Party City Holdco has adopted the Amended and Restated 2012 Omnibus Equity Incentive Plan (the “2012 Plan”) under which it can grant incentive awards in the form of stock appreciation rights, restricted stock, restricted stock units and common stock options to certain directors, officers, employees and consultants of Party City Holdco and its affiliates. A committee of Party City Holdco’s Board of Directors, or the Board itself in the absence of a committee, is authorized to make grants and various other decisions under the 2012 Plan. The maximum number of shares reserved under the 2012 Plan is 15,316,000 shares.

Party City Holdco grants time-based options to key eligible employees and outside directors. In conjunction with the options, the Company recorded compensation expense of $796, $1,319, and $1,744 during the years ended December 31, 2020, December 31, 2019, and December 31, 2018, respectively.

The fair value of time-based options granted during the year ended December 31, 2020 was estimated on the grant date using a Black-Scholes option valuation model based on the assumptions in the following table:

As Party City Holdco’s stock only recently started trading publicly, the Company determined volatility based on the average historical volatility of guideline companies. Additionally, as there is not sufficient historical exercise data to provide a reasonable basis for determining the expected terms of the options, the Company estimated such expected terms based on the assumption that options will be exercised at the mid-point of the vesting of the options and the completion of the contractual lives of such options.

The Company has based its estimated forfeiture rate on historical forfeitures for time-based options as the number of options given to each of the various levels of management is principally consistent with historical grants and forfeitures are expected to be materially consistent with past experience.

The Company’s time-based options principally vest 20% on each anniversary date. The Company records compensation expense for such options on a straight-line basis. As of December 31, 2020, there was $849 of unrecognized compensation cost, which will be recognized over a weighted-average period of approximately 30 months.

During 2013, Party City Holdco granted performance-based stock options to key employees and independent directors. For those performance-based options, vesting was contingent on Thomas H. Lee Partners, L.P. (“THL”) achieving specified investment returns when it sold its entire ownership stake in Party City Holdco. In June 2020, THL distributed its remaining shares. At the time of the THL distribution, there were 2,539,600 performance options outstanding with an average grant date fair value of $3.09. None of the performance-based options vested as the specified investment returns were not attained. The Company recorded compensation expense of $7,847 for the year ended December 31, 20202020

As Party City Holdco’s stock was not publicly traded when the performance-based options were granted, the Company determined volatility based on the average historical volatility of guideline companies.

The following table summarizes the changes in outstanding stock options for the years ended December 31, 2018, December 31, 2019, and December 31, 2020.

	Options			Average Exercise Price		Average Fair Value of Time-Based Options at Grant Date		Aggregate Intrinsic Value			Weighted Average Remaining Contractual Term (Years)
Outstanding at December 31, 2017		8,024,761
Granted		187,080		$	14.63		4.98
Exercised		(425,505	)		5.33
Forfeited		(859,162	)		7.84
Outstanding at December 31, 2018		6,927,174			9.39				4,089			5.2
Granted		337,000			6.43		2.16
Exercised		(215,300	)		5.33
Forfeited		(730,157	)		13.00
Outstanding at December 31, 2019		6,318,717			8.95				41,784			4.4
Granted		300,000			3.67		5.04
Exercised		(114,000	)		5.04
Forfeited		(3,216,984	)		5.99
Outstanding at December 31, 2020		3,287,733			7.63				(41,545	)		3.3
Exercisable at December 31, 2020		2,952,075			10.49				(28,698	)		3.8
Expected to vest at December 31, 2020 (excluding performance-based options)		329,411		$	8.40			$	(2,346	)		7.7

The intrinsic value of options exercised was $332, $1,254 and $3,351 for the years ended December 31, 2020, December 31, 2019, and December 31, 2018, respectively. The fair value of options vested was $254, $2,118, and $2,819, during the years ended December 31, 2020, December 31, 2019, and December 31, 2018, respectively.

During 2018, the Company started granting restricted stock and restricted stock units to certain executives, senior leaders and the Company’s independent directors. To the extent that the awards vest, the participants receive shares of the Company’s stock.

Of the awards that were granted, 358,506 awards vest solely based on service conditions. To the extent that such awards vest, one share of stock is issued for each award.

Additionally, the Company granted awards which vest if certain cash flow and earnings per share targets are met. Depending on the achievement of such targets, a maximum of 2,834,390 shares could be issued due to such awards.

The service-based awards vested 1/3 on January 1, 2019 and will vest 1/3 each on January 1, 2020 and January 1, 2021. During the years ended December 31, 2020 and December 31, 2019, the Company recorded $2,071 and $2,033 of compensation expense related to the service-based awards, respectively.

The performance-based awards vest if certain cash flow and earnings per share targets are met for the three-year period from January 1, 2018 to December 31, 2020. The Company recognizes compensation expense for such awards if it is probable that the performance conditions will be achieved. Based on the Company’s results for the year ended December 31, 2019 and December 31, 2018 and its projections for the year ending December 31, 2020, as of December 31, 2019 the Company concluded that it was not probable that such performance conditions will be met and, therefore, the Company did not record any compensation expense for the awards during the years ended December 31, 2019 and December 31, 2018.

The Company has based its estimated forfeiture rate for the restricted stock units and restricted stock on historical forfeitures for the Company’s time-based stock options as the number of awards given to each of the various levels of management is principally consistent with historical stock option grants and forfeitures are expected to be materially consistent with past experience.

As of December 31, 2020 and December 31, 2019, there were $1,491 and $2,158 of unrecognized compensation cost for the service-based awards, respectively.

On July 18, 2020, 6,448,276 performance-based restricted stock units ("PRSUs") and Restricted Cash awards were granted to certain executive officers and other employees. The performance period is three years from the grant date. The PRSUs and Restricted Cash become earned in a given period if the volume weighted average of the fair market value per share of the Common Stock meets or exceeds $2.50, $5.00, $7.50, and $10.00, respectively, for a period of not less than 90 consecutive trading days on the New York Stock Exchange and are subject to up to 2 years service-vesting after the achievement of these thresholds. The PRSUs and Restricted Cash awards are measured at fair value based on Monte Carlo simulation models, based on the assumptions in the table below. The PRSUs will be settled in Party City common stock and are accounted for as equity awards and the Restricted Cash will be settled in cash and are accounted for as liability awards.

At December 31, 2020, there was $6,196 of total unrecognized compensation cost related to unvested PRSUs, which is expected to be recognized over 3.0 years.

During the year ended December 31, 2020, the Company recorded $1,460 of compensation expense related to these awards.