Exhibit 10.4

CONSULTING AGREEMENT

     This Consulting Agreement (this “Agreement”) dated as of April 12, 2005,
and effective as of March 21, 2005 (the “Effective Date”) is entered into by and
between Party City Corporation, a Delaware corporation (the “Company”), and
Dillon Associates Retail Consultants (the “Consultant”).

RECITALS

     WHEREAS, the Company desires to engage the Consultant to provide services
to the Company pursuant to this Agreement and the Consultant desires to provide
such services to the Company pursuant to this Agreement;

     NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein, the Company and the Consultant agree as follows:

1. Services and Duties.

     (a) The Company agrees to engage the Consultant to provide strategic
business, management and financial advice to the Company as directed by and
reporting to the Board of Directors of the Company (the “Board”).

     (b) The Consultant agrees to devote as much time as is reasonably necessary
to the performance of services hereunder; including an appropriate amount of
time at the Company’s offices in Rockaway, NJ (to include by example but not
limitation reasonable travel between such location and the Consultant’s primary
residence in Wisconsin) and the balance of which may be performed from the
Consultants home in Wisconsin or at a location beneficial to the Company and
selected by the Consultant.

     2. Term. The term of this Agreement (the “Initial Term”) shall be for the
period beginning on the Effective Date and ending on June 30, 2005 provided that
the term will automatically be extended for successive ninety (90) day periods
(each, an “Extension Term”) unless either party shall provide written notice to
the other not later than 30 days prior to the expiration of the Initial Term or
Extension Term, if any, then in effect. The Initial Term and any Extension Term
shall be collectively referred to as the “Term” hereunder.

     3. Fees/Expenses. During the Term, the Company shall pay to the Consultant
a consulting fee of $700 per hour (the “Hourly Fee”). The Hourly Fee shall
include by example reasonable travel time incurred by Consultant pursuant to
this Agreement. The Hourly Fee shall be payable on the first business day of
each month (beginning April 2005) provided that the Consultant properly accounts
for his hours worked as a consultant hereunder. In addition, the Consultant
shall be entitled to prompt reimbursement by the Company for all reasonable
travel, entertainment and other business expenses incurred by him in connection
with his services hereunder, in accordance with the policies and procedures
established by the Company.

     4. Health Coverage. From the effective date of this Agreement the Company
shall provide medical and dental benefit plan coverage to the Consultant to the
same degree available to senior executives of the Company through the date of
the Consultant’s death (and to the Consultant’s spouse to whom he is married as
of the Effective Date from the date of such termination until her

 

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death). If and to the extent that the Company cannot provide such coverage or it
is not payable or provided under the terms of the Company’s plans because the
Consultant is not an active employee or for any other reason, the Company itself
shall, to the extent necessary, provide for payment of such benefit to the
Consultant or of an amount sufficient for him to purchase such benefits. In
every event, and notwithstanding anything to the contrary contained above,
Consultant understands and agrees that, upon the Consultant or spouse being
eligible for Medicare, the Company’s medical benefit plan coverage shall be
secondary, with Medicare being primary coverage. The provision of this paragraph
shall survive the termination of this Agreement.

     5. Other Consulting Arrangements. Prior to the execution of this Agreement,
the Company and Consultant were parties to an oral agreement (the “Oral
Agreement”) pursuant to which Consultant was paid at the rate of $10,000 per
month for consulting services rendered to the Company. As of the Effective Date
of this Agreement, the Company and Consultant agree as follows: (1) During any
period in which Consultant performs services pursuant to this Agreement, the
prior Oral Agreement shall be suspended and Consultant will receive no fees
(except for fees incurred for services rendered prior to the Effective Date of
this Agreement) pursuant to the Oral Agreement; and (2) upon termination of this
Agreement, the Oral Agreement shall be reinstated, provided, however, that
either party may terminate the Oral Agreement at any time upon notice to the
other party.

     6. Company Property. Upon the later of the termination of this Agreement
for any reason or the Consultant’s termination of services as a Director, the
Consultant will promptly deliver to the Company all Company property in his
possession and all documents including drawings, manuals, letters, notes,
notebooks, reports, programs, plans, proposals, financial documents, or any
other documents concerning the Company’s customers, business plans, marketing
strategies, products or processes which contain proprietary information or trade
secrets provided or obtained by Consultant pursuant to this Agreement.

     7. Confidential Information. Unless specifically authorized in writing by
the Company to do so, except to the extent required by an order of a court
having competent jurisdiction or under subpoena from an appropriate government
agency, the Consultant shall not disclose any information disclosed or made
available to the Consultant or known by the Consultant as a direct or indirect
consequent of or through his services as Director or Consultant to the Company,
related to the Company’s referral sources, business practices, trade secrets,
operating methods, techniques, products, processes, services or other operations
(individually or collectively “Operations”), including but not limited to,
information relating to research, development, inventions, accounting,
engineering or marketing of such Operations and including any such information
of any third party which the Company is under an obligation to keep confidential
(individually or collectively, “Confidential Information”) to any third person
unless such Confidential Information has been previously disclosed to the public
by the Company or is in the public domain (other than by reason of the
Consultant’s breach of this Section 7 or breach of any duty as a Director).
Notwithstanding the foregoing, if the Consultant is required by an order of a
court having competent jurisdiction or under subpoena from an appropriate
government agency to disclose Confidential Information, the Consultant shall
provide the Company with prompt written notice of such requirement and shall
assist the Company to seek a protective order or other appropriate remedy
protecting its interests. In any event, the Consultant will furnish only the
part of the Confidential Information that is required to be disclosed by the
court order or subpoena and will use reasonable efforts to obtain reliable
assurances that confidential treatment will be accorded to any Confidential
Information so furnished.

