Document:

SEPARATION AGREEMENT

 

EXHIBIT 10.8
EXECUTION COPY

SEPARATION AGREEMENT

     
This SEPARATION AGREEMENT (the
“Agreement”) is dated as of August 26, 2002, and
is entered into between PARTY CITY CORPORATION (the
“Company”), and Thomas E. Larson
(“Executive”).

     
WHEREAS, Executive is currently employed by the
Company as Senior Vice President and Chief Financial Officer; and

     
WHEREAS, Executive wishes to resign from his
employment with the Company and the Company wishes to accept
Executive’s resignation; and

     
WHEREAS, Executive and the Company desire to
embody in this Agreement the terms and conditions applicable to
Executive’s resignation of employment with the Company; and

     
WHEREAS, this Agreement shall supersede all prior
oral and written agreements, arrangements and understandings
relating to the terms and conditions of Executive’s
resignation.

     
NOW, THEREFORE, the parties hereby agree:

     
1.     Termination
Date. Executive’s resignation from the Company will be
effective September 3, 2002 (the “Termination
Date”).

     
2.     Company
Property. Executive shall return to the Company all
Company-owned property in his possession on or prior to the
Termination Date, unless otherwise set forth herein.

     
3.     Termination
Benefits. Commencing as of the Termination Date, the Company
shall continue to pay, in accordance with the Company’s
prevailing payroll practices, Executive’s current Salary of
$285,749.92 annually ($21,562.49 monthly), for the period of six
(6) months beginning on the Termination Date and ending on
March 3, 2003.

     
4.     Benefit
Plans. Except as otherwise specifically provided in this
Agreement or by law or by any employee benefit plan,
Executive’s participation in all employee benefit plans and
executive compensation plans and practices of the Company shall
terminate on the Termination Date, and there shall be no other
payments or benefits payable to Executive by the Company,
including, but not limited to, any other salary, bonus,
commissions, fees, benefits, or other payments of any nature
whatsoever.

     
5.     Additional
Consideration. Executive acknowledges that pursuant to this
Agreement he is receiving consideration in addition to any
amounts to which he would otherwise have been entitled but for
this Agreement.

     
6.     Taxes. The
payments due to Executive under this Agreement shall be subject
to reduction to satisfy all applicable Federal, state and local
withholding tax obligations.

 

     
7.     Payment Upon
Death. Executive’s rights and obligations under this
Agreement are not transferable. However, if Executive should die
while any amounts would still be payable to him hereunder, all
such amounts shall be payable to Executive’s estate, heirs,
executors or beneficiaries in accordance with the terms hereof.

     
8.     Non-competition.

A.     Executive agrees
for a period of one (1) year from the Termination Date that
he will not, as a principal, agent, employee, employer,
consultant, stockholder, investor, director or co-partner of any
person, firm, corporation or business entity other than the
Company, or in any individual representative capacity
whatsoever, directly or indirectly, without the express prior
written consent of the Company:

     
(a) engage or participate in any business
whose products or services are competitive with that of the
Company, which business is exclusively the sale of party goods,
and which conducts or solicits business, or transacts with
supplier or customers located within the United States, Canada
or Puerto Rico;

     
(b) aid or counsel any other person, firm,
corporation or business entity to do any of the above;

     
(c) become employed by a firm, corporation,
partnership or joint venture which competes with the business of
the Company within the United States, Canada or Puerto Rico;

     
(d) approach, solicit business from, or
otherwise do business or deal with any customer of the Company
in connection with any product or service competitive to any
provided by the Company.

B.     Executive agrees
for a period of one year from the Termination Date that he will
not, as a principal, agent, employee, employer, consultant,
stockholder, investor, director or partner of any person, firm,
corporation or business entity other than the Company, or in any
individual representative capacity whatsoever, directly or
indirectly, without the express prior written consent of the
Company approach, counsel or attempt to induce any person who is
then in the employ of the Company to leave the employ of the
Company or employ or attempt to employ any such person or
persons who at the time during the preceding six months was in
the employ of the Company.

     
Executive acknowledges (i) that his position
with the Company required the performance of services which were
special, unique and extraordinary in character and placed him in
a position of confidence and trust with the customers and
employees of the Company, through which, among other things, he
obtained knowledge of the Company’s “technical
information” and “know-how” and became acquainted
with its customers, in which matters the Company has substantial
proprietary interests, (ii) that the restrictive covenants
set forth above are necessary in order to protect and maintain
such proprietary interests and the other legitimate business

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 interests of the Company, and (iii) that
the Company would not have entered into this Agreement unless
the non-competition covenants of this Section 8 were
included herein.

