Exhibit - 10.1
FACTORY CARD & PARTY OUTLET CORP.
AMENDED AND RESTATED EXECUTIVE
SEVERANCE PLAN

 

--------------------------------------------------------------------------------

 

FACTORY CARD & PARTY OUTLET CORP.
Amended and Restated Executive Severance Plan
Effective September 17, 2007
ARTICLE 1
PURPOSE AND DEFINITIONS
     1.1. Purpose. The Factory Card & Party Outlet Corp. Amended and Restated
Management Severance Plan (“Plan”), effective as of July 1, 2004 (“Effective
Date”) and amended and restated effective September 17, 2007, protects key
executives of Factory Card & Party Outlet Corp. (“Factory Card & Party Outlet”)
and its subsidiaries (collectively with Factory Card & Party Outlet, the
“Company”) against an involuntary loss of employment so as to attract and retain
such employees, and motivate them to enhance the value of the Company. The Plan
is intended to qualify as an unfunded welfare plan subject to the Employee
Retirement Income Security Act (ERISA) of 1974, as amended.
     1.2. Definitions. The following words and phrases as used herein shall have
the following meanings, unless a different meaning is required by the context:
“Board of Directors” means the Board of Directors of Factory Card & Party
Outlet.
“Cause” means any act or any failure to act on the part of a Participant which
constitutes:

  (a)   fraud, embezzlement, theft or dishonesty against the Company or any of
its affiliates, or the Board of Directors of the Company or any of its
affiliates;     (b)   material violation of law in connection with or in the
course of the Participant’s duties or employment with the Company or any of its
affiliates;     (c)   a felony for which the Participant is convicted or pleads
guilty or nolo contendere;     (d)   engagement in any activity competitive with
the business of the Company as to which the Company has notified the Participant
in writing and the Participant has not ceased (other than for reasons beyond the
control of the Participant) within 3 business days following such notice of his
or her participation in such activity;     (e)   a willful failure to follow
reasonable directions or instructions of a more senior officer (or, in the case
of the Chief Executive Officer, the Board of Directors of the Company) which are
consistent with the Participant’s position and responsibilities (as such
position and responsibilities may be changed from time to time), and such
failure shall have continued (other than for reasons beyond the control of the
Participant) for a period of 3 business days after receipt of written notice
thereof from the Company;

 

--------------------------------------------------------------------------------

 

  (f)   gross negligence, as determined by the Board of Directors, in connection
with his or her employment which has not been cured within 3 business days after
receipt of written notice thereof from the Company;     (g)   material breach of
any written employment policy of the Company; or     (h)   willful and wrongful
damage to material property of the Company or any of its affiliates.

“Change in Control” means the first to occur of the following events with
respect to Factory Card & Party Outlet, the Company, or any successor:

  (a)   the sale or other divestiture of all or substantially all of the assets
(excluding the sale of inventory or other assets in the ordinary course of
business);     (b)   during any period of two consecutive years, the individuals
who at the beginning of such period constitute the Board or any individuals who
would be “Continuing Directors” (as hereinafter defined) cease for any reason to
constitute at least a majority thereof; or     (c)   the acquisition by any
person or affiliated group of persons of more than 30% of any common stock of
Factory Card & Party Outlet or any successor thereof that is outstanding at any
time.

“Committee” means the Compensation Committee of the Board of Directors of
Factory Card & Party Outlet.
“Continuing Directors” means (i) the members of the Board of Directors in office
on the Effective Date and (ii) any successor to any such director and any
additional director who after the Effective Date was nominated or selected by a
majority of the Continuing Directors in office at the time of his or her
nomination or selection.
“Good Reason” shall mean with respect to a Participant (i) a reduction in the
Participant’s annual base salary (other than any reduction applicable to
management employees generally and not exceeding 5% during any 24-month period),
(ii) a material diminution in the Participant’s authority, duties or
responsibilities as an employee of the Company, (iii) a material reduction in
the Participant’s bonus opportunity (taking into consideration, among other
factors, the amount reasonably expected to be earned) unless such reduction is
part of, and proportionally consistent with, a broad based change in the
Company’s bonus plans for officers of the Company, or (iv) within two years
after a Change in Control a change in the Participant’s principal work location
by more than 50 miles and more than 50 miles from the Participant’s principal
place of abode as of the date of such change in job location.
“Participant” means any person who is entitled to participate in the Plan in
accordance with Section 2.1 and has not had such participation terminated
pursuant to Section 2.2.
“Plan Year” means the calendar year.

