock dividend, payable in shares, to holders of Common Stock, the Purchase Price shall be adjusted by multiplying the Purchase Price by a fraction, the numerator of which is equal to the number of issued and outstanding shares of Common Stock immediately prior to such subdivision, combination or stock dividend, and the denominator of which is equal to the number of issued and outstanding shares of Common Stock immediately following such subdivision, CUSIP No. 702145103 Page 22 of 30 combination or stock dividend. If the Company shall be reorganized, consolidated, or merged with another corporation, or if all or substantially all of the assets of the Company shall be sold or exchanged, or if there is a recapitalization, stock split, stock dividend, combination of shares or similar change in the Company's shares, the Purchaser shall at the time of issuance of the stock under such corporate event be entitled to receive, upon the exercise of his or her Option, the same number and kind of shares of stock or the same amount of property, cash or securities as the Purchaser would have been entitled to receive upon the occurrence of any such corporate event as if the Optionee had been, immediately prior to such event, the holder of the number of shares covered by his or her Option so exercised. 5. No Rights as Stockholder. The Option Holder, by virtue of holding the Option evidenced by this Option Certificate, shall not be entitled to vote or receive dividends or be deemed to be or be entitled to any rights of a stockholder of the Company and the Option Holder shall have no rights other than those specifically set forth herein. 6. Complete Agreement; Modification and Termination. This Option Certificate contains, or otherwise makes reference to, a complete statement of all the arrangements with respect to the Options evidenced by this Option Certificate and cannot be changed or terminated orally. 7. Notice. All notices and other communications relating to the Options shall be in writing and shall be deemed to have been duly given when delivered personally or mailed (registered or certified mail, postage prepaid, return receipt requested) as follows: if to the Option Holder, then to Jack Futterman 16315 Vintage Oaks Lane Delray Beach, FL 33484 if to Steven Mandell, to: Steven Mandell P.O. Box 85 New Vernon, New Jersey 07976 or to such other address as the party to whom notice is to be given shall have previously furnished the other party in writing in the manner set forth above. 8. Governing Law. The Options evidenced by this Option Certificate shall be governed by and construed in accordance with the laws of the State of New York. 9. Headings. The headings in this Option Certificate are solely for convenience of reference and shall not affect the meaning or interpretation of this Option Certificate. CUSIP No. 702145103 Page 23 of 30 Dated: June 8, 1999 /s/ Steven Mandell ------------------ STEVEN MANDELL EXERCISE FORM (To be executed by the Option Holder to exercise the Option evidenced by the attached Option Certificate) Mr. Steven Mandell P.O. Box 85 New Vernon, New Jersey 07976 Dear Mr. Mandell: The undersigned, pursuant to and in accordance with the terms and conditions of the option certificate (the "Option Certificate") issued by you, on ____________________, hereby irrevocably exercises his option evidenced by the Option Certificate, and requests that a certificate for ____ shares of Party City Corporation Common Stock, par value $____ per share ("Common Stock"), issuable upon the exercise of the option be issued in the name of the undersigned and delivered to the undersigned at the address stated below. Pursuant to Section 1 of the Option Certificate and in complete satisfaction of the Aggregate Purchase Price for the shares of Common Stock specified herein issuable upon the exercise of the option, the undersigned is delivering to you herewith, a certified or bank cashier's check payable to your order in the amount of $__________. The undersigned agrees that the undersigned shall not offer, sell, transfer or otherwise dispose of any shares of Common Stock issuable upon the exercise of the option evidenced by the Option Certificate except in accordance with the terms of that certain Option Agreement dated as of June 8, 1999, by and between Jack Futterman and Steven Mandell. Dated: By:___________________________ Registered Holder Address: EX-99.(II) 3 STOCK PLEDGE AGREEMENT, DATED JUNE 8, 1999 CUSIP No. 702145103 Page 25 of 30 Exhibit II STOCK PLEDGE AGREEMENT This STOCK PLEDGE AGREEMENT (this "Agreement"), dated as of June 8, 1999, is by and between STEVEN MANDELL, having an address at P.O. Box 85, New Vernon, New Jersey 07976 ("Pledgor"), and JACK FUTTERMAN, residing at 16315 Vintage Oaks Lane, Delray Beach, Florida 33484 ("Secured Party"). WITNESSETH: WHEREAS, Secured Party and Pledgor have entered into that certain Option Agreement (the "Option") of even date, whereby Pledgor has granted to Secured Party an option to purchase 1,000,000 shares (the "Shares") of Pledgor's common stock, par value $.01 per share ("Common Stock"), of Party City Corporation, a Delaware corporation (the "Company") at an exercise price of $3.00 per share (as more fully described in the Option); and WHEREAS, as security for performance of the Option and under any other instrument, document, or agreement executed and delivered by Pledgor pursuant to the Option (if any, the "Other Documents"), Pledgor has agreed to pledge and grant a lien and security interest to Secured Party in the Shares and Pledgor has agreed to execute and deliver this Agreement to Secured Party. NOW, THEREFORE, in consideration of the foregoing premises and for other good and valuable consideration, the receipt of which is hereby acknowledged, each party intending to be legally bound hereby, the Pledgor and the Secured Party hereby agree as follows: 1. Definitions. Unless the context otherwise requires, all terms used but not expressly defined herein shall have the meanings, if any, given to