Document:

<PAGE>

                                        1

                                                                    Exhibit 4.03

                                 CITIGROUP INC.

                                       AND

                                 CITIBANK, N.A.
                  AS FISCAL AGENT, REGISTRAR AND EXCHANGE AGENT

                                       AND

            DEXIA BANQUE INTERNATIONALE A LUXEMBOURG, SOCIETE ANONYME
                       AS PAYING AGENT AND TRANSFER AGENT

                                AGENCY AGREEMENT
  EURO 1,350,000,000 4.75% FIXED RATE/FLOATING RATE SUBORDINATED NOTES DUE 2019
                          DATED AS OF FEBRUARY 10, 2004

<PAGE>

                                        2

THIS AGREEMENT is made in London as of February 10, 2004, BY

(1)      CITIGROUP INC. (the "ISSUER").

(2)      CITIBANK, N.A. ("CITIBANK, N.A."), which shall act as fiscal agent,
         registrar and exchange agent (hereinafter referred to in such
         respective capacities as "FISCAL AGENT", "REGISTRAR" or as "EXCHANGE
         AGENT", which expressions shall include any successor or successors
         thereto).

(3)      DEXIA BANQUE INTERNATIONALE A LUXEMBOURG, SOCIETE ANONYME, which shall
         act as paying agent and transfer agent (hereinafter referred to as
         "PAYING AGENT" and "TRANSFER AGENT", which expression shall include any
         successor or successors thereto).

         WHEREAS pursuant to the Terms Agreement dated January 30, 2004 (the
"UNDERWRITING AGREEMENT") between the Issuer and the Underwriters named therein,
the Issuer has agreed to issue its Euro 1,350,000,000 4.75% Fixed/Floating Rate
Subordinated Notes due February 2019 (the "NOTES"); and

         WHEREAS the Issuer wishes to appoint Citibank, N.A. to act as Fiscal
Agent, Registrar and Exchange Agent and Dexia Banque Internationale a
Luxembourg, societe anonyme as Paying Agent and Transfer Agent in relation to
the Notes upon the terms and conditions set forth in this Agreement and the
Schedules hereto.

         IT IS HEREBY AGREED as follows:

1.       DEFINITIONS, INTERPRETATION

         The following terms shall, unless the context otherwise requires, have
         the respective meanings indicated below:

         "AGENT(S)" means any of the Fiscal Agent, the Registrar, the Paying
         Agent and the Transfer Agent.

         "CONDITIONS" means the terms and conditions of the Notes, as contained
         in the Global Notes, in the Prospectus Supplement dated October 31,
         2003 and the Indenture.

         "GLOBAL NOTES" means either one or both of (i) the International Global
         Note in the form of Schedule 1 attached hereto and (ii) the DTC Global
         Notes in the form of Schedule 2 attached hereto (also referred to
         herein as the "DTC GLOBAL NOTE" and the "INTERNATIONAL GLOBAL NOTE",
         respectively).

         "INDENTURE" means the Indenture dated as of April 12, 2001, as amended
         and supplemented to date, between the Issuer and J.P. Morgan Trust
         Company, N.A. (the "TRUSTEE").

         Terms not defined herein shall have the same meanings as are assigned
         thereto in the Underwriting Agreement and the Conditions.

<PAGE>

                                        3

2.       APPOINTMENTS

2.1      The Issuer hereby appoints Citibank, N.A. to act as Fiscal Agent,
Registrar and Exchange Agent in respect of the Notes and Global Notes.

2.2      Citibank, N.A. hereby accepts such appointments and the resulting
obligations, and agrees to act in such capacities, on the terms and conditions
set out in this Agreement and the Schedules hereto. In particular, the Fiscal
Agent agrees to effect any publication of notices pursuant to the Conditions.

2.3      The Issuer hereby appoints Dexia Banque Internationale a Luxembourg,
societe anonyme to act as Paying Agent and Transfer Agent in respect of the
Notes and Global Notes.

2.4      Dexia Banque Internationale a Luxembourg, societe anonyme hereby
accepts such appointments and the resulting obligations, and agrees to act in
such capacities, on the terms and conditions set out in this Agreement and the
Schedules hereto.

2.5      The obligations of the Agents are several and not joint.

3.       THE NOTES

3.1      The Notes shall be represented by permanent Global Notes without
interest coupons as specified in the Conditions. The International Global Note
and the DTC Global Note shall be substantially in the forms attached hereto as
Schedules 1 and 2, respectively, in each case with such changes as may be agreed
between the Issuer and the Trustee. The Conditions shall be attached to, or
endorsed upon, each Global Note. In the event that individual definitive Notes
are issued, the parties shall enter into a supplement to this Agreement to
provide for the matters set forth herein with regard to such definitive Notes.

3.2      Each Global Note shall be signed manually by a duly authorised officer
of the Issuer and dated the Issue Date. Each Global Note shall be authenticated
manually by Citibank, N.A., as authenticating agent on behalf of the Trustee,
and delivered to (i) in the case of the International Global Note, Citibank,
N.A. as common depositary for Euroclear and Clearstream, and (ii), in the case
of the DTC Global Notes, Citibank, N.A., London office as custodian for The
Depository Trust Company, New York ("DTC").

4.       PAYING AGENCY

4.1      The Issuer shall remit the funds necessary for the payment of interest
on and principal of the Notes to the Fiscal Agent, in Euros in same-day funds,
to such account at the Fiscal Agent in London as the Fiscal Agent may from time
to time specify (the "REDEMPTION ACCOUNT") on the Business Day such payment is
due, provided always that, if any due date shall not be a Business Day, the
Issuer shall make such transfer to the account of the Fiscal Agent on the next
succeeding Business Day (for the purposes of this Clause 4, Business Day shall
mean (x) a day on which commercial banks and foreign exchange markets settle
payments and are open for general business in each of London and The City of New
York and (y) a day which is a TARGET business day).