-2-

--------------------------------------------------------------------------------

 

“Severance Period” means a period of six months following a Participant’s
termination of employment; provided that if such termination of employment
occurs upon or within two years after a Change in Control, the “Severance
Period” shall mean a period of eighteen months following such termination of
employment.
ARTICLE 2
ELIGIBILITY AND PARTICIPATION
     2.1. Eligibility. Each individual who has completed at least 120 days of
employment with the Company as an officer not under contract (as an employee and
not as a member of any board of directors, all as reflected in the Company’s
employment records) shall participate in the Plan. Any officer with an
employment contract with Factory Card & Party Outlet shall not be a Participant
in this Plan and the provisions of said contract shall govern such officer’s
severance pay, if any. The Committee may waive the employment period requirement
in its sole discretion. The Committee may, in writing, set forth any additional
terms and conditions of participation (beyond the provisions of the Plan) as the
Committee may, in its sole discretion, determine to be applicable to any
Participant.
     2.2. Termination of Participation. A Participant’s participation in the
Plan shall automatically terminate, without notice to or consent of the
Participant, and the Participant shall not be treated as a Participant, upon the
earlier to occur of the following events:

  (a)   the Participant’s termination of employment by the Company for Cause,  
  (b)   the Participant’s resignation other than for Good Reason, or     (c)  
the Participant’s failure to be employed in an eligible position described in
Section 2.1 (unless such failure constitutes Good Reason).

ARTICLE 3
SEVERANCE BENEFITS
     3.1. Involuntary Termination. Subject to the execution and delivery of a
valid waiver and release substantially in the form of Exhibit A hereto and other
conditions set forth below, each Participant who is terminated by the Company
without Cause or terminates his or her own employment with the Company for Good
Reason shall be entitled to severance pay and other benefits under the Plan in
the amount set forth in Sections 3.2 and 3.3 below. To the fullest extent
permitted by law, a Participant’s eligibility for severance pay and other
benefits under the Plan shall be reasonably determined by the Committee.
     3.2. Amount of Severance Pay.

  (a)   The amount of cash severance pay to which any Participant is entitled
under the Plan shall be equal to:

  (i)   the Participant’s Monthly Pay Rate (as defined below) multiplied by six;
provided, however, that if termination of employment

-3-

--------------------------------------------------------------------------------

 

occurs upon or within two years after a Change in Control the Participant’s
Monthly Pay Rate shall be multiplied by eighteen; plus

  (ii)   the bonus amount, if any, that the Participant would have been entitled
to under the bonus arrangements applicable to the Participant had the
Participant remained employed until the end of the calendar year multiplied by a
fraction the numerator of which shall be the number of full months of employment
during the calendar year and the denominator of which shall be 12;

      Notwithstanding the foregoing, the amount of severance pay shall be
subject to customary payroll deductions and shall be reduced by any other
payments in the nature of severance pay to which the Participant is otherwise
entitled from the Company pursuant to any other contract, policy or agreement
with the Company or any Federal, state or local law including but not limited to
payments under the Federal Worker Adjustment and Retraining Notification Act
(WARN).

  (b)   Compensation otherwise payable to a Participant upon a termination of
employment without regard to the reason for such termination shall not be deemed
to be in the nature of severance pay and shall not be an offset to any payments
under the Plan.     (c)   “Monthly Pay Rate” means one twelfth of the greater of
(i) the Participant’s annual salary rate in effect on the date of termination,
or (ii) the Participant’s actual regular salary paid for the twelve months
immediately preceding his or her date of termination of employment for all
services rendered to the Company.     (d)   There shall be no duplication of
severance benefits in any manner. In this regard, no Participant shall be
entitled to severance pay hereunder for more than one position with the Company.
    (e)   A Participant shall not be obligated to secure new employment, and
severance payments under the Plan shall not be subject to mitigation except as
provided in Section 3.2 (a) hereof for other severance pay by the Company and by
Section 3.3 for determining continuing eligibility for health benefits coverage,
but shall be obligated to report promptly any actual employment obtained to the
Company during the period of severance.

     3.3. Other Benefits. Participants shall be entitled to continue their
participation in the Company’s health and life insurance benefit plans (but not
any disability plans or qualified retirement plans) during the Severance Period,
except such coverage shall expire if the Participant becomes eligible for
coverage under a substantially comparable plan of a successor employer or an
employer of a family member or domestic partner of the Participant. In the case
of any health and life insurance benefit plans, nothing herein shall be deemed
to restrict the right

-4-

--------------------------------------------------------------------------------

 

of the Company from amending or terminating any such plan in a manner generally
applicable to active employees, and Participants shall be entitled to
participate on the same basis (including payment of applicable contributions) as
active employees. Participants shall be entitled to outplacement counseling with
an outplacement firm of the Company’s selection, for a period not to exceed six
months after termination of employment.
     3.4. Payment.

  (a)   Except as provided in Section 3.4(b), and subject to Section 3.4(d), the
Company shall commence payment of severance pay in the aggregate amount set
forth in Section 3.2(a)(i) not later than the eighth day following the later of
the Participant’s termination of employment or the Company’s receipt of the
Participant’s duly executed and unrevoked waiver and release. Such payment shall
be made in equal installments payable over the period of 6 months in accordance
with the Company’s payroll practices.     (b)   Notwithstanding Section 3.4(a),
and subject to Section 3.4(d), in the event that termination of employment
occurs upon or within two years after a Change in Control, then the Company
shall pay the aggregate amount set forth in Section 3.2(a)(i) in a single lump
payment not later than the eighth day following the later of the Participant’s
termination of employment or the Company’s receipt of the Participant’s duly
executed and unrevoked waiver and release.     (c)   Subject to Section 3.4(d),
the Company shall pay the amount set forth in Section 3.2(a)(ii) at the same
time as the applicable bonus arrangement is paid to other employees of the
Company.     (d)   Notwithstanding Section 3.4(a), (b) or (c), to the extent
required by Section 409A of the Internal Revenue Code of 1986 (the Code”),
payment to a Participant who is a “specified employee” (as defined in Section
1.409A-1(i) of the Treasury regulations under Section 409A of the Code) shall
not be made before the date which is six months after the date of the
Participant’s separation from service (within the meaning of Section
409A(a)(2)(B)(i) of the Code) or, if earlier, the date of death of the
Participant; except to the extent the payments are made by reason of involuntary
termination of employment by the Company without Cause or a termination of the
Participant’s own employment with the Company for Strong Good Reason (defined
below), and do not exceed the Basic Severance Limitation (defined below). For
this purpose:

