Party City Holdco Inc. (Form: S-1/A, Received: 03/27/2015 06:06:04)

Large accelerated filer

Accelerated filer

Non-accelerated filer

x (Do not check if a smaller reporting company)

Smaller reporting company

As filed with the Securities and Exchange Commission on March 26, 2015.

Registration No. 333-193466

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Amendment No. 6

Form S-1

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

Party City Holdco Inc.

(Exact name of registrant as specified in its charter)

Delaware

5900

46-0539758

(State or other jurisdiction of

incorporation or organization)

(Primary Standard Industrial

Classification Code Number)

(I.R.S. Employer

Identification No.)

(914) 345-2020

80 Grasslands Road, Elmsford, NY 10523

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

James M. Harrison

Chief Executive Officer

80 Grasslands Road

Elmsford, NY 10523

(914) 345-2020

(Name, address, including zip code, and telephone number, including area code, of agent for service)

Copies to:

Julie H. Jones, Esq.

Jay J. Kim, Esq.

Ropes & Gray LLP

Prudential Tower, 800 Boylston Street

Boston, MA 02199-3600

Telephone (617) 951-7000

Fax (617) 951-7050

Marc D. Jaffe, Esq.

Senet Bischoff, Esq.

Latham & Watkins LLP

885 Third Avenue

New York, NY 10022-4834

Telephone (212) 906-1200

Fax (212) 751-4864

Approximate date of commencement of proposed sale to public: As soon as practicable after this Registration Statement becomes effective.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, as amended (the “Securities Act”), check the following box. ¨

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

The information in this preliminary prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

Subject to Completion. Dated March 26, 2015

Party City Holdco Inc.

Shares

LOGO

Common Stock

This is the initial public offering of shares of common stock of Party City Holdco Inc., or “Party City Holdco.”

Party City Holdco is offering shares to be sold in the offering.

Prior to this offering, there has been no public market for the common stock. It is currently estimated that the initial public offering price per share will be between $ and $ . Party City Holdco intends to list the common stock on the New York Stock Exchange under the symbol “PRTY”.

See “ Risk Factors ” on page 15 to read about factors you should consider before buying shares of the common stock.

Neither the Securities and Exchange Commission nor any other regulatory body has approved or disapproved of these securities or passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense.


	Per Share	Total
Initial public offering price	$	$
Underwriting discount	$	$
Proceeds before expenses to Party City Holdco (1)	$	$

(1)	See “Underwriting (Conflict of Interest)” on page 135 for additional information regarding underwriting compensation.

We have granted the underwriters the option to purchase up to an additional shares of our common stock on the same terms and conditions set forth above if the underwriters sell more than shares of our common stock in this offering.

The underwriters expect to deliver the shares against payment in New York, New York on , 2015.


Goldman, Sachs & Co.		BofA Merrill Lynch

Credit Suisse		Morgan Stanley



Barclays	Deutsche Bank Securities	J.P. Morgan



William Blair	Stephens Inc.	Telsey Advisory Group

Prospectus dated , 2015

LOGO

TABLE OF CONTENTS


Market, Ranking and Other Industry Data			ii
Trademarks			ii
Prospectus Summary			1
Risk Factors			15
Special Note Regarding Forward-Looking Statements			32
The Transactions			34
Use of Proceeds			35
Dividend Policy			36
Capitalization			37
Dilution			39
Selected Consolidated Financial Data			41
Management’s Discussion and Analysis of Financial Condition and Results of Operations			46
Business			72
Management			92
Executive Compensation			97
Principal Stockholders			114
Certain Relationships and Related Party Transactions			116
Description of Capital Stock			119
Description of Certain Debt			123
Shares Eligible For Future Sale			129
Material U.S. Federal Income Tax Considerations For Non-U.S. Holders of Common Stock			131
Underwriting (Conflict of Interest)			135
Validity of Common Stock			141
Experts			141
Where You Can Find Additional Information			141
Index to Consolidated Financial Statements of Party City Holdco Inc. and Subsidiaries			F-1

We have not authorized anyone to provide any information or to make any representations other than those contained in this prospectus or in any free writing prospectuses we have prepared. We take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. This prospectus is an offer to sell only the shares offered hereby, but only under circumstances and in jurisdictions where it is lawful to do so. The information contained in this prospectus is current only as of its date.

MARKET, RANKING AND OTHER INDUSTRY DATA

The market, ranking and other industry data included in this prospectus, including the size of certain markets and our position and the position of our competitors within these markets, are based on published industry sources, our own research and estimates based on our management’s knowledge and experience in the markets in which we operate. Our estimates have been based on information obtained from trade and business organizations and other contacts in the markets in which we operate. We note that our estimates, in particular as they relate to general expectations concerning our industry, involve risks and uncertainties and are subject to change based on various factors, including those discussed under the heading “Risk Factors” in this prospectus.

TRADEMARKS

We own or have rights to trademarks or trade names that we use in conjunction with the operation of our business. In addition, our name, logo and website name and address are our service marks or trademarks. Some of the more important trademarks and service marks that we use include Party City ^® , The Discount Party Super Store ^® , Amscan ^® and Halloween City ^® . Solely for convenience, the trademarks, service marks, trade names and copyrights referred to in this prospectus may be listed without the ^© , ^® and ™ symbols, but we will assert, to the fullest extent under applicable law, our rights to these trademarks, service marks, trade names and copyrights. This prospectus may also include trademarks, service marks or trade names of other companies. Each trademark, trade name or service mark by any other company appearing in this prospectus belongs to its holder.

PROSPECTUS SUMMARY

This summary highlights information contained elsewhere in this prospectus. This summary may not contain all of the information that is important to you in considering an investment in our common stock. You should read this entire prospectus carefully, especially the “Risk Factors” section of this prospectus and our consolidated financial statements and related notes appearing at the end of this prospectus, before making an investment decision.

As part of the transactions described under “The Transactions,” on July 27, 2012 our wholly-owned indirect subsidiary, PC Merger Sub, Inc. (“Merger Sub”), merged with and into Party City Holdings Inc., with Party City Holdings Inc. being the surviving corporation, which we refer to as the “Acquisition.” In this prospectus, the terms “we,” “us,” “our,” “the Company” and other similar terms refer to Party City Holdco Inc. and all its subsidiaries, including Party City Holdings Inc., that are consolidated under United States generally accepted accounting principles (“GAAP”).

Please note that our discussion of certain financial information, specifically net sales, royalties and franchise fees and retail operating expenses, for the year ended December 31, 2012 include data from the “Predecessor” period, which covers the period preceding the Acquisition (January 1, 2012 to July 27, 2012) and data from the “Successor” period, which covers the period following the Acquisition (July 28, 2012 to December 31, 2012), on a combined basis. The Company notes that the change in basis resulting from the Acquisition did not impact such financial information and, although this presentation of financial information on a combined basis does not comply with GAAP, we believe it provides a meaningful method of comparison to the other periods presented in this prospectus. The data is being presented for analytical purposes only. Combined operating results (i) have not been prepared on a pro forma basis as if the Acquisition occurred on the first day of the period, (ii) may not reflect the actual results we would have achieved absent the Acquisition and (iii) may not be predictive of future results of operations.

Our Company

We are the leading party goods retailer by revenue in North America and, we believe, the largest vertically integrated supplier of decorated party goods globally by revenue, with multiple levers to drive future growth across channels, products and geographies. With approximately 900 locations, we have the only coast-to-coast network of party superstores in the U.S. and Canada that make it easy and fun to enhance special occasions with a differentiated shopping experience and an unrivaled assortment of innovative and exciting merchandise offered at a compelling value. Through a series of acquisitions between 2005 and 2010, we built a powerful retail operation that captures the full manufacturing-to-retail margin on a significant portion of the products sold in our stores. We believe we are the largest global designer, manufacturer and distributor of decorated party supplies by revenue with products found in over 40,000 retail outlets worldwide, including our own stores as well as independent party supply stores, mass merchants, grocery retailers, dollar stores and others. Our category-defining retail concept, multi-channel reach, widely recognized brands, broad and deep product offering, and low-cost global sourcing model are, we believe, significant competitive advantages. We believe these characteristics position us for continued organic and acquisition-led growth and margin expansion.

Founded in 1947, we started as an importer and wholesaler and grew to offer a broad selection of decorated party supplies including paper and plastic tableware, metallic and latex balloons, novelties, costumes and other garments, stationery and gifts for everyday, themed and seasonal events. Our products are available in over 100 countries with the U.K., France, Germany and Australia among the largest end markets for us outside North America. We believe that through our extensive assortment, as well as our industry-leading innovation, customer service levels and compelling value proposition, we will continue to win with our customers.

The 2005 combination of Amscan Holdings, Inc. (“Amscan”), which focused on the wholesale market, and Party City Corporation (“Party City”), which focused on the retail market, represented an important step in our evolution. Since then, we have established the largest multi-channel party supply business by revenue in North America with approximately 900 party superstores (inclusive of approximately 210 franchised stores) in the United States and Canada, principally under the Party City banner, and PartyCity.com, our primary e-commerce site. Underscored by our slogan “Nobody Has More Party for Less,” we believe we offer a superior one-stop shopping experience with a broad selection, consistently high in-stock positions and compelling value proposition, making us the favored destination for all of our customers’ party supply needs. We also operate a network of over 300 temporary Halloween locations under the Halloween City banner.

Through a combination of organic growth and strategic acquisitions, we have been able to generate strong topline performance and margin expansion, including:

•

Growing revenue from $1,599.1 million for the year ended December 31, 2010 to $2,271.3 million for the year ended December 31, 2014 representing a compounded annual growth rate of 9.2%.

•

Increasing adjusted EBITDA from $230.6 million, implying an adjusted EBITDA margin of 14.4%, for the year ended December 31, 2010 to $362.1 million for the year ended December 31, 2014, for an implied adjusted EBITDA margin of 15.9%. Net income increased from $49 million for the year ended December 31, 2010 to $56 million for the year ended December 31, 2014. Net income during 2014 was impacted by higher interest expense, resulting from debt incurred in conjunction with the Transactions and the issuance of the $350 million senior PIK toggle notes (“the senior PIK toggle notes”), as well as the impact of non-cash purchase accounting adjustments resulting from the Transactions and the impact of non-recurring charges related to refinancings.

For a discussion of our use of adjusted EBITDA and a reconciliation to net income (loss), please refer to “—Summary Financial Data” and “Selected Consolidated Financial Data.”

Evolution of Our Business

Over the past 60 years, we have grown to become a global, vertically integrated designer, manufacturer, distributor and retailer of decorated party supplies. Key strategic initiatives that were and continue to be important to our evolution include:

•

Establishing retail leadership in our industry and our vertically integrated model through the acquisitions of Party City, Party America Corporation (“Party America”), Factory Card & Party Outlet (“FCPO”), Party Packagers in Canada and iParty Corp. (“iParty”). Following each acquisition, we capitalized on our vertically integrated model by increasing the percentage of products for sale at such retail stores that are manufactured and/or distributed by us, allowing us to capture the full manufacturing-to-retail margin on a significant portion of the retail sales.

•

Enhancing our wholesale platform through targeted acquisitions while investing in state-of-the-art distribution facilities and developing a strong Asian-based sourcing and sales organization.

•

Re-launching our retail e-commerce platform in 2009 provided us with an additional direct-to-consumer channel and was the first step in the development of a global e-commerce platform.

•

Broadening our product offering and channel reach by acquiring valuable character licenses and costume capabilities in addition to improving our access to grocery and mass merchant retailers.

•

Growing our international presence by building relationships with local retailers to develop party supply store-in-store concepts as well as targeted acquisitions that extended our wholesale and retail geographic reach.

As a result of these investments, we have created a differentiated, vertically integrated business model. We believe that our superior selection of party supplies, scale, innovation and service position us for future growth across all of our channels.

Competitive Strengths

We are well-positioned to continue to attract customers who celebrate life’s memorable events as a result of the following competitive strengths:

Category Defining Multi-Channel Retailer. We believe we are the premier party supplies retailer, providing a one-stop shopping experience with a broad and deep selection of products offered at a compelling value seamlessly through our retail stores and our e-commerce platform. We keep our assortment current by frequently introducing new products, and we organize our stores by events and themes to make it easy to shop while consistently presenting customers with additional product ideas that will enhance their events and our sales. With our extensive selection, convenient locations, consistently high in-stock positions and compelling value proposition, we believe customers associate Party City with successful celebrations, and, as a result, our physical and online stores will continue to be seen as the favored destination for party supplies and innovative ideas.

Leading Market Position. Based on our revenues, we are the largest retailer of decorated party supplies in the U.S. and Canada. With our network of approximately 860 party superstores, we are the only party supply retailer with a national store footprint. In addition to our leading retail presence, we believe that our integrated wholesale business is the largest global designer, manufacturer and distributor of decorated party goods by revenue with over 40,000 SKUs found in over 40,000 retail outlets worldwide. Through our category-leading brands, Party City and Amscan, we offer what we believe is the broadest selection of continuously updated and innovative merchandise at a compelling value. We believe that our scale, brand recognition and value proposition underscore our credibility as the destination of choice for party supplies in any channel.

Unique Vertically Integrated Operating Model. We manufacture, source and distribute party supplies, acting as a one-stop shop for decorated party goods to both retail and wholesale customers. Our vertically integrated model provides us with a number of advantages including the ability to (i) enhance our profitability as we realize the full manufacturing-to-retail margin on a significant portion of our retail sales, (ii) leverage a global sourcing network to reinforce our position as a low-cost provider of quality party supplies and (iii) effectively respond to changes in consumer trends through our in-house design and innovation team.

Broad and Innovative Product Offering. We offer a broad and deep product assortment with an average of 25,000 SKUs offered at any one time in our Party City superstores, supported by the approximately 35,000 SKUs offered online which can be accessed via our “endless aisle” in-store kiosk system as well as through PartyCity.com. Our extensive selection offers customers a single source for all of their party needs. Our in-house design team introduces approximately 7,000 products annually, driving newness in our licensed and unlicensed product offering and supporting increased sales across our channels.

Highly Efficient Global Sourcing and Distribution Capabilities. Over the past 60 years, we have developed a global network of owned and third-party manufacturers that we believe optimizes speed to market, quality and cost. We also have warehousing and distribution facilities around the world, including four in the U.S. and seven centers located outside the United States. We have also opened sourcing, quality control and testing offices throughout Asia with over 300 employees in our offices located in China, Vietnam and Hong Kong. Our global sourcing and distribution capabilities offer our customers best-in-class service levels, rapid fulfillment and competitive prices, and have capacity for continued growth with our business.

party goods sector. Our team has successfully grown our sales and profits during various economic cycles and through several business transformations. Additionally, our team has a strong track record of successful acquisitions and integrations, which continue to be an important part of our overall strategy.

Growth Strategy

We believe we have significant opportunities to enhance our leadership position in the party goods industry and improve profitability through the further implementation of our operating strategy both organically and through strategic acquisitions. Key elements of our growth strategy include:

Expand Our Retail Store Base. Our retail network includes approximately 860 party superstores (inclusive of approximately 210 franchised stores) in the United States and approximately 40 locations in Canada. We believe there is an opportunity to open more than 350 additional Party City stores in North America which is consistent with an independent analysis conducted by a leading, global consulting firm in 2012. We anticipate opening approximately 30 new stores per year. Based on historical performance and the margin generated from our vertically integrated model, we expect our new stores to have a payback period of approximately three years and to generate an average pre-tax cash-on-cash return on invested capital of approximately 50% in year three.

Drive Additional Growth and Productivity From Existing Retail Stores. We plan to grow our comparable store sales by continuing to improve our brand image and awareness, executing our merchandising initiatives and converting existing stores to our new more interactive format. We are pursuing various merchandising initiatives to drive increased units per transaction including aligning dress-up and candy products coordinated by color and party themes and broadening the product formats available within existing license arrangements. We also anticipate remodeling or relocating approximately 50 stores per year and converting them to our latest interactive store-within-a-store concept (specialty areas named “Sports City”, “Candy City”, “Color City” and “Favor City”). Based on our historical experience, we expect remodeled or relocated stores to generate sales growth of five to six percentage points higher than non-remodeled or non-relocated stores in the first year following conversion with longer-term sales growth of one to two percentage points higher than non-remodeled or non-relocated stores.

Delights”). We have broadened the products and services available to our customers through our retail e-commerce channel. For example, although customers can currently access PartyCity.com through their mobile devices, we have launched a mobile application that ensures a seamless experience between online, mobile and physical interactions and includes functionality to assist customers in coordinating their shopping experience as they plan theme parties. In addition to our retail e-commerce platform, we have developed a wholesale e-commerce platform that provides our party goods and other wholesale customers the opportunity to order our products through our amscan.com website, as well as our other international sites. Wholesale e-commerce orders, which are included in our 2014 wholesale sales, totaled approximately $19 million during 2014 or approximately 35% higher than 2013.

Pursue Accretive Acquisitions. Over the past 16 years, we have successfully integrated numerous acquisitions, such as Christy’s Group (“Christy’s” or “Christy’s Group”), and Party Delights, strengthening our manufacturing, distribution and retail platforms. We have also acquired, and will continue to acquire, our franchised stores and independent party good retailers as such opportunities emerge. We believe our significant experience in identifying attractive acquisition targets, proven integration process and global infrastructure create a strong platform for future acquisitions.

During October 2014, we acquired U.S. Balloon Manufacturing Co., Inc. (“U.S. Balloon”), a distributor of metallic balloons. We expect that the acquisition will allow us to capture the full manufacturing-to-retail margin on balloons that we manufacture and sell at company-owned Party City stores.

Industry Overview

We operate in the broadly defined $10 billion retail party goods industry (including decorative paper and plastic tableware, decorations, accessories and balloons), which is supported by a range of suppliers from commodity paper goods producers to party goods specialty retailers. Sales of party goods are fueled by everyday events such as birthdays, baby showers, weddings and anniversaries, as well as seasonal events such as holidays and other special occasions (Halloween, Christmas, New Year’s Eve, graduations, Easter, Super Bowl, Fourth of July). As a result of numerous and diverse occasions, the U.S. party goods market enjoys broad demographic appeal. Additionally, we operate in the $7 billion Halloween market, a portion of which overlaps with the $10 billion retail party goods industry. The Halloween market includes costumes, candy and makeup.

The retail landscape is comprised primarily of party superstores, mass merchants, craft stores, grocery retailers, and dollar stores. The party superstore has emerged as a preferred destination for party goods shoppers, similar to the dominance of specialty retailers in other categories such as home improvement, pet products and sporting goods. This is typically due to the superstore chain’s ability to offer a wider variety of merchandise at more compelling prices in a convenient setting as well as the knowledgeable staff often found at superstores. Other retailers that cater to the party goods market typically offer a limited assortment of party supplies and seasonal items. Mass merchants tend to focus primarily on juvenile and seasonal goods, greeting cards and gift wrap; craft stores on decorations and seasonal merchandise; and dollar stores on general and seasonal party goods items.

well during economic downturns. Manufacturers and retailers continue to create and market party goods and gifts that celebrate a greater number of holidays and occasions. Additionally, the number and types of products offered for each occasion continues to expand, encouraging add-on and impulse purchases by consumers.

Recent Developments

We estimate that as of and for the quarter ended March 31, 2015:

•

Consolidated revenue will be between $ million and $ million, compared to $433.0 million for the quarter ended March 31, 2014;

•

Party City brand comp sales will increase between % and % as compared to the quarter ended March 31, 2014.

The preliminary consolidated financial results presented above are subject to the completion of our financial closing procedures for the quarter ended March 31, 2015. Those procedures have not been completed and we do not anticipate completion of those procedures until mid-May 2015. Accordingly, these results may change and those changes may be material. In particular, we have provided ranges for the preliminary consolidated revenue and Party City brand comp sales presented above because we expect that our final results may vary from our preliminary estimates. Party City brand comp sales include e-commerce, Canadian store sales and sales for stores converted from the FCPO, Party Packagers and iParty formats to the Party City format. This preliminary consolidated financial data has been prepared by and is the responsibility of our management. Ernst & Young LLP has not audited, reviewed, compiled or performed any procedures with respect to this preliminary consolidated financial data. Accordingly, Ernst & Young LLP does not express an opinion or any other form of assurance with respect thereto.

The Transactions

On July 27, 2012, Merger Sub, a wholly-owned subsidiary of PC Intermediate Holdings, Inc. (“Holdings”), which is our wholly-owned subsidiary, merged into Party City Holdings Inc. (“PCHI”), with PCHI being the surviving entity. Immediately after the Acquisition, 100% of our common stock was owned by funds affiliated with Thomas H. Lee Partners, L.P. (“THL”), who held approximately 70% ownership, funds affiliated with Advent International Corporation (“Advent” and, together with THL, the “Sponsors”), who held approximately 24% ownership, and other minority investors, including management, who held approximately 6% ownership. To consummate the Acquisition, our subsidiary, PCHI, entered into new debt financing consisting of (i) $1,525 million of senior secured credit facilities (the “Senior Credit Facilities”) consisting of: (a) a $400 million revolving credit facility (the “ABL Facility”), which had $115 million drawn at the closing of the Acquisition and (b) a $1,125 million term loan credit facility (the “Term Loan Facility”), and (ii) $700 million of 8.875% senior notes (the “senior notes”).

We refer to the Acquisition and the related transactions, including the issuance and sale of the senior notes and the borrowings under the Senior Credit Facilities, as the “Transactions.”

Risks That We Face

Our business is subject to a number of risks of which you should be aware before making an investment decision. The risks are discussed more fully in the “Risk Factors” section of this prospectus immediately following this prospectus summary. These risks include, but are not limited to, the following:

•

we operate in a competitive industry, and our failure to compete effectively could cause us to lose our market share, revenues and growth prospects;

•

our business may be adversely affected by fluctuations in commodity prices;

•

our failure to appropriately respond to changing merchandise trends and consumer preferences could significantly harm our customer relationships and financial performance;

•

we may not be able to successfully implement our store growth strategy;

•

a decrease in our Halloween sales could have a material adverse effect on our operating results for the year;

•

our substantial indebtedness and lease obligations could adversely affect our financial flexibility and our competitive position; and

•

investment funds affiliated with the Sponsors will have the ability to control the outcome of matters submitted for stockholder approval and may have interests that differ from those of our other stockholders.

The Sponsors

THL is one of the world’s oldest and most experienced private equity firms. THL invests in growth-oriented companies across three broad sectors: Business & Financial Services, Consumer & Healthcare and Media & Information Services. THL’s investment and operating professionals partner with portfolio company management teams to identify and implement business model improvements that accelerate sustainable revenue and profit growth. The firm focuses on global businesses headquartered primarily in North America. Since the firm’s founding in 1974, THL has raised approximately $20 billion of equity capital and invested in more than 100 portfolio companies with an aggregate value of more than $150 billion. The firm’s two most recent private equity funds comprise more than $14 billion of aggregate committed capital.

Founded in 1984, Advent is one of the largest and most experienced global private equity investors. Since inception, the firm has invested in 300 companies in 40 countries, and today has $34 billion in assets under management. With offices on four continents, Advent has established a globally integrated team of over 180 investment professionals across North America, Europe, Latin America and Asia. The firm focuses on investments across five core sectors, including business and financial services; healthcare; industrial; retail, consumer and leisure; and technology, media and telecoms.

Affiliates of THL, together with affiliates of Advent, own approximately 93% of our common stock, with affiliates of THL owning approximately 69% of our common stock. Upon completion of this offering and assuming no exercise of the underwriters’ option to purchase additional shares, the Sponsors will continue to beneficially own approximately % of our outstanding common stock. As a result, we expect to be a “controlled company” within the meaning of the corporate governance standards of the New York Stock Exchange (the “NYSE”) on which we have applied for our shares to be listed. See “Risk Factors—Risks Related to this Offering.”

Corporate Information

Party City Holdco Inc. is a Delaware corporation. Our executive offices are located at 80 Grasslands Road, Elmsford, New York 10523 and our telephone number at that location is (914) 345-2020. Our website address is http://www.PartyCity.com. The information on our website is not a part of this prospectus, and you should not rely on it in connection with your decision whether or not to participate in this offering.

THE OFFERING

Common stock offered by us

Common stock to be outstanding after this offering

Option to purchase additional shares offered to underwriters

We have granted the underwriters an option to purchase up to additional shares.

Use of proceeds

Assuming an initial public offering price of $ , which is the midpoint of the range listed on the cover page of this prospectus, we estimate that the net proceeds to us from this offering will be approximately $ million. We intend to use the net proceeds from this offering to (a) pay a $ million termination fee, in the aggregate, to the Sponsors pursuant to our management agreement with them, which will thereafter be terminated, and (b) to redeem all or a portion of the senior PIK toggle notes. See “Use of Proceeds.”

Risk factors

You should read the “Risk Factors” section of this prospectus beginning on page 15 for a discussion of factors to consider carefully before deciding whether to purchase shares of our common stock.

Proposed NYSE symbol

PRTY

Conflict of Interest

Because Goldman, Sachs & Co. is an underwriter and its affiliates collectively indirectly own approximately 11% of the issuer’s common stock through investments in investment funds affiliated with Thomas H. Lee Partners, L.P. and Advent International Corporation, Goldman, Sachs & Co. is deemed to have a “conflict of interest” under Rule 5121 of the Financial Industry Regulatory Authority. Rule 5121 requires that a “qualified independent underwriter” meeting certain standards participate in the preparation of the registration statement and prospectus and exercise the usual standards of due diligence in respect thereto, subject to certain exceptions which are not applicable here. Merrill Lynch, Pierce, Fenner & Smith Incorporated will serve as a qualified independent underwriter within the meaning of Rule 5121 in connection with this offering. For more information see “Underwriting (Conflicts of Interest).”

The number of shares of our common stock to be outstanding after this offering is based on 33,605.91 shares of common stock outstanding as of December 31, 2014 and excludes:

•

2,388 shares of common stock issuable upon the exercise of stock options issued under our 2012 Omnibus Equity Incentive Plan (the “2012 Plan”) with a weighted average exercise price of $14,916 per share;

•

1,245.6 additional shares of common stock reserved for future issuance under the 2012 Plan; and

•

5,470 additional shares of common stock reserved for future issuance under the 2012 Plan, as amended, which amendment shall take effect prior to the consummation of this offering.

Unless otherwise indicated, all information in this prospectus assumes:

•

a -for-one stock split on our common stock effected as a stock dividend on , 2015;

•

the adoption of our amended and restated certificate of incorporation and our amended and restated bylaws (“bylaws”), to be effective upon the closing of this offering; and

•

no exercise by the underwriters of their option to purchase up to additional shares of our common stock in this offering.

SUMMARY FINANCIAL DATA

The following table sets forth summary historical consolidated financial data for the periods ended and at the dates indicated below. Our summary historical consolidated financial data as of December 31, 2013 (Successor) and December 31, 2014 (Successor) and for the period from July 28, 2012 to December 31, 2012 (Successor), the period from January 1, 2012 to July 27, 2012 (Predecessor) and the years ended December 31, 2013 (Successor) and December 31, 2014 (Successor) presented in this table has been derived from our historical audited consolidated financial statements included elsewhere in this prospectus.

The historical results presented below are not necessarily indicative of the results to be expected for any future period. The following information should be read in conjunction with the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our financial statements and the notes thereto contained elsewhere in this prospectus.


	Period from January 1 to July 27, 2012			Period from July 28 to December 31, 2012			Fiscal Year Ended December 31, 2013 (1)			Fiscal Year Ended December 31, 2014 (2)
	Period from January 1 to July 27, 2012			Period from July 28 to December 31, 2012			Fiscal Year Ended December 31, 2013 (1)			Fiscal Year Ended December 31, 2014 (2)
	(Predecessor)			(Successor)			(Successor)			(Successor)
		(dollars in thousands, except per common share data)
Income Statement Data:
Revenues:
Net sales	$	930,903		$	964,330		$	2,026,272		$	2,251,589
Royalties and franchise fees		9,281			9,312			18,841			19,668

Total revenues		940,184			973,642			2,045,113			2,271,257
Expenses:
Cost of sales (3)		574,048			636,410			1,259,188			1,375,706
Wholesale selling expenses		31,568			28,096			68,102			73,910
Retail operating expenses		166,047			172,168			369,996			397,110
Franchise expenses		6,579			6,128			13,320			14,281
General and administrative expenses (4)		101,502			65,890			146,094			147,718
Art and development costs		10,824			8,201			19,311			19,390
Impairment of trade name (5)		—			—			7,500			—

Income from operations		49,616			56,749			161,602			243,142
Interest expense, net		41,970			62,062			143,406			155,917
Other expense, net (6)		22,245			26,157			18,478			5,891

(Loss) income before income taxes		(14,599	)		(31,470	)		(282	)		81,334
Income tax expense (benefit)		403			(1,322	)		(4,525	)		25,211

Net (loss) income		(15,002	)		(30,148	)		4,243			56,123
Less: net income attributable to noncontrolling interests		96			60			224			—

Net (loss) income attributable to Party City Holdco Inc.	$	(15,098	)	$	(30,208	)	$	4,019		$	56,123

Per Share Data:
Net income (loss) per share
Basic
Diluted
Weighted Average
Outstanding basic
Diluted

Statement of Cash Flow Data:
Net cash provided by (used in)
Operating activities (7)	$	(18,126	)	$	(35,508	)	$	135,818		$	136,387
Investing activities (7)		(31,824	)		(1,578,553	)		(112,522	)		(89,632	)
Financing activities (7)		33,318			1,629,331			(18,373	)		(23,530	)

Cash dividend per common share		—			—			10,087			—


	Period from January 1 to July 27, 2012			Period from July 28 to December 31, 2012			Fiscal Year Ended December 31, 2013 (1)			Fiscal Year Ended December 31, 2014 (2)
	Period from January 1 to July 27, 2012			Period from July 28 to December 31, 2012			Fiscal Year Ended December 31, 2013 (1)			Fiscal Year Ended December 31, 2014 (2)
	(Predecessor)			(Successor)			(Successor)			(Successor)
				(dollars in thousands)
Other Financial Data:
Adjusted EBITDA (8)	$	116,982		$	175,329		$	320,775		$	362,125
Adjusted EBITDA margin (8)		12.4	%		18.0	%		15.7	%		15.9	%
Adjusted net income (8)	$	22,883		$	50,920		$	68,393		$	86,838
Number of company-owned Party City stores (9)					600			674			693
Capital expenditures	$	28,864		$	16,376		$	61,241		$	78,241
Party City brand comp sales (10)								2.9	%		5.8	%
Share of shelf (11)		64.7	%		63.7	%		67.5	%		70.2	%

Balance Sheet Data (at end of period):
Cash and cash equivalents				$	20,899		$	25,645		$	47,214
Working capital					387,858			396,027			463,715
Total assets					3,283,319			3,327,534			3,380,863
Total debt (12)					1,851,517			2,184,486			2,165,168
Redeemable common securities					22,205			23,555			35,062
Total equity (12)					787,450			456,757			487,226

(1)	The acquisitions of Party Delights and iParty are included in the financial statements from their acquisition dates (March 13, 2013 and May 9, 2013, respectively).

(2)	The acquisition of U.S. Balloon is included in the financial statements from the acquisition date (October 24, 2014).

(3)

(4)

In conjunction with the Transactions, the Company recorded $8.4 million of transaction costs in general and administrative expenses during the period from January 1, 2012 to July 27, 2012. Additionally, the Transactions accelerated the vesting of certain of the Company’s stock options and during the period from January 1, 2012 to July 27, 2012 the Company recorded $2.1 million of expense in general and administrative expenses. Further, due to the vesting of such stock options, the Company made payments in lieu of dividends to the holders of such options and during the period from January 1, 2012 to July 27, 2012, the Company recorded a $16.1 million charge in general and administrative expenses.

(5)

In conjunction with the Transactions, the Company applied the acquisition method of accounting and allocated the $2.7 billion acquisition price to various tangible and intangible assets, including the Company’s Halloween City trade name. The value that was ascribed to the trade name was based on the number of Halloween City stores that the Company expected to open during each subsequent Halloween selling season and the expected performance of such stores. The number of stores that the Company opens during a season is driven by many factors, including the availability of suitable locations. During 2013, the Company made a strategic decision to open fewer temporary Halloween City stores. As a result of a change in store performance and the Company’s decision to open fewer Halloween City stores than assumed in 2012, during 2013 the Company lowered the value of its Halloween City trade name by recording a $7.5 million impairment charge.

(6)

During February 2014, the Company amended the Term Loan Facility. In conjunction with the refinancing, the Company wrote-off $1.6 million of costs that had been capitalized during the issuance of the debt. Additionally, the Company wrote-off $0.6 million of the net original issuance discount and $0.7 million of the unamortized call premium that existed at the time of the amendment. Also, in conjunction with the refinancing, the Company expensed $1.4 million of banker and legal fees. During February 2013, the Company amended the Term Loan Facility. In conjunction with that amendment, the Company wrote-off $5.9 million of costs that had been capitalized during the initial issuance of the debt. Additionally, the Company wrote-off $2.3 million of the net original issuance discount that existed as of the time of that amendment. Also, in conjunction with that amendment, the Company expensed $2.5 million of a call premium and $1.6 million of investment banking and legal fees. In conjunction with the Transactions, the Company recorded $19.7 million of transaction costs in other expense, net during the period from January 1, 2012 to July 27, 2012 and $24.6 million of transaction costs during the period from July 28, 2012 to December 31, 2012. Additionally, the period from January 1, 2012 to July 27, 2012 included $2.5 million in costs as a result of the termination of an initial public offering.

(7)	See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity” for a discussion of cash flows.

(8)

We present adjusted EBITDA and adjusted net income as supplemental measures of our operating performance. We define EBITDA as net income (loss) before interest expense, net, income taxes, depreciation and amortization. We define adjusted EBITDA as EBITDA, as further adjusted to eliminate the impact of certain items that we do not consider indicative of our ongoing operating performance. These further adjustments are itemized below. Adjusted net income represents our net income (loss), adjusted for intangible asset amortization, non-cash purchase accounting adjustments, amortization of deferred financing costs and original issue discount, the Sponsors management fee, refinancing charges, equity-based compensation, payments in lieu of dividend, impairment charges and costs associated with the Transactions. We present adjusted EBITDA and adjusted net income as supplemental measures of our performance. You are encouraged to evaluate these adjustments and the reasons we consider them appropriate for supplemental analysis. In evaluating adjusted EBITDA and adjusted net income, you should be aware that in the future we may incur expenses that are the same as or similar to some of the adjustments in this presentation. Our presentation of adjusted EBITDA and adjusted net income should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items.

We present adjusted EBITDA and adjusted net income because we believe it assists investors and analysts in comparing our performance across reporting periods on a consistent basis by excluding items that we do not believe are indicative of our core operating performance. In addition, we use adjusted EBITDA: (i) as a factor in determining incentive compensation, (ii) to evaluate the effectiveness of our business strategies and (iii) because the credit facility uses adjusted EBITDA to measure compliance with certain covenants. While we have historically not used adjusted net income for internal management reporting and valuation purposes, we believe adjusted net income is a helpful benchmark to evaluate our operating performance.

We also include information concerning adjusted EBITDA margin, which is defined as the ratio of adjusted EBITDA to revenue. We present adjusted EBITDA margin because it is used by management as a performance measurement to judge the level of adjusted EBITDA generated from revenue. We believe its inclusion is appropriate to provide additional information to investors.

Adjusted EBITDA, adjusted net income and adjusted EBITDA margin have limitations as analytical tools. Some of these limitations are:

•

adjusted EBITDA, adjusted net income and adjusted EBITDA margin do not reflect our cash expenditures, or future requirements, for capital expenditures or contractual commitments;

•

adjusted EBITDA and adjusted net income do not reflect changes in, or cash requirements for, our working capital needs;

•

adjusted EBITDA does not reflect the significant interest expense, or the cash requirements necessary to service interest or principal payments, on our indebtedness;

•

although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and adjusted EBITDA and adjusted net income do not reflect any cash requirements for such replacements;

•

non-cash compensation is and will remain a key element of our overall long-term incentive compensation package, although we exclude it as an expense when evaluating our ongoing operating performance for a particular period;

•

adjusted EBITDA and adjusted net income do not reflect the impact of certain cash charges resulting from matters we consider not to be indicative of our ongoing operations; and

•

other companies in our industry may calculate adjusted EBITDA and adjusted net income differently than we do, limiting its usefulness as a comparative measure.

Because of these limitations, adjusted EBITDA, adjusted net income and adjusted EBITDA margin should not be considered in isolation or as substitutes for performance measures calculated in accordance with GAAP. We compensate for these limitations by relying primarily on our GAAP results and using adjusted EBITDA, adjusted net income and adjusted EBITDA margin only on a supplemental basis. The reconciliations from net income (loss) to each of adjusted EBITDA and adjusted net income for the periods presented is as follows:


	Period from January 1 to July 27, 2012			Period from July 28 to December 31, 2012			Fiscal Year Ended December 31, 2013			Fiscal Year Ended December 31, 2014
	(Predecessor)			(Successor)			(Successor)			(Successor)
	(dollars in thousands)
Net (loss) income	$	(15,002	)	$	(30,148	)	$	4,243		$	56,123
Interest expense, net		41,970			62,062			143,406			155,917
Income taxes		403			(1,322	)		(4,525	)		25,211
Depreciation and amortization		33,915			49,837			94,624			82,890

EBITDA		61,286			80,429			237,748			320,141
Equity based compensation		3,375			—			2,137			1,583
Non-cash purchase accounting adjustments		—			58,626	(a)		25,229	(a)		8,868	(a)
Management fee		713	(b)		1,292	(b)		3,000	(b)		3,356	(b)
Impairment charges		—			—			7,822	(c)		1,012
Restructuring, retention and severance		355			784			4,673			3,391
Payment in lieu of dividend		16,533	(d)		—			—			—
Refinancing charges		—			—			12,295	(e)		4,396	(e)
Deferred rent		3,344			6,335			17,055			14,418
Business interruption		—			2,000	(f)		500	(f)		(2,435	)(f)
Transaction costs		28,582	(g)		24,564	(g)		—			—
Corporate development expenses		2,395			351			4,828			700
Foreign currency losses		148			532			1,581			1,447
Store closing costs		305			169			1,498			1,199
Undistributed (income) loss in unconsolidated joint venture		(128	)		(297	)		172			1,556
Other		74			544			2,237			2,493

Adjusted EBITDA	$	116,982		$	175,329		$	320,775		$	362,125


	Period from January 1 to July 27, 2012			Period from July 28 to December 31, 2012			Fiscal Year Ended December 31, 2013			Fiscal Year Ended December 31, 2014
	(Predecessor)			(Successor)			(Successor)			(Successor)
	(dollars in thousands)
(Loss) income before income taxes	$	(14,599	)	$	(31,470	)	$	(282	)	$	81,334
Intangible asset amortization		5,542	(h)		14,160	(h)		26,997	(h)		22,195	(h)
Non-cash purchase accounting adjustments		—			71,755	(a)		39,414	(a)		13,692	(a)
Amortization of deferred financing costs and original issuance discount		2,592	(i)		4,605	(i)		20,211	(e)(i)		15,610	(e)(i)
Management fee		713	(b)		1,292	(b)		3,000	(b)		3,356	(b)
Refinancing charges		—			—			4,068	(e)		1,407	(e)
Equity based compensation		3,375			—			2,137			1,583
Payment in lieu of dividend		16,533	(d)		—			—			—
Impairment charges		—			—			7,822	(c)		1,012
Transaction costs		28,582	(g)		24,564	(g)		—			—

Adjusted income before income taxes		42,738			84,906			103,367			140,189
Adjusted income tax expense		19,855	(j)		33,986	(j)		34,974	(j)		53,351	(j)

Adjusted net income	$	22,883		$	50,920		$	68,393		$	86,838

(a)

As a result of the Acquisition, the Company applied the acquisition method of accounting and increased the value of its inventory by $89.8 million as of July 28, 2012. Such adjustment increased the Company’s cost of sales during 2014, 2013, and the period from July 28, 2012 to December 31, 2012 by $5.9 million, $25.2 million and $58.6 million, respectively, as the related inventory was sold. Further, during the application of the acquisition method of accounting, the Company increased the value of certain property, plant and equipment. The impact of such adjustments on depreciation expense increased the Company’s expenses during 2014, 2013, and the period from July 28, 2012 to December 31, 2012, by $4.8 million, $14.2 million and $13.1 million, respectively. These property, plant and equipment depreciation amounts are included in “Non-cash purchase accounting adjustments” for purposes of calculating “adjusted net income,” but are excluded from “Non-cash purchase accounting adjustments” for purposes of calculating adjusted EBITDA since they are included in depreciation expense.

(b)

Represents management fees paid to the Sponsors. The management agreement will terminate upon consummation of this offering. See “Certain Relationships and Related Party Transactions—Management Agreement.”

(c)

(d)

In December 2010, a one-time cash dividend was declared. In addition, holders of unvested options at the declaration date would receive a distribution when the options vested. At the time of the Transactions on July 27, 2012, certain outstanding stock options became fully vested and distributions were made in the amount of $16.1 million. Further, prior to the Transactions, during 2012 certain outstanding stock options became fully vested and the Company made distributions in the amount of $0.4 million. The Company recorded charges equal to such amounts in general and administrative expenses during the period from January 1, 2012 to July 27, 2012.

(e)

During February 2014, the Company amended the Term Loan Facility. In conjunction with the refinancing, the Company wrote-off $1.6 million of costs that had been capitalized during the issuance of the debt. Additionally, the Company wrote-off $0.6 million of the net original issuance discount and $0.7 million of the unamortized call premium that existed at the time of the amendment. These amounts are included in “Amortization of deferred financing costs and original issue discount” in this table and in the Company’s consolidated statement of cash flows included elsewhere in this prospectus. Also, in conjunction with the refinancing, the Company expensed $1.4 million of banker and legal fees. During February 2013, the Company amended the Term Loan Facility. In conjunction with that amendment, the Company wrote-off $5.9 million of costs that had been capitalized during the initial issuance of the debt. Additionally, the Company wrote-off $2.3 million of the net original issuance discount that existed as of the time of that amendment. Both amounts are included in “Amortization of deferred financing costs and original issue discount” in this table and in the Company’s consolidated statement of cash flows included elsewhere in this prospectus. Also, in conjunction with that amendment, the Company expensed $2.5 million of a call premium and $1.6 million of investment banking and legal fees.

(f)

During October 2012, the Company’s operations were negatively impacted by Superstorm Sandy and the Company pursued business interruption insurance proceeds. During the fourth quarter of 2012 and the second quarter of 2013, the Company increased Adjusted EBITDA by $2.0 million and $1.0 million, respectively, to reflect its best estimate of the expected business interruption proceeds yet to be reflected in the consolidated statement of operations and comprehensive income (loss). During the fourth quarter of 2013 and during 2014, the Company received business interruption proceeds of $0.5 million and $4.5 million, respectively, and recognized those amounts in its consolidated statements of operations and comprehensive income (loss). To the extent that estimated proceeds were previously included in Adjusted EBITDA, the Company reduced Adjusted EBITDA for 2013 and 2014.

(g)

In conjunction with the Transactions, the Company incurred certain costs. See Note 5 to the audited consolidated financial statements which are included elsewhere in this prospectus.

(h)

Represents the amortization of intangible assets, including those assets recorded in conjunction with the application of the acquisition method of accounting due to the Transactions.

(i)

Represents the amortization of deferred financing costs and original issuance discounts related to debt offerings. Additionally, 2013 includes the write-off of deferred financing costs and net original issuance discounts in conjunction with the February 2013 Term Loan Facility amendment and 2014 includes the write-off of deferred financing costs, net original issue discounts and unamortized call premiums in conjunction with the February 2014 Term Loan Facility amendment. See note (e) for further discussion.

(j)

Represents the income tax expense using the rate in effect after considering the adjustments.

(9)	Data as of December 31, 2014 and December 31, 2013 includes all stores that were acquired from iParty and which were converted to the Party City banner at such dates.

(10)	Party City brand comp sales include e-commerce, Canadian store sales and sales for stores converted from the FCPO, Party Packagers and iParty formats to the Party City format.

(11)	Represents the percentage of product costs included in cost of goods sold by our domestic permanent stores (including converted iParty stores starting in 2014) and North American e-commerce operations, which relate to products supplied by our wholesale operations.

(12)	Excludes redeemable common securities.

RISK FACTORS

Investing in our common stock involves a certain degree of risk. You should carefully consider the following risk factors, as well as the other information in this prospectus, before deciding to invest in our common stock. The occurrence of any of the following risks could harm our business, financial condition, results of operations or prospects. In that case, the trading price of our common stock could decline, and you may lose all or part of your investment. Certain statements in “Risk Factors” are “forward-looking statements.” See “Special Note Regarding Forward-Looking Statements” elsewhere in this prospectus.

Risks Related to Our Business

We operate in a competitive industry, and our failure to compete effectively could cause us to lose our market share, revenues and growth prospects.

We compete with many other manufacturers and distributors, including smaller, independent manufacturers and distributors and divisions or subsidiaries of larger companies with greater financial and other resources than we have. Some of our competitors control licenses for widely recognized images and have broader access to mass market retailers that could provide them with a competitive advantage.

The party goods retail industry is large and highly fragmented. Our retail stores compete with a variety of smaller and larger retailers, including specialty retailers, warehouse/merchandise clubs, drug stores, supermarkets, dollar stores, mass merchants, and catalogue and online merchants. Our stores compete, among other ways, on the basis of location and store layout, product mix and availability, customer convenience and price. We may not be able to continue to compete successfully against existing or future competitors in the retail space. Expansion into markets served by our competitors and entry of new competitors or expansion of existing competitors into our markets could materially adversely affect our business, results of operations, cash flows and financial performance.

We must remain competitive in the areas of quality, price, breadth of selection, customer service and convenience. Competing effectively may require us to reduce our prices or increase our costs, which could lower our margins and adversely affect our revenues and growth prospects.

Our business may be adversely affected by fluctuations in commodity prices.

The costs of our key raw materials (paper, petroleum-based resin and cotton) fluctuate. In general, we absorb movements in raw material costs that we consider temporary or insignificant. However, cost increases that are considered other than temporary may require us to increase our prices to maintain our margins. Raw material prices may increase in the future and we may not be able to pass on these increases to our customers. A significant increase in the price of raw materials that we cannot pass on to customers could have a material adverse effect on our results of operations and financial performance. In addition, the interruption in supply of certain key raw materials essential to the manufacturing of our products may have an adverse impact on our and our suppliers’ abilities to manufacture the products necessary to maintain our existing customer relationships.

Our business may be adversely impacted by helium shortages.

Although not used in the actual manufacture of our products, helium gas is currently used to inflate the majority of our metallic balloons. We rely upon the exploration and refining of natural gas to ensure adequate supplies of helium as helium is a by-product of the natural gas production process.

During the middle of 2012, helium supplies tightened due to the following factors: (i) new natural gas plants took longer than expected to come on-line, (ii) certain natural gas plants experienced longer than anticipated downtime for maintenance, (iii) helium demand increased due to new technologies and (iv) natural gas production declined due to warmer than usual winters. As a result, our full-year 2012 domestic metallic balloon

sales were $2.6 million lower than 2011 and our full-year 2013 domestic metallic balloon sales were $0.5 million lower than 2012 as balloon distributors and retailers rationalized inventory levels in light of the shortage.

We believe that the shortage is temporary as new natural gas plants came on-line during the second half of 2013, other plants are expected to come online in the near term, and many helium users are implementing conservation programs. However, should the shortage continue, it could have a material impact on our results.

During 2014, net sales of metallic balloons to domestic distributors and others were $5.7 million higher than during 2013 primarily due to the impact of new licenses and improving helium supplies.

Our failure to appropriately respond to changing merchandise trends and consumer preferences could significantly harm our customer relationships and financial performance.

As a manufacturer, distributor and retailer of consumer goods, our products must appeal to a broad range of consumers whose preferences are constantly changing. We also sell certain licensed products, with images such as cartoon or motion picture characters, which are in great demand for short time periods, making it difficult to project our inventory needs for these products. In addition, we may not be able to obtain the licenses for certain popular characters and could lose market share to competitors who are able to obtain those licenses. Additionally, if consumers’ demand for single-use, disposable party goods were to diminish in favor of reusable products for environmental or other reasons, our sales could decline.

The success of our business depends upon many factors, such as our ability to accurately predict the market for our products and our customers’ purchasing habits, to identify product and merchandise trends, to innovate and develop new products, to manufacture and deliver our products in sufficient volumes and in a timely manner and to differentiate our product offerings from those of our competitors. We may not be able to continue to offer assortments of products that appeal to our customers or respond appropriately to consumer demands. We could misinterpret or fail to identify trends on a timely basis. Our failure to anticipate, identify or react appropriately to changes in consumer tastes could, among other things, lead to excess inventories and significant markdowns or a shortage of products and lost sales. Our failure to do so could harm our customer relationships and financial performance.

We may not be able to successfully implement our store growth strategy.

If we are unable to increase the number of retail stores we operate and increase the productivity and profitability of existing retail stores, our ability to increase sales, profitability and cash flow could be impaired. To the extent we are unable to open new stores as we planned, our sales growth would come primarily from increases in comparable store sales. We may not be able to increase our comparable store sales, improve our margins or reduce costs as a percentage of sales. Growth in profitability in that case would depend significantly on our ability to increase margins or reduce costs as a percentage of sales. Further, as we implement new initiatives to reduce the cost of operating our stores, sales and profitability may be negatively impacted.

Our ability to successfully open and operate new stores depends on many factors including, among others, our ability to:

•

identify suitable store locations, including temporary lease space for our Halloween City locations, the availability of which is largely outside of our control;

•

negotiate and secure acceptable lease terms, desired tenant allowances and assurances from operators and developers that they can complete the project, which depend in part on the financial resources of the operators and developers;

•

obtain or maintain adequate capital resources on acceptable terms, including the availability of cash for rent outlays under new leases;

•

manufacture and source sufficient levels of inventory at acceptable costs;

•

hire, train and retain an expanded workforce of store managers and other personnel;

•

successfully integrate new stores into our existing control structure and operations, including information system integration;

•

maintain adequate manufacturing and distribution facilities, information system and other operational system capabilities;

•

identify and satisfy the merchandise and other preferences of our customers in new geographic areas and markets;

•

gain brand recognition and acceptance in new markets; and

•

address competitive, merchandising, marketing, distribution and other challenges encountered in connection with expansion into new geographic areas and markets, including geographic restrictions on the opening of new stores based on certain agreements with our franchisees and other business partners.

In addition, as the number of our stores increases along with our online sales, we may face risks associated with market saturation of our product offerings. To the extent our new store openings are in markets where we have existing stores, we may experience reduced net sales in existing stores in those markets. Finally, there can be no assurance that any newly opened stores will be received as well as, or achieve net sales or profitability levels comparable to those of, our existing stores in the time periods estimated by us, or at all. If our stores fail to achieve, or are unable to sustain, acceptable net sales and profitability levels, our business may be materially harmed and we may incur significant costs associated with closing those stores. Our failure to effectively address challenges such as these could adversely affect our ability to successfully open and operate new stores in a timely and cost-effective manner, and could have a material adverse effect on our business, results of operations and financial condition.

A decrease in our Halloween sales could have a material adverse effect on our operating results for the year.

Our retail business, including our Party City stores, online sales from our e-commerce website and our temporary Halloween City locations, realizes a significant portion of its revenues, net income and cash flow in September and October, principally due to our Halloween sales. For example, in 2014 our Halloween business represented approximately 25% of our total domestic retail sales. We believe this general pattern will continue in the future. An economic downturn, or adverse weather, during this period could adversely affect us to a greater extent than at other times of the year. Any unanticipated decrease in demand for our products during the Halloween season could require us to maintain excess inventory or sell excess inventory at a substantial markdown, which could have a material adverse effect on our business, profitability, ability to repay any indebtedness and our brand image. In addition, our sales during the Halloween season could be affected if we are not able to find sufficient and adequate lease space for our temporary Halloween City locations or if we are unable to hire temporary personnel to adequately staff these stores and our distribution facility during the Halloween season. Failure to have proper lease space and adequate personnel could hurt our business, financial condition and results of operations.

Disruption to the transportation system or increases in transportation costs may negatively affect our operating results.

We rely upon various means of transportation, including shipments by air, sea, rail and truck, to deliver products to our distribution centers from vendors and manufacturers and from other distribution centers to our stores, as well as for direct shipments from vendors to stores. Independent third parties with whom we conduct business may employ personnel represented by labor unions. Labor stoppages, shortages or capacity constraints in the transportation industry, disruptions to the national and international transportation infrastructure, fuel shortages or transportation cost increases could adversely affect our business, results of operations, cash flows and financial performance.

Product recalls and/or product liability may adversely impact our business, merchandise offerings, reputation, results of operations, cash flow and financial performance.

We may be subject to product recalls if any of the products that we manufacture or sell are believed to cause injury or illness. In addition, as a retailer of products manufactured by third parties, we may also be liable for various product liability claims for products we do not manufacture. Indemnification provisions that we may enter into are typically limited by their terms and depend on the creditworthiness of the indemnifying party and its insurer and the absence of significant defenses. We may be unable to obtain full recovery from the insurer or any indemnifying third party in respect of any claims against us in connection with products manufactured by such third party. In addition, if our vendors fail to manufacture or import merchandise that adheres to our quality control standards or standards established by applicable law, our reputation and brands could be damaged, potentially leading to an increase in customer litigation against us. Furthermore, to the extent we are unable to replace any recalled products, we may have to reduce our merchandise offerings, resulting in a decrease in sales, especially if a recall occurs near or during a peak seasonal period. If our vendors are unable or unwilling to recall products failing to meet our quality standards, we may be required to recall those products at a substantial cost to us.

Our business is sensitive to consumer spending and general economic conditions, and an economic slowdown could adversely affect our financial performance.

In general, our retail sales, and the retail sales of our business partners to whom we sell, represent discretionary spending by our customers and our business partners’ customers. Discretionary spending is affected by many factors, such as general business conditions, interest rates, availability of consumer credit, unemployment levels, taxation, weather and consumer confidence in future economic conditions. Our customers’ and our business partners’ customers’ purchases of discretionary items, including our products, often decline during periods when disposable income is lower or during periods of actual or perceived unfavorable economic conditions. If this occurs, our revenues and profitability will decline. In addition, economic downturns may make it difficult for us to accurately forecast future demand trends, which could cause us to purchase excess inventories, resulting in increases in our inventory carrying cost, or insufficient inventories, resulting in our inability to satisfy our customer demand and potential loss of market share.

Our business may be adversely affected by the loss or actions of our third-party vendors.

Our ability to find new qualified vendors who meet our standards and supply products in a timely and efficient manner can be a significant challenge, especially for goods sourced from outside the United States. Many of our vendors currently provide us with incentives such as volume purchasing allowances and trade discounts. If our vendors were to reduce or discontinue these incentives, costs would increase. Should we be unable to pass cost increases to consumers, our profitability would be reduced.

Because we rely heavily on our own manufacturing operations, disruptions at our manufacturing facilities could adversely affect our business, results of operations, cash flows and financial performance.

In 2014, we manufactured items representing approximately 31% of our net sales at wholesale (including sales to our retail operations). Any significant disruption in our manufacturing facilities, in the United States or abroad, for any reason, including regulatory requirements, the loss of certifications, power interruptions, fires, hurricanes, war or other force of nature, could disrupt our supply of products, adversely affecting our business, results of operations, cash flows and financial performance. The occurrence of one or more natural disasters, or other disruptive geo-political events, could also result in increases in fuel (or other energy) prices or a fuel shortage, the temporary or permanent closure of one or more of manufacturing or distribution centers, the temporary lack of an adequate work force in a market, the temporary or long-term disruption in the supply of products from some local and overseas suppliers, the temporary disruption in the transport of goods from overseas or delays in the delivery of goods to our distribution centers or stores or to third parties who purchase from us. If one or more of these events occurred, our revenues and profitability would be reduced.

Our business and results of operations may be harmed if our suppliers or third-party manufacturers fail to follow acceptable labor practices or to comply with other applicable laws and guidelines.

Many of the products sold in our stores and on our website are manufactured outside of the United States, which may increase the risk that the labor, manufacturing safety and other practices followed by the manufacturers of these products may differ from those generally accepted in the United States as well as those with which we are required to comply under many of our image or character licenses. Although we require each of our vendors to sign a purchase order and vendor agreement that requires adherence to accepted labor practices and compliance with labor, manufacturing safety and other laws and we test merchandise for product safety standards, we do not supervise, control or audit our vendors or the manufacturers that produce the merchandise we sell to our customers. The violation of labor, manufacturing safety or other laws by any of our vendors or manufacturers, or the divergence of the labor practices followed by any of our vendors or manufacturers from those generally accepted in the United States could interrupt or otherwise disrupt the shipment of finished products to us, damage our brand image, subject us to boycotts by our customers or activist groups or cause some of our licensors of popular images to terminate their licenses to us. Our future operations and performance will be subject to these factors, which are beyond our control and could materially hurt our business, financial condition and results of operations or require us to modify our current business practices or incur increased costs.

Our international operations subject us to additional risks, which risks and costs may differ in each country in which we do business and may cause our profitability to decline.

We conduct our business in a number of foreign countries, including contracting with manufacturers and suppliers located outside of the United States, many of which are located in Asia. We recently expanded our international operations through the acquisitions of the Christy’s Group, a U.K. based costume company, in September 2010, Riethmüller, a German distributor of party goods, in January 2011, Party City Canada, a Canadian retailer of party goods and outdoor toys, in July 2011 and Party Delights, a U.K. based e-commerce retailer, in March 2013, and we plan to continue to expand our international operations through acquisitions, investments in joint ventures and organic expansion. Our operations and financial condition may be adversely affected if the markets in which we compete or source our products are affected by changes in political, economic or other factors. These factors, over which we have no control, may include:

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recessionary or expansive trends in international markets;

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changes in foreign currency exchange rates, principally fluctuations in the Euro, British pound sterling, Mexican peso, Canadian dollar, Australian dollar, Malaysian ringgit and Chinese renminbi;

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hyperinflation or deflation in the foreign countries in which we operate;

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work stoppages or other employee rights issues;

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the imposition of restrictions on currency conversion or the transfer of funds;

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transportation delays and interruptions;

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increases in the taxes we pay and other changes in applicable tax laws;

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difficulty enforcing our intellectual property and competition against counterfeit goods;

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legal and regulatory changes and the burdens and costs of our compliance with a variety of laws, including trade restrictions and tariffs; and

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political and economic instability.

We may face risks associated with litigation and claims.

From time to time, we are involved in class actions and other lawsuits, claims and other proceedings relating to the conduct of our business, including but not limited to employee-related and consumer matters. Additionally, as a retailer and manufacturer of decorated party goods, we have been and may continue to be subject to product liability claims if the use of our products, whether manufactured by us or third party manufacturers, is alleged to have resulted in injury or if our products include inadequate instructions or warnings. Due to the uncertainties of litigation, we can give no assurance that we will prevail on all claims made against us in the lawsuits that we

currently face or that additional claims will not be made against us in the future. While it is not feasible to predict the outcome of pending lawsuits and claims, we do not believe that any such matters are material or that the disposition thereof is likely to have a material adverse effect on our business, financial condition and results of operations, although the resolution in any reporting period of any matter could have an adverse effect on our operating results for that period. Also, we can give no assurance that any other lawsuits or claims brought in the future will not have a material adverse effect on our business, financial condition and results of operations.

We may require additional capital to fund our business, which may not be available to us on satisfactory terms or at all.

We currently rely on cash generated by operations and borrowings available under the credit facilities to meet our working capital needs. However, if we are unable to generate sufficient cash from operations or if borrowings available under the credit facilities are insufficient, we may be required to adopt one or more alternatives to raise cash, such as incurring additional indebtedness, selling our assets, seeking to raise additional equity capital or restructuring, which alternatives may not be available to us on satisfactory terms or at all. Any of the foregoing could have a material adverse effect on our business.

Our success depends on key personnel whom we may not be able to retain or hire.

The success of our business depends, to a large extent, on the continued service of our senior management team. Gerald C. Rittenberg, our Executive Chairman, and James M. Harrison, our Chief Executive Officer, have been with the Company for approximately 24 and 18 years, respectively. The loss of the services and leadership of either of these individuals could have a negative impact on our business, as we may not be able to find management personnel with similar experience and industry knowledge to replace either of them on a timely basis. We do not maintain key life insurance on any of our senior officers.

As our business expands, we believe that our future success will depend greatly on our continued ability to attract, motivate and retain highly skilled and qualified personnel. Although we generally have been able to meet our staffing requirements in the past, our ability to meet our labor needs while controlling costs is subject to external factors, such as unemployment levels, minimum wage legislation and changing demographics. Our inability to meet our staffing requirements in the future at costs that are favorable to us, or at all, could impair our ability to increase revenue, and our customers could experience lower levels of customer service.

We are subject to risks associated with leasing substantial amounts of space.

We lease all of our company-owned stores, our corporate headquarters and most of our distribution facilities. Payments under our leases account for a significant portion of our operating expenses and we expect payment obligations under our leases to account for a significant portion of our future operating expenses. The majority of our store leases contain provisions for base rent and a small number of store leases contain provisions for base rent, plus percentage rent based on sales in excess of an agreed upon minimum annual sales level. Our continued growth and success depends in part on our ability to renew leases for successful stores and negotiate leases for new stores, including temporary leases for our Halloween City stores. There is no assurance that we will be able to negotiate leases at similar or favorable terms, and we may decide not to enter a market or be forced to exit a market if a favorable arrangement cannot be made. If an existing or future store is not profitable and we decide to close it, we may nonetheless be committed to perform our obligations under the applicable lease, including, among other things, paying the base rent for the balance of the lease term. Moreover, even if a lease has an early cancellation clause, we may not satisfy the contractual requirements for early cancellation under the lease.

Our business could be harmed if our existing franchisees do not conduct their business in accordance with agreed upon standards.

Our success depends, in part, upon the ability of our franchisees to operate their stores and promote and develop our store concept. Although our franchise agreements include certain operating standards, all franchisees

operate independently and their employees are not our employees. We provide certain training and support to our franchisees, but the quality of franchise store operations may be diminished by any number of factors beyond our control. Consequently, franchisees may not successfully operate stores in a manner consistent with our standards and requirements, or may not hire and train qualified managers and other store personnel. If they do not, our image, brand and reputation could suffer.

Our information systems, order fulfillment and distribution facilities may prove inadequate or may be disrupted.

We depend on our management information systems for many aspects of our business. We will be materially adversely affected if our management information systems are disrupted or we are unable to improve, upgrade, maintain and expand our systems. In particular, we believe our perpetual inventory, automated replenishment and stock ledger systems are necessary to properly forecast, manage and analyze our inventory levels, margins and merchandise ordering quantities. We may fail to properly optimize the effectiveness of these systems, or to adequately support and maintain the systems. Moreover, we may not be successful in developing or acquiring technology that is competitive and responsive to our customers and might lack sufficient resources to make the necessary investments in technology needs and to compete with our competitors, which could have a material adverse impact on our business, results of operations, cash flows and financial performance.

In addition, we may not be able to prevent a significant interruption in the operation of our electronic order entry and information systems, e-commerce platform or manufacturing and distribution facilities due to natural disasters, accidents, systems failures or other events. Any significant interruption in the operation of these facilities, including an interruption caused by our failure to successfully expand or upgrade our systems or manage our transition to utilizing the expansions or upgrades, could reduce our ability to receive and process orders and provide products and services to our stores, third-party stores, and other customers, which could result in lost sales, cancelled sales and a loss of loyalty to our brand.

We may fail to adequately maintain the security of our electronic and other confidential information.

We have become increasingly centralized and dependent upon automated information technology processes. In addition, a portion of our business operations is now conducted over the Internet. We could experience operational problems with our information systems and e-commerce platform as a result of system failures, viruses, computer “hackers” or other causes. Any material disruption or slowdown of our systems could cause information, including data related to customer orders, to be lost or delayed, which could—especially if the disruption or slowdown occurred during a peak sales season—result in delays in the delivery of merchandise to our stores and customers or lost sales, which could reduce demand for our merchandise and cause our sales to decline.

In addition, in the ordinary course of our business, we collect and store certain personal information from individuals, such as our customers and suppliers, and we process customer payment card and check information, including via our e-commerce platform. Computer hackers may attempt to penetrate our computer system and, if successful, misappropriate personal information, payment card or check information or confidential Company business information. In addition, a Company employee, contractor or other third party with whom we do business may attempt to circumvent our security measures in order to obtain such information and may purposefully or inadvertently cause a breach involving such information. Any failure to maintain the security of our customers’ confidential information, or data belonging to us or our suppliers, could put us at a competitive disadvantage, result in deterioration in our customers’ confidence in us, subject us to potential litigation and liability, and fines and penalties, resulting in a possible material adverse impact on our business, results of operations, cash flows and financial performance.

Historically we have made a number of acquisitions, and we may make more acquisitions in the future as part of our growth strategy. Future acquisitions or investments could disrupt our ongoing business, distract management and employees, increase our expenses and adversely affect our business. In addition, we may not be able to identify suitable acquisitions.

We have made a number of recent acquisitions which have contributed to our growth. Acquisitions require significant capital resources and can divert management’s attention from our existing business. Acquisitions also entail an inherent risk that we could become subject to contingent or other liabilities, including liabilities arising from events or conduct predating the acquisition, that were not known to us at the time of acquisition. We may also incur significantly greater expenditures in integrating an acquired business than we had anticipated at the time of the acquisition, which could impair our ability to achieve anticipated cost savings and synergies. Acquisitions may also have unanticipated tax and accounting ramifications. Our failure to successfully identify and consummate acquisitions or to manage and integrate the acquisitions we make could have a material adverse effect on our business, financial condition or results of operations.

In addition, we may not be able to:

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identify suitable acquisition candidates;

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consummate acquisitions on acceptable terms;

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successfully integrate any acquired business into our operations or successfully manage the operations of any acquired business; or

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retain an acquired company’s significant customer relationships, goodwill and key personnel or otherwise realize the intended benefits of an acquisition.

In the event that the operations of an acquired business do not meet our performance expectations, we may have to restructure the acquired business or write-off the value of some or all of the assets of the acquired business.

Our intellectual property rights may be inadequate to protect our business.

We hold a variety of United States trademarks, service marks, patents, copyrights, and registrations and applications therefor, as well as a number of foreign counterparts thereto and/or independent foreign intellectual property asset registrations. In some cases, we rely solely on unregistered common law trademark rights and unregistered copyrights under applicable United States law to distinguish and/or protect our products, services and branding from the products, services and branding of our competitors. We cannot assure you that no one will challenge our intellectual property rights in the future. In the event that our intellectual property rights are successfully challenged by a third party, we could be forced to re-brand, re-design or discontinue the sale of certain of our products or services, which could result in loss of brand recognition and/or sales and could require us to devote resources to advertising and marketing new branding or re-designing our products. Further, we cannot assure you that competitors will not infringe our intellectual property rights, or that we will have adequate resources to enforce these rights. We also permit our franchisees to use a number of our trademarks and service marks, including Party City, The Discount Party Super Store, Party America and Halloween City. Our failure to properly control our franchisees’ use of such trademarks could adversely affect our ability to enforce them against third parties. A loss of any of our material intellectual property rights could have a material adverse effect on our business, financial condition and results of operations.

We license from many third parties and do not own the intellectual property rights necessary to sell products capturing many popular images, such as cartoon or motion picture characters. While none of these licenses is individually material to our aggregate business, a large portion of our business depends on the continued ability to license the intellectual property rights to these images in the aggregate. Any injury to our reputation or our inability to comply with, in many cases, stringent licensing guidelines in these agreements may adversely affect our ability to maintain these relationships. A termination of any of our significant intellectual property licenses, or any other similarly material limitation on our ability to use certain licensed material may prevent us from

manufacturing and distributing certain licensed products and could cause our customers to purchase these products from our competitors. In addition, we may be unable to renew some of our significant intellectual property licenses on terms favorable to us or at all. A large aggregate loss of our right to use intellectual property under our license agreements could have a material adverse effect on our business, financial condition and results of operations.

We also face the risk of claims that we have infringed third parties’ intellectual property rights, which could be expensive and time consuming to defend, cause us to cease using certain intellectual property rights, redesign certain products or packaging or cease selling certain products or services, result in our being required to pay significant damages or require us to enter into costly royalty or licensing agreements in order to obtain the rights to use third parties’ intellectual property rights, which royalty or licensing agreements may not be available at all, any of which could have a negative impact on our operating profits and harm our future prospects.

Risks Related to Our Indebtedness

Our substantial indebtedness and lease obligations could adversely affect our financial flexibility and our competitive position.

As of December 31, 2014, we had total indebtedness of $2,178.5 million (exclusive of original issue discount and call premiums) and an additional $356.6 million of borrowing capacity available under the ABL Facility (excluding $19.5 million of letters of credit outstanding as of December 31, 2014).

We also have, and will continue to have, significant lease obligations. As of December 31, 2014, our minimum aggregate rental obligation under operating leases for fiscal 2015 through 2019 totaled $497.9 million.

Our net interest expense for 2014 was approximately $155.9 million. As of December 31, 2014, we had outstanding approximately $1,123.8 million in aggregate principal amount (exclusive of original issue discount and call premiums) of indebtedness under the Senior Credit Facilities that bears interest at a floating rate.

Our substantial level of indebtedness will increase the possibility that we may be unable to generate cash sufficient to pay, when due, the principal of, interest on or other amounts due in respect of our indebtedness. For example, it could:

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make it more difficult for us to satisfy our obligations with respect to our indebtedness and any failure to comply with the obligations under any of our debt instruments, including restrictive covenants, could result in an event of default under the agreements governing such other indebtedness;

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require us to dedicate a substantial portion of our cash flow from operations to payments on our indebtedness, thereby reducing funds available for working capital, capital expenditures, acquisitions, selling and marketing efforts, product development and other purposes;

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increase our vulnerability to adverse economic and industry conditions, which could place us at a competitive disadvantage compared to our competitors that have relatively less indebtedness;

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limit our flexibility in planning for, or reacting to, changes in our business and the industries in which we operate;

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expose us to the risk of increasing rates as certain of our borrowings, including under the Senior Credit Facilities, will be at variable interest rates;

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restrict us from making strategic acquisitions or cause us to make non-strategic divestitures; and

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limit our ability to borrow additional funds, or to dispose of assets to raise funds, if needed, for working capital, capital expenditures, acquisitions, product development and other corporate purposes.

The occurrence of any one of these events could have an adverse effect on our business, financial condition, results of operations, prospects and ability to satisfy our obligations under our indebtedness.

Restrictions under our existing and future indebtedness may prevent us from taking actions that we believe would be in the best interest of our business.

The agreements governing our existing indebtedness contain and the agreements governing our future indebtedness will likely contain customary restrictions on us or our subsidiaries, including covenants that, among other things and subject to certain exceptions, restrict us or our subsidiaries, as the case may be, from:

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incurring additional indebtedness or issuing disqualified stock;

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paying dividends or distributions on, redeeming, repurchasing or retiring our capital stock;

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making payments on, or redeeming, repurchasing or retiring indebtedness;

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making investments, loans, advances or acquisitions;

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entering into sale and leaseback transactions;

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engaging in transactions with affiliates;

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creating liens;

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transferring or selling assets;

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guaranteeing indebtedness;

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creating restrictions on the payment of dividends or other amounts to us from our subsidiaries; and

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consolidating, merging or transferring all or substantially all of our assets and the assets of our subsidiaries.

In addition, the ABL Facility requires us to comply, under specific circumstances, including certain types of acquisitions, with a minimum fixed charge coverage ratio (as defined therein) covenant of 1.00 to 1.00. At December 31, 2014, such ratio was 1.5 to 1.00. Our ability to comply with this covenant can be affected by events beyond our control, and we may not be able to satisfy it. A breach of this covenant would be an event of default. If an event of a default occurs under the ABL Facility, the ABL Facility lenders could elect to declare all amounts outstanding under the ABL Facility to be immediately due and payable and/or terminate their commitments to lend additional money, which would also lead to a cross-default and cross-acceleration of amounts owing under the Term Loan Facility and would lead to an event of default under our senior notes and senior PIK toggle notes if any of the Senior Credit Facilities were accelerated. If the indebtedness under the Senior Credit Facilities or our other indebtedness were to be accelerated, our assets may not be sufficient to repay such indebtedness in full. We have pledged a significant portion of our assets as collateral under the Senior Credit Facilities. See “Description of Certain Debt.”

We may not be able to generate sufficient cash to service all of our indebtedness and may be forced to take other actions to satisfy our obligations under our indebtedness, which may not be successful.

Our ability to make scheduled payments on or to refinance our debt obligations depends on our financial condition and operating performance, which is subject to prevailing economic and competitive conditions and to certain financial, business and other factors beyond our control. We may not be able to maintain a level of cash flows from operating activities sufficient to permit us to pay the principal, premium, if any, and interest on our indebtedness.

If our cash flows and capital resources are insufficient to fund our debt service obligations, we may be forced to reduce or delay investments and capital expenditures, or to sell assets, seek additional capital or restructure or refinance our indebtedness. Our ability to restructure or refinance our debt will depend on the condition of the capital markets and our financial condition at such time. Any refinancing of our debt could be at higher interest rates and may require us to comply with more onerous covenants, which could further restrict our

business operations. The terms of existing or future debt instruments may restrict us from adopting some of these alternatives. In addition, any failure to make payments of interest and principal on our outstanding indebtedness on a timely basis would likely result in a reduction of our credit rating, which could harm our ability to incur additional indebtedness. In the absence of such operating results and resources, we could face substantial liquidity problems and might be required to dispose of material assets or operations to meet our debt service and other obligations. The Senior Credit Facilities and the indentures governing the senior notes and senior PIK toggle notes will restrict our ability to dispose of assets and use the proceeds from the disposition. We may not be able to consummate those dispositions or to obtain the proceeds that we could realize from them and these proceeds may not be adequate to meet any debt service obligations then due. These alternative measures may not be successful and may not permit us to meet our scheduled debt service obligations.

Our ability to repay our debt is affected by the cash flow generated by our subsidiaries.

Our subsidiaries own substantially all of our assets and conduct substantially all of our operations. Accordingly, repayment of our indebtedness will be dependent on the generation of cash flow by our subsidiaries and their ability to make such cash available to us, by dividend, debt repayment or otherwise. Our subsidiaries may not be able to, or may not be permitted to, make distributions to enable us to make payments in respect of our indebtedness. Each subsidiary is a distinct legal entity and, under certain circumstances, legal and contractual restrictions may limit our ability to obtain cash from our subsidiaries. While the indentures governing the senior notes and the senior PIK toggle notes limit the ability of our subsidiaries to incur consensual restrictions on their ability to pay dividends or make other intercompany payments to us, these limitations are subject to certain qualifications and exceptions.

In addition, under certain circumstances, legal restrictions may limit our ability to obtain cash from our subsidiaries. Under the Delaware General Corporation Law (the “DGCL”), our subsidiaries organized in the State of Delaware may only make dividends (i) out of their “surplus” as defined in the DGCL or (ii) if there is no such surplus, out of their net profits for the fiscal year in which the dividend is declared and/or the preceding fiscal year. Under fraudulent transfer laws, certain of our subsidiaries may not pay dividends if the relevant entity is insolvent or is rendered insolvent thereby. The measures of insolvency for purposes of these fraudulent transfer laws vary depending upon the law applied in any proceeding to determine whether a fraudulent transfer has occurred. Generally, however, an entity would be considered insolvent if:

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the sum of its debts, including contingent liabilities, was greater than the fair saleable value of all of its assets;

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the present fair saleable value of its assets was less than the amount that would be required to pay its probable liability on its existing debts, including contingent liabilities, as they become absolute and mature; or

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it could not pay its debts as they became due.

While we believe that we and our relevant subsidiaries currently have surplus and are not insolvent, there can otherwise be no assurance that we and these subsidiaries will not become insolvent or will be permitted to make dividends in the future in compliance with these restrictions in amounts needed to service our indebtedness.

Significant interest rate changes could affect our profitability and financial performance.

Our earnings are affected by changes in interest rates as a result of our variable rate indebtedness under the ABL Facility and Term Loan Facility. The interest rate swap agreements that we use to manage the risk associated with fluctuations in interest rates may not be able to fully eliminate our exposure to these changes.

Risks Related to This Offering

An active public market for our common stock may not develop following this offering.

Prior to this offering, there has been no public market for our common stock. We cannot predict the extent to which investor interest in our company will lead to the development of an active trading market in our common stock or how liquid that market might become. An active market for our common stock may not develop or be sustained after the offering. If an active public market does not develop or is not sustained, it may be difficult for you to sell your shares of common stock at a price that is attractive to you, or at all. In addition, an inactive market may impair our ability to raise capital by selling shares and may impair our ability to acquire other companies by using our shares as consideration, which, in turn, could materially adversely affect our business.

We expect to be a “controlled company” within the meaning of the NYSE rules and, as a result, we will qualify for, and currently intend to rely on, exemptions from certain corporate governance requirements. You will not have the same protections afforded to stockholders of companies that are subject to such requirements.

After completion of this offering, we expect that our Sponsors will hold more than 50% of our common stock. If that occurs, we expect to qualify as a “controlled company” within the meaning of the corporate governance rules of the NYSE. Under these rules, a company of which more than 50% of the voting power is held by an individual, group or another company is a “controlled company” and may elect not to comply with certain corporate governance requirements, including:

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the requirement that a majority of the board of directors consist of independent directors;

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the requirement that we have a nominating and corporate governance committee that is composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities; and

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the requirement that we have a compensation committee that is composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities.

Accordingly, we intend to rely on exemptions from certain corporate governance requirements. As a result, we may not have a majority of independent directors and our compensation committee and nominating and corporate governance committee may not consist entirely of independent directors. Additionally, we are only required to have one independent audit committee member upon the listing of our common stock on the , a majority of independent audit committee members within 90 days from the date of listing and all independent audit committee members within one year from the date of listing. Consequently, you will not have the same protections afforded to stockholders of companies that are subject to all of the NYSE corporate governance rules and requirements. Our status as a controlled company could make our common stock less attractive to some investors or otherwise harm our stock price.

Investment funds affiliated with the Sponsors will have the ability to control the outcome of matters submitted for stockholder approval and may have interests that differ from those of our other stockholders.

Investment funds affiliated with the Sponsors beneficially own approximately 93% of our capital stock as of December 31, 2014. After the completion of this offering, assuming the underwriters do not exercise their option to purchase additional shares, the Sponsors will beneficially own approximately % of our common stock. The Sponsors have significant influence over corporate transactions. So long as investment funds associated with or designated by the Sponsors continue to own a significant amount of the outstanding shares of our common stock, even if such amount is less than 50%, the Sponsors will continue to be able to strongly influence or effectively control our decisions, regardless of whether or not other stockholders believe that the transaction is in their own best interests. Such concentration of voting power could also have the effect of delaying, deterring or preventing a change of control or other business combination that might otherwise be beneficial to our stockholders.

Our stock price may be volatile or may decline regardless of our operating performance, and you may not be able to resell your shares at a price at or above the initial public offering price.

The initial public offering price for the shares of our common stock sold in this offering will be determined by negotiation between the representatives of the underwriters and us. This price may not reflect the market price of our common stock following this offering. In addition, the market price of our common stock is likely to be highly volatile and may fluctuate substantially in response to a number of factors, most of which we cannot control, including:

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actual or anticipated fluctuations in our results of operations;

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variance in our financial performance from the expectations of equity research analysts;

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changes in consumer preferences or merchandise trends;

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announcements of new products or significant price reductions by our competitors;

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additions or changes to key personnel;

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the timing of releases of new merchandise or promotional events;

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the level of customer service that we provide in our stores;

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our ability to source and distribute products effectively;

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weather conditions (particularly during the holiday season);

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the number of stores we open, close or convert in any period;

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the commencement or outcome of litigation;

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changes in market valuation or earnings of our competitors;

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the trading volume of our common stock;

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future sale of our equity securities; and

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economic, legal and regulatory factors unrelated to our performance.

The initial public offering price of our common stock will be determined by negotiations between us and the underwriters based upon a number of factors and may not be indicative of prices that will prevail following the completion of this offering. Volatility in the market price of our common stock may prevent investors from being able to sell their common stock at or above the initial public offering price. As a result, you may suffer a loss on your investment.

In addition, the stock markets in general have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance or the particular companies affected. These broad market and industry factors may materially harm the market price of our common stock irrespective of our operating performance. As a result of these factors, you might be unable to resell your shares at or above the initial public offering price after this offering. In addition, in the past, following periods of volatility in the overall market and the market price of a company’s securities, securities class action litigation has often been instituted against the affected company. This type of litigation, if instituted against us, could result in substantial costs and a diversion of our management’s attention and resources.

We will incur increased costs as a result of becoming a public company.

As a public company, we will incur significant legal, accounting, and other expenses that we have not incurred as a private company, including costs associated with public company reporting requirements. We also have incurred and will incur costs associated with the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”) and related rules implemented by the Securities and Exchange Commission (“SEC”). The expenses incurred by

public companies generally for reporting and corporate governance purposes have been increasing. We expect these rules and regulations to increase our legal and financial compliance costs and to make some activities more time-consuming and costly, although we are currently unable to estimate these costs with any degree of certainty. These laws and regulations could also make it more difficult or costly for us to obtain certain types of insurance, including director and officer liability insurance, and we may be forced to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. These laws and regulations could also make it more difficult for us to attract and retain qualified persons to serve on our board of directors, our board committees or as our executive officers. Furthermore, if we are unable to satisfy our obligations as a public company, we could be subject to delisting of our common stock, fines, sanctions and other regulatory action and potentially civil litigation.

We do not expect to pay any cash dividends for the foreseeable future and, consequently, your only opportunity to achieve a return on your investment is if the price of our common stock appreciates.

Following this offering, we do not anticipate that we will pay any cash dividend on shares of our common stock for the foreseeable future. Any determination to pay dividends in the future will be at the discretion of our board of directors and will depend upon results of operations, financial performance, contractual restrictions, restrictions imposed by applicable law and other factors our board of directors deems relevant. Additionally, the ABL Facility, the Term Loan Facility and the indentures governing the senior notes and the senior PIK toggle notes contain restrictive covenants which have the effect of limiting our ability to pay cash dividends. Accordingly, if you purchase shares in this offering, realization of a gain on your investment will depend on the appreciation of the price of our common stock, which may never occur. Investors seeking cash dividends in the foreseeable future should not purchase our common stock.

Future sales of our common stock, or the perception in the public markets that these sales may occur, may depress our stock price.

Sales of substantial amounts of our common stock in the public market after this offering, or the perception that these sales could occur, could adversely affect the price of our common stock and could impair our ability to raise capital through the sale of additional shares. Upon completion of this offering, assuming no exercise by the underwriters of their option to purchase additional shares, we will have million shares of common stock outstanding, a majority of which we expect will be held by the Sponsors. This concentration, commonly referred to as a market overhang, could depress the price at which our stock trades.

Upon expiration of lock-up agreements between the underwriters and our officers, directors, and certain other holders of our common stock, a substantial number of shares of our common stock could be sold into the public market shortly after this offering, which could depress our stock price.

Our officers, directors and holders of substantially all of our common stock have entered into lock-up agreements with our underwriters which prohibit, subject to certain limited exceptions, the disposal or pledge of, or the hedging against, any of their common stock or securities convertible into or exchangeable for shares of common stock for a period through the date 180 days after the date of this prospectus, subject to extension in certain circumstances. See “Shares Eligible for Future Sale” for a more detailed description of the restrictions on selling shares of our common stock after this offering. The market price of our common stock could decline as a result of sales by our existing stockholders in the market after this offering and after the expiration of these lock-up periods, or the perception that these sales could occur. Once a trading market develops for our common stock, and after these lock-up periods expire, many of our stockholders will have an opportunity to sell their stock for the first time. These factors could also make it difficult for us to raise additional capital by selling stock.

If you purchase shares of common stock in this offering, you will incur immediate and substantial dilution.

If you purchase shares of common stock in this offering, you will incur immediate and substantial dilution in the amount of $ per share because the initial public offering price of $ per share is substantially higher than the pro forma net tangible book value per share of our common stock. This dilution is due in large part to the fact that our earlier investors paid substantially less than the initial public offering price when they purchased their shares. In addition, you may also experience additional dilution upon future equity issuances or the exercise of stock options to purchase common stock granted to our employees, consultants and directors under our equity incentive plans.

We may undertake acquisitions to expand our business, which may pose risks to our business and dilute the ownership of our existing shareholders.

We continuously seek to expand our business through strategic acquisitions, both domestically and internationally. Our recent acquisitions include the March 2013 acquisition of Party Delights, the May 2013 acquisition of iParty and the October 2014 acquisition of U.S. Balloon. See “Business—Evolution of Our Business” for a more detailed description of recent acquisitions and the growth of our business.

We will continue to selectively pursue acquisitions of businesses, technologies or services. Based on our previous experiences, integrating any newly acquired business, technology or service is an expensive and time consuming task. To finance any future acquisitions, it may be necessary for us to raise additional funds through public or private financings. Additional funds may not be available on terms that are favorable to us, and, in the case of equity financings, would result in dilution to our shareholders. We may be unable to operate any newly acquired businesses profitably or otherwise implement our strategy successfully. If we are unable to integrate any newly acquired entities, technologies or services effectively, our business and results of operations will suffer.

The time and expense associated with finding suitable and compatible businesses, technologies or services could also disrupt our ongoing business and divert our management’s attention. Future acquisitions by us could also result in large and immediate write-offs or assumptions of debt and contingent liabilities, any of which could substantially harm our business and results of operations.

Our management will have broad discretion over the use of the proceeds we receive in this offering and might not apply the proceeds in ways that increase the value of your investment.

We estimate that net proceeds of the sale of the common stock that we are offering will be approximately $ million. Our management will have broad discretion to use our net proceeds from this offering, and you will be relying on the judgment of our management regarding the application of these proceeds. Our management might not apply the net proceeds of this offering in ways that increase the value of your investment. Our management might not be able to yield any return on the investment and use of these net proceeds. You will not have the opportunity to influence our decisions on how to use the proceeds.

If securities or industry analysts do not publish research or reports or publish unfavorable research or reports about our business, our stock price and trading volume could decline.

The trading market for our common stock will depend in part on the research and reports that securities and industry analysts publish about us, our business, our market or our competitors. We may not obtain research coverage by securities and industry analysts. If no securities or industry analysts commence coverage of our company, the trading price of our stock could be negatively impacted. In the event we obtain securities or industry analyst coverage, if one or more of the analysts who covers us publishes unfavorable research or reports or downgrades our stock, our stock price would likely decline. If one or more of these analysts ceases to cover us or fails to regularly publish reports on us, interest in our stock could decrease, which could cause our stock price or trading volume to decline.

Anti-takeover provisions in our charter documents and Delaware law might discourage, delay or prevent a change in control of our company.

Our amended and restated certificate of incorporation or bylaws contain provisions that may make the acquisition of our company more difficult without the approval of our board of directors. These provisions include:

•

the division of our board of directors into three classes and the election of each class for three-year terms;

•

certain rights of the Sponsors with respect to the designation of directors for nomination and election to our board of directors;

•

advance notice requirements for stockholder proposals and director nominations;

•

the sole ability of the board of directors to fill a vacancy created by the expansion of the board of directors;

•

the required approval of holders of at least 75% of our outstanding shares of capital stock entitled to vote generally at an election of the directors to remove directors only for cause once the Sponsors cease to collectively own at least 50% of our outstanding common stock;

•

the required approval of holders of at least 66 ² ⁄ ₃ % of our outstanding shares of capital stock entitled to vote at an election of directors to adopt, amend or repeal our bylaws, or amend or repeal certain provisions of our amended and restated certificate of incorporation once the Sponsors cease to collectively own at least 50% of our outstanding common stock;

•

limitations on the ability of stockholders to call special meetings and, when the Sponsors cease to collectively own 50% of our outstanding common stock, to take action by written consent; and

•

provisions that reproduce much of the provisions that limit the ability of “interested stockholders” (other than the Sponsors and certain of their transferees) from engaging in specified business combinations with us absent prior approval of the board of directors or holders of 66 ² ⁄ ₃ % of our voting stock.

The existence of the foregoing provisions and anti-takeover measures could limit the price that investors might be willing to pay in the future for shares of our common stock. They could also deter potential acquirers of our company, thereby reducing the likelihood that you could receive a premium for your common stock in the acquisition.

Our amended and restated certificate of incorporation designates courts in the State of Delaware as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees.

Our amended and restated certificate of incorporation provides that, subject to limited exceptions, the Court of Chancery of the State of Delaware will be the sole and exclusive forum for (i) any derivative action or proceeding brought on our behalf, (ii) any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers or other employees to us or our stockholders, (iii) any action asserting a claim against us arising pursuant to any provision of the DGCL, our amended and restated certificate of incorporation or our amended and restated bylaws or (iv) any other action asserting a claim against us that is governed by the internal affairs doctrine (each, a “Covered Proceeding”). In addition, our amended and restated certificate of incorporation provides that if any action the subject matter of which is a Covered Proceeding is filed in a court other than the specified Delaware courts without the approval of our board of directors (each, a “Foreign Action”), the claiming party will be deemed to have consented to (i) the personal jurisdiction of the specified Delaware courts in connection with any action brought in any such courts to enforce the exclusive forum provision described above and (ii) having service of process made upon such claiming party in any such

enforcement action by service upon such claiming party’s counsel in the Foreign Action as agent for such claiming party. Any person or entity purchasing or otherwise acquiring any interest in shares of our capital stock shall be deemed to have notice of and to have consented to these provisions. These provisions may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers or other employees, which may discourage such lawsuits against us and our directors, officers and employees. Alternatively, if a court were to find these provisions of our amended and restated certificate of incorporation inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions, which could adversely affect our business and financial condition.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

From time to time, including in this prospectus and, in particular, the section captioned “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” we make forward-looking statements that use words such as the company “believes,” “anticipates,” “expects,” “targets,” “estimates,” “intends,” “will,” “may” or “plans” and similar expressions. These forward-looking statements reflect our current expectations and are based upon data available to us at the time the statements were made. Examples of forward-looking statements include, but are not limited to, statements we make regarding (i) our target percentage for the selection of Amscan merchandise offered in Party City stores, (ii) our belief that our cash generated by operating activities, the remaining funds under the credit facilities and existing cash and cash equivalents will be sufficient to meet our liquidity needs over the next 12 months and (iii) anticipated benefits expected to be realized from recent acquisitions.

Such statements are subject to certain risks and uncertainties that could cause actual results to differ materially from expectations. These risks, as well as other risks and uncertainties, are detailed in the sections titled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this prospectus. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this prospectus may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements. All forward-looking statements in this prospectus are qualified by these cautionary statements and are made only as of the date of this prospectus. Any such forward-looking statements, whether made in this prospectus or elsewhere, should be considered in context with the various disclosures made by us about our business. The following risks related to our business, among others, could cause actual results to differ materially from those described in the forward-looking statements:

•

our ability to compete effectively in a competitive industry;

•

fluctuations in commodity prices;

•

adequacy of helium supplies;

•

our ability to appropriately respond to changing merchandise trends and consumer preferences;

•

successful implementation of our store growth strategy;

•

decreases in our Halloween sales;

•

disruption to the transportation system or increases in transportation costs;

•

product recalls or product liability;

•

economic slowdown affecting consumer spending and general economic conditions;

•

loss or actions of third party vendors and loss of the right to use licensed material;

•

disruptions at our manufacturing facilities;

•

failure by suppliers or third-party manufacturers to follow acceptable labor practices or to comply with other applicable laws and guidelines;

•

our international operations subjecting us to additional risks;

•

potential litigation and claims;

•

lack of available additional capital;

•

our inability to retain or hire key personnel;

•

risks associated with leasing substantial amounts of space;

•

failure of existing franchisees to conduct their business in accordance with agreed upon standards;

•

adequacy of our information systems, order fulfillment and distribution facilities;

•

our ability to adequately maintain the security of our electronic and other confidential information;

•

our inability to successfully identify and integrate acquisitions;

•

adequacy of our intellectual property rights;

•

risks related to our substantial indebtedness; and

•

the other factors set forth under “Risk Factors.”

You should not unduly rely on these forward-looking statements, which speak only as of the date of this prospectus. Unless required by law, we undertake no obligation to publicly update or revise any forward-looking statements to reflect new information or future events or otherwise. You should, however, review the factors and risks we describe in the reports we will file from time to time with the SEC after the date of this prospectus. See “Where You Can Find Additional Information.”

THE TRANSACTIONS

On June 4, 2012, Party City Holdco Inc., an affiliate of THL, PCHI and Merger Sub entered into an Agreement and Plan of Merger, pursuant to which, on July 27, 2012, Merger Sub merged with and into PCHI, with PCHI being the surviving corporation and a wholly-owned subsidiary of Holdings. The aggregate consideration paid in connection with the Acquisition was approximately $2.7 billion. As a result of the consummation of the Acquisition, each outstanding share of PCHI’s common stock (together with any associated rights), other than those held by PCHI (other than treasury stock), Party City Holdco Inc., or any subsidiary of either PCHI or Party City Holdco Inc., were converted into the right to receive cash consideration. Additionally, all outstanding options to acquire capital stock of PCHI were accelerated and cancelled and, in the case of vested in-the-money options only, was converted into the right to receive a cash payment.

To consummate the Acquisition, our subsidiary, PCHI, entered into new debt financing consisting of (i) the $1,525 million Senior Credit Facilities, consisting of: (a) the $400 million ABL Facility, which had $115 million drawn at the closing of the Acquisition, and (b) the $1,125 million Term Loan Facility, and (ii) $700 million of 8.875% senior notes. Subsequent to the closing of the Acquisition, proceeds from the ABL Facility are available to provide financing for working capital and general corporate purposes. See “Description of Certain Debt” for further details on the Senior Credit Facilities and the senior notes.

USE OF PROCEEDS

We estimate that the net proceeds of the sale of the common stock that we are offering will be approximately $ million, assuming an initial public offering price of $ per share, which is the midpoint of the range listed on the cover page of this prospectus, and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. If the underwriters exercise their option to purchase additional shares in full, we estimate that the net proceeds will be approximately after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.

We intend to use the net proceeds that we receive from this offering (a) to pay a $ million termination fee, in the aggregate, to the Sponsors pursuant to our management agreement with them, which will thereafter be terminated, and (b) to redeem all or a portion of the senior PIK toggle notes, which mature on August 15, 2019. The amount of senior PIK toggle notes we redeem will depend on the amount of net proceeds from this offering remaining after payment of the management agreement termination fee. Assuming an initial offering price of $ per share, which is the midpoint of the range listed on the cover page of this prospectus, we expect to redeem approximately $ million of the senior PIK toggle notes.

In the event we generate more than $ million of net proceeds, we expect to redeem all outstanding senior PIK toggle notes and to use any remaining proceeds to repay or repurchase additional indebtedness, including amounts outstanding under the Senior Credit Facilities.

We are required to pay interest in cash at a rate of 8.750% per annum on the senior PIK toggle notes, unless certain conditions are satisfied, in which case we are entitled to pay all or a portion of the interest by increasing the principal amount of the notes or issuing additional notes (“PIK Interest”). PIK Interest is paid at a rate of 9.500%. Under the terms of the indenture governing the senior PIK toggle notes, prior to February 15, 2016, we may redeem the notes at a price equal to 102% of the principal amount thereof plus accrued and unpaid interest thereon up to but not including the date of redemption.

A $1.00 increase or decrease in the assumed initial public offering price of $ per share (the midpoint of the range listed on the cover page of this prospectus) would increase or decrease the net proceeds to us from this offering by $ assuming the number of shares offered by us remains the same and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. An increase or decrease of 1,000,000 shares in the number of shares offered by us would increase or decrease the net proceeds to us to us by $ million, assuming no change in the assumed initial public offering price of $ per share (the midpoint of the range listed on the cover page of this prospectus) and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.

For additional information on our liquidity and outstanding indebtedness, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources.”

This expected use of net proceeds from this offering represents our intentions based upon our current plans and business conditions. The amounts and timing of our actual expenditures may vary significantly depending on numerous factors and any unforeseen cash needs. As a result, our management will retain broad discretion over the allocation of the net proceeds from this offering. Pending our use of the net proceeds from this offering as described above, we intend to invest the net proceeds in a variety of capital preservation investments, including short-term, investment-grade, interest-bearing instruments and U.S. government securities.

DIVIDEND POLICY

We currently intend to retain all of our future earnings, if any, to finance operations, development and growth of our business, and repay debt. Most of our indebtedness contains restrictions on our activities, including paying dividends on our capital stock and restricting dividends or other payments to us. Any future determination relating to our dividend policy will be made at the discretion of our board of directors and will depend on a number of factors, including future earnings, capital requirements, financial conditions, future prospects, contractual restrictions and covenants and other factors that our board of directors may deem relevant.

In August 2013, our wholly-owned subsidiaries, PC Nextco Holdings, LLC (“Nextco Holdings”) and PC Nextco Finance, Inc. (“Nextco Finance”), issued $350.0 million of senior PIK toggle notes. Nextco Holdings distributed the proceeds, net of expenses, to us and we used this cash to pay a one-time cash dividend to holders of our common stock. The total amount of the dividend was $338.0 million.

CAPITALIZATION

The following table sets forth our cash and cash equivalents and capitalization as of December 31, 2014:

•

on an actual basis; and

•

on an as adjusted basis to give effect to the issuance and sale by us of shares of our common stock in the offering at an assumed initial public offering price of $ per share, the midpoint of the range set forth on the cover of this prospectus, after deducting underwriting discounts and commissions and estimated offering expenses payable by us and the application of the net proceeds from this offering as described in “Use of Proceeds.”

You should read this table in conjunction with “Use of Proceeds,” “Selected Consolidated Financial Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes thereto included elsewhere in this prospectus.


	December 31, 2014
	Actual			As Adjusted
	(dollars in thousands)
Cash and cash equivalents	$	47,214

Debt:
Revolving credit facilities (1)	$	25,336
Term loan (2)		1,099,854
Capital lease obligations		3,274
8.875% senior notes		700,000
8.750%/9.500% senior PIK toggle notes (3)		350,000

Total debt		2,178,464
Redeemable common stock, $0.01 par value, 1,103.09 shares issued and outstanding, actual; shares issued and outstanding, as adjusted		35,062
Stockholders’ Equity:
Common stock, $0.01 par value, 1,000,000 shares authorized (including redeemable common stock), 32,502.82 shares issued and outstanding, actual; shares authorized, and shares issued and outstanding, as adjusted		—
Additional paid-in capital		470,027
Retained earnings		29,934
Accumulated other comprehensive loss		(12,735	)

Total stockholders’ equity		487,226

Total capitalization	$	2,700,752

(1)

At December 31, 2014, there were $24.0 million of outstanding borrowings under the ABL Facility, a total of $19.5 million of outstanding letters of credit and excess availability of $356.6 million after giving effect to borrowing base limitations. Additionally, at December 31, 2014, there was $1.4 million outstanding under various foreign credit facilities.

(2)	Amounts exclude the impact of a $5.5 million net call premium and a $5.1 million net original issue discount.

(3)	Amounts exclude the impact of the net original issue discount in the amount of $2.7 million.

Each $1.00 increase or decrease in the assumed initial public offering price of $ per share (the midpoint of the range listed on the cover page of this prospectus) would increase or decrease, as applicable, our cash and cash equivalents, additional paid-in capital and stockholders’ equity by $ million, assuming that the number of shares offered by us as set forth on the cover page of this prospectus remains the same and after deducting

estimated underwriting discounts and commissions and estimated offering expenses. Each 1,000,000 share increase or decrease in the number of shares offered by us would increase or decrease, as applicable, as our cash and cash equivalents, additional paid-in capital and stockholders’ equity by $ million assuming no change in the assumed initial public offering price of $ per share (the midpoint of the range listed on the cover page of this prospectus) and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. To the extent we raise more proceeds in this offering, we expect to redeem additional senior PIK toggle notes. To the extent we raise less proceeds in this offering, we expect to reduce the amount of senior PIK toggle notes that will be redeemed. To the extent we raise more than $ in this offering, we expect to redeem all outstanding senior PIK toggle notes and to use any remaining proceeds to repay or repurchase additional indebtedness, including amounts outstanding under the Senior Credit Facilities.

The table above does not include:

•

2,388 shares of common stock issuable upon the exercise of stock options issued under the 2012 Plan with a weighted average exercise price of $14,916 per share;

•

1,245.6 additional shares of common stock reserved for future issuance under the 2012 Plan; and

•

5,470 additional shares of common stock reserved for future issuance under the 2012 Plan, as amended, which amendment shall take effect upon consummation of this offering.

DILUTION

If you purchase our common stock in this offering, you will experience an immediate dilution of net tangible book value per share from the initial public offering price. Dilution in net tangible book value per share of our common stock represents the difference between the initial public offering price per share and the net tangible book value per share immediately after this offering. We calculate net tangible book value per share of our common stock by dividing the net tangible book value (total consolidated tangible assets less total consolidated liabilities) by the number of outstanding shares of our common stock.

At December 31, 2014, the net tangible book value of our common stock was approximately $(1,746.38) million, or approximately $(51,966.37) per share of our common stock. After giving effect to the sale of shares of our common stock in this offering at an assumed initial public offering price of $ per share, and after deducting estimated underwriting discounts and commissions and the estimated offering expenses of this offering, the as adjusted net tangible book value at December 31, 2014 attributable to common stockholders would have been approximately $ million, or approximately $ per share of our common stock. This represents a net increase in net tangible book value of approximately $ per existing share and an immediate dilution in net tangible book value of approximately $ per share to new stockholders. The following table illustrates this per share dilution to new stockholders:


Assumed initial public offering price per share				$
Net tangible book value per share as of December 31, 2014	$	(51,966.37	)
Increase in net tangible book value per share attributable to this offering	$
As adjusted net tangible book value per share after this offering				$

Dilution in net tangible book value per share to new stockholders				$

The table below summarizes, as of December 31, 2014, the differences for (1) our existing stockholders, and (2) investors in this offering, with respect to the number of shares of common stock purchased from us, the total consideration paid, and the average price per share paid before deducting fees and expenses.


	Shares Issued				Total Consideration				Average Price per Share
	Number	Percentage			Amount	Percentage			Average Price per Share
Existing stockholders				%				%	$
New stockholders in this offering

Total			100	%			100	%	$

The foregoing discussion and tables assume no exercise of stock options to purchase shares of our common stock subject to outstanding stock options with a weighted average exercise price of $ per share as of December 31, 2014 and excludes shares of our common stock available for future grant or issuance under our stock plans. To the extent that any options having an exercise price that is less than the offering price of this offering are exercised, new investors will experience further dilution.

A $1.00 increase or decrease in the assumed initial offering price of $ per share (the midpoint of the range listed on the cover page of this prospectus) would increase or decrease our net tangible deficit as adjusted to give effect to this offering by $ per share, assuming that the number of shares offered by us set forth on the cover page of this prospectus remains the same, and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us. An increase or decrease of 1,000,000 shares in the number of shares offered by us would increase or decrease our net tangible deficit as adjusted to give effect to this offering by $ per share, assuming the assumed initial offering price of $ per share (the midpoint of the range listed on the cover page of this prospectus) remains the same, and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.

If the underwriters exercise their option to purchase additional shares in full, as adjusted net tangible book value at December 31, 2014 will increase to $ , or $ per share, representing an increase to existing stockholders of $ per share, and there will be a decrease in the dilution to new investors of $ .

The table above does not include:

•

2,388 shares of common stock issuable upon the exercise of stock options issued under the 2012 Plan with a weighted average exercise price of $14,916 per share;

•

1,245.6 additional shares of common stock reserved for future issuance under the 2012 Plan; and

•

5,470 additional shares of common stock reserved for future issuance under the 2012 Plan, as amended, which amendment shall take effect prior to the consummation of this offering.

SELECTED CONSOLIDATED FINANCIAL DATA

The following table sets forth selected historical consolidated financial data for the periods ended and at the dates indicated below. Our selected historical consolidated financial data as of December 31, 2013 (Successor) and December 31, 2014 (Successor) and for the period from July 28, 2012 to December 31, 2012 (Successor), the period from January 1, 2012 to July 27, 2012 (Predecessor) and the years ended December 31, 2013 (Successor) and December 31, 2014 (Successor) presented in this table has been derived from our historical audited consolidated financial statements included elsewhere in this prospectus. Our selected historical consolidated financial data for the years ended December 31, 2010 (Predecessor) and December 31, 2011 (Predecessor) were derived from our audited consolidated financial statements that are not included in this prospectus.


	Fiscal Year Ended December 31,						Period from January 1 to July 27, 2012			Period from July 28 to December 31, 2012			Fiscal Year Ended December 31, 2013 (3)			Fiscal Year Ended December 31, 2014 (4)
	2010 (1)			2011 (2)			Period from January 1 to July 27, 2012			Period from July 28 to December 31, 2012			Fiscal Year Ended December 31, 2013 (3)			Fiscal Year Ended December 31, 2014 (4)
	(Predecessor)			(Predecessor)			(Predecessor)			(Successor)			(Successor)			(Successor)
	(dollars in thousands, except per common share data)
Income Statement Data:
Revenues:
Net sales	$	1,579,677		$	1,852,869		$	930,903		$	964,330		$	2,026,272		$	2,251,589
Royalties and franchise fees		19,417			19,106			9,281			9,312			18,841			19,668

Total revenues		1,599,094			1,871,975			940,184			973,642			2,045,113			2,271,257
Expenses:
Cost of sales (5)		943,058			1,118,973			574,048			636,410			1,259,188			1,375,706
Wholesale selling expenses		42,725			57,905			31,568			28,096			68,102			73,910
Retail operating expenses		296,891			325,332			166,047			172,168			369,996			397,110
Franchise expenses		12,269			13,685			6,579			6,128			13,320			14,281
General and administrative expenses (6)		134,392			138,074			101,502			65,890			146,094			147,718
Art and development costs		14,923			16,636			10,824			8,201			19,311			19,390
Impairment of trade name (7)		27,400			—			—			—			7,500			—

Income from operations		127,436			201,370			49,616			56,749			161,602			243,142
Interest expense, net		40,850			77,743			41,970			62,062			143,406			155,917
Other expense, net (8)		4,208			1,476			22,245			26,157			18,478			5,891

Income (loss) before income taxes		82,378			122,151			(14,599	)		(31,470	)		(282	)		81,334
Income tax expense (benefit)		32,945			45,741			403			(1,322	)		(4,525	)		25,211

Net income (loss)		49,433			76,410			(15,002	)		(30,148	)		4,243			56,123
Less: net income attributable to noncontrolling interests		114			135			96			60			224			—

Net income (loss) attributable to Party City Holdco Inc.	$	49,319		$	76,275		$	(15,098	)	$	(30,208	)	$	4,019		$	56,123

Statement of Cash Flow Data:
Net cash provided by (used in)
Operating activities (9)	$	61,168		$	161,264		$	(18,126	)	$	(35,508	)	$	135,818		$	136,387
Investing activities (9)		(102,766	)		(138,909	)		(31,824	)		(1,578,553	)		(112,522	)		(89,632	)
Financing activities (9)		46,515			(19,784	)		33,318			1,629,331			(18,373	)		(23,530	)
Per Share Data:
Basic
Diluted
Weighted Average
Outstanding basic
Diluted
Cash dividend per common share		9,400			—			—			—			10,087			—


	Year Ended December 31,						Period from January 1 to July 27, 2012			Period from July 28 to December 31, 2012			Fiscal Year Ended December 31, 2013 (3)			Fiscal Year Ended December 31, 2014 (4)
	2010 (1)			2011 (2)			Period from January 1 to July 27, 2012			Period from July 28 to December 31, 2012			Fiscal Year Ended December 31, 2013 (3)			Fiscal Year Ended December 31, 2014 (4)
	(Predecessor)			(Predecessor)			(Predecessor)			(Successor)			(Successor)			(Successor)
	(dollars in thousands)
Other Financial Data:
Adjusted EBITDA (10)	$	230,618		$	275,466		$	116,982		$	175,329		$	320,775		$	362,125
Adjusted EBITDA margin (10)		14.4	%		14.7	%		12.4	%		18.0	%		15.7	%		15.9	%
Adjusted net income (10)	$	86,430		$	88,260		$	22,883		$	50,920		$	68,393		$	86,838
Number of company-owned Party City stores (11)		439			487						600			674			693
Capital expenditures	$	49,623		$	44,483		$	28,864		$	16,376		$	61,241		$	78,241
Party City brand comp sales (12)		3.6	%		9.5	%								2.9	%		5.8	%
Share of shelf (13)		58.7	%		60.5	%		64.7	%		63.7	%		67.5	%		70.2	%
Balance Sheet Data (at end of period):
Cash and cash equivalents	$	20,454		$	22,053					$	20,899		$	25,645		$	47,214
Working capital		189,993			226,277						387,858			396,027			463,715
Total assets		1,653,151			1,750,338						3,283,319			3,327,534			3,380,863
Total debt (14)		1,000,256			982,258						1,851,517			2,184,486			2,165,168
Redeemable common securities		18,089			36,939						22,205			23,555			35,062
Total equity (14)		256,422			326,091						787,450			456,757			487,226

(1)	The acquisitions of Designware and the Christy’s Group are included in the financial statements from their acquisition dates (March 1, 2010 and September 30, 2010, respectively).

(2)	The acquisitions of Riethmüller and Party City Canada are included in the financial statements from their acquisition dates (January 30, 2011 and July 29, 2011, respectively).

(3)	The acquisitions of Party Delights and iParty are included in the financial statements from their acquisition dates (March 13, 2013 and May 9, 2013, respectively).

(4)	The acquisition of U.S. Balloon is included in the financial statements from the acquisition date (October 24, 2014).

(5)

(6)

(7)

(8)

(9)	See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity” for a discussion of cash flows.

(10)

We present adjusted EBITDA and adjusted net income as supplemental measures of our operating performance. We define EBITDA as net income (loss) before interest expense, net, income taxes, depreciation and amortization. We define adjusted EBITDA as EBITDA, as further adjusted to eliminate the impact of certain items that we do not consider indicative of our ongoing operating performance. These further adjustments are itemized below. Adjusted net income represents our net income (loss), adjusted for intangible asset amortization, non-cash purchase accounting adjustments, amortization of deferred financing costs and original issue discount, the Sponsors management fee, refinancing charges, equity based compensation, payments in lieu of dividend, impairment charges and costs related to the Transactions. We present adjusted EBITDA and adjusted net income as supplemental measures of our performance. You are encouraged to evaluate these adjustments and the reasons we consider them appropriate for supplemental analysis. In evaluating adjusted EBITDA and adjusted net income, you should be aware that in the future we may incur expenses that are the same as or similar to some of the adjustments in this presentation. Our presentation of adjusted EBITDA and adjusted net income should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items.

Adjusted EBITDA, adjusted net income and adjusted EBITDA margin have limitations as analytical tools. Some of these limitations are:

•

adjusted EBITDA, adjusted net income and adjusted EBITDA margin do not reflect our cash expenditures, or future requirements, for capital expenditures or contractual commitments;

•

adjusted EBITDA and adjusted net income do not reflect changes in, or cash requirements for, our working capital needs;

•

adjusted EBITDA does not reflect the significant interest expense, or the cash requirements necessary to service interest or principal payments, on our indebtedness;

•

adjusted EBITDA and adjusted net income do not reflect the impact of certain cash charges resulting from matters we consider not to be indicative of our ongoing operations; and

•

other companies in our industry may calculate adjusted EBITDA and adjusted net income differently than we do, limiting its usefulness as a comparative measure.