The Issuer hereby authorizes and directs the Fiscal Agent, from the amounts so
paid to it, to make payment of the principal of, and interest on, the Notes on
the due date for payment set forth in the Conditions and this Agreement. If
applicable, the Fiscal Agent will, from funds so received from the Issuer,
credit to the account of the Paying Agent the amounts of all such payments made
by it in accordance with the provisions of this Agreement.

The Issuer shall confirm to the Fiscal Agent not later than 10:00 a.m. (London
time) on the second Business Day before the relevant date for such payment that
it has issued irrevocable payment instructions for such payment to be made.

4.2      If for any reason the Fiscal Agent does not receive unconditionally the
full amount payable by the Issuer on the relevant due date in respect of all the
outstanding or maturing Notes, the Fiscal Agent

<PAGE>

                                        4

shall forthwith notify immediately the Issuer by telephone followed by facsimile
and the Fiscal Agent shall not be bound to make any payment of principal or
interest in respect of the Notes until the Fiscal Agent has received to its
order the full amount of the monies then due and payable in respect of all
outstanding or maturing Notes, provided, however, that if the Fiscal Agent
shall, in its discretion, make any payment of principal or interest on or after
the due date therefor in respect of the Notes prior to its unconditional receipt
of the full amount then due and payable in respect of all outstanding Notes, the
Issuer will promptly pay such amount to the Fiscal Agent and will compensate the
Fiscal Agent at a rate equal to the Fiscal Agent's cost of funding.

4.3      Out of the sums paid to the Fiscal Agent in respect of interest and
principal on the Notes, the Fiscal Agent will make payment free of charge to the
registered holder of the International Global Note and the DTC Global Note as
stipulated in Clause 9 below, in the amounts specified in the Conditions. The
Fiscal Agent shall obtain from the Registrar, and the Registrar shall supply,
such details as are required for the Paying Agent to make payment as stated
above.

4.4      In respect of the monies paid to it relating to any Note, the Fiscal
Agent

         4.4.1    shall not be entitled to exercise any lien, right of set-off
         or similar claim (including without limitation any claim arising from
         or relating to any other issue of securities by the Issuer),

         4.4.2    shall not be required to account for interest thereon and

         4.4.3    money held by it need not be segregated except as may be
         required by applicable law.

5.       DOCUMENTS FOR INSPECTION AND PUBLICATION OF NOTICES

5.1      On behalf and at the request and expense of the Issuer, the Fiscal
Agent shall cause to be published any notices required to be given by the Issuer
in accordance with the Conditions.

5.2      The Issuer shall provide to the Fiscal Agent sufficient copies of all
documents required by the Conditions to be available for issue or inspection,
and the Fiscal Agent shall make such copies available to Noteholders upon their
request.

5.3      To the extent practicable, the Issuer shall provide the Fiscal Agent
with a copy (prior to publication) of all notices to be issued in connection
with the Notes.

6.       CANCELLATION OF THE GLOBAL NOTES

6.1      Subject to the terms of the Indenture, promptly upon the Issuer's
request, the Registrar shall take all measures necessary to cancel any Notes
which the Issuer has repurchased or whose maturity has been accelerated pursuant
to the Conditions. The Registrar shall cause any such Notes (i) to the extent
represented by the International Global Note, to be cancelled resulting in a
reduction in the aggregate amount of the Notes represented by the International
Global Note by the aggregate amount of Notes so cancelled, and (ii) to the
extent represented by the DTC Global Note, to be cancelled in accordance with
the procedures established for that purpose by DTC, resulting in a reduction in
the aggregate amount of the Notes represented by the DTC Global Note by the
aggregate amount of the Notes so cancelled.

6.2      On the same day such cancellation is effected, the Registrar shall
record such cancellation of Notes on the Register in such a way that the
aggregate principal amount of Notes cancelled at any time together with the
aggregate principal amount of Notes outstanding and represented by the Global
Notes shall equal the aggregate principal amount of Notes originally issued by
the Issuer.

6.3      The Registrar shall upon request furnish the Issuer with a notice of
cancellation signed by an authorized officer of the Registrar confirming the
cancellation of such Notes and the corresponding reduction of the relevant
Global Note(s).

<PAGE>

                                        5

7.       DUTIES OF THE REGISTRAR

7.1      The Registrar shall maintain the Register in London in accordance with
the Conditions. The Register shall show the aggregate amount of Notes
represented by each Global Note at the date of issue and all subsequent
transfers and exchanges involving a change in such amounts and the names and
addresses of the registered holders (each a "PAYEE"). On the first Business Day
after the Record Date for any interest payment on the Notes, the Registrar shall
send payment details in respect of the Payees and the Euros accounts to which
transfers should be made to the Fiscal Agent.

7.2      Transfers or exchanges of Notes will be made in accordance with the
Conditions, the procedures established for this purpose between Euroclear,
Clearstream, DTC and the Registrar, and Euroclear, Clearstream and DTC's
regulations applicable to such transfers or exchanges. Any such transfer or
exchange which results in a change in the aggregate principal amount of Notes
held by Euroclear, Clearstream and DTC shall be notified by Euroclear,
Clearstream and DTC to the Registrar. The Registrar shall promptly enter details
of the transfer or exchange in the Register, which entry shall, without further
action, cause the aggregate principal amount represented by each Global Note to
be amended accordingly.