  (i)   “Strong Good Reason” means an event described in clause (ii) or (iv) of
the definition of Good Reason, or an event described in clause (i) of the
definition of Good Reason where the reduction in annual base salary is material;
and

-5-

--------------------------------------------------------------------------------

 

  (ii)   “Basic Severance Limitation” means two times the lesser of (A) the sum
of the Participant’s annualized compensation based on the annual rate of pay for
services provided to the Company for the taxable year of the Participant
preceding the taxable year in which the Participant’s employment terminated
(adjusted for any increase during that taxable year that was expected to
continue indefinitely if the Participant had not incurred a termination of
employment); or (B) the maximum amount that may be taken into account under a
qualified plan pursuant to Section 401(a)(17) of the Code for the year of the
Participant’s termination of employment (which is $225,000 for 2007).

      In the event payment in accordance with Section 3.4(a) or (c) is delayed
under this Section 3.4(d), payment of the accumulated amounts which would have
been paid prior thereto in accordance with Section 3.4(a) or (c) shall be made
in a lump sum (without interest) as soon as permitted by this Section 3.4(d). In
the event payment in accordance with Section 3.4(b) is delayed under this
Section 3.4(d), the Company shall, no later than the eighth day following the
later of the Participant’s termination of employment or the Company’s receipt of
the Participant’s duly executed and unrevoked waiver and release: (i) create a
trust of the type commonly referred to as a “rabbi” trust with terms
substantially similar (but not identical) to the terms of the model trust
published by the Internal Revenue Service in Rev. Proc. 92-64 and the other
terms specified below (a “Trust”); and (ii) deposit into the Trust the aggregate
amount set forth in Section 3.2(a)(i) for which payment is delayed under this
Section 3.4(d). The terms of the Trust shall provide: (i) for a trustee
acceptable to the Participant; (ii) that the funds held by the Trust shall
remain the general assets of the Company, which is the grantor of the Trust;
(iii) that the rights of the Participant under the Trust shall be exclusively
unsecured contractual rights; (iv) that the funds deposited in the trust shall
be invested in a money market fund or account insured by the FDIC; (v) that all
income earned on the funds held by the Trust shall be reported as income by the
Company for federal, state, local and foreign tax purposes; (vi) that the
Company shall pay all costs of establishing and maintaining the Trust and shall
indemnify the Trustee against any and all expenses, including attorney fees,
claims, liabilities, loss and damages arising out of or relating to the
establishment and maintenance of the Trust; (vii) that the Trust shall not be
revoked or the principal invaded by the Company unless the Company is
“insolvent” as defined for purposes of Rev. Proc. 92-64; and (viii) that the
funds deposited in the Trust and all income earned on such funds shall be paid
to the Participant as soon as permitted by this Section 3.4(d).

     3.5. Equity Awards. In the event of a termination of employment upon or
within two years after a Change of Control: (a) the Participant’s equity awards
(e.g., stock options, restricted stock, etc.) under either the 2002 Factory Card
& Party Outlet Stock Option Plan or the 2003 Factory Card & Party Outlet Corp.
Equity Incentive Plan shall become fully exercisable,

-6-

--------------------------------------------------------------------------------

 

vested, and nonforfeitable as of such termination of employment; and (b) the
Participant’s restricted stock awards granted as contemplated by the Company’s
Amended Plan of Reorganization shall become fully exercisable, vested, and
nonforfeitable as of such termination of employment.
     3.6. Waiver and Release. In order to receive benefits under the Plan, a
Participant must submit a signed Waiver and Release Agreement to the Company on
or within forty-five (45) days of his or her date of termination of employment
substantially in the form of the Waiver and Release Agreement attached hereto as
Exhibit A, with any changes thereto approved by Company’s counsel prior to
execution. A Participant may revoke his or her signed Waiver and Release
Agreement within seven (7) days of his or her signing the Waiver and Release
Agreement.
     Any such revocation must be made in writing and must be received by the
Company within such seven (7) day period. A Participant who fails to timely
submit or who revokes his or her Waiver and Release Agreement shall not be
eligible to receive any severance pay under the Plan. A Participant who timely
submits a signed Waiver and Release Agreement and who does not exercise his or
her right of revocation shall be eligible to receive severance pay under the
Plan.
     3.7. Non-Competition. No severance pay shall be paid during any period in
which the Participant engages in a Competing Business or in Solicitation or
after the Participant has disclosed Confidential Information, and in
consideration of severance pay the Participant will not, during the Severance
Period, engage in a Competing Business or in Solicitation or disclose
Confidential Information.

