☒
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
☐
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
Delaware
|
46-0539758
|
|
(State or Other Jurisdiction of
Incorporation or Organization)
|
(I.R.S. Employer
Identification No.)
|
|
80 Grasslands Road Elmsford,
NY
|
10523
|
|
(Address of Principal Executive Offices)
|
(Zip Code)
|
Title of each class
|
Trading
Symbol(s)
|
Name of each exchange
on which registered
|
||
Common Stock, Par Value:
$0.01/share |
PRTY
|
New York Stock Exchange
|
Large accelerated filer
|
|
☒
|
|
|
Accelerated filer ☐
|
|
|
Non-accelerated filer
|
|
☐
|
|
|
|
|
|
|
|
|
|
|
|
Smaller reporting company
|
|
☐
|
|
|
|
|
|
Emerging growth company
|
|
☐
|
|
Page
|
|||
PART I
|
|
|||
Item 1. Condensed Consolidated Financial Statements (Unaudited)
|
|
|||
3
|
||||
4
|
||||
5
|
||||
6
|
||||
7
|
||||
8
|
||||
9
|
||||
21
|
||||
36
|
||||
36
|
||||
|
||||
37
|
||||
37
|
||||
37
|
||||
38
|
|
Three Months Ended
June 30,
|
|||||||
|
2019
|
2018
|
||||||
Revenues:
|
|
|
||||||
Net sales
|
$ |
561,702
|
$ |
558,101
|
||||
Royalties and franchise fees
|
2,189
|
2,910
|
||||||
Total revenues
|
563,891
|
561,011
|
||||||
|
|
|
|
|
|
|
|
|
Cost of sales
|
353,056
|
329,477
|
||||||
Wholesale selling expenses
|
16,884
|
17,256
|
||||||
Retail operating expenses
|
96,143
|
92,094
|
||||||
Franchise expenses
|
3,236
|
3,980
|
||||||
General and administrative expenses
|
41,510
|
45,326
|
||||||
Art and development costs
|
5,712
|
5,732
|
||||||
Development stage expenses
|
3,012
|
1,695
|
||||||
Gain on sale/leaseback transaction
|
|
|
(58,381
|
)
|
|
|
—
|
|
Store impairment and restructuring charges
|
5,234
|
—
|
||||||
|
466,406
|
495,560
|
||||||
Income from operations
|
97,485
|
65,451
|
||||||
Interest expense, net
|
30,176
|
25,501
|
||||||
Other expense, net
|
3,342
|
2,532
|
||||||
Income before income taxes
|
63,967
|
37,418
|
||||||
Income tax expense
|
15,962
|
9,370
|
||||||
Net income
|
48,005
|
28,048
|
||||||
Add: Net income attributable to redeemable securities holder
|
—
|
410
|
||||||
Less: Net loss attributable to noncontrolling interests
|
(69
|
) |
(29
|
) | ||||
Net income attributable to common shareholders of Party City Holdco Inc.
|
$ |
48,074
|
$ |
28,487
|
||||
Net income per share attributable to common shareholders of Party City Holdco Inc.–Basic
|
$ |
0.52
|
$ |
0.30
|
||||
Net income per share attributable to common shareholders of Party City Holdco Inc.–Diluted
|
$ |
0.51
|
$ |
0.29
|
||||
Weighted-average number of common shares-Basic
|
93,293,176
|
96,453,884
|
||||||
Weighted-average number of common shares-Diluted
|
93,703,546
|
97,688,233
|
||||||
Dividends declared per share
|
$ |
0.00
|
$ |
0.00
|
||||
|
|
|
|
|
|
|
|
|
Comprehensive income
|
$ |
48,327
|
$ |
18,825
|
||||
Add: Comprehensive income attributable to redeemable securities holder
|
—
|
410
|
||||||
Less: Comprehensive loss attributable to noncontrolling interests
|
(89
|
) |
(55
|
) | ||||
Comprehensive income attributable to common shareholders of Party City Holdco Inc.
|
$ |
48,416
|
$ |
19,290
|
||||
|
Six Months Ended
June 30,
|
|||||||
|
2019
|
2018
|
||||||
Revenues:
|
|
|
||||||
Net sales
|
$ |
1,072,804
|
$ |
1,063,209
|
||||
Royalties and franchise fees
|
4,203
|
5,626
|
||||||
Total revenues
|
1,077,007
|
1,068,835
|
||||||
|
|
|
||||||
Cost of sales
|
692,098
|
646,443
|
||||||
Wholesale selling expenses
|
34,845
|
36,043
|
||||||
Retail operating expenses
|
191,161
|
181,186
|
||||||
Franchise expenses
|
6,539
|
7,762
|
||||||
General and administrative expenses
|
83,435
|
93,991
|
||||||
Art and development costs
|
11,641
|
11,705
|
||||||
Development stage expenses
|
5,238
|
3,998
|
||||||
Gain on sale/leaseback transaction
|
|
|
(58,381
|
)
|
|
|
—
|
|
Store impairment and restructuring charges
|
23,243
|
—
|
||||||
|
989,819
|
981,128
|
||||||
Income from operations
|
87,188
|
87,707
|
||||||
Interest expense, net
|
59,433
|
48,776
|
||||||
Other expense, net
|
4,596
|
3,380
|
||||||
Income before income taxes
|
23,159
|
35,551
|
||||||
Income tax expense
|
5,443
|
8,666
|
||||||
Net income
|
17,716
|
26,885
|
||||||
Add: Net income attributable to redeemable securities holder
|
—
|
410
|
||||||
Less: Net loss attributable to noncontrolling interests
|
(140
|
) |
(59
|
) | ||||
Net income attributable to common shareholders of Party City Holdco Inc.
|
$ |
17,856
|
$ |
27,354
|
||||
Net income per share attributable to common shareholders of Party City Holdco Inc.
–
Basic
|
$ |
0.19
|
$ |
0.28
|
||||
Net income per share attributable to common shareholders of Party City Holdco Inc.
–
Diluted
|
$ |
0.19
|
$ |
0.28
|
||||
Weighted-average number of common shares-Basic
|
93,233,865
|
96,426,235
|
||||||
Weighted-average number of common shares-Diluted
|
93,791,763
|
97,669,309
|
||||||
Dividends declared per share
|
$ |
0.00
|
$ |
0.00
|
||||
|
|
|
|
|
|
|
|
|
Comprehensive income
|
$ |
21,690
|
$ |
22,892
|
||||
Add: Comprehensive income attributable to redeemable securities holder
|
—
|
410
|
||||||
Less: Comprehensive loss attributable to noncontrolling interests
|
(151
|
) |
(73
|
) | ||||
Comprehensive income attributable to common shareholders of Party City Holdco Inc.
|
$ |
21,841
|
$ |
23,375
|
||||
|
Common
Stock |
Additional
Paid-in
Capital |
Retained
Earnings |
Accumulated
Other Comprehensive Loss |
Total Party
City Holdco Inc. Stockholders’ Equity Before Common Stock Held In Treasury |
Common
Stock Held In Treasury |
Total Party
City Holdco Inc.
Stockholders’
Equity |
Non-
Controlling
Interests
|
Total
Stockholders’
Equity |
|||||||||||||||||||||||||||
Balance at March 31, 2019
|
$
|
1,210
|
$
|
925,233
|
$
|
465,056
|
$
|
(45,558
|
)
|
$
|
1,345,941
|
$
|
(327,086
|
)
|
$
|
1,018,855
|
$
|
300
|
$
|
1,019,155
|
||||||||||||||||
Net income (loss)
|
—
|
—
|
48,074
|
—
|
48,074
|
—
|
48,074
|
(69
|
)
|
48,005
|
||||||||||||||||||||||||||
Stock option expense
|
—
|
371
|
—
|
—
|
371
|
—
|
371
|
—
|
371
|
|||||||||||||||||||||||||||
Restricted stock units – time-based
|
—
|
541
|
—
|
—
|
541
|
—
|
541
|
—
|
541
|
|||||||||||||||||||||||||||
Restricted stock units – performance-based
|
—
|
476
|
—
|
—
|
476
|
—
|
476
|
—
|
476
|
|||||||||||||||||||||||||||
Director – non-cash compensation
|
—
|
88
|
—
|
—
|
88
|
—
|
88
|
—
|
88
|
|||||||||||||||||||||||||||
Warrant expense
|
—
|
129
|
—
|
—
|
129
|
—
|
129
|
—
|
129
|
|||||||||||||||||||||||||||
Foreign currency adjustments
|
—
|
—
|
—
|
556
|
556
|
—
|
556
|
(20
|
)
|
536
|
||||||||||||||||||||||||||
Impact of foreign exchange contracts, net
|
—
|
—
|
—
|
(214
|
)
|
(214
|
)
|
—
|
(214
|
)
|
—
|
(214
|
)
|
|||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at June 30, 2019
|
$
|
1,210
|
$
|
926,838
|
$
|
513,130
|
$
|
(45,216
|
)
|
$
|
1,395,962
|
$
|
(327,086
|
)
|
$
|
1,068,876
|
$
|
211
|
$
|
1,069,087
|
||||||||||||||||
|
Common
Stock |
Additional
Paid-in
Capital |
Retained
Earnings |
Accumulated
Other Comprehensive Loss |
Total Party
City Holdco Inc. Stockholders’ Equity Before Common Stock Held In Treasury |
Common
Stock Held In Treasury |
Total Party
City Holdco Inc.
Stockholders’
Equity |
Non-
Controlling
Interests
|
Total
Stockholders’
Equity |
|||||||||||||||||||||||||||
Balance at March 31, 2018
|
$
|
1,198
|
$
|
918,205
|
$
|
371,385
|
$
|
(30,600
|
)
|
$
|
1,260,188
|
$
|
(286,733
|
)
|
$
|
973,455
|
$
|
337
|
$
|
973,792
|
||||||||||||||||
Net income (loss)
|
—
|
—
|
28,077
|
—
|
28,077
|
—
|
28,077
|
(29
|
)
|
28,048
|
||||||||||||||||||||||||||
Net income attributable to redeemable securities
holder |
—
|
—
|
410
|
—
|
410
|
—
|
410
|
—
|
410
|
|||||||||||||||||||||||||||
Stock option expense
|
—
|
482
|
—
|
—
|
482
|
—
|
482
|
—
|
482
|
|||||||||||||||||||||||||||
Restricted stock units – time-based
|
—
|
252
|
—
|
—
|
252
|
—
|
252
|
—
|
252
|
|||||||||||||||||||||||||||
Restricted stock units – performance-based
|
—
|
593
|
—
|
—
|
593
|
—
|
593
|
—
|
593
|
|||||||||||||||||||||||||||
Director – non-cash compensation
|
—
|
59
|
—
|
—
|
59
|
—
|
59
|
—
|
59
|
|||||||||||||||||||||||||||
Warrant expense
|
—
|
65
|
—
|
—
|
65
|
—
|
65
|
—
|
65
|
|||||||||||||||||||||||||||
Exercise of stock options
|
1
|
189
|
—
|
—
|
190
|
—
|
190
|
—
|
190
|
|||||||||||||||||||||||||||
Foreign currency adjustments
|
—
|
—
|
—
|
(10,713
|
)
|
(10,713
|
)
|
—
|
(10,713
|
)
|
(26
|
)
|
(10,739
|
)
|
||||||||||||||||||||||
Impact of foreign exchange contracts, net
|
—
|
—
|
—
|
1,516
|
1,516
|
—
|
1,516
|
—
|
1,516
|
|||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at June 30, 2018
|
$
|
1,199
|
$
|
919,845
|
$
|
399,872
|
$
|
(39,797
|
)
|
$
|
1,281,119
|
$
|
(286,733
|
)
|
$
|
994,386
|
$
|
282
|
$
|
994,668
|
||||||||||||||||
|
|
Common
Stock |
|
|
Additional
Paid-in
Capital |
|
|
Retained
Earnings |
|
|
Accumulated
Other Comprehensive Loss |
|
|
Total Party
City Holdco Inc. Stockholders’ Equity Before Common Stock Held In Treasury |
|
|
Common
Stock Held In Treasury |
|
|
Total Party
City Holdco Inc.
