S-1

As filed with the Securities and Exchange Commission on January 21, 2014.

Registration No. 333-            

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form S-1

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

Party City Holdco Inc.

(Exact name of registrant as specified in its charter)

Delaware	5900	46-0539758
(State or other jurisdiction of incorporation or organization)	(Primary Standard Industrial Classification Code Number)	(I.R.S. Employer Identification No.)

(914) 345-2020

80 Grasslands Road, Elmsford, NY 10523

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

James M. Harrison

Chief Executive Officer and President

80 Grasslands Road

Elmsford, NY 10523

(914) 345-2020

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

Copies to:

Julie H. Jones, Esq. Jay J. Kim, Esq. Ropes & Gray LLP Prudential Tower, 800 Boylston Street Boston, MA 02199-3600 Telephone (617) 951-7000 Fax (617) 951-7050 Marc D. Jaffe, Esq. Senet Bischoff, Esq. Latham & Watkins LLP 885 Third Avenue New York, NY 10022-4834 Telephone (212) 906-1200 Fax (212) 751-4864

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

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

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

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

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

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

Large accelerated filer	¨	Accelerated filer	¨
Non-accelerated filer	x  (Do not check if a smaller reporting company)	Smaller reporting company	¨

CALCULATION OF REGISTRATION FEE

Title of Each Class of Securities to be Registered	Proposed Maximum Aggregate Offering Price (1)(2)	Amount of Registration Fee (3)
Common Stock, $0.01 par value per share	$500,000,000	$64,400

(1) Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(o) under the Securities Act.

(2) Includes shares to be sold upon exercise of the underwriters’ option to purchase additional shares. See “Underwriting.”

(3) This fee is being offset by the previously paid fee of $40,635 paid in connection with the registration statement filed on April 22, 2011 by Party City Holdings Inc., the Registrant’s indirect, wholly-owned subsidiary.

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

The information in this preliminary prospectus is not complete and may be changed. Neither we nor the selling stockholders may sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

Subject to Completion. Dated January 21, 2014

Party City Holdco Inc.

            Shares

Common Stock

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

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

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

See “Risk Factors” on page 13 to read about factors you should consider before buying shares of the common stock.

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

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

(1) See “Underwriting” on page 140 for additional information regarding underwriting compensation.

Certain selling stockholders identified in this prospectus have granted the underwriters the option to purchase up to an additional              shares of our common stock on the same terms and conditions set forth above if the underwriters sell more than              shares of our common stock in this offering. We will not receive any proceeds from the sale of shares offered by the selling stockholders.

The underwriters expect to deliver the shares against payment in New York, New York on                    , 2014.

Goldman, Sachs & Co.	BofA Merrill Lynch
Credit Suisse	Morgan Stanley

Barclays Deutsche Bank Securities J.P. Morgan

Prospectus dated                    , 2014

TABLE OF CONTENTS

Market, Ranking and Other Industry Data	ii
Trademarks	ii
Prospectus Summary	1
Risk Factors	13
Special Note Regarding Forward-Looking Statements	29
The Transactions	31
Use of Proceeds	32
Dividend Policy	33
Capitalization	34
Dilution	36
Selected Consolidated Financial Data	38
Unaudited Pro Forma Condensed Consolidated Financial Statements	43
Management’s Discussion and Analysis of Financial Condition and Results of Operations	50
Business	79
Management	99
Executive Compensation	104
Principal and Selling Stockholders	120
Certain Relationships and Related Party Transactions	122
Description of Capital Stock	124
Description of Certain Debt	128
Shares Eligible For Future Sale	134
Material U.S. Federal Income Tax Considerations For Non-U.S. Holders of Common Stock	136
Underwriting	140
Validity of Common Stock	146
Experts	146
Where You Can Find Additional Information	146
Index to Consolidated Financial Statements of Party City Holdco Inc. and Subsidiaries	F-1

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

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MARKET, RANKING AND OTHER INDUSTRY DATA

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

TRADEMARKS

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

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PROSPECTUS SUMMARY

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

As part of the transactions described under “The Transactions,” on July 27, 2012 our wholly-owned indirect subsidiary, PC Merger Sub, Inc. (“Merger Sub”), merged with and into Party City Holdings Inc., with Party City Holdings Inc. being the surviving corporation, which we refer to as the “Acquisition.” In this prospectus, the terms “we,” “us,” “our,” “the Company” and other similar terms refer to Party City Holdco Inc. and all its subsidiaries, including Party City Holdings Inc., that are consolidated under United States generally accepted accounting principles (“GAAP”). Unless we indicate otherwise or the context otherwise requires, information identified in this prospectus as “pro forma” gives effect to various transactions as described under “Unaudited Pro Forma Condensed Consolidated Financial Statements.”

Please note that our discussion of certain financial information, specifically net sales, royalties and franchise fees and retail operating expenses, for the year ended December 31, 2012 and the three and nine months ended September 30, 2012 include data from the “Predecessor” period, which covers the period preceding the Acquisition (January 1, 2012 to July 27, 2012) and data from the “Successor” period, which covers the period following the Acquisition (July 28, 2012 to September 30, 2013), on a combined basis. The Company notes that the change in basis resulting from the Acquisition did not impact such financial information and, although this presentation of financial information on a combined basis does not comply with GAAP, we believe it provides a meaningful method of comparison to the other periods presented in this prospectus. The data is being presented for analytical purposes only. Combined operating results (i) have not been prepared on a pro forma basis as if the Acquisition occurred on the first day of the period, (ii) may not reflect the actual results we would have achieved absent the Acquisition and (iii) may not be predictive of future results of operations.

Our Company

We are the leading party goods retailer in North America and, we believe, the largest vertically integrated supplier of decorated party goods globally with multiple levers to drive future growth across channels, products and geographies. With approximately 880 locations, we have the only coast-to-coast network of party superstores in the U.S. and Canada that make it easy and fun to enhance special occasions with a differentiated shopping experience and an unrivaled assortment of innovative and exciting merchandise offered at a compelling value. Through a series of acquisitions between 2005 and 2010, we built a powerful retail operation that captures the full manufacturing-to-retail margin on a significant portion of the products sold in our stores. We believe we are the largest global designer, manufacturer and distributor of decorated party supplies with products found in over 40,000 retail outlets worldwide, including our own stores as well as independent party supply stores, mass merchants, grocery retailers, dollar stores and others. Our category-defining retail concept, multi-channel reach, widely recognized brands, broad and deep product offering, and low-cost global sourcing model are, we believe, significant competitive advantages. We believe these characteristics position us for continued organic and acquisition-led growth and margin expansion.

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

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The 2005 combination of Amscan Holdings, Inc. (“Amscan”), which focused on the wholesale market, and Party City Corporation (“Party City”), which focused on the retail market, represented an important step in our evolution. Since then, we have established the largest multi-channel party supply business in North America with approximately 880 party superstores (inclusive of approximately 215 franchised stores) in the United States and Canada, principally under the Party City banner, and PartyCity.com, our primary e-commerce site. Underscored by our slogan “Nobody Has More Party for Less,” we believe we offer a superior one-stop shopping experience with a broad selection, consistently high in-stock positions and compelling value proposition, making us the favored destination for all of our customers’ party supply needs. We also operate a network of approximately 350 temporary Halloween locations under the Halloween City banner.

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

• Growing revenue from $1,487 million for the year ended December 31, 2009 to $1,981 million for the twelve months ended September 30, 2013 representing a compounded annual growth rate of 7.9%.

• Increasing adjusted EBITDA from $192 million, implying an adjusted EBITDA margin of 12.9%, for the year ended December 31, 2009 to $         million on a pro forma basis for the twelve months ended September 30, 2013, for an implied pro forma adjusted EBITDA margin of         %. Net income decreased from $63 million for the year ended December 31, 2009 to a net loss of $         million on a pro forma basis for the twelve months ended September 30, 2013 due to both higher interest expense, resulting from debt incurred in conjunction with the Transactions, the impact of non-cash purchase accounting adjustments resulting from the Transactions, and the impact of non-recurring charges related to refinancings.

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

Evolution of Our Business

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

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

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

• Re-launching our e-commerce platform in 2009 provided us with an additional direct-to-consumer channel.

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

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

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

Competitive Strengths

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

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

Leading Market Position. We are the largest retailer of decorated party supplies in the U.S. and Canada. With our network of approximately 850 party superstores, we are the only party supply retailer with a national store footprint. In addition to our leading retail presence, we believe our integrated wholesale business is the largest global designer, manufacturer and distributor of decorated party goods with over 40,000 SKUs found in over 40,000 retail outlets worldwide. Through our category-leading brands, Party City and Amscan, we offer what we believe is the broadest selection of continuously updated and innovative merchandise at a compelling value. We believe that our scale, brand recognition and value proposition underscore our credibility as the destination of choice for party supplies in any channel.

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

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

Highly Efficient Global Sourcing and Distribution Capabilities. Over the past 60 years, we have developed a global network of owned and third-party manufacturers that we believe optimizes speed to market, quality and cost. We also have warehousing and distribution facilities around the world, including three in the U.S. and seven centers located outside the United States. We have also opened sourcing, quality control and testing offices throughout Asia with over 200 employees in our offices located in China, Vietnam and Hong Kong. Our global sourcing and distribution capabilities offer our customers best-in-class service levels, rapid fulfillment and competitive prices, and have capacity for continued growth with our business.

World-Class Management Team with a Proven Track Record. Our senior management team averages over 20 years of industry experience and possesses a unique combination of management skills and experience in the

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

Growth Strategy

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

Expand Our Retail Store Base. Our retail network includes approximately 850 party superstores (inclusive of approximately 215 franchised stores) in the United States and approximately 30 locations in Canada. We believe there is an opportunity to open more than 350 additional Party City stores in North America which is consistent with an independent analysis conducted by a leading, global consulting firm in 2012. We anticipate opening approximately 30 new stores per year. Based on historical performance and the margin generated from our vertically integrated model, we expect our new stores to have a payback period of approximately three years and to generate an average pre-tax cash-on-cash return on invested capital of approximately 50% in year three.

Drive Additional Growth and Productivity From Existing Retail Stores. We plan to grow our comparable store sales by continuing to improve our brand image and awareness, executing our merchandising initiatives, converting existing stores to our new more interactive format and integrating the 2013 iParty acquisition. We are pursuing various merchandising initiatives to drive increased units per transaction including aligning dress-up and candy products coordinated by color and party themes and broadening the product formats available within existing license arrangements. We also anticipate remodeling or relocating approximately 50 stores per year and converting them to our latest interactive store-within-a-store concept (specialty areas named “Sports City”, “Candy City”, “Color City” and “Favor City”). Based on our historical experience, we expect remodeled or relocated stores to generate sales growth of four to five percentage points higher than non-remodeled or non-relocated stores in the first year following conversion with longer-term sales growth of one to two percentage points higher than non-remodeled or non-relocated stores.

Growing Market Share and Earnings. We believe we have significant opportunities to continue to grow our wholesale business by capitalizing on our leading scale, vertical operating model and strong innovation capabilities as well as through strategic acquisitions. We will also continue to broaden our product assortment by adding new items that coordinate with our party themed events and licenses and broaden our reach by expanding into adjacent business-to-business and alternate consumer channels where we see a compelling opportunity for our products. As we continue to grow, our increased scale will allow us to leverage our costs and drive margin expansion. Since 2005, we have increased the selection of our own merchandise offered in Party City stores (also known as “share of shelf”) from approximately 25% in 2005 to approximately 67% for the nine months ended September 30, 2013 which allowed us to increase our margins. Our ultimate long-term share of shelf target is 75% to 80%. Our ability to create new and enhance existing celebration opportunities will continue to be a consistent driver of our growth.

Grow Our E-commerce Platform. Since our e-commerce business was relaunched in 2009 under the PartyCity.com banner, it has grown to account for approximately $100 million in revenue during the twelve months ended September 30, 2013 and, we believe, to become one of the largest e-commerce retailers of decorated party goods and costumes. We are targeting future e-commerce growth by enhancing our merchandising approach online, as well as launching country specific e-commerce sites, building off the 2013 acquisition of Party Delights Ltd. (“Party Delights”). In addition, we anticipate broadening the products and services available to our customers through our e-commerce channel and launching a mobile application.

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Increase International Presence. Through acquisitions and organic growth, we have increased sales to international customers to represent approximately 13.7% of our total revenues in 2012. The market for party goods outside the United States is less mature due to lower consumer awareness of party products and less developed retail distribution channels. We believe this represents an opportunity as we customize our products to different cultural norms as well as engage in a “party education process” to grow demand for party goods in international markets.

Pursue Accretive Acquisitions. Over the past 15 years, we have successfully integrated numerous acquisitions, such as Christy’s Group (“Christy’s” or “Christy’s Group”), and Party Delights, strengthening our manufacturing, distribution and retail platforms. We have also acquired, and will continue to acquire, our franchised stores and independent party good retailers as such opportunities emerge. We believe our significant experience in identifying attractive acquisition targets, proven integration process and global infrastructure create a strong platform for future acquisitions.

Industry Overview

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

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

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

The Transactions

On July 27, 2012, Merger Sub, a wholly-owned subsidiary of PC Intermediate Holdings, Inc. (“Holdings”), which is our wholly-owned subsidiary, merged into Party City Holdings Inc. (“PCHI”), with PCHI being the surviving entity. Immediately after the Acquisition, 100% of our common stock was owned by funds affiliated with Thomas H. Lee Partners, L.P. (“THL”), who held approximately 70% ownership, funds affiliated with Advent International Corporation (“Advent” and, together with THL, the “Sponsors”), who held approximately 24% ownership, and other minority investors, including management, who held approximately 6% ownership. To consummate the Acquisition, our subsidiary, PCHI, entered into new debt financing consisting of (i) $1,525

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million of senior secured credit facilities (the “Senior Credit Facilities”) consisting of: (a) a $400 million revolving credit facility (the “ABL Facility”), which had $115 million drawn at the closing of the Acquisition and (b) a $1,125 million term loan credit facility (the “Term Loan Facility”), and (ii) $700 million of 8.875% senior notes (the “senior notes”).

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

Risks That We Face

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

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

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

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

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

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

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

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

The Sponsors

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

Founded in 1984, Advent is one of the largest and most experienced global investors dedicated solely to private equity. Since inception, the firm has invested in 290 buyout transactions in 39 countries, and today has $32.2 billion in assets under management. With offices on four continents, Advent has established a globally integrated team of over 170 investment professionals across North America, Europe, Latin America and Asia. The firm focuses on growth and traditional buyout and strategic repositioning transactions across five core sectors, including business and financial services; healthcare; industrial; retail, consumer and leisure; and technology, media and telecoms.

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Affiliates of THL, together with affiliates of Advent, own approximately 93% of our common stock, with affiliates of THL owning approximately 69% of our common stock. Upon completion of this offering and assuming no exercise of the underwriters’ option to purchase additional shares, the Sponsors will continue to beneficially own approximately     % of our outstanding common stock.

Corporate Information

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

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THE OFFERING

Common stock offered by us             shares

Common stock to be outstanding after this offering             shares

Option to purchase additional shares offered to underwriters The selling stockholders have granted the underwriters an option to purchase up to              additional shares.

Use of proceeds Assuming an initial public offering price of $         , which is the midpoint of the range listed on the cover page of this prospectus, we estimate that the net proceeds to us from this offering will be approximately $         million. We intend to use the net proceeds from this offering to repay indebtedness and for working capital and other general corporate purposes. See “Use of Proceeds.”

We will not receive any proceeds from the shares sold by the selling stockholders if the underwriters’ option to purchase additional shares is exercised.

Risk factors You should read the “Risk Factors” section of this prospectus beginning on page 13 for a discussion of factors to consider carefully before deciding whether to purchase shares of our common stock.

Proposed              symbol PRTY

The number of shares of our common stock to be outstanding after this offering is based on 33,509.93 shares of common stock outstanding as of December 31, 2013 and excludes:

• 2,547 shares of common stock issuable upon the exercise of stock options issued under our 2012 Omnibus Equity Incentive Plan (the “2012 Plan”) with a weighted average exercise price of $14,916 per share;

• 1,159 additional shares of common stock reserved for future issuance under the 2012 Plan; and

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

Unless otherwise indicated, all information in this prospectus assumes:

• a            -for-one stock split on our common stock effected as a stock dividend on                     , 2014;

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

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

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SUMMARY FINANCIAL DATA

The following table sets forth summary historical consolidated financial data for the periods ended and at the dates indicated below. Our summary historical consolidated financial data as of December 31, 2011 (Predecessor) and December 31, 2012 (Successor) and for the period from July 28, 2012 to December 31, 2012 (Successor), the period from January 1, 2012 to July 27, 2012 (Predecessor) and the years ended December 31, 2011 (Predecessor) and December 31, 2010 (Predecessor) presented in this table has been derived from our historical audited consolidated financial statements included elsewhere in this prospectus. Our summary historical consolidated financial data for the nine months ended September 30, 2013 (Successor) and the period from July 28, 2012 to September 30, 2012 (Successor) has been derived from our historical unaudited consolidated financial statements included elsewhere in this prospectus. The unaudited pro forma condensed consolidated statements of operations and comprehensive loss for the twelve months ended September 30, 2013 has been derived from our unaudited pro forma condensed consolidated financial statements included elsewhere in this prospectus.

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

	Fiscal Year Ended December 31,						Period from January 1 to July 27, 2012			Period from July 28 to December 31, 2012			Period from January 1 to July 27, 2012			Period from July 28 to September 30, 2012			Nine Months Ended September 30, 2013 (3)			Pro Forma Twelve Months Ended September 30, 2013 (4)
	2010 (1)			2011 (2)
	(Predecessor)			(Predecessor)			(Predecessor)			(Successor)			(Predecessor)			(Successor)			(Successor)			(Successor)
		(dollars in thousands, except per common share data)
Income Statement Data:
Revenues:
Net sales	$	1,579,677		$	1,852,869		$	930,903		$	964,330		$	930,903		$	324,525		$	1,323,216
Royalties and franchise fees		19,417			19,106			9,281			9,312			9,281			2,797			11,961
Total revenues		1,599,094			1,871,975			940,184			973,642			940,184			327,322			1,335,177
Expenses:
Cost of sales (5)		943,058			1,118,973			574,048			636,410			574,048			247,508			877,258
Wholesale selling expenses		42,725			57,905			31,568			28,096			31,568			11,465			51,091
Retail operating expenses		296,891			325,332			166,047			172,168			166,047			62,454			245,252
Franchise expenses		12,269			13,685			6,579			6,128			6,579			2,585			9,872
General and administrative expenses (6)		134,392			138,074			101,502			65,890			101,502			28,596			107,718
Art and development costs		14,923			16,636			10,824			8,201			10,824			3,390			14,480
Impairment of trade name (7)		27,400			—			—			—			—			—			—
Income (loss) from operations		127,436			201,370			49,616			56,749			49,616			(28,676	)		29,506
Interest expense, net		40,850			77,743			41,970			62,062			41,970			26,572			103,561
Other expense, net (8)		4,208			1,476			22,245			26,157			22,245			25,621			15,991
Income (loss) before income taxes		82,378			122,151			(14,599	)		(31,470	)		(14,599	)		(80,869	)		(90,046	)
Income tax expense (benefit)		32,945			45,741			403			(1,322	)		403			(25,755	)		(38,546	)
Net income (loss)		49,433			76,410			(15,002	)		(30,148	)		(15,002	)		(55,114	)		(51,500	)
Less: net income attributable to noncontrolling interests		114			135			96			60			96			61			224
Net income (loss) attributable to Party City Holdco Inc.	$	49,319		$	76,275		$	(15,098	)	$	(30,208	)	$	(15,098	)	$	(55,175	)	$	(51,724	)
Per Share Data:
Net income (loss) per share
Basic
Diluted
Pro forma basic
Pro forma diluted
Weighted Average
Outstanding basic
Diluted
Pro forma outstanding basic
Pro forma diluted
Statement of Cash Flow Data
Net cash provided by (used in)
Operating activities (9)	$	61,168		$	161,264		$	(18,126	)	$	(41,844	)	$	(18,126	)	$	(199,168	)	$	(73,986	)
Investing activities (9)		(102,766	)		(138,909	)		(31,824	)		(1,578,553	)		(31,824	)		(1,570,454	)		(90,572	)
Financing activities (9)		46,515			(19,784	)		33,318			1,629,331			33,318			1,777,662			162,871
Cash dividend per common share		9,400			—			—			—			—			—			10,087

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	Year Ended December 31,						Period from January 1 to July 27, 2012			Period from July 28 to December 31, 2012			Period from January 1 to July 27, 2012			Period from July 28 to September 30, 2012			Nine Months Ended September 30, 2013 (3)			Pro Forma Twelve Months Ended September 30, 2013(4)
	2010 (1)			2011 (2)
	(Predecessor)			(Predecessor)			(Predecessor)			(Successor)			(Predecessor)			(Successor)			(Successor)			(Successor)
	(dollars in thousands)
Other Financial Data:
Adjusted EBITDA (10)	$	230,618		$	275,466		$	116,982		$	175,329		$	116,982		$	21,806		$	145,906
Adjusted EBITDA margin (10)		14.4	%		14.7	%		12.4	%		18.0	%		12.4	%		6.7	%		10.9	%
Adjusted net income (10)	$	86,430		$	88,260		$	22,883		$	50,920		$	22,883		$	(5,239	)	$	(2,566	)
Number of company-owned Party City stores (11)		439			487			—			600			—			594			665
Capital expenditures	$	49,623		$	44,483		$	28,864		$	16,376		$	28,864		$	7,635		$	42,143
Party City brand comp sales (12)		3.6	%		9.5	%														1.9	%
Share of shelf (13)		58.7	%		60.5	%		64.7	%		63.7	%		64.7	%		63.0	%		67.1	%
Balance Sheet Data (at end of period):
Cash and cash equivalents	$	20,454		$	22,053		$	—		$	14,563		$	—		$	13,652		$	12,904
Working capital (14)		189,993			226,277			—			387,858			—			337,650			337,827
Total assets		1,653,151			1,750,338			—			3,276,983			—			3,219,374			3,462,049
Total debt		1,000,256			982,258			—			1,851,517			—			2,000,006			2,365,768
Total equity		256,422			326,091			—			787,450			—			761,734			406,286

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

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

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

(4) The unaudited pro forma condensed consolidated statements of operations and comprehensive loss and other financial data for the twelve months ended September 30, 2013 gives effect to: (i) this offering and the use of proceeds therefrom, (ii) the February 2013 amendment to the credit agreement governing the Term Loan Facility, (iii) the issuance of the senior PIK toggle notes and the use of proceeds therefrom and (iv) the termination of the management agreement with the Sponsors, assuming in each case such event occurred on October 1, 2012. The unaudited pro forma condensed consolidated balance sheet data at September 30, 2013 gives effect to: (i) this offering and the use of proceeds therefrom and (ii) the termination of the management agreement with the Sponsors, assuming in each case such event occurred on September 30, 2013. The unaudited pro forma condensed consolidated statements of operations and comprehensive loss and other financial data and the unaudited pro forma consolidated balance sheet data do not necessarily represent what our financial position and results of operations would have been if the transactions had actually been completed on the dates indicated, and are not intended to project our financial position or results of operations for any future period. See “Use of Proceeds” and “Unaudited Pro Forma Condensed Consolidated Financial Statements.”

(5) As a result of the Acquisition, the Company applied the acquisition method of accounting and increased the value of its inventory by $89.8 million as of July 28, 2012. Such adjustment increased the Company’s cost of sales during the nine months ended September 30, 2013, the period from July 28, 2012 to December 31, 2012 and the period from July 28, 2012 to September 30, 2012 by $22.0 million, $58.6 million and $27.8 million, respectively, as a portion of the related inventory was sold.

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

(7) During 2010, the Company implemented plans to convert and rebrand its company-owned FCPO stores as Party City stores. As a result, the Company recorded a charge for the impairment of the Factory Card & Party Outlet trade name of $27.4 million in the fourth quarter of 2010.

(8) During February 2013, the Company amended the Term Loan Facility. In conjunction with that amendment, the Company wrote-off $5.9 million of costs that had been capitalized during the initial issuance of the debt. Additionally, the Company wrote-off $2.3 million of the net original issuance discount that existed as of the time of that amendment. Also, in conjunction with that amendment, the Company expensed $2.5 million of a call premium and $1.6 million of investment banking and legal fees. In conjunction with the Transactions, the Company recorded $19.7 million of transaction costs in other expense, net during the period from January 1, 2012 to July 27, 2012 and $24.6 million of transaction costs during the period from July 28, 2012 to December 31, 2012. Additionally, the period from January 1, 2012 to July 27, 2012 included $2.5 million in costs as a result of the termination of an initial public offering. In connection with the refinancing of the Company’s revolving and term debt credit facilities in August and December 2010, the Company wrote off $2.4 million of deferred finance charges during 2010.

(9) See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity” for a discussion of 2012 cash flows.

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

We present adjusted EBITDA and adjusted net income because we believe it assists investors and analysts in comparing our performance across reporting periods on a consistent basis by excluding items that we do not believe are indicative of our core operating performance. In addition, we

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use adjusted EBITDA: (i) as a factor in determining incentive compensation, (ii) to evaluate the effectiveness of our business strategies and (iii) because the credit facility uses adjusted EBITDA to measure compliance with certain covenants. While we have historically not used adjusted net income for internal management reporting and valuation purposes, we believe adjusted net income is a helpful benchmark to evaluate our operating performance.

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

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

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

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

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

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

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

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

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

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

	Year Ended December 31,						Period from January 1 to July 27, 2012			Period from July 28 to December 31, 2012			Period from January 1 to July 27, 2012			Period from July 28 to September 30, 2012			Nine Months Ended September 30, 2013			Pro Forma Twelve Months Ended September 30, 2013
	2010			2011
	(Predecessor)			(Predecessor)			(Predecessor)			(Successor)			(Predecessor)			(Successor)			(Successor)			(Successor)
	(dollars in thousands)
Net income (loss)	$	49,433		$	76,410		$	(15,002	)	$	(30,148	)	$	(15,002	)	$	(55,114	)	$	(51,500	)
Interest expense, net		40,850			77,743			41,970			62,062			41,970			26,572			103,561
Income taxes		32,945			45,741			403			(1,322	)		403			(25,755	)		(38,546	)
Depreciation and amortization		49,418			59,631			33,915			49,837			33,915			20,327			70,960
EBITDA		172,646			259,525			61,286			80,429			61,286			(33,970	)		84,475
Equity based compensation		6,019			1,397			3,375			—			3,375			—			1,741
Non-cash purchase accounting adjustments		1,244			—			—			58,626	(a)		—			27,805	(a)		21,979	(a)
Management fee		1,248	(b)		1,248	(b)		713	(b)		1,292	(b)		713	(b)		541	(b)		2,250	(b)
Impairment charges		27,997	(c)		87			—			—			—			—			—
Restructuring, retention and severance		1,780			2,513			355			784			355			350			2,840
Payment in lieu of dividend		9,395	(d)		617	(d)		16,533	(d)		—			16,533	(d)		—			—
Refinancing charges		2,448			—			—			—			—			—			12,295	(e)
Deferred rent		4,500			7,467			3,344			6,335			3,344			1,434			11,706
Estimated business interruption proceeds		—			—			—			2,000			—			—			1,000
Transaction costs		—			—			28,582	(f)		24,564	(f)		28,582	(f)		24,564	(f)		—
Corporate development expenses		1,660			2,471			2,395			351			2,395			239			4,606
Other		1,681			141			399			948			399			843			3,014
Adjusted EBITDA	$	230,618		$	275,466		$	116,982		$	175,329		$	116,982		$	21,806		$	145,906

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	Year Ended December 31,						Period from January 1 to July 27, 2012			Period from July 28 to December 31, 2012			Period from January 1 to July 27, 2012			Period from July 28 to September 30, 2012			Nine Months Ended September 30, 2013			Pro Forma Twelve Months Ended September 30, 2013
	2010			2011
	(Predecessor)			(Predecessor)			(Predecessor)			(Successor)			(Predecessor)			(Successor)			(Successor)			(Successor)
	(dollars in thousands)
Income (loss) before income taxes	$	82,378		$	122,151		$	(14,599	)	$	(31,470	)	$	(14,599	)	$	(80,869	)	$	(90,046	)
Intangible asset amortization		10,345	(g)		11,116	(g)		5,542	(g)		14,160	(g)		5,542	(g)		5,661	(g)		20,477	(g)
Non-cash purchase accounting adjustments		1,244			—			—			71,755	(a)		—			33,057	(a)		33,793	(a)
Amortization of deferred financing costs and original issuance discount		2,475	(h)		4,500	(h)		2,592	(h)		4,605	(h)		2,592	(h)		1,907	(h)		16,886	(e)(h)
Management fee		1,248	(b)		1,248	(b)		713	(b)		1,292	(b)		713	(b)		541	(b)		2,250	(b)
Refinancing charges		2,448			—			—			—			—			—			4,068	(e)
Equity based compensation		6,019			1,397			3,375			—			3,375			—			1,741
Payment in lieu of dividend		9,395	(d)		617	(d)		16,533	(d)		—			16,533	(d)		—			—
Impairment charges		27,997	(c)		87			—			—			—			—			—
Transaction costs		—			—			28,582	(f)		24,564	(f)		28,582	(f)		24,564	(f)		—
Adjusted income (loss) before income taxes		143,549			141,116			42,738			84,906			42,738			(15,139)			(10,831)
Adjusted income tax expense (benefit)		57,119	(i)		52,856	(i)		19,855	(i)		33,986	(i)		19,855	(i)		(9,900	)(i)		(8,265	)(i)
Adjusted net income (loss)	$	86,430		$	88,260		$	22,883		$	50,920		$	22,883		$	(5,239	)	$	(2,566	)

(a) As a result of the Acquisition, the Company applied the acquisition method of accounting and increased the value of its inventory by $89.8 million as of July 28, 2012. Such adjustment increased the Company’s cost of sales during the nine months ended September 30, 2013, the period from July 28, 2012 to December 31, 2012 and the period from July 28, 2012 to September 30, 2012 by $22.0 million, $58.6 million and, $27.8 million, respectively, as a portion of the related inventory was sold. Further, during the application of the acquisition method of accounting, the Company increased the value of certain property, plant and equipment. The impact of such adjustments on depreciation expense increased the Company’s expenses during the nine months ended September 30, 2013, the period from July 28, 2012 to December 31, 2012 and the period from July 28, 2012 to September 30, 2012 by $11.8 million, $13.1 million and $5.3 million, respectively. These property, plant and equipment depreciation amounts are included in “Non-cash purchase accounting adjustments” for purposes of calculating “adjusted net income,” but are excluded from “Non-cash purchase accounting adjustments” for purposes of calculating adjusted EBITDA since they are included in depreciation expense.

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

(c) During 2010, we implemented plans to convert and rebrand our company-owned FCPO stores as Party City stores. As a result, we recorded a $27.4 million charge for impairment of the FCPO trade name in the fourth quarter of 2010.

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

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

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

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

(h) Represents the amortization of deferred financing costs and original issuance discounts related to debt offerings. Additionally, the nine months ended September 30, 2013 includes the write-off of deferred financing costs and net original issuance discounts in conjunction with the February 2013 Term Loan Facility amendment. See note (e) for further discussion.

(i) Represents the income tax expense (benefit) using the rate in effect after considering the adjustments.

(11) Data as of September 30, 2013 includes all 54 stores that were acquired from iParty and which were converted to the Party City banner at such date.

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

(13) Represents the percentage of cost of goods sold by our domestic permanent stores (excluding iParty stores) and domestic e-commerce operations which relates to product supplied by our wholesale operations.

(14) Loans and notes payable (included in current liabilities) decreased by $106.0 million from December 31, 2011 to December 31, 2012. Additionally, as a result of the Transactions, the Company applied the acquisition method of accounting and increased the value of its inventory as of July 28, 2012. At September 30, 2013 and December 31, 2012, $9.1 million and $31.1 million, respectively, of the adjustment was included in inventory.

12

RISK FACTORS

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

Risks Related to Our Business

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

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

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

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

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

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

Our business may be adversely impacted by helium shortages.

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

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

13

sales were $2.6 million lower than 2011 as balloon distributors and retailers rationalized inventory levels in light of the shortage. Additionally, our net sales of domestic metallic balloons during the first nine months of 2013 were $4.4 million lower than the first nine months of 2012.

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

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

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

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

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

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

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

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

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

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

• manufacture and source sufficient levels of inventory at acceptable costs;

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

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

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

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

• gain brand recognition and acceptance in new markets; and

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

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

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

Our retail business, including our Party City stores, online sales from our e-commerce website and our temporary Halloween City locations, realizes a significant portion of its revenues, net income and cash flow in September and October, principally due to our Halloween sales. For example, in 2012 our Halloween business represented approximately 25% of our total domestic retail sales. We believe this general pattern will continue in the future. An economic downturn, or adverse weather, during this period could adversely affect us to a greater extent than at other times of the year. Any unanticipated decrease in demand for our products during the Halloween season could require us to maintain excess inventory or sell excess inventory at a substantial markdown, which could have a material adverse effect on our business, profitability, ability to repay any indebtedness and our brand image. In addition, our sales during the Halloween season could be affected if we are not able to find sufficient and adequate lease space for our temporary Halloween City locations or if we are unable to hire temporary personnel to adequately staff these stores and our distribution facility during the Halloween season. Failure to have proper lease space and adequate personnel could hurt our business, financial condition and results of operations.

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

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

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

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

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

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

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

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

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

In 2012, we manufactured items representing approximately 34% of our net sales at wholesale (including sales to our retail operations). Any significant disruption in our manufacturing facilities, in the United States or abroad, for any reason, including regulatory requirements, the loss of certifications, power interruptions, fires, hurricanes, war or other force of nature, could disrupt our supply of products, adversely affecting our business, results of operations, cash flows and financial performance. The occurrence of one or more natural disasters, or other disruptive geo-political events, could also result in increases in fuel (or other energy) prices or a fuel shortage, the temporary or permanent closure of one or more of manufacturing or distribution centers, the temporary lack of an adequate work force in a market, the temporary or long-term disruption in the supply of products from some local and overseas suppliers, the temporary disruption in the transport of goods from overseas or delays in the delivery of goods to our distribution centers or stores or to third parties who purchase from us. If one or more of these events occurred, our revenues and profitability would be reduced.

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

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

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

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

• recessionary or expansive trends in international markets;

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

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

• work stoppages or other employee rights issues;

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

• transportation delays and interruptions;

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

• difficulty enforcing our intellectual property and competition against counterfeit goods;

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

• political and economic instability.

We may face risks associated with litigation and claims.

From time to time, we are involved in class actions and other lawsuits, claims and other proceedings relating to the conduct of our business, including but not limited to employee-related and consumer matters. Additionally,

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as a retailer and manufacturer of decorated party goods, we have been and may continue to be subject to product liability claims if the use of our products, whether manufactured by us or third party manufacturers, is alleged to have resulted in injury or if our products include inadequate instructions or warnings. Due to the uncertainties of litigation, we can give no assurance that we will prevail on all claims made against us in the lawsuits that we currently face or that additional claims will not be made against us in the future. While it is not feasible to predict the outcome of pending lawsuits and claims, we do not believe that any such matters are material or that the disposition thereof is likely to have a material adverse effect on our business, financial condition and results of operations, although the resolution in any reporting period of any matter could have an adverse effect on our operating results for that period. Also, we can give no assurance that any other lawsuits or claims brought in the future will not have a material adverse effect on our business, financial condition and results of operations.

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

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

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

The success of our business depends, to a large extent, on the continued service of our senior management team. Gerald C. Rittenberg, our Executive Chairman, and James M. Harrison, our Chief Executive Officer and President, have been with the Company for approximately 23 and 17 years, respectively. The loss of the services and leadership of either of these individuals could have a negative impact on our business, as we may not be able to find management personnel with similar experience and industry knowledge to replace either of them on a timely basis. We do not maintain key life insurance on any of our senior officers.

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

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

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

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

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

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

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

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

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

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

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

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

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

In addition, we may not be able to:

• identify suitable acquisition candidates;

• consummate acquisitions on acceptable terms;

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

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

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

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

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

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

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

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

Risks Related to Our Indebtedness

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

As of September 30, 2013, we had total indebtedness of $2,384.2 million (exclusive of original issue discount and call premiums) and an additional $167.3 million of borrowing capacity available under the ABL Facility (excluding $19.0 million of letters of credit outstanding as of September 30, 2013).

We also have, and will continue to have, significant lease obligations. As of December 31, 2012, our minimum aggregate rental obligation under operating leases for fiscal 2013 through 2017 totaled $438.8 million.

Our pro forma net interest expense for the nine months ended September 30, 2013 was $118.8 million, after giving effect to the issuance of the $350 million senior PIK toggle notes (the “senior PIK toggle notes”) issued by our subsidiaries, PC Nextco Holdings, LLC (“Nextco Holdings”) and PC Nextco Finance, LLC (“Nextco Finance”) in August 2013 and after giving effect to the impact of the Term Loan Facility refinancing in February 2013. As of September 30, 2013, we had outstanding approximately $1,328.5 million in aggregate principal amount (exclusive of original issue discount and call premiums) of indebtedness under the Senior Credit Facilities that bears interest at a floating rate.

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

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

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

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

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

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

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

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

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

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

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

• incurring additional indebtedness or issuing disqualified stock;

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

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

• making investments, loans, advances or acquisitions;

• entering into sale and leaseback transactions;

• engaging in transactions with affiliates;

• creating liens;

• transferring or selling assets;

• guaranteeing indebtedness;

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

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

In addition, the ABL Facility requires us to comply, under specific circumstances, including certain types of acquisitions, with a minimum fixed charge coverage ratio (as defined therein) covenant of 1.00 to 1.00. At September 30, 2013, such ratio was 1.55 to 1.00. Our ability to comply with this covenant can be affected by events beyond our control, and we may not be able to satisfy them. A breach of this covenant would be an event of default. In the event of a default under the ABL Facility, the ABL Facility lenders could elect to declare all amounts outstanding under the ABL Facility to be immediately due and payable or terminate their commitments to lend additional money, which would also lead to a cross-default and cross-acceleration of amounts owing under the Term Loan Facility. If the indebtedness under the Senior Credit Facilities or our other indebtedness were to be accelerated, our assets may not be sufficient to repay such indebtedness in full. We have pledged a significant portion of our assets as collateral under the Senior Credit Facilities. See “Description of Certain Debt.”

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

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

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

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

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

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

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

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

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

• it could not pay its debts as they became due.

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

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

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

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Risks Related to This Offering

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

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

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

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

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

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

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

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

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

Investment funds affiliated with the Sponsors beneficially own approximately 93% of our capital stock as of September 30, 2013. After the completion of this offering, assuming the underwriters do not exercise their option to purchase additional shares, the Sponsors will beneficially own approximately     % of our common stock. The Sponsors have significant influence over corporate transactions. So long as investment funds associated with or designated by the Sponsors continue to own a significant amount of the outstanding shares of our common stock, even if such amount is less than 50%, the Sponsors will continue to be able to strongly influence or effectively control our decisions, regardless of whether or not other stockholders believe that the transaction is in their own best interests. Such concentration of voting power could also have the effect of delaying, deterring or preventing a change of control or other business combination that might otherwise be beneficial to our stockholders.

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

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

• actual or anticipated fluctuations in our results of operations;

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

• changes in consumer preferences or merchandise trends;

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

• additions or changes to key personnel;

• the timing of releases of new merchandise or promotional events;

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

• our ability to source and distribute products effectively;

• weather conditions (particularly during the holiday season);

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

• the commencement or outcome of litigation;

• changes in market valuation or earnings of our competitors;

• the trading volume of our common stock;

• future sale of our equity securities; and

• economic, legal and regulatory factors unrelated to our performance.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

• advance notice requirements for stockholder proposals and director nominations;

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

• the required approval of holders of at least a majority of our outstanding shares of capital stock entitled to vote generally at an election of the directors to remove directors only for cause;

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

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

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

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

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

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

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

• our ability to compete effectively in a competitive industry;

• fluctuations in commodity prices;

• adequacy of helium supplies;

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

• successful implementation of our store growth strategy;

• decreases in our Halloween sales;

• disruption to the transportation system or increases in transportation costs;

• product recalls or product liability;

• economic slowdown affecting consumer spending and general economic conditions;

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

• disruptions at our manufacturing facilities;

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

• our international operations subjecting us to additional risks;

• potential litigation and claims;

• lack of available additional capital;

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• our inability to retain or hire key personnel;

• risks associated with leasing substantial amounts of space;

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

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

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

• our inability to successfully identify and integrate acquisitions;

• adequacy of our intellectual property rights;

• risks related to our substantial indebtedness; and

• the other factors set forth under “Risk Factors.”

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

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THE TRANSACTIONS

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

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

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USE OF PROCEEDS

We estimate that the net proceeds of the sale of the common stock that we are offering will be approximately $         million, assuming an initial public offering price of $         per share, which is the midpoint of the range listed on the cover page of this prospectus, and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. We will not receive any proceeds from the sale of shares of common stock by the selling stockholders if the underwriters exercise their option to purchase additional shares, although we will pay the expenses, other than underwriters discounts and commissions, associated with the sale of those shares.

We expect to use approximately $         million of the net proceeds from this offering received by us to repay or repurchase indebtedness, including amounts outstanding under the Senior Credit Facilities, the senior notes or the senior PIK toggle notes. We do not currently have a firm expectation as to how we will allocate the reduction of our indebtedness among these borrowing arrangements but intend to determine the allocation following the completion of this offering based on a number of factors, including amounts remaining at maturity, applicable interest rates, available pricing of repurchases, repayments or redemptions, outstanding balance and ability to reborrow.

We may also use the remaining portion of the net proceeds for working capital and other general corporate purposes.

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

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

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

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DIVIDEND POLICY

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

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

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CAPITALIZATION

The following table sets forth our cash and cash equivalents and capitalization as of September 30, 2013:

• on an actual basis; and

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

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

	September 30, 2013
	Actual			As Adjusted
	(dollars in thousands)
Cash and cash equivalents	$	12,904
Debt:
Revolving credit facilities (1)	$	215,041
Term loan (2)		1,114,769
Mortgage obligation		1,492
Capital lease obligations		2,944
8.875% senior notes		700,000
8.750%/9.500% senior PIK toggle notes (3)		350,000
Total debt		2,384,246
Redeemable common stock, $0.01 par value, 1,039.23 shares issued and outstanding, actual;                 shares issued and outstanding, as adjusted		15,497
Stockholders’ Equity:
Common stock, $0.01 par value, 1,000,000 shares authorized (including redeemable common stock), 32,470.70 shares issued and outstanding, actual;                 shares authorized, and                 shares issued and outstanding, as adjusted		—
Additional paid-in capital		483,689
Accumulated deficit		(81,932	)
Accumulated other comprehensive income		4,529
Party City Holdco Inc. stockholders’ equity		406,286
Noncontrolling interests		—
Total stockholders’ equity		406,286
Total capitalization	$	2,806,029

(1) At September 30, 2013, there were $213.8 million of outstanding borrowings under the ABL Facility, a total of $19.0 million of outstanding letters of credit and excess availability of $167.3 million after giving effect to borrowing base limitations. Additionally, at September 30, 2013, there was $1.3 million outstanding under various foreign credit facilities.

(2) Amounts exclude the impact of a $7.9 million net call premium and a $7.3 million net original issue discount.

(3) Amounts exclude the impact of the net original issue discount in the amount of $3.4 million.

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Each $1.00 increase or decrease in the assumed initial public offering price of $         per share (the mid point of the range listed on the cover page of this prospectus) would increase or decrease, as applicable, our cash and cash equivalents, additional paid-in capital and stockholders’ equity by $         million, assuming that the number of shares offered by us as set forth on the cover page of this prospectus remains the same and after deducting estimated underwriting discounts and commissions and estimated offering expenses. Each 1,000,000 share increase or decrease in the number of shares offered by us would increase or decrease, as applicable, as our cash and cash equivalents, additional paid-in capital and stockholders’ equity by $         million assuming no change in the assumed initial public offering price of $         per share (the mid point of the range listed on the cover page of this prospectus) and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. To the extent we raise more proceeds in this offering, we may repay additional indebtedness. To the extent we raise less proceeds in this offering, we may reduce the amount of indebtedness that will be repaid.

The table above does not include:

• 2,565 shares of common stock issuable upon the exercise of stock options issued under the 2012 Plan with a weighted average exercise price of $14,916 per share;

• 1,141 additional shares of common stock reserved for future issuance under the 2012 Plan; and

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

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DILUTION

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

At September 30, 2013, the net tangible book value of our common stock was approximately $(1,857.8) million, or approximately $(55,440.67) per share of our common stock. After giving effect to the sale of shares of our common stock in this offering at an assumed initial public offering price of $         per share, and after deducting estimated underwriting discounts and commissions and the estimated offering expenses of this offering, the as adjusted net tangible book value at September 30, 2013 attributable to common stockholders would have been approximately $         million, or approximately $         per share of our common stock. This represents a net increase in net tangible book value of approximately $         per existing share and an immediate dilution in net tangible book value of approximately $         per share to new stockholders. The following table illustrates this per share dilution to new stockholders:

Assumed initial public offering price per share				$
Net tangible book value per share as of September 30, 2013	$	(55,440.67	)
Increase in net tangible book value per share attributable to this offering	$
As adjusted net tangible book value per share after this offering				$
Dilution in net tangible book value per share to new stockholders				$

The table below summarizes, as of September 30, 2013, the differences for (1) our existing stockholders, and (2) investors in this offering, with respect to the number of shares of common stock purchased from us, the total consideration paid, and the average price per share paid before deducting fees and expenses.

	Shares Issued				Total Consideration				Average Price per Share
	Number	Percentage			Amount	Percentage
Existing stockholders				%				%	$
New stockholders in this offering
Total			100	%			100	%	$

The sale of              shares of our common stock to be sold by the selling stockholders in this offering, which assumes the exercise in full of the underwriters’ option to purchase additional shares, will reduce the number of shares of our common stock held by existing stockholders to         , or         % of the total shares outstanding, and will increase the number of shares of our common stock held by new investors to         , or         % of the total shares of our common stock outstanding.

The foregoing discussion and tables assume no exercise of stock options to purchase              shares of our common stock subject to outstanding stock options with a weighted average exercise price of $         per share as of September 30, 2013 and excludes              shares of our common stock available for future grant or issuance under our stock plans. To the extent that any options having an exercise price that is less than the offering price of this offering are exercised, new investors will experience further dilution.

A $1.00 increase or decrease in the assumed initial offering price of $         per share (the mid point of the range listed on the cover page of this prospectus) would increase or decrease our net tangible deficit as adjusted

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

The table above does not include:

• 2,565 shares of common stock issuable upon the exercise of stock options issued under the 2012 Plan with a weighted average exercise price of $14,916 per share;

• 1,141 additional shares of common stock reserved for future issuance under the 2012 Plan; and

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

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SELECTED CONSOLIDATED FINANCIAL DATA

The following table sets forth selected historical consolidated financial data for the periods ended and at the dates indicated below. Our selected historical consolidated financial data as of December 31, 2011 (Predecessor) and December 31, 2012 (Successor) and for the period from July 28, 2012 to December 31, 2012 (Successor), the period from January 1, 2012 to July 27, 2012 (Predecessor) and the years ended December 31, 2010 (Predecessor) and December 31, 2011 (Predecessor) presented in this table has been derived from our historical audited consolidated financial statements included elsewhere in this prospectus. Our selected historical consolidated financial data for the years ended December 31, 2008 (Predecessor) and December 31, 2009 (Predecessor) were derived from our audited consolidated financial statements that are not included in this prospectus. Our selected historical consolidated financial data for the nine months ended September 30, 2013 (Successor) and the period from July 28, 2012 to September 30, 2012 (Successor) has been derived from our historical unaudited consolidated financial statements included elsewhere in this prospectus.

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

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	Fiscal Year Ended December 31,												Period from January 1 to July 27, 2012			Period from July 28 to December 31, 2012			Period from January 1 to July 27, 2012			Period from July 28 to September 30, 2012			Nine Months Ended September 30, 2013 (3)
	2008			2009			2010 (1)			2011 (2)
	(Predecessor)			(Predecessor)			(Predecessor)			(Predecessor)			(Predecessor)			(Successor)			(Predecessor)			(Successor)			(Successor)
	(dollars in thousands, except per common share data)
Income Statement Data:
Revenues:
Net sales	$	1,537,641		$	1,467,324		$	1,579,677		$	1,852,869		$	930,903		$	964,330		$	930,903		$	324,525		$	1,323,216
Royalties and franchise fees		22,020			19,494			19,417			19,106			9,281			9,312			9,281			2,797			11,961
Total revenues		1,559,661			1,486,818			1,599,094			1,871,975			940,184			973,642			940,184			327,322			1,335,177
Expenses:
Cost of sales (4)		966,426			899,041			943,058			1,118,973			574,048			636,410			574,048			247,508			877,258
Wholesale selling expenses		41,894			39,786			42,725			57,905			31,568			28,096			31,568			11,465			51,091
Retail operating expenses		273,627			261,691			296,891			325,332			166,047			172,168			166,047			62,454			245,252
Franchise expenses		13,686			11,991			12,269			13,685			6,579			6,128			6,579			2,585			9,872
General and administrative expenses (5)		120,272			119,193			134,392			138,074			101,502			65,890			101,502			28,596			107,718
Art and development costs		12,462			13,243			14,923			16,636			10,824			8,201			10,824			3,390			14,480
Impairment of trade name (6)		17,376			—			27,400			—			—			—			—			—			—
Income (loss) from operations		113,918			141,873			127,436			201,370			49,616			56,749			49,616			(28,676	)		29,506
Interest expense, net		50,915			41,481			40,850			77,743			41,970			62,062			41,970			26,572			103,561
Other (income) expense, net (7)		(818	)		(32	)		4,208			1,476			22,245			26,157			22,245			25,621			15,991
Income (loss) before income taxes		63,821			100,424			82,378			122,151			(14,599	)		(31,470	)		(14,599	)		(80,869	)		(90,046	)
Income tax expense (benefit)		24,188			37,673			32,945			45,741			403			(1,322	)		403			(25,755	)		(38,546	)
Net income (loss)		39,633			62,751			49,433			76,410			(15,002	)		(30,148	)		(15,002	)		(55,114	)		(51,500	)
Less: net income attributable to noncontrolling interests		(877	)		198			114			135			96			60			96			61			224
Net income (loss) attributable to Party City Holdco Inc.	$	40,510		$	62,553		$	49,319		$	76,275		$	(15,098	)	$	(30,208	)	$	(15,098	)	$	(55,175	)	$	(51,724	)
Statement of Cash Flow Data
Net cash provided by (used in)
Operating activities (8)	$	79,928		$	123,942		$	61,168		$	161,264		$	(18,126	)	$	(41,844	)	$	(18,126	)	$	(199,168	)	$	(73,986	)
Investing activities (8)		(51,199	)		(54,358	)		(102,766	)		(138,909	)		(31,824	)		(1,578,553	)		(31,824	)		(1,570,454	)		(90,572	)
Financing activities (8)		(23,033	)		(70,157	)		46,515			(19,784	)		33,318			1,629,331			33,318			1,777,662			162,871
Per Share Data
Basic
Diluted
Pro forma basic
Pro forma diluted
Weighted Average
Outstanding basic
Diluted
Pro forma outstanding basic
Pro forma diluted
Cash dividend per common share		—			—			9,400			—			—			—			—			—			10,087

39

	Year Ended December 31,												Period from January 1 to July 27, 2012			Period from July 28 to December 31, 2012			Period from January 1 to July 27, 2012			Period from July 28 to September 30, 2012			Nine Months Ended September 30, 2013 (3)
	2008			2009			2010 (1)			2011 (2)
	(Predecessor)			(Predecessor)			(Predecessor)			(Predecessor)			(Predecessor)			(Successor)			(Predecessor)			(Successor)			(Successor)
	(dollars in thousands)
Other Financial Data:
Adjusted EBITDA (9)	$	186,500		$	192,113		$	230,618		$	275,466		$	116,982		$	175,329		$	116,982		$	21,806		$	145,906
Adjusted EBITDA margin (9)		12.0	%		12.9	%		14.4	%		14.7	%		12.4	%		18.0	%		12.4	%		6.7	%		10.9	%
Adjusted net income (9)	$	60,985		$	68,561		$	86,430		$	88,260		$	22,883		$	50,920		$	22,883		$	(5,239	)	$	(2,566	)
Number of company-owned Party City stores (10)		385			382			439			487			—			600			—			594			665
Capital expenditures	$	53,001		$	26,195		$	49,623		$	44,483		$	28,864		$	16,376		$	28,864		$	7,635		$	42,143
Party City brand comp sales (11)		0.5	%		(3.3	%)		3.6	%		9.5	%														1.9	%
Share of shelf (12)		47.2	%		49.3	%		58.7	%		60.5	%		64.7	%		63.7	%		64.7	%		63.0	%		67.1	%
Balance Sheet Data (at end of period):
Cash and cash equivalents	$	13,058		$	15,420		$	20,454		$	22,053		$	—		$	14,563		$	—		$	13,652		$	12,904
Working capital (13)		76,904			162,243			189,993			226,277			—			387,858			—			337,650			337,827
Total assets		1,507,977			1,480,501			1,653,151			1,750,338			—			3,276,983			—			3,219,374			3,462,049
Total debt		721,635			651,433			1,000,256			982,258			—			1,851,517			—			2,000,006			2,365,768
Total equity		412,117			479,122			256,422			326,091			—			787,450			—			761,734			406,286

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

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

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

(4) As a result of the Acquisition, the Company applied the acquisition method of accounting and increased the value of its inventory by $89.8 million as of July 28, 2012. Such adjustment increased the Company’s cost of sales during the nine months ended September 30, 2013, the period from July 28, 2012 to December 31, 2012 and the period from July 28, 2012 to September 30, 2012 by $22.0 million, $58.6 million and $27.8 million, respectively, as a portion of the related inventory was sold.

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

(6) During 2010 and 2008, the Company implemented plans to convert and rebrand its company-owned FCPO stores and its company-owned and franchised Party America stores to Party City stores, respectively. As a result, the Company recorded charges for the impairment of the Factory Card & Party Outlet and Party America trade names of $27.4 million and $17.4 million in the fourth quarters of 2010 and 2008, respectively.

(7) During February 2013, the Company amended the Term Loan Facility. In conjunction with that amendment, the Company wrote-off $5.9 million of costs that had been capitalized during the initial issuance of the debt. Additionally, the Company wrote-off $2.3 million of the net original issuance discount that existed as of the time of that amendment. Also, in conjunction with that amendment, the Company expensed $2.5 million of a call premium and $1.6 million of investment banking and legal fees. In conjunction with the Transactions, the Company recorded $19.7 million of transaction costs in other expense, net during the period from January 1, 2012 to July 27, 2012 and $24.6 million of transaction costs during the period from July 28, 2012 to December 31, 2012. Additionally, the period from January 1, 2012 to July 27, 2012 included $2.5 million in costs as a result of the termination of an initial public offering. In connection with the refinancing of the Company’s revolving and term debt credit facilities in August and December 2010, the Company wrote off $2.4 million of deferred finance charges during 2010.

(8) See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity” for a discussion of 2012 cash flows.

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

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

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

40

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

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

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

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

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

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

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

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

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

	Year Ended December 31,												Period from January 1 to July 27, 2012			Period from July 28 to December 31, 2012			Period from January 1 to July 27, 2012			Period from July 28 to September 30, 2012			Nine Months Ended September 30, 2013
	2008			2009			2010			2011
	(Predecessor)			(Predecessor)			(Predecessor)			(Predecessor)			(Predecessor)			(Successor)			(Predecessor)			(Successor)			(Successor)
	(dollars in thousands)
Net income (loss)	$	39,633		$	62,751		$	49,433		$	76,410		$	(15,002	)	$	(30,148	)	$	(15,002	)	$	(55,114	)	$	(51,500	)
Interest expense, net		50,915			41,481			40,850			77,743			41,970			62,062			41,970			26,572			103,561
Income taxes		24,188			37,673			32,945			45,741			403			(1,322	)		403			(25,755	)		(38,546	)
Depreciation and amortization		47,278			44,382			49,418			59,631			33,915			49,837			33,915			20,327			70,960
EBITDA		162,014			186,287			172,646			259,525			61,286			80,429			61,286			(33,970	)		84,475
Equity based compensation		4,546			882			6,019			1,397			3,375			—			3,375			—			1,741
Non-cash purchase accounting adjustments		590			(1,556	)		1,244			—			—			58,626	(a)		—			27,805	(a)		21,979	(a)
Management fee		1,248	(b)		1,248	(b)		1,248	(b)		1,248	(b)		713	(b)		1,292	(b)		713	(b)		541	(b)		2,250	(b)
Impairment charges		17,376	(c)		—			27,997	(c)		87			—			—			—			—			—
Restructuring, retention and severance		—			2,670			1,780			2,513			355			784			355			350			2,840
Payment in lieu of dividend		—			—			9,395	(d)		617	(d)		16,533	(d)		—			16,533	(d)		—			—
Refinancing charges		—			—			2,448			—			—			—			—			—			12,295	(e)
Deferred rent		1,202			1,763			4,500			7,467			3,344			6,335			3,344			1,434			11,706
Estimated business interruption proceeds		—			—			—			—			—			2,000			—			—			1,000
Transaction costs		—			—			—			—			28,582	(f)		24,564	(f)		28,582	(f)		24,564	(f)		—
Corporate development expenses		—			270			1,660			2,471			2,395			351			2,395			239			4,606
Other		(476	)		549			1,681			141			399			948			399			843			3,014
Adjusted EBITDA	$	186,500		$	192,113		$	230,618		$	275,466		$	116,982		$	175,329		$	116,982		$	21,806		$	145,906

41

	Year Ended December 31,												Period from January 1 to July 27, 2012			Period from July 28 to December 31, 2012			Period from January 1 to July 27, 2012			Period from July 28 to September 30, 2012			Nine Months Ended September 30, 2013
	2008			2009			2010			2011
	(Predecessor)			(Predecessor)			(Predecessor)			(Predecessor)			(Predecessor)			(Successor)			(Predecessor)			(Successor)			(Successor)
	(dollars in thousands)
Income (loss) before income taxes	$	63,821		$	100,424		$	82,378		$	122,151		$	(14,599	)	$	(31,470	)	$	(14,599	)	$	(80,869	)	$	(90,046	)
Intangible asset amortization		8,582	(g)		6,559	(g)		10,345	(g)		11,116	(g)		5,542	(g)		14,160	(g)		5,542	(g)		5,661	(g)		20,477	(g)
Non-cash purchase accounting adjustments		590			(1,556	)		1,244			—			—			71,755	(a)		—			33,057	(a)		33,793	(a)
Amortization of deferred financing costs and original issuance discount		2,221	(h)		2,163	(h)		2,475	(h)		4,500	(h)		2,592	(h)		4,605	(h)		2,592	(h)		1,907	(h)		16,886	(e)(h)
Management fee		1,248	(b)		1,248	(b)		1,248	(b)		1,248	(b)		713	(b)		1,292	(b)		713	(b)		541	(b)		2,250	(b)
Refinancing charges		—			—			2,448			—			—			—			—			—			4,068	(e)
Equity based compensation		4,546			882			6,019			1,397			3,375			—			3,375			—			1,741
Payment in lieu of dividend		—			—			9,395	(d)		617	(d)		16,533	(d)		—			16,533	(d)		—			—
Impairment charges		17,376	(c)		—			27,997	(c)		87			—			—			—			—			—
Transaction costs		—			—			—			—			28,582	(f)		24,564	(f)		28,582	(f)		24,564	(f)		—
Adjusted income (loss) before income taxes		98,384			109,720			143,549			141,116			42,738			84,906			42,738			(15,139	)		(10,831	)
Adjusted income tax expense (benefit)		37,399	(i)		41,159	(i)		57,119	(i)		52,856	(i)		19,855	(i)		33,986	(i)		19,855	(i)		(9,900	)(i)		(8,265	)(i)
Adjusted net income (loss)	$	60,985		$	68,561		$	86,430		$	88,260		$	22,883		$	50,920		$	22,883		$	(5,239	)	$	(2,566	)

(a) As a result of the Acquisition, the Company applied the acquisition method of accounting and increased the value of its inventory by $89.8 million as of July 28, 2012. Such adjustment increased the Company’s cost of sales during the nine months ended September 30, 2013, the period from July 28, 2012 to December 31, 2012 and the period from July 28, 2012 to September 30, 2012 by $22.0 million, $58.6 million and, $27.8 million, respectively, as a portion of the related inventory was sold. Further, during the application of the acquisition method of accounting, the Company increased the value of certain property, plant and equipment. The impact of such adjustments on depreciation expense increased the Company’s expenses during the nine months ended September 30, 2013, the period from July 28, 2012 to December 31, 2012 and the period from July 28, 2012 to September 30, 2012 by $11.8 million, $13.1 million and $5.3 million, respectively. These property, plant and equipment depreciation amounts are included in “Non-cash purchase accounting adjustments” for purposes of calculating “adjusted net income”, but are excluded from “Non-cash purchase accounting adjustments” for purposes of calculating adjusted EBITDA since they are included in depreciation expense.

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

(c) During 2010 and 2008, we implemented plans to convert and rebrand our company-owned FCPO stores and our company-owned and franchised Party America stores as Party City stores, respectively. As a result, we recorded charges for impairment of the FCPO and Party America trade names of $27.4 million and $17.4 million in the fourth quarters of 2010 and 2008, respectively.

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

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

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

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

(h) Represents the amortization of deferred financing costs and original issuance discounts related to debt offerings. Additionally, the nine months ended September 30, 2013 includes the write-off of deferred financing costs and net original issuance discounts in conjunction with the February 2013 Term Loan Facility amendment. See note (e) for further discussion.

(i) Represents the income tax expense (benefit) using the rate in effect after considering the adjustments.

(10) Data as of September 30, 2013 includes all 54 stores that were acquired from iParty and which were converted to the Party City banner at such date.

(11) Party City brand comp sales include e-commerce, Canadian store sale and all store sales converted from the FCPO and Party Packagers formats to the Party City format and excludes iParty store sales.

(12) Represents the percentage of cost of goods sold by our domestic permanent stores (excluding iParty stores) and domestic e-commerce operations which relates to product supplied by our wholesale operations.

(13) Loans and notes payable (included in current liabilities) decreased by $106.0 million from December 31, 2011 to December 31, 2012. Additionally, as a result of the Transactions, the Company applied the acquisition method of accounting and increased the value of its inventory as of July 28, 2012. At September 30, 2013 and December 31, 2012, $9.1 million and $31.1 million, respectively, of the adjustment was included in inventory.

42

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The following unaudited pro forma condensed consolidated financial statements set forth our unaudited pro forma and historical condensed consolidated statements of operations and comprehensive loss for the year ended December 31, 2012, for the nine months ended September 30, 2013, and for the twelve months ended September 30, 2013 and our unaudited pro forma and historical balance sheet at September 30, 2013. Such information is based on the historical financial statements of the Company appearing elsewhere in this prospectus. The historical information in the unaudited pro forma condensed consolidated statement of operations and comprehensive loss for the twelve months ended September 30, 2013 has been derived by taking the consolidated statement of operations and comprehensive loss for the year ended December 31, 2012, plus the condensed consolidated statement of operations and comprehensive loss for the nine months ended September 30, 2013, less the condensed consolidated statement of operations and comprehensive loss for the period from January 1, 2012 to July 27, 2012, and the condensed consolidated statement of operations and comprehensive loss for the period from July 28, 2012 to September 30, 2012.

The unaudited pro forma consolidated statement of operations and comprehensive loss for the year ended December 31, 2012 gives effect to the following as if each had occurred on January 1, 2012:

• The Transactions. The July 2012 consummation of the Acquisition and the related financing consisting of the $400 million ABL Facility, the $1,125 million Term Loan Facility and the $700 million senior notes.

• Term Loan Facility amendment. The February 2013 amendment to the credit agreement governing the Term Loan Facility which reduced the interest rate applicable to borrowings under the Term Loan Facility.

• Issuance of senior PIK toggle notes. The August 2013 issuance of the $350 million senior PIK toggle notes by our wholly-owned subsidiaries, Nextco Holdings and Nextco Finance, and the use of proceeds to pay a cash dividend to our shareholders. The issuance of the senior PIK toggle notes and the Term Loan Facility amendment are collectively referred to below in these Unaudited Pro Forma Condensed Consolidated Financial Statements as “the Financing.”

• Initial Public Offering. The issuance of                  shares of common stock by us in this offering at a price equal to $         per share, the midpoint of the price range set forth on the cover of this prospectus, and the impact of using the proceeds to us, net of transaction fees and expenses, to repay or repurchase indebtedness.

• Termination of management agreement. The payment of approximately $         million to terminate the management agreement with the Sponsors in connection with this offering.

The unaudited pro forma condensed consolidated statements of operations and comprehensive loss for the nine and twelve months ended September 30, 2013 give effect to the Term Loan Facility amendment, the issuance of the senor PIK toggle notes, this offering and the application of the net proceeds therefrom and the termination of the management agreement as if each had occurred on January 1, 2013 and October 1, 2012, respectively. The unaudited pro forma condensed consolidated balance sheet at September 30, 2013 gives effect to this offering and the application of the net proceeds therefrom and the termination of the management agreement as if each had occurred on September 30, 2013.

The unaudited pro forma adjustments are based upon available information and certain assumptions that we believe are reasonable under the circumstances. The unaudited pro forma condensed consolidated financial data is presented for informational purposes only. The unaudited pro forma condensed consolidated financial data does not purport to represent what our results of operations would have been had the events described above actually occurred on the date indicated and they do not purport to project our results of operations for any future period. The unaudited pro forma condensed consolidated financial statements should be read in conjunction with the information contained in the “Selected Consolidated Financial Data,” “Management’s Discussion and

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Analysis of Financial Condition and Results of Operations” and our historical audited and unaudited consolidated financial statements and related notes thereto appearing elsewhere in this prospectus. All pro forma adjustments and their underlying assumptions are described more fully in the notes to our unaudited pro forma condensed consolidated financial statements.

The Acquisition has been accounted for as a business combination in accordance with ASC 805, Business Combinations.

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Unaudited Pro Forma Condensed Consolidated Statement of Operations and Comprehensive Loss

For the Year Ended December 31, 2012

(dollars in thousands, except per share amounts)

				Pro Forma Adjustments
	Historical			The Transactions       and Financing			IPO and Termination of Management Fee	Pro Forma
Revenues:
Net sales	$	1,895,233		$			$	$
Royalties and franchise fees		18,593
Total revenues		1,913,826
Expenses:
Cost of sales (1)		1,210,458			24,968
Wholesale selling expenses (2)		59,664			4,811
Retail operating expenses		338,215
Franchise expenses (2)		12,707			567
General and administrative expenses (3)		167,392			(25,125	)
Art and development costs (2)		19,025			101
Total expenses		1,807,461			5,322
Income from operations		106,365			(5,322	)
Interest expense, net (4)		104,032			55,630
Other expense, net (5)		48,402			(46,934	)
Loss before income taxes		(46,069	)		(14,018	)
Income tax benefit (6)		(919	)		(20,278	)
Net loss		(45,150	)		6,260
Less: net income attributable to noncontrolling interests		156
Net loss attributable to Party City Holdco Inc.	$	(45,306	)	$	6,260		$	$
Other comprehensive income, net of tax:
Foreign currency adjustments	$	5,209		$			$	$
Cash flow hedges		(172	)
Other comprehensive income, net		5,037
Comprehensive loss		(40,113	)		6,260
Less: comprehensive income attributable to noncontrolling interest		256
Comprehensive loss attributable to Party City Holdco Inc.	$	(40,369	)	$	6,260		$	$
Net Income per share
Basic
Diluted
Weighted Average
Outstanding basic
Diluted

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Unaudited Pro Forma Condensed Consolidated Statement of Operations and Comprehensive Loss

For the Nine Months Ended September 30, 2013

(dollars in thousands, except per share amounts)

				Pro Forma Adjustments
	Historical			The Financing			IPO and Termination of Management Fee	Pro Forma
Revenues:
Net sales	$	1,323,216		$			$	$
Royalties and franchise fees		11,961
Total revenues		1,335,177
Expenses:
Cost of sales		877,258
Wholesale selling expenses		51,091
Retail operating expenses		245,252
Franchise expenses		9,872
General and administrative expenses		107,718
Art and development costs		14,480
Total expenses		1,305,671
Income from operations		29,506
Interest expense, net (4)		103,561			16,355
Other expense, net		15,991
Loss before income taxes		(90,046	)		(16,355	)
Income tax benefit (6)		(38,546	)		(6,591	)
Net loss		(51,500	)		(9,764	)
Less: net income attributable to noncontrolling interests		224
Net loss attributable to Party City Holdco Inc.	$	(51,724	)	$	(9,764	)	$	$
Comprehensive loss		(52,555	)		(9,764	)
Less: comprehensive income attributable to noncontrolling interest		201
Comprehensive loss attributable to Party City Holdco Inc.	$	(52,756	)	$	(9,764	)	$	$
Net Income per share
Basic
Diluted
Weighted Average
Outstanding basic
Diluted

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Unaudited Pro Forma Condensed Consolidated Statement of Operations and Comprehensive Loss

For the Twelve Months Ended September 30, 2013

(dollars in thousands, except per share amounts)

				Pro Forma Adjustments
	Historical			The Financing			IPO and Termination of Management Fee	Pro Forma
Revenues:
Net sales	$	1,963,021		$			$	$
Royalties and franchise fees		18,476
Total revenues		1,981,497
Expenses:
Cost of sales		1,266,160
Wholesale selling expenses		67,722
Retail operating expenses		354,966
Franchise expenses		13,415
General and administrative expenses		145,012
Art and development costs		19,291
Total expenses		1,866,566
Income from operations		114,931
Interest expense, net (4)		139,051			19,935
Other expense, net		16,527
Loss before income taxes		(40,647	)		(19,935	)
Income tax benefit (6)		(14,133	)		(8,034	)
Net loss		(26,534	)		(11,901	)
Less: net income attributable to noncontrolling interests		223
Net loss attributable to Party City Holdco Inc.	$	(26,757	)	$	(11,901	)	$	$
Comprehensive loss		(27,401	)		(11,901	)
Less: comprehensive income attributable to noncontrolling interest		181
Comprehensive loss attributable to Party City Holdco Inc.	$	(27,582	)	$	(11,901	)	$	$
Net Income per share
Basic
Diluted
Weighted Average
Outstanding basic
Diluted

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Unaudited Pro Forma Condensed Consolidated Balance Sheet

At September 30, 2013

(dollars in thousands)

	Historical			Pro Forma Adjustments	Pro Forma
				IPO and Termination of Management Fee
ASSETS
Current assets:
Cash and cash equivalents	$	12,904		$	$
Accounts receivable, net of allowances		165,216
Inventories, net of allowances		610,210
Prepaid expenses and other currents assets		110,045
Total current assets		898,375
Property, plant and equipment, net		233,838
Goodwill		1,550,942
Trade names		566,540
Other intangible assets, net		146,617
Other assets, net		65,737
Total assets	$	3,462,049
LIABILITIES, REDEEMABLE COMMON SECURITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Loans and notes payable	$	215,041		$	$
Accounts payable		177,346
Accrued expenses		154,907
Current portion of long-term obligations		13,254
Total current liabilities		560,548
Long-term obligations, excluding current portion		2,137,473
Deferred income tax liabilities		324,159
Deferred rent and other long-term liabilities		18,086
Total liabilities		3,040,266
Redeemable common securities		15,497
Stockholder’s equity:
Common stock		—
Additional paid-in capital		483,689
Accumulated deficit		(81,932	)
Accumulated other comprehensive income		4,529
Total stockholders’ equity		406,286
Total liabilities, redeemable common securities and stockholders’ equity	$	3,462,049		$	$

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Notes to Unaudited Pro Forma Condensed Consolidated Financial Data

(1) As a result of the Acquisition, the Company applied the acquisition method of accounting and increased the value of its inventory. The adjustment principally reflects the previously deferred wholesale margin on inventory supplied to the Company’s retail operations at the Acquisition date. Such adjustment increased the Company’s cost of sales as the related inventory was sold.

Additionally, as a result of the application of the acquisition method of accounting, the Company recorded certain intangible assets and recorded its property, plant and equipment at fair value. Such adjustments impacted the Company’s depreciation expense and amortization expense.

(2) As a result of the application of the acquisition method of accounting, the Company recorded certain intangible assets and recorded its property, plant and equipment at fair value. Such adjustments impacted the Company’s depreciation expense and amortization expense.

(3) In conjunction with the Transactions, the Company incurred $28.6 million of compensation-related costs. Such costs were recorded in the Company’s consolidated statement of operations and comprehensive loss in the period prior to the Transactions (January 1, 2012 to July 27, 2012). As the unaudited pro forma condensed consolidated statements of operations and comprehensive loss for the year ended December 31, 2012 assumes that the Transactions occurred on January 1, 2012, such costs have been removed from the financial statements.

Additionally, as a result of the application of the acquisition method of accounting, the Company recorded certain intangible assets and recorded its property, plant and equipment at fair value. Such adjustments impacted the Company’s depreciation expense and amortization expense.

(4) The unaudited pro forma condensed consolidated statement of operations and comprehensive loss for the year ended December 31, 2012 assumes that the Transactions occurred on January 1, 2012 and that the related refinancing also took place on such date. In conjunction with the Transactions, amounts outstanding under PCHI’s previous $350.0 million ABL revolving credit facility and $675.0 million term loan agreement were repaid. At such time, PCHI entered into the ABL Facility and the Term Loan Facility. Additionally, in conjunction with the Transactions, on July 27, 2012, PCHI issued the senior notes and redeemed all of its outstanding $175.0 million 8.75% senior subordinated notes.

During February 2013, PCHI amended the Term Loan Facility and the interest rate was decreased by 1.50%. The unaudited pro forma condensed consolidated statement of operations and comprehensive loss for the year ended December 31, 2012 assumes that the Term Loan Facility was entered into on January 1, 2012 at the amended rate. The unaudited pro forma condensed consolidated statements of operations and comprehensive loss for the nine months ended September 30, 2013 and for the twelve months ended September 30, 2013 assume that the amendment occurred on January 1, 2013 and October 1, 2012, respectively.

During August 2013, Nextco Holdings and Nextco Finance issued the $350.0 million senior PIK toggle notes. The unaudited pro forma condensed consolidated statement of operations and comprehensive loss for the year ended December 31, 2012 assumes that the senior PIK toggle notes were issued on January 1, 2012. The unaudited pro forma condensed consolidated statements of operations and comprehensive loss for the nine months ended September 30, 2013 and for the twelve months ended September 30, 2013 assume that the notes were issued on January 1, 2013 and October 1, 2012, respectively.

(5) In conjunction with the Transactions, the Company incurred $44.5 million of third-party costs. Such costs were recorded in the Company’s consolidated statement of operations and comprehensive loss in the period prior to the Acquisition (January 1, 2012 to July 27, 2012). As the unaudited pro forma condensed consolidated statement of operations and comprehensive loss for the year ended December 31, 2012 assumes that the Transactions occurred on January 1, 2012, such costs have been removed from the financial statements.

(6) Reflects the estimated tax effects of the pro forma adjustments.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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

Effect of the Transactions

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

As a result of the Transactions, the financial information for the period after July 27, 2012 represents the financial information of the “Successor” company. Prior to, and including, July 27, 2012, the consolidated financial statements include the accounts of the “Predecessor” company. Due to the change in the basis of accounting resulting from the application of the acquisition method of accounting and push-down accounting (see Note 1 to the audited consolidated financial statements, which are included elsewhere in this prospectus, for further discussion), the Predecessor’s consolidated financial statements and the Successor’s consolidated financial statements are not necessarily comparable. The change in basis resulting from the Transactions did not impact net sales, royalties and franchise fees or retail operating expenses and, for those accounts, comparing full-year 2012 results to full-year 2011 results and comparing results for the nine months ended September 30, 2013 to the nine months ended September 30, 2012 provides meaningful comparison. However, for all other accounts, to the extent that the change in basis had a material impact on our results during the Successor period, we have disclosed such impact in “Results of Operations”. Certain amounts in this prospectus combine the results of the Predecessor and the Successor. Such combination was performed by mathematical addition and does not comply with GAAP, although we believe it provides a meaningful method of comparison for certain accounts. The data is being presented for analytical purposes only. Combined operating results (i) have not been prepared on a pro forma basis as if the Transactions occurred on the first day of the period, (ii) may not reflect the actual results we would have achieved absent the Transactions and (iii) may not be predictive of future results of operations.

Business Overview

Our Company

We are the leading party goods retailer in North America and, we believe, the largest vertically integrated supplier of decorated party goods globally with multiple levers to drive future growth across channels, products and geographies. With approximately 880 locations, we have the only coast-to-coast network of party superstores in the U.S. and Canada that make it easy and fun to enhance special occasions with a differentiated shopping experience and an unrivaled assortment of innovative and exciting merchandise offered at a compelling value. Through a series of acquisitions between 2005 and 2010, we built a powerful retail operation that captures the full manufacturing-to-retail margin on a significant portion of the products sold in our stores. We believe we are the largest global designer, manufacturer and distributor of decorated party supplies with products found in over 40,000 retail outlets worldwide, including our own stores as well as independent party supply stores, mass merchants, grocery retailers, dollar stores and others. Our category-defining retail concept, multi-channel reach, widely recognized brands, broad and deep product offering, and low-cost global sourcing model are, we believe, significant competitive advantages. We believe these characteristics position us for continued organic and acquisition-led growth and margin expansion.

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How We Assess the Performance of Our Company

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

Segments

Our Wholesale segment generates revenues globally through sales of Amscan, Designware, Anagram, Costumes USA and other party supplies to party goods superstores, including our company-owned and franchised stores, other party goods retailers, dollar stores, mass merchants, independent card and gift stores and other retailers and distributors throughout the world. Sales to domestic and international customers accounted for 79% and 21%, respectively, of our total wholesale sales in 2012.

Our Retail segment generates revenues from the sale of merchandise to the end consumer through our chain of company-owned party goods stores, online through our e-commerce websites, including PartyCity.com, and through our chain of temporary Halloween City locations. Franchise revenues include royalties on franchise retail sales and franchise fees charged for the initial franchise award and subsequent renewals. Our retail sales of party goods are fueled by everyday events such as birthdays, various seasonal events and other special occasions occurring throughout the year. In addition, through Halloween City, our temporary Halloween business, we seek to maximize our Halloween seasonal opportunity. As a result, in 2012, our Halloween business represented approximately 25% of our total domestic retail sales, generally occurring in a five-week selling season ending on October 31. We expect to continue to generate a significant portion of our retail sales during the Halloween selling season.

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

Financial Measures

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

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

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

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

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

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

As a result of the Acquisition, we applied the acquisition method of accounting and increased the value of our inventory by $89.8 million as of July 28, 2012. The adjustment principally reflects the previously deferred wholesale margin on inventory supplied to our retail operations at July 27, 2012. Such adjustment increased our cost of sales during the period from July 28, 2012 to December 31, 2012 by $58.6 million, and during the nine months ended September 30, 2013 by $22.0 million, as a portion of the related inventory was sold. Further, during the application of the acquisition method of accounting, we increased the values of our property, plant and equipment and certain intangible assets. The impact of such adjustments on depreciation expense and amortization expense increased our cost of sales during the period from July 28, 2012 to December 31, 2012 by $15.4 million and by $21.2 million during the nine months ended September 30, 2013.

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

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

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

General and Administrative Expenses. General and administrative expenses include all operating costs not included elsewhere in the statement of operations and comprehensive income (loss). These expenses include payroll and other expenses related to operations at our corporate offices, including occupancy costs, related depreciation and amortization, legal and professional fees and data-processing costs. These expenses generally do not vary proportionally with net sales.

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

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

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

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

Executive Overview

Our recent financial results demonstrate continued growth and profitability enhancements in a difficult economic environment. During 2012, we posted revenue growth despite the adverse impact of Super Storm Sandy during the all-important Halloween weekend shopping period. Super Storm Sandy’s adverse impact on 2012 net sales is estimated at approximately $10 million. Additionally, 2012 revenues were adversely impacted by Halloween falling on a Wednesday. Further, 2012 Party City sales were negatively impacted by approximately $8 million as a result of the timing of New Year’s Eve, as the fiscal year for our retail operations ended on December 29, 2012 (as opposed to on December 31^st during 2011).

Other Factors Affecting Our Results

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

Party City Canada. On July 29, 2011, we acquired Party City Canada for total consideration of approximately $31.8 million. Party City Canada is a Canadian retailer of party goods. The acquisition expands our vertical business model, giving us a significant retail presence in Canada. The results of operations of Party City Canada are included in our consolidated financial statements from the date of acquisition. Due to the additional seven months of operations in 2012, our revenues increased by $21.5 million over 2011.

Acquisition-Related Costs. As a result of the Acquisition, we applied the acquisition method of accounting and increased the value of its inventory by $89.8 million as of July 28, 2012. The adjustment principally reflects

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the previously deferred wholesale margin on inventory supplied to our retail operations at July 27, 2012. The adjustment increased our cost of sales during the period from July 28, 2012 to December 31, 2012 by $58.6 million, and during the nine months ended September 30, 2013 by $22.0 million, as a portion of the related inventory was sold. Such amount was added back to EBITDA when arriving at Adjusted EBITDA. For a discussion of our use of Adjusted EBITDA and a reconciliation to net income (loss), please refer to “Prospectus Summary—Summary Financial Data” and “Selected Consolidated Financial Data.”

Additionally, as a result of the Acquisition, we applied the acquisition method of accounting and recorded our property, plant and equipment and intangible assets at fair value. The impact of such adjustments on depreciation expense and amortization expense increased our cost of sales during the period from July 28, 2012 to December 31, 2012 and during the first nine months of 2013 by $15.4 million and $21.2 million, respectively. The impact of such adjustments on depreciation and amortization expense increased wholesale selling expenses during the period from July 28, 2012 to December 31, 2012 and during the first nine months of 2013 by $3.8 million and $6.5 million, respectively.

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

Recent Acquisitions. In March 2013, we completed our acquisition of Party Delights, an online retailer of party goods, fancy dress and similar items for birthdays, weddings, christenings and other celebrations, for $14.8 million. The acquisition broadens our product offering and allows it to enter European retail markets through e-commerce. The acquisition of Party Delights contributed $10.4 million to net sales during the first nine months of 2013. In May 2013, we completed our acquisition of iParty, a party goods retailer with approximately 50 stores, principally located in the New England region, for $38.4 million (including the repayment of $9.0 million outstanding under iParty’s credit agreement). The acquisition accelerates our growth throughout New England, a densely populated region where we did not have a market presence. The acquisition of iParty contributed $27.8 million to net sales during the first nine months of 2013.

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

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

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

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

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

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

Results of Operations

Nine Months Ended September 30, 2013 Compared To Period From July 28, 2012 to September 30, 2012 and Period From January 1, 2012 to July 27, 2012

The following tables set forth our operating results and operating results as a percentage of total revenues for the nine months ended September 30, 2013, the period from July 28, 2012 to September 30, 2012 and the period from January 1, 2012 to July 27, 2012.

	Period from January 1 to July 27, 2012					Period from July 28 to September 30, 2012					Nine Months Ended September 30, 2013
	(Predecessor)					(Successor)					(Successor)
						(Dollars in thousands)
Revenues:
Net sales	$	930,903		99.0	%	$	324,525		99.1	%	$	1,323,216		99.1	%
Royalties and franchise fees		9,281		1.0			2,797		0.9			11,961		0.9
Total revenues		940,184		100.0			327,322		100.0			1,335,177		100.0
Expenses:
Cost of sales		574,048		61.1			247,508		75.6			877,258		65.7
Wholesale selling expenses		31,568		3.4			11,465		3.5			51,091		3.8
Retail operating expenses		166,047		17.7			62,454		19.1			245,252		18.4
Franchise expenses		6,579		0.6			2,585		0.8			9,872		0.7
General and administrative expenses		101,502		10.8			28,596		8.7			107,718		8.1
Art and development costs		10,824		1.1			3,390		1.1			14,480		1.1
Total expenses		890,568		94.7			355,998		108.8			1,305,671		97.8
Income (loss) from operations		49,616		5.3			(28,676	)	(8.8	)		29,506		2.2
Interest expense, net		41,970		4.5			26,572		8.1			103,561		7.8
Other expense, net		22,245		2.4			25,621		7.8			15,991		1.2
Loss before income taxes		(14,599	)	(1.6	)		(80,869	)	(24.7	)		(90,046	)	(6.8	)
Income tax (benefit) expense		403		0.0			(25,755	)	(7.9	)		(38,546	)	(2.9	)
Net loss		(15,002	)	(1.6	)		(55,114	)	(16.8	)		(51,500	)	(3.9	)
Less: net income attributable to noncontrolling interests		96		0.0			61		0.0			224		0.0
Net loss attributable to Party City Holdco Inc.	$	(15,098	)	(1.6	)%	$	(55,175	)	(16.9	)%	$	(51,724	)	(3.9	%)

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Revenues

Total revenues for the nine months ended September 30, 2013 were $1,335.2 million. The following table sets forth the composition of our total revenues for the nine months ended September 30, 2013, the period from July 28, 2012 to September 30, 2012 and the period from January 1, 2012 to July 27, 2012.

	Period from January 1 to July 27, 2012						Period from July 28 to September 30, 2012						Nine Months Ended September 30, 2013
	(Predecessor)						(Successor)						(Successor)
	Dollars in Thousands			Percentage of Total Revenues			Dollars in Thousands			Percentage of Total Revenues			Dollars in Thousands			Percentage of Total Revenues
Net Sales:
Wholesale	$	512,473			54.5	%	$	262,215			80.1	%	$	808,834			60.6	%
Eliminations		(194,659	)		(20.7	)%		(135,324	)		(41.3	)%		(364,966	)		(27.4	)%
Net wholesale		317,814			33.8	%		126,891			38.8	%		443,868			33.2	%
Retail		613,089			65.2	%		197,634			60.3	%		879,348			65.9	%
Total net sales		930,903			99.0	%		324,525			99.1	%		1,323,216			99.1	%
Royalties and franchise fees		9,281			1.0	%		2,797			0.9	%		11,961			0.9	%
Total revenues	$	940,184			100.0	%	$	327,322			100.0	%	$	1,335,177			100.0	%

Retail

Retail net sales for the first nine months of 2013 were $879.3 million. Net sales during the periods from July 28, 2012 to September 30, 2012 and January 1, 2012 to July 27, 2012 were $197.6 million and $613.1 million, respectively. The change in basis resulting from the Transactions did not impact our net sales. Net sales during the nine months ended September 30, 2013 were $68.6 million, or 8.5%, higher than the corresponding period of 2012. The retail net sales at our Party City stores totaled $769.0 million and were $33.8 million, or 4.6%, higher than the corresponding period of 2012. Additionally, our domestic e-commerce sales totaled $65.1 million during the nine months ended September 30, 2013 and were $3.1 million, or 4.9%, higher than the corresponding period of 2012. Net sales during the first nine months of 2013 were positively impacted by approximately $8 million as a result of the timing of New Year’s Eve, as the 2012 fiscal year for our retail operations ended on December 29, 2012 (as opposed to on December 31^st during 2011). Same-store sales for the Party City brand (including e-commerce sales and sales at acquired stores, to the extent that the stores were converted to the Party City format and included in our sales for the comparable period of the prior year) increased by 1.9% from the corresponding nine months of 2012 as a 3.2% increase in average transaction dollar size was partially offset by a 1.3% decrease in transaction count. Excluding the impact of e-commerce, same-store sales increased by 1.6% as a 3.0% increase in average transaction dollar size was partially offset by a 1.4% decrease in transaction count. Domestic e-commerce sales increased by 4.9% due to a 4.3% increase in transaction count and a 0.6% increase in average transaction dollar size. The timing of New Year’s Eve positively impacted same-store sales for the Party City brand by 1.0%. The overall increase in Party City store sales also reflects the operation of 17 additional stores during the first nine months of 2013 as 21 stores were opened and four stores were closed between September 2012 and September 2013. The May 2013 acquisition of iParty contributed $27.8 million to net sales. Net sales at our temporary Halloween City stores totaled $5.7 million and were $2.3 million lower than 2012 principally due to a decrease in temporary stores opened period over period. Sales at all other formats totaled $11.7 million and were $6.2 million higher than the corresponding period of 2012 due to other acquisitions during the first nine months of 2013.

Wholesale

Wholesale net sales during the nine months ended September 30, 2013 were $443.9 million. Wholesale net sales during the periods from July 28, 2012 to September 30, 2012 and January 1, 2012 to July 27, 2012 were $126.9 million and $317.8 million, respectively. The change in basis resulting from the Transactions did not

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impact our net sales. Net sales during the nine months ended September 30, 2013 were $0.8 million, or 0.2%, lower than during the first nine months of 2012. During the first nine months of 2013, net sales to domestic party goods retailers, including our franchisee network, and to domestic party goods distributors totaled $223.9 million and were $2.8 million, or 1.3%, higher than the corresponding period of 2012. Sales of Halloween and Christmas product, including the gift line, increased by approximately $6 million primarily due to higher sales of our Christy’s costume line and a shift in the timing of Christmas gift shipments from the fourth quarter of 2012 to the third quarter of 2013. Additionally, sales of non-Christmas gift product increased by approximately $2 million principally due to the same timing shift. These increases were partially offset by the elimination of an additional $3 million of intercompany sales as a result of our May 2013 acquisition of iParty. Additionally, sales of solid colored tableware and juvenile birthday product each decreased by approximately $1 million from 2012. In the case of juvenile birthday product, 2012 benefitted from the initial load-in of product related to new licenses and new products for existing licenses. Net sales of metallic balloons to domestic customers totaled $58.2 million and were $4.4 million, or 7.0%, lower than 2012 as 2013 sales were impacted by the temporary helium shortage and certain customers shifted purchases from the first quarter of 2013 to the fourth quarter of 2012. International net sales, including U.S. export sales, totaled $161.8 million and were $0.8 million, or 0.5%, higher than 2012 despite foreign currency negatively impacting 2013 sales by $1.3 million. Sales of Christy’s garments and accessories and Christy’s costumes increased by approximately $6 million and $5 million, respectively. These favorable variances were substantially offset by lower U.K. sales; primarily due to 2012 benefitting from the Queen’s Jubilee and the London Olympics.

Intercompany sales to our retail affiliates were $365.0 million during the first nine months of 2013. Intercompany sales to our retail affiliates during the periods from July 28, 2012 to September 30, 2012 and January 1, 2012 to July 27, 2012 were $135.3 million and $194.7 million, respectively. Intercompany sales during the nine month period were $35.0 million, or 10.6%, higher than the corresponding period of 2012. The increase was primarily due to our acquisition of iParty during May 2013, as approximately $18 million of sales to iParty were included in intercompany sales, and additionally due to increased sales of Christy’s costumes to our retail affiliates. Intercompany sales represented 45.1% of total wholesale sales during the first nine months of 2013, compared to 51.6% during the period from July 28, 2012 to September 30, 2012 and 38.0% during the period from January 1, 2012 to July 27, 2012. The intercompany sales of our wholesale segment are eliminated against the intercompany purchases of our retail segment in the consolidated financial statements.

Royalties and franchise fees

Royalties and franchise fees for the nine months ended September 30, 2013, which were not affected by the basis change caused by the Transactions, totaled $12.0 million and were principally consistent with the corresponding period of 2012.

Gross Profit

Our total gross profit on net sales during the nine months ended September 30, 2013 was 33.7%. The total gross profit on net sales during the periods from July 28, 2012 to September 30, 2012 and January 1, 2012 to July 27, 2012 were 23.7% and 38.3%, respectively. As a result of the Transactions, we applied the acquisition method of accounting and increased the value of its inventory by $89.8 million as of July 28, 2012. Such adjustment increased our cost of sales during the nine month period ended September 30, 2013 and the period from July 28, 2012 to September 30, 2012 by $22.0 million and $27.8 million, respectively, as a portion of the related inventory was sold. Further, during the application of the acquisition method of accounting we increased the values of certain intangible assets and its property, plant and equipment. The impact of such adjustments on depreciation and amortization expense increased our cost of sales during the nine month period ended September 30, 2013 and the period from July 28, 2012 to September 30, 2012 by $21.2 million and $6.2 million, respectively. The purchase accounting adjustments to cost of sales negatively impacted our gross profit percentage during the first nine months of 2013 and the period from July 28, 2012 to September 30, 2012 by 330 basis points and 1050 basis points, respectively.

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The following table sets forth our gross profit for the nine months ended September 30, 2013, the period from July 28, 2012 to September 30, 2012 and the period from January 1, 2012 to July 27, 2012.

	Period from January 1 to July 27, 2012					Period from July 28 to September 30, 2012					Nine Months Ended September 30, 2013
	Predecessor					Successor					Successor
	Dollars in Thousands		Percentage of Net Sales			Dollars in Thousands		Percentage of Net Sales			Dollars in Thousands		Percentage of Net Sales
Wholesale	$	112,205		35.3	%	$	32,288		25.4	%	$	132,083		29.8	%
Retail		244,650		39.9			44,729		22.6			313,875		35.7
Total	$	356,855		38.3	%	$	77,017		23.7	%	$	445,958		33.7	%

The gross profit on net sales at wholesale during the nine months ended September 30, 2013 was 29.8%. The gross profit on net sales at wholesale during the periods from July 28, 2012 to September 30, 2012 and January 1, 2012 to July 27, 2012 were 25.4% and 35.3%, respectively. The purchase accounting adjustments to cost of sales negatively impacted wholesale’s gross profit percentage during the first nine months of 2013 and during the period from July 28, 2012 to September 30, 2012 by 270 basis points and 740 basis points, respectively. The percentage during the first nine months of 2013 was also impacted by changes in product mix, including greater licensed product sales and the introduction of additional value line tableware products. The gross profit on net sales at retail during the first nine months of 2013 was 35.7%. The gross profit on net sales at retail during the periods from July 28, 2012 to September 30, 2012 and January 1, 2012 to July 27, 2012 were 22.6% and 39.9%, respectively. The purchase accounting adjustments to cost of sales negatively impacted retail’s gross profit percentage during the first nine months of 2013 and during the period from July 28, 2012 to September 30, 2012 by 350 basis points and 1250 basis points, respectively. During the nine months ended September 30, 2013, our wholesale operations’ share of shelf at our domestic permanent stores (excluding iParty stores) and our domestic e-commerce operations (i.e., the percentage of total cost of sales which relates to product supplied by our wholesale operations) was 67.1%. Our Canadian retail share of shelf was 68.0%.

Operating expenses

Wholesale selling expenses were $51.1 million during the first nine months of 2013, $11.5 million during the period from July 28, 2012 to September 30, 2012 and $31.6 million during the period from January 1, 2012 to July 27, 2012. As a result of the application of the acquisition method of accounting, we increased the values of certain intangible assets and its property, plant and equipment. The impact of such adjustments on depreciation and amortization expense increased wholesale selling expenses during the nine months ended September 30, 2013 and the period from July 28, 2012 to September 30, 2012 by $6.5 million and $1.5 million, respectively. Additionally, to a lesser extent, the first nine months of 2013 were impacted by the reclassification of certain costs from general and administrative expenses. Wholesale selling expenses were 11.5% of net wholesale sales during the first nine months of 2013, 9.0% of net wholesale sales during the period from July 28, 2012 to September 30, 2012 and 9.9% of net wholesale sales during the period from January 1, 2012 to July 27, 2012. The percentage during the period from July 28, 2012 to September 30, 2012 was lower than during the two other periods principally due to the impact of higher Halloween-related sales levels on fixed selling expenses. The depreciation and amortization adjustments increased wholesale selling expenses as a percentage of net wholesale sales by 150 basis points and 120 basis points, respectively, during the first nine months of 2013 and the period from July 28, 2012 to September 30, 2012.

Retail operating expenses during the first nine months of 2013 were $245.3 million. Retail operating expenses during the periods from July 28, 2012 to September 30, 2012 and January 1, 2012 to July 27, 2012 were $62.5 million and $166.0 million, respectively. The change in basis resulting from the Transactions did not impact retail operating expenses. Retail operating expenses during the period were $16.8 million, or 7.3%, higher than the corresponding period of 2012. The increase was principally due to $11.2 million of retail operating costs

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related to iParty and other operations acquired during 2013. Additionally, during the period, we operated 17 more Party City stores than during the corresponding period of 2012. Retail operating expenses were 27.9% of retail net sales during the nine months ended September 30, 2013 and 28.2% of retail net sales during the corresponding period of 2012.

Franchise expenses during the first nine months of 2013 were $9.9 million. Franchise expenses during the periods from July 28, 2012 to September 30, 2012 and January 1, 2012 to July 27, 2012 were $2.6 million and $6.6 million, respectively. Franchise expenses increased subsequent to July 27, 2012 due to increased amortization expense caused by the application of the acquisition method of accounting.

General and administrative expenses during the nine months ended September 30, 2013 were $107.7 million. General and administrative expenses during the periods from July 28, 2012 to September 30, 2012 and January 1, 2012 to July 27, 2012 were $28.6 million and $101.5 million, respectively. In conjunction with the Transactions, we recorded $8.4 million of transaction costs in general and administrative expenses during the period from January 1, 2012 to July 27, 2012. Additionally, the Transactions accelerated the vesting of certain of our stock options and, as a result, we recorded $2.1 million of expense in general and administrative expenses during the period. Further, due to the vesting of such stock options, we made payments in lieu of dividends to the holders of such options and during the period from January 1, 2012 to July 27, 2012 we recorded a $16.1 million charge in general and administrative expenses. General and administrative expenses were 8.1%, 8.7% and 10.8% of total revenues during the first nine months of 2013, the period from July 28, 2012 to September 30, 2012 and the period from January 1, 2012 to July 27, 2012, respectively. Costs related to the Transactions increased the percentage for the period from January 1, 2012 to July 27, 2012 by 280 basis points.

Art and development costs totaled $14.5 million during the first nine months of 2013. Art and development costs totaled $3.4 million and $10.8 million during the periods from July 28, 2012 to September 30, 2012 and January 1, 2012 to July 27, 2012, respectively. Art and development costs as a percentage of total revenues were 1.1%, 1.0% and 1.2% during the nine months ended September 30, 2013, the period from July 28, 2012 to September 30, 2012 and the period from January 1, 2012 to July 27, 2012, respectively.

Interest expense, net

Interest expense, net, totaled $103.6 million during the nine months ended September 30, 2013. Interest expense, net, was $26.6 million during the period from July 28, 2012 to September 30, 2012 and $42.0 million during the period from January 1, 2012 to July 27, 2012. Our interest expense subsequent to July 27, 2012 was higher than during predecessor periods due to debt incurred in conjunction with the Transactions and $350.0 million of senior PIK toggle notes issued during August 2013. During February 2013, the Term Loan Facility was amended and lowered the interest rate (see Note 13 to the unaudited consolidated financial statements which are included elsewhere in this prospectus).

Other expense, net

Other expense, net, was $16.0 million during the nine months ended September 30, 2013, $1.1 million during the period from July 28, 2012 to September 30, 2012 and $46.8 million during the period from January 1, 2012 to July 27, 2012.

During February 2013, the Term Loan Facility was amended (see Note 13 to the unaudited consolidated financial statements which are included elsewhere in this prospectus). In conjunction with the refinancing, we wrote-off $5.9 million of costs that had been capitalized during the initial issuance of the debt. Additionally, we wrote-off $2.3 million of the net original issuance discount that existed as of the time of the amendment. Also in conjunction with the refinancing, we expensed $2.5 million of a call premium and $1.6 million of investment banking and legal fees. The nine months ended September 30, 2013 also included corporate development costs related to the acquisitions of iParty and other operations.

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In conjunction with the Transactions, we recorded $19.7 million and $24.6 million of transaction costs in other expense during the periods from January 1, 2012 to July 27, 2012 and July 28, 2012 to December 31, 2012, respectively. Additionally, the period from January 1, 2012 to July 27, 2012 included $2.5 million in costs as a result of the termination of an initial public offering.

Income tax expense

The effective income tax rate for the first nine months of 2013 was 42.8%. The rate was impacted by the recording of a state deferred tax benefit related to the depreciation of property, plant and equipment.

Period from January 1, 2012 to July 27, 2012 and Period from July 28, 2012 Compared to December 31, 2012 and Year Ended December 31, 2011

The following tables set forth our operating results and operating results as a percentage of total revenues.

	Year Ended December 31,				Period from January 1 to July 27,					Period from July 28 to December 31,
	2011				2012					2012
	(Predecessor)				(Predecessor)					(Successor)
					(dollars in thousands)
Revenues:
Net sales	$	1,852,869	99.0	%	$	930,903		99.0	%	$	964,330		99.0	%
Royalties and franchise fees		19,106	1.0			9,281		1.0			9,312		1.0
Total revenues		1,871,975	100.0			940,184		100.0			973,642		100.0
Expenses:
Cost of sales		1,118,973	59.8			574,048		61.1			636,410		65.4
Wholesale selling expenses		57,905	3.1			31,568		3.4			28,096		2.9
Retail operating expenses		325,332	17.3			166,047		17.7			172,168		17.7
Franchise expenses		13,685	0.7			6,579		0.7			6,128		0.6
General and administrative expenses		138,074	7.4			101,502		10.7			65,890		6.8
Art and development costs		16,636	0.9			10,824		1.1			8,201		0.8
Total expenses		1,670,605	89.2			890,568		94.7			916,893		94.2
Income from operations		201,370	10.8			49,616		5.3			56,749		5.8
Interest expense, net		77,743	4.2			41,970		4.5			62,062		6.4
Other expense, net		1,476	0.1			22,245		2.4			26,157		2.7
(Loss) income before income taxes		122,151	6.5			(14,599	)	(1.6	)		(31,470	)	(3.3	)
Income tax expense (benefit)		45,741	2.4			403		0.0			(1,322	)	(0.1	)
Net (loss) income		76,410	4.1			(15,002	)	(1.6	)		(30,148	)	(3.1	)
Less: net income attributable to noncontrolling interests		135	0.0			96		0.0			60		0.0
Net (loss) income attributable to Party City Holdco Inc.	$	76,275	4.1	%	$	(15,098	)	(1.6	)%	$	(30,208	)	(3.1	)%

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Revenues

The following table sets forth the composition of our total revenues.

	Year Ended December 31, 2011						Period from January 1 to July 27, 2012						Period from July 28 to December 31, 2012
	(Predecessor)						(Predecessor)						(Successor)
	Dollars in Thousands			Percentage of Total Revenue			Dollars in Thousands			Percentage of Total Revenue			Dollars in Thousands			Percentage of Total Revenue
Revenues
Net sales
Wholesale	$	940,073			50.2	%	$	512,473			54.5	%	$	510,277			52.4	%
Eliminations		(355,168	)		(19.0	)%		(194,659	)		(20.7	)%		(245,219	)		(25.2	)%
Net wholesale		584,905			31.2	%		317,814			33.8	%		265,058			27.2	%
Retail		1,267,964			67.8	%		613,089			65.2	%		699,272			71.8	%
Total net sales		1,852,869			99.0	%		930,903			99.0	%		964,330			99.0	%
Royalties and franchise fees		19,106			1.0	%		9,281			1.0	%		9,312			1.0	%
Total revenues	$	1,871,975			100.0	%	$	940,184			100.0	%	$	973,642			100.0	%

Retail

Retail net sales for the period from January 1, 2012 to July 27, 2012 were $613.1 million. Net sales for the period from July 28, 2012 to December 31, 2012 were $699.3 million. The change in basis resulting from the Transactions did not impact our net sales. Retail net sales for full-year 2012 were $1,312.4 million and were $44.4 million, or 3.5%, higher than retail net sales for 2011. The retail net sales at our domestic superstores totaled $1,071.7 million during full-year 2012 and our e-commerce sales totaled $96.1 million during full-year 2012, as compared to $76.0 million during 2011. Same-store sales for the domestic Party City brand, including e-commerce and all stores converted from the FCPO format to the Party City format prior to December 31, 2012, increased by 1.8% from 2011 reflecting a 2.5% increase in average transaction dollar size, partially offset by a 0.7% decrease in transaction count. Super Storm Sandy adversely impacted the combined sales of our Party City and Halloween City stores by approximately $10 million during the 2012 Halloween selling season. Further, full-year 2012 Party City sales were negatively impacted by approximately $8 million as a result of the timing of New Year’s Eve, as the fiscal year for our retail operations ended on December 29, 2012 (as opposed to on December 31^st during 2011). In aggregate, Super Storm Sandy and the timing of New Year’s Eve adversely impacted our same-store sales for the domestic Party City brand by approximately 1.3%. Full year 2012 e-commerce sales increased by 26.6% as a 28.7% increase in transaction count was slightly offset by a 2.1% decrease in average transaction dollar size. Domestic superstore sales were positively impacted by the opening of 21 stores and the acquisition of six stores from franchisees, partially offset by the closure of five stores. Sales at Party City stores in Canada totaled $48.7 million during full-year 2012 and were $23.0 million higher than 2011 principally due to a full year of operations in 2012. Net sales at our temporary Halloween City stores (including Canadian locations) totaled $89.1 million during full-year 2012 or $16.9 million lower than 2011 principally due to the impact of Super Storm Sandy, as well as the impact of the Wednesday Halloween. Sales at outlet stores totaled $6.8 million during full-year 2012 and were $12.5 million lower than 2011 principally due to the closure of 25 stores during 2012.

Wholesale

Wholesale net sales for the period from January 1, 2012 to July 27, 2013 were $317.8 million. Wholesale net sales for the period from July 28, 2012 to December 31, 2012 were $265.1 million. The change in basis resulting from the Transactions did not impact our net sales. Net sales for full-year 2012 were $582.9 million and were $2.0 million, or 0.3%, lower than 2011. During full-year 2012, net sales to domestic party goods retailers, including our franchisee network, and to other domestic party goods distributors totaled $289.6 million and were

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$16.0 million, or 5.9%, higher than 2011. The growth in sales was principally driven by higher sales of our Christy’s costume line, approximately $8 million, and increased sales of juvenile birthday products across all channels, driven by both new licenses and new products for existing licenses, also approximately $8 million. Net sales of metallic balloons to domestic customers, excluding export sales, totaled $83.6 million during full-year 2012 and were $2.6 million, or 3.1%, lower than 2011, as distributors and retailers rationalized inventory levels in light of the temporary helium shortage. International net sales, including U.S. export sales, totaled $209.7 million during full-year 2012 and were $15.4 million, or 6.9%, lower than 2011. The decrease in international sales reflects several factors, including changes in foreign currency exchange rates (which resulted in a $5.4 million decrease in international net sales compared to 2011) and the July 2011 acquisition of Party City Canada, which resulted in the elimination of sales to Party City Canada during the seven months ended July 2012 (sales to Party City Canada were $3.1 million during the seven months ended July 2011). Additionally, sales volumes in Europe were adversely impacted by weaker economic conditions in 2012 and by changes in the timing of purchases by certain customers.

Intercompany sales to our retail affiliates were $439.9 million during full-year 2012 and were $84.7 million, or 23.9%, higher than 2011. Such sales represented 43.0% of total wholesale sales during 2012, compared to 37.8% during 2011. The increase in intercompany sales included higher sales of Christy’s costumes, juvenile birthday products and sports products. Additionally, intercompany sales reflect the acquisition of Party City Canada in July 2011. The intercompany sales of our wholesale segment are eliminated against the intercompany purchases of our retail segment in the consolidated financial statements.

Royalties and franchise fees

Royalties and franchise fees for the period from January 1, 2012 to July 27, 2012 were $9.3 million. Royalties and franchise fees for the period from July 28, 2012 to December 31, 2012 were also $9.3 million. The change in basis resulting from the Transactions did not impact royalties and franchise fees. Royalties and franchise fees for full-year 2012 were $18.6 million or $0.5 million lower than 2011, partially due to the operation of fewer franchise stores.

Gross Profit

Our total gross profit on net sales for the period from January 1, 2012 to July 27, 2012 was 38.3% and our total gross profit on net sales for the period from July 28, 2012 to December 31, 2012 was 34.0%. Our total gross profit on net sales for 2011 was 39.6%. As a result of the Acquisition, we applied the acquisition method of accounting, and increased the value of its inventory by $89.8 million as of July 28, 2012. Such adjustment increased our cost of sales during the period from July 28, 2012 to December 31, 2012 by $58.6 million, as a portion of the related inventory was sold. Further, during the application of the acquisition method of accounting, we increased the values of certain intangible assets and its property, plant and equipment. The impact of such adjustments on depreciation expense and amortization expense increased our cost of sales during the period from July 28, 2012 to December 31, 2012 by $15.4 million. The adjustments to inventory, intangible assets and property, plant and equipment adversely impacted our gross profit percentage during the period from July 28, 2012 to December 31, 2012 by 770 basis points.

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The following table sets forth our gross profit:

	Year Ended December 31, 2011					Period from January 1, 2012 to July 27, 2012					Period from July 28, 2012 to December 31, 2012
	(Predecessor)					(Predecessor)					(Successor)
	Dollars in Thousands		Percentage of Net Sales			Dollars in Thousands		Percentage of Net Sales			Dollars in Thousands		Percentage of Net Sales
Wholesale	$	201,246		34.4	%	$	112,205		35.3	%	$	72,415		27.3	%
Retail		532,650		42.0	%		244,650		39.9	%		255,505		36.5	%
Total	$	733,896		39.6	%	$	356,855		38.3	%	$	327,920		34.0	%

The gross profit on net sales at wholesale during the period from January 1, 2012 to July 27, 2012 was 35.3% and the gross profit on net sales at wholesale during the period from July 28, 2012 to December 31, 2012 was 27.3%. The gross profit on net sales at wholesale during 2011 was 34.4%. The adjustments to inventory, intangible assets and property, plant and equipment adversely impacted wholesale’s gross profit percentage by 730 basis points during the period from July 28, 2012 to December 31, 2012. The gross profit on net sales at retail during the period from January 1, 2012 to July 27, 2012 was 39.9% and the gross profit on net sales at retail during the period from July 28, 2012 to December 31, 2012 was 36.5%. The gross profit on net sales at retail during 2011 was 42.0%. The adjustments to inventory, intangible assets and property, plant and equipment adversely impacted retail’s gross profit percentage by 780 basis points during the period from July 28, 2012 to December 31, 2012. Excluding the impact of the adjustments, retail’s gross profit on net sales was higher during the period from July 28, 2012 to December 31, 2012 than during the period from January 1, 2012 to July 27, 2012 due to the impact of higher sales levels during the Halloween selling season on fixed occupancy costs. During full-year 2012, our wholesale operations’ share of shelf at our domestic permanent stores and domestic e-commerce operations (i.e., the percentage of total cost of sales which relates to product supplied by our wholesale operations) was 64.2%, compared to 60.5% during 2011. During full-year 2012, our Canadian retail share of shelf was 64.4%.

Operating expenses

Wholesale selling expenses were $31.6 million during the period from January 1, 2012 to July 27, 2012 and $28.1 million during the period from July 28, 2012 to December 31, 2012. Wholesale selling expenses were $57.9 million during 2011. Wholesale selling expenses were 9.9% of net wholesale sales during the period from January 1, 2012 to July 27, 2012, 10.6% of net wholesale sales during the period from July 28, 2012 to December 31, 2012 and 9.9% of net wholesale sales during 2011. As a result of the application of the acquisition method of accounting, we increased the values of certain intangible assets and its property, plant and equipment. The impact of such adjustments on depreciation expense and amortization expense increased wholesale selling expenses during the period from July 28, 2012 to December 31, 2012 by $3.8 million.

Retail operating expenses were $166.0 million during the period from January 1, 2012 to July 27, 2012, $172.2 million during the period from July 28, 2012 to December 31, 2012 and $325.3 million during 2011. The change in basis resulting from the Transactions did not impact retail operating expenses. Retail operating expenses during full-year 2012 were $338.2 million and were $12.9 million, or 4.0%, higher than 2011. The increase was principally due to $6.5 million of incremental operating expenses related to the July 2011 acquisition of Party City Canada and increased e-commerce costs consistent with the growth of our e-commerce business. Retail operating expenses were 27.1% of retail net sales during the period from January 1, 2012 to July 27, 2012, 24.6% during the period from July 28, 2012 to December 31, 2012 and 25.7% during 2011. Franchise expenses were $6.6 million during the period from January 1, 2012 to July 27, 2012, $6.1 million during the period from July 28, 2012 to December 31, 2012 and $13.7 million during 2011. There was a net decrease of seven franchise stores during 2012.

General and administrative expenses were $101.5 million during the period from January 1, 2012 to July 27, 2012, $65.9 million during the period from July 28, 2012 to December 31, 2012 and $138.1 million during

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full-year 2011. In conjunction with the Transactions, we recorded $8.9 million of transaction costs in general and administrative expenses during the period from January 1, 2012 to July 27, 2012. Additionally, the Acquisition accelerated the vesting of certain of our stock options and during the period we recorded $2.1 million of expense in general and administrative expenses. Further, due to the vesting of such stock options, we made payments in lieu of dividends to the holders of such options and during the period from January 1, 2012 to July 27, 2012 we recorded a $16.1 million charge in general and administrative expenses. During the application of the acquisition method of accounting, we increased the values of certain intangible assets and its property, plant and equipment. The impact of such adjustments on depreciation expense and amortization expense increased general and administrative expenses during the period from July 28, 2012 to December 31, 2012 by $2.7 million. General and administrative expenses were 10.7% of total revenues during the period from January 1, 2012 to July 27, 2012, 6.8% of total revenues during the period from July 28, 2012 to December 31, 2012 and 7.4% of total revenues during 2011. Costs related to the Transactions adversely impacted the January 1, 2012 to July 27, 2012 percentage by 280 basis points. Additionally, general and administrative expenses as a percentage of total revenues during the period from July 28, 2012 to December 31, 2012 were lower than during the period from January 1, 2012 to July 27, 2012 due to the impact of the higher sales levels during the Halloween selling season on fixed general and administrative costs.

Art and development costs totaled $10.8 million during the period from January 1, 2012 to July 27, 2012, $8.2 million during the period from July 28, 2012 to December 31, 2012 and $16.6 million during 2011. As a percentage of total revenues, art and development costs were 1.1% during the period from January 1, 2012 to July 27, 2012, 0.8% from July 28, 2012 to December 31, 2012 and 0.9% during 2011.

Interest expense, net

Interest expense, net, totaled $42.0 million during the period from January 1, 2012 to July 27, 2012, $62.1 million during the period from July 28, 2012 to December 31, 2012 and $77.7 million during 2011. Interest expense was higher during the period from July 28, 2012 to December 31, 2012 due to the increase in debt in conjunction with the Transactions.

Other expense, net

Other expense, net, was $22.2 million during the period from January 1, 2012 to July 27, 2012, $26.2 million during the period from July 28, 2012 to December 31, 2012 and $1.5 million during 2011. In conjunction with the Transactions, we recorded $19.7 million of transaction costs in other expense, during the period from January 1, 2012 to July 27, 2012 and $24.6 million of transaction costs during the period from July 28, 2012 to December 31, 2012. Additionally, the period from January 1, 2012 to July 27, 2012 included $2.5 million in costs as a result of the termination of an initial public offering.

Income tax expense

The effective income tax rate was (2.8%) during the period from January 1, 2012 to July 27, 2012, 4.2% during the period from July 28, 2012 to December 31, 2012 and 37.4% during 2011. The effective tax rates for the periods from January 1, 2012 to July 27, 2012 and July 28, 2012 to December 31, 2012 were impacted by non-deductible costs related to the Transactions. The effective tax rate during the period from July 28, 2012 to December 31, 2012 was impacted by the recording of a valuation allowance against certain deferred tax assets.

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Year Ended December 31, 2011 Compared To Year Ended December 31, 2010

The following tables set forth our operating results and operating results as a percentage of total revenues for the years ended December 31, 2011 and 2010.

	Year Ended December 31,
	2010				2011
	(Predecessor)				(Predecessor)
	(dollars in thousands)
Revenues:
Net sales	$	1,579,677	98.8	%	$	1,852,869	99.0	%
Royalties and franchise fees		19,417	1.2			19,106	1.0
Total revenues		1,599,094	100.0			1,871,975	100.0
Expenses:
Cost of sales		943,058	59.0			1,118,973	59.8
Wholesale selling expenses		42,725	2.7			57,905	3.1
Retail operating expenses		296,891	18.6			325,332	17.3
Franchise expenses		12,269	0.8			13,685	0.7
General and administrative expenses		134,392	8.4			138,074	7.4
Art and development costs		14,923	0.9			16,636	0.9
Impairment of trade name		27,400	1.7			—	—
Total expenses		1,471,658	92.0			1,670,605	89.2
Income from operations		127,436	8.0			201,370	10.8
Interest expense, net		40,850	2.6			77,743	4.2
Other expense, net		4,208	0.3			1,476	0.1
Income before income taxes		82,378	5.2			122,151	6.5
Income tax expense		32,945	2.1			45,741	2.4
Net income		49,433	3.1			76,410	4.1
Less: net income attributable to noncontrolling interests		114	0.0			135	0.0
Net income attributable to Party City Holdco Inc.	$	49,319	3.1	%	$	76,275	4.1	%

Revenues

Total revenues for 2011 were $1,872.0 million, or 17.1%, higher than 2010. The following table sets forth the composition of our total revenues for 2011 and 2010.