  (a)   The prohibition on engaging in a Competing Business set forth in this
Section 3.7 shall mean participating, directly or indirectly, in any manner
whatsoever including, without limitation, either individually, or in
partnership, jointly or in conjunction with any other person, firm or
corporation, or as employee, principal, agent, director, officer, investor,
lender, consultant or shareholder (other than by way of less than five percent
(5%) ownership of stock in a publicly traded company or limited partnership);
provided, however, that such participation shall not include any activity
engaged in with the prior written approval of the Committee. For purposes of
this Plan, “Competing Business” shall mean any entity or business: (i) engaged
in the operation of retail stores for the primary purpose of selling greeting
cards, gift wrap and party supplies and which operates such retail stores in any
market in which the Company is operating a retail store at the time of the
Participant’s termination of employment, or a market into which the Participant
knows the Company is intending to enter; or (ii) is engaged in the primary
business of the manufacture and distribution of greeting cards, gift wrap and
party supplies.     (b)   For purposes of this Plan, “Solicitation” shall mean
recruiting, soliciting or inducing, directly or indirectly, any non-clerical
employee or employees of the Company or any advisor or consultant to the Company
to terminate

-7-

--------------------------------------------------------------------------------

 

      their employment, or otherwise cease their relationship with the Company
or hiring, retaining or assisting another person or entity to hire or retain any
employee of the Company or any advisor or consultant to the Company or any
person who within six (6) months before had been a non-clerical employee,
advisor or consultant of the Company or any of its Affiliates.     (c)   The
Company owns and has developed, and will develop, certain proprietary techniques
and confidential information which have great value to its business (referred to
for purposes of this Section 3.7 as collectively as “Confidential Information”).
Confidential Information includes not only information disclosed by the Company
to the Participant, but also information developed or learned by the Participant
during the course or as a result of employment with the Company, which
information is the property of the Company. Confidential Information includes
all information that has or could have commercial value or other utility in the
business in which the Company is engaged or in any business in which the
Participant is aware the Company is contemplating engaging, and all information
of which the unauthorized disclosure could be detrimental to the interests of
the Company, whether or not such information is specifically labeled as
Confidential Information by the Company. By way of example and without
limitation, Confidential Information includes any and all information developed,
obtained or owned by the Company concerning trade secrets, techniques, know-how,
business plans, strategies, forecasts, unpublished financial information,
orders, agreements and other forms of documents, price and cost information,
merchandising opportunities, expansion plans, store plans, budgets, projections,
customer, supplier and subcontractor identities, characteristics and agreements,
and salary, staffing and employment information, Notwithstanding the foregoing,
Confidential Information shall not include any information which (i) was in the
public domain at the time of receipt by the Participant or thereafter without
breach or violation of this Section 3.7, or (ii) was furnished to the
Participant by a third party lawfully entitled to do so and not known to the
Participant to be bound by a confidentiality agreement to the Company. The
Participant shall not, directly or indirectly, use, make available, sell,
disclose or otherwise communicate to any corporation, partnership, individual or
other third party, other than in the course of the Participant’s assigned duties
and for the benefit of the Company, any Confidential Information. In the event
that the Participant is requested (by oral questions, interrogatories, requests
for information or documents, subpoena, civil investigative demand or similar
process) to disclose any Confidential Information, the Participant agrees to
notify the Company promptly of such request(s) and the documents requested
thereby so that the Company may seek an appropriate protective order and/or
waive in writing the Participant’s compliance with the provisions of this Plan.
It is further agreed that, if in the absence of a protective order or the
receipt of a waiver hereunder the Participant is nonetheless, in the opinion of
the Participant’s counsel,

-8-

--------------------------------------------------------------------------------

 

      compelled to disclose such Confidential Information or else stand liable
for contempt or suffer other censure or penalty from the tribunal or
governmental or similar authority, the Participant may disclose such information
without liability hereunder, provided, however, that the Participant shall give
the Company written notice of the information to be so disclosed as far in
advance of its disclosure as is practicable and shall use the Participant’s best
efforts to obtain an order or other reliable assurance that confidential
treatment will be accorded to such portion of the information required to be
disclosed at the Company designates. In the event the Participant’s employment
with the Company ceases for any reason, the Participant will not remove from the
Company’s premises without its prior written consent any records, files,
drawings, documents, equipment, materials and writings received from, created
for or belonging to the Company, including those which relate to or contain
Confidential Information, or any copies thereof. When employment with the
Company terminates, the Participant will immediately deliver the same to the
Company.

