Exhibit 10.3

CONSENT AND FIFTH AMENDMENT TO LOAN AND SECURITY AGREEMENT

This CONSENT AND AMENDMENT, dated as of August 7, 2006,  (this “Amendment”) is
made in reference to that certain the Loan and Security Agreement, dated as of
August 23, 2000, by and between IPARTY RETAIL STORES CORP. (“iParty Retail” or a
“Borrower”), a Delaware corporation, and IPARTY CORP., a Delaware corporation (
“iParty Corp.” or a “Borrower”, and together with iParty Retail, the
“Borrowers”), and WELLS FARGO RETAIL FINANCE II, LLC, a Delaware limited
liability company (the “Lender”), as amended by that First Amendment to Loan and
Security Agreement dated as of May 23, 2002 by and between the Borrowers and the
Lender, as amended by that Second Amendment to Loan and Security Agreement dated
as of January 2, 2004 by and between the Borrowers and the Lender, and as
amended by that Third Amendment to Loan and Security Agreement dated as of April
27, 2005 by and between the Borrowers and the Lender, and as amended by that
Fourth Amendment to Loan and Security Agreement dated as of January 17, 2006 (as
amended from time to time, the “Loan Agreement”).  All capitalized terms not
otherwise defined herein shall have the meanings ascribed to them in the Loan
Agreement.

The Borrowers have entered into, or propose to enter into that Asset Purchase
Agreement dated as of August 7, 2006 (the “Asset Purchase Agreement”) by and
between the Borrowers and Party City Corporation (the “Seller”), pursuant to
which iParty Retail will purchase and acquire certain of the assets (and assume
certain of the liabilities associated with those assets) of the Seller’s
Massachusetts retail store located at 300 Andover Street, Peabody, MA 01960 (the
“Acquired Location”) for $2,450,000, as more fully specified in the Asset
Purchase Agreement, payable $1,850,000 in cash and the balance, $600,000, by a
Subordinated Promissory Note in such amount executed by iParty Retail (the
“Seller Note”).

In addition, iParty Corp. has entered into a Supply Agreement dated as of August
7, 2006 by and between Amscan, Inc. (“Amscan”) and iParty Corp. (the “Supply
Agreement”) pursuant to which iParty Corp. has agreed to purchase party goods
from Amscan and will receive certain favorable pricing terms and rebates and
which provides for $1,850,000 in current trade payables to be extended until
October 31, 2006 and for iParty Corp. to have the option to term out such trade
payables over a three-year term pursuant to a Subordinated Promissory Note in
such amount payable to Amscan in the form attached to the Supply Agreement (the
“Trade Note”).

The Asset Purchase Agreement  and Supply Agreement shall hereinafter be referred
to as the “Transaction Documents”.  The transactions contemplated by the
Transaction Documents shall hereinafter be referred to as the “Transactions”.

Borrowers have requested that the Lender consent to the entry into the
Transaction Documents and consummation of the Transactions on the terms
contained therein.

--------------------------------------------------------------------------------

 

In consideration of the foregoing and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, each of the
undersigned hereby agrees as follows:

1.   CONSENT.  LENDER HEREBY CONSENTS TO THE BORROWERS’ ENTRY INTO THE
TRANSACTION DOCUMENTS AND CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED THEREBY
ON THE TERMS AND CONDITIONS CONTAINED THEREIN, SUBJECT TO EXECUTION BY BORROWERS
OF THIS AMENDMENT AND SATISFACTION OF THE CONDITIONS CONTAINED HEREIN.  IN
CONNECTION THEREWITH, BORROWERS REPRESENT AND WARRANT THAT THEY HAVE PROVIDED
TRUE AND COMPLETE COPIES OF THE TRANSACTION DOCUMENTS TO THE LENDER.

2.   INSURANCE.  PRIOR TO OR SIMULTANEOUSLY WITH THE CONSUMMATION OF THE
TRANSACTIONS, BORROWERS SHALL PROVIDE LENDER WITH EVIDENCE THAT IT HAS INSURANCE
COVERING THE ACQUIRED LOCATION AND THEIR CONTENTS, INCLUDING WITHOUT LIMITATION,
THE INVENTORY CONTAINED THEREIN COVERING SUCH RISKS, IN SUCH AMOUNTS, CONTAINING
SUCH TERMS, IN SUCH FORM, FOR SUCH PERIODS, AND WRITTEN SUCH BY SUCH COMPANIES
AS ARE REASONABLY SATISFACTORY TO THE LENDER AND WHICH OTHERWISE COMPLY WITH
SECTION 5-7 OF THE LOAN AGREEMENT.

