<PAGE> 1
As filed with the Securities and Exchange Commission on January 9, 1997.
Registration No. 33-
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-8
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
PARTY CITY CORPORATION
(Exact name of issuer as specified in its charter)
<TABLE>
<S> <C>
Delaware 22-3033692
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
</TABLE>
400 Commons Way, Rockaway, New Jersey 07866
(Address of Principal Executive Offices) (Zip Code)
Party City Corporation
Amended and Restated 1994 Stock Option Plan and Stock Option
Agreements with Non-Employee Directors
(Full title of the plan)
Steven Mandell, Party City Corporation,
400 Commons Way, Rockaway, New Jersey 07866
(Name and address of agent for service)
(201) 983-0888
(Telephone number, including area code, of agent for service)
<PAGE> 2
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Proposed Proposed
Title of maximum maximum
securities Amount offering aggregate Amount of
to be to be price per offering Registration
registered registered (1) share price Fee
---------- -------------- ----- ----- ---
<S> <C> <C> <C> <C>
Common Stock $.01
par value per share, 90,000 $ 2.50(2) $225,000 $ 68.19
issuable upon
exercise of Plan
Options
Common Stock,
$.01 par value per 8,333 $ 3.50(3) $ 29,166 $ 8.39
share, issuable upon
exercise of Plan
Options
Common Stock,
$.01 par value per 90,000 $ 10.00(4) $900,000 $ 272.73
share, issuable upon
exercise of Plan
Options
Common Stock,
$.01 par value per
share, issuable upon 500 $ 15.00(5) $ 7,500 $ 2.27
exercise of Plan
Options
Common Stock,
$.01 par value per 50,000 $ 15.25(6) $762,500 $ 231.06
share, issuable upon
exercise of Plan
Options
Common Stock,
$.01 par value per 500 $ 17.00(7) $ 8,500 $ 2.58
share, issuable upon
exercise of Plan
Options
</TABLE>
2
<PAGE> 3
<TABLE>
<S> <C> <C> <C> <C>
Common Stock,
$.01 par value per 3,000 $ 17.50(8) $ 52,500 $ 45.91
share, issuable upon
exercise of Plan
Options
Common Stock,
$.01 par value per 36,000 $ 17.75(9) $639,000 $ 193.64
share, issuable upon
exercise of Plan
Options
Common Stock,
$.01 par value per
share, issuable upon 15,000 $ 18.50(10) $277,500 $ 84.09
exercise of Plan
Options
Common Stock,
$.01 par value per 5,000 $ 20.00(11) $100,000 $ 30.31
share, issuable upon
exercise of Plan
Options
Common Stock,
$.01 par value per
share, issuable upon 5,000 $ 20.50(12) $102,500 $ 31.06
exercise of Plan
Options
Common Stock,
$.01 par value per 15,000 $ 21.00(13) $315,000 $ 95.46
share, issuable upon
exercise of Plan
Options
Common Stock,
$.01 par value per 40,000 $ 14.50(14) $580,000 $ 175.76
share, issuable upon
exercise of Stock
Option Agreement
granted to Non-
Employee Directors
</TABLE>
3
<PAGE> 4
<TABLE>
<S> <C> <C> <C> <C>
Common Stock,
$.01 par value per 245,000 $16.19(15) $3,966,550 $1,201.99
share, issuable upon
exercise of Plan
Options
TOTAL $7,965,666 $2,443.44
</TABLE>
(1) The aggregate amount of securities registered hereunder is 603,333 shares of
Common Stock. Pursuant to Rule 416 promulgated under the Securities Act of 1933,
as amended (the "Act"), this Registration Statement covers such additional
shares of Common Stock to be offered or issued to prevent dilution as a result
of future stock splits, stock dividends or similar transactions.
(2) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(h), based on the exercise price of $2.50 per share of
Common Stock for shares subject to options granted under the Plan.
(3) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(h), based on the exercise price of $3.50 per share of
Common Stock for shares subject to options granted under the Plan.
(4) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(h), based on the exercise price of $10.00 per share of
Common Stock for shares subject to options granted under the Plan.
(5) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(h), based on the exercise price of $15.00 per share of
Common Stock for shares subject to options granted under the Plan.
(6) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(h), based on the exercise price of $15.25 per share of
Common Stock for shares subject to options granted under the Plan.
(7) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(h), based on the exercise price of $17.00 per share of
Common Stock for shares subject to options granted under the Plan.
(8) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(h), based on the exercise price of $17.50 per share of
Common Stock for shares subject to options granted under the Plan.
(9) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(h), based on the exercise price of $17.75 per share of
Common Stock for shares subject to options granted under the Plan.
(10) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(h), based on the exercise price of $18.50 per share of
Common Stock for shares subject to options granted under the Plan.
(11) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(h), based on the exercise price of $20.00 per share of
Common Stock for shares subject to options granted under the Plan.
(12) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(h), based on the exercise price of $20.50 per share of
Common Stock for shares subject to options granted under the Plan.
(13) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(h), based on the exercise price of $21.00 per share of
Common Stock for shares subject to options granted under the Plan.
4
<PAGE> 5
(14) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(h), based on the exercise price of $14.50 per share of
Common Stock for shares subject to options granted pursuant to stock option
agreements with the Registrant's non-employee Directors.
(15)The fee with respect to these shares has been calculated pursuant to
paragraphs (h) and (c) of Rule 457 upon the basis of $16.19, the average of the
high and low price per share of the Registrant's Common Stock on January 7,
1997, a date within five (5) business days prior to the date of filing of this
Registration Statement, as reported by the National Association of Securities
Dealers' Automated Quotation System.
