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                                                                 EXHIBIT 10.2


                               SECURITY AGREEMENT
                                    (Parent)

      THIS SECURITY AGREEMENT (the "Agreement"), dated April 24, 1998, is
entered into by and between PARTY CITY CORPORATION, a Delaware corporation (the
"Borrower"), and PNC BANK, NATIONAL ASSOCIATION, a national banking association
in its capacity as agent for the Banks (the "Agent");

                                WITNESSETH THAT:

      WHEREAS, the Borrower is (or will be with respect to after-acquired
property) the legal and beneficial owner and the holder of the Collateral (as
defined in Section 1 hereof); and

      WHEREAS, pursuant to that certain Credit Agreement (as it may hereafter
from time to time be restated, amended, modified or supplemented, the "Credit
Agreement") of even date herewith by and among the Borrower, each of the
Guarantors, the Banks and the Agent, the Banks have agreed to make certain loans
to the Borrower; and

      WHEREAS, the obligation of the Banks to make loans under the Credit
Agreement is subject to the condition, among others, that the Borrower secure
its obligations to the Banks under the Credit Agreement in the manner set forth
herein.

      NOW, THEREFORE, intending to be legally bound hereby, the parties hereto
covenant and agree as follows:

      1. Terms which are defined in the Credit Agreement and not otherwise
defined herein are used herein as defined therein. The following words and terms
shall have the following meanings, respectively, unless the context hereof
otherwise clearly requires:

            (a) "Code" means the Uniform Commercial Code of each state as in
effect on the date hereof and as the same may subsequently be amended from time
to time, the substantive provisions of which are applicable to any of the
property of the Borrower in which the Banks are granted a security interest
pursuant to this Agreement.

            (b) "Collateral" means all of the Borrower's right, title and
interest in, to and under the following described property of the Borrower,
wherever located and irrespective of whether the Borrower owns or leases the
premises at which such property is located (each capitalized term used in this
Section 1(b) shall have in this Agreement the meaning given to it by Article 9
of the Code as in effect in New Jersey):

                  (i) all now existing and hereafter acquired and arising:
Accounts and General Intangibles (including, without limitation the Franchise
Royalties and all of the Borrower's rights to any royalty payments or any other
rights pursuant to any franchise agreement or related agreement entered into by
the Borrower, to the extent permitted to be 

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assigned or pledged), Chattel Paper, Documents, Instruments, Letters of Credit,
Advices of Credit, Equipment, Investment Property and Inventory, all Products of
and Accessions to the foregoing and all Proceeds of all of the foregoing
(including without limitation all insurance policies and proceeds thereof);

                  (ii) to the extent, if any, not included in clause (i) above,
each and every other item of personal property and fixtures, both those that are
now owned and those that hereafter arise or are acquired, regardless of whether
Article 9 of the Code is applicable to any extent to the creation, perfection or
enforcement of Liens thereon or therein.

Without limiting the foregoing, Collateral includes all business records and
information, including computer tapes and other storage media containing the
same and computer programs and software (including without limitation, source
code, object code and related manuals and documentation and all licenses to use
such software) for accessing and manipulating such information.

            (c) "Debt" means, collectively, all now existing and hereafter
arising Indebtedness of the Borrower to the Banks under the Credit Agreement and
other Loan Documents, including without limitation, all Indebtedness, whether of
principal, interest, fees, expenses or otherwise, of the Borrower to the Banks
now existing or hereafter incurred under the Credit Agreement or the Notes, or
any of the other Loan Documents referred to therein as any of the same or any
one or more of them may from time to time be amended, restated, modified or
supplemented, together with any and all extensions, renewals, refinancings or
refundings thereof in whole or in part, together with all other Obligations of
the Borrower to the Banks.

            (d) "Receivables" means all of the Collateral except Equipment,
Investment Property and Inventory.