	Year Ended December 31,
	2010						2011
	(Predecessor)						(Predecessor)
	Dollars in Thousands			Percentage of Total Revenue			Dollars in Thousands			Percentage of Total Revenue
Revenues
Sales
Wholesale	$	769,247			48.1	%	$	940,073			50.2	%
Eliminations		(298,355	)		(18.7	)%		(355,168	)		(19.0	)%
Net wholesale		470,892			29.4	%		584,905			31.2	%
Retail		1,108,785			69.4	%		1,267,964			67.8	%
Total net sales		1,579,677			98.8	%		1,852,869			99.0	%
Royalties and franchise fees		19,417			1.2	%		19,106			1.0	%
Total revenues	$	1,599,094			100.0	%	$	1,871,975			100.0	%

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Retail

Retail net sales for 2011 of $1,268.0 million were $159.2 million, or 14.4%, higher than retail sales in 2010. The retail sales at our Party City stores (including all converted FCPO stores) totaled $954.2 million and were $154.9 million, or 19.4%, higher than in 2010. Additionally, our e-commerce sales totaled $76.0 million in 2011 and were $35.8 million higher than our 2010 e-commerce sales of $40.2 million. Same-store sales for the domestic Party City brand, including e-commerce and all stores converted from the FCPO format to the Party City format prior to December 31, 2011, increased by 9.5% from 2010. E-commerce sales increased by 88.7%, driven by an 88.2% increase in transaction count and a 0.5% increase in average transaction dollar size and Party City same-store sales increased by 4.6%, driven by a 2.7% increase in average transaction dollar size and a 1.9% increase in transaction count. Sales at stores converted from the FCPO format to the Party City format during 2011 were 21.8% higher than sales at those same stores during 2010. The increase in sales is partially attributable to the successful shift in our principal advertising strategy from free standing newspaper inserts to a national broadcasting campaign, coupled with other successful online initiatives implemented since our re-launch of the PartyCity.com website in August 2009. The increase in Party City store sales also reflects the net addition of 48 new stores during 2011, including the opening of 16 stores, the acquisition of eight stores from franchisees, and the conversion of 31 FCPO stores to the Party City format during that time period, offset by the closure of seven stores. Additionally, 2011 Party City store sales benefited from the impact of a full year of sales for the stores that were added during 2010. Net sales at our temporary Halloween stores, including 16 stores operated in Canada, totaled $106.0 million and were $4.6 million higher than in 2010. The 26 Party City Canada stores acquired at the end of July 2011 added net sales of $25.7 million during 2011. Sales at all other store formats, including unconverted FCPO and outlet stores, totaled $106.1 million and were $61.8 million or 36.8% lower than in 2010. The decrease principally reflects the conversion of 31 FCPO stores to the Party City format and the closure of 27 stores during 2011.

Wholesale

Net sales for 2011 of $584.9 million were $114.0 million, or 24.2%, higher than net sales for 2010. During 2011, net sales to domestic party goods retailers, including our franchisee network, and to other domestic party goods distributors totaled $284.9 million and were $3.7 million, or 1.3%, higher than during 2010. The increase in sales was principally attributable to an increase in Halloween products shipped directly to our franchise stores under a distribution center bypass program including $3.9 million of synergistic sales of Christy’s Halloween and other costumes. Net sales of metallic balloons, including export sales, of $106.2 million were $9.8 million or 10.2% higher than 2010, with the sales growth occurring across most channels, including domestic and international balloon distributors, dollar stores and custom. International sales, excluding export sales of metallic balloons, totaled $194.1 million and were $100.8 million higher than 2010, principally reflecting the acquisition of the Christy’s Group in September 2010 and Riethmüller in late January 2011. The contribution from the Christy’s Group in 2011 was $35.2 million higher than 2010, due to an additional nine months of operations, and the Riethmüller acquisition contributed $55.5 million to 2011 sales. In addition, changes in foreign currency exchange rates resulted in a $4.8 million or 5.1% increase in international sales over 2010.

Intercompany sales to our retail affiliates of $355.2 million were $56.8 million or 19.0% higher than during 2010 and represented 37.8% of total wholesale sales in 2011, compared to 38.8% in 2010. The increase in intercompany sales principally reflects an increase in Halloween products, including synergistic sales of Christy’s Halloween costumes. The intercompany sales of our wholesale segment are eliminated against the intercompany purchases of our retail segment in the consolidated financial statements.

Royalties and franchise fees

Royalties and franchise fees of $19.1 million for 2011 were comparable to 2010 as the negative impact on royalty income from the net decrease of 11 franchise stores during 2011 was substantially offset by the impact of increased same-store sales at the remaining franchise stores.

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Gross Profit

Our total margin on net sales for 2011 was 39.6% or 70 basis points lower than 2010. The following table sets forth our gross profit on net sales for 2011 and 2010.

	Year Ended December 31,
	2010					2011
	(Predecessor)					(Predecessor)
	Dollars in Thousands		Percentage of Net Sales			Dollars in Thousands		Percentage of Net Sales
Net Wholesale	$	174,507		37.1	%	$	201,246		34.4	%
Retail		462,112		41.7	%		532,650		42.0	%
Total	$	636,619		40.3	%	$	733,896		39.6	%

The gross profit margin on net sales at wholesale for 2011 was 34.4% or 270 basis points lower than 2010. The decrease in wholesale gross profit margin partially reflects the dilutive impact of our recent international acquisitions, the Christy’s Group and Riethmüller, which have lower gross profit margins relative to our historical wholesale operations. The impact of the Christy’s Group and Riethmüller on wholesale gross profit margin was approximately 100 basis points of the decline in 2011. The remaining decline reflected a combination of increased sales of lower margin products and increases in certain raw material and product costs.

Retail gross profit margin for 2011 was 42.0% or 30 basis points higher than 2010, as the impact of a greater percentage of our wholesale products sold at retail and the realization of higher previously deferred manufacturing and distribution margin in 2011 compared to 2010 were partially offset by a decrease in the margin for temporary Halloween stores from 2010 to 2011 and, to a lesser extent, the inclusion of lower margin Party City Canada sales. During 2011, our wholesale operations’ share of shelf at our domestic permanent stores and domestic e-commerce operations, or the percentage of total cost of sales which relates to product supplied by our wholesale operations, was 60.5% compared to 58.7% in 2010.

Operating expenses

Wholesale selling expenses of $57.9 million for 2011 were $15.2 million or 35.6% higher than 2010. The increase in wholesale selling expenses principally reflects the additional expenses of the Christy’s Group and Riethmüller of $6.7 million and $4.8 million, respectively. Wholesale selling expenses were 6.2% of total wholesale sales in 2011, compared to 5.6% in 2010. The increase was principally due to the cost structures of the Christy’s Group and Riethmüller as selling expenses for the two recently acquired businesses were 12.1% of their 2011 sales. Excluding the impact of the Christy’s Group and Riethmüller, wholesale selling expenses were 5.5% of total wholesale sales in both 2011 and 2010.

Retail operating expenses for 2011 of $325.3 million were $28.4 million higher than 2010. The increase in retail operating expenses reflects the growth in our retail store base, including a $11.3 million increase due to the growth in our e-commerce operations and $7.7 million of expenses related to the acquisition of Party City Canada. E-commerce costs reflect additional distribution, website and customer service costs. The increase in retail operating expenses also reflects additional costs associated with a national broadcasting campaign and inflationary increases in retail expenses. As a percent of retail sales, retail operating expenses were 25.6% for 2011, compared to 26.8% for 2010. Franchise expenses for 2011 of $13.7 million were $1.4 million or 11.4% higher than 2010, principally due to an increase in commissions paid to franchisees on e-commerce sales originating in their territories.

As a percentage of total revenues, general and administrative expenses decreased to 7.4% for 2011, compared to 8.4% for 2010. General and administrative expenses for 2011 of $138.1 million were $3.7 million or 2.8% higher than 2010, as additional expenses from the acquisitions of the Christy’s Group, Riethmüller and Party City Canada of $0.7 million, $8.1 million and $2.2 million, respectively, were partially offset by 2010 including $9.4 million of stock compensation expense arising from the payment of the December 2010 dividend distribution to vested time-based option holders.

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Art and development costs of $16.6 million for 2011 were $1.7 million or 11.4% higher than 2010, principally reflecting increases in personnel, compensation and employee benefits. As a percentage of total revenues, art and development costs were 0.9% in both 2011 and 2010.

During 2010, we instituted a program to convert substantially all of our FCPO stores to either Party City stores or to an outlet format and recorded a $27.4 million non-cash charge in 2010 for the impairment of the Factory Card & Party Outlet trade name.

Interest expense, net

Interest expense, net, of $77.7 million for 2011 was $36.8 million higher than 2010. The increase was principally due to higher interest rates and the $326.6 million increase in term loan borrowings following the $350.0 million ABL revolving credit facility refinancing in August 2010 and the $675.0 million term loan refinancing in December 2010.

Other expense, net

Other expense, net, was $1.5 million for 2011 compared to $4.2 million for 2010. During 2011 and 2010, Other expense, net, principally consisted of our share of income from an unconsolidated balloon distribution joint venture in Mexico, foreign currency gains and acquisition related expenses. During 2010 Other expense, net also included $2.4 million of costs related to the $350.0 million ABL revolving credit facility refinancing and the $675.0 million term loan refinancing.

Income tax expense

Income tax expense for 2011 and 2010 reflected consolidated effective income tax rates of 37.4% and 40.0%, respectively. The higher effective income tax rate in 2010 was primarily attributable to adjustments to deferred tax accounts related to previous acquisitions and non-deductible non-cash stock option and warrant-related charges, partially offset by higher domestic manufacturing deductions in 2010.

Liquidity and Capital Resources

Capital Structure

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

Other Credit Agreements

The Company, through its subsidiaries, has entered into several foreign credit facilities which provide those subsidiaries with borrowing capacity of GBP 10.0 million, CDN 6.0 million, EUR 2.5 million and RM 2.5 million. At September 30, 2013 and December 31, 2012, borrowings under the foreign facilities totaled $1.3 million and $9.9 million, respectively. In connection with one of the facilities, at both September 30, 2013 and December 31, 2012, a compensating cash balance of $4.4 million was maintained to secure outstanding standby letters of credit.

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Other Indebtedness

Long-term borrowings at September 30, 2013 and December 31, 2012 included a mortgage note with the New York Job Development Authority in the amounts of $1.5 million and $2.4 million, respectively. The mortgage note was amended during December 2009, extending the fixed monthly payments of principal and interest for a period of 60 months up to and including December 31, 2014. The note bears interest at the rate of approximately 2%, and is subject to review and adjustment semi-annually based on the New York Job Development Authority’s confidential internal protocols. The mortgage note is collateralized by our Chester, New York distribution facility.

Additionally, we have entered into various capital leases for machinery and equipment. At September 30, 2013 and December 31, 2012 the balances of such leases were $2.9 million and $3.3 million, respectively. We also have numerous non-cancelable operating leases for its retail store sites, as well as several leases for offices, distribution and manufacturing facilities, showrooms and equipment. These leases generally contain renewal options and require us to pay real estate taxes, utilities and related insurance costs.

Liquidity

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

Cash Flow Data—Nine Months Ended September 30, 2013 Compared to Periods from January 1, 2012 to July 27, 2012 and July 28, 2012 to September 30, 2012

Net cash used in operating activities totaled $74.0 million during the nine months ended September 30, 2013. Net cash used in operating activities totaled $199.2 million and $18.1 million during the periods from July 28, 2012 to September 30, 2012 and January 1, 2012 to July 27, 2012, respectively. Net cash flows provided by operating activities before changes in operating assets and liabilities were $37.0 million during the first nine months of 2013. Net cash flows (used in) provided by operating activities before changes in operating assets and liabilities were ($37.5) million and $32.5 million during the periods from July 28, 2012 to September 30, 2012 and January 1, 2012 to July 27, 2012, respectively. Changes in operating assets and liabilities during the first nine months of 2013 resulted in the use of cash of $111.0 million. Changes in operating assets and liabilities during the period from July 28, 2012 to September 30, 2012 and the period from January 1, 2012 to July 27, 2012 resulted in uses of cash in the amounts of $161.7 million and $50.6 million, respectively. The operating assets and liabilities cash outflow during the period from July 28, 2012 to September 30, 2012 principally related to stock option payments, payments in lieu of dividends and other Transactions-related payments (see Note 5 to our audited consolidated financial statements which are included elsewhere in this prospectus). The operating assets and liabilities cash outflow during the first nine months of 2013 primarily related to the timing of income tax payments, the pay down of Halloween and other fourth quarter 2012 seasonal trade accounts payable, and increased receivables due to third quarter 2013 Halloween-related sales to franchisees and other party goods retailers and distributors.

Net cash used in investing activities totaled $90.6 million during the nine months ended September 30, 2013, as compared to $1,570.5 million during the period from July 28, 2012 to September 30, 2012 and $31.8 million during the period from January 1, 2012 to July 27, 2012. Investing activities during the nine months ended September 30, 2013 included $48.6 million paid in connection with certain acquisitions, including the

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acquisition of iParty (see Note 3 to our unaudited condensed consolidated financial statements which are included elsewhere in this prospectus). Investing activities during the period from July 28, 2012 to September 30, 2012 included $1,562.2 million paid to our former owners in conjunction with the Transactions (see Note 5 to our audited consolidated financial statements which are included elsewhere in this prospectus). Capital expenditures during the nine months ended September 30, 2013 were $42.1 million. Retail capital expenditures totaled $30.7 million during the nine months ended September 30, 2013 and principally related to store conversions and new stores. Wholesale capital expenditures totaled $11.4 million and primarily related to printing plates/dies, machinery/equipment for our manufacturing operations and information technology expenditures.

Net cash provided by financing activities was $162.9 million during the nine months ended September 30, 2013, as compared to $1,777.7 million provided by financing activities during the period from July 28, 2012 to September 30, 2012 and $33.3 million provided by financing activities during the period from January 1, 2012 to July 27, 2012. Borrowings during the nine months ended September 30, 2013 were principally used to make interest payments on the debt which was incurred in conjunction with the Transactions, finance acquisitions (see Note 3 to our unaudited condensed consolidated financial statements which are included elsewhere in this prospectus), make income tax payments, pay down Halloween and other fourth quarter seasonal trade accounts payable, and refinance the Term Loan Facility (see Note 13 to our unaudited condensed consolidated financial statements which are included elsewhere in this prospectus). Additionally, during the first nine months of 2013, Nextco Holdings and Nextco Finance issued $350.0 million senior PIK toggle notes and Nextco Holdings used the proceeds, net of expenses, and we used the proceeds to pay a dividend to our shareholders. The cash inflow during the period from July 28, 2012 to September 30, 2012 related to the Transactions (see Note 5 to our audited consolidated financial statements which are included elsewhere in this prospectus).

At September 30, 2013, we had $167.3 million of excess availability under the ABL Facility.

Cash Flow Data—Periods from July 28, 2012 to December 31, 2012 and January 1, 2012 to July 27, 2012 Compared to Year Ended December 31, 2011

Net cash used in operating activities totaled $41.8 million during the period from July 28, 2012 to December 31, 2012 and $18.1 million during the period from January 1, 2012 to July 27, 2012, as compared to cash provided by operating activities of $161.3 million during 2011. The net cash outflow during the period from July 28, 2012 to December 31, 2012 was principally due to stock option payments, payments in lieu of dividends and other Transactions-related payments being principally offset by other operating cash inflows. See Notes 5 and 12 to the consolidated financial statements which are included elsewhere in this prospectus for further discussion of the Transactions-related payments.

Net cash used in investing activities totaled $1,578.6 million during the period from July 28, 2012 to December 31, 2012 and $31.8 million during the period from January 1, 2012 to July 27, 2012, as compared to $138.9 million during 2011. Our subsidiary, PCHI, was acquired on July 27, 2012 for aggregated consideration of approximately $2,690.0 million. The portion of the consideration that was not retained by us, $1,562.2 million, is included in cash paid in connection with acquisitions during the period from July 28, 2012 to December 31, 2012. Investing activities during the period from January 1, 2012 to July 27, 2012 included $3.1 million paid in connection with the acquisition of retail stores from franchisees. Investing activities during 2011 included $47.1 million paid in connection with the acquisition of Riethmüller, $31.8 million paid in connection with the acquisition of Party City Canada, $4.0 million paid in connection with the acquisition of the Christy’s Group, and $12.7 million paid in connection with the purchase of retail franchise stores. Capital expenditures during 2012 were principally consistent with 2011. Retail capital expenditures totaled $11.3 million and $22.0 million during the periods from July 28, 2012 to December 31, 2012 and January 1, 2012 to July 27, 2012, respectively, and were principally for store conversions and new stores. Wholesale capital expenditures totaled $5.1 million and $6.9 million during the periods from July 28, 2012 to December 31, 2012 and January 1, 2012 to July 27, 2012, respectively, and were principally for printing plates and dies and data processing equipment.

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Net cash provided by financing activities was $1,629.3 million during the period from July 28, 2012 to December 31, 2012 and $33.3 million during the period from January 1, 2012 to July 27, 2012, as compared to net cash used in financing activities of $19.8 million during 2011. Due to the Transactions, during the period from July 28, 2012 to December 31, 2012 amounts outstanding under our previous $350.0 million ABL revolving credit facility and previous $675.0 million term loan agreement were repaid and we entered into the ABL Facility, of which $115.0 million was drawn at closing, and the Term Loan Facility. Additionally, we issued $700.0 million of senior notes and repaid $175.0 million of then-existing notes. We paid $64.1 million of costs in conjunction with the issuance of the new debt. See the consolidated financial statements which are included elsewhere in this prospectus for further detail. Additionally, due to the acquisition, we received $833.9 million of capital contributions. The periods from July 28, 2012 to December 31, 2012 and January 1, 2012 to July 27, 2012 include excess tax benefits from stock options in the amounts of $0.6 million and $32.3 million, respectively. See the consolidated financial statements which are included elsewhere in this prospectus for further discussion.

Cash Flow Data—Year Ended December 31, 2011 Compared to Year Ended December 31, 2010

Net cash provided by operating activities totaled $161.3 million during 2011, as compared to $61.2 million during 2010. Net cash flow provided by operating activities before changes in operating assets and liabilities was $155.7 million during 2011 and $133.4 million during 2010. During 2011, changes in operating assets and liabilities provided $5.6 million of cash. During 2010 changes in operating assets and liabilities used $72.2 million of cash, which principally reflected an increase in inventories to support the replenishment of inventories across the channels we serve from the intentionally low levels reached in 2009, growth in Halloween City locations and additional inventory build related to the Designware acquisition.

Net cash used in investing activities totaled $138.9 million during 2011, as compared to $102.8 million during 2010. Investing activities during 2011 included $47.1 million paid in connection with the acquisition of Riethmüller, $31.8 million paid in connection with the acquisition of Party City Canada, an additional $4.0 million paid in connection with the acquisition of the Christy’s Group, and $12.7 million paid in connection with the purchase of retail franchise stores. Capital expenditures totaled $44.5 million during 2011, compared to $49.6 million in 2010. Retail capital expenditures totaled $31.3 million in 2011 and were principally for new stores, FCPO conversions and store renovations, while wholesale capital expenditures totaled $13.2 million and were principally for printing plates, dies, computer equipment and distribution equipment.

Net cash used in financing activities was $19.8 million during 2011, compared to $46.5 million provided by financing activities in 2010. The 2011 usage principally reflects repayments under the $350.0 million ABL revolving credit facility and scheduled repayments of the $675.0 million term loan agreement, partially offset by borrowings under the foreign credit facilities.

Tabular Disclosure of Contractual Obligations

Our contractual obligations at December 31, 2012 are summarized by the year in which the payments are due in the following table (dollars in thousands):

	Total		2013		2014		2015		2016		2017		Thereafter
Long-term debt obligations (a)	$	1,814,983	$	12,405	$	13,445	$	11,250	$	11,250	$	11,250	$	1,755,383
Capital lease obligations (a)		3,276		826		788		584		748		330		—
Operating lease obligations (b)		579,992		124,708		98,857		83,842		72,352		59,064		141,169
Purchase commitments (c)		42,567		14,567		14,000		14,000		—		—		—
Minimum product royalty obligations (a)		49,025		10,171		14,091		13,772		8,028		2,963		—
Total contractual obligations	$	2,489,843	$	162,677	$	141,181	$	123,448	$	92,378	$	73,607	$	1,896,552

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

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(b) We are also an assignor with continuing lease liability for 12 stores sold to franchisees, and other parties, that expire through 2018. The assigned lease obligations continue until the applicable leases expire. The maximum amount of the assigned lease obligations may vary, but is limited to the sum of the total amount due under the lease. At December 31, 2012, the maximum amount of the assigned lease obligations was approximately $3.3 million and is not included in the table above.

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

Not included in the above table are borrowings under the ABL Facility and our foreign credit facilities, nor does it include obligations under the senior PIK toggle notes as the senior PIK toggle notes were issued in August 2013.

Not included in the above table are $0.5 million of net potential cash obligations associated with unrecognized tax benefits due to the high degree of uncertainty regarding the timing of future cash outflows associated with such obligations. Refer to the notes to the consolidated financial statements which are included elsewhere in this prospectus for further information related to unrecognized tax benefits.

Additionally, not included in the above table are expected interest payments associated with the Term Loan Facility, the senior notes, capital lease obligations and mortgage obligations, of approximately $109.9 million in 2013, $109.3 million in 2014, $108.8 million in 2015, $108.3 million in 2016, $107.8 million in 2017 and $231.7 million thereafter. In addition, our expected interest payments associated with the senior PIK toggle notes, which were issued in August 2013 and are not included in the above table, are expected to be approximately $31.9 million in 2014, $30.6 million in 2015, $30.6 million in 2016, $30.6 million in 2017 and $61.2 million thereafter (assuming payments are made in cash). Interest payments are estimates based on our debt’s scheduled maturities and stated interest rates or, for variable rate debt, interest rates as of December 31, 2012 (with the exception of the Term Loan Facility for which the revised interest rates, as amended in February 2013, were used). Our estimates do not reflect interest payments on the credit facilities or the possibility of additional interest from the refinancing of our debt as such amounts are not determinable.

The above table also does not reflect net proceeds from this offering and the proposed use of proceeds to repay indebtedness. See “Use of Proceeds.”

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements.

Effects of Inflation

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

Critical Accounting Policies and Procedures

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

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

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Revenue Recognition

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

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

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

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

Store Closure Costs

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

Product Royalty Agreements

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

Allowance for Doubtful Accounts

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

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Inventories

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

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

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

Long-Lived and Intangible Assets (including Goodwill)

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

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

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

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

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

Insurance Accruals

Our consolidated balance sheet includes significant liabilities with respect to self-insured workers’ compensation, medical and general liability claims. We estimate the required liability for such claims based upon

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various assumptions, which include, but are not limited to, our historical loss experience, projected loss development factors, actual payroll and other data. The required liability is also subject to adjustment in the future based upon changes in claims experience, including changes in the number of incidents (frequency) and changes in the ultimate cost per incident (severity). Adjustments to earnings resulting from changes in historical loss trends have been insignificant. Further, we do not anticipate any significant change in loss trends, settlements or other costs that would cause a significant change in our earnings.

Income Taxes

Temporary differences arising from differing treatment of income and expense items for tax and financial reporting purposes result in deferred tax assets and liabilities that are recorded on the balance sheet. These balances, as well as income tax expense, are determined through management’s estimations, interpretation of tax law for multiple jurisdictions and tax planning. However, inherent in the measurement of deferred balances are certain judgments and interpretations of enacted tax laws and published guidance with respect to applicability to our operations. If our actual results differ from estimated results due to changes in tax laws or tax planning, our effective tax rate and tax balances could be affected. As such, these estimates may require adjustment in the future as additional facts become known or as circumstances change.

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

Stock-Based Compensation

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

Recently Issued Accounting Pronouncements

In July 2013, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2013-10, “Derivatives and Hedging (Topic 815), Inclusion of the Federal Funds Effective Swap Rate (or Overnight Index Swap Rate) as a Benchmark Interest Rate for Hedging Accounting Purposes.” The pronouncement allows companies to use the federal funds effective rate as a benchmark interest rate for purposes of achieving hedge accounting. Although the pronouncement has no current impact on us, it could impact us in the future.

In July 2013, the FASB issued ASU 2013-11, “Income Taxes: Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists”. The update provides guidance on the financial statement presentation of an unrecognized tax benefit, as either a reduction of

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a deferred tax asset or as a liability, when a net operating loss carryforward, similar tax loss, or a tax credit carryforward exists. The update will be effective for interim and annual periods beginning after December 15, 2013 and may be applied on a retrospective basis. Early adoption is permitted. We do not believe that the adoption of this pronouncement will have a material impact on our condensed consolidated financial statements.

In March 2013, the FASB issued ASU 2013-05, “Foreign Currency Matters (Topic 830), Parent’s Accounting for the Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity”. The pronouncement states that a cumulative translation adjustment is attached to the parent’s investment in a foreign entity and should be released in a manner consistent with the derecognition guidance on investments in entities. The ASU is effective for fiscal years beginning after December 15, 2013. Although we continue to review this pronouncement, we do not believe that it will have a material impact on our financial statements.

In December 2011, the FASB issued ASU 2011-11, “Balance Sheet (Topic 210), Disclosures about Offsetting Assets and Liabilities”. Additionally, in January 2013, the FASB issued ASU 2013-01, “Balance Sheet (Topic 210), Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities”. The pronouncements require an entity to disclose information about offsetting and related arrangements to enable users of its financial statements to understand the effect of those arrangements on its financial position. We adopted the pronouncements on January 1, 2013. The adoption did not have a material impact on our condensed consolidated financial statements.

In February 2013, the FASB issued ASU 2013-02, “Comprehensive Income (Topic 220), Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income”. The pronouncement requires companies to report, in one place, information about reclassifications out of accumulated other comprehensive income. Additionally, it requires companies to report changes in accumulated other comprehensive income balances. We adopted ASU 2013-02 on January 1, 2013. See Note 5 to the audited consolidated financial statements in which are included elsewhere in this prospectus. The adoption did not have a material impact on our condensed consolidated financial statements.

Quarterly Results

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

As a result of the Transactions, the financial information for the period after July 27, 2012 represents the financial information of the “Successor” company. Prior to, and including, July 27, 2012, the consolidated financial statements include the accounts of the “Predecessor” company. Due to the change in the basis of accounting resulting from the application of the acquisition method of accounting, the Predecessor’s consolidated financial statements and the Successor’s consolidated financial statements are not necessarily comparable. The following table sets forth our historical revenues, gross profit, income (loss) from operations, net income (loss) and net income (loss) attributable to Party City Holdco Inc. for the quarters ended March 31, 2011 (Predecessor), June 30, 2011 (Predecessor), September 30, 2011 (Predecessor), December 31, 2011 (Predecessor), March 31, 2012 (Predecessor), June 30, 2012 (Predecessor), for the periods from July 1, 2012 to July 27, 2012

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(Predecessor) and July 28, 2012 to September 30, 2012 (Successor), December 31, 2012 (Successor), March 31, 2013 (Successor), June 30, 2013 (Successor) and September 30, 2013 (Successor) (dollars in thousands):

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

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

	For the Three Months Ended, (Predecessor)
	March 31,			June 30,		September 30,			December 31,
2011:
Revenues:
Net sales	$	352,501		$	411,502	$	436,186		$	652,680
Royalties and franchise fees		3,681			4,550		3,962			6,913
Gross profit		127,486			163,715		148,039			294,656
Income from operations		16,608			43,022		11,276			130,464
Net (loss) income		(2,492	)		14,578		(5,820	)		70,144
Net (loss) income attributable to Party City Holdco Inc.		(2,563	)		14,532		(5,922	)		70,228

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

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

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

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

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

Quantitative and Qualitative Disclosures about Market Risk

As a result of our variable rate indebtedness, our earnings are affected by changes in interest rates. From time to time we have utilized interest rate swap agreements to manage the risk associated with such changes. As discussed in the notes to the consolidated financial statements included elsewhere in this prospectus, on July 27, 2012 all amounts outstanding under the $675.0 million term loan agreement were repaid and our subsidiary, PCHI, entered into the Term Loan Facility. Assuming that the refinancing had occurred on January 1, 2010, if market interest rates for our variable rate indebtedness averaged 2% more than the actual rates, during 2012, 2011 and 2010 the interest expense amounts in our consolidated financial statements included elsewhere in this prospectus would have increased by $25.3 million, $25.3 million and $22.3 million during 2012, 2011 and 2010, respectively. The income (loss) before income taxes for the three years would have also been impacted by the same amounts. These amounts are determined by considering the impact of the hypothetical interest rates on our borrowings and considering any interest rate swap agreements. This analysis does not consider the effects of the reduced level of overall economic activity that could exist in such an environment. Further, in the event of a change of such magnitude, management could potentially take action to mitigate our exposure to the change. However, due to the uncertainty of the specific actions that we would take and their possible effects, the sensitivity analysis assumes no changes in our financial structure.

As a result of the sale of our products in foreign markets, our earnings are affected by fluctuations in the value of the U.S. dollar when compared to the values of foreign currencies. Although we periodically enter into foreign currency forward contracts to hedge against the earnings impact of such fluctuations, we (1) may not be able to achieve hedge effectiveness in order to qualify for hedge-accounting treatment and, therefore, would record any gain or loss on the mark-to-market of the contracts in other expense (income) and (2) may not be able to hedge such risks completely or permanently. A uniform 10% strengthening in the value of the U.S. dollar relative to the currencies in which our foreign sales are denominated would have decreased income from operations, as stated in the consolidated financial statements included elsewhere in this prospectus, by $5.5 million, $6.6 million, $12.4 million and $5.8 million during the period from July 28, 2012 to December 31, 2012, the period from January 1, 2012 to July 27, 2012, full-year 2011 and full-year 2010, respectively. The income (loss) before income taxes for the three years would have also been impacted by the same amounts. In addition to the direct effects of changes in exchange rates, changes in exchange rates may also affect the volume of sales or the foreign currency sales price as competitors’ products become more or less attractive. Our sensitivity analysis of the effects of changes in foreign currency exchange rates does not consider a potential change in sales levels or local currency prices.

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BUSINESS

Our Company

We are the leading party goods retailer in North America and, we believe, the largest vertically integrated supplier of decorated party goods globally with multiple levers to drive future growth across channels, products and geographies. With approximately 880 locations, we have the only coast-to-coast network of party superstores in the U.S. and Canada that make it easy and fun to enhance special occasions with a differentiated shopping experience and an unrivaled assortment of innovative and exciting merchandise offered at a compelling value. Through a series of acquisitions between 2005 and 2010, we built a powerful retail operation that captures the full manufacturing-to-retail margin on a significant portion of the products sold in our stores. We believe we are the largest global designer, manufacturer and distributor of decorated party supplies with products found in over 40,000 retail outlets worldwide, including our own stores as well as independent party supply stores, mass merchants, grocery retailers, dollar stores and others. Our category-defining retail concept, multi-channel reach, widely recognized brands, broad and deep product offering and low-cost global sourcing model are, we believe, significant competitive advantages. We believe these characteristics position us for continued organic and acquisition-led growth and margin expansion.

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

The 2005 combination of Amscan, which focused on the wholesale market, and Party City, which focused on the retail market, represented an important step in our evolution. Since then, we have established the largest multi-channel party supply business in North America with approximately 880 party superstores (inclusive of approximately 215 franchised stores) in the United States and Canada, principally under the Party City banner. We believe we are the only party supply retailer with a national footprint. We also operate PartyCity.com, our primary e-commerce site. Underscored by our slogan “Nobody Has More Party for Less”, we believe we offer a superior one-stop shopping experience with a broad selection, consistently high in-stock positions and compelling value proposition, making us the favored destination for all of our customers’ party supply needs. Since the acquisition of Party City in 2005, we have steadily increased the selection of Amscan merchandise offered in Party City stores from approximately 25% to approximately 67% in 2013, allowing us to capture the full manufacturing-to-retail margin on a significant portion of our retail sales. We also operate a network of approximately 350 temporary Halloween locations under the Halloween City banner.

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

• Growing revenue from $1,487 million in 2009 to $1,981 million for the twelve months ended September 30, 2013 representing a compounded annual growth rate of 7.9%.

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• Increasing adjusted EBITDA from $192 million, implying an adjusted EBITDA margin of 12.9%, in 2009 to $         million on a pro forma basis for the twelve months ended September 30, 2013, for an implied pro forma adjusted EBITDA margin of         %. Net income decreased from $63 million in 2009 to a net loss of $         million on a pro forma basis for the twelve months ended September 30, 2013 due to both higher interest expense, resulting from debt incurred in conjunction with the Transactions, the impact of non-cash purchase accounting adjustments resulting from the Transactions and the impact of non-recurring charges related to refinancings.

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

Evolution of Our Business

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

Creating Our Retail Leadership Platform to Leverage Our Vertically Integrated Model

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

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

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

• In 2007, we acquired Gags & Games Inc., the parent company of Halloween USA, which operated 84 locations, enabling us to enter the growing temporary Halloween business. Since that acquisition, we have grown to approximately 350 locations and changed the banner to Halloween City.

Enhancing Our Wholesale Platform

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

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

• In 2003, we opened a Hong Kong office to support our Asian-based sourcing and sales organization. We have since expanded our operations to include sourcing offices in Hong Kong, China, and Vietnam with over 200 employees. In addition we currently operate seven distribution centers located outside the United States (as well as three located within the United States, including Chester, NY).

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• Our September 2010 acquisition of the Christy’s Group, a U.K.-based costume company, provided costume design and sourcing capabilities as well as additional resources in the U.K. and European markets. The Christy’s Group accelerates our entry into the costume wholesale business and enables us to further increase the percentage of our own products sold at Party City, Halloween City and PartyCity.com. Prior to our acquisition, Christy’s Group generated approximately $49 million in sales during 2009. Capitalizing on our vertical model and approach, we have grown Christy’s Group since the acquisition to sales of approximately $136 million for the twelve month period ended September 30, 2013 (including sales to our retail affiliates), an example of an accretive acquisition opportunity made possible through our unique vertically integrated platform.

Building Upon Our E-commerce Platform

• In August 2009, we re-launched PartyCity.com with e-commerce capabilities, providing us with an additional direct-to-consumer sales channel. Since the re-launch, we have grown our e-commerce revenues to approximately $100 million through the twelve month period ended September 30, 2013 as we continue to capitalize on our competitive advantages, which include a nationwide store base, strong brand recognition driven by a national broadcasting campaign and vertical business model.

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

Broadening Products and Channel Reach

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

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

Growing International Presence

• In the past five years, we have grown our international operations, as sales to international customers represented 13.7% of total revenues in 2012.

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

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

Competitive Strengths

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

Category Defining Multi-Channel Retailer. We believe we are the premier party supplies retailer, providing a one-stop shopping experience with a broad and deep selection of products offered at a compelling value

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

Leading Market Position. We are the largest retailer of decorated party supplies in the U.S. and Canada. With our network of approximately 850 party superstores, we are the only party supply retailer with a national store footprint. In addition to our leading retail presence, we believe our integrated wholesale business is the largest global designer, manufacturer and distributor of decorated party goods with products found in over 40,000 retail outlets worldwide. Through our category-leading brands, Party City and Amscan, we offer what we believe is the broadest selection of continuously updated and innovative merchandise at a compelling value. Our history of growth and established global relationships have been driven by our broad selection of continuously updated and innovative merchandise at a compelling value which, in turn, we believe underscores our credibility as the destination of choice for party supplies in any channel.

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

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

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

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

• sustain high standards of product quality and safety;

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

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

Broad and Innovative Product Offering. We offer a broad and deep product assortment with an average of 25,000 SKUs offered at any one time in our Party City superstores supported by the approximately 35,000 SKUs offered online which can be accessed via our “endless aisle” in-store kiosk system as well as through PartyCity.com. Our extensive selection offers customers a single source for all of their party needs. The majority of our products are designed and developed by a staff of approximately 120 artists and product developers who keep the product portfolio fresh and exciting. Our vertically integrated model allows our product development team to test new products and effectively respond to changes in consumer preferences. We introduce approximately 7,000 new products and 50 new party goods ensembles annually, and we believe that this ability to consistently introduce innovative items drives newness in our licensed and non-licensed product offering and supports increased sales across our channels.

Highly Efficient Global Sourcing and Distribution Capabilities. Over the past 60 years, we have developed a global network of owned and third-party manufacturers that we believe optimizes speed to market, quality and cost. In 2012, we manufactured approximately 34% of our wholesale product sales, principally in the United States, with the balance sourced from low-cost, third-party manufacturers primarily in Asia. Our in-house manufacturing is focused on high-volume party essentials that can be manufactured through highly automated processes, such as paper and plastic tableware products and metallic balloons. We believe our manufacturing capabilities are cost-competitive and allow us to offer rapid turnaround times on key product categories. With

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respect to our third-party supply network, we have over 20-year relationships with many of our vendors and often represent a significant portion of their overall business. We also have warehousing and distribution facilities around the world, including three in the U.S. (including our state-of-the-art distribution center in Chester, New York, which has nearly 900,000 square feet under one roof) and seven centers located outside the United States. We have also opened sourcing, quality control and testing offices throughout Asia with over 200 people in our offices located in China, Vietnam and Hong Kong. Our manufacturing, sourcing and distribution capabilities offer our company-owned stores, third-party retailers, distributors and our retail consumers best-in-class levels of service, rapid fulfillment and competitive prices, and have capacity for continued growth with our business.

World-Class Management Team with a Proven Track Record. Our senior management team averages over 20 years of industry experience and possesses a unique combination of management skills and experience in the party goods sector. Our team has successfully grown our sales and profits during various economic cycles and through several business transformations. Mr. Rittenberg, our Executive Chairman, and Mr. Harrison, our Chief Executive Officer and President, have worked together at the Company for approximately 17 years and have grown our business with an almost tenfold increase in revenues during that period. Additionally, our team has a strong track record of successful acquisitions and integrations, which continue to be an important part of our overall strategy.

Growth Strategy

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

Expand Our Retail Store Base. Our retail network includes approximately 850 party superstores (inclusive of approximately 215 franchised stores) in the United States and approximately 30 locations in Canada. We believe based on our own internal research that there is an opportunity to open more than 350 additional Party City stores in North America, which is consistent with an independent analysis conducted by a leading, global consulting firm in 2012. During the nine months ended September 30, 2013, we opened 15 Party City stores, acquired approximately 50 stores through our acquisition of iParty and closed four locations. Starting in 2014, we anticipate opening 30 Party City stores per year in the U.S. and Canada, representing annual company-owned party superstore growth of approximately 4%. Based on historical performance and the margin generated from our vertically integrated model, we expect our new stores to have a payback period of approximately three years and to generate an average pre-tax cash-on-cash return on invested capital of approximately 50% in year three.

Drive Additional Growth and Productivity From Existing Retail Stores. We plan to grow our comparable store sales by continuing to improve our brand image and awareness, executing our merchandising initiatives, converting existing stores to our new format and integrating the 2013 iParty acquisition. We are pursuing various merchandising initiatives to drive increased units per transaction including broadening the product formats available within existing license arrangements and adding color coordinated dress-up and candy products to merchandise offerings. We have also implemented a new store management model that increases employee engagement and improves customer service. In 2006 we began converting our existing superstores into a new, more customer interactive format and expect to have all remaining 250 stores converted by 2018. Based on our historical experience, we expect remodeled or relocated stores to generate sales growth of four to five percentage points higher than non-remodeled or non-relocated stores in the first year following conversion with longer-term sales growth of one to two percentage points higher than non-remodeled or non-relocated stores. We believe the full year impact of integrated operations with a higher share of vertical product will be a meaningful sales and earnings opportunity in 2014.

Growing Market Share and Earnings. We believe we have significant opportunities to continue to grow our wholesale business by capitalizing on our leading scale, vertical operating model and strong innovation capabilities as well as through strategic acquisitions. As we continue to grow, our increased scale will allow us to leverage our

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costs and drive margin expansion. Over the past five years, we have successfully grown our wholesale revenues at an 11.9% compound annual growth rate to $1,023 million in 2012 (including sales to company-owned superstores). We will continue to broaden our product assortment by adding new party themed events and licenses. In 2012, we began manufacturing and selling NFL licensed themed party products. Additionally, we obtained new juvenile birthday licenses and developed new products for existing juvenile birthday licenses. In 2011, we began manufacturing and selling MLB, NBA and NHL licensed themed party products and, during 2010, we acquired Christy’s Group, which significantly enhanced our in-house costume capabilities. We will also continue to broaden our product assortment by adding new items that coordinate with our party themed events and licenses and broaden our reach by expanding into adjacent business-to-business and alternate consumer channels where we see a compelling opportunity for our products. These and other opportunities will position us to continue to increase our market share and grow the percentage of our own products sold at retail, including our company-owned and franchised stores. Since 2005, we have increased the selection of our own merchandise offered in Party City stores (also known as “share of shelf”) from approximately 25% in 2005 to approximately 67% for the nine months ended September 30, 2013 which allowed us to increase our margins. Our ultimate long-term share of shelf target is 75% to 80%. Our ability to create new and enhance existing celebration opportunities will continue to be a consistent driver of our growth.

Grow Our E-commerce Platform. Since relaunching our e-commerce business in 2009 under the PartyCity.com banner, it has grown to account for approximately $100 million of revenue during the twelve months ended September 30, 2013 and, we believe, to become one of the largest e-commerce retailers of decorated party goods and costumes. We are focused on enhancing our customer experience online by creating a seamless interaction across channels through various merchandising and marketing initiatives. We expect e-commerce will continue to experience significant growth as we increase online content for products, party ideas and promotional offerings, invest in additional online advertising to drive traffic, increase customer interactions through social networking interfaces and target customers through the 11 million email addresses that we have captured, as of October 2013, through our stores and website. Our recent acquisition of Party Delights, a U.K. retail e-commerce business, provided additional international capabilities that expanded our online platform into continental Europe. Through this platform, we anticipate launching additional country specific e-commerce sites, building off the 2013 acquisition of Party Delights. We recently hired a Chief Digital Officer to focus on expanding our mobile and tablet capabilities and optimizing our online merchandising strategy. By working with our existing vendor base, we plan to increase the online only offering of products and services to continue to broaden our product assortment while managing inventory effectively. We are also developing a mobile application that will ensure a seamless experience between online, mobile and physical interactions, and will include functionality to assist customers in coordinating their shopping experience as they plan theme parties.

Increase International Presence. Through acquisitions and organic growth, we have increased sales to international customers to represent approximately 13.7% of our total revenues in 2012. The market for party goods outside the United States is less mature due to lower consumer awareness of party products and less developed retail distribution channels. We believe international growth will be driven, in part, through increasing customization of our products to local tastes and holidays and the expansion of our retail concept globally through future franchise and joint venture agreements. Our near-term growth priorities are in Mexico, France, the Netherlands and Brazil. Our acquisitions of Christy’s Group, Riethmüller and Party Packagers also expanded our presence in select markets, including the U.K., Germany, Poland and Canada.

Pursue Accretive Acquisitions. Over the past 15 years, we have successfully integrated numerous acquisitions such as Christy’s and Party Delights, strengthening our manufacturing, distribution and retail platforms. We have also acquired, and will continue to acquire, our franchised stores as such opportunities emerge. We believe our significant experience in identifying attractive acquisition targets, proven integration process and global infrastructure create a strong platform for future acquisitions. Through future acquisitions we can leverage our existing marketing, distribution and production capabilities, expand our presence in various retail distribution channels, further broaden and deepen our product lines and increase penetration in both domestic and international markets.

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Industry Overview

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

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

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

Business Overview

We believe we are the leading retailer and largest vertically integrated supplier of decorated party goods in North America. We have the only national network of party superstores which make it easy and fun to enhance special occasions with an unrivaled assortment of party supplies offered at a compelling value. We have two primary reporting segments: Retail and Wholesale. In 2012, we generated 69.6% of our total revenues from our retail segment (which includes 1.0% of total revenues from franchising activities) and 30.4% of our total revenues from our wholesale segment. Our retail operations generate revenue primarily through the sale of Amscan, Designware, Anagram, Costumes USA and other party supplies through Party City, Halloween City and PartyCity.com. Our franchising revenues are generated from an initial one-time franchise fee, renewal fees and ongoing franchise royalty payments based on retail sales from the franchised stores. Our wholesale revenues are generated from the sales of party goods for all occasions, including paper and plastic tableware, accessories and novelties, metallic and latex balloons, stationery and gift items. Our products are sold at wholesale to party goods superstores, including our company-owned and franchised retail stores, other party goods retailers, mass merchants, independent card and gift stores, dollar stores and other retailers and distributors throughout the world.

Financial Information by Geographic Area

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

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Retail Operations

Overview

Opening its first company-owned store in 1986, Party City has grown to become what we believe is the largest operator of owned and franchised party superstores in the United States. At the time of the acquisition in 2005, Party City’s network consisted of 502 stores, including 254 franchised locations. Since the acquisition, we have expanded the Party City network to approximately 850 superstore locations in the United States (inclusive of approximately 215 franchised stores) and approximately 30 locations in Canada. We also operate approximately 350 temporary Halloween locations, under the Halloween City banner.

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

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

In recent years, Party City has made substantial investments to enhance the customers’ in-store experience and become the ultimate retail destination for party supplies. Stores now showcase dynamic balloon counters displaying hundreds of balloons to coordinate with any occasion. Additionally, store-within-a-store concepts for sports, candy and party favors are focal points in all new stores. Aptly named “Sports City,” “Candy City”, “Color City” and “Favor City,” these specialty areas create a fun shopping environment, expand product offering and allow us to better showcase the merchandise.

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

Format	# of Stores as of December 31, 2008		# of Stores as of December 31, 2012		# of Stores as of September 30, 2013			Average Size of Stores (sq. ft.)		Strategy/Focus
Party City U.S.		385		571		634	(1)		10,000-12,000	Grow the store base opening 25 new stores per year and update store base to new interactive format by converting or relocating 50 old format stores per year
FCPO		166		—		—			10,000-12,000	Converted to Party City banner
The Paper Factory and other outlets		92		12		5			3,500-5,000	Product liquidation channel
Party City Canada		—		29		31			8,000-10,500	Enter the Canadian market and grow store base

(1) Amount includes 54 iParty stores converted to the Party City banner.

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

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

	Nine Months Ended September 30, 2013			2012			2011			2010
Stores open at beginning of period		600			487			439			382
Stores opened		15			24			16			13
FCPO and Party Packagers stores converted to Party City		—			88			31			40
iParty stores acquired		54			—			—			—
Stores acquired from franchisees		—			6			8			20
Stores closed		(4	)		(5	)		(7	)		(10	)
Stores sold		—			—			—			(6	)
Stores open at end of period		665			600			487			439

We spent the last six years integrating our retail acquisitions and rationalizing our store base. We believe there are more than 350 locations in North America that present opportunities for us to expand our party superstore base. In 2012, we opened 24 Party City stores, acquired six Party City stores from franchisees and closed five Party City store locations, as well as converted 88 FCPO/ Party Packagers stores to the Party City banner. A new Party City location costs an average of $765,000, which includes $90,000 in pre-opening expenses and $325,000 of net startup inventory. A typical new store reaches approximately 80% maturity in the first year of operation and reaches maturity in its fourth year of operation. We target locations where stores have the potential to generate annual sales of at least $2 million at maturity and achieve consolidated pre-tax store contribution of approximately 18% to 20%. We expect our new stores to have a payback period of approximately three years and to generate an average pre-tax cash-on-cash return on invested capital of approximately 50% in year three (including margin generated from our vertical model).

Retail Merchandising

Our merchandising strategy is based on three core principles:

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

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

• Compelling Value—Our pricing strategy is to provide the best value to our customers. Our vertically integrated business model enables us to provide our customers with leading prices for most of our product categories. We negotiate pricing with suppliers on behalf of all stores in our network (company-owned and franchised) and believe that our buying power enables us to receive favorable pricing terms and

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enhances our ability to obtain high demand merchandise. We reinforce our value message through our advertising and marketing campaigns with the “Nobody Has More Party for Less” slogan.

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

We have many product categories that relate to birthdays, making this event the largest non-seasonal occasion at approximately 21% of our sales for our permanent domestic operations. We aim to be the pre-eminent resource for the party goods associated with birthday celebrations. Each birthday product category includes a wide assortment of merchandise to fulfill customer needs, including invitations, thank you cards, tableware, hats, horns, banners, cascades, balloons, novelty gifts, piñatas, favors and candy.

Halloween is our retail segment’s largest seasonal product category in dollars. As a key component of our sales strategy, our stores provide an extensive selection of Halloween products throughout the year to position us as the premier Halloween shopping destination. The stores also carry a broad array of related decorations and accessories for the Halloween season. In 2012, Halloween business represented approximately 25% of our total domestic retail sales. To maximize our seasonal opportunity, we operate a chain of temporary Halloween locations, under the Halloween City banner, during the months of September and October of each year. During 2012, our temporary Halloween locations (including Canadian locations) generated revenues of approximately $89 million.

As a vertically integrated business, our wholesale operation is the largest supplier to our retail operations. During the first nine months of 2013, our wholesale operations’ share of shelf at our domestic Party City stores (excluding iParty stores) and e-commerce (i.e., the percentage of total cost of sales which relates to product supplied by our wholesale operations) was approximately 67%. Our target is 75% to 80% over the long term.

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

Retail Seasonality

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

E-commerce

In August 2009, we re-launched e-commerce capabilities through PartyCity.com, providing us with an additional direct-to-consumer sales channel. Our website offers a convenient, user-friendly and secure online shopping option for new and existing customers. In addition to the ability to order products, we expect our website to provide a substantial amount of content about our party products, party planning ideas and promotional offers. Our website will also be one of our key marketing vehicles, specifically as it relates to social marketing initiatives.

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

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In March 2013, we acquired Party Delights, a U.K. retail e-commerce business with approximately $18 million of annual revenues. The acquisition expanded our e-commerce platform into Europe.

During the twelve months ended September 30, 2013, sales from e-commerce were nearly $100 million. We believe that our website is well positioned to continue to capture market share of online purchases, which represent one of the fastest growing distribution channels for party related goods, as we capitalize on our competitive advantages which include a nationwide store base, strong brand recognition and vertical integration. The average basket size through our e-commerce site is approximately three times as large as the average basket size in our Party City stores. We plan to drive future traffic to our website through the continuation of our pay-per-click advertising strategy, through our mobile site and by utilizing the approximately 11 million e-mail addresses that we have obtained (as of October 2013) from visitors to our stores and visitors to the website. Additionally, we are in the process of rolling out a new online merchandising strategy to present collections of products in a manner consistent with how our customers shop for them in our stores.

Retail Advertising and Marketing

Our advertising focuses on promoting specific seasonal occasions and general party themes, with a strong emphasis on our price-value proposition—“Nobody Has More Party for Less”—with the goal of increasing customer traffic and further building our brand. In late 2009, we modified our advertising strategy to minimize our dependency on newspaper inserts and focus instead on a national broadcasting campaign to further develop our customer base. This shift emphasizes brand building and our price-value proposition. As a result, our use of newspaper inserts has decreased from 60% of gross domestic advertising spend in 2009 to 13% in 2012, while the use of broadcasts has increased to 61% of gross domestic advertising spend in 2012.

Competition at Retail

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

Franchise Operations

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

	Nine Months Ended September 30, 2013			2012			2011			2010
Stores open at beginning of period		214			221			232			250
Stores opened/acquired by existing franchisees		1			1			2			7
Stores sold to the Company		—			(6	)		(8	)		(20	)
Stores closed or converted to independent		(3	)		(2	)		(5	)		(5	)
Stores open at end of period		212			214			221			232

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

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

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

Wholesale Operations

Overview

We are one of the leading designers, manufacturers and distributors of decorated party goods in the world, offering an extensive selection with over 40,000 SKUs. We currently offer over 400 party goods ensembles, which range from approximately five to 50 design-coordinated items spanning tableware, accessories, novelties, balloons, decorations and gifts. The breadth of these ensembles enables retailers to promote additional sales of related products for every occasion. To enhance our customers’ celebrations of life’s important events, we market party goods ensembles for a wide variety of occasions, including seasonal and religious holidays, special events and themed celebrations.

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

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The table below shows the breakdown of our total wholesale sales by channel for the year ended December 31, 2012:

Channel	Sales
	(dollars in millions)
Party City and Halloween City—owned stores and e-commerce	$	440
Party City—franchised stores		147
Other domestic retailers		142
Domestic balloon distributors		84
International balloon distributors		22
Other international		188
Total wholesale sales	$	1,023

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

Product Lines

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

Wholesale Sales by Product for the Year Ended

December 31, 2012

Category	Items	% of Sales
Tableware	Plastic Plates, Paper Plates, Plastic Cups, Paper Cups, Paper Napkins, Plastic Cutlery, Tablecovers		27	%
Favors, Stationery & Other	Party Favors, Gift Bags, Gift Wrap, Invitations, Bows, Stationery		20	%
Decorations	Latex Balloons, Piñatas, Crepes, Flags & Banners, Decorative Tissues, Stickers and Confetti, Scene Setters, Garland, Centerpieces		20	%
Metallic Balloons	Bouquets, Standard 18 Inch Sing-A-Tune, SuperShapes, Weights		12	%
Costumes & Accessories	Costumes, Other Wearables, Wigs		21	%

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Our products span a wide range of lifestyle events from birthdays to theme parties and sporting events, as well as holidays such as Halloween and New Year’s. In 2012, approximately 77% of our wholesale sales consisted of items designed for everyday occasions, with the remaining 23% comprised of items used for holidays and seasonal celebrations throughout the year. Our product offerings cover the following broad range of occasions and life celebrations:

Current Product Offering

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

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

Wholesale Product Development and Design Capabilities

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

Wholesale Sales and Marketing

Our principal wholesale sales and marketing efforts are conducted through an employee sales force servicing approximately 15,000 non-affiliated retail accounts in the United States. In addition to the employee sales team, a select group of manufacturers’ representatives handle specific account situations. International customers are generally serviced by employees of our subsidiaries outside the United States. We have our own sales force of professionals in the U.K., Mexico, Canada, Germany, France, Spain and Hong Kong and operate through third-party distributors elsewhere. Our Anagram subsidiary utilizes independent distributors in the United States to bring our metallic balloons to the grocery, retail gift and floral markets, as well as to our party superstore and specialty retailer customers. Additionally, through our agreement with American Greetings, we are able to leverage American Greetings’ sales force to place our product into other distribution channels, including mass market, drug and grocery retailers.

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

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Wholesale Manufactured Products

We are one of the largest manufacturers of decorated party goods products globally. Our in-house manufacturing capabilities enable us to control costs, monitor product quality, better manage inventory and provide more efficient order fulfillment. Our domestic manufacturing facilities allow us to react rapidly to changing consumer trends and fulfill our customers’ needs for key products with fast turnaround times. In 2012, we manufactured items representing approximately 34% of our net sales at wholesale (including sales to the Company’s retail operations). Our facilities in Rhode Island, Kentucky, Minnesota, Mexico, Malaysia and New York are highly automated and produce paper and plastic plates and cups, paper napkins, metallic and latex balloons and other party and novelty items at a globally competitive cost. State-of-the-art printing, forming, folding and packaging equipment support these manufacturing operations. Given our size and sales volume, we are generally able to operate our manufacturing equipment on the basis of at least two shifts per day, thus lowering production costs per unit. In select cases, we use available capacity to manufacture products for third parties, which allows us to maintain a satisfactory level of equipment utilization.

The table below summarizes our principal manufacturing facilities.

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

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

Complementing our manufacturing facilities, we have a diverse global network of third-party suppliers that supports our strategy of consistently offering a broad selection of high quality, innovative and competitively priced product. We have over 20-year relationships with many of our vendors and often represent a significant portion of their overall business. Third-party manufacturers supplied approximately 66% of products sold at wholesale in 2012. These manufacturers generally produce items designed by and created for us, are located in Asia and are managed by our sourcing office in Hong Kong. We actively work with our third-party suppliers to ensure product cost, quality and safety.

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

Wholesale Product Safety and Quality Assurance

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

Wholesale Distribution and Systems

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

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

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

We sell metallic balloons domestically from our facilities in Minnesota and New York.

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

Wholesale Customers

We have a diverse third party customer base at wholesale. During 2012, no individual third party customer accounted for more than 5% of our total sales at wholesale.

Competition at Wholesale

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

Information Systems

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

Employees

As of December 31, 2012, the Company had approximately 6,296 full-time employees and 8,331 part-time employees, none of whom is covered by a collective bargaining agreement. We consider our relationship with our employees to be good.

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Intellectual Property

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

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

Government Regulation

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

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

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

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

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

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Properties

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

Location	Principal Activity	Square Feet	Owned or Leased (With Expiration Date)
Elmsford, New York	Executive and other corporate offices, show rooms, design and art production for party products	119,469 square feet	Leased (expiration date: December 31, 2014)
Rockaway, New Jersey	Party City corporate offices	106,000 square feet	Leased (expiration date: July 31, 2017)
Eden Prairie, Minnesota	Manufacture of metallic balloons and accessories	115,600 square feet	Owned
Eden Prairie, Minnesota	Manufacture of retail, trade show and showroom fixtures	15,324 square feet	Leased (expiration date: July 31, 2015)
Harriman, New York	Manufacture of paper napkins	74,400 square feet	Leased (expiration date: March 31, 2016)
Louisville, Kentucky	Manufacture and distribution of paper plates	189,175 square feet	Leased (expiration date: March 31, 2018)
Newburgh, New York	Manufacture of paper napkins and cups	52,400 square feet	Leased (expiration date: May 31, 2015)
East Providence, Rhode Island	Manufacture and distribution of plastic plates, cups and bowls	229,230 square feet (1)	Leased (expiration date: April 26, 2016)
Tijuana, Mexico	Manufacture and distribution of party products	135,000 square feet	Leased (2)
Melaka, Malaysia	Manufacture and distribution of latex balloons	100,000 square feet	Leased (expiration date: May 30, 2072)
Chester, New York (3)	Distribution of party and gift products	896,000 square feet	Owned
Edina, Minnesota	Distribution of metallic balloons and accessories	122,312 square feet	Leased (expiration date: December 31, 2015)
Milton Keynes, Buckinghamshire, England	Distribution of party products throughout Europe	130,858 square feet	Leased (expiration date: June 30, 2017)
Naperville, Illinois	Distribution of party goods for e-commerce sales	440,343 square feet	Leased (expiration date: December 31, 2018)
Kircheim unter Teck, Germany	Distribution of party goods	215,000 square feet	Owned
Blackstown, Australia	Distribution of party goods	27,631 square feet	Leased (expiration date: November 12, 2014)
Atlanta, Georgia	Office and storage facilities	15,012 square feet	Leased (expiration date: June 30, 2016)
Toronto, Canada	Office and distribution of party goods	64,000 square feet	Leased (expiration date: July 14, 2014)
Livonia, Michigan	Office and distribution of party goods for Halloween City	89,780 square feet	Leased (expiration date: May 31, 2019)
Pleasanton, California	Office for e-commerce sales	11,278 square feet	Leased (expiration date: June 18, 2015)

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

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

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(3) Property is subject to a lien mortgage note in the original principal amount of $10.0 million with the New York State Job Development Authority. The lien mortgage note was amended on December 24, 2009. The amended mortgage note for $5.6 million was extended for a period of 60 months and requires fixed monthly payments of principal and interest. At September 30, 2013 and December 31, 2012, the lien mortgage note had balances of $1.5 million and $2.4 million, respectively.

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

As of December 31, 2012, Company-owned and franchised retail stores (including outlet stores) were located in the following states and Puerto Rico:

State	Company-owned		Franchise		Chain-wide
Alabama		1		8		9
Arizona		0		19		19
Arkansas		0		3		3
California		95		15		110
Colorado		13		1		14
Connecticut		3		2		5
Delaware		0		1		1
Florida		55		10		65
Georgia		28		1		29
Hawaii		0		2		2
Illinois		55		0		55
Indiana		24		0		24
Iowa		8		0		8
Kansas		2		4		6
Kentucky		7		0		7
Louisiana		3		8		11
Maryland		12		13		25
Michigan		27		0		27
Minnesota		0		21		21
Mississippi		0		3		3
Missouri		18		1		19
Montana		0		1		1
Nebraska		5		0		5
Nevada		6		0		6
New Jersey		27		2		29
New Mexico		0		3		3
New York		46		13		59
North Carolina		2		19		21
North Dakota		0		3		3
Ohio		30		0		30
Oklahoma		2		0		2
Oregon		0		2		2
Pennsylvania		15		16		31
Puerto Rico		0		5		5
South Carolina		2		6		8
Tennessee		8		7		15
Texas		49		16		65
Virginia		12		8		20
Washington		14		1		15
West Virginia		1		0		1
Wisconsin		13		0		13
Total		583		214		797

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Additionally, at December 31, 2012, there were 29 company-owned retail stores in Canada. In 2012, the Company operated over 350 temporary Halloween stores, under the Halloween City banner, in the U.S. and Canada. Under this program, we operate temporary stores under short-term leases with terms of approximately four months, to cover the early September through October Halloween season.

We lease the property for all of our company-owned stores. We do not believe that any individual store property is material to our financial condition or results of operations. Of the leases for the company-owned stores at December 31, 2012, 117 expire in 2013, 108 expire in 2014, 44 expire in 2015, 53 expire in 2016, 56 expire in 2017 and the balance expire in 2018 or thereafter. We have options to extend many of these leases for a minimum of five years.

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

Legal Proceedings

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

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MANAGEMENT

Set forth below are the names, ages and positions with the Company of the persons who are serving as directors and executive officers of the Company at December 31, 2013.

Name	Age		Position
Gerald C. Rittenberg		61	Executive Chairman and Director
James M. Harrison		62	Chief Executive Officer, President and Director
Michael A. Correale		56	Chief Financial Officer
Gregg A. Melnick		44	President, Party City Retail Group
Todd M. Abbrecht		45	Director
Jefferson M. Case		36	Director
Steven J. Collins		45	Director
Uttam K. Jain		34	Director
Norman S. Matthews		80	Director
Lawrence P. Molloy		52	Director
Joshua M. Nelson		40	Director

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

Gerald C. Rittenberg became our Executive Chairman in January 2014. From 1997 until January 2014, Mr. Rittenberg served as our Chief Executive Officer. From May 1997 until December 1997, Mr. Rittenberg served as acting Chairman of the Board. From October 1996 until May 1997, Mr. Rittenberg served as our President. Mr. Rittenberg’s extensive experience in the decorated party goods industry, his 23-year tenure, his prior experience as our Chief Executive Officer and the requirements of the Stockholders Agreement led to the conclusion that he should serve as a director of our Company.

James M. Harrison became our Chief Executive Officer in January 2014. Mr. Harrison became our President in December 1997. From March 2002 to July 2012, Mr. Harrison served as our Chief Operating Officer. From February 1997 to March 2002, Mr. Harrison also served as our Chief Financial Officer and Treasurer. From February 1997 to December 1997, Mr. Harrison served as our Secretary. Mr. Harrison’s extensive experience in the decorated party goods industry, his 17-year tenure, his role as our Chief Executive Officer and President and the requirements of the Stockholders Agreement led to the conclusion that he should serve as a director of our Company.

Michael A. Correale became our Chief Financial Officer in March 2002. Prior to that time, Mr. Correale served as our Vice President—Finance, from May 1997 to March 2002.

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

Todd M. Abbrecht has been a member of our Board since July 2012. Mr. Abbrecht is a Managing Director at Thomas H. Lee Partners, L.P. (“THL”). Prior to joining THL in 1992, Mr. Abbrecht was in the Mergers and Acquisitions department of Credit Suisse First Boston. Mr. Abbrecht is currently a director of Aramark Holdings Corporation, Fogo de Chão, Intermedix Corporation and inVentiv Health, Inc. His prior directorships include Warner Chilcott plc and Dunkin’ Brands Group, Inc. Mr. Abbrecht holds a B.S.E. in Finance from the Wharton School of the University of Pennsylvania and an M.B.A. from Harvard Business School. Mr. Abbrecht’s experience serving as a director of various companies and his affiliation with THL, whose affiliated funds are entitled to elect a certain number of directors, led to the conclusion that he should serve as a director of our Company.

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

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

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

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

Lawrence P. Molloy has served in various leadership and financial executive roles primarily in the retail sector over the last several years. From September 2007 through June 2013, Mr. Molloy was the Chief Financial Officer for PetSmart Inc. From September 2003 through September 2007, Mr. Molloy worked for Circuit City Stores Inc., where he was the Vice President and CFO of Retail and the Vice President of Financial Planning and Analysis. He has also worked for Capital One Financial, AGL Capital Investments, Deloitte Consulting and the U.S. Navy where he was a fighter pilot for 10 years. In 2011, Mr. Molloy was named Institutional Investors CFO of the Year for Specialty Retail. He earned a B.S. from the U.S. Naval Academy and an MBA from the Darden Graduate School of Business at the University of Virginia. Mr. Molloy also serves as a Director for Sprouts Farmers Market. Mr. Molloy’s extensive experience in financial executive roles and his valuable experience in the retail industry led to the conclusion that he should serve as a director of our Company.

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

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

Composition of our Board of Directors

Upon the completion of this offering, the terms of office of members of our board of directors will be divided into three classes:

• Class I directors, whose terms will expire at the annual meeting of stockholders to be held in 2015;

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

• Class III directors, whose terms will expire at the annual meeting of stockholders to be held in 2017.

Our Class I directors will be            , our Class II directors will be            and our Class III directors will be            . At each annual meeting of stockholders, the successors to the directors whose terms will then expire will be elected to serve from the time of election and qualification until the third annual meeting following such election and until their successors are duly elected and qualified or until his or her earlier death, resignation or removal. Any vacancies in our classified board of directors will be filled by the remaining directors, and the elected person will serve the remainder of the term of the class to which he or she is appointed. Any additional directorships resulting from an increase in the number of directors will be distributed among the three classes so that, as nearly as possible, each class will consist of one-third of the directors.

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

Board Structure and Committee Composition

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

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Audit Committee

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

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

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

• engage independent counsel and other advisers, as necessary;

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

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

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

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

Compensation Committee

Upon completion of this offering, our compensation committee will consist of                    , with                     serving as chairman of the committee. The compensation committee will be responsible for:

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

• reviewing and approving executive officer compensation;

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

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

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

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

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

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

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

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Nominating and Governance Committee

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

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

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

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

• compliance activities.

Code of Business Conduct and Ethics

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

Risk Oversight

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

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EXECUTIVE COMPENSATION

Compensation Discussion and Analysis

This compensation discussion and analysis section provides context for the information contained in the tables following this discussion and is intended to provide information about our 2013 compensation objectives and policies for Gerald C. Rittenberg, our Executive Chairman, James M. Harrison, our Chief Executive Officer and President, Michael A. Correale, our Chief Financial Officer, and Gregg A. Melnick, our President-Party City Retail Group (collectively, our “named executive officers”). In January 2014, Mr. Rittenberg became our Executive Chairman and Mr. Harrison became our Chief Executive Officer and President. While the 2013 compensation discussed in this section relates to Mr. Rittenberg’s service as our Chief Executive Officer and Mr. Harrison’s service as our President, for purposes of this Executive Compensation section, we have referenced their new titles.

Compensation Committee

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

The Compensation Committee has the authority to retain outside independent executive compensation consultants to assist in the evaluation of executive officer compensation. The Compensation Committee has the sole authority to retain, at our expense, and terminate any such consultant, including the sole authority to approve such consultant’s fees and other retention terms. However, all decisions regarding compensation of executive officers are made solely by the Compensation Committee. No independent executive compensation consultants were retained by the Compensation Committees during 2013.

Compensation Philosophy

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

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

• ensuring compensation levels and components are actively managed; and

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

Compensation

Our Chief Executive Officer and President and our Executive Chairman jointly evaluate the performance of all executive and senior officers, other than themselves, against goals and objectives established with respect to those officers, determine the annual base salaries of Mr. Correale and Mr. Melnick and recommend to the Compensation Committee annual cash incentive and share-based incentive compensation for such officers. The Compensation Committee independently evaluates the performance of our Chief Executive Officer and President and our Executive Chairman. The Compensation Committee meets annually, usually in February or March, to evaluate the performance of the executive and senior officers, to approve annual base salaries for Mr. Rittenberg and Mr. Harrison, subject to the contractual commitments we have made with certain of our named executive officers (as described below), and to determine annual cash incentive awards for the prior year’s performance and share-based incentive compensation to be effective for the current year. The Compensation Committee may meet at interim dates during the year to review the compensation of a named executive officer or other officer as the result of unforeseen organizational or responsibility changes, including new hires, which occur during the year.

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

Components of Compensation

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

Compensation is comprised of the following components:

Annual Base Salary

We pay our named executive officers an annual base salary to provide them with a fixed, base level of compensation. The annual base salaries for Mr. Correale and Mr. Melnick were determined by Mr. Rittenberg and Mr. Harrison based on the scope of Mr. Correale’s and Mr. Melnick’s responsibilities. The annual base salaries of Mr. Rittenberg and Mr. Harrison were determined by the Compensation Committee based on their employment agreements. Generally, we believe that executive annual base salaries should be near the middle of the range of salaries that our Compensation Committee members have observed for executives in similar positions and with similar responsibilities. Annual base salaries are reviewed annually and adjusted from time to time to reflect individual responsibilities, performance and experience, as well as market compensation levels. In the case of Mr. Rittenberg and Mr. Harrison, annual base salary adjustments are determined in accordance with their respective employment agreements. Mr. Correale’s and Mr. Melnick’s annual base salary adjustments for 2013 (an increase of 2% for each of Mr. Correale and Mr. Melnick) were the result of an evaluation of their overall performance during the last completed fiscal year by our Chief Executive Officer and President and our Executive Chairman.

Annual Cash Incentive Plan

We have an annual cash incentive plan that is designed to serve as an incentive to drive annual financial performance. As a company with a substantial amount of indebtedness, we believe that Adjusted EBITDA is an important measure of our financial performance and ability to service our indebtedness and we use it as the target metric for our annual cash incentive plan. Adjusted EBITDA is a non-GAAP measure used internally and is measured by taking net income (loss) and adding back interest charges, income taxes, depreciation and amortization and other adjustments which eliminate the impact of certain items that we do not consider indicative of our ongoing operating performance. For a discussion of our use of Adjusted EBITDA and a reconciliation to net income, please refer to “Prospectus Summary— Summary Financial Data” and “Selected Consolidated Financial Data.”

During 2013, the target annual bonus for each named executive officer was based on a percentage of annual base salary ranging from 50%, in the case of Mr. Correale and Mr. Melnick, to 100%, in the case of Mr. Rittenberg and Mr. Harrison. For twenty-five percent (25%) of the target, the Compensation Committee, with input from our Chief Executive Officer and President and our Executive Chairman (other than with respect

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

For 2013, the Compensation Committee has not yet determined the annual bonuses that will be paid to the named executive officers. If actual Adjusted EBITDA equals the target Adjusted EBITDA, each of the named executive officers will earn 100% of the Adjusted EBITDA portion of the his annual bonus. If actual Adjusted EBITDA is less than 90% of target Adjusted EBITDA, each named executive officer will earn 0% of the Adjusted EBITDA portion of the annual bonus. If actual Adjusted EBITDA is equal to 90% of target Adjusted EBITDA, each named executive officer will earn 50% of the Adjusted EBITDA portion of his annual bonus. If actual Adjusted EBITDA exceeds 90% of target Adjusted EBITDA, but is less than 100% of the target, the percentage of the Adjusted EBITDA portion of each named executive officer’s annual bonus that is earned is adjusted on a straight-line basis. If actual Adjusted EBITDA equals 112% of target Adjusted EBITDA, each of the named executive officers will earn 150% of the Adjusted EBITDA portion of his annual bonus. If actual Adjusted EBITDA exceeds 100% of the target, but is less than 112% of the target, the percentage of the Adjusted EBITDA portion of each named executive officer’s annual bonus that is earned is adjusted on a straight-line basis. If actual Adjusted EBITDA exceeds 112% of the target, Mr. Rittenberg and Mr. Harrison will each earn 200% of the Adjusted EBITDA portion of his annual bonus, and Mr. Correale and Mr. Melnick will each earn 150% of the Adjusted EBITDA portion of his annual bonus.

Stock-based Incentive Program

The Company has adopted the 2012 Plan, under which the Company can grant incentive awards in the form of stock appreciation rights, restricted stock and common stock options to certain directors, officers, employees and consultants of the Company and its affiliates. During 2013, time-based stock options and performance-based stock options were granted under the 2012 Plan. Prior to these grants, none of our named executive officers held any long-term incentive awards. All long-term incentive awards held by our named executive officers prior to the Acquisition were cancelled in connection with the Acquisition. In determining the size of the grants made to our named executive officers, the Compensation Committee considered the size of the equity awards held by our named executive officers prior to the Acquisition, the scope and responsibility of the officer’s position and their experience with equity grants made to executives of other companies with which the Sponsor-directors are affiliated.

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

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

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

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

Investment in the Company

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

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

Adjustments in Connection with Cash Dividend

In August 2013, we paid a cash dividend of $10,087 per share on each share of our common stock that was outstanding as of that date. In order to prevent dilution of the value of our outstanding stock options, including awards held by our named executive officers, in connection with the cash dividend, the exercise price of each outstanding stock option was reduced by the amount of the per share dividend, as required by the terms of the 2012 Plan.

Severance Arrangements

We provide severance protection to Mr. Rittenberg and Mr. Harrison in their employment agreements, and to Mr. Correale pursuant to his offer letter. These severance protections are described below under “Potential Payments Upon Termination or Change in Control.”

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

Other Benefits and Perquisites

Each named executive officer is also eligible to participate in our broad-based employee benefit plans for U.S.-based employees, such as medical, dental, group life, disability and accidental death and dismemberment insurance. Under our tax-qualified defined contribution plans, our named executive officers and generally all full-time domestic exempt and non-exempt employees who meet certain length-of-service and age requirements, as defined in such plans, may contribute a portion of their compensation to the plan on a pre-tax basis and receive an employer matching contribution ranging from approximately 11% to 100% of the employee contributions, not to exceed a range of 5% to 6% of the employee’s annual salary. In addition, our tax-qualified defined contribution plans provide for annual discretionary contributions to be credited to participants’ accounts. Named

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executive officers participate in the benefit plans on the same basis as our other employees. The annual value of the contributions to our profit-sharing plans for each named executive officer is reflected in the “All Other Compensation” column of the Summary Compensation Table below. We also provide Mr. Rittenberg, Mr. Harrison and Mr. Correale with certain supplemental disability insurance benefits and Mr. Melnick with certain supplemental life insurance benefits. These benefits are only made available to a select group of executives and senior employees.

Our Chief Executive Officer and President and our Executive Chairman drive automobiles owned by the Company. The Chief Financial Officer and the President-Party City Retail Group each receive an allowance to cover the cost of his automobile. The annual value of the automobile usage and the allowance are reported as taxable income to the executive and are reflected in the “All Other Compensation” column of the Summary Compensation Table below. The Compensation Committee believes that the cost of providing these automobile-related benefits is reasonable relative to its value to our named executive officers.

Clawback Policy

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

Tax Treatment

Because our common stock is not currently publicly traded, executive compensation has not been subject to the provisions of Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”), which limit the deductibility of compensation paid to certain individuals to $1.0 million, excluding qualifying performance-based compensation and certain other compensation. Following this offering, at such time as we are subject to the deduction limitation under Section 162(m) of the Code, we expect that the Compensation Committee will consider the impact of Section 162(m) of the Code when structuring our executive compensation arrangements with our named executive officers. However, the Compensation Committee will retain flexibility to approve the compensation arrangements that promote the objectives of our compensation program but that may not qualify for full or partial tax deductibility.

Summary Compensation Table

Name and Principal Position	Year		Salary		Bonus (1)		Option Awards (2)		Non-Equity Incentive Plan Compensation (3)		All Other Compensation (4)		Total
Gerald C. Rittenberg		2013	$	1,337,057	$	—	$	1,250,834			$	539,685	$	3,127,576
Executive Chairman		2012		1,273,388		1,195,333		—	$	846,421		4,194,399		7,509,541
		2011		1,212,750		70,000		715,900		1,281,634		528,641		3,808,925
James M. Harrison		2013	$	1,136,499	$	—	$	1,161,489			$	425,664	$	2,723,652
Chief Executive Officer and President		2012		1,082,380		896,500		—	$	719,852		3,231,102		5,929,834
		2011		1,030,838		60,000		536,925		1,089,389		421,320		3,138,472
Michael A. Correale		2013	$	366,667	$	—	$	223,363			$	43,009	$	633,039
Chief Financial Officer		2012		357,433		368,543		—	$	120,463		446,117		1,292,556
		2011		346,693		—		—		185,939		43,065		575,697
Gregg A. Melnick		2013	$	694,552	$	—	$	714,762			$	8,988	$	1,418,302
President, Party City Retail Group		2012		662,139		228,532		102,540	$	228,275		861,705		2,083,191
		2011		531,818		—		—		283,000		65,034		879,852

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(1) 2012 amounts represent discretionary bonuses paid in conjunction with the Transaction. See “—Compensation Discussion and Analysis—Components of Compensation—Annual Cash Incentive Plan” for further discussion. 2011 amounts represent discretionary bonuses paid in recognition of our 2011 performance.

(2) The dollar values shown reflect the aggregate grant date fair value of equity awards granted within the year in accordance with FASB Accounting Standards Codification Topic 718 for stock-based compensation. These amounts do not represent the actual value that will be received by each individual from the awards. The assumptions used in determining the fair values are disclosed in Note 12 to our audited consolidated financial statements that appear elsewhere in this prospectus.

(3) The Compensation Committee has not yet determined 2013 annual bonuses payable under our annual cash incentive plan. We expect that the amounts will be determined during the first quarter of 2014 and will be included in a subsequent amendment to the Registration Statement of which this prospectus is a part. See the “Grants of Plan Based Awards” table for the 2013 annual incentive plan threshold, target and maximum amounts, for each of the named executive officers. For 2012 and 2011, amounts represent annual bonuses paid for such years.

(4) Includes for 2013 an annual accrual for deferred bonuses for Mr. Rittenberg and Mr. Harrison of $500,000 and $400,000, respectively, that are payable under their employment agreements described below. In addition, during 2013, each of the named executive officers either used a company car or received a car allowance and, the 2013 amounts include the following automobile-related compensation: Mr. Rittenberg ($25,100); Mr. Harrison ($11,000); Mr. Correale ($28,800); and Mr. Melnick ($8,100). Also included are amounts related to matching 401(k) contributions, contributions to one of our tax-qualified defined contribution plans and life insurance and disability contributions. Includes for 2012 special distributions of $9,400 per pre-Acquisition stock option that became vested in connection with the Acquisition in the following amounts: Mr. Rittenberg ($3,666,602), Mr. Harrison ($2,804,726), Mr. Correale ($402,696) and Mr. Melnick ($843,317). The rights to these payments were established in connection with our December 2010 dividend, which was payable in the same per share amount, and were intended to prevent dilution of our option holders’ interests.

Grants of Plan Based Awards

Name	Grant Date		Estimated Future Payouts Under Non-Equity Incentive Plan Awards						All Other Option Awards: Number of Securities Underlying Options		Exercise Price of Option Awards (2)		Grant Date Fair Value of Stock And Option Awards
			Threshold (1)		Target		Maximum(1)
Gerald C. Rittenberg		4/1/2013	$	—	$	—	$	—		140	$	14,913	$	8,935	(3)
		4/1/2013		—		—		—		210		14,913		—	(4)
		1/1/2013		501,397		1,337,057		2,339,850		—		—		—
James M. Harrison		4/1/2013		—		—		—		130		14,913		8,935	(3)
		4/1/2013		—		—		—		195		14,913		—	(4)
		1/1/2013		426,187		1,136,499		1,988,873		—		—		—
Michael A. Correale		4/1/2013		—		—		—		25		14,913		8,935	(3)
		4/1/2013		—		—		—		37		14,913		—	(4)
		1/1/2013		69,320		184,853		254,173		—		—		—
Gregg A. Melnick		4/1/2013		—		—		—		80		14,913		8,935	(3)
		4/1/2013		—		—		—		120		14,913		—	(4)
		1/1/2013		131,102		349,605		480,707		—		—		—

(1) Under our annual cash incentive plan, if our actual Adjusted EBITDA for our 2013 fiscal year is achieved at a threshold Adjusted EBITDA level, the Adjusted EBITDA portion of each named executive officer’s annual bonus (i.e., 75% of his total annual bonus) will be funded at 50% for our 2013 fiscal year. If our actual Adjusted EBITDA for our 2013 fiscal year is achieved at a maximum Adjusted EBITDA level, this portion will be funded at 200% for Mr. Rittenberg and Mr. Harrison and 150% for Mr. Correale and Mr. Melnick. For purposes of this table, we have assumed that the remaining 25% of each named executive officer’s annual bonus that is determined on a subjective basis will be funded at 0% in the threshold case and at 100% in the maximum case.

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

(3) The dollar values shown reflect the grant date fair value of equity awards in accordance with FASB Accounting Standards Codification Topic 718 for stock-based compensation. These amounts do not represent the actual value that will be received from the award. The assumptions used in determining the fair values are disclosed in Note 12 to our audited consolidated financial statements that appear elsewhere in this prospectus.

(4) There is no value assigned to these performance grants under FASB Accounting Standards Codification Topic 718 for stock-based compensation. See Note 12 to our audited consolidated financial statements that appear elsewhere in this prospectus.

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

Employment Agreements

Employment Agreement with Mr. Rittenberg. Mr. Rittenberg entered into an employment agreement with the Company, dated June 1, 2011 and amended on July 1, 2011 (the “Rittenberg Employment Agreement”), pursuant to which Mr. Rittenberg will serve as our Chief Executive Officer for an employment period of January 1, 2011 through December 31, 2015. For 2011, Mr. Rittenberg’s annual base salary was $1,212,750. His annual base salary is subject to an automatic five percent increase on January 1 each year during his employment period commencing in 2012. Mr. Rittenberg will be eligible for an annual bonus with a target of 100% of annual base salary for each calendar year during the employment period consistent with the Company’s bonus plan for key executives in effect from time to time, not to exceed 200% of Mr. Rittenberg’s annual base salary. In addition to the annual bonus, Mr. Rittenberg is entitled to receive a deferred bonus accruing at a rate of $500,000 per year (the “Deferred Bonus”), which accrues on a monthly basis. The Deferred Bonus for the period beginning on January 1, 2011 and ending on December 31, 2012 was paid to Mr. Rittenberg on December 31, 2012. The Deferred Bonus accruing for the period beginning January 1, 2013 will be paid upon the earliest of the expiration of the employment period or the termination of his employment by the Company other than for cause, by Mr. Rittenberg for good reason, or by reason of Mr. Rittenberg’s permanent disability or death. Any payment of the Deferred Bonus to Mr. Rittenberg upon the termination of his employment will be subject to his signing a release of claims. The Rittenberg Employment Agreement also provides for other customary benefits including savings and retirement plans, paid vacation, health care and life insurance plans and expense reimbursement.

Employment Agreement with Mr. Harrison. Mr. Harrison entered into an employment agreement with the Company, dated June 1, 2011 and amended on July 1, 2011 (the “Harrison Employment Agreement”), pursuant to which Mr. Harrison agreed to serve as our President for an employment period of January 1, 2011 through December 31, 2015. The Harrison Employment Agreement is substantially identical to the Rittenberg Employment Agreement. The only material differences from the Rittenberg Employment Agreement are that (1) for 2011, Mr. Harrison’s annual base salary was $1,030,837.50 (and has been adjusted as provided for in the agreement since), (2) Mr. Harrison’s deferred bonus accrues at a rate of $400,000 per year, and (3) Mr. Harrison’s severance is calculated differently than Mr. Rittenberg’s, as described below.

We intend to amend and restate the employment agreement agreements with Mr. Rittenberg and Mr. Harrison to reflect their new titles and anticipate that the terms of the amended and restated employment agreements will be otherwise materially unchanged from their current employment agreements.

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

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Outstanding Equity Awards

The following table sets forth certain information with respect to outstanding stock options held by our named executive officers on December 31, 2013.

	Option Awards
Name	Number of Securities Underlying Unexercised Options (#) Exercisable (1)		Number of Securities Underlying Unexercised Options (#) Unexercisable (1)		Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options) (#)) (2)		Option Exercise Price ($)(3)		Option Expiration Date
Gerald C. Rittenberg		28.00		112.00		210.00	$	14,913		4/1/2023
James M. Harrison		26.00		104.00		195.00		14,913		4/1/2023
Michael A. Correale		5.00		20.00		37.00		14,913		4/1/2023
Gregg A. Melnick		16.00		64.00		120.00		14,913		4/1/2023

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

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

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

Option Exercises and Stock Vested

None of our named executive officers exercised any stock options or became vested in any stock awards during 2013.

Potential Payments upon Termination or Change in Control

The employment contracts of Mr. Rittenberg and Mr. Harrison and the offer letter with Mr. Correale provide for severance benefits upon a termination of employment under certain circumstances or a change in control. For a discussion regarding the severance benefits provided under Mr. Rittenberg’s, Mr. Harrison’s and Mr. Correale’s employment contracts, see “—Employment Agreement with Mr. Rittenberg”, “—Employment Agreement with Mr. Harrison”, and “—Offer Letter with Mr. Correale” below. A change in control would also result in acceleration of our time-based options and would have certain effects on our performance-based options. See “—Effect of Change of Control on Stock Options” below. The following table presents the potential post-employment severance, bonus and deferred bonus payments payable to Mr. Rittenberg, Mr. Harrison and Mr. Correale, as applicable, and the potential effect of a change in control on stock options held by our named executive officers, in each case, as of December 31, 2013. The table also assumes that the triggering event took place on December 31, 2013.

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Amounts shown in the table do not include (i) accrued but unpaid salary, annual cash bonuses for 2013 (which will be reflected in the “Non-Equity Incentive Plan Compensation” column of the Summary Compensation Table) and vested benefits and (ii) other benefits earned or accrued by the named executive officer during his or her employment that are available to all salaried employees and that do not discriminate in scope, terms or operations in favor of executive officers.

Name	Benefit	Termination of Employment Without Cause or for Good Reason		Termination of Employment due to Death and Disability		Termination of Employment without Cause or for Good Reason within Six Months of Change in Control (5)		Change in Control without Termination of Employment
Gerald C. Rittenberg	Severance (1)	$	5,511,172	$	—	$	5,348,230	$	—
	Deferred Bonus (2)		500,000		500,000		500,000		—
	Vesting of Time-Based Options (3)		—		—		12,180		12,180
	Vesting of Performance-Based Options (3)		—		—		—		—
James M. Harrison	Severance (1)	$	4,609,497	$	—	$	4,545,996	$	—
	Deferred Bonus (2)		400,000		400,000		400,000		—
	Vesting of Time-Based Options (3)		—		—		11,310		11,310
	Vesting of Performance-Based Options (3)		—		—		—		—
Michael A. Correale	Severance (4)	$	554,559		—	$	554,559	$	—
	Vesting of Time-Based Options (3)		—		—		2,175		2,175
	Vesting of Performance-Based Options (3)		—		—		—		—
Gregg A. Melnick	Vesting of Time-Based Options (3)		—		—	$	6,960	$	6,960
	Vesting of Performance-Based Options (3)		—		—		—		—

(1) If the named executive officer’s employment is terminated other than for cause, or if he terminates his employment for good reason, the executive is entitled to receive up to three times the sum of his base salary and $500,000 ($400,000 in the case of Mr. Harrison). The table assumes the executive will be subject to a three-year “restriction period” (as described below) and that his severance multiplier will be three. If the executive is terminated under those circumstances within six months following a change in control, the executive will receive the sum of (a) his base salary multiplied by three and (b) the amount equal to the annual bonus paid to the executive with respect to the last full calendar year of his employment prior to the change in control (the table assumes that such year was 2013 and assumes the bonus paid for 2013 would be equal to the bonus target).

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

(3) The value of the acceleration of unvested stock options is determined based on the difference between the exercise price of the options ($14,913) and the fair market value of a share of our common stock ($15,000) as of December 31, 2013. Amounts included in the table represent the value associated with the acceleration of all time-based options in connection with a change of control. No amounts have been included in the table with respect to performance-based options since they would not have vested if a change of control occurred on December 31, 2013. The actual vesting of performance-based stock options in connection with a change of control may be different.

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(4) Represents payment under the severance agreement based on the officer’s base salary and 100% bonus for the year of termination (the table assumes Mr. Correale’s salary as of December 31, 2013 and 100% of his bonus target for 2013).

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

Employment Agreement with Mr. Rittenberg. Under the Rittenberg Employment Agreement, if we terminate Mr. Rittenberg’s employment other than for cause, or if Mr. Rittenberg terminates his employment for good reason, we would be obligated to pay Mr. Rittenberg the following lump sum cash payments: (1) accrued unpaid salary, earned but unpaid annual bonus for any prior year and accrued but unpaid vacation pay (collectively, the “Accrued Obligations”); (2) severance pay (the “Severance Payment”) equal to (A)(x) his annual base salary plus (y) $500,000 multiplied by (B) the number of years in the Restriction Period (which will last one to three years following the termination of his employment, as described below); provided, however, that if such a termination occurs within six months following a change in control, the Restriction Period will equal three years and the Severance Payment will equal the sum of three years’ base salary and the amount of annual bonus paid to Mr. Rittenberg with respect to the last full calendar of his employment prior to the change in control; (3) the Deferred Bonus (as described above and calculated under the Rittenberg Employment Agreement) and (4) a pro rata annual bonus for the year of termination. Upon termination of Mr. Rittenberg’s employment by us for cause, or upon the termination of his employment without good reason, Mr. Rittenberg will be entitled to the Accrued Obligations. Upon his termination of employment due to death or disability, Mr. Rittenberg will be entitled to the Accrued Obligations, the Deferred Bonus and a pro rata annual bonus for the year of termination. All payments of the Deferred Bonus and pro rata bonus are subject to Mr. Rittenberg’s (or, in the case of his death, his beneficiary or estate’s) signing of a release of claims.

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

The Rittenberg Employment Agreement also provides that during the term of the agreement and the Restriction Period (as described below), Mr. Rittenberg will be subject to certain non-competition and non-solicitation provisions, as described in the Rittenberg Employment Agreement. The Restriction Period will be three years in the event of the termination of Mr. Rittenberg’s employment by us for cause or by Mr. Rittenberg without good reason. If we terminate Mr. Rittenberg’s employment other than for cause or due to his death or permanent disability, or Mr. Rittenberg terminates his employment for good reason, the Restriction Period will be instead a one, two or three-year period, determined at our election (except that following a change in control, the Restriction Period will be three years if Mr. Rittenberg’s employment is terminated by us other than for cause or by Mr. Rittenberg for good reason).

Employment Agreement with Mr. Harrison. The Harrison Employment Agreement is substantially identical to the Rittenberg Employment Agreement. The only material differences from the Rittenberg Employment Agreement with respect to severance and change in control-related benefits is that the Severance Payment payable to Mr. Harrison in the case of a termination of his employment by us other than for cause or by Mr. Harrison for good reason is based on his annual base salary plus $400,000.

Offer Letter with Mr. Correale. Under an offer letter with Mr. Correale, upon termination of his employment by the Company for any reason other than for cause, Mr. Correale is entitled to severance in an amount equal to one year’s compensation at the rate of compensation in effect at the date of termination.

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Effect of Change of Control on Stock Options. Upon a “change of control” (as defined in the 2012 Plan) all time-based options will become immediately and fully vested and the time-vesting condition applicable to performance-based options will be deemed satisfied as to all but 20% of each grant of performance-based options. The time-vesting condition would be deemed satisfied as to the final 20% of each grant of performance-based options on the earliest of (i) the first anniversary of the change of control, (ii) the date on which the named executive officer’s employment or other service terminates for any reason other than by us for “cause” or by the named executive officer without “good reason” (each as defined in the 2012 Plan) and (iii) the regularly scheduled vesting date, subject to the named executive officer’s employment through the applicable date.

If THL receives “deferred proceeds” (which are generally defined to include rights to contingent payments, deferred payments and similar payments) in connection with a change of control, any unvested performance-based options will generally remain outstanding and eligible to vest until the earlier of the date THL no longer holds any equity or other securities of the Company or any deferred proceeds or the tenth anniversary of the date of grant (the earlier date, the “Final Vesting Date”). Upon the termination of a named executive officer’s employment or other service by us for any reason on or after a change in control other than for cause or by the named executive officer without good reason, any unvested performance-based options will remaining outstanding and eligible to vest until the Final Vesting Date.

Restrictive Covenants in Stock Option Agreements. The stock option agreements for the stock options held by each of our named executive officers contain certain restrictive covenants, including non-competition and non-solicitation provisions that apply during the named executive officer’s employment and the 18-month period following a termination of his employment with us.

Amended and Restated 2012 Plan

Prior to the completion of this offering, our board of directors intends to amend and restate the 2012 Plan. The following describes what we anticipate to be the material terms of the amended and restated 2012 Plan. This summary is not a complete description of all provisions of the 2012 Plan and is qualified in its entirety by reference to the 2012 Plan, which will be filed as an exhibit to an amended version of the Registration Statement of which this prospectus is a part.

Plan Administration. The Compensation Committee will administer the amended and restated 2012 Plan. The Compensation Committee will have the authority to, among other things, select participants, determine the amount and terms and conditions of awards and adopt such rules, forms and guidelines for administering the amended and restated 2012 Plan as it deems necessary and proper. All actions taken and all interpretations and determinations made by the Compensation Committee will be final and binding.

Authorized Shares. Subject to adjustment as described in the amended and restated 2012 Plan, the maximum number of shares of our common stock that may be delivered in satisfaction of awards under the amended and restated 2012 Plan will be                 . Any shares tendered to or withheld by us in connection with the payment of the exercise or purchase price of an award or to satisfy tax withholding obligations with respect to an award will not be available again under the plan. In the event that an outstanding award expires, is forfeited, cancelled or otherwise terminated without consideration, the shares subject to such award will be available for future grant under the plan.

Shares of our common stock to be issued under the amended and restated 2012 Plan may be authorized but unissued shares of common stock or treasury shares.

Eligibility. The Compensation Committee will select participants from among those employees, directors and consultants who are in a position to make a significant contribution to our success.

Types of Awards; Vesting. The amended and restated 2012 Plan will provide for grants of stock options, stock appreciation rights, restricted stock and unrestricted stock and other stock-based awards. The Compensation Committee will have the authority to determine the vesting schedule applicable to each award, and to accelerate the vesting or exercisability of any award.

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• Stock options and stock appreciation rights. The exercise price of a stock option, and the base price against which a stock appreciation right is to be measured, may not be less than the fair market value (or, in the case of an incentive stock option granted to a ten percent shareholder, 110% of the fair market value) of a share of our common stock on the date of grant.

• Restricted and unrestricted stock. A restricted stock award is an award of shares of our common stock subject to forfeiture restrictions, while an unrestricted stock award is not subject to such restrictions.

• Other stock-based awards. Other stock-based awards are awards that are valued by reference to, or otherwise based, on shares of our common stock, including without limitation, restricted stock units, dividend equivalent rights and other phantom awards.

Non-Transferability of Awards. Awards under the amended and restated 2012 Plan may not be transferred except in the case of a participant’s death, unless otherwise provided by the Compensation Committee.

Termination of Employment. Unless otherwise provided by the Compensation Committee or in an award agreement, upon a termination of employment or service all unvested options and other awards requiring exercise will terminate and all other unvested awards will be forfeited. Upon a termination of employment or service for cause, all outstanding awards will terminate and be forfeited without consideration. Upon a termination of employment or service for reasons other than for cause, vested options may remain exercisable for 60 days following such termination (90 days in the case of a termination due to death), unless otherwise provided by the Compensation Committee or in an award agreement.

Performance Criteria. In the case of awards intended to qualify for the performance-based compensation exception under Section 162(m) of the Code, the Compensation Committee will establish the applicable performance criteria in writing within the time required by Section 162(m) of the Code, which will be limited to objectively determinable measures of performance relating to any or any combination of the following: net sales; system-wide sales; comparable store sales; revenue; revenue growth or product revenue growth; operating income (before or after taxes); adjusted operating income; adjusted net income; adjusted earnings per share; channel revenue growth; franchising commitments; manufacturing profit; manufacturing profit margin; store closures; pre- or after-tax income or loss (before or after allocation of corporate overhead and bonus); earnings or loss per share; net income or loss (before or after taxes); return on equity; total stockholder return; return on assets or net assets; appreciation in and/or maintenance of the price of the shares or any other publicly-traded securities of the Company; market share; gross profits; earnings or losses (including earnings or losses before taxes, before interest and taxes, or before interest, taxes, depreciation and/or amortization); adjusted earnings or loss (including adjusted earnings or loss before taxes, before interest and taxes, or before interest, taxes, depreciation and/or amortization); economic value-added models or equivalent metrics; comparisons with various stock market indices; reductions in costs; cash flow or cash flow per share (before or after dividends); return on capital (including return on total capital or return on invested capital); cash flow return on investment; improvement in or attainment of expense levels or working capital levels, including cash, inventory and accounts receivable; operating margin; gross margin; year-end cash; cash margin; debt reduction; stockholders equity; operating efficiencies; market share; customer satisfaction; customer growth; employee satisfaction; supply chain achievements (including establishing relationships with manufacturers or suppliers of component materials and manufacturers of the Company’s products); points of distribution; gross or net store openings; co-development, co-marketing, profit sharing, joint venture or other similar arrangements; financial ratios, including those measuring liquidity, activity, profitability or leverage; cost of capital or assets under management; financing and other capital raising transactions (including sales of the Company’s equity or debt securities; factoring transactions; sales or licenses of the Company’s assets, including its intellectual property, whether in a particular jurisdiction or territory or globally; or through partnering transactions); implementation, completion or attainment of measurable objectives with respect to research, development, manufacturing, commercialization, products or projects, production volume levels, acquisitions and divestitures; factoring transactions; and recruiting and maintaining personnel.

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To the extent consistent with the requirements of Section 162(m) of the Code, the Compensation Committee may establish that, in the case of any award intended to qualify as exempt performance-based compensation under Section 162(m), that one or more of the performance criteria applicable to such award be adjusted in an objectively determinable manner to reflect events occurring during the performance period of such award that affect the applicable performance criteria.

Payment of Certain Awards. A participant will be entitled to payment under an award intended to qualify for the performance-based compensation exception under Section 162(m) of the Code only if all conditions to payment have been satisfied under the award. Following the close of the performance period, the Compensation Committee will determine (and, to the extent required by Section 162(m) of the Code, certify) as to whether and to what extent the applicable performance criteria have been satisfied. The Compensation Committee will then determine the actual payment, if any, under each award.

Individual Limits. The following additional limits will apply to awards granted or, in the case of an other stock-based award, payable to any person in a calendar year under the amended and restated 2012 Plan: (i) stock options:                  shares of our common stock; (ii) stock appreciation rights:                  shares of our common stock; (iii) restricted and unrestricted stock:                  shares of our common stock; (iv) other stock-based awards settled in shares:                  shares of our common stock: and (v) other stock-based awards settled in cash: $        .

Adjustments. In the event of a corporate event or transaction involving the company or its subsidiaries or affiliates, including a merger, consolidation, reorganization, recapitalization, stock split, combination of shares, extraordinary cash dividend or other like change in capital structure (other than normal cash dividends to stockholders), or any similar corporate event or transaction, the Compensation Committee, in order to prevent dilution or enlargement of participants’ rights under the amended and restated 2012 Plan, will substitute or adjust, in its sole discretion, the number and kind of shares or other property that may be issued under the amended and restated 2012 Plan or awards thereunder, the exercise prices, grant prices or purchase prices of awards thereunder, and other value determinations (including performance conditions) applicable to the amended and restated 2012 Plan or awards.

Change in Control. Upon the occurrence of a change of control, unless specifically prohibited by applicable law or regulation or as otherwise provided in an award agreement, the Compensation Committee will be authorized (but not obligated) to make adjustments in the terms and conditions of outstanding awards, including, but not limited to, continuing or assuming outstanding awards, substituting outstanding awards with equity, equity-based, or cash awards of the surviving entity with substantially the same terms, accelerating the exercisability, vesting and/or lapse of restrictions under outstanding awards, upon written notice, requiring the exercise of outstanding awards (to the extent exercisable) prior to the change in control, providing for the cancellation of all or any portion of outstanding awards for fair value and cancelling unvested or unexercisable awards for no consideration.

Recovery of Compensation. The Compensation Committee may cancel, rescind, withhold or otherwise limit or restrict any award at any time under the amended and restated 2012 Plan if a participant is not in compliance with the provisions of the plan, any award thereunder or if a participant breaches any agreement with our company with respect to non-competition, non-solicitation or confidentiality. The Compensation Committee also may recover any award or payments or gain in respect of any award under the amended and restated 2012 Plan in accordance with any applicable company recoupment policy or as otherwise required by applicable law or applicable stock-exchange listing standards.

Amendment and Termination. The Compensation Committee may amend the amended and restated 2012 Plan or outstanding awards, or terminate the amended and restated 2012 Plan, except that the consent of a participant will be required for any amendment to an award that adversely affects a participant’s rights under such award (unless necessary to comply with applicable law).

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Executive Annual Incentive Plan

Prior to the completion of this offering, our board of directors intends to adopt the Party City Holdco Inc. Executive Annual Incentive Plan (the “Annual Plan”). Upon completion of this offering, annual award opportunities for certain key employees, including our named executive officers, will be granted under the Annual Plan. The following summary describes what we anticipate to be the material terms of the Annual Plan. This summary is not a complete description of all provisions of the Annual Plan and is qualified in its entirety by reference to the Annual Plan, which will be filed as an exhibit to an amended version of the Registration Statement of which this prospectus is a part.

Administration. The Annual Plan will be administered by the Compensation Committee.

Eligibility. Executive officers and other key employees of the Company and its affiliates will be selected from time to time by the Compensation Committee to participate in the Annual Plan.

Awards. Award opportunities under the Annual Plan will be granted by the Compensation Committee prior to, or within a specified period of time following the beginning of, the fiscal year of the Company (or other performance period selected by the Compensation Committee). The Compensation Committee will establish the performance criteria applicable to the award, the amount or amounts payable if the performance criteria are achieved, and such other terms as the Compensation Committee deems appropriate. The Annual Plan permits the grant of awards that are intended to qualify as exempt performance-based compensation under Section 162(m) of the Code, to the extent applicable, as well as awards that are not intended to so qualify.

Performance Criteria. Awards under the Annual Plan will be made based on, and subject to achieving, “performance criteria” established by the Compensation Committee. Performance criteria for awards intended to qualify as performance-based compensation for purposes of Section 162(m) of the Code are limited to the objectively determinable measures of performance relating to any or any combination of the following (measured either absolutely or by reference to an index or indices or the performance of one or more companies and determined either on a consolidated basis or, as the context permits, on a divisional, subsidiary, line of business, project or geographical basis or in combinations thereof): net sales; system-wide sales; comparable store sales; revenue; revenue growth or product revenue growth; operating income (before or after taxes); adjusted operating income; adjusted net income; adjusted earnings per share; channel revenue; channel revenue growth; franchising commitments; manufacturing profit; manufacturing profit margin; store closures; pre- or after-tax income or loss (before or after allocation of corporate overhead and bonus); earnings or loss per share; net income or loss (before or after taxes); return on equity; total stockholder return; return on assets or net assets; appreciation in and/or maintenance of the price of the shares or any other publicly-traded securities of the Company; market share; gross profits; earnings or losses (including earnings or losses before taxes, before interest and taxes, or before interest, taxes, depreciation and/or amortization); adjusted earnings or losses (including adjusted earnings or losses before taxes, before interest and taxes, or before interest, taxes, depreciation and/or amortization); economic value-added models or equivalent metrics; comparisons with various stock market indices; reductions in costs; cash flow or cash flow per share (before or after dividends); return on capital (including return on total capital or return on invested capital); cash flow return on investment; improvement in or attainment of expense levels or working capital levels, including cash, inventory and accounts receivable; operating margin; gross margin; year-end cash; cash margin; debt reduction; stockholders equity; operating efficiencies; market share; customer satisfaction; customer growth; employee satisfaction; supply chain achievements (including establishing relationships with manufacturers or suppliers of component materials and manufacturers of the Company’s products); points of distribution; gross or net store openings; co-development, co-marketing, profit sharing, joint venture or other similar arrangements; financial ratios, including those measuring liquidity, activity, profitability or leverage; cost of capital or assets under management; financing and other capital raising transactions (including sales of the Company’s equity or debt securities; factoring transactions; sales or licenses of the Company’s assets, including its intellectual property, whether in a particular jurisdiction or territory or globally; or through partnering transactions); implementation, completion or attainment of measurable objectives

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with respect to research, development, manufacturing, commercialization, products or projects, production volume levels, acquisitions and divestitures; factoring transactions; and recruiting and maintaining personnel.

To the extent consistent with the requirements of Section 162(m) of the Code, the Compensation Committee may establish that, in the case of any award intended to qualify as exempt performance-based compensation under Section 162(m) of the Code, that one or more of the performance criteria applicable to such award be adjusted in an objectively determinable manner to reflect events occurring during the performance period of such award that affect the applicable performance criteria.

Payment. A participant will be entitled to payment under an award only if all conditions to payment have been satisfied under the award. Following the close of the performance period, the Compensation Committee will determine (and, to the extent required by Section 162(m) of the Code, certify) as to whether and to what extent the applicable performance criteria have been satisfied. The Compensation Committee will then determine the actual payment, if any, under each award.

Payment Limits. The maximum payment to any participant under the Annual Plan for any fiscal year will in no event exceed $        .

Recovery of Compensation. Awards under the Annual Plan will be subject to forfeiture, termination and rescission, and a participant who receives a payment pursuant to the Annual Plan will be obligated to return such payment to us, to the extent provided by the Compensation Committee in connection with a breach by the participant of an award agreement under the plan or any non-competition, non-solicitation, confidentiality or similar covenant or agreement with the Company or otherwise in accordance with any applicable Company recoupment policy, or as otherwise required by law or applicable stock exchange listing standards.

Amendment and Termination. The Compensation Committee may amend or terminate the Annual Plan at any time, provided that any amendment will be approved by the Company’s stockholders if required by Section 162(m) of the Code.

Director Compensation

Annual Compensation

Directors who are also our employees, or are representatives of our Sponsors, receive no additional compensation for serving as a director. In 2013, two non-Sponsor directors were appointed to our Board: Norman S. Matthews and Lawrence P. Molloy.

We agreed to pay, and will continue to pay, the non-Sponsor directors an annual retainer fee of $50,000 that is pro-rated for any partial year. In addition, Mr. Matthews was granted time-based stock options with respect to two shares of our common stock during 2013.

The following table further summarizes the compensation paid to our directors for the year ended December 31, 2013.

Name	Fees Earned or Paid in Cash		Option Awards (1)		Total
Norman S. Matthews	$	29,670	$	17,869	$	47,539
Lawrence P. Molloy		3,973		—		3,973
Todd M. Abbrecht		—		—		—
Jefferson M. Case		—		—		—
Steven J. Collins		—		—		—
Uttam K. Jain		—		—		—
Joshua M. Nelson		—		—		—

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(1) The dollar values shown reflect the aggregate grant date fair value of equity awards granted within the year in accordance with FASB Accounting Standards Codification Topic 718 for stock-based compensation. These amounts do not represent the actual value that will be received by Mr. Matthews from the award. The assumptions used in determining the fair values are disclosed in Note 12 to our audited consolidated financial statements that appear elsewhere in this prospectus. As of December 31, 2013, Mr. Matthews held options with respect to two shares of our common stock and no stock awards. None of our other directors held any options with respect to our common stock or stock awards.

Compensation Committee Interlocks and Insider Participation

The members of the Compensation Committee who served during 2013 are set forth under “—Compensation Committee.” There were no interlocks or insider participation between any member of the Board of Directors or Compensation Committee and any member of the board of directors or compensation committee of any other company, nor has any interlocking relationship existed in the past.

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PRINCIPAL AND SELLING STOCKHOLDERS

The following table sets forth certain information with respect to the beneficial ownership of our common stock at December 31, 2013 for:

• each person whom we know beneficially owns more than five percent of our common stock;

• each of our directors;

• each of our named executive officers;

• all of our directors and executive officers as a group; and

• each other selling stockholder.

The number of shares beneficially owned by each stockholder is determined under rules issued by the SEC and includes voting or investment power with respect to securities. Under these rules, beneficial ownership includes any shares as to which the individual or entity has sole or shared voting power or investment power. Each of the stockholders listed has sole voting and investment power with respect to the shares beneficially owned by the stockholder unless noted otherwise, subject to community property laws where applicable.

Shares of common stock that may be acquired within 60 days following December 31, 2013 pursuant to the exercise of options are deemed to be outstanding for the purpose of computing the percentage ownership of such holder but are not deemed to be outstanding for computing the percentage ownership of any other person shown in the table. Beneficial ownership representing less than one percent is denoted with an “*.”

Unless otherwise indicated, the address for each of the stockholders in the table below is c/o Party City Holdco Inc., 80 Grasslands Road, Elmsford, New York 10523.

Name of Beneficial Owner	Number of Shares of Common Stock Beneficially Owned Prior to the Offering		Percentage of Class Outstanding Prior to the Offering			Shares to be Offered in Underwriters’ Option	Number of Shares of Common Stock Beneficially Owned After the Offering+	Percentage of Class Outstanding After the Offering+
Funds managed by Advent International Corporation (1)		8,000.00		23.87	%
Funds affiliated with Thomas H. Lee Partners, L.P. (2)		23,270.70		69.44	%
Todd M. Abbrecht (3)		23,270.70		69.44	%
Jefferson M. Case (4)		8,000.00		23.87	%
Steven J. Collins (4)		8,000.00		23.87	%
Michael A. Correale (5)		29.56		*
James M. Harrison (6)		227.85		*
Uttam K. Jain (3)		23,270.70		69.44	%
Norman S. Matthews		30.00		*
Gregg A. Melnick (7)		93.76		*
Lawrence P. Molloy		—		—
Joshua M. Nelson (3)		23,270.70		69.44	%
Gerald C. Rittenberg (8)		251.95		*
All directors and executive officers as a group (11 persons)		31,903.82		94.99	%
Other Selling Stockholders:

* Represents beneficial ownership of less than 1%.

+ Assumes the exercise of the underwriters’ option to purchase additional shares in full.

(1) Funds managed by Advent International Corporation own 100% of Advent Party City Acquisition L.P., which in turn owns shares of our common stock. With respect to the shares held by funds managed by

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Advent International Corporation, a group of individuals currently composed of David M. Mussafer, Steven M. Tadler and David M. McKenna, none of whom have individual voting or investment power, exercise voting and investment power over the shares beneficially owned by the funds managed by Advent International Corporation. Each of Mr. Mussafer, Mr. Tadler and Mr. McKenna disclaims beneficial ownership of the shares held by funds managed by Advent International Corporation, except to the extent of their respective pecuniary interest therein. The address of Advent International Corporation is 75 State Street, Boston, MA 02109.

(2) Funds affiliated with Thomas H. Lee Partners, L.P. (the “THL Funds”) own 100% of THL PC Topco, L.P., which in turn owns shares of our common stock. Voting and investment determinations with respect to the securities held by the THL Funds are made by a management committee consisting of Anthony J. DiNovi and Scott M. Sperling, and as such Messrs. DiNovi and Sperling may be deemed to share beneficial ownership of the securities held or controlled by the THL Funds. Each of Messrs. DiNovi and Sperling disclaims beneficial ownership of such securities. The address of each of Messrs. DiNovi and Sperling is c/o Thomas H. Lee Partners, L.P., 100 Federal Street, Boston, Massachusetts 02110.

(3) Mr. Abbrecht and Mr. Nelson are managing directors of THL and Mr. Jain is a vice president of THL. Mr. Abbrecht, Mr. Jain and Mr. Nelson each disclaim beneficial ownership of the securities held or controlled by the THL Funds. Their addresses are c/o Thomas H. Lee Partners, L.P., 100 Federal Street, Boston, MA 02110.

(4) Mr. Case and Mr. Collins each disclaim beneficial ownership of the shares held by the funds managed by Advent International Corporation. Their addresses are c/o Advent International Corporation, 75 State Street, Boston, MA 02109.

(5) Includes 5.00 shares which could be acquired by Mr. Correale within 60 days upon exercise of options.

(6) Includes 161.85 shares held by a limited liability company and a trust and 26.00 shares which could be acquired by Mr. Harrison within 60 days upon exercise of options.

(7) Includes 21.64 shares held by a trust and 16.00 shares which could be acquired by Mr. Melnick within 60 days upon exercise of options.

(8) Includes 223.95 shares held indirectly in a limited liability company and a trust and 28.00 shares which could be acquired by Mr. Rittenberg within 60 days upon exercise of options.

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CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

Related Person Transactions Policy

In accordance with the charter of our Audit Committee, which will become effective upon the closing of this offering, and our policy with respect to related person transactions, which our board of directors (acting through our Audit Committee) will adopt prior to the closing of this offering, our Audit Committee will be responsible for reviewing and approving related person transactions.

The policy with respect to related person transactions will apply to transactions, arrangements and relationships (or any series of similar transactions, arrangements or relationships) where the aggregate amount involved will or may be expected to exceed $120,000 in any calendar year, and where we (or our subsidiaries) are a participant and in which a related person has or will have a direct or indirect material interest. A related person is: (1) any person who is, or at any time since the beginning of our fiscal year was, a director or executive officer of the company, or a nominee for director or executive officer of the company; (2) any person who is known to be the beneficial owner of more than 5% of any class of our voting securities; (3) any immediate family member of the foregoing persons and (4) any firm, corporation or other entity in which any of the foregoing persons has a position or relationship, or in which such person, together with his or her immediate family members, has a 10% or greater beneficial ownership.

In the course of its review and approval of related person transactions, our Audit Committee will consider the relevant facts and circumstances to decide whether to approve such transactions. In particular, our policy with respect to related person transactions will require our Audit Committee to consider, among other factors it deems appropriate:

• the benefits to the Company;

• the impact on a director’s independence in the event the related person is a director, an immediate family member of a director or an entity in which a director has a position or relationship;

• the availability of other sources for comparable products or services;

• the terms of the transaction; and

• the terms available to unrelated third parties or to employees generally.

The Audit Committee may only approve those transactions that are in, or are not inconsistent with, our best interests and those of our stockholders, as the Audit Committee determines in good faith.

Agreements with Management

We have previously entered into employment agreements with certain of our executive officers. See “Executive Compensation—Employment Agreements.”

Management Agreement

As a result of the Acquisition, on July 27, 2012, funds affiliated with THL, Advent and other investors acquired a majority stake in the Company. In conjunction with the Acquisition, funds affiliated with Advent maintained a minority interest in the Company. At the time of the Acquisition the Company entered into a management agreement with THL and Advent, under which THL and Advent will provide advice to the Company on, among other things, financing, operations, acquisitions and dispositions. Under the agreement, THL and Advent are paid, in aggregate, an annual management fee in the amount of the greater of $3.0 million or 1.0% of Adjusted EBITDA, as defined in the Company’s debt agreements (see Selected Consolidated Financial Data for further details). THL and Advent received annual management fees in the amounts of $2.2 million and $0.8 million, respectively, during 2013 and $1.0 million and $0.3 million, respectively, during the period from

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July 28, 2012 to December 31, 2012. Additionally, at the time of the Acquisition, the Company paid THL and Advent a non-recurring $20.0 million fee for certain services that were performed in conjunction with the consummation of the Acquisition. The amount was recorded in other expense net in the Company’s consolidated statement of operations and comprehensive loss for the period from July 28, 2012 to December 31, 2012. Additionally, as long as THL and Advent receive annual management fees, they will advise the Company in connection with financing, acquisition and disposition transactions and the Company will pay a fee for services rendered in connection with financing, acquisition and disposition transactions in an amount up to 1% of the gross transaction value. The management agreement expires on its tenth anniversary. In the case of an initial public offering or a change in control, as defined in the Company’s Stockholders Agreement, at the time of such event the Company must pay THL and Advent the net present value of the remaining annual management fees that are payable over the agreement’s ten year term. Upon consummation of this offering, the management agreement will terminate and the Company will pay a termination fee of approximately $         to the Sponsors.

Prior to the Acquisition, the Company had a management agreement with two of its former owners, Berkshire Partners LLC (“Berkshire Partners”) and Weston Presidio Capital (“Weston Presidio”), pursuant to which they were paid an annual management fee in the aggregate amount of $1.3 million. Berkshire Partners received management fees of $0.5 million during the period from January 1, 2012 to July 27, 2012 and $0.8 million during 2011. Weston Presidio received management fees of $0.2 million during the period from January 1, 2012 to July 27, 2012 and $0.4 million during 2011. On August 19, 2008, Berkshire Partners and Weston Presidio entered into an agreement with Advent pursuant to which Advent would provide consulting and management advisory services to the Company and would receive, in return, a portion of the management fees due to Berkshire Partners and Weston Presidio under their management agreement. Under this agreement, Advent received management fees of $0.3 million during the period from January 1, 2012 to July 27, 2012 and $0.5 million during 2011.

Stockholders Agreement

In connection with the Acquisition, the Company, the Sponsors, American Greetings and certain members of management entered into a stockholders agreement (the “Stockholders Agreement”). The Stockholders Agreement contains provisions related to the election of directors, governance, stock transfer restrictions, customary drag-along rights and customary tag-along rights and preemptive rights. The terms of the Stockholders Agreement terminate, subject to certain limited exceptions, upon the earlier of (i) an initial public offering of the Company or any subsidiary of the Company, (ii) consummation of a Change of Control Transaction (as defined in the Stockholders Agreement) and (iii) the mutual written consent of the Company, the Sponsors, American Greetings and a majority in interest of members of senior management party to the Stockholders Agreement.

We intend, in connection with the completion of this offering, to enter into an amended and restated stockholders agreement, the terms of which have not yet been agreed to by the Company and the Sponsors.

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DESCRIPTION OF CAPITAL STOCK

The following is a description of the material terms of our amended and restated certificate of incorporation and our amended and restated bylaws, which we refer to as our bylaws, as each is anticipated to be in effect upon the closing of this offering.