7.3      The Registrar shall at all reasonable times during office hours make
the Register available to the Issuer and the Fiscal Agent or any person
authorised by either of them for inspection and for the taking of copies thereof
or extracts therefrom, and the Registrar shall deliver to such persons such
information contained in the Register or relating to the Notes as they may
reasonably request.

8.       DUTIES OF THE TRANSFER AGENT

If and to the extent so specified by the Conditions and in accordance therewith,
or if otherwise requested by the Issuer, the Transfer Agent shall make available
all relevant forms of transfer, inform the Registrar of the name and address of
the relevant person to be inserted in the Register and carry out such other acts
as may be necessary to give effect to the Conditions and this Agreement.

9.       PAYMENTS TO DTC NOTEHOLDERS

9.1      All amounts of principal and interest due in respect of the Notes which
are represented by the DTC Global Note (each a "DTC AMOUNT") shall be paid in
U.S. dollars (each such payment being referred to herein as a "U.S. DOLLAR
PAYMENT"), unless DTC has advised the Fiscal Agent that the relevant Noteholder
has made an effective election to receive all or a portion of its payment in
Euros outside DTC (each a "EUROS PAYMENT").

9.2      The Paying Agent shall, from each DTC Amount received by it, make U.S.
Dollar Payments in accordance with the Conditions and Euros Payments in
accordance with the Conditions.

10.      DUTIES OF EXCHANGE AGENT

         For the purposes of this Clause 10, a "payment date" shall be each date
         on which the Issuer is obligated to remit funds to the Fiscal Agent
         pursuant to Clause 4.1.

         The Exchange Agent shall:

(i)      accept Euros by remittance to an account maintained by the Exchange
         Agent of the total amount of interest or principal due on any payment
         date on Notes held by Cede & Co. (as nominee of DTC) on the Record
         Date. The Exchange Agent shall be advised by Cede & Co. (as nominee of
         DTC) if any beneficial holders of the Notes held by Cede & Co. (as
         nominee of DTC) have elected to receive payment in Euros and, if so,
         the amount of Notes held by such holders and the accounts to which such
         payments in Euros are to be wired. On the payment date, the Exchange
         Agent shall wire payment in the appropriate Euro amounts to the
         accounts indicated. The remainder on such payment date shall be
         exchanged by the Exchange Agent pursuant to sub-clause (ii) below into
         U.S. dollars and, after deduction of any costs relating to such
         exchange, shall be paid to Cede & Co. (as nominee of DTC) on the
         payment date; and

<PAGE>

                                        6

(ii)     at or prior to 11:00 a.m., London time, on the second London business
         day preceding the applicable payment date, enter into a contract for
         the purchase of U.S. dollars with the Specified Amount of Euros for
         settlement on such payment date. "SPECIFIED AMOUNT" shall mean the
         aggregate amount of Euros payable to all Noteholders holding Notes
         through participants of DTC that have not elected to receive payments
         in Euros. The amount of U.S. dollars payable in respect of a particular
         payment under the DTC Global Note will be equal to the amount of Euros
         otherwise payable exchanged into U.S. dollars at the Euro/U.S.$
         exchange rate prevailing as at 11:00 a.m. (London time) on the second
         London business day prior to the relevant payment date, less any costs
         incurred by the Exchange Agent for such conversion (such costs to be
         shared pro rata among holders under the DTC Global Note accepting U.S.
         dollar payments in proportion of their respective holdings). If an
         exchange rate bid quotation is not so available, the Exchange Agent
         shall obtain a bid quotation from a leading foreign exchange bank in
         London selected by the Exchange Agent after consultation with the
         Issuer. If no bid quotation is so available, payment will be made in
         Euros to the account or accounts specified by DTC to the Exchange
         Agent. In this sub-clause (ii), the term "London business day" shall
         mean any day on which commercial banks and foreign exchange markets
         settle payments in New York City and London.

11.      CONDITIONS OF APPOINTMENT

11.1     The Issuer will pay to the Agents a remuneration for all services
rendered hereunder by the Agents in connection with the Notes together with any
expenses incurred as separately agreed upon by the Agents and the Issuer.

11.2     The Issuer will indemnify and hold harmless each of the Agents against
any loss, liability or expense which it may incur or any claim, action or demand
which may be made against it resulting from the negligence or wilful misconduct
on the part of the Issuer (or its officers, employees or agents (other than the
Agents and their officers, employees, and agents)) and arising out of or in
connection with such Agent's appointment or the exercise of its powers and
duties hereunder without negligence or wilful misconduct on the part of such
Agent.

11.3     Each Agent will indemnify and hold harmless the Issuer against any
loss, liability or expense incurred by the Issuer or any claim, action or demand
which may be made against the Issuer resulting from the negligence or wilful
misconduct on the part of such Agent (or such Agent's officers, employees or
agents) and arising out of or in connection with such Agent's duties hereunder.
Notwithstanding the foregoing, under no circumstances will any Agent be liable
to the Issuer or any other person for any consequential loss (being loss of
business, goodwill, opportunity or profit) even if advised to the possibility of
such loss or damages.

11.4     The indemnities above shall survive the termination or expiry of this
Agreement.

11.5     Each of the Agents shall be protected and shall incur no liability for
or in respect of any action taken, omitted or suffered in reliance upon any
instruction or communication from the Issuer or any document reasonably believed
by it to be genuine and to have been delivered, signed or sent by the proper
party or parties in accordance with the provisions hereof, except such as may
result from its own negligence or wilful misconduct or that of its officers,
employees or agents.

11.6     In acting hereunder and in connection with the Notes, the Agents do not
assume any relationship of agency and trust for the Noteholders, and shall not
have any obligation towards them except that all funds held by the Fiscal Agent
for payment of principal of or interest on the Notes shall be held exclusively
for the benefit of and for payment to the Noteholders and shall be applied as
set forth herein and in the Conditions. Except as otherwise required by
applicable law, no Agent will be required to segregate any funds held by it
hereunder from any of its other funds.