3.   NEW DEFINITIONS.   THE FOLLOWING SHALL BE ADDED AS NEW DEFINITIONS TO
EXHIBIT 3 OF THE LOAN AGREEMENT:

“Amendment Number Five” means that Fifth Amendment to the Loan Agreement.

“Effective Date of Amendment Number Five” has that meaning ascribed to it in
Amendment Number Five to the Loan Agreement.

“Seller Note” means that certain Subordinated Promissory Note dated as of August
7, 2006 in the face amount of $600,000 executed by iParty Retail in favor of
Party City Corporation.

“Subordination Agreement” means a subordination agreement, in form and substance
acceptable to the Lender in its sole discretion, pursuant to which a creditor of
the Borrowers or any guarantor of the Liabilities acknowledges and agrees that
the obligations of the Borrowers or any guarantor of the Liabilities to such
creditor are subordinate to the obligations of the Borrowers and any guarantor
of the Liabilities to the Lender.

“Supply Agreement” means into a Supply Agreement dated as of August 7, 2006 by
and between Amscan, Inc. and iParty Corp. (or any replacement thereof entered
into by the Borrowers with the prior written consent of the Lender, which
consent shall not be unreasonably withheld or delayed) pursuant to which iParty
Corp. has agreed to purchase party goods from Amscan, Inc. and will receive
certain favorable pricing terms and rebates and which provides for approximately
$1,150,000, in current trade payables to be extended until October 31, 2006 and
for iParty Corp. to have the option to term out such unpaid extended trade
payables, or such greater amount of trade payables, as may be agreed to by

2

--------------------------------------------------------------------------------

 

the parties, with the consent of the Lender, which consent shall not be
unreasonably withheld or delayed (the Extended Payables”) over a three-year term
pursuant to the terms of the Trade Note.

“Trade Note” means that certain Subordinated Promissory Note in the face amount 
of the Extended Trade Payables to be executed by iParty Retail on or before
October 31, 2006 and made payable to Amscan, Inc., in form and substance
attached to the Supply Agreement as Exhibit “1”.

4.   INDEBTEDNESS.   SECTION 5-6 OF THE LOAN AGREEMENT SHALL BE AMENDED TO ADD
THE FOLLOWING SUBPARAGRAPHS:  “(D)  UNSECURED INDEBTEDNESS EVIDENCED BY THE
SELLER NOTE, WHICH SHALL AT ALL TIMES BE SUBJECT TO A SUBORDINATION AGREEMENT.
(F) UNSECURED INDEBTEDNESS EVIDENCED BY THE TRADE NOTE, WHICH SHALL AT ALL TIMES
BE SUBJECT TO A SUBORDINATION AGREEMENT;(G) UNSECURED INDEBTEDNESS EVIDENCED BY
ANY GUARANTY BY ANY BORROWER OF ANY INDEBTEDNESS OR OTHER OBLIGATIONS OF ANY
OTHER BORROWER THAT IS PERMITTED UNDER THIS AGREEMENT AND (H) OTHER UNSECURED
INDEBTEDNESS WHICH IS CONSENTED TO BY THE LENDER IN ITS SOLE DISCRETION
(“ADDITIONAL SUBORDINATED DEBT”)-AND WHICH IS AT ALL TIMES SUBJECT TO A
SUBORDINATION AGREEMENT.”

5.   COVENANTS.   NEW SECTIONS 5-27 AND 5-28 SHALL BE ADDED TO THE LOAN
AGREEMENT, WHICH SHALL READ AS FOLLOWS:  “5-27.  THE BORROWERS SHALL NOT FAIL TO
EXERCISE THEIR OPTION TO TERM OUT AT LEAST APPROXIMATELY $1,150,000 IN CURRENT
TRADE PAYABLES OVER A THREE-YEAR TERM PURSUANT TO THE TERMS OF THE TRADE NOTE. 
5-28.  NO PARTY TO THE SUPPLY AGREEMENT IS IN DEFAULT OR VIOLATION OF THE SUPPLY
AGREEMENT, AND THE SUPPLY AGREEMENT IS, AND SHALL AT ALL TIMES REMAIN, IN FULL
FORCE AND EFFECT

6.   EXHIBITS.   THE FOLLOWING EXHIBITS TO THE LOAN AGREEMENT ARE HEREBY
STRICKEN AND REPLACED BY THE CORRESPONDINGLY IDENTIFIED EXHIBITS ATTACHED
HERETO:  5-4 [LOCATIONS]; 5-9 [LEASES].