Stockholders’
Equity |
|
|
Non-
Controlling
Interests
|
|
|
Total
Stockholders’
Equity |
|
|||||||||
Balance at December 31, 2018
|
|
$
|
1,208
|
|
|
$
|
922,476
|
|
|
$
|
495,777
|
|
|
$
|
(49,201
|
)
|
|
$
|
1,370,260
|
|
|
$
|
(326,930
|
)
|
|
$
|
1,043,330
|
|
|
$
|
291
|
|
|
$
|
1,043,621
|
|
Cumulative effect of change in
accounting principle, net (see Note 2) |
|
|
—
|
|
|
|
662
|
|
|
|
(503
|
)
|
|
|
—
|
|
|
|
159
|
|
|
|
—
|
|
|
|
159
|
|
|
|
—
|
|
|
|
159
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2018, as adjusted
|
|
$
|
1,208
|
|
|
$
|
923,138
|
|
|
$
|
495,274
|
|
|
$
|
(49,201
|
)
|
|
$
|
1,370,419
|
|
|
$
|
(326,930
|
)
|
|
$
|
1,043,489
|
|
|
$
|
291
|
|
|
$
|
1,043,780
|
|
Net income (loss)
|
|
|
—
|
|
|
|
—
|
|
|
|
17,856
|
|
|
|
—
|
|
|
|
17,856
|
|
|
|
—
|
|
|
|
17,856
|
|
|
|
(140
|
)
|
|
|
17,716
|
|
Stock option expense
|
|
|
—
|
|
|
|
741
|
|
|
|
—
|
|
|
|
—
|
|
|
|
741
|
|
|
|
—
|
|
|
|
741
|
|
|
|
—
|
|
|
|
741
|
|
Restricted stock units – time-based
|
|
|
—
|
|
|
|
933
|
|
|
|
—
|
|
|
|
—
|
|
|
|
933
|
|
|
|
—
|
|
|
|
933
|
|
|
|
—
|
|
|
|
933
|
|
Restricted stock units – performance-based
|
|
|
—
|
|
|
|
476
|
|
|
|
—
|
|
|
|
—
|
|
|
|
476
|
|
|
|
—
|
|
|
|
476
|
|
|
|
—
|
|
|
|
476
|
|
Director – non-cash compensation
|
|
|
—
|
|
|
|
165
|
|
|
|
—
|
|
|
|
—
|
|
|
|
165
|
|
|
|
—
|
|
|
|
165
|
|
|
|
—
|
|
|
|
165
|
|
Warrant expense
|
|
|
—
|
|
|
|
258
|
|
|
|
—
|
|
|
|
—
|
|
|
|
258
|
|
|
|
—
|
|
|
|
258
|
|
|
|
—
|
|
|
|
258
|
|
Exercise of stock options
|
|
|
2
|
|
|
|
1,086
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,088
|
|
|
|
—
|
|
|
|
1,088
|
|
|
|
—
|
|
|
|
1,088
|
|
Acquired non-controlling interest
|
|
|
—
|
|
|
|
41
|
|
|
|
—
|
|
|
|
—
|
|
|
|
41
|
|
|
|
—
|
|
|
|
41
|
|
|
|
71
|
|
|
|
112
|
|
Treasury stock purchases
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(156
|
)
|
|
|
(156
|
)
|
|
|
—
|
|
|
|
(156
|
)
|
Foreign currency adjustments
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
4,712
|
|
|
|
4,712
|
|
|
|
—
|
|
|
|
4,712
|
|
|
|
(11
|
)
|
|
|
4,701
|
|
Impact of foreign exchange contracts, net
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(727
|
)
|
|
|
(727
|
)
|
|
|
—
|
|
|
|
(727
|
)
|
|
|
—
|
|
|
|
(727
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at June 30, 2019
|
|
$
|
1,210
|
|
|
$
|
926,838
|
|
|
$
|
513,130
|
|
|
$
|
(45,216
|
)
|
|
$
|
1,395,962
|
|
|
$
|
(327,086
|
)
|
|
$
|
1,068,876
|
|
|
$
|
211
|
|
|
$
|
1,069,087
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
Stock |
|
|
Additional
Paid-in
Capital |
|
|
Retained
Earnings |
|
|
Accumulated
Other Comprehensive Loss |
|
|
Total Party
City Holdco Inc. Stockholders’ Equity Before Common Stock Held In Treasury |
|
|
Common
Stock Held In Treasury |
|
|
Total Party
City Holdco Inc.
Stockholders’
Equity |
|
|
Non-
Controlling
Interests
|
|
|
Total
Stockholders’
Equity |
|
|||||||||
Balance at December 31, 2017
|
|
$
|
1,198
|
|
|
$
|
917,192
|
|
|
$
|
372,596
|
|
|
$
|
(35,818
|
)
|
|
$
|
1,255,168
|
|
|
$
|
(286,733
|
)
|
|
$
|
968,435
|
|
|
$
|
355
|
|
|
$
|
968,790
|
|
Cumulative effect of change in accounting principle, net
|
|
|
—
|
|
|
|
—
|
|
|
|
(78
|
)
|
|
|
—
|
|
|
|
(78
|
)
|
|
|
—
|
|
|
|
(78
|
)
|
|
|
—
|
|
|
|
(78
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2017, as adjusted
|
|
$
|
1,198
|
|
|
$
|
917,192
|
|
|
$
|
372,518
|
|
|
$
|
(35,818
|
)
|
|
$
|
1,255,090
|
|
|
$
|
(286,733
|
)
|
|
$
|
968,357
|
|
|
$
|
355
|
|
|
$
|
968,712
|
|
Net income
|
|
|
—
|
|
|
|
—
|
|
|
|
26,944
|
|
|
|
—
|
|
|
|
26,944
|
|
|
|
—
|
|
|
|
26,944
|
|
|
|
(59
|
)
|
|
|
26,885
|
|
Net income attributable to redeemable securities
holder |
|
|
—
|
|
|
|
—
|
|
|
|
410
|
|
|
|
—
|
|
|
|
410
|
|
|
|
—
|
|
|
|
410
|
|
|
|
—
|
|
|
|
410
|
|
Stock option expense
|
|
|
—
|
|
|
|
942
|
|
|
|
—
|
|
|
|
—
|
|
|
|
942
|
|
|
|
—
|
|
|
|
942
|
|
|
|
—
|
|
|
|
942
|
|
Restricted stock units – time-based
|
|
|
—
|
|
|
|
252
|
|
|
|
—
|
|
|
|
—
|
|
|
|
252
|
|
|
|
—
|
|
|
|
252
|
|
|
|
—
|
|
|
|
252
|
|
Restricted stock units – performance-based
|
|
|
—
|
|
|
|
593
|
|
|
|
—
|
|
|
|
—
|
|
|
|
593
|
|
|
|
—
|
|
|
|
593
|
|
|
|
—
|
|
|
|
593
|
|
Director – non-cash compensation
|
|
|
—
|
|
|
|
59
|
|
|
|
—
|
|
|
|
—
|
|
|
|
59
|
|
|
|
—
|
|
|
|
59
|
|
|
|
—
|
|
|
|
59
|
|
Warrant expense
|
|
|
—
|
|
|
|
326
|
|
|
|
—
|
|
|
|
—
|
|
|
|
326
|
|
|
|
—
|
|
|
|
326
|
|
|
|
—
|
|
|
|
326
|
|
Exercise of stock options
|
|
|
1
|
|
|
|
481
|
|
|
|
—
|
|
|
|
—
|
|
|
|
482
|
|
|
|
—
|
|
|
|
482
|
|
|
|
—
|
|
|
|
482
|
|
Foreign currency adjustments
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(5,307
|
)
|
|
|
(5,307
|
)
|
|
|
—
|
|
|
|
(5,307
|
)
|
|
|
(14
|
)
|
|
|
(5,321
|
)
|
Impact of foreign exchange contracts, net
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,328
|
|
|
|
1,328
|
|
|
|
—
|
|
|
|
1,328
|
|
|
|
—
|
|
|
|
1,328
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at June 30, 2018
|
|
$
|
1,199
|
|
|
$
|
919,845
|
|
|
$
|
399,872
|
|
|
$
|
(39,797
|
)
|
|
$
|
1,281,119
|
|
|
$
|
(286,733
|
)
|
|
$
|
994,386
|
|
|
$
|
282
|
|
|
$
|
994,668
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
June 30,
|
|||||||
|
2019
|
2018
|
||||||
Cash flows used in operating activities:
|
|
|
||||||
Net income
|
$ |
17,716
|
$ |
26,885
|
||||
Adjustments to reconcile net income to net cash used in operating activities:
|
|
|
||||||
Depreciation and amortization expense
|
43,225
|
40,812
|
||||||
Amortization of deferred financing costs and original issuance discounts
|
2,289
|
2,766
|
||||||
Provision for doubtful accounts
|
596
|
304
|
||||||
Deferred income tax (benefit) expense
|
(10,779
|
) |
1,443
|
|||||
Deferred rent
|
—
|
1,155
|
||||||
Change in operating lease liability/asset
|
(21,406
|
) |
—
|
|||||
Undistributed income in equity method investments
|
(202
|
) |
(301
|
) | ||||
(Gain) loss
on disposal of assets
|
(59,087
|
) |
24
|
|||||
Store impairment and restructuring charges
|
19,490
|
—
|
||||||
Non-employee
equity based compensation
|
258
|
365
|
||||||
Stock option expense
|
741
|
942
|
||||||
Restricted stock units expense – time-based
|
933
|
252
|
||||||
Restricted stock units expense – performance-based
|
476
|
593
|
||||||
Directors –
non-cash
compensation
|
165
|
59
|
||||||
Changes in operating assets and liabilities, net of effects of acquired businesses:
|
|
|
||||||
Decrease in accounts receivable
|
6,588
|
8,791
|
||||||
Increase in inventories
|
(31,145
|
) |
(68,741
|
) | ||||
Increase in prepaid expenses and other current assets
|
(4,333
|
) |
(9,137
|
) | ||||
Decrease in accounts payable, accrued expenses and income taxes payable
|
(71,438
|
) |
(29,220
|
) | ||||
Net cash used in operating activities
|
(105,913
|
) |
(23,008
|
) | ||||
Cash flows provided by (used in) investing activities:
|
|
|
||||||
Cash paid in connection with acquisitions, net of cash acquired
|
(545
|
) |
(21,325
|
) | ||||
Capital expenditures
|
(31,098
|
) |
(44,406
|
) | ||||
Proceeds from disposal of property and equipment
|
113,799
|
21
|
||||||
Net cash provided by (used in) investing activities
|
82,156
|
(65,710
|
) | |||||
Cash flows provided by financing activities:
|
|
|
||||||
Repayment of loans, notes payable and long-term obligations
|
(148,526
|
) |
(26,062
|
) | ||||
Proceeds from loans, notes payable and long-term obligations
|
157,440
|
112,293
|
||||||
Stock repurchases
|
(156
|
) |
—
|
|||||
Exercise of stock options
|
1,088
|
482
|
||||||
Debt issuance costs
|
(343
|
) |
(56
|
) | ||||
Net cash provided by financing activities
|
9,503
|
86,657
|
||||||
Effect of exchange rate changes on cash and cash equivalents
