<PAGE>
                                                                   EXHIBIT 10(p)

                              EMPLOYMENT AGREEMENT

     EMPLOYMENT AGREEMENT ("AGREEMENT") made as of this 1ST day of January, 2002
between AMSCAN HOLDINGS, INC., a Delaware corporation, with offices at 80
Grasslands Road, Elmsford, New York 10523 (the "COMPANY"), and JAMES F. FLANAGAN
residing at 12708 Granada Lane, Leawood, Kansas 66209 (the "EXECUTIVE").

                                   WITNESSETH,

THAT, WHEREAS,

     A.   The Company is engaged in the business of designing, manufacturing and
          distributing seasonal and everyday party goods and gift items;

     B.   The Executive has heretofore been employed by the Company pursuant to
          an Employment Agreement dated as of July 1, 2001 (the "PRIOR
          EMPLOYMENT AGREEMENT");

     C.   The Company now desires to have Executive serve as its Executive Vice
          President; and

     D.   The Company and Executive desire to terminate the Prior Employment
          Agreement and enter into this agreement to set forth the terms and
          conditions of such continued employment;

     NOW, THEREFORE, in consideration of the premises and of the mutual
agreements hereinafter set forth, the parties hereto agree as follows:

1.   TERMINATION OF PRIOR EMPLOYMENT AGREEMENT.

     The Prior Employment Agreement is terminated simultaneously with the
execution of this Agreement without further obligation of the Company, by mutual
agreement of the parties, and Executive's compensation and terms of employment
shall henceforth be governed by this Agreement.

2.   TERM OF EMPLOYMENT.

     (a) TERM. The Company agrees to employ Executive during the period
commencing on January 1, 2002 and ending on December 31, 2004 (the "INITIAL
TERM") as its Executive Vice President and Executive agrees to be employed by
the Company in such capacity, subject to the termination provisions set forth
hereinafter.

     (b) Extension of Term. The Initial Term of this Agreement shall be extended
after December 31, 2004, for additional successive one year periods (the
"Additional Term") (the Initial Term and any Additional Term are hereinafter
referred to as the "Term"), at the Company's option, on not less than thirty
(30) days prior notice of renewal at the end of each Additional Term.

<PAGE>

3.   POSITION AND DUTIES.


     (a) DUTIES. The Company hereby employs Executive, and Executive accepts
such employment, to serve as Executive Vice President of the Company during the
Term, and, in such capacity, to perform any and all duties consistent with
Executive's position, to the best of Executive's abilities. The Company shall
have the power to determine the specific duties to be performed by Executive,
and the means and the manner by which those duties shall be performed. The
Company's board of directors ("BOARD"), or officers of the Company ("OFFICERS"),
shall have the power to supervise the duties to be performed, the manner of
performing such duties, and the terms for performance thereof. Executive's job
description is subject to modification in the sole discretion of the Board at
any time.

     (b) OTHER SERVICES. During the Period of Employment, Executive shall
perform such other reasonable services for the Company as shall be prescribed
from time to time by the Board; except as provided in Paragraph 4, no additional
compensation shall be payable to the Executive for any services performed by him
as an officer, director or in any other capacity for the Company. As used in
this Agreement, the term "COMPANY" shall include the subsidiaries of the
Company.

     (c) BEST EFFORTS. During the Term, Executive agrees to devote his full
business time, attention and best efforts to the faithful discharge of the
duties described herein and to use his best efforts to promote the interests and
welfare of the Company. During the Term, Executive shall not engage in any other
business activity (except on behalf of affiliates of the Company), regardless of
whether or not it is pursued for gain or profit. The parties hereto understand
and agree that Executive may participate in charitable and similar activities
which may, from time to time, require portions of his time, but which Executive
agrees shall not interfere with the performance of his duties hereunder, and
shall not adversely reflect upon the Company or its operations.

4.   COMPENSATION.

     (a) BASE SALARY. For services hereunder, the Company shall pay Executive a
base salary ("BASE SALARY") equal to $250,000.00 per annum during the Term. The
Base Salary shall be payable to Executive in regular intervals in accordance
with the Company's usual payroll practices. All compensation shall be subject to
such withholding of any federal, state or local taxes as may be required by law
with respect to such payments.