General

Upon completion of this offering, we have authority to issue up to: (i)                 shares of common stock, par value $0.01 per share; and (ii)                 shares of preferred stock, par value $0.01 per share.

Common Stock

Holders of our common stock are entitled to one vote for each share held on all matters submitted to a vote of stockholders and do not have cumulative voting rights. An election of directors by our stockholders shall be determined by a plurality of the votes cast by the stockholders entitled to vote on the election. Holders of common stock are entitled to receive proportionately any dividends as may be declared by our board of directors, subject to any preferential dividend rights of any series of preferred stock that is outstanding at the time of the dividend.

In the event of our liquidation or dissolution, the holders of common stock are entitled to receive proportionately our net assets available for distribution to stockholders after payment of all debts and other liabilities, subject to the prior rights of any outstanding preferred stock.

The rights, preferences and privileges of holders of common stock are subject to the rights of the holders of shares of any series of preferred stock that we may designate and issue in the future.

Preferred Stock

Under our amended and restated certificate of incorporation, our board of directors has the authority, without further action by our stockholders, except as described below, to issue up to                 shares of preferred stock in one or more series and to fix the voting powers, designations, preferences and the relative participating, optional or other special rights and qualifications, limitations and restrictions of each series, including dividend rights, conversion rights, voting rights, terms of redemption, liquidation preferences and the number of shares constituting any series. Upon completion of the offering, no shares of our authorized preferred stock will be outstanding. Because the board of directors has the power to establish the preferences and rights of the shares of any additional series of preferred stock, it may afford holders of any preferred stock preferences, powers and rights, including voting and dividend rights, senior to the rights of the holders of the common stock, which could adversely affect the holders of the common stock and could discourage a takeover of us even if a change of control of our company would be beneficial to the interests of our stockholders.

Anti-takeover Effects of the DGCL and our Amended and Restated Certificate of Incorporation and Bylaws

Our amended and restated certificate of incorporation or our bylaws contain provisions that may delay, defer or discourage another party from acquiring control of us. We expect that these provisions, which are summarized below, will discourage coercive takeover practices or inadequate takeover bids. These provisions are also designed to encourage persons seeking to acquire control of us to first negotiate with the board of directors, which we believe may result in an improvement of the terms of any such acquisition in favor of our stockholders. However, they also give the board of directors the power to discourage acquisitions that some stockholders may favor.

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Classified Board of Directors

Our board of directors is divided into three classes, Class I, Class II and Class III, with members of each class serving staggered three-year terms. Our amended and restated certificate of incorporation provides that the authorized number of directors may be changed only by resolution of the board of directors. Any additional directorships resulting from an increase in the number of directors will be distributed among the three classes so that, as nearly as possible, each class will consist of one-third of the directors. Our amended and restated certificate of incorporation and our bylaws also provide that a director may be removed only for cause by the affirmative vote of the holders of at least a majority of the voting power of our outstanding shares of capital stock entitled to vote generally in the election of directors, voting together as a single class, and that any vacancy on our board of directors, including a vacancy resulting from an enlargement of our board of directors, may be filled only by vote of a majority of our directors then in office. Our classified board of directors could have the effect of delaying or discouraging an acquisition of us or a change in our management.

Action by Written Consent

The DGCL provides that, unless otherwise stated in a corporation’s certificate of incorporation, the stockholders may act by written consent without a meeting. Our certificate of incorporation provides that after the Sponsors collectively own less than 50% of our outstanding common stock, any action required or permitted to be taken by our stockholders at an annual meeting or special meeting of the stockholders may only be taken at an annual or special meeting before which it is properly brought, and not by written consent without a meeting. As a result, THL and Advent will be able to act by written consent so long as they collectively own at least 50% of our outstanding common stock.

Special Meeting of Stockholders and Advance Notice Requirements for Stockholder Proposals

Our amended and restated certificate of incorporation and bylaws provide that, except as otherwise required by law, special meetings of the stockholders can only be called by (a) our chairman or vice chairman of the board of directors or (b) the board of directors through a special resolution.

In addition, our bylaws require advance notice procedures for stockholder proposals to be brought before an annual meeting of the stockholders, including the nomination of directors. Stockholders at an annual meeting may only consider the proposals specified in the notice of meeting or brought before the meeting by or at the direction of the board of directors or any committee thereof, or by a stockholder of record on the record date for the meeting, who is entitled to vote at the meeting and who has delivered a timely written notice in proper form to our secretary, of the stockholder’s intention to bring such business before the meeting.

These provisions could have the effect of delaying until the next stockholder meeting any stockholder actions, even if they are favored by the holders of a majority of our outstanding voting securities.

Amendment to Amended and Restated Certificate of Incorporation and Bylaws

The DGCL provides generally that the affirmative vote of a majority of the outstanding stock entitled to vote on amendments to a corporation’s certificate of incorporation or bylaws is required to approve such amendment, unless a corporation’s certificate of incorporation or bylaws, as the case may be, requires a greater percentage. Our bylaws may be amended or repealed by a majority vote of our board of directors or, in addition to any other vote otherwise required by law, the affirmative vote of at least two-thirds of the voting power of the outstanding shares of capital stock entitled to vote. Additionally, the affirmative vote of at least two-thirds of the voting power of the outstanding shares of capital stock entitled to vote on the adoption, alteration, amendment or repeal of our amended and restated certificate of incorporation, voting as a single class, is required to amend or repeal or to adopt any provision inconsistent with the “Classified Board of Directors,” “Action by Written Consent,” “Special Meetings of Stockholders,” “Amendments to Certificate of Incorporation and Bylaws” and “Business Combinations” provisions described in our amended and restated certificate of incorporation;

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provided, however, that so long as the Sponsors collectively beneficially own (directly or indirectly) more than fifty percent (50%) of the outstanding shares of our common stock, such alteration, amendment, repeal or adoption will be approved by, in addition to any other vote otherwise required by law, the affirmative vote of the holders of a majority of the voting power of the outstanding shares of capital stock entitled to vote. These provisions may have the effect of deferring, delaying or discouraging the removal of any anti-takeover defenses provided for in our amended and restated certificate of incorporation and our bylaws.

Renouncement of Corporate Opportunity

Our amended and restated certificate of incorporation provides that we renounce any interest or expectancy in, or in being offered an opportunity to participate in, any business opportunity that may from time to time be presented to Exempted Persons and that may be a business opportunity for such Exempted Person, even if the opportunity is one that we might reasonably have pursued or had the ability or desire to pursue if granted the opportunity to do so. No such Exempted Person will be liable to us for breach of any fiduciary or other duty, as a director or officer or otherwise, by reason of the fact that such person, acting in good faith, pursues or acquires any such business opportunity, directs any such business opportunity to another person or fails to present any such business opportunity, or information regarding any such business opportunity, to us. None of the Exempted Persons or their representatives has any duty to refrain from engaging directly or indirectly in the same or similar business activities or lines of business as us or any of our subsidiaries. In addition, the affirmative vote of eighty percent (80%) of the voting power of the outstanding shares of capital stock entitled to vote on the adoption, alteration, amendment or repeal of our amended and restated certificate of incorporation, voting together as a single class, shall be required to alter, amend or repeal, or to adopt any provision inconsistent with provisions related to the “Renouncement of Corporate Opportunity.”

Business Combinations

We have opted out of Section 203 of the DGCL. However, our amended and restated certificate of incorporation contains similar provisions providing that we may not engage in certain “business combinations” with any “interested stockholder” for a three-year period following the time that the stockholder became an interested stockholder, unless:

• prior to such time, our board of directors approved either the business combination or the transaction which resulted in the stockholder becoming an interested stockholder;

• upon consummation of the transaction that resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of our voting stock outstanding at the time the transaction commenced, excluding certain shares; or

• at or subsequent to that time, the business combination is approved by our board of directors and by the affirmative vote of holders of at least 66 ²⁄₃% of the outstanding voting stock that is not owned by the interested stockholder.

Generally, a “business combination” includes a merger, asset or stock sale or other transaction resulting in a financial benefit to the interested stockholder. Subject to certain exceptions, an “interested stockholder” is a person who, together with that person’s affiliates and associates, owns, or within the previous three years owned, 15% or more of our voting stock.

Under certain circumstances, this provision will make it more difficult for a person who would be an “interested stockholder” to effect various business combinations with a corporation for a three-year period. This provision may encourage companies interested in acquiring our company to negotiate in advance with our board of directors because the stockholder approval requirement would be avoided if our board of directors approves either the business combination or the transaction which results in the stockholder becoming an interested stockholder. These provisions also may have the effect of preventing changes in our board of directors and may make it more difficult to accomplish transactions which stockholders may otherwise deem to be in their best interests.

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Our amended and restated certificate of incorporation provides that the Sponsors, their respective affiliates and associates, and any of their respective direct or indirect transferees of at least 5% of our outstanding common stock and any group as to which such persons are party to, do not constitute “interested stockholders” for purposes of this provision.

Transfer Agent and Registrar

The transfer agent and registrar for our common stock is             .

Listing

We intend to apply to list our shares of common stock on the              under the symbol “PRTY.”

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DESCRIPTION OF CERTAIN DEBT

Senior Credit Facilities

In connection with the Acquisition our wholly-owned subsidiaries, PCHI and Holdings, and certain of their subsidiaries entered into a $400.0 million senior secured asset-based revolving credit facility (the “ABL Facility”), which included a $50.0 million letter of credit and a $40.0 million swingline loan facility and a $1,125.0 million senior secured term loan facility (the “Term Loan Facility,” and collectively with the ABL Facility, the “Senior Credit Facilities”), with Deutsche Bank Trust Company Americas, as administrative agent, and certain financial institutions as lenders. Deutsche Bank Securities Inc., Merrill Lynch, Pierce, Fenner & Smith Incorporated, Barclays Bank PLC, Goldman Sachs Lending Partners LLC, and Morgan Stanley Senior Funding, Inc. acted as joint lead arrangers and joint bookrunners for the Senior Credit Facilities.

On February 19, 2013, the credit agreement governing the Term Loan Facility was amended to reduce the interest rate applicable to borrowing under the Term Loan Facility by 1.50%.

General

The credit agreement governing the ABL Facility (the “ABL Facility”) provides that PCHI may request up to $125.0 million in increased commitments under the ABL Facility subject to certain conditions. In addition, the credit agreement governing the Term Loan Facility (the “Term Loan Facility”) provides that PCHI may request increases to the Term Loan Facility and/or add one or more incremental revolving facilities or term loan facilities in an aggregate principal amount not to exceed (x) $250.0 million, plus (y) in the case of any incremental revolving facilities that serve to effectively extend the maturity of the Term Loan Facility and/or any incremental revolving facilities, an amount equal to the reductions in the Term Loan Facility and/or such incremental revolving facilities to be replaced thereby plus (z) an unlimited amount, subject to compliance on a pro forma basis with a senior secured leverage ratio of no greater than 4.00:1.00. The interest rate for any such incremental facility will be determined in accordance with a calculation set forth in the Term Loan Facility. The existing lenders under the Senior Credit Facilities will not be under any obligation to provide such additional commitments, and any increase in commitments is subject to customary conditions precedent.

Availability under the ABL Facility is limited to the line cap, which is calculated as the lesser of (a) the aggregate revolving commitments and (b) the then applicable borrowing base (the “Line Cap”). The borrowing base shall equal the sum of the following:

• 90% of eligible trade receivables, plus

• 90% of eligible credit card receivables, plus

• 90% of the net orderly liquidation value of eligible inventory and eligible in-transit inventory (not to exceed $20.0 million), minus

• any reserves established by the administrative agent for the ABL Facility in its permitted discretion.

Interest Rate and Fees

Borrowings under the Senior Credit Facilities bear interest at a rate per annum equal to an applicable margin, plus, at PCHI’s option, either (a) a base rate (which in the case of the Term Loan Facility only, shall be no less than 2.00% (2.25% prior to the amendment)) determined by the reference to the highest of (1) the prime commercial lending rate publicly announced by the administrative agent as the “prime rate” as in effect on such day, (2) the federal funds effective rate plus 0.50%, and (3) the LIBOR rate determined by reference to the cost of funds for Eurodollar deposits for an interest period of one month, plus 1.00% or (b) a LIBOR rate (which in the case of the Term Loan Facility only, shall be no less than 1.00% (1.25% prior to the amendment)) determined by reference to the costs of funds for Eurodollar deposits for the specified interest period, as adjusted for certain statutory reserve requirements. The applicable margin for borrowings under the ABL Facility ranges from 0.5%

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to 1.00% with respect to base rate borrowings and from 1.50% to 2.00% with respect to LIBOR borrowings, based on excess availability under the Line Cap. The applicable margin as of June 30, 2013 was 0.75% for base rate loans and 1.75% for loans based on the LIBOR rate. The applicable margin for borrowings under the Term Loan Facility margin is 2.25% (3.50% prior to the amendment) with respect to base rate borrowings and 3.25% (4.50% prior to the amendment) with respect to LIBOR borrowings.

A commitment fee will be charged on the average daily unused portion of the ABL Facility of 0.25% per annum if average utilization under the ABL Facility is greater than or equal to 50.0% or 0.375% if average utilization under the ABL Facility is less than 50.0%. A letter of credit fee will accrue on the aggregate face amount of outstanding letters of credit under the ABL Facility equal to the interest rate margin for LIBOR loans. In addition, a fronting fee will be charged on the aggregate face amount of outstanding letters of credit equal to 0.125% per annum.

Mandatory Prepayments

The Term Loan Facility requires PCHI to prepay, subject to certain exceptions, outstanding term loans with:

• 100% of net cash proceeds of any incurrence of debt, other than the net cash proceeds of debt permitted under the Term Loan Facility;

• 100% of net cash proceeds above a threshold amount of certain asset sales, subject to reinvestment rights and certain other exceptions; and

• 50% (subject to step-downs to 25% and 0% based upon the senior secured leverage ratio) of our annual excess cash flow.

The ABL Facility requires PCHI to prepay outstanding loans and cash collateralize, “backstop” or replace outstanding letters of credit if at any time the aggregate amount of outstanding loans, unreimbursed letter of credit drawings and outstanding letters of credit under the ABL Facility exceeds the Line Cap, in an aggregate amount equal to such excess.

Optional Prepayments

PCHI may voluntarily reduce the unutilized portion of the commitment amount and repay outstanding loans under the Senior Credit Facilities at any time without premium or penalty other than customary “breakage” costs with respect to LIBOR borrowings.

Amortization and Final Maturity

There is no scheduled amortization under the ABL Facility. The ABL Facility has a maturity date of July 27, 2017. The term loans under the Term Loan Facility mature on July 27, 2019. PCHI is required to repay installments on the term loans in quarterly principal amounts of 0.25%, with the remaining amount payable on the maturity date.

Guarantees and Security

All obligations under the Senior Credit Facilities are unconditionally guaranteed by Holdings and certain of PCHI’s existing and future direct and indirect wholly-owned domestic subsidiaries. All obligations under the Senior Credit Facilities, and the guarantees of those obligations, are secured, subject to certain exceptions, by substantially all of PCHI’s assets and the assets of the guarantors, including:

• A first-priority or second-priority pledge, as applicable, of all of PCHI’s capital stock directly held by Holdings and a first-priority or second-priority pledge, as applicable, of all of the capital stock directly held by PCHI and its subsidiary guarantors (which pledge, in the case of the capital stock of any foreign subsidiary or any “disregarded” domestic subsidiary, will be limited to 65% of the stock of such subsidiary); and

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• A first-priority or second-priority security interest, as applicable, in substantially all of PCHI’s and the guarantors’ tangible and intangible assets, including certain deposit accounts.

Certain Covenants and Events of Default

The Senior Credit Facilities contain a number of restrictive covenants that, among other things and subject to certain exceptions, restrict PCHI’s ability and the ability of its subsidiaries to:

• incur additional indebtedness;

• pay dividends on our capital stock or redeem, repurchase or retire our capital stock;

• make investments, acquisitions, loans and advances;

• create negative pledge or restrictions on the payment of dividends or payment of other amounts owed to us from our subsidiaries;

• engage in transactions with our affiliates;

• sell, transfer or otherwise dispose of our assets, including capital stock of our subsidiaries;

• materially alter the business we conduct;

• modify certain material documents;

• change our fiscal year;

• consolidate, merge, liquidate or dissolve;

• incur liens; and

• make prepayments of subordinated or junior debt or the notes.

Holdings shall also be subject to a “passive holding company” covenant under the Senior Credit Facilities.

In addition, upon the occurrence of an event of default or excess availability under the Line Cap of less than the greater of 10.0% of the Line Cap and $30.0 million, we will be subject to a fixed charge coverage ratio test of at least 1.0 to 1.0.

The Senior Credit Facilities also contain certain customary representations and warranties, affirmative covenants and reporting obligations. In addition, the lenders under the Senior Credit Facilities will be permitted to accelerate the loans and terminate commitments thereunder or exercise other specified remedies available to secured creditors upon the occurrence of certain events of default, subject to certain grace periods and exceptions, which will include, among others, payment defaults, breaches of representations and warranties, covenant defaults, cross-defaults to certain material indebtedness, certain events of bankruptcy, certain events under the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), material judgments and changes of control.

Senior Notes

General

In July 2012, PCHI, our wholly-owned indirect subsidiary, issued $700.0 million aggregate principal amount of 8.875% senior notes due 2020 under an indenture dated July 27, 2012, as amended or supplemented from time to time. The senior notes are guaranteed, jointly and severally, on an unsecured subordinated basis by each of its existing and future domestic subsidiaries.

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Covenants

The indenture governing the senior notes contains certain covenants limiting, among other things and subject to certain exceptions, PCHI’s ability and the ability of its restricted subsidiaries to:

• incur additional indebtedness or issue preferred stock;

• pay dividends or distributions on capital stock or redeem, repurchase or retire its capital stock or the capital stock of any restricted subsidiary or make payments on, or redeem, repurchase or retire any indebtedness subordinated to the senior notes;

• make certain investments, loans, advances and acquisitions;

• enter into sale and leaseback transactions;

• engage in transactions with affiliates;

• create liens;

• guarantee debt;

• create restrictions on the payment of dividends or other amounts to PCHI from its restricted subsidiaries;

• consolidate, merge or transfer all or substantially all of PCHI’s assets and the assets of its subsidiaries; and

• engage in unrelated businesses.

The indenture governing the senior notes also contains certain customary affirmative covenants and events of default, including a cross-payment default provision and cross-acceleration provision in the case of a payment default or acceleration according to the terms of any indebtedness with an aggregate principal amount of $50 million or more.

Prepayments

Prior to August 1, 2015, PCHI may redeem the outstanding senior notes, in whole or in part, at a redemption price equal to 100.0% of the principal amount of the senior notes redeemed plus accrued and unpaid interest, if any, to, but not including, the redemption date, and a “make-whole premium.” PCHI may redeem up to 40% of the aggregate principal amount of the senior notes before August 1, 2015 with the net cash proceeds from one or more equity offerings at a redemption price of 108.875% of the principal amount plus accrued and unpaid interest, if any, to, but not including, the redemption date.

On or after August 1, 2015, PCHI may redeem the senior notes, in whole or in part, at the following (expressed as a percentage of the principal amount to be redeemed) plus accrued and unpaid interest thereon:

Twelve-month period beginning on August 1,	Percentage
2015		106.656	%
2016		104.438	%
2017		102.219	%
2018 and thereafter		100.000	%

If PCHI experiences certain types of change in control, it must offer to purchase the outstanding senior notes at 101% of their principal amount, plus accrued and unpaid interest.

Asset Sales

If PCHI or its restricted subsidiaries engage in certain asset sales, PCHI generally must either invest the net cash proceeds from such sales in its business within a period of time, prepay senior debt or make an offer to purchase a principal amount of its outstanding senior notes equal to the excess net cash proceeds, subject to certain exceptions. The purchase price of the outstanding senior notes will be 100% of their principal amount, plus accrued and unpaid interest.

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Senior PIK Toggle Notes

General

On August 1, 2013, Nextco Holdings and Nextco Finance, our indirect wholly owned subsidiaries, issued $350.0 million aggregate principal amount of 8.750% / 9.500% senior PIK toggle notes due 2019 under an indenture dated August 1, 2013, as amended or supplemented from time to time. Nextco Holdings and Nextco Finance are required to pay interest on the senior PIK toggle notes entirely in cash unless certain conditions are satisfied, in which case Nextco Holdings and Nextco Finance will be entitled to pay, to the extent described in the indenture, interest for such interest period by increasing the principal amount of the senior PIK toggle notes or issuing new notes. The senior PIK toggle notes are not guaranteed by any subsidiaries of Nextco Holdings and Nextco Finance.

Covenants

The indenture governing the senior PIK toggle notes contains certain covenants limiting, among other things and subject to certain exceptions, our ability and the ability of Nextco Holdings and its restricted subsidiaries to:

• incur additional indebtedness or issue preferred stock;

• pay dividends or distributions on capital stock or redeem, repurchase or retire our capital stock or the capital stock of any restricted subsidiary or make payments on, or redeem, repurchase or retire any indebtedness subordinated to the senior PIK toggle notes;

• make certain investments, loans, advances and acquisitions;

• enter into sale and leaseback transactions;

• engage in transactions with affiliates;

• create liens;

• guarantee debt;

• create restrictions on the payment of dividends or other amounts to Nextco Holdings from its restricted subsidiaries;

• consolidate, merge or transfer all or substantially all of Nextco Holdings’ assets and the assets of its subsidiaries; and

• engage in unrelated businesses.

The indenture governing the senior PIK toggle notes also contains certain customary affirmative covenants and events of default, including a cross-payment default provision and cross-acceleration provision in the case of a payment default or acceleration according to the terms of any indebtedness with an aggregate principal amount of $50 million or more.

Prepayments

Prior to February 15, 2015, Nextco Holdings may redeem the outstanding senior PIK toggle notes, in whole or in part, at a redemption price equal to 100.0% of the principal amount of the senior PIK toggle notes redeemed plus accrued and unpaid interest, if any, to, but not including, the redemption date, and a “make-whole premium.”

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On or after February 15, 2015, Nextco Holdings may redeem the outstanding senior PIK toggle notes, in whole or in part, at the redemption prices specified below (expressed as a percentage of the principal amount of the senior PIK toggle notes to be redeemed) plus accrued and unpaid interest thereon:

12 month period beginning on	Percentage
February 15, 2015		102.000	%
February 15, 2016		101.000	%
February 15, 2017 and thereafter		100.000	%

In addition, Nextco Holdings may, on one or more occasions (i) redeem up to 40% of the aggregate principal amount of senior PIK toggle notes or (ii) on or after February 15, 2014 and before February 15, 2015, redeem all (but not less than all) of the aggregate principal amount of senior PIK toggle notes, at a redemption price equal to 102% of the aggregate principal amount thereof, plus accrued and unpaid interest, if any, thereon to the applicable redemption date, subject to the right of holder of the senior PIK toggle notes on the relevant record date to receive interest due on the relevant interest payment date, with the net cash proceeds of one or more equity offerings; provided that each such redemption occurs within 180 days of the date of closing of each such equity offering upon not less than 30 nor more than 60 days’ notice sent to each holder of senior PIK toggle notes being redeemed and otherwise in accordance with the procedures set forth in the indenture.

If it experiences certain types of change in control, Nextco Holdings must offer to purchase the outstanding senior PIK toggle notes at 101% of their principal amount, plus accrued and unpaid interest.

Asset Sales

If Nextco Holdings or its restricted subsidiaries engage in certain asset sales, Nextco Holdings generally must either invest the net cash proceeds from such sales in its business within a period of time, prepay certain indebtedness of Nextco Holdings or its subsidiaries or make an offer to purchase a principal amount of its outstanding senior PIK toggle notes equal to the excess net cash proceeds, subject to certain exceptions. The purchase price of the outstanding senior PIK toggle notes will be 100% of their principal amount, plus accrued and unpaid interest.

Other Foreign Indebtedness

In connection with the acquisitions of the Christy’s Group, Riethmüller and Party Packagers, the Company, through its subsidiaries, entered into several foreign asset-based and overdraft credit facilities that provide certain foreign subsidiaries of the Company with GBP 10.0 million, CDN 6.0 million, EUR 2.5 million and MYR 2.5 million of borrowing capacity. At September 30, 2013 and December 31, 2012, borrowings under the foreign facilities totaled $1.3 million and $9.9 million, respectively. The facilities contain customary affirmative and negative covenants.

Mortgage Note

Amscan, Inc., one of our subsidiaries, is the borrower under a mortgage note dated as December 19, 2001 (and further modified by the Note Modification Agreement, dated as of December 24, 2009) (the “Mortgage Note”) which evidences a $10.0 million dollar loan from the New York Job Development Authority. The Mortgage Note terminates on December 31, 2014 and is secured by a mortgage over the premises located at 47 Elizabeth Drive, Chester, New York. As of September 30, 2013, approximately $1.5 million was outstanding under the Mortgage Note.

Capital Leases

As of September 30, 2013, we had approximately $2.9 million in capital lease obligations outstanding.

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SHARES ELIGIBLE FOR FUTURE SALE

Before this offering, there has not been a public market for our common stock. As described below, only a limited number of shares currently outstanding will be available for sale immediately after this offering due to contractual and legal restrictions on resale. Nevertheless, future sales of substantial amounts of our common stock, including shares issued upon exercise of outstanding options, in the public market after the restrictions lapse, or the possibility of such sales, could cause the prevailing market price of our common stock to fall or impair our ability to raise equity capital in the future.

Upon completion of this offering, we will have outstanding              shares of our common stock, assuming no exercise by the underwriters of their option to purchase additional shares and no exercise of options outstanding as of September 30, 2013. Of these shares, all              shares of our common stock sold in this offering will be freely tradable in the public market without restriction or further registration under the Securities Act, except for any of these shares that are held by our affiliates, as that term is defined in Rule 144 under the Securities Act. Shares purchased by our affiliates may not be resold except pursuant to an effective registration statement or an exemption from registration, including the safe harbor under Rule 144 described below.

After this offering,              shares of our common stock held by existing stockholders will be “restricted securities,” as that term is defined in Rule 144. These restricted securities may be sold in the public market only pursuant to an effective registration statement or an exemption from registration under the Securities Act. The exemptions under Rule 144 and Rule 701 are summarized below. Subject to the Stockholders Agreement and the lock-up agreements described below and the provisions of Rule 144 and Rule 701, these restricted securities will be available for sale in the public market as follows:

Number of Shares	Date of Availability for Sale
	On the date of this prospectus
	180 days after the date of this prospectus and various times thereafter

Lock-Up Agreements

In connection with this offering, officers, directors, employees and holders of substantially all of our common stock who together hold an aggregate of              shares of our common stock after the completion of this offering, have agreed, subject to limited exceptions, not to directly or indirectly sell or dispose of any shares of common stock (except for shares that may be sold by the selling stockholders in this offering) or any securities convertible into or exchangeable or exercisable for shares of common stock for a period of 180 days after the date of this prospectus without the prior written consent of Goldman, Sachs & Co. and Merrill Lynch, Pierce, Fenner & Smith. For additional information, see “Underwriting.”

Rule 144

In general, under Rule 144, immediately upon the completion of this offering, a person who is not our affiliate and has not been our affiliate at any time during the preceding three months will be entitled to sell any shares of our common stock that such person has held for at least six months, including the holding period of any prior owner other than one of our affiliates, so long as we are current with our filings with the SEC. If such person has held the shares for at least one year, such person may effect sales of our common stock even if current public information about us is not available.

Our affiliates who have beneficially owned shares of our common stock for at least six months, including the holding period of any prior owner other than another of our affiliates, would be entitled to sell within any three-month period those shares and any other shares they have acquired that are not restricted securities, provided that the aggregate number of shares sold does not exceed the greater of:

• 1% of the number of shares of our common stock then outstanding, which will equal approximately              shares immediately after this offering; and

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• the average weekly trading volume in our common stock on      during the four calendar weeks preceding the date of filing of a Notice of Proposed Sale of Securities Pursuant to Rule 144 with respect to the sale.

Sales under Rule 144 by our affiliates are also subject to manner of sale provisions and notice requirements and to the availability of current public information about us.

Rule 701

In general, under Rule 701, any of our employees, consultants or advisors, other than our affiliates, who purchased shares from us in connection with a qualified compensatory stock plan or other written agreement is eligible to resell these shares 90 days after the date of this prospectus in reliance on Rule 144, but without compliance with the various restrictions, including the availability of public information about us, holding period and volume limitations, contained in Rule 144.

Stock Plans

As of December 31, 2013, we had outstanding options to purchase 2,547 shares of our common stock, of which options to purchase 187.6 shares were vested. Following this offering, we intend to file one or more registration statements on Form S-8 under the Securities Act to register all of the shares of our common stock subject to outstanding options and other awards issuable pursuant to our stock plans. See “Executive Compensation—Stock-based Incentive Program” for additional information about these plans. Accordingly, shares of our common stock registered under the registration statements will be available for sale in the open market, subject to Rule 144 volume limitations applicable to affiliates, and subject to any vesting restrictions and lock-up agreements applicable to these shares.

Registration Rights

Subject to the lock-up agreements described above, certain holders of our common stock may demand that we register their shares under the Securities Act or, if we file another registration statement under the Securities Act, may elect to include their shares of common stock in such registration. If these shares are registered, they will be freely tradable without restriction under the Securities Act.

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MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS FOR

NON-U.S. HOLDERS OF COMMON STOCK

The following is a summary of the material U.S. federal income and estate tax considerations relating to the purchase, ownership and disposition of our common stock by Non-U.S. Holders (defined below). This summary does not purport to be a complete analysis of all the potential tax considerations relevant to Non-U.S. Holders of our common stock. This summary is based upon the Internal Revenue Code, the Treasury regulations promulgated or proposed thereunder and administrative and judicial interpretations thereof, all as of the date hereof and all of which are subject to change at any time, possibly on a retroactive basis.

This summary assumes that shares of our common stock are held as “capital assets” within the meaning of Section 1221 of the Internal Revenue Code (generally, property held for investment). This summary does not purport to deal with all aspects of U.S. federal income and estate taxation that might be relevant to particular Non-U.S. Holders in light of their particular investment circumstances or status, nor does it address specific tax considerations that may be relevant to particular persons (including, for example, financial institutions, broker-dealers, insurance companies, partnerships or other pass-through entities, certain U.S. expatriates, tax-exempt organizations, pension plans, “controlled foreign corporations”, “passive foreign investment companies”, corporations that accumulate earnings to avoid U.S. federal income tax, persons in special situations, such as those who have elected to mark securities to market or those who hold common stock as part of a straddle, hedge, conversion transaction, synthetic security or other integrated investment, persons that have a “functional currency” other than the U.S. dollar, or holders subject to the alternative minimum or the unearned income Medicare contribution tax). In addition, except as explicitly addressed herein with respect to estate tax, this summary does not address estate and gift tax considerations or considerations under the tax laws of any state, local or non-U.S. jurisdiction.

For purposes of this summary, a “Non-U.S. Holder” means a beneficial owner of common stock that for U.S. federal income tax purposes is not classified as a partnership and is not:

• an individual who is a citizen or resident of the United States;

• a corporation or any other organization taxable as a corporation for U.S. federal income tax purposes, created or organized in or under the laws of the United States, any state thereof or the District of Columbia;

• an estate, the income of which is included in gross income for U.S. federal income tax purposes regardless of its source; or

• a trust if (1) a U.S. court is able to exercise primary supervision over the trust’s administration and one or more U.S. persons have the authority to control all of the trust’s substantial decisions or (2) the trust has a valid election in effect under applicable Treasury regulations to be treated as a U.S. person.

If an entity that is classified as a partnership for U.S. federal income tax purposes holds our common stock, the tax treatment of persons treated as its partners for U.S. federal income tax purposes will generally depend upon the status of the partner and the activities of the partnership. Entities that are classified as partnerships for U.S. federal income tax purposes and persons holding our common stock through an entity classified as a partnership for U.S. federal income tax purposes are urged to consult their own tax advisors.

There can be no assurance that the Internal Revenue Service (“IRS”) will not challenge one or more of the tax consequences described herein, and we have not obtained, nor do we intend to obtain a ruling from the IRS with respect to the U.S. federal income or estate tax consequences to a Non-U.S. Holder of the purchase, ownership or disposition of our common stock.

THIS SUMMARY IS FOR GENERAL INFORMATION ONLY AND IS NOT INTENDED TO BE TAX ADVICE. NON-U.S. HOLDERS ARE URGED TO CONSULT THEIR TAX ADVISORS

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CONCERNING THE U.S. FEDERAL INCOME AND ESTATE TAXATION, STATE, LOCAL AND NON-U.S. TAXATION AND OTHER TAX CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF OUR COMMON STOCK.

Distributions on Our Common Stock

As discussed under “Dividend Policy” above, we do not currently expect to pay dividends. In the event that we do make a distribution of cash or property with respect to our common stock, any such distributions generally will constitute dividends for U.S. federal income tax purposes to the extent of our current and accumulated earnings and profits, as determined under U.S. federal income tax principles. If a distribution exceeds our current and accumulated earnings and profits, the excess will constitute a return of capital and will first reduce the holder’s adjusted tax basis in our common stock, but not below zero. Any remaining excess will be treated as capital gain, subject to the tax treatment described below in “—Gain on Sale, Exchange or Other Taxable Disposition of Our Common Stock.” Any such distribution would also be subject to the discussion below under the section titled “—Additional Withholding and Reporting Requirements.”

Dividends paid to a Non-U.S. Holder generally will be subject to a 30% U.S. federal withholding tax unless such Non-U.S. Holder provides us or other applicable withholding agent, as the case may be, with the appropriate IRS Form W-8, such as:

• IRS Form W-8BEN (or successor form) certifying, under penalties of perjury, a reduction in withholding under an applicable income tax treaty, or

• IRS Form W-8ECI (or successor form) certifying that a dividend paid on common stock is not subject to withholding tax because it is effectively connected with a trade or business in the United States of the Non-U.S. Holder (in which case such dividend generally will be subject to regular graduated U.S. tax rates as described below).

The certification requirement described above must be provided to us or other applicable withholding agent prior to the payment of dividends and must be updated periodically. The certification also may require a Non-U.S. Holder that provides an IRS form or that claims income tax treaty benefits to provide its U.S. taxpayer identification number. Special certification and other requirements apply in the case of certain Non-U.S. Holders that are intermediaries or pass-through entities for U.S. federal income tax purposes.

Each Non-U.S. Holder is urged to consult its own tax advisor about the specific methods for satisfying these requirements. A claim for exemption will not be valid if the person receiving the applicable form has actual knowledge or reason to know that the statements on the form are false.

If dividends are effectively connected with a trade or business in the United States of a Non-U.S. Holder (and, if required by an applicable income tax treaty, attributable to a U.S. permanent establishment), the Non-U.S. Holder, although exempt from the withholding tax described above (provided that the certifications described above are satisfied), generally will be subject to U.S. federal income tax on such dividends on a net income basis in the same manner as if it were a resident of the United States. In addition, if a Non-U.S. Holder is treated as a corporation for U.S. federal income tax purposes, the Non-U.S. Holder may be subject to an additional “branch profits tax” equal to 30% (unless reduced by an applicable income treaty) of its earnings and profits in respect of such effectively connected dividend income.

Non-U.S. Holders that do not timely provide us or other applicable withholding agent with the required certification but which are eligible for a reduced rate of U.S. federal withholding tax pursuant to an income tax treaty, may obtain a refund or credit of any excess amount withheld by timely filing an appropriate claim for refund with the IRS.

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Gain on Sale, Exchange or Other Taxable Disposition of Our Common Stock

Subject to the discussion below under the section titled “—Additional Withholding and Reporting Requirements”, in general, a Non-U.S. Holder will not be subject to U.S. federal income tax or withholding tax on gain realized upon such holder’s sale, exchange or other taxable disposition of our common stock unless (i) such Non-U.S. Holder is an individual who is present in the United States for 183 days or more in the taxable year of disposition, and certain other conditions are met, (ii) we are or have been a “United States real property holding corporation”, as defined in the Internal Revenue Code (a “USRPHC”), at any time within the shorter of the five-year period preceding the disposition and the Non-U.S. Holder’s holding period in the shares of our common stock, and certain other requirements are met, or (iii) such gain is effectively connected with the conduct by such Non-U.S. Holder of a trade or business in the United States (and, if required by an applicable income tax treaty, is attributable to a permanent establishment maintained by such Non-U.S. Holder in the United States).

If the first exception applies, the Non-U.S. Holder generally will be subject to U.S. federal income tax at a rate of 30% (or at a reduced rate under an applicable income tax treaty) on the amount by which such Non-U.S. Holder’s capital gains allocable to U.S. sources exceed capital losses allocable to U.S. sources during the taxable year of the disposition. If the third exception applies, the Non-U.S. Holder generally will be subject to U.S. federal income tax with respect to such gain on a net income basis in the same manner as if it were a resident of the United States and a Non-U.S. Holder that is a corporation for U.S. federal income tax purposes may also be subject to a branch profits tax with respect to any earnings and profits attributable to such gain at a rate of 30% (or at a reduced rate under an applicable income tax treaty).

Generally, a corporation is a USRPHC only if the fair market value of its U.S. real property interests (as defined in the Internal Revenue Code) equals or exceeds 50% of the sum of the fair market value of its worldwide real property interests plus its other assets used or held for use in a trade or business. Although there can be no assurance in this regard, we believe that we are not, and do not anticipate becoming, a USRPHC. However, because the determination of whether we are a USRPHC depends on the fair market value of our U.S. real property interests relative to the fair market value of other business assets, there can be no assurance that we will not become a USRPHC in the future. Even if we became a USRPHC, a Non-U.S. Holder would not be subject to U.S. federal income tax on a sale, exchange or other taxable disposition of our common stock by reason of our status as USRPHC so long as our common stock is regularly traded on an established securities market (as defined in the Internal Revenue Code) at any time during the calendar year in which the disposition occurs and such Non-U.S. Holder does not own and is not deemed to own (directly, indirectly or constructively) more than 5% of our common stock at any time during the shorter of the five year period ending on the date of disposition and the holder’s holding period. However, no assurance can be provided that our common stock will be regularly traded on an established securities market for purposes of the rules described above. Prospective investors are encouraged to consult their own tax advisors regarding the possible consequences to them if we are, or were to become, a USRPHC.

Additional Withholding and Reporting Requirements

Legislation enacted in March 2010 and related IRS and Treasury department guidance (commonly referred to as “FATCA”) will impose, in certain circumstances, U.S. federal withholding at a rate of 30% on payments of (a) dividends on our common stock on or after July 1, 2014, and (b) gross proceeds from the sale or other disposition of our common stock on or after January 1, 2017. In the case of payments made to a “foreign financial institution” as defined under FATCA (including, among other entities, an investment fund), as a beneficial owner or as an intermediary, the withholding tax generally will be imposed, subject to certain exceptions, unless such institution (i) enters into (or is otherwise subject to) and complies with an agreement with the U.S. government (a ‘‘FATCA Agreement’’) or (ii) complies with applicable foreign law enacted in connection with an intergovernmental agreement between the United States and a foreign jurisdiction (an “IGA”), in either case to, among other things, collect and provide to the U.S. or other relevant tax authorities certain information regarding U.S. account holders of such institution. In the case of payments made to a foreign

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entity that is not a foreign financial institution (as a beneficial owner), the withholding tax generally will be imposed, subject to certain exceptions, unless such foreign entity provides the withholding agent with a certification that it does not have any “substantial U.S. owner” (generally, any specified U.S. person that directly or indirectly owns more than a specified percentage of such entity) or that identifies its substantial U.S. owners. If our common stock is held through a foreign financial institution that enters into (or is otherwise subject to) a FATCA Agreement, such foreign financial institution (or, in certain cases, a person paying amounts to such foreign financial institution) generally will be required, subject to certain exceptions, to withhold such tax on payments of dividends and proceeds described above made to (x) a person (including an individual) that fails to comply with certain information requests or (y) a foreign financial institution that has not entered into (and is not otherwise subject to) a FATCA Agreement and is not required to comply with FATCA pursuant to applicable foreign law enacted in connection with an IGA.

Prospective investors should consult their own tax advisors regarding the possible impact of these rules on their investment in our common stock, and the entities through which they hold our common stock, including, without limitation, the process and deadlines for meeting the applicable requirements to prevent the imposition of this 30% withholding tax under FATCA.

Backup Withholding and Information Reporting

We must report annually to the IRS and to each Non-U.S. Holder the gross amount of the distributions on our common stock paid to the holder and the tax withheld, if any, with respect to the distributions. Non-U.S. Holders may have to comply with specific certification procedures to establish that the holder is not a United States person (as defined in the Internal Revenue Code) in order to avoid backup withholding at the applicable rate, currently 28%, with respect to dividends on our common stock. Dividends paid to Non-U.S. Holders subject to the U.S. withholding tax, as described above under the section titled “—Distributions on Our Common Stock,” generally will be exempt from U.S. backup withholding.

Information reporting and backup withholding will generally apply to the proceeds of a disposition of our common stock by a Non-U.S. Holder effected by or through the U.S. office of any broker, U.S. or foreign, unless the holder certifies its status as a Non-U.S. Holder and satisfies certain other requirements, or otherwise establishes an exemption. Generally, information reporting and backup withholding will not apply to a payment of disposition proceeds to a Non-U.S. Holder where the transaction is effected outside the United States through a non-U.S. office of a broker. However, for information reporting purposes, dispositions effected through a non-U.S. office of a broker with substantial U.S. ownership or operations generally will be treated in a manner similar to dispositions effected through a U.S. office of a broker. Prospective investors should consult their own tax advisors regarding the application of the information reporting and backup withholding rules to them.

Copies of information returns may be made available to the tax authorities of the country in which the Non-U.S. Holder resides or, in which the Non-U.S. Holder is incorporated, under the provisions of a specific treaty or agreement.

Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules from a payment to a Non-U.S. Holder can be refunded or credited against the Non-U.S. Holder’s U.S. federal income tax liability, if any, provided that an appropriate claim is timely filed with the IRS.

Federal Estate Tax

Common stock owned (or treated as owned) by an individual who is not a citizen or a resident of the United States (as defined for U.S. federal estate tax purposes) at the time of death will be included in the individual’s gross estate for U.S. federal estate tax purposes, unless an applicable estate or other tax treaty provides otherwise, and therefore, may be subject to U.S. federal estate tax.

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UNDERWRITING

We, the selling stockholders and the underwriters named below have entered into an underwriting agreement with respect to the shares being offered. Subject to certain conditions, each underwriter has severally agreed to purchase the number of shares indicated in the following table. Goldman, Sachs & Co. and Merrill Lynch, Pierce, Fenner & Smith Incorporated are representatives of the underwriters.

Underwriters	Number of Shares
Goldman, Sachs & Co
Merrill Lynch, Pierce, Fenner & Smith                        Incorporated
Credit Suisse Securities (USA) LLC
Morgan Stanley & Co. LLC
Barclays Capital Inc.
Deutsche Bank Securities Inc.
J.P. Morgan Securities LLC
Total

The underwriters are committed to take and pay for all of the shares being offered, if any are taken, other than the shares covered by the option described below unless and until this option is exercised.

If the underwriters sell more shares than the total number set forth in the table above, the underwriters have an option to purchase up to an additional              shares from the selling stockholders. They may exercise that option for 30 days. If any shares are purchased pursuant to this option, the underwriters will severally purchase shares in approximately the same proportion as set forth in the table above.

The following tables show the per share and total underwriting discounts and commissions to be paid to the underwriters by us and, if the underwriters’ option to purchase additional shares is exercised in full, the selling stockholders.

	No Exercise	Full Exercise
Per share	$	$
Total paid by us	$	$
Total paid by the selling stockholders

Shares sold by the underwriters to the public will initially be offered at the initial public offering price set forth on the cover of this prospectus. Any shares sold by the underwriters to securities dealers may be sold at a discount of up to $          per share from the initial public offering price. If all the shares are not sold at the initial public offering price, the representatives may change the offering price and the other selling terms. The offering of the shares by the underwriters is subject to receipt and acceptance and subject to the underwriters’ right to reject any order in whole or in part.

We and our officers, directors, and holders of substantially all of our common stock, have agreed with the underwriters, subject to certain exceptions, not to dispose of or hedge any of their common stock (except for shares that may be sold by the selling shareholders in this offering) or securities convertible into or exchangeable for shares of common stock during the period from the date of this prospectus continuing through the date 180 days after the date of this prospectus, except with the prior written consent of the representatives. This agreement does not apply to any existing employee benefit plans. See “Shares Eligible for Future Sale” for a discussion of certain transfer restrictions.

The 180-day restricted period described in the preceding paragraph will be automatically extended if: (1) during the last 17 days of the 180-day restricted period the Company issues an earnings release or announces material news or a material event; or (2) prior to the expiration of the 180-day restricted period, the Company

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announces that it will release earnings results during the 15-day period following the last day of the 180-day period, in which case the restrictions described in the preceding paragraph will continue to apply until the expiration of the 18-day period beginning on the issuance of the earnings release of the announcement of the material news or material event.

Prior to the offering, there has been no public market for the shares. The initial public offering price will be negotiated among the Company and the representatives. Among the factors to be considered in determining the initial public offering price of the shares, in addition to prevailing market conditions, will be the Company’s historical performance, estimates of the business potential and earnings prospects of the Company, an assessment of the Company’s management and the consideration of the above factors in relation to market valuation of companies in related businesses.

We intend to apply to list the common stock on the              under the symbol “PRTY”.

In connection with the offering, the underwriters may purchase and sell shares of common stock in the open market. These transactions may include short sales, stabilizing transactions and purchases to cover positions created by short sales. Shorts sales involve the sale by the underwriters of a greater number of shares than they are required to purchase in the offering. “Covered” short sales are sales made in an amount not greater than the underwriters’ option to purchase additional shares from the selling stockholders in the offering. The underwriters may close out any covered short position by either exercising their option to purchase additional shares or purchasing shares in the open market. In determining the source of shares to close out the covered short position, the underwriters will consider, among other things, the price of shares available for purchase in the open market as compared to the price at which they may purchase additional shares pursuant to the option granted to them. “Naked” short sales are any sales in excess of such option. The underwriters must close out any naked short position by purchasing shares in the open market. A naked short position is more likely to be created if the underwriters are concerned that there may be downward pressure on the price of the common stock in the open market after pricing that could adversely affect investors who purchase in the offering. Stabilizing transactions consist of various bids for or purchases of common stock made by the underwriters in the open market prior to the completion of the offering.

The underwriters may also impose a penalty bid. This occurs when a particular underwriter repays to the underwriters a portion of the underwriting discount received by it because the representatives have repurchased shares sold by or for the account of such underwriter in stabilizing or short covering transactions.

Purchases to cover a short position and stabilizing transactions, as well as other purchases by the underwriters for their own accounts, may have the effect of preventing or retarding a decline in the market price of the Company’s stock, and together with the imposition of the penalty bid, may stabilize, maintain or otherwise affect the market price of the common stock. As a result, the price of the common stock may be higher than the price that otherwise might exist in the open market. If these activities are commenced, they may be discontinued at any time. These transactions may be effected on the             , in the over-the-counter market or otherwise.

Neither we nor any of the underwriters make any representation or prediction as to the direction or magnitude of any effect that the transactions described above may have on the price of the Company’s common stock. In addition, neither we nor any of the underwriters make any representation that the representatives will engage in these transactions or that these transactions, once commenced, will not be discontinued without notice.

In connection with the offering, certain of the underwriters or securities dealers may distribute prospectuses by electronic means, such as e-mail. In addition, certain of the underwriters or securities dealers may facilitate Internet distribution for this offering to certain of its Internet subscription customers. Certain of the underwriters may allocate a limited number of shares for sale to online brokerage customers. An electronic prospectus is available on the Internet websites maintained by certain of the underwriters. Other than the prospectus in electronic format, the information on the underwriters’ websites are not part of this prospectus.

The underwriters do not expect sales to discretionary accounts to exceed five percent of the total number of shares offered.

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We estimate that our share of the total expenses of the offering, excluding underwriting discounts and commissions, will be approximately $        . We have agreed to reimburse the underwriters for certain expenses in an amount up to $        .

We and the selling stockholders have agreed to indemnify the several underwriters against certain liabilities, including liabilities under the Securities Act.

Other Relationships

The underwriters and their respective affiliates are full service financial institutions engaged in various activities, which may include securities trading, commercial and investment banking, financial advisory, investment management, investment research, principal investment, hedging, financing and brokerage activities. Certain of the underwriters and their respective affiliates have, from time to time, performed, and may in the future perform, various financial advisory, commercial banking and investment banking services for the issuer or its affiliates, for which they received or will receive customary fees and expenses. For instance, affiliates of certain of the underwriters are lenders, and in some cases agents or managers for the lenders under the credit facilities.

In the ordinary course of their various business activities, the underwriters and their respective affiliates may make or hold a broad array of investments and actively trade debt and equity securities (or related derivative securities) and financial instruments (including bank loans) for their own account and for the accounts of their customers, and such investment and securities activities may involve securities and/or instruments of the issuer. The underwriters and their respective affiliates may also make investment recommendations and/or publish or express independent research views in respect of such securities or instruments and may at any time hold, or recommend to clients that they acquire, long and/or short positions in such securities and instruments.

Solebury Capital LLC (“Solebury”), a FINRA member, is acting as our financial advisor in connection with the offering. We expect to pay Solebury, upon the successful completion of this offering, a fee of $         for its services, and, in our discretion, may pay Solebury an additional incentive fee of up to $        . We have also agreed to reimburse Solebury for certain expenses incurred in connection with the engagement of up to $        . Solebury is not acting as an underwriter and will not sell or offer to sell any securities and will not identify, solicit or engage directly with potential investors. In addition, Solebury will not underwrite or purchase any of the offered securities or otherwise participate in any such undertaking.

European Economic Area

In relation to each Member State of the European Economic Area which has implemented the Prospectus Directive (each, a Relevant Member State), each underwriter has represented and agreed that with effect from and including the date on which the Prospectus Directive is implemented in that Relevant Member State (the Relevant Implementation Date) it has not made and will not make an offer of shares to the public in that Relevant Member State prior to the publication of a prospectus in relation to the shares which has been approved by the competent authority in that Relevant Member State or, where appropriate, approved in another Relevant Member State and notified to the competent authority in that Relevant Member State, all in accordance with the Prospectus Directive, except that it may, with effect from and including the Relevant Implementation Date, make an offer of shares to the public in that Relevant Member State at any time:

(1) to any legal entity which is a qualified investor as defined in the Prospectus Directive;

(2) to fewer than 100 or, if the Relevant Member State has implemented the relevant provision of the 2010 PD Amending Directive, 150 natural or legal persons (other than qualified investors as defined in the Prospectus Directive), as permitted under the Prospectus Directive, subject to obtaining the prior consent of the relevant underwriter or underwriters nominated by the Issuer for any such offer; or

(3) in any other circumstances which do not require the publication by the Issuer of a prospectus pursuant to Article 3(2) of the Prospectus Directive;

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provided that no such offer of shares shall require the Issuer or any underwriter to publish a prospectus pursuant to Article 3 of the Prospectus Directive or supplement a prospectus pursuant to Article 16 of the Prospectus Directive.

For the purposes of this provision, the expression an “offer of shares to the public” in relation to any shares in any Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the offer and the shares to be offered so as to enable an investor to decide to purchase or subscribe the shares, as the same may be varied in that Relevant Member State by any measure implementing the Prospectus Directive in that Relevant Member State and the expression Prospectus Directive means Directive 2003/71/EC (and amendments thereto, including the 2010 PD Amending Directive, to the extent implemented in the Relevant Member State), and includes any relevant implementing measure in the Relevant Member State and the expression 2010 PD Amending Directive means Directive 2010/73/EU.

United Kingdom

Each underwriter has represented and agreed that:

(1) it has only communicated or caused to be communicated and will only communicate or cause to be communicated an invitation or inducement to engage in investment activity (within the meaning of Section 21 of the FSMA) received by it in connection with the issue or sale of the shares in circumstances in which Section 21(1) of the FSMA does not apply to the Issuer; and

(2) it has complied and will comply with all applicable provisions of the FSMA with respect to anything done by it in relation to the shares in, from or otherwise involving the United Kingdom.

Hong Kong

The shares may not be offered or sold by means of any document other than (1) in circumstances which do not constitute an offer to the public within the meaning of the Companies Ordinance (Cap.32, Laws of Hong Kong), or (2) to “professional investors” within the meaning of the Securities and Futures Ordinance (Cap.571, Laws of Hong Kong) and any rules made thereunder, or (iii) in other circumstances which do not result in the document being a “prospectus” within the meaning of the Companies Ordinance (Cap.32, Laws of Hong Kong), and no advertisement, invitation or document relating to the shares may be issued or may be in the possession of any person for the purpose of issue (in each case whether in Hong Kong or elsewhere), which is directed at, or the contents of which are likely to be accessed or read by, the public in Hong Kong (except if permitted to do so under the laws of Hong Kong) other than with respect to shares which are or are intended to be disposed of only to persons outside Hong Kong or only to “professional investors” within the meaning of the Securities and Futures Ordinance (Cap. 571, Laws of Hong Kong) and any rules made thereunder.

Singapore

This prospectus has not been registered as a prospectus with the Monetary Authority of Singapore. Accordingly, this prospectus and any other document or material in connection with the offer or sale, or invitation for subscription or purchase, of the shares may not be circulated or distributed, nor may the shares be offered or sold, or be made the subject of an invitation for subscription or purchase, whether directly or indirectly, to persons in Singapore other than (1) to an institutional investor under Section 274 of the Securities and Futures Act, Chapter 289 of Singapore (the “SFA”), (2) to a relevant person, or any person pursuant to Section 275(1A), and in accordance with the conditions, specified in Section 275 of the SFA or (3) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA.

Where the shares are subscribed or purchased under Section 275 by a relevant person which is: (a) a corporation (which is not an accredited investor) the sole business of which is to hold investments and the entire share capital of which is owned by one or more individuals, each of whom is an accredited investor; or (b) a trust (where the trustee is not an accredited investor) whose sole purpose is to hold investments and each beneficiary is

143

an accredited investor, shares, debentures and units of shares and debentures of that corporation or the beneficiaries’ rights and interest in that trust shall not be transferable for 6 months after that corporation or that trust has acquired the shares under Section 275 except: (1) to an institutional investor under Section 274 of the SFA or to a relevant person, or any person pursuant to Section 275(1A), and in accordance with the conditions, specified in Section 275 of the SFA; (2) where no consideration is given for the transfer; or (3) by operation of law.

Japan

The shares have not been and will not be registered under the Financial Instruments and Exchange Law of Japan (the Financial Instruments and Exchange Law) and each underwriter has agreed that it will not offer or sell any shares, directly or indirectly, in Japan or to, or for the benefit of, any resident of Japan (which term as used herein means any person resident in Japan, including any corporation or other entity organized under the laws of Japan), or to others for re-offering or resale, directly or indirectly, in Japan or to a resident of Japan, except pursuant to an exemption from the registration requirements of, and otherwise in compliance with, the Financial Instruments and Exchange Law and any other applicable laws, regulations and ministerial guidelines of Japan.

Switzerland

The shares may not be publicly offered in Switzerland and will not be listed on the SIX Swiss Exchange (“SIX”) or on any other stock exchange or regulated trading facility in Switzerland. This prospectus has been prepared without regard to the disclosure standards for issuance prospectuses under art. 652a or art. 1156 of the Swiss Code of Obligations or the disclosure standards for listing prospectuses under art. 27 ff. of the SIX Listing Rules or the listing rules of any other stock exchange or regulated trading facility in Switzerland. Neither this prospectus nor any other offering or marketing material relating to the shares or the offering may be publicly distributed or otherwise made publicly available in Switzerland.

Neither this prospectus nor any other offering or marketing material relating to the offering, the Issuer, the shares have been or will be filed with or approved by any Swiss regulatory authority. In particular, this document will not be filed with, and the offer of shares will not be supervised by, the Swiss Financial Market Supervisory Authority FINMA (“FINMA”), and the offer of shares has not been and will not be authorized under the Swiss Federal Act on Collective Investment Schemes (“CISA”). The investor protection afforded to acquirers of interests in collective investment schemes under the CISA does not extend to acquirers of shares.

Dubai International Financial Centre

This prospectus relates to an Exempt Offer in accordance with the Offered Securities Rules of the Dubai Financial Services Authority (“DFSA”). This prospectus is intended for distribution only to persons of a type specified in the Offered Securities Rules of the DFSA. It must not be delivered to, or relied on by, any other person. The DFSA has no responsibility for reviewing or verifying any documents in connection with Exempt Offers. The DFSA has not approved this prospectus nor taken steps to verify the information set forth herein and has no responsibility for the prospectus. The shares to which this prospectus relates may be illiquid and/or subject to restrictions on their resale. Prospective purchasers of the shares offered should conduct their own due diligence on the shares. If you do not understand the contents of this prospectus you should consult an authorized financial advisor.

Australia

No placement document, prospectus, product disclosure statement or other disclosure document has been lodged with the Australian Securities and Investments Commission (“ASIC”), in relation to the offering. This prospectus does not constitute a prospectus, product disclosure statement or other disclosure document under the Corporations Act 2001 (the “Corporations Act”), and does not purport to include the information required for a prospectus, product disclosure statement or other disclosure document under the Corporations Act.

144

Any offer in Australia of the shares may only be made to persons (the “Exempt Investors”) who are “sophisticated investors” (within the meaning of section 708(8) of the Corporations Act), “professional investors” (within the meaning of section 708(11) of the Corporations Act) or otherwise pursuant to one or more exemptions contained in section 708 of the Corporations Act so that it is lawful to offer the shares without disclosure to investors under Chapter 6D of the Corporations Act.

The shares applied for by Exempt Investors in Australia must not be offered for sale in Australia in the period of 12 months after the date of allotment under the offering, except in circumstances where disclosure to investors under Chapter 6D of the Corporations Act would not be required pursuant to an exemption under section 708 of the Corporations Act or otherwise or where the offer is pursuant to a disclosure document which complies with Chapter 6D of the Corporations Act. Any person acquiring shares must observe such Australian on-sale restrictions.

This prospectus contains general information only and does not take account of the investment objectives, financial situation or particular needs of any particular person. It does not contain any securities recommendations or financial product advice. Before making an investment decision, investors need to consider whether the information in this prospectus is appropriate to their needs, objectives and circumstances, and, if necessary, seek expert advice on those matters.

145

VALIDITY OF COMMON STOCK

Ropes & Gray LLP, Boston, Massachusetts, will pass for us on the validity of the shares of common stock offered by this prospectus. The underwriters are being represented by Latham & Watkins LLP, New York, New York. Ropes & Gray LLP and some attorneys of Ropes & Gray LLP are members of RGIP, LLC, which is an investor in certain investment funds sponsored by THL and often a co-investor with such funds. This investment entity directly and indirectly owns less than 1% of the outstanding equity of Party City Holdco Inc.

EXPERTS

Ernst & Young LLP, independent registered public accounting firm, has audited our consolidated financial statements and schedules at December 31, 2012 and the related consolidated statement of operations and comprehensive (loss) income, changes in stockholders’ equity and cash flows for the period from July 28, 2012 to December 31, 2012 (“Successor”) and the accompanying consolidated balance sheet as of December 31, 2011, and the related consolidated statements of operations and comprehensive (loss) income, changes in stockholders’ equity, and cash flows for the period from January 1, 2012 to July 27, 2012 and the years ended December 31, 2011 and 2010, (“Predecessor”) as set forth in their report. We’ve included our financial statements and schedules in the prospectus and elsewhere in the registration statement in reliance on Ernst & Young LLP’s report, given on their authority as experts in accounting and auditing.

WHERE YOU CAN FIND ADDITIONAL INFORMATION

We have filed with the SEC a registration statement on Form S-1 under the Securities Act that registers the shares of our common stock to be sold in this offering. This prospectus does not contain all of the information set forth in the registration statement and the exhibits and schedules filed as part of the registration statement. For further information with respect to us and our common stock, we refer you to the registration statement and the exhibits and schedules filed as a part of the registration statement. Statements contained in this prospectus concerning the contents of any contract or any other document are not necessarily complete. If a contract or document has been filed as an exhibit to the registration statement, we refer you to the copy of the contract or document that has been filed. Each statement in this prospectus relating to a contract or document filed as an exhibit is qualified in all respects by the filed exhibit.

You may read and copy the registration statement of which this prospectus is a part at the SEC’s Public Reference Room at 100 F Street, N.E., Washington D.C. 20549. You may obtain information regarding the operation of the public reference room by calling 1-800-SEC-0330. The SEC also maintains a website (http://www.sec.gov) that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC. Our website addresses are www.amscan.com and www.PartyCity.com. Our subsidiary, Amscan Holdings, currently is a voluntary filer and makes available free of charge, through www.amscan.com, its annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act, as soon as reasonably practicable after such material is electronically filed with or furnished to the SEC. The information contained on, or accessible through, these websites is not part of this prospectus, and is therefore not incorporated by reference.

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PARTY CITY HOLDCO INC. AND SUBSIDIARIES

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

AND FINANCIAL STATEMENT SCHEDULE

Consolidated Financial Statements as of December 31, 2012 and December 31, 2011 and for the Periods from July 28, 2012 to December 31, 2012 and from January 1, 2012 to July 27, 2012 and the Two Years Ended December 31, 2011
Report of Independent Registered Public Accounting Firm	F-2
Consolidated Balance Sheets at December 31, 2012 (Successor) and December 31, 2011 (Predecessor)	F-3
Consolidated Statements of Operations and Comprehensive Income (Loss) for the periods from July  28, 2012 to December 31, 2012 (Successor) and January 1, 2012 to July 27, 2012 (Predecessor) and for the years ended December 31, 2011 and 2010 (Predecessor)	F-4
Consolidated Statements of Stockholders’ Equity for the periods from July 28, 2012 to December  31, 2012 (Successor) and January 1, 2012 to July 27, 2012 (Predecessor) and for the years ended December 31, 2011 and 2010 (Predecessor)	F-5
Consolidated Statements of Cash Flows for the periods from July 28, 2012 to December  31, 2012 (Successor) and January 1, 2012 to July 27, 2012 (Predecessor), and for the years ended December 31, 2011 and 2010 (Predecessor)	F-6
Notes to Consolidated Financial Statements	F-7
Financial Statement Schedules for the Periods from July 28, 2012 to December  31, 2012 (Successor) and from January 1, 2012 to July 27, 2012 (Predecessor) and for the years ended December 31, 2011 and 2010 (Predecessor):
Schedule II—Valuation and Qualifying Accounts	F-45
Condensed Consolidated Financial Statements as of September 30, 2013 and December 31, 2012 and for the Three and Nine Months Ended September 30, 2013 and for the Periods from July 28, 2012 to September 30, 2012, July 1, 2012 to July 27, 2012 and January 1, 2012 to July 27, 2012
Condensed Consolidated Balance Sheets at September 30, 2013 (Successor) and December  31, 2012 (Successor) (Unaudited)	F-46
Condensed Consolidated Statements of Operations and Comprehensive Loss for the Three Months ended September 30, 2013 (Successor), the period from July 28, 2012 to September 30, 2012 (Successor) and the period from July 1, 2012 to July 27, 2012 (Predecessor) (Unaudited)	F-47
Condensed Consolidated Statements of Operations and Comprehensive Loss for the Nine Months ended September  30, 2013 (Successor), the period from July 28, 2012 to September 30, 2012 (Successor) and the period from January 1, 2012 to July 27, 2012 (Predecessor)	F-48
Condensed Consolidated Statements of Equity for the nine months ended September  30, 2013 (Successor) (Unaudited)	F-49
Condensed Consolidated Statements of Cash Flows for the Nine Months ended September  30, 2013 (Successor), the period from July 28, 2012 to September 30, 2012 (Successor) and the period from January 1, 2012 to July 27, 2012 (Predecessor) (Unaudited)	F-50
Notes to Unaudited Condensed Consolidated Financial Statements	F-51

All other schedules for which provision is made in the applicable accounting regulations of the Securities and Exchange Commission (“SEC”) are not required under the related instructions or are inapplicable and therefore have been omitted.

F-1

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of

Party City Holdco Inc.

We have audited the accompanying consolidated balance sheet of Party City Holdco Inc. and subsidiaries (the “Company”) as of December 31, 2012 and the related consolidated statement of operations and comprehensive (loss) income, changes in stockholders’ equity and cash flows for the period from July 28, 2012 to December 31, 2012 (“Successor”) and the accompanying consolidated balance sheet as of December 31, 2011, and the related consolidated statements of operations and comprehensive (loss) income, changes in stockholders’ equity, and cash flows for the period from January 1, 2012 to July 27, 2012 and the years ended December 31, 2011 and 2010, (“Predecessor”). Our audits also included the financial statement schedules listed in the Index. These financial statements and schedules are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and schedules based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Party City Holdco Inc. and subsidiaries at December 31, 2012 and 2011 and the consolidated results of their operations and their cash flows for the period from July 28, 2012 to December 31, 2012, the period from January 1, 2012 to July 27, 2012 and for each of the two years in the period ended December 31, 2011, in conformity with U.S. generally accepted accounting principles. Also in our opinion, the related financial statement schedules, when considered in relation to the basic financial statements takes as a whole, present fairly in all material respects the information set forth therein.

Ernst & Young LLP

New York, New York

January 21, 2014, except as to Note 2

as to which the date is XXX XX, 2014

The foregoing report is in the form that will be signed at effectiveness upon the completion of the stock split and computation of earnings per share described in Note 2 to the financial statements.

/s/ Ernst & Young LLP

New York, New York

January 21, 2014

F-2

PARTY CITY HOLDCO INC.

CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except per share amounts)

	Successor			Predecessor
	December 31, 2012			December 31, 2011
ASSETS
Current assets:
Cash and cash equivalents	$	14,563		$	22,053
Accounts receivable, net		129,339			127,122
Inventories, net		510,217			434,983
Prepaid expenses and other current assets		48,927			74,520
Total current assets		703,046			658,678
Property, plant and equipment, net		239,771			204,329
Goodwill		1,537,569			681,760
Trade names		566,536			132,722
Other intangible assets, net		160,623			47,084
Other assets, net		69,438			25,765
Total assets	$	3,276,983		$	1,750,338
LIABILITIES, REDEEMABLE COMMON SECURITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Loans and notes payable	$	33,258		$	139,282
Accounts payable		117,661			119,305
Accrued expenses		134,724			125,875
Income taxes payable		16,314			39,273
Current portion of long-term obligations		13,231			8,666
Total current liabilities		315,188			432,401
Long-term obligations, excluding current portion		1,805,028			834,310
Deferred income tax liabilities		340,288			100,183
Deferred rent and other long-term liabilities		6,824			20,414
Total liabilities		2,467,328			1,387,308
Redeemable common securities (including 888.23 and 1,210.49 common shares issued and outstanding at December 31, 2012 and December 31, 2011, respectively)		22,205			36,939
Commitments and contingencies
Stockholders’ equity:
Common stock ($0.01 par value; 32,470.70 and 30,970.02 shares issued and outstanding at December 31, 2012 and 2011, respectively)		0			0
Additional paid-in capital		808,925			286,451
Accumulated (deficit) retained earnings		(30,208	)		48,717
Accumulated other comprehensive income (loss)		6,200			(11,354	)
Party City Holdco Inc. stockholders’ equity		784,917			323,814
Noncontrolling interests		2,533			2,277
Total stockholders’ equity		787,450			326,091
Total liabilities, redeemable common securities and stockholders’ equity	$	3,276,983		$	1,750,338

See accompanying notes to consolidated financial statements.

F-3

PARTY CITY HOLDCO INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS) INCOME

(Dollars in thousands, except per common share data)

	Successor			Predecessor
	Period from July 28 to December 31, 2012			Period from January 1 to July 27, 2012			Year Ended December 31, 2011			Year Ended December 31, 2010
Revenues:
Net sales	$	964,330		$	930,903		$	1,852,869		$	1,579,677
Royalties and franchise fees		9,312			9,281			19,106			19,417
Total revenues		973,642			940,184			1,871,975			1,599,094
Expenses:
Cost of sales		636,410			574,048			1,118,973			943,058
Wholesale selling expenses		28,096			31,568			57,905			42,725
Retail operating expenses		172,168			166,047			325,332			296,891
Franchise expenses		6,128			6,579			13,685			12,269
General and administrative expenses		65,890			101,502			138,074			134,392
Art and development costs		8,201			10,824			16,636			14,923
Impairment of trade name		0			0			0			27,400
Total expenses		916,893			890,568			1,670,605			1,471,658
Income from operations		56,749			49,616			201,370			127,436
Interest expense, net		62,062			41,970			77,743			40,850
Other expense, net		26,157			22,245			1,476			4,208
(Loss) income before income taxes		(31,470	)		(14,599	)		122,151			82,378
Income tax (benefit) expense		(1,322	)		403			45,741			32,945
Net (loss) income		(30,148	)		(15,002	)		76,410			49,433
Less: net income attributable to noncontrolling interests		60			96			135			114
Net (loss) income attributable to Party City Holdco Inc.	$	(30,208	)	$	(15,098	)	$	76,275		$	49,319
Net income per common share—basic	$			$			$			$
Net income per common share—diluted	$			$			$			$
Weighted-average number of common shares—basic
Weighted-average number of common shares—diluted
Other comprehensive income (loss), net of tax:
Foreign currency adjustments	$	6,481		$	(1,272	)	$	(7,404	)	$	(315	)
Cash flow hedges		(225	)		53			1,795			2,856
Other comprehensive income (loss), net		6,256			(1,219	)		(5,609	)		2,541
Comprehensive (loss) income		(23,892	)		(16,221	)		70,801			51,974
Less: comprehensive income (loss) attributable to noncontrolling interest		116			140			(35	)		175
Comprehensive (loss) income attributable to Party City Holdco Inc.	$	(24,008	)	$	(16,361	)	$	70,836		$	51,799

See accompanying notes to consolidated financial statements.

F-4

PARTY CITY HOLDCO INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

For the Years Ended December 31, 2010 and 2011 (Predecessor), the Period from January 1, 2012 to July 27, 2012 (Predecessor) and the Period from July 28, 2012 to December 31, 2012 (Successor)

	Common Shares		Common Stock		Additional Paid-in Capital			(Deficit) Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Party City Holdco Inc. Stockholders’ Equity			Non- controlling Interests			Total
	(Dollars in thousands)
Predecessor:
Balance at December 31, 2009		30,226.50	$	0	$	335,823		$	149,557		$	(8,395	)	$	476,985		$	2,137		$	479,122
Net income									49,319						49,319			114			49,433
Foreign currency adjustments												(376	)		(376	)		61			(315	)
Impact of interest rate swap contracts, net												2,563			2,563						2,563
Impact of foreign exchange contracts, net												293			293						293
Revaluation of redeemable common securities						(5,305	)								(5,305	)					(5,305	)
Issuance of non-redeemable warrants						21,000									21,000						21,000
Dividend distribution						(64,658	)		(226,434	)					(291,092	)					(291,092	)
Equity based compensation expense						723									723						723
Balance at December 31, 2010		30,226.50	$	0	$	287,583		$	(27,558	)	$	(5,915	)	$	254,110		$	2,312		$	256,422
Net income									76,275						76,275			135			76,410
Foreign currency adjustments												(7,234	)		(7,234	)		(170	)		(7,404	)
Impact of interest rate swap contracts, net												1,414			1,414						1,414
Impact of foreign exchange contracts, net												381			381						381
Exercise of warrants to redeemable common stock						(4	)								(4	)					(4	)
Exercise of stock options to redeemable common stock						(248	)								(248	)					(248	)
Exercise of non-redeemable warrants		740.74
Exercise of non-redeemable common stock options		2.78				28									28						28
Equity based compensation expense						1,281									1,281						1,281
Revaluation of redeemable shares						(2,189	)								(2,189	)					(2,189	)
Balance at December 31, 2011		30,970.02	$	0	$	286,451		$	48,717		$	(11,354	)	$	323,814		$	2,277		$	326,091
Net (loss) income									(15,098	)					(15,098	)		96			(15,002	)
Foreign currency adjustments												(1,316	)		(1,316	)		44			(1,272	)
Impact of foreign exchange contracts, net												53			53						53
Revaluation of redeemable shares						(23,000	)								(23,000	)					(23,000	)
Excess tax benefit from stock options						32,292									32,292						32,292
Equity based compensation expense						2,600									2,600						2,600
Balance at July 27, 2012		30,970.02	$	0	$	298,343		$	33,619		$	(12,617	)	$	319,345		$	2,417		$	321,762
Successor:
Balance at July 28, 2012		32,470.70	$	0	$	808,365		$	0		$	0		$	808,365		$	2,417		$	810,782
Net (loss) income									(30,208	)					(30,208	)		60			(30,148	)
Foreign currency adjustments												6,425			6,425			56			6,481
Excess tax benefit from stock options						560									560						560
Impact of foreign exchange contracts, net												(225	)		(225	)					(225	)
Balance at December 31, 2012		32,470.70	$	0	$	808,925		$	(30,208	)	$	6,200		$	784,917		$	2,533		$	787,450

See accompanying notes to consolidated financial statements.

F-5

PARTY CITY HOLDCO INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in thousands)

	Successor			Predecessor
	Period from July 28 to December 31, 2012			Period from January 1 to July 27, 2012			Year Ended December 31, 2011			Year Ended December 31, 2010
Cash flows (used in) provided by operating activities:
Net (loss) income	$	(30,148	)	$	(15,002	)	$	76,410		$	49,433
Less: net income attributable to noncontrolling interests		60			96			135			114
Net (loss) income attributable to Party City Holdco Inc.		(30,208	)	$	(15,098	)		76,275			49,319
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:
Depreciation and amortization expense		49,837			33,915			59,631			49,418
Amortization of deferred financing costs		4,605			2,592			4,500			2,475
Provision for doubtful accounts		801			644			1,773			637
Deferred income tax (benefit) expense		(22,163	)		3,823			5,208			(8,942	)
Deferred rent		6,335			3,344			7,467			4,500
Undistributed income in unconsolidated joint venture		(297	)		(128	)		(463	)		(678	)
Impairment of trade names		0			0			0			27,400
Impairment of fixed assets		71			0			87			597
(Gain) loss on disposal of equipment		(9	)		9			(171	)		191
Equity based compensation		0			3,375			1,397			6,018
Debt retirement costs		0			0			0			2,448
Changes in operating assets and liabilities, net of effects of acquired businesses:
(Increase) decrease in accounts receivable		(7,002	)		3,995			(8,006	)		(6,507	)
Decrease (increase) in inventories		94,714			(77,264	)		14,979			(85,767	)
Decrease (increase) in prepaid expenses and other current assets		10,050			(7,107	)		(9,876	)		(22,993	)
(Decrease) increase in accounts payable, accrued expenses and income taxes payable		(148,578	)		29,774			8,463			43,052
Net cash (used in) provided by operating activities		(41,844	)		(18,126	)		161,264			61,168
Cash flows used in investing activities:
Cash paid in connection with acquisitions, net of cash acquired		(1,562,246	)		(3,106	)		(95,624	)		(53,348	)
Capital expenditures		(16,376	)		(28,864	)		(44,483	)		(49,623	)
Proceeds from disposal of property and equipment		69			146			1,198			205
Net cash used in investing activities		(1,578,553	)		(31,824	)		(138,909	)		(102,766	)
Cash flows provided by (used in) financing activities:
Repayment of loans, notes payable and long-term obligations		(1,169,100	)		(9,564	)		(29,215	)		(393,289	)
Proceeds from loans, notes payable and long-term obligations		2,028,051			10,590			8,197			742,153
Excess tax benefit from stock options		560			32,292			0			0
Payments related to redeemable common stock and rollover options		0			0			0			(572	)
Dividend distribution		0			0			0			(301,829	)
Capital contributions and proceeds from exercise of stock options		833,934			0			1,234			52
Debt issuance costs		(64,114	)		0			0			0
Net cash provided by (used in) financing activities		1,629,331			33,318			(19,784	)		46,515
Effect of exchange rate changes on cash and cash equivalents		128			80			(972	)		117
Net increase (decrease) in cash and cash equivalents		9,062			(16,552	)		1,599			5,034
Cash and cash equivalents at beginning of period		5,501			22,053			20,454			15,420
Cash and cash equivalents at end of period	$	14,563		$	5,501		$	22,053		$	20,454
Supplemental disclosure of cash flow information:
Cash paid during the period
Interest	$	25,508		$	41,396		$	69,470		$	38,363
Income taxes, net of (refunds)	$	(7,749	)	$	6,165		$	35,090		$	39,743

Supplemental information on non-cash activities:

Capital lease obligations of $1,275, $330, $2,008, and $619 were incurred during the period from July 28, 2012 to December 31, 2012, the period from January 1, 2012 to July 27, 2012 and for the years ended December 31, 2011 and 2010, respectively.

See accompanying notes to consolidated financial statements.

F-6

PARTY CITY HOLDCO INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share)

Note 1—Organization, Description of Business and Basis of Presentation

Party City Holdco Inc. (the “Company” or “Party City Holdco”) designs, manufactures, contracts for manufacture and distributes party goods, including paper and plastic tableware, metallic and latex balloons, accessories, novelties, costumes, other garments, gifts and stationery throughout the world. In addition, the Company operates specialty retail party supply stores in the United States and Canada, principally under the names Party City and Halloween City, and the Company operates an e-commerce website, PartyCity.com. The Company also franchises both individual stores and franchise areas throughout the United States and Puerto Rico, principally under the name Party City.

The Company has no assets or operations. The Company owns 100% of PC Nextco Holdings, LLC (“PC Nextco”), which owns 100% of PC Intermediate Holdings, Inc. (“PC Intermediate”). PC Intermediate owns 100% of Party City Holdings Inc. (“Party City Holdings”).

On July 27, 2012, PC Merger Sub, Inc. (“Merger Sub”), a wholly-owned subsidiary of PC Intermediate, merged into Party City Holdings, with Party City Holdings being the surviving entity (“the Transaction”). At such time 100% of Party City Holdco, which was formed in order to affect the Transaction, was owned by a collaborative group consisting of funds affiliated with Thomas H. Lee Partners, L.P. (“THL”), 70% ownership, funds affiliated with Advent International Corporation (“Advent”), 24% ownership, and other minority investors, including management, 6% ownership. Prior to the Transaction, Party City Holdings was owned by Berkshire Partners LLC, Weston Presidio Capital, Advent, and other minority investors, including management. THL did not own any portion of Party City Holdings prior to the Transaction. See Note 5 for further discussion.

Party City Holdco and PC Intermediate were formed during May 2012 for the purpose of affecting the Transaction. PC Nextco was formed during 2013. As a result of the Transaction, the financial information for the period after July 27, 2012 represents the financial information of the “Successor” company. Prior to, and including, July 27, 2012, the consolidated financial statements include the accounts of the “Predecessor” company. Financial information in the Predecessor period principally relates to Party City Holdings and its subsidiaries. Additionally, it includes the activity of Party City Holdco and PC Intermediate subsequent to their incorporation during May 2012. Due to the change in the basis of accounting resulting from the application of the acquisition method of accounting and push-down accounting, the Predecessor’s consolidated financial statements and the Successor’s consolidated financial statements are not necessarily comparable.

Note 2—Summary of Significant Accounting Policies

Consolidated Financial Statements

The consolidated financial statements of the Company include the accounts of all majority-owned subsidiaries and controlled entities. All significant intercompany balances and transactions have been eliminated.

The Company’s retail operations define a fiscal year (“Fiscal Year”) as the 52-week period or 53-week period ended on the Saturday nearest December 31st of each year, and define their fiscal quarters (“Fiscal Quarter”) as the four interim 13-week periods following the end of the previous Fiscal Year, except in the case of a 53-week Fiscal Year when the fourth Fiscal Quarter is extended to 14 weeks. The consolidated financial statements of the Company combine the Fiscal Year and Fiscal Quarters of the Company’s retail operations with the calendar year and calendar quarters of the Company’s wholesale operations, as the differences are not significant.

F-7

Use of Estimates

The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates. Management periodically evaluates estimates used in the preparation of the consolidated financial statements for continued reasonableness. Appropriate adjustments, if any, to the estimates used are made prospectively based on such periodic evaluations.

Cash Equivalents

Highly liquid investments with a maturity of three months or less when purchased are considered to be cash equivalents.

Inventories

Inventories are valued at the lower of cost or market.

The Company determines the cost of inventory at its retail stores using the weighted average method. All other inventory cost is determined principally using the first-in, first-out method.

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

Allowance for Doubtful Accounts

The Company maintains allowances for doubtful accounts for estimated losses resulting from the inability of the Company’s customers to make required payments. A considerable amount of judgment is required in assessing the ultimate realization of these receivables, including consideration of the Company’s history of receivable write-offs, the level of past due accounts and the economic status of the Company’s customers. In an effort to identify adverse trends relative to customer economic status, the Company assesses the financial health of the markets it operates in and performs periodic credit evaluations of its customers and ongoing reviews of account balances and aging of receivables. Amounts are considered past due when payment has not been received within the time frame of the credit terms extended. Write-offs are charged directly against the allowance for doubtful accounts and occur only after all collection efforts have been exhausted. At December 31, 2012 and December 31, 2011, the allowance for doubtful accounts was $706 and $3,877, respectively.

Long-Lived and Intangible Assets (including Goodwill)

Property, plant and equipment are stated at cost. Equipment under capital leases are stated at the present value of the minimum lease payments at the inception of the lease. Depreciation is calculated principally on the straight-line method over the estimated useful lives of the assets. Leasehold improvements are amortized on a straight-line basis over the shorter of the lease term or the estimated useful life of the asset.

The Company reviews the recoverability of its finite long-lived assets, including finite-lived intangible assets, whenever facts and circumstances indicate that the carrying amount may not be fully recoverable. For purposes of recognizing and measuring impairment, the Company evaluates long-lived assets other than goodwill based upon the lowest level of independent cash flows ascertainable to evaluate impairment. If the sum of the undiscounted future cash flows expected over the remaining asset life is less than the carrying value of the assets, the Company may recognize an impairment loss. The impairment related to long-lived assets is measured as the amount by which the carrying amount of the asset exceeds the fair value of the asset.

F-8

In the evaluation of the fair value and future benefits of finite long-lived assets attached to retail stores, the Company performs its cash flow analysis on a store-by-store basis. Various factors including future sales growth and profit margins are included in this analysis.

Goodwill represents the excess of the purchase price of acquired companies over the estimated fair value of the net assets acquired. Goodwill and other intangibles with indefinite lives are not amortized, but are reviewed for impairment annually or more frequently if certain indicators arise. The Company evaluates the goodwill associated with its acquisitions, and other intangibles with indefinite lives, as of the first day of its fourth quarter based on current and projected performance. For purposes of testing goodwill for impairment, reporting units are determined by identifying individual components within the Company’s organization which constitute a business for which discrete financial information is available and is reviewed by management. Components within a segment are aggregated to the extent that they have similar economic characteristics. Based on this evaluation, the Company has determined that its operating segments, wholesale and retail, represent reporting units for the purposes of its goodwill impairment test.

If necessary, the Company estimates the fair value of each reporting unit using expected discounted cash flows. If the carrying amount of a reporting unit exceeds its fair value, the excess, if any, of the fair value of the reporting unit over amounts allocable to the unit’s other assets and liabilities is the implied fair value of goodwill. If the carrying amount of a reporting unit’s goodwill exceeds the implied fair value of that goodwill, an impairment loss will be recognized in an amount equal to that excess. The fair value of a reporting unit refers to the amount at which the unit as a whole could be sold in a current transaction between willing parties.

During 2010, the Company evaluated the conversion of approximately 20 of its Factory Card & Party Outlet (“FCPO”) stores to the Party City name and, based on the results, the Company concluded during the fourth quarter of 2010 that it would convert the remaining FCPO non-outlet stores, over time, to the Party City name. The Company performed an impairment test and determined that the FCPO trade name of $27,400 became fully impaired during the fourth quarter of 2010 and impaired the entire amount of the trade name. The fair value calculation utilized Level 3 fair value inputs, as defined in Note 17.

Deferred Financing Costs

Deferred financing costs are amortized to interest expense over the lives of the debt using the effective interest method.

Deferred Rent and Rental Expenses

The Company leases its retail stores under operating leases that generally have initial terms of ten years, with two five year renewal options. The Company’s leases may have early cancellation clauses, which permit the lease to be terminated if certain sales levels are not met in specific periods, and may provide for the payment of contingent rent based on a percentage of the store’s net sales. The Company’s lease agreements generally have defined escalating rent provisions, which are reported as a deferred rent liability and expensed on a straight-line basis over the term of the related lease, commencing with the date of possession. In addition, the Company may receive cash allowances from its landlords on certain properties, which are reported as deferred rent and amortized to rent expense over the term of the lease, also commencing with the date of possession. The deferred rent liability at December 31, 2012 and 2011 was $6,335 and $18,425, respectively.

Investments

The Company maintains a 49.9% interest in Convergram Mexico, a joint venture distributing metallic balloons, principally in Mexico and Latin America. The Company accounts for its investment in the joint venture using the equity method. The Company’s investment in the joint venture is included in other assets on the consolidated balance sheet and the results of the joint venture’s operations are included in other expense (income) on the consolidated statement of operations and comprehensive income (loss) (see Note 10).

F-9

Insurance Accruals

The Company maintains certain self-insured workers’ compensation and general liability insurance plans. The Company estimates the required liability for claims under such plans based upon various assumptions, which include, but are not limited to, historical loss experience, projected loss development factors, actual payroll and other data. The required liability is also subject to adjustment in the future based upon changes in claims experience, including changes in the number of incidents (frequency) and changes in the ultimate cost per incident (severity).

Revenue Recognition

The Company’s terms of sale to retailers and other distributors for substantially all of its sales is free-on-board (“F.O.B.”) shipping point and, accordingly, title and the risks and rewards of ownership are transferred to the customer, and revenue is recognized, when goods are shipped. The Company estimates reductions to revenues for volume-based rebate programs at the time sales are recognized. Wholesale sales returns are not significant as, generally, we only accept the return of goods that were shipped to retailers in error. Revenue from retail operations is recognized at the point of sale. The Company estimates future retail sales returns and records a provision in the period that the related sales are recorded based on historical information. Retail sales are reported net of taxes collected.

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

Cost of Sales

Cost of sales at wholesale reflects the production costs (i.e., raw materials, labor and overhead) of manufactured goods and the direct cost of purchased goods, inventory shrinkage, inventory adjustments, inbound freight to the Company’s manufacturing and distribution facilities, distribution costs and outbound freight to transfer goods to the Company’s wholesale customers. At retail, cost of sales reflects the direct cost of goods purchased from third parties and the production or purchase costs of goods acquired from the Company’s wholesale operations. Retail cost of sales also includes inventory shrinkage, inventory adjustments, inbound freight, occupancy costs related to store operations, such as rent and common area maintenance, utilities and depreciation on assets, and all logistics costs (i.e., procurement, handling and distribution costs) associated with the Company’s e-commerce business. As a result of the Transaction (see Note 1), the Company applied the acquisition method of accounting and increased the value of its inventory by $89,754 as of July 28, 2012. The adjustment principally reflects the previously deferred wholesale margin on inventory supplied to the Company’s retail operations at July 27, 2012. Such adjustment increased the Company’s cost of sales during the period from July 28, 2012 to December 31, 2012 by $58,626 as a portion of the related inventory was sold.

Retail Operating Expenses

Retail operating expenses include the costs and expenses associated with the operation of the Company’s retail stores, with the exception of occupancy costs included in cost of sales. Retail operating expenses principally consist of employee compensation and benefits, advertising, supplies expense and credit card and banking fees.

Shipping and Handling

Outbound shipping costs billed to customers are included in net sales. The costs of shipping and handling incurred by the Company are included in cost of sales.

F-10

Store Closure Costs

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

Product Royalty Agreements

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

Catalogue Costs

The Company expenses costs associated with the production of catalogues when incurred.

Advertising

Advertising costs are expensed as incurred. Retail advertising expenses for the period from July 28, 2012 to December 31, 2012, the period from January 1, 2012 to July 27, 2012 and the years ended December 31, 2011 and 2010 were $34,434, $30,068, $65,914 and $53,256, respectively.

Art and Development Costs

Art and development costs are primarily internal costs that are not easily associated with specific designs, some of which may not reach commercial production. Accordingly, the Company expenses these costs as incurred.

Derivative Financial Instruments

The Company accounts for derivative financial instruments pursuant to Accounting Standards Codification (“ASC”) Topic 815, “Accounting for Derivative Instruments and Hedging Activities.” ASC Topic 815 requires that all derivative financial instruments be recognized on the balance sheet at fair value and establishes criteria for both the designation and effectiveness of hedging activities. The Company uses derivatives in the management of interest rate and foreign currency exposure. ASC Topic 815 requires the Company to formally document the assets, liabilities or other transactions the Company designates as hedged items, the risk being hedged and the relationship between the hedged items and the hedging instruments. The Company must measure the effectiveness of the hedging relationship at the inception of the hedge and on an on-going basis.

If derivative financial instruments qualify as fair value hedges, the gain or loss on the instrument and the offsetting loss or gain on the hedged item attributable to the hedged risk are recognized in current earnings during the period of the change in fair values. For derivative financial instruments that qualify as cash flow hedges (i.e., hedging the exposure to variability in expected future cash flows that is attributable to a particular risk), the effective portion of the gain or loss on the derivative instrument is reported as a component of other comprehensive income and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings. The ineffective portion of a cash flow hedge, if any, is determined based on the dollar-offset method (i.e., the gain or loss on the derivative financial instrument in excess of the cumulative change in the present value of future cash flows of the hedged item) and is recognized in current earnings during the period of change. As long as hedge effectiveness is maintained, interest rate swap arrangements and foreign currency exchange agreements qualify for hedge accounting as cash flow hedges (see Note 18).

F-11

Income Taxes

The Company accounts for income taxes in accordance with the provisions of ASC Topic 740, “Accounting for Income Taxes.” Under the asset and liability method of ASC Topic 740, deferred tax assets and liabilities are determined based on the difference between the financial statement and tax bases of assets and liabilities and operating loss and tax credit carryforwards applying enacted statutory tax rates in effect for the year in which the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance when, in the judgment of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized.

Stock-Based Compensation

Accounting for stock-based compensation requires measurement of compensation cost for all stock-based awards at fair value on the date of grant and recognition of compensation over the service period for awards expected to vest. The value of the Company’s stock-based awards is recognized as expense over the service period, net of estimated forfeitures.

Accumulated Other Comprehensive Income (Loss)

Accumulated other comprehensive income (loss) consists of the Company’s foreign currency adjustments and the impact of interest rate swap and foreign exchange contracts that qualify as hedges (see Notes 18 and 19).

Foreign Currency Transactions and Translation

The functional currencies of the Company’s foreign operations are the local currencies in which they operate. Foreign currency exchange gains or losses resulting from receivables or payables in currencies other than the functional currencies generally are credited or charged to operations. The balance sheets of foreign subsidiaries are translated into U.S. dollars at the exchange rates in effect on the balance sheet date. The results of operations of foreign subsidiaries are translated into U.S. dollars at the average exchange rates effective for the periods presented. The differences from historical exchange rates are recorded as comprehensive income (loss) and are included as a component of accumulated other comprehensive income (loss).

Earnings Per Share

Basic earnings per share are computed by dividing net income available for common stockholders by the weighted average number of common shares outstanding for the period. Diluted earnings per share are calculated based on the weighted average number of outstanding common shares plus the dilutive effect of stock options as if they were exercised.

A reconciliation between basic and diluted income per share is as follows:

	Period from July 28, 2012 to December 31, 2012 (Successor)			Period from January 1, 2012 to July 27, 2012 (Predecessor)			Year Ended December 31, 2011 (Predecessor)		Year Ended December 31, 2010 (Predecessor)
Net (loss) income available for common stockholders	$	(30,208	)	$	(15,098	)	$	76,275	$	49,319
Weighted average shares of Common Stock
Shares used in net (loss) income per common share—basic
Effect of dilutive securities:
Stock options and warrants
Dilutive potential common shares
Shares used in net (loss) income per common share—diluted
Net (loss) income per common share—basic	$			$			$		$
Net (loss) income per common share—diluted	$			$			$		$

F-12

All earnings per share amounts and number of shares outstanding have been retroactively adjusted to give effect to a -for-1 split of the Company’s common stock that was affected                     , 2013.

Recently Issued Accounting Pronouncements

In July 2012, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2012-02, “Intangibles—Goodwill and Other (Topic 350), Testing Indefinite-Lived Intangible Assets for Impairment”. Under the ASU, an entity has the option to first assess qualitative factors to determine whether it is more likely than not that an indefinite-lived intangible asset is impaired. If an entity determines that it is not more likely than not that an impairment has taken place, it does not need to calculate the fair value of the asset. However, if an entity concludes otherwise, then it is required to calculate the fair value of the asset, compare that value with its carrying amount and record an impairment charge, if any. The ASU is effective for interim and annual impairment tests performed for fiscal years beginning after September 15, 2012. The Company early adopted the pronouncement during the period from July 28, 2012 to December 31, 2012 and the adoption did not have a material impact on its consolidated financial statements.

In December 2011, the FASB issued ASU 2011-11, “Balance Sheet (Topic 210), Disclosures about Offsetting Assets and Liabilities”. Additionally, in January 2013, the FASB issued ASU 2013-01, “Balance Sheet (Topic 210), Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities”. The pronouncements require an entity to disclose information about offsetting and related arrangements to enable users of its financial statements to understand the effect of those arrangements on its financial position. The pronouncements are effective during interim and annual periods beginning on or after January 1, 2013. Although the Company continues to review the pronouncements, the Company does not believe that they will have a material impact on the Company’s consolidated financial statements or the notes thereto.

In September 2011, the FASB issued ASU 2011-05, “Comprehensive Income (Topic 220), Presentation of Comprehensive Income”. The pronouncement gives two choices of how to present items of net income, items of other comprehensive income and total comprehensive income: one continuous statement of comprehensive income or two separate consecutive statements can be presented. The guidance also required the reclassification adjustments for each component of accumulated other comprehensive income to be displayed in both net income and other comprehensive income. However, in December 2011, the FASB issued ASU 2011-12, “Comprehensive Income (Topic 220): Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05”, which deferred such requirement. In February 2013, the FASB issued ASU 2013-02, “Comprehensive Income (Topic 220), Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income”. The pronouncement requires companies to report, in one place, information about reclassifications out of accumulated other comprehensive income. Additionally, it requires companies to report changes in accumulated other comprehensive income balances. The Company adopted ASU 2011-05 during 2012 and chose the single continuous statement approach. Since ASU 2011-05 only required a change in presentation, the adoption did not have a material impact on the Company’s results of operations, cash flows or financial condition. For public companies, ASU 2013-02 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2012. Since the update only impacts presentation and disclosure, the Company does not expect that the adoption of the pronouncement will have a material impact on its results of operations, cash flows or financial condition.

In May 2011, the FASB issued ASU 2011-04, “Fair Value Measurement (Topic 820), Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and International Financial Reporting Standards, or “IFRS”. The ASU amends the fair value measurement and disclosure guidance in Accounting Standards Codification 820, “Fair Value Measurement”, to converge U.S. GAAP and IFRS requirements for measuring amounts at fair value as well as disclosures about these measurements. Many of the amendments clarify existing concepts and are generally not expected to result in significant changes to application of fair value principles. In certain instances, however, the FASB changed a principle to achieve convergence, and while limited, these amendments have the potential to significantly change practice. These

F-13

amendments were effective during interim and annual periods beginning after December 15, 2011. The Company adopted the pronouncement during 2012. Such adoption did not have a material impact on the Company’s consolidated financial statements or the notes thereto.

Note 3—Inventories, Net

Inventories consisted of the following:

	December 31,
	2012 (Successor)		2011 (Predecessor)
Finished goods	$	490,241	$	415,311
Raw materials		13,822		13,660
Work in process		6,154		6,012
	$	510,217	$	434,983

As a result of the Transaction (see Note 1 and Note 5), the Company applied the acquisition method of accounting and increased the value of its inventory by $89,754 as of July 28, 2012. The adjustment principally reflects the previously deferred wholesale margin on inventory supplied to the Company’s retail operations at July 27, 2012. Such adjustment increased the Company’s cost of sales during the period from July 28, 2012 to December 31, 2012 by $58,626 as a portion of the related inventory was sold. At December 31, 2012, $31,128 of the adjustment was included in finished goods.

Note 4—Property, Plant and Equipment, Net

Property, plant and equipment, net consisted of the following:

	December 31,
	2012 (Successor)			2011 (Predecessor)			Useful lives
Machinery and equipment	$	69,273		$	131,209			3-15 years
Buildings		68,844			53,138			40 years
Data processing		22,293			77,471			3-5 years
Leasehold improvements		37,299			83,614			1-10 years
Furniture and fixtures		71,701			128,967			5-10 years
Land		7,342			6,494
		276,752			480,893
Less: accumulated depreciation		(36,981	)		(276,564	)
	$	239,771		$	204,329

Depreciation and amortization expense related to property, plant and equipment, including assets under capital leases, was $35,677, $28,373, $48,515 and $39,073 for the period from July 28, 2012 to December 31, 2012, the period from January 1, 2012 to July 27, 2012 and the years ended December 31, 2011 and 2010, respectively.

As a result of the Transaction (see Note 1 and Note 5), the Company applied the acquisition method of accounting and recorded its property, plant and equipment at fair value, $257,266, at July 28, 2012.

Note 5—Acquisitions

The Transaction

On July 27, 2012, Merger Sub, a wholly-owned subsidiary of PC Intermediate, which is a wholly-owned subsidiary of Party City Holdco, merged into Party City Holdings, with Party City Holdings being the surviving

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entity through the Transaction. At such time 100% of Party City Holdco, which was formed in order to affect the Transaction, was owned by a collaborative group consisting of funds affiliated with THL, 70% ownership, funds affiliated with Advent, 24% ownership, and other minority investors, including management, 6% ownership. Prior to the Transaction, Party City Holdings was owned by Berkshire Partners LLC, Weston Presidio Capital, Advent, and other minority investors, including management. THL did not own any portion of Party City Holdings prior to the Transaction. As the collaborative group acquired 100% of Party City Holdings, push-down accounting was required.

The consideration was paid in cash and was funded by a combination of equity and debt financing. The consideration was equal to:

	$	2,690,000
plus: Party City Holdings’ cash (as defined in the merger agreement):		6,650
plus: the aggregate strike price of vested stock options (see Note 12 for further discussion):		52,080
plus: working capital adjustment (as defined in the merger agreement):		8,540
less: Party City Holdings’ debt (as defined in the merger agreement):		(994,510	)
less: Transaction-related costs of the “Predecessor” company:		(35,630	)
Merger consideration to former owners:	$	1,727,130

The amount of cash paid in connection with acquisitions, net of cash acquired on the Company’s consolidated statement of cash flows for the period from July 28, 2012 to December 31, 2012, $1,562,246, represents the portion of the merger consideration that was received by Party City Holdings’ former owners. The difference between such amount and the merger consideration represents payments to the holders of vested stock options and payments in lieu of dividends on vested stock options (please see Note 12 for a discussion of the impact of the Transaction on stock options and payments in lieu of dividends). Such payments are included in decrease in accounts payable, accrued expenses and income taxes payable on the Company’s consolidated statement of cash flows for the period from July 28, 2012 to December 31, 2012.

Prior to the Transaction, Amscan Holdings, Inc. (“Amscan Holdings”) was a wholly-owned subsidiary of Party City Holdings. At the time of the Transaction, Amscan Holdings was merged into Party City Holdings. Amounts outstanding under Amscan Holdings’ $350,000 ABL revolving credit facility (“Old ABL Facility”) and its $675,000 Term Loan Agreement (“Old Term Loan Credit Agreement”) were repaid in conjunction with the closing of the Transaction. At such time, Party City Holdings entered into a new $400,000 ABL revolving credit facility (“New ABL Facility”) and Party City Holdings and Party City Corporation, a wholly-owned subsidiary of Party City Holdings, entered into a new $1,125,000 Term Loan Agreement (“New Term Loan Credit Agreement”). Additionally, in conjunction with the Transaction, on July 27, 2012, Party City Holdings issued $700,000 of 8.875% senior notes (the “Senior Notes”). See Notes 7 and 8 for further detail. Also, in connection with the Transaction, Amscan Holdings commenced a cash tender offer for any and all of its outstanding $175,000 8.75% Senior Subordinated Notes due 2014 (the “Tender Offer”). The total consideration included an early tender payment and the tender offer consideration. The early tender payment equaled $30 per $1,000 principal amount of notes tendered and accepted for payment. The Tender Offer consideration equaled $973.75 per $1,000 principal amount of notes tendered and accepted for payment, plus accrued and unpaid interest. Approximately $115,800 aggregate principal amount of the notes were validly tendered. On August 27, 2012, all remaining outstanding notes not tendered pursuant to the Tender Offer were redeemed. The notes were redeemed at a price of 100% of the principal amount plus accrued and unpaid interest on the principal amount.

In conjunction with the Transaction, Party City Holdings incurred $28,052 of transaction costs during the period from January 1, 2012 to July 27, 2012. Of such amount, $19,669, relating principally to banker fees, was recorded in other expense, net in the Company’s consolidated statement of operations and comprehensive loss. The remaining $8,383 was recorded as compensation expense in general and administrative expenses in the Company’s consolidated statement of operations and comprehensive loss. Additionally, the Transaction accelerated the vesting of certain of Party City Holdings’ stock options and, as a result, the Company recorded $2,149 of stock-based

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compensation expense in general and administrative expenses in the Company’s consolidated statement of operations and comprehensive loss. Further, due to the vesting of such stock options, Party City Holdings made payments in lieu of dividends to the holders of such options and recorded a $16,148 charge in general and administrative expenses in the Company’s consolidated statement of operations and comprehensive loss. The transaction costs payments, stock option payments and payments in lieu of dividends are included in the decrease in accounts payable, accrued expenses and income taxes payable in the Company’s July 28, 2012 to December 31, 2012 consolidated statement of cash flows. See Note 12 for further detail on the stock option and dividend charges.

Additionally, in conjunction with the Transaction, Party City Holdco incurred $4,564 of third-party costs, principally attorney and banker fees. The amount was recorded in other expense, net in the Company’s consolidated statement of operations and comprehensive loss for the period from July 28, 2012 to December 31, 2012. Also, at the time of the Transaction, Party City Holdco paid THL and Advent a non-recurring $20,000 fee for certain services that were performed in conjunction with the execution of the Transaction. The amount was recorded in other expense, net in the Company’s consolidated statement of operations and comprehensive loss for the period from July 28, 2012 to December 31, 2012.

The Transaction represented a business combination and the Company applied the acquisition method of accounting and recorded $741,066 of intangible assets. See Note 6 for further detail. The excess of the purchase price over the fair value of the net assets acquired was assigned to goodwill. Of the total amount, $1,041,388 was assigned to the Retail segment and $493,149 was assigned to the Wholesale segment. None of the goodwill is deductible for tax purposes. Goodwill arises due to the Company’s vertically integrated structure as, during 2011, 63.6% of the Company’s Party City branded store sales were products supplied by the Company’s wholesale operations. The vertically integrated structure enhances the Company’s profitability as the Company realizes the wholesale-to-retail margin on a significant portion of its retail sales. However, the structure limits the values of certain identifiable intangible assets of the Company’s wholesale operations, including the values of trade names and customer lists and relationships, as a significant portion of the wholesale operations consist of intercompany activity. Also, goodwill arises due to the fact that the purchase price that was paid by the collaborative group reflected the expectation that the Company will continue to increase the percentage of the Company’s retail sales that relate to product supplied by the Company’s wholesale operations and, therefore, the Company will realize the entire wholesale-to-retail margin on such retail sales.

The allocation of the purchase price is based on the Company’s estimate of the fair value of the tangible assets acquired and liabilities assumed. The following table summarizes the values of the major classes of assets acquired and liabilities assumed:

Assets:
Cash and cash equivalents	$	5,501
Accounts receivable		121,249
Inventories		602,543
Prepaid expenses and other current assets		88,857
Total current assets		818,150
Property, plant and equipment		257,266
Goodwill		1,534,537
Other intangible assets		741,066
Other assets		73,606
Total assets	$	3,424,625
Liabilities, Redeemable Common Securities and Stockholders’ Equity:
Total liabilities	$	2,616,203
Total redeemable common securities and stockholders’ equity		808,422
Total liabilities, redeemable common securities and stockholders’ equity	$	3,424,625

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Due to the application of the acquisition method of accounting, the Company increased the value of its inventory by $89,754 as of July 28, 2012. The adjustment principally reflects the previously deferred wholesale margin on inventory supplied to the Company’s retail operations at July 27, 2012. Such adjustment increased the Company’s cost of sales during the period from July 28, 2012 to December 31, 2012 by $58,626 as a portion of the related inventory was sold.

Wholesale Acquisitions

On January 30, 2011, the Company acquired all of the common stock of Riethmüller GmbH (“Riethmuller”) for $47,069 in cash, in a transaction accounted for as a business combination. Riethmüller is a German distributor of party goods and carnival items with latex balloon manufacturing operations in Malaysia and the ability to manufacture certain party goods in Poland. The results of this acquired business are included in the consolidated financial statements since the January 30, 2011 acquisition date and are reported in the operating results of the Company’s Wholesale segment.

On September 30, 2010, the Company acquired Christy’s By Design Limited and three affiliated companies (the “Christy’s Group”) from Christy Holdings Limited, a United Kingdom (“U.K.”) based company. The Christy’s Group designs and distributes costumes and other garments and accessories through its operations in Asia and the U.K. The fair value of the total consideration paid for the Christy’s Group was $34,342, including $3,974 paid during the year ended December 31, 2011. The results of this acquired business are included in the consolidated financial statements since the September 30, 2010 acquisition date and are reported in the operating results of the Company’s Wholesale segment.

Retail Acquisitions

On July 29, 2011, the Company acquired all of the common stock of Party Packagers Inc. (“Party City Canada” or “Party Packagers”) for $31,783 in cash in a transaction accounted for as a business combination. The results of this acquired business are included in the consolidated financial statements since the July 29, 2011 acquisition date and are reported in the operating results of the Company’s Retail segment. The excess of the purchase price of Party Packagers over the fair value of the net assets acquired was assigned to goodwill. The following summarizes the fair values of the assets acquired and liabilities assumed: accounts receivable of $284, inventory of $9,874, fixed assets of $4,457, other current and non-current assets of $1,418, accounts payable and other current liabilities of $7,466 and other liabilities of $323. The remaining $23,539 has been recorded as goodwill. The allocation of the purchase price, which was finalized during the period from January 1, 2012 to July 27, 2012, was based on the fair values of the tangible assets acquired and liabilities assumed. Goodwill arose because the purchase price reflected the strategic fit and expected synergies this business brings to the Company’s operations. The acquisition expanded the Company’s vertical business model by giving the Company a significant retail presence in Canada. Subsequent to the acquisition date, all Party Packagers stores were converted to the Party City banner.

During the period from January 1, 2012 to July 27, 2012, the Company acquired franchisee stores for total consideration of $3,106. The results of these stores are included in the consolidated financial statements from the acquisition dates and are reported in the operating results of the Company’s Retail segment. No franchisee stores were acquired during the period from July 28, 2012 to December 31, 2012.

During 2011, the Company acquired franchisee stores for total consideration of $12,798 in cash.

During 2010, the Company acquired franchisee stores for total consideration of $24,300. Total consideration consisted of $21,500 in cash and the exchange of five corporate stores located in Pennsylvania.

F-17

Goodwill Changes by Reporting Segment

For the period from July 28, 2012 to December 31, 2012, the period from January 1, 2012 to July 27, 2012 and the year ended December 31, 2011, goodwill changes, by reporting segment, were as follows:

	Period from July 28, 2012 to December 31, 2012 (Successor)		Period from January 1, 2012 to July 27, 2012 (Predecessor)			2011 (Predecessor)
Wholesale segment:
Beginning balance	$	493,149	$	355,217		$	336,044
Christy’s acquisition		0		0			2,472
Riethmüller acquisition		0		0			17,816
Foreign currency impact		2,681		(429	)		(1,115	)
Ending balance		495,830		354,788			355,217
Retail segment:
Beginning balance		1,041,388		326,543			294,448
Party Packagers acquisition		0		(121	)		23,660
Franchisee acquisitions		0		2,281			10,313
Foreign currency impact		351		163			(1,878	)
Ending balance		1,041,739		328,866			326,543
Total ending balance, both segments	$	1,537,569	$	683,654		$	681,760

Note 6—Intangible Assets

The Company had the following other identifiable intangible assets:

	At December 31, 2012 (Successor)
	Cost		Accumulated Amortization		Net Carrying Value		Useful lives
Retail franchise licenses	$	67,000	$	3,500	$	63,500		19 years
Customer lists and relationships		55,705		3,819		51,886		20 years
Copyrights and designs		29,000		2,850		26,150		5-7 years
Leasehold interests		20,702		2,975		17,727		1-11 years
Design licenses		2,397		1,037		1,360		1-4 years
Total	$	174,804	$	14,181	$	160,623

	At December 31, 2011 (Predecessor)
	Cost		Accumulated Amortization		Net Carrying Value
Retail franchise licenses	$	63,630	$	30,077	$	33,553
Customer lists and relationships		16,747		7,866		8,881
Other		27,532		22,882		4,650
Total	$	107,909	$	60,825	$	47,084

As a result of the Transaction (see Note 1 and Note 5) the Company applied the acquisition method of accounting and recorded the finite-lived intangible assets listed above. The Company is amortizing most of the assets using accelerated patterns based on the discounted cash flows that were used to value such assets.

Additionally, as a result of the Transaction, the Company applied the acquisition method of accounting and recorded an indefinite-lived asset for the Party City trade name of $519,000, an indefinite-lived asset for the Amscan trade name of $26,000, an indefinite-lived asset for the Halloween City trade name of $18,000 and indefinite-lived assets for other trade names in the aggregate amount of $3,326.

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The amortization expense for finite-lived intangible assets for the period from July 28, 2012 to December 31, 2012, the period from January 1, 2012 to July 27, 2012 and the years ended December 31, 2011 and 2010 were $14,160, $5,542, $11,116 and $10,345, respectively. Estimated amortization expense for each of the next five years will be approximately $27,640, $23,445, $19,744, $16,708, and $13,437, respectively.

Note 7—Loans and Notes Payable

Amounts outstanding under Amscan Holdings’ $350,000 ABL revolving credit facility and $675,000 Term Loan Agreement were repaid in conjunction with the closing of the Transaction. At such time, Party City Holdings entered into a new $400,000 ABL revolving credit facility (“New ABL Facility”) and Party City Holdings and Party City Corporation entered into a new $1,125,000 Term Loan Agreement (“New Term Loan Credit Agreement”). Additionally, in conjunction with the Transaction, on July 27, 2012, Party City Holdings issued $700,000 of 8.875% senior notes (the “Senior Notes”).

Below is a discussion of the New ABL Facility and other credit agreements. See Note 8 for a discussion of the Company’s long-term obligations.

New ABL Facility

The New ABL Facility, as amended, provides for (a) revolving loans in an aggregate principal amount at any time outstanding not to exceed $400,000, subject to a borrowing base described below, (b) swing-line loans in an aggregate principal amount at any time outstanding not to exceed 10% of the aggregate commitments under the facility and (c) letters of credit, in an aggregate face amount at any time outstanding not to exceed $50,000.

Under the New ABL Facility, the borrowing base at any time equals (a) 90% of eligible trade receivables plus (b) 90% of eligible inventory and (c) 90% of eligible credit card receivables, less (d) certain reserves.

The New ABL Facility provides for two pricing options: (i) an alternate base interest rate (“ABR”) equal to the greater of (a) the prime rate, (b) the federal funds rate plus 1/2 of 1% or (c) the LIBOR rate plus 1%, in each case, on the date of such borrowing or (ii) a LIBOR based interest rate determined by reference to the LIBOR cost of funds for U.S. dollar deposits for the relevant interest period adjusted for certain additional costs and, in each case, plus an applicable margin. The applicable margin ranges from 0.5% to 1.00% with respect to ABR borrowings and from 1.50% to 2.00% with respect to LIBOR borrowings. The applicable margin at December 31, 2012 was 0.75% for ABR loans and 1.75% for loans based on the LIBOR rate.

In addition to paying interest on outstanding principal under the New ABL Facility, Party City Holdings is required to pay a commitment fee of between 0.250% and 0.375% per annum in respect of the unutilized commitments thereunder. Party City Holdings must also pay customary letter of credit fees.

The New ABL Facility also provides that Party City Holdings has the right from time to time to request additional commitments, of which $125,000 remains available. The lenders under the New ABL Facility are not under any obligation to provide any such additional commitments, and any increase in commitments is subject to several conditions precedent and limitations. If Party City Holdings were to request any additional commitments, and the existing lenders or new lenders were to agree to provide such commitments, the facility size could be increased to up to $525,000, but Party City Holdings’ ability to borrow under this facility would still be limited by the amount of the borrowing base under this facility and limitations on incurring additional indebtedness under other debt agreements.

The New ABL Facility has a maturity date of July 27, 2017.

In connection with the New ABL Facility, Party City Holdings incurred $6,224 in finance costs that have been capitalized and will be amortized over the life of the debt.

F-19

All obligations under the New ABL Facility are jointly and severally guaranteed by PC Intermediate, PCHI and each existing and future domestic subsidiary of Party City Holdings. Party City Holdings and each guarantor has secured its obligations, subject to certain exceptions and limitations, including obligations under its guaranty, as applicable, by a first-priority lien on its accounts receivable, inventory, cash and certain related assets and a second-priority lien on substantially all of its other assets, including a pledge of all of the capital stock held by PC Intermediate, Party City Holdings and each guarantor.

The New ABL Facility contains negative covenants that, among other things and subject to certain exceptions, restrict the ability of Party City Holdings to:

• incur additional indebtedness;

• pay dividends on capital stock or redeem, repurchase or retire capital stock;

• make certain investments, loans, advances and acquisitions;

• engage in transactions with affiliates;

• create liens; and

• transfer or sell certain assets.

In addition, Party City Holdings must comply with a fixed charge coverage ratio if excess availability under the New ABL Facility on any day is less than the greater of: (a) 10% of the lesser of the aggregate commitments and the then borrowing base under the New ABL Facility and (b) $30,000. The fixed charge coverage ratio is the ratio of (i) Adjusted EBITDA (as defined in the New ABL Facility) minus maintenance-related capital expenditures (as defined in the New ABL Facility) to (ii) fixed charges (as defined in the New ABL Facility). Party City Holdings has not been subjected to the fixed charge coverage ratio as its excess availability has not fallen below the amounts specified above.

The New ABL Facility also contains certain customary affirmative covenants and events of default.

Borrowings under the New ABL Facility totaled $23,330 at December 31, 2012 and the interest rate was 4.00%. Borrowings under the $350,000 ABL revolving credit facility totaled $131,089 at December 31, 2011. The interest rate on $100,000 of the outstanding balance was 3.03% and the interest rate on the remaining balance was 5.00%. Outstanding standby letters of credit totaled $18,683 and, after considering borrowing base restrictions, Party City Holdings had $338,470 of available borrowing capacity under the terms of the New ABL Facility at December 31, 2012.

Other Credit Agreements

In connection with the acquisitions of the Christy’s Group, Riethmüller and Party Packagers, Party City Holdings, through its subsidiaries, entered into several foreign asset-based and overdraft credit facilities that provide the Company with GBP10,000, CDN6,000, EUR2,500 and MYR2,500 of borrowing capacity. At December 31, 2012, borrowings under the foreign facilities totaled $9,928. The facilities contain customary affirmative and negative covenants. In connection with one of the facilities, the Company maintains a compensating cash balance of $4,361 to secure outstanding standby letters of credit. The compensating cash balance is included in prepaid expenses and other current assets.

F-20

Note 8—Long-Term Obligations

Long-term obligations consisted of the following:

	December 31,
	2012 (Successor)			2011 (Predecessor)
New Term Loan Credit Agreement (a)	$	1,112,632		$	0
$675,000 Term Loan Agreement (a)		0			660,905
Mortgage obligation (b)		2,351			3,465
Capital lease obligations (c)		3,276			3,606
Senior Notes (d)		700,000			0
$175,000 senior subordinated notes (d)		0			175,000
Total long-term obligations		1,818,259			842,976
Less: current portion		(13,231	)		(8,666	)
Long-term obligations, excluding current portion	$	1,805,028		$	834,310

New Term Loan Credit Agreement

(a) Amounts outstanding under Amscan Holdings’ $675,000 Term Loan Agreement were repaid in conjunction with the closing of the Transaction. At such time, Party City Holdings and Party City Corporation entered into the New Term Loan Credit Agreement, which was amended in February 2013 (see Note 19). The New Term Loan Credit Agreement was initially issued at a 1% discount, which was being amortized by the effective interest method over the term of the loan. The discount was eliminated in conjunction with the amendment.

The New Term Loan Credit Agreement, as amended, provides for two pricing options: (i) an ABR for any day, a rate per annum equal to the greater of (a) Deutsche Bank’s prime rate in effect on such day, (b) the federal funds effective rate in effect on such day plus 1/2 of 1%, (c) the adjusted LIBOR rate plus 1% and (d) 2.00% (2.25% prior to the amendment) or (ii) the LIBOR rate, adjusted for certain additional costs, with a LIBOR floor of 1.00% (1.25% prior to the amendment), in each case plus an applicable margin. The applicable margin is 2.25% (3.50% prior to the amendment) with respect to ABR borrowings and 3.25% (4.50% prior to the amendment) with respect to LIBOR borrowings.

The New Term Loan Credit Agreement also provides the right from time to time to request an amount of additional term loans up to $250,000. The lenders under the New Term Loan Credit Agreement are not under any obligation to provide any such additional term loans.