      2. As security for the due and punctual payment and performance of the
Debt in full, the Borrower hereby agrees that the Banks shall have, and the
Borrower hereby grants to and creates in favor of the Banks, a first priority
security interest under the Code in and to the Collateral subject only to
Permitted Liens. Without limiting the generality of Section 4 below, the
Borrower further agrees that with respect to each item of Collateral as to which
(i) the creation of a valid and enforceable security interest is not governed
exclusively by the Code or (ii) the perfection of a valid and enforceable
security interest therein under the Code cannot be accomplished either by the
Agent taking possession thereof or by the filing in appropriate locations of
appropriate Code financing statements executed by the Borrower, the Borrower
will at its expense execute and deliver to the Agent such documents, agreements,
notices, assignments and instruments and take such further actions as may be
requested by the Agent from time to time for the purpose of creating a valid and
perfected first priority Lien on such item, subject only to Permitted Liens,
enforceable against the Borrower and all third parties to secure the Debt.

      3. The Borrower represents and warrants to the Banks that (a) the Borrower
has good and marketable title to the Collateral, and (b) except for the security
interest granted to and 


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created in favor of the Banks hereunder and Permitted Liens, all the Collateral
is free and clear of any Lien.

      4. The Borrower will faithfully preserve and protect the Banks' security
interest in the Collateral as a prior perfected security interest under the
Code, superior and prior to the rights of all third Persons, except for
Permitted Liens, and will do all such other acts and things and will, upon
request therefor by the Agent, execute, deliver, file and record all such other
documents and instruments, including, without limitation, financing statements,
security agreements, assignments and documents and powers of attorney with
respect to the Collateral, and pay all filing fees and taxes related thereto, as
the Agent in its reasonable discretion may deem necessary or advisable from time
to time in order to attach, continue, preserve, perfect and protect said
security interest; and the Borrower hereby irrevocably appoints the Agent, its
officers, employees and agents, or any of them, as attorneys-in-fact for the
Borrower to execute, deliver, file and record such items for the Borrower and in
the Borrower's name, place and stead. This power of attorney, being coupled with
an interest, shall be irrevocable until all of the Secured Obligations shall
have been paid in full.

      5. The Borrower covenants and agrees that, except as expressly permitted
to the contrary in the Credit Agreement:

            (a) it will defend the Banks' right, title and security interest in
and to the Collateral and the proceeds thereof against the claims and demands of
all Persons whomsoever, other than any Person claiming a right in the Collateral
pursuant to an agreement between such Person and the Banks;

            (b) it will not suffer or permit to exist on any Collateral any Lien
except for Permitted Liens;

            (c) it will not take or omit to take any action, the taking or the
omission of which might result in a material alteration or impairment of the
Collateral or of the Banks' rights under this Agreement;

            (d) it will not sell, assign or otherwise dispose of any portion of
the Collateral other than in the ordinary course of business;

            (e) it will (i) obtain and maintain sole and exclusive possession of
the Collateral, (ii) keep the Collateral and all records pertaining thereto at
the locations specified on the Security Interest Data Summary attached as
Schedule A hereto, unless it shall have given the Agent prior notice and taken
any action reasonably requested by the Agent to maintain its security interest
therein, (iii) deliver to the Agent upon the Agent's request therefor all
Collateral consisting of Chattel Paper immediately upon the Borrower's receipt
of a request therefor, and (iv) keep materially accurate and complete books and
records concerning the Collateral and such other books and records as the Agent
may from time to time reasonably require;


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            (f) it will promptly furnish to the Agent such information and
documents relating to the Collateral as the Agent may reasonably request,
including, without limitation, all invoices, Documents, contracts, Chattel
Paper, Instruments and other writings pertaining to the Borrower's contracts or
the performance thereof; all of the foregoing to be certified upon request of
the Agent by an Authorized Officer of the Borrower;

      6. The Borrower assumes full responsibility for taking any and all
necessary steps to preserve the Banks' rights with respect to the Collateral
against all Persons other than anyone asserting rights in respect of a Permitted
Lien. The Agent shall be deemed to have exercised reasonable care in the custody
and preservation of the Collateral in its possession if the Agent takes such
action for that purpose as the Borrower shall request in writing, provided that
such requested action will not, in the judgment of the Agent, impair the
security interest in the Collateral created hereby or the Banks' rights in, or
the value of, the Collateral, and provided further that such written request is
received by the Agent in sufficient time to permit the Bank to take the
requested action.