     (b) BONUS. In addition to the Base Salary, Executive will be paid an annual
bonus of $125,000 (the "BONUS"). The payment of the Bonus, shall be subject to
the Company's ability to comply with the terms and covenants of its Bank Credit
Agreements. The Bonus payable hereunder shall be paid no later than the March
30th following the end of the calendar year to which such Bonus corresponds.

5.   STOCK OPTIONS.

As additional compensation to the Executive, simultaneously with the execution
of this Agreement, the Company shall recommend to the Stock Option Committee of
the Board a grant to the Executive


                                      - 2 -
<PAGE>

of a stock option to purchase two and one-half (2.5) shares of the Company's
common stock at the option price and upon the terms and conditions set forth in
the Company's Stock Option Plan; a copy of which has been delivered to
Executive.

6.   RESTRICTED STOCK.

     (a) Upon the execution of this Agreement, Executive is hereby granted three
(3) shares of common stock of the Company (the "RESTRICTED STOCK"), which shares
are subject to vesting as set forth below, and forfeiture to the extent not
vested upon a termination of employment. The foregoing grant of stock is subject
in all respects to the terms of the Amended and Restated Stockholders Agreement
of the Company, dated as of February 20, 2002 (the "STOCKHOLDERS AGREEMENT"), to
which Executive is a party.

     (b) The Restricted Stock granted to Executive hereunder shall vest in full
on December 31, 2004, provided that Executive is employed on such date (the
"VESTING PERIOD").

     (c) Notwithstanding anything to the contrary set forth herein, the
Restricted Stock shall immediately vest upon (i) the occurrence of an IPO (as
defined in the Stockholders Agreement), (ii) the consummation of a transaction
or series of transactions, approved by the Board, pursuant to which a person,
entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the
Securities Exchange Act of 1934, as amended), other than Goldman, Sachs & Co. or
any of its affiliates, acquires a majority of the outstanding voting stock of
the Company (iii) the termination of Executive's employment with the Company (i)
because of Executive's death, (2) by the Company without Cause, (3) by the
Executive because of the Company's material breach of its obligations hereunder,
(4) by the Executive if the Company imposes on Executive duties or work
conditions materially burdensome to the Executive which are inconsistent with
such Executive's prior duties and work conditions or (5) because of the
Executive's Disability (as those terms are defined herein).]. Upon the voluntary
or involuntary termination of the Executive's employment during the Vesting
Period for any reason, other than a reason listed in clause (iii) of the
preceding sentence, any unvested Restricted Stock shall be forfeited and
returned to the Company without payment.

     (d) The Company shall promptly issue to the Executive, as vested one or
more stock certificates in respect of the Restricted Stock, which certificates
shall be registered in the name of the Executive and shall bear an appropriate
legend substantially in the following form:

               The securities represented by this certificate are subject to the
               terms and conditions set forth in (i) an Employment Agreement,
               dated as of January 1, 2002, between the issuer and the
               registered holder hereof and (ii) an Amended and Restated
               Stockholders Agreement, dated as of February 20, 2002, copies of
               each of which may be obtained from the issuer or from the holder
               of this security. No transfer of such



                                      - 3 -
<PAGE>

               securities will be made on the books of the issuer unless
               accompanied by evidence of compliance with the terms of such
               agreements.

               The securities represented by this certificate have not been
               registered under the Securities Act of 1933, as amended, or under
               the securities laws of any state, and may not be sold or
               otherwise disposed of except pursuant to an effective
               registration statement under said Act and applicable state
               securities law or an applicable exemption to the registration
               requirements of such Act or laws.

Such certificates may bear other legends to the extent the Board determines it
to be necessary or appropriate or as may be required by the Stockholders
Agreement. The Board may require that the certificates evidencing the Restricted
Stock be held in custody by the Company until the restrictions thereon shall
have lapsed and that the Executive deliver a stock power, endorsed in blank,
relating to the shares of Restricted Stock.