The New Term Loan Credit Agreement, as amended, provides that the term loans are subject to a 1.00% prepayment premium if voluntarily repaid under certain circumstances before August 19, 2013. Otherwise, the term loans may be voluntarily prepaid at any time without premium or penalty, other than customary breakage costs with respect to loans based on the LIBOR rate. The term loans are subject to mandatory prepayment, subject to certain exceptions, with (i) 100% of net proceeds above a threshold amount of certain asset sales, subject to reinvestment rights and certain other exceptions, (ii) 100% of the net cash proceeds of any incurrence of debt other than debt permitted under the New Term Loan Credit Agreement, (iii) commencing with the fiscal year ended December 31, 2013, 50% of Excess Cash Flow, as defined in the New Term Loan Credit Agreement, if any (which percentage will be reduced to 25% if Party City Holdings’ senior secured leverage ratio (as defined in the New Term Loan Credit Agreement) is less than 3.50 to 1.00, but greater than 2.50 to 1.00, and 0% if Party City Holdings’ senior secured leverage ratio is less than 2.50 to 1.00).

The term loans under the New Term Loan Credit Agreement mature on July 27, 2019. The borrowers are required to repay installments on the term loans in quarterly principal amounts of 0.25%, with the remaining amount payable on the maturity date.

F-21

All obligations under the New Term Loan Credit Agreement are jointly and severally guaranteed by PC Intermediate, Party City Holdings, Party City Corporation and each existing and future domestic subsidiary of Party City Holdings. Party City Holdings and Party City Corporation and each guarantor has secured its obligations, subject to certain exceptions and limitations, by a first-priority lien on substantially all of their assets (other than accounts receivable, inventory, cash and certain related assets), including a pledge of all of the capital stock held by PC Intermediate, Party City Holdings, Party City Corporation and each guarantor, and a second-priority lien on their accounts receivable, inventory, cash and certain related assets.

The New Term Loan Credit Agreement contains certain customary affirmative covenants and events of default. Additionally, it contains negative covenants which, among other things and subject to certain exceptions, restrict the ability of Party City Holdings and Party City Corporation to:

• incur additional indebtedness;

• pay dividends on capital stock or redeem, repurchase or retire capital stock;

• make certain investments, loans, advances and acquisitions;

• engage in transactions with affiliates;

• create liens; and

• transfer or sell certain assets.

In connection with the New Term Loan Credit Agreement, $28,371 of finance costs were incurred. The costs have been capitalized and will be amortized over the life of the debt.

At December 31, 2012, the outstanding principal amount of term loans under the New Term Loan Credit Agreement was $1,112,632, which reflects an original issue discount of $10,556, net of $694 of accumulated amortization. At December 31, 2012, the interest rate on the outstanding term loan borrowings was 5.75%. At December 31, 2011, the interest rate on the $675,000 Term Loan Agreement was 6.75%.

(b) In conjunction with the construction of a new distribution facility, Amscan Inc., a wholly-owned subsidiary of Party City Holdings, borrowed $10,000 from the New York State Job Development Authority on December 21, 2001, pursuant to the terms of a second lien mortgage note. On December 18, 2009 the mortgage note was amended, extending the fixed monthly payments of principal and interest for a period of 60 months up to and including December 31, 2014. The interest rate under the amended mortgage note remains variable and subject to review and adjustment semi-annually based on the New York State Job Development Authority’s confidential internal protocols. At December 31, 2012, the amended mortgage note bears at an interest rate of 2.01%. The principal amounts outstanding under the mortgage note as of December 31, 2012 and 2011, were $2,351 and $3,465, respectively. At December 31, 2012, the distribution facility had a carrying value of $60,172.

(c) Party City Holdings’ subsidiaries have entered into various capital leases for machinery and equipment with implicit interest rates generally ranging from 3% to 8% and extending to 2017.

(d) In connection with the Transaction, Party City Holdings issued $700,000 of 8.875% Senior Notes, which are due on August 1, 2020. Also, in connection with the Transaction, Amscan Holdings commenced a cash tender offer for any and all of its outstanding $175,000 8.75% Senior Subordinated Notes due 2014 (the “Tender Offer”). The total consideration included an early tender payment and the tender offer consideration. The early tender payment equaled $30 per $1,000 principal amount of notes tendered and accepted for payment. The Tender Offer consideration equaled $973.75 per $1,000 principal amount of notes tendered and accepted for payment, plus accrued and unpaid interest. Approximately $115,800 aggregate principal amount of the notes were validly tendered. On August 27, 2012, all remaining outstanding notes not tendered pursuant to the Tender Offer were redeemed. The notes were redeemed at a price of 100% of the principal amount plus accrued and unpaid interest on the principal amount.

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Interest on the Senior Notes is payable semi-annually in arrears on February 1 and August 1 of each year. The Senior Notes are guaranteed, jointly and severally, on an unsecured subordinated basis by each of Party City Holdings’ existing and future domestic subsidiaries.

The indenture governing the Senior Notes contains certain covenants limiting, among other things and subject to certain exceptions, Party City Holdings’ ability to:

• incur additional indebtedness or issue certain disqualified stock and preferred stock;

• pay dividends or distributions, redeem or repurchase equity;

• prepay subordinated debt or make certain investments;

• transfer and sell assets;

• engage in transactions with affiliates;

• create liens; and

• consolidate, merge or transfer all or substantially all of Party City Holdings’ assets.

The indenture governing the Senior Notes also contains certain customary affirmative covenants and events of default.

On or after August 1, 2015, Party City Holdings may redeem the Senior Notes, in whole or in part, at the following (expressed as a percentage of the principal amount to be redeemed) plus accrued and unpaid interest thereon:

Twelve-month period beginning on August 1,	Percentage
2015		106.656	%
2016		104.438	%
2017		102.219	%
2018 and thereafter		100.000	%

In addition, Party City Holdings may redeem up to 40% of the aggregate principal amount of the Senior Notes before August 1, 2015 with the net cash proceeds from one or more equity offerings at a redemption price of 108.875% of the principal amount plus accrued and unpaid interest. Party City Holdings may also redeem some or all of the notes before August 1, 2015 at a redemption price of 100% of the principal amount, plus accrued and unpaid interest plus a “make whole” premium.

If Party City Holdings experiences certain types of change in control, it may be required to offer to repurchase the Senior Notes at 101% of their principal amount, plus accrued and unpaid interest.

Party City Holdings must file a registration statement with respect to an offer to exchange the outstanding Senior Notes for exchange notes within 365 days after July 27, 2012 and it must use commercially reasonable efforts to have the registration statement declared effective by the SEC on or prior to 405 days after July 27, 2012. If the exchange offer is not completed prior to September 5, 2013, additional interest on the outstanding Senior Notes will accrue at a rate of 0.25% per annum for the first 90-day period and shall increase at a rate of 0.25% per annum at the end of each subsequent 90-day period until the registration obligations are fulfilled; provided that the additional interest on the outstanding Senior Notes may in no event exceed 1.00% per annum. The Company did not record a liability for penalty interest as of December 31, 2012 as the payment of penalty interest was not probable.

In connection with the issuance of the Senior Notes, $29,519 of finance costs were incurred. Such costs were capitalized and will be amortized over the life of the debt.

F-23

In addition, subject to certain exceptions, Party City Holdings may not make restricted payments, including the payment of dividends to its shareholders, unless certain conditions are met under the terms of the indenture governing the Senior Notes, the New ABL Facility and the New Term Loan Credit Agreement. As of December 31, 2012, the most restrictive of these conditions existed in the indenture for the Senior Notes, which limits restricted payments based on Party City Holdings’ consolidated net income subsequent to the date of the Transaction. As of December 31, 2012, Party City Holdings had $78,651 of restricted payment capacity under the indenture for the Senior Notes. In conjunction with the amendment to the New Term Loan Credit Agreement during February 2013 (see Note 19), the most restrictive condition in the New Term Loan Credit Agreement was modified to match the consolidated net income requirement in the indenture for the Senior Notes. Party City Holdings’ parent companies, PC Intermediate, PC Nextco and Party City Holdco, have no assets or operations other than their investments in their subsidiaries and income from those subsidiaries.

At December 31, 2012, maturities of long-term obligations consisted of the following:

	Long-term Debt Obligations		Capital Lease Obligations		Totals
2013	$	12,405	$	826	$	13,231
2014		13,445		788		14,233
2015		11,250		584		11,834
2016		11,250		748		11,998
2017		11,250		330		11,580
Thereafter		1,755,383		0		1,755,383
Long-term obligations	$	1,814,983	$	3,276	$	1,818,259

Note 9—Capital Stock

At December 31, 2012, the Company’s authorized capital stock, including redeemable securities, consisted of 1,000,000.00 shares of $0.01 par value common stock.

Under the terms of Party City Holdco’s stockholders’ agreement, dated July 27, 2012, and Party City Holdings’ former stockholders’ agreement, dated April 30, 2004, the Company has an option to purchase all of the shares of common stock held by former employees and, under certain circumstances, former employee stockholders can require the Company to purchase all of the shares held by the former employees. The aggregate amount that may be payable to current employee stockholders should they die or become disabled, based on the estimated fair market value of fully paid and vested common securities, totaled $22,205 and $35,831 at December 31, 2012 and 2011, respectively, and was classified as redeemable common securities on the Company’s consolidated balance sheet, with a corresponding adjustment to stockholders’ equity. As there is no active market for the common stock, the Company estimates the fair value of its common stock based on a valuation model confirmed periodically by recent acquisitions or independent appraisals. The former stockholders’ agreement, dated April 30, 2004, was terminated in conjunction with the Transaction (see Note 5).

In addition, in 2004, Party City Holdings’ CEO and President exchanged vested options in a predecessor company for fully vested options to purchase common stock of Party City Holdings. Since these options vested immediately and could be exercised upon the death or disability of the officer and put back to Party City Holdings, they were reflected as redeemable common securities on the Company’s consolidated balance sheet and are recorded at fair market value, with a corresponding adjustment to general and administrative expenses. In conjunction with the Transaction, the options were cancelled and the CEO and President received payments equal to the difference between the fair value of the stock and the exercise prices of the options.

F-24

A summary of the changes in redeemable common securities for the years ended December 31, 2010 and 2011 and the period from January 1, 2012 to July 27, 2012 follows:

	Redeemable											Total Redeemable Common Securities
	Number of Rollover Stock Options			Number of Common Shares		Rollover Stock Options			Common Shares
Predecessor:
Balance as of December 31, 2009 (Predecessor)		61.18			592.84	$	1,582		$	16,807		$	18,389
Shares issued upon option exercise		0			4.68		0			133			133
Dividends paid		0			0		(575	)		(5,617	)		(6,192	)
Revaluation of remaining options/shares		0			0		535			5,224			5,759
Balance as of December 31, 2010 (Predecessor)		61.18			597.52		1,542			16,547			18,089
Warrant exercise		0			544.75		0			15,090			15,090
Shares issued upon option exercise		(20.29	)		68.22		(550	)		2,001			1,451
Revaluation of remaining options/shares		0			0		116			2,193			2,309
Balance as of December 31, 2011 (Predecessor)		40.89			1,210.49		1,108			35,831			36,939
Revaluation of remaining options/shares		0			0		774			23,000			23,774
Balance as of July 27, 2012 (Predecessor)		40.89			1,210.49	$	1,882		$	58,831		$	60,713

At July 28, 2012 there were 888.23 redeemable common securities outstanding, at a fair value of $25,000 per share. There was no change in the number of redeemable shares or the value of such shares from July 28, 2012 to December 31, 2012.

In December 2010, Party City Holdings’ Board of Directors declared a one-time cash dividend of $9,400 per share of outstanding common stock, totaling $289,746, and similar distributions to the holders of vested common stock warrants, $12,083, and vested time options, $9,370. The distribution to vested time option holders resulted in a charge to stock compensation expense in 2010. In addition, the Board of Directors declared that holders of unvested options at the declaration date would receive a distribution of $9,400 per share when the options vested. During 2011, certain time options vested and the Company recorded a $617 charge to stock compensation expense. Additionally, at the time of the Transaction (see Note 5) certain outstanding stock options became fully vested and Party City Holdings made distributions in the amount of $16,148. The Company recorded a charge equal to such amount in general and administrative expenses in the Company’s consolidated statement of operations and comprehensive loss for the period from January 1, 2012 to July 27, 2012.

Note 10—Other Expense, net

	Period from July 28, 2012 to December 31, 2012 (Successor)			Period from January 1, 2012 to July 27, 2012 (Predecessor)			Year Ended December 31, 2011 (Predecessor)			Year Ended December 31, 2010 (Predecessor)
Other expense, net consists of the following:
Undistributed income in unconsolidated joint venture	$	(297	)	$	(128	)	$	(463	)	$	(678	)
Foreign currency loss (gain)		532			148			(280	)		354
Write-off of deferred finance charges in connection with the extinguishment of debt		0			0			0			2,448
Transaction costs (see Note 5)		24,564			19,669			0			0
Corporate development expenses		351			2,395			2,147			1,607
Other, net		1,007			161			72			477
Other expense, net	$	26,157		$	22,245		$	1,476		$	4,208

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Note 11—Employee Benefit Plans

Certain subsidiaries of the Company maintain profit sharing plans for eligible employees providing for annual discretionary contributions to a trust. Eligible employees are full time domestic employees who have completed a certain length of service, as defined, and attained a certain age, as defined. In addition, the plans require the subsidiaries to match from approximately 12% to 100% of voluntary employee contributions to the plans, not to exceed a maximum amount of the employee’s annual salary, ranging from 4% to 6%. Expense for the plans for the period from July 28, 2012 to December 31, 2012, the period from January 1, 2012 to July 27, 2012 and the years ended December 31, 2011 and 2010 totaled $2,286, $2,505, $4,943 and $4,470, respectively.

Note 12—Equity Incentive Plan

On May 1, 2004, Party City Holdings adopted the 2004 Equity Incentive Plan (the “2004 Plan”) under which it could grant incentive awards in the form of restricted and unrestricted common stock options to purchase shares of its common stock to certain directors, officers, employees and consultants of Party City Holdings and its affiliates. All stock option activity discussed below related to the 2004 Plan.

Party City Holdco has adopted the 2012 Omnibus Equity Incentive Plan (the “2012 Plan”) under which it can grant incentive awards in the form of stock appreciation rights, restricted stock and common stock options to certain directors, officers, employees and consultants of Party City Holdco and its affiliates. A committee of Party City Holdco’s board of directors, or the board itself in the absence of a committee, is authorized to make grants and various other decisions under the 2012 Plan. The maximum number of shares reserved under the 2012 Plan is 3,706 shares. As of December 31, 2012, no awards had been granted under the 2012 Plan.

Prior to the Transaction (see Note 5), Party City Holdings had three types of options—rollover options, time-based options, and performance-based options, each of which is described below. At the time of the Transaction certain outstanding stock options became fully vested and employees holding such options received cash payments equal to the difference between the fair value of Party City Holdings’ stock and the exercise prices of the stock options. As a result, at such time, the Company recorded $2,149 of expense in general and administrative expenses in the Company’s consolidated statement of operations and comprehensive loss. Total stock-based compensation expense recorded during the period from January 1, 2012 to July 27, 2012 was $3,375. Any stock options that did not vest at the time of the Transaction were cancelled and no new stock options were granted subsequent to July 27, 2012.

In December 2010, Party City Holdings’ Board of Directors declared a one-time cash dividend of $9,400 per share of outstanding common stock. In addition, the Board of Directors declared that holders of unvested options at the declaration date would receive a distribution of $9,400 per share when the options vested. At the time of the Transaction certain outstanding stock options became fully vested and Party City Holdings made distributions in the amount of $16,148. The Company recorded a charge equal to such amount in general and administrative expenses in the Company’s consolidated statement of operations and comprehensive loss for the period from January 1, 2012 to July 27, 2012.

The stock option payments and payments in lieu of dividends are included in the decrease in accounts payable, accrued expenses and income taxes payable in the Company’s July 28, 2012 to December 31, 2012 consolidated statement of cash flows.

Prior to the Transaction Party City Holdings had three types of options—rollover options, time-based options, and performance-based options, each of which is described below.

Rollover Options

In 2004, Party City Holdings’ CEO and its President exchanged vested options in the predecessor company for 98.18 vested options to purchase common shares at $2,500 per share (the “Rollover Options”). These options had an intrinsic value of $737 and a fair value of $880. Under ASC 805-30-30-11 Goodwill or Gain from

F-26

Bargain Purchase, Including Consideration Transferred, vested options granted by the acquiring company in exchange for outstanding options of the target company should be considered part of the purchase transaction. The fair value is accounted for as part of the purchase price of the target company.

Since these options were vested immediately and could be exercised upon death or disability of the executives and put back to Party City Holdings, they were reflected as redeemable common securities on the Company’s consolidated balance sheet.

However, these options had an additional condition, whereby they could have been put back to Party City Holdings at fair market value upon retirement. Because the terms of the Rollover Options could extend beyond the retirement dates of these two executives, it was possible that they could exercise these options within six months of the specified retirement date and then put the immature shares back to Party City Holdings at retirement less than six months later. GAAP requires variable accounting for awards with puts that can be exercised within six months of the issuance of the shares.

Therefore, regardless of the probability of this occurrence, changes in market value of the shares were expensed as additional stock compensation because the put, even if not probable, was within the control of the employee.

During the period from January 1, 2012 to July 27, 2012 and the years ended December 31, 2011 and 2010, increases in the valuation of the remaining options resulted in charges to pre-tax income of $775, $116 and $572, respectively.

Time-based options

From 2004 to 2012 Party City Holdings granted time-based options to key eligible employees and outside directors. In conjunction with the options the Company recorded compensation expense of $1,747, $1,281 and $723 during the period from January 1, 2012 to July 27, 2012 and the years ended December 31, 2011 and 2010, respectively. Compensation expense during the period from January 1, 2012 to July 27, 2012 included a $1,296 charge due to the acceleration of vesting of time-based options in conjunction with the Transaction (see Note 5). The fair value of each grant was estimated on the grant date using a Black-Scholes option valuation model based on the assumptions in the following table:

Expected dividend rate	0
Risk free interest rate	1.41% to 5.08	%
Price volatility	15.00	%
Weighted average expected life	7.5
Forfeiture rate	7.75

The weighted average expected life (estimated period of time outstanding) was estimated using the best estimate for determining the expected term. Expected volatility was based on implied historical volatility of an applicable Dow Jones Industrial Average sector index for a period equal to the stock option’s expected life.

Performance-based options

From 2005 to 2012 Party City Holdings granted performance based options (“PBOs”) to key employees and its outside directors. Under the PBO feature, the ability to exercise vested option awards was contingent upon the occurrence of an initial public offering of Party City Holdings’ common stock or a change in control of Party City Holdings and the achievement of specified investment returns to its shareholders. Since a change in control condition cannot be assessed as probable before it occurs, no compensation expense was recorded in connection with the issuance of PBOs until the Transaction. At such time the Company recorded compensation expense of $853.

F-27

The fair value of each grant was estimated on the grant date using a Monte Carlo option valuation model based on the assumptions in the following table:

Expected dividend rate	0
Risk free interest rate	2.75% to 5.10	%
Price volatility	15.00	%
Weighted average expected life	3.44
Forfeiture rate	0

The following table summarizes the changes in outstanding options for the years ended December 31, 2010 and 2011 and the period from January 1, 2012 to July 27, 2012:

	Options			Average Exercise Price		Average Fair Market Value of TBOs at Grant Date		Weighted Average Remaining Contractual Term (Years)
Outstanding at December 31, 2009 (Predecessor)		2,933.03		$	13,462
Granted		327.00			28,035	$	7,399
Exercised		(4.68	)		11,090
Canceled		(133.10	)		21,622
Outstanding at December 31, 2010 (Predecessor)		3,122.25			14,350
Granted		689.00			29,148		7,179
Exercised		(70.99	)		17,549
Canceled		(41.99	)		27,897
Outstanding at December 31, 2011 (Predecessor)		3,698.27			17,137
Granted		10.00			42,000		10,254
Exercised		(3,295.58	)		15,803
Canceled		(412.69	)		28,392
Outstanding at July 27, 2012 (Predecessor)		0.00
Exercisable at December 31, 2011		1,073.11			12,689		18,148		4.3

No new options were granted subsequent to July 27, 2012. The intrinsic value of options exercised was $108,364, $831 and $81 for the period from January 1, 2012 to July 27, 2012 and the years ended December 31, 2011 and 2010, respectively. The fair value of options vested was $2,632, $789 and $187 during the period from January 1, 2012 to July 27, 2012 and the years ended December 31, 2011 and 2010, respectively.

Note 13—Income Taxes

A summary of domestic and foreign (loss) income before income taxes and including minority interest follows:

	Period from July 28, 2012 to December 31, 2012 (Successor)			Period from January 1, 2012 to July 27, 2012 (Predecessor)			Year Ended December 31, 2011 (Predecessor)		Year Ended December 31, 2010 (Predecessor)
Domestic	$	(31,692	)	$	(11,128	)	$	113,697	$	77,537
Foreign		222			(3,471	)		8,454		4,841
Total	$	(31,470	)	$	(14,599	)	$	122,151	$	82,378

F-28

The income tax (benefit) expense consisted of the following:

	Period from July 28, 2012 to December 31, 2012 (Successor)			Period from January 1, 2012 to July 27, 2012 (Predecessor)			Year Ended December 31, 2011 (Predecessor)			Year Ended December 31, 2010 (Predecessor)
Current:
Federal	$	18,309		$	(5,345	)	$	30,869		$	34,752
State		622			433			6,586			5,281
Foreign		1,910			1,492			3,078			1,854
Total current expense (benefit)		20,841			(3,420	)		40,533			41,887
Deferred:
Federal		(19,611	)		6,077			4,852			(7,187	)
State		(1,470	)		(904	)		365			(1,739	)
Foreign		(1,082	)		(1,350	)		(9	)		(16	)
Total deferred (benefit) expense		(22,163	)		3,823			5,208			(8,942	)
Income tax (benefit) expense	$	(1,322	)	$	403		$	45,741		$	32,945

Deferred income taxes reflect the net tax effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.

Deferred income tax assets and liabilities consisted of the following:

	December 31,
	2012 (Successor)			2011 (Predecessor)
Current deferred income tax assets:
Inventory valuation	$	(3,107	)	$	19,602
Allowance for doubtful accounts		228			851
Accrued liabilities		7,765			8,662
Contribution carryforward		0			107
Deferred foreign intercompany profit		1,130			0
Tax loss carryforwards		2,488			0
Tax credit carryforwards		2,157			576
Current deferred income tax assets before valuation allowances		10,661			29,798
Less: valuation allowances		(3,774	)		0
Current deferred income tax assets, net (included in prepaid expenses and other current assets)	$	6,887		$	29,798
Non-current deferred income tax liabilities, net:
Property, plant and equipment	$	28,012		$	15,973
Intangible assets		221,081			62,128
Amortization of goodwill and other assets		86,908			19,746
Other		4,287			2,336
Non-current deferred income tax liabilities, net	$	340,288		$	100,183

Management assesses the available positive and negative evidence to estimate if sufficient taxable income will be generated to realize existing deferred tax assets. On the basis of this evaluation, as of December 31, 2012, a $1,720 valuation allowance had been established for United Kingdom (“U.K.”) net operating loss carryforwards. In addition to such allowance, an additional valuation allowance of $2,054 was established on the Company’s foreign tax credit carryforwards based on a projection of foreign source income which limits the Company’s ability to utilize the credits.

F-29

The difference between the Company’s effective income tax rate and the U.S. statutory income tax rate is as follows:

	Period from July 28, 2012 to December 31, 2012 (Successor)			Period from January 1, 2012 to July 27, 2012 (Predecessor)			Year Ended December 31, 2011 (Predecessor)			Year Ended December 31, 2010 (Predecessor)
Tax provision at U.S. statutory income tax rate		35.0	%		35.0	%		35.0	%		35.0	%
State income tax, net of federal income tax benefit		1.7			2.4			3.5			2.8
Warrant compensation charge not deductible		0			0			0			2.0
Domestic production activities deduction		2.6			(15.8	)		(1.8	)		(3.0	)
Deferred tax adjustments		0			(1.5	)		0			3.5
Non-deductible transaction costs		(27.3	)		(13.4	)		0			0
U.K. net operating losses not benefited		(2.3	)		(8.7	)		0			0
U.S.—foreign rate differential		(5.1	)		(0.5	)		0.2			(0.2	)
Other		(0.4	)		(0.3	)		0.5			(0.1	)
Effective income tax rate		4.2	%		(2.8	)%		37.4	%		40.0	%

Deferred tax adjustments: During the period from January 1, 2012 to July 27, 2012 the Company established a full valuation allowance on its foreign tax credit carryforwards. Additionally, the Company wrote-off a deferred tax liability related to the federal deduction for state taxes and it wrote-off a deferred tax asset related to deferred rent. In 2010, the Company recorded certain adjustments related to deferred income tax accounts recorded during the year related to activities associated with previous acquisitions.

U.S.—foreign rate differential: During the periods from July 28, 2012 to December 31, 2012 and January 1, 2012 to July 27, 2012, the U.S. tax effect on foreign earnings which are expected to be remitted in the future was provided, without consideration of offsetting foreign tax credits, due to projected future foreign source income being insufficient to utilize any available foreign tax credits.

As of December 31, 2012, the Company had tax-effected net operating loss carryforwards in the U.K. and Canada of $1,720 and $768, respectively. The Company has established a full valuation allowance on loss carryforwards in the U.K. and it expects the net operating loss carryforwards in Canada to be fully realizable.

Certain costs related to the Transaction are non-deductible. See Note 5 for further discussion of such costs.

Other differences between the effective income tax rate and the federal statutory income tax rate are composed primarily of favorable permanent differences related to inventory contributions, offset by non-deductible meals and entertainment expenses and, in 2011, offset by the settlement of an IRS audit of the Company’s 2008 and 2009 Federal income tax returns.

At December 31, 2012 and 2011, the Company’s share of the cumulative undistributed earnings of its foreign subsidiaries whose earnings are considered permanently reinvested was approximately $22,764 and $26,435, respectively. No provision has been made for U.S. or additional foreign taxes on the undistributed earnings of certain foreign subsidiaries, because such earnings are expected to be reinvested indefinitely in the subsidiaries’ operations. It is not practical to estimate the amount of additional tax that might be payable on these foreign earnings in the event of distribution or sale.

The Company and its subsidiaries file a U.S. federal income tax return, and over 100 state, city, and foreign tax returns.

F-30

The following table summarizes the activity related to the Company’s gross unrecognized tax benefits:

	Period from July 28, 2012 to December 31, 2012 (Successor)			Period from January 1, 2012 to July 27, 2012 (Predecessor)		Year Ended December 31, 2011 (Predecessor)			Year Ended December 31, 2010 (Predecessor)
Balance as of beginning of period	$	492		$	492	$	831		$	992
Increases related to current period tax positions		163			0		49			73
Increases related to prior period tax positions		0			0		0			505
Decrease related to settlements		0			0		(253	)		(334	)
Decreases related to lapsing of statutes of limitations		(126	)		0		(135	)		(405	)
Balance as of end of period	$	529		$	492	$	492		$	831

The Company’s total net unrecognized tax benefits that, if recognized, would impact the Company’s effective tax rate are $443 and $362 at December 31, 2012 and 2011, respectively. It is reasonably possible that a reduction of uncertain tax positions of $159 may occur prior to December 31, 2013, upon the expiration of the period to assess tax in various federal, state and foreign taxing jurisdictions.

The Company recognizes accrued interest and penalties related to unrecognized tax benefits in income tax expense. The Company has accrued $67 and $48 for the potential payment of interest and penalties at December 31, 2012 and 2011, respectively. During the period from July 28, 2012 to December 31, 2012, the period from January 1, 2012 to July 27, 2012 and the years ended December 31, 2011 and 2010, the Company recorded income tax expense (credits) of $10, ($29), ($42) and ($56), respectively, related to interest and penalties.

For federal income tax purposes, the years 2010 through 2012 are open to examination at December 31, 2012. For non-U.S. income tax purposes, tax years from 2006 through 2012 remain open. Lastly, the Company is open to state and local income tax examinations for the tax years 2008 through 2012.

Note 14—Commitments, Contingencies and Related Party Transactions

Lease Agreements

The Company has non-cancelable operating leases for its numerous retail store sites, as well as for its corporate offices, certain distribution and manufacturing facilities, showrooms, and warehouse equipment that expire on various dates, principally through 2024. These leases generally contain renewal options and require the Company to pay real estate taxes, utilities and related insurance.

At December 31, 2012, future minimum lease payments under all operating leases consisted of the following:

	Future Minimum Operating Lease Payments
2013	$	124,708
2014		98,857
2015		83,842
2016		72,352
2017		59,064
Thereafter		141,169
	$	579,992

F-31

The Company is also an assignor with contingent lease liability for 12 stores sold to franchisees and other parties. The potential contingent lease obligations continue until the applicable leases expire in 2018. The maximum amount of the contingent lease obligations may vary, but is limited to the sum of the total amount due under the leases. At December 31, 2012, the maximum amount of the contingent lease obligations was approximately $3,254 and is not included in the table above as such amount is contingent upon certain events occurring, which management has not assessed as probable or estimable at this time.

The future minimum lease payments included in the above table also do not include contingent rent based upon sales volumes or other variable costs, such as maintenance, insurance and taxes.

Rent expense for the period from July 28, 2012 to December 31, 2012, the period from January 1, 2012 to July 27, 2012 and the years ended December 31, 2011 and 2010, was $86,642, $95,100, $167,791 and $144,006, respectively, and included immaterial amounts of rent expense related to contingent rent.

Product Royalty Agreements

The Company has entered into product royalty agreements, with various licensors of copyrighted and trademarked characters and designs, which are used on the Company’s products, which require royalty payments based on sales of the Company’s products, and, in some cases, include annual minimum royalties.

At December 31, 2012, the Company’s commitment to pay future minimum product royalties was as follows:

	Future Minimum Royalty Payments
2013	$	10,171
2014		14,091
2015		13,772
2016		8,028
2017		2,963
Thereafter		0
	$	49,025

Product royalty expense for the period from July 28, 2012 to December 31, 2012, the period from January 1, 2012 to July 27, 2012 and the years ended December 31, 2011 and 2010, was $13,729, $13,040, $16,812 and $14,693, respectively.

During December 2009, the Company entered into a product purchase agreement with a vendor which requires the Company to purchase $9,000 of products annually through 2015.

During July 2012, the Company entered into an agreement which requires the Company to spend a minimum of $5,000 on advertising annually during the three year period ended July 2015.

Legal Proceedings

The Company is a party to certain claims and litigation in the ordinary course of business. The Company does not believe that any of these proceedings will result, individually or in the aggregate, in a material adverse effect upon its financial condition or future results of operations.

Related Party Transactions

At the time of the Transaction (see Note 5), the Company entered into a management agreement with THL and Advent, a minority owner, under which THL and Advent will provide advice to the Company on, among other things, financing, operations, acquisitions and dispositions. Under the agreement THL and Advent are paid,

F-32

in aggregate, an annual management fee in the amount of the greater of $3,000 or 1.0% of Adjusted EBITDA, as defined in the Company’s debt agreements. THL and Advent received annual management fees in the amounts of $961 and $331, respectively, during the period from July 28, 2012 to December 31, 2012. Such amounts were recorded in general and administrative expenses in the Company’s consolidated statement of operations and comprehensive loss. Additionally, at the time of the Transaction, the Company paid THL and Advent a non-recurring $20,000 fee for certain services that were performed in conjunction with the execution of the Transaction. The amount was recorded in other expense, net in the Company’s consolidated statement of operations and comprehensive loss for the period from July 28, 2012 to December 31, 2012. Additionally, as long as THL and Advent receive annual management fees, they will advise the Company in connection with financing, acquisition and disposition transactions and the Company will pay a fee for services rendered in connection with each such transaction in an amount up to 1% of the gross transaction value. The management agreement expires on its tenth anniversary. In the case of an initial public offering or a change in control, as defined in Party City Holdco’s stockholders’ agreement, at the time of such event the Company must pay THL and Advent the net present value of the remaining annual management fees that are payable over the agreement’s ten year term.

Prior to the Transaction, Party City Holdings had a management agreement with two of its former owners, Berkshire Partners LLC (“Berkshire Partners”) and Weston Presidio Capital (“Weston Presidio”), pursuant to which they were paid an annual management fee of $1,300. Berkshire Partners received management fees of $474 during the period from January 1, 2012 to July 27, 2012 and $833 during each of 2011 and 2010. Weston Presidio received management fees of $239 during the period from January 1, 2012 to July 27, 2012 and $417 during each of 2011 and 2010.

Note 15—Segment Information

Industry Segments

The Company has two identifiable business segments. The Wholesale segment includes the design, manufacture, contract for manufacture and wholesale distribution of party goods, including paper and plastic tableware, metallic and latex balloons, accessories, novelties, costumes, other garments, gifts and stationery. The Retail segment includes the operation of company-owned retail party supply superstores in the United States and Canada, the Company’s e-commerce operations through its PartyCity.com website and the sale of franchises on an individual store and franchise area basis throughout the United States and Puerto Rico.

The Company’s industry segment data for the period from July 28, 2012 to December 31, 2012, the period from January 1, 2012 to July 27, 2012 and the years ended December 31, 2011 and 2010 are as follows:

	Wholesale			Retail		Consolidated
Period from July 28 to December 31, 2012 (Successor)
Revenues:
Net sales	$	510,277		$	699,272	$	1,209,549
Royalties and franchise fees		0			9,312		9,312
Total revenues		510,277			708,584		1,218,861
Eliminations		(245,219	)		0		(245,219	)
Net revenues	$	265,058		$	708,584	$	973,642
Income from operations	$	18,681		$	38,068	$	56,749
Interest expense, net							62,062
Other expense, net							26,157
Loss before income taxes						$	(31,470	)
Depreciation and amortization	$	19,827		$	30,010	$	49,837
Capital expenditures	$	5,042		$	11,334	$	16,376
Total assets	$	1,028,329		$	2,248,654	$	3,276,983

F-33

	Wholesale			Retail		Consolidated
Period from January 1 to July 27, 2012 (Predecessor)
Revenues:
Net sales	$	512,473		$	613,089	$	1,125,562
Royalties and franchise fees		0			9,281		9,281
Total revenues		512,473			622,370		1,134,843
Eliminations		(194,659	)		0		(194,659	)
Net revenues	$	317,814		$	622,370	$	940,184
Income from operations	$	44,719		$	4,897	$	49,616
Interest expense, net							41,970
Other expense, net							22,245
Loss before income taxes						$	(14,599	)
Depreciation and amortization	$	11,849		$	22,066	$	33,915
Capital expenditures	$	6,859		$	22,005	$	28,864

	Wholesale			Retail		Consolidated
Year Ended December 31, 2011 (Predecessor)
Revenues:
Net sales	$	940,073		$	1,267,964	$	2,208,037
Royalties and franchise fees		0			19,106		19,106
Total revenues		940,073			1,287,070		2,227,143
Eliminations		(355,168	)		0		(355,168	)
Net revenues	$	584,905		$	1,287,070	$	1,871,975
Income from operations	$	92,228		$	109,142	$	201,370
Interest expense, net							77,743
Other expense, net							1,476
Income before income taxes						$	122,151
Depreciation and amortization	$	22,274		$	37,357	$	59,631
Capital expenditures	$	13,159		$	31,324	$	44,483
Total assets	$	977,343		$	772,995	$	1,750,338

	Wholesale			Retail		Consolidated
Year Ended December 31, 2010 (Predecessor)
Revenues:
Net sales	$	769,247		$	1,108,785	$	1,878,032
Royalties and franchise fees		0			19,417		19,417
Total revenues		769,247			1,128,202		1,897,449
Eliminations		(298,355	)		0		(298,355	)
Net revenues	$	470,892		$	1,128,202	$	1,599,094
Income from operations	$	85,636		$	41,800	$	127,436
Interest expense, net							40,850
Other expense, net							4,208
Income before income taxes						$	82,378
Depreciation and amortization	$	18,979		$	30,439	$	49,418
Capital expenditures	$	12,435		$	37,188	$	49,623
Total assets	$	948,850		$	704,301	$	1,653,151

F-34

Geographic Segments

Export sales of metallic balloons of $10,196, $11,517, $21,344 and $18,851 during the period from July 28, 2012 to December 31, 2012, the period from January 1, 2012 to July 27, 2012 and the years ended December 31, 2011 and 2010, respectively, are included in domestic sales below. Intercompany sales between geographic areas primarily consist of sales of finished goods for distribution in foreign markets and are made at cost plus a share of operating profit.

The Company’s geographic area data are as follows:

	Domestic		Foreign		Eliminations			Consolidated
Period from July 28 to December 31, 2012 (Successor)
Revenues:
Net sales to unaffiliated customers	$	848,303	$	116,027	$	0		$	964,330
Net sales between geographic areas		16,298		19,136		(35,434	)		0
Net sales		864,601		135,163		(35,434	)		964,330
Royalties and franchise fees		9,312		0		0			9,312
Total revenues	$	873,913	$	135,163	$	(35,434	)	$	973,642
Income from operations	$	54,333	$	2,652	$	(236	)	$	56,749
Interest expense, net									62,062
Other expense, net									26,157
Loss before income taxes								$	(31,470	)
Depreciation and amortization	$	47,906	$	1,931				$	49,837
Total long-lived assets (excluding goodwill, trade names and other intangible assets, net)	$	289,802	$	19,407				$	309,209
Total assets	$	3,428,796	$	295,557	$	(447,370	)	$	3,276,983

	Domestic		Foreign			Eliminations			Consolidated
Period from January 1 to July 27, 2012 (Predecessor)
Revenues:
Net sales to unaffiliated customers	$	808,171	$	122,732		$	0		$	930,903
Net sales between geographic areas		18,484		15,998			(34,482	)		0
Net sales		826,655		138,730			(34,482	)		930,903
Royalties and franchise fees		9,281		0			0			9,281
Total revenues	$	835,936	$	138,730		$	(34,482	)	$	940,184
Income (loss) from operations	$	53,679	$	(3,261	)	$	(802	)	$	49,616
Interest expense, net										41,970
Other expense, net										22,245
Loss before income taxes									$	(14,599	)
Depreciation and amortization	$	31,462	$	2,453					$	33,915

F-35

	Domestic		Foreign		Eliminations			Consolidated
Year Ended December 31, 2011 (Predecessor)
Revenues:
Net sales to unaffiliated customers	$	1,619,572	$	233,297	$	0		$	1,852,869
Net sales between geographic areas		28,321		12,304		(40,625	)		0
Net sales		1,647,893		245,601		(40,625	)		1,852,869
Royalties and franchise fees		19,106		0		0			19,106
Total revenues	$	1,666,999	$	245,601	$	(40,625	)	$	1,871,975
Income from operations	$	192,490	$	8,883	$	(3	)	$	201,370
Interest expense, net									77,743
Other expense, net									1,476
Income before income taxes								$	122,151
Depreciation and amortization	$	55,487	$	4,144				$	59,631
Total long-lived assets (excluding goodwill, trade names and other intangible assets, net)	$	211,602	$	18,492				$	230,094
Total assets	$	1,886,665	$	261,389	$	(397,716	)	$	1,750,338

	Domestic		Foreign		Eliminations			Consolidated
Year Ended December 31, 2010 (Predecessor)
Revenues:
Net sales to unaffiliated customers	$	1,469,533	$	110,144	$	0		$	1,579,677
Net sales between geographic areas		23,570		0		(23,570	)		0
Net sales		1,493,103		110,144		(23,570	)		1,579,677
Royalties and franchise fees		19,417		0		0			19,417
Total revenues	$	1,512,520	$	110,144	$	(23,570	)	$	1,599,094
Income from operations	$	120,058	$	6,129	$	1,249		$	127,436
Interest expense, net									40,850
Other expense, net									4,208
Income before income taxes								$	82,378
Depreciation and amortization	$	48,427	$	991				$	49,418
Total long-lived assets (excluding goodwill, trade names and other intangible assets, net)	$	215,631	$	3,938				$	219,569
Total assets	$	1,645,154	$	108,646	$	(100,649	)	$	1,653,151

Note 16—Quarterly Results (Unaudited)

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

F-36

The following table sets forth our historical revenues, gross profit, income (loss) from operations, net income (loss) and net income (loss) attributable to Party City Holdco Inc. for each of the quarters during the period from January 1, 2010 to June 30, 2012, the quarter ended December 31, 2012 and for the periods from July 1, 2012 to July 27, 2012 and July 28, 2012 to September 30, 2012:

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

	For the Three Months Ended, (Predecessor)
	March 31,			June 30,		September 30,			December 31,
2011:
Revenues:
Net sales	$	352,501		$	411,502	$	436,186		$	652,680
Royalties and franchise fees		3,681			4,550		3,962			6,913
Gross profit		127,486			163,715		148,039			294,656
Income from operations		16,608			43,022		11,276			130,464
Net (loss) income		(2,492	)		14,578		(5,820	)		70,144
Net (loss) income attributable to Party City Holdco Inc.		(2,563	)		14,532		(5,922	)		70,228
2010:
Revenues:
Net sales	$	304,379		$	352,705	$	358,772		$	563,821
Royalties and franchise fees		3,844			4,453		4,035			7,085
Gross profit		104,479			141,840		132,437			257,863
Income from operations		8,288			35,367		17,963			65,818	(d)
Net (loss) income		(369	)		16,531		4,673			28,598	(d)
Net (loss) income attributable to Party City Holdco Inc.		(412	)		16,460		4,603			28,668	(d)

(a) Includes: $8,383 of compensation expense related to the Transaction (see Note 5), $2,149 of stock-based compensation expense related to the Transaction and $16,148 of expense for payments in lieu of dividends.

(b) Includes: $28,052 of costs related to the Transaction (see Note 5), principally bankers fees and compensation costs, $2,149 of stock-based compensation expense related to the Transaction and $16,148 of expense for payments in lieu of dividends.

(c) As a result of the Transaction (see Note 5), the Company applied the acquisition method of accounting and increased the value of its inventory by $89,754 as of July 28, 2012. Such adjustment increased the Company’s cost of sales during the periods from July 28, 2012 to September 30, 2012 and October 1, 2012 to December 31, 2012 by $27,805 and $30,821, respectively, as a portion of the related inventory was sold. Additionally, during the period from July 28, 2012 to September 30, 2012, the Company recorded $24,564 of costs related to the Transaction. See Note 5 for further discussion.

(d) During 2010, the Company instituted a program to convert its Factory Card & Party Outlet stores to Party City stores and recorded a fourth quarter charge of $27,400 for the impairment of the Factory Card & Party Outlet trade name.

F-37

Note 17—Fair Value Measurements

The provisions of ASC Topic 820, “Fair Value Measurement”, define fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. ASC Topic 820 established a three-level fair value hierarchy that prioritizes the inputs used to measure fair value. This hierarchy requires entities to maximize the use of observable inputs and minimize the use of unobservable inputs. The three levels of inputs used to measure fair value are as follows:

Level 1—Quoted prices in active markets for identical assets or liabilities.

Level 2—Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.

The following table shows assets and liabilities as of December 31, 2012 (Successor) that are measured at fair value on a recurring basis:

	Quoted Prices in Active Markets for Identical Assets or Liabilities (Level 1)		Significant Other Observable Inputs (Level 2)			Unobservable Inputs (Level 3)		Total as of December 31, 2012
Derivative assets		0	$	27			0	$	27
Derivative liabilities		0		(63	)		0		(63	)

The following table shows assets and liabilities as of December 31, 2011 (Predecessor) that are measured at fair value on a recurring basis:

	Quoted Prices in Active Markets for Identical Assets or Liabilities (Level 1)		Significant Other Observable Inputs (Level 2)			Unobservable Inputs (Level 3)		Total as of December 31, 2011
Derivative assets		0	$	808			0	$	808
Derivative liabilities		0		(18	)		0		(18	)

In addition to assets and liabilities that are recorded at fair value on a recurring basis, the Company is required to record other assets and liabilities at fair value on a nonrecurring basis, generally as a result of impairment charges.

The carrying amounts for cash and cash equivalents, accounts receivable, prepaid expenses and other current assets, accounts payable, accrued expenses and other current liabilities approximated fair value at December 31, 2012 and December 31, 2011 because of the short-term maturities of the instruments and/or their variable rates of interest.

The carrying amount and fair value (based on observable inputs, including interest rates) of the Company’s borrowings under the New Term Loan Credit Agreement are as follows:

	December 31, 2012
	Carrying Amount		Fair Value (Level 2)
New Term Loan Credit Agreement	$	1,112,632	$	1,235,973

F-38

At December 31, 2012, the carrying amount of the Company’s borrowings under the Senior Notes approximated fair value as market conditions have not changed significantly since the issuance of the debt in July 2012.

The carrying amounts for other long-term debt approximated fair value at December 31, 2012 and December 31, 2011 based on the discounted future cash flow of each instrument at rates currently offered for similar debt instruments of comparable maturity.

Note 18—Derivative Financial Instruments

The Company is directly and indirectly affected by changes in certain market conditions. These changes in market conditions may adversely impact the Company’s financial performance and are referred to as market risks. The Company, when deemed appropriate, uses derivatives as a risk management tool to mitigate the potential impact of certain market risks. The primary market risks managed through the use of derivative financial instruments are interest rate risk and foreign currency exchange rate risk.

Interest Rate Risk Management

As part of the Company’s risk management strategy, the Company periodically uses interest rate swap agreements to hedge the variability of cash flows on floating rate debt obligations. Accordingly, interest rate swap agreements are reflected in the consolidated balance sheets at fair value and the related gains and losses on these contracts are deferred in stockholders’ equity and recognized in interest expense over the same period in which the related interest payments being hedged are recognized in income. The fair value of an interest rate swap agreement is the estimated amount that the counterparty would receive or pay to terminate the swap agreement at the reporting date, taking into account current interest rates and the current creditworthiness of the swap counterparty. The Company did not utilize interest rate swap agreements during 2012. See Note 19 for disclosure of the impact of interest rate swap agreements during 2011 and 2010.

Foreign Exchange Risk Management

A portion of the Company’s cash flows is derived from transactions denominated in foreign currencies. In order to reduce the uncertainty of foreign exchange rate movements on transactions denominated in foreign currencies, including the British Pound Sterling, the Euro, the Malaysian Ringgit, the Canadian Dollar and the Australian Dollar, the Company enters into foreign exchange contracts with major international financial institutions. These forward contracts, which typically mature within one year, are designed to hedge anticipated foreign currency transactions, primarily inventory purchases and sales. For contracts that qualify for hedge accounting, the terms of the foreign exchange contracts are such that cash flows from the contracts should be highly effective in offsetting the expected cash flows from the underlying forecasted transactions.

The foreign currency exchange contracts are reflected in the consolidated balance sheets at fair value. The fair value of the foreign currency exchange contracts is the estimated amount that the counterparties would receive or pay to terminate the foreign currency exchange contracts at the reporting date, taking into account current foreign exchange spot rates. At December 31, 2012 and 2011, the Company had unrealized net (losses) gains of $(225), and $505, respectively, recorded in accumulated other comprehensive income (loss) (see Note 19) related to foreign exchange contracts that qualify for hedge accounting. No components of these agreements are excluded in the measurement of hedge effectiveness. As these hedges are 100% effective, there is no current impact on earnings due to hedge ineffectiveness. The Company anticipates that substantially all unrealized gains and losses in accumulated other comprehensive income related to these foreign exchange contracts will be reclassified into earnings by June 2014.

F-39

The following table displays the fair values and notional amounts of the Company’s derivatives at December 31, 2012 and December 31, 2011:

Derivative Instrument

Notional Amounts

Derivative Assets

Derivative Liabilities

December 31, 2012 (Successor)

December 31, 2011 (Predecessor)

Balance Sheet Line

Fair Value

Balance Sheet Line

Fair Value

Balance Sheet Line

Fair Value

Balance Sheet Line

Fair Value

December 31, 2012 (Successor)

December 31, 2011 (Predecessor)

December 31, 2012 (Successor)

December 31, 2011 (Predecessor)

Foreign Exchange Contracts

$

20,120

$

27,884

(a

)PP

$

27

(a

)PP

$

808

(b

)AE

$

63

(b

)AE

$

18

(a) PP = Prepaid expenses and other current assets

(b) AE = Accrued expenses

Note 19—Subsequent Events

During February 2013, the New Term Loan Credit Agreement was amended. All term loans outstanding at the time of the amendment were replaced with new term loans for the same principal amount and the original issuance discount was eliminated. Additionally, the applicable margin for ABR borrowings was lowered from 3.50% to 2.25%, the applicable margin for LIBOR borrowings was lowered from 4.50% to 3.25% and the LIBOR floor was decreased from 1.25% to 1.00%. The amended agreement provides for two pricing options: (i) an ABR for any day, a rate per annum equal to the greater of (a) Deutsche Bank’s prime rate in effect on such day, (b) the federal funds effective rate in effect on such day plus 1/2 of 1%, (c) the adjusted LIBOR rate plus 1% and (d) 2.00% or (ii) the LIBOR rate, adjusted for certain additional costs, with a LIBOR floor of 1.00%, in each case plus the applicable margin.

Party City Holdco has adopted the 2012 Plan under which Party City Holdco can grant incentive awards in the form of stock appreciation rights, restricted stock and common stock options to certain directors, officers, employees and consultants of Party City Holdco and its affiliates. A committee of Party City Holdco’s Board of Directors, or the Board itself in the absence of a committee, is authorized to make grants and various other decisions under the 2012 Plan. During April 2013, 950 time-based stock options and 1,417 performance-based stock options were granted.

During May 2013, the Company acquired 100% of the stock of iParty Corp. (“iParty”), a party goods retailer with approximately 50 stores, principally located in the New England region. The purchase price was $29,401. Additionally, on the closing date, the Company repaid the entire amount outstanding under iParty’s credit agreement, $9,029. The acquisition was funded using borrowings under the New ABL Facility.

On August 1, 2013, PC Nextco issued $350,000 of 8.75% notes at a 1% discount (“the Nextco Notes”). The proceeds, net of expenses, were used to pay a dividend to the shareholders of PC Nextco’s parent, Party City Holdco. The total amount of the dividend was $338,015. The Nextco Notes, which mature on August 15, 2019, are not guaranteed by Party City Holdings or any of its subsidiaries. Since PC Nextco has no assets or operations other than its investment in, and income (loss) from, Party City Holdings and its subsidiaries, interest and principal payments for the Nextco Notes will be funded by Party City Holdings and its subsidiaries. To the extent that restricted payment basket limitations in Party City Holdings’ existing debt agreements prevent Party City Holdings from being able to dividend the necessary funds to PC Nextco in order for PC Nextco to make the semi-annual interest payments, the Nextco Notes require PC Nextco to make the interest payments in the form of additional notes bearing interest at 9.50%.

F-40

SCHEDULE I—CONDENSED FINANCIAL INFORMATION OF REGISTRANT

PARTY CITY HOLDCO INC. (Parent company only)

CONDENSED BALANCE SHEETS

(Dollars in thousands)

	December 31, 2012 (Successor)			December 31,2011 (Predecessor)
ASSETS
Other assets (principally investment in and amounts due from wholly-owned subsidiaries)	$	807,122		$	360,753
Total assets	$	807,122		$	360,753
LIABILITIES, REDEEMABLE COMMON SECURITIES AND STOCKHOLDERS’ EQUITY
Total liabilities	$	—		$	—
Redeemable common securities (888.23 and 1,210.49 shares issued and outstanding at December 31, 2012 and December 31, 2011, respectively)		22,205			36,939
Commitments and contingencies
Stockholders’ equity:
Common Stock ($0.01 par value; 32,470.70 and 30,970.02 shares issued and outstanding at December 31, 2012 and December 31, 2011, respectively)		—			—
Additional paid-in capital		808,925			286,451
Accumulated (deficit) retained earnings		(30,208	)		48,717
Accumulated other comprehensive income (loss)		6,200			(11,354	)
Total stockholders’ equity		784,917			323,814
Total liabilities, redeemable common securities and stockholders’ equity	$	807,122		$	360,753

See accompanying notes to these condensed financial statements.

F-41

PARTY CITY HOLDCO INC. (Parent company only)

CONDENSED STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS) INCOME

(Dollars in thousands)

	Period from July 28, 2012 to December 31, 2012 (Successor)			Period from January 1, 2012 to July 27, 2012 (Predecessor)			December 31, 2011 (Predecessor)			December 31, 2010 (Predecessor)
Other expense, net	$	24,564		$	0		$	0		$	0
Loss before income taxes		(24,564	)		0			0			0
Income tax benefit		0			0			0			0
Equity in net (loss) income of subsidiaries		(5,644	)		(15,098	)		76,275			49,319
Net (loss) income	$	(30,208	)	$	(15,098	)	$	76,275		$	49,319
Other comprehensive income (loss)		6,200			(1,263	)		(5,439	)		2,480
Comprehensive (loss) income	$	(24,008	)	$	(16,361	)	$	70,836		$	51,799

See accompanying notes to these condensed financial statements.

F-42

PARTY CITY HOLDCO INC. (Parent company only)

CONDENSED STATEMENTS OF CASH FLOWS

(Dollars in thousands)

	Period from July 28, 2012 to December 31, 2012 (Successor)			Period from January 1, 2012 to July 27, 2012 (Predecessor)			December 31, 2011 (Predecessor)			December 31, 2010 (Predecessor)
Cash flows provided by operating activities:
Net (loss) income	$	(30,208	)	$	(15,098	)	$	76,275		$	49,319
Adjustments to reconcile net loss to net cash provided by operating activities:
Equity in net loss (income) of subsidiaries		5,644			15,098			(76,275	)		(49,319	)
Increase in due to affiliates		752,876			0			0			0
Net cash provided by operating activities		728,312			0			0			0
Cash flows used in investing activities:
Cash paid in connection with acquisitions, net of cash acquired		(1,562,246	)		0			0			0
Net cash used in investing activities		(1,562,246	)		0			0			0
Cash flows provided by financing activities:
Capital contributions		833,934			0			0			0
Net cash provided by financing activities		833,934			0			0			0
Net change in cash and cash equivalents		0			0			0			0
Cash and cash equivalents at beginning of period		0			0			0			0
Cash and cash equivalents at end of period	$	0		$	0		$	0		$	0

See accompanying notes to these condensed financial statements.

F-43

PARTY CITY HOLDCO INC. (Parent company only)

NOTES TO CONDENSED FINANCIAL STATEMENTS

(Dollars in thousands)

Note 1—Basis of presentation and description of registrant

Party City Holdco Inc. (“Party City Holdco”) Schedule I Condensed Financial Information included in this prospectus provides all parent company information that is required to be presented in accordance with the SEC rules and regulations for financial statement schedules. The consolidated financial statements of Party City Holdco are included elsewhere in this Registration Statement. The parent-company financial statements should be read in conjunction with the consolidated financial statements and the notes thereto.

Party City Holdco conducts no separate operations and acts only as a holding company. Its share of the net income of its unconsolidated subsidiaries is included in its statements of income using the equity method.

Since all material redeemable stock requirements, dividends and guarantees of the registrant have been disclosed in the consolidated financial statements, the information is not required to be repeated in this schedule.

On July 27, 2012, PC Merger Sub, Inc., a wholly-owned subsidiary of PC Intermediate Holdings, Inc., which is a wholly-owned subsidiary of Party City Holdco, merged into Party City Holdings Inc. (“Party City Holdings”), with Party City Holdings being the surviving entity (“the Transaction”). At such time 100% of Party City Holdco, which was formed in order to affect the Transaction, was owned by a collaborative group consisting of funds affiliated with Thomas H. Lee Partners, L.P., 70% ownership, funds affiliated with Advent International Corporation, 24% ownership, and other minority investors, including management, 6% ownership.

As a result of the Transaction, the financial information for the period after July 27, 2012 represents the financial information of the “Successor” company. Prior to, and including, July 27, 2012, the consolidated financial statements include the accounts of the “Predecessor” company. Financial information in the Predecessor period principally relates to Party City Holdings and its subsidiaries. Due to the change in the basis of accounting resulting from the application of the acquisition method of accounting and push-down accounting, the Predecessor’s consolidated financial statements and the Successor’s consolidated financial statements are not necessarily comparable.

Note 2—Dividends from subsidiaries

No cash dividends were paid to Party City Holdco by its subsidiaries during the periods included in these financial statements.

Note 3—Other expense, net

In conjunction with the Transaction, Party City Holdco incurred $4,564 of third-party costs, principally attorney and banker fees. The amount was recorded in other expense, net in the condensed statement of operations and comprehensive loss for the period from July 28, 2012 to December 31, 2012. Also, at the time of the Transaction, Party City Holdco paid THL and Advent a non-recurring $20,000 fee for certain services that were performed in conjunction with the execution of the Transaction. The amount was also recorded in other expense, net.

F-44

SCHEDULE II

PARTY CITY HOLDCO INC.

VALUATION AND QUALIFYING ACCOUNTS

Period from July 28, 2012 to December 31, 2012, Period from January 1, 2012 to July 27, 2012 and the Years Ended December 31, 2011 and 2010

	Beginning Balance		Write- Offs		Additions		Ending Balance
	(Dollars in thousands)
Allowance for Doubtful Accounts:
For the year ended December 31, 2010 (Predecessor)	$	2,997	$	920	$	637	$	2,714
For the year ended December 31, 2011 (Predecessor)		2,714		610		1,773		3,877
For the period from January 1, 2012 to July 27, 2012 (Predecessor)		3,877		738		644		3,783
For the period from July 28, 2012 to December 31, 2012 (Successor)		0		95		801		706
Sales Returns and Allowances:
For the year ended December 31, 2010 (Predecessor)		180		58,321		58,590		449
For the year ended December 31, 2011 (Predecessor)		449		72,367		72,516		598
For the period from January 1, 2012 to July 27, 2012 (Predecessor)		598		37,031		37,118		685
For the period from July 28, 2012 to December 31, 2012 (Successor)		0		39,085		39,456		371

F-45

PARTY CITY HOLDCO INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Amounts in thousands, except share and per share amounts)

	September 30, 2013			December 31, 2012
	(Note 2) (Unaudited)			(Note 2)
ASSETS
Current assets:
Cash and cash equivalents	$	12,904		$	14,563
Accounts receivable, net		165,216			129,339
Inventories, net		610,210			510,217
Prepaid expenses and other current assets		110,045			48,927
Total current assets		898,375			703,046
Property, plant and equipment, net		233,838			239,771
Goodwill		1,550,942			1,537,569
Trade names		566,540			566,536
Other intangible assets, net		146,617			160,623
Other assets, net		65,737			69,438
Total assets	$	3,462,049		$	3,276,983
LIABILITIES, REDEEMABLE COMMON SECURITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Loans and notes payable	$	215,041		$	33,258
Accounts payable		177,346			117,661
Accrued expenses		154,907			134,724
Income taxes payable		0			16,314
Current portion of long-term obligations		13,254			13,231
Total current liabilities		560,548			315,188
Long-term obligations, excluding current portion		2,137,473			1,805,028
Deferred income tax liabilities		324,159			340,288
Deferred rent and other long-term liabilities		18,086			6,824
Total liabilities		3,040,266			2,467,328
Redeemable common securities (including 1,039.23 and 888.23 shares issued and outstanding at September 30, 2013 and December 31, 2012, respectively)		15,497			22,205
Commitments and contingencies
Stockholders’ equity:
Common stock ($0.01 par value; 32,470.70 shares issued and outstanding)		0			0
Additional paid-in capital		483,689			808,925
Accumulated deficit		(81,932	)		(30,208	)
Accumulated other comprehensive income		4,529			6,200
Party City Holdco Inc. stockholders’ equity		406,286			784,917
Noncontrolling interests		0			2,533
Total stockholders’ equity		406,286			787,450
Total liabilities, redeemable common securities and stockholders’ equity	$	3,462,049		$	3,276,983

See accompanying notes to unaudited condensed consolidated financial statements.

F-46

PARTY CITY HOLDCO INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(Unaudited)

(Amounts in thousands, except per common share data)

	Successor						Predecessor
	Three Months Ended September 30, 2013			Period from July 28 to September 30, 2012			Period from July 1 to July 27, 2012
Revenues:
Net sales	$	483,585		$	324,525		$	122,182
Royalties and franchise fees		3,815			2,797			1,045
Total revenues		487,400			327,322			123,227
Expenses:
Cost of sales		322,683			247,508			77,576
Wholesale selling expenses		17,038			11,465			4,263
Retail operating expenses		90,403			62,454			19,452
Franchise expenses		3,368			2,585			798
General and administrative expenses		38,389			28,596			36,058
Art and development costs		4,782			3,390			1,350
Total expenses		476,663			355,998			139,497
Income (loss) from operations		10,737			(28,676	)		(16,270	)
Interest expense, net		37,887			26,572			5,165
Other expense, net		1,510			25,621			21,950
Loss before income taxes		(28,660	)		(80,869	)		(43,385	)
Income tax benefit		(16,785	)		(25,755	)		(10,257	)
Net loss		(11,875	)		(55,114	)		(33,128	)
Less: net income attributable to noncontrolling interests		45			61			5
Net loss attributable to Party City Holdco Inc.	$	(11,920	)	$	(55,175	)	$	(33,133	)
Net income per common share—basic	$			$			$
Net income per common share—diluted	$			$			$
Weighted-average number of common shares—basic
Weighted-average number of common shares—diluted
Comprehensive loss	$	(3,051	)	$	(49,046	)	$	(33,659	)
Less: comprehensive income (loss) attributable to noncontrolling interests		18			136			(2	)
Comprehensive loss attributable to Party City Holdco Inc.	$	(3,069	)	$	(49,182	)	$	(33,657	)

See accompanying notes to unaudited condensed consolidated financial statements.

F-47

PARTY CITY HOLDCO INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(Unaudited)

(Amounts in thousands, except per common share data)

	Successor						Predecessor
	Nine Months Ended September 30, 2013			Period from July 28 to September 30, 2012			Period from January 1 to July 27, 2012
Revenues:
Net sales	$	1,323,216		$	324,525		$	930,903
Royalties and franchise fees		11,961			2,797			9,281
Total revenues		1,335,177			327,322			940,184
Expenses:
Cost of sales		877,258			247,508			574,048
Wholesale selling expenses		51,091			11,465			31,568
Retail operating expenses		245,252			62,454			166,047
Franchise expenses		9,872			2,585			6,579
General and administrative expenses		107,718			28,596			101,502
Art and development costs		14,480			3,390			10,824
Total expenses		1,305,671			355,998			890,568
Income (loss) from operations		29,506			(28,676	)		49,616
Interest expense, net		103,561			26,572			41,970
Other expense, net		15,991			25,621			22,245
Loss before income taxes		(90,046	)		(80,869	)		(14,599	)
Income tax (benefit) expense		(38,546	)		(25,755	)		403
Net loss		(51,500	)		(55,114	)		(15,002	)
Less: net income attributable to noncontrolling interests		224			61			96
Net loss attributable to Party City Holdco Inc.	$	(51,724	)	$	(55,175	)	$	(15,098	)
Net income per common share—basic	$			$			$
Net income per common share—diluted	$			$			$
Weighted-average number of common shares—basic
Weighted-average number of common shares—diluted
Comprehensive loss	$	(52,555	)	$	(49,046	)	$	(16,221	)
Less: comprehensive income attributable to noncontrolling interests		201			136			140
Comprehensive loss attributable to Party City Holdco Inc.	$	(52,756	)	$	(49,182	)	$	(16,361	)

See accompanying notes to unaudited condensed consolidated financial statements.

F-48

PARTY CITY HOLDCO INC.

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY

(Unaudited)

(Amounts in thousands, except share amounts)

	Common Shares		Common Stock		Additional Paid-in Capital			Accumulated Deficit			Accumulated Other Comprehensive Income			Party City Holdco Inc. Stockholders’ Equity			Noncontrolling Interests			Total Stockholders’ Equity
Balance at December 31, 2012		32,470.70	$	0	$	808,925		$	(30,208	)	$	6,200		$	784,917		$	2,533		$	787,450
Net (loss) income									(51,724	)					(51,724	)		224			(51,500	)
Dividend distribution						(338,015	)								(338,015	)					(338,015	)
Equity based compensation						1,741									1,741						1,741
Adjustment to fair value of redeemable common securities						10,483									10,483						10,483
Acquisition of noncontrolling interest						555						(639	)		(84	)		(2,734	)		(2,818	)
Foreign currency adjustments												(1,213	)		(1,213	)		(23	)		(1,236	)
Impact of foreign exchange contracts, net of income taxes												181			181						181
Balance at September 30, 2013		32,470.70	$	0	$	483,689		$	(81,932	)	$	4,529		$	406,286		$	0		$	406,286

See accompanying notes to unaudited condensed consolidated financial statements.

F-49

PARTY CITY HOLDCO INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(Amounts in thousands)

	Successor						Predecessor
	Nine Months Ended September 30, 2013			Period from July 28 to September 30, 2012			Period from January 1 to July 27, 2012
Cash flows used in operating activities:
Net loss	$	(51,500	)	$	(55,114	)	$	(15,002	)
Less: net income attributable to noncontrolling interests		224			61			96
Net loss attributable to Party City Holdco Inc.		(51,724	)		(55,175	)		(15,098	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization expense		70,960			20,327			33,915
Amortization of deferred financing costs and original issuance discount		16,886			1,907			2,592
Provision for doubtful accounts		574			212			644
Deferred income tax (benefit) expense		(13,749	)		(6,244	)		3,823
Deferred rent		11,706			1,434			3,344
Undistributed loss (income) in unconsolidated joint venture		311			16			(128	)
Loss (gain) on disposal of equipment		329			(23	)		9
Equity based compensation		1,741			0			3,375
Changes in operating assets and liabilities, net of effects of acquired businesses:
(Increase) decrease in accounts receivable		(35,488	)		(28,219	)		3,995
Increase in inventories		(82,379	)		(15,578	)		(77,264	)
Increase in prepaid expenses and other current assets		(12,853	)		(13,901	)		(7,107	)
Increase (decrease) in accounts payable, accrued expenses and income taxes payable		19,700			(103,924	)		29,774
Net cash used in operating activities		(73,986	)		(199,168	)		(18,126	)
Cash flows used in investing activities:
Cash paid in connection with acquisitions, net of cash acquired		(48,644	)		(1,562,819	)		(3,106	)
Capital expenditures		(42,143	)		(7,635	)		(28,864	)
Proceeds from disposal of property and equipment		215			0			146
Net cash used in investing activities		(90,572	)		(1,570,454	)		(31,824	)
Cash flows provided by financing activities:
Repayment of loans, notes payable and long-term obligations		(1,149,145	)		(970,421	)		(9,564	)
Proceeds from loans, notes payable and long-term obligations		1,659,103			1,978,263			10,590
Dividend distribution		(338,015	)		0			0
Excess tax benefit from stock options		0			0			32,292
Capital contributions		750			833,934			0
Debt issuance costs		(9,822	)		(64,114	)		0
Net cash provided by financing activities		162,871			1,777,662			33,318
Effect of exchange rate changes on cash and cash equivalents		28			111			80
Net (decrease) increase in cash and cash equivalents		(1,659	)		8,151			(16,552	)
Cash and cash equivalents at beginning of period		14,563			5,501			22,053
Cash and cash equivalents at end of period	$	12,904		$	13,652		$	5,501
Supplemental disclosure of cash flow information:
Cash paid during the period
Interest	$	105,695		$	6,382		$	41,396
Income taxes, net of refunds	$	21,152		$	206		$	6,165

See accompanying notes to unaudited condensed consolidated financial statements.

F-50

PARTY CITY HOLDCO INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Dollars in thousands, except share and per share amounts)

Note 1—Description of Business

Party City Holdco Inc. (the “Company” or “Party City Holdco”) designs, manufactures, contracts for manufacture and distributes party goods, including paper and plastic tableware, metallic and latex balloons, accessories, novelties, costumes, other garments, gifts and stationery throughout the world. In addition, the Company operates specialty retail party supply stores in the United States and Canada, principally under the names Party City and Halloween City, and it operates e-commerce websites, principally under the domain name partycity.com. The Company also franchises both individual stores and franchise areas throughout the United States and Puerto Rico, principally under the name Party City.

Note 2—Basis of Presentation and Recently Issued Accounting Pronouncements

The Company has no assets or operations. The Company owns 100% of PC Nextco Holdings, LLC (“PC Nextco”), which owns 100% of PC Intermediate Holdings, Inc. (“PC Intermediate”). PC Intermediate owns 100% of Party City Holdings Inc. (“Party City Holdings”).

On July 27, 2012, PC Merger Sub, Inc. (“Merger Sub”), a wholly-owned subsidiary of PC Intermediate, merged into Party City Holdings, with Party City Holdings being the surviving entity (“the Transaction”). At such time 100% of Party City Holdco, which was formed in order to affect the Transaction, was owned by a collaborative group consisting of funds affiliated with Thomas H. Lee Partners, L.P. (“THL”), 70% ownership, funds affiliated with Advent International Corporation (“Advent”), 24% ownership, and other minority investors, including management, 6% ownership.

Party City Holdco and PC Intermediate were formed during May 2012 for the purpose of affecting the Transaction. PC Nextco was formed during 2013. As a result of the Transaction, the financial information for the period after July 27, 2012 represents the financial information of the “Successor” company. Prior to, and including, July 27, 2012, the consolidated financial statements include the accounts of the “Predecessor” company. Financial information in the Predecessor period principally relates to Party City Holdings and its subsidiaries. Additionally, it includes the activity of Party City Holdco and PC Intermediate subsequent to their incorporation during May 2012. Due to the change in the basis of assets and liabilities resulting from the application of the acquisition method of accounting, the Predecessor’s consolidated financial statements and the Successor’s consolidated financial statements are not necessarily comparable.

The unaudited condensed consolidated financial statements of the Company include the accounts of the Company and its majority-owned and controlled entities. All significant intercompany balances and transactions have been eliminated in consolidation. The unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles for interim financial information. Accordingly, they do not include all of the information and footnotes required by U.S. generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring items) considered necessary for a fair presentation have been included in the unaudited condensed consolidated financial statements.

The majority of our retail operations define a fiscal year (“Fiscal Year”) as the 52-week period or 53-week period ended on the Saturday nearest December 31st of each year and define their fiscal quarters (“Fiscal Quarter”) as the four interim 13-week periods following the end of the previous Fiscal Year, except in the case of a 53-week Fiscal Year when the fourth Fiscal Quarter is extended to 14 weeks. The consolidated financial statements of the Company combine the Fiscal Quarters of our retail operations with the calendar quarters of our wholesale operations. The Company has determined the differences between the retail operation’s Fiscal Year and Fiscal Quarters and the calendar year and calendar quarters to be insignificant.

F-51

Operating results for interim periods are not necessarily indicative of the results to be expected for the year ending December 31, 2013. Our business is subject to substantial seasonal variations as our retail segment has realized a significant portion of its net sales, cash flows and net income in the fourth quarter of each year, principally due to its Halloween season sales in October and, to a lesser extent, other year-end holiday sales. We expect that this general pattern will continue. Our results of operations may also be affected by industry factors that may be specific to a particular period such as movement in, and the general level of, raw material costs.

Recently Issued Accounting Pronouncements

In July 2013, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2013-10, “Derivatives and Hedging (Topic 815), Inclusion of the Federal Funds Effective Swap Rate (or Overnight Index Swap Rate) as a Benchmark Interest Rate for Hedge Accounting Purposes”. The pronouncement allows companies to use the federal funds effective rate as a benchmark interest rate for purposes of achieving hedge accounting. Although the pronouncement has no current impact on the Company, it could impact the Company in the future.

In July 2013, the FASB issued ASU 2013-11, “Income Taxes: Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists”. The update provides guidance on the financial statement presentation of an unrecognized tax benefit, as either a reduction of a deferred tax asset or as a liability, when a net operating loss carryforward, similar tax loss, or a tax credit carryforward exists. The update will be effective for interim and annual periods beginning after December 15, 2013 and may be applied on a retrospective basis. Early adoption is permitted. The Company does not believe that the adoption of this pronouncement will have a material impact on the Company’s condensed consolidated financial statements.

In March 2013, the FASB issued ASU 2013-05, “Foreign Currency Matters (Topic 830), Parent’s Accounting for the Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity”. The pronouncement states that a cumulative translation adjustment is attached to the parent’s investment in a foreign entity and should be released in a manner consistent with the derecognition guidance on investments in entities. The ASU is effective for fiscal years beginning after December 15, 2013. Although the Company continues to review this pronouncement, it does not believe that it will have a material impact on the Company’s condensed consolidated financial statements.

In February 2013, the FASB issued ASU 2013-02, “Comprehensive Income (Topic 220), Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income”. The pronouncement requires companies to report, in one place, information about reclassifications out of accumulated other comprehensive income. Additionally, it requires companies to report changes in accumulated other comprehensive income balances. The Company adopted ASU 2013-02 as of January 1, 2013. See Note 6. The adoption did not have a material impact on the Company’s condensed consolidated financial statements.

In December 2011, the FASB issued ASU 2011-11, “Balance Sheet (Topic 210), Disclosures about Offsetting Assets and Liabilities”. Additionally, in January 2013, the FASB issued ASU 2013-01, “Balance Sheet (Topic 210), Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities”. The pronouncements require an entity to disclose information about offsetting and related arrangements to enable users of its financial statements to understand the effect of those arrangements on its financial position. The Company adopted the pronouncements on January 1, 2013. The adoption did not have a material impact on the Company’s condensed consolidated financial statements.

Note 3—Acquisitions

Retail Acquisitions

During May 2013, the Company acquired 100% of the stock of iParty Corp. (“iParty”), a party goods retailer with approximately 50 stores principally located in the New England region. The purchase price was

F-52

$29,401. Additionally, on the closing date, the Company repaid the entire amount outstanding under iParty’s credit agreement, $9,029. The acquisition was funded using borrowings under the Company’s $400,000 ABL Credit Agreement (“New ABL Facility”). The results of iParty are included in the condensed consolidated financial statements from the May 9, 2013 acquisition date and are reported in the operating results of the Company’s Retail segment.

The following summarizes the estimated fair values of the major classes of assets acquired and liabilities assumed: inventory of $16,497, current deferred tax assets of $11,622, fixed assets of $2,441, accounts payable of $7,161 and accrued expenses of $2,814. $19,361 has been initially recorded as goodwill. The allocation of the purchase price is based on our preliminary estimate of the fair value of the assets acquired and liabilities assumed. The Company is still in the process of accumulating information to complete the determination of the fair value of certain acquired assets, including inventory and income tax-related assets. Goodwill arises because the purchase price reflects the strategic fit and expected synergies that the business will bring to the Company’s operations. Due to the Company’s vertically integrated structure, the percentage of the Company’s wholesale product sold at iParty stores will be increased significantly. Additionally, the acquisition expands the Company’s vertical model by giving the Company a significant retail presence in New England. The excess of the purchase price over the fair value of the tangible assets and liabilities acquired is not deductible for U.S. tax purposes.

Note 4—Inventories

Inventories consisted of the following:

	September 30, 2013		December 31, 2012
Finished goods	$	587,374	$	490,241
Raw materials		15,012		13,822
Work in process		7,824		6,154
	$	610,210	$	510,217

Inventories are valued at the lower of cost or market. The Company determines the cost of inventory at its retail operations using the weighted average method. Other inventory cost is determined principally using the first-in, first-out method.

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

As a result of the Transaction (see Note 2), the Company applied the acquisition method of accounting and increased the value of its inventory at July 28, 2012 by $89,754. The adjustment principally reflects the previously deferred wholesale margin on inventory supplied to the Company’s retail operations and on hand at July 27, 2012. Such adjustment increased the Company’s cost of sales during the three and nine months ended September 30, 2013 by $2,616 and $21,979, respectively, as a portion of the related inventory was sold. Additionally, the adjustment increased the Company’s cost of sales during the period from July 28, 2012 to September 30, 2012 by $27,805 as a portion of the related inventory was sold. At September 30, 2013, $9,149 of the adjustment remained in finished goods.

Note 5—Income Taxes

The income tax benefit for the three and nine months ended September 30, 2013 was determined based upon the Company’s estimated consolidated effective income tax rate of 40.3% for the year ending December 31, 2013. The difference between the estimated consolidated effective income tax rate for the year ending December 31, 2013 and the U.S. federal statutory rate is primarily attributable to unrecognized foreign tax credits and state income taxes, partially offset by available domestic manufacturing deductions.

F-53

Note 6—Changes in Accumulated Other Comprehensive Income

The changes in accumulated other comprehensive income attributable to Party City Holdco Inc. consisted of the following:

	Nine Months Ended September 30, 2013
	Foreign Currency Adjustments			Impact of Foreign Exchange Contracts, Net of Taxes			Total, Net of Taxes
Balance at December 31, 2012	$	6,425		$	(225	)	$	6,200
Other comprehensive (loss) income before reclassifications, net of income tax expense of $0, $11 and $11		(1,213	)		18			(1,195	)
Amounts reclassified from accumulated other comprehensive income, net of income tax expense of $0, $96 and $96		0			163			163
Net current-period other comprehensive (loss) income		(1,213	)		181			(1,032	)
Acquisition of noncontrolling interest		(639	)		0			(639	)
Balance at September 30, 2013	$	4,573		$	(44	)	$	4,529

Note 7—Capital Stock and Share-Based Compensation

At September 30, 2013, the Company’s authorized capital stock, including redeemable securities, consisted of 1,000,000.00 shares of $0.01 par value common stock.

Under the terms of Party City Holdco’s stockholders’ agreement, dated July 27, 2012, Party City Holdco has an option to purchase all of the shares of common stock held by former employees and, under certain circumstances, former employee stockholders and independent director stockholders can require Party City Holdco to purchase all of the shares held by the former employees/directors. The aggregate amount that may be payable to current employee/director stockholders should they die or become disabled, based on the estimated fair market value of fully paid and vested common securities, totaled $15,497 and $22,205 at September 30, 2013 and December 31, 2012, respectively, and was classified as redeemable common securities on the Company’s condensed consolidated balance sheet, with a corresponding adjustment to additional paid-in capital.

The change in redeemable common securities during the nine months ended September 30, 2013 was as follows:

	Common Shares
Balance at December 31, 2012	$	22,205
Common shares issued		3,775
Fair value adjustment		(10,483	)
Balance at September 30, 2013	$	15,497

During the nine months ended September 30, 2013, Party City Holdco issued 121 shares of redeemable common stock in conjunction with an acquisition and the sellers of the acquired entity became employees of the Company. Additionally, during the nine months ended September 30, 2013, an independent member of the Board of Directors purchased 30 shares of redeemable common stock.

On August 1, 2013, PC Nextco issued $350,000 of 8.75% notes at a 1% discount (“the Nextco Notes”). The proceeds, net of expenses, were used to pay a dividend to the shareholders of PC Nextco’s parent, Party City Holdco. The total amount of the dividend was $338,015. See Note 13 for further discussion of the Nextco Notes. As a result of the dividend, the fair value of the redeemable common securities decreased by $10,483 during the nine months ended September 30, 2013.

F-54

Subsequent to the Transaction (see Note 2), Party City Holdco adopted the 2012 Omnibus Equity Incentive Plan (the “2012 Plan”) under which it can grant incentive awards in the form of stock appreciation rights, restricted stock and common stock options to certain directors, officers, employees and consultants of Party City Holdco and its affiliates. A committee of Party City Holdco’s Board of Directors, or the Board itself in the absence of a committee, is authorized to make grants and various other decisions under the 2012 Plan.

During the second quarter of 2013, 998 time-based stock options and 1,493 performance-based stock options were granted to employees and the independent director. The options were exercisable at $25,000 per share. As a result of the August 2013 dividend distribution, in accordance with the terms of the 2012 Plan, the exercise prices of the options were adjusted.

During the third quarter of 2013, 38 time-based stock options and 62 performance-based stock options were granted to employees. The options are exercisable at $15,000 per share.

The time-based options vest at a rate of 20% per year and become fully vested in the event of a change-in-control.

The performance-based options vest if: 1) certain service requirements are met, 2) certain specified investment returns are achieved and 3) there is a change-in-control. Since a change-in-control cannot be assessed as probable before it occurs, no compensation expense has been recorded in connection with the performance-based options.

The Company recorded $388 and $1,741 of share-based compensation expense in general and administrative expenses during the three and nine months ended September 30, 2013, respectively. Additionally, the Company recorded $2,150 and $3,375 of share-based compensation expense in general and administrative expenses during the period from July 1, 2012 to July 27, 2012 and the period from January 1, 2012 to July 27, 2012, respectively. No share-based compensation expense was recorded during the period from July 28, 2012 to September 30, 2012.

Note 8—Segment Information

Industry Segments

The Company has two identifiable business segments. The Wholesale segment includes the design, manufacture, contract for manufacture and wholesale distribution of party goods, including paper and plastic tableware, metallic and latex balloons, accessories, novelties, costumes, other garments, gifts and stationery. The Retail segment includes the operation of company-owned retail party supply superstores in the United States and Canada, the Company’s e-commerce operations and the sale of franchises on an individual store and franchise area basis throughout the United States and Puerto Rico.

F-55

The Company’s industry segment data for the three months ended September 30, 2013, the period from July 28, 2012 to September 30, 2012 and the period from July 1, 2012 to July 27, 2012 was as follows:

Successor:	Wholesale			Retail			Consolidated
Three Months Ended September 30, 2013
Revenues:
Net sales	$	379,629		$	298,657		$	678,286
Royalties and franchise fees		0			3,815			3,815
Total revenues		379,629			302,472			682,101
Eliminations		(194,701	)		0			(194,701	)
Net revenues	$	184,928		$	302,472		$	487,400
Income (loss) from operations	$	29,704		$	(18,967	)	$	10,737
Interest expense, net								37,887
Other expense, net								1,510
Loss before income taxes							$	(28,660	)
Total assets	$	1,269,878		$	2,192,171		$	3,462,049
	Wholesale			Retail			Consolidated
Period from July 28 to September 30, 2012
Revenues:
Net sales	$	262,215		$	197,634		$	459,849
Royalties and franchise fees		0			2,797			2,797
Total revenues		262,215			200,431			462,646
Eliminations		(135,324	)		0			(135,324	)
Net revenues	$	126,891		$	200,431		$	327,322
Income (loss) from operations	$	6,451		$	(35,127	)	$	(28,676	)
Interest expense, net								26,572
Other expense, net								25,621
Loss before income taxes							$	(80,869	)
Predecessor:	Wholesale			Retail			Consolidated
Period from July 1 to July 27, 2012
Revenues:
Net sales	$	75,534		$	73,718		$	149,252
Royalties and franchise fees		0			1,045			1,045
Total revenues		75,534			74,763			150,297
Eliminations		(27,070	)		0			(27,070	)
Net revenues	$	48,464		$	74,763		$	123,227
Income (loss) from operations	$	2,742		$	(19,012	)	$	(16,270	)
Interest expense, net								5,165
Other expense, net								21,950
Loss before income taxes							$	(43,385	)

F-56

The Company’s industry segment data for the nine months ended September 30, 2013, the period from July 28, 2012 to September 30, 2012 and the period from January 1, 2012 to July 27, 2012 was as follows:

Successor:	Wholesale			Retail			Consolidated
Nine Months Ended September 30, 2013
Revenues:
Net sales	$	808,834		$	879,348		$	1,688,182
Royalties and franchise fees		0			11,961			11,961
Total revenues		808,834			891,309			1,700,143
Eliminations		(364,966	)		0			(364,966	)
Net revenues	$	443,868		$	891,309		$	1,335,177
Income (loss) from operations	$	43,359		$	(13,853	)	$	29,506
Interest expense, net								103,561
Other expense, net								15,991
Loss before income taxes							$	(90,046	)
	Wholesale			Retail			Consolidated
Period from July 28 to September 30, 2012
Revenues:
Net sales	$	262,215		$	197,634		$	459,849
Royalties and franchise fees		0			2,797			2,797
Total revenues		262,215			200,431			462,646
Eliminations		(135,324	)		0			(135,324	)
Net revenues	$	126,891		$	200,431		$	327,322
Income (loss) from operations	$	6,451		$	(35,127	)	$	(28,676	)
Interest expense, net								26,572
Other expense, net								25,621
Loss before income taxes							$	(80,869	)
Predecessor:	Wholesale			Retail			Consolidated
Period from January 1 to July 27, 2012
Revenues:
Net sales	$	512,473		$	613,089		$	1,125,562
Royalties and franchise fees		0			9,281			9,281
Total revenues		512,473			622,370			1,134,843
Eliminations		(194,659	)		0			(194,659	)
Net revenues	$	317,814		$	622,370		$	940,184
Income from operations	$	44,719		$	4,897		$	49,616
Interest expense, net								41,970
Other expense, net								22,245
Loss before income taxes							$	(14,599	)

F-57

Geographic Segments

Intercompany sales between geographic areas primarily consist of sales of finished goods for distribution in foreign markets and are made at cost plus a share of operating profit.

Note 9—Commitments and Contingencies

The Company is a party to certain claims and litigation in the ordinary course of business. The Company does not believe these proceedings will result, individually or in the aggregate, in a material adverse effect on its financial condition or future results of operations.

We are an assignor with contingent lease liability for five stores sold to franchisees and other parties. The potential contingent lease obligations continue until the applicable leases expire in 2018. The maximum amount of the contingent lease obligations may vary, but is limited to the sum of the total amount due under the leases. At September 30, 2013, the maximum amount of the contingent lease obligations was approximately $2,100. Payment of such amount is contingent upon certain events occurring, which management has not assessed as probable or estimable at this time.

The Company’s 8.875% Senior Notes (“Senior Notes”) require the Company to file a registration statement with respect to an offer to exchange the outstanding Senior Notes for exchange notes. If the exchange offer is not completed prior to September 5, 2013, additional interest accrues on the outstanding Senior Notes at a rate of 0.25% per annum. The Company expects the exchange offer to be completed in November 2013. Based on such estimate, at September 30, 2013 the Company recorded a $350 liability for estimated penalty payments.

Note 10—Derivative Financial Instruments

The Company is directly and indirectly affected by changes in certain market conditions. These changes in market conditions may adversely impact the Company’s financial performance and are referred to as market risks. The Company, when deemed appropriate, uses derivatives as a risk management tool to mitigate the potential impact of certain market risks. The primary market risks managed through the use of derivative financial instruments are interest rate risk and foreign currency exchange rate risk.

Interest Rate Risk Management

As part of the Company’s risk management strategy, the Company periodically uses interest rate swap agreements to hedge the variability of cash flows on floating rate debt obligations. Accordingly, interest rate swap agreements are reflected in the consolidated balance sheets at fair value and the related gains and losses on these contracts are deferred in stockholders’ equity and recognized in interest expense over the same period in which the related interest payments being hedged are recognized in income. The fair value of an interest rate swap agreement is the estimated amount that the counterparty would receive or pay to terminate the swap agreement at the reporting date, taking into account current interest rates and the current creditworthiness of the swap counterparty. The Company did not utilize interest rate swap agreements during the nine months ended September 30, 2013 or during 2012.

Foreign Exchange Risk Management

A portion of the Company’s cash flows is derived from transactions denominated in foreign currencies. In order to reduce the uncertainty of foreign exchange rate movements on transactions denominated in foreign currencies, including the British Pound Sterling, the Euro, the Malaysian Ringgit, the Canadian Dollar and the Australian Dollar, the Company enters into foreign exchange contracts with major international financial institutions. These forward contracts, which typically mature within one year, are designed to hedge anticipated foreign currency transactions, primarily inventory purchases and sales. For the contracts that qualify for hedge accounting, the terms of the foreign exchange contracts are such that cash flows from the contracts should be highly effective in offsetting the expected cash flows from the underlying forecasted transactions.

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The foreign exchange contracts are reflected in the consolidated balance sheets at fair value. The fair value of the foreign exchange contracts is the estimated amount that the counterparties would receive or pay to terminate the foreign exchange contracts at the reporting date, taking into account current foreign exchange rates. No components of these agreements are excluded in the measurement of hedge effectiveness. As these hedges are 100% effective, there is no current impact on earnings due to hedge ineffectiveness. The Company anticipates that substantially all unrealized gains and losses in accumulated other comprehensive loss related to these foreign exchange contracts will be reclassified into earnings by June 2014.

The following table displays the fair values and notional amounts of the Company’s derivatives at September 30, 2013 and December 31, 2012:

Notional Amounts

Derivative Assets

Derivative Liabilities

Balance Sheet Line

Fair Value

Balance Sheet Line

Fair Value

Balance Sheet Line

Fair Value

Balance Sheet Line

Fair Value

Derivative Instrument

September 30, 2013

December 31, 2012

September 30, 2013

December 31, 2012

September 30, 2013

December 31, 2012

Foreign Exchange Contracts

$

21,115

$

20,120

(a

) PP

$

34

(a

) PP

$

27

(b

) AE

$

259

(b

) AE

$

63

(a) PP = Prepaid expenses and other current assets

(b) AE = Accrued expenses

Note 11—Fair Value Measurements

The provisions of FASB ASC Topic 820, “Fair Value Measurement”, define fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. ASC Topic 820 established a three-level fair value hierarchy that prioritizes the inputs used to measure fair value. This hierarchy requires entities to maximize the use of observable inputs and minimize the use of unobservable inputs. The three levels of inputs used to measure fair value are as follows:

• Level 1—Quoted prices in active markets for identical assets or liabilities.

• Level 2—Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

• Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.

The following table shows assets and liabilities as of September 30, 2013 that are measured at fair value on a recurring basis:

	Quoted Prices in Active Markets for Identical Assets or Liabilities (Level 1)		Significant Other Observable Inputs (Level 2)		Unobservable Inputs (Level 3)		Total as of September 30, 2013
Derivative assets	$	0	$	34	$	0	$	34
Derivative liabilities		0		259		0		259

F-59

The following table shows assets and liabilities as of December 31, 2012 that are measured at fair value on a recurring basis:

	Quoted Prices in Active Markets for Identical Assets or Liabilities (Level 1)		Significant Other Observable Inputs (Level 2)		Unobservable Inputs (Level 3)		Total as of December 31, 2012
Derivative assets	$	0	$	27	$	0	$	27
Derivative liabilities		0		63		0		63

In addition to assets and liabilities that are recorded at fair value on a recurring basis, the Company is required to record other assets and liabilities at fair value on a nonrecurring basis, generally as a result of impairment charges and restructuring charges.

Note 12—Fair Value of Financial Instruments

The carrying amounts for cash and cash equivalents, accounts receivable, prepaid expenses and other current assets, accounts payable, accrued expenses and other current liabilities approximated fair value at September 30, 2013 and December 31, 2012 because of the short-term maturities of the instruments and/or their variable rates of interest.

At September 30, 2013, the fair value of the Company’s borrowings under the $1,125,000 Term Loan Credit Agreement (“New Term Loan Credit Agreement”) was $1,110,644. The book value at September 30, 2013, net of the unamortized original issuance discount and call premium, was $1,099,695. This represents a Level 2 fair value measurement. At September 30, 2013, the fair value of the Company’s borrowings under its $700,000 8.875% Senior Notes (“New Senior Notes”) was $752,941. This represents a Level 1 fair value measurement.

The carrying amounts for other long-term debt approximated fair value at September 30, 2013 and December 31, 2012 based on the discounted future cash flow of each instrument at rates currently offered for similar debt instruments of comparable maturity. This represents a Level 2 fair value measurement.

Note 13—Debt

During February 2013, the Company amended its New Term Loan Credit Agreement. All term loans outstanding at the time of the amendment were replaced with new term loans for the same principal amount and the original issuance discount was partially eliminated. Additionally, the applicable margin for alternate base interest rate borrowings was lowered from 3.50% to 2.25%, the applicable margin for LIBOR borrowings was lowered from 4.50% to 3.25% and the LIBOR floor was decreased from 1.25% to 1.00%. The amended agreement provides for two pricing options: (i) an ABR, a rate per annum equal to the greater of (a) Deutsche Bank’s prime rate in effect on such day, (b) the federal funds effective rate in effect on such day plus 1/2 of 1%, (c) the adjusted LIBOR rate plus 1% and (d) 2.00% or (ii) the LIBOR rate, adjusted for certain additional costs, with a LIBOR floor of 1.00%, in each case plus the applicable margin.

As the New Term Loan Credit Agreement is a loan syndication, the Company assessed whether the debt modification should be accounted for as an extinguishment on a creditor-by-creditor basis. The Company wrote-off $5,911 of costs incurred during the initial issuance of the debt and which were being amortized over the life of the debt. The amount was recorded in other expense in the Company’s condensed consolidated statement of operations and comprehensive loss and included in amortization of deferred financing costs and original issuance discount in the Company’s condensed consolidated statement of cash flows. The remaining costs of $20,442 will continue to be amortized over the life of the debt, using the effective interest method. Additionally, the Company recorded in other expense $2,316 of the net original issuance discount that existed as of the time of the amendment. The remainder of the discount, $8,015, will continue to be amortized over the life of the debt, using the effective interest method. In conjunction with the amendment, the Company paid an $11,222 call premium,

F-60

equal to 1.00% of the outstanding principal balance. The Company recorded $2,535 of the call premium in other expense. The rest of the premium, $8,687, will be amortized over the life of the debt, using the effective interest method. Additionally, the Company incurred $1,655 of banker and legal fees; $1,533 of which was recorded in other expense. The rest of the costs, $122, will be amortized over the life of the debt, using the effective interest method.

As all term loans outstanding at the time of the amendment were replaced with new term loans for the same principal amount, the Company included the total principal amount, $1,122,188, in both repayment of loans, notes payable and long-term obligations and proceeds from loans, notes payable and long-term obligations in the financing activities section of the Company’s condensed consolidated statement of cash flows.

On August 1, 2013, PC Nextco issued $350,000 of 8.75% notes at a 1% discount (“the Nextco Notes”). The proceeds, net of expenses, were used to pay a dividend to the shareholders of PC Nextco’s parent, Party City Holdco. The Nextco Notes, which mature on August 15, 2019, are not guaranteed by the Company. Since PC Nextco has no assets or operations other than its investment in, and income (loss) from, Party City Holdings and its subsidiaries, interest and principal payments for the Nextco Notes will be funded by Party City Holdings. To the extent that restricted payment basket limitations in Party City Holdings’ existing debt agreements prevent Party City Holdings from being able to dividend the necessary funds to PC Nextco in order for PC Nextco to make the semi-annual interest payments, the Nextco Notes require PC Nextco to make the interest payments in the form of additional notes bearing interest at 9.50%. As of September 30, 2013, Party City Holdings had $84,350 of restricted payment capacity.

F-61

            Shares

Party City Holdco Inc.

Common Stock

Goldman, Sachs & Co.

BofA Merrill Lynch

Credit Suisse

Morgan Stanley

Barclays

Deutsche Bank Securities

J.P. Morgan

Until                    , 2014 (the 25th day after the date of this prospectus), all dealers effecting transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealers’ obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. Other Expenses of Issuance and Distribution.

The following table indicates the expenses to be incurred in connection with the offering described in this registration statement, other than underwriting discounts and commissions, all of which will be paid by the registrant and selling stockholders. All amounts are estimated except the SEC registration fee and FINRA fee.

SEC registration fee	$	64,400
FINRA filing fee		75,500
Stock exchange listing fee			*
Accountants’ fees and expenses			*
Legal fees and expenses			*
Transfer Agent’s fees and expenses			*
Printing and engraving expenses			*
Miscellaneous			*
Total Expenses	$		*

* To be filed by amendment

ITEM 14. Indemnification of Directors and Officers.

Section 102(b)(7) of the DGCL enables a corporation in its original certificates of incorporation or an amendment thereto to eliminate or limit the personal liability of a director for violations of the director’s fiduciary duty, except (i) for any breach of the director’s duty of loyalty to the corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) for liability of directors for unlawful payment of dividends or unlawful stock purchase or redemptions pursuant to Section 174 of the DGCL or (iv) for any transaction from which a director derived an improper personal benefit. Our certificate of incorporation includes a provision that eliminates the personal liability of directors for monetary damages for actions taken as a director to the fullest extent authorized by the DGCL.

Section 145(a) of the DGCL provides in relevant part that a corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding (other than an action by or in the right of the corporation) by reason of the fact that such person is or was a director or officer of the corporation, or is or was serving at the request of the corporation as a director or officer of another entity, against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such action, suit or proceeding if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe such person’s conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that such person did not act in good faith and in a manner which such person reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that such person’s conduct was lawful.

Section 145(b) of the DGCL provides in relevant part that a corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that the person is or was a director or officer of the corporation, or is or was serving at the request of the corporation as a director or officer of another entity, against expenses (including attorneys’ fees) actually and reasonably incurred by such person in connection with the defense or settlement of such action or suit if the person acted in good faith and in a manner

II-1

the person reasonably believed to be in or not opposed to the best interests of the corporation and except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the corporation unless and only to the extent that the Court of Chancery or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or such other court shall deem proper.

Our existing certificate of incorporation generally provides that we will indemnify our directors and officers to the fullest extent permitted by law. Our existing certificate of incorporation also provides that the indemnification and advancement of expenses provided by, or granted pursuant to the existing certificate of incorporation are not exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled under any bylaw, agreement, vote of stockholders or otherwise. Section 145(f) of the DGCL further provides that a right to indemnification or to advancement of expenses arising under a provision of the certificate of incorporation shall not be eliminated or impaired by an amendment to such provision after the occurrence of the act or omission which is the subject of the civil, criminal, administrative or investigation action, suit or proceeding for which indemnification or advancement of expenses is sought.

We currently have indemnification agreements in place with our directors. In connection with this offering we will enter into new indemnification agreements with our directors and executive officers. Such agreements generally provide for indemnification by reason of being our director or officer, as the case may be. These agreements are in addition to the indemnification provided by our amended and restated charter and bylaws.

We also will obtain officers’ and directors’ liability insurance which insures against liabilities that officers and directors of the registrant may, in such capacities, incur. Section 145(g) of the DGCL provides that a corporation shall have power to purchase and maintain insurance on behalf of any person who is or was a director or officer of the corporation, or is or was serving at the request of the corporation as a director or officer of another entity, against any liability asserted against such person and incurred by such person in any such capacity, or arising out of such person’s status as such, whether or not the corporation would have the power to indemnify such person against such liability under that section.

The underwriting agreement we will enter into in connection with the offering of common stock described in this registration statement provides for indemnification by the underwriters of the registrant and its executive officers and directors, by the registrant of the underwriters and by the selling stockholders of the underwriters, for certain liabilities, including liabilities arising under the Securities Act.

Also see “Item 17. Undertakings.”

ITEM 15. Recent Sales of Unregistered Securities.

Equity Securities

In connection with the closing of the Acquisition, on July 27, 2012, we issued 32,470.70 shares of our common stock and 888.23 shares of our redeemable common stock. From January 1, 2013 through November 30, 2013 we issued a total of 151 shares of our redeemable common stock. The common stock and redeemable common stock were issued without registration in reliance on the exemption afforded by Section 4(2) of the Securities Act, as a transaction by an issuer not involving a public offering.

From January 1, 2013 through December 31, 2013, we granted options to purchase a total of 2,583 shares of our common stock to employees at a weighted average exercise price of $14,916 per share. Option grants were exempt pursuant to Section 4(2) of the Securities Act, as a transaction by an issuer not involving a public offering.

II-2

Debt Securities

In July 2012, PCHI, our wholly-owned indirect subsidiary, issued $700.0 million aggregate principal amount of 8.875% senior notes due 2020. The issuance of the senior notes was conducted pursuant to the exemptions afforded by Section 4(2) of the Securities Act, as a transaction by an issuer not involving a public offering. PCHI and the guarantors of the senior notes entered into a registration rights agreement in which they agreed, among other things, to file a registration statement to exchange the senior notes for similar notes registered under the Securities Act. The registration statement on Form S-4 registering such notes was filed with the SEC on June 21, 2013 and declared effective on October 17, 2013.

In August 2013, Nextco Holdings, our wholly-owned direct subsidiary, issued $350.0 million aggregate principal amount of 8.75% / 9.500% senior PIK toggle notes due 2019. The issuance of the senior PIK toggle notes was conducted pursuant to the exemptions afforded by Section 4(2) of the Securities Act, as a transaction by an issuer not involving a public offering. Nextco Holdings entered into a registration rights agreement in which it agreed, among other things, to file a registration statement to exchange the senior notes for similar notes registered under the Securities Act. The registration statement has not yet been filed with the SEC.

ITEM 16. Exhibits and Financial Statement Schedules.

(a) Exhibits

Number	Description
1.1*	Form of Underwriting Agreement
2.1	Agreement and Plan of Merger, dated June 4, 2012, by and among Party City Holdings Inc., PC Merger Sub, Inc., Party City Holdco Inc. (formerly PC Topco Holdings, Inc.) and the Stockholders’ Representatives party thereto (incorporated by reference to Exhibit 2.1 to Party City Holding Inc.’s Registration Statement on Form S-4 dated June 21, 2013)
3.1*	Amended and Restated Certificate of Incorporation (to be effective upon completion of this offering)
3.2*	Amended and Restated Bylaws (to be effective upon completion of this offering)
3.3	Certificate of Incorporation of Party City Holdco Inc., dated May 31, 2012, as amended on November 22, 2013
3.4	By-Laws of Party City Holdco Inc.
4.1*	Specimen common stock certificate
4.2	Indenture, dated as of July 27, 2012, among PC Merger Sub, Inc., which on July 27, 2012 was merged with and into Party City Holdings Inc., and Wilmington Trust, National Association, as Trustee (incorporated by reference to Exhibit 4.1 to Party City Holding Inc.’s Registration Statement on Form S-4 dated June 21, 2013)
4.3	First Supplemental Indenture, dated as of July 27, 2012, among Party City Holdings Inc., the Guarantors named therein and Wilmington Trust, National Association, as Trustee (incorporated by reference to Exhibit 4.2 to Party City Holding Inc.’s Registration Statement on Form S-4 dated June 21, 2013)
4.4	Second Supplemental Indenture, dated as of June 7, 2013, among Party City Holdings Inc., the Guarantors named therein and Wilmington Trust, National Association, as Trustee (incorporated by reference to Exhibit 4.6 to Party City Holding Inc.’s Registration Statement on Form S-4 dated June 21, 2013)
4.5	Registration Rights Agreement, dated as of July 27, 2012, among PC Merger Sub, Inc., which on July 27, 2012 was merged with and into Party City Holdings Inc., and Merrill Lynch, Pierce, Fenner & Smith Incorporated, as representative of the several Purchasers named therein (incorporated by reference to Exhibit 4.4 to Party City Holding Inc.’s Registration Statement on Form S-4 dated June 21, 2013)

II-3

Number	Description
4.6	Joinder Agreement to the Registration Rights Agreement, dated as of July 27, 2012, among Party City Holdings Inc., the Guarantors named therein and Merrill Lynch, Pierce, Fenner & Smith Incorporated, as representative of the several Purchasers named therein (incorporated by reference to Exhibit 4.5 to Party City Holding Inc.’s Registration Statement on Form S-4 dated June 21, 2013)
4.7	Registration Rights Agreement, dated July 27, 2012, by and among Party City Holdco Inc. (formerly PC Topco Holdings, Inc.), The PC Topco, L.P., Advent-Party City Acquisition Limited Partnership, American Greetings Corporation and the other stockholders that are signatories thereto
4.8	Indenture, dated August 1, 2013, among PC Nextco Holdings, LLC, PC Nextco Finance, Inc. and Wilmington Trust, National Association, as Trustee
4.9	Stockholders Agreement, dated July 27, 2012, by and among Party City Holdco Inc. (formerly PC Topco Holdings, Inc.), THL PC Topco, L.P., Advent-Party City Acquisition Limited Partnership, American Greetings Corporation and the Persons listed as Management Holders on the signature pages thereto (incorporated by reference to Exhibit 10.19 to Party City Holding Inc.’s Amendment No.2 to Registration Statement on Form S-4 dated October 4, 2013)
5.1*	Opinion of Ropes & Gray LLP
10.1	The MetLife Capital Corporation Master Lease Purchase Agreement between MetLife Capital Corporation and Amscan Inc., Deco Paper Products, Inc., Kookaburra USA Ltd., and Trisar, Inc., dated November 21, 1991, as amended (incorporated by reference to Exhibit 10(n) to Amendment No. 2 to Amscan Holdings’ Registration Statement on Form S-1 dated December 16, 1996)
10.2*	Form of Indemnification Agreement
10.3	Employment Agreement between Party City Holdings Inc. and Gerald C. Rittenberg, dated June 1, 2011 and amended and restated as of July 1, 2011 (incorporated by reference to Exhibit No. 10.4 to Amendment No. 2 to Party City Holdings Inc.’s Registration Statement on Form S-1 dated July 6, 2011)
10.4	Employment Agreement between Party City Holdings Inc. and James M. Harrison, dated June 1, 2011 and amended and restated as of July 1, 2011 (incorporated by reference to Exhibit No. 10.5 to Amendment No. 2 to Party City Holdings Inc.’s Registration Statement on Form S-1 dated July 6, 2011)
10.5	Offer Letter between Amscan Inc. and Michael Correale, dated as of April 28, 1997 (incorporated by reference to Exhibit No. 10.7 to Party City Holdings Inc.’s Registration Statement on Form S-1 dated April 21, 2011)
10.6	ABL Credit Agreement, dated as of July 27, 2012, among PC Intermediate Holdings, Inc., PC Merger Sub, Inc. (to be merged with and into Party City Holdings Inc.), PC Finance Sub, Inc. (to be merged with and into Party City Corporation), the subsidiaries of the Borrowers from time to time party thereto, the financial institutions party thereto, as the Lenders, and Deutsche Bank Trust Company Americas, as Administrative Agent (incorporated by reference to Exhibit 10.6 to Party City Holding Inc.’s Registration Statement on Form S-4 dated June 21, 2013)
10.7	Term Loan Credit Agreement, dated as of July 27, 2012, among PC Intermediate Holdings, Inc., PC Merger Sub, Inc. (to be merged with and into Party City Holdings Inc.), PC Finance Sub, Inc. (to be merged with and into Party City Corporation), the subsidiaries of the Borrowers from time to time party thereto, the financial institutions party thereto, as the Lenders, and Deutsche Bank Trust Company Americas, as Administrative Agent (incorporated by reference to Exhibit 10.7 to Party City Holding Inc.’s Registration Statement on Form S-4 dated June 21, 2013)
10.8	Pledge and Security Agreement, dated as of July 27, 2012, among PC Merger Sub, Inc. (to be merged with and into Party City Holdings Inc.), PC Finance Sub, Inc., PC Intermediate Holdings, Inc., the Subsidiary Parties from time to time party thereto and Deutsche Bank Trust Company Americas, as Agent (incorporated by reference to Exhibit 10.8 to Party City Holding Inc.’s Registration Statement on Form S-4 dated June 21, 2013)

II-4

Number	Description
10.9	Pledge and Security Agreement, dated as of July 27, 2012, among PC Merger Sub, Inc. (to be merged with and into Party City Holdings Inc.), PC Finance Sub, Inc., PC Intermediate Holdings, Inc., the Subsidiary Parties from time to time party thereto and Deutsche Bank Trust Company Americas, as Agent (incorporated by reference to Exhibit 10.9 to Party City Holding Inc.’s Registration Statement on Form S-4 dated June 21, 2013)
10.10	Intercreditor Agreement, dated as of July 27, 2012, among PC Intermediate Holdings, Inc., PC Merger Sub, Inc. (to be merged with and into Party City Holdings Inc.), PC Finance Sub, Inc., the other Grantors from time to time party thereto, Deutsche Bank Trust Company Americas, as Revolving Facility Security Agent, and Deutsche Bank Trust Company Americas, as Term Loan Security Agent (incorporated by reference to Exhibit 10.10 to Party City Holding Inc.’s Registration Statement on Form S-4 dated June 21, 2013)
10.11	First Amendment to Term Loan Credit Agreement, dated as of February 19, 2013, among Party City Holdings Inc., Party City Corporation, PC Intermediate Holdings, Inc., Deutsche Bank Trust Company Americas, as Administrative Agent, the 2013 Replacement Lenders and the Lenders (incorporated by reference to Exhibit 10.11 to Party City Holding Inc.’s Registration Statement on Form S-4 dated June 21, 2013)
10.12	Intercreditor Agreement Joinder, dated as of June 7, 2013, joining iParty Corp. and iParty Retails Stores Corp. as Grantors under the Intercreditor Agreement dated as of July 27, 2012 among PC Intermediate Holdings Inc., Party City Corporation, the other Grantors from time to time party thereto, Deutsche Bank Trust Company Americas, as Revolving Facility Security Agent and Deutsche Bank Trust Company Americas, as Term Loan Security Agent (incorporated by reference to Exhibit 10.18 to Party City Holding Inc.’s Registration Statement on Form S-4 dated June 21, 2013)
10.13	Subsidiary Guarantor Joinder Agreement, dated as of June 7, 2013, among iParty Corp., iParty Retail Stores Corp. and Deutsche Bank Trust Company Americas, as Administrative Agent and Collateral Agent (incorporated by reference to Exhibit 10.14 to Party City Holding Inc.’s Registration Statement on Form S-4 dated June 21, 2013)
10.14	Joinder Agreement, dated as of June 7, 2013, among iParty Corp., iParty Retail Stores Corp. and Deutsche Bank Trust Company Americas, as Administrative Agent (incorporated by reference to Exhibit 10.15 to Party City Holding Inc.’s Registration Statement on Form S-4 dated June 21, 2013)
10.15	Supplement No. 1, dated as of June 7, 2013, to the Pledge and Security Agreement dated as of July 27, 2012, among Party City Holdings Inc., Party City Corporation, PC Intermediate Holdings, Inc. and Deutsche Bank Trust Company Americas, as Administrative Agent and Collateral Agent (incorporated by reference to Exhibit 10.16 to Party City Holding Inc.’s Registration Statement on Form S-4 dated June 21, 2013)
10.16	Supplement No. 1, dated as of June 7, 2013, to the Pledge and Security Agreement dated as of July 27, 2012, among Party City Holdings Inc., Party City Corporation, PC Intermediate Holdings, Inc. and Deutsche Bank Trust Company Americas, as Administrative Agent and Collateral Agent (incorporated by reference to Exhibit 10.17 to Party City Holding Inc.’s Registration Statement on Form S-4 dated June 21, 2013)
10.17	2012 Omnibus Equity Incentive Plan of Party City Holdco Inc. (formerly PC Topco Holdings, Inc.) (incorporated by reference to Exhibit 10.12 to Party City Holding Inc.’s Registration Statement on Form S-4 dated June 21, 2013)
10.18	Advisory Services Agreement, dated as of July 27, 2012, among Party City Holdco Inc. (formerly PC Topco Holdings, Inc.), PC Intermediate Holdings, Inc., Party City Holdings Inc., THL Managers VI, LLC and Advent International Corporation (incorporated by reference to Exhibit 10.13 to Party City Holding Inc.’s Registration Statement on Form S-4 dated June 21, 2013)
14.1*	Code of Business Conduct
21.1	List of Subsidiaries of the Party City Holdco Inc.
23.1	Consent of Ernst & Young LLP, independent registered public accounting firm
23.2*	Consent of Ropes & Gray LLP (included in Exhibit 5.1)
24.1	Power of Attorney (included on signature page)

* To be filed by amendment

II-5

ITEM 17. Undertakings.

Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.

The undersigned registrant hereby undertakes that:

(1) For purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b) (1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective.

(2) For the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

(3) For the purpose of determining liability under the Securities Act, if the registrant is subject to Rule 430C, each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use.

(4) For the purpose of determining liability of the registrant under the Securities Act to any purchaser in the initial distribution of the securities: The undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:

i. Any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424;

ii. Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant;

iii. The portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and

iv. Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser.

The undersigned registrant hereby undertakes to provide to the underwriter at the closing specified in the underwriting agreement certificates in such denominations and registered in such names as required by the underwriter to permit prompt delivery to each purchaser.

II-6

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Elmsford, New York, on the 21^st day of January, 2014.

Party City Holdco Inc.
By:	/s/ Michael A. Correale
	Name: Michael A. Correale
	Title:   Chief Financial Officer

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below hereby constitutes and appoints James M. Harrison and Michael A. Correale, and each of them acting individually, as his or her true and lawful attorneys-in-fact and agents, with full power of each to act alone, with full powers of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign the Registration Statement filed herewith and any and all amendments to said Registration Statement (including post-effective amendments and any related registration statements thereto filed pursuant to Rule 462 and otherwise), and file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, with full power of each to act alone, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully for all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or his, her or their substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated:

Signature	Title	Date
/s/ James M. Harrison James M. Harrison	Chief Executive Officer, President and Director (Principal Executive Officer)	January 21, 2014
/s/ Michael A. Correale Michael A. Correale	Chief Financial Officer (Principal Financial Officer) (Principal Accounting Officer)	January 21, 2014
/s/ Gerald C. Rittenberg Gerald C. Rittenberg	Executive Chairman and Director	January 21, 2014
/s/ Todd M. Abbrecht Todd M. Abbrecht	Director	January 21, 2014
/s/ Joshua M. Nelson Joshua M. Nelson	Director	January 21, 2014
/s/ Uttam K. Jain Uttam K. Jain	Director	January 21, 2014

II-7

Signature	Title	Date
/s/ Jefferson M. Case Jefferson M. Case	Director	January 21, 2014
/s/ Steven J. Collins Steven J. Collins	Director	January 21, 2014
/s/ Norman S. Matthews Norman S. Matthews	Director	January 21, 2014
/s/ Lawrence P. Molloy Lawrence P. Molloy	Director	January 21, 2014

II-8

EX-3.3

Exhibit 3.3

State of Delaware

Secretary of State

Division of Corporations

Delivered 03:13 PM 05/31/2012

FILED 03:11 PM 05/31/2012

SRV 120680147 – 5162733 FILE

CERTIFICATE OF INCORPORATION

OF

PC TOPCO HOLDINGS, INC.

MAY 31, 2012

THE UNDERSIGNED, being a natural person, hereby certifies, for the purpose of organizing a corporation under the General Corporation Law of the State of Delaware (the “DGCL”), that:

FIRST: The name of the Corporation is: PC Topco Holdings, Inc.

SECOND: The address of the registered office of the Corporation in the State of Delaware and the County of New Castle is 2711 Centerville Road, Suite 400, Wilmington, Delaware 19808 and the name of the registered agent at that address is Corporation Service Company.

THIRD: The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the DGCL, as from time to time amended.

FOURTH: The total number of shares of capital stock which the Corporation shall have authority to issue is 1,000,000 (one million) shares of Common stock, par value $0.01 per share. Except as otherwise provided by law, the shares of stock of the Corporation may be issued by the Corporation from time to time in such amounts, for such consideration and for such corporate purposes as the Board of Directors of the Corporation (the “Board of Directors”) may from time to time determine.

FIFTH: The name and mailing address of the sole incorporator is Emma Robinson, Weil, Gotshal & Manges LLP, 767 Fifth Avenue, New York, NY 10153.

SIXTH: The number of directors of the Corporation shall be fixed from time to time by the bylaws or amendment thereof adopted by the Board of Directors. Election of directors need not be by written ballot. Any director may be removed from office either with or without cause at any time by the affirmative vote of the holders of a majority of the outstanding stock of the Corporation entitled to vote, given at a meeting of the stockholders called for that purpose, or by the consent of the holders of a majority of the outstanding stock of the Corporation entitled to vote, given in accordance with Section 228 of the DGCL.

SEVENTH: In furtherance and not in limitation of the powers conferred by law, subject to any limitations contained elsewhere in these articles of incorporation, bylaws of the Corporation may be adopted, amended or repealed by a majority of the Board of Directors of the Corporation, but any bylaws adopted by the Board of Directors may be amended or repealed by the stockholders entitled to vote thereon.

EIGHTH: A director of the Corporation shall not be personally liable either to the Corporation or to any stockholder for monetary damages for breach of fiduciary duty as a director, except (i) for any breach of the director’s duty of loyalty to the Corporation or its stockholders, or (ii) for acts or omissions which are not in good faith or which involve intentional misconduct or knowing violation of the law, or (iii) for any matter in respect of which such director shall be liable under Section 174 of the DGCL or any amendment thereto or successor provision thereto, or (iv) for any transaction from which the director shall have derived an improper personal benefit. Neither amendment nor repeal of this Article Eighth nor the adoption of any provision of the Certificate of Incorporation of the Corporation inconsistent with this Article Eighth shall eliminate or reduce the effect of this Article Eighth in respect of any matter occurring, or any cause of action, suit or claim that, but for this Article Eighth, would accrue or arise, prior to such amendment, repeal or adoption of an inconsistent provision.

NINTH: The Corporation shall indemnify any person who was or is a party or is threatened to be made a party to, or testifies in, any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative in nature, by reason of the fact that such person is or was a director or officer of the Corporation, or, while a director or officer of the Corporation, is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, employee benefit plan, trust or other enterprise, against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such action, suit or proceeding to the full extent permitted by law, and the Corporation may adopt Bylaws or enter into agreements with any such person for the purpose of providing for such indemnification. The rights provided in this Article Ninth (i) shall not be deemed exclusive of any other rights to which an indemnitee may be entitled under any law, agreement or vote of stockholders or disinterested directors or otherwise, and (ii) shall inure to the benefit of the heirs, executors and administrators of the indemnitees. The Corporation may, to the extent authorized from time to time by its Board of Directors, grant indemnification rights to other employees or agents of the Corporation or other persons serving the Corporation and such rights may be equivalent to or greater or less than, those set forth in this Article.

TENTH: The Corporation expressly elects not to be governed by Section 203 of the DGCL.

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IN WITNESS WHEREOF, the undersigned has duly executed this Certificate of Incorporation on this 31st day of May, 2012.