	Year Ended December 31,						Period from January 1 to July 27, 2012			Period from July 28 to December 31, 2012			Fiscal Year Ended December 31, 2013			Fiscal Year Ended December 31, 2014
	2010			2011			Period from January 1 to July 27, 2012			Period from July 28 to December 31, 2012			Fiscal Year Ended December 31, 2013			Fiscal Year Ended December 31, 2014
	(Predecessor)			(Predecessor)			(Predecessor)			(Successor)			(Successor)			(Successor)
	(dollars in thousands)
Net income (loss)	$	49,433		$	76,410		$	(15,002	)	$	(30,148	)	$	4,243		$	56,123
Interest expense, net		40,850			77,743			41,970			62,062			143,406			155,917
Income taxes		32,945			45,741			403			(1,322	)		(4,525	)		25,211
Depreciation and amortization		49,418			59,631			33,915			49,837			94,624			82,890

EBITDA		172,646			259,525			61,286			80,429			237,748			320,141
Equity based compensation		6,019			1,397			3,375			—			2,137			1,583
Non-cash purchase accounting adjustments		1,244			—			—			58,626	(a)		25,229	(a)		8,868	(a)
Management fee		1,248	(b)		1,248	(b)		713	(b)		1,292	(b)		3,000	(b)		3,356	(b)
Impairment charges		27,997	(c)		87			—			—			7,822	(c)		1,012
Restructuring, retention and severance		1,780			2,513			355			784			4,673			3,391
Payment in lieu of dividend		9,395	(d)		617	(d)		16,533	(d)		—			—			—
Refinancing charges		2,448			—			—			—			12,295	(e)		4,396	(e)
Deferred rent		4,500			7,467			3,344			6,335			17,055			14,418
Business interruption		—			—			—			2,000	(f)		500	(f)		(2,435	)(f)
Transaction costs		—			—			28,582	(g)		24,564	(g)		—			—
Corporate development expenses		1,660			2,471			2,395			351			4,828			700
Foreign currency losses (gains)		354			(280	)		148			532			1,581			1,447
Store closing costs		1,293			664			305			169			1,498			1,199
Undistributed (income) loss in unconsolidated joint venture		(678	)		(463	)		(128	)		(297	)		172			1,556
Other		712			220			74			544			2,237			2,493

Adjusted EBITDA	$	230,618		$	275,466		$	116,982		$	175,329		$	320,775		$	362,125


	Year Ended December 31,						Period from January 1 to July 27, 2012			Period from July 28 to December 31, 2012			Fiscal Year Ended December 31, 2013			Fiscal Year Ended December 31, 2014
	2010			2011			Period from January 1 to July 27, 2012			Period from July 28 to December 31, 2012			Fiscal Year Ended December 31, 2013			Fiscal Year Ended December 31, 2014
	(Predecessor)			(Predecessor)			(Predecessor)			(Successor)			(Successor)			(Successor)
	(dollars in thousands)
Income (loss) before income taxes	$	82,378		$	122,151		$	(14,599	)	$	(31,470	)	$	(282	)	$	81,334
Intangible asset amortization		10,345	(h)		11,116	(h)		5,542	(h)		14,160	(h)		26,997	(h)		22,195	(h)
Non-cash purchase accounting adjustments		1,244			—			—			71,755	(a)		39,414	(a)		13,692	(a)
Amortization of deferred financing costs and original issuance discount		2,475	(i)		4,500	(i)		2,592	(i)		4,605	(i)		20,211	(i)(e)		15,610	(i)(e)
Management fee		1,248	(b)		1,248	(b)		713	(b)		1,292	(b)		3,000	(b)		3,356	(b)
Refinancing charges		2,448			—			—			—			4,068	(e)		1,407	(e)
Equity based compensation		6,019			1,397			3,375			—			2,137			1,583
Payment in lieu of dividend		9,395	(d)		617	(d)		16,533	(d)		—			—			—
Impairment charges		27,997	(c)		87			—			—			7,822	(c)		1,012
Transaction costs		—			—			28,582	(g)		24,564	(g)		—			—

Adjusted income before income taxes		143,549			141,116			42,738			84,906			103,367			140,189
Adjusted income tax expense		57,119	(j)		52,856	(j)		19,855	(j)		33,986	(j)		34,974	(j)		53,351	(j)

Adjusted net income	$	86,430		$	88,260		$	22,883		$	50,920		$	68,393		$	86,838

(a)

As a result of the Acquisition, the Company applied the acquisition method of accounting and increased the value of its inventory by $89.8 million as of July 28, 2012. Such adjustment increased the Company’s cost of sales during 2014, 2013, and the period from July 28, 2012 to December 31, 2012 by $5.9 million, $25.2 million and $58.6 million, respectively, as the related inventory was sold. Further, during the application of the acquisition method of accounting, the Company increased the value of certain property, plant and equipment. The impact of such adjustments on depreciation expense increased the Company’s expenses during 2014, 2013, and the period from July 28, 2012 to December 31, 2012 by $4.8 million, $14.2 million and $13.1 million, respectively. These property, plant and equipment depreciation amounts are included in “Non-cash purchase accounting adjustments” for purposes of calculating “adjusted net income”, but are excluded from “Non-cash purchase accounting adjustments” for purposes of calculating adjusted EBITDA since they are included in depreciation expense.

(b)

Represents management fees paid to the Sponsors. The management agreement will terminate upon consummation of this offering. See “—Certain Relationships and Related Party Transactions—Management Agreement.”

(c)

(d)

In December 2010, a one-time cash dividend was declared. In addition, holders of unvested options at the declaration date would receive a distribution when the options vested. At the time of the Transactions, certain outstanding stock options became fully vested and distributions were made in the amount of $16.1 million. Further, prior to the Transactions, during 2012 certain outstanding stock options became fully vested and the Company made distributions in the amount of $0.4 million. The Company recorded charges equal to such amounts in general and administrative expenses during the period from January 1, 2012 to July 27, 2012.

(e)

During February 2014, the Company amended the Term Loan Facility. In conjunction with the refinancing, the Company wrote-off $1.6 million of costs that had been capitalized during the issuance of the debt. Additionally, the Company wrote-off $0.6 million of the net original issuance discount and $0.7 million of the unamortized call premium that existed at the time of the amendment. These amounts are included in “Amortization of deferred financing costs and original issue discount” in this table and in the Company’s consolidated statement of cash flows included elsewhere in this prospectus. Also, in conjunction with the refinancing, the Company expensed $1.4 million of banker and legal fees. During February 2013, the Company amended the Term Loan Facility. In conjunction with that amendment, the Company wrote-off $5.9 million of costs that had been capitalized during the initial issuance of the debt. Additionally, the Company wrote-off $2.3 million of the net original issuance discount that existed as of the time of that amendment. Both amounts are included in “Amortization of deferred financing costs and original issue discount” in this table and in the Company’s consolidated statement of cash flows included elsewhere in this prospectus. Also, in conjunction with that amendment, the Company expensed $2.5 million of a call premium and $1.6 million of investment banking and legal fees.

(f)

(g)

In conjunction with the Transactions, the Company incurred certain costs. See Note 5 to the audited consolidated financial statements which are included elsewhere in this prospectus.

(h)

Represents the amortization of intangible assets, including those assets recorded in conjunction with the application of the acquisition method of accounting due to the Transactions.

(i)

(j)

Represents the income tax expense using the rate in effect after considering the adjustments.

(11)	Data as of December 31, 2013 and December 31, 2014 includes all stores that were acquired from iParty and which were converted to the Party City banner at such dates.

(12)	Party City brand comp sales include e-commerce, Canadian store sales and sales for stores converted from the FCPO, Party Packagers and iParty formats to the Party City format.

(13)	Represents the percentage of product costs included in cost of goods sold by our domestic permanent stores (including converted iParty stores starting in 2014) and North American e-commerce operations, which relate to products supplied by our wholesale operations.

(14)	Excludes redeemable common securities.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion and analysis of our results of operations and financial statements in conjunction with the consolidated financial statements, the accompanying notes and the other financial information contained elsewhere in this prospectus. This section contains forward-looking statements, based on current expectations and related to future events and our future financial performance, that involve risks and uncertainties. Our actual results may vary materially from those discussed in the forward-looking statements as a result of various factors, including, without limitation, those set forth in “Risk Factors”, as well as other matters described in this prospectus. See “Special Note Regarding Forward-Looking Statements.”

Effect of the Transactions

On July 27, 2012, Merger Sub, a wholly-owned subsidiary of Holdings, merged into PCHI, with PCHI being the surviving entity. Immediately after the Acquisition, 100% of our common stock was owned by funds affiliated with THL, who held approximately 70% ownership, funds affiliated with Advent, who held approximately 24% ownership, and other minority investors, including management, who held approximately 6% ownership.

As a result of the Transactions, the financial information for the period after July 27, 2012 represents the financial information of the “Successor” company. Prior to, and including, July 27, 2012, the consolidated financial statements include the accounts of the “Predecessor” company. Due to the change in the basis of accounting resulting from the application of the acquisition method of accounting and push-down accounting (see Note 1 to the audited consolidated financial statements, which are included elsewhere in this prospectus, for further discussion), the Predecessor’s consolidated financial statements and the Successor’s consolidated financial statements are not necessarily comparable. The change in basis resulting from the Transactions did not impact net sales, royalties and franchise fees or retail operating expenses and, for those accounts, comparing full-year 2013 results to full-year 2012 results provides meaningful comparison. However, for all other accounts, to the extent that the change in basis had a material impact on our results during the Successor period, we have disclosed such impact in “Results of Operations”. Certain amounts in this prospectus combine the results of the Predecessor and the Successor. Such combination was performed by mathematical addition and does not comply with GAAP, although we believe it provides a meaningful method of comparison for certain accounts. The data is being presented for analytical purposes only. Combined operating results (i) have not been prepared on a pro forma basis as if the Transactions occurred on the first day of the period, (ii) may not reflect the actual results we would have achieved absent the Transactions and (iii) may not be predictive of future results of operations.

Business Overview

Our Company

We are the leading party goods retailer by revenue in North America and, we believe, the largest vertically integrated supplier of decorated party goods globally, based on revenues, with multiple levers to drive future growth across channels, products and geographies. With approximately 900 locations, we have the only coast-to-coast network of party superstores in the U.S. and Canada that make it easy and fun to enhance special occasions with a differentiated shopping experience and an unrivaled assortment of innovative and exciting merchandise offered at a compelling value. Through a series of acquisitions between 2005 and 2010, we built a powerful retail operation that captures the full manufacturing-to-retail margin on a significant portion of the products sold in our stores. We believe we are the largest global designer, manufacturer and distributor of decorated party supplies by revenue with products found in over 40,000 retail outlets worldwide, including our own stores as well as independent party supply stores, mass merchants, grocery retailers, dollar stores and others. Our category-defining retail concept, multi-channel reach, widely recognized brands, broad and deep product offering, and low-cost global sourcing model are, we believe, significant competitive advantages. We believe these characteristics position us for continued organic and acquisition-led growth and margin expansion.

How We Assess the Performance of Our Company

In assessing the performance of our company, we consider a variety of performance and financial measures for our two operating segments, Retail and Wholesale. These key measures include revenues and gross profit, comparable retail same-store sales and operating expenses. We also review other metrics such as adjusted EBITDA, adjusted EBITDA margin and adjusted net income. For a discussion of our use of these measures and a reconciliation of each of adjusted EBITDA and adjusted net income to net income (loss), please refer to “Prospectus Summary—Summary Financial Data” and “Selected Consolidated Financial Data.”

Segments

Our Wholesale segment generates revenues globally through sales of Amscan, Designware, Anagram, Costumes USA and other party supplies to party goods superstores, including our company-owned and franchised stores, other party goods retailers, dollar stores, mass merchants, independent card and gift stores and other retailers and distributors throughout the world. Sales to domestic and international customers accounted for 61% and 39%, respectively, of our net wholesale sales in 2014.

Our Retail segment generates revenues from the sale of merchandise to the end consumer through our chain of company-owned party goods stores, online through our e-commerce websites, including PartyCity.com, and through our chain of temporary Halloween City locations. Franchise revenues include royalties on franchise retail sales and franchise fees charged for the initial franchise award and subsequent renewals. Our retail sales of party goods are fueled by everyday events such as birthdays, various seasonal events and other special occasions occurring throughout the year. In addition, through Halloween City, our temporary Halloween business, we seek to maximize our Halloween seasonal opportunity. As a result, in 2014, our Halloween business represented approximately 25% of our total domestic retail sales, generally occurring in a five-week selling season ending on October 31. We expect to continue to generate a significant portion of our retail sales during the Halloween selling season.

Intercompany sales between the Wholesale and the Retail segment are eliminated, and the profits on intercompany sales are deferred and realized at the time the merchandise is sold to the consumer. For segment reporting purposes, certain general and administrative expenses and art and development costs are allocated based on total revenues.

Financial Measures

Revenues. Revenues from retail operations are recognized at point of sale. We estimate future retail sales returns and record a provision in the period in which the related sales are recorded based on historical information. Retail revenues include shipping revenue related to e-commerce sales. Retail sales are reported net of taxes collected. Franchise royalties are recognized based on reported franchise retail sales.

Revenues from our wholesale operations represent the sale of our products to third parties, less rebates, discounts and other allowances. The terms of our wholesale sales are generally free-on-board (“FOB”) shipping point, and revenue is recognized when goods are shipped. We estimate reductions to revenues for volume-based rebate programs and subsequent credits at the time sales are recognized. Intercompany sales from our wholesale operations to our retail stores are eliminated in our consolidated total revenues.

Comparable Retail Same-Store Sales. The growth in same-store sales represents the percentage change in same-store sales in the period presented compared to the prior year. Same-store sales exclude the net sales of a store for any period if the store was not open during the same period of the prior year. Comparable sales are calculated based upon stores that were open at least thirteen full months as of the end of the applicable reporting period. When a store is reconfigured or relocated within the same general territory, the store continues to be treated as the same store. If, during the period presented, a store was closed, sales from that store up to and including the closing day are included as same-store sales as long as the store was open during the same period of

the prior year. Converted FCPO and Party Packagers stores are included in Party City’s same-store sales immediately following conversion. Same-store sales for the Party City brand include retail e-commerce sales. iParty stores were included in Party City’s same-store sales after the completion of thirteen full months following the acquisition.

Cost of Sales. Cost of sales at wholesale reflects the production costs (i.e., raw materials, labor and overhead) of manufactured goods and the direct cost of purchased goods, inventory shrinkage, inventory adjustments, inbound freight to our manufacturing and distribution facilities, distribution costs and outbound freight to get goods to our wholesale customers. At retail, cost of sales reflects the direct cost of goods purchased from third parties and the production or purchase costs of goods acquired from our wholesale operations. Retail cost of sales also includes inventory shrinkage, inventory adjustments, inbound freight, occupancy costs related to store operations (such as rent and common area maintenance, utilities and depreciation on assets) and all logistics costs associated with our retail e-commerce business.

Our cost of sales increases in higher volume periods as the direct costs of manufactured and purchased goods, inventory shrinkage and freight are generally tied to net sales. However, other costs are largely fixed or vary based on other factors and do not necessarily increase as sales volume increases. Changes in the mix of our products may also impact our overall cost of sales. The direct costs of manufactured and purchased goods are influenced by raw material costs (principally paper, petroleum-based resins and cotton), domestic and international labor costs in the countries where our goods are purchased or manufactured and logistics costs associated with transporting our goods. We monitor our inventory levels on an on-going basis in order to identify slow-moving goods.

As a result of the Acquisition, we applied the acquisition method of accounting and increased the value of our inventory by $89.8 million as of July 28, 2012. The adjustment principally reflects the previously deferred wholesale margin on inventory supplied to our retail operations at July 27, 2012. Such adjustment increased our cost of sales during the period from July 28, 2012 to December 31, 2012 by $58.6 million, during 2013 by $25.2 million, and during 2014 by $5.9 million as the related inventory was sold. Further, during the application of the acquisition method of accounting, we increased the values of our property, plant and equipment and certain intangible assets. The impact of such adjustments on depreciation expense and amortization expense increased our cost of sales during the period from July 28, 2012 to December 31, 2012 by $15.4 million, during 2013 by $25.9 million, and during 2014 by $15.2 million.

Wholesale Selling Expenses. Wholesale selling expenses include the costs associated with our wholesale sales and marketing efforts, including merchandising and customer service. Costs include the salaries and benefits of the related work force, including sales-based bonuses and commissions. Other costs include catalogues, showroom rent, travel and other operating costs. Certain selling expenses, such as sales-based bonuses and commissions, vary in proportion to sales, while other costs vary based on other factors, such as our marketing efforts, or are largely fixed and do not necessarily increase as sales volumes increase.

Retail Operating Expenses. Retail operating expenses include all of the costs associated with retail store operations, excluding occupancy-related costs included in cost of sales. Costs include store payroll and benefits, advertising, supplies and credit card costs. Retail expenses are largely variable but do not necessarily vary in proportion to net sales.

Franchise Expenses. Franchise expenses include the costs associated with operating our franchise network, including salaries and benefits of the administrative work force and other administrative costs. These expenses generally do not vary proportionally with royalties and franchise fees.

General and Administrative Expenses. General and administrative expenses include all operating costs not included elsewhere in the statement of operations and comprehensive income (loss). These expenses include

payroll and other expenses related to operations at our corporate offices, including occupancy costs, related depreciation and amortization, legal and professional fees and data-processing costs. These expenses generally do not vary proportionally with net sales.

In conjunction with the Transactions, we incurred transaction costs that were recorded in general and administrative expenses. Additionally, the Transactions accelerated the vesting of certain stock options and we recorded a charge in general and administrative expenses. Further, due to the vesting of such stock options, we made payments in lieu of dividends to the holders of such options and recorded a charge in general and administrative expenses. See “—Results of Operations” for further discussion of these charges.

Art and Development Costs. Art and development costs include the costs associated with art production, creative development and product management. Costs include the salaries and benefits of the related work force. These expenses generally do not vary proportionally with net sales.

Adjusted EBITDA. We define EBITDA as net income (loss) before interest expense, net, income taxes, depreciation and amortization. We define Adjusted EBITDA as EBITDA, as further adjusted to eliminate the impact of certain items that we do not consider indicative of our ongoing operating performance. We caution investors that amounts presented in accordance with our definition of Adjusted EBITDA may not be comparable to similar measures disclosed by other issuers, because not all issuers and analysts calculate Adjusted EBITDA in the same manner. We present Adjusted EBITDA because we believe it assists investors and analysts in comparing our performance across reporting periods on a consistent basis by excluding items that we do not believe are indicative of our core operating performance. In addition, we use Adjusted EBITDA: (i) as a factor in determining incentive compensation, (ii) to evaluate the effectiveness of our business strategies and (iii) because the credit facility uses Adjusted EBITDA to measure compliance with certain covenants.

Adjusted Net Income. Adjusted net income represents our net income (loss), adjusted for intangible asset amortization, non-cash purchase accounting adjustments, amortization of deferred financing costs and original issue discount, the Sponsors management fee, refinancing charges, equity based compensation, payments in lieu of dividend, impairment charges and costs relating to the Transactions. We present adjusted net income because we believe it assists investors and analysts in comparing our performance across reporting periods on a consistent basis by excluding items that we do not believe are indicative of our core operating performance. While we have historically not used adjusted net income for internal management reporting and valuation purposes, we believe adjusted net income is a helpful benchmark to evaluate our operating performance.

Executive Overview

Total revenues for the year ended December 31, 2014 were $2,271.3 million and were $226.1 million or 11.1% higher than 2013. Same-store sales for the Party City brand (including domestic and Canadian retail e-commerce sales and sales at acquired stores, to the extent that the stores were converted to the Party City format and included in our sales for the comparable period of the prior year) increased by 5.8% due to a 4.2% increase in average transaction dollar size and a 1.6% increase in transaction count. The revenue increase was also partially due to the 2014 fiscal year of our Retail operations consisting of 53 weeks (fiscal year 2013 had 52 weeks). The 53rd week contributed $34.0 million to Retail net sales. See “—Results of Operations” for further discussion of the increase in revenues.

Additionally, Adjusted EBITDA increased from $320.8 million in 2013 to $362.1 million in 2014. See “—Results of Operations” and “Prospectus Summary—Summary Financial Data” for further detail of the increase in Adjusted EBITDA.

Factors Affecting Our Results

Other important events that have impacted or will impact the results presented in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” include:

53 ^rd Week. The 2014 fiscal year of our Retail operations consisted of 53 weeks. Fiscal year 2013 had 52 weeks. The 53rd week contributed $34.0 million to Retail net sales. Please see “—Results of Operations” below for further discussion of the impact of the 53rd week on the various accounts in our consolidated statement of operations and comprehensive income.

Acquisition-Related Costs. As a result of the Acquisition, we applied the acquisition method of accounting and increased the value of its inventory by $89.8 million as of July 28, 2012. The adjustment principally reflects the previously deferred wholesale margin on inventory supplied to our retail operations at July 27, 2012. The adjustment increased our cost of sales during the period from July 28, 2012 to December 31, 2012 by $58.6 million, during 2013 by $25.2 million, and during 2014 by $5.9 million, as the related inventory was sold. Such amount was added back to EBITDA when arriving at Adjusted EBITDA. For a discussion of our use of Adjusted EBITDA and a reconciliation to net income (loss), please refer to “Prospectus Summary—Summary Financial Data” and “Selected Consolidated Financial Data.”

Additionally, as a result of the Acquisition, we applied the acquisition method of accounting and recorded our property, plant and equipment and intangible assets at fair value. The impact of such adjustments on depreciation expense and amortization expense increased our cost of sales during the period from July 28, 2012 to December 31, 2012, during 2013, and during 2014 by $15.4 million, $25.9 million and $15.2 million, respectively.

In conjunction with the Transactions, during the period from January 1, 2012 to July 27, 2012, we recorded $8.9 million of compensation-related transaction costs in general and administrative expenses and $19.7 million of additional transaction costs in other expense, net. Also, the Acquisition accelerated the vesting of certain of our stock options and during the period from January 1, 2012 to July 27, 2012, we recorded $2.1 million of expense in general and administrative expenses. Further, due to the vesting of such stock options, we made payments in lieu of dividends to the holders of such options and during the period from January 1, 2012 to July 27, 2012, we recorded a $16.1 million charge in general and administrative expenses. Finally, in conjunction with the Transactions, during the period from July 28, 2012 to December 31, 2012, we recorded $24.6 million of transaction costs in other expense, net. These costs were added back to EBITDA when arriving at Adjusted EBITDA. For a discussion of our use of Adjusted EBITDA and a reconciliation to net income (loss), please refer to “Prospectus Summary—Summary Financial Data” and “Selected Consolidated Financial Data.”

Recent Acquisitions. In March 2013, we completed our acquisition of Party Delights, an online retailer of party goods, fancy dress and similar items for birthdays, weddings, christenings and other celebrations, for $14.8 million. The acquisition broadens our product offering and allows it to enter European retail markets through e-commerce. The acquisition of Party Delights contributed $27.2 million and $16.9 million to net sales during 2014 and 2013, respectively. In May 2013, we completed our acquisition of iParty, a party goods retailer with approximately 50 stores, principally located in the New England region, for $38.4 million (including the repayment of $9.0 million outstanding under iParty’s credit agreement). The acquisition accelerates our growth throughout New England, a densely populated region where we did not have a market presence. The acquisition of iParty contributed $87.7 million and $57.1 million to net sales during 2014 and 2013, respectively.

Refinancings . Amounts outstanding under PCHI’s previous $350.0 million ABL revolving credit facility and previous $675.0 million term loan agreement were repaid in conjunction with the closing of the Transactions. At such time, PCHI entered into the ABL Facility and the Term Loan Facility. Additionally, in conjunction with the Transactions, our subsidiary, PCHI, issued the 8.875% senior notes and completed a cash tender offer for all of its outstanding $175.0 million 8.75% senior subordinated notes.

As a result of the higher debt levels following these refinancings, our interest expense increased during 2012 and 2013.

During February 2013, the Term Loan Facility was amended and the interest rate was lowered. In conjunction with that amendment, we wrote-off $5.9 million of costs that had been capitalized during the initial issuance of the debt. Additionally, we wrote-off $2.3 million of the net original issuance discount that existed as of the time of that amendment. Also, in conjunction with that amendment, we expensed $2.5 million of a call premium and $1.6 million of investment banking and legal fees. All of the charges were recorded in other expense in our consolidated statement of operations and comprehensive loss. For further discussion see the notes to the consolidated financial statements which are included elsewhere in this prospectus.

During February 2014, we amended the Term Loan Facility again. In conjunction with the refinancing, we wrote-off $1.6 million of costs that had been capitalized during the issuance of the debt. Additionally, we wrote-off $0.6 million of the net original issuance discount and $0.7 million of the unamortized call premium that existed at the time of the amendment. Also, in conjunction with the refinancing, we expensed $1.4 million of banker and legal fees. All of these charges were recorded in other expense in our consolidated statement of operations and comprehensive income. For further discussion, see the notes to the consolidated financial statements which are included elsewhere in this prospectus.

Senior PIK Toggle Notes. On August 1, 2013, our wholly-owned subsidiaries, Nextco Holdings and Nextco Finance, issued $350.0 million of 8.750%/9.500% senior PIK toggle notes. The net proceeds were distributed to us by Nextco Holdings and we used this cash to pay a one-time cash dividend to holders of our common stock totaling $338.0 million.

Public Company Costs. As a result of the initial public offering of our common stock we will incur additional legal, accounting and other expenses that we did not previously incur, including costs associated with public company reporting and corporate governance requirements. These requirements include compliance with the Sarbanes-Oxley Act as well as other rules implemented by the SEC and the .

Termination of Management Agreement. We have a management agreement with our Sponsors. Pursuant to the management agreement, we pay annual management fees of the greater of $3.0 million and 1% of Adjusted EBITDA, as defined in our debt agreements. We intend to pay a termination fee of approximately $ million to terminate the agreement in connection with this offering.

Results of Operations

Year Ended December 31, 2014 Compared To Year Ended December 31, 2013

The following tables set forth our operating results and operating results as a percentage of total revenues for the years ended December 31, 2014 and 2013.


	Years Ended December 31,
	2013					2014
	Successor					Successor
	(Dollars in thousands)
Revenues:
Net sales	$	2,026,272		99.1	%	$	2,251,589	99.1	%
Royalties and franchise fees		18,841		0.9			19,668	0.9

Total revenues		2,045,113		100.0			2,271,257	100.0
Expenses:
Cost of sales		1,259,188		61.6			1,375,706	60.6
Wholesale selling expenses		68,102		3.3			73,910	3.3
Retail operating expenses		369,996		18.1			397,110	17.4
Franchise expenses		13,320		0.7			14,281	0.6
General and administrative expenses		146,094		7.1			147,718	6.5
Art and development costs		19,311		1.0			19,390	0.9
Impairment of trade name		7,500		0.3			0	0.0

Total expenses		1,883,511		92.1			2,028,115	89.3

Income from operations		161,602		7.9			243,142	10.7
Interest expense, net		143,406		7.0			155,917	6.9
Other expense, net		18,478		0.9			5,891	0.2

(Loss) income before income taxes		(282	)	0.0			81,334	3.6
Income tax (benefit) expense		(4,525	)	(0.2	)		25,211	1.1

Net income		4,243		0.2			56,123	2.5
Less: net income attributable to noncontrolling interests		224		0.0			0	0.0

Net income attributable to Party City Holdco Inc.	$	4,019		0.2	%	$	56,123	2.5	%

Revenues

Total revenues for the year ended December 31, 2014 were $2,271.3 million and were $226.1 million or 11.1% higher than the corresponding period of 2013. The following table sets forth the Company’s total revenues for the years ended December 31, 2014 and 2013.


	Years Ended December 31,
	2013						2014
	Dollars in Thousands			Percentage of Total Revenues			Dollars in Thousands			Percentage of Total Revenues
Net Sales:
Wholesale	$	1,080,740			52.9	%	$	1,213,024			53.4	%
Eliminations		(487,990	)		(23.9	)%		(566,663	)		(24.9	)%

Net wholesale		592,750			29.0	%		646,361			28.5	%
Retail		1,433,522			70.1	%		1,605,228			70.6	%

Total net sales		2,026,272			99.1	%		2,251,589			99.1	%
Royalties and franchise fees		18,841			0.9	%		19,668			0.9	%

Total revenues	$	2,045,113			100.0	%	$	2,271,257			100.0	%

Retail

Retail net sales during 2014 were $1,605.2 million and increased $171.7 million or 12.0% over 2013. The increase was partially due to the 2014 fiscal year of our retail operations consisting of 53 weeks (fiscal year 2013 had 52 weeks). The 53rd week contributed $34.0 million to Retail net sales. Retail net sales at our Party City stores (including iParty stores acquired during May 2013) totaled $1,386.4 million and were $148.0 million or 12.0% higher than the corresponding period of 2013, including the impact of the 53rd week. The May 2013 acquisition and subsequent rebranding and remerchandising of iParty stores as Party City stores increased sales during the year by $30.6 million over 2013 (including the impact of positive same-store sales from May 2014 to December 2014). The increase in sales at our Party City stores also reflects the operation of 21 additional stores during 2014 as 23 stores were opened, six stores were acquired and eight stores were closed during 2014. Our global retail e-commerce sales totaled $141.4 million during 2014 and were $23.0 million or 19.4% higher than 2013, including the impact of the 53rd week. Retail net sales were negatively impacted by $1.4 million compared to the corresponding period of 2013 due to the closure of our remaining outlet stores. Same-store sales for the Party City brand (including domestic and Canadian retail e-commerce sales and sales at acquired stores, to the extent that the stores were converted to the Party City format and included in our sales for the comparable period of the prior year) increased by 5.8% during 2014 due to a 4.2% increase in average transaction dollar size and a 1.6% increase in transaction count. Excluding the impact of e-commerce, same-store sales increased by 5.4% due to a 3.9% increase in average transaction dollar size and a 1.5% increase in transaction count. Retail e-commerce sales included in our brand comp increased by 11.3% due to a 5.7% increase in transaction count and a 5.6% increase in average transaction dollar size. Net sales at our temporary Halloween City stores were $77.4 million during 2014 and were $2.1 million higher than 2013. The average sales per Halloween City store increased by 14.3% compared to 2013 and by 13.8% when compared to 2013’s five-week Halloween selling season. We operated 315 Halloween City stores during 2014, as compared to 350 stores during 2013.

Wholesale

Wholesale net sales during 2014 totaled $646.4 million and were $53.6 million or 9.0% higher than the corresponding period of 2013. The fiscal year of our Wholesale operations is the calendar year. During the year, net sales to domestic party goods retailers and distributors, including our franchisee network, totaled $306.3 million and were $15.6 million, or 5.4%, higher than 2013. Sales increased versus 2013 due to an approximately $8 million increase in sales of juvenile birthday product, driven principally by new licenses, an approximately $6 million increase in sales of Halloween-related product, including our Christy’s costumes line, and an approximately $5 million increase in contract manufacturing sales of paper tableware. Sales during 2013 benefitted from approximately $4 million of sales to iParty prior to our acquisition of iParty in May 2013. As a result of the acquisition, sales to iParty are now excluded as intercompany sales. Net sales of metallic balloons to domestic distributors and others totaled $88.8 million and were $5.7 million or 6.9% higher than in 2013 principally due to the impact of new licenses and improving helium supplies. Sales from our international operations and U.S. export sales totaled $251.3 million and were $32.3 million, or 14.7%, higher than 2013. The increase was principally due to higher sales of our Christy’s costumes, approximately $18 million, and increased sales of party goods to a large multi-national company located in the U.S. Additionally, foreign currency translation positively impacted 2014 sales by approximately $3 million.

Intercompany sales to our retail affiliates were $566.7 million during 2014 and were $78.7 million or 16.1% higher than the corresponding period of 2013. The increase was primarily due to sales growth at our retail operations and an increase in our wholesale share of shelf at our retail operations (including the impact of synergies associated with acquired iParty stores). Intercompany sales represented 46.7% of total wholesale sales during 2014, compared to 45.2% during the corresponding period of 2013. The intercompany sales of our wholesale segment are eliminated against the intercompany purchases of our retail segment in the consolidated financial statements.

Royalties and franchise fees

Royalties and franchise fees for 2014 were $19.7 million and were $0.8 million higher than 2013 principally due to increased sales at franchise stores and the impact of the 53rd week in fiscal year 2014.

Gross Profit

Our total gross profit on net sales during 2014 was 38.9%, compared to 37.9% during the corresponding period of 2013. As a result of the Transaction, we applied the acquisition method of accounting and increased the value of our inventory by $89.8 million as of July 28, 2012. Such adjustment increased our cost of sales during 2014 and 2013 by $5.9 million and $25.2 million, respectively, as the related inventory was sold. Further, during the application of the acquisition method of accounting, we increased the values of certain intangible assets and property, plant and equipment. The impact of such adjustments on depreciation and amortization expense increased our cost of sales during the years ended December 31, 2014 and 2013 by $15.2 million and $25.9 million, respectively. The purchase accounting adjustments to cost of sales negatively impacted our gross profit percentages during 2014 and 2013 by 90 basis points and 250 basis points, respectively.

The following table sets forth the Company’s gross profit for the years ended December 31, 2014 and December 31, 2013.


	Year Ended December 31,
	2013					2014
	Dollars in Thousands		Percentage of Net Sales			Dollars in Thousands		Percentage of Net Sales
Retail	$	582,214		40.6	%	$	674,453		42.0	%
Wholesale		184,870		31.2			201,430		31.2

Total	$	767,084		37.9	%	$	875,883		38.9	%

The gross profit on net sales at retail during the years ended December 31, 2014 and 2013 was 42.0% and 40.6%, respectively. The purchase accounting adjustments to cost of sales negatively impacted retail’s gross profit percentage during 2014 and 2013 by 80 basis points and 250 basis points, respectively. Excluding the impact of purchase accounting, the gross profit percentage during 2014 was slightly lower than during 2013 as changes in product mix was mostly offset by further leveraging of fixed occupancy costs and increased sales of product supplied by our wholesale operations. During 2014, our wholesale operations’ share of shelf at our domestic Party City stores (including stores acquired from iParty) and our North American retail e-commerce operations (i.e., product costs supplied by our wholesale operations) was 70.2%.

The gross profit on net sales at wholesale during each of the years ended December 31, 2014 and 2013 was 31.2%. The purchase accounting adjustments to cost of sales negatively impacted wholesale’s gross profit percentage during 2014 and 2013 by 120 basis points and 250 basis points, respectively. Excluding the impact of purchase accounting, the gross profit percentage during 2014 was lower than during 2013 principally due to changes in sales mix, including higher international sales and increased royalties due to higher sales of licensed product, partially offset by the leveraging of fixed distribution and manufacturing costs.

Operating expenses

Wholesale selling expenses were $73.9 million during 2014 and were $5.8 million or 8.5% higher than 2013 principally due to the increase in sales (see above), inflationary cost increases and the impact of foreign currency translation. Wholesale selling expenses were 11.4% and 11.5% of net wholesale sales during 2014 and 2013, respectively. As a result of the application of the acquisition method of accounting, we increased the values of certain intangible assets. The impact of such adjustments on amortization expense increased wholesale selling expenses during 2014 and 2013 by $7.0 million and $8.3 million, respectively.

Retail operating expenses during 2014 and 2013 were $397.1 million and $370.0 million, respectively. Retail operating expenses during 2014 were $27.1 million or 7.3% higher than in 2013. Approximately $9 million of the increase was due to the May 2013 acquisition of iParty and the March 2013 acquisition of Party Delights. The remainder of the increase was primarily due to the operation of approximately 21 additional stores, the impact of fiscal year 2014 for our Retail operations consisting of 53 weeks, and inflationary cost increases. Such increases were partially offset by lower advertising costs. Retail operating expenses were 24.7% and 25.8% of net retail sales during 2014 and 2013, respectively.

Franchise expenses during 2014 and 2013 were $14.3 million and $13.3 million, respectively. The $1.0 million increase was principally due to the 53rd week.

General and administrative expenses during 2014 and 2013 were $147.7 million and $146.1 million, respectively. Inflationary cost increases, the impact of fiscal year 2014 for our Retail operations consisting of 53 weeks, and the impact of general and administrative costs at Party Delights (which was acquired in March 2013) were offset by the elimination, in 2014, of iParty general and administrative costs which were incurred during 2013, as part of the synergies related to the May 2013 acquisition. General and administrative expenses were 6.5% and 7.1% of total revenues during 2014 and 2013, respectively.

Art and development costs totaled $19.4 million and $19.3 million during 2014 and 2013, respectively. The costs were 0.9% and 1.0% of total revenues during 2014 and 2013, respectively.

In conjunction with the Transactions, we applied the acquisition method of accounting and allocated the $2.7 billion acquisition price to various tangible and intangible assets, including our Halloween City trade name. The value that was ascribed to the trade name was based on the number of Halloween City stores that we expected to open during each subsequent Halloween selling season and the expected performance of such stores. The number of stores that the Company opens during a season is driven by many factors, including the availability of suitable locations. During 2013, we made a strategic decision to open fewer temporary Halloween City stores. As a result of that decision and a change in store performance, during 2013 we lowered the value of the Halloween City trade name by recording a $7.5 million impairment charge.

Interest expense, net

Interest expense, net, totaled $155.9 million during 2014, compared to $143.4 million during 2013. The $12.5 million increase was principally due to the August 2013 issuance of the senior PIK toggle notes. Such impact was partially offset by the February 2013 and February 2014 amendments of the Term Loan Facility, which lowered the interest rate by 150 basis points and 25 basis points, respectively.

Other expense, net

Other expense, net, was $5.9 million during 2014, compared to $18.5 million during 2013.

During February 2014, we amended the Term Loan Facility. In conjunction with the refinancing, we wrote-off $1.6 million of costs that had been capitalized during the issuance of the debt. Additionally, we wrote-off $0.6 million of the net original issuance discount that existed as of the time of the amendment and $0.7 million of the unamortized call premium that existed at the time of the amendment. Also in conjunction with the refinancing, we expensed $1.4 million of banker and legal fees.

During 2014, we received $4.5 million of business interruption insurance proceeds related to the impact of Superstorm Sandy in 2012 and recorded the amount in other expense, net.

Additionally, during February 2013, we amended the Term Loan Facility. In conjunction with the refinancing, we wrote-off $5.9 million of costs that had been capitalized during the initial issuance of the debt. Additionally, we wrote-off $2.3 million of the net original issuance discount that existed as of the time of the amendment. Also in conjunction with the refinancing, we expensed $2.5 million of a call premium and $1.6 million of banker and legal fees.

Other expense, net also includes corporate development expenses, foreign currency losses and losses in unconsolidated joint ventures.

Income tax expense

The difference between the consolidated effective income tax rate for the year ending December 31, 2014 and the U.S. federal statutory rate is primarily attributable to the recording of a tax benefit for certain costs incurred in conjunction with the Transaction, a foreign rate differential and available domestic manufacturing deductions, partially offset by unrecognized foreign tax credits and state income taxes. See Note 13 of the consolidated financial statements for further detail.

Year Ended December 31, 2013 Compared To Period From July 28, 2012 to December 31, 2012 and Period From January 1, 2012 to July 27, 2012

The following tables set forth our operating results and operating results as a percentage of total revenues for the year ended December 31, 2013, the period from July 28, 2012 to December 31, 2012 and the period from January 1, 2012 to July 27, 2012.


	Period from January 1 to July 27, 2012				Period from July 28 to December 31, 2012				Year Ended December 31, 2013
	Predecessor				Successor				Successor
	(Dollars in thousands)
Revenues:
Net sales	$	930,903	99.0	%	$	964,330	99.0	%	$	2,026,272	99.1	%
Royalties and franchise fees		9,281	1.0			9,312	1.0			18,841	0.9

Total revenues		940,184	100.0			973,642	100.0			2,045,113	100.0
Expenses:
Cost of sales		574,048	61.1			636,410	65.4			1,259,188	61.6
Wholesale selling expenses		31,568	3.4			28,096	2.9			68,102	3.3
Retail operating expenses		166,047	17.7			172,168	17.7			369,996	18.1
Franchise expenses		6,579	0.7			6,128	0.6			13,320	0.7
General and administrative expenses		101,502	10.7			65,890	6.8			146,094	7.1
Art and development costs		10,824	1.1			8,201	0.8			19,311	1.0
Impairment of trade name		0	0.0			0	0.0			7,500	0.3

Total expenses		890,568	94.7			916,893	94.2			1,883,511	92.1

Income from operations		49,616	5.3			56,749	5.8			161,602	7.9
Interest expense, net		41,970	4.5			62,062	6.4			143,406	7.0
Other expense, net		22,245	2.4			26,157	2.7			18,478	0.9

Loss before income taxes		(14,599)	(1.6)			(31,470)	(3.3)			(282)	0.0
Income tax expense (benefit)		403	0.0			(1,322)	(0.1)			(4,525)	(0.2)

Net (loss) income		(15,002)	(1.6)			(30,148)	(3.1)			4,243	0.2
Less: net income attributable to noncontrolling interests		96	0.0			60	0.0			224	0.0

Net (loss) income attributable to Party City Holdco Inc.	$	(15,098)	(1.6)	%	$	(30,208)	(3.1)	%	$	4,019	0.2	%

Revenues

The following table sets forth our total revenues for the year ended December 31, 2013, the period from July 28, 2012 to December 31, 2012 and the period from January 1, 2012 to July 27, 2012.


	Period from January 1 to July 27, 2012						Period from July 28 to December 31, 2012						Year Ended December 31, 2013
	Predecessor						Successor						Successor
	Dollars in Thousands			Percentage of Total Revenues			Dollars in Thousands			Percentage of Total Revenues			Dollars in Thousands			Percentage of Total Revenues
Net Sales:
Wholesale	$	512,473			54.5	%	$	510,277			52.4	%	$	1,080,740			52.9	%
Eliminations		(194,659	)		(20.7	)%		(245,219	)		(25.2	)%		(487,990	)		(23.9	)%

Net wholesale		317,814			33.8	%		265,058			27.2	%		592,750			29.0	%
Retail		613,089			65.2	%		699,272			71.8	%		1,433,522			70.1	%

Total net sales		930,903			99.0	%		964,330			99.0	%		2,026,272			99.1	%
Royalties and franchise fees		9,281			1.0	%		9,312			1.0	%		18,841			0.9	%

Total revenues	$	940,184			100.0	%	$	973,642			100.0	%	$	2,045,113			100.0	%

Retail

Retail net sales for the year ended December 31, 2013 totaled $1,433.5 million. Net sales during the periods from July 28, 2012 to December 31, 2012 and January 1, 2012 to July 27, 2012 were $699.3 million and $613.1 million, respectively. The changes in basis resulting from the Transactions did not impact our retail net sales. Retail net sales during the year ended December 31, 2013 increased $121.2 million or 9.2% compared to the corresponding period of 2012. Retail net sales at our Party City stores (excluding iParty stores acquired during May 2013) totaled $1,181.3 million and were $60.8 million or 5.4% higher than the corresponding period of 2012. Additionally, our domestic retail e-commerce sales totaled $101.5 million during 2013 and were $5.4 million or 5.6% higher than the corresponding period of 2012. Retail net sales during 2012 were negatively impacted by approximately $8 million as a result of the timing of New Year’s Eve, as the 2012 fiscal year for our retail operations began on January 1, 2012 and ended on December 29, 2012. The 2013 fiscal year for our retail operations began on December 30, 2012 and ended on December 28, 2013. Same-store sales for the Party City brand (including retail e-commerce sales and sales at acquired stores, to the extent that the stores were converted to the Party City format and included in our sales for the comparable period of the prior year) increased by 2.9% during 2013 due to a 2.7% increase in average transaction dollar size and a 0.2% increase in transaction count. Excluding the impact of e-commerce, same-store sales increased by 2.7% due to a 2.6% increase in average transaction dollar size and a 0.1% increase in transaction count. Domestic retail e-commerce sales increased by 5.6% due to a 4.2% increase in transaction count and a 1.4% increase in average transaction dollar size. The timing of New Year’s Eve positively impacted same-store sales for the Party City brand and Party City stores by 0.7% each. The overall increase in Party City store sales also reflects the operation of 20 additional stores during 2013 as 25 stores were opened and five stores were closed during the year. The May 2013 acquisition of iParty contributed $57.1 million to net sales. All 54 iParty stores were re-branded and re-merchandised as Party City stores prior to the end of 2013. Net sales at our temporary Halloween City stores totaled $75.3 million and were $13.7 million lower than 2012 due to a decrease in the number of temporary stores opened in 2013 (approximately 350 stores) compared to 2012 (approximately 420 stores). The average sales per Halloween City store was 3.0% higher during the five-week period ended November 2, 2013 than during the corresponding period of 2012. The March 2013 acquisition of Party Delights Ltd., our international retail e-commerce operations, contributed $16.9 million to net sales. Sales at all other formats totaled $1.4 million in 2013 and were $5.3 million lower than the corresponding period of 2012 due to the closure of our remaining outlet stores.

Wholesale

Wholesale net sales during the year ended December 31, 2013 totaled $592.8 million. Net sales during the periods from July 28, 2012 to December 31, 2012 and January 1, 2012 to July 27, 2012 were $265.1 million and $317.8 million, respectively. The changes in basis resulting from the Transactions did not impact our wholesale net sales. Wholesale net sales during 2013 were $9.9 million, or 1.7%, higher than during 2012. During 2013, net sales to domestic party goods retailers, including our franchisee network, and to domestic party goods distributors totaled $290.7 million and were $1.2 million or 0.4% higher than during 2012. Sales of Halloween-related product increased by approximately $4 million principally due to higher sales of our Christy’s costume line. In addition, contract manufacturing sales of tableware at our manufacturing operations were approximately $3 million higher than 2012. These increases were partially offset by the elimination of an additional $6.0 million of intercompany sales as a result of our May 2013 acquisition of iParty. Net sales of metallic balloons to domestic distributors and others totaled $83.1 million and were $0.5 million, or 0.6% lower than in 2012, as the impact of the temporary helium shortage was substantially offset by a shift of approximately $2 million of Valentine’s Day sales into December 2013 (the corresponding sales shipped in January 2013 during the prior Valentine’s Day selling season). International net sales, including U.S. export sales, totaled $219.0 million and were $9.2 million or 4.4% higher than in the corresponding period of 2012 despite foreign currency negatively impacting 2013 sales by approximately $1.0 million. International sales of Christy’s costumes and Christy’s garments and accessories increased by approximately $8.0 million and $5.0 million, respectively, in 2013. These favorable variances were partially offset by lower sales in the U.K., primarily due to 2012 benefiting from the Queen’s Jubilee and the London Olympics.

Intercompany sales to our retail affiliates were $488.0 million during 2013. Intercompany sales to our retail affiliates during the periods from July 28, 2012 to December 31, 2012 and January 1, 2012 to July 27, 2012 were $245.2 million and $194.7 million, respectively. Intercompany sales during 2013 were $48.1 million or 10.9% higher than the corresponding period of 2012, reflecting an increase in our wholesale share of shelf at our retail operations (principally additional sales of Christy’s costumes), as well as our acquisition of iParty during May 2013 (which resulted in approximately $28.0 million of subsequent sales to iParty being included in intercompany sales). Intercompany sales represented 45.1% of total wholesale sales during 2013, compared to 43.0% during 2012. The intercompany sales of our wholesale segment are eliminated against the intercompany purchases of our retail segment in the consolidated financial statements.

Royalties and franchise fees

Royalties and franchise fees for the year ended December 31, 2013, which were not affected by the basis changes caused by the Transactions, totaled $18.8 million and were principally consistent with the corresponding period of 2012.

Gross Profit

Our total gross profit on net sales during the year ended December 31, 2013 was 37.9%. The total gross profit on net sales during the periods from July 28, 2012 to December 31, 2012 and January 1, 2012 to July 27, 2012 were 34.0% and 38.3%, respectively. As a result of the Transactions, we applied the acquisition method of accounting and increased the value of its inventory by $89.8 million as of July 28, 2012. Such adjustment increased our cost of sales during the year ended December 31, 2013 and the period from July 28, 2012 to December 31, 2012 by $25.2 million and $58.6 million, respectively, as the related inventory was sold. Further, during the application of the acquisition method of accounting, we increased the values of certain intangible assets and its property, plant and equipment. The impact of such adjustments on depreciation and amortization expense increased our cost of sales during the year ended December 31, 2013 and the period from July 28, 2012 to December 31, 2012 by $25.9 million and $15.4 million, respectively. The purchase accounting adjustments to cost of sales negatively impacted our gross profit percentage during 2013 and the period from July 28, 2012 to December 31, 2012 by 250 basis points and 770 basis points, respectively.

The following table sets forth our gross profit for the year ended December 31, 2013, the period from July 28, 2012 to December 31, 2012 and the period from January 1, 2012 to July 27, 2012.


	Period from January 1 to July 27, 2012					Period from July 28 to December 31, 2012					Year Ended December 31, 2013
	Predecessor					Successor					Successor
	Dollars in Thousands		Percentage of Net Sales			Dollars in Thousands		Percentage of Net Sales			Dollars in Thousands		Percentage of Net Sales
Wholesale	$	112,205		35.3	%	$	72,415		27.3	%	$	184,870		31.2	%
Retail		244,650		39.9			255,505		36.5			582,214		40.6

Total	$	356,855		38.3	%	$	327,920		34.0	%	$	767,084		37.9	%

The gross profit on net sales at retail during 2013 was 40.6%. The gross profit on net sales at retail during the periods from July 28, 2012 to December 31, 2012 and January 1, 2012 to July 27, 2012 were 36.5% and 39.9%, respectively. The purchase accounting adjustments to cost of sales negatively impacted retail’s gross profit percentage during 2013 and during the period from July 28, 2012 to December 31, 2012 by 250 basis points and 780 basis points, respectively. During 2013, our wholesale operations’ share of shelf at our domestic Party City stores (excluding acquired iParty stores) and our North American retail e-commerce operations (i.e., product costs supplied by our wholesale operations) was 67.5%.

The gross profit on net sales at wholesale during 2013 was 31.2%. The gross profit on net sales at wholesale during the periods from July 28, 2012 to December 31, 2012 and January 1, 2012 to July 27, 2012 were 27.3% and 35.3%, respectively. The purchase accounting adjustments to cost of sales negatively impacted wholesale’s gross profit percentage during 2013 and during the period from July 28, 2012 to December 31, 2012 by 250 basis points and 730 basis points, respectively. The percentage during 2013 was also impacted by changes in product mix, including greater licensed product sales and the introduction of additional value line tableware products.

Operating expenses

Wholesale selling expenses were $68.1 million during 2013, $28.1 million during the period from July 28, 2012 to December 31, 2012 and $31.6 million during the period from January 1, 2012 to July 27, 2012. As a result of the application of the acquisition method of accounting, we increased the values of certain intangible assets and its property, plant and equipment. The impact of such adjustments on depreciation and amortization expense increased wholesale selling expenses during 2013 and the period from July 28, 2012 to December 31, 2012 by $8.9 million and $3.8 million, respectively. Wholesale selling expenses were 11.5% of net wholesale sales during 2013, 10.6% of net wholesale sales during the period from July 28, 2012 to December 31, 2012 and 9.9% of net wholesale sales during the period from January 1, 2012 to July 27, 2012. Excluding the impact of the adjustments on depreciation and amortization expense, the wholesale selling expense percentage during the period from July 28, 2012 to December 31, 2012 was lower than during the period from January 1, 2012 to July 27, 2012 principally due to the impact of higher Halloween-related sales on fixed selling expenses.

Retail operating expenses during 2013 were $370.0 million. Retail operating expenses during the periods from July 28, 2012 to December 31, 2012 and January 1, 2012 to July 27, 2012 were $172.2 million and $166.0 million, respectively. The changes in basis resulting from the Transactions did not impact retail operating expenses. Retail operating expenses during 2013 were $31.8 million or 9.4% higher than in 2012. The increase was principally due to $21.0 million of retail operating costs related to iParty and Party Delights, which were acquired during 2013. Additionally, during 2013, we operated 20 more Party City stores than during 2012. Retail operating expenses were 25.8% of retail net sales during both 2013 and 2012.

Franchise expenses during 2013 were $13.3 million. Franchise expenses during the periods from July 28, 2012 to December 31, 2012 and January 1, 2012 to July 27, 2012 were $6.1 million and $6.6 million, respectively. Franchise expenses increased subsequent to July 27, 2012 principally due to increased amortization expense caused by the application of the acquisition method of accounting.

General and administrative expenses during 2013 were $146.1 million. General and administrative expenses during the periods from July 28, 2012 to December 31, 2012 and January 1, 2012 to July 27, 2012 were $65.9 million and $101.5 million, respectively. In conjunction with the Transactions, we recorded $8.4 million of transaction costs in general and administrative expenses during the period from January 1, 2012 to July 27, 2012. Additionally, the Transactions accelerated the vesting of certain of our stock options and, as a result, we recorded $2.1 million of expense in general and administrative expenses during the period. Further, due to the vesting of such stock options, we made payments in lieu of dividends to the holders of such options and during the period from January 1, 2012 to July 27, 2012 we recorded a $16.1 million charge in general and administrative expenses. General and administrative expenses were 7.1%, 6.8% and 10.7% of total revenues during full-year 2013, the period from July 28, 2012 to December 31, 2012 and the period from January 1, 2012 to July 27, 2012, respectively. Costs related to the Transactions increased the percentage for the period from January 1, 2012 to July 27, 2012 by 280 basis points. Additionally, the percentage for the period from July 28, 2012 to December 31, 2012 was lower than during the period from January 1, 2012 to July 27, 2012 principally due to the impact of higher Halloween-related sales on fixed expenses.

Art and development costs totaled $19.3 million during 2013. Art and development costs totaled $8.2 million and $10.8 million during the periods from July 28, 2012 to December 31, 2012 and January 1, 2012 to July 27, 2012, respectively. Art and development costs as a percentage of total revenues were 1.0%, 0.8% and 1.1% during full-year 2013, the period from July 28, 2012 to December 31, 2012 and the period from January 1, 2012 to July 27, 2012, respectively.

In conjunction with the Transactions, we applied the acquisition method of accounting and allocated the $2.7 billion acquisition price to various tangible and intangible assets, including our Halloween City trade name. The value that was ascribed to the trade name was based on the number of Halloween City stores that we expected to open during each subsequent Halloween selling season and the expected performance of such stores. The number of stores that the Company opens during a season is driven by many factors, including the availability of suitable locations. During 2013, we made a strategic decision to open fewer temporary Halloween City stores. As a result of a change in store performance and the decision to open fewer Halloween City stores than assumed in 2012, during 2013 we lowered the value of the Halloween City trade name by recording a $7.5 million impairment charge.

Interest expense, net

Interest expense, net, totaled $143.4 million during 2013. Interest expense, net, was $62.1 million during the period from July 28, 2012 to December 31, 2012 and $42.0 million during the period from January 1, 2012 to July 27, 2012. Our interest expense subsequent to July 27, 2012 was higher than during the period from January 1, 2012 to July 27, 2012 due to the debt incurred in conjunction with the Transactions. Additionally, during August 2013, in order to pay a dividend, we issued $350.0 million of 8.75% notes which are due in 2019 (see Note 8 to the consolidated financial statements included elsewhere in this prospectus). The impact of the new notes was partially offset by our February 2013 amendment to the Term Loan Credit Agreement, which lowered the interest rate by 150 basis points (see Note 8 to the audited consolidated financial statements included elsewhere in this prospectus).

Other expense, net

Other expense, net, was $18.5 million during full-year 2013, $26.2 million during the period from July 28, 2012 to December 31, 2012 and $22.2 million during the period from January 1, 2012 to July 27, 2012.

During February 2013, we amended the Term Loan Credit Agreement (see Note 8 to the consolidated financial statements included elsewhere in this prospectus). In conjunction with the refinancing, we wrote-off $5.9 million of costs that had been capitalized during the initial issuance of the debt. Additionally, we wrote-off $2.3 million of the net original issuance discount that existed as of the time of the amendment. Also in conjunction with the refinancing, we expensed $2.5 million of a call premium and $1.6 million of banker and legal fees. Full-year 2013 also included corporate development costs related to the acquisitions of iParty and Party Delights.

In conjunction with the Transactions, we recorded $24.6 million of transaction costs in other expense during the period from July 28, 2012 to December 31, 2012 and $19.7 million of transaction costs in other expense during the period from January 1, 2012 to July 27, 2012. Additionally, the period from January 1, 2012 to July 27, 2012 included $2.4 million in costs as a result of the termination of an initial public offering.

Income tax benefit

In addition to recording an income tax benefit at the statutory rate, during 2013 we recorded a $2.2 million state income tax benefit principally due to the impact of apportionment changes on future state income taxes associated with a deferred income tax liability on trade names. Additionally, we recorded a state income tax credit in the amount of $1.4 million due to a write-off of a deferred tax liability related to state bonus depreciation. See Note 13 to the consolidated financial statements included elsewhere in this prospectus for further discussion.

Liquidity and Capital Resources

Capital Structure

In conjunction with the closing of the Transactions, PCHI entered into the $400.0 million ABL Facility and the $1,125.0 million Term Loan Facility and amounts outstanding under PCHI’s previous $350.0 million ABL revolving credit facility and its previous $675.0 million term loan agreement were repaid. Additionally, in conjunction with the Transactions, on July 27, 2012, PCHI issued $700.0 million 8.875% senior notes and completed a cash tender offer for all of its outstanding $175.0 million 8.75% senior subordinated notes. On August 1, 2013, Nextco Holdings and Nextco Finance issued $350.0 million of 8.750%/9.500% senior PIK toggle notes. The net proceeds were distributed to us by Nextco Holdings and we used this cash to pay a one-time cash dividend to holders of our common stock totaling $338.0 million. See “Description of Certain Debt” for further details on the ABL Facility, Term Loan Facility, the senior notes and the senior PIK toggle notes. For additional information, refer to the credit agreements, indentures and related agreements filed as exhibits to this prospectus.

Other Credit Agreements

The Company has entered into several foreign credit facilities which provide it with additional borrowing capacity. At December 31, 2014 and December 31, 2013, borrowings under the foreign facilities totaled $1.4 million and $1.2 million, respectively.

Other Indebtedness

Additionally, we have entered into various capital leases for machinery and equipment. At December 31, 2014 and December 31, 2013 the balances of such leases were $3.3 million and $2.9 million, respectively. We also have numerous non-cancelable operating leases for its retail store sites, as well as several leases for offices, distribution and manufacturing facilities, showrooms and equipment. These leases generally contain renewal options and require us to pay real estate taxes, utilities and related insurance costs.

Liquidity

We expect that cash generated from operating activities and availability under our credit agreements will be our principal sources of liquidity. Based on our current level of operations, we believe these sources will be adequate to meet our liquidity needs for at least the next 12 months. We cannot assure you, however, that our business will generate sufficient cash flow from operations or that future borrowings will be available to us under the ABL Facility and the Term Loan Facility in amounts sufficient to enable us to repay our indebtedness or to fund our other liquidity needs. See “Risk Factors—Risks Related to Our Indebtedness—We may not be able to generate sufficient cash to service all of our indebtedness and may be forced to take other actions to satisfy our obligations under our indebtedness, which may not be successful.”

Cash Flow Data—Year Ended December 31, 2014 Compared to Year Ended December 31, 2013

Net cash provided by operating activities totaled $136.4 million and $135.8 million during the years ended December 31, 2014 and 2013, respectively. Net cash flows provided by operating activities before changes in operating assets and liabilities were $163.5 million during 2014, compared to $121.9 million during 2013, with the variance principally attributable to the increased profitability during 2014. Changes in operating assets and liabilities during 2014 resulted in a use of cash of $27.1 million. Changes in operating assets and liabilities during 2013 resulted in a source of cash of $13.9 million. The variance was due to an increase in inventory in order to support the higher sales levels and new merchandising programs.

Net cash used in investing activities totaled $89.6 million during 2014, as compared to $112.5 million during 2013. Investing activities during 2014 included $10.2 million paid in connection with the acquisition of U.S. Balloon. Investing activities during 2013 included $48.6 million paid in connection with the acquisitions of iParty and Party Delights. Capital expenditures during 2014 and 2013 were $78.2 million and $61.2 million, respectively. Retail capital expenditures totaled $50.6 million during 2014 and principally related to store conversions and new stores. Wholesale capital expenditures totaled $27.6 million during 2014 and primarily related to machinery and equipment at manufacturing operations, as well as printing plates and dies.

Net cash used in financing activities was $23.5 million during 2014, as compared to $18.4 million during 2013. During both February 2014 and February 2013, the Company amended the Term Loan Facility. As all term loans outstanding at the time of the amendments were replaced with new term loans for the same principal amount, the Company included the total principal amounts, $1,111.0 million and $1,122.2 million, respectively, in both the repayment of loans, notes payable and long-term obligations and the proceeds from loans, notes payable and long-term obligations. Additionally, during 2013, the Company issued the senior PIK toggle notes and used the proceeds, net of expenses, to pay a dividend to its shareholders. Excluding the impact of the issuance of the senior PIK toggle notes, net repayments during 2014 were $5.9 million greater than during 2013 as the increased profitability and lower cash used in investing activities more than offset the change in operating assets and liabilities and interest payments on the new senior PIK toggle notes.

At December 31, 2014, we had $356.6 million of excess availability under the ABL Facility, after considering borrowing base restrictions.

Cash Flow Data—Year Ended December 31, 2013 Compared to Periods from January 1, 2012 to July 27, 2012 and July 28, 2012 to December 31, 2012

Net cash provided by operating activities totaled $135.8 million during 2013. Net cash used in operating activities totaled $35.5 million and $18.1 million during the periods from July 28, 2012 to December 31, 2012 and January 1, 2012 to July 27, 2012, respectively. Net cash flows provided by operating activities before changes in operating assets and liabilities were $121.9 million during 2013. Net cash flows provided by operating activities before changes in operating assets and liabilities, which were impacted by the Transactions, were $9.0 million and $32.5 million during the periods from July 28, 2012 to December 31, 2012 and January 1, 2012 to July 27, 2012, respectively. Changes in operating assets and liabilities during 2013 resulted in a source of cash of

$13.9 million. Changes in operating assets and liabilities during the period from July 28, 2012 to December 31, 2012 and the period from January 1, 2012 to July 27, 2012 resulted in uses of cash in the amounts of $44.5 million and $50.6 million, respectively. The change in accounts payable, accrued expenses and income taxes payable during the period from July 28, 2012 to December 31, 2012 principally related to stock option payments, payments in lieu of dividends and other Transaction-related payments (see Note 5 to our consolidated financial statements included elsewhere in this prospectus for further discussion). The $50.6 million use of cash during the period from January 1, 2012 to July 27, 2012 was due to our seasonal working capital build.

Net cash used in investing activities totaled $112.5 million during 2013, as compared to $1,578.6 million during the period from July 28, 2012 to December 31, 2012 and $31.8 million during the period from January 1, 2012 to July 27, 2012. Investing activities during 2013 included $51.5 million paid in connection with certain acquisitions, including the acquisitions of iParty and Party Delights. Investing activities during the period from July 28, 2012 to December 31, 2012 included $1,562.2 million paid to our former owners in conjunction with the Transactions (see Note 5 to our consolidated financial statements included elsewhere in this prospectus for further discussion). Capital expenditures during 2013 were $61.2 million. Retail capital expenditures totaled $45.4 million during 2013 and principally related to store conversions (including the conversion of iParty stores) and new stores. Wholesale capital expenditures totaled $15.8 million and primarily related to printing plates/dies, machinery/equipment for our manufacturing operations and information technology expenditures.

Net cash used in financing activities was $18.4 million during 2013, as compared to $1,629.3 million provided by financing activities during the period from July 28, 2012 to December 31, 2012 and $33.3 million provided by financing activities during the period from January 1, 2012 to July 27, 2012. During 2013, we issued $350.0 million of notes at a 1% discount and used the proceeds, net of expenses, to pay a $338.0 million dividend. The cash inflow during the period from July 28, 2012 to December 31, 2012 related to the Transactions (see Note 5 to our consolidated financial statements included elsewhere in this prospectus for further discussion).

At December 31, 2013, we had $346.7 million of excess availability under the ABL Facility.

Tabular Disclosure of Contractual Obligations

Our contractual obligations at December 31, 2014 are summarized by the year in which the payments are due in the following table (dollars in thousands):


	Total		2015		2016		2017		2018		2019		Thereafter
Long-term debt obligations (a)	$	2,136,558	$	11,250	$	11,110	$	11,110	$	11,110	$	1,391,978	$	700,000
Capital lease obligations (a)		3,274		999		1,112		800		240		118		5
Operating lease obligations (b)		673,441		130,392		117,342		103,262		83,503		63,353		175,589
Purchase commitments (c)		14,000		14,000		—		—		—		—		—
Minimum product royalty obligations (a)		33,628		20,582		10,929		2,117		—		—		—

Total contractual obligations	$	2,860,901	$	177,223	$	140,493	$	117,289	$	94,853	$	1,455,449	$	875,594

(a)	See our consolidated financial statements which are included elsewhere in this prospectus for further detail.

(b)

We are also an assignor with continuing lease liability for four stores sold to franchisees, and other parties, that expire through 2018. The assigned lease obligations continue until the applicable leases expire. The maximum amount of the assigned lease obligations may vary, but is limited to the sum of the total amount due under the lease. At December 31, 2014, the maximum amount of the assigned lease obligations was approximately $1.1 million and is not included in the table above.

(c)	We have certain purchase commitments requiring minimum purchase commitments. See our consolidated financial statements which are included elsewhere in this prospectus for further detail.

Not included in the above table are borrowings under the ABL Facility and our foreign credit facilities.

Not included in the above table are $0.8 million of net potential cash obligations associated with unrecognized tax benefits due to the high degree of uncertainty regarding the timing of future cash outflows associated with such obligations. Refer to the notes to the consolidated financial statements which are included elsewhere in this prospectus for further information related to unrecognized tax benefits.

Additionally, not included in the above table are expected interest payments associated with the Term Loan Facility, the senior notes, the PIK toggle notes and capital lease obligations, of approximately $136.8 million in 2015, $136.3 million in 2016, $135.8 million in 2017, $135.3 million in 2018, $105.4 million in 2019 and $36.2 million thereafter. Interest payments are estimates based on our debt’s scheduled maturities and stated interest rates or, for variable rate debt, interest rates as of December 31, 2014. Additionally, payments for the PIK toggle notes are assumed to be made in cash. Our estimates do not reflect interest payments on the credit facilities or the possibility of additional interest from the refinancing of our debt as such amounts are not determinable.

The above table also does not reflect net proceeds from this offering and the proposed use of a portion of the proceeds to repay all or a portion of the senior PIK toggle notes. See “Use of Proceeds.”

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements.

Effects of Inflation

Although we expect that our operating results will be influenced by general economic conditions, we do not believe that inflation has had a material effect on our results of operations during the periods presented. However, there can be no assurance that our business will not be affected by inflation in the future.

Critical Accounting Policies and Procedures

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires the appropriate application of certain accounting policies, many of which require estimates and assumptions about future events and their impact on amounts reported in the financial statements and related notes. Since future events and their impact cannot be determined with certainty, the actual results will inevitably differ from our estimates. Such differences could be material to the consolidated financial statements included herein.

We believe our application of accounting policies, and the estimates inherently required by these policies, are reasonable. These accounting policies and estimates are constantly re-evaluated and adjustments are made when facts and circumstances dictate a change. Historically, we have found the application of accounting policies to be reasonable, and actual results generally do not differ materially from those determined using necessary estimates.

Revenue Recognition

Our terms of sale to retailers and other distributors for substantially all of our sales is FOB shipping point and, accordingly, title and the risks and rewards of ownership are transferred to the customer, and revenue is recognized, when goods are shipped. We estimate reductions to revenues for volume-based rebate programs at the time sales are recognized.

Wholesale sales returns are not significant as, generally, we only accept the return of goods that were shipped to retailers in error.

Revenue from retail operations is recognized at the point of sale. We estimate future retail sales returns and record a provision in the period that the related sales are recorded based on historical information. Retail sales are reported net of taxes collected.

Franchise fee revenue is recognized upon the completion of our performance requirements and the opening of the franchise store. In addition to the initial franchise fee, we also recognize royalty fees generally ranging from 4% to 6% and advertising fund fees ranging from 1% to 2.25% based upon the franchised stores’ reported gross retail sales. The terms of our franchise agreements also provide for payments to franchisees based on domestic retail e-commerce sales originating from specified areas relating to the franchisees’ contractual territory. The amounts paid vary based on several factors, including the profitability of our e-commerce sales, and are expensed at the time of sale.

Store Closure Costs

We record estimated store closure costs, estimated lease commitment costs net of estimated sublease income and other miscellaneous store closing costs when the liability is incurred.

Product Royalty Agreements

We enter into product royalty agreements that allow us to use licensed designs on certain of our products. These contracts require us to pay royalties, generally based on the sales of such product and may require guaranteed minimum royalties, a portion of which may be paid in advance. We match royalty expense with revenue by recording royalties at the time of sale, at the greater of the contractual rate or an effective rate calculated based on the guaranteed minimum royalty and our estimate of sales during the contract period. Guaranteed minimum royalties paid in advance are recorded in the consolidated balance sheets in either prepaid expenses and other current assets or other assets, depending on the nature of the royalties.

Allowance for Doubtful Accounts

We maintain allowances for doubtful accounts for estimated losses resulting from the inability of our customers and franchisees to make required payments. A considerable amount of judgment is required in assessing the ultimate realization of these receivables, including consideration of our history of receivable write-offs, the level of past due accounts and the economic status of our customers. In an effort to identify adverse trends relative to customer economic status, we assess the financial health of the markets we operate in and perform periodic credit evaluations of our customers and ongoing reviews of account balances and aging of receivables. Amounts are considered past due when payment has not been received within the time frame of the credit terms extended. Write-offs are charged directly against the allowance for doubtful accounts and occur only after all collection efforts have been exhausted. Because we cannot predict future changes in economic conditions and in the financial stability of our customers, actual future losses from uncollectible accounts may differ from our estimates and could impact our allowance for doubtful accounts.

Inventories

Inventories are valued at the lower of cost or market. In assessing the ultimate realization of inventories, we are required to make judgments regarding, among other things, future demand and market conditions, current inventory levels and the impact of the possible discontinuation of product designs.

We determine the cost of inventory at our retail stores using the weighted average method. All other inventory cost is determined principally using the first-in, first-out method.

We estimate retail inventory shortage for the period between physical inventory dates on a store-by-store basis. Our inventory shortage estimate can be affected by changes in merchandise mix and changes in actual shortage trends. The shrinkage rate from the most recent physical inventory, in combination with historical experience, is the basis for estimating shrinkage.

Long-Lived and Intangible Assets (including Goodwill)

We review the recoverability of our long-lived assets, including finite-lived intangible assets, whenever facts and circumstances indicate that the carrying amount may not be fully recoverable. For purposes of recognizing and measuring impairment, we evaluate long-lived assets other than goodwill based upon the lowest level of independent cash flows ascertainable to evaluate impairment. If the sum of the undiscounted future cash flows expected over the remaining asset life is less than the carrying value of the assets, we may recognize an impairment loss. The impairment related to long-lived assets is measured as the amount by which the carrying amount of the asset exceeds the fair value of the asset. When fair values are not readily available, we estimate fair values using expected discounted future cash flows. Such estimates of fair value require significant judgment, and actual fair value could differ due to changes in the expectations of cash flows or other assumptions, including discount rates.

In the evaluation of the fair value and future benefits of finite long-lived assets attached to retail stores, we perform our cash flow analysis on a store-by-store basis. Various factors including future sales growth and profit margins are included in this analysis. To the extent these future projections or strategies change, the conclusion regarding impairment may differ from the current estimates.

Goodwill is reviewed for potential impairment on an annual basis or more frequently if circumstances indicate a possible impairment.

For purposes of testing goodwill for impairment, reporting units are determined by identifying individual components within our organization which constitute a business for which discrete financial information is available and is reviewed by management. Components within a segment are aggregated to the extent that they have similar economic characteristics. Based on this evaluation, we have determined that our operating segments, wholesale and retail, represent our reporting units for the purposes of our goodwill impairment test.

If necessary, we estimate the fair value of each reporting unit using expected discounted cash flows. If the carrying amount of a reporting unit exceeds its fair value, the excess, if any, of the fair value of the reporting unit over amounts allocable to the unit’s other assets and liabilities is the implied fair value of goodwill. If the carrying amount of a reporting unit’s goodwill exceeds the implied fair value of that goodwill, an impairment loss will be recognized in an amount equal to that excess. The fair value of a reporting unit refers to the amount at which the unit as a whole could be sold in a current transaction between willing parties. The determination of such fair value is subjective, and actual fair value could differ due to changes in the expectations of cash flows or other assumptions including discount rates.

Insurance Accruals

Our consolidated balance sheet includes significant liabilities with respect to self-insured workers’ compensation, medical and general liability claims. We estimate the required liability for such claims based upon various assumptions, which include, but are not limited to, our historical loss experience, projected loss development factors, actual payroll and other data. The required liability is also subject to adjustment in the future based upon changes in claims experience, including changes in the number of incidents (frequency) and changes in the ultimate cost per incident (severity). Adjustments to earnings resulting from changes in historical loss trends have been insignificant. Further, we do not anticipate any significant change in loss trends, settlements or other costs that would cause a significant change in our earnings.

Income Taxes

Temporary differences arising from differing treatment of income and expense items for tax and financial reporting purposes result in deferred tax assets and liabilities that are recorded on the balance sheet. These balances, as well as income tax expense, are determined through management’s estimations, interpretation of tax law for multiple jurisdictions and tax planning. However, inherent in the measurement of deferred balances are

certain judgments and interpretations of enacted tax laws and published guidance with respect to applicability to our operations. If our actual results differ from estimated results due to changes in tax laws or tax planning, our effective tax rate and tax balances could be affected. As such, these estimates may require adjustment in the future as additional facts become known or as circumstances change.

During the ordinary course of business, there are many transactions and calculations for which the ultimate tax determination is uncertain. A valuation allowance is established against deferred tax assets when it is more likely than not that some portion or all of the deferred tax assets will not be realized. These provisions prescribe a comprehensive model of how a company should recognize, measure, present and disclose in its financial statements uncertain tax positions that the company has taken or expects to take on a tax return. In accordance with these provisions, we recognize a tax benefit when a tax position is more-likely-than-not to be sustained upon examination, based solely on its technical merits. We measure the recognized tax benefit as the largest amount of tax benefit that has greater than a 50% likelihood of being realized upon the ultimate settlement with a taxing authority. We reverse previously recognized tax benefits if we determine that the tax position no longer meets the more-likely-than-not threshold of being sustained. We accrue interest and penalties related to unrecognized tax benefits in income tax expense.

Stock-Based Compensation

Accounting for stock-based compensation requires measurement of compensation cost for all stock-based awards at fair value on the date of grant and recognition of compensation over the service period for awards expected to vest. The value of our stock-based awards is recognized as expense over the service period, net of estimated forfeitures. The estimation of stock awards that will ultimately vest requires judgment, and to the extent actual results or updated estimates differ from our current estimates, such amounts will be recorded as a cumulative adjustment in the period estimates are revised. Actual results and future estimates may differ substantially from our current estimates.

We granted 2,583 stock options during 2013, 2,367 of which were granted on April 1, 2013. With the assistance of an independent third-party valuation firm, we determined the fair value of the common stock underlying such options by using a market approach and an income approach and taking the average of the two approaches. The market approach involved estimating EBITDA multiples and the income approach involved estimating future cash flows and determining the present value of such cash flows based on a discount rate. The estimates are complex and subjective. Once our shares begin trading, estimates will not be necessary for purposes of determining the value of our stock for future stock option grants. See Note 12 of the consolidated financial statements, included elsewhere in this prospectus, for a discussion of additional inputs which were used for purposes of determining the fair value of our stock options.

Recently Issued Accounting Pronouncements

In January 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2015-01, “Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items”. The pronouncement will be effective for us during the first quarter of 2016. Although we continue to review this pronouncement, we do not believe that it will have a material impact on our consolidated financial statements.

In June 2014, the FASB issued ASU 2014-12, “Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period”. The update clarifies that a performance target in a share-based payment that affects vesting and that could be achieved after the requisite service period should be accounted for as a performance condition. The pronouncement will be effective for us during the first quarter of 2016. We do not believe that the pronouncement will have a material impact on our consolidated financial statements.

In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers (Topic 606)”. The pronouncement contains a five-step model which replaces most existing revenue recognition guidance. The

update will be effective for us during the first quarter of 2017 and can be applied retrospectively to prior reporting periods or through a cumulative-effect adjustment as of the date of adoption. We are in the process of evaluating the impact of the pronouncement on our consolidated financial statements.

In April 2014, the FASB issued ASU 2014-08, “Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity.” The update changes the criteria for reporting discontinued operations and enhances disclosures related to disposals of components of an entity. The pronouncement will be effective for us during the first quarter of 2015. Although we continue to review this pronouncement, we do not believe that it will have a material impact on our consolidated financial statements.

In July 2013, the FASB issued ASU 2013-11, “Income Taxes: Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists”. The update provides guidance on the financial statement presentation of an unrecognized tax benefit, as either a reduction of a deferred tax asset or as a liability, when a net operating loss carryforward, similar tax loss, or a tax credit carryforward exists. We adopted the update during the first quarter of 2014 and such adoption did not have a material impact on our consolidated financial statements.

In March 2013, the FASB issued ASU 2013-05, “Foreign Currency Matters (Topic 830), Parent’s Accounting for the Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity”. The pronouncement states that a cumulative translation adjustment is attached to the parent’s investment in a foreign entity and should be released in a manner consistent with the derecognition guidance on investments in entities. We adopted the update during the first quarter of 2014 and such adoption did not have a material impact on our consolidated financial statements.

Quarterly Results

Despite a concentration of holidays in the fourth quarter of the year, as a result of our expansive product lines and customer base and increased promotional activities, the impact of seasonality on the quarterly results of our wholesale operations has been limited. However, due to Halloween and Christmas, the inventory balances of our wholesale operations are slightly higher during the third quarter than during the remainder of the year. Additionally, the promotional activities of our wholesale business, including special dating terms, particularly with respect to Halloween products sold to retailers and other distributors, result in slightly higher accounts receivable balances during the third quarter. Our retail operations are subject to significant seasonal variations. Historically, our retail segment has realized a significant portion of its revenues, cash flow and net income in the fourth quarter of the year, principally due to our Halloween sales in October and, to a lesser extent, year-end holiday sales.

September 30, 2013 (Successor), December 31, 2013 (Successor), March 31, 2014 (Successor), June 30, 2014 (Successor), September 30, 2014 (Successor) and December 31, 2014 (Successor) (dollars in thousands):


	For the Three Months Ended, (Successor)
	March 31,			June 30,			September 30,			December 31,
2014:
Revenues:
Net sales	$	429,220		$	487,182		$	538,671		$	796,516
Royalties and franchise fees		3,767			4,392			3,990			7,519
Gross profit		154,839	(a)		182,664	(a)		184,146	(a)		354,234	(a)
Income from operations		15,906	(a)		40,305	(a)		28,778	(a)		158,153	(a)
Net (loss) income		(19,912	)(a)(b)		2,456	(a)		(5,410	)(a)		78,989	(a)


	For the Three Months Ended, (Successor)
	March 31,			June 30,			September 30,			December 31,
2013:
Revenues:
Net sales	$	397,655		$	441,976		$	483,585		$	703,056
Royalties and franchise fees		3,893			4,253			3,815			6,880
Gross profit		130,457	(a)		154,599	(a)		160,902	(a)		321,126	(a)
Income from operations		4,171	(a)		14,598	(a)		10,737	(a)		132,096	(a)(c)
Net (loss) income		(27,100	)(a)(b)		(12,525	)(a)		(11,875	)(a)		55,743	(a)(c)
Net (loss) income attributable to Party City Holdco Inc.		(27,213	)(a)(b)		(12,591	)(a)		(11,920	)(a)		55,743	(a)(c)


	For the Three Months Ended March 31, (Predecessor)		For the Three Months Ended June 30, (Predecessor)		For the period from July 1, to July 27, (Predecessor)			For the period from July 28, to September 30, (Successor)			For the Three Months Ended December 31, (Successor)
2012:
Revenues:
Net sales	$	379,281	$	429,440	$	122,182		$	324,525		$	639,805
Royalties and franchise fees		3,796		4,440		1,045			2,797			6,515
Gross profit		142,657		169,592		44,606			77,017	(a)		250,903	(a)
Income (loss) from operations		21,157		44,729		(16,270	)(d)		(28,676	)(a)		85,425	(a)
Net income (loss)		2,084		16,042		(33,128	)(e)		(55,114	)(a)(f)		24,966	(a)
Net income (loss) attributable to Party City Holdco Inc.		2,044		15,991		(33,133	)(e)		(55,175	)(a)(f)		24,967	(a)

(a)

As a result of the Acquisition, we applied the acquisition method of accounting and increased the value of our inventory by $89.8 million as of July 28, 2012. Such adjustment increased our cost of sales during the periods from July 28, 2012 to September 30, 2012, October 1, 2012 to December 31, 2012, January 1, 2013 to March 31, 2013, April 1, 2013 to June 30, 2013, July 1, 2013 to September 30, 2013, October 1, 2013 to December 31, 2013, January 1, 2014 to March 31, 2014, April 1, 2014 to June 30, 2014, July 1, 2014 to September 30, 2014 and October 1, 2014 to December 31, 2014 by $27.8 million, $30.8 million, $10.8 million, $8.5 million, $2.6 million, $3.3 million, $1.4 million, $1.4 million, $0.6 million and $2.5 million, respectively, as the related inventory was sold. See the notes to the consolidated financial statements for further detail.

(b)

During February 2013, the Term Loan Facility was amended. In conjunction with that amendment, we wrote-off $5.9 million of costs that had been capitalized during the initial issuance of the debt. Additionally, we wrote-off $2.3 million of the net original issuance discount that existed as of the time of that amendment. Also in conjunction with that amendment, we expensed $2.5 million of a call premium and $1.6 million of investment banking and legal fees. All of the charges were recorded in other expense in our consolidated statement of operations and comprehensive loss. During February 2014, we amended the Term Loan

Facility again. In conjunction with the refinancing, we wrote-off $1.6 million of costs that had been capitalized during the issuance of the debt. Additionally, we wrote-off $0.6 million of the net original issuance discount and $0.7 million of the unamortized call premium that existed at the time of the amendment. Also, in conjunction with the refinancing, we expensed $1.4 million of banker and legal fees. All of these charges were recorded in other expense in our consolidated statement of operations and comprehensive loss. For further discussion, see the notes to the consolidated financial statements which are included elsewhere in this prospectus.

(c)

In conjunction with the Transactions, we applied the acquisition method of accounting and allocated the $2.7 billion acquisition price to various tangible and intangible assets, including our Halloween City trade name. The value that was ascribed to the trade name was based on the number of Halloween City stores that we expected to open during each subsequent Halloween selling season and the expected performance of such stores. The number of stores that we open during a season is driven by many factors, including the availability of suitable locations. During 2013, we made a strategic decision to open fewer temporary Halloween City stores. As a result of a change in store performance and our decision to open fewer Halloween City stores than assumed in 2012, during 2013 we lowered the value of our Halloween City trade name by recording a $7.5 million impairment charge.

(d)

Includes: $8.4 million of compensation expense related to the Acquisition, $2.1 million of stock-based compensation expense related to the Acquisition and $16.1 million of expense for payments in lieu of dividends. See the notes to the consolidated financial statements for further detail, including a discussion of the income tax impact.

(e)

Includes: $28.1 million of costs related to the Acquisition, $2.1 million of stock-based compensation expense related to the Acquisition and $16.1 million of expense for payments in lieu of dividends. See the notes to the consolidated financial statements for further detail, including a discussion of the income tax impact.

(f)	Includes: $24.6 million of costs related to the Acquisition.

Quantitative and Qualitative Disclosures about Market Risk

As a result of our variable rate indebtedness, our earnings are affected by changes in interest rates. From time to time we have utilized interest rate swap agreements to manage the risk associated with such changes. As discussed in the notes to the consolidated financial statements included elsewhere in this prospectus, on July 27, 2012 all amounts outstanding under the $675.0 million term loan agreement were repaid and our subsidiary, PCHI, entered into the Term Loan Facility. Assuming that the refinancing had occurred on January 1, 2012, if market interest rates for our variable rate indebtedness averaged 2% more than the actual rates, during 2014, 2013 and 2012 the interest expense amounts in our consolidated financial statements included elsewhere in this prospectus would have increased by $24.4 million, $25.0 million, and $25.3 million during 2014, 2013 and 2012, respectively. The income (loss) before income taxes for the three years would have also been impacted by the same amounts. These amounts are determined by considering the impact of the hypothetical interest rates on our borrowings and considering any interest rate swap agreements. This analysis does not consider the effects of the reduced level of overall economic activity that could exist in such an environment. Further, in the event of a change of such magnitude, management could potentially take action to mitigate our exposure to the change. However, due to the uncertainty of the specific actions that we would take and their possible effects, the sensitivity analysis assumes no changes in our financial structure.

As a result of the sale of our products in foreign markets, our earnings are affected by fluctuations in the value of the U.S. dollar when compared to the values of foreign currencies. Although we periodically enter into foreign currency forward contracts to hedge against the earnings impact of such fluctuations, we (1) may not be able to achieve hedge effectiveness in order to qualify for hedge-accounting treatment and, therefore, would record any gain or loss on the mark-to-market of the contracts in other expense (income) and (2) may not be able to hedge such risks completely or permanently. A uniform 10% strengthening in the value of the U.S. dollar relative to the currencies in which our foreign sales are denominated would have decreased income from operations, as stated in the consolidated financial statements included elsewhere in this prospectus, by $11.0 million, $9.1 million, $3.9 million and $4.8 million during full-year 2014, full-year 2013, the period from July 28, 2012 to December 31, 2012 and the period from January 1,

2012 to July 27, 2012, respectively. The income (loss) before income taxes for the three years would have also been impacted by the same amounts. In addition to the direct effects of changes in exchange rates, changes in exchange rates may also affect the volume of sales or the foreign currency sales price as competitors’ products become more or less attractive. Our sensitivity analysis of the effects of changes in foreign currency exchange rates does not consider a potential change in sales levels or local currency prices.

BUSINESS

Our Company

We are the leading party goods retailer by revenue in North America and, we believe, the largest vertically integrated supplier of decorated party goods globally by revenue with multiple levers to drive future growth across channels, products and geographies. With approximately 900 locations, we have the only coast-to-coast network of party superstores in the U.S. and Canada that make it easy and fun to enhance special occasions with a differentiated shopping experience and an unrivaled assortment of innovative and exciting merchandise offered at a compelling value. Through a series of acquisitions between 2005 and 2010, we built a powerful retail operation that captures the full manufacturing-to-retail margin on a significant portion of the products sold in our stores. Based on our revenues, we believe we are the largest global designer, manufacturer and distributor of decorated party supplies with products found in over 40,000 retail outlets worldwide, including our own stores as well as independent party supply stores, mass merchants, grocery retailers, dollar stores and others. Our category-defining retail concept, multi-channel reach, widely recognized brands, broad and deep product offering and low-cost global sourcing model are, we believe, significant competitive advantages. We believe these characteristics position us for continued organic and acquisition-led growth and margin expansion.

Founded in 1947, we started as an importer and wholesaler and grew to become one of the largest global designers, manufacturers, distributors and retailers of decorated party supplies by revenue. Our broad selection of decorated party supplies includes paper and plastic tableware, metallic and latex balloons, novelties, costumes and other garments, stationery and gifts for everyday, themed and seasonal events. We have a history of driving innovation in the category with an in-house product development team that introduces approximately 7,000 new products annually. Our global network of owned and third-party manufacturers, combined with our state-of-the-art distribution systems, position us to deliver high-quality, cost-competitive products with turnaround times and fill rates that we believe are among the best in the industry. We have long-term relationships with many of our wholesale customers, for whom we provide sales support through in-store signage and planogram support. Our products are available in over 100 countries with the U.K., France, Germany and Australia among the largest end markets for us outside North America. We believe that through our extensive offerings, as well as our industry-leading innovation, customer service levels and compelling value proposition, we will continue to win with our customers.

The 2005 combination of Amscan, which focused on the wholesale market, and Party City, which focused on the retail market, represented an important step in our evolution. Since then, we have established the largest multi-channel party supply business in North America, based on revenues, with approximately 900 party superstores (inclusive of approximately 210 franchised stores) in the United States and Canada, principally under the Party City banner. We believe we are the only party supply retailer with a national footprint. We also operate PartyCity.com, our primary domestic retail e-commerce site. Underscored by our slogan “Nobody Has More Party for Less”, we believe we offer a superior one-stop shopping experience with a broad selection, consistently high in-stock positions and compelling value proposition, making us the favored destination for all of our customers’ party supply needs. Since the acquisition of Party City in 2005, we have steadily increased the selection of Amscan merchandise offered in Party City stores from approximately 25% to approximately 70% in 2014, allowing us to capture the full manufacturing-to-retail margin on a significant portion of our retail sales. We also operate a network of over 300 temporary Halloween locations under the Halloween City banner.

We believe our scale and scope, extending from our leading retail footprint and e-commerce presence to our design and manufacturing expertise, provide numerous competitive advantages and opportunities for growth. Through a combination of organic growth and strategic acquisitions, we have been able to generate strong topline performance and margin expansion, including:

•

Growing revenue from $1,599.1 million in 2010 to $2,271.3 million for the year ended December 31, 2014, representing a compounded annual growth rate of 9.2%.

•

Increasing adjusted EBITDA from $230.6 million, implying an adjusted EBITDA margin of 14.4%, in 2010 to $362.1 million for the year ended December 31, 2014, for an implied adjusted EBITDA margin of 15.9%. Net income increased from $49 million in 2010 to $56 million for the year ended December 31, 2014. Net income during 2014 was impacted by higher interest expense, resulting from debt incurred in conjunction with the Transactions and the issuance of the $350 million senior PIK toggle notes, as well as the impact of non-cash purchase accounting adjustments resulting from the Transactions and the impact of non-recurring charges related to refinancings.

For a discussion of our use of adjusted EBITDA and a reconciliation to net income (loss), please refer to “Prospectus Summary—Summary Financial Data” and “Selected Consolidated Financial Data.”

Evolution of Our Business

Over the past 60 years, we have grown from a manufacturer and distributor of selected paper goods to a leading vertically integrated retailer of decorated party supplies by revenue with a global wholesale platform. This evolution was accomplished organically and through strategic acquisitions that were successfully integrated over the years. More recently, we completed several strategic initiatives to further strengthen our business and position us for continued growth. Below we summarize some of our key acquisitions and strategic initiatives:

Creating Our Retail Leadership Platform to Leverage Our Vertically Integrated Model

•

Through the acquisitions of Party City in 2005, Party America in 2006, FCPO in 2007 and Party Packagers in 2011, we have become the largest party goods specialty retailer by revenue in North America. We have since converted all Party America, FCPO and Party Packagers banners to the Party City banner and format.

•

Subsequent to the acquisition of each party store retailer, we focused on rebranding non-Party City store banners and remerchandising the stores. Following each acquisition, we capitalized on our vertically integrated model by increasing the percentage of products sold by the acquired retail stores that are manufactured and/or distributed by us, allowing us to capture the full manufacturing-to-retail margin on a significant portion of our retail sales.

•

Our May 2013 acquisition of iParty, a party goods retailer with approximately 50 stores principally located in the New England region, accelerated our growth throughout New England, a region where we previously did not have a large market presence.

•

In 2007, we acquired Gags & Games Inc., the parent company of Halloween USA, which operated 84 locations, enabling us to enter the growing temporary Halloween business. Since that acquisition, we have grown to over 300 locations and changed the banner to Halloween City.

Enhancing Our Wholesale Platform

•

We believe that the acquisition of Anagram International in 1998 and the subsequent acquisition of M&D Balloons in 2002 positioned us as the largest manufacturer of metallic balloons by revenue in the world.

•

In 2001, we opened a new distribution center in Chester, New York, which was significantly expanded in 2005, for an aggregate investment of approximately $60 million. This approximately 900,000 square foot state-of-the-art facility enables us to deliver industry-leading service levels to our third-party customers and network of company-owned stores.

•

In 2003, we opened a Hong Kong office to support our Asian-based sourcing and sales organization. We have since expanded our operations to include sourcing offices in Hong Kong, China, and Vietnam with over 300 employees. In addition we currently operate seven distribution centers located outside the United States (as well as four located within the United States, including Chester, NY).

•

Our September 2010 acquisition of the Christy’s Group, a U.K.-based costume company, provided costume design and sourcing capabilities as well as additional resources in the U.K. and European markets. The Christy’s Group accelerates our entry into the costume wholesale business and enables us to further increase the percentage of our own products sold at Party City, Halloween City and PartyCity.com. Prior to our acquisition, Christy’s Group generated approximately $49 million in sales during 2009. Capitalizing on our vertical model and approach, we have grown Christy’s Group since the acquisition to sales of approximately $209 million for the year ended December 31, 2014 (including sales to our retail affiliates), an example of an accretive acquisition opportunity made possible through our unique vertically integrated platform.

•

In October 2014, we acquired U.S. Balloon, a distributor of metallic balloons. We expect that the acquisition will allow us to capture the full manufacturing-to-retail margin on balloons that we manufacture and sell at company-owned Party City stores.

Building Upon Our Global E-commerce Platform

•

In August 2009, we re-launched PartyCity.com with e-commerce capabilities, providing us with an additional direct-to-consumer sales channel and as the first step in the development of a global retail and wholesale e-commerce platform. Since the re-launch, we have grown our global e-commerce revenues, including wholesale revenues, to approximately $160 million for the year ended December 31, 2014 as we continue to capitalize on our competitive advantages, which include a nationwide store base, strong brand recognition driven by a national broadcasting campaign and vertical business model. We have expanded our retail platform, using the PartyCity.com website, to include a platform for business to business opportunities. Business consumers such as hotel and restaurant chains are capable of purchasing decorations and other party goods directly from us as wholesale customers.

•

Our March 2013 acquisition of Party Delights, an online retailer of party goods, fancy dress, costumes and similar items for birthdays, weddings, christenings and other celebrations, broadened our product offering, provided access to the European retail markets through e-commerce and serves as a platform for expansion.

•

In addition to our retail e-commerce platform, we have developed a wholesale e-commerce platform that provides our party goods and other wholesale customers the opportunity to order our products through our amscan.com website, as well as our other international sites. Wholesale e-commerce orders, which are included in our 2014 wholesale sales, totaled approximately $19 million during 2014 or approximately 35% higher than 2013.

Broadening Products and Channel Reach

•

Our March 2010 acquisition of the Designware party goods division from American Greetings strengthened our juvenile licensed character portfolio and enhanced our reach into the grocery retailers and mass merchant channels. In connection with this acquisition, American Greetings granted us rights to manufacture and distribute Designware-branded and licensed character-based products into select retail venues, including the party supply store channel. We also agreed to supply substantially all of American Greetings’ party supply requirements, allowing us to grow our distribution with American Greetings, specifically in the mass market, drug and grocery retail channels.

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In 2011 and 2012 we obtained and began manufacturing NFL, MLB, NBA and NHL licensed themed party products.

Growing International Presence

•

In the past five years, we have grown our international operations, as sales to international customers represented 15.4% of total revenues in 2014.

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Our January 2011 acquisition of Riethmüller, which included the Malaysian operations of latex balloon manufacturer Everts Balloon, expanded our reach in Europe while also enabling us to directly supply a significant portion of our latex balloon requirements previously sourced from third-party vendors.

Competitive Strengths

We are well-positioned to continue to attract customers who celebrate life’s memorable events as a result of the following competitive strengths:

Category Defining Multi-Channel Retailer. We believe we are the premier party supplies retailer, providing a one-stop shopping experience with a broad and deep selection of products offered at a compelling value seamlessly through our retail stores and our e-commerce platform. We keep our assortment current by frequently introducing new products, and we organize our stores by events and themes to make it easy to shop while consistently presenting customers with additional product ideas that will enhance their events and our sales. Our stores also maintain high in-stock positions of core products and related items, so we are able to address party needs of any size. With our extensive selection, convenient locations, consistently high in-stock positions and compelling value proposition, we believe customers associate Party City with successful celebrations, and, as a result, our physical and online stores will continue to be seen as the favored destination for party supplies and innovative ideas.

Leading Market Position. Based on our revenues, we are the largest retailer of decorated party supplies in the U.S. and Canada. With our network of approximately 860 party superstores, we are the only party supply retailer with a national store footprint. In addition to our leading retail presence, we believe that our integrated wholesale business is the largest global designer, manufacturer and distributor of decorated party goods by revenue with products found in over 40,000 retail outlets worldwide. Through our category-leading brands, Party City and Amscan, we offer what we believe is the broadest selection of continuously updated and innovative merchandise at a compelling value. Our history of growth and established global relationships have been driven by our broad selection of continuously updated and innovative merchandise at a compelling value which, in turn, we believe underscores our credibility as the destination of choice for party supplies in any channel.

Unique Vertically Integrated Operating Model. We manufacture, source and distribute party supplies, acting as a one-stop shop for party goods to both retail and wholesale customers. Our vertically integrated model provides us with a number of advantages by allowing us to:

•

enhance our profitability as we realize the full manufacturing-to-retail margin on a significant portion of our retail sales;

•

leverage our global sourcing network and scale to reinforce our position as the low-cost provider of quality party supplies;

•

effectively respond to changes in consumer trends through our in-house design and innovation team;

•

sustain high standards of product quality and safety;

•

maintain greater control of the design, production, cost and introduction of new products across our multiple channels; and

•

monitor sell-through at retail in real-time to limit markdowns and excessive promotions.

Broad and Innovative Product Offering. We offer a broad and deep product assortment with an average of 25,000 SKUs offered at any one time in our Party City superstores supported by the approximately 35,000 SKUs offered online which can be accessed via our “endless aisle” in-store kiosk system as well as through PartyCity.com. Our extensive selection offers customers a single source for all of their party needs. The majority of our products are designed and developed by a staff of approximately 110 artists and product developers who keep the product portfolio fresh and exciting. Our vertically integrated model allows our product development

team to test new products and effectively respond to changes in consumer preferences. We introduce approximately 7,000 new products and 50 new party goods ensembles annually, and we believe that this ability to consistently introduce innovative items drives newness in our licensed and non-licensed product offering and supports increased sales across our channels.

Highly Efficient Global Sourcing and Distribution Capabilities. Over the past 60 years, we have developed a global network of owned and third-party manufacturers that we believe optimizes speed to market, quality and cost. In 2014, we manufactured approximately 31% of our wholesale product sales, principally in the United States, with the balance sourced from low-cost, third-party manufacturers primarily in Asia. Our in-house manufacturing is focused on high-volume party essentials that can be manufactured through highly automated processes, such as paper and plastic tableware products and metallic balloons. We believe our manufacturing capabilities are cost-competitive and allow us to offer rapid turnaround times on key product categories. With respect to our third-party supply network, we have over 20-year relationships with many of our vendors and often represent a significant portion of their overall business. We also have warehousing and distribution facilities around the world, including four in the U.S. (including our state-of-the-art distribution center in Chester, New York, which has nearly 900,000 square feet under one roof) and seven centers located outside the United States. We have also opened sourcing, quality control and testing offices throughout Asia with over 300 people in our offices located in China, Vietnam and Hong Kong. Our manufacturing, sourcing and distribution capabilities offer our company-owned stores, third-party retailers, distributors and our retail consumers best-in-class levels of service, rapid fulfillment and competitive prices, and have capacity for continued growth with our business.

World-Class Management Team with a Proven Track Record. Our senior management team averages over 20 years of industry experience and possesses a unique combination of management skills and experience in the party goods sector. Our team has successfully grown our sales and profits during various economic cycles and through several business transformations. Mr. Rittenberg, our Executive Chairman, and Mr. Harrison, our Chief Executive Officer, have worked together at the Company for approximately 18 years and have grown our business with an almost tenfold increase in revenues during that period. Additionally, our team has a strong track record of successful acquisitions and integrations, which continue to be an important part of our overall strategy.

Growth Strategy

Expand Our Retail Store Base. Our retail network includes approximately 860 party superstores (inclusive of approximately 210 franchised stores) in the United States and approximately 40 locations in Canada. We believe based on our own internal research that there is an opportunity to open more than 350 additional Party City stores in North America, which is consistent with an independent analysis conducted by a leading, global consulting firm in 2012. During 2014, we opened 23 Party City stores acquired 6 stores and closed 10 locations. Starting in 2015, we anticipate opening 30 Party City stores per year in the U.S. and Canada, representing annual company-owned party superstore growth of approximately 4%. Based on historical performance and the margin generated from our vertically integrated model, we expect our new stores to have a payback period of approximately three years and to generate an average pre-tax cash-on-cash return on invested capital of approximately 50% in year three.

service. In 2006 we began converting our existing superstores into a new, more customer interactive format and expect to have the approximately 200 remaining stores converted by 2018. Based on our historical experience, we expect remodeled or relocated stores to generate sales growth of five to six percentage points higher than non-remodeled or non-relocated stores in the first year following conversion with longer-term sales growth of one to two percentage points higher than non-remodeled or non-relocated stores. We believe the full year impact of integrated operations with a higher share of vertical product will be a meaningful sales and earnings opportunity in 2015.

Growing Market Share and Earnings. We believe we have significant opportunities to continue to grow our wholesale business by capitalizing on our leading scale, vertical operating model and strong innovation capabilities as well as through strategic acquisitions. As we continue to grow, our increased scale will allow us to leverage our costs and drive margin expansion. Over the past five years, we have successfully grown our wholesale revenues at a 12.1% compound annual growth rate to $1,213 million in 2014 (including sales to company-owned superstores). We will continue to broaden our product assortment by adding new party themed events and licenses. In 2012, we began manufacturing and selling NFL licensed themed party products. Additionally, we obtained new juvenile birthday licenses and developed new products for existing juvenile birthday licenses. In 2011, we began manufacturing and selling MLB, NBA and NHL licensed themed party products and, during 2010, we acquired Christy’s Group, which significantly enhanced our in-house costume capabilities. We will also continue to broaden our product assortment by adding new items that coordinate with our party themed events and licenses and broaden our reach by expanding into adjacent business-to-business and alternate consumer channels where we see a compelling opportunity for our products. These and other opportunities will position us to continue to increase our market share and grow the percentage of our own products sold at retail, including our company-owned and franchised stores. Since 2005, we have increased the selection of our own merchandise offered in Party City stores (also known as “share of shelf”) from approximately 25% in 2005 to approximately 70% for the year ended December 31, 2014 which allowed us to increase our margins. Our ultimate long-term share of shelf target is 75% to 80%. Our ability to create new and enhance existing celebration opportunities will continue to be a consistent driver of our growth.

Grow Our Global Retail and Wholesale E-commerce Platforms. During 2014, total global e-commerce revenues were approximately $160 million. Our global retail e-commerce business was relaunched in 2009 under the PartyCity.com banner. Global retail e-commerce revenues have grown to approximately $141 million during 2014 and we believe that we have become one of the largest e-commerce retailers of decorated party goods and costumes. In 2013, we expanded our retail platform, using the PartyCity.com website, to include a platform for business to business opportunities. Business consumers such as hotel and restaurant chains are capable of purchasing decorations and other party goods directly from us as wholesale customers. We are focused on enhancing our customer experience online by creating a seamless interaction across channels through various merchandising and marketing initiatives. We expect e-commerce will continue to experience significant growth as we increase online content for products, party ideas and promotional offerings, invest in additional online advertising to drive traffic, increase customer interactions through social networking interfaces and target customers through the 14 million email addresses that we have captured, as of December 2014, through our stores and website. Our 2013 acquisition of Party Delights, a U.K. retail e-commerce business, provided additional international capabilities that expanded our online platform into continental Europe. Through this platform, we anticipate launching additional country specific e-commerce sites, building off the acquisition of Party Delights. We recently hired a Chief Digital Officer to focus on expanding our mobile and tablet capabilities and optimizing our online merchandising strategy. By working with our existing vendor base, we plan to increase the online only offering of products and services to continue to broaden our product assortment while managing inventory effectively. Although consumers can currently access PartyCity.com through their mobile devices, we have launched a mobile application that ensures a seamless experience between online, mobile and physical interactions and includes functionality to assist customers in coordinating their shopping experience as they plan theme parties. In addition to our retail e-commerce platform, we have developed a wholesale e-commerce platform that provides our party goods and other wholesale customers the opportunity to order our products through our amscan.com website, as well as our other international sites. Wholesale e-commerce orders, which are included in our 2014 wholesale sales, totaled approximately $19 million during 2014 or approximately 35% higher than 2013.

Increase International Presence. Through acquisitions and organic growth, we have increased sales to international customers to represent approximately 15.4% of our total revenues in 2014. The market for party goods outside the United States is less mature due to lower consumer awareness of party products and less developed retail distribution channels. We believe international growth will be driven, in part, through increasing customization of our products to local tastes and holidays and the expansion of our retail concept globally through future franchise and joint venture agreements. Our near-term growth priorities are in Mexico, France, the Netherlands and Brazil. Our acquisitions of Christy’s Group, Riethmüller and Party Packagers also expanded our presence in select markets, including the U.K., Germany, Poland and Canada.

Pursue Accretive Acquisitions. Over the past 16 years, we have successfully integrated numerous acquisitions such as Christy’s and Party Delights, strengthening our manufacturing, distribution and retail platforms. We have also acquired, and will continue to acquire, our franchised stores as such opportunities emerge. We believe our significant experience in identifying attractive acquisition targets, proven integration process and global infrastructure create a strong platform for future acquisitions. Through future acquisitions we can leverage our existing marketing, distribution and production capabilities, expand our presence in various retail distribution channels, further broaden and deepen our product lines and increase penetration in both domestic and international markets.

During October 2014, we acquired U.S. Balloon, a distributor of metallic balloons. We expect that the acquisition will allow us to capture the full manufacturing-to-retail margin on balloons that we manufacture and sell at company-owned Party City stores.

Industry Overview

The retail landscape is comprised primarily of party superstores, mass merchants, craft stores, grocery retailers and dollar stores. The party superstore has emerged as a preferred destination for party goods shoppers, similar to the dominance of specialty retailers in other categories such as home improvement, pet products and sporting goods. This is typically due to the superstore chain’s ability to offer a wider variety of merchandise at more compelling prices in a convenient setting as well as the knowledgeable staff often found at superstores. Other retailers that cater to the party goods market typically offer a limited assortment of party supplies and seasonal items. Mass merchants tend to focus primarily on juvenile and seasonal goods, greeting cards and gift wrap; craft stores on decorations and seasonal merchandise; and dollar stores on general and seasonal party goods items.

The consumable nature and low per-item prices in the party goods market have historically driven demand among consumers seeking to enhance the quality of their gatherings and celebrations. Party goods are an economical means by which to make events and occasions more festive and, as a result, have continued to sell well during economic downturns. Manufacturers and retailers continue to create and market party goods and gifts that celebrate a greater number of holidays and occasions. Additionally, the number and types of products offered for each occasion continues to expand, encouraging add-on and impulse purchases by consumers.

Business Overview

We believe that we are the leading retailer and largest vertically integrated supplier of decorated party goods by revenue in North America. We have the only national network of party superstores which make it easy and

fun to enhance special occasions with an unrivaled assortment of party supplies offered at a compelling value. We have two primary reporting segments: Retail and Wholesale. In 2014, we generated 71.5% of our total revenues from our retail segment (which includes 0.9% of total revenues from franchising activities) and 28.5% of our total revenues from our wholesale segment. Our retail operations generate revenue primarily through the sale of Amscan, Designware, Anagram, Costumes USA and other party supplies through Party City, Halloween City and PartyCity.com. Our franchising revenues are generated from an initial one-time franchise fee, renewal fees and ongoing franchise royalty payments based on retail sales from the franchised stores. Our wholesale revenues are generated from the sales of party goods for all occasions, including paper and plastic tableware, accessories and novelties, metallic and latex balloons, stationery and gift items. Our products are sold at wholesale to party goods superstores, including our company-owned and franchised retail stores, other party goods retailers, mass merchants, independent card and gift stores, dollar stores and other retailers and distributors throughout the world.

Segments

For segment information please see Note 15 to the audited consolidated financial statements included elsewhere in this prospectus.

Financial Information by Geographic Area

For financial information by geographic area, please see Note 15 to the audited consolidated financial statements included elsewhere in this prospectus.

Retail Operations

Overview

Opening its first company-owned store in 1986, Party City has grown to become what we believe is the largest operator of owned and franchised party superstores by revenue in the United States. At the time of the acquisition in 2005, Party City’s network consisted of 502 stores, including 254 franchised locations. Since the acquisition, we have expanded the Party City network to approximately 860 superstore locations in the United States (inclusive of approximately 210 franchised stores) and approximately 40 locations in Canada. We also operate over 300 temporary Halloween locations, under the Halloween City banner.

The 2005 combination of Party City and Amscan has led to the creation of a vertically integrated business from which we derive a number of competitive advantages. We offer customers a differentiated shopping experience with extensive selection and consistently high in-stock positions of quality products with a compelling value proposition making us the premier destination for party supplies. Through our vertical model, we also enhance our total profitability by capturing the manufacturing-to-retail margin on a significant portion of our retail sales and by leveraging our access to multiple channels to limit mark-downs and excessive promotions. Moreover, we believe that our direct-to-consumer channels enable our product development teams to effectively respond to trends and changes in consumer preferences, which allows us to keep our assortment fresh and exciting.

Party City was founded on the idea that life should be celebrated in monumental ways, with a passion for inspiring celebrations—from Super Bowl to New Year’s Eve parties and all the celebrations and seasons in between. With our brand’s slogan, “Nobody Has More Party for Less,” Party City offers an assortment of party supplies, decorations and costumes perfect for every type of party occasion. With dynamic merchandising displays combined with organized seasonal aisles and hundreds of party themes to match any type of celebration, party planning has never been simpler or more fun.

In recent years, Party City has made substantial investments to enhance the customers’ in-store experience and become the ultimate retail destination for party supplies. Stores now showcase dynamic balloon counters displaying hundreds of balloons to coordinate with any occasion. Additionally, store-within-a-store concepts for sports, candy and party favors are focal points in all new stores. Aptly named “Sports City,” “Candy City”,

“Color City” and “Favor City,” these specialty areas create a fun shopping environment, expand product offering and allow us to better showcase the merchandise.

The following table summarizes our company-owned retail footprint by format as well as our strategy going forward:


Format	# of Stores as of December 31, 2010		# of Stores as of December 31, 2014			Average Size of Stores (sq. ft.)		Strategy/Focus
Party City U.S.		439		652	(1)		10,000-12,000	Grow the store base opening 30 new stores per year and update store base to new interactive format by converting or relocating 50 old format stores per year
FCPO		90		—			10,000-12,000	Converted to Party City banner
The Paper Factory and other outlets		67		—			3,500-5,000	Product liquidation channel
Party City Canada		—		41			8,000-10,500	Enter the Canadian market and grow store base

(1)	Amount includes iParty stores converted to the Party City banner.

We believe that our stores are typically destination shopping locations. We seek to maximize customer traffic and quickly build the visibility of new stores by situating them in high traffic areas. Our stores are predominantly located in strip centers and are generally co-located with other destination retailers. Site selection criteria include population density, demographics, traffic counts, location of complementary retailers, storefront visibility and presence (either in a stand-alone building or in dominant strip shopping centers), competition, lease rates and accessible parking.

The following table shows the change in our company-owned Party City store network:


	Full-Year 2014			Full-Year 2013			Full-Year 2012
Stores open at beginning of period		674			600			487
Stores opened		23			25			24
FCPO and Party Packagers stores converted to Party City		—			—			88
iParty stores acquired		—			54			—
Stores acquired from franchisees/other		6			—			6
Stores closed		(10	)		(5	)		(5	)

Stores open at end of period		693			674			600

We spent the last seven years integrating our retail acquisitions and rationalizing our store base. We believe there are more than 350 locations in North America that present opportunities for us to expand our party superstore base. In 2014, we opened 23 Party City stores, acquired six stores and closed ten Party City store locations. A new Party City location costs an average of $765,000, which includes $90,000 in pre-opening expenses and $325,000 of net startup inventory. A typical new store reaches approximately 80% maturity in the first year of operation and reaches maturity in its fourth year of operation. We target locations where stores have the potential to generate annual sales of at least $2 million at maturity and achieve consolidated pre-tax store

contribution of approximately 18% to 20%. We expect our new stores to have a payback period of approximately three years and to generate an average pre-tax cash-on-cash return on invested capital of approximately 50% in year three (including margin generated from our vertical model).

Retail Merchandising

Our merchandising strategy is based on three core principles:

•

Broad Assortment of Merchandise —We believe we offer a greater assortment of products than our national competitors, including mass merchants. Our products span a wide range of lifestyle events from birthdays to themed parties and sporting events, as well as holidays such as Halloween and New Year’s. A typical retail store offers a wide selection of Amscan and other merchandise consisting of an average of 25,000 SKUs at any one time to satisfy a broad range of styles and tastes.

•

Deep Merchandise Selection —We maintain high in-stock positions of core products and related items, so we are able to address party needs of any size. These high in-stock positions are enabled by our vertical integration model, which results in a high percentage of Amscan merchandise in our company-owned stores and quick turnaround times.

•

Compelling Value —Our pricing strategy is to provide the best value to our customers. Our vertically integrated business model enables us to provide our customers with leading prices for most of our product categories. We negotiate pricing with suppliers on behalf of all stores in our network (company-owned and franchised) and believe that our buying power enables us to receive favorable pricing terms and enhances our ability to obtain high demand merchandise. We reinforce our value message through our advertising and marketing campaigns with the “Nobody Has More Party for Less” slogan.

We generally organize the aisles in our stores into four-foot sections based on themed products, which include basic products like plates, cups and napkins and other coordinated accessories that enhance sales and customers’ shopping experiences. This presentation makes it simple and easy for our customers to find all their party needs in one convenient location and allows us to achieve a higher average basket size compared to non-specialty channels. We manage each category by product and by SKU and use planograms to ensure a consistent merchandise presentation across our store base. Our coordinated product offering drives add-on purchases as customers are presented with additional decorations, favors and accessories that match their party theme. Our low individual price points encourage impulse buys by customers resulting in higher unit sales.

We have many product categories that relate to birthdays, making this event the largest non-seasonal occasion at approximately 20% of our sales for our permanent domestic operations. We aim to be the pre-eminent resource for the party goods associated with birthday celebrations. Each birthday product category includes a wide assortment of merchandise to fulfill customer needs, including invitations, thank you cards, tableware, hats, horns, banners, cascades, balloons, novelty gifts, piñatas, favors and candy.

