Exhibit 10.1

SEPARATION AGREEMENT AND GENERAL RELEASE

This is an Agreement by and among Party City Holdings Inc. and Party City Holdco
Inc. (collectively, the “Company”) and Gregg A. Melnick (“Executive”) concerning
Executive’s separation from the Company.

1.    Separation Date. Executive’s employment will cease as of August 31, 2018
(“Separation Date”). Except as provided below, Executive’s active participation
in the Company’s benefit plans, including but not limited to vacation or other
paid time off policies, will cease as of the Separation Date.

2.    Severance Pay. In return for Executive’s agreement to abide by the terms
contained in this Agreement, the Company will provide the following benefits:

a.    Severance Pay: The Company will pay Executive severance pay through
January 31, 2019 (“Severance Period”) at the rate of Executive’s usual and
customary regular gross weekly rate of $17,163.46 (for an aggregate gross amount
of $374,164.34) (“Severance”), less all applicable state, federal, local and
other deductions payable, in the form of salary continuation over the Severance
Period, with the first installment payable in arrears in the first regular
payroll of the Company that occurs after this Agreement is executed and the
revocation period set forth in paragraph 19 has expired, continuing in
accordance with the Company’s regular payroll practices; and

b.    Bonus Payment: The Company will pay Executive an amount equal to 2/3 of
his bonus for 2018 (for the period 1/1/18-8/31/18). Such bonus shall be paid
consistent with the Company’s bonus plan for key executives as in effect as of
the Separation Date with the actual amount of the bonus to be determined in good
faith by the Board of Directors or the Compensation Committee thereof in
accordance with the bonus plan in effect as of the Separation Date. The bonus
payment shall be payable no later than March 15, 2019.

c.    Benefits: To the extent permitted by law, the Company will (i) maintain
Executive’s welfare benefits that had been provided to him prior to the
Separation Date and, further, (ii) the Company will assume the payment
obligations associated with Executive’s share of any COBRA payments due for
health insurance continuation and premiums, during that period that commences on
the Separation Date through and ceasing on December 31, 2018.

d.    No Other Compensation Due and Owing: Executive acknowledges and agrees
that no compensation or benefits are due and owing to him except as provided for
herein, and that Executive has used all accrued vacation and PTO benefits.

e.    Executive understands and agrees that no payments described in paragraph
2(a), 2(b), or 2(c) (collectively, the “Separation Pay”) will be provided
hereunder unless this Agreement is signed within the timeframe specified herein
and not revoked.

 

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3.    General Release. In consideration of the benefits being provided to
Executive under Paragraph 2 of this Agreement, Executive, on behalf of himself
and Executive’s heirs, estate, executors, beneficiaries, administrators,
successors, assigns and all others connected with or claiming through Executive,
irrevocably and unconditionally releases the Company, and all of its parents,
subsidiaries, or other affiliated companies, and all of their present and former
owners, directors, officers, presidents, shareholders, executives, employee
benefit plans and all of the trustees, fiduciaries or administrators thereof,
employees, insurers, attorneys, and agents (collectively referred to as
“Releasees”), from any and all claims, actions and expenses (including
attorneys’ fees and costs) of any nature, known or unknown, which Executive may
have (or may be able to bring on behalf of another person), from the beginning
of time to the date this Agreement is executed, relating in any way to
Executive’s employment with or separation from the Company, or otherwise. This
Release includes any claims of negligence, breach of contract, oral or written,
implied or otherwise, wrongful discharge, defamation, other claims at common law
and intentional torts, all statutory claims under federal, state and local laws
regulating employment, including but not limited claims under the Employee
Retirement Income Security Act (“ERISA”), the Americans With Disabilities Act,
the Civil Rights Act of 1964 (Title VII), Age Discrimination in Employment Act,
including the Older Workers Benefit Protection Act, the Family and Medical Leave
Act, the Fair Labor Standards Act, the New York State Human Rights Law, the New
York State Labor Law, the New York Civil Rights Law, the New York
Non-Discrimination for Legal Activities Law, the New Jersey Law Against
Discrimination, the New Jersey Family Leave Act, the New Jersey Conscientious
Employee Protection Act, all laws in New York and New Jersey governing wage and
hour, sick leave, workers’ compensation and the New York and New Jersey
Constitutions; as well as claims under any other federal, state or local
statute, order or regulation pertaining to leave or discrimination, retaliation,
or harassment in employment on the basis of age, race, religion, disability,
handicap, national origin, sex, sexual orientation, gender, or any other
characteristic or conduct protected by law or other laws governing employment.
Executive waives any and all right to future employment with the Company, and
agrees not to seek reinstatement with the Company. Nothing in this Release
affects Executive’s rights to vested benefits provided in accordance with the
terms of an employee benefit plan subject to ERISA, if any, except as provided
herein.