5
<PAGE> 6
PART I
INFORMATION REQUIRED IN THE SECTION 10(A) PROSPECTUS
ITEM 1. PLAN INFORMATION.
The documents containing the information specified in this Item 1 will
be sent or given to employees as specified by Rule 428(b)(1). In accordance with
the rules and regulations of these Securities and Exchange Commission (the
"Commission") and the instructions to Form S-8, such documents are not being
filed with the Commission either as part of this Registration Statement or as a
Prospectus or Prospectus Supplement pursuant to Rule 424.
ITEM 2. REGISTRATION INFORMATION AND EMPLOYEE PLAN ANNUAL INFORMATION.
The documents containing the information specified in this Item 2 will
be sent or given to employees as specified by Rule 428(b)(1). In accordance with
the rules and regulations of the Commission and the instructions to Form S-8,
such documents are not being filed with the Commission either as part of this
Registration Statement or as a Prospectus or Prospectus Supplement pursuant to
Rule 424.
(I-1)
<PAGE> 7
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
ITEM 3. DOCUMENTS INCORPORATED BY REFERENCE
The following documents filed with the Commission (File No. 0-27826
pursuant to the Exchange Act are incorporated herein by reference:
1. The Company's Prospectus dated March 26, 1996 filed with the
Commission pursuant to Rule 424(b) of the Act.
2. The Company's Quarterly Report on Form 10-Q for each of the
quarters ended March 31, 1996, June 30, 1996 and September 30,
1996.
3. The description of the Company's Common Stock as described in
Form 8-A filed with the Commission under the Exchange Act, on
February 23, 1996.
All documents subsequently filed by the Registrant with the Commission
pursuant to Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act after the
date hereof and prior to the filing of a Post-Effective Amendment which
indicates that all securities offered have been sold or which deregisters all
securities then remaining unsold, shall be deemed to be incorporated by
reference and to be a part hereof from the date of filing of such documents.
(II-1)
<PAGE> 8
ITEM 4. DESCRIPTION OF SECURITIES
The description of the Company's Common Stock is hereby incorporated by
reference to the description thereof contained in the Company's Registration
Statement under Section 12(g) of the Exchange Act on Form 8-A as filed with the
Commission on February 23, 1996.
TRANSFER AGENT
The Transfer Agent for the Company's Common Stock is First City
Transfer Company.
ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL
The balance sheet of the Company as of December 31, 1995 and 1996 and
the statements of income, changes in stockholders' equity and cash flows for the
years ended December 31, 1995, 1994 and 1993, incorporated by reference in this
Registration Statement have been audited by Deloitte & Touche LLP, independent
auditors, whose report thereon is included in the Company's Prospectus dated
March 26, 1996 (the "Prospectus"). These financial statements and schedules have
been incorporated herein by reference in reliance on the report of Deloitte &
Touche LLP, given on its authority as an expert in accounting and auditing.
The legality of the Common Stock to be offered hereby has been passed
upon for the Company by St. John & Wayne, Two Penn Plaza East, Newark, New
Jersey 07105. John J. Oberdorf, a director of the Company, and William P.
Oberdorf, John Oberdorf's brother, are both Partners in the law firm of St. John
& Wayne. John Oberdorf owns 12,000 shares of Common Stock of the Company and has
option to purchase an additional 10,000 shares of Common Stock. William Oberdorf
owns 25,000 shares of Common Stock of the Company. In addition, other members of
St. John & Wayne own an aggregate of 1,500 shares of the Company's Common Stock.
ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Pursuant to the provisions of the Delaware General Corporation Law
("Delaware GCL"), the Company has adopted provisions in its Certificate of
Incorporation and Bylaws which require the Company to indemnify its officers and
directors to the fullest extent permitted by law, and eliminate the personal
liability of its Directors to the Company or its stockholders for monetary
damages for breach of their duty of due care except (i) for any breach of the
duty of loyalty; (ii) for acts or omissions not in good faith or which involve
intentional misconduct or knowing violations of law; (iii) for liability under
Section 174 of the Delaware GCL (relating to certain unlawful dividends, stock
repurchases or stock redemptions); or (iv) for any transaction from which the
Director derived any improper personal benefit. In addition, the Company's
Certificate of Incorporation and Bylaws require the Company to indemnify its
Directors and officers, permit the Company to insure its Directors and officers
and permit the Company to indemnify or
(II-2)
<PAGE> 9
insure its employees or agents to the fullest extent permitted by Delaware law,
including those circumstances in which indemnification would otherwise be
discretionary, except that the Company shall not be obligated to advance
expenses or to indemnify any such person (i) with respect to proceedings, claims
or actions initiated or brought voluntarily by any such person and not be way of
defense, (ii) for any amounts paid in settlement or an action indemnified
against by the Company without the prior written consent of the Company or (iii)
in connection with any event in which the person did not act in good faith and
in a manner reasonably believed to be in or not opposed to the best interest of
the Company.
In addition to such other rights of indemnification as they may have as
directors or as members of the committee (the "Committee") administering the
Company's Amended and Restated 1994 Stock Option Plan (the "Plan"), under the
terms of the Plan the members of the Committee shall be indemnified by the
Company against the reasonable expenses, including attorney's fees, actually and
necessarily incurred in connection with the defense of any action, suit or
proceeding, or in connection with any appeal therein, to which they or any of
them may be a party by reason of any action taken or failure to act under or in
connection with the Plan or any option granted thereunder, and against all
amounts paid by them in settlement thereof (provided such settlement is approved
by independent legal counsel selected by the Company) or paid by them in
satisfaction of a judgment in any such action, suit or proceeding, except in
relation to matters as to which it shall be adjudged in such action, suit or
proceeding that such Board member is liable for negligence or misconduct in the
performance of his duties; provided that within 60 days after institution of any
such action, suit or proceeding a Board member shall in writing offer the
Company the opportunity, at its own expense, to handle and defend the same.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers or persons controlling the
Company pursuant to the foregoing provisions, the Company has been informed that
in the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is therefore unenforceable.
ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED
[NOT APPLICABLE]
(II-3)
<PAGE> 10
ITEM 8. EXHIBITS
Number Description
- ------ -----------
4.1 Party City Corporation Amended and Restated 1994 Stock Option Plan
5.1 Opinion of St. John & Wayne
23.1 Consent of Deloitte & Touche LLP
23.2 Consent of St. John & Wayne (included in Exhibit 5.1)
24.1 Powers of Attorney (included on page S-1 hereof)
(II-4)
<PAGE> 11
ITEM 9. UNDERTAKINGS
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section
10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the registration statement
(or the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental change
in the information set forth in the registration statement.
Notwithstanding the foregoing, any increase or decrease in volume
of securities offered (if the total dollar value of securities
offered would not exceed that which was registered) and any
deviation from the low or high and of the estimated maximum
offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate,
the changes in volume and price represent no more than 20 percent
change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective
registration statement; and
(iii) To include any material information with respect to
the plan of distribution not previously disclosed in the
registration statement or any material change to such information
in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
The undersigned Registrant hereby undertakes that, for purposes
of determining any liability under the Securities Act of 1933, each filing of
the Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing
(II-5)
<PAGE> 12
provisions, or otherwise, the Registrant has been advised that in the opinion of
the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
(II-6)
<PAGE> 13
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-8 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Rockaway, State of New Jersey, on January 2, 1997.
PARTY CITY CORPORATION
By: /S/ Steven Mandell
-------------------------------------
Steven Mandell, Chairman of the
Board and President
POWER OF ATTORNEYS
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Steven Mandell and David Lauber, or
either of them, his true and lawful attorney-in-fact and agent with full power
of substitution and resubstitution, for him and his name, place and stead, in
any and all capacities, to sign any or all amendments (including post-effective
amendments) to this Registration Statement, and to file the same, with all
Exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission granting unto said attorneys-in-fact and
agents, each acting alone, full power and authority to do and perform each and
every act and deed requisite and necessary to be done in connection with the
above premises, and fully for all intents and purposes as he might or could do
in person, hereby ratifying and conforming all that said attorney-in-fact and
agents, each acting alone, or his substitute or substitutes, may lawfully do or
cause to be done by virtue hereof. Pursuant to the requirements of the
Securities Act of 1933, this Registration Statement has been signed below by the
following persons on behalf of the Registrant and in the capacities and on the
dates indicated.
<TABLE>
<CAPTION>
Signatures Title Date
---------- ----- ----
<S> <C> <C>
/S/ Steven Mandell Chairman of the Board, President January 2, 1997
- ------------------ and Director (Principal Executive
Steven Mandell Officer)
</TABLE>
S-1
<PAGE> 14
<TABLE>
<S> <C> <C>
/S/ David Lauber Vice President and Chief Financial January 2, 1997
- -------------------- Officer (Principal
David Lauber Financial and Accounting
Officer)
/S/ John J. Oberdorf Director January 2, 1997
- --------------------
John J. Oberdorf
/S/ Raymond Hemmig Director January 2, 1997
- --------------------
Raymond Hemmig
/S/ Duayne Weinger Director January 2, 1997
- --------------------
Duayne Weinger
/S/ Perry Kaplan Director January 2, 1997
- --------------------
Perry Kaplan
</TABLE>
S-2
<PAGE> 15
EXHIBITS
<TABLE>
<CAPTION>
ITEM PAGE
---- ----
<S> <C>
4.1 Party City Corporation Amended and Restated 1994 Stock Option Plan 14
5.1 Opinion of St. John & Wayne 28
23.1 Consent of Deloitte & Touche LLP 31
23.3 Consent of St. John & Wayne (included in Exhibit 5.1)
24.1 Power of Attorney (included on Page S-1 hereof)
</TABLE>
<PAGE> 1
EXHIBIT 4.1
PARTY CITY CORPORATION
AMENDED AND RESTATED
1994 STOCK OPTION PLAN*
1. PURPOSES. The Plan described herein, as amended and restated, shall be known
as the "Party City Corporation Amended and Restated 1994 Stock Option Plan" (the
"Plan"). The purposes of the Plan are to attract and retain the best available
personnel for positions of substantial responsibility, to provide additional
incentive to Employees, Directors and Consultants of the Company or its
Subsidiaries (as defined in Section 2 below) to whom Option's may be granted
under this Plan, and to promote the success of the Company's business.
Options granted hereunder may be either "incentive stock options," as
defined in Section 422 of the Internal Revenue Code of 1986, as amended, or
"Non-ISO's," at the discretion of the Board and as reflected in the terms of the
written option agreement.
The Plan is not intended as an agreement or promise of employment. Neither
the Plan, nor any Option granted pursuant to the Plan, shall confer on any
person any right to continue in the employ of the Company. The right of the
Company to terminate an Employee is not limited by the Plan, nor by any Option
granted pursuant to the Plan, unless such right is specifically described by the
terms of any such Option.
2. DEFINITIONS. As used herein, the following definitions shall apply:
(a) "Board" shall mean the Committee, if one has been appointed, or the
Board of Directors of the Company, if no Committee is appointed.
(b) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(c) "Committee" shall mean the Committee appointed under Section 4(a)
hereof.
