**Exhibit10.3**

 

**AMENDEDAND RESTATED EMPLOYMENT AGREEMENT**

 

**THISAMENDED AND RESTATED EMPLOYMENT AGREEMENT** (this “Agreement”)is being made as of this 14th day of May, 2004 between iPARTY CORP., a Delawarecorporation (the “Company”) and DORICE DIONNE, an individual residing at288 Huron Avenue, Cambridge, Massachusetts (the  “Executive”).

 

**WI T N E S S E T H:**

 

**WHEREAS**,the Company and the Executive previously entered into an employment agreementdated as of March 26, 2002 (the “Prior Employment Agreement”); and

 

**WHEREAS**,the Company and the Executive desire to amend and restate the Prior EmploymentAgreement in its entirety as set forth herein.

 

**NOW,THEREFORE**, in consideration of the mutual premises andagreements contained herein, and intending to be legally bound hereby, theparties hereto agree as follows:

 

# 1.                                       **Term of Employment**.

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## (a)                                  Except for earliertermination as provided in Section 11 hereof, the Executive’semployment under this Agreement shall be for a three (3) year term (the “EmploymentTerm”) commencing as of April 1, 2004.

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## (b)                                 On or aboutSeptember 30, 2006 the Company shall provide the Executive with writtennotice regarding whether or not the Company intends to seek to extend theEmployment Term.  A notice which statesthat the Company intends to seek to the extend the Employment Term is referredto herein as a “Renewal Notice” and a notice which states that theCompany does not intend to seek to extend the Employment Term is referred toherein as a “Non-renewal Notice.” If the Company delivers a Non-renewal Notice, the period of time fromthe date of the delivery of the Non-renewal Notice to the expiration of theEmployment Term is referred to herein as the “Transition Period.”  If the Company delivers a Renewal Notice tothe Executive (i) the Employment Term shall automatically be extended for aperiod of six (6) months and (ii) the Company and the Executive shall seek tonegotiate the terms of a new, mutually agreeable employment agreement.  Such six (6) month extension period, if (andonly if) applicable, is referred to herein as the “Extension Period,”and during the Extension Period, if (and only if) applicable, all referencesherein to the Employment Term shall include the Extension Period.

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# 2.                                       **Duties, Responsibilities andPositions**.

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## (a)                                  During the Employment Term, theExecutive shall serve as Senior Vice President—Merchandising of the Company andperform all duties and accept all responsibilities incidental to such position,as may be assigned to her from time to time. The Executive shall be subject at all times to the general supervision,orders, advice and direction of the Chief Executive Officer of theCompany.  The Executive shall alsocooperate fully with the Board of Directors of the Company (the “Board”)and other executive officers of the Company.

 

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## (b)                                 Upon termination of theExecutive’s employment for any reason, the Executive shall immediately resignfrom any other office or offices within the Company and any subsidiary of theCompany that the Executive may then hold.

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## (c)                                  During the Employment Term, theExecutive shall devote substantially all her full working time, energy andefforts to the business of the Company; provided, however, thatthe Executive shall be allowed, to the extent that such activities do notmaterially interfere with the performance of her duties and responsibilitieshereunder, to manage her personal and family financial and legal affairs and toserve on civic, not-for-profit and charitable industry boards and advisorycommittees.  The Executive shall onlyserve on for-profit corporate boards of directors and advisory committees ifapproved in advance, in writing, by the Chief Executive Officer or the Board.

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## (d)                                 The Executive represents to theCompany that  (i) the Executive has the legal capacity to execute and perform thisAgreement and (ii) that she is not currently subject to or bound by anyemployment agreement, non-competition covenant, non-disclosure agreement orother agreement, covenant, understanding or restriction of any naturewhatsoever which would prohibit the Executive from executing this Agreement andperforming fully her duties and responsibilities hereunder, or which would inany manner, directly or indirectly, materially limit the duties andresponsibilities which it is now reasonably foreseeable may now or in thefuture be assigned to the Executive by the Chief Executive Officer or theBoard.

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## (e)                                  The Executive shall at all timescomply in all material respects with policies and procedures adopted by theCompany applicable to executives of the Company, including without limitation,procedures and policies regarding conflicts of interest.