4.    Responsibility for Taxes and Indemnification. Executive acknowledges and
agrees that no representations or advice have been made concerning the
taxability or applicable tax rate of the payments specified in paragraph 2.
Executive further represents that no liens have attached to the Separation Pay
and acknowledges and agrees that Executive shall be solely responsible for
payment of any liens which have or may attach to these payments, including, but
not limited to, liens for medical bills or disability benefits, taxes, and/or
attorneys’ fees. In the event the Internal Revenue Service, or any other taxing
entity, including, but not limited to, the New Jersey Department of Taxation, or
any court or other tribunal of competent jurisdiction, determines that all or
part of the above payments specified in paragraph 2 constitute remuneration for
which a lien has attached or any taxes are due and owing in excess of the
withholdings taken from the Severance Pay, Executive shall be solely responsible
for the payment of such liens or taxes. Executive agrees to make no claim
against Releasees for payment of any such liens or taxes, or for the payment of
any applicable interest or penalties. Executive agrees to fully indemnify the
Releasees for any amounts paid, including, but not limited to, interest and
penalties, in connection with any taxes or liens found to be due and owing by it
with respect to the payments specified in paragraph 2. In the event it is
ultimately determined that any liens or taxes are due and owing with respect to
those payments, the validity of this Agreement shall not be affected in any way.

 

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5.    Forfeiture of Rights Under the Long Term Incentive Agreement. Executive
has executed a Restricted Stock Award Agreement (Time and Performance-Based
Vesting) dated April 20, 2018 (the “RSA”). Notwithstanding the foregoing,
Executive hereby acknowledges and agrees that, as of the Separation Date, he has
not vested in any portion of the RSA. Accordingly, Executive agrees that as of
the Separation Date he shall forfeit all rights which he has, or to which he may
have, under the RSA.

6.    Extension of Post-Termination Exercise Periods. Executive was awarded
certain non-qualified stock options (“Options”) pursuant to Nonqualified Stock
Option Award Agreements dated April 1, 2013 and April 15, 2015 (collectively,
the “Award Agreements”). Pursuant to the terms of the Award Agreements and the
Party City Holdco Inc. Amended and Restated 2012 Omnibus Equity Incentive Plan
(the “Plan”), Executive may exercise all or any part of the Vested Portion (as
defined in the Award Agreements) of the Options prior to the date that is sixty
(60) days following the Separation Date. Notwithstanding the terms of the Award
Agreements and the Plan, Executive and Company have agreed to amend the
post-termination exercise period for the Vested Portion of the Options until the
date that is sixty (60) days following the end of the Severance Period and this
Section 6 shall be deemed to be an amendment of the Award Agreements to
effectuate such change. The parties agree that any Vested Portion of any Option
granted to Executive not exercised within such extended time period shall be
forfeited. Further, Executive acknowledges and agrees that any Unvested Portion
(as defined in the Award Agreements) of the Options shall be forfeited as of the
Separation Date and that Executive shall not accrue additional vesting during
the Severance Period. For the avoidance of doubt, as of the date hereof,
Executive and Company agree that the Vested Portion consists of time-vested
options on 179,200 shares from the 2013 grant and time-vested options on 193,200
shares from the 2015 grant; further, as of the date hereof, Executive and
Company agree that the unvested portion of the Award Agreements consists of
performance-vested options on 336,000 shares from the 2013 grant and time-vested
options on 128,800 shares from the 2015 grant.

7.    Confidentiality of Agreement. Executive promises not to discuss or
disclose the amount or nature of the benefits paid to Executive under this
Agreement to any person other than Executive’s spouse and Executive’s attorney
and/or financial advisor, should one be consulted, provided that those to whom
Executive makes such disclosure agree to keep said information confidential and
not disclose it to others.

8.    No Claims. Executive represents that Executive does not currently suffer
from any work related injury, and has been paid all wages and benefits due and
owing up through the date of the Agreement. Executive affirms, by signing this
Agreement, that no claims of any kind including, but not limited to, those
relating to or arising out of Executive’s employment with the Company or the
termination thereof, are currently pending against any of the Releasees and
that, to the extent permitted by law, Executive agrees not to file any such
actions in any court on behalf of himself or any other person for Executive’s
monetary benefit or for any other purpose to the extent permitted by law. This
does not apply to any claims which may not lawfully be released, waived or
discharged by Executive including any claims which could be brought on his
behalf by the Equal Employment Opportunity Commission; however, Executive hereby
explicitly agrees to waive any right to monetary damages that any agency may
recover against Releasees without regard as to who brought any said complaint or
charge.