ARTICLE 4
CLAIMS
     4.1. Good Reason Determination. Any Participant believing he or she has a
right to resign for Good Reason may apply to the Committee for written
confirmation that an event constituting Good Reason has occurred with respect to
such Participant. The Committee shall confirm or deny in writing that Good
Reason exists within 21 days following receipt of any such application. Any
confirmation of Good Reason by the Committee shall be binding on the Company.
     4.2. Claims Procedure. If any Participant has a claim for benefits which
are not being paid, such claimant may file with the Committee a written claim
setting forth the amount and nature of the claim, supporting facts, and the
claimant’s address. The Committee shall notify each claimant of its decision in
writing by registered or certified mail within 30 days after its receipt of a
claim, unless otherwise agreed by the claimant. If a claim is denied, the
written notice of denial shall set forth the reasons for such denial, refer to
pertinent Plan provisions on which the denial is based, describe any additional
material or information necessary for the claimant to realize the claim, and
explain the claim review procedure under the Plan.
     4.3. Claims Review Procedure. A claimant whose claim has been denied or
such claimant’s duly authorized representative may file, within 60 days after
notice of such denial is received by the claimant, a written request for review
of such claim by the Committee. If a request is so filed, the Committee shall
review the claim and notify the claimant in writing of its decision within
30 days after receipt of such request. In special circumstances, the Committee
may extend for up to 30 additional days the deadline for its decision. The
notice of the final decision of the Committee shall include the reasons for its
decision and specific references to the Plan provisions on which the decision is
based. The decision of the Committee shall be final and binding on all parties;
provided, however, that if a claim relates to benefits due following a Change in
Control, the Committee’s determination shall not be final and binding if the
party

-9-

--------------------------------------------------------------------------------

 

challenging the Committee’s determination establishes by a preponderance of the
evidence that he or she is entitled to the benefits in dispute.
     4.4. Enforcement. In the event that a Participant reasonably incurs any
professional fees (including but not limited to attorneys’ fees and related
costs) in enforcing his or her rights arising under, or preserved by, this Plan
following a Change in Control, the Company shall reimburse the Participant for
such attorneys’ and other professional fees, and for any other reasonable
expenses related thereto, provided that the Participant prevails in any material
respect in protecting or enforcing such rights. Such reimbursement shall be made
within thirty (30) days following the later of (i) final resolution of the
dispute or occurrence giving rise to such fees and expenses and
(ii) presentation to the Company of appropriate invoices or other documentation
for the amount of such fees and expenses.
ARTICLE 5
ADMINISTRATION
     5.1. Plan Administrator. The Company shall be the plan administrator and
shall administer the Plan through the Committee.
     5.2. Duties. The Committee shall have the power and duty in its sole and
absolute discretion to do all things necessary or convenient to effect the
intent and purposes of the Plan, whether or not such powers and duties are
specifically set forth herein, and, by way of amplification and not limitation
of the foregoing, the Committee shall have the power in its sole and absolute
discretion to:

  (a)   provide rules for the management, operation and administration of the
Plan, and, from time to time, amend or supplement such rules;     (b)  
reasonably construe the Plan in its sole and absolute discretion to the fullest
extent permitted by law, which shall be final and conclusive upon all persons;  
  (c)   correct any defect, supply any omission, or reconcile any inconsistency
in the Plan in such manner and to such extent as it shall deem appropriate in
its sole discretion to carry the same into effect;     (d)   make reasonable
determinations as to a Participant’s eligibility for benefits under the Plan,
including determinations as to Cause and Good Reason.

     5.3. Binding Authority. The decisions of the Committee or its duly
authorized delegate within the powers conferred by the Plan shall be final and
conclusive for all purposes of the Plan, and shall not be subject to any appeal
or review other than pursuant to Section 4.2 and Section 4.3.
     5.4. Exculpation. No member of the Committee shall be directly or
indirectly responsible or otherwise liable by reason of any action or default as
a member of that committee, or by reason of the exercise of or failure to
exercise any power or discretion as such member, except for any action, default,
exercise or failure to exercise resulting from such member’s gross

-10-

--------------------------------------------------------------------------------

 

negligence or willful misconduct. No member of the Committee shall be liable in
any way for the acts or defaults of any other member of the Committee, or any of
its advisors, agents or representatives.
     5.5. Indemnification. The Company shall indemnify and hold harmless each
member of the Committee against any and all expenses and liabilities arising out
of his or her own membership on the Committee, except for expenses and
liabilities arising out of a member’s gross negligence or willful misconduct.
     5.6. Information. The Company shall furnish to the Committee in writing all
information the Committee may deem appropriate for the exercise of their powers
and duties in the administration of the Plan. Such information may include, but
shall not be limited to, the names of all Participants, their earnings and their
dates of birth, employment, retirement or death. Such information shall be
conclusive for all purposes of the Plan, and the Committee shall be entitled to
rely thereon without any investigation thereof.
ARTICLE 6
GENERAL PROVISIONS
     6.1. Non-Property Interest. The Plan is unfunded. Severance pay shall be
paid from the general assets of the Company and any liability of the Company to
any person with respect to benefits payable under the Plan shall give rise to a
claim as an unsecured creditor against the general assets of the Company. Any
Participant who may have or claim any interest in or right to any compensation,
payment or benefit payable hereunder, shall rely solely upon the unsecured
promise of the Company for the payment thereof, and nothing herein contained
shall be construed to give to or vest in the Participant or any other person now
or at any time in the future, any right, title, interest or claim in or to any
specific asset, fund, reserve, account, insurance or annuity policy or contract,
or other property of any kind whatsoever owned by the Company, or in which the
Company may have any right, title or interest now or at any time in the future.
     6.2. Other Rights. The Plan shall not affect or impair the rights or
obligations of the Company or a Participant under any other written plan,
contract, arrangement, or pension, profit sharing or other compensation plan.
     6.3. Amendment or Termination. The Plan may be amended, modified,
suspended, or terminated by the Company at any time; provided, however, that
prior to July 1, 2009 or, in the event the Offer (as defined by the Agreement
and Plan of Merger dated September ___, 2007 by and among Amscan Holdings, Inc.,
Amscan Acquisition, Inc. and the Company) is consummated, December 31, 2011:
(i) no such amendment, modification, suspension or termination shall adversely
affect the rights of any Participant without his or her written approval unless
required by law (including the Code or other revenue law); and (ii) no amendment
or modification may be made to Article 5 or the definition of “Committee”.
     6.4. Severability. If any term or condition of the Plan shall be invalid or
unenforceable to any extent or in any application, then the remainder of the
Plan, with the exception of such invalid or unenforceable provision, shall not
be affected thereby and shall