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# 3.                                       **Compensation**.  For all services rendered by the Executive in any capacity duringthe Employment Term, including without limitation, services as an officer,director, or member of any committee of the Company, or any subsidiary,affiliate or division thereof, the Executive shall be compensated as follows(subject, in each case, to the provisions of Section 11 below):

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## (a)                                  Base Salary.  During the Employment Term, the Company shall pay to theExecutive a base salary on an annualized basis (the “Base Salary”) asfollows: (i) for the period from April 1, 2004 through March 31,2005, $165,000;  (ii) for the periodfrom April 1, 2005 through March 31, 2006, $172,500; and (iii) forthe period from April 1, 2006 through March 31, 2007, $180,000.  The term “Base Salary” as used in thisAgreement shall refer to Base Salary in effect for the applicable period set forthin the immediately preceding sentence. The Base Salary shall be payable in accordance with the customarypayroll practices of the Company. If, during the Employment Term, the Companyconsummates any material acquisitions or similar transactions which increasethe size and scope of the Company’s business, the Compensation Committee of theBoard shall convene as promptly as reasonably practicable for the purpose ofdiscussing whether or not it is appropriate to increase the Executive’s BaseSalary; provided, however, that no such increase shall be required.

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## (b)                                 Bonus.  In addition to the Base Salary provided herein, theExecutive shall be entitled to participate in, and may receive performancebonus payments under,

 

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such annual bonus plan orplans as the Compensation Committee of the Board may establish from time totime for senior executive officers of the Company.  Any such performance bonus or bonuses shall be determined in thesole discretion of the Compensation Committee of the Board. Without limitingthe generality of the foregoing, such performance bonus or bonuses, if paid,may be paid in stock, stock options, restricted stock, cash, or any combinationthereof.

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## (c)                                  Benefits.  During the Employment Term, the Executive shall be entitled toparticipate in all employee benefit and equity plans and fringe benefits andprerequisites generally provided to senior executives of the Company, in eachcase subject to the eligibility requirements and other terms and provisions ofsuch plans and programs.  The Companymay amend, modify or rescind any employee benefit plan or program and changeemployee contribution amounts or benefit costs without notice in itsdiscretion.

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# 4.                                       **Stock Options Matters. **On May 6, 2004, the Executive wasgranted stock options (the “Options”) for an aggregate of 230,000 sharesof common stock of the Company, at an exercise price of $0.95 per share (theclosing price of the common stock on such date), pursuant to the Company’s Amended and Restated1998 Incentive and Nonqualified Stock Option Plan (the “Plan”).  The Options shall vest as follows:  provided the Executive remains continuouslyemployed by the Company through March 31, 2005, options for 76,667 sharesshall vest on March 31, 2005; provided the Executive remains continuouslyemployed by the Company through March 31, 2006, options for an additional76,667 shares shall vest on March 31, 2006; and provided the Executiveremains continuously employed by the Company through March 31, 2007,options for the final 76,666 shares shall vest on March 31, 2007.  The Options shall be subject to the terms ofthe Plan and shall be evidenced by a Stock Option Grant Agreement between theCompany and the Executive.

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# 5.                                       **Expenses; Vacations**. The Executive shall be entitled to reimbursement for reasonable traveland other out-of-pocket expenses necessarily incurred in the performance of herduties hereunder, upon submission and approval of written statements and billsin accordance with the then regular procedures of the Company.  The Executive shall be entitled to fourweeks paid vacation per calendar year, with such vacation to be scheduled andtaken in accordance with the Company’s standard vacation policies.  Upto two (2) weeks accrued but unused vacation time may be carried forward fromyear to year; provided, however, in no event shall more than anaggregate of six (6) weeks of unused vacation time be accrued during theEmployment Term.

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# 6.                                       **Representations and Warranties ofthe Company**.  The Company represents and warrants to, andagrees with, the Executive that (i) pursuant to the Delaware GeneralCorporation Law, the Company’s Certificate of Incorporation, as amended to date(the “Charter”), provides for indemnification of officers and directorsof the Company and that so long as the Executive serves as an executive officerof the Company, unless required by applicable law the Charter will not beamended to limit such indemnification without the written consent of theExecutive and (ii) the Company maintains an officers and directors liabilityinsurance policy which insures (subject to the limitations contained therein)the Executive and will maintain such a policy for so long as the Executiveserves as an executive officer of the Company.