Halloween is our retail segment’s largest seasonal product category in dollars. As a key component of our sales strategy, our stores provide an extensive selection of Halloween products throughout the year to position us as the premier Halloween shopping destination. The stores also carry a broad array of related decorations and accessories for the Halloween season. In 2014, Halloween business represented approximately 25% of our total domestic retail sales. To maximize our seasonal opportunity, we operate a chain of temporary Halloween locations, under the Halloween City banner, during the months of September and October of each year. During 2014, our temporary Halloween locations (including Canadian locations) generated revenues of approximately $77 million.

As a vertically integrated business, our wholesale operation is the largest supplier to our retail operations. During 2014, our wholesale operations’ share of shelf at our domestic Party City stores (excluding iParty stores) and retail e-commerce (i.e., the percentage of total cost of sales which relates to product supplied by our wholesale operations) was approximately 70%. Our target is 75% to 80% over the long term.

We also offer products supplied by other vendors, which include licensed products, candies, greeting cards and costumes.

Retail Seasonality

Our retail operations are subject to significant seasonal variations. Historically, this segment has realized a significant portion of its revenues, cash flow and net income in the fourth quarter of the year, principally due to our Halloween sales in October and, to a lesser extent, year-end holiday sales.

E-commerce

In August 2009, we re-launched global e-commerce capabilities through PartyCity.com, providing us with an additional direct-to-consumer sales channel. We have expanded our retail platform, using the PartyCity.com website, to include a platform for business to business opportunities. Business consumers such as hotel and restaurant chains are capable of purchasing decorations and other party goods directly from us as wholesale customers. Our website offers a convenient, user-friendly and secure online shopping option for new and existing customers. In addition to the ability to order products, we expect our website to provide a substantial amount of content about our party products, party planning ideas and promotional offers. Our website will also be one of our key marketing vehicles, specifically as it relates to social marketing initiatives.

Compared to our Party City superstores, PartyCity.com offers a broader assortment of products with over 35,000 SKUs available online versus an average of 25,000 SKUs at any one time in our party superstores. By seamlessly linking our website to our store network, we intend to offer our customers the option to purchase products online which are not physically available at the store.

In March 2013, we acquired Party Delights, a U.K. retail e-commerce business. The acquisition expanded our e-commerce platform into Europe.

During 2014, sales from global e-commerce, including wholesale sales (which are discussed below), were approximately $160 million. We believe that our website is well positioned to continue to capture market share of online purchases, which represent one of the fastest growing distribution channels for party related goods, as we capitalize on our competitive advantages which include a nationwide store base, strong brand recognition and vertical integration. The average basket size through our e-commerce site is approximately three times as large as the average basket size in our Party City stores. We plan to drive future traffic to our website through the continuation of our pay-per-click advertising strategy, through our mobile site and by utilizing the approximately 14 million e-mail addresses that we have obtained (as of December 2014) from visitors to our stores and visitors to the website. Additionally, we are in the process of rolling out a new online merchandising strategy to present collections of products in a manner consistent with how our customers shop for them in our stores. In addition to our retail e-commerce platform, we have developed a wholesale e-commerce platform that provides our party goods and other wholesale customers the opportunity to order our products through our amscan.com website, as well as our other international sites. Wholesale e-commerce orders, which are included in our 2014 wholesale sales, totaled approximately $19 million during 2014 or approximately 35% higher than 2013.

Retail Advertising and Marketing

Our advertising focuses on promoting specific seasonal occasions and general party themes, with a strong emphasis on our price-value proposition—“Nobody Has More Party for Less”—with the goal of increasing customer traffic and further building our brand. In late 2009, we modified our advertising strategy to minimize our dependency on newspaper inserts and focus instead on a national broadcasting campaign to further develop our customer base. This shift emphasizes brand building and our price-value proposition. As a result, our use of newspaper inserts has decreased from 60% of gross domestic advertising spend in 2009 to 11% in 2014, while the use of broadcasts has increased to 60% of gross domestic advertising spend in 2014.

Competition at Retail

In our retail segment, our stores compete primarily on the basis of product mix and variety, store location and layout, customer convenience and value. Although we compete with a variety of smaller and larger retailers, including, but not limited to, independent party goods supply stores, specialty stores, dollar stores, warehouse/merchandise clubs, drug stores, mass merchants and catalogue and e-commerce merchandisers, we believe that, based on their revenues, our retail stores maintain a leading position in the party goods business by offering a wider breadth of merchandise than most competitors and a greater selection within merchandise classes, at a compelling value. We are one of only a few vertically integrated suppliers of decorated party goods. While some of our competitors in our markets may have greater financial resources, we believe that our significant buying power, which results from the size of our retail store network and the breadth of our assortment, is an important competitive advantage. Many of our retail competitors are also customers of our wholesale business.

Franchise Operations

We have franchised stores throughout the United States and Puerto Rico run by franchisees utilizing our format, design specifications, methods, standards, operating procedures, systems and trademarks. Our wholesale sales to our franchised stores generally mirror, with respect to relative size, mix and category, those to our company-owned stores. The following table shows the change in our franchise-owned store network:


	Full-Year 2014			Full-Year 2013			Full-Year 2012
Stores open at beginning of period		212			214			221
Stores opened/acquired by existing franchisees		—			1			1
Stores sold to the Company		(1	)		—			(6	)
Stores closed or converted to independent		(3	)		(3	)		(2	)

Stores open at end of period		208			212			214

We are not currently marketing, nor do we plan to market, new franchise territories in the United States or Canada.

We receive revenue from our franchisees, consisting of an initial one-time fee and ongoing royalty fees generally ranging from 4% to 6%. In exchange for these franchise fees, franchisees receive brand value and company support with respect to planograms, information technology, purchasing and marketing. In addition, each franchisee has a mandated advertising budget, which consists of a minimum initial store opening promotion and ongoing local advertising and promotions. Further, franchisees must pay an additional 1% to 2.25% of net sales to a group advertising fund to cover common advertising materials. The terms of our franchise agreements provide for payments to franchisees based on domestic retail e-commerce sales originating from specified areas relating to the franchisees’ contractual territory. The amounts paid by us vary based on several factors, including the profitability of our e-commerce sales, and are expensed at the time of sale. We do not offer financing to our franchisees for one-time fees or ongoing royalty fees. Our franchise agreements provide us with a right of first refusal should any franchisee look to dispose of its operations.

Current franchise agreements provide for an assigned area or territory that typically equals a three or four-mile radius from the franchisee’s store location and the right to use the Party City ^® logo and trademark. In addition, certain agreements with our franchisees and other business partners contain geographic limitations on opening new stores. In most stores, the franchisee or the majority owner of a corporate franchisee devotes full time to the management, operation and on-premises supervision of the stores or groups of stores.

Wholesale Operations

Overview

Based on our revenues, we are one of the leading designers, manufacturers and distributors of decorated party goods in the world, offering an extensive selection with over 40,000 SKUs. We currently offer over 400

party goods ensembles, which range from approximately five to 50 design-coordinated items spanning tableware, accessories, novelties, balloons, decorations and gifts. The breadth of these ensembles enables retailers to promote additional sales of related products for every occasion. To enhance our customers’ celebrations of life’s important events, we market party goods ensembles for a wide variety of occasions, including seasonal and religious holidays, special events and themed celebrations.

Our Amscan, Anagram, Costumes USA and Designware branded products are offered in over 40,000 retail outlets worldwide, ranging from party goods superstores, including our company-owned and franchised retail stores, other party goods retailers, mass merchants, independent card and gift stores, dollar stores and other retailers and distributors throughout the world. We have long-term relationships with many of our wholesale customers. Party goods superstores, the Company’s primary channel of distribution, provide consumers with a one-stop source for all of their party needs. Amscan, Anagram, Costumes USA and Designware branded products represent a significant portion of party goods carried by both company-owned and third-party stores with the overall percentage continuing to increase, reflecting the breadth of our product line and, based on our scale, our ability to manufacture and source quality products at competitive prices.

The table below shows the breakdown of our total wholesale sales by channel for the year ended December 31, 2014:


Channel	Sales
	(dollars in millions)
Party City and Halloween City—owned stores and e-commerce	$	567
Party City—franchised stores		163
Other domestic retailers		144
Domestic balloon distributors/retailers		88
International balloon distributors		22
Other international		229

Total wholesale sales	$	1,213

International party supply markets are generally less mature than the U.S. markets. However, we believe this will change over time, and we are making significant investments to ensure we are well positioned to benefit from growth in these markets. Investments include our September 2010 acquisition of Christy’s Group and the January 2011 acquisition of Riethmüller, which provided us with an expanded international platform.

Product Lines

We believe we have the industry’s most extensive selection of party supplies. The following table sets forth the principal products we distribute by product category, and the corresponding percentage of revenue that each category represents:

Wholesale Sales by Product for the Year Ended

December 31, 2014


Category	Items	% of Sales
Tableware	Plastic Plates, Paper Plates, Plastic Cups, Paper Cups, Paper Napkins, Plastic Cutlery, Tablecovers		24	%
Favors, Stationery & Other	Party Favors, Gift Bags, Gift Wrap, Invitations, Bows, Stationery		17	%
Decorations	Latex Balloons, Piñatas, Crepes, Flags & Banners, Decorative Tissues, Stickers and Confetti, Scene Setters, Garland, Centerpieces		20	%
Metallic Balloons	Bouquets, Standard 18 Inch Sing-A-Tune, SuperShapes, Weights		12	%
Costumes & Accessories	Costumes, Other Wearables, Wigs		27	%

Our products span a wide range of lifestyle events from birthdays to theme parties and sporting events, as well as holidays such as Halloween and New Year’s. In 2014, approximately 71% of our wholesale sales consisted of items designed for everyday occasions, with the remaining 29% comprised of items used for holidays and seasonal celebrations throughout the year. Our product offerings cover the following broad range of occasions and life celebrations:

Current Product Offering


Everyday		Seasonal
Birthdays		New Year’s
Anniversaries		Valentine’s Day
Bar Mitzvahs		St. Patrick’s Day
Bridal/Baby Showers		Easter
Christenings		Passover
Confirmations		Fourth of July
First Communions		Halloween
Graduations		Fall
Theme-oriented*		Thanksgiving
Weddings		Hanukkah
		Christmas

*	Our theme-oriented ensembles enhance every celebration and include Bachelorette, Card Party, Casino, Chinese New Year, Cocktail Party, Disco, Fiesta, Fifties Rock-and-Roll, Hawaiian Luau, Hollywood, Mardi Gras, Masquerade, Patriotic, Retirement, Sports, Summer Barbeque and Western.

Wholesale Product Development and Design Capabilities

Our in-house design staff continuously develops innovative and contemporary product designs and concepts. Our continued investment in art and design results in a steady supply of fresh ideas and the creation of unique ensembles that appeal to consumers. Our creative staff is constantly in the market identifying trends and new product concepts. We typically introduce approximately 7,000 new products and approximately 50 new party goods ensembles annually. Our proprietary designs and strength in developing new items at attractive prices help differentiate our products from those of our competitors.

Wholesale Sales and Marketing

Our principal wholesale sales and marketing efforts are conducted through an employee sales force servicing approximately 15,000 non-affiliated retail accounts in the United States. In addition to the employee sales team, a select group of manufacturers’ representatives handle specific account situations. International customers are generally serviced by employees of our subsidiaries outside the United States. We have our own sales force of professionals in the U.K., Mexico, Canada, Germany, France, Spain and Hong Kong and operate through third-party distributors elsewhere. Our Anagram subsidiary utilizes independent distributors in the United States to bring our metallic balloons to the grocery, retail gift and floral markets, as well as to third-party party superstores and specialty retailer customers. During October 2014, we acquired U.S. Balloon, a distributor of metallic balloons. We expect that the acquisition will allow us to capture the full manufacturing-to-retail margin on balloons that we manufacture and sell at company-owned Party City stores. Additionally, through our agreement with American Greetings, we are able to leverage American Greetings’ sales force to place our product into other distribution channels, including mass market, drug and grocery retailers.

To support our sales and marketing efforts, we produce five key decorative party product catalogues annually (four catalogues for seasonal products and one catalogue for everyday products), with additional catalogues produced to market our metallic balloons and gift products and for international markets. We have also developed a website which displays and describes our product assortment and capabilities. We utilize this website as a marketing tool, providing us with the ability to announce special product promotions, new program launches and other information in an expeditious manner. To further promote our products, we participate in a variety of industry trade shows throughout the year.

Wholesale Manufactured Products

We are one of the largest manufacturers of decorated party goods products by revenue globally. Our in-house manufacturing capabilities enable us to control costs, monitor product quality, better manage inventory and provide more efficient order fulfillment. Our domestic manufacturing facilities allow us to react rapidly to changing consumer trends and fulfill our customers’ needs for key products with fast turnaround times. In 2014, we manufactured items representing approximately 31% of our net sales at wholesale (including sales to the Company’s retail operations). Our facilities in Rhode Island, Kentucky, Minnesota, Mexico, Malaysia and New York are highly automated and produce paper and plastic plates and cups, paper napkins, metallic and latex balloons and other party and novelty items at a globally competitive cost. State-of-the-art printing, forming, folding and packaging equipment support these manufacturing operations. Given our size and sales volume, we are generally able to operate our manufacturing equipment on the basis of at least two shifts per day, thus lowering production costs per unit. In select cases, we use available capacity to manufacture products for third parties, which allows us to maintain a satisfactory level of equipment utilization.

The table below summarizes our principal manufacturing facilities.


Location	Principal Products	Approximate Square Feet
East Providence, Rhode Island	Plastic plates, cups and bowls		229,230	(1)
Louisville, Kentucky	Paper plates		189,175
Eden Prairie, Minnesota	Metallic balloons and accessories		115,600
Tijuana, Mexico	Piñatas and other party products		135,000
Melaka, Malaysia	Latex balloons		100,000
Harriman, New York	Paper napkins		74,400
Newburgh, New York	Paper napkins and paper cups		52,400

(1)	This figure represents an industrial park, which includes a 48,455 square foot office and warehouse.

Complementing our manufacturing facilities, we have a diverse global network of third-party suppliers that supports our strategy of consistently offering a broad selection of high quality, innovative and competitively priced product. We have over 20-year relationships with many of our vendors and often represent a significant portion of their overall business. Third-party manufacturers supplied approximately 69% of products sold at wholesale in 2014. These manufacturers generally produce items designed by and created for us, are located in Asia and are managed by our sourcing office in Hong Kong. We actively work with our third-party suppliers to ensure product cost, quality and safety.

The principal raw materials used in manufacturing our products are paper, petroleum-based resin and cotton. While we currently purchase such raw material from a relatively small number of sources, paper, resin and cotton are available from numerous sources. Therefore, we believe our current suppliers could be replaced without adversely affecting our manufacturing operations in any material respect.

Wholesale Product Safety and Quality Assurance

We are subject to regulatory requirements in the United States and internationally, and we believe that all products that we manufacture comply with the requirements in the markets in which they are sold. Third-party manufactured products are tested both at the manufacturing site and upon arrival at our distribution center. We have a full-time staff of professionals in the United States, Asia and Europe dedicated to product safety and quality assurance.

Wholesale Distribution and Systems

We ship our products directly to retailers and distributors throughout the world from our distribution facilities, as well as on a free-on-board (“FOB”) basis directly from our domestic and international factories. Our electronic order entry and information systems allow us to manage our inventory with minimal obsolescence while maintaining strong fill rates and quick order turnaround time.

Our main distribution facility for domestic party customers is located in Chester, New York, with nearly 900,000 square feet under one roof. This state-of-the-art facility, built in 2001 and expanded in 2005, serves as the main point of distribution for our Amscan-branded products and utilizes paperless, pick-by-light systems, offering superior inventory management and turnaround times as short as 48 hours. Over the last ten years, we have made significant investments in order to customize and upgrade our Chester distribution facility and we believe it has sufficient capacity to support our continued growth.

We utilize a bypass system which allows us to ship products directly from selected third-party suppliers to our company-owned and franchised stores, thus bypassing our distribution facilities. In addition to lowering our distribution costs, this bypass system creates warehouse capacity. We expect to grow the percentage of our products shipped via bypass, which will lead to additional savings.

The distribution center for our retail e-commerce platform is located in Naperville, Illinois. We also have other distribution centers in the U.K., Germany, Mexico and Australia, to support our international customers.

Wholesale Customers

We have a diverse third party customer base at wholesale. During 2014, no individual third party customer accounted for more than 10% of our total third-party sales at wholesale.

Competition at Wholesale

In our wholesale segment, we compete primarily on the basis of diversity and quality of our product designs, breadth of product line, product availability, price, reputation and customer service. Although we have many competitors with respect to one or more of our products, we believe that there are no competitors who design, manufacture, source and distribute products with the complexity of design and breadth of product lines that we do. Furthermore, our design and manufacturing processes create efficiencies in manufacturing that few of our competitors can achieve in the production of numerous coordinated products in multiple design types. Competitors include smaller independent manufacturers and distributors, as well as divisions or subsidiaries of large companies. Certain of these competitors control various party goods product licenses for widely recognized images, such as cartoon or motion picture characters, which could provide them with a competitive advantage. However, we control a strong portfolio of character licenses for use in the design and production of our metallic balloons and, as a result of the acquisition of Designware, we have access to a strong portfolio of character and other licenses for party goods.

Information Systems

We continually evaluate and upgrade our information systems to enhance the quantity, quality and timeliness of information available to management and to improve the efficiency of our manufacturing and distribution facilities, as well as our service at the store level. We have implemented merchandise replenishment software to complement our distribution, planning and allocation processes. The system enhances the store replenishment function by improving in-stock positions, leveraging our distribution infrastructure and allowing us to become more effective in our use of store labor. We have implemented a Point of Sale system and upgraded merchandising systems to standardize technology across all of our domestic retail superstores and we have implemented similar systems at our temporary Halloween City locations.

Employees

As of December 31, 2014, the Company had approximately 7,313 full-time employees and 10,714 part-time employees, none of whom is covered by a collective bargaining agreement. We consider our relationship with our employees to be good.

Intellectual Property

We own the copyrights in the designs we create and use on our products and various trademarks and service marks used on or in connection with our products. It is our practice to register our copyrights with the United States Copyright Office and our trademarks and service marks with the United States Patent and Trademark Office, or with other foreign jurisdictions, to the extent we deem necessary. In addition, we rely on unregistered common law trademark rights and unregistered copyrights under applicable U.S. law to distinguish and/or protect our products, services and branding. We do not believe that the loss of copyrights or trademarks with respect to any particular product or products would have a material adverse effect on our business. We hold numerous intellectual property licenses from third parties, allowing us to use various third-party cartoon and other characters and designs on our products, and the images on our metallic balloons and costumes are principally covered by these licenses. None of these licenses is individually material to our aggregate business. We also own patents relating to display racks and balloon weights, none of which is individually material to our aggregate business.

We permit our franchisees to use a number of our trademarks and service marks, including Party City, The Discount Party Super Store, Party America and Halloween City.

Government Regulation

As a franchisor, we must comply with regulations adopted by the Federal Trade Commission, such as the Trade Regulation Rule on Franchising, which requires us, among other things, to furnish prospective franchisees with a franchise offering circular. We also must comply with a number of state laws that regulate the offer and sale of our franchises and certain substantive aspects of franchisor-franchisee relationships. These laws vary in their application and in their regulatory requirements. State laws that regulate the offer and sale of franchises typically require us to, among other things, register before the offer and sale of a franchise can be made in that state and to provide a franchise offering circular to prospective franchisees.

State laws that regulate the franchisor-franchisee relationship presently exist in a substantial number of states. Those laws regulate the franchise relationship, for example, by restricting a franchisor’s rights with regard to the termination, transfer and renewal of a franchise agreement (for example, by requiring “good cause” to exist as a basis for the termination and the franchisor’s decision to refuse to permit the franchisee to exercise its transfer or renewal rights), by requiring the franchisor to give advance notice to the franchisee of the termination and give the franchisee an opportunity to cure most defaults. To date, those laws have not precluded us from seeking franchisees in any given area and have not had a material adverse effect on our operations.

Our wholesale and retail segments must also comply with applicable regulations adopted by federal agencies, including product safety regulations, and with licensing and other regulations enforced by state and local health, sanitation, safety, fire and other departments. Difficulties or failures in obtaining the required licenses or approvals can delay and sometimes prevent the opening of a new store or the shutting down of an existing store.

Our manufacturing operations, stores and other facilities must comply with applicable environmental, health and safety regulations, although the cost of complying with these regulations to date has not been material. More stringent and varied requirements of local governmental bodies with respect to zoning, land use, and environmental factors can delay, and sometimes prevent, development of new stores in particular locations.

Our stores must comply with the Fair Labor Standards Act and various state laws governing various matters such as minimum wages, overtime and other working conditions. Our stores must also comply with the provisions of the Americans with Disabilities Act, which requires that employers provide reasonable accommodation for employees with disabilities and that stores must be accessible to customers with disabilities.

Properties

We maintain the following facilities for our corporate and retail headquarters and to conduct our principal design, manufacturing and distribution operations:


Location	Principal Activity	Square Feet	Owned or Leased (With Expiration Date)
Elmsford, New York	Executive and other corporate offices, show rooms, design and art production for party products	119,469 square feet	Leased (expiration date: December 31, 2021)
Rockaway, New Jersey	Party City corporate offices	106,000 square feet	Leased (expiration date: July 31, 2017)
Eden Prairie, Minnesota	Manufacture of metallic balloons and accessories	115,600 square feet	Owned
Eden Prairie, Minnesota	Manufacture of retail, trade show and showroom fixtures	15,324 square feet	Leased (expiration date: July 31, 2015)
Harriman, New York	Manufacture of paper napkins	74,400 square feet	Leased (expiration date: March 31, 2016)
Louisville, Kentucky	Manufacture and distribution of paper plates	189,175 square feet	Leased (expiration date: March 31, 2018)
Newburgh, New York	Manufacture of paper napkins and cups	52,400 square feet	Leased (expiration date: May 31, 2018)
East Providence, Rhode Island	Manufacture and distribution of plastic plates, cups and bowls	229,230 square feet (1)	Leased (expiration date: April 26, 2016)
Tijuana, Mexico	Manufacture and distribution of party products	135,000 square feet	Leased (2)
Melaka, Malaysia	Manufacture and distribution of latex balloons	100,000 square feet	Leased (expiration date: May 30, 2072)
Chester, New York	Distribution of party and gift products	896,000 square feet	Owned
Edina, Minnesota	Distribution of metallic balloons and accessories	122,312 square feet	Leased (expiration date: December 31, 2015)
Milton Keynes, Buckinghamshire, England	Distribution of party products throughout Europe	130,858 square feet	Leased (expiration date: June 30, 2017)
Naperville, Illinois	Distribution of party goods for e-commerce sales	440,343 square feet	Leased (expiration date: December 31, 2018)
Kircheim unter Teck, Germany	Distribution of party goods	215,000 square feet	Owned
Baulkham Hills, Australia	Distribution of party goods	3,778 square feet	Leased (expiration date: November 14, 2017)
Atlanta, Georgia	Office and storage facilities	15,012 square feet	Leased (expiration date: June 30, 2016)
Livonia, Michigan	Office and distribution of party goods for Halloween City	89,780 square feet	Leased (expiration date: May 31, 2019)
Pleasanton, California	Office for retail e-commerce sales	11,278 square feet	Leased (expiration date: June 18, 2015)
Brooklyn, New York	Distribution of balloons	68,700 square feet	Leased (expiration date: March 31, 2018)

(1)	This figure represents an industrial park, which includes a 48,455 square foot office and warehouse.

(2)	Property is comprised of two buildings with various lease expiration dates through April 1, 2017.

In addition to the facilities listed above, we maintain smaller distribution facilities in the United Kingdom, Canada and Mexico and sourcing offices in China and Hong Kong. We also maintain sales offices in Australia, Canada, Hong Kong and Japan and showrooms in New York, California, Georgia, Texas, Canada and Hong Kong.

As of December 31, 2014, Company-owned and franchised retail stores were located in the following states and Puerto Rico:


*State*	*Company-owned*		*Franchise*		*Chain-wide*
Alabama		1		8		9
Arizona		0		17		17
Arkansas		0		3		3
California		99		15		114
Colorado		14		0		14
Connecticut		14		2		16
Delaware		1		1		2
Florida		62		9		71
Georgia		30		1		31
Hawaii		0		2		2
Illinois		53		0		53
Indiana		22		0		22
Iowa		8		0		8
Kansas		2		4		6
Kentucky		9		0		9
Louisiana		3		8		11
Maine		3		0		3
Maryland		12		12		24
Massachusetts		27		0		27
Michigan		29		0		29
Minnesota		0		19		19
Mississippi		0		3		3
Missouri		17		1		18
Montana		0		1		1
Nebraska		4		0		4
Nevada		6		0		6
New Hampshire		7		0		7
New Jersey		26		2		28
New Mexico		0		3		3
New York		52		13		65
North Carolina		0		19		19
North Dakota		0		3		3
Ohio		29		0		29
Oklahoma		2		0		2
Oregon		0		2		2
Pennsylvania		14		17		31
Puerto Rico		0		5		5
Rhode Island		3		0		3
South Carolina		3		6		9
Tennessee		6		7		13
Texas		51		16		67
Vermont		2		0		2
Virginia		14		8		22
Washington		14		1		15
West Virginia		1		0		1
Wisconsin		12		0		12

Total		652		208		860

Additionally, at December 31, 2014, there were 41 company-owned retail stores in Canada. In 2014, the Company operated 315 temporary Halloween stores, under the Halloween City banner, in the U.S. and Canada. Under this program, we operate temporary stores under short-term leases with terms of approximately four months, to cover the early September through October Halloween season.

We lease the property for all of our company-owned stores. We do not believe that any individual store property is material to our financial condition or results of operations. Of the leases for the company-owned stores at December 31, 2014, 75 expire in 2015, 77 expire in 2016, 68 expire in 2017, 101 expire in 2018, 77 expire in 2019 and the balance expire in 2020 or thereafter. We have options to extend many of these leases for a minimum of five years.

We believe that our properties have been adequately maintained, are in generally good condition and are suitable for our business as presently conducted. We believe our existing manufacturing facilities provide sufficient production capacity for our present needs and for our anticipated needs in the foreseeable future. To the extent such capacity is not needed for the manufacture of our products, we generally use such capacity for the manufacture of products for others pursuant to terminable agreements. All manufacturing and distribution facilities generally are used on a basis of two shifts per day. We also believe that, upon the expiration of our current leases, we will be able either to secure renewal terms or to enter into leases for alternative locations at market terms.

Legal Proceedings

From time to time, we are subject to various legal proceedings and claims that arise in the ordinary course of our business activities. Although the results of litigation and claims cannot be predicted with certainty, as of the date of this prospectus, we do not believe we are party to any claim or litigation, the outcome of which, if determined adversely to us, would individually or in the aggregate be reasonably expected to have a material adverse effect on our business. Regardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors.

MANAGEMENT

Set forth below are the names, ages and positions with the Company of the persons who are serving as directors and executive officers of the Company at February 28, 2015.


Name	Age		Position
Gerald C. Rittenberg		62	Executive Chairman and Director
James M. Harrison		63	Chief Executive Officer and Director
Michael A. Correale		57	Chief Financial Officer
Gregg A. Melnick		45	President
Todd M. Abbrecht		46	Director
Jefferson M. Case		37	Director
Steven J. Collins		46	Director
Uttam K. Jain		35	Director
Norman S. Matthews		82	Director
Lawrence P. Molloy		53	Director
Joshua M. Nelson		42	Director

Our directors have been selected pursuant to the terms of the Stockholders Agreement, described more fully below, and the terms of our existing certificate of incorporation.

Gerald C. Rittenberg became our Executive Chairman in January 2014. From 1997 until January 2014, Mr. Rittenberg served as our Chief Executive Officer. From May 1997 until December 1997, Mr. Rittenberg served as acting Chairman of the Board. From October 1996 until May 1997, Mr. Rittenberg served as our President. Mr. Rittenberg’s extensive experience in the decorated party goods industry, his 24-year tenure, his prior experience as our Chief Executive Officer and the requirements of the Stockholders Agreement led to the conclusion that he should serve as a director of our Company.

James M. Harrison became our Chief Executive Officer in January 2014. Mr. Harrison served as our President from December 1997 until January 2015. From March 2002 to July 2012, Mr. Harrison served as our Chief Operating Officer. From February 1997 to March 2002, Mr. Harrison also served as our Chief Financial Officer and Treasurer. From February 1997 to December 1997, Mr. Harrison served as our Secretary. Mr. Harrison’s extensive experience in the decorated party goods industry, his 18-year tenure, his role as our Chief Executive Officer and President and the requirements of the Stockholders Agreement led to the conclusion that he should serve as a director of our Company.

Michael A. Correale became our Chief Financial Officer in March 2002. Prior to that time, Mr. Correale served as our Vice President—Finance, from May 1997 to March 2002. Prior to joining the Company, Mr. Correale was the Director of Financial Reporting for Ultramar Corporation and also worked for Ernst & Young LLP.

Gregg A. Melnick became our President in January 2015 and became President of Party City Holdings Inc. in October 2014. From March 2011 to September 2014, Mr. Melnick was President of the Party City Retail Group. From May 2010 to February 2011, Mr. Melnick was President of Party City Corporation. Previously, he was Chief Operating Officer from October 2007 to April 2010 and Chief Financial Officer from September 2004 to September 2007 of Party City Corporation.

Todd M. Abbrecht has been a member of our Board since July 2012. Mr. Abbrecht is a Managing Director at Thomas H. Lee Partners, L.P. (“THL”). Prior to joining THL in 1992, Mr. Abbrecht was in the Mergers and Acquisitions department of Credit Suisse First Boston. Mr. Abbrecht is currently a director of Aramark Holdings Corporation, Curo Health Services, Inc., Fogo de Chão, Intermedix Corporation and inVentiv Health, Inc. His prior directorships include Warner Chilcott plc and Dunkin’ Brands Group, Inc. Mr. Abbrecht holds a B.S.E. in Finance from the Wharton School of the University of Pennsylvania and an M.B.A. from Harvard Business School.

Mr. Abbrecht’s experience serving as a director of various companies and his affiliation with THL, whose affiliated funds are entitled to elect a certain number of directors, led to the conclusion that he should serve as a director of our Company.

Jefferson M. Case has been a member of our Board since July 2012. Mr. Case is a Managing Director at Advent. Mr. Case originally joined Advent in 2001. He left the company in 2004 and attended Harvard Business School, before rejoining Advent in 2006. Prior to joining Advent, Mr. Case worked at Bowles Hollowell Conner / First Union, a leading middle-market M&A investment bank, and in the corporate development group of Danaher Corp. Mr. Case currently serves on the board of directors of International Coffee & Tea, LLC, Noosa Yoghurt, LLC and Serta Simmons Holdings, LLC and has served on the board of directors of Hudson Group. He holds a B.A. in economics from Davidson College and an MBA from Harvard Business School. Mr. Case’s experience serving as a director of various companies and his affiliation with Advent, whose managed funds’ common stock holdings entitle it to elect a certain number of directors, led to the conclusion that he should serve as a director of our Company.

Steven J. Collins has been a member of our Board since August 2008. Mr. Collins, a Managing Director of Advent, serves on the board of directors of Five Below, Inc., lululemon athletica, inc. and Kirkland’s, Inc. and on the board of directors of several privately held businesses. Mr. Collins originally joined Advent in 1995. He left the company in 1997 and worked at Kirkland’s, Inc. and attended Harvard Business School, before rejoining Advent in 2000. Mr. Collins received a B.S. from the Wharton School of the University of Pennsylvania and an MBA from Harvard Business School. Mr. Collins’ experience serving as a director of various companies and his affiliation with Advent, whose managed funds’ common stock holdings entitle it to elect a certain number of directors, led to the conclusion that he should serve as a director of our Company.

Uttam K. Jain has been a member of our Board since July 2012. Mr. Jain is a Principal at THL. Prior to joining THL in 2011, Mr. Jain worked at Riverside Partners and The Boston Consulting Group. Mr. Jain is currently a director of Curo Health Services, Inc. Mr. Jain holds a B.Tech. in Chemical Engineering from the Indian Institute of Technology, Bombay, where he was the recipient of the Institute Silver Medal, an M.S. in Chemical Engineering Practice from Massachusetts Institute of Technology and a MBA, with Honors, from the Wharton School of the University of Pennsylvania. Mr. Jain’s affiliation with THL, whose affiliated funds are entitled to elect a certain number of directors, led to the conclusion that he should serve as a director of our Company.

Norman S. Matthews has been a member of our Board since May 2013. Mr. Matthews has worked as an independent consultant and venture capitalist since 1989. From 1978 to 1988, Mr. Matthews served in various senior management positions for Federated Department Stores, Inc., including President from 1987 to 1988. Mr. Matthews currently serves on the Board of Directors of Henry Schein, Inc., Duff & Phelps Corp., Spectrum Brands, Inc. (as Chairman of its nominating and governance committee) and as Chairman of the Board of The Children’s Place Retail Stores, Inc. Mr. Matthews is director emeritus of Sunoco, Inc., Toys ‘R’ Us, Inc. and Federated Department Stores, Inc. and a trustee emeritus at the American Museum of Natural History. During the past five years, Mr. Matthews served on the board of directors of Finlay Fine Jewelry Corporation, Finlay Enterprises, Inc. and The Progressive Corporation. In 2005, Mr. Matthews was named as one of eight outstanding directors by the Outstanding Directors Exchange (an annual award voted on by peer directors and awarded to an outstanding director for the key role he played during a crisis, business transformation or turnaround). Mr. Matthews’ extensive experience in strategic marketing and sales with over 30 years of experience as a senior business leader in marketing and merchandising at large public companies and his valuable expertise in compensation programs and strategy led to the conclusion that he should serve as a director of our Company.

Lawrence P. Molloy has served in various leadership and financial executive roles primarily in the retail sector over the last several years. Since October 2014, Mr. Molloy has been a senior advisor at Roark Capital Group. From September 2007 through June 2013, Mr. Molloy was the Chief Financial Officer for PetSmart Inc. From September 2003 through September 2007, Mr. Molloy worked for Circuit City Stores Inc., where he was

the Vice President and CFO of Retail and the Vice President of Financial Planning and Analysis. He has also worked for Capital One Financial, AGL Capital Investments, Deloitte Consulting and the U.S. Navy where he was a fighter pilot for 10 years. In 2011, Mr. Molloy was named Institutional Investors CFO of the Year for Specialty Retail. He earned a B.S. from the U.S. Naval Academy and an MBA from the Darden Graduate School of Business at the University of Virginia. Mr. Molloy also serves as a director for Sprouts Farmers Market. Mr. Molloy’s extensive experience in financial executive roles and his valuable experience in the retail industry led to the conclusion that he should serve as a director of our Company.

Joshua M. Nelson has been a member of our Board since July 2012. Mr. Nelson is a Managing Director at THL. Prior to joining THL in 2003, Mr. Nelson worked at JPMorgan Partners, the private equity affiliate of JPMorgan Chase. Mr. Nelson also worked at McKinsey & Co. and The Beacon Group, LLC. Mr. Nelson is currently a director of 1-800-CONTACTS, Inc., Curo Health Services, Inc., Intermedix Corporation, inVentiv Health, Inc., Hawkeye Energy Holdings, LLC and Advance BioEnergy LLC. Mr. Nelson holds an A.B., summa cum laude , in Politics from Princeton University and an MBA with Honors from Harvard Business School. Mr. Nelson’s experience serving as a director of various companies and his affiliation with THL, whose affiliated funds are entitled to elect a certain number of directors, led to the conclusion that he should serve as a director of our Company.

In addition to the individual attributes of each of our directors listed above, we highly value the collective qualifications and experiences of our board members. We believe the collective viewpoints and perspectives of our directors results in a board that is dedicated to advancing the interests of our stockholders.

Composition of our Board of Directors

Our business and affairs are managed under the direction of the board of directors. Our board currently consists of nine directors. Under the amended and restated stockholders agreement, THL will have the right to nominate (i) five directors if it owns at least 50% of the common stock it held at the closing of this offering (the “Closing Date Shares”), (ii) four directors if it owns at least 40% but less than 50% of its Closing Date Shares, (iii) three directors if it owns at least 30% but less than 40% of its Closing Date Shares, (iv) two directors if it owns at least 15% but less than 30% of its Closing Date Shares and (v) one director if it owns at least 5% but less than 15% of its Closing Date Shares. Advent will have the right to nominate (i) two directors if it owns at least 50% of its Closing Date Shares and (ii) one director if it owns at least 20% but less than 50% of its Closing Date Shares. Our certificate of incorporation that will be in effect upon closing of this offering provides that our board of directors shall consist of at least three directors but not more than 15 directors and that the number of directors may be fixed from time to time by resolution of our board of directors. In the case of a vacancy on our board of directors created by the removal or resignation of a director designated by THL or Advent, as applicable, the amended and restated stockholders agreement will require us to nominate an individual designated by such entity for election to fill the vacancy. Upon the completion of this offering, the terms of office of members of our board of directors will be divided into three classes:

•

Class I directors, whose terms will expire at the annual meeting of stockholders to be held in 2016;

•

Class II directors, whose terms will expire at the annual meeting of stockholders to be held in 2017; and

•

Class III directors, whose terms will expire at the annual meeting of stockholders to be held in 2018.

Our Class I directors will be Messrs. Abbrecht, Case and Molloy, our Class II directors will be Messrs. Harrison, Matthews and Nelson and our Class III directors will be Messrs. Collins, Jain and Rittenberg. At each annual meeting of stockholders, the successors to the directors whose terms will then expire will be elected to serve from the time of election and qualification until the third annual meeting following such election and until their successors are duly elected and qualified or until his or her earlier death, resignation or removal. Any vacancies in our classified board of directors will be filled by the remaining directors, and the elected person

will serve the remainder of the term of the class to which he or she is appointed. Any additional directorships resulting from an increase in the number of directors will be distributed among the three classes so that, as nearly as possible, each class will consist of one-third of the directors.

Following the completion of this offering, we expect to be a “controlled company” under the rules of the NYSE because more than 50% of our outstanding voting power will be held by the Sponsors. See “Principal Stockholders.” We intend to rely upon the “controlled company” exception relating to the board of directors and committee independence requirements under the rules of the NYSE. Pursuant to this exception, we will be exempt from the rules that would otherwise require that our board of directors consist of a majority of independent directors and that our compensation committee and nominating and governance committee be composed entirely of independent directors. The “controlled company” exception does not modify the independence requirements for the audit committee, and we intend to comply with the requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and the rules of the NYSE.

Board Structure and Committee Composition

Our board of directors has established, or will establish prior to the completion of this offering, an audit committee, a compensation committee and a nominating and corporate governance committee. Each committee will operate under a charter that will be approved by our board of directors. The composition of each committee will be effective upon the closing of this offering.

Audit Committee

The audit committee’s primary duties and responsibilities will be to:

•

appoint, compensate, retain and oversee the work of any registered public accounting firm engaged for the purpose of preparing or issuing an audit report or performing other audit, review or attest services and review and appraise the audit efforts of our independent accountants;

•

establish procedures for the receipt, retention and treatment of complaints regarding accounting, internal accounting controls or auditing matters;

•

engage independent counsel and other advisers, as necessary;

•

determine funding of various services provided by accountants or advisers retained by the committee;

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serve as an independent and objective party to oversee our internal controls and procedures system; and

•

provide an open avenue of communication among the independent accountants, financial and senior management and the board of directors.

Upon completion of this offering, the audit committee will consist of Messrs. Matthews, Molloy and Jain with Mr. Molloy serving as chairman of the committee, and will have at least one independent member. We anticipate that, prior to the completion of this offering, our audit committee will determine that Messrs. Matthews and Molloy meet the definition of “independent director” under the rules of the NYSE and under Rule 10A-3 under the Exchange Act. Within 90 days following the effective date of the registration statement of which this prospectus forms a part, we anticipate that the audit committee will consist of a majority of independent directors, and within one year following the effective date of the registration statement of which this prospectus forms a part, the audit committee will consist exclusively of independent directors. Our board of directors has determined that Mr. Molloy is an “audit committee financial expert” within the meaning of the SEC regulations and applicable listing standards of the NYSE.

Compensation Committee

Upon completion of this offering, our compensation committee will consist of Messrs. Abbrecht, Matthews and Nelson, with Mr. Abbrecht serving as chairman of the committee. The compensation committee will be responsible for:

•

reviewing and approving corporate and individual goals and objectives relevant to executive officer compensation and evaluating the performance of executive officers in light of the goals and objectives;

•

reviewing and approving executive officer compensation;

•

reviewing and approving the chief executive officer’s compensation based upon the compensation committee’s evaluation of the chief executive officer’s performance;

•

making recommendations to the board of directors regarding the adoption of new incentive compensation and equity-based plans, and administering our existing incentive compensation and equity-based plans;

•

making recommendations to the board of directors regarding compensation of the members of the board of directors and its committees;

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reviewing and discussing with management the compensation discussion and analysis to be included in our filings with the SEC and preparing an annual compensation committee report for inclusion in our annual proxy statement;

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reviewing and approving generally any significant non-executive compensation and benefits plans;

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reviewing our significant policies, practices and procedures concerning human resource-related matters; and

•

overseeing any other such matters as the board of directors shall deem appropriate from time to time.

Nominating and Governance Committee

Upon completion of this offering, the nominating and governance committee of our board of directors will consist of Messrs. Abbrecht, Matthews and Nelson, with Mr. Matthews serving as chairman of the committee. The nominating and governance committee will be responsible for and oversee:

•

recruiting and retention of qualified persons to serve on our board of directors;

•

proposing such individuals to the board of directors for nomination for election as directors;

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evaluating the performance, size and composition of our board of directors; and

•

compliance activities.

Code of Business Conduct and Ethics

We will adopt a code of business conduct, applicable to our officers, directors and employees, in connection with this offering, which will be filed as an exhibit to the registration statement of which this prospectus forms a part.

Risk Oversight

The board of directors’ role in the Company’s risk oversight process includes receiving reports from members of senior management on areas of material risk to the Company, including operational, financial, legal and regulatory, and strategic risks. The full board of directors receives these reports in order to enable it to understand the Company’s risk identification, risk management and risk mitigation strategies. While the audit and compensation committees are responsible for evaluating certain risks and overseeing the management of such risks, the entire board of directors is informed of such risks at the board of directors meetings, following a given committee meeting. This enables the board of directors and its committees to coordinate the risk oversight role, particularly with respect to risk interrelationships.

EXECUTIVE COMPENSATION

Compensation Discussion and Analysis

This compensation discussion and analysis section provides context for the information contained in the tables following this discussion and is intended to provide information about our 2014 compensation objectives and policies for Gerald C. Rittenberg, our Executive Chairman, James M. Harrison, our Chief Executive Officer, Michael A. Correale, our Chief Financial Officer, and Gregg A. Melnick, our President (collectively, our “named executive officers”). In January 2014, Mr. Rittenberg became our Executive Chairman and Mr. Harrison became our Chief Executive Officer and President. In January 2015, Mr. Melnick became our President, with Mr. Harrison remaining as our Chief Executive Officer only. While a portion of the 2014 compensation discussed in this section relates to Mr. Rittenberg’s service as our Chief Executive Officer, Mr. Harrison’s service as our President and Mr. Melnick’s service as President of Party City Holdings Inc. and the Party City Retail Group, for purposes of this Executive Compensation section, we have referenced their new titles.

Compensation Committee

The members of the Compensation Committee of our board of directors (the “Compensation Committee”) are Todd M. Abbrecht, Steven J. Collins and Joshua M. Nelson. The Compensation Committee is responsible for setting and administering our executive compensation policies and programs and determining the compensation of our executive officers, including our named executive officers. The Compensation Committee also administers our equity incentive plan, the 2012 Plan.

The Compensation Committee has the authority to retain outside independent executive compensation consultants to assist it in the evaluation of executive officer compensation. The Compensation Committee has the sole authority to retain, at our expense, and terminate any such consultant, including the sole authority to approve such consultant’s fees and other retention terms. However, all decisions regarding compensation of executive officers are made solely by the Compensation Committee. No independent executive compensation consultants were retained by the Compensation Committees during 2014.

Compensation Philosophy

Our executive compensation program has been designed to motivate, reward, attract and retain the management deemed essential to ensure our success. The program seeks to align executive compensation with our short- and long-term objectives, business strategy and financial performance. We seek to create a sustainable competitive advantage by achieving higher productivity and lower costs than our competitors. Our compensation objectives at all compensation levels are designed to support this goal by:

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linking pay to performance to create incentives for our named executive officers to perform their duties at a high level;

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ensuring compensation levels and components are actively managed; and

•

using equity compensation to align employees’ long-term interests with those of our stockholders.

Compensation

Our Chief Executive Officer and our Executive Chairman jointly evaluate the performance of all executive and senior officers, other than themselves, against goals and objectives established with respect to those officers, determine the annual base salaries of Mr. Correale and Mr. Melnick and recommend to the Compensation Committee annual cash incentive and share-based incentive compensation for such officers. The Compensation Committee independently evaluates the performance of our Chief Executive Officer and our Executive Chairman. The Compensation Committee meets annually, usually in February or March, to evaluate the performance of the executive and senior officers, to approve annual base salaries for Mr. Rittenberg and Mr. Harrison, subject to the contractual commitments we have made with certain of our named executive officers (as described below), and to determine annual cash incentive awards for the prior year’s performance and share-based incentive compensation to

be effective for the current year. The Compensation Committee may meet at interim dates during the year to review the compensation of a named executive officer or other officer as the result of unforeseen organizational or responsibility changes, including new hires, which occur during the year.

In determining compensation components and levels, the Compensation Committee, our Chief Executive Officer and/or the Executive Chairman consider the scope and responsibility of the officer’s position, our overall financial and operating performance and the officer’s overall performance and future potential. The members of the Compensation Committee are representatives of private equity firms that collectively own approximately 93% of our outstanding equity. Thus, unlike the situation at many public companies, compensation decisions at our company are currently made by individuals who have a real and direct economic stake in the outcome of the decisions. The Compensation Committee members apply their considerable experiences in serving as directors of private equity portfolio companies to devise compensation packages that they believe will attract, retain and provide incentives to the executive talent necessary to manage an entity in which their firms have a substantial economic interest. Although the Compensation Committee looks to other companies to get a sense of the market for executive compensation in comparable circumstances, it currently does not engage in formal benchmarking.

Components of Compensation

The Company’s named executive and other officer compensation includes both short-term and long-term components. Short-term compensation consists of an officer’s annual base salary and annual incentive cash bonus. Long-term compensation may include grants of stock options or other share-based incentives established by the Company, as determined by the Compensation Committee.

Compensation is comprised of the following components:

Annual Base Salary

We pay our named executive officers an annual base salary to provide them with a fixed, base level of compensation. The annual base salaries for Mr. Correale and Mr. Melnick were determined by Mr. Rittenberg and Mr. Harrison based on the scope of Mr. Correale’s and Mr. Melnick’s responsibilities. The annual base salaries of Mr. Rittenberg and Mr. Harrison were determined by the Compensation Committee based on their employment agreements, which were amended effective January 1, 2015. Generally, we believe that executive annual base salaries should be near the middle of the range of salaries that our Compensation Committee members have observed for executives in similar positions and with similar responsibilities. Annual base salaries are reviewed annually and adjusted from time to time to reflect individual responsibilities, performance and experience, as well as market compensation levels. In the case of Mr. Rittenberg and Mr. Harrison, annual base salary adjustments for 2014 were determined in accordance with their respective employment agreements. Mr. Correale’s and Mr. Melnick’s annual base salary adjustments for 2014 were the result of an evaluation of their overall performance during the last completed fiscal year by our Chief Executive Officer and our Executive Chairman.

Annual Cash Incentive Plan

We have an annual cash incentive plan that is designed to serve as an incentive to drive annual financial performance. As a company with a substantial amount of indebtedness, we believe that Adjusted EBITDA is an important measure of our financial performance and ability to service our indebtedness and we use it as the target metric for our annual cash incentive plan. Adjusted EBITDA is a non-GAAP measure used internally and is measured by taking net income (loss) and adding back interest charges, income taxes, depreciation and amortization and other adjustments which eliminate the impact of certain items that we do not consider indicative of our ongoing operating performance. For a discussion of our use of Adjusted EBITDA generally and a reconciliation to net income, please refer to “Prospectus Summary— Summary Financial Data” and “Selected Consolidated Financial Data.” In addition, solely for purposes of our annual cash incentive plan, Adjusted EBITDA is further adjusted to eliminate the impact of bonus expense for our senior management ($10,024,000 in 2014) on Adjusted EBITDA. All references to “Adjusted EBITDA” throughout this “Executive Compensation” section mean Adjusted EBITDA as described in the preceding sentence.

During 2014, the target annual bonus for each named executive officer was based on a percentage of annual base salary: 50% in the case of Mr. Correale, 75% in the case of Mr. Melnick, and 100% in the case of Mr. Rittenberg and Mr. Harrison. For twenty-five percent (25%) of the target, the Compensation Committee, with input from our Chief Executive Officer and our Executive Chairman (other than with respect to their own annual cash bonuses), determines, on a subjective basis, the amount that should be paid. In making the determination, the Compensation Committee evaluates the individual executive’s overall contribution during the prior year, but there are no specific, pre-determined, performance goals. The remaining seventy-five percent (75%) of a named executive officer’s target annual bonus depends on our performance against an Adjusted EBITDA target and also requires that the Compensation Committee, with input from Mr. Rittenberg and Mr. Harrison, be satisfied with the contributions made by the executive during the year. Depending on actual Adjusted EBITDA, the portion of the incentive award that is related to Adjusted EBITDA can be paid at a maximum of 200% for Mr. Rittenberg and Mr. Harrison and 150% for Mr. Correale and Mr. Melnick. The target and maximum annual bonus opportunities for Mr. Rittenberg and Mr. Harrison are established in their employment agreements.

If actual Adjusted EBITDA had equaled the target Adjusted EBITDA, each of the named executive officers would have earned 100% of the Adjusted EBITDA portion of his annual bonus. If actual Adjusted EBITDA was less than 90% of target Adjusted EBITDA, each named executive officer would have earned 0% of the Adjusted EBITDA portion of the annual bonus. If actual Adjusted EBITDA was equal to 90% of target Adjusted EBITDA, each named executive officer would have earned 50% of the Adjusted EBITDA portion of his annual bonus. If actual Adjusted EBITDA was greater than 90% of target Adjusted EBITDA, but less than 100% of the target, the percentage of the Adjusted EBITDA portion of each named executive officer’s annual bonus that was earned would have been adjusted on a straight-line basis. If actual Adjusted EBITDA had equaled 112% of target Adjusted EBITDA, each of the named executive officers would have earned 150% of the Adjusted EBITDA portion of his annual bonus. If actual Adjusted EBITDA was greater than 100% of the target, but less than 112% of the target, the percentage of the Adjusted EBITDA portion of each named executive officer’s annual bonus that was earned would have been adjusted on a straight-line basis. If actual Adjusted EBITDA was greater than 112% of the target, Mr. Rittenberg and Mr. Harrison would each have earned 200% of the Adjusted EBITDA portion of his annual bonus, and Mr. Correale and Mr. Melnick would each have earned 150% of the Adjusted EBITDA portion of his annual bonus.

Actual Adjusted EBITDA for 2014 was achieved at 101.1% of target Adjusted EBITDA and the named executive officers earned 104.4% of the Adjusted EBITDA portion of their annual bonuses. Additionally, based on the overall contributions by each of the named executive officers during the year, the Compensation Committee concluded that, for 2014, each of the named executive officers had earned 100% of the twenty-five percent of his target bonus that is determined on a subjective basis.

Stock-based Incentive Program

The Company has adopted the 2012 Plan, under which the Company can grant incentive awards in the form of stock appreciation rights, restricted stock and common stock options to certain directors, officers, employees and consultants of the Company and its affiliates. No long-term incentive awards were granted to our named executive officers in 2014 but they continued to vest in stock options granted to them in 2013, which were intended to serve as incentives over a multi-year period. During 2013, time-based stock options and performance-based stock options were granted under the 2012 Plan. Prior to these grants, none of our named executive officers held any long-term incentive awards. All long-term incentive awards held by our named executive officers prior to the Acquisition were cancelled in connection with the Acquisition. In determining the size of the grants made to our named executive officers in 2013, the Compensation Committee considered the size of the equity awards held by our named executive officers prior to the Acquisition, the scope and responsibility of the officer’s position and their experience with equity grants made to executives of other companies with which the Sponsor-directors are affiliated.

The Compensation Committee uses the 2012 Plan as an important component of our overall compensation program because it helps retain key employees, aligns their financial interests with the interests of our equity owners, and rewards the achievement of our long-term strategic goals. Stock options provide our key employees with the opportunity to purchase and maintain an equity interest in the Company and to share in the appreciation in the value of our stock.

The Compensation Committee uses both time-based awards and performance-based awards to provide what it believes are the appropriate incentives for our named executive officers and other key employees. Time-based stock options help to retain executives, who must be employed by us at the time the award vests. In addition, because we set the exercise price of stock options at the fair market value of the common stock at the time of grant, our equity value must increase, thereby benefiting all stockholders, before the awards have any value. Additionally, we grant performance-based awards that vest if specified investment returns are achieved by THL and certain service requirements are met. We believe that these options put our executives in the shoes of our stockholders and align their interests with those of our stockholders.

Upon a change of control described in the 2012 Plan, all outstanding time-based options will, subject to certain limitations, become fully exercisable and vested, and the service-based conditions that apply to outstanding performance-based options will be deemed satisfied with respect to 80% of each such grant. The service-based condition with respect to the remaining 20% of each grant of performance-based options will be deemed satisfied on the earliest of (i) the first anniversary of the change of control, (ii) the date on which the named executive officer’s employment or other service terminates for any reason other than by us for “cause” or by the named executive officer without “good reason” (each as defined in the 2012 Plan) and (iii) the regularly scheduled vesting date, subject to the named executive officer’s continued employment through the applicable date. We believe that providing for acceleration upon a liquidity event such as a change of control helps to align the interests of the executives with those of our stockholders.

The 2012 Plan is further described below under the heading “—Amended and Restated 2012 Plan.”

Investment in the Company

In connection with the Acquisition, each of our named executive officers was offered the opportunity to make an investment in us by converting their directly-owned shares into our post-Acquisition shares. Each of our named executive officers elected to roll over shares in connection with the Acquisition and, as a result, directly or indirectly holds shares of our common stock in the following amounts: Mr. Rittenberg – 223.95 shares; Mr. Harrison – 201.85 shares; Mr. Correale – 24.56 shares; and Mr. Melnick – 77.76 shares.

Offering our named executive officers this opportunity aligns their interests with those of our other stockholders, leads them to act as “employee owners” of our company and allows them to benefit from increases in value that they helped create.

Additionally, during 2014 certain of the named executive officers exercised vested stock options. See the “Option Exercises and Stock Vested in 2014” table below for additional information.

Severance Arrangements

We provide severance protection to Mr. Rittenberg and Mr. Harrison in their employment agreements, and to Mr. Correale pursuant to a letter agreement. Mr. Melnick was not covered by an employment agreement in 2014 but became party to one with us effective in 2015. These severance protections are described below under “Potential Payments Upon Termination or Change in Control for 2014.”

Our severance protections are designed to retain the services of Mr. Rittenberg, Mr. Harrison, Mr. Melnick and Mr. Correale and resulted from prior negotiations regarding their employment arrangements. We believe the level of severance payments we provide is appropriate and within the range of competitive practice.

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Starting in 2015, Mr. Melnick will also receive severance protections through his new employment agreement. See “Narrative Disclosure to Summary Compensation Table and Grant of Plan-Based Awards Table—Employment Agreements” below for further discussion.

Other Benefits and Perquisites

Each named executive officer is also eligible to participate in our broad-based employee benefit plans for U.S.-based employees, such as medical, dental, group life, disability and accidental death and dismemberment insurance. Under our tax-qualified defined contribution plans, our named executive officers and generally all full-time domestic exempt and non-exempt employees who meet certain length-of-service and age requirements, as defined in such plans, may contribute a portion of their compensation to the plan on a pre-tax basis and receive an employer matching contribution ranging from approximately 11% to 100% of the employee contributions, not to exceed a range of 5% to 6% of the employee’s annual salary. In addition, our tax-qualified defined contribution plans provide for annual discretionary contributions to be credited to participants’ accounts. Named executive officers participate in the benefit plans on the same basis as our other employees. The annual value of the contributions to our profit-sharing plans for each named executive officer is reflected in the “All Other Compensation” column of the Summary Compensation Table below. We also provide Mr. Rittenberg, Mr. Harrison and Mr. Correale with certain supplemental disability insurance benefits and Mr. Melnick with certain supplemental life insurance benefits. These benefits are only made available to a select group of executives and senior employees.

Mr. Rittenberg and Mr. Harrison drive automobiles owned by the Company. Mr. Correale and Mr. Melnick each receive an allowance to cover the cost of his automobile. The annual value of the automobile usage and the allowance are reported as taxable income to the executive and are reflected in the “All Other Compensation” column of the Summary Compensation Table below. The Compensation Committee believes that the cost of providing these automobile-related benefits is reasonable relative to its value to our named executive officers.

New Employment Agreements

As further described under “Narrative Disclosure to Summary Compensation Table and Grant of Plan-Based Awards Table—Employment Agreements”, we entered into amended employment agreements with Mr. Rittenberg and Mr. Harrison and entered into a new employment agreement with Mr. Melnick, in each case, effective January 1, 2015. We also entered into a new letter agreement with Mr. Correale effective March 24, 2015. The terms of these agreements are described in the narrative below.

Clawback Policy

We do not currently have a formal policy for recovery of amounts paid on the basis of financial results which are subsequently restated. Following completion of the offering, under the Sarbanes-Oxley Act, our Chief Executive Officer and our Chief Financial Officer will be required to forfeit incentive compensation paid on the basis of previously issued financial statements for which they were responsible and which have to be restated as a result of misconduct. In the future, we intend to implement a formal policy for recovery of incentive-based compensation paid to current and former executive officers in compliance with requirements of the Dodd-Frank Wall Street Reform and Consumer Protection Act and related rulemaking.

Tax Treatment

Because our common stock is not currently publicly traded, executive compensation has not been subject to the provisions of Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”), which limit the deductibility of compensation paid to certain individuals to $1.0 million, excluding qualifying performance-based compensation and certain other compensation. Following this offering, at such time as we are subject to the deduction limitation under Section 162(m) of the Code, we expect that the Compensation Committee will consider the impact of Section 162(m) of the Code when structuring our executive compensation arrangements

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with our named executive officers. However, the Compensation Committee will retain flexibility to approve the compensation arrangements that promote the objectives of our compensation program but that may not qualify for full or partial tax deductibility.

Summary Compensation Table for 2014, 2013 and 2012


Name and Principal Position	Year		Salary		Bonus (1)		Option Awards (2)		Non-Equity Incentive Plan Compensation (3)		All Other Compensation (4)		Total
James M. Harrison		2014	$	1,193,323	$	—	$	—	$	1,232,703	$	426,505	$	2,852,531
Chief Executive Officer		2013		1,136,498		—		1,161,489		921,069		425,664		3,644,720
		2012		1,082,380		896,500		—		719,852		3,231,102		5,929,834
Michael A. Correale		2014	$	382,965	$	—	$	—	$	206,600	$	43,850	$	633,415
Chief Financial Officer		2013		366,667		—		223,363		149,731		43,009		782,770
		2012		357,433		368,543		—		120,463		446,117		1,292,556
Gerald C. Rittenberg		2014	$	1,403,910	$	—	$	—	$	1,450,240	$	532,626	$	3,386,776
Executive Chairman		2013		1,337,057		—		1,250,834		1,083,017		539,685		4,210,593
		2012		1,273,388		1,195,333		—		846,421		4,194,399		7,509,541
Gregg A. Melnick		2014	$	745,852	$	—	$	—	$	639,169	$	8,988	$	1,394,009
President		2013		694,552		—		714,762		283,200		8,988		1,701,502
		2012		662,139		228,532		102,540		228,275		861,705		2,083,191

(1)	2012 amounts represent discretionary bonuses paid in conjunction with the Transaction.

(2)

The dollar values shown reflect the aggregate grant date fair value of equity awards granted within the year in accordance with FASB Accounting Standards Codification Topic 718 for stock-based compensation. These amounts do not represent the actual value that will be received by each individual from the awards. The assumptions used in determining the fair values are disclosed in the notes to our audited consolidated financial statements that appear elsewhere in this prospectus.

(3)	Amounts represent annual bonuses paid for such years.

(4)

Includes for 2014 an annual accrual for deferred bonuses for Mr. Rittenberg and Mr. Harrison of $500,000 and $400,000, respectively. In addition, during 2014, each of the named executive officers either used a company car or received a car allowance and, the 2014 amounts include the following automobile-related compensation: Mr. Rittenberg ($17,200); Mr. Harrison ($11,000); Mr. Correale ($28,800); and Mr. Melnick ($8,100). Also included are amounts related to matching 401(k) contributions, contributions to one of our tax-qualified defined contribution plans and life insurance and disability contributions. Includes for 2012 special distributions of $9,400 per pre-Acquisition stock option that became vested in connection with the Acquisition in the following amounts: Mr. Rittenberg ($3,666,602), Mr. Harrison ($2,801,726), Mr. Correale ($402,696) and Mr. Melnick ($852,717). The rights to these payments were established in connection with our December 2010 dividend, which was payable in the same per share amount, and were intended to prevent dilution of our option holders’ interests.

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Grants of Plan Based Awards for 2014


Name	Grant Date		Estimated Future Payouts Under Non-Equity Incentive Plan Awards
Name	Grant Date		Threshold (1)		Target		Maximum(1)
James M. Harrison		1/1/2014	$	447,496	$	1,193,323	$	2,088,315
Michael A. Correale		1/1/2014	$	75,000	$	200,000	$	275,000
Gerald C. Rittenberg		1/1/2014	$	526,466	$	1,403,910	$	2,456,843
Gregg A. Melnick		1/1/2014	$	232,031	$	618,750	$	850,781

(1)

Represents annual bonuses granted under our cash incentive plan. Under this plan, if our actual Adjusted EBITDA for our 2014 fiscal year was achieved at a threshold Adjusted EBITDA level, the Adjusted EBITDA portion of each named executive officer’s annual bonus (i.e., 75% of his total annual bonus) would have been funded at 50% for our 2014 fiscal year. If our actual Adjusted EBITDA for our 2014 fiscal year was achieved at a maximum Adjusted EBITDA level, this portion would have been funded at 200% for Mr. Rittenberg and Mr. Harrison and 150% for Mr. Correale and Mr. Melnick. For purposes of this table, we have assumed that the remaining 25% of each named executive officer’s annual bonus that is determined on a subjective basis will be funded at 0% in the threshold case and at 100% in the maximum case.

Narrative Disclosure to Summary Compensation Table and Grant of Plan-Based Awards Table

Employment Agreements

Employment Agreement with Mr. Rittenberg. Mr. Rittenberg is a party to an employment agreement with the Company and Party City Holdings that was amended and restated as of January 13, 2014, and amended and restated again as of December 30, 2014, effective January 1, 2015 (the “Rittenberg Employment Agreement”), pursuant to which Mr. Rittenberg serves as our Executive Chairman for an employment period ending on December 31, 2017. For 2015, Mr. Rittenberg’s annual base salary will be $2,008,600. His annual base salary is subject to an automatic two percent increase on January 1, 2016 and January 1, 2017. During 2015, 2016 and 2017, Mr. Rittenberg will be eligible for an annual bonus with a target of 80% of annual base salary for each calendar year during the employment period, consistent with the Company’s bonus plan for key executives in effect from time to time, not to exceed 160% of Mr. Rittenberg’s annual base salary. In addition to the annual bonus, Mr. Rittenberg was entitled to receive a deferred bonus accruing at a rate of $500,000 per year (the “Deferred Bonus”) for 2014. The December 30, 2014 amendment to the Rittenberg Employment Agreement eliminated the Deferred Bonus, effective January 1, 2015, and on such date Mr. Rittenberg was paid the Deferred Bonus that accrued for the period from January 1, 2013 to December 31, 2014. The increase in Mr. Rittenberg’s 2015 base salary is primarily to compensate him for agreeing to the elimination of the Deferred Bonus. Additionally, the Rittenberg Employment Agreement states that it is expected that Mr. Rittenberg will receive 229 stock options in conjunction with an initial public offering of the common stock of Party City Holdco Inc. and the exercise price of such stock options will be equal to the price of a share of Party City Holdco Inc.’s common stock in connection with such offering. However, the grant of such options (and the exact terms of such options) is subject to the discretion of the Compensation Committee. The Rittenberg Employment Agreement also provides for other customary benefits, including savings and retirement plans, paid vacation, health care, life insurance plans, payment of disability insurance premiums in an amount of up to $2,000 per month and expense reimbursement.

Employment Agreement with Mr. Harrison. Mr. Harrison is a party to an employment agreement with the Company that was amended and restated as of January 31, 2014 and again as of December 30, 2014, effective January 1, 2015, (the “Harrison Employment Agreement”), pursuant to which Mr. Harrison serves as our Chief Executive Officer for an employment period ending on December 31, 2017. The Harrison Employment Agreement is substantially identical to the Rittenberg Employment Agreement. The only material differences from the Rittenberg Employment Agreement are that (1) for 2015, Mr. Harrison’s annual base salary is $1,682,801, and (2) Mr. Harrison’s deferred bonus accrued at a rate of $400,000 per year prior to the elimination

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of such deferred bonus in the December 30, 2014 amendment. The increase in Mr. Harrison’s 2015 base salary is also primarily to compensate him for agreeing to the elimination of his deferred bonus.

Employment Agreement with Mr. Melnick. Mr. Melnick entered into an employment agreement with the Company as of December 30, 2014 which become effective on January 1, 2015, (the “Melnick Employment Agreement”), pursuant to which Mr. Melnick serves as our President for an employment period ending on December 31, 2017. The Melnick Employment Agreement is substantially identical to the Rittenberg Employment Agreement. The only material differences from the Rittenberg Employment Agreement are that (1) for 2015, Mr. Melnick’s annual base salary is $825,000, (2) any increases to Mr. Melnick’s annual base salary during the term of the Melnick Employment Agreement are subject to Compensation Committee approval, (3) Mr. Melnick is eligible for an annual bonus with a target of 75% of annual base salary, with such annual bonus not to exceed 150% of Mr. Melnick’s annual base salary, (4) it is expected that Mr. Melnick will receive 115 stock options in conjunction with an initial public offering of the common stock of Party City Holdco Inc. (however, the grant of such options (and the exact terms of such options) is subject to the discretion of the Compensation Committee), and (5) Mr. Melnick’s severance is calculated differently than Mr. Rittenberg’s, as described below under “Potential Payments Upon Termination or Change in Control for 2014—Employment Agreement with Mr. Melnick.”

Letter Agreement with Mr. Correale . Mr. Correale entered into a new letter agreement with the Company effective on March 24, 2015. Under the letter agreement, Mr. Correale is entitled to an annual base salary of $400,000 and an annual bonus with a target of 50% of annual base salary.

For a description of the payments and benefits our named executive officers may be entitled to in connection with a termination of employment or a change in control, and for a description of the restrictive covenants in our favor by which our named executive officers are bound, see “—Potential Payments Upon Termination or Change in Control for 2014.”

Outstanding Equity Awards at Fiscal Year End for 2014

The following table sets forth certain information with respect to outstanding stock options held by our named executive officers on December 31, 2014.


	Option Awards
Name	Number of Securities Underlying Unexercised Options (#) Exercisable (1)		Number of Securities Underlying Unexercised Options (#) Unexercisable (1)		Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options) (#)) (2)		Option Exercise Price ($)(3)		Option Expiration Date
James M. Harrison		26.00		78.00		195.00		14,913		4/1/2023
Michael A. Correale		10.00		15.00		37.00		14,913		4/1/2023
Gerald C. Rittenberg		28.00		84.00		210.00		14,913		4/1/2023
Gregg A. Melnick		16.00		48.00		120.00		14,913		4/1/2023

(1)	All time-based options vested 20% on July 27, 2013 and 20% on July 27, 2014 and will vest 20% on each of July 27, 2015, July 27, 2016 and July 27, 2017, subject to the named executive officer’s continued employment through the applicable vesting date.

(2)

All performance-based options will vest if both service-based and performance-based conditions are met, subject to the terms of the 2012 Plan and the applicable award agreements. The service-based condition was satisfied as to 20% of the options on July 27, 2013 and as to an additional 20% of the options on July 27, 2014 and will be satisfied as to an additional 20% of the options on each of the third through fifth anniversaries of July 27, 2012, subject to the named executive officer’s employment through the applicable service-based vesting date. Once the service-based condition has been satisfied, the performance-based options will become eligible to vest if a certain minimum multiple of investment is realized by THL and will vest in whole or in part if THL realizes an internal rate of return on its investment in the Company within a specified range.

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(3)

The options were originally granted with an exercise price equal to $25,000 per share. In connection with the August 2013 dividend distribution of $10,087 per share, in accordance with the terms of the 2012 Plan, the exercise prices of the options were decreased by the amount of the per share dividend.

Option Exercises and Stock Vested in 2014

The following table provides information regarding options to purchase our common stock that were exercised by our named executive officers during 2014. None of our named executive officers vested in any stock awards during 2014.


Name	Number of Shares Acquired On Exercise (#)		Value Realized On Exercise ($)
James M. Harrison		26.00	$	201,574
Michael A. Correale		—		—
Gerald C. Rittenberg		28.00		217,080
Gregg A. Melnick		16.00		124,046

Potential Payments upon Termination or Change in Control for 2014

The employment contracts of Mr. Rittenberg and Mr. Harrison and the letter agreement with Mr. Correale in effect in 2014 provided for severance benefits upon a termination of employment under certain circumstances or a change in control. For a discussion regarding the severance benefits provided under Mr. Rittenberg’s, Mr. Harrison’s and Mr. Correale’s employment contracts, see “—Employment Agreement with Mr. Rittenberg”, “—Employment Agreement with Mr. Harrison”, and “—Letter Agreement with Mr. Correale” below. A change in control would also result in acceleration of our time-based options and would have certain effects on our performance-based options. See “—Effect of Change of Control on Stock Options” below. The following table presents the potential post-employment severance, bonus and deferred bonus payments payable to Mr. Rittenberg, Mr. Harrison and Mr. Correale, as applicable, and the potential effect of a change in control on stock options held by our named executive officers, in each case, as of December 31, 2014. The table also assumes that the triggering event took place on December 31, 2014.

Amounts shown in the table do not include (i) accrued but unpaid salary, annual cash bonuses for 2014 (which will be reflected in the “Non-Equity Incentive Plan Compensation” column of the Summary Compensation Table) and vested benefits and (ii) other benefits earned or accrued by the named executive officer during his or her employment that are available to all salaried employees and that do not discriminate in scope, terms or operations in favor of executive officers.


Name	Benefit	Termination of Employment Without Cause or for Good Reason		Termination of Employment due to Death and Disability		Termination of Employment without Cause or for Good Reason within Six Months of Change in Control (5)		Change in Control without Termination of Employment
Name	Benefit			Termination of Employment due to Death and Disability				Change in Control without Termination of Employment
James M. Harrison	Severance (1)	$	4,779,969	$	—	$	4,812,672	$	—
	Deferred Bonus (2)		800,000		800,000		800,000		—
	Vesting of Time-Based Options (3)		—		—		1,316,016		1,316,016
	Vesting of Performance-Based Options (3)		—		—		—		—
Michael A. Correale	Severance (4)	$	606,600		—	$	606,600	$	—
	Vesting of Time-Based Options (3)		—		—		253,080		253,080
	Vesting of Performance-Based Options (3)		—		—		—		—

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Name	Benefit	Termination of Employment Without Cause or for Good Reason		Termination of Employment due to Death and Disability		Termination of Employment without Cause or for Good Reason within Six Months of Change in Control (5)		Change in Control without Termination of Employment
Name	Benefit			Termination of Employment due to Death and Disability				Change in Control without Termination of Employment
Gerald C. Rittenberg	Severance (1)	$	5,711,731	$	—	$	5,661,971	$	—
	Deferred Bonus (2)		1,000,000		1,000,000		1,000,000		—
	Vesting of Time-Based Options (3)		—		—		1,417,248		1,417,248
	Vesting of Performance-Based Options (3)		—		—		—		—
Gregg A. Melnick (6)	Vesting of Time-Based Options (3)		—		—	$	809,856	$	809,856
	Vesting of Performance-Based Options (3)		—		—		—		—

(1)

If the named executive officer’s employment were terminated other than for cause during 2014, or if he terminated his employment for good reason during 2014, the executive would have been entitled to receive up to three times the sum of his base salary and $500,000 ($400,000 in the case of Mr. Harrison). The table assumes the executive would be subject to a three-year “restriction period” (as described below) and that his severance multiplier would be three. If the executive had been terminated under those circumstances within six months following a change in control, the executive would have received the sum of (a) his base salary multiplied by three and (b) the amount equal to the annual bonus paid to the executive with respect to the last full calendar year of his employment prior to the change in control. Amounts included in the table have been calculated using the executive’s actual bonus paid for 2014.

(2)	Represents accrued but unpaid deferred bonus earned by the named executive officer through the date of termination.

(3)

The value of the acceleration of unvested stock options is determined based on the difference between the exercise price of the options ($14,913) and the fair market value of a share of our common stock ($31,785) as of December 31, 2014 (which fair market value was determined after taking into account that our common stock is not currently marketable and other factors described in the notes to our consolidated financial statements that appear elsewhere in this prospectus). Amounts included in the table represent the value associated with the acceleration of all time-based options in connection with a change of control. No amounts have been included in the table with respect to performance-based options since they would not have vested if a change of control occurred on December 31, 2014, based on the then fair market value of a share of our common stock, determined as described above.

(4)	Represents severance payment under the letter agreement with Mr. Correale based on Mr. Correale’s base salary and 100% bonus for the year of termination (the table assumes Mr. Correale’s salary as of December 31, 2014 and has been calculated using his actual bonus for 2014).

(5)	If Mr. Rittenberg or Mr. Harrison is not offered employment on substantially similar terms by us or one of our affiliates following a change in control, his employment will be treated as having been terminated other than for cause. See (1) above for the calculation of termination benefits.

(6)	During 2014, Mr. Melnick was not entitled to any severance payments. Beginning in 2015, Mr. Melnick will be entitled to severance under the terms of his employment agreement, as described below.

Employment Agreement with Mr. Rittenberg. As described above, we entered into an amended and restated employment agreement with Mr. Rittenberg, effective January 1, 2015. Under Mr. Rittenberg’s employment agreement, as in effect on December 31, 2014, if we had terminated Mr. Rittenberg’s employment other than for cause (as defined in Mr. Rittenberg’s employment agreement), or if Mr. Rittenberg had terminated his employment for good reason (as defined in Mr. Rittenberg’s employment agreement), we would have been obligated to pay Mr. Rittenberg the following lump sum cash payments: (1) accrued unpaid salary, earned but unpaid annual bonus for any prior year and accrued but unpaid vacation pay (collectively, the “Accrued Obligations”); (2) severance pay equal to (A)(x) his annual base salary plus (y) $500,000, multiplied by (B) the number of years in the restriction period (which will last one to three years following the termination of his employment, as described below); (3) his deferred bonus, to the extent then unpaid, and (4) a pro rata annual

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bonus for the year of termination. If such a termination had occurred within six months following a change in control, the restriction period would have been equal to three years and the severance payment would have been equal the sum of three years’ base salary and the amount of annual bonus paid to Mr. Rittenberg with respect to the last full calendar of his employment prior to the change in control. Upon termination of Mr. Rittenberg’s employment by us for cause, or upon the termination of his employment without good reason, Mr. Rittenberg would only have been entitled to the Accrued Obligations. Upon his termination of employment due to death or disability, Mr. Rittenberg would have been entitled to the Accrued Obligations, his deferred bonus, to the extent then unpaid, and a pro rata annual bonus for the year of termination. Payments of his deferred bonus and pro rata bonus are subject to Mr. Rittenberg’s (or, in the case of his death, his beneficiary or estate’s) signing of a release of claims.

If a change in control occurs and Mr. Rittenberg is not offered employment on substantially similar terms by us or by one of our continuing affiliates immediately thereafter, then for all purposes of the Rittenberg Employment Agreement, Mr. Rittenberg’s employment will be treated as having been terminated by us other than for cause effective as of the date of such change in control. However, if Mr. Rittenberg is hired or offered employment on substantially similar terms by the purchaser of our stock or assets, if his employment is continued by us or one of our continuing affiliates, or if Mr. Rittenberg does not actually terminate employment, he will not be entitled to the treatment described in the preceding sentence.

The Rittenberg Employment Agreement also provides that during the term of the agreement and the Restriction Period (as described below), Mr. Rittenberg will be subject to certain non-competition and non-solicitation provisions, as described in the Rittenberg Employment Agreement. The Restriction Period will be three years in the event of the termination of Mr. Rittenberg’s employment by us for cause or by Mr. Rittenberg without good reason. If we terminate Mr. Rittenberg’s employment other than for cause or due to his death or permanent disability, or Mr. Rittenberg terminates his employment for good reason, the Restriction Period will be instead a one, two or three-year period, determined at our election (except that following a change in control, the Restriction Period will be three years if Mr. Rittenberg’s employment is terminated by us other than for cause or by Mr. Rittenberg for good reason).

The terms of the Rittenberg Employment Agreement, as amended effective January 1, 2015, are the same as those that applied during 2014, except that if we terminate Mr. Rittenberg’s employment other than for cause, or if Mr. Rittenberg terminates his employment for good reason, we will be obligate to pay Mr. Rittenberg the following lump sum cash payments: (1) the Accrued Obligations; (2) severance pay equal to (A) his annual base salary, multiplied by (B) the number of years in the restriction period (which will last one to three years following the termination of his employment, as described above); and (3) a pro rata annual bonus for the year of termination.

Employment Agreement with Mr. Harrison. As described above, we entered into an amended and restated employment agreement with Mr. Harrison, effective January 1, 2015. Under Mr. Harrison’s employment agreement, as in effect on December 31, 2014, he would have received the same benefits as Mr. Rittenberg, except that the severance payment payable to Mr. Harrison in the case of a termination of his employment by us other than for cause (as defined in Mr. Harrison’s employment agreement) or by Mr. Harrison for good reason (as defined in Mr. Harrison’s employment agreement) would have been based on his annual base salary plus $400,000.

The terms of the Harrison Employment Agreement, as amended effective January 1, 2015, are the same as those that applied during 2014, except that if we terminate Mr. Harrison’s employment other than for cause, or if Mr. Harrison terminates his employment for good reason, we will be obligated to pay Mr. Harrison the following lump sum cash payments: (1) the Accrued Obligations; (2) severance pay equal to (A) his annual base salary, multiplied by (B) the number of years in the restriction period (which will last one to three years following the termination of his employment, as described above); and (3) a pro rata annual bonus for the year of termination.

Employ ment Agreement with Mr. Melnick . The Melnick Employment Agreement, which was effective on January 1, 2015, is substantially identical to the Rittenberg Employment Agreement with respect to severance

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and change in control-related benefits. The only material differences are that: (1) Mr. Melnick’s severance pay (including if such payment is being made due to a change in control), if payable, is equal to one year of base salary and would be paid over a twelve-month period, and (2) Mr. Melnick’s Restriction Period is one year in all cases.

Letter Agreement with Mr. Correale . In 2014, under a letter agreement with Mr. Correale, upon termination of his employment by the Company for any reason other than for cause (as defined in Mr. Correale’s letter agreement), Mr. Correale would have been entitled to severance in an amount equal to one year’s compensation at the rate of compensation in effect at the date of termination.

We entered into a new letter agreement with Mr. Correale effective on March 24, 2015. Under the letter agreement, if Mr. Correale’s employment is terminated without cause, he would be entitled to severance in an amount equal to (i) his annual base salary as of the date of the termination, and (ii) to the extent permitted under applicable law without penalty to the Company, an amount in cash that is sufficient on an after-tax basis to reimburse Mr. Correale for the portion of his COBRA premiums that is equal to the employer contributions made on his behalf as of immediately prior to his termination under the Company’s group health plans, which, in each case, will be paid in equal installments in accordance with the Company’s regular payroll schedule over the one-year period commencing on the date of the termination. In the event of such a termination, Mr. Correale would also be entitled to the annual bonus he would have received based on actual performance for the year in which such termination occurs, which would be paid to him within the first two and one-half months following the end of the year to which the annual bonus corresponds. In the event that Mr. Correale’s employment is terminated by the Company due to his disability or due to his death, Mr. Correale would be entitled to a pro rata annual bonus based on actual performance for the year in which the termination occurs, which would be paid to him within the first two and one-half months following the end of the year to which the annual bonus corresponds. The payments described above are subject to Mr. Correale’s (or, in the case of his death, his beneficiary or estate’s) signing of a release of claims.

Effect of Change of Control on Stock Options . Upon a “change of control” (as defined in the 2012 Plan) all time-based options will become immediately and fully vested and the time-vesting condition applicable to performance-based options will be deemed satisfied as to all but 20% of each grant of performance-based options. The time-vesting condition would be deemed satisfied as to the final 20% of each grant of performance-based options on the earliest of (i) the first anniversary of the change of control, (ii) the date on which the named executive officer’s employment or other service terminates for any reason other than by us for “cause” or by the named executive officer without “good reason” (each as defined in the 2012 Plan) and (iii) the regularly scheduled vesting date, subject to the named executive officer’s employment through the applicable date.

If THL receives “deferred proceeds” (which are generally defined to include rights to contingent payments, deferred payments and similar payments) in connection with a change of control, any unvested performance-based options will generally remain outstanding and eligible to vest until the earlier of the date THL no longer holds any equity or other securities of the Company or any deferred proceeds or the tenth anniversary of the date of grant (the earlier date, the “Final Vesting Date”). Upon the termination of a named executive officer’s employment or other service by us for any reason on or after a change in control other than for cause or by the named executive officer without good reason, any unvested performance-based options will remaining outstanding and eligible to vest until the Final Vesting Date.

Restrictive Covenants in Stock Option Agreements . The stock option agreements for the stock options held by each of our named executive officers contain certain restrictive covenants, including non-competition and non-solicitation provisions that apply during the named executive officer’s employment and the 18-month period following a termination of his employment with us.

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Amended and Restated 2012 Plan

In connection with this offering, our board of directors amended and restated the 2012 Plan. The following describes the material terms of the amended and restated 2012 Plan. This summary is not a complete description of all provisions of the 2012 Plan and is qualified in its entirety by reference to the 2012 Plan, which is filed as an exhibit to the Registration Statement of which this prospectus is a part.

Plan Administration. The Compensation Committee administers the amended and restated 2012 Plan. The Compensation Committee has the authority to, among other things, select participants, determine the amount and terms and conditions of awards and adopt such rules, forms and guidelines for administering the amended and restated 2012 Plan as it deems necessary and proper. All actions taken and all interpretations and determinations made by the Compensation Committee will be final and binding.

Authorized Shares. Subject to adjustment as described in the amended and restated 2012 Plan, the maximum number of shares of our common stock that may be delivered in satisfaction of awards under the amended and restated 2012 Plan is 5,470 shares. Any shares tendered to or withheld by us in connection with the payment of the exercise or purchase price of an award or to satisfy tax withholding obligations with respect to a stock option or stock appreciation right will not be available again under the plan. In the event that an outstanding award expires, is forfeited, cancelled or otherwise terminated without consideration, the shares subject to such award will be available for future grant under the plan.

Shares of our common stock to be issued under the amended and restated 2012 Plan may be authorized but unissued shares of common stock or treasury shares.

Eligibility. The Compensation Committee will select participants from employees, directors and consultants of the Company or its subsidiaries or affiliates.

Types of Awards; Vesting. The amended and restated 2012 Plan provides for grants of stock options, stock appreciation rights, restricted stock and unrestricted stock and other stock-based awards. The Compensation Committee has the authority to determine the vesting schedule applicable to each award, and to accelerate the vesting or exercisability of any award.

•

Stock options and stock appreciation rights . The exercise price of a stock option, and the grant price against which a stock appreciation right is to be measured, may not be less than the fair market value (or, in the case of an incentive stock option granted to a ten percent shareholder, 110% of the fair market value) of a share of our common stock on the date of grant.

•

Restricted and unrestricted stock . A restricted stock award is an award of shares of our common stock subject to forfeiture restrictions, while an unrestricted stock award is not subject to such restrictions.

•

Other stock-based awards . Other stock-based awards are awards that are valued by reference to, or otherwise based, on shares of our common stock, including without limitation, restricted stock units, dividend equivalent rights and other phantom awards.

Non-Transferability of Awards . Awards under the amended and restated 2012 Plan may not be transferred except in the case of a participant’s death, unless otherwise provided by the Compensation Committee.

Termination of Employment. Unless otherwise provided by the Compensation Committee or in an award agreement, upon a termination of employment or service all unvested options and other awards requiring exercise will terminate and all other unvested awards will be forfeited. Upon a termination of employment or service for cause, all outstanding awards will terminate and be forfeited without consideration. Upon a termination of employment or service for reasons other than for cause, vested options will remain exercisable for 60 days following such termination (90 days in the case of a termination due to death), unless otherwise provided by the Compensation Committee or in an award agreement.

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Performance Criteria . In the case of awards intended to qualify for the performance-based compensation exception under Section 162(m) of the Code, the Compensation Committee will establish the applicable performance criteria in writing within the time required by Section 162(m) of the Code, which will be limited to objectively determinable measures of performance relating to any or any combination of the following: net sales; system-wide sales; comparable store sales; revenue; revenue growth or product revenue growth; operating income (before or after taxes); adjusted operating income; adjusted net income; adjusted earnings per share; channel revenue growth; franchising commitments; manufacturing profit; manufacturing profit margin; store closures; pre- or after-tax income or loss (before or after allocation of corporate overhead and bonus); earnings or loss per share; net income or loss (before or after taxes); return on equity; total stockholder return; return on assets or net assets; appreciation in and/or maintenance of the price of the shares or any other publicly-traded securities of the Company; market share; gross profits; earnings or losses (including earnings or losses before taxes, before interest and taxes, or before interest, taxes, depreciation and/or amortization); adjusted earnings or loss (including adjusted earnings or loss before taxes, before interest and taxes, or before interest, taxes, depreciation and/or amortization); economic value-added models or equivalent metrics; comparisons with various stock market indices; reductions in costs; cash flow or cash flow per share (before or after dividends); return on capital (including return on total capital or return on invested capital); cash flow return on investment; improvement in or attainment of expense levels or working capital levels, including cash, inventory and accounts receivable; operating margin; gross margin; year-end cash; cash margin; debt reduction; stockholders equity; operating efficiencies; market share; customer satisfaction; customer growth; employee satisfaction; supply chain achievements (including establishing relationships with manufacturers or suppliers of component materials and manufacturers of the Company’s products); points of distribution; gross or net store openings; co-development, co-marketing, profit sharing, joint venture or other similar arrangements; financial ratios, including those measuring liquidity, activity, profitability or leverage; cost of capital or assets under management; financing and other capital raising transactions (including sales of the Company’s equity or debt securities; factoring transactions; sales or licenses of the Company’s assets, including its intellectual property, whether in a particular jurisdiction or territory or globally; or through partnering transactions); implementation, completion or attainment of measurable objectives with respect to research, development, manufacturing, commercialization, products or projects, production volume levels, acquisitions and divestitures; and recruiting and maintaining personnel.

To the extent consistent with the requirements of Section 162(m) of the Code, the Compensation Committee may establish that, in the case of any award intended to qualify as exempt performance-based compensation under Section 162(m), that one or more of the performance criteria applicable to such award be adjusted in an objectively determinable manner to reflect events occurring during the performance period of such award that affect the applicable performance criteria.

Individual Limits . The following limits will apply to awards granted or, in the case of an other stock-based award, payable to any person in a calendar year under the amended and restated 2012 Plan: (i) stock options: 957 shares of our common stock; (ii) stock appreciation rights: 957 shares of our common stock; (iii) restricted stock: 601 shares of our common stock; (iv) unrestricted stock: 601 shares of our common stock; and (v) other stock-based awards: 601 shares of our common stock. In addition, in the case of a non-employee director, an additional limit applies such that the maximum grant-date fair value of awards granted under the amended and restated 2012 Plan in any fiscal year during any part of which the director is then eligible under the plan is $400,000.

Adjustments. In the event of a corporate event or transaction involving the company or its subsidiaries or affiliates, including a merger, consolidation, reorganization, recapitalization, stock split, combination of shares, extraordinary cash dividend or other like change in capital structure (other than normal cash dividends to stockholders), or any similar corporate event or transaction, the Compensation Committee, in order to prevent dilution or enlargement of participants’ rights under the amended and restated 2012 Plan, will substitute or adjust, in its sole discretion, the number and kind of shares or other property that may be issued under the amended and restated 2012 Plan or awards thereunder, the exercise prices, grant prices or purchase prices of

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awards thereunder, and other value determinations (including performance conditions) applicable to the amended and restated 2012 Plan or awards.

Change in Control. Upon the occurrence of a change of control, unless specifically prohibited by applicable law or regulation or as otherwise provided in an award agreement, the Compensation Committee will be authorized (but not obligated) to make adjustments in the terms and conditions of outstanding awards, including, but not limited to, continuing or assuming outstanding awards, substituting outstanding awards with equity, equity-based, or cash awards of the surviving entity with substantially the same terms, accelerating the exercisability, vesting and/or lapse of restrictions under outstanding awards, upon written notice, requiring the exercise of outstanding awards (to the extent exercisable) prior to the change in control, providing for the cancellation of all or any portion of outstanding awards for fair value and cancelling unvested or unexercisable awards for no consideration.

Recovery of Compensation . The Compensation Committee may cancel, rescind, withhold or otherwise limit or restrict any award at any time under the amended and restated 2012 Plan if a participant is not in compliance with the provisions of the plan, any award thereunder or if a participant breaches any agreement with our company with respect to non-competition, non-solicitation or confidentiality. The Compensation Committee also may recover any award or payments or gain in respect of any award under the amended and restated 2012 Plan in accordance with any applicable company recoupment policy or as otherwise required by applicable law or applicable stock-exchange listing standards.

Amendment and Termination . The Compensation Committee may amend the amended and restated 2012 Plan or outstanding awards, or terminate the amended and restated 2012 Plan, except that the consent of a participant will be required for any amendment to an award that adversely affects a participant’s rights under such award (unless necessary to comply with applicable law).

Executive Annual Incentive Plan

In connection with this offering, our board of directors adopted the Party City Holdco Inc. Executive Annual Incentive Plan (the “Annual Plan”). Upon completion of this offering, annual award opportunities for certain key employees, including our named executive officers, will be granted under the Annual Plan. The following summary describes the material terms of the Annual Plan. This summary is not a complete description of all provisions of the Annual Plan and is qualified in its entirety by reference to the Annual Plan, which is filed as an exhibit to the Registration Statement of which this prospectus is a part.

Administration. The Annual Plan is administered by the Compensation Committee.

Eligibility. Executive officers and other key employees of the Company and its affiliates will be selected from time to time by the Compensation Committee to participate in the Annual Plan.

Awards. Award opportunities under the Annual Plan will be granted by the Compensation Committee prior to, or within a specified period of time following the beginning of, the fiscal year of the Company (or other performance period selected by the Compensation Committee). The Compensation Committee will establish the performance criteria applicable to the award, the amount or amounts payable if the performance criteria are achieved, and such other terms as the Compensation Committee deems appropriate. The Annual Plan permits the grant of awards that are intended to qualify as exempt performance-based compensation under Section 162(m) of the Code, to the extent applicable, as well as awards that are not intended to so qualify.

Performance Criteria. Awards under the Annual Plan will be made based on, and subject to achieving, “performance criteria” established by the Compensation Committee. Performance criteria for awards intended to qualify as performance-based compensation for purposes of Section 162(m) of the Code are limited to the objectively determinable measures of performance relating to any or any combination of the following (measured either absolutely

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or by reference to an index or indices or the performance of one or more companies and determined either on a consolidated basis or, as the context permits, on a divisional, subsidiary, line of business, project or geographical basis or in combinations thereof): net sales; system-wide sales; comparable store sales; revenue; revenue growth or product revenue growth; operating income (before or after taxes); adjusted operating income; adjusted net income; adjusted earnings per share; channel revenue; channel revenue growth; franchising commitments; manufacturing profit; manufacturing profit margin; store closures; pre- or after-tax income or loss (before or after allocation of corporate overhead and bonus); earnings or loss per share; net income or loss (before or after taxes); return on equity; total stockholder return; return on assets or net assets; appreciation in and/or maintenance of the price of the shares or any other publicly-traded securities of the Company; market share; gross profits; earnings or losses (including earnings or losses before taxes, before interest and taxes, or before interest, taxes, depreciation and/or amortization); adjusted earnings or losses (including adjusted earnings or losses before taxes, before interest and taxes, or before interest, taxes, depreciation and/or amortization); economic value-added models or equivalent metrics; comparisons with various stock market indices; reductions in costs; cash flow or cash flow per share (before or after dividends); return on capital (including return on total capital or return on invested capital); cash flow return on investment; improvement in or attainment of expense levels or working capital levels, including cash, inventory and accounts receivable; operating margin; gross margin; year-end cash; cash margin; debt reduction; stockholders equity; operating efficiencies; market share; customer satisfaction; customer growth; employee satisfaction; supply chain achievements (including establishing relationships with manufacturers or suppliers of component materials and manufacturers of the Company’s products); points of distribution; gross or net store openings; co-development, co-marketing, profit sharing, joint venture or other similar arrangements; financial ratios, including those measuring liquidity, activity, profitability or leverage; cost of capital or assets under management; financing and other capital raising transactions (including sales of the Company’s equity or debt securities, factoring transactions, sales or licenses of the Company’s assets, including its intellectual property, whether in a particular jurisdiction or territory or globally, or through partnering transactions); implementation, completion or attainment of measurable objectives with respect to research, development, manufacturing, commercialization, products or projects, production volume levels, acquisitions and divestitures; and recruiting and maintaining personnel.

To the extent consistent with the requirements of Section 162(m) of the Code, the Compensation Committee may establish that, in the case of any award intended to qualify as exempt performance-based compensation under Section 162(m) of the Code, that one or more of the performance criteria applicable to such award be adjusted in an objectively determinable manner to reflect events occurring during the performance period of such award that affect the applicable performance criteria.

Payment. A participant will be entitled to payment under an award only if all conditions to payment have been satisfied under the award. Following the close of the performance period, the Compensation Committee will determine (and, to the extent required by Section 162(m) of the Code, certify) as to whether and to what extent the applicable performance criteria have been satisfied. The Compensation Committee will then determine the actual payment, if any, under each award.

Payment Limits. The maximum payment to any participant under the Annual Plan for any fiscal year will in no event exceed $5 million.

Recovery of Compensation . Awards under the Annual Plan will be subject to forfeiture, termination and rescission, and a participant who receives a payment pursuant to the Annual Plan will be obligated to return such payment to us, to the extent provided by the Compensation Committee in connection with a breach by the participant of an award agreement under the plan or any non-competition, non-solicitation, confidentiality or similar covenant or agreement with the Company or otherwise in accordance with any applicable Company recoupment policy, or as otherwise required by law or applicable stock exchange listing standards.

Amendment and Termination. The Compensation Committee may amend or terminate the Annual Plan at any time, provided that any amendment will be approved by the Company’s stockholders if required by Section 162(m) of the Code.

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2015 Annual Cash Incentive Plan

Our named executive officers are each entitled to participate in our annual cash incentive plan for our 2015 fiscal year. The terms of our annual cash incentive plan for our 2015 fiscal year, as they apply to our named executive officers, are the same as the terms that applied for our 2014 fiscal year, as described above under “—Executive compensation—Components of Compensation—Annual Cash Incentive Plan.” Seventy-five percent (75%) of each named executive officer’s target bonus for our 2015 fiscal year will be determined based on the achievement of pre-established Adjusted EBITDA goals and the remaining twenty-five percent (25%) of each named executive officer’s target annual bonus will be determined by the Compensation Committee on a subjective basis, as described above. The target annual bonus as a percentage of annual base salary for each of our named executive officers will be 80% for Mr. Rittenberg and Mr. Harrison, 75% for Mr. Melnick and 50% for Mr. Correale.

Director Compensation for 2014

Annual Compensation

Directors who are also our employees, or are representatives of our Sponsors, receive no additional compensation for serving as a director. In 2014, there were two non-Sponsor directors on our board of directors: Norman S. Matthews and Lawrence P. Molloy.

In 2014, we paid the non-Sponsor directors an annual retainer fee of $50,000.

The following table further summarizes the compensation paid to our directors for the year ended December 31, 2014.


Name	Fees Earned or Paid in Cash		Total (1)
Norman S. Matthews	$	50,000	$	50,000
Lawrence P. Molloy		50,000		50,000
Todd M. Abbrecht		—		—
Jefferson M. Case		—		—
Steven J. Collins		—		—
Uttam K. Jain		—		—
Joshua M. Nelson		—		—

(1)	As of December 31, 2014, Mr. Matthews held options with respect to two shares of our common stock and no stock awards. None of our other directors held any options with respect to our common stock or stock awards.

On March 25, 2015, our board of directors approved a new non-employee director compensation program, which will replace our current non-employee director compensation arrangements effective upon the completion of this offering. Under the new non-employee director compensation program, each member of our board of directors who is not an employee and who is not affiliated with our Sponsors will be eligible to receive an annual cash retainer payment of $70,000, payable in arrears on a quarterly basis, and an annual grant of stock options with an aggregate exercise price of $70,000. The annual grant of stock options will vest in full on the earliest of the first anniversary of the date of grant, the termination of the director’s service due to his or her death or a change in control, subject, in each case, to the director’s continued service as a member of the board of directors of the Company through the vesting date. In addition, under the new program, eligible directors will receive the following additional cash payments on an annual basis for service on the committees of our board of directors, payable in arrears on a quarterly basis: audit committee chair – $15,000; compensation committee chair – $10,000; and nominating and governance committee chair – $10,000.

Compensation Committee Interlocks and Insider Participation

The members of the Compensation Committee who served during 2014 are set forth under “—Compensation Committee.” There were no interlocks or insider participation between any member of the Board of Directors or Compensation Committee and any member of the board of directors or compensation committee of any other company, nor has any interlocking relationship existed in the past.

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PRINCIPAL STOCKHOLDERS

The following table sets forth certain information with respect to the beneficial ownership of our common stock at February 28, 2015 for:

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each person whom we know beneficially owns more than five percent of our common stock;

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each of our directors;

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each of our named executive officers; and

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all of our directors and executive officers as a group.

The number of shares beneficially owned by each stockholder is determined under rules issued by the SEC and includes voting or investment power with respect to securities. Under these rules, beneficial ownership includes any shares as to which the individual or entity has sole or shared voting power or investment power. Each of the stockholders listed has sole voting and investment power with respect to the shares beneficially owned by the stockholder unless noted otherwise, subject to community property laws where applicable.

Shares of common stock that may be acquired within 60 days following February 28, 2015 pursuant to the exercise of options are deemed to be outstanding for the purpose of computing the percentage ownership of such holder but are not deemed to be outstanding for computing the percentage ownership of any other person shown in the table. Beneficial ownership representing less than one percent is denoted with an “*.”

Unless otherwise indicated, the address for each of the stockholders in the table below is c/o Party City Holdco Inc., 80 Grasslands Road, Elmsford, New York 10523.


Name of Beneficial Owner	Number of Shares of Common Stock Beneficially Owned		Percentage of Class Outstanding Prior to the Offering			Percentage of Class Outstanding After the Offering+
Funds managed by Advent International Corporation (1)		8,000.00		23.81	%
Funds affiliated with Thomas H. Lee Partners, L.P. (2)		23,270.70		69.25	%
Todd M. Abbrecht (3)		23,270.70		69.25	%
Jefferson M. Case (4)		8,000.00		23.81	%
Steven J. Collins (4)		8,000.00		23.81	%
Michael A. Correale (5)		34.56		*
James M. Harrison (6)		253.85		*
Uttam K. Jain (3)		23,270.70		69.25	%
Norman S. Matthews (7)		30.40		*
Gregg A. Melnick (8)		109.76		*
Lawrence P. Molloy		—		—
Joshua M. Nelson (3)		23,270.70		69.25	%
Gerald C. Rittenberg (9)		279.95		*
All directors and executive officers as a group (11 persons)		31,979.22		94.93	%

*	Represents beneficial ownership of less than 1%.

+	Assumes the exercise of the underwriters’ option to purchase additional shares in full.

(1)

Funds managed by Advent International Corporation own 100% of Advent Party City Acquisition L.P., which in turn owns shares of our common stock. With respect to the shares held by funds managed by Advent International Corporation, a group of individuals currently composed of David M. Mussafer, Steven M. Tadler and David M. McKenna, none of whom have individual voting or investment power, exercise voting and investment power over the shares beneficially owned by the funds managed by Advent International Corporation. Each of Mr. Mussafer, Mr. Tadler and Mr. McKenna disclaims beneficial ownership of the shares held by funds managed by Advent International Corporation, except to the extent of their respective pecuniary interest therein. The address of Advent International Corporation is 75 State Street, Boston, MA 02109.

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(2)

Funds affiliated with Thomas H. Lee Partners, L.P. (the “THL Funds”) own 100% of THL PC Topco, L.P., which in turn owns shares of our common stock. Voting and investment determinations with respect to the securities held by the THL Funds are made by a management committee consisting of Anthony J. DiNovi and Scott M. Sperling, and as such Messrs. DiNovi and Sperling may be deemed to share beneficial ownership of the securities held or controlled by the THL Funds. Each of Messrs. DiNovi and Sperling disclaims beneficial ownership of such securities. The address of each of Messrs. DiNovi and Sperling is c/o Thomas H. Lee Partners, L.P., 100 Federal Street, Boston, Massachusetts 02110.

(3)

Mr. Abbrecht and Mr. Nelson are managing directors of THL and Mr. Jain is a vice president of THL. Mr. Abbrecht, Mr. Jain and Mr. Nelson each disclaim beneficial ownership of the securities held or controlled by the THL Funds. Their addresses are c/o Thomas H. Lee Partners, L.P., 100 Federal Street, Boston, MA 02110.

(4)	Mr. Case and Mr. Collins each disclaim beneficial ownership of the shares held by the funds managed by Advent International Corporation, except to the extent of their respective pecuniary interest therein. Their addresses are c/o Advent International Corporation, 75 State Street, Boston, MA 02109.

(5)	Includes 10.00 shares which could be acquired by Mr. Correale within 60 days upon exercise of options.

(6)	Includes 227.85 shares held by a limited liability company and a trust and 26.00 shares which could be acquired by Mr. Harrison within 60 days upon exercise of options.

(7)	Includes 0.4 shares which could be acquired by Mr. Matthews within 60 days upon exercise of options.

(8)	Includes 77.76 shares held by a trust and 16.00 shares which could be acquired by Mr. Melnick within 60 days upon exercise of options.

(9)	Includes 251.95 shares held indirectly in a limited liability company and a trust and 28.00 shares which could be acquired by Mr. Rittenberg within 60 days upon exercise of options.

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CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

Related Person Transactions Policy

In accordance with the charter of our Audit Committee, which will become effective upon the closing of this offering, and our policy with respect to related person transactions, which our board of directors (acting through our Audit Committee) will adopt prior to the closing of this offering, our Audit Committee will be responsible for reviewing and approving related person transactions.

The policy with respect to related person transactions will apply to transactions, arrangements and relationships (or any series of similar transactions, arrangements or relationships) where the aggregate amount involved will or may be expected to exceed $120,000 in any calendar year, and where we (or our subsidiaries) are a participant and in which a related person has or will have a direct or indirect material interest. A related person is: (1) any person who is, or at any time since the beginning of our fiscal year was, a director or executive officer of the company, or a nominee for director or executive officer of the company; (2) any person who is known to be the beneficial owner of more than 5% of any class of our voting securities; (3) any immediate family member of the foregoing persons and (4) any firm, corporation or other entity in which any of the foregoing persons has a position or relationship, or in which such person, together with his or her immediate family members, has a 10% or greater beneficial ownership.

In the course of its review and approval of related person transactions, our Audit Committee will consider the relevant facts and circumstances to decide whether to approve such transactions. In particular, our policy with respect to related person transactions will require our Audit Committee to consider, among other factors it deems appropriate:

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the benefits to the Company;

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the impact on a director’s independence in the event the related person is a director, an immediate family member of a director or an entity in which a director has a position or relationship;

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the availability of other sources for comparable products or services;

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the terms of the transaction; and

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the terms available to unrelated third parties or to employees generally.

The Audit Committee may only approve those transactions that are in, or are not inconsistent with, our best interests and those of our stockholders, as the Audit Committee determines in good faith.

Agreements with Management

We have previously entered into employment agreements with certain of our executive officers. See “Executive Compensation—Employment Agreements.”

Management Agreement

As a result of the Acquisition, on July 27, 2012, funds affiliated with THL, Advent and other investors acquired a majority stake in the Company. In conjunction with the Acquisition, funds affiliated with Advent maintained a minority interest in the Company. At the time of the Acquisition the Company entered into a management agreement with THL and Advent, under which THL and Advent will provide advice to the Company on, among other things, financing, operations, acquisitions and dispositions. Under the agreement, THL and Advent are paid, in aggregate, an annual management fee in the amount of the greater of $3.0 million or 1.0% of Adjusted EBITDA, as defined in the Company’s debt agreements (see Selected Consolidated Financial Data for further details). THL and Advent received management fees in the amounts of $2.5 million and $0.9 million, respectively, during 2014, $2.2 million and $0.8 million, respectively, during 2013 and $1.0 million and $0.3 million, respectively, during the period from July 28, 2012 to December 31, 2012. Additionally, at the time

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of the Acquisition, the Company paid THL and Advent a non-recurring $20.0 million fee for certain services that were performed in conjunction with the consummation of the Acquisition. The amount was recorded in other expense net in the Company’s consolidated statement of operations and comprehensive loss for the period from July 28, 2012 to December 31, 2012. Additionally, as long as THL and Advent receive annual management fees, they will advise the Company in connection with financing, acquisition and disposition transactions and the Company will pay a fee for services rendered in connection with financing, acquisition and disposition transactions in an amount up to 1% of the gross transaction value. The management agreement expires on its tenth anniversary. In the case of an initial public offering or a change in control, as defined in the Company’s Stockholders Agreement, at the time of such event the Company must pay THL and Advent the net present value of the remaining annual management fees that are payable over the agreement’s ten year term. Upon consummation of this offering, the management agreement will terminate and the Company will pay a termination fee of approximately $ to the Sponsors.

Prior to the Acquisition, the Company had a management agreement with two of its former owners, Berkshire Partners LLC (“Berkshire Partners”) and Weston Presidio Capital (“Weston Presidio”), pursuant to which they were paid an annual management fee in the aggregate amount of $1.3 million. Berkshire Partners received management fees of $0.5 million during the period from January 1, 2012 to July 27, 2012. Weston Presidio received management fees of $0.2 million during the period from January 1, 2012 to July 27, 2012. On August 19, 2008, Berkshire Partners and Weston Presidio entered into an agreement with Advent pursuant to which Advent would provide consulting and management advisory services to the Company and would receive, in return, a portion of the management fees due to Berkshire Partners and Weston Presidio under their management agreement. Under this agreement, Advent received management fees of $0.3 million during the period from January 1, 2012 to July 27, 2012.

Stockholders Agreement

In connection with the Acquisition, the Company, the Sponsors, American Greetings and certain members of management entered into a stockholders agreement (the “Stockholders Agreement”). The Stockholders Agreement contains provisions related to the election of directors, governance, stock transfer restrictions, customary drag-along rights and customary tag-along rights and preemptive rights. The terms of the Stockholders Agreement terminate, subject to certain limited exceptions, upon the earlier of (i) an initial public offering of the Company or any subsidiary of the Company, (ii) consummation of a Change of Control Transaction (as defined in the Stockholders Agreement) and (iii) the mutual written consent of the Company, the Sponsors, American Greetings and a majority in interest of members of senior management party to the Stockholders Agreement.

In connection with this offering, we intend to enter into an amended and restated stockholders agreement with the Sponsors and certain members of management pursuant to which we will be required to take all necessary action to cause the board of directors to include individuals designated by the Sponsors in the slate of nominees recommended by the board of directors for election by our stockholders. These nomination rights are described in this prospectus in the sections titled “Management—Composition of our Board of Directors.” Our amended and restated stockholders agreement also provides that we will obtain customary director indemnity insurance and enter into indemnification agreements with the Sponsors’ director designees, and we expect to enter into indemnification agreements with each of our directors generally providing for indemnification in connection with their service to us or on our behalf.

Registration Rights Agreement

In connection with this offering, we intend to enter into an amended and restated registration rights agreement with the Sponsors and certain members of management pursuant to which the Sponsors will be provided with demand registration rights in respect of any shares of common stock it holds, subject to certain conditions. In addition, in the event that we register additional shares of common stock for sale to the public following the completion of this offering, we will be required to give notice of such registration to the parties

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thereto, and, subject to certain limitations, include shares of common stock held by them in such registration. Members of management party to the amended and restated registration rights agreement will have similar piggyback rights in the event we register shares of common stock held by the Sponsors for sale to the public following the completion of this offering. The agreement includes customary indemnification provisions in favor of the Sponsors and members of management, any person who is or might be deemed a control person (within the meaning of the Securities Act and the Exchange Act) and related parties against certain losses and liabilities (including reasonable costs of investigation and legal expenses) arising out of or based upon any filing or other disclosure made by us under the securities laws relating to any such registration.

Spin-off Transaction

Immediately prior to the consummation of this offering, the Company will effect a spin-off of its interest in a subsidiary, Retail Force, Inc. (“Retail Force”), to which the Company will transfer software code and other assets related to an enterprise management tool for monitoring retail store metrics. All of the interests in Retail Force will be held on a pro rata basis by the holders of the Company’s common stock of record immediately prior the closing of this offering. As a result, new stockholders in this offering will not have an interest in Retail Force. The assets that will be transferred to Retail Force have been valued at $280,000.

In connection with the spin-off, the Company will receive a perpetual license to use the enterprise management software as well as five years of support services from Retail Force. In consideration for the license and support services, during such five-year term, the Company will pay Retail Force a $250,000 annual license fee, will indemnify Retail Force for certain contingent liabilities, and will reimburse Retail Force for expenses incurred in connection with the development and maintenance of any software modifications requested by the Company. The value of such reimbursement for modifications will be capped at $250,000 per year during the five-year support term. In addition, the Company will provide Retail Force with all necessary management services in exchange for a $200,000 annual management fee. Our board of directors has determined that the fair market value of the license, support services, and software modifications the Company currently expects to receive from Retail Force equals the anticipated value of the Company’s annual license fee, indemnity, and modification expense reimbursement to Retail Force during the five year support term.

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DESCRIPTION OF CAPITAL STOCK

The following is a description of the material terms of our amended and restated certificate of incorporation and our amended and restated bylaws, which we refer to as our bylaws, as each is anticipated to be in effect upon the closing of this offering.

General

Upon completion of this offering, we have authority to issue up to: (i) shares of common stock, par value $0.01 per share; and (ii) shares of preferred stock, par value $0.01 per share. As of December 31, 2014, we had 33,605.91 shares of common stock outstanding held by 79 shareholders of record and no shares of preferred stock outstanding.

Common Stock

Holders of our common stock are entitled to one vote for each share held on all matters submitted to a vote of stockholders and do not have cumulative voting rights. An election of directors by our stockholders shall be determined by a plurality of the votes cast by the stockholders entitled to vote on the election. Holders of common stock are entitled to receive proportionately any dividends as may be declared by our board of directors, subject to any preferential dividend rights of any series of preferred stock that is outstanding at the time of the dividend.

In the event of our liquidation or dissolution, the holders of common stock are entitled to receive proportionately our net assets available for distribution to stockholders after payment of all debts and other liabilities, subject to the prior rights of any outstanding preferred stock.

The rights, preferences and privileges of holders of common stock are subject to the rights of the holders of shares of any series of preferred stock that we may designate and issue in the future.

Preferred Stock

Under our amended and restated certificate of incorporation, our board of directors has the authority, without further action by our stockholders, except as described below, to issue up to shares of preferred stock in one or more series and to fix the voting powers, designations, preferences and the relative participating, optional or other special rights and qualifications, limitations and restrictions of each series, including dividend rights, conversion rights, voting rights, terms of redemption, liquidation preferences and the number of shares constituting any series. Upon completion of the offering, no shares of our authorized preferred stock will be outstanding. Because the board of directors has the power to establish the preferences and rights of the shares of any additional series of preferred stock, it may afford holders of any preferred stock preferences, powers and rights, including voting and dividend rights, senior to the rights of the holders of the common stock, which could adversely affect the holders of the common stock and could discourage a takeover of us even if a change of control of our company would be beneficial to the interests of our stockholders.