     
Executive also acknowledges that the business of
the Company presently extends throughout the United States,
Puerto Rico and other certain European countries, and that he
personally supervised and engaged in such business on behalf of
Company, and accordingly, it is reasonable that the restrictive
covenants set forth above are not more limited as to geographic
area then is set forth herein. Executive also represents to the
Company that the enforcement of such covenants will not prevent
Executive from earning a livelihood or impose an undue hardship
on the Executive.

     
If any provisions of this Section 8, or any
part thereof, is hereinafter construed to be invalid or
unenforceable, the same shall not affect the remainder of such
provision or provisions, which shall be given full effect,
without regard to the invalid portions. If any of the provisions
of this Section or any part thereof, is held to be unenforceable
because of the duration of such provision, the area covered
thereby or the type of conduct restricted therein, the parties
agree that the court making such determination shall have the
power to modify the duration, geographic area and/or other terms
or such provision and, as so modified, said provisions shall
then be enforceable. In the event that the courts of any one or
more jurisdictions shall not hold such provisions wholly or
partially unenforceable by reason of the scope thereof or
otherwise, it is the intention of the parties hereto that such
determination not bar or in any way affect the Company’s
right to the relief provided for herein in the courts of any
other jurisdictions as to breaches or threatened breaches of
such provisions in such other jurisdictions, the above
provisions as they relate to each jurisdiction being, for this
purpose, severable into diverse and independent convents.

     
The provision of this Section 8 shall be
construed as an agreement on the part of the Executive
independent of any other part of this Agreement or any other
agreement, and the existence of any claim or cause of action of
the Executive against the Company, whether predicated on this
Agreement or otherwise, shall not constitute a defense to the
enforcement by the Company of the provisions of this
Section 8.

     
9.     Release and
Waiver of Claims. Effective as of the Termination Date,
subject to Section 10 hereof, in consideration of the
payments, benefits, and other consideration provided to
Executive under this Agreement, Executive, for himself and his
family, heirs, executors, administrators, legal representatives,
and their respective successors and assigns, hereby releases and
forever discharges the Company, and all of its subsidiaries,
officers, directors, employees, agents, stockholders,
representatives, and their successors and assigns (collectively,
“Company Entities”), from all rights, claims or
demands Executive may have, arising at any time on or before the
date hereof, based on his employment with any Company Entity or
the termination of that employment, including without limitation
any claims under the Employment Agreement, or based on any
services provided to any Company Entity by Executive other than
pursuant to an employment relationship with any Company Entity.
This includes a release of any and all rights, claims or demands
Executive may have, whether known or unknown, under the Age
Discrimination in Employment Act, which prohibits age
discrimination in employment; Title VII of the Civil Rights
Act of 1964, which prohibits discrimination in employment based
on race, color, national origin, religion or sex; the Equal Pay
Act, which

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prohibits paying men and women unequal pay for
equal work; or under any other federal, state or local laws or
regulations regarding employment discrimination or termination
of employment. This also includes a release by Executive of any
claims for wrongful discharge under any statute, rule,
regulation or under the common law. Executive hereby agrees
never individually or with any person to file, or commence the
filing of, any charges, lawsuits, complaints or proceedings with
any governmental agency, or against any Company Entity, with
respect to any of the matters released by Executive pursuant to
this Section 9.

     
10.     Rights Not
Released or Waived. Section 9 hereof notwithstanding,
by signing this Agreement, Executive shall not have relinquished
his right to (i) benefits in accordance with the provisions
of any Company retirement plans subject to the Employee
Retirement Income Security Act of 1974, as amended, or
(ii) enforce the provisions of this Agreement.

     
11.     Release and
Waiver of Claims Under the Age Discrimination in Employment
Act. Executive acknowledges that the Company has encouraged
him to consult with an attorney of his choosing and, through
this Agreement, encourages him to consult with his attorney with
respect to any possible claims he may have, including claims
under the Age Discrimination in Employment Act
(“ADEA”), as well as under the other federal, state
and local laws described in Section 9 hereof. Executive
understands that by signing this Agreement he is in fact
waiving, releasing and forever giving up any claim under the
ADEA, as well as all other federal, state and local laws
described in Section 9 hereof that may have existed on or
prior to the date hereof.