/s/ Emma Robinson

Emma Robinson

Sole Incorporator

[SIGNATURE PAGE TO PC TOPCO HOLDINGS, INC. CERTIFICATE OF INCORPORATION]

CERTIFICATE OF AMENDMENT

OF

CERTIFICATE OF INCORPORATION

OF

PC TOPCO HOLDINGS, INC.

PC Topco Holdings, Inc., a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware (the “Corporation”),

DOES HEREBY CERTIFY:

FIRST: That the Board of Directors of the Corporation, by unanimous written consent, adopted resolutions to effect a change in the Corporation’s name so that paragraph First of the Certificate of Incorporation of the Corporation be amended by deleting paragraph First in its entirety and replacing it with the following:

“The name of the Corporation is: Party City Holdco Inc.”

SECOND: That, in lieu of a meeting and vote of the stockholders, the stockholders of said Corporation have given written consent to said amendment in accordance with the provisions of Section 228 of the General Corporation Law of the State of Delaware.

THIRD: That the aforesaid amendment was duly adopted in accordance with the applicable provisions of Section 242 and 228 of the General Corporation Law of the State of Delaware.

[Remainder of Page Intentionally Left Blank]

IN WITNESS WHEREOF, the Corporation has caused this certificate to be signed by its Chief Financial Officer this 22 day of November, 2013.

/s/ Michael A. Correale
Name:	Michael A. Correale
Title:	Chief Financial Officer

EX-3.4

Exhibit 3.4

BYLAWS

OF

PC TOPCO HOLDINGS, INC.

(a Delaware corporation)

ARTICLE I

Stockholders

SECTION 1. Annual Meetings. The annual meeting of stockholders for the election of directors and for the transaction of such other business as may properly come before the meeting shall be held each year at such date and time, within or without the State of Delaware, as the Board of Directors shall determine.

SECTION 2. Special Meetings. Special meetings of stockholders for the transaction of such business as may properly come before the meeting may be called by order of the Board of Directors or by stockholders holding together at least a majority of all the shares of the Corporation entitled to vote at the meeting, and shall be held at such date and time, within or without the State of Delaware, as may be specified by such order. Whenever the directors shall fail to fix such place, the meeting shall be held at the principal executive office of the Corporation.

SECTION 3. Notice of Meetings. Written notice of all meetings of the stockholders, stating the place, date and hour of the meeting and the place within the city or other municipality or community at which the list of stockholders may be examined, shall be mailed or delivered to each stockholder not less than 10 nor more than 60 days prior to the meeting. Notice of any special meeting shall state in general terms the purpose or purposes for which the meeting is to be held.

SECTION 4. Stockholder Lists. The officer who has charge of the stock ledger of the Corporation shall prepare and make, at least 10 days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present.

The stock ledger shall be the only evidence as to who are the stockholders entitled to examine the stock ledger, the list required by this section or the books of the Corporation, or to vote in person or by proxy at any meeting of stockholders.

SECTION 5. Quorum. Except as otherwise provided by law or the Corporation’s Certificate of Incorporation, a quorum for the transaction of business at any meeting of stockholders shall consist of the holders of record of a majority of the issued and outstanding shares of the capital stock of the Corporation entitled to vote at the meeting, present in person or by proxy. At all meetings of the stockholders at which a quorum is present, all matters, except as otherwise provided by law or the Certificate of Incorporation, shall be decided by the vote of the holders of a majority of the shares entitled to vote thereat present in person or by proxy. If there be no such quorum, the holders of a majority of such shares so present or represented may adjourn the meeting from time to time, without further notice, until a quorum shall have been obtained. When a quorum is once present it is not broken by the subsequent withdrawal of any stockholder.

SECTION 6. Organization. Meetings of stockholders shall be presided over by the Chairman, if any, or if none or in the Chairman’s absence the Vice-Chairman, if any, or if none or in the Vice-Chairman’s absence the President, if any, or if none or in the President’s absence a Vice-President, or, if none of the foregoing is present, by a chairman to be chosen by the stockholders entitled to vote who are present in person or by proxy at the meeting. The Secretary of the Corporation, or in the Secretary’s absence an Assistant Secretary, shall act as secretary of every meeting, but if neither the Secretary nor an Assistant Secretary is present, the presiding officer of the meeting shall appoint any person present to act as secretary of the meeting.

SECTION 7. Voting; Proxies; Required Vote. (a) At each meeting of stockholders, every stockholder shall be entitled to vote in person or by proxy appointed by instrument in writing, subscribed by such stockholder or by such stockholder’s duly authorized attorney-in-fact (but no such proxy shall be voted or acted upon after three years from its date, unless the proxy provides for a longer period), and, unless the Certificate of Incorporation provides otherwise, shall have one vote for each share of stock entitled to vote registered in the name of such stockholder on the books of the Corporation on the applicable record date fixed pursuant to these Bylaws. At all elections of directors the voting may but need not be by ballot and a plurality of the votes cast there shall elect. Except as otherwise required by law or the Certificate of Incorporation, any other action shall be authorized by a majority of the votes cast.

(b) Any action required or permitted to be taken at any meeting of stockholders may, except as otherwise required by law or the Certificate of Incorporation, be taken without a meeting, without prior notice and without a vote, if a consent in writing, setting forth the action so taken, shall be signed by the holders of record of the issued and outstanding capital stock of the Corporation having a majority of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted, and the writing or writings are filed with the permanent records of the Corporation. Prompt notice of the taking of corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing.

2

SECTION 8. Inspectors. The Board of Directors, in advance of any meeting, may, but need not, appoint one or more inspectors of election to act at the meeting or any adjournment thereof. If an inspector or inspectors are not so appointed, the person presiding at the meeting may, but need not, appoint one or more inspectors. In case any person who may be appointed as an inspector fails to appear or act, the vacancy may be filled by appointment made by the directors in advance of the meeting or at the meeting by the person presiding thereat. Each inspector, if any, before entering upon the discharge of his or her duties, shall take and sign an oath faithfully to execute the duties of inspector at such meeting with strict impartiality and according to the best of his ability. The inspectors, if any, shall determine the number of shares of stock outstanding and the voting power of each, the shares of stock represented at the meeting, the existence of a quorum, and the validity and effect of proxies, and shall receive votes, ballots or consents, hear and determine all challenges and questions arising in connection with the right to vote, count and tabulate all votes, ballots or consents, determine the result, and do such acts as are proper to conduct the election or vote with fairness to all stockholders. On request of the person presiding at the meeting, the inspector or inspectors, if any, shall make a report in writing of any challenge, question or matter determined by such inspector or inspectors and execute a certificate of any fact found by such inspector or inspectors.

ARTICLE II

Board of Directors

SECTION 1. General Powers. The business, property and affairs of the Corporation shall be managed by, or under the direction of, the Board of Directors.

SECTION 2. Qualification; Number; Term; Remuneration. (a) Each director shall be at least 18 years of age. A director need not be a stockholder, a citizen of the United States, or a resident of the State of Delaware. The number of directors constituting the entire Board shall be at least one (1) or such larger number as may be fixed from time to time by action of the stockholders or Board of Directors, one of whom may be selected by the Board of Directors to be its Chairman. The use of the phrase “entire Board” herein refers to the total number of directors which the Corporation would have if there were no vacancies.

(b) Directors who are elected at an annual meeting of stockholders, and directors who are elected in the interim to fill vacancies and newly created directorships, shall hold office until the next annual meeting of stockholders and until their successors are elected and qualified or until their earlier resignation or removal.

(c) Directors may be paid their expenses, if any, of attendance at each meeting of the Board of Directors and may be paid a fixed sum for attendance at each meeting of the Board of Directors or a stated salary as director. No such payment shall preclude any director from serving the Corporation in any other capacity and receiving compensation therefor. Members of special or standing committees may be allowed like compensation for attending committee meetings.

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SECTION 3. Quorum and Manner of Voting. Except as otherwise provided by law, a majority of the entire Board shall constitute a quorum. A majority of the directors present, whether or not a quorum is present, may adjourn a meeting from time to time to another time and place without notice. The vote of the majority of the directors present at a meeting at which a quorum is present shall be the act of the Board of Directors.

SECTION 4. Places of Meetings. Meetings of the Board of Directors may be held at any place within or without the State of Delaware, as may from time to time be fixed by resolution of the Board of Directors, or as may be specified in the notice of meeting.

SECTION 5. Annual Meeting. Following the annual meeting of stockholders, the newly elected Board of Directors shall meet for the purpose of the election of officers and the transaction of such other business as may properly come before the meeting. Such meeting may be held without notice immediately after the annual meeting of stockholders at the same place at which such stockholders’ meeting is held.

SECTION 6. Regular Meetings. Regular meetings of the Board of Directors shall be held at such times and places as the Board of Directors shall from time to time by resolution determine. Notice need not be given of regular meetings of the Board of Directors held at times and places fixed by resolution of the Board of Directors.

SECTION 7. Special Meetings. Special meetings of the Board of Directors shall be held whenever called by the Chairman of the Board, President, or by a majority of the directors then in office.

SECTION 8. Notice of Meetings. A notice of the place, date and time and the purpose or purposes of each meeting of the Board of Directors shall be given to each director by mailing the same at least two days before the meeting, or by telegraphing or telephoning the same or by delivering the same personally not later than the day before the day of the meeting.

SECTION 9. Organization. At all meetings of the Board of Directors, the Chairman, if any, or if none or in the Chairman’s absence or inability to act the President, or in the President’s absence or inability to act any Vice-President who is a member of the Board of Directors, or in such Vice-President’s absence or inability to act a chairman chosen by the directors, shall preside. The Secretary of the Corporation shall act as secretary at all meetings of the Board of Directors when present, and, in the Secretary’s absence, the presiding officer may appoint any person to act as secretary.

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SECTION 10. Resignation. Any director may resign at any time upon written notice to the Corporation and such resignation shall take effect upon receipt thereof by the President or Secretary, unless otherwise specified in the resignation. Any or all of the directors may be removed, with or without cause, by the holders of a majority of the shares of stock outstanding and entitled to vote for the election of directors.

SECTION 11. Vacancies. Unless otherwise provided in these Bylaws, vacancies on the Board of Directors, whether caused by resignation, death, disqualification, removal, an increase in the authorized number of directors or otherwise, may be filled by the affirmative vote of a majority of the remaining directors, although less than a quorum, or by a sole remaining director, or at a special meeting of the stockholders, by the holders of shares entitled to vote for the election of directors.

SECTION 12. Action by Written Consent. Any action required or permitted to be taken at any meeting of the Board of Directors may be taken without a meeting if all the directors consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the Board of Directors.

ARTICLE III

Committees

SECTION 1. Appointment. From time to time the Board of Directors by a resolution adopted by a majority of the entire Board may appoint any committee or committees for any purpose or purposes, to the extent lawful, which shall have powers as shall be determined and specified by the Board of Directors in the resolution of appointment.

SECTION 2. Procedures, Quorum and Manner of Acting. Each committee shall fix its own rules of procedure, and shall meet where and as provided by such rules or by resolution of the Board of Directors. Except as otherwise provided by law, the presence of a majority of the then appointed members of a committee shall constitute a quorum for the transaction of business by that committee, and in every case where a quorum is present the affirmative vote of a majority of the members of the committee present shall be the act of the committee. Each committee shall keep minutes of its proceedings, and actions taken by a committee shall be reported to the Board of Directors.

SECTION 3. Action by Written Consent. Any action required or permitted to be taken at any meeting of any committee of the Board of Directors may be taken without a meeting if all the members of the committee consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the committee.

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SECTION 4. Term; Termination. In the event any person shall cease to be a director of the Corporation, such person shall simultaneously therewith cease to be a member of any committee appointed by the Board of Directors.

ARTICLE IV

Officers

SECTION 1. Election and Qualifications. The Board of Directors shall elect the officers of the Corporation, which shall include a President and a Secretary, and may include, by election or appointment, one or more Vice-Presidents (any one or more of whom may be given an additional designation of rank or function), a Treasurer and such Assistant Secretaries, such Assistant Treasurers and such other officers as the Board may from time to time deem proper. Each officer shall have such powers and duties as may be prescribed by these Bylaws and as may be assigned by the Board of Directors or the President. Any two or more offices may be held by the same person except the offices of President and Secretary.

SECTION 2. Term of Office and Remuneration. The term of office of all officers shall be one year and until their respective successors have been elected and qualified, but any officer may be removed from office, either with or without cause, at any time by the Board of Directors. Any vacancy in any office arising from any cause may be filled for the unexpired portion of the term by the Board of Directors. The remuneration of all officers of the Corporation may be fixed by the Board of Directors or in such manner as the Board of Directors shall provide.

SECTION 3. Resignation; Removal. Any officer may resign at any time upon written notice to the Corporation and such resignation shall take effect upon receipt thereof by the President, unless otherwise specified in the resignation. Any officer shall be subject to removal, with or without cause, at any time by vote of a majority of the entire Board.

SECTION 4. Chairman of the Board. The Chairman of the Board of Directors, if there be one, shall preside at all meetings of the Board of Directors and shall have such other powers and duties as may from time to time be assigned by the Board of Directors.

SECTION 5. President and Chief Executive Officer. The President shall be the chief executive officer of the Corporation, and shall have such duties as customarily pertain to that office. The President shall have general management and supervision of the property, business and affairs of the Corporation and over its other officers; may appoint and remove assistant officers and other agents and employee; and may execute and deliver in the name of the Corporation powers of attorney, contracts, bonds and other obligations and instruments.

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SECTION 6. Vice-President. A Vice-President may execute and deliver in the name of the Corporation contracts and other obligations and instruments pertaining to the regular course of the duties of said office, and shall have such other authority as from time to time may be assigned by the Board of Directors or the President.

SECTION 7. Treasurer. The Treasurer shall in general have all duties incident to the position of Treasurer and such other duties as may be assigned by the Board of Directors or the President.

SECTION 8. Secretary. The Secretary shall in general have all the duties incident to the office of Secretary and such other duties as may be assigned by the Board of Directors or the President.

SECTION 9. Assistant Officers. Any assistant officer shall have such powers and duties of the officer such assistant officer assists subject to the powers and duties that such officer or the Board of Directors shall from time to time prescribe.

ARTICLE V

Books and Records

SECTION 1. Location. The books and records of the Corporation may be kept at such place or places within or outside the State of Delaware as the Board of Directors or the respective officers in charge thereof may from time to time determine. The record books containing the names and addresses of all stockholders, the number and class of shares of stock held by each and the dates when they respectively became the owners of record thereof shall be kept by the Secretary as prescribed in the Bylaws and by such officer or agent as shall be designated by the Board of Directors.

SECTION 2. Addresses of Stockholders. Notices of meetings and all other corporate notices may be delivered personally or mailed to each stockholder at the stockholder’s address as it appears on the records of the Corporation.

SECTION 3. Fixing Date for Determination of Stockholders of Record. (a) In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors and which record date shall not be more than 60 nor less than 10 days before the date of such meeting. If no record date is fixed by the Board of Directors, the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting.

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(b) In order that the Corporation may determine the stockholders entitled to consent to corporate action in writing without a meeting, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors and if no record date has been fixed by the Board of Directors, the record date for determining stockholders entitled to consent to corporate action in writing without a meeting, when no prior action by the Board of Directors is required, shall be the first date on which a signed written consent setting forth the action taken or proposed to be taken is delivered to the Corporation by delivery to its registered office in this State, its principal place of business, or an officer or agent of the Corporation having custody of the book in which proceedings of meetings of stockholders are recorded. Delivery made to the Corporation’s registered office shall be by hand or by certified or registered mail, return receipt requested. If no record date has been fixed by the Board of Directors and prior action by the Board of Directors is required by this chapter, the record date for determining stockholders entitled to consent to corporate action in writing without a meeting shall be at the close of business on the day on which the Board of Directors adopts the resolution taking such prior action.

(c) In order that the Corporation may determine the stockholders entitled to receive payment of any dividend or other distribution or allotment of any rights or the stockholders entitled to exercise any rights in respect of any change, conversion or exchange of stock, or for the purpose of any other lawful action, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted and if no record date is fixed, the record date for determining stockholders for any such purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto.

ARTICLE VI

Amendments

The Board of Directors shall have power to adopt, amend or repeal Bylaws. Bylaws adopted by the Board of Directors may be repealed or changed, and new Bylaws made, by the stockholders, and the stockholders may prescribe that any By-law made by them shall not be altered, amended or repealed by the Board of Directors.

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EX-4.7

Exhibit 4.7

EXECUTION VERSION

REGISTRATION RIGHTS AGREEMENT

by and among

PC TOPCO HOLDINGS, INC.,

THL PC TOPCO, L.P.

ADVENT-PARTY CITY ACQUISITION LIMITED PARTNERSHIP,

AMERICAN GREETINGS CORPORATION

and

THE OTHER STOCKHOLDERS THAT ARE SIGNATORIES HERETO

Dated as of July 27, 2012

TABLE OF CONTENTS

			Page
Section 1.	Certain Definitions.			1
Section 2.	Registration Rights.			6
	2.1.	Demand Registrations.		6
	2.2.	Piggyback Registrations.		10
	2.3.	Allocation of Securities Included in Registration Statement.		11
	2.4.	Registration Procedures.		14
	2.5.	Registration Expenses.		20
	2.6.	Certain Limitations on Registration Rights.		21
	2.7.	Limitations on Sale or Distribution of Other Securities.		21
	2.8.	No Required Sale.		22
	2.9.	Indemnification.		22
	2.10.	Limitations on Registration of Other Securities; Representation.		26
	2.11.	No Inconsistent Agreements.		26
Section 3.	Underwritten Offerings.			26
	3.1.	Requested Underwritten Offerings.		26
	3.2.	Piggyback Underwritten Offerings.		27
Section 4.	General.			28
	4.1.	Adjustments Affecting Registrable Securities.		28
	4.2.	Rule 144 and Rule 144A.		28
	4.3.	Nominees for Beneficial Owners.		29
	4.4.	Amendments and Waivers.		29
	4.5.	Notices.		29
	4.6.	Successors and Assigns.		31
	4.7.	Entire Agreement.		31
	4.8.	Governing Law; Submission to Jurisdiction; Waiver of Jury Trial.		31
	4.9.	Interpretation: Construction.		32
	4.10.	Counterparts.		32
	4.11.	Severability.		32
	4.12.	Remedies.		32
	4.13.	Further Assurances.		33
	4.14.	Confidentiality.		33
Schedule 4.5	Notices

i

This REGISTRATION RIGHTS AGREEMENT (this “Agreement”) is made as of July 27, 2012 by and among PC Topco Holdings Inc., a Delaware corporation (the “Company”), THL PC Topco, L.P., a Delaware limited partnership, and collectively with any Affiliates of the foregoing which own stock of the Company from time to time (the “THL Party”), Advent-Party City Acquisition Limited Partnership, a Delaware limited partnership, and collectively with any Affiliates of the foregoing which own stock of the Company from time to time (the “Advent Party”), American Greetings Corporation, an Ohio corporation, and collectively with any Affiliates of the foregoing which own stock of the Company from time to time (the “American Greetings Party”) and the Persons listed on the signature pages hereto (each a “Management Stockholder” and collectively the “Management Stockholders”), and is effective as of the Effective Time.

W I T N E S S E T H :

WHEREAS, pursuant to that certain Agreement and Plan of Merger, dated as of June 4, 2012 (as such agreement may be amended, supplemented or otherwise modified from time to time, the “Merger Agreement”), by and among the Company, PC Merger Sub, Inc., a Delaware corporation (“Merger Sub”), Party City Holdings Inc., a Delaware corporation (“Party City”), Jefferson M. Case, BSR LLC, a Delaware limited liability company and Weston Presidio Capital Partners IV, L.P., a Delaware limited partnership, Merger Sub will merge with and into Party City, with Party City continuing as the surviving corporation (the “Merger”):

WHEREAS, the Company, the THL Party, the Advent Party, the American Greetings Party and the Management Stockholders are parties to that certain Stockholders Agreement, dated as of the date hereof, as amended from time to time (the “Stockholders Agreement”), establishing and setting forth their agreement with respect to certain rights and obligations associated with the ownership of shares of capital stock of the Company and certain arrangements relating to the management of the Company; and

WHEREAS, in connection with entering into the Merger Agreement and the Stockholders Agreement, the Company has agreed to provide the registration rights set forth in this Agreement.

NOW, THEREFORE, in consideration of the premises and of the mutual covenants and obligations hereinafter set forth, the parties hereto hereby agree as follows:

Section 1. Certain Definitions. As used herein, the following terms shall have the following meanings:

“Additional Piggyback Rights” has the meaning ascribed to such term in Section 2.2(b).

“Advent Party” has the meaning ascribed to such term in the Preamble.

“Affiliate” means with respect to any Person, any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person, where “control” means the possession, directly or indirectly, of the power to direct the management and policies of a Person whether through the ownership of voting securities, contract or otherwise. For the avoidance of doubt, neither the Company nor any Person controlled by the Company shall be deemed to be an Affiliate of any Holder.

“Agreement” means this Registration Rights Agreement, as this agreement may be amended, modified, supplemented or restated from time to time after the date hereof.

“American Greetings Party” has the meaning ascribed to such term in the Preamble.

“automatic shelf registration statement” has the meaning ascribed to such term in Section 2.4.

“Board” means the board of directors of the Company.

“Business Day” shall mean a day other than a Saturday, Sunday, federal or New York State holiday or other day on which commercial banks in the City of New York are authorized or required by law or other governmental action to close.

“Claims” has the meaning ascribed to such term in Section 2.9(a).

“Common Stock” means the common stock, par value $0.01 per share, of the Company and any and all securities of any kind whatsoever which may be issued after the date hereof in respect of, or in exchange for, such shares of common stock of the Company pursuant to a merger, consolidation, stock split, stock dividend or recapitalization of the Company or otherwise.

“Common Stock Equivalents” means, with respect to any Person, all options, warrants and other securities convertible into, or exchangeable or exercisable for (at any time or upon the occurrence of any event or contingency and without regard to any vesting or other conditions to which such securities may be subject), shares of capital stock or other equity securities of such Person (including, without limitation, any note or debt security convertible into or exchangeable for shares of capital stock or other equity securities of such Person).

“Company” means PC Topco Holdings, Inc., any Subsidiary or parent company of PC Topco Holdings, Inc. and any successor to PC Topco Holdings, Inc.

“Demand Exercise Notice” has the meaning ascribed to such term in Section 2.1(a)(i).

“Demand Registration” has the meaning ascribed to such term in Section 2.1(a)(i).

“Demand Registration Request” has the meaning ascribed to such term in Section 2.1(a)(i).

“Effective Time” has the meaning ascribed to such term in the Merger Agreement.

“Eligible Block Participants” means (i) institutional Holders, and (ii) the Senior Management Holders.

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“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations of the SEC issued under such Act, as they may from time to time be in effect.

“Expenses” means any and all fees and expenses incident to the Company’s performance of or compliance with Section 2, including, without limitation: (i) SEC, stock exchange or FINRA registration and filing fees and all listing fees and fees with respect to the inclusion of securities on the New York Stock Exchange or on any other securities market on which the Common Stock is listed or quoted, (ii) fees and expenses of compliance with state securities or “blue sky” laws of any state or jurisdiction of the United States or compliance with the securities laws of foreign jurisdictions and in connection with the preparation of a “blue sky” survey, including, without limitation, reasonable fees and expenses of outside “blue sky” counsel and securities counsel in foreign jurisdictions, (iii) printing and copying expenses, (iv) messenger and delivery expenses, (v) expenses incurred in connection with any road show, (vi) fees and disbursements of counsel for the Company, (vii) with respect to each registration or underwritten offering, the fees and disbursements of (a) one counsel for the THL Party, (b) one counsel for the Advent Party, (c) one counsel for the American Greetings Party (such fees and expenses not to exceed $25,000) and (d) one counsel for all other Participating Holder(s) collectively (selected by the holders of a majority of the shares held by such other Participating Holder(s)), together in each case with any local counsel, (viii) fees and disbursements of all independent public accountants (including the expenses of any audit and/or “cold comfort” letter and updates thereof) and fees and expenses of other Persons, including special experts, retained by the Company, (ix) fees and expenses payable to a Qualified Independent Underwriter, (x) fees and expenses of any transfer agent or custodian, (xi) any other fees and disbursements of underwriters, if any, customarily paid by issuers or sellers of securities and (xii) expenses for securities law liability insurance and, if any, rating agency fees.

“FINRA” means the Financial Industry Regulatory Authority, Inc.

“Holder” or “Holders” means (1) any Person who is a signatory to this Agreement or (2) any Permitted Transferee to whom any Person who is a signatory to this Agreement shall assign or transfer any rights hereunder, provided that such transferee has agreed in writing to be bound by this Agreement in respect of such Registrable Securities.

“Initiating Holders” has the meaning ascribed to such term in Section 2.1(a)(i).

“IPO” means the initial bona fide underwritten public offering and sale of Common Stock (or other equity securities of the Company) to the general public pursuant to an effective registration statement filed under the Securities Act.

“Litigation” means any action, proceeding or investigation in any court or before any governmental authority.

“Majority Participating Holders” means Participating Holders holding more than 50% of the Registrable Securities proposed to be included in any offering of Registrable Securities by such Participating Holders pursuant to Section 2.1 or Section 2.2.

“Management Stockholders” has the meaning ascribed to such term in the Preamble to this Agreement.

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“Manager” has the meaning ascribed to such term in Section 2.1(c).

“Merger” has the meaning ascribed to such term in the Recitals to this Agreement.

“Merger Agreement” has the meaning ascribed to such term in the Recitals to this Agreement.

“Merger Sub” has the meaning ascribed to such term in the Recitals to this Agreement.

“NASD” means the National Association of Securities Dealers, Inc.

“Participating Holders” means all Holders of Registrable Securities which are proposed to be included in any offering of Registrable Securities pursuant to Section 2.1 or Section 2.2.

“Partner Distribution” has the meaning ascribed to such term in Section 2.1(a)(iii).

“Permitted Transferee” means, in relation to any Person who is a signatory to this Agreement, any Person to whom such Person is permitted to transfer Registrable Securities under the Stockholders Agreement.

“Person” means any individual, corporation (including not for profit), general or limited partnership, limited liability company, joint venture, estate, trust, association, joint-stock company, unincorporated organization, governmental entity or agency or other entity of any kind or nature.

“Piggyback Shares” has the meaning ascribed to such term in Section 2.1(a)(iii).

“Postponement Period” has the meaning ascribed to such term in Section 2.1(b).

“Qualified Independent Underwriter” means a “qualified independent underwriter” within the meaning of NASD Conduct Rule 2720.

“Registrable Securities” means (a) any shares of Common Stock held by the Holders at any time (including those held as a result of, or issuable upon, the conversion or exercise of Common Stock Equivalents), whether now owned or acquired by the Holders at a later time, (b) any shares of Common Stock issued or issuable, directly or indirectly, in exchange for or with respect to the Common Stock referenced in clause (a) above by way of stock dividend, stock split or combination of shares or in connection with a reclassification, recapitalization, merger, share exchange, consolidation or other reorganization and (c) any securities issued in replacement of or exchange for any securities described in clause (a) or (b) above. As to any particular Registrable Securities, such securities shall cease to be Registrable Securities when (A) a registration statement with respect to the sale of such securities shall have been declared effective under the Securities Act and such securities shall have been disposed of in accordance with such registration statement, or (B) such securities shall have been sold (other than in a privately negotiated sale) in compliance with the requirements of Rule 144 under the Securities Act, as such Rule 144 may be amended (or any successor provision thereto).

“Rule 144” and “Rule 144A” have the meaning ascribed to such term in Section 4.2.

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“SEC” means the Securities and Exchange Commission or such other federal agency which at such time administers the Securities Act.

“Section 2.3(a) Sale Number” has the meaning ascribed to such term in Section 2.3(a).

“Section 2.3(b) Sale Number” has the meaning ascribed to such term in Section 2.3(b).

“Section 2.3(c) Sale Number” has the meaning ascribed to such term in Section 2.3(c).

“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations of the SEC issued under such Act, as they may from time to time be in effect.

“Senior Management Holders” means the Management Holders who, as of the date hereof, each hold at least 20 shares of Common Stock and each of whom is an “accredited investor” (as defined in Rule 501(a) under the Securities Act) or, if not an accredited investor, has retained a “purchaser representative” (as defined in Rule 501(h) under the Securities Act) or has such knowledge and experience in financial and business matters that he or she is capable of evaluating the merits and risks of the action(s) contemplated.

“Significant Management Holders” means Jim Harrison, Gerald Rittenberg, Michael Correale and Gregg Melnick.

“Shelf Registrable Securities” has the meaning ascribed to such term in Section 2.1(e).

“Shelf Registration Statement” has the meaning ascribed to such term in Section 2.1(e).

“Shelf Underwriting” has the meaning ascribed to such term in Section 2.1(e).

“Shelf Underwriting Notice” has the meaning ascribed to such term in Section 2.1(e).

“Shelf Underwriting Request” has the meaning ascribed to such term in Section 2.1(e).

“Stockholders Agreement” has the meaning ascribed to such term in the Recitals to this Agreement.

“Subsidiary” means any direct or indirect subsidiary of the Company on the date hereof and any direct or indirect subsidiary of the Company organized or acquired after the date hereof.

“THL Party” has the meaning ascribed to such term in the Preamble.

“Valid Business Reason” has the meaning ascribed to such term in Section 2.1(b).

“WKSI” has the meaning ascribed to such term in Section 2.4.

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Section 2. Registration Rights.

2.1. Demand Registrations.

(a) (i) Subject to Sections 2.1(b) and 2.3, (x) at any time and from time to time, for so long as the THL Party owns at least 5% of the outstanding Registrable Securities of the Company, the THL Party shall have the right to require the Company to file one or more registration statements under the Securities Act covering all or any part of its and its Affiliates’ Registrable Securities by delivering a written request therefor to the Company specifying the number of Registrable Securities to be included in such registration and the intended method of distribution therefor (a “Demand Registration Request”), and (y) from time to time after the closing of an IPO, the Holders of at least 5% of the outstanding Registrable Securities of the Company (other than individuals) shall have the right to require the Company to file one or more registration statements under the Securities Act covering all or any part of its and its Affiliates’ Registrable Securities by delivering a Demand Registration Request. The registration so requested is referred to herein as a “Demand Registration” (with respect to any Demand Registration, the Holder(s) making such demand for registration being referred to as the “Initiating Holders”). Any Demand Registration Request may request that the Company register Registrable Securities on an appropriate form, including a shelf registration statement, and, if the Company is a WKSI, an automatic shelf registration statement. The Company shall give written notice (the “Demand Exercise Notice”) of such Demand Registration Request (A) to each of the THL Party, the Advent Party, the American Greetings Party and the Significant Management Holders no later than five (5) Business Days after receipt of a Demand Registration Request and (B) to all other Holders of record of Registrable Securities no later than five (5) Business Days after the filing of a registration statement pursuant to the Demand Registration Request (or, in the case of a request for the filing of an automatic shelf registration statement, five (5) Business Days after receipt of the Demand Registration Request).

(ii) The Company, subject to Sections 2.3 and 2.6, shall include in a Demand Registration (x) the Registrable Securities of the Initiating Holders and (y) the Registrable Securities of any other Holder of Registrable Securities which shall have made a written request to the Company for inclusion in such registration pursuant to Section 2.2 (which request shall specify the maximum number of Registrable Securities intended to be disposed of by such Participating Holder) within ten (10) days after the receipt of the Demand Exercise Notice.

(iii) The Company shall, subject to Section 2.1(b), use its reasonable best efforts to (x) no later than 30 days following receipt of a Demand Registration Request, file with the SEC and, within 60 days of such filing, cause to be declared effective such registration under the Securities Act (including, without limitation, by means of a shelf registration pursuant to Rule 415 under the Securities Act if so requested and if the Company is then eligible to use such a registration) of the Registrable Securities which the Company has been so requested to register, for distribution in accordance with such intended method of distribution, including a distribution to, and resale by, the members or partners of a Holder (a “Partner Distribution”) and (y) if requested by the Initiating Holders, obtain acceleration of the effective date of the registration statement relating to such registration.

(iv) Notwithstanding anything contained herein to the contrary, the Company shall, at the request of any Holder seeking to effect or considering a Partner Distribution, file any prospectus supplement or post-effective amendments, or include in the initial registration statement any disclosure or language, or include in any prospectus supplement or post-effective amendment any disclosure or language, and otherwise take any action, deemed necessary or advisable by such Holder to effect such Partner Distribution.

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(b) Notwithstanding anything to the contrary in Section 2.1(a), the Demand Registration rights granted in Section 2.1(a) are subject to the following limitations: (i) (x) the Company shall not be required to effect more than one (1) Demand Registration delivered pursuant to Section 2.1(a)(i)(y) in any nine month period from the THL Party (it being understood that a registration pursuant to a Piggyback Request (as defined below) by the THL Party shall not constitute a Demand Registration for the purposes of this Section 2.1(b)(i)) and (y) the Company shall not be required to effect more than one (1) Demand Registration delivered pursuant to Section 2.1(a)(i)(y) in any nine month period from the Advent Party (it being understood that a registration pursuant to a Piggyback Request by the Advent Party shall not constitute a Demand Registration for the purposes of this Section 2.1(b)(i)); (ii) each registration in respect of a Demand Registration Request made by any Holder must include, in the aggregate (based on the Common Stock included in such registration by all Holders participating in such registration), shares of Common Stock having an aggregate market value of at least $25 million; and (iii) if the Board, in its good faith judgment, determines that any registration of Registrable Securities should not be made or continued because it would materially interfere with any material financing, acquisition, corporate reorganization, merger, share exchange or other transaction or event involving the Company or any of its subsidiaries or because the Company does not yet have appropriate financial statements of acquired or to be acquired entities available for filing (in each case, a “Valid Business Reason”), then (x) the Company may postpone filing a registration statement relating to a Demand Registration Request until five (5) Business Days after such Valid Business Reason no longer exists, but in no event for more than 45 days after the date the Board determines a Valid Business Reason exists and (y) in case a registration statement has been filed relating to a Demand Registration Request, if the Valid Business Reason has not resulted from actions taken by the Company, the Company may, to the extent determined in the good faith judgment of the Board to be reasonably necessary to avoid interference with any of the transactions described above, cause such registration statement to be withdrawn and its effectiveness terminated or may postpone amending or supplementing such registration statement until five (5) Business Days after such Valid Business Reason no longer exists, but in no event for more than 45 days after the date the Board determines a Valid Business Reason exists (such period of postponement or withdrawal under this clause (iv), the “Postponement Period”). The Company shall give written notice of its determination to postpone or withdraw a registration statement and of the fact that the Valid Business Reason for such postponement or withdrawal no longer exists, together with a certificate of such determination signed by the Chief Executive Officer or Chief Financial Officer of the Company, in each case, promptly after the occurrence thereof; provided, however, the Company shall not be permitted to postpone or withdraw a registration statement after the expiration of any Postponement Period until twelve (12) months after the expiration of such Postponement Period.

If the Company shall give any notice of postponement or withdrawal of any registration statement pursuant to clause (x) above, the Company shall not, during the Postponement Period,

7

register any Common Stock, other than pursuant to a registration statement on Form S-4 or S-8 (or an equivalent registration form then in effect). Each Holder of Registrable Securities agrees that, upon receipt of any notice from the Company that the Company has determined to withdraw, terminate or postpone amending or supplementing any registration statement pursuant to clause (x) above, such Holder will discontinue its disposition of Registrable Securities pursuant to such registration statement. If the Company shall have withdrawn or prematurely terminated a registration statement filed under Section 2.1(a)(i) (whether pursuant to clause (iii) above or as a result of any stop order, injunction or other order or requirement of the SEC or any other governmental agency or court), the Company shall not be considered to have effected an effective registration for the purposes of this Agreement until the Company shall have filed a new registration statement covering the Registrable Securities covered by the withdrawn or terminated registration statement and such registration statement shall have been declared effective and shall not have been withdrawn. If the Company shall give any notice of withdrawal or postponement of a registration statement, the Company shall, not later than five (5) Business Days after the Valid Business Reason that caused such withdrawal or postponement no longer exists (but in no event later than 45 days after the date of the postponement or withdrawal), use its reasonable best efforts to effect the registration under the Securities Act of the Registrable Securities covered by the withdrawn or postponed registration statement in accordance with this Section 2.1 (unless the Initiating Holders shall have withdrawn such request, in which case the Company shall not be considered to have effected an effective registration for the purposes of this Agreement), and such registration shall not be withdrawn or postponed pursuant to clause (x) of this Section 2.1(b).

(c) In connection with any Demand Registration, the Company shall have the right to designate the lead managing underwriter (any lead managing underwriter for the purposes of this Agreement, the “Manager”) in connection with any underwritten offering pursuant to such registration and each other managing underwriter for any such underwritten offering; provided that in each case, each such underwriter is reasonably satisfactory to the Initiating Holders, which approval shall not be unreasonably withheld or delayed.

(d) The obligation to effect a Demand Registration as described in this Section 2.1 shall be deemed satisfied only when a registration statement covering the applicable Registrable Securities shall have become effective (unless, after effectiveness, the registration statement becomes subject to any stop order, injunction or other order of the SEC or other governmental agency, in which case the obligation shall not be deemed satisfied) and, if the method of disposition is a firm commitment underwritten public offering, all such Registrable Securities have been sold pursuant thereto.

(e) In the event that the Company files a shelf registration statement under Rule 415 of the Securities Act pursuant to a Demand Registration Request and such registration becomes effective (such registration statement, a “Shelf Registration Statement”), the Initiating Holders with respect to such Demand Registration Request and the Holders of other Registrable Securities registered on such Shelf Registration Statement shall have the right at any time or from time to time to elect to sell pursuant to an underwritten offering Registrable Securities available for sale pursuant to such registration statement (“Shelf Registrable Securities”), so long as the Shelf Registration Statement remains in effect and only if the method of distribution set forth in the shelf registration allows for sales pursuant to an underwritten offering. The Initiating

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Holders and such other Holders shall make such election by delivering to the Company a written request (a “Shelf Underwriting Request”) for such underwritten offering to the Company specifying the number of Shelf Registrable Securities that the Holders desire to sell pursuant to such underwritten offering (the “Shelf Underwriting”). As promptly as practicable, but no later than two (2) Business Days after receipt of a Shelf Underwriting Request, the Company shall give written notice (the “Shelf Underwriting Notice”) of such Shelf Underwriting Request to all other Holders of record of Shelf Registrable Securities. The Company, subject to Sections 2.3 and 2.6, shall include in such Shelf Underwriting (x) the Registrable Securities of the Initiating Holders and (y) the Shelf Registrable Securities of any other Holder of Shelf Registrable Securities which shall have made a written request to the Company for inclusion in such Shelf Underwriting (which request shall specify the maximum number of Shelf Registrable Securities intended to be disposed of by such Holder) within seven (7) days after the receipt of the Shelf Underwriting Notice. The Company shall, as expeditiously as possible (and in any event within twenty (20) days after the receipt of a Shelf Underwriting Request), but subject to Section 2.1(b), use its reasonable best efforts to facilitate such Shelf Underwriting. Notwithstanding the foregoing, if an institutional Holder wishes to engage in an underwritten block trade off of a Shelf Registration Statement (either through filing an automatic shelf registration statement or through a take-down from an already existing Shelf Registration Statement), then notwithstanding the foregoing time periods, the Holder only needs to notify the Company of the block trade Shelf Underwriting on the day such offering is to commence and the Company shall notify other Holders and other Holders must elect whether or not to participate on the day such offering is to commence, and the Company shall as expeditiously as possible use its reasonable best efforts (including co-operating with such Holder with respect to the provision of necessary information) to facilitate such shelf offering (which may close as early as three (3) business days after the date it commences), provided that in the case of such underwritten block trade, only Eligible Block Participants shall have a right to notice and to participate, and provided, further, that the Holder requesting such underwritten block trade shall use commercially reasonable efforts to work with the Company and the underwriters prior to making such request in order to facilitate preparation of the registration statement, prospectus and other offering documentation related to the underwritten block trade. The Company shall, at the request of any Initiating Holder or any other Holder of Registrable Securities registered on such Shelf Registration Statement, file any prospectus supplement or, if the applicable Shelf Registration Statement is an automatic shelf registration statement (as defined in Section 2.4), any post-effective amendments and otherwise take any action necessary to include therein all disclosure and language deemed necessary or advisable by the Initiating Holders or any other Holder of Registrable Securities registered on such Shelf Registration Statement to effect such Shelf Underwriting. Once a Shelf Registration Statement has been declared effective, the Holders of Registrable Securities may request, and the Company shall be required to facilitate, an unlimited number of Shelf Underwritings with respect to such Shelf Registration Statement. Notwithstanding anything to the contrary in this Section 2.1(e), each Shelf Underwriting must include, in the aggregate (based on the Common Stock included in such Shelf Underwriting by all Holders participating in such Shelf Underwriting), shares of Common Stock having an aggregate market value of at least $25 million.

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2.2. Piggyback Registrations.

(a) If the Company proposes or is required (pursuant to Section 2.1 or otherwise) to register any of its equity securities for its own account or for the account of any other shareholder under the Securities Act (other than pursuant to registrations on Form S-4 or Form S-8 or any similar successor forms thereto), the Company shall give prompt written notice of its intention to do so to each of the Holders of record of Registrable Securities, at least ten (10) business days prior to the filing of any registration statement under the Securities Act. Upon the written request of any such Holder (a “Piggyback Request”), made within ten (10) days following the receipt of any such written notice (which request shall specify the maximum number of Registrable Securities intended to be disposed of by such Holder and the intended method of distribution thereof), the Company shall, subject to Sections 2.2(c), 2.3 and 2.6 hereof, use its reasonable best efforts to cause all such Registrable Securities, the Holders of which have so requested the registration thereof, to be registered under the Securities Act with the securities which the Company at the time proposes to register to permit the sale or other disposition by the Holders (in accordance with the intended method of distribution thereof) of the Registrable Securities to be so registered, including, if necessary, by filing with the SEC a post-effective amendment or a supplement to the registration statement filed by the Company or the prospectus related thereto. There is no limitation on the number of such piggyback registrations pursuant to the preceding sentence which the Company is obligated to effect. No registration of Registrable Securities effected under this Section 2.2(a) shall relieve the Company of its obligations to effect Demand Registrations under Section 2.1 hereof. Notwithstanding the foregoing, if an institutional Holder wishes to engage in an underwritten block trade off of a Shelf Registration Statement (either through filing an automatic shelf registration statement or through a take-down from an already existing Shelf Registration Statement), then notwithstanding the foregoing time periods, the Holder only needs to notify the Company of the block trade Shelf Underwriting on the day such offering is to commence and the Company shall notify other Holders and other Holders must elect whether or not to participate on the day such offering is to commence, and the Company shall as expeditiously as possible use its reasonable best efforts (including co-operating with such Holder with respect to the provision of necessary information) to facilitate such shelf offering (which may close as early as three (3) business days after the date it commences), provided that in the case of such underwritten block trade, only Block Eligible Participants shall have a right to notice and to participate, and provided, further, that the Holder requesting such underwritten block trade shall use commercially reasonable efforts to work with the Company and the underwriters prior to making such request in order to facilitate preparation of the registration statement, prospectus and other offering documentation related to the underwritten block trade.

(b) The Company, subject to Sections 2.3 and 2.6, may elect to include in any registration statement and offering pursuant to demand registration rights by any Person, (i) authorized but unissued shares of Common Stock or shares of Common Stock held by the Company as treasury shares and (ii) any other shares of Common Stock which are requested to be included in such registration pursuant to the exercise of piggyback registration rights granted by the Company after the date hereof and which are not inconsistent with the rights granted in, or otherwise conflict with the terms of, this Agreement (“Additional Piggyback Rights”); provided, however, that, with respect to any underwritten offering, such inclusion shall be permitted only

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to the extent that it is pursuant to, and subject to, the terms of the underwriting agreement or arrangements, if any, entered into by the Majority Participating Holders in such underwritten offering.

(c) If, at any time after giving written notice of its intention to register any equity securities and prior to the effective date of the registration statement filed in connection with such registration, the Company shall determine for any reason not to register or to delay registration of such equity securities, the Company may, at its election, give written notice of such determination to all Holders of record of Registrable Securities and (i) in the case of a determination not to register, shall be relieved of its obligation to register any Registrable Securities in connection with such abandoned registration, without prejudice, however, to the rights of Holders under Section 2.1, and (ii) in the case of a determination to delay such registration of its equity securities, shall be permitted to delay the registration of such Registrable Securities for the same period as the delay in registering such other equity securities.

(d) Any Holder shall have the right to withdraw its request for inclusion of its Registrable Securities in any registration statement pursuant to this Section 2.2 by giving written notice to the Company of its request to withdraw; provided, however, that such request must be made in writing prior to the earlier of the execution of the under-writing agreement or the execution of the custody agreement with respect to such registration.

(e) Notwithstanding anything contained herein to the contrary, the Company shall, at the request of any Holder (including to effect a Partner Distribution), file any prospectus supplement or post-effective amendments, or include in the initial registration statement any disclosure or language, or include in any prospectus supplement or post-effective amendment any disclosure or language, and otherwise take any action, deemed necessary or advisable by such Holder (including to effect such Partner Distribution).

2.3. Allocation of Securities Included in Registration Statement.

(a) If any requested registration made pursuant to Section 2.1 (including a Shelf Underwriting) involves an underwritten offering and the Manager of such offering shall advise the Company that, in its view, the number of securities requested to be included in such underwritten offering by the Holders of Registrable Securities, the Company or any other Persons exercising Additional Piggyback Rights exceeds the largest number (the “Section 2.3(a) Sale Number”) that can be sold in an orderly manner in such underwritten offering within a price range acceptable to the Majority Participating Holders, the Company shall use its reasonable best efforts to include in such underwritten offering:

(i) first, all Registrable Securities requested to be included in such underwritten offering by the Holders thereof (including pursuant to the exercise of piggyback rights pursuant to Section 2.2); provided, however, that if the number of such Registrable Securities exceeds the Section 2.3(a) Sale Number, the number of such Registrable Securities (not to exceed the Section 2.3(a) Sale Number) to be included in such underwritten offering shall be allocated on a pro rata basis among all Holders requesting that Registrable Securities be

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included in such underwritten offering, based on the number of Registrable Securities then owned by each such Holder requesting inclusion in relation to the aggregate number of Registrable Securities owned by all Holders requesting inclusion;

(ii) second, to the extent that the number of Registrable Securities to be included pursuant to clause (i) of this Section 2.3(a) is less than the Section 2.3(a) Sale Number, any securities that the Company proposes to register; provided that the number of such securities when aggregated with that number of Registrable Securities to be included pursuant to clause (i), totals no more than the Section 2.3(a) Sale Number; and

(iii) third, to the extent that the number of Registrable Securities to be included pursuant to clauses (i) and (ii) of this Section 2.3(a) is less than the Section 2.3(a) Sale Number, the remaining Registrable Securities to be included in such underwritten offering shall be allocated on a pro rata basis among all Persons requesting that securities be included in such underwritten offering pursuant to the exercise of Additional Piggyback Rights (“Piggyback Shares”), based on the number of Piggyback Shares then owned by each Person requesting inclusion in relation to the aggregate number of Piggyback Shares owned by all Persons requesting inclusion; provided that the number of such securities when aggregated with that number of Registrable Securities to be included pursuant to clauses (i) and (ii) totals no more than the Section 2.3(a) Sale Number.

Notwithstanding anything in this Section 2.3(a) to the contrary, no employee stockholder of the Company will be entitled to include Registrable Securities in an underwritten offering requested by the Initiating Holders pursuant to Section 2.1 to the extent that the Manager of such underwritten offering shall determine in good faith that the participation of such employee stockholder would adversely affect in any material respect the marketability of the securities being sold by the Initiating Holders in such underwritten offering.

(b) If any registration or offering made pursuant to Section 2.2 involves an underwritten primary offering on behalf of the Company after the date hereof and the Manager shall advise the Company that, in its view, the number of securities requested to be included in such underwritten offering by the Holders of Registrable Securities, the Company or any other Persons exercising Additional Piggyback Rights exceeds the largest number (the “Section 2.3(b) Sale Number”) that can be sold in an orderly manner in such underwritten offering within a price range acceptable to the Company, the Company shall include in such underwritten offering:

(i) first, all equity securities that the Company proposes to register for its own account;

(ii) second, to the extent that the number of Registrable Securities to be included pursuant to clause (1) of this Section 2.3(b) is less than the Section 2.3(b) Sale Number, the remaining Registrable Securities to be included in such underwritten offering shall be allocated on a pro rata basis among all Holders requesting that Registrable Securities be included in such underwritten offering pursuant to the exercise of piggyback rights pursuant to Section 2.2, based on the number of Registrable Securities then owned by each such Holder requesting inclusion in relation to the aggregate number of Registrable Securities owned by all Holders requesting inclusion; provided that the number of such remaining Registrable Securities when aggregated with that number of equity securities to be included pursuant to clause (i), totals no more than the Section 2.3(b) Sale Number: and

(iii) third, to the extent that the number of Registrable Securities to be included pursuant to clauses (i) and (ii) of this Section 2.3(b) is less than the Section 2.3(b) Sale Number, the remaining Registrable Securities to be included in such underwritten offering shall be allocated on a pro rata basis among all Persons requesting that securities be included in such underwritten offering pursuant to the exercise of Additional Piggyback Rights, based on the number of Piggyback Shares then owned by each Person requesting inclusion in relation to the aggregate number of Piggyback Shares owned by all Persons requesting inclusion; provided that the number of such securities when aggregated with that number of Registrable Securities to be included pursuant to clauses (i) and (ii) totals no more than the Section 2.3(b) Sale Number.

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(c) If any registration pursuant to Section 2.2 involves an underwritten offering that was initially requested by any Person(s) other than a Holder to whom the Company has granted registration rights which are not inconsistent with the rights granted in, or otherwise conflict with the terms of, this Agreement and the Manager shall advise the Company that, in its view, the number of securities requested to be included in such underwritten offering exceeds the number (the “Section 2.3(c) Sale Number”) that can be sold in an orderly manner in such underwritten offering within a price range acceptable to the Company, the Company shall include in such underwritten offering:

(i) first, the shares requested to be included in such underwritten offering shall be allocated on a pro rata basis among such Person(s) requesting the registration and all Holders requesting that Registrable Securities be included in such under-written offering pursuant to the exercise of piggyback rights pursuant to Section 2.2, based on the aggregate number of securities or Registrable Securities, as applicable, then owned by each of the foregoing requesting inclusion in relation to the aggregate number of securities or Registrable Securities, as applicable, owned by all such Holders and Persons requesting inclusion, up to the Section 2.3(c) Sale Number:

(ii) second, to the extent that the number of Registrable Securities to be included pursuant to clause (i) of this Section 2.3(c) is less than the Section 2.3(c) Sale Number, the remaining Registrable Securities to be included in such underwritten offering shall be allocated on a pro rata basis among all Persons requesting that securities be included in such underwritten offering pursuant to the exercise of Additional Piggyback Rights, based on the number of Piggyback Shares then owned by each Person requesting inclusion in relation to the aggregate number of Piggyback Shares owned by all Persons requesting inclusion; provided that the number of such remaining Registrable Securities when aggregated with that number of shares requested to be included pursuant to clause (i), totals no more than the Section 2.3(c) Sale Number; and

(iii) third, to the extent that the number of Registrable Securities to be included pursuant to clauses (i) and (ii) of this Section 2.3(c) is less than the Section 2.3(c) Sale Number, the remaining Registrable Securities to be included in such underwritten offering shall be allocated to shares the Company proposes to register for its own account; provided that the number of such securities when aggregated with that number of Registrable Securities to be included pursuant to clauses (i) and (ii) totals no more than the Section 2.3(c) Sale Number.

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(d) If, as a result of the proration provisions set forth in clauses (a), (b) or (c) of this Section 2.3, any Holder shall not be entitled to include all Registrable Securities in an underwritten offering that such Holder has requested be included, such Holder may elect to withdraw such Holder’s request to include Registrable Securities in the registration to which such underwritten offering relates or may reduce the number requested to be included; provided, however, that (x) such request must be made in writing prior to the earlier of the execution of the underwriting agreement or the execution of the custody agreement with respect to such registration and (y) such withdrawal or reduction shall be irrevocable and, after making such withdrawal or reduction, such Holder shall no longer have any right to include Registrable Securities in the registration as to which such withdrawal or reduction was made to the extent of the Registrable Securities so withdrawn or reduced.

2.4. Registration Procedures. If and whenever the Company is required by the provisions of this Agreement to effect or cause the registration of any Registrable Securities under the Securities Act as provided in this Agreement (or use best efforts or reasonable best efforts to accomplish the same), the Company shall, as expeditiously as possible:

(a) prepare and file with the SEC a registration statement on an appropriate registration form of the SEC for the disposition of such Registrable Securities in accordance with the intended method of disposition thereof (including, without limitation, a Partner Distribution), which registration form (i) shall be selected by the Company and (ii) shall, in the case of a shelf registration, be available for the sale of the Registrable Securities by the selling Holders thereof and such registration statement shall comply as to form in all material respects with the requirements of the applicable registration form and include all financial statements required by the SEC to be filed therewith, and the Company shall use its reasonable best efforts to cause such registration statement to become effective and remain continuously effective for such period as any Participating Holder pursuant to such registration statement shall request, and no less than 180 days, (provided, however, that as far in advance as reasonably practicable before filing a registration statement or prospectus or any amendments or supplements thereto, or comparable statements under securities or state “blue sky” laws of any jurisdiction, or any free writing prospectus related thereto, or before sending a response to an SEC comment letter prior to any such filing, the Company will furnish to one counsel for the Holders participating in the planned offering (selected by the Majority Participating Holders) and to one counsel for the Manager, if any, copies of reasonably complete drafts of all such documents proposed to be filed (including all exhibits thereto and each document incorporated by reference therein to the extent then required by the rules and regulations of the SEC), which documents will be subject to the reasonable review and reasonable comment of such counsel (including any objections to any information pertaining to any Participating Holder and its plan of distribution and otherwise to the extent necessary, if at all, to complete the filing or maintain the effectiveness thereof), and the Company shall make the changes reasonably requested by such counsel and shall not file any registration statement or amendment thereto, any prospectus or supplement thereto or any free writing prospectus related thereto to which the Majority Participating Holders or the underwriters, if any, shall reasonably object), provided that, notwithstanding the foregoing, in no

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event shall the Company be required to file any document with the SEC which in the view of the Company or its counsel contains an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make any statement therein not misleading;

(b) (i) prepare and file with the SEC such amendments and supplements (including, without limitation, any reports required to be filed pursuant to the Securities Exchange Act of 1934, as amended) to such registration statement and the prospectus used in connection therewith as may be necessary to keep such registration statement continuously effective for such period as any Participating Holder pursuant to such registration statement shall request and to comply with the provisions of the Securities Act with respect to the sale or other disposition of all Registrable Securities covered by such registration statement in accordance with the intended methods of disposition by the seller or sellers thereof set forth in such registration statement and (ii) provide notice to such sellers of Registrable Securities and the Manager, if any, of the Company’s reasonable determination that a post-effective amendment to a registration statement would be appropriate;

(c) furnish, without charge, to each Participating Holder and each underwriter, if any, of the securities covered by such registration statement such number of copies of such registration statement, each amendment and supplement thereto (in each case including all exhibits), the prospectus included in such registration statement (including each preliminary prospectus and any summary prospectus) and any other prospectus filed under Rule 424 under the Securities Act, each free writing prospectus utilized in connection therewith, in each case, in all material respects in conformity with the requirements of the Securities Act, and other documents, as such seller and underwriter may reasonably request in order to facilitate the public sale or other disposition of the Registrable Securities owned by such seller (the Company hereby consenting to the use in accordance with all applicable laws of each such registration statement (or amendment or post-effective amendment thereto) and each such prospectus (or preliminary prospectus or supplement thereto) or free writing prospectus by each such Participating Holder and the underwriters, if any, in connection with the offering and sale of the Registrable Securities covered by such registration statement or prospectus);

(d) use its reasonable best efforts to register or qualify the Registrable Securities covered by such registration statement under such other securities or state “blue sky” laws of such jurisdictions as any sellers of Registrable Securities or any managing underwriter, if any, shall reasonably request in writing, and do any and all other acts and things which may be reasonably necessary or advisable to enable such sellers or underwriter, if any, to consummate the disposition of the Registrable Securities in such jurisdictions (including keeping such registration or qualification in effect for so long as such registration statement remains in effect), except that in no event shall the Company be required to qualify to do business as a foreign corporation in any jurisdiction where it would not, but for the requirements of this paragraph (d), be required to be so qualified, to subject itself to taxation in any such jurisdiction or to consent to general service of process in any such jurisdiction;

(e) promptly notify each Participating Holder and each managing underwriter, if any: (i) when the registration statement, any pre-effective amendment, the prospectus or any prospectus supplement related thereto, any post-effective amendment to the registration

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statement or any free writing prospectus has been filed with the SEC and, with respect to the registration statement or any post-effective amendment, when the same has become effective; (ii) of any comment letter or request by the SEC or state securities authority for amendments or supplements to the registration statement or the prospectus related thereto or for additional information; (iii) of the issuance by the SEC of any stop order suspending the effectiveness of the registration statement or the initiation of any proceedings for that purpose; (iv) of the receipt by the Company of any notification with respect to the suspension of the qualification of any Registrable Securities for sale under the securities or state “blue sky” laws of any jurisdiction or the initiation of any proceeding for such purpose; (v) of the existence of any fact of which the Company becomes aware which results in the registration statement or any amendment thereto, the prospectus related thereto or any supplement thereto, any document incorporated therein by reference, any free writing prospectus or the information conveyed to any purchaser at the time of sale to such purchaser containing an untrue statement of a material fact or omitting to state a material fact required to be stated therein or necessary to make any statement therein not misleading; and (vi) if at any time the representations and warranties contemplated by any underwriting agreement, securities sale agreement, or other similar agreement, relating to the offering shall cease to be true and correct in all material respects; and, if the notification relates to an event described in clause (v), unless the Company has declared that a Postponement Period exists, the Company shall promptly prepare and furnish to each such seller and each underwriter, if any, a reasonable number of copies of a prospectus supplemented or amended so that, as thereafter delivered to the purchasers of such Registrable Securities, such prospectus shall not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein in the light of the circumstances under which they were made not misleading;

(f) comply (and continue to comply) with all applicable rules and regulations of the SEC (including, without limitation, maintaining disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e)) and internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f)) in accordance with the Exchange Act), and make generally available to its security holders, as soon as reasonably practicable after the effective date of the registration statement (and in any event within forty-five (45) days, or ninety (90) days if it is a fiscal year, after the end of such twelve month period described hereafter), an earnings statement (which need not be audited) covering the period of at least twelve (12) consecutive months beginning with the first day of the Company’s first calendar quarter after the effective date of the registration statement, which earnings statement shall satisfy the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder;

(g) (i) (A) cause all such Registrable Securities covered by such registration statement to be listed on the principal securities exchange on which similar securities issued by the Company are then listed (if any), if the listing of such Registrable Securities is then permitted under the rules of such exchange, or (B) if no similar securities are then so listed, to either cause all such Registrable Securities to be listed on a national securities exchange or to secure designation of all such Registrable Securities as a Nasdaq National Market “national market system security” within the meaning of Rule 1 lAa2-l of the Exchange Act or, failing that, secure Nasdaq National Market authorization for such shares and, without limiting the generality of the foregoing, take all actions that may be required by the Company as the issuer of such Registrable Securities in order to facilitate the managing underwriter’s arranging for the registration of at

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least two market makers as such with respect to such shares with FINRA, and (ii) comply (and continue to comply) with the requirements of any self-regulatory organization applicable to the Company, including without limitation all corporate governance requirements;

(h) provide and cause to be maintained a transfer agent and registrar for all such Registrable Securities covered by such registration statement not later than the effective date of such registration statement and, in the case of any secondary equity offering, provide and enter into any reasonable agreements with a custodian for the Registrable Securities;

(i) enter into such customary agreements (including, if applicable, an underwriting agreement) and take such other actions as the Majority Participating Holders or the underwriters shall reasonably request in order to expedite or facilitate the disposition of such Registrable Securities (it being understood that the Holders of the Registrable Securities which are to be distributed by any underwriters shall be parties to any such underwriting agreement and may, at their option, require that the Company make to and for the benefit of such Holders the representations, warranties and covenants of the Company which are being made to and for the benefit of such underwriters);

(j) use its reasonable best efforts (i) to obtain an opinion from the Company’s counsel and a “cold comfort” letter and updates thereof from the independent public accountants who have certified the Company’s financial statements (and/or any other financial statements) included or incorporated by reference in such registration statement, in each case, in customary form and covering such matters as are customarily covered by such opinions and “cold comfort” letters (including, in the case of such “cold comfort” letter, events subsequent to the date of such financial statements) delivered to underwriters in underwritten public offerings, which opinion and letter shall be dated the dates such opinions and “cold comfort” letters are customarily dated and otherwise reasonably satisfactory to the underwriters, if any, and to the Majority Participating Holders, and (ii) furnish to each Participating Holder upon its request and to each underwriter, if any, a copy of such opinion and letter addressed to such underwriter;

(k) deliver promptly to counsel for each Participating Holder and to each managing underwriter, if any, copies of all correspondence between the SEC and the Company, its counsel or auditors and all memoranda relating to discussions with the SEC or its staff with respect to the registration statement, and, upon receipt of such confidentiality agreements as the Company may reasonably request, make reasonably available for inspection by counsel for each Participating Holder, by counsel for any underwriter participating in any disposition to be effected pursuant to such registration statement and by any attorney, accountant or other agent retained by any Participating Holder or any such underwriter, all pertinent financial and other records, pertinent corporate documents and properties of the Company, and cause all of the Company’s officers, directors and employees to supply all information reasonably requested by any such counsel for a Participating Holder, counsel for an underwriter, attorney, accountant or agent in connection with such registration statement;

(l) use its reasonable best efforts to prevent the issuance or obtain the withdrawal of any order suspending the effectiveness of the registration statement, or the lifting of any suspension of the qualification of any of the Registrable Securities for sale in any jurisdiction, in each case, as promptly as reasonably practicable;

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(m) provide a CUSIP number for all Registrable Securities, not later than the effective date of the registration statement;

(n) use its reasonable best efforts to make available its employees and personnel for participation in “road shows” and other marketing efforts and otherwise provide reasonable assistance to the underwriters (taking into account the needs of the Company’s businesses and the requirements of the marketing process) in the marketing of Registrable Securities in any underwritten offering;

(o) promptly prior to the filing of any document which is to be incorporated by reference into the registration statement or the prospectus (after the initial filing of such registration statement), and prior to the filing or use of any free writing prospectus, provide copies of such document to counsel for each Participating Holder and to each managing underwriter, if any, and make the Company’s representatives reasonably available for discussion of such document and make such changes in such document concerning the Participating Holders prior to the filing thereof as counsel for such Participating Holders or underwriters may reasonably request (provided that, notwithstanding the foregoing, in no event shall the Company be required to file any document with the SEC which in the view of the Company or its counsel contains an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make any statement therein not misleading);

(p) furnish to counsel for each Participating Holder upon its request and to each managing underwriter, without charge, upon request, at least one conformed copy of the registration statement and any post-effective amendments or supplements thereto, including financial statements and schedules, all documents incorporated therein by reference, the prospectus contained in such registration statement (including each preliminary prospectus and any summary prospectus), any other prospectus filed under Rule 424 under the Securities Act and all exhibits (including those incorporated by reference) and any free writing prospectus utilized in connection therewith;

(q) cooperate with the Participating Holders and the managing underwriter, if any, to facilitate the timely preparation and delivery of certificates not bearing any restrictive legends representing the Registrable Securities to be sold, and cause such Registrable Securities to be issued in such denominations and registered in such names in accordance with the underwriting agreement at least two (2) Business Days prior to any sale of Registrable Securities to the underwriters or, if not an underwritten offering, in accordance with the instructions of the Participating Holders at least two (2) Business Days prior to any sale of Registrable Securities and instruct any transfer agent and registrar of Registrable Securities to release any stop transfer orders in respect thereof (and, in the case of Registrable Securities registered on a Shelf Registration Statement, at the request of any Holder, prepare and deliver certificates representing such Registrable Securities not bearing any restrictive legends and deliver or cause to be delivered an opinion or instructions to the transfer agent in order to allow such Registrable Securities to be sold from time to time);

(r) take no direct or indirect action prohibited by Regulation M under the Exchange Act; provided, however, that to the extent that any prohibition is applicable to the Company, the Company will use its reasonable best efforts to make any such prohibition inapplicable;

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(s) use its reasonable best efforts to cause the Registrable Securities covered by the applicable registration statement to be registered with or approved by such other governmental agencies or authorities as may be necessary to enable the Participating Holders or the underwriters, if any, to consummate the disposition of such Registrable Securities;

(t) take all such other commercially reasonable actions as are necessary or advisable in order to expedite or facilitate the disposition of such Registrable Securities;

(u) take all reasonable action to ensure that any free writing prospectus utilized in connection with any registration covered by Section 2.1 or 2.2 complies in all material respects with the Securities Act, is filed in accordance with the Securities Act to the extent required thereby, is retained in accordance with the Securities Act to the extent required thereby and, when taken together with the related prospectus, prospectus supplement and related documents, will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; and

(v) in connection with any underwritten offering, if at any time the information conveyed to a purchaser at the time of sale includes any untrue statement of a material fact or omits to state any material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading, promptly file with the SEC such amendments or supplements to such information as may be necessary so that the statements as so amended or supplemented will not, in light of the circumstances, be misleading.

To the extent the Company is a well-known seasoned issuer (as defined in Rule 405 under the Securities Act) (a “WKSI”) at the time any Demand Registration Request is submitted to the Company, and such Demand Registration Request requests that the Company file an automatic shelf registration statement (as defined in Rule 405 under the Securities Act) (an “automatic shelf registration statement”) on Form S-3, the Company shall file an automatic shelf registration statement which covers those Registrable Securities which are requested to be registered. The Company shall use its commercially reasonable best efforts to remain a WKSI (and not become an ineligible issuer (as defined in Rule 405 under the Securities Act)) during the period during which such automatic shelf registration statement is required to remain effective.

If the Company does not pay the filing fee covering the Registrable Securities at the time the automatic shelf registration statement is filed, the Company agrees to pay such fee at such time or times as the Registrable Securities are to be sold. If the automatic shelf registration statement has been outstanding for at least three (3) years, at the end of the third year the Company shall refile a new automatic shelf registration statement covering the Registrable Securities. If at any time when the Company is required to re-evaluate its WKSI status the Company determines that it is not a WKSI, the Company shall use its commercially reasonable best efforts to refile the shelf registration statement on Form S-3 and, if such form is not available, Form S-l and keep such registration statement effective during the period during which such registration statement is required to be kept effective.

If the Company files any shelf registration statement for the benefit of the holders of any of its securities other than the Holders, and the Holders do not request that their

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Registrable Securities be included in such Shelf Registration Statement, the Company agrees that it shall include in such registration statement such disclosures as may be required by Rule 430B under the Securities Act (referring to the unnamed selling security holders in a generic manner by identifying the initial offering of the securities to the Holders) in order to ensure that the Holders may be added to such shelf registration statement at a later time through the filing of a prospectus supplement rather than a post-effective amendment.

The Company may require as a condition precedent to the Company’s obligations under this Section 2.4 that each Participating Holder as to which any registration is being effected furnish the Company such information regarding such seller and the distribution of such securities as the Company may from time to time reasonably request provided that such information is necessary for the Company to consummate such registration and shall be used only in connection with such registration.

Each Holder of Registrable Securities agrees that upon receipt of any notice from the Company of the happening of any event of the land described in clause (v) of paragraph (e) of this Section 2.4, such Holder will discontinue such Holder’s disposition of Registrable Securities pursuant to the registration statement covering such Registrable Securities until such Holder’s receipt of the copies of the supplemented or amended prospectus contemplated by paragraph (e) of this Section 2.4 and, if so directed by the Company, will deliver to the Company (at the Company’s expense) all copies, other than permanent file copies, then in such Holder’s possession of the prospectus covering such Registrable Securities that was in effect at the time of receipt of such notice. In the event the Company shall give any such notice, the applicable period mentioned in paragraph (a) of this Section 2.4 shall be extended by the number of days during such period from and including the date of the giving of such notice to and including the date when each Participating Holder covered by such registration statement shall have received the copies of the supplemented or amended prospectus contemplated by paragraph (e) of this Section 2.4.

If any such registration statement or comparable statement under state “blue sky” laws refers to any Holder by name or otherwise as the Holder of any securities of the Company, then such Holder shall have the right to require (i) the insertion therein of language, in form and substance satisfactory to such Holder and the Company, to the effect that the holding by such Holder of such securities is not to be construed as a recommendation by such Holder of the investment quality of the Company’s securities covered thereby and that such holding does not imply that such Holder will assist in meeting any future financial requirements of the Company, or (ii) in the event that such reference to such Holder by name or otherwise is not in the judgment of the Company, as advised by counsel, required by the Securities Act or any similar federal statute or any state “blue sky” or securities law then in force, the deletion of the reference to such Holder.

2.5. Registration Expenses.

(a) The Company shall pay all Expenses with respect to any registration or offering of Registrable Securities pursuant to Section 2, whether or not a registration statement becomes effective or the offering is consummated.

(b) Notwithstanding the foregoing, (x) the provisions of this Section 2.5 shall be deemed amended to the extent necessary to cause these expense provisions to comply with state “blue sky” laws of each state in which the offering is made and (y) in connection with any underwritten offering hereunder, each Participating Holder shall pay all underwriting discounts and commissions and any transfer taxes, if any, attributable to the sale of such Registrable Securities, pro rata with respect to payments of discounts and commissions in accordance with the number of shares sold in the offering by such Holder.

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2.6. Certain Limitations on Registration Rights. In the case of any registration under Section 2.1 involving an underwritten offering, or, in the case of a registration under Section 2.2, if the Company has determined to enter into an underwriting agreement in connection therewith, all securities to be included in such underwritten offering shall be subject to such underwriting agreement and no Person may participate in such underwritten offering unless such Person (i) agrees to sell such Person’s securities on the basis provided therein and completes and executes all reasonable questionnaires, and other customary documents (including custody agreements and powers of attorney) which must be executed in connection therewith; provided, however, that all such documents shall be consistent with the provisions hereof and (ii) provides such other information to the Company or the underwriter as may be necessary to register such Person’s securities.

2.7. Limitations on Sale or Distribution of Other Securities.

(a) Each Holder agrees, (i) to the extent requested in writing by a managing underwriter, if any, of any underwritten public offering pursuant to a registration or offering effected pursuant to Section 2.1, not to sell, transfer or otherwise dispose of, including any sale pursuant to Rule 144 under the Securities Act, any Common Stock, or any other equity security of the Company or any security convertible into or exchangeable or exercisable for any equity security of the Company (other than as part of such underwritten public offering) during the time period reasonably requested by the managing underwriter, not to exceed ninety (90) days (plus customary seventeen (17) day lockup extension periods) or such shorter period as the managing underwriter shall agree to (other than in the case of the IPO, which time period shall be 180 days (plus customary seventeen (17) day lockup extension periods), provided that (x) such shorter period shall apply to all Holders who are subject to such period and (y) if a managing underwriter of an offering releases any Holder of its obligations under this Section 2.7(a)(i), all other Holders shall be released from their obligations under this Section 2.7(a) (i), on a pro rata basis, in accordance with the number of Registrable Securities held by them at such time (and the Company hereby also so agrees (except that the Company may effect any sale or distribution of any such securities pursuant to a registration on Form S-4 (if reasonably acceptable to such managing underwriter) or Form S-8, or any successor or similar form which is (x) then in effect or (y) shall become effective upon the conversion, exchange or exercise of any then outstanding Common Stock Equivalent), to use its reasonable best efforts to cause each holder of any equity security or any security convertible into or exchangeable or exercisable for any equity security of the Company purchased from the Company at any time other than in a public offering so to agree); and (ii) to the extent requested in writing by a managing underwriter of any underwritten public offering effected by the Company for its own account (including without limitation any

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offering in which one or more Holders is selling Common Stock pursuant to the exercise of piggyback rights under Section 2.2 hereof), it will not sell any Common Stock (other than as part of such underwritten public offering) during the time period reasonably requested by the managing underwriter, which period shall not exceed ninety (90) days (plus customary seventeen (17) day lockup extension periods) or such shorter period as the managing underwriter shall agree to (other than in the case of the IPO, which time period shall be 180 days (plus customary seventeen (17) day lockup extension periods)), provided that (x) such shorter period shall apply to all Holders who are subject to such period and (y) if a managing underwriter of an offering releases any Holder of its obligations under this Section 2.7(a)(ii), all other Holders shall be released from their obligations under this Section 2.7(a)(ii), on a pro rata basis, in accordance with the number of Registrable Securities held by them at such time.

(b) The Company hereby agrees that, in connection with an offering pursuant to Section 2.1 or 2.2, the Company shall not sell, transfer, or otherwise dispose of, any Common Stock, or any other equity security of the Company or any security convertible into or exchangeable or exercisable for any equity security of the Company (other than as part of such underwritten public offering, a registration on Form S-4 or Form S-8 or any successor or similar form which is (x) then in effect or (y) shall become effective upon the conversion, exchange or exercise of any then outstanding Common Stock Equivalent), until a period of ninety (90) days (or such shorter period to which the Majority Participating Holders shall agree, but 180 days in the case of the IPO) shall have elapsed from the pricing date of such offering (in each case plus customary seventeen (17) day lockup extension periods); and the Company shall (i) so provide in any registration rights agreements hereafter entered into with respect to any of its securities and (ii) use its reasonable best efforts to cause each holder of any equity security or any security convertible into or exchangeable or exercisable for any equity security of the Company purchased from the Company at any time other than in a public offering to so agree.

2.8. No Required Sale. Nothing in this Agreement shall be deemed to create an independent obligation on the part of any Holder to sell any Registrable Securities pursuant to any effective registration statement.

2.9. Indemnification.

(a) In the event of any registration or offer and sale of any securities of the Company under the Securities Act pursuant to this Section 2, the Company will, and hereby agrees to, and hereby does, indemnify and hold harmless, to the fullest extent permitted by law, each Participating Holder, its directors, officers, fiduciaries, employees, stockholders, members or general and limited partners (and the directors, officers, fiduciaries, employees, stockholders, members or general and limited partners thereof), each other Person who participates as a seller (and its directors, officers, fiduciaries, employees, stockholders, members or general and limited partners), underwriter or Qualified Independent Underwriter, if any, in the offering or sale of such securities, each officer, director, employee, stockholder, fiduciary, managing director, agent, affiliate, consultant, representative, successor, assign or partner of such underwriter or Qualified Independent Underwriter, and each other Person, if any, who controls such seller or any such underwriter or Qualified Independent Underwriter within the meaning of the Securities

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Act, from and against any and all losses, claims, damages or liabilities, joint or several, actions or proceedings (whether commenced or threatened) and expenses (including reasonable fees of counsel and any amounts paid in any settlement effected with the Company’s consent, which consent shall not be unreasonably withheld or delayed) to which each such indemnified party may become subject under the Securities Act or otherwise in respect thereof (collectively, “Claims”), insofar as such Claims arise out of or are based upon (i) any untrue statement or alleged untrue statement of a material fact contained in any registration statement under which such securities were registered under the Securities Act or the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, (ii) any untrue statement or alleged untrue statement of a material fact contained in any preliminary, final or summary prospectus or any amendment or supplement thereto, together with the documents incorporated by reference therein, or any free writing prospectus utilized in connection therewith, or the omission or alleged omission to state therein a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, or (iii) any untrue statement or alleged untrue statement of a material fact in the information conveyed by the Company to any purchaser at the time of the sale to such purchaser, or the omission or alleged omission to state therein a material fact required to be stated therein, or (iv) any violation by the Company of any federal, state or common law rule or regulation applicable to the Company and relating to action required of or inaction by the Company in connection with any such registration, and the Company will reimburse any such indemnified party for any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such Claim as such expenses are incurred; provided, however, that the Company shall not be liable to any such indemnified party in any such case to the extent such Claim arises out of or is based upon any untrue statement or alleged untrue statement of a material fact or omission or alleged omission of a material fact made in such registration statement or amendment thereof or supplement thereto or in any such prospectus or any preliminary, final or summary prospectus or free writing prospectus in reliance upon and in strict conformity with written information furnished to the Company by or on behalf of such indemnified party specifically for use therein. Such indemnity and reimbursement of expenses shall remain in full force and effect regardless of any investigation made by or on behalf of such indemnified party and shall survive the transfer of such securities by such seller.

(b) Each Participating Holder (and, if the Company requires as a condition to including any Registrable Securities in any registration statement filed in accordance with Section 2.1 or 2.2, any underwriter and Qualified Independent Underwriter, if any) shall, severally and not jointly, indemnify and hold harmless (in the same manner and to the same extent as set forth in paragraph (a) of this Section 2.9) to the extent permitted by law the Company, its officers and directors, each Person controlling the Company within the meaning of the Securities Act and all other prospective sellers and their directors, officers, stockholders, fiduciaries, managing directors, agents, affiliates, consultants, representatives, successors, assigns or general and limited partners and respective controlling Persons with respect to any untrue statement or alleged untrue statement of any material fact in, or omission or alleged omission of any material fact from, such registration statement, any preliminary, final or summary prospectus contained therein, or any amendment or supplement thereto, or any free writing prospectus utilized in connection therewith, if such statement or alleged statement or omission or alleged omission was made in reliance upon and in strict conformity with written

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information furnished to the Company or its representatives by or on behalf of such Participating Holder or underwriter or Qualified Independent Underwriter, if any, specifically for use therein, and each such Participating Holder, underwriter or Qualified Independent Underwriter, if any, shall reimburse such indemnified party for any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such Claim as such expenses are incurred; provided, however, that the aggregate amount which any such Participating Holder shall be required to pay pursuant to this Section 2.9 (including pursuant to indemnity, contribution or otherwise) shall in no case be greater than the amount of the net proceeds received by such Participating Holder upon the sale of the Registrable Securities pursuant to the registration statement giving rise to such Claim; provided further that such Participating Holder shall not be liable in any such case to the extent that prior to the filing of any such registration statement or prospectus or amendment thereof or supplement thereto, or any free writing prospectus utilized in connection therewith, such Participating Holder has furnished in writing to the Company information expressly for use in such registration statement or prospectus or any amendment thereof or supplement thereto or free writing prospectus which corrected or made not misleading information previously furnished to the Company. The Company and each Participating Holder hereby acknowledge and agree that, unless otherwise expressly agreed to in writing by such Participating Holders to the contrary, for all purposes of this Agreement, the only information furnished or to be furnished to the Company for use in any such registration statement, preliminary, final or summary prospectus or amendment or supplement thereto, or any free writing prospectus, are statements specifically relating to (i) the beneficial ownership of shares of Common Stock by such Participating Holder and its Affiliates as disclosed in the section of such document entitled “Selling Stockholders” or “Principal and Selling Stockholders” or other documents thereof and (ii) the name and address of such Participating Holder. If any additional information about such Holder or the plan of distribution (other than for an underwritten offering) is required by law to be disclosed in any such document, then such Holder shall not unreasonably withhold its agreement referred to in the immediately preceding sentence. Such indemnity and reimbursement of expenses shall remain in full force and effect regardless of any investigation made by or on behalf of such indemnified party and shall survive the transfer of such securities by such Holder.

(c) Indemnification similar to that specified in the preceding paragraphs (a) and (b) of this Section 2.9 (with appropriate modifications) shall be given by the Company and each Participating Holder with respect to any required registration or other qualification of securities under any applicable securities and state “blue sky” laws.

(d) Any Person entitled to indemnification under this Agreement shall notify promptly the indemnifying party in writing of the commencement of any action or proceeding with respect to which a claim for indemnification may be made pursuant to this Section 2.9, but the failure of any indemnified party to provide such notice shall not relieve the indemnifying party of its obligations under the preceding paragraphs of this Section 2.9, except to the extent the indemnifying party is materially and actually prejudiced thereby and shall not relieve the indemnifying party from any liability which it may have to any indemnified party otherwise than under this Section 2. In case any action or proceeding is brought against an indemnified party and such indemnified party shall have notified the indemnifying party of the commencement thereof (as required above), the indemnifying party shall be entitled to participate therein and, unless in the reasonable opinion of outside counsel to the indemnified party a conflict of interest

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between such indemnified and indemnifying parties may exist in respect of such Claim, to assume the defense thereof jointly with any other indemnifying party similarly notified, to the extent that it chooses, with counsel reasonably satisfactory to such indemnified party, and after notice from the indemnifying party to such indemnified party that it so chooses, the indemnifying party shall not be liable to such indemnified party for any legal or other expenses subsequently incurred by such indemnified party in connection with the defense thereof other than reasonable costs of investigation; provided, however, that (i) if the indemnifying party fails to take reasonable steps necessary to defend diligently the action or proceeding within twenty (20) days after receiving notice from such indemnified party that the indemnified party believes it has failed to do so; or (ii) if such indemnified party who is a defendant in any action or proceeding which is also brought against the indemnifying party reasonably shall have concluded that there may be one or more legal or equitable defenses available to such indemnified party which are not available to the indemnifying party or which may conflict with those available to another indemnified party with respect to such Claim; or (iii) if representation of both parties by the same counsel is otherwise inappropriate under applicable standards of professional conduct, then, in any such case, the indemnified party shall have the right to assume or continue its own defense as set forth above (but with no more than one firm of counsel for all indemnified parties in each jurisdiction, except to the extent any indemnified party or parties reasonably shall have made a conclusion described in clause (ii) or (iii) above) and the indemnifying party shall be liable for any expenses therefor. No indemnifying party shall, without the written consent of the indemnified party, effect the settlement or compromise of, or consent to the entry of any judgment with respect to, any pending or threatened action or claim in respect of which indemnification or contribution may be sought hereunder (whether or not the indemnified party is an actual or potential party to such action or claim) unless such settlement, compromise or judgment (A) includes an unconditional release of the indemnified party from all liability arising out of such action or claim and (B) does not include a statement as to or an admission of fault, culpability or a failure to act, by or on behalf of any indemnified party.

(e) If for any reason the foregoing indemnity is unavailable, unenforceable or is insufficient to hold harmless an indemnified party under Sections 2.9(a), (b) or (c), then each applicable indemnifying party shall contribute to the amount paid or payable to such indemnified party as a result of any Claim in such proportion as is appropriate to reflect the relative fault of the indemnifying party, on the one hand, and the indemnified party, on the other hand, with respect to such Claim. The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the indemnifying party or the indemnified party and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such untrue statement or omission. If, however, the allocation provided in the second preceding sentence is not permitted by applicable law, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party in such proportion as is appropriate to reflect not only such relative faults but also the relative benefits of the indemnifying party and the indemnified party as well as any other relevant equitable considerations. The parties hereto agree that it would not be just and equitable if any contribution pursuant to this Section 2.9(e) were to be determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to in the preceding sentences of this Section 2.9(e). The amount paid or payable in respect of any Claim shall be deemed to include any legal or other expenses reasonably incurred

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by such indemnified party in connection with investigating or defending any such Claim. No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation. Notwithstanding anything in this Section 2.9(e) to the contrary, no indemnifying party (other than the Company) shall be required pursuant to this Section 2.9(e) to contribute any amount greater than the amount of the net proceeds received by such indemnifying party from the sale of Registrable Securities pursuant to the registration statement giving rise to such Claim, less the amount of any indemnification payment made by such indemnifying party pursuant to Sections 2.9(b) and (c). In addition, no Holder of Registrable Securities or any Affiliate thereof shall be required to pay any amount under this Section 2.9(e) unless such Person or entity would have been required to pay an amount pursuant to Section 2.9(b) if it had been applicable in accordance with its terms.

(f) The indemnity and contribution agreements contained herein shall be in addition to any other rights to indemnification or contribution which any indemnified party may have pursuant to law or contract and shall remain operative and in full force and effect regardless of any investigation made or omitted by or on behalf of any indemnified party and shall survive the transfer of the Registrable Securities by any such party.

(g) The indemnification and contribution required by this Section 2.9 shall be made by periodic payments of the amount thereof during the course of the investigation or defense, as and when bills are received or expense, loss, damage or liability is incurred; provided, however, that the recipient thereof hereby undertakes to repay such payments if and to the extent it shall be determined by a court of competent jurisdiction that such recipient is not entitled to such payment hereunder.

2.10. Limitations on Registration of Other Securities; Representation. From and after the date of this Agreement, the Company shall not, without the prior written consent of Holders holding more than 50% of the Registrable Securities, enter into any agreement with any holder or prospective holder of any securities of the Company giving such holder or prospective holder any registration rights the terms of which are more favorable taken as a whole than the registration rights granted to the Holders hereunder unless the Company shall also give such rights to such Holders.

2.11. No Inconsistent Agreements. The Company shall not hereafter enter into any agreement with respect to its securities that is inconsistent in any material respects with the rights granted to the Holders in this Agreement.

Section 3. Underwritten Offerings.

3.1. Requested Underwritten Offerings. If requested by the underwriters for any underwritten offering pursuant to a registration requested under Section 2.1, the Company shall enter into a customary underwriting agreement with the underwriters. Such

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underwriting agreement shall (i) be satisfactory in form and substance to the Majority Participating Holders, (ii) contain terms not inconsistent with the provisions of this Agreement and (iii) contain such representations and warranties by, and such other agreements on the part of, the Company and such other terms as are generally prevailing in agreements of that type, including, without limitation, indemnities and contribution agreements on substantially the same terms as those contained herein. Any Participating Holder shall be a party to such underwriting agreement and may, at its option, require that any or all of the representations and warranties by, and the other agreements on the part of, the Company to and for the benefit of such underwriters shall also be made to and for the benefit of such Participating Holder and that any or all of the conditions precedent to the obligations of such underwriters under such underwriting agreement be conditions precedent to the obligations of such Participating Holder; provided, however, that the Company shall not be required to make any representations or warranties with respect to written information specifically provided by a Participating Holder for inclusion in the registration statement. Unless otherwise agreed by the respective Participating Holders and the underwriters, each such Participating Holder shall not be required to make any representations or warranties to or agreements with the Company or the underwriters other than representations, warranties or agreements regarding such Participating Holder, its ownership of and title to the Registrable Securities, any written information specifically provided by such Participating Holder for inclusion in the registration statement and its intended method of distribution; and any liability of such Participating Holder to any underwriter or other Person under such underwriting agreement for indemnity, contribution or otherwise shall in no case be greater than the amount of the net proceeds received by such Participating Holder upon the sale of Registrable Securities pursuant to such registration statement and in no event shall relate to anything other than information about such Holder specifically provided by such Holder for use in the registration statement and prospectus.

3.2. Piggyback Underwritten Offerings. In the case of a registration pursuant to Section 2.2, if the Company shall have determined to enter into an underwriting agreement in connection therewith, all of the Participating Holders’ Registrable Securities to be included in such registration shall be subject to such underwriting agreement. Any Participating Holder may, at its option, require that any or all of the representations and warranties lay, and the other agreements on the part of, the Company to and for the benefit of such underwriters shall also be made to and for the benefit of such Participating Holder and that any or all of the conditions precedent to the obligations of such underwriters under such underwriting agreement be conditions precedent to the obligations of such Participating Holder; provided that the Company shall not be required to make any representations or warranties with respect to written information specifically provided by a Participating Holder for inclusion in the registration statement. Unless otherwise agreed by the respective Participating Holders and the underwriters, each such Participating Holder shall not be required to make any representations or warranties to or agreements with the Company or the underwriters other than representations, warranties or agreements regarding such Participating Holder, its ownership of and title to the Registrable Securities, any written information specifically provided by such Participating Holder for inclusion in the registration statement and its intended method of distribution; and any liability of such Participating Holder to any underwriter or other Person under such underwriting agreement shall in no case be greater than the amount of the net proceeds received by such Participating Holder upon the sale of Registrable Securities pursuant to such registration statement and in no event shall relate to anything other than information about such Holder specifically provided by such Holder for use in the registration statement and prospectus.

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Section 4. General.

4.1. Adjustments Affecting Registrable Securities. The Company agrees that it shall not effect or permit to occur any combination or subdivision of shares of Common Stock which would adversely affect the ability of any Holder of any Registrable Securities to include such Registrable Securities in any registration contemplated by this Agreement or the marketability of such Registrable Securities in any such registration. The Company agrees that it will take all reasonable steps necessary to effect a subdivision of shares of Common Stock if in the reasonable judgment of (a) the Majority Participating Holders or (b) the Manager for the offering in respect of such Demand Registration Request, such subdivision would enhance the marketability of the Registrable Securities. Subject to the Stockholders Agreement (if in effect at the time), each Holder agrees to vote all of its shares of capital stock in a manner, and to take all other actions necessary, to permit the Company to carry out the intent of the preceding sentence including, without limitation, voting in favor of an amendment to the Company’s organizational documents in order to increase the number of authorized shares of capital stock of the Company. In any event, the provisions of this Agreement shall apply, to the full extent set forth herein with respect to the Registrable Securities, to any and all shares of capital stock of the Company, any successor or assign of the Company (whether by merger, share exchange, consolidation, sale of assets or otherwise) or any Subsidiary of the Company which may be issued in respect of, in exchange for or in substitution of, Registrable Securities and shall be appropriately adjusted for any stock dividends, splits, reverse splits, combinations, recapitalizations and the like occurring after the date hereof.

4.2. Rule 144 and Rule 144A. If the Company shall have filed a registration statement pursuant to the requirements of Section 12 of the Exchange Act or a registration statement pursuant to the requirements of the Securities Act in respect of the Common Stock or Common Stock Equivalents, the Company covenants that (i) so long as it remains subject to the reporting provisions of the Exchange Act, it will timely file the reports required to be filed by it under the Securities Act or the Exchange Act (including, but not limited to, the reports under Sections 13 and 15(d) of the Exchange Act referred to in subparagraph (c)(l)(i) of Rule 144 under the Securities Act, as such Rule may be amended (“Rule 144”) ) or, if the Company is not required to file such reports, it will, upon the request of any Holder, make publicly available other information so long as necessary to permit sales by such Holder under Rule 144, Rule 144A under the Securities Act, as such Rule may be amended (“Rule 144A”), or any similar rules or regulations hereafter adopted by the SEC, and (ii) it will take such further action as any Holder may reasonably request, all to the extent required from time to time to enable such Holder to sell Registrable Securities without registration under the Securities Act within the limitation of the exemptions provided by (A) Rule 144, (B) Rule 144A or (C) any similar rule or regulation hereafter adopted by the SEC. Upon the request of any Holder of Registrable Securities, the Company will deliver to such Holder a written statement as to whether it has complied with such requirements.

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4.3. Nominees for Beneficial Owners. If Registrable Securities are held by a nominee for the beneficial owner thereof the beneficial owner thereof may, at its option, be treated as the Holder of such Registrable Securities for purposes of any request or other action by any Holder or Holders of Registrable Securities pursuant to this Agreement (or any determination of any number or percentage of shares constituting Registrable Securities held by any Holder or Holders of Registrable Securities contemplated by this Agreement), provided that the Company shall have received assurances reasonably satisfactory to it of such beneficial ownership.

4.4. Amendments and Waivers. Except as otherwise provided herein, no modification, amendment or waiver of any provision of this Agreement shall be effective against the Company or any Holder unless such modification, amendment or waiver is approved in writing by the Company and the Holders holding a majority of the Registrable Securities then held by all Holders; provided that any amendment, modification, supplement or waiver of any of the provisions of this Agreement which disproportionately materially adversely affects any Holder shall not be effective without the written approval of such Holder. No waiver of any of the provisions of this Agreement shall be deemed to or shall constitute a waiver of any other provision hereof (whether or not similar). No failure or delay on the part of any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof or of any other or future exercise of any such right, power or privilege.

4.5. Notices. Except as otherwise provided in this Agreement, all notices, requests, consents and other communications hereunder to any party shall be deemed to be sufficient if contained in a written instrument addressed to such party delivered in person, by nationally recognized overnight courier or first class registered or certified mail, return receipt requested, postage prepaid, or by facsimile or electronic mail at the address set forth below and to any other recipient at the address indicated on Schedule 4.5 hereto or at such other address as may hereafter be designated in writing by such party to the other parties:

(i) if to the Company, to:

(ii) if to the THL Party, to:

c/o Thomas H. Lee Partners, L.P.

100 Federal Street, 35th Floor

Boston, MA 02110

Facsimile: (617)227-3514

Attention: Joshua M. Nelson and Uttam Jain

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with a copy (which shall not constitute notice) to:

Weil, Gotshal & Manges LLP

767 Fifth Avenue

New York, New York 10153

Attention: Michael J. Aiello

Facsimile: (212)310-8007

(iii) if to the Advent Party, to:

c/o Advent International Corporation

75 State Street

Boston, MA 02109

Facsimile: (617) 951-9353

Attention: Jefferson M. Case and James Westra

with a copy (which shall not constitute notice) to:

Ropes & Gray LLP

Prudential Tower, 800 Boylston Street

Boston, MA 02199-3600

Facsimile: (617) 235-0376

Attention: Jane D. Goldstein

(iv) if to the American Greetings Party, to:

American Greetings Corporation

One American Road

Cleveland, OH 44144

Facsimile: (216) 252-6778

Attention: Catherine M. Kilbane

with a copy (which shall not constitute notice) to:

Calfee, Halter & Griswold LLP

The Calfee Building

1405 East Sixth Street

Cleveland, Ohio 44114

Facsimile: (216)241-0816

Attention: Douglas A. Neary

(v) if to the Management Stockholders, to the address indicated in the records of the Company:

All such notices, requests, consents and other communications shall be deemed to have been given to the receiving party upon actual receipt, if delivered in person; three (3) business

30

days after deposit in the mail, if sent by registered or certified mail; upon confirmation of successful transmission if sent by facsimile; or on the next business day after deposit with an overnight courier, if sent by overnight courier.

4.6. Successors and Assigns. Except as otherwise provided herein, this Agreement shall be binding upon and inure to the benefit of and be enforceable by the parties hereto and the respective successors, permitted assigns, heirs and personal representatives of the parties hereto, whether so expressed or not. This Agreement may not be assigned by the Company without the prior written consent of the THL Party. Each Holder shall have the right to assign all or part of its or his rights and obligations under this Agreement only in accordance with transfers of Registrable Securities to such Holder’s Permitted Transferees. For the avoidance of doubt, the THL Party shall have the right to assign all or part of its rights and obligations under this Agreement to any of its Affiliates in connection with any transfer of Registrable Securities to such Affiliate. Upon any such assignment, such assignee shall have and be able to exercise and enforce all rights of the assigning Holder which are assigned to it and, to the extent such rights are assigned, any reference to the assigning Holder shall be treated as a reference to the assignee. If any Holder shall acquire additional Registrable Securities, such Registrable Securities shall be subject to all of tire terms, and entitled to all the benefits, of this Agreement. The parties hereto and their respective successors may assign their rights under this Agreement, in whole or in part, to any purchaser of shares of Registrable Securities held by them.

4.7. Entire Agreement. This Agreement, the Stockholders Agreement and the other documents referred to herein or delivered pursuant hereto which form part hereof constitute the entire agreement and understanding between the parties hereto and supersedes all prior agreements and understandings relating to the subject matter hereof.

4.8. Governing Law; Submission to Jurisdiction; Waiver of Jury Trial.

(a) This Agreement, including the validity hereof and the rights and obligations of the parties hereunder, all amendments and supplements hereto, and all actions or proceedings arising out of or relating to this Agreement, of any nature whatsoever, shall be construed in accordance with and governed by the domestic substantive laws of the State of Delaware without giving effect to any choice of law or conflicts of law provision or rule that might otherwise cause the application of the domestic substantive laws of any other jurisdiction. The parties hereto hereby irrevocably submit to the exclusive jurisdiction of the state and federal courts located in the Borough of Manhattan within the State of New York in connection with any dispute arising out of or relating to this Agreement or any of the transactions contemplated hereby and each party hereby irrevocably waives, to the fullest extent permitted by applicable law, any objection which they may now or hereafter have to the laying of venue of any such dispute brought in such court or any defense of inconvenient forum or lack of personal jurisdiction in respect of such dispute. Each of the parties hereto agrees that a judgment rendered in any such dispute may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law.

(b) Each party hereto hereby waives to the fullest extent permitted by applicable law any right it may have to a trial by jury in respect of any legal proceeding directly or indirectly arising out of, under or in connection with this Agreement or any transaction contemplated hereby. Each party hereto (i) certifies that no representative, agent or attorney of any other party has represented, expressly or otherwise, that such other party would not, in the event of litigation, seek to enforce the foregoing waiver and (ii) acknowledges that it and the other parties hereto have been induced to enter into this Agreement by, among other things, the mutual waivers and certifications in this Section 4.8.

31

4.9. Interpretation: Construction.

(a) The table of contents and headings in this Agreement are for convenience of reference only, do not constitute part of this Agreement and shall not be deemed to limit or otherwise affect any of the provisions hereof. Where a reference in this Agreement is made to a Section, such reference shall be to a Section of this Agreement unless otherwise indicated. Whenever the words “include,” “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation.”

(b) The parties have participated jointly in negotiating and drafting this Agreement. In the event that an ambiguity or a question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the parties, and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any provision of this Agreement.

4.10. Counterparts. This Agreement may be executed and delivered in any number of separate counterparts (including by facsimile or electronic mail), each of which shall be an original, but all of which together shall constitute one and the same agreement.

4.11. Severability. The provisions of this Agreement shall be deemed severable and the invalidity or unenforceability of any provision shall not affect the validity or enforceability of the other provisions hereof. If any provision of this Agreement, or the application thereof to any person or any circumstance, is invalid or unenforceable, (a) a suitable and equitable provision shall be substituted therefor in order to carry out, so far as may be valid and enforceable, the intent and purpose of such invalid or unenforceable provision and (b) the remainder of this Agreement and the application of such provision to other persons or circumstances shall not be affected by such invalidity or unenforceability, nor shall such invalidity or unenforceability affect the validity or enforceability of such provision, or the application thereof, in any other jurisdiction.

4.12. Remedies. The parties hereto agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that each party hereto shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce

32

specifically the terms and provisions of this Agreement, without the posting of any bond, and, if any action should be brought in equity to enforce any of the provisions of this Agreement, none of the parties hereto shall raise the defense that there is an adequate remedy at law. All remedies, either under this Agreement, by law, or otherwise afforded to any party, shall be cumulative and not alternative.

4.13. Further Assurances. Each party hereto shall do and perform or cause to be done and performed all such further acts and things and shall execute and deliver all such other agreements, certificates, instruments, and documents as any other party hereto reasonably may request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby.

4.14. Confidentiality. Each Management Stockholder agrees that all material non-public information provided pursuant to or in accordance with the terms of this Agreement shall be kept confidential by the person to whom such information is provided, until such time as such information becomes public other than through violation of this provision. Notwithstanding the foregoing, any party may disclose the information if required to do so by any law, rule, regulation, order, decree or subpoena of any governmental agency or authority or court.

[Remainder of Page Intentionally Left Blank]

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IN WITNESS WHEREOF, the parties hereto have duly executed this Registration Rights Agreement as of the date first above written.

	PC TOPCO HOLDINGS, INC.
By:	/s/ Todd M. Abbrecht
	Name:	Todd M. Abbrecht
	Title:	President

THE THL PARTY:
THL PC TOPCO, L.P.
By:	THL Equity Advisors VI, LLC, its general partner
By:	Thomas H. Lee Partners, L.P., its sole member
By:	Thomas H. Lee Advisors, LLC, its general partner
By:	THL Holdco, LLC, its managing member
By:	/s/ Todd M. Abbrecht
	Name:	Todd M. Abbrecht
	Title:	Managing Director

THE ADVENT PARTY:
ADVENT-PARTY CITY ACQUISITION LIMITED PARTNERSHIP
By:	Advent-Party City GP, LLC, its general partner
By:	/s/ Andrew D. Dodge
	Name:	Andrew D. Dodge
	Title:	Authorized Signatory

THE AMERICAN GREETINGS PARTY:
	AMERICAN GREETINGS CORPORATION
	By:	/s/ Catherine M. Kilbane
	Name:	Catherine M. Kilbane
	Title:	Secretary

MANAGEMENT HOLDER:
RITTENBERG 2008 TRUST
By:	/s/ Joel S. Lee
	Name:	Joel S. Lee
	Title:	Trustee

MANAGEMENT HOLDER:

/s/ Jim Harrison

Jim Harrison

MANAGEMENT HOLDER:
RITTS ENTERPRISES LLC
By:	/s/ Gerald C. Rittenberg
	Name:
	Title:

MANAGEMENT HOLDER:
HARRISON FAMILY 2010 TRUST
By:	/s/ Bernadette A. Harrison
	Name:	Bernadette A. Harrison
	Title:	Trustee

MANAGEMENT HOLDER:

/s/ Gregg Melnick

Gregg Melnick

MANAGEMENT HOLDER:

/s/ Diane Spaar

Diane Spaar

MANAGEMENT HOLDER:

/s/ Alice Tang

Alice Tang

MANAGEMENT HOLDER:

/s/ Michael Correale

Michael Correale

MANAGEMENT HOLDER:
MELNICK 2008 FAMILY TRUST
By:	/s/ Gregg Melnick
	Name:	Gregg Melnick
	Title:	Trustee

MANAGEMENT HOLDER:

/s/ Steven Skiba

Steven Skiba

EX-4.8

Exhibit 4.8

PC NEXTCO HOLDINGS, LLC

as Issuer

PC NEXTCO FINANCE, INC.

as Co-Issuer

8.750%/9.500% Senior PIK Toggle Notes due 2019

INDENTURE

Dated as of August 1, 2013

WILMINGTON TRUST, NATIONAL ASSOCIATION,

as Trustee

TABLE OF CONTENTS

		Page
ARTICLE 1
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01.	Definitions		1
SECTION 1.02.	Other Definitions		29
SECTION 1.03.	Incorporation by Reference of Trust Indenture Act		31
SECTION 1.04.	Rules of Construction		31
SECTION 1.05.	Acts of Holders		32
ARTICLE 2
THE SECURITIES
SECTION 2.01.	Amount of Securities		33
SECTION 2.02.	Form and Dating		34
SECTION 2.03.	Execution and Authentication		34
SECTION 2.04.	Registrar and Paying Agent		35
SECTION 2.05.	Paying Agent to Hold Money in Trust		35
SECTION 2.06.	Holder Lists		35
SECTION 2.07.	Transfer and Exchange		35
SECTION 2.08.	Replacement Securities		36
SECTION 2.09.	Outstanding Securities		36
SECTION 2.10.	Temporary Securities		37
SECTION 2.11.	Cancellation		37
SECTION 2.12.	Defaulted Interest		37
SECTION 2.13.	CUSIP Numbers, ISINs, etc.		37
SECTION 2.14.	Calculation of Principal Amount of Securities		37
ARTICLE 3
REDEMPTION
SECTION 3.01.	Redemption		37
SECTION 3.02.	Applicability of Article		38
SECTION 3.03.	Notices to Trustee		38
SECTION 3.04.	Selection of Securities to Be Redeemed		38
SECTION 3.05.	Notice of Optional Redemption		38
SECTION 3.06.	Effect of Notice of Redemption		39
SECTION 3.07.	Deposit of Redemption Price		40
SECTION 3.08.	Securities Redeemed in Part		40
ARTICLE 4
COVENANTS
SECTION 4.01.	Payment of Securities		40
SECTION 4.02.	Reports		40
SECTION 4.03.	Limitation on Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock		42
SECTION 4.04.	Limitation on Restricted Payments		47

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SECTION 4.05.	Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries	54
SECTION 4.06.	Asset Sales	56
SECTION 4.07.	Transactions with Affiliates	58
SECTION 4.08.	Change of Control	61
SECTION 4.09.	Compliance Certificate	63
SECTION 4.10.	Further Instruments and Acts	63
SECTION 4.11.	Limitation on Guarantees of Indebtedness by Restricted Subsidiaries	63
SECTION 4.12.	Liens	64
SECTION 4.13.	Maintenance of Office or Agency	64
SECTION 4.14.	Termination and Suspension of Certain Covenants	65
ARTICLE 5
SUCCESSOR COMPANY
SECTION 5.01.	Merger, Consolidation or Sale of All or Substantially All Assets	65
SECTION 5.02.	Successor Corporation Substituted	67
ARTICLE 6
DEFAULTS AND REMEDIES
SECTION 6.01.	Events of Default	67
SECTION 6.02.	Acceleration	69
SECTION 6.03.	Other Remedies	70
SECTION 6.04.	Waiver of Past Defaults	70
SECTION 6.05.	Control by Majority	70
SECTION 6.06.	Limitation on Suits	70
SECTION 6.07.	Rights of the Holders to Receive Payment	71
SECTION 6.08.	Collection Suit by Trustee	71
SECTION 6.09.	Trustee May File Proofs of Claim	71
SECTION 6.10.	Priorities	71
SECTION 6.11.	Undertaking for Costs	71
SECTION 6.12.	Waiver of Stay or Extension Laws	71
ARTICLE 7
TRUSTEE
SECTION 7.01.	Duties of Trustee	72
SECTION 7.02.	Rights of Trustee	73
SECTION 7.03.	Individual Rights of Trustee	74
SECTION 7.04.	Trustee’s Disclaimer	74
SECTION 7.05.	Notice of Defaults	74
SECTION 7.06.	Reports by Trustee to the Holders	74
SECTION 7.07.	Compensation and Indemnity	74
SECTION 7.08.	Replacement of Trustee	75
SECTION 7.09.	Successor Trustee by Merger	76
SECTION 7.10.	Eligibility; Disqualification	76
SECTION 7.11.	Preferential Collection of Claims Against the Issuers	76
ARTICLE 8
DISCHARGE OF INDENTURE; DEFEASANCE
SECTION 8.01.	Discharge of Liability on Securities; Defeasance	76

ii

SECTION 8.02.	Conditions to Defeasance	77
SECTION 8.03.	Application of Trust Money	78
SECTION 8.04.	Repayment to Issuer	79
SECTION 8.05.	Indemnity for Government Securities	79
SECTION 8.06.	Reinstatement	79
ARTICLE 9
AMENDMENTS AND WAIVERS
SECTION 9.01.	Without Consent of the Holders	79
SECTION 9.02.	With Consent of the Holders	80
SECTION 9.03.	Compliance with Trust Indenture Act	81
SECTION 9.04.	Revocation and Effect of Consents and Waivers	81
SECTION 9.05.	Notation on or Exchange of Securities	82
SECTION 9.06.	Trustee to Sign Amendments	82
SECTION 9.07.	Payment for Consent	82
SECTION 9.08.	Additional Voting Terms; Calculation of Principal Amount	82
ARTICLE 10
GUARANTEES
SECTION 10.01.	Guarantees	82
SECTION 10.02.	Limitation on Liability	83
SECTION 10.03.	Successors and Assigns	84
SECTION 10.04.	No Waiver	84
SECTION 10.05.	Modification	84
SECTION 10.06.	Execution of Supplemental Indenture for Future Guarantors	84
SECTION 10.07.	Non-Impairment	85
SECTION 10.08.	Benefits Acknowledged	85
ARTICLE 11
MISCELLANEOUS
SECTION 11.01.	Trust Indenture Act Controls	85
SECTION 11.02.	Notices	85
SECTION 11.03.	Communication by the Holders with Other Holders	86
SECTION 11.04.	Certificate and Opinion as to Conditions Precedent	86
SECTION 11.05.	Statements Required in Certificate or Opinion	86
SECTION 11.06.	When Securities Disregarded	87
SECTION 11.07.	Rules by Trustee, Paying Agent and Registrar	87
SECTION 11.08.	Legal Holidays	87
SECTION 11.09.	GOVERNING LAW; WAIVER OF JURY TRIAL	87
SECTION 11.10.	No Recourse Against Others	87
SECTION 11.11.	Successors	87
SECTION 11.12.	Multiple Originals	87
SECTION 11.13.	Table of Contents; Headings	87
SECTION 11.14.	Indenture Controls	88
SECTION 11.15.	Severability	88
SECTION 11.16.	Force Majeure	88
SECTION 11.17.	U.S.A. Patriot Act	88
SECTION 11.18.	No Adverse Interpretation of Other Agreements	88

Appendix A – Provisions Relating to Original Securities and Additional Securities

iii

EXHIBIT INDEX

Exhibit A	–	Form of Security
Exhibit B	–	Form of Transferee Letter of Representation
Exhibit C	–	Form of Supplemental Indenture

iv

CROSS-REFERENCE TABLE

TIA Section	Indenture Section
310 (a)	7.10
(b)	7.08; 7.10
311 (a)	7.11
(b)	7.11
312 (a)	2.06
(b)	11.03
(c)	11.03
313 (a)	7.06
(b)	7.06
(c)	7.06
(d)	7.06
314 (a)	4.02; 4.09
(b)	N.A.
(c)(1)	11.04
(c)(2)	11.04
(c)(3)	N.A.
(d)	N.A.
(e)	11.05
(f)	4.10
315 (a)	7.01
(b)	7.05
(c)	7.01
(d)	7.01
(e)	6.11
316 (a)(last sentence)	11.06
(a)(1)(A)	6.05
(a)(1)(B)	6.04
(a)(2)	N.A.
(b)	6.07
(c)	1.05
317 (a)(1)	6.08
(a)(2)	6.09
(b)	2.05
318 (a)	11.01
(b)	N.A.
(c)	N.A.

N.A. Means Not Applicable.

Note: This Cross-Reference Table shall not, for any purposes, be deemed to be part of this Indenture.

v

INDENTURE dated as of August 1, 2013 among PC NEXTCO HOLDINGS, LLC, a Delaware limited liability company (the “Issuer”), PC NEXTCO FINANCE, INC., a Delaware corporation (the “Co-Issuer” and, together with the Issuer, the “Issuers”) and WILMINGTON TRUST, NATIONAL ASSOCIATION, a national banking association, as trustee (the “Trustee”).

Each party agrees as follows for the benefit of the other parties and for the equal and ratable benefit of the Holders (as defined herein) of (a) $350,000,000 aggregate principal amount of the Issuers’ 8.750%/9.500% Senior PIK Toggle Notes due 2019 issued on the date hereof (the “Original Securities”), (b) any Additional Securities (as defined herein) that may be issued after the date hereof in the form of Exhibit A (all such securities in clauses (a) and (b) being referred to collectively as the “Initial Securities”), (c) the PIK Notes (as defined below), if any, and (d) if and when issued as provided in the Registration Rights Agreement or otherwise registered under the Securities Act and issued, the Issuers’ 8.750%/9.500% Senior PIK Toggle Notes due 2019 (the “Exchange Securities” and together with the Initial Securities and the PIK Notes, the “Securities”). The Original Securities, the PIK Notes and any Additional Securities (as defined herein) shall constitute a single series hereunder. Subject to the conditions and compliance with the covenants set forth herein, the Issuers may issue an unlimited aggregate principal amount of Additional Securities.

ARTICLE 1

DEFINITIONS AND INCORPORATION BY REFERENCE

SECTION 1.01. Definitions.

“ABL Facility” means (1) the credit facility provided under the ABL credit agreement, dated July 27, 2012, among Opco, the other borrowers party thereto, the subsidiaries of Opco party thereto from time to time, the lenders party thereto from time to time in their capacities as lenders thereunder, Deutsche Bank Trust Company Americas, as administrative agent, Deutsche Bank Trust Company Americas and Bank of America, N.A., as co-collateral agents and the other agents party thereto, including one or more debt facilities or other financing arrangements (including, without limitation indentures) providing for term loans or other long-term indebtedness that replace or refinance such credit facility, including any such replacement or refinancing facility or indenture that increases or decreases the amount permitted to be borrowed thereunder or alters the maturity thereof and whether by the same or any other agent, lender or group of lenders, and any amendments, supplements, modifications, extensions, renewals, restatements, amendments and restatements or refundings thereof or any such indentures or credit facilities that replace or refinance such credit facility and (2) whether or not the ABL credit agreement referred to in clause (1) remains outstanding, if designated by the Issuer to be included in the definition of “ABL Facility,” one or more (i) debt facilities or commercial paper facilities, providing for revolving credit loans, term loans, receivables financing (including through the sale of receivables to lenders or to special purpose entities formed to borrower from lenders against such receivables) or letters of credit, (ii) debt securities, indentures or other forms of debt financing (including convertible or exchangeable debt instruments or bank guarantees or bankers’ acceptances) or (iii) instruments or agreements evidencing any other Indebtedness, in each case, with the same or different arrangements, agents, lenders, borrowers or issuer and, in each case, as amended, restated, amended and restated, supplemented, waived, renewed, refunded, replaced, restructured, repaid, refinanced or otherwise modified in whole or in part from time to time.

“Acquired Indebtedness” means, with respect to any specified Person:

(1) Indebtedness of any other Person existing at the time such other Person is consolidated, merged or amalgamated with or into or became a Restricted Subsidiary of such specified Person, including Indebtedness incurred in connection with, or in contemplation of, such other Person merging or amalgamating with or into, or becoming a Restricted Subsidiary of, such specified Person, and

(2) Indebtedness secured by a Lien encumbering any asset acquired by such specified Person.

“Acquisition” means the transactions contemplated by the Transaction Agreement.

1

“Additional Interest” means all additional interest then owing pursuant to the Registration Rights Agreement.

“Additional Securities” means additional Securities (other than (i) the Original Securities, (ii) Exchange Securities issued in exchange for such Original Securities and (iii) PIK Notes) issued from time to time under the terms of this Indenture subsequent to the Issue Date.

“Affiliate” of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For 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.

“Applicable Premium” means, with respect to any Security on any Redemption Date, the greater of:

(1) 1.0% of the principal amount of such Security; and

(2) the excess, if any, of:

(a) (a) the present value at such Redemption Date of (i) the redemption price of such Security at February 15, 2015, plus (ii) all required interest payments due on such Security through February 15, 2015 (excluding accrued but unpaid interest to the Redemption Date), computed using a discount rate equal to the Treasury Rate as of such Redemption Date plus 50 basis points; over

(b) the then outstanding principal amount of such Security.

as calculated by the Issuer or on behalf of the Issuer by such Person as the Issuer shall designate; provided that such calculation shall not be a duty or an obligation of the Trustee.

“Asset Sale” means:

(1) the sale, conveyance, transfer or other disposition, whether in a single transaction or a series of related transactions, of property or assets (including by way of a Sale and Lease-Back Transaction) of the Issuer or any of its Restricted Subsidiaries (each referred to in this definition as a “disposition”); or

(2) the issuance or sale of Equity Interests of any Restricted Subsidiary, whether in a single transaction or a series of related transactions (other than directors’ qualifying shares and shares issued to foreign nationals as required under applicable law);

in each case, other than:

(a) any disposition of (i) Cash Equivalents or Investment Grade Securities, (ii) surplus, obsolete, damaged or worn out property or equipment in the ordinary course of business or any disposition of inventory or goods (or other assets) held for sale in the ordinary course of business (it being understood that the sale of inventory or goods (or other assets) in bulk in connection with the closing of any number of retail locations in the ordinary course of business shall be considered a sale in the ordinary course of business), or (iii) property no longer used or useful in the conduct of business of the Issuer and its Restricted Subsidiaries;

(b) the disposition of all or substantially all of the assets of the Issuer in a manner permitted pursuant to Section 5.01 or any disposition that constitutes a Change of Control;

2

(c) the making of any Restricted Payment that is permitted to be made, and is made, under Section 4.04;

(d) any disposition of assets of the Issuer or any Restricted Subsidiary or issuance or sale of Equity Interests of any Restricted Subsidiary in any transaction or series of transactions with an aggregate fair market value of less than $15.0 million;

(e) any disposition of property or assets or issuance of securities by a Restricted Subsidiary to the Issuer or by the Issuer or a Restricted Subsidiary to another Restricted Subsidiary;

(f) to the extent allowable under Section 1031 of the Internal Revenue Code of 1986, as amended, any exchange of like property (excluding any boot thereon) for use in a Similar Business;

(g) (i) the lease, assignment, sublease, license or sublicense of any real or personal property in the ordinary course of business and (ii) the termination of leases in the ordinary course of business;

(h) any issuance or sale of Equity Interests in, or Indebtedness or other securities of, an Unrestricted Subsidiary or any other disposition of such Unrestricted Subsidiary or any disposition of assets of such Unrestricted Subsidiary;

(i) any disposition arising from foreclosure, casualty, condemnation or any similar action or transfers by reason of eminent domain with respect to any property or other asset of the Issuer or any of the Restricted Subsidiaries or exercise of termination rights under any lease, sublease, license, sublicense, concession or other agreement;

(j) a transfer of accounts receivable and related assets of the type specified in the definition of “Receivables Facility” (or a fractional undivided interest therein or pursuant to any factoring or similar arrangement);

(k) dispositions in connection with the granting of a Lien that is permitted under Section 4.12;

(l) the issuance by a Restricted Subsidiary of Preferred Stock or Disqualified Stock that is permitted under Section 4.03;

(m) any financing transaction with respect to property built or acquired by the Issuer or any Restricted Subsidiary after July 27, 2012, including Sale and Lease-Back Transactions and asset securitizations, permitted by this Indenture;

(n) any grant in the ordinary course of business of any license of patents, trademarks, know-how or any other intellectual property, including, but not limited to, grants of franchises or licenses, franchise or license master agreements and/or area development agreements;

(o) dispositions of receivables in connection with the compromise, settlement or collection thereof in the ordinary course of business or in bankruptcy or similar proceedings;

(p) the discount of inventory, accounts receivable or notes receivable in the ordinary course of business or the conversion of accounts receivable to notes receivable

(q) the abandonment of intellectual property rights in the ordinary course of business which in the reasonable good faith determination of the Issuer are not material to the conduct of the business of the Issuer and the Restricted Subsidiaries taken as a whole;

(r) licenses for the conduct of licensed departments within the Issuer or any Restricted Subsidiary’s stores in the ordinary course of business;

3

(s) termination of Hedging Obligations;

(t) any surrender or waiver of contract rights or the settlement, release, recovery on or surrender of contract, tort or other claims of any kind in the ordinary course of business; and

(u) sales, transfers and other dispositions of Investments in joint ventures to the extent required by, or made pursuant to, customary buy/sell arrangements between the joint venture parties set forth in joint venture arrangements and similar binding arrangements.