(d) "Common Stock" shall mean the Common Stock of the Company.
(e) "Company" shall mean Party City Corporation, a Delaware corporation.
- --------
* Amended and Restated by the Board of Directors (i) on January 16,
1996, and ratified by the shareholders, to increase the aggregate
number of shares authorized under the Plan to 600,000 shares, and
(ii) on December 31, 1996 to revise the Plan to (a) permit the
granting of Options to non-employee Directors and consultants of the
Company and (b) to conform the Plan to revised Rule 16b-3 of the
Securities Exchange Act of 1934.
<PAGE> 2
(f) "Continuous Service or Continuous Status as an Employee" shall mean
the absence of any interruption or termination of service as an Employee.
Continuous Status as an Employee shall not be considered interrupted in the case
of sick leave, military leave, or any other leave of absence approved by the
Board.
(g) "Director" shall mean any person serving on the Board of Directors.
(h) "Employee" shall mean any person, including officers, employed by the
Company or any Parent or Subsidiary of the Company. The payment of a Director's
fee by the Company shall not be sufficient to constitute "employment" by the
Company.
(i) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
(j) "Fair Market Value" shall mean (i) the closing price for a share of
the Common Stock on the exchange or quotation system which reports or quotes the
closing prices for a share of the Common Stock, as accurately reported for any
date (or, if no shares of Common Stock are traded on such date, for the
immediately preceding date on which shares of Common Stock were traded) in The
Wall Street Journal (or if The Wall Street Journal no longer reports such price,
in a newspaper or trade journal selected by the Committee) or (ii) if no such
price quotation is available, the price which the Committee acting in good faith
determines through any reasonable valuation method that a share of Common Stock
might change hands between a willing Buyer and a willing Seller, neither being
under any compulsion to buy or to sell and both having reasonable knowledge of
the relevant facts.
(k) "Incentive Stock Option" shall mean an Option intended to qualify as
an incentive stock option within the meaning of Section 422 of the Code.
(l) "Non-ISO" shall mean an Option to purchase stock which is not intended
by the Committee to satisfy the requirements of Section 422 of the Code.
(m) "Option" shall mean a stock option granted pursuant to the Plan.
(n) "Optioned Stock" shall mean the Common Stock subject to an Option.
(o) "Optionee" shall mean an Employee, Director or Consultant who receives
an Option.
(p) "Parent" shall mean a "parent corporation," whether now or hereafter
existing, as defined in Section 424(e) of the Code.
2
<PAGE> 3
(q) "Plan" shall mean this Party City Corporation Amended and Restated
1994 Stock Option Plan, as amended from time to time.
(r) "Rule 16b-3" shall mean Rule 16b-3 of the General Rules and
Regulations under the Exchange Act.
(s) "Share" shall mean a share of the Common Stock, as adjusted in
accordance with Section 10 of the Plan.
(t) "Subsidiary" shall mean a "subsidiary corporation," whether now or
hereafter existing, as defined in Section 424(f) of the Code.
(u) "Ten Percent Shareholder" shall mean a person who owns (after taking
into account the attribution rules of Section 424(d) of the Code) more than ten
percent (10%) of the total combined voting power of all classes of stock of the
Company, or a Subsidiary.
3. STOCK AUTHORIZED.
Subject to the provisions of Section 11 of the Plan, the maximum aggregate
number of shares which may be Optioned and sold under the Plan is Six Hundred
Thousand (600,000) shares of authorized, but unissued, or reacquired $.01 par
value Common Stock.
If an Option should expire or become unexercisable for any reason without
having been exercised in full, the unpurchased Shares which were subject thereto
shall, unless the Plan shall have been terminated, become available for further
grant under the Plan.
4. ADMINISTRATION.
(a) Procedure. The Company's Board of Directors may appoint a Committee to
administer the Plan which shall be constituted so as to permit the Plan to
continue to comply with Rule 16b-3, as currently in effect or as hereafter
modified or amended, promulgated under the Exchange Act. The Committee appointed
by the Board of Directors shall consist of not less than two members of the
Board of Directors, to administer the Plan on behalf of the Board of Directors,
subject to such terms and conditions as the Board of Directors may prescribe.
Once appointed, the Committee shall continue to serve until otherwise directed
by the Board of Directors. From time to time, the Board of Directors may
increase the size of the Committee and appoint additional members thereof,
remove members (with or without cause), and appoint new members in substitution
therefor, fill vacancies however caused, or remove all members of the Committee
and thereafter directly administer the Plan; provided, however, that at no time
shall a Committee of less than two (2) members administer the Plan. Subject to
the provisions of the Plan, the Committee shall be authorized to interpret the
Plan, to establish, amend and rescind any rules and regulations relating
3
<PAGE> 4
to the Plan and to make all other determinations necessary or advisable for the
administration of the Plan. Notwithstanding anything to the contrary contained
herein, no member of the Committee shall serve as such under this Plan unless
such person is a "Non-Employee Director" within a meaning of Rule 16b-3(b)(3)(i)
of the Exchange Act. A majority vote of the members of the Committee shall be
required for all of its actions.
A majority of the entire Committee shall constitute a quorum, and the
action of the majority of the Committee members present at any meeting at which
a quorum is present shall be the action of the Committee. All decisions,
determinations, and interpretations of the Committee shall be final and
conclusive on all persons affected thereby and shall, as to Incentive Stock
Options, be consistent with Section 422 of the Code. The Committee shall have
all of the powers and duties set forth herein, as well as such additional powers
and duties as the Board of Directors may delegate to it; provided, however, that
the Board of Directors expressly retains the right in its sole discretion (i) to
elect and to replace the members of the Committee, and (ii) to terminate or
amend this Plan in any manner consistent with applicable law.