     (e) During the Restricted Period that Executive shall be entitled to vote
the Restricted Stock and to receive regular quarterly cash dividends and cash
distributions, if any, with respect thereto, but shall have no other rights of a
stockholder with respect thereto.

     (f) The number and kind of shares included in the Restricted Stock (and
thereby subject to the terms and conditions set forth in this Agreement with
respect thereto) shall be adjusted to reflect any merger, reorganization,
consolidation, recapitalization, spin-off, stock dividend, stock split,
extraordinary distribution with respect to the Company's common stock or other
change in corporate structure affecting such common stock, as the Board or a
committee thereof shall deem fair and appropriate.

     (g) At the end of the Vesting Period (with respect to any shares of
Restricted Stock), if the Restricted Stock has not been forfeited, certificates
for such shares shall be delivered to the Executive.

7.   FRINGE BENEFITS.

     As additional consideration for the services of Executive under this
Agreement, the Company shall provide to Executive all fringe benefits provided
by the Company to other management personnel at a comparable level, including
the following:

     (a) CAR ALLOWANCE. Executive shall receive a car allowance in the amount of
$800.00 per month, payable monthly, for costs incurred in connection with the
operation of Executive's car for the business of the Company.



                                      - 4 -
<PAGE>

     (b) VACATION AND SICK LEAVE. Executive shall be entitled to paid vacation,
holiday and sick leave, in the same manner and to the same extent as such
vacation, holiday and sick leave time shall be available to other management
personnel at a comparable level.

     (c) GROUP INSURANCE. The same coverage of group health and group life
insurance that the Company may maintain in effect from time to time for the
benefit of other management personnel at a comparable level; provided, that the
Company reserves the right to amend, modify and/or cease maintaining any or all
such insurance plans that are in effect at any time during the Term, and to
require that employees pay all or a portion of the costs of such policies.

     (d) DEFERRED COMPENSATION PLANS. Participation in any retirement plan,
401(k) plan, profit sharing and/or pension plan that may be enacted by the
Company, in the same manner and to the same extent as such plan participation is
available to the Company's other management personnel at a comparable level, and
subject to the provisions and requirements of such plans.

     Notwithstanding the foregoing, the Company reserves the right to amend,
modify and/or cease maintaining any or all such retirement, 401(k),
profit-sharing and/or pension plans that are in effect at any time during the
Term, and to require that employees pay all or a portion of the costs of such
plans, so long as Executive is treated similarly to other management personnel
at a comparable level.

8.   BUSINESS EXPENSES.

     Executive may incur, for the benefit of the Company and in furtherance of
the Company's business, various reasonable expenses in accordance with the
budget and policies of the Company, as determined by its Board from time to
time, for the purpose of promoting the business of the Company. In furtherance
of the foregoing, and not in limitation thereof, the Company agrees, upon
presentation by Executive from time to time of itemized accountings therefor, to
pay or to reimburse Executive for, all reasonably necessary expenses of travel
and entertainment undertaken by Executive for the benefit of the Company.
Executive shall support any claim for reimbursement for expenses by adequate
proof of such expenditures in the form of cancelled checks, vouchers, bills or
in other form satisfactory to the Company.

9.   TERMINATION.

     (a) TERMINATION FOR CAUSE. The Company may terminate this Agreement, and
(except as provided below) all of the Company's obligations hereunder, for
"CAUSE" (as hereinafter defined). Such termination shall be effected by notice
thereof delivered by the Company to Executive, and shall be effective as of the
date of such notice. In the event of termination for cause, Executive shall be
entitled to receive all Base Salary earned to the date of termination, but all
other rights of Executive hereunder, including the right to receive any unvested
Restricted Stock or to exercise vested Stock Options, shall terminate as of the
effective date of Executive's termination. As used herein, "CAUSE" shall mean:
(i) Executive's conviction of a felony which involves moral turpitude; or
(ii)Executive's repeated failure to discharge his assignments from the Officers
or the Board consistent with the responsibilities of his position and the
failure by Executive to correct such failure within 30 days after written notice
thereof from the Company; (iii) the commission by Executive of any crime or
intentional act of fraud against the Company; (iv) any conduct on the part of
Executive which has a


                                     - 5 -
<PAGE>

material adverse effect upon the performance by Executive of his duties
hereunder or upon the relationship of customers or employees of the Company with
the Company or (v)Executive's gross negligence or willful misconduct in the
performance of his duties which has a material adverse effect on the Company's
operations, profits or business.