Anti-takeover Effects of the DGCL and our Amended and Restated Certificate of Incorporation and Bylaws

Our amended and restated certificate of incorporation or our bylaws contain provisions that may delay, defer or discourage another party from acquiring control of us. We expect that these provisions, which are summarized below, will discourage coercive takeover practices or inadequate takeover bids. These provisions are also designed to encourage persons seeking to acquire control of us to first negotiate with the board of directors, which we believe may result in an improvement of the terms of any such acquisition in favor of our stockholders. However, they also give the board of directors the power to discourage acquisitions that some stockholders may favor.

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Classified Board of Directors

Our board of directors is divided into three classes, Class I, Class II and Class III, with members of each class serving staggered three-year terms. Our amended and restated certificate of incorporation provides that the authorized number of directors may be changed only by resolution of the board of directors. Any additional directorships resulting from an increase in the number of directors will be distributed among the three classes so that, as nearly as possible, each class will consist of one-third of the directors. Our amended and restated certificate of incorporation and our bylaws also provide that, prior to the date on which the Sponsors own less than 50% of our outstanding common stock, a director may be removed with or without cause by the affirmative vote of the holders of a majority of the voting power of our outstanding shares of capital stock entitled to vote generally in the election of directors, voting together as a single class. At and following the date on which the Sponsors own less than 50% of our outstanding common stock a director may be removed only for cause by the affirmative vote of the holders of at least 75% of the voting power of our outstanding shares of capital stock entitled to vote generally in the election of directors, voting together as a single class. Any vacancy on our board of directors, including a vacancy resulting from an enlargement of our board of directors, may be filled only by vote of a majority of our directors then in office. Our classified board of directors could have the effect of delaying or discouraging an acquisition of us or a change in our management.

Action by Written Consent

The DGCL provides that, unless otherwise stated in a corporation’s certificate of incorporation, the stockholders may act by written consent without a meeting. Our certificate of incorporation provides that after the Sponsors collectively own less than 50% of our outstanding common stock, any action required or permitted to be taken by our stockholders at an annual meeting or special meeting of the stockholders may only be taken at an annual or special meeting before which it is properly brought, and not by written consent without a meeting. As a result, THL and Advent will be able to act by written consent so long as they collectively own at least 50% of our outstanding common stock.

Special Meeting of Stockholders and Advance Notice Requirements for Stockholder Proposals

Our amended and restated certificate of incorporation and bylaws provide that, except as otherwise required by law, special meetings of the stockholders can only be called by (a) our chairman or vice chairman of the board of directors or (b) the board of directors through a special resolution.

In addition, our bylaws require advance notice procedures for stockholder proposals to be brought before an annual meeting of the stockholders, including the nomination of directors. Stockholders at an annual meeting may only consider the proposals specified in the notice of meeting or brought before the meeting by or at the direction of the board of directors or any committee thereof, or by a stockholder of record on the record date for the meeting, who is entitled to vote at the meeting and who has delivered a timely written notice in proper form to our secretary, of the stockholder’s intention to bring such business before the meeting.

These provisions could have the effect of delaying until the next stockholder meeting any stockholder actions, even if they are favored by the holders of a majority of our outstanding voting securities.

Amendment to Amended and Restated Certificate of Incorporation and Bylaws

The DGCL provides generally that the affirmative vote of a majority of the outstanding stock entitled to vote on amendments to a corporation’s certificate of incorporation or bylaws is required to approve such amendment, unless a corporation’s certificate of incorporation or bylaws, as the case may be, requires a greater percentage. Our bylaws may be amended or repealed by a majority vote of our board of directors or, in addition to any other vote otherwise required by law, prior to the date on which the Sponsors own less than 50% of our outstanding common stock, by the holders of a majority of the voting power of our outstanding shares of capital

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stock entitled to vote, which such majority must include at least two-thirds of the shares then held by the Sponsors. At and following the date on which the Sponsors own less than 50% of our outstanding common stock, the affirmative vote of at least two-thirds of the voting power of the outstanding shares of capital stock entitled to vote shall be required to award or repeal our bylaws. Additionally, the affirmative vote of at least two-thirds of the voting power of the outstanding shares of capital stock entitled to vote on the adoption, alteration, amendment or repeal of our amended and restated certificate of incorporation, voting as a single class, is required to amend or repeal or to adopt any provision inconsistent with the “Classified Board of Directors,” “Action by Written Consent,” “Special Meetings of Stockholders,” “Amendments to Certificate of Incorporation and Bylaws” and “Business Combinations” provisions described in our amended and restated certificate of incorporation; provided, however, that so long as the Sponsors collectively beneficially own (directly or indirectly) more than 50% of the outstanding shares of our common stock, such alteration, amendment, repeal or adoption will be approved by, in addition to any other vote otherwise required by law, the affirmative vote of the holders of a majority of the voting power of the outstanding shares of capital stock entitled to vote. These provisions may have the effect of deferring, delaying or discouraging the removal of any anti-takeover defenses provided for in our amended and restated certificate of incorporation and our bylaws.

Renouncement of Corporate Opportunity

Our amended and restated certificate of incorporation provides that we renounce any interest or expectancy in, or in being offered an opportunity to participate in, any business opportunity that may from time to time be presented to Exempted Persons and that may be a business opportunity for such Exempted Person, even if the opportunity is one that we might reasonably have pursued or had the ability or desire to pursue if granted the opportunity to do so. No such Exempted Person will be liable to us for breach of any fiduciary or other duty, as a director or officer or otherwise, by reason of the fact that such person, acting in good faith, pursues or acquires any such business opportunity, directs any such business opportunity to another person or fails to present any such business opportunity, or information regarding any such business opportunity, to us. None of the Exempted Persons or their representatives has any duty to refrain from engaging directly or indirectly in the same or similar business activities or lines of business as us or any of our subsidiaries. In addition, the affirmative vote of 80% of the voting power of the outstanding shares of capital stock entitled to vote on the adoption, alteration, amendment or repeal of our amended and restated certificate of incorporation, voting together as a single class, shall be required to alter, amend or repeal, or to adopt any provision inconsistent with provisions related to the “Renouncement of Corporate Opportunity.”

Business Combinations

We have opted out of Section 203 of the DGCL. However, our amended and restated certificate of incorporation contains similar provisions providing that we may not engage in certain “business combinations” with any “interested stockholder” for a three-year period following the time that the stockholder became an interested stockholder, unless:

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prior to such time, our board of directors approved either the business combination or the transaction which resulted in the stockholder becoming an interested stockholder;

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upon consummation of the transaction that resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of our voting stock outstanding at the time the transaction commenced, excluding certain shares; or

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at or subsequent to that time, the business combination is approved by our board of directors and by the affirmative vote of holders of at least 66 ² ⁄ ₃ % of the outstanding voting stock that is not owned by the interested stockholder.

Generally, a “business combination” includes a merger, asset or stock sale or other transaction resulting in a financial benefit to the interested stockholder. Subject to certain exceptions, an “interested stockholder” is a person who, together with that person’s affiliates and associates, owns, or within the previous three years owned, 15% or more of our voting stock.

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Under certain circumstances, this provision will make it more difficult for a person who would be an “interested stockholder” to effect various business combinations with a corporation for a three-year period. This provision may encourage companies interested in acquiring our company to negotiate in advance with our board of directors because the stockholder approval requirement would be avoided if our board of directors approves either the business combination or the transaction which results in the stockholder becoming an interested stockholder. These provisions also may have the effect of preventing changes in our board of directors and may make it more difficult to accomplish transactions which stockholders may otherwise deem to be in their best interests.

Our amended and restated certificate of incorporation provides that the Sponsors, their respective affiliates and associates, and any of their respective direct or indirect transferees of at least 5% of our outstanding common stock and any group as to which such persons are party to, do not constitute “interested stockholders” for purposes of this provision.

Exclusive Jurisdiction for Certain Actions

Our amended and restated certificate of incorporation requires, to the fullest extent permitted by law, that derivative actions brought in the name of the Company, actions against directors, officers and employees for breach of a fiduciary duty and other similar actions, may be brought only in specified courts in the State of Delaware. Although we believe this provision benefits us by providing increased consistency in the application of Delaware law in the types of lawsuits to which it applies, the provision may have the effect of discouraging lawsuits against our directors and officers. See “Risk Factors—Our amended and restated certificate of incorporation designates courts in the State of Delaware as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees.”

Transfer Agent and Registrar

The transfer agent and registrar for our common stock is Computershare Trust Company, N.A.

Listing

We intend to apply to list our shares of common stock on the NYSE under the symbol “PRTY.”

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DESCRIPTION OF CERTAIN DEBT

Senior Credit Facilities

In connection with the Acquisition our wholly-owned subsidiaries, PCHI and Holdings, and certain of their subsidiaries entered into a $400.0 million senior secured asset-based revolving credit facility (the “ABL Facility”), which included a $50.0 million letter of credit and a $40.0 million swingline loan facility and a $1,125.0 million senior secured term loan facility (the “Term Loan Facility,” and collectively with the ABL Facility, the “Senior Credit Facilities”), with Deutsche Bank Trust Company Americas, as administrative agent, and certain financial institutions as lenders. Deutsche Bank Securities Inc., Merrill Lynch, Pierce, Fenner & Smith Incorporated, Barclays Bank PLC, Goldman Sachs Lending Partners LLC, and Morgan Stanley Senior Funding, Inc. acted as joint lead arrangers and joint bookrunners for the Senior Credit Facilities.

On February 19, 2013, the credit agreement governing the Term Loan Facility was amended to reduce the interest rate margin applicable to borrowing under the Term Loan Facility by 1.25%. Additionally, on February 27, 2014, the agreement was amended again to reduce the interest rate margin by an additional 0.25%.

General

The credit agreement governing the ABL Facility (the “ABL Facility”) provides that PCHI may request up to $125.0 million in increased commitments under the ABL Facility subject to certain conditions. In addition, the credit agreement governing the Term Loan Facility (the “Term Loan Facility”) provides that PCHI may request increases to the Term Loan Facility and/or add one or more incremental revolving facilities or term loan facilities in an aggregate principal amount not to exceed (x) $250.0 million, plus (y) in the case of any incremental facilities that serve to effectively extend the maturity of the Term Loan Facility and/or any incremental revolving facilities, an amount equal to the reductions in the Term Loan Facility and/or such incremental revolving facilities to be replaced thereby plus (z) an unlimited amount, subject to compliance on a pro forma basis with a senior secured leverage ratio of no greater than 4.00:1.00. The interest rate for any such incremental facility under the Term Loan Facility will be determined in accordance with a calculation set forth in the Term Loan Facility. The existing lenders under the Senior Credit Facilities will not be under any obligation to provide such additional commitments, and any increase in commitments is subject to customary conditions precedent.

Availability under the ABL Facility is limited to the line cap, which is calculated as the lesser of (a) the aggregate revolving commitments and (b) the then applicable borrowing base (the “Line Cap”). The borrowing base shall equal the sum of the following:

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90% of eligible trade receivables, plus

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90% of eligible credit card receivables, plus

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90% of the net orderly liquidation value of eligible inventory and eligible in-transit inventory (not to exceed $20.0 million), minus

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any reserves established by the administrative agent for the ABL Facility in its permitted discretion.

Interest Rate and Fees

Borrowings under the Senior Credit Facilities bear interest at a rate per annum equal to an applicable margin, plus , at PCHI’s option, either (a) a base rate (which in the case of the Term Loan Facility only, shall be no less than 2.00% (2.25% prior to the amendments)) determined by the reference to the highest of (1) the prime commercial lending rate publicly announced by the administrative agent as the “prime rate” as in effect on such day, (2) the federal funds effective rate plus 0.50%, and (3) the LIBOR rate determined by reference to the cost of funds for Eurodollar deposits for an interest period of one month, plus 1.00% or (b) a LIBOR rate (which in the case of the Term Loan Facility only, shall be no less than 1.00% (1.25% prior to the amendments)) determined by reference to the costs of funds for Eurodollar deposits for the specified interest period, as adjusted for certain statutory reserve requirements. The applicable margin for borrowings under the ABL Facility ranges

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from 0.5% to 1.00% with respect to base rate borrowings and from 1.50% to 2.00% with respect to LIBOR borrowings, based on excess availability under the Line Cap. The applicable margin as of December 31, 2014 was 0.75% for base rate loans and 1.75% for loans based on the LIBOR rate. The applicable margin for borrowings under the Term Loan Facility is 2.00% (3.50% prior to the amendments) with respect to base rate borrowings and 3.00% (4.50% prior to the amendments) with respect to LIBOR borrowings.

A commitment fee will be charged on the average daily unused portion of the ABL Facility of 0.25% per annum if average utilization under the ABL Facility is greater than or equal to 50.0% or 0.375% if average utilization under the ABL Facility is less than 50.0%. A letter of credit fee will accrue on the aggregate face amount of outstanding letters of credit under the ABL Facility equal to the interest rate margin for LIBOR loans. In addition, a fronting fee will be charged on the aggregate face amount of outstanding letters of credit equal to 0.125% per annum.

Mandatory Prepayments

The Term Loan Facility requires PCHI to prepay, subject to certain exceptions, outstanding term loans with:

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100% of net cash proceeds of any incurrence of debt, other than the net cash proceeds of debt permitted under the Term Loan Facility;

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100% of net cash proceeds above a threshold amount of certain asset sales, subject to reinvestment rights and certain other exceptions; and

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50% (subject to step-downs to 25% and 0% based upon the senior secured leverage ratio) of our annual excess cash flow.

The ABL Facility requires PCHI to prepay outstanding loans and cash collateralize, “backstop” or replace outstanding letters of credit if at any time the aggregate amount of outstanding loans, unreimbursed letter of credit drawings and outstanding letters of credit under the ABL Facility exceeds the Line Cap, in an aggregate amount equal to such excess.

Optional Prepayments

PCHI may voluntarily reduce the unutilized portion of the commitment amount and repay outstanding loans under the Senior Credit Facilities at any time without premium or penalty other than customary “breakage” costs with respect to LIBOR borrowings.

Amortization and Final Maturity

There is no scheduled amortization under the ABL Facility. The ABL Facility has a maturity date of July 27, 2017. The term loans under the Term Loan Facility mature on July 27, 2019. PCHI is required to repay installments on the term loans in quarterly principal amounts of 0.25%, with the remaining amount payable on the maturity date.

Guarantees and Security

All obligations under the Senior Credit Facilities are unconditionally guaranteed by Holdings and certain of PCHI’s existing and future direct and indirect wholly-owned domestic subsidiaries. All obligations under the Senior Credit Facilities, and the guarantees of those obligations, are secured, subject to certain exceptions, by substantially all of PCHI’s assets and the assets of the guarantors, including:

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A first-priority or second-priority pledge, as applicable, of all of PCHI’s capital stock directly held by Holdings and a first-priority or second-priority pledge, as applicable, of all of the capital stock directly held by PCHI and its subsidiary guarantors (which pledge, in the case of the capital stock of any foreign subsidiary or any “disregarded” domestic subsidiary, will be limited to 65% of the stock of such subsidiary); and

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A first-priority or second-priority security interest, as applicable, in substantially all of PCHI’s and the guarantors’ tangible and intangible assets, including certain deposit accounts.

Certain Covenants and Events of Default

The Senior Credit Facilities contain a number of restrictive covenants that, among other things and subject to certain exceptions, restrict PCHI’s ability and the ability of its subsidiaries to:

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incur additional indebtedness;

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pay dividends on our capital stock or redeem, repurchase or retire our capital stock;

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make investments, acquisitions, loans and advances;

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create negative pledge or restrictions on the payment of dividends or payment of other amounts owed to us from our subsidiaries;

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engage in transactions with our affiliates;

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sell, transfer or otherwise dispose of our assets, including capital stock of our subsidiaries;

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materially alter the business we conduct;

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modify certain material documents;

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change our fiscal year;

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consolidate, merge, liquidate or dissolve;

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incur liens; and

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make prepayments of subordinated or junior debt or the notes.

Holdings is subject to a “passive holding company” covenant under the Senior Credit Facilities.

In addition, upon the occurrence of an event of default or excess availability being less than the greater of 10.0% of the Line Cap and $30.0 million, we will be subject to a fixed charge coverage ratio test of at least 1.0 to 1.0 until the first period of 30 consecutive days, at all times during which no event of default has existed and excess availability for each day has been in excess of such limit.

The Senior Credit Facilities also contain certain customary representations and warranties, affirmative covenants and reporting obligations. In addition, the lenders under the Senior Credit Facilities will be permitted to accelerate the loans and terminate commitments thereunder or exercise other specified remedies available to secured creditors upon the occurrence of certain events of default, subject to certain grace periods and exceptions, which will include, among others, payment defaults, breaches of representations and warranties, covenant defaults, cross-defaults to certain material indebtedness, certain events of bankruptcy, certain events under the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), material judgments and changes of control.

Senior Notes

General

In July 2012, PCHI, our wholly-owned indirect subsidiary, issued $700.0 million aggregate principal amount of 8.875% senior notes due 2020 under an indenture dated July 27, 2012, as amended or supplemented from time to time. The senior notes are guaranteed, jointly and severally, on an unsecured senior basis by each of its existing and future domestic wholly-owned domestic subsidiaries, subject to certain exceptions.

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Covenants

The indenture governing the senior notes contains certain covenants limiting, among other things and subject to certain exceptions, PCHI’s ability and the ability of its restricted subsidiaries to:

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incur additional indebtedness or issue preferred stock;

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pay dividends or distributions on capital stock or redeem, repurchase or retire its capital stock or the capital stock of any restricted subsidiary or make payments on, or redeem, repurchase or retire any indebtedness subordinated to the senior notes;

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make certain investments, loans, advances and acquisitions;

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enter into sale and leaseback transactions;

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engage in transactions with affiliates;

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create liens;

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guarantee debt;

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create restrictions on the payment of dividends or other amounts to PCHI from its restricted subsidiaries;

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consolidate, merge or transfer all or substantially all of PCHI’s assets and the assets of its subsidiaries; and

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engage in unrelated businesses.

The indenture governing the senior notes also contains certain customary affirmative covenants and events of default, including a cross-payment default provision and cross-acceleration provision in the case of a payment default or acceleration according to the terms of any indebtedness with an aggregate principal amount of $50 million or more.

Prepayments

Prior to August 1, 2015, PCHI may redeem the outstanding senior notes, in whole or in part, at a redemption price equal to 100.0% of the principal amount of the senior notes redeemed plus accrued and unpaid interest, if any, to, but not including, the redemption date, and a “make-whole premium.” PCHI may redeem up to 40% of the aggregate principal amount of the senior notes on or before August 1, 2015 with the net cash proceeds from one or more equity offerings at a redemption price of 108.875% of the principal amount plus accrued and unpaid interest, if any, to, but not including, the redemption date.

On or after August 1, 2015, PCHI may redeem the senior notes, in whole or in part, at the following (expressed as a percentage of the principal amount to be redeemed) plus accrued and unpaid interest thereon:


Twelve-month period beginning on August 1,	Percentage
2015		106.656	%
2016		104.438	%
2017		102.219	%
2018 and thereafter		100.000	%

If PCHI experiences certain types of change in control, it must offer to purchase the outstanding senior notes at 101% of their principal amount, plus accrued and unpaid interest.

Asset Sales

If PCHI or its restricted subsidiaries engage in certain asset sales, PCHI generally must either invest the net cash proceeds from such sales in its business within a period of time, prepay senior debt or make an offer to

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purchase a principal amount of its outstanding senior notes equal to the excess net cash proceeds, subject to certain exceptions. The purchase price of the outstanding senior notes will be 100% of their principal amount, plus accrued and unpaid interest.

Senior PIK Toggle Notes

General

On August 1, 2013, Nextco Holdings and Nextco Finance, our indirect wholly owned subsidiaries, issued $350.0 million aggregate principal amount of 8.750% / 9.500% senior PIK toggle notes due 2019 under an indenture dated August 1, 2013, as amended or supplemented from time to time. Nextco Holdings and Nextco Finance are required to pay interest on the senior PIK toggle notes entirely in cash unless certain conditions are satisfied, in which case Nextco Holdings and Nextco Finance will be entitled to pay, to the extent described in the indenture, interest for such interest period by increasing the principal amount of the senior PIK toggle notes or issuing new notes. The senior PIK toggle notes are not guaranteed by any subsidiaries of Nextco Holdings or Nextco Finance.

Covenants

The indenture governing the senior PIK toggle notes contains certain covenants limiting, among other things and subject to certain exceptions, our ability and the ability of Nextco Holdings and its restricted subsidiaries to:

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incur additional indebtedness or issue preferred stock;

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pay dividends or distributions on capital stock or redeem, repurchase or retire our capital stock or the capital stock of any restricted subsidiary or make payments on, or redeem, repurchase or retire any indebtedness subordinated to the senior PIK toggle notes;

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make certain investments, loans, advances and acquisitions;

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enter into sale and leaseback transactions;

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engage in transactions with affiliates;

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create liens;

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guarantee debt;

•

create restrictions on the payment of dividends or other amounts to Nextco Holdings from its restricted subsidiaries;

•

consolidate, merge or transfer all or substantially all of Nextco Holdings’ assets and the assets of its subsidiaries; and

•

engage in unrelated businesses.

The indenture governing the senior PIK toggle notes also contains certain customary affirmative covenants and events of default, including a cross-payment default provision and cross-acceleration provision in the case of a payment default or acceleration according to the terms of any indebtedness with an aggregate principal amount of $50 million or more.

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Prepayments

Nextco Holdings and Nextco Finance may redeem the outstanding senior PIK toggle notes, in whole or in part, at the redemption prices specified below (expressed as a percentage of the principal amount of the senior PIK toggle notes to be redeemed) plus accrued and unpaid interest thereon:


12 month period beginning on	Percentage
February 15, 2015		102.000	%
February 15, 2016		101.000	%
February 15, 2017 and thereafter		100.000	%

If it experiences certain types of change in control, Nextco Holdings and Nextco Finance must offer to purchase the outstanding senior PIK toggle notes at 101% of their principal amount, plus accrued and unpaid interest.

Asset Sales

If Nextco Holdings or its restricted subsidiaries and Nextco Finance engage in certain asset sales, Nextco Holdings and Nextco Finance generally must either invest the net cash proceeds from such sales in its business within a period of time, prepay certain indebtedness of Nextco Holdings or its subsidiaries or make an offer to purchase a principal amount of its outstanding senior PIK toggle notes equal to the excess net cash proceeds, subject to certain exceptions. The purchase price of the outstanding senior PIK toggle notes will be 100% of their principal amount, plus accrued and unpaid interest.

Other Foreign Indebtedness

In connection with the acquisitions of the Christy’s Group, Riethmüller and Party Packagers, the Company, through its subsidiaries, entered into several foreign asset-based and overdraft credit facilities that provide certain foreign subsidiaries of the Company with borrowing capacity. At December 31, 2014 and December 31, 2013, borrowings under the foreign facilities totaled $1.4 million and $1.2 million, respectively. The facilities contain customary affirmative and negative covenants.

Capital Leases

As of December 31, 2014 and December 31, 2013, we had approximately $3.3 million and $2.9 million in capital lease obligations outstanding.

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SHARES ELIGIBLE FOR FUTURE SALE

Before this offering, there has not been a public market for our common stock. As described below, only a limited number of shares currently outstanding will be available for sale immediately after this offering due to contractual and legal restrictions on resale. Nevertheless, future sales of substantial amounts of our common stock, including shares issued upon exercise of outstanding options, in the public market after the restrictions lapse, or the possibility of such sales, could cause the prevailing market price of our common stock to fall or impair our ability to raise equity capital in the future.

Upon completion of this offering, we will have outstanding shares of our common stock, assuming no exercise by the underwriters of their option to purchase additional shares and no exercise of options outstanding as of December 31, 2014. Of these shares, all shares of our common stock sold in this offering will be freely tradable in the public market without restriction or further registration under the Securities Act, except for any of these shares that are held by our affiliates, as that term is defined in Rule 144 under the Securities Act. Shares purchased by our affiliates may not be resold except pursuant to an effective registration statement or an exemption from registration, including the safe harbor under Rule 144 described below.

After this offering, shares of our common stock held by existing stockholders will be “restricted securities,” as that term is defined in Rule 144. These restricted securities may be sold in the public market only pursuant to an effective registration statement or an exemption from registration under the Securities Act. The exemptions under Rule 144 and Rule 701 are summarized below. Subject to the Stockholders Agreement and the lock-up agreements described below and the provisions of Rule 144 and Rule 701, these restricted securities will be available for sale in the public market as follows:


Number of Shares		Date of Availability for Sale
		On the date of this prospectus
		180 days after the date of this prospectus and various times thereafter

Lock-Up Agreements

In connection with this offering, officers, directors, employees and holders of substantially all of our common stock who together hold an aggregate of shares of our common stock after the completion of this offering, have agreed, subject to limited exceptions, not to directly or indirectly sell or dispose of any shares of common stock or any securities convertible into or exchangeable or exercisable for shares of common stock for a period of 180 days after the date of this prospectus without the prior written consent of Goldman, Sachs & Co. and Merrill Lynch, Pierce, Fenner & Smith Incorporated. For additional information, see “Underwriting (Conflict of Interest).”

Rule 144

In general, under Rule 144, immediately upon the completion of this offering, a person who is not our affiliate and has not been our affiliate at any time during the preceding three months will be entitled to sell any shares of our common stock that such person has held for at least six months, including the holding period of any prior owner other than one of our affiliates, so long as we are current with our filings with the SEC. If such person has held the shares for at least one year, such person may effect sales of our common stock even if current public information about us is not available.

Our affiliates who have beneficially owned shares of our common stock for at least six months, including the holding period of any prior owner other than another of our affiliates, would be entitled to sell within any three-month period those shares and any other shares they have acquired that are not restricted securities, provided that the aggregate number of shares sold does not exceed the greater of:

•

1% of the number of shares of our common stock then outstanding, which will equal approximately shares immediately after this offering; and

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•

the average weekly trading volume in our common stock on the NYSE during the four calendar weeks preceding the date of filing of a Notice of Proposed Sale of Securities Pursuant to Rule 144 with respect to the sale.

Sales under Rule 144 by our affiliates are also subject to manner of sale provisions and notice requirements and to the availability of current public information about us.

Rule 701

In general, under Rule 701, any of our employees, consultants or advisors, other than our affiliates, who purchased shares from us in connection with a qualified compensatory stock plan or other written agreement is eligible to resell these shares 90 days after the date of this prospectus in reliance on Rule 144, but without compliance with the various restrictions, including the availability of public information about us, holding period and volume limitations, contained in Rule 144.

Stock Plans

As of December 31, 2014, we had outstanding options to purchase 2,388 shares of our common stock, of which options to purchase 309.8 shares were vested. Following this offering, we intend to file one or more registration statements on Form S-8 under the Securities Act to register all of the shares of our common stock subject to outstanding options and other awards issuable pursuant to our stock plans. See “Executive Compensation—Stock-based Incentive Program” for additional information about these plans. Accordingly, shares of our common stock registered under the registration statements will be available for sale in the open market, subject to Rule 144 volume limitations applicable to affiliates, and subject to any vesting restrictions and lock-up agreements applicable to these shares.

Registration Rights

Subject to the lock-up agreements described above, certain holders of our common stock may demand that we register their shares under the Securities Act or, if we file another registration statement under the Securities Act, may elect to include their shares of common stock in such registration. If these shares are registered, they will be freely tradable without restriction under the Securities Act. See “Certain Relationships and Related Party Transactions—Registration Rights Agreement.”

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MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS FOR

NON-U.S. HOLDERS OF COMMON STOCK

The following is a summary of the material U.S. federal income and estate tax considerations relating to the purchase, ownership and disposition of our common stock by Non-U.S. Holders (defined below). This summary does not purport to be a complete analysis of all the potential tax considerations relevant to Non-U.S. Holders of our common stock. This summary is based upon the Internal Revenue Code, the Treasury regulations promulgated or proposed thereunder and administrative and judicial interpretations thereof, all as of the date hereof and all of which are subject to change at any time, possibly on a retroactive basis.

This summary assumes that shares of our common stock are held as “capital assets” within the meaning of Section 1221 of the Internal Revenue Code (generally, property held for investment). This summary does not purport to deal with all aspects of U.S. federal income and estate taxation that might be relevant to particular Non-U.S. Holders in light of their particular investment circumstances or status, nor does it address specific tax considerations that may be relevant to particular persons (including, for example, financial institutions, broker-dealers, insurance companies, partnerships or other pass-through entities, certain U.S. expatriates, tax-exempt organizations, pension plans, “controlled foreign corporations”, “passive foreign investment companies”, corporations that accumulate earnings to avoid U.S. federal income tax, persons in special situations, such as those who have elected to mark securities to market or those who hold common stock as part of a straddle, hedge, conversion transaction, synthetic security or other integrated investment, persons that have a “functional currency” other than the U.S. dollar, or holders subject to the alternative minimum or the unearned income Medicare contribution tax). In addition, except as explicitly addressed herein with respect to estate tax, this summary does not address estate and gift tax considerations or considerations under the tax laws of any state, local or non-U.S. jurisdiction.

For purposes of this summary, a “Non-U.S. Holder” means a beneficial owner of common stock that for U.S. federal income tax purposes is not classified as a partnership and is not:

•

an individual who is a citizen or resident of the United States;

•

a corporation or any other organization taxable as a corporation for U.S. federal income tax purposes, created or organized in or under the laws of the United States, any state thereof or the District of Columbia;

•

an estate, the income of which is included in gross income for U.S. federal income tax purposes regardless of its source; or

•

a trust if (1) a U.S. court is able to exercise primary supervision over the trust’s administration and one or more U.S. persons have the authority to control all of the trust’s substantial decisions or (2) the trust has a valid election in effect under applicable Treasury regulations to be treated as a U.S. person.

If an entity that is classified as a partnership for U.S. federal income tax purposes holds our common stock, the tax treatment of persons treated as its partners for U.S. federal income tax purposes will generally depend upon the status of the partner and the activities of the partnership. Entities that are classified as partnerships for U.S. federal income tax purposes and persons holding our common stock through an entity classified as a partnership for U.S. federal income tax purposes are urged to consult their own tax advisors.

There can be no assurance that the Internal Revenue Service (“IRS”) will not challenge one or more of the tax consequences described herein, and we have not obtained, nor do we intend to obtain a ruling from the IRS with respect to the U.S. federal income or estate tax consequences to a Non-U.S. Holder of the purchase, ownership or disposition of our common stock.

THIS SUMMARY IS FOR GENERAL INFORMATION ONLY AND IS NOT INTENDED TO BE TAX ADVICE. NON-U.S. HOLDERS ARE URGED TO CONSULT THEIR TAX ADVISORS

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CONCERNING THE U.S. FEDERAL INCOME AND ESTATE TAXATION, STATE, LOCAL AND NON-U.S. TAXATION AND OTHER TAX CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF OUR COMMON STOCK.

Distributions on Our Common Stock

As discussed under “Dividend Policy” above, we do not currently expect to pay dividends. In the event that we do make a distribution of cash or property with respect to our common stock, any such distributions generally will constitute dividends for U.S. federal income tax purposes to the extent of our current and accumulated earnings and profits, as determined under U.S. federal income tax principles. If a distribution exceeds our current and accumulated earnings and profits, the excess will constitute a return of capital and will first reduce the holder’s adjusted tax basis in our common stock, but not below zero. Any remaining excess will be treated as capital gain, subject to the tax treatment described below in “—Gain on Sale, Exchange or Other Taxable Disposition of Our Common Stock.” Any such distribution would also be subject to the discussion below under the section titled “—Additional Withholding and Reporting Requirements.”

Dividends paid to a Non-U.S. Holder generally will be subject to a 30% U.S. federal withholding tax unless such Non-U.S. Holder provides us or other applicable withholding agent, as the case may be, with the appropriate IRS Form W-8, such as:

•

IRS Form W-8BEN (or successor form) certifying, under penalties of perjury, a reduction in withholding under an applicable income tax treaty, or

•

IRS Form W-8ECI (or successor form) certifying that a dividend paid on common stock is not subject to withholding tax because it is effectively connected with a trade or business in the United States of the Non-U.S. Holder (in which case such dividend generally will be subject to regular graduated U.S. tax rates as described below).

The certification requirement described above must be provided to us or other applicable withholding agent prior to the payment of dividends and must be updated periodically. The certification also may require a Non-U.S. Holder that provides an IRS form or that claims income tax treaty benefits to provide its U.S. taxpayer identification number. Special certification and other requirements apply in the case of certain Non-U.S. Holders that are intermediaries or pass-through entities for U.S. federal income tax purposes.

Each Non-U.S. Holder is urged to consult its own tax advisor about the specific methods for satisfying these requirements. A claim for exemption will not be valid if the person receiving the applicable form has actual knowledge or reason to know that the statements on the form are false.

If dividends are effectively connected with a trade or business in the United States of a Non-U.S. Holder (and, if required by an applicable income tax treaty, attributable to a U.S. permanent establishment), the Non-U.S. Holder, although exempt from the withholding tax described above (provided that the certifications described above are satisfied), generally will be subject to U.S. federal income tax on such dividends on a net income basis in the same manner as if it were a resident of the United States. In addition, if a Non-U.S. Holder is treated as a corporation for U.S. federal income tax purposes, the Non-U.S. Holder may be subject to an additional “branch profits tax” equal to 30% (unless reduced by an applicable income treaty) of its earnings and profits in respect of such effectively connected dividend income.

Non-U.S. Holders that do not timely provide us or other applicable withholding agent with the required certification but which are eligible for a reduced rate of U.S. federal withholding tax pursuant to an income tax treaty, may obtain a refund or credit of any excess amount withheld by timely filing an appropriate claim for refund with the IRS.

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Gain on Sale, Exchange or Other Taxable Disposition of Our Common Stock

Subject to the discussion below under the section titled “—Additional Withholding and Reporting Requirements”, in general, a Non-U.S. Holder will not be subject to U.S. federal income tax or withholding tax on gain realized upon such holder’s sale, exchange or other taxable disposition of our common stock unless (i) such Non-U.S. Holder is an individual who is present in the United States for 183 days or more in the taxable year of disposition, and certain other conditions are met, (ii) we are or have been a “United States real property holding corporation”, as defined in the Internal Revenue Code (a “USRPHC”), at any time within the shorter of the five-year period preceding the disposition and the Non-U.S. Holder’s holding period in the shares of our common stock, and certain other requirements are met, or (iii) such gain is effectively connected with the conduct by such Non-U.S. Holder of a trade or business in the United States (and, if required by an applicable income tax treaty, is attributable to a permanent establishment maintained by such Non-U.S. Holder in the United States).

If the first exception applies, the Non-U.S. Holder generally will be subject to U.S. federal income tax at a rate of 30% (or at a reduced rate under an applicable income tax treaty) on the amount by which such Non-U.S. Holder’s capital gains allocable to U.S. sources exceed capital losses allocable to U.S. sources during the taxable year of the disposition. If the third exception applies, the Non-U.S. Holder generally will be subject to U.S. federal income tax with respect to such gain on a net income basis in the same manner as if it were a resident of the United States and a Non-U.S. Holder that is a corporation for U.S. federal income tax purposes may also be subject to a branch profits tax with respect to any earnings and profits attributable to such gain at a rate of 30% (or at a reduced rate under an applicable income tax treaty).

Generally, a corporation is a USRPHC only if the fair market value of its U.S. real property interests (as defined in the Internal Revenue Code) equals or exceeds 50% of the sum of the fair market value of its worldwide real property interests plus its other assets used or held for use in a trade or business. Although there can be no assurance in this regard, we believe that we are not, and do not anticipate becoming, a USRPHC. However, because the determination of whether we are a USRPHC depends on the fair market value of our U.S. real property interests relative to the fair market value of other business assets, there can be no assurance that we will not become a USRPHC in the future. Even if we became a USRPHC, a Non-U.S. Holder would not be subject to U.S. federal income tax on a sale, exchange or other taxable disposition of our common stock by reason of our status as USRPHC so long as our common stock is regularly traded on an established securities market (as defined in the Internal Revenue Code) at any time during the calendar year in which the disposition occurs and such Non-U.S. Holder does not own and is not deemed to own (directly, indirectly or constructively) more than 5% of our common stock at any time during the shorter of the five year period ending on the date of disposition and the holder’s holding period. However, no assurance can be provided that our common stock will be regularly traded on an established securities market for purposes of the rules described above. Prospective investors are encouraged to consult their own tax advisors regarding the possible consequences to them if we are, or were to become, a USRPHC.

Additional Withholding and Reporting Requirements

Legislation enacted in March 2010 and related IRS and Treasury department guidance (commonly referred to as “FATCA”) will impose, in certain circumstances, U.S. federal withholding at a rate of 30% on payments of (a) dividends on our common stock on or after July 1, 2014, and (b) gross proceeds from the sale or other disposition of our common stock on or after January 1, 2017. In the case of payments made to a “foreign financial institution” as defined under FATCA (including, among other entities, an investment fund), as a beneficial owner or as an intermediary, the withholding tax generally will be imposed, subject to certain exceptions, unless such institution (i) enters into (or is otherwise subject to) and complies with an agreement with the U.S. government (a ‘‘FATCA Agreement’’) or (ii) complies with applicable foreign law enacted in connection with an intergovernmental agreement between the United States and a foreign jurisdiction (an “IGA”), in either case to, among other things, collect and provide to the U.S. or other relevant tax authorities certain information regarding U.S. account holders of such institution. In the case of payments made to a foreign

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entity that is not a foreign financial institution (as a beneficial owner), the withholding tax generally will be imposed, subject to certain exceptions, unless such foreign entity provides the withholding agent with a certification that it does not have any “substantial U.S. owner” (generally, any specified U.S. person that directly or indirectly owns more than a specified percentage of such entity) or that identifies its substantial U.S. owners. If our common stock is held through a foreign financial institution that enters into (or is otherwise subject to) a FATCA Agreement, such foreign financial institution (or, in certain cases, a person paying amounts to such foreign financial institution) generally will be required, subject to certain exceptions, to withhold such tax on payments of dividends and proceeds described above made to (x) a person (including an individual) that fails to comply with certain information requests or (y) a foreign financial institution that has not entered into (and is not otherwise subject to) a FATCA Agreement and is not required to comply with FATCA pursuant to applicable foreign law enacted in connection with an IGA.

Prospective investors should consult their own tax advisors regarding the possible impact of these rules on their investment in our common stock, and the entities through which they hold our common stock, including, without limitation, the process and deadlines for meeting the applicable requirements to prevent the imposition of this 30% withholding tax under FATCA.

Backup Withholding and Information Reporting

We must report annually to the IRS and to each Non-U.S. Holder the gross amount of the distributions on our common stock paid to the holder and the tax withheld, if any, with respect to the distributions. Non-U.S. Holders may have to comply with specific certification procedures to establish that the holder is not a United States person (as defined in the Internal Revenue Code) in order to avoid backup withholding at the applicable rate, currently 28%, with respect to dividends on our common stock. Dividends paid to Non-U.S. Holders subject to the U.S. withholding tax, as described above under the section titled “—Distributions on Our Common Stock,” generally will be exempt from U.S. backup withholding.

Information reporting and backup withholding will generally apply to the proceeds of a disposition of our common stock by a Non-U.S. Holder effected by or through the U.S. office of any broker, U.S. or foreign, unless the holder certifies its status as a Non-U.S. Holder and satisfies certain other requirements, or otherwise establishes an exemption. Generally, information reporting and backup withholding will not apply to a payment of disposition proceeds to a Non-U.S. Holder where the transaction is effected outside the United States through a non-U.S. office of a broker. However, for information reporting purposes, dispositions effected through a non-U.S. office of a broker with substantial U.S. ownership or operations generally will be treated in a manner similar to dispositions effected through a U.S. office of a broker. Prospective investors should consult their own tax advisors regarding the application of the information reporting and backup withholding rules to them.

Copies of information returns may be made available to the tax authorities of the country in which the Non-U.S. Holder resides or, in which the Non-U.S. Holder is incorporated, under the provisions of a specific treaty or agreement.

Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules from a payment to a Non-U.S. Holder can be refunded or credited against the Non-U.S. Holder’s U.S. federal income tax liability, if any, provided that an appropriate claim is timely filed with the IRS.

Federal Estate Tax

Common stock owned (or treated as owned) by an individual who is not a citizen or a resident of the United States (as defined for U.S. federal estate tax purposes) at the time of death will be included in the individual’s gross estate for U.S. federal estate tax purposes, unless an applicable estate or other tax treaty provides otherwise, and therefore, may be subject to U.S. federal estate tax.

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UNDERWRITING (CONFLICT OF INTEREST)

We and the underwriters named below have entered into an underwriting agreement with respect to the shares being offered. Subject to certain conditions, each underwriter has severally agreed to purchase the number of shares indicated in the following table. Goldman, Sachs & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated, Credit Suisse Securities (USA) LLC and Morgan Stanley & Co. LLC are representatives of the underwriters.


Underwriters		Number of Shares
Goldman, Sachs & Co
Merrill Lynch, Pierce, Fenner & Smith Incorporated
Credit Suisse Securities (USA) LLC
Morgan Stanley & Co. LLC
Barclays Capital Inc.
Deutsche Bank Securities Inc.
J.P. Morgan Securities LLC
William Blair & Company, L.L.C.
Stephens Inc.
Telsey Advisory Group LLC
Total

The underwriters are committed to take and pay for all of the shares being offered, if any are taken, other than the shares covered by the option described below unless and until this option is exercised.

If the underwriters sell more shares than the total number set forth in the table above, the underwriters have an option to purchase up to an additional shares from us. They may exercise that option for 30 days. If any shares are purchased pursuant to this option, the underwriters will severally purchase shares in approximately the same proportion as set forth in the table above.

The following tables show the per share and total underwriting discounts and commissions to be paid to the underwriters by us assuming both no exercise and full exercise of the underwriters’ option to purchase additional shares.


	No Exercise	Full Exercise
Per share	$	$
Total paid	$	$

Shares sold by the underwriters to the public will initially be offered at the initial public offering price set forth on the cover of this prospectus. Any shares sold by the underwriters to securities dealers may be sold at a discount of up to $ per share from the initial public offering price. If all the shares are not sold at the initial public offering price, the representatives may change the offering price and the other selling terms. The offering of the shares by the underwriters is subject to receipt and acceptance and subject to the underwriters’ right to reject any order in whole or in part.

We and our officers, directors, and holders of substantially all of our common stock, have agreed with the underwriters, subject to certain exceptions, not to dispose of or hedge any of their common stock or securities convertible into or exchangeable for shares of common stock during the period from the date of this prospectus continuing through the date 180 days after the date of this prospectus, except with the prior written consent of Goldman, Sachs & Co. and Merrill Lynch, Pierce, Fenner & Smith Incorporated. This agreement does not apply to any existing employee benefit plans. See “Shares Eligible for Future Sale” for a discussion of certain transfer restrictions.

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The 180-day restricted period described in the preceding paragraph will be automatically extended if: (1) during the last 17 days of the 180-day restricted period the Company issues an earnings release or announces material news or a material event; or (2) prior to the expiration of the 180-day restricted period, the Company announces that it will release earnings results during the 15-day period following the last day of the 180-day period, in which case the restrictions described in the preceding paragraph will continue to apply until the expiration of the 18-day period beginning on the issuance of the earnings release of the announcement of the material news or material event.

Prior to the offering, there has been no public market for the shares. The initial public offering price will be negotiated among the Company and the representatives. Among the factors to be considered in determining the initial public offering price of the shares, in addition to prevailing market conditions, will be the Company’s historical performance, estimates of the business potential and earnings prospects of the Company, an assessment of the Company’s management and the consideration of the above factors in relation to market valuation of companies in related businesses.

We intend to apply to list the common stock on the NYSE under the symbol “PRTY”.

In connection with the offering, the underwriters may purchase and sell shares of common stock in the open market. These transactions may include short sales, stabilizing transactions and purchases to cover positions created by short sales. Shorts sales involve the sale by the underwriters of a greater number of shares than they are required to purchase in the offering. “Covered” short sales are sales made in an amount not greater than the underwriters’ option to purchase additional shares in the offering. The underwriters may close out any covered short position by either exercising their option to purchase additional shares or purchasing shares in the open market. In determining the source of shares to close out the covered short position, the underwriters will consider, among other things, the price of shares available for purchase in the open market as compared to the price at which they may purchase additional shares pursuant to the option granted to them. “Naked” short sales are any sales in excess of such option. The underwriters must close out any naked short position by purchasing shares in the open market. A naked short position is more likely to be created if the underwriters are concerned that there may be downward pressure on the price of the common stock in the open market after pricing that could adversely affect investors who purchase in the offering. Stabilizing transactions consist of various bids for or purchases of common stock made by the underwriters in the open market prior to the completion of the offering.

The underwriters may also impose a penalty bid. This occurs when a particular underwriter repays to the underwriters a portion of the underwriting discount received by it because the representatives have repurchased shares sold by or for the account of such underwriter in stabilizing or short covering transactions.

Purchases to cover a short position and stabilizing transactions, as well as other purchases by the underwriters for their own accounts, may have the effect of preventing or retarding a decline in the market price of the Company’s stock, and together with the imposition of the penalty bid, may stabilize, maintain or otherwise affect the market price of the common stock. As a result, the price of the common stock may be higher than the price that otherwise might exist in the open market. If these activities are commenced, they may be discontinued at any time. These transactions may be effected on the NYSE, in the over-the-counter market or otherwise.

Neither we nor any of the underwriters make any representation or prediction as to the direction or magnitude of any effect that the transactions described above may have on the price of the Company’s common stock. In addition, neither we nor any of the underwriters make any representation that the representatives will engage in these transactions or that these transactions, once commenced, will not be discontinued without notice.

In connection with the offering, certain of the underwriters or securities dealers may distribute prospectuses by electronic means, such as e-mail. In addition, certain of the underwriters or securities dealers may facilitate Internet distribution for this offering to certain of its Internet subscription customers. Certain of the underwriters may allocate a limited number of shares for sale to online brokerage customers. An electronic prospectus is

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available on the Internet websites maintained by certain of the underwriters. Other than the prospectus in electronic format, the information on the underwriters’ websites are not part of this prospectus.

The underwriters do not expect sales to discretionary accounts to exceed five percent of the total number of shares offered.

We estimate that our share of the total expenses of the offering, excluding underwriting discounts and commissions, will be approximately $ . We have agreed to reimburse the underwriters for certain expenses in an amount up to $ .

We have agreed to indemnify the several underwriters against certain liabilities, including liabilities under the Securities Act.

Other Relationships

The underwriters and their respective affiliates are full service financial institutions engaged in various activities, which may include securities trading, commercial and investment banking, financial advisory, investment management, investment research, principal investment, hedging, financing and brokerage activities. Certain of the underwriters and their respective affiliates have, from time to time, performed, and may in the future perform, various financial advisory, commercial banking and investment banking services for the issuer or its affiliates, for which they received or will receive customary fees and expenses. For instance, affiliates of certain of the underwriters are lenders, and in some cases agents or managers for the lenders under the credit facilities.

In the ordinary course of their various business activities, the underwriters and their respective affiliates may make or hold a broad array of investments and actively trade debt and equity securities (or related derivative securities) and financial instruments (including bank loans) for their own account and for the accounts of their customers, and such investment and securities activities may involve securities and/or instruments of the issuer. The underwriters and their respective affiliates may also make investment recommendations and/or publish or express independent research views in respect of such securities or instruments and may at any time hold, or recommend to clients that they acquire, long and/or short positions in such securities and instruments.

Conflict of Interest

Accordingly, this offering will be made in compliance with the applicable provisions of Rule 5121. Rule 5121 requires that a “qualified independent underwriter” meeting certain standards participate in the preparation of the registration statement and prospectus and exercise the usual standards of due diligence in respect thereto, subject to certain exceptions which are not applicable here. Merrill Lynch, Pierce, Fenner & Smith Incorporated will serve as a qualified independent underwriter within the meaning of Rule 5121 in connection with this offering. Merrill Lynch, Pierce, Fenner & Smith Incorporated will not receive any additional compensation for acting as a qualified independent underwriter. In addition, no underwriter with a conflict of interest will confirm sales to any accounts over which it exercises discretionary authority without first receiving a written consent from those accounts. We have agreed to indemnify Merrill Lynch, Pierce, Fenner & Smith Incorporated against certain liabilities incurred in connection with acting as a qualified independent underwriter, including liabilities under the Securities Act.

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European Economic Area

In relation to each Member State of the European Economic Area which has implemented the Prospectus Directive (each, a Relevant Member State), each underwriter has represented and agreed that with effect from and including the date on which the Prospectus Directive is implemented in that Relevant Member State (the Relevant Implementation Date) it has not made and will not make an offer of shares to the public in that Relevant Member State prior to the publication of a prospectus in relation to the shares which has been approved by the competent authority in that Relevant Member State or, where appropriate, approved in another Relevant Member State and notified to the competent authority in that Relevant Member State, all in accordance with the Prospectus Directive, except that it may, with effect from and including the Relevant Implementation Date, make an offer of shares to the public in that Relevant Member State at any time:

(1)

to any legal entity which is a qualified investor as defined in the Prospectus Directive;

(2)

to fewer than 100 or, if the Relevant Member State has implemented the relevant provision of the 2010 PD Amending Directive, 150 natural or legal persons (other than qualified investors as defined in the Prospectus Directive), as permitted under the Prospectus Directive, subject to obtaining the prior consent of the relevant underwriter or underwriters nominated by the Issuer for any such offer; or

(3)

in any other circumstances which do not require the publication by the Issuer of a prospectus pursuant to Article 3(2) of the Prospectus Directive;

provided that no such offer of shares shall require the Issuer or any underwriter to publish a prospectus pursuant to Article 3 of the Prospectus Directive or supplement a prospectus pursuant to Article 16 of the Prospectus Directive.

For the purposes of this provision, the expression an “offer of shares to the public” in relation to any shares in any Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the offer and the shares to be offered so as to enable an investor to decide to purchase or subscribe the shares, as the same may be varied in that Relevant Member State by any measure implementing the Prospectus Directive in that Relevant Member State and the expression Prospectus Directive means Directive 2003/71/EC (and amendments thereto, including the 2010 PD Amending Directive, to the extent implemented in the Relevant Member State), and includes any relevant implementing measure in the Relevant Member State and the expression 2010 PD Amending Directive means Directive 2010/73/EU.

United Kingdom

Each underwriter has represented and agreed that:

(1) it has only communicated or caused to be communicated and will only communicate or cause to be communicated an invitation or inducement to engage in investment activity (within the meaning of Section 21 of the FSMA) received by it in connection with the issue or sale of the shares in circumstances in which Section 21(1) of the FSMA does not apply to the Issuer; and

(2) it has complied and will comply with all applicable provisions of the FSMA with respect to anything done by it in relation to the shares in, from or otherwise involving the United Kingdom.

Hong Kong

The shares may not be offered or sold by means of any document other than (1) in circumstances which do not constitute an offer to the public within the meaning of the Companies Ordinance (Cap.32, Laws of Hong Kong), or (2) to “professional investors” within the meaning of the Securities and Futures Ordinance (Cap.571, Laws of Hong Kong) and any rules made thereunder, or (iii) in other circumstances which do not result in the document being a “prospectus” within the meaning of the Companies Ordinance (Cap.32, Laws of Hong Kong), and no advertisement, invitation or document relating to the shares may be issued or may be in the possession of

138

any person for the purpose of issue (in each case whether in Hong Kong or elsewhere), which is directed at, or the contents of which are likely to be accessed or read by, the public in Hong Kong (except if permitted to do so under the laws of Hong Kong) other than with respect to shares which are or are intended to be disposed of only to persons outside Hong Kong or only to “professional investors” within the meaning of the Securities and Futures Ordinance (Cap. 571, Laws of Hong Kong) and any rules made thereunder.

Singapore

This prospectus has not been registered as a prospectus with the Monetary Authority of Singapore. Accordingly, this prospectus and any other document or material in connection with the offer or sale, or invitation for subscription or purchase, of the shares may not be circulated or distributed, nor may the shares be offered or sold, or be made the subject of an invitation for subscription or purchase, whether directly or indirectly, to persons in Singapore other than (1) to an institutional investor under Section 274 of the Securities and Futures Act, Chapter 289 of Singapore (the “SFA”), (2) to a relevant person, or any person pursuant to Section 275(1A), and in accordance with the conditions, specified in Section 275 of the SFA or (3) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA.

Where the shares are subscribed or purchased under Section 275 by a relevant person which is: (a) a corporation (which is not an accredited investor) the sole business of which is to hold investments and the entire share capital of which is owned by one or more individuals, each of whom is an accredited investor; or (b) a trust (where the trustee is not an accredited investor) whose sole purpose is to hold investments and each beneficiary is an accredited investor, shares, debentures and units of shares and debentures of that corporation or the beneficiaries’ rights and interest in that trust shall not be transferable for 6 months after that corporation or that trust has acquired the shares under Section 275 except: (1) to an institutional investor under Section 274 of the SFA or to a relevant person, or any person pursuant to Section 275(1A), and in accordance with the conditions, specified in Section 275 of the SFA; (2) where no consideration is given for the transfer; or (3) by operation of law.

Japan

The shares have not been and will not be registered under the Financial Instruments and Exchange Law of Japan (the Financial Instruments and Exchange Law) and each underwriter has agreed that it will not offer or sell any shares, directly or indirectly, in Japan or to, or for the benefit of, any resident of Japan (which term as used herein means any person resident in Japan, including any corporation or other entity organized under the laws of Japan), or to others for re-offering or resale, directly or indirectly, in Japan or to a resident of Japan, except pursuant to an exemption from the registration requirements of, and otherwise in compliance with, the Financial Instruments and Exchange Law and any other applicable laws, regulations and ministerial guidelines of Japan.

Switzerland

The shares may not be publicly offered in Switzerland and will not be listed on the SIX Swiss Exchange (“SIX”) or on any other stock exchange or regulated trading facility in Switzerland. This prospectus has been prepared without regard to the disclosure standards for issuance prospectuses under art. 652a or art. 1156 of the Swiss Code of Obligations or the disclosure standards for listing prospectuses under art. 27 ff. of the SIX Listing Rules or the listing rules of any other stock exchange or regulated trading facility in Switzerland. Neither this prospectus nor any other offering or marketing material relating to the shares or the offering may be publicly distributed or otherwise made publicly available in Switzerland.

Neither this prospectus nor any other offering or marketing material relating to the offering, the Issuer, the shares have been or will be filed with or approved by any Swiss regulatory authority. In particular, this document will not be filed with, and the offer of shares will not be supervised by, the Swiss Financial Market Supervisory Authority FINMA (“FINMA”), and the offer of shares has not been and will not be authorized under the Swiss

139

Federal Act on Collective Investment Schemes (“CISA”). The investor protection afforded to acquirers of interests in collective investment schemes under the CISA does not extend to acquirers of shares.

Dubai International Financial Centre

This prospectus relates to an Exempt Offer in accordance with the Offered Securities Rules of the Dubai Financial Services Authority (“DFSA”). This prospectus is intended for distribution only to persons of a type specified in the Offered Securities Rules of the DFSA. It must not be delivered to, or relied on by, any other person. The DFSA has no responsibility for reviewing or verifying any documents in connection with Exempt Offers. The DFSA has not approved this prospectus nor taken steps to verify the information set forth herein and has no responsibility for the prospectus. The shares to which this prospectus relates may be illiquid and/or subject to restrictions on their resale. Prospective purchasers of the shares offered should conduct their own due diligence on the shares. If you do not understand the contents of this prospectus you should consult an authorized financial advisor.

Australia

No placement document, prospectus, product disclosure statement or other disclosure document has been lodged with the Australian Securities and Investments Commission (“ASIC”), in relation to the offering. This prospectus does not constitute a prospectus, product disclosure statement or other disclosure document under the Corporations Act 2001 (the “Corporations Act”), and does not purport to include the information required for a prospectus, product disclosure statement or other disclosure document under the Corporations Act.

Any offer in Australia of the shares may only be made to persons (the “Exempt Investors”) who are “sophisticated investors” (within the meaning of section 708(8) of the Corporations Act), “professional investors” (within the meaning of section 708(11) of the Corporations Act) or otherwise pursuant to one or more exemptions contained in section 708 of the Corporations Act so that it is lawful to offer the shares without disclosure to investors under Chapter 6D of the Corporations Act.

The shares applied for by Exempt Investors in Australia must not be offered for sale in Australia in the period of 12 months after the date of allotment under the offering, except in circumstances where disclosure to investors under Chapter 6D of the Corporations Act would not be required pursuant to an exemption under section 708 of the Corporations Act or otherwise or where the offer is pursuant to a disclosure document which complies with Chapter 6D of the Corporations Act. Any person acquiring shares must observe such Australian on-sale restrictions.

This prospectus contains general information only and does not take account of the investment objectives, financial situation or particular needs of any particular person. It does not contain any securities recommendations or financial product advice. Before making an investment decision, investors need to consider whether the information in this prospectus is appropriate to their needs, objectives and circumstances, and, if necessary, seek expert advice on those matters.

140

VALIDITY OF COMMON STOCK

Ropes & Gray LLP, Boston, Massachusetts, will pass for us on the validity of the shares of common stock offered by this prospectus. The underwriters are being represented by Latham & Watkins LLP, New York, New York. Ropes & Gray LLP and some attorneys of Ropes & Gray LLP are members of RGIP, LLC, which is an investor in certain investment funds sponsored by THL and often a co-investor with such funds. This investment entity directly and indirectly owns less than 1% of the outstanding equity of Party City Holdco Inc.

EXPERTS

Ernst & Young LLP, independent registered public accounting firm, has audited our consolidated financial statements and schedules at December 31, 2014 and December 31, 2013 and the related consolidated statements of operations and comprehensive income (loss), changes in stockholders’ equity and cash flows for the years ended December 31, 2014 and 2013 and the period from July 28, 2012 to December 31, 2012 (“Successor”) and the consolidated statements of operations and comprehensive income (loss), changes in stockholders’ equity, and cash flows for the period from January 1, 2012 to July 27, 2012 (“Predecessor”), as set forth in their report. We’ve included our financial statements and schedules in the prospectus and elsewhere in the registration statement in reliance on Ernst & Young LLP’s report, given on their authority as experts in accounting and auditing.

WHERE YOU CAN FIND ADDITIONAL INFORMATION

We have filed with the SEC a registration statement on Form S-1 under the Securities Act that registers the shares of our common stock to be sold in this offering. This prospectus does not contain all of the information set forth in the registration statement and the exhibits and schedules filed as part of the registration statement. For further information with respect to us and our common stock, we refer you to the registration statement and the exhibits and schedules filed as a part of the registration statement. Statements contained in this prospectus concerning the contents of any contract or any other document are not necessarily complete. If a contract or document has been filed as an exhibit to the registration statement, we refer you to the copy of the contract or document that has been filed. Each statement in this prospectus relating to a contract or document filed as an exhibit is qualified in all respects by the filed exhibit.

You may read and copy the registration statement of which this prospectus is a part at the SEC’s Public Reference Room at 100 F Street, N.E., Washington D.C. 20549. You may obtain information regarding the operation of the public reference room by calling 1-800-SEC-0330. The SEC also maintains a website (http://www.sec.gov) that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC. Our website addresses are www.amscan.com and www.PartyCity.com. Our subsidiary, PCHI, currently is a voluntary filer and makes available free of charge, through www.amscan.com, its annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act, as soon as reasonably practicable after such material is electronically filed with or furnished to the SEC. The information contained on, or accessible through, these websites is not part of this prospectus, and is therefore not incorporated by reference.

141

PARTY CITY HOLDCO INC. AND SUBSIDIARIES

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

AND FINANCIAL STATEMENT SCHEDULE


Consolidated Financial Statements as of December 31, 2014 and December 31, 2013 and for the Years Ended December 31, 2014 and 2013, and the Periods from July 28, 2012 to December 31, 2012 and from January 1, 2012 to July 27, 2012
Report of Independent Registered Public Accounting Firm			F-2
Consolidated Balance Sheets at December 31, 2014 (Successor) and December 31, 2013 (Successor)			F-3
Consolidated Statements of Operations and Comprehensive Income (Loss) for the years ended December 31, 2014 and 2013 (Successor), and the periods from July 28, 2012 to December 31, 2012 (Successor) and January 1, 2012 to July 27, 2012 (Predecessor)			F-4
Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2014 and 2013 (Successor), and the periods from July 28, 2012 to December 31, 2012 (Successor) and January 1, 2012 to July 27, 2012 (Predecessor)			F-5
Consolidated Statements of Cash Flows for the years ended December 31, 2014 and 2013 (Successor), and the periods from July 28, 2012 to December 31, 2012 (Successor) and January 1, 2012 to July 27, 2012 (Predecessor)			F-6
Notes to Consolidated Financial Statements			F-7
Financial Statement Schedules for the years ended December 31, 2014 and 2013 (Successor), and the periods from July 28, 2012 to December 31, 2012 (Successor) and from January 1, 2012 to July 27, 2012 (Predecessor):
Schedule I—Condensed Financial Information			F-44
Schedule II—Valuation and Qualifying Accounts			F-48

All other schedules for which provision is made in the applicable accounting regulations of the Securities and Exchange Commission (“SEC”) are not required under the related instructions or are inapplicable and therefore have been omitted.

F-1

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of

Party City Holdco Inc. and subsidiaries

We have audited the accompanying consolidated balance sheets of Party City Holdco Inc. and subsidiaries (the “Company”) as of December 31, 2014 and 2013 and the related consolidated statements of operations and comprehensive income (loss), changes in stockholders’ equity and cash flows for the year ended December 31, 2014 and 2013 and for the period from July 28, 2012 to December 31, 2012 (“Successor”) and the related consolidated statement of operations and comprehensive income (loss), changes in stockholders’ equity and cash flows for the period from January 1, 2012 to July 27, 2012 (“Predecessor”). Our audits also included the financial statement schedules listed in the Index. These financial statements and schedules are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and schedules based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Company’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Party City Holdco Inc. and subsidiaries at December 31, 2014 and 2013 and the consolidated results of their operations and their cash flows for the year ended December 31, 2014 and 2013, and for the period from July 28, 2012 to December 31, 2012 and the period from January 1, 2012 to July 27, 2012, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statements schedules when considered in relation to the basic financial statements taken as a whole, present fairly in all material respects the information set forth therein.

Ernst & Young LLP

New York, New York

March 13, 2015, except as to Note 2

as to which the date is XXX XX, 2015

The foregoing report is in the form that will be signed at effectiveness upon the completion of the stock split and computation of earnings per share described in Note 2 to the financial statements.

/s/ Ernst & Young LLP

New York, New York

March 26, 2015

F-2

PARTY CITY HOLDCO INC.

CONSOLIDATED BALANCE SHEETS

(Dollars in thousands)


	December 31, 2014			December 31, 2013
ASSETS
Current assets:
Cash and cash equivalents	$	47,214		$	25,645
Accounts receivable, net		140,663			139,539
Inventories, net		582,230			524,361
Prepaid expenses and other current assets		77,232			77,099

Total current assets		847,339			766,644
Property, plant and equipment, net		248,684			235,146
Goodwill		1,557,250			1,561,707
Trade names		569,343			570,141
Other intangible assets, net		107,010			129,408
Other assets, net		51,237			64,488

Total assets	$	3,380,863		$	3,327,534

LIABILITIES, REDEEMABLE COMMON SECURITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Loans and notes payable	$	25,336		$	36,047
Accounts payable		145,686			150,782
Accrued expenses		165,683			158,491
Income taxes payable		34,670			11,845
Current portion of long-term obligations		12,249			13,452

Total current liabilities		383,624			370,617
Long-term obligations, excluding current portion		2,127,583			2,134,987
Deferred income tax liabilities		309,338			318,173
Deferred rent and other long-term liabilities		38,030			23,445

Total liabilities		2,858,575			2,847,222

Redeemable common securities (including 1,103.09 and 1,039.23 common shares issued and outstanding at December 31, 2014 and December 31, 2013, respectively)		35,062			23,555

Commitments and contingencies

Stockholders’ equity:
Common stock ($0.01 par value, 32,502.82 and 32,470.70 shares issued and outstanding at December 31, 2014 and December 31, 2013, respectively)		0			0
Additional paid-in capital		470,027			477,538
Retained earnings (accumulated deficit)		29,934			(26,189	)
Accumulated other comprehensive (loss) income		(12,735	)		5,408

Total stockholders’ equity		487,226			456,757

Total liabilities, redeemable common securities and stockholders’ equity	$	3,380,863		$	3,327,534

See accompanying notes to consolidated financial statements.

F-3

PARTY CITY HOLDCO INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

(Dollars in thousands)


	Successor									Predecessor
	Year Ended December 31, 2014			Year Ended December 31, 2013			Period from July 28 to December 31, 2012			Period from January 1 to July 27, 2012
Revenues:
Net sales	$	2,251,589		$	2,026,272		$	964,330		$	930,903
Royalties and franchise fees		19,668			18,841			9,312			9,281

Total revenues		2,271,257			2,045,113			973,642			940,184

Expenses:
Cost of sales		1,375,706			1,259,188			636,410			574,048
Wholesale selling expenses		73,910			68,102			28,096			31,568
Retail operating expenses		397,110			369,996			172,168			166,047
Franchise expenses		14,281			13,320			6,128			6,579
General and administrative expenses		147,718			146,094			65,890			101,502
Art and development costs		19,390			19,311			8,201			10,824
Impairment of trade name		0			7,500			0			0

Total expenses		2,028,115			1,883,511			916,893			890,568

Income from operations		243,142			161,602			56,749			49,616
Interest expense, net		155,917			143,406			62,062			41,970
Other expense, net		5,891			18,478			26,157			22,245

Income (loss) before income taxes		81,334			(282	)		(31,470	)		(14,599	)
Income tax expense (benefit)		25,211			(4,525	)		(1,322	)		403

Net income (loss)		56,123			4,243			(30,148	)		(15,002	)
Less: net income attributable to noncontrolling interests		0			224			60			96

Net income (loss) attributable to Party City Holdco Inc.	$	56,123		$	4,019		$	(30,208	)	$	(15,098	)

Net income per common share-basic	$			$			$			$

Net income per common share-diluted	$			$			$			$

Weighted-average number of common shares-basic
Weighted-average number of common shares-diluted

Other comprehensive (loss) income, net of tax:
Foreign currency adjustments	$	(18,707	)	$	(71	)	$	6,481		$	(1,272	)
Cash flow hedges		564			(105	)		(225	)		53

Other comprehensive (loss) income, net		(18,143	)		(176	)		6,256			(1,219	)

Comprehensive income (loss)		37,980			4,067			(23,892	)		(16,221	)
Less: comprehensive income attributable to noncontrolling interest		0			201			116			140

Comprehensive income (loss) attributable to Party City Holdco Inc.	$	37,980		$	3,866		$	(24,008	)	$	(16,361	)

See accompanying notes to consolidated financial statements.

F-4

PARTY CITY HOLDCO INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

For the Periods from January 1, 2012 to July 27, 2012 (Predecessor) and July 28, 2012 to December 31, 2012 (Successor), the Year Ended December 31, 2013 (Successor), and the Year Ended December 31, 2014 (Successor)

(Dollars in thousands)


	Common Shares		Common Stock		Additional Paid-in Capital			Retained Earnings (Deficit)			Accumulated Other Comprehensive (Loss) Income			Party City Holdco Inc. Stockholders’ Equity			Non- controlling Interests			Total
Predecessor:

Balance at December 31, 2011		30,970.02	$	0	$	286,451		$	48,717		$	(11,354	)	$	323,814		$	2,277		$	326,091
Net (loss) income									(15,098	)					(15,098	)		96			(15,002	)
Foreign currency adjustments												(1,316	)		(1,316	)		44			(1,272	)
Impact of foreign exchange contracts, net												53			53						53
Adjustment of PCHI redeemable common shares to fair value						(23,000	)								(23,000	)					(23,000	)
Excess tax benefit from stock options						32,292									32,292						32,292
Equity based compensation						2,600									2,600						2,600

Balance at July 27, 2012		30,970.02	$	0	$	298,343		$	33,619		$	(12,617	)	$	319,345		$	2,417		$	321,762



Successor:

Balance at July 28, 2012		32,470.70	$	0	$	808,365		$	0		$	0		$	808,365		$	2,417		$	810,782
Net (loss) income									(30,208	)					(30,208	)		60			(30,148	)
Foreign currency adjustments												6,425			6,425			56			6,481
Excess tax benefit from stock options						560									560						560
Impact of foreign exchange contracts, net												(225	)		(225	)					(225	)

Balance at December 31, 2012		32,470.70	$	0	$	808,925		$	(30,208	)	$	6,200		$	784,917		$	2,533		$	787,450
Net income									4,019						4,019			224			4,243
Equity based compensation						2,137									2,137						2,137
Adjustment of redeemable common shares to fair value						2,425									2,425						2,425
Acquisition of noncontrolling interest						555						(639	)		(84	)		(2,734	)		(2,818	)
Foreign currency adjustments												(48	)		(48	)		(23	)		(71	)
Excess tax benefit from stock options						1,511									1,511						1,511
Dividend distribution						(338,015	)								(338,015	)					(338,015	)
Impact of foreign exchange contracts, net												(105	)		(105	)					(105	)

Balance at December 31, 2013		32,470.70	$	0	$	477,538		$	(26,189	)	$	5,408		$	456,757		$	0		$	456,757
Net income									56,123						56,123						56,123
Equity based compensation						1,583									1,583						1,583
Adjustment of redeemable common shares to fair value						(10,387	)								(10,387	)					(10,387	)
Shares reclassified from redeemable stock due to employee terminations		29.72				674									674						674
Exercise of stock options		2.40				37									37						37
Foreign currency adjustments												(18,707	)		(18,707	)					(18,707	)
Excess tax benefit from stock options						582									582						582
Impact of foreign exchange contracts, net												564			564						564

Balance at December 31, 2014		32,502.82	$	0	$	470,027		$	29,934		$	(12,735	)	$	487,226		$	0		$	487,226

See accompanying notes to consolidated financial statements.

F-5

PARTY CITY HOLDCO INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in thousands)


	Successor									Predecessor
	Year Ended December 31, 2014			Year Ended December 31, 2013			Period from July 28 to December 31, 2012			Period from January 1 to July 27, 2012
Cash flows provided by (used in) operating activities:
Net income (loss)	$	56,123		$	4,243		$	(30,148	)	$	(15,002	)
Less: net income attributable to noncontrolling interests		0			224			60			96

Net income (loss) attributable to Party City Holdco Inc.		56,123			4,019			(30,208	)		(15,098	)

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization expense		82,890			94,624			49,837			33,915
Amortization of deferred financing costs		15,610			20,211			4,605			2,592
Provision for doubtful accounts		1,783			1,079			801			644
Deferred income tax (benefit) expense		(13,758	)		(25,599	)		(22,163	)		3,823
Deferred rent		14,418			17,055			6,335			3,344
Undistributed loss (income) in unconsolidated joint venture		1,556			172			(297	)		(128	)
Impairment of trade name		0			7,500			0			0
Impairment of fixed assets		1,012			322			71			0
Loss (gain) on disposal of equipment		2,310			388			(9	)		9
Equity based compensation		1,583			2,137			0			3,375
Changes in operating assets and liabilities, net of effects of acquired businesses:
(Increase) decrease in accounts receivable		(7,202	)		(7,356	)		(7,002	)		3,995
(Increase) decrease in inventories		(55,786	)		(2,040	)		94,714			(77,264	)
Decrease (increase) in prepaid expenses and other current assets		5,813			(10,235	)		10,050			(7,107	)
Increase (decrease) in accounts payable, accrued expenses and income taxes payable		30,035			33,541			(142,242	)		29,774

Net cash provided by (used in) operating activities		136,387			135,818			(35,508	)		(18,126	)
Cash flows used in investing activities:
Cash paid in connection with acquisitions, net of cash acquired		(12,377	)		(51,546	)		(1,562,246	)		(3,106	)
Capital expenditures		(78,241	)		(61,241	)		(16,376	)		(28,864	)
Proceeds from disposal of property and equipment		986			265			69			146

Net cash used in investing activities		(89,632	)		(112,522	)		(1,578,553	)		(31,824	)
Cash flows (used in) provided by financing activities:
Repayment of loans, notes payable and long-term obligations		(1,374,017	)		(1,392,681	)		(1,169,100	)		(9,564	)
Proceeds from loans, notes payable and long-term obligations		1,349,197			1,720,253			2,028,051			10,590
Excess tax benefit from stock options		582			1,511			560			32,292
Exercise of stock options		1,080			0			0			0
Capital contributions		0			750			833,934			0
Dividend distribution		0			(338,015	)		0			0
Debt issuance costs		(372	)		(10,191	)		(64,114	)		0

Net cash (used in) provided by financing activities		(23,530	)		(18,373	)		1,629,331			33,318
Effect of exchange rate changes on cash and cash equivalents		(1,656	)		(177	)		128			80

Net increase (decrease) in cash and cash equivalents		21,569			4,746			15,398			(16,552	)
Cash and cash equivalents at beginning of period		25,645			20,899			5,501			22,053

Cash and cash equivalents at end of period	$	47,214		$	25,645		$	20,899		$	5,501

Supplemental disclosure of cash flow information:
Cash paid during the period
Interest	$	145,632		$	121,064		$	25,508		$	41,396
Income taxes, net of (refunds)	$	14,455		$	22,561		$	(7,749	)	$	6,165

Supplemental information on non-cash activities:

Capital lease obligations of $1,474, $446, $1,275, and $330 were incurred during the year ended December 31, 2014, the year ended December 31, 2013, the period from July 28, 2012 to December 31, 2012, and the period from January 1, 2012 to July 27, 2012, respectively.

See accompanying notes to consolidated financial statements.

F-6

PARTY CITY HOLDCO INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share)

Note 1—Organization, Description of Business and Basis of Presentation

Party City Holdco Inc. (the “Company” or “Party City Holdco”) designs, manufactures, contracts for manufacture and distributes party goods, including paper and plastic tableware, metallic and latex balloons, Halloween and other costumes, accessories, novelties, gifts and stationery throughout the world. In addition, the Company operates specialty retail party supply stores in the United States and Canada, principally under the names Party City and Halloween City, and e-commerce websites, principally through the domain name PartyCity.com. The Company also franchises both individual stores and franchise areas throughout the United States and Puerto Rico, principally under the name Party City.

Party City Holdco Inc. is a holding company with no operating assets or operations. The Company owns 100% of PC Nextco Holdings, LLC (“PC Nextco”), which owns 100% of PC Intermediate Holdings, Inc. (“PC Intermediate”). PC Intermediate owns 100% of Party City Holdings Inc. (“PCHI”), which owns the Company’s operating subsidiaries.

On July 27, 2012, PC Merger Sub, Inc. (“Merger Sub”), a wholly-owned subsidiary of PC Intermediate, merged into PCHI, with PCHI being the surviving entity (“the Transaction”). At such time 100% of Party City Holdco, which was formed in order to affect the Transaction, was owned by a collaborative group consisting of funds affiliated with Thomas H. Lee Partners, L.P. (“THL”), 70% ownership, funds affiliated with Advent International Corporation (“Advent”), 24% ownership, and other minority investors, including management, 6% ownership. Prior to the Transaction, PCHI was owned by Berkshire Partners LLC, Weston Presidio Capital, Advent, and other minority investors, including management. THL did not own any portion of PCHI prior to the Transaction. See Note 5 for further discussion.

Party City Holdco and PC Intermediate were formed during May 2012 for the purpose of affecting the Transaction. PC Nextco was formed during 2013. As a result of the Transaction, the financial information for the period after July 27, 2012 represents the financial information of the “Successor” company. Prior to, and including, July 27, 2012, the consolidated financial statements include the accounts of the “Predecessor” company. Financial information in the Predecessor period principally relates to PCHI and its subsidiaries. Additionally, it includes the activity of Party City Holdco and PC Intermediate subsequent to their incorporation during May 2012. Due to the change in the basis of accounting resulting from the application of the acquisition method of accounting and push-down accounting, the Predecessor’s consolidated financial statements and the Successor’s consolidated financial statements are not necessarily comparable.

Note 2—Summary of Significant Accounting Policies

Consolidated Financial Statements

The consolidated financial statements of the Company include the accounts of all majority-owned subsidiaries and controlled entities. All significant intercompany balances and transactions have been eliminated.

The Company’s retail operations define a fiscal year (“Fiscal Year”) as the 52-week period or 53-week period ended on the Saturday nearest December 31st of each year, and define their fiscal quarters (“Fiscal Quarter”) as the four interim 13-week periods following the end of the previous Fiscal Year, except in the case of a 53-week Fiscal Year when the fourth Fiscal Quarter is extended to 14 weeks. The consolidated financial statements of the Company combine the Fiscal Year and Fiscal Quarters of the Company’s retail operations with the calendar year and calendar quarters of the Company’s wholesale operations, as the differences are not significant. The Company’s consolidated financial statements for the year ended December 31, 2014 include the results of its retail operations for the 53-week Fiscal Year ended January 3, 2015.

F-7

PARTY CITY HOLDCO INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Dollars in thousands, except per share)

Use of Estimates

The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates. Management periodically evaluates estimates used in the preparation of the consolidated financial statements for continued reasonableness. Appropriate adjustments, if any, to the estimates used are made prospectively based on such periodic evaluations.

Cash Equivalents

Highly liquid investments with a maturity of three months or less when purchased are considered to be cash equivalents.

Inventories

Inventories are valued at the lower of cost or market.

The Company determines the cost of inventory at its retail operations using the weighted average method. All other inventory cost is determined principally using the first-in, first-out method.

The Company estimates retail inventory shortage for the period between physical inventory dates on a store-by-store basis. Inventory shrinkage estimates can be affected by changes in merchandise mix and changes in actual shortage trends. The shrinkage rate from the most recent physical inventory, in combination with historical experience, is the basis for estimating shrinkage.

Allowance for Doubtful Accounts

The Company maintains allowances for doubtful accounts for estimated losses resulting from the inability of the Company’s customers to make required payments. A considerable amount of judgment is required in assessing the ultimate realization of these receivables, including consideration of the Company’s history of receivable write-offs, the level of past due accounts and the economic status of the Company’s customers. In an effort to identify adverse trends relative to customer economic status, the Company assesses the financial health of the markets it operates in and performs periodic credit evaluations of its customers and ongoing reviews of account balances and aging of receivables. Amounts are considered past due when payment has not been received within the time frame of the credit terms extended. Write-offs are charged directly against the allowance for doubtful accounts and occur only after all collection efforts have been exhausted. At December 31, 2014 and December 31, 2013, the allowance for doubtful accounts was $2,889 and $1,362, respectively.

Long-Lived and Intangible Assets (including Goodwill)

Property, plant and equipment are stated at cost. Equipment under capital leases are stated at the present value of the minimum lease payments at the inception of the lease. Depreciation is calculated principally on the straight-line method over the estimated useful lives of the assets. Leasehold improvements are amortized on a straight-line basis over the shorter of the lease term or the estimated useful life of the asset.

The Company reviews the recoverability of its finite long-lived assets, including finite-lived intangible assets, whenever facts and circumstances indicate that the carrying amount may not be fully recoverable. For purposes of recognizing and measuring impairment, the Company evaluates long-lived assets other than goodwill

F-8

PARTY CITY HOLDCO INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Dollars in thousands, except per share)

based upon the lowest level of independent cash flows ascertainable to evaluate impairment. If the sum of the undiscounted future cash flows expected over the remaining asset life is less than the carrying value of the assets, the Company may recognize an impairment loss. The impairment related to long-lived assets is measured as the amount by which the carrying amount of the asset exceeds the fair value of the asset.

In the evaluation of the fair value and future benefits of finite long-lived assets attached to retail stores, the Company performs its cash flow analysis on a store-by-store basis. Various factors including future sales growth and profit margins are included in this analysis.

Goodwill represents the excess of the purchase price of acquired companies over the estimated fair value of the net assets acquired. Goodwill and other intangibles with indefinite lives are not amortized, but are reviewed for impairment annually or more frequently if certain indicators arise.

The Company evaluates the goodwill associated with its acquisitions, and other intangibles with indefinite lives, as of the first day of its fourth quarter based on current and projected performance. For purposes of testing goodwill for impairment, reporting units are determined by identifying individual components within the Company’s organization which constitute a business for which discrete financial information is available and is reviewed by management. Components within a segment are aggregated to the extent that they have similar economic characteristics. Based on this evaluation, the Company has determined that its operating segments, wholesale and retail, represent reporting units for the purposes of its goodwill impairment test.

If necessary, the Company estimates the fair value of each reporting unit using expected discounted cash flows. If the carrying amount of a reporting unit exceeds its fair value, the excess, if any, of the fair value of the reporting unit over amounts allocable to the unit’s other assets and liabilities is the implied fair value of goodwill. If the carrying amount of a reporting unit’s goodwill exceeds the implied fair value of that goodwill, an impairment loss will be recognized in an amount equal to that excess. The fair value of a reporting unit refers to the amount at which the unit as a whole could be sold in a current transaction between willing parties.

Deferred Financing Costs

Deferred financing costs are amortized to interest expense over the lives of the related debt using the effective interest method.

Deferred Rent and Rental Expenses

The Company leases its retail stores under operating leases that generally have initial terms of ten years, with two five year renewal options. The Company’s leases may have early cancellation clauses, which permit the lease to be terminated if certain sales levels are not met in specific periods, and may provide for the payment of contingent rent based on a percentage of the store’s net sales. The Company’s lease agreements generally have defined escalating rent provisions, which are reported as a deferred rent liability and expensed on a straight-line basis over the term of the related lease, commencing with the date of possession. In addition, the Company may receive cash allowances from its landlords on certain properties, which are reported as deferred rent and amortized to rent expense over the term of the lease, also commencing with the date of possession. The deferred rent liability at December 31, 2014 and 2013 was $37,355 and $23,252, respectively.

Investments

The Company maintains a 49.9% interest in Convergram Mexico, a joint venture distributing metallic balloons, principally in Mexico and Latin America. The Company accounts for its investment in the joint venture

F-9

PARTY CITY HOLDCO INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Dollars in thousands, except per share)

using the equity method. The Company’s investment in the joint venture is included in other assets on the consolidated balance sheet and the results of the joint venture’s operations are included in other expense (income) on the consolidated statement of operations and comprehensive income (loss) (see Note 10).

Insurance Accruals

The Company maintains certain self-insured workers’ compensation and general liability insurance plans. The Company estimates the required liability for claims under such plans based upon various assumptions, which include, but are not limited to, historical loss experience, projected loss development factors, actual payroll and other data. The required liability is also subject to adjustment in the future based upon changes in claims experience, including changes in the number of incidents (frequency) and changes in the ultimate cost per incident (severity).

Revenue Recognition

The Company’s terms of sale to retailers and other distributors for substantially all of its sales is free-on-board (“F.O.B.”) shipping point and, accordingly, title and the risks and rewards of ownership are transferred to the customer, and revenue is recognized, when goods are shipped. The Company estimates reductions to revenues for volume-based rebate programs at the time sales are recognized. Wholesale sales returns are not significant as, generally, we only accept the return of goods that were shipped to retailers in error. Revenue from retail operations is recognized at the point of sale. The Company estimates future retail sales returns and records a provision in the period that the related sales are recorded based on historical information. Retail sales are reported net of taxes collected.

Franchise fee revenue is recognized upon the completion of the Company’s performance requirements and the opening of the franchise store. In addition to the initial franchise fee, the Company also recognizes royalty fees generally ranging from 4% to 6% and advertising fund fees ranging from 1% to 2.25% based upon the franchised stores’ reported gross retail sales. The terms of the Company’s franchise agreements also provide for payments to franchisees based on e-commerce sales originating from specified areas relating to the franchisees’ contractual territory. The amounts paid by the Company vary based on several factors, including the profitability of the Company’s e-commerce sales, and are expensed at the time of sale.

Revenues, and the related profit, on sales from the Company’s wholesale operations to its retail operations are eliminated in consolidation.

Cost of Sales

Cost of sales at wholesale reflects the production costs (i.e., raw materials, labor and overhead) of manufactured goods and the direct cost of purchased goods, inventory shrinkage, inventory adjustments, inbound freight to the Company’s manufacturing and distribution facilities, distribution costs and outbound freight to transfer goods to the Company’s wholesale customers. At retail, cost of sales reflects the direct cost of goods purchased from third parties and the production or purchase costs of goods acquired from the Company’s wholesale operations. Retail cost of sales also includes inventory shrinkage, inventory adjustments, inbound freight, occupancy costs related to store operations, such as rent and common area maintenance, utilities and depreciation on assets, and all logistics costs (i.e., procurement, handling and distribution costs) associated with the Company’s e-commerce business.

F-10

PARTY CITY HOLDCO INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Dollars in thousands, except per share)

July 27, 2012. Such adjustment increased the Company’s cost of sales during the year ended December 31, 2014, the year ended December 31, 2013 and the period from July 28, 2012 to December 31, 2012 by $5,899, $25,229 and $58,626, respectively, as the related inventory was sold.

Retail Operating Expenses

Retail operating expenses include the costs and expenses associated with the operation of the Company’s retail stores, with the exception of occupancy costs included in cost of sales. Retail operating expenses principally consist of employee compensation and benefits, advertising, supplies expense and credit card and banking fees.

Shipping and Handling

Outbound shipping costs billed to customers are included in net sales. The costs of shipping and handling incurred by the Company are included in cost of sales.

Store Closure Costs

The Company records estimated store closure costs, estimated lease commitment costs (net of estimated sublease income) and other miscellaneous store closing costs when the liability is incurred.

Product Royalty Agreements

The Company enters into product royalty agreements that allow the Company to use licensed designs on certain of its products. These contracts require the Company to pay royalties, generally based on the sales of such product, and may require guaranteed minimum royalties, a portion of which may be paid in advance. The Company matches royalty expense with revenue by recording royalties at the time of sale, at the greater of the contractual rate or an effective rate calculated based on the guaranteed minimum royalty and the Company’s estimate of sales during the contract period. If a portion of the guaranteed minimum royalty is determined to be unrecoverable, the unrecoverable portion is charged to expense at that time. Guaranteed minimum royalties paid in advance are recorded in the consolidated balance sheets in either prepaid expenses and other current assets or other assets, depending on the nature of the royalties.

Catalogue Costs

The Company expenses costs associated with the production of catalogues when incurred.

Advertising

Advertising costs are expensed as incurred. Retail advertising expenses for the year ended December 31, 2014, the year ended December 31, 2013, the period from July 28, 2012 to December 31, 2012, and the period from January 1, 2012 to July 27, 2012 were $64,816, $68,134, $34,434, and $30,068, respectively.

Art and Development Costs

Art and development costs are primarily internal costs that are not easily associated with specific designs, some of which may not reach commercial production. Accordingly, the Company expenses these costs as incurred.

F-11

PARTY CITY HOLDCO INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Dollars in thousands, except per share)

Derivative Financial Instruments

Accounting Standards Codification (“ASC”) Topic 815, “Accounting for Derivative Instruments and Hedging Activities”, requires that all derivative financial instruments be recognized on the balance sheet at fair value and establishes criteria for both the designation and effectiveness of hedging activities. The Company uses derivatives in the management of interest rate and foreign currency exposure. ASC Topic 815 requires the Company to formally document the assets, liabilities or other transactions the Company designates as hedged items, the risk being hedged and the relationship between the hedged items and the hedging instruments. The Company must measure the effectiveness of the hedging relationship at the inception of the hedge and on an on-going basis.

If derivative financial instruments qualify as fair value hedges, the gain or loss on the instrument and the offsetting loss or gain on the hedged item attributable to the hedged risk are recognized in net income during the period of the change in fair values. For derivative financial instruments that qualify as cash flow hedges (i.e., hedging the exposure to variability in expected future cash flows that is attributable to a particular risk), the effective portion of the gain or loss on the derivative instrument is reported as a component of other comprehensive income and reclassified into net income in the same period or periods during which the hedged transaction affects earnings. The ineffective portion of a cash flow hedge, if any, is determined based on the dollar-offset method (i.e., the gain or loss on the derivative financial instrument in excess of the cumulative change in the present value of future cash flows of the hedged item) and is recognized in net income during the period of change. As long as hedge effectiveness is maintained, interest rate swap arrangements and foreign currency exchange agreements qualify for hedge accounting as cash flow hedges (see Note 18).

Income Taxes

Deferred tax assets and liabilities are determined based on the difference between the financial statement and tax bases of assets and liabilities (and operating loss and tax credit carryforwards) applying enacted statutory tax rates in effect for the years in which the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance when, in the judgment of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized.

Stock-Based Compensation

Accumulated Other Comprehensive (Loss) Income

Accumulated other comprehensive (loss) income consists of the Company’s foreign currency adjustments and the impact of interest rate swap and foreign exchange contracts that qualify as hedges (see Notes 18 and 19).

Foreign Currency Transactions and Translation

The functional currencies of the Company’s foreign operations are the local currencies in which they operate. Foreign currency exchange gains or losses resulting from receivables or payables in currencies other than the functional currencies generally are credited or charged to operations. The balance sheets of foreign subsidiaries are translated into U.S. dollars at the exchange rates in effect on the balance sheet date. The results of operations of foreign subsidiaries are translated into U.S. dollars at the average exchange rates effective for the periods presented. The differences from historical exchange rates are recorded as comprehensive income (loss) and are included as a component of accumulated other comprehensive income (loss).

F-12

PARTY CITY HOLDCO INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Dollars in thousands, except per share)

Earnings Per Share

Basic earnings per share are computed by dividing net income available for common stockholders by the weighted average number of common shares outstanding for the period. Diluted earnings per share are calculated based on the weighted average number of outstanding common shares plus the dilutive effect of stock options as if they were exercised.

A reconciliation between basic and diluted income per share is as follows:


	Year Ended December 31, 2014 (Successor)		Year Ended December 31, 2013 (Successor)		Period from July 28, 2012 to December 31, 2012 (Successor)			Period from January 1, 2012 to July 27, 2012 (Predecessor)
Net income (loss) available for common stockholders	$	56,123	$	4,019	$	(30,208	)	$	(15,098	)
Weighted average shares of Common Stock
Shares used in net (loss) income per common share—basic
Effect of dilutive securities:
Stock options and warrants

Dilutive potential common shares

Shares used in net (loss) income per common share—diluted
Net (loss) income per common share—basic	$		$		$			$

Net (loss) income per common share—diluted	$		$		$			$

All earnings per share amounts and number of shares outstanding have been retroactively adjusted to give effect to a -for-1 split of the Company’s common stock that was affected , 2015.

Recently Issued Accounting Pronouncements

In January 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2015-01, “Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items”. The pronouncement will be effective for the Company during the first quarter of 2016. Although the Company continues to review this pronouncement, it does not believe that it will have a material impact on the Company’s consolidated financial statements.

In June 2014, the FASB issued ASU 2014-12, “Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period”. The update clarifies that a performance target in a share-based payment award which affects vesting, and which could be achieved after the requisite service period, should be accounted for as a performance condition. The pronouncement will be effective for the Company during the first quarter of 2016. Although the Company continues to review this pronouncement, it does not believe that it will have a material impact on the Company’s consolidated financial statements.

F-13

PARTY CITY HOLDCO INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Dollars in thousands, except per share)

update will be effective for the Company during the first quarter of 2017 and can be applied retrospectively to prior reporting periods or through a cumulative-effect adjustment as of the date of adoption. The Company is in the process of evaluating the impact of the pronouncement on the Company’s consolidated financial statements.

In April 2014, the FASB issued ASU 2014-08, “Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity”. The update changes the criteria for reporting discontinued operations and enhances disclosures related to disposals of components of an entity. The pronouncement will be effective for the Company during the first quarter of 2015. Although the Company continues to review this pronouncement, it does not believe that it will have a material impact on the Company’s consolidated financial statements.

In July 2013, the FASB issued ASU 2013-11, “Income Taxes: Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists”. The update provides guidance on the financial statement presentation of an unrecognized tax benefit, as either a reduction of a deferred tax asset or as a liability, when a net operating loss carryforward, similar tax loss, or a tax credit carryforward exists. The Company adopted the update during the three months ended March 31, 2014 and such adoption did not have a material impact on the Company’s consolidated financial statements.

In March 2013, the FASB issued ASU 2013-05, “Foreign Currency Matters (Topic 830), Parent’s Accounting for the Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity”. The pronouncement states that a cumulative translation adjustment is attached to the parent’s investment in a foreign entity and should be released in a manner consistent with the derecognition guidance on investments in entities. The Company adopted the update during the three months ended March 31, 2014 and such adoption did not have a material impact on the Company’s consolidated financial statements.

Note 3—Inventories, Net

Inventories consisted of the following:


	December 31,
	2014		2013
Finished goods	$	550,975	$	501,229
Raw materials		22,093		15,921
Work in process		9,162		7,211

	$	582,230	$	524,361

As a result of the Transaction (see Note 1 and Note 5), the Company applied the acquisition method of accounting and increased the value of its inventory by $89,754 as of July 28, 2012. The adjustment principally reflects the previously deferred wholesale margin on inventory supplied to the Company’s retail operations at July 27, 2012. Such adjustment increased the Company’s cost of sales during the year ended December 31, 2014, the year ended December 31, 2013 and the period from July 28, 2012 to December 31, 2012 by $5,899, $25,229 and $58,626, respectively, as the related inventory was sold. At December 31, 2014 and December 31, 2013, $0 and $5,899, respectively, of the adjustment was included in finished goods.

F-14

PARTY CITY HOLDCO INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Dollars in thousands, except per share)

Note 4—Property, Plant and Equipment, Net

Property, plant and equipment, net consisted of the following:


	December 31,						Useful lives
	2014			2013			Useful lives
Machinery and equipment	$	116,613		$	87,312		3-15 years
Buildings		66,797			67,095		40 years
Data processing		31,893			30,033		3-5 years
Leasehold improvements		65,882			48,595		1-10 years
Furniture and fixtures		117,602			97,250		5-10 years
Land		9,449			8,968

		408,236			339,253
Less: accumulated depreciation		(159,552	)		(104,107	)

	$	248,684		$	235,146

Depreciation and amortization expense related to property, plant and equipment, including assets under capital leases, was $60,695, $67,627, $35,677, and $28,373, for the year ended December 31, 2014, the year ended December 31, 2013, the period from July 28, 2012 to December 31, 2012, and the period from January 1, 2012 to July 27, 2012, respectively.

Note 5—Acquisitions

The Transaction

On July 27, 2012, Merger Sub, a wholly owned subsidiary of PC Intermediate, which is an indirect wholly-owned subsidiary of Party City Holdco, merged into PCHI, with PCHI being the surviving entity through the Transaction. At such time 100% of Party City Holdco, which was formed in order to effect the Transaction, was owned by a collaborative group consisting of funds affiliated with THL, funds affiliated with Advent, and other minority investors, including management. Prior to the Transaction, PCHI was owned by Berkshire Partners LLC, Weston Presidio Capital, Advent, and other minority investors, including management. THL did not own any portion of PCHI prior to the Transaction. As the collaborative group acquired 100% of PCHI, push-down accounting was required.

The amount of cash paid in connection with acquisitions, net of cash acquired on the Company’s consolidated statement of cash flows for the period from July 28, 2012 to December 31, 2012, $1,562,246, represents the portion of the merger consideration that was received by PCHI’s former owners.

In conjunction with the Transaction, PCHI incurred $28,052 of transaction costs during the period from January 1, 2012 to July 27, 2012. Of such amount, $19,669, relating principally to banker fees, was recorded in other expense, net in the Company’s consolidated statement of operations and comprehensive loss. The remaining $8,383 was recorded as compensation expense in general and administrative expenses in the Company’s consolidated statement of operations and comprehensive loss. Additionally, the Transaction accelerated the vesting of certain of PCHI’s stock options and, as a result, the Company recorded $2,149 of stock-based compensation expense in general and administrative expenses in the Company’s consolidated statement of operations and comprehensive loss. Further, due to the vesting of such stock options, PCHI made payments in lieu of dividends to the holders of such options and recorded a $16,148 charge in general and administrative expenses in the Company’s consolidated statement of operations and comprehensive loss. The

F-15

PARTY CITY HOLDCO INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Dollars in thousands, except per share)

transaction costs payments and payments in lieu of dividends are included in the decrease in accounts payable, accrued expenses and income taxes payable in the Company’s July 28, 2012 to December 31, 2012 consolidated statement of cash flows.

Additionally, in conjunction with the Transaction, Party City Holdco incurred $4,564 of third-party costs, principally attorney and banker fees. The amount was recorded in other expense, net in the Company’s consolidated statement of operations and comprehensive loss for the period from July 28, 2012 to December 31, 2012. Also, at the time of the Transaction, Party City Holdco paid THL and Advent a non-recurring $20,000 fee for certain services that were performed in conjunction with the execution of the Transaction. The amount was recorded in other expense, net in the Company’s consolidated statement of operations and comprehensive loss for the period from July 28, 2012 to December 31, 2012.

Retail Acquisitions

During May 2013, the Company acquired 100% of the stock of iParty Corp. (“iParty”), a party goods retailer with approximately 50 stores principally located in the New England region. The purchase price was $29,401. Additionally, on the closing date, the Company repaid the entire amount outstanding under iParty’s credit agreement, $9,029. The results of iParty are included in the consolidated financial statements from the May 9, 2013 acquisition date and are reported in the operating results of the Company’s Retail segment.

Goodwill Changes by Reporting Segment

For the years ended December 31, 2014 and December 31, 2013, goodwill changes, by reporting segment, were as follows:


	Year Ended December 31, 2014			Year Ended December 31, 2013
Wholesale segment:
Beginning balance	$	496,375		$	495,830
Foreign currency impact and other		(4,279	)		545

Ending balance		492,096			496,375

Retail segment:
Beginning balance		1,065,332			1,041,739
iParty acquisition		0			21,059
Foreign currency impact and other		(178	)		2,534

Ending balance		1,065,154			1,065,332

Total ending balance, both segments	$	1,557,250		$	1,561,707

F-16

PARTY CITY HOLDCO INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Dollars in thousands, except per share)

Note 6—Intangible Assets

The Company had the following other identifiable intangible assets:


	December 31, 2014
	Cost		Accumulated Amortization		Net Carrying Value		Useful lives
Retail franchise licenses	$	67,000	$	15,400	$	51,600	19 years
Customer lists and relationships		55,770		19,392		36,378	20 years
Copyrights and designs		29,000		15,342		13,658	5-7 years
Leasehold interests		16,005		11,020		4,985	1-11 years
Design licenses		2,469		2,080		389	1-4 years

Total	$	170,244	$	63,234	$	107,010


	December 31, 2013
	Cost		Accumulated Amortization		Net Carrying Value		Useful lives
Retail franchise licenses	$	67,000	$	9,700	$	57,300	19 years
Customer lists and relationships		56,005		12,287		43,718	20 years
Copyrights and designs		29,000		9,442		19,558	5-7 years
Leasehold interests		16,031		8,019		8,012	1-11 years
Design licenses		2,469		1,649		820	1-4 years

Total	$	170,505	$	41,097	$	129,408

As a result of the Transaction (see Note 1 and Note 5) the Company applied the acquisition method of accounting and recorded the finite-lived intangible assets listed above. The Company is amortizing most of the assets using accelerated patterns based on the discounted cash flows that were used to value such assets.

Additionally, as a result of the Transaction, the Company applied the acquisition method of accounting and recorded an indefinite-lived asset for the Party City trade name of $519,000, an indefinite-lived asset for the Amscan trade name of $26,000 and an indefinite-lived asset for the Halloween City trade name of $18,000.

The value that was ascribed to the Halloween City trade name was based on the number of Halloween City stores that the Company expected to open during each subsequent Halloween selling season and the expected performance of such stores. The number of stores that the Company opens during a season is driven by many factors, including the availability of suitable locations. During 2013, the Company made a strategic decision to open fewer temporary Halloween City stores and the Company took a similar approach in 2014. As a result of a change in store performance and the Company’s decision to open fewer Halloween City stores than assumed when the Company recorded the asset in 2012, during 2013 the Company lowered the value of its Halloween City trade name by recording a $7,500 impairment charge.

The amortization expense for finite-lived intangible assets for the year ended December 31, 2014, the year ended December 31, 2013, the period from July 28, 2012 to December 31, 2012, and the period from January 1, 2012 to July 27, 2012 was $22,195, $26,997, $14,160, and $5,542, respectively. Estimated amortization expense for each of the next five years will be approximately $18,883, $15,973, $12,810, $9,435, and $8,267, respectively.

F-17

PARTY CITY HOLDCO INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Dollars in thousands, except per share)

Note 7—Loans and Notes Payable

At the time of the Transaction, PCHI entered into a new $400,000 ABL revolving credit facility (“ABL Facility”) and PCHI and its subsidiary, Party City Corporation, entered into a new $1,125,000 Term Loan Agreement (“Term Loan Credit Agreement”). Additionally, in conjunction with the Transaction, on July 27, 2012, PCHI issued $700,000 of 8.875% senior notes (the “Senior Notes”). At the time of the Transaction most of PCHI’s existing debt was repaid.

Below is a discussion of the ABL Facility and other credit agreements. See Note 8 for a discussion of the Company’s long-term obligations.

ABL Facility

The ABL Facility provides for (a) revolving loans in an aggregate principal amount at any time outstanding not to exceed $400,000, subject to a borrowing base described below, (b) swing-line loans in an aggregate principal amount at any time outstanding not to exceed 10% of the aggregate commitments under the facility and (c) letters of credit, in an aggregate face amount at any time outstanding not to exceed $50,000.

Under the ABL Facility, the borrowing base at any time equals (a) a percentage of eligible trade receivables plus (b) a percentage of eligible inventory and (c) a percentage of eligible credit card receivables, less (d) certain reserves.

The ABL Facility provides for two pricing options: (i) an alternate base interest rate (“ABR”) equal to the greater of (a) the prime rate, (b) the federal funds rate plus 1/2 of 1% or (c) the LIBOR rate plus 1%, in each case, on the date of such borrowing or (ii) a LIBOR based interest rate determined by reference to the LIBOR cost of funds for U.S. dollar deposits for the relevant interest period adjusted for certain additional costs and, in each case, plus an applicable margin. The applicable margin ranges from 0.5% to 1.00% with respect to ABR borrowings and from 1.50% to 2.00% with respect to LIBOR borrowings. The applicable margin at December 31, 2014 was 0.75% for ABR loans and 1.75% for loans based on the LIBOR rate.

In addition to paying interest on outstanding principal under the ABL Facility, PCHI is required to pay a commitment fee of between 0.250% and 0.375% per annum in respect of the unutilized commitments thereunder. PCHI must also pay customary letter of credit fees.

The ABL Facility also provides that PCHI has the right from time to time to request additional commitments, of which $125,000 remains available. The lenders under the ABL Facility are not under any obligation to provide any such additional commitments, and any increase in commitments is subject to several conditions precedent and limitations. If PCHI were to request any additional commitments, and the existing lenders or new lenders were to agree to provide such commitments, the facility size could be increased, but PCHI’s ability to borrow under this facility would still be limited by the amount of the borrowing base under this facility and limitations on incurring additional indebtedness under other debt agreements.

The ABL Facility has a maturity date of July 27, 2017.

In connection with the ABL Facility, PCHI incurred finance costs which have been capitalized and are being amortized over the life of the debt.

All obligations under the ABL Facility are jointly and severally guaranteed by PC Intermediate, PCHI and each existing and future domestic subsidiary of PCHI. PCHI and each guarantor has secured its obligations, subject to certain exceptions and limitations, including obligations under its guaranty, as applicable, by a

F-18

PARTY CITY HOLDCO INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Dollars in thousands, except per share)

first-priority lien on its accounts receivable, inventory, cash and certain related assets and a second-priority lien on substantially all of its other assets, including a pledge of all of the capital stock held by PC Intermediate, PCHI and each guarantor.

The ABL Facility contains negative covenants that, among other things and subject to certain exceptions, restrict the ability of PCHI to:

•

incur additional indebtedness;

•

pay dividends on capital stock or redeem, repurchase or retire capital stock;

•

make certain investments, loans, advances and acquisitions;

•

engage in transactions with affiliates;

•

create liens; and

•

transfer or sell certain assets.

In addition, PCHI must comply with a fixed charge coverage ratio if excess availability under the ABL Facility on any day is less than the greater of: (a) 10% of the lesser of the aggregate commitments and the then borrowing base under the ABL Facility and (b) $30,000. The fixed charge coverage ratio is the ratio of (i) Adjusted EBITDA (as defined in the ABL Facility) minus maintenance-related capital expenditures (as defined in the ABL Facility) to (ii) fixed charges (as defined in the ABL Facility). PCHI has not been subjected to the fixed charge coverage ratio as its excess availability has not fallen below the amounts specified above.

The ABL Facility also contains certain customary affirmative covenants and events of default.

Borrowings under the ABL Facility totaled $23,975 and $34,800 at December 31, 2014 and December 31, 2013, respectively. The interest rates at December 31, 2014 and December 31, 2013 were both 4.00%. Outstanding standby letters of credit totaled $19,464 at December 31, 2014 and, after considering borrowing base restrictions, PCHI had $356,561 of available borrowing capacity under the terms of the ABL Facility at December 31, 2014.

Other Credit Agreements

The Company’s subsidiaries have also entered into several foreign asset-based and overdraft credit facilities that provide the Company with additional borrowing capacity. At December 31, 2014 and December 31, 2013, borrowings under the foreign facilities totaled $1,361 and $1,247, respectively. The facilities contain customary affirmative and negative covenants.

F-19

PARTY CITY HOLDCO INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Dollars in thousands, except per share)

Note 8—Long-Term Obligations

Long-term obligations consisted of the following:


	December 31,
	2014			2013
Term Loan Credit Agreement (a)	$	1,089,242		$	1,097,561
Mortgage obligation (b)		0			1,216
Capital lease obligations (c)		3,274			2,921
Senior Notes (d)		700,000			700,000
Nextco Notes (e)		347,316			346,741

Total long-term obligations		2,139,832			2,148,439
Less: current portion		(12,249	)		(13,452	)

Long-term obligations, excluding current portion	$	2,127,583		$	2,134,987

Term Loan Credit Agreement

(a) At the time of the Transaction, PCHI and Party City Corporation entered into the Term Loan Credit Agreement. During February 2013 and February 2014, the Term Loan Credit Agreement was amended and all term loans outstanding at the time of the amendments were replaced with new term loans for the same principal amounts. See below for further discussion.

The Term Loan Credit Agreement provides for two pricing options: (i) an ABR for any day, a rate per annum equal to the greater of (a) Deutsche Bank’s prime rate in effect on such day, (b) the federal funds effective rate in effect on such day plus 1/2 of 1%, (c) the adjusted LIBOR rate plus 1% and (d) 2.00% or (ii) the LIBOR rate, adjusted for certain additional costs, with a LIBOR floor of 1.00%, in each case plus an applicable margin. The applicable margin is 2.00% with respect to ABR borrowings and 3.00% with respect to LIBOR borrowings.

The Term Loan Credit Agreement also provides the right from time to time to request an amount of additional term loans up to $250,000. The lenders under the Term Loan Credit Agreement are not under any obligation to provide any such additional term loans.

The term loans may be voluntarily prepaid at any time without premium or penalty, other than customary breakage costs with respect to loans based on the LIBOR rate. The term loans are subject to mandatory prepayment, subject to certain exceptions, with (i) 100% of net proceeds above a threshold amount of certain asset sales, subject to reinvestment rights and certain other exceptions, (ii) 100% of the net cash proceeds of any incurrence of debt other than debt permitted under the Term Loan Credit Agreement, (iii) 50% of Excess Cash Flow, as defined in the Term Loan Credit Agreement, if any (which percentage will be reduced to 25% if the senior secured leverage ratio (as defined in the Term Loan Credit Agreement) is less than 3.50 to 1.00, but greater than 2.50 to 1.00, and 0% if the senior secured leverage ratio is less than 2.50 to 1.00).

The term loans under the Term Loan Credit Agreement mature on July 27, 2019. PCHI and Party City Corporation are required to repay installments on the term loans in quarterly principal amounts of 0.25%, with the remaining amount payable on the maturity date.

All obligations under the Term Loan Credit Agreement are jointly and severally guaranteed by PC Intermediate, PCHI, Party City Corporation and each existing and future domestic subsidiary of PCHI. PCHI, Party City Corporation and each guarantor has secured its obligations, subject to certain exceptions and limitations, by a first-priority lien on substantially all of its assets (other than accounts receivable, inventory, cash

F-20

PARTY CITY HOLDCO INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Dollars in thousands, except per share)

and certain related assets), including a pledge of all of the capital stock held by PC Intermediate, PCHI, Party City Corporation and each guarantor, and a second-priority lien on its accounts receivable, inventory, cash and certain related assets.

The Term Loan Credit Agreement contains certain customary affirmative covenants and events of default. Additionally, it contains negative covenants which, among other things and subject to certain exceptions, restrict the ability of PCHI and Party City Corporation to:

•

incur additional indebtedness;

•

pay dividends on capital stock or redeem, repurchase or retire capital stock;

•

make certain investments, loans, advances and acquisitions;

•

engage in transactions with affiliates;

•

create liens; and

•

transfer or sell certain assets.

In connection with the Term Loan Credit Agreement, finance costs were incurred and capitalized. In conjunction with the amendments, some of the costs were written-off. See below. The remaining costs are being amortized over the life of the debt using the effective interest method.

During February 2014, the Term Loan Credit Agreement was amended. As the Term Loan Credit Agreement is a loan syndication, the Company assessed whether the debt modification should be accounted for as an extinguishment on a creditor-by-creditor basis. During the year ended December 31, 2014, the Company wrote-off $1,649 of costs incurred during the issuance of the debt and which were being amortized over the life of the debt. The amount was recorded in other expense in the Company’s consolidated statement of operations and comprehensive income and included in amortization of deferred financing costs and original issuance discount in the Company’s consolidated statement of cash flows. The remaining costs of $15,626 will continue to be amortized over the life of the debt, using the effective interest method. Additionally, during the year ended December 31, 2014, the Company recorded in other expense $642 of the net original issuance discount that existed as of the time of the amendment. The remainder of the discount, $6,087, will continue to be amortized over the life of the debt, using the effective interest method. Further, during the year ended December 31, 2014, the Company recorded in other expense $698 of the unamortized call premium that existed as of the time of the amendment. The remainder of the call premium, $6,611, will continue to be amortized over the life of the debt, using the effective interest method. Finally, in conjunction with the amendment, the Company incurred $1,555 of banker and legal fees; $1,407 of which was recorded in other expense during the year ended December 31, 2014. The rest of the costs, $148, will be amortized over the life of the debt, using the effective interest method.

At the time of the February 2013 amendment of the Term Loan Credit Agreement, the Company assessed whether the debt modification should be accounted for as an extinguishment on a creditor-by-creditor basis and recorded a $12,295 charge in other expense, net in the Company’s consolidated statement of operations and comprehensive income for the year ended December 31, 2013.

As all term loans outstanding during the February 2014 and February 2013 amendments were replaced with new term loans for the same principal amounts, the Company included the total principal amounts, $1,110,966 and $1,122,188, respectively, in both repayment of loans, notes payable and long-term obligations and proceeds from loans, notes payable and long-term obligations in the financing activities section of the Company’s consolidated statement of cash flows.

F-21

PARTY CITY HOLDCO INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Dollars in thousands, except per share)

At December 31, 2014, the outstanding principal amount of term loans under the Term Loan Credit Agreement was $1,089,242, which reflects an original issue discount of $5,085, net of $3,207 of accumulated amortization, and a call premium of $5,527, net of $2,462 of accumulated amortization. At December 31, 2013, the outstanding principal amount of term loans under the Term Loan Credit Agreement was $1,097,561, which reflects an original issue discount of $6,901, net of $2,033 of accumulated amortization, and a call premium of $7,502, net of $1,185 of accumulated amortization. At December 31, 2014, the interest rate on the outstanding term loan borrowings was 4.00%. At December 31, 2013, the interest rate on the outstanding term loan borrowings was 4.25%.

(b) In conjunction with the construction of a new distribution facility, during 2001 the Company borrowed from the New York State Job Development Authority, pursuant to the terms of a second lien mortgage note. The mortgage was fully repaid as of December 31, 2014.

(c) The Company’s operating subsidiaries have entered into various capital leases for machinery and equipment with implicit interest rates generally ranging from 3% to 8% and generally extending to 2020.

(d) In connection with the Transaction, PCHI issued $700,000 of 8.875% Senior Notes, which are due on August 1, 2020.

Interest on the Senior Notes is payable semi-annually in arrears on February 1 and August 1 of each year. The Senior Notes are guaranteed, jointly and severally, on a senior basis by each of PCHI’s existing and future domestic subsidiaries. The Senior Notes and the guarantees are general unsecured senior obligations and are effectively subordinated to all other secured debt to the extent of the assets securing such secured debt.

The indenture governing the Senior Notes contains certain covenants limiting, among other things and subject to certain exceptions, PCHI’s ability to:

•

incur additional indebtedness or issue certain disqualified stock and preferred stock;

•

pay dividends or distributions, redeem or repurchase equity;

•

prepay subordinated debt or make certain investments;

•

transfer and sell assets;

•

engage in transactions with affiliates;

•

create liens; and

•

consolidate, merge or transfer all or substantially all of its assets.

The indenture governing the Senior Notes also contains certain customary affirmative covenants and events of default.