-11-

--------------------------------------------------------------------------------

 

continue in effect and application to its fullest extent. If, however, the
Committee determines in its sole discretion that any term or condition of the
Plan which is invalid or unenforceable is material to the interests of the
Company, the Committee may declare the Plan null and void in its entirety.
     6.5. No Employment Rights. Neither the establishment of the Plan, any
provisions of the Plan, nor any action of the Committee shall be held or
construed to confer upon any employee the right to a continuation of employment
by the Company. Subject to any applicable employment agreement, the Company
reserves the right to dismiss any employee, or otherwise deal with any employee
to the same extent as though the Plan had not been adopted.
     6.6. Transferability of Rights. This Plan shall inure to the benefit of,
and shall be binding upon, the Company and its successors and permitted assigns
and upon the Participants and their respective heirs, executors, and legal
representatives. The Company shall have the unrestricted right to transfer its
obligations under the Plan with respect to one or more Participants to any
person, including, but not limited to, any purchaser of all or any part of the
Company’s business. No Participant shall have any right to commute, encumber,
transfer or otherwise dispose of or alienate any present or future right or
expectancy which the Participant may have at any time to receive payments of
benefits hereunder, which benefits and the right thereto are expressly declared
to be non-assignable and nontransferable, except to the extent required by law.
Any attempt to transfer or assign a benefit, or any rights granted hereunder, by
a Participant shall, in the sole discretion of the Committee (after
consideration of such facts as it deems pertinent), be grounds for terminating
any rights of the Participant to any portion of the Plan benefits not previously
paid.
     6.7. Entire Document. The Plan, as set forth herein, supersedes any and all
prior practices, understandings, agreements, descriptions or other non-written
arrangements respecting severance, including but not limited to the Factory Card
& Party Outlet Corporation Amended Management Severance Plan (effective July 1,
2004), except for written employment or severance contracts signed by the
Company.
     6.8. Plan Year. The fiscal records of the Plan shall be kept on the basis
of a plan year which is the calendar year.
     6.9. Governing Law. The Plan shall be construed, administered, and enforced
according to the laws of the State of Illinois, except to the extent that such
laws are preempted by the federal laws of the United States of America.
EXECUTED this 17th day of September, 2007.
FACTORY CARD & PARTY OUTLET CORP.

                  By:   /s/  Gary W. Rada       Gary W. Rada        President &
CEO   

-12-

--------------------------------------------------------------------------------

 

         

EXHIBIT A
WAIVER AND RELEASE
This is a Waiver and Release (“Release”)
between                                          (“Executive”) and Factory Card
& Party Outlet Corp. (“Factory Card & Party Outlet”) and its subsidiaries
(collectively with Factory Card & Party Outlet, the “Company”). The Company and
the Executive agree that they have entered into this Release voluntarily, and
that it is intended to be a legally binding commitment between them. The parties
agree that their employment relationship is and has been “at will,” and that
either has the right to end the employment relationship at any time, with or
without notice or cause.

1.   In consideration for the promises made herein by the Executive, the Company
hereby agrees as follows:

  (a)   Severance Pay. The Company will pay to the Executive severance pay in
the gross amount of $                      , minus customary payroll deductions,
in accordance with Section 3.2(a)(i) of the Factory Card Outlet Executive
Severance Plan (the “Severance Plan”). This payment shall be made in accordance
with Section 3.4 of the Severance Plan. The Company will also pay Executive
accrued but unused vacation pay in the amount of
$                      representing days of accrued but unused vacation.     (b)
  The Executive will be eligible to receive the bonus amount, if any, in
accordance with Section 3.2(a)(ii) of the Severance Plan, such amount to be paid
in accordance with Section 3.4 of the Severance Plan.     (c)   Other Benefits.
The Executive will be eligible to receive other benefits as described in the
Severance Plan.     (d)   Unemployment Compensation. The Company will not
contest the decision of the appropriate regulatory commission regarding
unemployment compensation that may be due to the Executive.