     
12.     Waiting
Period and Revocation Period. Executive hereby acknowledges
that the Company has informed him that he has up to twenty-one
(21) days to sign this Agreement and he may knowingly and
voluntarily waive that twenty-one (21) day period by signing
this Agreement earlier. Executive also understands that he shall
have seven (7) days following the date on which he signs this
Agreement within which to revoke it by providing a written
notice of his revocation to the Company.

     
13.     Remedies.
Executive hereby acknowledges and understands that if he revokes
this Agreement within the seven (7)-day revocation period
provided under Section 12 above, the Company may, in
addition to any other remedies it may have, reclaim any amounts
paid to Executive under this Agreement to which Executive would
not be otherwise entitled, and/or terminate any payments to
which Executive would not be otherwise entitled that are
subsequently due hereunder.

     
14.     Non-Admission.
Executive expressly acknowledges that this Agreement does not
constitute an admission by the Company of any violation of any
employment law, regulation, ordinance, or administrative
procedure, or any other federal, state, or local law, common
law, regulation or ordinance, liability for which is expressly
denied.

     
15.     Non-Disparagement.
Executive shall not at any time after the date hereof disparage
the Company or any of its officers, directors, shareholders or
any of their respective affiliates. The obligations of Executive
under this Section 15 shall not apply to disclosures
required by applicable law, regulation or order of a court or
governmental agency.

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16.     Confidentiality.
Executive and the Company hereby agree to keep the terms of this
Agreement confidential. The obligations of Executive and the
Company under this Section 16 shall not apply to
disclosures required by applicable law, regulation or order of a
court or governmental agency.

     
17.     Opportunity
for Advice. By signing this Agreement, Executive
acknowledges that with the advice of the Company, he has had a
reasonable opportunity to consider advice from his legal counsel
and that the Company had encouraged him to seek such legal
counsel. Fully understanding these terms, Executive is entering
into this Agreement knowingly and voluntarily.

     
18.     Acceptance.
To accept this Agreement, Executive shall execute and date this
Agreement on the spaces provided and return a copy to the
Company at any time during the twenty-one (21)-day period
commencing on the date hereof. This Agreement shall take effect
on the eighth day following Executive’s execution of this
Agreement unless Executive’s written revocation is
delivered to the Company within seven (7) days after such
execution.

     
19.     Entire
Agreement. This Agreement represents the entire agreement of
the parties with respect to the Executive’s employment and
termination thereof. Except as specifically provided herein,
this Agreement shall supersede any other agreements between the
Executive and the Company in all respects effective as of the
Termination Date. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE
OF NEW JERSEY APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED
ENTIRELY WITHIN SUCH STATE.

     
20.     Relocation.
The Company agrees to reimburse Executive for his reasonable
personal moving expenses incurred should Executive relocate from
his home in New Jersey to Texas at any time through
March 3, 2003. Executive understands that the reasonable
personal moving expenses agreed to be reimbursed by the Company
pursuant to this Section 20 do not include any costs and
expenses which may be incurred by Executive in the sale of his
home in New Jersey or any bridge or refinance loans in
connection therewith. Executive shall submit not later than
March 16, 2003 those costs and expenses to be reimbursed
hereunder, along with documentation reasonable to verify the
payment of such costs and expenses. The Company agrees to
reimburse Executive within fifteen (15) days of the
Company’s receipt of such reimbursement request pursuant to
the provisions of this Section 20.

     
21.     Executive Out
Placement Service. The Company, at its expense, will provide
“Executive Out Placement” assistance through the
services of Goodrich and Sherwood (New York City or Parsippany,
NJ) or a comparable “Executive Out Placement” firm
from the Termination Date through March 16, 2003.

     
22.     Vested Stock
Options. Notwithstanding any Company policies to the
contrary, the Company agrees that Executive shall have until
March 3, 2003 to exercise any stock options which had
vested for Executive prior to the Termination Date.

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23.     Cell
Phones. Executive shall be permitted to use the
Company’s cell phone until March 3, 2003, at which
date Executive agrees to return such cell phone to the Company.

     
24.     Automobile
Allowance. Executive shall continue to receive through
March 3, 2003 Executive’s automobile allowance of
$675.00 per month.