11.7     Nothing herein shall be deemed to require any Agent to advance its own
funds in the performance of its duties hereunder.

11.8     The Agents may consult with legal and other professional advisers
selected in good faith and satisfactory to them and the opinion of such advisers
shall be full and complete protection in respect of

<PAGE>

                                        7

any action taken, omitted or suffered hereunder in good faith and without
negligence and in accordance with the opinion of such advisers.

11.9     The Agents shall be obliged to perform such duties and only such duties
as are herein specifically set forth, and no implied duties or obligations shall
be read into this Agreement against the Agents. No Agent shall be under any
obligation to take any action hereunder which it expects will result in any
expense or liability of such Agent, the payment of which within a reasonable
time is not, in its opinion, assured to it. The obligations of the Agents
hereunder are several and not joint.

11.10    The Agents, their affiliates and their respective officers and
employees, in their individual or any other capacity, may become the owner of,
or acquire any interest in, any Notes with the same rights that the Agents would
have it they were not the Agents hereunder.

12.      CHANGE IN AGENTS

12.1     Each of the Fiscal Agent, Registrar, Exchange Agent, Paying Agent and
Transfer Agent in its capacity as such may be removed at any time by the giving
to it of at least 30 days' written notice to that effect signed on behalf of the
Issuer specifying the date on which such removal shall become effective. Each of
the Fiscal Agent, Registrar, Exchange Agent, Paying Agent and Transfer Agent may
at any time resign by giving at least 30 days' written notice (unless the Issuer
agrees to accept less notice) to that effect to the Issuer specifying the date
on which such resignation shall become effective. Notwithstanding the foregoing,
no such resignation or removal shall take effect within 30 days before or after
any due date for payment of any Notes or before a new Fiscal Agent, Registrar,
Exchange Agent, Paying Agent and Transfer Agent, as the case may be, shall have
been appointed by the Issuer as hereinafter provided, and such new Agent shall
have accepted such appointment. Any change in any Agent shall be notified by the
Issuer to the other Agent(s).

12.2     The Issuer agrees with the Fiscal Agent that if, by the day falling 10
days before the expiry of any notice under Clause 12.1 above, the Issuer has not
appointed a replacement Fiscal Agent, then the Fiscal Agent shall be entitled,
on behalf of the Issuer, to appoint in its place any reputable financial
institution of good standing and the Issuer shall not unreasonably object to
such appointment.

12.3     Upon the effectiveness of the appointment of any successor Fiscal
Agent, Registrar, Exchange Agent, Paying Agent and Transfer Agent, as the case
may be, pursuant to Clause 12.1, the Fiscal Agent, Registrar, Exchange Agent,
Paying Agent and Transfer Agent so removed shall cease to be a Fiscal Agent,
Registrar, Exchange Agent, Paying Agent and Transfer Agent, as the case may be,
hereunder. Prior to the effectiveness of such appointment, the Fiscal Agent,
Registrar, Exchange Agent, Paying Agent and Transfer Agent shall hold all moneys
deposited with it or held by it hereunder in respect of the Notes to the order
of the respective successor Fiscal Agent, Registrar, Exchange Agent, Paying
Agent and Transfer Agent.

13.      NOTICES

Notices shall be in writing (including by facsimile) and addressed to the
relevant party hereto as follows:

(a)      If to the Issuer:

         Citigroup Inc.
         153 East 53rd Street
         New York, New York 10043
         Attention:  Treasury Department
         Telephone:  212-559-3553
         Telefax: 212-793-5629

(b)      If to the Fiscal Agent, Registrar and Exchange Agent:

         Citibank, N.A.
         P.O. Box 18055

<PAGE>

                                        8

         5 Carmelite Street
         London EC4Y 0PA
         Attn:  Agency & Trust, Bond Desk
         Telefax: 44-020-7508-3878

(c)      If to the Paying Agent:

         Dexia Banque Internationale a Luxembourg, societe anonyme
         69, route d'Esch
         L-2953 Luxembourg
         Telephone: 352-45-90-1
         Telefax: 352-45-90-42-27

or at any other address of which any of the foregoing shall have notified the
others, and shall be deemed to have been given when received by the relevant
party.

14.      APPLICABLE LAW, PLACE OF JURISDICTION

14.1     This Agreement shall be subject to New York law.

14.2     The non-exclusive place for all proceedings arising out of this
         agreement shall be New York.

15.      MISCELLANEOUS

15.1     The Fiscal Agent agrees to perform its obligations hereunder through
its London Branch to the extent that this is necessary or appropriate in order
to make payments to DTC or DTC Participants in accordance with the Conditions.

15.2     The Fiscal Agent shall promptly advise the Issuer of any notice,
including any notice declaring Notes due, which it may receive pursuant to the
Conditions.

15.3     Should any of the provisions of this Agreement be or become invalid, in
whole or in part, the other provisions of this Agreement shall remain in force.
Invalid provisions shall, according to the intent and purpose of this Agreement,
be replaced by such valid provisions which in their economic effect come as
close as legally possible to that of the invalid provisions.

15.4     This Agreement may be signed in two counterparts.

15.5     Terms not defined in this Agreement shall have the meanings ascribed to
them in the Underwriting Agreement or the Conditions, as the case may be.

15.6     If there is any conflict between the terms of this Agreement and the
terms of the Indenture, the terms of the Indenture shall control.