(b) Powers of the Committee. Subject to the provisions of the Plan, the
Committee shall have the authority, in its discretion: (i) to grant Incentive
Stock Options, in accordance with Section 422 of the Code, or to grant
"Non-ISO's;" (ii) to determine the Fair Market Value of the Common Stock; (iii)
to determine the exercise price per share of Options to be granted which
exercise price shall be determined in accordance with Section 9 of the Plan;
(iv) to determine the persons to whom (including, without limitation, members of
the Committee) and the time or times at which, Options shall be granted and the
number of Shares to be represented by each Option; (v) to interpret the Plan;
(vi) to prescribe, amend and rescind rules and regulations relating to the Plan;
(vii) to determine the terms and provisions of each Option granted (which need
not be identical) and, with the consent of the holder thereof, modify or amend
each Option; (viii) to accelerate or defer (with the consent of the Optionee)
the exercise date of any Option; (ix) to authorize any person to execute on
behalf of the Company any instrument required to effectuate the grant of an
Option previously granted by the Board; and (x) to make all other determinations
deemed necessary or advisable for the administration of the Plan.
(c) Subject to the provisions of this Plan and compliance with Rule 16b-3
of the Exchange Act, the Committee may grant options under this Plan to members
of the Company's Board of Directors, including members of the Committee, and in
such regard may determine:
(i) the time at which any such Option shall be granted;
(ii) the number of Shares covered by any such Option;
4
<PAGE> 5
(iii) the time or times at which, or the period during which, any
such Option may be exercised or whether it may be exercised in
whole or in installments;
(iv) the provisions of the agreement relating to any such Option;
and
(v) the Option Price of Shares subject to an Option granted such
Board member.
(d) Effect of the Committee's Decision. All decisions, determinations and
interpretations of the Committee shall be final and binding on all Optionees and
any other holders of any Options granted under the Plan.
5. ELIGIBILITY. Incentive Stock Options may be granted only to Employees.
Non-ISO's may be granted to Employees as well as non-employee Directors and
Consultants of the Company as determined by the Board or any Committee. Any
person who has been granted an Option may, if he is otherwise eligible, be
granted an additional Option or Options.
Each grant of an Option shall be evidenced by an Option Agreement, and
each Option Agreement shall (1) specify whether the Option is an Incentive Stock
Option or a Non-ISO and (2) incorporate such other terms and conditions as the
Committee acting in its absolute discretion deems consistent with the terms of
this Plan, including, without limitation, a restriction on the number of shares
of stock subject to the Option which first become exercisable during any
calendar year.
To the extent that the aggregate Fair Market Value of the stock of the
Company subject to Incentive Stock Options granted (determined as of the date
such an Incentive Stock Option is granted) which first become exercisable in any
calendar year exceeds $100,000, such Options shall be treated as Non-ISO's. This
$100,000 limitation shall be administered in accordance with the rules under
Section 422(d) of the Code.
6. EFFECTIVE DATE AND TERM OF PLAN. The effective date of this Plan ("Effective
Date") shall be the date it is adopted by the Board, provided the shareholders
of the Company (acting at a duly called meeting of such shareholders or by the
written consent of shareholders) approve this Plan within twelve (12) months
after such Effective Date. The effectiveness of Options granted under this Plan
prior to the date such shareholder approval is obtained shall be contingent on
such shareholder approval.
Subject to the provisions of Section 12 hereof, no Option shall be granted
under this Plan on or after the earlier of
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(1) the tenth anniversary of the Effective Date of this Plan in which
event the Plan otherwise thereafter shall continue in effect until all
outstanding Options shall have been surrendered or exercised in full or no
longer are exercisable, or
(2) the date on which all of the Common Stock reserved for issuance under
Section 3 of this Plan has (as a result of the exercise or expiration of Options
granted under this Plan) been issued or no longer is available for use under
this Plan, in which event the Plan also shall terminate on such date.
7. TERM OF OPTION. An Option shall expire on the date specified in such Option,
which date shall not be later than the tenth anniversary of the date on which
the Option was granted, except that, if any Employee, at any time an Incentive
Stock Option is granted to him or her, owns stock representing more than ten
percent of the total combined voting power of all classes of Common Stock (or,
under Section 424(d) of the Code is deemed to own stock representing more than
ten percent of the total combined voting power of all such classes of Common
Stock, by reason of the ownership of such classes of stock, directly or
indirectly, by or for any brother, sister, spouse, ancestor or lineal descendant
of such Employee, or by or for any corporation, partnership, state or trust of
which such Employee is a shareholder, partner or beneficiary), the Incentive
Stock Option granted him or her shall not be exercisable after the expiration of
five years from the date of grant or such earlier expiration as provided in the
particular Option agreement.
8. EXERCISE PRICE AND CONSIDERATION.
(a) The per Share exercise price for the Shares to be issued pursuant to
exercise of an Option shall be such price as is determined by the Board, but
shall be subject to the following:
(i) In the case of an Incentive Stock Option
(A) granted to an Employee who, immediately before the grant
of such Incentive Stock Option, owns stock representing more than ten percent
(10%) of the voting power of all classes of stock of the Company or any Parent
or Subsidiary, the per Share exercise price shall be no less than 110% of the
Fair Market Value per Share on the date of grant.
(B) granted to any Employee, the per share exercise price
shall be no less than 100% of the Fair Market Value per Share on the date of
grant.
(ii) In the case of a Non-ISO, the per Share exercise price shall be
determined by the Board on the date of grant.