On or after August 1, 2015, PCHI may redeem the Senior Notes, in whole or in part, at the following (expressed as a percentage of the principal amount to be redeemed) plus accrued and unpaid interest thereon:


Twelve-month period beginning on August 1,	Percentage
2015		106.656	%
2016		104.438	%
2017		102.219	%
2018 and thereafter		100.000	%

F-22

PARTY CITY HOLDCO INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Dollars in thousands, except per share)

In addition, PCHI may redeem up to 40% of the aggregate principal amount of the Senior Notes before August 1, 2015 with the net cash proceeds from one or more equity offerings at a redemption price of 108.875% of the principal amount plus accrued and unpaid interest. PCHI may also redeem some or all of the notes before August 1, 2015 at a redemption price of 100% of the principal amount, plus accrued and unpaid interest plus a “make whole” premium.

If PCHI experiences certain types of change in control, PCHI may be required to offer to repurchase the Senior Notes at 101% of their principal amount, plus accrued and unpaid interest.

In connection with the issuance of the Senior Notes, PCHI incurred finance costs that have been capitalized and are being amortized over the life of the debt.

(e) On August 1, 2013, PC Nextco, along with its co-issuer, PC Nextco Finance, issued $350,000 of 8.75% notes at a 1% discount (“the Nextco Notes”). The proceeds, net of expenses, were used to make a distribution to the shareholders of PC Nextco’s member, Party City Holdco. The Nextco Notes, which mature on August 15, 2019 and which pay interest semiannually on February 15 ^th and August 15 ^th , are not guaranteed. Since PC Nextco has no assets or operations other than its investment in, and income (loss) from, PCHI and its subsidiaries, interest and principal payments for the Nextco Notes are being funded by PCHI and its subsidiaries. To the extent that restricted payment basket limitations in PCHI’s existing debt agreements prevent it from being able to pay the necessary funds to PC Nextco in order for PC Nextco to make the semi-annual interest payments, the Nextco Notes require PC Nextco to pay the interest by increasing the principal amount of the notes or issuing additional notes (“PIK Interest”). PIK Interest is paid at a rate of 9.50%.

The indenture governing the Nextco Notes contains certain covenants limiting, among other things and subject to certain exceptions, the ability of PC Nextco and its restricted subsidiaries to:

•

incur additional indebtedness or issue preferred stock;

•

pay dividends or distributions on capital stock or redeem, repurchase or retire capital stock or the capital stock of any restricted subsidiary or make payments on, or redeem, repurchase or retire any indebtedness subordinated to the Nextco Notes;

•

make certain investments, loans, advances and acquisitions;

•

enter into sale and leaseback transactions;

•

engage in transactions with affiliates;

•

create liens;

•

guarantee debt;

•

create restrictions on the payment of dividends or other amounts to PC Nextco from its restricted subsidiaries;

•

consolidate, merge or transfer all or substantially all of PC Nextco’s assets and the assets of its subsidiaries; and

•

engage in unrelated businesses.

The indenture governing the Nextco Notes also contains certain customary affirmative covenants and events of default, including a cross-payment default provision and cross-acceleration provision in the case of a payment default or acceleration according to the terms of any indebtedness with an aggregate principal amount of $50,000 or more.

F-23

PARTY CITY HOLDCO INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Dollars in thousands, except per share)

PC Nextco may redeem the outstanding notes, in whole or in part, at the redemption prices specified below (expressed as a percentage of the principal amount of the notes to be redeemed) plus accrued and unpaid interest thereon:


12 month period beginning on	Percentage
February 15, 2015		102.000	%
February 15, 2016		101.000	%
February 15, 2017 and thereafter		100.000	%

In addition, PC Nextco may, on one or more occasions, redeem up to 40% of the aggregate principal amount of the notes, plus accrued and unpaid interest, with the net cash proceeds of one or more equity offerings; provided that each such redemption occurs within 180 days of the date of closing of each such equity offering upon not less than 30 nor more than 60 days’ notice sent to each holder of the notes being redeemed. Additionally, if it experiences certain types of change in control, PC Nextco must offer to purchase the outstanding notes at 101% of their principal amount, plus accrued and unpaid interest.

In connection with the issuance of the Nextco Notes, PC Nextco incurred finance costs that have been capitalized and are being amortized over the life of the debt.

In addition, subject to certain exceptions, PCHI may not make restricted payments, including the payment of dividends to its shareholders, unless certain conditions are met under the terms of the indenture governing the Senior Notes, the ABL Facility and the Term Loan Credit Agreement. As of December 31, 2014, the most restrictive of these conditions existed in the indenture for the Senior Notes and in the Term Loan Credit Agreement, which both limit restricted payments based on PCHI’s consolidated net income and leverage ratios subsequent to the date of the Transaction. As of December 31, 2014, PCHI had $154,425 of restricted payment capacity under the two debt instruments. PCHI’s parent companies, PC Intermediate, PC Nextco and Party City Holdco, have no assets or operations other than their investments in their subsidiaries and income from those subsidiaries.

At December 31, 2014, maturities of long-term obligations consisted of the following:


	Long-Term Debt Obligations		Capital Lease Obligations		Totals
2015	$	11,250	$	999	$	12,249
2016		11,110		1,112		12,222
2017		11,110		800		11,910
2018		11,110		240		11,350
2019		1,391,978		118		1,392,096
Thereafter		700,000		5		700,005

Long-term obligations	$	2,136,558	$	3,274	$	2,139,832

F-24

PARTY CITY HOLDCO INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Dollars in thousands, except per share)

Note 9—Capital Stock

At December 31, 2014, the Company’s authorized capital stock, including redeemable securities, consisted of 1,000,000.00 shares of $0.01 par value common stock.

Under the terms of Party City Holdco’s stockholders’ agreement, dated July 27, 2012, Party City Holdco has an option to purchase all of the shares of common stock held by former employees. Additionally, employee stockholders who die or become disabled while employed can require Party City Holdco to purchase all of the shares held by the employee stockholders. The aggregate amount that may be payable by the Company to current employee stockholders should they die or become disabled while employed, based on the estimated fair market value of fully paid and vested common securities, totaled $35,062 and $23,555 at December 31, 2014 and December 31, 2013, respectively, and was classified as redeemable common securities on the Company’s consolidated balance sheet, with a corresponding adjustment to additional paid-in capital. As there is no active market for the common stock, the Company estimates the fair value of the stock based on a valuation model, which is periodically substantiated by independent appraisals or third-party transactions, including acquisitions. The valuation model takes into consideration the fact that Party City Holdco’s stock was not marketable at December 31, 2014 and December 31, 2013.

Immediately subsequent to the Transaction, at July 28, 2012, there were 888.23 redeemable common securities outstanding. There were no changes in redeemable common securities during the period from July 28, 2012 to December 31, 2012.

A summary of the changes in redeemable common securities during the years ended December 31, 2014 and 2013 follows:


	Redeemable
	Number of Common Shares			Total Redeemable Common Securities
Successor:
Balance as of December 31, 2012		888.23		$	22,205
Shares issued		151.00			3,775
Revaluation of shares		0			(2,425	)

Balance as of December 31, 2013		1,039.23		$	23,555
Shares issued		93.58			1,794
Revaluation of shares		0			10,387
Shares reclassified to additional paid-in capital due to employee terminations		(29.72	)		(674	)

Balance as of December 31, 2014		1,103.09		$	35,062

During the year ended December 31, 2014, 70 shares of redeemable common stock were issued to current employees due to stock option exercises. During the years ended December 31, 2014 and 2013, 23.58 shares and 121 shares of redeemable common stock were issued, respectively, in conjunction with acquisitions (the sellers of the acquired entities became employees of the Company). Additionally, during the year ended December 31, 2013, an independent member of the Board of Directors purchased 30 shares of redeemable common stock.

On August 1, 2013, PC Nextco issued the Nextco Notes (see Note 8). The proceeds, net of expenses, were used to pay a dividend to the shareholders of PC Nextco’s parent, Party City Holdco. During the year ended

F-25

PARTY CITY HOLDCO INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Dollars in thousands, except per share)

December 31, 2013, based on a valuation model, the estimated fair value of the redeemable common securities increased by $8,058. Such increase was more than offset by the impact of the dividend, which decreased the fair value of such securities by $10,483.

Note 10—Other Expense, net


	Year Ended December 31, 2014 (Successor)			Year Ended December 31, 2013 (Successor)		Period from July 28, 2012 to December 31, 2012 (Successor)			Period from January 1, 2012 to July 27, 2012 (Predecessor)
Other expense, net consists of the following:
Undistributed loss (income) in unconsolidated joint venture	$	1,556		$	172	$	(297	)	$	(128	)
Foreign currency loss		1,447			1,581		532			148
Term Loan Credit Agreement amendment (see Note 8)		4,396			12,295		0			0
Transaction costs (see Note 5)		0			0		24,564			19,669
Corporate development expenses		700			2,960		351			2,395
Business interruption proceeds		(4,514	)		0		0			0
Other, net		2,306			1,470		1,007			161

Other expense, net	$	5,891		$	18,478	$	26,157		$	22,245

During October 2012, the Company’s operations were negatively impacted by Superstorm Sandy. During the year ended December 31, 2014, the Company received $4,514 of business interruption insurance proceeds, net of costs, related to the storm and the Company recorded the proceeds in other expense, net in the Company’s consolidated statement of operations and comprehensive income.

Note 11—Employee Benefit Plans

Certain subsidiaries of the Company maintain defined contribution plans for eligible employees. The plans require the subsidiaries to match from approximately 11% to 100% of voluntary employee contributions to the plans, not to exceed a maximum amount of the employee’s annual salary, ranging from 5% to 6%. Expense for the plans for the year ended December 31, 2014, the year ended December 31, 2013, the period from July 28, 2012 to December 31, 2012, and the period from January 1, 2012 to July 27, 2012 totaled $6,179, $4,899, $2,286, and $2,505, respectively.

Note 12—Equity Incentive Plans

Subsequent to the Transaction (see Note 5), Party City Holdco adopted the 2012 Omnibus Equity Incentive Plan (the “2012 Plan”) under which it can grant incentive awards in the form of stock appreciation rights, restricted stock 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 3,706 shares.

F-26

PARTY CITY HOLDCO INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Dollars in thousands, except per share)

During April 2013 and May 2013, time-based stock options and performance-based stock options were granted to employees and an independent director under the 2012 Plan. The options were originally exercisable at $25,000 per share. As a result of the August 2013 dividend distribution (see Note 8), in accordance with the terms of the 2012 Plan, the exercise prices of the options were adjusted to $14,913 per share.

Time-based options

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 $1,583, $2,137, $0, and $1,747, during the year ended December 31, 2014, the year ended December 31, 2013, the period from July 28, 2012 to December 31, 2012, and the period from January 1, 2012 to July 27, 2012, respectively. The fair value of time-based options granted during 2013 was estimated on the grant date using a Black-Scholes option valuation model based on the assumptions in the following table:


Expected dividend rate		0%
Risk-free interest rate		1.03% to 2.07%
Volatility		35.00%
Expected option term		6.2 years – 6.5 years

As Party City Holdco’s stock is not publicly traded, the Company determined volatility based on the average historical volatility of guideline companies. As there is not sufficient historical exercise data to provide a reasonable basis for determining the expected term, the Company estimated the expected term using the “simplified” method.

The Company based its estimated forfeiture rate of 13.4% on historical forfeitures for time-based options that were granted by PCHI between 2004 and 2012 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 time-based options that were granted during April 2013 vested 20% on July 27, 2013 and vest 20% each July 27 ^th thereafter. The other time-based options that were granted during 2013 vest 20% on each anniversary date. All time-based options become fully vested in the event of a change-in-control. The Company records compensation expense for such options on a straight-line basis.

Performance-based options

Party City Holdco also grants performance-based stock options to key employees and independent directors. For performance-based options, vesting is contingent upon a change-in-control and the achievement of specified investment returns for Party City Holdco’s shareholders. Since a change-in-control cannot be assessed as probable before it occurs, no compensation expense has been recorded for the performance-based options that have been granted under the 2012 Plan. At December 31, 2014, 1,468 performance-based stock options were outstanding.

F-27

PARTY CITY HOLDCO INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Dollars in thousands, except per share)

The following table summarizes the changes in outstanding stock options for the period from January 1, 2012 to July 27, 2012, the year ended December 31, 2013, and the year ended December 31, 2014. There was no activity during the period from July 28, 2012 to December 31, 2012.


	Options			Average Exercise Price		Average Fair Value of Time-Based Options at Grant Date		Aggregate Intrinsic Value		Weighted Average Remaining Contractual Term (Years)
Predecessor:
Outstanding at December 31, 2011		3,698.27		$	17,137
Granted		10.00			42,000	$	10,254
Exercised		(3,295.58	)		15,803
Forfeited		(412.69	)		28,392

Outstanding at July 27, 2012		0.00


Successor:
Outstanding at December 31, 2012		0.00

Granted		2,583.00			14,916		8,830
Exercised		0.00			0
Forfeited		(36.00	)		14,913

Outstanding at December 31, 2013		2,547.00			14,916			$	19,739		9.2

Granted		0.00
Exercised		(72.40	)		14,913
Forfeited		(86.60	)		14,913

Outstanding at December 31, 2014		2,388.00			14,916				40,282		8.3

Exercisable at December 31, 2014		309.80			14,915				5,226		8.2

Expected to vest at December 31, 2014 (excluding performance-based options)		610.20			14,917				10,293		8.3

Exercisable at December 31, 2013		187.60			14,913				1,454		9.2

The intrinsic value of options exercised was $561, $0, $0, and $108,364 for the year ended December 31, 2014, the year ended December 31, 2013, the period from July 28, 2012 to December 31, 2012, and the period from January 1, 2012 to July 27, 2012, respectively. The fair value of options vested was $1,769, $1,676, $0, and $2,632, during the year ended December 31, 2014, the year ended December 31, 2013, the period July 28, 2012 to December 31, 2012, and the period from January 1, 2012 to July 27, 2012, respectively.

F-28

PARTY CITY HOLDCO INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Dollars in thousands, except per share)

Note 13—Income Taxes

A summary of domestic and foreign income (loss) before income taxes and including noncontrolling interest follows:


	Year Ended December 31, 2014 (Successor)		Year Ended December 31, 2013 (Successor)			Period from July 28, 2012 to December 31, 2012 (Successor)			Period from January 1, 2012 to July 27, 2012 (Predecessor)
Domestic	$	67,000	$	(5,479	)	$	(31,692	)	$	(11,128	)
Foreign		14,334		5,197			222			(3,471	)

Total	$	81,334	$	(282	)	$	(31,470	)	$	(14,599	)

The income tax expense (benefit) consisted of the following:


	Year Ended December 31, 2014 (Successor)			Year Ended December 31, 2013 (Successor)			Period from July 28, 2012 to December 31, 2012 (Successor)			Period from January 1, 2012 to July 27, 2012 (Predecessor)
Current:
Federal	$	28,735		$	15,259		$	18,309		$	(5,345	)
State		5,954			2,285			622			433
Foreign		4,280			3,530			1,910			1,492

Total current expense (benefit)		38,969			21,074			20,841			(3,420	)
Deferred:
Federal		(11,522	)		(19,519	)		(19,611	)		6,077
State		(2,838	)		(5,675	)		(1,470	)		(904	)
Foreign		602			(405	)		(1,082	)		(1,350	)

Total deferred (benefit) expense		(13,758	)		(25,599	)		(22,163	)		3,823

Income tax expense (benefit)	$	25,211		$	(4,525	)	$	(1,322	)	$	403

F-29

PARTY CITY HOLDCO INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Dollars in thousands, except per share)

Deferred income taxes reflect the net tax effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.

Deferred income tax assets and liabilities consisted of the following:


	December 31,
	2014			2013
Current deferred income tax assets:
Inventory valuation	$	10,923		$	9,294
Allowance for doubtful accounts		1,079			736
Accrued liabilities		6,533			4,448
Federal tax loss carryforwards		4,944			6,235
State tax loss carryforwards		1,517			1,517
Foreign tax loss carryforwards		4,003			3,942
Tax credit carryforwards		1,637			2,054
Other		6,087			(167	)

Current deferred income tax assets before valuation allowances		36,723			28,059
Less: valuation allowances		(8,663	)		(5,335	)

Current deferred income tax assets, net (included in prepaid expenses and other current assets)	$	28,060		$	22,724

Non-current deferred income tax liabilities, net:
Property, plant and equipment	$	15,984		$	21,404
Intangible assets		218,623			219,562
Amortization of goodwill and other assets		68,025			74,536
Foreign earnings expected to be repatriated		8,844			4,275
Other		(2,138	)		(1,604	)

Non-current deferred income tax liabilities, net	$	309,338		$	318,173

Management assesses the available positive and negative evidence to estimate if sufficient taxable income will be generated to realize existing deferred tax assets. On the basis of this evaluation, as of December 31, 2014 and December 31, 2013, valuation allowances in the amounts of $3,406 and $3,281, respectively, were established for United Kingdom (“U.K.”) net operating loss carryforwards, which do not expire. In addition, at December 31, 2014, a valuation allowance of $2,103 was established for German pre-acquisition loss carryforwards of an entity treated as a U.S. branch for income tax purposes. In addition to such allowances, at December 31, 2014 and December 31, 2013, additional valuation allowances of $1,637 and $2,054, respectively, were established on the Company’s foreign tax credit carryforwards, which expire in 2021, based on a projection of foreign sourced income which limits the Company’s ability to utilize the credits. Further, at December 31, 2014, a valuation allowance in the amount of $1,517 was established on state net operating loss carryforwards which expire beginning in 2021.

F-30

PARTY CITY HOLDCO INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Dollars in thousands, except per share)

The difference between the Company’s effective income tax rate and the U.S. statutory income tax rate is as follows:


	Year Ended December 31, 2014 (Successor)			Year Ended December 31, 2013 (Successor)			Period from July 28, 2012 to December 31, 2012 (Successor)			Period from January 1, 2012 to July 27, 2012 (Predecessor)
Tax provision at U.S. statutory income tax rate		35.0	%		35.0	%		35.0	%		35.0	%
State income tax, net of federal income tax		2.5			1,299.0			1.7			2.4
Domestic production activities deduction		(1.9	)		460.3			2.6			(15.8	)
Deferred tax adjustments		(0.2	)		244.0			0			(1.5	)
Transaction costs		(6.9	)		(131.2	)		(27.3	)		(13.4	)
Foreign net operating losses not benefited		0.5			(588.7	)		(2.3	)		(8.7	)
U.S.—foreign rate differential		1.5			115.7			(5.1	)		(0.5	)
Other		0.5			170.5			(0.4	)		(0.3	)

Effective income tax rate		31.0	%		1,604.6	%		4.2	%		(2.8	)%

Transaction costs : As described in Note 5, Party City Holdco incurred $24,564 of costs for services performed in conjunction with the Transaction. These expenses, recorded in other expense, net, in the period from July 28, 2012 to December 31, 2012, were capitalized for tax purposes. During 2014, Party City Holdco determined that $15,876 of these expenses qualify for amortization over time for tax purposes. Party City Holdco will file an automatic method change with its 2014 tax return in order to deduct these expenses for tax purposes. The tax benefit of $5,918, realized over 15 years, has been reflected in the Company’s 2014 consolidated statement of operations and comprehensive income.

State income tax : During 2013, the Company recorded a $2,247 state income tax benefit principally due to a reduction in a deferred income tax liability on trade names, which was caused by the impact of apportionment changes on future state income taxes. Additionally, during 2013, the Company recorded a state income tax credit in the amount of $1,441 due to a write-off of a deferred tax liability related to state bonus depreciation.

Deferred tax adjustments : During 2013, the Company wrote-off deferred tax liabilities related primarily to deferred finance charges and the federal deduction for state taxes. During the period from January 1, 2012 to July 27, 2012 the Company established a full valuation allowance on its foreign tax credit carryforwards. Additionally, the Company wrote-off a deferred tax liability related to the federal deduction for state taxes and it wrote-off a deferred tax asset related to deferred rent.

U.S.—foreign rate differential : During 2014, 2013, and the periods from July 28, 2012 to December 31, 2012 and January 1, 2012 to July 27, 2012, the U.S. tax effect on foreign earnings which are expected to be remitted in the future was provided, without consideration of offsetting foreign tax credits, due to projected future foreign source income being insufficient to utilize any available foreign tax credits.

As of December 31, 2014 and December 31, 2013, the Company had $4,944 and $6,235, respectively, of tax-effected net operating loss carryforwards in the U.S. primarily due to the acquisition of iParty (see Note 5), which expire primarily in 2020. Additionally, at December 31, 2014, the Company had tax-effected net operating loss carryforwards in the U.K. and Canada in the amounts of $3,406 (which do not expire) and $597 (which begin to expire in 2031), respectively. As of December 31, 2013, the Company had tax-effected net operating loss carryforwards in the U.K. and Canada of $3,281 and $661, respectively. The Company has established a full

F-31

PARTY CITY HOLDCO INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Dollars in thousands, except per share)

valuation allowance on loss carryforwards in the U.K. and it expects the net operating loss carryforwards in Canada to be fully realizable. Also, at both December 31, 2014 and December 31, 2013, the Company had state net operating loss carryforwards which expire beginning in 2021.

When the Company acquired Christy’s By Design Limited and Riethmuller GmbH during 2010 and 2011, respectively, it chose to treat the entities as if they were U.S. branches in order to achieve certain U.S. tax benefits then available. At the time of the acquisitions, these foreign entities had pre-acquisition foreign net operating loss carryforwards (the post-acquisition losses of the entities, if any, cannot be carried forward in the foreign jurisdictions as those losses are deducted in the Company’s U.S. income tax return). These pre-acquisition losses can be carried forward indefinitely in both countries. However, any future foreign earnings that would utilize these losses will still be taxed in the U.S. at the U.S. income tax rate. The Company has established a full valuation allowance on its Riethmuller GmbH pre-acquisition loss carryforwards of $2,103 at December 31, 2014. The Company expects the Christy’s By Design Limited pre-acquisition loss carryforwards of $2,663 at December 31, 2014 to be fully realizable. However, because Christy’s By Design Limited’s future earnings will not result in future taxes paid in the amount of the loss carryforwards to be utilized as it is not anticipated that there will be foreign tax credits available to offset the amounts taxed in the U.S., a deferred tax liability is recognized in an amount equal to the recognized pre-acquisition losses. Once the pre-acquisition loss carryforwards of the U.S. branches have been utilized, the future foreign earnings will be taxed in both the foreign jurisdiction and in the U.S. and the Company’s total income tax expense related to those earnings will depend on whether foreign taxes paid on those earnings can be used as foreign tax credits on the Company’s federal income tax return.

Other differences between the effective income tax rate and the federal statutory income tax rate are composed primarily of favorable permanent differences related to inventory contributions, offset by non-deductible meals and entertainment expenses.

The Company continuously monitors whether foreign earnings are to be permanently reinvested. During 2013, the Company recorded a $1,723 benefit due to changes in the estimated foreign earnings which will be repatriated to appropriately reflect the current and future business needs. Such amount is included in “U.S.—foreign rate differential” in the table above.

At December 31, 2014 and 2013, the Company’s share of the cumulative undistributed earnings of any foreign subsidiaries whose earnings are considered permanently reinvested was approximately $31,101 and $27,076, respectively. No provision has been made for U.S. or additional foreign taxes on the undistributed earnings of these subsidiaries as such earnings have been reinvested indefinitely in the subsidiaries’ operations. It is not practical to estimate the amount of additional tax that might be payable on these foreign earnings in the event of a distribution or sale as the Company cannot estimate the ratio of foreign and domestic sourced income at the time of such event. However, there are approximately $19,000 of foreign taxes paid that relate to these earnings if they were ever repatriated.

F-32

PARTY CITY HOLDCO INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Dollars in thousands, except per share)

The following table summarizes the activity related to the Company’s gross unrecognized tax benefits:


	Year Ended December 31, 2014 (Successor)			Year Ended December 31, 2013 (Successor)			Period from July 28, 2012 to December 31, 2012 (Successor)			Period from January 1, 2012 to July 27, 2012 (Predecessor)
Balance as of beginning of period	$	285		$	529		$	492		$	492
Increases related to current period tax positions		763			0			163			0
Increases related to prior period tax positions		0			0			0			0
Decrease related to settlements		(193	)		0			0			0
Decreases related to lapsing of statutes of limitations		(57	)		(244	)		(126	)		0

Balance as of end of period	$	798		$	285		$	529		$	492

The Company’s total net unrecognized tax benefits that, if recognized, would impact the Company’s effective tax rate were $798 and $285 at December 31, 2014 and 2013, respectively. It is reasonably possible that a reduction of uncertain tax positions of $71 may occur prior to December 31, 2015, upon the expiration of the period to assess tax in various federal, state and foreign taxing jurisdictions.

The Company recognizes accrued interest and penalties related to unrecognized tax benefits in income tax expense. The Company has accrued $22 and $37 for the potential payment of interest and penalties at December 31, 2014 and 2013, respectively. During the year ended December 31, 2014, December 31, 2013, the period from July 28, 2012 to December 31, 2012, and the period from January 1, 2012 to July 27, 2012, the Company recorded income tax (credits) expense of ($15), ($30), $10, and ($29), respectively, related to interest and penalties.

For federal income tax purposes, the period from July 28, 2012 to December 31, 2012, the year ended December 31, 2013 and the year ended December 31, 2014 are open to examination at December 31, 2014. For non-U.S. income tax purposes, tax years from 2007 through 2014 remain open. Lastly, the Company is open to state and local income tax examinations for the tax years 2009 through 2014.

Note 14—Commitments, Contingencies and Related Party Transactions

Lease Agreements

The Company has non-cancelable operating leases for its numerous retail store sites, as well as for its corporate offices, certain distribution and manufacturing facilities, showrooms, and warehouse equipment that expire on various dates, principally through 2026. These leases generally contain renewal options and require the Company to pay real estate taxes, utilities and related insurance.

F-33

PARTY CITY HOLDCO INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Dollars in thousands, except per share)

At December 31, 2014, future minimum lease payments under all operating leases consisted of the following:


	Future Minimum Operating Lease Payments
2015	$	130,392
2016		117,342
2017		103,262
2018		83,503
2019		63,353
Thereafter		175,589

	$	673,441

The Company is also an assignor with contingent lease liability for four stores sold to franchisees and other parties. The potential contingent lease obligations continue until the applicable leases expire in 2018. The maximum amount of the contingent lease obligations may vary, but is limited to the sum of the total amount due under the leases. At December 31, 2014, the maximum amount of the contingent lease obligations was approximately $1,072 and is not included in the table above as such amount is contingent upon certain events occurring, which management has not assessed as probable or estimable at this time.

The future minimum lease payments included in the above table also do not include contingent rent based upon sales volumes or other variable costs, such as maintenance, insurance and taxes.

Rent expense for the year ended December 31, 2014, the year ended December 31, 2013, the period from July 28, 2012 to December 31, 2012, and the period from January 1, 2012 to July 27, 2012, was $216,572, $200,544, $86,642, and $95,100, respectively, and included immaterial amounts of rent expense related to contingent rent.

Product Royalty Agreements

The Company has entered into product royalty agreements, with various licensors of copyrighted and trademarked characters and designs, which are used on the Company’s products, which require royalty payments based on sales of the Company’s products, and, in some cases, include annual minimum royalties.

At December 31, 2014, the Company’s commitment to pay future minimum product royalties was as follows:


	Future Minimum Royalty Payments
2015	$	20,582
2016		10,929
2017		2,117
2018		0
2019		0
Thereafter		0

	$	33,628

F-34

PARTY CITY HOLDCO INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Dollars in thousands, except per share)

Product royalty expense for the year ended December 31, 2014, the year ended December 31, 2013, the period from July 28, 2012 to December 31, 2012, and the period from January 1, 2012 to July 27, 2012, was $42,679, $30,968, $13,729, and $13,040, respectively.

During December 2009, the Company entered into a product purchase agreement with a vendor which requires the Company to purchase $9,000 of products annually through December 2015. Additionally, during July 2012, the Company entered into an agreement which requires the Company to spend a minimum of $5,000 on advertising during the three year period ended July 2015.

Legal Proceedings

The Company is a party to certain claims and litigation in the ordinary course of business. The Company does not believe that any of these proceedings will result, individually or in the aggregate, in a material adverse effect upon its financial condition or future results of operations.

Related Party Transactions

At the time of the Transaction (see Note 5), Party City Holdco and PCHI entered into a management agreement with THL and Advent under which THL and Advent will provide advice on, among other things, financing, operations, acquisitions and dispositions. Under the agreement, THL and Advent are paid, in aggregate, an annual management fee in the amount of the greater of $3,000 or 1.0% of Adjusted EBITDA, as defined in PCHI’s debt agreements. THL and Advent received annual management fees in the amounts of $2,498 and $858, respectively, during the year ended December 31, 2014 and $2,233 and $767, respectively, during the year ended December 31, 2013. Additionally, THL and Advent received management fees in the amounts of $961 and $331, respectively, during the period from July 28, 2012 to December 31, 2012. Such amounts were recorded in general and administrative expenses in the Company’s consolidated statement of operations and comprehensive income (loss). Also, at the time of the Transaction, the Company paid THL and Advent a non-recurring $20,000 fee for certain services that were performed in conjunction with the execution of the Transaction. The amount was recorded in other expense, net in the Company’s consolidated statement of operations and comprehensive loss for the period from July 28, 2012 to December 31, 2012. Further, as long as THL and Advent receive annual management fees, they will advise in connection with financing, acquisition and disposition transactions and the Company will pay a fee for services rendered in connection with each such transaction in an amount up to 1% of the gross transaction value. The management agreement expires on its tenth anniversary. In the case of an initial public offering or a change in control, as defined in Party City Holdco’s stockholders’ agreement, at the time of such event the Company must pay THL and Advent the net present value of the remaining annual management fees that are payable over the agreement’s ten year term.

Note 15—Segment Information

Industry Segments

The Company has two identifiable business segments. The Wholesale segment designs, manufactures, contracts for manufacture and distributes party goods, including paper and plastic tableware, metallic and latex balloons, Halloween and other costumes, accessories, novelties, gifts and stationery throughout the world. The Retail segment operates specialty retail party supply stores in the United States and Canada, principally under the names Party City and Halloween City, and it operates e-commerce websites, principally through the domain name PartyCity.com. The Retail segment also franchises both individual stores and franchise areas throughout the United States and Puerto Rico, principally under the name Party City.

F-35

PARTY CITY HOLDCO INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Dollars in thousands, except per share)

The Company’s industry segment data for the year ended December 31, 2014, the year ended December 31, 2013, the period from July 28, 2012 to December 31, 2012, and the period from January 1, 2012 to July 27, 2012 are as follows:


	Wholesale			Retail		Consolidated
Year Ended December 31, 2014 (Successor)
Revenues:
Net sales	$	1,213,024		$	1,605,228	$	2,818,252
Royalties and franchise fees		0			19,668		19,668

Total revenues		1,213,024			1,624,896		2,837,920
Eliminations		(566,663	)		0		(566,663	)

Net revenues	$	646,361		$	1,624,896	$	2,271,257

Income from operations	$	74,177		$	168,965	$	243,142

Interest expense, net							155,917
Other expense, net							5,891

Income before income taxes						$	81,334

Depreciation and amortization	$	32,446		$	50,444	$	82,890
Capital expenditures	$	27,651		$	50,590	$	78,241
Total assets	$	1,135,370		$	2,245,493	$	3,380,863


	Wholesale			Retail		Consolidated
Year Ended December 31, 2013 (Successor)
Revenues:
Net sales	$	1,080,740		$	1,433,522	$	2,514,262
Royalties and franchise fees		0			18,841		18,841

Total revenues		1,080,740			1,452,363		2,533,103
Eliminations		(487,990	)		0		(487,990	)

Net revenues	$	592,750		$	1,452,363	$	2,045,113

Income from operations	$	65,997		$	95,605	$	161,602

Interest expense, net							143,406
Other expense, net							18,478

Income before income taxes						$	(282	)

Depreciation and amortization	$	40,789		$	53,835	$	94,624
Capital expenditures	$	15,796		$	45,445	$	61,241
Total assets	$	1,068,822		$	2,258,712	$	3,327,534

F-36

PARTY CITY HOLDCO INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Dollars in thousands, except per share)



	Wholesale			Retail		Consolidated
Period from July 28 to December 31, 2012 (Successor)
Revenues:
Net sales	$	510,277		$	699,272	$	1,209,549
Royalties and franchise fees		0			9,312		9,312

Total revenues		510,277			708,584		1,218,861
Eliminations		(245,219	)		0		(245,219	)

Net revenues	$	265,058		$	708,584	$	973,642

Income from operations	$	18,681		$	38,068	$	56,749

Interest expense, net							62,062
Other expense, net							26,157

Loss before income taxes						$	(31,470	)

Depreciation and amortization	$	19,827		$	30,010	$	49,837
Capital expenditures	$	5,042		$	11,334	$	16,376

	Wholesale			Retail		Consolidated
Period from January 1 to July 27, 2012 (Predecessor)
Revenues:
Net sales	$	512,473		$	613,089	$	1,125,562
Royalties and franchise fees		0			9,281		9,281

Total revenues		512,473			622,370		1,134,843
Eliminations		(194,659	)		0		(194,659	)

Net revenues	$	317,814		$	622,370	$	940,184

Income from operations	$	44,719		$	4,897	$	49,616

Interest expense, net							41,970
Other expense, net							22,245

Loss before income taxes						$	(14,599	)

Depreciation and amortization	$	11,849		$	22,066	$	33,915
Capital expenditures	$	6,859		$	22,005	$	28,864

F-37

PARTY CITY HOLDCO INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Dollars in thousands, except per share)

Geographic Segments

Export sales of metallic balloons of $22,023, $20,140, $10,196, and $11,517 during the year ended December 31, 2014, December 31, 2013, the period from July 28, 2012 to December 31, 2012, and the period from January 1, 2012 to July 27, 2012, respectively, are included in domestic sales below. Intercompany sales between geographic areas primarily consist of sales of finished goods and are generally made at cost plus a share of operating profit.

The Company’s geographic area data are as follows:


	Domestic		Foreign		Eliminations			Consolidated
Year Ended December 31, 2014 (Successor)
Revenues:
Net sales to unaffiliated customers	$	1,930,270	$	321,319	$	0		$	2,251,589
Net sales between geographic areas		44,903		75,462		(120,365	)		0

Net sales		1,975,173		396,781		(120,365	)		2,251,589
Royalties and franchise fees		19,668		0		0			19,668

Total revenues	$	1,994,841	$	396,781	$	(120,365	)	$	2,271,257

Income from operations	$	236,495	$	6,647	$	0		$	243,142

Interest expense, net									155,917
Other expense, net									5,891

Income before income taxes								$	81,334

Depreciation and amortization	$	77,445	$	5,445				$	82,890

Total long-lived assets (excluding goodwill, trade names and other intangible assets, net)	$	276,192	$	23,729				$	299,921

Total assets	$	3,397,237	$	324,817	$	(341,191	)	$	3,380,863


	Domestic		Foreign		Eliminations			Consolidated
Year Ended December 31, 2013 (Successor)
Revenues:
Net sales to unaffiliated customers	$	1,756,375	$	269,897	$	0		$	2,026,272
Net sales between geographic areas		34,146		54,996		(89,142	)		0

Net sales		1,790,521		324,893		(89,142	)		2,026,272
Royalties and franchise fees		18,841		0		0			18,841

Total revenues	$	1,809,362	$	324,893	$	(89,142	)	$	2,045,113

Income from operations	$	159,481	$	2,121	$	0		$	161,602

Interest expense, net									143,406
Other expense, net									18,478

Loss before income taxes								$	(282	)

Depreciation and amortization	$	89,839	$	4,785				$	94,624

Total long-lived assets (excluding goodwill, trade names and other intangible assets, net)	$	276,698	$	22,936				$	299,634

Total assets	$	3,355,626	$	318,971	$	(347,063	)	$	3,327,534

F-38

PARTY CITY HOLDCO INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Dollars in thousands, except per share)


	Domestic		Foreign			Eliminations			Consolidated
Period from July 28 to December 31, 2012 (Successor)
Revenues:
Net sales to unaffiliated customers	$	848,303	$	116,027		$	0		$	964,330
Net sales between geographic areas		16,298		19,136			(35,434	)		0

Net sales		864,601		135,163			(35,434	)		964,330
Royalties and franchise fees		9,312		0			0			9,312

Total revenues	$	873,913	$	135,163		$	(35,434	)	$	973,642

Income from operations	$	54,333	$	2,652		$	(236	)	$	56,749

Interest expense, net										62,062
Other expense, net										26,157

Loss before income taxes									$	(31,470	)

Depreciation and amortization	$	47,906	$	1,931					$	49,837


	Domestic		Foreign			Eliminations			Consolidated
Period from January 1 to July 27, 2012 (Predecessor)
Revenues:
Net sales to unaffiliated customers	$	808,171	$	122,732		$	0		$	930,903
Net sales between geographic areas		18,484		15,998			(34,482	)		0

Net sales		826,655		138,730			(34,482	)		930,903
Royalties and franchise fees		9,281		0			0			9,281

Total revenues	$	835,936	$	138,730		$	(34,482	)	$	940,184

Income (loss) from operations	$	53,679	$	(3,261	)	$	(802	)	$	49,616

Interest expense, net										41,970
Other expense, net										22,245

Loss before income taxes									$	(14,599	)

Depreciation and amortization	$	31,462	$	2,453					$	33,915

Note 16—Quarterly Results (Unaudited)

Despite a concentration of holidays in the fourth quarter of the year, as a result of the Company’s expansive product lines and customer base and increased promotional activities, the impact of seasonality on the quarterly results of the Company’s wholesale operations has been limited. However, due to Halloween and Christmas, the inventory balances of the Company’s wholesale operations are slightly higher during the third quarter than during the remainder of the year. Additionally, the promotional activities of the Company’s wholesale business, including special dating terms, particularly with respect to Halloween products sold to retailers and other distributors, result in slightly higher accounts receivable balances during the third quarter. The Company’s retail operations are subject to significant seasonal variations. Historically, the Company’s retail operations have realized a significant portion of their revenues, cash flow and net income in the fourth quarter of the year, principally due to Halloween sales in October and, to a lesser extent, year-end holiday sales.

F-39

PARTY CITY HOLDCO INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Dollars in thousands, except per share)

The following table sets forth our historical revenues, gross profit, income (loss) from operations, net income (loss) and net income (loss) attributable to Party City Holdco Inc. for each of the following periods:


	For the Three Months Ended,
	March 31,			June 30,		September 30,			December 31,
2014:
Revenues:
Net sales	$	429,220		$	487,182	$	538,671		$	796,516
Royalties and franchise fees		3,767			4,392		3,990			7,519
Gross profit		154,839			182,664		184,146			354,234
Income from operations		15,906			40,305		28,778			158,153
Net (loss) income		(19,912	)(a)		2,456		(5,410	)		78,989


	For the Three Months Ended,
	March 31,			June 30,			September 30,			December 31,
2013:
Revenues:
Net sales	$	397,655		$	441,976		$	483,585		$	703,056
Royalties and franchise fees		3,893			4,253			3,815			6,880
Gross profit		130,457			154,599			160,902			321,126
Income from operations		4,171			14,598			10,737			132,096	(b)
Net (loss) income		(27,100	)(a)		(12,525	)		(11,875	)		55,743	(b)
Net (loss) income attributable to Party City Holdco Inc.		(27,213	)(a)		(12,591	)		(11,920	)		55,743	(b)

(a)	As a result of amendments to the Term Loan Credit Agreement during the first quarters of 2014 and 2013, the Company recorded $4,396 and $12,295, respectively, in other expense, net. See Note 8 for further discussion.

(b)	Includes a $7,500 impairment charge for the Halloween City trade name (see Note 6).

Note 17—Fair Value Measurements

The provisions of ASC Topic 820, “Fair Value Measurement”, define fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. ASC Topic 820 established a three-level fair value hierarchy that prioritizes the inputs used to measure fair value. This hierarchy requires entities to maximize the use of observable inputs and minimize the use of unobservable inputs. The three levels of inputs used to measure fair value are as follows:

•

Level 1—Quoted prices in active markets for identical assets or liabilities.

•

Level 2—Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

•

Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.

F-40

PARTY CITY HOLDCO INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Dollars in thousands, except per share)

The following table shows assets and liabilities as of December 31, 2014 that are measured at fair value on a recurring basis:


	Level 1		Level 2		Level 3		Total as of December 31, 2014
Derivative assets	$	0	$	0	$	0	$	0
Derivative liabilities		0		476		0		476

The following table shows assets and liabilities as of December 31, 2013 that are measured at fair value on a recurring basis:


	Level 1		Level 2		Level 3		Total as of December 31, 2013
Derivative assets	$	0	$	0	$	0	$	0
Derivative liabilities		0		597		0		597

In addition to assets and liabilities that are recorded at fair value on a recurring basis, the Company is required to record other assets and liabilities at fair value on a nonrecurring basis, generally as a result of impairment charges. The carrying amounts for cash and cash equivalents, accounts receivable, prepaid expenses and other current assets, accounts payable, accrued expenses and other current liabilities approximated fair value at December 31, 2014 because of the short-term maturities of the instruments and/or their variable rates of interest.

The carrying amount and fair value of borrowings under the Term Loan Credit Agreement, the Senior Notes and the Nextco Notes, as of December 31, 2014, are as follows:


	Carrying Amount		Fair Value
Term Loan Credit Agreement	$	1,089,242	$	1,079,231
Senior Notes		700,000		756,000
Nextco Notes		347,316		356,125

The fair values of the Term Loan Credit Agreement, the Senior Notes, and the Nextco Notes represent Level 2 fair value measurements as the debt instruments trade in inactive markets. The carrying amounts for other long-term debt approximated fair value at December 31, 2014 based on the discounted future cash flows of each instrument at rates currently offered for similar debt instruments of comparable maturity.

Note 18—Derivative Financial Instruments

The Company is directly and indirectly affected by changes in certain market conditions. These changes in market conditions may adversely impact the Company’s financial performance and are referred to as market risks. The Company, when deemed appropriate, uses derivatives as a risk management tool to mitigate the potential impact of certain market risks. The primary market risks managed through the use of derivative financial instruments are interest rate risk and foreign currency exchange rate risk.

Interest Rate Risk Management

As part of the Company’s risk management strategy, the Company periodically uses interest rate swap agreements to hedge the variability of cash flows on floating rate debt obligations. Accordingly, interest rate

F-41

PARTY CITY HOLDCO INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Dollars in thousands, except per share)

swap agreements are reflected in the consolidated balance sheets at fair value and the related gains and losses on these contracts are deferred in equity and recognized in interest expense over the same period in which the related interest payments being hedged are recognized in income. The fair value of an interest rate swap agreement is the estimated amount that the counterparty would receive or pay to terminate the swap agreement at the reporting date, taking into account current interest rates and the current creditworthiness of the swap counterparty. The Company did not utilize interest rate swap agreements during the years ended December 31, 2014, December 31, 2013 or December 31, 2012.

Foreign Exchange Risk Management

A portion of the Company’s cash flows is derived from transactions denominated in foreign currencies. In order to reduce the uncertainty of foreign exchange rate movements on transactions denominated in foreign currencies, including the British Pound Sterling, the Canadian Dollar, the Euro, the Malaysian Ringgit, and the Australian Dollar, the Company enters into foreign exchange contracts with major international financial institutions. These forward contracts, which typically mature within one year, are designed to hedge anticipated foreign currency transactions, primarily inventory purchases and sales. For contracts that qualify for hedge accounting, the terms of the foreign exchange contracts are such that cash flows from the contracts should be highly effective in offsetting the expected cash flows from the underlying forecasted transactions.

The foreign currency exchange contracts are reflected in the consolidated balance sheets at fair value. The fair value of the foreign currency exchange contracts is the estimated amount that the counterparties would receive or pay to terminate the foreign currency exchange contracts at the reporting date, taking into account current foreign exchange spot rates. At December 31, 2014 and 2013, the Company had foreign currency exchange contracts that qualified for hedge accounting. No components of these agreements were excluded in the measurement of hedge effectiveness. As these hedges are 100% effective, there is no current impact on earnings due to hedge ineffectiveness. The Company anticipates that substantially all unrealized gains and losses in accumulated other comprehensive income (loss) related to these foreign currency exchange contracts will be reclassified into earnings by June 2015.

The following table displays the fair values of the Company’s derivatives at December 31, 2014 and December 31, 2013:

Derivative Assets

Derivative Liabilities

Balance
Sheet
Line

Fair
Value

Balance
Sheet
Line

Fair
Value

Balance
Sheet
Line

Fair
Value

Balance
Sheet
Line

Fair
Value

Derivative Instrument

December 31, 2014

December 31, 2013

December 31, 2014

December 31, 2013

Foreign Exchange Contracts

)PP

)AE

476

)AE

597

(a)	PP = Prepaid expenses and other current assets

(b)	AE = Accrued expenses

The following table displays the notional amounts of the Company’s derivatives at December 31, 2014 and December 31, 2013:


Derivative Instrument	December 31, 2014		December 31, 2013
Foreign Exchange Contracts	$	8,900	$	33,250

F-42

PARTY CITY HOLDCO INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Dollars in thousands, except per share)

Note 19—Changes in Accumulated Other Comprehensive (Loss) Income

The changes in accumulated other comprehensive (loss) income attributable to Party City Holdco Inc. consisted of the following:


	Year Ended December 31, 2014
	Foreign Currency Adjustments			Impact of Foreign Exchange Contracts, Net of Taxes			Total, Net of Taxes
Balance at December 31, 2013	$	5,738		$	(330	)	$	5,408
Other comprehensive (loss) income before reclassifications, net of income tax		(18,707	)		336			(18,371	)
Amounts reclassified from accumulated other comprehensive income (loss) to the consolidated statement of operations and comprehensive income, net of income tax		0			228			228

Net current-period other comprehensive (loss) income		(18,707	)		564			(18,143	)

Balance at December 31, 2014	$	(12,969	)	$	234		$	(12,735	)


	Year Ended December 31, 2013
	Foreign Currency Adjustments			Impact of Foreign Exchange Contracts, Net of Taxes			Total, Net of Taxes
Balance at December 31, 2012	$	6,425		$	(225	)	$	6,200
Other comprehensive loss before reclassifications, net of income tax		(48	)		(306	)		(354	)
Amounts reclassified from accumulated other comprehensive income (loss) to the consolidated statement of operations and comprehensive income, net of income tax		0			201			201

Net current-period other comprehensive loss		(48	)		(105	)		(153	)
Acquisition of noncontrolling interest		(639	)		0			(639	)

Balance at December 31, 2013	$	5,738		$	(330	)	$	5,408

F-43

SCHEDULE I—CONDENSED FINANCIAL INFORMATION OF REGISTRANT

PARTY CITY HOLDCO INC.

(Parent company only)

CONDENSED BALANCE SHEETS

(Dollars in thousands)


	December 31, 2014			December 31,2013
ASSETS
Other assets (principally investment in and amounts due from wholly-owned subsidiaries)	$	522,288		$	480,312

Total assets	$	522,288		$	480,312

LIABILITIES, REDEEMABLE COMMON SECURITIES AND STOCKHOLDERS’ EQUITY
Total liabilities	$	0		$	0
Redeemable common securities (1,103.09 and 1,039.23 shares issued and outstanding at December 31, 2014 and December 31, 2013, respectively)		35,062			23,555
Commitments and contingencies
Stockholders’ equity:
Common stock ($0.01 par value; 32,502.82 and 32,470.70 shares issued and outstanding at December 31, 2014 and December 31, 2013, respectively)		0			0
Additional paid-in capital		470,027			477,538
Retained earnings (accumulated deficit)		29,934			(26,189	)
Accumulated other comprehensive (loss) income		(12,735	)		5,408

Total stockholders’ equity		487,226			456,757

Total liabilities, redeemable common securities and stockholders’ equity	$	522,288		$	480,312

See accompanying notes to these condensed financial statements.

F-44

PARTY CITY HOLDCO INC. (Parent company only)

CONDENSED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

(Dollars in thousands)


	Year ended December 31, 2014 (Successor)			Year ended December 31, 2013 (Successor)			Period from July 28, 2012 to December 31, 2012 (Successor)			Period from January 1, 2012 to July 27, 2012 (Predecessor)
Other expense, net	$	0		$	0		$	24,564		$	0

Loss before income taxes		0			0			(24,564	)		0
Income tax benefit		5,918			0			0			0
Equity in net income (loss) of subsidiaries		50,205			4,019			(5,644	)		(15,098	)

Net income (loss)	$	56,123		$	4,019		$	(30,208	)	$	(15,098	)
Other comprehensive (loss) income		(18,143	)		(153	)		6,200			(1,263	)

Comprehensive income (loss)	$	37,980		$	3,866		$	(24,008	)	$	(16,361	)

See accompanying notes to these condensed financial statements.

F-45

PARTY CITY HOLDCO INC. (Parent company only)

CONDENSED STATEMENTS OF CASH FLOWS

(Dollars in thousands)


	Year ended December 31, 2014 (Successor)			Year ended December 31, 2013 (Successor)			Period from July 28, 2012 to December 31, 2012 (Successor)			Period from January 1, 2012 to July 27, 2012 (Predecessor)
Cash flows (used in) provided by operating activities:
Net income (loss)	$	56,123		$	4,019		$	(30,208	)	$	(15,098	)
Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities:
Equity in net (income) loss of subsidiaries		(50,205	)		(4,019	)		5,644			15,098
Dividends received		0			338,015			0			0
(Decrease) increase in due to affiliates and income taxes payable		(6,998	)		(750	)		752,876			0

Net cash (used in) provided by operating activities		(1,080	)		337,265			728,312			0

Cash flows used in investing activities:
Cash paid in connection with acquisitions, net of cash acquired		0			0			(1,562,246	)		0

Net cash used in investing activities		0			0			(1,562,246	)		0

Cash flows provided by (used in) financing activities:
Dividend distribution		0			(338,015	)		0			0
Capital contributions		0			750			833,934			0
Exercise of stock options		1,080			0			0			0

Net cash provided by (used in) financing activities		1,080			(337,265	)		833,934			0
Net change in cash and cash equivalents		0			0			0			0
Cash and cash equivalents at beginning of period		0			0			0			0

Cash and cash equivalents at end of period	$	0		$	0		$	0		$	0

See accompanying notes to these condensed financial statements.

F-46

PARTY CITY HOLDCO INC. (Parent company only)

NOTES TO CONDENSED FINANCIAL STATEMENTS

(Dollars in thousands)

Note 1—Basis of presentation and description of registrant

Party City Holdco Inc. (“Party City Holdco”) Schedule I Condensed Financial Information provides all parent company information that is required to be presented in accordance with the SEC rules and regulations for financial statement schedules. The consolidated financial statements of Party City Holdco are included elsewhere. The parent-company financial statements should be read in conjunction with the consolidated financial statements and the notes thereto.

Party City Holdco conducts no separate operations and acts only as a holding company. Its share of the net income of its unconsolidated subsidiaries is included in its statements of income using the equity method.

Since all material redeemable stock requirements, dividends and guarantees of the registrant have been disclosed in the consolidated financial statements, the information is not required to be repeated in this schedule.

On July 27, 2012, PC Merger Sub, Inc., a wholly-owned subsidiary of PC Intermediate Holdings, Inc., which is a wholly-owned subsidiary of PC Nextco Holdings, LLC (“PC Nextco”), which is a wholly-owned subsidiary of Party City Holdco, merged into Party City Holdings Inc. (“PCHI”), with PCHI being the surviving entity (“the Transaction”). At such time 100% of Party City Holdco, which was formed in order to affect the Transaction, was owned by a collaborative group consisting of funds affiliated with Thomas H. Lee Partners, L.P., 70% ownership, funds affiliated with Advent International Corporation, 24% ownership, and other minority investors, including management, 6% ownership.

As a result of the Transaction, the financial information for the period after July 27, 2012 represents the financial information of the “Successor” company. Prior to, and including, July 27, 2012, the consolidated financial statements include the accounts of the “Predecessor” company. Financial information in the Predecessor period principally relates to PCHI and its subsidiaries. Due to the change in the basis of accounting resulting from the application of the acquisition method of accounting and push-down accounting, the Predecessor’s consolidated financial statements and the Successor’s consolidated financial statements are not necessarily comparable.

Note 2—Dividends from subsidiaries

On August 1, 2013, PC Nextco issued $350,000 of 8.75% notes. The proceeds, net of expenses, were used to pay a dividend to Party City Holdco, which then paid a dividend to its shareholders. The total amount of the dividend was $338,015. No cash dividends were paid to Party City Holdco by its subsidiaries during the other periods included in these financial statements.

Note 3—Other expense, net

In conjunction with the Transaction, Party City Holdco incurred $4,564 of third-party costs, principally attorney and banker fees. The amount was recorded in other expense, net in the condensed statement of operations and comprehensive loss for the period from July 28, 2012 to December 31, 2012. Also, at the time of the Transaction, Party City Holdco paid THL and Advent a non-recurring $20,000 fee for certain services that were performed in conjunction with the execution of the Transaction. The amount was also recorded in other expense, net.

F-47

SCHEDULE II

PARTY CITY HOLDCO INC.

VALUATION AND QUALIFYING ACCOUNTS

The Year Ended December 31, 2014, the Year Ended December 31, 2013, the Period from July 28, 2012 to December 31, 2012, and the Period from January 1, 2012 to July 27, 2012

(Dollars in thousands)


	Beginning Balance		Write-Offs		Additions		Ending Balance
Allowance for Doubtful Accounts:
For the period from January 1, 2012 to July 27, 2012 (Predecessor)	$	3,877	$	738	$	644	$	3,783
For the period from July 28, 2012 to December 31, 2012 (Successor)		0		95		801		706
For the year ended December 31, 2013 (Successor)		706		423		1,079		1,362
For the year ended December 31, 2014 (Successor)		1,362		256		1,783		2,889

Sales Returns and Allowances:
For the period from January 1, 2012 to July 27, 2012 (Predecessor)	$	598	$	37,031	$	37,118	$	685
For the period from July 28, 2012 to December 31, 2012 (Successor)		0		39,085		39,456		371
For the year ended December 31, 2013 (Successor)		371		81,692		81,647		326
For the year ended December 31, 2014 (Successor)		326		83,750		83,950		526

F-48

LOGO

Shares

Party City Holdco Inc.

LOGO

Common Stock

Goldman, Sachs & Co.

BofA Merrill Lynch

Credit Suisse

Morgan Stanley

Barclays

Deutsche Bank Securities

J.P. Morgan

William Blair

Stephens Inc.

Telsey Advisory Group

Until , 2015 (the 25th day after the date of this prospectus), all dealers effecting transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealers’ obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13.

Other Expenses of Issuance and Distribution.

The following table indicates the expenses to be incurred in connection with the offering described in this registration statement, other than underwriting discounts and commissions, all of which will be paid by the registrant. All amounts are estimated except the SEC registration fee and FINRA fee.


SEC registration fee	$	64,400
FINRA filing fee		75,500
Stock exchange listing fee			*
Accountants’ fees and expenses			*
Legal fees and expenses			*
Transfer Agent’s fees and expenses			*
Printing and engraving expenses			*
Miscellaneous			*

Total Expenses	$		*

*	To be filed by amendment

ITEM 14.

Indemnification of Directors and Officers.

Section 102(b)(7) of the DGCL enables a corporation in its original certificates of incorporation or an amendment thereto to eliminate or limit the personal liability of a director for violations of the director’s fiduciary duty, except (i) for any breach of the director’s duty of loyalty to the corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) for liability of directors for unlawful payment of dividends or unlawful stock purchase or redemptions pursuant to Section 174 of the DGCL or (iv) for any transaction from which a director derived an improper personal benefit. Our certificate of incorporation includes a provision that eliminates the personal liability of directors for monetary damages for actions taken as a director to the fullest extent authorized by the DGCL.

Section 145(a) of the DGCL provides in relevant part that a corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding (other than an action by or in the right of the corporation) by reason of the fact that such person is or was a director or officer of the corporation, or is or was serving at the request of the corporation as a director or officer of another entity, against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such action, suit or proceeding if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe such person’s conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that such person did not act in good faith and in a manner which such person reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that such person’s conduct was lawful.

Section 145(b) of the DGCL provides in relevant part that a corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that the person is or was a director or officer of the corporation, or is or was serving at the request of the corporation as a director or officer of another entity, against expenses (including attorneys’ fees) actually and reasonably incurred by such person in connection with the defense or settlement of such action or suit if the person acted in good faith and in a manner

II-1

the person reasonably believed to be in or not opposed to the best interests of the corporation and except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the corporation unless and only to the extent that the Court of Chancery or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or such other court shall deem proper.

Our existing certificate of incorporation generally provides that we will indemnify our directors and officers to the fullest extent permitted by law. Our existing certificate of incorporation also provides that the indemnification and advancement of expenses provided by, or granted pursuant to the existing certificate of incorporation are not exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled under any bylaw, agreement, vote of stockholders or otherwise. Section 145(f) of the DGCL further provides that a right to indemnification or to advancement of expenses arising under a provision of the certificate of incorporation shall not be eliminated or impaired by an amendment to such provision after the occurrence of the act or omission which is the subject of the civil, criminal, administrative or investigation action, suit or proceeding for which indemnification or advancement of expenses is sought.

We currently have indemnification agreements in place with our directors. In connection with this offering we will enter into new indemnification agreements with our directors and executive officers. Such agreements generally provide for indemnification by reason of being our director or officer, as the case may be. These agreements are in addition to the indemnification provided by our amended and restated charter and bylaws.

We also will obtain officers’ and directors’ liability insurance which insures against liabilities that officers and directors of the registrant may, in such capacities, incur. Section 145(g) of the DGCL provides that a corporation shall have power to purchase and maintain insurance on behalf of any person who is or was a director or officer of the corporation, or is or was serving at the request of the corporation as a director or officer of another entity, against any liability asserted against such person and incurred by such person in any such capacity, or arising out of such person’s status as such, whether or not the corporation would have the power to indemnify such person against such liability under that section.

The underwriting agreement we will enter into in connection with the offering of common stock described in this registration statement provides for indemnification by the underwriters of the registrant and its executive officers and directors, by the registrant of the underwriters, for certain liabilities, including liabilities arising under the Securities Act.

Also see “Item 17. Undertakings.”

ITEM 15.

Recent Sales of Unregistered Securities.

Equity Securities

In connection with the closing of the Acquisition, on July 27, 2012, we issued 33,358.93 shares of our common stock (including shares of our redeemable common stock). From January 1, 2013 through December 31, 2014 we issued a total of 246.98 shares of our common stock. The common stock and redeemable common stock were issued without registration in reliance on the exemption afforded by Section 4(a)(2) of the Securities Act, as a transaction by an issuer not involving a public offering.

From January 1, 2013 through December 31, 2014, we granted options to purchase a total of 2,583 shares of our common stock to employees at a weighted average exercise price of $14,916 per share. 2,388 options were outstanding at December 31, 2014 at a weighted average exercise price of $14,916 per share. Option grants were exempt pursuant to Section 4(a)(2) of the Securities Act, as a transaction by an issuer not involving a public offering.

II-2

Debt Securities

In July 2012, PCHI, our wholly-owned indirect subsidiary, issued $700.0 million aggregate principal amount of 8.875% senior notes due 2020. The issuance of the senior notes was conducted pursuant to the exemptions afforded by Section 4(a)(2) of the Securities Act, as a transaction by an issuer not involving a public offering. PCHI and the guarantors of the senior notes entered into a registration rights agreement in which they agreed, among other things, to file a registration statement to exchange the senior notes for similar notes registered under the Securities Act. The registration statement on Form S-4 registering such notes was filed with the SEC on June 21, 2013 and declared effective on October 17, 2013.

In August 2013, Nextco Holdings, our wholly-owned direct subsidiary, issued $350.0 million aggregate principal amount of 8.75% / 9.500% senior PIK toggle notes due 2019. The issuance of the senior PIK toggle notes was conducted pursuant to the exemptions afforded by Section 4(a)(2) of the Securities Act, as a transaction by an issuer not involving a public offering. Nextco Holdings entered into a registration rights agreement in which it agreed, among other things, to file a registration statement to exchange the senior notes for similar notes registered under the Securities Act. The registration statement on Form S-4 registering such notes was filed with the SEC on July 3, 2014 and declared effective on August 8, 2014.

ITEM 16.

Exhibits and Financial Statement Schedules.

(a) Exhibits


Number		Description

1.1		Form of Underwriting Agreement

2.1		Agreement and Plan of Merger, dated June 4, 2012, by and among Party City Holdings Inc., PC Merger Sub, Inc., Party City Holdco Inc. (formerly PC Topco Holdings, Inc.) and the Stockholders’ Representatives party thereto (incorporated by reference to Exhibit 2.1 to Party City Holding Inc.’s Registration Statement on Form S-4 dated June 21, 2013)

3.1*		Amended and Restated Certificate of Incorporation (to be effective upon completion of this offering)

3.2		Amended and Restated Bylaws (to be effective upon completion of this offering)

3.3**		Certificate of Incorporation of Party City Holdco Inc., dated May 31, 2012, as amended on November 22, 2013

3.4**		By-Laws of Party City Holdco Inc.

4.1		Specimen common stock certificate

4.2		Indenture, dated as of July 27, 2012, among PC Merger Sub, Inc., which on July 27, 2012 was merged with and into Party City Holdings Inc., and Wilmington Trust, National Association, as Trustee (incorporated by reference to Exhibit 4.1 to Party City Holding Inc.’s Registration Statement on Form S-4 dated June 21, 2013)

4.3		First Supplemental Indenture, dated as of July 27, 2012, among Party City Holdings Inc., the Guarantors named therein and Wilmington Trust, National Association, as Trustee (incorporated by reference to Exhibit 4.2 to Party City Holding Inc.’s Registration Statement on Form S-4 dated June 21, 2013)

4.4		Second Supplemental Indenture, dated as of June 7, 2013, among Party City Holdings Inc., the Guarantors named therein and Wilmington Trust, National Association, as Trustee (incorporated by reference to Exhibit 4.6 to Party City Holding Inc.’s Registration Statement on Form S-4 dated June 21, 2013)

4.5		Registration Rights Agreement, dated as of July 27, 2012, among PC Merger Sub, Inc., which on July 27, 2012 was merged with and into Party City Holdings Inc., and Merrill Lynch, Pierce, Fenner & Smith Incorporated, as representative of the several Purchasers named therein (incorporated by reference to Exhibit 4.4 to Party City Holding Inc.’s Registration Statement on Form S-4 dated June 21, 2013)

II-3


Number		Description

4.6		Joinder Agreement to the Registration Rights Agreement, dated as of July 27, 2012, among Party City Holdings Inc., the Guarantors named therein and Merrill Lynch, Pierce, Fenner & Smith Incorporated, as representative of the several Purchasers named therein (incorporated by reference to Exhibit 4.5 to Party City Holding Inc.’s Registration Statement on Form S-4 dated June 21, 2013)

4.7		Form of Amended and Restated Registration Rights Agreement among Party City Holdco Inc., THL PC Topco, L.P., Advent-Party City Acquisition Limited Partnership and certain other stockholders of Party City Holdco Inc.

4.8**		Indenture, dated August 1, 2013, among PC Nextco Holdings, LLC, PC Nextco Finance, Inc. and Wilmington Trust, National Association, as Trustee

4.9		Form of Amended and Restated Stockholders Agreement among Party City Holdco Inc., THL PC Topco, L.P., Advent-Party City Acquisition Limited Partnership and certain other stockholders of Party City Holdco Inc.

5.1*		Opinion of Ropes & Gray LLP

10.1		The MetLife Capital Corporation Master Lease Purchase Agreement between MetLife Capital Corporation and Amscan Inc., Deco Paper Products, Inc., Kookaburra USA Ltd., and Trisar, Inc., dated November 21, 1991, as amended (incorporated by reference to Exhibit 10(n) to Amendment No. 2 to Amscan Holdings’ Registration Statement on Form S-1 dated December 16, 1996)

10.2		Form of Indemnification Agreement

10.3**		Employment Agreement between Party City Holdings Inc., Party City Holdco Inc. and Gerald C. Rittenberg, dated December 30, 2014

10.4**		Employment Agreement between Party City Holdings Inc., Party City Holdco Inc. and James M. Harrison, dated December 30, 2014

10.5		Letter Agreement between Party City Holdco Inc., Party City Holdings Inc. and Michael Correale, dated March 24, 2015

10.6		ABL Credit Agreement, dated as of July 27, 2012, among PC Intermediate Holdings, Inc., PC Merger Sub, Inc. (to be merged with and into Party City Holdings Inc.), PC Finance Sub, Inc. (to be merged with and into Party City Corporation), the subsidiaries of the Borrowers from time to time party thereto, the financial institutions party thereto, as the Lenders, and Deutsche Bank Trust Company Americas, as Administrative Agent (incorporated by reference to Exhibit 10.6 to Party City Holding Inc.’s Registration Statement on Form S-4 dated June 21, 2013)

10.7		Term Loan Credit Agreement, dated as of July 27, 2012, among PC Intermediate Holdings, Inc., PC Merger Sub, Inc. (to be merged with and into Party City Holdings Inc.), PC Finance Sub, Inc. (to be merged with and into Party City Corporation), the subsidiaries of the Borrowers from time to time party thereto, the financial institutions party thereto, as the Lenders, and Deutsche Bank Trust Company Americas, as Administrative Agent (incorporated by reference to Exhibit 10.7 to Party City Holding Inc.’s Registration Statement on Form S-4 dated June 21, 2013)

10.8		Pledge and Security Agreement, dated as of July 27, 2012, among PC Merger Sub, Inc. (to be merged with and into Party City Holdings Inc.), PC Finance Sub, Inc., PC Intermediate Holdings, Inc., the Subsidiary Parties from time to time party thereto and Deutsche Bank Trust Company Americas, as Agent (incorporated by reference to Exhibit 10.8 to Party City Holding Inc.’s Registration Statement on Form S-4 dated June 21, 2013)

10.9		Pledge and Security Agreement, dated as of July 27, 2012, among PC Merger Sub, Inc. (to be merged with and into Party City Holdings Inc.), PC Finance Sub, Inc., PC Intermediate Holdings, Inc., the Subsidiary Parties from time to time party thereto and Deutsche Bank Trust Company Americas, as Agent (incorporated by reference to Exhibit 10.9 to Party City Holding Inc.’s Registration Statement on Form S-4 dated June 21, 2013)

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Number		Description

10.10		Intercreditor Agreement, dated as of July 27, 2012, among PC Intermediate Holdings, Inc., PC Merger Sub, Inc. (to be merged with and into Party City Holdings Inc.), PC Finance Sub, Inc., the other Grantors from time to time party thereto, Deutsche Bank Trust Company Americas, as Revolving Facility Security Agent, and Deutsche Bank Trust Company Americas, as Term Loan Security Agent (incorporated by reference to Exhibit 10.10 to Party City Holding Inc.’s Registration Statement on Form S-4 dated June 21, 2013)

10.11		First Amendment to Term Loan Credit Agreement, dated as of February 19, 2013, among Party City Holdings Inc., Party City Corporation, PC Intermediate Holdings, Inc., Deutsche Bank Trust Company Americas, as Administrative Agent, the 2013 Replacement Lenders and the Lenders (incorporated by reference to Exhibit 10.11 to Party City Holding Inc.’s Registration Statement on Form S-4 dated June 21, 2013)

10.12		Intercreditor Agreement Joinder, dated as of June 7, 2013, joining iParty Corp. and iParty Retails Stores Corp. as Grantors under the Intercreditor Agreement dated as of July 27, 2012 among PC Intermediate Holdings Inc., Party City Corporation, the other Grantors from time to time party thereto, Deutsche Bank Trust Company Americas, as Revolving Facility Security Agent and Deutsche Bank Trust Company Americas, as Term Loan Security Agent (incorporated by reference to Exhibit 10.18 to Party City Holding Inc.’s Registration Statement on Form S-4 dated June 21, 2013)

10.13		Subsidiary Guarantor Joinder Agreement, dated as of June 7, 2013, among iParty Corp., iParty Retail Stores Corp. and Deutsche Bank Trust Company Americas, as Administrative Agent and Collateral Agent (incorporated by reference to Exhibit 10.14 to Party City Holding Inc.’s Registration Statement on Form S-4 dated June 21, 2013)

10.14		Joinder Agreement, dated as of June 7, 2013, among iParty Corp., iParty Retail Stores Corp. and Deutsche Bank Trust Company Americas, as Administrative Agent (incorporated by reference to Exhibit 10.15 to Party City Holding Inc.’s Registration Statement on Form S-4 dated June 21, 2013)

10.15		Supplement No. 1, dated as of June 7, 2013, to the Pledge and Security Agreement dated as of July 27, 2012, among Party City Holdings Inc., Party City Corporation, PC Intermediate Holdings, Inc. and Deutsche Bank Trust Company Americas, as Administrative Agent and Collateral Agent (incorporated by reference to Exhibit 10.16 to Party City Holding Inc.’s Registration Statement on Form S-4 dated June 21, 2013)

10.16		Supplement No. 1, dated as of June 7, 2013, to the Pledge and Security Agreement dated as of July 27, 2012, among Party City Holdings Inc., Party City Corporation, PC Intermediate Holdings, Inc. and Deutsche Bank Trust Company Americas, as Administrative Agent and Collateral Agent (incorporated by reference to Exhibit 10.17 to Party City Holding Inc.’s Registration Statement on Form S-4 dated June 21, 2013)

10.17		Party City Holdco Amended and Restated 2012 Omnibus Equity Incentive Plan

10.18		Advisory Services Agreement, dated as of July 27, 2012, among Party City Holdco Inc. (formerly PC Topco Holdings, Inc.), PC Intermediate Holdings, Inc., Party City Holdings Inc., THL Managers VI, LLC and Advent International Corporation (incorporated by reference to Exhibit 10.13 to Party City Holding Inc.’s Registration Statement on Form S-4 dated June 21, 2013)

10.19		Second Amendment to Term Loan Credit Agreement, dated as of February 27, 2014, among Party City Holdings Inc., Party City Corporation, PC Intermediate Holdings, Inc., Deutsche Bank Trust Company Americas, as administrative agent, and the various lenders party thereto (incorporated by reference to Exhibit 10.1 to Party City Holdings Inc.’s Current Report on Form 8-K dated February 28, 2014)

10.20**		Employment Agreement between Party City Holdings Inc., Party City Holdco Inc. and Gregg A. Melnick, dated December 30, 2014

10.21		Party City Holdco Inc. Executive Annual Incentive Plan

10.22		Party City Holdco Inc. Non-Employee Director Compensation Program

II-5


Number		Description

10.23		Form of Nonqualified Stock Option Award Agreement (Non-Employee Directors) under the Party City Holdco Inc. Amended and Restated 2012 Omnibus Equity Incentive Plan

10.24		Form of Nonqualified Stock Option Award Agreement (Employees) under the Party City Holdco Inc. Amended and Restated 2012 Omnibus Equity Incentive Plan

21.1		List of Subsidiaries of the Party City Holdco Inc.

23.1		Consent of Ernst & Young LLP, independent registered public accounting firm

23.2*		Consent of Ropes & Gray LLP (included in Exhibit 5.1)

24.1**		Power of Attorney

*	To be filed by amendment

**	Previously filed

ITEM 17.

Undertakings.

Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing 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 Securities 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 Securities Act and will be governed by the final adjudication of such issue.

The undersigned registrant hereby undertakes that:

(1) For purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b) (1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective.

(2) For the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus 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) For the purpose of determining liability under the Securities Act, if the registrant is subject to Rule 430C, each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use.

(4) For the purpose of determining liability of the registrant under the Securities Act to any purchaser in the initial distribution of the securities: The undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such

II-6

purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:

i. Any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424;

ii. Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant;

iii. The portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and

iv. Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser.

The undersigned registrant hereby undertakes to provide to the underwriter at the closing specified in the underwriting agreement certificates in such denominations and registered in such names as required by the underwriter to permit prompt delivery to each purchaser.

II-7

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Elmsford, New York, on the 26 ^th day of March, 2015.


Party City Holdco Inc.

By:		/s/ Michael A. Correale
		Name: Michael A. Correale
		Title: Chief Financial Officer

POWER OF ATTORNEY

Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated:


Signature	Title	Date

/s/ James M. Harrison James M. Harrison	Chief Executive Officer and Director (Principal Executive Officer)	March 26, 2015

/s/ Michael A. Correale Michael A. Correale	Chief Financial Officer (Principal Financial Officer) (Principal Accounting Officer)	March 26, 2015

* Gerald C. Rittenberg	Executive Chairman and Director	March 26, 2015

* Todd M. Abbrecht	Director	March 26, 2015

* Joshua M. Nelson	Director	March 26, 2015

* Uttam K. Jain	Director	March 26, 2015

* Jefferson M. Case	Director	March 26, 2015

* Steven J. Collins	Director	March 26, 2015

II-8


Signature	Title	Date

* Norman S. Matthews	Director	March 26, 2015

* Lawrence P. Molloy	Director	March 26, 2015

II-9

Exhibit 1.1

Party City Holdco Inc.

Common Stock, $0.01 par value

Underwriting Agreement

[ — ], 2015

Goldman, Sachs & Co.,

Merrill Lynch, Pierce, Fenner & Smith

Incorporated

Credit Suisse Securities (USA) LLC

Morgan Stanley & Co. LLC

As representatives of the several Underwriters

named in Schedule I hereto,

c/o Goldman, Sachs & Co.

200 West Street,

New York, New York 10282

c/o Merrill Lynch, Pierce, Fenner & Smith

Incorporated

One Bryant Park

New York, NY 10036

c/o Credit Suisse Securities (USA) LLC

Eleven Madison Avenue

New York, NY 10010

c/o Morgan Stanley & Co. LLC

1585 Broadway

New York, New York 10036

Ladies and Gentlemen:

Party City Holdco Inc., a Delaware corporation (the “Company”), proposes, subject to the terms and conditions stated herein, to issue and sell to the Underwriters named in Schedule I hereto (the “Underwriters”) for whom Goldman, Sachs & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated, Credit Suisse Securities (USA) LLC and Morgan Stanley & Co. LLC are acting as representatives (in such capacity, the “Representatives”) an aggregate of [ ]

shares of common stock, $0.01 par value (“Stock”) of the Company and at the election of the Underwriters, up to [ ] additional shares of Stock. The [ ] shares of Stock to be sold by the Company are herein called the “Firm Shares” and the [ ] additional shares of Stock to be sold by the Company are herein called the “Optional Shares.” The Firm Shares and the Optional Shares that the Underwriters elect to purchase pursuant to Section 2 hereof being collectively called the “Shares”.

1. (A) The Company represents and warrants to, and agrees with, each of the Underwriters that:

(a) A registration statement on Form S-1 (File No. 333-193466) (the “Initial Registration Statement”) in respect of the Shares has been filed with the Securities and Exchange Commission (the “Commission”); the Initial Registration Statement and any post-effective amendment thereto, each in the form heretofore delivered to you, and, excluding exhibits thereto, to you for each of the other Underwriters, have been declared effective by the Commission in such form; other than a registration statement, if any, increasing the size of the offering (a “Rule 462(b) Registration Statement”), filed pursuant to Rule 462(b) under the Securities Act of 1933, as amended (the “Act”), which became effective upon filing, no other document with respect to the Initial Registration Statement has heretofore been filed with the Commission; and no stop order suspending the effectiveness of the Initial Registration Statement, any post-effective amendment thereto or the Rule 462(b) Registration Statement, if any, has been issued and no proceeding for that purpose has been initiated or, to the knowledge of the Company, threatened by the Commission (any preliminary prospectus included in the Initial Registration Statement or filed with the Commission pursuant to Rule 424(a) of the rules and regulations of the Commission under the Act is hereinafter called a “Preliminary Prospectus”; the various parts of the Initial Registration Statement and the Rule 462(b) Registration Statement, if any, including all exhibits thereto and including the information contained in the form of final prospectus filed with the Commission pursuant to Rule 424(b) under the Act in accordance with Section 5(a) hereof and deemed by virtue of Rule 430A under the Act to be part of the Initial Registration Statement at the time it was declared effective, each as amended at the time such part of the Initial Registration Statement became effective or such part of the Rule 462(b) Registration Statement, if any, became or hereafter becomes effective, are hereinafter collectively called the “Registration Statement”; the Preliminary Prospectus relating to the Shares that was included in the Registration Statement immediately prior to the Applicable Time (as defined in Section 1(c) hereof) is hereinafter called the “Pricing Prospectus”; the final prospectus, in the form first filed pursuant to Rule 424(b) under the Act, is hereinafter called the “Prospectus”; and any “issuer free writing prospectus” as defined in Rule 433 under the Act relating to the Shares is hereinafter called an “Issuer Free Writing Prospectus”);

(b) No order preventing or suspending the use of any Preliminary Prospectus or any Issuer Free Writing Prospectus has been issued by the Commission, and each Preliminary Prospectus, at the time of filing thereof, conformed in all material respects to the requirements of the Act and the rules and regulations of the Commission thereunder, and the Pricing Prospectus, at the time of filing thereof, did not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided , however , that this representation and warranty shall not apply to any statements or omissions made in reliance upon and in conformity with information furnished in writing to the Company by an Underwriter through the Representatives expressly for use therein, it being understood and agreed that the only such information is that described as such in Section 9(c) hereof;

(c) For the purposes of this Agreement, the “Applicable Time” is [00:00] [a][p].m. (Eastern time) on the date of this Agreement. The Pricing Prospectus, as supplemented by the information listed on Schedule II hereto, taken together (collectively, the “Pricing Disclosure Package”), as of the Applicable Time, did not include any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; and each Issuer Free Writing Prospectus listed on Schedule II(a) hereto does not conflict with the information contained in the Registration Statement, the Pricing Prospectus or the Prospectus and each such Issuer Free Writing Prospectus, as supplemented by and taken together with the Pricing Disclosure Package, as of the Applicable Time, did not include any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided, however, that this representation and warranty shall not apply to statements or omissions made in the Pricing Disclosure Package or an Issuer Free Writing Prospectus in reliance upon and in conformity with information furnished in writing to the Company by an Underwriter through the Representatives expressly for use therein, it being understood and agreed that the only such information is that described as such in Section 9(c) hereof;

(d) The Registration Statement conforms, and the Prospectus and any further amendments or supplements to the Registration Statement and the Prospectus will conform, in all material respects to the requirements of the Act and the rules and regulations of the Commission thereunder and do not and will not, as of the applicable effective date as to each part of the Registration Statement and any amendment thereto and as of the applicable filing date as to the Prospectus and any amendment or supplement thereto, contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading; provided, however, that this representation and warranty shall not apply to any statements

or omissions made in reliance upon and in conformity with information furnished in writing to the Company by an Underwriter through the Representatives for use therein, it being understood and agreed that the only such information is that described as such in Section 9(c) hereof;

(e) Neither the Company nor any of its subsidiaries has sustained since the date of the latest audited financial statements included in the Pricing Prospectus any material loss or interference with its business from fire, explosion, flood or other calamity, whether or not covered by insurance, or from any labor dispute or court or governmental action, order or decree, otherwise than as set forth or contemplated in the Pricing Prospectus; and, since the respective dates as of which information is given in the Registration Statement and the Pricing Prospectus, there has not been any change in the capital stock (other than as a result of the grant or exercise of stock options or award shares of restricted stock pursuant to employee benefit plans existing on the date of this Agreement and described in the Pricing Prospectus or Prospectus) or long-term debt of the Company or any of its subsidiaries or any material adverse change, or any development involving a prospective material adverse change, in or affecting the general affairs, management, financial position, business prospects, stockholders’ equity or results of operations of the Company and its subsidiaries taken as a whole (a “Material Adverse Effect”), and neither the Company nor any of its subsidiaries has entered into any transaction or agreement that is material to the Company and its subsidiaries taken as a whole or incurred any liability or obligation, direct or contingent, that is material to the Company and its subsidiaries taken as a whole, otherwise than as set forth or contemplated in the Pricing Prospectus;

(f) The Company and its subsidiaries have good and valid title in fee simple to all real property and good and valid title to all personal property owned by them, in each case free and clear of all liens, encumbrances and defects except such as are described in the Pricing Prospectus or such as would not, individually or in the aggregate, have, or reasonably be expected to have, a Material Adverse Effect; and any real property and buildings held under lease by the Company and its subsidiaries are held by them under valid, subsisting and enforceable leases except as would not, individually or in the aggregate, have a Material Adverse Effect;

(g) The Company has been duly incorporated and is validly existing as a corporation in good standing under the laws of the State of Delaware, with corporate power and authority to own its properties and conduct its business as described in the Pricing Prospectus and the Prospectus, and has been duly qualified as a foreign corporation for the transaction of business and is in good standing under the laws of each other jurisdiction in which it owns or leases properties or conducts any business so as to require such qualification, except where the failure to be so qualified would not have a Material Adverse Effect; and each subsidiary of the Company has been duly incorporated or formed, as

applicable, and is validly existing as a corporation or a limited liability company, as applicable, in good standing under the laws of its jurisdiction of incorporation or formation, as applicable, with power and authority to own its properties and conduct its business as described in the Pricing Prospectus and Prospectus, and has been duly qualified as a foreign corporation or limited liability company, as applicable, for the transaction of business and is in good standing under the laws of each other jurisdiction in which it owns or leases properties or conducts any business so as to require such qualification, or is subject to no liability or disability by reason of the failure to be so qualified in any such jurisdiction, except as would not have a Material Adverse Effect;

(h) The Company has an authorized capitalization as set forth in the Pricing Prospectus and the Prospectus, and all of the issued shares of capital stock of the Company have been duly and validly authorized and issued and are fully paid and non-assessable, and conform to the description of the Stock contained in the Pricing Prospectus and Prospectus; and all of the issued shares of capital stock or other equity interests, as applicable, of each subsidiary of the Company have been duly and validly authorized and issued, are fully paid and non-assessable and (except for directors’ qualifying shares and except as otherwise set forth in the Pricing Prospectus) are owned directly or indirectly by the Company, free and clear of all liens, encumbrances, equities or claims (other than liens arising under the Company’s existing secured indebtedness described in the Pricing Prospectus and the Prospectus); and, except as set forth in the Pricing Prospectus, the stockholders of the Company have no preemptive or similar rights;

(i) The Firm Shares to be issued and sold by the Company to the Underwriters hereunder have been duly and validly authorized and, when issued and delivered against payment therefor as provided herein, will be duly and validly issued and fully paid and non-assessable and will conform to the description of the Stock contained in the Pricing Prospectus and the Prospectus;

(j) The execution, delivery and performance by the Company of this Agreement, the compliance by the Company with this Agreement and the consummation of the transactions herein contemplated will not conflict with or result in a breach or violation of any of the terms or provisions of, or constitute a default under, (i) any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument to which the Company or any of its subsidiaries is a party or by which the Company or any of its subsidiaries is bound or to which any of the property or assets of the Company or any of its subsidiaries is subject, (ii) nor will such action result in any violation of the provisions of the certificate of incorporation or by-laws or similar organization documents of the Company or (iii) any statute or any order, rule or regulation of any court or governmental agency or body having jurisdiction over the Company or any of its subsidiaries or any of their properties, except in the case of clauses (i) and (iii) above, for conflicts, breaches, violations or defaults that would not have, individually or in the aggregate, a

Material Adverse Effect or affect the validity of the Shares; and no consent, approval, authorization, order, registration or qualification of or with any such court or governmental agency or body is required for the execution, delivery and performance by the Company of this Agreement and compliance herewith, the issuance and sale of the Shares or the consummation by the Company of the transactions contemplated by this Agreement, except the registration under the Act of the Shares, the approval by the Financial Industry Regulatory Authority (the “FINRA”) of the underwriting terms and arrangements, the approval for listing on the New York Stock Exchange (the “Exchange”) and such consents, approvals, authorizations, registrations or qualifications as may be required under state securities or Blue Sky laws in connection with the purchase and distribution of the Shares by the Underwriters;

(k) Neither the Company nor any of its subsidiaries is (i) in violation of its certificate of incorporation or by-laws or similar organizational documents or (ii) in default in the performance or observance of any material obligation, agreement, covenant or condition contained in any indenture, mortgage, deed of trust, loan agreement, lease or other agreement or instrument to which it is a party or by which it or any of its properties may be bound, except in the case of (ii) above, to the extent that any such default would not, individually or in the aggregate, have a Material Adverse Effect;

(l) The statements set forth in the Pricing Prospectus and Prospectus under the caption “Description of Capital Stock”, insofar as they purport to constitute a summary of the terms of the Stock, under the caption “Material United States Federal Tax Consequences to Non-United States Stockholders”, under the caption “Underwriting” (other than notices to prospective investors outside of the United States described under such caption), and under the caption “Shares Eligible for Future Sale”, insofar as they purport to describe the provisions of the laws and documents referred to therein, are accurate, complete and fair in all material respects;

(m) Other than as set forth in the Pricing Prospectus, there are no legal or governmental proceedings pending to which the Company or any of its subsidiaries is a party or of which any property of the Company or any of its subsidiaries is the subject which, if determined adversely to the Company or any of its subsidiaries, would individually or in the aggregate have a Material Adverse Effect on the current or future financial position, stockholders’ equity or results of operations of the Company and its subsidiaries; and, to the best of the Company’s knowledge, no such proceedings are threatened or contemplated by governmental authorities or threatened by others;

(n) The Company is not and, after giving effect to the offering and sale of the Shares and the application of the proceeds thereof, will not be an “investment company”, as such term is defined in the Investment Company Act of 1940, as amended (the “Investment Company Act”);

(o) The Company has the requisite corporate power and authority to execute and deliver this Agreement, perform its obligations hereunder and to consummate the transactions contemplated hereby; this Agreement has been duly authorized, executed and delivered by the Company;

(p) At the time of filing the Initial Registration Statement the Company was not and is not an “ineligible issuer,” as defined under Rule 405 under the Act;

(q) Ernst & Young LLP, who have certified certain financial statements of the Company and its subsidiaries, are independent public accountants as required by the Act and the rules and regulations of the Commission thereunder;

(r) The Company maintains a system of internal control over financial reporting (as such term is defined in Rule 13a-15(f) under the Exchange Act of 1934, as amended (the “Exchange Act”)) that complies with the requirements of the Exchange Act and has been designed by the Company’s principal executive officer and principal financial officer, or under their supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. The Company’s internal control over financial reporting is effective for purposes of Rules 13a-15 and 15d-15 under the Exchange Act and the Company is not aware of any material weaknesses in its internal control over financial reporting;

(s) Since the date of the latest audited financial statements included in the Pricing Prospectus, there has been no change in the Company’s internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting;

(t) The Company maintains disclosure controls and procedures (as such term is defined in Rule 13a-15(e) under the Exchange Act) that comply with the requirements of the Exchange Act; such disclosure controls and procedures have been designed to ensure that material information relating to the Company and its subsidiaries is made known to the Company’s principal executive officer and principal financial officer by others within those entities; and such disclosure controls and procedures are effective;

(u) Since October 17, 2013, there is and has been no failure on the part of the Company or any of the Company’s directors or officers, in their capacities as such, to comply with any provision of the Sarbanes-Oxley Act of 2002 and the rules and regulations promulgated in connection therewith (the “Sarbanes-Oxley Act”), including Section 402 related to loans and Sections 302 and 906 related to certifications;

(v) There are no contracts, arrangements or documents which are required to be described in the Registration Statement or the Pricing Prospectus or to be filed as exhibits thereto which have not been so described and filed as required;

(w) The Company and its subsidiaries own or otherwise have the right to use all (i) patents, patent applications, and inventions (whether or not patentable), (ii) copyrights, copyright applications and other works of authorship, (iii) confidential and proprietary information (including know-how, trade secrets and other similar information, systems or procedures), (iv) trademarks, service marks, trade names, and registrations and applications therefore, and (v) all other intellectual property rights (collectively, “Intellectual Property”) necessary to carry on the businesses now operated by them. Neither the Company nor any of its subsidiaries has received any notice, or is otherwise aware, of any infringement, misappropriation, dilution or other violation by the Company or its subsidiaries of the rights of others with respect to any Intellectual Property or of any facts or circumstances which would render any Intellectual Property owned by the Company or its subsidiaries invalid, unenforceable or inadequate to protect the interest of the Company or any of its subsidiaries therein, except, in each case, where any of the foregoing, individually or in the aggregate, would not result in a Material Adverse Effect. To the knowledge of the Company, no third party has infringed, diluted, misappropriated or otherwise violated the Intellectual Property rights of the Company or any of its subsidiaries, except as disclosed in the Pricing Prospectus and the Prospectus;

(x) Except as disclosed in the Pricing Prospectus and the Prospectus, with respect to each “employee benefit plan” (within the meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974 (“ERISA”)) for which the Company has any liability (whether absolute or contingent) (each, a “Plan”), (i) no failure to satisfy the minimum funding standards of Sections 302 and 303 of ERISA or Section 412 of the Internal Revenue Code of 1986, as amended from time to time (the “Code”)), or other event of the kind described in Section 4043(c) of ERISA (other than events with respect to which the 30-day notice requirement under Section 4043 of ERISA has been waived) has occurred; (ii) to the extent required by applicable law to be funded, the fair market value of the assets under each Plan exceeds the present value of all benefits accrued under such Plan (determined based on those assumptions used to fund such Plan); (iii) no prohibited transaction, within the meaning of Section 406 of ERISA or Section 4975 of the Code, has occurred, excluding transactions effected pursuant to a statutory or administrative exemption and (iv) each Plan is in material compliance with applicable law, including, without limitation, ERISA and the Code. Neither the Company nor any trade or business, whether or not incorporated, that, together with the Company, would be deemed to be a “single employer” within the meaning of Section 4001(b) of ERISA or Section 414 of the Code has incurred or reasonably expects to incur any liability with respect to any Plan (A) under Title IV of ERISA (other than contributions to the Plan or premiums to the Pension Benefit Guaranty Corporation in the ordinary course and without default) or (B) material

liability in respect of any post-employment health, medical or life insurance benefits for former, current or future employees of the Company or any subsidiary, except as required to avoid excise tax under Section 4980B of the Code. No Plan is a “multiemployer pension plan” (as defined in Section 3(37) of ERISA). Each Plan that is intended to be qualified under Section 401(a) of the Code has received a favorable determination or opinion letter from the Internal Revenue Service upon which it can rely and nothing has occurred, whether by action or by failure to act, which could reasonably be expected to cause the loss of such qualification. To the knowledge of the Company, there is no pending audit or investigation by the Internal Revenue Service, the U.S. Department of Labor, the Pension Benefit Guaranty Corporation or any other governmental agency or any foreign regulatory agency with respect to any Plan that, individually or in the aggregate, could reasonably be expected to result in Material Adverse Effect to the Company or its subsidiaries;

(y) [Reserved];

(z) All United States federal income tax returns of the Company and its subsidiaries required by law to be filed have been filed and all taxes shown as due on such returns, or that otherwise have been assessed, have been paid, except assessments against which appeals have been or will be promptly taken and as to which adequate reserves have been provided. The statute of limitations on the assessment of United States federal income taxes of the Company and its subsidiaries has expired for all taxable years through and including the taxable year ending December 31, 2008. The Company and its subsidiaries have filed all other tax returns that are required to have been filed by them pursuant to applicable foreign, state, local or other law except insofar as the failure to file such returns would not result in a Material Adverse Effect, and have paid all other taxes due and payable by the Company and its subsidiaries, except for such taxes, if any, as are being contested in good faith and as to which adequate reserves have been established by the Company. The charges, accruals and reserves on the books of the Company in respect of any tax liability for any taxable years the remain for which the statute of limitations on assessment has not yet expired are adequate to meet any assessments or re-assessments for additional tax for any open years, except to the extent of any inadequacy that would not result in a Material Adverse Effect;

(aa) The Company and its subsidiaries possess all permits, licenses, consents, approvals, certificates and other authorizations (collectively, “Governmental Licenses”) issued by, and have made all declarations and filings with, the appropriate federal, state, local or foreign governmental or regulatory authorities that are necessary for the ownership or lease of their respective properties or the conduct of their respective businesses as described in each of the Pricing Prospectus and the Prospectus; the Company and its subsidiaries are in compliance with the terms and conditions of all such Governmental Licenses other than as would not, individually or in the aggregate, have a Material Adverse

Effect; all such Governmental Licenses are valid and in full force and effect other than as would not, individually or in the aggregate, have a Material Adverse Effect; and neither the Company nor any of its subsidiaries has received any notice of proceedings related to revocation or modification of any such Governmental Licenses or has any reason to believe that any such Governmental Licenses will not be renewed in the ordinary course;

(bb) There are no persons with registration rights or other similar rights to have any securities registered for sale pursuant to the Registration Statement or otherwise registered for sale or sold by the Company under the Act pursuant to this Agreement, except for those rights which have been waived in writing prior to the date hereof;

(cc) The Company and its subsidiaries carry or are entitled to the benefits of insurance, with financially sound and reputable insurers, in such amounts and covering such risks as is generally maintained by companies of established repute engaged in the same or similar business of the same or similar size and/or otherwise similarly situated, and all such insurance is in full force and effect. The Company has no reason to believe that it or any subsidiary will not be able (A) to renew its existing insurance coverage as and when such policies expire or (B) to obtain comparable coverage from similar institutions as may be necessary or appropriate to conduct its business as now conducted and at a cost that would not result in a Material Adverse Effect. Neither the Company nor any of its subsidiaries has been denied any insurance coverage that it has sought or for which it has applied;

(dd) Except as would not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect: (i) the Company and its subsidiaries and their respective operations and facilities are in compliance with applicable Environmental Laws, which compliance includes, without limitation, having obtained and being in compliance with any permits, licenses or other governmental authorizations or approvals, and having made all filings and provided all financial assurances and notices, required for the ownership and operation of the business as presently conducted, properties and facilities of the Company or its subsidiaries under applicable Environmental Laws, and compliance with the terms and conditions thereof; (ii) neither the Company nor any of its subsidiaries has received any written communication, whether from a governmental authority, citizens group, employee or other person, that alleges that the Company or any of its subsidiaries is in violation of any Environmental Law; (iii) there is no claim, action or cause of action filed with a court or governmental authority based on or pursuant to any Environmental Law pending or, to the Company’s knowledge, threatened, against the Company or any of its subsidiaries, no investigation with respect to which the Company has received written notice, and no written notice by any person or entity alleging actual or potential liability on the part of the Company or any of its subsidiaries based on or pursuant to any Environmental Law against the Company or any of its

subsidiaries; (iv) neither the Company nor any of its subsidiaries is conducting or paying for, in whole or in part, any public investigation, response or other corrective action pursuant to any Environmental Law at any site or facility, nor is any of them subject or a party to any order, judgment or decree issued by a governmental authority, which imposes any obligation or liability under any Environmental Law; (v) to the Company’s knowledge, no lien, charge, encumbrance or restriction has been recorded pursuant to any Environmental Law with respect to any assets, facility or property owned, operated or leased by the Company or any of its subsidiaries; and (vi) to the Company’s knowledge there are no past or present actions, activities, circumstances, conditions or occurrences, including, without limitation, the Release or threatened Release of any Material of Environmental Concern, that could reasonably be expected to result in a violation of or liability under any Environmental Law on the part of the Company or any of its subsidiaries.

For purposes of this Agreement, “Environment” means ambient air, indoor air, surface water, groundwater, drinking water, soil, surface and subsurface strata, and natural resources such as wetlands, flora and fauna. “Environmental Laws” means, to the extent applicable to the Company, all federal, state, local and foreign laws or regulations, ordinances, codes, orders, decrees, judgments and injunctions issued, promulgated or entered thereunder, relating to pollution or protection of the Environment or human health, including without limitation, those relating to (i) the Release or threatened Release of Materials of Environmental Concern; and (ii) the manufacture, processing, distribution, use, generation, treatment, storage, transport, handling or recycling of Materials of Environmental Concern. “Materials of Environmental Concern” means any substance, material, pollutant, contaminant, chemical, waste, compound, or constituent, in any form, including without limitation, petroleum and petroleum products, subject to regulation or which can give rise to liability under any Environmental Law. “Release” means any release, spill, emission, discharge, deposit, disposal, leaking, pumping, pouring, dumping, emptying, injection or leaching into the Environment, or into, from or through any building, structure or facility.

In the ordinary course of its business, the Company conducts a periodic review of the effect of Environmental Laws on the business, operations and properties of the Company and its subsidiaries, in the course of which it identifies and evaluates associated costs and liabilities (including, without limitation, any capital or operating expenditures required for clean-up, closure of properties or compliance with Environmental Laws or any permit, license or approval, any related constraints on operating activities and any potential liabilities to third parties). On the basis of such review and the amount of its established reserves, the Company has reasonably concluded that such associated costs and liabilities would not, individually or in the aggregate, result in a Material Adverse Effect;

(ee) None of the Company, any of its subsidiaries or, to the knowledge of the Company, any director, officer, agent, employee, affiliate or other person

acting on behalf of the Company or any of its subsidiaries is aware of or has taken any action, directly or indirectly, that would result in a violation by such persons of the Foreign Corrupt Practices Act of 1977, as amended, and the rules and regulations thereunder (the “FCPA”), including, without limitation, making use of the mails or any means or instrumentality of interstate commerce corruptly in furtherance of an offer, payment, promise to pay or authorization of the payment of any money, or other property, gift, promise to give, or authorization of the giving of anything of value to any “foreign official” (as such term is defined in the FCPA) or any foreign political party or official thereof or any candidate for foreign political office, in contravention of the FCPA and the Company and, to the knowledge of the Company, its affiliates have conducted their businesses in compliance with the FCPA and have instituted and maintain policies and procedures designed to ensure, and which are reasonably expected to continue to ensure, continued compliance therewith;

(ff) The operations of the Company and its subsidiaries are and have been conducted at all times in compliance with applicable financial recordkeeping and reporting requirements of the Currency and Foreign Transactions Reporting Act of 1970, as amended, the money laundering statutes of all jurisdictions, the rules and regulations thereunder and any related or similar rules, regulations or guidelines, issued, administered or enforced by any governmental agency (collectively, the “Money Laundering Laws”); and no action, suit or proceeding by or before any court or governmental agency, authority or body or any arbitrator involving the Company or any of its subsidiaries with respect to the Money Laundering Laws is pending or, to the best knowledge of the Company, threatened;

(gg) None of the Company, any of its subsidiaries or, to the knowledge of the Company, any director, officer, agent, employee, affiliate or other person acting on behalf of the Company or any of its subsidiaries is currently subject to any U.S. sanctions administered by the Office of Foreign Assets Control of the U.S. Treasury Department (“OFAC”), nor are the Company or any of its subsidiaries located, organized or resident in a country or territory that is the subject of Sanctions. The Company will not directly or indirectly use the proceeds of the sale of the Shares, or lend, contribute or otherwise make available such proceeds to any of its subsidiaries, joint venture partners or other person, (i) to fund any activities of or business with any person that, at the time of such funding, is the subject of Sanctions, or is in Burma/Myanmar, Cuba, Iran, Libya, North Korea, Sudan or in any other country or territory, that, at the time of such funding, is the subject of Sanctions, or (ii) in any other manner that will result in a violation by any person (including any person participating in the offering, whether as underwriter, advisor, investor or otherwise) of Sanctions;

(hh) Any statistical and market-related data included in the Pricing Prospectus or the Prospectus are based on or derived from sources that the Company believes, after reasonable inquiry, to be reliable and accurate and, to the extent required, the Company has obtained the written consent to the use of such data from such sources;

(ii) Neither the Company nor any of its affiliates has taken nor will any such party take, directly or indirectly, any action which is designed to or which has constituted or which might reasonably be expected to cause or result in stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of the Shares;

(jj) The Company and its subsidiaries are in material compliance with applicable requirements of the Federal Trade Commission (the “FTC”) rules governing franchising and applicable provisions of federal, state, local and other U.S. laws or regulations governing the business of a franchise or that are applicable to their business as presently conducted, except in each case as would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect;

(kk) Neither the Company nor any of its subsidiaries nor any agent thereof acting on their behalf has taken, and none of them will take, any action that might cause this Agreement or the issuance, sale and delivery of the Share to violate Regulation T, Regulation U or Regulation X of the Board of Governors of the Federal Reserve System;

(ll) Except as would not, individually or in the aggregate, result in a Material Adverse Effect, (i) there is (A) no unfair labor practice complaint pending or, to the Company’s knowledge, threatened against the Company or any of its subsidiaries before the National Labor Relations Board, and no grievance or arbitration proceeding arising out of or under collective bargaining agreements pending, or to the Company’s knowledge, threatened, against the Company or any of its subsidiaries, (B) no strike, labor dispute, slowdown or stoppage pending or, to the Company’s knowledge, threatened against the Company or any of its subsidiaries and (C) no union representation question existing with respect to the employees of the Company or any of its subsidiaries and, to the Company’s knowledge, no union organizing activities taking place and (ii) there has been no violation of any federal, state or local law relating to discrimination in hiring, promotion or pay of employees or of any applicable wage or hour laws; and

(mm) No material relationship, direct or indirect, exists between or among the Company or any controlled affiliate of the Company, on the one hand, and any director, officer, member, stockholder, customer or supplier of the Company or any controlled affiliate of the Company, on the other hand, which is required by GAAP to be disclosed in the Company’s financial statements which is not so disclosed in the Pricing Prospectus and Prospectus. There are no outstanding loans, advances (except advances for business expenses in the ordinary course of business) or guarantees of indebtedness by the Company or any controlled affiliate of the Company to or for the benefit of any of the officers or directors of the Company or any controlled affiliate of the Company or any of their respective family members.

2. Subject to the terms and conditions set forth herein, (a) the Company agrees to sell to each of the Underwriters, and each of the Underwriters agrees, severally and not jointly, to purchase from the Company, at a purchase price per share of $[ ], the number of Firm Shares (to be adjusted by you so as to eliminate fractional shares) determined by multiplying the aggregate number of Shares to be sold by the Company by a fraction, the numerator of which is the aggregate number of Firm Shares to be purchased by such Underwriter as set forth opposite the name of such Underwriter in Schedule I hereto and the denominator of which is the aggregate number of Firm Shares to be purchased by all of the Underwriters from the Company and (b) in the event and to the extent that the Underwriters shall exercise the election to purchase Optional Shares as provided below, the Company agrees to sell to each of the Underwriters, and each of the Underwriters agrees, severally and not jointly, to purchase from the Company, at the purchase price per share set forth in clause (a) of this Section 2, that portion of the number of Optional Shares as to which such election shall have been exercised (to be adjusted by you so as to eliminate fractional shares) determined by multiplying such number of Optional Shares by a fraction, the numerator of which is the maximum number of Optional Shares which such Underwriter is entitled to purchase as set forth opposite the name of such Underwriter in Schedule I hereto and the denominator of which is the maximum number of Optional Shares that all of the Underwriters are entitled to purchase hereunder.

The Company hereby grants to the Underwriters the right to purchase at their election up to [ ] Optional Shares, at the purchase price per share set forth in the paragraph above, for the sole purpose of covering sales of shares in excess of the number of Firm Shares, provided that the purchase price per Optional Share shall be reduced by an amount per share equal to any dividends or distributions declared by the Company and payable on the Firm Shares but not payable on the Optional Shares. Any such election to purchase Optional Shares may be exercised only by written notice from the Representatives to the Company, given within a period of 30 calendar days after the date of this Agreement, setting forth the aggregate number of Optional Shares to be purchased and the date on which such Optional Shares are to be delivered, as determined by you but in no event earlier than the First Time of Delivery (as defined in Section 4 hereof) or, unless the Representatives and the Company otherwise agree in writing, later than ten business days after the date of such notice.

3. Upon the authorization by you of the release of the Firm Shares, the several Underwriters propose to offer the Firm Shares for sale upon the terms and conditions set forth in the Pricing Prospectus and the Prospectus. The Company hereby confirms its engagement of Merrill Lynch, Pierce, Fenner & Smith Incorporated as, and Merrill Lynch, Pierce, Fenner & Smith Incorporated hereby confirms its agreement with the Company to render services as a “qualified

independent underwriter” within the meaning of FINRA Rule 5121 with respect to the offering and sale of the Shares. Merrill Lynch, Pierce, Fenner & Smith Incorporated in its capacity as a qualified independent underwriter and not otherwise, is referred to herein as the “QIU”.

4. (a) The Shares to be purchased by each Underwriter hereunder, in definitive form, and in such authorized denominations and registered in such names as the Representatives may request upon at least forty-eight hours’ prior notice to the Company shall be delivered by or on behalf of the Company to the Representatives, through the facilities of the Depository Trust Company (“DTC”), for the account of such Underwriter, against payment by or on behalf of such Underwriter of the purchase price therefor by wire transfer of Federal (same-day) funds to the accounts specified by each of the Company and the Custodian to the Representatives at least forty-eight hours in advance. The Company will cause the certificates representing the Shares to be made available for checking and packaging at least twenty-four hours prior to the Time of Delivery (as defined below) with respect thereto at the office of DTC or its designated custodian (the “Designated Office”). The time and date of such delivery and payment shall be, with respect to the Firm Shares, 9:30 a.m., New York City time, on [ ], 2015 or such other time and date as the Representatives and the Company may agree upon in writing, and, with respect to the Optional Shares, 9:30 a.m., New York time, on the date specified by the Representatives in the written notice given by the Representatives of the Underwriters’ election to purchase such Optional Shares, or such other time and date as the Representatives and the Company may agree upon in writing. Such time and date for delivery of the Firm Shares is herein called the “First Time of Delivery”, such time and date for delivery of the Optional Shares, if not the First Time of Delivery, is herein called the “Second Time of Delivery”, and each such time and date for delivery is herein called a “Time of Delivery”.

(b) The documents to be delivered at each Time of Delivery by or on behalf of the parties hereto pursuant to Section 8 hereof, including the cross receipt for the Shares and any additional documents requested by the Underwriters pursuant to Section 8(n) hereof, will be delivered at the offices of Latham & Watkins LLP, 885 Third Avenue, New York, New York 10022-4834 (the “Closing Location”), and the Shares will be delivered at the Designated Office, all at such Time of Delivery. A meeting will be held at the Closing Location at [ ] [a][p].m., New York City time, on the New York Business Day next preceding such Time of Delivery, at which meeting the final drafts of the documents to be delivered pursuant to the preceding sentence will be available for review by the parties hereto. For the purposes of this Section 4, “New York Business Day” shall mean each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which banking institutions in New York City are generally authorized or obligated by law or executive order to close.

5. The Company agrees with each of the Underwriters:

(a) To prepare the Prospectus in a form approved by you and to file such Prospectus pursuant to Rule 424(b) under the Act not later than the Commission’s close of business on the second business day following the execution and delivery of this Agreement, or, if applicable, such earlier time as may be required by Rule 430A(a)(3) under the Act; to make no further amendment or any supplement to the Registration Statement or the Prospectus prior to the last Time of Delivery which shall be reasonably disapproved by you promptly after reasonable notice thereof; to advise you, promptly after it receives notice thereof, of the time when any amendment to the Registration Statement has been filed or becomes effective or any amendment or supplement to the Prospectus has been filed and to furnish you with copies thereof; to file promptly all material required to be filed by the Company with the Commission pursuant to Rule 433(d) under the Act; to advise you, promptly after it receives notice thereof, of the issuance by the Commission of any stop order or of any order preventing or suspending the use of any Preliminary Prospectus, the Prospectus or other prospectus in respect of the Shares, of the suspension of the qualification of the Shares for offering or sale in any jurisdiction, of the initiation or threatening of any proceeding for any such purpose, or of any request by the Commission for the amending or supplementing of the Registration Statement or the Prospectus or for additional information; and, in the event of the issuance of any stop order or of any order preventing or suspending the use of any Preliminary Prospectus or other prospectus or suspending any such qualification, to promptly use its best efforts to obtain the withdrawal of such order;

(b) Promptly from time to time to take such action as you may reasonably request to qualify the Shares for offering and sale under the securities laws of such jurisdictions as you may request and to comply with such laws so as to permit the continuance of sales and dealings therein in such jurisdictions for as long as may be necessary to complete the distribution of the Shares, provided that in connection therewith the Company shall not be required to qualify as a foreign corporation or to file a general consent to service of process in any jurisdiction or to subject itself to taxation in any such jurisdiction in which it was not otherwise subject to taxation;

(c) Prior to 10:00 a.m., New York City time, on the New York Business Day next succeeding the date of this Agreement and from time to time, to furnish the Underwriters with written and electronic copies of the Prospectus in New York City in such quantities as you may reasonably request, and, if the delivery of a prospectus (or in lieu thereof, the notice referred to in Rule 173(a) under the Act) is required at any time prior to the expiration of nine months after the time of issue of the Prospectus in connection with the offering or sale of the Shares and if at such time any event shall have occurred as a result of which the Prospectus as then amended or supplemented would include an untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made when such

Prospectus (or in lieu thereof, the notice referred to in Rule 173(a) under the Act) is delivered, not misleading, or, if for any other reason it shall be necessary during such same period to amend or supplement the Prospectus in order to comply with the Act, to notify you and upon your request to prepare and furnish without charge to each Underwriter and to any dealer in securities as many written and electronic copies as you may from time to time reasonably request of an amended Prospectus or a supplement to the Prospectus which will correct such statement or omission or effect such compliance; and in case any Underwriter is required to deliver a prospectus (or in lieu thereof, the notice referred to in Rule 173(a) under the Act) in connection with sales of any of the Shares at any time nine months or more after the time of issue of the Prospectus, upon your request but at the expense of such Underwriter, to prepare and deliver to such Underwriter as many written and electronic copies as you may request of an amended or supplemented Prospectus complying with Section 10(a)(3) of the Act;

(d) To make generally available to its securityholders as soon as practicable (which may be satisfied by filing such information with the Commission), but in any event not later than sixteen months after the effective date of the Registration Statement (as defined in Rule 158(c) under the Act), an earnings statement of the Company and its subsidiaries (which need not be audited) complying with Section 11(a) of the Act and the rules and regulations of the Commission thereunder (including, at the option of the Company, Rule 158);

(e) During the period beginning from the date hereof and continuing to and including the date 180 days after the date of the Prospectus (the “Lock-Up Period”), not to (i) offer, sell, contract to sell, pledge, grant any option to purchase, make any short sale or otherwise transfer, lend or dispose of, except as provided hereunder, directly or indirectly, or file with the Commission a registration statement under the Act relating to, any securities of the Company that are substantially similar to the Shares, including but not limited to any options or warrants to purchase shares of Stock or any securities that are convertible into or exchangeable for, or that represent the right to receive, Stock or any such substantially similar securities, or publicly disclose the intention to make any offer, sale, pledge, disposition or filing or (ii) enter into any swap or other agreement that transfers, in whole or in part, any of the economic consequences of ownership of the Stock or any such other securities, whether any such transaction described in clause (i) or (ii) above is to be settled by delivery of Stock or such other securities, in cash or otherwise (other than (A) the Shares to be sold hereunder, (B) the filing of any registration statement on Form S-8 relating to securities granted or to be granted pursuant to a stock incentive plan or stock purchase plan of the Company described in the Pricing Prospectus, (C) the issuance of stock options or other equity awards, or the issuance of shares of Stock upon exercise of such stock options or equity awards, pursuant to a stock incentive plan or stock purchase plan of the Company described in the Pricing Prospectus, (D) the issuance of shares of Stock upon the conversion or exchange

of convertible or exchangeable securities outstanding as of the date of this Agreement and (E) the issuance by the Company of securities in connection with any acquisitions or strategic investments by the Company or any of its subsidiaries, so long as any such issuances under clauses (C), (D) and (E) are conditioned upon the execution by the recipients of an agreement consistent and similar in scope and duration with the form of lock-up agreement attached hereto as Annex II in connection with the sale of Shares hereunder and with respect to issuances under clause (E) hereof, shall not exceed 5% of the total number of shares of Stock outstanding on the date hereof (after giving effect to the sale of the Shares)), without the prior written consent of Goldman, Sachs & Co. and Merrill Lynch, Pierce, Fenner & Smith Incorporated; provided, however, that if (1) during the last 17 days of the initial Lock-Up Period, the Company releases earnings results or announces material news or a material event or (2) prior to the expiration of the initial Lock-Up Period, the Company announces that it will release earnings results during the 15-day period following the last day of the initial Lock-Up Period, then in each case the Lock-Up Period will be automatically extended until the expiration of the 18-day period beginning on the date of release of the earnings results or the announcement of the material news or material event, as applicable, unless Goldman, Sachs & Co. and Merrill Lynch, Pierce, Fenner & Smith Incorporated waive, in writing, such extension; the Company will provide Goldman, Sachs & Co. and Merrill Lynch, Pierce, Fenner & Smith Incorporated and each stockholder subject to the Lock-Up Period pursuant to the lockup letters described in Section 8(l) with prior notice of any such announcement that gives rise to an extension of the Lock-up Period;

(f) To furnish to its stockholders as soon as practicable after the end of each fiscal year an annual report (including a balance sheet and statements of income, stockholders’ equity and cash flows of the Company and its consolidated subsidiaries certified by independent public accountants) and, as soon as practicable after the end of each of the first three quarters of each fiscal year (beginning with the fiscal quarter ending after the effective date of the Registration Statement), to make available to its stockholders consolidated summary financial information of the Company and its subsidiaries for such quarter in reasonable detail; provided, however , that the Company may satisfy the requirements of this subsection by making any such reports, communications or information generally available on its website or by electronically filing such information with the Commission;

(g) During a period of five years from the effective date of the Registration Statement, as you may from time to time reasonably request, to furnish to you copies of all reports or other communications (financial or other) furnished to stockholders, and to deliver to you (i) copies of any reports and financial statements furnished to or filed with the Commission or any national securities exchange on which any class of securities of the Company is listed; and (ii) such additional information concerning the business and financial condition of

the Company (such financial statements to be on a consolidated basis to the extent the accounts of the Company and its subsidiaries are consolidated in reports furnished to its stockholders generally or to the Commission); provided that any report, communication or financial statement furnished or filed with the Commission that is publicly available on the Commission’s EDGAR system shall be deemed to have been furnished to you at the time furnished or filed with the Commission;

(h) To use the net proceeds received by it from the sale of the Shares pursuant to this Agreement in the manner specified in the Pricing Prospectus under the caption “Use of Proceeds”;

(i) To use its best efforts to list, subject to notice of issuance, the Shares on the New York Stock Exchange (the “Exchange”);

(j) To file with the Commission such information on Form 10-Q or Form 10-K as may be required by Rule 463 under the Act;

(k) If the Company elects to rely upon Rule 462(b), the Company shall file a Rule 462(b) Registration Statement with the Commission in compliance with Rule 462(b) by 10:00 P.M., Washington, D.C. time, on the date of this Agreement, and the Company shall at the time of filing either pay to the Commission the filing fee for the Rule 462(b) Registration Statement or give irrevocable instructions for the payment of such fee pursuant to Rule 3a(c) of the Commission’s Informal and Other Procedures (16 CFR 202 3a); and

(l) Upon request of any Underwriter, to furnish, or cause to be furnished, to such Underwriter an electronic version of the Company’s trademarks, servicemarks and corporate logo for use on the website, if any, operated by such Underwriter for the purpose of facilitating the on-line offering of the Shares (the “License”); provided, however , that the License shall be used solely for the purpose described above, is granted without any fee and may not be assigned or transferred.