     
25.     SEC
Filing. Executive and the Company agree to coordinate the
preparation and filing of any “Form 4” required
to be filed as a result of an acquisition/disposition of Company
stock that occurs from the Termination Date through
March 3, 2003. Executive agrees to notify the Company not
later than three (3) business days prior to Executive’s
contemplated acquisition/disposition of Company stock to
coordinate the timely filing of any required
“Form 4”. Executive and the Company further agree
to coordinate the filing of a “Form 5” or other
documents as may be required pursuant to SEC regulations
resulting from Executive’s “Section 16”
position while employed by the Company. The costs for preparing
and filing any of the Forms referenced in this Section 25
shall be borne by the Company.

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

		
	 	
    /s/ THOMAS E. LARSON
    
	 	

	 	Name: Thomas E. Larson
	 	 
	 	PARTY CITY CORPORATION
	 	 
	 	By: /s/ Melissa Wallace
	 	 
	 	

	 	Name: Melissa Wallace
	 	Title: VP of Human Resources

-6-EMPLOYMENT AGREEMENT

 

EXHIBIT 10.9

EMPLOYMENT AGREEMENT

     
THIS EMPLOYMENT AGREEMENT (the
“Agreement”), dated as of November 29, 2002, is
made and entered into by and between Party City Corporation, a
Delaware corporation (the “Company”), and Steve Skiba
(the “Executive”).

     
WHEREAS, the Company wishes to employ the
Executive, and the Executive wishes to serve the Company, in the
capacities and on the terms and conditions set forth in this
Agreement;

     
NOW, THEREFORE, it is hereby agreed as follows:

     
1.     Employment.

     
(a)     Agreement to
Employ. Upon the terms and subject to the conditions of this
Agreement, the Company hereby agrees to employ the Executive and
the Executive hereby agrees to accept his employment by the
Company.

     
(b)     Employment
Period. The Company shall employ the Executive for a one (1)
year period commencing on November 29, 2002 (the
“Commencement Date”), unless earlier terminated in
accordance with the provisions hereof. The employment period
shall automatically be extended for an indefinite number of
one-year periods, subject to earlier termination in accordance
with the provisions hereof, unless notice is given by either
party of an intent not to extend the period for additional years
at least two (2) months prior to the expiration of the then
current employment period. The period during which the Executive
is employed pursuant to this Agreement, including any extension
thereof in accordance with this Paragraph 1(b), shall be
referred to as the “Employment Period.”

     
2. Duties. During the Employment
Period, the Executive shall serve as Chief Information Officer
(CIO). Executive shall have such duties and responsibilities as
are consistent with and customarily assigned to his position
with the Company. Executive shall also have such other duties
and responsibilities as may from time to time be assigned to him
by the Chief Executive Officer of the Company (the
“CEO”) or any other officer of the Company having a
senior position. During the Employment Period, the Executive
shall devote his full attention and time to the business and
affairs of the Company and shall carry out such duties and
responsibilities faithfully and to the best of his ability.

     
3. Salary. For the services rendered
by the Executive under and during the Employment Period, the
Company shall pay to Executive as compensation, subject to any
required withholding, an annual base salary of $240,000 (the
“Base Salary”). In addition, in consideration for
Executive’s agreement to abide by the provisions of
Paragraph 8 herein, the Company shall pay to Executive,
subject to any required withholding, an annual noncompete
stipend of $10,000 (the “Noncompete Stipend”)(the Base
Salary and the Noncompete Stipend hereafter referred to as the
“Salary”). The Salary shall be payable in accordance
with the Company’s regular payroll practice for its senior
executives, as in effect from time to time.

 

     
4.     Bonus. In
addition to Salary, the Executive shall be entitled to earn an
annual bonus for each full fiscal year of the Company during the
Employment Period pursuant to the Company’s annual
incentive bonus plan as in effect from time to time and based on
attaining certain performance objectives thereunder (the
“Bonus”). The determination of what level the
Executive may participate in any Company bonus plan and the
maximum and target Bonus that may be earned shall be made by the
CEO in his sole discretion.

     
5.     Benefit
Plans. The Executive shall also be eligible to participate
in any health insurance plan, dental insurance plan, retirement
plan, fringe benefit plan, vacation plan or other employee
benefit plan generally made available by the Company to all
employees or to other executive officers of the Company in the
same class as the Executive. Participation in any such plan or
program shall be subject to the terms and conditions of such
plan, including any waiting periods and/or eligibility
requirements thereunder.

     
6.     Reimbursement
of Expenses. During the Employment Period, the Executive
shall be entitled to receive prompt reimbursement for all
reasonable expenses incurred by him in performing services
hereunder, in accordance with the Company’s policies and
procedures established for reimbursement of expenses of
executive officers in the same class as the Executive.
Reimbursement shall be subject to prompt presentation by
Executive of expense statements, receipts or such other
supporting information as the Company may require or as may be
required for tax purposes.