|
2,166
|
(780
|
) | |||||
Net decrease in cash and cash equivalents and restricted cash
|
(12,088
|
) |
(2,841
|
) | ||||
Cash and cash equivalents and restricted cash at beginning of period
|
59,219
|
54,408
|
||||||
Cash and cash equivalents and restricted cash at end of period
|
$ |
47,131
|
$ |
51,567
|
||||
Supplemental disclosure of cash flow information:
|
|
|
||||||
Cash paid during the period for interest
|
$ |
57,503
|
$ |
49,489
|
||||
Cash paid during the period for income taxes, net of refunds
|
$ |
31,924
|
$ |
46,617
|
|
Three Months
Ended June 30,
2019
|
Six Months
Ended June 30,
2019
|
||||||
Inventory reserves
|
$ |
3,656
|
$ |
21,285
|
||||
Operating lease asset impairment
|
940
|
14,149
|
||||||
Property, plant and equipment impairment
|
541
|
4,680
|
||||||
Labor and other costs incurred closing stores
|
3,753
|
3,753
|
||||||
Severance
|
—
|
661
|
||||||
Total
|
$ |
8,890
|
$ |
44,528
|
||||
|
June 30,
2019
|
December 31,
2018
|
||||||
Finished goods
|
$ |
738,404
|
$ |
706,327
|
||||
Raw materials
|
33,030
|
33,423
|
||||||
Work in process
|
16,663
|
16,288
|
||||||
|
$ |
788,097
|
$ |
756,038
|
||||
|
Three Months Ended June 30, 2019
|
|||||||||||
|
Foreign
Currency
Adjustments
|
Impact of
Foreign
Exchange
Contracts,
Net of Taxes
|
Total,
Net of Taxes
|
|||||||||
Balance at March 31, 2019
|
$ |
(45,900
|
) | $ |
342
|
$ |
(45,558
|
) | ||||
Other comprehensive income (loss) before reclassifications, net of tax
|
556
|
(3
|
) |
553
|
||||||||
Gains reclassified from accumulated other comprehensive loss to the condensed consolidated statement of operations and comprehensive income, net of income tax
|
—
|
(211
|
) |
(211
|
) | |||||||
Net current-period other comprehensive income (loss)
|
556
|
(214
|
) |
342
|
||||||||
Balance at June 30, 2019
|
$ |
(45,344
|
) | $ |
128
|
$ |
(45,216
|
) | ||||
|
Three Months Ended June 30, 2018
|
|||||||||||
|
Foreign
Currency
Adjustments
|
Impact of
Foreign
Exchange
Contracts,
Net of Taxes
|
Total,
Net of Taxes
|
|||||||||
Balance at March 31, 2018
|
$ |
(30,204
|
) | $ |
(396
|
) | $ |
(30,600
|
) | |||
Other comprehensive (loss) income before reclassifications
|
(10,713
|
) |
1,398
|
(9,315
|
) | |||||||
Loss reclassified from accumulated other comprehensive loss to the condensed consolidated statement of operations and comprehensive income
|
—
|
118
|
118
|
|||||||||
Net current-period other comprehensive (loss) income
|
(10,713
|
) |
1,516
|
(9,197
|
) | |||||||
Balance at June 30, 2018
|
$ |
(40,917
|
) | $ |
1,120
|
$ |
(39,797
|
) | ||||
|
Six Months Ended June 30, 2019
|
|||||||||||
|
Foreign
Currency
Adjustments
|
Impact of
Foreign
Exchange
Contracts,
Net of Taxes
|
Total,
Net of Taxes
|
|||||||||
Balance at December 31, 2018
|
$ |
(50,056
|
) | $ |
855
|
$ |
(49,201
|
) | ||||
Other comprehensive income before reclassifications, net of tax
|
4,712
|
60
|
4,772
|
|||||||||
Gains reclassified from accumulated other comprehensive loss to the condensed consolidated statement of operations and comprehensive income, net of income tax
|
—
|
(787
|
) |
(787
|
) | |||||||
Net current-period other comprehensive income (loss)
|
4,712
|
(727
|
) |
3,985
|
||||||||
Balance at June 30, 2019
|
$ |
(45,344
|
) | $ |
128
|
$ |
(45,216
|
) | ||||
|
Six Months Ended June 30, 2018
|
|||||||||||
|
Foreign
Currency
Adjustments
|
Impact of
Foreign
Exchange
Contracts,
Net of Taxes
|
Total,
Net of Taxes
|
|||||||||
Balance at December 31, 2017
|
$ |
(35,610
|
) | $ |
(208
|
) | $ |
(35,818
|
) | |||
Other comprehensive (loss) income before reclassifications, net of income tax
|
(5,307
|
) |
971
|
(4,336
|
) | |||||||
Loss reclassified from accumulated other comprehensive loss to the condensed consolidated statement of operations and comprehensive income, net of income tax
|
—
|
357
|
357
|
|||||||||
Net current-period other comprehensive (loss) income
|
(5,307
|
) |
1,328
|
(3,979
|
) | |||||||
Balance at June 30, 2018
|
$ |
(40,917
|
) | $ |
1,120
|
$ |
(39,797
|
) | ||||
|
Wholesale
|
Retail
|
Consolidated
|
|||||||||
Three Months Ended June 30, 2019
|
|
|
|
|||||||||
Revenues:
|
|
|
|
|||||||||
Net sales
|
$ |
289,067
|
$ |
423,157
|
$ |
712,224
|
||||||
Royalties and franchise fees
|
—
|
2,189
|
2,189
|
|||||||||
Total revenues
|
289,067
|
425,346
|
714,413
|
|||||||||
Eliminations
|
(150,522
|
) |
—
|
(150,522
|
) | |||||||
Net revenues
|
$ |
138,545
|
$ |
425,346
|
$ |
563,891
|
||||||
Income from operations
|
$ |
60,297
|
$ |
37,188
|
$ |
97,485
|
||||||
Interest expense, net
|
|
|
30,176
|
|||||||||
Other expense, net
|
|
|
3,342
|
|||||||||
Income before income taxes
|
|
|
$ |
63,967
|
||||||||
|
Wholesale
|
Retail
|
Consolidated
|
|||||||||
Three Months Ended June 30, 2018
|
|
|
|
|||||||||
Revenues:
|
|
|
|
|||||||||
Net sales
|
$ |
285,733
|
$ |
411,353
|
$ |
697,086
|
||||||
Royalties and franchise fees
|
—
|
2,910
|
2,910
|
|||||||||
Total revenues
|
285,733
|
414,263
|
699,996
|
|||||||||
Eliminations
|
(138,985
|
) |
—
|
(138,985
|
||||||||
Net revenues
|
$ |
146,748
|
$ |
414,263
|
$ |
561,011
|
||||||
Income from operations
|
$ |
11,148
|
$ |
54,303
|
$ |
65,451
|
||||||
Interest expense, net
|
|
|
25,501
|
|||||||||
Other expense, net
|
|
|
2,532
|
|||||||||
Income before income taxes
|
|
|
$ |
37,418
|
||||||||
|
Wholesale
|
Retail
|
Consolidated
|
|||||||||
Six Months Ended June 30, 2019
|
|
|
|
|||||||||
Revenues:
|
|
|
|
|||||||||
Net sales
|
$ |
579,368
|
$ |
801,310
|
$ |
1,380,678
|
||||||
Royalties and franchise fees
|
—
|
4,203
|
4,203
|
|||||||||
Total revenues
|
579,368
|
805,513
|
1,384,881
|
|||||||||
Eliminations
|
(307,874
|
) |
—
|
(307,874
|
) | |||||||
Net revenues
|
$ |
271,494
|
$ |
805,513
|
$ |
1,077,007
|
||||||
Income from operations
|
$ |
62,520
|
$ |
24,668
|
$ |
87,188
|
||||||
Interest expense, net
|
|
|
59,433
|
|||||||||
Other expense, net
|
|
|
4,596
|
|||||||||
Income before income taxes
|
|
|
$ |
23,159
|
||||||||
|
Wholesale
|
Retail
|
Consolidated
|
|||||||||
Six Months Ended June 30, 2018
|
|
|
|
|||||||||
Revenues:
|
|
|
|
|||||||||
Net sales
|
$ |
563,560
|
$ |
774,929
|
$ |
1,338,489
|
||||||
Royalties and franchise fees
|
—
|
5,626
|
5,626
|
|||||||||
Total revenues
|
563,560
|
780,555
|
1,344,115
|
|||||||||
Eliminations
|
(275,280
|
) |
—
|
(275,280
|
) | |||||||
Net revenues
|
$ |
288,280
|
$ |
780,555
|
$ |
1,068,835
|
||||||
Income from operations
|
$ |
16,496
|
$ |
71,211
|
$ |
87,707
|
||||||
Interest expense, net
|
|
|
48,776
|
|||||||||
Other expense, net
|
|
|
3,380
|
|||||||||
Income before income taxes
|
|
|
$ |
35,551
|
||||||||
(a) | PP = Prepaid expenses and other current assets |
(b) | AE = Accrued expenses |
• | 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. |
|
Level 1
|
Level 2
|
Level 3
|
Total as of
June 30,
2019
|
||||||||||||
Derivative assets
|
$ |
—
|
$ |
58
|
$ |
—
|
$ |
58
|
||||||||
Derivative liabilities
|
—
|
7
|
—
|
7
|
|
Level 1
|
Level 2
|
Level 3
|
Total as of
December 31,
2018
|
||||||||||||
Derivative assets
|
$ |
—
|
$ |
115
|
$ |
—
|
$ |
115
|
||||||||
Derivative liabilities
|
—
|
—
|
—
|
—
|
||||||||||||
Punchbowl put liability
|
—
|
—
|
316
|
316
|
|
June 30, 2019
|
|||||||
|
Carrying
Amount
|
Fair
Value
|
||||||
Term Loan Credit Agreement
|
$ |
784,994
|
$ |
787,913
|
||||
6.125% Senior Notes – due 2023
|
346,603
|
352,625
|
||||||
6.625% Senior Notes – due 2026
|
494,524
|
485,000
|
|
Three Months
Ended
June 30,
2019
|
Three Months
Ended
June 30,
2018
|
Six Months
Ended
June 30,
2019
|
Six Months
Ended
June 30,
2018
|
||||||||||||
Net income attributable to common shareholders of Party City Holdco Inc.