15.7     The provisions of the United States Trust Indenture Act of 1939, as
amended (the "Trust Indenture Act"), shall be incorporated by reference herein
to the extent applicable. Each of the Agents agrees to abide by the Trust
Indenture Act, to the extent applicable in the performance of their respective
duties hereunder. If there is any conflict between the terms of this Agreement
and the Trust Indenture Act, the provisions of the Trust Indenture Act shall
govern to the extent of such conflict.

<PAGE>

                                        9

This Agreement has been entered into effective the date stated at the beginning
hereof.

CITIGROUP INC.

/s/ Eric Wentzel
--------------------------------------------
Eric Wentzel, Assistant Treasurer

CITIBANK, N.A.

/s/ Jillian Hamblin
--------------------------------------------
Jillian Hamblin, Vice President

DEXIA BANQUE INTERNATIONALE A LUXEMBOURG, SOCIETE ANONYME

/s/ Pierre-Francois Henrion                        /s/ Jean-Jacques Kinnen
------------------------------------            --------------------------------
Pierre-Francois Henrion                            Jean-Jacques Kinnen
                                                   Assistant Vice PresidentEMPLOYMENT AGREEMENT OF RICHARD H. GRINER

 

EMPLOYMENT AGREEMENT

     THIS EMPLOYMENT AGREEMENT (the “Agreement”), dated as of January 12, 2004,
is made and entered into by and between Party City Corporation, a Delaware
corporation (the “Company”), and Richard H. Griner (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 and the
Executive shall serve the Company, on the terms and conditions set forth
herein, for the period commencing on January 12, 2004 (the “Commencement Date”)
and ending on the third anniversary of the Commencement Date (the “Employment
Period”); provided, that (i) the Employment Period will automatically be
extended for successive one year periods thereafter upon the terms and
conditions set forth herein, unless either party gives the other party written
notice of such party’s intention not to renew this Agreement at least three
months prior to the end of the original three-year period or any such
successive one-year renewal period, and (ii) the Employment Period may be
terminated earlier as provided hereinafter.

     2. Duties. During the Employment Period, the Executive shall serve as
Chief Operating Officer of the Company. Executive shall report to the
Company’s Chief Executive Officer (the “CEO”). Executive shall have such
duties and responsibilities as are consistent with and customarily assigned to
his position with the Company as determined by the CEO. Executive shall also
have such other duties and responsibilities as may from time to time be
assigned to him by the CEO. 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 applicable withholding and deductions, an annual base salary of
$300,000 (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 applicable withholding and deductions, an
annual stipend of $65,000 (the “Restrictive Covenant Stipend”) (the Base Salary
and the Restrictive Covenant Stipend hereafter referred to as the “Salary”).
The Salary shall be subject to annual review and adjustment at the direction of
the Board. 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. Incentive Compensation. (i) In addition to Salary, the Executive shall
be entitled to earn an annual bonus for each full Fiscal Year (as defined
below) 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 “Performance Bonus”).
The target amount of the Performance Bonus for each Fiscal Year during the
Employment Period shall be fifty percent (50%) of Executive’s Salary, at the
rate in effect as of the last day of the Fiscal Year for which such bonus is
paid. The actual Performance Bonus may be more or less than 50% of Salary,
based on actual performance according to the reasonable performance objectives
established, provided that the maximum bonus may not exceed 100% of Salary.
The objectives for Fiscal Year ending July 3, 2004 are set forth on Exhibit A
annexed hereto. The actual amount of the Performance Bonus for any Fiscal Year
shall be payable as soon as practicable after completion of the Company’s
audited financial statements. For purposes of this Agreement, “Fiscal Year”
means each twelve month period ending June 30 or such other date as hereinafter
adopted. Notwithstanding the foregoing, with respect to the Fiscal Year ending
June 30, 2004, the Executive shall be entitled to earn a bonus equal to
one-half (1/2) of the Performance Bonus.

          (ii) Stock Options. The Executive shall be granted on the
Commencement Date, nonqualified stock options (the “Stock Options”) to
acquire 150,000 shares of common stock of the Company, $0.01 par value
per share (the “Common Stock”), at an exercise price per share equal to a
share of Common Stock at the market close on the Commencement Date. The
Options shall have a term of ten years from the date of grant and shall
vest and become exercisable as follows:

          50,000 shares shall vest and become fully exercisable on January 12,
2005, provided Executive is employed by the Company on such date;

          33,333 shares shall vest and become fully exercisable on January 12,
2006, provided Executive is employed by the Company on such date;

          33,333 shares shall vest and become fully exercisable on January 12,
2007, provided Executive is employed by the Company on such date; and

          33,334 shares shall vest and become fully exercisable on January 12,
2008, provided Executive remained employed by the Company through
January 12, 2008.

          (iii) Vacation. During the Employment Period, the Executive shall
be entitled to three weeks of paid vacation per year of employment.

          (iv) Automobile Allowance. During the Employment Period, the
Executive shall be reimbursed for the actual cost of leasing and insuring
an automobile, up to a maximum of $675.00 per month.

     5. Benefit Plans. The Executive shall be eligible to participate in any
health insurance plan, dental insurance plan, retirement plan, fringe benefit
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

-2-

 

 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 a termination
of Executive’s employment by the Company due to Disability (as defined below),
(ii) a termination of Executive’s employment by the Company for Cause, (iii) a
termination of Executive’s employment by the Company without Cause, (iv) a
resignation by the Executive other than in accordance with Paragraph 7(a)(vi);
provided, that Executive shall provide the Company with at least 30 days’ prior
written notice of such resignation, (v) the end of the final Employment Period,
or (vi) a resignation by the Executive following a Change in Control (as
defined below); provided, however, that such resignation shall be tendered, if
at all, within 30 days of the occurrence of such Change in Control.

