PARTY CITY CORPORATION
INCENTIVE STOCK OPTION AGREEMENT
PARTY CITY CORPORATION, a Delaware corporation (the "Company"), has granted
to Xxxx Xxxxxxxxx (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/Xxxxx X. Xxxxxx
---------------------------
Name: Xxxxx X. Xxxxxx
------------------------
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/Xxxx Xxxxxxxxx
-----------------
Xxxx Xxxxxxxxx