“Bank Products” means any services or facilities on account of credit or debit cards, purchase cards or merchant services constituting a line of credit (including, for the avoidance of doubt, all “Bank Products” as defined in the ABL Facility in effect on the Issue Date).

“Bankruptcy Code” means Title 11 of the United States Code, as amended.

“Bankruptcy Law” means the Bankruptcy Code and any similar federal, state or foreign law for relief of debtors.

“Borrowing Base” means (a) 90% of the book value of the eligible accounts receivable of Opco and its Restricted Subsidiaries that are guarantors of the Senior Credit Facilities, (b) 90% of the book value of the eligible credit card receivables of Opco and its Restricted Subsidiaries that are guarantors of the Senior Credit Facilities, and (c) 90% of the net orderly liquidation value of the eligible inventory of Opco and its Restricted Subsidiaries that are guarantors of the Senior Credit Facilities.

“Business Day” means each day which is not a Legal Holiday.

“Capital Stock” means:

(1) in the case of a corporation, shares in the capital of such corporation;

(2) in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of capital stock;

(3) in the case of a partnership or limited liability company, partnership or membership interests (whether general or limited); and

(4) any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person.

“Capitalized Lease Obligation” means, at the time any determination thereof is to be made, the amount of the liability in respect of a capital lease that would at such time be required to be capitalized and reflected as a liability on a balance sheet (excluding the footnotes thereto) prepared in accordance with GAAP.

“Capitalized Software Expenditures” shall mean, for any period, the aggregate of all expenditures (whether paid in cash or accrued as liabilities) by a Person and its Subsidiaries during such period in respect of licensed or purchased software or internally developed software and enhancements that, in conformity with GAAP, are or are required to be reflected as capitalized costs on the consolidated balance sheet of such Person and such Subsidiaries.

“Cash Equivalents” means:

(1) United States dollars and Canadian dollars;

(2) (a) pounds sterling, euro, or any national currency of any participating member state of the EMU; or (b) in the case of any Foreign Subsidiary that is a Restricted Subsidiary, such local currencies held by them from time to time in the ordinary course of business;

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(3) securities issued or directly and fully and unconditionally guaranteed or insured by the U.S. government or any country that is a member of the European Union or any agency or instrumentality thereof the securities of which are unconditionally guaranteed as a full faith and credit obligation of such government with maturities of 24 months or less from the date of acquisition;

(4) certificates of deposit, time deposits and eurodollar time deposits with maturities of one year or less from the date of acquisition, bankers’ acceptances with maturities not exceeding one year and overnight bank deposits, in each case with any commercial bank having capital and surplus of not less than $250.0 million in the case of U.S. banks and, in the case of any Foreign Subsidiary that is a Restricted. Subsidiary, $100.0 million (or the U.S. dollar equivalent as of the date of determination) in the case of non-U.S. banks, and in each case in a currency permitted under clause (1) or (2) above;

(5) repurchase obligations for underlying securities of the types described in clauses (3) and (4) entered into with any financial institution meeting the qualifications specified in clause (4) above, and in each case in a currency permitted under clause (1) or (2) above

(6) commercial paper rated at least P-2 by Moody’s or at least A-2 by S&P (or reasonably equivalent ratings of another internationally recognized ratings agency) and in each case maturing within 24 months after the date of creation thereof, and in each case in a currency permitted under clause (1) or (2) above;

(7) marketable short-term money market and similar securities having a rating of at least P-2 or A-2 from either Moody’s or S&P, respectively (or reasonably equivalent ratings of another internationally recognized ratings agency) and in each case maturing within 24 months after the date of creation thereof and in a currency permitted under clause (1) or (2) above;

(8) readily marketable direct obligations issued by any state, commonwealth or territory of the United States or any political subdivision or taxing authority thereof having an Investment Grade Rating from either Moody’s or S&P (or reasonably equivalent ratings of another internationally recognized rating agency) with maturities of 24 months or less from the date of acquisition;

(9) Indebtedness or Preferred Stock issued by Persons with a rating of “A” or higher from S&P or “A2” or higher from Moody’s (or reasonably equivalent ratings of another internationally recognized ratings agency) with maturities of 24 months or less from the date of acquisition and in each case in a currency permitted under clause (1) or (2) above;

(10) Investments with average maturities of 12 months or less from the date of acquisition in money market funds rated AAA- (or the equivalent thereof) or better by S&P or Aaa3 (or the equivalent thereof) or better by Moody’s and in each case in a currency permitted under clause (1) or (2) above;

(11) investment funds investing substantially all of their assets in securities of the types described in clauses (1) through (10) above; and

(12) credit card receivables and debit card receivables constituting cash equivalents pursuant to FASB Codification Topic 305 Cash and Cash Equivalents (or any successor provision as in effect from time to time).

Notwithstanding the foregoing, Cash Equivalents shall include amounts denominated in currencies other than those set forth in clauses (1) and (2) above, provided that such amounts are converted into any currency listed in clauses (1) and (2) as promptly as practicable and in any event within ten Business Days following the receipt of such amounts.

“Cash Management Services” means any of the following to the extent not constituting a line of credit: treasury and/or cash management services, including, without limitation, controlled disbursement services, foreign exchange facilities, deposit and other accounts and merchant services (including, for the avoidance of doubt, all “Cash Management Services” as defined in the ABL Facility in effect on the Issue Date).

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“Change of Control” means the occurrence of any of the following after the Issue Date:

(1) the sale, lease or transfer, in one or a series of related transactions (other than by way of merger or consolidation), of all or substantially all of the assets of the Issuer and its Subsidiaries, taken as a whole, to any Person other than one or more Permitted Holders;

(2) the Issuer becomes aware of (by way of a report or any other filing pursuant to Section 13(d) of the Exchange Act, proxy, vote, written notice or otherwise) the acquisition by (A) any Person (other than one or more Permitted Holders) or (B) Persons (other than one or more Permitted Holders) that are together (1) a group (within the meaning of Section 13(d)(3) or Section 14(d)(2) of the Exchange Act, or any successor provision), or (2) are acting, for the purpose of acquiring, holding or disposing of securities (within the meaning of Rule 13d-5(b)(1) under the Exchange Act), as a group, in a single transaction or in a related series of transactions, by way of merger, consolidation or outer business combination or purchase of beneficial ownership (within the meaning of Rule 13d-3 under the Exchange Act, or any successor provision) of more than 50% of the total voting power of the Voting Stock of the Issuer or any of its direct or indirect parent companies holding directly or indirectly 100% of the total voting power of the Voting Stock of the Issuer, other than in connection with any transaction or transactions in which the Issuer shall become a wholly-owned Subsidiary of a Parent Company; or

(3) the Issuer ceases to beneficially own (within the meaning of Rule 13d-3 under the Exchange Act, or any successor provision) directly or indirectly 100% of the issued and outstanding Capital Stock of Opco (or any successor thereto to the extent Opco is consolidated into or merged with or into such Person in accordance with the terms of this Indenture) other than in a transaction (A) in which Opco is merged with or into the Issuer in accordance with the terms of this Indenture or (B) that complies with the provisions of Section 5.01.

“Consolidated Depreciation and Amortization Expense” means, with respect to any Person for any period, the total amount of depreciation and amortization expense, including without limitation the amortization of intangible assets, deferred financing fees and Capitalized Software Expenditures, of such Person and its Restricted Subsidiaries for such period on a consolidated basis and otherwise determined in accordance with GAAP.

“Consolidated Interest Expense” means, with respect to any Person for any period, without duplication, the sum of:

(1) consolidated interest expense of such Person and its Restricted Subsidiaries for such period, to the extent such expense was deducted (and not added back) in computing Consolidated Net Income (including (a) amortization of original issue discount resulting from the issuance of Indebtedness at less than par, (b) all commissions, discounts and other fees and charges owed with respect to letters of credit or bankers acceptances, (c) non-cash interest payments (but excluding any non-cash interest expense attributable to the movement in the mark to market valuation of Hedging Obligations or other derivative instruments pursuant to GAAP), (d) the interest component of Capitalized Lease Obligations, and (e) net payments, if any, made (less net payments, if any, received) pursuant to interest rate Hedging Obligations with respect to Indebtedness, and excluding (i) penalties and interest related to taxes, (ii) any Additional Interest (as defined in the Opco Notes Indenture) on the Opco Notes, (iii) any Additional Interest on the Securities, (iv) amortization of deferred financing fees, debt issuance costs, discounted liabilities, commissions, fees and expenses, (v) any expensing of bridge, commitment and other financing fees, (vi) commissions, discounts, yield and other fees and charges (including any interest expense) related to any Receivables Facility) and (vii) any expense resulting from the discounting of Indebtedness in connection with the application of recapitalization accounting or, if applicable, acquisition accounting; plus

(2) consolidated capitalized interest of such Person and its Restricted Subsidiaries for such period, whether paid or accrued; less

(3) interest income of such Person and its Restricted Subsidiaries for such period.

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For purposes of this definition, interest on a Capitalized Lease Obligation shall be deemed to accrue at an interest rate reasonably determined by the Issuer to be the rate of interest implicit in such Capitalized Lease Obligation in accordance with GAAP.

“Consolidated Net Income” means, with respect to any Person for any period, the aggregate of the Net Income, of such Person and its Restricted Subsidiaries for such period, on a consolidated basis, and otherwise determined in accordance with GAAP; provided, however, that, without duplication,

(1) any after-tax effect of extraordinary, non-recurring or unusual gains or losses, including costs of and payments of legal settlements, fines, judgments or orders (less all fees and expenses relating thereto) or expenses, Transaction Expenses, severance, relocation costs, Public Company Costs, integration costs, pre-opening, opening, consolidation and closing costs for facilities (including stores and distribution centers), expenses related to any reconstruction, decommissioning, recommissioning or reconfiguration of fixed assets for alternative uses, signing, retention or completion bonuses, executive recruiting costs, transition costs, costs incurred in connection with acquisitions after the Issue Date (including integration costs), consulting fees and curtailments or modifications to pension and postretirement employee benefit plans shall be excluded;

(2) the Net Income for such period shall not include the cumulative effect of a change in accounting principles during such period;

(3) any net after-tax gains, charges or losses with respect to disposed, abandoned, closed or discontinued operations (other than assets held for sale) and any accretion or accrual of discounted liabilities and with respect to facilities, stores or distribution centers that have been closed during such period, shall be excluded;

(4) any after-tax effect of gains or losses (less all fees and expenses relating thereto) attributable to asset dispositions (including asset retirement costs) or returned surplus assets of any employee pension benefit plan other than in the ordinary course of business shall be excluded;

(5) the Net Income for such period of any Person that is not a Subsidiary, or is an Unrestricted Subsidiary, (and excluding Amscan de Mexico, S.A. de C.V. for so long as it is treated as a consolidated subsidiary of the Issuer in accordance with GAAP) or that is accounted for by the equity method of accounting, shall be excluded; provided that Consolidated Net Income of the Issuer shall be increased by the amount of dividends or distributions or other payments that are actually paid in cash (or to the extent converted into cash) to the referent Person or a Restricted Subsidiary thereof in respect of such period by such Person;

(6) solely for the purpose of determining the amount available for Restricted Payments under clause (1) of Section 4.04(a)(3)(A), the Net Income for such period of any Restricted Subsidiary (other than any Guarantor, Opco or any guarantor of Opco’s indebtedness) shall be excluded to the extent that the declaration or payment of dividends or similar distributions by that Restricted Subsidiary of its Net Income is not at the date of determination permitted without any prior governmental approval (which has not been obtained) or, directly or indirectly, by the operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule, or governmental regulation applicable to that Restricted Subsidiary or its stockholders, unless (x) such restriction with respect to the payment of dividends or similar distributions has been legally waived or (y) such restriction is permitted by Section 4.05, provided that Consolidated Net Income of the Issuer shall be increased by the amount of dividends or other distributions or other payments actually paid in cash (or to the extent converted into cash) to the Issuer or a Restricted Subsidiary thereof in respect of such period, to the extent not already included therein;

(7) effects of fair value adjustments (including the effects of such adjustments pushed down to the Issuer and its Restricted Subsidiaries) in the merchandise inventory, property and equipment,

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goodwill, intangible assets, deferred revenue, deferred rent, deferred franchise fees and debt line items in such Person’s consolidated financial statements pursuant to GAAP resulting from the application of acquisition accounting in relation to the Transactions or any consummated acquisition and the amortization or write-off or removal of revenue otherwise recognizable of any amounts thereof, net of taxes, shall be excluded or added back in the case of lost revenue;

(8) any after-tax effect of income (loss) from the early extinguishment or conversion of Indebtedness or Hedging Obligations or other derivative instruments shall be excluded;

(9) any impairment charge or asset write-up, write-off or write-down, in each case, pursuant to GAAP and the amortization of intangibles arising pursuant to GAAP shall be excluded;

(10) any non-cash compensation charge or expense, including any such charge or expense arising from the grant of stock appreciation or similar rights, stock options, restricted stock or other equity incentive programs, and any cash charges associated with the rollover, acceleration or payment of management equity in connection with the Transactions or Issue Date Transactions shall be excluded;

(11) any fees and expenses incurred during such period, or any amortization or write-off thereof for such period in connection with any acquisition, Investment, Asset Sale, issuance or repayment of Indebtedness, issuance of Equity Interests, refinancing transaction or amendment or modification of any debt instrument (in each case, including any such transaction consummated prior to July 27, 2012 and any such transaction undertaken but not completed) and any charges or non-recurring merger costs incurred during such period as a result of any such transaction shall be excluded;

(12) accruals and reserves that are established or adjusted within twelve months after July 27, 2012 that are so required to be established or adjusted as a result of the Transactions in accordance with GAAP shall be excluded;

(13) any net gain or loss resulting from currency translation gains or losses related to currency remeasurements of Indebtedness (including any net loss or gain resulting from hedge agreements for currency exchange risk) and any foreign currency translation gains or losses shall be excluded;

(14) the excess of (i) GAAP rent expense over (ii) actual cash rent paid, including the benefit of lease incentives shall be excluded and the excess of (i) actual cash rent paid, including the benefit of lease incentives, over (ii) GAAP rent expense shall be included (in each case during such period due to the use of straight line rent for GAAP purposes); and

(15) any unrealized net gains and losses resulting from Hedging Obligations and the application of Statement of Financial Accounting Standards No. 133 shall be excluded.

In addition, to the extent not already included in the Net Income of such Person and its Restricted Subsidiaries, notwithstanding anything to the contrary in the foregoing, Consolidated Net Income shall include the amount of proceeds received from business interruption insurance and reimbursements of any expenses and charges that are covered by indemnification or other reimbursement provisions in connection with any Permitted Investment or any sale, conveyance, transfer or other disposition of assets permitted under this Indenture.

Notwithstanding the foregoing, for the purpose of Section 4.04 hereof only (other than clause 3(D) of Section 4.04(a) hereof) there shall be excluded from Consolidated Net Income any income arising from any sale or other disposition of Restricted Investments made by the Issuer and its Restricted Subsidiaries, any repurchases and redemptions of Restricted Investments from the Issuer and its Restricted Subsidiaries, any repayments of loans and advances which constitute Restricted Investments by the Issuer or any of its Restricted Subsidiaries, any sale of the stock of an Unrestricted Subsidiary or any distribution or dividend from an Unrestricted Subsidiary, in each case only to the extent such amounts increase the amount of Restricted Payments permitted under clause 3(D) of Section 4.04(a).

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“Consolidated Secured Debt Ratio” means, as of any date of determination, the ratio of (1) Consolidated Total Indebtedness of the Issuer and its Restricted Subsidiaries that is secured by Liens as of the end of the most recent fiscal quarter for which internal financial statements are available immediately preceding the date on which such event for which such calculation is being made shall occur to (2) the Issuer’s EBITDA for the most recently ended four full fiscal quarters for which internal financial statements are available immediately preceding the date on which such event for which such calculation is being made shall occur, in each case with such pro forma adjustments to Consolidated Total Indebtedness and EBITDA as are appropriate and consistent with the pro forma adjustment provisions set forth in the definition of Fixed Charge Coverage Ratio.

“Consolidated Total Assets” means, at any date, all amounts that would, in conformity with GAAP, be set forth opposite the caption “total assets” (or like caption) on a consolidated balance sheet of the Issuer and its Subsidiaries at such date.

“Consolidated Total Indebtedness” means, as at any date of determination, an amount equal to (x) the sum of (1) the aggregate amount of all outstanding Indebtedness of the Issuer and its Restricted Subsidiaries on a consolidated basis consisting of Indebtedness for borrowed money, Obligations in respect of Capitalized Lease Obligations and debt obligations evidenced by promissory notes and similar instruments (and excluding, for the avoidance of doubt, all obligations relating to Receivables Facilities) and (2) the aggregate amount of all outstanding Disqualified Stock of the Issuer and all Preferred Stock of its Restricted Subsidiaries on a consolidated basis, with the amount of such Disqualified Stock and Preferred Stock equal to the greater of their respective voluntary or involuntary liquidation preferences and maximum fixed repurchase prices, in each case determined on a consolidated basis in accordance with GAAP, less unrestricted cash and Cash Equivalents included on the consolidated balance sheet of the Issuer and any Restricted Subsidiaries as of such date in an amount not to exceed $150.0 million; provided that Indebtedness of the Issuer and its Restricted Subsidiaries under any revolving credit facility as at any date of determination shall be determined using the Average Monthly Balance of such Indebtedness for the most recently ended four fiscal quarters for which internal financial statements are available as of such date of determination (the “Reference Period”). For purposes hereof, (a) the “maximum fixed repurchase price” of any Disqualified Stock or Preferred Stock that does not have a fixed repurchase price shall be calculated in accordance with the terms of such Disqualified Stock or Preferred Stock as if such Disqualified Stock or Preferred Stock were purchased on any date on which Consolidated Total Indebtedness shall be required to be determined pursuant to this Indenture, and if such price is based upon, or measured by, the fair market value of such Disqualified Stock or Preferred Stock, such fair market value shall be determined reasonably and in good faith by the Issuer, (b) “Average Monthly Balance” means, with respect to any Indebtedness incurred by the Issuer or its Restricted Subsidiaries under a revolving facility, the quotient of (x) the sum of each Individual Monthly Balance for each fiscal month ended on or prior to such date of determination and included in the Reference Period divided by (y) 12, and (c) “Individual Monthly Balance” means, with respect to any Indebtedness incurred by the Issuer or its Restricted Subsidiaries under a revolving credit facility during any fiscal month of the Issuer, the quotient of (x) the sum of the aggregate outstanding principal amount of all such Indebtedness at the end of each day of such fiscal month divided by (y) the number of days in such fiscal month.

“Contingent Obligations” means, with respect to any Person, any obligation of such Person guaranteeing any leases, dividends or other obligations that do not constitute Indebtedness (“primary obligations”) of any other Person (the “primary obligor”) in any manner, whether directly or indirectly, including, without limitation, any obligation of such Person, whether or not contingent,

(1) to purchase any such primary obligation or any property constituting direct or indirect security therefor;

(2) to advance or supply funds:

(a) for the purchase or payment of any such primary obligation; or

(b) to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency of the primary obligor; or

(3) to purchase property, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation against loss in respect thereof.

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“Default” means any event that is, or with the passage of time or the giving of notice or both would be, an Event of Default.

“Depositary” means, with respect to the Securities issuable or issued in whole or in part in global form, the Person specified in Section 2.04 hereof as the Depositary with respect to the Securities, and any and all successors thereto appointed as depositary hereunder and having become such pursuant to the applicable provision of this Indenture.

“Designated Non-cash Consideration” means the fair market value of non-cash consideration received by the Issuer or a Restricted Subsidiary in connection with an Asset Sale that is so designated as Designated Non-cash Consideration pursuant to an Officer’s Certificate, setting forth the basis of such valuation, less the amount of Cash Equivalents received in connection with a subsequent sale, redemption, repurchase of, or collection or payment on, such Designated Non-cash Consideration.

“Designated Preferred Stock” means Preferred Stock of the Issuer, any Restricted Subsidiary or any direct or indirect Parent Company thereof (in each case other than Disqualified Stock) that is issued for cash (other than to a Restricted Subsidiary or an employee stock ownership plan or trust established by the Issuer or any of its Subsidiaries) and is so designated as Designated Preferred Stock, pursuant to an Officer’s Certificate, on the issuance date thereof, the cash proceeds of which are excluded from the calculation set forth in clause (3) of Section 4.04(a).

“Disqualified Stock” means, with respect to any Person, any Capital Stock of such Person which, by its terms, or by the terms of any security into which it is convertible or for which it is redeemable or exchangeable, or upon the happening of any event, matures or is mandatorily redeemable (other than solely as a result of a change of control or asset sale) pursuant to a sinking fund obligation or otherwise or is redeemable at the option of the holder thereof (other than solely as a result of a change of control or asset sale), in whole or in part, in each case prior to the date 91 days after the earlier of the maturity date of the Securities or the date the Securities are no longer outstanding; provided, however, that if such Capital Stock is issued to any current or former employee or to any plan for the benefit of employees, directors, officers, members of management or consultants of the Issuer or its Subsidiaries or by any such plan to such employees, directors, officers, members or management or consultants, such Capital Stock shall not constitute Disqualified Stock solely because it may be required to be repurchased by the Issuer or its Subsidiaries in order to satisfy applicable statutory or regulatory obligations or as a result of such employee’s, director’s, officer’s, management member’s or consultant’s termination, death or disability.

“Domestic Subsidiary” means a Subsidiary incorporated or organized under the laws of the United States of America, any State thereof or the District of Columbia other than a Subsidiary (i) that has no material assets other than debt and/or equity interests in a Foreign Subsidiary or (ii) that is treated as a disregarded entity for federal income tax purposes that owns debt and/or equity in a Foreign Subsidiary.

“EBITDA” means, with respect to any Person for any period, the Consolidated Net Income of such Person for such period:

(1) increased (without duplication) by:

(a) provision for taxes based on income or profits or capital, including, without limitation, state, franchise, property and similar taxes and foreign withholding taxes and foreign unreimbursed value added taxes (including, in each case, penalties and interest related to such taxes or arising from tax examinations) of or with respect to such Person paid or accrued during such period deducted (and not added back) in computing Consolidated Net Income (including the amount treated as having been paid by such Persons pursuant to Section 4.04(b)(xv)(B); plus

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(b) Fixed Charges of such Person for such period plus bank fees and costs of surety bonds in connection with financing activities, plus amounts excluded from Consolidated Interest Expense as set forth in clauses (i), (ii), (iii), (iv) and (v) in the definition thereof, to the extent the same were deducted (and not added back) in calculating such Consolidated Net Income; plus

(c) Consolidated Depreciation and Amortization Expense of such Person for such period to the extent the same was deducted (and not added back) in computing Consolidated Net Income; plus

(d) any expenses or charges (other than depreciation or amortization expense) related to any Equity Offering, Permitted Investment, acquisition, disposition, recapitalization or the incurrence of Indebtedness permitted to be incurred by this Indenture (including a refinancing thereof) (whether or not successful), including (i) such fees, expenses or charges related to the offering of the Securities, the Opco Notes and the Senior Credit Facilities and (ii) any amendment or other modification of the Securities, the Opco Notes or any Senior Credit Facility and (iii) commissions, discounts, yield and other fees and charges (including any interest expense related to any Receivables Financing), in each case, deducted (and not added back) in computing Consolidated Net Income; plus

(e) the amount of any restructuring costs, charges, accruals, reserves or expenses attributable to the undertaking and/or implementation of cost savings initiatives, operating expense reductions, business optimization and other restructuring costs, charges, accruals, reserves and expenses (including, without limitation, inventory optimization programs, software development costs, costs related to entry into new markets and consulting fees); plus

(f) any other non-cash charges, including (i) any write offs or write downs, (ii) equity based awards compensation expense, (iii) losses on sales, disposals or abandonment of, or any impairment charges or asset write off related to, intangible assets, long-lived assets and investments in debt and equity securities, (iv) all losses from investments recorded using the equity method and (v) other non-cash charges, non-cash expenses or non-cash losses reducing Consolidated Net Income for such period (provided that if any such non-cash charges represent an accrual or reserve for potential cash items in any future period, the cash payment in respect thereof in such future period shall be subtracted from EBITDA to such extent, and excluding amortization of a prepaid cash item that was paid in a prior period); plus

(g) the amount of any minority interest expense consisting of Subsidiary income attributable to minority equity interests of third parties in any non-Wholly-Owned Subsidiary deducted (and not added back) in such period in calculating Consolidated Net Income; plus

(h) the amount of management, monitoring, consulting and advisory fees (including termination fees) and related indemnities and expenses paid or accrued in such period to the Permitted Holders or other persons with a similar interest in the Issuer or its direct or indirect parent companies to the extent otherwise permitted under Section 4.07 and deducted (and not added back) in such period in computing Consolidated Net Income; plus

(i) the amount of net cost savings and operating expense reductions projected by the Issuer in good faith to be realized as a result of specified actions taken within 12 months after the Issue Date, or committed or expected to be taken (in either case, whether or not actually taken within such period) within 12 months after the Issue Date (calculated on a pro forma basis as though such cost savings and operating expense reductions had been realized on the first day of such period and as if such cost savings and operating expense reductions were realized during the entirety of such period), net of the amount of actual benefits realized during such period from such actions; provided that such cost savings are reasonably identifiable and factually supportable (which adjustments may be incremental to pro forma adjustments made pursuant to the definition of “Fixed Charge Coverage Ratio”); plus

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(j) the amount of loss on sale of receivables and related assets to the Receivables Subsidiary in connection with a Receivables Facility; plus

(k) any costs or expense incurred by the Issuer or a Restricted Subsidiary pursuant to any management equity plan or stock option plan or any other management or employee benefit plan or agreement or any stock subscription or shareholder agreement, to the extent that such cost or expenses are funded with cash proceeds contributed to the capital of the Issuer or net cash proceeds of an issuance of Equity Interest of the Issuer (other than Disqualified Stock) solely to the extent that such net cash proceeds are excluded from the calculation set forth in Section 4.04(a)(3); plus

(l) any net loss from disposed or discontinued operations; plus

(m) cash receipts (or any netting arrangements resulting in reduced cash expenditures) not representing EBITDA or Net Income in any period to the extent non-cash gains relating to such income were deducted in the calculation of EBITDA pursuant to clause (2) below for any previous period and not added back,

(2) decreased (without duplication) by:

(a) non-cash gains increasing Consolidated Net Income of such Person for such period, excluding any non-cash gains to the extent they represent the reversal of an accrual or reserve for a potential cash item that reduced EBITDA in any prior period and any non-cash gains with respect to cash actually received in a prior period so long as such cash did not increase EBITDA in such prior period, plus

(b) any net income from disposed or discontinued operations; and

(3) increased or decreased by (without duplication), as applicable, any adjustments resulting from the application of ASC Topic Number 460 (Guarantees).

“EMU” means economic and monetary union as contemplated in the Treaty on European Union.

“Equity Interests” means Capital Stock and all warrants, options or other rights to acquire Capital Stock, but excluding any debt security that is convertible into, or exchangeable for, Capital Stock.

“Equity Offering” means any public or private sale of common stock or Preferred Stock of the Issuer or any of its direct or indirect parent companies (excluding Disqualified Stock), other than:

(1) public offerings with respect to the Issuer’s or any direct or indirect Parent Company’s common stock registered on Form S-8;

(2) issuances to any Subsidiary of the Issuer; and

(3) any such public or private sale that constitutes an Excluded Contribution.

“euro” means the single currency of participating member states of the EMU.

“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations of the SEC promulgated thereunder.

“Exchange Securities” has the meaning given to such term in the Preamble to this Indenture.

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“Excluded Contribution” means net cash proceeds, marketable securities or Qualified Proceeds received by the Issuer after the Issue Date from:

(1) contributions to its common equity capital, and

(2) the sale (other than to a Subsidiary of the Issuer or to any management equity plan or stock option plan or any other, management or employee benefit plan or agreement of the Issuer) of Capital Stock (other than Disqualified Stock and Designated Preferred Stock) of the Issuer,

in each case designated as Excluded Contributions pursuant to an Officer’s Certificate on or promptly after the date such capital contributions are made or the date such Equity Interests are sold, as the case may be, which are excluded from the calculation set forth in Section 4.04(a)(3).

“Excluded Subsidiary” means (a) any Domestic Subsidiary that is not a Wholly-Owned Subsidiary, (b) any Immaterial Subsidiary, (c) any Domestic Subsidiary that is prohibited by law, regulation or contractual obligations from providing a guarantee under the Senior Credit Facilities or that would require a governmental (including regulatory) consent, approval, license or authorization to provide such guarantee; (d) any not-for-profit Subsidiary, (e) any captive insurance Subsidiaries, (f) any special purpose entities used for securitization facilities, (g) any Domestic Subsidiary substantially all of the assets of which consist of Capital Stock of Foreign Subsidiaries or that is treated as a disregarded entity for U.S. federal income tax purposes that holds the equity of one or more Foreign Subsidiaries, (h) any direct or indirect Domestic Subsidiary of a Foreign Subsidiary or Domestic Subsidiary substantially all of the assets of which consist of Capital Stock of Foreign Subsidiaries or that is treated as a disregarded entity for U.S. federal income tax purposes that holds the equity of one or more Foreign Subsidiaries and (i) any other Domestic Subsidiary with respect to which the burden or cost or of making it a Guarantor shall outweigh the benefits to be afforded thereby (as reasonably determined by the Issuer), provided, that in no event shall the Co-Issuer be or become an Excluded Subsidiary.

“Fixed Charge Coverage Ratio” means, with respect to any Person for any period, the ratio of EBITDA of such Person for such period to the Fixed Charges of such Person for such period. In the event that the Issuer or any Restricted Subsidiary incurs, assumes, guarantees, repurchases, redeems, retires or extinguishes any Indebtedness (other than Indebtedness under any revolving credit facility or revolving advances under any Receivables Financing, in which case interest expense shall be computed based upon the average daily balance of such Indebtedness during such applicable period) or issues, repurchases or redeems Disqualified Stock or Preferred Stock subsequent to the commencement of the period for which the Fixed Charge Coverage Ratio is being calculated but prior to or simultaneously with the event for which the calculation of the Fixed Charge Coverage Ratio is made (the “Fixed Charge Coverage Ratio Calculation Date”), then the Fixed Charge Coverage Ratio shall be calculated giving pro forma effect to such incurrence, assumption, guarantee, repurchase, redemption, retirement or extinguishment of Indebtedness, or such issuance, repurchase or redemption of Disqualified Stock or Preferred Stock, as if the same had occurred at the beginning of the applicable four-quarter period.

For purposes of making the computation referred to above, Investments, acquisitions, dispositions, amalgamations, mergers, consolidations (including the Transactions) and discontinued operations (as determined in accordance with GAAP) and any operational changes that the Issuer or any of its Restricted Subsidiaries has determined to make/or has made during the four-quarter reference period or subsequent to such reference period and on or prior to or simultaneously with the Fixed Charge Coverage Ratio Calculation Date shall be calculated on a pro forma basis assuming that all such Investments, acquisitions, dispositions, amalgamations, mergers, consolidations, discontinued operations and operational changes (and the change in any associated fixed charge obligations and the change in EBITDA resulting therefrom) had occurred on the first day of the four-quarter reference period. If since the beginning of such period any Person that subsequently became a Restricted Subsidiary or was merged, amalgamated or consolidated with or into the Issuer or any of its Restricted Subsidiaries since the beginning of such period shall have made any Investment, acquisition, disposition, amalgamation, merger, consolidation, discontinued operation or operational change that would have required adjustment pursuant to this definition, then the Fixed Charge Coverage Ratio shall be calculated giving pro forma effect thereto for such period as if such Investment, acquisition, disposition, discontinued operation, merger, amalgamation, consolidation or operational change had occurred at the beginning of the applicable four-quarter period.

For purposes of this definition, whenever pro forma effect is to be given to an Investment, acquisition, disposition, amalgamation, merger, consolidation (including the Transactions), discontinued operation

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or operational change, the pro forma calculations shall be made in good faith by a responsible financial or accounting officer of the Issuer or Opco, as applicable (and may include, for the avoidance of doubt, (a) cost savings, product margin synergies (including increased share of shelf), operating expense reductions and other operating improvements and product cost reductions, synergies or cost savings resulting from such Investment, acquisition, disposition, amalgamation, merger, consolidation (including the Transactions) or discontinued operation, which is being given pro forma effect that have been or are expected to be realized and for which the actions necessary to realize such cost savings, product margin synergies (including increased share of shelf), operating expense reductions and other operating improvements and product cost reductions, synergies or cost savings are taken or expected to be taken no later than 18 months after the date of any such Investment, acquisition, disposition, amalgamation, merger, consolidation, discontinued operation or operational change and (b) adjustments of the nature used in connection with the calculation of “Adjusted EBITDA” as set forth in note (8) to “Selected Historical and Consolidated Financial Data” of the Offering Memorandum). If any Indebtedness bears a floating rate of interest and is being given pro forma effect, the interest on such Indebtedness shall be calculated as if the rate in effect on the Fixed Charge Coverage Ratio Calculation Date had been the applicable rate for the entire period (taking into account any Hedging Obligations applicable to such Indebtedness). Interest on a Capitalized Lease Obligation shall be deemed to accrue at an interest rate reasonably determined by a responsible financial or accounting officer of the Issuer or Opco, as applicable, to be the rate of interest implicit in such Capitalized Lease Obligation in accordance with GAAP. Interest on Indebtedness that may optionally be determined at an interest rate based upon a factor of a prime or similar rate, a eurocurrency interbank offered rate, or other rate, shall be deemed to have been based upon the rate actually chosen, or, if none, then based upon such optional rate chosen as the Issuer may designate. Interest on any Indebtedness under a revolving credit facility computed on a pro forma basis shall be computed based upon the average daily balance of such indebtedness during the applicable period.

For purposes of this definition, any amount in a currency other than U.S. dollars will be converted to U.S. dollars based on the average exchange rate for such currency for the most recent twelve month period immediately prior to the date of determination in a manner consistent with that used in calculating EBITDA for the applicable period.

“Fixed Charges” means, with respect to any Person for any period, the sum, without duplication, of:

(1) Consolidated Interest Expense of such Person for such period;

(2) all cash dividends or other distributions paid (excluding items eliminated in consolidation) on any series of Preferred Stock during such period; and

(3) all cash dividends or other distributions paid (excluding items eliminated in consolidation) on any series of Disqualified Stock during such period.

“Foreign Subsidiary” means any subsidiary that is not a Domestic Subsidiary.

“GAAP” means generally accepted accounting principles in the United States which are in effect on the Issue Date, except for any reports required to be delivered under Section 4.02 which shall be prepared in accordance with GAAP in effect on the date thereof. For purposes of this Indenture, the term “consolidated” with respect to any Person means such Person consolidated with its Restricted Subsidiaries and does not include any Unrestricted Subsidiary.

“Government Securities” means securities that are:

(1) direct obligations of the United States of America for the timely payment of which its full faith and credit is pledged; or

(2) obligations of a Person controlled or supervised by and acting as an agency or instrumentality of the United States of America the timely payment of which is unconditionally guaranteed as a full faith and credit obligation by the United States of America,

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which, in either case, are not callable or redeemable at the option of the issuers thereof, and shall also include a depository receipt issued by a bank (as defined in Section 3(a)(2) of the Securities Act), as custodian with respect to any such Government Securities or a specific payment of principal of or interest on any such Government Securities held by such custodian for the account of the holder of such depository receipt; provided that (except as required by law) such custodian is not authorized to make any deduction from the amount payable to the holder of such depository receipt from any amount received by the custodian in respect of the Government Securities or the specific payment of principal of or interest on the Government Securities evidenced by such depository receipt.

“guarantee” means a guarantee (other than by endorsement of negotiable instruments for collection in the ordinary course of business), direct or indirect, in any manner (including letters of credit and reimbursement agreements in respect thereof), of all or any part of any Indebtedness or other obligations.

“Guarantee” means the guarantee by any Guarantor of the Issuer’s Obligations under this Indenture and the Securities.

“Guarantor” means each Restricted Subsidiary that Guarantees the Securities in accordance with the terms of this Indenture.

“Hedging Obligations” means, with respect to any Person, the obligations of such Person under any interest rate swap agreement, interest rate cap agreement, interest rate collar agreement, commodity swap agreement, commodity cap agreement, commodity collar agreement, foreign exchange contract, currency swap agreement or similar agreement providing for the transfer or mitigation of interest rate, commodity price or currency risks either generally or under specific contingencies (including, for the avoidance of doubt, under all “Swap Contracts” as defined in the ABL Facility and the Term Loan Facility).

“Holder” means the Person in whose name a Security is registered on the registrar’s books.

“Holdings” means PC Intermediate Holdings, Inc., a Delaware corporation, and its successors and assigns.

“Immaterial Subsidiaries” means, as of any date, any Subsidiary of the Issuer (a) having Total Consolidated Assets in an amount of less than 2.5% of Consolidated Total Assets of the Issuer and its Subsidiaries and (b) contributing less than 2.5% to consolidated revenues of the Issuer and its Subsidiaries, in each case, for the most recently ended four full fiscal quarters for which internal financial statements are available; provided, however, that the Consolidated Total Assets (as so determined) and revenue (as so determined) of all Immaterial Subsidiaries shall not exceed 2.5% of Consolidated Total Assets of the Issuer and its Subsidiaries or 2.5% of the consolidated revenues of the Issuer and its Subsidiaries for the most recently ended four full fiscal quarters for which internal financial statements are available, as the case may be.

“Indebtedness” means, with respect to any Person, without duplication:

(1) any indebtedness (including principal and premium) of such Person, whether or not contingent:

(a) in respect of borrowed money;

(b) evidenced by bonds, notes, debentures or similar instruments or letters of credit or bankers’ acceptances (or, without duplication, reimbursement agreements in respect thereof);

(c) representing the balance deferred and unpaid of the purchase price of any property (including Capitalized Lease Obligations), except (i) any such balance that constitutes an obligation in respect of a commercial letter of credit, a trade payable or similar obligation, in each case accrued in the ordinary course of business, (ii) any earn-out obligations until such obligation becomes a liability on the balance sheet of such Person in accordance with GAAP and is not paid after becoming due and payable and (iii) any such obligations under ERISA or liabilities associated with customer prepayments; or

(d) representing any Hedging Obligations;

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if and to the extent that any of the foregoing Indebtedness (other than letters of credit (other than commercial letters of credit) and Hedging Obligations) would appear as a liability upon a balance sheet (excluding the footnotes thereto) of such Person prepared in accordance with GAAP;

(2) to the extent not otherwise included, any obligation by such Person to be liable for, or to pay, as obligor, guarantor or otherwise, on the obligations of the type referred to in clause (1) of a third Person (whether or not such items would appear upon the balance sheet of such obligor or guarantor), other than by endorsement of negotiable instruments for collection in the ordinary course of business; and

(3) to the extent not otherwise included, the obligations of the type referred to in clause (1) of a third Person secured by a Lien on any asset owned by such first Person, whether or not such Indebtedness is assumed by such first Person; provided, however, that the amount of such Indebtedness will be the lesser of: (i) the fair market value of such asset at such date of determination, and (ii) the amount of such Indebtedness of such other Person;

provided, however, that notwithstanding the foregoing, Indebtedness shall be deemed not to include (1) Contingent Obligations incurred in the ordinary course of business and (2) deferred or prepaid revenues.

Notwithstanding anything in this Indenture to the contrary, Indebtedness shall not include, and shall be calculated without giving effect to, the effects of Accounting Standards Codification Topic 815 and related interpretations to the extent such effects would otherwise increase or decrease an amount of Indebtedness for any purpose under this Indenture as a result of accounting for any embedded derivatives created by the terms of such Indebtedness; and any such amounts that would have constituted Indebtedness under this Indenture but for the application of this sentence shall not be deemed an incurrence of Indebtedness under this Indenture.

“Indenture” means this Indenture as amended or supplemented from time to time.

“Independent Financial Advisor” means an accounting, appraisal, investment banking firm or consultant, in each case of nationally recognized standing that is, in the good faith judgment of the Issuer, qualified to perform the task for which it has been engaged.

“Initial Purchasers” means Merrill Lynch, Pierce, Fenner & Smith Incorporated, Deutsche Bank Securities Inc., Barclays Capital Inc., Goldman, Sachs & Co., Morgan Stanley & Co. LLC and Moelis & Company LLC.

“Initial Securities” has the meaning given to such term in the Preamble to this Indenture.

“Investment Grade Rating” means a rating equal to or higher than Baa3 (or the equivalent) by Moody’s and BBB- (or the equivalent) by S&P, or, in either case, an equivalent rating by any other Rating Agency.

“Investment Grade Securities” means:

(1) securities issued or directly and fully guaranteed or insured by the United States government or any agency or instrumentality thereof (other than Cash Equivalents);

(2) securities or instruments with an Investment Grade Rating, but excluding any debt securities or instruments constituting loans or advances among the Issuer and its Subsidiaries;

(3) investments in any fund that invests exclusively in investments of the type described in clauses (1) and (2) which fund may also hold immaterial amounts of cash pending investment or distribution; and

(4) corresponding instruments in countries other than the United States customarily utilized for high quality investments.

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“Investments” means, with respect to any Person, all investments by such Person in other Persons (including Affiliates) in the form of loans (including guarantees), advances or capital contributions (excluding accounts receivable, credit card and debit card receivables, trade credit, advances to customers, commission, travel and similar advances to officers, directors, distributors, consultants and employees, in each case made in the ordinary course of business), purchases or other acquisitions for consideration of Indebtedness, Equity Interests or other securities issued by any other Person and investments that are required by GAAP to be classified on the balance sheet (excluding the footnotes thereto) of the Issuer in the same manner as the other investments included in this definition to the extent such transactions involve the transfer of cash or other property. The amount of any Investment shall be deemed to be the amount actually invested, without adjustment for subsequent increases or decreases in value or any write-downs or write-offs, but giving effect to any repayments thereof in the form of loans and any return on capital or return on Investment in the case of equity Investments (whether as a distribution, dividend, redemption or sale but not in excess of the amount of such Investment). For purposes of the definition of “Unrestricted Subsidiary” and Section 4.04:

(1) “Investments” shall include the portion (proportionate to the Issuer’s equity interest in such Subsidiary) of the fair market value of the net assets of a Subsidiary of the Issuer at the time that such Subsidiary is designated an Unrestricted Subsidiary; provided, however, that upon a redesignation of such Subsidiary as a Restricted Subsidiary, the Issuer shall be deemed to continue to have a permanent “Investment” in an Unrestricted Subsidiary in an amount (if positive) equal to:

(a) the Issuer’s “Investment” in such Subsidiary at the time of such redesignation; less

(b) the portion (proportionate to the Issuer’s equity interest in such Subsidiary) of the fair market value of the net assets of such Subsidiary at the time of such redesignation; and

(2) any property transferred to or from an Unrestricted Subsidiary shall be valued at its fair market value at the time of such transfer, in each case as determined in good faith by the Issuer.

“Investors” means Thomas H. Lee Partners L.P., each of its Affiliates and any investment funds advised or managed by any of the foregoing, but not including, however, any portfolio companies of any of the foregoing.

“Issue Date” means August 1, 2013.

“Issue Date Transactions” means the entry by the Issuer into the Indenture and the issuance of the Securities thereunder, the payment of cash dividends, distributions and other payments from the proceeds of the Securities and other transactions, including the payment of fees related to the foregoing.

“Issuer” means the party named as such in the Preamble to this Indenture and successors thereto.

“Legal Holiday” means a Saturday, a Sunday or a day on which commercial banking institutions are not required to be open in the State of New York or in the State at the place of payment. If a payment date at a place of payment is on a Legal Holiday, payment shall be made at that place on the next succeeding Business Day, and no interest shall accrue on such payment for the intervening period.

“Lien” means, with respect to any asset, any mortgage, lien, deed of trust, hypothecation, pledge, charge, security interest or encumbrance of any kind in respect of such asset, whether or not filed, recorded or otherwise perfected under applicable law (including any conditional sale or other title retention agreement, any lease in the nature thereof; provided that in no event shall an operating lease be deemed to constitute a Lien.

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“Moody’s” means Moody’s Investors Service, Inc. and any successor to its rating agency business.

“Net Income” means, with respect to any Person, the net income (loss) of such Person, determined in accordance with GAAP and before any reduction in respect of Preferred Stock dividends.

“Net Proceeds” means the aggregate cash proceeds received by the Issuer or any of its Restricted Subsidiaries in respect of any Asset Sale, including, without limitation, any cash received in respect of or upon the sale or other disposition of any Designated Non-cash Consideration received in any Asset Sale, net of the direct costs relating to such Asset Sale and the sale or disposition of such Designated Non-cash Consideration, including legal, accounting and investment banking fees, and brokerage and sales commissions, any relocation expenses incurred as a result thereof, taxes paid or payable as a result thereof (after taking into account any available tax credits or deductions and any tax sharing arrangements directly relating to such Asset Sale), amounts required to be applied to the repayment of principal, premium, if any, and interest on Indebtedness (other than Subordinated Indebtedness) secured by a Lien on the assets disposed of required (other than required by Section 4.06(a)(i)) to be paid as a result of such transaction and any deduction of appropriate amounts to be provided by the Issuer or any of its Restricted Subsidiaries as a reserve in accordance with GAAP against any liabilities associated with the asset disposed of in such transaction and retained by the Issuer or any of its Restricted Subsidiaries after such sale or other disposition thereof, including pension and other post-employment benefit liabilities and liabilities related to environmental matters or against any indemnification obligations associated with such transaction.

“New York UCC” means the Uniform Commercial Code as from time to time in effect in the State of New York.

“Obligations” means any principal, interest (including any interest accruing subsequent to the filing of a petition in bankruptcy, reorganization or similar proceeding at the rate provided for in the documentation with respect thereto, whether or not such interest is an allowed claim under applicable state, federal or foreign law), penalties, fees, indemnifications, reimbursements (including reimbursement obligations with respect to letters of credit and banker’s acceptances), damages and other liabilities, and guarantees of payment of such principal, interest, penalties, fees, indemnifications, reimbursements, damages and other liabilities, payable under the documentation governing any Indebtedness.

“Offering Memorandum” means the offering memorandum relating to the offering of the Original Securities dated July 29, 2013.

“Officer” means the Chairman of the Board, the Chief Executive Officer, the Chief Financial Officer, the President, any Executive Vice President, Senior Vice President or Vice President, the Treasurer or the Secretary of the Issuer.

“Officer’s Certificate” means a certificate signed on behalf of both of the Issuers by an Officer of each of the Issuers, who must be the principal executive officer, the principal financial officer or the principal accounting officer of the Issuer which meets the requirements set forth in this Indenture.

“Opco” means Party City Holdings Inc., a Delaware corporation, and its permitted successors and assigns.

“Opco Notes” means the 8.875% senior notes due 2020 issued by Party City Holdings Inc.

“Opco Notes Indenture” means the indenture dated July 27, 2012 by and among Opco, the other parties thereto and Wilmington Trust, National Association, as trustee, relating to the Opco Notes.

“Opinion of Counsel” means a written opinion from legal counsel who is reasonably acceptable to the Trustee. The counsel may be an employee of or counsel to the Issuer or the Trustee.

“Parent” means PC Topco Holdings, Inc., a Delaware corporation, and its successors and assigns.

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“Parent Company” means any Person so long as such Person directly or indirectly holds 100.0% of the total voting power of the Capital Stock of the Issuer, and at the time such Person acquired such voting power, no Person and no group (within the meaning of Section 13(d)(3) or Section 14(d)(2) of the Exchange Act or any successor provision), including any such group acting for the purpose of acquiring, holding or disposing of securities (within the meaning of Rule 13d-5(b)(1) under the Exchange Act) (other than any Permitted Holders), shall have beneficial ownership (within the meaning of Rule 13d-3 under the Exchange Act, or any successor provisions), directly or indirectly, of 50.0% or more of the total voting power of the Voting Stock of such Person.

“Paying Agent” means an office or agency maintained by the Issuer pursuant to the terms of this Indenture, where Securities may be presented for payment.

“Permitted Asset Swap” means the substantially concurrent purchase and sale or exchange of Related Business Assets or a combination of Related Business Assets and Cash Equivalents between the Issuer or any of its Restricted Subsidiaries and another Person; provided that any Cash Equivalents received must be applied in accordance with Section 4.06.

“Permitted Holders” means (i) each of the Investors, (ii) each Roll-Over Investor, (iii) members of management of the Issuer (or its direct parent) who are holders of Equity Interests of the Issuer (or any of its direct or indirect parent companies) on the Issue Date and (iv) any group (within the meaning of Section 13(d)(3) or Section 14(d)(2) of the Exchange Act or any successor provision) of which any of the foregoing are members; provided that, in the case of such group and without giving effect to the existence of such group or any other group, such Investors and members of management, collectively, have beneficial ownership of more than 50% of the total voting power of the Voting Stock of the Issuer or any of its direct or indirect parent companies. Any person or group whose acquisition of beneficial ownership (within the meaning of Rule 13d-3 under the Exchange Act, or any successor provision) constitutes a Change of Control in respect of which a Change of Control Offer is made in accordance with the requirements of Section 4.08 (or would result in a Change of Control Offer in the absence of the waiver of such requirement by Holders in accordance with Section 4.08) shall thereafter, together with its Affiliates, constitute an additional Permitted Holder.

“Permitted Investments” means:

(1) any Investment in the Issuer or any of its Restricted Subsidiaries;

(2) any Investment in cash and Cash Equivalents or Investment Grade Securities;

(3) any Investment by the Issuer or any of its Restricted Subsidiaries in a Person (including in the Equity Interests of such Person) if as a result of such Investment (a) such Person becomes a Restricted Subsidiary or (b) such Person, in one transaction or a series of related transactions, is merged, amalgamated or consolidated with or into, or transfers or conveys substantially all of its assets to, or is liquidated into, the Issuer or a Restricted Subsidiary, and, in each case, any Investment held by such Person; provided that such Investment was not acquired by such Person in contemplation of such acquisition, merger, consolidation or transfer;

(4) any Investment in securities or other assets not constituting cash, Cash Equivalents or Investment Grade Securities and received in connection with an Asset Sale made pursuant to Section 4.06(a) or any other disposition of assets not constituting an Asset Sale;

(5) any Investment existing on, or made pursuant to binding commitments existing on, the Issue Date and any extension, modification, replacement, renewal or reinvestments of any such Investments existing or committed on the Issue Date, (other than reimbursements of Investments in the Issuer or any Subsidiary); provided that the amount of any such Investment may be increased (x) as required by the terms of such Investment or commitment as in existence on the Issuer Date or (y) as otherwise permitted under this Indenture;

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(6) any Investment acquired by the Issuer or any of its Restricted Subsidiaries:

(a) in exchange for any other Investment or accounts receivable held by the Issuer or any such Restricted Subsidiary in connection with or as a result of a bankruptcy, workout, reorganization or recapitalization of, or settlement of delinquent accounts and disputes with or judgments against, the issuer of such other Investment or accounts receivable;

(b) as a result of a foreclosure by the Issuer or any of its Restricted Subsidiaries with respect to any secured Investment or other transfer of title with respect to any secured Investment in default;

(c) as a result of the settlement, compromise or resolution of litigation, arbitration or other disputes with Persons who are not Affiliates; or

(d) in settlement of debts created in the ordinary course of business;

(7) Hedging Obligations permitted under clause (x) of Section 4.03(b);

(8) any Investment in a Similar Business having an aggregate fair market value, taken together with all other Investments made pursuant to this clause (8) that are at that time outstanding, not to exceed the greater of (x) $90.0 million and (y) 2.9% of Consolidated Total Assets (with the fair market value of each Investment being measured at the time made and without giving effect to subsequent changes in value);

(9) Investments the payment for which consists of Equity Interests (exclusive of Disqualified Stock) of the Issuer, or any of its direct or indirect parent companies; provided, however, that such Equity Interests will not increase the amount available for Restricted Payments under Section 4.04(a)(iii);

(10) guarantees (including Guarantees) of Indebtedness of the Issuer or any Restricted Subsidiary permitted under Section 4.03, performance guarantees and Contingent Obligations in the ordinary course of business and the creation of liens on the assets of the Issuer or any of its Restricted Subsidiaries in compliance with Section 4.12, including, without limitation, any guarantee or other obligation issued or incurred under the Senior Credit Facilities in connection with any letter of credit issued for the account of the Issuer or any of its Subsidiaries (including with respect to the issuance of, or payments in respect of drawings under, such letters of credit);

(11) any transaction to the extent it constitutes an Investment that is permitted and made in accordance with the provisions of Section 4.07(b) (except transactions described in clauses (ii), (v) and (viii) thereof);

(12) Investments consisting of or to finance purchases and acquisitions of inventory, supplies, materials, services or equipment or purchases of contract rights or licenses or leases of intellectual property;

(13) Investments having an aggregate fair market value, taken together with all other

Investments made pursuant to this clause (13) that are at that time outstanding (without giving effect to the sale of an Unrestricted Subsidiary to the extent the proceeds of such sale do not consist of, or have not been subsequently sold or transferred for, cash or marketable securities), not to exceed the greater of (x) $90.0 million and (y) 2.9% of Consolidated Total Assets (with the fair market value of each investment being measured at the time made and without giving effect to subsequent changes in value);

(14) Investments relating to a Receivables Subsidiary that, in the good faith determination of the Issuer, are necessary or advisable to effect any Receivables Facility;

(15) loans and advances to, or guarantees of Indebtedness of, officers, directors, employees, consultants and members of management of the Issuer, any of its Subsidiaries or any direct or indirect parent of the Issuer not in excess of $10.0 million outstanding at any one time, in the aggregate (calculated without regard to write-downs or write-offs thereof);

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(16) loans and advances to officers, directors, employees, consultants and members of management for business-related travel expenses, moving expenses and other similar expenses, in each case incurred in the ordinary course of business or consistent with past practices or to fund such Person’s purchase of Equity Interests of the Issuer or any direct or indirect parent company thereof;

(17) Investments consisting of licensing or contribution of intellectual property pursuant to joint marketing arrangements with other Persons;

(18) Investments in prepaid expenses, negotiable instruments held for collection and lease, utility and workers compensation, performance and similar deposits entered into as a result of the operations of the business in the ordinary course;

(19) Investments in any Subsidiary or any joint venture in connection with intercompany cash management arrangements or related activities arising in the ordinary course of business;

(20) Investments in the ordinary course of business consisting of Uniform Commercial Code Article 3 endorsements for collection or deposit and Article 4 customary trade arrangements with customers consistent with past practices;

(21) Investments in joint ventures in an aggregate amount not to exceed $25 million outstanding at any one time;

(22) the Securities and the related Guarantees;

(23) any loan or loans made by the Issuer or any of its Restricted Subsidiaries to a franchisee; provided, that the aggregate principal amount of all loans made pursuant to this clause (23) shall not exceed $10.0 million outstanding at any time; and

(24) guarantees of leases (other than capital leases) or of other obligations not constituting Indebtedness, in each case in the ordinary course of business.

“Permitted Liens” means, with respect to any Person:

(1) (a) (i) pledges, deposits or security by such Person under workmen’s compensation laws, unemployment insurance, employers’ health tax and other social security laws or similar legislation or regulations, health, disability or other employee benefits or property and deposits securing liability to insurance carriers under insurance or self-insurance arrangements in respect of such obligations and (ii) pledges and deposits and other Liens securing liability for reimbursement or indemnification obligations of (including obligations in respect of letters of credit or bank guarantees for the benefit of) insurance carriers providing property, casualty or liability insurance to the Issuer or any Subsidiary; or (b) Liens, pledges and deposits in connection with bids, tenders, contracts (other than for Indebtedness for borrowed money) or leases, statutory obligations, surety, customs, bid and appeal bonds, performance and return of money bonds, bids, leases, government contracts, trade contracts, agreements with utilities, performance and completion guarantees and other obligations of a like nature (including letters of credit in lieu of any such items or to support the issuance thereof) incurred in the ordinary course of business, including those incurred to secure health, safety and environmental obligations in the ordinary course of business and obligations in respect of letters of credit or bank guarantees that have been posted to support payment of the items described in this clause (1);

(2) Liens imposed by law, such as landlord’s, carriers’, warehousemen’s, materialmen’s, repairmen’s, construction and mechanics’ Liens, (i) for sums not yet overdue for a period of more than 30 days, (ii) being contested in good faith by appropriate actions or other Liens arising out of judgments or awards against such Person with respect to which such Person shall then be proceeding with an appeal or other proceedings for review if adequate reserves with respect thereto are maintained on the books of such Person in accordance with GAAP or (iii) with respect to which the failure to make payment could not reasonably be expected to have a material adverse effect;

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(3) Liens for taxes, assessments or other governmental charges (i) not yet overdue for a period of more than 30 days, (ii) which are being contested in good faith by appropriate actions diligently conducted, if adequate reserves with respect thereto are maintained on the books of such Person in accordance with GAAP, (iii) for property taxes on property that the Issuer or one of its Subsidiaries has determined to abandon if the sole recourse for such tax, assessment, charge, levy or claim is to such property or (iv) with respect to which the failure to make payment could not reasonably be expected to have a material adverse effect;

(4) Liens in favor of issuers of performance, surety, bid, indemnity, warranty, release, appeal or similar bonds or with respect to other regulatory requirements or letters of credit or bankers’ acceptances issued, and completion guarantees provided for, in each case pursuant to the request of and for the account of such Person in the ordinary course of its business or consistent with past practice prior to the Issue Date;

(5) minor survey exceptions, minor encumbrances, ground leases, easements or reservations of, or rights of others for, licenses, rights-of-way, servitudes, sewers, electric lines, drains, telegraph and telephone and cable television lines, gas and oil pipelines and other similar purposes, or zoning, building codes or other restrictions (including, without limitation, minor defects or irregularities in title and similar encumbrances) as to the use of real properties or Liens incidental to the conduct of the business of such Person or to the ownership of its properties which were not incurred in connection with Indebtedness and which do not in the aggregate materially impair their use in the operation of the business of such Person;

(6) Liens securing Indebtedness permitted to be incurred pursuant to clause (iv), (xii)(b), or (xviii) of Section 4.03(b); provided that Liens securing Indebtedness permitted to be incurred pursuant to clause (xviii) extend only to assets of subsidiaries that are not Guarantors;

(7) Liens existing on the Issue Date;

(8) Liens existing on property or shares of stock of a Person at the time such Person becomes a Subsidiary; provided, however, such Liens are not created or incurred in connection with, or in contemplation of, such other Person becoming such a Subsidiary; provided, further, however, that such Liens may not extend to any other property owned by the Issuer or any of its Restricted Subsidiaries;

(9) Liens existing on property at the time the Issuer or a Restricted Subsidiary acquired the property, including any acquisition by means of a merger, amalgamation or consolidation with or into the Issuer or any of its Restricted Subsidiaries; provided, however, that such Liens are not created or incurred in connection with, or in contemplation of, such acquisition, merger, amalgamation or consolidation; provided, further, however, that the Liens may not extend to any other property owned by the Issuer or any of its Restricted Subsidiaries;

(10) Liens securing Indebtedness or other obligations of the Issuer or a Restricted Subsidiary owing to the Issuer or another Restricted Subsidiary permitted to be incurred in accordance with Section 4.03;

(11) Liens securing Hedging Obligations and in respect of Cash Management Services so long as the related Indebtedness is permitted to be incurred under this Indenture;

(12) Liens on specific items of inventory or other goods and proceeds of any Person securing such Person’s obligations in respect of bankers’ acceptances, a bank guarantee or letters of credit issued or created for the account of such Person to facilitate the purchase, shipment or storage of such inventory or other goods;

(13) leases, subleases, licenses or sublicenses, grants or permits (including with respect to intellectual property and software) granted to others in the ordinary course of business which do not materially interfere with the ordinary conduct of the business of the Issuer or any of its Restricted Subsidiaries and the customary rights reserved or vested in any Person by the terms of any lease, sublease, license, sublicense, grant or permit, or to require annual or periodic payments as a condition to the continuance thereof;

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(14) Liens arising from Uniform Commercial Code (or equivalent statutes) financing statement filings regarding operating leases, consignments or accounts in connection with any transaction otherwise permitted under this Indenture;

(15) Liens in favor of the Issuer or any Guarantor;

(16) Liens on equipment of the Issuer or any of its Restricted Subsidiaries granted in the ordinary course of business to the Issuer’s clients;

(17) Liens on accounts receivable and related assets incurred in connection with a Receivables Facility;

(18) Liens to secure any refinancing, refunding, extension, renewal or replacement (or successive refinancing, refunding, extensions, renewals or replacements) as a whole, or in part, of any Indebtedness secured by any Lien referred to in the foregoing clauses (6), (7), (8) and (9); provided, however, that (a) such new Lien shall be limited to all or part of the same property that secured the original Lien (plus improvements on such property), and (b) the Indebtedness secured by such Lien at such time is not increased to any amount greater than the sum of (i) the outstanding principal amount or, if greater, committed amount of the Indebtedness described under clauses (6), (7), (8) and (9) at the time the original Lien became a Permitted Lien under this Indenture, and (ii) an amount necessary to pay any fees (including original issue discount, upfront fees or similar fees) and expenses, including premiums (including tender premiums), related to such refinancing, refunding, extension, renewal or replacement;

(19) deposits made or other security provided to secure liabilities to insurance carriers under insurance or self-insurance arrangements in the ordinary course of business;

(20) Liens securing judgments for the payment of money not constituting an Event of Default under Section 6.01(e) so long as such Liens are, adequately bonded and any appropriate legal proceedings that may have been duly initiated for the review of such judgment have not been finally terminated or the period within which such proceedings may be initiated has not expired;

(21) Liens in favor of customs and revenue authorities arising as a matter of law to secure payment of customs duties in connection with the importation of goods in the ordinary course of business;

(22) Liens (i) of a collection bank arising under Section 4-210 of the Uniform Commercial Code on items in the course of collection, (ii) attaching to commodity trading accounts or other commodity brokerage accounts incurred in the ordinary course of business, and (iii) in favor of banking institutions arising as a matter of law encumbering deposits (including the right of set-off) and which are within the general parameters customary in the banking industry;

(23) Liens deemed to exist in connection with Investments in repurchase agreements or other Cash Equivalents permitted under Section 4.03; provided that such Liens do not extend to any assets other than those that are the subject of such repurchase agreement or other Cash Equivalent;

(24) Liens encumbering reasonable customary initial deposits and margin deposits and similar Liens attaching to commodity trading accounts or other brokerage accounts incurred in the ordinary course of business and not for speculative purposes;

(25) Liens that are contractual rights of set-off (i) relating to the establishment of depository relations with banks not given in connection with the issuance of Indebtedness, (ii) relating to pooled deposit or sweep accounts of the Issuer or any of its Restricted Subsidiaries to permit satisfaction of overdraft or similar obligations incurred in the ordinary course of business of the Issuer and its Restricted Subsidiaries or (iii) relating to purchase orders and other agreements entered into with customers of the Issuer or any of its Restricted Subsidiaries in the ordinary course of business;

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(26) Liens solely on any cash earnest money deposits made by the Issuer or any of its Restricted Subsidiaries in connection with any letter of intent or purchase agreement permitted under this Indenture;

(27) the rights reserved or vested in any Person by the terms of any lease, license, franchise, grant or permit held by the Issuer or any of its Restricted Subsidiaries or by a statutory provision, to terminate any such lease, license, franchise, grant or permit, or to require annual or periodic payments as a condition to the continuance thereof;

(28) restrictive covenants affecting the use to which real property may be put; provided, however, that the covenants are complied with;

(29) security given to a public utility or any municipality or governmental authority when required by such utility or authority in connection with the operations of that Person in the ordinary course of business;

(30) zoning by-laws and other land use restrictions, including, without limitation, site plan agreements, development agreements and contract zoning agreements;

(31) Liens arising out of conditional sale, title retention, consignment or similar arrangements for sale of goods entered into by the Issuer or any Restricted Subsidiary in the ordinary course of business;

(32) Liens arising from Personal Property Security Act financing statement filings regarding leases entered into by the Issuer or any of its Restricted Subsidiaries in the ordinary course of business;

(33) the reservations, limitations, provisos and conditions, if any, expressed in any original grants from the crown under Canadian law and any statutory exceptions to title under Canadian law;

(34) (i) customary transfer restrictions and purchase options in joint venture and similar agreements, (ii) Liens on Equity Interests in joint ventures securing obligations of such joint ventures and (iii) customary rights of first refusal and tag, drag and similar rights in joint venture agreements entered into in the ordinary course of business;

(35) (i) the prior rights of consignees and their lenders under consignment arrangements entered into in the ordinary course of business, (ii) Liens arising out of conditional sale, title retention or similar arrangements for the sale of goods in the ordinary course of business and (iii) Liens arising by operation of law under Article 2 of the Uniform Commercial Code;

(36) Liens securing the Securities issued on the Issue Date and Guarantees, if any, of such Securities;

(37) Liens on the assets of Foreign Subsidiaries securing Indebtedness permitted to be incurred by Foreign Subsidiaries under this Indenture; and

(38) other Liens securing obligations not to exceed the greater of (x) $40.0 million and (y) 1.25% of Consolidated Total Assets at any one time outstanding.

For purposes of this definition, the term “Indebtedness” shall be deemed to include interest on such Indebtedness.

“Person” means any individual, corporation, limited liability company, partnership, joint venture, association, joint stock company, trust, unincorporated organization, government or any agency or political subdivision thereof or any other entity.

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“Preferred Stock” means any Equity Interest with preferential rights of payment of dividends or upon liquidation, dissolution, or winding up.

“Public Company Costs” shall mean costs relating to compliance with the Sarbanes-Oxley Act of 2002, as amended, and other expenses arising out of or incidental to the Issuer’s or its Subsidiaries status as a reporting company or in connection with the Issuer’s potential initial public offering, including costs, fees and expenses (including legal, accounting and other professional fees) relating to compliance with provisions of the Securities Act and the Exchange Act, directors’ compensation, fees and expense reimbursement, shareholder meetings and reports to shareholders, directors’ and officers’ insurance and other executive costs, legal and other professional fees, and listing fees in each case incurred or accrued prior to the Issue Date.

“Qualified Proceeds” means assets that are used or useful in, or Capital Stock of any Person engaged in, a Similar Business; provided that the fair market value of any such assets or Capital Stock shall be determined by the Issuer in good faith.

“Rating Agencies” means Moody’s and S&P or if Moody’s or S&P or both shall not make a rating on the Securities publicly available, a nationally recognized statistical rating agency or agencies, as the case may be, selected by the Issuer which shall be substituted for Moody’s or S&P or both, as the case may be.

“Receivables Facility” means any of one or more receivables financing facilities as amended, supplemented, modified, extended, renewed, restated or refunded from time to time, the Obligations of which are non-recourse (except for customary representations, warranties, covenants and indemnities made in connection with such facilities) to the Issuer or any of its Restricted Subsidiaries (other than a Receivables Subsidiary) pursuant to which the Issuer or any of its Restricted Subsidiaries sells its accounts receivable to either (a) a Person that is not a Restricted Subsidiary or (b) a Receivables Subsidiary that in turn sells its accounts receivable to a Person that is not a Restricted Subsidiary.

“Receivables Fees” means distributions or payments made directly or by means of discounts with respect to any accounts receivable or participation interest therein issued or sold in connection with, and other fees paid to a Person that is not a Restricted Subsidiary in connection with, any Receivables Facility.

“Receivables Subsidiary” means any Subsidiary formed for the purpose of, and that solely engages only in one or more Receivables Facilities and other activities reasonably related thereto.

“Registration Rights Agreement” means (1) with respect to the Securities issued on the Issue Date, the Registration Rights Agreement to be dated the Issue Date, among the Issuers and the Initial Purchasers and (2) with respect to any Additional Securities, any registration rights agreement among the Issuers and the other parties thereto relating to the registration by the Issuers of such Additional Securities under the Securities Act.

“Related Business Assets” means assets (other than cash or Cash Equivalents) used or useful in a Similar Business, provided that any assets received by the Issuer or a Restricted Subsidiary in exchange for assets transferred by the Issuer or a Restricted Subsidiary shall not be deemed to be Related Business Assets if they consist of securities of a Person, unless upon receipt of the securities of such Person, such Person would become a Restricted Subsidiary.

“Restricted Investment” means an Investment other than a Permitted Investment.

“Restricted Subsidiary” means, at any time, any direct or indirect Subsidiary of the Issuer (including any Foreign Subsidiary) that is not then an Unrestricted Subsidiary; provided, however, that upon the occurrence of an Unrestricted Subsidiary ceasing to be an Unrestricted Subsidiary, such Subsidiary shall be included in the definition of “Restricted Subsidiary.”

“Roll-Over Investors” means, collectively, Advent International and each of its respective Affiliates (but not portfolio companies), in each case to the extent that such Persons or their Affiliates own Equity Interests in the Issuer or any direct or indirect parent on the Issue Date.

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“S&P” means Standard & Poor’s, a division of The McGraw-Hill Companies, Inc., and any successor to its rating agency business.

“Sale and Lease-Back Transaction” means any arrangement providing for the leasing by the Issuer or any of its Restricted Subsidiaries of any real or tangible personal property, which property has been or is to be sold or transferred by the Issuer or such Restricted Subsidiary to a third Person in contemplation of such leasing.

“SEC” means the U.S. Securities and Exchange Commission.

“Secured Indebtedness” means any Indebtedness of the Issuer or any of its Restricted Subsidiaries, as applicable, secured by a Lien.

“Securities” has the meaning given to such term in the Preamble to this Indenture.

“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations of the SEC promulgated thereunder.

“Security Register” means the register of Securities, maintained by the Registrar, pursuant to Section 2.04 hereof.

“Senior Credit Facilities” means the ABL Facility and the Term Loan Facility.

“Significant Subsidiary” means any Restricted Subsidiary that would be a “significant subsidiary” as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated pursuant to the Securities Act, as such regulation is in effect on the Issue Date.

“Similar Business” means any business conducted or proposed to be conducted by the Issuer and its Restricted Subsidiaries on the Issue Date or any business that is a reasonable extension, development or expansion of any of the foregoing or is similar, reasonably related, incidental or ancillary thereto (including, for the avoidance of doubt, any sourcing companies created in connection with any of the foregoing).

“Sponsor Management Agreement” means that certain Management Agreement, entered into as of July 27, 2012, by and among, inter alios, Opco and Thomas H. Lee Partners L.P. and/or one or more of its affiliates and certain other equity investors who may become a party thereto.

“Standard Securitization Undertakings” means representations, warranties, covenants, indemnities and guarantees of performance entered into by the Issuer or any Subsidiary of the Issuer which the Issuer has determined in good faith to be customary in a Receivables Facility including, without limitation, those relating to the servicing of the assets of a Receivables Subsidiary.

“Subordinated Indebtedness” means, with respect to the Securities,

(1) any Indebtedness of the Issuer which is by its terms subordinated in right of payment to the Securities, and

(2) any Indebtedness of any Guarantor which is by its terms subordinated in right of payment to the Guarantee of such entity of the Securities.

“Subsidiary” means, with respect to any Person:

(1) any corporation, association, or other business entity (other than a partnership, joint venture, limited liability company or similar entity) of which more than 50% of the total voting power of shares of Capital Stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time of determination owned or controlled, directly or indirectly, by such Person or one or more of the other Subsidiaries of that Person or a combination thereof or is consolidated under GAAP with such Person at such time; and

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(2) any partnership, joint venture, limited liability company or similar entity of which

(x) more than 50% of the capital accounts, distribution tights, total equity and voting interests or general or limited partnership interests, as applicable, are owned or controlled, directly or indirectly, by such Person or one or more of the other Subsidiaries of that Person or a combination thereof whether in the form of membership, general, special or limited partnership or otherwise, and

(y) such Person or any Restricted Subsidiary of such Person is a controlling general partner or otherwise controls such entity.

“Term Loan Facility” means (1) the credit facility provided under the term loan credit agreement, dated July 27, 2012, among Opco, the other borrowers party thereto, the subsidiaries of Opco party thereto from time to time, the lenders party thereto from time to time in their capacities as lenders thereunder and Deutsche Bank Trust Company Americas, as administrative agent and collateral agent for the lenders, including and one or more debt facilities or other financing arrangements (including, without limitation indentures) providing for term loans or other long-term indebtedness that replace or refinance such credit facility, including any such replacement or refinancing facility or indenture that increases or decreases the amount permitted to be borrowed thereunder or alters the maturity thereof and whether by the same or any other agent, lender or group of lenders, and any amendments, supplements, modifications, extensions, renewals, restatements, amendments and restatements or refundings thereof or any such indentures or credit facilities that replace or refinance such credit facility and (2) whether or not the term loan credit agreement referred to in clause (1) remains outstanding, if designated by the Issuer to be included in the definition of “Term Loan Facility,” one or more (i) debt facilities or commercial paper facilities, providing for revolving credit loans, term loans, receivables financing (including through the sale of receivables to lenders or to special purpose entities formed to borrower from lenders against such receivables) or letters of credit, (ii) debt securities, indentures or other forms of debt financing (including convertible or exchangeable debt instruments or bank guarantees or bankers’ acceptances) or (iii) instruments or agreements evidencing any other Indebtedness, in each case, with the same or different arrangements, agents, lenders, borrowers or issuer and, in each case, as amended, restated, amended and restated, supplemented, waived, renewed, refunded, replaced, restructured, repaid, refinanced or otherwise modified in whole or in part from time to time.

“Transaction Agreement” means the Agreement and Plan of Merger, dated as of June 4, 2012 among Party City Holdings, Inc., PC Merger Sub, Inc., PC Topco Holdings, Inc. and the stockholders’ representatives party thereto, as the same may be amended from time to time, as the same may be amended from time to time.

“Transaction Expenses” means any fees, expenses, costs or charges incurred or paid by the Issuer or any Restricted Subsidiary in connection with the Transactions and the Issue Date Transactions, including payments to officers, employees and directors as change of control payments, severance payments, special or retention bonuses and charges for repurchase or rollover of, or modifications to, stock options and/or restricted stock.

“Transactions” means the transactions contemplated by the Transaction Agreement, the issuance of the Opco Notes, borrowings under the Senior Credit Facilities and contemplated restructuring transactions in connection with the Acquisition.

“Treasury Rate” means, as of any Redemption Date, the yield to maturity as of such Redemption Date of United States Treasury securities with a constant maturity (as compiled and published in the most recent Federal Reserve Statistical Release H.15 (519) that has become publicly available at least two Business Days prior to the Redemption Date (or, if such Statistical Release is no longer published, any publicly available source of similar market data)) most nearly equal to the period from the Redemption Date to February 15, 2015; provided, however, that if the period from the Redemption Date to February 15, 2015 is less than one year, the weekly average yield on actually traded United States Treasury securities adjusted to a constant maturity of one year will be used.

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“Trust Indenture Act” means the Trust Indenture Act of 1939, as amended (15 U.S.C. §§ 77aaa-77bbbb).

“Trust Officer” means:

(1) any officer within the corporate trust department of the Trustee, including any vice president, assistant vice president, trust officer or any other officer of the Trustee who customarily performs functions similar to those performed by the Persons who at the time shall be such officers, respectively, or to whom any corporate trust matter is referred because of such Person’s knowledge of and familiarity with the particular subject, and

(2) who shall have direct responsibility for the administration of this Indenture.

“Trustee” means the party named as such in the Preamble of this Indenture until a successor replaces it and, thereafter, means the successor.

“Unrestricted Subsidiary” means:

(1) any Subsidiary (other than the Co-Issuer) of the Issuer which at the time of determination is an Unrestricted Subsidiary (as designated by the Issuer, as provided below); and

(2) any Subsidiary of an Unrestricted Subsidiary.

The Issuer may designate any Subsidiary of the Issuer (including any existing Subsidiary and any newly acquired or newly formed Subsidiary but excluding the Co-Issuer) to be an Unrestricted Subsidiary unless such Subsidiary or any of its Subsidiaries owns any Equity Interests or Indebtedness of, or owns or holds any Lien on, any property of, the Issuer or any Subsidiary of the Issuer (other than solely any Subsidiary of the Subsidiary to be so designated); provided that

(1) any Unrestricted Subsidiary must be an entity of which the Equity Interests entitled to cast at least a majority of the votes that may be cast by all Equity Interests having ordinary voting power for the election of directors or Persons performing a similar function are owned, directly or indirectly, by the Issuer;

(2) such designation complies with Section 4.04; and

(3) each of:

(a) the Subsidiary to be so designated; and

(b) its Subsidiaries

has not at the time of designation, and does not thereafter, create, incur, issue, assume, guarantee or otherwise become directly or indirectly liable with respect to any Indebtedness pursuant to which the lender has recourse to any of the assets of the Issuer or any Restricted Subsidiary.

The Issuer may designate any Unrestricted Subsidiary to be a Restricted Subsidiary; provided that, immediately after giving effect to such designation, no Default shall have occurred and be continuing and either:

(i) if such Unrestricted Subsidiary is a Subsidiary of the Issuer (other than Opco or any of its Subsidiaries), either:

(1) the Issuer could incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test in Section 4.03(a)(i); or

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(2) the Fixed Charge Coverage Ratio for the Issuer and its Restricted Subsidiaries would be greater than such ratio for the Issuer and its Restricted Subsidiaries immediately prior to such designation, in each case on a pro forma basis taking into account such designation or

(ii) if such Unrestricted Subsidiary is a Subsidiary of Opco, either:

(1) Opco could incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test described in Section 4.03(a)(ii); or

(2) the Fixed Charge Coverage Ratio for Opco and its Restricted Subsidiaries would be greater than such ratio for Opco and its Restricted Subsidiaries immediately prior to such designation, in each case on a pro forma basis taking into account such designation.

Any such designation by the Issuer shall be notified by the Issuer to the Trustee by promptly filing with the Trustee a copy of the resolution of the board of directors of the Issuer or any committee thereof giving effect to such designation and an Officer’s Certificate certifying that such designation complied with the foregoing provisions.

“Voting Stock” of any Person as of any date means the Capital Stock of such Person that is at the time entitled to vote in the election of the board of directors of such Person.

“Weighted Average Life to Maturity” means, when applied to any Indebtedness, Disqualified Stock or Preferred Stock, as the case may be, at any date, the quotient obtained by dividing:

(1) the sum of the products of the number of years from the date of determination to the date of each successive scheduled principal payment of such Indebtedness or redemption or similar payment with respect to such Disqualified Stock or Preferred Stock multiplied by the amount of such payment; by

(2) the sum of all such payments.

“Wholly Owned Subsidiary” of any Person means a Subsidiary of such Person, 100% of the outstanding Equity Interests of which (other than directors’ qualifying shares and shares issued to foreign nationals as required under applicable law) shall at the time be owned by such Person or by one or more Wholly-Owned Subsidiaries of such Person or by such Person and one or more Wholly-Owned Subsidiaries of such Person.

SECTION 1.02. Other Definitions.

Term	Defined in Section
“Applicable Amount”	Exhibit A
“Acceptable Commitment”	4.06(b)
“Affiliate Transaction”	4.07
“Appendix”	2.01
“Asset Sale Offer”	4.06(b)
“Broker-Dealer”	Appendix A
“Cash Interest”	Exhibit A
“Change of Control Offer”	4.08(a)
“Change of Control Payment”	4.08(a)
“Change of Control Payment Date”	4.08(b)
“Clearstream”	Appendix A
“covenant defeasance option”	8.01
“Covenant Suspension Event”	4.14(a)
“Definitive Security”	Appendix A
“Depository”	Appendix A

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Term	Defined in Section
“DTC”	1.05(h)
“Euroclear”	Appendix A
“Event of Default”	6.01
“Excess Proceeds”	4.06(b)
“Exchange Offer”	Appendix A
“Exchange Offer Registration Statement”	Appendix A
“Global Securities”	Appendix A
“Global Securities Legend”	Appendix A
“Guaranteed Obligations”	10.01(a)
“IAI”	Appendix A
“incorporated provision”	11.01
“inur”	4.03(a)
“Initial Purchasers”	Appendix A
“Initial Securities”	Preamble
“Interest Period”	Exhibit A
“legal defeasance option”	8.01
“Letter of Transmittal”	Appendix A
“Original Securities”	Preamble
“Pari Passu Indebtedness”	4.06(b)
“PIK Interest”	Exhibit A
“PIK Note”	2.01
“PIK Payment”	2.01
“protected purchaser”	2.08
“Purchase Agreement”	Appendix A
“QIB”	Appendix A
“Refinancing Indebtedness”	4.03(b)
“Refunding Capital Stock”	4.04(b)
“Registered Exchange Offer”	Appendix A
“Registrar”	2.04(a)
“Registration Rights Agreement”	Appendix A
“Regulation S”	Appendix A
“Regulation S Global Securities”	Appendix A
“Regulation S Permanent Global Security”	Appendix A
“Regulation S Temporary Global Security”	Appendix A
“Regulation S Securities”	Appendix A
“Restricted Payments”	4.04(a)
“Restricted Period”	Appendix A
“Restricted Securities Legend”	Appendix A
“Reversion Date”	4.14(a)
“Rule 144A”	Appendix A
“Rule 144A Global Securities”	Appendix A
“Rule 144A Securities”	Appendix A
“Rule 501”	Appendix A
“Second Commitment”	4.06(b)
“Securities Custodian”	Appendix A
“Shelf Registration Statement”	Appendix A
“Successor Person”	5.01(b)
“Successor Company”	5.01(a)
“Suspended Covenants”	4.14(a)
“Suspension Period”	4.14(a)
“Tax Group”	4.04(b)
“Transfer Restricted Securities”	Appendix A
“Treasury Capital Stock”	4.04(b)
“Unrestricted Definitive Security”	Appendix A
“Unrestricted Global Security”	Appendix A

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SECTION 1.03. Incorporation by Reference of Trust Indenture Act. Whenever this Indenture expressly refers to a provision of the Trust Indenture Act, the provision is incorporated by reference in and made part of this Indenture. The following Trust Indenture Act terms have the following meanings:

“indenture securities” means the Securities and the Guarantees.

“indenture security holder” means a Holder.

“indenture to be qualified” means this Indenture.

“indenture trustee” or “institutional trustee” means the Trustee.

“Obligor” on the securities and the Guarantees means the Issuers and the Guarantors, respectively, and any successor obligor upon the Securities and the Guarantees, respectively.

All other Trust Indenture Act terms used in this Indenture that are defined by the Trust Indenture Act, defined by Trust Indenture Act reference to another statute or defined by SEC rule have the meanings assigned to them by such definitions.

SECTION 1.04. Rules of Construction. Unless the context otherwise requires:

(a) a term has the meaning assigned to it;

(b) an accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP;

(c) “or” is not exclusive;

(d) “including” means including without limitation;

(e) words in the singular include the plural and words in the plural include the singular;

(f) unsecured Indebtedness shall not be deemed to be subordinate or junior to Secured Indebtedness merely by virtue of its nature as unsecured Indebtedness, and senior Indebtedness shall not be deemed to be subordinate or junior to any other senior Indebtedness merely by virtue of its junior priority with respect to the same collateral;

(g) “$” and “U.S. Dollars” each refer to United States dollars, or such other money of the United States of America that at the time of payment is legal tender for payment of public and private debts;

(h) “consolidated” means, with respect to any Person, such Person consolidated with its Restricted Subsidiaries, and shall not include any Unrestricted Subsidiary, but the interest of such Person in an Unrestricted Subsidiary shall be accounted for as an Investment;

(i) “will” shall be interpreted to express a command;

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(j) provisions apply to successive events and transactions;

(k) unless the context otherwise requires, any reference to an “Appendix,” “Article,” “Section,” “clause,” “Schedule” or “Exhibit” refers to an Appendix, Article, Section, clause, Schedule or Exhibit, as the case may be, of this Indenture;

(l) the words “herein,” “hereof” and other words of similar import refer to this Indenture as a whole and not any particular Article, Section, clause or other subdivision;

(m) references to sections of, or rules under the Securities Act, the Exchange Act or the Trust Indenture Act shall be deemed to include substitute, replacement or successor sections or rules adopted by the SEC from time to time; and

(n) unless otherwise provided, references to agreements and other instruments shall be deemed to include all amendments and other modifications to such agreements or instruments, but only to the extent such amendments and other modifications are not prohibited by the terms of this Indenture.

SECTION 1.05. Acts of Holders.

(a) Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given or taken by Holders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Holders in person or by an agent duly appointed in writing. Except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments or record or both are delivered to the Trustee and, where it is hereby expressly required, to the Issuers. Proof of execution of any such instrument or of a writing appointing any such agent, or the holding by any Person of a Security, shall be sufficient for any purpose of this Indenture and (subject to Section 7.01) conclusive in favor of the Trustee and the Issuers, if made in the manner provided in this Section 1.05.

(b) The fact and date of the execution by any Person of any such instrument or writing may be proved by the affidavit of a witness of such execution or by the certificate of any notary public or other officer authorized by law to take acknowledgements of deeds, certifying that the individual signing such instrument or writing acknowledged to him the execution thereof. Where such execution is by or on behalf of any legal entity other than an individual, such certificate or affidavit shall also constitute proof of the authority of the Person executing the same. The fact and date of the execution of any such instrument or writing, or the authority of the Person executing the same, may also be proved in any other manner that the Trustee deems sufficient.

(c) The ownership of Securities shall be proved by the Security Register.

(d) Any request, demand, authorization, direction, notice, consent, waiver or other action by the Holder of any Security shall bind every future Holder of the same Security and the Holder of every Security issued upon the registration of transfer thereof or in exchange therefor or in lieu thereof, in respect of any action taken, suffered or omitted by the Trustee or any Issuer in reliance thereon, whether or not notation of such action is made upon such Security.

(e) The Issuers may, at their option in the circumstances permitted by the Trust Indenture Act, set a record date for purposes of determining the identity of Holders entitled to give any request, demand, authorization, direction, notice, consent, waiver or take any other act, or to vote or consent to any action by vote or consent authorized or permitted to be given or taken by Holders, but the Issuers shall have no obligation to do so.

(f) Without limiting the foregoing, a Holder entitled to take any action hereunder with regard to any particular Security may do so with regard to all or any part of the principal amount of such Security or by one or more duly appointed agents, each of which may do so pursuant to such appointment with

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regard to all or any part of such principal amount. Any notice given or action taken by a Holder or its agents with regard to different parts of such principal amount pursuant to this paragraph shall have the same effect as if given or taken by separate Holders of each such different part.

(g) Without limiting the generality of the foregoing, a Holder, including the Depositary, may make, give or take, by a proxy or proxies duly appointed in writing, any request, demand, authorization, direction, notice, consent, waiver or other action provided in this Indenture to be made, given or taken by Holders, and the Depositary may provide its proxy to the beneficial owners of interests in any such Global Security through such Depositary’s standing instructions and customary practices.

(h) The Issuers may fix a record date for the purpose of determining the Persons who are beneficial owners of interests in any Global Security held by The Depository Trust Company (“DTC”) entitled under the procedures of such Depositary to make, give or take, by a proxy or proxies duly appointed in writing, any request, demand, authorization, direction, notice, consent, waiver or other action provided in this Indenture to be made, given or taken by Holders. If such a record date is fixed, the Holders on such record date or their duly appointed proxy or proxies, and only such Persons, shall be entitled to make, give or take such request, demand, authorization, direction, notice, consent, waiver or other action, whether or not such Holders remain Holders after such record date.

ARTICLE 2

THE SECURITIES

SECTION 2.01. Amount of Securities. The aggregate principal amount of Securities which may be authenticated and delivered under this Indenture on the Issue Date is $350,000,000.

The Issuers may from time to time after the Issue Date issue Additional Securities under this Indenture in an unlimited principal amount, so long as (i) the incurrence of the Indebtedness represented by such Additional Securities is at such time permitted by Section 4.03 and (ii) such Additional Securities are issued in compliance with the other applicable provisions of this Indenture. With respect to any Additional Securities issued after the Issue Date (except for Securities authenticated and delivered upon registration of transfer of, or in exchange for, or in lieu of, other Securities pursuant to Section 2.07, 2.08, 2.09, 2.10, 3.06, 3.08, 4.08(c) or Appendix A (the “Appendix”)), there shall be (a) established in or pursuant to a resolution of the board of directors of the Issuer and (b) (i) set forth or determined in the manner provided in an Officer’s Certificate or (ii) established in one or more indentures supplemental hereto, prior to the issuance of such Additional Securities:

(1) the aggregate principal amount of such Additional Securities to be authenticated and delivered under this Indenture;

(2) the issue price and issuance date of such Additional Securities, including the date from which interest on such Additional Securities shall accrue; and

(3) if applicable, that such Additional Securities shall be issuable in whole or in part in the form of one or more Global Securities and, in such case, the respective depositaries for such Global Securities, the form of any legend or legends which shall be borne by such Global Securities in addition to or in lieu of those set forth in Exhibit A hereto and any circumstances in addition to or in lieu of those set forth in Section 2.2 of the Appendix in which any such Global Security may be exchanged in whole or in part for Additional Securities registered, or any transfer of such Global Security in whole or in part may be registered, in the name or names of Persons other than the Depositary for such Global Security or a nominee thereof.

If any of the terms of any Additional Securities are established by action taken pursuant to a resolution of the board of directors of the Issuer, a copy of an appropriate record of such action shall be certified by the Secretary or any Assistant Secretary of the Issuer and delivered to the Trustee at or prior to the delivery of the Officer’s Certificate or the indenture supplemental hereto setting forth the terms of the Additional Securities.

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In addition, if the Issuers elect to pay PIK Interest in respect of the Securities in the manner provided in the Securities, the Issuers may elect, in accordance with the terms of the Securities and this Indenture, either to increase the outstanding principal amount of the Securities or issue additional Securities (the “PIK Notes”) under this Indenture having the same terms as the Securities offered hereby (in each case, a “PIK Payment”). The Securities, including any Additional Securities and PIK Notes, shall be treated as a single class for all purposes under this Indenture, including, without limitation, waivers, amendments, redemptions and offers to purchase. Unless the context requires otherwise, references to “Securities” for all purposes of this Indenture includes any Additional Securities and any PIK Notes that are actually issued and any references to “principal amount of the Securities” includes any increase in the principal amount of the outstanding Securities as a result of the issuance of Additional Securities and any PIK Payment.

SECTION 2.02. Form and Dating. Provisions relating to the Securities are set forth in the Appendix, which is hereby incorporated into and expressly made a part of this Indenture. The (i) Original Securities and the Trustee’s certificate of authentication, (ii) the PIK Notes and the Trustee’s certificate of authentication and (iii) any Additional Securities and the Trustee’s certificate of authentication shall each be substantially in the form of Exhibit A hereto, which is hereby incorporated in and expressly made a part of this Indenture. The Securities may have notations, legends or endorsements required by law, stock exchange rule, agreements to which the Issuer or any Guarantor is subject, if any, or usage (provided that any such notation, legend or endorsement is in a form acceptable to the Issuer). Each Security shall be dated the date of its authentication. The Securities shall be issuable only in registered form without interest coupons and in denominations of $2,000 and any integral multiples of $1,000 in excess thereof. PIK Payments on the Securities will be made in denominations of $1.00 and any integral multiple of $1.00 in excess thereof.

SECTION 2.03. Execution and Authentication. The Trustee shall authenticate and make available for delivery upon a written order of each Issuer signed by one Officer (an “Authentication Order”) (a) Original Securities for original issue on the date hereof in an aggregate principal amount of $350,000,000, (b) subject to the terms of this Indenture, Additional Securities in an aggregate principal amount to be determined at the time of issuance and specified therein, (c) PIK Notes in an aggregate principal amount equal to the amount of PIK Interest for the applicable interest period and (d) the Exchange Securities for issue in a Registered Exchange Offer pursuant to the Registration Rights Agreement for a like principal amount of Initial Securities exchanged pursuant thereto or otherwise pursuant to an effective registration statement under the Securities Act. Such Authentication Order shall specify the amount of the Securities to be authenticated and the date on which the original issue of Securities is to be authenticated and whether the Securities are to be Initial Securities or Exchange Securities. Notwithstanding anything to the contrary in this Indenture or the Appendix, any issuance of Additional Securities after the Issue Date shall be in a principal amount of at least $2,000 and integral multiples of $1,000 in excess thereof or, in case any PIK Payment has been made, in minimum denominations of $1.00 and any integral multiple of $1.00 in excess thereof.

One Officer shall sign the Securities for each Issuer by manual, facsimile or electronic (in “.pdf” format) signature.

If an Officer whose signature is on a Security no longer holds that office at the time the Trustee authenticates the Security, the Security shall be valid nevertheless.

A Security shall not be entitled to any benefit under this Indenture or valid until an authorized signatory of the Trustee manually signs the certificate of authentication on the Security. The signature shall be conclusive evidence that the Security has been authenticated under this Indenture.

The Trustee may appoint one or more authenticating agents reasonably acceptable to the Issuer to authenticate the Securities. Any such appointment shall be evidenced by an instrument signed by a Trust Officer, a copy of which shall be furnished to the Issuer. Unless limited by the terms of such appointment, an authenticating agent may authenticate Securities whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by such agent. An authenticating agent has the same rights as any Registrar, Paying Agent or agent for service of notices and demands.

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SECTION 2.04. Registrar and Paying Agent.

(a) The Issuers shall maintain (i) an office or agency where Securities may be presented for registration of transfer or for exchange (the “Registrar”) and (ii) a Paying Agent. The Registrar shall keep a register of the Securities and of their transfer and exchange. The registered Holders will be treated as the owner of the Security for all purposes. Only registered Holders will have rights under this Indenture and the Securities. The Issuers may have one or more co-registrars and one or more additional paying agents. The term “Registrar” includes any co-registrars. The term “Paying Agent” includes the Paying Agent and any additional paying agents. The Issuers initially appoints the Trustee as Registrar, Paying Agent and the Securities Custodian with respect to the Global Securities. The Issuers initially appoints DTC to act as Depositary with respect to the Global Securities.

(b) The Issuers shall enter into an appropriate agency agreement with any Registrar or Paying Agent not a party to this Indenture, which shall incorporate the terms of the Trust Indenture Act. The agreement shall implement the provisions of this Indenture that relate to such agent. The Issuers shall notify the Trustee in writing of the name and address of any such agent. If the Issuer fails to maintain a Registrar or Paying Agent, the Trustee shall act as such and shall be entitled to appropriate compensation therefor pursuant to Section 7.07. The Issuers or any of its domestically organized Wholly Owned Subsidiaries may act as Paying Agent or Registrar.

(c) The Issuers may remove any Registrar or Paying Agent upon written notice to such Registrar or Paying Agent and to the Trustee and without prior notice to any Holder; provided, however, that no such removal shall become effective until (i) if applicable, acceptance of an appointment by a successor as evidenced by an appropriate agreement entered into by the Issuers and such successor Registrar or Paying Agent, as the case may be, and delivered to the Trustee or (ii) notification to the Trustee that the Trustee shall serve as Registrar or Paying Agent until the appointment of a successor in accordance with clause (i) above. The Registrar or Paying Agent may resign at any time upon written notice to the Issuer and the Trustee; provided, however, that the Trustee may resign as Paying Agent or Registrar only if the Trustee also resigns as Trustee in accordance with Section 7.08.

SECTION 2.05. Paying Agent to Hold Money in Trust. Prior to or on each due date of the principal of and interest on any Security, the Issuers shall deposit with a Paying Agent a sum sufficient to pay such principal and interest when so becoming due. The Issuers shall require each Paying Agent (other than the Trustee) to agree in writing that a Paying Agent shall hold in trust for the benefit of Holders or the Trustee all money held by a Paying Agent for the payment of principal of and interest on the Securities, and shall notify the Trustee in writing of any default by the Issuers in making any such payment. If the Issuers or a Wholly Owned Subsidiary of any Issuer acts as Paying Agent, it shall segregate the money held by it as Paying Agent and hold it in trust for the benefit of the Persons entitled thereto. The Issuers at any time may require a Paying Agent to pay all money held by it to the Trustee and to account for any funds disbursed by such Paying Agent. Upon complying with this Section, a Paying Agent shall have no further liability for the money delivered to the Trustee. Upon any bankruptcy or reorganization proceedings relating to the Issuers, the Trustee shall serve as Paying Agent for the Securities.

SECTION 2.06. Holder Lists. The Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of Holders. If the Trustee is not the Registrar, the Issuers shall furnish, or cause the Registrar to furnish, to the Trustee, in writing at least five Business Days before each interest payment date and at such other times as the Trustee may request in writing, a list in such form and as of such date as the Trustee may reasonably require of the names and addresses of Holders.

SECTION 2.07. Transfer and Exchange. The Securities shall be issued in registered form and shall be transferable only upon the surrender of a Security for registration of transfer and in compliance with the Appendix. When a Security is presented to the Registrar with a request to register a transfer, the Registrar shall register the transfer as requested if its requirements therefor are met. When Securities are presented to the Registrar with a request to exchange them for an equal principal amount of Securities of other denominations, the Registrar shall make the exchange as requested if the same requirements are met. To permit registration of transfers and exchanges, the Issuer shall execute and the Trustee shall authenticate Securities at the Registrar’s request. The Issuer may require payment of a sum sufficient to pay all taxes, assessments or other governmental charges in connection with any transfer or exchange pursuant to this Section. The Issuers shall not be required to make, and

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the Registrar need not register, transfers or exchanges of any Securities (i) selected for redemption (except, in the case of Securities to be redeemed in part, the portion thereof not to be redeemed) (ii) for a period of 15 days before the mailing of a notice of redemption of Securities to be redeemed or (iii) between a regular record date and the next succeeding interest payment date.

Prior to the due presentation for registration of transfer of any Security, the Issuers, any Guarantor, the Trustee, the Paying Agent and the Registrar may deem and treat the Person in whose name a Security is registered as the absolute owner of such Security for the purpose of receiving payment of principal of and interest on such Security and for all other purposes whatsoever, whether or not such Security is overdue, and none of the Issuers, any Guarantor, the Trustee, the Paying Agent or the Registrar shall be affected by notice to the contrary.

Any Holder of a beneficial interest in a Global Security shall, by acceptance of such beneficial interest, agree that transfers of beneficial interests in such Global Security may be effected only through a book-entry system maintained by (a) the Holder of such Global Security (or its agent) or (b) any Holder of a beneficial interest in such Global Security, and that ownership of a beneficial interest in such Global Security shall be required to be reflected in a book entry.

All Securities issued upon any transfer or exchange pursuant to the terms of this Indenture shall evidence the same debt and shall be entitled to the same benefits under this Indenture as the Securities surrendered upon such transfer or exchange.

SECTION 2.08. Replacement Securities. If a mutilated Security is surrendered to the Registrar or if the Holder of a Security claims that the Security has been lost, destroyed or wrongfully taken, the Issuers shall issue and the Trustee shall authenticate a replacement Security if the requirements of Section 8-405 of the New York UCC are met, such that the Holder (a) satisfies the Issuer or the Trustee within a reasonable time after such Holder has notice of such loss, destruction or wrongful taking and the Registrar does not register a transfer prior to receiving such notification, (b) makes such request to the Issuers or the Trustee prior to the Security being acquired by a protected purchaser as defined in Section 8-303 of the New York UCC (a “protected purchaser”) and (c) satisfies any other reasonable requirements of the Trustee. Such Holder shall furnish an indemnity bond sufficient in the judgment of (i) the Trustee to protect the Trustee or (ii) the Issuers to protect the Issuer, the Trustee, a Paying Agent and the Registrar from any loss that any of them may suffer if a Security is replaced. The Issuers and the Trustee may charge the Holder for their expenses in replacing a Security (including without limitation, attorneys’ fees and disbursements in replacing such Security). In the event any such mutilated, lost, destroyed or wrongfully taken Security has become or is about to become due and payable, the Issuer in its discretion may pay such Security instead of issuing a new Security in replacement thereof.

Every replacement Security is an additional obligation of the Issuers.

The provisions of this Section 2.08 are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, lost, destroyed or wrongfully taken Securities.

SECTION 2.09. Outstanding Securities. Securities outstanding at any time are all Securities authenticated by the Trustee except for those canceled by it, those delivered to it for cancellation, those paid pursuant to Section 2.08 and those described in this Section as not outstanding. Subject to Section 11.06, a Security does not cease to be outstanding because the Issuers or an Affiliate of the Issuers holds the Security.

If a Security is replaced pursuant to Section 2.08, it ceases to be outstanding unless the Trustee and the Issuers receive proof satisfactory to them that the replaced Security is held by a protected purchaser.

If a Paying Agent segregates and holds in trust, in accordance with this Indenture, on a redemption date or maturity date or any date of purchase pursuant to an offer to purchase money sufficient to pay all principal and interest payable on that date with respect to the Securities (or portions thereof) to be redeemed, maturing or purchased, as the case may be, and no Paying Agent is prohibited from paying such money to the Holders on that date pursuant to the terms of this Indenture, then on and after that date such Securities (or portions thereof) cease to be outstanding and interest on them ceases to accrue.

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SECTION 2.10. Temporary Securities. In the event that Definitive Securities are to be issued under the terms of this Indenture, until such Definitive Securities are ready for delivery, the Issuers may prepare and the Trustee shall authenticate temporary Securities. Temporary Securities shall be substantially in the form of Definitive Securities but may have variations that the Issuer considers appropriate for temporary Securities. Without unreasonable delay, the Issuers shall prepare and the Trustee shall authenticate Definitive Securities and make them available for delivery in exchange for temporary Securities upon surrender of such temporary Securities at the office or agency of the Issuer, without charge to the Holder. Until such exchange, temporary Securities shall be entitled to the same rights, benefits and privileges as Definitive Securities.

SECTION 2.11. Cancellation. The Issuers at any time may deliver Securities to the Trustee for cancellation. The Registrar and each Paying Agent shall forward to the Trustee any Securities surrendered to them for registration of transfer, exchange or payment. The Trustee, or at the direction of the Trustee, the Registrar or the Paying Agent and no one else shall cancel all Securities surrendered for registration of transfer, exchange, payment or cancellation and shall dispose of canceled Securities in accordance with its customary procedures (subject to the record retention requirement of the Exchange Act). The Issuers may not issue new Securities to replace Securities it has redeemed, paid or delivered to the Trustee for cancellation. The Trustee shall not authenticate Securities in place of canceled Securities other than pursuant to the terms of this Indenture.

SECTION 2.12. Defaulted Interest. If the Issuers default in a payment of interest on the Securities, the Issuers shall pay the defaulted interest then borne by the Securities (plus interest on such defaulted interest to the extent lawful) in any lawful manner. The Issuers may pay the defaulted interest to the Persons who are Holders on a subsequent special record date. The Issuers shall fix or cause to be fixed any such special record date and payment and shall promptly mail or cause to be sent to each affected Holder and the Trustee a notice that states the special record date, the payment date and the amount of defaulted interest to be paid.

SECTION 2.13. CUSIP Numbers, ISINs, etc.. The Issuers in issuing the Securities may use CUSIP numbers, ISINs and “Common Code” numbers (if then generally in use) and, if so, the Trustee shall use CUSIP numbers, ISINs and “Common Code” numbers in notices of redemption as a convenience to Holders; provided, however, that any such notice may state that no representation is made as to the correctness of such numbers, either as printed on the Securities or as contained in any notice of a redemption that reliance may be placed only on the other identification numbers printed on the Securities and that any such redemption shall not be affected by any defect in or omission of such numbers. The Issuers shall promptly advise the Trustee in writing of any change in the CUSIP numbers, ISINs and “Common Code” numbers.

SECTION 2.14. Calculation of Principal Amount of Securities. The aggregate principal amount of the Securities, at any date of determination, shall be the principal amount of the Securities outstanding at such date of determination. With respect to any matter requiring consent, waiver, approval or other action of the Holders of a specified percentage of the principal amount of all the Securities, such percentage shall be calculated, on the relevant date of determination, by dividing (a) the principal amount, as of such date of determination, of Securities, the Holders of which have so consented, by (b) the aggregate principal amount, as of such date of determination, of the Securities then outstanding, in each case, as determined in accordance with the preceding sentence, Section 2.09 and Section 11.06 of this Indenture. Any such calculation made pursuant to this Section 2.14 shall be made by the Issuer and delivered to the Trustee pursuant to an Officer’s Certificate.

ARTICLE 3

REDEMPTION

SECTION 3.01. Redemption. The Securities may be redeemed, in whole, or from time to time in part, subject to the conditions and at the redemption prices set forth in Paragraph 5 of the form of Securities set forth in Exhibit A hereto, which are hereby incorporated by reference and made a part of this Indenture, together with accrued and unpaid interest to, but excluding, the redemption date.

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SECTION 3.02. Applicability of Article. Redemption of Securities at the election of the Issuers or otherwise, as permitted or required by any provision of this Indenture, shall be made in accordance with such provision and this Article.

SECTION 3.03. Notices to Trustee. If the Issuers elect to redeem Securities pursuant to the optional redemption provisions of Paragraph 5 of the Security, it shall notify the Trustee in writing of (i) the paragraph or subparagraph of such Security and the Section of this Indenture pursuant to which the redemption shall occur, (ii) the redemption date, (iii) the principal amount of Securities to be redeemed and (iv) the redemption price. The Issuers shall give notice to the Trustee provided for in this paragraph at least 2 Business Days (or such shorter period as shall be acceptable to the Trustee) before notice of redemption is required to be delivered or mailed to Holders pursuant to this Section 3.03 but not more than 60 days before a redemption date if the redemption is pursuant to Paragraph 5 of the Security, provided, notice may be given more than 60 days prior to a redemption date if the notice (i) is issued in connection with Section 8.01 or (ii) is conditioned upon satisfaction (or waiver by the Issuers in their sole discretion) of one or more conditions precedent and any or all such conditions shall have not been satisfied (or waived by the Issuers in their sole discretion). Such notice shall be accompanied by an Officer’s Certificate from the Issuers to the effect that such redemption will comply with the conditions herein. Any such notice may be canceled at any time prior to notice of such redemption being sent to any Holder and shall thereby be void and of no effect.

SECTION 3.04. Selection of Securities to Be Redeemed. In the case of any partial redemption, the Trustee shall select the Securities to be redeemed (a) if the Securities are listed on any national securities exchange, in compliance with the requirements of the principal national securities exchange, if any, on which the Securities are listed (so long as such listing is known to the Trustee) or (b) if the Securities are not so listed, on a pro rata basis to the extent practicable or, to the extent that selection on a pro rata basis is not practicable, by lot or such other method as the Trustee shall deem fair and appropriate and otherwise in accordance with the customary procedures of the relevant Depositary; provided that no Securities of $2,000 or less shall be redeemed in part (or if a PIK Payment has been made, in minimum denominations of $1.00 and any integral multiple of $1.00 in excess thereof). The Trustee shall make the selection from outstanding Securities not previously called for redemption. The Trustee may select for redemption portions of the principal of Securities that have denominations larger than $2,000. Securities and portions of them that the Trustee selects shall be in amounts of $2,000 or any integral multiple of $1,000 in excess thereof or, in the case of any PIK Payment has been made, in minimum denominations of $1.00 and any integral multiple of $1.00 in excess thereof. Provisions of this Indenture that apply to Securities called for redemption also apply to portions of Securities called for redemption. The Trustee shall notify the Issuers promptly of the Securities or portions of Securities to be redeemed.

After the redemption date, upon surrender of the Security to be redeemed in part only, a new Security or Securities in principal amount equal to the unredeemed portion of the original Security representing the same Indebtedness to the extent not redeemed shall be issued in the name of the Holder of the Securities upon cancellation of the original Security (or appropriate book entries shall be made to reflect such partial redemption).

SECTION 3.05. Notice of Optional Redemption.

(a) At least 30 days but not more than 60 days before a redemption date pursuant to the optional redemption provisions of Paragraph 5 of the Security, the Issuers shall deliver electronically, mail or cause to be mailed by first-class mail a notice of redemption to each Holder whose Securities are to be redeemed (except that such notice of redemption may be delivered or mailed more than 60 days prior to a redemption date if the notice (i) is issued in connection with Section 8.01 or (ii) is conditioned upon satisfaction (or waiver by the Issuers in their sole discretion) of one or more conditions precedent and any or all such conditions shall have not been satisfied (or waived by the Issuers in their sole discretion)).

Any such notice shall identify the Securities to be redeemed and shall state:

(i) the redemption date;

(ii) the redemption price and the amount of accrued and unpaid interest to the redemption date; provided that in connection with a redemption under the second subparagraph of Paragraph 5(b) of the Security, the initial notice need not set forth the redemption price but only the manner of calculation thereof;

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(iii) the paragraph or subparagraph of the Securities and/or Section of this Indenture pursuant to which the Securities called for redemption are being redeemed;

(iv) the name and address of the Paying Agent;

(v) that Securities called for redemption must be surrendered to the Paying Agent to collect the redemption price, plus accrued interest;

(vi) if fewer than all the outstanding Securities are to be redeemed, the certificate numbers and principal amounts of the particular Securities to be redeemed, the aggregate principal amount of Securities to be redeemed and the aggregate principal amount of Securities to be outstanding after such partial redemption;

(vii) that, unless the Issuers default in making such redemption payment or the Paying Agent is prohibited from making such payment pursuant to the terms of this Indenture, interest on Securities (or portion thereof) called for redemption ceases to accrue on and after the redemption date;

(viii) any condition to such redemption;

(ix) the CUSIP number, ISIN and/or “Common Code” number, if any, printed on the Securities being redeemed; and

(x) that no representation is made as to the correctness or accuracy of the CUSIP number or ISIN and/or “Common Code” number, if any, listed in such notice or printed on the Securities.

(b) At the Issuers’ written request, the Trustee shall give the notice of redemption in the Issuers’ name and at the Issuers’ expense. In such event, the Issuer shall provide the Trustee with the information required by this Section at least 2 Business Days (or such shorter period as shall be acceptable to the Trustee) prior to the date such notice is to be provided to Holders.

(c) Such notice of redemption, and the related redemption, may, at the Issuers’ discretion, be subject to one or more conditions precedent, including, but not limited to, completion of the related Equity Offering. In addition, if such redemption is subject to satisfaction of one or more conditions precedent, such notice of redemption shall describe each such condition, and if applicable, shall state that, in the Issuers’ discretion, the redemption date may be delayed until such time as any or all such conditions shall be satisfied (or waived by the Issuers in their sole discretion) (provided, however, that the redemption price in respect of the Securities redeemed will be determined based on the applicable redemption date specified in the related notice of redemption, without giving effect to any extension or delay relating to the satisfaction of any condition precedent to such redemption plus accrued and unpaid interest thereon to, but not including, the actual redemption date), or that such redemption may not occur and such notice may be rescinded in the event that any or all such conditions shall not have been satisfied (or waived by the Issuers in their sole discretion) by the redemption date as stated in such notice, or by the redemption date as so delayed. The Issuers may provide in such notice that payment of the redemption price and performance of the Issuers’ obligations with respect to such redemption may be performed by another Person.

SECTION 3.06. Effect of Notice of Redemption. Once notice of redemption is mailed or sent in accordance with Section 3.05, Securities called for redemption become due and payable on the redemption date and at the redemption price stated in the notice, except as provided in the final sentence under the “Optional Redemption” provisions of paragraph 5 of the Securities. Upon surrender to the Paying Agent, such Securities shall be paid at the redemption price stated in the notice, plus accrued interest, to, but not including, the redemption date; provided, however, that if the redemption date is after a regular record date and on or prior to the interest payment date, the accrued interest shall be payable to the Holder of the redeemed Securities registered on the relevant record

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date. The notice, if mailed or delivered in a manner herein provided, shall be conclusively presumed to have been given, whether or not the Holder receives such notice. Failure to give notice or any defect in the notice to any Holder shall not affect the validity of the notice to any other Holder.

SECTION 3.07. Deposit of Redemption Price. With respect to any Securities, prior to 11:00 a.m., New York City time, on the redemption date, the Issuer shall deposit with the Paying Agent (or, if the Issuer or a Wholly Owned Subsidiary is the Paying Agent, shall segregate and hold in trust) money sufficient to pay the redemption price of and accrued interest on all Securities or portions thereof to be redeemed on that date other than Securities or portions of Securities called for redemption that have been delivered by the Issuer to the Trustee for cancellation. On and after the redemption date, interest shall cease to accrue on Securities or portions thereof called for redemption so long as the Issuer has deposited with the Paying Agent funds sufficient to pay the principal of, plus accrued and unpaid interest on, the Securities to be redeemed, unless the Paying Agent is prohibited from making such payment pursuant to the terms of this Indenture or applicable law. If a Security is redeemed on or after a record date but on or prior to the related Interest Payment Date, then any accrued and unpaid interest to the redemption date shall be paid on the relevant Interest Payment Date to the Person in whose name such Security was registered at the close of business on such record date.

SECTION 3.08. Securities Redeemed in Part. Upon surrender of a Security that is redeemed in part, the Issuers shall execute and the Trustee shall authenticate for the Holder (at the Issuer’s expense) a new Security equal in principal amount to the unredeemed portion of the Security surrendered; provided that each new Security shall be in a principal amount of $2,000 or an integral multiple of $1,000 in excess thereof or, in case any PIK Payment has been made, in minimum denominations of $1.00 and any integral multiple of $1.00 in excess thereof. It is understood that, notwithstanding anything in this Indenture to the contrary, only an Authentication Order and not an Opinion of Counsel or Officer’s Certificate is required for the Trustee to authenticate such new Security.

ARTICLE 4

COVENANTS

SECTION 4.01. Payment of Securities. The Issuers shall promptly pay the principal of and interest on the Securities on the dates and in the manner provided in the Securities and in this Indenture. An installment of principal or interest shall be considered paid on the date due if on such date the Trustee or the Paying Agent holds as of 11:00 a.m., New York City time, money sufficient to pay all principal and interest then due and the Trustee or the Paying Agent, as the case may be, is not prohibited from paying such money to the Holders on that date pursuant to the terms of this Indenture; provided that, if the Issuers elect to pay interest in the form of PIK Interest in the manner provided for herein and in the Securities, then all such interest paid in the form of PIK Interest shall be considered paid or duly provided for, for all purposes of this Indenture, and shall not be considered overdue.

The Issuers shall pay interest on overdue principal at the rate specified therefor in the Securities, and it shall pay interest on overdue installments of interest at the same rate borne by the Securities to the extent lawful.

SECTION 4.02. Reports.

(a) So long as any Securities are outstanding, the Issuer will furnish to the Trustee within 15 days after each of the periods set forth below:

(i) within 90 days after the end of each fiscal year, annual reports containing substantially all of the information that would have been required to be contained in an Annual Report on Form 10-K of the Issuer, or any successor or comparable form, containing the information required to be contained therein, or required in such successor or comparable form;

(ii) within 45 days after the end of each of the first three fiscal quarters of each fiscal year, commencing with the second fiscal quarter of the fiscal year commencing January 1, 2013, quarterly reports containing substantially all of the information that would have been

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required to be contained in a Quarterly Report on Form 10-Q of the Issuer containing all quarterly information that would be required to be contained in Form 10-Q, or any successor or comparable form; and

(iii) promptly from time to time after the occurrence of an event required to be therein reported, such other reports on Form 8-K, or any successor or comparable form; provided, however, that no such report or information will be required to be so furnished if the Issuer determines in good faith that such event is not material to the Holders of the Securities or the business, assets, operations or financial condition of the Issuer and its Restricted Subsidiaries, taken as a whole;

in each case, in a manner that complies in all material respects with the requirements specified in such form; provided that the Issuer shall make available such information to prospective purchasers of Securities, in addition to providing such information to the Trustee and the Holders of Securities, including by posting such information on a password protected online data system requiring user identification or the website of Opco, the Issuer or any of its parent companies (which may be password protected so long as the password is made promptly available by the Issuer to the Trustee, the Holders of Securities and such prospective purchasers upon request); provided, further, that such reports required pursuant to clauses (1), (2) and (3) above (a) shall not be required to comply with Section 302, Section 404 or 906 of the Sarbanes-Oxley Act of 2002, as amended, or related Items 307, 308 and 308T of Regulation S-K promulgated by the SEC, or Item 10(e) of Regulation S-K (with respect to any non-GAAP financial measures contained therein), (b) shall not be required to comply with Items 402, 403, 406 and 407 of Regulation S-K promulgated by the SEC, (c) shall not be required to comply with Rule 3-10 or Rule 3-16 of Regulation S-X and (d) shall not be required to include any exhibits that would have been required to be filed pursuant to Item 601 of Regulation S-K promulgated by the SEC. The Trustee shall have no obligation whatsoever to determine whether or not such information has been posted. In addition, to the extent not satisfied by the foregoing, the Issuer will agree that, for so long as any Securities are outstanding, it will furnish to Holders and to securities analysts and prospective investors, upon their request, the information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act.