          (b) Benefits Payable Upon Termination. (i) In the event of the
termination of Executive’s employment on account of Executive’s death or the
termination of Executive’s employment by the Company due to Disability,
Executive’s resignation other than in accordance with Paragraph 7(a)(vi), the
Company’s termination of Executive’s employment for Cause, or the end of the
final Employment Period, the Company shall pay to Executive, or Executive’s
estate in the event of his death, in a lump sum within ten business days
following Executive’s termination, all earned but unpaid then-existing Salary
and Performance Bonus; provided, however, that, whether any Performance 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, if any, or, if not set forth therein, as
determined by the Company in its sole discretion (such earned but unpaid Salary
and Performance Bonus hereafter referred to as “Earned Compensation”). (ii) In
the event of the termination of Executive’s employment by the Company without
Cause, or a resignation by the Executive in accordance with Paragraph 7(a)(vi),
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, for the 26 weeks immediately following such termination. In
the event of a resignation by the Executive in accordance with Paragraph
7(a)(vi), any Options scheduled to vest within the subsequent twelve (12) month
period shall fully vest.

          (c) Notwithstanding anything herein to the contrary, to the degree that a
Performance Bonus has been earned but cannot be calculated because the
performance objectives

-3-

 

applicable to such Performance Bonus cannot yet be calculated then payment
of the earned Performance 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 commission of
(x) a felony, or (y) any other crime (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) use of alcohol, narcotics or other controlled substances by the
Executive 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 Board.

               (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.

               (iii) “Change in Control” shall mean:

	 	(1)	 	The acquisition by any individual,
entity or group (within the meaning of Section 13(d)(3)
of 14(d)(2) of the Securities Exchange Act of 1934, as
amended (the “Exchange Act”)) (a “Person”) of beneficial
ownership (within the meaning of Rule 13d-3 promulgated
under the Exchange Act) of 50% or more (on a fully
diluted basis) of either (x) the then outstanding shares
of Common Stock, taking into account as outstanding for
this purpose such shares issuable upon the exercise of
options or warrants, the conversion of convertible
shares or debt, and the exercise of any similar right to
acquire shares (the “Outstanding Company Common Stock”)
or (y) the combined voting power of the then outstanding
voting securities of the Company entitled to vote
generally in the election of directors or member
managers (the “Outstanding Company Voting Securities”);
provided, however, that for purposes of this Paragraph
7(d)(iii), the following acquisitions shall not
constitute a Change in Control: (A) any acquisition by
the Company or any “affiliate” of the Company, within
the meaning of 17 C.F.R. §230.405 (an “Affiliate”), (B)
any acquisition by any employee benefit plan (or related
trust) sponsored or maintained by the Company

-4-

 

	 		 	or any Affiliate of the Company, (C) any acquisition by
any corporation pursuant to a transaction which complies
with clauses (x), (y) and (z) of Paragraph 7(d)(iii)(2),
or (D) any acquisition by any entity in which the
Executive has a direct or indirect equity interest of
greater than five percent; or

	 	(2)	 	Consummation of a reorganization,
merger or consolidation or sale or other disposition of
all or substantially all of the assets of the Company (a
“Business Combination”), in each case, unless, following
such Business Combination, (x) all or substantially all
of the individuals and entities who were the beneficial
owners, respectively, of the Outstanding Company Common
Stock and Outstanding Company voting Securities
immediately prior to such Business Combination
beneficially own, directly or indirectly, more than 50%
of the then outstanding shares of common stock or
interests and the combined voting power of the then
outstanding voting securities entitled to vote generally
in the election of directors, as the case may be, of the
corporation or other entity resulting from such Business
Combination (including, without imitation, a corporation
or entity which as a result of such transaction owns the
Company or all or substantially all of the Company’s
assets either directly or through one or more
subsidiaries) in substantially the same proportions as
their ownership, immediately prior to such Business
Combination of the Outstanding Company Common Stock and
Outstanding Company Voting Securities, as the case may
be, and (y) no Person (excluding (A) any employee
benefit plan (or related trust) sponsored or maintained
by the Company or any Affiliate of the Company, or such
corporation resulting from such Business Combination or
any Affiliate of such corporation, or (b) any entity in
which the Executive has a direct or indirect equity
interest of greater than five percent or any Affiliate
of such entity) beneficially owns, directly or
indirectly, 50% or more (on a fully diluted basis) of,
respectively, the then outstanding shares of common
stock or interests of the corporation or entity
resulting from such Business Combination, taking into
account as outstanding for this purpose such common
stock or interests issuable upon the exercise of options
or warrants, the conversion of convertible stock,
interests or debt, and the exercise of any similar right
to acquire such common stock or interests, or the
combined voting power of the then outstanding voting
securities of such corporation or other entity except to
the extent that such ownership existed prior to the
Business Combination and (z) at least a majority of the
members of the board of directors or equivalent
governing body of the corporation or other entity
resulting from such Business Combination were members of
the Incumbent Board at the time of the execution of the
initial agreement, or of the action of the Board,
providing for such Business Combination, or

-5-

 

	 	(3)	 	Approval by the shareholders or
equityholders of the Company of a complete liquidation
or dissolution of the Company.

          (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).

     8. Restrictive Covenants. By and in consideration of the Restrictive
Covenant Stipend and Base 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 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 or any of its
subsidiaries (collectively, the “Company Group”) 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)). Notwithstanding the
foregoing, if the Executive is required by an order of a court having competent
jurisdiction or under subpoena from an appropriate government agency to
disclose

-6-

 

Confidential Information, the Executive shall provide the Company with
prompt written notice of such requirement and shall assist the Company to seek
a protective order or other appropriate remedy protecting its interests. In
any event, the Executive will furnish only that part of the Confidential
Information that is required to be disclosed by the court order or subpoena and
will use reasonable efforts to obtain reliable assurances that confidential
treatment will be accorded to any Confidential Information so furnished.

