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



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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



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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.



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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.


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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



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