     
7.     Termination of
Employment.

		
	 	     
    (a) Termination of the Employment
    Period. Notwithstanding Paragraph 1(b), the Company
    reserves the right at any time during the Employment Period to
    terminate Executive’s employment with or without Cause. The
    Employment Period shall end upon the earliest to occur of
    (i) Executive’s death or Disability (as defined
    below), (ii) a termination of Executive’s employment
    by the Company for Cause (as defined below), (iii) a
    termination of Executive’s employment by the Company
    without Cause, (iv) a resignation by the Executive, or
    (v) the end of the final Employment Period after notice of
    nonrenewal pursuant to Paragraph 1(b) herein.
    
	 
	 	     
    (b) Benefits Payable Upon
    Termination. (i) In the event of the termination of
    Executive’s employment on account of Executive’s death
    or Disability, Executive’s voluntary resignation or the
    Company’s termination of Executive’s employment for
    Cause, the Company shall pay to Executive, or Executive’s
    estate on account of his death, in a lump sum within 10 business
    days following Executive’s termination, all earned but
    unpaid then-existing Salary and Bonus; provided however, that,
    whether any Bonus is earned at the time of Executive’s
    termination will be determined by reference to the terms of the
    Company’s respective bonus or performance-based
    compensation plans or programs, in any, or, if not set forth
    therein, as determined by the Company in its sole discretion
    (such earned but unpaid Salary and Bonus hereafter referred to
    as “Earned Compensation”). (ii) In the event of
    the termination of Executive’s employment by the Company
    without Cause, the Company shall (A) pay to Executive, in a
    lump sum within 10 business days following such termination, all
    Earned Compensation and (B) continue to pay
    Executive’s then-existing Salary, in accordance with the
    Company’s regular payroll practices, (the “Severance
    Payments”) for the twenty-six (26) weeks
    

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immediately following such termination (the
“Severance Period”).

     
(c) Notwithstanding anything herein to the
contrary, to the degree that a Bonus has been earned but cannot
be calculated because the performance objectives identified to
such Bonus cannot yet be calculated then payment of the earned
Bonus shall occur in a lump sum within 10 business days
following the date on which such performance goals are
calculated.

     
(d) Definitions. For the purposes of
this Agreement the following capitalized terms shall have the
following meanings:

		
	 	     
    (i) “Cause” shall mean any of the
    following: (A) fraud, personal dishonesty,
    embezzlement, defalcation or acts of gross negligence or gross
    misconduct on the part of Executive in the course of his
    employment; (B) a material breach of Executive’s
    fiduciary duty of loyalty to the Company; (C) a material
    breach of this Agreement by Executive that is injurious to the
    Company; (D) Executive’s conviction by a court of
    competent jurisdiction of, or pleading “guilty” or
    “no contest” to, (x) a felony, or (y) any
    other criminal charge (other than minor traffic violations)
    which could reasonably be expected to have, or which actually
    has, a material adverse financial impact on the Company or a
    material adverse impact on the Company’s reputation and
    standing in the community; (E) consistent drunkenness by
    Executive or his illegal use of narcotics which is, or could
    reasonably be expected to become, materially injurious to the
    reputation or business of the Company or which impairs, or could
    reasonably be expected to impair, the performance of
    Executive’s duties hereunder; (F) any breach of
    Paragraph 8 hereunder; or (G) willful failure by
    Executive to follow the lawful directions of the CEO.
    
	 
	 	     
    (ii) “Disability” shall mean
    Executive’s inability to perform the material duties
    required of him by the Company and historically performed by him
    due to a mental or physical illness or incapacity for a period
    of three consecutive months or for shorter periods aggregating
    four months during any twelve-month period.
    

     
(e) Full Discharge of Company
Obligations. The amounts payable to the Executive pursuant
to this Paragraph 7 following termination of his employment
shall be in full and complete satisfaction of the
Executive’s rights under this Agreement and any other
claims he may have in respect of his employment by the Company
or any of its subsidiaries. Such amounts shall constitute
liquidated damages with respect to any and all such rights and
claims and, upon the commencement of Executive’s receipt of
such amounts, and contingent on the full payment of such
amounts, the Company shall be released and discharged from any
and all liability to the Executive in connection with this
Agreement or otherwise in connection with the Executive’s
employment with the Company and its subsidiaries. Executive
agrees to enter into a release and waiver of claims agreement
satisfactory to the Company at the time of Executive’s
termination of employment in order to implement the purpose of
this Paragraph 7(e).