 

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# 7.                                       **Developments**.  Alldevelopments, including inventions, whether patentable or otherwise, tradesecrets, discoveries, improvements, ideas and writings which relate to or maybe useful in the business of the Company, and which the Executive, either byherself or in conjunction with any other person or persons, has conceived,made, developed, acquired or acquired knowledge of while engaged in anyactivity on behalf of or while acting for the Company during the course of heremployment by the Company (the “Developments”), shall, on and after thestart of the Employment Term, become the sole and exclusive property of theCompany.  The Executive hereby assigns,transfers and conveys, and agrees to so assign, transfer and convey to theCompany, all of her right, title and interest in and to any and all suchDevelopments and to disclose in writing to the Board, as soon as practicable,all Developments that she believes in her good faith judgment may be ofmaterial significance to the Company, and to reduce any such Developments towriting at the request of Board if she has not already done so.  At any time, and from time to time, upon therequest and at the expense of the Company, the Executive will execute anddeliver any and all instruments, documents and papers, give evidence and do anyand all other acts which, in the reasonable opinion of counsel for the Company,are or may reasonably be necessary or desirable to document such transfer or toenable the Company to file and prosecute applications for and to acquire,maintain and enforce any and all patents, trademark registrations or copyrightsunder United States or foreign law with respect to any such Developments or toobtain any extension, validation, reissue, continuance or renewal of any suchpatent, trademark or copyrights; provided only that any such actions requestedfollowing termination of employment shall not unreasonably interfere withExecutive’s then employment, business or other activities.  The Company will be responsible for thepreparation of any such instruments, documents and papers and for theprosecution of any such proceedings and will reimburse the Executive for allreasonable expenses incurred by her in compliance with the provisions of this Section 7.  The Developments shall not include anyknowledge or information of any kind acquired by or disclosed to the Executivewhile serving in her capacity as a member of the board of directors of anynon-Company entity, in her capacity as a private investor, or in any othercircumstance during which the Executive is not or was not engaged in anyactivity on behalf of or acting for the Company.  Furthermore, nothing herein shall preclude Executive fromutilizing Developments applicable to retailing generally (whether from stores,via catalog, via e-commerce or otherwise) following termination of employment,subject always to the provisions of Section 8 below.

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# 8.                                       **Non-Competition andNon-Solicitation**.

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## (a)                                  Non-Competition.  The Executive agrees that the Executive willnot, during the “Restrictive Period”, as defined below, engage in, or otherwisedirectly or indirectly be employed by, or act as a consultant or lender to, orbe a director, officer, employee, owner, co-venturer, member or partner of, oruse or expressly permit the Executive’s name to be used by (collectively an “EngagementWith”), any business, entity or organization which has a primary line ofbusiness (i.e. representing more than 4.9% of its revenue) involving the saleat retail, whether from store locations, and/or by or from direct mail,catalogues and/or websites, of party goods and/or supplies anywhere in theUnited States (a “Competing Entity”); provided, however,that in each case the provisions of this Section 8(a) will not bedeemed breached merely because the Executive owns not more than five percent(5.0%) of the outstanding common stock of a Competing Entity, if, at the timeof its acquisition by the Executive, such stock is listed on a nationalsecurities exchange, is reported on NASDAQ, or is regularly traded

 

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## in the over-the-counter market by a member of a national securitiesexchange; and provided, further, however, that, subject tothe provisions of Section 8(b), nothing herein shall prevent theExecutive from working for a business segment or department of a CompetingEntity, or a subsidiary, division or other entity that controls or iscontrolled by a Competing Entity if (and only if), the business segment ordepartment of the Competing Entity for which the Executive provides services,or the subsidiary, division or other entity by which the Executive has anEngagement With (as the case may be), (1) does not itself compete with theCompany, and (2) the Executive does not provide any services, advice,assistance and/or guidance to any business segment or department, subsidiary,division, or other entity of the Competing Entity which competes with theCompany.  As used in thisSection the “Restrictive Period” shall be (i) the period theExecutive is employed by the Company and (ii) the period of one (1) year afterthe Executive ceases to be employed by the Company for any reason, or, in thecase of the Executive’s Engagement With any Competing Entity that operatesretail stores which are located in any states where the Company has retailstores on the date of the Executive’s cessation of employment, the period ofeighteen (18) months period after the Executive ceases to be employed by theCompany for any reason.

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## (b)                                 Non-Solicitation. During the Restrictive Period,the Executive will not, either directly or indirectly, (i) call on or solicit(for the purpose of diverting business from the Company) any person, firm,corporation or other entity who or which at the time of such termination was,or within one (1) year prior thereto had been, a customer of the Company or(ii) solicit the employment of any person (other than any family member) whowas employed the Company on a full or part-time basis at any time during thesix (6) months prior to the termination of Executive’s employment, unless suchperson prior to such solicitation of employment was involuntarily discharged bythe Company.