7.   EVENTS OF DEFAULT.   A NEW SECTION 10-19 SHALL BE ADDED TO THE LOAN
AGREEMENT WHICH SHALL READ AS FOLLOWS:  “10-19. SUBORDINATED INDEBTEDNESS.  (A) 
THE OCCURRENCE OF ANY DEFAULT OR EVENT OF DEFAULT IN RESPECT OF ANY THE SELLER
NOTE, THE TERM NOTE (FOLLOWING EXECUTION AND DELIVERY THEREOF BY THE OBLIGOR
THEREUNDER TO AMSCAN, INC.) OR ANY ADDITIONAL SUBORDINATED DEBT, OR (B)  THE
OCCURRENCE OF ANY BREACH OF ANY SUBORDINATION AGREEMENT BY ANY PARTY THERETO.

8.   ACKNOWLEDGEMENT OF LIABILITIES BY BORROWER.   THE BORROWERS CONFIRM AND
AGREE THAT (A) ALL REPRESENTATIONS AND WARRANTIES CONTAINED IN THE LOAN
AGREEMENT AND IN THE OTHER LOAN DOCUMENTS ARE ON THE DATE HEREOF TRUE AND
CORRECT IN ALL MATERIAL RESPECTS, AND (B) IT IS UNCONDITIONALLY LIABLE FOR THE
PUNCTUAL AND FULL PAYMENT OF ALL LIABILITIES, INCLUDING, WITHOUT LIMITATION, ALL
REASONABLE CHARGES, FEES, EXPENSES AND COSTS (INCLUDING ATTORNEYS’ FEES AND
EXPENSES) UNDER THE LOAN DOCUMENTS, AND THAT THE BORROWERS HAVE NO DEFENSES,
COUNTERCLAIMS OR SETOFFS WITH RESPECT TO FULL, COMPLETE AND TIMELY PAYMENT OF
ALL LIABILITIES.

9.   RATIFICATION OF FINANCING.   THE BORROWERS CONFIRM THAT THE LOAN AGREEMENT
AND THE LOAN DOCUMENTS REMAIN IN FULL FORCE AND EFFECT WITHOUT AMENDMENT OR
MODIFICATION OF ANY KIND, EXCEPT FOR THE AMENDMENTS EXPLICITLY SET FORTH
HEREIN.  THIS AMENDMENT SHALL BE DEEMED TO BE ONE OF THE LOAN DOCUMENTS AND,
TOGETHER WITH THE OTHER LOAN DOCUMENTS, CONSTITUTE THE ENTIRE

3

--------------------------------------------------------------------------------

 

AGREEMENT BETWEEN THE PARTIES WITH RESPECT TO THE SUBJECT MATTER HEREOF AND
SUPERSEDES ALL PRIOR DEALINGS, CORRESPONDENCE, CONVERSATIONS OR COMMUNICATIONS
BETWEEN THE PARTIES WITH RESPECT TO THE SUBJECT MATTER HEREOF.  THIS AMENDMENT
SHALL BE CONSIDERED A LOAN DOCUMENT AND, WITHOUT IN ANY WAY LIMITING THE
APPLICATION OF OTHER PROVISIONS OF THE LOAN AGREEMENT, THIS AMENDMENT SHALL
GOVERNED BY THE PROVISIONS OF ARTICLES 14-2, 14-3, 14-4, 14-7, 14-8, 14-9,
14-10, 14-14 OF THE LOAN AGREEMENT.  NO FURTHER AMENDMENT TO THE LOAN AGREEMENT
SHALL BE MADE EXCEPT BY A WRITING SIGNED BY ALL PARTIES TO THE LOAN AGREEMENT.