6. (a) The Company represents and agrees that, without the prior consent of the Representatives, it has not made and will not make any offer relating to the Shares that would constitute a “free writing prospectus” as defined in Rule 405 under the Act; each Underwriter represents and agrees that, without the prior consent of the Company and the Representatives, it has not made and will not make any offer relating to the Shares that would constitute a free writing prospectus; any such free writing prospectus the use of which has been consented to by the Company and the Representatives is listed on Schedule II(a) or Schedule II(b) hereto;

(b) The Company has complied and will comply with the requirements of Rule 433 under the Act applicable to any Issuer Free Writing Prospectus, including timely filing with the Commission or retention where required and

legending; and the Company represents that it has satisfied and agrees that it will satisfy the conditions under Rule 433 under the Act to avoid a requirement to file with the Commission any electronic road show;

(c) The Company agrees that if at any time following issuance of an Issuer Free Writing Prospectus any event occurred or occurs as a result of which such Issuer Free Writing Prospectus would conflict with the information in the Registration Statement, the Pricing Prospectus or the Prospectus or would include an untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances then prevailing, not misleading, the Company will give prompt notice thereof to the Representatives and, if requested by the Representatives, will prepare and furnish without charge to each Underwriter an Issuer Free Writing Prospectus or other document which will correct such conflict, statement or omission; provided, however, that this representation and warranty shall not apply to any statements or omissions in an Issuer Free Writing Prospectus made in reliance upon and in conformity with information furnished in writing to the Company by an Underwriter through the Representatives expressly for use therein, it being understood and agreed that the only such information is that described as such in Section 9(c) hereof.

7. The Company covenants and agrees with the several Underwriters: (a) that the Company will pay or cause to be paid the following: (i) the fees, disbursements and expenses of the Company’s counsel and accountants in connection with the registration of the Shares under the Act and all other expenses in connection with the preparation, printing, reproduction and filing of the Registration Statement, any Preliminary Prospectus, any Issuer Free Writing Prospectus and the Prospectus and amendments and supplements thereto and the mailing and delivering of copies thereof to the Underwriters and dealers; (ii) the cost of printing or producing any Agreement among Underwriters, this Agreement, the Blue Sky Memorandum, closing documents (including any compilations thereof) and any other documents in connection with the offering, purchase, sale and delivery of the Shares; (iii) all expenses in connection with the qualification of the Shares for offering and sale under state securities laws as provided in Section 5(b) hereof, including the reasonable fees and disbursements of counsel for the Underwriters in connection with such qualification and in connection with the Blue Sky survey (such fee and expenses not to exceed $20,000.00) (iv) all fees and expenses in connection with listing the Shares on the Exchange; and (v) the filing fees incident to, and the reasonable fees and disbursements of counsel for the Underwriters in connection with, any required review by FINRA of the terms of the sale of the Shares (such fee and expenses not to exceed $30,000.00); and (b) the Company will pay or cause to be paid (i) the cost of preparing stock certificates; (ii) the cost and charges of any transfer agent or registrar; (iii) the costs and expenses of the Company relating to investor

presentations on any “road show” undertaken in connection with the marketing of the Shares, including without limitation, expenses associated with the production of road show slides and graphics, fees and expenses of any consultants engaged in connection with the road show presentations with the prior approval of the Company, travel and lodging expenses of the representatives and officers of the Company and any such consultants, and 50% of the cost of any aircraft and other transportation chartered in connection with the road show; and (iv) all other costs and expenses incident to the performance of its obligations hereunder which are not otherwise specifically provided for in this Section. It is understood, however, that except as provided in this Section and Sections 9 and 12 hereof, the Underwriters will pay all of their own costs and expenses, including (i) the fees of their counsel; (ii) New York stock transfer taxes on resale of any of the Shares by them, if any, and the Company agrees to reimburse the Representatives for associated carrying costs if such tax payment is not rebated on the day of payment and for any portion of such tax payment not rebated; and (iii) the travel and lodging expenses of the representatives of the Underwriters and 50% of the cost of any aircraft and other transportation chartered in connection with any “road show” undertaken in connection with the offering.

8. The obligations of the Underwriters hereunder, as to the Shares to be delivered at each Time of Delivery, shall be subject, in their discretion, to the condition that all representations and warranties and other statements of the Company herein are, at and as of such Time of Delivery, true and correct, the condition that the Company herein shall have performed all of its and their respective obligations hereunder theretofore to be performed, and the following additional conditions:

(a) The Prospectus shall have been filed with the Commission pursuant to Rule 424(b) under the Act within the applicable time period prescribed for such filing by the rules and regulations under the Act and in accordance with Section 5(a) hereof; all material required to be filed by the Company pursuant to Rule 433(d) under the Act shall have been filed with the Commission within the applicable time period prescribed for such filing by Rule 433; if the Company has elected to rely upon Rule 462(b) under the Act, the Rule 462(b) Registration Statement shall have become effective by 10:00 P.M., Washington, D.C. time, on the date of this Agreement; no stop order suspending the effectiveness of the Registration Statement or any part thereof shall have been issued and no proceeding for that purpose shall have been initiated or threatened by the Commission; no stop order suspending or preventing the use of any Preliminary Prospectus, the Prospectus or any Issuer Free Writing Prospectus shall have been initiated or threatened by the Commission; and all requests for additional information on the part of the Commission shall have been complied with to your reasonable satisfaction;

(b) Latham & Watkins LLP, counsel for the Underwriters, shall have furnished to you such written opinion or opinions, dated such Time of Delivery, in form and substance satisfactory to you and such counsel shall have received such papers and information as they may reasonably request to enable them to pass upon such matters;

(c) Ropes & Gray LLP, counsel for the Company, shall have furnished to you their written opinion (a draft of such opinion is attached as Annex III hereto) and negative assurance letter, dated such Time of Delivery, in form and substance satisfactory to you;

(d) [Reserved];

(e) [Reserved];

(f) On the date of the Prospectus at a time prior to the execution of this Agreement, at 9:30 a.m., New York City time, on the effective date of any post-effective amendment to the Registration Statement filed subsequent to the date of this Agreement and also at each Time of Delivery, Ernst & Young LLP shall have furnished to you a letter or letters, dated the respective dates of delivery thereof, in form and substance satisfactory to you;

(g) As of the date hereof and at each Time of Delivery, the Chief Financial Officer of the Company shall have furnished to you a certificate with respect to certain financial information contained in the Pricing Prospectus and the Prospectus, dated the respective dates of delivery thereof, in form and substance satisfactory to you;

(h) (i) Neither the Company nor any of its subsidiaries shall have sustained since the date of the latest audited financial statements included in the Pricing Prospectus any loss or interference with its business from fire, explosion, flood or other calamity, whether or not covered by insurance, or from any labor dispute or court or governmental action, order or decree, otherwise than as set forth or contemplated in the Pricing Prospectus, and (ii) since the respective dates as of which information is given in the Pricing Prospectus there shall not have been any change in the capital stock (other than as a result of the grant or exercise of stock options or award shares of restricted stock pursuant to employee benefit plans existing on the date of this Agreement and described in the Pricing Prospectus of Prospectus) or long-term debt of the Company or any of its subsidiaries or any change, or any development involving a prospective change, in or affecting the general affairs, management, financial position, stockholders’ equity or results of operations of the Company and its subsidiaries, otherwise than as set forth or contemplated in the Pricing Prospectus, the effect of which, in any such case described in clause (i) or (ii), is in the judgment of the Representatives so material and adverse as to

make it impracticable or inadvisable to proceed with the public offering or the delivery of the Shares being delivered at such Time of Delivery on the terms and in the manner contemplated in the Prospectus;

(i) On or after the Applicable Time (i) no downgrading shall have occurred in the rating accorded the Company’s or any of its subsidiaries’ debt securities by any “nationally recognized statistical rating organization”, as that term is defined by the Commission for purposes of Rule 436(g)(2) under the Act, and (ii) no such organization shall have publicly announced that it has under surveillance or review, with possible negative implications, its rating of any of the Company’s or any of its subsidiaries’ debt securities ;

(j) On or after the Applicable Time there shall not have occurred any of the following: (i) a suspension or material limitation in trading in securities generally on the Exchange; (ii) a suspension or material limitation in trading in the Company’s securities on the Exchange; (iii) a general moratorium on commercial banking activities declared by either Federal or New York State authorities or a material disruption in commercial banking or securities settlement or clearance services in the United States; (iv) the outbreak or escalation of hostilities involving the United States or the declaration by the United States of a national emergency or war or (v) the occurrence of any other calamity or crisis or any change in financial, political or economic conditions in the United States or elsewhere, if the effect of any such event specified in clause (iv) or (v) in your judgment makes it impracticable or inadvisable to proceed with the public offering or the delivery of the Shares being delivered at such Time of Delivery on the terms and in the manner contemplated in the Prospectus;

(k) The Shares to be sold at such Time of Delivery shall have been duly listed, subject to notice of issuance, on the Exchange;

(l) The Company shall have obtained and delivered to the Underwriters executed copies of an agreement from each of the parties listed on Annex I hereto, substantially to the effect set forth in Section 5(e) hereof in form and substance satisfactory to you;

(m) The Company shall have complied with the provisions of Section 5(c) hereof with respect to the furnishing of prospectuses on the New York Business Day next succeeding the date of this Agreement;

(n) The Company shall have furnished or caused to be furnished to you at such Time of Delivery certificates of officers of the Company satisfactory to you as to the accuracy of the representations and warranties of the Company herein at and as of such Time of Delivery, as to the performance by the Company of all of their respective obligations hereunder to be performed at or prior to such Time of Delivery, as to the matters set forth in subsections (a), (h) and (i) of this Section and as to such other matters as you may reasonably request; and

(o) FINRA shall not have raised any objection with respect to the fairness or reasonableness of the underwriting, or other arrangements of the transactions, contemplated hereby.

9. (a) The Company will indemnify and hold harmless each Underwriter against any losses, claims, damages or liabilities, joint or several, to which such Underwriter may become subject, under the Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon an untrue statement or alleged untrue statement of a material fact contained in the Registration Statement, the Pricing Disclosure Package or the Prospectus, or any amendment or supplement thereto, any materials or information provided to investors by, or with the approval of, the Company in connection with the marketing of the offering of the Shares, including any road show or investor presentations made to investors by the Company (whether in person or electronically), any Issuer Free Writing Prospectus or any “issuer information” filed or required to be filed pursuant to Rule 433(d) under the Act, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and will reimburse each Underwriter for any legal or other expenses reasonably incurred by such Underwriter in connection with investigating or defending any such action or claim as such expenses are incurred; provided , however , that the Company shall not be liable in any such case to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in the Registration Statement, the Pricing Disclosure Package or the Prospectus, or any amendment or supplement thereto, or any Issuer Free Writing Prospectus, in reliance upon and in conformity with written information furnished to the Company by any Underwriter through the Representatives, expressly for use therein, it being understood and agreed that the only such information is that described as such in Section 9(c) hereof.

(b) [Reserved].

(c) Each Underwriter will indemnify and hold harmless the Company and against any losses, claims, damages or liabilities to which the Company may become subject, under the Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon an untrue statement or alleged untrue statement of a material fact contained in the Registration Statement, any Preliminary Prospectus, the Pricing Prospectus or the Prospectus, or any amendment or supplement thereto, or any Issuer Free Writing Prospectus, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, in each case to the extent, but only to the

extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in the Registration Statement, any Preliminary Prospectus, the Pricing Prospectus or the Prospectus, or any amendment or supplement thereto, or any Issuer Free Writing Prospectus, in reliance upon and in conformity with written information furnished to the Company by such Underwriter through the Representatives expressly for use therein; and will reimburse the Company for any legal or other expenses reasonably incurred by the Company in connection with investigating or defending any such action or claim as such expenses are incurred. The Company acknowledges that the information set forth in the fifth paragraph of text concerning the terms of the offering by the Underwriters, in the tenth, eleventh and twelfth paragraphs of text concerning short sales, stabilizing transactions and purchases to cover positions created by short sales by the Underwriters, in the first sentence of the fourteenth paragraph of text concerning electronic prospectuses and in the fifteenth paragraph of text concerning sales to discretionary accounts under the heading “Underwriting” in the Preliminary Prospectus, the Pricing Prospectus and the Prospectus, constitute the only information furnished in writing by or on behalf of the Underwriters for inclusion in the Preliminary Prospectus, the Pricing Prospectus or the Prospectus.

(d) Promptly after receipt by an indemnified party under subsection (a), (b) or (c) above or (g) below of notice of the commencement of any action, such indemnified party shall, if a claim in respect thereof is to be made against the indemnifying party under such subsection, notify the indemnifying party in writing of the commencement thereof; but the omission so to notify the indemnifying party shall not relieve it from any liability which it may have to any indemnified party otherwise than under such subsection. In case any such action shall be brought against any indemnified party and it shall notify the indemnifying party of the commencement thereof, the indemnifying party shall be entitled to participate therein and, to the extent that it shall wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel satisfactory to such indemnified party (who shall not, except with the consent of the indemnified party, be counsel to the indemnifying party), and, after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party shall not be liable to such indemnified party under such subsection for any legal expenses of other counsel or any other expenses, in each case subsequently incurred by such indemnified party, in connection with the defense thereof other than reasonable costs of investigation. No indemnifying party shall, without the written consent of the indemnified party, effect the settlement or compromise of, or consent to the entry of any judgment with respect to, any pending or threatened action or claim in respect of which indemnification or contribution may be sought hereunder (whether or not the indemnified party is an actual or potential party to such action or claim) unless such settlement, compromise or judgment (i) includes an unconditional release of

the indemnified party from all liability arising out of such action or claim and (ii) does not include a statement as to or an admission of fault, culpability or a failure to act, by or on behalf of any indemnified party.

(e) If the indemnification provided for in this Section 9 is unavailable to or insufficient to hold harmless an indemnified party under subsection (a), (b) or (c) above in respect of any losses, claims, damages or liabilities (or actions in respect thereof) referred to therein, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages or liabilities (or actions in respect thereof) in such proportion as is appropriate to reflect the relative benefits received by the Company on the one hand and the Underwriters on the other from the offering of the Shares. If, however, the allocation provided by the immediately preceding sentence is not permitted by applicable law or if the indemnified party failed to give the notice required under subsection (d) above, then each indemnifying party shall contribute to such amount paid or payable by such indemnified party in such proportion as is appropriate to reflect not only such relative benefits but also the relative fault of the Company on the one hand and the Underwriters on the other in connection with the statements or omissions which resulted in such losses, claims, damages or liabilities (or actions in respect thereof), as well as any other relevant equitable considerations. The relative benefits received by the Company on the one hand and the Underwriters on the other shall be deemed to be in the same proportion as the total net proceeds from the offering (before deducting expenses) received by the Company bear to the total underwriting discounts and commissions received by the Underwriters, in each case as set forth in the table on the cover page of the Prospectus. The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company on the one hand or the Underwriters on the other and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Company and the Underwriters agree that it would not be just and equitable if contribution pursuant to this subsection (e) were determined by pro rata allocation (even if the Underwriters were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to above in this subsection (e). The amount paid or payable by an indemnified party as a result of the losses, claims, damages or liabilities (or actions in respect thereof) referred to above in this subsection (e) shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this subsection (e), no Underwriter shall be required to contribute any amount in excess of the amount by which the total price at which the Shares underwritten by it and distributed to the public were offered to the public exceeds the amount of any damages which such

Underwriter has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The Underwriters’ obligations in this subsection (e) to contribute are several in proportion to their respective underwriting obligations and not joint. The Company and the Underwriters agree that Merrill Lynch, Pierce, Fenner & Smith Incorporated will not receive any additional benefits hereunder for serving as the QIU in connection with the offering and sale of the Shares.

(f) The obligations of the Company under this Section 9 shall be in addition to any liability which the Company may otherwise have and shall extend, upon the same terms and conditions, to each person, if any, who controls any Underwriter within the meaning of the Act, each broker-dealer affiliate of any Underwriter and the selling agents of any Underwriter; and the obligations of the Underwriters under this Section 9 shall be in addition to any liability which the respective Underwriters may otherwise have and shall extend, upon the same terms and conditions, to each officer and director of the Company (including any person who, with his or her consent, is named in the Registration Statement as about to become a director of the Company) and to each person, if any, who controls the Company within the meaning of the Act.

(g) The Company will indemnify and hold harmless Merrill Lynch, Pierce, Fenner & Smith Incorporated in its capacity as QIU, against any losses, claims, damages or liabilities, joint or several, to which the QIU may become subject, under the Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon (i) an untrue statement or alleged untrue statement of a material fact contained in the Registration Statement, the Pricing Disclosure Package or the Prospectus, or any amendment or supplement thereto, (ii) the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading or (iii) any act or omission to act or any alleged act or omission to act by Merrill Lynch, Pierce, Fenner & Smith Incorporated as QIU in connection with any transaction contemplated by this Agreement or undertaken in preparing for the purchase, sale and delivery of the Shares, except as to this clause (iii) to the extent that any such loss, claim, damage or liability results from the gross negligence or bad faith of Merrill Lynch, Pierce, Fenner & Smith Incorporated in performing the services as QIU, and will reimburse the QIU for any legal or other expenses reasonably incurred by the QIU in connection with investigating or defending any such action or claim as such expenses are incurred.

10. (a) If any Underwriter shall default in its obligation to purchase the Shares which it has agreed to purchase hereunder at a Time of Delivery, you may in your discretion arrange for you or another party or other parties to purchase such Shares on the terms contained herein. If within thirty-six hours after such

default by any Underwriter you do not arrange for the purchase of such Shares, then the Company shall be entitled to a further period of thirty-six hours within which to procure another party or other parties satisfactory to you to purchase such Shares on such terms. In the event that, within the respective prescribed periods, you notify the Company that you have so arranged for the purchase of such Shares, or the Company notifies you that they have so arranged for the purchase of such Shares, you or the Company shall have the right to postpone such Time of Delivery for a period of not more than seven days, in order to effect whatever changes may thereby be made necessary in the Registration Statement or the Prospectus, or in any other documents or arrangements, and the Company agrees to file promptly any amendments or supplements to the Registration Statement or the Prospectus which in your opinion may thereby be made necessary. The term “Underwriter” as used in this Agreement shall include any person substituted under this Section with like effect as if such person had originally been a party to this Agreement with respect to such Shares.

(b) If, after giving effect to any arrangements for the purchase of the Shares of a defaulting Underwriter or Underwriters by you and the Company as provided in subsection (a) above, the aggregate number of such Shares which remains unpurchased does not exceed one-eleventh of the aggregate number of all the Shares to be purchased at such Time of Delivery, then the Company shall have the right to require each non-defaulting Underwriter to purchase the number of shares which such Underwriter agreed to purchase hereunder at such Time of Delivery and, in addition, to require each non-defaulting Underwriter to purchase its pro rata share (based on the number of Shares which such Underwriter agreed to purchase hereunder) of the Shares of such defaulting Underwriter or Underwriters for which such arrangements have not been made; but nothing herein shall relieve a defaulting Underwriter from liability for its default.

(c) If, after giving effect to any arrangements for the purchase of the Shares of a defaulting Underwriter or Underwriters by you and the Company as provided in subsection (a) above, the aggregate number of such Shares which remains unpurchased exceeds one-eleventh of the aggregate number of all the Shares to be purchased at such Time of Delivery, or if the Company shall not exercise the right described in subsection (b) above to require non-defaulting Underwriters to purchase Shares of a defaulting Underwriter or Underwriters, then this Agreement (or, with respect to the Second Time of Delivery, the obligations of the Underwriters to purchase and of the Company to sell the Optional Shares) shall thereupon terminate, without liability on the part of any non-defaulting Underwriter or the Company, except for the expenses to be borne by the Company and the Underwriters as provided in Section 7 hereof and the indemnity and contribution agreements in Section 9 hereof; but nothing herein shall relieve a defaulting Underwriter from liability for its default.

11. The respective indemnities, agreements, representations, warranties and other statements of the Company and the several Underwriters, as set forth in

this Agreement or made by or on behalf of them, respectively, pursuant to this Agreement, shall remain in full force and effect, regardless of any investigation (or any statement as to the results thereof) made by or on behalf of any Underwriter or any controlling person of any Underwriter, or the Company, or any officer or director or controlling person of the Company and shall survive delivery of and payment for the Shares.

12. If this Agreement shall be terminated pursuant to Section 10 hereof, the Company shall not then be under any liability to any Underwriter except as provided in Sections 7 and 9 hereof; but, if for any other reason, any Shares are not delivered by or on behalf of the Company as provided herein, the Company will reimburse the Underwriters for all out-of-pocket expenses approved in writing by the Representatives, including fees and disbursements of counsel, reasonably incurred by the Underwriters in making preparations for the purchase, sale and delivery of the Shares not so delivered, but the Company shall then be under no further liability to any Underwriter in respect of the Shares not so delivered except as provided in Sections 7 and 9 hereof.

13. In all dealings hereunder, you shall act on behalf of each of the Underwriters, and the parties hereto shall be entitled to act and rely upon any statement, request, notice or agreement on behalf of any Underwriter made or given by you jointly or by Goldman, Sachs & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated, Credit Suisse Securities (USA) LLC and Morgan Stanley & Co. LLC on behalf of you as the Representatives.

All statements, requests, notices and agreements hereunder shall be in writing, and if to the Underwriters shall be delivered or sent by mail, telex or facsimile transmission to you as the Representatives in care of Goldman, Sachs & Co., 200 West Street, New York, New York 10282-2198, Attention: Registration Department, Merrill Lynch, Pierce, Fenner & Smith Incorporated, One Bryant Park, New York, NY 10036, Attention: Syndicate Department, Credit Suisse Securities (USA) LLC, Eleven Madison Avenue, New York, NY 10010-3629, Attention: LCD-IBD, and Morgan Stanley & Co. LLC 1585 Broadway, New York, NY 10036, (fax: (646) 290-2639), Attention: Equity Syndicate Desk, with a copy to the Legal Department; and if to the Company shall be delivered or sent by mail, telex or facsimile transmission to the address of the Company set forth in the Registration Statement, Attention: Secretary; provided, however, that any notice to an Underwriter pursuant to Section 9(d) hereof shall be delivered or sent by mail, telex or facsimile transmission to such Underwriter at its address set forth in its Underwriters’ Questionnaire, or telex constituting such Questionnaire, which address will be supplied to the Company by you upon request; provided, however, that notices under subsection 5(e) shall be in writing, and if to the Underwriters shall be delivered or sent by mail, telex or facsimile transmission to you as the Representatives at Goldman, Sachs & Co., 200 West Street, New York, New York 10282-2198, Attention: Control Room, Merrill Lynch, Pierce, Fenner & Smith Incorporated, One Bryant Park, New York, NY 10036, Attention: Syndicate

Department (facsimile: (646) 855-3073), with a copy to ECM Legal (facsimile: (212) 230-8730), Credit Suisse Securities (USA) LLC, Eleven Madison Avenue, New York, NY 10010-3629, Attention: LCD-IBD, and Morgan Stanley & Co. LLC 1585 Broadway, New York, NY 10036, (fax: (646) 290-2639), Attention: Equity Syndicate Desk, with a copy to the Legal Department. Any such statements, requests, notices or agreements shall take effect upon receipt thereof.

In accordance with the requirements of the USA Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)), the Underwriters are required to obtain, verify and record information that identifies their respective clients, including the Company, which information may include the name and address of their respective clients, as well as other information that will allow the underwriters to properly identify their respective clients.

14. This Agreement shall be binding upon, and inure solely to the benefit of, the Underwriters and the Company and, to the extent provided in Sections 9 and 11 hereof, the officers and directors of the Company and each person who controls the Company or any Underwriter, and their respective heirs, executors, administrators, successors and assigns, and no other person shall acquire or have any right under or by virtue of this Agreement. No purchaser of any of the Shares from any Underwriter shall be deemed a successor or assign by reason merely of such purchase.

15. Time shall be of the essence of this Agreement. As used herein, the term “business day” shall mean any day when the Commission’s office in Washington, D.C. is open for business.

16. The Company acknowledges and agrees that (i) the purchase and sale of the Shares pursuant to this Agreement is an arm’s-length commercial transaction between the Company, on the one hand, and the several Underwriters, on the other, (ii) in connection therewith and with the process leading to such transaction each Underwriter is acting solely as a principal and not the agent or fiduciary of the Company, (iii) no Underwriter has assumed an advisory or fiduciary responsibility in favor of the Company with respect to the offering contemplated hereby or the process leading thereto (irrespective of whether such Underwriter has advised or is currently advising the Company on other matters) or any other obligation to the Company except the obligations expressly set forth in this Agreement and (iv) the Company has consulted its own legal and financial advisors to the extent it deemed appropriate. The Company agrees that it will not claim that the Underwriters, or any of them, has rendered advisory services of any nature or respect, or owes a fiduciary or similar duty to the Company, in connection with such transaction or the process leading thereto.

17. This Agreement supersedes all prior agreements and understandings (whether written or oral) between the Company and the Underwriters, or any of them, with respect to the subject matter hereof.

18. THIS AGREEMENT AND ANY MATTERS RELATED TO THIS TRANSACTION SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAWS THAT WOULD RESULT IN THE APPLICATION OF ANY LAW OTHER THAN THE LAWS OF THE STATE OF NEW YORK. The Company agrees that any suit or proceeding arising in respect of this Agreement or our engagement will be tried exclusively in the U.S. District Court for the Southern District of New York or, if that court does not have subject matter jurisdiction, in any state court located in The City and County of New York and the Company agrees to submit to the jurisdiction of, and to venue in, such courts.

19. The Company and each of the Underwriters hereby irrevocably waives, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to this Agreement or the transactions contemplated hereby.

20. This Agreement may be executed by any one or more of the parties hereto in any number of counterparts, each of which shall be deemed to be an original, but all such counterparts shall together constitute one and the same instrument.

21. Notwithstanding anything herein to the contrary, the Company is authorized to disclose to any persons the U.S. federal and state income tax treatment and tax structure of the potential transaction and all materials of any kind (including tax opinions and other tax analyses) provided to the Company relating to that treatment and structure, without the Underwriters imposing any limitation of any kind. However, any information relating to the tax treatment and tax structure shall remain confidential (and the foregoing sentence shall not apply) to the extent necessary to enable any person to comply with securities laws. For this purpose, “tax structure” is limited to any facts that may be relevant to that treatment.

If the foregoing is in accordance with your understanding, please sign and return to us counterparts hereof, and upon the acceptance hereof by you, on behalf of each of the Underwriters, this letter and such acceptance hereof shall constitute a binding agreement among each of the Underwriters and the Company. It is understood that your acceptance of this letter on behalf of each of the Underwriters is pursuant to the authority set forth in a form of Agreement among the Underwriters, the form of which shall be submitted to the Company for examination upon request, but without warranty on your part as to the authority of the signers thereof.

Signature Page Follows.


Very truly yours,

Party City Holdco Inc.

By:
		Name:
		Title:

[Signature Page to Underwriting Agreement]


Accepted as of the date hereof:

Goldman, Sachs & Co.

By:
(Goldman, Sachs & Co.)

Merrill Lynch, Pierce, Fenner & Smith Incorporated

By:
		Name:
		Title:

Credit Suisse Securities (USA) LLC

By:
		Name:
		Title:

Morgan Stanley & Co. LLC

By:
		Name:
		Title:

On behalf of each of the Underwriters named in Schedule I to this Agreement

[Signature Page to Underwriting Agreement]


SCHEDULE I
Underwriter	Total Number of Firm Shares to be Purchased	Number of Optional Shares to be Purchased if Maximum Option Exercised

Goldman, Sachs & Co.
Merrill Lynch, Pierce, Fenner & Smith Incorporated

Credit Suisse Securities (USA) LLC
Morgan Stanley & Co. LLC

Barclays Capital Inc.
Deutsche Bank Securities Inc.

J.P. Morgan Securities LLC
William Blair & Company, L.L.C.
Stephens Inc.
Telsey Advisory Group LLC

Total

SCHEDULE II

(a) Issuer Free Writing Prospectuses:

(b) Additional Documents Incorporated by Reference:

ANNEX I

Parties to Lock-Up Agreements

[All directors, officers, sponsors and all holders of equity]

ANNEX II

Form of Lock-Up Agreement

Annex III

Form of R&G Opinion

Exhibit 3.2

AMENDED AND RESTATED BYLAWS

SECTION 1 - STOCKHOLDERS

Section 1.1. Annual Meeting . An annual meeting of the stockholders of Party City Holdco Inc. (the “ Corporation ”) for the election of directors to succeed those whose term expire and for the transaction of such other business as may properly come before the meeting shall be held at the place, if any, within or without the State of Delaware, on the date and at the time that the board of directors of the Corporation (the “ Board of Directors ”) shall each year fix. Unless stated otherwise in the notice of the annual meeting of the stockholders of the Corporation, such annual meeting shall be at the principal office of the Corporation.

Section

1.2. Advance Notice of Nominations and Proposals of Business .

(a) Nominations of persons for election to the Board of Directors and proposals for business to be transacted by the stockholders at an annual meeting of stockholders may be made (i) pursuant to the Corporation’s notice with respect to such meeting (or any supplement thereto), (ii) by or at the direction of the Board of Directors or any committee thereof or (iii) by any stockholder of record of the Corporation who (A) was a stockholder of record at the time of the giving of the notice contemplated in Section 1.2(b), (B) is entitled to vote at such meeting and (C) has complied with the notice procedures set forth in this Section 1.2. Subject to Section 1.2(i) and except as otherwise required by law, clause (iii) of this Section 1.2(a) shall be the exclusive means for a stockholder to make nominations or propose other business (other than matters properly brought pursuant to applicable provisions of federal law, including the Securities Exchange Act of 1934 (as amended from time to time, the “ Act ”) and the rules and regulations of the Securities and Exchange Commission thereunder) before an annual meeting of stockholders.

(b) For nominations or other business to be properly brought before an annual meeting by a stockholder pursuant to clause (iii) of Section 1.2(a), (i) the stockholder must have given timely notice thereof in writing to the Secretary of the Corporation with the information contemplated by Section 1.2(c), and (ii) the business must be a proper matter for stockholder action under the Delaware General Corporation Law (the “ DGCL ”). The notice requirements of this Section 1.2 shall be deemed satisfied by a stockholder with respect to business other than a nomination if the stockholder has notified the Corporation of his, her or its intention to present a proposal at an annual meeting in compliance with applicable rules and regulations promulgated under the Act and such stockholder’s proposal has been included in a proxy statement prepared by the Corporation to solicit proxies for such annual meeting.

(c) To be timely, a stockholder’s notice must be delivered to the Secretary of the Corporation at the principal executive offices of the Corporation a date (i) not less than 90 nor more than 120 days prior to the anniversary date of the prior year’s annual meeting or (ii) if there was no annual meeting in the prior year or if the date of the current year’s annual meeting is more than 30 days before or after the anniversary date of the prior year’s annual meeting, on or before 10 days after the day on which the date of the current year’s annual meeting is first

disclosed in a public announcement. In no event shall any adjournment or postponement of an annual meeting or the announcement thereof commence a new time period for the delivery of such notice. Such notice from a stockholder must include (i) as to each nominee that the stockholder proposes for election or reelection as a director, (A) all information relating to such nominee that would be required to be disclosed in solicitations of proxies for the election of such nominee as a director pursuant to Regulation 14A under the Act and such nominee’s written consent to serve as a director if elected, and (B) a description of all direct and indirect compensation and other material monetary arrangements, agreements or understandings during the past three years, and any other material relationship, if any, between or concerning such stockholder and its respective affiliates or associates, or others with whom they are acting in concert, on the one hand, and the proposed nominee, and his or her respective affiliates or associates, on the other hand; (ii) as to each proposal that the stockholder seeks to bring before the meeting, a brief description of such proposal, the reasons for making the proposal at the meeting, the text of the proposal or business (including the text of any resolutions proposed for consideration and in the event that such business includes a proposal to amend the bylaws of the Corporation, the language of the proposed amendment) and any material interest that the stockholder has in the proposal; (iii) (A) the name and address of the stockholder giving the notice and the Stockholder Associated Person (as defined below), if any, on whose behalf the nomination or proposal is made, (B) the class (and, if applicable, series) and number of shares of stock of the Corporation that are, directly or indirectly, owned beneficially or of record by the stockholder or any Stockholder Associated Person, (C) a description of any option, warrant, convertible security, stock appreciation right or similar right with an exercise or conversion privilege or a settlement payment or mechanism at a price related to any class (or, if applicable, series) of shares of stock of the Corporation or with a value derived in whole or in part from the value of any class (or, if applicable, series) of shares of stock of the Corporation, whether or not such instrument or right shall be subject to settlement in the underlying class or series of capital stock of the Corporation or otherwise (each, a “ Derivative Instrument ”) directly or indirectly owned beneficially or of record by such stockholder or any Stockholder Associated Person and any other direct or indirect opportunity to profit or share in any profit derived from any increase or decrease in the value of shares of stock of the Corporation of the stockholder or any Stockholder Associated Person, (D) any proxy, contract, arrangement, understanding or relationship pursuant to which such stockholder or any Stockholder Associated Person has a right to vote any securities of the Corporation, (E) any proportionate interest in shares of the Corporation or Derivative Instruments held, directly or indirectly, by a general or limited partnership in which such stockholder or any Stockholder Associated Person is a general partner or beneficially owns an interest in a general partner, (F) any performance-related fees (other than an asset-based fee) that such stockholder or any Stockholder Associated Person is entitled to based on any increase or decrease in the value of the shares of stock of the Corporation or Derivative Instruments, (G) any other information relating to such stockholder and Stockholder Associated Person, if any, required to be disclosed in a proxy statement or other filing required to be made in connection with solicitations of proxies for, as applicable, the proposal and/or for the election of directors in an election contest pursuant to and in accordance with Section 14(a) of the Act, (H) a representation that the stockholder is a holder of record of the Corporation entitled to vote at such meeting and intends to appear in person or by proxy at the meeting to propose such business or nomination, (I) a certification as to whether or not the stockholder and all Stockholder Associated Persons have complied with all applicable federal, state and other legal

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requirements in connection with the stockholder’s and each Stockholder Associated Person’s acquisition of shares of capital stock or other securities of the Corporation and the stockholder’s and each Stockholder Associated Person’s acts or omissions as a stockholder (or beneficial owner of securities) of the Corporation and (J) whether either the stockholder intends to deliver a proxy statement and form of proxy to holders of, in the case of a proposal, at least the percentage of the Corporation’s voting shares required under applicable law to carry the proposal or, in the case of a nomination or nominations, a sufficient number of holders of the Corporation’s voting shares reasonably believed by such stockholder to be sufficient to elect such nominee or nominees or otherwise to solicit proxies or votes from stockholders in support of such proposal or nomination. For purposes of these bylaws, a “ Stockholder Associated Person ” of any stockholder means (i) any “affiliate” or “associate” (as those terms are defined in Rule 12b-2 under the Act) of such stockholder, (ii) any beneficial owner of any capital stock or other securities of the Corporation owned of record or beneficially by such stockholder, (iii) any person directly or indirectly controlling, controlled by or under common control with any such Stockholder Associated Person referred to in clause (i) or (ii) above, and (iv) any person acting in concert in respect of any matter involving the Corporation or its securities with either such stockholder or any beneficial owner of any capital stock or other securities of the Corporation owned of record or beneficially by such stockholder; “ beneficial ownership ” shall be determined in accordance with Rule 13d-3 promulgated under the Act; and “ control ” means the power to direct or cause the direction of the management and policies of such person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise, and “ controlled ” and “ controlling ” have meanings correlative to the foregoing. In addition, in order for a nomination to be properly brought before an annual or special meeting by a stockholder pursuant to clause (iii) of Section 1.2(a), any nominee proposed by a stockholder shall complete a questionnaire, in a form provided by the Corporation, and deliver a signed copy of such completed questionnaire to the Corporation within 10 days of the date that the Corporation makes available to the stockholder seeking to make such nomination or such nominee the form of such questionnaire. The Corporation may require any proposed nominee to furnish such other information as may be reasonably requested by the Corporation to determine the eligibility of the proposed nominee to serve as an independent director of the Corporation or that could be material to a reasonable stockholder’s understanding of the independence, or lack thereof, of the nominee. The information required to be included in a notice pursuant to this Section 1.2(c) shall be provided as of the date of such notice and shall be supplemented by the stockholder not later than 10 days after the record date for the determination of stockholders entitled to notice of the meeting to disclose any changes to such information as of the record date. The information required to be included in a notice pursuant to this Section 1.2(c) shall not include any ordinary course business activities of any broker, dealer, commercial bank, trust company or other nominee who is directed to prepare and submit the notice required by this Section 1.2(c) on behalf of a beneficial owner of the shares held of record by such broker, dealer, commercial bank, trust company or other nominee and who is not otherwise affiliated or associated with such beneficial owner.

(d) Subject to the certificate of incorporation of the Corporation (the “ Certificate of Incorporation ”), Section 1.2(i) and applicable law, only persons nominated in accordance with procedures stated in this Section 1.2 shall be eligible for election as and to serve as a member of the Board of Directors and the only business that shall be conducted at an annual meeting of stockholders is the business that has been brought before the meeting in accordance

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with the procedures set forth in this Section 1.2. The chairman of the meeting shall have the power and the duty to determine whether a nomination or any proposal has been made according to the procedures stated in this Section 1.2 and, if any nomination or proposal does not comply with this Section 1.2, unless otherwise required by law, the nomination or proposal shall be disregarded.

(e) For purposes of this Section 1.2, “public announcement” means disclosure in a press release reported by the Dow Jones News Service, Associated Press or a comparable news service or in a document publicly filed or furnished by the Corporation with the Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of the Act.

(f) Notwithstanding the foregoing provisions of this Section 1.2, a stockholder shall also comply with all applicable requirements of the Act and the rules and regulations thereunder with respect to matters set forth in this Section 1.2. Nothing in this Section 1.2 shall affect any rights, if any, of stockholders to request inclusion of nominations or proposals in the Corporation’s proxy statement pursuant to applicable provisions of federal law, including the Act.

(g) Notwithstanding the foregoing provisions of this Section 1.2, unless otherwise required by law, if the stockholder (or a qualified representative of the stockholder) does not appear at the annual or special meeting of stockholders of the Corporation to present a nomination or proposed business or does not provide the information required by Section 1.2(c), including any required supplement thereto, such nomination shall be disregarded and such proposed business shall not be transacted, notwithstanding that proxies in respect of such vote may have been received by the Corporation. For purposes of this Section 1.2, to be considered a qualified representative of the stockholder, a person must be a duly authorized officer, manager or partner of such stockholder or must be authorized by a writing executed by such stockholder or an electronic transmission delivered by such stockholder to act for such stockholder as proxy at the meeting of stockholders and such person must produce such writing or electronic transmission, or a reliable reproduction of the writing or electronic transmission, at the meeting of stockholders.

(h) Only such business shall be conducted at a special meeting of stockholders as shall have been brought before the meeting pursuant to the Corporation’s notice of meeting. Nominations of persons for election to the Board of Directors may be made at a special meeting of stockholders at which directors are to be elected pursuant to the Corporation’s notice of meeting (1) by or at the direction of the Board of Directors or any committee thereof or (2) provided that the Board of Directors has determined that directors shall be elected at such meeting, by any stockholder of the Corporation who is a stockholder of record at the time the notice provided for in this Section 1.2 is delivered to the Secretary of the Corporation, who is entitled to vote at the meeting and upon such election and who complies with the notice procedures set forth in this Section 1.2. In the event the Corporation calls a special meeting of stockholders for the purpose of electing one or more directors to the Board of Directors, any such stockholder entitled to vote in such election of directors may nominate a person or persons (as the case may be) for election to such position(s) as specified in the Corporation’s notice of meeting, if the stockholder’s notice required by paragraph (b) of this Section 1.2 shall be delivered to the Secretary of the Corporation at the principal executive offices of the Corporation

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not earlier than the close of business on the 90 ^th day prior to such special meeting and not later than the close of business on the later of the 60 ^th day prior to such special meeting or the 10 ^th day following the day on which public announcement is first made of the date of the special meeting and of the nominees proposed by the Board of Directors to be elected at such meeting. In no event shall the public announcement of an adjournment or postponement of a special meeting commence a new time period (or extend any time period) for the giving of a stockholder’s notice as described above.

(i) All provisions of this Section 1.2 are subject to, and nothing in this Section 1.2 shall in any way limit the exercise, or the method or timing of the exercise of, the rights of any person granted by the Corporation to nominate directors, which rights may be exercised without compliance with the provisions of this Section1.2.

Section 1.3. Special Meetings; Notice .

Special meetings of the stockholders of the Corporation may be called only in the manner set forth in the Certificate of Incorporation. Notice of every special meeting of the stockholders of the Corporation shall state the purpose(s) of such meeting. Except as otherwise required by law or section 1.2(h), the business conducted at a special meeting of stockholders of the Corporation shall be limited exclusively to the business set forth in the Corporation’s notice of meeting, and the individual or group calling such meeting shall have exclusive authority to determine the business included in such notice.

Section 1.4. Notice of Meetings .

Notice of the place, if any, date and time of all meetings of stockholders of the Corporation, the record date for determining the stockholders entitled to vote at the meeting (if such date is different from the record date for the stockholders entitled to notice of the meeting) and the means of remote communications, if any, by which stockholders and proxy holders may be deemed present and vote at such meeting, and, in the case of all special meetings of stockholders, the purpose(s) of the meeting, shall be given, not less than 10 nor more than 60 days before the date on which such meeting is to be held, to each stockholder entitled to notice of the meeting.

The Corporation may postpone or cancel any previously called annual or special meeting of stockholders of the Corporation by making a public announcement (as defined in Section 1.2(e)) of such postponement or cancellation prior to the meeting. When a previously called annual or special meeting is postponed to another time, date or place, if any, notice of the place (if any), date and time of the postponed meeting, the record date for determining the stockholders entitled to vote at the meeting (if such date is different from the record date for the stockholders entitled to notice of the meeting) and the means of remote communications, if any, by which stockholders and proxy holders may be deemed present and vote at such postponed meeting, shall be given in conformity with this Section 1.4 unless such meeting is postponed not more than 60 days after initial notice of the meeting was provided in conformity with this Section 1.4.

When a meeting is adjourned to another time or place, notice need not be given of the adjourned meeting if the time and place, if any, thereof and the means of remote communication,

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if any, by which stockholders and proxy holders may be deemed to be present and vote at such adjourned meeting are announced at the meeting at which the adjournment is taken; however , if the date of any adjourned meeting is more than 30 days after the date for which the meeting was originally noticed, or if a new record date is fixed for the adjourned meeting, notice of the place, if any, date and time of the adjourned meeting and the means of remote communication, if any, by which stockholders and proxy holders may be deemed present and vote at such adjourned meeting, shall be given in conformity herewith to each stockholder of record entitled to vote at such adjourned meeting. At any adjourned meeting, any business may be transacted that may have been transacted at the original meeting.

Section 1.5. Quorum .

At any meeting of the stockholders, the holders of shares of stock of the Corporation entitled to cast a majority of the total votes entitled to be cast by the holders of all outstanding capital stock of the Corporation, present in person or by proxy, shall constitute a quorum for all purposes, unless or except to the extent that the presence of a larger number is required by applicable law or the Certificate of Incorporation. If a separate vote by one or more classes or series is required, the holders of shares entitled to cast a majority of the total votes entitled to be cast by the holders of the shares of the class or classes or series, present in person or represented by proxy, shall constitute a quorum entitled to take action with respect to that vote on that matter.

If a quorum shall fail to attend any meeting, the chairman of the meeting may adjourn the meeting to another place, if any, date and time.

Section 1.6. Organization .

The Chairman of the Board of Directors or, in his or her absence, the person whom the Board of Directors designates or, in the absence of that person or the failure of the Board of Directors to designate a person, the Chief Executive Officer of the Corporation or, in his or her absence, the person chosen by the holders of a majority of the shares of capital stock entitled to vote who are present, in person or by proxy, shall call to order any meeting of the stockholders of the Corporation and act as chairman of the meeting. In the absence of the Secretary of the Corporation, the secretary of the meeting shall be the person the chairman appoints.

Section 1.7. Conduct of Business .

The chairman of any meeting of stockholders of the Corporation shall determine the order of business and the rules of procedure for the conduct of such meeting, including the manner of voting and the conduct of discussion as he or she determines to be in order. The chairman shall have the power to adjourn the meeting to another place, if any, date and time. The date and time of the opening and closing of the polls for each matter upon which the stockholders will vote at the meeting shall be announced at the meeting. Except to the extent inconsistent with such rules and regulations as adopted by the Board of Directors, the chairman of the meeting shall have the right and authority to convene and (for any or no reason) to adjourn the meeting, to prescribe such rules, regulations and procedures and to do all such acts as, in the judgment of such chairman, are appropriate for the proper conduct of the meeting. Such rules, regulations or procedures, whether adopted by the Board of Directors or prescribed by the

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chairman of the meeting, may include, without limitation, the following: (i) the establishment of an agenda or order of business for the meeting; (ii) rules and procedures for maintaining order at the meeting and the safety of those present; (iii) limitations on attendance at or participation in the meeting to stockholders entitled to vote at the meeting, their duly authorized and constituted proxies or such other persons as the chairman of the meeting shall determine; (iv) restrictions on entry to the meeting after the time fixed for the commencement thereof; and (v) limitations on the time allotted to questions or comments by participants. The chairman of the meeting of stockholders, in addition to making any other determinations that may be appropriate to the conduct of the meeting, shall, if the facts warrant, determine and declare to the meeting that a nomination or matter of business was not properly brought before the meeting and if such chairman should so determine, such chairman shall so declare to the meeting and any such matter or business not properly brought before the meeting shall not be transacted or considered. Unless and to the extent determined by the Board of Directors or the chairman of the meeting, meetings of stockholders shall not be required to be held in accordance with the rules of parliamentary procedure.

Section 1.8. Proxies; Inspectors .

(a) At any meeting of the stockholders, every stockholder entitled to vote may vote in person or by proxy authorized by an instrument in writing or by a transmission permitted by applicable law.

(b) Prior to a meeting of the stockholders of the Corporation, the Corporation shall appoint one or more inspectors to act at a meeting of stockholders of the Corporation and make a written report thereof. The Corporation may designate one or more persons as alternate inspectors to replace any inspector who fails to act. If no inspector or alternate is able to act at a meeting of stockholders, the person presiding at the meeting may, and to the extent required by applicable law, shall, appoint one or more inspectors to act at the meeting. Each inspector, before beginning the discharge of his or her duties, shall take and sign an oath faithfully to execute the duties of inspector with strict impartiality and according to the best of his or her ability. The inspectors may appoint or retain other persons or entities to assist the inspectors in the performance of the duties of inspectors. The inspectors shall have the duties prescribed by applicable law.

Section 1.9. Voting .

Except as otherwise required by the rules or regulations of any stock exchange on which any capital stock of the Corporation may be listed or pursuant to any law or regulation applicable to the Corporation or its securities or by the Certificate of Incorporation or these bylaws, all matters other than the election of directors shall be determined by a majority of the votes cast on the matter affirmatively or negatively. All elections of directors shall be determined by a plurality of the votes cast.

Section 1.10. Stock List .

A complete list of stockholders of the Corporation entitled to vote at any meeting of stockholders of the Corporation, arranged in alphabetical order for each class of stock and

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showing the address of each such stockholder and the number of shares registered in the name of such stockholder, shall be open to the examination of any such stockholder, for any purpose germane to a meeting of the stockholders of the Corporation, for a period of at least 10 days before the meeting (i) on a reasonably accessible electronic network, provided that the information required to gain access to such list is provided with the notice of the meeting or (ii) during ordinary business hours at the principal place of business of the Corporation; provided , however , if the record date for determining the stockholders entitled to vote is less than 10 days before the meeting date, the list shall reflect the stockholders entitled to vote as of the 10th day before such meeting date.

The stock list shall also be open to the examination of any such stockholder during the entire meeting. The Corporation may look to this list as the sole evidence of the identity of the stockholders entitled to vote at a meeting and the number of shares held by each stockholder.

Section 1.11. Written Consent .

Except as otherwise provided in the Certificate of Incorporation, stockholders may not take any action by written consent in lieu of a meeting of stockholders.

SECTION 2 - BOARD OF DIRECTORS

Section 2.1. Qualifications of Directors .

The business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors. In addition to the powers and authorities these bylaws expressly confer upon them, the Board of Directors may exercise all such powers of the Corporation and do all such lawful acts and things as are not prohibited by the DGCL or by the Certificate of Incorporation or by these bylaws required to be exercised or done by the stockholders. Directors need not be stockholders to be qualified for election or service as a director of the Corporation.

Section 2.2. Removal; Resignation .

Prior to the first date (the “ Trigger Date ”) on which investment funds affiliated with Thomas H. Lee Partners, L.P. and their respective successors and affiliates (collectively, the “ THL Entities ”) and investment funds affiliated with Advent International Corporation and their respective successors and affiliates (collectively, the “ Advent Entities ” and together with the THL Entities, the “ Sponsor Holders ” and each, a “ Sponsor Holder ”) cease collectively to beneficially own (directly or indirectly) more than 50% of the outstanding shares of Common Stock, any director or the entire Board of Directors may be removed with or without cause by the holders of a majority of the voting power of the outstanding shares of capital stock of the Company. At and following the Tigger Date, any director or the entire Board of Directors may be removed, but only with cause, by the holders of 75% of the voting power of the outstanding shares of capital stock of the Company. Any director may resign at any time upon notice given in writing, including by electronic transmission, to the Corporation.

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Section 2.3. Regular Meetings .

Regular meetings of the Board of Directors shall be held at the place (if any), on the date and at the time as shall have been established by the Board of Directors and publicized among all directors. A notice of a regular meeting, the date of which has been so publicized, shall not be required.

Section 2.4. Special Meetings .

Special meetings of the Board of Directors may be called by (i) the Chairman or Vice-Chairman of the Board of Directors, (ii) two or more directors then in office, or (iii) if prior to the Trigger Date, by any director nominated or designated for nomination by a Sponsor Holder, and shall be held at the place, if any, on the date and at the time as he, she or they shall fix. Notice of the place, if any, date and time of each special meeting shall be given to each director either (a) by mailing written notice thereof not less than five days before the meeting, or (b) by telephone, facsimile or other means of electronic transmission providing notice thereof not less than twenty-four hours before the meeting. Any and all business may be transacted at a special meeting of the Board of Directors.

Section 2.5. Quorum .

At any meeting of the Board of Directors, a majority of the total number of directors then in office shall constitute a quorum for all purposes; provided that prior to the Trigger Date, it shall be necessary to constitute a quorum, in addition to a majority of the total number of directors then in office (a) that one director nominated or designated for nomination by the THL Entities (other than attendance for the sole purpose of objecting to the transaction of any business because the meeting is not lawfully called or convened), provided in each case that such THL Entities then hold at least 10% of the outstanding shares of Common Stock, and (b) for an action of the Board of Directors taken at a meeting to be valid, directors that constitute a quorum must be present at the time that the vote on such action is taken. For the avoidance of doubt, prior to the Trigger Date, if directors that constitute a quorum are not present at the time that the vote on any action is taken, a quorum shall not be constituted with respect to such action, and any vote taken with respect to such action shall not be a valid action of the Board of Directors, notwithstanding that a quorum of the Board of Directors may have been present at the commencement of such meeting. If a quorum shall fail to attend any meeting, a majority of those present may adjourn the meeting to another place, if any, date or time, without further notice or waiver thereof.

Section 2.6. Participation in Meetings By Conference Telephone or Other Communications Equipment .

Members of the Board of Directors, or of any committee thereof, may participate in a meeting of the Board of Directors or committee thereof by means of conference telephone or other communications equipment by means of which all directors participating in the meeting can hear each other director, and such participation shall constitute presence in person at the meeting.

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Section 2.7. Conduct of Business .

At any meeting of the Board of Directors, business shall be transacted in the order and manner that the Board of Directors may from time to time determine, and all matters shall be determined by the vote of a majority of the directors present, except as otherwise provided in the Certificate of Incorporation or these bylaws or required by applicable law. The Board of Directors or any committee thereof may take action without a meeting if all members thereof consent thereto in writing or by electronic transmission, and the writing or writings, or electronic transmission or electronic transmissions, are filed with the minutes of proceedings of the Board of Directors or any committee thereof. Such filing shall be in paper form if the minutes are maintained in paper form and shall be in electronic form if the minutes are maintained in electronic form.

Section 2.8. Compensation of Directors .

The Board of Directors shall be authorized to fix the compensation of directors. The directors of the Corporation shall be paid their expenses, if any, of attendance at each meeting of the Board of Directors and shall be reimbursed a fixed sum for attendance at each meeting of the Board of Directors, paid an annual retainer or paid other compensation, including equity compensation, as directors of the Corporation. No such payment shall preclude any director from serving the Corporation in any other capacity and receiving compensation therefor. Members of committees may have their expenses, if any, of attendance of each meeting of such committee reimbursed and may be paid compensation for attending committee meetings or being a member of a committee.

SECTION 3 - COMMITTEES

Section 3.1. Committees of the Board of Directors .

The Board of Directors may designate committees of the Board of Directors, with such lawfully delegable powers and duties as it thereby confers, to serve at the pleasure of the Board of Directors and shall, for those committees, appoint a director or directors to serve as the member or members, designating, if it desires, other directors as alternate members who may replace any absent or disqualified member at any meeting of such committee. In the absence or disqualification of any member of any committee and any alternate member in his or her place, the member or members of the committee present at the meeting and not disqualified from voting, whether or not he or she or they constitute a quorum, may by unanimous vote appoint another member of the Board of Directors to act at the meeting in the place of the absent or disqualified member. All provisions of this Section 3.1 are subject to, and nothing in this Section 3.1 shall in any way limit the exercise or method or timing of the exercise of, the rights of any person granted by the Corporation with respect to the existence, duties, composition or conduct of any committee of the Board of Directors.

SECTION 4 - OFFICERS

Section 4.1. Generally .

The officers of the Corporation shall consist of a Chief Executive Officer, a President, one or more Vice Presidents, a Secretary, one or more Assistant Secretaries, a Treasurer, one or more Assistant Treasurer, a Chief Financial Officer and other officers as may from time to time

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be appointed by the Board of Directors. Each officer shall hold office until his or her successor is elected and qualified or until his or her earlier resignation or removal. Any number of offices may be held by the same person. The compensation of officers appointed by the Board of Directors shall be determined from time to time by the Board of Directors or a committee thereof or by the officers as may be designated by resolution of the Board of Directors.

Section 4.2. President .

Unless otherwise determined by the Board of Directors, the President shall be the Chief Executive Officer of the Corporation. Subject to the provisions of these bylaws and to the direction of the Board of Directors, he or she shall have the responsibility for the general management and control of the business and affairs of the Corporation and shall perform all duties and have all powers that are commonly incident to the office of chief executive or which are delegated to him or her by the Board of Directors. He or she shall have the power to sign all stock certificates, contracts and other instruments of the Corporation that are authorized and shall have general supervision and direction of all of the other officers, employees and agents of the Corporation.

Section 4.3. Vice President .

Each Vice President shall have the powers and duties delegated to him or her by the Board of Directors or the President. One Vice President may be designated by the Board of Directors to perform the duties and exercise the powers of the President in the event of the President’s absence or disability.

Section 4.4. Secretary and Assistant Secretaries .

The Secretary shall issue all authorized notices for, and shall keep minutes of, all meetings of the stockholders and the Board of Directors. He or she shall have charge of the corporate books and shall perform other duties as the Board of Directors may from time to time prescribe.

Any Assistant Secretary shall perform such duties and possess such powers as the Board of Directors, the Chief Executive Officer or the Secretary may from time to time prescribe. In the event of the absence, inability or refusal to act of the Secretary, the Assistant Secretary (or, if there shall be more than one, the Assistant Secretaries in the order determined by the Board of Directors) shall perform the duties and exercise the powers of the Secretary.

Section 4.5. Chief Financial Officer, Treasurer and Assistant Treasurers .

The Chief Financial Officer shall keep or cause to be kept the books of account of the Corporation in a thorough and proper manner and shall render statements of the financial affairs of the Corporation in such form and as often as required by the Board of Directors or the President. The Chief Financial Officer, subject to the order of the Board of Directors, shall have the custody of all funds and securities of the Corporation. The Chief Financial Officer shall perform other duties commonly incident to his office and shall also perform such other duties and have such other powers as the Board of Directors or the President shall designate from time to time. The President may direct the Treasurer or any Assistant Treasurer to assume and

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perform the duties of the Chief Financial Officer in the absence or disability of the Chief Financial Officer, and each Treasurer and Assistant Treasurer shall perform other duties commonly incident to his office and shall also perform such other duties and have such other powers as the Board of Directors or the President shall designate from time to time.

Section 4.6. Delegation of Authority .

The Board of Directors may from time to time delegate the powers or duties of any officer to any other officer or agent, notwithstanding any provision hereof.

Section 4.7. Removal .

The Board of Directors may remove any officer of the Corporation at any time, with or without cause.

Section 4.8. Action with Respect to Securities of Other Companies .

Unless otherwise directed by the Board of Directors, the President, or any officer of the Corporation authorized by the President, shall have power to vote and otherwise act on behalf of the Corporation, in person or by proxy, at any meeting of stockholders or equityholders of, or with respect to any action of, stockholders or equityholders of any other entity in which the Corporation may hold securities and otherwise to exercise any and all rights and powers which the Corporation may possess by reason of its ownership of securities in such other entity.

SECTION 5 - STOCK

Section 5.1. Certificates of Stock .

Shares of the capital stock of the Corporation may be certificated or uncertificated, as provided in the DGCL. Stock certificates shall be signed by, or in the name of the Corporation by, (i) the Chairman of the Board (if any) or the Vice Chairman of the Board (if any), the President or a Vice President, and (ii) the Secretary or an Assistant Secretary, or the Treasurer or an Assistant Treasurer, or the Chief Financial Officer certifying the number of shares owned by such stockholder. Any signatures on a certificate may be by facsimile.

Section 5.2. Transfers of Stock .

Transfers of stock shall be made only upon the transfer books of the Corporation kept at an office of the Corporation (within or without the State of Delaware) or by transfer agents designated to transfer shares of the stock of the Corporation.

Section 5.3. Lost, Stolen or Destroyed Certificates.

In the event of the loss, theft or destruction of any certificate of stock, another may be issued in its place pursuant to regulations as the Board of Directors may establish concerning proof of the loss, theft or destruction and concerning the giving of a satisfactory bond or indemnity.

-12-

Section 5.4. Regulations .

The issue, transfer, conversion and registration of certificates of stock of the Corporation shall be governed by other regulations as the Board of Directors may establish.

Section 5.5. Record Date .

(a) In order for the Corporation to determine the stockholders of the Corporation entitled to notice of any meeting of stockholders or any adjournment thereof, the Board of Directors may, except as otherwise required by applicable law, fix a record date, which record date shall not precede the date on which the resolution fixing the record date is adopted and which record date shall not be more than 60 nor less than 10 days before the date of any meeting of stockholders. If the Board of Directors so fixes a date, such date shall also be the record date for determining the stockholders entitled to vote at such meeting unless the Board of Directors determines that a later date on or before the date of the meeting shall be the date for making such determination. If no record date is fixed by the Board of Directors, the record date for determining stockholders entitled to notice of and to vote at a meeting of stockholders of the Corporation shall be at the close of business on the day next preceding the day on which notice is given or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held.

(b) A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders of the Corporation shall apply to any postponement or adjournment of the meeting, provided , that the Board of Directors may fix a new record date for determination of the stockholders entitled to vote at a postponed or adjourned meeting, and in such case shall also fix the record date of the stockholders entitled to notice of such postponed or adjourned meeting at the same or on an earlier date as that fixed for determination of the stockholders entitled to vote at the postponed or adjourned meeting.

(c) In order that the Corporation may determine the stockholders of the Corporation entitled to consent to corporate action in writing without a meeting (until such time as stockholders are no longer permitted to act by written consent pursuant to the Certificate of Incorporation), the Board of Directors may fix a record date, which date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors, and which date shall not be more than 10 days after the date upon which the resolution fixing the record date is adopted by the Board of Directors. Any stockholder of record seeking to have the stockholders authorize or take corporate action by written consent shall, by written notice to the Secretary, request that the Board of Directors fix a record date. The Board of Directors shall promptly, but in any event no later than 10 days after the date on which such a request is received, adopt a resolution fixing the record date (unless the Board of Directors has previously fixed a record date pursuant to the first sentence hereof). If no record date has been fixed by the Board of Directors pursuant to the first sentence hereof or otherwise within 10 days of the date on which such a request is received, the record date for determining stockholders entitled to consent to corporate action in writing without a meeting, where no prior action by the Board of Directors is required by applicable law, shall be the first date on which a signed written consent setting forth the action taken or proposed to be taken is delivered to the Corporation by delivery to its registered agent in Delaware, its principal place of business or to any officer or agent of the

-13-

Corporation having custody of the book in which proceedings of meetings of stockholders are reported. Delivery shall be by hand or by certified or registered mail, return receipt requested. If no record date has been fixed by the Board of Directors and prior action by the Board of Directors is required by law, the record date for determining stockholders entitled to consent to corporate action in writing without a meeting shall be the close of business on the date on which the Board of Directors adopts the resolution taking the prior action.

(d) In order that the Corporation may determine the stockholders entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix a record date, which shall not be more than sixty (60) days prior to such other action. If no such record date is fixed, the record date for determining stockholders for any such purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto.

SECTION 6 - NOTICES

Section 6.1. Notices .

Except as otherwise provided herein or permitted by applicable law, notices to stockholders shall be in writing and delivered personally or mailed to the stockholders at their addresses appearing on the books of the Corporation. If mailed, notice to a stockholder of the Corporation shall be deemed given when deposited in the mail, postage prepaid, directed to a stockholder at such stockholder’s address as it appears on the records of the Corporation. Without limiting the manner by which notice otherwise may be given effectively to stockholders, any notice to stockholders of the Corporation may be given by electronic transmission in the manner provided in Section 232 of the DGCL.

Section 6.2. Waivers .

A written waiver of any notice, signed by a stockholder or director, or a waiver by electronic transmission by such person or entity, whether given before or after the time of the event for which notice is to be given, shall be deemed equivalent to the notice required to be given to such person or entity. Neither the business nor the purpose of any meeting need be specified in the waiver. Attendance at any meeting shall constitute waiver of notice except attendance for the sole purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened.

SECTION 7 - MISCELLANEOUS

Section 7.1. Corporate Seal .

The Board of Directors may provide a suitable seal, containing the name of the Corporation, which seal shall be in the charge of the Secretary. If and when so directed by the Board of Directors, duplicates of the seal may be kept and used by the Treasurer or by an Assistant Secretary or Assistant Treasurer.

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Section 7.2. Reliance upon Books, Reports, and Records .

Each director and each member of any committee designated by the Board of Directors shall, in the performance of his or her duties, be fully protected in relying in good faith upon the books and records of the Corporation and upon such information, opinions, reports or statements presented to the Corporation by any of its officers, agents or employees, or committees of the Board of Directors so designated, or by any other person or entity as to matters which such director or committee member reasonably believes are within such other person’s or entity’s professional or expert competence and that has been selected with reasonable care by or on behalf of the Corporation.

Section 7.3. Fiscal Year .

The fiscal year of the Corporation shall be as fixed by the Board of Directors. If the Board of Directors makes no determination to the contrary, the fiscal year of the Corporation shall be the twelve months ending with December 31, in each year.

Section 7.4. Time Periods.

In applying any provision of these bylaws that requires that an act be done or not be done a specified number of days before an event or that an act be done during a specified number of days before an event, calendar days shall be used, the day of the doing of the act shall be excluded, and the day of the event shall be included.

SECTION 8 - AMENDMENTS

These bylaws may be altered, amended or repealed in accordance with the Certificate of Incorporation and the DGCL.

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Exhibit 4.1

LOGO

ZQ|CERT#|COY|CLS|RGSTRY|ACCT#|TRANSTYPE|RUN#|TRANS#
Certificate Number
ZQ00000000
COMMON STOCK
PAR VALUE $0.01
Party City®
HOLDCO INC.
COMMON STOCK
THIS CERTIFICATE IS TRANSFERABLE IN CANTON, MA, JERSEY CITY, NJ AND
COLLEGE STATION, TX
Shares
**000000******************
***000000*****************
****000000****************
*****000000***************
******000000**************
PARTY CITY HOLDCO INC.
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
THIS CERTIFIES THAT
is the owner of
CUSIP 702149 10 5
SEE REVERSE FOR CERTAIN DEFINITIONS
**** Mr. Alexander David Sample
MR. SAMPLE & MRS. SAMPLE &
MR. SAMPLE & MRS. SAMPLE
**Shares****000000
***ZERO HUNDRED THOUSAND
ZERO HUNDRED AND ZERO***
FULLY-PAID AND NON-ASSESSABLE SHARES OF COMMON STOCK OF
Party City Holdco Inc. (hereinafter called the “Company”), transferable on the books of the Company in person or by duly authorized attorney, upon surrender of this Certificate properly endorsed. This Certificate and the shares represented hereby, are issued and shall be held subject to all of the provisions of the Articles of Incorporation, as amended, and the By-Laws, as amended, of the Company (copies of which are on file with the Company and with the Transfer Agent), to all of which each holder, by acceptance hereof, assents. This Certificate is not valid unless countersigned and registered by the Transfer Agent and Registrar.
Witness the facsimile seal of the Company and the facsimile signatures of its duly authorized officers.
Vice President
Secretary
PARTY CITY HOLDCO INC.
SEAL
May 2012 DELAWARE
DATED DD-MMM-YYYY
COUNTERSIGNED AND REGISTERED:
COMPUTERSHARE TRUST COMPANY, N.A.
TRANSFER AGENT AND REGISTRAR,
By
AUTHORIZED SIGNATURE
1234567
Party City®
HOLDCO INC.
PO BOX 43004, Providence, RI 02940-3004
MR A SAMPLE
DESIGNATION (IF ANY)
ADD 1 ADD 2 ADD 3 ADD 4
CUSIP XXXXXX XX X
Holder ID XXXXXXXXXX
Insurance Value 1,000,000.00
Number of Shares 123456
DTC 12345678 123456789012345
Certificate Numbers Num/No. Denom. Total
1234567890/1234567890 1 1 1
1234567890/1234567890 2 2 2
1234567890/1234567890 3 3 3
1234567890/1234567890 4 4 4
1234567890/1234567890 5 5 5
1234567890/1234567890 6 6 6
Total Transaction 7

PARTY CITY HOLDCO INC.

THE COMPANY WILL FURNISH WITHOUT CHARGE TO EACH SHAREHOLDER WHO SO REQUESTS, A SUMMARY OF THE POWERS, DESIGNATIONS, PREFERENCES AND RELATIVE, PARTICIPATING, OPTIONAL OR OTHER SPECIAL RIGHTS OF EACH CLASS OF STOCK OF THE COMPANY AND THE QUALIFICATIONS, LIMITATIONS OR RESTRICTIONS OF SUCH PREFERENCES AND RIGHTS, AND THE VARIATIONS IN RIGHTS, PREFERENCES AND LIMITATIONS DETERMINED FOR EACH SERIES, WHICH ARE FIXED BY THE ARTICLES OF INCORPORATION OF THE COMPANY, AS AMENDED, AND THE RESOLUTIONS OF THE BOARD OF DIRECTORS OF THE COMPANY, AND THE AUTHORITY OF THE BOARD OF DIRECTORS TO DETERMINE VARIATIONS FOR FUTURE SERIES. SUCH REQUEST MAY BE MADE TO THE OFFICE OF THE SECRETARY OF THE COMPANY OR TO THE TRANSFER AGENT. THE BOARD OF DIRECTORS MAY REQUIRE THE OWNER OF A LOST OR DESTROYED STOCK CERTIFICATE, OR HIS LEGAL REPRESENTATIVES, TO GIVE THE COMPANY A BOND TO INDEMNIFY IT AND ITS TRANSFER AGENTS AND REGISTRARS AGAINST ANY CLAIM THAT MAY BE MADE AGAINST THEM ON ACCOUNT OF THE ALLEGED LOSS OR DESTRUCTION OF ANY SUCH CERTIFICATE.

The following abbreviations, when used in the inscription on the face of this certificate, shall be construed as though they were written out in full according to applicable laws or regulations:

TEN COM

as tenants in common

UNIF GIFT MIN ACT -

Custodian

(Cust)

(Minor)

TEN ENT

as tenants by the entireties

under Uniform Gifts to Minors Act

(State)

JT TEN

as joint tenants with right of survivorship

and not as tenants in common

UNIF TRF MIN ACT -

(Cust)

Custodian (until age

)

under Uniform Transfers to Minors Act

(Minor)

(State)

Additional abbreviations may also be used though not in the above list.


		PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE

For value received, hereby sell, assign and transfer unto




(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING POSTAL ZIP CODE, OF ASSIGNEE)





		Shares
of the common stock represented by the within Certificate, and do hereby irrevocably constitute and appoint

		Attorney
to transfer the said stock on the books of the within-named Company with full power of substitution in the premises.

Dated:

Signature(s) Guaranteed: Medallion Guarantee Stamp

THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION (Banks, Stockbrokers, Savings and Loan Associations and Credit Unions) WITH MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM, PURSUANT TO S.E.C. RULE 17Ad-15.

Signature:

Notice:

The signature to this assignment must correspond with the name as written upon the face of the certificate, in every particular, without alteration or enlargement, or any change whatever.

LOGO

Exhibit 4.7

AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT

by and among

PARTY CITY HOLDCO INC.,

THL PC TOPCO, L.P.

ADVENT-PARTY CITY ACQUISITION LIMITED PARTNERSHIP

and

THE OTHER STOCKHOLDERS THAT ARE SIGNATORIES HERETO

Dated as of [ ], 2015

TABLE OF CONTENTS


			Page

Section 1.	Certain Definitions			1

Section 2.	Registration Rights			5

	2.1.	Demand Registrations		5
	2.2.	Piggyback Registrations		9
	2.3.	Allocation of Securities Included in Registration Statement		10
	2.4.	Registration Procedures		13
	2.5.	Registration Expenses		20
	2.6.	Certain Limitations on Registration Rights		20
	2.7.	Limitations on Sale or Distribution of Other Securities		20
	2.8.	No Required Sale		21
	2.9.	Indemnification		22
	2.10.	Limitations on Registration of Other Securities; Representation		25
	2.11.	No Inconsistent Agreements		26

Section 3.	Underwritten Offerings			26

	3.1.	Requested Underwritten Offerings		26
	3.2.	Piggyback Underwritten Offerings		26

Section 4.	General			27

	4.1.	Adjustments Affecting Registrable Securities		27
	4.2.	Rule 144 and Rule 144A		27
	4.3.	Nominees for Beneficial Owners		28
	4.4.	Amendments and Waivers		28
	4.5.	Notices		28
	4.6.	Termination and Effect of Termination		29
	4.7.	Successors and Assigns		29
	4.8.	Entire Agreement		30
	4.9.	Governing Law; Submission to Jurisdiction; Waiver of Jury Trial		30
	4.10.	Interpretation: Construction		31
	4.11.	Counterparts		31
	4.12.	Severability		31
	4.13.	Remedies		31
	4.14.	Further Assurances		31
	4.15.	Confidentiality		32

Schedule 4.5 Notices

This AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT (this “ Agreement ”) is made as of [ ], 2015 by and among Party City Holdco Inc. (formerly known as PC Topco Holdings, Inc.), a Delaware corporation (the “ Company ”), THL PC Topco, L.P., a Delaware limited partnership (collectively with its Affiliates which own stock of the Company from time to time, the “ THL Party ”), Advent-Party City Acquisition Limited Partnership, a Delaware limited partnership (collectively with its Affiliates which own stock of the Company from time to time, the “ Advent Party ”) and the other Persons listed on the signature pages hereto (each a “ Management Stockholder ” and, collectively, the “ Management Stockholders ”).

W I T N E S S E T H:

WHEREAS, the Company, the THL Party, the Advent Party and certain stockholders of the Company are parties to that certain Registration Rights Agreement, dated July 27, 2012, as amended from time to time (the “ Prior Agreement ”);

WHEREAS, the Company, the THL Party, the Advent Party and the Management Stockholders desire to amend and restate the Prior Agreement to grant the THL Party, the Advent Party and the Management Stockholders the registration rights set forth herein; and

WHEREAS, in accordance with Section 4.4 of the Prior Agreement, this Agreement has been approved by the Company and all holders of Registrable Securities (as defined in the Prior Agreement).

NOW, THEREFORE, in consideration of the premises and of the mutual covenants and obligations hereinafter set forth, the parties hereto hereby agree to amend and restate the Prior Agreement in its entirety as follows:

Section 1. Certain Definitions . As used herein, the following terms shall have the following meanings:

“ Additional Piggyback Rights ” has the meaning ascribed to such term in Section 2.2(b) .

“ Advent Party ” has the meaning ascribed to such term in the Preamble.

“ Affiliate ” means with respect to any Person, any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person, where “control” means the possession, directly or indirectly, of the power to direct the management and policies of a Person whether through the ownership of voting securities, contract or otherwise. For the avoidance of doubt, neither the Company nor any Person controlled by the Company shall be deemed to be an Affiliate of any Holder.

“ Agreement ” has the meaning ascribed to such term in the Preamble.

“ automatic shelf registration statement ” has the meaning ascribed to such term in Section 2.4(v) .

“ Block Trade ” means an offering and/or sale of Registrable Securities by one or more of the Holders on a block trade or underwritten basis (whether firm commitment or otherwise) without substantial marketing efforts prior to pricing, including, without limitation, a same day trade, overnight trade or similar transaction.

“ Board ” means the board of directors of the Company.

“ Business Day ” shall mean a day other than a Saturday, Sunday, federal or New York State holiday or other day on which commercial banks in the City of New York are authorized or required by law or other governmental action to close.

“ Claims ” has the meaning ascribed to such term in Section 2.9(a) .

“ Common Stock ” means the common stock, par value $0.01 per share, of the Company and any and all securities of any kind whatsoever which may be issued after the date hereof in respect of, or in exchange for, such shares of common stock of the Company pursuant to a merger, consolidation, stock split, stock dividend or recapitalization of the Company or otherwise.

“ Common Stock Equivalents ” means, with respect to any Person, all options, warrants and other securities convertible into, or exchangeable or exercisable for (at any time or upon the occurrence of any event or contingency and without regard to any vesting or other conditions to which such securities may be subject), shares of capital stock or other equity securities of such Person (including, without limitation, any note or debt security convertible into or exchangeable for shares of capital stock or other equity securities of such Person).

“ Company ” has the meaning ascribed to such term in the Preamble.

“ Demand Exercise Notice ” has the meaning ascribed to such term in Section 2.1(a)(i) .

“ Demand Registration ” has the meaning ascribed to such term in Section 2.1(a)(i) .

“ Demand Registration Request ” has the meaning ascribed to such term in Section 2.1(a)(i) .

“ Exchange Act ” means the Securities Exchange Act of 1934, as amended, and the rules and regulations of the SEC issued under such Act, as they may from time to time be in effect.

“ Expenses ” means any and all fees and expenses incident to the Company’s performance of or compliance with Section 2 , including, without limitation: (i) SEC, stock exchange or FINRA registration and filing fees and all listing fees and fees with respect to the inclusion of securities on the New York Stock Exchange or on any other securities market on which the Common Stock is listed or quoted, (ii) fees and expenses of compliance with state securities or “blue sky” laws of any state or jurisdiction of the United States or compliance with the securities laws of foreign jurisdictions and in connection with the preparation of a “blue sky” survey, including, without limitation, reasonable fees and expenses of outside “blue sky” counsel and securities counsel in foreign jurisdictions, (iii) printing and copying expenses, (iv) messenger and delivery expenses, (v) expenses incurred in connection with any road show, (vi) fees and disbursements of counsel for the Company, (vii) with respect to each registration or underwritten offering, the fees and disbursements of (a) one counsel for the THL Party, (b) one counsel for the

Advent Party and (c) one counsel for all other Participating Holder(s) collectively (selected by the holders of a majority of the shares held by such other Participating Holder(s)), together in each case with any local counsel, (viii) fees and disbursements of all independent public accountants (including the expenses of any audit and/or “cold comfort” letter and updates thereof) and fees and expenses of other Persons, including special experts, retained by the Company, (ix) fees and expenses payable to a Qualified Independent Underwriter, (x) fees and expenses of any transfer agent or custodian, (xi) any other fees and disbursements of underwriters, if any, customarily paid by issuers or sellers of securities and (xii) expenses for securities law liability insurance and, if any, rating agency fees.

“ FINRA ” means the Financial Industry Regulatory Authority, Inc.

“ Holder ” or “ Holders ” means (i) any Person who is a signatory to this Agreement or (ii) any Permitted Transferee to whom any Person who is a signatory to this Agreement shall assign or transfer any rights hereunder, provided that such transferee has agreed in writing to be bound by this Agreement in respect of such Registrable Securities.

“ Initiating Holders ” has the meaning ascribed to such term in Section 2.1(a)(i) .

“ IPO ” means the initial bona fide underwritten public offering and sale of Common Stock (or other equity securities of the Company) to the general public pursuant to an effective registration statement filed under the Securities Act.

“ Litigation ” means any action, proceeding or investigation in any court or before any governmental authority.

“ Majority Participating Holders ” means Participating Holders holding more than 50% of the Registrable Securities proposed to be included in any offering of Registrable Securities by such Participating Holders pursuant to Section 2.1 or Section 2.2 .

“ Management Stockholders ” has the meaning ascribed to such term in the Preamble to this Agreement.

“ Manager ” has the meaning ascribed to such term in Section 2.1(c) .

“ NASD ” means the National Association of Securities Dealers, Inc.

“ Participating Holders ” means all Holders with Registrable Securities which are proposed to be included in any offering of Registrable Securities pursuant to Section 2.1 or Section 2.2 .

“ Partner Distribution ” has the meaning ascribed to such term in Section 2.1(a)(iii) .

“ Permitted Transferee ” means, in relation to any Person who is a signatory to this Agreement, any Person to whom such Person is permitted to transfer Registrable Securities under the Stockholders Agreement.

“ Person ” means any individual, corporation (including not for profit), general or limited partnership, limited liability company, joint venture, estate, trust, association, joint-stock company, unincorporated organization, governmental entity or agency or other entity of any kind or nature.

“ Piggyback Request ” has the meaning ascribed to such term in Section 2.2(a) .

“ Piggyback Shares ” has the meaning ascribed to such term in Section 2.3(a)(iii) .

“ Postponement Period ” has the meaning ascribed to such term in Section 2.1(b) .

“ Prior Agreement ” has the meaning ascribed to such term in the recitals to this Agreement.

“ Qualified Independent Underwriter ” means a “qualified independent underwriter” within the meaning of NASD Conduct Rule 2720.

“ Registrable Securities ” means (a) any shares of Common Stock held by the Holders at any time (including those held as a result of, or issuable upon, the conversion or exercise of Common Stock Equivalents), whether now owned or acquired by the Holders at a later time, (b) any shares of Common Stock issued or issuable, directly or indirectly, in exchange for or with respect to the Common Stock referenced in clause (a) above by way of stock dividend, stock split or combination of shares or in connection with a reclassification, recapitalization, merger, share exchange, consolidation or other reorganization and (c) any securities issued in replacement of or exchange for any securities described in clause (a) or (b) above. As to any particular Registrable Securities, such securities shall cease to be Registrable Securities when (A) a registration statement with respect to the sale of such securities shall have been declared effective under the Securities Act and such securities shall have been disposed of in accordance with such registration statement, (B) such securities shall have been sold (other than in a privately negotiated sale) in compliance with the requirements of Rule 144, (C) such securities are able to be immediately sold pursuant to Rule 144 without any restrictions on transfer under such rule, (D) in the case of the Advent Party and the THL Party, the entire amount of such Holder’s Registrable Securities, together with the Registrable Securities of its Affiliates, constitute less than 1% of the then outstanding shares of Common Stock or (E) in the case of the Management Stockholders, such Holder, or the employee of the Company that is an Affiliate such Holder, ceases to be an employee or an Affiliate of the Company.

“ Rule 144 ” and “ Rule 144A ” have the meaning ascribed to such term in Section 4.2 .

“ SEC ” means the Securities and Exchange Commission or such other federal agency which at such time administers the Securities Act.

“ Section 2.3(a) Sale Number ” has the meaning ascribed to such term in Section 2.3(a) .

“ Section 2.3(b) Sale Number ” has the meaning ascribed to such term in Section 2.3(b) .

“ Section 2.3(c) Sale Number ” has the meaning ascribed to such term in Section 2.3(c) .

“ Securities Act ” means the Securities Act of 1933, as amended, and the rules and regulations of the SEC issued under such Act, as they may from time to time be in effect.

“ Shelf Registrable Securities ” has the meaning ascribed to such term in Section 2.1(e) .

“ Shelf Registration Statement ” has the meaning ascribed to such term in Section 2.1(e) .

“ Shelf Underwriting ” has the meaning ascribed to such term in Section 2.1(e) .

“ Shelf Underwriting Notice ” has the meaning ascribed to such term in Section 2.1(e) .

“ Shelf Underwriting Request ” has the meaning ascribed to such term in Section 2.1(e) .

“ Stockholders Agreement ” means that certain Amended and Restated Stockholders Agreement, dated as of the date hereof, as amended from time to time, among the Company, the THL Party, the Advent Party and certain of the Management Stockholders.

“ Subsidiary ” means any direct or indirect subsidiary of the Company on the date hereof and any direct or indirect subsidiary of the Company organized or acquired after the date hereof.

“ THL Party ” has the meaning ascribed to such term in the Preamble.

“ Valid Business Reason ” has the meaning ascribed to such term in Section 2.1(b) .

“ WKSI ” means a well-known seasoned issuer (as defined in Rule 405 under the Securities Act).

Section 2. Registration Rights .

2.1. Demand Registrations .

(a) (i) Subject to Sections 2.1(b) and 2.3 , at any time and from time to time, for so long as the THL Party or the Advent Party owns at least 5% of the outstanding Registrable Securities of the Company, such party shall have the right to require the Company to file one or more registration statements under the Securities Act covering all or any part of its Registrable Securities by delivering a written request therefor to the Company specifying the number of Registrable Securities to be included in such registration and the intended method of distribution therefor (a “ Demand Registration Request ”). The registration so requested is referred to herein as a “ Demand Registration ” (with respect to any Demand Registration, the Holder(s) making such demand for registration being referred to as the “ Initiating Holders ”). Any Demand Registration Request may request that the Company register Registrable Securities on an appropriate form, including a shelf registration statement, and, if the Company is a WKSI, an automatic shelf registration statement. No later than five Business Days after receipt of a Demand Registration Request, the Company shall give written notice (the “ Demand Exercise Notice ”) of such Demand Registration Request to each other Holder.

(ii) The Company, subject to Sections 2.3 and 2.6 , shall include in a Demand Registration (x) the Registrable Securities of the Initiating Holders and (y) the Registrable Securities of any other Holder which shall have made a written request to the Company for inclusion in such registration pursuant to Section 2.2 (which request shall specify the maximum number of Registrable Securities intended to be disposed of by such Participating Holder) within five days after the receipt of the Demand Exercise Notice.

(iii) The Company shall, subject to Section 2.1(b) , use its reasonable best efforts to (x) no later than 30 days following receipt of a Demand Registration Request, file with the SEC and, within 60 days of such filing, cause to be declared effective such registration under the Securities Act (including, without limitation, by means of a shelf registration pursuant to Rule 415 under the Securities Act if so requested) of the Registrable Securities which the Company has been so requested to register, for distribution in accordance with such intended method of distribution, including a distribution to, and resale by, the members or partners of a Holder (a “ Partner Distribution ”) and (y) if requested by the Initiating Holders, obtain acceleration of the effective date of the registration statement relating to such registration.

(iv) Notwithstanding anything contained herein to the contrary, the Company shall, at the request of any Holder seeking to effect or considering a Partner Distribution, file any prospectus supplement or post-effective amendments, or include in the initial registration statement any disclosure or language, or include in any prospectus supplement or post-effective amendment any disclosure or language, and otherwise take any action, deemed necessary or advisable by such Holder to effect such Partner Distribution.

(b) Notwithstanding anything to the contrary in Section 2.1(a) , the Demand Registration rights granted in Section 2.1(a) are subject to the following limitations: (i) (x) the Company shall not be required to effect more than one Demand Registration pursuant to Section 2.1(a)(i)(y) in any nine month period from the THL Party (it being understood that a registration pursuant to a Piggyback Request (as defined in Section 2.2) by the THL Party shall not constitute a Demand Registration for the purposes of this Section 2.1(b)(i) ) and (y) the Company shall not be required to effect more than one Demand Registration pursuant to Section 2.1(a)(i)(y) in any nine month period from the Advent Party (it being understood that a registration pursuant to a Piggyback Request by the Advent Party shall not constitute a Demand Registration for the purposes of this Section 2.1(b)(i) ); (ii) each registration in respect of a Demand Registration Request made by an Initiating Holder must include, in the aggregate (based on the Common Stock included in such registration by all Holders participating in such registration), shares of Common Stock having an aggregate market value of at least $25 million; and (iii) if the Board, in its good faith judgment, determines that any registration of Registrable Securities should not be made or continued because it would materially interfere with any material financing, acquisition, corporate reorganization, merger, share exchange or other transaction or event involving the Company or any of its subsidiaries or because the Company does not yet have appropriate financial statements of acquired or to be acquired entities available for filing (in each case, a “ Valid Business Reason ”), then (x) the Company may postpone filing a registration statement relating to a Demand Registration Request until five Business Days after such Valid Business Reason no longer exists, but in no event for more than 45 days after the date the Board determines a Valid Business Reason exists and (y) in case a registration statement has been filed relating to a Demand Registration Request, if the Valid Business Reason has not resulted from actions taken by the Company, the Company may, to the extent determined in the good faith judgment of the Board to be reasonably necessary to avoid interference with any of the transactions described above, cause such registration statement to be withdrawn and its effectiveness terminated or may postpone amending or supplementing such registration

statement until five Business Days after such Valid Business Reason no longer exists, but in no event for more than 45 days after the date the Board determines a Valid Business Reason exists (such period of postponement or withdrawal under this clause (iv), the “ Postponement Period ”). The Company shall give written notice of its determination to postpone or withdraw a registration statement and of the fact that the Valid Business Reason for such postponement or withdrawal no longer exists, together with a certificate of such determination signed by the Chief Executive Officer or Chief Financial Officer of the Company, in each case, promptly after the occurrence thereof; provided , however, the Company shall not be permitted to postpone or withdraw a registration statement after the expiration of any Postponement Period until 12 months after the expiration of such Postponement Period.

If the Company shall give any notice of postponement or withdrawal of any registration statement pursuant to clause (x) above, the Company shall not, during the Postponement Period, register any Common Stock, other than pursuant to a registration statement on Form S-4 or S-8 (or an equivalent registration form then in effect). Each Holder agrees that, upon receipt of any notice from the Company that the Company has determined to withdraw, terminate or postpone amending or supplementing any registration statement pursuant to clause (x) above, such Holder will discontinue its disposition of Registrable Securities pursuant to such registration statement. If the Company shall have withdrawn or prematurely terminated a registration statement filed under Section 2.1(a)(i) (whether pursuant to clause (iii) above or as a result of any stop order, injunction or other order or requirement of the SEC or any other governmental agency or court), the Company shall not be considered to have effected an effective registration for the purposes of this Agreement until the Company shall have filed a new registration statement covering the Registrable Securities covered by the withdrawn or terminated registration statement and such registration statement shall have been declared effective and shall not have been withdrawn. If the Company shall give any notice of withdrawal or postponement of a registration statement, the Company shall, not later than five Business Days after the Valid Business Reason that caused such withdrawal or postponement no longer exists (but in no event later than 45 days after the date of the postponement or withdrawal), use its reasonable best efforts to effect the registration under the Securities Act of the Registrable Securities covered by the withdrawn or postponed registration statement in accordance with this Section 2.1 (unless the Initiating Holders shall have withdrawn such request, in which case the Company shall not be considered to have effected an effective registration for the purposes of this Agreement), and such registration shall not be withdrawn or postponed pursuant to clause (x) above, of this Section 2.1(b) .

(c) In connection with any Demand Registration, the Participating Holder holding the highest percentage of the then outstanding Registrable Securities at the time of the Demand Registration Request shall have the right to designate the lead managing underwriter (any lead managing underwriter for the purposes of this Agreement, the “ Manager ”) in connection with any underwritten offering pursuant to such registration and each other managing underwriter for any such underwritten offering; provided that in each case, each such underwriter is reasonably satisfactory to the Company, which approval shall not be unreasonably withheld or delayed.

(d) The obligation to effect a Demand Registration as described in this Section 2.1 shall be deemed satisfied only when a registration statement covering the applicable Registrable Securities shall have become effective (unless, after effectiveness, the registration statement becomes subject to any stop order, injunction or other order of the SEC or other governmental

agency, in which case the obligation shall not be deemed satisfied) and, if the method of disposition is a firm commitment underwritten public offering, all such Registrable Securities have been sold pursuant thereto.

(e) In the event that the Company files a shelf registration statement under Rule 415 of the Securities Act pursuant to a Demand Registration Request and such registration becomes effective (such registration statement, a “ Shelf Registration Statement ”), the Initiating Holders with respect to such Demand Registration Request shall have the right at any time or from time to time to elect to sell pursuant to an underwritten offering Registrable Securities available for sale pursuant to such registration statement (“ Shelf Registrable Securities ”), so long as the Shelf Registration Statement remains in effect and only if the method of distribution set forth in the shelf registration allows for sales pursuant to an underwritten offering. The Initiating Holders shall make such election by delivering to the Company a written request (a “ Shelf Underwriting Request ”) for such underwritten offering to the Company specifying the number of Shelf Registrable Securities that the Initiating Holders desire to sell pursuant to such underwritten offering (the “ Shelf Underwriting ”). As promptly as practicable, but no later than two Business Days after receipt of a Shelf Underwriting Request, the Company shall give written notice (the “ Shelf Underwriting Notice ”) of such Shelf Underwriting Request to each other Holder. The Company, subject to Sections 2.3 and 2.6 , shall include in such Shelf Underwriting (x) the Registrable Securities of the Initiating Holders and (y) the Shelf Registrable Securities of any other Holder which shall have made a written request to the Company for inclusion in such Shelf Underwriting (which request shall specify the maximum number of Shelf Registrable Securities intended to be disposed of by such Holder) pursuant to a Shelf Underwriting Notice within seven days after the receipt of such notice. The Company shall, as expeditiously as possible (and in any event within 20 days after the receipt of a Shelf Underwriting Request), but subject to Section 2.1(b) , use its reasonable best efforts to facilitate such Shelf Underwriting. Notwithstanding the foregoing, if the THL Party or the Advent Party wishes to engage in a Block Trade off of a Shelf Registration Statement (either through filing an automatic shelf registration statement or through a take-down from an already existing Shelf Registration Statement), then such Holder only needs to notify the Company of the Block Trade on the day such offering is to commence and the Company shall notify the THL Party or the Advent Party that did not initiate the Block Trade. Such Holder must elect whether or not to participate in such Block Trade on the day such offering is to commence, and the Company shall as expeditiously as possible use its reasonable best efforts (including cooperating with the Participating Holders with respect to the provision of necessary information) to facilitate such shelf offering (which may close as early as three Business Days after the date it commences), provided that the Holder requesting such Block Trade shall use commercially reasonable efforts to work with the Company and the underwriters prior to making such request in order to facilitate preparation of the registration statement, prospectus and other offering documentation related to the Block Trade. For the avoidance of doubt, the Management Stockholders shall not be entitled to receive notice of, or to elect to participate in, a Block Trade or any Shelf Registration Statement or prospectus to be used in connection with such Block Trade. The Company shall, at the request of the Holder initiating the Block Trade, file any prospectus supplement or, if the applicable Shelf Registration Statement is an automatic shelf registration statement (as defined in Section 2.4 ), any post-effective amendments and otherwise take any action necessary to include therein all disclosure and language deemed necessary or advisable by the Holder initiating the Block Trade to effect such Shelf Underwriting. Once a Shelf Registration Statement has been declared effective, the

THL Party and the Advent Party may request, and the Company shall be required to facilitate, an unlimited number of Shelf Underwritings with respect to such Shelf Registration Statement. Notwithstanding anything to the contrary in this Section 2.1(e) , each Shelf Underwriting must include, in the aggregate (based on the Common Stock included in such Shelf Underwriting by all Holders participating in such Shelf Underwriting), shares of Common Stock having an aggregate market value of at least $25 million.

2.2. Piggyback Registrations .

(a) If the Company proposes or is required (pursuant to Section 2.1 or otherwise) to register any of its equity securities for its own account or for the account of any other shareholder under the Securities Act (other than pursuant to registrations on Form S-4 or Form S-8 or any similar successor forms thereto), the Company shall give prompt written notice of its intention to do so at least five Business Days prior to the filing of any registration statement under the Securities Act to each Holder. Upon the written request of any Holder (a “ Piggyback Request ”), made within five days following the receipt of any such written notice (which request shall specify the maximum number of Registrable Securities intended to be disposed of by such Holder and the intended method of distribution thereof), the Company shall, subject to Sections 2.2(c) , 2.3 and 2.6 hereof, use its reasonable best efforts to cause all such Registrable Securities, which such Holders have so requested the registration thereof, to be registered under the Securities Act with the securities which the Company at the time proposes to register to permit the sale or other disposition by such Holders (in accordance with the intended method of distribution thereof) of the Registrable Securities to be so registered, including, if necessary, by filing with the SEC a post-effective amendment or a supplement to the registration statement filed by the Company or the prospectus related thereto. There is no limitation on the number of such piggyback registrations pursuant to the preceding sentence which the Company is obligated to effect. No registration of Registrable Securities effected under this Section Error! Reference source not found. shall relieve the Company of its obligations to effect Demand Registrations under Section 2.1 hereof. Notwithstanding the foregoing, if the THL Party or the Advent Party wishes to engage in a Block Trade off of a Shelf Registration Statement (either through filing an automatic shelf registration statement or through a take-down from an already existing Shelf Registration Statement), then such Holder only needs to notify the Company of the Block Trade on the day such offering is to commence and the Company shall notify the THL Party or the Advent Party that did not initiate the Block Trade. Such Holder must elect whether or not to participate in such Block Trade on the day such offering is to commence, and the Company shall as expeditiously as possible use its reasonable best efforts (including cooperating with the Participating Holders with respect to the provision of necessary information) to facilitate such shelf offering (which may close as early as three Business Days after the date it commences), provided the Holder requesting such Block Trade shall use commercially reasonable efforts to work with the Company and the underwriters prior to making such request in order to facilitate preparation of the registration statement, prospectus and other offering documentation related to the Block Trade. For the avoidance of doubt, the Management Stockholders shall not be entitled to receive notice of, or to elect to participate in, a Block Trade or any Shelf Registration Statement and prospectus to be used in connection with such Block Trade.

(b) The Company, subject to Sections 2.3 and 2.6 , may elect to include in any registration statement and offering pursuant to demand registration rights by any Person, (i) authorized but unissued shares of Common Stock or shares of Common Stock held by the Company as treasury shares and (ii) any other shares of Common Stock which are requested to be included in such registration pursuant to the exercise of piggyback registration rights granted by the Company after the date hereof and which are not inconsistent with the rights granted in, or otherwise conflict with the terms of, this Agreement (“ Additional Piggyback Rights ”); provided , however, that, with respect to any underwritten offering, such inclusion shall be permitted only to the extent that it is pursuant to, and subject to, the terms of the underwriting agreement or arrangements, if any, entered into by the Majority Participating Holders in such underwritten offering; provided further that no party holding Additional Piggyback Rights shall be entitled to receive notice of, or to elect to participate in, a Block Trade or any Shelf Registration Statement and prospectus to be used in connection with such Block Trade.

(c) If, at any time after giving written notice of its intention to register any equity securities and prior to the effective date of the registration statement filed in connection with such registration, the Company shall determine for any reason not to register or to delay registration of such equity securities, the Company may, at its election, give written notice of such determination to all Holders and (i) in the case of a determination not to register, shall be relieved of its obligation to register any Registrable Securities in connection with such abandoned registration, without prejudice, however, to the rights of Holders under Section 2.1 , and (ii) in the case of a determination to delay such registration of its equity securities, shall be permitted to delay the registration of such Registrable Securities for the same period as the delay in registering such other equity securities.

(d) Any Holder shall have the right to withdraw its request for inclusion of its Registrable Securities in any registration statement pursuant to this Section 2.2 by giving written notice to the Company of its request to withdraw; provided , however, that such request must be made in writing prior to the earlier of the execution of the underwriting agreement or the execution of the custody agreement with respect to such registration.

(e) Notwithstanding anything contained herein to the contrary, the Company shall, at the request of any Holder (including to effect a Partner Distribution), file any prospectus supplement or post-effective amendments, or include in the initial registration statement any disclosure or language, or include in any prospectus supplement or post-effective amendment any disclosure or language, and otherwise take any action, deemed necessary or advisable by such Holder (including to effect such Partner Distribution).

2.3. Allocation of Securities Included in Registration Statement .

(a) If any requested registration made pursuant to Section 2.1 (including a Shelf Underwriting) involves an underwritten offering and the Manager of such offering shall advise the Company that, in its view, the number of securities requested to be included in such underwritten offering by the Holders, the Company or any other Persons exercising Additional Piggyback Rights exceeds the largest number (the “ Section 2.3(a) Sale Number ”) that can be sold in an orderly manner in such underwritten offering within a price range acceptable to the

Majority Participating Holders, the Company shall use its reasonable best efforts to include in such underwritten offering:

(i) first, all Registrable Securities requested to be included in such underwritten offering by the Holders thereof (including pursuant to the exercise of piggyback rights pursuant to Section 2.2 ); provided , however, that if the number of such Registrable Securities exceeds the Section 2.3(a) Sale Number , the number of such Registrable Securities (not to exceed the Section 2.3(a) Sale Number ) to be included in such underwritten offering shall be allocated on a pro rata basis among all Holders requesting that Registrable Securities be included in such underwritten offering, based on the number of Registrable Securities then owned by each such Holder requesting inclusion in relation to the aggregate number of Registrable Securities owned by all Holders requesting inclusion;

(ii) second, to the extent that the number of Registrable Securities to be included pursuant to clause (i) of this Section 2.3(a) is less than the Section 2.3(a) Sale Number , any securities that the Company proposes to register; provided that the number of such securities when aggregated with that number of Registrable Securities to be included pursuant to clause (i), totals no more than the Section 2.3(a) Sale Number ; and

(iii) third, to the extent that the number of Registrable Securities to be included pursuant to clauses (i) and (ii) of this Section 2.3(a) is less than the Section 2.3(a) Sale Number , the remaining Registrable Securities to be included in such underwritten offering shall be allocated on a pro rata basis among all Persons requesting that securities be included in such underwritten offering pursuant to the exercise of Additional Piggyback Rights (“ Piggyback Shares ”), based on the number of Piggyback Shares then owned by each Person requesting inclusion in relation to the aggregate number of Piggyback Shares owned by all Persons requesting inclusion; provided that the number of such securities when aggregated with that number of Registrable Securities to be included pursuant to clauses (i) and (ii) totals no more than the Section 2.3(a) Sale Number .

Notwithstanding anything in this Section 2.3(a) to the contrary, no Management Stockholder will be entitled to include Registrable Securities in an underwritten offering requested by the Initiating Holders pursuant to Section 2.1 to the extent that the Manager of such underwritten offering shall determine in good faith that the participation of such Management Stockholder would adversely affect in any material respect the marketability of the securities being sold by the Initiating Holders in such underwritten offering.

(b) If any registration or offering made pursuant to Section 2.2 involves an underwritten primary offering on behalf of the Company after the date hereof and the Manager shall advise the Company that, in its view, the number of securities requested to be included in such underwritten offering by the Holders, the Company or any other Persons exercising Additional Piggyback Rights exceeds the largest number (the “ Section 2.3(b) Sale Number ”) that can be sold in an orderly manner in such underwritten offering within a price range acceptable to the Company, the Company shall include in such underwritten offering:

(i) first, all equity securities that the Company proposes to register for its own account;

(ii) second, to the extent that the number of Registrable Securities to be included pursuant to clause (i) of this Section 2.3(b) is less than the Section 2.3(b) Sale Number , the remaining Registrable Securities to be included in such underwritten offering shall be allocated on a pro rata basis among all Holders requesting that Registrable Securities be included in such underwritten offering pursuant to the exercise of piggyback rights pursuant to Section 2.2 , based on the number of Registrable Securities then owned by each such Holder requesting inclusion in relation to the aggregate number of Registrable Securities owned by all Holders requesting inclusion; provided that the number of such remaining Registrable Securities when aggregated with that number of equity securities to be included pursuant to clause (i), totals no more than the Section 2.3(b) Sale Number : and

(iii) third, to the extent that the number of Registrable Securities to be included pursuant to clauses (i) and (ii) of this Section 2.3(b) is less than the Section 2.3(b) Sale Number , the remaining Registrable Securities to be included in such underwritten offering shall be allocated on a pro rata basis among all Persons requesting that securities be included in such underwritten offering pursuant to the exercise of Additional Piggyback Rights, based on the number of Piggyback Shares then owned by each Person requesting inclusion in relation to the aggregate number of Piggyback Shares owned by all Persons requesting inclusion; provided that the number of such securities when aggregated with that number of Registrable Securities to be included pursuant to clauses (i) and (ii) totals no more than the Section 2.3(b) Sale Number .

Notwithstanding anything in this Section 2.3(b) to the contrary, no Management Stockholder will be entitled to include Registrable Securities in an underwritten offering pursuant to Section 2.2 to the extent that the Manager of such underwritten offering shall determine in good faith that the participation of such Management Stockholder would adversely affect in any material respect the marketability of the securities being sold by the Company or the other Holders in such underwritten offering.

(c) If any registration pursuant to Section 2.2 involves an underwritten offering that was initially requested by any Person(s) other than a Holder to whom the Company has granted registration rights which are not inconsistent with the rights granted in, or otherwise conflict with the terms of, this Agreement and the Manager shall advise the Company that, in its view, the number of securities requested to be included in such underwritten offering exceeds the number (the “ Section 2.3(c) Sale Number ”) that can be sold in an orderly manner in such underwritten offering within a price range acceptable to the Company, the Company shall include in such underwritten offering:

(i) first, the shares requested to be included in such underwritten offering shall be allocated on a pro rata basis among such Person(s) requesting the registration and all Holders requesting that Registrable Securities be included in such underwritten offering pursuant to the exercise of piggyback rights pursuant to Section 2.2 , based on the aggregate number of securities or Registrable Securities, as applicable, then owned by each of the foregoing requesting inclusion in relation to the aggregate number of securities or Registrable Securities, as applicable, owned by all such Holders and Persons requesting inclusion, up to the Section 2.3(c) Sale Number :

(ii) second, to the extent that the number of Registrable Securities to be included pursuant to clause (i) of this Section 2.3(c) is less than the Section 2.3(c) Sale Number , the remaining Registrable Securities to be included in such underwritten offering shall be allocated on a pro rata basis among all Persons requesting that securities be included in such underwritten offering pursuant to the exercise of Additional Piggyback Rights, based on the number of Piggyback Shares then owned by each Person requesting inclusion in relation to the aggregate number of Piggyback Shares owned by all Persons requesting inclusion; provided that the number of such remaining Registrable Securities when aggregated with that number of shares requested to be included pursuant to clause (i), totals no more than the Section 2.3(c) Sale Number ; and

(iii) third, to the extent that the number of Registrable Securities to be included pursuant to clauses (i) and (ii) of this Section 2.3(c) is less than the Section 2.3(c) Sale Number , the remaining Registrable Securities to be included in such underwritten offering shall be allocated to shares the Company proposes to register for its own account; provided that the number of such securities when aggregated with that number of Registrable Securities to be included pursuant to clauses (i) and (ii) totals no more than the Section 2.3(c) Sale Number .

Notwithstanding anything in this Section 2.3(c) to the contrary, no Management Stockholder will be entitled to include Registrable Securities in an underwritten offering pursuant to Section 2.2 to the extent that the Manager of such underwritten offering shall determine in good faith that the participation of such Management Stockholder would adversely affect in any material respect the marketability of the securities being sold by the Person(s) requesting the registration or the other Holders in such underwritten offering.

(d) If, as a result of the proration provisions set forth in clauses (a), (b) or (c) of this Section 2.3 , any Holder shall not be entitled to include all Registrable Securities in an underwritten offering that such Holder has requested be included, such Holder may elect to withdraw such Holder’s request to include Registrable Securities in the registration to which such underwritten offering relates or may reduce the number requested to be included; provided , however, that (x) such request must be made in writing prior to the earlier of the execution of the underwriting agreement or the execution of the custody agreement with respect to such registration and (y) such withdrawal or reduction shall be irrevocable and, after making such withdrawal or reduction, such Holder shall no longer have any right to include Registrable Securities in the registration as to which such withdrawal or reduction was made to the extent of the Registrable Securities so withdrawn or reduced.