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# 9.                                       **Confidential Information**.  The Executive recognizes and acknowledges that by reason of heremployment by and service to the Company, she has had and will have access toconfidential information of the Company and its affiliates, including withoutlimitation, information and knowledge pertaining to products and servicesoffered, ideas, plans, trade secrets, proprietary information, advertising, distributionand sales methods and systems, sales and profit figures, customer and clientlists, and relationships between the Company and its customers, clients,suppliers and others who have business dealings with the Company (collectively,“Confidential Information”).  TheExecutive acknowledges that such Confidential Information is a valuable andunique asset and covenants that she will not, either during or at any timeafter the end of the Employment Term, use or disclose any such ConfidentialInformation to any person or entity for any reason whatsoever (except as herduties described herein may require) without the prior authorization of theBoard, unless such information is in or enters the public domain through nofault of the Executive or is otherwise lawfully known by third parties.  In the event the Executive becomes or maybecome legally compelled to disclose any Confidential Information (whether bydeposition, interrogatory, request for documents, subpoena, civil investigativedemand or other process or otherwise), the Executive shall provide to the Boardprompt prior written notice of such requirement so that the Company may seek aprotective order or other appropriate remedy and/or waive compliance with theterms of this Section 9.  Inthe event that such protective order or other remedy is not obtained, or thatthe Company waives compliance with the provisions this Section 9,the Executive shall furnish only that portion of the Confidential Informationwhich it is advised by counsel is legally required to

 

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# be disclosed, and shall use her best effortsto insure that confidential treatment shall be afforded such disclosed portionof the Confidential Information.

 

# 10.                                 **Equitable Relief**.

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## (a)                                  The Executive acknowledges thatthe restrictions contained in Sections 7, 8 and 9 hereof are reasonableand necessary to protect the legitimate interests of the Company, that theCompany would not have entered into this Agreement in the absence of suchrestrictions, and that any violation of any provision of those Sections willresult in irreparable injury to the Company. The Executive represents that her experience and capabilities are suchthat the restrictions contained in Section 8 hereof will notprevent the Executive from obtaining employment or otherwise earning a livingat the same general level of economic benefit as is anticipated by thisAgreement.  **THE****EXECUTIVE FURTHERREPRESENTS AND ACKNOWLEDGES THAT (i) SHE HAS BEEN ADVISED BY THE COMPANY TOCONSULT HER OWN LEGAL COUNSEL IN RESPECT OF THIS AGREEMENT, (ii) THAT SHE HASHAD FULL OPPORTUNITY, PRIOR TO EXECUTION OF THIS AGREEMENT, TO REVIEWTHOROUGHLY THIS AGREEMENT WITH HER COUNSEL, AND (iii) SHE HAS READ AND FULLYUNDERSTANDS THE TERMS AND PROVISIONS OF THIS AGREEMENT**.

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## (b)                                 The Executive agrees that theCompany shall be entitled to preliminary and permanent injunctive relief,without the necessity of proving actual damages, as well as an equitableaccounting of all earnings, profits and other benefits arising from anyviolation of Sections 7, 8 or 9 hereof, which rights shall be cumulativeand in addition to any other rights or remedies to which the Company may beentitled.  In the event that any of theprovisions of Sections 7, 8 or 9 hereof should ever be adjudicated toexceed the time, geographic, product or service, or other limitations permittedby applicable law in any jurisdiction, then such provisions shall be deemedreformed in such jurisdiction to the maximum time, geographic, product orservice, or other limitations permitted by applicable law.

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## (c)                                  The Company and the Executiveeach irrevocably and unconditionally (i) agree that any suit, action or otherlegal proceeding arising out of this Agreement, including without limitation,any action for preliminary or permanent injunctive relief or other equitablerelief, may be brought in the United States District Court for the District ofEastern Massachusetts, or if such court does not have jurisdiction or will notaccept jurisdiction, in any court of general jurisdiction in the Commonwealthof Massachusetts, (ii) consent to the non-exclusive jurisdiction of any suchcourt in any such suit, action or proceeding, and (iii) waive any objectionwhich such party may have to the laying of venue of any such suit, action orproceeding in any such court.  TheCompany and the Executive each also irrevocably and unconditionally consent tothe service of any process, pleadings, notices or other papers in a mannerpermitted by the notice provisions of Section 15 hereof.

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## (d)                                 The Executive agrees that shewill provide a copy of Sections 7, 8 and 9 of this Agreement to anyfor-profit business or enterprise (i) which she may directly or indirectly own,manage, operate, finance, join, participate in the ownership, management,operation, financing, control or control of, or (ii) with which she may beconnected with as an officer, director, employee, partner, principal, agent,representative, or consultant, or in

 

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## connection with which she may use orexpressly permit her name to be used; provided, however, thatthis provision shall not apply in respect of Section 8 of thisAgreement after expiration of the time periods set forth therein.

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# 11.                                 **Termination**.