     (b) TERMINATION WITHOUT CAUSE. The Company may terminate this Agreement and
(except as provided below) all of the Company's obligations hereunder without
cause by giving Executive 30 days prior written notice thereof. In the event of
termination without cause, Executive shall be entitled to receive (i) all Base
Salary earned but unpaid to the date of termination (ii) a pro rata portion of
the Bonus for the year in which such termination occurs based on the relative
period of employment during such year (the "PRO RATA BONUS"); (iii) severance
equal to twelve (12) months Base Salary ("SEVERANCE"); (iv) reimbursement of
costs associated with a job search related to the expense of a temporary office
and administrative support in an amount not to exceed $1,500.00 per month, such
amount payable until the earlier of (A) Executive terminating his job search or
(B) twelve (12) months following termination of employment hereunder; (v) the
right to exercise any vested portion of the Stock Options in accordance with the
terms of the Company's Stock Option Plan and (vi) the immediate vesting of the
Restricted Stock. All vested Restricted Stock of Executive shall continue to be
governed by the terms of the Stockholders Agreement following termination of
employment. All other rights of Executive hereunder, including the right to
receive to exercise unvested Stock Options shall terminate as of the effective
date of Executive's termination. Severance payable hereunder shall be payable in
normal payroll installments during the Severance period.

     (c) RESIGNATION OF EXECUTIVE. If Executive resigns, Executive shall be
entitled to receive all Base Salary earned to the effective date of resignation,
which shall be payable upon such resignation, but all other rights of Employee
hereunder, including the right to receive any unvested Restricted Stock or to
exercise any unvested portion of the Stock Options, shall terminate as of the
effective date of Executive's resignation.

     (d) EXECUTIVE'S TOTAL DISABILITY. If Executive is terminated by the
Company, or Executive resigns, due to Executive's "TOTAL DISABILITY" (as
hereinafter defined), Executive shall be entitled to receive (i) all Base Salary
earned to the date of termination, which shall be payable upon such termination
or resignation, (ii) the Pro Rata Bonus, (iii) the right to exercise the vested
portion of his Stock Options, if any and (iv) the immediate vesting of the
Restricted Stock. All other rights of Executive hereunder, including the right
to exercise any unvested portion of the Stock Options, shall terminate as of the
date of Executive's termination or resignation. As used herein, "TOTAL
DISABILITY" shall mean any physical or mental ailment which prevents Executive
from performing the duties incident to Executive's employment with the Company
which has continued for a period of ninety (90) consecutive days and which is
expected, based upon the results of an examination by a physician mutually
acceptable to Executive and the Company, to be of permanent duration.

     (e) DEATH. If Executive dies during the Term, Executive's estate shall be
entitled to receive (i) all Base Salary earned to the date of death, which shall
be payable upon the date of death, (ii) the Pro Rata Bonus, (iii) the right to
exercise the vested portion of his Stock Options, if any, in accordance with the
terms of the Stock Option Plan, and (iv) the immediate vesting of the Restricted


                                     - 6 -
<PAGE>

Stock. All other rights of Executive hereunder, including the right to exercise
any unvested portion of the Stock Options, shall terminate.

10.  RESTRICTIVE COVENANT.

     In consideration of Executive's special and unique services and Executive's
position, which by its nature exposes Executive to trade secrets, proprietary
information and other confidential material and assets of the Company, Executive
covenants and agrees as follows with the Company:

     (a) For the purposes of this Agreement, the term "CONFIDENTIAL INFORMATION"
shall mean any data, proprietary information, financial information, trade
secrets, and other materials and information, including, without limitation,
contracts, customer lists, supplier lists, names of representatives of customers
and suppliers, Company information as to specific customer needs, requirements,
purchasing history, pricing information, information relating to costs,
marketing, selling, servicing, technology, know-how, plans, processes,
techniques, inventions, discoveries, formulae, designs, patterns or devices in
any way concerning the operation of the Company's business. The term
Confidential Information does not include any information which (i) at the time
of disclosure is generally available to the public (other than as a result of a
disclosure directly or indirectly by Executive), or (ii) has been independently
acquired or developed by a third party not obligated to keep such information
confidential.