(b) For so long as the Issuer and its Subsidiaries (other than Opco and its Subsidiaries) do not have any material assets on a consolidated basis that are not reflected on a consolidated balance sheet of Opco (other than (i) cash and cash equivalents, (ii) Equity Interests and Indebtedness of Holdings and any Subsidiary of Holdings or Opco, and (iii) Equity Interests and Indebtedness of the Co-Issuer) and do not conduct any material operations that are not conducted through Opco and its Subsidiaries, this Indenture permits the Issuer to satisfy its reporting obligations under this Section 4.02 relating to the Issuer by furnishing the annual reports on Form 10-K, quarterly reports on Form 10-Q, other reports on Form 8-K and other financial information relating to Opco; provided, however, that the same is accompanied by information that explains in reasonable detail the differences between the financial information relating to the Issuer and its consolidated Subsidiaries (other than Opco and its Subsidiaries, as the case may be) on the one hand, and the financial information reflected in such financial information relating to Opco and its consolidated Subsidiaries, on the other hand; provided, further, that any obligation of the Issuer to furnish or deliver any such reports and information to the Trustee, the Holders of the Securities and such prospective purchasers shall be deemed satisfied if such reports or information shall have been filed by Opco with the SEC pursuant to its Electronic Data Gathering Analysis and Retrieval System (or any successor system). To the extent financial information, including any financial statements, of Opco are substituted for those of the Issuer in reliance on the foregoing sentence, then references in the Indenture to any financial statement of the Issuer shall be deemed to refer to the financial information for the Issuer and the Subsidiaries of the Issuer described above.

(c) In the event that any direct or indirect parent company of the Issuer becomes a guarantor of the Securities, the Issuer may satisfy its obligations under this Section 4.02 with respect to financial information relating to the Issuer by furnishing financial information relating to such parent; provided that the same is accompanied by consolidating information that explains in reasonable detail the differences between the information relating to such parent, on the one hand, and the information relating to the Issuer and its Restricted Subsidiaries on a standalone basis, on the other hand.

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(d) Notwithstanding the foregoing, the requirements of this Section 4.02 shall be deemed satisfied prior to the commencement of the Exchange Offer or the effectiveness of the Shelf Registration Statement by the filing with the SEC of the Exchange Offer Registration Statement or Shelf Registration Statement or any other filing, and any amendments thereto, with such financial information that satisfies Regulation S-X of the Securities Act.

(e) Notwithstanding anything herein to the contrary, failure by the Issuer to comply with any of its obligations under this Section 4.02 for purposes of Section 6.01(c) will not constitute an Event of Default thereunder until 90 days after the receipt of the written notice delivered thereunder. To the extent any information is not provided within the time periods specified in this Section 4.02 and such information is subsequently provided, the Issuer will be deemed to have satisfied its obligations with respect thereto at such time and any Default with respect thereto shall be deemed to have been cured.

(f) Delivery of such reports, information and documents to the Trustee is for informational purposes only and the Trustee’s receipt of such shall not constitute constructive notice of any information contained therein or determinable from information contained therein, including the Issuer’s compliance with any of its covenants hereunder (as to which the Trustee is entitled to rely exclusively on Officer’s Certificates with respect thereto).

SECTION 4.03. Limitation on Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock.

(a) The Issuer shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly, create, incur, issue, assume, guarantee or otherwise become directly or indirectly liable, contingently or otherwise (collectively, “incur” and collectively, an “incurrence”) with respect to any Indebtedness (including Acquired Indebtedness) and the Issuer shall not issue any shares of Disqualified Stock and shall not permit any Restricted Subsidiary to issue any shares of Disqualified Stock or Preferred Stock; provided, however, that (i) the Issuer may incur Indebtedness (including Acquired Indebtedness) or issue shares of Disqualified Stock, and any of its Restricted Subsidiaries (other than Opco and its Restricted Subsidiaries) may incur Indebtedness (including Acquired Indebtedness), issue shares of Disqualified Stock and issue shares of Preferred Stock, if the Fixed Charge Coverage Ratio on a consolidated basis for the Issuer and its Restricted Subsidiaries’ most recently ended four fiscal quarters for which internal financial statements are available immediately preceding the date on which such additional Indebtedness is incurred or such Disqualified Stock or Preferred Stock is issued would have been at least 2.00 to 1.00, determined on a pro forma basis (including a pro forma application of the net proceeds therefrom), as if the additional Indebtedness had been incurred, or the Disqualified Stock or Preferred Stock had been issued, as the case may be, and the application of the proceeds therefrom had occurred at the beginning of such four-quarter period and (ii) Opco may incur Indebtedness (including Acquired Indebtedness) or issue shares of Disqualified Stock, and any of its Restricted Subsidiaries may incur Indebtedness (including Acquired Indebtedness), issue shares of Disqualified Stock and issue shares of Preferred Stock, if the Fixed Charge Coverage Ratio on a consolidated basis for Opco and its Restricted Subsidiaries’ most recently ended four fiscal quarters for which internal financial statements are available immediately preceding the date on which such additional Indebtedness is incurred or such Disqualified Stock or Preferred Stock is issued would have been at least 2.00 to 1.00, determined on a pro forma basis (including a pro forma application of the net proceeds therefrom), as if the additional Indebtedness had been incurred, or the Disqualified Stock or Preferred Stock had been issued, as the case may be, and the application of the proceeds therefrom had occurred at the beginning of such four-quarter period.

(b) Section 4.03(a) shall not apply to:

(i) (x) Indebtedness incurred pursuant to the ABL Facility by the Issuer or any Restricted Subsidiary; provided that immediately after giving effect to any such incurrence, the aggregate principal amount of all Indebtedness incurred under this clause (x) and then outstanding does not exceed the greater of (A) $400.0 million and (B) the Borrowing Base, less the aggregate principal amount of Indebtedness incurred and outstanding pursuant to a Receivables Facility and (y) Indebtedness incurred pursuant to the Term Loan Facility by the Issuer or any Restricted Subsidiary; provided that after giving effect to any such incurrence, the aggregate principal amount of all Indebtedness incurred under this clause (y) and then outstanding does not exceed $1,375.0 million;

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(ii) the incurrence by the Issuers and any Guarantor of Indebtedness represented by (A) the Securities (including any Guarantee) (other than any Additional Securities), and any increase in the principal amount of the Securities and any PIK Notes issued in respect of any PIK Payment in accordance with the terms of this Indenture and (B) any exchange notes and any related exchange guarantees issued in exchange for the Securities pursuant to the Registration Rights Agreement;

(iii) Indebtedness of the Issuer and its Restricted Subsidiaries in existence on the Issue Date (other than Indebtedness described in clauses (i) and (ii) of this Section 4.03(b));

(iv) (x) Indebtedness (including Capitalized Lease Obligations) incurred or Disqualified Stock issued by the Issuer or any Restricted Subsidiary and Preferred Stock issued by any Restricted Subsidiary, to finance the purchase, lease, replacement or improvement of property (real or personal) or equipment, whether through the direct purchase of assets or the Capital Stock of any Person owning such assets and (y) any Indebtedness incurred or Disqualified Stock or Preferred Stock issued to refund, refinance or replace any other Indebtedness incurred or Disqualified Stock or Preferred Stock issued pursuant to this clause (iv); provided that the aggregate amount of Indebtedness incurred and Disqualified Stock and Preferred Stock issued pursuant to clauses (i) and (ii) of this clause (iv) does not exceed the greater of (x) $65.0 million and (y) 2.25% of Consolidated Total Assets, at any one time outstanding;;

(v) Indebtedness incurred by the Issuer or any of its Restricted Subsidiaries constituting reimbursement obligations with respect to letters of credit, bank guarantees, bankers acceptances, warehouse receipts or similar instruments issued in the ordinary course of business, including, without limitation, letters of credit in respect of workers’ compensation claims, health, disability or other employee benefits or property, casualty or liability insurance or self-insurance, unemployment insurance or other social security legislation or other Indebtedness with respect to reimbursement type obligations regarding workers’ compensation claims; provided, however, that upon the drawing of such letters of credit or the incurrence of such Indebtedness, such obligations are reimbursed within 30 Business Days following such drawing or incurrence;

(vi) Indebtedness arising from agreements of the Issuer or its Restricted Subsidiaries providing for indemnification, adjustment of purchase price, earnouts or similar obligations, in each case, incurred or assumed in connection with the acquisition or disposition of any business, assets or a Subsidiary, other than guarantees of Indebtedness incurred by any Person acquiring all or any portion of such business, assets or a Subsidiary for the purpose of financing such acquisition; provided, however, that such Indebtedness either (i) does not exceed at any time outstanding $10.0 million or (ii) is not reflected on the balance sheet of the Issuer, or any of its Restricted Subsidiaries prepared in accordance with GAAP (contingent obligations referred to in a footnote to financial statements and not otherwise reflected on the balance sheet will not be deemed to be reflected on such balance sheet for purposes of this clause (vi);

(vii) Indebtedness of the Issuer to a Restricted Subsidiary; provided that any such Indebtedness owing to a Restricted Subsidiary that is not a Guarantor is expressly subordinated in right of payment to the Securities; provided further that any subsequent issuance or transfer of any Capital Stock or any other event which results in any Restricted Subsidiary ceasing to be a Restricted Subsidiary or any other subsequent transfer of any such Indebtedness (except to the Issuer or another Restricted Subsidiary or any pledge of such Indebtedness constituting a Permitted Lien) shall be deemed, in each case, to be an incurrence of such Indebtedness not permitted by this clause (vii);

(viii) Indebtedness of a Restricted Subsidiary to the Issuer or another Restricted Subsidiary; provided that if a Guarantor incurs such Indebtedness to a Restricted Subsidiary that is not a Guarantor, such Indebtedness is expressly subordinated in right of payment to the Guarantee of the Securities of such Guarantor; provided further that any subsequent issuance or transfer of any Capital Stock or any other event which results in any such Restricted Subsidiary ceasing to be a Restricted Subsidiary or any subsequent transfer of any such Indebtedness (except to the Issuer or another Restricted Subsidiary or any pledge of such Indebtedness constituting a Permitted Lien) shall be deemed, in each case, to be an incurrence of such Indebtedness not permitted by this clause (viii);

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(ix) shares of Preferred Stock of a Restricted Subsidiary issued to the Issuer or another Restricted Subsidiary, provided that any subsequent issuance or transfer of any Capital Stock or any other event which results in any such Restricted Subsidiary ceasing to be a Restricted Subsidiary or any other subsequent transfer of any such shares of Preferred Stock (except to the Issuer or another of its Restricted Subsidiaries) shall be deemed in each case to be an issuance of such shares of Preferred Stock not permitted by this clause (ix);

(x) (x) Hedging Obligations (excluding Hedging Obligations entered into for speculative purposes) and (y) Indebtedness in respect of any Bank Products or Cash Management Services in the ordinary course of business;

(xi) obligations (including reimbursement obligations with respect to letters of credit, bank guarantees or other similar instruments) in respect of performance, bid, appeal and surety bonds and performance and completion guarantees or obligations in respect of letters of credit related thereto provided by the Issuer or any of its Restricted Subsidiaries in the ordinary course of business or consistent with past practice or industry practices;

(xii) (a) Indebtedness or Disqualified Stock of the Issuer and Indebtedness, Disqualified Stock or Preferred Stock of the Issuer or any Restricted Subsidiary equal to 100.0% of the net cash proceeds received by the Issuer since immediately after the Issue Date from the issue or sale of Equity Interests of the Issuer or cash contributed to the capital of the Issuer (in each case, other than proceeds of Disqualified Stock or sales of Equity Interests to the Issuer or any of its Subsidiaries) as determined in accordance with Sections 4.04(a)(3)(B) and (C) to the extent such net cash proceeds or cash have not been applied pursuant to such clauses to make Restricted Payments or to make other Investments, payments or exchanges pursuant to Section 4.04(b) or to make Permitted Investments (other than Permitted Investments specified in clauses (i) and (iii) of the definition thereof) and (b) Indebtedness or Disqualified Stock of the Issuer and Indebtedness, Disqualified Stock or Preferred Stock any Restricted Subsidiary not otherwise permitted hereunder in an aggregate principal amount or liquidation preference, which when aggregated with the principal amount and liquidation preference of all other Indebtedness, Disqualified Stock and Preferred Stock then outstanding and incurred or issued, as applicable, pursuant to this clause (xii)(b), does not at any one time outstanding exceed the greater of (x) $150.0 million and (y) 5.0% of Consolidated Total Assets (it being understood that any Indebtedness incurred or Disqualified Stock or Preferred Stock issued pursuant to this clause (xii)(b) shall cease to be deemed incurred, issued or outstanding for purposes of this clause (xii)(b) but shall be deemed incurred or issued for the purposes of Section 4.03(a) from and after the first date on which the Issuer or such Restricted Subsidiary could have incurred such Indebtedness or issued such Disqualified Stock or Preferred Stock under Section 4.03(a) without reliance on this clause (xii)(b));

(xiii) the incurrence by the Issuer or any Restricted Subsidiary of Indebtedness or issuance of Disqualified Stock or the issuance by any Restricted Subsidiary of Preferred Stock which serves to extend, replace, refund, refinance, renew or defease any Indebtedness incurred (including any existing commitments unutilized thereunder) or Disqualified Stock or Preferred Stock issued as permitted under Section 4.03(a) and clauses (ii), (iii), (ix), (xii)(a), this clause (xiii) and clause (xiv) of this Section 4.03(b) or any Indebtedness incurred or Disqualified Stock or Preferred Stock issued to so extend, replace, refund, refinance or renew such Indebtedness, Disqualified Stock or Preferred Stock including additional Indebtedness incurred or Disqualified Stock or Preferred Stock issued to pay premiums (including tender premiums), defeasance costs and fees and expenses (including original issue discount, upfront fees or similar fees) in connection therewith (the “Refinancing Indebtedness”) prior to its respective maturity; provided, however, that such Refinancing Indebtedness:

(1) has a Weighted Average Life to Maturity at the time such Refinancing Indebtedness is incurred or issued which is not less than the remaining Weighted Average Life to Maturity of the Indebtedness, Disqualified Stock or Preferred Stock being extended, replaced, refunded, refinanced, renewed or defeased (except by virtue of prepayment of such Indebtedness);

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(2) to the extent such Refinancing Indebtedness extends, replaces, refunds, refinances, renews or defeases (x) Indebtedness subordinated to or pari passu with the Securities or any Guarantee thereof, such Refinancing Indebtedness is subordinated to or pari passu with the Securities or the Guarantee at least to the same extent as the Indebtedness being extended, replaced, refunded, refinanced, renewed or defeased except, with respect to any indebtedness being extended, replaced, refunded, refinanced, renewed or defeased that is subordinated to the Securities or any Guarantee thereof, to the extent such extension, replacement, refund, refinancing, renewal or defeasance constitutes a Restricted Payment and such Restricted Payment is permitted to be made under Section 4.04 or (y) Disqualified Stock or Preferred Stock, such Refinancing Indebtedness must be Disqualified Stock or Preferred Stock, respectively; and

(3) shall not include (x) Indebtedness, Disqualified Stock or Preferred Stock of a Subsidiary of the Issuer that is not a Guarantor that refinances Indebtedness, Disqualified Stock or Preferred Stock of the Issuer, (y) Indebtedness, Disqualified Stock or Preferred Stock of a Subsidiary of the Issuer that is not a Guarantor that refinances Indebtedness, Disqualified Stock or Preferred Stock of a Guarantor, or (z) Indebtedness, Disqualified Stock or Preferred Stock of the Issuer or a Restricted Subsidiary that refinances Indebtedness, Disqualified Stock or Preferred Stock of an Unrestricted Subsidiary;

and provided, further, that subclause (1) of this clause (xiii) will not apply to any extension, replacement, refunding, refinancing, renewal or defeasance of any Indebtedness outstanding under a Senior Credit Facility;

(xiv) Indebtedness, Disqualified Stock or Preferred Stock of (x) the Issuer or a Restricted Subsidiary incurred or issued to finance an acquisition, merger, consolidation or amalgamation or (y) Persons that are acquired by the Issuer or any Restricted Subsidiary or merged into or amalgamated or consolidated with or into the Issuer or a Restricted Subsidiary in accordance with the terms of this Indenture or that is assumed by the Issuer or any Restricted Subsidiary in connection with such acquisition; provided that after giving effect to such acquisition, merger, amalgamation or consolidation:

(1) in the case of Indebtedness, Disqualified Stock or Preferred Stock incurred or assumed by the Issuer or its Restricted Subsidiaries (other than Opco and its Subsidiaries), either:

(a) the Issuer would be permitted to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in Section 4.03(a)(i); or

(b) the Fixed Charge Coverage Ratio of the Issuer and the Restricted Subsidiaries is equal to or greater than immediately prior to such acquisition, merger, amalgamation or consolidation;

(2) in the case of Indebtedness, Disqualified Stock or Preferred Stock incurred or assumed by Opco or its Restricted Subsidiaries, either:

(a) Opco would be permitted to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in Section 4.03(a)(ii), or

(b) the Fixed Charge Coverage Ratio of Opco and its Restricted Subsidiaries is equal to or greater than immediately prior to such acquisition, merger, amalgamation or consolidation;

(xv) Indebtedness (1) arising from the honoring by a bank or other financial institution of a check, draft or similar instrument drawn against insufficient funds in the ordinary course of business; provided that such Indebtedness is extinguished within five Business Days of its incurrence and (2) Indebtedness in respect of any agreement to provide cash management services, including treasury, depository, overdraft, credit or debit card, electronic funds transfer and other cash management arrangements entered into in the ordinary course of business;

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(xvi) Indebtedness of the Issuer or any of its Restricted Subsidiaries supported by a letter of credit or bank guarantee issued pursuant to a Senior Credit Facility, in a principal amount not in excess of the stated amount of such letter of credit or bank guarantee;

(xvii) (1) any guarantee by the Issuer or a Restricted Subsidiary of Indebtedness or other obligations of any Restricted Subsidiary so long as the incurrence of such Indebtedness incurred by such Restricted Subsidiary is permitted under the terms of the Indenture, or (2) any guarantee by a Restricted Subsidiary of Indebtedness of the Issuer provided that such guarantee is incurred in accordance with Section 4.15

(xviii) Indebtedness of Foreign Subsidiaries of the Issuer and Subsidiaries of the Issuer that are not Guarantors incurred not to exceed, together with any other Indebtedness incurred under this clause (xviii) at any one time outstanding, the greatest of (x) $75.0 million, (y) 7.5% of the Consolidated Total Assets of the Foreign Subsidiaries and (z) 2.5% of Consolidated Total Assets (it being understood that any Indebtedness incurred pursuant to this clause (xviii) shall cease to be deemed incurred or outstanding for purposes of this clause (xviii) but shall be deemed incurred for the purposes of Section 4.03(a) from and after the first date on which the applicable Foreign Subsidiary could have incurred such Indebtedness under Section 4.03(a) without reliance on this clause (xviii));

(xix) Indebtedness of the Issuer or any of its Restricted Subsidiaries consisting of (i) the financing of insurance premiums or (ii) take-or-pay obligations contained in supply arrangements, in each case incurred in the ordinary course of business;

(xx) Indebtedness consisting of Indebtedness issued by the Issuer or any of its Restricted Subsidiaries to future, present or former employee, officer, director, member of management or consultant (or the estate, heirs, family members, spouse, former spouse, domestic partner or former domestic partner of any of the foregoing), or any direct or indirect parent thereof, in each case to finance the purchase or redemption of Equity Interests of the Issuer, a Restricted Subsidiary or any of their direct or indirect parent companies to the extent described in Section 4.04(b)(iv); and

(xxi) Indebtedness incurred by a Receivables Subsidiary in a Receivables Facility that is not recourse to the Issuer or any Restricted Subsidiary other than the Receivables Subsidiary (except for Standard Securitization Undertakings).

For purposes of determining compliance with this Section 4.03, in the event that an item of Indebtedness, Disqualified Stock or Preferred Stock (or any portion thereof) meets the criteria of more than one of the categories of permitted Indebtedness, Disqualified Stock or Preferred Stock described in clauses (i) through (xxi) above or is entitled to be incurred pursuant to Section 4.03(a), then the Issuer shall, in its sole discretion, classify or reclassify, or later divide, classify or reclassify, such item of Indebtedness, Disqualified Stock or Preferred Stock (or any portion thereof) in any manner that complies with this Section 4.03; provided that all Indebtedness outstanding under the Senior Credit Facilities on July 27, 2012 will at all times be deemed outstanding in reliance on Section 4.03(b)(i).

Accrual of interest or dividends, the accretion of accreted value, the accretion or amortization of original issue discount, and the payment of interest or dividends in the form of additional Indebtedness, Disqualified Stock or Preferred Stock, as the case may be, of the same class, accretion or amortization of original issue discount or liquidation preference and increases in the amount of Indebtedness outstanding solely as a result of fluctuations in the exchange rate of currencies will not be deemed to be an incurrence of Indebtedness or issuance of Disqualified Stock or Preferred Stock for purposes of this Section 4.03. Guarantees of, or obligations in respect of letters of credit relating to, Indebtedness which is otherwise included in the determination of a particular amount of Indebtedness shall not be included in the determination of such amount of Indebtedness; provided that the incurrence of the Indebtedness represented by such guarantee or letter of credit, as the case may be, was in compliance with this Section 4.03.

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For purposes of determining compliance with any U.S. dollar-denominated restriction on the incurrence of Indebtedness or issuance of Disqualified Stock or Preferred Stock, the U.S. dollar-equivalent principal amount or liquidation preference, as applicable, of Indebtedness, Disqualified Stock or Preferred Stock denominated in a foreign currency shall be calculated based on the relevant currency exchange rate in effect on the date such Indebtedness was incurred, in the case of term debt, or first committed or first incurred (whichever yields the lower U.S. dollar equivalent), in the case of revolving credit debt; provided that if such Indebtedness is incurred or Disqualified Stock or Preferred Stock is issued, to extend, replace, refund, refinance, renew or defease other Indebtedness, Disqualified Stock or Preferred Stock, as applicable, denominated in a foreign currency, and such extension, replacement, refunding, refinancing, renewal or defeasance would cause the applicable U.S. dollar-denominated restriction to be exceeded if calculated at the relevant currency exchange rate in effect on the date of such extension, replacement, refunding, refinancing, renewal or defeasance, such U.S. dollar-denominated restriction shall be deemed not to have been exceeded so long as the principal amount or liquidation preference, as applicable, of such refinancing Indebtedness, Disqualified Stock or Preferred Stock does not exceed (x) the principal amount or liquidation preference, as applicable, of such Indebtedness, Disqualified Stock or Preferred Stock, as applicable, being extended, replaced, refunded, refinanced, renewed or defeased plus (y) the aggregate amount of fees, underwriting discounts, premiums (including tender premiums) and other costs and expenses (including original issue discount, upfront fees or similar fees) incurred in connection with such refinancing.

The principal amount of any Indebtedness incurred to refinance other Indebtedness, if incurred in a different currency from the Indebtedness being refinanced, shall be calculated based on the currency exchange rate applicable to the currencies in which such respective Indebtedness is denominated that is in effect on the date of such refinancing. The Issuer shall not directly or indirectly, incur any Indebtedness (including Acquired Indebtedness) that is contractually subordinated or junior in right of payment to any Indebtedness of the Issuer unless such Indebtedness is expressly subordinated in right of payment to the Securities to the extent and in the same manner as such Indebtedness is subordinated to other Indebtedness of the Issuer.

For purposes of this Indenture, Indebtedness that is unsecured is not deemed to be subordinated or junior to Secured Indebtedness merely because it is unsecured, and senior indebtedness is not deemed to be subordinated or junior to any other senior indebtedness merely because it has a junior priority with respect to the same collateral.

SECTION 4.04. Limitation on Restricted Payments.

(a) The Issuer shall not, and shall not permit any of the Restricted Subsidiaries to, directly or indirectly:

(i) declare or pay any dividend or make any other payment or any distribution on account of the Issuer’s or any of its Restricted Subsidiaries’ Equity Interests (in each case, solely in such Person’s capacity as holder of such Equity Interests), including any dividend or distribution payable in connection with any merger or consolidation (other than (A) dividends or distributions by the Issuer payable solely in Equity Interests (other than Disqualified Stock) of the Issuer; or (B) dividends or distributions by a Restricted Subsidiary so long as, in the case of any dividend or distribution payable on or in respect of any class or series of securities issued by a Restricted Subsidiary other than a Wholly Owned Subsidiary, the Issuer or a Restricted Subsidiary receives at least its pro rata share of such dividend or distribution in accordance with its Equity Interests in such class or series of securities);

(ii) purchase, redeem, defease or otherwise acquire or retire for value any Equity Interests of the Issuer or any direct or indirect parent of the Issuer, including in connection with any merger or consolidation, in each case held by Persons other than the Issuer or a Restricted Subsidiary;

(iii) make any principal payment on, or redeem, repurchase, defease or otherwise acquire or retire for value, in each case prior to any scheduled repayment, sinking fund payment or maturity, any Subordinated Indebtedness of the Issuer or a Guarantor, other than (A) Indebtedness permitted under clauses (vii) and (viii) of Section 4.03(b); or (B) the payment, redemption, repurchase, defeasance, acquisition or retirement for value of Subordinated Indebtedness purchased in anticipation of satisfying a sinking fund obligation, principal installment or final maturity, in each case due within one year of the date of such payment, redemption, repurchase, defeasance, acquisition or retirement; or

(iv) make any Restricted Investment;

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(all such payments and other actions set forth in clauses (i) through (iv) above being collectively referred to as “Restricted Payments”), unless, at the time of such Restricted Payment:

(1) no Default shall have occurred and be continuing or would occur as a consequence thereof;

(2) immediately after giving effect to such transaction on a pro forma basis, (x) in the case of a Restricted Payment by the Issuer or any of its Restricted Subsidiaries (other than Opco and its Subsidiaries), the Issuer could incur $1.00 of additional Indebtedness under Section 4.03(a)(i) or (y) in the case of a Restricted Payment by Opco or any of its Restricted Subsidiaries, Opco could incur $1.00 of additional Indebtedness under Section 4.03(a)(ii); and

(3) such Restricted Payment, together with the aggregate amount of all other Restricted Payments made by the Issuer and its Restricted Subsidiaries after July 27, 2012 (including Restricted Payments permitted by clauses (i), (vi)(c), (ix) and (xiv) of Section 4.04(b) but excluding all other Restricted Payments permitted by Section 4.04(b) hereof), is less than the sum of (without duplication):

(A) 50% of the Consolidated Net Income of (x) the Issuer for the period (taken as one accounting period) beginning on July 1, 2012 (with the Consolidated Net Income of Opco substituting for the Consolidated Net Income of the Issuer for the period from July 1, 2012 to the Issue Date) to the end of the Issuer’s most recently ended fiscal quarter for which internal financial statements are available at the time of such Restricted Payment, in the case of a Restricted Payment by the Issuer or any of its Restricted Subsidiaries (other than Opco and its Subsidiaries) or (y) Opco for the period (taken as one accounting period) beginning on July 1, 2012 to the end of Opco’s most recently ended fiscal quarter for which internal financial statements are available at the time of such Restricted Payment, in the case of a Restricted Payment by Opco or any of its Restricted Subsidiaries, or, in each case, in the case such Consolidated Net Income for such period is a deficit, minus 100% of such deficit; plus

(B) 100% of the aggregate net cash proceeds and the fair market value, as determined in good faith by the Issuer, of marketable securities or other property received by the Issuer since the Issue Date (other than net cash proceeds to the extent such net cash proceeds have been used to incur Indebtedness, Disqualified Stock or Preferred Stock pursuant to Section 4.03(b)(xii)(1) from the issue or sale of: (i) (A) Equity Interests of the Issuer, including Treasury Capital Stock (as defined below), but excluding cash proceeds and the fair market value, as determined in good faith by the Issuer, of marketable securities or other property received from the sale of: (x) Equity Interests to any future, present or former employee, officer, director, member of management or consultant (or the estate, heirs, family members, spouse, former spouse, domestic partner or former domestic partner of any of the foregoing) of the Issuer, any direct or indirect parent company of the Issuer and the Issuer’s Subsidiaries since the Issue Date to the extent such amounts have been applied to Restricted Payments made in accordance with clause (iv) of Section 4.04(b) hereof; and (y) Designated Preferred Stock; and (B) to the extent such net cash proceeds are actually contributed to the Issuer, Equity Interests of the Issuer’s direct or indirect parent companies (excluding contributions of the proceeds from the sale of Designated Preferred Stock of such companies or contributions to the extent such amounts have been applied to Restricted Payments made in accordance with clause (iv) of Section 4.04(b) hereof); or (ii) debt securities of the Issuer that have been converted into or exchanged for Equity Interests of the Issuer or its direct or indirect parent companies; provided, however, that this clause (b) shall not include the proceeds from (W) Refunding Capital Stock (as defined below), (X) Equity Interests or convertible debt securities of the Issuer sold to a Restricted Subsidiary, (Y) Disqualified Stock or debt securities that have been converted into Disqualified Stock or (Z) Excluded Contributions; plus

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(C) 100% of the aggregate amount of cash and the fair market value, as determined in good faith by the Issuer, of marketable securities or other property contributed to the capital of the Issuer following the Issue Date other than (X) net cash proceeds to the extent such net cash proceeds have been used to incur Indebtedness or issue Disqualified Stock or Preferred Stock pursuant to Section 4.03(b)(xii)(a), (Y) by a Restricted Subsidiary and (Z) from any Excluded Contributions; plus

(D) 100% of the aggregate amount received in cash and the fair market value, as determined in good faith by the Issuer, of marketable securities or other property received by means of:

(A) the sale or other disposition (other than to the Issuer or a Restricted Subsidiary) of Restricted Investments made by the Issuer or its Restricted Subsidiaries and repurchases and redemptions of such Restricted Investments from the Issuer or its Restricted Subsidiaries and repayments of loans or advances, and releases of guarantees, which constitute Restricted Investments by the Issuer or its Restricted Subsidiaries, in each case since the Issue Date; or

(B) the sale (other than to the Issuer or a Restricted Subsidiary) of the stock of an Unrestricted Subsidiary or a distribution from an Unrestricted Subsidiary (other than in each case to the extent the Investment in such Unrestricted Subsidiary was made by the Issuer or a Restricted Subsidiary pursuant to clause (vii) of Section 4.04(b) hereof or to the extent such Investment constituted a Permitted Investment) or a dividend from an Unrestricted Subsidiary since the Issue Date; plus

(E) in the case of the redesignation of an Unrestricted Subsidiary as a Restricted Subsidiary or the merger, amalgamation or consolidation of an Unrestricted Subsidiary into the Issuer or a Restricted Subsidiary or the transfer of all or substantially all of the assets of an Unrestricted Subsidiary to the Issuer or a Restricted Subsidiary after the Issue Date, the fair market value of the Investment of the Issuer or the Restricted Subsidiary in such Unrestricted Subsidiary (or the assets transferred), as determined by the Issuer in good faith or, if such fair market value may exceed $50.0 million, by the board of directors of the Issuer, a copy of the resolution of which with respect thereto will be delivered to the Trustee at the time of the redesignation of such Unrestricted Subsidiary as a Restricted Subsidiary or at the time of such merger, amalgamation, consolidation or transfer of assets other than to the extent the Investment in such Unrestricted Subsidiary was made by the Issuer or a Restricted Subsidiary pursuant to clause (vii) of Section 4.04(b) hereof or to the extent such Investment constituted a Permitted Investment.

(b) Section 4.04(a) shall not prohibit:

(i) the payment of any dividend or distribution or the consummation of any irrevocable redemption within 60 days after the date of declaration of the dividend or other distribution or giving of the redemption notice, as the case may be, if at the date of declaration or distribution such dividend, distribution or redemption payment would have complied with the provisions of this Indenture;

(ii) (A) the redemption, repurchase, retirement or other acquisition of any Equity Interests (“Treasury Capital Stock”) or Subordinated Indebtedness of the Issuer, any direct or indirect parent of the Issuer or any Restricted Subsidiary in exchange for, or out of the proceeds of, the substantially concurrent sale or issuance (other than to a Restricted Subsidiary) of, Equity Interests of the Issuer or any direct or indirect Parent Company of the Issuer to the extent contributed to the Issuer (in each case, other than any Disqualified Stock) (“Refunding Capital Stock”),

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(B) the declaration and payment of dividends on Treasury Capital Stock out of the proceeds of the substantially concurrent sale or issuance (other than to a Subsidiary of the Issuer or to an employee stock ownership plan or any trust established by the Issuer or any of its Subsidiaries) of Refunding Capital Stock, and

(C) if immediately prior to the retirement of Treasury Capital Stock, the declaration and payment of dividends thereon was permitted under clause (vi) of this Section 4.04(b), the declaration and payment of dividends on the Refunding Capital Stock (other than Refunding Capital Stock the proceeds of which were used to redeem, repurchase, retire or otherwise acquire any Equity Interests of any direct or indirect Parent Company of the Issuer) in an aggregate amount per year no greater than the aggregate amount of dividends per annum that were declarable and payable on such Treasury Capital Stock immediately prior to such retirement;

(iii) the principal payment on, redemption, repurchase, defeasance, exchange or other acquisition or retirement of (x) Subordinated Indebtedness of the Issuer or a Guarantor made by exchange for, or out of the proceeds of, the substantially concurrent sale of, new Indebtedness of the Issuer or a Guarantor, as the case may be, or (y) Disqualified Stock of the Issuer or a Guarantor made by exchange for, or out of the proceeds of the substantially concurrent sale of, Disqualified Stock of the Issuer or a Guarantor, that, in each case, is incurred in compliance with Section 4.03 so long as:

(A) the principal amount (or accreted value, if applicable) of such new Indebtedness or the liquidation preference of such new Disqualified Stock does not exceed the principal amount of (or accreted value, if applicable), plus any accrued and unpaid interest on, the Subordinated Indebtedness or the liquidation preference of, plus any accrued and unpaid dividends on, the Disqualified Stock being so repaid, repurchased, redeemed, defeased, exchanged, acquired or retired for value, plus the amount of any premium required to be paid under the terms of the instrument governing the Subordinated Indebtedness or Disqualified Stock being so repaid, repurchased, redeemed, defeased, exchanged, acquired or retired, any tender premiums, plus any defeasance costs and any fees and expenses (including original issue discount, upfront or similar fees) incurred in connection therewith;

(B) such new Indebtedness is subordinated to the Securities or the applicable Guarantee at least to the same extent as such Subordinated Indebtedness so repaid, repurchased, redeemed, defeased, exchanged, acquired or retired for value;

(C) such new Indebtedness or Disqualified Stock has a final scheduled maturity date equal to or later than the final scheduled maturity date of the Subordinated Indebtedness or Disqualified Stock being so repaid, repurchased, redeemed, defeased, exchanged, acquired or retired; and

(D) such new Indebtedness or Disqualified Stock has a Weighted Average Life to Maturity at the time incurred equal to or greater than the remaining Weighted Average Life to Maturity of the Subordinated Indebtedness or Disqualified Stock being so repaid, repurchased, redeemed, defeased, exchanged, acquired or retired;

(iv) a Restricted Payment to pay for the repurchase, retirement or other acquisition for value of Equity Interests (other than Disqualified Stock) of the Issuer or any of its direct or indirect parent companies held by any future, present or former employee, officer, director, member of management or consultant (or the estate, heirs, family members, spouse, former spouse, domestic partner or former domestic partner of any of the foregoing) of the Issuer, any of its Subsidiaries or any of its direct or indirect parent companies, pursuant to any management equity plan or stock option plan or any other management or employee benefit plan or other agreement or arrangement including any Equity Interests rolled over by management of the Issuer, any of its Subsidiaries or any of its direct or indirect parent companies in connection with the Transactions (and including,

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for the avoidance of doubt, any principal and interest payable on any notes issued by the Issuer or any direct or indirect parent company in connection with any such repurchase, retirement or other acquisition); provided, however, that the aggregate Restricted Payments made under this clause (iv) do not exceed $15.0 million in any calendar year (which shall increase to $30.0 million subsequent to the consummation of an underwritten public Equity Offering by the Issuer or any direct or indirect parent company of the Issuer) with unused amounts in any calendar year being carried over to succeeding calendar years subject to a maximum (without giving effect to the following proviso) of $20.0 million in any calendar year (which shall increase to $40.0 million subsequent to the consummation of an underwritten public Equity Offering by the Issuer or any direct or indirect parent company of the Issuer); provided further that such amount in any calendar year may be increased by an amount not to exceed:

(A) the cash proceeds from the sale of Equity Interests (other than Disqualified Stock) of the Issuer and, to the extent contributed to the Issuer, Equity Interests of any of the Issuer’s direct or indirect parent companies, in each case to any future, present or former employee, officer, director, member of management or consultant (or the estate, heirs, family members, spouse, former spouse, domestic partner or former domestic partner of any of the foregoing) of the Issuer, any of its Subsidiaries or any of its direct or indirect parent companies after the Issue Date, to the extent the cash proceeds from the sale of such Equity Interests have not otherwise been applied to the payment of Restricted Payments by virtue of clause (3) of Section 4.04(a) hereof; plus, in respect of any sale of Equity Interests in connection with an exercise of stock options, an amount equal to the amount required to by withheld by the Issuer or any of its direct or indirect parent companies in connection with such exercise under applicable law to the extent such amount is repaid to the Issuer or its direct or indirect Parent Company, as applicable, constituted a Restricted Payment and has not otherwise been applied to the payment of Restricted Payments by virtue of clause (3) of Section 4.04(a) hereof; plus

(B) the cash proceeds of key man life insurance policies received by the Issuer or its Restricted Subsidiaries or any of its direct or indirect parent companies after the Issue Date; less

(C) the amount of any Restricted Payments previously made with the cash proceeds described in clauses (A) and (B) of this clause (iv);

provided further that cancellation of Indebtedness owing to the Issuer or any of its Restricted Subsidiaries from any future, present or former employee, officer, director, member of management or consultant (or the estate, heirs, family members, spouse, former spouse, domestic partner or former domestic partner of any of the foregoing) of the Issuer, any of the Issuer’s direct or indirect parent companies or any of the Issuer’s Restricted Subsidiaries in connection with a repurchase of Equity Interests of the Issuer or any of its direct or indirect parent companies will not be deemed to constitute a Restricted Payment for purposes of Section 4.04 or any other provision of this Indenture;

(v) the declaration and payment of dividends or distributions to holders of any class or series of Disqualified Stock of the Issuer or any of its Restricted Subsidiaries or any class or series of Preferred Stock of any Restricted Subsidiary issued or incurred in accordance with Section 4.03 hereof to the extent such dividends are included in the definition of “Fixed Charges”;

(vi) (a) the declaration and payment of dividends to holders of any class or series of Designated Preferred Stock (other than Disqualified Stock) issued by the Issuer or any of its Restricted Subsidiaries after the Issue Date; (b) the declaration and payment of dividends or distributions to a direct or indirect Parent Company of the Issuer, the proceeds of which will be used to fund the payment of dividends to holders of any class or series of Designated Preferred Stock (other than Disqualified Stock) of such Parent Company issued after the Issue Date, provided that the amount of dividends paid pursuant to this clause (b) shall not exceed the aggregate amount. of cash

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actually contributed to the Issuer from the sale of such Designated Preferred Stock; or (c) the declaration and payment of dividends on Refunding Capital Stock that is Preferred Stock in excess of the dividends declarable and payable thereon pursuant to clause (ii) of this Section 4.04(b); provided however, in the case of each of (a), (b) and (c) of this clause (vi), that for the most recently ended four full fiscal quarters for which internal financial statements are available immediately preceding the date of issuance of such Designated Preferred Stock or the declaration of such dividends on Refunding Capital Stock that is Preferred Stock, after giving effect to such issuance or declaration on a pro forma basis, (x) with respect to such issuance or declaration by the Issuer and its Restricted Subsidiaries (other than Opco and its Subsidiaries), the Issuer and its Restricted Subsidiaries on a consolidated basis would have had a Fixed Charge Coverage Ratio of at least 2.00 to 1.00 and (y) with respect to such issuance or declaration by Opco and its Restricted Subsidiaries, Opco and its Restricted Subsidiaries on a consolidated basis would have a Fixed Charge Coverage Ratio of at least 2.00 to 1.00;

(vii) Investments in Unrestricted Subsidiaries having an aggregate fair market value, taken together with all other Investments made pursuant to this clause (vii) that are at the time outstanding, without giving effect to the sale of an Unrestricted Subsidiary to the extent the proceeds of such sale do not consist of, or have not been subsequently sold or transferred for, cash or marketable securities, not to exceed $40.0 million (with the fair market value of each Investment being measured at the time made and without giving effect to subsequent changes in value);

(viii) redemptions, repurchases, retirements or other acquisitions of Equity Interests deemed to occur (a) upon exercise of stock options or warrants if such Equity Interests represent a portion of the exercise price of such options or warrants and (b) in connection with the withholding portion of the Equity Interests granted or awarded to any future, present or former employee, officer, director, member of management or consultant (or the estate, heirs, family members, spouse, former spouse, domestic partner or former domestic partner of any of the foregoing) of the Issuer or any of its Subsidiaries to pay for the taxes payable by such Persons upon such grant or award;

(ix) declaration and payment of dividends on the Issuer’s common stock (or the payment of dividends to any direct or indirect parent entity to fund a payment of dividends on such entity’s common stock), following the first public offering of the Issuer’s common stock or the common stock of any of its direct or indirect parent companies after the Issue Date, of up to 6% per annum of the net cash proceeds received by or contributed to the Issuer in or from any public offering, other than public offerings with respect to the Issuer’s common stock registered on Form S-8 and other than any public sale constituting an Excluded Contribution;

(x) Restricted Payments that are made with Excluded Contributions;

(xi) other Restricted Payments in an aggregate amount taken together with all other Restricted Payments made pursuant to this clause (xi) that are at the time outstanding not to exceed the greater of (x) $50.0 million and (y) 1.5% of Consolidated Total Assets;

(xii) distributions or payments of Receivables Fees;

(xiii) any Restricted Payment used to fund the Transactions and the fees and expenses related thereto or owed to Affiliates, in each case with respect to any Restricted Payment to or owed to an Affiliate, to the extent permitted by Section 4.07;

(xiv) the repurchase, redemption or other acquisition or retirement for value of any Subordinated Indebtedness pursuant to the provisions similar to those described under Sections 4.06 and 4.08; provided that all Securities tendered by Holders in connection with a Change of Control Offer or Asset Sale Offer, as applicable, have been repurchased, redeemed or acquired for value;

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(xv) the declaration and payment of dividends or distributions by the Issuer or a Restricted Subsidiary to, or the making of loans or advances to, any of their respective direct or indirect parent companies in amounts required for any direct or indirect parent companies to pay, in each case without duplication,

(A) franchise and similar taxes and other fees and expenses required to maintain their corporate existence;

(B) for any taxable period in which the Issuer and/or any of its Subsidiaries is a member of a consolidated, combined or similar income tax group of which a direct or indirect parent of the Issuer is the common parent (a “Tax Group”), consolidated tax liabilities of such Tax Group that are attributable to the taxable income of the Issuer and/or its Subsidiaries; provided that, for each taxable period, the amount of such payments made in respect of such taxable period in the aggregate shall not exceed the amount that the Issuer and the Subsidiaries would have been required to pay in respect of federal, foreign, state and local income taxes in the aggregate if such entities were corporations paying taxes separately from any Tax Group at the highest combined applicable federal, foreign, state and local tax rate for such fiscal year (it being understood and agreed that if the Issuer or any Subsidiary pays any such federal, foreign, state or local income taxes directly to such taxing authority, that a Restricted Payment in duplication of such amount shall not be permitted to be made pursuant to this clause (B)); provided further that the permitted payment pursuant to this clause (B) with respect to any taxes of any Unrestricted Subsidiary for any taxable period shall be limited to the amount actually paid with respect to such period by such Unrestricted Subsidiary to the Issuer or its Restricted Subsidiaries for the purposes of paying such consolidated, combined or similar taxes;

(C) customary salary, bonus, severance and other benefits payable to, and indemnitees provided on behalf of, officers, directors, employees and consultants of any direct or indirect Parent Company of the Issuer and any payroll, social security or similar taxes thereof to the extent such salaries, bonuses, severance, indemnification, obligations and other benefits are attributable to the ownership or operation of the Issuer and its Restricted Subsidiaries;

(D) interest and/or principal on Indebtedness the proceeds of which have been contributed to the Issuer or any Restricted Subsidiary and that has been guaranteed by, or is otherwise, considered Indebtedness of, the Issuer incurred in accordance with Section 4.03;

(E) general corporate operating and overhead costs and expenses of any direct or indirect Parent Company of the Issuer to the extent such costs and expenses are attributable to the ownership or operation of the Issuer and its Restricted Subsidiaries;

(F) fees and expenses other than to Affiliates of the Issuer related to any equity or debt offering of such Parent Company (whether or not successful);

(G) payments permitted under clauses (iii), (iv), (vii) or (xi) under Section 4.07(b); and

(H) payments to finance any Investment permitted to be made pursuant to Section 4.04; provided that (i) such Restricted Payment shall be made substantially concurrently with the closing of such Investment, (ii) such parent shall, promptly following the closing thereof, cause (A) all property acquired (whether assets or Equity Interests) to be contributed to the Issuer or a Restricted Subsidiary or (B) the merger, consolidation or sale of all or substantially all assets (to the extent permitted pursuant to Section 5.01) of the Person formed or acquired into the Issuer or a Restricted Subsidiary in order to consummate such acquisition or Investment, (iii) such direct or indirect Parent Company and its Affiliates (other than the Issuer or a Restricted Subsidiary) receives no consideration or other payment in connection with such transaction except to the extent

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the Issuer or a Restricted Subsidiary could have given such consideration or made such payment in compliance with this Indenture, (iv) any property received by the Issuer shall not increase amounts available for Restricted Payments pursuant to clause (3) of Section 4.04(a) hereof and (v) such Investment shall be deemed to be made by the Issuer or such Restricted Subsidiary pursuant to another provisions of Section 4.04 (other than pursuant to clause (x) of this Section 4.04(b)) or pursuant to the definition of “Permitted Investments”;

(xvi)  the distribution, by dividend or otherwise, or other transfer or disposition of shares of Capital Stock of, or Indebtedness owed to the Issuer or a Restricted Subsidiary by, Unrestricted Subsidiaries (other than Unrestricted Subsidiaries, the primary assets of which are Cash Equivalents) or the proceeds thereof;

(xvii)  cash payments in lieu of the issuance of fractional shares in connection with the exercise of warrants, options or other securities convertible into or exchangeable for Capital Stock of the Issuer, any of its Restricted Subsidiaries or any direct or indirect Parent Company of the Issuer; provided, that any such cash payment shall not be for the purpose of evading the limitation of Section 4.04;

(xviii)  payment of dividends and other distributions in an amount equal to any reduction in taxes actually realized by the Issuer and its Restricted Subsidiaries in the form of refunds or credits or from deductions when applied to offset income or gain as a direct result of (i) transaction fees and expenses, (ii) commitment and other financing fees or (iii) severance, change in control and other compensation expense incurred in connection with the exercise, repurchase, rollover or payout of stock options or bonuses, in each case in connection with the Transactions; and

(xix)  Restricted Payments made in connection with the Issue Date Transactions whether on or after the Issue Date, including without limitation, any dividends or distributions, payments or loans made to any direct or indirect parent of the Issuer to enable it to make any such payments;

provided, however, that at the time of, and after giving effect to, any Restricted Payment permitted under clauses (xi), (xvi) and (xviii) of Section 4.04(b) hereof, no Default shall have occurred and be continuing or would occur as a consequence thereof. As of the Issue Date, all of the Issuer’s Subsidiaries will be Restricted Subsidiaries. The Issuer shall not permit any Unrestricted Subsidiary to become a Restricted Subsidiary except pursuant to the second to last sentence of the definition of “Unrestricted Subsidiary.” For purposes of designating any Restricted Subsidiary as an Unrestricted Subsidiary, all outstanding Investments by the Issuer and its Restricted Subsidiaries (except to the extent repaid) in the Subsidiary so designated shall be deemed to be Investments in an amount determined as set forth in the last sentence of the definition of “Investments.” Such designation shall only be permitted if a Restricted Payment or Permitted Investment in such amount would be permitted at such time, and if such Subsidiary otherwise meets the definition of an Unrestricted Subsidiary. Unrestricted Subsidiaries shall not be subject to any of the restrictive covenants set forth in this Indenture.

SECTION 4.05. Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries. The Issuer shall not, and shall not permit any of its Restricted Subsidiaries that are not Guarantors to, directly or indirectly, create or otherwise cause or suffer to exist or become effective any consensual encumbrance or consensual restriction on the ability of any such Restricted Subsidiary to:

(a) (i) pay dividends or make any other distributions to the Issuer or any of its Restricted Subsidiaries on its Capital Stock or with respect to any other interest or participation in, or measured by, its profits; or (ii) pay any Indebtedness owed to the Issuer or any of its Restricted Subsidiaries;

(b) make loans or advances to the Issuer or any Guarantor; or

(c) sell, lease or transfer any of its properties or assets to the Issuer or any Guarantor; except in each case for such encumbrances or restrictions existing under or by reason of:

(1) contractual encumbrances or restrictions in effect on the Issue Date, including pursuant to the Senior Credit Facilities and the related documentation and the Opco Notes and related documentation;

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(2) this Indenture, the Securities and the related Guarantees, if any;

(3) purchase money obligations for property acquired and Capitalized Lease Obligations in the ordinary course of business that impose restrictions of the nature discussed in clause (c) above on the property or assets so acquired;

(4) applicable law or any applicable rule, regulation or order;

(5) any agreement or other instrument of a Person acquired by the Issuer or any of its Restricted Subsidiaries in existence at the time of such acquisition (but not created in contemplation thereof), which encumbrance or restriction is not applicable to any Person, or the properties or assets of any Person, other than the Person so acquired and its Subsidiaries, or the property or assets of the Person so acquired and its Subsidiaries;

(6) contracts or agreements for the sale of assets, including any restrictions with respect to a Subsidiary of the Issuer pursuant to an agreement that has been entered into for the sale or disposition of all or substantially all of the Capital Stock or assets of such Subsidiary;

(7) Secured Indebtedness otherwise permitted to be incurred pursuant to Sections 4.03 and 4.12 that apply to the assets securing such Indebtedness and/or the Restricted Subsidiaries incurring or guaranteeing such Indebtedness;

(8) restrictions on cash or other deposits or net worth imposed by customers under contracts entered into in the ordinary course of business;

(9) other Indebtedness, Disqualified Stock or Preferred Stock of Foreign Subsidiaries permitted to be incurred or issued subsequent to the Issue Date pursuant to the provisions of Section 4.03;

(10) customary provisions in any joint venture agreement and other similar agreements entered into in the ordinary course of business;

(11) customary provisions contained in leases, subleases, licenses or sublicenses, Equity Interests or asset sale agreements and other similar agreements, in each case, entered into in the ordinary course of business;

(12) any encumbrances or restrictions of the type referred to in Sections 4.05(a), (b) and (c) above imposed by any amendments, modifications, restatements, renewals, increases, supplements, refundings, replacements or refinancings of the contracts, instruments or obligations referred to in clauses (1) through (11) above; provided that such amendments, modifications, restatements, renewals, increases, supplements, refundings, replacements or refinancings are, in the good faith judgment of the Issuer, no more restrictive in any material respect with respect to such encumbrances and other restrictions taken as a whole than those prior to such amendment, modification, restatement, renewal, increase, supplement, refunding, replacement or refinancing;

(13) any other agreement governing Indebtedness entered into after the Issue Date if (a) such encumbrances and other restrictions are, in the good faith judgment of the Issuer, no more restrictive in any material respect taken as a whole with respect to any Restricted Subsidiary than (i) the restrictions contained in this Indenture as of the Issue Date or (ii) those encumbrances and other restrictions that are in effect on the Issue Date with respect to that Restricted Subsidiary pursuant to agreements in effect on the Issue Date, or (b) any such encumbrance or restriction contained in such Indebtedness does not prohibit (except upon a default or an event of default thereunder) the payment of dividends in an amount sufficient, as determined by the board of directors of the Issuer in good faith, to make scheduled payments of cash interest on the Securities when due;

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(14) customary provisions restricting assignment of any agreement entered into in the ordinary course of business;

(15) other Indebtedness, Disqualified Stock or Preferred Stock of any Restricted Subsidiary that is a Guarantor, provided that such Indebtedness, Disqualified Stock or Preferred Stock is permitted to be incurred subsequent to the Issue Date under Section 4.03;

(16) customary restrictions and conditions contained in any agreement relating to the sale, transfer, lease or other disposition of any asset permitted under Section 4.06 pending the consummation of such sale, transfer, lease or other disposition;

(17) customary restrictions and conditions contained in the document relating to any Lien so long as (i) such Lien is a Permitted Lien and such restrictions or conditions relate only to the specific asset subject to such Lien and (ii) such restrictions and conditions are not created for the purpose of avoiding the restrictions imposed by this clause (17); and

(18) restrictions created in connection with any Receivables Facility that in the good faith determination of the Issuer are necessary or advisable to affect such Receivables Facility.

For purposes of determining compliance with this Section 4.05, (1) the priority of any Preferred Stock in receiving dividends or liquidating distributions prior to dividends or liquidating distributions being paid on common stock shall not be deemed a restriction on the ability to make distributions on Capital Stock and (2) the subordination of loans or advances made to the Issuer or a Restricted Subsidiary to other Indebtedness incurred by the Issuer or any such Restricted Subsidiary shall not be deemed a restriction on the ability to make loans or advances.

SECTION 4.06. Asset Sales.

(a) The Issuer shall not, and shall not permit any of its Restricted Subsidiaries to, consummate an Asset Sale, unless:

(i) the Issuer or such Restricted Subsidiary, as the case may be, receives consideration at the time of such Asset Sale at least equal to the fair market value (as determined in good faith by the Issuer) of the assets sold or otherwise disposed of; and

(ii) except in the case of a Permitted Asset Swap, at least 75% of the consideration therefor received by the Issuer or such Restricted Subsidiary, as the case may be, is in the form of Cash Equivalents; provided that the amount of:

(a) any liabilities (as shown on the Issuer’s or such Restricted Subsidiary’s most recent balance sheet or in the footnotes thereto) of the Issuer or such Restricted Subsidiary, other than liabilities that are by their terms subordinated to the Securities, that are assumed by the transferee of any such assets or that are otherwise cancelled or terminated in connection with the transaction with such transferee and for which the Issuer and all of its Restricted Subsidiaries have been validly released by all creditors in writing,

(b) any securities, notes or other obligations or assets received by the Issuer or such Restricted Subsidiary from such transferee that are converted by the Issuer or such Restricted Subsidiary into Cash Equivalents (to the extent of the Cash Equivalents received) within 180 days following the closing of such Asset Sale, and

(c) any Designated Non-cash Consideration received by the Issuer or such Restricted Subsidiary in such Asset Sale having an aggregate fair market value, taken together with all other Designated Non-cash Consideration received pursuant to this clause (c) that is at that time outstanding, not to exceed the greater of (x) $40.0 million and (y) 1.25% of Consolidated Total Assets at the time of the receipt of such Designated Non-cash Consideration, with the fair market value of each item of Designated Non-cash Consideration being measured at the time received and without giving effect to subsequent changes in value,

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shall be deemed to be Cash Equivalents for the purposes of this Section 4.06(a).

(b) Within 365 days after the receipt of any Net Proceeds of any Asset Sale, the Issuer or such Restricted Subsidiary, at its option, may apply the Net Proceeds from such Asset Sale,

(i) to repay (a) Obligations under the Senior Credit Facilities and if the Indebtedness repaid is revolving credit indebtedness, to correspondingly reduce commitments with respect thereto; (b) Obligations under Indebtedness (other than Subordinated Indebtedness) that is secured by a Lien, which Lien is permitted by this Indenture, and if the Indebtedness repaid is revolving credit indebtedness, to correspondingly reduce commitments with respect thereto; (c) Obligations under Indebtedness of the Issuer or a Guarantor (other than Subordinated Indebtedness) (and if the Indebtedness repaid is revolving credit indebtedness, to correspondingly reduce commitments with respect thereto), provided that the Issuer shall equally and ratably reduce Obligations under the Securities as provided under “Optional Redemption,” through open-market purchases (to the extent such purchases are at or above 100% of the principal amount thereof) or by making an offer (in accordance with the procedures set forth below for an Asset Sale Offer) to all Holders to purchase their Securities at 100% of the principal amount thereof, plus the amount of accrued but unpaid interest and Additional Interest, if any, on the amount of Securities that would otherwise be prepaid; or (d) Obligations under Indebtedness (including the Opco Notes) of a Restricted Subsidiary that is not a Guarantor (including Opco), other than Indebtedness owed to the Issuer or another Restricted Subsidiary; provided, that (i) if an offer to purchase any Indebtedness of a Restricted Subsidiary of the Issuer is made in accordance with the terms of such Indebtedness, the obligation to repay or reduce Indebtedness of a Restricted Subsidiary will be deemed satisfied to the extent of the amount of the offer, whether or not accepted by the holders of such Indebtedness, and no Net Proceeds in the amount of such offer will be deemed to exist following such offer, and (ii) if the holder of any Indebtedness of a Restricted Subsidiary of the Issuer declines the repayment of such Indebtedness owed to it from such Net Proceeds, the obligation to repay or reduce Indebtedness of a Restricted Subsidiary will be deemed satisfied to the extent of the declined Net Proceeds;

(ii) to make (a) an Investment in any one or more businesses, provided that such Investment in any business is in the form of the acquisition of Capital Stock and results in the Issuer or any of its Restricted Subsidiaries, as the case may be, owning an amount of the Capital Stock of such business such that it constitutes a Restricted Subsidiary, (b) capital expenditures or (c) acquisitions of other properties or assets, in the case of each of (a), (b) and (c), used or useful in a Similar Business; or

(iii) to make an Investment in (a) any one or more businesses, provided that such Investment in any business is in the form of the acquisition of Capital Stock and results in the Issuer or any of its Restricted Subsidiaries, as the case may be, owning an amount of the Capital. Stock of such business such that it constitutes a Restricted Subsidiary, (b) properties or (c) other assets that, in the case of each of (a), (b) and (c), replace the businesses, properties and/or other assets that are the subject of such Asset Sale;

provided that, in the case of clauses (ii) and (iii) above, a binding commitment shall be treated as a permitted application of the Net Proceeds from the date of such commitment so long as the Issuer or such other Restricted Subsidiary enters into such commitment with the good faith expectation that such Net Proceeds will be applied to satisfy such commitment within 180 days of such commitment (an “Acceptable Commitment”) and, in the event any

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Acceptable Commitment is later cancelled or terminated for any reason before the Net Proceeds are applied in connection therewith, the Issuer or such Restricted Subsidiary enters into another Acceptable Commitment (a “Second Commitment”) within 180 days of such cancellation or termination; provided further that if any Second Commitment is later cancelled or terminated for any reason before such Net Proceeds are applied, then such Net Proceeds shall constitute Excess Proceeds (as defined below).

Any Net Proceeds from any Asset Sale that are not invested or applied as provided and within the time period set forth in this Section 4.06(b) (it being understood that any portion of such Net Proceeds used to make an offer to purchase Securities, as described in clause (i) of this Section 4.06(b), shall be deemed to have been invested whether or not such offer is accepted) will be deemed to constitute “Excess Proceeds.” When the aggregate amount of Excess Proceeds exceeds $25.0 million, the Issuer shall make an offer to all Holders of the Securities and, at the option of the Issuer, to any holders of any Indebtedness that is pari passu with the Securities (“Pari Passu Indebtedness”) (an “Asset Sale Offer”), to purchase the maximum aggregate principal amount of the Securities and such Pari Passu Indebtedness that is at least $2,000 and an integral multiple of $1,000 in excess thereof or, in case any PIK Payment has been made, in minimum denominations of $1.00 and any integral multiple of $1.00 in excess thereof, that may be purchased out of the Excess Proceeds at an offer price in cash in an amount equal to 100% of the principal amount thereof, or 100% of the accreted value thereof, if less, plus accrued and unpaid interest and Additional Interest, if any, (or, in respect of such Pari Passu Indebtedness, such lesser price, if any, as may be provided for by the terms of such Pari Passu Indebtedness), to, but not including, the date fixed for the closing of such offer, in accordance with the procedures set forth in this Indenture. The Issuer will commence an Asset Sale Offer with respect to Excess Proceeds within thirty Business Days after the date that Excess Proceeds exceed $25.0 million by mailing the notice required pursuant to the terms of this Indenture, with a copy to the Trustee, or otherwise in accordance with the procedures of DTC.

To the extent that the aggregate amount of Securities and such Pari Passu Indebtedness tendered pursuant to an Asset Sale Offer is less than the Excess Proceeds, the Issuer may use any remaining Excess Proceeds for general corporate purposes, subject to compliance with other covenants contained in this Indenture. If the aggregate principal amount of Securities and the Pari Passu Indebtedness surrendered in an Asset Sale Offer exceeds the amount of Excess Proceeds, the Trustee shall select the Securities to be purchased in the manner described in Section 3.04. Selection of such Pari Passu Indebtedness will be made pursuant to the terms of such Pari Passu Indebtedness. Upon completion of any such Asset Sale Offer, the amount of Excess Proceeds shall be reset to zero (regardless of whether there are any remaining Excess Proceeds upon such completion).

Notwithstanding the foregoing, the Issuer will not be required to apply in accordance with this Section 4.06 any Net Proceeds received in respect of any Asset Sale by any Restricted Subsidiary until such time as such entities are permitted in accordance with the terms of their Indebtedness to dividend or distribute an amount at least equal to such Net Proceeds to the Issuers, excluding for such purposes any such dividends or distributions that are required to be applied to Cash Interest or that are not included in the Applicable Amount because they were intended for another purpose.

Pending the final application of any Net Proceeds pursuant to this Section 4.06, the holder of such Net Proceeds may apply such Net Proceeds temporarily to reduce Indebtedness outstanding under a revolving credit facility or otherwise invest such Net Proceeds in any manner not prohibited by this Indenture.

The Issuers shall comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws or regulations are applicable in connection with the repurchase of the Securities pursuant to an Asset Sale Offer. To the extent that the provisions of any securities laws or regulations conflict with the provisions of this Indenture, the Issuers shall comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations described in this Indenture by virtue thereof.

SECTION 4.07. Transactions with Affiliates.

(a) The Issuer shall not, and shall not permit any of its Restricted Subsidiaries to, make any payment to, or sell, lease, transfer or otherwise dispose of any of its properties or assets to, or purchase any property or assets from, or enter into or make or amend any transaction, contract, agreement, understanding, loan, advance or guarantee with, or for the benefit of, any Affiliate of the Issuer (each of the foregoing, an “Affiliate Transaction”) involving aggregate payments or consideration in excess of $10.0 million, unless:

(i) such Affiliate Transaction is on terms that are not materially less favorable to the Issuer or its relevant Restricted Subsidiary than those that would have been obtained in a comparable transaction by the Issuer or such Restricted Subsidiary with an unrelated Person on an arm’s-length basis; and

(ii) the Issuer delivers to the Trustee with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate payments or consideration in excess of $25.0 million, a resolution adopted by the majority of the board of directors of the Issuer approving such Affiliate Transaction and set forth in an Officer’s Certificate certifying that such Affiliate Transaction complies with clause (i) above.

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(b) Section 4.07(a) shall not apply to the following:

(i) transactions between or among the Issuer or any of its Restricted Subsidiaries, or an entity that becomes a Restricted Subsidiary as a result of such transaction, and any merger, consolidation or amalgamation of the Issuer and any direct parent of the Issuer; provided that such parent shall have no material liabilities and no material assets other than cash, Cash Equivalents and Capital Stock of the Issuer (or a Parent Company thereof) and such merger, consolidation or amalgamation is otherwise in compliance with the terms of this Indenture and effected for a bona fide business purpose;

(ii) Restricted Payments permitted by Section 4.04 and Investments constituting Permitted Investments;

(iii) the payment of management, consulting, monitoring and advisory fees and termination fees and related indemnities and expenses pursuant to the Sponsor Management Agreement as in effect on the Issue Date or any amendment thereto or replacement thereof so long as any such amendment or replacement is not disadvantageous in any material respect, in the good faith judgment of the Issuer, to the Holders of the Securities when taken as a whole as compared to the Sponsor Management Agreement in effect on the Issue Date (it being understood that any amendment thereto or replacement thereof to increase the fees payable pursuant to such Sponsor Management Agreement would be deemed to be materially disadvantageous to the Holders);

(iv) the payment of reasonable and customary fees and reimbursement of expenses and compensation paid to, and indemnities provided on behalf of or for the benefit of, future, present or former employee, officer, director, member of management or consultant (or the estate, heirs, family members, spouse, former spouse, domestic partner or former domestic partner of any of the foregoing) of the Issuer, any of its direct or indirect parent companies or any of its Restricted Subsidiaries;

(v) transactions in which the Issuer or any of its Restricted Subsidiaries, as the case may be, delivers to the Trustee a letter from an Independent Financial Advisor stating that such transaction is fair to the Issuer or such Restricted Subsidiary from a financial point of view or stating that the terms are not materially less favorable to the Issuer or its relevant Restricted Subsidiary than those that would have been obtained in a comparable transaction by the Issuer or such Restricted Subsidiary with an unrelated Person on an arm’s-length basis;

(vi) any agreement as in effect as of the Issue Date, or any amendment thereto (so long as any such amendment is not disadvantageous in any material respect to the Holders when taken as a whole as compared to the applicable agreement as in effect on the Issue Date) or any transaction contemplated thereby as determined in good faith by the Issuer;

(vii) the existence of, or the performance by the Issuer, any of its Restricted Subsidiaries or any direct or indirect parent of the Issuer of its obligations under the terms of, any stockholders agreement

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(including any registration rights agreement or purchase agreement related thereto) to which it is a party as of the Issue Date and any transaction, agreement or arrangement described in the Offering Memorandum and, in each case, any amendment thereto or similar transactions, agreements or arrangements which it may enter into thereafter; provided, however, that the existence of, or the performance by the Issuer or any of its Restricted Subsidiaries of obligations under, any future amendment to any such existing transaction, agreement or arrangement or any similar transaction, agreement or arrangement entered into after the Issue Date shall only be permitted by this clause (vii) to the extent that the terms of any such existing transaction, agreement or arrangement together will all amendments thereto, taken as a whole, or new transaction, agreement or arrangement are not otherwise disadvantageous in any material respect to the Holders when taken as a whole as compared to the original agreement in effect on the Issue Date;

(viii) (a) transactions with customers, clients, suppliers, contractors, or purchasers or sellers of goods or services, or transactions otherwise relating to the purchase or sale of goods or services, in each case in the ordinary course of business and otherwise in compliance with the terms of this Indenture which are fair to the Issuer and its Restricted Subsidiaries, in the reasonable determination of the board of directors of the Issuer or the senior management thereof, or are on terms at least as favorable as would reasonably have been obtained at such time from an unaffiliated party or (b) transactions with joint ventures or Unrestricted Subsidiaries entered into in the ordinary course of business and consistent with past practice or industry norms;

(ix) the issuance of Equity Interests (other than Disqualified Stock or Preferred Stock) of the Issuer or a Restricted Subsidiary to any person;

(x) sales of accounts receivable, or participations therein, in connection with any Receivables Facility;

(xi) payments by the Issuer or any of its Restricted Subsidiaries made for any financial advisory, consulting, financing, underwriting or placement services or in respect of other investment banking activities, including, without limitation, in connection with acquisitions or divestitures which payments are approved by a majority of the board of directors of the Issuer in good faith or are otherwise permitted by this Indenture;

(xii) payments or loans (or cancellation of loans) or advances to employees, officers, directors, members of management or consultants (or the estate, heirs, family members, spouse, former spouse, domestic partner or former domestic partner of any of the foregoing) of the Issuer, any of its direct or indirect parent companies or any of its Restricted Subsidiaries and employment agreements, severance arrangements, stock option plans and other similar arrangements with such employees, officers, directors, members of management or consultants (or the estate, heirs, family members, spouse, former spouse, domestic partner or former domestic partner of any of the foregoing) which, in each case, are approved by a majority of the board of directors of the Issuer, in good faith;

(xiii) the Transactions, the Issue Date Transactions and the payment of all fees and expenses related to the Transactions and the Issue Date Transactions, including Transaction Expenses;

(xiv) any transaction effected as part of a Receivables Financing;

(xv) any contribution to the capital of the Issuer or any Restricted Subsidiary;

(xvi) transactions permitted by, and complying with, the provisions of Section 5.01 solely for the purpose of (a) reorganizing to facilitate any initial public offering of securities of the Issuer or any direct or indirect Parent Company, (b) forming a holding company, or (c) reincorporating the Issuer in a new jurisdiction;

(xvii) transactions between the Issuer or any Restricted Subsidiary and any Person, a director of which is also a director of the Issuer or any direct or indirect parent of the Issuer; provided, however, that such director abstains from voting as a director of the Issuer or such direct or indirect parent, as the case may be, on any matter involving such other Person;

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(xviii) the issuance of securities or other payments, awards or grants in cash, securities or otherwise pursuant to, or the funding of, employment arrangements, stock option and stock ownership plans or similar employee benefit plans approved by the board of directors of the Issuer or any direct or indirect Parent Company of the Issuer or a Subsidiary of the Issuer, as appropriate, in good faith;

(xix) transactions undertaken in good faith (as certified by a responsible financial or accounting officer of the Issuer in an Officer’s Certificate) for the purposes of improving the consolidated tax efficiency of the Issuer and its Subsidiaries and not for the purpose of circumventing any covenant set forth in this Indenture; and

(xx) payments and other transactions in respect of Indebtedness of the Issuer and its Subsidiaries held by Affiliates so long as such Affiliates are treated no more favorably than any non-Affiliate holders of such Indebtedness.

SECTION 4.08. Change of Control.

(a) Upon the occurrence of a Change of Control after the Issue Date, unless the Issuer has previously or concurrently mailed a redemption notice with respect to all the outstanding Securities as described under paragraph 5(b) of the Security, the Issuers will make an offer to purchase all of the Securities pursuant to the offer described below (the “Change of Control Offer”) at a price in cash (the “Change of Control Payment”) equal to 101% of the aggregate principal amount thereof plus accrued and unpaid interest and Additional Interest, if any, to, but not including, the date of purchase, subject to the right of Holders of record of the Securities on the relevant record date to receive interest due on the relevant interest payment date.

(b) Within 30 days following any Change of Control, the Issuer will send notice of such Change of Control Offer by first-class mail, with a copy to the Trustee, to each Holder of Securities to the registered address of such Holder or otherwise in accordance with the procedures of DTC, with the following information:

(i) that a Change of Control Offer is being made pursuant to this Section 4.08, and that all Securities properly tendered pursuant to such Change of Control Offer will be accepted for payment by the Issuers at a repurchase price in cash equal to 101% of the principal amount thereof, plus accrued and unpaid interest to, but not including, the date of repurchase, subject to the right of Holders of records of the Securities on the relevant record date to receive interest due on the relevant interest payment date;

(ii) the purchase price and the purchase date, which shall be no earlier than 30 days nor later than 60 days from the date such notice is mailed or otherwise delivered (the “Change of Control Payment Date”), subject to extension (in the case where such notice was mailed or otherwise delivered prior to the occurrence of the Change of Control) in the event that occurrence of the Change of Control is delayed;

(iii) that any Security not properly tendered will remain outstanding and continue to accrue interest;

(iv) that unless the Issuers default in the payment of the Change of Control Payment, all Securities accepted for payment pursuant to the Change of Control Offer will cease to accrue interest on the Change of Control Payment Date;

(v) if such notice is delivered prior to the occurrence of a Change of Control, stating that the Change of Control Offer is conditional on the occurrence of such Change of Control;

(vi) that Holders electing to have any Securities purchased pursuant to a Change of Control Offer will be required to surrender such Securities, with the form entitled “Option of Holder to

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Elect Purchase” on the reverse of such Securities completed, to the Paying Agent specified in the notice at the address specified in the notice prior to the close of business on the third Business Day preceding the Change of Control Payment Date;

(vii) that Holders will be entitled to withdraw their tendered Securities and their election to require the Issuers to purchase such Securities, provided that the Paying Agent receives, not later than the close of business on the second Business Day prior to the Change of Control Payment Date, facsimile transmission or letter setting forth the name of the Holder of the Securities, the principal amount of Securities tendered for purchase, and a statement that such Securities is withdrawing its tendered Securities and its election to have such Securities purchased;

(viii) that if the Issuers are redeeming less than all of the Securities, the Holders of the remaining Securities will be issued new Securities and such new Securities will be equal in principal amount to the unpurchased portion of the Securities surrendered. The unpurchased portion of the Securities must be equal to $2,000 or an integral multiple of $1,000 in excess of $2,000 or, in case any PIK Payment has been made, in minimum denominations of $1.00 and any integral multiple of $1.00 in excess thereof; and

(ix) the other instructions, as determined by the Issuer, consistent with this Section 4.08, that a Holder must follow.

Securities repurchased by the Issuers pursuant to a Change of Control Offer will have the status of Securities issued but not outstanding or will be retired and cancelled at the option of the Issuers. Securities purchased by a third party pursuant to the preceding paragraph will have the status of Securities issued and outstanding.

The notice, if mailed in a manner herein provided, shall be conclusively presumed to have been given, whether or not the Holder receives such notice. If (a) the notice is mailed in a manner herein provided and (b) any Holder fails to receive such notice or a Holder receives such notice but it is defective, such Holder’s failure to receive such notice or such defect shall not affect the validity of the proceedings for the purchase of the Securities as to all other Holders that properly received such notice without defect.

The Issuers shall comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws or regulations are applicable in connection with the repurchase by the Issuers of Securities pursuant to a Change of Control Offer. To the extent that the provisions of any securities laws or regulations conflict with the provisions of this Indenture, the Issuers will comply with the applicable securities laws and regulations and shall not be deemed to have breached their obligations described in this Indenture by virtue thereof.

(c) On the Change of Control Payment Date, the Issuers shall, to the extent permitted by law,

(1) accept for payment all Securities issued by the Issuers or portions thereof properly tendered pursuant to the Change of Control Offer;

(2) deposit with the Paying Agent an amount equal to the aggregate Change of Control Payment in respect of all Securities or portions thereof so tendered; and

(3) deliver, or cause to be delivered, to the Trustee for cancellation the Securities so accepted together with an Officer’s Certificate to the Trustee stating that such Securities or portions thereof have been tendered to and purchased by the Issuers.

(d) The Issuer shall not be required to make a Change of Control Offer following a Change of Control if a third party makes the Change of Control Offer in the manner, at the times and otherwise in compliance with the requirements set forth in this Indenture applicable to a Change of Control Offer made by the Issuer and purchases all Securities validly tendered and not withdrawn under such Change of Control Offer. Notwithstanding anything to the contrary herein, a Change of Control Offer may be made in advance of a Change of Control, conditional upon such Change of Control, if a definitive agreement is in place for the Change of Control at the time of making of the Change of Control Offer.

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(e) Other than as specifically provided in this Section 4.08, any purchase pursuant to this Section 4.08 shall be made pursuant to the provisions of Sections 3.04, 3.07 and 3.08 hereof.

SECTION 4.09. Compliance Certificate. The Issuers shall deliver to the Trustee within 120 days after the end of each fiscal year of the Issuers, beginning with the fiscal year ending on or about December 31, 2013, a certificate (the signer of which shall be the principal executive officer, the principal financial officer or the principal accounting officer of the Issuers) stating that in the course of the performance by the signer of the signer’s duties as an Officer of the Issuers the signer would normally have knowledge of any Default and whether or not the signer knows of any Default that occurred during such period. If the signer does, the certificate shall describe the Default. The Issuer also shall comply with Section 314(a)(4) of the Trust Indenture Act.

SECTION 4.10. Further Instruments and Acts. Upon request of the Trustee, the Issuers shall execute and deliver such further instruments and do such further acts as may be reasonably necessary or proper to carry out more effectively the purpose of this Indenture.

SECTION 4.11. Limitation on Guarantees of Indebtedness by Restricted Subsidiaries. The Issuer shall not permit any of its Wholly-Owned Subsidiaries that are Restricted Subsidiaries (and non-Wholly-Owned Subsidiaries if such non-Wholly-Owned Subsidiaries guarantee other capital markets debt securities of the Issuer or any Guarantor), other than a Guarantor or an Excluded Subsidiary, to guarantee the payment of any Indebtedness of the Issuer or any other Guarantor unless:

(1) such Restricted Subsidiary within 30 days executes and delivers a supplemental indenture to this Indenture, the form of which is attached as Exhibit C hereto, providing for a Guarantee by such Restricted Subsidiary, except that with respect to a guarantee of Indebtedness of the Issuer or any Guarantor, if such Indebtedness is by its express terms subordinated in right of payment to the Securities or such Guarantor’s Guarantee, any such guarantee by such Restricted Subsidiary with respect to such Indebtedness shall be subordinated in right of payment to such Guarantee substantially to the same extent as such Indebtedness is subordinated to the Securities; and

(2) such Restricted Subsidiary waives and shall not in any manner whatsoever claim or take the benefit or advantage of, any rights of reimbursement, indemnity or subrogation or any other rights against the Issuer or any other Restricted Subsidiary as a result of any payment by such Restricted Subsidiary under its Guarantee; and

provided that this Section 4.11 shall not be applicable to any guarantee of any Restricted Subsidiary that existed at the time such Person became a Restricted Subsidiary and was not incurred in connection with, or in contemplation of, such Person becoming a Restricted Subsidiary.

Each Guarantee will be limited, to the extent enforceable, to an amount not to exceed the maximum amount that can be guaranteed by that Restricted Subsidiary without rendering the Guarantee, as it relates to such Restricted Subsidiary, voidable under applicable law relating to fraudulent conveyance or fraudulent transfer or similar laws affecting the rights of creditors generally.

The Issuer may elect, in its sole discretion, to cause any Subsidiary that is not otherwise required to be a Guarantor to become a Guarantor, in which case, such Subsidiary shall only be required to comply with clauses (1) (other than with respect to any time period) and (2) of this Section 4.11.

Each Guarantee shall be released in accordance with Section 10.02(b).

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SECTION 4.12. Liens. The Issuer shall not, and shall not permit the Co-Issuer or any Guarantor to, directly or indirectly, create, incur, assume or suffer to exist any Lien (except Permitted Liens) that secures obligations under any Indebtedness of the Issuer or Co-Issuer or any related guarantees of Indebtedness by the Issuer or Co-Issuer, on any asset or property of the Issuer, Co-Issuer or any Guarantor, or any income or profits therefrom, or assign or convey any right to receive income therefrom, unless:

(i) in the case of Liens securing Subordinated Indebtedness, the Securities and related Guarantees, if any, are secured by a Lien on such property, assets or proceeds that is senior in priority to such Liens; or

(ii) in all other cases, the Securities or the Guarantees, if any, are equally and ratably secured,

except that the foregoing shall not apply to or restrict (a) Liens, if any, securing the Securities and the related Guarantees, if any, (b) Liens securing obligations in respect of (x) Indebtedness and other obligations permitted to be incurred under the Senior Credit Facilities, including any letter of credit facility relating thereto, that was permitted by the terms of this Indenture to be incurred pursuant to Section 4.03(b)(i) and (y) obligations of the Issuer or any Guarantor in respect of any Bank Products or Cash Management Services provided by any lender party to any Senior Credit Facility or any affiliate of such lender (or any Person that was a lender or an affiliate of a lender at the time the applicable agreements pursuant to which such Bank Products or Cash Management Services are provided were entered into) and (c) Liens incurred to secure Obligations in respect of any Indebtedness permitted to be incurred pursuant to Section 4.03; provided that, with respect to Liens securing Obligations permitted under this subclause (c), at the time of incurrence and after giving pro forma effect thereto, the Consolidated Secured Debt Ratio would be no greater than 4.00 to 1.0.

Any Lien created for the benefit of the Holders of the Securities pursuant to this Section 4.12 shall be deemed automatically and unconditionally released and discharged upon the release and discharge of each of the Liens described in clauses (i) and (ii) above.

The expansion of Liens by virtue of accrual of interest, the accretion of accreted value, the payment of interest or dividends in the form of additional Indebtedness, amortization of original issue discount and increases in the amount of Indebtedness outstanding solely as a result of fluctuations in the exchange rate of currencies will not be deemed to be an incurrence of Liens for purposes of this Section 4.12.

SECTION 4.13. Maintenance of Office or Agency.

(a) The Issuers shall maintain an office or agency (which may be an office of the Trustee or an affiliate of the Trustee or Registrar) where Securities may be surrendered for registration of transfer or for exchange and where notices and demands to or upon the Issuers in respect of the Securities and this Indenture may be served. The Issuers shall give prompt written notice to the Trustee of the location, and any change in the location, of such office or agency. If at any time the Issuers shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the corporate trust office of the Trustee as set forth in Section 11.02; provided that no service of legal process may be made against the Issuers at any office of the Trustee.

(b) The Issuers may also from time to time designate one or more other offices or agencies where the Securities may be presented or surrendered for any or all such purposes and may from time to time rescind such designations; provided, however, that no such designation or rescission shall in any manner relieve the Issuers of its obligation to maintain an office or agency for such purposes. The Issuers shall give prompt written notice to the Trustee of any such designation or rescission and of any change in the location of any such other office or agency.

(c) The Issuers hereby designates the corporate trust office of the Trustee or its agent as such office or agency of the Issuers in accordance with Section 2.04.

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SECTION 4.14. Termination and Suspension of Certain Covenants.

(a) If, on any date following the Issue Date, (i) the Securities have Investment Grade Ratings from both Rating Agencies and (ii) no Default has occurred and is continuing under this Indenture (the occurrence of the events described in the foregoing clauses (i) and (ii) being collectively referred to as a “Covenant Suspension Event”) then, beginning on that day and continuing at all times thereafter until the Reversion Date, as defined below, the Issuer and its Restricted Subsidiaries shall not be subject to Sections 4.03, 4.04, 4.05, 4.06, 4.07, 4.08, 4.11 and clause (iv) of Section 5.01(a) of this Indenture (collectively, the “Suspended Covenants”). In the event that the Issuer and the Restricted Subsidiaries are not subject to the Suspended Covenants under this Indenture for any period of time as a result of the foregoing, and on any subsequent date (the “Reversion Date”) one or both of the Rating Agencies withdraw their Investment Grade Rating or downgrade the rating assigned to the Securities below an Investment Grade Rating, then the Issuer and the Restricted Subsidiaries will thereafter again be subject to the Suspended Covenants under this Indenture with respect to future events. The period of time between the Covenant Suspension Event and the Reversion Date is referred to herein as the “Suspension Period.”

On each Reversion Date, all Indebtedness incurred, or Disqualified Stock or Preferred Stock issued, during the Suspension Period shall be classified as having been incurred or issued pursuant to Section 4.03(b)(iii). Calculations made after the Reversion Date of the amount available to be made as Restricted Payments under Section 4.04 shall be made as though Section 4.04 had been in effect prior to, but not during, the Suspension Period. No Default or Event of Default will be deemed to have occurred on the Reversion Date as a result of any actions taken by the Issuer or the Restricted Subsidiaries during the Suspension Period. On and after each Reversion Date, the Issuer and its Subsidiaries will be permitted to consummate the transactions contemplated by any contract entered into during the Suspension Period so long as such contract and such consummation would have been permitted during such Suspension Period.

(b) For purposes of Section 4.05, on the Reversion Date, any contractual encumbrances or restrictions of the type specified in clause (a), (b) or (c) of Section 4.05 entered into during the Suspension Period, will be deemed to have been in effect on the Issue Date, so that they are permitted under clause (1) of Section 4.05.

(c) For purposes of Section 4.06, on the Reversion Date, the unutilized Excess Proceeds amount will be reset to zero.

(d) For purposes of Section 4.07, any Affiliate Transaction entered into after the Reversion Date pursuant to a contract, agreement, loan, advance or guaranty with, or for the benefit of, any Affiliate of the Issuer entered into during the Suspension Period will be deemed to have been in effect as of the Issue Date for purposes of Section 4.07(b)(vi).

(e) During a Suspension Period, the Issuer may not designate any of its Subsidiaries as Unrestricted Subsidiaries.

(f) The Issuer shall deliver promptly to the Trustee an Officer’s Certificate notifying it of the occurrence of any Covenant Suspension Event or any Reversion Date. The Trustee shall have no independent obligation to determine if a Suspension Period has commenced or terminated, to notify the Holders regarding the same or to determine the consequences thereof.

ARTICLE 5

SUCCESSOR COMPANY

SECTION 5.01. Merger, Consolidation or Sale of All or Substantially All Assets.

(a) The Issuers shall not consolidate or merge with or into or wind up into (whether or not the Issuer is the surviving corporation), or sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of its properties or assets, in one or more related transactions, to any Person unless:

(i) such Issuer is the surviving Person or the Person formed by or surviving any such consolidation or merger (if other than an Issuer) or to which such sale, assignment, transfer, lease, conveyance or other disposition will have been made is a corporation, partnership or limited liability company organized or existing under the laws of the jurisdiction of organization of such Issuer or the laws of the United States, any state thereof, the District of Columbia (such Issuer or such Person, as the case may be, being herein called the “Successor Company”); provided that in the case where such Successor Company is not a corporation, a co-obligor of the Securities is a corporation;

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(ii) a Successor Company, if other than an Issuer, expressly assumes all the obligations of such Issuer under this Indenture, the Registration Rights Agreement and the Securities pursuant to supplemental indentures or other documents or instruments;

(iii) immediately after such transaction, no Default shall have occurred and be continuing;

(iv) immediately after giving pro forma effect to such transaction and any related financing transactions, as if such transactions had occurred at the beginning of the applicable four-quarter period, either:

(A) the Successor Company would be permitted to incur at least $1.00 of additional Indebtedness pursuant to the calculation set forth in Section 4.03(a)(i); or

(B) the Fixed Charge Coverage Ratio for the Successor Company and its Restricted Subsidiaries would be equal to or greater than the Fixed Charge Coverage Ratio for the Issuer and its Restricted Subsidiaries immediately prior to such transaction;

(v) [Reserved]; and

(vi) the Successor Company shall have delivered to the Trustee an Officer’s Certificate and an Opinion of Counsel, each stating that such consolidation, merger or transfer and such supplemental indentures, if any, comply with this Indenture.

The Successor Company (if other than an Issuer) shall succeed to, and be substituted for the Issuer, as the case may be, under this Indenture and the Securities, and in such event such Issuer will automatically be released and discharged from its obligation under this Indenture, the Registration Rights Agreement and the Securities. Notwithstanding the foregoing clauses (iii) and (iv) of this Section 5.01(a), (A) any Restricted Subsidiary may consolidate with or merge with or into or wind up into or sell, assign, transfer, lease, convey or otherwise dispose of all or part of its properties and assets to the Issuer, and (B) the Issuer may consolidate with or merge with or into or wind up into an Affiliate of the Issuer solely for the purpose of reincorporating the Issuer in a State of the United States, so long as the amount of Indebtedness of the Issuer and its Restricted Subsidiaries is not increased thereby.

(b) No Guarantor shall, and the Issuers shall not permit any Guarantor to, consolidate or merge with or into or wind up into (whether or not the Issuers or Guarantor is the surviving corporation), or sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of its properties or assets in one or more related transactions to, any Person (other than any such sale, assignment, transfer, lease, conveyance or disposition in connection with the Transactions) unless:

(i) (A) such Guarantor is the surviving Person or the Person formed by or surviving any such consolidation or merger (if other than such Guarantor) or to which such sale, assignment, transfer, lease, conveyance or other disposition shall have been made is a corporation, partnership or limited liability company organized or existing under the laws of the jurisdiction of organization of such Guarantor, as the case may be, or the laws of the United States, any state thereof, the District of Columbia or any territory thereof (such Guarantor or such Person, as the case may be, being herein called the “Successor Person” ), (B) the Successor Person (if other than such Guarantor) expressly assumes all the obligations of such Guarantor under this Indenture and such Guarantor’s Guarantee pursuant to a supplemental indenture or

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other documents or instruments, (C) immediately after such transaction, no Default exists, and (D) the Successor Person shall have delivered to the Trustee an Officer’s Certificate and an Opinion of Counsel, each stating that such consolidation, merger or transfer and such supplemental indentures, if any, comply with this Indenture; or

(ii) the transaction is made in compliance with clauses (i) and (ii) of Section 4.06(a) hereof.

Except as otherwise provided in this Indenture, the Successor Person (if other than such Guarantor) will succeed to, and be substituted for, such Guarantor under this Indenture and such Guarantor’s Guarantee, and such Guarantor will automatically be released and discharged from its obligations under this Indenture and such Guarantor’s Guarantee. Notwithstanding the foregoing, (1) a Guarantor may consolidate with or merge with or into or wind up into or sell, assign, transfer, lease, convey or otherwise dispose of all or part of its properties and assets to another Guarantor or the Issuer and (2) a Guarantor may consolidate with or merge with or into or wind up or convert into an Affiliate incorporated solely for the purpose of reincorporating such Guarantor in another state of the United States or the District of Columbia so long as the amount of Indebtedness of the Guarantor is not increased thereby.

Clauses (iii) and (iv) of Section 5.01(a) shall not apply to a sale, assignment, transfer, conveyance or other disposition of assets between or among the Issuer and the Restricted Subsidiaries.

SECTION 5.02. Successor Corporation Substituted.

Upon any consolidation or merger, or any sale, assignment, transfer, lease, conveyance or other disposition of all or substantially all of the assets of the Issuer in accordance with Section 5.01 hereof, the successor corporation formed by such consolidation or into or with which the Issuer is merged or to which such sale, assignment, transfer, lease, conveyance or other disposition is made shall succeed to, and be substituted for (so that from and after the date of such consolidation, merger, sale, lease, conveyance or other disposition, the provisions of this Indenture referring to the Issuer shall refer instead to the successor corporation and not to the Issuer), and may exercise every right and power of the Issuer under this Indenture with the same effect as if such successor Person had been named as the Issuer herein; provided that the predecessor Issuer shall not be relieved from the obligation to pay the principal of and interest and Additional Interest, if any, on the Securities except in the case of a sale, assignment, transfer, lease, conveyance or other disposition of all of the Issuer’s assets that meets the requirements of Section 5.01 hereof.

ARTICLE 6

DEFAULTS AND REMEDIES

SECTION 6.01. Events of Default. An “Event of Default” with respect to the Securities occurs if:

(a) there is a default in payment when due and payable, upon redemption, acceleration or otherwise, of principal of, or premium, if any, on the Securities;

(b) there is a default for 30 days or more in the payment when due of interest and Additional Interest, if any, on or with respect to the Securities;

(c) the Issuers or any Guarantor fails for 60 days after receipt of written notice given by the Trustee or the Holders of not less than 25% in principal amount of the Securities to comply with any of its obligations, covenants or agreements (other than a default referred to in clauses (a) and (b) above) contained in this Indenture or the Securities;

(d) there is a default under any mortgage, indenture or instrument under which there is issued or by which there is secured or evidenced any Indebtedness for money borrowed by the Issuer or any of its

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Restricted Subsidiaries or the payment of which is guaranteed by the Issuer or any of its Restricted Subsidiaries, other than Indebtedness owed to the Issuer or a Restricted Subsidiary, whether such Indebtedness or guarantee now exists or is created after the issuance of the Securities, if both:

(a) such default either results from the failure to pay any principal of such Indebtedness at its stated final maturity (after giving effect to any applicable grace periods) or relates to an obligation other than the obligation to pay principal of any such Indebtedness at its stated final maturity and results in the holder or holders of such Indebtedness causing such Indebtedness to become due prior to its stated maturity; and

(b) the principal amount of such Indebtedness, together with the principal amount of any other such indebtedness in default for failure to pay any principal at its stated final maturity (after giving effect to any applicable grace periods), or the maturity of which has been so accelerated, aggregate $50.0 million or more at any one time outstanding;

(e) Issuer or any Significant Subsidiary, or any group of Restricted Subsidiaries that, taken together (as of the latest audited consolidated financial statements for the Issuer), would constitute a Significant Subsidiary, fails to pay final judgments aggregating in excess of $50.0 million, which final judgments remain unpaid, undischarged, unwaived and unstayed for a period of more than 60 days after such judgment becomes final, and in the event such judgment is covered by insurance, an enforcement proceeding has been commenced by any creditor upon such judgment or decree which is not promptly stayed;

(f) the Issuer or any of its Restricted Subsidiaries that is a Significant Subsidiary or any group of Restricted Subsidiaries that, taken together (as of the latest audited consolidated financial statements for the Issuer), would constitute a Significant Subsidiary, pursuant to or within the meaning of any Bankruptcy Law:

(i) commences a voluntary case;

(ii) consents to the entry of an order for relief against it in an involuntary case;

(iii) consents to the appointment of a Custodian of it or for all or substantially all of its property; or

(iv) makes a general assignment for the benefit of its creditors;

(g) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that:

(i) is for relief against the Issuer or any of its Restricted Subsidiaries that is a Significant Subsidiary or any group of Restricted Subsidiaries that, taken together, would constitute a Significant Subsidiary, in a proceeding in which the Issuer or any such Restricted Subsidiaries that is a Significant Subsidiary or any group of Restricted Subsidiaries that, taken together (as of the latest audited consolidated financial statements for the Issuer), would constitute a Significant Subsidiary, is to be adjudicated bankrupt or insolvent;

(ii) appoints a receiver, liquidator, assignee, trustee, sequestrator or other similar official of the Issuer or any of its Restricted Subsidiaries that is a Significant Subsidiary or any group of Restricted Subsidiaries that, taken together (as of the latest audited consolidated financial statements for the Issuer), would constitute a Significant Subsidiary, or for all or substantially all of the property of the Issuer or any of its Restricted Subsidiaries that is a Significant Subsidiary or any group of Restricted Subsidiaries that, taken together (as of the latest audited consolidated financial statements for the Issuer), would constitute a Significant Subsidiary; or

(iii) orders the liquidation of the Issuer or any of its Restricted Subsidiaries that is a Significant Subsidiary or any group of Restricted Subsidiaries that, taken together (as of the latest audited consolidated financial statements for the Issuer), would constitute a Significant Subsidiary;

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and the order or decree remains unstayed and in effect for 60 consecutive days; or

(h) the Guarantee, if any, of any Significant Subsidiary, or any group of Restricted Subsidiaries that, taken together (as of the latest audited consolidated financial statements for the Issuer), would constitute a Significant Subsidiary, shall for any reason cease to be in full force and effect (except as contemplated by the terms thereof) or any responsible officer of any Guarantor that is a Significant Subsidiary, or any group of Restricted Subsidiaries that, taken together (as of the latest audited consolidated financial statements for the Issuer), would constitute a Significant Subsidiary, as the case may be, denies that it has any further liability under its or their Guarantee(s) or gives notice to such effect, other than by reason of the termination of this Indenture or the release of any such Guarantee in accordance with this Indenture.

In the event of any Event of Default specified in clause (d) above, such Event of Default and all consequences thereof (excluding any resulting payment default, other than as a result of acceleration of the Securities) shall be annulled, waived and rescinded, automatically and without any action by the Trustee or the Holders, if within 20 days after such Event of Default arose:

(1) the Indebtedness or guarantee that is the basis for such Event of Default has been discharged; or

(2) holders thereof have rescinded or waived the acceleration, notice or action (as the case may be) giving rise to such Event of Default; or

(3) the default that is the basis for such Event of Default has been cured.

SECTION 6.02. Acceleration. If any Event of Default (other than an Event of Default specified in clause (f) or (g) of Section 6.01 hereof with respect to the Issuer) occurs and is continuing under this Indenture, the Trustee or the Holders of at least 25% in principal amount of the then total outstanding Securities by notice to the Issuer may declare the principal, premium, if any, interest and any other monetary obligations on all the then outstanding Securities to be due and payable immediately. Upon the effectiveness of such declaration, such principal and interest shall be due and payable immediately.

Notwithstanding the foregoing, in the case of an Event of Default arising under clause (f) or (g) of Section 6.01 hereof with respect to the Issuer, all outstanding Securities shall be due and payable immediately without further action or notice.

The Holders of a majority in aggregate principal amount of the then outstanding Securities by written notice to the Trustee may on behalf of all of the Holders rescind an acceleration and its consequences:

(1) if the rescission would not conflict with any judgment or decree;

(2) if all existing Events of Default have been cured, waived, annulled or rescinded except nonpayment of principal interest or interest that has become due solely because of the acceleration;

(3) to the extent the payment of such interest is lawful, interest on overdue installments of interest and overdue principal, which has become due otherwise than by such declaration of acceleration, has been paid; and

(4) if the Issuer has paid the Trustee its reasonable compensation and reimbursed the Trustee for its expenses, disbursements and advances.

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SECTION 6.03. Other Remedies. If an Event of Default with respect to the Securities occurs and is continuing, the Trustee may pursue any available remedy at law or in equity to collect the payment of principal of or interest on the Securities or to enforce the performance of any provision of the Securities or this Indenture.

The Trustee may maintain a proceeding even if it does not possess any of the Securities or does not produce any of them in the proceeding. A delay or omission by the Trustee or any Holder in exercising any right or remedy accruing upon an Event of Default shall not impair the right or remedy or constitute a waiver of or acquiescence in the Event of Default. No remedy is exclusive of any other remedy. To the extent permitted by law, all available remedies are cumulative.

SECTION 6.04. Waiver of Past Defaults. Provided the Securities are not then due and payable by reason of a declaration of acceleration, the Holders of not less than a majority in principal amount of the then outstanding Securities by written notice to the Trustee may on the behalf of all Holders waive an existing Default or Event of Default and its consequences except (a) a continuing Default or Event of Default in the payment of the principal of or interest on a Security, (b) a continuing Default or Event of Default arising from the failure to redeem or purchase any Security when required pursuant to the terms of this Indenture or (c) a Default in respect of a provision that under Section 9.02 cannot be amended without the consent of each Holder affected. When a Default is waived, it is deemed cured and the Issuer, the Trustee and the Holders will be restored to their former positions and rights under this Indenture, but no such waiver shall extend to any subsequent or other Default or impair any consequent right.

SECTION 6.05. Control by Majority. The Holders of a majority in principal amount of the then outstanding Securities may direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or of exercising any trust or power conferred on the Trustee. However, the Trustee may refuse to follow any direction that conflicts with law or this Indenture or, subject to Section 7.01, that the Trustee determines is unduly prejudicial to the rights of any other Holder or that would involve the Trustee in personal liability. Prior to taking any action under this Indenture, the Trustee shall be entitled to indemnification satisfactory to it in its sole discretion against all losses and expenses caused by taking or not taking such action.

SECTION 6.06. Limitation on Suits.

(a) Except to enforce the right to receive payment of principal, premium (if any) or interest when due, no Holder may pursue any remedy with respect to this Indenture or the Securities unless:

(i) Such Holder has previously given the Trustee written notice that an Event of Default is continuing;

(ii) Holders of at least 25% in principal amount of the total outstanding Securities have requested the Trustee, in writing, to pursue the remedy;

(iii) Holders of the Securities have offered the Trustee security or indemnity satisfactory to it against any loss, liability or expense;

(iv) the Trustee has not complied with such request within 60 days after receipt thereof and the offer of security or indemnity; and

(v) Holders of a majority in principal amount of the total outstanding Securities have not given the Trustee a written direction inconsistent with the request during such 60-day period.

(b) A Holder may not use this Indenture to prejudice the rights of another Holder or to obtain a preference or priority over another Holder (it being understood that the Trustee does not have an affirmative duty to ascertain whether or not such actions or forbearances are unduly prejudicial to such Holders).

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SECTION 6.07. Rights of the Holders to Receive Payment. Notwithstanding any other provision of this Indenture, the right of any Holder to receive payment of principal of and interest on the Securities held by such Holder, on or after the respective due dates expressed or provided for in the Securities, or to bring suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected without the consent of such Holder.

SECTION 6.08. Collection Suit by Trustee. If an Event of Default specified in Section 6.01(a) or (b) occurs and is continuing with respect to Securities, the Trustee may recover judgment in its own name and as trustee of an express trust against the Issuer or any other Obligor on the Securities for the whole amount then due and owing (together with interest on overdue principal and (to the extent lawful) on any unpaid interest at the rate provided for in such Securities) and the amounts provided for in Section 7.07.

SECTION 6.09. Trustee May File Proofs of Claim. The Trustee may file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for reasonable compensation, expenses disbursements and advances of the Trustee (including counsel, accountants, experts or such other professionals as the Trustee deems necessary, advisable or appropriate)) and the Holders of Securities then outstanding allowed in any judicial proceedings relative to the Issuer or any Guarantor, its creditors or its property, shall be entitled to participate as a member, voting or otherwise, of any official committee of creditors appointed in such matters and, unless prohibited by law or applicable regulations, may vote on behalf of the Holders in any election of a trustee in bankruptcy or other Person performing similar functions, and any Custodian in any such judicial proceeding is hereby authorized by each Holder to make payments to the Trustee and, in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and its counsel, and any other amounts due the Trustee under Section 7.07.

SECTION 6.10. Priorities. If the Trustee collects any money or property pursuant to this Article 6, it shall pay out the money or property in the following order:

FIRST: to the Trustee for amounts due under Section 7.07;

SECOND: to the Holders for amounts due and unpaid on the Securities for principal, premium, if any, and interest, ratably, without preference or priority of any kind, according to the amounts due and payable on the Securities for principal and interest, respectively; and

THIRD: to the Issuer.

The Trustee may fix a record date and payment date for any payment to the Holders pursuant to this Section. At least 15 days before such record date, the Trustee shall send to each Holder and the Issuer a notice that states the record date, the payment date and amount to be paid.

SECTION 6.11. Undertaking for Costs. In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as Trustee, a court in its discretion may require the filing by any party litigant in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys’ fees and expenses, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section does not apply to a suit by the Trustee, a suit by a Holder pursuant to Section 6.07 or a suit by Holders of more than 10% in principal amount of the Securities.

SECTION 6.12. Waiver of Stay or Extension Laws. Neither the Issuer nor any Guarantor (to the extent it may lawfully do so) shall at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension law wherever enacted, now or at any time hereafter in force, which may affect the covenants or the performance of this Indenture; and the Issuer and each Guarantor (to the extent that it may lawfully do so) hereby expressly waive all benefit or advantage of any such law, and shall not hinder, delay or impede the execution of any power herein granted to the Trustee, but shall suffer and permit the execution of every such power as though no such law had been enacted.

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ARTICLE 7

TRUSTEE

SECTION 7.01. Duties of Trustee.

(a) If an Event of Default has occurred and is continuing, the Trustee shall exercise the rights and powers vested in it by this Indenture and use the same degree of care and skill in their exercise as a prudent person would exercise or use under the circumstances in the conduct of such person’s own affairs.

(b) Except during the continuance of an Event of Default:

(i) the Trustee undertakes to perform such duties and only such duties as are specifically set forth in this Indenture and no implied covenants or obligations shall be read into this Indenture against the Trustee (it being agreed that the permissive right of the Trustee to do things enumerated in this Indenture shall not be construed as a duty); and

(ii) in the absence of negligence, willful misconduct or bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture. The Trustee shall be under no duty to make any investigation as to any statement contained in any such instance, but may accept the same as conclusive evidence of the truth and accuracy of such statement or the correctness of such opinions. However, in the case of certificates or opinions required by any provision hereof to be provided to it, the Trustee shall examine the certificates and opinions to determine whether or not they conform to the requirements of this Indenture (but need not confirm or investigate the accuracy of mathematical calculations or other facts stated therein).

(c) The Trustee may not be relieved from liability for its own negligent action, its own negligent failure to act or its own willful misconduct, except that:

(i) this paragraph does not limit the effect of paragraph (b) of this Section;

(ii) the Trustee shall not be liable for any error of judgment made in good faith by a Trust Officer unless it is proved that the Trustee was negligent in ascertaining the pertinent facts;

(iii) the Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 6.05; and

(iv) no provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur financial liability in the performance of any of its duties hereunder or in the exercise of any of its rights or powers.

(d) Every provision of this Indenture that in any way relates to the Trustee is subject to paragraphs (a), (b) and (c) of this Section.

(e) The Trustee shall not be liable for interest on any money received by it except as the Trustee may agree in writing with the Issuer.

(f) Money held in trust by the Trustee need not be segregated from other funds except to the extent required by law.

(g) Every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Trustee shall be subject to the provisions of this Section and to the provisions of the Trust Indenture Act.

(h) Unless otherwise specifically provided in this Indenture, any demand, request, direction or notice from the Issuers will be sufficient if signed by an Officer of each Issuer.

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SECTION 7.02. Rights of Trustee.

(a) The Trustee may conclusively rely on any document believed by it to be genuine and to have been signed or presented by the proper person. The Trustee need not investigate any fact or matter stated in the document.

(b) Before the Trustee acts or refrains from acting, it may require an Officer’s Certificate or an Opinion of Counsel or both. The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on the Officer’s Certificate or Opinion of Counsel.

(c) The Trustee may act through its attorneys and agents and shall not be responsible for the misconduct or negligence of any attorney or agent appointed with due care.

(d) The Trustee shall not be liable for any action it takes or omits to take in good faith which it believes to be authorized or within its rights or powers conferred upon it by this Indenture; provided, however, that the Trustee’s conduct does not constitute negligence, willful misconduct or bad faith.

(e) The Trustee may consult with counsel of its own selection and the advice or opinion of counsel with respect to legal matters relating to this Indenture and the Securities shall be full and complete authorization and protection from liability in respect of any action taken, omitted or suffered by it hereunder in good faith and in accordance with the advice or opinion of such counsel.

(f) The Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, approval, bond, debenture, note or other paper or document unless requested in writing to do so by the Holders of not less than a majority in principal amount of the Securities at the time outstanding, but the Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled to examine the books, records and premises of the Issuers, personally or by agent or attorney, at the expense of the Issuers and shall incur no liability of any kind by reason of such inquiry or investigation.

(g) The Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders pursuant to this Indenture, unless such Holders shall have offered to the Trustee security or indemnity satisfactory to the Trustee against the costs, expenses and liabilities which might be incurred by it in compliance with such request or direction.

(h) The rights, privileges, protections, immunities and benefits given to the Trustee, including its right to be indemnified, are extended to, and shall be enforceable by, the Trustee in each of its capacities hereunder, and each agent, custodian and other Person employed to act hereunder.

(i) The Trustee shall not be liable for any action taken or omitted by it in good faith at the direction of the Holders of not less than a majority in principal amount of the outstanding Securities as to the time, method and place of conducting any proceedings for any remedy available to the Trustee or the exercising of any power conferred by this Indenture.

(j) Any action taken, or omitted to be taken, by the Trustee in good faith pursuant to this Indenture upon the request or authority or consent of any person who, at the time of making such request or giving such authority or consent, is the Holder of any Security shall be conclusive and binding upon future Holders of Securities and upon Securities executed and delivered in exchange therefor or in place thereof.

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(k) In no event shall the Trustee be responsible or liable for special, indirect, punitive or consequential loss or damage of any kind whatsoever (including, but not limited to, loss of profit) irrespective of whether the Trustee has been advised of the likelihood of such loss or damage and regardless of the form of action.

(l) The Trustee shall not be required to give any bond or surety in respect of the performance of its powers and duties hereunder.

(m) The Trustee may request that the Issuers deliver a certificate setting forth the names of individuals and/or titles of officers authorized at such time to take specified actions pursuant to this Indenture.

SECTION 7.03. Individual Rights of Trustee. The Trustee in its individual or any other capacity may become the owner or pledgee of Securities and may otherwise deal with the Issuer or their Affiliates with the same rights it would have if it were not Trustee. Any Paying Agent or Registrar may do the same with like rights. However, the Trustee must comply with Sections 7.10 and 7.11.

SECTION 7.04. Trustee’s Disclaimer. The Trustee shall not be responsible for and makes no representation as to the validity or adequacy of this Indenture, any Guarantee or the Securities, it shall not be accountable for the Issuer’s use of the proceeds from the Securities, and it shall not be responsible for any statement of any Issuer or any Guarantor in this Indenture or in any document issued in connection with the sale of the Securities or in the Securities other than the Trustee’s certificate of authentication. The Trustee shall not be charged with knowledge of any Default or Event of Default unless either (a) a Trust Officer shall have actual knowledge thereof or (b) the Trustee shall have received written notice thereof in accordance with Section 11.02 hereof from the Issuer, any Guarantor or any Holder. In accepting the trust hereby created, the Trustee acts solely as Trustee for the Holders and not in its individual capacity and all persons, including without limitation the Holders of Securities and the Issuers having any claim against the Trustee arising from this Indenture shall look only to the funds and accounts held by the Trustee hereunder for payment.

SECTION 7.05. Notice of Defaults. If a Default occurs and is continuing and if it is actually known to a Trust Officer of the Trustee, the Trustee shall send to each Holder notice of the Default within the earlier of 90 days after it occurs or 30 days after it is actually known to a Trust Officer or written notice of it is received by the Trustee, or promptly after discovery or obtaining notice if such discovery is made or notice is received 90 days after the Default occurs. Except in the case of a Default in the payment of principal of, premium (if any) or interest on any Security, the Trustee may withhold the notice if and so long as it in good faith determines that withholding the notice is in the interests of the Holders.

SECTION 7.06. Reports by Trustee to the Holders. As promptly as practicable after each July 1 beginning with the July 1 following the date of this Indenture, and in any event prior to August 30 in each year, for so long as Securities remain outstanding, the Trustee shall mail to each Holder a brief report dated as of such reporting date that complies with Section 313(a) of the Trust Indenture Act if and to the extent required thereby. The Trustee shall also comply with Section 313(b) of the Trust Indenture Act.

A copy of each report at the time of its mailing to the Holders will be mailed by the Trustee to the Issuer and shall be filed by the Trustee with the SEC and each stock exchange (if any) on which the Securities are listed in accordance with Section 313(d) of the Trust Indenture Act. The Issuer agrees to notify promptly the Trustee in writing whenever the Securities become listed on any stock exchange and of any delisting thereof.

SECTION 7.07. Compensation and Indemnity. The Issuers shall pay to the Trustee from time to time such compensation for its services as shall be agreed in writing between the Issuers and the Trustee. The Trustee’s compensation shall not be limited by any law on compensation of a trustee of an express trust. The Issuers shall reimburse the Trustee upon request for all reasonable out-of-pocket expenses incurred or made by it, including costs of collection, in addition to the compensation for its services, except any such disbursements, advances or expenses as may be attributable to its negligence, willful misconduct or bad faith as determined by a court of competent jurisdiction. Such expenses shall include the reasonable compensation and expenses, disbursements and advances of the Trustee’s agents, counsel, accountants and experts. The Issuers and each Guarantor, jointly and severally, shall indemnify the Trustee against any and all loss, liability, claim, damage or expense (including reasonable attorneys’ fees and expenses) incurred by it arising out of or in connection with the acceptance or

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administration of this trust and the performance of its duties under this Indenture, including the costs and expenses of enforcing this Indenture or Guarantee against the Issuers or a Guarantor (including this Section 7.07) and defending itself against or investigating any claim (whether asserted by the Issuers, any Guarantor, any Holder or any other Person). The obligation to pay such amounts shall survive the payment in full or defeasance of the Securities or the removal or resignation of the Trustee. The Trustee shall notify the Issuers of any claim for which it may seek indemnity promptly upon obtaining actual knowledge thereof; provided, however, that any failure so to notify the Issuers shall not relieve the Issuers or any Guarantor of its indemnity obligations hereunder. The Issuers shall defend the claim and the indemnified party shall provide reasonable cooperation at the Issuers’ expense in the defense. Such indemnified parties may have separate counsel and the Issuers and the Guarantors, as applicable, shall pay the fees and expenses of such counsel; provided, however, that the Issuers shall not be required to pay such fees and expenses if it assumes such indemnified parties’ defense and, in such indemnified parties’ reasonable judgment, there is no conflict of interest between the Issuer and the Guarantors, as applicable, and such parties in connection with such defense. The Issuers need not reimburse any expense or indemnify against any loss, liability or expense incurred by an indemnified party through such party’s own willful misconduct, negligence or bad faith as determined by a court of competent jurisdiction.

To secure the Issuers’ and the Guarantors’ payment obligations in this Section, the Trustee shall have a Lien prior to the Securities on all money or property held or collected by the Trustee other than money or property held in trust to pay principal of and interest on particular Securities pursuant to Article 8 hereof or otherwise.

The Issuers’ and the Guarantors’ payment obligations pursuant to this Section shall survive the satisfaction or discharge of this Indenture, any rejection or termination of this Indenture under any Bankruptcy Law or the resignation or removal of the Trustee. Without prejudice to any other rights available to the Trustee under applicable law, when the Trustee incurs expenses after the occurrence of a Default specified in Section 6.01(e) or (f) with respect to any Issuer, the expenses are intended to constitute expenses of administration under the Bankruptcy Law.

No provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if adequate indemnity against such risk or liability is not assured to its satisfaction.

SECTION 7.08. Replacement of Trustee.

(a) A resignation or removal of the Trustee and appointment of a successor Trustee will become effective only upon the successor Trustee’s acceptance of appointment as provided in this Section 7.08.

(b) The Trustee may resign in writing at any time and be discharged from the trust hereby created by so notifying the Issuer. The Holders of a majority in aggregate principal amount of the then outstanding Securities may remove the Trustee by so notifying the Trustee and the Issuer in writing, and may appoint a successor Trustee. The Issuer shall remove the Trustee if:

(i) the Trustee fails to comply with Section 7.10;

(ii) the Trustee is adjudged bankrupt or insolvent, or an order for relief is entered with respect to the Trustee under any Bankruptcy Law;

(iii) a receiver or other public officer takes charge of the Trustee or its property; or

(iv) the Trustee otherwise becomes incapable of acting.

(c) If the Trustee resigns, is removed by the Issuer or by the Holders of a majority in principal amount of the Securities and such Holders do not reasonably promptly appoint a successor Trustee, or if a vacancy exists in the office of Trustee for any reason (the Trustee in such event being referred to herein as the retiring Trustee), the Issuer shall promptly appoint a successor Trustee.

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(d) A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Issuer. Thereupon the resignation or removal of the retiring Trustee shall become effective, and the successor Trustee shall have all the rights, powers and duties of the Trustee under this Indenture. The successor Trustee shall mail a notice of its succession to the Holders. The retiring Trustee shall promptly transfer all property held by it as Trustee to the successor Trustee, subject to the Lien provided for in Section 7.07.

(e) If a successor Trustee does not take office within 60 days after the retiring Trustee resigns or is removed, the retiring Trustee or the Holders of at least 10% in aggregate principal amount of the then outstanding Securities may petition at the expense of the Issuer any court of competent jurisdiction for the appointment of a successor Trustee.

(f) If the Trustee fails to comply with Section 7.10, unless the Trustee’s duty to resign is stayed as provided in Section 310(b) of the Trust Indenture Act, any Holder who has been a bona fide holder of a Security for at least six months may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee.

(g) Notwithstanding the replacement of the Trustee pursuant to this Section, the Issuer’s obligations under Section 7.07 shall continue for the benefit of the retiring Trustee.

SECTION 7.09. Successor Trustee by Merger. If the Trustee consolidates with, merges or converts into, or transfers all or substantially all its corporate trust business or assets to, another corporation or banking association, the resulting, surviving or transferee corporation without any further act shall be the successor Trustee.

In case at the time such successor or successors by merger, conversion or consolidation to the Trustee shall succeed to the trusts created by this Indenture any of the Securities shall have been authenticated but not delivered, any such successor to the Trustee may adopt the certificate of authentication of any predecessor trustee, and deliver such Securities so authenticated; and in case at that time any of the Securities shall not have been authenticated, any successor to the Trustee may authenticate such Securities either in the name of any predecessor hereunder or in the name of the successor to the Trustee; and in all such cases such certificates shall have the full force which it is anywhere in the Securities or in this Indenture provided that the certificate of the Trustee shall have.

SECTION 7.10. Eligibility; Disqualification. The Trustee shall at all times satisfy the requirements of Section 310(a) of the Trust Indenture Act. The Trustee shall have a combined capital and surplus of at least $50 million as set forth in its most recent published annual report of condition. The Trustee shall comply with Section 310(b) of the Trust Indenture Act, subject to its right to apply for a stay of its duty to resign under the penultimate paragraph of Section 310(b) of the TIA; provided, however, that there shall be excluded from the operation of Section 310(b)(1) of the Trust Indenture Act any series of securities issued under this Indenture and any indenture or indentures under which other securities or certificates of interest or participation in other securities of the Issuer are outstanding if the requirements for such exclusion set forth in Section 310(b)(1) of the Trust Indenture Act are met.

SECTION 7.11. Preferential Collection of Claims Against the Issuers. The Trustee shall comply with Section 311(a) of the Trust Indenture Act, excluding any creditor relationship listed in Section 311(b) of the Trust Indenture Act. A Trustee who has resigned or been removed shall be subject to Section 311(a) of the Trust Indenture Act to the extent indicated.

ARTICLE 8

DISCHARGE OF INDENTURE; DEFEASANCE

SECTION 8.01. Discharge of Liability on Securities; Defeasance. This Indenture shall be discharged and shall cease to be of further effect as to all outstanding Securities when either:

(1)(a) all Securities theretofore authenticated and delivered, except lost, stolen or destroyed Securities which have been replaced or paid and Securities for whose payment money has theretofore been deposited in trust or segregated and held in trust by the Issuers and thereafter repaid to the Issuers or discharged from trust, have been delivered to the Trustee for cancellation; or

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(b) (i) all Securities not theretofore delivered to the Trustee for cancellation have become due and payable by reason of the making of a notice of redemption or otherwise, will become due and payable within one year or are to be called for redemption within one year under arrangements satisfactory to the Trustee for the giving of notice of redemption by the Trustee in the name, and at the expense, of the Issuers and the Issuers or any Guarantor have irrevocably deposited or caused to be deposited with the Trustee as trust funds in trust solely for the benefit of the Holders of the Securities, cash in U.S. dollars, Government Securities, or a combination thereof, in such amounts as will be sufficient without consideration of any reinvestment of interest to pay and discharge the entire indebtedness as determined by the Issuers on the Securities not theretofore delivered to the Trustee for cancellation for principal, premium, if any, and accrued interest to, but not including, the date of maturity or redemption; (ii) the Issuers and/or the Guarantors have paid or caused to be paid all sums payable by it under this Indenture; and (iii) the Issuers have delivered irrevocable instructions to the Trustee to apply the deposited money toward the payment of the Securities at maturity or the redemption date, as the case may be.