      7. (a) At any time and from time to time whether or not an Event of
Default then exists and without prior notice to or consent of the Borrower, the
Agent may at its option, acting in good faith and in a commercially reasonable
manner such as not to interfere unreasonably with the operation of Borrower's
business, take such actions as the Agent deems appropriate (i) to attach,
perfect, continue, preserve and protect the Banks' prior security interest in
the Collateral, and/or (ii) inspect, audit and verify the Collateral, including
reviewing all of the Borrower's books and records and copying and making
excerpts therefrom, provided that prior to an Event of Default or a Potential
Default, the same is done with advance notice during normal business hours to
the extent access to the Borrower's premises is required, and to add all
liabilities, obligations, costs and expenses reasonably incurred in connection
with the foregoing clauses (i) and (ii) to the Debt, to be paid by the Borrower
to the Agent upon demand;

            (b) At any time and from time to time after an Event of Default
exists and is continuing and without prior notice to or consent of the Borrower,
the Agent may at its option, acting in good faith and in a commercially
reasonable manner such as not to interfere unreasonably with the operation of
Borrower's business, take such action as the Agent deems appropriate (i) to
maintain, repair, protect and insure the Collateral, and/or (ii) to perform,
keep, observe and render true and correct any and all covenants, agreements,
representations and warranties of the Borrower hereunder, and to add all
liabilities, obligations, costs and expenses reasonably incurred in connection
with the foregoing clauses (i) and (ii) to the Debt, to be paid by the Borrower
to the Agent upon demand.

      8. After there exists any Event of Default under the Credit Agreement:

            (a) The Agent shall have and may exercise all the rights and
remedies available to a secured party under the Code in effect at the time, and
such other rights and remedies as may be provided by Law and as set forth below,
including without limitation to take over and collect all the Borrower's
Receivables and all other Collateral, and to this end the 


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Borrower hereby appoints the Agent, its officers, employees and agents, as its
irrevocable, true and lawful attorneys-in-fact with all necessary power and
authority to (i) take possession immediately, with or without notice, demand, or
legal process, of any of or all of the Collateral wherever found, and for such
purposes, enter upon any premises upon which the Collateral may be found and
remove the Collateral therefrom, (ii) require the Borrower to assemble the
Collateral and deliver it to the Agent or to any place designated by the Agent
at the Borrower's expense, (iii) receive, open and dispose of all mail addressed
to the Borrower and notify postal authorities to change the address for delivery
thereof to such address as the Agent may designate, (iv) demand payment of the
Receivables, (v) enforce payment of the Receivables by legal proceedings or
otherwise, (vi) exercise all of the Borrower's rights and remedies with respect
to the collection of the Receivables, (vii) settle, adjust, compromise, extend
or renew the Receivables, (viii) settle, adjust or compromise any legal
proceedings brought to collect the Receivables, (ix) to the extent permitted by
applicable Law, sell or assign the Receivables upon such terms, for such amounts
and at such time or times as the Agent deems advisable, (x) discharge and
release the Receivables, (xi) take control, in any manner, of any item of
payment or proceeds from any account debtor, (xii) prepare, file and sign the
Borrower's name on any Proof of Claim in Bankruptcy or similar document against
any account debtor, (xiii) prepare, file and sign the Borrower's name on any
notice of Lien, assignment or satisfaction of Lien or similar document in
connection with the Receivables, (xiv) do all acts and things necessary, in the
Agent's sole discretion, to fulfill the Borrower's obligations under the Loan
Documents, (xv) endorse the name of the Borrower upon any check, Chattel Paper,
Document, Instrument, invoice, freight bill, bill of lading or similar document
or agreement relating to the Receivables or Inventory; (xvi) use the Borrower's
stationery and sign the Borrower's name to verifications of the Receivables and
notices thereof to account debtors; (xvii) access and use the information
recorded on or contained in any data processing equipment or computer hardware
or software relating to the Receivables, Inventory, or other Collateral or
proceeds thereof to which the Borrower has access, (xviii) demand, sue for,
collect, compromise and give acquittances for any and all Collateral, (xix)
prosecute, defend or compromise any action, claim or proceeding with respect to
any of the Collateral, and (xx) take such other action as the Agent may deem
appropriate, including extending or modifying the terms of payment of the
Borrower's debtors. This power of attorney, being coupled with an interest,
shall be irrevocable until all of the Secured Obligations shall have been paid
in full. To the extent permitted by Law, the Borrower hereby waives all claims
of damages due to or arising from or connected with any of the rights or
remedies exercised by the Agent pursuant to this Agreement, except claims for
physical damage to the Collateral arising from gross negligence or willful
misconduct by the Agent.