 

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9.    Non-Disparagement. Neither party shall disparage the other party or any of
his or its current or former officers, directors, employees, customers or
potential customers, the general public, vendors or any other person. For the
purposes of this paragraph, disparagement shall include, without limitation, any
statement denigrating the Executive or the products or services of the Company
and its affiliates, criticizing the financial status or management of the
Executive, the Company or their affiliates, or criticizing the customers or
vendors or vendors of the Executive, the Company or their affiliates. Neither
party shall make any willfully false statements to any person about other party
or any of his or its current or former officers, directors, employees, customers
or potential customers, vendors or the professional abilities of same. Nothing
in this paragraph shall prohibit either party from making any statement as may
be required for any legitimate law enforcement purpose or in response to a valid
subpoena or court order.

10.    No Admission of Liability. By this Agreement, the Company does not admit
to any misconduct or violation of any law, regulation, or Company agreement,
policy, or procedure and specifically denies any misconduct or violation of any
law. Accordingly, this Agreement shall not be admissible in court as an
admission, but only in an action to enforce it. Executive shall not be
considered a prevailing party or a successful party.

11.    No Rights Under Employment Agreement. Executive hereby acknowledges and
understands that the Employment Agreement between him and the Company expired as
of December 31, 2017 and that he has no rights thereunder and that there are no
payments or obligations due to him thereunder.

12.    Confidential Information and Trade Secrets. Each party acknowledges that
during the course of Executive’s employment, each party has had access to the
other party’s confidential information and trade secrets. Each party agrees not
to use for any purpose or to disclose the other party’s “Confidential
Information and Trade Secrets” to any third party. For purposes of this
Agreement, “Confidential Information and Trade Secrets” includes any and all
information of the other party that is not generally available to the public,
including, without limitation, including, but not limited to, business plans,
software programs, sales, marketing and pricing information, vendor and
distributor contracts, manufacturing processes, intellectual property, client
lists/information, client marketing materials, confidential information
disclosed to the Company by third parties, and financial statements.
Confidential Information and Trade Secrets shall not include any material or
information that has entered the public domain through no fault of either party.
The parties agree that it shall not be a violation of this Agreement for either
party to disclose the other Party’s Confidential Information and Trade Secrets
in any of the following cases:

a.    where disclosure is made in confidence to a Federal, State, or local
government official, either directly or indirectly, or to an attorney solely for
the purpose of reporting or investigating a suspected violation of law;

 

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b.    where disclosure is made in a complaint or other document filed in a
lawsuit or other proceeding, if such filing is made under seal; or

c.    where disclosure is to Executive’s attorney who is representing Executive
in a claim that the Company retaliated against Executive for reporting a
suspected violation of law. Executive or Executive’s attorney may use the
Confidential Information and Trade Secrets in the court proceeding without
violating this Agreement, only if any document containing the trade secret is
filed under seal and Executive or Executive’s attorney does not disclose the
Confidential Information and Trade Secrets, except pursuant to court order

provided that, in each case, notwithstanding this immunity from liability,
Executive may be held liable if Executive unlawfully accesses trade secrets by
unauthorized means.

13.    Return of Company Property/Confidential Information. All written
materials, records and documents made by Executive or coming into Executive’s
possession during Executive’s employment by the Company concerning the business
or affairs of the Company are the sole property of the Company. Executive
represents that Executive either has returned or shall deliver the same to the
Company by the Separation Date, without retaining any copies. Executive also
agrees that Executive either has or will return any and all of the Company’s
physical property of the Company in Executive’s possession, such as keys,
computer equipment, access cards, and credit cards by the Separation Date.
Executive understands that his access to the Company email and computer systems
shall cease as of the Separation Date and he agrees to provide the Company with
all passwords used to access any Company information. Executive understands and
agrees that no Severance Pay shall be paid until all of the Company’s property
has been returned.