(iii) In the case of an Option granted on or after the effective
date of registration of any class of equity security of the Company pursuant to
Section 12 of the Exchange Act and prior to six months after the termination of
such registration, the per Share exercise price shall
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be no less than one hundred percent (100%) of the fair market value per Share on
the date of grant.
(b) The consideration to be paid for the Shares to be issued upon exercise
of an Option, including the method of payment, shall be determined by the Board
and may consist entirely of cash, check, promissory note, other Shares of Common
Stock having a Fair Market Value on the date of surrender equal to the aggregate
exercise price of the Shares as to which said Option shall be exercised, or any
combination of such methods of payment, or such other consideration and method
of payment for the issuance of Shares to the extent permitted under Delaware
law.
If the optionee desires to pay for the optioned shares, in whole or in part, by
conversion of Shares, Optionee shall be entitled upon exercise of the Option to
receive that number of Shares equal to the quotient obtained by dividing
[(A-B)(X)] by (A) where:
(A) = the Fair Market Value of one Share of Common Stock on the
date of conversion.
(B) = the Option Price for one Share of Common Stock subject to an
Option.
(X) = the Number of Shares of Common Stock issuable upon exercise
of the Option if exercised for cash;
provided, if the above calculation results in a negative number, then no Shares
shall be issued or issuable upon conversion of the Option. Any payment made in
Shares of the Company's Common Stock shall be treated as equal to the Fair
Market Value of such Common Stock on the date the properly endorsed certificate
for such Common Stock is delivered to the Committee (or its delegate).
9. EXERCISE OF OPTION.
(a) Procedure for Exercise; Rights as a Shareholder. Any Option granted
hereunder shall be exercisable at such times and under such conditions as
determined by the Committee, including performance criteria with respect to the
Company and/or the Optionee, and as shall be permissible under the terms of the
Plan.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised when written notice of such
exercise has been given to the Company in accordance with the terms of the
Option by the person entitled to exercise the Option and full payment for the
Shares with respect to which the Option is exercised has been received by the
Company. Full payment may, as authorized by the Board, consist of
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any consideration and method of payment allowable under Section 8(b) of the
Plan. Until the issuance, which in no event will be delayed more than thirty
(30) days from the date of the exercise of the Option, (as evidenced by the
appropriate entry on the books of the Company or of a duly authorized transfer
agent of the Company) of the stock certificate evidencing such Shares, no right
to vote or receive dividends or any other rights as a shareholder shall exist
with respect to the Optioned Stock, notwithstanding the exercise of the Option.
No adjustment will be made for a dividend or other right for which the record
date is prior to the date the stock certificate is issued, except as provided in
the Plan.
Exercise of an Option in any manner shall result in a decrease in the
number of Shares which thereafter may be available, both for purposes of the
Plan and for sale under the Option, by the number of Shares as to which the
Option is exercised.
(b) Termination of Status as an Employee, or Director or Consultant with
Respect to Non-ISO's. Non-ISO's granted pursuant to the Plan may be exercised
notwithstanding the termination of the Optionee's status as an employee, a
non-employee Director or a Consultant, except as provided in the Plan or as
provided by the terms of the Stock Option Agreement.
(c) Termination of Service as an Employee with Respect to Incentive Stock
Options. If the Continuous Service of any Employee terminates, he or she may,
but only within thirty (30) days (or such other period of time not exceeding
three (3) months as is determined by the Committee) after the date he or she
ceases to be an Employee of the Company, exercise his or her Option to the
extent that he or she was entitled to exercise it as of the date of such
termination. To the extent that he or she was not entitled to exercise the
Option at the date of such termination, or if he or she does not exercise such
Option (which he or she was entitled to exercise) within the time specified
herein, the Option shall terminate.
(d) Notwithstanding the provisions of Section 9(c) above, in the event an
Employee is unable to continue his or her Continued Service with the Company as
a result of his or her total and permanent disability (within the meaning of
Section 22(e)(3) of the Code), he or she may, but only within three (3) months
(or such other period of time not exceeding twelve (12) months as is determined
by the Committee) from the date of disability, exercise his or her Option to the
extent he or she was entitled to exercise it at the date of such disability. To
the extent that he or she was not entitled to exercise the Option at the date of
disability, or if he or she does not exercise such Option (which he or she was
entitled to exercise) within the time specified herein, the Option shall
terminate.
(e) Death of Optionee. In the event of the death of an Optionee:
(i) during the term of the Option who is at the time of his or her
death an Employee of the Company and who shall have been in
Continuous Status
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as an Employee, a Director or Consultant since the date of
grant of the Option, the 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 the Option by bequest or inheritance, but only to the
extent of the right to exercise that would have accrued had
the Optionee continued living one (1) month after the date of
death; or
(ii) within thirty (30) days (or such other period of time not
exceeding three (3) months as is determined by the Committee)
after the termination of Continuous Status as an Employee, a
Director or Consultant, the 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 the Option by bequest or inheritance, but only to the
extent of the right to exercise that had accrued at the date
of termination.
10. TRANSFERABILITY OF OPTIONS.
(a) Incentive Stock Options may not be sold, pledged, assigned,
hypothecated, transferred, or disposed of in any manner other than by will or by
the laws of descent or distribution and may be exercised, during the life time
of the Optionee only by the Optionee.