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## (a)                                  Cause.  Notwithstanding anything herein contained, if on or after thedate hereof and prior to the end of the Employment Term, the Executive isterminated “For Cause” (as defined below) then the Company shall havethe right to give notice of termination of the Executive’s services hereunderas of a date to be specified in such notice, and the Employment Term shallterminate on the date so specified. Termination “For Cause” shall mean the Executive shall (i) becharged with the commission of a felony crime; (ii) commit any act or omit totake any action in bad faith and to the detriment of the Company; (iii)intentionally fail to follow any commercially reasonable and lawful directionof the Chief Executive Officer or the Board and continue to fail to follow suchdirection within ten (10) days of written notification of same; (iv) commit anact of fraud against the Company; (v) knowingly provide materially falseinformation concerning the Company to the Board, any governmental body, anyregulatory agency, any lender or other financing source of the Company, or anyshareholder of the Company; or (vi) breach any term of this Agreement and failto correct such breach within ten (10) days after written notice of commissionthereof.  In the event that thisAgreement is terminated “For Cause” pursuant to this Section 11(a),then the Executive shall be entitled to receive only the Base Salary at therate provided in Section 3(a) to the date on which terminationshall take effect, any accrued vacation and unpaid expenses as contemplatedunder Section 5, and (iii) any performance bonus earned andunpaid for any prior plan periods and, if applicable under any performancebonus plan for the year of termination, the amount, if any, earned thereunderto the date of termination (collectively, “Accrued Bonus Payments”).

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## (b)                                 Disability.  In the event that the Executive shall be physically or mentallyincapacitated or disabled or otherwise unable fully to discharge her dutieshereunder, with reasonable accommodation, for more than 180 days during anyrolling 12-month period, then the Company may terminate the Executive’semployment hereunder for “Disability” upon thirty (30) days’ writtennotice to the Executive, and no further compensation shall be payable to theExecutive, except for any accrued and unpaid Base Salary as contemplated under Section 3(a),any accrued vacation and unpaid expenses as contemplated under Section 5,any Accrued Bonus Payments and as may otherwise be provided under anydisability insurance policy, if any.

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## (c)                                  Death.  In the event that the Executive shall die, then her employmentshall terminate on the date of her death, and no further compensation shall bepayable to the Executive, except for any accrued and unpaid Base Salary ascontemplated under Section 3(a), any accrued vacation and unpaidexpenses as contemplated under Section 5, any Accrued BonusPayments and as may otherwise be provided under any insurance policy or similarinstrument.

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## (d)                                 Expiration.  This Agreement shall automatically terminate upon the expirationof the Employment Term and upon such expiration, the following paymentprovisions shall apply:

 

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## (i)                                     In the event that the Companydelivers a Non-renewal Notice, upon expiration of the Employment Term, nofurther compensation shall be payable to the Executive, except for (1) anyaccrued and unpaid Base Salary though the effective date of such termination ascontemplated under Section 3(a), (2) any accrued vacation andunpaid expenses as contemplated under Section 5, and (3) anyAccrued Bonus Payments.  In addition,subject to the provisions of Section 11(i) hereof and theExecutive’s compliance (and continued compliance) with the provisions of Sections7, 8 and 9 hereof, (Y) the Company shall pay to the Executive a severancepayment equal to six (6) months salary at the Base Salary then in effect,payable in six (6) equal monthly installments and (Z) for such six (6) monthperiod, the Executive shall be entitled to continue to receive her then currenthealth, life and disability insurance benefits or, in the case of healthinsurance benefits, payment by the Company of applicable “COBRA” payments.

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## (ii)                                  Inthe event that the Company delivers a Renewal Notice, upon expiration of theExtension Period no further compensation shall be payable to the Executive,except for (1) any accrued and unpaid Base Salary though the effective date ofsuch termination as contemplated under Section 3(a), (2) anyaccrued vacation and unpaid expenses as contemplated under Section 5,and (3) any Accrued Bonus Payments.  Forthe avoidance of doubt, the termination of this Agreement upon the expirationof the Extension Period shall not be deemed a termination without causepursuant to Section 11(e) and the Executive shall not be entitledto receive any severance or similar payment or benefit provided for in Section 11(e)upon expiration of the Extension Period.