     (b) Executive hereby agrees that during the term of Executive's employment
by the Company and at all times thereafter that he: (i) will keep confidential
and protect all Confidential Information (as hereinabove defined) known to him
or in his possession, (ii) will not disclose any Confidential Information to any
person or entity, except as may be required in the performance by of his duties
as an employee of the Company, (iii) will not use any Confidential Information
except for the exclusive benefit of the Company and (iv) will return any
Confidential Information and/or documents containing Confidential Information at
the end of the term or at any time at the Company's request.

     (c) During the Covenant Period (as hereinafter defined) Executive shall
not:

          (i)  directly or indirectly (whether as owner, principal, agent,
               partner, officer, employee, independent contractor, consultant,
               stockholder, or otherwise), engage or participate or have any
               financial interest in or perform services for, any entity which
               offers any service in competition with the Company or engage in
               any business or activity which is substantially the same as any
               business or activity related to the business which the Company or
               any of its affiliates is now or may hereafter become engaged, in
               any location where such activity would be in competition with the
               business of the Company as conducted at the time of termination
               of Executive's employment with the Company. Executive
               acknowledges that the Company now carries on its business in many
               trading areas throughout the world and in particular in the
               United States and Canada.

          (ii) For himself or with or as an agent for any other person, firm,
               corporation or


                                     - 7 -
<PAGE>

               entity, directly or indirectly, solicit, interfere with, endeavor
               to entice away from, divert or attempt to divert or otherwise
               interfere with, or disrupt the business relationship of the
               Company with, (i) any person or entity who is a client, customer
               or business contact of the Company during the Covenant Period, or
               (ii) any potential clients, customers or business contacts with
               whom the Company is actively negotiating at the time of
               termination of Executive's employment with the Company.

          (iii) directly or indirectly, for his own benefit or for the benefit
               of any other person, firm, corporation or entity, divert, or
               attempt to divert, solicit, recruit, entice or hire away any
               employees of the Company, whether or not any such employee is a
               full-time, part-time or temporary employee and whether or not
               such person's employment is for a determined period or at will,
               unless such person shall have ceased to be an employee of the
               Company for a period of at least 12 months.

     (d) As used in this Agreement, the term "COVENANT PERIOD" shall mean the
period commencing on the date of this Agreement and ending one (1) year
following the effective date of termination.

     (e) During the Term, Executive will promptly disclose to the Company, and
that the Company will own all right, title and interest in, all inventions, and
other intellectual property (the "INTELLECTUAL PROPERTY") which he conceives or
develops during the course of his employment (excluding that which he conceives
or develops without the use of the Company's time, resources or facilities and
which does not relate to the Company's past, present or planned future
activities), will affix appropriate legends and copyright notices indicating the
Company's ownership of all Intellectual Property and all underlying
documentation, and will execute such further assignments and other documents as
the Company consider necessary to vest, perfect, maintain or defend the
Company's right, title and interest in the Intellectual Property.

     (f) Executive will deliver promptly to the Company on termination of his
employment by the Company, or at any other time the Company may so request, all
memoranda, notes, records, reports and other documents (and all copies thereof)
relating to the business of the Company which he obtained while employed by, or
otherwise serving or acting on behalf of, the Company and which he may then
possess or have under his control or relating to the Intellectual Property.

     (g) In addition to a right to accounting by the Company and/or damages
and/or any other relief to which the Company may be entitled as a result of
Executive's breach of the provisions of this Paragraph 10, the Company will be
entitled to injunctive relief restraining any such breach or threatened breach,
or the continuation of such breach, by Executive, provided, however that, if a
court of competent jurisdiction shall determine that this covenant shall be
enforceable only if limited to a shorter period of time or to a smaller
geographical area than is herein expressly provided, or otherwise limited, then
and in such event, this covenant shall be deemed to be limited to the extent so
determined to be enforceable, in the same manner and to the same extent as if
such limits were



                                     - 8 -
<PAGE>

expressly provided herein.