(b) The Committee may, in its discretion, authorize all or a portion of
the Non-ISOs to be granted to an Optionee to be on terms which permit transfer
by such Optionee to (i) the spouse, children or grandchildren of the Optionee
(the "Immediate Family Members"), (ii) a trust or trusts for the exclusive
benefit of such Immediate Family Members, or (iii) a partnership in which such
Immediate Family Members are the only partners, provided that (x) there may be
no consideration for any such transfer, (y) the Non-ISO Stock Option Agreement
pursuant to which such options are granted must be approved by the Committee,
and must expressly provide for transferability in a manner consistent with this
section, (z) subsequent transfers of transferred Options shall be prohibited
except those made by will or by the laws of descent or distribution, and (zz)
such transfer is approved in advance by the Committee. Following transfer, any
such Options shall continue to be subject to the same terms and conditions as
were applicable immediately prior to transfer, provided that for purposes of
determining the rights of exercise under the Option, the term "Optionee" shall
be deemed to refer to the transferee. The termination of service as an employee,
non-employee director or consultant shall continue to be applied with respect to
the original Optionee, following which the options shall be exercisable by the
transferee only to the extent, and for the periods specified in Section 9 of the
Plan and in the Stock Option Agreement.
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<PAGE> 10
11. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION OR MERGER. Subject to
any required action by the shareholders of the Company, the number of shares of
Common Stock covered by each outstanding Option, and the number of shares of
Common Stock which have been authorized for issuance under the Plan but as to
which no Options have yet been granted or which have been returned to the Plan
upon cancellation or expiration of an Option, as well as the price per share of
Common Stock covered by each such outstanding Option, shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
Stock resulting from a stock split or the payment of a stock dividend with
respect to the Common Stock or any other increase or decrease in the number of
issued shares of Common Stock effected without receipt of consideration by the
Company; provided, however, that conversion of any convertible securities of the
Company shall not be deemed to have been "effected without receipt of
consideration." Such adjustment shall be made by the Board, whose determination
in that respect shall be final, binding and conclusive. Except as expressly
provided herein, no issuance by the Company of shares of stock of any class, or
securities convertible into shares of stock of any class, shall affect, and no
adjustment by reason thereof shall be made with respect to, the number or
exercise price of shares of Common Stock subject to an Option.
In the event of the proposed dissolution or liquidation of the Company, or
in the event of a proposed sale of all or substantially all of the assets of the
Company, or the merger of the Company with or into another corporation, the
Option will terminate immediately prior to the consummation of such proposed
action, unless otherwise provided by the Board. The Board may, in the exercise
of its sole discretion in such instances, declare that any Option shall
terminate as of a date fixed by the Board and give each Optionee the right to
exercise his Option as to all or any part of the Optioned Stock, including
Shares as to which the Option would not otherwise be exercisable.
12. TIME FOR GRANTING OPTIONS. The date of grant of an Option shall, for all
purposes, be the date on which the Board makes the determination granting such
Option. Notice of the determination shall be given to each Employee,
non-employee Director and Consultant to whom an Option is so granted within a
reasonable time after the date of such grant.
13. AMENDMENT AND TERMINATION OF THE PLAN. (a) The Board may amend or
terminate the Plan from time to time in such respects as the Board may deem
advisable; provided that, the following revisions or amendments shall require
approval of the holders of a majority of the outstanding shares of the Company
entitled to vote:
(i) any increase in the number of Shares subject to the Plan,
other than in connection with an adjustment under Section 11
of the Plan;
(ii) any change in the class of Employees which are eligible
participants for Options under the Plan; or
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(iii) if shareholder approval of such amendment is required for
continued compliance with Rule 16b-3.
(b) Shareholder Approval. Any amendment requiring shareholder approval
under Section 13(a) of the Plan shall be solicited as described in Section 17 of
the Plan.
(c) Effect of Amendment or Termination. Any such amendment or termination
of the Plan shall not affect Options already granted and such Options shall
remain in full force and effect as if this Plan had not been amended or
terminated, unless mutually agreed otherwise between the Optionee and the Board,
which agreement must be in writing and signed by the Optionee and the Company.
14. CONDITIONS UPON ISSUANCE OF SHARES. Shares shall not be issued pursuant to
the exercise of an Option unless the exercise of such Option and the issuance
and delivery of such Shares pursuant thereto shall comply with all relevant
provisions of law, including, without limitation, the Securities Act of 1933, as
amended, the Exchange Act, the rules and regulations promulgated thereunder, and
the requirements of any stock exchange upon which the Shares may then be listed,
and shall be further subject to the approval of counsel for the Company with
respect to such compliance.
As a condition to the exercise of an Option, the Company may require the
person exercising such Option to represent and warrant at the time of any such
exercise that the Shares are being purchased only for investment and without any
present intention to sell or distribute such Shares if, in the opinion of
counsel for the Company, such a representation is required by any of the
aforementioned relevant provisions of law.
15. RESERVATION OF SHARES. The Company, during the term of this Plan, will at
all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
Inability of the Company to obtain authority from any regulatory body
having jurisdiction, which authority is deemed by the Company's counsel to be
necessary to the lawful issuance and sale of any Shares hereunder, shall relieve
the Company of any liability in respect of the failure to issue or sell such
Shares as to which such requisite authority shall not have been obtained.
16. OPTION AGREEMENT. Options shall be evidenced by written Option agreements in
such form as the Committee shall approve.
17. SHAREHOLDER APPROVAL. Continuance of the Plan shall be subject to approval
by the shareholders of the Company within twelve months before or after the date
the Plan is
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adopted. If such shareholder approval is obtained at a duly held shareholders'
meeting, it may be obtained by the affirmative vote of the holders of a majority
of the outstanding shares of the Company present or represented and entitled to
vote thereon. The approval of such shareholders of the Company shall be (1)
solicited substantially in accordance with Section 14(a) of the Exchange Act and
the rules and regulations promulgated thereunder, or (2) solicited after the
Company has furnished in writing to the holders entitled to vote substantially
the same information concerning the Plan as that which would be required by the
rules and regulations in effect under Section 14(a) of the Exchange Act at the
time such information is furnished.