|
$ |
48,074
|
$ |
28,487
|
$ |
17,856
|
$ |
27,354
|
||||||||
Weighted average shares - Basic
|
93,293,176
|
96,453,884
|
93,233,865
|
96,426,235
|
||||||||||||
Effect of dilutive securities:
|
|
|
|
|
||||||||||||
Warrants
|
—
|
—
|
—
|
—
|
||||||||||||
Restricted stock units
|
19,228
|
—
|
23,628
|
—
|
||||||||||||
Stock options
|
391,142
|
1,234,350
|
534,270
|
1,243,074
|
||||||||||||
Weighted average shares - Diluted
|
93,703,546
|
97,688,233
|
93,791,763
|
97,669,309
|
||||||||||||
Net income per share attributable to common shareholders of Party City Holdco Inc. - Basic
|
$ |
0.52
|
$ |
0.30
|
$ |
0.19
|
$ |
0.28
|
||||||||
Net income per share attributable to common shareholders of Party City Holdco Inc. - Diluted
|
$ |
0.51
|
$ |
0.29
|
$ |
0.19
|
$ |
0.28
|
||||||||
|
June 30,
2019
|
December 31,
2018
|
||||||
Term Loan Credit Agreement
|
$ |
784,994
|
$ |
791,135
|
||||
6.125% Senior Notes – due 2023
|
346,603
|
346,191
|
||||||
6.625% Senior Notes – due 2026
|
494,524
|
494,138
|
||||||
Finance lease obligations
|
15,445
|
3,815
|
||||||
Total long-term obligations
|
|
|
1,641,566
|
|
|
|
1,635,279
|
|
Less: current portion
|
(76,251
|
) |
(13,316
|
) | ||||
Long-term obligations, excluding current portion
|
$ |
1,565,315
|
$ |
1,621,963
|
||||
|
Three Months
Ended
June 30,
2019
|
Three Months
Ended
June 30,
2018
|
Six Months
Ended
June 30,
2019
|
Six Months
Ended
June 30,
2018
|
||||||||||||
Retail Net Sales:
|
|
|
|
|
||||||||||||
North American Party City Stores
|
$ |
387,308
|
$ |
376,222
|
$ |
733,448
|
$ |
707,067
|
||||||||
Global
E-commerce
|
35,364
|
35,131
|
67,172
|
67,862
|
||||||||||||
Other
|
485
|
—
|
690
|
—
|
||||||||||||
Total Retail Net Sales
|
$ |
423,157
|
$ |
411,353
|
$ |
801,310
|
$ |
774,929
|
||||||||
Royalties and Franchise Fees
|
2,189
|
2,910
|
4,203
|
5,626
|
||||||||||||
Total Retail Revenue
|
$ |
425,346
|
$ |
414,263
|
$ |
805,513
|
$ |
780,555
|
||||||||
Wholesale Net Sales:
|
|
|
|
|
||||||||||||
Domestic
|
$ |
74,766
|
$ |
79,397
|
$ |
148,587
|
$ |
158,956
|
||||||||
International
|
63,779
|
67,351
|
122,907
|
129,324
|
||||||||||||
Total Wholesale Net Sales
|
$ |
138,545
|
$ |
146,748
|
$ |
271,494
|
$ |
288,280
|
||||||||
Total Consolidated Revenue
|
$ |
563,891
|
$ |
561,011
|
$ |
1,077,007
|
$ |
1,068,835
|
||||||||
Six months ended December 31, 2019
|
$ |
89,895
|
||
2020
|
201,578
|
|||
2021
|
185,305
|
|||
2022
|
165,815
|
|||
2023
|
137,724
|
|||
Thereafter
|
477,022
|
|||
Total Undiscounted Cash Flows
|
$ |
1,257,339
|
||
Less: Interest
|
(317,891
|
) | ||
Total Operating Lease Liability
|
939,448
|
|||
Less: Current Portion of Operating Lease Liability
|
(145,472
|
) | ||
Long-Term Portion of Operating Lease Liability
|
$ |
793,976
|
||
|
Three Months Ended June 30,
|
|||||||||||||||
|
2019
|
2018
|
||||||||||||||
|
(Dollars in thousands)
|
|||||||||||||||
Revenues:
|
|
|
|
|
||||||||||||
Net sales
|
$ |
561,702
|
99.6
|
% | $ |
558,101
|
99.5
|
% | ||||||||
Royalties and franchise fees
|
2,189
|
0.4
|
2,910
|
0.5
|
||||||||||||
Total revenues
|
563,891
|
100.0
|
561,011
|
100.0
|
||||||||||||
Cost of sales
|
353,056
|
62.6
|
329,477
|
58.7
|
||||||||||||
Wholesale selling expenses
|
16,884
|
3.0
|
17,256
|
3.1
|
||||||||||||
Retail operating expenses
|
96,143
|
17.0
|
92,094
|
16.4
|
||||||||||||
Franchise expenses
|
3,236
|
0.6
|
3,980
|
0.7
|
||||||||||||
General and administrative expenses
|
41,510
|
7.4
|
45,326
|
8.1
|
||||||||||||
Art and development costs
|
5,712
|
1.0
|
5,732
|
1.0
|
||||||||||||
Development stage expenses
|
3,012
|
0.5
|
1,695
|
0.3
|
||||||||||||
Gain on sale/leaseback transaction
|
(58,381
|
) |
(10.4
|
) |
—
|
—
|
||||||||||
Store impairment and restructuring charges
|
5,234
|
0.9
|
—
|
—
|
||||||||||||
|
466,406
|
82.7
|
495,560
|
88.3
|
||||||||||||
Income from operations
|
97,485
|
17.3
|
65,451
|
11.7
|
||||||||||||
Interest expense, net
|
30,176
|
5.4
|
25,501
|
4.5
|
||||||||||||
Other expense, net
|
3,342
|
0.6
|
2,532
|
0.5
|
||||||||||||
Income before income taxes
|
63,967
|
11.3
|
37,418
|
6.7
|
||||||||||||
Income tax expense
|
15,962
|
2.8
|
9,370
|
1.7
|
||||||||||||
Net income
|
48,005
|
8.5
|
28,048
|
5.0
|
||||||||||||
Add: Net income attributable to redeemable securities holder
|
—
|
—
|
410
|
0.1
|
||||||||||||
Less: Net loss attributable to noncontrolling interests
|
(69
|
) |
(0.0
|
) |
(29
|
) |
(0.0
|
) | ||||||||
Net income attributable to common shareholders of Party City Holdco Inc.
|
$ |
48,074
|
8.5
|
% | $ |
28,487
|
5.1
|
% | ||||||||
Net income per share attributable to common shareholders of Party City Holdco Inc. – Basic
|
$ |
0.52
|
|
$ |
0.30
|
|
||||||||||
Net income per share attributable to common shareholders of Party City Holdco Inc. – Diluted
|
$ |
0.51
|
|
$ |
0.29
|
|
|
Three Months Ended June 30,
|
|||||||||||||||
|
2019
|
2018
|
||||||||||||||
|
Dollars in
Thousands
|
Percentage of
Total Revenues
|
Dollars in
Thousands
|
Percentage of
Total Revenues
|
||||||||||||
Net Sales:
|
|
|
|
|
||||||||||||
Wholesale
|
$ |
289,067
|
51.3
|
% | $ |
285,733
|
50.9
|
% | ||||||||
Eliminations
|
(150,522
|
) |
(26.7
|
)% |
(138,985
|
) |
(24.8
|
)% | ||||||||
Net wholesale
|
138,545
|
24.6
|
% |
146,748
|
26.2
|
% | ||||||||||
Retail
|
423,157
|
75.0
|
% |
411,353
|
73.3
|
% | ||||||||||
Total net sales
|
561,702
|
99.6
|
% |
558,101
|
99.5
|
% | ||||||||||
Royalties and franchise fees
|
2,189
|
0.4
|
% |
2,910
|
0.5
|
% | ||||||||||
Total revenues
|
$ |
563,891
|
100.0
|
% | $ |
561,011
|
100.0
|
% | ||||||||
|
Three Months Ended June 30,
|
|||||||||||||||
|
2019
|
2018
|
||||||||||||||
|
Dollars in
Thousands
|
Percentage of
Net Sales
|
Dollars in
Thousands
|
Percentage of
Net Sales
|
||||||||||||
Retail
|
$ |
172,051
|
40.7
|
% | $ |
183,915
|
44.7
|
% | ||||||||
Wholesale
|
36,595
|
26.4
|
44,709
|
30.5
|
||||||||||||
Total
|
$ |
208,646
|
37.1
|
% | $ |
228,624
|
41.0
|
% | ||||||||
|
Six Months Ended June 30,
|
|||||||||||||||
|
2019
|
2018
|
||||||||||||||
|
(Dollars in thousands)
|
|||||||||||||||
Revenues:
|
|
|
|
|
||||||||||||
Net sales
|
$ |
1,072,804
|
99.6
|
% | $ |
1,063,209
|
99.5
|
% | ||||||||
Royalties and franchise fees
|
4,203
|
0.4
|
5,626
|
0.5
|
||||||||||||
Total revenues
|
1,077,007
|
100.0
|
1,068,835
|
100.0
|
||||||||||||
|
|
|
|
|
||||||||||||
Cost of sales
|
692,098
|
64.3
|
646,443
|
60.5
|
||||||||||||
Wholesale selling expenses
|
34,845
|
3.2
|
36,043
|
3.4
|
||||||||||||
Retail operating expenses
|
191,161
|
17.7
|
181,186
|
17.0
|
||||||||||||
Franchise expenses
|
6,539
|
0.6
|
7,762
|
0.7
|
||||||||||||
General and administrative expenses
|
83,435
|
7.7
|
93,991
|
8.8
|
||||||||||||
Art and development costs
|
11,641
|
1.1
|
11,705
|
1.1
|
||||||||||||
Development stage expenses
|
5,238
|
0.5
|
3,998
|
0.4
|
||||||||||||
Gain on sale/leaseback transaction
|
(58,381
|
) |
(5.4
|
) |
—
|
—
|
||||||||||
Store impairment and restructuring charges
|
23,243
|
2.2
|
—
|
—
|
||||||||||||
|
989,819
|
91.9
|
981,128
|
91.8
|
||||||||||||
Income from operations
|
87,188
|
8.1
|
87,707
|
8.2
|
||||||||||||
Interest expense, net
|
59,433
|
5.5
|
48,776
|
4.6
|
||||||||||||
Other expense, net
|
4,596
|
0.4
|
3,380
|
0.3
|
||||||||||||
Income before income taxes
|
23,159
|
2.2
|
35,551
|
3.3
|
||||||||||||
Income tax expense
|
5,443
|
0.5
|
8,666
|
0.8
|
||||||||||||
Net income
|
17,716
|
1.6
|
26,885
|
2.5
|
||||||||||||
Add: Net income attributable to redeemable securities holder
|
—
|
—
|
410
|
0.0
|
||||||||||||
Less: Net loss attributable to noncontrolling interests
|
(140
|
) |
(0.0
|
) |
(59
|
) |
(0.0
|
) | ||||||||
Net income attributable to common shareholders of Party City Holdco Inc.