2.4. Registration Procedures . If and whenever the Company is required by the provisions of this Agreement to effect or cause the registration of any Registrable Securities under the Securities Act as provided in this Agreement (or use best efforts or reasonable best efforts to accomplish the same), the Company shall, as expeditiously as possible:

(a) prepare and file with the SEC a registration statement on an appropriate registration form of the SEC for the disposition of such Registrable Securities in accordance with the intended method of disposition thereof (including, without limitation, a Partner Distribution), which registration form (i) shall be selected by the Company and (ii) shall, in the case of a shelf registration, be available for the sale of the Registrable Securities by the selling Holders thereof

and such registration statement shall comply as to form in all material respects with the requirements of the applicable registration form and include all financial statements required by the SEC to be filed therewith, and the Company shall use its reasonable best efforts to cause such registration statement to become effective and remain continuously effective for such period as any Participating Holder pursuant to such registration statement shall request, and no less than 180 days, (provided, however, that as far in advance as reasonably practicable before filing a registration statement or prospectus or any amendments or supplements thereto, or comparable statements under securities or state “blue sky” laws of any jurisdiction, or any free writing prospectus related thereto, or before sending a response to an SEC comment letter prior to any such filing, the Company will furnish to one counsel for the Holders participating in the planned offering (selected by the Majority Participating Holders) and to one counsel for the Manager, if any, copies of reasonably complete drafts of all such documents proposed to be filed (including all exhibits thereto and each document incorporated by reference therein to the extent then required by the rules and regulations of the SEC), which documents will be subject to the reasonable review and reasonable comment of such counsel (including any objections to any information pertaining to any Participating Holder and its plan of distribution and otherwise to the extent necessary, if at all, to complete the filing or maintain the effectiveness thereof), and the Company shall make the changes reasonably requested by such counsel and shall not file any registration statement or amendment thereto, any prospectus or supplement thereto or any free writing prospectus related thereto to which the Majority Participating Holders or the underwriters, if any, shall reasonably object), provided that, notwithstanding the foregoing, in no event shall the Company be required to file any document with the SEC which in the view of the Company or its counsel contains an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make any statement therein not misleading;

(b) (i) prepare and file with the SEC such amendments and supplements (including, without limitation, any reports required to be filed pursuant to the Exchange Act) to such registration statement and the prospectus used in connection therewith as may be necessary to keep such registration statement continuously effective for such period as any Participating Holder pursuant to such registration statement shall request and to comply with the provisions of the Securities Act with respect to the sale or other disposition of all Registrable Securities covered by such registration statement in accordance with the intended methods of disposition by the seller or sellers thereof set forth in such registration statement and (ii) provide notice to such sellers of Registrable Securities and the Manager, if any, of the Company’s reasonable determination that a post-effective amendment to a registration statement would be appropriate;

(c) furnish, without charge, to each Participating Holder and each underwriter, if any, of the securities covered by such registration statement such number of copies of such registration statement, each amendment and supplement thereto (in each case including all exhibits), the prospectus included in such registration statement (including each preliminary prospectus and any summary prospectus) and any other prospectus filed under Rule 424 under the Securities Act, each free writing prospectus utilized in connection therewith, in each case, in all material respects in conformity with the requirements of the Securities Act, and other documents, as such seller and underwriter may reasonably request in order to facilitate the public sale or other disposition of the Registrable Securities owned by such seller (the Company hereby consenting to the use in accordance with all applicable laws of each such registration statement

(or amendment or post-effective amendment thereto) and each such prospectus (or preliminary prospectus or supplement thereto) or free writing prospectus by each such Participating Holder and the underwriters, if any, in connection with the offering and sale of the Registrable Securities covered by such registration statement or prospectus);

(d) use its reasonable best efforts to register or qualify the Registrable Securities covered by such registration statement under such other securities or state “blue sky” laws of such jurisdictions as any sellers of Registrable Securities or any managing underwriter, if any, shall reasonably request in writing, and do any and all other acts and things which may be reasonably necessary or advisable to enable such sellers or underwriter, if any, to consummate the disposition of the Registrable Securities in such jurisdictions (including keeping such registration or qualification in effect for so long as such registration statement remains in effect), except that in no event shall the Company be required to qualify to do business as a foreign corporation in any jurisdiction where it would not, but for the requirements of this paragraph (d), be required to be so qualified, to subject itself to taxation in any such jurisdiction or to consent to general service of process in any such jurisdiction;

(e) promptly notify each Participating Holder and each managing underwriter, if any: (i) when the registration statement, any pre-effective amendment, the prospectus or any prospectus supplement related thereto, any post-effective amendment to the registration statement or any free writing prospectus has been filed with the SEC and, with respect to the registration statement or any post-effective amendment, when the same has become effective; (ii) of any comment letter or request by the SEC or state securities authority for amendments or supplements to the registration statement or the prospectus related thereto or for additional information; (iii) of the issuance by the SEC of any stop order suspending the effectiveness of the registration statement or the initiation of any proceedings for that purpose; (iv) of the receipt by the Company of any notification with respect to the suspension of the qualification of any Registrable Securities for sale under the securities or state “blue sky” laws of any jurisdiction or the initiation of any proceeding for such purpose; (v) of the existence of any fact of which the Company becomes aware which results in the registration statement or any amendment thereto, the prospectus related thereto or any supplement thereto, any document incorporated therein by reference, any free writing prospectus or the information conveyed to any purchaser at the time of sale to such purchaser containing an untrue statement of a material fact or omitting to state a material fact required to be stated therein or necessary to make any statement therein not misleading; and (vi) if at any time the representations and warranties contemplated by any underwriting agreement, securities sale agreement, or other similar agreement, relating to the offering shall cease to be true and correct in all material respects; and, if the notification relates to an event described in clause (v), unless the Company has declared that a Postponement Period exists, the Company shall promptly prepare and furnish to each such seller and each underwriter, if any, a reasonable number of copies of a prospectus supplemented or amended so that, as thereafter delivered to the purchasers of such Registrable Securities, such prospectus shall not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein in the light of the circumstances under which they were made not misleading;

(f) comply (and continue to comply) with all applicable rules and regulations of the SEC (including, without limitation, maintaining disclosure controls and procedures (as defined in

Exchange Act Rule 13a-15(e)) and internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f)) in accordance with the Exchange Act), and make generally available to its security holders, as soon as reasonably practicable after the effective date of the registration statement (and in any event within 45 days, or 90 days if it is a fiscal year, after the end of such 12-month period described hereafter), an earnings statement (which need not be audited) covering the period of at least 12 consecutive months beginning with the first day of the Company’s first calendar quarter after the effective date of the registration statement, which earnings statement shall satisfy the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder;

(g) (i) cause all such Registrable Securities covered by such registration statement to be listed on the principal securities exchange on which similar securities issued by the Company are then listed and, without limiting the generality of the foregoing, take all actions that may be required by the Company as the issuer of such Registrable Securities in order to facilitate the managing underwriter’s arranging for the registration of at least two market makers as such with respect to such shares with FINRA, and (ii) comply (and continue to comply) with the requirements of any self-regulatory organization applicable to the Company, including without limitation all corporate governance requirements;

(h) provide and cause to be maintained a transfer agent and registrar for all such Registrable Securities covered by such registration statement not later than the effective date of such registration statement and, in the case of any secondary equity offering, provide and enter into any reasonable agreements with a custodian for the Registrable Securities;

(i) enter into such customary agreements (including, if applicable, an underwriting agreement) and take such other actions as the Majority Participating Holders or the underwriters shall reasonably request in order to expedite or facilitate the disposition of such Registrable Securities (it being understood that the Holders with the Registrable Securities which are to be distributed by any underwriters shall be parties to any such underwriting agreement and may, at their option, require that the Company make to and for the benefit of such Holders the representations, warranties and covenants of the Company which are being made to and for the benefit of such underwriters);

(j) use its reasonable best efforts (i) to obtain an opinion from the Company’s counsel and a “cold comfort” letter and updates thereof from the independent public accountants who have certified the Company’s financial statements (and/or any other financial statements) included or incorporated by reference in such registration statement, in each case, in customary form and covering such matters as are customarily covered by such opinions and “cold comfort” letters (including, in the case of such “cold comfort” letter, events subsequent to the date of such financial statements) delivered to underwriters in underwritten public offerings, which opinion and letter shall be dated the dates such opinions and “cold comfort” letters are customarily dated and otherwise reasonably satisfactory to the underwriters, if any, and to the Majority Participating Holders, and (ii) furnish to each Participating Holder upon its request and to each underwriter, if any, a copy of such opinion and letter addressed to such underwriter;

(k) deliver promptly to counsel for each Participating Holder and to each managing underwriter, if any, copies of all correspondence between the SEC and the Company, its counsel

or auditors and all memoranda relating to discussions with the SEC or its staff with respect to the registration statement, and, upon receipt of such confidentiality agreements as the Company may reasonably request, make reasonably available for inspection by counsel for each Participating Holder, by counsel for any underwriter participating in any disposition to be effected pursuant to such registration statement and by any attorney, accountant or other agent retained by any Participating Holder or any such underwriter, all pertinent financial and other records, pertinent corporate documents and properties of the Company, and cause all of the Company’s officers, directors and employees to supply all information reasonably requested by any such counsel for a Participating Holder, counsel for an underwriter, attorney, accountant or agent in connection with such registration statement;

(l) use its reasonable best efforts to prevent the issuance or obtain the withdrawal of any order suspending the effectiveness of the registration statement, or the lifting of any suspension of the qualification of any of the Registrable Securities for sale in any jurisdiction, in each case, as promptly as reasonably practicable;

(m) provide a CUSIP number for all Registrable Securities, not later than the effective date of the registration statement;

(n) use its reasonable best efforts to make available its employees and personnel for participation in “road shows” and other marketing efforts and otherwise provide reasonable assistance to the underwriters (taking into account the needs of the Company’s businesses and the requirements of the marketing process) in the marketing of Registrable Securities in any underwritten offering;

(o) promptly prior to the filing of any document which is to be incorporated by reference into the registration statement or the prospectus (after the initial filing of such registration statement), and prior to the filing or use of any free writing prospectus, provide copies of such document to counsel for each Participating Holder and to each managing underwriter, if any, and make the Company’s representatives reasonably available for discussion of such document and make such changes in such document concerning the Participating Holders prior to the filing thereof as counsel for such Participating Holders or underwriters may reasonably request (provided that, notwithstanding the foregoing, in no event shall the Company be required to file any document with the SEC which in the view of the Company or its counsel contains an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make any statement therein not misleading);

(p) furnish to counsel for each Participating Holder upon its request and to each managing underwriter, without charge, upon request, at least one conformed copy of the registration statement and any post-effective amendments or supplements thereto, including financial statements and schedules, all documents incorporated therein by reference, the prospectus contained in such registration statement (including each preliminary prospectus and any summary prospectus), any other prospectus filed under Rule 424 under the Securities Act and all exhibits (including those incorporated by reference) and any free writing prospectus utilized in connection therewith;

(q) cooperate with the Participating Holders and the managing underwriter, if any, to facilitate the timely preparation and delivery of book-entry shares or certificates not bearing any restrictive legends representing the Registrable Securities to be sold, and cause such Registrable Securities to be issued in such denominations and registered in such names in accordance with the underwriting agreement at least two Business Days prior to any sale of Registrable Securities to the underwriters or, if not an underwritten offering, in accordance with the instructions of the Participating Holders at least two Business Days prior to any sale of Registrable Securities and instruct any transfer agent and registrar of Registrable Securities to release any stop transfer orders in respect thereof (and, in the case of Registrable Securities registered on a Shelf Registration Statement, at the request of any Holder, prepare and deliver book-entry shares or certificates representing such Registrable Securities not bearing any restrictive legends and deliver or cause to be delivered an opinion or instructions to the transfer agent in order to allow such Registrable Securities to be sold from time to time);

(r) take no direct or indirect action prohibited by Regulation M under the Exchange Act; provided , however, that to the extent that any prohibition is applicable to the Company, the Company will use its reasonable best efforts to make any such prohibition inapplicable;

(s) use its reasonable best efforts to cause the Registrable Securities covered by the applicable registration statement to be registered with or approved by such other governmental agencies or authorities as may be necessary to enable the Participating Holders or the underwriters, if any, to consummate the disposition of such Registrable Securities;

(t) take all such other commercially reasonable actions as are necessary or advisable in order to expedite or facilitate the disposition of such Registrable Securities;

(u) take all reasonable action to ensure that any free writing prospectus utilized in connection with any registration covered by Section 2.1 or 2.2 complies in all material respects with the Securities Act, is filed in accordance with the Securities Act to the extent required thereby, is retained in accordance with the Securities Act to the extent required thereby and, when taken together with the related prospectus, prospectus supplement and related documents, will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; and

(v) in connection with any underwritten offering, if at any time the information conveyed to a purchaser at the time of sale includes any untrue statement of a material fact or omits to state any material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading, promptly file with the SEC such amendments or supplements to such information as may be necessary so that the statements as so amended or supplemented will not, in light of the circumstances, be misleading.

To the extent the Company is a WKSI at the time any Demand Registration Request is submitted to the Company, and such Demand Registration Request requests that the Company file an automatic shelf registration statement (as defined in Rule 405 under the Securities Act) (an “ automatic shelf registration statement ”) on Form S-3, the Company shall file an automatic shelf registration statement which covers those Registrable Securities which are

requested to be registered. The Company shall use its commercially reasonable best efforts to remain a WKSI (and not become an ineligible issuer (as defined in Rule 405 under the Securities Act)) during the period during which such automatic shelf registration statement is required to remain effective.

If the Company does not pay the filing fee covering the Registrable Securities at the time the automatic shelf registration statement is filed, the Company agrees to pay such fee at such time or times as the Registrable Securities are to be sold. If the automatic shelf registration statement has been outstanding for at least three years, at the end of the third year the Company shall refile a new automatic shelf registration statement covering the Registrable Securities. If at any time when the Company is required to re-evaluate its WKSI status the Company determines that it is not a WKSI, the Company shall use its commercially reasonable best efforts to refile the shelf registration statement on Form S-3 and, if such form is not available, Form S-l and keep such registration statement effective during the period during which such registration statement is required to be kept effective.

If the Company files any shelf registration statement for the benefit of the holders of any of its securities other than the Holders, and the Holders do not request that their Registrable Securities be included in such Shelf Registration Statement, the Company agrees that it shall include in such registration statement such disclosures as may be required by Rule 430B under the Securities Act (referring to the unnamed selling security holders in a generic manner by identifying the initial offering of the securities to the Holders) in order to ensure that the Holders may be added to such shelf registration statement at a later time through the filing of a prospectus supplement rather than a post-effective amendment.

The Company may require as a condition precedent to the Company’s obligations under this Section 2.4 that each Participating Holder as to which any registration is being effected furnish the Company such information regarding such seller and the distribution of such securities as the Company may from time to time reasonably request provided that such information is necessary for the Company to consummate such registration and shall be used only in connection with such registration.

Each Holder agrees that upon receipt of any notice from the Company of the happening of any event described in clause (v) of paragraph (e) of this Section 2.4 , such Holder will discontinue such Holder’s disposition of Registrable Securities pursuant to the registration statement covering such Registrable Securities until such Holder’s receipt of the copies of the supplemented or amended prospectus contemplated by paragraph (e) of this Section 2.4 and, if so directed by the Company, will deliver to the Company (at the Company’s expense) all copies, other than permanent file copies, then in such Holder’s possession of the prospectus covering such Registrable Securities that was in effect at the time of receipt of such notice. In the event the Company shall give any such notice, the applicable period mentioned in paragraph (a) of this Section 2.4 shall be extended by the number of days during such period from and including the date of the giving of such notice to and including the date when each Participating Holder covered by such registration statement shall have received the copies of the supplemented or amended prospectus contemplated by paragraph (e) of this Section 2.4 .

If any such registration statement or comparable statement under state “blue sky” laws refers to any Holder by name or otherwise as the holder of any securities of the Company, then such Holder shall have the right to require (i) the insertion therein of language, in form and substance satisfactory to such Holder and the Company, to the effect that the holding by such Holder of such securities is not to be construed as a recommendation by such Holder of the investment quality of the Company’s securities covered thereby and that such holding does not imply that such Holder will assist in meeting any future financial requirements of the Company, or (ii) in the event that such reference to such Holder by name or otherwise is not in the judgment of the Company, as advised by counsel, required by the Securities Act or any similar federal statute or any state “blue sky” or securities law then in force, the deletion of the reference to such Holder.

2.5. Registration Expenses .

(a) The Company shall pay all Expenses with respect to any registration or offering of Registrable Securities pursuant to Section 2 , whether or not a registration statement becomes effective or the offering is consummated.

(b) Notwithstanding the foregoing, (x) the provisions of this Section 2.5 shall be deemed amended to the extent necessary to cause these expense provisions to comply with state “blue sky” laws of each state in which the offering is made and (y) in connection with any underwritten offering hereunder, each Participating Holder shall pay all underwriting discounts and commissions and any transfer taxes, if any, attributable to the sale of such Registrable Securities, pro rata with respect to payments of discounts and commissions in accordance with the number of shares sold in the offering by such Holder.

2.6. Certain Limitations on Registration Rights . In the case of any registration under Section 2.1 involving an underwritten offering, or, in the case of a registration under Section 2.2 , if the Company has determined to enter into an underwriting agreement in connection therewith, all securities to be included in such underwritten offering shall be subject to such underwriting agreement and no Person may participate in such underwritten offering unless such Person (i) agrees to sell such Person’s securities on the basis provided therein and completes and executes all reasonable questionnaires, and other customary documents (including custody agreements and powers of attorney) which must be executed in connection therewith; provided , however, that all such documents shall be consistent with the provisions hereof, and (ii) provides such other information to the Company or the underwriter as may be necessary to register such Person’s securities.

2.7. Limitations on Sale or Distribution of Other Securities .

(a) Each Holder agrees, (i) to the extent requested in writing by a managing underwriter, if any, of any underwritten public offering pursuant to a registration or offering effected pursuant to Section 2.1 (except in the case of an Block Trade, unless the Holder has the option to participate in such Block Trade pursuant to this Agreement or otherwise), not to sell, transfer or otherwise dispose of, including any sale pursuant to Rule 144 under the Securities Act, any Common Stock, or any other equity security of the Company or any security convertible into or exchangeable or exercisable for any equity security of the Company (other

than as part of such underwritten public offering) during the time period reasonably requested by the managing underwriter, not to exceed 90 days (plus customary 17 day lockup extension periods) or such shorter period as the managing underwriter shall agree to (other than in the case of the IPO, which time period shall be 180 days (plus customary 17 day lockup extension periods)), provided that (x) such shorter period shall apply to all Holders who are subject to such period, and (y) if a managing underwriter of an offering releases any Holder of its obligations under this Section 2.7(a)(i) , all other Holders shall be released from their obligations under this Section 2.7(a) (i) , on a pro rata basis, in accordance with the number of Registrable Securities held by them at such time (and the Company hereby also so agrees (except that the Company may effect any sale or distribution of any such securities pursuant to a registration on Form S-4 (if reasonably acceptable to such managing underwriter) or Form S-8, or any successor or similar form which is (x) then in effect or (y) shall become effective upon the conversion, exchange or exercise of any then outstanding Common Stock Equivalent), to use its reasonable best efforts to cause each holder of any equity security or any security convertible into or exchangeable or exercisable for any equity security of the Company purchased from the Company at any time other than in a public offering so to agree); and (ii) to the extent requested in writing by a managing underwriter of any underwritten public offering effected by the Company for its own account (including without limitation any offering in which one or more Holders is selling Common Stock pursuant to the exercise of piggyback rights under Section 2.2 hereof), it will not sell any Common Stock (other than as part of such underwritten public offering) during the time period reasonably requested by the managing underwriter, which period shall not exceed 90 days (plus customary 17 day lockup extension periods) or such shorter period as the managing underwriter shall agree to (other than in the case of the IPO, which time period shall be 180 days (plus customary 17 day lockup extension periods)), provided that (x) such shorter period shall apply to all Holders who are subject to such period, and (y) if a managing underwriter of an offering releases any Holder of its obligations under this Section 2.7(a)(ii) , all other Holders shall be released from their obligations under this Section 2.7(a)(ii) , on a pro rata basis, in accordance with the number of Registrable Securities held by them at such time.

(b) The Company hereby agrees that, in connection with an offering pursuant to Section 2.1 or 2.2 , the Company shall not sell, transfer, or otherwise dispose of, any Common Stock, or any other equity security of the Company or any security convertible into or exchangeable or exercisable for any equity security of the Company (other than as part of such underwritten public offering, a registration on Form S-4 or Form S-8 or any successor or similar form which is (x) then in effect or (y) shall become effective upon the conversion, exchange or exercise of any then outstanding Common Stock Equivalent), until a period of 90 days (or such shorter period to which the Majority Participating Holders shall agree, but 180 days in the case of the IPO) shall have elapsed from the pricing date of such offering (in each case plus customary 17 day lockup extension periods); and the Company shall (i) so provide in any registration rights agreements hereafter entered into with respect to any of its securities and (ii) use its reasonable best efforts to cause each holder of any equity security or any security convertible into or exchangeable or exercisable for any equity security of the Company purchased from the Company at any time other than in a public offering to so agree.

2.8. No Required Sale . Nothing in this Agreement shall be deemed to create an independent obligation on the part of any Holder to sell any Registrable Securities pursuant to any effective registration statement.

2.9. Indemnification .

(a) In the event of any registration or offer and sale of any securities of the Company under the Securities Act pursuant to this Section 2 , the Company will, and hereby agrees to, and hereby does, indemnify and hold harmless, to the fullest extent permitted by law, each Participating Holder, its directors, officers, fiduciaries, employees, stockholders, members or general and limited partners (and the directors, officers, fiduciaries, employees, stockholders, members or general and limited partners thereof), each other Person who participates as a seller (and its directors, officers, fiduciaries, employees, stockholders, members or general and limited partners), underwriter or Qualified Independent Underwriter, if any, in the offering or sale of such securities, each officer, director, employee, stockholder, fiduciary, managing director, agent, affiliate, consultant, representative, successor, assign or partner of such underwriter or Qualified Independent Underwriter, and each other Person, if any, who controls such seller or any such underwriter or Qualified Independent Underwriter within the meaning of the Securities Act, from and against any and all losses, claims, damages or liabilities, joint or several, actions or proceedings (whether commenced or threatened) and expenses (including reasonable fees of counsel and any amounts paid in any settlement effected with the Company’s consent, which consent shall not be unreasonably withheld or delayed) to which each such indemnified party may become subject under the Securities Act or otherwise in respect thereof (collectively, “ Claims ”), insofar as such Claims arise out of or are based upon (i) any untrue statement or alleged untrue statement of a material fact contained in any registration statement under which such securities were registered under the Securities Act or the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, (ii) any untrue statement or alleged untrue statement of a material fact contained in any preliminary, final or summary prospectus or any amendment or supplement thereto, together with the documents incorporated by reference therein, or any free writing prospectus utilized in connection therewith, or the omission or alleged omission to state therein a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, or (iii) any untrue statement or alleged untrue statement of a material fact in the information conveyed by the Company to any purchaser at the time of the sale to such purchaser, or the omission or alleged omission to state therein a material fact required to be stated therein, or (iv) any violation by the Company of any federal, state or common law rule or regulation applicable to the Company and relating to action required of or inaction by the Company in connection with any such registration, and the Company will reimburse any such indemnified party for any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such Claim as such expenses are incurred; provided , however, that the Company shall not be liable to any such indemnified party in any such case to the extent such Claim arises out of or is based upon any untrue statement or alleged untrue statement of a material fact or omission or alleged omission of a material fact made in such registration statement or amendment thereof or supplement thereto or in any such prospectus or any preliminary, final or summary prospectus or free writing prospectus in reliance upon and in strict conformity with written information furnished to the Company by or on behalf of such indemnified party specifically for use therein. Such indemnity and reimbursement of expenses shall remain in full force and effect regardless of any investigation made by or on behalf of such indemnified party and shall survive the transfer of such securities by such seller.

(b) Each Participating Holder (and, if the Company requires as a condition to including any Registrable Securities in any registration statement filed in accordance with Section 2.1 or 2.2 , any underwriter and Qualified Independent Underwriter, if any) shall, severally and not jointly, indemnify and hold harmless (in the same manner and to the same extent as set forth in paragraph (a) of this Section 2.9 ) to the extent permitted by law the Company, its officers and directors, each Person controlling the Company within the meaning of the Securities Act and all other prospective sellers and their directors, officers, stockholders, fiduciaries, managing directors, agents, affiliates, consultants, representatives, successors, assigns or general and limited partners and respective controlling Persons with respect to any untrue statement or alleged untrue statement of any material fact in, or omission or alleged omission of any material fact from, such registration statement, any preliminary, final or summary prospectus contained therein, or any amendment or supplement thereto, or any free writing prospectus utilized in connection therewith, if such statement or alleged statement or omission or alleged omission was made in reliance upon and in strict conformity with written information furnished to the Company or its representatives by or on behalf of such Participating Holder or underwriter or Qualified Independent Underwriter, if any, specifically for use therein, and each such Participating Holder, underwriter or Qualified Independent Underwriter, if any, shall reimburse such indemnified party for any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such Claim as such expenses are incurred; provided , however, that the aggregate amount which any such Participating Holder shall be required to pay pursuant to this Section 2.9 (including pursuant to indemnity, contribution or otherwise) shall in no case be greater than the amount of the net proceeds received by such Participating Holder upon the sale of the Registrable Securities pursuant to the registration statement giving rise to such Claim; provided further that such Participating Holder shall not be liable in any such case to the extent that prior to the filing of any such registration statement or prospectus or amendment thereof or supplement thereto, or any free writing prospectus utilized in connection therewith, such Participating Holder has furnished in writing to the Company information expressly for use in such registration statement or prospectus or any amendment thereof or supplement thereto or free writing prospectus which corrected or made not misleading information previously furnished to the Company. The Company and each Participating Holder hereby acknowledge and agree that, unless otherwise expressly agreed to in writing by such Participating Holders to the contrary, for all purposes of this Agreement, the only information furnished or to be furnished to the Company for use in any such registration statement, preliminary, final or summary prospectus or amendment or supplement thereto, or any free writing prospectus, are statements specifically relating to (i) the beneficial ownership of shares of Common Stock by such Participating Holder and its Affiliates as disclosed in the section of such document entitled “Selling Stockholders” or “Principal and Selling Stockholders” or other documents thereof and (ii) the name and address of such Participating Holder. If any additional information about such Holder or the plan of distribution (other than for an underwritten offering) is required by law to be disclosed in any such document, then such Holder shall not unreasonably withhold its agreement referred to in the immediately preceding sentence. Such indemnity and reimbursement of expenses shall remain in full force and effect regardless of any investigation made by or on behalf of such indemnified party and shall survive the transfer of such securities by such Holder.

(c) Indemnification similar to that specified in the preceding paragraphs (a) and (b) of this Section 2.9 (with appropriate modifications) shall be given by the Company and each Participating Holder with respect to any required registration or other qualification of securities under any applicable securities and state “blue sky” laws.

(d) Any Person entitled to indemnification under this Agreement shall notify promptly the indemnifying party in writing of the commencement of any action or proceeding with respect to which a claim for indemnification may be made pursuant to this Section 2.9 , but the failure of any indemnified party to provide such notice shall not relieve the indemnifying party of its obligations under the preceding paragraphs of this Section 2.9 , except to the extent the indemnifying party is materially and actually prejudiced thereby and shall not relieve the indemnifying party from any liability which it may have to any indemnified party otherwise than under this Section 2 . In case any action or proceeding is brought against an indemnified party and such indemnified party shall have notified the indemnifying party of the commencement thereof (as required above), the indemnifying party shall be entitled to participate therein and, unless in the reasonable opinion of outside counsel to the indemnified party a conflict of interest between such indemnified and indemnifying parties may exist in respect of such Claim, to assume the defense thereof jointly with any other indemnifying party similarly notified, to the extent that it chooses, with counsel reasonably satisfactory to such indemnified party, and after notice from the indemnifying party to such indemnified party that it so chooses, the indemnifying party shall not be liable to such indemnified party for any legal or other expenses subsequently incurred by such indemnified party in connection with the defense thereof other than reasonable costs of investigation; provided , however, that (i) if the indemnifying party fails to take reasonable steps necessary to defend diligently the action or proceeding within 20 days after receiving notice from such indemnified party that the indemnified party believes it has failed to do so; or (ii) if such indemnified party who is a defendant in any action or proceeding which is also brought against the indemnifying party reasonably shall have concluded that there may be one or more legal or equitable defenses available to such indemnified party which are not available to the indemnifying party or which may conflict with those available to another indemnified party with respect to such Claim; or (iii) if representation of both parties by the same counsel is otherwise inappropriate under applicable standards of professional conduct, then, in any such case, the indemnified party shall have the right to assume or continue its own defense as set forth above (but with no more than one firm of counsel for all indemnified parties in each jurisdiction, except to the extent any indemnified party or parties reasonably shall have made a conclusion described in clause (ii) or (iii) above) and the indemnifying party shall be liable for any expenses therefor. No indemnifying party shall, without the written consent of the indemnified party, effect the settlement or compromise of, or consent to the entry of any judgment with respect to, any pending or threatened action or claim in respect of which indemnification or contribution may be sought hereunder (whether or not the indemnified party is an actual or potential party to such action or claim) unless such settlement, compromise or judgment (A) includes an unconditional release of the indemnified party from all liability arising out of such action or claim and (B) does not include a statement as to or an admission of fault, culpability or a failure to act, by or on behalf of any indemnified party.

(e) If for any reason the foregoing indemnity is unavailable, unenforceable or is insufficient to hold harmless an indemnified party under Sections 2.9(a) , (b) or (c) , then each applicable indemnifying party shall contribute to the amount paid or payable to such indemnified party as a result of any Claim in such proportion as is appropriate to reflect the relative fault of the indemnifying party, on the one hand, and the indemnified party, on the other hand, with

respect to such Claim. The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the indemnifying party or the indemnified party and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such untrue statement or omission. If, however, the allocation provided in the second preceding sentence is not permitted by applicable law, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party in such proportion as is appropriate to reflect not only such relative faults but also the relative benefits of the indemnifying party and the indemnified party as well as any other relevant equitable considerations. The parties hereto agree that it would not be just and equitable if any contribution pursuant to this Section 2.9(e) were to be determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to in the preceding sentences of this Section 2.9(e) . The amount paid or payable in respect of any Claim shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such Claim. No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation. Notwithstanding anything in this Section 2.9(e) to the contrary, no indemnifying party (other than the Company) shall be required pursuant to this Section 2.9(e) to contribute any amount greater than the amount of the net proceeds received by such indemnifying party from the sale of Registrable Securities pursuant to the registration statement giving rise to such Claim, less the amount of any indemnification payment made by such indemnifying party pursuant to Sections 2.9(b) and (c) . In addition, no Holder or any Affiliate thereof shall be required to pay any amount under this Section 2.9(e) unless such Person or entity would have been required to pay an amount pursuant to Section 2.9(b) if it had been applicable in accordance with its terms.

(f) The indemnity and contribution agreements contained herein shall be in addition to any other rights to indemnification or contribution which any indemnified party may have pursuant to law or contract and shall remain operative and in full force and effect regardless of any investigation made or omitted by or on behalf of any indemnified party and shall survive the transfer of the Registrable Securities by any such party.

(g) The indemnification and contribution required by this Section 2.9 shall be made by periodic payments of the amount thereof during the course of the investigation or defense, as and when bills are received or expense, loss, damage or liability is incurred; provided , however, that the recipient thereof hereby undertakes to repay such payments if and to the extent it shall be determined by a court of competent jurisdiction that such recipient is not entitled to such payment hereunder.

2.10. Limitations on Registration of Other Securities; Representation . From and after the date of this Agreement, the Company shall not, without the prior written consent of Holders holding more than 50% of the Registrable Securities, enter into any agreement with any holder or prospective holder of any securities of the Company giving such holder or prospective holder any registration rights the terms of which are more favorable taken as a whole than the registration rights granted to the Holders hereunder unless the Company shall also give such rights to such Holders.

2.11. No Inconsistent Agreements . The Company shall not hereafter enter into any agreement with respect to its securities that is inconsistent in any material respects with the rights granted to the Holders in this Agreement.

Section 3. Underwritten Offerings .

3.1. Requested Underwritten Offerings . If requested by the underwriters for any underwritten offering pursuant to a registration requested under Section 2.1 , the Company shall enter into a customary underwriting agreement with the underwriters. Such underwriting agreement shall (i) be satisfactory in form and substance to the Majority Participating Holders, (ii) contain terms not inconsistent with the provisions of this Agreement and (iii) contain such representations and warranties by, and such other agreements on the part of, the Company and such other terms as are generally prevailing in agreements of that type, including, without limitation, indemnities and contribution agreements on substantially the same terms as those contained herein. Any Participating Holder shall be a party to such underwriting agreement and may, at its option, require that any or all of the representations and warranties by, and the other agreements on the part of, the Company to and for the benefit of such underwriters shall also be made to and for the benefit of such Participating Holder and that any or all of the conditions precedent to the obligations of such underwriters under such underwriting agreement be conditions precedent to the obligations of such Participating Holder; provided , however, that the Company shall not be required to make any representations or warranties with respect to written information specifically provided by a Participating Holder for inclusion in the registration statement. Unless otherwise agreed by the respective Participating Holders and the underwriters, each such Participating Holder shall not be required to make any representations or warranties to or agreements with the Company or the underwriters other than representations, warranties or agreements regarding such Participating Holder, its ownership of and title to the Registrable Securities, any written information specifically provided by such Participating Holder for inclusion in the registration statement and its intended method of distribution; and any liability of such Participating Holder to any underwriter or other Person under such underwriting agreement for indemnity, contribution or otherwise shall in no case be greater than the amount of the net proceeds received by such Participating Holder upon the sale of Registrable Securities pursuant to such registration statement and in no event shall relate to anything other than information about such Holder specifically provided by such Holder for use in the registration statement and prospectus.

3.2. Piggyback Underwritten Offerings . In the case of a registration pursuant to Section 2.2 , if the Company shall have determined to enter into an underwriting agreement in connection therewith, all of the Participating Holders’ Registrable Securities to be included in such registration shall be subject to such underwriting agreement. Any Participating Holder may, at its option, require that any or all of the representations and warranties by, and the other agreements on the part of, the Company to and for the benefit of such underwriters shall also be made to and for the benefit of such Participating Holder and that any or all of the conditions precedent to the obligations of such underwriters under such underwriting agreement be conditions precedent to the obligations of such Participating Holder; provided that the Company shall not be required to make any representations or warranties with respect to written information specifically provided by a Participating Holder for inclusion in the registration statement. Unless otherwise agreed by the respective Participating Holders and the underwriters,

each such Participating Holder shall not be required to make any representations or warranties to or agreements with the Company or the underwriters other than representations, warranties or agreements regarding such Participating Holder, its ownership of and title to the Registrable Securities, any written information specifically provided by such Participating Holder for inclusion in the registration statement and its intended method of distribution; and any liability of such Participating Holder to any underwriter or other Person under such underwriting agreement shall in no case be greater than the amount of the net proceeds received by such Participating Holder upon the sale of Registrable Securities pursuant to such registration statement and in no event shall relate to anything other than information about such Holder specifically provided by such Holder for use in the registration statement and prospectus.

Section 4. General .

4.1. Adjustments Affecting Registrable Securities . The Company agrees that it shall not effect or permit to occur any combination or subdivision of shares of Common Stock which would adversely affect the ability of any Holder to include its Registrable Securities in any registration contemplated by this Agreement or the marketability of such Registrable Securities in any such registration. The Company agrees that it will take all reasonable steps necessary to effect a subdivision of shares of Common Stock if in the reasonable judgment of (a) the Majority Participating Holders or (b) the Manager for the offering in respect of such Demand Registration Request, such subdivision would enhance the marketability of the Registrable Securities. Subject to the Stockholders Agreement (if in effect at the time), each Holder agrees to vote all of its shares of capital stock in a manner, and to take all other actions necessary, to permit the Company to carry out the intent of the preceding sentence including, without limitation, voting in favor of an amendment to the Company’s organizational documents in order to increase the number of authorized shares of capital stock of the Company. In any event, the provisions of this Agreement shall apply, to the full extent set forth herein with respect to the Registrable Securities, to any and all shares of capital stock of the Company, any successor or assign of the Company (whether by merger, share exchange, consolidation, sale of assets or otherwise) or any Subsidiary of the Company which may be issued in respect of, in exchange for or in substitution of, Registrable Securities and shall be appropriately adjusted for any stock dividends, splits, reverse splits, combinations, recapitalizations and the like occurring after the date hereof.

4.2. Rule 144 and Rule 144A . The Company covenants that (i) so long as it remains subject to the reporting provisions of the Exchange Act, it will timely file the reports required to be filed by it under the Securities Act or the Exchange Act (including, but not limited to, the reports under Sections 13 and 15(d) of the Exchange Act referred to in subparagraph (c)(l)(i) of Rule 144 under the Securities Act, as such Rule may be amended (“ Rule 144 ”) ) or, if the Company is not required to file such reports, it will, upon the request of any Holder, make publicly available other information so long as necessary to permit sales by such Holder under Rule 144, Rule 144A under the Securities Act, as such Rule may be amended (“ Rule 144A ”), or any similar rules or regulations hereafter adopted by the SEC, and (ii) it will take such further action as any Holder may reasonably request, all to the extent required from time to time to enable such Holder to sell Registrable Securities without registration under the Securities Act within the limitation of the exemptions provided by (A) Rule 144, (B) Rule 144A or (C) any similar rule or regulation hereafter adopted by the SEC. Upon the request of any Holder, the Company will deliver to such Holder a written statement as to whether it has complied with such requirements.

4.3. Nominees for Beneficial Owners . If Registrable Securities are held by a nominee for the beneficial owner thereof the beneficial owner thereof may, at its option, be treated as a Holder for purposes of any request or other action by any Holder or Holders pursuant to this Agreement (or any determination of any number or percentage of shares constituting Registrable Securities held by any Holder or Holders contemplated by this Agreement), provided that the Company shall have received assurances reasonably satisfactory to it of such beneficial ownership.

4.4. Amendments and Waivers . Except as otherwise provided herein, no modification, amendment or waiver of any provision of this Agreement shall be effective against the Company or any Holder unless such modification, amendment or waiver is approved in writing by the Company and the Holders holding a majority of the Registrable Securities then held by all Holders; provided that any amendment, modification, supplement or waiver of any of the provisions of this Agreement which disproportionately materially adversely affects any Holder shall not be effective without the written approval of such Holder. No waiver of any of the provisions of this Agreement shall be deemed to or shall constitute a waiver of any other provision hereof (whether or not similar). No failure or delay on the part of any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof or of any other or future exercise of any such right, power or privilege.

4.5. Notices . Except as otherwise provided in this Agreement, all notices, requests, consents and other communications hereunder to any party shall be deemed to be sufficient if contained in a written instrument addressed to such party delivered in person, by nationally recognized overnight courier or first class registered or certified mail, return receipt requested, postage prepaid, or by facsimile or electronic mail at the address set forth below and to any other recipient at the address indicated on Schedule 4.5 hereto or at such other address as may hereafter be designated in writing by such party to the other parties:

(i) if to the Company, to:

Party City Holdco Inc.

80 Grasslands Road

Elmsford, NY 10523

Facsimile: (914) 784-4339

Attention: General Counsel

(ii) if to the THL Party, to:

c/o Thomas H. Lee Partners, L.P.

100 Federal Street, 35th Floor

Boston, MA 02110

Facsimile: (617) 227-3514

Attention: Todd M. Abbrecht and Joshua M. Nelson

with a copy (which shall not constitute notice) to :

Ropes & Gray LLP

Prudential Tower

800 Boylston Street

Boston, MA 02199-3600

Facsimile: (617) 235-0433

Attention: Julie H. Jones

(iii)

if to the Advent Party, to:

c/o Advent International Corporation

75 State Street

Boston, MA 02109

Facsimile: (617) 951-9353

Attention: Jefferson M. Case and James Westra

with a copy (which shall not constitute notice) to :

Ropes & Gray LLP

Prudential Tower, 800 Boylston Street

Boston, MA 02199-3600

Facsimile: (617) 235-0433

Attention: Julie H. Jones

(iv) if to the Management Stockholders, to the address indicated in the records of the Company.

All such notices, requests, consents and other communications shall be deemed to have been given to the receiving party upon actual receipt, if delivered in person; three Business Days after deposit in the mail, if sent by registered or certified mail; upon confirmation of successful transmission if sent by facsimile; or on the next Business Day after deposit with an overnight courier, if sent by overnight courier.

4.6. Termination and Effect of Termination . This Agreement shall terminate with respect to each Holder when such Holder no longer holds any Registrable Securities and will terminate in full when no Holder holds any Registrable Securities, except for the provisions of Sections 2.9 and 4.2 , which shall survive any such termination. No termination under this Agreement shall relieve any Person of liability for breach or Expenses incurred prior to termination. In the event this Agreement is terminated, each Person entitled to indemnification rights pursuant to Section 2.9 shall retain such indemnification rights with respect to any matter that (i) may be an indemnified liability thereunder and (ii) occurred prior to such termination.

4.7. Successors and Assigns . Except as otherwise provided herein, this Agreement shall be binding upon and inure to the benefit of and be enforceable by the parties hereto and the respective successors, permitted assigns, heirs and personal representatives of the parties hereto, whether so expressed or not. This Agreement may not be assigned by the Company without the

prior written consent of the THL Party. Each Holder shall have the right to assign all or part of its or his rights and obligations under this Agreement only in accordance with transfers of Registrable Securities to such Holder’s Permitted Transferees. For the avoidance of doubt, the THL Party shall have the right to assign all or part of its rights and obligations under this Agreement to any of its Affiliates in connection with any transfer of Registrable Securities to such Affiliate. Upon any such assignment, such assignee shall have and be able to exercise and enforce all rights of the assigning Holder which are assigned to it and, to the extent such rights are assigned, any reference to the assigning Holder shall be treated as a reference to the assignee. If any Holder shall acquire additional Registrable Securities, such Registrable Securities shall be subject to all of tire terms, and entitled to all the benefits, of this Agreement. The parties hereto and their respective successors may assign their rights under this Agreement, in whole or in part, to any purchaser of shares of Registrable Securities held by them.

4.8. Entire Agreement . This Agreement, the Stockholders Agreement and the other documents referred to herein or delivered pursuant hereto which form part hereof constitute the entire agreement and understanding between the parties hereto and supersedes all prior agreements and understandings relating to the subject matter hereof.

4.9. Governing Law; Submission to Jurisdiction; Waiver of Jury Trial .

(a) This Agreement, including the validity hereof and the rights and obligations of the parties hereunder, all amendments and supplements hereto, and all actions or proceedings arising out of or relating to this Agreement, of any nature whatsoever, shall be construed in accordance with and governed by the domestic substantive laws of the State of Delaware without giving effect to any choice of law or conflicts of law provision or rule that might otherwise cause the application of the domestic substantive laws of any other jurisdiction. The parties hereto hereby irrevocably submit to the exclusive jurisdiction of the state and federal courts located in the Borough of Manhattan within the State of New York in connection with any dispute arising out of or relating to this Agreement or any of the transactions contemplated hereby and each party hereby irrevocably waives, to the fullest extent permitted by applicable law, any objection which they may now or hereafter have to the laying of venue of any such dispute brought in such court or any defense of inconvenient forum or lack of personal jurisdiction in respect of such dispute. Each of the parties hereto agrees that a judgment rendered in any such dispute may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law.

(b) Each party hereto hereby waives to the fullest extent permitted by applicable law any right it may have to a trial by jury in respect of any legal proceeding directly or indirectly arising out of, under or in connection with this Agreement or any transaction contemplated hereby. Each party hereto (i) certifies that no representative, agent or attorney of any other party has represented, expressly or otherwise, that such other party would not, in the event of Litigation, seek to enforce the foregoing waiver and (ii) acknowledges that it and the other parties hereto have been induced to enter into this Agreement by, among other things, the mutual waivers and certifications in this Section 4.9 .

4.10. Interpretation: Construction .

(a) The table of contents and headings in this Agreement are for convenience of reference only, do not constitute part of this Agreement and shall not be deemed to limit or otherwise affect any of the provisions hereof. Where a reference in this Agreement is made to a Section, such reference shall be to a Section of this Agreement unless otherwise indicated. Whenever the words “include,” “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation.”

(b) The parties have participated jointly in negotiating and drafting this Agreement. In the event that an ambiguity or a question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the parties, and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any provision of this Agreement.

4.11. Counterparts . This Agreement may be executed and delivered in any number of separate counterparts (including by facsimile or electronic mail), each of which shall be an original, but all of which together shall constitute one and the same agreement.

4.12. Severability . The provisions of this Agreement shall be deemed severable and the invalidity or unenforceability of any provision shall not affect the validity or enforceability of the other provisions hereof. If any provision of this Agreement, or the application thereof to any person or any circumstance, is invalid or unenforceable, (a) a suitable and equitable provision shall be substituted therefor in order to carry out, so far as may be valid and enforceable, the intent and purpose of such invalid or unenforceable provision and (b) the remainder of this Agreement and the application of such provision to other persons or circumstances shall not be affected by such invalidity or unenforceability, nor shall such invalidity or unenforceability affect the validity or enforceability of such provision, or the application thereof, in any other jurisdiction.

4.13. Remedies . The parties hereto agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that each party hereto shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement, without the posting of any bond, and, if any action should be brought in equity to enforce any of the provisions of this Agreement, none of the parties hereto shall raise the defense that there is an adequate remedy at law. All remedies, either under this Agreement, by law, or otherwise afforded to any party, shall be cumulative and not alternative.

4.14. Further Assurances . Each party hereto shall do and perform or cause to be done and performed all such further acts and things and shall execute and deliver all such other agreements, certificates, instruments, and documents as any other party hereto reasonably may request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby.

4.15. Confidentiality . Each Management Stockholder agrees that all material non-public information provided pursuant to or in accordance with the terms of this Agreement shall be kept confidential by the person to whom such information is provided, until such time as such information becomes public other than through violation of this provision. Notwithstanding the foregoing, any party may disclose the information if required to do so by any law, rule, regulation, order, decree or subpoena of any governmental agency or authority or court.

[ Remainder of Page Intentionally Left Blank ]

IN WITNESS WHEREOF, the parties hereto have duly executed this Registration Rights Agreement as of the date first above written.


PARTY CITY HOLDCO INC.

By:
Name: Title:

[SIGNATURE PAGE TO AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT]


THE THL PARTY:

THL PC TOPCO, L.P.

By:		THL Equity Advisors VI, LLC, its general partner

By:		Thomas H. Lee Partners, L.P., its sole member

By:		Thomas H. Lee Advisors, LLC, its general partner

By:		THL Holdco, LLC, its managing member

By:
Name:
Title:

[SIGNATURE PAGE TO AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT]



THE ADVENT PARTY:

ADVENT-PARTY CITY ACQUISITION LIMITED PARTNERSHIP

Advent-Party City GP, LLC, its general partner

By:
Name: Title:

[SIGNATURE PAGE TO AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT]


MANAGEMENT STOCKHOLDER:

CHARLES ARTHUR RITTENBERG 2008 TRUST

By:
Name: Title:

[SIGNATURE PAGE TO AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT]


MANAGEMENT STOCKHOLDER:

JACK DOLLIVER RITTENBERG 2013 TRUST

By:
Name: Title:

[SIGNATURE PAGE TO AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT]


MANAGEMENT STOCKHOLDER:

THEODORE FREDERICK RITTENBERG 2014 TRUST

By:
Name: Title:

[SIGNATURE PAGE TO AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT]


MANAGEMENT STOCKHOLDER:

CRAIG M. RITTENBERG SELF-SETTLED TRUST U/A/D JUNE 28, 2008

By:
Name: Title:

[SIGNATURE PAGE TO AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT]


MANAGEMENT STOCKHOLDER:

BJM ² LLC

By:
Name: Title:

[SIGNATURE PAGE TO AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT]


MANAGEMENT STOCKHOLDER:

RITTS ENTERPRISES LLC

By:
Name: Title:

[SIGNATURE PAGE TO AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT]


MANAGEMENT STOCKHOLDER:

HARRISON FAMILY 2010 TRUST

By:
Name: Title:

[SIGNATURE PAGE TO AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT]

MANAGEMENT STOCKHOLDER:

Gregg Melnick

[SIGNATURE PAGE TO AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT]

MANAGEMENT STOCKHOLDER:

Alice Tang

[SIGNATURE PAGE TO AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT]

MANAGEMENT STOCKHOLDER:

Diane Spaar

[SIGNATURE PAGE TO AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT]


MANAGEMENT STOCKHOLDER:

ETHAN REES SPAAR IRREVOCABLE TRUST

By:
Name:
Title:

[SIGNATURE PAGE TO AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT]


MANAGEMENT STOCKHOLDER:

JULIA ROSE SPAAR IRREVOCABLE TRUST

By:
Name:
Title:

[SIGNATURE PAGE TO AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT]


MANAGEMENT STOCKHOLDER:

KEITH ALAN SPAAR JR. IRREVOCABLE TRUST

By:
Name:
Title:

[SIGNATURE PAGE TO AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT]


MANAGEMENT STOCKHOLDER:

WILLA ANNE SPAAR IRREVOCABLE TRUST

By:
Name:
Title:

[SIGNATURE PAGE TO AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT]

MANAGEMENT STOCKHOLDER:

Steven Skiba

[SIGNATURE PAGE TO AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT]

MANAGEMENT STOCKHOLDER:

Michael Correale

[SIGNATURE PAGE TO AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT]


MANAGEMENT STOCKHOLDER:

MELNICK 2008 FAMILY TRUST

By:
Name:
Title:

[SIGNATURE PAGE TO AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT]

Exhibit 4.9

AMENDED AND RESTATED STOCKHOLDERS AGREEMENT

by and among

PARTY CITY HOLDCO INC.,

THL PC TOPCO, L.P.,

ADVENT-PARTY CITY ACQUISITION LIMITED PARTNERSHIP

and

THE OTHER STOCKHOLDERS THAT ARE SIGNATORIES HERETO

Dated as of [ ], 2015

TABLE OF CONTENTS


Section 1.	Definitions.	1

1.1.	Definitions.	1

1.2.	General Interpretive Principles.	5

Section 2.	Methodology for Calculations.	6

Section 3.	Corporate Governance.	6

3.1.	Board of Directors.	6

3.2.	Expenses and Indemnification.	9

Section 4.	Restrictions on Transfers of Stock by Stockholders.	9

Section 5.	Financial and Business Information.	9

Section 6.	Confidentiality.	10

Section 7.	Corporate Opportunities.	10

Section 8.	Termination.	11

Section 9.	Further Assurances.	11

Section 10.	Amendment and Waiver.	11

Section 11.	Entire Agreement.	11

Section 12.	Successors and Assigns.	12

Section 13.	Severability.	12

Section 14.	Remedies.	12

Section 15.	Notices.	12

Section 16.	Governing Law; Submission to Jurisdiction; Waiver of Jury Trial.	14

Section 17.	No Publicity.	15

Section 18.	Company Logo.	15

Section 19.	Descriptive Headings.	15

Section 20.	Conflicting Agreements.	15

Section 21.	Counterparts.	16

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AMENDED AND RESTATED STOCKHOLDERS AGREEMENT

This AMENDED AND RESTATED STOCKHOLDERS AGREEMENT (as it may be amended from time to time in accordance with the terms hereof, the “ Agreement ”) dated as of [ — ], 2015 is made by and among Party City Holdco Inc., a Delaware corporation (the “ Company ”), THL PC Topco, L.P. (the “ THL Party ”, which term includes any Affiliates of the foregoing which own Stock from time to time), Advent-Party City Acquisition Limited Partnership, a Delaware limited partnership (the “ Advent Party ”, which term includes any Affiliates of the foregoing which own Stock from time to time, and together with the THL Party, the “ Investor Stockholders ”), and the Persons listed as Management Holders on the signature pages hereto.

RECITALS

WHEREAS, on July 27, 2012, the Investor Stockholders, the Company and certain other parties entered into a Stockholders Agreement (the “ Prior Agreement ”);

WHEREAS, on the date hereof, the Company is consummating an initial public offering (the “ IPO ”) of its shares of Common Stock pursuant to an underwriting agreement dated [ — ], 2015; and

WHEREAS, on the date hereof, the parties hereto desire to amend and restate the Prior Agreement in order to set forth their agreement with respect to certain rights and obligations associated with ownership of shares of capital stock of the Company.

NOW, THEREFORE, in consideration of the premises and of the mutual covenants and obligations hereinafter set forth, the parties hereby agree as follows:

Section 1. Definitions .

1.1. Definitions . As used herein, the following terms shall have the following meanings:

“ Additional Unaffiliated Director ” has the meaning ascribed to such term in Section 3.1(a) .

“ Advent Director ” has the meaning ascribed to such term in Section 3.1(a)

“ Advent Party ” has the meaning ascribed to such term in the Preamble.

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“ Agreement ” has the meaning ascribed to such term in the Preamble.

“ Board ” means the board of directors of the Company.

“ Cause ” shall have the meaning set forth below, except with respect to any Management Holder who is employed by the Company or one of its Subsidiaries pursuant to an effective written employment agreement, if any, between the Company and/or one of its Subsidiaries and such Management Holder in which there is a definition of “Cause,” in which event the definition of “Cause” as set forth in such employment agreement shall be deemed to be the definition of “Cause” herein solely for such Management Holder and only for so long as such employment agreement remains effective. In all other events, the term “Cause” shall mean the Board has determined, in its reasonable judgment, that any one or more of the following has occurred: (a) the Management Holder shall have been convicted of, or shall have pleaded guilty or nolo contendere to, any felony or any crime involving dishonesty or moral turpitude; (b) the Management Holder shall have committed any fraud, theft, embezzlement, misappropriation of funds, breach of fiduciary duty or act of dishonesty; (c) the Management Holder shall have breached in any material respect any of the provisions of any agreement between the Management Holder and the Company or its Affiliates, including, without limitation, this Agreement; (d) the Management Holder shall have engaged in conduct likely to make the Company or any of its Affiliates subject to criminal liabilities other than those arising from the Company’s normal business activities; or (e) the Management Holder shall have willfully engaged in any other conduct that involves a breach of fiduciary obligation on the part of the Management Holder or otherwise could reasonably be expected to have a material adverse effect upon the business, interests or reputation of the Company or any of its Affiliates.

“ Certificate of Incorporation ” means the certificate of incorporation of the Company as in effect from time to time.

“ Chief Executive Officer ” means the chief executive officer of the Company then in office.

“ Common Stock ” means the common stock, par value $0.01 per share, of the Company and any and all securities of any kind whatsoever of the Company which may be issued after the date of this Agreement in respect of, or in exchange for, such shares of common stock of the Company pursuant to a merger, consolidation, stock split, stock dividend or recapitalization of the Company or otherwise.

“ Common Stock Equivalents ” means all securities convertible into, or exchangeable or exercisable for (at any time or upon the occurrence of any event or contingency and without regard to any vesting or other conditions to which such securities may be subject) (i) shares of Common Stock or (ii) other Equity Securities convertible into, or exchangeable or exercisable for (at any time or upon the occurrence of any event or contingency and without regard to any vesting or other conditions to which such securities may be subject), Common Stock.

“ Company ” has the meaning ascribed to such term in the Preamble.

“ Equity Securities ” means any capital Stock or other equity security of the Company or any of its Subsidiaries, including Common Stock and Common Stock Equivalents.

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“ Executive Chairman ” means the executive chairman of the Board.

“ GAAP ” means generally accepted accounting principles in the United States as in effect from time to time.

“ Group ” means two or more Persons who agree to act together for the purpose of acquiring, holding, voting or disposing of Stock.

“ Investor Stockholders ” has the meaning set forth in the Preamble.

“ Investor Stockholder Party ” has the meaning ascribed to such term in Section 7 .

“ Issue ” means to issue or in any other way directly or indirectly sell or exchange, or agree to issue, sell or exchange, any security or any legal or beneficial interest therein.

“ Majority Management Holders ” means the Senior Management Holders holding a majority of the aggregate Voting Shares held by the Senior Management Holders.

“ Management Holder ” means any current or former director, officer or employee of the Company or any of its Subsidiaries (or any Affiliate of such Person (other than the Investor Stockholders and the Sponsor Directors)) who is a Stockholder and any Permitted Management Holder Transferee who is a Stockholder.

“ Minimum Percentage ” means, at any given time, a fraction (expressed as a percentage), with the numerator being the number of shares, in the aggregate, held by such Stockholder at such time and the denominator being the number of shares of Common Stock, in the aggregate, held by such Stockholder immediately following the closing of the IPO (including any additional closing pursuant to the underwriters’ over-allotment option).

“ Necessary Action ” means, with respect to any party and a specified result, all actions (to the extent such actions are permitted by law and within such party’s control) necessary to cause such result, including (i) voting or providing a written consent or proxy with respect to the Common Stock, (ii) causing the adoption of stockholders’ resolutions and amendments to the organizational documents of the Company, (iii) executing agreements and instruments, and (iv) making, or causing to be made, with governmental, administrative or regulatory authorities, all filings, registrations or similar actions that are required to achieve such result.

“ Option Plan ” means the Company’s 2012 Omnibus Equity Incentive Plan, as amended from time to time.

“ Option Stock ” means Common Stock received upon the exercise of Common Stock Equivalents (including Plan Options and Plan Stock Appreciation Rights).

“ Permanent Disability ” shall have the meaning set forth below, except with respect to any Management Holder who is employed by the Company or one of its Subsidiaries pursuant to an effective written employment agreement, if any, between the Company and/or one of its Subsidiaries and such Management Holder in which there is a definition of “Permanent Disability,” in which event the definition of “Permanent Disability” as set forth in such

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employment agreement shall be deemed to be the definition of “Permanent Disability” herein solely for such Management Holder and only for so long as such employment agreement remains effective. In all other events, the term “Permanent Disability” shall mean: a determination by independent competent medical authority (selected by the Board) that the Management Holder is unable to perform his duties and in all reasonable medical likelihood such inability shall continue for a consecutive period of 90 days or for a period in excess of 120 days in any 365 day period.

“ Permitted Management Holder Transferee ” means any transferee who obtained Stock as a direct or indirect result of a Permitted Management Transfer by a Management Holder.

“ Permitted Management Transfer ” means any Transfer of Stock by a Management Holder (i) to spouses, children, and exclusive benefit trusts, in each case, so long as such Management Holder retains voting control of such Stock, (ii) to the Company or (iii) upon the death of an individual Management Holder, pursuant to the terms of any trust or will of the deceased individual Management Holder or by the laws of intestate succession.

“ Person ” means any individual, corporation, limited liability company, limited or general partnership, joint venture, association, joint-stock company, trust, unincorporated organization, governmental entity or agency or other entity of any kind or nature.

“ Plan Options ” means, options to purchase Common Stock of the Company pursuant to the Option Plan.

“ Plan Stock Appreciation Rights ” means the right to receive Common Stock or cash payments in connection with the appreciation of a specified number of shares of Common Stock pursuant to the Option Plan.

“ Prior Agreement ” has the meaning set forth in the Preamble.

“ Proprietary Information ” has the meaning ascribed to such term in Section 6 .

“ Registration Rights Agreement ” means the Amended and Restated Registration Rights Agreement, dated [ — ], 2015, among the Company, the Investor Stockholders and certain other parties, as amended from time to time.

“ SEC ” means the Securities and Exchange Commission or such other federal agency which at such time administers the Securities Act.

“ Securities Act ” means the Securities Act of 1933, as amended, and the rules and regulations of the SEC issued under such Act, as they may from time to time be in effect.

“ Senior Management Holders ” means the Management Holders who, as of the date hereof, each hold at least [ ] shares of Common Stock and each of whom is an “accredited investor” (as defined in Rule 501(a) under the Securities Act) or, if not an accredited investor, has retained a “purchaser representative” (as defined in Rule 501(h) under the Securities Act) or has such knowledge and experience in financial and business matters that he or she is capable of evaluating the merits and risks of the action(s) contemplated.

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“ Sponsor Directors ” has the meaning ascribed to such term in Section 3.1(a) .

“ Stock ” means any shares of Common Stock or of any other class or series of authorized capital stock of the Company, whether owned, issued or authorized on the date of this Agreement or hereafter, including any Option Stock but excluding any Plan Options.

“ Stockholders ” means the parties to this Agreement (other than the Company) and any other subsequent holder of Stock who agrees to be bound by the terms of this Agreement.

“ Subsidiary ” means, with respect to any Person, (i) any corporation, limited liability company, partnership or other entity of which shares of capital stock or other ownership interests having ordinary voting power to elect a majority of the board of directors or other similar managing body of such corporation, limited liability company, partnership or other entity are at the time directly or indirectly owned or controlled by such Person, or (ii) the management of which is otherwise controlled, directly or indirectly, by such Person.

“ THL Director ” has the meaning ascribed to such term in Section 3.1(a)

“ THL Party ” has the meaning ascribed to such term in the Preamble.

“ THL Supplemental Director ” has the meaning ascribed to such term in Section 3.1(b)(ii) .

“ Transfer ” means to transfer, sell, assign, distribute, pledge, encumber, hypothecate, assign, exchange, or in any other way directly or indirectly dispose of, in whole or in part, either voluntarily or involuntarily, including by gift, by way of merger (forward or reverse) or similar transaction, by operation of law or otherwise, any security or any legal or beneficial interest therein, including the grant of an option or other right or interest that would result in the transferor no longer having the economic consequences of ownership in, or the power to vote, such security.

“ Trigger Date ” has the meaning ascribed to such term in Section 3.1(f)

“ Unaffiliated Director ” has the meaning ascribed to such term in Section 3.1 .

“ Voting Shares ” means, at any time, any securities of the Company, the holders of which are generally entitled to vote for the election of directors to the Board (including all outstanding shares of Common Stock).

1.2. General Interpretive Principles . When a reference is made in this Agreement to a Section, Schedule or Exhibit such reference shall be to a Section of, or a Schedule or Exhibit to, this Agreement unless otherwise indicated. The table of contents and headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. Whenever the words “ include ,” “ includes ” or “ including ” are used in this Agreement, they shall be deemed to be followed by the words “ without limitation .” The words “ hereof ,” “ herein ” and “ hereunder ” and words of similar import when used in this Agreement shall refer to this Agreement as a whole (including the Schedules and Exhibits) and not to any particular provision of this Agreement. All terms defined in this Agreement shall have the defined meanings when used in any document made or delivered pursuant hereto unless

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otherwise defined therein. The definitions contained in this Agreement are applicable to the singular as well as the plural forms of such terms and, except as otherwise expressly provided or unless the context otherwise requires, any noun or pronoun shall be deemed to cover all genders. Any statute, rule, order or regulation defined or referred to in this Agreement or in any agreement or instrument that is referred to in this Agreement shall mean such statute, rule, order or regulation as from time to time amended, updated, modified, supplemented or superseded, including by succession of comparable successor statutes, rules, orders or regulations and references to all attachments thereto and instruments incorporated therein. Where specific language is used to clarify by example a general statement contained herein, such specific language shall not be deemed to modify, limit or restrict in any manner the construction of the general statement to which it relates. The language used in this Agreement shall be deemed to be the language chosen by the parties hereto to express their mutual intent, and no rule of strict construction shall be applied against any party.

Section 2. Methodology for Calculations . Except as otherwise expressly provided in this Agreement, for purposes of calculating (a) the amount of outstanding shares of Common Stock as of any date and (b) the amount of shares of Common Stock owned by a Person hereunder (and the percentage of the outstanding shares of Common Stock owned by a Person hereunder), no Common Stock Equivalents of the Company shall be treated as having been converted, exchanged or exercised. In the event of any stock split, stock dividend, reverse stock split, any combination of the shares of Stock or any similar event, with respect to all references in this Agreement to a Stockholder or Stockholders holding a number of shares of Stock, the applicable number shall be appropriately adjusted to give effect to such stock split, stock dividend, reverse stock split, any combination of the shares of Stock or similar event.

Section 3. Corporate Governance .

3.1. Board of Directors .

(a) Composition of Initial Board. Concurrently with the effectiveness of this Agreement, the Company, the Investor Stockholders and the Management Holders shall take all Necessary Action to cause the Board to be comprised of nine directors, (i) three of whom shall be designated by the THL Party (each such director, a “ THL Director ”), (ii) two of whom shall be designated by the Advent Party (each such director, an “ Advent Director ” and together with the THL Directors, the “ Sponsor Directors ”), (iii) one of whom shall be the Chief Executive Officer, (iv) one of whom shall be the Executive Chairman and (v) two of whom shall be independent directors who meet the independence criteria set forth in Rule 10A-3 of the Exchange Act (each such director, an “ Unaffiliated Director ”). Within one year of the effectiveness of this Agreement, the Company, the Investor Stockholders and certain other Management Holders shall take all Necessary Action to cause the Board to increase in size by one director to 10 directors and to fill such vacancy with one additional Unaffiliated Director (the “ Additional Unaffiliated Director ”) who shall be appointed by a majority of the Board, which majority must include at least one THL Director. Each of the foregoing directors shall be divided into three classes of directors, each of whose members shall serve for staggered three-year terms as follows:

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(A)

the class I directors shall include one THL Director, one Advent Director and one Unaffiliated Director, and their term will expire at the annual meeting of stockholders to be held in 2015;

(B)

the class II directors shall include one THL Director, one Unaffiliated Director and the Chief Executive Officer, and their term will expire at the annual meeting of stockholders to be held in 2016; and

(C)

the class III directors shall include one THL Director, one Advent Director, the Executive Chairman and the Additional Unaffiliated Director, and their term will expire at the annual meeting of stockholders to be held in 2017.

For the avoidance of doubt, this Section 3.1(a) shall have no further force or effect after the Additional Unaffiliated Director is appointed to the Board.

(b)

THL Representation.

(i) For so long as the THL Party holds a number of shares of Common Stock representing the Minimum Percentages shown below, the Company shall, and the Investor Stockholders and Management Holders shall take all Necessary Action to, include in the slate of nominees recommended by the Board for election as directors at each applicable annual or special meeting of stockholders at which directors are to be elected, or pursuant to a written consent, that number of individuals designated by the THL Party that, if elected, will result in the THL Party having the number of directors serving on the Board that is shown below, and the other Investor Stockholders agree to vote in favor of such nominees.


Minimum Percentage		Number of THL Directors
30% or greater		3
Less than 30% but greater than or equal to 15%		2
Less than 15% but greater than or equal to 5%		1

(ii) In addition, for so long as the THL Party holds a number of shares of Common Stock representing Minimum Percentages shown below, upon receiving a written request from the THL Party, the Company, the other Investor Stockholders and the Management Holders will take all Necessary Action to cause the Board as soon as practicable to: (a) increase the size of the Board to permit the inclusion of the number of additional directors shown below on the Board and (b) appoint such directors to fill the vacancies created thereby as are specified by the THL Party. Any director so appointed (each, a “ THL Supplemental Director ”) shall be assigned to such class of directors to be elected at the annual meeting of stockholders that is latest to occur of the then-existing classes of directors. Thereafter, for so long as the THL Party holds a number of shares of Common Stock representing the Minimum Percentage shown below, in addition to any directors designated in accordance with Section 3.1(b)(i) , the Company shall, and the Investor Stockholders and the Management Holders shall take all Necessary Action to, include in the slate of nominees recommended for election as directors at each applicable annual or special meeting of stockholders at which directors are to be elected, or pursuant to a written consent, that number of individuals designated by the THL Party that, if elected, will result in the

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THL Party having the number of THL Supplemental Directors serving on the Board that is shown below, and the other Investor Stockholders agree to vote in favor of such nominees.


Minimum Percentage		Number of THL Supplemental Directors
50% or greater		2
Less than 50% but greater than or equal to 40%		1

(c) Advent Representation. For so long as the Advent Party holds a number of shares of Common Stock representing the Minimum Percentages shown below, the Company shall, and the Investor Stockholders and Management Holders shall take all Necessary Action to, include in the slate of nominees recommended by the Board for election as directors at each applicable annual or special meeting of stockholders at which directors are to be elected, or pursuant to a written consent, that number of individuals designated by the Advent Party that, if elected, will result in the Advent Party having the number of directors serving on the Board that is shown below, and the other Investor Stockholders agree to vote in favor of such nominees.


Minimum Percentage		Number of Advent Directors
50% or greater		2
Less than 50% but greater than or equal to 20%		1

(d) The Chief Executive Officer and the Executive Chairman will serve on the Board, and the Investor Stockholders agree to vote in favor of the Chief Executive Officer and the Executive Chairman as directors.

(e) In the event that a vacancy is created at any time by the death, disability, retirement, resignation or removal of any THL Director or any Advent Director, the Company hereby agrees to take all Necessary Action to cause the vacancy created thereby to be filled as soon as practicable by a THL Director or an Advent Director, as the case may be, for so long as such Investor Stockholder has the right to designate an individual for nomination to the Board under this Agreement.

(f) For so long as the Investor Stockholders hold a majority of the outstanding shares of Common Stock (the “ Trigger Date ”), any director of the Company may be removed with our without cause by holders of a majority of the outstanding shares of Common Stock; provided , that the Investor Stockholders agree not to vote to remove each other’s directors without cause. At and following the Trigger Date, directors may only be removed for cause by the affirmative vote of the holders of at least 75 percent of the voting power of the outstanding Stock.

(g) Subject to Section 3.1(b)(ii), the Board shall not, and the Company will take all Necessary Action to ensure that the Board shall not, consist of fewer than three or greater than 15 directors, the exact number of directors to be determined from time to time by resolution adopted by the affirmative vote of a majority of the Board, including a majority of the Advent Directors and the THL Directors, voting together as a class.

(h) Upon any decrease in the number of directors that an Investor Stockholders is entitled to designate for nomination to the Board, such Investor Stockholder shall take all

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Necessary Action to cause the appropriate number of Sponsor Directors to offer to tender resignation. If such resignation is then accepted by the Board, the Company and the Investor Stockholders shall take all Necessary Action to cause the authorized size of the Board to be reduced accordingly.

(i) Except as required by applicable law, the business and affairs of the Company shall be managed by or under the direction of the Board. At all meetings of the Board, a quorum shall consist of not less than a number of directors holding a majority of the votes held by all directors; provided , that until the Trigger Date, the attendance of at least one THL Director shall be required for a quorum to be present. At each meeting of the Board (or committee thereof) at which a quorum is present, each director shall be entitled to one vote on each matter to be voted on at such meeting. All actions of the Board shall require the affirmative vote of at least a majority of the votes held by all directors present at such meeting. Subject to applicable law, any action that may be taken at a meeting of the Board may also be taken by written consent of the members of the Board in lieu of a meeting.

(j) The Company and the Investor Stockholders shall take all Necessary Action to ensure that the composition of the Board complies with all applicable law and stock exchange rules upon loss of the “controlled company” exemption under the applicable stock exchange rules.

3.2. Expenses and Indemnification . The Company shall pay the reasonable out-of-pocket expenses incurred by each member of the Board in connection with performing his or her duties as a member of the Board, including the reasonable out-of-pocket expenses incurred by such person for attending meetings of the Board or any committee thereof or meetings of any board of directors or other similar managing body (and any committee thereof) of any Subsidiary of the Company. The Company shall obtain customary director and officer liability insurance on commercially reasonable terms.

Section 4. Restrictions on Transfers of Stock by Stockholders . No Stockholder (other than any Investor Stockholder in accordance with paragraph (b) below) shall Transfer any Stock other than (i) pursuant to a Permitted Management Transfer, (ii) with the prior written consent of the THL Party or (iii) to any Person either (A) pursuant to the exercise of registration rights under the Registration Rights Agreement, or (B) pursuant to an exemption from registration under the Securities Act, provided , that, until the Minimum Percentage of the THL Party is less than 10 percent, no Transfers shall be permitted under this clause (iii) if, after giving effect to any such Transfers, the Minimum Percentage held by such Stockholder and his Permitted Management Holder Transferee is less than the Minimum Percentage of the THL Party.

Section 5. Financial and Business Information . For so long as any Investor Stockholder, together with its Affiliates, has the right to designate a member of the Board the Company shall provide to such Investor Stockholder the following information (i) unaudited consolidated quarterly financial reports of the Company and its consolidated subsidiaries prepared in accordance with GAAP for the first three fiscal quarters of each year, which shall be provided at the same time that the Company provides such financial reports to the Company’s lenders and no later than 60 days after the end of such fiscal quarter, (ii) audited consolidated

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annual financial reports of the Company and its consolidated subsidiaries prepared in accordance with GAAP, which shall be provided at the same time that the Company is required to provide such financial reports to the Company’s lenders and no later than 120 days after the end of the Company’s fiscal year, (iii) an annual consolidated budget for the Company and its Subsidiaries as approved by the Board no later than 90 days after the end of the Company’s fiscal year, (iv) with respect to each Investor Stockholder, complete copies of the quarterly information packages distributed to the Company’s lenders at the same time the Company provides such information packets to the Company’s lenders and no later than 60 days after the end of each fiscal quarter and (v) all information that is provided to the Board in connection with any meeting thereof, which information shall be provided to all Investor Stockholders at the same time it is provided to the Board; provided , however , that each Stockholder receiving information pursuant to this Section 5 shall comply with the requirements of Section 6 herein.

Section 6. Confidentiality . Each Stockholder shall maintain the confidentiality of any confidential and proprietary information of the Company, including any information received by any Investor Stockholder pursuant to Section 5 hereof, (“ Proprietary Information ”) using the same standard of care, but in no event less than reasonable care, as it applies to its own confidential information; provided , however , that a Stockholder may disclose Proprietary Information (a) to its representatives in connection with monitoring its investment in the Company, (b) to any Affiliate, partner, limited partner, member, trustee, investor or related investment fund of such Stockholder and its and their respective investors, limited partners, directors, employees and consultants, in each case, in the ordinary course of business, or (c) as may otherwise be required by law, rule, regulation or self-regulatory organization, and further provided , that (i) such Proprietary Information provided pursuant to clauses (a) to (c) above is identified prior to disclosure by the Stockholder to the recipient as requiring confidential treatment, and (ii) the disclosing Stockholder shall be responsible for the acts and omissions related to the Proprietary Information of any Person to whom such Stockholder discloses Proprietary Information (other than pursuant to clause (c) above). “ Proprietary Information ” shall not include any information (a) that is publicly available (other than as a result of dissemination by such Stockholder) or a matter of public knowledge generally, (b) that was known to such Stockholder on a non-confidential basis, without, to such Stockholders’ knowledge, breach of any third party’s confidentiality obligations, prior to its disclosure by the Company, or (c) that is or was independently developed or conceived by such Stockholder without use of the Proprietary Information.

Section 7. Corporate Opportunities . To the fullest extent permitted by applicable law, the Company, on behalf of itself and its Subsidiaries, and each of the Stockholders, hereby renounces any interest, duty or expectancy of the Company and its Subsidiaries in, or in being offered an opportunity to participate in, business opportunities that are from time to time presented to any Investor Stockholder, any Affiliate of any Investor Stockholder or any director (or director of any Subsidiary of the Company) designated by any of the foregoing (each an “ Investor Stockholder Party ”) even if the opportunity is one that the Company or its Subsidiaries might reasonably be deemed to have pursued or had the ability or desire to pursue if granted the opportunity to do so and each Investor Stockholder Party shall have no duty to communicate or offer such business opportunity to the Company and to the fullest extent permitted by applicable law, shall not be liable to the Company or any of its Subsidiaries for breach of any fiduciary or other duty, as a director or otherwise, by reason of the fact that such Investor Stockholder Party

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pursues or acquires such business opportunity, directs such business opportunity to another Person or fails to present such business opportunity, or information regarding such business opportunity, to the Company or its Subsidiaries.

Section 8. Termination . Section 3 shall terminate automatically (without any action by any party hereto) as to each Investor Stockholder upon the time at which such Investor Stockholder no longer has the right to designate an individual for nomination to the Board under this Agreement; provided , that the provision in Section 3.2 shall survive such termination. The remainder of this Agreement shall terminate automatically (without any action by any party hereto) as to each Stockholder when such Stockholder ceases to hold any Shares; provided , that this Agreement shall terminate with respect to each such Management Holder at such time when (i) such Management Holder is not a director, officer or employee of the Company or any of its Subsidiaries (or any Affiliate of such Person (other than the Investor Stockholders and the Sponsor Directors)), (ii) such Management Holder holds less than 1% of the Company’s outstanding shares of Common Stock and (iii) except where such Management Holder is terminated without Cause or for Good Reason (to the extent defined in any applicable employment agreement), six months have elapsed since such Management Holder was a director, officer or employee of the Company or any of its Subsidiaries.

Section 9. Further Assurances . At any time or from time to time after the date of this Agreement, the parties agree to cooperate with each other, and at the request of any other party, to execute and deliver any further instruments or documents and to take all such further action as the other party may reasonably request in order to evidence or effectuate the consummation of the transactions contemplated hereby and to otherwise carry out the intent of the parties hereunder.

Section 10. Amendment and Waiver . Except as otherwise provided herein, no modification, amendment or waiver of any provision of this Agreement shall be effective against the Company or any Stockholder unless such modification, amendment or waiver is approved in writing by the THL Party. Notwithstanding the foregoing, no amendment shall be made or waiver granted in a manner that adversely affects (i) the Advent Party without the prior written consent of such affected party, (ii) the Management Holders’ rights hereunder, to the extent that such amendment or waiver has a material and disproportionate impact or effect on the Management Holders’ as a Group as compared to the other Stockholders, without the prior written consent of the Majority Management Holders, or (iii) any particular Management Holder’s rights or obligations hereunder to the extent (and only to the extent) such particular Management Holder would be uniquely and adversely affected by such amendment or waiver, without the written consent of such Management Holder. The failure of any party to enforce any of the provisions of this Agreement shall in no way be construed as a waiver of such provisions and shall not affect the right of such party thereafter to enforce each and every provision of this Agreement in accordance with its terms.

Section 11. Entire Agreement . This Agreement, the Registration Rights Agreement and the other writings referred to herein or delivered pursuant hereto or which make specific reference to this Section 11 form a part hereof and contain the entire agreement and understanding among the parties hereto with respect to the subject matter hereof and supersede and preempt any prior understandings, agreements or representations by or among the parties, written or oral, which may have related to the subject matter hereof in any way.

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Section 12. Successors and Assigns . Except as otherwise provided herein, this Agreement shall bind and inure to the benefit of and be enforceable by the Company and its successors and assigns and each Stockholder and its successors, permitted assigns, heirs and personal representatives. Subject to compliance with the provisions of this Agreement, (i) each Investor Stockholder shall, at any time and without the consent of any other party hereto, have the right to assign all or part of its rights and obligations under this Agreement to one or more of its Affiliates or (ii) each Stockholder shall, at any time and without the consent of any other party hereto, have the right to assign all or part of its rights and obligations under this Agreement to any Person to whom such Stockholder Transferred Stock in accordance with this Agreement; provided , however , that, without the prior written consent of the THL Party, the Advent Party shall not be permitted to assign any of its rights under Section 3 to any transferee other than an Affiliate of such person. Upon any such permitted assignment, such assignee shall have and be able to exercise and enforce all rights of the assigning party which are assigned to it and, to the extent such rights are assigned, any reference to the assigning Stockholder shall be treated as a reference to the assignee.

Section 13. Severability . Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provision or any other jurisdiction, but this Agreement shall be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision had never been contained herein.

Section 14. Remedies . Each party hereto shall be entitled to enforce its rights under this Agreement specifically, to recover damages by reason of any breach of any provision of this Agreement and to exercise all other rights existing in its favor. The parties hereto agree and acknowledge that money damages may not be an adequate remedy for any breach of the provisions of this Agreement and that each party may in its sole discretion apply to any court of law or equity of competent jurisdiction for specific performance and/or injunctive relief (without posting a bond or other security) in order to enforce or prevent any violation of the provisions of this Agreement.

Section 15. Notices . All notices, requests, consents and other communications hereunder to any party shall be deemed to be sufficient if contained in a written instrument delivered in person or by telecopy (with a confirmatory copy sent by different means within three business days of such notice), nationally recognized overnight courier or first class registered or certified mail, return receipt requested, postage prepaid, addressed to such party at the address set forth below and to any subsequent holder of Stock subject to this Agreement at such address as indicated by the Company’s records, or at such address or to the attention of such other person as may hereafter be designated in writing by such party to the other parties:

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if to the Company to:

Party City Holdco Inc.

80 Grasslands Road

Elmsford, NY 10523

Facsimile: (914) 345-2056

Attention: Michael A. Correale

Email: MCorreale@amscan.com

with a copy (which shall not constitute notice) to:

Ropes & Gray LLP

Prudential Tower, 800 Boylston Street

Boston, MA 02199-3600

Facsimile: (617) 235-0433

Attention: Julie H. Jones

Email: Julie.Jones@ropesgray.com

if to the THL Party, to:

c/o Thomas H. Lee Partners, L.P.

100 Federal Street, 35th Floor

Boston, MA 02110

Facsimile: (617) 227-3514

Attention: Todd M. Abbrecht and Joshua M. Nelson

Email: TAbbrecht@THL.com

JNelson@THL.com

with a copy (which shall not constitute notice) to:

Ropes & Gray LLP

Prudential Tower, 800 Boylston Street

Boston, MA 02199-3600

Facsimile: (617) 235-0433

Attention: Julie H. Jones

Email: Julie.Jones@ropesgray.com

if to the Advent Party, to:

Advent International Corporation

75 State Street

Boston, MA 02109

Facsimile: (617) 951-9353

Attention: Jefferson M. Case and James Westra

Email: JCase@AdventInternational.com

JWestra@AdventInternational.com

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with a copy (which shall not constitute notice) to:

Ropes & Gray LLP

Prudential Tower, 800 Boylston Street

Boston, MA 02199-3600

Facsimile: (617) 235-0433

Attention: Julie H. Jones

Email: Julie.Jones@ropesgray.com

if to any Management Holder, to: such address indicated in the records of the Company:

with a copy (which shall not constitute notice) to:

Ropes & Gray LLP

Prudential Tower, 800 Boylston Street

Boston, MA 02199-3600

Facsimile: (617) 235-0433

Attention: Julie H. Jones

Email: Julie.Jones@ropesgray.com

All such notices, requests, consents and other communications will be deemed to have been given hereunder when received.

Section 16. Governing Law; Submission to Jurisdiction; Waiver of Jury Trial .

(a) This Agreement, including the validity hereof and the rights and obligations of the parties hereunder, all amendments and supplements hereto and the transactions contemplated hereby, and all actions or proceedings arising out of or relating to this Agreement, of any nature whatsoever, shall be construed in accordance with and governed by the domestic substantive laws of the State of Delaware without giving effect to any choice of law or conflicts of law provision or rule that might otherwise cause the application of the domestic substantive laws of any other jurisdiction. The parties hereto hereby irrevocably submit to the exclusive jurisdiction of the state and federal courts located in the Borough of Manhattan within the State of New York in connection with any dispute arising out of or relating to this Agreement or any of the transactions contemplated hereby (except for actions to enforce a judgment rendered by a state or federal court located in the Borough of Manhattan within the State of New York in connection with any dispute that arises out of this Agreement or any of the transactions), and each party hereby irrevocably waives, to the fullest extent permitted by applicable law, any objection which they may now or hereafter have to the laying of venue of any such dispute brought in such court or any defense of inconvenient forum or lack of personal jurisdiction in respect of such dispute. Each of the parties hereto agrees that a judgment rendered in any such dispute may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law.

(b) Each party hereto hereby waives to the fullest extent permitted by applicable law any right it may have to a trial by jury in respect of any legal proceeding directly or indirectly arising out of, under or in connection with this Agreement or any transaction contemplated hereby. Each party hereto (i) certifies that no representative, agent or attorney of any other party has represented, expressly or otherwise, that such other party would not, in the event of litigation, seek to enforce the foregoing waiver and (ii) acknowledges that it and the other parties hereto have been induced to enter into this Agreement by, among other things, the mutual waivers and certifications in this Section 16 .

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Section 17. No Publicity .

(a) None of the Stockholders or the Company shall issue any public announcements or make any published statements regarding this Agreement, or the subject matter hereof, without the prior written consent of the THL Party and the Advent Party; provided , that , this Section 17(a) shall not limit disclosures by any Stockholder if such disclosure is requested or required by applicable law or any governmental entity or self-regulatory organization having jurisdiction over such Stockholder or its Affiliates or any of its respective representatives or advisers, or that such Stockholder deems advisable to provide to such a governmental entity or self-regulatory organization, in each case whether in connection with an audit, examination or otherwise.

(b) The Company shall not, and shall ensure that its Affiliates and its and their respective officers, directors, employees and other representatives do not, without the prior written consent of the applicable Investor Stockholder, (i) use in advertising, publicity or otherwise the name of such Investor Stockholder, or any of its Affiliates, or the name of any member, stockholder, partner, manager or employee of such Investor Stockholder or any of its Affiliates or any trade name, trademark, trade device, logo, service mark, symbol or any abbreviation, contraction or simulation thereof owned or used by such Investor Stockholder or any of its Affiliates, (ii) represent, directly or indirectly, that any product or any service provided by the Company or any Affiliate of the Company has been approved, endorsed, recommended or provided by, or in association with, such Investor Stockholder or any of its Affiliates after the date of this Agreement, or (iii) disclose the fact that such Investor Stockholder is a Stockholder of the Company.

Section 18. Company Logo . The Company hereby grants the Investor Stockholders permission to use the Company’s and its Subsidiaries’ name and logo in marketing materials. The Investor Stockholders, or Affiliates of the Investor Stockholders, as applicable, shall include a trademark attribution notice giving notice of the Company’s ownership of its trademarks in the marketing materials in which the Company’s or any of its Subsidiaries’ name and logo appear.

Section 19. Descriptive Headings . The descriptive headings of this Agreement are inserted for convenience only and do not constitute a part of this Agreement.

Section 20. Conflicting Agreements . Other than with respect to proxies or powers of attorney that one or more of the Investor Stockholders may have granted or grant to an Affiliate of such Investor Stockholder, each Stockholder represents and warrants that such Stockholder has not granted and is not a party to any proxy, voting trust or other agreement which conflicts with any provision of this Agreement, and no holder of Stock shall grant any proxy or become party to any voting trust or other agreement which conflicts with any provision of this Agreement.

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Section 21. Counterparts . This Agreement may be executed in separate counterparts each of which shall be an original and all of which taken together shall constitute one and the same agreement.

[ Remainder of Page Intentionally Left Blank ]

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IN WITNESS WHEREOF, the parties hereto have executed this Stockholders Agreement as of the day and year first written above.


PARTY CITY HOLDCO INC.

By:
Name:
Title:

[SIGNATURE PAGE TO STOCKHOLDERS AGREEMENT]


THE THL PARTY:

THL PC TOPCO, L.P.

By:		THL Equity Advisors VI, LLC,
		its general partner

By:		Thomas H. Lee Partners, L.P.,
		its sole member

By:		Thomas H. Lee Advisors, LLC,
		its general partner

By:		THL Holdco, LLC,
		its managing member

By:
Name:
Title:

[SIGNATURE PAGE TO STOCKHOLDERS AGREEMENT]


THE ADVENT PARTY:

ADVENT-PARTY CITY ACQUISITION LIMITED PARTNERSHIP

By:		Advent-Party City GP, LLC, its general partner

By:
Name:
Title:

[SIGNATURE PAGE TO STOCKHOLDERS AGREEMENT]


MANAGEMENT HOLDER:

CHARLES ARTHUR RITTENBERG 2008 TRUST

By:
Name:
Title:

[SIGNATURE PAGE TO STOCKHOLDERS AGREEMENT]


MANAGEMENT HOLDER:

JACK DOLLIVER RITTENBERG 2013 TRUST

By:
Name:
Title:

[SIGNATURE PAGE TO STOCKHOLDERS AGREEMENT]


MANAGEMENT HOLDER:

THEODORE FREDERICK RITTENBERG 2014 TRUST

By:
Name:
Title:

[SIGNATURE PAGE TO STOCKHOLDERS AGREEMENT]


MANAGEMENT HOLDER:

CRAIG M. RITTENBERG SELF-SETTLED TRUST U/A/D JUNE 28, 2008

By:
Name:
Title:

[SIGNATURE PAGE TO STOCKHOLDERS AGREEMENT]


MANAGEMENT HOLDER:

BJM ² LLC

By:
Name:
Title:

[SIGNATURE PAGE TO STOCKHOLDERS AGREEMENT]


MANAGEMENT HOLDER:

RITTS ENTERPRISES LLC

By:
Name:
Title:

[SIGNATURE PAGE TO STOCKHOLDERS AGREEMENT]


MANAGEMENT HOLDER:

HARRISON FAMILY 2010 TRUST

By:
Name:
Title:

[SIGNATURE PAGE TO STOCKHOLDERS AGREEMENT]

MANAGEMENT HOLDER:

Gregg Melnick

[SIGNATURE PAGE TO STOCKHOLDERS AGREEMENT]

MANAGEMENT HOLDER:

Alice Tang

[SIGNATURE PAGE TO STOCKHOLDERS AGREEMENT]

MANAGEMENT HOLDER:

Diane Spaar

[SIGNATURE PAGE TO STOCKHOLDERS AGREEMENT]


MANAGEMENT HOLDER:

ETHAN REES SPAAR IRREVOCABLE TRUST

By:
Name:
Title:

[SIGNATURE PAGE TO STOCKHOLDERS AGREEMENT]


MANAGEMENT HOLDER:

JULIA ROSE SPAAR IRREVOCABLE TRUST

By:
Name:
Title:

[SIGNATURE PAGE TO STOCKHOLDERS AGREEMENT]


MANAGEMENT HOLDER:

KEITH ALAN SPAAR JR. IRREVOCABLE TRUST

By:
Name:
Title:

[SIGNATURE PAGE TO STOCKHOLDERS AGREEMENT]


MANAGEMENT HOLDER:

WILLA ANNE SPAAR IRREVOCABLE TRUST

By:
Name:
Title:

[SIGNATURE PAGE TO STOCKHOLDERS AGREEMENT]

MANAGEMENT HOLDER:

Steven Skiba

[SIGNATURE PAGE TO STOCKHOLDERS AGREEMENT]

MANAGEMENT HOLDER:

Michael Correale

[SIGNATURE PAGE TO STOCKHOLDERS AGREEMENT]


MANAGEMENT HOLDER:

MELNICK 2008 FAMILY TRUST

By:
Name:
Title:

[SIGNATURE PAGE TO STOCKHOLDERS AGREEMENT]

Exhibit 10.2

INDEMNIFICATION AGREEMENT

This Indemnification Agreement (“ Agreement ”) is made and entered into as of this [ — ] day of [ — ], 2015, by and among Party City Holdco Inc. (the “ Company ”), a Delaware corporation, Party City Holdings Inc., a Delaware corporation (“ Opco ”, and together with the Company, the “ Party City Companies ” and each a “ Party City Company ”), and [ — ] (“ Indemnitee ”).

WHEREAS, in light of the litigation costs and risks to directors and officers resulting from their service to companies, and the desire of the Party City Companies to attract and retain qualified individuals to serve as directors, it is reasonable, prudent and necessary for each of the Party City Companies to indemnify and advance expenses on behalf of its directors and/or officers to the extent permitted by applicable law so that they will serve or continue to serve the Party City Companies free from undue concern regarding such risks;

WHEREAS, the Party City Companies have requested that Indemnitee serve or continue to serve as a director and/or officer of each of the Party City Companies and may have requested or may in the future request that Indemnitee serve one or more Party City Entities (as hereinafter defined) as a director or officer or in other capacities;

WHEREAS, Indemnitee is willing to serve as a director and/or officer of each of the Party City Companies on the condition that Indemnitee be so indemnified; and

WHEREAS, Indemnitee may have certain rights to indemnification, advancement of expenses and/or insurance provided by the Designating Stockholders (as hereinafter defined) (or their affiliates), which Indemnitee, the Party City Companies and the Designating Stockholders (or their affiliates) intend to be secondary to the primary obligation of the Party City Companies to indemnify Indemnitee as provided herein, with the Party City Companies’ acknowledgement of and agreement to the foregoing being a material condition to Indemnitee’s willingness to serve as a director of each of the Party City Companies.

NOW, THEREFORE, in consideration of the premises and the covenants contained herein, the Party City Companies and Indemnitee do hereby covenant and agree as follows:

1. Services by Indemnitee . Indemnitee agrees to serve as a director and/or officer of one or more of the Party City Companies. Indemnitee may at any time and for any reason resign from such position (subject to any contractual obligation under any other agreement or any obligation imposed by operation of law).

2. Indemnification - General . On the terms and subject to the conditions of this Agreement, the Party City Companies shall, to the fullest extent permitted by law, indemnify Indemnitee with respect to, and hold Indemnitee harmless from and against, all losses, liabilities, judgments, fines, penalties, costs, amounts paid in settlement, Expenses (as hereinafter defined) and other amounts that Indemnitee reasonably incurs and that result from, arise in connection with or are by reason of Indemnitee’s Corporate Status (as hereinafter defined) and shall advance Expenses to Indemnitee. The obligations of the Party City Companies under this Agreement (a)

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are joint and several obligations of each Party City Company, (b) shall continue after such time as Indemnitee ceases to serve as a director or officer of the Party City Companies or in any other Corporate Status, and (c) include, without limitation, claims for monetary damages against Indemnitee in respect of any actual or alleged liability or other loss of Indemnitee, to the fullest extent permitted under applicable law (including, if applicable, Section 145 of the Delaware General Corporation Law) as in existence on the date hereof and as amended from time to time.

3. Proceedings Other Than Proceedings by or in the Right of the Party City Companies . If in connection with or by reason of Indemnitee’s Corporate Status Indemnitee was, is, or is threatened to be made, a party to or a participant in any Proceeding (as hereinafter defined) other than a Proceeding by or in the right of any of the Party City Companies to procure a judgment in its favor, the Party City Companies shall, to the fullest extent permitted by law, indemnify Indemnitee with respect to, and hold Indemnitee harmless from and against, all losses, liabilities, judgments, fines, penalties, costs amounts paid in settlement, Expenses and other amounts (including all interest, assessments and other charges paid or payable in connection with or in respect of such amounts paid in settlement) reasonably incurred by Indemnitee or on behalf of Indemnitee in connection with such Proceeding or any claim, issue or matter therein, if Indemnitee acted in good faith and in a manner Indemnitee reasonably believed to be in, or not opposed to, the best interests of the applicable Party City Company and, with respect to any criminal Proceeding, had no reasonable cause to believe Indemnitee’s conduct was unlawful.

4. Proceedings by or in the Right of the Party City Companies . If by reason of Indemnitee’s Corporate Status Indemnitee was, is, or is threatened to be made a party to or a participant in any Proceeding by or in the right of any of the Party City Companies to procure a judgment in its favor, the Party City Companies shall, to the fullest extent permitted by law, indemnify Indemnitee with respect to, and hold Indemnitee harmless from and against, all Expenses reasonably incurred by Indemnitee or on behalf of Indemnitee in connection with such Proceeding if Indemnitee acted in good faith and in a manner Indemnitee reasonably believed to be in, or not opposed to, the best interests of the applicable Party City Company; provided , however , that indemnification against such Expenses shall be made in respect of any claim, issue or matter in such Proceeding as to which Indemnitee shall have been adjudged by a court of competent jurisdiction to be liable to the applicable Party City Company only if (and only to the extent that) the Court of Chancery of the State of Delaware or other court in which such Proceeding shall have been brought or is pending (the “ Trial Court ”) shall determine that despite such adjudication of liability and in light of all circumstances such indemnification may be made.

5. Mandatory Indemnification in Case of Successful Defense . Notwithstanding any other provision of this Agreement, to the extent that Indemnitee is, by reason of Indemnitee’s Corporate Status, a party to (or a participant in) and is successful, on the merits or otherwise, in defense of any Proceeding (including, without limitation, any Proceeding brought by or in the right of any Party City Company), the Party City Companies shall, to the fullest extent permitted by law, indemnify Indemnitee with respect to, and hold Indemnitee harmless from and against, all Expenses reasonably incurred by Indemnitee or on behalf of Indemnitee in connection therewith. If Indemnitee is not wholly successful in defense of such Proceeding but is successful, on the merits or otherwise, as to one or more but less than all claims, issues or

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matters in such Proceeding, the Party City Companies shall, to the fullest extent permitted by law, indemnify Indemnitee against all Expenses reasonably incurred by Indemnitee or on behalf of Indemnitee in connection with each successfully resolved claim, issue or matter. For purposes of this Section 5 and without limitation, the termination of any claim, issue or matter in such a Proceeding by dismissal, with or without prejudice, on substantive or procedural grounds, shall be deemed to be a successful result as to such claim, issue or matter.

6. Partial Indemnification . If Indemnitee is entitled under any provision of this Agreement or otherwise to indemnification by any of the Party City Companies for some or a portion of the Expenses, liabilities, judgments, penalties, fines and amounts paid in settlement (including all interest, assessments and other charges paid or payable in connection with or in respect of such liabilities, judgments, penalties, fines and amounts paid in settlement) incurred by Indemnitee or on behalf of Indemnitee in connection with a Proceeding or any claim, issue or matter therein, in whole or in part, the Party City Companies shall, to the fullest extent permitted by law, indemnify Indemnitee to the fullest extent to which Indemnitee is entitled to such indemnification.

7. Indemnification for Additional Expenses Incurred to Secure Recovery or as Witness .

(a) The Party City Companies shall, to the fullest extent permitted by law, indemnify Indemnitee with respect to, and hold Indemnitee harmless from and against, any and all Expenses and, if requested by Indemnitee, shall advance on an as-incurred basis (as provided in Section 8 of this Agreement) such Expenses to Indemnitee, which are reasonably incurred by Indemnitee in connection with any action or proceeding or part thereof brought by Indemnitee for (i) indemnification or advance payment of Expenses by the Party City Companies under this Agreement, any other agreement, the Certificate of Incorporation or By-laws of the applicable Party City Company as now or hereafter in effect; or (ii) recovery under any director and officer liability insurance policies maintained by any Party City Entity.

(b) To the extent that Indemnitee is, by reason of Indemnitee’s Corporate Status, a witness (or is forced or asked to respond to discovery requests) in any Proceeding to which Indemnitee is not a party, the Party City Companies shall, to the fullest extent permitted by law, indemnify Indemnitee with respect to, and hold Indemnitee harmless from and against, and the Party City Companies will advance on an as-incurred basis (as provided in Section 8 of this Agreement), all Expenses reasonably incurred by Indemnitee or on behalf of Indemnitee in connection therewith.

8. Advancement of Expenses . The Party City Companies shall, to the fullest extent permitted by law, pay on a current and as-incurred basis all Expenses incurred by Indemnitee in connection with any Proceeding in any way connected with, resulting from or relating to Indemnitee’s Corporate Status. Such Expenses shall be paid in advance of the final disposition of such Proceeding, without regard to whether Indemnitee will ultimately be entitled to be indemnified for such Expenses and without regard to whether an Adverse Determination has been or may be made, except as contemplated by the last sentence of Section 9(f) of this Agreement. Upon submission of a request for advancement of Expenses pursuant to Section 9(c)

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of this Agreement, Indemnitee shall be entitled to advancement of Expenses as provided in this Section 8 , and such advancement of Expenses shall continue until such time (if any) as there is a final non-appealable judicial determination that Indemnitee is not entitled to indemnification.

9. Indemnification Procedures .

(a) Notice of Proceeding . Indemnitee agrees to notify the Party City Companies promptly upon being served with any summons, citation, subpoena, complaint, indictment, information or other document relating to any Proceeding or matter which may be subject to indemnification or advancement of Expenses hereunder. Any failure by Indemnitee to notify any Party City Company will relieve the Party City Companies of its advancement or indemnification obligations under this Agreement only to the extent the Party City Companies can establish that such omission to notify resulted in actual prejudice to it, and the omission to notify such Party City Companies will, in any event, not relieve any Party City Company from any liability which it may have to indemnify Indemnitee otherwise than under this Agreement. If, at the time of receipt of any such notice, the Party City Companies have director and officer insurance policies in effect, the Party City Companies will promptly notify the relevant insurers in accordance with the procedures and requirements of such policies.

(b) Defense; Settlement . Indemnitee shall have the sole right and obligation to control the defense or conduct of any claim or Proceeding with respect to Indemnitee. The Party City Companies shall not, without the prior written consent of Indemnitee, which may be provided or withheld in Indemnitee’s sole discretion, effect any settlement of any Proceeding against Indemnitee or which could have been brought against Indemnitee or which potentially or actually imposes any cost, liability, exposure or burden on Indemnitee unless such settlement solely involves the payment of money or performance of any obligation by persons other than Indemnitee and includes an unconditional release of Indemnitee from all liability on any matters that are the subject of such Proceeding and an acknowledgment that Indemnitee denies all wrongdoing in connection with such matters. The Party City Companies shall not be obligated to indemnify Indemnitee against amounts paid in settlement of a Proceeding against Indemnitee if such settlement is effected by Indemnitee without the Party City Companies’ prior written consent, which consent shall not be unreasonably withheld.

(i) To obtain advancement of Expenses under this Agreement, Indemnitee shall submit to the Party City Companies a written request therefor, together with such invoices or other supporting information as may be reasonably requested by the Party City Companies and reasonably available to Indemnitee, and, only to the extent required by applicable law which cannot be waived, a written undertaking to repay amounts advanced. Any such repayment obligation shall be unsecured and shall not bear interest. Advancement shall be made without regard to Indemnitee’s ability to repay amounts advanced. The Party City Companies shall make advance payment of Expenses to Indemnitee no later than twenty (20) days after receipt of the written request for advancement (and each subsequent request for advancement) by Indemnitee. If, at the time of receipt of any such written request for advancement of Expenses, the Party City Companies have director and officer insurance policies

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in effect, the Party City Companies will promptly notify the relevant insurers in accordance with the procedures and requirements of such policies. The Party City Companies shall thereafter keep such director and officer insurers informed of the status of the Proceeding or other claim, as appropriate to secure coverage of Indemnitee for such claim.

(ii) To obtain indemnification under this Agreement, at any time after submission of a request for advancement pursuant to Section 9(c)(i) of this Agreement, Indemnitee may submit a written request for indemnification hereunder. The time at which Indemnitee submits a written request for indemnification shall be determined by the Indemnitee in the Indemnitee’s sole discretion. Once Indemnitee submits such a written request for indemnification (and only at such time that Indemnitee submits such a written request for indemnification), a Determination shall thereafter be made, as provided in and only to the extent required by Section 9(d) of this Agreement. In no event shall a Determination be made, or be required to be made, as a condition to or otherwise in connection with any advancement of Expenses pursuant to Section 8 and Section 9(c)(i) of this Agreement. If, at the time of receipt of any such request for indemnification, the Party City Companies have director and officer insurance policies in effect, the Party City Companies will promptly notify the relevant insurers in accordance with the procedures and requirements of such policies.

(d) Determination . The Party City Companies agree that Indemnitee shall be indemnified to the fullest extent permitted by law and that no Determination shall be required in connection with such indemnification unless specifically required by applicable law which cannot be waived. In no event shall a Determination be required in connection with indemnification for Expenses incurred as a witness pursuant to Section 7 of this Agreement or incurred in connection with any Proceeding or portion thereof with respect to which Indemnitee has been successful on the merits or otherwise. Any decision that a Determination is required by law in connection with any other indemnification of Indemnitee, and any such Determination, shall be made within thirty (30) days after receipt of Indemnitee’s written request for indemnification pursuant to Section 9(d)(ii) and such Determination shall be made either (i) by the Disinterested Directors, even though less than a quorum, so long as Indemnitee does not request that such Determination be made by Independent Counsel, or (ii) if so requested by Indemnitee, in Indemnitee’s sole discretion, by Independent Counsel in a written opinion to the Party City Companies and Indemnitee. If a Determination is made that Indemnitee is entitled to indemnification, payment to Indemnitee shall be made within twenty (20) days after such Determination. Indemnitee shall reasonably cooperate with the person, persons or entity making such determination with respect to Indemnitee’s entitlement to indemnification, including providing to such person, persons or entity upon reasonable advance request any documentation or information which is not privileged or otherwise protected from disclosure and which is reasonably available to Indemnitee and reasonably necessary to such Determination. Any Expenses incurred by Indemnitee in so cooperating with the Disinterested Directors or Independent Counsel, as the case may be, making such determination shall be advanced and borne by the Party City Companies (irrespective of the Determination as to Indemnitee’s entitlement to indemnification) and each Party City Company is liable to indemnify and hold Indemnitee harmless therefrom.

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(e) Independent Counsel . In the event Indemnitee requests that the Determination be made by Independent Counsel pursuant to Section 9(d) of this Agreement, the Independent Counsel shall be selected as provided in this Section 9(e) . The Independent Counsel shall be selected by Indemnitee (unless Indemnitee shall request that such selection by made by the Board of Directors, in which event the Board of Directors shall make such selection on behalf of the Party City Companies, subject to the remaining provisions of this Section 9(e) ), and Indemnitee or the Party City Companies, as the case may be, shall give written notice to the other, advising the Party City Companies or Indemnitee of the identity of the Independent Counsel so selected. The Party City Companies or Indemnitee, as the case may be, may, within ten (10) days after such written notice of selection shall have been received, deliver to Indemnitee or the Company, as the case may be, a written objection to such selection; provided , however , that such objection may be asserted only on the ground that the Independent Counsel so selected does not meet the requirements of “Independent Counsel” as defined in Section 14 of this Agreement, and the objection shall set forth with particularity the factual basis of such assertion. Absent a proper and timely objection, the person so selected shall act as Independent Counsel. If a written objection is so made and substantiated, the Independent Counsel so selected may not serve as Independent Counsel unless and until such objection is withdrawn or a court of competent jurisdiction has determined that such objection is without merit. If, within twenty (20) days after submission by Indemnitee of a written request for indemnification pursuant to Section 9(c)(ii) of this Agreement, no Independent Counsel shall have been selected and not objected to, either the Party City Companies or Indemnitee may petition a court of competent jurisdiction for resolution of any objection which shall have been made by the Party City Companies or Indemnitee to the other’s selection of Independent Counsel and/or for the appointment as Independent Counsel of a person selected by the court or by such other person as the court shall designate, and the person with respect to whom all objections are so resolved or the person so appointed shall act as Independent Counsel under Section 9(d) of this Agreement. Upon the due commencement of any judicial proceeding or arbitration pursuant to Section 9(f) of this Agreement, Independent Counsel shall be discharged and relieved of any further responsibility in such capacity (subject to the applicable standards of professional conduct then prevailing). Any expenses incurred by Independent Counsel shall be borne by the Party City Companies (irrespective of the Determination of Indemnitee’s entitlement to indemnification) and not by Indemnitee.

(f) Consequences of Determination; Remedies of Indemnitee . The Party City Companies shall be bound by and shall have no right to challenge a Favorable Determination. If an Adverse Determination is made, or if for any other reason the Party City Companies do not make timely indemnification payments or advances of Expenses, Indemnitee shall have the right to commence a Proceeding before a court of competent jurisdiction to challenge such Adverse Determination and/or to require the Party City Companies to make such payments or advances (and the Company shall have the right to defend its position in such Proceeding and to appeal any adverse judgment in such Proceeding). Indemnitee shall be entitled to be indemnified for all Expenses incurred in connection with such a Proceeding and to have such Expenses advanced by the Company in accordance with Section 8 of this Agreement. If Indemnitee fails to challenge an Adverse Determination, or if Indemnitee challenges an Adverse Determination and such Adverse Determination has been upheld by a final judgment of a court of competent jurisdiction from which no appeal can be taken, then, to the extent and only to the extent required by such Adverse Determination or final judgment, the Party City Companies shall not be obligated to indemnify or advance Expenses to Indemnitee under this Agreement.

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(g) Presumptions; Burden and Standard of Proof . The parties intend and agree that, to the extent permitted by law, in connection with any Determination with respect to Indemnitee’s entitlement to indemnification hereunder by any person, including a court:

(i) it will be presumed that Indemnitee is entitled to indemnification under this Agreement, and the Party City Entities or any other person or entity challenging such right will have the burden of proof to overcome that presumption in connection with the making by any person, persons or entity of any determination contrary to that presumption;

(ii) the termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that Indemnitee did not act in good faith and in a manner which Indemnitee reasonably believed to be in or not opposed to the best interests of the applicable Party City Entity, and, with respect to any criminal action or proceeding, had reasonable cause to believe that Indemnitee’s conduct was unlawful;

(iii) Indemnitee will be deemed to have acted in good faith if Indemnitee’s action is based on the records or books of account of the applicable Party City Entity, including financial statements, or on information supplied to Indemnitee by the officers, employees, or committees of the board of directors of the applicable Party City Entity, or on the advice of legal counsel for the applicable Party City Entity or on information or records given in reports made to the applicable Party City Entity by an independent certified public accountant or by an appraiser or other expert or advisor selected by the applicable Party City Entity; and

(iv) the knowledge and/or actions, or failure to act, of any director, officer, agent or employee of any of the Party City Entities or relevant enterprises will not be imputed to Indemnitee in a manner that limits or otherwise adversely affects Indemnitee’s rights hereunder.

The provisions of this Section 9(g) shall not be deemed to be exclusive or to limit in any way the other circumstances in which Indemnitee may be deemed to have met the applicable standard of conduct set forth in this Agreement.

10. Insurance; Subrogation; Other Rights of Recovery, etc .

(a) Each Party City Company shall use its reasonable best efforts to purchase and maintain a policy or policies of insurance with reputable insurance companies with A.M. Best ratings of “A” or better, providing Indemnitee with coverage for any liability asserted against, and incurred by, Indemnitee or on Indemnitee’s behalf by reason of Indemnitee’s Corporate Status, or arising out of Indemnitee’s status as such, whether or not any such Party City Company would have the power to indemnify Indemnitee against such liability. Such insurance policies shall have coverage terms and policy limits at least as favorable to Indemnitee as the insurance coverage provided to any other director or officer of the Party City Companies. If an Party City Company has such insurance in effect at the time it receives from Indemnitee any

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notice of the commencement of an action, suit, proceeding or other claim, such Party City Company shall give prompt notice of the commencement of such action, suit, proceeding or other claim to the insurers in accordance with the procedures set forth in the policy. The Party City Company shall thereafter take all necessary or desirable action to cause such insurers to pay, on behalf of Indemnitee, all amounts payable as a result of such action, suit, proceeding or other claim in accordance with the terms of such policy. The Party City Company shall continue to provide such insurance coverage to Indemnitee for a period of at least six (6) years after Indemnitee ceases to serve as a director or officer or any other present Corporate Status.

(b) In the event of any payment by any Party City Company under this Agreement, such Party City Company shall be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee against any other Party City Entity, and Indemnitee hereby agrees, as a condition to obtaining any advancement or indemnification from the Party City Companies, to assign to such Party City Company all of Indemnitee’s rights to obtain from such other Party City Entity such amounts to the extent that they have been paid by such Party City Company to or for the benefit of Indemnitee as advancement or indemnification under this Agreement and are adequate to indemnify Indemnitee with respect to the costs, Expenses or other items to the full extent that Indemnitee is entitled to indemnification or other payment hereunder; and Indemnitee will (upon request by the Party City Companies) execute all papers required and take all action necessary to secure such rights, including execution of such documents as are necessary to enable such Party City Company to bring suit or enforce such rights.

(c) Each of the Party City Companies hereby unconditionally and irrevocably waives, relinquishes and releases, and covenants and agrees not to exercise (and to cause each of the other Party City Entities not to exercise), any rights that such Party City Company may now have or hereafter acquire against any Designating Stockholder (or former Designating Stockholder) or Indemnitee that arise from or relate to the existence, payment, performance or enforcement of the Party City Companies’ obligations under this Agreement or under any other indemnification agreement (whether pursuant to contract, by-laws or charter) with any person or entity, including, without limitation, any right of subrogation (whether pursuant to contract or common law), reimbursement, exoneration, contribution or indemnification, or to be held harmless, and any right to participate in any claim or remedy of Indemnitee against any Designating Stockholder (or former Designating Stockholder) or Indemnitee, whether or not such claim, remedy or right arises in equity or under contract, statute or common law, including, without limitation, the right to take or receive from any Designating Stockholder (or former Designating Stockholder) or Indemnitee, directly or indirectly, in cash or other property or by set-off or in any other manner, payment or security on account of such claim, remedy or right.

(d) The Party City Companies shall not be liable to pay or advance to Indemnitee any amounts otherwise indemnifiable under this Agreement or under any other indemnification agreement if and to the extent that Indemnitee has otherwise actually received payment under any insurance policy, contract, agreement or otherwise. Notwithstanding the foregoing, (i) the Party City Companies hereby agree that they are the indemnitors of first resort under this Agreement and any obligations they have to provide advancement and/or indemnification to Indemnitee (under this Agreement or otherwise) are primary, and any obligation of any Designating Stockholder (or any affiliate thereof, other than an Party City Entity), or any

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obligation of any insurer providing insurance coverage under any policy purchased or maintained by any Designating Stockholder (or by any affiliate thereof, other than an Party City Entity) or of any insurer providing insurance coverage to Indemnitee under any personal umbrella liability insurance policy, to provide advancement, indemnification or insurance coverage for the same amounts incurred by Indemnitee are secondary, and (ii) if any Designating Stockholder (or any affiliate thereof other than a Party City Entity) pays or causes to be paid, for any reason, any amounts otherwise indemnifiable hereunder or under any other indemnification agreement (whether pursuant to contract, by-laws or charter) with Indemnitee, then (x) such Designating Stockholder (or such affiliate, as the case may be) shall be fully subrogated to all rights of Indemnitee with respect to such payment and (y) the Party City Companies shall fully indemnify, reimburse and hold harmless such Designating Stockholder (or such other affiliate) for all such payments actually made by such Designating Stockholder (or such other affiliate).

(e) The Party City Companies’ obligation to indemnify or advance Expenses hereunder to Indemnitee in respect of or relating to Indemnitee’s service at the request of any of the Party City Companies as a director, officer, employee, fiduciary, representative, partner or agent of any other Party City Entity shall be reduced by any amount Indemnitee has actually received as payment of indemnification or advancement of Expenses from such other Party City Entity, except to the extent that such indemnification payments and advance payment of Expenses when taken together with any such amount actually received from other Party City Entities or under director and officer insurance policies maintained by one or more Party City Entities are inadequate to fully pay all costs, Expenses or other items to the full extent that Indemnitee is otherwise entitled to indemnification or other payment hereunder.

(f) Except for the rights set forth in Sections 10(c) , 10(d) and 10(e) of this Agreement, the rights to indemnification and advancement of Expenses as provided by this Agreement shall not be deemed exclusive of any other rights to which Indemnitee may at any time, whenever conferred or arising, be entitled under applicable law, under the Party City Entities’ Certificates of Incorporation or By-Laws, or under any other agreement, vote of stockholders or resolution of directors of any Party City Entity, or otherwise. Indemnitee’s rights under this Agreement are present contractual rights that fully vest upon Indemnitee’s first service as a director or officer of any of the Party City Companies. The Parties hereby agree that Sections 10(c) , 10(d) and 10(e) of this Agreement shall be deemed exclusive and shall be deemed to modify, amend and clarify any right to indemnification or advancement provided to Indemnitee under any other contract, agreement or document with any Party City Entity.

(g) No amendment, alteration or repeal of this Agreement or of any provision hereof shall limit or restrict any right of Indemnitee under this Agreement in respect of any action taken or omitted by such Indemnitee in Indemnitee’s Corporate Status prior to such amendment, alteration or repeal. To the extent that a change in the General Corporation Law of the State of Delaware (or other applicable law), whether by statute or judicial decision, permits greater indemnification or advancement of Expenses than would be afforded currently under the Party City Entities’ Certificates of Incorporation or By-Laws and this Agreement, it is the intent of the parties hereto that Indemnitee enjoy by this Agreement the greater benefits so afforded by such change. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other right or remedy.

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11. Employment Rights; Successors; Third Party Beneficiaries .

(a) This Agreement shall not be deemed an employment contract between the Party City Companies and Indemnitee. This Agreement shall continue in force as provided above after Indemnitee has ceased to serve as a director and/or officer of the Party City Companies or any other Corporate Status.

(b) This Agreement shall be binding upon each of the Party City Companies and their successors and assigns and shall inure to the benefit of Indemnitee and Indemnitee’s heirs, executors and administrators.

(c) The Designating Stockholders are express third party beneficiaries of this Agreement, are entitled to rely upon this Agreement, and may specifically enforce the Party City Companies’ obligations hereunder (including but not limited to the obligations specified in Section 10 of this Agreement) as though a party hereunder.

12. Severability . If any provision or provisions of this Agreement shall be held to be invalid, illegal or unenforceable for any reason whatsoever: (a) the validity, legality and enforceability of the remaining provisions of this Agreement (including without limitation, each portion of any Section of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that is not itself invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby; (b) such provision or provisions shall be deemed reformed to the extent necessary to conform to applicable law and to give the maximum effect to the intent of the parties hereto; and (c) to the fullest extent possible, the provisions of this Agreement (including, without limitation, each portion of any Section of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that is not itself invalid, illegal or unenforceable) shall be construed so as to give effect to the intent manifested thereby.

13. Exception to Right of Indemnification or Advancement of Expenses . Notwithstanding any other provision of this Agreement and except as provided in Section 7(a) of this Agreement or as may otherwise be agreed by any Party City Company, Indemnitee shall not be entitled to indemnification or advancement of Expenses under this Agreement with respect to any Proceeding brought by Indemnitee (other than a Proceeding by Indemnitee (i) by way of defense or counterclaim, (ii) to enforce Indemnitee’s rights under this Agreement or (iii) to enforce any other rights of Indemnitee to indemnification, advancement or contribution from the Party City Companies under any other contract, by-laws or charter or under statute or other law, including any rights under Section 145 of the Delaware General Corporation Law), unless the bringing of such Proceeding or making of such claim shall have been approved by the Board of Directors of the applicable Party City Company.

14. Definitions . For purposes of this Agreement:

(a) “ Board of Directors ” means the board of directors of the Company.

(b) “ Certificate of Incorporation ” means, with respect to any entity, (i) in the case of the Company, its certificate of incorporation, (ii) in the case of Opco, its certificate of incorporation, and (iii) in the case of any other entity, its certificate of incorporation, articles of incorporation or similar constituent document.

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(c) “ Corporate Status ” describes the status of a person by reason of such person’s past, present or future service as a director or officer of any of the Party City Companies (including, without limitation, one who serves at the request of any of the Party City Companies as a director, officer, employee, fiduciary or agent of any other Party City Entity).

(d) “ Designating Stockholder ” means Thomas H. Lee Partners, L.P. and Advent International Corporation, in each case so long as an individual designated (directly or indirectly) by the Designating Stockholder, or any of its affiliates serves as a director of any Party City Entity.