     (h) The Company may assign its rights and remedies against Executive to any
person or entity, and such rights and remedies may be enforced by any successors
or assigns of the Company.

11.  COMPANY'S REPRESENTATIONS.

     The Company hereby represents and warrants to Executive that: (a) it has
full power and corporate authority to execute and deliver this Agreement and to
perform its obligations hereunder, (b) such execution, delivery and performance
will not (with the giving of notice or the lapse of time or both) result in the
breach of any agreements or other obligations to which it is a party or is
otherwise bound, (c) the execution and delivery of this Agreement by the Company
is not in violation of the Company's certificate of incorporation or by-laws,
and (d) this Agreement is the legal, valid and binding obligation of the Company
which is enforceable against the Company in accordance with its terms.

12.  REPRESENTATIONS BY EXECUTIVE.

     (a) Executive warrants and represents to the Company that, to the best of
Executive's knowledge, each of the following is true, correct and complete on
the date of this Agreement:

          (i)  The execution, delivery and performance of this Agreement by
               Executive, and the consummation of the transactions contemplated
               hereunder, do not and will not conflict with, violate or result
               in the breach of any of the terms or conditions of, or constitute
               a default under, (1) any contract, agreement, commitment or other
               instrument or obligation to which Executive is a party, or (2)
               any common law duty that may be owed by Executive to any former
               employer or other person or entity or to any of their respective
               current or former affiliates, shareholders, officers, or
               directors, or (3) any law, regulation, ordinance or decree to
               which Executive is subject.

          (ii) Executive has the power, authority and capacity to enter into
               this Agreement and to perform all of his obligations hereunder.

          (iii) No permit, consent, approval, or authorization of, or
               designation, declaration or filing with, any person or entity is
               required by Executive in connection with the execution or
               delivery by her of this Agreement or the consummation of the
               transactions contemplated hereunder.

     (b) Executive shall indemnify the Company, and each of the Company's
shareholders, officers, directors, employees and agents, from and against any
and all claims, demands, damages, fines, penalties, losses, liabilities,
interests, costs and expenses (including, without limitation, reasonable
attorney fees and expenses, and expert fees and expenses) arising from or
related to any breach by Employee of any of the representations or warranties
made by Executive.

     (c) INVESTMENT INTENTION; NO RESALES. Executive represents and warrants
that



                                     - 9 -
<PAGE>

Executive is acquiring the Restricted Stock for investment purposes only, solely
for his own account and not with a view to, or for resale in connection with,
the distribution or other disposition thereof or with any present intention of
distributing or reselling any Restricted Stock, except for such distributions
and dispositions as are both explicitly permitted under this Agreement and the
Stockholders Agreement and effected in compliance with the Securities Act of
1933, as amended (the "SECURITIES ACT"), and the rules and regulations
thereunder, and all applicable state securities or "blue sky" laws. The
Executive agrees and acknowledges that such executive will not, directly or
indirectly offer, transfer, sell, assign, pledge, hypothecate or otherwise
dispose of any Restricted Stock, or solicit any offers to purchase or otherwise
acquire or take a pledge of any Restricted Stock, other than transfers, sales,
assignments, pledges, hypothecations or other dispositions explicitly permitted
by the Stockholders Agreement and provided that (x) any such transfer, sale,
assignment, pledge, hypothecation or other disposition is in accordance with the
terms and provisions of the Stockholders Agreement and (y) (i) the transfer,
sale, assignment, pledge, hypothecation or other disposition is pursuant to an
effective registration statement under the Securities Act and has been
registered under all applicable state securities or "blue sky" laws, or (ii) the
Executive shall have furnished the Company with an opinion of counsel (which
counsel and the form and substance of which opinion shall be reasonably
satisfactory to the Company), to the effect that no such registration is
required because of the availability of an exemption from registration under the
Securities Act and the rules and regulations in effect thereunder and under all
applicable state securities or "blue sky" laws.