     
(f) Offset for Subsequent Employment.
In the event during the Severance Period the Executive becomes
employed with another entity (“Post Termination
Employment”), the Company’s obligation to make
Severance Payments shall be reduced on a dollar-for-dollar basis
by the amount that Executive earns on account of such Post
Termination Employment. The Executive agrees to notify the
Company of such Post Termination Employment and to disclose

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to the Company the compensation to be earned by
Executive therein. In the event that the Executive fails to
notify the Company of such Post Termination Employment, within
ten (10) business days of the date Executive first undertakes
such Post Termination Employment, the Company’s obligation
to make Severance Payments shall expire.

     
8.     Noncompetition
and Confidentiality. By and in consideration of the
Noncompete Stipend and Salary and other benefits to be provided
by the Company hereunder, the Executive agrees that:

          
(a) Noncompetition. During the
Employment Period and during the six (6) month period following
termination of the Executive’s employment for any reason
(the “Restriction Period”), the Executive shall not,
directly or indirectly, whether as a principal, partner,
employee, agent, consultant, shareholder (other than shares
purchased prior to the effective date of this Agreement or as a
holder, or a member of a group which is a holder, of not in
excess of five percent (5%) of the outstanding voting shares of
any publicly traded company) or in any other relationship or
capacity be affiliated with any business corporation,
partnership, enterprise or entity in any geographic area, which
competes with the Company’s Business (as defined below).
For purposes of this Agreement, the “Company’s
Business” at any time means the sale of party goods,
including costumes, and any other line of business which the
Company is engaged in or has substantial plans to become engaged
in at the time.

          
(b) Confidentiality. Unless
specifically authorized in writing by the Company to do so,
except to the extent required by an order of a court having
competent jurisdiction or under subpoena from an appropriate
government agency, the Executive shall not disclose (i) any
information disclosed or made available to the Executive or
known by the Executive as a direct or indirect consequence of or
through employment by the Company, or (ii) any other
information related to the Company’s referral sources,
business practices, trade secrets, operating methods,
techniques, products, processes, services or other operations
(individually or collectively Operations”), including, but
not limited to, information relating to research, development,
inventions, accounting, engineering or marketing of such
Operations and including any such information of any third party
which the Company is under an obligation to keep confidential
(individually or collectively, “Confidential
Information”) to any third person unless such Confidential
Information has been previously disclosed to the public by the
Company or is in the public domain (other than by reason of the
Executive’s breach of this Paragraph 8(b)).

          
(c) Nonsolicitation of Employees.
During the Employment Period and the Restricted Period, the
Executive shall not directly or indirectly solicit, encourage or
induce any employee of the Company or any of its subsidiaries to
terminate employment with such entity, and shall not directly or
indirectly, either individually or as owner, agent, employee,
consultant or otherwise, employ or offer employment to any
person who is or was employed by the Company or a subsidiary
thereof unless such person shall have ceased to be employed by
such entity for a period of at least six months.

          
(d) Company Property. Except as
expressly provided herein, at the time of the Executive’s
termination of employment or at any other time as the CEO or the
Board may request, the Executive shall return to the Company all
property of the Company, including any automobile and other
machinery and all memoranda, notes, records, reports, manuals,
drawings

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and blueprints, including electronic versions,
concerning the Company’s Business (and all copies thereof)
in the Executive’s possession or under his control.

     
(e)     Protection of
Legitimate Business Interests. Executive acknowledges that
(i) Executive’s position with the Company requires the
performance of services which are special, unique and
extraordinary in character and places him in a position of
confidence and trust with the customers and employees of the
Company, through which, among other things, he will obtain
knowledge of the Company’s technical information and
know-how and become acquainted with its customers, in which
matters the Company has substantial proprietary interests,
(ii) the restrictive covenants in this Paragraph 8 are
necessary in order to protect and maintain such proprietary
interests and other legitimate business interests of the
Company, and (iii) the Company would not have entered into
this Agreement unless such covenants were included herein.