          (c) Nonsolicitation of Employees. During the Employment Period and the
Restriction Period, the Executive shall not directly or indirectly solicit,
encourage or induce any employee of the Company Group to terminate employment
with the Company Group, 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 Group
unless such person shall have ceased to be employed by the Company Group 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 Board
may request, the Executive shall return to the Company all property of the
Company Group, including any credit cards, keys or entry cards, automobile and
other machinery, all computers, cell phones or other electronic equipment and
all memoranda, notes, records, reports, manuals, drawings and blueprints,
including electronic versions, concerning the Company’s Business (and all
copies thereof) in the Executive’s possession or under his control.

          (e) Developments the Property of the Company. All discoveries,
inventions, ideas, technology, formulas, designs, software, programs,
algorithms, products, systems, applications, processes, procedures, methods and
improvements and enhancements conceived, developed or otherwise made or created
or produced by the Executive alone or with others, and in any way relating to
the Company’s Business, whether or not subject to patent, copyright or other
protection and whether or not reduced to tangible form, at any time during the
Employment Period (“Developments”), shall be the sole and exclusive property of
the Company. The Executive agrees to, and hereby does, assign to the Company,
without any further consideration, all of the Executive’s right, title and
interest throughout the world in, and to, all Developments. The Executive
agrees that all such Developments that are copyrightable may constitute works
made for hire under the copyright laws of the United States and, as such,
acknowledges that the Company is the author of such Developments and owns all
of the rights comprised in the copyright of such Developments and the Executive
hereby assigns to the Company without any further consideration all of the
rights comprised in the copyright and other proprietary rights the Executive
may have in such Developments to the extent that it might not be considered a
work made for hire. The Executive shall make and maintain adequate and current
written records of all Developments and shall disclose all Developments fully,
and in writing, to the Company promptly after the development of same, and at
any time upon request.

          (f) 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

-7-

 

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.

          (g) 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,
Company property, developments and nondisparagement 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. The Executive (x) acknowledges and agrees that the
covenants set forth in Paragraph 8 are reasonable and valid in geographical and
temporal scope and in all other respects and (y) represents that his economic
means and circumstances are such that such covenants will not prevent him from
providing for himself and his family on a basis satisfactory to him.

          (h) Option Claw-Back. Executive acknowledges that, in addition to the
Restrictive Covenant Stipend, any and all options to acquire Common Stock
granted to Executive by the Company, (the “Options”) are and were granted to
Executive in consideration for Executive’s covenants pursuant to subparagraphs
8(a), (b), (c), (d) and (e) herein. In the event the Executive breaches any of
the covenants set forth in subparagraphs 8(a), (b), (c), (d) or (e) herein, in
addition to any other remedy that may be available to the Company in law or
equity and/or pursuant to the other provisions of this Paragraph 8, (i) all
Options (whether vested or not) then held by Executive shall expire and
terminate immediately and (ii) the Executive shall be required to repay to the
Company an amount equal to all Option Gain (as defined below) that the
Executive has received during the six-month period immediately preceding (or at
any time after) the date the Executive first breaches such covenant(s). For
purposes of this Paragraph 8, (i) 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, and (ii) the term “Option
Gain” shall mean, with respect to any specified period of time, the product of
(A) the number of shares of Common Stock purchases upon the exercise of any
Options during such period and (B) the excess of (x) the fair market value per
share of Common Stock as of the date of such exercise over (y) the exercise
price per share of Common Stock subject to such Options.

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

-8-

 

          (j) Notifications. The Executive agrees that prior to becoming employed
by any entity during the Restriction Period, the Executive will (i) provide
notice to the Company of such employment and (ii) provide copies of Paragraphs
8(a), (b) and (c) to such prospective employer. The Executive further agrees
that the Company may provide notice to such prospective employer of the
Executive’s obligations under this Agreement, including, without limitation,
the Executive’s obligations pursuant to this Paragraph 8.

     9. Miscellaneous.

          (a) Survival. Paragraphs 7 (relating to early termination of employment),
8 (containing the restrictive covenants ), and all the provisions of this
Paragraph 9 shall survive the termination of this Agreement (and the
Executive’s employment hereunder) in accordance with their terms.

          (b) Validity and Enforceability. The invalidity or unenforceability of
any provision 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. Any dispute or controversy arising under or in
connection with this Agreement shall be resolved by binding arbitration;
provided, that any dispute or controversy relating to Paragraph 8 (including
any claim for specific performance) may be brought by any party hereto in any
court of competent jurisdiction; provided, further, that, if the state or
federal courts of New Jersey have jurisdiction, such disputes or controversies
shall be litigated in New Jersey. 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 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 three arbitrators, one appointed by each
of the parties and the third appointed by the other two arbitrators. Judgments
on any award may be entered in and enforced by any court of appropriate
jurisdiction. Each party shall pay his or its own costs for the arbitration or
litigation, as the case may be, with the cost of the arbitrator, if applicable,
to be equally divided between the parties.

-9-

 

     (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 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
or 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; provided, that, a refusal by a party to accept delivery shall
constitute receipt. Notices 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):

-10-

 

	 	 	 	 	 
	 	 	
If to the Company:
	 	Party City Corporation

400 Commons Way
	 	 	 	 	Rockaway, New Jersey 07866
	 	 	 	 	Attention: Vice President
	 	 	 	 	of Human Resources
	 	 	 	 	 
	 	 	
with a copy to:
	 	Party City Corporation
	 	 	 	 	400 Commons Way
	 	 	 	 	Rockaway, New Jersey 07866
	 	 	 	 	Attention: Vice President
	 	 	 	 	and General Counsel
	 	 	 	 	 
	 	 	
If to the Executive:
	 	Richard H. Griner
	 	 	 	 	155 West 68th Street
	 	 	 	 	New York, NY 10023

          (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.

