TRADEMARK SECURITY AGREEMENT

EXHIBIT 10.16

Execution Copy

TRADEMARK SECURITY AGREEMENT

     This TRADEMARK SECURITY AGREEMENT (this “Agreement”) is made as of January 9, 2003 by and between Party City Corporation, a Delaware corporation (“Grantor”), and WELLS FARGO RETAIL FINANCE, LLC, as the arranger, collateral agent, and administrative agent for the Lender Group and any other holder of Obligations under, and as defined in, the Loan Agreement referred to below (together with its successor(s) thereto in such capacity, the “Agent”).

INTRODUCTION:

     Pursuant to the Loan and Security Agreement dated as of the date hereof (as amended, restated, supplemented and/or modified from time to time, the “Loan Agreement”) by and among the Grantor, the Agent and the financial institutions from time to time party thereto as Lenders (the “Lenders”), the Agent and the Lenders have agreed, subject to the terms and conditions set forth therein, to make revolving credit loans and to provide other financial accommodations to the Grantor (collectively, the “Loans”).

     It is a condition precedent to the effectiveness of the Loan Agreement that the Grantor execute and deliver this Agreement and grant to the Agent, for the benefit of the Lender Group and any other holder of Obligations under, and as defined in, the Loan Agreement (the Lender Group and such other holders of Obligations collectively with the Agent, the “Secured Parties”), a continuing security interest in all of the Trademark Collateral referred to below to secure all of the Obligations.

     NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and in order to induce the Agent and Lenders to make Loans to the Grantor pursuant to the Loan Agreement, the Grantor agrees, for the benefit of the Agent and each other Secured Party, as follows:

     SECTION 1. Definitions. Unless otherwise defined herein or the context otherwise requires, terms used in this Agreement, including its preamble and recitals, have the meanings provided in the Loan Agreement.

     SECTION 2. Grant of Security Interest. To secure the prompt performance of the Obligations, the Grantor hereby collaterally assigns, pledges, hypothecates, charges, mortgages, delivers, and transfers to the Agent, for the benefit of the Secured Parties, and hereby grants to the Agent, for the benefit of the Secured Parties, a continuing security interest in all of the following property, whether now or hereafter existing or acquired by the Grantor (the “Trademark Collateral”):

     SECTION 3. Security Agreement. This Agreement has been executed and delivered by the Grantor for the purpose of registering the security interest of the Agent in the Trademark Collateral with the United States Patent and Trademark Office and corresponding offices in other countries of the world. The security interest granted hereby has been granted as a supplement to, and not in limitation of, the security interest granted to the Agent for its benefit and the ratable benefit of each other Secured Party under the Loan Agreement. The Loan Agreement (and all rights and remedies of each Secured Party thereunder) shall remain in full force and effect in accordance with its terms.

     SECTION 4. Covenants. The Grantor covenants and agrees to comply with the following provisions as such provisions relate to any item of Trademark Collateral (other than items of Trademark Collateral which are not, individually or in the aggregate, material):

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     SECTION 5. Release of Liens. Upon (a) the disposition of Trademark Collateral in accordance with the Loan Agreement or (b) the payment in full of the Obligations (other than contingent indemnification obligations for which neither the Agent nor the Lenders have yet made a claim) and the termination of the Lender Group’s obligations to make Loans under the Loan Agreement, the security interests granted herein shall automatically terminate with respect to (i) such Trademark Collateral (in the case of clause 5(a)) or (ii) all Trademark Collateral (in the case of clause 5(b)). Upon any such disposition or termination, the Agent will, at the Grantor’s sole expense, deliver to the Grantor, without any representations, warranties or recourse of any kind whatsoever, all Trademark Collateral held by the Agent hereunder, and execute and deliver to the Grantor such documents as the Grantor shall reasonably request to evidence such termination.

     SECTION 6. Acknowledgment. The Grantor further acknowledges and affirms that the rights and remedies of the Agent with respect to the security interest in the Trademark Collateral granted hereby are more fully set forth in the Loan Agreement, the terms and provisions of which (including the remedies provided for therein) are incorporated by reference herein as if fully set forth herein.

     SECTION 7. Due Authorization. The Grantor represents and warrants that the execution, delivery, and performance by the Grantor of this Agreement have been duly authorized by all necessary action on the part of the Grantor.

     SECTION 8. Loan Document. This Agreement is a Loan Document executed pursuant to the Loan Agreement and shall (unless otherwise expressly indicated herein) be construed, administered and applied in accordance with the terms and provisions thereof.

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     SECTION 9. Counterparts. This Agreement may be executed by the parties hereto in several counterparts, each of which shall be deemed to be an original and all of which shall constitute together but one and the same agreement.

     SECTION 10. Governing Law. This Agreement shall be construed under and governed by the laws of The State of New York.

[Signatures appear on next page.]

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     IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be duly executed and delivered by its officer thereunto duly authorized as of the date first above written.

     Then personally appeared the above named Linda M. Siluk, as Chief Financial Officer of Party City Corporation, and acknowledged the foregoing instrument to be her free act and deed as Chief Financial Officer of Party City Corporation, before me,

Signature Page

SCHEDULE I

to Trademark Security Agreement