     (d) STOCK UNREGISTERED. The Executive acknowledges and represents that
Executive has been advised that (i) the Restricted Stock, upon issuance, will
not have been registered under the Securities Act; (ii) the Restricted Stock
must be held for an indefinite period and such Executive must continue to bear
the economic risk of the investment in the Restricted Stock unless it is
subsequently registered under the Securities Act or an exemption from such
registration is available; (iii) there is no, and it is not anticipated that
there will be any, public market for the Restricted Stock; (iv) Rule 144
promulgated under the Securities Act ("RULE 144") will not be available with
respect to the sales of any securities of the Company and the Company has made
no covenant to make such Rule 144 available; (v) if and when the Restricted
Stock may be disposed of without registration in reliance on Rule 144, such
disposition can be made only in limited amounts in accordance with the
Stockholders Agreement; (vi) if the Rule 144 exemption is not available, public
offer or sale without registration will require the availability of an exemption
under the Securities Act; (vii) a restrictive legend or legends as provided for
in the Stockholders Agreement shall be placed on the certificates representing
the Restricted Stock; (viii) the Stockholders Agreement restricts the sale or
transfer of shares of Restricted Stock other than at specified times and under
specified circumstances; and (ix) a notation shall be made in the appropriate
records of the Company indicating that the Restricted Stock is subject to
restrictions on transfer and, if the Company should at some time in the future
engage the services of a securities transfer agent, appropriate stop transfer
instructions may be issued to such transfer agent with respect to the Restricted
Stock.

     (e) ADDITIONAL INVESTMENT REPRESENTATIONS. The Executive represents and
warrants that (i) the Executive's financial situation is such that the Executive
can afford to bear the economic risk of holding the Restricted Stock for an
indefinite period of time and suffer complete loss of the Executive's investment
in the Restricted Stock; (ii) the Executive's knowledge and experience in

                                     - 10 -
<PAGE>


financial and business matters (and, in particular, with respect to the Company)
are such that the Executive is capable of evaluating the merits and risks of the
Executive's investment in the Restricted Stock; (iii) the Executive understands
that the Restricted Stock is a speculative investment which involves a high
degree of risk of loss of the Executive's investment therein, that there are
substantial restrictions on the transferability of the Restricted Stock and that
on the date of this Agreement and for an indefinite period following such date
there will be no public market for the Restricted Stick and, accordingly, it may
not be possible to liquidate the Executive's investment in the Company at all,
including in case of emergency; (iv) the Executive and the Executive's
representatives, including the Executive's professional, tax and other advisors,
have carefully reviewed the financial and other information with respect to the
Company and its subsidiaries and the Executive understands and has taken
cognizance of (or has been advised by the Executive's representatives as to) all
the risks related to an investment in the Restricted Stock; (v) in making the
Executive's decision to invest in the Restricted Stock hereunder, the Executive
has relied upon independent investigations made by the Executive and, to the
extent believed by the Executive to be appropriate, the Executive's
representatives, including the Executive's own professional, tax and other
advisors; (vi) the Executive and the Executive's representatives have received
and read this Agreement, the Stockholders Agreement and all other documents
related to and executed or to be executed in connection with the transactions
contemplated hereby and thereby, and have been given the opportunity to examine
for a reasonable time prior to the date hereof all documents and to ask
questions of, and to receive answers from the Company and its representatives
concerning the terms and conditions of the investment in the Restricted Stock
and to obtain any additional information necessary to verify the accuracy of the
information supplied to it, and the Executive and the Executive's
representatives have received all additional information requested by them, and
no representations have been made to the Executive or such representatives
concerning the Restricted Stock, their respective affiliates, their businesses
or prospects or other matters, except as set forth in this Agreement; and (vii)
the Executive is an officer of the Company holding the position of Executive
Vice President of Sales and Marketing as of the date hereof, is familiar with
the operations and businesses of the Company, has access to all material
financial and other information available from the Company, and has significant
business experience in the party goods or similar business.