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## (e)                                  Termination Without Cause.  In the event that the Company terminates the Executive for anyreason other than as provided under Section 11(a), 11(b), 11(c) or11(d), then the Executive’s employment shall terminate upon thirty (30)days’ written notice to the Executive and, the Company shall be obligated topay to the Executive Base Salary earned, but not yet paid to the Executive,prior to the date of such termination in accordance with Section 3(a),and reimburse the Executive for any accrued vacation and unpaid expensesincurred by the Executive through the date of termination in accordance with Section 5,and any Accrued Bonus Payments.  Inaddition, subject to the provisions of Section 11(i) hereof and theExecutive’s compliance (and continued compliance) with the provisions of Sections7, 8 and 9 hereof, (i) the Company shall pay to the Executive a severancepayment equal to twelve (12) months salary at the Base Salary as then ineffect, payable in twelve (12) equal monthly installments and (ii) for suchtwelve (12) month period, the Executive shall be entitled to continue toreceive her then current health, life and disability insurance benefits or, inthe case of health insurance benefits, payment by the Company of applicable“COBRA” payments (collectively (i) and (ii) are called the “SeverancePayments”).

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## (f)                                    Change of Control. Subject to the provisions of Sections11(i) and 11(j), in the event that Company shall terminate this Agreementand the Executive’s employment hereunder pursuant to the provisions of Section 11(e)within six (6) months following a Change in Control (as defined below) or theExecutive shall terminate this Agreement and the Executive’s employmenthereunder for Good Reason (as defined in Section 11(h)) within six(6)****months following a Change inControl, then, in lieu of (and not in addition to) the amounts to be paid (andbenefits to be provided) by the Company pursuant to Section 11(e)or Section 11(h),

 

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## the Company shall have no further obligationsunder this Agreement to the Executive other than the obligation to: (i) pay tothe Executive Base Salary earned, but not yet paid to the Executive, prior tothe date of such termination in accordance with Section 3(a), (ii)reimburse the Executive for any accrued vacation and unpaid expenses incurredby the Executive through the date of termination in accordance with Section 5,and pay any Accrued Bonus Payments and (iii) subject to the provisions of Sections 11(i) and 11(j), pay to theExecutive a lump sum amount equal to eighteen (18) months of the Executive’sBase Salary, as then in effect. In addition, for the twelve (12) month periodfollowing the date of such termination, the Executive shall be entitled tocontinue to receive her then current health, life and disability insurancebenefits or, in the case of health insurance benefits, payment by the Companyof applicable “COBRA” payments.

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As used in thisAgreement, “Change in Control” shall mean the occurrence of any one ofthe following events:

 

(i)                                     anyPerson other than an employee benefit plan of the Company or of anywholly-owned subsidiary of the Company becomes the owner of 40% or more of thecombined voting power of the Company’s then outstanding voting securities andthereafter individuals who were not directors of the Company prior to the datesuch Person became a 40% owner are elected as directors pursuant to anarrangement or understanding with, or upon the request of or nomination by,such Person and constitute at least 1/2 of the Board; provided, however,such acquisition of ownership shall not constitute a Change of Control if theExecutive or an Executive Related Party is the Person or a member of a groupconstituting the Person acquiring such ownership; or

 

(ii)                                  thereoccurs any solicitation or series of solicitations of proxies by or on behalfof any Person other than the Board and thereafter individuals who were notdirectors of the Company prior to the commencement of such solicitation orseries of solicitations are elected as directors pursuant to an arrangement orunderstanding with, or upon the request of or nomination by, such Person andconstitute at least 1/2 of the Board of Directors; or

 

(iii)                               theCompany executes an agreement of sale, merger or consolidation whichcontemplates that (x) after the effective date provided for in such agreement,all or substantially all of the business and/or assets of the Company shall beowned, leased or otherwise controlled by another Person and (y) individuals whoare directors of the Company when such agreement is executed shall notconstitute at least 1⁄2 of the board of directors of the survivor or successorentity immediately after the effective date provided for in such agreement; provided,however, that for purposes of this paragraph (iii), if such agreementrequires as a condition precedent approval by the Company’s shareholders of theagreement or transaction, a Change of Control shall not be deemed to have takenplace unless and until such approval is secured (but upon any such approval, aChange of Control shall be deemed to have occurred on the effective date ofsuch agreement).

 

**“Executive Related Party”shall mean any Affiliate or Associate of the Executive other than the Companyor a Subsidiary of the Company.  Theterms “Affiliate” and “Associate” shall have the meanings ascribed thereto inRule 12b-2 under the Securities Exchange Act of 1934, as**

 

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amended (the “ExchangeAct”) (the term “registrant” in the definition of “Associate” meaning, inthis case, the Company).

