Exhibit 10.16

EMPLOYEE

STOCK OPTION AGREEMENT
UNDER THE
PARTY CITY CORPORATION
1999 STOCK INCENTIVE PLAN

     THIS AGREEMENT, made as of the ___day of ______, by and between Party City
Corporation, a Delaware corporation (the “Company”), and ______(the “Optionee”).

     WHEREAS, the Optionee serves as an employee of the Company, and the Company
desires to afford the Optionee the opportunity to acquire, or enlarge,
Optionee’s ownership of the Company’s Common Stock, par value $.01 per share
(the “Common Stock”), so that Optionee may have a direct proprietary interest in
the Company’s success;

     WHEREAS, all capitalized terms not otherwise defined herein shall have the
same meaning as set forth in Company’s 1999 Stock Incentive Plan (amended and
restated as of October 17, 2003) (the “Plan”);

     NOW, THEREFORE, in consideration of the covenants and agreements herein
contained, the parties hereto hereby agree as follows:

W I T N E S S E T H:

     1. Grant of Option. Subject to the terms and conditions set forth herein
and in the Plan, the Company hereby grants to the Optionee, during the period
commencing on the date of this Agreement and ending on the date that is ten
years from the date hereof (the “Option Period”), the right and option (the
right to purchase any one share of Common Stock hereunder being an (“Option”) to
purchase from the Company, at a purchase price equal to $___  per share (the
“Option Price”) (the Fair Market Value of one share of Common Stock on the date
hereof), an aggregate of ___ shares of Common Stock. The Options are not
intended to be “incentive stock options”, as defined in Section 422 of the
Internal Revenue Code of 1986, as amended.

     2. Limitations on Exercise of Option.

     (a) Subject to the terms and conditions set forth herein, the Options shall
vest and become exercisable in accordance with the following schedule:

  (i)   one-___of the Options, ___shares, shall vest and become exercisable on
the ___anniversary of the date hereof;     (ii)   an additional one-___of the
Options, ___shares, shall vest and become exercisable on the ___anniversary of
the date hereof;

 

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  (iii)   an additional one-___of the Options, ___shares, shall vest and become
exercisable on the ___anniversary of the date hereof, and,     (iv)   an
additional one-___of the Options, ___shares, shall vest and become exercisable
on the ___anniversary of the date hereof.

     (b) Except as otherwise stated in this agreement, the Options shall expire
on the tenth anniversary of the date hereof.

     3. Termination of Status as an Employee.

     (a) If prior to the end of the Option Period, the Optionee shall terminate
status as an employee for any reason, all outstanding Options that have not
vested and become exercisable as of the date of such termination shall
immediately expire and all outstanding Options vested and exercisable at the
time of such termination shall remain exercisable by the Optionee until their
expiration as set forth below.

     (b) In the event the Optionee’s status as an employee terminates on account
of a Normal Termination, all outstanding vested and exercisable Options as of
the date of such termination may be exercised at any time within the three
(3) months immediately following the date of such termination.

     (c) In the event of the death of the Optionee during the Optionee’s term as
an employee or within three (3) months immediately after the Optionee’s
termination of service as an employee on account of a Normal Termination, all
outstanding vested and exercisable Options as of the date of the Optionee’s
death may be exercised, at any time within the twelve (12) months immediately
following the date of death, by the Optionee’s estate or by any person who
acquired the right to exercise the Option by bequest or inheritance; or

     (d) In the event the Optionee’s status as an employee terminates for any
reason other than death or on account of a Normal Termination, all outstanding
vested and exercisable Options as of the date of such termination shall
immediately expire.

     (e) Notwithstanding anything herein to the contrary, no Option may be
exercised beyond the date that is the tenth anniversary of the date hereof.

     (f) After the expiration of any exercise period described in this paragraph
3, all unexercised Options shall expire together with all of the Optionee’s
rights hereunder.

     (g) For purposes of this Agreement, “Normal Termination” means termination
of service as an employee of the Company:

  (i)   Upon retirement pursuant to the retirement plan of the Company;    
(ii)   On account of Disability;     (iii)   With the written approval of the
Committee; or

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  (iv)   By the Company or a Subsidiary without Cause.

     4. Method of Exercising Option. (a) Options which have become exercisable
may be exercised by delivery of a written notice of exercise to the Committee
accompanied by payment of the Option Price. The Option Price may be payable
(i) in cash, (ii) by bank check acceptable to the Committee, and/or (iii) by
delivery of Mature Shares (valued at the Fair Market Value at the time the
Option is exercised), having in the aggregate a value equal to the aggregate
Option Price, or any combination of such methods of payment. In addition, at the
discretion of the Committee, the Option Price may be payable by delivering to
the Committee a copy of irrevocable instructions to a stockbroker to deliver
promptly to the Company an amount of sale or loan proceeds sufficient to pay the
aggregate Option Price. For purposes of this paragraph, the term “Mature Shares”
shall mean shares of Common Stock for which the Optionee has good title, free
and clear of all liens and encumbrances, and which the Optionee either (i) has
held for at least six months or (ii) has purchased on the open market.