2.   In consideration for the Executive’s right to receive the severance pay and
other benefits described in the Plan and this Release, Executive hereby agrees
as follows:

  (a)   Waiver. Executive and any person acting through or under the Executive
hereby release, waive and forever discharge the Company, its past subsidiaries
and its past and present affiliates, and their respective successors and
assigns, and their respective present or past officers, trustees, directors,
shareholders, Executives and agents of each of them, from any and all claims,
demands, actions, liabilities and other claims for relief and remuneration
whatsoever (including without limitation attorneys’ fees and expenses), whether
known or unknown, absolute, contingent or otherwise (each, a “Claim”), arising
or which could have arisen up to and including the date of his execution of this
Release, including without limitation those arising out of or relating to
Executive’s employment or cessation and termination of employment, or any other
written or oral agreement, any change in Executive’s employment status, any
benefits or compensation, any

 

--------------------------------------------------------------------------------

 

      tortious injury, breach of contract, wrongful discharge (including any
Claim for constructive discharge), infliction of emotional distress, slander,
libel or defamation of character, and any Claims arising under Title VII of the
Civil Rights Act of 1964 (as amended by the Civil Rights Act of 1991), the
Americans With Disabilities Act, the Rehabilitation Act of 1973, the Equal Pay
Act, the Fair Labor Standards Act, the Older Workers Benefits Protection Act,
the Age Discrimination in Employment Act, the Executive Retirement Income
Security Act of 1974, or any other federal, state or local statute, law,
ordinance, regulation, rule or executive order, any tort or contract claims, and
any of the claims, matters and issues which could have been asserted by
Executive against the Company or its subsidiaries and affiliates in any legal,
administrative or other proceeding. Executive agrees that if any action is
brought in his or her name before any court or administrative body, Executive
will not accept any payment of monies in connection therewith.

  (b)   Nondisparagement. Executive agrees that he or she will not, nor will he
or she cause or assist any other person to, make any statement to a third party
or take any action which is intended to or would reasonably have the effect of
disparaging or harming the Company or the Company’s employees, officers and
managers.     (c)   Miscellaneous. Executive agrees that this Release specifies
payment from the Company to himself or herself, the total of which meets or
exceeds any and all funds due him or her by the Company, and that he or she will
not seek to obtain any additional funds from the Company with the exception of
non-reimbursed business expenses. (This covenant does not preclude the Executive
from seeking workers compensation, unemployment compensation, or benefit
payments from Company’s insurance carriers that could be due him or her.)    
(d)   Non-Competition, Non-Solicitation and Confidential Information.

  (i)   No severance pay shall be paid during any period in which the Executive
engages in a Competing Business (defined below) or in Solicitation (defined
below) or after the Executive has disclosed Confidential Information (defined
below), and in consideration of severance pay the Executive will not during the
[six] [eighteen] month period following the Executive’s termination of
employment (the “Severance Period”) engage in a Competing Business or in
Solicitation or disclose Confidential Information.     (ii)   The prohibition on
engaging in a Competing Business set forth in Section 2(d) of this Release shall
mean participating, directly or indirectly, in any manner whatsoever including,
without limitation, either individually, or in partnership, jointly or in
conjunction with any person, firm or corporation, or as employee, principal,
agent, director, officer, investor, lender, consultant or shareholder (other
than by way of less than five percent (5%) ownership of stock in a publicly
traded Company or limited partnership); provided, however, that such
participation shall not include any activity engaged in with the prior written
approval of the Compensation

-2-

--------------------------------------------------------------------------------

 

      Committee of Factory Card Outlet. For purposes of this Release, “Competing
Business” shall mean any entity or business; (a) engaged in the operation of
retail stores for the primary purpose of selling greeting cards, gift wrap and
party supplies and which operates such retail stores in any market in which the
Company is operating a retail store at the time of the executive’s termination
of employment, or a market into which the Executive knows the Company is
intending to enter; or (b) is engaged in the primary business of the manufacture
and distribution of greeting cards, gift wrap and party supplies.     (iii)  
For purposes of this Release, “Solicitation” shall mean recruiting, soliciting
or inducing, directly or indirectly, any non-clerical employee or employees of
the Company or any advisor or consultant to the Company to terminate their
employment, or otherwise cease their relationship with the Company or hiring,
retaining or assisting another person or entity to hire or retain any employee
of the Company or any advisor or consultant to the Company or any person who
within six (6) months before such Solicitation had been a non-clerical employee,
advisor or consultant of the Company or any of its affiliates.     (iv)   The
Company owns and has developed, and will develop, certain proprietary techniques
and confidential information which have great value to its business (referred to
for purposes of Section 2(d) of this Release as collectively as “Confidential
Information”). Confidential Information includes not only information disclosed
by the Company to the Executive, but also information developed or learned by
the Executive during the course or as a result of employment with the Company,
which information is the property of the Company. Confidential Information
includes all information that has or could have commercial value or other
utility in the business in which the Company is engaged or in any business in
which the Executive is aware the Company is contemplating engaging, and all
information of which the unauthorized disclosure could be detrimental to the
interests of the Company, whether or not such information is specifically
labeled as Confidential Information by the Company. By way of example and
without limitation, Confidential Information includes any and all information
developed, obtained or owned by the Company concerning trade secrets,
techniques, know-how, business plans, strategies, forecasts, unpublished
financial information, orders, agreements and other forms of documents, price
and cost information, merchandising opportunities, expansion plans, store plans,
budgets, projections, customer, supplier and subcontractor identities,
characteristics and agreements, and salary, staffing and employment information.
Notwithstanding the foregoing, Confidential Information shall not include any
information which (a) was in the public domain at the time of receipt by the
Executive or thereafter without breach or violation of Section 2(d) of this
Release, or (b) was furnished the Executive by a third party lawfully entitled
to do so and not known to the Executive to be bound by a confidentiality
agreement to the Company.