(c) In addition, the Issuers must deliver an Officer’s Certificate and an Opinion of Counsel to the Trustee stating that all conditions precedent to satisfaction and discharge have been satisfied.

(2) Subject to Section 8.02, the Issuers may, at their option and at any time, elect to discharge (i) all of their obligations under the Securities and this Indenture (“legal defeasance option”) or (ii) their obligations under Sections 4.02, 4.03, 4.04, 4.05, 4.06, 4.07, 4.08, 4.09, 4.11 and 4.12 for the benefit of the Holders and the operation of Section 5.01 and Sections 6.01(c), 6.01(d), 6.01(e), 6.01(f) (with respect to Significant Subsidiaries of the Issuers only), 6.01(g) (with respect to Significant Subsidiaries of the Issuers only) and 6.01(h) (“covenant defeasance option”) for the benefit of the Holders. The Issuers may exercise their legal defeasance option notwithstanding its prior exercise of its covenant defeasance option. In the event that the Issuers terminate all of its obligations under the Securities and this Indenture by exercising its legal defeasance option or its covenant defeasance option, the obligations of each Guarantor under its Guarantee of the Securities shall be terminated simultaneously with the termination of such obligations so long as no Securities are then outstanding.

(3) If the Issuers exercise its legal defeasance option, payment of the Securities so defeased may not be accelerated because of an Event of Default. If the Issuer exercises its covenant defeasance option, payment of the Securities so defeased may not be accelerated because of an Event of Default specified in Section 6.01(c), 6.01(d), 6.01(e), 6.01(f) (with respect to Significant Subsidiaries of the Issuer only), 6.01(g) (with respect to Significant Subsidiaries of the Issuer only), 6.01(h) or because of the failure of the Issuer to comply with subclause (a)(iv) of Section 5.01.

(4) Upon satisfaction of the conditions set forth herein and upon request of the Issuers, the Trustee shall acknowledge in writing the discharge of those obligations that the Issuer terminates.

(5) Notwithstanding paragraph 2(i) above, the Issuers’ obligations in Sections 2.04, 2.05, 2.06, 2.07, 2.08, 2.09, 7.07, 7.08 and in this Article 8 shall survive until the Securities have been paid in full. Thereafter, the Issuer’s obligations in Sections 7.07, 8.05 and 8.06 shall survive such satisfaction and discharge.

SECTION 8.02. Conditions to Defeasance.

(a) The Issuers may exercise its legal defeasance option or its covenant defeasance option, in each case, with respect to the Securities only if:

(i) the Issuers must irrevocably deposit with the Trustee, in trust, for the benefit of the Holders of the Securities, cash in U.S. dollars, Government Securities, or a combination thereof, in such amounts as will be sufficient, in the opinion of a nationally recognized firm of independent public accountants, investment bank or appraisal firm, to pay the principal of, premium, if any, and interest due on

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the Securities on the stated maturity date or on the redemption date, as the case may be, of such principal, premium, if any, or interest on such Securities (provided that if such redemption is made as provided under paragraph 5 of the Security, (x) the amount of cash in U.S. dollars, Government Securities, or a combination thereof, that the Issuers must irrevocably deposit or cause to be deposited will be determined using an assumed Applicable Premium calculated as of the date of such deposit and (y) the Issuers must irrevocably deposit or cause to be deposited additional money in trust on the redemption date as necessary to pay the Applicable Premium as determined on such date) and the Issuers must specify whether such Securities are being defeased to maturity or to a particular redemption date;

(ii) in the case of Legal Defeasance, the Issuers shall have delivered to the Trustee an Opinion of Counsel confirming that, subject to customary assumptions and exclusions, (a) the Issuers have received from, or there has been published by, the United States Internal Revenue Service a ruling, or (b) since the issuance of the Securities, there has been a change in the applicable U.S. federal income tax law,

in either case to the effect that, and based thereon such Opinion of Counsel shall confirm that, subject to customary assumptions and exclusions, the Holders of the Securities will not recognize income, gain or loss for U.S. federal income tax purposes, as applicable, as a result of such Legal Defeasance and will be subject to U.S. federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Legal Defeasance had not occurred;

(iii) in the case of Covenant Defeasance, the Issuers shall have delivered to the Trustee an Opinion of Counsel confirming that, subject to customary assumptions and exclusions, the Holders of the Securities will not recognize income, gain or loss for U.S. federal income tax purposes as a result of such Covenant Defeasance and will be subject to such tax on the same amounts, in the same manner and at the same times as would have been the case if such Covenant Defeasance had not occurred;

(iv) no Default (other than that resulting from borrowing funds to be applied to make such deposit and the granting of Liens in connection therewith) shall have occurred and be continuing on the date of such deposit;

(v) such Legal Defeasance or Covenant Defeasance shall not result in a breach or violation of, or constitute a default under the Senior Credit Facilities have been issued or any other material agreement or instrument (other than the Indenture) to which the Issuers or any Guarantor is a party or by which the Issuers or any Guarantor is bound;

(vi) the Issuers shall have delivered to the Trustee an Officer’s Certificate stating that the deposit was not made by the Issuers with the intent of defeating, hindering, delaying or defrauding any creditors of the Issuers or any Guarantor or others; and

(vii) the Issuers shall have delivered to the Trustee an Officer’s Certificate and an Opinion of Counsel (which Opinion of Counsel may be subject to customary assumptions and exclusions) each stating that all conditions precedent provided for or relating to the Legal Defeasance or the Covenant Defeasance, as the case may be, have been complied with.

Notwithstanding the foregoing, an Opinion of Counsel required by the immediately preceding paragraph with respect to legal defeasance need not be delivered if all of the Securities not thereto for delivered to the Trustee for cancellation (x) have become due and payable or (y) will become due and payable at their stated maturity within one year under arrangements satisfactory to the Trustee for the giving of notice of redemption by the Trustee in the name, and at the expense, of the Issuers.

(b) Before or after a deposit, the Issuers may make arrangements satisfactory to the Trustee for the redemption of such Securities at a future date in accordance with Article 3.

SECTION 8.03. Application of Trust Money. The Trustee shall hold in trust money or Government Securities (including proceeds thereof) deposited with it pursuant to this Article 8. It shall apply the deposited money and the money from Government Securities through each Paying Agent and in accordance with this Indenture to the payment of principal of and interest on the Securities so discharged or defeased.

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SECTION 8.04. Repayment to Issuer. Each of the Trustee and each Paying Agent shall promptly turn over to the Issuers upon written request any money or Government Securities held by it as provided in this Article which, in the written opinion of a nationally recognized firm of independent public accountants delivered to the Trustee (which delivery shall only be required if Government Securities have been so deposited), are in excess of the amount thereof which would then be required to be deposited to effect an equivalent discharge or defeasance in accordance with this Article 8.

Subject to any applicable abandoned property law, the Trustee and each Paying Agent shall pay to the Issuers upon written request any money held by them for the payment of principal or interest that remains unclaimed for two years, and, thereafter, Holders entitled to the money must look to the Issuer for payment as general creditors, and the Trustee and each Paying Agent shall have no further liability with respect to such monies.

SECTION 8.05. Indemnity for Government Securities. The Issuers shall pay and shall indemnify the Trustee against any tax, fee or other charge imposed on or assessed against deposited Government Securities or the principal and interest received on such Government Securities.

SECTION 8.06. Reinstatement. If the Trustee or any Paying Agent is unable to apply any money or Government Securities in accordance with this Article 8 by reason of any legal proceeding or by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, the Issuers’ obligations under this Indenture and the Securities so discharged or defeased shall be revived and reinstated as though no deposit had occurred pursuant to this Article 8 until such time as the Trustee or any Paying Agent is permitted to apply all such money or Government Securities in accordance with this Article 8; provided, however, that, if the Issuer has made any payment of principal of or interest on, any such Securities because of the reinstatement of its obligations, the Issuer shall be subrogated to the rights of the Holders of such Securities to receive such payment from the money or Government Securities held by the Trustee or any Paying Agent.

ARTICLE 9

AMENDMENTS AND WAIVERS

SECTION 9.01. Without Consent of the Holders. The Issuer, the Guarantors (with respect to a Guarantee or this Indenture to which it is a party) and the Trustee may amend or supplement this Indenture and any Guarantee or the Securities without the consent of any Holder:

(i) to cure any ambiguity, omission, mistake, defect or inconsistency;

(ii) to provide for uncertificated Securities of such series in addition to or in place of certificated Securities;

(iii) to comply with the covenant relating to mergers, consolidations and sales of assets;

(iv) to provide for the assumption of the Issuer’s or any Guarantor’s obligations to the Holders in a transaction that complies with this Indenture;

(v) to make any change that would provide any additional rights or benefits to the Holders or that does not adversely affect the legal rights under this Indenture of any such Holder;

(vi) to add covenants for the benefit of the Holders or to surrender any right or power conferred upon the Issuer or any Guarantor;

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(vii) to comply with requirements of the SEC in order to effect or maintain the qualification of this Indenture under the Trust Indenture Act, if such qualification is required;

(viii) to evidence and provide for the acceptance and appointment under the Indenture of a successor Trustee thereunder pursuant to the requirements thereof;

(ix) to provide for the issuance of exchange notes or private exchange notes, which are identical to exchange notes except that they are not freely transferable;

(x) to add a Guarantor under this Indenture;

(xi) to conform the text of this Indenture, the Guarantees or the Securities to any provision of the Offering Memorandum under the caption “Description of Notes” to the extent that such provision in the “Description of Notes” was intended to be a verbatim recitation of a provision of this Indenture, the Guarantees or the Securities;

(xii) to make certain changes to the Indenture to provide for the issuance of additional Securities or PIK Notes;

(xiii) to make any amendment to the provisions of this Indenture relating to the transfer and legending of Securities as permitted by this Indenture, including, without limitation to facilitate the issuance and administration of the Indenture; provided, however, that (i) compliance with this Indenture as so amended would not result in Securities being transferred in violation of the Securities Act or any applicable securities law and (ii) such amendment does not materially and adversely affect the rights of Holders to transfer Securities; or

(xiv) In the event that the PIK Notes are issued in certificated form, to make appropriate amendments to the Indenture to reflect an appropriate minimum denomination of certificated PIK Notes and establish minimum redemption amounts for certificated PIK Notes.

After an amendment under this Section 9.01 becomes effective, the Issuer shall mail to the Holders a notice briefly describing such amendment. The failure to give such notice to all Holders, or any defect therein, shall not impair or affect the validity of an amendment under this Section 9.01.

SECTION 9.02. With Consent of the Holders. Notwithstanding Section 9.01 of this Indenture, the Issuer, the Guarantors and the Trustee may amend or supplement this Indenture, the Securities or the Guarantees with the written consent of the Holders of at least a majority in principal amount of the Securities then outstanding voting as a single class (including consents obtained in connection with a purchase of, or tender offer or exchange offer for the Securities), and, subject to Sections 6.04 and 6.07, any existing Default or Event of Default (other than a Default or Event of Default in the payment of the principal of, premium, if any, or interest on the Securities, except a payment default resulting from an acceleration that has been rescinded) or compliance with any provision of this Indenture, the Securities or the Subsidiary Guarantees may be waived with the consent of the Holders of a majority in aggregate principal amount of the then outstanding Securities (including Additional Securities and PIK Notes, if any) voting as a single class (including consents obtained in connection with the purchase of, or tender offer or exchange offer for, Securities). Section 2.09 and Section 11.06 shall determine which Securities are considered to be “outstanding” for the purposes of this Section 9.02. However, without the consent of each Holder of an outstanding Security affected, an amendment or waiver may not, with respect to any Securities held by a non-consenting Holder:

(i) reduce the principal amount of such Securities whose Holders must consent to an amendment, supplement or waiver;

(ii) reduce the principal of or change the fixed final maturity of any such Security or alter or waive the provisions with respect to the redemption of such Securities (other than provisions relating to Sections 4.06 and 4.08); provided, that any amendment to the notice requirements may be made with the consent of the Holders of a majority in aggregate principal amount of then outstanding Securities prior to giving of any notice;

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(iii) reduce the rate of or change the time for payment of interest on any Security;

(iv) waive a Default in the payment of principal of or premium, if any, or interest on the Securities, except a rescission of acceleration of the Securities by the Holders of at least a majority in aggregate principal amount of the Securities and a waiver of the payment default that resulted from such acceleration, or in respect of a covenant or provision contained in this Indenture or any Guarantee which cannot be amended or modified without the consent of all affected Holders;

(v) make any Security payable in money other than that stated in such Security;

(vi) make any change in the provisions of this Indenture relating to waivers of past Defaults or the rights of Holders to receive payments of principal of or premium, if any, or interest on the Securities;

(vii) make any change to this Section 9.02;

(viii) impair the right of any Holder to receive payment of principal of, premium, if any, and interest on such Holder’s Securities on or after the due dates therefor or to institute suit for the enforcement of any payment on or with respect to such Holder’s Securities;

(ix) make any change to or modify the ranking of the Securities that would adversely affect the Holders; or

(x) except as expressly permitted by this Indenture, modify or release any Guarantee of any Significant Subsidiary, or any group of Restricted Subsidiaries that, taken together (as of the latest audited consolidated financial statements for the Issuer), would constitute a Significant Subsidiary, in any manner adverse to the Holders.

It shall not be necessary for the consent of the Holders under this Section 9.02 to approve the particular form of any proposed amendment, but it shall be sufficient if such consent approves the substance thereof.

After an amendment under this Section 9.02 becomes effective, the Issuer shall promptly mail to the Holders a notice briefly describing such amendment. The failure to give such notice to all Holders, or any defect therein, shall not impair or affect the validity of an amendment under this Section 9.02.

SECTION 9.03. Compliance with Trust Indenture Act. From the date on which this Indenture is qualified under the Trust Indenture Act, every amendment, waiver or supplement to this Indenture or the Securities shall comply with the Trust Indenture Act as then in effect.

SECTION 9.04. Revocation and Effect of Consents and Waivers.

(a) A consent to an amendment or a waiver by a Holder of a Security shall bind the Holder and every subsequent Holder of that Security or portion of the Security that evidences the same debt as the consenting Holder’s Security, even if notation of the consent or waiver is not made on the Security. However, any such Holder or subsequent Holder may revoke the consent or waiver as to such Holder’s Security or portion of the Security if the Trustee receives written notice of revocation delivered in accordance with Section 11.02 before the date on which the Trustee receives an Officer’s Certificate from the Issuer certifying that the requisite principal amount of Securities have consented. After an amendment or waiver becomes effective, it shall bind every Holder. An amendment or waiver becomes effective upon the (i) receipt by the Issuers or the Trustee of consents by the Holders of the requisite principal amount of securities, (ii) satisfaction of conditions to effectiveness as set forth in this Indenture and any indenture supplemental hereto containing such amendment or waiver and (iii) execution of such amendment or waiver (or supplemental indenture) by the Issuers and the Trustee.

(b) The Issuers may, but shall not be obligated to, fix a record date for the purpose of determining the Holders entitled to give their consent or take any other action described above or required or permitted to be taken pursuant to this Indenture. If a record date is fixed, then notwithstanding the immediately preceding paragraph, those Persons who were Holders at such record date (or their duly designated proxies), and only those Persons, shall be entitled to give such consent or to revoke any consent previously given or to take any such action, whether or not such Persons continue to be Holders after such record date. No such consent shall be valid or effective for more than 120 days after such record date.

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SECTION 9.05. Notation on or Exchange of Securities. If an amendment, supplement or waiver changes the terms of a Security, the Issuer may require the Holder to deliver it to the Trustee. The Trustee may place a notation on the Security regarding the changed terms and return it to the Holder. Alternatively, if the Issuers so determine, the Issuers in exchange for the Security shall issue and the Trustee shall authenticate a new Security that reflects the changed terms. Failure to make a notation or to issue a new Security shall not affect the validity of such amendment, supplement or waiver.

SECTION 9.06. Trustee to Sign Amendments. The Trustee shall sign any amendment, supplement or waiver authorized pursuant to this Article 9 if the amendment does not adversely affect the rights, duties, liabilities or immunities of the Trustee. If it does, the Trustee may but need not sign it. In signing such amendment, the Trustee shall be entitled to receive indemnity reasonably satisfactory to it and shall be provided with, and (subject to Section 7.01) shall be fully protected in conclusively relying upon, an Officer’s Certificate and an Opinion of Counsel stating that such amendment, supplement or waiver is authorized or permitted by this Indenture and that such amendment, supplement or waiver is the legal, valid and binding obligation of the Issuers and the Guarantors, enforceable against them in accordance with its terms, subject to customary exceptions, and complies with the provisions hereof (including Section 9.03). Notwithstanding the foregoing, an Officer’s Certificate and an Opinion of Counsel shall not be required in connection with the addition of any Guarantor under this Indenture on the Closing Date upon execution and delivery by such Guarantor and the Trustee of a Supplemental Indenture to this Indenture.

SECTION 9.07. Payment for Consent. Neither the Issuer nor any Affiliate of the Issuer shall, directly or indirectly, pay or cause to be paid any consideration, whether by way of interest, fee or otherwise, to any Holder for or as an inducement to any consent, waiver or amendment of any of the terms or provisions of this Indenture or the Securities unless such consideration is offered to be paid to all Holders that so consent, waive or agree to amend in the time frame set forth in solicitation documents relating to such consent, waiver or agreement.

SECTION 9.08. Additional Voting Terms; Calculation of Principal Amount. Except as otherwise set forth herein, all Securities issued under this Indenture shall vote and consent separately on all matters as to which any of such Securities may vote. Determinations as to whether Holders of the requisite aggregate principal amount of Securities have concurred in any direction, waiver or consent shall be made in accordance with this Article 9 and Section 2.14.

ARTICLE 10

GUARANTEES

SECTION 10.01. Guarantees.

(a) If the Securities are subject to a Guarantee pursuant to Section 4.11 hereof, each Guarantor shall, subject to this Article 10 and execution of a related supplemental indenture, jointly and severally, irrevocably and unconditionally guarantees on an unsecured basis, as a primary obligor and not merely as a surety, to each Holder and the Trustee and their successors and assigns (i) the full and punctual payment when due, whether at maturity, by acceleration, by redemption or otherwise, of all obligations of the Issuers under this Indenture (including obligations to the Trustee) and the Securities, whether for payment of principal of, premium, if any, or interest on the Securities and all other monetary obligations of the Issuers under this Indenture and the Securities and (ii) the full and punctual performance within applicable grace periods of all other obligations of the Issuers whether for fees, expenses, indemnification or otherwise under this Indenture and the Securities, on the terms set forth in this Indenture by executing this Indenture.

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Each Guarantor further agrees that the Guaranteed Obligations may be extended or renewed, in whole or in part, without notice or further assent from each such Guarantor, and that each such Guarantor shall remain bound under this Article 10 notwithstanding any extension or renewal of any Guaranteed Obligation.

(b) Each Guarantor waives presentation to, demand of payment from and protest to the Issuers of any of the Guaranteed Obligations and also waives notice of protest for nonpayment. Each Guarantor waives notice of any default under the Securities or the Guaranteed Obligations.

(c) Each Guarantor further agrees that its Guarantee herein constitutes a guarantee of payment, performance and compliance when due (and not a guarantee of collection) and waives any right to require that any resort be had by any Holder or the Trustee to any security held for payment of the Guaranteed Obligations.

(d) Except as expressly set forth in Sections 8.01(b), 10.02 and 10.06, the obligations of each Guarantor hereunder shall not be subject to any reduction, limitation, impairment or termination for any reason, including any claim of waiver, release, surrender, alteration or compromise, and shall not be subject to any defense of setoff, counterclaim, recoupment or termination whatsoever or by reason of the invalidity, illegality or unenforceability of the Guaranteed Obligations or otherwise.

(e) Subject to Section 10.02 hereof, each Guarantor agrees that its Guarantee shall remain in full force and effect until payment in full of all the Guaranteed Obligations. Each Guarantor further agrees that its Guarantee herein shall continue to be effective or be reinstated, as the case may be, if at any time payment, or any part thereof, of principal of or interest on any Guaranteed Obligation is rescinded or must otherwise be restored by any Holder or the Trustee upon the bankruptcy or reorganization of the Issuers or otherwise.

(f) In furtherance of the foregoing and not in limitation of any other right which any Holder or the Trustee has at law or in equity against any Guarantor by virtue hereof, upon the failure of the Issuers to pay the principal of or interest on any Guaranteed Obligation when and as the same shall become due, whether at maturity, by acceleration, by redemption or otherwise, or to perform or comply with any other Guaranteed Obligation, each Guarantor by execution of a supplemental indenture promises to and shall, upon receipt of written demand by the Trustee, forthwith pay, or cause to be paid, in cash, to the Trustee an amount equal to the sum of (i) the unpaid principal amount of such Guaranteed Obligations, (ii) accrued and unpaid interest on such Guaranteed Obligations (but only to the extent not prohibited by applicable law) and (iii) all other monetary obligations of the Issuers to the Trustee.

(g) Each Guarantor agrees that it shall not be entitled to any right of subrogation in relation to the Trustee in respect of any Guaranteed Obligations guaranteed hereby until payment in full of all Guaranteed Obligations. Each Guarantor further agrees that, as between it, on the one hand, and the Trustee, on the other hand, (i) the maturity of the Guaranteed Obligations guaranteed hereby may be accelerated as provided in Article 6 for the purposes of any Guarantee herein, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the Guaranteed Obligations guaranteed hereby, and (ii) in the event of any declaration of acceleration of such Guaranteed Obligations as provided in Article 6, such Guaranteed Obligations (whether or not due and payable) shall forthwith become due and payable by such Guarantor for the purposes of this Section 10.01.

(h) Each Guarantor also agrees to pay any and all costs and expenses (including reasonable attorneys’ fees and expenses) incurred by the Trustee or any Holder in enforcing any rights under this Section 10.01.

Upon request of the Trustee, each Guarantor shall promptly execute and deliver such further instruments and do such further acts as may be reasonably necessary or proper to carry out more effectively the purpose of this Indenture.

SECTION 10.02. Limitation on Liability.

(a) Each Guarantor, and by its acceptance of Securities, each Holder, hereby confirms that it is the intention of all such parties that the Guarantee of such Guarantor not constitute a fraudulent transfer or conveyance for purposes of Bankruptcy Law, the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent

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Transfer Act or any similar federal or state law to the extent applicable to any Guarantee. To effectuate the foregoing intention, the Trustee, the Holders and the Guarantors hereby irrevocably agree that, any term or provision of this Indenture to the contrary notwithstanding, the maximum aggregate amount of the Guaranteed Obligations guaranteed hereunder by any Guarantor shall not exceed the maximum amount that can be hereby guaranteed without rendering this Indenture, as it relates to such Guarantor, voidable under applicable law relating to fraudulent conveyance or fraudulent transfer or similar laws affecting the rights of creditors generally. Each Guarantor that makes a payment under its Guarantee shall be entitled upon payment in full of all Guaranteed Obligations under this Indenture to a contribution from each other Guarantor in an amount equal to such other Guarantor’s pro rata portion of such payment based on the respective net assets of all the Guarantors at the time of such payment determined in accordance with GAAP.

(b) A Guarantee by a Guarantor shall provide by its terms that it shall be automatically and unconditionally released and discharged upon:

(i) (a) any sale, exchange, disposition or transfer (by merger or otherwise) of (x) the Capital Stock of such Guarantor, after which the applicable Guarantor is no longer a Restricted Subsidiary, or (y) all or substantially all the assets of such Guarantor, which sale, exchange, disposition or transfer in each case is made in compliance with clauses (i) and (ii) of Section 4.06(a),

(b) the release or discharge of the guarantee which resulted in the creation of such Guarantee, except a discharge or release by or as a result of payment under such guarantee;

(c) the proper designation of any Restricted Subsidiary that is a Guarantor as an Unrestricted Subsidiary; or

(d) the Issuers exercising their legal defeasance option or covenant defeasance option as described under Section 8.02 or the Issuers’ obligations under this Indenture being discharged in accordance with the terms hereof; and

(ii) the Issuers delivering to the Trustee an Officer’s Certificate and an Opinion of Counsel, each stating that all conditions precedent provided for in the Indenture relating to such transaction have been complied with.

SECTION 10.03. Successors and Assigns. This Article 10 shall be binding upon each Guarantor and its successors and assigns and shall inure to the benefit of the successors and assigns of the Trustee and the Holders and, in the event of any transfer or assignment of rights by any Holder or the Trustee, the rights and privileges conferred upon that party in this Indenture and in the Securities shall automatically extend to and be vested in such transferee or assignee, all subject to the terms and conditions of this Indenture.

SECTION 10.04. No Waiver. Neither a failure nor a delay on the part of either the Trustee or the Holders in exercising any right, power or privilege under this Article 10 shall operate as a waiver thereof, nor shall a single or partial exercise thereof preclude any other or further exercise of any right, power or privilege. The rights, remedies and benefits of the Trustee and the Holders herein expressly specified are cumulative and not exclusive of any other rights, remedies or benefits which either may have under this Article 10 at law, in equity, by statute or otherwise.

SECTION 10.05. Modification. No modification, amendment or waiver of any provision of this Article 10, nor the consent to any departure by any Guarantor therefrom, shall in any event be effective unless the same shall be in writing and signed by the Trustee, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. No notice to or demand on any Guarantor in any case shall entitle such Guarantor to any other or further notice or demand in the same, similar or other circumstances.

SECTION 10.06. Execution of Supplemental Indenture for Future Guarantors. Each Subsidiary and other Person which is required to become a Guarantor pursuant to Section 4.11 shall promptly execute and deliver to the Trustee a supplemental indenture in the form of Exhibit C pursuant to which such Subsidiary or other

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Person shall become a Guarantor under this Article 10 and shall guarantee the Guaranteed Obligations. Concurrently with the execution and delivery of such supplemental indenture, the Issuer shall deliver to the Trustee an Opinion of Counsel and an Officer’s Certificate to the effect that such supplemental indenture has been duly authorized, executed and delivered by such Subsidiary or other Person and that, subject to the application of bankruptcy, insolvency, moratorium, fraudulent conveyance or transfer and other similar laws relating to creditors’ rights generally and to the principles of equity, whether considered in a proceeding at law or in equity, the Guarantee of such Guarantor is a valid and binding obligation of such Guarantor, enforceable against such Guarantor in accordance with its terms and/or to such other matters as the Trustee may reasonably request.

SECTION 10.07. Non-Impairment. The failure to endorse a Guarantee on any Security shall not affect or impair the validity thereof.

SECTION 10.08. Benefits Acknowledged. Each Guarantor acknowledges that it will receive direct and indirect benefits from the financing arrangements contemplated by this Indenture and that the guarantee and waivers made by it pursuant to its Guarantee are knowingly made in contemplation of such benefits.

ARTICLE 11

MISCELLANEOUS

SECTION 11.01. Trust Indenture Act Controls. If and to the extent that any provision of this Indenture limits, qualifies or conflicts with the duties imposed by, or with another provision (an “incorporated provision”) included in this Indenture by operation of, Sections 310 to 318 of the Trust Indenture Act, inclusive, such imposed duties or incorporated provision shall control.

SECTION 11.02. Notices.

(a) Any notice or communication by the Issuers, any Guarantor or the Trustee to the others is duly given if in writing and delivered in person, via facsimile, mailed by first-class mail (registered or certified, return receipt requested) or overnight air courier guaranteeing next day delivery, to the addressed as follows::

if to the Issuers or a Guarantor:

c/o Party City Holdings Inc.

80 Grasslands Road

Elmsford, NY 10523

Attention: Michael A. Correale, Chief Financial Officer, Assistant Secretary, Vice President

Facsimile: (914) 345-2056

With a copy to:

Ropes & Gray LLP

1211 Avenue of the Americas

New York, NY 10036

Attention: Jay Kim, Esq.

Facsimile: (646) 728-1667

if to the Trustee:

Wilmington Trust, National Association

246 Goose Lane, Suite 105

Guilford CT 06437

Attention: Party City Administrator

Facsimile: (203) 453-1183

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The Issuers, any Guarantor or the Trustee by notice to the others may designate additional or different addresses for subsequent notices or communications.

All notices and communications (other than those sent to Holders) will be deemed to have been duly given: at the time delivered by hand, if personally delivered; five Business Days after being deposited in the mail, postage prepaid, if mailed; when receipt acknowledged, if transmitted by facsimile; and the next Business Day after timely delivery to the courier, if sent by overnight air courier guaranteeing next day delivery.

(b) Any notice or communication mailed to a Holder shall be mailed, first class mail (certified or registered, return receipt requested), by overnight air courier guaranteeing next day delivery or sent electronically to the Holder at the Holder’s address as it appears on the registration books of the Registrar and shall be sufficiently given if so mailed or sent within the time prescribed.

(c) Failure to mail a notice or communication to a Holder or any defect in it shall not affect its sufficiency with respect to other Holders. If a notice or communication is mailed in the manner provided above, it is duly given, whether or not the addressee receives it.

(d) Notwithstanding any other provision of this Indenture or any Security, where this Indenture or any Security provides for notice of any event (including any notice of redemption) to a Holder of a Global Security (whether by mail or otherwise), such notice shall be sufficiently given if given to the Depositary for such Security (or its designee) pursuant to the standing instructions from the Depositary (or its designee), including by electronic mail in accordance with accepted practices at the Depositary.

SECTION 11.03. Communication by the Holders with Other Holders. The Holders may communicate pursuant to Section 312(b) of the Trust Indenture Act with other Holders with respect to their rights under this Indenture or the Securities. The Issuers, the Guarantors, the Trustee, the Registrar and other Persons shall have the protection of Section 312(c) of the Trust Indenture Act.

SECTION 11.04. Certificate and Opinion as to Conditions Precedent. Upon any request or application by the Issuer to the Trustee to take or refrain from taking any action under this Indenture, the Issuer shall furnish to the Trustee:

(a) an Officer’s Certificate in form reasonably satisfactory to the Trustee stating that, in the opinion of the signers, all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with; and

(b) an Opinion of Counsel in form reasonably satisfactory to the Trustee stating that, in the opinion of such counsel, all such conditions precedent have been complied with.

SECTION 11.05. Statements Required in Certificate or Opinion. Each certificate or opinion with respect to compliance with a covenant or condition provided for in this Indenture (other than pursuant to Section 4.09) shall include:

(a) a statement that the individual making such certificate or opinion has read such covenant or condition;

(b) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based;

(c) a statement that, in the opinion of such individual, he or she has made such examination or investigation as is necessary to enable him or her to express an informed opinion as to whether or not such covenant or condition has been complied with (and, in the case of an Opinion of Counsel, may be limited to reliance on an officer’s certificate as to matters of fact); and

(d) a statement as to whether or not, in the opinion of such individual, such covenant or condition has been complied with; provided, however, that with respect to matters of fact an Opinion of Counsel may rely on an Officer’s Certificate or certificates of public officials.

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SECTION 11.06. When Securities Disregarded. In determining whether the Holders of the required principal amount of Securities have concurred in any direction, waiver or consent, Securities owned by the Issuers, any Guarantor or by any Person directly or indirectly controlling or controlled by or under direct or indirect common control with the Issuer or any Guarantor shall be disregarded and deemed not to be outstanding, except that, for the purpose of determining whether the Trustee shall be protected in relying on any such direction, waiver or consent, only Securities which a Trust Officer of the Trustee actually knows are so owned shall be so disregarded. Securities so owned which have been pledged in good faith shall not be disregarded if the pledgee establishes to the satisfaction of the Trustee the pledgee’s right to deliver any such direction, waiver or consent with respect to the Securities and that the pledgee is not the Issuer any Guarantor or any Person directly or indirectly controlling or controlled by or under direct or indirect common control with the Issuer or any Guarantor Subject to the foregoing, only Securities outstanding at the time shall be considered in any such determination.

SECTION 11.07. Rules by Trustee, Paying Agent and Registrar. The Trustee may make reasonable rules for action by or a meeting of the Holders. The Registrar and a Paying Agent may make reasonable rules for their functions.

SECTION 11.08. Legal Holidays. If a payment date is not a Business Day, payment shall be made on the next succeeding day that is a Business Day, and no interest shall accrue on any amount that would have been otherwise payable on such payment date if it were a Business Day for the intervening period. If a regular record date is not a Business Day, the record date shall not be affected.

SECTION 11.09. GOVERNING LAW; WAIVER OF JURY TRIAL. THIS INDENTURE AND THE SECURITIES SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. EACH OF THE ISSUERS, THE GUARANTORS AND THE TRUSTEE HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS INDENTURE, THE SECURITIES OR THE TRANSACTION CONTEMPLATED HEREBY.

SECTION 11.10. No Recourse Against Others. No past, present or future director, officer, employee, manager, incorporator, member, partner or stockholder of any Issuer or any Guarantor or any of their Subsidiaries or direct or indirect parent companies shall have any liability for any obligations of the Issuer or the Guarantors under the Securities, the Guarantees or this Indenture or for any claim based on, in respect of, or by reason of such obligations or their creation. Each Holder of Securities by accepting a Security waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Securities.

SECTION 11.11. Successors. All agreements of the Issuers and each Guarantor in this Indenture and the Securities shall bind its successors. All agreements of the Trustee in this Indenture shall bind its successors.

SECTION 11.12. Multiple Originals. The parties may sign any number of copies of this Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. One signed copy is enough to prove this Indenture. The exchange of copies of this Indenture and of signature pages by facsimile or email (in PDF format or otherwise) transmission shall constitute effective execution and delivery of this Indenture as to the parties hereto and may be used in lieu of the original Indenture for all purposes. Signatures of the parties hereto transmitted by facsimile or email (in PDF format or otherwise) shall be deemed to be their original signatures for all purposes.

SECTION 11.13. Table of Contents; Headings. The table of contents, cross-reference sheet and headings of the Articles and Sections of this Indenture have been inserted for convenience of reference only, are not intended to be considered a part of this Indenture and shall not modify or restrict any of the terms or provisions of this Indenture.

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SECTION 11.14. Indenture Controls. If and to the extent that any provision of the Securities limits, qualifies or conflicts with a provision of this Indenture, such provision of this Indenture shall control.

SECTION 11.15. Severability. In case any provision in this Indenture shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby and such provision shall be ineffective only to the extent of such invalidity, illegality or unenforceability.

SECTION 11.16. Force Majeure. In no event shall the Trustee be responsible or liable for any failure or delay in the performance of its obligations hereunder arising out of or caused by, directly or indirectly, forces beyond its control, including, without limitation, strikes, work stoppages, accidents, acts of war or terrorism, civil or military disturbances, nuclear or natural catastrophes or acts of God, and interruptions, loss or malfunctions of utilities, communications or computer (software and hardware) services; it being understood that the Trustee shall use reasonable efforts which are consistent with accepted practices in the banking industry to resume performance as soon as practicable under the circumstances.

SECTION 11.17. U.S.A. Patriot Act. The parties hereto acknowledge that in accordance with Section 326 of the U.S.A. Patriot Act, the Trustee, like all financial institutions and in order to help fight the funding of terrorism and money laundering, is required to obtain, verify, and record information that identifies each person or legal entity that establishes a relationship or opens an account with the Trustee.

SECTION 11.18. No Adverse Interpretation of Other Agreements. This Indenture may not be used to interpret any other indenture, loan or debt agreement of the Issuers or their Subsidiaries or of any other Person. Any such indenture, loan or debt agreement may not be used to interpret this Indenture.

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IN WITNESS WHEREOF, the parties have caused this Indenture to be duly executed as of the date first written above.

Very truly yours,
PC NEXTCO HOLDINGS, LLC
By:	/s/ Michael A. Correale
	Name:	Michael A. Correale
	Title:	Chief Financial Officer
PC NEXTCO FINANCE, INC.
By:	/s/ Michael A. Correale
	Name:	Michael A. Correale
	Title:	Chief Financial Officer

[Indenture – Signature Page (Company)]

WILMINGTON TRUST, NATIONAL
ASSOCIATION,
as Trustee
By:	/s/ Joseph P. O’Donnell
	Name:	Joseph P. O’Donnell
	Title:	Vice President

[Indenture – Signature Page (Trustee)]

APPENDIX A

PROVISIONS RELATING TO ORIGINAL SECURITIES, ADDITIONAL SECURITIES AND EXCHANGE SECURITIES

1. Definitions.

1.1 Definitions.

For the purposes of this Appendix A the following terms shall have the meanings indicated below:

“Broker-Dealer” has the meaning set forth in the Registration Rights Agreement.

“Definitive Security” means a certificated Security (bearing the Restricted Securities Legend if the transfer of such Security is restricted by applicable law) that does not include the Global Securities Legend.

“Depository” means The Depository Trust Company, its nominees and their respective successors.

“Exchange Offer” has the meaning set forth in the Registration Rights Agreement.

“Exchange Offer Registration Statement” has the meaning set forth in the Registration Rights Agreement.

“Global Securities Legend” means the legend set forth under that caption in the applicable Exhibit to this Indenture.

“IAI” means an institutional “accredited investor” as described in Rule 501(a)(1), (2), (3) or (7) under the Securities Act.

“Initial Purchasers” means Merrill Lynch, Pierce, Fenner & Smith Incorporated, Deutsche Bank Securities Inc., Barclays Capital Inc., Goldman, Sachs & Co., Morgan Stanley & Co. LLC and Moelis & Company LLC as initial purchasers under the Purchase Agreement entered into in connection with the offer and sale of the Securities.

“Letter of Transmittal” means the letter of transmittal to be prepared by the Issuers and sent to all Holders for use by such Holders in connection with the Registered Exchange Offer pursuant to the Shelf Registration Statement.

“Purchase Agreement” means (a) the Purchase Agreement dated July 29, 2013, among the Issuers and the representative of the Initial Purchasers and (b) any other similar Purchase Agreement relating to Additional Securities.

“QIB” means a “qualified institutional buyer” as defined in Rule 144A.

“Registered Exchange Offer” means the offer by the Issuers, pursuant to the Registration Rights Agreement, to certain Holders of Initial Securities, to issue and deliver to such Holders, in exchange for their Initial Securities, a like aggregate principal amount of Exchange Securities registered under the Securities Act.

“Registration Rights Agreement” means (a) the Registration Rights Agreement dated August 1, 2013 among the Issuers and the Initial Purchasers relating to the Securities and (b) any other similar Registration Rights Agreement relating to Additional Securities.

“Regulation S” means Regulation S under the Securities Act.

Appendix A-1

“Regulation S Securities” means all Securities offered and sold outside the United States in reliance on Regulation S.

“Restricted Period,” with respect to any Securities, means the period of 40 consecutive days beginning on and including the later of (a) the day on which such Securities are first offered to persons other than distributors (as defined in Regulation S under the Securities Act) in reliance on Regulation S, notice of which day shall be promptly given by the Issuers to the Trustee, and (b) the Issue Date, and with respect to any Additional Securities that are Transfer Restricted Securities, it means the comparable period of 40 consecutive days.

“Restricted Securities Legend” means the legend set forth in Section 2.2(f)(i) herein.

“Rule 144A” means Rule 144A under the Securities Act.

“Rule 144A Securities” means all Securities offered and sold to QIBs in reliance on Rule 144A.

“Rule 501” means Rule 501(a)(1), (2), (3) or (7) under the Securities Act.

“Securities Custodian” means the custodian with respect to a Global Security (as appointed by the Depository) or any successor person thereto, who shall initially be the Trustee.

“Shelf Registration Statement” means a registration statement filed by the Issuers in connection with the offer and sale of Initial Securities pursuant to the Registration Rights Agreement.

“Transfer Restricted Securities” means Definitive Securities and any other Securities that bear or are required to bear or are subject to the Restricted Securities Legend.

“Unrestricted Definitive Security” means Definitive Securities and any other Securities that are not required to bear, or are not subject to, the Restricted Securities Legend.

“Unrestricted Global Security” means Global Securities and any other Securities that are not required to bear, or are not subject to, the Restricted Securities Legend.

1.2 Other Definitions.

Term:	Defined in Section:
Agent Members	2.1(b)
Clearstream	2.1(b)
Euroclear	2.1(b)
Global Securities	2.1(b)
Regulation S Global Securities	2.1(b)
Regulation S Permanent Global Security	2.1(b)
Regulation S Temporary Global Security	2.1(b)
Rule 144A Global Securities	2.1(b)

2. The Securities.

2.1 Form and Dating; Global Securities.

(a) The Original Securities issued on the date hereof will be (i) offered and sold by the Issuers pursuant to the Purchase Agreement and (ii) resold, initially only to (1) QIBs in reliance on Rule 144A and (2) Persons other than U.S. Persons (as defined in Regulation S) in reliance on Regulation S. Such Securities may thereafter be transferred to, among others, QIBs, purchasers in reliance on Regulation S and, except as set forth below, IAIs in accordance with Rule 501. Additional Securities offered after the date hereof may be offered and sold by the Issuers from time to time pursuant to one or more purchase agreements in accordance with applicable law.

Appendix A-2

(b) Global Securities. (i) Rule 144A Securities initially shall be represented by one or more Securities in definitive, fully registered, global form without interest coupons (collectively, the “Rule 144A Global Securities”).

Regulation S Securities initially shall be represented by one or more Securities in fully registered, global form without interest coupons (collectively, the “Regulation S Temporary Global Security” and, together with the Regulation S Permanent Global Security (defined below), the “Regulation S Global Securities”), which shall be registered in the name of the Depository or the nominee of the Depository for the accounts of designated agents holding on behalf of Euroclear Bank S.A./N.V., as operator of the Euroclear system (“Euroclear”) or Clearstream Banking, Société Anonyme (“Clearstream”).

Following the termination of the Restricted Period, beneficial interests in the Regulation S Temporary Global Security shall be exchanged for beneficial interests in a permanent Global Security (the “Regulation S Permanent Global Security”) pursuant to the applicable procedures of the Depository. Simultaneously with the authentication of the Regulation S Permanent Global Security, the Trustee shall cancel the Regulation S Temporary Global Security. The aggregate principal amount of the Regulation S Temporary Global Security and the Regulation S Permanent Global Security may from time to time be increased or decreased by adjustments made on the records of the Trustee and the Depository or its nominee, as the case may be, in connection with transfers of interest as hereinafter provided, and increased to reflect the making of PIK Interest.

The provisions of the “Operating Procedures of the Euroclear System” and “Terms and Conditions Governing Use of Euroclear” and the “General Terms and Conditions of Clearstream Banking” and “Customer Handbook” of Clearstream shall be applicable to transfers of beneficial interests in the Regulation S Temporary Global Security and the Regulation S Permanent Global Security that are held by Participants through Euroclear or Clearstream.

The term “Global Securities” means the Rule 144A Global Securities and the Regulation S Global Securities. The Global Securities shall bear the Global Security Legend. The Global Securities initially shall (i) be registered in the name of the Depository or the nominee of such Depository, in each case for credit to an account of an Agent Member, (ii) be delivered to the Trustee as custodian for such Depository and (iii) bear the Restricted Securities Legend.

Members of, or direct or indirect participants in, the Depository shall have no rights under this Indenture with respect to any Global Security held on their behalf by the Depository, or the Trustee as its custodian, or under the Global Securities. The Depository may be treated by the Issuers, the Trustee and any agent of the Issuers or the Trustee as the absolute owner of the Global Securities for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the Issuers, the Trustee or any agent of the Issuers or the Trustee from giving effect to any written certification, proxy or other authorization furnished by the Depository, or impair, as between the Depository and its Agent Members, the operation of customary practices governing the exercise of the rights of a Holder of any Security.

(ii) Transfers of Global Securities shall be limited to transfer in whole, but not in part, to the Depository, its successors or their respective nominees. Interests of beneficial owners in the Global Securities may be transferred or exchanged for Definitive Securities only in accordance with the applicable rules and procedures of the Depository and the provisions of Section 2.2. In addition, a Global Security shall be exchangeable for Definitive Securities if (x) the Depository (1) notifies the Issuers that it is unwilling or unable to continue as depository for such Global Security and the Issuers thereupon fail to appoint a successor depository within 90 days or (2) has ceased to be a clearing agency registered under the Exchange Act, (y) the Issuers, at their option, notifies the Trustee that it elects to cause the issuance of Definitive Securities or (z) there shall have occurred and be continuing an Event of Default with respect to such Global Security and the Depositary shall have requested such exchange; provided that in no event shall the Regulation S Temporary Global Security be exchanged by the Issuers for Definitive Securities prior to (x) the expiration of the Restricted Period and (y) the receipt by the Registrar of any certificates required pursuant to Rule 903(b)(3)(ii)(B) under the Securities Act. In all cases, Definitive Securities

Appendix A-3

delivered in exchange for any Global Security or beneficial interests therein shall be registered in the names, and issued in any approved denominations, requested by or on behalf of the Depository in accordance with its customary procedures.

(iii) In connection with the transfer of a Global Security as an entirety to beneficial owners pursuant to subsection (i) of this Section 2.1(b), such Global Security shall be deemed to be surrendered to the Trustee for cancellation, and the Issuers shall execute, and the Trustee shall authenticate and make available for delivery, to each beneficial owner identified by the Depository in writing in exchange for its beneficial interest in such Global Security, an equal aggregate principal amount of Definitive Securities of authorized denominations.

(iv) Any Transfer Restricted Security delivered in exchange for an interest in a Global Security pursuant to Section 2.2 shall, except as otherwise provided in Section 2.2, bear the Restricted Securities Legend.

(v) Notwithstanding the foregoing, through the Restricted Period, a beneficial interest in such Regulation S Global Security may be held only through Euroclear or Clearstream unless delivery is made in accordance with the applicable provisions of Section 2.2.

(vi) The Holder of any Global Security may grant proxies and otherwise authorize any Person, including Agent Members and Persons that may hold interests through Agent Members, to take any action which a Holder is entitled to take under this Indenture or the Securities.

2.2 Transfer and Exchange.

(a) Transfer and Exchange of Global Securities. A Global Security may not be transferred as a whole except as set forth in Section 2.1(b). Global Securities will not be exchanged by the Issuers for Definitive Securities except under the circumstances described in Section 2.1(b)(ii). Global Securities also may be exchanged or replaced, in whole or in part, as provided in Sections 2.08 and 2.10 of this Indenture. Beneficial interests in a Global Security may be transferred and exchanged as provided in Section 2.2(b) or 2.2(g).

(b) Transfer and Exchange of Beneficial Interests in Global Securities. The transfer and exchange of beneficial interests in the Global Securities shall be effected through the Depository, in accordance with the provisions of this Indenture and the applicable rules and procedures of the Depository. Beneficial interests in Restricted Global Securities shall be subject to restrictions on transfer comparable to those set forth herein to the extent required by the Securities Act. Beneficial interests in Global Securities shall be transferred or exchanged only for beneficial interests in Global Securities. Transfers and exchanges of beneficial interests in the Global Securities also shall require compliance with either subparagraph (i) or (ii) below, as applicable, as well as one or more of the other following subparagraphs, as applicable:

(i) Transfer of Beneficial Interests in the Same Global Security. Beneficial interests in any Restricted Global Security may be transferred to Persons who take delivery thereof in the form of a beneficial interest in the same Restricted Global Security in accordance with the transfer restrictions set forth in the Restricted Securities Legend; provided, however, that prior to the expiration of the Restricted Period, transfers of beneficial interests in a Regulation S Global Security may not be made to a U.S. Person or for the account or benefit of a U.S. Person (other than an Initial Purchaser). A beneficial interest in an Unrestricted Global Security may be transferred to Persons who take delivery thereof in the form of a beneficial interest in an Unrestricted Global Security. No written orders or instructions shall be required to be delivered to the Registrar to effect the transfers described in this Section 2.2(b)(i).

(ii) All Other Transfers and Exchanges of Beneficial Interests in Global Securities. In connection with all transfers and exchanges of beneficial interests in any Global Security that is not subject to Section 2.2(b)(i), the transferor of such beneficial interest must deliver to the Registrar (1) a written order from an Agent Member given to the Depository in accordance with the applicable rules and procedures of the Depository directing the Depository to credit or cause to be credited a beneficial interest in another Global Security in an amount equal to the beneficial interest to be transferred or exchanged and

Appendix A-4

(2) instructions given in accordance with the applicable rules and procedures of the Depository containing information regarding the Agent Member account to be credited with such increase. Upon satisfaction of all of the requirements for transfer or exchange of beneficial interests in Global Securities contained in this Indenture and the Securities or otherwise applicable under the Securities Act, the Trustee shall adjust the principal amount of the relevant Global Security pursuant to Section 2.2(g).

(iii) Transfer of Beneficial Interests to Another Restricted Global Security. A beneficial interest in a Transfer Restricted Global Security may be transferred to a Person who takes delivery thereof in the form of a beneficial interest in another Transfer Restricted Global Security if the transfer complies with the requirements of Section 2.2(b)(ii) above and the Registrar receives the following:

(A) if the transferee will take delivery in the form of a beneficial interest in a Rule 144A Global Security, then the transferor must deliver a certificate in the form attached to the applicable Security; and

(B) if the transferee will take delivery in the form of a beneficial interest in a Regulation S Global Security, then the transferor must deliver a certificate in the form attached to the applicable Security.

(iv) Transfer and Exchange of Beneficial Interests in a Transfer Restricted Global Security for Beneficial Interests in an Unrestricted Global Security. A beneficial interest in a Transfer Restricted Global Security may be exchanged by any holder thereof for a beneficial interest in an Unrestricted Global Security or transferred to a Person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Security if the exchange or transfer complies with the requirements of Section 2.2(b)(ii) above and:

(A) such exchange or transfer is effected in accordance with the Registration Rights Agreement and the holder of the beneficial interest to be transferred, in the case of an exchange, or the transferee, in the case of a transfer, provides the certifications required by the applicable Letter of Transmittal and the Exchange Offer Registration Statement that it is not (1) a Broker-Dealer, (2) a Person participating in the distribution of the Exchange Securities or (3) a Person who is an affiliate (as defined in Rule 144) of the Issuers;

(B) such transfer is effected pursuant to a Shelf Registration Statement in accordance with the Registration Rights Agreement;

(C) such transfer is effected by a Broker-Dealer pursuant to the Shelf Registration Statement in accordance with the Registration Rights Agreement; or

(D) the Registrar receives the following:

(1) if the holder of such beneficial interest in a Restricted Global Security proposes to exchange such beneficial interest for a beneficial interest in an Unrestricted Global Security, a certificate from such holder in the form attached to the applicable Security; or

(2) if the holder of such beneficial interest in a Restricted Global Security proposes to transfer such beneficial interest to a Person who shall take delivery thereof in the form of a beneficial interest in an Unrestricted Global Security, a certificate from such holder in the form attached to the applicable Security,

and, in each such case, if the Issuers so request or if the applicable rules and procedures of the Depository so require, an Opinion of Counsel in form reasonably acceptable to the Issuers to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Restricted Securities Legend are no longer required in order to maintain compliance with the Securities Act. If any such

Appendix A-5

transfer or exchange is effected pursuant to this subparagraph (iv) at a time when an Unrestricted Global Security has not yet been issued, the Issuers shall issue and, upon receipt of an written order of the Issuers in the form of an Officer’s Certificate in accordance with Section 2.01, the Trustee shall authenticate one or more Unrestricted Global Securities in an aggregate principal amount equal to the aggregate principal amount of beneficial interests transferred or exchanged pursuant to this subparagraph (iv).

(v) Transfer and Exchange of Beneficial Interests in an Unrestricted Global Security for Beneficial Interests in a Restricted Global Security. Beneficial interests in an Unrestricted Global Security cannot be exchanged for, or transferred to Persons who take delivery thereof in the form of, a beneficial interest in a Restricted Global Security.

(c) Transfer and Exchange of Beneficial Interests in Global Securities for Definitive Securities. A beneficial interest in a Global Security may not be exchanged for a Definitive Security except under the circumstances described in Section 2.1(b)(ii). A beneficial interest in a Global Security may not be transferred to a Person who takes delivery thereof in the form of a Definitive Security except under the circumstances described in Section 2.1(b)(ii). In any case, beneficial interests in Global Securities shall be transferred or exchanged only for Definitive Securities.

(d) Transfer and Exchange of Definitive Securities for Beneficial Interests in Global Securities. Transfers and exchanges of beneficial interests in the Global Securities also shall require compliance with either subparagraph (i), (ii), (iii) or (iv) below, as applicable:

(i) Transfer Restricted Securities to Beneficial Interests in Restricted Global Securities. If any Holder of a Transfer Restricted Security proposes to exchange such Transfer Restricted Security for a beneficial interest in a Restricted Global Security or to transfer such Transfer Restricted Security to a Person who takes delivery thereof in the form of a beneficial interest in a Restricted Global Security, then, upon receipt by the Registrar of the following documentation:

(A) if the Holder of such Transfer Restricted Security proposes to exchange such Transfer Restricted Security for a beneficial interest in a Restricted Global Security, a certificate from such Holder in the form attached to the applicable Security;

(B) if such Transfer Restricted Security is being transferred to a Qualified Institutional Buyer in accordance with Rule 144A under the Securities Act, a certificate from such Holder in the form attached to the applicable Security;

(C) if such Transfer Restricted Security is being transferred to a Non-U.S. Person in an offshore transaction in accordance with Rule 903 or Rule 904 under the Securities Act, a certificate from such Holder in the form attached to the applicable Security;

(D) if such Transfer Restricted Security is being transferred pursuant to an exemption from the registration requirements of the Securities Act in accordance with Rule 144 under the Securities Act, a certificate from such Holder in the form attached to the applicable Security;

(E) if such Transfer Restricted Security is being transferred to an Institutional Accredited Investor in reliance on an exemption from the registration requirements of the Securities Act other than those listed in subparagraphs (B) through (D) above, a certificate from such Holder in the form attached to the applicable Security, including the certifications, certificates and Opinion of Counsel, if applicable; or

(F) if such Transfer Restricted Security is being transferred to the Issuers or a Subsidiary thereof, a certificate from such Holder in the form attached to the applicable Security; the Trustee shall cancel the Transfer Restricted Security, and increase or cause to be increased the aggregate principal amount of the appropriate Restricted Global Security.

Appendix A-6

(ii) Transfer Restricted Securities to Beneficial Interests in Unrestricted Global Securities. A Holder of a Transfer Restricted Security may exchange such Transfer Restricted Definitive Security for a beneficial interest in an Unrestricted Global Security or transfer such Transfer Restricted Security to a Person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Security only if:

(A) such exchange is effected pursuant to the Exchange Offer in accordance with the Registration Rights Agreement and the Holder, in the case of an exchange, or the transferee, in the case of a transfer, provides the certifications required by the applicable Letter of Transmittal and the Exchange Offer Registration Statement that it is not (1) a Broker-Dealer, (2) a Person participating in the distribution of the Exchange Securities or (3) a Person who is an affiliate (as defined in Rule 144) of the Issuers;

(B) such transfer is effected pursuant to the Shelf Registration in accordance with the Registration Rights Agreement;

(C) such transfer is effected by a Broker-Dealer pursuant to the Exchange Offer Registration Statement in accordance with the Registration Rights Agreement; or

(D) the Registrar receives the following:

(1) if the Holder of such Transfer Restricted Security proposes to exchange such Transfer Restricted Security for a beneficial interest in an Unrestricted Global Security, a certificate from such Holder in the form attached to the applicable Security; or

(2) if the Holder of such Transfer Restricted Securities proposes to transfer such Transfer Restricted Security to a Person who shall take delivery thereof in the form of a beneficial interest in an Unrestricted Global Security, a certificate from such Holder in the form attached to the applicable Security,

and, in each such case, if the Issuers so request or if the applicable rules and procedures of the Depository so require, an Opinion of Counsel in form reasonably acceptable to the Issuers to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Restricted Securities Legend are no longer required in order to maintain compliance with the Securities Act. Upon satisfaction of the conditions of this subparagraph (ii), the Trustee shall cancel the Transfer Restricted Securities and increase or cause to be increased the aggregate principal amount of the Unrestricted Global Security. If any such transfer or exchange is effected pursuant to this subparagraph (ii) at a time when an Unrestricted Global Security has not yet been issued, the Issuers shall issue and, upon receipt of a written order of the Issuers in the form of an Officer’s Certificate, the Trustee shall authenticate one or more Unrestricted Global Securities in an aggregate principal amount equal to the aggregate principal amount of Transfer Restricted Securities transferred or exchanged pursuant to this subparagraph (ii).

(iii) Unrestricted Definitive Securities to Beneficial Interests in Unrestricted Global Securities. A Holder of an Unrestricted Definitive Security may exchange such Unrestricted Definitive Security for a beneficial interest in an Unrestricted Global Security or transfer such Unrestricted Definitive Security to a Person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Security at any time. Upon receipt of a request for such an exchange or transfer, the Trustee shall cancel the applicable Unrestricted Definitive Security and increase or cause to be increased the aggregate principal amount of one of the Unrestricted Global Securities. If any such transfer or exchange is effected pursuant to this subparagraph (iii) at a time when an Unrestricted Global Security has not yet been issued, the Issuers shall issue and, upon receipt of an written order of the Issuers in the form of an Officer’s Certificate, the

Appendix A-7

Trustee shall authenticate one or more Unrestricted Global Securities in an aggregate principal amount equal to the aggregate principal amount of Unrestricted Definitive Securities transferred or exchanged pursuant to this subparagraph (iii).

(iv) Unrestricted Definitive Securities to Beneficial Interests in Restricted Global Securities. An Unrestricted Definitive Security cannot be exchanged for, or transferred to a Person who takes delivery thereof in the form of, a beneficial interest in a Restricted Global Security.

(e) Transfer and Exchange of Definitive Securities for Definitive Securities. Upon request by a Holder of Definitive Securities and such Holder’s compliance with the provisions of this Section 2.2(e), the Registrar shall register the transfer or exchange of Definitive Securities. Prior to such registration of transfer or exchange, the requesting Holder shall present or surrender to the Registrar the Definitive Securities duly endorsed or accompanied by a written instruction of transfer in form satisfactory to the Registrar duly executed by such Holder or by its attorney, duly authorized in writing. In addition, the requesting Holder shall provide any additional certifications, documents and information, as applicable, required pursuant to the following provisions of this Section 2.2(e).

(i) Transfer Restricted Securities to Transfer Restricted Securities. A Transfer Restricted Security may be transferred to and registered in the name of a Person who takes delivery thereof in the form of a Transfer Restricted Security if the Registrar receives the following:

(A) if the transfer will be made pursuant to Rule 144A under the Securities Act, then the transferor must deliver a certificate in the form attached to the applicable Security;

(B) if the transfer will be made pursuant to Rule 903 or Rule 904 under the Securities Act, then the transferor must deliver a certificate in the form attached to the applicable Security;

(C) if the transfer will be made pursuant to an exemption from the registration requirements of the Securities Act in accordance with Rule 144 under the Securities Act, a certificate in the form attached to the applicable Security;

(D) if the transfer will be made to an IAI in reliance on an exemption from the registration requirements of the Securities Act other than those listed in subparagraphs (A) through (C) above, a certificate in the form attached to the applicable Security; and

(E) if such transfer will be made to the Issuers or a Subsidiary thereof, a certificate in the form attached to the applicable Security.

(ii) Transfer Restricted Securities to Unrestricted Definitive Securities. Any Transfer Restricted Security may be exchanged by the Holder thereof for an Unrestricted Definitive Security or transferred to a Person who takes delivery thereof in the form of an Unrestricted Definitive Security only if:

(A) such exchange or transfer is effected pursuant to the Exchange Offer in accordance with the Registration Rights Agreement and the holder of such beneficial interest, in the case of an exchange, or the transferee, in the case of a transfer, provides the certifications required by the applicable Letter of Transmittal and the Exchange Offer Registration Statement that it is not (1) a Broker-Dealer, (2) a Person participating in the distribution of the Exchange Securities or (3) a Person who is an affiliate (as defined in Rule 144) of the Issuers;

(B) such transfer is effected pursuant to the Shelf Registration Statement in accordance with the Registration Rights Agreement;

(C) such transfer is effected by a Broker-Dealer pursuant to the Exchange Offer Registration Statement in accordance with the Registration Rights Agreement; or

Appendix A-8

(D) the Registrar receives the following:

(i) if the Holder of such Transfer Restricted Security proposes to exchange such Transfer Restricted Security for an Unrestricted Definitive Security, a certificate from such Holder in the form attached to the applicable Security; or

(ii) if the Holder of such Transfer Restricted Security proposes to transfer such Securities to a Person who shall take delivery thereof in the form of an Unrestricted Definitive Security, a certificate from such Holder in the form attached to the applicable Security,

and, in each such case, if the Issuers so request, an Opinion of Counsel in form reasonably acceptable to the Issuers to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Restricted Securities Legend are no longer required in order to maintain compliance with the Securities Act.

(iii) Unrestricted Definitive Securities to Unrestricted Definitive Securities. A Holder of an Unrestricted Definitive Security may transfer such Unrestricted Definitive Securities to a Person who takes delivery thereof in the form of an Unrestricted Definitive Security at any time. Upon receipt of a request to register such a transfer, the Registrar shall register the Unrestricted Definitive Securities pursuant to the instructions from the Holder thereof.

(iv) Unrestricted Definitive Securities to Transfer Restricted Securities. An Unrestricted Definitive Security cannot be exchanged for, or transferred to a Person who takes delivery thereof in the form of, a Transfer Restricted Security.

At such time as all beneficial interests in a particular Global Security have been exchanged for Definitive Securities or a particular Global Security has been redeemed, repurchased or canceled in whole and not in part, each such Global Security shall be returned to or retained and canceled by the Trustee in accordance with Section 2.11. At any time prior to such cancellation, if any beneficial interest in a Global Security is exchanged for or transferred to a Person who will take delivery thereof in the form of a beneficial interest in another Global Security or for Definitive Securities, the principal amount of Securities represented by such Global Security shall be reduced accordingly and an endorsement shall be made on such Global Security by the Trustee or by the Depository at the direction of the Trustee to reflect such reduction; and if the beneficial interest is being exchanged for or transferred to a Person who will take delivery thereof in the form of a beneficial interest in another Global Security, such other Global Security shall be increased accordingly and an endorsement shall be made on such Global Security by the Trustee or by the Depository at the direction of the Trustee to reflect such increase.

(f) Exchange Offer. Upon the occurrence of the Exchange Offer in accordance with the Registration Rights Agreement, the Issuers will issue and, upon receipt of an Authentication Order in accordance with Section 2.02 hereof (together with such other documents that the Trustee may reasonably require), the Trustee will authenticate:

(1) one or more Unrestricted Global Securities in an aggregate principal amount equal to the principal amount of the beneficial interests in the Restricted Global Securities accepted for exchange in the Exchange Offer in accordance with the Registration Rights Agreement by Persons that certify in the applicable Letters of Transmittal that (A) they are not Broker-Dealers, (B) they are not participating in a distribution of the Exchange Securities and (C) they are not affiliates (as defined in Rule 144) of any Issuer; and

(2) Unrestricted Definitive Securities in an aggregate principal amount equal to the principal amount of the Restricted Definitive Securities accepted for exchange in the Exchange Offer in accordance with the Registration Rights Agreement.

Appendix A-9

Concurrently with the issuance of such notes, the Trustee will cause the aggregate principal amount of the applicable Restricted Global notes to be reduced accordingly and, if applicable, the Issuers will execute and the Trustee will authenticate and deliver to the Persons designated by the Holders of Definitive Securities so accepted Unrestricted Definitive Securities in the appropriate principal amount.

(g) Legend.

(i) Except as permitted by the following paragraph (ii), each Security certificate evidencing the Global Securities and the Definitive Securities (and all Securities issued in exchange therefor or in substitution thereof) shall bear a legend in substantially the following form (each defined term in the legend being defined as such for purposes of the legend only):

“THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND THE SECURITY EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THE SECURITY EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER. THE HOLDER OF THE SECURITY EVIDENCED HEREBY AGREES FOR THE BENEFIT OF THE ISSUERS THAT (A) SUCH SECURITY MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (1)(a) INSIDE THE UNITED STATES TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A UNDER THE SECURITIES ACT, (b) OUTSIDE THE UNITED STATES TO A FOREIGN PERSON IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 903 OR RULE 904 OF REGULATION S UNDER THE SECURITIES ACT, (c) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF APPLICABLE) OR (d) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL ACCEPTABLE TO THE ISSUERS IF THE ISSUER SO REQUEST), (2) TO THE ISSUERS OR (3) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER OF THE SECURITY EVIDENCED HEREBY OF THE RESALE RESTRICTIONS SET FORTH IN CLAUSE (A) ABOVE. NO REPRESENTATION CAN BE MADE AS TO THE AVAILABILITY OF THE EXEMPTION PROVIDED BY RULE 144 FOR RESALE OF THE SECURITY EVIDENCED HEREBY.”

Each Definitive Security shall bear the following additional legends:

“IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE REGISTRAR AND TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION AS SUCH TRANSFER AGENT MAY REASONABLY REQUIRE TO CONFIRM THAT THE TRANSFER COMPLIES WITH THE FOREGOING RESTRICTIONS.”

Each Temporary Regulation S Security shall bear the following additional legend:

“THIS SECURITY (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A TRANSACTION ORIGINALLY EXEMPT FROM REGISTRATION UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND MAY NOT

Appendix A-10

BE TRANSFERRED IN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, ANY U.S. PERSON EXCEPT PURSUANT TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND ALL APPLICABLE STATE SECURITIES LAWS. TERMS USED ABOVE HAVE THE MEANINGS GIVEN TO THEM IN REGULATION S UNDER THE SECURITIES ACT.”

Each Global Security shall bear the following additional legends:

“UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION (“DTC”), NEW YORK, NEW YORK, TO THE ISSUERS OR THEIR AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.”

“TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO DTC, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR’S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE INDENTURE REFERRED TO ON THE REVERSE HEREOF.”

Each Security that has more than a de minimis amount of original issue discount for U.S. federal income tax purposes shall bear the legend in substantially the following form:

“THIS SECURITY HAS BEEN ISSUED WITH “ORIGINAL ISSUE DISCOUNT” (WITHIN THE MEANING OF SECTION 1273 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED) FOR U.S. FEDERAL INCOME TAX PURPOSES. UPON WRITTEN REQUEST, THE ISSUERS WILL PROMPTLY MAKE AVAILABLE TO ANY HOLDER OF THIS SECURITY THE FOLLOWING INFORMATION: (1) THE ISSUE PRICE AND DATE OF THE SECURITY, (2) THE AMOUNT OF ORIGINAL ISSUE DISCOUNT ON THE SECURITY AND (3) THE YIELD TO MATURITY OF THE SECURITY. HOLDERS SHOULD CONTACT THE CHIEF FINANCIAL OFFICER OF THE ISSUERS AT 80 GRASSLANDS ROAD, ELMSFORD, NY 10523.”

(ii) Upon any sale or transfer of a Transfer Restricted Security that is a Definitive Security, the Registrar shall permit the Holder thereof to exchange such Transfer Restricted Security for a Definitive Security that does not bear the legends set forth above and rescind any restriction on the transfer of such Transfer Restricted Security if the Holder certifies in writing to the Registrar that its request for such exchange was made in reliance on Rule 144 (such certification to be in the form set forth on the reverse of the Security).

(iii) After a transfer of the Initial Securities during the period of the effectiveness of a Shelf Registration Statement with respect to such Initial Securities, all requirements pertaining to the Restricted Securities Legend on such Initial Securities shall cease to apply and the requirements that any such Initial Securities be issued in global form shall continue to apply.

(iv) Upon the consummation of a Registered Exchange Offer with respect to the Initial Securities pursuant to which Holders of such Initial Securities are offered Exchange Securities in exchange for their Initial Securities, all requirements pertaining to Initial Securities that Initial Securities be issued in global form shall continue to apply, and Exchange Securities in global form without the Restricted Securities Legend shall be available to Holders that exchange such Initial Securities in such Registered Exchange Offer.

Appendix A-11

(v) Upon a sale or transfer after the expiration of the Restricted Period of any Security acquired pursuant to Regulation S, all requirements that such Security bear the Restricted Securities Legend shall cease to apply and the requirements requiring any such Security be issued in global form shall continue to apply.

(vi) Any Additional Securities sold in a registered offering shall not be required to bear the Restricted Securities Legend.

(h) Cancellation or Adjustment of Global Security. At such time as all beneficial interests in a particular Global Security have been exchanged for Definitive Securities or a particular Global Security has been redeemed, repurchased or canceled in whole and not in part, each such Global Security shall be returned to or retained and canceled by the Trustee in accordance with Section 2.11 of this Indenture. At any time prior to such cancellation, if any beneficial interest in a Global Security is exchanged for or transferred to a Person who will take delivery thereof in the form of a beneficial interest in another Global Security or for Definitive Securities, the principal amount of Securities represented by such Global Security shall be reduced accordingly and an endorsement shall be made on such Global Security by the Trustee or by the Depository at the direction of the Trustee to reflect such reduction; and if the beneficial interest is being exchanged for or transferred to a Person who will take delivery thereof in the form of a beneficial interest in another Global Security, such other Global Security shall be increased accordingly and an endorsement shall be made on such Global Security by the Trustee or by the Depository at the direction of the Trustee to reflect such increase.

(i) Obligations with Respect to Transfers and Exchanges of Securities.

(i) To permit registrations of transfers and exchanges, the Issuer shall execute and the Trustee shall authenticate, Definitive Securities and Global Securities at the Registrar’s request.

(ii) No service charge shall be made for any registration of transfer or exchange, but the Issuer may require payment of a sum sufficient to cover any transfer tax, assessments, or similar governmental charge payable in connection therewith (other than any such transfer taxes, assessments or similar governmental charge payable upon exchanges pursuant to Sections 3.06, 4.06, 4.08 and 9.05 of this Indenture).

(iii) Prior to the due presentation for registration of transfer of any Security, the Issuer, the Trustee, a Paying Agent or the Registrar may deem and treat the person in whose name a Security is registered as the absolute owner of such Security for the purpose of receiving payment of principal of and interest on such Security and for all other purposes whatsoever, whether or not such Security is overdue, and none of the Issuer, the Trustee, the Paying Agent or the Registrar shall be affected by notice to the contrary.

(iv) All Securities issued upon any transfer or exchange pursuant to the terms of this Indenture shall evidence the same debt and shall be entitled to the same benefits under this Indenture as the Securities surrendered upon such transfer or exchange.

(j) No Obligation of the Trustee.

(i) The Trustee shall have no responsibility or obligation to any beneficial owner of a Global Security, a member of, or a participant in the Depository or any other Person with respect to the accuracy of the records of the Depository or its nominee or of any participant or member thereof, with respect to any ownership interest in the Securities or with respect to the delivery to any participant, member, beneficial owner or other Person (other than the Depository) of any notice (including any notice of redemption or repurchase) or the payment of any amount, under or with respect to such Securities. All notices and communications to be given to the Holders and all payments to be made to the Holders under the Securities shall be given or made only to the registered Holders (which shall be the Depository or its nominee in the case of a Global Security). The rights of beneficial owners in any Global Security shall be exercised only through the Depository subject to the applicable rules and procedures of the Depository. The Trustee may conclusively rely and shall be fully protected in so relying upon information furnished by the Depository with respect to its members, participants and any beneficial owners.

Appendix A-12

(ii) The Trustee shall have no obligation or duty to monitor, determine or inquire as to compliance with any restrictions on transfer imposed under this Indenture or under applicable law with respect to any transfer of any interest in any Security (including any transfers between or among Depository participants, members or beneficial owners in any Global Security) other than to require delivery of such certificates and other documentation or evidence as are expressly required by, and to do so if and when expressly required by, the terms of this Indenture, and to examine the same to determine substantial compliance as to form with the express requirements hereof.

Appendix A-13

EXHIBIT A

[FORM OF FACE OF SECURITY]

[Global Securities Legend]

UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION (“DTC”), NEW YORK, NEW YORK, TO THE ISSUERS OR THEIR AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.

TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO DTC, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR’S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE INDENTURE REFERRED TO ON THE REVERSE HEREOF.

[Restricted Securities Legend]

“THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND THE SECURITY EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THE SECURITY EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER. THE HOLDER OF THE SECURITY EVIDENCED HEREBY AGREES FOR THE BENEFIT OF THE ISSUERS THAT (A) SUCH SECURITY MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (1)(a) INSIDE THE UNITED STATES TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A UNDER THE SECURITIES ACT, (b) OUTSIDE THE UNITED STATES TO A FOREIGN PERSON IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 903 OR RULE 904 OF REGULATION S UNDER THE SECURITIES ACT, (c) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF APPLICABLE) OR (d) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL ACCEPTABLE TO THE ISSUERS IF THE ISSUERS SO REQUEST), (2) TO THE ISSUER OR (3) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER OF THE SECURITY EVIDENCED HEREBY OF THE RESALE RESTRICTIONS SET FORTH IN CLAUSE (A) ABOVE. NO REPRESENTATION CAN BE MADE AS TO THE AVAILABILITY OF THE EXEMPTION PROVIDED BY RULE 144 FOR RESALE OF THE SECURITY EVIDENCED HEREBY.”

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Each Temporary Regulation S Security shall bear the following additional legend:

“THIS SECURITY (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A TRANSACTION ORIGINALLY EXEMPT FROM REGISTRATION UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND MAY NOT BE TRANSFERRED IN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, ANY U.S. PERSON EXCEPT PURSUANT TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND ALL APPLICABLE STATE SECURITIES LAWS. TERMS USED ABOVE HAVE THE MEANINGS GIVEN TO THEM IN REGULATION S UNDER THE SECURITIES ACT.”

Each Definitive Security shall bear the following additional legends:

“IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE REGISTRAR AND TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION AS SUCH TRANSFER AGENT MAY REASONABLY REQUIRE TO CONFIRM THAT THE TRANSFER COMPLIES WITH THE FOREGOING RESTRICTIONS.”

Each Security that has more than a de minimis amount of original issue discount for U.S. federal income tax purposes shall bear the legend in substantially the following form:

“THIS SECURITY HAS BEEN ISSUED WITH “ORIGINAL ISSUE DISCOUNT” (WITHIN THE MEANING OF SECTION 1273 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED) FOR U.S. FEDERAL INCOME TAX PURPOSES. UPON WRITTEN REQUEST, THE ISSUERS WILL PROMPTLY MAKE AVAILABLE TO ANY HOLDER OF THIS SECURITY THE FOLLOWING INFORMATION: (1) THE ISSUE PRICE AND DATE OF THE SECURITY, (2) THE AMOUNT OF ORIGINAL ISSUE DISCOUNT ON THE SECURITY AND (3) THE YIELD TO MATURITY OF THE SECURITY. HOLDERS SHOULD CONTACT THE CHIEF FINANCIAL OFFICER OF THE ISSUERS AT 80 GRASSLANDS ROAD, ELMSFORD, NY 10523.”

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[FORM OF SECURITY]

No. $        

8.750%/9.500% Senior PIK Toggle Notes due 2019

CUSIP No.

ISIN No.

PC NEXTCO HOLDINGS, LLC, a Delaware limited liability company, and PC NEXTCO FINANCE, INC., a Delaware corporation, promise to pay to Cede & Co., or registered assigns, the principal sum of Dollars [, as the same may be revised from time to time on the Schedule of Increases or Decreases in Global Security attached hereto,]¹ on August 15, 2019.

Interest Payment Dates: February 15 and August 15

Record Dates: February 1 and August 1

Additional provisions of this Security are set forth on the other side of this Security.

[Remainder of this page left intentionally blank, signature page to follow]

¹  Use the Schedule of Increases and Decreases language if Security is in Global Form.

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IN WITNESS HEREOF, the Issuers have caused this instrument to be duly executed.

Dated:                     , 2013

PC NEXTCO HOLDINGS, LLC
By:
	Name:	Michael A. Correale
	Title:	Chief Financial Officer
PC NEXTCO FINANCE, INC.
By:
	Name:	Michael A. Correale
	Title:	Chief Financial Officer

[Security (144A) – Signature Page (Trustee)]

This is one of the Securities referred to in the within-mentioned Indenture:

Dated:                     , 2013

WILMINGTON TRUST, NATIONAL ASSOCIATION,
as Trustee
By:
	Authorized Signatory

[Security (144A) – Signature Page (Trustee)]

[FORM OF REVERSE SIDE OF SECURITY]

8.750%/9.500% Senior PIK Toggle Notes due 2019

Capitalized terms used herein have the meanings assigned to them in the Indenture referred to below unless otherwise indicated.

1. Interest

(a) PC NEXTCO HOLDINGS, LLC, a Delaware limited liability company (the “Issuer”), and PC NEXTCO FINANCE, INC., a Delaware corporation (the “Co-Issuer” and, together with the Issuer, the “Issuers”), jointly and severally promise to pay interest on the outstanding principal amount of this Security at the rate of 8.750% per annum with respect to Cash Interest (as defined below) and 9.500% per annum with respect to any PIK Interest (as defined below) from the Issue Date or from the most recent date to which interest has been paid or provided for, payable semiannually to holders of record at the close of business on February 1 and August 1, immediately preceding each February 15 and August 15 of each year (each an “Interest Payment Date”), commencing February 15, 2014. Interest shall be paid on the basis of a 360-day year comprised of twelve 30-day months. The Issuers shall pay interest on overdue principal at the rate borne by the Securities, and it shall pay interest on overdue installments of interest at the same rate to the extent lawful.

(b) Except as provided in the immediately succeeding sentence and the definition of “Applicable Amount,” interest on the Securities shall be payable entirely in cash (“Cash Interest”). For any Interest Period after the initial Interest Period (other than the final Interest Period ending at stated maturity), if the Applicable Amount (as defined below) as determined on the Determination Date (as defined below) for such Interest Period shall:

(i) equal or exceed 75%, but be less than 100%, of the aggregate amount of Cash Interest that would otherwise be due on the relevant Interest Payment Date, then the Issuers may, at their option, elect to pay interest on (a) 25% of the then outstanding principal amount of the Securities by increasing the principal amount of the outstanding Securities or by issuing PIK Notes in a principal amount equal to such interest (such increased principal amount or PIK Notes, “PIK Interest”) and (b) 75% of the then outstanding principal amount of the Securities as Cash Interest;

(ii) equal or exceed 50%, but be less than 75%, of the aggregate amount of Cash Interest that would otherwise be due on the relevant Interest Payment Date, then the Issuers may, at their option, elect to pay interest on (a) 50% of the then outstanding principal amount of the Securities as PIK Interest and (b) 50% of the then outstanding principal amount of the Securities as Cash Interest;

(iii) equal or exceed 25%, but be less than 50%, of the aggregate amount of Cash Interest that would otherwise be due on the relevant Interest Payment Date, then the Issuers may, at their option, elect to pay interest on (a) 75% of the then outstanding principal amount of the Securities as PIK Interest and (b) 25% of the then outstanding principal amount of the Securities as Cash Interest; or

(iv) be less than 25% of the aggregate amount of Cash Interest that would otherwise be due on the relevant Interest Payment Date, then the Issuers may, at their option, elect to pay interest on the Securities entirely as PIK Interest.

The insufficiency or lack of funds available to the Issuers to pay Cash Interest as required by the preceding paragraph shall not permit the Issuers to pay PIK Interest in respect of any Interest Period and the sole right of the Issuers to elect to pay PIK Interest shall be as (and to the extent) provided in the immediately preceding paragraph.

As used herein:

(1) “Applicable Amount” shall be the amount equal to the sum (without duplication) of:

(i) (a) the maximum amount of all dividends and distributions that, as of the applicable Determination Date, would be permitted to be paid to the Issuer for the purpose of

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paying Cash Interest by all Restricted Subsidiaries (after giving effect to (1) any borrowing or issuance of Indebtedness made or to be made on such date, (2) all corporate, limited liability company, shareholder, member or other comparable actions required in order to make such payment, (3) requirements and considerations of applicable laws as determined in good faith by the officers and directors of each such Restricted Subsidiary, and (4) all restrictions on the ability to make such dividends or distributions that are otherwise permitted by the covenant described in Section 4.05 of the Indenture (including, without limitation, any restrictions and limitations in the Senior Credit Facilities, the Opco Notes Indenture, all other Indebtedness of the Issuer and its Subsidiaries in existence on the Issue Date and any future Indebtedness of the Issuer and its Subsidiaries incurred in accordance with the Indenture or any agreement that amends, modifies, renews, increases, supplements, refunds, replaces or refinances such Indebtedness)) pursuant to the “restricted payments” covenants (including any exceptions or “baskets” in respect thereof) contained in the Opco Notes Indenture, the Senior Credit Facilities and any other instrument or agreement governing Indebtedness of any Restricted Subsidiary of the Issuer, the incurrence of which did not violate the Indenture, net of all taxes attributable solely to such dividend or distribution, if any, and, in each case, without regard to whether any such Restricted Subsidiary shall have any funds available to make any such dividends or distributions, less (b) $20.0 million (which amount pursuant to this clause (i) shall in no event be less than $0); and

(ii) (a) all cash and Cash Equivalents on hand at the Issuers as of such Determination Date (other than any cash and Cash Equivalents on hand at the Issuers that were distributed to the Issuers by a Restricted Subsidiary but only if such amounts have been distributed to the Issuers for a purpose, or is conditioned upon being used for a purpose, other than paying Cash Interest (including, without limitation, any amounts distributed to the Issuers for the purpose of paying taxes, management fees and other corporate and administrative expenses attributable to the Issuer’s consolidated Subsidiaries)) less (b) $5.0 million (which amount pursuant to this clause (ii) shall in no event be less than $0); provided that there shall be excluded from this clause (ii) any net proceeds from the Securities issued on the Issue Date pending the final application of such proceeds in connection with the Issue Date Transactions and there shall be excluded from this definition any cash and Cash Equivalents on hand to be used for payment of Cash Interest on the Interest Payment Date next succeeding such Determination Date.

If interest on the Securities with respect to an Interest Period will not be paid entirely as Cash Interest, the Applicable Amount shall be calculated by the Issuer and shall be set forth in an Officer’s Certificate delivered to the Trustee (upon which the Trustee may conclusively rely) prior to the first day of the relevant Interest Period in which it is to be applied, which Officer’s Certificate shall set forth in reasonable detail (x) the Issuer’s good faith determination of each component of this definition and (y) in the case of clause (i)(a) identifying the applicable restriction(s) and Issuer’s good faith determination of the maximum amount of funds that may be paid after giving effect to such restriction. To the extent the Issuers are required pursuant to the second preceding paragraph and the definition of “Applicable Amount” to pay Cash Interest for all or any portion of the interest due on any Interest Payment Date, the Issuers shall and shall cause each of the Restricted Subsidiaries to take all such shareholder, member, corporate, limited liability company and other corporate or similar actions necessary or appropriate to permit the making of any such dividends or distribution, provided that any such shareholder, corporate and other actions would not violate any applicable law or cause a breach of any applicable contract, in each case, as determined in good faith by the officers and directors of each such Restricted Subsidiary;

(2) “Determination Date” shall mean, with respect to each Interest Period, the fifteenth calendar day immediately prior to the first day of the relevant Interest Period; and

(3) “Interest Period” shall mean the period commencing on and including an Interest Payment Date and ending on and including the day immediately preceding the next succeeding Interest Payment Date, with the exception that the first Interest Period shall commence on and include the Issue Date and end on and include February 14, 2014 (the Interest Payment Date for any Interest Period shall be the Interest Payment Date occurring on the day immediately following the last day of such Interest Period).

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In the event that the Issuers shall determine to pay PIK Interest for any Interest Period, then the Issuer shall deliver a written notice to the Trustee following the Determination Date but prior to the commencement of the relevant Interest Period, which notice shall state the total amount of interest to be paid on such Interest Payment Date and the amount of such interest to be paid as PIK Interest. The Trustee shall promptly deliver a copy of the notice to the holders. Interest for the first Interest Period commencing on the Issue Date shall be payable entirely in Cash Interest. Interest for the final Interest Period ending at stated maturity shall be payable entirely in Cash Interest.

Notwithstanding anything to the contrary, the payment of accrued interest in connection with any redemption or repurchase of the Securities as described under Sections 4.06 and 4.08 of the Indenture and Paragraph 5(b) hereof will be made solely in cash.

(c) [Registration Rights Agreement. The Holder of this Security is entitled to the benefits of a Registration Rights Agreement, dated as of the Issue Date, among the Issuers and the Initial Purchasers.]¹

2. Method of Payment

The Issuers shall pay interest on the Securities (except defaulted interest) to the Persons who are registered Holders at the close of business on the February 1 or August 1 next preceding the interest payment date even if Securities are canceled after the record date and on or before the interest payment date (whether or not a Business Day). Holders must surrender Securities to the Paying Agent to collect principal payments. Except as set forth below with respect to payment of PIK Interest, the Issuers shall pay principal, premium, if any, and interest in money of the United States of America that at the time of payment is legal tender for payment of public and private debts. Payments in respect of the Securities represented by a Global Security (including principal, premium, if any, and interest) shall be made by wire transfer of immediately available funds to the accounts specified by The Depository Trust Company (“DTC”) or any successor depositary. The Issuers shall make all payments in respect of a certificated Security (including principal, premium, if any, and interest) at the office of the Paying Agent, except that, at the option of the Issuers, payment of interest may be made by mailing a check to the registered address of each Holder thereof; provided, however, that payments on the Securities may also be made, in the case of a Holder of at least $1,000,000 aggregate principal amount of Securities, by wire transfer to a U.S. dollar account maintained by the payee with a bank in the United States if such Holder elects payment by wire transfer by giving written notice to the Trustee or Paying Agent to such effect designating such account no later than 30 days immediately preceding the relevant due date for payment (or such other date as the Trustee may accept in its discretion).

If the Issuers pay a portion of the interest on the Securities as Cash Interest and as PIK Interest, such Cash Interest and PIK Interest shall be paid to holders pro rata or by lot in accordance with their interests subject to the procedures of the DTC. Principal of, premium, if any, and Cash Interest on the Securities will be payable at the office or agency of the Issuer maintained for such purpose within the United States or, at the option of the Issuers, payment of Cash Interest may be made by check mailed to the holders of the Securities at their respective addresses set forth in the register of holders; provided that all payments of principal, premium, if any, and Cash Interest with respect to the Securities represented by one or more global notes registered in the name of or held by the DTC or its nominee will be made by wire transfer of immediately available funds to the accounts specified by the holder or holders thereof. Until otherwise designated by the Issuers, the Issuer’s office or agency will be the office of the Trustee maintained for such purpose. PIK Interest on the Securities will be payable (1) with respect to Securities represented by one or more global notes registered in the name of or held by the DTC or its nominee, by increasing the principal amount of the outstanding global Security by an amount equal to the amount of PIK Interest for the applicable Interest Period (rounded up to the nearest whole dollar) as provided in writing by the Issuer to the Trustee, which shall be recorded in the registrar’s books and records and in the schedule to the global note in accordance with the Indenture, and (2) with respect to Securities represented by certificated Securities, by issuing PIK Notes in certificated form in an aggregate principal amount equal to the amount of PIK Interest for the applicable Interest Period (rounded up to the nearest whole dollar), and the Trustee will, at the written order of the

¹  Include only for Original Securities when required by the Registration Rights Agreement.

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Issuer, authenticate and deliver such PIK Notes in certificated form for original issuance to the holders on the relevant record date, as shown by the records of the register of holders. Following an increase in the principal amount of the outstanding global Securities as a result of a PIK Payment, the Securities will bear interest on such increased principal amount from and after the date of such PIK Payment. Any PIK Notes issued in certificated form will be dated as of the applicable interest payment date and will bear interest from and after such date. All Securities issued pursuant to a PIK Payment will mature on August 15, 2019 and will be governed by, and subject to the terms, provisions and conditions of, the Indenture and will have the same rights and benefits as the Securities issued on the Issue Date.

3. Paying Agent and Registrar

Initially, Wilmington Trust, National Association, a national banking association (the “Trustee”), will act as Paying Agent and Registrar. The Issuers may appoint and change any Paying Agent or Registrar without notice. The Issuers or any of its domestically incorporated Wholly Owned Subsidiaries may act as Paying Agent or Registrar.

4. Indenture

The Issuers issued the Securities under an Indenture dated as of August 1, 2013 (the “Indenture”), among the Issuer, Co-Issuer and the Trustee. The terms of the Securities include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S.C. §§ 77aaa-77bbbb) as in effect on the date of the Indenture (the “Trust Indenture Act”). Terms defined in the Indenture and not defined herein have the meanings ascribed thereto in the Indenture. The Securities are subject to all terms and provisions of the Indenture, and the Holders are referred to the Indenture and the Trust Indenture Act for a statement of such terms and provisions.

The Securities are senior unsecured obligations of the Issuers. This Security is one of the Original Securities referred to in the Indenture. The Securities include the Original Securities, any Additional Securities and any PIK Notes. The Original Securities, any Additional Securities and any PIK Notes are treated as a single class of securities under the Indenture. The Indenture imposes certain limitations on the ability of the Issuer and its Restricted Subsidiaries to, among other things, make certain Investments and other Restricted Payments, pay dividends and other distributions, incur Indebtedness, enter into consensual restrictions upon the payment of certain dividends and distributions by such Restricted Subsidiaries, issue or sell shares of capital stock of the Issuer and such Restricted Subsidiaries, enter into or permit certain transactions with Affiliates, create or incur Liens and make Asset Sales. The Indenture also imposes limitations on the ability of the Issuers to consolidate or merge with or into any other Person or convey, transfer or lease all or substantially all of its property.

5. Redemption

(a) Mandatory Redemption

On or before the end of each “accrual period” ending after the fifth anniversary of the “date of issue” of the Securities (each, an “AHYDO Redemption Date”), the Issuers will redeem for cash a portion of each Security then outstanding equal to the Mandatory Principal Redemption Amount (as defined below), if any (such redemption, a “Mandatory Principal Redemption”). The redemption price for the portion of each Security redeemed pursuant to Mandatory Principal Redemption, if any, will be 100% of the principal amount of such portion plus accrued and unpaid interest (including Additional Interest) thereon, if any, through the date of redemption. The “Mandatory Principal Redemption Amount” with respect to an accrual period means the portion of a note, if any, required to be redeemed to prevent such note from being treated as an “applicable high yield discount obligation” within the meaning of Section 163(i)(1) of the Code. The Issuer will be responsible for calculating the Mandatory Principal Redemption Amount.

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(b) Optional Redemption

Except as set forth in the following paragraphs, the Securities shall not be redeemable at the option of the Issuers prior to February 15, 2015. On February 15, 2015 or thereafter, the Issuers may redeem Securities, at its option, in whole at any time or in part from time to time, upon not less than 30 nor more than 60 days’ prior notice, mailed by first-class mail to each Holder’s registered address or otherwise delivered in accordance with the procedures of the Depositary, at the following redemption prices (expressed as a percentage of principal amount), plus accrued and unpaid interest and Additional Interest, if any, to, but not including, the applicable redemption date (subject to the right of the Holders of record on the relevant record date to receive interest due on the relevant interest payment date), if redeemed during the 12-month period commencing on February 15 of the years set forth below:

Year	Redemption Price
2015		102.000	%
2016		101.000	%
2017 and thereafter		100.000	%

In addition, at any time prior to February 15, 2015, the Issuers may redeem all or part of the Securities, at its option, at any time or from time to time, upon not less than 30 nor more than 60 days’ prior notice mailed by first-class mail to each Holder’s registered address or otherwise delivered in accordance with the procedures of the Depositary, at a redemption price equal to 100% of the principal amount of the Securities redeemed plus the Applicable Premium as of, and accrued and unpaid interest and Additional Interest, if any, to, but not including, the applicable redemption date (subject to the right of the Holders of record on the relevant record date to receive interest due on the relevant interest payment date).

In addition, on or after February 14, 2014 and before February 15, 2015, the Issuers may, at their option, redeem up to 40% of the aggregate principal amount of the Securities (including any Additional Securities and any PIK Notes) with the net cash proceeds of one or more Equity Offerings by the Issuers at a redemption price equal to 102% of the aggregate principal amount thereof, plus accrued and unpaid interest thereon and Additional Interest, if any, to, but not including, the applicable redemption date (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date); provided, however, that at least 60% of the sum of the aggregate principal amount of the Securities originally issued under the Indenture and any Additional Securities issued after the Issue Date must remain outstanding after each such redemption; provided, further, that such redemption shall occur within 180 days after the date on which any such Equity Offering is consummated upon not less than 30 nor more than 60 days’ notice mailed to each Holder of Securities being redeemed and otherwise in accordance with the procedures set forth in the Indenture.

Notice of any redemption described above may be given prior to the completion thereof, and any such redemption or notice may, at the Issuers’ discretion (i) be subject to one or more conditions precedent, including, but not limited to, completion of the relevant Equity Offering, (ii) be subject to delay or extension until such time as any or all such conditions shall be satisfied (or waived by the Issuers in their sole discretion) or (iii) provide that such redemption may not occur and such notice may be rescinded in the event that any or all such conditions shall not have been satisfied (or waived by the Issuers in their sole discretion).

In addition, on or after February 14, 2014 and before February 15, 2015, the Issuers may, at their option, on one or more occasions redeem all (but not less than all) of the aggregate principal amount of Securities (including the aggregate principal amount of Securities issued after the Issue Date and any PIK Notes) at a redemption price equal to 102% of the aggregate principal amount thereof, plus accrued and unpaid interest and Additional Interest, if any, thereon to the applicable Redemption Date, subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date, with the net cash proceeds of one or more Equity Offerings; provided that each such redemption occurs within 180 days of the date of closing of each such Equity Offering upon not less than 30 nor more than 60 days’ notice sent to each Holder of Securities being redeemed and otherwise in accordance with the procedures set forth in the Indenture.

If Holders of not less than 90% in aggregate principal amount of the outstanding Securities validly tender and do not withdraw such Securities in a Change of Control Offer and the Issuers, or any third party making a Change of Control Offer in lieu of the Issuers as described above, purchase all of the Securities validly

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tendered and not withdrawn by such Holders, the Issuers or such third party will have the right, upon prior notice given not more than 30 days following such purchase pursuant to the Change of Control Offer described above, to redeem all Securities that remain outstanding following such purchase at a price in cash equal to 101% of the principal amount thereof plus accrued and unpaid interest to but excluding the date of redemption.

6. Sinking Fund

The Securities are not subject to any sinking fund.

7. Notice of Redemption

Notice of redemption pursuant to Paragraph 5 above will be mailed by first-class mail or otherwise delivered in accordance with the procedures of DTC at least 30 days but not more than 60 days before the redemption date to each Holder of Securities to be redeemed at his, her or its registered address. Securities in denominations larger than $2,000 may be redeemed in part but only in whole multiples of $1,000 (or, in case any PIK Payment has been made, in minimum denominations of $1.00 and any integral multiple of $1.00). If money sufficient to pay the redemption price of and accrued and unpaid interest on all Securities (or portions thereof) to be redeemed on the redemption date is deposited with a Paying Agent on or before the redemption date and certain other conditions are satisfied, on and after such date, interest ceases to accrue on such Securities (or such portions thereof) called for redemption.

8. Repurchase of Securities at the Option of the

Holders upon Change of Control and Asset Sales

Upon the occurrence of a Change of Control, each Holder shall have the right, subject to certain conditions specified in the Indenture, to cause the Issuers to repurchase all or any part of such Holder’s Securities at a purchase price in cash equal to 101% of the principal amount thereof, plus accrued and unpaid interest, if any, to the date of repurchase (subject to the right of the Holders of record on the relevant record date to receive interest due on the relevant interest payment date), as provided in, and subject to the terms of, the Indenture.

In accordance with Section 4.06 of the Indenture, the Issuer will be required to offer to purchase Securities upon the occurrence of certain events.

9. Denominations; Transfer; Exchange

The Securities are in registered form, without coupons, in denominations of $2,000 and any integral multiple of $1,000 or, in case any PIK Payment has been made, in minimum denominations of $1.00 and any integral multiple of $1.00. A Holder shall register the transfer of or exchange of Securities in accordance with the Indenture. Upon any registration of transfer or exchange, the Registrar and the Trustee may require a Holder, among other things, to furnish appropriate endorsements or transfer documents and to pay any taxes required by law or permitted by the Indenture. The Registrar need not register the transfer of or exchange any Securities selected for redemption (except, in the case of a Security to be redeemed in part, the portion of the Security not to be redeemed) or to transfer or exchange any Securities for a period of 15 days prior to the mailing of a notice of redemption of Securities to be redeemed.

10. Persons Deemed Owners

The registered Holder of this Security shall be treated as the owner of it for all purposes.

11. Unclaimed Money

If money for the payment of principal or interest remains unclaimed for two years, the Trustee and a Paying Agent shall pay the money back to the Issuers at their written request unless an abandoned property law designates another Person. After any such payment, the Holders entitled to the money must look to the Issuers for payment as general creditors and the Trustee and a Paying Agent shall have no further liability with respect to such monies.

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12. Discharge and Defeasance

Subject to certain conditions and as set forth in the Indenture, the Issuers at any time may terminate some of or all of their obligations under the Securities and the Indenture if the Issuers deposit with the Trustee money or Government Securities for the payment of principal and interest on the Securities to redemption or maturity, as the case may be.

13. Amendment; Waiver

The Indenture or the Security may be amended or supplemented as provided in the Indenture.

14. Defaults and Remedies

If an Event of Default (other than a Default relating to certain events of bankruptcy, insolvency or reorganization of any Issuer) occurs and is continuing, the Trustee or the Holders of at least 25% in principal amount of outstanding Securities by notice to the Issuers, may declare the principal of, premium, if any, interest and any other monetary obligations on all the Securities to be due and payable immediately. Upon such a declaration, such principal and interest shall be due and payable immediately. If an Event of Default relating to certain events of bankruptcy, insolvency or reorganization of such Issuer occurs, the principal of, premium, if any, and interest on all the Securities shall become immediately due and payable without any declaration or other act on the part of the Trustee or any Holders. Under certain circumstances, the Holders of a majority in principal amount of outstanding Securities may rescind any such acceleration with respect to the Securities and its consequences.

If an Event of Default occurs and is continuing, the Trustee shall be under no obligation to exercise any of the rights or powers under the Indenture at the request or direction of any of the Holders unless such Holders have offered to the Trustee indemnity or security satisfactory to it against any loss, liability or expense. Except to enforce the right to receive payment of principal, premium (if any) or interest when due, no Holder may pursue any remedy with respect to the Indenture or the Securities unless (i) such Holder has previously given the Trustee written notice that an Event of Default is continuing, (ii) the Holders of at least 25% in principal amount of the outstanding Securities have requested the Trustee, in writing, to pursue the remedy, (iii) such Holders have offered the Trustee security or indemnity satisfactory to it against any loss, liability or expense, (iv) the Trustee has not complied with such request within 60 days after the receipt of the request and the offer of security or indemnity and (v) the Holders of a majority in principal amount of the outstanding Securities have not given the Trustee a written direction inconsistent with such request within such 60-day period. Subject to certain restrictions, the Holders of a majority in principal amount of the outstanding Securities are given the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or of exercising any trust or power conferred on the Trustee. The Trustee, however, may refuse to follow any direction that conflicts with law or the Indenture or that the Trustee determines is unduly prejudicial to the rights of any other Holder or that would involve the Trustee in personal liability. Prior to taking any action under the Indenture, the Trustee shall be entitled to indemnification satisfactory to it in its sole discretion against all losses and expenses that may be caused by taking or not taking such action.

The Issuers are required to deliver to the Trustee, annually, a certificate indicating whether the signers thereof know of any Default that occurred during the previous year. The Issuers also are required to deliver to the Trustee, within five (5) Business Days after the occurrence thereof, written notice of any event which would constitute certain Defaults.

15. Trustee Dealings with the Issuers

Subject to certain limitations imposed by the Trust Indenture Act, the Trustee under the Indenture, in its individual or any other capacity, may become the owner or pledgee of Securities and may otherwise deal with and collect obligations owed to it by the Issuers or their Affiliates and may otherwise deal with the Issuers or their Affiliates with the same rights it would have if it were not Trustee.

A-10

16. No Recourse Against Others

No past, present or future director, officer, employee, manager, incorporator, member, partner or stockholder of the Issuers or any Guarantor or any of their Subsidiaries or direct or indirect parent companies shall have any liability for any obligations of the Issuers or the Guarantors under the Securities, the Guarantees or the Indenture or for any claim based on, in respect of, or by reason of such obligations or their creation. Each Holder of Securities by accepting a Security waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Securities. The waiver may not be effective to waive liabilities under the federal securities laws.

17. Authentication

This Security shall not be valid until an authorized signatory of the Trustee (or an authenticating agent) manually signs the certificate of authentication on the other side of this Security.

18. Abbreviations

Customary abbreviations may be used in the name of a Holder or an assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by the entireties), JT TEN (=joint tenants with rights of survivorship and not as tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to Minors Act).

19. Governing Law

THIS SECURITY SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW.

20. CUSIP Numbers; ISINs

The Issuers have caused CUSIP numbers and ISINs to be printed on the Securities and have directed the Trustee to use CUSIP numbers and ISINs in notices of redemption as a convenience to the Holders. No representation is made as to the accuracy of such numbers either as printed on the Securities or as contained in any notice of redemption and reliance may be placed only on the other identification numbers placed thereon.

The Issuers will furnish to any Holder of Securities upon written request and without charge to the Holder a copy of the Indenture which has in it the text of this Security.

A-11

ASSIGNMENT FORM

To assign this Security, fill in the form below:

I or we assign and transfer this Security to:

(Print or type assignee’s name, address and zip code)

(Insert assignee’s soc. sec. or tax identification No.)

and irrevocably appoint                      as agent to transfer this Security on the books of the Issuer. The agent may substitute another to act for him.

Date: Your Signature:

Sign exactly as your name appears on the other side of this Security.

Signature Guarantee: Signature of Signature Guarantee:

Date:

Signature must be guaranteed by a participant in a recognized signature guaranty medallion program or other signature guarantor program reasonably acceptable to the Trustee

A-12

PC Nextco Holdings, LLC

PC Nextco Finance, Inc.

80 Grasslands Road

Elmsford, NY 10523

Attention: Joseph Zepf, Vice President, General Counsel

Facsimile: (914) 345-2056

Wilmington Trust, National Association

246 Goose Lane, Suite 105

Guilford, CT 06437

Attention: Party City Administrator

Facsimile: (203) 453-1183

CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR

REGISTRATION OF TRANSFER RESTRICTED SECURITIES

This certificate relates to $         principal amount of Securities held in (check applicable space)              book-entry or              definitive form by the undersigned.

The undersigned (check one box below):

¨ has requested the Trustee by written order to deliver in exchange for its beneficial interest in the Global Security held by the Depository a Security or Securities in definitive, registered form of authorized denominations and an aggregate principal amount equal to its beneficial interest in such Global Security (or the portion thereof indicated above);

¨ has requested the Trustee by written order to exchange or register the transfer of a Security or Securities.

In connection with any transfer of any of the Securities evidenced by this certificate occurring prior to the expiration of the period referred to in Rule 144(k) under the Securities Act, the undersigned confirms that such Securities are being transferred in accordance with its terms:

CHECK ONE BOX BELOW

(1)	¨	to the Issuers or subsidiary thereof; or
(2)	¨	to the Registrar for registration in the name of the Holder, without transfer; or
(3)	¨	inside the United States to a “qualified institutional buyer” (as defined in Rule 144A under the Securities Act of 1933) that purchases for its own account or for the account of a qualified institutional buyer to whom notice is given that such transfer is being made in reliance on Rule 144A, in each case pursuant to and in compliance with Rule 144A under the Securities Act of 1933; or
(4)	¨	outside the United States in an offshore transaction within the meaning of Regulation S under the Securities Act in compliance with Rule 904 under the Securities Act of 1933 and such Security shall be held immediately after the transfer through Euroclear or Clearstream until the expiration of the Restricted Period (as defined in the Indenture); or
(5)	¨	to an institutional “accredited investor” (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act of 1933) that has furnished to the Trustee a signed letter containing certain representations and agreements in the form attached as Exhibit B to the Indenture; or
(6)	¨	pursuant to another available exemption from registration provided by Rule 144 under the Securities Act of 1933.

A-13

Unless one of the boxes is checked, the Trustee will refuse to register any of the Securities evidenced by this certificate in the name of any Person other than the registered Holder thereof; provided, however, that if box (4), (5) or (6) is checked, the Issuers or the Trustee may require, prior to registering any such transfer of the Securities, such legal opinions, certifications and other information as any Issuer or the Trustee have reasonably requested to confirm that such transfer is being made pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act of 1933.

Date:	Your Signature:
Signature Guarantee:	Signature of Signature Guarantee:
Date:
Signature must be guaranteed by a participant in a recognized signature guaranty medallion program or other signature guarantor program reasonably acceptable to the Trustee

TO BE COMPLETED BY PURCHASER IF (3) ABOVE IS CHECKED.

The undersigned represents and warrants that it is purchasing this Security for its own account or an account with respect to which it exercises sole investment discretion and that it and any such account is a “qualified institutional buyer” within the meaning of Rule 144A, and is aware that the sale to it is being made in reliance on Rule 144A and acknowledges that it has received such information regarding the Issuer as the undersigned has requested pursuant to Rule 144A or has determined not to request such information and that it is aware that the transferor is relying upon the undersigned’s foregoing representations in order to claim the exemption from registration provided by Rule 144A.

Date:
	NOTICE: To be executed by an executive officer

A-14

[TO BE ATTACHED TO GLOBAL SECURITIES]

SCHEDULE OF INCREASES OR DECREASES IN GLOBAL SECURITY

The initial principal amount of this Global Security is $        . The following increases or decreases in this Global Security have been made:

Date of Exchange Amount of decrease in Principal Amount of this Global Security Amount of increase in Principal Amount of this Global Security Principal amount of this Global Security following such decrease or increase Signature of authorized signatory of Trustee or Securities Custodian

A-15

OPTION OF HOLDER TO ELECT PURCHASE

If you want to elect to have this Security purchased by any Issuer pursuant to Section 4.06 (Asset Sale Offer) or 4.08 (Change of Control Offer) of the Indenture, check the box:

Asset Sale ¨ Change of Control ¨

If you want to elect to have only part of this Security purchased by any Issuer pursuant to Section 4.06 (Asset Sale Offer) or 4.08 (Change of Control Offer) of the Indenture, state the amount ($2,000 or any integral multiple of $1,000 or, in case any PIK Payment has been made, $1.00 and any integral multiple of $1.00):

$
Date:	Your Signature:
		(Sign exactly as your name appears on the other side of this Security)

Signature Guarantee:

Signature must be guaranteed by a participant in a recognized signature guaranty medallion program or other signature guarantor program reasonably acceptable to the Trustee

A-16

EXHIBIT B

[FORM OF]

TRANSFEREE LETTER OF REPRESENTATION

[PC Nextco Holdings, LLC

PC Nextco Finance, Inc.]

c/o Wilmington Trust, National Association

Attention: [    ]

Ladies and Gentlemen:

This CERTIFICATE IS DELIVERED TO REQUEST A TRANSFER OF $[        ] PRINCIPAL AMOUNT OF THE 8.750%/9.500% SENIOR PIK TOGGLE NOTES DUE 2019 (THE “SECURITIES”) OF PC NEXTCO HOLDINGS, LLC (THE “ISSUER”) AND PC NEXTCO FINANCE, INC. (THE “CO-ISSUER” AND, TOGETHER WITH THE ISSUER, THE “ISSUERS”).

Upon transfer, the Securities would be registered in the name of the new beneficial owner as follows:

Name:

Address:

Taxpayer ID Number:

The undersigned represents and warrants to you that:

(1) We are an institutional “accredited investor” (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act of 1933, as amended (the “Securities Act”)), purchasing for our own account or for the account of such an institutional “accredited investor” at least $100,000 principal amount of the Securities, and we are acquiring the Securities not with a view to, or for offer or sale in connection with, any distribution in violation of the Securities Act. We have such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of our investment in the Securities, and we invest in or purchase securities similar to the Securities in the normal course of our business. We, and any accounts for which we are acting, are each able to bear the economic risk of our or its investment.

(2) We understand that the Securities have not been registered under the Securities Act and, unless so registered, may not be sold except as permitted in the following sentence. We agree on our own behalf and on behalf of any investor account for which we are purchasing Securities to offer, sell or otherwise transfer such Securities prior to the date that is two years after the later of the date of original issue and the last date on which either the Issuer or any affiliate of such Issuer was the owner of such Securities (or any predecessor thereto) (the “Resale Restriction Termination Date”) only (a) in the United States to a person whom we reasonably believe is a qualified institutional buyer (as defined in rule 144A under the Securities Act) in a transaction meeting the requirements of Rule 144A, (b) outside the United States in an offshore transaction in accordance with Rule 904 of Regulation S under the Securities Act, (c) pursuant to an exemption from registration under the Securities Act provided by Rule 144 thereunder (if applicable) or (d) pursuant to an effective registration statement under the Securities Act, in each of cases (a) through (d) in accordance with any applicable securities laws of any state of the United States. In addition, we will, and each subsequent holder is required to, notify any purchaser of the Security evidenced hereby of the resale restrictions set forth above. The foregoing restrictions on resale will not apply subsequent to the Resale Restriction Termination Date. If any resale or other transfer of the Securities is proposed to be made to an institutional “accredited investor” prior to the Resale Restriction Termination Date, the transferor shall deliver a letter from the transferee substantially in the form of this letter to the Issuer and the Trustee, which shall provide, among other things, that the transferee is an institutional “accredited investor” within the meaning of Rule 501(a)(1), (2), (3) or (7) under the Securities Act and that it is acquiring such Securities for investment purposes and not for distribution in violation of the Securities Act. Each purchaser acknowledges that either Issuer and the Trustee reserve the right prior to the offer, sale or other transfer prior to the Resale Restriction Termination Date of the Securities pursuant to clause 2(b), 2(c) or 2(d) above to require the delivery of an opinion of counsel, certifications or other information satisfactory to the Issuers and the Trustee.

B-1

Dated:
	TRANSFEREE:	,

By:

B-2

EXHIBIT C

[FORM OF SUPPLEMENTAL INDENTURE]

[SUPPLEMENTAL INDENTURE (this “Supplemental Indenture”) dated as of [                    ], among PC Nextco Holdings, LLC, a Delaware limited liability company (the “Issuer”), PC Nextco Finance, Inc., a Delaware corporation (the “Co-Issuer” and, together with the Issuer, the “Issuers”), the guarantors named in the signature pages hereto (the “Guarantors”) and Wilmington Trust, National Association, a national banking association, as trustee under the Indenture referred to below (the “Trustee”).]

W I T N E S S E T H :

WHEREAS the Issuers have heretofore executed and delivered to the Trustee an indenture, dated as of August 1, 2013 (as amended, supplemented or otherwise modified, the “Indenture”), providing initially for the issuance of $350,000,000 in aggregate principal amount of the Issuers’ 8.750%/9.500% Senior PIK Toggle Notes due 2019 (the “Securities”);

WHEREAS Sections 4.11 and 10.06 of the Indenture provide that under certain circumstances the Issuers are required to cause the Guarantors to execute and deliver to the Trustee a supplemental indenture pursuant to which the Guarantors shall unconditionally guarantee all the Issuers’ Obligations under the Securities and the Indenture pursuant to a Guarantee on the terms and conditions set forth herein; and

WHEREAS pursuant to Section 9.01 of the Indenture, the Trustee and the Issuer are authorized to execute and deliver this Supplemental Indenture;

NOW THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt of which is hereby acknowledged, the Guarantors, the Issuers and the Trustee mutually covenant and agree for the equal and ratable benefit of the Holders as follows:

1. Defined Terms. As used in this Supplemental Indenture, terms defined in the Indenture or in the preamble or recital hereto are used herein as therein defined, except that the term “Holders” in this Guarantee shall refer to the term “Holders” as defined in the Indenture and the Trustee acting on behalf of and for the benefit of such Holders. The words “herein,” “hereof” and “hereby” and other words of similar import used in this Supplemental Indenture refer to this Supplemental Indenture as a whole and not to any particular section hereof.

2. Agreement to Guarantee. The Guarantors hereby agree, jointly and severally with all existing Guarantors (if any), to irrevocably and unconditionally guarantee the Issuers’ Obligations under the Securities and the Indenture on the terms and subject to the conditions set forth in the Indenture, including, but not limited to, Article 10 of the Indenture, and to be bound by all other applicable provisions of the Indenture and the Securities and to perform all of the obligations and agreements of a Guarantor under the Indenture.

3. Releases. (b) A Guarantee as to any Guarantor shall terminate and be of no further force or effect and such Guarantor shall be deemed to be released from all obligations as provided in Section 10.02(b) of the Indenture.

4. Notices. All notices or other communications to the Guarantors shall be given as provided in Section 11.02 of the Indenture.

5. Ratification of Indenture; Supplemental Indentures Part of Indenture. Except as expressly amended and supplemented hereby, the Indenture is in all respects ratified and confirmed and all the terms, conditions and provisions thereof shall remain in full force and effect. This Supplemental Indenture shall form a part of the Indenture for all purposes, and every Holder of Securities heretofore or hereafter authenticated and delivered shall be bound hereby.

C-1

6. No Recourse Against Others. No past, present or future director, officer, employee, manager, incorporator, agent or holder of any Equity Interests in any Issuer or of the Guarantors or any direct or indirect parent corporation, as such, shall have any liability for any obligations of the Issuers and the Guarantors under the Securities, the Guarantees, the Indenture or this Supplemental Indenture or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder of Securities by accepting a Security waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Securities. The waiver may not be effective to waive liabilities under the federal securities laws.

7. Governing Law. THIS SUPPLEMENTAL INDENTURE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. EACH OF THE NEW GUARANTOR AND THE TRUSTEE HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS SUPPLEMENTAL INDENTURE, THE INDENTURE, THE SECURITIES OR THE TRANSACTION CONTEMPLATED HEREBY.

8. Trustee Makes No Representation. The Trustee makes no representation as to the validity or sufficiency of this Supplemental Indenture.

9. Counterparts. The parties may sign any number of copies of this Supplemental Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. One signed copy is enough to prove this Supplemental Indenture. The exchange of copies of this Supplemental Indenture and of signature pages by facsimile or email (in PDF format or otherwise) shall constitute effective execution and delivery of this Supplemental Indenture as to the parties hereto and may be used in lieu of the original Supplemental Indenture for all purposes. Signatures of the parties hereto transmitted by facsimile or email (in PDF format or otherwise) shall be deemed to be their original signatures for all purposes.

10. Effect of Headings. The Section headings herein are for convenience only and shall not affect the construction thereof.

11. The Trustee. The Trustee shall not be responsible in any manner whatsoever for or in respect of the validity or sufficiency of this Supplemental Indenture or for or in respect of the recitals contained herein, all of which recitals are made solely by the Guarantors.

12. Successors. All agreements of the Guarantors in this Supplemental Indenture shall bind its successors. All agreements of the Trustee in this Indenture shall bind its successors.

C-2

IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture to be duly executed as of the date first above written.

PC NEXTCO HOLDINGS, LLC
By:
	Name:
	Title:
PC NEXTCO FINANCE, INC.
By:
	Name:
	Title:
[GUARANTORS]
By:
	Name:
	Title:
WILMINGTON TRUST, NATIONAL ASSOCIATION, as Trustee
By:
	Name:
	Title:

C-3

EX-21.1

Exhibit 21.1

List of Subsidiaries of Party City Holdco Inc.

Name	State/Country of Organization or Incorporation
Amscan Asia International Limited	Hong Kong
Amscan de Mexico S.A. de C.V.	Mexico
Amscan Distributors (Canada), Ltd.	Canada
Amscan Europe GmbH	Germany
Amscan Holdings Limited	United Kingdom
Amscan Inc.	New York
Amscan International Limited	United Kingdom
Amscan Japan Co., Ltd.	Japan
Amscan Party Goods Pty. Limited	Australia
Amscan Partyartikel GmbH	Germany
Am-Source, LLC	Rhode Island
Anagram Eden Prairie Property Holdings LLC	Delaware
Anagram Espana S.L.	Spain
Anagram France S.C.S.	France
Anagram International Inc.	Minnesota
Anagram International LLC	Nevada
Anagram International Holdings, Inc.	Minnesota
Christy Asia Limited	Hong Kong
Christy Dressup Limited	United Kingdom
Christy’s By Design Limited	United Kingdom
Christy Garments and Accessories Limited	United Kingdom
Convergram de Mexico S. de R.L.	Mexico
Delights Limited	United Kingdom
Everts International Ltd.	United Kingdom
Everts Malaysia SDN BHD	Malaysia
JCS Packaging Inc.	New York
Party Ballons Int. GmbH	Germany
Party City Canada Inc.	Ontario
Party City Corporation	Delaware
Party City Holdings Inc.	Delaware
Party Delights Ltd.	United Kingdom
PC Nextco Holdings, LLC	Delaware
PC Nextco Finance, Inc.	Delaware
PC Intermediate Holdings, Inc.	Delaware
Riethmüller (Polska) Sp.z.o.o.	Poland
SSY Realty Corp.	New York
Trisar, Inc.	California

EX-23.1

Exhibit 23.1

Consent of Independent Registered Public Accounting Firm

We consent to the reference to our firm under the caption “Experts” and to the use of our report dated January 21, 2014 (except Note 2, as to which the date is XXX XX, 2014) in the Registration Statement (Form S-1 No. 333-                 ) and related Prospectus of Party City Holdco Inc. for the registration of                 000,000 shares of its common stock.

Ernst & Young LLP

New York, New York

The foregoing consent is in the form that will be signed at effectiveness upon the completion of the stock split and computation of earnings per share as described in Note 2 to the financial statements.

/s/ Ernst & Young LLP

New York, New York

January 21, 2014