|
$ |
17,856
|
1.7
|
% | $ |
27,354
|
2.6
|
% | ||||||||
Net income per share attributable to common shareholders of Party City Holdco Inc. – Basic
|
$ |
0.19
|
|
$ |
0.28
|
|
||||||||||
Net income per share attributable to common shareholders of Party City Holdco Inc. – Diluted
|
$ |
0.19
|
|
$ |
0.28
|
|
|
Six Months Ended June 30,
|
|||||||||||||||
|
2019
|
2018
|
||||||||||||||
|
Dollars in
Thousands
|
Percentage of
Total Revenues
|
Dollars in
Thousands
|
Percentage of
Total Revenues
|
||||||||||||
Net Sales:
|
|
|
|
|
||||||||||||
Wholesale
|
$ |
579,368
|
53.8
|
% | $ |
563,560
|
52.7
|
% | ||||||||
Eliminations
|
(307,874
|
) |
(28.6
|
)% |
(275,280
|
) |
(25.8
|
)% | ||||||||
Net wholesale
|
271,494
|
25.2
|
% |
288,280
|
27.0
|
% | ||||||||||
Retail
|
801,310
|
74.4
|
% |
774,929
|
72.5
|
% | ||||||||||
Total net sales
|
1,072,804
|
99.6
|
% |
1,063,209
|
99.5
|
% | ||||||||||
Royalties and franchise fees
|
4,203
|
0.4
|
% |
5,626
|
0.5
|
% | ||||||||||
Total revenues
|
$ |
1,077,007
|
100.0
|
% | $ |
1,068,835
|
100.0
|
% | ||||||||
|
Six Months Ended June 30,
|
|||||||||||||||
|
2019
|
2018
|
||||||||||||||
|
Dollars in
Thousands
|
Percentage of
Net Sales
|
Dollars in
Thousands
|
Percentage of
Net Sales
|
||||||||||||
Retail
|
$ |
308,069
|
38.4
|
% | $ |
330,750
|
42.7
|
% | ||||||||
Wholesale
|
72,637
|
26.8
|
86,016
|
29.8
|
||||||||||||
Total
|
$ |
380,706
|
35.5
|
% | $ |
416,766
|
39.2
|
% | ||||||||
|
Three Months Ended
June 30, 2019
|
Three Months Ended
June 30, 2018
|
Six Months Ended
June 30, 2019
|
Six Months Ended
June 30, 2018
|
||||||||||||
(Dollars in thousands)
|
|
|
|
|
||||||||||||
Net income
|
$ |
48,005
|
$ |
28,048
|
$ |
17,716
|
$ |
26,885
|
||||||||
Interest expense, net
|
30,176
|
25,501
|
59,433
|
48,776
|
||||||||||||
Income taxes
|
15,962
|
9,370
|
5,443
|
8,666
|
||||||||||||
Depreciation and amortization
|
21,884
|
20,255
|
43,225
|
40,812
|
||||||||||||
EBITDA
|
116,027
|
83,174
|
125,817
|
125,139
|
||||||||||||
Non-cash
purchase accounting
adjustments
|
1,756
|
1,098
|
2,757
|
542
|
||||||||||||
Store impairment and restructuring charges (a)
|
10,628
|
—
|
46,266
|
—
|
||||||||||||
Other restructuring, retention and severance (b)
|
3,933
|
(457
|
) |
5,321
|
2,154
|
|||||||||||
Deferred rent (c)
|
(338
|
) |
787
|
(1,488
|
) |
1,155
|
||||||||||
Closed store expense (d)
|
507
|
793
|
1,098
|
2,605
|
||||||||||||
Foreign currency losses/(gains), net
|
133
|
505
|
(160
|
) |
442
|
|||||||||||
Stock option expense (e)
|
371
|
482
|
741
|
942
|
||||||||||||
Non-employee
equity based compensation (f)
|
129
|
104
|
258
|
365
|
||||||||||||
Undistributed income in equity method investments
|
(4
|
) |
(90
|
) |
(202
|
) |
(301
|
) | ||||||||
Corporate development expenses (g)
|
4,349
|
2,778
|
7,194
|
5,352
|
||||||||||||
Non-recurring
consulting charges (h)
|
—
|
6,869
|
—
|
11,619
|
||||||||||||
Refinancing charges (i)
|
—
|
—
|
—
|
1,146
|
||||||||||||
Restricted stock units – time-based (j)
|
541
|
252
|
933
|
252
|
||||||||||||
Restricted stock units – performance-based (k)
|
476
|
593
|
476
|
593
|
||||||||||||
Non-recurring
legal settlements/costs
|
869
|
—
|
1,601
|
—
|
||||||||||||
Gain on sale/leaseback transaction (l)
|
(58,381
|
) |
—
|
(58,381
|
) |
—
|
||||||||||
Other
|
44
|
(282
|
) |
291
|
(251
|
) | ||||||||||
Adjusted EBITDA
|
$ |
81,040
|
$ |
96,606
|
$ |
132,522
|
$ |
151,754
|
||||||||
|
Three Months
Ended
June 30,
2019
|
Three Months
Ended
June 30,
2018
|
Six Months
Ended
June 30,
2019
|
Six Months
Ended
June 30,
2018
|
||||||||||||
(Dollars in thousands, except per share amounts)
|
|
|
|
|
||||||||||||
Income before income taxes
|
$ |
63,967
|
$ |
37,418
|
$ |
23,159
|
$ |
35,551
|
||||||||
Intangible asset amortization
|
3,546
|
3,705
|
6,975
|
7,368
|
||||||||||||
Non-cash
purchase accounting adjustments
|
2,459
|
1,668
|
3,776
|
963
|
||||||||||||
Amortization of deferred financing costs and original issuance discounts (i)
|
1,146
|
1,210
|
2,289
|
2,766
|
||||||||||||
Store impairment and restructuring charges (a)
|
10,628
|
—
|
46,266
|
—
|
||||||||||||
Other restructuring charges (b)
|
3,085
|
—
|
3,085
|
—
|
||||||||||||
Non-employee
equity based compensation (f)
|
129
|
104
|
258
|
365
|
||||||||||||
Refinancing charges (i)
|
36
|
—
|
36
|
800
|
||||||||||||
Non-recurring
consulting charges (h)
|
—
|
6,869
|
—
|
11,619
|
||||||||||||
Stock option expense (e)
|
371
|
482
|
741
|
942
|
||||||||||||
Gain on sale/leaseback transaction (l)
|
(58,381
|
) |
—
|
(58,381
|
) |
—
|
||||||||||
Restricted stock units - performance-based (k)
|
476
|
593
|
476
|
593
|
||||||||||||
Adjusted income before income taxes
|
27,462
|
52,049
|
28,680
|
60,967
|
||||||||||||
Adjusted income tax expense (m)
|
7,227
|
12,813
|
7,342
|
14,849
|
||||||||||||
Adjusted net income
|
$ |
20,235
|
$ |
39,236
|
$ |
21,338
|
$ |
46,118
|
||||||||
Adjusted net income per common share – diluted
|
$ |
0.22
|
$ |
0.40
|
$ |
0.23
|
$ |
0.47
|
||||||||
Weighted-average number of common shares-diluted
|
93,703,546
|
97,688,233
|
93,791,763
|
97,669,309
|
(a) | During the six months ended June 30, 2019, the Company initiated a store optimization program under which it plans to close approximately 55 Party City stores during the course of 2019. In conjunction with the program, during the first six months of 2019, the Company recorded the following charges: inventory reserves: $21,285, operating lease asset impairment: $14,149, labor and other costs related to closing the stores: $3,753, property, plant and equipment impairment: $4,680 and severance: $661. The charge for inventory reserves was recorded in cost of sales in the Company’s statement of operations and comprehensive income (loss). The other charges were recorded in store impairment and restructuring charges in the Company’s statement of operations and comprehensive income (loss). See Note 3 in Item 1 for further discussion. Additionally, during the process of liquidating the inventory in such stores, the Company lost margin of approximately $1,738. |
(b) |
Amounts expensed during 2019 principally relate to executive severance and the
write-off
of inventory for a section of the Company’s Party City stores that is being restructured.
|
(c) | The “deferred rent” adjustment reflects the difference between accounting for rent and landlord incentives in accordance with GAAP and the Company’s actual cash outlay for such items. During the first quarter of 2019, the Company adopted ASC 842. Under the standard, the difference between accounting for rent and landlord incentives in accordance with GAAP and the Company’s actual cash outlay for such items is now incorporated in the Company’s operating lease asset. |
(d) | Charges incurred related to closing and relocating stores in the ordinary course of business. |
(e) |
Represents
non-cash
charges related to stock options.
|
(f) |
Principally represents shares of Kazzam awarded to Ampology as compensation for Ampology’s services. See the 2018 Form
10-K
for further discussion.
|
(g) |
Primarily represents
start-up
costs for Kazzam (see the 2018 Form
10-K
for further discussion) and third-party costs related to acquisitions (principally legal and diligence expenses).
|
(h) |
Non-recurring
consulting charges related to the Company’s retail operations.
|
(i) |
During February 2018, the Company amended the Term Loan Credit Agreement. In conjunction with the amendment, the Company
wrote-off
capitalized deferred financing costs, original issue discounts and call premiums. The amounts are included in “Refinancing charges” in the adjusted EBITDA table above and in “Amortization of deferred financing costs and original issuance discounts” in the adjusted net income table above. Further, in conjunction with the amendment, the Company expensed investment banking and legal fees. These amounts are included in “Refinancing charges” in the tables above.
|
(j) |
Non-cash
charges for restricted stock units that vest based on service conditions.
|
(k) |
Non-cash
charges for restricted stock units that vest based on performance conditions.
|
(l) | During June 2019, the Company reported a $58,381 gain from the sale and leaseback of its main distribution center in Chester, New York and its metallic balloons manufacturing facility in Eden Prairie, Minnesota. The aggregate sale price for the three properties was $128,000. Simultaneous with the sale, the Company entered into twenty year leases for each of the facilities. |
(m) |
Represents income tax expense/benefit after excluding the specific tax impacts for each of the
pre-tax
adjustments. The tax impacts for each of the adjustments were determined by applying to the
pre-tax
adjustments the effective income tax rates for the specific legal entities in which the adjustments were recorded.
|
• | our ability to compete effectively in a competitive industry; |
• | fluctuations in commodity prices; |
• | helium shortages; |
• | our ability to appropriately respond to changing merchandise trends and consumer preferences; |
• | successful implementation of our store growth strategy; |
• | decreases in our Halloween sales; |
• | unexpected or unfavorable consumer responses to our promotional or merchandising programs; |
• |
failure to comply with existing or future laws relating to our marketing programs,
e-commerce
initiatives and the use of consumer information;
|
• | 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” in our Annual Report on Form
10-K,
filed with the SEC on February 28, 2019.
|
3.1
|
||
3.2
|
||
10.1
|
||
10.2
|
||
10.3
|
||
10.4
|
||
10.5 †*
|
||
10.6 †*
|
||
10.7 †*
|
||
10.8 †*
|
||
31.1*
|
||
31.2*
|
||
32.1*
|
||
32.2*
|
||
101.INS*
|
XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
|
|
101.SCH*
|
XBRL Taxonomy Extension Schema Document.
|
|
101.CAL*
|
XBRL Taxonomy Extension Calculation Linkbase Document.
|
|
101.DEF*
|
XBRL Taxonomy Extension Definition Linkbase Document.
|
|
101.LAB*
|
XBRL Taxonomy Extension Label Linkbase Document.
|
|
101.PRE*
|
XBRL Taxonomy Extension Presentation Linkbase Document.
|
† | Management contract of compensatory plan or arrangement |
* | Filed herewith. |
|
|
|
PARTY CITY HOLDCO INC.
|
|||
|
|
By:
|
/s/ Michael A. Correale
|
|||
|
|
|
Michael A. Correale
|
|||
|
|
|
Interim Chief Financial Officer
(on behalf of the Registrant and as Principal Financial Officer)
|
Exhibit 10.5
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, amended and restated as of March 24, 2015. This Plan was further amended and restated as set forth herein effective as of May 20, 2019 (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 Companys 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 Stockholders 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 Participants 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 Companys or an Affiliates (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 Companys 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 Participants failure or refusal (other than due to Permanent Disability) to substantially perform the duties reasonably assigned to the Participant by the Board or the Participants 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 Persons acting as a group, 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
2.8 Committee means the Compensation Committee of the Board. 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 Participants base salary, (b) a material diminution in the Participants 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 Participants 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.