 

**“Person” shall have themeaning used in Section 13(d) of the Exchange Act, as in effect on thedate hereof.**

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## (g)                                 Termination by Executive.  In the event that the Executive desires to resign voluntarily asSenior Vice President—Merchandising, the Executive covenants to provide theCompany with not less than ninety (90) days written notice of any suchvoluntary resignation; and further the Executive covenants to cooperate in goodfaith in order to facilitate a smooth transfer of authority during the periodfrom notice of resignation to the date of termination.  In the event that the Executive’s employmentis terminated by the Executive pursuant to this Section 0, then theExecutive shall be entitled to receive an amount payable in a lump sum withinten (10) business days following the date of termination, equal to the sum ofany accrued and unpaid Base Salary as contemplated by Section 3(a),and any accrued vacation and unpaid expenses as contemplated by Section 5and any Accrued Bonus Payments.

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## (h)                                 Good Reason.  The Executive may, upon thirty (30) dayswritten notice, terminate her employment with the Company for “GoodReason”.  “Good Reason” shallmean any material breach by the Company of its obligations hereunder which arenot cured within ten (10) days following receipt of written notice from theExecutive detailing such breach.  Theparties agree that a material breach shall mean, (x) any material reduction inthe Executive’s duties, authority, reporting relationships or responsibilities(whether or not accompanied by a title change) not consented to by theExecutive, and (y) the relocation of the principal executive offices of theCompany a distance of more than 35 miles from its current location notconsented to by the Executive.  Notwithstanding the foregoing oranything to the contrary contained herein, the Executive shall not be entitledto terminate her employment for “Good Reason” at any time during the Extension Period or the TransitionPeriod, for any reason.  In theevent that the Executive terminates this Agreement for Good Reason, the Companyshall be obligated to pay to the Executive Base Salary earned, but not yet paidto the Executive, prior to the date of such termination in accordance with Section 3(a),reimburse the Executive for any accrued vacation and unpaid expenses incurredby the Executive through the date of termination in accordance with Section 5and pay any Accrued Bonus Payments.  Inaddition, subject to the provisions of Section 11(i) hereof, andthe Executive’s compliance (and continued compliance) with the provisions of Sections7, 8 and 9 hereof, the Company shall pay and provide to the Executive theSeverance Payments.

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## (i)                                     Release.  Notwithstanding anything to the contrarycontained in this Agreement, the Executive (or her estate) shall not beentitled to receive the payments and benefits set forth in this Section 11(other than Base Salary through the effective date of termination in accordancewith Section 3(a) hereof and reimbursement of expenses inaccordance with Section 5) prior to (i) the execution and deliveryby the Executive to the Company of a valid and fully effective general release and nondisparagement agreement(in form and substance reasonably satisfactory to the Company) of all claims,including but not limited to the Age Discrimination in Employment Act, TitleVII of the Civil Rights Act of 1964, which the Executive might have at suchtime against the Company and (ii) the resignation of the Executive from allpositions of any nature which the Executive may then have held with the Companyand any subsidiary of the Company.

 

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## (j)                                     Limitation asto Amounts Payable.  Notwithstandingany provision of this Agreement to the contrary (including without limitationthe provisions of Section 11(f)), if all or any portion of theamounts to be paid to the Executive under this Agreement otherwise would be a“parachute payment,” as defined in section 280G(b)(2) of the InternalRevenue Code of 1986, as amended (the “Code”) and the TreasuryRegulations thereunder, the aggregate present value of the total amounts to bepaid to the Executive under this Agreement shall be limited to an amount thatis less than three times the Executive’s “annualized includible compensationfor the base period,” as defined in section 280G(d) of the Code and anyTreasury Regulations thereunder; provided, however, that in noevent shall the amount payable under this Agreement be reduced pursuant to thisSection 11(j) to less than the maximum amount that may be paid tothe Executive without causing any portion of such amount to becomenondeductible under section 280G of the Code and subject to the excise taximposed by section 4999 of the Code. The determination of the Executive’s “annualized includible compensationfor the base period” and the deductibility of payments made pursuant to thisAgreement shall be made by the independent outside accounting firm regularlyretained by the Company.  For purposesof this Section 11(j), “present value” shall be determined inaccordance with section 280G of the Code and the Treasury Regulationsthereunder.

##  

# 12.                                 **Survival**. Except as otherwise providedin this Agreement, notwithstanding the termination of this Agreement or theExecutive’s employment for any reason, the Executive’s obligations under Sections2(b), 7, 8 and 9 hereof shall survive and remain in full force and effectfor the periods therein provided, and the provisions for equitable reliefagainst the Executive in Section 10 hereof shall continue in force,along with the provisions of Sections 12 through 20 hereof.  In addition, the obligations of the Companyset forth in Section 11 shall survive any termination (asapplicable) and shall remain in full force and effect until such obligationsare satisfied in full (subject, as applicable, to the Executive’scompliance with the provisions of Section11(i)).