14.    Noncompetition; Nonsolicitation.

a    Non-Competition. For eighteen (18) months following the Separation Date,
Executive shall not directly or indirectly participate in or permit his name
directly or indirectly to be used by or become associated with (including as an
advisor, representative, agent, promoter, independent contractor, provider of
personal services or otherwise) any person, corporation, partnership, firm,
association or other enterprise or entity (a “person”) that is, or intends to
be, engaged in any business which is in competition with any business of the
Company or controlled affiliates with respect to any geographic area in which
the Company, or any of its respective subsidiaries or controlled affiliates
operate, compete or are engaged in such business or at such time intend so to
operate, compete or become engaged in such business (a “Competitor”); provided,
however, that the foregoing will not prohibit Executive from participating in or
becoming associated with a person if (i) less than 10% of the consolidated gross
revenues of such person, together with its affiliates, derive from activities or
businesses that are in competition with any business of the Company or any of
its subsidiaries or controlled affiliates (a “Competitive Business”) and
(ii) the Company does not, directly or indirectly, participate in, become
associated with, or otherwise have responsibilities that relate to the conduct
or operations of, any Competitive Business that is conducted by such person or a
division, group, or subsidiary or affiliate of such person. For purposes of this
Agreement, the term “participate” includes any direct or indirect interest,
whether as an officer, director, employee, partner, sole proprietor, trustee,
beneficiary, agent, representative, independent contractor, consultant, advisor,
provider of personal services, creditor, or owner (other than by ownership of
less than five percent of the stock of a publicly-held corporation whose stock
is traded on a national securities exchange or in an over-the-counter market).

 

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b.    Non-Solicitation. For eighteen (18) months following the Separation Date,
Executive shall not, directly or indirectly, encourage or solicit, or assist any
other person or firm in encouraging or soliciting, any person that during the
three-year period preceding the Separation Date is or was engaged in a business
relationship with the Company or any of its respective subsidiaries or
controlled affiliates to terminate its relationship with the Company or any of
its respective subsidiaries or controlled affiliates or to engage in a business
relationship with a Competitor.

c.    No Hire. For eighteen (18) months following the Separation Date, Executive
will not, except with the prior written consent of the Company, directly or
indirectly, induce any employee of the Company, any of its respective
subsidiaries or controlled affiliates to terminate employment with such entity,
and will not, directly or indirectly, either individually or as owner, agent,
employee, consultant or otherwise, employ, offer employment or cause employment
to be offered to any person (including employment as an independent contractor)
who is or was employed by the Company or any of its respective subsidiaries or
controlled affiliates unless such person shall have ceased to be employed by
such entity for a period of at least twelve months. For purposes of this
paragraph, “employment” shall be deemed to include rendering services as an
independent contractor and “employees” shall be deemed to include independent
contractors.

d.    Enforcement; Injunctive Relief. Executive acknowledges and agrees that the
covenants and obligations in this Agreement with respect to non-competition,
nonsolicitation and confidentiality and with respect to the property of the
Company and its subsidiaries and controlled affiliates, and the territories
covered thereby, are fair and reasonable and the result of negotiation.
Executive further acknowledges and agrees that the covenants and obligations of
Executive in this Agreement with respect to noncompetition, nonsolicitation and
confidentiality and with respect to the property of the Company and its
respective subsidiaries and controlled affiliates, and the territories covered
thereby, relate to special, unique and extraordinary matters and that a
violation of any of the terms of such covenants and obligations will cause the
Company, and its respective subsidiaries and affiliates irreparable injury for
which adequate remedies are not available at law. Therefore, Executive agrees
that the Company shall be entitled to an injunction, restraining order or such
other equitable relief as a court of competent jurisdiction may deem necessary
or appropriate, in each case, without the necessity of posting bond, to restrain
Executive from committing any violation of such covenants and obligations. These
injunctive remedies are cumulative and are in addition to any other rights and
remedies the Company may have at law or in equity. If, at the time of
enforcement of this section, a court holds that any of the restrictions stated
herein are unreasonable under circumstances then existing, the parties hereto
agree that the maximum period, scope, and/or geographical area legally
permissible under such circumstances will be substituted for the period, scope
and/or area stated herein. The applicable periods of restriction set forth
herein will be tolled and will not run during any period during which Executive
is in violation of such restriction.

 

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15.    Cooperation. Executive agrees, upon reasonable notice, to cooperate in
any Company investigation or any litigation, arbitration, or regulatory
proceeding in which Company is or may become involved, regarding events that
occurred during Executive’s tenure with Company. Executive agrees to make
himself reasonably available to consult with Company’s representatives,
including its counsel, to provide information, and to appear to give
testimony. Company will reimburse Executive for reasonable out-of-pocket
expenses that Executive incurs in extending such cooperation, so long as
Executive provides written notice of his request for reimbursement and provide
satisfactory documentation of the expenses.