them in the Option or, if they are not defined in the Option but are defined in the Uniform Commercial Code, as enacted in New York (the "Code"), they shall have the same meaning herein as in the Code. 2. Pledge of the Pledged Collateral and Adjustments. (a) As security for the performance of the Pledgor's obligations under the Option (collectively, the "Obligations"), Pledgor hereby pledges, delivers and sets over unto Secured Party, and grants a lien and security interest to Secured Party, in the following (collectively, the "Pledged Collateral"): (i) the Shares; (ii) Pledgor's rights in any stock dividend, reclassification, readjustment or other change declared or made by the Company with respect to or affecting the Shares; (iii) Pledgor's rights in any subscription warrants or any other rights or options issued by the Company in connection with the Shares; and CUSIP No. 702145103 Page 26 of 30 (iv) all proceeds of any of the foregoing upon sale, exchange or other disposition of any of the foregoing (but excluding cash payments or distributions made by the Company with respect to any of the foregoing as a result of owning, rather than disposing of, any of the foregoing-which payments or distributions are referred to herein as "Distributions"). (b) All new, substituted and additional shares (such shares to be included within the definition ofthe Shares hereunder), warrants, rights, options or other securities, issued by reason of any of the foregoing, in respect of the Pledged Collateral, shall be immediately delivered to and held by (or otherwise retained by) the Secured Party under the terms of this Pledge Agreement and shall constitute Pledged Collateral hereunder. (c) Simultaneously with the execution of this Pledge Agreement, Pledgor hereby delivers to the Secured Party the original stock certificate(s) evidencing the Shares, as described in more detail on Schedule A hereto, accompanied by stock powers in the form of Exhibit A attached hereto and made a part hereof, duly executed in blank for all of the Shares. (d) In addition, the Pledgor shall, upon request of the Secured Party, deliver to the Secured Party such financing statements as may be necessary or desirable, in the reasonable opinion of the Secured Party to perfect the security interest created herein. Pledgor hereby authorizes Secured Party to file, and appoints Secured Party his attorney-in-fact for the purpose of executing and filing financing statements or continuation statements to the extent permitted by applicable law. 3. Power of Attorney. (a) The Secured Party shall have no obligation with respect to the Pledged Collateral or any other property held or received by it hereunder except to use reasonable care in the custody thereof to the extent required by law. The Secured Party may hold the Pledged Collateral in the form in which it is received by it. (b) The Pledgor, to the full extent permitted by law, hereby constitutes and irrevocably appoints the Secured Party (and any officer or agent of the Secured Party, with full power of substitution and revocation) as the Pledgor's true and lawful attorney-in-fact, in the Pledgor's stead and in the name of the Pledgor, to transfer, upon the occurrence of an Event of Default, the Pledged Collateral on the books of the Company, in whole or in part, to the name of the Secured Party or such other Person or Persons as the Secured Party may designate in accordance with the terms of the Option and, upon the occurrence of an Event of Default, to take all such other and further actions as the Pledgor could have taken with respect to the Pledged Collateral and as the Secured Party in its reasonable discretion determines to be necessary or appropriate to accomplish the purposes of this Agreement and the Option. (c) The limited powers of attorney granted pursuant to this Agreement and all authority hereby conferred are granted and conferred solely to protect the Secured Party's interests in the Pledged Collateral and shall not impose any duty upon the attorney-in-fact to exercise such powers. Such powers of attorney shall be irrevocable prior to the performance in full of the Obligations or expiration of the Option, and shall CUSIP No. 702145103 Page 27 of 30 not be terminated prior thereto or affected by any act of the Pledgor or other Persons or by operation of law. 4. Voting Rights, Dividends, Etc. During the term of this Pledge Agreement, and except as otherwise provided in this Section 4, (a) Pledgor shall have the right to vote the Shares on all corporate questions in a manner not inconsistent with the terms of this Pledge Agreement and any other agreement, instrument or document executed pursuant thereto or in connection therewith and (b) all Distributions, if any, in respect of the Pledged Collateral, shall be the property of the Pledgor. Any Distributions received by Secured Party prior to either the exercise of the Option with respect to any Shares or prior to the occurrence of an Event of Default shall be promptly forwarded to Pledgor. After the Option has been duly exercised, including payment of the exercise price, (x) the Secured Party may, at the Secured Party's option and following written notice from the Secured Party to Pledgor, exercise all voting powers pertaining to the Pledged Collateral, and Pledgor hereby grants Secured Party an irrevocable proxy, coupled with an interest, therefor, and (y) all Distributions, if any, in respect of the Pledged Collateral, shall be the property of the Secured Party. Any Distributions received by Pledgor after either the exercise of the Option with respect to any Shares, including payment of the exercise price therefor, or after the occurrence of an Event of Default shall be promptly forwarded to Secured Party. 5. Pledgor's Covenants, Representations and Warranties. (a) Pledgor reaffirms his representations, warranties and covenants set forth in the Option Agreement; and (b) Pledgor agrees to defend the Pledged Collateral from all claims, liens, suits, or asserted rights of all other parties to the Pledged Collateral arising out of an action or omission of Pledgor. 