10.   REPRESENTATIONS, WARRANTIES AND COVENANTS.   THE BORROWERS REPRESENT,
WARRANT AND COVENANT WITH AND TO THE LENDER AS FOLLOWS, WHICH REPRESENTATIONS,
WARRANTIES AND COVENANTS ARE CONTINUING AND SHALL SURVIVE THE EXECUTION AND
DELIVERY HEREOF, THE TRUTH AND ACCURACY OF, OR COMPLIANCE WITH EACH, TOGETHER
WITH THE REPRESENTATIONS, WARRANTIES AND COVENANTS IN THE OTHER LOAN AGREEMENTS,
BEGIN CONTINUING CONDITION OF THE MAKING OR PROVIDING ANY LOANS OR L/CS BY THE
LENDER TO BORROWERS:

(A)   THIS AMENDMENT HAS BEEN DULY AUTHORIZED, EXECUTED AND DELIVERED BY ALL
NECESSARY ACTION OF THE BORROWERS, AND IS IN FULL FORCE AND EFFECT, AND THE
AGREEMENTS AND OBLIGATIONS OF THE BORROWERS CONTAINED HERE CONSTITUTE LEGAL,
VALID AND BINDING OBLIGATIONS OF THE BORROWER ENFORCEABLE AGAINST THE BORROWER
IN ACCORDANCE WITH ITS TERMS.

(B)   AFTER GIVING EFFECT TO THIS AMENDMENT, THERE IS NO EVENT OF DEFAULT UNDER
THE LOAN AGREEMENT OR ANY OF THE LOAN DOCUMENTS.

11.   CONDITIONS PRECEDENT.   THIS AMENDMENT SHALL BECOME EFFECTIVE (THE
“EFFECTIVE DATE OF THE AMENDMENT NUMBER FOUR”) UPON SATISFACTION OF EACH OF THE
FOLLOWING CONDITIONS PRECEDENT OR WAIVER OF SUCH CONDITIONS BY THE LENDER:

(A)   RECEIPT BY LENDER OF THIS AMENDMENT DULY EXECUTED BY THE BORROWER, THE
GUARANTOR AND LENDER.

(B)   ALL REPRESENTATIONS AND WARRANTIES CONTAINED HEREIN SHALL BE TRUE AND
CORRECT IN ALL MATERIAL RESPECTS.

(C)   AFTER GIVING EFFECT TO THIS AMENDMENT, NO DEFAULT OR EVENT OF DEFAULT
SHALL HAVE OCCURRED AND BE CONTINUING.

(d)   Receipt by Lender of true and correct copies of all Transaction Documents.

(e)   Receipt by Lender of evidence, satisfactory to the Lender, that the
Transactions have been consummated in accordance with the Transaction Documents.

(f)   Receipt by Lender of such other documents as the Lender may reasonably
request.

12.   MISCELLANEOUS.   SECTION AND PARAGRAPH HEADINGS HEREIN ARE INCLUDED FOR
CONVENIENCE OF REFERENCE ONLY AND SHALL NOT CONSTITUTE A PART OF THIS AMENDMENT
FOR ANY OTHER PURPOSE.  THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS.

4

--------------------------------------------------------------------------------

 

13.   COUNTERPARTS.   THIS AMENDMENT MAY BE EXECUTED IN ANY NUMBER OF
COUNTERPARTS, EACH OF WHICH SHALL BE DEEMED TO BE AN ORIGINAL HEREOF AND
SUBMISSIBLE INTO EVIDENCE AND ALL OF WHICH TOGETHER SHALL BE DEEMED TO BE A
SINGLE INSTRUMENT.  IN MAKING PROOF OF THIS AMENDMENT, IT SHALL NOT BE NECESSARY
TO PRODUCE OR ACCOUNT FOR MORE THAN ONE COUNTERPART THEREOF SIGNED BY EACH OF
THE PARTIES HERETO.  DELIVERY OF AN EXECUTED COUNTERPART OF THIS AMENDMENT BY
TELEFACSIMILE OR OTHER ELECTRONIC METHOD OF TRANSMISSION SHALL HAVE THE SAME
FORCE AND EFFECT AS DELIVERY OF AN ORIGINAL EXECUTED COUNTERPART OF THIS
AMENDMENT.

[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

5

--------------------------------------------------------------------------------

IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly
executed and delivered by their authorized officers as of the day and year first
above written.

WELLS FARGO RETAIL FINANCE II, LLC

 

(the “Lender”)

 

 

 

 

 

By:

/s/ LYNN S. WHITMORE

 

Name:

Lynn S. Whitmore

 

Title:

Senior Vice President

BORROWERS:

 

 

 

 

 

IPARTY RETAIL STORES CORP.

 

 

 

 

 

By:

/s/ SAL V. PERISANO

 

Name: Sal V. Perisano

 

 

Title: CEO

 

 

 

 

 

IPARTY CORP.

 

 

 

 

 

By:

/s/ SAL V. PERISANO

 

Name: Sal V. Perisano

 

 

Title: CEO

 

 

 

Signature Page to Amendment No. Five

6

--------------------------------------------------------------------------------