 

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8. Independent Contractor Status.

     (a) It is hereby understood and agreed by the Company and the Consultant
that the Consultant’s rendering of the consulting services pursuant to this
Agreement is as an independent contractor and not as a stockholder, officer,
employee, director or partner of the Company, and that the Consultant’s
retention as a consultant pursuant to this Agreement shall not entitle the
Consultant to any benefits as an employee of the Company under any benefit plan
maintained by the Company or any of its subsidiaries or affiliates for its or
their respective employees except as expressly provided herein. It is further
hereby understood and agreed by the Company and the Consultant that, as an
independent contractor, the Consultant shall be responsible for complying with
all applicable laws, rules and regulations concerning taxes, social security
contributions, pension plans contributions, unemployment contributions, and the
like.

     (b) It is hereby acknowledged by the Company and the Consultant that as of
the Effective Date the Consultant is a member of the Board (a “Director”).
Nothing in this Agreement shall affect the Consultant’s duties, obligations or
authority as a Director or the Company’s obligations to the Consultant in
respect of his services as a Director. Except as expressly provided herein, the
Consultant’s continuation or termination of services as a Director shall have no
effect on this Agreement or the obligations of either party hereto. In addition,
Consultant agrees that time devoted in the performance of services for Board
duties shall not be deemed time devoted for Consultant’s services under the
Agreement or applied in anyway against the services and duties requirements of
Section 1.(b) herein.

     9. Authority. The Consultant hereby acknowledges and agrees that in his
capacity as Consultant he shall have no right or authority to enter into any
agreements or other arrangements in the name or on behalf of the Company, or to
assume or create any obligation or liability of any kind whatsoever, express or
implied, in the name or on behalf of the Company, except as expressly authorized
by the Board.

     10. Amendments. This Agreement may not be amended or changed except by the
written agreement of the Company and the Consultant.

     11. Not an Employment Contract. This Agreement is not a contract of
employment between the Consultant and the Company, and the Consultant and the
Company hereby agree and acknowledge that this Agreement does not impose any
obligation on the Company to offer employment to the Consultant at any time.

     12. Governing Law. This Agreement, and any dispute arising under or
relating to any provision of this Agreement shall be governed by and construed
in accordance with the laws of the State of New Jersey.

     13. Severability. Whenever possible, each provision of this Agreement shall
be interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability shall not affect
any other provision, but this Agreement shall be reformed, construed and
enforced as if such invalid, illegal or unenforceable provision had never been
contained herein.

 

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     14. Entire Agreement. This Agreement constitutes the entire agreement
between the parties hereto with respect to the Consultant’s services as a
consultant to the Company. No other agreement relating to the terms of the
Consultant’s engagement to perform consulting services for the Company, oral or
otherwise, shall be binding between the parties unless it is in writing and
signed by the party against whom enforcement is sought. There are no promises,
representations, inducements or statements between the parties relating to the
terms of the Consultant’s engagement as a consultant to the Company other than
those that are expressly contained herein. The Consultant acknowledges that he
is entering into this Agreement of his own free will and accord, and with no
duress, that he has read this Agreement and that he understands it and its legal
consequences.

     15. Successors and Assigns of the Company. This Agreement shall be binding
upon inure to the benefit of the Company and its successors and assigns (whether
by merger, consolidation, sale of all or substantially all assets or otherwise).
The Consultant hereby acknowledges and agrees that the consulting services to be
performed by him pursuant to this Agreement are personal in nature and that he
shall not assign any of his rights or delegate any of his duties or obligations
under this Agreement to any other person or entity.

     16. Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed shall be deemed to be an original,
and such counterparts together shall constitute and be one and the same
instrument.

     17. Arbitration. In the event that any dispute or controversy should arise
under or in connection with this Agreement the parties hereto shall first
attempt to resolved such dispute through mediation, the costs of which shall be
shared equally by the parties. In the event that such dispute is not resolved in
mediation, the parties agree that it shall be resolved by binding arbitration.
The arbitration shall be held in Morris County, New Jersey and except to the
extent inconsistent with this Agreement, shall be conducted in accordance with
the Labor Arbitration Rules of the American Arbitration Association then in
effect at the time of the arbitration, and otherwise in accordance with
principles which would be applied by a court of law or equity. The arbitrator
shall be acceptable to both the Company and the Consultant. If the parties
cannot agree on an acceptable arbitrator, the dispute shall be heard by one
arbitrator, appointed by the American Arbitration Association. Judgments on any
award may be entered in and enforced by any court appropriate jurisdiction. Each
party shall pay his or its own costs for the arbitration or litigation, as the
case may be, with the cost of the arbitrator, if applicable, to be equally
divided between the parties.

[signature page follows]

 

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     IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date and year first above written.

 
Party City Corporation

By: /s/ L. R. Jalenak, Jr.
It’s:  

 
Consultant: Dillon Associates Retail Consultants

By: /s/ Ralph D. Dillon
Ralph D. Dillon