6. Return of the Pledged Collateral Upon Termination; Termination of Financing Statement. The Pledged Collateral shall be released, in whole or in part, from the lien created by this Agreement to the extent that the Secured Party exercises its Option. Upon expiration of the Option, Secured Party shall cause to be transferred to Pledgor all of the Pledged Collateral then in its possession, to the extent Secured Party has not exercised its option under the terms of the Option or taken, sold or otherwise realized upon the same pursuant to its rights hereunder. Immediately following the termination of the lien created by this Agreement, Secured Party shall execute and deliver to Pledgor, at Secured Party's expense, such documents as Pledgor may reasonably request to release the Pledged Collateral from the lien of this Agreement and shall cause any Pledged Collateral remaining in its possession to be transferred to Pledgor or his nominee in accordance with Pledgor's instructions. 7. Event of Default. The following event shall constitute an Event of Default hereunder: a failure by Pledgor to perform his obligations under the Option if such failure is coupled with an exercise of the Option including payment of the exercise price by Secured Party or his permitted transferee pursuant to the provisions of the Option. CUSIP No. 702145103 Page 28 of 30 8. Remedies Upon Default. Upon the occurrence of an Event of Default Secured Party shall have (a) the right to recover from Seller all actual damages arising as a result of such Event of Default, and (b) all of the rights of a secured party under the Code, including without limitation, seizure of, foreclosure upon and/or sale of the Pledged Collateral. The proceeds of any such sale shall be the property of Secured Party. Notwithstanding the foregoing, Pledgor irrevocably agrees that Secured Party may, in lieu of foreclosure upon and sale of the Pledged Collateral, seize and retain the Pledged Collateral upon the occurrence of an Event of Default. 9. Transfer and Assignment. Pledgor may not transfer its rights or liabilities under this Pledge Agreement to any other person without the express written consent of the Secured Party. Secured Party may transfer its rights and obligations solely to the permitted transferees as set forth in the Option, on written notice to Pledgor. 10. Further Assurances. Pledgor agrees that it will cooperate with the Secured Party and will execute and deliver, or cause to be executed and delivered, all such other stock powers, proxies, instruments and documents, and will take all such other action, including, without limitation, the execution of financing statements, as the Secured Party may reasonably request from time to time in order to carry out the provisions and purposes of this Pledge Agreement. 11. Miscellaneous. (a) No Waivers. No action, failure to act, or knowledge of Secured Party shall be deemed to constitute a waiver of any power, right, or remedy hereunder, nor shall any single or partial exercise thereof preclude any further exercise thereof or the exercise of any other power, right, or remedy. The failure, or delay of Secured Party at any time or times to require performance of, or to exercise its rights with respect to, any representation, warranty, covenant, or other term or provision of this Pledge Agreement in no manner shall affect its right at a later time to enforce any such provision. No notice to or demand on a party in any case shall entitle such party to any other or further notice or demand in the same, similar, or other circumstances. (b) Amendment. This Pledge Agreement shall not be amended nor shall any right hereunder be deemed waived except by a written agreement expressly setting forth the amendment or waiver and signed by the party against whom or which such amendment or waiver is sought to be charged. (c) Counterparts. This Pledge Agreement may be executed by the parties on any number of separate counterparts, and by each party on separate counterparts; each counterpart shall be deemed an original instrument; and all of the counterparts taken together shall be deemed to constitute one and the same instrument. (d) Choice of Law. This Pledge Agreement and any document or instrument executed in connection herewith shall be governed by, and construed and interpreted in accordance with, the internal laws of the State of New York. (e) No Strict Construction. The language used in this Pledge Agreement shall be deemed to be the language chosen by the parties hereto to express their mutual intent, and no rule of strict construction will be applied against any person. CUSIP No. 702145103 Page 29 of 30 IN WITNESS WHEREOF, Pledgor and Secured Party have executed this Pledge Agreement as of the day and year first above written. SECURED PARTY: PLEDGOR: /s/ Jack Futterman /s/ Steven Mandell - ------------------ ------------------ JACK FUTTERMAN STEVEN MANDELL CUSIP No. 702145103 Page 30 of 30 STOCK POWER FOR VALUE RECEIVED, the undersigned does hereby sell, assign and transfer to __________________________, [_________] shares of common stock, $.01 par value per share, of Party City Corporation, a Delaware corporation, represented by Certificate No. [___] (the "Stock"), standing in the name of the undersigned on the books of said corporation and does hereby irrevocably constitute and appoint _________________________ as the undersigned's true and lawful attorney, for him and in his name and stead, to sell, assign and transfer all or any of the Stock, and for that purpose to make and execute all necessary acts of assignment and transfer thereof; and to substitute one or more persons with like full power, hereby ratifying and confirming all that said attorney or substitute or substitutes shall lawfully do by virtue hereof. Dated: ______________________ ---------------------------- Name: STEVEN MANDELL Its: Sole General Partner -----END PRIVACY-ENHANCED MESSAGE-----