-3-

--------------------------------------------------------------------------------

 

      The Executive shall not, directly or indirectly, use, make available,
sell, disclose or otherwise communicate to any corporation, partnership,
individual or other third party, other than in the course of the Executive’s
assigned duties and for the benefit of the Company, any Confidential
Information. In the event that the Participant is requested (by oral questions,
interrogatories, requests for information or documents, subpoena, civil
investigative demand or similar process) to disclose any Confidential
Information, the Participant agrees to notify the Company promptly of such
request(s) and the documents requested thereby so that the Company may seek an
appropriate protective order and/or waive in writing the Participant’s
compliance with the provisions of this Plan. It is further agreed that, if in
the absence of a protective order or the receipt of a waiver hereunder the
Participant is nonetheless, in the opinion of the Participant’s counsel,
compelled to disclose such Confidential Information or else stand liable for
contempt or suffer other censure or penalty from the tribunal or governmental or
similar authority, the Participant may disclose such information without
liability hereunder, provided, however, that the Participant shall give the
Company written notice of the information to be so disclosed as far in advance
of its disclosure as is practicable and shall use the Participant’s best efforts
to obtain an order or other reliable assurance that confidential treatment will
be accorded to such portion of the information required to be disclosed at the
Company designates. In the event the Executive’s employment with the Company
ceases for any reason, the Executive will not remove from the Company’s premises
without its prior written consent any records, files, drawings, documents,
equipment, materials and writings received from, created for or belonging to the
Company, including those which relate to or contain Confidential Information, or
any copies thereof. When employment with the Company terminates, the Executive
will immediately deliver the same to the Company.     (v)   In the event the
Executive violates any requirement of Section 2(d) of this Release the Company
may, in addition to any other rights or remedies which the Company may have at
law, in equity, or under this Release or any other agreement, recover
immediately upon notice and demand all severance pay theretofore paid to the
Executive.     (vi)   If any restriction set forth in this Release is found by
any court of competent jurisdiction to be unenforceable because it extends for
too long a period of time or over too great a range of activities or over too
broad a geographic area (as applicable), it shall be interpreted to extend over
a maximum period of time, range of activities or geographic area to which it may
be enforceable.     (vii)   Executive acknowledges and agrees that the remedy at
law available to the Company for breach of any of provision of Section 2(d) of
this Release would be inadequate, and that damages flowing from such a breach
may not readily be susceptible to being measured in monetary terms.

-4-

--------------------------------------------------------------------------------

 

      Accordingly, Executive acknowledges, consents and agrees that, in addition
to any other rights or remedies which the Company may have at law, in equity or
under this Agreement, upon adequate proof of violation of any provision of
Section 2(d) of this Release, the Company shall be entitled to immediate
injunctive relief and may obtain a temporary order restraining any threatened or
further breach, without the necessity of proof of actual damage.

  (e)   THE COMPANY AND THE EXECUTIVE AGREE THAT THE SEVERANCE PAY AND BENEFITS
DESCRIBED IN THIS RELEASE AND THE SEVERANCE PLAN ARE CONTINGENT UPON THE
EXECUTIVE SIGNING THIS RELEASE. The Executive understands and agrees that if he
or she revokes this Release, that he or she will immediately refund to the
Company any and all severance payments and other benefits he or she may have
already received.     (f)   The waiver contained in Section 2(a) above does not
apply to any Claims with respect to:

  (i)   Any unreimbursed claims for medical services rendered on or before the
date of execution of this Release in accordance with the terms of the applicable
Executive benefit plan,     (ii)   Any Claim under or based on a breach of this
Release,     (iii)   Rights or Claims that may arise under the Age
Discrimination in Employment Act after the date that Executive signs this
Release,     (iv)   Any right to indemnification in accordance with the
Company’s articles or by-laws.

  (g)   Executive acknowledges that he or she has read and is voluntarily
signing this Release. Executive also acknowledges that he or she is hereby
advised to consult with an attorney, he or she has been given at least [21 days]
[45 days] to consider this Release before the deadline for signing it, and he or
she understands that he or she may revoke the Release within seven (7) days of
signing it. This Release accordingly is not effective until the eighth (8) day
after it is signed by Executive.

BY SIGNING BELOW, BOTH THE COMPANY AND EXECUTIVE AGREE THAT THEY UNDERSTAND AND
ACCEPT EACH PART OF THIS RELEASE.

             
 
           
 
           
 
  (Executive)       DATE
 
            FACTORY CARD & PARTY OUTLET CORP.        
 
           
By:
           
 
           
 
          DATE

-5-