(e) “ Determination ” means a determination that either (x) there is a reasonable basis for the conclusion that indemnification of Indemnitee is proper in the circumstances because Indemnitee met a particular standard of conduct (a “ Favorable Determination ”) or (y) there is no reasonable basis for the conclusion that indemnification of Indemnitee is proper in the circumstances because Indemnitee met a particular standard of conduct (an “ Adverse Determination ”). An Adverse Determination shall include the decision that a Determination was required in connection with indemnification and the decision as to the applicable standard of conduct.

(f) “ Disinterested Director ” means director of the Company who is not and was not a party to the Proceeding in respect of which indemnification is sought by Indemnitee.

(g) “ Expenses ” shall mean all reasonable direct and indirect costs, fees and expenses of any type or nature whatsoever and shall specifically include, without limitation, all reasonable attorneys’ fees, retainers, court costs, transcript costs, fees and costs of experts, witness fees, travel expenses, duplicating costs, printing and binding costs, telephone charges, postage, delivery service fees, and all other disbursements or expenses of the types customarily incurred in connection with prosecuting, defending, preparing to prosecute or defend, investigating, being or preparing to be a witness, in, or otherwise participating in, a Proceeding, including, but not limited to, the premium for appeal bonds, attachment bonds or similar bonds and all interest, assessments and other charges paid or payable in connection with or in respect of any such Expenses, and shall also specifically include, without limitation, all reasonable attorneys’ fees and all other expenses incurred by or on behalf of Indemnitee in connection with preparing and submitting any requests or statements for indemnification, advancement, contribution or any other right provided by this Agreement. Expenses, however, shall not include amounts paid in settlement by Indemnitee or the amounts of judgments or fines against Indemnitee.

(h) “ Independent Counsel ” means, at any time, any law firm, or a member of a law firm, that (a) is experienced in matters of corporation law and (b) is not, at such time, or has not been in the five years prior to such time, retained to represent: (i) any Party City Entity or Indemnitee in any matter material to either such party (other than with respect to matters concerning Indemnitee under this Agreement, or of other indemnities under similar indemnification agreements), or (ii) any other party to the Proceeding giving rise to a claim for

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indemnification hereunder. Notwithstanding the foregoing, the term “Independent Counsel” shall not include any person who, under the applicable standards of professional conduct then prevailing, would have a conflict of interest in representing either the Party City Companies or Indemnitee in an action to determine Indemnitee’s rights under this Agreement. The Party City Companies agree to pay the reasonable fees and expenses of the Independent Counsel referred to above and to fully indemnify such counsel against any and all Expenses, claims, liabilities and damages arising out of or relating to this Agreement or its engagement pursuant hereto and to be jointly and severally liable therefor.

(i) “ Proceeding ” includes any actual, threatened, pending or completed action, suit, arbitration, alternate dispute resolution mechanism, investigation, inquiry, administrative hearing or any other actual, threatened, pending or completed proceeding, whether brought by or in the right of any Party City Company or otherwise and whether civil, criminal, administrative or investigative in nature, in which Indemnitee was, is, may be or will be involved as a party, witness or otherwise, by reason of Indemnitee’s Corporate Status or by reason of any action taken by Indemnitee or of any inaction on Indemnitee’s part while acting as director or officer of any Party City Entity (in each case whether or not he is acting or serving in any such capacity or has such status at the time any liability or expense is incurred for which indemnification or advancement of Expenses can be provided under this Agreement).

(j) “ Party City Entity ” means any Party City Company, any of their respective subsidiaries and any other corporation, partnership, limited liability company, joint venture, trust, employee benefit plan or other enterprise with respect to which Indemnitee serves as a director, officer, employee, partner, representative, fiduciary or agent, or in any similar capacity, at the request of any Party City Company.

(k) Construction . Whenever required by the context, as used in this Agreement the singular number shall include the plural, the plural shall include the singular, and all words herein in any gender shall be deemed to include (as appropriate) the masculine, feminine and neuter genders.

15. Reliance; Integration .

(a) The Party City Companies expressly confirm and agree that they have entered into this Agreement and assumed the obligations imposed on each of them hereby in order to induce Indemnitee to serve as a director and/or officer of the Party City Companies, and the Party City Companies acknowledge that Indemnitee is relying upon this Agreement in serving as a director and/or officer of the Party City Companies.

16. Modification and Waiver . No supplement, modification or amendment of this Agreement shall be binding unless executed in a writing identified as such by both of the parties hereto. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provisions hereof (whether or not similar) nor shall such waiver constitute a continuing waiver.

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17. Notice Mechanics . All notices, requests, demands or other communications hereunder shall be in writing and shall be deemed to have been duly given if (i) delivered by hand and receipted for by the party to whom said notice or other communication shall have been direct, or (ii) mailed by certified or registered mail with postage prepaid, on the third business day after the date on which it is so mailed:

(a)

If to Indemnitee to:

with a copy to:

Ropes & Gray LLP

Prudential Tower, 800 Boylston Street

Boston, MA 02119-3600

Attn: Julie H. Jones

(b)

If to any Party City Company, to:

Party City Holdco Inc.

80 Grasslands Road

Elmsford, NY 10523

Attn: General Counsel

with a copy to:

Ropes & Gray LLP

Prudential Tower, 800 Boylston Street

Boston, MA 02119-3600

Attn: Julie H. Jones

or to such other address as may have been furnished (in the manner prescribed above) as follows: (a) in the case of a change in address for notices to Indemnitee, furnished by Indemnitee to the Party City Companies and (b) in the case of a change in address for notices to any Party City Company, furnished by the Party City Companies to Indemnitee.

18. Contribution . To the fullest extent permissible under applicable law, if the indemnification provided for in this Agreement is unavailable to Indemnitee for any reason whatsoever, the Party City Companies, in lieu of indemnifying Indemnitee, shall contribute to the amount incurred by Indemnitee, whether for judgments, fines, penalties, excise taxes, amounts paid or to be paid in settlement and/or for reasonably incurred Expenses, in connection with any claim relating to an indemnifiable event under this Agreement, in such proportion as is deemed fair and reasonable in light of all of the circumstances of such Proceeding in order to reflect (i) the relative benefits received by the Party City Companies and Indemnitee as a result of the event(s) and/or transaction(s) giving cause to such Proceeding; and/or (ii) the relative fault of the Party City Companies (and their other directors, officers, employees and agents) and Indemnitee in connection with such event(s) and/or transaction(s).

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19. Governing Law; Submission to Jurisdiction; Appointment of Agent for Service of Process . This Agreement and the legal relations among the parties shall, to the fullest extent permitted by law, be governed by, and construed and enforced in accordance with, the laws of the State of Delaware, without regard to its conflict of laws rules. The Party City Companies and Indemnitee hereby irrevocably and unconditionally (i) agree that any action or proceeding arising out of or in connection with this Agreement shall be brought only in the Trial Court, and not in any other state or federal court in the United States of America or any court in any other country, (ii) consent to submit to the exclusive jurisdiction of the Trial Court for purposes of any action or proceeding arising out of or in connection with this Agreement, (iii) waive any objection to the laying of venue of any such action or proceeding in the Trial Court, and (iv) waive, and agree not to plead or to make, any claim that any such action or proceeding brought in the Trial Court has been brought in an improper or otherwise inconvenient forum.

20. Headings . The headings of the paragraphs of this Agreement are inserted for convenience only and shall not be deemed to constitute part of this Agreement or to affect the construction thereof.

21. Counterparts . This Agreement may be executed in one or more counterparts, each of which shall for all purposes be deemed to be an original but all of which together shall constitute one and the same Agreement.

[Remainder of Page Intentionally Blank]

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the day and year first above written.


Company:	Party City Holdco Inc.

	By:
	Name:
	Title:

Opco:	Party City Holdings Inc.

	By:
	Name:
	Title:

Indemnitee:
	Name:	[ ]

[Signature Page to Indemnification Agreement]

Exhibit 10.5

Execution Version

PARTY CITY HOLDCO INC.

80 Grasslands Road

Elmsford, New York 10523

March 24, 2015

Dear Mike:

This letter will confirm our understanding regarding the terms of your continued employment as the Chief Financial Officer of Party City Holdings Inc. (the “ Company ” ) and Party City Holdco, Inc. ( “ Holdco ” ).

1. Annual Base Salary . Your annual base salary is $400,000, as may be adjusted from time to time by the board of directors of Holdco.

2. Annual Bonus . You will be eligible for an annual cash bonus (the “ Annual Bonus ”) consistent with the Company’s bonus plan for key executives as in effect from time to time (the “ Bonus Plan ”) with a target amount equal to 50% of your annual base salary and with the actual amount of the Annual Bonus, if any, to be determined by the board of directors of Holdco (or the compensation committee thereof) in accordance with the Bonus Plan. The Annual Bonus, if any, shall be paid no later than two and one-half months following the end of the calendar year to which such Annual Bonus corresponds, subject to your continued employment through the end of the calendar year to which such Annual Bonus corresponds.

3. Severance .

(a) If your employment with the Company and Holdco is terminated by the Company without Cause (as defined below), subject to your signing within 45 days of the date of your termination (and not subsequently revoking) an effective general release of claims (the “ Release ”) in the form attached hereto and your continued compliance with the requirements of Section 5 below, the Company will pay you: (i) (A) an amount of cash equal to your annual base salary as of the date of such termination, and (B) to the extent permitted under applicable law without penalty to the Company, an amount in cash that is sufficient on an after-tax basis to reimburse you for the portion of your COBRA premiums that is equal to the employer contributions made on your behalf as of immediately prior to such termination under the Company’s group health plans, which, in each case, shall be paid in equal installments in accordance with the Company’s regular payroll schedule over the one-year period commencing on the date of such termination, with the first payment to be paid in arrears on the 60 ^th day following such date of termination, and (ii) the Annual Bonus you would have received based on actual performance for the Company’s fiscal year in which such termination occurs, which shall be paid to you within the first two and one-half months following the end of the calendar year to which such Annual Bonus corresponds.

(b) If your employment with the Company and Holdco terminates due to your death or the Company terminates your employment due to your Permanent Disability (as defined below), the Company will pay you: (i) the Annual Bonus you would have received based on actual performance for the Company’s fiscal year in which such termination occurs, multiplied by (ii) a fraction, the numerator of which is the number of days in the applicable fiscal year during which you were employed by the Company prior to your death or the date

of termination of your employment due to Permanent Disability, as applicable, and the denominator of which is 365. Any amount payable to you under this Section 3(b) shall be paid to you within the first two and one-half months following the end of the calendar year to which such Annual Bonus corresponds. Notwithstanding anything to the contrary set forth herein, you shall not be entitled any payment pursuant to this Section 3(b) unless you (or your beneficiary previously designated in writing to the Company or, if no such beneficiary has been so designated, your estate, as applicable) have, at the written request of the Company or Holdco, executed the Release (which such form may be modified by the Company to the extent necessary to reflect execution by a person other than you) no later than forty-five (45) days following the date of termination (which period shall be sixty-five (65) days following the date of termination in the case of a termination of your employment due to your death) and shall not have revoked such release in accordance with its terms.

(c) “ Cause ” means (1) your conviction by a court of competent jurisdiction of a felony (excluding felonies under the Vehicle and Traffic Code of the State of New York or any similar law of another state within the United States of America); (2) any act of intentional fraud in connection with your employment with the Company; (3) any act of gross negligence or willful misconduct with respect to your employment with the Company and (4) any act of willful disobedience in violation of specific reasonable directions of the board of directors of Holdco or the Chief Executive Officer of the Company and/or Holdco consistent with your duties as the Chief Financial Officer of the Company and Holdco.

(d) “ Permanent Disability ” means that you (i) are unable to perform the duties of your employment by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months; (ii) are, by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months, receiving income replacement benefits for a period of not less than three months under an accident and health plan covering employees of the Company, or (iii) have been determined to be totally disabled by the Social Security Administration.

4. Term . This agreement will remain in effect for so long as you are employed by the Company or Holdco, unless earlier terminated by the mutual consent of you and the Company and Holdco.

5. Confidential Information . You shall hold in a fiduciary capacity for the benefit of the Company and Holdco all secret or confidential information, knowledge or data relating to the Company, Holdco or any company affiliated with the Company or Holdco and their respective businesses that you obtain during your employment by the Company and Holdco (whether before, during or after such employment period) and that is not public knowledge (other than as a result of your violation of this Section 5) (“ Confidential Information ”). You shall not communicate, divulge or disseminate Confidential Information at any time during or after your employment with the Company and Holdco, except with the prior written consent of the Company or as otherwise required by law. Promptly following your termination of employment, you shall return to the Company all property of the Company, Holdco and their respective subsidiaries and affiliates, and all copies thereof, in your possession or under your control, including, without limitation, all Confidential Information in whatever media such Confidential Information is maintained.

6. Certain Delayed Payments . If any payment or benefit hereunder constituting “nonqualified deferred compensation” subject to Section 409A of the Internal Revenue Code of 1986, as amended (“ Section 409A ”) would be subject to subsection (a)(2)(B)(i) of Section 409A (relating to payments made to “specified employees” of publicly-traded companies upon separation from service), any such payment or benefit to which you would otherwise be entitled during the six (6) month period following your separation from service will instead be provided or paid without interest on the first business day following the expiration of such six (6) month period, or if earlier, the date of your death. The term “specified employee” means an individual determined by Holdco to be a specified employee under Treasury regulation Section 1.409A-1(i).

7. Miscellaneous .

(a) This agreement is personal to you and shall not be assignable by you. This agreement shall inure to the benefit of and be enforceable by your legal representatives and heirs and successors. This agreement shall inure to the benefit of and be binding upon the Company and Holdco and their successors and assigns.

(b) Notwithstanding any other provision of this agreement, the Company and Holdco may withhold from amounts payable under this agreement all taxes that are required to be withheld by applicable laws or regulations.

(c) You acknowledge and agree that this agreement, together with the Exhibit hereto, supersedes all other agreements and understandings, both written and oral, between you and the Company, Holdco and their affiliates with respect to the subject matter hereof, including, without limitation, the letter agreement to you from Amscan Inc. dated April 28, 1997; provided , however , that this agreement shall not supersede any agreement with the Company, Holdco or any affiliate of either relating to confidentiality or any other restrictive covenant. This agreement may be executed in counterparts, each of which shall be deemed to be an original, but all of which shall together constitute one and the same instrument.

(d) Provisions of this agreement shall survive any termination of employment if so provided herein or if necessary or desirable to accomplish the purposes of other surviving provisions, including, without limitation, your obligations under Section 5 hereof.

(e) This agreement shall be governed by, and construed in accordance with, the laws of the State of New York, without reference to principles of conflict of laws. The captions of this agreement are not part of the provisions hereof and shall have no force or effect. This agreement may not be amended or modified except by a written agreement executed by the parties hereto or their respective heirs, successors and legal representatives.

[Remainder of Page Intentionally Left Blank]

By its signature below, each party agrees to the terms of this letter agreement as of the date first written above.


Party City Holdco Inc.

By:		/s/ James M. Harrison

Name:		James M. Harrison

Title:		Chief Executive Officer



Party City Holdings Inc.

By:		/s/ James M. Harrison

Name:		James M. Harrison

Title:		Chief Executive Officer



Executive

/s/ Michael Correale

Michael Correale

Exhibit A

FORM OF RELEASE OF CLAIMS

This Release of Claims is provided by me, Michael Correale, pursuant to the letter agreement between me and Party City Holdco, Inc. (the “Company”) dated as of March 24, 2015 (the “Letter Agreement”).

This Release of Claims is given in consideration of the severance benefits to be provided to me in connection with the termination of my employment under Section 3(a) or 3(b), as applicable, of the Letter Agreement (the “Separation Payments”), which are conditioned on my signing this Release of Claims and to which I am not otherwise entitled, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged. On my own behalf and that of my heirs, executors, administrators, beneficiaries, representatives and assigns, and all others connected with or claiming through me, I hereby release and forever discharge the Company from any and all causes of action, rights or claims of any type or description, known or unknown, which I have had in the past, now have or might have, through the date of my signing of this Release of Claims. This includes, without limitation, any and all causes of action, rights or claims in any way resulting from, arising out of or connected with my employment by the Company or the termination of that employment or pursuant to any federal, state or local law, regulation or other requirement, including without limitation Title VII of the Civil Rights Act of 1964, the Americans with Disabilities Act, the Age Discrimination in Employment Act, the fair employment practices statutes of the state or states in which I have provided services to the Company or any other federal, state, local or foreign law, all as amended, any contracts of employment, any tort claims, or any agreements, plans or policies.

Nothing in this Release of Claims shall be construed to prohibit you from filing a charge with or participating in any investigation or proceeding conducted by the federal Equal Employment Opportunity Commission or a comparable state or local agency, except that you hereby agree to waive your right to recover monetary damages or other individual relief in any charge, complaint or lawsuit filed by you or by anyone else on your behalf.

For purposes of this Release of Claims, the word “Company” always includes the Company, Holdco, the subsidiaries and affiliates of the Company or Holdco and all of their respective past, present and future officers, directors, trustees, shareholders, employees, employee benefit plans and any of the trustees or administrators thereof, agents, general and limited partners, members, managers, investors, joint venturers, representatives, predecessors, successors and assigns, and all others connected with any of them, both individually and in their official capacities.

Excluded from the scope of this Release of Claims are any rights to benefits that were vested under the Company’s employee benefit plans on the date on which your employment with the Company terminated, in accordance with the terms of such plans.

In signing this Release of Claims, I give the Company assurance that I have returned to the Company any and all documents, materials and information related to the business, whether

present or otherwise, of the Company and all keys and other property of the Company that were in my possession or control, all as required by and consistent with Section 5 of the Letter Agreement. I agree that I will not, for any purpose, attempt to access or use any computer or computer network or system of the Company, including without limitation their electronic mail systems. I further acknowledge that I have disclosed to the Company all passwords necessary or desirable to enable the Company to access all information which I have password-protected on its computer network or system.

In signing this Release of Claims, I agree that I have been paid in full all compensation due to me, whether for services rendered by me to the Company or otherwise, through the date on which my employment with the Company terminated and that, exclusive only of the Separation Payments, no further compensation of any kind shall be due to me by the Company, whether arising under the Letter Agreement or otherwise, in connection with my employment or the termination thereof. I also agree that except for any right my eligible dependents and I may have to continue participation in the Company’s health and dental plans under the federal law commonly known as COBRA, my right to participate in any employee benefit plan of the Company will be determined in accordance with the terms of such plan.

I acknowledge that my eligibility for the Separation Payments is not only contingent on my signing and returning this Release of Claims to the Company in a timely manner and not revoking it thereafter, but also is subject to my compliance with the covenants contained in the Letter Agreement.

In signing this Release of Claims, I acknowledge that I have not relied on any promises or representations, express or implied, that are not set forth expressly in this Release of Claims. I further acknowledge that I am waiving and releasing any rights I may have under the Age Discrimination in Employment Act of 1967, as amended (“ADEA”), and that this waiver and release is knowing and voluntary and is being done with a full understanding of its terms. I agree that the consideration given for this waiver and release is in addition to anything of value to which I was already entitled. I further acknowledge that I have been advised by this writing as required by the ADEA that:

1. I have the right to and am advised by the Company to consult with an attorney prior to executing this Release of Claims; and I acknowledge that I have had sufficient time to consider this Release of Claims and to consult with an attorney, if I wished to do so, or to consult with any other person of my choosing before signing;

2. I may not sign this Release of Claims prior to the termination of my employment, but that I may consider the terms of this Release of Claims for up to twenty-one days (or, if the Company so instructs me in writing, for up to forty-five days) from the later of the date my employment with the Company terminates or the date I receive this Release of Claims;

3. I have seven (7) days following execution of this Release of Claims to revoke this Release of Claims; and

4. This Release of Claims shall not be effective until the revocation period has expired.

Intending to be legally bound, I have signed this Release of Claims as of the date written below.

EXHIBIT 10.17

PARTY CITY HOLDCO INC.

AMENDED AND RESTATED 2012 OMNIBUS EQUITY INCENTIVE PLAN

Article 1.

Establishment & Purpose

1.1 Establishment . Party City Holdco Inc., a Delaware corporation (the “ Company ”), established the 2012 Omnibus Equity Incentive Plan (this “ Plan ”) as of July 27, 2012. This Plan was amended and restated as set forth herein effective as of [ — ], 2015 (the “ Effective Date ”).

1.2 Purpose of this Plan . The purpose of this Plan is to attract, retain and motivate the officers, directors, employees and consultants of the Company and its Subsidiaries and Affiliates, and to promote the success of the Company’s business by providing them with appropriate incentives and rewards either through a proprietary interest in the long-term success of the Company or compensation based on fulfilling certain performance goals.

Article 2. Definitions

Capitalized terms used and not otherwise defined herein shall have the meanings set forth below.

2.1 “ Affiliate ” means, with respect to any specified Person, any other Person which, directly or indirectly, through one or more intermediaries, controls, or is controlled by, or is under common control with, such specified Person (for the purposes of this definition, “control” (including, with correlative meanings, the terms “ controlling ,” “ controlled by ” and “ under common control with ”), as used with respect to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by agreement or otherwise); provided , however , that for purposes of this Plan the Company and its Subsidiaries shall not be an Affiliate of any Stockholder or of any Stockholder’s Affiliates. Unless otherwise specifically indicated, when used herein the term Affiliate shall refer to an Affiliate of the Company.

2.2 “ Award ” means any Option, Stock Appreciation Right, Restricted Stock, Unrestricted Stock, or Other Stock-Based Award that is granted under this Plan.

2.3 “ Award Agreement ” means either (a) a written agreement (which may be in an electronic format) entered into by the Company and a Participant setting forth the terms and provisions applicable to an Award, or (b) a written statement (which may be in an electronic format) signed by an authorized officer of the Company to a Participant describing the terms and provisions of the actual grant of such Award.

2.4 “ Board ” means the Board of Directors of the Company.

2.5 “ Cause ”, unless otherwise specified in the Award Agreement, shall have the meaning set forth below, except with respect to any Participant who is employed by the Company or one of its Subsidiaries pursuant to an effective written employment agreement, if

any, between the Company and/or one of its Subsidiaries and such Participant in which there is a definition of “Cause” (or a similar term), in which event the definition of “Cause” (or such similar term) as set forth in such employment agreement shall be deemed to be the definition of “Cause” herein solely for such Participant and only for so long as such employment agreement remains effective. In all other events, the term “Cause” shall mean the Committee or its designee has determined, in its reasonable judgment, that any one or more of the following has occurred: (a) the Participant shall have been convicted of, indicted for, or shall have pleaded guilty or nolo contendere to, any felony, indictable offense or any crime involving fraud, dishonesty or moral turpitude or which materially impairs the Participant’s ability to perform his or her duties with the Company and/or its Subsidiaries; (b) the Participant shall have committed any fraud, theft, embezzlement, misappropriation of funds, breach of fiduciary duty, unauthorized use or destruction of any asset of the Company, act of dishonesty or other violation of the Company’s or an Affiliate’s (if applicable) written policies, rules or practices (including any employment, Service, non-disclosure, non-competition, non-solicitation or other similar agreement between the Company and/or one of its Subsidiaries and the Participant); (c) the Participant shall have breached in any material respect any of the provisions of any agreement between the Participant and the Company or its Affiliates; (d) the Participant shall have engaged in conduct likely to make the Company or any of its Affiliates subject to criminal liabilities other than those arising from the Company’s normal business activities; (e) the Participant shall have willfully engaged in any other conduct that involves a breach of fiduciary obligation on the part of the Participant or otherwise could reasonably be expected to have a material adverse effect upon the business, interests or reputation of the Company or any of its Affiliates; or (f) the Participant’s failure or refusal (other than due to Permanent Disability) to substantially perform the duties reasonably assigned to the Participant by the Board or the Participant’s direct supervisor; provided, however, that, the Participant has first been given written notice by the Company or its Affiliate, as applicable, of such failure or refusal and such conduct remains uncured for a period of ten (10) business days after such notice to the Participant.

2.6 “ Change of Control ”, unless otherwise specified in the Award Agreement, means any transaction or a series of related transactions as a result of which any Person or group of Persons other than Thomas H. Lee Partners, L.P. (“ THL ”), Advent International Corporation (“ Advent ”), or funds affiliated with either THL or Advent, shall (A) acquire (whether by purchase, exchange, tender offer, merger, consolidation, recapitalization, redemption, reorganization, issuance of capital stock or otherwise) beneficial ownership (as defined in Rule 13d-3 under the Securities Exchange Act of 1934, as amended) of directly or indirectly more than 50% of the voting power (entitling the beneficial owner to vote generally in the election of directors to the Board) of the Company or more than 50% of Shares that were issued and outstanding immediately prior to such transaction or series of transactions, or (B) acquire assets constituting all or substantially all of the assets of the Company (by merger, consolidation or otherwise); provided , that , to the extent necessary to comply with Section 409A of the Code with respect to the payment of deferred compensation, “Change of Control” shall be limited to a “change in control event” as defined in the Treasury Regulations Section 1.409A-3(i)(5) prescribed pursuant to Section 409A of the Code.

2.7 “ Code ” means the U.S. Internal Revenue Code of 1986, as amended from time to time.

2.8 “ Committee ” means the Compensation Committee of the Board; provided , that with respect to any Award intended to qualify for the performance-based compensation exception in Section 162(m) following the expiration of any post-initial public offering transition relief in Section 1.162-27(f) of the Treasury Regulations, if any member of the Compensation Committee is not an “outside director” (as defined in Section 162(m)), “Committee” means a subcommittee of the Compensation Committee (or other committee established by the Board) consisting solely of at least two members who are “outside directors” as so defined. The full Board may perform any function of the Committee hereunder or under any Award Agreement, in which case the term “Committee” shall refer to the Board.

2.9 “ Consultant ” means any person who provides bona fide services to the Company or any Affiliate or Subsidiary as a consultant or advisor, excluding any Employee or Director; provided , that the identity of such Person, the nature of such services or the entity to which such services are provided would not preclude the Company from offering or selling securities to such person pursuant to the Plan in reliance on registration on Form S-8 under the Securities Act of 1933, as amended.

2.10 “ Director ” means a member of the Board who is not an Employee.

2.11 “ Employee ” means an officer or other employee of the Company or any Subsidiary or Affiliate, including a member of the Board who is such an employee.

2.12 “ Fair Market Value ” means, as of any day, with respect to the Shares:

(a)

if the Shares are immediately and freely tradable on a stock exchange or in an over-the-counter market, the closing price per Share on the day, or if no trades of Shares were made on such date, the immediately preceding day on which trades of Shares were made, on the primary market or exchange; or

(b)

in the absence of such a market for the Shares, the fair value per Share as determined in good faith by the Committee and, for the purpose of determining the Option Price or grant price of an Award, or the repurchase or redemption price of Shares acquired upon exercise of an Option or Stock Appreciation Right, consistent with the principles of Section 409A and Section 422 of the Code.

2.13 “ Good Reason ”, unless otherwise specified in the Award Agreement, shall have the meaning set forth below, except with respect to any Participant who is employed by the Company or one of its Subsidiaries pursuant to an effective written employment agreement, if any, between the Company and/or one of its Subsidiaries and such Participant in which there is a definition of “Good Reason” (or a similar term), in which event the definition of “Good Reason” (or such similar term) as set forth in such employment agreement shall be deemed to be the definition of “Good Reason” herein solely for such Participant and only for so long as such employment agreement remains effective. In all other events, the term “Good Reason” shall mean the following: (a) a material diminution of Participant’s base salary, (b) a material diminution in the Participant’s authority, duties or responsibilities, or (c) the Company or any Subsidiary requiring the Participant to be based at any office or location that is more than fifty (50) miles from the initial location of the Participant’s employment.

2.14 “ Incentive Stock Option ” means an Option intended to meet the requirements of an incentive stock option as defined in Section 422 of the Code and designated as an Incentive Stock Option in accordance with Article 6 of this Plan.

2.15 “ Insider ” means an Employee, Director or other person whose transactions in Shares are subject to Section 16 of the Securities Exchange Act of 1934, as amended.

2.16 “ Nonqualified Stock Option ” means an Option that is not an Incentive Stock Option.

2.17 “ Option ” means any Option granted from time to time under Article 6 of this Plan.

2.18 “ Option Price ” means the purchase price per Share subject to an Option, as determined pursuant to Section 6.2 of this Plan.

2.19 “ Other Stock-Based Award ” means any Award granted under Article 9 of this Plan.

2.20 “ Participant ” means any eligible person as set forth in Section 4.1 to whom an Award is granted.

2.21 “ Performance Criteria ” or “ Performance Criterion ” means specified criteria, other than the mere continuation of employment or service or the mere passage of time, the satisfaction of which is a condition for the grant, exercisability, vesting or full enjoyment of an Award. For purposes of Awards that are intended to qualify for the performance-based compensation exception under Section 162(m), a Performance Criterion will mean an objectively determinable measure of performance relating to any or any combination of the following (measured either absolutely or by reference to an index or indices and determined either on a consolidated basis or, as the context permits, on a divisional, subsidiary, line of business, project or geographical basis or in combinations thereof) : net sales; system-wide sales; comparable store sales; revenue; revenue growth or product revenue growth; operating income (before or after taxes); adjusted operating income; adjusted net income; adjusted earnings per share; channel revenue; channel revenue growth; franchising commitments; manufacturing profit; manufacturing profit margin; store closures; pre- or after-tax income or loss (before or after allocation of corporate overhead and bonus); earnings or loss per share; net income or loss (before or after taxes); return on equity; total stockholder return; return on assets or net assets; appreciation in and/or maintenance of the price of the shares or any other publicly-traded securities of the Company; market share; gross profits; earnings or losses (including earnings or losses before taxes, before interest and taxes, or before interest, taxes, depreciation and/or amortization); adjusted earnings or losses (including adjusted earnings or losses before taxes, before interest and taxes, or before interest, taxes, depreciation and/or amortization); economic value-added models or equivalent metrics; comparisons with various stock market indices; reductions in costs; cash flow or cash flow per share (before or after dividends); return on capital

(including return on total capital or return on invested capital); cash flow return on investment; improvement in or attainment of expense levels or working capital levels, including cash, inventory and accounts receivable; operating margin; gross margin; year-end cash; cash margin; debt reduction; stockholders equity; operating efficiencies; customer satisfaction; customer growth; employee satisfaction; supply chain achievements (including establishing relationships with manufacturers or suppliers of component materials and manufacturers of the Company’s products); points of distribution; gross or net store openings; co-development, co-marketing, profit sharing, joint venture or other similar arrangements; financial ratios, including those measuring liquidity, activity, profitability or leverage; cost of capital or assets under management; financing and other capital raising transactions (including sales of the Company’s equity or debt securities, factoring transactions, sales or licenses of the Company’s assets, including its intellectual property, whether in a particular jurisdiction or territory or globally, or through partnering transactions); implementation, completion or attainment of measurable objectives with respect to research, development, manufacturing, commercialization, products or projects, production volume levels, acquisitions and divestitures; and recruiting and maintaining personnel. A Performance Criterion and any targets with respect thereto determined by the Committee need not be based upon an increase, a positive or improved result or avoidance of loss. The Committee may establish that one or more of the Performance Criteria applicable to any Award will be adjusted in an objectively determinable manner to reflect events (for example, the impact of charges for restructurings, discontinued operations, mergers, acquisitions, extraordinary items, and other unusual or non-recurring items, and the cumulative effects of tax or accounting changes, each as defined by U.S. generally accepted accounting principles) occurring during the performance period that affect the applicable Performance Criterion or Criteria; provided , however , that such adjustments must be consistent with the requirements of Section 162(m) in the case of Awards that are intended to qualify for the performance-based exception under Section 162(m).

2.22 “ Permanent Disability ”, unless otherwise specified in the Award Agreement, shall have the meaning set forth below, except with respect to any Participant who is employed by the Company or one of its Subsidiaries pursuant to an effective written employment agreement, if any, between the Company and/or one of its Subsidiaries and such Participant in which there is a definition of “Permanent Disability” (or a similar term), in which event the definition of “Permanent Disability” (or such similar term) as set forth in such employment agreement shall be deemed to be the definition of “Permanent Disability” herein solely for such Participant and only for so long as such employment agreement remains effective. In all other events, the term “Permanent Disability” shall mean: a determination by independent competent medical authority (selected by the Company) that the Participant is unable to perform his duties and in all reasonable medical likelihood such inability shall continue for a consecutive period of 90 days or for a period in excess of 120 days in any 365 day period. Notwithstanding the foregoing, however, in the case of any Award that is subject to Section 409A and is payable upon a Participant’s Permanent Disability, the Participant shall be treated as having a Permanent Disability only if the Participant’s condition also satisfies the definition of “disability” in Treasury Regulation 1.409A-3(i)(4).

2.23 “ Person ” means any natural person, sole proprietorship, general partnership, limited partnership, limited liability company, joint venture, trust, unincorporated organization, association, corporation, governmental authority, or any other organization, irrespective of whether it is a legal entity and includes any successor (by merger or otherwise) of such entity.

2.24 “ Restricted Stock ” means any Award granted under Article 8 of this Plan.

2.25 “ Restriction Period ” means the period during which Restricted Stock awarded under Article 8 of this Plan is restricted.

2.26 “ Section 162(m) ” means Section 162(m) of the Code, together with the regulations thereunder.

2.27 “ Service ” means service as an Employee, Director or Consultant, provided , however , that the effect of a Participant’s “break in service” on a Participant’s outstanding Awards, if any, shall be determined by the Committee in its sole discretion.

2.28 “ Share ” means a share of common stock of the Company, par value $0.01 per share, or such other class or kind of shares or other securities resulting from the application of Article 11 of this Plan.

2.29 “ Stock Appreciation Right ” means any right granted under Article 7 of this Plan

2.30 “ Stockholders ” has the meaning set forth in the Stockholders Agreement.

2.31 “ Stockholders Agreement ” means that certain Stockholders Agreement dated July 27, 2012 entered into by and among the Company and the stockholders listed on the signature pages thereto, as may be amended from time to time.

2.32 “ Subsidiary ” with respect to any entity (the “parent”) means any corporation, limited liability company, partnership, limited partnership, company, firm, association or trust of which such parent, at the time in respect of which such term is used, (i) owns directly or indirectly more than fifty percent (50%) of the equity, membership interest or beneficial interest, on a consolidated basis, or (ii) owns directly or controls with power to vote, directly or indirectly through one or more Subsidiaries, shares of the equity, membership interest or beneficial interest having the power to elect more than fifty percent (50%) of the directors, trustees, managers or other officials having powers analogous to that of directors of a corporation. Unless otherwise specifically indicated, when used herein the term Subsidiary shall refer to a direct or indirect Subsidiary of the Company.

2.33 “ Ten Percent Shareholder ” means a person who on any given date owns, either directly or indirectly (taking into account the attribution rules contained in Section 424(d) of the Code), stock possessing more than ten percent (10%) of the total combined voting power of all classes of stock of the Company or a Subsidiary or Affiliate.

2.34 “ Unrestricted Stock ” means an Award of Shares not subject to restrictions and granted under Article 8 of the Plan.

Article 3.

Administration

3.1 Authority of the Committee . This Plan shall be administered by the Committee, which shall have full power to interpret and administer this Plan and full authority to select the Directors, Employees and Consultants to whom Awards will be granted and determine the type and amount of Awards to be granted to each such Director, Employee or Consultant, and the terms and conditions of such Awards. Without limiting the generality of the foregoing, the Committee may, in its sole discretion, interpret, clarify, construe or resolve any ambiguity in any provision of this Plan or any Award Agreement, accelerate or waive the vesting of Awards and exercisability of Awards, extend the term or period of exercisability of any Awards, or waive any terms or conditions applicable to any Award, subject to the limitations set forth in Section 12.2 of this Plan. Awards may, in the discretion of the Committee, be made under this Plan in assumption of, or in substitution for, outstanding awards previously granted by the Company or an Affiliate or a company acquired by the Company or an Affiliate or with which the Company or an Affiliate combines. The Committee shall have full and exclusive discretionary power to adopt rules, forms, instruments and guidelines for administering this Plan as the Committee deems necessary or proper. All actions taken and all interpretations and determinations made by the Committee or by the Board (or any other committee or sub-committee thereof), as applicable, shall be final and binding upon the Participants, the Company and all other interested individuals.

3.2 Delegation . The Committee may delegate to one or more of its members, one or more officers of the Company or any Subsidiary, or one or more agents or advisors such administrative duties or powers as it may deem advisable, consistent with the requirements of applicable law, including, in the case of Awards intended to qualify as performance-based compensation under Section 162(m), consistent with Section 162(m). To the extent permitted by applicable law, the Committee may, in its discretion, delegate to a committee comprised of one or more officers of the Company the authority to grant one or more Awards of Options and/or Stock Appreciation Rights or other Awards, to the extent permitted by applicable law, (“ Delegated Awards ”), without further approval of the Committee, to any Employee, other than a person who, at the time of such grant, is an Insider or a covered employee (as defined under Section 162(m)), and to exercise such other powers under the Plan as the Committee may determine; provided , however , that (a) the Committee shall fix the maximum number of Shares subject to Delegated Awards that may be granted by such officers, (b) each such Delegated Award shall be subject to the terms and conditions of the appropriate standard form of Award Agreement approved by the Committee and shall conform to the provisions of the Plan and (c) each such Delegated Award shall conform to such other limits and guidelines as may established from time to time by the Committee.

Article 4.

Eligibility and Participation

4.1 Eligibility . Participants will consist of such Employees, Directors and Consultants as the Committee in its sole discretion determines and whom the Committee may designate from time to time to receive Awards under this Plan; provided , however , that Options and Stock Appreciation Rights may only be granted to those Employees, Directors and Consultants with respect to whom the Company is an “eligible issuer” within the meaning of Section 409A of the Code. Designation of a Participant in any year shall not require the Committee to designate such person to receive an Award in any other year or, once designated, to receive the same type or amount of Award as granted to the Participant in any other year.

4.2 Type of Awards . Awards under this Plan may be granted in any one or a combination of: (a) Options; (b) Stock Appreciation Rights; (c) Restricted Stock (and Unrestricted Stock); and (d) Other Stock-Based Awards. Awards granted under this Plan shall be evidenced by Award Agreements (which need not be identical) that provide additional terms and conditions associated with such Awards, including, without limitation restrictive covenants, as determined by the Committee in its sole discretion; provided , however , that in the event of any conflict between the provisions of this Plan and any such Award Agreement, the provisions of this Plan shall prevail. Notwithstanding any provision of this Plan to the contrary, awards of an acquired company that are converted, replaced or adjusted in connection with the acquisition may contain terms and conditions that are inconsistent with the terms and conditions specified herein, as determined by the Committee.

Article 5.

Shares Subject to this Plan and Maximum Awards

5.1 Number of Shares Issuable for Awards .

(a)

Shares . Subject to adjustment as provided in this Article 5 and Article 11 of the Plan, the maximum number of Shares that may be issued to Participants pursuant to Awards under the Plan shall be 5,470. Up to the total number of shares issuable for Awards to employee Participants may be issued in satisfaction of Incentive Stock Options, but nothing in this Section 5.1(a) will be construed as requiring that any, or any fixed number of Incentive Stock Options be awarded under the Plan. The Shares issuable under the Plan may consist, in whole or in part, of authorized and unissued Shares or treasury Shares. Any Shares tendered to or withheld by the Company as part or full payment for the purchase price, Option Price or grant price of an Award or to satisfy all or part of the Company’s tax withholding obligation, in each case with respect to an Option or a share-settled Stock Appreciation Right shall not be available again for the issuance of additional Awards. For purposes of this Section 5.1(a), the full number of Shares subject to a share-settled Stock Appreciation Right or Option (and not the number of Shares delivered in settlement of such Award) shall be counted against the number of Shares issuable under the Plan.

(b)

Additional Shares . In the event that any outstanding Award (or portion of such Award) expires, is forfeited, cancelled or otherwise terminated without consideration (i.e., Shares or cash) therefor, the Shares subject to such Award (or portion thereof), to the extent of any such forfeiture, cancellation, expiration, termination or settlement, shall again be available for Awards under this Plan. If an Award is settled in cash (i.e., the Participant receives cash rather than stock) by its terms without any election by Participant, then such Award shall not reduce the maximum number of Shares issuable under this Plan. If the Committee authorizes

the assumption or substitution under this Plan, in connection with any merger, consolidation, acquisition of property or stock, or reorganization, of awards granted under another plan, such assumption or substitution shall not reduce the maximum number of Shares issuable under this Plan.

5.2 Individual Limits. The following additional per-Participant limits will apply to Awards of the specified type granted, or in the case of Other Stock-Based Awards payable, to any person in any calendar year:

(a)

Options: 957 Shares.

(b)

Stock Appreciation Rights: 957 Shares.

(c)

Restricted Stock: 601 Shares.

(d)

Unrestricted Stock: 601 Shares.

(e)

Other Stock-Based Awards: 601 Shares.

In applying the foregoing limits, (i) all Awards of the specified type granted to the same person in the same calendar year will be aggregated and made subject to one limit; (ii) the limits applicable to Options and Awards of Stock Appreciation Rights refer to the number of Shares subject to those Awards; and (iii) the Share limit under clauses (c), (d) and (e) refer to the maximum number of Shares that may be delivered under these Awards assuming a maximum payout. The foregoing provisions will be construed in a manner consistent with Section 162(m), including, without limitation, where applicable, the rules under Section 162(m) pertaining to permissible deferrals of exempt awards.

If an Option or Stock Appreciation Right is cancelled, the number of Shares subject to the cancelled Option or Stock Appreciation Right shall continue to be counted against and shall not again become available under the individual per-Participant limits of this Section 5.2; for this purpose, if the Option Price of an Option or the grant price of a Stock Appreciation Right is reduced after the date of grant, the Option and Stock Appreciation Right will be deemed to have been cancelled and reissued, with the number of Shares covered by both the cancelled and reissued Option and Stock Appreciation Right being counted against the Shares remaining available under the individual per-Participant limits of this Section 5.2.

5.3 Non-Employee Director Limits . In the case of a Director, an additional limit shall apply such that the maximum grant-date fair value of Awards granted in any fiscal year of the Company during any part of which the Director is then eligible under the Plan shall be $400,000 computed in accordance with FASB ASC Topic 718 (or any successor provision). The foregoing additional limit related to Directors shall not apply to any Award or Shares granted pursuant to a Director’s election to receive an Award or Shares in lieu of cash retainers or other fees (to the extent such Award or Shares have a fair value equal to the value of such cash retainers or other fees).

Article 6.

Options

6.1 Grant of Options . The Committee is hereby authorized to grant Options to Participants. Each Option shall permit a Participant to purchase from the Company a stated number of Shares at an Option Price established by the Committee, subject to the terms and conditions described in this Article 6 and to such additional terms and conditions, as established by the Committee, in its sole discretion, that are consistent with the provisions of the Plan. Options shall be designated as either Incentive Stock Options or Nonqualified Stock Options; provided , that , Options granted to Directors or Consultants shall be Nonqualified Stock Options. An Option granted as an Incentive Stock Option shall, to the extent it fails to qualify under the Code as an Incentive Stock Option, be treated as a Nonqualified Stock Option. Neither the Committee, the Company, any of its Subsidiaries or Affiliates, nor any of their employees or representatives shall be liable to any Participant or to any other Person if it is determined that an Option intended to be an Incentive Stock Option does not qualify under the Code as an Incentive Stock Option. Each Option shall be evidenced by an Award Agreement which shall state the number of Shares covered by such Option. Such Award Agreements shall conform to the requirements of the Plan and may contain such other provisions as the Committee shall deem advisable.

6.2 Option Price . The Option Price shall be determined by the Committee at the time of grant, but shall not be less than one hundred percent of the Fair Market Value of a Share on the date of grant; provided , however , an Option may be granted with an exercise price lower than such minimum exercise price if granted pursuant to an assumption or substitution of another option in a manner that would qualify under Section 409A or Section 424(a) of the Code. In the case of any Incentive Stock Option granted to a Ten Percent Shareholder, the Option Price shall not be less than one hundred ten percent of the Fair Market Value of a Share on the date of grant. Except as contemplated by Article 11, the terms of outstanding Options may not be amended to reduce the Option Price of such Option other than in accordance with the stockholder approval requirements of the New York Stock Exchange.

6.3 Option Term . The term of each Option shall be determined by the Committee at the time of grant and shall be stated in the Award Agreement, but in no event shall such term be greater than ten years (or, in the case of an Incentive Stock Option granted to a Ten Percent Shareholder, five years).

6.4 Time of Exercise . Options granted under this Article 6 shall be exercisable at such times and be subject to such restrictions and conditions as the Committee shall in each instance approve as set forth in each Award Agreement, which terms and restrictions need not be the same for each grant or for each Participant.

6.5 Method of Exercise . Except as otherwise provided in the Plan or in an Award Agreement, an Option may be exercised for all, or from time to time any part, of the Shares for which it is then exercisable. For purposes of this Article 6 , the exercise date of an Option shall be the later of the date a notice of exercise is received by the Company and, if applicable, the date full payment is received by the Company pursuant to clauses (a), (b), (c), (d), or (e) of the following sentence (including the applicable tax withholding pursuant to Section 14.3 of the Plan). The aggregate Option Price for the Shares as to which an Option is exercised shall be paid to the Company in full at the time of exercise at the election of the Participant: (a) in cash or its equivalent (e.g., by cashier’s check); (b) to the extent permitted by the Committee, in Shares

(whether or not previously owned by the Participant) that are unrestricted and nonforfeitable having a Fair Market Value equal to the aggregate Option Price for the Shares being purchased and satisfying such other requirements as may be imposed by the Committee; (c) partly in cash and, to the extent permitted by the Committee, partly in such Shares (as described in (b) above); (d) to the extent permitted by the Committee, by reducing the number of Shares otherwise deliverable upon the exercise of the Option by the number of Shares having a Fair Market Value equal to the aggregate Option Price; or (e) if there is a public market for the Shares at such time, subject to such requirements as may be imposed by the Committee, through the delivery of irrevocable instructions to a broker to sell Shares obtained upon the exercise of the Option and to deliver promptly to the Company an amount out of the proceeds of such sale equal to the aggregate Option Price for the Shares being purchased. The Committee may prescribe any other method of payment that it determines to be consistent with applicable law and the purpose of the Plan.

6.6 Limitations on Incentive Stock Options. Incentive Stock Options may be granted only to employees of the Company or of a “parent corporation” or “subsidiary corporation” (as such terms are defined in Section 424 of the Code) at the date of grant. The aggregate Fair Market Value (generally determined as of the time the Option is granted) of the Shares with respect to which Incentive Stock Options are exercisable for the first time by a Participant during any calendar year under all plans of the Company and of any “parent corporation” or “subsidiary corporation” shall not exceed one hundred thousand dollars, or the Option shall be treated as a Nonqualified Stock Option, but only to the extent of that portion of the Option in excess of the limit. For purposes of the preceding sentence, unless otherwise designated by the Company, Incentive Stock Options will be taken into account in the order in which they are granted. Each provision of the Plan and each Award Agreement relating to an Incentive Stock Option shall be construed so that each Incentive Stock Option shall be an incentive stock option as defined in Section 422 of the Code, and any provisions of the Award Agreement thereof that cannot be so construed shall be disregarded.

Article 7.

Stock Appreciation Rights

7.1 Grant of Stock Appreciation Rights. The Committee is hereby authorized to grant Stock Appreciation Rights to Participants. Stock Appreciation Rights shall be evidenced by Award Agreements that shall conform to the requirements of the Plan and may contain such other provisions as the Committee shall deem advisable. Subject to the terms of the Plan and any applicable Award Agreement, a Stock Appreciation Right granted under the Plan shall confer on the holder thereof a right to receive, upon exercise thereof, the excess of: (a) the Fair Market Value of a Share on the date of exercise over (b) the grant price of the right as specified by the Committee on the date of the grant. Such payment may be in the form of cash, Shares, other property or any combination thereof, as the Committee shall determine in its sole discretion. Except as contemplated by Article 11, the terms of outstanding Stock Appreciation Rights may not be amended to reduce the grant price of the right from which appreciation under such Stock Appreciation Rights are to be measured other than in accordance with the stockholder approval requirements of the New York Stock Exchange.

7.2 Terms of Stock Appreciation Right. Each Stock Appreciation Right grant shall be evidenced by an Award Agreement which shall state the grant price (which shall not be less

than one hundred percent of the Fair Market Value of a Share on the date of grant), term, methods of exercise, methods of settlement, and such other provisions as the Committee shall determine. No Stock Appreciation Right shall have a term of more than ten years from the date of grant.

Article 8.

Restricted Stock

8.1 Grant of Restricted Stock. The Committee is hereby authorized to grant Restricted Stock to Participants. An Award of Restricted Stock is a grant by the Committee of a specified number of Shares to the Participant, which Shares are subject to forfeiture upon the occurrence of specified events. Participants shall be awarded Restricted Stock in exchange for consideration not less than the minimum consideration required by applicable law. Restricted Stock shall be evidenced by an Award Agreement, which shall conform to the requirements of the Plan and may contain such other provisions as the Committee shall deem advisable.

8.2 Terms of Restricted Stock Awards. Each Award Agreement evidencing a Restricted Stock grant shall specify the Restriction Period(s), the number of Shares of Restricted Stock subject to the Award, the purchase price, if any, of the Restricted Stock, the performance, employment, or other conditions (including the termination of a Participant’s Service whether due to death, disability or other reason) under which the Restricted Stock may be forfeited to the Company and such other provisions as the Committee shall determine. Any Restricted Stock granted under the Plan shall be evidenced in such manner as the Committee may deem appropriate, including book-entry registration or issuance of a stock certificate or certificates (in which case, the certificate(s) representing such Shares shall be legended as to sale, transfer, assignment, pledge or other encumbrances during the Restriction Period and deposited by the Participant, together with a stock power endorsed in blank, with the Company, to be held in escrow during the Restriction Period). At the end of the Restriction Period, the restrictions imposed hereunder and under the Award Agreement shall lapse with respect to the number of Shares of Restricted Stock as determined by the Committee, and, except as provided in Section 14.6 , the legend required by this Section 8.2 shall be removed and such number of Shares delivered to the Participant (or, where appropriate, the Participant’s legal representative).

8.3 Voting and Dividend Rights. The Committee shall determine and set forth in a Participant’s Award Agreement whether or not a Participant holding Restricted Stock granted hereunder shall have the right to exercise voting rights with respect to the Restricted Stock during the Restriction Period (the Committee may require a Participant to grant an irrevocable proxy and power of substitution) and/or have the right to receive dividends on the Restricted Stock during the Restriction Period (and, if so, on what terms).

8.4 Performance Goals. The Committee may condition the grant of Restricted Stock or the expiration of the Restriction Period upon the Participant’s achievement of one or more performance goal(s) or Performance Criterion or Criteria specified in the Award Agreement. If the Participant fails to achieve the specified performance goal(s) or Performance Criterion or Criteria, the Committee shall not grant the Restricted Stock to such Participant or the Participant shall forfeit the Award of Restricted Stock to the Company, as applicable.

8.5 Unrestricted Stock. The Committee is hereby authorized to grant Unrestricted Stock to Participants. An Award of Unrestricted Stock is a grant by the Committee of a specified number of Shares, which Shares are not subject to forfeiture upon the occurrence of specified events. Participants shall be awarded Unrestricted Stock in exchange for consideration not less than the minimum consideration required by applicable law. Unrestricted Stock shall be evidenced by an Award Agreement, which shall conform to the provisions of the Plan and may contain such other provisions as the Committee shall deem advisable. Any Unrestricted Stock granted under the Plan shall be evidenced in such manner as the Committee may deem appropriate.

Article 9.

Other Stock-Based Awards

The Committee, in its sole discretion, may grant Awards of Shares and Awards that are valued, in whole or in part, by reference to, or are otherwise based on the Fair Market Value of, Shares, including without limitation, restricted stock units, dividend equivalent rights, and other phantom awards. Such Other Stock-Based Awards shall be in such form, and dependent on such conditions, as the Committee shall determine, including, without limitation, the right to receive one or more Shares (or the equivalent cash value of such Shares) upon the completion of a specified period of Service, the occurrence of an event, and/or the attainment of performance objectives or Performance Criterion or Criteria. Subject to the provisions of the Plan, the Committee shall determine to whom and when Other Stock-Based Awards will be made, the number of Shares to be awarded under (or otherwise related to) such Other Stock-Based Awards, whether such Other Stock-Based Awards shall be settled in cash, Shares or a combination of cash and Shares, and all other terms and conditions of such Awards (including, without limitation, the vesting provisions thereof and provisions ensuring that all Shares so awarded and issued shall be fully paid and non-assessable). Each Other Stock-Based Award grant shall be evidenced by an Award Agreement, which shall conform to the requirements of the Plan and may contain such other provisions as the Committee shall deem advisable.

Article 10.

Compliance with Sections 409A and 162(m) of the Code

10.1 General . The Company intends that the Plan and all Awards be construed to avoid the imposition of additional taxes, interest, and penalties pursuant to Section 409A of the Code (together with all regulations, guidance, compliance programs, and other interpretative authority thereunder, “ Section 409A ”). Notwithstanding the Company’s intention, in the event any Award is subject to such additional taxes, interest or penalties pursuant to Section 409A, the Committee may, in its sole discretion and without a Participant’s prior consent, amend the Plan and/or Awards, adopt policies and procedures, or take any other actions (including amendments, policies, procedures and actions with retroactive effect) as are necessary or appropriate to (a) exempt the Plan and/or any Award from the application of Section 409A, (b) preserve the intended tax treatment of any such Award, or (c) comply with the requirements of Section 409A, including without limitation any such regulations, guidance, compliance programs, and other interpretative authority that may be issued after the date of the grant. In no event shall the Company or any of its Subsidiaries or Affiliates be liable for any additional tax, interest or penalties that may be imposed on a Participant under Section 409A or any damages for failing to comply with Section 409A.

10.2 Payments to Specified Employees . Notwithstanding any contrary provision in the Plan or Award Agreement, any payment(s) of nonqualified deferred compensation (within the meaning of Section 409A) that are otherwise required to be made under the Plan to a “specified employee” (as defined under Section 409A) as a result of his or her separation from service (other than a payment that is not subject to Section 409A) shall be delayed for the first six months following such separation from service (or, if earlier, until the date of death of the specified employee) and shall instead be paid (in a manner set forth in the Award Agreement) on the day that immediately follows the end of such six-month period or as soon as administratively practicable thereafter. Any remaining payments of nonqualified deferred compensation shall be paid without delay and at the time or times such payments are otherwise scheduled to be made.

10.3 Separation from Service . A termination of Service shall not be deemed to have occurred for purposes of any provision of the Plan or any Award Agreement providing for the payment of any amounts or benefits that are considered nonqualified deferred compensation under Section 409A upon or following a termination of Service, unless such termination is also a “separation from service” within the meaning of Section 409A (after giving effect to the presumptions contained therein) and the payment thereof prior to a “separation from service” would violate Section 409A. For purposes of any such provision of the Plan or any Award Agreement relating to any such payments or benefits, references to a “termination,” “termination of employment,” “termination of service,” or like terms shall mean “separation from service.”

10.4 Section 162(m). In the case of any Award (other than an Option or an Award of Stock Appreciation Rights) intended to qualify for the performance-based compensation exception under Section 162(m), the Committee will establish the applicable Performance Criterion or Criteria in writing no later than ninety (90) days after the commencement of the period of service to which the performance relates at a time when it is substantially uncertain whether or not the Performance Criterion or Criteria will be achieved (or at such earlier time as is required to qualify the Award as performance-based under Section 162(m)) and, prior to the event or occurrence (grant, vesting or payment, as the case may be) that is conditioned on the attainment of such Performance Criterion or Criteria, will certify whether it or they have been attained in a manner that complies with Section 162(m). The preceding sentence will not apply to an Award eligible (as determined by the Committee) for exemption from the limitations of Section 162(m) by reason of the post-initial public offering transition relief in Section 1.162-27(f) of the Treasury Regulations. In any case where an award is made under another plan or program of the Company or its Affiliates and such award is intended to qualify for the performance-based compensation exception under Section 162(m), and such award is settled by the delivery of Stock or another Award under the Plan, the applicable limitations relating to Section 162(m) under both the other plan or program and under the Plan will be applied to the Plan as necessary (as determined by the Committee) to preserve the availability of the Section 162(m) performance-based compensation exception with respect thereto.

Article 11.

Adjustments

11.1 Adjustments in Authorized Shares . In the event of any corporate event or transaction involving the Company, a Subsidiary and/or an Affiliate (including, but not limited to, a change in the Shares of the Company or the capitalization of the Company) such as a merger, consolidation, reorganization, recapitalization, separation, stock dividend, stock split,

reverse stock split, split up, spin-off, combination of Shares, exchange of Shares, dividend in kind, extraordinary cash dividend, amalgamation, or other like change in capital structure (other than normal cash dividends to stockholders of the Company), or any similar corporate event or transaction, the Committee, to prevent dilution or enlargement of Participants’ rights under the Plan, shall substitute or adjust, in its sole discretion, the number and kind of Shares or other property that may be issued under the Plan or under particular forms of Awards in the aggregate or to individual Participants, the number and kind of Shares or other property subject to outstanding Awards, the individual limits contained in Section 5.2, the Option Price, grant price or purchase price applicable to outstanding Awards and/or other value determinations (including Performance Criteria) applicable to the Plan or outstanding Awards. All adjustments shall be made in good faith compliance with Section 409A. For the avoidance of doubt, the purchase of Shares or other equity securities of the Company by a stockholder of the Company or any third party from the Company shall not constitute a corporate event or transaction giving rise to an adjustment described in this Section 11.1 . References in the Plan to Shares will be construed to include any stock or securities resulting from an adjustment pursuant to this Article 11.

11.2 Change of Control . Upon the occurrence of a Change of Control after the Effective Date, unless otherwise specifically prohibited under applicable laws or by the rules and regulations of any governing governmental agencies or national securities exchanges, or unless the Committee shall specify otherwise in the Award Agreement, the Committee is authorized (but not obligated) to make adjustments in the terms and conditions of outstanding Awards, including without limitation the following (or any combination thereof): (a) continuation or assumption of such outstanding Awards under the Plan by the Company (if it is the surviving company or corporation) or by the surviving company or corporation or its parent; (b) substitution by the surviving company or corporation or its parent of equity, equity-based and/or cash awards with substantially the same terms for outstanding Awards (excluding the consideration payable upon settlement of the Awards); (c) accelerated exercisability, vesting and/or lapse of restrictions under outstanding Awards immediately prior to the occurrence of such event; (d) upon written notice, provide that any outstanding Awards must be exercised, to the extent then exercisable, during a reasonable period of time immediately prior to the scheduled consummation of the event or such other period as determined by the Committee (contingent upon the consummation of the event), and at the end of such period, such Awards shall terminate to the extent not so exercised within the relevant period; (e) cancellation of all or any portion of outstanding Awards for fair value (in the form of cash, Shares, other property or any combination thereof) as determined in the sole discretion of the Committee and which value may be zero, provided , that , in the case of Options and Stock Appreciation Rights or similar Awards, the fair value may equal the excess, if any, of the value of the consideration to be paid in the Change of Control transaction to holders of the same number of Shares subject to such Awards (or, if no such consideration is paid, Fair Market Value of the Shares subject to such outstanding Awards or portion thereof being canceled) over the aggregate Option Price or grant price, as applicable, with respect to such Awards or portion thereof being canceled, or if no such excess, zero; and (f) cancellation of all or any portion of outstanding unvested and/or unexercisable Awards for no consideration.

Article 12.

Duration; Amendment, Modification, Suspension and Termination

12.1 Duration of Plan . Unless sooner terminated as provided in Section 12.2 , this Plan shall terminate on the tenth (10th) anniversary of the Effective Date.

12.2 Amendment, Modification, Suspension and Termination of Plan . Subject to the terms of the Plan, the Committee may amend, alter, suspend, discontinue or terminate this Plan or any portion thereof or any Award (or Award Agreement) hereunder at any time, in its sole discretion, provided , that , no action taken by the Committee shall adversely affect in any material respect the rights granted to any Participant under any outstanding Awards (other than pursuant to Article 10 , Article 11 , or as the Committee deems necessary to comply with applicable law, including without limitation, the Dodd-Frank Wall Street Reform and Consumer Protection Act) without the Participant’s written consent. Notwithstanding the foregoing, no amendment requiring shareholder approval under Section 162(m) or Section 422 shall be made without obtaining requisite shareholder approval under said provisions.

Article 13.

Forfeiture of Awards Upon Termination of Service

13.1 Termination of Service for Cause . Unless otherwise provided in an Award Agreement, in the event (a) a Participant’s Service is terminated for Cause, or (b) the Committee determines that a Participant’s acts or omissions constitute Cause, all outstanding Awards held by the Participant shall terminate and be forfeited without consideration, effective on the date the Participant’s Service is terminated for Cause or the date the act or omission constituting Cause is determined to have occurred, as applicable.

13.2 Termination of Service Due to Death or Permanent Disability . Unless otherwise provided in an Award Agreement, in the event a Participant’s Service is terminated due to death or Permanent Disability (and Cause does not exist as of such date): (a) all unvested Awards held by the Participant shall terminate and be forfeited without consideration, effective as of the date the Participant’s Service is terminated and (b) all vested Options and Stock Appreciation Rights may be exercised by the Participant or, as applicable, the Participant’s beneficiary or estate and shall terminate on the earlier of (i) ninety (90) days following the termination of Service and (ii) the expiration of the term of such Awards.

13.3 Termination of Service for Reason Other than Cause or Death or Permanent Disability . Unless otherwise provided in an Award Agreement, in the event a Participant’s Service is terminated for any reason other than pursuant to Section 13.1 or Section 13.2 above (and Cause does not exist as of such date): (a) all unvested Awards held by the Participant shall terminate and be forfeited without consideration, effective as of the date the Participant’s Service is terminated and (b) all vested Options and Stock Appreciation Rights shall terminate on the earlier of (i) sixty (60) days following the termination of Service and (ii) the expiration of the term of such Awards.

Article 14.

General Provisions

14.1 No Right to Service or Award . The granting of an Award under the Plan shall impose no obligation on the Company, any Subsidiary or any Affiliate to continue the Service of a Participant and shall not lessen or affect any right that the Company, any Subsidiary or any Affiliate may have to terminate the Service of such Participant. No Participant or other Person shall have any claim to be granted any Award, and there is no obligation for uniformity of treatment of Participants, or holders or beneficiaries of Awards. The terms and conditions of Awards and the Committee’s determinations and interpretations with respect thereto need not be the same with respect to each Participant (whether or not such Participants are similarly situated). The loss of existing or potential profit in an Award will not constitute an element of damages in the event of the termination of a Participant’s employment or service for any reason, even if the termination is in violation of an obligation of the Company or any Affiliate to the Participant.

14.2 Settlement of Awards . Each Award Agreement shall establish the form in which the Award shall be settled, which may be in cash, Shares, other property or a combination thereof. The Committee shall determine whether cash, Awards, other securities or other property shall be issued or paid in lieu of fractional Shares or whether such fractional Shares or any rights thereto shall be issued, rounded, forfeited, or otherwise eliminated.

14.3 Tax Withholding . The Company shall have the power and the right to deduct or withhold automatically from any amount deliverable under the Award or otherwise, or require a Participant to remit to the Company such amount as may be required by law or regulation, including federal, state and local taxes, domestic or foreign laws or regulations, to be withheld with respect to any taxable event arising as a result of the Plan. The Committee, in its sole discretion, may permit Participants to satisfy the withholding requirement, in whole or in part, by having the Company withhold Shares having a Fair Market Value equal to the minimum statutory total tax that could be imposed in connection with any such taxable event.

14.4 Additional Restrictions. The Committee may cancel, rescind, withhold or otherwise limit or restrict any Award at any time if the Participant is not in compliance with all applicable provisions of the Award Agreement and the Plan, or if the Participant breaches any agreement with the Company or its Affiliates with respect to non-competition, non-solicitation or confidentiality. Without limiting the generality of the foregoing, the Committee may recover Awards made under the Plan and payments under or gain in respect of any Award in accordance with any applicable Company clawback or recoupment policy, as such policy may be amended and in effect from time to time, or as otherwise required by law or applicable stock exchange listing standards, including, without limitation, Section 10D of the Securities Exchange Act of 1934, as amended.

14.5 No Guarantees Regarding Tax Treatment . Participants (or their beneficiaries) shall be responsible for all taxes with respect to any Awards under the Plan. The Committee and the Company make no guarantees to any Person regarding the tax treatment of Awards or payments made under the Plan. Neither the Committee nor the Company has any obligation to take any action to prevent the assessment of any tax on any Person with respect to any Award under Section 409A of the Code, Section 457A of the Code, Section 4999 of the Code or otherwise and none of the Company, any of its Subsidiaries or Affiliates, or any of their employees or representatives shall have any liability to a Participant with respect thereto.

14.6 Non-Transferability of Awards . Unless otherwise determined by the Committee, an Award shall not be transferable or assignable by the Participant except in the event of his or her death (subject to the applicable laws of descent and distribution) and any such purported assignment, alienation, pledge, attachment, sale, transfer or encumbrance shall be void and unenforceable against the Company or any Affiliate. No transfer shall be permitted for value or consideration. An Award exercisable after the death of a Participant may be exercised by the heirs, legatees, personal representatives or distributees of the Participant. Any permitted transfer of the Awards to heirs, legatees, personal representatives or distributees of the Participant shall not be effective to bind the Company unless the Committee shall have been furnished with written notice thereof and a copy of such evidence as the Committee may deem necessary to establish the validity of the transfer and the acceptance by the transferee or transferees of the terms and conditions hereof.

14.7 Stockholders Agreement; Conditions and Restrictions on Shares . Shares received in connection with Awards granted hereunder prior to an IPO (as defined in the Stockholders Agreement), or as otherwise specifically required by the Committee, shall be subject to all of the terms and conditions of the Stockholders Agreement, including all transfer restrictions, repurchase rights and “take along” rights set forth therein. As a condition to receiving, exercising or settling an Award, if not already fully bound by the terms set forth in the Stockholders Agreement, each Participant shall sign a joinder agreement pursuant to which such Participant shall become fully bound by the terms set forth in the Stockholders Agreement, to the extent then applicable. The Committee may impose such other conditions or restrictions on any Shares received in connection with an Award as it may deem advisable or desirable. These restrictions may include, but shall not be limited to, requirements that the Participant: (a) hold the Shares received for a specified period of time or (b) represent and warrant in writing that the Participant is acquiring the Shares for investment and without any present intention to sell or distribute such Shares. The certificates for Shares may include any legend which the Committee deems appropriate to reflect any conditions and restrictions applicable to such Shares.

14.8 Shares Not Registered . Shares and Awards shall not be issued under this Plan unless the issuance and delivery of such Shares and any Awards comply with (or are exempt from) all applicable requirements of law, including, without limitation, the Securities Act of 1933, as amended, the rules and regulations promulgated thereunder, state securities laws and regulations, and the regulations of any stock exchange or other securities market on which the Company’s securities may then be traded. The Company shall not be obligated to file any registration statement under any applicable securities laws to permit the purchase or issuance of any Shares or any Awards under this Plan, and accordingly any certificates for Shares or documents granting Awards may have an appropriate legend or statement of applicable restrictions endorsed thereon. If the Company deems it necessary to ensure that the issuance of securities under this Plan is not required to be registered under any applicable securities laws, each Participant to whom such security would be purchased or issued shall deliver to the Company an agreement or certificate containing such representations, warranties and covenants as the Company reasonably requires.

14.9 Awards to Non-U.S. Employees or Directors . To comply with the laws in countries other than the United States in which the Company or any Subsidiary or Affiliate

operates or has Employees, Directors or Consultants, the Committee, in its sole discretion, shall have the power and authority to: (a) determine which Subsidiaries or Affiliates shall be covered by the Plan; (b) determine which Employees, Directors or Consultants outside the United States are eligible to participate in the Plan; (c) modify the terms and conditions of any Award granted to Employees, Directors or Consultants outside the United States to comply with applicable foreign laws; (d) take any action, before or after an Award is made, that it deems advisable to obtain approval or comply with any necessary local government regulatory exemptions or approvals; and (e) establish sub-plans and modify exercise procedures and other terms and procedures, to the extent such actions may be necessary or advisable.

14.10 Rights as a Stockholder . Except as otherwise provided herein or in the applicable Award Agreement, a Participant shall have none of the rights of a stockholder with respect to Shares covered by any Award until the Participant becomes the record holder of such Shares.

14.11 Severability . If any provision of the Plan or any Award is or becomes or is deemed to be invalid, illegal, or unenforceable in any jurisdiction, or as to any Person or Award, or would disqualify the Plan or any Award under any law deemed applicable by the Committee, such provision shall be construed or deemed amended to conform to applicable laws, or if it cannot be so construed or deemed amended without, in the determination of the Committee, materially altering the intent of the Plan or the Award, such provision shall be stricken as to such jurisdiction, Person, or Award, and the remainder of the Plan and any such Award shall remain in full force and effect.

14.12 Unfunded Plan . Participants shall have no right, title, or interest whatsoever in or to any investments that the Company or any of its Subsidiaries or Affiliates may make to aid it in meeting its obligations under the Plan. Nothing contained in the Plan, and no action taken pursuant to its provisions, shall create or be construed to create a trust of any kind, or a fiduciary relationship between the Company and any Participant, beneficiary, legal representative, or any other Person. To the extent that any Person acquires a right to receive payments from the Company under the Plan, such right shall be no greater than the right of an unsecured general creditor of the Company. All payments to be made hereunder shall be paid from the general funds of the Company and no special or separate fund shall be established and no segregation of assets shall be made to assure payment of such amounts. The Plan is not subject to the U.S. Employee Retirement Income Security Act of 1974, as amended from time to time.

14.13 No Constraint on Corporate Action . Nothing in the Plan shall be construed to: (a) limit, impair, or otherwise affect the Company’s right or power to make adjustments, reclassifications, reorganizations, or changes of its capital or business structure, or to merge or consolidate, or dissolve, liquidate, sell, or transfer all or any part of its business or assets; or (b) limit the right or power of the Company to take any action which such entity deems to be necessary or appropriate.

14.14 Successors . All obligations of the Company under the Plan with respect to Awards granted hereunder shall be binding on any successor to the Company, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation, or otherwise, of all or substantially all of the business or assets of the Company.

14.15 Waiver of Jury Trial. By accepting an Award under this Plan, each Participant waives any right to a trial by jury in any action, proceeding or counterclaim concerning any rights under the Plan and any Award, or under any amendment, waiver, consent, instrument, document or other agreement delivered or which in the future may be delivered in connection therewith, and agrees that any such action, proceedings or counterclaim will be tried before a court and not before a jury. By accepting an Award under the Plan, each Participant certifies that no officer, representative, or attorney of the Company has represented, expressly or otherwise, that the Company would not, in the event of any action, proceeding or counterclaim, seek to enforce the foregoing waivers. Notwithstanding anything to the contrary in the Plan, nothing herein is to be construed as limiting the ability of the Company and a Participant to agree to submit disputes arising under the terms of the Plan or any Award made hereunder to binding arbitration or as limiting the ability of the Company to require any eligible individual to agree to submit such disputes to binding arbitration as a condition of receiving an Award hereunder. For the avoidance of doubt, each party hereunder shall bear its own legal costs in connection with any such action, proceeding, counterclaim or dispute, whether tried before a court or as submit to binding arbitration as set forth herein.

14.16 Governing Law . This Plan and each Award Agreement and all claims or causes of action or other matters (whether in contract, tort or otherwise) that may be based upon, arise out of or relate to this Plan or any Award Agreement or the negotiation, execution or performance of this Plan or any Award Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, excluding any conflict or choice of law rule or principle that might otherwise refer construction or interpretation of this Plan to the substantive law of another jurisdiction.

14.17 Jurisdiction . By accepting an Award, each Participant will be deemed to (a) have submitted irrevocably and unconditionally to the jurisdiction of the federal and state courts located within the geographic boundaries of the United States District Court for the Southern District of New York for the purpose of any suit, action or other proceeding arising out of or based upon the Plan or any Award; (b) agree not to commence any suit, action or other proceeding arising out of or based upon the Plan or an Award, except in the federal and state courts located within the geographic boundaries of the United States District Court for the Southern District of New York; and (c) waive, and agree not to assert, by way of motion as a defense or otherwise, in any such suit, action or proceeding, any claim that it is not subject personally to the jurisdiction of the above-named courts that its property is exempt or immune from attachment or execution, that the suit, action or proceeding is brought in an inconvenient forum, that the venue of the suit, action or proceeding is improper or that the Plan or an Award or the subject matter thereof may not be enforced in or by such court.

* * *

Exhibit 10.21

PARTY CITY HOLDCO INC.

EXECUTIVE ANNUAL INCENTIVE PLAN

This Executive Annual Incentive Plan (the “Plan”) has been established to advance the interests of Party City Holdco Inc. (the “Company”) by providing for the grant of Awards to eligible employees of the Company and its subsidiaries, including Awards intended to qualify for the performance-based compensation exemption under Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”) (Section 162(m) of the Code, together with the regulations thereunder, “Section 162(m)”), to the extent applicable. Awards intended to qualify for the performance-based compensation exemption under Section 162(m), to the extent applicable, are referred to herein as “Exempt Awards”. Both Exempt Awards and Awards that are not Exempt Awards may be granted under the Plan.

I. ADMINISTRATION

The Plan will be administered by the Committee and its delegates (the Committee and its delegates, to the extent of such delegation, are referred to herein as the “Administrator”); provided , that all determinations and other actions of the Administrator required by the performance-based compensation provisions of Section 162(m) to be made or taken by a “compensation committee” (as defined in Section 162(m)) will be made or taken hereunder directly by the Committee, and all references to the Administrator herein are to be construed accordingly. For purposes of the Plan, the “Committee” means the Compensation Committee of the Board of Directors of the Company (the “Board”), except that, with respect to Exempt Awards, if any member of the Compensation Committee is not an “outside director” (as defined in Section 162(m)), “Committee” means a subcommittee of the Compensation Committee (or other committee established by the Board) consisting solely of those Compensation Committee members who are “outside directors” as so defined.

The Administrator has the authority to interpret the Plan and Awards, to determine eligibility for Awards, to determine the terms of and the conditions applicable to any Award, and generally to do all things necessary to administer the Plan. The Administrator may prescribe, amend and rescind rules and regulations relating to the Plan, define terms not otherwise defined herein, and take or approve such further actions as it determines necessary or appropriate to the administration of the Plan, such as correcting a defect or supplying any omission, or reconciling any inconsistency, so that the Plan or any Award complies with applicable law, regulations and listing requirements and so as to avoid unanticipated consequences or address unanticipated events deemed by the Committee to be inconsistent with the purposes of the Plan. Any interpretation or decision by the Administrator with respect to the Plan or any Award will be final and conclusive as to all parties.

II. ELIGIBILITY; PARTICIPANTS

Executive officers and other key employees of the Company and its subsidiaries shall be eligible to participate in the Plan. The Committee will select, from among those eligible, the persons who will from time to time participate in the Plan (each, a “Participant”). Participation with respect to one Award under the Plan will not entitle an individual to participate with respect to a subsequent Award or Awards, if any.

III. GRANT OF AWARDS

The term “Award” as used in the Plan means an award opportunity that is granted to a Participant with respect to a specified performance period consisting of the Company’s fiscal year or such other period as the Administrator may determine (such period, the “Performance Period”). A Participant who is granted an Award will be entitled to a payment, if any, under the Award only if all conditions to payment have been satisfied in accordance with the Plan and the terms of the Award. By accepting (or, under such rules as the Committee may prescribe, being deemed to have accepted) an Award, the Participant agrees (or will be deemed to agree) to the terms of the Award and the Plan. For each Award, the Administrator shall establish the following:

(a) the Performance Criteria (as defined in Section IV below) applicable to the Award;

(b) the amount or amounts that will be payable (subject to adjustment in accordance with Section V) if the Performance Criteria are achieved;

(c) the consequences of the Participant’s change in employment status (to the extent different from that set forth in Section VI); and

(d) such other terms and conditions as the Administrator deems appropriate, subject in each case to the terms of the Plan.

For Exempt Awards, (i) such terms shall be established by the Committee when the outcome is substantially uncertain and not later than (A) the ninetieth (90th) day after the beginning of the Performance Period, in the case of a Performance Period of 360 days or longer, or (B) the end of the period constituting the first quarter of the Performance Period, in the case of a Performance Period of less than 360 days, and (ii) once the Committee has established the terms of such Award in accordance with the foregoing, it shall not thereafter adjust such terms, except to reduce payments, if any, under the Award in accordance with Section V or as otherwise permitted in accordance with the requirements of Section 162(m).

IV. PERFORMANCE CRITERIA

As used in the Plan, “Performance Criteria” or “Performance Criterion” means specified criteria, other than the mere continuation of employment or the mere passage of time, the satisfaction of which is a condition for the vesting, payment or full enjoyment of an Award, including, for the avoidance of doubt, any individual performance factors. A Performance Criterion and any targets with respect thereto determined by the Committee need not be based upon an increase, a positive or improved result or avoidance of loss and may be applied to the Participant individually, or to a business unit or division or the Company as a whole. For Exempt Awards, a Performance Criterion will mean an objectively determinable measure or objectively determinable measures of performance relating to any or any combination of the

following (measured either absolutely or by reference to an index or indices and determined either on a consolidated basis or, as the context permits, on a divisional, subsidiary, line of business, project or geographical basis or in combinations thereof): net sales; system-wide sales; comparable store sales; revenue; revenue growth or product revenue growth; operating income (before or after taxes); adjusted operating income; adjusted net income; adjusted earnings per share; channel revenue; channel revenue growth; franchising commitments; manufacturing profit; manufacturing profit margin; store closures; pre- or after-tax income or loss (before or after allocation of corporate overhead and bonus); earnings or loss per share; net income or loss (before or after taxes); return on equity; total stockholder return; return on assets or net assets; appreciation in and/or maintenance of the price of the shares or any other publicly-traded securities of the Company; market share; gross profits; earnings or losses (including earnings or losses before taxes, before interest and taxes, or before interest, taxes, depreciation and/or amortization); adjusted earnings or losses (including adjusted earnings or losses before taxes, before interest and taxes, or before interest, taxes, depreciation and/or amortization); economic value-added models or equivalent metrics; comparisons with various stock market indices; reductions in costs; cash flow or cash flow per share (before or after dividends); return on capital (including return on total capital or return on invested capital); cash flow return on investment; improvement in or attainment of expense levels or working capital levels, including cash, inventory and accounts receivable; operating margin; gross margin; year-end cash; cash margin; debt reduction; stockholders equity; operating efficiencies; customer satisfaction; customer growth; employee satisfaction; supply chain achievements (including establishing relationships with manufacturers or suppliers of component materials and manufacturers of the Company’s products); points of distribution; gross or net store openings; co-development, co-marketing, profit sharing, joint venture or other similar arrangements; financial ratios, including those measuring liquidity, activity, profitability or leverage; cost of capital or assets under management; financing and other capital raising transactions (including sales of the Company’s equity or debt securities, factoring transactions, sales or licenses of the Company’s assets, including its intellectual property, whether in a particular jurisdiction or territory or globally, or through partnering transactions); implementation, completion or attainment of measurable objectives with respect to research, development, manufacturing, commercialization, products or projects, production volume levels, acquisitions and divestitures; and recruiting and maintaining personnel. The Committee may establish that one or more of the Performance Criteria applicable to any Award will be adjusted in an objectively determinable manner to reflect events (for example, the impact of charges for restructurings, discontinued operations, mergers, acquisitions, extraordinary items, and other unusual or non-recurring items, and the cumulative effects of tax or accounting changes, each as defined by U.S. generally accepted accounting principles) occurring during the Performance Period that affect the applicable Performance Criterion or Criteria; provided , however , that such adjustments must be consistent with the requirements of Section 162(m) in the case of Exempt Awards.

V. CERTIFICATION OF PERFORMANCE; AMOUNT PAYABLE UNDER AWARDS

As soon as practicable after the close of a Performance Period, the Administrator will determine whether and to what extent, if at all, the Performance Criterion or Criteria applicable to each Award granted for the Performance Period have been satisfied and, in the case

of Exempt Awards, will take such steps as it determines to be sufficient to satisfy the certification requirement under Section 162(m) as to such performance results. The Administrator shall then determine the actual payment, if any, under each Award. No amount may be paid under any Exempt Award unless such certification requirement has been satisfied as set forth above, except as provided by the Committee consistent with the requirements of Section 162(m). The Administrator may, in its sole and absolute discretion and with or without specifying its reasons for doing so, after determining the amount that would otherwise be payable under any Award for a Performance Period, reduce (including to zero) the actual payment, if any, to be made under such Award or, in the case of Awards other than Exempt Awards, otherwise adjust the amount payable under such Award. The Administrator may exercise the discretion described in the immediately preceding sentence either in individual cases or in ways that affect more than one Participant. The actual payment under an Exempt Award may be less than (but in no event more than) the amount indicated by the certified level of achievement under the Award. The actual payment under an Award other than an Exempt Award may be more or less than the amount indicated by the level of achievement under the Award. In each case the Administrator’s discretionary determination, which may affect different Awards differently, will be binding on all parties.

VI. PAYMENT UNDER AWARDS

Except as otherwise determined by the Administrator or as otherwise provided in this Section VI, all payments under the Plan will be made, if at all, by the later to occur of (i) the period ending on the 15th day of the third month of the calendar year following the calendar year in which the Performance Period ends and (ii) the period ending on the 15th day of the third month of the Company fiscal year following the Company fiscal year in which the Performance Period ends; provided , that the Administrator may authorize elective deferrals of any Award payments in accordance with the deferral rules of Section 409A of the Code and the regulations thereunder (“Section 409A”). Except as otherwise determined by the Administrator, an Award payment will not be made to a Participant unless the Participant has remained employed with the Company and its subsidiaries through the date of payment. Any deferrals with respect to an Exempt Award will be subject to adjustment for notional interest or other notional earnings on a basis, determined by the Administrator, that is consistent with qualification of the Award as exempt performance-based compensation under Section 162(m). Awards under the Plan are intended either to qualify for exemption from, or to comply with the requirements of, Section 409A.

VII. PAYMENT LIMITS

The maximum amount payable to any Participant in any fiscal year of the Company under Exempt Awards will be $5 million, which limitation, with respect to any such Awards for which payment is deferred in accordance with Section VI above, shall be applied without regard to such deferral.

VIII. TAX WITHHOLDING; LIMITATION ON LIABILITY

All payments under the Plan will be subject to reduction for applicable tax and other legally or contractually required withholdings.

Neither the Company nor any affiliate, nor the Administrator, nor any person acting on behalf of the Company, any affiliate, or the Administrator, will be liable for any adverse tax or other consequences to any Participant or to the estate or beneficiary of any Participant or to any other holder of an Award that may arise or otherwise be asserted with respect to an Award, including, but not limited to, by reason of the application of Section X below or any acceleration of income or any additional tax (including any interest and penalties) asserted by reason of the failure of an Award to satisfy the requirements of Section 409A or by reason of Section 4999 of the Code.

IX. AMENDMENT AND TERMINATION

The Committee may amend the Plan at any time and from time to time; provided , that, with respect to Exempt Awards, no amendment for which Section 162(m) would require shareholder approval in order to preserve the eligibility of such Awards as exempt performance-based compensation shall be effective unless approved by the shareholders of the Company in a manner consistent with the requirements of Section 162(m). The Committee may at any time terminate the Plan.

X. MISCELLANEOUS

Awards held by a Participant are subject to forfeiture, termination and rescission, and a Participant will be obligated to return to the Company payments received with respect to Awards, in each case, to the extent provided by the Administrator in connection with (i) a breach by the Participant of an Award agreement or the Plan, or any employment, non-competition, non-solicitation, confidentiality or similar covenant or agreement with the Company or any of its affiliates or (ii) an overpayment to the Participant of incentive compensation due to inaccurate financial data. Without limiting the generality of the foregoing, the Administrator may recover Awards and payments under or gain in respect of any Award in accordance with any applicable Company clawback or recoupment policy, as such policy may be amended and in effect from time to time, or as otherwise required by law or applicable stock exchange listing standards, including, without limitation, Section 10D of the Securities Exchange Act of 1934, as amended. Each Participant, by accepting an Award pursuant to the Plan, agrees to return the full amount required under this Section X at such time and in such manner as the Administrator shall determine in its sole discretion and consistent with applicable law.

No person shall have any claim or right to be granted an Award, nor shall the selection for participation in the Plan for any Performance Period be construed as giving a Participant the right to be retained in the employ or service of the Company or its affiliates for that Performance Period or for any other period. The loss of an Award will not constitute an element of damages in the event of termination of employment for any reason, even if the termination is in violation of an obligation of the Company or any affiliate to the Participant.

In the case of any Exempt Award, the Plan and such Award will be construed and administered to the maximum extent permitted by law in a manner consistent with qualifying the Award for the exemption for performance-based compensation under Section 162(m), notwithstanding anything to the contrary in the Plan. Awards will not be required to comply with the provisions of the Plan applicable to solely Exempt Awards (including, without limitation, the composition of the Committee as set forth in Section I above) if and to the extent they are eligible (as determined by the Committee) for exemption from such provisions by reason of the transition relief set forth in Treas. Regs. § 1.162-27(f).

A Participant’s rights and interest under the Plan may not be assigned, transferred, conveyed, gifted, pledged or otherwise hypothecated; provided that a Participant may, pursuant to a form or other applicable method approved by the Administrator, establish that payment will be made to a beneficiary of a Participant in the event of a Participant’s death prior to the payment of any Award to which the Participant is otherwise entitled and the Company shall make such payment in accordance therewith. Any attempted assignment or transfer shall be null and void and shall extinguish, in the Committee’s sole discretion, the Company’s obligation under the Plan to pay Awards with respect to the Participant.

The Plan shall be governed by the laws of the State of New York, without giving effect to any choice of law provisions that might otherwise refer construction or interpretation of the Plan to the substantive laws of another jurisdiction. The Plan shall be effective upon adoption of the Plan by the Board (the “Effective Date”) and shall supersede and replace the Company’s annual incentive plan with respect to Awards granted to eligible executive officers and employees after the Effective Date.

E XHIBIT 10.22

P ARTY C ITY H OLDCO I NC .

N ON -E MPLOYEE D IRECTOR C OMPENSATION P ROGRAM

Effective as of the initial public offering (the “ IPO ”) of the common stock of Party City Holdco Inc. (the “ Company ”), each individual who provides services to the Company as a director, other than a director who is employed by the Company or a subsidiary or who is affiliated with Thomas H. Lee Partners, L.P. or Advent International Corporation, or an affiliate of either (a “ Non-Employee Director ”), shall be entitled to receive the following amounts of compensation:


Type of Compensation		Amount and Form of Payment

Annual cash retainer		$70,000 (payable in arrears on a quarterly basis)

Equity retainer		Annual grant of stock options with an aggregate exercise price, which will be equal to the aggregate fair market value of the shares of the Company’s common stock underlying the options on the date of grant (as determined below), of $70,000 (with the number of stock options actually granted to be based on the closing price of the Company’s common stock on the NYSE on the grant date, rounded down to the nearest whole share); such stock options to be granted at the time of the Company’s annual meeting of stockholders and to vest in full on the earliest of the first anniversary of the date of grant, the termination of the Non-Employee Director’s service due to his or her death or a Change in Control (as defined in the applicable stock option agreement), subject, in each case, to the director’s continued service as a member of the board of directors of the Company through such date. Following the IPO, a Non-Employee Director whose appointment or election to the board of directors of the Company is effective at a time other than the Company’s annual meeting of stockholders will receive a grant of stock options upon his or her appointment or election, as applicable, with respect to a number of shares of the Company’s common stock that is determined on the same basis as described above, but pro-rated by multiplying the number of stock options that


		would otherwise be granted by a fraction, (i) the numerator of which is the number of days from such appointment or election until the first anniversary of the annual meeting of stockholders that immediately preceded such appointment or election, and (ii) the denominator of which is 365, and then rounding down the number of options granted to the nearest whole number. Such stock options vest on the same basis as is described above.
Additional annual cash retainer for audit committee chair		$15,000 (payable in arrears on a quarterly basis and in lieu of separate cash retainer for serving as audit committee member)

Additional annual cash retainer for compensation committee chair and nominating and governance committee chair		$10,000 (payable in arrears on a quarterly basis)

In addition, Non-Employee Directors will be reimbursed by the Company for reasonable and customary expenses incurred in connection with attendance at board of director and committee meetings, in accordance with the Company’s policies as in effect from time to time.

For the avoidance of doubt, directors who are employees of the Company or one of its subsidiaries, or who are affiliated with Thomas H. Lee Partners, L.P. or Advent International Corporation, or an affiliate of either, will not receive compensation for their service as a director, other than reimbursement for reasonable and customary expenses incurred in connection with attendance at board of director and committee meetings, in accordance with the Company’s policies as in effect from time to time.

To the extent permitted by applicable Company plan terms, Non-Employee Directors may elect to defer their annual cash retainers in accordance with the terms and provisions of the Company’s nonqualified deferred compensation plan, as such plan may be in effect from time to time, or such other program (if any) as is maintained by the Company.

This Non-Employee Director Compensation Program may be amended or terminated by the board of directors of the Company (or the compensation committee thereof) at any time.

Exhibit 10.23

Party City Holdco Inc.

Amended and Restated 2012 Omnibus Equity Incentive Plan

NONQUALIFIED STOCK OPTION AWARD AGREEMENT (NON-EMPLOYEE DIRECTORS)

THIS AGREEMENT (this “ Award Agreement ”), is made effective as of [ — ], (the “ Date of Grant ”), by and between Party City Holdco Inc., a Delaware corporation (the “ Company ”), and [ — ] (the “ Participant ”). Capitalized terms not otherwise defined herein shall have the meanings set forth in the Party City Holdco Inc. Amended and Restated 2012 Omnibus Equity Incentive Plan (as amended from time to time, the “ Plan ”).

R E C I T A L S :

WHEREAS , the Committee has determined that it would be in the best interests of the Company and its stockholders to grant the option provided for herein to the Participant pursuant to the Plan and the terms set forth herein.

NOW THEREFORE , in consideration of the mutual covenants hereinafter set forth, the parties agree as follows:

1. Grant of the Option . The Company hereby grants to the Participant the right and option to purchase, on the terms and conditions set forth in the Plan and this Award Agreement, [ — ] Shares (the “ Option ”), subject to adjustment as set forth in the Plan. The Option is intended to be a Nonqualified Stock Option. The Option shall be subject to the vesting conditions described in Section 3 below. At any time, the portion of the Option that has become vested and exercisable is hereinafter referred to as the “ Vested Portion ” and any portion of the Option that is not a Vested Portion is hereinafter referred to as the “ Unvested Portion ”.

2. Option Price . The purchase price of all of the Shares subject to the Option shall be $[ — ] per Share (the “ Option Price ”), subject to adjustment as set forth in the Plan.

3. Vesting. The Option shall vest in full on the first to occur of (a) the first anniversary of the Date of Grant, (b) the termination of the Participant’s Service as a result of his or her death or (c) a Change of Control, subject, in each case, to the Participant’s continued Service through the applicable date.

4. Forfeiture, Expiration .

a. Termination of Service Generally . Subject to Section 3(b) above, if the Participant’s Service ceases for any reason, the Option to the extent not then vested, will be automatically and immediately forfeited.

b. Termination of Service for Cause . Notwithstanding anything herein to the contrary, in the event the Participant’s Service is terminated for Cause or the Participant resigns at a time when the Participant’s acts or omissions constituted grounds to terminate the Participant’s Service for Cause without regard to any applicable cure rights, the Vested Portion of

the Option shall also be forfeited without consideration. For purposes of this Award Agreement, the term “ Cause ” shall mean the Board or its designee has determined, in its reasonable judgment, that any one or more of the following has occurred: (a) the Participant shall have been convicted of, indicted for, or shall have pleaded guilty or nolo contendere to, any felony or any indictable offense or crime that impairs the Participant’s ability to perform his or her duties with the Company and/or its Subsidiaries; (b) the Participant shall have committed any fraud, theft, embezzlement, misappropriation of funds or any unauthorized use or destruction of any asset of the Company; or (c) the Participant shall have willfully engaged in any other conduct that involves a breach of fiduciary obligation on the part of the Participant or otherwise could reasonably be expected to have a material adverse effect upon the business, interests or reputation of the Company or any of its Affiliates.

c. Expiration of Option Term . To the extent not earlier terminated or forfeited, any unexercised portion of the Option shall expire upon the tenth (10th) anniversary of the Date of Grant.

5. Period of Exercise . Subject to the provisions of the Plan and this Award Agreement, the Participant may exercise all or any part of the Vested Portion at any time prior to the earliest to occur of:

a. the tenth (10th) anniversary of the Date of Grant;

b. the date that is ninety (90) days following termination of the Participant’s Service for any reason other than death or Cause; and

c. the date that is twelve (12) months following termination of the Participant’s Service due to death.

6. Exercise Procedures .

a. Notice of Exercise . Subject to Section 5 hereof, the Vested Portion may be exercised by delivering to the Company at its principal office written notice of intent to so exercise in the form attached hereto as Exhibit A (such notice, a “ Notice of Exercise ”) or by such other means as is permitted by the Committee in its sole discretion. Such Notice of Exercise or such exercise by such other means shall be accompanied by payment in full of the aggregate Option Price for the Shares to be acquired upon exercise. In the event the Option is being exercised by the Participant’s representative, the Notice of Exercise or such exercise by such other means shall be accompanied by proof (satisfactory to the Committee) of the representative’s right to exercise the Option. The aggregate Option Price for the Shares to be exercised may be paid in cash or its equivalent (e.g., by cashiers check) or by such other means as are permitted by the Committee in its sole discretion.

b. Rights of Participant; Method of Exercise . Neither the Participant nor the Participant’s representative shall have any rights to dividends, voting rights or other rights of a stockholder with respect to Shares subject to the Option until (i) the Participant has given a Notice of Exercise of the Option (or has otherwise exercised the Option in a manner permitted by the Committee in its sole discretion) and paid in full for such Shares, (ii) such Shares have been

issued, and (iii) if applicable, the Participant has satisfied any other conditions imposed by the Committee pursuant to the Plan. In the event of the Participant’s death, the Vested Portion shall be exercisable by the executor or administrator of the Participant’s estate, or the person or persons to whom the Participant’s rights under this Award Agreement shall pass by will or by the laws of descent and distribution, as the case may be. Any heir or legatee of the Participant shall take rights herein granted subject to the terms and conditions of this Award Agreement and the Plan.

7. No Right to Continued Service . The granting of the Option shall impose no obligation on the Company, any Subsidiary or the Board to continue the Service of the Participant and shall not lessen or affect any right that the Company, any Subsidiary or the Board may have to terminate the Service of the Participant.

8. Certain Tax Matters . The Participant expressly acknowledges and agrees that he or she shall be responsible for satisfying and paying all taxes arising from or due in connection with the grant, vesting, exercise and holding of the Option. The Company and its Subsidiaries shall have no liability or obligation relating to the foregoing.

9. Transferability . Unless otherwise determined by the Committee, the Participant shall not be permitted to transfer or assign the Option except in the event of death and in accordance with Section 14.6 of the Plan.

10. Adjustment of Option . Adjustments to the Option (or any Shares underlying the Option) shall be made in accordance with the terms of the Plan.

11. Option Subject to Plan . By entering into this Award Agreement the Participant agrees and acknowledges that the Participant has received and read a copy of the Plan. The Option is subject to the terms and conditions of the Plan. In the event of a conflict between any term hereof and a term of the Plan, the applicable term of the Plan shall govern and prevail.

12. Choice of Law . This Award Agreement, and all claims or causes of action or other matters that may be based upon, arise out of or relate to this Award Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, excluding any conflict or choice of law rule or principle that might otherwise refer construction or interpretation thereof to the substantive laws of another jurisdiction.

13. Consent to Jurisdiction . The Company and the Participant, by his or her execution hereof, (a) hereby irrevocably submit to the exclusive jurisdiction of the state and federal courts in the State of Delaware for the purposes of any claim or action arising out of or based upon this Award Agreement or relating to the subject matter hereof, (b) hereby waive, to the extent not prohibited by applicable law, and agree not to assert by way of motion, as a defense or otherwise, in any such claim or action, any claim that it, he or she is not subject personally to the jurisdiction of the above-named courts, that its, his or her property is exempt or immune from attachment or execution, that any such proceeding brought in the above-named court is improper or that this Award Agreement or the subject matter hereof may not be enforced in or by such court and (c) hereby agree not to commence any claim or action arising out of or based upon this Award Agreement or relating to the subject matter hereof other than before the above-named courts nor to make any motion or take any other action seeking or intending to cause the transfer or removal of any such claim or action to any court other than the above-named courts whether on the grounds of inconvenient forum or otherwise; provided , however , that the Company and the

Participant may seek to enforce a judgment issued by the above-named courts in any proper jurisdiction. The Company and the Participant hereby consent to service of process in any such proceeding, and agree that service of process by registered or certified mail, return receipt requested, at its, his or her address specified pursuant to Section 16 is reasonably calculated to give actual notice.

14. WAIVER OF JURY TRIAL . TO THE EXTENT NOT PROHIBITED BY APPLICABLE LAW THAT CANNOT BE WAIVED, EACH PARTY HERETO HEREBY WAIVES AND COVENANTS THAT HE, SHE OR IT SHALL NOT ASSERT (WHETHER AS PLAINTIFF, DEFENDANT OR OTHERWISE) ANY RIGHT TO TRIAL BY JURY IN ANY FORUM IN RESPECT OF ANY ISSUE OR ACTION, CLAIM, CAUSE OF ACTION OR SUIT (IN CONTRACT, TORT OR OTHERWISE), INQUIRY, PROCEEDING OR INVESTIGATION ARISING OUT OF OR BASED UPON THIS AWARD AGREEMENT OR THE SUBJECT MATTER HEREOF OR IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE TRANSACTIONS CONTEMPLATED HEREBY, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING. EACH PARTY HERETO ACKNOWLEDGES THAT IT HAS BEEN INFORMED BY THE OTHER PARTY HERETO THAT THIS SECTION 14 CONSTITUTES A MATERIAL INDUCEMENT UPON WHICH THEY ARE RELYING AND SHALL RELY IN ENTERING INTO THIS AWARD AGREEMENT. ANY PARTY HERETO MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION 14 WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF EACH SUCH PARTY TO THE WAIVER OF ITS RIGHT TO TRIAL BY JURY.

15. Compliance with Securities Laws . Shares shall not be issued pursuant to this Award Agreement unless the issuance and delivery of such Shares comply with (or are exempt from) all applicable requirements of law, including, without limitation, the Securities Act of 1933, as amended, the rules and regulations promulgated thereunder, state securities laws and regulations, and the regulations of any stock exchange or other securities market on which the Company’s securities may then be traded. The Company shall not be obligated to file any registration statement under any applicable securities laws to permit the purchase or issuance of any Shares, and accordingly any certificates for Shares may have an appropriate legend or statement of applicable restrictions endorsed thereon. If the Company deems it necessary to ensure that the issuance of Shares under this Award Agreement is not required to be registered under any applicable securities laws, the Participant shall deliver to the Company an agreement containing such representations, warranties and covenants as the Company may reasonably require.

16. Notices . Any notice or other communication provided for herein or given hereunder to a party hereto must be in writing, and shall be deemed to have been given (a) when personally delivered or delivered by facsimile transmission with confirmation of delivery, (b) one (1) business day after deposit with Federal Express or similar overnight courier service, or (c) three (3) business days after being mailed by first class mail, return receipt requested. A notice shall be addressed to the Company at its principal executive office, attention Chief Executive Officer and to the Participant at the address that he or she most recently provided to the Company.

17. Entire Agreement . This Award Agreement, including Exhibit A attached hereto, and the Plan constitute the entire agreement and understanding among the parties hereto in

respect of the subject matter hereof and supersede all prior and contemporaneous arrangements, agreements and understandings, whether oral or written and whether express or implied, and whether in term sheets, appendices, exhibits, presentations or otherwise, among the parties hereto, or between any of them, with respect to the subject matter hereof; provided , that , the Participant shall continue to be bound by any other confidentiality, non-competition, non-solicitation and other similar restrictive covenants contained in any other agreements between the Participant and the Company, its Affiliates and their respective predecessors to which the Participant is bound.

18. Amendment; Waiver . No amendment or modification of any term of this Award Agreement shall be effective unless signed in writing by or on behalf of the Company and the Participant, and made in accordance with the terms of the Plan. No waiver of any breach or condition of this Award Agreement shall be deemed to be a waiver of any other or subsequent breach or condition whether of like or different nature.

19. Successors and Assigns; No Third Party Beneficiaries . The provisions of this Award Agreement shall inure to the benefit of, and be binding upon, the Company and its successors and assigns and upon the Participant and the Participant’s heirs, successors, legal representatives and permitted assigns. Nothing in this Award Agreement, express or implied, is intended to confer on any person other than the Company and the Participant, and their respective heirs, successors, legal representatives and permitted assigns, any rights, remedies, obligations or liabilities under or by reason of this Award Agreement.

20. Signature in Counterparts . This Award Agreement may be signed in counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument.

21. No Guarantees Regarding Tax Treatment . The Participant (or his beneficiaries) shall be responsible for all taxes with respect to the Option. The Committee and the Company make no guarantees regarding the tax treatment of the Option. Neither the Committee nor the Company has any obligation to take any action to prevent the assessment of any tax under Section 409A (as defined below), Section 4999 of the Code or otherwise and none of the Company, any Subsidiary or Affiliate, or any of their employees or representatives shall have any liability to a Participant with respect thereto.

* * *

IN WITNESS WHEREOF, the parties hereto have executed this Award Agreement.


PARTY CITY HOLDCO INC.

By:
		Name:
		Title:

Agreed and acknowledged as of the date first above written:

[ — ]

EXHIBIT A

NOTICE OF EXERCISE


Party City Holdco Inc.
[ADDRESS]
[ADDRESS]
Attention: Chief Executive Officer		Date of Exercise:

Ladies & Gentlemen:

1. Exercise of Option . This constitutes notice to Party City Holdco Inc. (the “ Company ”) that pursuant to my Nonqualified Stock Option Award Agreement, dated (the “ Award Agreement ”), I elect to purchase the number of Shares set forth below and for the price set forth below. Capitalized terms used and not otherwise defined herein shall have the meaning ascribed to such term in the Award Agreement. By signing and delivering this notice to the Company, I hereby acknowledge that I am the holder of the Option exercised by this notice and have full power and authority to exercise the same.


Number of Shares as to which the Option is exercised (the “ Shares ”):

Date of Grant:

Shares to be issued in name of:

Total exercise price of the Shares:

2. Form of Payment . Forms of payment other than cash or its equivalent (e.g., by cashier’s check) are permissible only to the extent approved by the Committee, in its sole discretion.

3. Delivery of Payment . With this notice, I hereby deliver to the Company the full exercise price of the Shares, and any and all withholding taxes due in connection with the exercise of my Option or have otherwise satisfied such requirements.

4. Rights as Stockholder . While the Company shall endeavor to process this notice in a timely manner, I acknowledge that until the issuance of the Shares (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company) and my satisfaction of any other conditions imposed by the Committee pursuant to the Plan or set forth in the Award Agreement, no right to vote or receive dividends or any other rights as a stockholder shall exist with respect to such shares, notwithstanding the exercise of my Option. No adjustment shall be made for a dividend or other right for which the record date is prior to the date of issuance of the Shares.

5. Interpretation . Any dispute regarding the interpretation of this notice shall be submitted promptly by me or by the Company to the Committee. The resolution of such a dispute by the Committee shall be final and binding on all parties.

6. Entire Agreement . The Plan and the Award Agreement under which the Shares were granted are incorporated herein by reference, and together with this notice constitute the entire agreement of the parties with respect to the subject matter hereof.


Very truly yours,




(social security number)

Exhibit 10.24

Party City Holdco Inc.

Amended and Restated 2012 Omnibus Equity Incentive Plan

NONQUALIFIED STOCK OPTION AWARD AGREEMENT

THIS AGREEMENT (this “ Award Agreement ”), is made effective as of [ — ], 2015 (the “ Date of Grant ”), by and between Party City Holdco Inc., a Delaware corporation (the “ Company ”), and [ — ] (the “ Participant ”). Capitalized terms not otherwise defined herein shall have the meanings set forth in the Party City Holdco Inc. Amended and Restated 2012 Omnibus Equity Incentive Plan (as amended from time to time, the “ Plan ”).

R E C I T A L S :

NOW THEREFORE , in consideration of the mutual covenants hereinafter set forth, the parties agree as follows:

2. Option Price . The purchase price of all of the Shares subject to the Option shall be $[ — ] per Share (the “ Option Price ”), subject to adjustment as set forth in the Plan.

3. Vesting of the Option .

a. General . Subject to Sections 3(b) and 3(c) hereof, twenty percent (20%) of the Option shall vest on each of the first five anniversaries of the Date of Grant (each, a “ Time-Vesting Date ”), subject to the Participant’s continued Service on the applicable Time-Vesting Date, such that 100% of the Option shall be vested on the fifth (5th) anniversary of the Date of Grant.

b. Termination without Cause Following a Change of Control . The Option, to the extent not then vested or forfeited and to the extent then outstanding, shall become immediately and fully vested upon a termination of the Participant’s Service by the Company without Cause within one year following a Change of Control.

c. Termination without Cause other than Following a Change of Control . Upon a termination of the Participant’s Service by the Company without Cause other than in circumstances described in subsection (b) above, the Participant will immediately vest in that portion of the Option that would have vested in the 12-month period following the date of such termination of Service had the Participant remained in Service during such period.

4. Forfeiture; Expiration .

a. Termination of Employment . Upon the termination of the Participant’s Service by the Company for any reason at any time, any Unvested Portion of the Option (after giving effect to any accelerated vesting provided in Sections 3(b) or 3(c) above) will be forfeited automatically without consideration. Notwithstanding anything herein to the contrary, in the event the Participant’s Service is terminated for Cause or the Participant resigns at a time when the Participant’s acts or omissions constituted grounds to terminate the Participant’s Service for Cause without regard to any applicable cure rights, the Vested Portion of the Option shall also be forfeited without consideration.

b. Breach of Restrictive Covenants . Any outstanding portion of the Option, including the Vested Portion, shall be forfeited without consideration if the Participant breaches any restrictive covenant relating to non-competition, non-solicitation and/or non-disparagement and/or other similar restrictive covenants in favor of the Company or any of its Subsidiaries.

c. Expiration of Option Term . To the extent not earlier terminated or forfeited, any unexercised portion of the Option shall expire upon the tenth (10th) anniversary of the Date of Grant.

a. the tenth (10th) anniversary of the Date of Grant;

b. the date that is sixty (60) days following termination of the Participant’s Service for any reason other than death or Cause; and

c. the date that is ninety (90) days following termination of the Participant’s Service due to death.

6. Exercise Procedures .

the Committee in its sole discretion) and paid in full for such Shares, (ii) such Shares have been issued, and (iii) if applicable, the Participant has satisfied any other conditions imposed by the Committee pursuant to the Plan. In the event of the Participant’s death, the Vested Portion shall be exercisable by the executor or administrator of the Participant’s estate, or the person or persons to whom the Participant’s rights under this Award Agreement shall pass by will or by the laws of descent and distribution, as the case may be. Any heir or legatee of the Participant shall take rights herein granted subject to the terms and conditions of this Award Agreement and the Plan.

7. No Right to Continued Service . The granting of the Option shall impose no obligation on the Company or any Subsidiary to continue the employment or other Service of the Participant and shall not lessen or affect any right that the Company or any Subsidiary may have to terminate the employment or other Service of the Participant.

8. Withholding . The Company shall have the power and the right to deduct or withhold automatically from any payment or Shares deliverable under this Award Agreement, or require the Participant to remit to the Company, the minimum statutory amount to satisfy federal, state, and local taxes, domestic or foreign, required by law or regulation to be withheld with respect to any taxable event arising as a result of this Award Agreement. The Participant authorizes the Company and its Subsidiaries to withhold such amounts due hereunder from any payments otherwise owed to the Participant, but nothing in this sentence shall be construed as relieving the Participant of any liability for satisfying his or her obligation under the preceding provisions of this Section 8.

10. Adjustment of Option . Adjustments to the Option (or any Shares underlying the Option) shall be made in accordance with the terms of the Plan.

court and (c) hereby agree not to commence any claim or action arising out of or based upon this Award Agreement or relating to the subject matter hereof other than before the above-named courts nor to make any motion or take any other action seeking or intending to cause the transfer or removal of any such claim or action to any court other than the above-named courts whether on the grounds of inconvenient forum or otherwise; provided , however , that the Company and the Participant may seek to enforce a judgment issued by the above-named courts in any proper jurisdiction. The Company and the Participant hereby consent to service of process in any such proceeding, and agree that service of process by registered or certified mail, return receipt requested, at its, his or her address specified pursuant to Section 16 is reasonably calculated to give actual notice.

17. Entire Agreement . This Award Agreement, including Exhibit A attached hereto, and the Plan constitute the entire agreement and understanding among the parties hereto in respect of the subject matter hereof and supersede all prior and contemporaneous arrangements, agreements and understandings, whether oral or written and whether express or implied, and whether in term sheets, appendices, exhibits, presentations or otherwise, among the parties hereto, or between any of them, with respect to the subject matter hereof; provided , that , the Participant shall continue to be bound by any other confidentiality, non-competition, non-solicitation and other similar restrictive covenants contained in any other agreements between the Participant and the Company, its Affiliates and their respective predecessors to which the Participant is bound.

* * *

IN WITNESS WHEREOF, the parties hereto have executed this Award Agreement.


PARTY CITY HOLDCO INC.

By:
		Name:
		Title:

Agreed and acknowledged as of the date first above written:

[ — ]

EXHIBIT A

NOTICE OF EXERCISE


Party City Holdco Inc.
[ADDRESS]
[ADDRESS]
Attention: Chief Executive Officer		Date of Exercise:

Ladies & Gentlemen:

1. Exercise of Option . This constitutes notice to Party City Holdco Inc. (the “ Company ”) that pursuant to my Nonqualified Stock Option Award Agreement, dated , 2015 (the “ Award Agreement ”), I elect to purchase the number of Shares set forth below and for the price set forth below. Capitalized terms used and not otherwise defined herein shall have the meaning ascribed to such term in the Award Agreement. By signing and delivering this notice to the Company, I hereby acknowledge that I am the holder of the Option exercised by this notice and have full power and authority to exercise the same.


Number of Shares as to which the Option is exercised (the “ Shares ”):

Date of Grant:

Shares to be issued in name of:

Total exercise price of the Shares:

2. Form of Payment . Forms of payment other than cash or its equivalent (e.g., by cashier’s check) are permissible only to the extent approved by the Committee, in its sole discretion.


Very truly yours,





(social security number)

Exhibit 21.1

List of Subsidiaries of Party City Holdco Inc.


Name		State/Country of Organization or Incorporation
Amscan Asia International Limited		Hong Kong
Amscan de Mexico S.A. de C.V.		Mexico
Amscan Distributors (Canada), Ltd.		Canada
Amscan Europe GmbH		Germany
Amscan Holdings Limited		United Kingdom
Amscan Inc.		New York
Amscan International Limited		United Kingdom
Amscan Japan Co., Ltd.		Japan
Amscan Party Goods Pty. Limited		Australia
Amscan Partyartikel GmbH		Germany
Am-Source, LLC		Rhode Island
Anagram Eden Prairie Property Holdings LLC		Delaware
Anagram Espana S.L.		Spain
Anagram France S.C.S.		France
Anagram International Holdings, Inc.		Minnesota
Anagram International Inc.		Minnesota
Anagram International LLC		Nevada
Anagram International Ltd		United Kingdom
Christy Asia Limited		Hong Kong
Christy Dressup Limited		United Kingdom
Christy’s By Design Limited		United Kingdom
Christy Garments and Accessories Limited		United Kingdom
Convergram de Mexico S. de R.L.		Mexico
Delights Limited		United Kingdom
Everts International Ltd.		United Kingdom
Everts Malaysia SDN BHD		Malaysia
Party City Canada Inc.		Ontario
Party City Corporation		Delaware
Party City Holdings Inc.		Delaware
Party Delights Ltd.		United Kingdom
PC Nextco Holdings, LLC		Delaware
PC Nextco Finance, Inc.		Delaware
PC Intermediate Holdings, Inc.		Delaware
Riethmüller (Polska) Sp.z.o.o.		Poland
Streamers Card & Party Shop Limited		United Kingdom
Streamers Limited		United Kingdom
Travis Designs Limited		United Kingdom
Trisar, Inc.		California
US Balloon Manufacturing Co., Inc.		New York

Exhibit 23.1

Consent of Independent Registered Public Accounting Firm

We consent to the reference to our firm under the caption “Experts” and to the use of our report dated March 13, 2015 (except Note 2, as to which the date is XXX XX, 2015) in the Registration Statement (Form S-1 No. 333-193466) and related Prospectus of Party City Holdco Inc. for the registration of 000,000 shares of its common stock.

Ernst & Young LLP

New York, New York

The foregoing consent is in the form that will be signed at effectiveness upon the completion of the stock split and computation of earnings per share as described in Note 2 to the financial statements.

/s/ Ernst & Young LLP

New York, New York

March 26, 2015