3
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 under the Plan, a Performance Criterion will mean a performance criterion determined by the Committee in its sole discretion, which may include a 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 Companys 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 Companys equity or debt securities, factoring transactions, sales or licenses of the Companys 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, in its sole discretion, that one or more of the Performance Criteria applicable to any Award will be adjusted at any time in a manner to reflect such events or circumstances as to which it deems an adjustment necessary or desirable (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, with respect to Awards granted prior to January 1, 2019, such adjustments must be consistent with the Plan as amended and restated as of March 24, 2015.
4
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 Participants Permanent Disability, the Participant shall be treated as having a Permanent Disability only if the Participants 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.
5
2.26 Service means service as an Employee, Director or Consultant, provided, however, that the effect of a Participants break in service on a Participants outstanding Awards, if any, shall be determined by the Committee in its sole discretion.
2.27 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.
2.28 Stock Appreciation Right means any right granted under Article 7 of this Plan
2.29 Stockholders has the meaning set forth in the Stockholders Agreement.
2.30 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.
2.31 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.
2.32 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.
2.33 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.
6
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. 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, 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.
7
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 15,316,000. 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 Companys 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: 2,679,600 Shares. |
(b) |
Stock Appreciation Rights: 2,679,600 Shares. |
(c) |
Restricted Stock: 1,682,800 Shares. |
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(d) |
Unrestricted Stock: 1,682,800 Shares. |
(e) |
Other Stock-Based Awards: 1,682,800 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.
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 Directors 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.
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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 cashiers 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.
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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 Participants 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 Participants legal representative).
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8.3 Voting and Dividend Rights. The Committee shall determine and set forth in a Participants 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 Participants 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.
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Article 10. |
Compliance with Sections 409A 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 Companys 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 Participants 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.
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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.
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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 Participants written consent. Notwithstanding the foregoing, no amendment requiring shareholder approval under 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 Participants Service is terminated for Cause, or (b) the Committee determines that a Participants acts or omissions constitute Cause, all outstanding Awards held by the Participant shall terminate and be forfeited without consideration, effective on the date the Participants 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 Participants 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 Participants Service is terminated and (b) all vested Options and Stock Appreciation Rights may be exercised by the Participant or, as applicable, the Participants 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 Participants 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 Participants 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.
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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 Committees 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 Participants 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.
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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 Companys 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.
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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 Companys 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.
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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.
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19
Exhibit 10.6
Party City Holdco Inc.
Amended and Restated 2012 Omnibus Equity Incentive Plan
RESTRICTED STOCK AWARD AGREEMENT
(TIME AND PERFORMANCE-BASED VESTING)
THIS AGREEMENT (this Award Agreement), is made effective as of [●], 2019 (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 Award 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 Award. The Company hereby grants to the Participant an Award of _________ Shares of Restricted Stock, on the terms and conditions set forth in the Plan and this Award Agreement, subject to adjustment as set forth in the Plan.
2. Vesting of the Restricted Stock. The term vest as used herein with respect to any Share of Restricted Stock means the lapsing of the restrictions described herein with respect to such Share. The Restricted Stock shall become vested in accordance with, and subject to the conditions described in, Exhibit A to this Award Agreement. At any time, the portion of the Restricted Stock that has become vested is hereinafter referred to as the Vested Portion and any portion of the Restricted Stock that is not a Vested Portion is hereinafter referred to as the Unvested Portion.
3. Forfeiture; Expiration.
a. Termination of Employment. Upon the termination of the Participants Service by the Company for any reason at any time, any Unvested Portion of the Restricted Stock will be forfeited automatically without consideration.
b. Breach of Restrictive Covenants. The Unvested Portion shall be forfeited without consideration if the Participant breaches any restrictive covenant relating to confidentiality, non-competition, non-solicitation and/or non-disparagement and/or other similar restrictive covenants in favor of the Company or any of its Subsidiaries.
4. Retention of Certificates; Legend. Any certificates representing unvested shares of Restricted Stock will be held by the Company. If unvested shares of Restricted Stock are held in book entry form, the Participant agrees that the Company may give stop transfer instructions to the depository to ensure compliance with the provisions hereof. All certificates representing unvested shares of Restricted Stock will contain a legend substantially in the following form:
THE TRANSFERABILITY OF THIS CERTIFICATE AND THE SHARES OF STOCK REPRESENTED HEREBY ARE SUBJECT TO THE TERMS AND CONDITIONS (INCLUDING FORFEITURE) OF THE PARTY CITY HOLDCO INC. AMENDED AND RESTATED 2012 OMNIBUS EQUITY INCENTIVE PLAN AND A RESTRICTED STOCK AWARD AGREEMENT ENTERED INTO BETWEEN THE REGISTERED OWNER AND PARTY CITY HOLDCO INC. COPIES OF SUCH PLAN AND AGREEMENT ARE ON FILE IN THE OFFICES OF PARTY CITY HOLDCO INC.
As soon as practicable following the vesting of any such shares of Restricted Stock the Company shall cause a certificate or certificates covering such shares, without the aforesaid legend, to be issued and delivered to the Participant. If any shares of Restricted Stock are held in book-entry form, the Company may take such steps as it deems necessary or appropriate to record and manifest the restrictions applicable to such shares.
5. Company Policies. The Participants sales or other dispositions of Shares acquired hereunder shall be subject to applicable restrictions under Company policies applicable to the Participant, including those covering insider trading by employees and recoupment of compensation, as in effect from time to time.
6. No Right to Continued Service. The granting of the Restricted Stock 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.
7. Tax Matters.
a. Withholding. As a condition to the granting of the Restricted Stock and the vesting thereof, the Participant acknowledges and agrees that he or she is responsible for the payment of all income and employment taxes (and any other taxes required to be withheld) payable in connection with the grant or vesting of, or otherwise in connection with, the Restricted Stock (including as a result of any election pursuant to Section 83(b) of the Code). The Company shall have the power and the right to require the Participant to remit to the Company (including through the delivery of irrevocable instructions to a broker to sell Shares of Restricted Stock that has vested pursuant to this Award Agreement and to deliver promptly to the Company an amount out of the proceeds of such sale equal to an amount as determined by the Company, consistent with the terms of the Plan), such amount as is determined by the Company, consistent with the terms of the Plan, 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 7(a).
b. 83(b) Election. The Participant is hereby advised to confer promptly with a professional tax advisor to consider whether to make any 83(b) election with respect to the Restricted Stock. Any such election, must be made in accordance with applicable regulations and within thirty (30) days following the Date of Grant. The Participant shall notify the Company of any such election as soon as practicable and in no event later than thirty (30) days after making such election, and shall provide the Company with a copy of such election and shall comply with Section 7(a) above in connection with any such election. The Company has made no recommendation to the Participant with respect to the advisability of making such an election.
c. Section 280G. In the event that the Company undergoes a change in control after it (or any of its Affiliates that would be treated, together with the Company, as a single corporation under Section 280G of the Code and the regulations thereunder) has stock that is readily tradeable on an established securities market (within the meaning of Section 280G of the Code and the regulations thereunder), if all, or any portion, of the payments provided under this Award Agreement, either alone or together with other payments or benefits which the Participant receives or is entitled to receive from the Company or an Affiliate, could constitute an excess parachute payment within the meaning of Section 280G of the Code, then the Executive shall be entitled to receive (i) an amount limited so that no portion thereof shall fail to be tax deductible under Section 280G of the Code (the Limited Amount), or (ii) if the amount otherwise payable hereunder (without regard to clause (i)) reduced by the excise tax imposed by Section 4999 of the Code and all other applicable federal, state and local taxes (with income taxes all computed at the highest applicable marginal rate) is greater than the Limited Amount reduced by all taxes applicable thereto (with income taxes all computed at the highest marginal rate), the amount otherwise payable hereunder. If it is determined that the Limited Amount will maximize the Participants after-tax proceeds, payments and benefits shall be reduced to equal the Limited Amount in the following order: (i) first, by reducing cash severance payments, (ii) second, by reducing other payments and benefits to which Q&A 24(c) of Section 1.280G-1 of the Treasury Regulations does not apply, and (iii) finally, by reducing all remaining payments and benefits, with all such reductions done on a pro rata basis. All determinations made pursuant this Section 7(b) will be made at the Companys expense by the independent public accounting firm most recently serving as the Companys outside auditors or such other accounting or benefits consulting group or firm as the Company may designate.
8. Dividends. The Restricted Stock shall have such rights with respect to dividends declared by the Company as are carried by other Shares, provided that any dividends payable with respect to the Unvested Portion shall be subject to the same vesting conditions as the underlying Shares of Restricted Stock and shall only be paid if, when and to the extent such underlying Shares vest. The foregoing shall not prohibit or otherwise limit the adjustment of the terms of this Award Agreement in accordance with the terms of the Plan.
9. Transferability. Unless otherwise determined by the Committee, the Participant shall not be permitted to transfer or assign the Shares of Restricted Stock except in the event of death and in accordance with Section 14.6 of the Plan, until such Shares of Restricted Stock have vested in accordance with the terms of this Award Agreement.
10. Adjustment of Restricted Stock. Adjustments to the Shares of Restricted Stock, and the Performance Criteria specified in Exhibit A, may be made in accordance with the terms of the Plan. Without limiting the generality of the foregoing, upon a Change of Control, the Committee may deem any Restricted Stock subject to Performance Criteria to be earned at any level as it deems appropriate in its sole discretion, which determination shall be binding on all parties.
11. Restricted Stock 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 Restricted Stock 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 Companys 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. Except as otherwise provided in Exhibit A to this Award Agreement, 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 Participants 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. This Award Agreement is intended to comply with or be exempt from the requirements of Section 409A of the Code and shall be construed consistently therewith. In any event, the Participant (or his beneficiaries) shall be responsible for all taxes with respect to the Restricted Stock. The Committee and the Company make no guarantees regarding the tax treatment of the Restricted Stock. Neither the Committee nor the Company has any obligation to take any action to prevent the assessment of any tax under Section 409A of the Code, 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.