     
(f)     Injunctive
Relief and Other Remedies with Respect to Covenants. The
Executive acknowledges and agrees that the covenants and
obligations of the Executive with respect to noncompetition,
nonsolicitation, confidentiality and Company property, relate to
special, unique and extraordinary matters and that a violation
of any of the terms of such covenants and obligations will cause
the Company irreparable injury for which adequate remedies are
not available at law. Therefore, the Executive agrees that the
Company shall (i) be entitled to an injunction, restraining
order or such other equitable relief (without the requirement to
post bond) restraining the Executive from committing any
violation of the covenants and obligations contained in this
Paragraph 8 and (ii) have no further obligation to
make any payments to the Executive hereunder following any
material violation of the covenants and obligations contained in
this Paragraph 8. These remedies are cumulative and are in
addition to any other rights and remedies the Company may have
at law or in equity. In connection with the foregoing provisions
of this Paragraph 8, the Executive represents that his
economic means and circumstances are such that such provisions
will not prevent him from providing for himself and his family
on a basis satisfactory to him.

     
(g)     Executive
acknowledges that, in addition to the Noncompete Stipend, any
and all options to acquire Company stock granted to Executive
during the course of Executive’s employment with the
Company (“Options”) are and were granted in
consideration for Executive’s covenants pursuant to
subparagraphs 8(a), (b), (c) and (d) herein. In the event
the Executive breaches any of the provisions of
subparagraphs 8(a),(b),(c) or (d) herein, all Options
(whether vested or not) then held by Executive shall expire and
terminate immediately. For purposes of this Paragraph 8,
the determination of any breach by the Executive of any
provision of this Paragraph 8 shall be made by the Board of
Directors of the Company in its sole discretion, and such
determination shall be final and binding on the Company and
Executive.

5

 

     
(h) Non-Disparagement. Executive
shall not at any time after the date hereof disparage the
Company or any of its officers, directors, shareholders or any
of their respective affiliates. The obligations of Executive
under this Section 8(h) shall not apply to disclosures required
by applicable law, regulation or order of a court or
governmental agency.

 

		
	9.	
    Miscellaneous.

     
(a) Survival. Paragraphs 7
(relating to early termination of employment), 8 (relating
to noncompetition, nonsolicitation and confidentiality and
non-disparagement), 9(c) (relating to arbitration), and
9(n) (relating to governing law) shall survive the
termination hereof.

     
(b) Validity and Enforceability. The
Executive acknowledge and agrees that the covenants set forth in
Paragraph 8 are reasonable and valid in geographical and
temporal scope and in all other respects. The invalidity or
unenforceability of any provisions or provisions of this
Agreement shall not affect the validity or enforceability of any
other provision or provisions of this Agreement, which shall
remain in full force and effect. If any provision of this
Agreement is held to be invalid, void or unenforceable in any
jurisdiction, any court or arbitrator so holding shall
substitute a valid, enforceable provision that preserves, to the
maximum lawful extent, the terms and intent of such provisions
of this Agreement. If any of the provisions of, or covenants
contained in, this Agreement are hereafter construed to be
invalid or unenforceable in any jurisdiction, the same shall not
affect the remainder of the provisions or the enforceability
thereof in any other jurisdiction, which shall be given full
effect, without regard to the invalidity or unenforceability in
such other jurisdiction. Any such holding shall affect such
provision of this Agreement, solely as to that jurisdiction,
without rendering that or any other provision of this Agreement
invalid, illegal, or unenforceable in any other jurisdiction. If
any covenant should be deemed invalid, illegal or unenforceable
because its scope, either geographical or temporal, is
considered excessive, such covenant will be modified so that the
scope of the covenant is reduced only to the minimum extent
necessary to render the modified covenant valid, legal and
enforceable.

     
(c) Arbitration. Subject to
Paragraph 8(f), any dispute or controversy arising under or
in connection with this Agreement shall be resolved by binding
arbitration. The arbitration shall be held in Morris County, New
Jersey and except to the extent inconsistent with this
Agreement, shall be conducted in accordance with the Voluntary
Labor Arbitration Rules of the American Arbitration Association
then in effect at the time of the arbitration, and otherwise in
accordance with principles which would be applied by a court of
law or equity. The arbitrator shall be acceptable to both the
Company and the Executive. If the parties cannot agree on an
acceptable arbitrator, the dispute shall be heard by a panel of
the arbitrators, one appointed by each of the parties and the
third appointed by the other two arbitrators.

     
(d) Binding Effect. This Agreement
shall be binding on, and shall inure to the benefit of, the
Company and any person or entity that succeeds to the interest
of the Company (regardless of whether such succession does or
does not occur by operation of law) by reason of the sale of all
or a portion of the Company’s stock, a merger,
consolidation or reorganization involving the Company, or unless
the Company otherwise elects in writing, a sale of the assets of

-6-

 

the business of the Company (or portion thereof)
in which the Executive performs a majority of his services. This
Agreement shall also inure to the benefit of the
Executive’s heirs, executors, administrators and legal
representatives.