#  

# 13.                                 **Assignment**.  All of the terms and provisions of this Agreement shall bebinding upon and inure to the benefit of and be enforceable by the respectiveheirs, executors, administrators, legal representatives, successors and assignsof the parties hereto, except that the duties and responsibilities of theExecutive hereunder are of a personal nature and shall not be assignable ordelegatable in whole or in part by the Executive.

#  

# 14.                                 **Modification**.  This Agreement sets forth the entire understanding of the partieswith respect to the subject matter hereof, supersedes all existing agreementsbetween them concerning such subject matter, and may be modified only by awritten instrument duly executed by each party.

#  

# 15.                                 **Notices**.  All notices and other communications required or permittedhereunder or necessary or convenient in connection herewith shall be in writingand shall be deemed to have been given when hand delivered or three (3) daysafter being mailed by registered or certified mail, as follows (provided thatnotice of change of address shall be deemed given only when received):

 

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If to the Company:

 

iParty Corp.

270 Bridge Street

Suite 301

Dedham, MA 02026

Attn: Corporate Secretary

 

With a required copy to:

 

Lowenstein Sandler PC

65 Livingston Avenue

Roseland, NJ 07068

Attn:  Douglas N. Bernstein, Esq.

Fax:  973-597-2400

 

If to the Executive:

 

Dorice Dionne

288 Huron Avenue

Cambridge, MA 02138

 

# 16.                                 **Remedies Cumulative; No Waiver**.  No remedy conferred upon the Company by this Agreement isintended to be exclusive of any other remedy, and each and every such remedyshall be cumulative and shall be in addition to any other remedy given hereunderor now or hereafter existing at law or in equity.  No delay or omission by the Company in exercising any right,remedy or power hereunder or existing at law or in equity shall be construed asa waiver thereof, and any such right, remedy or power may be exercised by theCompany from time to time and as often as may be deemed expedient or necessaryby the Company in its sole discretion.

#  

# 17.                                 **Binding Effect**.  The Executive’s rights and obligations under this Agreement shallnot be transferable by assignment or otherwise, such rights shall not besubject to encumbrance or the claims of the Executive’s creditors, and anyattempt to do any of the foregoing shall be void.  The provisions of this Agreement shall be binding upon and inureto the benefit of the Executive and her heirs and personal representatives, andshall be binding upon and inure to the benefit of the Company and itssuccessors and those who are its assigns under Section 13.

#  

# 18.                                 **Entire Agreement; Contents ofAgreement**.

#  

## (a)                                  This Agreement supersedes allprior agreements in their entirety, including without limitation the PriorEmployment Agreement, effective as of April 1, 2004, and sets forth theentire understanding among the parties hereto with respect to the subjectmatter hereof and cannot be changed, modified, extended or terminated exceptupon written amendment executed by the Executive and approved by the Board andexecuted on behalf of the Company by a duly authorized officer.  The Executive acknowledges that the effectof this provision is that no oral modifications of any nature whatsoever tothis Agreement shall be permitted.

 

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## (b)                                 The Executive acknowledges thatfrom time to time, the Company may establish, maintain and distribute manualsor handbooks or personnel policy manuals, and officers or other representativesof the Company may make written or oral statements relating to personnelpolicies and procedures.  Such manuals,handbooks and statements are intended only for general guidance.  No policies, procedures or statements of anynature by or on behalf of the Company (whether written or oral, and whether ornot contained in any manual or handbook or personnel policy manual), and noacts or practices of any nature, shall be construed to modify this Agreement orto create express or implied obligations of any nature to the Executive.

##  

# 19.                                 **Headings**.  The headings in this Agreement are solely for the convenience ofreference and shall be given no effect in the construction or interpretation ofthis Agreement.

#  

# 20.                                 **Counterparts; Governing Law**.  This Agreement may be executed in any number of counterparts,each of which shall be deemed an original, but all of which together shallconstitute one and the same instrument. It shall be governed by, and construed in accordance with, the laws ofThe Commonwealth of Massachusetts, without giving effect to the rules governingthe conflicts of laws.

#  

**INWITNESS WHEREOF**, the parties have duly executed thisAgreement as of the date first written above.

 
|   | **iPARTY CORP.**  |
|--------|-------------------|
|   |              |
|   |              |
|   | By:               |   /s/ PATRICK  FARRELL |   |
|   | Name:             | Patrick Farrell |
|   | Title:            | President and Chief Financial Officer |
|   |              |   |
|   |              |   |
|   | /s/ DORICE DIONNE |   |
|   | Dorice Dionne     |
|        |                   |  |  |  |  |

 

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