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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
VESTING CONDITIONS
1. Time-Based Restricted Shares and Performance-Based Restricted Shares. _________ of the Shares of Restricted Stock are designated as Time-Based Restricted Shares, _________ of the Shares of Restricted Stock are designated as EPS Restricted Shares and _________ of the Shares of Restricted Stock are designated as FCF Restricted Shares.
2. Definitions.
a. Adjusted EPS shall mean, with respect to each fiscal year during the Performance Period, Net Income as adjusted consistent with the adjustments made to Net Income as reflected in the Companys Annual Report on Form 10-K for the applicable fiscal year, divided by the weighted-average Shares outstanding during the relevant fiscal year, calculated on a diluted basis and reported in the Companys financial statements in accordance with generally accepted accounting principles in the United States (GAAP). The performance goal for Cumulative Adjusted EPS shall be subject to adjustment upon the occurrence of certain corporate events in accordance with Section 11.1 of the Plan.
b. Credit Agreement shall mean the Term Loan Credit Agreement dated as of August 19, 2015, among PC Intermediate Holdings, Inc., Party City Holdings Inc., 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 AG New York Branch, as Administrative Agent.
c. Cumulative EPS shall mean the sum of Adjusted EPS for each of the fiscal years during the Performance Period.
d. Cumulative FCF shall mean the sum of Free Cash Flow for each of the fiscal years during the Performance Period.
e. Determination Date shall mean the date on which the Committee determines the number of Shares that have been earned with respect to the EPS Restricted Shares and the FCF Restricted Shares, which date shall not be later than March 15 of the year following the year in which the Performance Period ends.
f. Free Cash Flow shall mean, with respect to each fiscal year during the Performance Period, Consolidated Adjusted EBITDA, as such term is defined in the Credit Agreement, less capital expenditures, as reported in the Companys financial statements in accordance with GAAP.
g. Net Income shall mean, with respect to each fiscal year during the Performance Period, the Companys net income, as reported in accordance with GAAP.
h. Performance Period shall mean the period beginning on January 1, 2019 and ending on December 31, 2021.
i. Vesting Start Date shall mean January 1, 2019.
3. Vesting of Time-Based Restricted Shares. One third (1/3) of the Time-Based Shares shall vest on each of the first three anniversaries of the Vesting Start Date (each a Time-Vesting Date), subject to the Participants continued Service on the applicable Time-Vesting Date, such that 100% of the Time-Based Restricted Shares shall be vested on the third (3rd) anniversary of the Vesting Start Date. Any fractional Time-Based Restricted Shares vested pursuant to this Section 3 of this Exhibit A shall be rounded down to the nearest whole number.
4. Earning of EPS Restricted Shares. No EPS Restricted Shares shall vest unless they have become earned in accordance with this Section 4 of Exhibit A. No portion of the EPS Restricted Shares shall become earned unless Cumulative EPS is equal to or greater than threshold Cumulative EPS level. If the Cumulative EPS is equal to or greater than the threshold level described in the previous sentence, the number of Shares that may be earned with respect to the EPS Restricted Shares shall be equal to the number of EPS Restricted Shares multiplied by the Applicable Percentage set forth in the table below. In the event that the Cumulative EPS falls between the amounts listed in the table below, the Applicable Percentage shall be interpolated on a straight line basis and the percentage of the number of EPS Restricted Shares earned shall be based on such interpolated percentage. If Cumulative EPS is greater than maximum Cumulative EPS level, the Applicable Percentage shall be 100%. Any fractional EPS Restricted Shares earned pursuant to this Section 4 of this Exhibit A shall be rounded down to the nearest whole number.
Cumulative EPS Levels |
Applicable Percentage |
|
$5.16 | 18.75% | |
$5.36 | 50% | |
$5.57 | 100% |
5. Earning of FCF Restricted Shares. No FCF Restricted Shares shall vest unless they have become earned in accordance with this Section 5 of Exhibit A. No portion of the FCF Restricted Shares shall become earned unless Cumulative FCF is equal to or greater than threshold Cumulative FCF level. If the Cumulative FCF is equal to or greater than the threshold level described in the previous sentence, the number of Shares that may be earned with respect to the FCF Restricted Shares shall be equal to the number of FCF Restricted Shares multiplied by the Applicable Percentage set forth in the table below. In the event that the Cumulative FCF falls between the amounts listed in the table below, the Applicable Percentage shall be interpolated on a straight line basis and the percentage of the target number of FCF Restricted Shares earned shall be based on such interpolated percentage. If Cumulative FCF is greater than maximum Cumulative FCF level, the Applicable Percentage shall be 100%. Any fractional FCF Restricted Shares earned pursuant to this Section 5 of this Exhibit A shall be rounded down to the nearest whole number.
Cumulative FCF Levels |
Applicable Percentage |
|
$1,038,000 | 18.75% | |
$1,080,000 | 50% | |
$1,144,000 | 100% |
6. Vesting of EPS Restricted Shares and FCF Restricted Shares. The Participant shall become vested in the number of EPS Restricted Shares and/or FCF Restricted Shares that are earned under Section 4 or Section 5, as applicable, of this Exhibit A on the Determination Date, subject to the Participants continued Service through the Determination Date. Notwithstanding anything herein to the contrary, the Committee in its discretion may adjust the Cumulative EPS Levels and/or the Cumulative FCF Levels in Section 4 and Section 5 of this Exhibit A, respectively, or the number of EPS Restricted Shares and/or FCF Restricted Shares that are treated as earned, as it deems appropriate to account for fluctuations in commodity prices or other external factors adversely affecting the Companys performance against such metrics during the Performance Period; provided that the foregoing adjustments may not decrease the number of EPS Restricted Shares and/or FCF Restricted Shares that would otherwise be earned but for such adjustment. All determinations under this Exhibit A shall be made by the Committee and will be final and binding on the Participant.
Exhibit 10.7
Party City Holdco Inc.
Amended and Restated 2012 Omnibus Equity Incentive Plan
RESTRICTED STOCK UNIT AWARD AGREEMENT
(TIME AND PERFORMANCE-BASED VESTING)
THIS AGREEMENT (this Award Agreement), is made effective as of [●], 2019 (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 Award 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 Award. The Company hereby grants to the Participant an Award of ____________ restricted stock units (the RSUs), on the terms and conditions set forth in the Plan and this Award Agreement, subject to adjustment as set forth in the Plan. Certain RSUs are subject to performance-based vesting conditions and are referred to herein as PSUs. Each PSU represents the conditional right to receive up to two Shares and each other RSU represents the conditional right to receive one Share, in each case, without payment but subject to the term and conditions set forth in the Plan and this Award Agreement, including Exhibit A to this Award Agreement, and subject to adjustment as set forth in the Plan.
2. Vesting of the RSUs. The RSUs shall become vested in accordance with, and subject to the conditions described in, Exhibit A to this Award Agreement. At any time, the portion of the RSUs that have become vested is hereinafter referred to as the Vested Portion and any portion of the RSUs that are not a Vested Portion is hereinafter referred to as the Unvested Portion.
3. Forfeiture; Expiration.
a. Termination of Employment. Upon the termination of the Participants Service by the Company for any reason at any time, any Unvested Portion of the RSUs will be forfeited automatically without consideration.
b. Breach of Restrictive Covenants. The Unvested Portion shall be forfeited without consideration if the Participant breaches any restrictive covenant relating to confidentiality, non-competition, non-solicitation and/or non-disparagement and/or other similar restrictive covenants in favor of the Company or any of its Subsidiaries.
4. Delivery of Shares; Company Policies. Not later than thirty (30) days following the date on which any portion of the RSUs vest (as determined pursuant to the terms of Exhibit A), the Company shall effect delivery of the Shares with respect to such vested RSUs to the Participant. The Participants sales or other dispositions of Shares acquired upon settlement of the RSUs shall be subject to applicable restrictions under Company policies applicable to the Participant, including those covering insider trading by employees and recoupment of compensation, as in effect from time to time.
5. No Right to Continued Service. The granting of the RSUs 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.
6. Tax Matters.
a. Withholding. As a condition to the granting of the RSUs and the vesting thereof, the Participant acknowledges and agrees that he or she is responsible for the payment of all income and employment taxes (and any other taxes required to be withheld) payable in connection with the grant or vesting of, or otherwise in connection with, the RSUs. 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 (including through the delivery of irrevocable instructions to a broker to sell Shares deliverable under this Award Agreement and to deliver promptly to the Company an amount out of the proceeds of such sale equal to an amount as determined by the Company, consistent with the terms of the Plan), such amount as is determined by the Company, consistent with the terms of the Plan, 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 6(a).
b. Section 280G. In the event that the Company undergoes a change in control after it (or any of its Affiliates that would be treated, together with the Company, as a single corporation under Section 280G of the Code and the regulations thereunder) has stock that is readily tradeable on an established securities market (within the meaning of Section 280G of the Code and the regulations thereunder), if all, or any portion, of the payments provided under this Award Agreement, either alone or together with other payments or benefits which the Participant receives or is entitled to receive from the Company or an Affiliate, could constitute an excess parachute payment within the meaning of Section 280G of the Code, then the Executive shall be entitled to receive (i) an amount limited so that no portion thereof shall fail to be tax deductible under Section 280G of the Code (the Limited Amount), or (ii) if the amount otherwise payable hereunder (without regard to clause (i)) reduced by the excise tax imposed by Section 4999 of the Code and all other applicable federal, state and local taxes (with income taxes all computed at the highest applicable marginal rate) is greater than the Limited Amount reduced by all taxes applicable thereto (with income taxes all computed at the highest marginal rate), the amount otherwise payable hereunder. If it is determined that the Limited Amount will maximize the Participants after-tax proceeds, payments and benefits shall be reduced to equal the Limited Amount in the following order: (i) first, by reducing cash severance payments, (ii) second, by reducing other payments and benefits to which Q&A 24(c) of Section 1.280G-1 of the Treasury Regulations does not apply, and (iii) finally, by reducing all remaining payments and benefits, with all such reductions done on a pro rata basis. All determinations made pursuant this Section 6(b) will be made at the Companys expense by the independent public accounting firm most recently serving as the Companys outside auditors or such other accounting or benefits consulting group or firm as the Company may designate.
7. Dividends. The RSUs shall have no rights with respect to dividends declared by the Company with respect to its capital stock, provided that the foregoing shall not prohibit or otherwise limit the adjustment of the terms of this Award Agreement in accordance with the terms of the Plan.
8. Transferability. Unless otherwise determined by the Committee, the Participant shall not be permitted to transfer or assign the RSUs except in the event of death and in accordance with Section 14.6 of the Plan.
9. Adjustment of RSUs. Adjustments to the RSUs (or any Shares underlying the RSUs), and the Performance Criteria specified in Exhibit A, may be made in accordance with the terms of the Plan. Without limiting the generality of the foregoing, upon a Change of Control, the Committee may deem the PSUs to be earned at any level as it deems appropriate in its sole discretion, which determination shall be binding on all parties.
10. RSUs 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 RSUs are 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.
11. 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.
12. 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 15 is reasonably calculated to give actual notice.
13. 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 13 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 13 WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF EACH SUCH PARTY TO THE WAIVER OF ITS RIGHT TO TRIAL BY JURY.
14. 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 Companys 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.
15. 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.
16. 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.