If such shareholder approval is obtained by written consent in the absence
of a Shareholders' Meeting, it must be obtained by the written consent of all
shareholders of the Company who would have been entitled to cast the minimum
number of votes which would be necessary to authorize such action at a meeting
at which all Shareholders entitled to vote thereon were present and voting.
18. MISCELLANEOUS PROVISIONS. An Optionee shall have no rights as a shareholder
with respect to any Shares covered by his Option until the date of the issuance
of a stock certificate to him for such shares.
19. OTHER PROVISIONS. The stock option agreement authorized under the Plan shall
contain such other provisions, including, without limitation, restrictions upon
the exercise of the Option, as the Committee shall deem advisable. Any such
stock option agreement shall contain such limitations and restrictions upon the
exercise of the Option as shall be necessary in order that such option will be
an Incentive Stock Option as defined in Section 422 of the Code if an Incentive
Stock Option is intended to be granted.
20. INDEMNIFICATION OF COMMITTEE. In addition to such other rights of
indemnification as they may have as Directors or as members of the Committee,
the members of the Committee shall be indemnified by the Company against the
reasonable expenses, including attorneys' fees actually and necessarily incurred
in connection with the defense of any action, suit or proceeding, or in
connection with any appeal therein, to which they or any of them may be a party
by reason of any action taken or failure to act under or in connection with the
Plan or any Option granted thereunder, and against all amounts paid by them in
settlement thereof (provided such settlement is approved by independent legal
counsel selected by the Company) or paid by them in satisfaction of a judgment
in any such action, suit or proceeding, except in relation to matters as to
which it shall be adjudged in such action, suit or proceeding that such Board
member is liable for negligence or misconduct in the performance of his duties;
provided that within 60 days after institution of any such action, suit or
proceeding a Board member shall in writing offer the Company the opportunity, at
its own expense, to handle and defend the same.
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21. APPLICATION OF FUNDS. The proceeds received by the Company from the sale of
Common Stock pursuant to Options will be used for general corporate purposes.
22. NO OBLIGATION TO EXERCISE OPTION. The granting of an Option shall impose no
obligation upon the Optionee to exercise such Option.
23. OTHER COMPENSATION PLANS. The adoption of the Plan shall not affect any
other stock option or incentive or other compensation plans in effect for the
Company or any Subsidiary, nor shall the Plan preclude the Company from
establishing any other forms of incentive or other compensation for employees
and Directors of the Company or any Subsidiary.
24. SINGULAR, PLURAL; GENDER. Whenever used herein, nouns in the singular shall
include the plural, and the masculine pronoun shall include the feminine gender.
25. HEADINGS, ETC., NO PART OF PLAN. Headings of Articles and Sections hereof
are inserted for convenience and reference; they constitute no part of the Plan.
26. GOVERNING LAW. The Plan shall be governed by and construed in accordance
with the laws of the State of Delaware, except to the extent preempted by
Federal law. The Plan is intended to comply with Rule 16b-3. Any provisions
inconsistent with Rule 16b-3 shall be inoperative and shall not affect the
validity of the Plan, unless the Board of Directors shall expressly resolve that
the Plan is no longer intended to comply with Rule 16b-3.
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EXHIBIT 5.1
January 9, 1997
Party City Corporation
400 Commons Way
Rockaway, New Jersey 07866
Ladies and Gentlemen:
This opinion is delivered to you in connection with the Registration
Statement on Form S-8 (the "Registration Statement"), which will be filed with
the U.S. Securities and Exchange Commission on or about January 9, 1997 by Party
City Corporation (the "Company") under the Securities Act of 1933, as amended
(the "Act") for registration under said the Act of up to 640,000 shares (the
"S-8 Shares") of Common Stock, $.01 par value, of the Company to be sold and
issued by the Company pursuant to (i) its Amended and Restated 1994 Stock Option
Plan (the "Plan"), and (ii) Stock Option Agreements with Non-Employee Directors
(the "Option Agreements").
We are familiar with the Articles and Incorporation, the corporate minute
book and the Bylaws of the Company, the Plan, the Option Agreements and the
Registration Statement. We have examined the proceedings taken and proposed to
be taken in connection with the issuance, sale and payment of consideration for
the S-8 Shares. We have also examined such other documents, records and
certificates and made such further investigation as we have deemed necessary for
the purposes of this option.
Based upon and subject to the foregoing, we are of the opinion that upon
completion of the proceedings being taken or contemplated by us, as your
counsel, to be taken prior to the issuance of the S-8 Shares pursuant to the S-8
Prospectus described in the Registration Statement and upon completion of the
proceedings being taken to permit such transactions to be carried out in
accordance with the securities laws of the various states where required, the
S-8 Shares will be legally issued, fully paid and nonassessable.
<PAGE> 2
Party City Corporation
January 9, 1997
Page 2
We consent to the use of this opinion as an exhibit to the Registration
Statement and further consent to the reference to our firm in the Registration
Statement under the caption "Interests of Named Experts and Counsel."
Very truly yours,
ST. JOHN & WAYNE, L.L.C.
<PAGE> 1
Exhibit 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement of
Party City Corporation on Form S-8 of our report dated February 19, 1996,
appearing in the Prospectus of Party City Corporation dated March 26, 1996 which
included therein the financial statements of Party City Corporation for the year
ended December 31, 1995.
Deloitte & Touche LLP
Parsippany, New Jersey
January 6, 1997
