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 Xxxx Xxxxxxxxx
(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:
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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/ Xxxxxx X. Xxxxxx
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Name: Xxxxxx X. Xxxxxx
Title: Senior Vice President and CEO
/s/ Xxxx Xxxxxxxxx
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Xxxx Xxxxxxxxx