16.    Indemnification. The Company shall indemnify, defend and hold harmless
Executive from and against any and all against any and all losses, damages,
liabilities, deficiencies, claims, actions, judgments, settlements, interest,
awards, penalties, fines, costs, or expenses of whatever kind, including
attorneys’ fees (“Losses”), that are actually incurred by Executive after his
Separation Date and which losses arise out of or relate to Executive’s
employment with the Company.

17.    Receipt of Process. In the event that Executive receives legal process
seeking disclosure or production of this Agreement or any event regarding
Executive’s employment with the Company, he agrees to notify the Company of any
such proceedings within forty-eight (48) hours of being noticed of such
proceeding, and refrain from disclosing any information in response to such
process (if lawful to do so) until the Company has had an opportunity to contest
such process or notifies Executive that it will not contest such process. Notice
by Executive, as referenced in this paragraph, shall be given to Joseph J. Zepf,
Esq., Party City Holdings Inc. 80 Grasslands Road, Elmsford, NY 10523, by either
hand delivery or overnight delivery.

18.    Section 409A. This Agreement is intended to comply with Section 409A of
the Internal Revenue Code of 1986, as amended (Section 409A) or an exemption
thereunder and shall be construed and administered in accordance with
Section 409A. Notwithstanding any other provision of this Agreement, payments
provided under this Agreement may only be made upon an event and in a manner
that complies with Section 409A or an applicable exemption. Any payments under
this Agreement that may be excluded from Section 409A either as separation pay
due to an involuntary separation from service or as a short-term deferral shall
be excluded from Section 409A to the maximum extent possible. For purposes of
Section 409A, each installment payment provided under this Agreement shall be
treated as a separate payment. Any payments to be made under this Agreement upon
a termination of employment shall only be made upon a “separation from service”
under Section 409A. Notwithstanding the foregoing, the Company makes no
representations that the payments and benefits provided under this Agreement
comply with Section 409A and in no event shall the Company be liable for all or
any portion of any taxes, penalties, interest or other expenses that may be
incurred by Executive on account of non-compliance with Section 409A.

19.    Agreement Construction. This Agreement constitutes the entire agreement
by and among the parties, and may not be modified, altered, or changed, except
upon the written consent of all parties hereto. This Agreement supersedes all
prior agreements between Executive and the Company, except that it does not
supersede any confidentiality or restrictive covenant agreements executed by
Executive unless specifically noted in this Agreement. The parties agree that
there shall be no presumption against the drafter of this Agreement. If any part
of this Agreement is found by a court to be void or unenforceable, the remaining
parts shall be binding on the parties.

 

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20.    Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York, without regard to conflicts
of laws principles thereof. Any dispute arising out of or relating to this
Agreement or its breach, interpretation, termination or validity shall be
brought in the United States District Court for the Southern District of New
York or the Supreme Court of New York.

21.    Voluntariness. Please read this document carefully. This is a legal
document that includes a release of known and unknown claims. This Agreement may
not be signed prior to the Separation Date. Executive has the right and is
advised to review this document with an attorney. Executive, through the
signature below, represents that Executive has read this Agreement and fully
understands and voluntarily agrees to its terms. Executive understands that
Executive is entitled to consider this Agreement for twenty-one days (21), and
that the Agreement may be revoked in writing within seven (7) days of executing
it. Any revocation must be in writing and received by Joseph J. Zepf, Esq.
within the seven-day period. This Agreement shall not become effective or
enforceable until the expiration of this seven-day period. Executive fully
understands all of the terms and intent of this Agreement and executes it
voluntarily, without coercion or duress, and with full knowledge of its
significance and further acknowledges that he is receiving consideration in
addition to anything of value to which he is already entitled by virtue of his
employment with the Company or otherwise. Executive represents that Executive is
competent to understand this agreement and to agree to be bound by this
Agreement. Executive represents and acknowledges that Executive does not rely
and has not relied upon any representation or statement made by the Company or
by any of the Company’s agents, representatives or attorneys with regard to the
subject matter, basis, or effect of this Agreement or otherwise, other than as
specifically stated in this written Agreement.

This Agreement contains the complete understanding between Company and
Executive, and no other promises or agreements shall be binding unless signed by
the parties hereto. In signing this Agreement, the parties are not relying on
any fact, statement, or assumption not set forth in this Agreement. By signing
below, Company and Executive indicate that they have carefully read and
understood the terms of this Agreement, enter into this Agreement knowingly,
voluntarily, and of their own free will, understand its terms and significance
and intend to abide by its provisions without exception.

 

Party City Holdings Inc.     Gregg A. Melnick Party City Holdco Inc.       By:  
/s/ James Harrison     By:   /s/ Gregg A. Melnick Dated: August 31, 2018    
Dated: August 30, 2018

 

 

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