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 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/ Xxxxxx Xxxxxxx
-----------------------------
Xxxxxx Xxxxxxx
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/ Xxxx Xxxxxxxxx
Xxxx Xxxxxxxxx