17. Amendment; Waiver. Except as otherwise provided in Exhibit A to this Award Agreement, 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.
18. 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 Participants 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.
19. 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.
20. No Guarantees Regarding Tax Treatment. This Award Agreement is intended to comply with or be exempt from the requirements of Section 409A of the Code and shall be construed consistently therewith. In any event, the Participant (or his beneficiaries) shall be responsible for all taxes with respect to the RSUs. The Committee and the Company make no guarantees regarding the tax treatment of the RSUs. Neither the Committee nor the Company has any obligation to take any action to prevent the assessment of any tax under Section 409A of the Code, 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
VESTING CONDITIONS
1. Time-Based RSUs and Performance-Based RSUs. ____________ of the RSUs are designated as Time-Based RSUs. ____________ of the RSUs are designated as EPS PSUs and ____________ of the RSUs are designated as FCF PSUs.
2. Definitions.
a. Adjusted EPS shall mean, with respect to each fiscal year during the Performance Period, Net Income as adjusted consistent with the adjustments made to Net Income as reflected in the Companys Annual Report on Form 10-K for the applicable fiscal year, divided by the weighted-average Shares outstanding during the relevant fiscal year, calculated on a diluted basis and reported in the Companys financial statements in accordance with generally accepted accounting principles in the United States (GAAP). The performance goal for Cumulative Adjusted EPS shall be subject to adjustment upon the occurrence of certain corporate events in accordance with Section 11.1 of the Plan.
b. Credit Agreement shall mean the Term Loan Credit Agreement dated as of August 19, 2015, among PC Intermediate Holdings, Inc., Party City Holdings Inc., 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 AG New York Branch, as Administrative Agent.
c. Cumulative EPS shall mean the sum of Adjusted EPS for each of the fiscal years during the Performance Period.
d. Cumulative FCF shall mean the sum of Free Cash Flow for each of the fiscal years during the Performance Period.
e. Determination Date shall mean the date on which the Committee determines the number of Shares that have been earned with respect to the EPS PSUs and the FCF PSUs, which date shall not be later than March 15 of the year following the year in which the Performance Period ends.
f. Free Cash Flow shall mean, with respect to each fiscal year during the Performance Period, Consolidated Adjusted EBITDA, as such term is defined in the Credit Agreement, less capital expenditures, as reported in the Companys financial statements in accordance with GAAP.
g. Net Income shall mean, with respect to each fiscal year during the Performance Period, the Companys net income, as reported in accordance with GAAP.
h. Performance Period shall mean the period beginning on January 1, 2019 and ending on December 31, 2021.
i. Vesting Start Date shall mean January 1, 2019.
3. Vesting of Time-Based RSUs. One third (1/3) of the Time-Based RSUs shall vest on each of the first three anniversaries of the Vesting Start Date (each a Time-Vesting Date), subject to the Participants continued Service on the applicable Time-Vesting Date, such that 100% of the Time-Based RSUs shall be vested on the third (3rd) anniversary of the Vesting Start Date. Any fractional Time-Based RSUs vested pursuant to this Section 3 of this Exhibit A shall be rounded down to the nearest whole number.
4. Earning of EPS PSUs. No EPS PSUs shall vest unless they have become earned in accordance with this Section 4 of Exhibit A. No portion of the EPS PSUs shall become earned unless Cumulative EPS is equal to or greater than threshold Cumulative EPS level. If the Cumulative EPS is equal to or greater than the threshold level described in the previous sentence, the number of Shares that may be earned with respect to the EPS PSUs shall be equal to the number of EPS PSUs multiplied by the Applicable Percentage set forth in the table below. In the event that the Cumulative EPS falls between the amounts listed in the table below, the Applicable Percentage shall be interpolated on a straight line basis and the percentage of the number of EPS PSUs earned shall be based on such interpolated percentage. If Cumulative EPS is greater than maximum Cumulative EPS level, the Applicable Percentage shall be 200%. Any fractional EPS PSUs earned pursuant to this Section 4 of this Exhibit A shall be rounded down to the nearest whole number.
Cumulative EPS Levels |
Applicable Percentage |
|
$5.16 | 37.5% | |
$5.36 | 100% | |
$5.57 | 200% |
5. Earning of FCF PSUs. No FCF PSUs shall vest unless they have become earned in accordance with this Section 5 of Exhibit A. No portion of the FCF PSUs shall become earned unless Cumulative FCF is equal to or greater than threshold Cumulative FCF level. If the Cumulative FCF is equal to or greater than the threshold level described in the previous sentence, the number of Shares that may be earned with respect to the FCF PSUs shall be equal to the target number of FCF PSUs multiplied by the Applicable Percentage set forth in the table below. In the event that the Cumulative FCF falls between the amounts listed in the table below, the Applicable Percentage shall be interpolated on a straight line basis and the percentage of the number of FCF PSUs earned shall be based on such interpolated percentage. If Cumulative FCF is greater than maximum Cumulative FCF level, the Applicable Percentage shall be 200%. Any fractional FCF PSUs earned pursuant to this Section 5 of this Exhibit A shall be rounded down to the nearest whole number.
Cumulative FCF Levels |
Applicable Percentage |
|
$1,038,000 | 37.5% | |
$1,080,000 | 100% | |
$1,144,000 | 200% |
6. Vesting of EPS PSUs and FCF PSUs. The Participant shall become vested in the number of EPS PSUs and/or FCF PSUs that are earned under Section 4 or Section 5, as applicable, of this Exhibit A on the Determination Date, subject to the Participants continued Service through the Determination Date. Notwithstanding anything herein to the contrary, the Committee in its discretion may adjust the Cumulative EPS Levels and/or the Cumulative FCF Levels in Section 4 and Section 5 of this Exhibit A, respectively, or the number of EPS PSUs and/or FCF PSUs that are treated as earned, as it deems appropriate to account for fluctuations in commodity prices or other external factors adversely affecting the Companys performance against such metrics during the Performance Period; provided that the foregoing adjustments may not decrease the number of EPS PSUs and/or FCF PSUs that would otherwise be earned but for such adjustment. All determinations under this Exhibit A shall be made by the Committee and will be final and binding on the Participant.
Exhibit 10.8
Party City Holdco Inc.
Amended and Restated 2012 Omnibus Equity Incentive Plan
RESTRICTED STOCK UNIT AWARD AGREEMENT
(NON-EMPLOYEE DIRECTORS)
THIS AGREEMENT (this Award Agreement), is made effective as of [●], 2019 (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 Award 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 Award. The Company hereby grants to the Participant an Award of [●] ([●]) restricted stock units (the RSUs). Each RSU represents the conditional right to receive one Share, subject to the terms and conditions set forth in the Plan and this Award Agreement, and subject to adjustment as set forth in the Plan.
2. Vesting. To the extent not earlier terminated or forfeited, the RSUs shall vest in full on the first to occur of (a) the first anniversary of the Date of Grant, (b) the termination of the Participants Service as a result of his or her death or (c) a Change of Control, subject, in each case, to the Participants continued Service through the applicable date (such applicable date, the Vesting Date).
3. Termination of Service. Subject to Section 2(b) above, if the Participants Service ceases for any reason, the RSUs, to the extent not then vested, will be automatically and immediately forfeited without consideration.
4. Delivery of Shares; Company Policies. Not later than thirty (30) days following the Vesting Date, the Company shall effect delivery of the Shares with respect to such vested RSUs to the Participant. The Participants sales or other dispositions of Shares acquired upon settlement of the RSUs shall be subject to applicable restrictions under Company policies applicable to the Participant, including those covering insider trading, as in effect from time to time.
5. 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, settlement and holding of the RSUs. The Company and its Subsidiaries shall have no liability or obligation relating to the foregoing.
6. Dividends. The RSUs shall have no rights with respect to dividends declared by the Company with respect to its capital stock, provided that the foregoing shall not prohibit or otherwise limit the adjustment of the terms of this Award Agreement in accordance with the terms of the Plan.
7. Transferability. Unless otherwise determined by the Committee, the Participant shall not be permitted to transfer or assign the RSUs except in the event of death and in accordance with Section 14.6 of the Plan.
8. RSUs 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 RSUs are 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.
9. Adjustment of RSUs. Adjustments to the RSUs (or any Shares underlying the RSUs), may be made in accordance with the terms of the Plan.
10. 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.
11. 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 14 is reasonably calculated to give actual notice.
12. 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 12 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 12 WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF EACH SUCH PARTY TO THE WAIVER OF ITS RIGHT TO TRIAL BY JURY.
13. 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 Companys 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.
14. 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.
15. No Right to Continued Service. The granting of the RSUs 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.
16. Entire Agreement. This Award Agreement 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.
17. 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.
18. 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 Participants 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.
19. 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.
20. No Guarantees Regarding Tax Treatment. The Participant (or his beneficiaries) shall be responsible for all taxes with respect to the RSUs. The Committee and the Company make no guarantees regarding the tax treatment of the RSUs. Neither the Committee nor the Company has any obligation to take any action to prevent the assessment of any tax under Sections 409A or 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: Daniel J. Sullivan | ||
Title: Executive Vice-President & Chief Financial Officer |
Agreed and acknowledged as of the date first
above written:
[●]
Exhibit 31.1
Section 302 Certification
I, James M. Harrison, certify that:
1. |
I have reviewed this quarterly report on Form 10-Q of Party City Holdco Inc.; |
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. |
The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our 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; |
(c) |
Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) |
Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
5. |
The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions): |
(a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and |
(b) |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. |
Date: August 9, 2019
/s/ James M. Harrison |
James M. Harrison |
Chief Executive Officer |
(Principal Executive Officer) |
Exhibit 31.2
Section 302 Certification
I, Michael A. Correale, certify that:
1. |
I have reviewed this quarterly report on Form 10-Q of Party City Holdco Inc.; |
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. |
The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our 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; |
(c) |
Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) |
Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
5. |
The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions): |
(a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and |
(b) |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. |
Date: August 9, 2019
/s/ Michael A. Correale |
Michael A. Correale |
Interim Chief Financial Officer |
(Principal Financial Officer) |
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Party City Holdco Inc. (the Company) on Form 10-Q for the quarter ended June 30, 2019, as filed with the Securities and Exchange Commission (the Report), I, James M. Harrison, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
/s/ James M. Harrison |
James M. Harrison |
Chief Executive Officer |
(Principal Executive Officer) |
Date: August 9, 2019
This certification accompanies the Form 10-Q to which it relates, is not deemed filed with the Securities and Exchange Commission and is not to be incorporated by reference into any filing of Party City Holdco Inc. under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended (whether made before or after the date of the Form 10-Q), irrespective of any general incorporation language contained in such filing.
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Party City Holdco Inc. (the Company) on Form 10-Q for the quarter ended June 30, 2019, as filed with the Securities and Exchange Commission (the Report), I, Michael A. Correale, Interim Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
/s/ Michael A. Correale |
Michael A. Correale |
Interim Chief Financial Officer (Principal Financial Officer) |
Date: August 9, 2019
This certification accompanies the Form 10-Q to which it relates, is not deemed filed with the Securities and Exchange Commission and is not to be incorporated by reference into any filing of Party City Holdco Inc. under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended (whether made before or after the date of the Form 10-Q), irrespective of any general incorporation language contained in such filing.