          (j) Right of Offset. The Company may offset any payment to be made to the
Executive pursuant to this Agreement by any amount the Executive owes to the
Company (including, without limitation, any amount that the Executive may be
required to pay to the Company pursuant to Paragraph 8(h)) as of the time such
payment would otherwise be made.

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

          (l) 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.

          (m) 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.

-11-

 

     (n) 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.

     (o) 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.

     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/ Linda M. Siluk
	 	 
	 	 	

	 	 
	Its:	 	
Chief Financial Officer	 	 
	 	 	

	 	 
	 	 	 	 	 
	EXECUTIVE	 	 
	 	 	 	 	 
	/s/ Richard H. Griner

	 	 
	Richard H. Griner	 	 

-12-

 

EXHIBIT A

			
	Cascading Bonus Eligibility	 	
100% EBITDA = 50% Payout at 100% Max Payout

	 	 	 	 	 	 	 	 	 
	 	 	6 Month	 	Full Year 2004
	 	 	Goal	 	Goal
	 	 	
	 	

	Company EBITDA Goal
	 	$	36,969,901	 	 	$	48,433,711	 
	Net Income
	 	$	17,304,173	 	 	$	19,332,075	 
	EPS
	 	$	0.90	 	 	$	1.01	 

	 	 	 	 	 	 	 
	Calculations	 	 	 	 
	
	 	 	 	 
	Shares outstanding
	 	 	19,211,173	 
	Percent
increase from 100% to 115%
	 	 	3.3	%
	Depreciation
and Amortization
	 	 	15,571,600	 
	Interest
	 	 	642,000	 
	Taxes
	 	 	40	%

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	Bonus Payout	 	 	 	 	 	 	 	 	 	 
	EBITDA	 	 	 	 	 	Bonus %	 	Based on Salary	 	Net Income	 	 	 	 	 	EPS	 	 
	% of Goal	 	EBITDA $	 	of Salary	 	$ 365,000	 	% of Goal	 	Net Income	 	% of Goal	 	EPS
	
	 	
	 	
	 	
	 	
	 	
	 	
	 	

	90%
	 	$	43,590,340	 	 	 	13	%	 	$	45,625	 	 	 	85	%	 	$	16,426,044	 	 	 	85	%	 	$	0.86	 
	95%
	 	$	46,012,025	 	 	 	25	%	 	$	91,250	 	 	 	92	%	 	$	17,879,055	 	 	 	92	%	 	$	0.93	 
	100%
	 	$	48,433,711	 	 	 	50	%	 	$	182,500	 	 	 	100	%	 	$	19,332,066	 	 	 	100	%	 	$	1.01	 
	101%
	 	$	48,918,048	 	 	 	53	%	 	$	194,667	 	 	 	102	%	 	$	19,622,669	 	 	 	101	%	 	$	1.02	 
	102%
	 	$	49,402,385	 	 	 	57	%	 	$	206,833	 	 	 	103	%	 	$	19,913,271	 	 	 	103	%	 	$	1.04	 
	103%
	 	$	49,886,722	 	 	 	60	%	 	$	219,000	 	 	 	105	%	 	$	20,203,873	 	 	 	104	%	 	$	1.05	 
	104%
	 	$	50,371,059	 	 	 	63	%	 	$	231,167	 	 	 	106	%	 	$	20,494,476	 	 	 	106	%	 	$	1.07	 
	105%
	 	$	50,855,396	 	 	 	67	%	 	$	243,333	 	 	 	108	%	 	$	20,785,078	 	 	 	107	%	 	$	1.08	 
	106%
	 	$	51,339,733	 	 	 	70	%	 	$	255,500	 	 	 	109	%	 	$	21,075,680	 	 	 	109	%	 	$	1.10	 
	107%
	 	$	51,824,071	 	 	 	73	%	 	$	267,667	 	 	 	111	%	 	$	21,366,282	 	 	 	110	%	 	$	1.11	 
	108%
	 	$	52,308,408	 	 	 	77	%	 	$	279,833	 	 	 	112	%	 	$	21,656,885	 	 	 	112	%	 	$	1.13	 
	109%
	 	$	52,792,745	 	 	 	80	%	 	$	292,000	 	 	 	114	%	 	$	21,947,487	 	 	 	113	%	 	$	1.14	 
	110%
	 	$	53,277,082	 	 	 	83	%	 	$	304,167	 	 	 	115	%	 	$	22,238,089	 	 	 	115	%	 	$	1.16	 
	111%
	 	$	53,761,419	 	 	 	87	%	 	$	316,333	 	 	 	117	%	 	$	22,528,691	 	 	 	116	%	 	$	1.17	 
	112%
	 	$	54,245,756	 	 	 	90	%	 	$	328,500	 	 	 	118	%	 	$	22,819,294	 	 	 	118	%	 	$	1.19	 
	113%
	 	$	54,730,093	 	 	 	93	%	 	$	340,667	 	 	 	120	%	 	$	23,109,896	 	 	 	119	%	 	$	1.20	 
	114%
	 	$	55,214,430	 	 	 	97	%	 	$	352,833	 	 	 	121	%	 	$	23,400,498	 	 	 	121	%	 	$	1.22	 
	115%
	 	$	55,698,767	 	 	 	100	%	 	$	365,000	 	 	 	123	%	 	$	23,691,100	 	 	 	122	%	 	$	1.23

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00060-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00060-of-00352.parquet"}]]