            (b) The Agent shall have the right to lease, sell or otherwise
dispose of all or any of the Collateral at public or private sale or sales for
cash, credit or any combination thereof, with such notice as may be required by
Law (it being agreed by the Borrower that, in the absence of any contrary
requirement of Law, ten (10) days' prior notice of a public or private sale of
Collateral shall be deemed reasonable notice), in lots or in bulk, for cash or
on credit, all as the Agent, in its sole discretion, may deem advisable. Such
sales may be adjourned from time to time with or without notice. The Agent shall
have the right to conduct such sales on the Borrower's premises or elsewhere and
shall have the right to use the Borrower's premises without 


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charge for such sales for such time or times as the Agent may see fit. The Agent
may purchase all or any part of the Collateral at public or, if permitted by
Law, private sale and, in lieu of actual payment of such purchase price, may set
off the amount of such price against the Debt.

      9. The security interest in the Borrower's Collateral granted to and
created in favor of the Banks by this Agreement shall be for the benefit of the
Banks. Each of the rights, privileges, and remedies provided to the Banks
hereunder or otherwise held by any of the Banks and any of the Borrower's
Collateral or proceeds thereof held or realized upon at any time by the Agent
shall be applied as set forth in the Credit Agreement. The Borrower shall remain
liable to the Banks and shall pay to the Agent any deficiency which may remain
after such sale or collection.

      10. If the Agent repossesses or seeks to repossess any of the Collateral
pursuant to the terms hereof because of the occurrence of an Event of Default,
then to the extent it is commercially reasonable for the Agent to store any
Collateral on any of the Borrower's premises, the Borrower hereby agrees to
lease to the Agent, to the extent such lease to the Agent is not prohibited by
the terms of any applicable lease agreement, on a month-to-month tenancy for a
period not to exceed one hundred twenty (120) days at the Agent's election, at a
rental of One Dollar ($1.00) per month, the premises on which the Collateral is
located, provided it is located on premises owned or leased by the Borrower.

      11. Upon indefeasible payment in full of the Debt and termination of the
Credit Agreement, this Agreement shall terminate and be of no further force and
effect, and the Agent shall thereupon promptly return to the Borrower such of
the Collateral and such other documents delivered by the Borrower hereunder as
may then be in the Agent's possession. Until such time, however, this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns.