13.  SCOPE OF RESTRICTIONS.

     If any severable provision of this Agreement shall be held invalid or
unenforceable, such invalidity or unenforceability shall attach only to such
provision and shall not in any manner affect or render invalid or unenforceable
any other provision of this Agreement, and this Agreement shall be carried out
as if any such invalid or unenforceable provision were not contained herein;
provided, however, that if any of the restrictions contained in Paragraph 10
hereof shall be deemed to be unenforceable by reason of the extent, duration or
geographical scope thereof, or otherwise, then such restriction shall be deemed
reduced to such extent, duration, geographical scope or in such other manner as
otherwise required to make it enforceable, and, in such reduced form, Paragraph
10 hereof shall then be enforceable in the manner contemplated hereby.

14.  NOTICES.

     Any notice hereunder shall be sufficient if sent either (a) by hand, or (b)
by certified mail, return receipt requested, or (c) by commercial overnight
delivery service, in any event with postage,



                                     - 11 -
<PAGE>

fees and delivery charges prepaid. Such notice shall be deemed to have been
given on receipt, if delivered by hand or by overnight carrier, or three
business days after the date of deposit in an official depository of the United
States mail, if mailed. All notices shall be mailed or delivered, as aforesaid,
addressed to the party to be notified at such party's address set forth below or
at such other address as the party to be notified may have otherwise designated,
by notice in writing, with copies to their respective attorneys as set forth
below:

         If to the Company, at:      AMSCAN HOLDINGS, INC.
                                     80 Grasslands Road
                                     Elmsford, New York 10523


                                     Attention:  James M. Harrison, President
                                     Telephone:  (914) 784-4000
                                     Facsimile:   (914) 345-2056


         with a copy to:             KURZMAN EISENBERG CORBIN
                                     LEVER & GOODMAN, LLP
                                     One North Broadway, 10th Floor
                                     White Plains, New York  10601
                                     Attention:  Joel S. Lever, Esq.
                                     Telephone:  (914) 285-9800
                                     Facsimile:   (914) 285-9855


         If to Executive, to:        JAMES F. FLANAGAN
                                     12708 Granada Lane
                                     Leawood, KS 66209

15.  MISCELLANEOUS.

     (a) The parties severally acknowledge that they have not relied upon any
representations, warranties, negotiations, understandings, arrangements, or
other inducements not expressly set forth herein in entering into this
Agreement.

     (b) This Agreement may not be modified except by written modification
signed by all parties hereto, and its terms and conditions may not be deemed
waived except by written waiver signed by the party to be charged with such
waiver.

     (c) This Agreement contains the entire agreement and understanding by and
between the Company and Executive with respect to Executive's employment by the
Company, and supersedes all oral and written prior understandings and agreements
between the Company and Executive relating to the subject matter of this
Agreement and Executive's relationship to the Company.

     (d) This Agreement may be executed in counterparts, each of which will be
deemed an




                                     - 12 -
<PAGE>

original of this Agreement but all of which together will constitute one
Agreement.

     (e) This Agreement has been made in, and its validity and interpretation
will be determined under the internal laws of, the State of New York applicable
to contracts made and to be wholly performed therein. Any suit, action or other
proceeding in connection with this Agreement shall be brought by any party
hereto in a court of record in the State of New York, County of Westchester or
in the United States District Court for the Southern District of New York, each
of the parties hereto consenting to the jurisdiction of such courts for such
purpose.

     (f) This Agreement is binding upon and inures to the benefit of the
parties and their personal representatives, successors and assigns.

     (g) The paragraph headings used in this Agreement are included solely for
convenience and shall not affect or be used in connection with the
interpretation of this Agreement. Schedules annexed hereto are a part of this
Agreement as if set forth herein at length.

     (h) The rights and benefits of Executive under this Agreement are personal
to Executive and no such right or benefit shall be subject to voluntary or
involuntary alienation, assignment or transfer. The Company may not assign its
rights under this Agreement to any other person or entity other than a wholly
owned subsidiary or a corporation into which the Company may merge or to which
the Company may sell all or substantially all of its assets.

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

                                        AMSCAN HOLDINGS, INC.

                                        By: /s/ James M. Harrison
                                            ------------------------------------
                                            Name:  James M. Harrison
                                            Title: President

                                    EXECUTIVE:

                                            /s/ James F. Flanagan
                                            ------------------------------------
                                            JAMES F. FLANAGAN



                                     - 13 -