     (b) At the time of exercise, (i) the Company shall have the right to
withhold from the number of shares of Stock to be issued upon exercise or
(ii) at the discretion of the Committee, the Optionee shall be obligated to pay
to the Company such amount, as the Company deems necessary to satisfy its
obligation, if any, to withhold Federal, state and local income or other taxes
incurred by reason of the exercise or the transfer of shares thereupon.

     5. Issuance of Shares. As promptly as practical after receipt of such
written notification and full payment of such aggregate Option Price and any
required income tax withholding amount, the Company shall issue or transfer to
the Optionee the number of shares with respect to which Options have been so
exercised, and shall deliver to the Optionee a certificate or certificates
therefor, registered in the Optionee’s name.

     6. Non-Transferability. Except as otherwise determined by the Committee in
its sole discretion, the Options are not transferable by the Optionee otherwise
than by will or the laws of descent and distribution and are exercisable during
the Optionee’s lifetime only by Optionee. Unless such assignment or transfer is
consented to by the Committee, no assignment or transfer of the Options, or of
the rights represented thereby, whether voluntary or involuntary, by operation
of law or otherwise (except by will or the laws of descent and distribution),
shall vest in the assignee or transferee any interest or right herein
whatsoever, but immediately upon such assignment or transfer the Options shall
terminate and become of no further effect.

     7. Rights as Stockholder. The Optionee or a transferee of the Options shall
have no rights as a stockholder with respect to any share covered by the Options
until Optionee shall have become the holder of record of such share, and no
adjustment shall be made for dividends or distributions or other rights in
respect of such share for which the record date is prior to the date upon which
Optionee shall become the holder or record thereof.

     8. Changes in Capital Structure.

     (a) The Options granted under this Agreement shall be subject to adjustment
or substitution, as determined by the Committee in its sole discretion, as to
the number, price or kind of a share of Common Stock or other consideration
subject to such Options or as otherwise

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determined by the Committee to be equitable (i) in the event of changes in the
outstanding Common Stock or in the capital structure of the Company by reason of
stock dividends, stock splits, reverse stock splits, recapitalizations,
reorganizations, mergers, consolidations, combinations, exchanges, or other
relevant changes in capitalization occurring after the date hereof, (ii) in the
event of any change in applicable laws or any change in circumstances which
results in or would result in any substantial dilution or enlargement of the
rights granted to, or available for, participants in the Plan or (iii) upon the
occurrence of any other event which otherwise warrants equitable adjustment
because it interferes with the intended operation of the Plan.

     (b) Notwithstanding the above, in the event of (i) a merger or
consolidation such that after such merger or consolidation the Company is not
the surviving entity or the ultimate parent of the surviving entity, (ii) the
sale of all or substantially all of the assets of the Company, or (iii) the
reorganization or liquidation of the Company, the Committee may, in its sole
discretion and upon at least ten (10) days advance notice to the Optionee,
cancel any outstanding Options and pay to the Optionee, in cash or Stock, the
value of such Options based upon the price per share of Stock received or to be
received by other shareholders of the Company in the event.

     9. Compliance with Law. Notwithstanding any of the provisions hereof, the
Optionee hereby agrees that Optionee will not exercise the Options, and that the
Company will not be obligated to issue or transfer any shares to the Optionee
hereunder, if the exercise hereof or the issuance or transfer of such shares
shall constitute a violation by the Optionee or the Company of any provisions of
any law or regulation of any governmental authority. Any determination in this
connection by the Committee shall be final, binding and conclusive. The Company
shall in no event be obliged to register any securities pursuant to the
Securities Act of 1933 (as now in effect or as hereafter amended) or to take any
other affirmative action in order to cause the exercise of the Options or the
issuance or transfer of shares pursuant thereto to comply with any law or
regulation of any governmental authority.

     10. Notice. Every notice or other communication relating to this Agreement
shall be in writing, and shall be mailed to or delivered to the party for whom
it is intended at such address as may from time to time be designated by it in a
notice mailed or delivered to the other party as herein provided, provided that,
unless and until some other address be so designated, all notices or
communications by the Optionee to the Company shall be mailed or delivered to
the Company at its principal executive office, and all notices or communications
by the Company to the Optionee may be given to the Optionee personally or may be
mailed to Optionee at the Optionee’s last known address, as reflected in the
Company’s records.

     11. Binding Effect. Subject to Section 6 hereof, this Agreement shall be
binding upon the heirs, executors, administrators and successors of the parties
hereto.

     12. Governing Law. This Agreement shall be construed and interpreted in
accordance with the laws of the State of Delaware, without regard to the
principles of conflicts of law thereof.

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     13. Plan. The terms and provisions of the Plan are incorporated herein by
reference. Capitalized terms used herein which are not defined herein shall have
the meanings attributable thereto in the Plan. In the event of a conflict or
inconsistency between discretionary terms and provisions of the Plan and the
express provisions of this Agreement, this Agreement shall govern and control.
In all other instances of conflicts or inconsistencies or omissions, the terms
and provisions of the Plan shall govern and control.

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

              PARTY CITY CORPORATION
 
       
 
       

  By:    

     
 
 
       
 
           
 
    [Name of Employee]

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