      12. No failure or delay on the part of the Agent in exercising any right,
remedy, power or privilege hereunder shall operate as a waiver thereof or of any
other right, remedy, power or privilege of the Banks hereunder; nor shall any
single or partial exercise of any such right, remedy, power or privilege
preclude any other or further exercise thereof or the exercise of any other
right, remedy, power or privilege. No waiver of a single Event of Default shall
be deemed a waiver of a subsequent Event of Default. All waivers under this
Agreement must be in writing. The rights and remedies of the Banks under this
Agreement are cumulative and in addition to any rights or remedies which it may
otherwise have, and the Agent may enforce any one or more remedies hereunder
successively or concurrently at its option.

      13. All notices, statements, requests and demands given to or made upon
either party hereto in accordance with the provisions of this Agreement shall be
given or made as provided in Section 10.6 of the Credit Agreement.

      14. The Borrower agrees that as of the date hereof, all information
contained on the Security Interest Data Schedule attached hereto as Schedule A
is accurate and complete and 


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contains no omission or misrepresentation. The Borrower shall notify (in
accordance with the Credit Agreement) the Agent of any changes in the
information set forth thereon.

      15. The Borrower acknowledges that the provisions hereof giving the Agent
rights of access to books, records and information concerning the Collateral and
the Borrower's operations and providing the Agent access to the Borrower's
premises are intended to afford the Agent with immediate access to current
information concerning the Borrower and its activities, including without
limitation, the value, nature and location of the Collateral so that the Agent
can, among other things, make an appropriate determination after the occurrence
of an Event of Default, whether and when to exercise its other remedies
hereunder and at Law, including without limitation, instituting a replevin
action should the Borrower refuse to turn over any Collateral to the Agent. The
Borrower further acknowledges that should the Borrower at any time fail to
promptly provide such information and access to the Agent, the Borrower
acknowledges that the Bank would have no adequate remedy at Law to promptly
obtain the same. The Borrower agrees that the provisions hereof may be
specifically enforced by the Agent and waives any claim or defense in any such
action or proceeding that the Agent has an adequate remedy at Law.

      16. This Agreement shall be binding upon and inure to the benefit of the
Agent and its successors and assigns, and the Borrower and its successors and
assigns, except that the Borrower may not assign or transfer the Borrower's
obligations hereunder or any interest herein.

      17. This Agreement shall be deemed to be a contract under the laws of the
State of New Jersey and for all purposes shall be governed by and construed in
accordance with the laws of said State excluding its rules relating to conflicts
of law.

      18. Any provision of this Agreement which is prohibited or unenforceable
in any jurisdiction shall not invalidate the remaining provisions hereof, and
any such prohibition or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other jurisdiction.


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      IN WITNESS WHEREOF, the parties hereto, by their officers thereunto duly
authorized, have executed and delivered this Agreement as of the day and year
first above set forth.


                                        PNC BANK, NATIONAL ASSOCIATION


                                        By:_____________________________________
                                        Name:___________________________________
                                        Title:__________________________________

ATTEST:                                 PARTY CITY CORPORATION


By:_____________________________        By:_____________________________________
Name:___________________________        Name:___________________________________
Title:__________________________        Title:__________________________________



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                                   SCHEDULE A
                                       TO
                               SECURITY AGREEMENT

                         SECURITY INTEREST DATA SUMMARY

      1. The chief executive office of Party City Corporation (the "Debtor") is
located at: 400 Commons Way, Rockaway, New Jersey 07866.

      2. The Debtor's true, full and corporate name is: Party City Corporation.
The Debtor uses the following trade names in the following jurisdictions,
together with the local store names on Rider 1 attached hereto:

            Delaware:         PARTY CITY MICHIGAN, INC.

            Colorado          PARTY CITY OF DENVER (LITTLETON)

            Indiana:          PARTY CITY, THE DISCOUNT PARTY SUPER
                                STORE CORPORATION

            Michigan:         PARTY CITY, THE DISCOUNT PARTY SUPER
                              STORE

      3. All Collateral is located either at Borrower's address in paragraph 1
above, at the Offsite Storage Locations or at the Company-owned Stores in
respect of which the Agent has received UCC-1 financing statements executed by
the Borrower.


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