     
(e) Assignment. This Agreement, and
the Executive’s rights and obligations hereunder, may not
be assigned by the Executive. The Company may assign its rights,
together with its obligations, hereunder in connection with any
sale, transfer or other disposition of all or substantially all
of the business assets with respect to which Executive is
performing a majority of his services at any such time.

     
(f) Entire Agreement. This Agreement
constitutes the entire agreement between the parties hereto with
respect to the matters referred to herein. No other agreement
relating to the terms of the Executive’s employment by the
Company, oral or otherwise, shall be binding between the parties
unless it is in writing and signed by the party against whom
enforcement is sought. There are no promises, representations,
inducements or statements between the parties relating to the
terms of Executive’s employment with the Company other than
those that are expressly contained herein. The Executive
acknowledges that he is entering into this Agreement of his own
free will and accord, and with no duress, that he has read this
Agreement and that he understands it and its legal consequences.

     
(g) Waiver. Waiver by any party
hereto of any breach or default by the other party of any of the
terms of this Agreement shall not operate as a waiver of any
other breach or default, whether similar to or different from
the breach of default waived. No waiver of any provision of this
Agreement shall be implied from any course of dealing between
the parties hereto or from any failure by either party hereto to
assert its or his rights hereunder on any occasion or series of
occasions.

     
(h) Notices. Any notice required or
desired to be delivered under this Agreement shall be in writing
and shall be delivered personally, by courier service, by
registered mail, return receipt requested, or by telecopy and
shall be effective upon actual receipt by the party to which
such notice shall be directed, and shall be addressed as follows
(or to such other address as the party entitled to notice shall
hereafter designate in accordance with the terms hereof):

			
	 	If to the Company:	Party City Corporation
	 	 	400 Commons Way
	 	 	Rockaway, New Jersey
	 	 	Attention:     Vice
President, General Counsel

	 	If to the Executive:	The most recent home address of the Executive
    noted on the records of the Company.

-7-

 

     
(i) No Conflicting Obligations. The
Executive represents that his performance of the terms of this
Agreement and his employment by the Company does not and will
not breach any agreement to which the Executive is a party
including (without limitation) any agreement to keep in
confidence proprietary information or trade secrets acquired by
the Executive in confidence or in trust prior to the date of
this Agreement. The Executive has not entered into, and hereby
agrees not to enter into, any agreement whether written or oral
in conflict with this Agreement. The Executive further agrees
not to use in the performance of his duties for the Company any
confidential materials or documents of a present or former
employer of the Executive, or any materials or documents
obtained by the Executive under a binder of confidentiality
imposed by reason of any of the Executive’s consulting
relationships, if any, unless such materials or documents are
generally available to the public or the Executive has
authorization from such present or former employer or client for
the possession and unrestricted use of such materials. The
provisions of this Paragraph 9(i) shall survive any
termination of this Agreement.

     
(j) Amendments. This Agreement may
not be altered, modified or amended except by a written
instrument signed by each of the parties hereto.

     
(k) Headings. Headings to paragraphs
in this Agreement are for the convenience of the parties only
and are not intended to be part of or to affect the meaning or
interpretation hereof.

     
(l) Counterparts. This Agreement may
be executed in counterparts, each of which shall be deemed an
original but all of which together shall constitute one and the
same instrument.

     
(m) Withholding. Any payments
provided for herein shall be reduced by any amounts required to
be withheld by the Company from time to time under applicable
Federal, State or local income or employment tax laws or similar
statutes or other provisions of law then in effect.

     
(n) Governing Law. This Agreement
shall be governed by the laws of the State of New Jersey,
without reference to principles of conflicts or choice of law
under which the law of any other jurisdiction would apply.

-8-

 

     
IN WITNESS WHEREOF, the Company has caused this
Agreement to be executed by its duly authorized officer and the
Executive has hereunto set his hand as of the day and year first
above written.

		
	 	
    PARTY CITY CORPORATION
    
	 	 
	 	By: /s/ Melissa Wallace
	 	

			
	 	Its: 	
    11/29/02
    

		
	 	
    

	 
	 	
    EXECUTIVE
    
	 
	 	/s/ STEVE SKIBA
    
	 	
    

	 	Steve Skiba

-9-

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